If manager oversteps duty, board must step in

Question: Our homeowner association seems to get involved in things it shouldn’t. The manager always comes up with projects that have nothing to do with our association. Recently, she had the board of directors draft and distribute a letter to neighboring property owners telling them about the “benefits of joining an association” and listing properties for possible annexation. Several owners are concerned. We don’t want to incur any liability, and we do not want to take part in a solicitation of neighbors for annexation. Is our reasoning wrong?

Answer: Your reasoning is just fine. The management company is a third-party vendor supplying services under contract to the association. Any vendor contract the board enters into must include details regarding performance, services to be rendered and cause for termination.

All vendors take direction from the association’s board, not vice versa. Vendors, other than attorneys, cannot practice law without a license, and instructing a board to act outside the scope of its statutory duties might be actionable. Boards that follow such instructions may open the door to potential liability for all the homeowners. All owners assume the risks of their boards and their agents’ activities performed on behalf of the association.

Unless the association’s governing documents state otherwise, board duties do not include annexing new territory.

This manager and her company owe an unequivocal duty of loyalty and obedience to your association. The duty of loyalty means acting solely for the benefit of the association at all times and does not mean using your association to expand a clientele by encouraging the annexation of other people’s property.

Realistically, the manager’s windfall of new clients could compromise the association’s exclusive and autonomous nature. An annexation may allow the manager to charge higher fees without providing quantifiable benefits to your association.

The association’s board of directors cannot escape accountability by delegating its duties to a manager. “Enlightening” the neighbors to the benefits of joining an association or soliciting votes for annexation are not within the scope of an association director’s duties and may be prohibited by the governing documents or existing law.

Civil Code section 1364(a) says that a board’s duties are limited to “repairing, replacing, restoring, or maintaining” the common areas, and actions beyond those permitted by law could even result in a change of the association’s tax status.

When managers exceed the scope of their employment, they can be fired by the board. In this case, your board should be telling association members what it’s trying to do, as member approval will be necessary. Those who are opposed to the board taking this type of action must communicate their feelings.

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