When mental state of director is in question, act fast

Question: Our board has allowed more than 300 units to go without heat for two years, and there is talk that our association is $400,000 in debt. One owner hired a private investigator, who made discoveries that raise questions about the past mental fitness of an influential board officer. This board director intimidates other board members and employees to enforce his decisions. Board directors who oppose him aren’t permitted in executive sessions.

I cannot find anything in our covenants, conditions and restrictions (CC&Rs;) that would protect owners and our investments from someone who becomes incapacitated. What can we do?

Answer: Every board director has a duty to act competently and in the best interests of the association. The board’s statutory duty is clearly stated in Civil Code section 1364(a): “Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.”

Heating is considered a necessity and in this situation falls under board duties to maintain. There is no excuse for a board’s failure to adequately maintain the system.

If the association’s funds are misappropriated or mismanaged to the extent that operations are jeopardized, the entire board may be held responsible. Any titleholder can request a resolution from the board, mediate or arbitrate the matter, or file a lawsuit to enforce the CC&Rs;, including the obligation of the association to repair, replace and maintain the project. Should any lawsuits be filed against the association or board, the directors still may be sued individually and also may be held liable for damages.

Any titleholder may file a petition in Superior Court requesting a receiver be appointed. If the court finds that owners are incapable of managing the association, a receiver is appointed to step into the shoes of the directors. Once appointed, the receiver takes full control of operating the association’s business.

The duration of the receivership is left to the court’s discretion. In addition to the cost of running the association, the titleholders must pay the receiver’s court-approved salary. All of this is funded from association bank accounts, assessments paid by the titleholders or even from special assessments. This is an extremely expensive and laborious avenue to pursue and is fraught with unpredictable results.

There is no justification for allowing one director to exercise excessive control -- especially in preventing other directors from performing their duties and attending executive sessions.

Although the association’s CC&Rs; may be silent on the topic, the Corporations Code Section 7221 states that the board may declare vacant the office of a director who has been declared of unsound mind by a final order of court, or has been convicted of a felony.

This allows the association, or any of its members, to go to court and have a director declared incompetent and removed from the board. Or, if a director has already been declared incompetent, the other directors may remove that person from the board.

If the board fails to act of its own accord, titleholders can act quickly by calling a special meeting for the purpose of removing that director.

Inaction, complacency or intimidation are not going to solve anything. As evidenced by the heating situation, the problems at your association appear to have been long-standing and somewhat tolerated. Title holders do not need to wait for board elections to take place to make a difference. Like-minded owners can get together, pool their resources and make a difference.

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