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May 8, 2006
RECALL EFFORT - WHO PAYS?
Here is a sticky question recently sent to me: "My HOA board was recalled. The new board had hired an attorney to help them with the recall and then once elected paid him with HOA funds. Is this right?"
Right, legal, or proper, which do you want to know really. Legal? I do not believe there is a law in California that specifically says the board cannot do that. Right? Is it "right" ?- that is a fiduciary responsibility question. Proper: Perhaps, and this seems to be a moral inquiry.
There might be some limitation in the governing documents that would either allow or prevent it. There may be a limit on dollar amount or purposes of expenditures. If the Board that was removed was ignoring the law or the governing documents and the owners would be entitled to recover fees based on a "prevailing party" argument, this kind of board action might be found justifiable.
One way to test the theory that it is not proper would be to file a small claims action against the Association and/or the individuals who approved the decision to recover their share or such an expenditure. I do not have a crystal ball and cannot predict how a small claims court referee would rule on this. But its an option.
Boards have a lot of lattitude, but whether that lattitude extends to paying off individual expenses accrued prior to coming into power is the question. When I represent groups of owners seeking recall, the question always comes up. I advise the group to raise the money beforehand so that the question of whether the fees can be recovered does not overshadow or dilute the efforts of recall.
So legally correct, right, moral or proper? The answer is subject to debate and to the best of my knowledge, as yet untested in court.
Posted by Beth Grimm at May 8, 2006 11:10 PM