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December 26, 2005
What Constitutes A Board Meeting?
I received this email from a reader and I think many people would like answers to his question:
"Dear Beth,
I serve on an association board of directors and have a question regarding what constitutes a meeting of the board. I am aware of the rule that a meeting is defined as any congregation of a majority of the members of the board at the same time and place…. We have a president who will contact another board member individually requesting that he sign and approve various documents and then repeat the process with a further board member. He always approaches the two board members over whom he has the most influence and the remaining two board members, of the five person board, are always excluded from the process. Technically, he does not meet with the other members at the same time and place, but the outcome is the same as two board members are always excluded from being able to have their input and are never made aware that such decisions are being made behind their backs. The president maintains that what he does constitutes proper approval by the board of directors even though such decisions are not made at duly called open meetings of the full board. What are your thoughts on this?"
I imagine this happens more than anyone would like to admit. If indeed action is being taken outside of meetings and the president is signing contracts, etc., without board approval, then that is against the law and there is a possibility of making a successful legal challenge to block such practices. However, it is more likely the case is that no law is being broken because a person like the president can have a lot of influence by making the individual contacts to get support for measures he or she intends to raise at a meeting. It is not illegal for any board members to contact other board members individually and exert whatever influence they wish to exert to get them to try to agree with some proposal that is coming up at a meeting. However, action items actually decided at a meeting by majority approval, (or outside a meeting if by unanimous written consent) do not usually give rise to a legal challenge. All Board members must be notified of meetings.
I have actually served on a Board (as a new board member) where it seemed all the important business was somehow turned into a "consent" item and discussion on the action items was discouraged because of the practice complained of here. There was always majority support for all of these ideas I had not even heard anything about. It was very frustrating, so I can relate. Some ways to try to effect a change to this practice (because in and of itself if there is actually a meeting, it is not illegal) is either to insist on discussion on matters that are brought up and seemingly already decided and if the discussion is intelligent or thought provoking, maybe those upon whom the president is exerting pressure will see that there is actually a better way to do business. Try at elections to change the Board makeup by working to get board members elected that would be in favor of reserving discussions on Board business to Board meetings. If you see no hope of changing the Board makeup or the way the majority decides things before the meeting, then decide if you want to put yourself through the meetings and give service to the Board. There may be ways you can find to be effective like bringing good ideas to the Board, remaining positive and working toward more discussion etc. In my case, I did not find serving on the Board worth my time, but I worked with others to change in the Board makeup and over time things did change. It sounds like new blood may be important. Sometimes it is just a matter of lambs following the shepherd because it's just easier than thinking on their own, and if the decisions start to get a lot of challenge or flack, the lambs resign and leave the door open to new appointments. Of course, few would call me a lamb. But I am a realist. And I do not like to take the slow road myself, and often when I run into a quandry, I stop and think about how to best use my time, for the optimum result. In a situation like the one described, I look for a way over, around or through the invisible barrier. And I often come to the conclusion that teaching others how to do something and helping them to get into a position that will allow them to use that knowledge and bloom is better use of my time than banging my head against seemingly immovable wall. Likewise, in the above described situation, I moved aside strategically to help the right two people get through the door that had the patience, time, and inclination to work for a gradual change. And it came, and not so gradually. And it was good for the organization. And I moved on. ...
Posted by Beth Grimm at 12:01 AM
December 25, 2005
CC&R and Rule Change Requirements - What Are The Differences?
A reader recently asked this question: "How do you go about making a change in the CC&Rs. The board has imposed a no plants around the residences provision in the CC&Rs so we want to get that rule taken off the books allowing us to have house plants on patios." The reader also complained that the Board imposed a quiet time fom 7am to 9pm - a change from the prior time of 7am to 10 pm on weekdays and 7am to 11pm on weekends. The reader opined that no one but the Board wanted the change.
The difference between rules and CC&R amendments is this: Unless the governing documents require owner approval to pass rules and regulations, the Board can do it without taking a vote of the members. An amendment to CC&Rs on the other hand does require owner approval, and the percentage needed to amend the CC&Rs is usually stated in the CC&Rs. If it is not, then Civil Code Section 1355 requires majority approval. Another difference is that rules and regulations are not recorded with the County but CC&R amendments, to be effective, must be recorded with the County (per Civil Code Section 1355).
It is important to note that even though approval for rules and rule changes is not required by California law (unless the documents say approval is required), Civil Code Section 1357.100 and the following statutes set forth a process that requires Boards of Directors to circulate proposed rules and rule changes to the owners in the development at least 30 days before the meeting at which the Board is considering adopting the rules or rule changes. This allows for an owner comment period. There is also a process for owners to petition the Board to require it to take a vote of owners to terminate a rule that is adopted by the Board, and if the petition satisfies the legal requirements, the Board must put the rule or rule change to a vote of the members.
As to the reader, it seems they are unhappy with changes made by the Board. If the Board amended the CC&Rs without getting owner approval, there is a problem. If the Board approved rules without sending them to owners for review before the Board approved them, there may be a problem, unless it occurred before January 1, 2005, the date the requirements for rule circulation came into effect.
Posted by Beth Grimm at 11:02 PM
December 6, 2005
Keep an open mind! Judge People on What You Know About Them ... CAI IS A-OK!
I got an email the other day from a reader that loves the website and this blog, and is impressed with my level of knowledge and willingness to "give back" to the community. But the reader was in a quandry - the question: "Our Association hired _________ to write an amendment for our governing documents on the subject of ____________. We would like a second opinion but the attorney we hired is a CAI Attorney. Are you a CAI Attorney and if so, can you recommend a non-CAI Attorney? "
I am dismayed to hear that someone is spreading the mis-impression that all "CAI Attorneys" are created equal (and apparently that they cannot think independently). In case you do not know, CAI stands for Community Associations Institute. It is a National Organization with chapters in every state. The organization is a non-profit corporation that serves many functions. It is a grand source of education for all who manage, live in and offer services to homeowner associations all over the country. In fact, contracts have been let with the State in Florida and other states for the provision of classes in management training, board training and homeowner education. Classes are offered all over the country. The National CAI is a watchdog for federal legislation that is harmful to or can help HOAs all over the country. The website for CAI National is http://www.caionline.org. Check it out.
The statewide Chapters serve similar functions on a more local basis. I have served on the California Legislative Action Committee for 20 years. All delegates are volunteers and give service willingly, and without compensation.
Being a member of CAI is certainly nothing to be ashamed of. I am, and I have had the benefit of the collective brain trust of attorneys, managers, board members, homeowners, and others who serve Associations and provide service in the industry from all over the country for 20 years. I have written for the publications, taken all of the PMDP Management classes, spoken at various annual seminars (management, law, etc.) and served on National and local committees and on the Boards. I enjoy my affiliations with CAI as much as I do with ECHO (Executive Council of Homeowners in Northern California) and SCHOA (South Coast Homeowners Association) and the State Bar Real Property Section, the Contra Costa Bar Association Real Estate Section, the mediation groups, and other organizations geared to service of homeowner associations in California.
There are people who have good and bad, positive and negative, and painful experiences in the courts or otherwise (being on the right side or wrong side of the law). Many legal battles involve attorneys. Grudges can be formed. Some have formed such strong opinions that they feel compelled to condemn the entire lot of CAI members! And they are vocal, and get quite obnoxious in their presentation, leading others to question the thinking of any "CAI Attorney". Pitiful. Attorneys, of all people, are as different as night and day in their training, experience, treatment of legal issues, handling of problems, seeking of resolution, clientele, type and style of practice, compassion, age, experience, bias, and interests. Keep an open mind! Judge people on what you know about them, not what others advertise with brazen generalizations.
Posted by Beth Grimm at 10:03 PM
QUESTIONS ABOUT OWNERS RIGHTS
Here are some questions from a homeowner about meetings and homeowner rights.
Question: Do HOA boards in general have problems with open meetings?
Answer: Some HOAs have problems with meetings. Those that know and honor the legal requirements would tend to have fewer problems than those without any structure or design.
Question: When did §1363.05, the Open Meeting Act, become effective, and who is the author? Any background regarding this legislation is appreciated.
Answer: The law came into play several years ago, in part to respond to a general misconception that The Brown Act applies to HOAs and in part because of anecdotal complaints to legislators about HOA meetings. (PS -The Brown Act does not apply to HOA meetings; it relates to public government meetings.)
Question: Executive session meeting considerations are specific. However, there are no witnesses at these meetings. Homeowners aren't present to know what is being discussed or how decisions are being made. Is there a procedure that can be recommended regarding executive session abuse prevention and/or resolution?
Answer: The executive sessions are legally protected because the purposes are to allow the Board a forum to discuss matters in private that may have legal ramifications, such as strategy in a lawsuit, delicate personnel matters, competitive bidding issues and negotiations, and private disciplinary items.
Question: Executive sessions are to discuss litigation and formation of third party contracts. Yet the appropriation of homeowner funds are being discussed. Litigation and third party contracts are relevant to homewners.
Answer: True, However, there are legal limitations (protections) on use of the funds collected by the Association to cover expenses and fiduciary responsibility for contracts executed by the Board.
Question: With existing legislation, when and how is disclosure to homeowners authorized?
Answer: As to executive sessions, the Board must announce at and the minutes of the next open board meeting must reflect that an executive session was held and the purpose must be stated. (This assures that owners can see what the meeting was about, and whether it fits into a category of executive session privileged purposes.)
Question: Can attorney-client privilege extend to homeowners who are the paying clients being represented by a board of directors?
Answer: It is possible that the privilege could be ex tended to homeowners if there was a good reason to do so. But more often, and more likely, there is not a reason, and protecting the privilege so that the Association does not end up at a disadvantage in a lawsuit or other matter that requires legal strategy for success becomes of utmost importance. So it is not often extended beyond the Board and management.
Question: May Association contracts be made available to homeowners after their formation?
Answer: After July 1 of 2006, some contracts will have to be made available for review, upon a proper written request. There are exceptions as well. Watch the website www.clac.org for the specifics on AB 1098.
Questions, Questions, Questions, this reader had many!
Posted by Beth Grimm at 8:44 PM
ITS NOT A GOOD SIGN WHEN NO ONE SHOWS UP FOR MEETINGS
Here is something from a reader that relates to apathy at meetings, both on the part of the Board and the homeowners.
A reader writes: “As a homeowner living in a condo, I attended our annual meeting and was one of two homeowners who showed up. Only one board member attended. I have had a lot of issues and am quite outspoken and complained about our funding situation, and a few other things. The management company told me that I was the only one who was unhappy. His rationale was that since nobody showed up at the meeting and because none of them call him to complain, then everybody must be happy. And of course, I'm in the wrong for complaining. It has been conveyed to me by several homeowners that this is why homeowners stop attending meetings”.
Another says: “I attended the annual meeting this year and there was not a quorum of members so the Board turned it into a “town hall” meeting. This seems all the rage today - town hall meetings. It just seems like filler to me. What can be accomplished at such a meeting? “
As you can see, meetings can be seen as a problem from both sides of the table. For many Boards, most in fact of the associations that come to me for help, apathy is one of the biggest issues that arises. For an article on this, visit the guru website. and check out the articles.
When neither the Board nor the members come to meetings, who reigns? The manager often takes the reins, and then is later criticized for making decisions. It’s quite a catch-22 situation.
Here are some myths and realities about meetings:
Myth: The fact that everyone stays away from meetings and ignores communications, surveys and ballots means they are all happy with the way the association is being managed.
Reality: In most cases with regard to homeowners associations, people have been sold a “care free” life! And generally people are too busy to care about what is happening in their association. As long as they do not receive a big special assessment notice in the mail, they assume that everything ok, running smoothly and their money is being well-spent. They do not want to be bothered with details. This certainly can create a false perception that everyone is satisfied and unquestioning.
Myth: Owners who ask a lot of questions or complain a lot are “dissident homeowners.”
Reality: Everyone has a right to ask questions. Challenging decisions or lack thereof by the Board never endears a member to the Board. Some owners who ask questions or challenge the Board can be very valuable when enlisted into service. Nothing is worse than a “yes man” (my pet name for someone who agrees with everything someone else says without thinking about it). I have seen “yes men” get Associations into as much or more trouble than “complainers”.
Myth: If there is no quorum, everyone must be sent home.
Reality: When people take the time to come to a meeting, even if there is no quorum to vote on anything, the Board can give reports or take this opportunity to poll the attendees and find out what they think on any given topic. Interests can be explored and the value and importance of service (like serving on the Board or a committee) can be discussed. This is the benefit of a town hall meeting: allow give and take, identify problems and look for solutions, brainstorm, create goodwill, talk about what happened over the past year, ask for suggestions on getting neighbors to come out, plan a social event. Most governing documents allow for the Board to call for adjournment of a meeting when there is no quorum, and allow for the members present to approve a followup meeting (adjourned meeting) that same night, without requiring a mailed notice. Some allow for reconvening later the same evening, and some with a lower proxy requirement, allowing the Board to achieve a quorum with a little door-to-door foot work, or filler time while some attendees try to round up their neighbors.
Another time town-hall meetings are very valuable is in time of crisis, when there is to be a large expense and the members need information. It is important to enlist the support of the community before a sizable rehabilitation or reconstruction project that will require a special assessment or loan, or a matter of slide repair that though it does not threaten all homes in the community, threatens all pocketbooks.
A townhall meeting can be very helpful to a Board that is served with a petition from the members calling for a vote on a subject that is not legally within the member’s purview (unless the governing documents so provide), such as approving a budget for the coming year.
But back to basics. If there is no quorum of board members) for a board meeting) or of members (for a membership meeting), no business can be conducted. And it does not mean everything is ok! To the contrary it means everything is not ok.
Posted by Beth Grimm at 8:33 PM