Inspection Rights for HOA Directors

Question: " I am a recently appointed director of our HOA board. I would like to review the associations past records. What are my inspection rights?"

Many newly elected board members may wish to inspect the past records of the HOA. There may be a variety of reasons why the board member wishes to inspect the records. Some of which may be to become acquainted with the history of the community, its fiscal management, review meeting minutes, or to determine whether the board is acted appropriately in the past.

Corporations Code § 8334 states the following as it relates to director inspection rights:

"Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director."

Corp Code § 8334 gives a director of the board much broader discretion inspection rights than a non-director member would receive. The director does not need to provide written notification of their inspection rights, nor does the board member need to provide a reason for the inspection of the associations records.

It is also clearly evident that the board member has a broad inspection right to the type of documents they wish to inspect. The board member has a right to inspect and copy "...all books, records, and documents of every kind..." This is a much broader inspection right than non-board members receive under Corporations Code § 8333, which states the following:

"The accounting books and records and minutes of proceedings of the members and the board and committees of the board shall be open to inspection upon the written demand on the corporation of any member at any reasonable time, for a purpose reasonably related to such person's interests as a member."

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

HOA Governing Documents

Question: "What are the Homeowners Associations governing documents?"

I use this term and many people are thrown off by it. Generally, people refer to the documents that they receive when they purchase a residence in a HOA by calling them the CC&R's. (Covenant, Conditions and Restrictions)

The governing documents typically included under the Davis-Stirling Act are the Declaration, Bylaws, and any other documents that prescribe the rules of the community, which ma include the Articles of Incorporation if the community is incorporated. Civil Code § 1351 describes the Declaration as a document that contains the information that is required of Civil Code § 1353(a) (1):

A declaration, recorded on or after January 1, 1986, shall contain a legal description of the common interest development, and a statement that the common interest development is a community apartment project, condominium project, planned development, stock cooperative, or combination thereof. The declaration shall additionally set forth the name of the association and the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes. ( There is additional language required under the statute section if property is recorded after Jan 1, 2004 & located in airport influence area-see code section)

Civil Code § 1354(a) states that the covenants and restrictions recorded in the Declaration are enforceable as equitable servitudes unless unreasonable. The reasonableness of a restriction contained in the Declaration becomes an issue when an association board enforces such a restriction, or whether the homeowner defends a board enforcement action on the grounds that the restriction is unreasonable and therefore unenforceable against the homeowner.

Generally, the Bylaws are not recorded and do not contain equitable servitudes upon the community and for this reason are easier to amend and make changes, which are typically done through community voting. The Bylaws are usually the governing document that contain the internal operational rules of the community.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

The Dangers of Hiring Contractors

I sometimes get questions concerning the hiring of an outside contractor to perform regular maintenance on the common area's of the community association. Many times, but not always, the governing documents will contain language requiring such maintenance. Therefore, it is up to the Board to ensure compliance with the governing documents and ensure that the maintenance is performed properly.

Generally the Board has two options in these types of situations. First, if the community is small then a professional property management company is probably not necessary. However, this means that the Board will need to ensure that the contractors are properly licensed. You can go to the following website to check contractors licenses http://www.cslb.ca.gov/. In addition, you will need to ensure that they are carrying proper workman's compensation insurance as well. Finally, it would be advisable that you have a written contract with the outside contractor and that the contract is reviewed by either your association attorney or an outside attorney. Following these general steps could alleviate many serious issues in the future.

Second, if community association has a professional property management company then the contract may require that the property management company hire outside contractors to perform the routine maintenance. However, just because the property management company is responsible for the contracting and hiring does not mean that the Board shouldn't be involved in the process at some level to ensure proper compliance. A recent court case is an example of why you want to know who your property management company is hiring.

In April of 2007 a California Appellate court held liable a professional property management company and a general contractor for the injuries that the contractors employee received while trying to install rain gutters in the community . The contractor was uninsured and unlicensed. In addition, the court held that the association was liable as the property manager's principal ,but did not impute liability to the community owners. See Heiman v. Workers Compensation Appeals Board (Cal. App. 4th 2007)

Unlicensed and uninsured contractors can wreak havoc on a community. Without the proper license and insurance it may be the homeowner association that is left holding the bag when the job that they were hired goes unfinished, or an employee the contractor hires is injured while on community property.

Homeowners Association (HOA) Attorney
Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

Regular Assessments

Well, since I received such a quick response to my posting pertaining to special Assessments I thought that I would post briefly the requirements under the Davis-Stirling Act for levying and collection of regular assessments.

Like special assessments an association shall levy regular assessments sufficient to perform its obligations under the governing documents and this title. Civil Code § 1366(a). Civil Code § 1366(b) states; " Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year ."

An important note to subsection (b) is that even if the governing documents state that the association cannot raise the regular assessment more than, lets say, 8%, the 20% ceiling in Civil Code § 1366(b) controls.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

Special Assessments

Special assessments seem to be all the rage right now. Many associations have found themselves in a situation where a special assessment is required. Therefore, I thought it would be useful to touch on some of the statutory requirements under the Davis-Stirling Act for special assessments.

First, special assessments can be a controversial and risky proposition for a community if the assessments are not planned in advance and are simply sprung onto homeowners. The community may find, if passed, that the assessments are financially burdensome to some their community residents, which may require additional action by the board in terms of filing liens and possibly even foreclosing on property. Based on the turbulent real estate market a special assessment may mean default to a owner that is carrying a variable rate loan that has adjusted or will be adjusting some time in the future.

Civil Code § 1366(a) states that the "association shall levy...special assessments sufficient to perform its obligations under the governing documents... ." The statute goes on to state that unless there are more restrictive limits placed on the HOA Board by the governing documents the board of directors may not impose a special assessment, which in the aggregate exceeds 5 percent (5%) of the budgeted gross expense of the association for that fiscal year without approval of a quorum of owners that cast a majority of votes .

A quorum under the statute is defined as more than fifty percent (50%) of the owners of the association.

Civil Code § 1366(d) states that the community association must notify owners by first class mail of any increase or special assessment not less than 30 days nor more than 60 days prior to the increased assessment becoming due.

Finally, Civil Code § 1366(e) goes on to state generally that levied special assessments become delinquent 15 days after they are due (unless longer period prescribed in governing documents), at which time the association may collect: 1) reasonable costs in collecting delinquent assessments, which includes reasonable attorney fees 2) late charges not to exceed 10% of the delinquent assessment or $10, whichever is greater, and 3) interest on all fees, which cannot exceed 12%.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

Resignation of HOA Board Member

Question: "How do I resign from my position as a Board member of the HOA?"

Corporations Code 7224(c) states that a member of the Board may resign their position by delivering written notice of their intent to resign to the Chairman of the Board, the President of the association, the secretary of the association, or the board of directors.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

Removal of Directors of the Board

I have had this question with increasing regularity from both members of the community and active Board members. The question goes like this; "How can we remove a Board or a certain member?"

First, Corporations Code § 7221 states that a Board may remove a director for "cause" for any the following reasons:

• A member of the Board has been declared to be of unsound mind by a final court order.


• A member of the Board was convicted of a felony (It appears that merely charged or accused would not rise to the level needed for removal).


• A member may be removed if they fail attend a specified number of Meetings, which include Board meetings. However, the section requires that the attendance requirements be setforth in the bylaws at the time the Board member was elected.

Second, if a Board member cannot be removed for "cause" one or all of the Board members may be removed by voting action of the members. Corporation Code § 7222. Generally Board action requires a vote of a majority of the members to remove if the association (corp) has 50 or less members. If the association has 50 or more members it requires a majority of the quorum of members to remove. There are additional requirements for communities with no members or communities that have cumulative voting, in which reading the entire section would be advisable.

Finally, Corporations Code § 7223 states that a director may be removed by a court sitting in the county in which the association is located for the following reasons;

• fraudulent and dishonest acts; or


• gross or abusive authority;or


• discretion with reference to the corporation


• breach of any duty arising as a result of Section 7238 (corp holding assets in charitable trust)
  

Once the court has removed the Director the court may bar any reelection of the removed Director for a term described by the court.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

HOA Board Emergency Meetings

Question: "When can we as a Board declare and emergency meeting?"

The answer lies in the Common Interest Development Open Meeting Act Civil Code § 1363.05(h), which states;

"An emergency meeting of the board may be called by the president of the association, or by any two members of the governing body other than the president, if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice as required by this section."

The question of what is a situation that cant be avoided and requires immediate attention is not a simply inquiry. In most cases, it would appear that it would be a situation where giving the proper notice could possibly harm financially or otherwise the association and community members. More than likely this inquiry will be dealt with on a case by case basis.

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.

Board Meeting Notice

Question: "What kind of notice must we give before we have a Homeowners Association
meeting?"

First, Civil Code § 1363.05(f) defines a "meeting" as;

" any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board, except those matters that may be discussed in executive session."

Association members must be given notice of when and where a meeting is going to be held. The governing documents (bylaws) of the community may specify when and where the meetings will be held. If not, Civil Code § 1363.05(g) states that notice will be given at least four days prior to the meeting, unless the meeting is an emergency. The code section goes on to say;

"Notice shall be given by posting the notice in a prominent place or places within the common area and by mail to any owner who had requested notification of board meetings by mail, at the address requested by the owner. Notice may also be given, by mail or delivery of the notice to each unit in the development or by newsletter or similar means of communication."

Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.