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...
Boards Elections [Part 1]

Boards Elections [Part 1]

Mr. Richardson, What recourse does a member have if the board refuses to abide by the governing documents or state law? Our president refuses to hold the annual election in an apparent attempt to stay in power. C.S., Poway Dear C.S., 5% of the members may under Corporations Code 7511(c) send a written petition demanding a membership meeting. However, most likely the board will ignore it. I have seen members announce their own membership meeting, but this is a bad idea because it is too easy to make an error in the very technical election procedures required by Civil Code 5100-5135. A better option may be to file a court petition under Corporations Code 7510(c) for an order compelling an election. This involves legal expense, and is a last resort, but judges are normally sympathetic to these petitions and are willing to order an election. Before going to all the effort and expense of filing a court petition, make sure you have member support (and a few candidates). Best regards, Kelly Dear Kelly, Our association did not make quorum, so our election was postponed a month. Each homeowner gets 1 vote, but there were couples at this meeting so some homeowners got 2 votes. Some homeowners returned a handful of ballots they had collected. I was told each homeowner must mail or bring their ballot in themselves. Is this legal? D.P., Aliso Viejo Dear D.P., Civil Code 5115(a)(2) says that ballots may be mailed or delivered by hand to a location specified by the inspector of elections but does not specify who does that. Election rules could avoid a...
Keep the Lawyers at Bay [Ten Tips]

Keep the Lawyers at Bay [Ten Tips]

Serving as a volunteer director is often thankless, but it shouldn’t be risky. Here are ten ways to reduce if not prevent personal risk from your service. 1. Learn and follow the Business Judgment Rule Found at California Corporations Code 7231 and 7231.5 and contained in most bylaws, the Rule protects volunteers from liability while acting in good faith, for the association’s best interests, and upon reasonable inquiry. 2. Insurance is necessary Only serve if the association has directors and officers (“D&O”) insurance coverage. Civil Code 5800 protects directors from personal liability if the HOA with more than 100 memberships has $1,000,000 of D&O insurance or $500,00 if less members. 3. Refuse compensation Whether called a “stipend” or assessment reduction, reject any form of renumeration for board service. Upon receiving even one dollar of compensation the director is no longer a volunteer and loses all the immunities of volunteers. Reimbursement for a director’s time serving the HOA is not reimbursement – it is compensation. Reimbursements are repayments of out of pocket expenses. 4. Don’t get mad… or even “Good faith” doesn’t just mean a pure heart. However, it certainly does exclude any willful, malicious or retaliatory intent. The nastiest homeowner has the same rights as the saintly ones. Enforce the rules evenly. 5. Don’t take matters into your own hands HOA governance is a team sport, not an individual event. What you think is valid instruction may be viewed by the board (and the HOA’s attorney) as interference. A director (even the president) must use restraint and wait for the board to act. 6. Follow the corporate process Is...
Ramped Up Assessments, Where To Pay

Ramped Up Assessments, Where To Pay

Mr. Richardson, This year our HOA dues increased 20%. The reason given was plumbing issues due to sewage backups. When I asked about just having a special assessment to cover the plumbing issues, I was told a special assessment would require a vote by association members. What can homeowners do to prevent this from continuing? J.L, Newport Beach Dear J.L., Most CC&R’s or bylaws limit increases in regular assessments by boards to no more than 20% per year. Per Civil Code 5605(b), governing documents cannot impose any smaller assessment limits to board power. Some boards, discouraged by lack of participation, address major expenditures by using the maximum increase in assessments for a few years, eliminating the need for a special assessment. While expedient, this does create a few issues. Since members are not voting on it, boards often skip the critical step of having “town hall” meetings and newsletter bulletins to inform the members the reasons for the expenditure. Also, once the need for the increase ends, will the board remember to reduce the assessment amount? Members really should be more involved in their associations, and it is discouraging for a board to try to have to avoid member votes simply because the members won’t vote. Thanks, Kelly Hello Kelly, Recently, I signed up for e-statements, by which my monthly statement is available online. I asked my HOA if I could still receive my monthly assessments through mail as well as being signed up for e-statements. Their reply to me was that I could only chose one way or the other. Is this allowed? J.K., Irvine Dear J.K., The Civil Code...

Potentially Disastrous Bill Pending in Sacramento [SB 1265]

The California Legislature continues to try to “fix” California common interest developments, yet elected representatives still do not understand the dynamic of volunteer run communities or what they need. Senate Bill 1265 is the latest example. SB 1265, authored by Senator Wieckowski from Fremont, seeks to revamp the HOA election process for the second time in 13 years. This bill would bar any HOA board candidacy eligibility requirements, except that candidates must be members. Many associations ban delinquent members, non-resident members, or members suing the HOA, from serving as directors. Other HOAs ban two co-owners from running. Should this bill pass, all those sensible limitations on eligibility would be illegal. The bill also dramatically increases the technical requirements which must be followed during the election process, and would change Civil 5145(a) to REQUIRE courts to overturn an election if they are shown an error (the current statute says a judge MAY overturn the election). The bill also begins with a declaration that HOAs are quasi-governments, just like cities, functioning like cities “in almost every way.” This is a dangerous and false statement. Try to tell the 24 unit building in Whittier that they are just like a city! HOAs are neighborhoods which have been given via covenants simple tools to enable shared living. They don’t have courts, or large staffs of dozens of full time employees, and their job is not to enforce all applicable laws – just to make sure neighbors are good neighbors and the governing documents are followed, and the community preserved. The bill also would require HOAs to store outer ballot envelopes, which are signed...