Q&A: Are board committees bound to any laws or rules?
Question: The board has appointed three non-board director owners to a committee. Questions came up whether the committee needs to produce an agenda, give notice for the meetings, take minutes and have “open” meetings where homeowners attend.
As a board director, I asked our association attorney and he said “absolutely not” to all these questions. He said that “committees are not bound by the same laws and rules boards are.” He also said, “Committees can do whatever they want and not inform homeowners, and the committee reports only to the board.”
Is our association attorney right? Our board president thinks he can create any committee he wants; can he?
Answer: The association’s attorney is flat-out wrong on all counts. The board should not follow that bad advice.
Authority to establish or create a committee and appoint committee members must preexist in provisions stating such in the association’s recorded documents, including bylaws and the covenants, conditions and restrictions (also known as the CC&Rs).
A homeowner association president has no per se distinctive unilateral power to create a committee or appoint its members. No single association board director unilaterally establishes a committee or appoints committee members. The board acts as a body and its actions take place during a duly noticed meeting. Authority to appoint committee members must coexist with recorded document provisions establishing the committee itself. Hence, the committee may already exist by virtue of its “recordation” in governing documents such as CC&Rs — for example, architectural committee, election nominating committee and so on.
Committees recorded in governing documents are typically called “standing” or “permanent” committees.
Committees not recorded in governing documents are typically called “special” or “temporary” committees and creation requires a board meeting to determine duration and duties, which must be documented in the minutes.
Special committees are temporary and perform special functions or investigative tasks beyond those of an existing standing committee. The investigative task must directly relate to an existing standing committee function, such as reviewing architectural building permit costs, obtaining estimates for election mailings or interviewing candidates for independent third party election inspectors. Where creation of a temporary special committee unaffiliated with a standing committee arises (i.e., cost estimates for a new insurance policy or to change gardeners), this requires a board meeting and description of the committee’s duration and duties be documented in the minutes.
Standing and special committees get instructions from, and report to, the board. Directors’ nondelegable duties cannot be delegated or assigned to anyone, including a committee.
Every board-created committee and every board-appointed committee member must act in good faith and abide by the law as well as governing documents. Their actions are documented in the minutes. This means, if a committee meets it has to give notice, distribute an agenda and conduct open meetings. California’s legislature had ample opportunity to exempt committees from complying with laws meant to protect titleholders, but it categorically chose not to do so.
Committees and disclosures are discussed under Corporations Code section 7151, which presumes bylaws are preexisting. Irrespective of any bylaws and/or CC&Rs, committees are bound by law to give notice, disclose conflicts of interest, conduct open meetings and produce minutes. Doing otherwise creates secret meetings and a parallel shadow governing structure not supported in law.
California’s Common Interest Development Act includes an extremely limited, albeit narrowly defined, exception only for executive sessions noted in Civil Code section 4925, yet no exemption from the law of any kind is noted for committees. Civil Code section 4935(e) requires that any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership. In legal usage, “shall” means “mandatory.”
Committees are mentioned in Civil Code section 5210, stating if a committee has decision-making authority, minutes of the meetings of that committee shall be made available commencing Jan. 1, 2007, and shall thereafter be permanently subject to inspection. This section presumes the committee is operating lawfully and following procedures set forth in the Common Interest Development Open Meetings Act, codified in Civil Code sections 4900 to 5000.
Committees are typically not without some authority, even to voice opinions and make recommendations. Therefore, whether intended or not, by their actions they have the ability to bind the association and owners. Civil Code section 5350(a) makes clear that, notwithstanding any other law and regardless of whether an association is incorporated or unincorporated, the provisions of Corporations Code sections 7233 and 7234 shall apply to any contract or other transaction authorized, approved or ratified by the board or board committee.
Bad legal advice is costly. As a result, associations, boards, directors and homeowners may spend countless hours in meet-and-confer conferences, internal dispute resolution meetings, mediation, arbitration hearings and litigation trying to vindicate the interests of the parties. Every step leading toward a lawsuit takes a toll on owners who fund the result of an attorney’s bad advice, and any action taken in secret is usually one that invites litigation.
Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.
