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by Kelly G. Richardson, Esq. CCAL | Jan 21, 2019 | Articles, H.O.A. Homefront
Before seeking a board seat, the best candidates should improve their readiness for service, and can: Read the governing documents at least once The governing documents are the framework (along with applicable laws) within which the board must operate. Familiarize yourself with these important documents. Most likely, the majority of the neighbors have not read them. Take particular care in reviewing the use restrictions in the CC&Rs, and carefully read all the HOA rules. One of the main tasks as a director is not only to enforce and implement those documents but also to educate and inform the neighbors, most of whom will not be familiar with the “do’s and don’ts.” Join CAI CAI is the only nationally respected resource for homeowners, promoting better community governance and prepared volunteers. Read CAI’s free introductory publications “Introduction to Community Association Living,” “From Good To Great,” and “Rights and Responsibilities for Better Association Communities,” available at www.caionline.org/homeownerleaders. Take advantage of CAI’s board training courses All CAI chapters offer free or low-cost courses training volunteers to better serve their communities, including a 3-hour “Basic Board Education” course, and the “Essentials of Community Leadership,” an all-day course. The Orange County Chapter offers its “Community Leadership Training Program.” Also offered annually is the California Law Course for CID Managers, an 8-hour course. The CAI headquarters also offers a four-hour interactive online seminar, called the “Board Leadership Development Workshop, accessed at www.caionline.org/bldw. Understand the business judgment rule The business judgment rule separates careful board members from liability for the decisions they make while governing the association. Learn the boundaries of that rule. Even well-intentioned directors can...
by Kelly G. Richardson, Esq. CCAL | Dec 3, 2018 | Articles, H.O.A. Homefront
Assembly Bill 2912 The most important new legislation changing how HOAs will operate is Assembly Bill 2912. AB 2912 began with the statement that its purpose is to “take important steps to protect [HOA members] from fraudulent activity by those entrusted with the management of the association’s finances.” Sponsored by the Community Associations Institute and the California Association of Community Managers, the bill received no credible opposition and passed both houses of the Legislature on unanimous votes. Civil Code 5380(b)(6) and 5502 One very significant change is the new Civil Code 5380(b)(6) and 5502. These new statutes are identical in substance and so appear to be redundant. They require that before any transfer of $10,000 or 5% of total association combined reserve and operating deposits (whichever is smaller), there must be prior written approval from the association board. This slows down the overly active board officer or lazy manager who would pay bills or transfer funds without bothering to obtain explicit board approval. One question is whether a manager could obtain permission in advance to pay certain larger recurring bills, but the intent of the statute seems to argue against this and require express permission for each individual transfer. Association boards should already be preparing for this additional step and talking to their managers about how compliance will occur. This statute does not only reference payments, but controls any “transfer” of association funds. So, advance written authorization is required not only for payments and withdrawals but also deposits and transfers between association accounts. Civil Code 5500 Civil Code 5500 has for years required boards to at least quarterly review...
by Kelly G. Richardson, Esq. CCAL | Nov 12, 2018 | H.O.A. Homefront, Reader Questions
Hello Mr. Richardson, Our board is against raising our fees which have been the same for at least 10 years! Obviously we are not keeping up with inflation. According to our reserve study we are over $1000 per unit underfunded. We have [decades old] buildings. My concerns are falling on deaf ears despite the encouragement of our management company to raise fees. I would deeply appreciate your opinion. J.E., Irvine Dear J.E., Association boards are responsible to budget and spend association funds wisely. If a board decides in advance that it will not increase the budget, it is quite likely such a board has placed as its first priority the artificial preservation of assessments and that the upkeep of the property (and the association’s long-term financial health) is a lower priority. Properly caring for the common property and keeping vendor expenses flat for over ten years is unbelievable (and not in a good way). Because of the fact of inflation, cost increases should be factored into the healthy HOA budget. Otherwise, the association is probably deferring maintenance, hiring cheap (instead of the most competent and appropriate) vendors, and is not properly funding its reserve account. Such association are not financially healthy and are akin to people who live on credit cards. Such an association eventually has to face a day of unhappy reckoning when the deferred bills all come due and the association is forced to borrow. Qualified and certified managers are trained to prepare budgets and should be heeded in this regard. Maintaining property, keeping up with inflation, and depositing faithfully in reserves are all actions preserving the...
by Kelly G. Richardson, Esq. CCAL | Sep 24, 2018 | H.O.A. Homefront, Reader Questions
Hello Mr. Richardson, Our board announced that audio recordings of meetings would no longer be allowed. What are your thoughts on this? Does this action by the board violate the Brown Act, the Davis-Stirling or some other statute? Thank you, N.D., Rancho Santa Fe Dear N.D., As private organizations, common interest development associations (aka “HOAs”) are not controlled by the Brown Act (which applies to public bodies). The Davis-Stirling Act contains the “Open Meeting Act,” found at Civil Code 4900-4955. The Open Meeting Act does not require that HOA meetings be recorded electronically, but only that draft minutes of meetings be available no later than 30 days after the meeting. I generally recommend against audio or video recording of board proceedings, except in the rare occasion the association has the proper facilities to record and broadcast meetings (typically only in very large HOAs). Recording meetings often creates two negative problems – it intimidates some, and invites others to grandstand. So long as the policy is clearly stated, association boards can take either policy direction. Best, Kelly To Kelly G. Richardson, We have a question concerning our HOA president. The president is running a construction company that controls all maintenance and repairs throughout the community. She runs the community as a dictatorship and no one on the board is allowed to even speak. We have requested financial records – it won’t work. She told us this could no longer be discussed. M.L., Lake Forest Dear M.L., Some HOA presidents simply let the position get to their head. HOA presidents have very little power in most HOAs, aside from calling and chairing meetings. They have...
by Kelly G. Richardson, Esq. CCAL | Jan 1, 2018 | Articles, H.O.A. Homefront
I, the HOA member, resolve to: Number one: Follow the Golden Rule: treat others as you would like to be treated. My attitude: Not refer to the HOA or board as “they,” since it is all “us.” The directors are also members who pay assessments and give their time to benefit us all. Be neighborly, because shared ownership fails without cooperation. Assume our directors are doing their best as volunteers, and give them the benefit of the doubt. Not first assume the board is incompetent or dishonest when I believe it is overspending. Avoid the “my home, my castle” attitude. We share the benefits of common interest ownership, which means we also agree to share the control of our property. Ask questions before making statements, criticizing, or even accusing. Acknowledge the board may have more information than me. This doesn’t mean the board is right, but it does mean my opinion might not be fully informed. Take the long view of our association property, supporting growth of our capital reserves fund and maintaining our buildings. Be knowledgeable: Read the information the HOA sends to me. Be familiar with the CC&R’s, bylaws, and rules. I will reduce confusion and disputes by understanding the use restrictions and rules. Read the association budget and reserve study. I will ask informed questions, particularly about deviations from budget. If I ask to review financial documents, I will not ask for “everything,” and request only documents which I really need, acknowledging my manager is not a librarian. Help board meetings: Insist the board follow the Open Meeting Act, and only handle in closed session the...
