What Happens if No One Is Willing to Serve on the HOA Board?

Boards, beware, if you do not reach out to owners in the right way you may end up with this question (and owners, if you don’t step up, you may end up with this question):

“Do you have an article on what happens when a board is nonexistent. What happens when the state appoints a conservator and how does that happen?”

I think this tends to happen more in really small associations (under 50 units) but I could be wrong.

Until someone takes the step of petitioning for a receivership, there is no one at the helm ad assessments don’t get collected, and bills don’t get paid. The corporate status gets suspended for failure to fulfill state reporting and SS and FTB (Secretary of State and Franchise Tax Board) This can send the HOA in a disastrous downward spiral. And by the way, if your HOA is not incorporated, each and every owner is at risk personally for the debts and liabilities of the association because there is no “corporate shield”.

And if any remaining members of the board or any owner does petition the court because no one will serve – then the outcome is still very problematic.

If a board (or remaining board member) cannot motivate members to serve, and your HOA ends up in receivership, here is what tends to happen:

The court appoints a receiver, and that person has unlimited assessment authority. The person has no personal stake in the HOA and the main role played is to pay bills, and raise money for whatever is needed, whether it be admin costs approved by the court, maintenance or reconstruction assessments, immediate needs. The person has to go to a judge with periodic reports, and even if they took a personal interest in the HOA, are affected by the limitations imposed by the court. The costs for the receiver exceed costs of professional management without the benefit of incentive to do a good job or face the possibility of being fired. And finding someone familiar with HOA operations, law and management to serve as receiver is very difficult. That is because there are not HOA savvy receivers standing in line to serve. Savvy managers have clients that compensate them directly, not according to a court’s whim or limitations.

So –what can an HOA do if it is difficult to get board members who are willing to serve?

  1. Reach out to the members with the truth about the options. Do the research, or have an experienced manager or attorney help you put together a plea to the members.
  2. Know that even if the board is down to only one director, that director has legal authority to legally appoint new board members to fill out the terms of the resigning directors.
  3. The “last board standing” has obligations not to abandon ship without a plan to get administration in place by the court. Each board member is very possibly subject to some personal responsibility for losses if leaving the HOA in a lurch.
  4. Make a plea to owners that if they are not willing to serve, that they approve an increase in assessments to pay or management – you are way ahead of the game to find a good manager than to rely on a court receiver!

I know it is easier said than done, but something has to be done if no one is willing to serve and drastic times call for drastic measures. An emergency assessment might even be in order here, without owner approval, if there is a need to put the association into receivership. Check with your legal advisor and review the California laws regarding emergency assessments.

Even the mere proposal of assessing the members to file a petition with the court for a receivership may have some positive effect alternatively on finding people willing to serve just to avoid actual receivership.