|
NO QUORUM REQUIREMENT
FOR ELECTING DIRECTORS
QUESTION: Our association eliminated quorum requirements for elections as you recommended, but your website says if we have over 50 members then the affirmative vote of a majority of a quorum is what is needed to remove a board member. Does this create a conflict? -Rick S.
ANSWER: Associations should eliminate quorum for electing directors, not removing them. If recalls were done without a quorum, a handful of owners could easily remove the entire board.
Easy Recalls. Calling a special meeting is already too easy. All you need is a petition signed by 5% of the membership. In a 100‑unit association, 5 members can trigger a recall election. Because apathy is a problem for most associations, it is not uncommon for only 30 members (or fewer) to cast ballots. If there is no quorum requirement for recalls and only 30 ballots are cast, it means 16 votes (out of 100 members) can recall an entire board.
If it is this easy to remove a board, it means threats of recall and actual recalls could increase significantly. Can you imagine elected directors trying to make hard decisions for the membership, such as increasing assessments to properly fund reserves, with the constant threat of recall by a minority of members who are not fiduciaries and free to act in their own best interests?
Statutory Requirements. Recall elections should require a quorum. As you noted, if an association has fewer than 50 members, removal must be approved by the affirmative vote of a majority of all members entitled to vote. If an association has 50 or more members, removal must be approved by a majority vote once a quorum is met, with the affirmative votes also constituting a majority of the required quorum. (Corp. Code § 7222(a).)
RECOMMENDATION: We routinely eliminate quorum requirements for electing directors when we restate documents. It saves associations the cost of multiple meetings to achieve quorum. Boards should consider doing the same when restating their documents. If you need assistance, contact us.
INTRUSIVE LENDER
QUESTIONNAIRES
New  lender questionnaires dealing with safety issues, deferred maintenance, and special assessments has created concern in managers and board members alike. Some of our colleagues are advising against answering the questionnaire for fear of potential liability.
Our firm is taking a different approach. In our March 2nd webinar on how boards can minimize liability answering the questionnaire, we recommended cautious responses with a disclaimer letter. Otherwise, condominium associations and co-ops would be tagged as ineligible for loans by Fannie Mae and Freddie Mac. That means home purchases and refinancing could quickly grind to a halt.
We had approximately 600 attendees in our webinar, which meant there were more questions than we could answer during our Q&A portion. To address all the questions, we recorded a Lender Questionnaire Follow-Up. Board members and managers should find the video useful. Two of the many questions we received are covered here.
QUESTION: How practical is it to consult with legal counsel for every sale?
RESPONSE: It's not practical and it is too expensive. You shouldn't need a lawyer reviewing questionnaire responses for every sale. We recommend boards consult with legal counsel to determine how best to deal with the questionnaires. Once that is decided, management and boards can take it from there.
QUESTION: Can or should we just provide a copy of the Reserve Study with the questionnaire?
RESPONSE: Providing the reserve study without answering the questions will not be sufficient for lender review and could result in denial of loans. You should answer the questions and provide a reserve summary rather than the entire reserve study. Depending on the situation or if the lender requests it, you can provide the full study.
RECOMMENDATION: Boards should work with their association's legal counsel to decide whether to answer the questions and, if so, how best to respond to them.
CC&Rs Pre-Empted? Our CC&Rs state that no more than one family can reside on a lot. Does California’s new ADU law preempt our association’s CC&Rs? –Harold C.
ANSWER: Unfortunately, it does. Our Governor and Legislature decided to fix the homeless problem by doing away with R-1 zoning, push ADUs, and impose lot‑splitting with multi‑family housing in existing neighborhoods. Single‑family lots are now multi‑family lots. It won't fix the homeless problem. It will, however, destabilize neighborhoods and negatively impact community associations by putting more cars on streets, overloading amenities, increasing rules enforcement problems, and driving down property values. Addressing the problems will undoubtedly increase associations' management and legal fees. CAI's California Legislative Action Committee (CLAC) keeps track of the insanity in Sacramento and sends out alerts. You should sign up for CLAC's eNews.
Floor Nominations? Can our association's bylaw provision for nominations from the floor prevent us from using the new election by acclamation? –J.A.
ANSWER: Fortunately, it won't. You can still hold elections by acclamation even if your bylaws require nominations from the floor. The relevant provision of the Davis-Stirling Act states that "Notwithstanding...any contrary provision in the governing documents..." uncontested elections can be held by acclamation. (Civ. Code § 5103.) To eliminate any confusion, you should amend your Election Rules to eliminate floor nominations. At some future point, you should also eliminate them from your bylaws.
Balcony Inspections? Our HOA is a planned development combined with a residential condominium project. There are 42 townhomes and 8 condominiums. We are looking for clarification if SB 326 applies only to the condos or to all units. Both have elevated balconies. We are getting mixed responses. -Joseph A.
ANSWER: Inspection of elevated structures does not apply to planned developments. It applies to condominium projects with buildings with three or more dwelling units. (Civ. Code § 5551.) Your association will need to inspect the condo balconies, but your townhome owners will be responsible for inspecting and repairing their own balconies (unless your governing documents state otherwise). You should have legal counsel review your governing documents to determine responsibility.
The election law video for HOAs was very helpful and quite informative. The itemizing of requirements to eliminate drawn-out and costly board elections made it simple to present to the board in a monthly meeting. Thank you. Your website is so helpful and full of important information for living in an HOA. –Ben
Rick R's assertion about the apostrophe has a major flaw...'s is possessive, not plural. You are correct. –Marcus P.
I utterly agree with you. NO APOSTROPHE in CC&Rs. –F.G.
I enjoy your newsletter and want to thank you for the valuable information you provide. -Jerry A.
|
DISCLAIMER. Our newsletter provides commentary, not legal advice. Boards need to retain an attorney to review all the facts and give a legal opinion on the issues they face. We serve as corporate counsel to California associations only. Request a proposal to represent your association.
PAST NEWSLETTERS. Readers can find current and prior year newsletters posted here. Older newsletters are not posted since the information they contain can change over time with new statutes and case law. The website itself is kept updated with current information which can be found via the "Index" or through our website's internal "Google Search" feature. |
|
|