July 19, 2008
Who Chooses Officers in an HOA?
This question below seems like a simple question to me ... probably because I already know the answer, but to the untrained, or the "tortured", it is not so simple. A reader asks:
"How are the HOA officers decided. Our Property Manager decided which job was given to each elected person. Is this the correct way?"
The real answer is that the Board by majority has the authority appoint the officers unless the governing documents (Bylaws, CC&Rs - in California terms which is aka the Declaration, or the Articles of Incorporation) specify otherwise.
As to the suggestion that the manager chose the officers, and is that okay, the answer is that managers can certainly make recommendations on any matters association related, unless their contract or scope of management is more restrictive, but the bottom line is that unless the documents call for election of officers specifically, by the members, (not to be confused with election of directors), then the Board makes the final decision or, at least, takes responsibility for it. It should be done by motion, second, and a vote recorded in the minutes of the first board (sometimes even called organizational) meeting after the annual election. The reason it makes sense is that the Board members can among themselves choose those best suited for the job, after a discussion of who has what knowledge and who among the directors has the skills and time to properly serve the officer duties.
However, if often appears that managers or one powerful board member chooses. It's all about power in some cases, and simple knowledge and understanding in others. Managers may have more insight about which directors might be capable of doing the duties required. They certainly have more insight than incoming board members, unless those members have taken an active role in HOA affairs.
So, take another look if you have questions about officer appointments. Don't be afraid to address the Board at the owner forum time at an open board meeting, to ask how the officers were chosen.
Posted by Beth Grimm at 10:55 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
April 15, 2008
What Can You Do If Your HOA Board is Out of Control?
My Board is Out of Control - Is it time for action? What Can I do?
If the board is not responsive to your “ideas”, you may want to try and enlist the support of other owners. There is sometimes “power in numbers”. In California, there are laws regulating condominiums that allow homeowner members to have access to the membership list, and if not that, provide a means for owners to address other members through mailings sent out by the association board, staff, or management. It is never a good idea to stomp through the neighborhoods with vitriolic leaflets expressing your disdain. You may find yourself with followers if you take out a negative message about the board or management, but they may not be the kind of followers that can help you garner respect for your cause.
Here are some things to consider:
**Contact other owners and see if you can get others involved. Sometimes gathering support for a position or demand can prod the Board into action. If you try, and are still the only owner concerned, you have a real uphill battle to get the board’s attention focused on your issues.
**Run for the Board. Sometimes you can get on the Board simply by asking - especially if there is not a full board or someone has just quit or moved. Then you will know why/whether/what is happening.
**Put your request in writing and try again to get neighbors to sign on with you in your presentation. A written message engenders more accountability than a frustrated telephone call or “attack” whenever you run into a board member out walking the complex or swimming at the pool.
**Sometimes (although do not do this without considerable thought) you might just decide – “to heck with it, I am going to just repair whatever it is that needs fixing (if that is the crux of your complaint) and then seeking reimbursement from the board. You have to be careful here. It make sense to test this action on a small scale meaning at a cost less than what you can ask for in small claims court. It is possible that you may not recover compensation. Worse yet, you may be penalized for taking whatever action it is you believe is warranted, so it is best obviously to get legal advice first to see if your "beef" is legitimate.
These and other suggestions appear in my book THE CONDO ANSWER BOOK, available through my website at http://www.californiacondoguru.com
Posted by Beth Grimm at 10:13 PM
April 8, 2008
Can "Those Guys" Really Do Whatever They Want?
I get this call or email at least once, usually more times, each day: "How can those guys [meaning the board] do whatever they want? Is there really no end to their power?"
Well, what does one say to that? It's a vague and broad statement, question, and premise. What I say is: "That is really general and broad. I can't really give you a meaningful answer." If they don't hang up in frustration, I might go on to ask if they want a consultation. Obviously, I need to know more, but I do not do free consultations. That turns some people off. I understand why. However, it does not change my manner of practice.
Maybe that sounds just like a lawyer - does that sound crass? I find that if I let owners get started on their "case", they often get frustrated if I try to stop them and suggest that their problems go beyond a simple answer. Some even get belligerent, assuming that once they have my "ear", I am required to listen to the whole story. Occasionally, someone will insult me before they hang up with something like: "I thought you were here to help people ... I guess not." [click]
Perhaps a view from a "lawyer's side" who does actually "try to help" will help you get perspective on this.
Imagine getting several calls a day begging for free help. I already spend at least 20% of my working time providing free information for the website and in other industry communications geared to reach "the masses", because I believe there is a great need for HOA owners and board members and others to be educated about living and solving problems in an HOA. Yet some people still expect more, pressing me to listen and tell them "whether [they] have a case." They want to know that before they are willing to spend any money. I understand that thinking of course, because some of those who call me have been given bad information before - that they paid good money for(and paid for it) and some have searched and searched for help. I have sympathy, and empathy; however, what I do not have is a lot more free time. My time is limited and I have family commitments (2 kids, 5 grandchildren, 2 aging parents, lots of friends) and hobbies like photography. I also have a need to get as much fresh air as I can by being outdoors.I have little time left over to "chat about a particular problem" several times a day. Many of you out there think your problem is unique, but actually, its not. You can tell by reading my blogs that you are not alone, and it is likely something I have already published or will publish will help you greatly. I even get calls from non-HOA lawyers with HOA clients who would like me to educate them on how to proceed with their client's case. Some callers get rather testy when I suggest that they might need to do some work on their own to get what they want.
And last but before I get off the soapbox, perhaps the most frustrating thing is when people pay for a consultation, are provided with steps they can take to better their situation, and then say: "So what are you going to do for me?" Or "Well if I have to do all that, obviously you can't fix the problem for me, so you must not be a "real" lawyer.
I got news for 'ya. I am a "real" lawyer who has lots of experience with HOA problems and lots of valuable tools in my tool chest. However, I am not a miracle worker. I cannot "fix" people. I can define problems, educate, call people "on the carpet" who are doing something identifiably wrong, write letters that make a difference, make respectable demands and get satisfaction in many cases, suggest a course of action, and pose pragmatic and non-big-expensive-court-involved solutions for just about every problem that involves an HOA situation. I expect follow through by people who want to "win" some justice or satisfaction.
Imagine people expecting that someone else will actually "fix" their life in the association with their boards or neighbors, some without any participation on their part, and some even without even offering some kind of olive branch or reasonable behavior on their side of the fence. In many cases, this is what it comes down to: people want an easy answer, a free answer, and don't want any hassle, don't want to "waste" their precious time on the solution, and in some cases, rare but disturbing, they become very critical of the someone (me) that does not jump at the chance to serve them. I think it is a social phenomenon - that sense of "entitlement" that many have. Luckily it has not spread to everyone.
I have some words of wisdom for those people who blame others for everything and are not willing to do their share of the work - do not call me.
Now, on a lighter note. I very much appreciate the people who drink in what is offered to them, those who write every day and thank me for the website and all the information it offers. I get about many emails a day from people who appreciate the free information and resources offered. And don't cha know that those are the people who are going to use that information to help themselves figure out how to deal with their problems. I appreciate the folks who pay for a consultation, absorb what I can give them like a sponge, and then report back to me the successes they achieve. Those who are patient enough to start with "baby steps" often get to satisfaction. of accountability and concessions, which ofte or a sense of empowerment that allows them to move on to the next level, determined and armed with valuable information, sometimes even willing to run for the Board and serve.
Education is power, people. Looking to others to solve your life's problems is not the way to solve them. Look to others to provide the tools and education you need, and run with it. There is no satisfaction like solving your own problem. I remember a day years ago when living on my own as a single mother that I researched, ordered and installed my own oven element (back in the days when I used to bake and cook). It may seem like a menial thing (especially to someone of the opposite sex), but it made me feel stronger .
If you want help, check out my website - http://www.californiacondoguru.com, and read, read, read. You can also purchase tools, research other useful sites, and learn something. If you need something more specific (California law only) ask for a paid consultation and find out what your specific options are, and the pros and cons of the position you would like to take. Absorb the information I give you on those aspects and the other resources I recommend. Put on your "listening" ears. Then take that education and put it to good use!
Posted by Beth Grimm at 11:08 AM
December 20, 2007
What Do You Do About Board Infighting?
Board infighting is disastrous. And it usually occurs because board members let emotions prevail over good sense. This is a message I sent to a board today that constitutes the leadership of an association client of mine (for more than 10 years). I kid you not when I say this (board infighting) seems to be a fairly common problem. This was my message:
"I received 3 emails today from board members asking me to "go forward" with a project of some kind, all emails were different, and one had a set of minutes attached. Neither the emails nor the minutes were clear on what the message was. This uncoordinated approach indicates to me that there is considerable confusion and more going among board members. There are two projects on the table that have been discussed and for which I provided estimates over a month ago. I feel the need to clarify things for the board and management, in order to assist you in moving them off your table and on to mine, if that is your wish. Clarity and business-like approaches to association matters are the keys here to your future success.
It is hard for me to tell from your emails just what the problem is, and what it is that you want me to do. The meetings minutes reflect more than anyone needs to know about comments and derogatory remarks being slung about by each board member about another, and less than I need to know about what motions were passed relating to the work that needs to be done. No one seems to agree with anyone else. To be clear about the proposals that are on the table:"
[I then explained the projects, the cost estimates, and gave the Board blanks to check as to specific projects that the board was authorizing and provided a date and signature blank for the person authorized to give me direction and authority for the projects.]
And then I could not resist (maybe its the mother in me, or the desire to see everyone get along, or the mediator, meditator or problem solving attorney/counselor in me) to go on with a bit of a lecture:
"I will tell you all this. I see a lot of discussion here exhibiting personal frustration and things that do not need to be presented to each other or to me - and that is the discussion about why each of you feels the way you do - family issues, illnesses, stress, history, and what you think the other board members are suffering from, etc. I think at this point it would be wise to just agree that you do not all agree on processes, procedures, or the history or the future of the Board and association. Then you can just get down to business in a more business-like manner. That means raise proposals or issues without the explanatory "fluff", discuss them as if you were sitting at a corporate table, or if another visualization is better, as if a judge or decision making body were reading your emails (they do not like the fluff or emotional positioning when it comes to decision making, and every email is probably discoverable in a court of law).
Do not think that you can make decisions over the email either, it is not acceptable. Business has to be done at meetings. You all have to be civilized, follow parliamentary procedure, raise motions, discuss them, define them and vote on them. Majority rules when it comes to board decisions. I wonder if you need a "referee" for the meetings? I imagine that you may be putting undue pressure on management to "referee" when that is not his job. If you get to the point where you cannot hold a civilized meeting, either business will come to a halt or you could wind up in a serious situation, maybe even litigation. That is costly, so the best thing to do is to get down to business and help me help you all. I intend to remain objective and neutral in all things, and will not take sides. I will provide advice based on what the law says and what practically is good for the association and its members, not any individual board member.Your comments and criticisms of each other are unnecessary. To quote a famous detective: 'Just the facts m'am.' That's all I need.
I see you all as a "body" that needs to function more efficiently to get business done. I hope this message not only clarifies what is on the table, but also gives you the shot in the arm that you need to move forward and get business done in a rational, pragmatic fashion. I trust you will pass this message on to those board members who do not have email."
Maybe I went a bit overboard, but the point needs to be made. Board infighting is a cancer that needs a cure. Help should be sought if your association board suffers from this serious condition.
Posted by Beth Grimm at 8:34 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 9, 2007
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
February 21, 2007
Appointing A "Minutes" Committee - Who Is Right For The Job?
A reader of my materials wrote this email to me about appointing a "Minutes Approval Committee":
"I'm very interested in your article about approving annual meeting minutes. It makes sense to me that the Board can approve them now. (We don't really need an Minute Approval Committee.) "
This is an example of how Boards can sometimes accept adaptations of what is said without thinking through all of the issues that might arise. In my business, believe me, the result of years of experience is that the questions sometimes start popping in your head as soon as a premise or conclusion is offered . The makeup of the "Minutes Approval Committee", if it is the Board and no other members of the Association, could be called into question. This is why:
The basis for the "Minutes Approval Committee" comes from Roberts Rules, and not a specific law on the subject of approving minutes. There is no guidance I can find that defines who should serve. While it might be OK to designate the Board as the committee, from a practical standpoint, if there was any question about objectivity, not having any non-board members on the committee might cause it to be seen as self-serving and the actions taken might be suspect - if any owner ever makes a challenge to the process.
In many associations, finding members to serve on the board is hard enough, let alone trying to find additional members to serve on committees. And of course the "Minutes Approval Committee" must consist of members that will be present at the annual membership meetings, since it would be charged with writing and finalizing the minutes. So, it seems it would make sense to have at least one non-board-member on the "Minutes Approval Committee".
Posted by Beth Grimm at 9:07 PM
February 11, 2007
Getting a Quorum of the Board - It's As Hard As Getting a Quorum of the Members - What Do We Do?
The title to this blog is the question: "Getting a Quorum of the Board - It's As Hard As Getting a Quorum of the Members - What Do We Do? "If your association faces this kind of serious issue, here are some considerations:
1. Seek approval of the membership of an amendment to the Bylaws lowering the number of Directors. (Just be apprised that you cannot remove a current board member from serving out their term by doing this).
2. Seek approval of the membership of an amendment to the Bylaws to lower the percentage required for Board approval of actions (although I would not likely ever be inclined to recommend lowering the Board approval requirements to less than a majority of the Board).
3. Encourage those board members who do not attend meetings to resign.
4. If you have such provisions in your Bylaws, take action as a board to vacate the board position of any board member who misses 3 or more consecutive board meetings, or 3 or more a year (depending on how the right is defined as that is the authority) and appoint some other member who is committed to attend meetings.
[AND ... No, this does not mean the Board can remove or recall board members - that takes member approval except for the right to vacate the position if the documents allow it.]
5. Conduct meetings on a timed agenda using Roberts Rules or some good form of parliamentary procedure so the meetings do not become a free-for-all or last all night (as this may discourage even good board members from attending.
6. Be sure to schedule board meetings with an attempt to pick a time spot that all Board members could reasonably manage. Remember that commuters cannot always get back home, eat and be ready to make decisions by 5:30 pm.
7. Make sure your meetings are conducted in such a manner that all board members are given equal respect and that any bully's are dealt with in some way before their conduct gets out of hand and scares off good board members.
8. And remember that in California anyway, there is one action that board members - or even a single remaining board member - can take without regard to the usual majority approval requirements. That is appoint other board members to positions that have been vacated. (This right is found in the Corporations Code so if your association is not incorporated, proceed carefully and definitely with legal advice.)
Posted by Beth Grimm at 4:27 PM
Boards Making Decisions By Telephone Poll - Is it Legal?
Making Board decisions (taking action) by telephone poll is not in and of itself a legal way to do business. The telephone may be used in some circumstances as described in more detail below. I can only speak for California law, though, where most HOAs are incorporated. There should be a set of Bylaws that governs the processes and operations of the Board and that provides and explains voting rights, board authority and duties, choosing of officers and their duties, and the things that relate to "running the ranch." The restrictions and rights of owners that relate to the uses of property they own are generally in a separate document called some variation of "Restrictions" and these "Restrictions" should be recorded with the county Recorder's office. I have seen lots of document machinations, but this is pretty much the way it is supposed to work and these are pretty much the most important of the regulatory documents. Why am I telling you this? Because the Bylaws may have something to say about the conduct of business that fits into this discussion.
The Bylaws and the California Corporations Code set up a structure that provides for membership meetings and Board meetings. The members have more participation rights on the membership meetings, and Board meetings are where the Board is expected to conduct the association business. In California as well as some other states there are open meeting laws that require Boards to allow members to attend, listen, and sometimes, offer their own input, and sometimes address the Board on matters of importance to them (as in California). As a cavaet, many states have public open meetings acts and they do not generally relate to private entities such as homeowners associations. Many people get confused about this. In California, for example, some think "The Brown Act" applies to HOA meetings. It does not by its own terms, but I will not say that it "never" applies because then someone will show me a set of documents where the drafter has incorporated that body of law (yes, you might see this even when there is a specific statute in the Davis Stirling Act addressing open meetings that should be treated as the primary authority on this).
In California, Civil Code Section 1363.05 sets forth the requirements for open board meetings.
Okay, so what can happen? Here is an example, from a reader:
"I have been asked by our Board to inquire whether the Board of an HOA can vote on matters before the Board. Specifically, in the event that a quorum of board members is not present at the time of a Board meeting and matters requiring a majority vote are needed, does the Board have the authority to take a poll of members not present following the meeting to ascertain their position and/or authority to approve the actions? In other words, can the President take a vote of those present and then subsequently contact the absent board members and secure their position? Your thoughts please."
A telephone poll could be taken. I mean no board member is restricted from questioning others on what they think about something. No one is going to bug the board members phones to see if they are calling any other board members to talk about board business, and there is no prohibition on discussing business with a "colleague" anyway .... until the conduct rises to the level of decision-making for the association. In California there is also the question of whether a majority of the Board members are in one place at one time (this could be on the telephone) discussing board business and there are only 3 board members total. Then, two board members talking to each other would constitute a meeting subjet to homeowner notice laws. While talking to each other is not a crime, deciding business this way and coming into meetings and discussing everything before the members as if the decisions are a "done deal" is a very different thing in principle.
And it falls far short of legal requirements for HOA Board action. If action is needed on an item and the Board cannot get notice out to owners and a quorum of Directors together in one place at one time - then there are some possible alternatives to do what needs to be done, i.e., get a board decision on an action matter.
One such alternative is: an emergency telephone, web or video conference call meeting. A conference call is different than a telephone polling call - it is a process where all board members are on the call or in the virtual meeting room at the same time, or at least a majority is. An attempt must have been made to contact all board members giving notice of the scheduling of the call. If done right, with proper notice to board members, it could iconstitute a valid meeting (see more below)., even if there is not full attendance but a majority "show up" for the process. This is one way to hold an emergency board meeting,
Member notice requirements may be an issue for this method. Although in California, Boards must give owners at least 4 days notice of open board meetings, there are specific exceptions to this notice requirement for executive sessions (matters that have certaiin protections because of the importance of confidentiality) and emergency meetings. I suggest getting legal advice as to what might truly qualify as an emergency meeting if this method might meet your needs of getting some business done when there was not a quorum of directors present at the board meeting.
Short of handling the emergency matter this way, written unanimous consent is another option that may be available for corporate boards. Check with your local counsel on this. It probably is not consistent with your state's staturory scheme for HOA meetings, if there is such a statute, but on the other hand, it does not necessarily present a direct "conflict" either. And some bylaws provide for written unanimous consent as one way to make board decisions. When I am writing documents, I qualify the right to decide something by written unanimous consent so that it is available only in emergency situations where a board meeting is not feasible (being aware that the open meetings law for California CIDs (common interest development acts) exempts emergency meetings from the usual homeowner notice requirements). But it requires, of course, some communication, whether that be by telephone, email or fax, AND a signed written consent form signed by all board members - hence, the "unanimous" aspect being satisfied.
In the event a meetiing cannot be called where the Board can meet and discuss the business at hand, and debate and hear and speak to one another, then polling might be a fair preamble to a written unanimous consent board decision. If all of the Board members are in favor of some action, and a written unanimous consent form is prepared and signed, an action item could conceivably be decided in this fashion. Generally then, the Board should then announce the action at the next meeting and refer to the form that was signed by all, unless there is an executive privilege component, which is for a separate discussion.
Neither the emergency board meeting nor action by written unanimous consent processes should be flaunted, overused or misused, and again, I feel that use of either should be made only in the most emergent of situations where a conference call or other type of meeting cannot be convened in time to resolve a problem or alleviate a difficult situation. The key to legality of the written unanimous consent method is UNANIMOUS CONSENT, not a majority, and the other important key is to be prepared to answer the challenge as to why this business couldd not be done at a duly called open board meeting. The reason had better be good.
The alternate processes mentioned above are not recommended to be used in place of open Board meetings except in the rarest of circumstances but may be available in your state in the difficult circumstances such as that suggested. Neither is as controversial or suseptible to challenge as simply coming to a final decision by polling board members who were not at the meeting on an item that requires action. If the meeting is held, there are not enough board members present to make a decision on something that requires immediate attention, then .... I would suggest only with your legal counsel's blessing, the polling might be useful tool to get to the right end result. (And you wonder why we - attorneys - never say never!)
The problem that has to be addressed in separately polling board members is that it leaves too much power in the hands of the caller. For example, if each Board member called is told that other Directors voted in favor of against a measure (whether they did or not), that could have undue influence. If a board member raises a possible issue to consider on some item and the concern does not get transmitted to other board members, the vote might be seriousy flawed. A Director's position might be misreported, and any Director could be at a disadvantage for not having been privy to everything that has been said by all other Board members. Commonly, there are the board leaders (shepherds) and then those Directors who always "yes" the President or always vote with their friends and whose opinions are never expressed (the sheep) and the shepherds could accomplish quite a bit addressing the sheep one by one. And sometimes it would not matter anyway because when the shepherds speak, the sheep always follow. Still, there are perceptions and legalities to be concerned with. It is always better to be above board and try to avoid actions that might trigger unwarranted criticism.
And here is another thought: if the Board member(s) who are not at the meeting are available by telephone - why not arrange for them to be present by speaker phone or video conference on a computer in the room. This can be arranged so that everyone can participate as if they were in the same room. Just be cognizant of owner notice and attendance rights. Just make sure proper arrangements are made. Members that are not board members can sit in the meeting room while the business is going on, and as long as all board members can hear and be heard and talk to each other, the meeting should be legal (assuming neither the association governing documents nor specific state laws do not preclude it). I do not believe in California there is any law that precludes a speakerphone or telephone conference call meeting so long as these requirements are met: proper notice and an opportunity to attend was given to board members and to HOA members, and all Board members are on the call or in the virtual room at the same time, can hear each other, be heard, and can communicate their views. The California Corporations Code provides for electronic attendance at board meetings. There is no eq2uivalent entitlement in the Davis Stirling Act related to HOAs, though, and it is always important to consult your own legal counsel on these matters and at anytiime when the Board cannot seem to get a quorum of directors to attend on a regular basis. And for more suggestions, see the concurrent blog for suggestions on dealing with difficulty in achieving quorum.
Posted by Beth Grimm at 3:11 PM
February 3, 2007
Committees - How Accountable Do They Need To Be?
Should Committees be accountable for their meetings, decisions, and roles in the Association? Certainly, they should be formed and should operate in a business like manner and serve a purpose. How does that tend to happen? It happens when they have structure, and guidance, and instructions, and a functional purpose. It is more likely to happen when they have a "charter" or are appointed by a resolution of the Board that specifies who will serve, how they will be chosen/appointed/elected, how long the members will serve, what the purpose of the committee is, what kind of reporting is required to the Board, and whatever limitations may need to be stated.
Seem simple enough? Surprisingly, it is all too common that the Board members are conducting business and something comes up like, for example, a decision to look for a new landscaping contractor. A board member makes a motion to appoint a committee to bring information to the Board to help find a new contractor. Two of the board members volunteer (out of 5) and two owners sitting in the audience volunteer and voila, a committee is appointed. The meeting minutes reflect this. That is all they reflect.
In the ensuing weeks, the committee members communicate via email. They have no instructions so when disagreements arise as to how to go about it, they lose some precious time and have nothing to report at the next board meeting. The Board threatens to disband the committee. The appointees agree to try again. They contuinue to communicate, but do not really "listen" to each other. The two board members call a committee meeting and one of the owners comes, but not the other. They decide to interview landscapers. They start asking around for names. The 4th committee member (non board member) has a brother in law who happens to be a landscaper just starting a business. The other three decide they want to beat out the member with the brother in law and so they decide among themselves to choose one of the contractors interviewed.
At the next board meeting, one of the board members on the committee reports that the committee has interviewed 4 contractors, received bids for the work and signed up one of the contractors. No specifications were provided. to the contractors. They just asked for the usual "mow and blow" services. The 4th committee member pipes up that his cousin wants to bid the job and he has brought in the bid. He explodes when he hears that the other committee members already chose a contractor. He says the bid was much lower than the one signed by the committee. In fact, the bids are quite vastly different. No one on the committee has checked licenses or references.
The Board is quite offended. The committee was not supposed to commit the Association. And there is no followup to check licenses; no one checks references; no one investigages why there is such a difference in the bids (which are all produced on a one page tear off contractor form proposal), and of course, no legal review of the contract that is ending or the contract that was signed by the Committee Chair. The Board assumes it is stuck.
On top of all that, an owner asks for a copy of the minutes of the meetings of the committee. In California, owners have a right to inspect minutes of committee meetings. Of course, there are no minutes since everything was done via email.
Good committee experience? Not............ This association could be headed for trouble.
First of all, the committee exceeded its authority - it did not have the right to commit a landscape contractor. It did not do any due diligence with regard to followup regarding licenses, references, etc. It did not report progress to the Board or allow the Board the opportunity to meet with contractors or ask questions about disparity in bids. It did not consider that legal review might be important, and worst of all, it acted in haste with an improper purpose. And furthermore, it produced no minutes for the record.
Can the Board reverse the decision? That pretty much depends on whether the contractor was aware that the committee member did not have the authority to sign the contract. He or she may have even believed the committee member was a board member and had the authorization. It is possible that to get out of the contract, if that was where the board was heading, a big price would have to be paid.
Can the owner sue whose brother in law lost out because of an unprofessional bidding/contractor situation? There might be a "breach of fiduciary duty" claim looming here.
What about the owner who wants to see the minutes of the committee? Do they have a cause of action? Possibly, if there are damages that can be proved - but maybe not choosing the least expensive contract could be the basis for the claimed loss.
Or do owners who accuse the Board of not following the law (in this case allowing an operating committee not only to exceed its authority, possibly by providing no guidance, instructions or limitations, and failing to meet or produce minutes) even have to prove damages?
Failure to follow the law in California, and probably many other states, is considered "negligence per se". In lay terms, this means one does not have to prove any damages to win a lawsuit, and get an award.
Now, I am not suggesting everyone go out and sue their board for every technical statutory viiolation, regardless of whether damages or losses can be proved or not. But I am suggesting that proper appointment, use, purpose and procedures for committees and committee meetings are important, not just from the perspective of any owner that might sue. They are important practices that may make the difference with regard to the question of whether the Board successfully manages the association or it becomes one of those that is "doomed" in the end for lack of structure.
Posted by Beth Grimm at 7:55 PM