Real Estate & Property Law

Volunteer Board Members -Should They Receive Compensation?

A recent common question:

"What specific information can you provide on the topic of Volunteer Board Members serving [HOAs], namely compensation for well defined work NOT related to their duties as a Board Member?"

Most HOA docs in California prohibit compensating Board members, allowing only for reimbursement for expenses incurred in serving the HOA.

The language may be broad enough to prevent any compensation for anything; but it may be narrow enough to allow compensation for services that are not within what would be expected of a volunteer board member. I know there are HOAs that compensate Board members for tasks like construction management, assessment collection, budget preparation and tax reporting, etc. There are risks.

HOA members unhappy with this practice might be able to assert a viable claim against the individual board members for this compensation paid, and may be able to recover from the money paid for services. (As yet, I know of no specific cases on this.)

If the practice is not disclosed to members, a viable claim for conflict of interest might exist.

The "volunteer" board members accepting compensation lose valuable protections that exist in the law for [bona fide] volunteer board members. They are no longer "volunteers". These protections insulate board members from personal liability - and the compensation is often not worth the loss of that protection.

Members often become suspicious (justified or not) when "volunteer" board members compensate themselves and it can cause political pressure and strife.

If compensation is to be paid for any services, those services should be well-defined in writing, by a contract, for services that are not what one would commonly expect of a volunteer (such as payment for specific expertise and skills), and for specified compensation. There should be a distinction in what is expected, so a determination can be made as to whether the compensation is for justifiable services.

I do not generally recommend that an HOA compensate board members for services the board should be providing; however, I certainly understand why some HOAs do it. It often results in (1) a savings over hiring outside services, and (2) having someone to do the work who has a personal interest in the HOA.

However, it often also has some negative effects. In some cases it results in paying for services that require specialized knowledge or training, without getting the benefit of specialized knowledge or training.

No board member should receive compensation simply for serving on the HOA Board when the governing documents say that board members shall not receive compensation.

Full post as published by California Condo & HOA Law on November 04, 2008 (boomark / email).