California Condo & HOA Law

June 15, 2008

DO BOARD MEMBERS HAVE TO PAY FOR COPIES OF RECORDS?

A reader asks: "Is there a provision in the civil code that a 'Board Member' may have access to HOA records, invoices etc. as a 'board member'? The management company tells us that a homeowner as well as a board member will be charged $____/hour plus ___ cents a copy with a 10 day notice."

I left the amounts out so no one would complain about being targetted. Believe it or not, this is a common question.

Board members are entitled to see all records of the association, with the cavaet that although the Corporations Code provides for an abolute, the basis for review of some association records came into question and a board member was denied review of some proxies in a California case. (Chantiles v Lake Forest II Master HOA) So, board members to not have unfettered access.

That said, board members are members of the association and the records inspection statute (Civil Code Section 1365.2) speaks in terms of members rights of access and charges that can be made to members for review of the records (see below).

"Civil Code Section 1365.2 - (b)(1) The association shall make available association records and enhanced association records for the time periods and within the timeframes provided in subdivisions (i) and (j) for inspection and copying by a member of the association, or the member's designated representative. The association may bill the requesting member for the direct and actual cost of copying requested documents. The association shall inform the member of the amount of the copying costs before copying the requested documents."

This leaves open the argument that the board member could be charged. However, if a board member is being charged for records that Board members should be seeing and reviewing because of their role in serving the association, such as financials that have to be reviewed under Civil Code Section 1365 on a quarterly basis by board members, and the reserve studies, budgets, financial statements, etc., then that would seem to me to be wrong. That said, board members can be as pesky as owners in making excessive demands on management to produce records for their review that have already been provided in past years or that normally are not copied for board members. If these demands cost the association money because they are out of the ordinary duties, then it could be right.

The only way to tell is to pay the charges and then bring a small claims action to recover the money. If the board member can show that they needed to records to fulfill their volunteer role successfully and properly, then the person would probably recover the costs.

So why go there? Be reasonable .... people.

Posted by Beth Grimm at 6:00 AM

May 3, 2008

So Many Questions -So Little Time - About Making An Impact in Your HOA

I am so backed up right now with many, many good questions. I would like to quit everything else I am doing for a week and answer them all, but like taking a cup of water out of a bucket, it would hardly make a dent. However, I notice that a lot of the questions have a common theme - How does one make an impact in the HOA when they do not like the way things are going. I get questions from board members, owners, and relatives of owners and have been on a kick lately to let readers know -

There are lots of questions ...
My time is limited ...
There are lots of resources that are untapped (even on my website)...
There are processes that work.

Check out two of the latest blogs for courses of action to make a difference, to change something, to stop something, etc. Of course, if the pragmatic diligent courses of action do not work, there is always an option to sue. I very rarely recommend that course of action because it can be slow, frustrating, expensive, and downright offensive to the parties. Readers often want to go there first, until I tell them the cost can could exceed the equity in their home if it is a particularly fractious issue. I do not even need to know what the equity is - its just a way of getting things into perspective. That tends to help people get real, and if it really works, it gets them into proactive mode - determined to make a difference on their own.

I can dispose of many questions asked recently with this one blog, because of the common thread. Here are the questions. You can probably recognize the commonality even though the subjects seem unrelated:

Pool: "Workorders [in our HOA] are totally neglected unless of course it’s a board member. They are not doing their job...SAFETY AND CODE violations have been neglected for years ... at this complex. Myself and my roommate are owners so we have two owners ... even the mailman will testify the place appears to be going down... the HOA has failed this community. Do you have any advice for us?"

Trees: "Our Board has arranged to have several trees removed from our small community. Many owners are up in arms! The Board members seem to be focused on views although they protect themselves by saying its to prevent fires. They seem to be forgetting about aesthetics, shade, landscape design, wind protection, beauty in nature, and other methods of fire protection. Our HOA will go from a place of beauty to a place of ugly soon, if something is not done. What can we do?

Use of Pesticides: "I own a town home. I’ve brought up to the property manager my concern over pesticides that are sprayed on the premises. I provided the Board information from an article stating how dangerous and highly toxic these chemicals are especially to the small children on the property and especially now that they are spending more time outside as it is warmer. Pretty much I feel like I’m being ignored. Any solutions?"

Want More Info: "What should ones course of action be if they believe that certain longtime HOA bored members are not being forthright or honest with the members ? Once a year we get a statement and thats it. They do not even try to enlighten us with monthly minutes. Is almost like they do not want us to know what is going on. The last annual statement included a finacial forecast for 30 YEARS OUT. That hardly seems realistic! Thank you in advance for any insight you may offer."

Want Action: "What recourse does a homeowner have if the Association Board takes over 4 months to deal with a simple rule infraction by a tenant? I have been trying to get my neighbor to remove her filing cabinets and 5 gallon water bottles from the front hall since Thanksgiving to no avail. All the Board says is: Have patience. "

Audit: "Me and some of the neighbors think the board and management are pilfering funds and misspending HOA money. We cannot get the Board to do an audit (duh). They say "it is too expensive" and "there is nothing that requires us to do one." What can we do?"

If you want some very practical ways of dealing with questions, concerns and issues like those noted above from readers, check out the two recent blogs: How To Communicate Concerns in Your HOA and What Can You Do If Your HOA Board is Out of Control? . Check out the inexpensive books and publications on the website. If you believe you need more specific information, or need to go a step further, but don't know what that step might be, look for the consultation form on the website at www.californiacondoguru.com. I will make myself available for a telephone consultation if there is no conflict of interest, at my hourly rate (one hour minimum). I need to form to determine whether there is a conflict of interest (I need to know who the parties are and what the problem is in a few words).

And watch this blog for more ...

Posted by Beth Grimm at 2:32 PM

February 20, 2008

More on Noise - Can a Developer Be Held Responsible?

Just today, during my HOACHAT at noon on issues including noise and hard surface floors (which is a free offering you can join on Wednesdays through my website at http://www.californiacondoguru.com) one of the "attendees" asked: "Can a developer have responsibility when there are noise issues through the walls and floors of a condo?

Noise is a problem in many stacked and wall-to-wall condos. Sometimes alternations and modifications are made by owners in condos that were not meant for hard surface floors. But that is for another blog.

Sometimes a developer will tell you that space is left between the walls of the adjoining condos and that reduces the noise (well, sometimes they will say it eliminates noise transmission but I think that anyone - including me - that has lived in such a condo situation and fell for that line knows better). Sometimes the developer will say, "Sure choosing the laminate flooring upgrade is fine because we add soundproofing," and you think - "Great!" ... And you buy, ... and then experience - "not so great results." I wrote an earlier blog suggesting that the extra money developers collect for installing laminate or hardwood floors in stacked units or townhouses should be placed into a fund to be used later to mediate flooring noise issues. Maybe this sounded like a "flip" comment, but ... why not?

And the answer of course is "Yes", a developer can have some responsibility. And that is apparently what happened in a Colorado case back in 2005. The case took place in Arapahoe County Colorado and it is reported that some of the residents were awarded punitive damages against the developer (as much as $150,000 each, plus costs of trial) and others settled with the developer before the matter came to trial. The owners' attorney's name as reported is David TeSelle. The articles say that the developer had to outfit units with soundproofing materials

I am not representing that this case controls anything in the legal arena, and there is always more to anything than meets the eye. If there were lots of big cases granting damages for noise pollution, builders and architects would have moved noise control to the top of the list of concerns. It does not appear to me that this has occurred, because the noise complaints continue to rage all around the state and in fact, in the nation. I have not located appellate level cases on this subject but feel free to send me some if you read this and know of some so I can add them to my musings.

But I am saying take heart, anyone can be sued for anything, and (hopefully) in matters that escalate to litigation, the culbable party or parties will be "outed" and have to compensate those that are wronged or taken advantage of. I am a California attorney and do not know Colorado law, or the particulars in the Arapahoe County case; however, further research could be done if one wanted to find out more.

My point in discussing this case and this topic is to say that developers need to get on board. And owners need to speak up, to the developer, to the homeowners association, and to each other, if there are noise issues in your building (unless, of course, you want to "move out quietly").

If you visit http://rismedia.com you can find an article about buyers and sellers combatting noise issues, and the gist of the article is that condo builders and architects should take heed. Certain building design and construction is critical if one wants to seriously reduce or eliminate noise transmission between the units.

The article says that while developers or architects might at first refuse to make noise isolation issues a priority because of the cost, they may come to their senses the next time around and spend the money, if they are plagued with complaints from the residents of a building they were responsible for. The article acknowledges that "Quiet does not happen by accident, it has to be engineered ..." and suggests that when you are thinking of buying a condo, it makes sense to set up a sound test, like making sure the neighboring toilets are flushed, the jacuzzi tub next door is filled (and I assume the jets are turned on), the neighbors walk around in their usual foot attire, and run televisions and sound systems.

Nice thought, but it could certainly slow down sales, in more ways than one, especially if potential buyers are given access to current resident neighbors. Short of such a comprehensive test, I think it wise to make sure you have the opportunity to go into a unit during the day, and at night as well, that is next door to a condo with active kids, even if it is not the one you are slated to buy. There is a probably a very good reason that "models" are often built close together and often isolated from the "inhabited" condos or townhouses.

Is it fair to expect a noise-pollution free environment in a condo or townhome? Maybe, if you are willing to pay a premium for it, but in most cases, probably not. But it should be fair to expect that you will not hear the neighbors whispering, talking at low volume, getting a drink of water, having sex, watching TV at a reasonable volume level. If you want more protection, ask developers about the construction of the walls, floors, and ceiling, and whether there is any vibration reducing construction, and write it down, and then talk to an accoustic specialist. This bit of information might help you if you want some more comprehensive research before buying. And accoustics specialists can also be located on the web.

Noise isolation and control may be moving up the priority list of amenities, and well it should. New technology encourages wall mounted window sized TVs, and surround sound systems.

Noise disputes are never easily resolvable, and they make people do things they would not otherwise ever consider doing! And worst of all, they make people sick! If you do not believe me, visit http://newscientist.com and read the articles including one entitled "Hidden Harm from Noise Pollution". In the article which appears in issue 2365 of the New Science magazine, December 22, 2007, the article claims: "Noise kills in much the same way as chronic stress does, by causing an accumulation of stress hormones, inflammation and changes in body chemistry that eventually lead to problems such as impaired blood circulation and heart attacks."

Now, don't get me wrong because while I am saying that noise pollution or transmission disturbances in condos and townhomes can be insidious and must be taken seriously, I also believe that all parties should work toward resolving the issues by means other than litigation. Just because there is noise, and just because it is disturbing, that does not mean there will be big bucks in your future. Visit earlier blogs to help sort out how culpability might be determined, and do not expect that this will be the last blog on the subject.

Posted by Beth Grimm at 8:54 PM

February 14, 2008

STOP THAT INFERNAL WALKING!

This is my 301st blog! Thought it worthy of some unusual step. Since I have on my plate neighbor to neighbor issues today, I decided to give neighbors their own category on this blog.

So, to kick off this special day, I have more to offer in the way of determining fault, options (or lack thereof) and solutions (to the extent there are any) on issues noise related - namely, to hard surface flooring. By the way, if any of you out there are claiming that you cannot live below carpetted-properly padded unstairs rooms, consider yourself lucky, because there is a whole world of unhappy owners out there living under hard surface flooring, and its getting worse every day because there are more and more and .... (well,. this seems a good place to stop with the madness).

So here is the latest that has come to my attention. Different sources sent me an article entitled "The Case of the Upstairs Condominium" apparently written by a flooring person or an attorney, I am not sure which. None of the parties identified the source of the article (naughty naughty) so I do not know who to thank (except if your initials are DLW give me a call or an email and identify yourself, and I will give you full credit). You may be asking me what a flooring person and an attorney could have in common. The article said that the person had received several calls in recent months from homeowners and homeowner association boards about noise issues related to hard surface flooring. That could be a flooring person or an attorney, right?

Anyway, to get to the point, the article talked about a "test" that can be performed to test "the level of noise transmitted through the assembly ..." of a sound level meter. It takes a specially trained accoustics specialist to read the noise from upstairs created by a specialized piece of equipment called "a tapping machine". This machine, according to the article, imitates the impact on the upstairs floor created by a person walking. The measurement from this test can be expressed as a single number that is called "Impact Insulation Class". According to the article (and by referring to it, I guess I cannot be "blamed" by anyone if this is incorrect information), California's "Title 24 Standards require that floor/ceiling separation assemblies between units in miltifamily developments achieve an 'IIC' rating of not less than 45 when field tested."

So I will add this to my list of considerations published earlier, when one is considering what to do about a noise problem related to hard surface flooring, which (now) is reiterated in a (new) list of questions to ask. As for the HOA, the developer, the flooring installer, or any other party that might be confronted with a noise-flooring issue here are some pertinent questions to ask:

**Is this a pre-existing condition or did something change, i.e., flooring, neighbors, change in family circumstances, residents (number or age), and if there was a change that is now creating a problem, will it be remedied any time soon?
**Are you just the problem, or also part of the solution?
**Did you do anything to cause or exacerbate the noise issue(s)?
**Did you do anything to mitigate or minimize the problems or condition leading to the problems?
**Did any of the parties violate the governing documents in their actions?
**Has anyone arranged for an "IIC" or other flooring impact analysis test to be done?
**Was there any requirement or duty to make disclosures?
**If so, were those disclosures made to the right party?
**Are there any viable solutions that do not involve expecting the impossible, such as moving when economics or life logistics do not allow it?

I cannot say that this "IIC" test will make or break any situation. First of all, I do not know if it is well recognized in the industry and by the courts (feel free to send me info on this). And, I do not believe it is necessarily the end of the inquiry. As described, it presents a test with a minimum standard, and I for one believe that the standards for condos should be higher than apartments because if someone does not like the upstairs noise in an apartment, they can move. They have little to lose. When one purchases a condo, the solution is much more complicated. If they remain quiet, they risk having a disclosure issue come up after sale. If they make noise, they risk creating an issue where one might not be there for the next person. Believe me, peoples' tolerance levels seem to be all over the map - and when "friends" live upstairs, people are much more tolerant than if they have nothing in common with the upstairs neighbors.

But, the saga continues. And I will continue to say that if attorneys continue to tell developers not to put limitations on hard surface flooring un upper stacked units, and attorneys continue to tell HOAs not to put stringent limitations and standards on the installation of hard surface flooring, and owners continue to be discourteous (like placing speakers on hardwood floors and turning up the base, like refusing to try any form of carpet or padded runners in traffic areas, like giving the neighbor who complains the finger instead of listening to what they have to say), the problems will not go away.

Of course, before condemning attorneys, I should say that the attorney does not make the ultimate decision on what goes into the governing document or the rules or standards. The developers and HOA boards do that. In every set of docs I have written in the past 20 years (ugh, has it been that long) that involves stacked units, I have advised boards to put some limitations or restrictions on hard surface flooring in the upper units. More than half, probably more than 90% (I lost count) have heeded my words and done it, but those that rejected my suggestion either could not fathom that it could ever raise an issue, have put property values ahead of human values, or have had or were considering converting to hardwood or laminate floors. Had they put limitations on the flooring, at least, if the HOA did not want to spend the money to sue someone who installed hard surface floors without getting approval, the neighbor below would have a potential remedy for the violation of the documents. However, this sometimes falls on deaf ears.

It seems simple to me. If there is a prohibition on installing hard surface flooring in upstairs units, or there are standards involving installation of cork or some good form of padding below the new floor, or developers go the extra mile to add good and true soundproofing materials below hard surface or laminate flooring, it eliminates a major problem. That problem is the awful situation that occurs when the parties might otherwise be willing to resolve the issues but are left looking at major reconstruction (raising other potentially serious issues) involving both the upstairs and downstairs units as the only remedy.

People. Wake up!

Posted by Beth Grimm at 11:18 AM

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 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 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

May 8, 2007

Disruptive Owners - Can't Get Through a Meeting? Try This...

One of my readers wrote in and asked if there was any legislation that would pertain to what a board can do about disruptive owners. The writer said that they had two owners in the association that come to every board meeting, that aren't satisfied with the homeowners forum time, and that interrupt the Board on every item of business that is discussed.

I experienced this on one very memorable occasion. At this association, two owners came to every meeting and harrassed the board and manager on everything the board tried to discuss. The number of other members that attended had dwindled down to a few diehards. It was almost impossible for the Board to get any business done. When described to me, it hardly seemed possible that two adults could or would create so much mayhem on a regular basis.

These are some of the things the board attempted, at my suggestion.

Get a gavel, and use it to keep order. It is a tool that usually engenders more respect than a meek - "please stop talking".

Have the homeowner forum at the beginning of the meeting, and let the attendees know that once it is over, then the board will move into the business portion and that comments from the audience are welcome only when invited.

Use an egg timer for the homeowner forum time.In most cases, even difficult people will have to acknowledge the ding as the end of their time to talk, and perhaps even give it more respect than the President of the Board who tries to keep order.

Try a timed agenda and the egg timer, to help everyone stay on track and as a reminder that time is limited.

Adopt a meetings policy that spells out the possible ramifications of disrupting the meeting. Usually, it is harder for a person to argue with a piece of paper than the Board President.

Bring in a video camera on a tripod and let the members know that the meeting will be taped. Usually, that is a deterrent to bad conduct (note: that is a tactic used by some attorneys in deposition to control the conduct of an overbearing and disgustingly difficult attorney who is there to question someone).

Another tactic that can be used sparingly was described in an earlier email and that involved adjourning the meeting and calling an emergency meeting after everyone has left to do the business that needs to be done.

Problem attendees might be subjected to a call to a hearing to consider fines (if the governing documents allow for fines).

A study and use of Roberts Rules to keep order in the meetings might help as sometimes disorganization works against a board's best efforts to get through business.

At this association, the board was stymied no matter what it tried, so I was asked to attend the meeting. Sure enough, the two trouble makers showed up, sat in the front row, and exhibited rude and thoughtless behavior. The two commented after every owner spoke in the forum time, declined to have their own few minutes, and then started in on the board once the business began. Usually, my presence engenders some cooperation, especially when I stand up and explain to the group that the board needs to get through business and the attendees must let it, or the meeting will be adjourned. Often, an authoritative presence leads the other attendees to jump in and verbally chastise the problem attendees. Sometimes they are empowered with an authority figure present.

But in this case, there was simply no respect of any kind exhibited by the two trouble makers. So, (hope I do not offend anyone but this is a true story, I said a little prayer. "God, if you have any ideas, I would like to know what they are. I'm plumb out and this board deserves a break.") Somewhere in the distance I heard sirens, but paid little attention., as usually happens when sirens are a common sound.

This meeting was taking place in a County Library. About 10 minutes after my "prayer", the night librarian popped in and said, "I have some bad news. There have been some car breakins in the parking lot. The good news is that only two vehicles were broken into - they are a Mercedes [something or other] and a BMW [something or other]. There were some items recovered, some laptops and things."

The two trouble makers shot out of the front row and ran outside. Both were tied up for the rest of the meeting with the police.

The moral of the story: Don't ever give up!

The truth is that - if these people continued to harrass (which, after the implementation of all processes described above seemed to dissapate), a board could, if the governing documents allow for suspension of membership rights, arguably (but consult your own attorney on this) call a hearing (California has laws on the procedure) and suspend rights of the owners to attend the meetings for a period of time. That was to be the next step in this case. A board could seek a restraining order; however, that can be expensive and there are no guarantees of success as many judges would wonder why a board had such a lack of control of meetings, so choose that remedy "judiciously".

And a board could use the "adjournment method" as an alternative, but that is not a pleasing long term prospect (and again, please check with your own attorney to see what he or she thinks of this remedy).

Most of the above steps will cure any problem with disruptive owners because in most cases, even the most aggressive owners have come respect for rules, discipline or the thought of appearing on tape acting like a child.

At any rate, I hope some of this helps. It is very frustrating to try and get through any kind of business with disrespective attendees. Sometimes the problem attendees are sitting at the board table, in which case the additional remedy of a "discussion with" or letter from the association attorney reminding the board member of his or her "fiduciary duty" to act in a business-like manner might help.

Posted by Beth Grimm at 7:27 PM

August 22, 2006

When a Board Member Resigns, Can He/She Take It Back?

Something totally unexpected happens at a board meeting. It takes the Board members by surprise and scares them out of their wits. A newly elected board member comes to his/her first board meeting and finds out that the Board members are catty and do a lot of name calling, or that a couple of members sit in the front row and harrass the board for the better part of the meeting. A member of the Association that has proven themselves to be very difficult, abusive, threatening or controlling comes in with a handful of proxies to the annual election (perhaps a thing of the past with the new election rules but perhaps not) and is elected to the Board. The other Board members are certain they cannot work with him/her. Resignations abound in these situations. Volunteer Board members often react to what is in front of them, without thinking about the consequences. That is one thing.

Then, perhaps some of the other Board members talk to the one, two, or more, that have resigned and ask them to stay on, promising that they will be supportive, or watch the other person's back, or other Board members or Owners who supported them in the elections beg them to reconsider saying that nothing meaningful can be accomplished without the Board member's assistance or participation. Sometimes that resigning Board member has second thoughts. He or she may decide to withdraw, withhold or take back their resignation. Can they do that?

It depends. The real question is: was the resignation effective? If not, there is no change in trying to "take it back." If it is effective then the question becomes: do the remaining Board members want to appoint that person to fill the vacancy created on the Board by their own resignation. (And can they?) The answer to that would depend on whether there was any language in the documents that prevented that - the re-appointment. There usually is not.

As to whether the resignation is effective ... there are many questions to consider. One thing to do is to check the governing documents for the Association (would normally be a subject covered in the bylaws) and California law (Corporations Code Section 7224 specifically) to find the answer to the question. The bylaws may have specific language stating either that the resignation needs to be accepted to be effective, or to the contrary, that no acceptance is necessary and the resignation is effective when it is given. Some documents say it must be given in writing. Some specify to whom and/or how it must be presented. Most bylaws say that a board member continues to serve until their successor is elected; however, those same documents usually also say that if a Board member resigns, the remaining Board members may appoint a successor that would fill assume that Board member's position for the remaining term of that Board member. In fact, if the Board is down to one person, that person may appoint directors to fill the vacant positions.

It is also very important to consider the words and/or actions involved. Perhaps the resignation is equivocal. Perhaps there is an effective date in the future provided (in which case the resignation is delayed until that date). Perhaps the Board member intended to resign from an office rather than from the Board. Maybe the Board member was intimidated into resiging or resigned under duress. Maybe the other Board members decided the Board member had to resign because he or she had his unit for sale or had sued the Board (neither of which requires of a Board member that they resign, but for many reasons may be the "right" thing to do if either causes the Board member to lose sight of what is best overall for the other members of the Association or he or she loses their long-term vision or interest). Sometimes a Board member says he or she wants "to quit" - and then the question becomes whether that equates to a resignation. Again, it depends (at least I believe that) on what is intended, what the documents say, and what the law says. California Corporations Code Section 7224 says:

"7224 (c) Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective."

So what happens if all Board members resign? California Corporations Code Section says:

"7220(e) If a corporation has not issued memberships and (1) all the directors resign, die, or become incompetent, or (2) a corporation's initial directors have not been named in the articles and all incorporators resign, die, or become incompetent before the election of the initial directors, the superior court of any county may appoint directors of the corporation upon application by any party in interest."

Thus, any member can petition the Court to appoint directors. However, maybe that sounds easy. It's not. It requires a court petition and probably an attorney to help with the court processes. So where does the money come from for filing fees, attorney fees and expenses? The Banks holding the Association funds will not release them to a person not serving on the Board. There is no way to pay the Association bills.

And while everyone is waiting for that to happen (someone to do something like petition the court), those Board members that resigned could find themselves personally responsible for any losses that occur based on their decision to leave the ship without a captain.

So, it is wise to give thoughtful consideration to resigning ... and then to trying to renig on the resignation.

Posted by Beth Grimm at 9:31 PM

June 7, 2006

Dogs - Big and Little - Leash Laws Rule!

I did not know whether to put this blog under Owner frustration or Board member frustration. In any event, living in a close, densely populated development with pets is not easy - especially for your neighbors.

For the dog owner, what are they to do? They live in an area where there is nowhere to take the dog to run or poop in the morning ... no way to get in and out quickly. With big dogs, this is especially frustrating. The pet needs to get exercise and to do that they need to stretch their legs. I am a dog lover. I understand.

However, ... what about the neighbors? The issue is particularly close to home right now as my daughter and her husband live in a very densely populated region, in a townhouse where there is no common area other than the pool and clubhouse, a bit of green in the sidewalks leading to the doors where the only way to go is up once you are inside, and runways between the garages barely wide enough to make the turn to get into the tandem garages. This young couple has a two year old and a baby and my daughter takes them out every day for a walk. On a regular basis they are accosted by a big dog running loose. The dog owner is present, but not kind enough to keep the dog on a leash (even though the CC&Rs and the local animal ordinances, and state law, require it!). "He's friendly" the owner always shouts as the dog runs up to greet the children and dances around them. So what!! The problem is that the two year old is smaller than the dog and has been traumatized by its conduct. Viewing things from the eyes of a two year old full of wonder but not free of all fears, this is a serious affront - one that can be easily avoided. My daughter has talked to the owner of the dog several times, explained the child's fears and politely asked the owner to keep the dog on the leash when in the complex. The owner's response: politely listen ... and ignore.

Get it people! The dog is not the problem. The owner is the problem, and unfortunately, is among many who do not have a courteous nature and good manners, and should not be living in a close, densely populated townhouse with a big dog.

Leash laws are passed for a reason. I go through this discussion with every board that is in the process of dealing with dog issues or amending governing documents. In many cases, the directors are either trying to be overly friendly, neighborly, or self-indulgent because they have their own "baby" who would never cause anyone any trouble off leash. Dogs need to be on a leash and under control of the person walking them when in the common areas. Big fines for failure to follow the rules are justified.

What can happen if people do not comply?

--Children, elderly people and people with animal fears can be traumatized, even by the friendliest dogs.
--Other dogs can yank their owners off their feet if they are on leashes and go after the dog running free (this has actually happened and resulted in a lawsuit by injured owner following the rules).
--Dogs can accidentally (or on purpose) bite children who are holding food or toys and try to protect them when the big dog wants to play, or who reach for the dog toy being carried around by the dog (yes, this has happened too and resulted in a lawsuit).
--Dogs can get into bushes and do business in places where it is not convenient to clean up, but is a mess for the gardners.
--Dogs can unexpectedly attack other dogs, chase (and traumatize) resident squirrels and birds even when friendly to people.
--Dogs can run up to people dressed for work and slobber on their clothes (yes, this has happened also).

Other problems with dogs in close places:

--Barking and yapping is cruel and unusual punishment for neighbors who like to enjoy a quiet environment in their homes.
--Dogs that are found uninsurable by some insurance companies can be very unpredictable and turn on humans without warning.
--Associations are a target for legal claims, a deep pocket easily tapped when a dog causes harm or damage to residents, and owners, including the dog owners, suffer when the Association is sued.
-Big dogs make big piles, little dogs can get ornry and yap, and lonely dogs tend to whine all day.

Think about it. Find a home for the dog that needs to room to roam.

Posted by Beth Grimm at 9:26 AM

May 26, 2006

May an HOA Board Take Action Without A Meeting?

A reader asked me if an HOA Board can take action without a Board meeting, and then proceeded to tell me what other attorneys say about it. What I got was that attorneys apparently do not agree on the subject. (What a surprise?) My take on it is that Board's sometimes need to take an action by unanimous consent. There are times when things come up that need attention right away, and the Board members may be scattered. Or one or two are out of town and can be reached by email but that's it. Or the Board cannot meet or get a conference call going in time for a decision.

Now I realize that in California, the legislature ruled that meetings at associations should be open to members except for certain protected meetings such as executive sessions (because of the confidentiality) and emergency meetings (because of the inability to give proper notice to owners).

This is part of what the Davis Stirling Act says on the subject:Civil Code Section 1363.05 is known as the Common Interest Development Open Meeting Act. It says:

"(b) Any member of the association may attend meetings of the Board of the association, except when the board adjourns to executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member upon the member’s request, regarding the members payment of assessments as specified in Section 1367 or 1367.1. The Board shall meet in executive session, if requested by a member who may be subject to a fine, penalty, or other form of discipline, and the member shall be entitled to attend the executive session. ... and ... "(f) As used in this section, “meeting” includes any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board, except those matters that may be discussed in executive session.

Ok, that's the rule on meetings. However, that is not the end of the inquiry on board action. The California Corporations Code says (and most HOAs in California are corporations):

"7211. (a) Unless otherwise provided in the articles or in the bylaws, all of the following apply: ...
(b) An action required or permitted to be taken by the board may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. The written consent or consents shall be filed with the minutes of the proceedings of the board. The action by written consent shall have the same force and effect as a unanimous vote of the directors. For purposes of this subdivision only, "all members of the board" does
not include an "interested director" as defined in Section 5233, insofar as it is made applicable pursuant to Section 7238."

So you can see, the Corporations Code allows action by written unanimous consent. However, so as not to violate the spirit of 1363.05, it is best, I believe, to confine such action to items that are either of a emergency nature or exeutive session meeting where all HOA directors could not be at a meeting.

Posted by Beth Grimm at 9:48 PM

May 13, 2006

Elections Immunity and Liability Questions-Where Is California Going?

I suggest that you watch what is going on in Sacramento. SB 1560 was just amended to remove the immunity clause that would protect Boards from liability for cummunications it is required to send out for candidates in HOA elections in California. Even if the Board tries to instill some reasonable rules about common decency in communications, there is no lid on what a member of the association can send to fellow members, and if the member is a candidate, no lid on what they can say in communications that are sent to the members during an election.

This is what the law currently says about this: [HOAs must] "... Ensure that any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election. Equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content."

What was removed from the cleanup language recently? This language: "The association, its directors, officers, and agents shall be immune from liability for the content of such communications and for distribution of such communications."

Now you tell me why it is fair to take out proposed cleanup the very language that would protect Boards from communications the law requires them to send out to members even when the communications include misstated facts, defamatory comments, misleading information, negative, inciteful or downright immoral comments.

If a member wants to send something particularly offensive, he or she can do it under California law. In addition to the election laws, he or she can demand a membership list of names and addresses of members. If members have opted out of being on this list, the Board still has to make alternative arrangements for mailing of member materials (at least in this case it is at the member's expense).

Now most of us who serve associations and try to help Boards work their way through the maze of California laws know from experience that in the vast majority of HOAs, the problem is finding people willing to commit to a board term, not having to try and put a lid on defamatory communications, but for those few associations with contested elections, the law is on the side of the irrationals.

There is a difference between a responsible challenge to Board actions or choices in vendors, managers and attorneys, and a spiteful vent that serves no other purpose than to criticize. There is a difference between being frustrated and being mean-spirited. But some people do not know the difference, and the law protects them.

Given that the legislators in this State are looking at the possibility of a CID Bureau that would allow people to call in and complain about their association boards and probably even managers, and given that the State has shown little or no movement in funding any educational resources that would help volunteer board members cope with the complicated laws or learn how to become fiscally intelligent about budget panning and implementation, I think that Board members should start talking to their local legislators about what they need to be able to do the job. If you know what is going on, you know that some of the State's legislators are bent on implementing laws that would punish Board members. Yes, Virginia, there are Bad Board Members, but I would bet my bottom dollar that there are more uneducated boards than "Bad Boards" and piling on the liability is going to do nothing more than shrink the pool of willing volunteers, which is already very very shallow.

So what can you do? Log onto the State website http://www.sen.gov and plug in any bill number you want to and check it out. You can opt to be put on a list where updates will be sent to you automatically. Visit the site http://clrc.org and see what the California Law Revision Commission is up to. Go to a hearing. Talk to the legislators about how difficult it is to be a board member subject to so many complicated laws without a free educational resource at the state level. Tell them how scary it is to be criticized, threatened with lawsuits, and expected to know about laws that are not published in a language you can understand. The agendas are on the CLRC site. Visit CLAC (the CAI California Legislative Action Committee)at http://www.clac.org and "Responsible Neighbors" at http://www.responsibleneighbors.com to find out about pending legislation and what it means to boards and homeowners in HOAs. And last, but not least, visit the California Guru at http://www.californiacondoguru.com to find out about new laws, proposed changes, how to cope and other things by reading the articles, FYIs, and pointers to the hottest issues in California. And one more thing, there is a plain English guide available on the guru site called "The Davis Stirling Act in Plain English." Its not free, but it's worth its author's weight in gold. Check out the "Publications Available" link on the front page.

Maybe you need to start a movement. (I can help.) If you are a board member or homeowner who follows rules, pays assessments on time, and thinks that is enough, you need to wake up. You and your boards may be hit with more than you bargained for. Already, compliance costs for coping with new complicated laws are rising every year, pushing Boards to increase budgets to the legal maximums, resulting in increased assessments. It takes an educated and experienced practitioner just to help an association cope with required laws and practices and that costs money. Finding board members as liability increases and reward decreases (which is kind of a joke anyway because even if their pay doubles, it will still be $0.00) will become more and more difficult. If you do not have knowledgeable members and leaders willing to serve on the Board because of the liability aspects, or the complicated nature of the laws, you will either end up with the irrationals with personal agendas at the helm, or in receivership. You will not be heard over the complainers, deadbeats and vitriol arising from the anecdotal horror stories that are brought to the legislators in California. I am not suggesting that anyone downplay the bad stuff and let it continue. But what I am suggesting is that the pendulum could swing too far in the direction of punishing innocent board members that the model for a successful HOA could be skewed by the lack of volunteers willing to serve.

So you can sit in your armchair and enjoy your "carefree living" so long as you are willing to pay more and more each year for professional help, or start a dialogue going with others and your own legislators to let them know that the 'balance" of fair treatment of board memhers needs to be considered at every turn, and the State needs to provide a resource for board members so they can learn to do things right - a resource that is free!. And one more thing, since the State relies on Board volunteers to run the entities that save the State from massive infrasctucture costs, some sensitivity must be given to reasonable protections from liability. The State is willing to protect its own in granting immunity from liabilty even for negligent acts to public "servants" (which again, is kind of a joke because they actually get paid), but it is far from giving the same protections to volunteers willing to serve on HOA Boards. This just does not seem fair, and it hurts you more than it hurts me, so get on your soapbox and ask for what you need. The "grassroots" is (or maybe its 'are', for you semantics lovers) a powerful tool.

Posted by Beth Grimm at 9:01 AM

May 12, 2006

"E-DAY" IS COMING - You Will Need New Good Election Rules!

. E-Day is coming. Every homeowners association in California has to adopt election rules for elections that involve assessments (above the legal limit the board can impose without member approval), board member elections, amendments to the governing documents and transfer of common area. And proposed "clean up" legislation, SB 1560, may expand the rules to all association elections. Timing? Look for a provider now who knows their stuff, and get help, because integrating the new elections processes is not a "slam dunk". The law was written without regard to existing Corporate Law requirements and common governing document language and its not easy to interpret or to apply to "real life" Association elections. In fact it is so not easy to interpret that attorneys in this State who do Association work exclusively and have for years do not agree on its interpretation or implementation. Everyone is qualifying their proposals to write election rules with CYA language like: "we will help you to make a good effort to comply with the new law." I challenge you to find a definitive representation like: "We know how you can absolutely avoid challenges to your elections' processes." So find someone you trust to serve your association, not some family law who did your divorce or patent attorney brother-in-law who thinks the law sounds simple enough.

And do this as soon as you can, because you will need the rules for every election that is subject to the law taking place after July 1, 2006. In fact, if cleanup legislation is passed, you will need them for all association elections taking place after July 1. But there is one more twist. This does not mean you are doomed if you do not get the rules by July 1, but there is a strategy in the timing. Visit the guru at http://www.californiadondoguru.com to read about timing. Click on the SB 61 New Elections Law link on the front page, and then on the timing link.

There is clean up language proposed that may or may not be approved, and also there is talk of it taking years to really "clean up" this new law, so be prepared for changes even after the rules are drafted. Get the picture? The State legislature has unwittingly created a "full employment for attorneys act" with this new elections reform. Attorneys are needed to draft the rules, to challenge the rules, and to defend Associations that get challenged on implementation. And don't blame the attorneys for the problems. Attorneys all over the State are asking for changes that will clarify and simplify the law, without success. Why is there confusion? Since attorneys have different types of associations as clients, ranging from 3-4 unit condos to highrises to 2000+ single family home developments, there is disagreement as to the best way to "fix" the law. Talk about being caught between a rock and a hard place. It just doesn't get much more challenging than this for Board members.

Watch out for the pitfalls in this new law. To see what to watch out for, check out the condoguru at http://www.californiacondoguru.com. Click on Elections After SB 61 on the front page. And don't talk to too many different attorneys. You will just get more confused.

Posted by Beth Grimm at 11:17 PM

January 27, 2006

Withholding Proxies Given By Owners - Is it a Good Idea?

If there is a membership meeting in an HOA and there is an important voting measure at stake, sometimes owners collect proxies and withhold them (fail to check them in at the meeting) so that there will not be a quorum and the meeting has to be adjourned. A board might send everyone home. If there is a quorum and a vote is taken and the measure is voted up or down, that might effectively resolve matters once and for all. If there is no quorum, 5% of owner(s) might raise the issue again, by submitting a legally proper petition for another meeting on the same subject.

In any case, if there is a legal vote it supports rejecting future votes on the same issue (although the facts would have to be examined in any particular situation to determine the risks and benefits of denying a legally valid petition). If the association members have already been informed as to an issue, and those who wanted had an opportunity to have their vote counted, a board might not need to honor a duplicative petition on the same issue (consult with your own legal counsel if the situation arises).

Thus, any owner that holds proxies back and does not turn them in may be promoting furtherance of a particular issue, rather than resolution or an end to it.

But there is more to be said. If someone collects proxies and gives the owner who signs the proxy an expectation that that person will carry forward a certain message, the person who assigned the proxy expecting it to be turned in and a vote lodged on their behalf will not have their expectation met.

The press and legislators in this state complain about boards left and right. However, the games that owners play can be just as frustrating and unfair as something a board does. It really places a burden on an association when an owner holding several proxies (I have seen this happen with someone holding as many as 100 or more proxies) withholds them until the last person has signed in for a meeting. If you are a board member or a person that checks in owners at a meeting, you know how this kind of "tactic" can disrupt a meeting and delay important matters, such as determining if a quorum is even present.

I do not recommend these kinds of games, and under the new elections law, a board might be able to enforce a firm cutoff time for return of ballots or proxies which would, hopefully, discourage this kind of practice. Consult with your own attorney of course. These comments are not to be construed as legal advice, just food for thought.

Posted by Beth Grimm at 10:59 PM

January 7, 2006

Apathy - The Continuing Saga - and Worse Case Scenario

The questions about what to do when no one will serve on the Board or come to Board meetings are common. One reader recently asked "What happens when an association hold [sic] its 'annual meeting' and there are no candidates or nominees and there are now only 2 board member [sic] out of 5 position [sic]. And only six people showed up for the meeting out of 116 units."

I would say that this association is very likely headed for trouble. Unforetunately it is up to the 2 remaining board members serving to get out and "recruit" board members, or take the Association down the path to receivership. Incidentally, even one remaining board member has the power and authority to appoint board members. This is one exception to the need for majority approval for Board actions. The documents may prevent 2 out of 5 from making valid decisions or taking action. If that is so, then any action taken by these 2 can be found to be either void, for failure of a quorum, or "ultra vires" (outside the corporate authority) except for the appointment of additional board members. These remaining board members should be concerned about personal liability and about the future of the Association, having assumed the positions.

If no owners are willing to serve, the worst thing (but not that uncommon) for these remaining board members to do is resign and leave no one in charge. This is what can happen (and has, in my experience representing clients). There are lots of possible events that can occur. Eventually, someone tries to sell and there is no one to fulfill the Association's duty to provide seller/buyer requested escrow documents. People start asking questions and the realtors and the seller come to the conclusion there is no "active" association. Lenders will no longer finance the units. That's getting into the end run-worse case scenario.

Of course, there are many interim problems likely to occur. No one collects assessments; no one pays the bills. If this is a condo the water may be turned off. The landscaping fails either because the water is off, or the gardeners have quit for failure to get paid, or both. The buildings and/or common area fall into disrepair. The insurance protecting the Association, the Association members, and the Board members lapses and there is therefore no insurance protection to pay for the defense of the board members breach of fiduciary duty. Chances are the governing documents protect the board members through "indemnification" clauses so the Association owners may pay any claims out of pocket, or if the "indemnification" clause fails because the Board members' leaving was considered "gross negligence" or because they are no longer Board members, then the Board members are subject to being sued individually, and they may end up paying the bulk of damages or losses.

And ... people may start constructing otherwise prohibited improvements; people may stop following parking rules or restrictions, and people may stop honoring pool rules. Some things that happen may be irreversible.

There is a host of potential problems, but the worst brunt of things may fall on the last remaining or two remaining board members, for abandoning ship.

The choices left to Board members who are burned out or owners who determine there is no longer a board include the right to petition the court to have a "receiver" approved. Whether and where the money is raised or put forth for these actions is a question for legal counsel.

Sometimes this hopeless scenario can be resolved with a letter to the owners warning of the dire consequences of not having anyone willing to step up and serve. The letter can explain that going into receivership is no picnic, and not the best choice for the Association. The members will have to pay the cost of a receiver, and before falling into this catch-22 situation, should be given the option of paying for association management instead. Good management can relieve Board members of the heaviest portion of the burden of volunteer service, and that may encourage more service.

To be continued... the new elections laws that take place July 1 require the offer of absentee voting to the members and some say this could discourage meeting attendance. It is important to consider this, and try to counter any effects by generating a meeting scenario (perhaps a social??) that people will attend - because it is often from these meetings that interest in serving (or opportunity for "recruiting") occurs.

Posted by Beth Grimm at 9:39 PM

September 11, 2005

Two Annual Meetings, No Election - What To Do?...What to Do??

Here is an all too common question from a frustrated reader: "We have had 2 attempts to have elections - no quorum the 1st time and not even a quorum the 2nd time (less than 25%). I am under the impression that they have to make another attempt - for 25% participants to hold elections. Yet, I am told that the current Board will just appoint people to fill vacancies. I do not believe this is legal. Can you tell me which law pertains to it - and who is correct?"

Well, I cannot give out legal advice too freely, without being informed about a particular situation (and no, this is not an invitation for you to send me all of the particulars of your problem), but here is some general information that may help ease the frustration at least (translated: you are not alone!):

[Remember, I am speaking for California only] In order to determine what the possibilities are, a lawyer (hopefully) would first review the Association documents. It may be possible to hold an election by mail, and if so, the board is likely to get a better return than at a meeting. The Corporations Code generally allows for a written ballot for any action that could be taken at a meeting and an election would qualify (though it might not be appropriate in all cases), so long as the documents do not prohibit it. Some Boards would just appoint directors after two tries in this scenario, with or without legal advice. Sometimes holding meetings can be expensive and time consuming and boards want to move on to pressing business. If it is not a "contested election" (meaning there were not more nominees than positions open), most boards would probably just deem the nominees to be elected by acclimation. If there are more nominees than positions open, it is probably better to keep trying for a successful and legally valid meeting or election by mail. Without a contest, who is going to challenge the election? On the other hand, if there if a fight going on for the open board positions, a challenge is more likely. However, I can tell you that if there is a hotly contested election, one or more candidates will generally seek proxies from the members thus enhancing the chance for reaching a quorum of persons present (either in person or by proxy) at the meeting.

If a Board does appoint Directors without having a valid annual meeting or election, and if the process of appointment was challenged in court, a Judge would look at what happened, how the attempts to get the owners to send proxies were made, and what was fair and the most reasonable thing to do under the circumstances. The "election" naming the new directors is not automatically void under the law, although not technically valid either. However, if the Board made a laudible effort to get owners to come or send in their proxies, forcing another election still does not guarantee that a quorum would be present, and although a Judge certainly could order another election, a question arises as to whether the Judge has the power to alter the quorum requirement in the governing documents to something less than 25%. So the most reasonable choice may not be to schedule another election. I believe a Judge would have some choices here considering what is fair and resonable.

I know this sounds like a lawyer talking in circles, and it is, sort of, but the best I can do here is provide some general information because each situation is just a bit different and there are often unanticipated twists that come to light when reviewing processes. Besides, I am not fully informed about things that I would need to know if I were actually giving legal advice. In such a situation the board should really consult with a knowledgeable HOA lawyer to see what is the best thing for the association to do. All governing documents would have to be examined and all actions leading up to the election(s) would be considered before advice as to the best way to proceed should be given.

But be sure to keep in mind that this answer is for this year. There are brand new elections requirements beginning in 2006 and Associations must be aware of them because there are brand new penalties for failure to follow them. Stay tuned to my blog right here and you can also check out the CLAC website to get ongoing news about legislation.

Posted by Beth Grimm at 3:34 PM