CONTROLLING MANAGEMENT

CONTROLLING MANAGEMENT

QUESTION: Our management company is trying to take over all board duties. I for one am against that. Can a board member perform certain duties within the association--like talking to vendors and current contractors to get information for possible work that may be planned?

ANSWER: A management company cannot take over an association on its own. It has no legal authority for such action. The company serves as a managing agent of the association and is given direction through the board of directors. As such, it has as little or as much authority as the board gives it. If a management company is out of control, it's the board's fault.  

Director Limitations. The same limitations are true for directors. Board members function within guidelines established by the board. Although directors have a duty of due diligence, they do not have the right to individually start questioning (interrogating as interviewees often see it) employees, contractors, members, and tenants without board approval. Doing so can lead to claims of harassment, interference with contractual relations, discrimination and constructive wrongful terminations.

Potential Liability. A director's due diligence obligation can be satisfied by other means that don't create potential liability. It can be done through the managing agent, industry experts and legal counsel. If a director wants to personally investigate a particular matter (and is qualified to do so), he should first get board permission. Otherwise, he may be incurring liability for himself as well as the association. 

RECOMMENDATION: Each year following their annual meeting, incoming boards should meet with legal counsel to go over their rights and responsibilities as directors. It will help them avoid stepping on landmines during their tenure and function more cohesively as a board.

WHO OWNS THE BALLOTS?

QUESTION: A third-party inspector of elections is denying a post-election ballot inspection by claiming the election materials belong to him, not to the association. He will permit an inspection when ballots are returned to the association in one year, at the point when the election can no longer be challenged! We say the election materials belong to the association and the inspector is merely the custodian.

ANSWER: You are correct. The association owns the ballots not the inspector. The election inspector is hired by the HOA to perform a service...count the ballots and hold them for one year so no one can tamper with them. As such, the inspector is the custodian not the owner.

Inspection Rights. Although limited, members have inspection rights.

If there is a recount or other challenge to the election process, the inspector or inspectors of elections shall, upon written request, make the ballots available for inspection and review by an association member or the member’s authorized representative. (Civ. Code §5125.)

Some take the above language to mean that an inspector is not required to produce ballots except for a recount or challenge. Refusing to produce them creates suspicion the inspector is hiding something. Moreover, to satisfy the statute a member need only state he intends to challenge the election. Accordingly, the better policy is to produce the ballots upon demand by a member.

No Right to Copy. Election materials do not fall under the list of records that members have a right to copy. (Civ. Code §5200.) There is no provision in the Davis-Stirling Act, the Corporations Code or the Election Code that provides for the copying of ballots or other election materials. Hence, members have a right to inspect but not to copy ballots.

Inspection Costs. Since professional inspectors do not work for free, there will be a cost associated with the inspection. The issue of who pays for the inspection is not covered by the Davis-Stirling Act. For guidance, we can turn to California's Election Code. The Code requires the person requesting a recount to deposit monies with the election official to cover the cost. (EC §15624.) 

CONCLUSION: Accordingly, it would be reasonable to require the person demanding the inspection to bear the cost. He can either pay in advance to the inspector or reimburse the association for the cost.  The Davis-Stirling Act gives associations general authority to impose fees to defray costs (Civ. Code §5600(b)). The payment method would be at the discretion of the inspector of elections, not the homeowner.