A condominium or homeowners' board of directors operates a multi-million dollar, not-for-profit corporation and is responsible for the assets of the dozens of homeowners who live in the association. When put in that perspective, the board's responsibilities can be viewed as staggering.

Yet, too often, boards become battlegrounds for egos, hotbeds of irresponsible cost cutting, or mires of indifference.

Tim Arel believes that for a board to be effective, it must understand its responsibilities for establishing and carrying out policies, maintaining the property, managing the finances of the property, and most importantly, preserving the homeowners' investment.

A successful board requires training and experience. And that is where the property manager comes in.

From a property manager's perspective, there are two main ways to train a board. First, the property manager can take the time to train the board as a group or to work with board members individually. Selecting an option depends primarily on whether the board members are all relatively equal in their knowledge.

Instead of undertaking the training personally, the property manager may chose to send board members to topical seminars in the area. These seminars may be sponsored by professional organizations and trade agencies or by vendors such as attorneys, accountants, and contractors.

A balance of both types of training is vital. The bottom line is not always where or how your board members receive their training, but that they receive the training they need to be effective in performing their responsibilities.

Property managers face a number of challenges when training boards members. It is up to managers to ensure that board members understand financial reports; the importance and impact of reserves; the basics of contract law; and the consideration for the overall operation of the association. Each of these items is of vital importance to a community's success.

Finances

Preparing the annual budget and overseeing the financial management system of the association are two of the most significant responsibilities of the board. The annual operating budget and capital reserves budget reflect the goals of the association and set the level of quality of service for all activities of the association.

Managers need to spend time with board members explaining how to read balance sheets and income statements in order to properly prepare the annual budgets. Unless your board is heavy with accountants and MBAs, do not presume that these skills are common knowledge. Low-cost seminars offered by accounting firms can also be a beneficial learning tool.

If one or two board members have more difficulty than others, then offer some private tutoring time. When new members join the board, the manager or the board president should act as an instructor or mentor.

To read financial reports, board members need to understand whether the cash or accrual accounting method is used. The cash method is easier for most board members to understand. However, the accrual method is a more beneficial operational tool.

Another vital part of the board's role involves understanding the importance and impact of reserves in maintaining property value. Prudent boards will establish their reserve budgets based on the age, condition, and anticipated replacement costs of major capital items.

Reserve funding through the assessment process is the most practical manner to address major replacements, and the manager must encourage the board to set aside a percentage of the assessments collected each month to be placed in a reserve account. Remind the board that equipment and facilities age and will need repairs and/or replacement. The key is to plan ahead and to have the funds available when repairs and/or replacements become necessary.

Many boards are reluctant to increase assessments to fund the reserve account, for fear that homeowners will react negatively. However, failure to increase assessments, when needed, is a huge disservice to the association. The manager should remind hesitant board members that homeowners will be even angrier about a huge special assessment when a capital expenditure cannot be put off any longer.

Communication is the key. The property manager must effectively communicate the property's needs to the board, who, in turn, must sell the idea of a capital reserve to the association members. This can be accomplished via a newsletter or personal contact. The "selling process" should begin months before the increase becomes effective. The ideal "pitch" is to emphasize to association members that failure to increase assessments will result in an inability to maintain and repair the property. This will ultimately result in lower property value and a lesser quality of life in the community.

Contracts

Contract negotiation is another aspect that can be a bit overwhelming for board members. Although every situation is different, there are certain items board members should ensure their contracts include, such as: term of the agreement, the function/responsibility of the contractor, levels of performance expected, method of reporting, and fee for services.

Additional issues to consider include familiarity with the contractor, proper execution of the contract, and non-performance provisions that allow for early termination. The property manager should review these areas with the board members and furnish them with a checklist of things to remember. It is also suggested that board members consider attending seminars conducted by legal experts on the principles of contract law.

Continuing Education

Once members have the proper training, it is important that the property manager ensure the board does not become complacent or conversely does not attempt to micro-manage the property manager.

The key to avoiding complacency is maintaining the board's enthusiasm. Board members must be kept involved in the decision-making process and not be allowed to lean too much on the property manager.

Conversely, a little knowledge may become a dangerous thing. Board members may become overly involved in the tasks being performed by a contractor or property manager. Second guessing the outcome of a situation, telling a contractor how to do his or her job, and constantly interfering with the operation of a vendor are all signs of micro-management. It is the responsibility of the property manager and the board president to curtail this activity before it becomes harmful to the community and its members.

It is also important that training be conducted on a regular basis. Every board has a certain amount of turnover, and it is up to the manager to see that new members are educated. The key to ensuring a smooth transition-period starts with advance planning. Board members should always be recruiting new participants. The best way to determine if a person might make a good board member is to invite him or her to serve on a committee. In this way, the board and the manager can see first hand the kind of work, commitment, and follow-through the prospect will bring to the post.

Life-Long Learning

Board members play a key role in the success of an association. It is vital that the property manager do everything possible to ensure board members have adequate training to fulfill their obligations. A successful board must always remember that its main purpose is to maintain, protect, and enhance the value of the community. With a good trainer, this success will be assured.

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