No Board Members? What Happens Next?

It happens to all Board Members:  you volunteer to be on your Association’s Board, and after a few years of devoting your time and energy to the Association, you decide that it is someone else’s turn to contribute by serving as a Board Member.  But what happens when no one is willing to be a Board Member?

Unfortunately, the Association cannot function without a Board.  There would be no one to transact business, make or sign contracts, or to make general decisions about the function of the Association.  No one would have authority to collect dues or pay contractors.

If the Board positions cannot be filled, any owner or creditor can commence a lawsuit to appoint a receiver.  The court, after determining that no members of the Association were willing to serve on the Board, can then appoint a receiver to facilitate general business on behalf of the Association.

Unfortunately, receivers are usually expensive, and may charge $250 - $400 per hour for the work that the Board would have done for free.

The costs of appointing a receiver would then be passed on to the owners and result in increased maintenance fees and/or special assessments.  The receivership would continue until a suitable Board could be put into place.

In some cases, a receiver is appointed to run the Association even if there are members willing to be Board Members.  In cases where the developer turns over control to a bank (usually through deed-in-lieu of foreclosure), the Association is insolvent (or facing bankruptcy), and/or involved in other litigation, a receiver may be appointed.

If your Association is in a receivership, keep in mind that this will look unfavorable to potential homebuyers and lenders, which may adversely affect your property values in addition to increasing maintenance fees and/or assessments.  If special assessments are not paid right away this may increase your delinquency rates.  For a conventional loan, generally no more than 15% of owners can be delinquent on maintenance fees.  What may be as simple as members not wanting to volunteer may turn your community into a “cash buyer only” situation, causing values to plummet. 

An important piece of advice for Association’s operating without a full Board: take continuous, reasonable steps to fill the Board vacancies.  Most declarations and bylaws and Ohio law allows for current Board Members to fill Board vacancies without an election.  Usually, Boards are empowered to appoint owners to fill vacancies for the remainder of the vacating Board Member’s term.

However the most effective way to fill a Board is to encourage participation and highlight the importance of serving on the Board.  Explaining the importance of taking an active role in the Association for the good of the community can often times appeal to owners who otherwise would not have considered serving on the Board.  Another effective tactic is to highlight the effectiveness that a Board can have in solving the issues that face an Association.  Often, Associations face serious issues that are no fault of their own (for example: systemic flooding issues, building defects, issues affecting the municipality).  Boards should take time to explain to owners that serving on the Board is an excellent way to meet those issues head-on and have a role in solving the problem.

If a Board is experiencing habitual vacancies, the Association may consider amending the governing documents to reduct the number of Board Members required.

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