Inflation Update - As Applied to Gasoline

Here's an update to the price of gasoline, originally posted on September 5, 2008 at another blog:

Link to Gasoline Prices September 2008

This is based upon the gasoline receipts for one of my automobiles. As a hobby, I collect data on certain things. In finances, that includes my household's "consumption and spending habits". I use several tools; this chart was created using data entered in a spreadsheet. I update it monthly using my gasoline receipts. Why do this? If you don't, won't or can't measure something then you certainly can't control it. Or, as we used to say in the early days of mini-computing "garbage in = garbage out". Some truisms are universal, but we are at a point in our development as a culture where we have forgotten how we got to where we currently are. Too bad for our future generations.

Some background information:
Total miles driven = 79117
Total gallons used = 3480.1312

There are two lines on the graph. The red line is the actual price of gasoline from the period February 3, 2005 through March 12, 2010. The black line is a trend line, which displays the actual trend in prices and as you can see, is trending mildly upwards. I also calculated the average of prices on an annual basis and compared those averages to determine the price increase per year. These annual price increases were then compared to determine the percent price per year.

Average cost per gallon annually was:
2005 = $2.50
2006 = $2.74
2007 = $3.04
2008 = $3.24
2009 = $2.68

The interesting thing here is that the price of gasoline has been increasing at a rate of about 2.2% per year, which is in line with the very low inflation we have been experiencing. Average inflation is usually in the range of 3.0 to 4.0% per year.  The averages, however can be deceiving. Do you remember the angst in 2007 and 2008 when gasoline prices "spiked"? Peak price I paid per gallon was $4.419. Even so, the average increase in gasoline prices per year, 2005 to the present, are low, less than 3% annually! What this means to the consumer it that when economists speak of "averages" it is useful to be aware that these averages can include severe periods of higher or lower numbers. So while the average is benign, the spikes are painful. Moral: "Be Prepared". Today's low prices will be replaced with higher prices in the future. So don't spend those savings acquired by low prices. Save them for the day when prices return to the normal rate of inflation, which is possibly as near to today as those July 2008 price spikes. If they are, then we could again face rising prices in the summer of 2012, or sooner. As the "experts" say, economics forecasting is not an exact science.

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References, Errors, Omissions, Comments:

1) I added additional information regarding annual increases and an explanation of the trend line or "Linear" line on the chart.  

2) On April 13 I updated the actual miles driven and gallons purchased.

Wheaton Recycling Extravaganza - Save the Date - April 17, 2010

Press Release Thursday, March 18, 2010

Small Household Appliances Also Accepted at Recycling Extravaganza

WHEATON, Ill. – The list of things that you can drop off at the annual Recycling Extravaganza continues to grow. In addition to electronics such as televisions and computers, the Environmental Improvement Commission announced that nearly anything with a cord that does not contain hazardous materials will be accepted for recycling at its April 17 event. Just drive to the commuter parking lot at Liberty Drive and Carlton Avenue between 9 a.m. and 1 p.m. to drop off a number of items for recycling or reuse.

Examples include but are not limited to:

• Small kitchen appliances such as blenders, mixers, toasters, coffee makers, microwaves and food processors
• Hair dryers, curling irons
• Alarm clocks
• Computers and related electronic equipment (such as a mouse, power cord, modem, monitor, etc.)
• Televisions, DVD players, VCRs
• Radios, CD and tape players
• Video game systems and other electronic games
• Printers, fax machines, scanners

As in past years, the event will also accept these items for recycling or reuse:

• Books
• Scrap metal, which also will include stoves, washers and dryers
• Eye glasses
• Keys
• Hearing aids
• Worn American flags
• Cell phones
• Bicycles in working order

In addition to residential electronics, businesses may also bring their equipment to be recycled.

Items that will not be accepted include refrigerators, freezers, air conditioners and other items that contain coolants or other hazardous materials.

This event’s success is dependent on volunteers. To help, people of high school age or older can call 630-690-1237 or 630-653-8877. 

Learn about our City's Budget at Three Workshops

Press Release Thursday, March 25, 2010

Learn About City Budget at Upcoming Workshops

WHEATON, Ill. – If you would like to learn about the City of Wheaton’s proposed budget for fiscal year 2010-2011, you can attend three upcoming Budget Workshop Sessions. They will take place in the Council Chambers of City Hall, 303 W. Wesley St., at the following times:

• Saturday, April 10 at 9 a.m.
• Monday, April 12 at 7 p.m.
• Saturday, April 17 at 9 a.m.

During these workshops, City staff and the City Council will discuss and review the proposed City budget for the upcoming fiscal year. The workshops will be videotaped and shown at a later date on City of Wheaton Channel 10, and they will also be available on the City’s website.

In addition, the Wheaton City Council will hold a public hearing regarding the 2010-2011 Municipal Budget at 7 p.m. Monday, April 26 in the Council Chambers of City Hall. 

New Look and a Search Box

I've added a "search box" to the right; this will aid in searching for text in this blog.
I'd like some feedback on the readability; I chose the earlier template because of its spartan suitability, and "easy on the eyes" format.

Bambi meets Godzilla and How to Get a Job

In the spirit of the "new" BLMH where entertainment is a necessity, I provide this post. Sorry, no freebies just yet, but if you do come to the next "Meet the Board" meeting, have a donut on me!

The first is an allegory for the "touchy feely" crowd, who want to bend, I mean "break" the rules, the By-Laws and everything else at BLMH so that "everyone is welcome at BLMH", and "no one is offended" and "no one is ever", and I mean ever, "fined for violations" at BLMH, unless you are really, really, obnoxious, or "one of them."

One thing we human beings need to keep in mind is, no matter what our heightened ego or unrealistic self esteem might tell us, as unit owners or as members of the Board of Managers, we too may be among the lowest creatures on the food chain, and what you or I want or believe, may have absolutely nothing to do with reality. "What" you say "Am I not the center of the Universe"?

Here, in beautiful Wheaton Illinois, in a protected environment, where others are willing to make sacrifices, where our military is working and dying to protect our way of life, and where others are willing to work 24/7 to generate the income required to pay the taxes, and scores of others pay the taxes to fund the benefits of those on social security, once we step outside the "bubble" reality intervenes.

So, here in the idyllic confines of BLMH, we might promote a "touchy-feely" agenda, break the rules for our friends, disregard the Illinois Condominium Act, ignore the By-Laws and do what we can to change the "Rules and Regulations" -"We don't need rules", you say, "Anarchy is a way of Life", and failing that, we can discover the joys of a "Life of Chaos" as we look the other way when it comes to rules enforcement, to create multiple tiers of unit owners, and so on.

When one steps back and looks "at the big picture" we aren't nearly so important, and our problems aren't nearly as great as we make them out to be. With some perspective, we are merely feedstock in the scheme of things, and such activities are merely flushing our wealth, which is to say the wealth of the unit owners here at BLMH.

Do I want a new bench outside my unit? Heck no; there are 84 entrances at BLMH; how much would proper installation of 84 benches cost this association? Do I want free "coffee and donuts" to entice me out of my unit so I can meet the board, because somebody heard that the Wheaton City council is doing that? Heck no! I don't need a "bribe" at association expense to get me off of my couch. I'll come to the monthly Association Meeting of my own volition; no payment required. Do I want garage sales, trucks, campers, and any manner of large vehicles or visitors crowding the streets and parking here for garage or lawn sales, just so some people who have so much junk that they won't or can't use EBay, the AmVets, Disabled American Veterans, the National Cancer Childrens Society, Goodwill or their local church, mosque, or temple to give it away? Heck No!

What do I want? I want my association to "Plan and Prepare", to collect and allocate my fees in such a manner that there are sufficient funds to replace my roof every 15 years, replace my driveway in a timely basis, and keep the streets in good conditions, as well as the common and limited common elements here at BLMH. Is that too much to ask for?



For your information "Bambi Meets Godzilla" is the title of a humorous 1969 cartoon created entirely by Marv Newland. Less than two minutes long, the film is regarded as a classic of animation, and in 1994 was voted #38 of the "50 Greatest Cartoons of all time by members of the animation field".

Next, are you bored? Need money? This funny but somewhat tasteless video suggests that you "Get a Job" and shows you how. With the new direction and need to flush our fees, all of us may need to "Find a Yob" to pay for the special assessments that some say are coming, and here is an online course to help you to do just that:


The above was originally shown on Comedy Central as a part of the program "Mind of Mencia" starring Carlos Mencia, with his brother Joseph playing various roles, including this one.

Fire and Utility Room Fan

Official Press Release:
"Monday, March 15, 2010

WHEATON, Ill. – At approximately 10:25 p.m. on March 12, 2010, the Wheaton Fire Department was dispatched to a reported structure fire at 1760 Plymouth Court. Upon arrival, fire crews identified smoke in both a lower and upper level unit, which led to the discovery of a fire in the laundry room of Unit C of the building. The fire was brought under control within minutes. The fire unit was unoccupied at the time of the fire. All other occupants safely escaped the building and one resident was treated and transported to a local hospital for complications apparently related to the incident.

Investigators from the Wheaton Fire Department were called to the scene to conduct an investigation. The cause of the fire is currently undetermined pending the final results of the investigation, and damage estimates are unavailable at this time. The City of Wheaton Building Department was called to the scene and the first floor fire unit was deemed not safe for occupancy due to the damage. The Wheaton Fire Department was also assisted on the scene by several fire departments from neighboring communities."

More Information:

CAUTION - DO NOT ATTEMPT THESE TESTS ON YOUR OWN - SUCH TESTS ARE DANGEROUS - HAZARDS INCLUDE A FALL FROM THE LADDER, INJURY BY SPINNING FAN BLADES, FLYING DEBRIS AND ELECTROCUTION.

The fire, I understand, was started by the failure of the vent fan in the utility room. Here is the photo of just such a fan.

How could the vent fan start a fire? My unit is, according to my bank, 33 years old and so is the fan. If the bearing of the fan and motor should fail, the fan will "stall" and the motor will encounter what is called a "locked rotor" condition. Under such a condition, the fan will consume electrical energy, but because the fan is no longer rotating, that energy will be released as heat in the motor and immediate area adjacent to the fan motor. How much energy is released by the motor? That can be readily determined with a simple measurement. Such measurements are essential if we are to deal with "the facts" and possibly establish certainty.

The next photo shows the use of an ammeter for determining the current of the motor, with the motor running freely:

CAUTION - DO NOT ATTEMPT THESE TESTS ON YOUR OWN - SUCH TESTS ARE DANGEROUS - HAZARDS INCLUDE A FALL FROM THE LADDER, INJURY BY SPINNING FAN BLADES, FLYING DEBRIS AND ELECTROCUTION.

The following photo shows the measurement of the motor current, with the motor "stalled".

CAUTION - DO NOT ATTEMPT THESE TESTS ON YOUR OWN - SUCH TESTS ARE DANGEROUS - HAZARDS INCLUDE A FALL FROM THE LADDER, INJURY BY SPINNING FAN BLADES, FLYING DEBRIS AND ELECTROCUTION. 

WARNING - ELECTRICAL HAZARD

The Bottom Line:
The fan draws about 2.4 amperes when stalled. That's about 288 watts of heat to be dissipated in a very small area. If the fan is "stalled" and not rotating, that heat accumulates in the windings of the motor and can be entrapped in the fan housing.

Suggestions: Replace the fans in the utility rooms and bathrooms. Consult the Association for specific recommendations for a fan including a thermally protected, continuous duty motor and the appropriate CFM rating.

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References, Errors, Omissions, Comments:

A Broan/Nutone 8210 is rated 210CFM with a 0.8amp motor. Costs are in the range of $100 plus installation. The 8210 is a utility room fan, 9 inch diameter and for use with a 7 inch duct. According to the NuTone "Architectural and Engineering Specifications" this fan will fit in a 9-1/8" diameter opening in the ceiling, the motor includes "thermal protection".

Comment: How much is your fire insurance deductible? How much will it cost to repair and replace the contents of the unit and the damage to the unit itself? Many times the cost of the fan. How much is the insurance deductible of the association? According to the city Building Department "the first floor fire unit was deemed not safe for occupancy due to the damage.". Perhaps unit owners should be "pro-active" and practice a little "preventative maintenance" and replace these fans. What do you think?


Click for Wheaton Press Release Details

Workings of Our Board - Renters and Unit Owner Involvement at our HOA

Returning to the issue of renters attending HOA meetings, the core question is, "What are the advantages and disadvantages of such attendance, and what is our Board of Managers doing to promote such attendance by unit owners and renters?" Another question is, "How is such promotion of attendance of renters consistent with the requirements of the Board of Managers; specifically that they act at all times in accordance with the fiduciary duties?"  I'm going to use this particular agenda and vote to look more closely at the workings of the majority of our Board and under their "leadership" the workings of the Association.

This occurred during the March 2010 association meeting. Our board President was not in attendance. This item was brought to the table by a member of the Board. It was not on the published agenda. During the meeting it was discussed among our Board of Managers for less than five minutes! After listening to unit owners, including objections and concerns raised during the "homeowners session" by former members of the board and a "landlord", it was motioned, seconded, voted, and passed by the board majority. Our Treasurer cast a "No" vote.  During that meeting, more time was spent discussing the contents of the “Welcome Packet” than were spent on this issue by the board.

The member of the Board of Managers who is responsible for the welcome committee now wants to expand that packet to include our Balance Sheet and Financial Statements. Question: Why are we giving that information to renters, etc.? Ref: (1)

It's my understanding that a statement in the Welcome Packet was cited as the reason for discussing this item, superseding all other business, and bringing it to a vote at this time. A document in that packet states that "Association Meetings" are open to "all residents except during Executive Session." Apparently the majority of our current board believes the "Welcome Packet" transcends our Rules and Regulations, the By-Laws of the Association and the Illinois Condominium Act. This is consistent with a group, which appears to be the board majority, which believes their purpose is to run this organization based upon some nebulous definition of "neighborliness". It would seem that it is the will of the majority of the Board of Managers that BLMH is not a business, and is not to be run as one.   Ref: (2)

Before proceeding, I want to define the word “involvement” as I use it in this post. I view "involvement" as unit owner "participation" in the matters of this association. Those matters include the "duties, responsibilities and liabilities of a unit owner."  I do not include participation in the "Neighbor's Club" or "Homeowner's Club" because it is not officially affiliated with BLMH and our association. It might be useful to be aware of some statistics which indicate the level of involvement by unit owners, who are our voting members and stakeholders in this HOA.

1. Nearly 50% of voting members do not vote at the annual meeting.
2. Fewer than 25% attend the annual meeting.
3. Of those members who do vote by proxy, some reputedly have their favorite candidate fill in the signed ballots. Would you define that as unit owner “involvement” or not? If not, then the statistics for voting are possibly fewer than 50% of the owners.
4. About 4% of the voting members attend association meetings.
5. Our HOA has about 20% rentals.

Why does the majority of the board, including our CD and R&R Directors, want to expand the association meetings to include renters? Let's think about this, and I have a few questions concerning the position of these Managers regarding unit owners:

1. Would it be beneficial to the association if more unit owners were involved?
2. Would or could such unit owner involvement include attending association meetings?
3. Would or could such involvement include increased voting by the members?
4. If such involvement is a desirable thing, and everything I have read indicates that it is, then how should the members of our Board of Managers go about attracting more unit owners to become more involved and attend the association meetings? Note: I can and do cite my sources. See recent posts on “Fiduciary Duties”.
5. If our board wants to include renters in the circle of unit owners, then I suggest that the Board of Managers actively promote the purchase of units. There are several for sale here at BLMH. Wouldn't that be consistent with acting as a fiduciary of the Association? Ref: (3)
6. If our board wants to support and expand "ownership", unit owners acting and operating as "owners" which is to say, acting in accordance with "the duties, responsibilities and liabilities of a unit owner", then why isn't the majority of the board doing just that?  There is no component of "ownership" which exclusively includes attending parties and being "neighborly." That is the lowest level of participation in any community. Be it a retirement village, a rental building or whatever. Is that sufficient criteria for unit owners? I think not. So why is that the emphasis of the majority of the Board? Why do they persist in this path? What is the underlying commitment? 

Concerning the attendance of renters at the association meetings of our voting members:

1. A member of the Board of Managers stated during the discussion of this issue during the most recent association meeting that allowing renters to attend the association meeting “is a good thing” and should therefore be voted “yes”. Other comments and arguments used in support of this agenda included “renters are members of our community” and “renters may not be comfortable with the landlord.” Are these relevant arguments for a member of the Board of Managers in fulfilling their fiduciary duties? What about the Illinois Condominium Act? Answer: Section 18.4 of the Illinois Condominium Property Act states in part that “In the performance of their duties, the officers and members of the board, whether appointed by the developer or elected by the unit owners, shall exercise the care required of a fiduciary of the unit owners.” The board is not empowered to act for or on behalf of the renters.
2. Is it possible that the board by acting for or on behalf of renters, can be in breach of its fiduciary duties, if they interfere in the contractual agreements between the unit owner as landlord and the renter? Whether knowingly or unknowingly? Answer: Yes.
3. Who has a contract with the association? The renters, or the voting members which is to say, the unit owners? For example, if there is a violation by a renter, who is cited and fined by the Association? Is it the renter or the unit owner? Answer: the unit owner.
4. Does a renter have something at stake here at BLMH? If so, with whom? For example, if there is a problem in the unit occupied by the renter, or it involves the limited common elements, who is responsible per the renter’s contract? The association or the unit owner who is the landlord? Answer: the unit owner.
5. If a renter breaks the rules and regulations of this association, or damages the property, who is responsible? Answer: the unit owner. The association will levy fines, etc. against the unit owner for tenant breach of the rules and regulations. 
6. Who is responsible for damage to the unit, other units or common elements either by accident or by negligence? The unit owner as landlord or the renter? Answer: the unit owners. For example, should the tenant flood the unit, damaging the common elements and/or adjacent units, the unit owner is held accountable by the association and must pay for repairs to correct the damage to the common elements of the association as well as other units affected. According to the Illinois Condominium Property Act 2010, the “unit owner may not assign, delegate, transfer, surrender, or avoid the duties, responsibilities and liabilities of a unit owner.”
7. Who is required to carry insurance by the Association? The renter or the unit owner? Answer: the unit owner.
8. If the renter doesn’t like the tree outside his unit, wants a bench along the walk, would prefer better carpeting in the hall, or wants to have a garage sale, etc. who would he or she approach to discuss this? The unit owner who is the landlord or the association? Answer: the renter’s contract (lease) is with the unit owner, who is the landlord. The renter will discuss this and should only discuss this with the landlord. It is the discretion of the unit owner to discuss renter comments about the common elements or rule changes with the Board of Managers. Why? Contracts and all else aside, whose money will be spent to address any and all of these issues? The renter’s or the unit owner's? Answer: the unit owner’s fees will be spent by the association, in accordance with their fiduciary duties on behalf of the unit owner, and only the unit owner.
9. Association meetings are held “for the voting members”. Are renters voting members? No.
10. If a renter is in violation and the unit owner is being fined, what are the possible consequences if the Association puts itself in the middle? For example, the association fines the unit owner, but the renter comes to the association meetings. The association “controls the interests” of the unit owners. Does the association "control the interest" of the renter? No, because the renter has none in the association. How will the attendance of renters enhance the interest of the unit owner so controlled? How will it detract from that interest? If it detracts from that interest, the board of managers is in breach of it’s fiduciary duties. According to the Illinois Condominium Act, "the board....shall exercise the care required of a fiduciary of the unit owners." If the board puts itself in a position to support renters over the "care required of a fiduciary of the unit owners" then the board is in breach. Could this happen? I have the perspective that "if it can happen, it will happen"; what we do not know is "precisely when it will happen." Ref: (4)
11. Our Board of Managers could have an "open house" once or twice a year for unit owners and board members alike to meet the renters. That could be similar in venue to the "Meet the Board" coffees or, it could be included in one of the parties held by the "Neighbor's Club". Better still, it could also be a part of a "Spring Cleanup" drive here at BLMH. During the March Association Meeting, one of the unit owners complained about "wood chips" left on a sidewalk during a tree felling about six months ago. Well, let's all get our brooms, unit owners and renters alike, and go for it! What better way to meet OWNERS, who are acting and behaving as OWNERS.   Ref: (5)

Concerning the involvement of member of the Board of Managers who are promoting this:

1. Why, instead of working with and expanding unit owner participation at our association, are members of our Board of Managers working diligently to expand the participation of our renters?
2. Is is possible that it is a goal of certain members of the board of managers to increase the number of rentals here at BLMH? If the actions of the members of the Board of Managers encourages rentals, and that number increases, making sales here at BLMH more difficult or, if that number reaches or exceeds FHA guidelines, making it impossible for potential buyers to obtain financing, thereby preventing the sale of units, is such involvement or activities by the Board in breach of their fiduciary duties?
3. Why aren't our CD and R&R Directors working diligently to get more unit owners to attend the association meetings, to vote at our annual meetings, etc.?
4. What other things could our Board of Managers do to promote unit owner involvement? Why isn't this part of an ongoing discussion at our association meetings?
5. Why would members of our board obstruct, or not support such efforts?
6. Why are our CD and R&R Directors pursuing renter involvement in the meetings, when to do so is not a part of their duties and job description as members the Board of Managers of our HOA?
7. Is this really a part of the "fiduciary duties" of the members of the Board of Managers; that is, are they acting as those "entrusted to make decisions for, and control the interests of, another person or persons?" Are they acting "in good faith, in a manner each director believes to be in the best interest of the association, and with such care, including reasonable inquiry, as a prudent person in a like position would ordinarily use under similar circumstances?" Are they acting "with undivided loyalty to the association and its membership?" Where such membership is defined as the unit owner? Or are they acting in their own interests or with a conflicting interest?
8. What information does this association need to provide to renters so that they will be "good renters" and will be so informed? Isn't that all that the association should provide? To put it another way, using language familiar to the majority of the board, isn't it the duty and obligation of the Board of Managers to support the renters in being "good renters" and nothing more?  In other words, support the renters in keeping their agreements and that includes their rental agreement with their landlord, as well as keeping the Rules and Regulations of BLMH? And nothing more?
9. What would be the political consequences to certain members of the Board of Managers if more unit owners became involved? Does this have a bearing on their actions?
10. If doing "the good thing" is the principal criteria for the majority of our board, then these members of our Board of Managers should be working day and night to increase the involvement of the unit owners. Unless, of course, they don't perceive that as "a good thing."

I want to state that I consider renters to be or have the potential to be "future owners" at BLMH. As such, and as members of this community, it is beneficial if they be kept "informed". Such information would and does include our newsletter. However, the renter has no duties and responsibilities to the Association other than acting in accordance with and keeping the Rules and Regulations of BLMH. The Illinois Condominium Property Act 2010 states the “unit owner may not assign, delegate, transfer, surrender, or avoid the duties, responsibilities and liabilities of a unit owner.” It would be obvious that the Board cannot assign or transfer those responsibilities to the renter, either. Keeping renters informed does not require our balance sheet, or participation in events paid for by the voting members, or participation in activities such as our association meetings, which are defined in our By-Laws as "Meetings of the voting members", nor attending the "Meet the Board" parties organized by the CD over at IHOP for unit owners and at unit owner expense.   Ref: (6)

The renters could certainly join the "Homeowner’s Club" or "Neighbor's Club" which is not officially associated with this HOA. The "leadership" of that club can actively promote such attendance by renters; that leadership has no fiduciary duties and are not so bound. They can party to their hearts content using the funds provided by their membership, until such funds are expended. Perhaps that has been a problem for the club, which I understand has fewer than 20 paying members, and would be a powerful motivation for the creation of  the "Meet the Board" events, which have to potential to replace some of the club meetings and reduce the club expenditures.    Ref: (7), (8)

I consider involvement in a leadership capacity in the “Homeowner’s Club” by any member of the Board of Managers as both irresponsible and a conflict of interest. The members of our Board of Managers are having difficulty performing their core duties and responsibilities. Some (most?) are woefully uninformed about the Illinois Condominium Act, or simply ignore it. I can't tell which. Some don't know the Rules and Regulations, and if they do, they prefer to see that they are not enforced; such enforcement "makes people uncomfortable" or to "feel unwelcome" or is "un-neighborly." As for the By-Laws? We can pass changes to the By-Laws by simple vote of the board of managers, can't we?  Ref: (9)

More questions, or questions paraphrased differently:

1. If this is not being completely and openly discussed by the board in view of the unit owners, why isn't it? Why are members of our Board of Managers discussing this with renters? Why would certain members of the Board of Managers pursue this and similar agenda items behind the back of and out of view of the unit owners? If such activity is occurring, is it "legal"? Is it consistent with their fiduciary duties? Answer: No.
2. If members of the Board of Managers have the time to enroll renters in attending the meetings, why aren't they putting that effort into attracting the unit owners to the meetings?
3. Why not expand the current association meetings to include the informal "meet the board" session and invite unit owners?
4. If the Association Meetings of "voting members" were expanded to a "meet the board" session, would that increase the attendance of unit owners at association meetings, reduce costs (no free donuts and coffee) and achieve both goals; i.e, increased participation by unit owners and informal conversation with the board? What would be the disadvantage to the association? What would be the political disadvantage to board members?
5. Would a Spring "community cleaning day" and a Fall "community prepare for winter" day be beneficial to this association? If so, why have our activist socialites never suggested such a thing?
6. What are the disadvantages to unit owners, who are landlords, if the board changes the By-Laws and allows renters to attend the association meetings? Consider that at present, if a renter has an issue he or she is to discuss this with the landlord, emergencies excepted.
7. What is the purpose of having renters attend meetings of the voting members of the association? The member who proposed this, stated that this was a "good thing" and other, but not all, of the members of the Board of Managers agreed. None of the proponents stated "how" this would be good for the association. Nor did they heartily discuss the "down side" or possibly detrimental issues. Is that consistent with "reasonable inquiry?" I think not.
8. If renters are invited to the association meetings, by change of By-Laws, then what is the protocol? Why wasn't that discussed and resolved before the rush to vote?
9. If renters do attend meetings, are they to remain mute during meetings? If not, how are they to act?  Renters can't vote and shouldn’t address the members of the Board of Managers during meetings of the voting members. They shouldn’t be given the opportunity to speak during the “homeowners session”. Why? Because they aren’t “homeowners”, that's why. So why are they there? If they can’t make requests, or demands; if they can’t discuss “homeowner issues” then what? Consider that the entire length of the “homeowners session” is usually less than 20 minutes. Frequently, unit owners are not given an opportunity to speak to the board because of a lack of time. Let's consider the problem when renters take up the time allotted to unit owners during the “homeowners session”. Would that cause any hard feelings and promote an environment of divisiveness? If so, then why would the board promote this? How would YOU feel as a unit owner if you attended a meeting and were not given an opportunity to address the board during the "homeowner's" sessions while renters were? How would YOU feel as a renter if you were invited to a meeting but, because you are not a unit owner, you were treated as a second class citizen? 
10. If renters truly shouldn't and can't participate as owners during the Association Meetings, then perhaps the meetings should be video taped and these made available for a modest cost, or "rental" to those who want to view the proceedings. There are other tangible benefits, including a clarification of "whom" said "what" during the meetings, so they can be properly and accurately documented. 

No discussion of protocol, of how to really make this work, was discussed. Is that a "reasonable inquiry?" Or are we just going to "wing it" and see how it all turns out? This from a group that is opposed to enforcing the Rules and Regulations. Can you see where this is possibly headed? If you can, then you  too possess a reasonable amount of common sense.

It is possible that members of our Board of Managers, who are proponents for this and many other changes which they say are "good" or "better" or "nice" or the ultimate justification "I have read somewhere that this is a good thing" will take any and all positions necessary to have this change take affect by decree. It is possible that they will "decree" that it is not a "By-Law" change, or a Rule change. They may say that because our "Welcome Packet" invites everyone to association meetings that it is the law. They are incorrect. The hierarchy is:

1. Illinois Condominium Act
2. Our By-Laws
3. Our Rules and Regulations.

The "Welcome Packet" is just that, an assembly of documents for distribution to unit owners and possibly to others, including our renters. Perhaps the language needs to be revised. Members of the Board of Managers are required to use sound business judgment and common sense. One can always hope for "change".

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Errors, Omissions, Comments, References ( ) :

On occasion, the majority of our Board will push measures through the meeting to a rapid vote. There is little deliberation on those issues, and because of the method employed, the members of the Board are given no opportunity to research these proposals, or to consult with professionals. Unless there is some legitimate urgency, why can't these non-critical issues be discussed, tabled until the next meeting so the board can their homework and become "informed" about all aspects of the issues, the pros, the cons and so on? When unit owner objections to these proposals are raised, there are sometimes supporters who "talk over" and "talk down" the speaker. When board member concerns or objections are raised, they are countered with ambiguous and unsubstantiated statements such as "this is a good thing" or "I have read somewhere that..." The word "good" when evoked by the board member in support of their agenda, seems to be some sort of code, or trigger which stimulates an automatic response from other members of the board and demands a "yes" vote for the proposal.

Of course, "good" people would never vote against a "good thing" would they? And if they did, then what are they? I suppose the answer is obstructionists or "bad people?" Usually, the board member who is promoting these "hot" issues will only discuss or promote one side of the issue. In all issues there are costs and benefits. There are also those who will benefit and those who will not. A member of the Board of Managers should have the capacity, and the willingness to discuss all sides of an issue. That is not occurring here at BLMH. I interpret that as one of the signs, or evidences, of an individual operating in accordance with their personal agenda. Our professional manager is consulted during the association meeting, but such consultation on an issue is often cursory and limited to a single comment. This was the method employed to vote on the budget. In the example contained in this post, most of the board members were given no opportunity to prepare for this question. That is to say, they "officially" were given no opportunity. It is possible that sub-groups of the board had discussed this issue and had pre-determined their positions, as a group. In such a situation, who wins and who loses? This type of activity by board members "squeezes out" other members of the board, and as a consequence the group does not make a decision; individual board members make the decision. The "losers" are the unit owners. The "winners" are the members of the board who are promoting the agenda.

(1) I understand the necessity of providing this information to unit owners and to qualified buyers. A renter is neither. If a renter wants this information; i.e Financial Documents for the Association, he or she should contact a realtor and make a bona-fide offer to purchase a unit. Such information is available to all qualified buyers. Question for the Board: How is publishing or uncontrolled distribution of these documents promoting the interests of the membership of this association; such membership defined as "the unit owners?" Publishing this information is effectively advertising how deep our pockets are to those with nothing at all at stake. In this litigious society, when they have that unfortunate accident, they can whip out that "Welcome Packet" and hand it to their attorney, who can readily calculate exactly how much we are good for. While we are at it, why don't we include a copy of our association insurance policy for "good measure". Using the logic of the board majority, we should make it easy on them. After all, that would be the "good thing" to do, wouldn't it?

(2) In our December newsletter it was stated "As of November 2009, a new procedure for handling violations went into effect." This went on to say that "we hope that this new protocol will reduce the number of violations and subsequent fines." The only method of handling violations that I am aware of that will reduce the number of violations, is simply to ignore them and to "look the other way". This occurred during the Association Meeting when a unit owner who reported a violation and asked for an inspection was told by the Rules and Regulations Director "That isn't Part of My Job Description." The terms "arbitrary and capricious" and "creation of multiple classes of unit owners" comes to mind when these types of things occur.

I have concern for our Treasurer. He has years of experience as a member of the Board of Managers, was called upon by the board to fill an empty position, and accepted the appointment. I really don't know how he deals with these questionable practices.  "Those who are most qualified to serve, such as architects, accountants, and attorneys, and those who are best equipped to make decisions and stand up to unit owners, don't want to serve."*** Gee, I wonder why that is? Second question: if those who are "best equipped" to serve don't, then who does?
[***I believe this statment was made by Tom Skweres of Vanguard Community Management].

(3) I realize that the "landlord" would be unappreciative if his tenant left at the conclusion of his or her lease and purchased a unit. However, that is always a possibility with a renter. It is always in the power of the landlord to work with his or her tenant to keep them happy and encourage them to recommit to another lease. It is also a reality that renters do periodically move on, whether it be to another rental or to a "home."

(4) I'm paraphrasing "Murphy's Law". I am a businessman and a mere mortal and I don't have the godlike powers which some on our board believe they possess. They can not only foresee the future, they can control it!

(5) Per the instructions of the Board of Managers, per several discussions held during Association Meetings in 2009, the "Neighbor's Club" or "Homeowner's Club" or whatever it is called, is not affiliated with the BLMH Association and all outdoor parties are to be held off of the property. This was decided in part for liability and insurance reasons. Or has that decision been reversed behind the backs of the unit owners? It's a question that needs to be asked.

(6)    I attended the most recent "Coffee with the Board" meeting at IHOP. I abstained from the "free" coffee and donuts because I was uncomfortable spending our unit owners' funds this way. There were about 20 attendees. I stated my concerns during the next Association meeting, and stated that I would make a "donation" to cover my expenditure during such "coffees" but I would not accept the "gift" of my fellow unit owners, who were not present. The former AD objected to the use of Association funds on the basis that he had to fight for funds for every limestone window-sill he installed and that if funds were that "precious" then they should not be spent frivolously. His point: What are our priorities at BLMH? and what are the priorities of the Board?

(7) Our Board majority has specific definitions of "neighborliness" which are manifested in different ways and apparently requires staging coffees and parties. There are unit owners who are very enthusiastic about attending these "freebies". It is common knowledge among "experts" that many condominium owners buy a condo because they don't want to do the outside work or maintenance; they want someone else to do it. They also want someone else to do the board work, and all other work, too. These individuals will not attend "spring cleaning" events. Nor will some of our renters. However, does that relieve our Board from organizing and promoting such events? Why the emphasis on "entertainment"? Is it possible that the core issue of one or more members of the Board of Managers is about themselves, their self esteem and self worth, which is predicated on have people around them who "make them feel good" or "important" or "agree with them"? 


(8) At the time of the formation of the "Homeowner's Club" or "Neighbor's Club" or whatever it is currently called, the professional manager recommended to the Board that the Board of Managers  review of the rules pertaining to the posting of notices at BLMH. These rules currently prohibit postings and advertisements, including the notification of unit owners about the meetings of the "club." This did not occur, and the majority of unit owners are now excluded from such notifications. Instead, the members of the board who had promoted such a club proposed the "Meet the Board" coffees and now promote those coffees. Why? Was this change due to the issues of funding for the club?  


(9)  I have written to the board many times, with instructions to the professional managers to forward my letters to the Board of Managers. For the most part, the majority of these communications were never acknowledged or responded to. Some are directed to the CD or other specific members of the board. I now continue to send letters to the management for forwarding, but I only send emails to specific members of the Board of Managers who are gracious, courteous, and sufficiently professional and aware of their fiduciary duties to at least acknowledge that they have received them. Officially we are encouraged by the board to send such communication. The reality is different. Using my personal experience as a guide, I suspect many of the board never read these unit owner communications.

Is our Board Adhering to the Requirements of the Illinois Condominium Act?

Section 18.4 (h) of the Act which pertains to the “Powers and Duties of Board of Managers” states that the powers of the Board of Managers include:

“To adopt and amend rules and regulations covering the details of the operation and use of the property, after a meeting of the unit owners called for the specific purpose of discussing the proposed rules and regulations."

The Act goes on to state that:

"Notice of the meeting shall contain the full text of the proposed rules and regulations, and the meeting shall conform to the requirements of Section 18(b) of this Act, except that no quorum is required at the meeting of the unit owners unless the declaration, bylaws or other condominium instrument expressly provides to the contrary."

This section of the Act has certain guidance regarding such rule changes:

"However, no rule or regulation may impair any rights guaranteed by the First Amendment to the Constitution of the United States or Section 4 of Article I of the Illinois Constitution including, but not limited to, the free exercise of religion, nor may any rules or regulations conflict with the provisions of this Act or the condominium instruments. No rule or regulation shall prohibit any reasonable accommodation for religious practices, including the attachment of religiously mandated objects to the front-door area of a condominium unit."

In other words, no rule changes can be discussed or voted, unless previously posted or mailed to all of the unit owners. The Act has specific guidelines for the method and proper allowance of time for unit owner notification.

Members of the Board of Managers are required, as part of their fiduciary duties, to be aware of the Act. Asking other members of the board to check on the accuracy of board action is not in accordance with the duties and obligations. Each board member needs to be informed and aware, and follow the rules. Just as we unit owners are to follow the rules.

==================================

References, Comments, Errors and Omissions:

1. Highlights above are mine. 

Stress Relief and Alleviating Boardom

I returned from a business trip on Saturday and passed the south entrance at about 11:45pm to find fire trucks and the police. Apparently another utility room vent fan failure. (Hint: turn the darn things off and open the utility room door). Then I discover that the "board" has proposed and passed a By-Law change illegally, our R&R Director is politely telling unit owners where to go "It isn't in my job description", and I haven't yet caught up with February's association meeting. Wow, go away for a couple of weeks and shazam! It seems there is always something exciting in our sleepy little community! With the onset of Spring, I can hardly imagine what will happen next!

So how to lighten up? Too bad the movie "KickAss" isn't out yet (release April 22); it's about ordinary people who pretend to be "super heroes", but in reality have no "super powers" of any kind. In the trailer the teen-aged hero quips that the only power he has is to be "invisible to women." Now that's a fantasy plot. Do the good guys win? With a movie name like that, it makes one wonder who is kicking whom. If it's a commercial success, perhaps they'll make a sequel. My title recommendation: "Break a Leg".

As for my taste in movies, the last movie I saw was "The Blind Side" and I enjoyed it. TMI!

OK, so I decided to lighten up "a bit". When my children were young, they enjoyed a game called "Whack-A-Mole" in which a number of holes were occupied by furry critters. In a random sequence, a critter would jump out of the hole and the object of the game was to "whack" the critter with a plastic mallet. If successful, the player rang a bell. Supposedly good for developing eye-hand coordination and upper body strength; it took two hands to swing the mallet. Also great entertainment for young children, just like "Jurrasic Park 3" (2). Click on the word "PLAY" to start the game. Use your mouse and click to "Whack Em"

==================================

References, Comments, Errors and Omissions:

1. Whack-A-Boss flash game, based on Whack A Mole. Designed and animated by Don Mangan and Artie Romero at ARG! Cartoon Animation Studio in Colorado. http://artie.com/

(2) Some years ago, I went to a movie theater for "Jurassic Park 3" and sat directly behind a family. Prior to the "lights out"  a small boy of about 4 asked the adult male he was with "Will I be scared, Daddy?"  The man replied "No, it's not a scary movie." Apparently unconvinced, the boy looked around at the adults in his vicinity, set his eyes on me and asked "Will I be scared?" I replied "Only when the dinosaurs eat people." Which drew the anger of the adult accompanying the boy. During the movie, during those scenes when the velociraptors began tearing people apart and eating them, the child let out a series of shrieks. Of course, there are those who would say that, as is the case here at BLMH, the reason that child was frightened was because of my comment. Certainly nothing on that screen, which is to say the "reality" of people screaming and being eaten had anything to do with the boy's fear. Of course not! Here's a trailer for what some people "believe" is a movie suitable for small children. They "know" this is a "good thing" and can simply ignore the MPAA PG-13 rating "for intense sci-fi terror and violence", because they "know".

It's Not in My Job Description

That was the response of our "Rules and Regulations" Director to a Unit Owner request to inspect an alleged violation to the rules. This is a direct quote from our Association meeting of March 11.

Sounds like "open season" for rules. Oh, but our CD and the R&R Directors are so concerned about making our "renters" welcome here at BLMH! To put it bluntly, they seem to have a problem with determining what they are supposed to be doing, as members of the "Board of Managers".  Or perhaps we should rename this the "Board of Social Directors"? For example, let's make the renters and our friends feel warm and fuzzy while vandals run loose in the streets, water sprouts destroy our trees and the streets disintegrate. But we have funds for "coffee and donuts" for our friends to come visit us at the IHOP!! Gee, just like the city of  Wheaton. Makes one feel simply wonderful, like the Mayor, doesn't it? Well, this will continue for as long as each unit owner sends that check each month for $300. That will fund a lot of "discretionary items" even if they aren't in the budget, and even if the reserves are underfunded. But these are "good things", or so they believe, and so they tell us, and so it will be. And that is the only critiria. What they "believe" is reality.

I have a few questions for our most illustrious and beneficent board. Do our renters send that money to the lock box each month? No, they don't. Do our renters have perhaps $190,000 invested here? No, they don't. And when our renters are behind in their payments, who "eats" this? And who is held accountable for payment of that association fee and the real estate taxes? Certainly not the renter or "occupant". It is the Unit Owner, who is a Member of the Association, who pays his or her association fees, the taxes and the mortgage. That's who. So why the emphasis of our CD for our "poor" renters? It seems that to be a renter at BLMH  is to be "the flavor of the month". Perhaps our CD, R&R Director and others on the board are merely fully committed to flushing the money of the unit owners, and at the unit owners expense. Who knows? Her official position is that this is "a good thing". Really? and for whom? And why should I or anyone else who has a vested interest at BLMH ever believe this individual?

Frankly, where in anyone's job description does it say anything about this kind of behavior?  Oh, I forgot, here at BLMH our board members are allowed to create their job titles, and to pick and choose their job responsibilities and duties. So the person who makes the Newsletter becomes our "Communications Director", our R&R Director states to unit owners that inspections or rule enforcements "Isn't in my job description", etc. One member of the board doesn't have even have any specific duties. Obviously, even without a "Landscaping Director" we have more than enough people on the board to carry out all of the ephemeral duties of the board.

Apparently, if the member of the board doesn't want or like a task or if there are tasks that we consider as "unpalatable", or difficult, those duties are simply "dropped out" or pushed over to the board president or some other responsible member of the board to do. As members of the Board of Managers, we'll pick our jobs and do that which works "for me". Part of what works "for me" is making the people I choose to champion feel welcome here; by shirking our duties, ignoring our responsibilities and just as the little children we are, by not doing the things we don't like to do, simply because "I'm not going to and you can't make me - so there."

So the person who decided to be "responsible" for the newsletter selected the title "Communications Director." Based on her actions and my observations, I really do think that "Social Director" would be far more appropriate. Too bad this isn't a retirement home. However, with the latest change in direction, perhaps "Director of Rentals" would be more appropriate. It probably doesn't matter, as long as the title is "Director" of something. How about "Grand Poobah"; yes, that sounds simply "grand".

It truly is amazing how capable some of our directors are, why, they can do anything! Anything that is, that has absolutely nothing to do with "fiduciary duties" or any of the other aspects of running this business. Administrators simply "administer", they hire and fire and let the minions or lesser members of the board "do the work" and "do the heavy lifting". Isn't that wonderful!

Returning to the subject of this post, I can understand that people take on responsibilities they aren't equipped to fulfill, particularly if they are sold a bill of goods by their "friend" on the board.  When the going gets tough, or uncomfortable, or I simply don't feel like it, all one has to do is turn to the unit owners and say "It's not in my job description".

Meeting Highlights - Illegal Vote for Renter Attendance at Meetings

During the most recent association unit owner meeting held March 11, 2010 our "Communications Director" proposed that the unit owner meetings be expanded to include renters. Her argument in favor of this was "I have read many places that this is a good thing". During the ensuing discussion, it was asked if our legal counsel had been approached for a ruling on this particular maneuver, specifically as per our By-Laws. The answer was "no" and apparently such counsel is not needed or required by our board.   The proposal was discussed, seconded and then passed.

In 2009 shortly after the election of the CD we had a handyman attend a meeting and this led to a discussion among the board who reaffirmed that such attendance was not consistent with the By-Laws and it was stated that meetings are only open to unit owners. However, it seems our new board is attempting to skirt the bylaws, effectively changing them, using a method inconsistent with our By-Laws. The method employed to pass this measure is a clear example of a breach of Fiduciary Duty. This action is not an accident, is not simply an error or an omission.

Our By-Laws, which is to say our By-Laws contained in our "Declarations of Easements, Covenants and Restrictions for Briarcliffe Lakes Condominium Manor Homes" has specific language regarding unit owner meetings. It also has specific language pertaining to membership in the association.

Article Three, section 3.4 states in part that "Each Unit Owner shall be a member of the Homeowners' Association....." it then continues "Each Owner agrees to be bound by and observe the terms and provisions of the Association's Charter, its By-Laws and the rules and regulations.....". Obviously, this also pertains to the members of our Board of Directors. Some apparently do not agree to be so bound.

Article Three, section 3.6 states "Meetings. The rules and regulations governing the calling and conduct of the Homeowners' Association meetings shall be set forth in the Association's By-Laws."

Exhibit "C", "By-Laws of the Briarcliffe Lakes Homeowners Association" stated in Article II "Members (Unit Owners)" Section 3 pertaining to meetings: "Meetings of the voting members shall be held at the Property or at such other place in the county wherein the Property is situated, as may be designated in any notice of a meeting." The Section 3(a) goes on to state "...any action may be taken at any meeting upon the affirmative vote of the voting members having a majority of the total votes present at such meeting." The by-laws pertaining to meetings go on to define the time and circumstances of annual meetings "shall be held on the first Tuesday of September......at 7:30pm." Section 3(b) states "Special meetings shall be called by written notice, authorized by a majority of the Board, or by the voting members having one-fourth (1/4) of the total votes....." and Section 3(c) states "Notice of meetings required to be given herein....to the Unit Owner with respect to which such voting right appertains...".

The documents pertaining to Briarcliffe Lakes Manor Homes make a clear distinction between voting members or Unit Owners, and "Occupants". Our by-laws do not state that "Occupants" may come to meetings for "Voting Members". Our covenants and By-Laws have specific language about members of our Association, and about "Homeowners' Association meetings" which are defined as "Meetings of the voting members."  Renters are not voting members.

I believe the action by our CD and the Board is illegal, which is to say, is not in accordance with our covenants and By-Laws. Our Board exceeded its authority. It is disturbing that our CD, who proposed this, did not even have a copy of the governing documents in hand, so that this could be properly discussed. Our board president was not present for the meeting. This is another example of someone on our Board "running their agenda" for their own personal reasons and personal motives.

The board does have the right to change or "Amend" the By-Laws, but only by "action and approval of the voting members having at least two-thirds (2/3) of the total votes; provided....no provision...[will] conflict with the provisions of the Condominium Property Act."  However, this unilateral action by the board is not in accordance with our By-Laws. The motive appears to be the personal agenda of various members of the Board.

There was a lively discussion by the unit owners who were present. As was pointed out by a unit owner, this will undermine the relationship of the owner who is the landlord, to his or her tenant, replacing the landlord with the Board. Perhaps that is the intention of our CD. However, this raises some serious questions. The By-Laws already pertain to Unit Owners and Occupants alike. So what is the goal here? When the question of the guidance of the By-Laws was discussed, and possible review by legal counsel, this was quickly passed over, in the rush to second and vote. This appears to be a clear breach of Fiduciary Duty. There was no attempt to consider and be "informed". With the exception of the 2009 meeting cited above, there has been no other discussion with Unit Owners present. Of course, various members of the Board are apparently privately discussing this and other "good things" for our HOA.

As a Unit Owner, it is extremely disappointing to see Board members who are so eager to pass their personal agendas that they are unwilling to do the necessary research. As a Unit Owner, I suspect I have invested much more time on reading the governing documents and studying the issues than our Board has. Various owners wonder why we have problems here at BLMH. I suggest they attend unit owner Association meetings and observe the action and character of the Board. Then they may have a better understanding of the incredible problems facing this HOA.

I'll be doing my own, independent research on the pros and cons of such a change to the By-Laws, since our CD is unwilling to discuss her rationale, other than that she has read somewhere that this is "a good thing".  It may be this is "a good thing", but I am unconvinced. It is also a fact that there is protocol for making changes to the By-Laws. and this is not the legal way.  I am also concerned that so many of our Board members voted for the affirmative!

Comment Added March 15, 2010. 
There is disinformation being distributed about who is allowed at meetings in accordance with the Illinois Condominium Act. The 2010 version of the "Act" Section 18.a.9 states that the Bylaws shall include at a minimum that "Meetings of the Board of Managers shall be open to any unit owner..." Section 18.3 goes on to state that "Each unit owner shall be a member of the Association." Renters or other "occupants" are not members of the association. If anyone tells you otherwise, ask them to cite the specific section of the "Act". If they can't then they are deliberately deceiving you.

Comment Added March 18, 2010. 

I have been asked if all of the board voted for this. The Treasure voted "NO" and explained exactly why. The President was absent from the meeting. 

Board Operation, Some Examples and Fiduciary Duties revisited - Part III

Aspects of Fiduciary Duties 

(3) "A fiduciary duty arises out of a relationship in which one person or entity is entrusted to make decisions for, and control the interests of, another person or persons. Boards of directors owe a fiduciary duty to the association’s members. Most jurisdictions have either enacted statutes or have specific case law that establishes directors of nonprofit and non-stock corporations as fiduciaries.

There are two aspects of fiduciary duty. The first relates to a director’s responsibility to perform his duties in good faith, in a manner each director believes to be in the best interest of the association, and with such care, including reasonable inquiry, as a prudent person in a like position would ordinarily use under similar circumstances. This standard of care has been adopted in most jurisdictions and is often cited as the “prudent person standard” or the “business judgment rule.” Directors will not be liable for mere mistakes in judgment so long as they act in good faith and have a rational and informed basis for their decision.

The second aspect relates to a director’s duty of undivided loyalty to the association and its membership. This higher standard of performance is breached when a director acts in his or her own interest or with a conflicting interest. Not only must directors perform their duties in good faith and in the association’s best interest, but they also must exercise undivided loyalty and honesty and avoid any conflict of interest or self dealing.

• A director can comply with the standard of due care by following the business judgment rule requirements. Courts will not second-guess a director’s decision that is made with reasonable diligence and is believed to be in the association’s best interest. The business judgment rule requires directors to:
• Be informed about the association’s business at all times.
• Attend and participate in all meetings.
• Register a dissent in the minutes.
• Remain knowledgeable about the declaration, bylaws, rules and other documents essential to the association’s operation.

As to the avoidance of conflicts of interest, failure to meet the standard of undivided loyalty and honesty could expose the director to liability for a breach of fiduciary duty. When faced with a decision involving a potential conflict of interest, the director should disclose the conflict of interest in writing and abstain from voting on the issue."

(4) "The law of fiduciary responsibility can be viewed as having two purposes. The first is moral or educational in nature. The law sets a standard for appropriate conduct of association directors. It is intended to guide proper conduct and avoid inappropriate actions. The other role of the law of fiduciary duty is to act as a practical tool for restitution. If a homeowners association is damaged because of a breach of fiduciary duty by the director, the law affords a remedy to recover the resulting damages. A wealth of resources are available to directors to assist in understanding and meeting their fiduciary responsibilities. Books, pamphlets, magazines and newsletters are one source of information. Professional advisors, including attorneys, accountants, reserve study consultants, engineers, architects, insurance brokers and community association management consultants are among the paid advisors who may be engaged to advise on either a narrow issue or more broadly to help directors understand and comply with their legal standard of care.

The ability of volunteer directors to effectively perform their fiduciary duties will ultimately determine the success of common interest developments as a form of housing. While there are widespread examples of successfully run subdivisions, there are unfortunately also well known instances of leadership failures where homeowners associations are in political turmoil, financial collapse and physical deterioration. The challenge to each director is to exercise good leadership to avoid such a downward spiral of economic and political self-destruction.

(5) Recipes for Success and Failure

From the legal standpoint, directors incur liability when they breach the standard of care to which they are held under the statutory and case law which are discussed below. In reality, however, suits for breach of fiduciary duty can be viewed as arising from a lack of leadership and management skills by the board of directors. It is appropriate, therefore, to pause and consider the characteristics of successful leadership and management.

In successfully run homeowners associations, members of the board of directors possess good communication skills, carefully plan in advance, make good judgments based on sound decision making practices, delegate work to qualified committees or advisors, exercise initiative and independent thinking, and work well together as a team. In contrast, political or fiscal failures often result from the acts or omissions of boards of directors lacking good communication skills, procrastinating necessary work, making bad judgments without seeking input from committees or advisors, stagnating for lack of initiative, or political stalemates caused by dysfunctional personal relationships among the board members. From this perspective, the exercise of fiduciary duty flows naturally from effective business management, and it is the breakdown of good management practices, and the lack of skilled leadership, that breeds claims for breach of fiduciary duty.

(6) What is Fiduciary Duty

Fiduciary duty is a standard of care which inheres in a legal relationship of trust and confidence between one in a position of power, dominance or authority, and another who is dependent on the proper exercise of that authority. Fiduciary duty exists in relationships between directors and their corporation, trustees and their trusts, and attorneys and their clients. Inherent in fiduciary duty is the responsibility to act in good faith and candor, the duty to act in the interests of another and to avoid self-dealing transactions, and the obligation to not exert undo pressure or to act without the knowledge and consent of the "beneficiary".

The law imposes fiduciary responsibilities to ensure that power is exercised responsibly. Directors are expected to act in the best interests of the corporation, and not to exploit their position of power for personal gain or advantage. No one argues with the soundness of this principle in the abstract. Experience demonstrates, however, that directors can become paralyzed in the stressful situation where the responsibility to act in the best interests of the corporation conflicts with personal or emotional needs, such as the basic human need for personal approval from one's neighbors and friends. Enforcing the governing instruments, properly funding the economic needs of the association, or pursuing causes of action for defective construction potentially place the director in the position of controversy and criticism. The good people who volunteer to serve their community through election or appointment to the board of directors are often unprepared for the emotional and political crossfires that can easily arise in the performance of these duties. Even the anticipation of such controversy is sufficient to keep many directors from taking difficult short term actions that are important to the long term well being of the homeowners association."

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I encourage the reader to visit the following sites and continue and expand their education. The more informed our unit owners and our Board of Directors are, the better run our HOA will be.

References:

(3)   Harborview HOA blog

(4), (5), (6)  HOA Law - Jeffry A. Barnett, APC

Board Operation, Some Examples and Fiduciary Duties revisited - Part IIb

An Interesting Case Study:

(1) "Among many other obligations, an Association, acting through its Board of Directors has the absolute duty to manage, operate, maintain and repair all common areas and to keep them in a safe, attractive and desirable condition for the use and enjoyment of its owners. In fulfilling this obligation the Board of Directors also has the duty to prepare a budget and establish assessments for the Association adequate to meet the financial requirements necessary to maintain the common areas.

[HOA Services Group] was recently awarded the management contract for a large 25-year old condominium community.....This community could easily spend $500,000 just to address the obvious deficiencies. And, of course, their reserves are $0.

[A]tremendous opportunity for [HOA Services Group] and That's exactly what we believed as well. Unfortunately the easiest and very first step in beginning to clean up this community, the landscaping, still hasn't been addressed because the Board is trying to get the contractor to reduce his quote for an initial cleanup of the entire property from $900 to $750, a whopping savings of $150....

...we've pointed out that this “band aid” approach will ultimately cost the owners substantially more in the long run......According to the Board we just need to keep any special assessment to minimum, and be careful about proposing any increase in the monthly dues even though they haven't been adjusted in years. Is it any wonder why this property is in its present condition, and what exactly is the likelihood that we'll be able to convince this Board to properly address their many needs?

A Board of Directors has a fiduciary duty to always act in the best interests of its members. Unfortunately many Board members make decisions based on their personal situations, and sometimes forget that service on the Board carries with it the obligation to represent the interests of all the owners in the community. Failure to meet this duty will often result in decreased property values, dissention among the owners, and quite possibly lawsuits against the Association and its Board members. Defense of these types of claims against the Board of Directors can be both costly and time consuming, and typically compounds the already existing animosity between the owners and the Board of Directors.

We still have hopes that we'll be able to better educate the Board members of the community mentioned above. Unfortunately, while our efforts could be directed at returning this community to a well-maintained and desirable place to own and live, we'll first have to devote a substantial amount of time to changing this Board's philosophy. Hopefully we can do that before they have the opportunity to test out that new Directors & Officers Liability policy."

In the above, there are several interesting items, from which I draw a few parallels.

1. [The] "Board of Directors has the absolute duty to manage, operate, maintain and repair all common areas and to keep them in a safe, attractive and desirable condition for the use and enjoyment of its owners."
2. "[The] Board of Directors also has the duty to prepare a budget and establish assessments for the Association adequate to meet the financial requirements necessary to maintain the common areas."
3. The experts who wrote this stated that it was their perspective that this was an opportunity for the "Board of Directors to make a real impact on this community and to dramatically improve the property values of the unit owners."
4. The Board of Directors in this case study were having great difficulty establishing priorities and were, for example, improperly embroiled in a negotiation with a contractor over a difference in perspective which was "a whopping savings of $150."
5. The authors went on to state that it was the perspective of the Board that "we just need to keep any special assessment to minimum, and be careful about proposing any increase in the monthly dues."
6.  The authors then went on to state "we've pointed out that this “band aid” approach will ultimately cost the owners substantially more in the long run."
7. They also stated that "A Board of Directors has a fiduciary duty to always act in the best interests of its members. Unfortunately many Board members make decisions based on their personal situations, and sometimes forget that service on the Board carries with it the obligation to represent the interests of all the owners in the community. "
8. The authors closed with the statement that "We still have hopes that we'll be able to better educate the Board members......our efforts could be directed at returning this community to a well-maintained and desirable place to own and live, we'll first have to devote a substantial amount of time to changing this Board's philosophy."

Here at BLMH, everyone including our paid managers, who were put on notice, have taken the perspective that it is best to keep their collective heads down and keep their jobs, while in 2009 our new board argued in favor of parties and garage sales which benefit the few, glossy newletters, $500 bids for concrete, championed semi-trailers on the property, etc. What will 2010 bring?

In coming posts, we'll take a look at the aspects of Fiduciary Duty.

Oh, and as I promised, I will be posting an interesting chart pertaining to the condition of our reserves. This is as promised in 2009. I decided to delay this until after the new board had completed its budget "planning", which they did. According to the overwhelming majority of our board, our finances (Operating and Maintenance, as well as Reserves) are in sufficiently good condition that there was absolutely no need to raise our fees this year. In other words, we are accumulating reserves at a rate adequate to fund all the roofs, driveway paving and street repairs, etc. in a timely manner so as to "maintain and repair all common areas and to keep them in a safe, attractive and desirable condition for the use and enjoyment of its owners." Well, it seems our Treasurer wasn't as certain of this as the others on the board. As they say "follow the money". So what do the numbers say? What? Base our decisions on numbers, rather than on our constituents? Is that any way to run a political organization based on "change"? Oh, but this isn't about politics they say, it's about running this HOA.  Okay, I'll go with the flow and we'll see what the numbers tell us!

If you enjoy slick presentations and colorful charts, "you are gonna love this" as they say. According to our official HOA Communications Director, the majority of our members love our new shiny and expanded newsletter, so this post should be enthusiastically greeted by all. Frankly, more information and less pap is my approach and it seems some new leadership is guiding her in that direction. It's my perspective that the more information and data that is available to ALL of our members, the better our association will function.

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References, Errors, Omissions, Additions:

(1)  HOA Services Group - A leading provider of reserve studies and maintenance plans