PRESIDENT IS
ALSO PAID MANAGER

QUESTION: Our board president for the last 9 years has ALSO been the manager of our HOA. He RULES the board and claims the board appointed him as manager. He gets $30,000 a year. Since we are a nonprofit corporation I thought directors are NOT supposed to get a salary.

ANSWER: Undoubtedly his salary is earned as a manager, not as a director. However, the two roles are hard to separate and this creates significant conflicts of interest. It is not "illegal" for the president to also be the paid manager but it is an unhealthy arrangement. If the membership were smart, they would end the arrangement by (i) removing the manager from the board or (ii) replacing the manager with an outside management company. If the membership is content with the current set-up, at some point they will suffer the consequences and will have no one to blame but themselves. As de Tocqueville observed, "In a democracy, people get the government they deserve."

MANIC BEHAVIOR

QUESTION: When I was manic last year, I put trash in front of another homeowner's door and during the period of one hour, I walked back and forth to her door 13 times which was on the surveillance camera of the pool deck. The board fined me 13 x $200 = $2,600 saying it was justified even though it was one incident. Now they are threatening to file a lien on me if I don't pay it in 30 days. They refused internal dispute resolution and alternative dispute resolution. Can they refuse my request?

ANSWER: Your manic behavior probably scared the daylights out of everyone and earned you a well-deserved fine. The size of the fine may or may not be deemed reasonable by a judge. It will depend on whether the judge believes your actions constitute one incident or 13 incidents. You're lucky the owner didn't seek a restraining order. Regarding the threat of a lien, the board cannot lien your unit for unpaid fines. Civil Code §1367.1(e) As for ADR, the board is not required to accept your request for mediation or arbitration. However, the board should not refuse your request for "internal dispute resolution."

READER FEEDBACK

Firing Contractors. I strongly disagree with your advice about terminating contractors in executive session since it only further promotes a lack of transparency. Any and all issues regarding contractors that the general membership is asked to underwrite, vis-à-vis their association dues should not be kept from those who attend meetings as it will only promote further clandestine actions and/or discussions by the board if they can get away with discussing issues (such as terminating contractors) that are not in fact reserved for executive sessions. -K.D.

Response. Balancing transparency and protecting the association from liability is never easy. Feedback from Tom Frutchey below may offer some balance -Adrian Adams

Transparency. I think the board’s discussion regarding termination of a contract should, as you relate, take place in executive session. I suggest the best practice should be to notice the consideration of termination of the contract as an open session item and, after the executive session discussion, to hold the board vote for the termination in open session. -Thomas Frutchey, CCAM, AMS

Verifying Violations. I do not think you addressed the question asked in "verifying complaints." Note that the question of the homeowners being anonymous was not raised in the question. It appears to me that the question simply asked if the board can take their word or does a board member have to witness it. I cannot imagine that the latter is correct. -J.S.

Response. The board still needs to hold a hearing but it does not need to independently verify the complaint if the witnesses are willing to testify. If neighbors testify to the violation and the accused denies it (he said, she said), the board can still decide whom to believe and impose penalties if appropriate. -Adrian Adams

Quorum Failure. I do not share the same view as Richard Neuland in not holding meetings if continued quorums are not met. If the CC&Rs include a provision or clause requiring annual meetings, the HOA is in violation of the CC&Rs if the meeting is not held annually, whether quorums are met or not. -W.H.

Response. I’m not aware of any statutory or appellate case opinion which compels such efforts. Rather, I subscribe to the position that CC&Rs are to be interpreted as the courts look at contracts and statutes. That view requires the reading of the word “reasonable” whenever an act is required but there is insufficient information or direction in the writing to cover the situation in question. For example, if the writing specifies that a fee will be paid for some privilege or activity, but the amount of the fee is not specified, the courts will consider it to require the payment of a “reasonable” fee. I view the CC&R or Bylaw provision requiring an annual meeting as compelling a “reasonable” effort or attempt to conduct a meeting. Nothing less is sufficient, and nothing more is required. -Richard Neuland, Esq. of Neuland, Nordberg, Andrews & Whitney

Board Positions if Quorum Fails. With regard to ending further attempts at holding an annual meeting, what would happen if there was competition for the board positions. Does the existing board continue or what? -A.Z.

Response. The Corporations Code explains that a currently seated director remains in his/her position as a director until the expiration of his/her term and the election of a successor. If a meeting is not held because no quorum is established then the current director remains the director until the successor is elected or the current director is lawfully removed and is replaced or resigns. -Richard P. Neuland, Esq.

Flowers. In your example of a side discussion leading to the board scheduling an item for decision, there is a suspect element; that is, the suggestion that money could be borrowed from the reserves for planting new flowers. There are pretty strict limits on borrowing funds from the reserves, and a relatively routine thing like plantings would seem an odd action for such borrowing. Would it not make more sense to spend funds from operations? -S.F.

Response. That's why the issue needs to be discussed at a board meeting in open session. The board needs to determine what it will cost and how to properly fund the project. If they have a line item in the reserves for plant replacement, it can be paid from reserves. If not, it should come from operations. If operational funds are not available, the board will need to special assess the membership. Membership approval will depend on the amount being assessed.