To pay or not to pay? A closer look at board compensation

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A community association's board members have a huge responsibility.

They oversee the daily operations, maintain the common elements and manage the money. Sometimes they deal with unpleasantness like lawsuits and mean neighbors.

Mostly, they do it for free.

Should associations pay board members for their service? The answer isn't simple.

The first consideration is whether the association has the authority to compensate the board, said attorney Robert Prince of Keough & Moody PC in Naperville.

Illinois condominium law says an association's bylaws must include the payment, if any, to board members. Homeowner association law says board members serve without compensation unless governing documents specify otherwise.

If payment authority isn't in the governing documents, associations must take the proper steps to change them before they can pay, Prince said.

But associations rarely pay board members. Industry professionals and volunteers generally agree that's how it should be.

"It's a double-edged sword," said Tairre Dever Sutton, president of Tairre Management Services Inc. in Des Plaines. "If board positions were paid, we might get more interest from owners wanting to serve. At the same time, I am concerned that owners will want to serve for the money and not for the actual reason of wanting to make their home a better place to live."

"I'm opposed," said Sheli Lulkin, president of the Association of Sheridan Road Condo/Co-op Owners in Chicago and publisher of Condobytes.info. "We have far too many people running for the board with special agendas of their own, and being paid money would be just another special agenda."

Payment should depend on the age, size and amenities of the community as well as the workload, said Carl Skrabacz, president of a professionally managed condo association of 62 duplexes in Naperville.

Skrabacz figures he spends about two hours a week on association matters. He prefers to be unpaid.

"Since I am retired, I fall into the geezer category that looks for things to keep busy," Skrabacz said.

Owners have higher performance expectations of paid board members, a responsibility he doesn't want.

"When arguments come up, I like being able to say, 'Hey, we're volunteers here. If you want to make those kinds of changes, run for the board,'" he said.

Maxine Lustig of Mount Prospect has been president of her 76-unit condo association for 17 years. The board farms out accounting work, but Lustig, a licensed community association manager, does most everything else unpaid.

She provides sellers with closing documents for a small fee, a task she performs at significant savings to the association.

"If a building is self-managed, I think there should be some compensation," Lustig said. "But if everyone gets paid and only two people do the work, someone is going to be resentful. It's just as well to leave it as a nonpaying job."

Volunteers enjoy greater legal protections than those who are paid, Prince said.

According to the Illinois General Not for Profit Corporation Act, unpaid board members cannot be held liable for unintentional negligence while in office, he said.

"The act shields (unpaid) board members from having the lawsuit filed against them," Prince said. "That's very good immunity to have."

Paid board members are protected by the business judgment rule, but that defense arises during the litigation process, not before, he said.

Associations that pay board members should do so by check, not by discounting assessments.

"The governing documents and state law dictate how assessments must be levied against each owner, and associations must comply," Prince said. "To avoid any claims of impropriety, board payment should be a separate transaction. You want a paper trail of what is happening."

Any payment is taxable income, said certified public accountant Mark Cantey of Wheaton.

"The IRS would prefer a payroll check with all taxes taken out," he said. "But at a minimum, a (Form) 1099 should be issued."

ctc-realestate@tribune.com

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