New board can reverse association’s unwanted rules

Question: A longtime network of owners dominated board positions leaving our association in bad shape. For six years the same board was advised by the same attorney and, with her help, secretly either amended, restated or rewrote portions of our governing documents. This cost our association tens of thousands of dollars that owners were unaware was being spent. We are still trying to figure out how these documents got recorded without a vote of the owners.

Shortly before the documents were recorded, the board decided to look into the matter further. They learned they should never have altered these documents, but by then it was too late.

Three board members sold and moved immediately before recordation, and the other two moved right after recordation. The remaining owners don’t want the amended governing documents because they have had a detrimental effect on our living conditions.

We want the money back that the old boards incompetently spent on this project of theirs. Can we sue the attorney and the old board if we can find them?

Answer: Not all governing documents fall under identical rules for amending, restating or rewriting. Most association governing documents contain information pertaining to amendments, the procedure to follow in order to change them and the percentage of homeowner votes necessary for approving changes.

In most cases, the covenants, conditions and restrictions (CC&Rs;) also require that changes be recorded before they become effective.

At the very least, the vote to approve or reject must be recorded in the minutes of the meeting at which the association membership voted. Because minutes in California are considered prima facie evidence of occurrence of the events recorded in those minutes, failure to include the amendment and a vote in an association’s minutes may indicate the meeting and vote never occurred. However, once the documents are recorded, the change is in place until subsequently amended.

Knowing where former directors have moved is essential in case they must be named or called as witnesses in any lawsuit about the amendments. Recovering misspent funds from prior board members through a lawsuit is difficult but not impossible. There are many defenses previous directors might raise, which could limit or prevent recovery.

The association’s officers and directors insurance policy (D&O;) will detail the coverage available and whether the association can recover its damages under that policy. The costs of trying to recover any money may make the recovery option not worth pursuing.

Whether the attorney committed malpractice is open to question because she likely did what the board requested of her. She may have acted unethically, which would be a violation of State Bar Rules of Conduct, especially if she knew or should have known that the association was going to make these changes without approval of the homeowners.

It is appropriate to write the State Bar Assn. requesting that an investigation be begun and that the attorney return all fees paid to her. Be sure to send the attorney an invoice detailing the requested refund amount.

Just as the old board was able to change the documents, a new board can make changes, even if they are to revert to the earlier version.

There is nothing stopping the new board members from reversing the damage caused by the old board and restoring trust by owners.

And there is no need to expend tens of thousands of dollars. Simply follow the procedures in your governing documents for amending them, and use that procedure to restore to the documents the terms previously removed or changed.

For more information about the State Bar Assn., visit www.calbar.ca.gov or to lodge a complaint, call the Attorney Complaint Hotline at (800) 843-9053.

Questions can be sent to P.O. Box 11843 Marina del Rey, CA 90295 or e-mailed to NoExit@mindspring.com.