Non-Resident Board Members Making Decisions from Afar

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During the heady days of rock-bottom interest rates, it became increasingly common for condo owners to purchase units purely as investment properties—renting them out to long-term tenants, or listing them on short-stay platforms like Airbnb, the latter being especially in popular destination cities like New York, Miami, and, of course, Las Vegas. 

While leasing or listing a unit in a condo building or HOA may be an asset for the unit owner, having owners living off-site does pose challenges when it comes to governing that building or HOA. While resident owners tend to be more vested in the day-to-day administration and upkeep of their communities, conventional wisdom holds that absentee owners tend to be more hands-off; they don’t take seats on the board, or much of an active role in running the community they bought into.  

This is not always the case, however. Many owners who don’t actually reside in an association do pursue board membership, usually for the same reasons resident owners do: a desire to take an active role in the governance and oversight of the property they’ve invested in. Having non-residents on a co-op or condo board presents certain considerations, however. CooperatorNews reached out to management experts across the country to find out how ‘mixed’ resident/non-resident boards function, what conflicts may arise, and how best to address them when they do. 

Motivating Factors

When board election time rolls around, condo and HOA residents should evaluate absentee or off-site candidates with much the same criteria as they would a full-time neighbor. The biggest questions of both candidates should be: what is motivating this individual to seek a board position, and will they put the interests of the greater association above their own?

“Over the years, we have represented some boards with non-resident members,” says James A. Slowikowski, a partner with Dickler, Kahn, Slowikowski & Zavell, Ltd. in Arlington Heights, Illinois. “Sometimes the member lives locally, but is not a resident in the association. In other instances, the members are snowbirds, and as such they are ‘absent’ for several months at a time, but otherwise live at the property. 

“I think there is only a slight difference between those two types of non-resident board members,” he continues. “The snowbirds generally think like resident board members. The main difference I tend to see is that the snowbirds often will want to put off projects or certain business until the spring, when they will be back on-site—and that’s usually in proportion to the number of snowbirds serving on the board. When one or more are away, board business tends to be conducted only as-needed. On the other hand, some things may be addressed sooner than they normally would, such as working on the annual budget before those snowbirds depart for the winter. So the timing of when things get done is what is most affected—not the substance of the decisions.”

The board member who lives entirely off-site year-round presents a different dynamic than his or her seasonal counterpart. “They typically reside locally, but just not on the property,” Slowikowski continues. “Strictly speaking, all board members have the same duty to act in the best interests of the association, and residency should not matter, from a legal perspective. But from a practical perspective, we do see some differences in how they approach their duties. In my experience, the non-resident board members tend to approach the operation of the association as a business; they are protecting an investment.” 

And as long as that business is financially stable and solvent, off-site board members may be satisfied. “This type of board member is typically not as concerned about funding reserves, paying or adopting special assessments, or borrowing funds as needed,” says Slowikowski. “They will want the parking lot repaved, rather than simply patching potholes. While resident board members, on the other hand, may have more concern for day-to-day operations, and how the enforcement of rules and regulations affects residents’ daily lives. They tend to be more in touch with smaller maintenance projects that can have immediate effect on those at the property, and are more likely to want to keep assessments lower—even when assessments should be raised—as they may not possess that investor mentality.”

For the Greater Good

Non-resident board members likely have purchased their units as assets to be monetized; and that means renting the property out, either long-term, or shorter-term. While that is extremely common and has been going on as long as people have owned property in multifamily communities, the differing priorities and personal investiture in the community between resident owners and renters can sometimes cause tension. 

“Many associations prefer owner-occupied units, so in instances where conflict arises, it’s typically between those who live there and those who don’t, and who want to rent,” notes Marc H. Schneider, a partner with Schneider Buchel LLP in Garden City, New York. “But there is an obvious commonality there as well, as they all presumably want to keep the property at maximum value. They have to remember that when you sit on a board, you’re supposed to take your ‘I’ cap off and put your ‘We’ cap on, and make decisions in the best interests of the entire building.”

“Interestingly enough, board members are on the same page regarding the running of the association, regardless of their living status—at least most of the time,” adds Coleen Crawford, owner of Desert Community Management LLC in Las Vegas. “They aim to save money where they can, and to keep the biggest amenity—whether pool, spa, what have you—open for as long as they can during the year.”

When it comes to renters, they, too, are entirely capable of making valuable contributions to the community, says Mary Breedlove, manager of the Augusta Village Homeowners Association in Plainfield, Illinois. “We had a renter in a community who wanted to get involved, and was appointed to the board—not elected, as we did not reach quorum to run an election meeting,” she recalls. “He was a great asset because his comments and decisions were not emotionally triggered, but business-based. After a couple of meetings, thanks to his methodical approach, the rest of the board became more likely to put their emotions aside and operate the association like a fine-tuned machine.”

Further Inspection

Occasionally, a non-resident steps up to join the board purely out of necessity.

“We often can’t get homeowners to complete their proxies to even hold an annual election meeting, much less run for the board,” laments Breedlove. And that means that some boards need to cast their nets more widely to get enough members to run the association. 

Gary M. Daddario, a partner with Marcus, Errico, Emmer & Brooks P.C., a condo law firm based in Massachusetts and New Hampshire, adds, “Sometimes, when non-residents are elected to a board, there is real split interest.” Other times, it is something that the community perceives to be a split interest. But in general, it just seems to be human nature that people will treat a home differently than they treat an investment.”

All the pros agree that communication issues can become prevalent when a board features non-residents. “The biggest concern I have had is when too many of the board members are out of town at the same time in the event of a meeting,” says Crawford. “The owners in attendance will be upset. That said, because of technology, board members can and do conference call in to address owners and conduct their board meeting. This has worked out very well. Then, when the board members are all in town, we’ll schedule a workshop or a walking inspection of the property.”

Regardless of any concerns, non-residents are certainly eligible to run for the board, unless the association documents specifically prohibit that. “Some argue that, if elected by the community, the concern ends there, because the people have spoken,” says Daddario. “But I believe that it depends on the circumstances. In any event, if a community finds [non-resident board members] to present a problem, amendment of the governing documents presents a straightforward solution. If the amendment passes by requisite vote of the owners, then residency can become a qualification for serving on the board.”

Cooper Smith is a frequent contributor to CooperatorNews. 

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