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FEEDING DIRECTORS
 QUESTION: Our association pays for the lunch of the board of directors. Could the directors be considered paid directors as a result of the free lunch?
ANSWER: No, feeding them does not make them paid directors. When directors miss meals to attend board meetings they get cranky. When their stomachs are rumbling, their blood sugar is low and they are looking at their watches, board members cannot give proper attention to the business at hand. When directors are fed, their patience seems to improve and I've noticed they make better decisions.
Industry Practice. Some boards have popcorn and M&Ms at their meetings, others order veggie platters, still others have pizza or Subway sandwiches. As long as the cost is modest, the practice is more than reasonable and should not raise any eyebrows.
BILL SIGNED INTO LAW
Occasionally a good bill gets signed into law. On August 13, Governor Schwarzenegger signed AB 2016, which allows associations to record a single blanket notice requiring foreclosure trustees to provide boards with (i) the name and mailing address of the new owner, and (ii) the date the sale took place. Civil Code 2924b. Previously, boards had to record a separate notice for every unit in the association. The new law should significantly reduce the cost of obtaining billing information on foreclosed properties. The bill takes effect January 1, 2011.
WHEN BOARD MINUTES
ARE "OFFICIAL"
QUESTION: When are meeting minutes effective--after the meeting adjourns or after the minutes are approved?
ANSWER: Actions approved by the board take effect immediately. Minutes are merely a record of those actions. Minutes do not become “official records" of the association until approved by the board.
DO BANKS GET BALLOTS?
 QUESTION: If a unit is foreclosed does the bank receive a ballot for voting? What does this do to the overall number to establish a quorum?
ANSWER: If a unit is bank-owned, the bank has a right to vote just like any other owner. If the bank is current in paying its assessments, it is in "good standing" and its units are included in the calculation of a quorum.
Problems with Banks. There are two problems with bank-owned properties--knowing who to send the ballots to and getting them to vote. Banks almost never participate in anything. If the board can identify someone at the bank who handles the REO Department and develop a working relationship with that person, the HOA could probably talk them into returning a ballot for quorum purposes. To eliminate this problem altogether, associations should amend their bylaws to eliminate quorum requirements for the election of directors.
NON-DAMAGE LAWSUITS
QUESTION: Reading your newsletter, I was stopped by the term "non-damages lawsuits." I don't understand how anybody can sue when there are no damages.
ANSWER: Most
lawsuits seek monetary damages for injuries suffered by a plaintiff, whether
real or imagined. With homeowner associations, plaintiffs might seek a
declaratory judgment or injunctive relief in addition to or instead of damages.
In other words, they want the court to clarify a disputed governing document
provision, order the association to do something (such as enforce the CC&Rs), or
stop doing something (such as giving an exclusive easement to the common areas
in violation of the Davis-Stirling Act). These kinds of lawsuits are often not
covered by the association's insurance and, therefore, may result in a special
assessment against the membership.
COMMITTEE QUALIFICATIONS
QUESTION: Our HOA has qualifications for serving on committees such as members in good standing, no spouses on the same committee, and anyone found at fault in any litigation are banned for 12 months. Can they limit committee members like this?
ANSWER: Unless committee qualifications are established in the governing documents, boards can set whatever qualifications they choose for the committees they appoint.
FEEDBACK
FDIC Insurance. Regarding the increase in the limit of FDIC insurance, you should perhaps mention, as our auditors did to us, the funds in a checking account earning 0.05% or less are FDIC insured without any limit. This is important to us because our annual dues tend to come in huge lumps at assessment time. -Robert W.
Lions, Tigers & Bears. Boards should not assume that everyone knows about the problem [of wild animals], or would be willing to say they knew under oath. In a case involving a large retirement community in the mid-80s, the trial court found the security company, the management company, and the association liable for failing to warn the owners about a suspected cat burglar.
The defendants, following a series of break-ins and thefts from homes in the association, concluded that a vendor was the likely burglar. They believed the vendor would “case the joint” while providing services to owners and then return at night to burglarize homes. The defendants did not warn owners. Instead, they devised a plan to catch him, using the owners as bait.
What followed was the break-in and robbery of an elderly resident who was frightened out of her wits. They caught the burglar but the resident sued. The trial court found that the defendants had a duty to warn the owners. In my opinion, boards should publish all sightings of coyotes, bears and mountain lions. -Rich Neuland, Esq. of Neuland and Whitney.
RESPONSE: I agree. Residents can then take appropriate action to protect themselves. It also undercuts any argument that the association had a duty to warn and then breached that duty.
Sincerely yours,
Adrian J. Adams, Esq.
Adams Kessler PLC
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Newsletters are for advertising & general information
purposes
by Adams Kessler PLC. Readers should consult legal counsel.
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