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October 31, 2007
What if One Board Member, or a Minority, Want the Board to Follow the Law?
Yes, it is true, in some associations the boards will "manage and administer" for years without help, and then someone will come along with an understanding that running an association in a void, without any concept of what is legally required, is a dangerous proposition. That person, who may even run for the board, becomes the "conscience" of the board, and starts advocating for all kinds of changes. The other board members resist, and maybe even threaten to resign, because they do not want the change, they do not want to learn new things (can an old dog learn new tricks easily?), they do not want to spend more time on things that might usurp important family or work time, they do not want to become a "target" because they are not doing things right, or they just do not like the newly instituted "debate" that occurs at every meeting on how to do things. And the new person in the picture is tagged the "resident bitch" (woman) or "disgruntled person" or "troublemaker" (male or female). Even if the person trying to interject new processes is not immediately tagged with a bad rap, the board members who now realize maybe they do not know what they are doing start to lose sleep at night and have uncomfortable and mixed feelings about the newly proclaimed "expert". It is unsettling and understandable that the comfort level in "running the association" just deteriorated.
Who is right? What should a board do?
Here is what I believe may be the best course of action:
1. Let the "newbie" bring in information for better processes, review it, and if it comes from a credible source, utilize it to improve procedures.
2. Be pragmatic. If you find out you are doing or have done things wrong (now or in the past), put a plan in place to do them right the next time around, and analyze (with knowledgeable professional help if you find out you have done something potentially seriously wrong) how to get the practices revamped to do things right.
3. Assign board members to find information on specific topics. The web is prolific, but be careful about the resources you use. Make sure the person is really an expert in their field, and knows HOA law and practices, and be careful about really unbalanced information (that for which no source or resource is mentioned) or that which is one-sided (obviuously biased toward one group or another or negative in the extreme). And if it seems to good to be true, it probably is.
4. Understand some things:
** That change does not happen overnight ...
** That your association still needs you (volunteers are hard to come by) ...
** That good faith is a critical element in all things (no one is perfect) ...
** That bringing someone into the mix that is willing to help you set things right is a plus ...
** That there are some resources available, like my website and others ...
** That suing or being sued is very undesirable and there are usually other ways (at least 95% of the time, whether you believe it or not) short of litigation.
Think about it like this: There is a speed limit on all streets and highways in California. It's my guess that about 90% of the people try to push the envelope. I think that most push a little, rather than alot, and go up to 5 mph faster than the posted limit only. They are breaking the law, right? They are bad people, right? Wrong. Those going 100 mph are in the "bad people" or at least "ill motivated" group. There are those in between. So what is the punishment for exceeding the speed limit? I think it is probably well established (somewhere) that most who exceed the speed limit by 5 mph or less feel fairly confident they will not get a ticket, even if stopped. I would bet most think a warning is the most they would get. And that seems like a reasonable conclusion, unless they are going 5mph in a school zone where the mph is 15, or driving through an HOA complex where children are out and about. On Interstate 5, where the speed limit is 70 in places, 75 will probably not get you stopped and ticketed. Clearly though, if you are going double the speed limit or over 100 you deserve a ticket, and over 100 mph you probably deserve jail time.In between, it might be a slap on the wrist or low level penalty. You might get a "bye" if you are speeding someone to the hospital, but maybe not, as you are endangering the lives of others.
So how in the world you say does this apply to HOAs? First of all, because of a huge void in the information train in California, it is impossible for probably 90% or more of the boards to follow the law because they do not know it. The State of California has done little to remedy that. More than half of the HOAs in California are 25 units and under, and cannot even afford management. More than 80% are self-managed and 50 units or under. And even when the most illustrious find the laws, they cannot understand them. (I get alot of relieved feedback from visitors to my website at http://www.californiacondoguru.com).
And then there is the difficulty in the law exactly fitting the practicalities of an HOA. The new elections law is a perfect example - some of the most knowledgeable HOA attorneys in the state do not even agree on how to interpret and apply it.
And then there is the issue that the smaller associations lose some of the "community spirit" when it gets to be all about the laws and technical requirements for everything. For example, I was at an HOA meeting the other day where more than half of the owners were present. The Board had to bring up several expensive cost items, and talk about the possibility of a $5,000 to $10,000 per unit assessment. It was suggested that at the next meeting, they would come up with the plan, based on bids and prioritizing, to fund the expenses and take a vote - 100 percent of the people in the room were behind the board in this effort. So I, being the only HOA professional for miles, had to tell them that they could not vote like that - that they had to use a double envelope, secret ballot system, appoint an inspector of elections, distribute the ballot at least 30 days prior to counting, call another meeting for counting the ballots, that they needed good election rules that would cost them $500-$750, blah, blah, blah, .... Truly, I felt like the "big, bad wolf".
The moral of the story is:
**Try to stay under the speed limit (translation: learn what the laws are and follow them)
**If you push the limit, do it minimally, and if you get caught, have a good "story" up your sleeve as to why you did it (good faith is not always enough, but its a step in the right direction).
**Don't push the limit to the point that you endanger others (or here, the assets of the others)
**Improve your driving by developing good driving skills
**Don't wait until the situation has reached the level of disaster to do something about it (most HOAs in California are seriously underfunded. It is easier to save and pay than pay as you go when there are big expenses involved in maintaining infrastructure.)
And remember: No one is perfect, and for every problem or screwup .... there is a solution or legitimate "fix".
Posted by Beth Grimm at 10:06 AM
October 26, 2007
Agendas - How Important Are They? What Role Do They Play in Meetings?
California legislators are micromanaging HOAs again. A new law takes effect January 1, 2008, that requires HOA boards to distribute agendas with meeting notices. The catch, the Boards cannot conduct business on any item not on the agenda, except for the exceptions. Here's the short scoop. The longer "scoop" with more questions and answers and ramifications is in an article on my website at www.californiacondoguru.com.
What's the short scoop?
To be specific, first of all, it applies to board meetings, not membership meetings. The requirement for distributing the agenda is tacked on to the meeting notice requirements found in Civil Code Section 1365.05(f).
Question: What if the notice of meetings is in the Bylaws or Association newsletter and that comes out before the agenda is set? Answer: Find a way to distribute or post the agenda at least 4 days before the meeting. That might be with the billing statements when they are mailed, in the newsletter if the timing works, or by posting in the common area. It would be a good idea to include another copy of the notice with it, even if it was already distributed. It may not be necessary, but it makes sense.
Question: What if the HOA does not have any common area to post in? Answer: That is a little more difficult. You can mail the agenda, post it by the mailboxes if there are any clusters, put a kiosk up somewhere near a street if there are private streets, a parking area if there is any, on a street lamp, or anywhere there is space available, that you can get permission. Choose the place all owners are most likely to drive by. If you still cannot find a posting place, but you have a website, posting on the website. Use good faith to try and find a reasonable way to get the agenda before the members.
Question: What are the exceptions? Answer:
The law applies to “nonemergency” meetings only.
The law does not prevent the Board or its staff or agents from talking to the members about something not on the agenda. It is not muzzled by this law.
The law allows Boards to communicate instructions to its management and staff.
The new law allows for taking action on items that come up before/at the meeting that are not on the agenda if certain findings are made as follows (choose from any one of the following)::
(1) A majority of the board members present at the meeting determine that an emergency situation exists.
(2) Two-thirds of the members present at the meeting, or, if fewer than two-thirds of the board members are present, by unanimous consent of the members present, determine there is a need to take immediate action.
(3) The item was on an agenda for a prior board meeting (within a month prior) and did not get put on the agenda for the meeting when it comes up again.
If these exceptions do not work, consider whether it might be more practical to call an emergency board meeting, even if to take place just before the scheduled board meeting or after, to address matters that come up before the meeting but are not on the agenda. Check my website for more information as time goes on. There may be a debate over what (2) actually means.
The statute says:
"Upon a determination made by the board by a vote of two-thirds of the members present at the meeting, or, if less than two-thirds of total membership of the board is present at the meeting, by a unanimous vote of the members present, that there is a need to take immediate action and that the need for action came to the attention of the board after the agenda was posted and
distributed pursuant to subdivision (f)."
It appears to me that the legislation was written incorrectly and that the #2 was meant to refer to members present that are not actually board members (however, for all practical purposes, the directors are also "members". The first reference to 2/3 of the members, and then the reference to 2/3 of the membership of the board, is confusing, and it is quite difficult to analyze why the reference to (note bolded words) "membership of the board" is even in there. I will be writing to the legislator who wrote the bill for an analysis of what this means, and wonder if that will lead to "clean-up" legislation.
There are many other questions that have arisen and they are answered on the most recent article posted to my website at http://www.californiacondoguru.com/hoarticles/articles.html. Look for “Articles” or “What’s new?”
.
Posted by Beth Grimm at 11:06 PM
October 23, 2007
What Happens If Boards Do Not Follow The Law?
Here is a question recently posed to me:
"Please advise me if there are any consequences for an HOA Board of Directors if the Davis Stirling laws and rules are not carried out. Who would impose any consequences? Who would know? Does being a volunteer board relieve of consequences? Thank you very much."
Answer: There are many consequences in the Davis Stirling Act and being a volunteer board member does not insulate a person from liability. There are protections for volunteer board members that provide insulation in lawsuits if the Association carries the certain amounts of insurance coverage (which by the way are understated compared to industry suggested amounts). The language for this is in Civil Code Section 1365.7.
There are penalties that the Association must pay to members in some cases, which might be attrirbuted to board members ... if the board members ignored the law, for failure to provide records that must be provided (Civil Code Section 1365.2); for failure to follow the election laws (Civil Code Section 1363.03, 1363.04 and 1363.09); for failure to honor the open meeting requirements (Civil Code Sections 1363.05 and 1363.09; and for failure to provide escrow information when requested by the selling owner (Civil Code Section 1368).
The best thing is to follow the law, of course. The next best thing is to have a justifiable excuse ready if you cannot. Impossibility and impracticability may get you somewhere in court if left to defend yourselves, but it is certainly no guarantee.
As for who might know, or bring charges? That would be up to members and the way members find out what is going on is to attend meetings and read association publications, financials, etc. A lot of information is supposed to be distributed each year to members.
Posted by Beth Grimm at 10:51 PM
Management Companies - How Much Power Should They Have?
I get a lot of emails from homeowners who are unhappy with management. Of course, it is predictable if the owner is commonly in trouble for breaking the rules or thumbing their noses at management or the board. (Yes, there are those kind of owners.)
But there are situations where management may have too much power. Here are some comments and questions sent to me, and my thoughts on the matter:
"Our current Management Company just simply came in and took over for the previous Management Company without any notice or approval from the homeowners. They took over 2 months before they even had a license to manage a cid. They had said we had no say in the matter since we had no board of directors, they have been friends and business partners of the previous manager who by their own admission was mishandling our funds. Can they do that?"
First of all, a manager or managing agent has to be hired, retained, or contracted to do work. If a managing agent comes in without a contract or written employment agreement, that company or individual does not have the right to perform services, and does not have guidance, protection or authorization to incur costs. And if there is no board, my question would be who is signing the checks? A manager cannot make decisions for an HOA, write their own ticket and sign their own checks, unless of course there is a court order involved, and the person is acting as a receiver, appointed by a judge, which is in fact something that could happen if there are no board members. However, someone would have had to initiate that process. Without it, the owners could call an election and elect a board. Or if there are any board members at all one, two or more could appoint additional board members to serve.
If no one is willing to step up and serve the association as volunteers to end this situation, then I have little helpful advice to offer. I can see why it would be disturbing, and I can imagine that finding volunteers to serve could be difficult, but there are no miracles here that can solve this dilemma. If there is no board to hire, who is going to fire?
Here is another one:
"My question is about Management Companies. Since the Board of Directors is liable and has a fiduciary duty to the association, how much power and authority should they give the management company? How much power and authority should be legally granted a management company? After all, the management company has a vested interest ($$$) to keep the contract. What I have seen over the years is the board relinguishing most control and relying on the manager, and this is what the manager wants. Also, since most board members don't have proper education and knowledge about HOA law, then how do they know whether what they are doing is legal? If all correspondence goes to the manager, then who monitors what the manager does with the correspondence (i.e. letters from attorneys)?"
This is the classic story about how an HOA gets to the point where the manager does more than just manage, by default more than anything else. The answer to the question about whether the board knows management is acting legally is that the board may never know if it operates in a void. So, attending industry group classes, reading up, looking for information, checking references and using good business judgment are things likely to help give a board member some insight as to how things should go. And the answer to the question about who knows what the manager does with correspondence is no one, unless someone is either watching, or has instructed the manager to forward all communications to the entire board. However, there are boards, such as those described herein that want their burden lifted, that may not want to be "bothered" with correspondence.
Here is one more:
"In our condo association our Management Company has full control; the only exception is signing checks with no co-signature. I believe the Board of Directors allowed this to happen without knowing what they were doing. The Manager talked them into refusing any HOA correspondence from any of the homeowners and routing everything thru him, which "could" be filtered. The only thing that the board members do is attend meetings and make decisions based on advice from the Manager. The Manager has told the Board members that they don't really have to know anything about HOA laws and also gives legal advice. Our association has no legal representation."
I received these comments, no questions attached. I have to assume there was a question somewhere in this like: "What can we do?"
I would say, run for the board, campaign, get elected, attend industry functions, read journals, articles, the web, and get involved. However, there probably is a reason the question was not asked. Because the most common answer to that kind of a suggestion is: "I don't have time."
So what else can I say? ... If no one in the HOA steps up to the plate, it is hard to complain to a court or anyone else about wrongdoing... there is little anyone can do. Is it better if an attorney steps in and directs the activities? Or directs the manager? Or gets rid of the manager? What then? ....
All I can say is stop being part of the problem (the complainer) .... and become part of the solution (offering volunteerism and/or leadership services to the association).
Posted by Beth Grimm at 10:46 PM
October 20, 2007
Clotheslines - Don't Get All Tied Up About Them
Clotheslines are becoming a big issue in HOAs. Most CC&Rs prohibit any kind of clotheslines in HOAs. Big surprise. Most developers assume that people to not want to look at laundry hanging on the line. Most attorneys assume that people do not want to look at laundry hanging on the line. Many boards assume that owners do not want to look at laundry hanging on the line. Many people assume that if clotheslines are allowed, the next thing will be clothes hanging over balconies, over fences, and everywhere. Laundry, laundry ..... everywhere.
There are those who are pushing to change this, in fact pushing for legislation to prohibit associations from having such restrictions. As the energy crunch continues, one can expect the supporters of clotheline options to keep pushing.
Here's a thought. In a planned development with single story homes and back yards, why not consider whether to survey your owners to see if they would approve clotheslines in back yards that do not exceed the fence height? If the members surprise you (suggesting that the majority have no problem with the use of clotheslines), then you could take the next step and get the requisite approval for a CC&R amendment, or propose a rule, circulate it to the members, and approve it.
I certainly can understand and anticipate that the general public probably does not want laundry hanging out on balconies, in front yards, over patio fences, and even in yards when homes are two or more stories and people can't help looking down into yards. But, there are those that would not have a problem allowing people to have clotheslines where they cannot be seen without peering over fences. In fact, there are those that would like to have the option of hanging their laundry outside to dry, not just because it saves power, but because it feels good, and makes the clothes and sheets smell good.
If resistance to reasonable energy saving processes continues, it is reasonable to anticipate that at some point in the future, legislation will force acceptance. It has with solar installations, drought resistant plant requests, and it is conceivable clotheslines could be next.
Posted by Beth Grimm at 10:12 PM
October 16, 2007
Can a Board be Sued for Not Collecting Assessments?
Here is a question that was recently sent to me:
"Can you direct me to any lawsuits filed against directors for not following their delinquency policy and collecting assessments - i.e., lawsuits by owners that are current. Does their failure to do subject them to personal liability? Are they covered by their D&O insurance?"
First of all, I am not aware of any lawsuits that would provide authority for the proposition that a member can prevail against a Board for failure to collect assessments. There is case authority for the proposition that a Board can be sued for failure to follow the CC&Rs (a fence approval case where the Board approved a block fence that was precluded by the CC&Rs when a open "view" fence was required - Cohen v. Kite Hill).
How this would factor into a collection case is not easy to determine. The facts of each case would have to be examined by an attorney to give a definitive legal opinion. There must be reasons why the Board is not moving on the collection items and those would have to be examined. If the Board is simply being noncommittal, or is purposely avoiding collecting assessments because of friendships or threats, there may be some liability exposure. If the Board is not moving forward because it has weighed the consequences and determined it is not cost effective to go forward, it may be protected by another case that stands for the proposition that the Board can make a decision not to sue even when a violation of the documents exists because of financial concerns. (Beehan v Lido Isle).
The bigger concern may be a case that stands for the proposition that if a Board fails to follow its own stated policies and procedures, it's continued right to do so may be jeopardized. (Ironwood case)
These are delicate issues. Since the failure to collect assessments adversely affects all owners that do pay assessments and threatens the budget, and since the board is a fiduciary in charge of the assets of others, the duty to collect assessments is of the utmost importance. In order to escape liability if sued, the board would likely have to show extreme diligence in its attempts to collect.
That's my take on the question. An association board should seek advice on handling collections from its own attorney. Not all attorneys agree on collection methods, and some are more heavy handed than others. There is no question that the assessment stream is the lifeblood of an association and collections should be considered one of the most important tasks with which a board is charged.
As for D and O coverage - it should cover the Board and the Association if the Board lacks diligence in collections, but there are factors that could take a Board member out from under the umbrella of that protection. The facts would have to be extreme, I believe.
Posted by Beth Grimm at 10:16 PM
October 12, 2007
Apathy Rears its Ugly Head at Election Time
I was at a conference a few weeks ago and one of the long time committee members was lamenting about his long time service on the board with no replacement in sight. He was asking around, to try and find out what happens when there is no one to serve.
A week later, I received this email message: "Here we go again - we have three openings on our five person board for 2008 & 2009. We only have three people who are interested in running - apathy is not getting any better."
So what do you do? This is not the first time I have talked about this. In fact, there is an article on my website entitled: "Apathy - The Number One Problem in HOAs??"
So what you do is try several things:
Have an HOA party ... and beg. You may not be able to get neighbors to a meeting, but maybe you can get them out to a "meet your neighbors" party.
Send out a questionnaire to members asking them about their interests, and then go about contacting them one by one to see if they will use their strong "suits" (capabilities or knowledge) to help the Association.
Put a letter together telling the members that there is a crisis in the association and if people are not willing to step up and serve, it is possible the HOA may go into receivership which means a court-appointed "manager-type" of person who will pay the bills and impose assessments as needed (under the authority of the court), but without any personal interest in the HOA itself.
If the HOA is facing a very large assessment, it might actually help bring people out to serve - at the least it will likely bring them out to criticize and provide the opportunity for the board to say: "If you think you can do a better job, we'll resign and appoint you."
It is a difficult place to be, having served for years and not seeing any reasonable opportunity to step down and hand over the mantle to someone else. It is important to understand, however, that quitting without having a successor board could lead to some serious legal liability. It might be better to hire a lawyer to petition the court for a receiver before disaster strikes due to leaving the "ship" without a "captain."
Posted by Beth Grimm at 10:04 PM
October 11, 2007
"GOOD STANDING" - WHAT IS IT GOOD FOR?
What does "good standing" mean and why would anyone like it?
These are my thoughts on the subject - "Good standing" means current with regard to payments of assessments and not in violation of any governing document provisions, including the CC&Rs and Rules. A "good standing" requirement is great - for board member service. If the Bylaws or CC&Rs provide for it, it assures that the Board sets a good example for the membership and respects the obligations of the governing documents. If the documents contain a "good standing" requirement for candidacy or service on the Board, a Director who does not qualify or falls out of "good standing" can be "ousted".
As to voting, it is my belief that requiring members to be in "good standing" to be allowed to vote complicates elections and due process procedures within the community. Generally, my experience indicates that members who violate the regulations or fail to pay assessments don't care if their voting privileges are revoked (and generally don't even bother to return ballots - although they may attend meetings just to stir up issues). However, I have seen situations where important measures are before the community and a sizable contingent of the community that is in violation of some requirement wants to vote it down, just because (because the members do not agree with anything the board does in some cases). In that scenario, it might make sense to have the right to deny the recalcitrant members the right to vote.
However, that leads to the question about what due process is required before an association board can impose the good standing requirement to disenfranchise members. Some documents do say that members of the association lose voting rights if they are behind in their assessment payments. That may be appropriate for "automatic" discounting the votes, but I do not like it. Other documents allow boards to suspend voting rights if a member is behind in their assessments or in violation of the rules or CC&Rs. Well and good - it would be my position that a hearing must be offered before the Board could suspend rights to vote on these bases. Why do I believe this? Because I have seen too many cases where owners have been taken by surprise, even blindsided, by these requirements in a contentious election. In some cases, the Board never imposed the sanctions in any previous election. In some cases, they have initiated the procedures after the election commenced, and sometimes, the facts lead to the obvious ... i.e., that the Board used the suspension or rights to throw an election. And that, of course, is devious and questionable, reprehensible, and, I should think, legally actionable.
As for suspending rights to use of the Association facilities for lack of "good standing", it may work well as a deterrent to abhorrent conduct, such as in the case of pool, laundry room, or clubhouse use. In other words, if a member (or by delegation his or her tenant) must be in "good standing" to use the association facilities, bad conduct may be minimized. A violation of the pool or other facility rules is a violation of the governing documents. And this is a remedy that may be enforceable against the tenants, whereby most other remedies are only enforceable against the owner, even for tenant conduct.
As a recap, suspension of membership rights for failure of "good standing" can be useful, but it can also be misused. Some boards apply the "good standing" requirement only sporadically, inconsistently, or to exert control in the face of controversial issues (sometimes just to keep members from voting who they don't like, or to keep people out of the pool that they do not like). In the course of using the "good standing" remedy, Boards may fail to provide owners with adequate notice and a hearing (required for such disciplinary actions). That conduct could be found to be improper on the part of the Board. For more on frequently asked questions such as this, visit the Guru at http://www.californiacondoguru.com. You will find questions and answers for members, board members, managers and realtors.
Posted by Beth Grimm at 10:12 AM
October 9, 2007
Members Out Of Control
I have written several blogs lately that are about Board conduct. But what about owners' conduct. I receive calls every week from Board members who are dealing with owner misconduct. What kind of things occur? See the following, and I keep thinking I have heard it all, but I am sure I have not.
HOA members should not ... ever ...
**"Get in the face" of a board member or manager or association vendor.
**Attack verbally or physically any board member or other member.
**Threaten other board members or neighbors.
**Ignore rules of the association.
**Disrupt board or membership meetings.
**Visit or call board members about association complaints at their homes (unless invited to do so) and never late at night.
**House dangerous dogs or other dangerous pets.
** Stalk board members, managers or neighbors or association vendors.
** Take it upon themselves to direct association vendors.
**Purposefully interfere with vendors on site trying to do their jobs.
**Take spiteful retaliatory actions because of the idiocy of others.
**Build additions, initiate constructions, sign contracts for, or install items that require architectural approval ... without architectural approval.
These are just a few examples of the things that happen every day in HOAs across the state and, as I hear, across the nation.
Posted by Beth Grimm at 9:57 PM
Board Members Out of Control??
Here is a question that is fairly common: "We have 2 Board members that have conflict of interest and special interest written all over them. They have an agenda that is only out to benefit and protect their neighbors and friends that live in the association. What recourse do the rest of the members have to stop them before they do serious harm? They are ruthless and out of control and scared of no one."
If a Board seems out of control, the recourse for owners is to address the specific issues that are occurring which in the above case could include:
1. Inconsistent Enforcement of Rules - this is a legally actionable cause of action and the number # source of Directors and Officers liability insurance claims in HOAs.
2. Conflict of Interest - if this is in fact occurring, it could mean serious consequences, and is also a legally actionable cause of action. However, sometimes when owners believe actual conflicts of interest exist, the requirements for pursuing a claim are not there. If a board member benefits financially from some action of the board (approval of a contract with the board member's family member or company might be an example), it is not a conflict of interest if it is disclosed.
3. Breach of Fiduciary Duty - Board members serve a position of trust and are responsible for the assets of others so they have fiduciary responsibilities to the members. If the board members actions causes losses to members, there may be a cause of action in this regard as well.
Posted by Beth Grimm at 9:44 PM
How Many Roommates Can Serve At the Same Time?
I get many questions about who is qualified to serve on a board of directors. Here are a few (with the answers):
Question: "Can a person that owns multiple units (6) be on the board of directors? I am sure I read somewhere in the civil code that two is the most a person can own."
A person who owns one or more units in any association should be able to serve on a board, unless there are other qualifications that apply, and the member does not meet those other qualifications. I do not know of any law that would bar any person from owning one, two, five, six, or more units in one association. If a set of governing documents limited ownership to a few units, it would be hard to enforce, at any rate.
Question: "Can more than one member of a household serve on a board? We have a husband - wife situation - both want to be candidates. This does not seem right."
Unless the governing documents prohibit it, any number of residents from one unit could serve on the Board. It happens fairly often in smaller associations where volunteers are hard to come by. It is not illegal, but it certainly does create some assumptions and often misconceptions about the propriety of it. Most people assume it is not appropriate - but I have seen some cases where it works out fine.
Posted by Beth Grimm at 9:26 PM
WRITE IN CANDIDATES - ARE THEY ALLOWED?
Here is a question about write-ins:
"We just had an election for Board members at our Condo and the ballot had a blank for a write in candidate. Is that OK? (A write in candidate received enough votes to get on the Board.)"
The answer to the question is "yes". A Board may provide on the ballot for write-in candidates. The new elections law provides this as an option. It does not appear from the statutory language, however, that is required, but if your governing documents or election rules require it, I say provide a blank for write-ins.
Posted by Beth Grimm at 9:16 PM
October 3, 2007
Who is Responsible for the Big Assessment?
Here are 2 emails I received recently:
"Hello, Our HOA has just informed us there will be a special assessment to shore up our reserves. The shortfall in reserves is caused by a $100,000 UNDER BUDGETING of utility costs in 2006. I bought in in 2007. Am I liable for my part of these fees?"
"I hope you can help me. I have lived in my condo 12 years and the assessments have remained the same. Now, all of a sudden the Board says that we have a shortfall of about $21,000 per unit because the decks are falling apart and need to be fixed? How could that happen? Who is watching the store? I had nothing to do with this mess. Do I have to pay? What are my rights?"
Many associatons are facing large assessments. There are many reasons. Many new owners new and oldtimers alike are surprised as they had no idea that the association was a "ticking time bomb". There is nothing in the disclosure documents that indicates serious trouble ahead. Or is there?
One common reason for needing a large assessment is reconstruction. The problem often is not visible, but manifests at the time or after a contractor has commenced painting, residing, refoofing, etc. The Association finds that the reserves were seriously underfunded, costs have gone out of sight, conditions were not discovered until the siding was ripped off or the roof covering was raised.
But that is not the only reason and this blog is not about trying to figure out all the reasons for all of the possible large assessments that might occur.It is about who is responsible.
There are many possible answers to this.
The initial answer is that all owners in the development are generally responsible to share in payment of the expense that is driving the special assessment. And the fact is that if the owners do not pay, or try to withhold and fight the assessment, it likely will result in extra costs and a downward spiral of serious ramifications. "Owners" means those that own at the time the special assessment is "imposed". If the assessment requires approval of members, then the owners responsible would be those who own at the time the special assessment is approved, because it cannot be "imposed" until that time. There may be a few exceptions, but this is the general premise.
Owners responsible may have recourse against any or all of the following:
The seller, if the seller failed to make disclosures about pending assessments - but do not think this is a given. Sometimes the disclosures are there, but the unsophisticated buyer does not reognize the signs.
The Board, or the Association, if the Board failed in its duty in some way and the facts are supported by evidence. Simply assuming the Board should pay because the Board made a mistake is not sufficient to make a case. Sometimes the actions of others caused the problem, and the Board gets blamed. Sometimes the board members who are responsible for the shortfall are long gone - having sold and moved on without disclosing a festering problem. And as for suing for nondisclosure, be cautious here; a buyer cannot likely successfully pursue a claim against the Association, as there is no legal relationship and the Board owes no duty to the buyer. However, the Board does owe a duty to the owners and the seller is an owner, so if a buyer goes after the seller, and the seller can prove the board did not disclose what it should have, the seller may have a case against the association.
Experts or vendors, if the experts or vendors fail in their duty to the owners, buyers, or the Board or the Association. An expert or vendor could include a manager, whomever does the budgets, a reserve study preparer, an accountant, a realtor, a lawyer, or anyone who holds themselves out to be in an expert - who tells you something that is false or misrepresents the facts, or misleads you. Again, be cautious however, because it is easy to point fingers but not so easy to prove a breach of duty. Someone doing their job may make a mistake on their own steam, or may make a mistake based on malfeasance or mistakes on the part of others, or from receiving inoorrect information.
The common first reaction of owners when a large assessment is raised is to blame someone and resist responsibility. However, often the facts, as they unfold, turn out merely to be a lack of education and understanding of how to run a complicated business, as a volunteer lacking specific expertise. Should a volunteer be sued and held responsible for making mistakes, especially honest mistakes? Should current boards or owners that have stepped up to serve and overcome mistakes of past boards be blamed for the failures of their predecessors?
The best one can do to avoid a special assessment is purchase a single family home. But that does not mean you will avoid large, unanticipated expenses. And the truth is that the common interest housing developments often have more to offer in the way of amenities than single family housing.
So, if you are hit with a large special assessment, gather all of the facts you can before you embark on a course of frustrating resistance and end up paying even more costs! And if you believe someone else caused your losses, seek out more facts and get some good a realistic advice from someone knowledgable with HOA law. There are probably lots of attorneys out there that will take your hard earned money and start writing letters pointing fingers. But you are better off from day 1 talking to a legal counselor that will consider all angles, honestly assess your situation and chances of collecting from others, and who will determine all possible courses of action, and honestly discuss the best and worst possible scenarios given the facts and evidence available if you want to try your luck at suing someone.
Posted by Beth Grimm at 9:11 PM