Should Our Assessments Increase?

Should Our Assessments Increase?

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...
Executive Session Misused?

Executive Session Misused?

Mr. Richardson, Members of our board mention discussions in executive session when they are discussing agenda items at board meetings. For instance, at a recent meeting the board tabled a matter relating to rules. The president said the matter would be discussed further in executive session. Also, three board members attend committee meetings. Two directors will be designated to participate with the committee and the third will not participate but just listen. What subjects are allowed under Davis-Stirling in executive session? Also, should a majority of the board be attending committee meetings, even if one of them does not participate? T.M., Canyon Lake Dear T.M., Closed session is only permissible under Civil Code 4935(a) to discuss a very few items: litigation, paid personnel, contract negotiations, disciplinary and common area damage hearings, hearings re delinquency payment plans, lien foreclosures (Civil Code 5705(c)) and requests for accommodation of disabilities (required by Fair Housing law to be kept confidential). Anything else must be handled in open session – period. When a board handles other topics in closed session it not only violates the Open Meeting Act (Civil 4900-4955) but also violates the members’ trust. As to committees, if a board majority attends a gathering in which association topics are discussed, that is a “board meeting” under Civil 4090(a). Even if the third director is silent, that committee meeting has become a board meeting and the Open Meeting Act applies. If a board majority needs to attend a committee’s meetings, why have the committee? Committees should support the board by helping share the load. When a majority of the board is attending anyway, then...
Bills That Made It in Sacramento and Some Which Didn’t

Bills That Made It in Sacramento and Some Which Didn’t

September 30 was the last day for the Governor to sign or veto bills passed by the Legislature in 2018. Many bills affecting HOAs were signed, and two were vetoed. SB 261 This bill, signed by the Governor on September 27, amends Civil Code 4040 to allow homeowners to use email to request the HOA send communications via email to the homeowner, and amends Civil 4360 to require 28 days (instead of the current 30) notice to homeowners for proposed rule changes. SB 721 HOAs exempted. SB 721 requires multilevel residential properties to conduct inspections of balconies and other elevated elements every six years. Signed into law by the Governor on September 17, the final version of the bill exempts HOAs from its requirements. SB 1016 Time of Usage (“TOU”) Meters. SB 1016, signed by the Governor on September 13, adds a new Section 4745.1 to the Civil Code, protecting the installation of TOU meters for electric vehicle charging stations. HOAs may impose reasonable requirements on the requesting owner. AB 2912 New Association Financial Requirements. AB 2912 requires boards to review the HOA financials monthly instead of the current quarterly requirement. The new law, approved by the Governor on September 14, requires all HOAs to have fidelity (dishonesty) insurance in place. It also requires documentation of board authority for expenditures over $10,000 or 5% of the HOA’s budget, whichever is lower. SB 1128 and 1265 Vetoed. Two of the most troubling bills for California HOAs this year were Senate Bills 1128 and 1265. SB 1265 would have made it much harder for common interest development associations to preserve elections...
Recording Meetings, Secret Budget Talks, and a Dictator President

Recording Meetings, Secret Budget Talks, and a Dictator President

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...
Boards Elections [Part 2]

Boards Elections [Part 2]

Dear Mr. Richardson, We cannot get people to volunteer to be on the board. I have been on the board and told the manager I didn’t want to run. She put my name on the ballot, and said I had to stay on the board until someone took my place. What happens if you don’t have people to serve on the board? Thanks, L.W., Encinitas Dear L.W., The usual cause for difficulty in finding volunteers is that homeowners are discouraged from volunteering by seeing directors working long hours for the HOA. The less common reason is HOAs in turmoil often have trouble filling seats with brave souls. A provisional director could be appointed by the court if the board cannot attain quorum, but this is very expensive (the director will charge hourly). You cannot be forced to serve as a director. A director can resign any time, and the board then can in an open meeting vote to fill the vacancy. The manager may be misapplying Corporations Code 7220(b), which says that a director serves until the term expires and a replacement is elected. Corporations Code 7224(c) provides that a director may resign upon giving written notice. I hope your board investigates the reasons why people are unwilling to serve, and things improve. Sincerely,Kelly Mr. Richardson, We have several candidates running for the board and one candidate is the spouse of an owner of record but she is not on title. Our board president announced in an open meeting that the candidate was not eligible to be a candidate based on the president’s interpretation of the Davis-Stirling Act. Your...