Survey Supports State Oversight Agency

On Nov. 4, this column carried information about the California Assembly’s Select Committee on Common Interest Subdivisions, which recently conducted hearings to determine the need for new legislation on development problems, financial concerns and other issues of importance to condominium and homeowner associations in California.

Readers were invited to participate in an informal survey on the need for legislation. Here are the results tabulated from 582 responses:

1-Should a new agency be created to oversee California’s homeowner associations, planned unit developments and other forms of community associations?

Yes, 86%; No, 14%.

Many who responded felt that a new agency is needed because homeowners have no recourse other than legal action if an association board is out of control or dictatorial. Some mentioned the desirability of an ombudsman or mediation services.

2--Should community association managers be licensed by the state?

Yes, 83%; No, 17%.

Comments: “Managers have a responsibility to operate as a fiduciary of the association. They control large amounts of cash and reserve funds and should have to pass some type of licensing requirement to have the right to stay in business.”

“Those managers who do not operate honestly could be required to surrender their licenses.”

“Associations have a right to expect that the manager has passed specific education requirements related to the legal documents and current state laws.”

3--Should community association managers be required to be real estate brokers?

Yes, 5%; No, 95%.

Comments: “No, a real estate license is no assurance of competence in the management of an association.”

“No, it’s a conflict of interest for a manager to be responsible for establishing stability in an association at the same time he or she is farming the property for listings.”

4--Should volunteer homeowner board members be required to take some form of training on the meaning of association legal documents and the laws that govern community associations?

Yes, 69%; No, 31%.

Many respondents felt that requiring training might discourage people from serving on a board.

Comments: “Perhaps the Department of Real Estate could offer more publications like their ‘Common Interest Development Brochure’ to educate the board members.”

“Too many board members are ignorant of the state laws and don’t understand the association’s legal documents.”

Board Members Have Same Obligations

QUESTION: Our association is governed by a board of directors that seem to think they are entitled to privileges. Some are either not paying their dues or are continually late. They do not pay the late charges.

Our association’s CC&Rs; state that any member who is delinquent more than one month is not entitled to vote or use the recreational facilities. The board doesn’t think that this restriction pertains to them. We’ve been told that many associations have board members who are always delinquent. What is your opinion?

ANSWER: The board has a duty to uphold the CC&Rs; regarding the collection of assessments. Board members are not entitled to special privileges or the waiving of late charges. Every member has the right to expect that they will be treated fairly and that board members are performing their duties in an honest manner.

Board members who do not pay their assessments could be sued by other owners for failure to uphold and enforce the CC&Rs.; In fact, the entire board could be sued, not just the delinquent members.

The board should verify their rights and obligations by seeking the advice of an attorney who specializes in community association law.

Use of Funds for Outside Activities

Q: Our homeowner association includes both single-family homes and condominiums located near the ocean. Can the association board of directors use funds for activities not associated with our specific needs?

They recently authorized funds for a member of the board to travel to San Francisco to attend a Coastal Commission meeting and speak in opposition to a new real estate development in our area. Is it legal to use association funds for such outside activities?

A: It may have been outside the board’s specific authority to do so. However, the board must have felt that sending a representative to the meeting was in the best interests of the association.

A better solution might have been to solicit contributions from those individual owners who opposed the new development rather than using association funds to pay for the trip.

Perhaps you could speak to the board if you feel that they should not use association funds for this purpose without authorization from the general membership. The board could survey the owners to see if the majority wants the association’s funds spent in this manner.

How to Run Your Condo Association

Q: We are considering the purchase of a condominium but we do not understand the role of the association. How is the board of directors formed after all of the units are sold? Who enforces the rules? What happens if the board of directors fails to run the association fairly?

A: An association’s legal documents set forth its responsibilities and guidelines for its operation.

The governing body, usually called the board of directors, is given the responsibility of upholding and enforcing the legal documents, including the declaration of covenants, conditions and restrictions (CC&Rs;), the bylaws and the rules and regulations. The declaration gives the board specific powers and authority.

The board of directors is initially composed of people appointed by the developer of the new association. Even during the development phase, the board must conduct the business of the association in the best interests of the entire association and abide by the CC&Rs.;

After the developer sells a majority of the units, or homes, to the new buyers, volunteer homeowners are elected to the board until the association is put under the control of owner volunteers who serve on the board and run the association.

The board has a duty to run the association according to the legal documents. If the board does not do so, the rest of the association members can petition for a recall election or wait for the next annual membership meeting and elect other directors who will be better representatives. I prefer the latter solution since recall elections cause a great deal of controversy and resentment.

When a board of directors flagrantly disregards the association’s legal documents or laws, owners have the right to file legal action against the board. All boards should have directors’ and officers’ liability insurance to protect against lawsuits. However, most insurance carriers will not defend the board if the board action has been of a criminal nature or grossly negligent.

Hickenbottom is past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually. Readers can write to her in care of “Condo Q&A;,” Box 5068, Thousand Oaks, Calif. 91360.