Board Member Faq
What does “good standing” mean and why would anyone like it?
CONDOGURU: These are my thoughts on the subject – “Good standing” means current with regard to payments of assessments and not in violation of any governing document provisions, including the CC&Rs and Rules. A “good standing” requirement is great – for board member service. If the Bylaws or CC&Rs provide for it, it assures that the Board sets a good example for the membership and respects the obligations of the governing documents. If the documents provide, a board member who does not qualify or falls out of “good standing” can be “ousted”. As to voting, it is my belief that requiring members to be in “good standing” to be allowed to vote complicates elections and due process procedures within the community. Generally, my experience indicates that members who violate the regulations or fail to pay assessments don’t care if their voting privileges are revoked (and generally don’t even bother to return proxies – although they may attend meetings just to stir up issues). As for use of the Association facilities, it may work well as a deterrent to poor conduct in the case of pool or clubhouse use. In other words, if a member must be in “good standing” to use the association facilities (or to allow the tenant to use the facilities), bad conduct may be minimized. A violation of the pool rules is a violation of the governing documents. As for another problem, I also find that Boards tend to apply the “good standing” requirement only sporadically or with regard to controversial issues (often just to keep members from voting who they don’t like or keep people out of the pool that they do not like). In the course of using it, boards often fail to provide owners with adequate notice and a hearing (required for such disciplinary actions) that voting or facilities privileges will be revoked because of an outstanding violation or non-payment of assessments. That conduct could be found to be improper on the part of the Board. So, I generally do not include a requirement in Bylaws or CC&Rs related to revocation of voting privileges based on the “good standing” criteria, but do include it for board service and facilities use.
Where can I get educated about homeowner association matters?
CONDOGURU: There are several industry groups and practitioners that offer information to homeowners as well as other people involved in common interest developments and homeowner associations. The different organizations offer different types of classes and courses, and some practitioners provide their clients with specific publications and ongoing information. On this website you will find “FYIs,” and articles and publications in lay persons language to help homeowners and boards of directors understand their rights and responsibilities.
Is serving on the board of directors difficult?
CONDOGURU: It doesn’t necessarily have to be difficult, but it can be time consuming and it is important that you try to educate yourself on the important aspects of being a board member, the legal requirements, the financial processes, and it also is very helpful to develop some people skills. The more organized a board is, and the more help it gets from the right persons with expertise, the more likely the “job” will seem like a breeze (although the lack kudos and of compensation may make it seem like a thankless job). All of these things can be learned and there are many resources available.
What does board member service involve?
CONDOGURU: Board members are expected to attend board meetings of the association. Some meet quarterly, some monthly, and some once a year (although I recommend meeting at least quarterly, since there are responsibilities in the law to review certain documents at least quarterly). Board members are expected to review bids for services, review financial documents regularly, review the associations insurance coverage and procure insurance, choose management (if needed, which is true in most cases), collect assessments, pay bills, prepare financial reports and make disclosures required by law, and generally address problems in the association as they arise. In most cases, the board of directors can pass off many of the duties that are normally required to a manager, a financial consultant, or others delegated to do those tasks as paid staff, or independent contractors. However, the board cannot delegate the responsibility for the consequences of the actions stemming from the duties that are delegated. The board can appoint other volunteers to serve on committees to do the research, investigation of matters, bring the board information, hold hearings, make architectural recommendations, etc. Therefore, at the very least, the board must oversee and give direction and instruction to those hired or appointed to manage the association.
What are some of the most important things the board of directors is responsible to do?
CONDOGURU: The board of directors must obtain and maintain certain financial records and generally must maintain or hold owners responsible to maintain the properties and buildings (the responsibility in either case depends on whether the development is condominiums or separately owned townhouses or lots) must make certain disclosures to the membership. These are some of the most critical duties of the board. For example, most associations (if there is any infrastructure or improvements that must be maintained) must have a reserve study prepared by someone qualified to do. A budget has to go out each year to the membership in a certain specified time period, including the reserve study information, or a summary of it. The association must disclosure this information through the owners through a mailing each year, along with other information, including a collections policy, alternative dispute resolution (ADR), procedures under the law, information about where to obtain the minutes of the association, and specific information about insurance carried by the association. All of these responsibilities are outlined in California statutes, so failure to do those things may have consequences. For example, if the board of directors does not get the budget package out to the membership in the specific time period from 45 to 60 days prior to the beginning of the next fiscal year (“the 15 day window”), then the association is barred from increasing the assessments for the coming year. A board of directors or any board member can be sued for breach of fiduciary duty for failure to follow the statutory requirements.
What is fiduciary duty and how does it relate to the Board?
CONDOGURU: “Fiduciary duty” is used often in describing the responsibilities for actions of board members. The term basically means that the board has responsibility for managing someone’s money or assets. It relates to protecting those assets and imparts a special responsibility upon the person who is the “fiduciary.” The term is generally used in a legal context and any board member and the entire board can be sued for what is commonly called “breach of fiduciary duty,” which means failure in their responsibility for properly managing the assets. (The Board should have insurance for this!
Can a board member be sued?
CONDOGURU: Yes, like any other human being or entity, a board member can be sued for actions taken or not taken while serving on a board of directors of a homeowners association. However, likewise, a person can be sued for saying something negative about someone, hitting someone with their car, knocking them down with their bike, accidentally backing into someone, knocking something over, and just about any other daily activity where someone else feels they did wrong. There are protections for board members serving on boards of directors from individual liability, and most documents provide for the legal defense and damages on most actions the board members would normally be expected to take, so don’t let it deter you from service. Failure of people being willing to put the time and effort into service on the board, or hiding out to avoid any responsibility or liability is one of the biggest problems in homeowner associations. The operations and management of the association depend upon the willingness of volunteers to come forward and serve.
Does one get paid as a homeowner association board member?
CONDOGURU: Generally not. Most documents say that board members do not receive compensation for board service. There are exceptions, but for the most part, board service is on a volunteer basis.
What is the #1 problem board members face?
CONDOGURU: sued is for inconsistent enforcement of the CC&Rs. So, since that is the only study I know of pinpointing specific problems, I would say enforcement of the CC&Rs (including architectural review) is one of the most difficult things the association has to do. Even if you hire management for all of the financial matters, assisting in drafting policies, and writing enforcement and fines letters, the Board is still responsible for setting policy and putting mechanisms into place that are effective and don’t invite litigation. Consistent enforcement of the CC&Rs is critical, but that doesn’t mean that variances, and exceptions are out of the question.
How much can a board increase assessments each year?
CONDOGURU: Generally, there is a statute (Civil Code Section 1366) that dictates how much a board of directors can raise assessments each year. That statute provides for regular increases (up to 20% without a vote of the membership), special assessments (up to 5% of the budgeted gross expenses for the coming fiscal year), and emergency assessments (in the event of a bona fide emergency). The statute dictates what is an emergency situation. The limitations on raising or imposing special assessments are tied to getting the budget package out on time. It is very difficult to read the statute and try and comprehend what all the nuances might be, so it is best to consult an attorney if you are considering increasing your assessments and want to know if the board is within its legal rights to do so. The statute does say that it controls over document provisions relating to assessment increases by use of the word “notwithstanding” anything in the governing documents.
Can the board fire a board member?
CONDOGURU: “Fire” relates to “removal,” and this question gets asked frequently by owners and board members. I presume. Board of directors cannot take anyone’s board position away unless they go to court and get a court order related to competency, criminal activities, or gross abuse of discretion. This means the board member has to have done something really bad, or be incompetent and evidence has to be available for the board to take to court. Other than a court order, a board of directors, if it wants to remove a board member, would have to go through the same processes as the homeowners, which would be to call a meeting and hold a recall election. Recalling a board member is difficult, especially if the association uses cumulative voting. There are many ways to diffuse problems caused by board members. The most common concerns the boards have when they contact me is that the board member is either disrupting meetings, distributing confidential information, trying to thwart the efforts of the majority of the board in taking certain actions, not showing up for board meetings, or causing physical issues. There are ways to handle all of these problems short of a recall election, and before any recall election would ever be instituted, I would suggest that the board meet with the recalcitrant or difficult board member in an executive session (it is a personnel matter), and see if the board member is willing to resign. Boards often forget that they can ask for a board member to step down and although this doesn’t always work, it should not be left out of the processes. Also, keep in mind there is a distinguishing between “firing” a board member and an “officer.” Most boards do have the ability, via the governing documents, to remove a director from an officer position, at will, but should not be done without a legal opinion on the documents for your association. For more information on this,
What if we can’t find people willing to serve?
CONDOGURU: Apathy is one of the biggest problems that homeowners face, both in board member service, and in getting owners to vote. The board of directors must be proactive in seeking out board members if they do not come knocking on the association door. Sometimes this can be accomplished through appointing committees or board liaisons to the serving capacities that would help train them to be board members, and get them interested in the association. It is critical to the associations ability to function to have a functioning board of directors. There are other options discussed below but they are not good ones.
What happens if no one is willing to serve, or we all want to resign because of pressure from the membership?
CONDOGURU: Once a person serves on the board of directors, the way that they leave could expose them to legal liability. For example, if the entire board resigns en masse, and leaves no one at the “helm” of the association, that could lead to personal liability, because it could be construed to constitute a breach of fiduciary duty. Board members have power of appointment, down to the last remaining board member (one can appoint) and the association should never be left without someone in charge. If the board is on its way out and can’t think of anyone to appoint to head the association, then an action for receivership should be considered. If no one is in charge of collecting assessments, paying bills, and managing the day-to-day operations, the association can run into serious trouble. If no one is there to receive the corporate documents (if incorporated), and provide information back to the Secretary of State, taxing agencies (as requested), etc., the association could lose its corporate or non-profit status. If defects are discovered, and a board of directors resigns rather than take on the task of pursuing them, the board members could be sued for breach of fiduciary duty for turning their backs or burying their heads in the sand.
What happens when we discover serious defects, and we know there is going to be great difficulty for the members and the association once the word is out?
CONDOGURU: It never serves an association well for a board to turn it backs on a problem. Whenever any serious defects or serious problems are discovered, and the board foresees “doom” for the association, the best thing to do is move forward and look for a resolution. In any serious problems, the board should be consulting the right kinds of experts to help solve it. Each board member receives individual protection as in the Corporations Code and the Davis-Stirling Act for acting in good faith in consulting the right kinds of experts. For example, if serious defects are discovered, the board would want to consult with contractors to identify the problem, (its insurance company) to see if there is any coverage, an attorney (to see if there is any legal recourse available against any parties) and possibly a manager (to coordinate the effort) or a construction manager (to oversee the bidding and contractor processes). The board will need assistance in identifying the problem, wrapping its arms around the problem, presenting it to the membership, and getting membership support for the resolution.
What does the board do with a serious disruptive homeowner, or a serious problem in the association related to conduct (such as a suspected drug house, meth lab, etc.)?
CONDOGURU: These are serious problems that probably also require the assistance of some professional with expertise in the matters. The association could try other things first, such as a neighborhood watch program, reports to the police (including psychiatric officer, if there is one, in the case of a serious disturbed individual). If the matter involves harassment, of some kind, and any potential discrimination claim, matters must be handled very delicately. This means that there is considerable exposure to litigation in these matters and so the processes have to be carefully laid out. The extent of the board’s responsibilities in these matters is not completely determined or definitive and there is case law emerging on the issues so they should not be taken lightly.
What do we do if we have a disruptive member or members at a board meeting and cannot conduct business?
CONDOGURU: The ultimate answer is adjourn the meeting and go home, but that is not necessarily the best answer. If the board is armed with certain things, it can have ammunition to deal with disruptions, and possibly proceed more effectively than a board that is unprepared. Having an agenda is a good idea. Conducting an orderly homeowner forum prescribing reasonable limits on it can be effective. Having the chair bring and use a gavel appropriately can be quite effective. Disciplinary actions for disruptions may be useful. Threats may be helpful (keeping a cell phone on the table to call 911, for example) could be of some value. Sometimes, shaming people in front of their peers can be used effectively, but is not recommended for people without the necessary “people skills” to do it in a way that does not trigger confrontation. As with other drastic situations, there are less drastic measures to achieve success. Bringing in the right kinds of experts to deal with practically gritty situations usually proves to be of great benefit.