WHAT IS AN
QUESTION: We are reviewing our committee structure and are confused about Corporations Code 7212 which relates to committee formation. We have eight committees which are advisory only. Your website states that 7212 refers to executive committees. The statute does not use the term "executive committee;" it only refers to committees. Does this mean all committees must have two directors or only executive committees with fiduciary responsibility? -Susan L.
ANSWER: You are right, the term "executive committee" is not in the statute. Instead, it found its way into common usage because of the nature of the committee. Unlike ad hoc committees and standing committees which are advisory in nature and don't necessarily have directors on the committees, an executive committee consists entirely of directors with authority to act on the board's behalf (Corp. Code § 7212).
Large Organizations. Organizations with large boards often form an executive committee to address day-to-day issues that may arise between board meetings. Their executive committees consist of the President, Treasurer and Secretary and sometimes one or two other directors but less than a quorum.
Smaller Boards. For typical HOA boards of 3, 5, or 7 directors, executive committees are not needed for decisions between meetings, since board members normally live onsite and can readily meet in person or via conference call. Instead, they are appointed when special circumstances arise. The most common is to address ongoing litigation issues, or when a rogue director refuses to keep executive session matters confidential. (See Executive Committees.)
RECOMMENDATION: Boards should consult legal counsel when contemplating the formation of an executive committee.
QUESTION. If funds are taken from the reserve account for a new roof, does the reserve fund need to be replenished? If so, what is the timeline? One year? Two years? –Judith H.
ANSWER: Yes, it should be replenished and no the timeline is not one or two years. The short timeline applies when a board borrows the funds. The timeline for replenishing reserve items related to planned replacements is the projected life of the new component.
If your new roof has a projected life of 20 years, your reserve analyst will reset that line item in your reserve study to 20 years. The amount of money paid into reserves each year (adjusted for inflation) should be sufficient at the end of 20 years to pay for a new roof. The goal is to properly fund your reserves so that replacement of major components does not require a special assessment. To get into the weeds on how reserve studies work, your reserve analyst can give you a detailed explanation.
QUESTION: Is our HOA required to keep paper copies of our meeting minutes or does an electronic copy meet the requirements of record retention? –Ginny B.
ANSWER: Associations are not required to store their minutes as paper — they can be stored electronically. By statute, an electronic record is deemed a "writing" and cannot be denied legal effect solely because it is in electronic form (Civ. Code § 1633.7).
In summary, associations are required to keep minutes of their board and membership meetings (Corp. Code § 8320). Minutes are permanent records of the association. (Civ. Code § 5210(a).) Minutes must be produced upon member request (Civ. Code § 4950). When produced, minutes can be produced electronically or printed and produced as paper records. If the homeowner wants them as paper, you can charge for the printing costs.
QUESTION: Do we have to change our election rules if we want to vote by acclamation?
ANSWER: No, you don't need to amend your governing documents to take advantage of elections by acclamation. The Davis-Stirling Act allows associations to employ this feature regardless of anything to the contrary in their documents (Civ. Code § 5103).
Even so, boards should plan to amend their election rules at some point to include this provision. It eliminates any confusion on the process for seating directors in uncontested elections. When amending documents, boards should also eliminate write-ins and floor nominations, quorum requirements, proxies, and cumulative voting. For assistance, contact us.
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Errant Grammar. I love your newsletter. And as a professional writer and proofreader, I concur with your spelling of CC&Rs. However, I notice an errant subject/verb disagreement from time to time. Grammatical nuances aside, your newsletter is a consistent source of education, enlightenment, and enjoyment. -Lee M.
RESPONSE: Errant grammar has a way of hiding until I hit the "send" button. Then it startles me by jumping out and saying "boo!"
California Law. Thanks for continuing to provide excellent illustrations and advice on this dumpster fire of the new California HOA law. -Leland B.
Small Associations. I approached Assemblyman Jessie Gabriel’s office about drafting legislation to address the inequities of the one-size-fits-all HOA regulations that have proliferated in recent years. Most are especially detrimental to smaller HOAs. Also, SB 1383, requiring composting and/or new recycling regs is now in effect in LA and other complication/expense for all residents of CA, but especially HOAs. -Lissa C.
Friends with Benefits. Thanks so much for your free newsletter and commentary for community organizations. I always find the articles pertinent, interesting, and well-written. Question, can a homeowner bring a friend who is not a resident to a board meeting? If so, does the board have to allow the non-resident to speak or participate during the meeting, especially if that friend has been disruptive and hostile in non-meeting conversations with board members. -M.L.
RESPONSE: Friends sometimes receive benefits but attending meetings is not one of them. That benefit is entirely at the discretion of the board. Non-member friends do not have a legal right to attend meetings or to speak at them. Boards, at their discretion, can (i) allow non-members to attend and observe only, (ii) to attend and speak, or (iii) prohibit them altogether.
Amending Documents. Thank you for the always pertinent information discussed in the ADAMS/STIRLING Newsletters with your unique insight and perspective. As we address the necessary changes to the CC&Rs, in order to comply with new California laws, should these discussions be held during the open board meetings or in the executive session? I would appreciate any clarification that is available. -M.J.B.
RESPONSE: If you are discussing proposed changes with legal counsel, that should be done in executive session. If legal counsel is not involved, the changes should be discussed in a noticed meeting if a majority of directors are in attendance. A working group with less than a majority of directors does not require membership notice.