HOA Lessons

June 20, 2018

I live in a condo building. We got a good price on it, but it's in pretty rough shape: cracked pipes, holes punched through the walls, and a leaking roof. Definitely a fixer-upper. But for better or worse, we're Bay Area homeowners, which isn't the easiest thing to be.

When I moved in, I asked the manager, Thomas, when some of these issues would be addressed. He told me he wanted to do something, but the money wasn't there. "Not my problem", the residents thought, let the kids of next owners deal with the repairs; blood from a stone. In addition to being the manager, Thomas also lived in the building, and was tired of 2AM water main disasters, and elevators that didn't work. The minute I told him I wanted better, and was willing to pay for it, he practically begged me to run. Next thing I know, I'm on the board of directors of a 328-unit, 800-resident building.

I don't know whether I'll do it again, but, four months in, here are some lessons:

  1. 95% of low-level politics is just doing the work: showing up to meetings, passing the right motions, ensuring peoples' concerns are addressed—not the stuff you see on TV: campaigning, fund-raising, giving speeches, etc. All else equal, vote for the board member with the best attendance record, even if you don't agree with their positions on everything; at least things will get done.
  2. Even though it's mostly about the work, HOA board members are politicians, which requires a spirit of respectful disagreement, and compromise. If you're the sort of person who doesn't enjoy respectful yet vigorous argument, or is easily offended or upset, or doesn't appreciate the need for healthy disagreement, you might not be cut out for the job.
  3. Boards have a surprising amount of unchecked power; they can fine owners, set assessments, and block private home improvement projects. Boards can levy special assessments in any amount, and as an owner, if you don't pay, you're likely to have a lien put on your title.
  4. Long-term financial planning is the most difficult problem in politics. It's why we don't have Medicare or Social Security reform even though everyone knows these programs aren't on firm financial footing. It's also why so many HOA boards fail to plan properly for major capital projects. Boards know they have to replace the elevator in ten years, but don't have the discipline, or the planning tools, to keep their eye on the long-term. It's the same with pensions, infrastructure spending, or any other large, publicly-financed long-term commitment.
  5. HOAs are highly regulated and full regulatory compliance is impossible. There are laws on everything from public notice of meetings, when and where boards can meet, and even what can and can't be discussed. Residents can and will sue if they feel their rights are being violated. And wow, is that just a great use of association funds, defending a suit.
  6. California's legal and regulatory climate is absurd. I had heard this was true, but never experienced it firsthand. Now that I have dealt with the California PUC telling us exactly how we must pass electricity charges to members and how often meters must be calibrated, BAAQMD delaying construction permits for backup generators for months, and every labor issue from overtime to mandatory benefits to contractor vs. employee classification, I see firsthand how much complexity, risk, and expense California's regulatory environment creates.
  7. Hiring is hard. It's even harder when a board is making the decision. It's like throwing a dinner party for eight where one guest hates another guest, half the group wants steak and the other is vegetarian, and everyone has a vacation planned. And any of it can be revised at any point before the meal is served.
  8. Any group of people that repeatedly interacts, and where preferences are stable over time, will form "political parties". In my building, the parties are roughly (a) the non-spenders, who tend to be older, (b) the young and employed (my party) who want a nice place to live and reasonable assessments, and (c) the investor-owners, who want anything that will increase their long-term rental income. It's important to acknowledge the inevitability of "party formation" and how it shapes decision-making.
  9. Most important: don't get too personally invested. All of this stuff matters beacuse it's close to home (literally), but I've come to appreciate the perspective of some investor-owners, for whom it's all "just business". One of my board colleagues verbally assaulted me last night, shouting at me for a full minute during executive session for "playing game" with him. It was totally inappropriate, made everyone in the room uncomfortable, and it happened because he's way too personally invested. You have to keep some distance; it matters, and yet, it doesn't, it's just an HOA, after all.

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