BY DIRECTORS ARE ALLOWED
Seventeen years ago, the Open Meeting Act for HOA meetings went into effect. Everyone assumed that emails among a quorum of directors constituted a board meeting and was not allowed.
A case was published last month that said it does not constitute a board meeting. The Court of Appeal for the Fourth District held that email communications between board members are allowed, even if directors discuss association business.
The court reviewed the language of the statute and concluded that a "board meeting" is defined to mean an in-person gathering of a quorum of directors at the same time and physical location for the purpose of taking action on items of association business. They decided that email exchanges among directors where no action is taken do not constitute board meetings.
They clarified another issue for us. We know that emergency board meetings by email require the unanimous consent of directors to hold the meeting. It was unclear whether votes had to also be unanimous. The court indicated once directors authorize an emergency email meeting, votes by email do not need to be unanimous. It would be a majority of a quorum as with regular meetings.
OBSERVATION: Volunteer directors often struggle to fit association business into their busy schedules. More often than not, the only way they can review materials, ask questions, and get ready for meetings is via email. We now know that doing so does not violate the Open Meeting Act. All actions on items of business must still take place in an open board meeting (unless the action-items are executive session matters).
To read the case in its entirety, see LNSU #1 v. Alta Del Mar Coastal Collection Cmty. Ass'n.
QUESTION: I recently invited two newly elected, but not yet seated board members to my home to bring them up to speed on violations that were going to be discussed in executive session at our next board meeting. One of the attendees was a former board member who mentioned that the meeting should have been considered a quorum. Was I in the wrong for doing this, and can I be removed from the board for this? -Kathy R.
ANSWER: You did not do anything wrong and you cannot be removed from the board for bringing the two individuals up to speed. Since they had not yet been seated, they were not directors. Therefore, giving them background information was not a board meeting.
QUESTION: One of our board members was turned down on an architectural matter and appealed to the board. When the board voted on he appeal, he did not recuse himself. Was this proper? –Sharon H.
ANSWER: The a board member should have recused himself and not voted on his own appeal. His situation fits the definition of an "interested director," i.e., one who has an interest in the outcome of a board decision because he receives a personal benefit from the decision that is different from the benefit conferred on other members of the association. This creates a conflict of interest for the director which has the potential of influencing his vote.
The Davis-Stirling Act defines actions the Legislature considers conflicts of interest. As provided for in Civil Code § 5350(b), a director may not vote on an architectural issue involving their property. Even if he had not voted , he should have recused himself so fellow directors could freely discuss the issue and vote without feeling pressured by the interested director.
RECOMMENDATION: To help directors and committee members better understand conflicts of interest and their duties, boards should adopt an Ethics Policy.
QUESTION: If cumulative voting is silent in the governing documents and three board members are up for election. Can members default to cumulative voting or just apply one vote per candidate? -Michele N.
ANSWER: It's one vote per candidate. Cumulative voting is only required if it is permitted in your governing documents. (Civ. Code § 5115(e).) Since your documents are silent on the issue, cumulative voting is not allowed.
RECOMMENDATION: Your association's Election Rules should be amended to make it clear that cumulative voting is not allowed.
Counselor Adrian, This is one awesome newsletter. I am a condo owner and recommend our HOA hire your firm as its counsel. Larry Stirling is my old council member whom I voted for in all his runs for political office. I am an 86-year-old retired attorney and federal administrative law judge, and although I quit claimed all of my legalese, in fee simple absolute, without the possibility of reverter?? I enjoy reading your e-mails and articles. Thank you for allowing me to receive your Newsletters. Blessing to you, Larry and your firm. Peace through Pasta. -Sam D.
RESPONSE: Smile. I hope I have your wit when I turn 86.
Reserve Studies. Thank you for the shout-out of the new reserve study standards, appreciate your promotion of the industry’s progress. My personal favorite change is the addition of the Level IV; pre-construction reports. CA DRE report preparers use a cost database populated by the developers, which are often lower than “market rate” costs for many components. This will encourage 1st reserve studies earlier than 3 years into the HOA’s existence. Thanks for continuing the great newsletter, we hear many positive comments about it from BOD members and managers. –Scott Clements
Reserve Studies #2. Thank you for your informative August 17, 2023 newsletter. Our association performs preventative maintenance. Because of it, I suggested we extend useful lifetime estimates in our Reserve Study. Each year, we employ a roofing contractor to repair and replace roofing as necessary. In addition, we employ an expert independent roof inspector who views the condition of each roof and writes a report grading numerous detailed aspects. This inspector also provides his estimate of remaining useful lifetimes based on the conditions he observes. Our association wants to rely on information that a professional Reserve Study contractor provides but because of lifetime estimates chosen by our contractor that do not reflect the actual condition of our components, the calculated Reserve Study information is not accurate. What options do we have? I am writing this as a homeowner, not as a member of the Board of Directors. (Laurie Poole is our association attorney). –Dan N.
RESPONSE: Laurie is an excellent attorney. You want to hang on to her. Let's see how our Reserve Study professionals answer your question.
Slab Leaks. Regarding slab leaks. Our HOA went through the same thing, one slab leak after another. Beware simple, low-cost repairs. We made repairs, replaced all damaged flooring, wallboard, etc., and adjacent pipes broke, same unit, damaging brand new floors, etc. If one slab pipe is leaking, eventually, they all will. And, then our insurer threatened to drop us if we didn't address it. That was 15 years ago; these days, insurers seek any excuse to drop insureds. We negotiated a favorable rate with re-pipe contractor to do entire property at once. We did a special assessment and allowed members to pay it off over 12 months. We kept our insurance. It was painful, but better than the alternatives. –Alan F.