No Board – Now What?

In these challenging times and with volunteerism at historically low rates, the possibility that no owner will volunteer to serve on the community’s Board of Directors is becoming a more common problem. Without owners willing to volunteer to serve on the Board, the prospects are grim as a functioning Board is necessary (legally and practically) to guide the association in decisions.

Without Board decisions, there would be no one making decisions about assessment collections or the maintenance of common areas of the association. In addition, bills regularly paid by the association, such as property taxes, liability insurance premiums, and others, could go unpaid.

While in many situations, a professional management company can reasonably and efficiently “run” the association in the short term, a managing agent cannot continue to operate indefinitely without a principal. Nor would it want to do so for liability reasons. Although it can usually keep utility bills and taxes paid and handle other routine matters, a management company cannot make key decisions, such as increasing regular assessments or entering into contracts with key vendors. Therefore, someone would need to step up and serve on the Board.

If no one volunteers to serve on the Board, we counsel clients to send out community-wide letters alerting all owners of the need for volunteers, but more importantly the negative impact on the future of the community if no Board is in place. Ultimately, without direction and decision makers, an association cannot properly fulfill its statutory and contractual duties.

At the association’s next election, if there are no volunteers to serve on the Board, or if a quorum cannot be obtained for an election, it is important to note that although an existing director’s term expires, he/she may continue to carry out the duties of the association. The Nonprofit Corporation Act states that a director shall continue to hold office until a successor is elected, designated, or appointed, or until there is a decrease in the number of directors, despite the expiration of such director’s term. As the director has a continuing statutory obligation to the association, if the director is unwilling or unable to continue to serve on the Board, it is in the director’s best interest to affirmatively resign in writing.

With the decrease in owners volunteering to run for the Board, associations have asked whether the association can be terminated. While theoretically this is possible, it is not easy to do as the city in most cases would have to take on the responsibility of maintaining the common areas. Most cities have no interest in taking on areas to maintain. Even if the city takes on the responsibility of maintaining the common areas, the association would have to terminate or amend the CCR&s as well as dissolve the corporation, which requires a significant membership vote.

Short of dissolving the association, a Board is a necessity. Without a Board, home values and the general health of the community would deteriorate. In some extreme cases, we have seen associations go into receiverships (with the receiver essentially acting as the Board), which also can affect property values and re-sales in the community.

While it can be a challenge to find volunteers to serve on the Board, it is a necessity for an association to continue to operate. If you have any questions about these issues, contact Nikita Patel or another attorney in our office.