Self Managed Condo; Self Managed Board President

B.K. from New Haven County writes:

Dear Mister Condo,

Is it legal and/or appropriate for the President (a voluntary position held by a NON owner) of a self-managed mid-sized complex to spend allocated funds from an approved budget without board approval? Example: The current president is spending funds without board approval on just about anything & everything. He is also submitting bills for repayment on “cash” deals also not approved or voted on by board members who are unit owners.

Mister Condo replies:

B.K., I am guessing you already know the answer to the question, but in a word, “NO”! I am sorry that you and your community find yourself in this perplexing predicament. I am a bit confused as to how someone who isn’t an owner has been elected by the Board or community to serve as the president. As I usually advise, you need to take a look at your condo documents that clearly outline the governance of the association, including who is eligible to serve on the Board and how the officers of the Board are selected. Generally speaking, the unit owners elect the Board members from within their own ranks, meaning unit ownership is generally a requirement to serve on the Board. The democratically elected Board then selects officers from amongst its members. This is not always the case but unless your documents allow an outsider to serve on the Board, the person serving as president may not even be eligible to serve on the Board, let alone act as president.

For the purposes of this discussion, let’s assume that your by-laws allow for an outsider to serve on your Board and that this person was elected by the Board to serve as president. Since you are self-managed, it is not uncommon for the Board and/or the president to have some discretionary control over the association’s money. This is both practical and necessary to conduct the business of the association. Bills need to be paid; goods and services need to be purchased; and contractors need to be hired and paid. However, unless the Board has charged the president with complete control over all such things, the Board has a say in how much discretionary expense can be made (usually $500 or less) and what things can be purchased with association money. Reimbursement for cash expenses is allowed as long as full receipts are provided and the items paid for with cash were part of the expected purchases for the association.

Self-managed condos face interesting governance challenges. A strong Board is needed to handle the day-to-day duties of running the association and the long-term duties of fiscal responsibility and accounting to the association members. It would appear to me that the Board needs to take a look at their policies to see if there is room for improvement. From what you have described to me, there would appear to be a rather large room. Keep in mind that you haven’t described anything specific here and I am not saying that your Board president has done anything wrong or illegal. As you mentioned, he is a volunteer and the community should be grateful for his service. He may be doing his duty as he sees fit and the Board may be thrilled that he is doing so. That being said, in a self-managed community such as yours, it is very important that the Board have as many safeguards in place as possible to assure unit owners like yourself that your common fees are being used appropriately and as intended. Best wishes!