The Homeowners Association (HOA) president plays an important leadership role, often overseeing day-to-day operations and serving as a liaison between the board of directors and the community.

However, while the board president has significant duties and major decisions to make, those related to financial commitments and contract signings often require the approval of the entire board to ensure transparency, accountability, and alignment with the interests of homeowners.

Needless to say, a central question arises: Can an HOA board president determine contract language or sign a contract without board approval?

This question raises important considerations about authority, governance, and potential legal ramifications. Furthermore, it highlights the need to consult with a professional management company. For example, Kuester Management Group is pleased to be a top provider of HOA management services in Charlotte area, Huntersville NC, Wilmington NC, Myrtle Beach SC, and Fort Mill SC.

No matter if your board of directors is presently working with a professional management team or if you’re simply looking for insight about board business and the formation of contracts, here are some key points to keep in mind.

Understanding the HOA Structure

The structure of an HOA involves a division of responsibilities between the board of directors and the HOA president.

Board officers are typically in charge of making major decisions, including setting meeting agendas and the annual budget, approving contracts, and enforcing community association rules.

The board president, as the executive committee leader, is usually tasked with ongoing operations and will act as a representative of the HOA in board meetings and public forums.

The governing documents, including the bylaws and CC&Rs (Covenants, Conditions, and Restrictions), outline the specific duties and powers of board positions, including the association president. As such, understanding these documents is essential for ensuring that decisions, such as contract signings, are made within the established framework of authority–and no personal agendas are involved.

Typical HOA Contract Formation Process

In the majority of HOAs, standard procedures require association boards to approve major contracts.

The board, as the governing body, typically reviews and approves contracts to ensure they align with the community’s best interests. Since the HOA president holds authority in daily operations, it’s true they may be allowed to sign off on smaller contracts or agreements that fall within the scope of routine maintenance.

However, for larger 6-figure contracts, such as vendor agreements or projects involving capital expenditures, real estate law says that the board of directors must be involved in the decision-making process and that a majority vote be realized.

Situations Where the Board President May Have Authority to Sign

Depending on the situation, the HOA president may have authority to sign contracts based on provisions in the association’s bylaws.

There are instances from time to time where governing documents grant the president the power to sign smaller contracts for common expenses. In emergency situations, for instance, where immediate action is required, the president may act without calling a regular meeting and without a board vote to prevent delays or harm to the community.

Additionally, the association board may delegate contract-signing authority to the president through a formal resolution or specific clauses in the bylaws, empowering the president to manage certain tasks while ensuring accountability within established guidelines.

Legal Implications of Signing Without Board Approval

Signing a contract without presenting to the board for discussion can have significant legal implications for both the HOA president and the community association.

If the president acts outside of their authority, the contract may be deemed invalid, leading to disputes with vendors, contractors, or unit owners. This could result in financial liabilities, reputational damage, and costly legal battles.

The president may also face personal liability, especially if their actions are deemed negligent or outside the scope of their role. This can result in the removal of the president from office.

Case studies have shown unauthorized signings can lead to lawsuits, forcing HOAs to honor agreements or pay penalties for breach of contract.

How to Avoid Issues: Best Practices for HOAs

• Ensure clear communication: Regularly review and discuss the governing documents with the board and president to ensure everyone understands their roles and responsibilities.
• Seek formal board approval: Always obtain written approval from the board for major contracts or decisions, especially large commercial contracts.
• Establish guidelines for emergency situations: Define what constitutes an emergency and outline procedures for acting quickly while ensuring business law or real estate law is followed.
• Delegate the authority of board members with caution: If the board delegates contract-signing authority, do so with clear, written guidelines outlining the scope and limitations of that authority.

Partner with an HOA Management Company

To avoid potential issues, it’s wise for HOAs to seek additional guidance and consider consulting with a professional management company. With questions about how your HOA can remain in good standing and all contracts are vetted, have board approval, and are compliant, reach out to Kuester Management Group directly.

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