Tiebreakers in HOA Elections – What are the Options?

There are some problems that may come up in the coming months and years – and the new elections law kind of complicates them. Maybe we can brainstorm some solutions for you before it happens. This is a real question sent to me recently: I am on the Board of Directors for ***. We have just had our elections for Board of directors (3 openings). We have voted in 2 board of directors and had a tie for the third one. We took another vote with only the two names on the ballot, and again we had another tie. What is the procedure for having a tie breaker? I cannot find anything written regarding tie votes on elections. Please help.”

Tie votes have happened in the past so they are not new. However, when there was a tie in past elections and the association was using proxies, an association could have a runoff election the same night as the meeting. In fact, the Association could have two runoff elections the same night. Now, under the new laws, in order to have a runoff election it appears to me that the Association needs to close the meeting, prepare new ballot packages (of the double envelope secret mail variety) and mail them out to the members, appoint inspector(s) to receive and count the ballots, hold the counting at another meeting (board or membership) and hope for the best. Sometimes there might be another tie, and another, etc. etc.

So when there is a tie, what is the procedure for a tie-breaker? These are possibilities that come to mind:

Vote again. Ask the volunteers subject to the tie to agree to flip a coin. Ask either to step down. Ask another board member to voluntarily step down so the two candidates in the tie can both serve. Go to court and ask for a determination. Take the next best vote getter for the Board.

If the Board does anything other than a runoff election, or go to court (an expensive endeavor), it seems to me that the candidate not getting the position because of the tie can cry foul and challenge the Board and the election. Sometimes the volunteers in the tie might be willing to step down, why not ask? Sometimes another board member might step aside to let new blood in. Why not ask? Sometimes the “contestants” might be willing to agree to a coin toss to settle as a tiebreaker, especially if they want to prevent protraction of the problems.

I would say look for a reasonable response to a difficult problem. The key is “good faith” because “legal” does not always present an option.

I am sure others out there have other suggestions.  If I receive any feedback from this blog, I will share it.

Termite Repairs in California – Who Repairs the Property Damaged to Get To Them?

Termites issues come up all the time. A reader recently sent me a long involved story of the situation in his condo association. I cannot answer long and involved emails, or, for that matter, any emails that ask for information specific to a particular person or association’s situation, because that would be giving legal advice without the important step of interviewing a client. And, unfortunately for those who write, I do not have time to provide free legal advice. That said, the person was kind enough to digest the situation to a question that might help others too. The scenario described in generic terms is:

“In our HOA, termites were located in the area between the ceiling and the roof of our condo. The Association admitted that it is responsible for the treatment of the termites and said that the termite company would open up the dry wall ceiling. The HOA wants to hold us responsible for the repair of the ceiling.”

How can we be responsible? The Association damaged the ceiling in going after the termites. The repairs could have been accomplished through the roof (much more expensive for them) to get to the infected area.”

This owner said there was nothing in the governing documents related to this issue which I commonly hear. There might be something pertinent to the question of who repairs what. Owners are probably responsible for repairing their units and the HOA is probably responsible for repairing common area, which is the usual threshold scheme of responsibility. The next inquiry (to see whether that scheme shifts) generally is whether there was negligent behavior on the part of either party that caused the damage. The mere presence of termites does not necessarily support any claim of negligence.

In this case, it does not sound like there was any negligence. It is true that the HOA damaged the ceiling in getting to the termites, but that fact alone does not necessarily determine liability. It is much the same as the case where the Board has to go through a floor to get to a slab leak, or has to open up a ceiling of a lower unit to let water escape from a leak that sprung in the common area or a tub that overflowed above and damaged the common area and lower unit. There are several factors that would have to be considered to determine whether the HOA has to repair the portions of the unit that are damaged in doing so.

Were I examining such a question for a client, I would ask a lot of questions about the current situation, past practice and similar situations, whether there were termite preventive measures in place, what recommendations had been made and followed by the HOA with regard to the termites, options explored by the Board for treatment and repair, and I would closely review the governing documents to see what guidance existed there. I would ask if there were any maintenance policies in place, and would consider case authority that exists.

In this case, the owner says the HOA could have approached this problem by going through the roof at a much greater expense. If a court was examining the question of whether the Board’s decision and approach to the work was appropriate, these facts would be pertinent (1) whether the Board consulted an expert and relied on that advice to determine the best approach to the problem and (2) why the Board chose one approach over another.

It’s more complicated an issue than simply opining that everytime the Board has to go through a unit to fix a problem, it has to repair the unit. There are a lot of considerations.

So I cannot say whether the Board was right or wrong in its determination that the owner should repair his own ceiling. Often, though, when a Board does have to go through a unit to fix a leak or make a repair, often the Board arranges at least for the dry wall to be reinstalled, and sometimes for painting to be done in the area entered, matching as closely as possible the paint on the ceiling or walls, in the area of the repair (although owners would always like to have more). When fixing a slab leak, the Board will often arrange to have carpeting re-stretched – assuming the carpeting is not so old it falls apart. Where the differences come in is when the owner wants a whole room painted, or expensive hardwood flooring replaced, or cupboards that are too old to put back up replaced. In the situation at hand, it appears we are just talking about a ceiling repair, which, if rises to a legal dispute, will cost both parties more than it costs to do the repair.

FEDERAL FHFA Regs May Hurt HOAs and Condos

By now, many of you may have heard about a proposed regulation from the Federal Housing Finance Agency (FHFA) issued on August 13, 2010.

The proposal would prohibit Fannie Mae, Freddie Mac and all federal home loan banks from purchasing mortgages for properties in communities with deed based transfer fees. While the target of the regulation appears to be private transfer fees that require a payment to a third party each time a property is sold, the proposed rule would include deed based transfer fees used by many community associations.

The impact of such a rule would be devastating to communities with such restrictions and would likely mean that their properties would be unmarketable. The reason for this is that Fannie Mae, Freddie Mac and the Federal Home Loan Banks originate most mortgages. If they cannot purchase such mortgages from banks, banks will likely not lend money to these properties. To further complicate matters, it is difficult – if not impossible – to remove a deed restriction, as it usually requires a super-majority of all property owners to approve such changes and, in some instances, requires the consent of all property owners.

Artificial Grass for HOAs and Condos

California Assembly Bill 1793 would prevent HOAs and Condos from prohibiting artificial grass products in landscape plans.

The bill is aimed at reducing irrigation water consumption by homeowners in homeowners associations. It targets HOAs.

There are some very nice products available produced by companies like Heavenly Greens. Many interested in “greening” America and preserving natural resources have installed the grass systems and are very thrilled with the result. The installation has a hefty up front cost, but the company tracks return on investment and it seems very reasonable.

There are people that are opposed as well. There are many association Boards that would not want to allow artificial turf, and some that have engaged in litigation to get stubborn owners who have installed Astrofurf in their yards to remove it. Let’s face it, there is a big difference between Astroturf and Grass!

There is a group that is fighting for HOAs that want to prohibit the product, and that has investigated the other side – leaching chemicals. Per the Community Associations Institute -California Legislative Action Committee –

“…the bill has a huge unintended consequence… some turf products contain lead chromate and several other hazardous substances and should not be installed. Associations should be able to ban the toxic turf products.

During the rain season these substances can run off the yards into the community and city water supply, polluting them. Skin contact among children and pets will also be extremely dangerous if there is hand-to-mouth contact.

The presence of these hazardous substances has been firmly established in tests conducted by environmental quality testing labs. And, the California Attorney General recently concluded its successful litigation against some of the turf manufacturers.”

Which side are you on?

Proxy and Quorum Questions

Here are some questions and concerns about proxies and quorum:

“In the condo association that my condo maintains, the board will usually solicit proxy votes for the meeting issues. Then no one shows up for the meetings. As a former government official I am concerned and disturbed by this. My understanding of Roberts Rules and all associations I have been involved with that allow proxy votes, still require an actual quorum be present, even if proxy votes are used. Are condos governed differently?”

First of all, for a valid membership meeting where any action will be taken, or any election for that matter, a quorum must be present or the meeting or election will not be legally valid and could be challenged.

A quorum for a meeting can be established through proxies; however, if there is a board election, or an election to amend the CC&Rs or Bylaws, or an election for an assessment or assessment increase, or transfer of common area to an individual owner, the election must be held by secret written ballot and the ballot packages count toward the quorum. In such a scenario, a proxy holder would have to obtain a ballot package in order to vote and turn it in to be counted toward the quorum.

Because of these complications, some associations have done away with proxies by posing an amendment for owner approval to the Bylaws.

So, what seems to be a simple question can be complicated when proxies are involved.

What Constitutes A Board Meeting?

I received this email from a reader and I think many people would like answers to his question:
I serve on an association board of directors and have a question regarding what constitutes a meeting of the board. I am aware of the rule that a meeting is defined as any congregation of a majority of the members of the board at the same time and place…. We have a president who will contact another board member individually requesting that he sign and approve various documents and then repeat the process with a further board member. He always approaches the two board members over whom he has the most influence and the remaining two board members, of the five person board, are always excluded from the process. Technically, he does not meet with the other members at the same time and place, but the outcome is the same as two board members are always excluded from being able to have their input and are never made aware that such decisions are being made behind their backs. The president maintains that what he does constitutes proper approval by the board of directors even though such decisions are not made at duly called open meetings of the full board. What are your thoughts on this?”

I imagine this happens more than anyone would like to admit. If indeed action is being taken outside of meetings and the president is signing contracts, etc., without board approval, then that is against the law and there is a possibility of making a successful legal challenge to block such practices. However, it is more likely the case is that no law is being broken because a person like the president can have a lot of influence by making the individual contacts to get support for measures he or she intends to raise at a meeting. It is not illegal for any board members to contact other board members individually and exert whatever influence they wish to exert to get them to try to agree with some proposal that is coming up at a meeting. However, action items actually decided at a meeting by majority approval, (or outside a meeting if by unanimous written consent) do not usually give rise to a legal challenge. All Board members must be notified of meetings.

I have actually served on a Board (as a new board member) where it seemed all the important business was somehow turned into a “consent” item and discussion on the action items was discouraged because of the practice complained of here. There was always majority support for all of these ideas I had not even heard anything about. It was very frustrating, so I can relate. Some ways to try to effect a change to this practice (because in and of itself if there is actually a meeting, it is not illegal) is either to insist on discussion on matters that are brought up and seemingly already decided and if the discussion is intelligent or thought provoking, maybe those upon whom the president is exerting pressure will see that there is actually a better way to do business. Try at elections to change the Board makeup by working to get board members elected that would be in favor of reserving discussions on Board business to Board meetings. If you see no hope of changing the Board makeup or the way the majority decides things before the meeting, then decide if you want to put yourself through the meetings and give service to the Board. There may be ways you can find to be effective like bringing good ideas to the Board, remaining positive and working toward more discussion etc. In my case, I did not find serving on the Board worth my time, but I worked with others to change in the Board makeup and over time things did change. It sounds like new blood may be important. Sometimes it is just a matter of lambs following the shepherd because it’s just easier than thinking on their own, and if the decisions start to get a lot of challenge or flack, the lambs resign and leave the door open to new appointments. Of course, few would call me a lamb. But I am a realist. And I do not like to take the slow road myself, and often when I run into a quandry, I stop and think about how to best use my time, for the optimum result. In a situation like the one described, I look for a way over, around or through the invisible barrier. And I often come to the conclusion that teaching others how to do something and helping them to get into a position that will allow them to use that knowledge and bloom is better use of my time than banging my head against seemingly immovable wall. Likewise, in the above described situation, I moved aside strategically to help the right two people get through the door that had the patience, time, and inclination to work for a gradual change.

What Rights Does a “Significant Other” Have in an HOA or Condo Association?

Here is the question sent to me.

“Our Board is in dispute as to exactly what the rights are of an individual who has been named by an owner to be his/her “Significant Other”. This “Significant Other” is not married nor is an owner within the HOA. They do not cohabitate within or outside the HOA. Can a “Significant Other” serve on committees?. Can a “Significant Other” run for the Board of Directors? Can they be afforded all the rights and privileges that an owner has without the benefit of ownership?”

The Association documents (in California, the CC&Rs or Bylaws) generally state whether a director has to be a member of the association, or not. They may state who can serve on committees. “Significant others” are not guaranteed the rights of the member they live with.

Assessment Collection in Today’s Economy

“Question posed recently – we seem to have a lot of trouble collecting assessments these days. What can we do to protect ourselves as an HOA?”

Tighten Up …… Tighten Your Belt

Tighten Up on Collections Processes – Make sure you have good policies in place – legal and tight  so that you can get a lien on a delinquent property at the earliest possible moment. The recording of a lien protects the membership if an owner claims bankruptcy or tries to sell on a short sale or is foreclosed by the bank.

Tighten Up on Information Gathering – If an owner goes into default, or even if not, you might start gathering information, such as car license numbers, phone numbers, bank account information off of checks tendered for assessments. It is my understanding that even if you use a lock box payment situation, you can get a copy of a check sent in – check with your bank. Naturally, its easier if you receive the payments directly. If an owner is in delinquency and still lives on site, it’s not that hard usually to get the auto descriptions and license plates, or even find out where they work, etc. If you are trying to locate someone, the more you can give the PI or whomever is doing the skip trace, the more likely they are to find out where the person is so you can pursue them for payment.

Tighten Up on Knowledge Base and Education of Owners – learn about small claims as a means of seeking a judgment. These days, most properties that go into foreclosure are upside down on the loan side and therefore not likely to provide a return on assessments if a sale goes through. And owners in general do not seem to understand that the assessments are a personal debt, payable even if their bank forecloses. Let them know this, and pursue the debt in small claims before it reaches the limit – to get the owner’s attention early on. (Limit for HOAs is $5000 for first 2 claims in a year, $2500 after that.) Sometimes owners pay the mortgage but stop paying assessments, thinking the HOA is not going to do anything drastic.

Tighten up on spending – Take greater care in budgetting, cut out the extra spending whereever possible, plan for losses each year due to delinquencies when preparing the budget so the “hit” does not come as an unexpected surprise.