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*Asked & Answered

recall-WEBAsked – We recently completed our annual meeting/election where approximately ninety-four percent (94%) of the membership participated. Almost immediately thereafter, we received a petition to recall the Board of Directors (“Board”). Must our association go forward with the recall election? What alternate options are available to the Board?

Answered – Most common interest developments (“CIDs”) are formed as nonprofit mutual benefit corporations. Under California’s nonprofit corporation law, “any or all directors may be removed without cause” (Cal. Corp. Code § 7222 (emphasis added)); meaning that directors can be removed by the membership for any reason, or no reason at all. In order to initiate the recall process, five percent (5%) of the membership may submit a petition to the CID (usually addressed to its president) requesting that a special meeting of the membership be noticed for the purpose of recalling the Board (or any director). The notice requirements are addressed in California Corporations Code section 7511(c).

Recall elections can disrupt the effective operation of the CID and are often a costly endeavor. And, in most cases, such efforts fail to achieve the petitioning members’ desired objective—the removal of the Board. This is especially true in situations where the CID’s Bylaws allow for cumulative voting and members try to recall individual directors. (See Removal & Recall of Directors – Individual Director or Directors.) Nevertheless, under most circumstances, the CID must take action in response to a petition to recall the Board. However, based on the facts contained in the question presented, there may be other options available. The three options available in response to a valid recall petition are:

  1. Perform only those acts required to conduct a recall election;
  2. Do nothing in response to the petition other than to inform the petitioners that the Board has elected not to take action; or
  3. Perform all acts necessary to hold a recall election and concurrent director election.

Each option will be discussed in turn.

Option #1 – Perform only those acts required to conduct a recall election.

According to the facts provided in this question, the petitioning members have submitted a petition to recall the Board. The petitioning members have not also requested that a director election be held in the event the recall is successful. Thus, the Board could simply notice a special meeting of the membership to recall the Board without soliciting membership votes on replacement directors. This approach is problematic for the CID.

Under California Corporations Code section 7220(b), a director continues to serve until their successor is elected, “unless the director has been removed from office.” Thus, if the recall is successful, all directors immediately cease being on the Board; in other words, the CID will be without a Board. Failure to have a Board violates California Corporations Code section 7210, which states that “[e]ach corporation shall have a board of directors.” (Emphasis added.) Moreover, without a Board, the CID will be significantly prejudiced; it will not be able to carry out its obligations under California law and its governing documents (e.g., maintenance may cease, rule enforcement ends, the CID will be unable to respond to lawsuits, etc.).

Since the CID will be without a Board, members will be forced to file a petition with the Superior Court for the appointment of a receiver pursuant to California Code of Civil Procedure section 564(a)(9). The receiver will then manage the affairs of the CID and will initiate the procedure to conduct a director election. This, of course, is problematic in several respects.  First, receivers are paid for their services. Most CIDs do not have adequate financial resources to cover unanticipated expenses. The receiver therefore may be forced (and will have the authority) to levy an emergency special assessment. Second, the receiver’s objectives are not usually in line with the interests of the CID’s members.

In light of the foregoing concerns, it would not be in the CID’s best interest to proceed in this fashion (i.e., conduct the recall election without a concurrent director election).

Option #2 – Do nothing in response to the petition other than to inform the petitioners that the Board has elected not to take action

Based on the information given, this option may be reasonable under the circumstances, especially given the overwhelming voter turnout (approximately ninety-four percent (94%) of the membership participated in the election). If such option is selected, the petitioning members will have the option of giving notice of the special meeting pursuant to California Corporations Code section 7511(c), or may petition the Court to require that such notice be given by the CID. Either way, the petitioners will be required to obtain a Court order directing the CID to prepare and distribute ballots as the petitioners do not have such authority. (See Cal. Civ. Code § 5115 (“Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member….”).)

This option, while seemingly reasonable, raises similar concerns referenced above. To the extent members petition the court for an order compelling the CID to take action in response to the petition (including providing notice and preparing/distributing balloting materials), the CID will incur significant legal fees in defense of its position in this matter (unless insurance-appointed defense counsel steps in to provide a defense). And, in the event the petitioners are successful, the CID will incur costs relative to holding the recall election/director election. Again, most CIDs are not in a financial position to incur these additional costs.

Option #3 – Perform all acts necessary to hold a recall election and concurrent director election.

The third, and final, option—to conduct the recall election and concurrent director election—is the only option available to the CID that minimizes the CID’s financial harm and liability exposure. It is therefore the preferred course of action in response to a petition to recall the Board.

It is important to note that recent changes to the California Civil Code governing CID elections has made it practically impossible for a CID to comply with the timing requirements contained in California Corporations Code section 7511(c) and those contained in California Civil Code section 5115. Nevertheless, California Civil Code section 5100(a)(1) makes it clear that the procedural requirements contained within the Davis-Stirling Common Interest Development Act (“Act”) control—“Notwithstanding any other law….” The CID must therefore comply with the procedural requirements contained in California Civil Code section 5115 notwithstanding the degree to which same deviates from those contained in California Corporations Code section 7511.

Other Option Available to the CID to Prevent Recall Petitions Immediately After a Director Election

The foregoing has addressed the ways in which a CID may respond to a recall petition immediately after the conclusion of a director election. It does not, however, address how a CID may prevent such petitions from being brought in the future. One way in which a CID may prevent such petitions from being brought in the future is to adopt rules governing recall elections. Although the Act does not directly address the extent to which a CID may restrict recall petitions, other bodies of law have. For example, in the California Elections Code, a person is precluded from bringing a recall petition against “an officer of a city, county, special district, school district, community college district, or county board of education” if one ore more of the specifically identified limitations apply (e.g., the officer “has not held office during [their] current term for more than 90 days”). A CID may adopt a similar limitation for director recalls.

California HOA lawyers Each recall petition is unique. Thus, while the foregoing provides general guidance based on the particular facts identified above, each CID must confer with its attorney to determine the appropriate response to a recall petition.

-Blog post authored by TLG Attorney, Matthew T. Plaxton, Esq.

covid-19-1330pxOver the last few business days, our firm has received several calls regarding the Coronavirus (COVID – 19).  We understand the obstacles created by COVID – 19 because successful association governance depends upon engaged community involvement and personal interaction.

The purpose of this blog post is to provide a brief overview of our response to some of the common questions we have received.  It is based upon information which is currently available as of March 17, 2020.  The recommendations set forth herein are subject to change based upon governmental mandates.

Continuance of Necessary Business Operations:

Community associations, as non-profit corporations, should continue to perform essential business operations (i.e. collect Member assessments and pay Association bills) during this epidemic.  As of the time of this drafting (3/17/20), President Trump released new guidelines to slow the spread of COVID – 19 by advising the public to avoid groups of more than ten (10) individuals, among other safeguards.  Governor Newsome recommends that restaurants eliminate dine-in options and the closure of movie theaters and health clubs.  Medical professionals have uniformly taken the position that social distancing can minimize virus transmission.  In view of those protections, boards, in consultation with management and legal counsel, should consider the temporary closure of community-based events and functions, particularly in situations where residents constitute a high-risk demographic (i.e. age-restricted communities).

Board Meetings:

Board meeting procedure is regulated by an association’s governing documents and the Civil Code.  An association’s by-laws will set forth the frequency of board meetings.  Boards should consider postponing non-essential general session board meetings, or in the alternative, conducting essential association business in executive session only via teleconference as permitted by California law.  Boards may conduct general session and executive session board meetings via teleconference upon proper notice which identifies at least one physical location so that Members of the association may attend (Civil Code Section 4090 (b)).  At least one director or a person designated by the board shall be present at that location (Civil Code Section 4090 (b)).

To the extent possible, efforts should be made to protect Member rights, such as the right to attend board meetings and participate in homeowner’s forums.  How do we balance those rights with current social distancing recommendations? There might be a viable path under the Open Meeting Act.  Members possess the legal right to attend general session board meetings and shall be entitled to attend teleconferenced board meetings (Civil Code Section 4925). An argument could be made that Members may attend general session board meetings via teleconferencing means if such board meeting was previously noticed as a teleconference board meeting and the procedural requirements are satisfied as referenced above.  Discuss with legal counsel whether the Open Meeting Act could be interpreted to allow Member attendance (via audio and/or video means) at teleconferenced board meetings instead of physical presence at the meeting location.

We recommend that boards consult with legal counsel to discuss teleconferenced general session board meeting procedure before deciding to hold open meetings without members and then issuing minutes thereafter.  It is unclear how a superior court judge, in the event of a later Member challenge, might evaluate the handling of board meeting procedure during this current state of emergency.  A possible judicial response might be to review how the association attempted to substantially comply with the law using the governance tools that are presently available through the Open Meeting Act.

Member Notice:

Medical professionals state that individuals respond to crisis and stress in different ways; it is very likely that some may be scared while others may not be.  Residents may look to the association and management for guidance and direction.  For that reason, transparency is desirable.  Boards should work with their management partners and legal counsel to develop a policy statement which identifies how your community intends to respond to COVID – 19 with respect to association meetings and community affairs.  In the event of common area closure or facility limitations, notices should be posted which explain the board’s reasoning in that regard.  Association residents should be directed to governmental agencies (e.g. CDC, California Department of Public Health, and county health agencies) for more information.

On March 12, 2020, California Governor Gavin Newsom issued Executive Order N-25-20 (“Order”) which modified how legislative bodies may conduct public meetings via teleconference under the Brown Act.  That Order does not apply to private association meetings which are governed by the Open Meeting Act and we are not aware of emergency legislation that might govern how association meetings are expected to be handled during this health crisis.  Although not applicable, the spirit of the Order’s final provision should be considered as we think about association governance during this time; namely, the Order concludes by stating that, “all state and local bodies are urged to use sound discretion and to make reasonable efforts to adhere as reasonably as possible to the provisions of the … Brown Act, and other applicable local laws regulating the conduct of public meetings, in order to maximize transparency and provide access to their meetings.”

California HOA lawyers It is critically important that boards work closely with their management partners and legal counsel to develop practical solutions regarding Board governance which, to the extent possible, complies with the Open Meeting Act while protecting Member safety.

-Blog post authored by TLG Attorney, Kumar S. Raja, Esq.

Neighbor-Disputes-8-Smart-Tips-to-Legally-Deal-with-Nuisance-Caused-by-Nasty-Neighbors*Unpublished Opinion

The Court of Appeals recently rendered an unpublished opinion in  Harbour Island Condominium Owners Association, Inc. v. Alexander (2019), which provides some clarity regarding a tenant’s right to attend board meetings and the ban on noxious activities within the community.

The Harbour Island Condominium Owners Association (“HOA”) sought a restraining order (known as a preliminary injunction) against two tenants and their landlord to abate the tenants’ noxious behavior.  The HOA relied on the provision in the CC&R’s, which stated that residents cannot disturb the neighborhood or occupants of a neighboring property or create a nuisance.

Neighboring residents made several complaints to the HOA about the tenants’ excessive and purposeful noise: the tenants consistently stomped on their floors and slammed their doors.  In addition to the noise complaints, tenants permitted their dog to urinate in the Common Area, despite the posted “No Dogs” signs.  Lastly, the tenants engaged in aggressive behavior against the Board of Directors in an apparent attempt to intimidate Board Members.  For example, the tenants secretly photographed a Board Member at the pool on different occasions.

The trial court granted the preliminary injunction, ordering the tenants and their landlord to install throw rugs throughout the unit and a sound-muffling device on the doors; to cease photographing Board Members; and to prevent their dog from urinating on the Common Area.  The trial court ruled in favor of the HOA because the tenants’ noxious behavior unfairly oppressed the rest of the community, while the ordered corrective measures were minimally oppressive to the tenants.

The Court of Appeals upheld the trial court’s decision.  Despite the fact that the HOA’s nuisance provision did not mention dogs, the Court broadly interpreted the existing provision to encompass the exclusion of dogs from the Common Area for health and safety reasons.

Furthermore, the Court held that the nuisance provision bans acoustic nuisances that interfere with a neighbor’s right to quiet enjoyment.  In this case, the nuisance claims were supported by credible witness testimony that the tenants’ noise was excessive.

Lastly, the Court of Appeals disagreed with the tenants that their due process rights had been violated since the tenants were not permitted to challenge the violation notices at hearings.  The Court held that only Owners with vested property rights are Members of the HOA.  As such, only Members may participate in HOA meetings.

California HOA lawyers The Harbour Island case highlights the broad reach of nuisance provisions in CC&Rs and serves as a reminder that Owners, not tenants, have the right to attend and participate in HOA meetings. 

-Blog post authored by TLG Attorney, Sarah A. Kyriakedes, Esq.

lawyer-hoa-attorney-meeting

Civil Code Section 4925 grants to each member of a homeowners association (“HOA”) the right to attend HOA board meetings (except for executive session meetings). Section 4925 also grants members with rights to speak at board meetings and to address the board during open forum. However, these rights are explicitly granted to the HOA’s “members” (the owners of lots or units within the HOA’s development), not to a member’s agent or attorney. The California Court of Appeal addressed this issue in the 2013 case of SB Liberty, LLC v. Isla Verde Assn. Inc., where it affirmed a HOA’s ability to prohibit a member’s attorney from attending a board meeting on the member’s behalf.

However, Assembly Bill 1720 (“AB 1720”) was just proposed by the California Legislature in order to change this structure by amending parts of Section 4925. If signed into law, AB 1720 will add new subpart (c) to Section 4925 to state:

“The board shall permit an attorney who represents a member to attend any board meeting that the member is permitted to attend, regardless of whether the member attends. Where possible, the member shall give the board at least 48 hours advance written notice that his or her attorney will attend the board meeting.”

AB 1720 follows in the same vein as legislation which became effective January 1, 2015. That legislation (AB 1738) was enacted to grant a HOA member the right to be assisted by an attorney when the member is participating in Internal Dispute Resolution (IDR) with a member of the board.

hoa laws AB 1720 could be problematic for HOAs by placing boards in a position of having their meetings observed or disrupted by the attorney of a member whom is, or is likely to become, involved in a dispute with the HOA. Such a situation will likely have a chilling effect on the discussions and actions taken at a board meeting where a member’s attorney is present, especially if the HOA’s attorney is not present. While AB 1720’s language currently requires the member to, “where possible,” give the board at least 48 hours written notice that his/her attorney will attend the board meeting, it does not clearly specify whether the attorney must be allowed to attend regardless of whether the member actually provides such notice. Moreover, this notice requirement is presumably intended to provide the HOA with enough time to arrange for its attorney to attend the meeting as well. A mere forty eight (48) hours notice may not be sufficient in this respect. If anything, members should be required to comply with the same timeline currently imposed upon the HOA when it provides notice of board meetings to its members: four (4) days. We will continue to track AB 1720 as it makes its way through the legislature.
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