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February 3, 2007
Committees - How Accountable Do They Need To Be?
Should Committees be accountable for their meetings, decisions, and roles in the Association? Certainly, they should be formed and should operate in a business like manner and serve a purpose. How does that tend to happen? It happens when they have structure, and guidance, and instructions, and a functional purpose. It is more likely to happen when they have a "charter" or are appointed by a resolution of the Board that specifies who will serve, how they will be chosen/appointed/elected, how long the members will serve, what the purpose of the committee is, what kind of reporting is required to the Board, and whatever limitations may need to be stated.
Seem simple enough? Surprisingly, it is all too common that the Board members are conducting business and something comes up like, for example, a decision to look for a new landscaping contractor. A board member makes a motion to appoint a committee to bring information to the Board to help find a new contractor. Two of the board members volunteer (out of 5) and two owners sitting in the audience volunteer and voila, a committee is appointed. The meeting minutes reflect this. That is all they reflect.
In the ensuing weeks, the committee members communicate via email. They have no instructions so when disagreements arise as to how to go about it, they lose some precious time and have nothing to report at the next board meeting. The Board threatens to disband the committee. The appointees agree to try again. They contuinue to communicate, but do not really "listen" to each other. The two board members call a committee meeting and one of the owners comes, but not the other. They decide to interview landscapers. They start asking around for names. The 4th committee member (non board member) has a brother in law who happens to be a landscaper just starting a business. The other three decide they want to beat out the member with the brother in law and so they decide among themselves to choose one of the contractors interviewed.
At the next board meeting, one of the board members on the committee reports that the committee has interviewed 4 contractors, received bids for the work and signed up one of the contractors. No specifications were provided. to the contractors. They just asked for the usual "mow and blow" services. The 4th committee member pipes up that his cousin wants to bid the job and he has brought in the bid. He explodes when he hears that the other committee members already chose a contractor. He says the bid was much lower than the one signed by the committee. In fact, the bids are quite vastly different. No one on the committee has checked licenses or references.
The Board is quite offended. The committee was not supposed to commit the Association. And there is no followup to check licenses; no one checks references; no one investigages why there is such a difference in the bids (which are all produced on a one page tear off contractor form proposal), and of course, no legal review of the contract that is ending or the contract that was signed by the Committee Chair. The Board assumes it is stuck.
On top of all that, an owner asks for a copy of the minutes of the meetings of the committee. In California, owners have a right to inspect minutes of committee meetings. Of course, there are no minutes since everything was done via email.
Good committee experience? Not............ This association could be headed for trouble.
First of all, the committee exceeded its authority - it did not have the right to commit a landscape contractor. It did not do any due diligence with regard to followup regarding licenses, references, etc. It did not report progress to the Board or allow the Board the opportunity to meet with contractors or ask questions about disparity in bids. It did not consider that legal review might be important, and worst of all, it acted in haste with an improper purpose. And furthermore, it produced no minutes for the record.
Can the Board reverse the decision? That pretty much depends on whether the contractor was aware that the committee member did not have the authority to sign the contract. He or she may have even believed the committee member was a board member and had the authorization. It is possible that to get out of the contract, if that was where the board was heading, a big price would have to be paid.
Can the owner sue whose brother in law lost out because of an unprofessional bidding/contractor situation? There might be a "breach of fiduciary duty" claim looming here.
What about the owner who wants to see the minutes of the committee? Do they have a cause of action? Possibly, if there are damages that can be proved - but maybe not choosing the least expensive contract could be the basis for the claimed loss.
Or do owners who accuse the Board of not following the law (in this case allowing an operating committee not only to exceed its authority, possibly by providing no guidance, instructions or limitations, and failing to meet or produce minutes) even have to prove damages?
Failure to follow the law in California, and probably many other states, is considered "negligence per se". In lay terms, this means one does not have to prove any damages to win a lawsuit, and get an award.
Now, I am not suggesting everyone go out and sue their board for every technical statutory viiolation, regardless of whether damages or losses can be proved or not. But I am suggesting that proper appointment, use, purpose and procedures for committees and committee meetings are important, not just from the perspective of any owner that might sue. They are important practices that may make the difference with regard to the question of whether the Board successfully manages the association or it becomes one of those that is "doomed" in the end for lack of structure.
Posted by Beth Grimm at February 3, 2007 7:55 PM