Should the HOA board get paid? When faced with a shortage of potential candidates, some associations toy with the idea of offering a salary to those willing to serve on the board. In other communities, the board members themselves call for a salary. However, providing compensation to board members can quickly blur the lines on being a volunteer homeowner.
Can the HOA Board Get Paid?
Most homeowners associations’ bylaws generally prohibit paying board members for their services. The HOA board consists of homeowners who volunteer their time and expertise to serve the community. By definition, volunteers do not receive payment.
Do HOA board members get paid? Whether or not an HOA can allow board compensation depends on two things: state laws and the governing documents.
In some states, the law prohibits board member compensation. For instance, in California, Corporations Code Section 5047.5 does not permit the compensation of board members of nonprofit corporations. However, this does not mean a board member may receive reimbursements for association-related expenses they initially pay out of pocket.
The governing documents of an HOA can also address this matter. Often, the bylaws of an association dictate that board members cannot receive compensation. Violation of the bylaws could be a violation of the board’s fiduciary duty.
If there is no statutory prohibition, an HOA can compensate its board if its bylaws allow it. However, most experts discourage this practice as it can lead to serious consequences.
Do HOA Board Members Get Paid? Reasons Why Not
While an HOA can pay board members if state laws and its governing documents allow it, there are several reasons to do otherwise.
1. It’s a Conflict of Interest
One of the responsibilities of an HOA board is overseeing the association’s finances. This means budgeting for expenses and accounting for every dollar. If the HOA pays the board, then it could create a huge conflict of interest.
Paying board members is a conflict of interest because the leaders, who have an obligation to manage the association’s finances, would also be in control of their own salaries. Instead of serving the best interests of the HOA, the board could decide to give its directors a raise.
2. It Makes Board Members Personally Liable
While board members may want to receive payment, it opens them up to potential liability. The HOA is responsible for covering unpaid volunteers in terms of insurance and legal costs. However, paid directors are considered professionals. As such, if a paid director makes a mistake, they could find themselves personally liable for all legal costs and damages.
3. There’s No Room in the Budget
Are HOA board members paid? Most of the time, the answer is no. Even if an HOA wants to pay its board members, there often isn’t enough money. Homeowners associations usually run on a tight budget. Board members will have difficulty justifying a salary to residents who don’t want an increase in dues or a special assessment.
4. It Makes the HOA Vulnerable to Financial Misdeeds
The HOA board is responsible for managing the association’s money. This includes allocating funds per line item in the budget. When board members receive compensation, it is very easy to commit fraud or embezzlement.
Board members could conspire with each other and raise their salaries to the detriment of the community. They could pad their compensation with funds set aside for other expenses. There are already so many horror stories of HOA boards and their financial misdeeds. Adding a salary to the mix could only make things worse.
5. It Sows Distrust
Trust is essential between the HOA board and the homeowners. Without trust, homeowners consistently question the board’s decisions and push back on every initiative. If board members get paid, trust is made even harder to earn.
Many homeowners already think the worst of their board or HOA. Even if the board isn’t committing any financial crimes, homeowners are easy to point fingers and become suspicious. Plus, it opens the board up to more criticism. If HOA board members get paid, homeowners expect them to perform without error.
6. Board Members Would Serve for the Wrong Reasons
Many HOAs consider compensation because they have a hard time recruiting board members. However, this course of action would be disadvantageous to the association at large. Homeowners would then be motivated by money to join the HOA board rather than by a genuine concern for their community. Someone who only wants to serve on the board for the pay certainly wouldn’t have the HOA’s best interests at heart.
Do HOA Board Members Pay Dues?
Board members are homeowners, too, which means they pay dues to the HOA just like everyone else. Waiving dues in exchange for the board’s service is a bad idea, similar to offering compensation. This also creates a conflict of interest and would be unfair to the rest of the community.
Non-Financial Reasons to Join the HOA Board
Why would anyone want to become a board member if a salary is out of the question? There are several benefits to joining the HOA board, though.
1. Good Leadership Experience
Homeowners associations are organized as nonprofit corporations, which means they operate like corporations in many ways.
Board members function as community leaders. They are responsible for managing the HOA’s finances, coordinating with vendors, negotiating contracts, resolving issues, and communicating with residents. Those serving on the HOA board can learn valuable skills and earn experience that can help them professionally. They can even include it in their resumes.
2. Make Positive Changes for the HOA
An HOA’s main objective is to improve the community by increasing property values and homeowner satisfaction. However, this goal is often difficult to achieve without the commitment of competent board members.
Joining the HOA board can help homeowners make a real difference in their community. Board members make key decisions, spearhead important project initiatives, and lead positive change.
3. Foster Relationships Within the Community
A successful HOA community is one with high homeowner involvement and resident camaraderie. Of course, this does not just happen overnight. Board members must work at it, encouraging homeowners to socialize and participate.
Serving on the HOA board means fostering relationships between homeowners. Board members can also build meaningful relationships with their neighbors, vendors, and management personnel.
4. Protect Your Investment
Homeowners associations play a significant role in preserving property values. Board members have a more direct impact on this because they make important decisions that influence the community. They are responsible for maintaining curb appeal, keeping order, and boosting property values. And, as homeowners, they benefit from effective leadership, too, because they can keep their investments safe.
5. Reap Emotional Benefits
Volunteering can improve the mental and emotional health of homeowners, as one study found. No matter what method, people who volunteer tend to feel happier and more content. In addition to enhancing their social lives, board members can benefit from the positive effects of volunteerism.
Does the HOA Board Earn a Salary? Answered!
The bottom line is that most associations do not pay their board directors, whether due to state laws or their bylaws. When considering the decision to have the HOA board get paid, there are more pitfalls than advantages. As such, it is best not to compensate board members in any way, shape, or form.
An HOA management company can help alleviate the board’s burden. Clark Simson Miller offers expert HOA management services to homeowners associations and condominiums. Call us today at 865.315.7505 or contact us online to learn more!
RELATED ARTICLES:
- What Happens When An HOA Board Member Breaks Rules?
- How And What Grounds To Remove An HOA Board Member?
- HOA Board Conflict: Can An HOA Management Company Intervene?