We Have Unwritten Rules

We Have Unwritten Rules

Dear Mr. Richardson, Our board frequently adopts new rules, generally following the required process of providing 30-day notice to homeowners prior to voting at an open board meeting. The new rules are documented only in the board meeting minutes. Consequently, many of these rules have been “lost” throughout the years as homeowners come and go and memories fade. New homeowners moving in have no knowledge of these undocumented rules and naturally they are upset when the board enforces them. So, where should new and/or modified rules be documented? D.W., Cerritos Dear D.W., If the rule change is not published in writing, it is not a rule, per Civil Code 4350(a). Once the board has completed the rule-making process, the final steps are sending notice of adoption of the change and amending the rules document to include the change. If a new owner is not provided a copy of the rule, it might not be enforceable against that owner. Also, per Civil Code 4525(a)(1), all governing documents are to be provided to a member upon request so that they can be given to a prospective buyer. Rules are part of the association governing documents, per Civil Code 4150. Hoping this is helpful, Kelly Dear Kelly, I showed our president your article which said Civil 5850 requires associations to have a list of fines and that the list is part of the Annual Policy Statement packet. He said that there is no annual list of fines as we have an Assessment and Collection policy in place, and that the board is not empowered to change it. Our C.C.& R’s on two pages...
Before Amending CC&Rs, Avoid “Ready, Fire, Aim!” [10 Tips]

Before Amending CC&Rs, Avoid “Ready, Fire, Aim!” [10 Tips]

First, check with the members Amending CC&Rs usually takes a supermajority (i.e. more than simply a majority of the quorum), so strong membership support is essential. Drafting a great amendment is meaningless if the homeowners will not vote for it. Avoid controversial amendments Amendments changing assessments so that some members pay a higher or lower amount or unpopular use restrictions should be avoided. Some amendments do not require a membership vote Under the Civil Code, amendments deleting developer marketing provisions (Section 4230) or removing illegal discriminatory restrictions (Section 4235), or simply changing the old Civil Code references to the current (Section 4235), are all amendments which can be adopted by the board of directors in an open meeting. Get out the vote Explain to the members that the failure to vote (abstaining) is the same as a “no” vote. Divide up the community into sectors and divide those sectors among volunteers. CC&R amendments are not often very interesting, and apathy is usually their greatest enemy. Missing supermajority If you cannot meet the supermajority required by your CC&Rs, Civil Code 4275 allows the HOA to file a court petition to seek judicial approval – however, to petition, more than 50% of all members, not just a majority of the quorum, must vote in favor. These petitions really should be viewed as a last resort, due to the legal, mailing, and copying cost involved. Verbatim The EXACT text of the amendment must be sent out with the ballots – even if it was already previously distributed. This is required by Civil Code 5115(e). When sending amendments to members, help them by...
El Presidente Is Not El Jefe

El Presidente Is Not El Jefe

The office of HOA president is often misunderstood, and very serious disfunction for associations and their boards, as well as heartburn for the president, can be the outcome. At the outset, it is critical to understand that the role of the HOA president is dramatically different than the for-profit corporate president. The typical for-profit president is hired to be the boss, and can hire and fire, create or terminate contracts, and otherwise run the show. On the other hand, the HOA’s boss is not the president, but its board of directors. Corporations Code 7210 confirms the chain of command in the common interest development – “the activities and affairs of a [non-profit mutual benefit] corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board.” In a for-profit corporation, the day to day running of the business is typically the responsibility of the president, along with hiring and firing staff. In most associations, day to day execution of board decisions is executed by the association’s paid professional manager. The association president has just one vote on the board, and that vote is no more valuable than any other director. Directors who always automatically defer to the president are not fulfilling their responsibility to the association – which needs each director to contribute. A “super-director” does not exist in the HOA world – each director is just as important as the others. HOA presidents often feel that it is their responsibility to instruct the HOA’s manager, employees, or vendors on how they should perform their jobs. However, in doing so without express...

New Year’s Resolutions [Part 2] – The HOA Member

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...

Conflicts of Interest: When to Step Aside

If one is involved in a decision affecting or involving that person uniquely as opposed to the community generally, that is a conflict of interest. Directors and committee members should avoid involvement in discussions or decisions in which they have a conflict of interest. Once a conflict presents itself, the only decision is to avoid involvement. No matter how principled a person thinks they are, if they participate in a decision in which they have a conflict, they damage both their and the board’s credibility. Worse yet, the action might be set aside later under Corporations Code 7233. Civil Code Section 5350 provides some minimal definitions of conflict, and bars a director or committee member from voting on their own discipline, assessment delinquency, individual assessment for damaging common area, architectural application, or request to add exclusive use area. The statute is a fine start, in addressing some of the most obvious conflicts, but it does not go far enough. A person with a conflict also should not participate as a director in other matters, including their own damage claim, reimbursement request to the association, complaint against a neighbor, or any other matter in which that person is personally and uniquely involved. While the statute only bars voting on such matters, a person with a conflict also should not deliberate on a subject in which the person has a conflict. If a director discusses a matter and then recuses (refrains) from voting, that person is using their position to do something other members of the community cannot do – participate in board discussions. Furthermore, a member who discusses “their” issue...