Together, Owners Have Power to Change the Rules
Question: I live in one of 20 one-story adjoining condominiums in a common interest development in Malibu. There are no luxury amenities. We share retaining walls, some plumbing, very small grassy areas in front of our units and a roof.
The builder recorded covenants, conventions and restrictions (CC&Rs;) with all the titles, and he also included a management company in the purchase. Collectively, all 20 homeowners are sick of the management company. Some have had problems reselling our units because we are in a common interest development with a homeowners association. Interested buyers have told us that the units are beautiful and they like them, but when they understand that we have CC&Rs; and a homeowners association they say no thanks.
The present 20 owners want to get rid of the common interest development, the CC&Rs; and the homeowners association. Is this complicated and can we do this ourselves, without an attorney?
Answer: Search through your covenants, conditions and restrictions (CC&Rs;) for a “termination clause.” Depending upon the age of your CC&Rs;, there may actually be a termination date and no termination clause. If there is an expiration date, has it come and gone? If the date has passed, your homeowners association no longer exists.
If it still exists, follow the instructions in the “amendments” clause and amend the CC&Rs; to remove the requirement of a management company. If the CC&Rs; do not contain an amendment clause, the Davis-Stirling Act provides a procedure for amending the CC&Rs.; Since a majority agrees, amendment is easy.
Once the CC&Rs; are amended, immediately terminate the management company in accordance with the terms of the contract. If there is no provision in the contract agreement, give them, say, 30 days’ notice and end the agreement. If one of your homeowners is an attorney, you might save additional money if he or she agrees to review the management contract regarding its termination.
Look for any provisions in the CC&Rs; that speak to how the common area is transferred back to the homeowners. If that provision exists, at this point, it may be easiest to hire a real estate attorney to draft the documents, circulate them for the necessary signatures and then record them with the county recorder. Remind the attorney you’ve already saved the cost of researching your homeowners association and its transfer provisions. If there are no such provisions, then that same attorney should be able to advise you on the distribution of the common areas based on current real estate law as applied to other common interest developments.
After you’ve dissolved your homeowners association, ask the attorney to draft a simple contract that each of the homeowners would sign agreeing that, as maintenance is needed, or gardening work is required, each will pay 1/20th of the cost. You do not need a board for this. Perhaps the individual in charge of gardening or maintenance under the homeowners association will agree to continue in that capacity, making recommendations to the homeowners from time to time, as work is needed.
It may be necessary to have a temporary board of directors preside over the association until its termination. When you have completed the changes, your board retires, breaks out the champagne and celebrates. Yours would likely mark one of the very first such changes in California, a true cause celebre .
Members Question Board’s Need for Lawyer
Q: We live in Manhattan Beach and our homeowners association consists of only 22 townhouses. Instead of making simple decisions on their own or with the help of other homeowners, the board hired an attorney to run our association. The attorney fees are astronomical because the board uses the attorney on a daily basis.
I understand from one of the board members that the board does not limit questions to the attorney to association business, but often asks personal questions at the expense of the homeowners. The board does not make any decisions without the attorney.
When the subject is broached at the annual meeting the questions are met with dirty looks. There was no vote taken on hiring an attorney, the board did it on their own. The board now refers to this attorney as the “association’s attorney.” No homeowner has access to this so-called association attorney, but the board uses him at whim. I am annoyed because I am paying for the board’s frivolous actions. Can anything be done about this?
A: When you examined the pro forma budget required under the Davis-Stirling Act to be distributed to you “not less than 45 days nor more than 60 days prior to the beginning of the association’s fiscal year,” did homeowners question the charges under “legal and professional fees” in the budget?
It is acceptable to hire an attorney to review a board’s actions to make sure it complies with the law and to file documents with the state. Hiring an attorney to cover the tracks of a board’s day-to-day decisions is a waste of assets. If your board abdicated its responsibility to an attorney without homeowner approval, that act may be a violation of the law.
Regarding the board’s suspected use of the attorney for its private matters, have you asked the board members to specifically deny they are doing that or, if they are, that they are paying for that advice personally? Homeowners need to remind the board members, as often as necessary, that their fiduciary duty precludes the use of an homeowners association-subsidized attorney for their personal affairs.
Change does not always require a lawsuit; your association is small enough that only a few of you need to do something to make a difference. That something, in this case, might simply be a vote to reject the proposed budget unless the fees for the “association’s attorney” are eliminated. It is your money; make certain you have a voice in how it is spent.
Homeowners elected the board because the candidates promised to do the job, not turn the association over to an attorney.
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Stephen Glassman is a writer and an attorney in private practice specializing in corporate and business law. Donie Vanitzian has authored articles on American civil liberties, has a J.D. and is an arbitrator. Both live in common interest developments and have served on various association boards. Please send questions to: Common Interest Living, P.O. Box 451278, Los Angeles, CA 90045; or send e-mail to: CIDCommonSense@aol.com.
