PRIOR BOARD DECISIONS
QUESTION: If a previous board passed motions, can a new board reverse their decisions? This seems to open a whole can of worms. How can homeowners compel the board to honor prior motions? –Candice S.
ANSWER: Depending on the issue, newly elected boards can reverse decisions made by prior boards. Sometimes new directors are elected for that express purpose. For example, if a prior board changed the development's color scheme from earth tones to shades of blue, candidates may be elected on the promise to change it back to earth tones.
Possible Can of Worms. Problems can arise if contracts were entered into based on decisions made by prior boards. In that case, legal counsel will need to review the agreements and advise the new board on whether contracts can be terminated without incurring penalties.
If the membership did not elect the board to reverse prior board decisions, members have the power to remove the board with or without cause in a recall election. In the alternative, new directors can be elected at the next annual meeting to reinstate the decisions the current board reversed.
ISSUING CREDIT CARDS
TO BOARD MEMBERS
QUESTION: Our president had a credit card issued to himself on our association's bank account. He uses it for lunches and other charges without reporting the charges or what HOA business, if any, was conducted. No approval was given by the board for such use. Is this proper? -Anonymous
ANSWER: No, it is not proper. The board has a fiduciary duty to oversee the association's finances. It is rarely a good idea to issue credit cards to directors—it’s too easy to abuse them. Their unauthorized use by your president and his refusal to report charges should raise red flags.
Credit Card Abuse. I've dealt with credit and debit card abuse in various associations. In each case, it lead to the recall of directors. One president was bold enough to use a debit card to withdraw cash at a casino for gambling. When the treasurer caught it, the president said he meant to repay it and simply forgot. He repaid the monies but that did not stop his recall. In another instance, the entire board was recalled for allowing the misuse of a credit card.
Transparency. As a rule, directors should not be making purchases—those should go through management with appropriate documentation and reporting. I cannot think of any pressing reason for a director to take vendors to lunch. To keep everything transparent, meetings should be onsite and should include the manager or another director whenever possible. The meeting should then be reported to the board. In the alternative, vendor meetings can be conducted at a duly noticed meeting with the entire board.
Authorize Manager. It is common in the industry for the board to authorize the manager to purchase supplies as-needed within a prescribed dollar limit with all purchases documented.
If a manager abuses the spending limit or fails to document transactions, he/she can be disciplined. If repeated, the manager's employment terminated. When a director abuses the association's finances, a recall election is required to remove him/her from the board.
Recalls are disruptive and costly with no certain outcome. Even if a recall is successful, the person continues to live in the community and can be a disruptive force for years (or decades) to come.
RECOMMENDATION: To avoid potential problems, the safest course of action is to revoke your president's credit card. It may not stop him from taking vendors to lunches and dinners, but he does so on his own dime. Fellow directors should make it clear the association will not reimburse him for such expenses.
QUESTION: My management company is restricting a property walk-through with our landscaper to only two board members to discuss longstanding issues. Can’t four directors attend if they are only listening to questions posed to the landscaping company and listening to their responses? –Ricardo T.
ANSWER: Your manager is correct. A majority of directors meeting to hear, discuss, or deliberate matters within the authority of the board is defined by the Davis-Stirling Act as a board meeting that requires prior notice to the membership. You have two choices: (i) limit the number of directors to less than a a majority or (ii) post it so members can join the walk-through if they so choose.
CAN AN OWNER'S DAUGHTER
QUESTION: Can a daughter, who's not the owner, but living with her Mom who's the owner, have representation rights for her Mom at HOA board meetings? –Rosana S.
ANSWER: Unless an association's governing documents provide otherwise, only members have the right to attend board and membership meetings. (Civ. Code § 4925.) A member is defined as an owner of a separate interest. (Civ. Code § 4160.) If the daughter is not on title to the property, she does not have a legal right to attend board meetings.
Industry Practice. Despite the above, industry practice is to allow a non-member spouse or child to attend meetings and address the board during Open Forum. This happens most often when the owner is ill or incapacitated, or there is a language barrier. If, however, the owner's representative is disruptive, they can be ejected from the meeting. If the behavior is repeated in a subsequent meeting, the person could be excluded from attending any further meetings.
Power of Attorney. If a board were to adopt a policy of disallowing nonmembers from attending meetings, the daughter (whether living with her mother or not) could still attend if her mother gives her a power of attorney to represent her at meetings. It should be noted that a power of attorney does not give the person the right to be disruptive. If the representative refuses to behave, the board can exclude him/her from in-person attendance but allow it by Zoom.
10th ANNUAL ABCs of HOAs
Adrian Adams will be speaking at an annual educational event hosted by HOA Organizers and open to board members.
In addition to 2023 legal update by Adrian, CEO Neda Nehouray and others will speak on water intrusion claims, the homeless crisis, loans & special assessments, board dynamics, safety & security, collections forecasting, and more. This free event will be held:
Saturday, December 10, 2022
10 a.m. to 3:30 p.m.
To register, click here
Free Speech. Please tell Adrian that for the price we pay for his excellent newsletter and access to the A/S website, he should not allow things to slip by him. What is this world coming too? Keep up the great work! -Bob B.
Hybrid Meetings. Regarding equipment needed for hybrid meetings, would this be a capital expenditure requiring a membership vote? -Jim W.
RESPONSE: The cost is small enough to constitute an operational expense for conducting meetings. Even if classified as a capital expenditure, it would fall well under 5% of the association's annual budget (unless the budget is tiny). Even though membership approval is not needed, it may still be classified as a capital expenditure for tax purposes.
Asbestos. What happens if the association needs to disturb asbestos by cutting an opening in a unit owner's ceiling to repair a common area plumbing line? Does the association pay for all the asbestos removal in that ceiling? -Bob B.
RESPONSE: Yes, the association pays for asbestos removal where it opened the ceiling. When it repairs the hole in the ceiling, the repair must match the rest of the ceiling. If the patch cannot be made to blend with existing ceiling materials, the association may need to remove the asbestos-containing material in the entire room where the patch was made, but not necessarily the entire unit. The board may need to consult with legal counsel when this situation presents itself.
|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, however, is kept updated with current information which can be found via the "Index" or through our website's internal "Google Search" feature.