Should You Discount Assessments for Board Members?
When managing a community association, the question of whether board members should receive discounts on their assessments can arise. While it might seem like a small gesture of appreciation for their volunteer service, there are several reasons why this practice is not in the best interest of the community.
Legal and Financial Implications
Financial Burden on Other Owners
Discounting assessments for board members essentially shifts the financial burden to other owners. While providing a discount might appear neighborly, it ultimately places the financial responsibility on other members of the community. This can lead to a deficit in the association’s annual budget, which is critical for maintaining and improving common areas and services.
Legal Considerations
Michigan law provides specific guidelines on how associations should handle delinquent assessments and settlements. The Michigan Court of Appeals has ruled that while boards have the authority to enter into settlement agreements and temporarily waive the association’s ability to collect assessments, such actions can create budget deficits. Deep Harbor Condo Ass’n v Marine Adventure, LLC, unpublished opinion of the Court of Appeals, issued December 29, 2020 (Docket No. 349471). If discounts for board members were to create a financial shortfall, it could legally complicate the board’s ability to manage the association’s finances effectively.
Perception and Fairness
Perceived Fairness
One of the cornerstones of effective community management is maintaining trust and fairness among all members. If board members were to receive discounts, it might create a perception of favoritism or unequal treatment, which could undermine the community’s trust in its leadership. Ensuring that all members, including board members, pay their fair share helps maintain a sense of equity and collective responsibility within the community.
Avoiding Conflicts of Interest
Board members are held to a high standard of fiduciary duty, which includes acting in the best interest of the community as a whole. Receiving discounts could be seen as a conflict of interest, where board members might appear to be prioritizing their own financial benefit over their responsibilities to the community. This can lead to conflicts and challenges in governance, particularly when it comes to making impartial decisions that affect all owners equally.
Alternative Forms of Recognition
While discounting assessments is not advisable, there are other ways to recognize the contributions of board members. These could include:
- Public Acknowledgment: Regularly acknowledging board members’ efforts in community newsletters or meetings can boost morale and show appreciation.
- Educational Opportunities: Providing access to training and educational resources can help board members perform their duties more effectively and feel valued for their contributions.
- Small Tokens of Appreciation: Non-monetary tokens, such as plaques or certificates of appreciation, can also be meaningful gestures of thanks.
Conclusion
While the idea of discounting assessments for board members might stem from a place of gratitude, it is fraught with potential financial, legal, and ethical issues. Maintaining fairness and transparency in how assessments are handled ensures that all community members, including board members, are treated equitably, fostering a healthier and more cooperative community environment. Instead, consider alternative methods to recognize and appreciate the valuable contributions of board members without compromising the financial integrity and fairness within the community.
Rita Khan is the Director of Marketing at Hirzel Law, PLC. Ms. Khan received her Bachelor of Arts in American Culture from the University of Michigan, Master of Business Administration with a focus on Business Intelligence from Baker College, Paralegal Certificate from the University of Michigan Flint – Center for Legal Studies, and Graphic Design Certification from the New York Institute of Art and Design. Ms. Khan has over 15 years of experience in the property management industry from residential real estate, student housing, and condominium & HOA management. Ms. Khan holds several designations and certifications such as Certified Manager of Community Associations (CMCA), Association Management Specialist (AMS) and Professional Community Association Manager (PCAM) from the Community Associations Institute (CAI), Accredited Residential Manager (ARM), Accredited Commercial Manager (ACoM), and Certified Property Manager (CPM) from the Institute of Real Estate Management (IREM), Certified Apartment Manager (CAM), Certified Apartment Portfolio Supervisor (CAPS), and Certified Apartment Supplier (CAS) from the National Apartment Association (NAA), Project Management Professional (PMP) from the Project Management Institute, Certified ScrumMaster (CSM) from Scrum Alliance, Professional Certified Marketer Marketing Management (PCM) from the American Marketing Association and Certified Digital Marketing Professional (CDMP) from the Digital Marketing Institute. She is a licensed Michigan Real Estate Salesperson, Broker and Notary Public. Ms. Khan is also a Real Estate Property Management faculty member at Schoolcraft College where she teaches Introduction to Property Management and Residential and Commercial Property Management. Ms. Khan currently serves as the Chair of the CAI-Michigan Social Media Committee and is an active member of the Institute of Real Estate Management (IREM), where she serves as a member of the IREM Foundation Board of Directors and a member of the Board of Directors for the IREM Michigan Chapter. Ms. Khan has previously served as a Delegate Member on the CAI Michigan Legislative Action Committee. She may be reached at (248) 478-1800 or rkhan@hirzellaw.com.
