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
CORPORATION
OR UNINCORPORATED ASSOCIATION
Q.
Are all homeowner associations corporations?
A.
No. However, in California 99% are corporations. The others are
unincorporated associations. 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
POWERS OF
CORPORATION
Q.
Our homeowner’s association is incorporated. What are the general powers
of a corporation?
A.
The powers of a corporation are those
1. Set forth in the articles
of incorporation;
2. Set forth in the bylaws;
3. Established by
law; and
4. Existing for a natural
person unless prohibited by the articles and/or bylaws.
The powers established
by law are too numerous to include in this column. Top
RIGHT TO
VOTE
Q.
Our townhome association has a provision in the bylaws that prohibits
members from voting at association elections if they are
delinquent in their assessments. Is this provision legally
enforceable?
A.
Yes, with one possible exception.
If a delinquent member has filed for bankruptcy, any attempt
to penalize the member for unpaid assessments accrued prior to
the filing may be considered by the court a violation of the automatic
stay. While I am
not aware of a case on this point, I do not recommend that your
board take such action in the event of a bankruptcy. 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
RIGHTS OF
MEMBERS
Q.
When a corporation for a homeowner association issues memberships,
must the rights of each member be equal?
A.
No. In accordance with Section
7330 of the California Corporations Code, a corporation may issue
memberships having different rights, privileges, preferences,
restrictions, or conditions, as authorized by its articles or
bylaws. However,
except as provided in or authorized by the articles or bylaws,
all memberships shall have the same rights, privileges preferences,
restrictions and conditions. 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
MINIMUM NUMBER
OF BOARD MEETINGS
Q.
The board of directors of our homeowners association rarely holds
meetings. Our bylaws do not specifically address this issue. How
often are boards required to have meetings?
A.
Normally, the frequency of board meetings is set forth in the
association bylaws, or in some instances, in the CC&Rs. If
your governing documents are silent concerning the number of board
meetings to be held each year, there is still a statutory minimum.
The California Corporations Code requires non-profit mutual benefit
corporation boards to meet at least twice each year. Also, in
accordance with California Civil Code §1365.5, a board of directors
of an association must review its finances at least each quarter
year. Consequently, a board must meet at least four times each
year.
Whether a board of directors
should meet more often than four times each year depends upon
the amount of business to be conducted by the association. 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
CONFLICTS
BETWEEN DOCUMENTS
Q.
In reviewing the bylaws and CC&Rs (Covenants, Conditions and
Restrictions) of our homeowner association, our board has noted
several conflicts. Which document takes precedence?
A.
CC&Rs take precedence over bylaws when a conflict occurs. Top
GOVERNING
DOCUMENTS
Q.
The CC&Rs (Covenants, Conditions and Restrictions) of our
homeowners association refers to the term "governing documents".
Are rules of the association included within the definition of
governing documents?
A.
Yes. Section 1351 of the California Civil Code defines governing
document as CC&Rs (Covenants, Conditions and Restrictions),
bylaws, operating rules and articles of incorporation. Top
DEPARTMENT
OF REAL ESTATE
Q.
Does the Department of Real Estate assist with the enforcement
of homeowner association bylaws and CC & Rs?
A.
Homeowner associations are subject to the Davis-Stirling Common
Interest Development Act (California Civil Code Sections 1350
et seq.), which is designed to provide homeowners with a system
of self government and dispute resolution. The Department of Real
Estate reviews the legal framework of all new homeowner associations
to ensure compliance with the Subdivided Lands Law through the
public report application process prior to the homes being offered
for sale to the public. Once sales have commenced, the Department’s
jurisdiction is limited to the subdivider’s obligations under
the public report, which does not include intervention in association
disputes. Presently, there is no state or local agency that regulates
associations or their members. Top
