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I’d Like to Submit a Complaint. . .

Jacquelyn E. Quinn, Esq.

Senior Attorney

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Practices: Community Association Counsel | Commercial CID

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One of the most important roles of a community association board is enforcement of its association’s governing documents, including CC&Rs, Bylaws, and Rules and Regulations. One way a board may become aware of alleged violations of the governing documents is through owner-submitted complaints. In some communities, reviewing owner-submitted complaints can be a full-time job and boards are often left wondering whether they have to address each and every complaint that is received. Boards might decide to streamline this process by establishing an owner complaint process, which details how an owner can submit an alleged violation and what information the board is expecting to accompany a submitted complaint. The following are a few items to consider including when creating an owner complaint process:
    1. Written complaints only. It can be very difficult for a board to respond to a complaint when it’s not in writing, so requiring that all complaints be in writing is helpful.
    2. No anonymous complaints. A board can make reasonable efforts to keep the identity of a complaining owner concealed, but anonymity cannot be guaranteed if an owner requests the board to act.
    3. Details, details, details. Specify what information is expected to be included in the written complaint (i.e. the description of the alleged violation, the section of the CC&Rs or rules that owner alleges was violated, the name (if known), the address of alleged violator, the approximate date and time of the alleged violation, a photo of the alleged violation (if appropriate), names of any witness (if applicable), and any other information the complainant deems relevant for the board’s review).
    4. Next Steps. Specify that the board has the right to elect to not take action on any complaint if, in the board’s sole discretion, there is insufficient evidence of a violation or it is determined that there has been no actionable conduct.
    5. Follow up. Include that the complaining owner will not receive a follow up from the board about any action taken. Owner discipline is a confidential matter that other owners do not have a right to receive information about. A complaining owner may want to know what action the board took in response to their complaint, but they do not have a right to that information. If the board reveals such information, the association may find itself in hot water.
Having a comprehensive complaint process is beneficial as it helps manage expectations. The association’s expectations for owners regarding what information is expected when they submit a complaint, and an owner’s expectations about how their complaints will be handled. Such a process can also minimize the number of meritless complaints a board receives when complainants are required to identify this type information, and sometimes make them realize that the behavior they observed may not actually be prohibited. If you wish to discuss such a policy for your association please consult with your association’s management company and legal counsel.

The Increasingly Complex Board Election Process

By Karyn A. Larko, Esq.

** This article was published on CACM’s The Law Journal– Summer 2024 Issue.

The Davis-Stirling Common Interest Development Act (California Civil Code (“CC”) §§5100-5145) mandates the following board election process for incorporated and unincorporated associations. Failing to comply with this process can lead to owner challenges of the election results and litigation, which in turn can lead to the election being voided, the association paying the challenging owner’s attorney’s fees and court costs, and civil penalties of up to $500 for each violation of the law.

Step 1: Notify members of the nominating procedure

The first step in the election process is to notify the members, via general delivery, of the procedure and deadline for submitting nominations for board election. This notice must be given at least 30 days before the nomination deadline and 90 days before the election.

Step 2: Handle unqualified nominees

If persons who do not meet the association’s candidate qualifications are nominated, the board must offer these persons internal dispute resolution before disqualifying them. The purpose of this meeting is to allow these nominees to qualify or prove they are qualified to run.

Step 3: Appoint/hire inspectors of elections

The board must appoint or hire one or three independent parties to oversee the election (“inspectors”). Inspectors can be association members who are not board members, candidates, or family members of board members or candidates. They can also be professional inspectors or other professionals, provided they, the entity they work for, and any parent entity are not performing any other compensable services for the association.

Step 4: Notify members of the election; create candidate and voter lists

At least 30 days before the ballot mailing, the association must notify members of the following via general delivery:

1) The date and time ballots must be received by mail or handed to the inspector(s);

2) The mailing address for returning ballots;

3) The date, time, and location of the election; and

4) The list of all qualified candidates who will appear on the ballot.

For associations that require a quorum to conduct elections, this notice must also include a statement that the board may call a subsequent meeting at least 20 days after the election date if a quorum is not reached. At that time the quorum will be 20% of the members unless the governing documents provide for a lower quorum.

At least 30 days before the ballots are mailed, the association must also prepare voter and candidate lists. The voter list must contain the name, voting power, address of the separate interest or parcel number, and mailing address for the ballot (if different) for all members. The candidate list must contain the names and addresses of all candidates.

Members are allowed to verify the accuracy of their information on these lists. The inspector(s) must correct errors on these lists within two business days of receiving notice of the mistakes.

Step 5: Ballot mailing

At least 30 days before the voting deadline, a ballot, two balloting envelopes, and the election rules must be delivered to all members. If the election rules are posted on the association’s website, the election rules can be omitted if the ballot includes the following statement in at least 12-point type “The rules governing this election may be found here:___.”

An association can but is not required to include candidate statements in the ballot mailing (unless the bylaws or election rules mandate their inclusion).

Step 6: The election

If a quorum is established, the inspector of elections must open ballots in public at a noticed meeting, and members must be permitted to witness the opening and counting of the votes.

If a quorum is required but not achieved at this meeting, the association may adjourn the meeting to a date at least 20 days after the adjourned meeting, at which time the quorum will be 20% of the members under CC §5115(d)(2). To take this action, the association must notify members via general delivery, at least 15 days prior to the reconvened meeting, of the date, time, and location of the meeting; the names of the candidates; that 20% of the members present, or voting by ballot or proxy (if permitted), will constitute a quorum, and that ballots will be counted if a quorum is reached.

Associations with adjourned quorum requirements lower than 20% should refer to their governing documents for any requirements.

Step 7: Announce election results

The election results must be recorded in the minutes of the next board meeting and provided to the members via general delivery within 15 days of the election.

ELECTION BY ACCLAMATION

If an association meets the requirements of CC §5103 and wants to elect board members by acclamation, the required election process changes in the following ways:

• The notice of the nominating procedure must be provided to members via individual notice at least 90 days before the nominating deadline. It must include the number of positions to be elected, the procedure and deadline for nominations, and a statement that if, at the close of the nominating period, the number of qualified candidates is the same or less than the positions to be filled, the board may elect the candidates by acclamation without a member vote.

• A reminder notice must be provided to members via individual delivery between seven and 30 days before the nomination deadline. This notice must include the same information as the original notice and a list of the names of all qualified candidates as of the notice date.

• Within seven business days of receiving a nomination, the association must send a written or electronic acknowledgment of the nomination to the submitter, and a written or electronic communication to the nominee confirming whether the nominee is qualified to be a candidate. These notices can be combined when a member nominates themself.

• The board votes to seat the candidates at an open session Board meeting. The agenda for this meeting must include the names of all qualified candidates who will be seated by acclamation.

PRACTICE TIPS

  • Include the candidate qualifications in the notice of nominating procedures to reduce the likelihood of unqualified persons being nominated.
  • Send out the notice of nominating procedures more than 90 days before the election so you have time to conduct IDR before the notice of the election and the names of the candidates must be provided to the members.
  • Remember the inspector(s) determine where the ballots are returned and kept until the election. This location can be the association’s management office, but only if the inspector(s) authorizes it.
  • While notices required as part of the election process can generally be provided to members by “general delivery” as defined by CC §4045, the association must provide these notices by “individual delivery” to any members who request individual delivery.
  • Check the bylaws and election rules to determine whether proxies are permitted and, if so, consult with the association’s legal counsel to ensure compliance with any requirements about the use of proxies.
  • Remember that the election rules are required and cannot be amended within 90 days of an election.
  • Provide equal access to the common area, without a charge, to members who want to campaign for or against candidates. If the association allows any candidate or member to use any association media, such as a newsletter or website, to campaign, all members must be given the same opportunity to use that media for campaign purposes.
  • If the association’s bylaws or election rules allow nominations from the floor at the annual meeting or write-in candidates, check with the association’s legal counsel before the election for guidance on what to do if someone who does not meet the qualifications to run for board election is nominated from the floor or as a write-in candidate.
  • It is just as important that the ballot mailing contains all of the information required by California law as it is that the association follows the mandated election process. Please consult with the association’s legal counsel if you are unsure what information must be provided.

 

Diversity, Equity and Inclusion in Community Associations

Susan M. Hawks McClintic, Esq., CCAL

Shareholder

858.527.0111
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Practices: Community Association Counsel | Commercial CID

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DEI is a term you might be hearing and reading about in the news lately.  DEI stands for diversity, equity and inclusion.  DEI is tied to civil rights laws and preventing discrimination in employment and housing based on someone’s characteristics.  In California, the characteristics protected by law include:

Race, color, ancestry, national origin, citizenship, immigration status, primary language, religion, disability (mental or physical), sex and gender, sexual orientation, gender identity or expression, genetic information, age, familial status, source of income, medical condition, marital status, military or veteran status, or citizenship.

At its core, DEI is about providing equal housing opportunities without harassment or discrimination based on these characteristics.

In California housing, including community associations, harassment of someone because of these protected characteristics is prohibited by the law.  Harassment includes verbal, written, or physical conduct that belittles or shows hostility toward an individual on the basis of these characteristics.  If a community association receives allegations of behavior that might constitute harassment the association is obligated to investigate and address any behavior which may be unlawful to the extent the association has the authority to do so in its governing documents.  The behavior may be subtle, rather than overt, and may be an accumulation of seemingly small events that result in someone feeling unwelcome in the community.

If any incidents between community members, residents and guests are reported to the community association, they may not specifically refer to harassment or discrimination.  The person reporting an incident or incidents may not use those specific terms or even be aware they might have harassment or discrimination claims.  Whether the report raises those concerns or not, the association should be aware of the potential for harassment or discrimination to be the basis for the behavior described in the allegations.

When the association receives a claim of an incident between community members, residents and/or guests, the board should determine whether the alleged behavior, if true, is behavior that might violate the association’s governing documents and/or which may be unlawful harassment or discrimination.  If there is insufficient information to make this determination, more investigation may be needed to attempt to verify what occurred and to evaluate whether any enforcement action against the alleged offender is needed.

It is understandable that if faced with allegations of harassment, board members may not feel qualified to investigate and determine whether a neighbor’s alleged harassing conduct was based on discriminationatory factors.  Remember that in many cases, the board may not need to definitively determine whether the alleged conduct was based on discriminatory behavior.  Harassing behavior can be a violation of the governing documents regardless of the reasons for the behavior.

Any investigation should be fair and impartial and appropriate in scope to the allegations made.  This process is similar to any other investigation of violations of the governing documents but the subject matter is likely to be more sensitive and personal than other types of potential violation investigations.  The board and management need to be sensitive to the nature of the complaint and in some situations may want to bring in a third party to perform the investigation particularly if the allegations are made against a board member or manager.

If the allegations are made against a board member or manager, that person should not be part of the group investigating the allegations or be involved in making any decisions as a result of the investigation.  The association’s investigation should be as fair and impartial as possible and, in some situations may be best handled by a third party to try to avoid any claims of bias or favoritism in the investigation process.

At the conclusion of the investigation, the board or committee created by the board to investigate the reported incident(s) will determine what they believe occurred, whether what occurred violates the governing documents and whether to take any disciplinary action or other steps.   (Generally, any unlawful harassment based on the characteristics protected by the law will be a violation of the association’s governing documents.  This should be addressed by the association with its legal counsel.)

The association’s objective is to provide an environment free from harassment and discrimination.  It is important for community association leaders to be able to recognize when a situation might involve unlawful harassment and discrimination and understand the potential role of the community association when situations arise within the community association which may constitute unlawful harassment.  Community association leaders are not expected to be experts in identifying and evaluating unlawful harassment but rather to be aware of circumstances where investigation and expert assistance may be needed.

“May I Buy This Home?” No Duty Owed to Prospective Purchasers

We are often asked by board members or management about an association’s obligation to answer questions posed by prospective purchasers, or to disclose certain documents, upon receipt of an escrow demand. Understandably, association representatives wish to promptly comply with an escrow demand within the time period required by law.[1]  However, it is important to keep a few things in mind when responding to these requests.

Current owners/prospective sellers are obligated to provide prospective purchasers with certain specified documents related to an association before they transfer title to a separate interest.  Civil Code section 4525(a)(1)-(10) lists the documents to be provided to a prospective purchaser by an owner and includes in the list: a copy of all association governing documents, along with nine other groups of documents. These specified documents are often termed “escrow disclosures.” Upon written request, the current owner of a separate interest must provide copies of the specified documents to the prospective purchaser “as soon as practicable” before the transfer of title or the execution of a real property sales contract pursuant to Civil Code section 4525(a).

Note that it is the current owner, not the association, that has the obligation to provide the specified documents under Civil Code section 4525 to the prospective purchaser.

However, common interest developments do not always get off quite so easily when it comes to an escrow demand. Associations are obligated to be part of the escrow disclosure process, by way of Civil Code section 4530. Civil Code section 4530(a)(1) provides:

“an association shall, within 10 days of receipt of a written request, provide the owner of a separate interest, or any recipient authorized by the owner, with a copy of all the documents requested as stated under Civil Code section 4525.”

As such, associations are required to provide a copy of the specified documents to the current owner or their designated recipient (who is often an escrow agent), within 10 days of receiving a written request. Again, notice that there is no obligation under law for an association to provide the requested documents to the prospective purchaser or the prospective purchaser’s representative.

It is important that association representatives are aware of these obligations and do not stray by providing more than what is required in Civil Code sections 4525 and 4530. Also, association representatives should be wary of interacting directly with prospective purchasers or prospective purchasers’ agents or representatives during the escrow disclosure process rather than the current owners/prospective sellers. For example, we are aware that sometimes prospective purchasers will ask associations to interpret existing restrictions in their CC&Rs or other governing documents (e.g., age restrictions or short-term rental restrictions). Questions like, “Is my son age-qualified to reside with me in the community?” or “May I short-term rent my home if I purchase in your community?” are not uncommon.

While an association representative’s instinct may be to answer such questions, we advise our clients to stick to the requirements of the law and only provide copies of the governing documents or other specified document, without analyzing the prospective purchaser’s situation. Remember: the association owes no duty to a prospective purchaser, only to the current owner of a separate interest within the association. Further, the disclosure duties of an association are limited to providing copies of lawfully requested documents as stated in Civil Code sections 4525 and 4530 to a current owner or owner’s designated recipient.

To do otherwise, could possibly subject an association to liability for unlawful interference with a contract to sell real property from the prospective purchaser or seller, in the unfortunate event that the sale of the separate interest goes bad. When an association representative is asked to interpret or explain any portion of an association’s governing documents by a prospective purchaser or even a current owner, the representative should provide a copy of the governing documents (or other specified document listed in Civil Code section 4525) and encourage the prospective purchaser or current owner to consult with their own qualified representatives if they have questions about the meaning of the governing documents.

[1] This article relates only to questions of prospective purchasers and not lender questionnaires.  Associations may also be required under the law to respond to lender questionnaires, in certain instances, but this topic is not covered in this article.

Virtual Board and Member Meetings

Jillian M. Wright, Esq.

Senior Attorney

858.527.0111
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Practice: Community Association Counsel

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Good news for directors and managers who hold virtual meetings but hate the hassles that come with hybrid meetings: you can legally hold solely virtual meetings! Read on for details. Associations have been using virtual video communications platforms like Zoom, GoTo Meetings, and Microsoft Teams for the last few years to hold board and member meetings. This was borne out of necessity as a result of the stay away orders of the COVID-19 pandemic. Boards continued to hold virtual meetings after the pandemic finding them convenient and efficient; more people – members, board directors, management, and vendors – are able to attend board meetings and at a lesser cost to the associations. However, until recently, unless there was a local, state, or federal state of emergency, Civil Code required that an association still provide a physical location for the board meeting to allow members or board directors to physically attend the meeting if they desired to do so (Civil Code section 4090(b)). This led to hybrid meetings where boards held meetings both virtually and at a physical location. While convenient for some, it complicated matters for others as it required enhanced audio visual equipment to allow those attending virtually to hear the members attending in person and increased costs for management’s presence in person or venue rentals. Now, as of January 1, 2024, Civil Code section 4926 allows boards to hold board meetings (and members to hold member meetings) solely by “teleconference”, without a physical location, provided a few conditions are met. Namely, associations planning to hold solely virtual meetings must give specific notifications to members; ensure director votes are cast clearly by roll call vote; allow members to attend by telephone; and protect members’ and directors’ statutory rights to participate. Notification Requirements Associations holding solely virtual meetings must provide notices of the meeting (given in accordance with Civil Code section 4920) which include:
    1. Clear technical instructions on how to participate by teleconference;
    2. The telephone number and e-mail address of a person who can provide technical assistance with the teleconference process, both before and during the meeting; and
    3. A reminder that a member may request individual delivery of meeting notices, with instructions how to do so.
Board Roll Call Vote To ensure the record is clear, Civil Code section 4926 requires that any vote of directors be conducted by roll call vote (Civ. Code section 4926(a)(3)). This means each director’s name should be stated either by the directors themselves or by the president or manager before they vote for, against, or abstain on a motion. Since the directors are required to vote using a roll call, each director’s vote should be noted in the minutes rather than just stating that a motion passed or failed. Member Participation Directors and members need to be given the chance to participate as they would at any meeting held in person (Civ. Code section 4926(a)(2)). This means that members need to be given the chance and capability to speak during the open homeowner forum. All present at the meeting – directors and members alike – need to be able to hear and be heard. However, we note that the board may opt to mute members during those portions of the meeting where the board is conducting board business and members are not permitted to interject. Attendance by Telephone Associations need to give members and directors the option to attend a board meeting by telephone (Civ. Code section 4926(a)(4)). This is usually already offered through the more common virtual meeting platforms. Associations should consider including instructions for muting and unmuting oneself while on telephone in the notice of the meeting. Managers may also want to make an announcement at the beginning of the meeting as to when it is appropriate to unmute oneself and how to do so to avoid those less technologically savvy members from complaining that they are not able to address the board during open homeowner forum. Exception Civil Code section 4926(b) clarifies that while some member meetings may be held solely virtually, those meetings at which ballots are counted and tabulated pursuant to Section 5120 may not be held exclusively by teleconference. Conclusion Holding meetings virtually has its advantages, but associations need to make sure they are conducting such meetings in accordance with the law to avoid members’ challenging the validity of actions taken at such meetings. If you have any questions about the requirements discussed in this article or in the Open Meetings Act generally, we recommend you consult with your legal counsel directly.  

Mastering the Architectural Review Process

By Rhonda R. Goldblatt, Esq.

Reviewing architectural applications is typically part of a community association manager’s bread and butter. However, the architectural review process can be fraught with stumbling blocks, and architectural disputes with homeowners can be drawn-out, expensive affairs. A few practice tips for processing architectural applications are listed below to help master the architectural review process:

1. The clock is ticking. An association’s declaration typically includes a deadline to respond to architectural applications, and may even provide that failing to respond by the deadline deems an application approved. Associations can consider calendaring response deadlines to ensure an application is timely processed.

Note that if an association’s declaration does not include a response deadline, that does not mean the association has unlimited time to respond. Civil Code section 4765 states an association’s architectural approval procedure “shall provide for prompt deadlines. The procedure shall state the maximum time for response to an application or a request for reconsideration by the board.” If an association’s declaration is silent on deadlines, boards can consider adopting architectural rules with that information.

2. Get familiar with Civil Code section 4765. Section 4765 includes other important standards, including the requirement to respond to an application in writing, and providing a written explanation as to why an application was disapproved, along with a description of the appeal process. The law also requires associations to make decisions on an application in good faith, and prohibits making unreasonable, arbitrary or capricious decisions. Further, associations must provide the membership with annual notice of the architectural review process.

3. Pay attention to the special cases. The Civil Code includes special standards for certain proposed improvements, including solar energy systems, electric vehicle (“EV”) charging stations, EV-dedicated TOU meters, accessory dwelling units (“ADUs”), and junior ADUs. Remember that the law prevails over an association’s governing documents in the event of conflict. Boards may want to consider adopting separate policies for processing these types of special applications to ensure compliance with the law.

4. Know thy governing documents. Associations must follow their own procedures, and may face liability for failing to do so. Adopting clear, concise procedures in the first place can help associations stay on the right side of the law. Boards can also consider asking their community association counsel for help drafting those procedures, and/or reviewing the procedures on a regular basis to ensure consistency with the law.

5. Keep a written record. Maintaining well-organized records of architectural decisions can help protect an association from liability in the event of a homeowner challenge. Relying on memory alone can lead to trouble. The members of a board or architectural committee can change, key witnesses can move away, memories fade, and managers can switch accounts.

When in doubt as to how to process an architectural application, remember that you can always consult your friendly community association counsel for assistance.

** This article was published on San Diego Community Insider Magazine – Spring 2024 Edition.

[Podcast] HOA’s Responsibility to Support CLAC with Kieran J. Purcell, CCAL

Don’t miss Epsten, APC attorney and Managing Shareholder Kieran J. Purcell, CCAL’s recent participation on the “HOA – It’s a True Story” podcast hosted b @thegbgroupinc. In this episode, Kieran explains the importance of HOA participation in following HOA legislation. Listen now: https://lnkd.in/ghABQfzP

What’s on your Agenda?

Over the last several months, several questions concerning agendas have resurfaced. For ease of reading, I have listed some of these questions below with a shortened version of my responses.

Please be on the lookout for practice tips on preparing agendas in future publications.

 

Question:

Why do we need an agenda?

 

 

If the Board intends to discuss a matter at a board meeting, the topic must be on the agenda. No worries. A procedure exists for adding certain items to the agenda (discussed below)

 

 

Question:

How much topic detail is necessary on the Open Meeting agenda?

 

 

The purpose of the agenda is to place attendees on notice as to what is going to be discussed during the meeting. It is beneficial to have a well-thought-out agenda. Boilerplate agendas are discouraged. Look at your agenda objectively from an uninformed owner’s perspective. If you read your agenda, you would know what the Board discussed at the meeting. Think of the agenda as a legal document that can be used as a tool to defend the Association. An agenda is also a tool to reference historical matters, such as when the Board approved or considered an item.

 

 

Question:

Should the Executive Session Agenda have the exact details as the Open Meeting Agenda?

 

 

The Board needs to have a clear understanding of what can be discussed in Executive Session (ref. Civil Code section 4935). The Executive Session agenda should tie into what is allowed to be addressed in the Executive Session (e.g., legal matters, personnel matters, member discipline, assessment payment plans, etc.) The Executive Session agenda will have less detail than other meeting agendas, as the items to be discussed may be deemed privileged. For example, if the Executive Session discussion covers collection matters, the owner’s name should be omitted. Similarly, discussions of ongoing or anticipated litigation should be noted in the agenda in general terms. It is a good practice to briefly consult with legal counsel if you have any questions on the description of items to be placed on the Executive Session agenda.

 

 

Question:

Who should prepare the agenda?

 

 

Oddly enough, the law contains little guidance in this matter. While “the board” is ultimately responsible for deciding what goes on the agenda, the law does not state that any particular director or officer may determine what goes on the agenda. Unless there are rational and substantive reasons for rejecting a request from a director to add an item to the agenda, a requested agenda item should be included. Note that the Board determines what to include on the agenda, and there is no procedure for owners to dictate to the Board the agenda for board meetings. In smaller communities, the agenda is typically prepared by the association manager. In larger communities, the agenda is generally prepared by the General Manager in conjunction with a designated board member. In either event, we suggest that a board member (typically the Board Secretary) be appointed to work with the association manager on agenda topics.

 

 

Question:

What do we do if an owner raises a topic outside the agenda at an Open Board Meeting?

 

 

The law allows the Board, among other things, to briefly respond to statements or questions posed by a person speaking at a meeting, ask a question for clarification, make brief announcements, and make a brief report on the Board’s activities. However, unless the item falls into one of the categories listed below, it cannot be added to the agenda for that board meeting.

 

 

Question:

Can we add items to the agenda after it has been published to the Owners?

 

Yes, under certain circumstances (Civil Code section 4930(d)(1)(2)(3)] such as an emergency, where immediate action is needed or where the item appeared on the agenda 30 calendar days before the action is taken and at a prior meeting the item was continued. A board motion and vote must be taken to add the item under the conditions mentioned above to the agenda, and we recommend the minutes of that meeting reflect the motion to add the item and the particular statutory provision that would allow the addition of the item.

 

If you have any questions, please contact a member of our Community Associations legal team.

The Maintenance Matrix: An Incredibly Helpful Tool

One of the perks of living in a common interest development is that maintenance, repair, and replacement responsibilities for various components are divided between the association and the owners.  This means that the expense of maintaining, repairing, and replacing some components are shared across the entire community (or a portion of the community, depending on what your governing documents provide) while the expense of maintaining, repairing, and replacing other components are borne by the individual owners.  These responsibilities can also be split up so that specific maintenance and repair items are the responsibility of the owners while replacement of the item is the responsibility of the association.  Sharing the cost burden of common components can help to ensure that the community is maintained at more uniform level.  However, maintenance, repair, and replacement responsibilities are not one size fits all and vary widely from community to community.

So, how can the board and management know who is responsible for what?

The particulars are found in the community’s governing documents which include condominium plans, tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  There are also statutory defaults found in the law for maintenance, repair, and replacement responsibilities which can be found in Civil Code section 4775, but it is important to note that these statutory defaults do not apply if the CC&Rs provide for a different breakdown of responsibility.

The board and management can review each situation on a case-by-case basis when a determination needs to be made on responsibility.  This will involve reviewing the governing documents for each component as issues arise and may require consultation with the association’s counsel if the documents are ambiguous.  There are two main problems with this approach.  First, these questions often pop up during emergencies and answers need to be ascertained quickly which can lead to unnecessary stress for the board and management.  Second, this can mean that the owners do not understand what their responsibilities are.

Alternatively, if an association has planned ahead, the association’s board and management can turn to their handy dandy maintenance matrix!  A maintenance matrix is a compilation of the maintenance, repair, and replacement responsibilities in a clear and concise chart which depicts the specific assignments for each component.  A maintenance matrix is prepared by reviewing all of the governing documents and the statutory defaults in advance so that it can be referred to when questions arise about responsibilities.

Adopting a maintenance matrix is one of the most effective ways of ensuring that owners, the board, and management understand who is responsible for each component.  Consultation with legal counsel during the process of preparing a maintenance matrix is crucial to help avoid any potential errors in the matrix which can lead to liability.  Carefully examining inconsistencies and discrepancies up front can save the association time and money down the road.

Maintenance matrices may be adopted as an operating rule in accordance with Civil Code section 4360 or can be adopted as part of the CC&Rs through an amendment or restatement.  The benefit of adopting a maintenance matrix as a rule is that the maintenance matrix can be adopted by the board at an open meeting after considering any comments made by the membership during the membership’s twenty-eight (28) day comment period.  There is no need for a membership vote if the matrix is adopted as an operating rule.

However, the board may not use a maintenance matrix that it has adopted as an operating rule to make any changes to the maintenance allocation that conflicts with the CC&Rs.  You cannot use it as a wish list.  Civil Code section 4205 establishes the statutory hierarchy of governing documents of common interest developments – law, condominium plans/tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  If there is a conflict between the CC&Rs and one of the sources below the CC&Rs in the hierarchy, the CC&Rs will prevail.  If the maintenance matrix is adopted as an operating rule, it cannot be used to override the CC&Rs given this statutory hierarchy.

Adopting a maintenance matrix as an amendment to the CC&Rs or as part of a restatement of the CC&Rs will allow the association to make changes to the maintenance, repair, and replacement responsibilities.  Amendments to the CC&Rs and restatements of the CC&Rs require membership approval – often the approval of a supermajority – which sometimes can be difficult to achieve given membership apathy.  However, adopting a maintenance matrix through an amendment to the CC&Rs or restatement of the CC&Rs is the best method.

Once a maintenance matrix is adopted or approved by the Board (or the membership, depending on whether a membership vote is required), it can be used by owners, the board, and management to determine maintenance, repair, and replacement responsibilities and can essentially serve as the association’s cheat sheet.

If your association is considering creating a maintenance matrix, your board should contact your association’s legal counsel for assistance in preparing or reviewing the matrix prior to implementation.

Mum’s the Word When Disclosure Leads to Breach of Fiduciary Duty

By Karyn A. Larko, Esq.

It is common knowledge that a director has a fiduciary duty to his or her association and its members.  To be a fiduciary means that the director has accepted the highest duty imposed by law.  This duty obligates the director to act:

    1. In good faith;
    2. In a manner such director believes to be in the best interests of the Association; and
    3. With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

This duty also obligates the director to place the interests of the association and its members as a whole over the director’s personal interests in the event these interests conflict.  This duty is referred to as the duty of loyalty or duty of undivided loyalty.

What may be less known is that one of the most common breaches of fiduciary duty is the disclosure by a director of information that should be kept confidential.

The disclosure of information that should be kept confidential can give rise to both a breach of a director’s duty of care and duty of loyalty.  In accordance with Civil Code section 4935, certain matters are discussed out of earshot of the members in executive session board meetings (i.e., discussions pertaining to personnel issues, the formation of contracts with third parties, litigation and potential litigation, disciplinary actions against members and member assessment issues).  Each of these issues requires the discussion of matters that if made public (i.e., disclosed to any persons other than current board members and management, including other owners) could needlessly and unnecessarily embarrass an owner or employee, compromise the association’s legal position in a dispute, result in the waste of association funds, lead to a claim that an owner’s privacy rights have been breached, or otherwise result in an unfavorable position for the association.  All of these results could lead to litigation and ultimately, to liability for the association.

Another act that is contrary to the interests of an association and damaging is the disclosure of association attorney-client privileged communications (i.e., legal advice) to third parties.  Communications between an association’s legal counsel and the board or management staff are subject to the attorney-client privilege.  This means these communications are protected communications that can be kept confidential from any disclosure, including disclosure during litigation.  In the litigation context, this protection is extremely important as it allows frank and open communication between the board and/or management staff and the association’s legal counsel as to what occurred and the strengths and weaknesses of the association’s position with regard to the claim or claims being made.  This protection also enables the association’s legal counsel and board to properly evaluate what course of action the association should take.

When communications between an association’s legal counsel and board or management  are revealed to others, including owners who are not on the board and family members, this disclosure can result in a waiver of the association’s attorney-client privilege.  This means that the association may be required to disclose all of the communications between the association’s legal counsel and the board or management, including without limitation, communications regarding the strengths and weaknesses of the association’s position and its legal strategy.  The disclosure of this information would, inevitably, be extremely prejudicial to the association’s interests.

A final act that is contrary to the interests of an association is the disclosure to persons other than board members of other sensitive information or documents that could expose the association to potential liability.  Examples of such information and documentation include the release of social security numbers, owner bank account numbers or other financial information, owner or resident health records, owner disciplinary records, plans and specifications for owner alterations (including security systems), vendor bids and proposals and confidential settlement agreements.  It should be noted that this list is by no means all encompassing.

The Significance of Disclosing Information that Should be kept Confidential

As stated above, the disclosure of information that should be kept confidential can lead to liability for the association.  It can also lead, in some cases, to personal liability for the director who discloses the information.  We say this because while California law generally protects volunteer directors from liability for their acts when those acts fall within the scope of their duties as a director, subject to certain requirements being met, this protection does not extend to instances where directors have breached their fiduciary duty to the association and its members.  Likewise, while the governing documents for many associations contain clauses protecting directors from liability, California law (i.e., Corporations Code section 204(a)(10)) expressly invalidates these clauses to the extent they attempt to protect directors from personal liability for breaching their fiduciary duty.

Finally, it is important to know that most directors and officers policies contain an exclusion whereby there is no coverage for a director who has breached his or her fiduciary duty.  Further, some carriers will issue a reservation of rights letter when asked to defend a breach of fiduciary duty claim.  This means that if the director is ultimately found by a judge or jury to have breached his or her fiduciary duty, the carrier is entitled to recover its defense costs from the applicable director.

 

PRACTICE TIPS:

  • When in doubt, do not share information with persons outside of the board and management without first checking with your association’s legal counsel on the advisability of doing so.
  • If participating in a telephonic or video executive session board meeting, do so in private. Do not allow family members or other persons to listen in on executive session meeting discussions.
  • Do not use phrases like “according to our attorney” or “on the recommendation of our attorney” when communicating with persons outside of the board and management as the use of such phrases could be deemed a waiver of the association’s attorney-client privilege.