Board Meetings

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Board Meetings Defined

Board “meetings” are defined in Civil Code section 4090[1] and must be open to members with limited exceptions for executive sessions (Civ. Code §§ 4090, 4900-4935.)

Board Action Not Permitted Outside of Board Meetings

Board meetings may not be conducted by email or other electronic transmissions except when very limited special criteria are met. (Civ. Code § 4910.)  Teleconferences are permissible, but everyone, including owners present, must be able to hear one another. (Civ. Code § 4090.) (See footnote 1.)

Executive Session Matters Noted in Minutes

Any matter discussed in executive session must be generally noted in the minutes of the immediately following meeting that is open to the entire membership. (Civ. Code § 4935(e).]

Notice of and Agendas for Board Meetings

Except for an emergency meeting and unless the bylaws provide for a longer time period, the association must give notice to members of board meetings at least four (4) days before an open meeting and two (2) days before an executive session. The board must post the agenda for the meeting with the notice. Notices of Board meetings may be given by “general delivery” as described in Civil Code section 4045. (Civ. Code § 4920.) The board may not consider items not listed on the agenda except for specified “emergencies.” See Civil Code section 4930 for details. However, the association must send notice by “individual delivery” as described in Civil Code section 4040 to any member who requests notice of board meetings by “individual delivery.” This may include delivery by email or other forms of electronic delivery if the member consents. (Civ. Code § 4045(b).)

Notice to Directors of Special Board Meetings

Special board meetings require four days’ notice to directors by first-class mail or 48 hours’ notice delivered personally or by electronic communication as defined in the Corporations Code. (Corp. Code §§ 20 & 7211.)

Emergency Board Meetings

Emergency board meetings, without required prior notice, are available only as specified in the law. (Civ. Code § 4923.) In an emergency, try to give the best notice possible under the circumstances. Even for an emergency that meets the statutory criteria, an open meeting must still be open for owners.

Board and Member Meeting Minutes

Minutes of member meetings and open board meetings must be made available to members as provided in our “Membership Rights Checklist.”

Board Agenda Required for Discussion and Action

Except as otherwise described in Civil Code section 4930 (b)-(e), the board may not discuss or take any action on any item at a nonemergency meeting unless the item was placed on the agenda.  Notwithstanding this requirement, the board may take action on any item of business not appearing on the agenda if concern conditions are met.  (See Civil Code section 4930(d) for more details.)

 

[1] “Board meeting” means either of the following:

(a) A congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board.

(b) A teleconference, where a sufficient number of directors to establish a quorum of the board, in different locations, are connected by electronic means, through audio or video, or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the association and otherwise complies with the requirements of this act. Except for a meeting that will be held solely in executive session, the notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend, and at least one director or a person designated by the board shall be present at that location. Participation by directors in a teleconference meeting constitutes presence at that meeting as long as all directors participating are able to hear one another, as well as members of the association speaking on matters before the board. (Civ. Code § 4090.)

Annual Disclosures, Mandatory

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  1. Annual Notice of Owner Information.

At least 30 days prior to the association mailing its required annual budget report and annual policy statement, an association must update certain owner information in its records.  [CC §4041(b)] To obtain this updated information, an association must solicit the following information from the owners: (1) the address(es) to which association notice are to be delivered; (2) an alternate or secondary address to which association notices are to be delivered; (3) the name and address of the owner’s legal representative, if any, including any person with the owner’s power of attorney or other person who can be contacted in the event of the owner’s extended absence from the separate interest; and (4) whether the separate interest is owner-occupied, rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.  [CC §4041(a)] For mixed-use associations where a portion of the association is subject to a time-share plan, the association must annually obtain from the time-share plan association a copy of the list of owners’ names and addresses and enter that information into its records. [CC§4041(d)] If an owner fails to provide their primary and alternate secondary address, if applicable, the last property address provided in writing by the owner, or if none, the property address within the association community shall be deemed to be the address to which association notices are to be delivered. [CC §4041(c)]

  1. Annual Budget Report.

Between 30 and 90 days before the new fiscal year begins, an association must prepare an annual budget report (“Report”) and distribute it to the owners. [CC §5300(a)] [As an alternative to distributing the full Annual Budget Report under CC §5300 or the Annual Policy Statement under CC §5310, the association may distribute only a summary of the items required by CC §5300 or CC §5310 [CC §5320. However, the members must be given a notice, in at least 10-point boldface type on the front page of each summary with instructions for how a member can request a complete copy of either report at no cost to the member. If a member requests a copy of the full report required by CC §5320, the association must mail a copy to the member presumably as provided for “individual delivery” under CC §4040.] Compliance with this requirement, except for the summary of the reserve funding plan required by CC §5300(b)(3) is necessary for associations to utilize the 20%/5% assessment increase provisions described, paragraph a, below. [CC §5300(b)(1)] This report must contain the information below. See the respective statutes for details.

  • Annual Budget. The Report must include an annual budget prepared on an accrual basis. [CC §5300(b)(1)]
  • Reserve Summary. The Report must include a summary of the association’s reserves in boldface type and include the many details described in the statute [CC §§5300(b)(3) & 5565] and must disclose reserve study information in a specified format. [CC §§5300(e) & 5570] Where a community service organization (CSO) maintains major components of the association, the CSO must provide the association with information to do the reserve study. [CC §5580] Reserves include any funds received and not yet expended from a settlement or damage award arising out of any claim for construction or design defects. [CC §4177] Each association must report, as separate line items, either in the reserve study or in the annual review or audit, the amount of any such defect funds that have not yet been expended, and the expenditure or disposition of such funds, including any amounts expended for the direct or indirect costs for repairing construction or design defects. [CC §5565(b)(3)]
  • Reserve Funding Plan Summary and Full Reserve Study. The Report must include a summary of the reserve funding plan adopted by the Board [CC §5550(b)(5)] and include notice to members that the full reserve study, including the reserve funding plan, is available to members and that the association must provide it upon request. [CC §5565(b)(3)]
  • Statement of Decision(s) to Defer Repairs. The Report must include a statement of whether the board has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years of less, including a justification for the decision [CC §5300(b)(4)].
  • Statement of Possible Levy of Special Assessments. The Report must include a statement of whether the board has determined or anticipates the need to levy one or more special assessments to repair, replace, or restore any major component or to provide adequate reserves for doing so [CC §5300(b)(5)].
  • Statement of Method(s) for Funding Reserves. The Report must include a statement of the mechanism(s) by which the board will fund reserves [CC §5300(b)(6)].
  • Statement of Procedures Used to Calculate and Establish Reserves. The Report must include a statement addressing procedures used for calculation and establishment of reserves. The statement shall include reserve calculations made using the formula described in paragraph (4) of subdivision (b) of CC §5570, and may not assume a rate of return on cash reserves in excess of 2 percent above the discount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made [CC §5300(b)(7)].
  • Statement of any Outstanding Loans. The Report must include a statement of whether the association has any outstanding loans with an original term of more than one year. See statute for details. [CC §5300(b)(8)].
  • Summary of Insurance Policies. The Report must include a summary of the association’s (1) property, (2) general liability, (3) earthquake, (4) flood insurance and (5) fidelity policies, listing the carrier’s name, type of insurance, policy limits for each type and the deductibles. If the policy declaration page includes the required information, the association may use the declaration The Report must also include verbatim disclaimer language specified by the statute in at least 10-point bold type. [CC §5300(b)(9)] It may be worth adding to the insurance disclosures that the association policy (usually) does not cover alternate housing, moving and storage expenses, nor loss of owner’s personal property from fire and other losses, nor cover the owner’s liability for injuries on or in the owner’s separate interest.
  • Statement of FHA Certification Status by Condominiums. If the HOA is a condominium, the Report must contain a verbatim statement about whether the development is a condominium project and whether it is FHA certified. [CC §5300(b)(10)]
  • Statement of VA Certification Status by Condominiums. If the HOA is a condominium, the Report must contain a verbatim statement about whether the development is a condominium project and whether it is VA certified.  [CC §5300(b)(11)]
  • A Copy of Completed Charges for Documents Provided Disclosure. The Report must include a completed “Charges for Documents Provided” disclosure as described in CC §4528.  For purposes of the Report a “completed” “Charges For Documents Provided” disclosure means that the “Fee for Document” section of the form individually identifies the costs associated with providing each document listed on the form. [CC §5300(b)(12)]
  1. Issues Related to the Annual Budget Report
  • Assessment Limits. Without obtaining the approval of a majority of a quorum of members, pursuant to CC §4070, at member meeting or election, associations may not increase in regular assessments 20% above the regular assessment for the prior fiscal year and total special assessments at a rate of more than 5% of the association’s budgeted gross expenses during a given fiscal year. [CC §5605] Unless the association levied assessments based on taxable value in accordance with its governing documents before December 31, 2009, it may not do so thereafter, except where the association pays taxes on the separate interests and then only with respect to the taxes levied [CC §5625].
  • Increase in Assessments Disclosure. Associations must send notice of any increase in regular or special assessments, by individual notice, 30 to 60 days before the due date for the increase [CC §5615] and notify prospective purchasers of increases that have been approved but are not yet due. [CC §4525(a)(8)]
  • Detailed Reserve Study. At least every 3 years, conduct a reasonably detailed and competent visual inspection of the accessible components the association must maintain, repair, replace, or restore as part of a study of the association’s reserve account requirements (if the replacement cost of the components the association must maintain is at least one-half of the association’s fiscal budget for the last 3-year period, excluding reserves). Consult the statute for many detailed requirements. [CC §5550)]
  • Annual Reserve Study Adjustments. At least annually, review the reserve study and make any necessary adjustments. [CC §5550]
  • Reserve Procedures. In reserve studies, associations may not assume a rate of return in excess of 2% higher than the discount rate from the Federal Reserve Bank of San Francisco. [CC §5300(b)(7) & 5570]
  • Reserves Used for Litigation Expenses. At least quarterly, if the board uses any reserve funds to pay expenses for any litigation, make an accounting of all litigation expenses and make it available for inspection at the association’s office. Give the members written notice of (1) any decision to use reserves to pay for such litigation expenses and (2) the location of the accounting that is available for their inspection. [CC §5520; Corp. Code 5016]
  • Directors and Officers (D&O) Insurance. To obtain exemption from personal liability for volunteer directors, purchase both general liability and directors and officer’s liability insurance. The amount must be at least $500,000 for associations consisting of up to 100 separate interests and $1,000,000 for those associations consisting of more than 100 separate interests. [CC §5800]
  • Commercial General Liability (CGL) Insurance. If the association contains any property owned in common by the owners, then to prevent suit and joint and several liabilities against individual owners the association must purchase general liability coverage of $2,000,000 for associations consisting of 100 separate interests or fewer and $3,000,000 for those with more than 100 separate interests. [CC §5805]
  • Workers Compensation Insurance. Be sure that you have workers compensation insurance for employees and pay taxes withheld from employees pay when due.
  • Fidelity Bond Coverage. Associations are required to maintain fidelity bond coverage for its officers, directors and employees in an amount that is equal to or more than the amount of the association’s reserves plus total assessments for three months. The fidelity bond must also include computer fraud and funds transfer fraud. If your association uses a managing agent or a management company, your association’s fidelity bond coverage must be separate from the fidelity bond of the management company or managing agent and must also include dishonest acts by that person, entity and its employees. [CC §5806]
  • Notice to Members of Insurance Lapse, Non-renewal or Cancellation. Associations must also give “individual notice” to all members under CC §4040 of any lapse, non-renewal, or cancellation of coverage, or if there is a significant change in coverage, such as a reduction in coverage or limits or an increase in deductibles. If an association receives a nonrenewal notice for an insurance policy described in the annual budget report, then such association must immediately notify the membership if replacement coverage will not be in effect by the date the existing coverage lapses. [CC §5810] Carriers must provide a reason for any non-renewal of a policy. [Ins. Code §678].
  1. Annual Policy Statement.

Between 30 and 90 days before the new fiscal year begins, an association must distribute an annual policy statement to provide information to members about association policies. [CC §5310(a)] This report must contain the information below. See the respective statutes for details.

  • Official Communications to Association. The name and address of the person designated to receive official communications to the association as provided in CC §4035. [CC §5310(a)(1)]
  • Second Member Address. A statement explaining that a member may submit a request to have notices sent to up to two different specified addresses under CC 4040(b). [CC §5310(a)(2)]
  • Place for Posting a General Notice. The location, if any, designated for posting of a general notice under CC §4045(a)(3). [CC §5310(a)(3)]
  • Option to Receive Member Notices by Individual Delivery. Notice of a member’s right to receive general notices by individual delivery as provided in CC §4045(b). [CC §5310(a)(4)]
  • Right to Receive Meeting Minutes. Notice of a member’s right to receive copies of meeting minutes as provided in CC §4950(b). [CC §5310(a)(5)]
  • Assessment Collection Policies. The statement of assessment collection policies required by CC §5730. [CC §5310(a)(6)] This is the lengthy verbatim statement set forth in CC §5730 describing an association’s collection rights that must be printed in at least 12-point type. [CC §5730]
  • Policies for Enforcing Lien Rights. A statement describing the association’s policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments, in other words, its own “Collection Policy.” [CC §5310(a)(7)] The board must also notify the owners of the standards for payment plans, if any exist. [CC §5665(a)]
  • Association Discipline Policy. A statement describing the association’s discipline policy, if any, including any schedule of penalties for violations of the governing documents as provided in CC §5850. [CC §5310(a)(8)]
  • Summary of Dispute Resolution Procedures. A summary of dispute resolution procedures as required by CC §§5920 (IDR) and 5965 (ADR). [CC §5310(a)(9)]
  • Requirements for Architectural Approvals. A summary of any requirements for association approval of a physical change to property as provided in CC §4765, including the types of changes that require association approval and a copy of the procedure used to review and approve or disapprove a proposed change. [CC §4765] [CC §5310(a)(10)] If the governing documents require association approval of architectural changes, the association must provide a fair, reasonable and expeditious process for making architectural decisions. Associations may not impose fines or assessments against members for reducing or eliminating the watering of vegetation or lawns during any period for which the Governor or a local government has declared a state of emergency due to drought conditions. Governing document architectural requirements may not conflict with the water conservation requirements in CC §4735. They may no longer prohibit, or have the effect of prohibiting, artificial turf or other artificial surfaces resembling grass. [CC §4735]. Owners may use a “clothesline” or “drying rack”, as defined in the law, for drying clothes in the owner’s “backyard” (not defined). [CC §4750.01] Associations can no longer establish a general policy prohibiting the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which an owner resides or a garage or carport adjacent to the building that has been assigned to an owner for his/her exclusive use.  [CC §4746]
  • Mailing Address for Overnight Payment. The mailing address for overnight payment of assessments as provided in CC §5655. [CC §5310(a)(11)]
  • Other Required or Optional Information. Any other information that is required by law or the governing documents. For items that require disclosure and that you may wish to include at the end of the Annual Policy Statement, see the paragraph, below, entitled “Other Mandatory Disclosure the Board May Wish to Disclose with the Annual Budget Report and Annual Policy Statement.” Some of these may require disclosure in a place other than the Annual Policy Statement. For optional items you may consider important to disclose to members but that may not be mandatory, also see the paragraph, below, entitled “Optional Disclosures the Board May Wish to Make with the Annual Budget Report and Annual Policy Statement.” [CC §5310(a)(12)]
  1. Issues Related to the Annual Policy Statement
  • Document Delivery Methods. The Board may deliver documents in any manner provided in CC §§4040 & 4045. [CC §§4040 & 4045]
  • Right to Annual Financial Report. The board must notify members (of incorporated associations) annually of their right to obtain an annual financial report upon written request. This report is similar to the auditor review required by CC §5300(b)(3), but it applies to corporations that have as little as $10,000 in gross annual receipts. [Corp. Code §8321]. Presumably the requirements of CC §5300(b)(3) are more extensive and control over Corp. Code §8321.
  • Monetary Penalty or Fine Disclosures. The board must distribute to all members any schedule of the monetary penalties adopted by the board to discipline members, whether committed by the owner, or the owner’s guests or invitees. The board must distribute it by individual delivery as provided in CC §4040. The board needs to do this only once per year pursuant to CC §5310(a)(8), although it must redistributed, if there are any changes. [CC §5850]
  • IDR and ADR Disclosures. Associations must have some procedure for informal, internal attempts to resolve disputes between the association and an owner. [CC §5900-5920] The board must also disclose its IDR (Internal Dispute Resolution) procedures in the annual policy statement. [CC §5920] If the board does not adopt its own IDR procedures, the statute contains default procedures in CC §5915 that will apply. Attorneys may assist either an association or a member at both ADR and IDR proceedings. [CC §§5910 & 5915] Associations must also include in the Annual Policy Statement at least a summary of the ADR (Alternative Dispute Resolution) procedures used under CC §5925-5965. It must contain the verbatim language found in CC §5965(a). This summary must also be disclosed in the annual policy statement. [CC §5965].
  1. Other Mandatory Disclosures the Board May Wish to Disclose with the Annual Budget Report and Annual Policy Statement
  • Preparation of an Annual Audit or Review. This statement or disclosure is not required, but it should help to alert the board of the need to get this task done within 120 days after the end of the fiscal year. An association must prepare at least a “review,” or possibly an “audit” if required by the governing documents, if its gross income for the year is $75,000 or more. [CC §5305]. The review or audit must be distributed to members by individual delivery within 120 days after the close of the fiscal year. If an incorporated association has at least $10,000 in income for the year, it must provide at least the information required by Corporations Code §8321 within 120 days after the end of the fiscal year. Also, if there are any disclosures required by Corp. Code §8322 (such as information about material financial interests, loans, guarantees, indemnifications, etc.) involving officers and directors as required by Corporations Code §8322, that must be disclosed annually as well.
  • Asbestos Disclosures. Under Health & Safety (H&S) Code Section 25915.2, associations must give or post notice about any asbestos known to exist in the project. See footnote 16 in CC §4525. [H&S Code §25915.2] Annual written notice and/or signs on the premises may be required to be posted. You should consult with legal counsel for assistance in preparing this disclosure for compliance with the requirements of the H&S Code.
  • Disclosure and Accounting of Reserves Borrowed for Litigation. When the Board temporarily borrows reserve funds to pay for litigation under CC §5510(b), the association must make an accounting of expenses related to the litigation on at least a quarterly basis. The accounting must be made available for inspection by members of the association at the association’s office. [CC §5520] A statement to this effect is not required, but if an association discloses this, it is more likely to do the accounting each quarter.
  • Rental/Lease Restriction Disclosures. If an association’s governing documents prohibit the rental or leasing of any separate interest to a renter, lessee or tenant [CC §4740], an owner is required to disclose this to prospective purchasers [CC §4525(a)(9)], but the association is required to provide that information to the owner on request to provide to the prospective purchaser. [CC §4528]. If the information is disclosed with the annual disclosures, the annual disclosures and budget documents are part of the documents that a prospective purchaser is required to be given.
  • Disclosure of Senior Community (55+) Status. This option is required by CC §4525(a)(2) only if there are differences between the CC&R requirements and the requirements of CC §51.3. While not specifically required for the annual policy statement, this disclosure is required if a prospective purchaser requests documents and disclosures for escrow as required by CC §4525(a)(2), AND if there is any difference between the CC&R provision on senior housing and the senior housing requirements in CC §51.3. There may also be some differences if an association is a mobile home community (that is subject to the Federal Fair Housing Act) or an association in Riverside County (that is subject to CC §51.11). Obviously the association must be a senior (55+) community in the first place. By including the disclosure in escrow packages as part of the annual budget disclosures, it helps to ensure that this disclosure will be distributed to the prospective purchaser under CC §5300 as required by CC §4525(a)(3). It is probably helpful to have a disclosure that the association is a senior community as part of the annual budget package that would go to a prospective purchaser who requests the documents, including the annual disclosures, under CC §4525.
  • Community Service Association Disclosure. Include this section only if there is a community service organization whose funding comes from the association, and it exceeds 10% of the association’s annual budget. [CC §5580] It is likely to apply to few associations. The association can disclose that it is subject to the disclosure requirements of the law, but it also needs to prepare and provide the accounting described in CC §5580 when it is required.
  • Emergency Preparedness and/or Evacuation Plans. Mobile home communities [H&S Code §§18603 & 18871.8] and high-rise buildings [H&S §§13210-13234] are required to have emergency preparedness and/or evacuation plans. Such associations may also wish to include them in their annual policy statements. However, there are other requirements, such as posting these in conspicuous common areas or conspicuous areas of a high rise, as required by the applicable statutes.
  • Any Other Disclosures that May be Required by Law or the Governing Documents. An association may include any other disclosure in its annual policy statement that is required by law or the governing documents.
  1. Optional Disclosures the Board May Wish to Make with the Annual Budget Report and Annual Policy Statement.
  • Architectural Modifications or Other Accommodations Made for Persons with Disabilities. This is an optional disclosure, but it is helpful for some associations. Such a disclosure would inform owners that they may observe some architectural changes or some other apparent violation of the association’s governing documents, but the changes or other apparent “violations” are actually “accommodations” that were permitted to enable the association to comply with state and/or federal fair housing laws requiring accommodations to be made for persons with disabilities. This disclosure can point out that these may be needed to give disabled residents an equal opportunity to use and enjoy the premises. This disclosure also can point out the many different types of disabilities may require many different types of accommodations. However, owners should recognize that this does not mean the association is lax about enforcing community standards and rules. Rather it is mindful of its legal duty to comply with disability protection laws.
  • Distribution of Mailing List to Owners. An association is required by CC 5200(a)(9), under the circumstances covered by the statute, to provide members with the name, property address, and mailing address of all members. However, association members may opt out of sharing their contact information by notifying the association that the member prefers to be contacted via the alternative process described in Corporations Code §8330(c). CC §5200(a) does not require this disclosure, but it may be useful for owners who wish to opt out of providing their name and other contact information to an owner who requests and is entitled to the information on the membership This disclosure would inform owners of their right to opt out, but if some do opt out, it will not exempt them from receiving the materials. It probably requires the association to disclose to the requesting party that X owners opted out, and if the requesting party wants to distribute information to them, the requesting owner will need to provide sealed and stamped envelopes with the return address of the sender, and the association will have to add mailing labels to mail out that information to those specific owners.
  • Security Disclaimer by Gated Communities and Associations with Locked Entry Doors, Security Cameras or Patrols. Associations may wish to consider a disclaimer to state explicitly that owners are ultimately responsible for their own security, and the fact that there may be gated entries, staffed entry gates, periodic patrols, the use of security cameras, etc., do not provide a guarantee of security on which any residents may rely.
  • Requirements for Owners to have Smoke and Carbon Monoxide Detectors in their Units. These are not mandatory disclosures, but they are important to remind owners about smoke detectors and carbon monoxide detector requirements, and some HOA insurance companies are also requiring the associations they insure to provide written notice to owners about these obligations. Owners are required by law to have operational smoke detectors and carbon monoxide Carbon monoxide detectors were required by July 1, 2011, in most single-family dwelling units with a fossil fuel-burning heater or fireplace. The deadline was January 1, 2013, for all other dwelling units intended for human occupancy. [H&S Code §§17926-17926.2] Also, smoke alarms have been required as far back as January 1, 1986. [H&S Code §13113.8).] Associations may wish to remind owners that it is common for many detectors to last no longer than 10 years, to test their detectors regularly, to follow the manufacturer’s instructions about replacement and to replace them when their useful life ends.
  • Water Shutoffs. It may be helpful to identify the location of all water main shutoffs in association buildings to be sure everyone knows where they are. This information is critical to find a shutoff to stop a major pipe leak or a fire sprinkler that is accidentally damaged or fails. This is important even if all residents are one floor and even more so if the association has a building that is two or more stories high.
  • Any Other Disclosures that an Association May Wish to Add. An association may add any other information in this section that it believes is appropriate.

SB800 and Governing Documents Checklist

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Notice to Members and Informational Meeting

  • Notice to members required at least 30 days before filing a civil action against developer
  • Notice must include:
    • Time and place that a meeting will take place to discuss problems impacting association
    • Potential impacts to community, including potential financial impacts to association and its members. This can include impact of claims on sales; attorney fees, expert and other costs; raising funds through assessments and reserves
    • The options, including civil actions, that are available to address the problems
  • If the association has reason to believe an applicable statute of limitations will expire, it may give notice of this meeting within 30 days after filing of a civil action
  • Some governing documents may suggest a membership vote is required prior to initiating any legal action against a declarant entity. Generally, these provisions are void and unenforceable if drafted by the declarant. Such provisions may be enforceable if adopted by the non-declarant members of the association.

Information Typically Required for Meetings Through Governing Documents

  • Impact of claims on sale
  • Attorney fees, expert and other costs
  • Raising funds through assessments and reserves
  • Potential parties
  • Description of process to pursue claims

Documents to Have Prepared and Ready when Sending Notice to Builder

  • Meeting Minutes
  • Maintenance Manual reports
  • Maintenance Records
  • Budgets, reserve studies for 10 years
  • Communications with members?

Community Association Transition to Owner Control Checklist Construction

  • Manufacturer warranties (HVAC, elevators, windows, lift gates, pool equipment, exterior cladding, key fobs, security)
  • Manufacturer recommended maintenance schedules and instructions
  • Building plans and permits; notices of completion or occupancy
  • Location of key components (water, gas, irrigation valves and shut off) and information concerning all fire safety and other emergency systems
  • Owner and Association Maintenance Manual
  • List of contractors and contact information
  • Inventory of Association real and personal property

Legal Documents

  • Everything recorded (CC&Rs, easements, maps), Bylaws, CC&Rs, Rules
  • Architectural requests, approvals, denials; meeting minutes
  • Insurance policies
  • Release of mechanics liens; lawsuit documents
  • Records from Department of Real Estate (or “BRE”)
  • Assessment and Construction Bonds
  • Leases
  • Senior Housing Compliance documents

General Timeline to Bring Claims

(Each case varies with the applicable facts)

For an association, the time to bring claims can begin to run from a number of different dates, including, the date of substantial completion of the building or building component (as defined by code) or the date the declarant relinquishes control over the decision to initiate a claim (this can have various meanings, including the date a homeowner becomes a director, the date homeowners become the majority on the Board of Directors, or some governing documents define a specific date based on the association’s annual meeting). Below is a list of some of the statutory deadlines for the major components. Consult with legal counsel to determine which statutory deadlines may apply to your claims.

1 year          Irrigation systems, drainage, manufactured products, noise (from occupancy of adjacent unit)

2 years        Dryer ducts, landscaping systems, untreated wood posts

4 years        Exterior pathways, driveways, hardscape, sidewalks, patios, (certain) plumbing and sewer system issues, (certain) electrical systems, untreated steel fences

5 years        Paint, stain

10 years      Other components including decks, balconies, tiles, stucco, framing, foundations, (other) plumbing and sewer lines, roofs, soils, structural, windows

Notice to Members of Settlement

If a settlement agreement is entered into between the Association and the builder, notice must be sent to the members of the association as soon as reasonably practicable. This notice to the members must include a general description of the defects that the association reasonably believes will be prepared, a good faith estimate of when the repairs will be completed, and the status of any defects that were identified in the association’s preliminary defect list that are not included among the anticipated repairs. This notice may be amended periodically to keep members apprised of the status as repairs are made, or more information is obtained.

Developer Transition Checklist

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Necessary Documents

☐  Developer Maintenance Agreement(s)

☐  Subsidy Agreement(s)

☐  DRE Budgets

☐  Verify receipt of all recorded documents affecting property

☐  Obtain executed copy of Bylaws and filed Articles of Incorporation

Developers Participation on the Board

☐  Determine Board approved directors and terms

☐  Verify required number of non-developer owners to be elected

☐  Track first and subsequent annual meeting dates

☐  Obtain all Board meeting minutes and corporate minute book

☐  Establish Architectural  Committee

Architectural Control

☐  Who is in charge… sales office, construction, superintendent, management?

☐  Retain consultant

☐  Establish tracking procedure

Turnover Walk-Throughs

☐  Determine annexable area

☐  Create punch list during walk-through

☐  Determine maintenance periods

☐  Establish utility transfers/notify insurance carriers

☐  Obtain warranty information

☐  Turnover letters/bond releases

Review/Creation of Association Contracts During/After Transition

☐  Attorney

☐  Management

☐  Insurance

☐  Utilities (including cable/internet)

☐  Landscaping

☐  Pest Control

☐  Janitorial

☐  Courtesy Patrol/Parking Enforcement

☐  Utilities (Cable/Internet)

Employment Law Duties

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Associations that have their own employees have numerous obligations for compliance with state and federal labor laws and regulations. The checklist items in this section mention only a few specifics. Seek legal advice to be sure your association complies with all employment laws. We cannot include all of the employment related duties in this publication. However, we have included some important duties:

Workers Compensation Insurance

Be sure that you have workers compensation insurance for employees and pay taxes withheld from employees pay when due. Most insurance professionals advise associations that have no employees to have at least a basic workers compensation policy for defense and indemnification from unfounded claims that someone who was injured was an association employee.

Fidelity Bond Coverage

Associations are now required to maintain fidelity bond coverage for its officers, directors and employees in an amount that is equal to or more than the amount of the association’s reserves plus total assessments for three months. The fidelity bond must also include computer fraud and funds transfer fraud. If your association uses a managing agent or a management company, your association’s fidelity bond coverage must be separate from the fidelity bond of the management company or managing agent and must also include dishonest acts by that person, entity and its employees. [CC §5806]

Independent Contractor or Employee?

Be sure you know whether your independent contractors are truly independent contractors and not employees. The penalties under workers compensation laws and unemployment compensation laws for failure to pay overtime and the Labor Code for misclassifying an employee as an independent contractor can be severe. [Labor Code §§226.8, 2750.3, 2753, 2775-2787]

Security Service Personnel

Associations that have security service personnel directly employed by the association must register those private security officers with the Department of Consumer Affairs. [Bus. & Prof. Code §7574 et seq.]

Discriminatory Employment Practices

Associations must avoid numerous unlawful or discriminatory employment practices. [Gov. Code §12940]

Injury, Illness & Prevention Program

Associations must have an effective Injury, Illness and Prevention program if it has employees. [Cal. Code Regs., tit. 8, §3203(a)]

Paid Sick Leave

Associations must provide paid sick leave to all employees who work for the association for 30 or more days within a year from the commencement of employment. [Cal. Labor Code §246]

Issues for Inspectors of Election to Consider

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  1. Front of envelope – not signed in upper left corner

         Accept            Reject

  1. Front of envelope – signed but other identifying information not filled in

         Accept            Reject

  1. Front of envelope -ballot voted by proxy, but envelope not signed by proxy holder (owner’s signature or no signature)

         Accept            Reject

  1. Front of envelope – no identifying information or signature

         Accept            Reject

  1. Front of envelope – name is different than the name on Association’s owners list

         Accept            Reject           Female and first name is the same
(possible change in marital status)

         Accept            Reject           Unit owned by corporation

         Accept            Reject           Unit owned by trust (trustee)

         Accept            Reject           Alleged Power of Attorney

         Accept            Reject           None of the above – name just does not match

  1. Outer envelope has been opened

         Accept            Reject           Apparently opened after receipt by
management/Inspectors of Election

         Accept            Reject           Apparently just not sealed by voting owner

  1. Outer envelope sealed, but inner envelope not sealed

         Accept            Reject

  1. Some form of ballot other than Official Ballot put into double envelopes (e.g., directions to proxy holder, handwritten ballot, other) [1]

         Accept            Reject

  1. Ballots received not in double envelope system – only in one envelope

         Accept            Reject           Placed only in outer envelope

         Accept            Reject           Placed only in inner envelope

  1. Validity of ballot if placed in ballot box but not in envelope(s)
    1.   Accept            Reject           Signed (or identity of voter can be determined)
    2.   Accept            Reject           Unsigned (identity of voter cannot be determined)
  1. Ballot delivered to other than the meeting or the officially designated location on envelope

         Accept            Reject

  1. Two ballots received from same unit

         Accept            Reject           Earliest dated / First received

         Accept            Reject           Owner vote over proxy holder vote

  1. Ballots received after official close of the polls

         Accept            Reject

  1. Validity of ballot if faxed

         Accept            Reject

  1. If owner wants to revoke original ballot and re-vote, can they revoke ballot already cast?[2]

         Accept            Reject           Allow Revocation and re-vote

         Accept            Reject           Disallow revocation and re-vote

If allowed to re-vote, what is the latest point in time when this can occur?

                                                                                                                     

  1. When will polls officially close? (If not previously determined)                                

PROXY ISSUES (IF USED)

  1. Front of envelope – ballot voted by proxy, but not signed by proxy holder (owner’s signature or no signature)

         Accept            Reject

  1. Validity/priority if two proxies received from same unit

         Accept            Reject           Earliest Dated

         Accept            Reject           Latest Dated

 

Date:                                                                                                                           

Inspector of Election

Date:                                                                                                                            

Inspector of Election

Date:                                                                                                                           

Inspector of Election

 

[1] The Association’s election rules may prohibit counting unofficial ballots. Please confirm with Association’s election rules.

[2] The Association’s election rules may prohibit revoking or changing an original ballot. Please confirm with Association’s election rules.

Membership/Owner Duties

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Resale Disclosure Statement

Owners must provide a completed statutory disclosure form to purchasers before reselling residential property. This also must be completed by a real estate agent, if any. The form is extensive and detailed and found in the statute. [Civ. Code §1102 et seq.; see e.g., §1102.6]

Smoke Detectors in Owner Units

Each owner must supply and install smoke detectors in accordance with the manufacturer’s instructions in any unit intended for human occupancy. Each smoke detector must be operable at the time that any tenant occupies a unit and must be repaired if the tenant reports a problem. The association is responsible for installing, maintaining and testing smoke detectors in hallways, common stairwells, etc. [Health & Saf. Code §§13113.7 & 13113.8]

Carbon Monoxide Detectors in Owner Units

Owners must install an approved carbon monoxide detector by July 1, 2011, in any single-family dwelling unit intended for human occupancy that has a fossil fuel burning heater or fireplace. For all other existing dwelling units intended for human occupancy, the deadline is January 1, 2013. [Health & Saf. Code §§17926-17926.2] Selling owners must disclose in the required form whether the unit being sold has a carbon monoxide detector. [Civ. Code §1102.6]

Low-Flow Plumbing Fixtures

Caution for associations and owners: all single-family dwellings must replace noncompliant plumbing fixtures no later than January 1, 2014 or January 1, 2017, depending on factors specified in the statute. The date is January 1, 2019 for multi-family residential properties and commercial properties. Failure to provide proof of compliance could prevent the issuance of building permits. It is not clear if multi-family residential includes condominiums and attached planned development housing. See statute for details and disclosure duties. [Civ. Code §§1101.1 – 1101.9 and 1102.155] Flow rates of noncompliant fixtures are in California Civil Code section 1101.3. It may take additional legislation for clarification and for how an HOA that does not maintain, repair or replace plumbing fixtures could compel owner compliance.

Membership Meetings

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Nomination and Election Procedures

Associations must adopt election rules [CC §5105(a)], but the requirements of §5100-5145 do not apply if the governing documents provide that one member from each separate interest is a director. [§5100(f)] Every corporation must have reasonable nomination and election procedures given the nature, size and operations of the corporation. Certain specific requirements apply in corporations with 500 or more members and in corporations with 5000 or more members. [Corp. Code §7520-7525] Consult the statutes for details. There are a multitude of additional requirements on election rules, requirements for independent inspectors of election and other detailed requirements that are stricter or different from the requirements in the Corporations Code. Association funds may not be used for campaign purposes in board elections or in other membership votes. Consult the relevant statutes for requirements. [CC §§5100-5145]

Parliamentary Procedure Adoption

Adopt a recognized system of parliamentary procedure and/or other parliamentary rules for conducting membership meetings. It’s a good idea, but not mandatory for board meetings. [CC §5000] Some governing documents require use of a specific system of parliamentary procedure (like Robert’s Rules of Order) for member meetings, but most do not specify the system of procedure. Even if Robert’s Rules is specified, there are numerous books entitled Robert’s Rules of Order, so if Robert’s Rules is specified, it is best to identify which title, publisher and date you are using.

Election Rules

Associations must adopt election rules [CC 3.§5105(a)], but the requirements of CC §§5100-5145 do not apply if the governing documents provide that one member from each separate interest is a director. [CC §5100(f)]

Election Inspectors

Appoint one or three election inspectors, preferably in advance of the annual meeting and any membership vote by secret ballot to perform the duties specified in the statute. Civil Code controls over Corporations Code. [Civ. Code §5110; Corp. Code §7614] Bylaws or election rules may set the number of inspectors at 1 or 3 and specify the qualifications for the inspector(s). The association’s manager may only be an inspector if allowed by the election rules.

IRS Revenue Ruling Needed?

Consult with the association’s accountant regarding the appropriate resolution, if needed, to adopt at the annual meeting for the treatment of any surplus income over expenses from the current fiscal year. [IRS Revenue Rulings]

Secret Ballots-Double Envelopes

Use a secret ballot and a double envelope system mailed to all owners at least 30 days in advance for all elections and removal of the board, membership votes regarding assessments, votes on amending the governing documents or the grant of exclusive of common area under CC §4600. There are a multitude of additional requirements on election rules, requirements for independent inspectors of election and other detailed requirements that are stricter or different from the requirements in the Corporations Code. Association funds may not be used for campaign purposes in board elections or in other membership votes. Consult the relevant statutes for requirements. [Civ. Code §§5100-5145] There is a maximum of one year to file an action for a violation of the article on elections. [Civ. Code §5145; Compare with Corp. Code §7527.]

Written Ballots in Lieu of Meeting (not Secret Ballots)

Written ballots to members (used in place of a meeting) must meet many specific requirements to be valid. [Corp. Code §7513] Written ballots are signed and dated by the voter and cannot be used when the Davis-Stirling Act requires a secret ballot.

Timing of Member Meeting Notices

Give written notice of membership meetings at least 10 and not more than 90 days before the meeting date. If notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, notice must be given at least 20 days before the meeting. Notice of meetings at which directors are to be elected must include the names of all those who are nominees at the time notice is given to members. [Corp. Code §7511] Corporations with more than 5000 members must have articles or bylaws that set a date for the close of nominations for the board. The date must be no less than 50 and no greater than 120 days before the election, and no nominations are permitted after that date. [Corp. Code §7522]

Topics Specified in Notice

Specify matters intended to be presented at the meeting in the notice of the meeting. [Corp. Code §7511(a)]

Special Meeting Petition

When a special meeting is called by a petition signed by the specified percentage of the members [Corp. Code §7510(e)], the Board must set the date, time and place of the meeting between 35 and 90 days after receipt of the petition and send notice within 20 days after receipt of the petition, or the persons signing the petition may give the notice. [Corp. Code §7511(c)]

Maximum Adjournment

No membership meeting may be adjourned for more than 45 days. [Corp. Code §7511]

Proxies

Any proxy distributed to 10 or more members in a corporation with 100 or more members must include the chance to specify a choice between approval or disapproval of each matter or group of related matters intended to be presented at the meeting. [Corp. Code §7514] Proxies may not be used in lieu of a secret ballot. Any proxy holder must complete a secret ballot. Any instruction in a proxy that directs the manner of voting must be set forth on a separate page of the proxy that can be detached.

Proxy Validity

Consult the statute for details on proxy validity. [Corp. Code §§7517 and 7613]. IMPORTANT: Under California Corporations Code section 7613(g), a proxy cannot be used for certain types of votes, including recalls, unless it generally mentions the nature of the transaction for which it will be used. Many associations do not use proxies any longer after the secret ballot, double envelope system took effect. Under California Corporations Code section 7613(f), proxies can be prohibited only if the members amend the Bylaws or Articles to do so.

Cumulative Voting

Cumulative voting is authorized in all new associations and many older associations. The Corporations Code and many bylaws state that no one may vote cumulatively unless the candidate’s name was placed in nomination before the voting, and someone gives notice prior to the voting of the intention to cumulate votes. As such, we recommend that the board give such notice before sending or with any proxies used for the election that provide for cumulative voting. [Corp. Code §7615]

Election Results

The results of any election (not just for the board), must be reported to the board, recorded in the minutes and published within 15 days to all members. [Civ. Code §5120(b)] Election materials must be kept for a minimum of one year. [Civ. Code §§5125 & 5145(a)] There is a maximum of one year to file an action for a violation of the article on elections. [CC §5145; Compare with Corp. Code §7527.]

Fire Damage Checklist

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The following is a basic checklist for associations faced with a fire damaged unit:

  • Immediately submit the claim to the association’s insurance carrier.
  • If you are aware of bodily injuries, notify the carrier of this fact too as experts may need to be retained.
  • Hire a contractor to board up the unit(s), if the insurance carrier has not already done so. Take any other action necessary to secure the area and to prevent people from entering the property which could cause further injury.
  • Shut off the utilities and inquire whether any further action needs to be taken with regard to power, water or gas. For instance, the electric company may need to remove the meters. Suggest any affected homeowners (and tenants, if any) to file claims on their personal insurance for moving expenses, personal property, etc.
  • Notify the local code enforcement officers. The City may need to condemn the building and post notice to restrict entrance. Be wary of unsolicited calls from public adjusters and contractors. Speak only with the insurance carrier’s adjuster and do not disclose information to unnecessary parties.
  • If the association has a preferred contractor, advise the insurance carrier that the association wants the contractor involved and would like it to bid the repairs, if possible.
  • Have all bids submitted both to the association and the insurance carrier. If the selected bid is not the lowest, try to get the insurance carrier’s concurrence and the contractor’s agreement to perform the work for the lowest price.
    The association should be the one to award the contract. If possible, control payments to coincide with payments from insurance carrier.
  • If a deductible is to be paid by the homeowner rather than the association, collect the deductible in advance, or have the contractor collect it directly from the homeowner. Often there are separate deductibles, one for the building and one for personal property (floor coverings, appliances, etc.).
  • If the claim covers personal items (floor coverings, etc.), ensure the contractor and homeowner are in direct contact with one another early on so that color and/or style selections can be made; some items may not be readily available and time will need to be allotted for delivery. Also, be sure homeowners are aware the association will not pay for any upgrades or extras that are not covered by the association’s insurance.
  • Some owners will want to take the insurance proceeds available for final interior decoration and use it to make changes or upgrades. In our experience, if they want to do this, this can complicate things, as the costs for their items can easily get mingled with the other costs, so that it is difficult to tell what expense belongs to whom. Discuss this early on with the insurance carrier and expect such requests. Also discuss it with the contractor before you sign the contract. Some owners will want to use the same contractor, and others will want to get their own contractor or vendor to do the work.
  • Decide how you want to handle this situation in advance so that if you allow it, neither the insurance carrier nor the association will be stuck with any extra costs. Also decide how those items will be split out from the contract and who will control the money to be used for the decor. If the association gets the money and has to parcel it out to the owners, count on disputes over how much is owed and under what circumstances it should be paid. Whether the association or the insurance carrier pays the money to the owner, it is not a good idea to pay anything until the materials are delivered and installed. It is also better to pay the money Ensure all monies are paid directly to the contractor, not the homeowner. If you give -money directly to the owner, the owner may take the money and not do the work.
  • If any fire or smoke-damaged materials or structures are to remain, i.e., not starting from a raw slab, be sure the contract includes a warranty for smoke-encapsulation as smoke odors may appear after reconstruction.
  • Execute a proof of claim only after all work has been completed and approved.

Individual circumstances, including the extent of the fire, may require additional or different actions. Please consult legal counsel.

Bidding Checklist

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In every bidding situation, consider the following issues:

  • Has the board defined its goals and objectives in this bid process?
  • Are there any bidding requirements in the Association’s governing documents that the board should follow (i.e., a requirement to obtain at least 3 bids)?
  • Will professional assistance be needed to draft the specifications for the job, and/or to evaluate the bids? Have complete plans and specifications been written to specifically define the scope of work to be performed?
  • Is the bid due date clearly stated? Have the bidders been given enough time to submit complete and accurate bids?
  • Should a pre-bid job walk be scheduled? Mandatory or optional?
  • Have interviews with the bidders been scheduled? What questions will be asked?
  • Who will check the bidder’s references and what questions will be asked of the references?
  • Who will check that the bidder has an active California Secretary of State registration?
  • Who will check the bidder’s Contractor’s State License Board profile for any prior complaints/violations? If there are any complaints/violations, does the bidder have a good explanation?
  • What special requirements does the association have? Are these listed in the bidder’s information materials?
  • Are bids to be submitted sealed or open?
  • Will unsuccessful bidders be told why they were not awarded the job?
  • Are the following forms included in the bid package? Invitation to Bid; Bid Form; Contractor’s Qualification Form; Designation of Subcontractors; Insurance and Licensing Information Form; Contractor’s Certification of Applicability of Specifications; Special Instructions; Contract Form.
  • Does the Contractor’s Qualification Form ask for all of the following? Form of company and company principals; years in business; number of employees; number of previous lawsuits/claims; references for similar jobs; bonding capacity/surety information; financial information; dollar volume of business in past year(s) and value of current work in progress.