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Should Your HOA Have An Advisory Board?

Posted by IKO Community Management on September 20, 2018 at 9:00 AM

advisory-board 

An advisory board is vastly different than an HOA board of directors, but should your HOA community invest in the former?

What’s an advisory board?

An advisory board is a group that provides strategic advice and support to the board of directors of a homeowners association. This advice and support is informal and non-binding within Covenants, Rules & Restrictions. An advisory board doesn’t have legal responsibilities or decision-making authority within an HOA community.

This gives the advisory board greater flexibility in structure and management compared to the HOA board of directors.

What’s the difference between an advisory board and an HOA board of directors?

According to Cerius Executives, an interim management and executive placement company in California, the difference in an advisory board and an HOA board of directors lies within the responsibilities and assigned duties.

  • Fiduciary Responsibilities. According to Marissa Levin, a renowned author, and speaker on boards, “There are quite a few differences between a board of directors and an advisory board, but the major difference lies in fiduciary responsibilities. The level of fiduciary obligation is much higher in the board of directors than an advisory board.”

    If the advice given by the board of directors costs your community, they’re financially liable for that decision. This is often why advisory boards readily offer more information than an HOA board of directors because they’re not held fiduciarily responsible for their advice or support.
  • Voting Rights. An advisory board for a homeowners association is a hand-selected, informal group. Members of this board have no legal responsibilities to the HOA, which means they don’t have voting rights. That means the advisory board can’t contain residents or HOA board members.

    The HOA board of directors has voting rights and decision-making power. Architectural changes, alterations in HOA law, and other important community decisions are voted upon by the board of directors as a sole governing body.

    In conclusion, the advisory board gives advice and support but can’t vote. The HOA board of directors isn’t obligated to take or follow that advice or support. Yet, the board of directors can make changes in the community by voting.

  • Nature Of Advice. The advisory board and HOA board of directors provide community advisory services with the goal of the betterment of the neighborhood. However, the nature of the advice is different.

    “The level of tender and hands on tactical advice is higher for me on the advisory board capacity,” Ginger Silverman, a former advisory board and board of directors member for private, public, and non-profit companies, said to Cerius Executives.

    “The advice of the board of directors is more strategic and focused on a higher level. Any decisions made have a higher level of impact, but on the advisory board, advice tends to be more specific to the actual changes happening in the [community] on an operational level.

    Participation from board members is more active on an advisory board, and there’s a free flow of information and discussion.”

    It’s common for a board of directors to ask for financial or legal advice before making a decision. Advisory members oblige, pulling together targeted expertise from industry experience, education, and certifications. Advisory boards fill gaps of knowledge and understanding in gray areas to avoid legal trouble.

  • Expenses And Compensation. It costs more to create, manage, and compensate an HOA board of directors than an advisory board. Compensation for a board member is individually higher than that of an advisory board member.

    Additionally, the board of directors could require extra expenses. For example, meeting attendance fees and travel expenses are common for larger associations.

Can an advisory board help your community association?

If your homeowners association needs assistance making legal or financial decisions, IKO Community Management suggests finding an advisory board. An advisory board has experience and education in areas that volunteer board members may lack. It’s also a less risky addition to your community, as board members aren’t required to take advice or support.

For more information, download IKO Community Management’s Guide To Risk Management Standards. Click on the button below to get started:

Download the Guide To HOA Risk Management Standards

Topics: HOA Board