Balancing Community and Governance

Balancing Community and Governance
Reforming the Community Association

By Wayne S. Hyatt

Hyatt and Stubblefield, P.C.,   Atlanta, Georgia

Excerpts from

Proposals for Change

The perpetual obstacle to human advancement is custom.  John Stuart Mill

Role and structure of association governing boards 

Governing boards need to have a more flexible approach to governance, and the initial governing documents need to create and to institutionalize rule-making as a dynamic rather than a static process.  A legal framework is needed that permits the board and the association to implement the development’s covenants in a manner that allows the governance process to evolve with the needs, desires and changes within the community.  At the same time, there should be procedures for owner involvement and owner protections.

An alternative governance approach involves the creation of a more legitimate governance structure than the current corporate model and recognizes the difference between regulation and prohibition.  Such a new structure contemplates that the initial governing documents will contain only a limited number, perhaps a severely limited number, of prohibitions and restrictions, including only those restrictions that the association believes to be vital to the overall community development and maintenance plan.  Coupled with these initial provisions would be a method for permitting changes and for the adoption, modification or abrogation of regulations through the community’s ‘legislative process” as time passes and circumstances change.  Members’ rights to initiate and to participate in this process are vital.

In addition to the initial restrictions or prohibitions, there would be several general but clearly stated standards of conduct, maintenance and design.  These standards would operate to establish ranges of expectation and permitted activity without being overly restrictive or disruptive of individual choice within articulated, accepted norms.

In a system that provides simplicity, flexibility and balance, it would be unnecessary to promulgate initial restrictions and prohibitions that might, in the final analysis, be inconsistent with the development plan and the reality of the community as it grows and changes.  Rather, the governing body, first the board of directors and, secondarily, the membership, would have the power to make or to change these provisions, according to a defined procedure,  In other words, the goal would be to create a truly responsive governance system, one that is realistically empowered to govern.  For this to work, the practitioner and the association, must not be change-averse and precedent-bound.

At the same time, the governance system must provide checks and balances, disclosures of potential consequences from operation of the system to purchasers, and specific protections for owners and for the individual owner.  If one argues, as I do, that there is a great need for recognition of the importance of the group and a moderation of the emphasis upon the individualism and “rights,” it is important not to forget that the individual’s interests do exist and need both recognition and protection.  Too frequently, boards of directors become autocratic and ignore these interests, deny members information and fair hearings.  Civility applies at all levels and the rights of the minority and of the majority need respect.

For this reason, the community association governing documents should contain not only empowering sections but also language establishing a “bill of rights” for owners, establishing boundaries to the board’s powers. These boundaries provide some degree of certainty to the purchaser and aid in enforceability by showing a court that there are limits both to the acceptable degree of control and to the powers that support that control.  It is also appropriate for there to be an obvious cost to directors who act in flagrant violation of these standards.  Periodic reevaluation of restrictions also will ensure that those in force have application in the community.  Finally, this format would address concerns regarding the applicability of the corporate model to the political and social needs of the community as well as establish an appellate mechanism.

Quality training promotes better job performance and job satisfaction by providing needed skills and maturity of judgment.  It also increases respect for the position and the person holding it.  Better-trained boards result in fewer problems and better association governance.

Board composition is problematic in this day and age.  As owners’ time and demands conflict, member involvement in community policy decisions, as such decisions involve an ever increasing range of issues, will take on even more importance than we see today.  Associations may also need procedures to create boards that are balanced in terms of the members’ understanding of and experience in corporate governance.

If it is true that “the perpetual obstacle to human advancement is custom,” then the challenge and the opportunity is to redefine custom, to build on it and to create new approaches and new applications.