Condo Law in California

QUESTION: One of our board members used exactly those words, “I quit!!!” in written board communication when things did not go to her liking — but now she acts as if nothing ever happened and is making decisions for the board. Is she on or is she off?

ANSWER: She is off the board. As provided for in Corp. Code §7224(c), a resignation takes effect upon written notice to the board and does not need approval by fellow directors to be effective.

If your resigning director had made her resignation effective at a future date, she could have withdrawn it. From your question, it appears the director did not qualify her resignation nor did she withdraw it. Accordingly, she is no longer on the board and the remaining directors may appoint someone to fill the vacant seat.

MORE COMMENTS
On Protecting Volunteers

Gentlemen: The last item in your newsletter [by the Workers' Compensation Specialist] refers to amending bylaws to incorporate reference to “volunteers” under a section of Labor Code §3363.6 as employees of an HOA and thereby limit liability from the civil arena. I think the advice is flawed in that the section referred to applies to volunteers of a “public agency” and the Labor Code defines a public agency as quasi-governmental and section 1720.4(a)(1) specifically defines the public agency as a non-profit 501(c)(3).

The Labor Code does include language that certain volunteers are excluded from coverage under workers’ compensation and not deemed employees, but that applies to ski patrol and a few limited areas. The other exceptions are the 501(c)(3) categories only.

As you know, HOAs are 501(c)(4) organizations. Consequently, it would appear that advice to modify the bylaws to incorporate section 3363.6 as applicable to volunteers being included in the category of “employee” of an association may be in error. -David Caine, Lake Arrowhead, CA

COMMENT: I invite those with workers’ compensation expertise to send information and comments on this issue. -Adrian Adams

COMMON AREA STORAGE

QUESTION: Our association was built in 1960 and, since then, has allowed residents to share use of a storage room in the underground parking. People have stored boxes, mattresses, appliances, etc, at their own risk. The board suddenly wants to order everything removed so they can use it for storing documents and cleaning items. Can the board make this decision, or does it have to put the question before owners?

ANSWER: If the room is part in the common area it is under the control of the board on behalf of the membership. If the board decides the space is needed for storing corporate records and cleaning supplies, the board can use it for that purpose without a membership vote.

OWNER WEBSITES

QUESTION: I am a resident in an over-55 condominium community. I also operate an unofficial website for the community. Do I have a right to post on my website public documents of the association, such as Articles of Incorporation, Rules and Regulations, and CC&Rs?

ANSWER: Yes, but you need prominent disclaimers making it clear that your website is not the association’s website and you do not speak for the association. Otherwise, you may incur potential liability for misrepresentation.

QUESTION: If a director resigns from the board, does a member have a right to inspect their letter of resignation? We had three directors resign and I would like to know why.

ANSWER: Yes, you have the right to review letters of resignation. They are part of the corporate records of the association.

DELINQUENT DIRECTORS

QUESTION: I am a board member in a new HOA. We asked three current directors to resign due to delinquent assessments. They refused to do so. One of them has just gone into foreclosure. Is there a California law that would force these board members to be removed? Our bylaws do not address such an issue.

ANSWER: There is no law requiring delinquent directors to resign. Your association needs to amend its bylaws to require that all directors be current in their assessments. Then, if they fall behind (by at least 60 days), they can be removed from the board.

TERM LIMITS

QUESTION: How long can board members be on the board?

ANSWER: If your documents have no term limitations, directors can stay on the board forever (as long as they remain alive and keep getting elected). This can be changed by adopting term limits. However, there is disagreement in the industry over the value of term limitations.

Strict Limits. Strict term limits that allow owners to serve one or two terms and then forever bars them from the board are unworkable. It is much too difficult to recruit members to serve on the board. Also, what happens when everyone in the association has served on the board? Accordingly, strict limits should not be adopted.

Flexible Limits. A more common term limit is one that allows directors to serve two terms and then requires them to step down for a year. This allows other owners the opportunity to serve on the board without permanently barring seasoned directors from serving at a later date. Even this kind of limitation can be problematic if no other owners are willing to serve on the board. To avoid this problem, term limitations should only take effect if there are people willing to run for the board.

STACKING THE BOARD

QUESTION: Our bylaws state that if a director fails to attend a specified number of regular board meetings, then that director is deemed to have resigned from the board. Our bylaws allow the remaining directors to appoint someone to fill the vacant seat. It seems to me that filling a vacancy by appointment gives the board the opportunity to “stack” the board with like-minded directors.

ANSWER: It is quite common that bylaws allow for the appointment of directors. Although this creates the potential for uniformity of approach to problems, that’s not necessarily bad. Also, appointments are never permanent since there is always another election just around the corner. Amending your bylaws so that all vacancies are filled by special election may satisfy your concern but it creates unnecessary cost since the association must solicit nominees, print and distribute ballots, and hire inspectors of election every time there is a vacancy. It makes more sense to appoint someone to fill the seat until the next general election.

READER COMMENTS
On Protecting Volunteers

What I have done for my HOA and my union is to have the board pass a resolution that states, “In accordance with Labor Code section 3363.6, all volunteers are considered to be employees for workers’ compensation.” I much rather have volunteers availing themselves of workers’ compensation rather than suing the association for negligence or board members for intentional torts. -Glen Grossman, State Bar Certified Specialist, Workers’ Compensation

Because of the economy, readers have been asking about volunteers.

QUESTION #1: Our landscape committee would like to do pruning instead of using the landscape service. Will this create liability for us?

QUESTION #2: Several owners asked if we could use volunteers for small maintenance jobs around the complex. Our funds are low so this seems like a good idea. What do you think?

ANSWER: There is always risk whenever an association uses volunteers. However, depending on the task, the risk may be acceptable. There are two sources of potential liability, (i) injuries to volunteers, and (ii) negligence by a volunteer that results in a lawsuit against the association.

Injuries. When it comes to injuries, there are steps boards can take to reduce risk.

a.  Workers’ Compensation Insurance. If a board member or committee member is injured while carrying out his/her duties, most insurance carriers will not cover the injuries because volunteers are not considered employees under Labor Code §3352(i). According to Tim Cline of the Timothy Cline Insurance Agency, only two carriers offer coverage for volunteers, OneBeacon Insurance and Republic Indemnity. To receive coverage, boards must appoint volunteers to committees and the appointments must be recorded in the minutes. Otherwise, the volunteers are not covered.

b.  General Liability Insurance. According to Carol Fulton of the LaBarre/Oksnee Insurance Agency, if volunteers are not covered under the association’s workers’ comp policy, injuries should be covered under the medical and general liability coverage on the association’s master insurance policy. Like Tim Cline, Carol Fulton cautioned that volunteers should be on committees approved by the board of directors.

c.  Hold Harmless Agreement. Another precaution is to have volunteers sign a hold harmless agreement releasing the association of liability in the event the volunteer is injured. However, this may discourage volunteers if they have no protection in the event of an injury. Boards need to discuss this with legal counsel.

d.  Safety. Another way to reduce risk is to make sure volunteers have safe working conditions. This means no faulty ladders or damaged tools. Another is to only allow low-risk tasks (clerical work, picking up trash, sweeping sidewalks, planting flowers, etc). Boards should avoid high risk tasks–anything involving heights (cleaning gutters, replacing roof tiles) or power tools (chain saws, lawn mowers, and so on).

Negligence. Another source of potential liability involves injury or damage to third parties. If a volunteer makes a plumbing repair that results in water damage to an owner’s unit, the association could be liable. These kinds of actions should by covered by the association’s general liability and D&O policies. However, the coverage may be conditional on whether the volunteer was named to a committee in the board’s minutes.

RECOMMENDATION: Boards need to make a business decision regarding the benefits of volunteers versus the potential risk. If associations want to use volunteers, boards should check with their insurance broker and, if available, extend coverage to them. In addition, boards should be diligent about naming volunteers to committees and recording the appointments in the minutes.

Contact information for the Timothy Cline Insurance Agency and the LaBarre/Oksnee Insurance Agency are in our Service Directory.

READER COMMENTS
About Last Week’s Newsletter

#1. Architectural Committee. I noticed in the Q&As that there was no reference to what an association’s corporate docs say on the matter. For instance, our documents require an architectural committee of 3 members, one being an architect. -Sue L. COMMENT: The board’s actions must be in concert with the governing documents. If a board wants to reduce the size of the committee to one, it needs to amend the CC&Rs. -Adrian

#2. Architectural Committee. Your comments on whether or not architectural review committee proceedings need to be open to the members needs a minor qualification. Specifically, I don’t think that conclusion follows during the period when the ACC is under developer control because, at that time, the committee is not a true committee of the Board and is not technically under the control of the Association (even though the committee has an Association representative). -Curt S. COMMENT: Good point. -Adrian

#3. Rules Committee. I did not think a board could delegate its responsibility on member discipline. -Sue L. COMMENT: Boards can delegate their duties but not their liability. Boards routinely assign their duties to managers. Even so, directors remain responsible for overseeing their committees and managing agents and may be liable for their actions. -Adrian

#4. Pool Safety. Thank you for taking the time to put together such helpful and encouraging information. May I comment on the pool closing question? I did not realize how SERIOUS a situation it was until I started researching it on the net because of an article I was working on for our newsletter. Please encourage all to dig deep into their research, and vote to CLOSE those pools until they are fixed. -John F., Branson, Missouri. COMMENT: It becomes deadly serious if the board ignores the law and someone dies as a result. When a child drowns (the whole point of the law), a board’s argument that, in their judgment, the risk of harm was not great enough to justify closing the pool will not save them from liability. They will be sued and they will lose. -Adrian

WATCHDOG COMMITTEE

QUESTION: Can members and tenants form a committee to monitor the board for the enforcement of the governing documents?

ANSWER: Residents always have the right to assemble, to discuss issues of mutual interest, to monitor board activities, and to petition the board. However, they should be careful not to adopt a name that would mislead members into thinking the group has some sort of official position in the community. Since only the board may appoint committees, use of the word “Committee” in your name is probably not a good idea.

ARCHITECTURAL COMMITTEES

QUESTION: A number of my associations do not have a formal Architectural Committee. Instead an architectural consultant reviews the plans. Since this is an individual, and not a formal committee, would there be a requirement to keep minutes like a regular committee?

ANSWER: Yes. If the consultant is making the decisions, then he/she functions as the Architectural Committees and must maintain an official record of the applications reviewed and decisions made. The “minutes” of the consultant/committee must be available for review by members. Civil Code §1365.2(i)(2)

QUESTION: Our Rules Committee was appointed by the board to hold monthly disciplinary hearings for violations of the CC&Rs. A member has requested a copy of the minutes of those meetings. The Committee minutes include lot numbers, addresses, and the action taken against each offender. Are we required to produce these?

ANSWER: No, members do not have a right to Rules Committee’s minutes. Even though the Committee has decision-making authority, member disciplinary hearings fall into the executive session protections afforded by the Open Meeting Act. However, the decisions of the Committee should be generally noted in the minutes of the subsequent open meeting of the board. Civil Code §1363.05(c)

OPEN COMMITTEE MEETINGS

QUESTION: Are committee meetings open to homeowners?

ANSWER: There is no law requiring that committees hold open meetings or post agendas. The Open Meeting Act applies only to meetings of the board. Most committees are advisory and deliver their recommendations to the board of directors in open meetings where members can hear the committee’s recommendations.

Exceptions. Committees with decision-making authority, such as architectural committees, should be open to the membership and should post agendas. In addition, if a majority of directors were to serve on a committee, meetings of that committee would meet the definition of a “board meeting” if the committee were to discuss any item of business scheduled to be heard by the board. Civil Code §1363.05(j) Such meetings require four-days notice to the membership and the posting of an agenda.

VOTING ON POOL SAFETY

QUESTION: With regard to the Virginia Graeme Baker Pool and Spa Safety Act, the board is looking into getting the necessary drain systems to bring our association into compliance with the law. However, the board does not want to close the pool until the work is done because they say the risk of anything happening is so small. What can I do, as the lone board member who wants to close the pool, to protect myself?

ANSWER: Make sure your vote to close the pool is recorded in the minutes. If your fellow directors refuse to record your vote, send a letter to the board and management company making your position clear. Save a copy in your files. Your fellow directors may be correct that the risk of injury is low. If they are wrong and someone is injured, the association and all its directors will likely be sued. Your letter will be important in your defense.

WEBSITE FEEDBACK

Congratulations on the new website. It is a tasteful, modern and easy to use. It has always reflected well on your law firm but now it is even better. I am especially glad you understand you have not outgrown the need for humor as a means of retaining sanity. -Mel S.

Congratulations on completing the most efficient website to my knowledge. I know it’s been a long haul for you, gathering all the information you needed and then putting it all together in just the right way. I appreciated the chance to look over this magnificent site, and I think you have done a super job. The money was well spent. Again, my compliments on a job well done. -Tom C.

Thank you for your continued efforts on behalf of HOAs. Much appreciated. -Ed W.

Adrian, have not got past the opening page of your new site, but it sure looks nice. -Jeff B.

Amazing website. Thank you so much. -Annette K.

Awesome…I forwarded this to the board…….  -Sue L.

Congratulations on the “New Website”… an enlightened move by a law firm in what I see as a highly controversial legal arena… HOA Governance! I hope to continue contributing whatever I can to help improve its content!  -Samuel R.

Kudos to you and your excellent team. Your hard work is so very much appreciated. Congratulations!  -Janis G.

Congratulations, Adrian!!!! I’m sure everybody will make even more use of this resource you’ve so graciously provided. Best wishes for continued growth and expansion! -Wendy F.

Thank you! You never let me down! -Trudy M.

Congratulations on your modernized website. -Connie G., Washington D.C.