I received an inquiry from a reader who currently serves on a board of directors. His association was undergoing a major siding project. The board member had spent a substantial amount of time supervising the contractors and wanted to be compensated by the association for his services. The other board members were in agreement that a substantial amount of work had been performed by this board member, but were uncertain as to whether he could be compensated by the association.
In order to compensate a board member, the board must consider the following:
1. The board must determine whether the work performed is within the scope of work generally performed by a board member. If it is, then the board member may not be compensated without complying with the provisions of the association’s declaration. Generally, the declaration will state either that board members may not be compensated, or that board members may be compensated with the consent of a certain percentage of the homeowners. If the declaration states that board members may not receive compensation, then an amendment to the declaration is required.
2. If the work performed is outside the scope of that generally performed by a board member, then it is our belief that the board member is simply acting as an independent contractor or employee of the association. Board members have the right to enter into contracts on behalf of the association. As such, the approval of the homeowners generally is not required to enter into this agreement. Since the job in question was to supervise a large siding project, it is our opinion that the board member was acting outside the scope of his board position. Based on this, in this situation, we do not believe it is necessary to obtain the approval of the homeowners prior to compensating this board member – a board vote is sufficient. However, the board member in question must disclose the conflict of interest and abstain from voting on the issue of compensation.
In addition, anyone on the board of a condominium association must comply with Section 18(a)(16) of the Illinois Condominium Property Act, which requires that notice be sent out to each owner within twenty days after a decision is made to enter into a contract with the board member. The unit owners may, within twenty days, file a petition signed by 20% of the members calling for a meeting to vote on the contract. If such a petition is filed, then the board must call a meeting within thirty days where the owners in attendance may either approve or disapprove of the contract.
If you live in a homeowners association, it is not necessary to send this notice. However, after approving the compensation at an open meeting, it is a good idea to advise the homeowners of the board’s decision and the reasons for compensating this board member. Generally, if the decision is properly communicated to the owners, there is less conflict.
Please note that if a board member is compensated, he conceivably takes on additional liability. A board member could be held liable if he fail to satisfactorily perform the task he was hired to perform. For instance, if the siding is not installed in a good and workmanlike manner and the board member fails to catch the defects, then the board member, along with the siding company, could be held responsible. It is possible that the board member would not be indemnified by the association or able to rely on the association’s directors and officers insurance to insulate him from liability since he was not acting as a board member, but as a contractor hired by the association.
Originally published in the Pioneer Press (January 2002).
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