Declarant Language In Documents

Source: Adrian J. Adams Esq. 

QUESTION: Our CC&Rs and bylaws have never been revised. In a number of provisions, powers are given to the “Declarant.” Since the builder has been gone for over 20 years, should these provisions be removed from our documents?

ANSWER: Yes they should.

Declarant Defined. As defined by the Davis-Stirling Act, a “declarant” is one who creates the original documents that govern the association. (Civ. Code §4130.) Declarants normally give themselves a great deal of power and voting rights so they can complete the development and sell units without interference from homeowners.

Confusing. Declarant language can be very confusing to directors and members alike. Is the association a successor to the declarant? Does the association have the powers of the declarant? Is the association allowed to modify or delete declarant language? In short, the association is not a successor to the developer and does not have a declarant’s powers. And yes, associations can delete declarant provisions once the builder no longer has an interest in the development.

RECOMMENDATION. Associations should, at some point, updatetheir documents. When they do, declarant language should be deleted along with all the legalese that goes with it. It gives you the opportunity to clarify maintenance issues (always a source of conflict and potential liability), add director qualifications, incorporate changes in the law, and make the documents easier to read.

Inspecting Garbage

Source: Adrian J. Adams Esq. 

QUESTION: Our condos have an ongoing problem with residents not placing their garbage bags properly into the bins. This creates a mess when workers move the bins because bags break and spread garbage around. Can the board inspect the bag’s contents for the purpose of identifying who is causing the problem?

ANSWER: Yes you can. People have no reasonable expectation of privacy when they put their trash in a public area. (California v. Greenwood, 486 U.S. 35 (1988).) Trash collectors, the homeless, neighbors, the police, anyone can go through garbage once an owner puts it in a trash bin. Therefore, a board can go through the trash to identify who is causing the problem.

RECOMMENDATION: Board members or staff digging through trash is unsanitary and unseemly. If you want to catch scofflaws, you should install a camera in the trash area. Don’t use hidden cameras. Highly visible cameras help deter bad behavior. Hidden cameras not only offend people, they reveal things you may not want to know.

Motions At Membership Meeting

Source: Adrian J. Adams Esq.

QUESTION: I am under the impression that homeowners can make motions at their annual meeting; am I
 correct?

ANSWER: Pre-2006, you could make motions but that effectively ended with changes to the Davis-Stirling Act.

Robert’s Rules. Under Civil Code §5000(a) membership meetings must be conducted using parliamentary procedures. The most common procedure is Robert’s Rules of Order, which allows members to make motions from the floor. In the “old days” a member could make a motion at the annual meeting. Once it was seconded and debated, it could be put to a vote. I chaired many a meeting where motions were made and votes taken by a voice vote (ayes and nays) or a show of hands.

Davis-Stirling Act. Everything changed in 2006 with Civil Code §1363.03 (now §§5000-5145) which established procedures for elections. Under Civil Code §5100(a), significant votes such as approval of special assessments, election and removal of directors, governing document amendments and the grant of exclusive use common areas requires an Inspector of Elections (Civ. Code §5110) and secret balloting for not less than 30 days (Civ. Code §5115). This procedure effectively precludes all but incidental matters from floor votes. Even incidental matters are problematic.

Color Change. With the advent of mail-in ballots, few members attend meetings any more. In a 100-unit association, sixty members might send in ballots, thereby establishing quorum for the meeting, but only nine members might actually attend. If one person makes a motion to change the color of all buildings from earth tones to navy blue and five vote for the change and four against, does the motion pass? I don’t believe it does.

No Prior Notice. How can the other sixty members whose ballots established quorum vote on the color change since they were not present to hear the motion? I don’t believe the matter can be raised at the meeting without prior notice to the membership. Moreover, I don’t believe approval is a majority of nine (those physically present) but rather a majority of those present in person and by ballot, i.e., a majority of sixty-nine members (60 by ballot and 9 in person). 

Assuming that approval can be accomplished by those physically present at the meeting, allowing five members to change the color scheme of the entire development would create an uproar. Members would be properly outraged since there was no prior notice of the vote.

RECOMMENDATION: Any matters of significance should be put to a vote of the entire membership via written notice and ballot rather than from the floor of an annual meeting.

No Due Process

Source: Adrian J. Adams Esq.

QUESTION: Our pool usage was revoked without any due process and nothing in writing. I went to use the pool one day and couldn’t get in. The president said we were banned as long as he was president and we were lucky we weren’t fined. I asked for a fine schedule but he couldn’t produce one. He said it depended on what the board saw fit for the offense. I mentioned the Davis-Stirling Act and he said it was nothing but a guideline. He said our CC&Rs are the law. Help!

ANSWER: Ah, where to start?

The Law. First, the Davis-Stirling Act is not just a guideline, it’s the law. It encompasses Civil Code sections 4000 through 6150. Violations by the board can result in lawsuits, fines, court orders and an award of attorneys’ fees. Second, your CC&Rs are not the law, they are recorded restrictions known as equitable servitudes. CC&Rs are high on the food chain but they’re a full step below the law.

Due Process. It’s entirely possible your family violated the rules, are a pain in everyone’s rear end, and deserve to have their privileges suspended. However, before any penalties can be imposed, the law requires that you first be given 10 days written notice of the violation and a hearing date so you can defend yourselves. Once the board hears the evidence and makes a decision, it has 15 days to give you its written decision.

Fine Policy. Finally, the board cannot create penalties on the fly. The board must comply with the association’s written fine policy (which must be published annually). If they don’t have a fine schedule, they can’t levy fines or suspend privileges.

RECOMMENDATION: If you’re violating the rules, you should stop. If your board is not following the law, they should start.

Delegating the Budget

Source: Adrian J. Adams Esq.

QUESTION: Our CC&Rs state “The Board shall prepare an operating budget.” However, the board delegates it to the general manager. If the budget is created and passed in violation of our CC&Rs, is it valid?

ANSWER: It is not a violation of the CC&Rs for the board to delegate preparation of the budget. The Corporations Code specifically authorizes the delegation of duties. (Corp. Code §7210.) 

Nondelegable Duties. There are only a handful of duties that boards cannot delegate, i.e., cannot be assigned or transferred to someone else. They include the following:

•  Attending board meetings and voting on motions.

    •  Filling vacancies on the board. (Corp. Code §7212(a)(2).)

    •  Appointing executive committees.

    •  Approving settlement agreements (Elnekave v. Via Dolce.)

CONCLUSION: A manager or a budget committee can put together a draft budget for the board’s review and approval. Once approved by the board, an “Annual Budget Report” and “Annual Policy Statement” must be delivered to the membership 30 to 90 days prior to the start of the association’s fiscal year. (See Disclosure Checklist.)