by Steven S. Weil, Esq. and Sandra M. Bonato, Esq.
In California, it takes a veto by the Governor to reject bills approved by our legislature. On September 30, 2010, the last day possible, Governor Schwarzenegger vetoed four bills that would have had potentially significant impacts on the operations of common interest developments and their associations.
As reflected in his veto messages discussed below, the Governor clearly respects the integrity of governing documents and the right of owners to vote to change the governing documents to reflect the unique circumstances of each community, without undue legislative interference.
AB 1726 (Swanson)
"Reduced Quorums" / Notice of Executive Sessions
AB 1726 would have permitted quorum to be reduced in director elections, even where bylaws do not provide for reduced quorums. The bill would also have specifically required the posting of a notice and agenda for executive sessions of the board of directors.
In his message to the Assembly explaining his reasons for refusing to sign the bill, the Governor said the first of these changes was unnecessary since members can amend the bylaws to provide for reduced quorums, if they don't already contain them. He concluded that the bill would "interfere with the basic democratic principle of CIDs." The Governor's message did not address the part of AB 1726 (belatedly inserted by its author without notice) that would have required executive sessions to be noticed and agendized. Some suggest this requirement already exists, while others believe that state law instead calls for general disclosure of executive sessions at the next open meeting of the board but not before.
The following question came to us from one of our readers:
I was reading your article "What you don't know about your CCRs, your Budget, and your Buildings" and it very much reminds me of an issue we currently have at my condo complex.
I am a member of my HOA board. Our five directors are currently divided on the issue of fumigating for termites. In 2008, our reserve study recommended tenting the buildings (constructed in 1994 and have never been fumigated for termites) within one year. In both 2008 and 2009, two different companies that did our annual termite inspections recommended tenting the buildings. This past summer when I was remodeling my unit, I discovered termite damage to the sub-floor (a previously inaccessible area for inspection until I removed the carpet and padding). I had two termite companies come in and look at the damage and they informed me, again, that the buildings were badly infested and needed to be fumigated. Another board member also discovered extensive damage to the framing in his unit this past summer (such that he actually had to have some of the 2x4s replaced).
We have been discussing tenting the buildings ever since I moved into the complex - but most recently, a new board member was elected and she is opposed to tenting because of the costs. (It would require an assessment of about $900 per owner.)
At what point does a board and/or management company become negligent in ignoring on-going termite problems? Another board member and I keep recommending that we tent to stop the current termite infestation. The other three are opposed. Any suggestions? Should I hire a lawyer? I really feel the other three board members are being negligent in ignoring the severe problem that our buildings have.
Board members have a fiduciary responsibility to the association. Part of that responsibility is considering the advice of qualified professionals when making decisions that affect the interests of the community. Civil Code Section 1364(b)(1) makes it clear that in a condominium project, unless the CC&Rs state otherwise, the association is responsible for damage caused by termites. Presumably, your CC&Rs do not say otherwise.
Your reserve study preparer has recommended tenting. The association's pest control professionals have twice advised that tenting is an immediate necessity. This strong, consistent advice must be considered by the board in concert with other information, including the cost, resident relocation and inconvenience that result from tenting. You haven't said whether other less-impacting types of termite treatment are available and would work, or whether you and your fellow directors have explored alternatives. You've told us that, despite evidence that the problem continues to get worse, cost is the only reason the work hasn't been authorized.
Based on what you've told us and assuming there is no other side to the story (there usually is), we think the members of the board majority who are ignoring the advice of qualified professionals and failing to act could have personal liability and could be judged to be not acting in "good faith" or in the best interests of the community as a whole. These are the legal tests for determining the reasonableness of directors' decisions and are the underpinnings of the conditional immunity provisions in Civil Code section 1365.7 that would otherwise protect directors from personal liability. State law gives boards adequate tools to deal with financial crises, and there are creative and practical solutions to managing underfunded maintenance and repair problems and get work done without stranding owners financially. The advice of qualified counsel for your association is definitely needed.
Copyright ©2010 BERDING | WEIL
All Rights Reserved.