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
INSPECTORS
OF ELECTION
Q.
Many of the members of our homeowners association don't trust
the board to accurately count the ballots at our next annual meeting.
Do you have any suggestions?
A.
Yes. The California Corporations Code sets forth a procedure for
appointing "inspectors of election."
Prior to any meeting of
members, the board may appoint inspectors of election to act at
the meeting. If inspectors of election are not so appointed, the
chairman of the meeting may, and on the request of any member,
appoint inspectors of election at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the
request of one or more members, the majority of the members represented
in person or by proxy shall determine whether one or three inspectors
are to be appointed.
The inspectors of election
shall determine the number of memberships outstanding and the
voting power of each, the number represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect
of proxies, and do such acts as may be proper to conduct the election
or vote with fairness to all members. Top
PROXY FOR
QUORUM PURPOSES
Q.
I cannot attend the annual meeting of our homeowners association.
I would like to give one of my neighbors a proxy to be used only
to help establish a quorum, but have been advised that I cannot
do this. Is this correct?
A.
No. Any member of an association can give their proxy to another
person to be used exclusively for quorum purposes. You have been
given incorrect advice. Top
ELECTION
BY MAIL
Q.
Is it possible for our homeowners' association to hold its annual
election by mail?
A.
Yes. Current law requires that elections be held by mail. 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
ELECTION
CHALLENGE
Q.
The management company for our homeowner association and our board
of directors recently conducted an election of directors that
did not meet the requirements of our bylaws and CC&Rs (Covenants,
Conditions and Restrictions). Can an election be challenged by
a group of homeowners?
A.
Yes. An action challenging the validity of an election must be
brought within nine months after the election. If no such action
is commenced, in the absence of fraud, the election will be presumed
valid after nine months from the date of the election. 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
PROHIBITION
FROM VOTING
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
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
TIE VOTE FOR DIRECTORS
Q.
What should we do if the election of directors results in a tie?
A.
The nominees who are tied can either compete in a runoff election or can simply flip a coin if they are agreeable. If a runoff election is scheduled, the newly elected directors who are not tied should begin serving immediately. Top
RAFFLE TO INCREASE VOTER TURNOUT
Q.
To maximize our chances of obtaining a quorum, is it legally permissible for our condominium association to enter the names of all voters in a raffle for some type of gift?
A.
Yes. As long as no consideration is given other than voting, you may do so without the need to register the raffle with the office of the Attorney General. Some associations raffle off a credit for one month’s assessment, others offer a gift card. Raffles almost always increase voter participation and the cost of a raffle can be far less than holding a second election.Top
MANAGEMENT COMPANY AS INSPECTOR
Q.
Is it legally permissible for the management company for a homeowner association to act as the inspector of elections?
A.
Yes, but only if the board has adopted an election rule permitting the management company to act as the inspector of elections. Otherwise, inspectors must fall into one of the following categories:
| • |
A licensee of the California Board of Accountancy; |
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A volunteer poll worker with the County Registrar of
Voters; |
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A Notary; or |
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A member of the association who is not a candidate for
the board of directors or related to a candidate, or a
current member of the board of directors. Top |
