IGNORING LEGAL ADVICE

IGNORING LEGAL ADVICE

QUESTION: If the association sought and paid for a legal opinion, is the board violating their fiduciary duty if they ignore the opinion?

ANSWER: If board members stick their fingers in their ears and refuse to listen to legal counsel, that's a problem. But, if they listen to the attorney's advice, weigh it against other factors and reach a different conclusion, they are not in breach of their fiduciary duties.
Independent Decision. Boards are not required to let experts and lawyers make decisions for them. For example, an attorney and a termite expert might both advise a board to tent their condo buildings to stop a termite infestation. After taking into account the cost of tenting, the financial condition of the association, and the disruption to members who must be moved out of their buildings, the board can decide to spot-treat even though tenting is the superior method.
Business Judgment. This was the scenario in a case that made it all the way to the California Supreme Court. The Court sided with the board and held that, 

...where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion...to select among means for discharging an obligation to maintain and repair a development's common areas, courts should defer to the board's authority and presumed expertise. (Lamden v. La Jolla Shores; Corp. Code §7231(a).)

Bad Advice. A second scenario under which boards can deviate from legal advice is when they believe the attorney is not knowledgeable or reliable in the issues presented. For example, if a divorce lawyer offers legal advice about HOA corporate matters, the board can (and should) disregard the advice. Instead, they should seek counsel from an experienced corporate attorney with expertise in community association law.

RECOMMENDATION: Boards should be cautious about discounting competent legal counsel. If directors are uncertain about the advice given, they should get a second opinion.

CITIZEN'S ARREST

DRAINING POOLS TO SAVE WATER

QUESTION: Since we are in a severe drought and our members barely use the pool, are we obligated to keep it open? It seems like a waste of water and money and we would like to drain it. Does the board have the authority to close the pool?
ANSWER: If they have good reason, boards can close and drain a pool. Often it's done when a pool needs to be replastered. The closure is short-term and the pool refilled with water. Your scenario is different since the closure would be long-term. Doing so could damage your pool.
In-Ground Pools. In-ground fiberglass and concrete pools are built to withstand the pressure of dirt against them when drained. Even so, ground pressure on fiberglass pools can cause side walls and floors to bulge and split. If ground water is high enough, hydrostatic pressure can cause an empty concrete pool to act like a ship and float several inches. This will break the coping/bond beam and damage the surrounding decks and pipes. Insurance does not cover such damage.

UV Damage. Pools built on solid concrete foundations or in a concrete vault are immune to hydrostatic pressure. However, they are not immune to solar damage. Direct sunlight will dry out plaster, causing spider cracks and tiles to pop off. When the pool is eventually refilled, water will seep into the cracks causing the plaster to blister and crumble. This is also not covered by insurance.

Safety Issues. The possibility of someone taking a swan dive into an empty pool should keep boards up at night. Associations that drain their pools should make sure they lock their gates and post warning signs. Even so, drunks have been known to climb fences for midnight swims. Finding a body at the bottom of an empty pool has a way of driving down property values. Plus there is the problem of cleaning up the mess.

RECOMMENDATION: Before an association drains its pool to save money, the board should talk to a pool construction expert, their insurance broker, and legal counsel.

CITIZEN'S ARREST

QUESTION: Our highrise building looks onto another highrise where a resident regularly watches porn on his big screen TV. We asked the neighboring building manager to encourage him to lower his shades. This had the opposite effect. He now leaves his shades completely open, watching in the nude and single-handedly participating. Do we have any recourse?

ANSWER: That is an ugly visual. If the porn junkie is in a building that is not part of your association, your options are limited.

Police. The police can be notified. They will talk to the resident but not arrest him unless they witnessed the illicit activity. To arrest him, you would have to accompany the police to the building and make a citizen's arrest. Penal Code §837 states, "A private person may arrest another: (1) For a public offense committed or attempted in his presence..." 

Public Offense. A "public offense" is defined as a felony, misdemeanor or infraction. (Penal Code §16). Is your neighbor's behavior a public offense? According to California Penal Code §647(a), engaging in lewd conduct in a public place is a misdemeanor.

The catch is the "public place" part of the statute. Lewd conduct by a lone adult in the privacy of his home wouldn't normally interest the police or the courts. In your situation, your neighbor is knowingly making his conduct visible to his neighbors. Accordingly, action can be taken.

RECOMMENDATION: Before you rush over and make a citizen's arrest, you should consider the possibility of retaliation. It's clear your lewd neighbor does not have any boundaries. If a visit by the police does not resolve the problem, your best bet may be a strongly worded lawyer letter to the miscreant.

SOCIAL EVENTS USING HOA MONEY

SOCIAL EVENTS USING HOA MONEY

QUESTION: Can the board use association funds for social events? Our CC&Rs are silent on the subject.

ANSWER: Unless governing documents specifically prohibit it, HOAs can budget for, assess and spend association monies on social events. 

Generic Language. More often than not, there is generic language in governing documents allowing associations to make decisions for the "general health, welfare, comfort and safety" of the membership. A variation is: "The Association may undertake any lawful activity, function or service for the benefit of Owners." Authorizing language is often found in the preamble of the CC&Rs, in addition to the general powers section, and in the assessments section describing the purpose of assessments. It can also be found in the bylaws and articles of incorporation.
Social Event Benefits. Do social events fall under "health, welfare and safety" categories? I believe they do. Part of being a community is knowing your neighbors, interacting with them and developing a positive community identity. Social events help make that happen. Knowing your neighbors also enhances general security for the association. Finally, developing a reputation for a positive community identity raises property values.

RECOMMENDATION: As in all things, moderation. Boards should not go overboard with extravagant parties. HOAs should also be careful about alcohol at their events and check into insurance. Then get everyone together and have steak and beer or cheese and wine, depending on your political persuasion.