Managers are there to advise, not to rule

Question: I sit on my homeowners association board. With prompting from the management company, board directors meet at my house for casual, off-the-record get-togethers in advance of board meetings, primarily so the homeowners won’t know we are meeting.

I’m concerned about what I feel is management company domination of our board and our association. In one of those get-togethers, the manager tried to persuade us to raise fees and impose a rather large special assessment, saying that if that didn’t work, to go for an emergency assessment. The manager informed us that when owners purchase this type of housing, and I quote, they are automatically “required to consent to paying large financial transactions, long-term contracts and large increases in assessments.”

I questioned the manager on this and was told that owners are required to consent because they do not have authority to veto or undo board actions. As a buyer, I never automatically agreed or consented to any such things and resent management butting into association business like this. Is our board being misled?

Answer: Yes. Misleading information and actions based on it create distrust between boards and titleholders that could subject board members and the management company to potential liability.

A manager is not an attorney. Associations hire management firms to provide a service. That does not include legal advice from nonlawyers, nor does it invite the company to advise the association to break the law.

Among the board’s duties are to direct and supervise the management company, not the other way around. Directors who defer to advice from management, especially legal advice, are derelict in their duties. If they ignore the rights of titleholders at the urging of management, they expose themselves and the association to liability.

Regardless of a management company’s advice, boards that meet secretly violate the Common Interest Open Meeting Act.

For boards of directors, there can be no off-the-record meetings. Convening a board meeting to discuss association business -- whether by get-together, phone, e-mail, etc. -- with the idea that others won’t know, is tantamount to perpetrating a fraud on all other members.

Under the Davis-Stirling Act, whenever a majority of the board gets together to discuss association affairs, that constitutes a meeting requiring notification of all titleholders and production of minutes that must be made available for distribution.

Owners are obligated to pay assessments as they come due, but nothing in the law states that owners are automatically “required to consent to paying large financial transactions, long-term contracts and large increases in assessments” by a board without knowing exactly what they are paying for, how much it will cost and the implications of the transaction itself.

Civil Code Section 1366 allows a board to raise the regular monthly dues by up to 20% a year without a vote of titleholders. Also permitted is a special assessment of not more than 5% annually of the aggregate budget. Any increases over those limits require a vote of all titleholders in accordance with the governing documents.

Section 1366 also specifies the criteria for implementing emergency assessments. Before any such assessment can be proposed, let alone voted on and collected, the law must be followed.

Boards that respect homeowner rights ask for discussion and vote of all titleholders before imposing any increases. Funding large financial transactions of the board -- not within the code’s definition and hardly an emergency -- is not the owners’ responsibility, nor is it the board’s function to obligate the association in that manner.

Use this checklist to determine whether assessment increases are legal.

* Any increase in monthly dues of more than 20% or any special assessment in excess of 5% of the gross budget is illegal and must be challenged by titleholders before it is paid.

* Any meeting not held on the date and time specified in the bylaws and/or without notice to the titleholders is illegal, and acts taken at those meetings are invalid and unenforceable.

* Emergency assessments must meet the criteria set forth in Civil Code Section 1366 or they are illegal.

* Titleholders do not automatically consent to increases in assessments beyond the limits in the law and must be given an opportunity to vote against them.

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