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Adams | Sterling Newsletter – Manager as President

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  California’s Leader in Community Association Law November 11, 2018
MANAGER AS
PRESIDENT

QUESTIONCan we operate without a president? The manager refuses to allow us to have a president claiming we would be sued. To compensate, the manager has taken over the president’s powers. How long can we function this way?

ANSWER: You should not be functioning that way at all. By law, all corporations must have a president, secretary and treasurer. (Corp. Code §7213(a).) It is possible there are efforts behind the scenes to resolve the problem and the situation is temporary. If not, the scenario you describe is troubling.

Business Judgment Rule. If the board is truly accepting legal advice from a manager, especially when there is a threat of litigation, directors have legal exposure. It puts them outside the protection of the business judgment rule. Without that shield, board members can be held personally liable for the decisions they make. (See Palm Springs II HOA v. Parth.)

RECOMMENDATION: Your board should put the association’s insurance carrier on notice of the threat of litigation you referenced. Next, directors should retain an experienced association lawyer for its legal advice. Finally, they should appoint one of their directors as president. 

ALCOHOL AT
POLITICAL MEETINGS

QUESTIONIs it permissible for attendees at a political meeting using HOA facilities (at no charge and with no insurance requirement) to bring alcohol for their personal consumption?

ANSWER: It depends on your rules. Despite the new legislation allowing political rallies on common areas, associations can adopt reasonable restrictions on the use of its common areas, including restrictions on alcohol consumption.

Restrictions on Associations. What associations cannot do is adopt rules that require a member or resident to pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy for using common areas to peacefully assemble and freely communicate with one another and with others with respect to common interest development living or for social, political, or educational purposes. (Civ. Code §4515.)

Restricting Alcohol. Given the current state of affairs in our nation’s politics, restricting alcohol at political meetings seems prudent.

TEMECULA OFFICE
OPENED
I am pleased to announce the opening of our newest office in historic Old Town Temecula.
Known for its wine country and hot air ballooning, Temecula is a rapidly growing hub for community associations throughout the region.
Our office will be managed by senior attorney Nancy Sidoruk. Nancy and her team will provide legal services in the Inland Empire and Coachella Valley. The address is:
ADAMS | STIRLING
41911 5th Street, Suite 302
Temecula, CA 92590

Contact us for a proposal for legal counsel and board training services.

Creepy Neighbor #1. I always find your newsletter an important resource to add to my understanding of what it means to live in a community of self-governing citizens.

As a psychotherapist, I have to take issue with your casual misuse of the word “bipolar.” The creepy guy you mention who trespasses in the space of other residents is more likely to be character/personality disordered with boundary issues. Thank you for your always enlightening newsletter. -Diane C.

RESPONSEI can’t claim credit for the description, “crazy, bipolar” is  how he described himself. His bipolar condition is likely not the underlying problem. As you pointed out, he seems to have boundary issues.

Creepy Neighbor #2. Bipolar people are not “crazy.” They don’t usually go into garages to scare females. Bipolar is caused by the absence lithium in the system and it is treatable with medication prescribed by a psychiatrist. It sounds like this man has poor impulse control and acts out. Whether or not the board can require him to seek treatment is something your firm can advise them on. -John A.

RESPONSEIt has been my experience that residents with mental issues are very difficult for boards to handle. Without proper treatment, they often do not respond to cease and desist letters, hearings, fines, suspension of privileges or threats of litigation. It is always a slow, frustrating process dealing with residents with mental illness.

*****

Election #1Love your articles…just a question about your comment regarding elections by acclamation. I believe the opportunity for write-in candidates would be eliminated if the board chose not to mail out ballots. Could you address this please? -Rick H.

RESPONSE: The Davis-Stirling Act states that associations can adopt election rules that permit nominations from the floor and write-in candidates. (Civ. Code §5105(b).) By implication, unless an association’s bylaws or election rules provide for write-in candidates, they are not allowed. 

If election rules provide for write-ins, balloting cannot be waived since there is a chance someone could write-in a candidate. To avoid uncertainty, many associations amend their governing documents to eliminate write-ins so elections by acclamation can take place.

Election #2. The board canceled our last election claiming there were not enough ballots for a quorum even though our election rules state that no quorum is required for electing directors. The board dismissed everyone and then opened ballots. The board claims this was legal. If our bylaws say we don’t need a quorum can we still hold the annual meeting and open the ballots that are turned in? -Monica W.

RESPONSE: Yes, you can (and should). If your bylaws do not require a quorum for the election of directors, ballots should be opened at the annual meeting and counted in front of the membership. (Civ. Code §5120(a).) The results must then be (i) reported to the board, (ii) recorded in the minutes of the next meeting of the board, (iii) made available for review by the membership, and (iv) within 15 days of the election, reported to the membership. (Civ. Code §5120(b).)

If your association’s election rules are being violated by the board, members have one year to take legal action to address the violation.

Election #3. We are a 4-unit association and we all agree on a CC&R amendment. Do they have to use the written secret ballot to to approve it or can we use a vote by acclamation since we all agree? -N.S.

RESPONSE: Election requirements under the Davis-Stirling Act are especially burdensome on small associations. Unfortunately, your 4-unit association is required to follow the same requirements as a 400-unit association. That means you are required to publish written election rules, seek nominations, mail out double-envelope ballots, and allow for 30 days of balloting.

In my experience, many (most?) small associations of ten units or less follow a much more relaxed approach to elections. As long as no one objects to the process, members attend the annual meeting and elect directors by a show of hands or voice vote. Some use secret balloting by passing around slips of paper and writing down their choices. 

Election #4. What if one forgets to use the small envelope and just uses the outer envelope with signature as required. Will the ballot votes be counted? -Linda W.

RESPONSE: Yes, the votes should be counted. (See ballot irregularities.)

*****

Fidelity Bond #1. I just wanted to clarify that associations are  not purchasing fidelity “bonds.” They are purchasing a fidelity (employee dishonesty) crime (non-employee coverage) policy. A bond is a different instrument. This may be semantics, but we should be using the proper terminology in the industry. -Joel M.

Fidelity Bond #2. If an association has a $500,000 employee dishonesty limit which is in compliance with Fannie Mae formula, does the computer and funds transfer fraud have to be $500,000 or can it be a lower limit and how is that formula determined? -Jon C.

RESPONSE: The coverage requirements for “computer and funds transfer fraud” must be an amount equal to or greater than the combined amount of the reserves and total assessments for three months (unless the governing documents call for greater limits). If that comes to $500,000, then that is the amount of coverage needed. 
Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC


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Our newsletter is for advertising and general information only. Readers should consult legal counsel.

ADAMS | STIRLING PLC


Articles may be reprinted provided there are no changes and the following is included:

Reprinted from
Davis-Stirling.com by ADAMS | STIRLING PLC

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Hon. Lawrence W. Stirling, Senior Partner ADAMS|STIRLING
Author of the Davis-Stirling Act

 

About 

With an extensive background in the community association industry, Adrian Adams is one of the leading attorneys in California specializing in common interest developments. Adrian founded “Adams Stirling PLC” and quickly grew his firm into a preeminent boutique firm specializing in highrise condominiums, stock cooperatives, business parks, lake associations, golfing communities, equestrian associations, and ocean-front communities.

 

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