January 2012 – What if you want to motivate your owners to do something—like volunteer on a committee or oversee the lobby redecoration? Is it possible to offer incentives—like reduced HOA fees for a given period of time—to attract otherwise–apathetic owners? Here, our experts weigh in.
No, no, no, and no.
It’s unanimous. All four experts we consulted say offering owners fee discounts is either a bad idea or improper.
“We took on an HOA where one director hadn’t paid assessments in more than a year because he sat on the board and felt like he’d earned the discount,” says Duane McPherson, Addison, Texas–based western region division president at RealManage, an association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas. “Though it was more than $1,000, the rest of the board knew about it and hadn’t said anything because they didn’t want to be the bad guys. We came in and told the board that they had to go back and collect those assessments from the director because that was a debt owed to the association. Did it create hard feelings? Sure. Was it fair and equitable to make the director pay those fees? Absolutely.”
In Florida, statutes prohibit that type of practice. “No, you can’t do this in Florida,” says Ben Solomon, an attorney and founder of the Association Law Group in Miami Beach, Fla., who advises more than 500 associations and also represents developers through his second law firm, Solomon & Furshman LLP. “Both the Florida condo and HOA acts say, ‘Owners shall pay…’ So associations don’t have right to do that. Even board members who put tireless hours in get no compensation, and you certainly can’t give credit on assessments for services provided. You have to treat all owners uniformly no matter what.”
The practice is also “problematic” in Michigan, according to Nathaniel Abbate Jr., a partner at Makower Abbate & Associates PLLC in Farmington Hills, Mich., who represents associations. “Technically, the assessments are what they are, and if you say you’re going to let some people off the hook, you’re violating the Michigan condo act. As a general rule, we’d not recommend that you pay people by giving them a discount on their assessments.”
Even if your state doesn’t prohibit such a practice, it’s still not wise. “It’s a bad idea because you need those charges, and there really should be no occasion when you give them up,” contends Robert Galvin, a partner at Davis, Malm & D’Agostine PC in Boston who specializes in representing condos and co–ops. “I think this is a terrible idea, too, but if you were going to pay a unit owner for some job the owner did, I’d just pay the owner with a check. I wouldn’t forgive the owner’s condo fees. The whole concept of an HOA is that it’s a voluntary association in which people work to make their community run, and I don’t think there’s ever an occasion to pay anybody.”
Is There No Way to Recognize Owners?
If you’ve got owners who are really going above and beyond their volunteer duties, is there absolutely nothing you can do to recognize their contributions? You can:
1. Pay them for their services. “What you might be able to do if owners are performing a service that’s normally something you’d pay a vendor to perform is to say, ‘You still owe your assessments and have to pay them. But we also recognize you cleaned out our pond, and the value of that is X. So out of our budget, we’ll pay you the value of your services,'” explains Abbate. “That, however, doesn’t address whether you can give people incentives to serve on a committee or do something that’s less likely to have to be performed by a vendor.”
2. Give them a token of your appreciation. “Always explore alternatives like gift cards,” recommends McPherson.
Abbate agrees. “If someone oversaw your lobby renovation, you can give that person a $100 gift certificate,” he says. “Who’s going to complain? And if someone were to take the association to court, what would the court say? It’s a question of whether you’re following the business judgment rule. If we were called on to defend that situation, I’d say the decision was committed to the discretion of the board and that the board used its best judgment to determine what it would have cost to have an interior decorator oversee the lobby renovation project. Given that, is it out of the realm of reason to have someone get a benefit like that? I don’t think something that’s not going to break the budget or is a token of appreciation is going to run afoul of the law.”
Is there a point at which a gift card amount could be too generous? “If you’re giving anything more than $100,” says McPherson, “you really need to stop and think about what you’re doing.”
Even then, Galvin is concerned. “I just don’t think it’s a good practice,” he says. “I don’t think people should expect to be compensated for their participation.”
Matt Humphrey is president of the Alameda, California-based HOAleader.com, from which this article was adapted.