The amount of time and energy invested by board members in the many decisions and projects surrounding the successful functioning of a building community can demand the kind of commitment and dedication required by a demanding part-time job. Anyone who has ever served in the line of fire of shareholder displeasure over a board decision—whether from an assessment levy to choices in lobby furniture—has probably wondered just why they set themselves up for so much uncompensated stress. While the rewards for an HOA or building community in having an outstanding board are obvious, the satisfaction of contributing a necessary service is typically the only compensation board members receive. Why is this the case?
Laws and Bylaws
There is currently no federal law expressly prohibiting co-op and condo board members from getting paid to serve, so in most cases it comes down to individual building bylaws forbidding it. There are also some state-by-state particularities that are worth noting. Adam Leitman Bailey, an attorney at Adam Leitman Bailey, P.C. in Manhattan, says that in New York State, “There’s no law banning compensation, but [the prospect of getting paid] might cause people to go on the board for ulterior motives. The few times I have seen people get paid, those buildings were tied to corruption. You want people running your building who don’t have a personal financial investment in just making money.”
Florida prohibits board members from being compensated unless compensation is specifically permitted in the HOA’s governing documents. “Some associations do have enabling language permitting board member compensation,” says Lisa A. Magill, a member of the College of Community Association Lawyers (CCAL) and of counsel at Florida-based law firm Kaye Bender Rembaum. “The amount and type of compensation is either specified by the board itself or voted upon by the members.”
Increased liability risks once may be one of the reasons why many building bylaws prohibit compensation despite no law out right prohibiting compensation currently nationally. “Governing documents typically prohibit compensation of board members. Additionally, compensating board members could have insurance implications as directors and officers (D&O) insurance covers volunteers,” says Cheryl Murphy, executive director of the Illinois chapter of the Community Associations Institute (CAI-IL). In Illinois, once compensation enters the picture, the protections that come with volunteer status could shift dramatically according to the General Not for Profit Corporation Act, which states, “No person who, without compensation other than reimbursement for actual expenses, renders service to or for a corporation organized under this Act… shall be liable, and no cause of action may be brought, for damages resulting from an act or omission in rendering such services, unless the act or omission involved willful or wanton conduct,” (805 ILCS 105/ General Not for Profit Corporation Act of 1986, www.ilga.gov, June 26, 2017).
Board members are taking hours out of their days to do this, payable workable hours, so why is this an unpaid position? “On the surface, it looks like people should be paid,” says Bailey. “When I first entered the business I wouldn’t have been surprised if people were compensated, but given the battles and cases I’ve seen in 20 years in the business, I don’t think it’s a good idea.”