« Special Assessments - Is Documentation of Need Required? | Main | Annual Meeting Minutes - Do We Have To Wait A Year to Approve? »
November 11, 2006
Recall of the Board - How Hard Is It?
Wanting to recall a board is a common desire of an owner or owners who are frustrated with the Board's actions. Sometime the issues are about parking, sometimes pets, but probaby the most common complaint is about financial issues. From the standpoint of the Owners, it looks like the Board is misspending funds. And when Board Members get peppered with questions, they often close down. And when Owners want records and verification for the expenditures, many Boards get tight lipped and closed fisted. Sometimes it's a defensive response. Sometimes it's just because no one has ever shown any interest in doing any of the volunteer work to figure out the budget or in any other capacity, and so the other members of the Association are completely in the dark about finances, by their own design. However, special assessments tend to get the Owner's attention. They serve as a wakeup call, and the immediate reaction often is this (from a reader):
Our Board just passed a special assessment and demanded that it be paid immediately. There was no meeting about it, no warning, no explanation, and a lot of us are upset. I had a meeting with several other Owner's and we all signed a Petition to Recall The Board. We asked for a meeting for the Recall - just like the law says we can do. The Board did not give us notice of when the "Special Meeting" will be called and I advised the other members that we need to pick the time and the place of the 'Special Meeting.' What happens if the BOD decides not to show up at our meeting? Are they automatically recalled?"
The simple answer is "no" the Board is not recalled just by virtue of the fact that they do not acknowledge a meeting called by Owners for recall. In the "old days" (pre the new elections law requirements), the Corporations Code had a process similar to that described above that was enforceable. It basically allowed homeowners to proceed to schedule a recall meeting if the Board did not answer a valid petition asking for recall properly, i.e., by scheduling a meeting within 30-90 days out, and providing notice within 20 days of the petition to the members. However, that process, though it still exists within the Corporations Code, is hobbled by the new elections law requirements. Even in the "old days" if a group of owners did schedule a meeting it often ended in chaos because many times, the Board would just ignore the results and then the battle was who had rights to the checkbooks and accounts, or the old Board claimed that the owners did not do the proper procedures and the matter often ended up in court or one side or the other got tired of the fight and gave up.
Today, it is harder for a group to proceed on their own, if the Board is resistent to honoring a valid petition for recall. The Board should, because if the Board members fail in their duty to follow the law, they could conceivably end up with some personal liability. However, the question is how to properly respond to a petition. In the "old days" scheduling, noticing and proceeding with the recall meeting and vote would be a legal and appropriate response (assuming the petition was "valid" and satisfied the legal requirements). The meeting would be held, the vote usually was decided by the result of the "proxy war", and the sides went their ways when the results were in. Sometimes the Board voted in, because of cumulative voting, ended up consisting of two strong members from each "camp" and one "fence-sitter." As it happened then, the "fence-sitter" (or a kinder word might be neutral) became the most powerful person on the board as they were always the "tie breaker".
Today, the process is more convoluted. The new elections law requires a written secret ballot by mail and the good news is (from the owner's perspectives) each Owner can vote in private, by mailing their ballot from home to be held, protected and counted by an independent source. The bad news is that there is no road map now for getting there. The Corp Code requires "calling a meeting". The elections law requires voting by mail. The Board may decide to try and satisfy neither, or both. Even if the Board decides to send out ballots and to call a meeting to deliver and count the ballots, the members may end up in a barrage of pre-meeting hit pieces and be confused about choosing. Neighbors may be pitted against neighbors. The proxy gatherers may go out in force. However, the issues and questions surrounding proxy distribution and use complicate the process considerably. No matter which side is being represented, there is likely a challenge from the other side on almost every step of the way, because there is no clear guidance on how the recall should proceed.
For example, the Board may decide not to distribute proxies thinking it not necessary to use them. It is true that because the new law says the returned ballots count as if the person was at a meeting, no proxies are necessary to establish quorum. And the Board may decide not to accept any proxies. But if the association documents allow members to vote by proxy, I would have to question the legality of that position.
And there is the question of how the election for Board members should proceed if the Board or any director is recalled. If the whole Board is recalled, who is going to conduct the election of the successors? If it is the Board that is recalled, owners may come unglued as the risks continue of the actions complained of that lead to the recall. If it is not the Board, then who will it be? A prudent Board could appoint the Inspectors of Election to conduct the election for the Board but what Board is likely to have that much insight or desire to make things easier for the "insurgents." And even if the Board is pragmatic and has a process in place for someone else to conduct the election of the successors, who makes decisions during the "in between" time, especially if a contract comes up for renewal or if there is a weather event that causes severe damage to the complex or an accident in the pool that needs addressing or something like that. It's like a boat without a rudder.
In the "old days" the recall and relection of successors (if the Board was removed) would commonly occur the same night. But now that is quite difficult because of the election law requirements of having to send the ballot out 30 days before the votes are to be tabulated. Some boards may try to combine the ballots into one - the question of the recall, and the election of successors in case the recall is successful. But this is difficult as the slate of proposed candidates cannot really be firmly established until one knows if the entire Board is going to be recalled. And even then, though the incumbents and the proponents of recall may have their slates identified, the neutrals have not had an opportunity to weigh in on the nominations for the Board that would be in effect if the Board is recalled.
So you can see, it gets quite complicted. There is an article on my website called "Recall in An HOA - A Blesssing or a Curse! I suggest you read it (http://www.californiacondoguru.coat the Guru site) and then decide if there is not a better way to address grievances. Groups of owners do not always think like individuals. There are such things as forcing a meeting to discuss a difficult ballot measure or special assessment, inviting a face-to-face with the concerned owners and the Board, asking for a group or representative mediation on an issue. The owners are entitled to seek help to enforce the document proviisions against Boards doing things in violation of the documents, and a good legal representative may be able to help apply pressure in the right places. The members can ask for an arbitration on the issue, ask for a neutral opinion from an expert, etc. The key is find the right buttons to push to get what you want and need, and what is legal. If the button is too hard to push (it is stuck) you may have to resort to desperate measures such as attempting recall. However, given the difficulty in trying to integrate proper procedures under the new Davis Stirling requirements and the Corporations Code, a group of owners will probably need legal counsel or at least a savvy advisor.
Leading a group of owners through recall is more difficult than ever. A Board can put up a lot of hurdles, but it is not out of the question. Sometimes the threat or pressure of a recall effort will scare board members off. No one likes to be threatened with that sort of action. There is nothing precluding a group of owners from going to court and asking the court to direct the processes for the election, laying out what is acceptable and what is not. It may be possible that less money would be expended and more accomplished by doing this. A group can fight hard and make all the wrong mistakes, even with paid legal counsel, and this area of actions has become so complicated as to necessitate a real expert and a real good fight to achieve a legally successful recall effort. I am guessing the cost of the process is doubled or tripled from earlier times because of the many more hurdles that can be put up by the opposition. In my experience, it used to take between $1500 and $3000 to get to a successful recall meeting and election; now I would guess the cost to be more like $3000-$6000. Some have been able to accomplish the effort without help or expenditures like this, but if those efforts were achieved by bullying and threats, one can almost predict that the other side will be back with a vengence. I have seen situations where in one association they end of with several recall efforts within the course of a year or two. I hope you do not end up there if you are considering such an effort.
Posted by Beth Grimm at November 11, 2006 1:26 PM