Unstable Slopes
QUESTION: I live in a PUD with homes perched atop a steep bluff. There have been mudslides and some homes are threatened. Against the advice of the soils engineer, the board voted to follow the advice of lay persons who claim the soils engineer is lying. Many of us stressed to the board that a second opinion from another soils engineer should be obtained but the board refused. If the “remedy” recommended by the lay people doesn’t hold up and damages are exacerbated, can the board be held personally liable?
ANSWER: Your board has its head in the sand. When it comes to geotechnical issues, they need a soils engineer to advise them not lay people.
Business Judgment Rule. If the unstable slope injures persons or property, your directors could face personal liability. To avoid this, directors must perform their duties:
- In good faith,
- In a manner which the director believes to be in the best interests of the association, and
- With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Corp. Code 7231(c).
The Davis-Stirling Act additionally provides:
- The act or omission was performed within the scope of the officer’s or director’s duties;
- The act or omission was performed in good faith;
- The act or omission was not willful, wanton, or grossly negligent;
- The association carries insurance as defined by Civil Code 1365.7(a).
Risky Business. I suspect a jury would find that ignoring the recommendations of a qualified soils engineer in favor of unqualified owners was imprudent and, depending on the extent of the damage and injuries, grossly negligent, thereby triggering personal liability by the directors. If the board has reason to doubt the advice of its engineer, it should get the opinion of second soils engineer. If the two engineers agree, follow their advice. If they disagree, get the opinion of a third qualified engineer to break the tie.
SPECIAL MEETING QUORUM
QUESTION: Our management company says that a quorum of the membership is only required for annual meetings. This seems contrary to our bylaws.
ANSWER: Unless you amended your bylaws to eliminate quorum for the election of directors, quorums are required for all meetings of the membership, not just annual meetings.
BUSINESS IN
RESIDENTIAL UNIT
QUESTION: 
Our CC&Rs state that “Each Unit shall be used solely as a private residential dwelling and for no other purpose. The board has ruled that a homeowner who provides music lessons in his unit is conducting a business in violation of the CC&Rs. The municipal code allows certain businesses to be conducted in the home. The owner claims the city ordinance supersedes the association’s CC&Rs. Is he right?
ANSWER: No, he is not correct. It is true that homeowners are subject to city ordinances as well as the association’s restrictions but ordinances do not supersede the CC&Rs unless the ordinance specifically states it. It’s like growing pot–the state allows it for medicinal purposes but the federal government does not. If you’re caught growing marijuana, the state will not prosecute you but the federal government will. Likewise, the city will not fine your owner for running a music business in his unit but the association can.
DONATING MONEY
TO THE ASSOCIATION
QUESTION: Is it allowable for members to donate money to the association? The donations would be earmarked to build a playground in the common area.
ANSWER: Yes, members can donate money to the association. They can specify that the money be used for a particular purpose and if not used for that purpose, returned to them.
PENALTIES FOR
NON-PARTICIPATION
QUESTION: Can non-participating condo owners be charged a non-participation fee? They don’t come to membership meetings and won’t serve on the board of directors. They don’t do anything for the association except pay their dues.
ANSWER: You’re lucky they pay their dues; many associations are struggling with high foreclosure rates. Your proposed “fee” is actually a fine. At a minimum, you will need to amend your Rules & Regulations to provide for voter non-participation penalties. I prefer incentives to fines, i.e., raffle a prize or series of prizes for those who cast ballots. You can get local businesses to donate products and services. Even though I’m opposed to penalties, they can be effective; they clearly increased voter turn out in North Korea, Cuba, and the former Soviet Union.
ALTERING THE COMMON AREAS
COMMENT: For an association to demand that only certain contractors be used by unit owners seems like an unfair restraint of trade providing no demonstrable benefits to the association and infringing on the unit owner’s right to choice.
RESPONSE: I know this sounds shocking but some owners will bootleg unapproved changes when they remodel. Unauthorized alterations to plumbing and electrical systems can significantly impact the membership through floods and fire. It is not unreasonable for the association to require particular plumbers and electricians be used–vendors who already know the building’s systems, who are licensed and insured, and who will not make unauthorized alterations. Owners do not have a “right” to pick their vendors when it comes to altering the association’s common areas.