Electronic Business.. But Not For HOAs?

This week, many of you have purchased airline tickets, paid bills, and even registered for traffic school using your cellular phone, tablet or computer. If you are a member of various non-profit organizations, from churches to private schools, from associations of Realtors® to unions, you may have also cast a vote electronically. One of the more interesting anomalies in current California corporate law is that under the Corporations Code, ALMOST any corporation can vote via the internet or other electronic means, so long as members have the opportunity to opt out and use a written ballot. However, HOAs cannot do so, because the Davis-Stirling Common Interest Development Act requires that votes only be by secret written ballot (Civil Code 5115), which means electronic voting is illegal for California common interest development associations. For small associations, this may not be a problem, since elections are less costly and it is easier to contact neighbors and collect ballots. However, larger associations commonly struggle with participation, and often cannot manage the logistics of “knocking on doors” to ask members to participate. Larger communities often spend thousands of dollars on mailers, only to have meetings fail for lack of quorum- requiring the association to send yet another mailer to all the members, asking for ballots to be returned. The Act now acknowledges many ways in which an association or its members can choose to receive communications electronically- annual disclosures, specific notices, and other announcements (Civil Code 4035(b)(1), 4040(a)(2), and 4055, for example). However, that “green” and economical approach is prohibited with HOA ballots. Instead of receiving an electronic ballot, logging into a secure...

Exactly Who Can Attend Board Meetings?

A longstanding issue of ambiguity and occasional dispute arises regarding when a common interest development member tries to designate someone to attend a board meeting for them. The Davis Stirling Act, at Civil Code 4925(a) (its “Open Meeting Act”) says only that “any member of the association may attend meetings of the board of directors of the association.” What if a homeowner brings an attorney with them, or has an attorney attend a board meeting in their place? If the member is an entity (LLC, or Trust, for example), who can attend and represent the entity/member? If the member executes a “power of attorney”, what would that need to include in order for someone to attend in place of the member? These questions were finally answered in the case of SB Liberty LLC v. Isla Verde Association, in an opinion released for publication June 18, 2013. As a “published” opinion, it can be used for precedential value to guide associations in the future. Isla Verde is an association of 87 homes in Solana Beach, into which Gregg and Janet Short bought a residence in 2006. They put ownership of the property first in a family trust, and later in an LLC called “SB Liberty LLC”. For reasons unexplained in the appellate decision, the Shorts sought to have their attorney attend a board meeting on their behalf. The association’s attorney told the Short’s attorney that he would not be permitted to attend. The Short’s attorney attempted to attend the meeting anyway and then refused to leave the meeting, which was adjourned to a director’s residence. The Shorts then executed a...
Management Charges, Proxies

Management Charges, Proxies

Dear Kelly, We are a community of several hundred single family homes, no amenities other than many acres of green belt. Our board felt it necessary to change management and go with a company that was a friend of our “in house” attorney. There was no other request for bid let out before we hired the new company. And no reason was given to the owners for changing. The current company charges more than double over the old one. Since we are upside down on our budget, I was wondering if there is any rule of thumb, or guideline as to what management firms can charge. Sincerely, N.M., San Clemente Dear N.M., There is no limit on what a management company can charge, and the charges for management services can vary widely. It is subject to negotiation. Be careful about putting too much or even sole emphasis on the management fee. The least expensive management firm may overload its managers too much, or have lesser qualified managers (who don’t need to be paid as much). It is quite difficult to compare “apples to apples” with management contracts, but careful preparation of the scope of responsibilities may help. However, other questions should be asked. Is the manager credentialed by CAI or another credentialing organization? How many other associations will the manager be handling? What triggers extra charges? The selection of management is a board responsibility. Boards should go beyond a bare “dollars per door” analysis, because yes, sometimes you do get just what you pay for – and nothing more. p.s.: Your lawyer is another service provider, and usually should only be reviewing the...