Homeowner board member should put objections on the record

Question: I am one of five directors elected to my homeowner association board. Last year three of the five directors chose to rehire a management company that had been fired by the board more than four years ago for a variety of problems, including mismanagement. The company’s manager has continued with the same poor service that was the reason he was previously terminated, including “accidentally” double-paying himself one month after putting himself on automatic payments without permission from the board and authorizing more than $2,000 in nonemergency repairs using a plumber he chose without consulting the board.

I have tried repeatedly to open discussion about terminating this manager along with his company, but the three-director majority refuses to admit there is a problem.

These three directors continue to make motions and to take actions that are outside of noticed meetings to all the owners, and they do this without unanimous approval as required by our bylaws. This is in direct conflict with the Common Interest Development Open Meeting Act, but they don’t care. Without a board majority to pass any motions, what options do I have to correct these problems?

Answer: Directors can neither cede nor delegate their duties to a third-party management-company vendor. It is the duty of each director to use independent thought, perform genuine due diligence and act in good faith at all times. Each board director owes a fiduciary duty to the association, to the titleholders and to the other directors.

Directors do not act individually. It is the board that makes the decisions, including giving direction to the management company and instructing it on the acts it is permitted to take.

To rehire a company that was previously terminated for cause is reckless and might even be negligent. Acting in defiance of the Open Meeting Act, taking action outside of noticed meetings and violating the association’s bylaws calls into question the validity of board actions and opens directors up to being removed from their positions, if not by the titleholders, then by a court.

A double payment is the type of thing that can occur when board directors fail to perform the vigilance that proper oversight demands. Although not a recommended practice, boards sometimes sign management contracts that include terms allowing the management company to pay employees by automatic deduction from the association bank account. Not only does this create a possible overdraft situation for the association, it also allows someone other than the association’s board to decide on payments and removes the board’s oversight in issuing such payables.

Terms like these also make it difficult to stop such payments when the board terminates the management company, as yours has done in the past. No one except the board should authorize association payables, and especially not a third-party vendor such as a management company.

It is vital that your opposition be included in the minutes of meetings. Each titleholder deserves to know the truth regarding the association’s business, and boards acting in conflict with the Open Meeting Act may be opening themselves up to litigation.

Although your position as a minority board director is a difficult one, your duty to the titleholders does not change. Your actions in support of adhering to the Open Meeting Act, of not rehiring a previously terminated vendor and constant questioning of other board members’ actions could serve to protect you if and when the board is sued.

Send questions to Box 10490, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.