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March 15, 2007
"I don't want to follow the law." What Can Happen?
Many Boards in California of HOAs that do not have professional management (and some that do) are fed up, tired, hungry, and just want to go home. The laws are overwhelming. Need I say it again ..... seriously overwhelming. They picture the feds, the state, the other board members and the association members are all lying in wait for them to do something wrong. Well why not just take a stand - we are fed up. The costs are too high ... the members won't like it if we spend the money to (it could be anything but these are some examples I am hearing about) get a reserve study, get election rules, send out double envelope ballots, hire election inspectors, build up the reserves, purchase earthquake insurance (when the documents require purchasing it) , etc. etc. etc.
So what is the worst that can happen? .........................................................#$!*&%*#
(Before launching into this, please be advised that I hate to be the bearer of bad news, that I am doing everything within my power and time constraints, and that I have been hammering the state leaders, to provide more low cost education, simpler laws, and processes that do not require the services of a rocket scientist (or lawyer) to figure out.)
That said:
1. A board that does not follow the law subjects the entire Association to legal claims for damages of any kind (damages meaning monetary losses, loss in value of homes. personal injury, etc.) and fines (for records inspections rights violations, meetings violations, elections violations and that kind of thing).
2. A board that knowingly does not follow (=ignores) the law can lose the protections provided by insurance for acts of board members as one of the components of the coverage is negligence (accidental mistakes), and knowingly violating the law is not negligence. It is much worse.
3. A board that knowngly does not follow (=ignores) the law can lose the protections provided by statute (Civil Code Section 1365.7 and Corporations Code Section 7231 and 7231.5) for acts of board members as one of the components of the coverage is good faith (accidental mistakes), and knowingly violating the law is not negligence. It is much worse.
4. HOAs in California are mostly incorporated as Non Profit Mutual Benefit Corporations under the jurisdication of the Attorney General's Office, and so failure to follow the law can bring down the AG's hammer (maybe not as likely as an arrow coming from the membership because the AG's office often responds that they do not have the resources to pursue HOA owner complaints - but still, a possiblity that should not be ignored).
Often, the board member or manager will say something like: "Well, everyone else is doing it (meaning ignoring the law), so why can't we? I say, "If you choose to drive 95 down the freeway in a 65 mile zone, because everyone else is doing it, but you get caught, what do you think the police officer is going to say?" Here is the scenario most likely - "Well, I caught you and I am going to throw the book at you." What is unsaid is "I just heard you admit you knew you were going to fast." On the other hand, if you are going 45 mph in a 35 mph zone and no one is around, the police officer might just let you off with a warning, especially if you say: "Sorry officer, I did not know this was a 35 mph zone." In many cases, what the officer is trying to determine is whether you really did know, or made an innocent mistake. How do I know these things? My son is a police officer.
I think come "judgment day" for any Board that is not following the law might present a similar picture, but I would never tell a Board to "count on it."
Either can have serious ramifications for the Association and each board member that does it. It can have fallout that reaches other board members if the majority of the Board chooses to ignore the law. It can, in the worst cases, lead to individual liability on the part of the board members, extreme and unanticipated special assessments for the members, and maybe even punitive (that means "just for punishment") damages.
Make an effort to learn what to do, work to get on track, and although the laws are complicated, don't ignore the fact that they exist hoping you won't get caught. ............... And last but not least, as Collin Powell has said: "Get mad .... and then get over it!"
Or, if you cannot get over it and need a cause, gather up some of your cohorts and write to or visit your local legislator and plead your case as a board member (or board members) trying to do the right thing. Tell the legislators how complicated and difficult it is to try and figure out what is right. Let them know that placing the focus on punishment for those who are trying, instead of providing readily available education, is just not fair.
Posted by Beth Grimm at March 15, 2007 10:42 AM