UNHAPPY WITH BOARD ACTION

UNHAPPY WITH BOARD ACTION

QUESTION: I am unhappy with a recent board decision. What can I do? What are my rights?

ANSWER: Members who are unhappy with board decisions or indecision can do the following:
1.  Remain Silent. Be part of the silent majority... say nothing and do nothing and hope the problem resolves itself. Things run in cycles, so sometimes it works--you just have to be patient.

2.  Open Forum. Address the board in open forum. Be respectful and clear in describing your position. The board may not be aware of the problem and your bringing it to their attention should get results. If you are hostile, rambling and make unreasonable demands or threats, the board will label you as a "crazy" and reject your request. A letter from the association's attorney might accompany the rejection.

3.  Write Letters. If the board does not respond to your open forum request, follow-up with a couple of letters. Do this for two reasons: (i) the squeaky wheel gets the grease and (ii) boards don't like paper trails that create potential liability for the association. Keep your letters respectful and business-like. Do not engage in personal attacks or hyperbole. If your letter sounds like you have squirrels running laps in your head, imagine how a jury (and your neighbors) will view you when your letter is read in open court. Remember, you are trying to persuade board members not alienate them.

4.  IDR. If the open forum and follow-up letters don't resolve the problem, try Internal Dispute Resolution. I've never seen IDR work but you never know. It keeps the issue in front of the board and it exhausts your friendly attempts to resolve the problem.

5.  Election. If the above actions don't resolve the issue, run for the board or support responsible members willing to run. First, however, examine your motives. If the reason you want on the board is to get something for yourself at the expense of the community, that would be a breach of fiduciary duties. Make sure you and those you support want to serve the community, not your own agendas.

6.  Recall the Board. You can launch a recall of the board. This is a drastic measure and very disruptive to the community. It will permanently damage relationships between neighbors and create life-long enemies. Hence, the issue better be sufficiently serious that it can't wait for the next annual election. 

7.  Litigate. If none of the above works or you're in a hurry to lose money and make enemies, you could always file a lawsuit. Rarely is a lawsuit justified--they are lengthy, expensive, emotionally draining and unpredictable. So carefully weigh the cost of litigation against the hoped-for benefit... and then weigh it again. If you're suing to punish the board because of a perceived sleight or to prove a point, you're one of the crazies.

8.  Move. If you live in a dysfunctional association, sell your property and get out before they cause you financial and emotional damage. Look for a single-family home not in an association or look for a good association. There are lots of them out there and one will be a good fit for you.

ZERO WASTE

Without getting into a debate on whether global warming is due to humans or to solar activity plus the earth's natural weather cycles, both sides should agree that minimizing waste is a worthy goal.

Many community associations are limited in their ability to recycle. Even so, there may be other ways to reduce waste, whether it be water, electricity or refuse. Boards should consider setting up committees to study what can be done to minimize waste in their communities.

There are many internet resources that can be utilized. One of them iswww.zerowaste.com. -Thank you to Larry Stirling for raising this issue.

RESERVE TRANSFER TO PAY FOR LITIGATION

QUESTION: We spent money from reserves for litigation expenses, do we need to repay the reserve fund? Also, should we add a line item in our reserve study for monies we expect to spend on litigation next year?

ANSWER: Yes you need to repay the funds and no you should not create a litigation line item in your reserve account. The current Davis-Stirling Act is a little ambiguous but the language in the rewrite, effective January 1, is clearer.

Temporary Transfer. The use of reserve funds for litigation is deemed a "temporary transfer" (Civ. Code §5520). When temporary transfers are made, boards must explain to the membership the reasons for the transfer and when and how moneys will be repaid to the reserve fund. In addition, the funds must be restored within one year of the date of the initial transfer. (Civ. Code §1365.5(c)&(d); §5515.)

Reserve for Expenses. Even though you anticipate litigation expenses next year, they do not qualify as a reserve item. Reserve accounts are for monies "identified for use to defray the future repair or replacement of, or additions to, those major components that the association is obligated to maintain." (Civ. Code §1365.5(f)(1); §5550.) Legal expenses do not meet the definition of a "component" nor do they meet National Reserve Study Standards.

Operating Expense. The appropriate place for anticipated legal expenses is the association's operating budget. This will likely increase your budget which may require a dues increase or a special assessment for the next fiscal year. In addition, even though a temporary delay in restoring borrowed reserve funds is allowed, boards must exercise prudent fiscal management in maintaining the integrity of the reserve account "and shall, if necessary, levy a special assessment" to repay the funds within one year. (Civ. Code §1365.5(c)(2); §5515.)

CONCLUSION: The statute is a little confusing about the repayment timeline but it is clear that associations cannot leave holes in their reserve accounts by transferring funds for legal expenses and not repaying them.