JUSTIFIED
EXPENDITURES
Q.
Can the board of directors of our association spend association
funds on what amounts to a political issue? The board wants to
spend funds to stop a nearby development, based on the belief
that it will harm the value of homes in our community.
A.
Absent a prohibition in the association’s bylaws or CC&Rs, the
board can probably justify the expenditure so long as they act:
1.
In good faith;
2.
In the best interest of the association;
3.
After becoming fully informed, and
4.
After deliberating as a body before deciding. Top
SPECIAL MEETINGS
Q.
Who can call for a special meeting of the members of a homeowners
association?
A.
A special meeting can be called by the board, the chairman of
the board, the president, or any group of members, consisting of
at least five percent. Top
VOTING BY
PRESIDENT OF BOARD
Q.
Historically, the President of our homeowner association board
has voted only to break ties.
Is this procedure required by law?
A.
No. The President of your
board may vote on any matter unless prohibited by your bylaws.
This is possible, but it would be highly unusual. Top
RECUSAL BY
BOARD MEMBER
Q.
When is it appropriate for a member of our homeowner association
board to recuse himself?
A.
A board member should recuse or disqualify himself or herself
because of self interest, bias or prejudice. If a board member does not
recuse himself or herself when required, he or she will have a
conflict of interest. If
a board member votes on a matter where he or she has a conflict
of interest, he or she violates his or her fiduciary duty. Top
ELIGIBILITY
TO SERVE ON BOARD
Q.
I own a townhome, however, I don’t reside in it. Am I still eligible
to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners
to be members of the board. Some do not. There is nothing in the
California Corporations Code to prohibit you from being a member. Top
CHRISTMAS
LIGHTS
Q.
Our homeowners association has a restriction against members attaching
anything, including lighting, to the common area. The common area includes
the roofs and exteriors of the buildings. We interpret this to mean
that members cannot attach Christmas lights to the exteriors of
their townhomes. Can
the board make an exception to the restriction so members can
put up their lights?
A.
I believe your board will be safe in making a temporary exception
to the restriction, however, don’t be shocked if someone complains.
Any rule concerning Christmas
lights should include the following:
1)
The first date they may be installed,
2) The
last date for their removal,
3) Any
limits on the number of lights permitted (if applicable),
4) The
type of hardware permitted to be used for installation, and
5) Any
daily fine to be imposed if the lights are not removed on time. Top
BOARD REFUSES
TO ENFORCE CC&Rs
Q.
I live in a zero-lot-line homeowner association where the CC&Rs (Covenants, Conditions and Restrictions) make the association
responsible for exterior stucco repairs and maintenance except
for situations where a member of the association has caused the
damage. Each member of the association is responsible for interior
repairs.
My neighbor has planted
ivy in her yard which has attached itself to the exterior of my
townhome in an area where only my neighbor has access. I am concerned
that the ivy will eventually damage the stucco leading to water
intrusion and interior damage. The board of directors seems to
be reluctant to request that my neighbor remove the ivy. What
should I do?
A.
You should advise your board of directors in writing of their
obligation as set forth in your CC & Rs . Specifically, you
should point out that the board should either require your neighbor
to remove the ivy, or agree to recommend to the full membership
, a proposed amendment to the CC & Rs that would require the
association to make both exterior and interior repairs caused
by exterior plants.
It is highly unlikely that
your board will choose to amend the CC & Rs as such. It is
more likely that they will agree to request the removal of the
ivy.
If the board fails to do
anything, you probably will have documented your file sufficiently
to hold the association responsible if damage takes place in the
future. Also, to be safe, I recommend that you send copies of
your correspondence to any new members who join the board at a
later date. Top
RIGHT TO
PRIVACY
Q.
I am on the board of directors of my homeowners association. May
the board discuss individual delinquencies (identifying names) at regular board meetings?
The association's law firm has advised us that we may do so. I
do not feel comfortable in having these types of matters discussed
in public. What is your opinion?
A.
Discussions concerning individual delinquencies (identifying names) should only take
place during executive sessions. This means that members of the
association will not be present other than board members. The
California Civil Code requires that the board of directors must
adjourn to executive session to consider litigation and member
discipline.
The California Constitution
guarantees the right to privacy. While it is unclear whether the
Constitution protects a person from an invasion of privacy by
a homeowners association (as opposed to the state), it may. The
right to privacy has been liberally interpreted by all courts.
Lastly, the intrusion into private affairs by an individual may
constitute a court for which the plaintiff may collect damages
including punitive damages.
I strongly disagree with
your counsel's opinion and suggest that your board discuss association
delinquencies only during executive committee sessions. Top
HIRING CONTRACTORS
Q.
We live in a common interest development. Based on the recommendation
of our management company, our board of directors obtained three
bids for landscaping maintenance and then selected the company
with the highest bid. The bids were for identical work. Since
all three companies were proposing to do the same work, shouldn’t
our board have selected the lowest bid? Our monthly assessments
are already too high and many of us live on fixed incomes.
A.
The board should use its best judgment in deciding which company
to use, based on all facts available. This is their legal duty.
While the three companies may have submitted bids for the same
work, it does not logically follow that all three companies will
provide the same quality of work. Sometimes experience is helpful
in determining which company will provide the highest quality
work and, likewise, who will be the most reliable contractor.
One of the advantages of hiring an established local management
company, is that they have experience with contractors and can
provide valuable recommendations to the board of directors. Top
REMOVAL OF
TREES BY BOARD
Q.
Our homeowners association consists of twelve townhomes. We have a three person board
which includes two members who live off-site. The two off-site board members
just voted as a majority to remove several beautiful, twenty-five
year old trees because they want to save money on tree trimming.
The ten members of the association who live on-site are
furious about the decision.
The trees are being removed within a week. Is there anything we can
do?
A.
If the board of directors has a good reason, in their reasonable
judgment, to remove the trees, they may do so.
While I recommend that
you present a petition signed by the ten members to your board
in order to influence their decision, they may legally exercise
their reasonable judgment and remove the trees.
This situation illustrates
the critical importance of electing board members who will represent
the majority of members. Members of associations
should take the subject of board elections very seriously. Top
BOARD REFUSES
TO SUE DEVELOPER
Q.
I live in a large condominium community with extensive common
areas. The community is only two years old. While we have several
serious construction defects, the board refuses to sue the developer
because they want to avoid litigation and would rather special
assess to repair the defects. Do I, as a member of the association,
have the right to sue the developer for these defects?
A.
Yes. As a member of a condominium association, you have standing
to file suit. You should immediately consult with a construction
defect attorney concerning your rights because they can be lost
if you delay taking action. Top
DISCLOSURE
OF DELINQUENCY TO MEMBERSHIP
Q.
Is there ever a time when it is appropriate for the board of directors
of a homeowners association to inform the membership of a serious
delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection action
has reached the stage of a lawsuit. When an association becomes
involved in litigation, the members are entitled to notice. The
filing of a suit places the matter in the public domain and is
material to the financial condition of the association. California
Civil Code Section 47 protects the association as plaintiff from
liability for defamation or disclosure of private information
under the "litigation privilege." Top
WAIVING LATE
FEES
Q.
Our board of directors recently waived a late fee for a board
member because "she puts in so much free time." Other members
of the association are required to pay a late fee whenever they
pay late, without exception. What are your comments?
A.
I strongly recommend that the board cease the policy of waiving
late fees for this or any other board member because such a policy
creates a legal defense for other members of the association who
pay late fees and get fined. If the board ignores my advice, at
the very minimum, the board member who is receiving the special
benefit should be recused from voting on such a waiver. Lastly,
the receipt of such a benefit may have the legal effect of eliminating
the board member's statutory protection because it can be argued
that volunteers do not receive compensation, and that the waiver
of a fee is in fact compensation. In short, it's asking for trouble
to make exceptions such as the one described. Top
FAILURE TO
HOLD ANNUAL MEETING
Q.
The board of directors of our homeowners association has not held
an annual meeting to elect new directors for more than 18 months
even though our bylaws require an annual meeting to be held. I
have requested that our "annual" meeting be held, but have been
ignored. What can I do?
A.
If a corporation with members is required by its bylaws to hold
a regular meeting and fails to do so for a period of sixty days
after the date designated, or if no date has been designated,
for a period of fifteen months after its last regular meeting,
the superior court of the county may summarily order a meeting
to be held upon application of a member after notice to the board
giving it an opportunity to be heard. Top
QUESTION
ABOUT POTENTIAL BOARD MEMBER
Q.
A member of our homeowner association who is running for the board
has been chronically late in paying her monthly assessments. She has had every excuse
under the sun but is now paid up. Other than the chronic delinquencies,
she is bright, knowledgeable and seems to work hard.
What do you think?
A.
Members of an association who have consistently paid their assessments
late, are generally not ideal board members. You should ask the following
questions before you vote for her:
Will she retaliate against
the board and / or management company because she has been required
to pay late fees and collection costs? This is a common problem.
Will she attempt to liberalize
the association's collection policy to make it easier for
members who don't pay on time?
This is also a common problem.
Will she vote unreasonably
against every proposed increase in monthly assessments because
she is having financial problems? Likewise, this is a common
problem.
I strongly recommend that
you elect board members who are "model citizens" to the extent
possible. Top
NON-OWNER
DIRECTORS
Q.
I own a townhome, however, I don't reside in it. Am I still eligible
to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners
to be members of the board. Some do not. There is nothing in the
California Corporations Code to prohibit you from being a member. Top
LIABILITY
PROTECTION OF BOARD MEMBERS
Q.
I am considering running for election to the board of directors
of my homeowners association. What types of protections are available
to protect me against legal liability for negligent acts?
A.
Under the California Civil Code, a director cannot be held personally
liable if the director is acting:
(1) As a volunteer (not
paid);
(2) Within the scope
of the director's authority;
(3) In good faith;
(4) In the absence of
willful, wanton or gross negligence; and
(5) The association has
both general liability and directors/officers liability insurance
coverage ($500,000 minimum for 100 units or less, or $1,000,000
minimum if over 100 units).
Not withstanding the above,
the association may be held liable for negligent acts of the board
of directors.
In addition, the California
Corporations Code also provides immunity if the director is acting:
(1) In good faith,
(2) In the best interest
of the corporation,
(3) In accordance with
the business judgment rule, and
(4) As a volunteer (not
paid).
Immunities are not absolute.
You should contact legal counsel for additional information and
obtain comprehensive insurance coverage from a knowledgeable insurance
broker. Top
PREPARING
TO BE A DIRECTOR
Q.
I was recently elected to the board of directors of my homeowner
association and am somewhat at a loss as to how I can best prepare
for my responsibilities. Can you provide me with a list
of what I should do?
A.
I suggest the following:
First, read the following:
1)
Bylaws of the association;
2)
CC&Rs (Covenants, Conditions and Restrictions);
3)
Rules (if applicable);
4)
Contract with management company;
5)
Latest reserve study;
6)
Most recent budget;
7)
Minutes of board meetings for the last twelve months;
8)
Minutes of the last annual meeting of owners (members);
9)
Monthly financial reports for the last twelve months;
10)
Insurance policy(ies) of the association; and
11)
Management company inspection reports for the last twelve
months.
Your management company
should provide you with any of the items listed that you need.
Ask your management company
representative to provide you with an update, along with current
legal compliance schedule for associations. Review their web site for
possible helpful information.
Ask you association attorney
for an update, if any legal matters are pending. Review their web site for
possible helpful information. Normally, a law firm will
not charge for such an update. Top
NEGLIGENCE
OF BOARD
Q.
During the recent rains, the roof to my condominium leaked through
a crack causing damage to my furniture and other personal property.
I have been informed by the association's insurance company that
the master policy excludes coverage for my personal property. I
don't have insurance. Can the association be held liable for not
maintaining the roof?
A.
Possibly. If the board of directors fell below the standard of care
in maintaining the roof, they could be liable for negligence and
would then be responsible for paying your damages. The fact that
the roof leaked is insufficient, by itself, to prove negligence
on the part of the board. For example, if the crack was new, the
board would probably not be held liable for negligence. If the crack
was old and the board failed to have the roof inspected, it would
be more likely that a court would hold them liable. The facts of
your case must be fully investigated before an educated opinion
can be offered.
The lesson is clear. It
is prudent for all condominium owners to obtain insurance to protect
their property. It is inexpensive compared to the risk of harm an
owner can suffer. Top
SELF-MANAGED ASSOCIATIONS
Q.
Our association, which consists of twelve townhomes, has been
self-managed for many years in order to save money. Our newly
elected board of directors is considering the possibility of
hiring a management company which would result in an increase
of our monthly assessments. The board claims that we should
save money in the long run. What is your experience?
A.
In my experience, I have found that self-managed associations
have higher expenses in the long run than those with professional
management. Overall, self-managed associations pay more for
maintenance and repairs, have more collection problems and pay
out more legal fees because more mistakes tend to be made by
the boards of these associations. Self-managed associations
tend to keep many lawyers working overtime. Top
DISCLOSURE
OF LITIGATION
Q.
Is there ever a time when it is appropriate for the board of
directors of a homeowners association to inform the membership
of a serious delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection
action has reached the stage of a lawsuit. When an association
becomes involved in litigation, the members are entitled to
notice. The filing of a suit places the matter in the public
domain and is material to the financial condition of the association.
California Civil Code Section 47 protects the association as
plaintiff from liability for defamation or disclosure of private
information under the "litigation privilege." Top
WHEN DOES
A CONFLICT EXIST?
Q.
Please define "conflict of interest."
A.
A conflict of interest exists where an individual's duty to
one party leads to the disregard of a duty to another. It exists
when an outside influence affects a person's ability to make
an independent, unimpeded, objective decision or when a person
owes duties to separate parties with conflicting interests.
Whether or not a conflict
of interest exists depends on the facts of a particular situation
which must be evaluated on a case-by-case basis. Top
BOARD REFUSES
TO OBTAIN RESERVE STUDY
Q.
Our board of directors refuses to obtain a reserve study for
our homeowner association. Can board members be held legally
liable for negligence if they won't obtain a reserve-study?
A.
Yes. Negligence is a civil wrong (tort) that has the following
elements:
(1) In good faith,
(2) In the best interest of the corporation,
(3) In accordance with the business judgment
rule, and
(4) As a volunteer (not paid).
Immunities are not absolute.
You should contact legal counsel for additional information and
obtain comprehensive insurance coverage from a knowledgeable insurance
broker. Top
BOARD MEETINGS
BY E-MAIL
Q.
May our board meetings be held by email communication?
A.
No. Members of the board may participate in a meeting through the
use of a conference telephone or similar communications equipment,
so long as all members participating in the meeting can hear one
another. It is necessary that board members be able to confer with
each other in order to comply with their legal duties. Top
RECALL OF
BOARD
Q.
What are the most common reasons that boards of Directors of homeowner
associations are recalled?
A.
The most common reasons for recalls are:
(1) The board violates
or has violated the law;
(2) The board has failed
to operate within the business judgment rule (See Corp.
Code Section 7231);
(3) They fail to plan
ahead, resulting in large special assessments;
(4) board members act
in an autocratic, arrogant, and secretive manner;
(5) Deferred maintenance
has been allowed, resulting in lower property values and the potential
for special assessments;
(6) They refuse to enforce
the CC&Rs and/or Rules;
(7) The board refuses
to permit members of the association to adequately address issues
at board meetings;
(8) They fail to treat
all members equally;
(9) The board misuses
"executive session"; and
(10) The board's collection
policy is either too harsh or too lenient. Top
PROCEDURE
FOR RECALL
Q.
The majority of homeowners in our association are outraged by the
conduct of our board of directors. The next election won't
be held for another eight months. Our bylaws are silent on
the subject of recalling the board. What can we do?
A.
The California Corporations Code sets forth the procedure for recalling
a board of directors. It involves calling for
a special meeting, sending out proxies and then voting. An association attorney
can assist you with the details. Top
PARLIAMENTARY PROCEDURES
Q.
Our homeowner association bylaws require that we adopt a system
of Parliamentary Procedure. What is Parliamentary Procedure and
what is its purpose as it relates to a homeowner association?
A.
Parliamentary Procedure is a set of rules of order. Following is
one of the basic rules:
All members have equal
rights, privileges and obligations which are to be ensured by
the chairperson;
To learn more of the basic
rules, consult with an Attorney who specializes in HOAs. Top
REQUIREMENT
OF MINUTES
Q.
Is the board of directors of our association required to keep minutes
of meetings?
A.
Yes. The corporations code requires associations to keep minutes
of meetings of the board of directors. However, the corporations
code does not require the board to keep minutes of executive sessions.
Any matter discussed in executive session must be generally noted
in the minutes of the board of directors. Top
WAIVING RESERVE
STUDY
Q.
We live in a small homeowners association. Can our board of directors
waive the legal requirement for a reserve study?
A.
No. Top
