January 2011 – Do your HOA governing documents have term limit clauses for board members? If not, should they? Here our experts run through the pros and cons.
HOA Board Term Limits Fading
Term limits for HOA board members are rare, and they’re becoming even more so. “I can’t recall seeing an association that has term limits in place,” says Matthew A. Drewes, a partner at Thomsen & Nybeck PA in Edina, Minn., who represents associations. “It’s certainly not common.” Neither can Nathaniel Abbate Jr., a partner at Makower Abbate & Associates PLLC in Farmington Hills, Mich., who represents associations. “We probably represent about 800 associations, and I’ve been at this firm for ten years,” he says. “I can’t think of one that has term limits, though there’s nothing in Michigan law that I’m aware of that would preclude them.”
That doesn’t mean term limits don’t exist in HOA governing documents. “I’ve seen them,” says Dennis J. Eisinger, a partner at Eisinger, Brown, Lewis & Frankel PA in Hollywood, Fla., who represents more than 500 condo and HOA associations. “They used to be much more common. Now under the condo statute in Florida, they’re effectively outlawed. The statute doesn’t say it in those words. But it says that everyone is eligible to run for the board, so effectively there can be no more term limits. Under the Florida HOA statute, if the documents allow for term limits, there can be term limits. Even there, term limits rarely come into play anymore.”
The Good and Bad of Limiting HOA Board Members’ Terms
“I can envision there could be some benefits to term limits,” says Drewes, “but there are also some detriments.” The biggest pro is that the risk of a tyranny may be lessened. “You may be able to reduce the possibility that there’s what some people might consider a dictatorship, where a long-term member appears to rule with an iron hand,” explains Drewes. “When you always have the same people or a particular person on the board, there can be the impression that things are being run for the benefit of one person or a small group of people as opposed to the good of all. By having, encouraging, or requiring board turnover, you might have more openness and more people involved in the association’s governance.”
Duane McPherson, the San Rafael, Calif.-based division president at RealManage, an association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas–who has seen associations with term limits–agrees. “Sometimes there’s a problem with one board member,” he says. “A person may get on the board and be there for five terms–which is usually 10 years–and he knows it all and thinks nobody else knows anything. That does present a problem.”
That said, McPherson doesn’t like term limits. “Some of the best board members I know have been on the board for two terms,” he contends. “It takes one term to really understand what’s going on, to really get plugged in and dialed into what’s happening at the association. It’s also important to have board members who have some sense of the association’s history. It makes sense to have board members who serve a longer period of time to help make smarter decisions for the association.”
Having that institutional history is critical. “By forcing someone who’s competent, trustworthy, and effective off the board, even if only for a term or two, you could lose some continuity and a loss of institutional memory,” says Drewes. “I find when boards make changes like switching boards or management companies several times over a few years, they can lose touch with processes they had even a few years ago that would help them be more efficient going forward.”
Abbate gives an example he’s handling right now. “We have one association in which it looks like there may have been some financial misdealing in past boards some years ago,” he says. “Having someone around who knows when certain common elements were expanded and when special assessments or levies were assessed has given the association a handle on where it should look to make sure deposits were made.”
Who’ll Step Up If You Limit Terms?
Term limits can also be harmful to your association because of the perennial problem of a lack of volunteers. “It’s often hard to find people who are willing and capable to effectively sit on the board, especially in smaller associations,” says Drewes.
That’s one reason Abbate thinks term limits are a bad idea. “The universe of willing participants is very small,” he says. “There are some associations where maybe one guy has been on the board too long and views the association as his fiefdom. But there are others that wouldn’t function as well if some board members didn’t come back.”
Eisinger agrees. “The biggest reason I’d be an advocate against term limits is that often there aren’t enough people to volunteer for the board,” he says. “You’ll eventually end up with bad board members–those who are willing to do it but aren’t good at it. Experience is very important, as is the concept that if something’s not broken, don’t fix it. If a dictatorial board guy gets in there and everybody’s afraid of him, other people’s option is to vote him out.”
Alternatives to Strict Term Limits
If you’re still leaning toward term limits, McPherson suggests making the terms substantive before limiting them. “I’d agree to term limits if they’re six to eight years tops and as long as you cultivate more volunteers to get involved to keep that continuity going,” he says. “I can understand if you get someone who’s sitting on the board in one office, say as president, for 14 years. That sort of defeats the purpose of having a democratically elected board. Another option is to have term limits on officers. They can’t serve as president for longer than a certain period of time [but they can remain on the board in a director capacity]. But I wouldn’t have term limits of two or four years because that’s way too short. If you’re going to have term limits, they need to be for six or eight years, which allows for some of that history within the association.”
Abbate says a more critical issue to address is staggered elections. “I don’t see term limits as important as the wisdom of staggering elections,” he says. “If you have a five-person board, you could have three members serve a two-year term, and two serve a one-year term so there’s never a complete turnover and there’s some continuity.”
“You could have staggered terms with two-year terms instead of one,” agrees Eisinger. “You can argue the wisdom of that back and forth, but it does allow new people to come on the board, and it’s going to be only half the board being replaced in one year and half the next. That allows continuity.”
Matt Humphrey is president of the Alameda, California-based HOAleader.com, from which this article was adapted.