Why Governing Documents Matter

Why Governing Documents Matter

Governing documents are critical for HOA communities and are literally the legal glue which holds the association together. Civil Code Section 4150 defines “governing documents” as articles of incorporation, CC&Rs, bylaws, and operating rules, but I think subdivision maps and condominium plans also should be regarded as governing documents. Each has a distinct purpose and function, and every HOA member should have copies. Subdivision map and condominium plan This document breaks up land into separate pieces of land or airspace sold to homeowners in planned development (“lots”) or condominium (“units”) projects. This document is recorded (i.e. filed) with the County Recorder, is easily retrieved, and defines the “common area” as well as the “separate interest” (i.e., the lot or unit). Sometimes it also delineates exclusive use common areas or maintenance easement areas. It establishes the real estate interests owned, so any amendment requires agreement of 100% of association members and their mortgage holders, and consequently amendment is highly unlikely. Articles of incorporation Articles of Incorporation establish the legal “person” of the association. Filed with the Secretary of State, this document can be retrieved from that office. Older Articles sometimes contain important information about limits on the association or board’s powers. The Articles list the association’s legal name and can be amended by membership vote, although amending is rarely necessary. Check the association’s corporate status at https://businesssearch.sos.ca.gov. CC&Rs The CC&Rs document is recorded (amendments also must be recorded), and therefore is also a public document. Associations often use unrecorded, unofficial copies, but official copies can be retrieved from the County Recorder. CC&Rs are a long contract automatically binding all owners,...
Drought’s Over, Must Cactus Go Too?

Drought’s Over, Must Cactus Go Too?

Mr. Richardson, After my HOA approved my drought-tolerant design, they asked me to add ‘more & bigger plants’ which violates Civil section 4735(e). Are the regulations still in place after May 2017? And if they are in effect, who do I get in touch with to help me enforce them? Thank you, I.D., Vista Dear I.D., Associations cannot ban drought-tolerant landscaping, as Civil Code 4735 still is in force. The part of that statute which no longer applies is part (c), which bars associations from penalizing members who let their yards “go brown” during a Drought Emergency. Furthermore, under section 4735(e) associations may not force removal of artificial turf or other drought-resistant landscaping once it is in place. The bottom line is that homeowners choosing xeriscapes are still protected by Civil 4735. The yard must of course be presentable and maintained, but it does not have to be a traditional lush lawn. Thanks,Kelly Hello Mr. Richardson, During the drought our front lawn went brown, like all others in our community. After the drought we had a difficult time resurrecting the green lawn in several spots. We were assessed several large monthly penalties, one after another, a couple of years back, the HOA stating the CC&Rs required a green lawn. The penalty is now [thousands of dollars]. I’m not sure what options we have to push the HOA to eliminate the penalty. Any assistance is appreciated. Thank you, M.T., Rocklin Dear M.T., Until April 7, 2017, the day Governor Brown declared an end to the Drought Emergency, associations could not fine members for under watering yards, as such penalties violated Civil...
Recalls, Voting

Recalls, Voting

Hello Kelly, I enjoy your column and have learned so much from reading it religiously. I have 2 questions: 1. A petition to recall a board member received sufficient signatures and the recall election was scheduled. The board appointed three homeowner inspectors, each of which either circulated or signed the recall petition. Is it legal and/or ethical for them to participate in the counting of the recall ballots? 2. The recall petition called for both the recall election and the election of candidates to replace the board member if the recall is successful to occur at the same meeting. The board and management company have refused to ask for candidates and the agenda for the recall meeting says nothing about the election of candidates. Ballots containing the recall vote only have already been sent to homeowners. Isn’t the board required to follow the petition? S.P., Banning Dear S.P., Inspectors of election may be volunteers, so long as they are “third parties.” A “third party” under Civil Code Section 5110(b) may not be director, candidate or someone related to a director or candidate. It is hard to ask a volunteer not to have a point of view, but in a hotly contested election the board should be careful to try to have a mix of views on the inspector panel, to give greater comfort to the members that the election is being conducted fairly. As to the recall election, the petitioners were wise to ask for voting to fill the vacancy if the recall vote succeeds. The board is violating the petition and is harming the association by not asking...
Shedding Light on Solar Applications

Shedding Light on Solar Applications

Hi Kelly, My HOA sent out a proposed policy for owners wanting to install solar power systems installed on a roof shared with other units. I am not anxious to have any contractor mess with my roof or my neighbor’s since we all own it and we are in the middle of a lengthy roof replacement project. D.S., San Diego Dear D.S., Civil Code 4746 applies to installation of solar systems on shared roofs, meaning roofs which are over stacked condominiums. Associations may require an owner to first develop a “solar site survey” showing how the shared roof can be fairly divided between the units under it. Associations also may require the owner to meet the conditions permitted by the statute – including maintaining, repairing and insuring it. This statute was new in 2018 and expands the strong preference toward solar installations expressed in Civil Code 714 and 714.1 by making it clear that homeowners may install solar systems even on a roof they share with other owners. Many associations are adopting reasonable solar installation policies to make sure that both the applicant and the board or committee reviewing the applications are aware of the solar system installation requirements. Thanks,Kelly Dear Mr. Richardson, I am interested in installing solar energy over my condo, but our board president feels they are ugly, so he always denies my request. He says even if he allowed it (and he won’t) I would be responsible for all roof damage and leaks covering all units in my building even though the solar array would only be just above my unit. Does he have the...
Fair or Unfair Housing

Fair or Unfair Housing

Hi Kelly, I recently read your earlier article on Fair Housing laws being violated by HOAs trying to enforce state-mandated signs that prohibit children from using HOA pool and spa. We have a large sign at the spa in our community pool section stating that “Children under 14 are prohibited from using the spa.” It’s just a flat out ban of children under 14, with or without a guardian. My 13-year-old daughter and 11-year-old son were devastated when a security guard told them they’d have to get out because of the sign. There was no one else in the pool or spa section other than us and our children. He said he feared losing his job if he didn’t try to enforce this. Is this a violation of the Fair Housing laws? If so, can you provide a link or legal reference to this? Thank you, E.A., Menifee Dear E.A., HOAs are currently required by Title 24 California Code of Regulations Section 3120B.4 to post a sign banning use of pools by children under the age of 14. At the same time, the Fair Housing laws ban discrimination against children, and do not contain an exception for safety. There have been several reported federal court cases in California in which housing providers have been sued because they tried to enforce the policy stated in the sign. The state Department of Public Health was considering amendments to its regulations to resolve this conflict in the law, but so far no changes have been announced on its web site. There are other instances in which safety concerns clash with Fair Housing laws, such...
What Makes a Director Outstanding [Part 4] – Participation in Board Meetings

What Makes a Director Outstanding [Part 4] – Participation in Board Meetings

Productive and efficient meetings are not happenstance but are the result of committed and prepared volunteers, normally assisted by a great professional manager. To help bring about the best board meetings: Read the agenda packet Come to the meeting prepared, having already read the agenda and the supporting materials. The packet is provided in advance to prepare you to make the decisions presented. Reading it for the first time at the meeting disrespects the other directors, indicates lack of commitment, and delays meetings as one “gets up to speed.” Stay on topic A single director can derail discussions by moving on to a different topic before the current one is concluded. Politely remind colleagues when deliberations stray from the matter at hand. Talk to the board, not the audience Directors attend board meeting to deliberate with board colleagues, not the audience. Grandstanding by speaking to the audience disrespects other directors and encourages raucous meetings. Ask the manager for input on most motions The board’s most frequent protector under the Business Judgment Rule is the manager, so seek the manager’s input. The manager often has years of experience and training; take advantage of that background. If a manager’s input isn’t being sought, why have them in the meeting? Treat open forum as an important event and pay attention California law requires open forum at all membership meetings and open board meetings. That is the time for the board to listen to the community. Take notes and don’t interject or argue. Open forum reminds directors that they are there to serve their community, and often helps the board learn things they...
What Makes a Director Outstanding [Part 3] – Understanding How The Role Is DIFFERENT

What Makes a Director Outstanding [Part 3] – Understanding How The Role Is DIFFERENT

All the knowledge and experience from the working world (“day job”) can actually hinder a volunteer’s effectiveness in the world of HOA governance if the differences between the two worlds are not understood. Outstanding directors have learned that much of what worked for them in their day job will likely work poorly in the context of board governance. The chain of command is completely different in a community association. In the workplace, there is usually a person who is the “big boss”, somebody who is your immediate supervisor, and someone who you supervise. In the association, no single person is in charge. Decisions are made by the board, so the chain of command is horizontal and not hierarchical. The president in a common interest development is not the “big boss.” The president has far less power in most nonprofit corporations since all important decisions are made by the board, and so the president’s vote is no more important than any other. In this very different paradigm, the individual director typically has no personal power. Once directors embrace the framework of the board as decision-maker, they understand that they cannot make individual promises. This restraint can be very freeing since no individual is responsible for the association and its actions, as all decisions is made by board vote. So, when confronted at the pool or parking garage by homeowners demanding action, the director can truly say they can’t individually do anything and suggest the homeowner bring their concern to management or to a board meeting. Directors failing to adapt to the group decision-making process will often stray outside of corporate...
What Makes a Director Outstanding [Part 2] – Preparation

What Makes a Director Outstanding [Part 2] – Preparation

Before seeking a board seat, the best candidates should improve their readiness for service, and can: Read the governing documents at least once The governing documents are the framework (along with applicable laws) within which the board must operate. Familiarize yourself with these important documents. Most likely, the majority of the neighbors have not read them. Take particular care in reviewing the use restrictions in the CC&Rs, and carefully read all the HOA rules. One of the main tasks as a director is not only to enforce and implement those documents but also to educate and inform the neighbors, most of whom will not be familiar with the “do’s and don’ts.” Join CAI CAI is the only nationally respected resource for homeowners, promoting better community governance and prepared volunteers. Read CAI’s free introductory publications “Introduction to Community Association Living,” “From Good To Great,” and “Rights and Responsibilities for Better Association Communities,” available at www.caionline.org/homeownerleaders. Take advantage of CAI’s board training courses All CAI chapters offer free or low-cost courses training volunteers to better serve their communities, including a 3-hour “Basic Board Education” course, and the “Essentials of Community Leadership,” an all-day course. The Orange County Chapter offers its “Community Leadership Training Program.” Also offered annually is the California Law Course for CID Managers, an 8-hour course. The CAI headquarters also offers a four-hour interactive online seminar, called the “Board Leadership Development Workshop, accessed at www.caionline.org/bldw. Understand the business judgment rule The business judgment rule separates careful board members from liability for the decisions they make while governing the association. Learn the boundaries of that rule. Even well-intentioned directors can...
What Makes a Director Outstanding [Part 1] – Attitude

What Makes a Director Outstanding [Part 1] – Attitude

A community association is no better than the board of directors which leads it, and excellent associations require excellent volunteer leaders. Truly exceptional volunteer governance is not a happy accident, and it often has little to do with a volunteer’s background, training, and experience. Instead, it is the result of hard work and the pursuit of proper values, foundational understandings, and perspectives. This week launches a four-part series regarding what makes (or should make) a volunteer director truly outstanding. Attitude makes the difference All the knowledge in the world and the best experience means nothing if the volunteer has the wrong attitude regarding the position of HOA director. Look for people who demonstrate the attitudes described below. Excellent board members understand that their position is one of service rather than control. They serve their neighbors; they don’t supervise them. A service-forward attitude fosters a less defensive perspective in which new ideas and opinions are welcomed and not perceived as insults or threats. The best leaders know that board service is not an accomplishment or distinction to be defended and preserved. Directors seeing the position as an achievement will be less likely to receive criticism and new ideas in a healthy manner, may be less willing to listen to the advice of others, will be threatened rather than encouraged by new ideas, and will be more deeply offended by disagreement. Directors concerned about their status may be prone to overly attend to protecting their reputation rather than the association’s welfare. Directors must understand their limitations The best accept that they do not know everything; they rely upon managers, consultants, and...
Make a Target! Goals for 2019

Make a Target! Goals for 2019

The late and legendary coach John Wooden said “The most important key to achieving great success is to decide upon your goal and launch, get started, take action, move.” Your association might benefit from setting a few goals, and then moving to achieve them. Here are some ideas for goals in the coming year: Increase the association’s reserve funds by 15%. The closer the association is to a fully funded reserve account, the more financially secure it is. Reduce assessment delinquencies by 20%. Make sure the association has all the Annual Budget Report (Civil 5300) and Annual Policy Statement (Civil 5310) items and annually provides them to owners. Improve member communication and save money by encouraging members to accept communications by email. The law now allows such a consent to be sent by electronic mail. Update the association CC&Rs and bylaws if they are the original documents or are at least 15 years old. Make sure the documents use the current Civil Code references which have been in effect since 2014. Updating the statutory references can be accomplished by board motion (in an open meeting) under Civil 4235. Review and update the rules. Remove rules discriminating against children or which are outdated and no longer enforced. Make sure the HOA has all the legally required rules. Hire an independent consultant to provide a comprehensive assessment of association maintenance and repair needs, to discover any overlooked problems before they become more expensive later. The consultant should NOT be a candidate for the work, so there is no mixed motive in their recommendations. Re-evaluate and update the association web site (or...