Personal Opinions

Source: Adrian J. Adams Esq. 

QUESTION: Is a board member allowed to vote on an issue according to his own personal opinions? Example: board member personally does not like a certain type of tree so he votes against planting them in the common areas.

ANSWER: Personal opinions…everyone has one. The law does not require directors abandon their opinions when elected to the board. If they did, whose would they adopt?

Rather, directors are required to make decisions (i) in good faith, (ii) in a manner they believe to be in the best interests of the association, and (iii) with such care as an ordinarily prudent person would use in similar circumstances. (Business Judgment Rule.)

If a director’s opinions are out of step with the community, homeowners can express their own views during Open Form and fellow directors can out-vote him. That’s why you have boards of five directors with majority votes–it exerts a moderating influence on outliers.

Director Loyalty

Source: Adrian J. Adams Esq. 

QUESTION: Does the “duty of loyalty” mean I have to support, in public, a position reached by a majority of the board? Am I precluded from publicly dissenting and making adverse comments?

ANSWER: You can dissent and make adverse comments in a board meeting when the matter is under discussion by the board. But once a decision is made, it’s time to move on. You don’t have to become a cheerleader for the board’s decision but a director goes too far when he undermines the board or the agreed-upon course of action. Such behavior can result in a breach of the director’s fiduciary duties.

Business Judgment Rule. When a homeowner is elected to the board, he/she automatically becomes a fiduciary and must follow the business judgment rule. That means the actions of a director must be in good faith, in the best interests of the association, and with prudent care. (Corp. Code §7231(a).) Stating you voted against the motion but support the board’s decision is okay. Disrupting operations, attacking fellow directors and undermining an agreed-upon course of action is not okay. It is harmful to the association and falls outside the Business Judgment Rule. When that happens, disruptive directors face personal liability.

Dealing with Rogues. If a director goes rogue, the board may have no choice but to censure him/her and, where appropriate, form an executive committee to exclude the director from sensitive issues. Any director who believes he must win all votes is really not suited to be on the board. If needed, the board can call a membership meeting to remove the director.

RECOMMENDATION: Once the board makes a decision, dissenting directors should either publicly support the decision or keep silent. They should in no way undermine the board. If the director cannot follow this policy, he/she should immediately resign from the board. Once off the board, the former director can publicly oppose the board’s decision, provided he/she does not disclose any privileged information.

Adrian J. Adams, Esq. - Think Tank Contributor for the Foundation For Community Research

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Think Tank members are really investing in the future of our research, once we have those initial reports back we'll be able to approach those external funders for the remaining projects.  They provide a critical review of the organization's scope of work, and facilitate introductions to like-minded organizations to ensure that the research produced is very robust and that they provide new data.

Adrian J. Adams, Esq.: "The monies that we raise jumpstart additional research because the Foundation for Community Association Research is really the only foundation that is doing serious work in studying community associations and the changing roles within those communities."

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Free Speech and Porn

Source: Adrian J. Adams Esq. 

QUESTION: Our HOA held an election but never received the results. I heard about it through the grapevine. I emailed the board and never received a reply.I was of the understanding that election results are supposed to be published.

ANSWER: By statute, the results of an election must be reported to the membershipand recorded in the minutes of the next meeting of the board. Failure to do so is a violation of the Davis-Stirling Act and the court may, but is not required to, void the election for the failure to report election results. (Civ. Code §5145(a).) The violation also makes the association vulnerable to monetary penalties of up to $500 per violation. (Civ. Code §5145(b).) If someone challenges your election for failure to report the results, the court is more likely to fine the association than void the election.

Collection Statute of Limitations

Source: Adrian J. Adams Esq. 

QUESTION: What is the statute of limitations for collecting delinquent assessments?

ANSWER: Statutes of limitations (SOL) are laws that restrict the time period within which legal proceedings may be brought. For example, if a driver runs a red light, the state can’t wait twenty years to prosecute the infraction. For traffic violations, the state has one year to take legal action, otherwise time runs out and legal action is no longer allowed.

Protect the Accused. This legal concept is designed to protect defendants from unfair prosecution. If the government drags its feet prosecuting a crime, evidence to defend the accused may be lost with the passage of time, i.e., memories fade, witnesses die and documents are lost. Protecting the accused also applies to private grievances, which are referred to as civil actions. (When the state takes action, it’s called a criminal proceeding; when a private individual seeks redress for damage, it’s called a civil action.)

Collecting Debt. There are different statutes of limitations when it comes to collecting debt. If money is borrowed and a promise made orally to repay the debt, the statute of limitations is two years. (Code Civ. Proc. §339.) If parties enter into a written agreement, the SOL is four years (Code Civ. Proc. §337). When the obligation is the result of recorded restrictions, e.g., an obligation created by CC&Rs, the SOL is five years. (Code Civ. Proc. §336(b), Pacific Hills HOA vs. Prun.) Accordingly, an association has five years to initiate action to collect delinquent assessments. However, if a court views the obligation as a written contract, the SOL is four years.

RECOMMENDATION: There seems to be some uncertainty as to whether the SOL for delinquent assessments is four years or five. Regardless, boards should not be waiting years to collect a debt owed to the association. Uncollected debt is harder to collect the older it gets. Plus, it burdens the membership who must make up the difference in the budget and it skews an association’s financial statement. If it’s bad debt, associations should write it off. If it’s collectable, boards need to pick acollection method and pursue the debt in accordance with the association’s collection policy.

Thank you to Wayne Louvier and Richard Witkin for their input on this question. NOTE: Adams Kessler offers all forms of debt collection. Contact us for more information.

Adopting Rules

Source: Adrian J. Adams Esq. 

QUESTION: Our board sent a notice of rule change without giving the text of the change. They simply stated the parking rules were reworded. It is my understanding the board must provide every homeowner with the exact wording of the new rule.

ANSWER: Your understanding is correct; the board must provide the exact wording.

CC&Rs. Although you asked about rule changes, let’s start with CC&Rs. Unlike Congress where they have to pass it first to find out what’s in it, common sense dictates that members receive and read what they vote on. Under the Davis-Stirling Act, the text of any proposed CC&R amendment must be included with the ballot so people can see what they’re voting for. (Civ. Code §5115(e).)

Rules. When it comes to rule changes, the Davis-Stirling Act requires the text of any proposed change be distributed to the membership at least 30 days prior to their adoption by the board. (Civ. Code §4360(a).) “Text of the proposed change” means exact wording, not a general statement that changes were made.

Possible Exception. In addition to the exception for emergencies
(Civ. Code §4360(a)), if the board is doing nothing more than correcting grammar or renumbering provisions, I don’t believe the 30-day notice period is triggered since the rules are not being changed. Even so, the board must distribute a copy of the “cleaned-up” set along with an explanation of what was done and that no changes were made to the rules.

Unrecorded Deeds

Source: Adrian J. Adams Esq. 

QUESTION: An owner of record sent me an unrecorded deed showing that he put his wife on title. Does an unrecorded deed make his wife a member?

ANSWER: Not necessarily since ownership may not have transferred. At this point, it is impossible for the board to know whether the wife is a member or not.

Membership Defined. As provided for in Civil Code §4160, membership is tied to ownership of a separate interest in a common interest development, e.g., a condominium or lot. Transfer of real property requires the following:

1. It must be in writing;
2. Parties must be properly identified;
3. Parties must be competent to convey and receive property;
4. The property must be sufficiently described to distinguish it from other real property;
5. There must be granting language;
6. The deed must be signed by the conveying party; and
7. It must be delivered and accepted.

Determination. “Delivery” means more than giving someone physical possession of a deed. In the situation you described, the husband must have the intention to immediately pass title to his wife. For all you know, the unrecorded deed is nothing more than a ruse by the husband to get his wife on the board. There are two ways to determine if a valid transfer occurred: (i) a ruling by a court or (ii) a recorded deed. Obviously, a recorded deed is the only practical option for associations to know whether ownership actually transferred.

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.