Homeowner’s associations are regulated at the state level through a variety of state laws, regulations and the HOA’s own bylaws. It is a constantly changing legal landscape that can be a challenge for HOAs to keep up with – especially for those that are managed by a volunteer board. For example, the last 40 years has seen the introduction of several major pieces of housing legislation, including the Fair Housing Act (FHA), Americans with Disabilities Act (ADA) and various transparency and governance regulations.
Violating these regulations means the risk of fines and close scrutiny from the courts. If the HOAs actions are deemed serious enough, courts may issue injunctions against the association or order an investigation into the HOA’s activities.
And though state laws and the HOA’s own bylaws may offer some personal liability protection to individual board members, this protection isn’t infallible. In some instances, legal action can be brought against individuals, resulting in costly litigation and potential financial penalties.
A proven way to mitigate these legal risks is to partner with an HOA management company. Professional management services are well-versed in the legal regulations affecting the housing industry and can take proactive steps to ensure their HOA clients aren’t exposed to unnecessary legal risks.
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Why is Legal Compliance so Critical for HOAs?
HOAs are expected to observe federal and state housing laws, which include the following:
- Anti-discrimination laws
- Accessibility laws
- Assessment and lien laws
- Voting and governance laws
- Financial transparency laws
- Record keeping and documentation laws
- Dispute resolution laws
- Insurance laws
- Environmental laws
Given the scope of the legal picture involved, it can be impossible for HOA board members to keep up with all HOA regulatory updates and protect the board from liability.
If homeowner associations are determined to be in violation of any of the above laws, it will result in state-level enforcement actions. This typically starts with fining the HOA itself and possibly instituting an injunction against some of its activities. If the HOA’s actions are considered egregious enough, a court may order an investigation into any complaints against the association, such as complaints made under the Fair Housing Act. Fines, legal costs and any assessments against the HOA can be a burden on the association’s budget, stressing its ability to manage the property and deliver on its promises to property owners.
HOA Board Members May Be Held Personally Liable in Some Instances
Enforcement may be limited to the HOA itself, but it can extend to individual board members and expose them to litigation risks as well. Personal liability may be in play when one or more of the following are true:
- Any illegal activities that are egregious and obvious, such as knowingly violating anti-discrimination or fair housing laws.
- The individual board member abuses their power, such as harassing a property owner or fraudulently misusing funds.
- An individual board member retaliates against someone who files a complaint against the HOA or reports illegal HOA activity to authorities.
There can be a considerable gray area when assessing whether or not an HOA board member should be held personally liable for a violation. For this reason, many HOAs partner with a management company that specializes in HOA legal risk management.
What Proactive Legal Protection Services Do HOA Management Companies Provide?
An HOA management company brings legal expertise to their clients and can reduce an HOA board’s liability through the following methods and services:
- Document review and compliance audits – A professional management company can audit your HOA’s governing documentation and assess whether it is compliant with state and local laws.
- Policy and procedure template updates – A professional management company can review an HOA’s policy documentation (like its emergency response or collection policy) and update them to bring them current and within regulation.
- Regular governing document revision recommendations – A professional management company will remain vigilant of any changes to housing laws that may affect your association’s policies. If so, they can recommend revisions to your policy documentation to ensure it stays within the scope of the law.
- Board education on liability reduction – Many board members are volunteers or otherwise inexperienced in HOA leadership, which can lead to confusion regarding HOA legal compliance. A professional management company can educate board members on HOA legal risk management and provide guidance on proper policy execution.
- Proper meeting notice and documentation – A professional management company can either issue notice of an HOA meeting or assist associations with publishing their own notice. HOA meeting notices must include certain details, including the meeting’s date, time, location and details about any proposed changes to the HOA’s budget or operating bylaws.
- Elections oversight and verification – A professional management company can help HOAs ensure their elections and voting processes are compliant with state laws. For example, transparency regarding the election process and vote tabulation is expected during HOA elections.
Professional management companies work to stay on top of any changes to the housing regulatory landscape, and any HOA laws. The above services are guaranteed to follow the most up to date interpretation of housing regulations, which will minimize the HOA board’s legal liability.
Professional Management Ensures Legal Compliance for Your HOA and Provides Peace of Mind for Your Board
HOA associations are confronted with legal risks with every decision they make, but professional HOA management companies are well equipped to identify and mitigate these legal risks as they emerge. For your association, that means better protection against financial penalties. For your board members, that means better personal liability protection and peace of mind. After all, the cost of litigation is always going to be much greater than the cost of a proven, reliable HOA management company.
If your association needs to assess its legal vulnerabilities and ensure complete legal compliance in all facets of its organization, consider consulting with a professional HOA management service to determine how their services can help.
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