Director’s activism may lead to liability

Question: We have an owner on our board who believes it’s the board’s job to protect property values and to prevent businesses from moving into the area. He claims to speak for everyone in my association and, now, the entire neighborhood.

This activist-director intimidates new businesses by attempting to shut them down before they go up. He inundates residents with petitions and dominates board meetings. He’s used association funds to produce and mail items supporting his causes.

Many owners fear a lawsuit might be filed against the association because of his interference with outside businesses. What can we do?

Answer: Without any proof, claims that a proposed business moving into the area is responsible for decreasing property values could, in this instance, be construed as slander or libel. Nothing in the Davis-Stirling Common Interest Development Act imparts a duty on an association board of directors to “protect property values.”

Owners wanting to support local businesses should do so, disavowing the activist director’s claims and letting these businesses know this director does not represent them.

Because his activities are beyond the scope of acts legally allowed, the association must not permit use of its name, time or funds to support them. All money should be repaid to the association and, if not, may possibly be recovered in a derivative action to enforce the covenants, conditions and restrictions (CC&Rs;) in Small Claims Court by any association titleholder.

California homeowner associations are primarily nonprofit, mutual benefit corporations -- meaning board members must be careful when claiming to represent their members in arenas outside the association’s boundaries. One possibility is the loss of a tax-exempt status.

This director’s activism could also be considered an interference with a business opportunity by the businesses he’s attempting to intimidate, and if any of those businesses decide to sue, he would subject not only himself but the entire association to risk.

Anyone has the right to contact any government official or agency that will listen to him, but if the activist director alludes to, gives the appearance of or claims he is representing all of the owners in his association or neighborhood -- when even one person disagrees with him -- he is misrepresenting his position and subjecting himself and the association to liability.

If that director becomes the subject of a lawsuit because of his actions, the association’s insurance won’t cover his defense or any damages he might be ordered to pay.

Send questions to P.O. Box 11843, Marina del Rey, CA 90295 or noexit@mindspring.com.