Recall Questions: Part 1

Recall Questions: Part 1

Dear Kelly, In our recent HOA election, one new member was elected but resigned six weeks later. There is an all-out war between the four remaining directors. All business has stopped due to the inability of the four to agree on anything that needs a vote. Homeowners want the board to appoint the next in line from the last election, two board members will not agree to this. We have cumulative voting and I understand recalling anyone less than the entire board is very difficult, no? We are being told that our bylaws require 25% of the owners to demand a special election. Is this so? K.C., Mission Viejo Dear K.C., Very sorry to hear of the discord within your board. Recalling the entire board is one possibility, which normally requires approval of a majority of a quorum of the members. Pursuant to Corporations Code 7222(b)(1), associations with cumulative voting find it much harder to recall a single or a few directors, because under that statute “no” votes are multiplied by the number of authorized seats, so it takes many more “yes” votes to remove a director. However, a less hostile alternative would be simply to ask the board to set a special election to fill the open seat. Another option, undesirable due to its cost, would be to ask the Superior Court to appoint a provisional director to break the tie and get a special election set. As to the minimum members necessary to petition for a special membership meeting, Corporations Code 7510(e) says that 5% or more of the members can petition for such a meeting. If the...
Conduct Policy With a Forced Waiver?

Conduct Policy With a Forced Waiver?

Kelly, Our board instituted an ethics policy for all directors and committee members. The first requirement is that all nominees for directors sign a confidentiality promise and promise they will never sue the board. If a board member does something wrong, illegal or unethical, how can we get relief if we sign away our rights to sue? The board’s current attorney wrote this policy because we have had board members suing the board for problems they could not resolve among themselves. Why should any candidate for the board sign their rights away? Is this even legal? S.K., Encino Dear S.K., Board ethics and conduct policies are a great idea for associations, and can apply to directors, committee chairs, and committee members. Such policies can make a strong statement about the association’s values and build members’ confidence in their volunteer leadership. Eligibility standards for board candidacy or for board service should not be in the conduct policy but should be stated in the bylaws or election rules. However, if Senate Bill 323, currently pending in Sacramento, becomes law it will require that all board eligibility requirements be stated in bylaws and will not allow such standards to be in board-adopted election rules. That bill is in process in the Assembly, with some increasing opposition after passing the Senate on a divided vote. The Community Associations Institute has a Model Code of Ethics for Community Association Board Members, which can be found by CAI members at www.caionline.org/homeownerleaders. That is a good place to start. A code of ethics/conduct can be adopted by the board as an operating rule, to make it...
Is It My Parking?

Is It My Parking?

Good morning Mr. Richardson, I discovered a problem with my deeded garage. Long story short my deed does not reflect the garage I was given. I have been fighting to retrieve what I paid for at the beginning. After a unit above my current located garage sold, I lost all power to the garage. HOA was contacted and they discovered the problem. Shouldn’t somebody have caught this issue before the sale? There is a whole mess here and all we want is what we paid for at the beginning. I look forward to your reply. Thank you, T.M., Brea Dear T.M., The first question is, do you own the garage or is it common area owned by all? Normally this is established when the condominium project is created. Sometimes, parking spaces or garages are designated by the Condominium Plan, an underappreciated but important document. Sometimes garages are designated by the Condominium Plan as part of the unit or described as exclusive use common area. CC&R’s unfortunately rarely include a parking list specifying which spaces are assigned to which units. If the Condominium Plan did not create a legal interest in the garage, the seller may have “sold” something which the seller never owned in the first place. Another problem arising from the lack of specificity regarding parking is that owners over the years will trade spaces or cede parking rights to another owner – without any documentation as to how this was done. The problem often surfaces when an association member claims they “acquired” a parking space from another owner, despite the fact that parking spaces are common area...
Can’t We Have a Satellite Dish?

Can’t We Have a Satellite Dish?

Dear Kelly, I am in an HOA of free-standing homes. Our CC&Rs require that satellite dishes cannot be visible from common areas or HOA streets. Yet, several members have installed small dishes, less than 36” across, on their own property, visible from common areas and HOA streets. I registered my complaint, but the management company maintains that FCC regulations stipulate that they are allowed and that FCC regulations supersede CC&Rs and that our CC&Rs are outdated. What is the current situation regarding FCC regulations in this matter? A.D., San Diego Dear A.D., The FCC “Over The Air Receiving Devices (OTARD) Rule” and California Civil Code Section 4725, protect the right of residents to have satellite dishes not more than one meter (OTARD rule) or 36 inches (Civil 4725) in diameter. The state law allows restrictions based on visibility but the FCC rule does not allow such restrictions. Under the Constitution’s Supremacy Clause, the FCC regulation controls, so dishes can be visible. Therefore, your HOA’s visibility restriction standard might be invalid, and that may be why the other owners have installed visible antennae. Hopefully, your association’s legal counsel has been consulted and has weighed in on this issue, and that is why the Board is not enforcing the antennae visibility ban in the CC&Rs. Under the current satellite television technology, disputes about dishes seem to be less frequent, maybe because they now are significantly smaller (typically eighteen inches across). Thanks, Kelly Kelly, My HOA has a CC&R section proscribing outdoor antennas (other than those satellite dishes covered by the federal mandate). I assume that what legitimately concerns the HOA are...
Investing, Growing, and Withdrawing Reserve Funds

Investing, Growing, and Withdrawing Reserve Funds

Kelly, I am a member of my HOA board. Our prior management company had done all of our investments (from our direction) for our reserve funds. FDIC insured CD’s were used as we understood that they were required by California law only to invest our funds in FDIC insured funds. We saw that the interest rate income from FDIC insured funds did not cover inflation increases and considered utilizing a financial firm to assist us to find some other opportunities that better protected our reserve assets using a combination of FDIC and SIPC insured securities. We have had some questioning from homeowners if it legal for us to utilize an SIPC insured fund (versus an FDIC fund). What type of investment opportunities are legal for HOA reserve funds? Thank you, C.W., Oceanside Dear C.W., As a fiduciary of the association funds, the board must keep the members’ money secure and not subject to reduction. In the world of financial fiduciaries, if the fund shrinks, the fiduciary could be “surcharged,” meaning held personally liable for the reduction in the fund due to loss of funds. Loss of funds is not a risk with deposits in banking institutions insured by the Federal Deposit Insurance Corporation (FDIC), so long as no more than $250,000 is in any one institution. Many associations spread their reserve funds across multiple banks to keep their funds all insured within the limit. The Securities Investor Protection Corporation (SIPC, www.sipc.org) protects against a stock brokerage becoming insolvent or taking a client’s funds – but it expressly does not protect against declining investments. Associations are often tempted to place...
What Amount of Reserves Does the Law Require?

What Amount of Reserves Does the Law Require?

Dear Kelly, Is there any legal requirement for the reserves to be at any levels or is it a recommendation by the state? Can an HOA be taken over by the state if it is underfunded and if so, at what percentage? Thank you, S.P., Newport Beach Mr. Richardson, Please tell me if there is a Civil Code requiring a certain percentage of funds to be kept in the HOA reserve fund? Also, would you know if there is an average or median level that is known for California HOA’s.? Ours is over 100 percent. J.D., El Cajon Dear S.P. and J.D., The Davis-Stirling Act contains several requirements regarding reserves. Civil Code Section 5550 requires a full study be performed every three years, with annual reviews in-between. Civil 5550(b)(5) requires a long-term funding plan, and Civil 5560 requires that plan include scheduled assessment increases and be adopted in an open board meeting. Civil 5565 requires a detailed written disclosure of the status of each common area component in the reserve study, which disclosure must be in the form prescribed by Civil 5570. This disclosure, per Civil 5300(b)(2) is part of the Annual Budget Report, and so is distributed annually to members and to prospective buyers. Civil 5510(b) requires that reserve funds be spent only on the items they are reserved for, and per Civil 5515 any other withdrawal of reserve funds is considered borrowing which must be disclosed to the members per Civil 5520. The Davis-Stirling Act does not specify any minimum funding of reserve accounts and does not specify a percentage the fund must be in comparison to...
Can I/They Keep My/Their Exclusive Use Area Change?

Can I/They Keep My/Their Exclusive Use Area Change?

Dear Mr. Richardson, Many years ago, I was allowed by the board to raise the height of my deck. I paid for the architectural change. No board member or manager since has ever inquired about it. Most people don’t even see the change. Do I have legal standing to keep my patio the way it is or at some time could I be forced to put it back the way it was originally built? J.H., Huntington Beach Dear J.H., When you modify an exclusive use common area, it is still not owned by you. Common areas are normally defined by a recorded plan or map. I am assuming from your question that you have no documentation proving the modification was approved. If you cannot prove the alteration was with HOA permission, the HOA might deny that the alteration was approved. If the association decided for some reason to renege on the permission, it might have to pay for the revision and possibly reimburse you for the original modification expense. Your situation illustrates why it is a good idea for both HOA and homeowner to document approved changes to an exclusive use common area, in a written agreement signed by the homeowner and the HOA. With a written agreement in hand, you would be able to prove you had permission. Such agreements are also helpful to the HOA because they can document the homeowner’s agreement to be responsible for the changed item’s maintenance and repair. To make sure that future owners of the lot or unit are notified of this agreement, the agreement can be filed with the County Registrar/Recorder....
Freedom of Speech and Assembly

Freedom of Speech and Assembly

Dear Mr. Richardson, Our board is considering banning informal meetings in common areas. To me, this sounds like a violation of the constitutional right of assembly, but are there laws in California that cover this? S.M. Escondido Dear Kelly, I have a question regarding the new state law supporting use of common facilities for political activities, and one on first amendment rights. The new law allows residents to use common facilities for political meetings without charge. May the HOA limit attendance to only residents, residents and guests according to its adopted policies, or may/must these programs be open to all? Can an HOA prohibit the display of political signage on front lawns? For example, must the HOA allow residents to have campaign signs? Are there limitations to this allowance like size, length of display time, etc., as established in the HOA rules and policies? B.S., Murrieta Dear S.M. and B.S., Two Davis-Stirling sections create First Amendment-type rights in HOAs – Civil Code Sections 4710 and 4515. Section 4710 protects the right of members to display noncommercial signs or banners in or on their separate interest. In a typical airspace condominium that would mean inside a window or sliding door, and in a planned development would allow such a sign or banner to be displayed anywhere within the lot. There is a size limit but no time limitation on display. Can the HOA stop a resident displaying an offensive racist or prurient sign or banner? No. However, under the current federal Fair Housing regulations (and the soon to be official California Fair Housing regulations), the HOA or any resident could...
Is This Exclusive Use?

Is This Exclusive Use?

Dear Mr. Richardson, If a club in the HOA wants a locked storage space, is it considered exclusive use? W.S., Escondido Dear W.S., Exclusive use common area is defined by Civil Code Section 4145 as a portion of common area dedicated by the CC&R’s to the use of a single owner or group of owners. So, the club storage space, unless it was mentioned in the CC&R’s, would ordinarily not be considered exclusive use, but is common area allocated by board permission. Thanks, Kelly Kelly, I have a problem with my HOA on who pays for plumbing backing up due to a rusty pipe outside my unit in the front. The pipe rusted out and backed up into my unit. The HOA says it’s my responsibility because the pipe is “exclusively” into my unit therefore I have to replace the pipe and fix my flooring at my expense. Any advice would be appreciated. D.W., Fair Oaks Dear D.W., Do the CC&R’s of your HOA designate pipes which only serve your unit to be “exclusive use common area?” Per the Dover Village v. Jennison appellate decision of 2010, unless the CC&R’s say otherwise, the pipes outside a unit are not considered exclusive use common area. Even if they are considered exclusive use, do the CC&R’s specifically say that repair of the pipes is your responsibility? Civil Code 4775(a)(3) states that, unless the CC&R’s say otherwise, exclusive use common areas are to be repaired by the HOA and maintained by the homeowner. In townhouse-style condominiums, in which much of the plumbing separately serves individual units, associations sometimes amend the CC&R’s to...