Community Association governance is changing. How association leaders get the information they need has become as important as the information itself. The amount and complexity of homeowner association law, cases, and practice points available online, in professional courses and educational seminars can be overwhelming.
Through our law seminars, publications and, board orientations, the attorneys at Berding|Weil work to keep our clients and industry leaders tuned in to what matters. Now we offer an additional source of information and education for Directors and Managers our community association video series. These programs are a short 3 minutes long and highlight some complicated issues governed by the New Davis-Stirling Act. For the beginner or the pro, these informal videos available when you want to review them address important aspects of association operations and will help you get in and get out what you need to lead.
The Common Interest Development Open Meeting Act sets the frame for meetings of community association boards of directors. It requires posted agendas; limits what can be acted on at open meetings; generally bans the use of email for decision making; and overrides conflicting rules in other governing documents or law.
Previously, decisions by association boards could be made by email by unanimous written consent thus eliminating the need for an in-person board meeting. The concept was, if directors all agree on an action, there is no need to wait for a formal meeting for its implantation. The legislature changed that in the Common Interest Development Open Meeting Act. Except for emergencies, the Act prohibits the use of unanimous written consent (including email) and opts instead for more transparency so that association members can see and hear the board's discussions on action items, even where the directors do not disagree.
Back in the day, there was no requirement that a board adopt or post an agenda for meetings. Any item introduced for action could be acted on even if notice had not been given the members. This changed with the Open Meeting Act. It requires an association to post or distribute agendas two days (for executive session matters) or four days (open meetings) prior to a meeting; if the agenda does not include a proposed action item, no action can be taken on it at the meeting. It is wiser to schedule more than less. There are nuances (including who actually sets the agenda) and exceptions and some work arounds.
Incorporated associations are required to keep a record of their proceedings and that record is typically the minutes of board meetings. Yet the law doesn't specify exactly what minutes should include (or omit). Clear minutes serve many purposes; they can eliminate disputes, provide clarity and greatly reduce expenses if facts stated in the minutes can challenged long after the minutes were adopted.
Fiduciary duty the concept that directors must act in good faith in the best interest of the corporation, and make decisions based on a consideration of the right information is easy to say but sometimes hard to execute. Meeting the fiduciary duty standard is good for directors; it gives them a frame for a 'safe harbor' in which to operate; and it is good for the members because its compliance assures that directors will feel the pressure to do a good job.
Indemnification occurs when one party defends another from claims or pays claims on their behalf. Community associations must indemnify their agents (directors, officers and managers) otherwise, no one would volunteer or work for the community association. The easiest and most common way an association provides indemnification is with good insurance. But insurance doesn't cover all claims, and it's important to understand its limitations.
Directors and Officers (D&O) insurance is one of the most effective ways an association can protect its volunteers, and with proper policy language, its manager. But, coverage is not a given. There are special time periods for submitting claims and failing to comply can jeopardize coverage. Also, some new insurance policies exclude the manager or claims that come up regularly, like claims based on noise or violation of some state or federal laws.
2006 was a big year for homeowner association elections. A new law was enacted, was immediately amended but remains complicated. Some provisions override the California Civil Code, the Corporations Code, or community association governing documents which conflict, while other provisions defer to those authorities. Basic voting rules about proxies, cumulative voting or director qualifications are changed just a little or not at all. Navigating which parts of the election statutes and the required election rules trump an association's governing documents can be tricky.
Next upcoming in our Community Association Video Series: Violation of Election Laws