If It Isn’t There, It Didn’t Happen – Good HOA Minutes

If It Isn’t There, It Didn’t Happen – Good HOA Minutes

When a corporation acts, its minutes document and prove that it acted. If the minutes do not record that the board of directors by majority vote approved a decision, it did not happen. The corporate record is critical to document corporate decisions, and the minutes are a critically important part of the governing process. The ultimate board member’s nightmare is to be accused of acting without corporate authority, and then discovering that the minutes do not record the authority they thought they had. In that situation, the director should seek a ratification vote as soon as possible. Minutes are not a meeting transcript. What “somebody said” is not recorded in the minutes – even if they demand “make sure my comment is in the minutes!” Minutes are intended to document that the board met on a given date, that certain directors attended, that certain motions were made, and certain reports were received. Many secretaries and managers work far too hard on “trying to get everything down,” and are therefore unable to meaningfully participate in the meeting as they try to get everyone’s remarks summarized. Some boards believe that they should also summarize open forum comments, but this is not required. Board meetings are not membership meetings, and the audience does not make motions or vote. It is sufficient to simply note that open forum was conducted. The good news for minute takers is that you can stop trying to compete with court reporters! Normally, meeting minutes should be about two to three pages.  Many committees take minutes of their meetings. However, committees normally do not make decisions, except for...
Avoid Overuse of Closed Sessions (part 4)

Avoid Overuse of Closed Sessions (part 4)

[After three previous articles addressing reader questions on this subject, this concludes the series] Perhaps the most frequently abused HOA governance tool is the closed session. Boards justify overuse of closed sessions for various reasons, such as that their open meetings are too raucous and closed sessions are more productive. However, the Open Meeting Act (part of the Davis-Stirling Act) requires all board deliberations to be in open meetings with members able to listen except for the short list of topics listed in Civil Code Section 4935. Closed session is intended for certain subjects in which harm could be inflicted upon the HOA or others if they were discussed in front of the community. The topics which may be addressed in closed session are:  Litigation. This also includes the risk or threat of litigation, and normally is why attorney discussions in closed meetings are considered permitted. Closed discussions are essential to protect attorney-client privilege. Formation of contracts. This is the most misinterpreted item regarding closed sessions. This does not mean ANYTHING to do with contracts but regards their FORMATION. Vendor selection is not formation of contract. Formation of contract is the negotiation strategy (counteroffer) and attorney advice regarding the contract’s legal terms, which all obviously need to be kept confidential and therefore discussed in closed session.  Hearings regarding member discipline (Civil Code Section 4935(a)) or regarding requiring a member to reimburse the HOA for common area damage (Civil Code Section 5855(b)). These statutes allow a member to request closed session for such hearings, but boards should routinely hold such hearings in closed sessions without waiting for a request. Closed...
HOA Homefront – Reader Questions – Closed Sessions (part 3)

HOA Homefront – Reader Questions – Closed Sessions (part 3)

When will it be legal for HOA boards to handle any business they want in closed sessions? H.F., Banning Dear H.F.: The Open Meeting Act limits what can be discussed in closed session. Boards that violate this by going beyond the limited topics allowed by Civil Code Section 4935 risk not only the mistrust of their neighbors, but also risk the argument that the board’s decisions are legally invalid because they were outside the association’s legal boundaries. The Open Meeting Act is not perfect, but it is generally good for HOA governance, and there is no reason to suspect it will go away in the future. Regards, Kelly Dear Mr. Richardson:  The board closed meeting agenda is posted on the window of the HOA office as follows: “Legal, contracts, personnel, members matters.” There is no detail under those categories. My contention is that the posted closed session agenda is not an actionable agenda and that the detailed agenda provided to each board member should be the one posted but with redacting names. Would you please provide your position in this matter.  Sincerely, H.M., Murrieta Dear H.M.: The posted agenda should be sufficiently informative so that homeowners can know generally what is planned for discussion, even in the closed session. Some more specificity than just listing the blanket categories is necessary to provide some transparency while still protecting the privacy of the members involved. Since the minutes of the next open meeting must per Civil Code 4935(e) “generally note” the “matters discussed in executive session,” it would seem reasonable that the posted agenda should match this level of specificity. Sincerely,...
HOA Homefront – Reader Questions – Closed Sessions (part 2)

HOA Homefront – Reader Questions – Closed Sessions (part 2)

[Part 2 of a 4-part series] Mr. Richardson: Our board has had several closed meetings to discuss revisions to our governing documents. An attorney has been present at each of these meetings. Is this not in conflict with the Open Meeting Act since it is not discussing litigation?  Does the fact that an attorney is present qualify these meetings as executive sessions? H.B., Carlsbad. Dear Kelly: If an HOA board goes into executive session about unauthorized topics, must those discussions be kept confidential? Thanks, N.S., Anaheim. Dear H.B. and N.S.:  Directors have a fiduciary obligation to protect the association’s legally confidential information and to keep it confidential, even from their friends, neighbors, and spouses. A director who does not protect that confidential information can be exposed to litigation and may be outside the directors and officers insurance coverage. However, if the discussion is truly not confidential and not proper for executive session (for example, discussing the need to raise regular assessments or a landscaping expenditure), then it should not have been kept confidential in the first place. However, check with the HOA’s attorney first about its confidentiality to avoid any mistakes. HOA attorneys normally meet with boards in closed session because most of the topics discussed are sensitive and regularly involve legal input, and usually connect to one or more of the permitted topics of discussion (most commonly, litigation risk). HOA attorneys should be alert to remind boards when a topic is outside closed session eligibility. Boards should know and carefully observe closed session boundaries. Best regards, Kelly Hello, Kelly: In our small HOA can the board members correspond...
Reader Questions – Closed Sessions (Part 1)

Reader Questions – Closed Sessions (Part 1)

Closed session is a common point of contention in HOAs. This week begins a multipart series of reader questions on this important and often misunderstood HOA governance issue. Hi, Mr. Richardson, is there a difference between Executive Session and Executive Meeting? Thank you. J.B., Vista Dear J.B.: Civil Code Section 4935 is part of the Open Meeting Act within the Davis-Stirling Act and provides for “Executive Session,” which is a closed board meeting to discuss certain specific subjects permitted by the statute. Sometimes executive session is referred to as closed session, and the limits of executive or closed session are found in Section 4935.  Some boards will occasionally create “executive committees” consisting of less than a board majority to address certain issues. However, if the committee consists of a quorum (majority) of the board, it is still a “board meeting” under Civil Code Section 4090 triggering the requirement of Open Meeting Act compliance. Thanks for your question, Kelly. Kelly, can a board handle approximately 90% of their business (including the annual budget) in executive session by classifying the items as contractual matters, even though the items are also on the agenda to be approved in the meeting immediately following the Executive Session.  So there are certainly no negotiation matters to be discussed. S.S., Mission Viejo Dear S.S.: The “contracts” subject is the most misused executive session topic. Civil Code Section 4935(a) permits executive session discussions of “matters relating to the formation of contracts with third parties.” Many boards and even HOA attorneys overlook “formation,” and focusing only on “contracts” they erroneously expand the use of closed session. “Formation” means...
Reader Question – HOAs and Pets

Reader Question – HOAs and Pets

Who doesn’t love pets? Sometimes, your neighbor! According to the American Pet Products Association, an estimated 67% of American households have a pet. Presumably, that means about 2/3 of HOA residents have pets, and sometimes they create problems. California law provides a unique (and limited) protection for pets. Civil Code Section 4715 says HOAs must allow a member to keep at least one pet and protects homeowners from having to remove existing pets because they are beyond a newly-imposed lower limit. The interesting part is that “pets” are defined in this statute only as a “domesticated bird, cat, dog, aquatic animal in an aquarium, or other animal as agreed to between the association and the homeowner.” (4715(b)). Consider all the common pets that are not protected by this law, including rabbits, mice, reptiles, and hamsters, to name a few. [I have been advocating for years that hamster owners rise up and oppose this law… “Hamster Liberation Front,” anyone?] Also, the law allows HOAs to limit aquatic animals to one. I have not yet heard of a board counting fish to make sure someone does not violate the limit and (until this law was enacted) never thought the number of fish was important! Fair Housing laws allow for assistance animals to help persons with their disabilities. This refers to trained “service animals” or untrained “support animals.” The law does not consider such animals to be “pets,” and bars any requirement of deposits or insurance from a resident with an assistance animal. The law is extremely vague on what species of animal may be assistive. The federal Housing and Urban Development...
Reader Question – Keeping Watch On Funds

Reader Question – Keeping Watch On Funds

Mr. Richardson: Are there laws governing the responsibilities and obligations of HOA boards, especially those related to limits on raising the monthly assessments that each resident in the community pays? Thank you, C.G., San Diego Dear C.G.: Most CC&Rs limit boards to the assessment increases allowed by Civil Code Section 5605(b), permitting boards to increase assessments up to 20% annually, and to impose special assessments up to 5% of the HOA’s gross budgeted annual total expenses. These powers must be exercised in an open meeting, and care should be taken to explain to the members the reasons why the action was taken. Civil Code Section 5600 requires the HOA to collect sufficient assessments to “perform its obligations.” Thanks, Kelly. Hello Mr. Richardson: Are there any suggested or mandatory statements board members must enter into the minutes of board meetings when complying with Civil Code §5500 & §5501? Thank you. E.A., Redondo Beach Dear E.A.: Civil Code Section 5500 requires boards to perform a monthly review of the HOA’s operating and reserve accounts current reconciliation, latest bank account statements, and income and expense statements. The board must also review monthly the current year’s actual operating revenues and expenses compared to the current year’s budget, the check register, monthly general ledger, and delinquent assessment receivable reports. Per Civil Code Section 5501, the requirement may be satisfied by the entire board or a board subcommittee consisting of the treasurer and at least one more director. Those reviewing the financial information should confirm in writing or orally in each open board meeting that the review has been completed for the months since the...
Reader Question – That Tree is a Problem!

Reader Question – That Tree is a Problem!

Dear Kelly: Our condominium association CC&Rs state that plumbing problems that service only a single unit are the responsibility of the unit owner. If the main drain servicing multiple units is blocked it is the responsibility of the association. My question is about damage caused by tree roots. The association has repaired driveways and sidewalks that service only a single unit that were lifted or cracked due to tree roots coming from the common area. The board considered these to be trip hazards. Recently a unit had a toilet drain clog under the slab that was caused by tree roots from a tree in the common area. It was the opinion of the board that the toilet served only one unit, so it was the unit owners responsibility. Were we correct in our assessment? T.E., Santa Barbara Dear T.E.: It’s hard to wade through all the many sometimes conflicting legal principles in governing HOAs. Here is one example. The common area tree grew due to nobody being negligent, but that does not end the discussion. The tree still has damaged property which otherwise would be an individual owner repair responsibility. That tree could be characterized as a nuisance, making it HOA responsibility. Boards and sometimes lawyers focus upon whether negligence exists but miss the possibility of nuisance. I can’t say definitively you were wrong or right, and that is for the HOA’s legal counsel to determine. Best, Kelly Mr. Richardson: Our board put together a committee to look at ways to amend our CC&Rs to safeguard or restore views that have been lost over the many years that this...
Reader Question – Who Watches HOAs?

Reader Question – Who Watches HOAs?

Kelly: Who has oversight of HOAs in California if someone wants to file a complaint against their HOA or management company?  Thanks, J.H., Lakeside.   Dear Mr. Richardson: I am amazed by the lack of training or basic knowledge that is required of HOA directors before they get elected. You would think just the basic understanding by directors of employee rights, relations  and what creates a hostile work environment are to be expected. In one of your future columns could you include any Civil Codes, Davis-Stirling Act requirements related to employee rights and how a board should interact with employees? G.H., Fallbrook Dear J.H. and G.H.: There is only one statewide mandatory qualification to serve as a director in one’s HOA – one must be a member. Someone can participate in making HOA Board decisions involving hundreds of thousands of dollars with no training or experience whatsoever. Also, there is no agency supervising compliance by HOAs or their directors with the Davis-Stirling Act. Certain law enforcement agencies enforce crimes or Fair Housing law violations, for example, but no state agency is charged with general oversight of HOA operations or governance. Some states have at least minimal requirements for board service. Florida since 2013 requires a director to certify within 90 days of starting board service that they have either completed an HOA certification course or have read the entire HOA governing documents. The Community Associations Institute (“CAI”) proposed a bill about 13 years ago to require just 3 hours of low cost HOA orientation for directors, but the bill was watered down during the legislative process so much that...
Are There Surprises In Your CC&Rs?

Are There Surprises In Your CC&Rs?

Among the association governing documents including articles of incorporation, recorded map or plan, bylaws, operating rules and covenants, conditions, and restrictions (“CC&Rs”), the CC&Rs document is arguably the most important. Here are eleven things about CC&Rs which might surprise you, before you read them. CC&Rs are: Public documents.  When filed with the County Registrar/Recorder (aka, “recorded”), CC&Rs become a public document and anyone can see a copy. Binding all owners. CC&Rs bind all owners, regardless of whether they read it, understood it, or received a full copy of it.  As a recorded document, CC&Rs are a “covenant running with the land,” meaning a legal commitment attaching to the land and therefore its owners. Typically not reviewed until too late.  Most buyers regard CC&Rs as boilerplate to be reviewed eventually.  Even though they don’t sign it, buyers should read it as carefully as the purchase agreement. Your covenants, not just the association’s. CC&Rs place rights and responsibilities on the association as well as upon each member.  If a neighbor violates the covenants, you have the same right to deal with the problem. Often distributed in draft or unrecorded format.  “Official” CC&Rs will have a recording number from the County Recorder on each page.  Associations often mistakenly distribute unrecorded copies originally received from the developer.  Obtaining a copy of the official document is easy. Normally enforced by courts, even if they seem unreasonable. The California Supreme Court ruled in 1994 that CC&Rs are presumed enforceable, with some narrow exceptions (such as if they contradict a law). Often not written with your HOA in mind. Original developer-supplied CC&Rs often are boilerplate with...