[Amendments to CC&Rs; Court Petition] Objectors to a petition brought pursuant to Civ. Code § 1356 (§ 4275) are not entitled to costs and attorney’s fees when the petition is denied.
Jeffrey S. Mintz, in pro. per., and for Objectors and Appellants.
Neuland & Nordberg, Hickey & Neuland, William P. Hickey, David E. Hickey and Robert J. Legate for Petitioner and Respondent.
OPINION
SILLS, P. J.
Blue Lagoon Community Association (the Association) petitioned the superior court pursuant to Civil Code section 1356 for an [474] order approving two amendments to the Association’s declaration of covenants, conditions and restrictions (CC&R’s) that had received approval from a majority of the members, but had not received the supermajority vote required by the declaration.[1] Section 1356 permits the superior court to reduce the percentage of affirmative votes necessary to amend a declaration where the property owners’ association is unable to obtain approval of the proposed amendments by the percentage of votes required by the declaration.
The amendments proposed by the Association were controversial and had been the subject of an intense political battle within the Association. Therefore, when the petition was filed several members of the Association (the objectors) hired an attorney and filed opposition to it.[2] Other members opposed to the proposed amendments also appeared and filed papers in opposition to the request. Following a contested hearing, the court denied the petition. The objectors then requested an award of attorney fees but the court ordered each side “to bear its own fees and costs.”
Only the objectors appeal. The sole issue they raise is whether objectors to a petition brought pursuant to Civil Code section 1356 are entitled to costs and attorney fees when the petition is denied. We answer that question in the negative.
I
Built in 1963, Blue Lagoon is a common interest development in Laguna Beach that comprises 119 condominium units in 14 separate buildings. Five of the buildings, which include thirty-six units, are located on the beach behind a common area seawall which protects the units from the ocean. The remaining buildings are situated for the most part on the slopes which [475] overlook, but are not directly threatened by, the ocean. CC&R’s were recorded against the subdivision in 1964 designating certain property, such as the seawall, common area which must be maintained by the Association. The covenants run with the land until July 1, 2014.
Over the years, the maintenance and repair of the seawall has been one of the largest recurring expenses for the Association. There was evidence that it had cost the Association around $1.5 million to keep it in place and operating. Maintenance and repair of the seawall had also been the focal point of an acrimonious dispute between the members. Owners whose properties are protected by the seawall want each unit to pay an equal share of its maintenance and repair costs because it is part of the common area. On the other hand, owners whose properties are not directly benefited by the seawall want each unit to pay only a pro rata share of the costs equal to the benefit each unit receives, if any.
This dispute is fueled by a weighted voting system, designed by the developer of the subdivision, which many members feel is unfair. When the development was built each unit was assigned an undivided percentage interest in the common area which ranged from a low of .56 percent to a high of 1.42 percent. The units with the higher percentage interest are generally located near the seawall. The percentage interest assigned to each unit determines the unit’s voting power, both in terms of whether a quorum is present and whether action proposed by the Association is adopted. However, expenses approved by the Association are shared equally by the units, regardless of the unit’s percentage interest in the common area. Thus, situations can arise where a minority of the members can force a majority of the members to pay for common area maintenance and repairs which the majority opposes-which is precisely what the Association and many of its members claim is happening here and why they believe the proposed amendments are so important.
At the urging of several members, the Association proposed two amendments to the CC&R’s. The first one provided for equal voting rights, i.e., “one unit, one vote.” The second one provided the governing documents could be amended by majority, as opposed to the then required 75 percent supermajority, vote. The proposed amendments were submitted to the property owners for a vote, and despite extensive efforts by all sides, not everyone voted. Tallying the votes of those who participated in the election, the amendments failed to receive sufficient affirmative votes. The first proposal received 71 percent of the vote, and the second one received 69 percent of the vote.
The Association then filed a petition pursuant to Civil Code section 1356, which was denied. Although the court expressed concern about the validity [476] of the unequal voting arrangement, and thought that amendment perhaps could be approved, it denied the petition as a whole on the basis that the proposed amendments were “unreasonable.”[3] The court’s apparent fear was the proposed amendments, as drafted, would allow the Association to cease maintaining the seawall.
II
[1] Having successfully fended off the petition, the objectors claim they are entitled to costs and attorney fees as the “prevailing party” because the petition was denied. They claim costs as a matter of right under Code of Civil Procedure section 1032, subdivision (b), and attorney fees under Civil Code section 1354 (because there is no provision for attorney fees in section 1356) and other equitable principles.
The objectors’ argument begins with an assertion that the petition was an “action” which proposed the dilution of their voting rights, and thus their opposition to the petition was necessary to “enforce” the equitable servitudes and contractual provisions of the CC&R’s. As they view it, their enforcement of the CC&R’s gives them a right to exact a pound of flesh (in the form of fees and costs) from the Association for putting them through the ordeal of defending against the petition. But their characterization of the scope of the statute and the nature of the proceedings is misinformed.
Civil Code section 1356 provides that, “If in order to amend a declaration, the declaration requires owners having more than 50 percent of the votes in the association … to vote in favor of the amendment, the association, or any owner of a separate interest, may petition the superior court … for an order reducing the percentage of the affirmative votes necessary for such amendment. The petition shall describe the effort that has been made to solicit approval of the association members in the manner provided in the declaration, the number of affirmative and negative votes actually received, the number or percentage of affirmative votes required to effect the amendment in accordance with the existing declaration, and other matters the petitioner considers relevant to the court’s determination.” (§ 1356, subd. (a).) The petitioner is required to attach copies of the governing documents, the text of the proposed amendment, any notice and materials used to solicit voter approval, and a short explanation of the reason for the amendment. (§ 1356, subd. (a)(1)-(5).) In addition, the petitioner is required to give the [477] members of the Association and any holders of a security interest notice of the hearing. (§ 1356, subd. (c).) If the court finds the balloting “was conducted in accordance with the applicable provisions” of the governing documents, a “reasonably diligent effort” was made to permit members to vote, owners having “more than 50 percent of the votes … voted in favor of the amendment,” and the “amendment is reasonable” (§ 1356, subd. (c) (1)-(6)), the court may, in its discretion, “dispense with any requirement relating to … the number or percentage of votes needed for approval of the amendment that would otherwise exist under the governing documents.” (§ 1356, subd. (d).)
Viewed objectively, the purpose of Civil Code section 1356 is to give a property owners’ association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration.(Sproul & Rosenberry, Advising Cal. Condominium and Homeowners Associations (Cont.Ed.Bar 1991) § 10.25, p. 459.)In essence, it provides the association with a safety valve for those situations where the need for a supermajority vote would hamstring the association. When the limited purpose of section 1356 is fully understood it is obvious a petition brought under this section is not an adversarial proceeding. No defendants are named. No rights are sought to be protected. No wrongs are sought to be redressed. As such, it cannot be said that by opposing the petition the objectors were enforcing the governing documents and thus entitled to attorney fees and costs.[4]
The objectors then argue that “equitable principles” support a statutory award of attorney fees because the Association’s petition violated its fiduciary duty to the minority members of the Association. This argument is premised on the notion the present weighted voting system is fair because it protects the minority’s rights from the tyranny of the majority, and the Association’s decision to file the petition represents a decision by the Association to “side” with the majority in violation of its fiduciary duties to the minority members. The theory seems to be that unless the objectors can claim fees and costs when they win, the Association will financially overwhelm them through the continuous filing of frivolous petitions under Civil Code section 1356.
This argument is shortsighted. In this case, the objectors “won.” But what if the Association had “won” and the petition had been granted? If we were to hold, as the objectors urge, that they are the prevailing party and thus entitled to attorney fees because they successfully beat back the majority’s efforts to amend the declaration, then is the Association entitled to its costs [478] and fees against the objectors when they successfully bring a petition under Civil Code section 1356? If the objectors’ analysis were correct, the answer would have to be yes. Further, the objectors’ position would have the undesirable effect of discouraging fair comment by members who are opposed, or at least do not fully support, an association’s effort to amend the declaration through this statutory procedure. No member of an association would dare appear or file opposition to a petition under section 1356 if the potential downside was having to bear the association’s entire costs for pursuing the petition. This was clearly not the intent of this section. The posttrial order is affirmed. The Association shall recover its costs on appeal.
Crosby, J., and Rylaarsdam, J., concurred.
FN 1. Enacted in 1985, section 1356 is part of the Davis-Stirling Common Interest Development Act (Civ. Code, §§ 1350-1373) and is patterned after Corporations Code section 7515. It replaces the commonly used terms “covenants, conditions, and restrictions” and “CC&R’s” with the term “declaration.” (Civ. Code, § 1351, subd. (h).)
FN 2. Objectors are Gwendolyn V. Mitchell, Elbert Davis, E. Cardon Walker, William Caldwell, Joseph T. Broderick, and Jeffrey S. Mintz. After the notice of appeal was filed, the Supreme Court held in Trope v. Katz (1995) 11 Cal.4th 274 , 292 [45 Cal.Rptr.2d 241, 902 P.2d 259] that an attorney who litigates in propria persona cannot recover reasonable attorney fees under Civil Code section 1717. Because the objectors’ attorney, Jeffrey S. Mintz, had also appeared as a party he was concerned that Trope might bar his attorney fee claim even though he had substituted in as the attorney of record only at the appellate level. Consequently, he filed a “motion to correct erroneous designation of party” with this court claiming he was not a proper party because title to the property was held in trust and he was only acting in his capacity as a trustee of the family trust. We do not decide that motion because, as we hold below, the objectors do not have any right to recover attorney fees in this case in any event. (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608 , 629 [55 Cal.Rptr.2d 818].)
FN 3. A court cannot grant the petition unless it finds, among other things, that the proposed “amendment is reasonable.” (Civ. Code, § 1356, subd. (c)(5).)
Related Links
Voter Apathy Not a Required Showing in a Petition to Reduce Percentage of Affirmative Votes Required to Amend CC&Rs – Published on HOA Lawyer Blog (04/19)
Personal Agriculture & Food Gardens
Civil Code Section 4750 provides homeowners within HOAs limited rights to use their backyards for “personal agriculture” (i.e., food gardens). It renders void and unenforceable any provision of a HOA’s governing documents that “effectively prohibits or unreasonably restricts the use of a homeowner’s backyard for personal agriculture.” (Civ. Code § 4750(b).)
“Personal Agriculture” & “Plant Crops” Defined
For the purposes of Section 4750, “personal agriculture” is defined as:
“…a use of land where an individual cultivates edible plant crops for personal use or donation.” (Civ. Code § 4750(a); Civ. Code § 1940.10(a)(2).)
“Plant crops” are further defined as:
“…any crop in its raw or natural state, which comes from a plant that will bear edible fruits or vegetables. It shall not include marijuana or any unlawful crops or substances.” (Civ. Code § 1940.10(a)(3).)
Limitations
The rights afforded to homeowners under Section 4750 are not absolute and are subject to the following limitations:
- Personal Use or Donation Only – the definition of “personal agriculture” includes edible plant crops grown for “personal use or donation.” (Civ. Code § 4750(a); Civ. Code § 1940.10(a)(2).) “Personal agriculture” would therefore not include edible plant crops which are grown for sale or other commercial purposes.
- No Marijuana or Unlawful Substances – the definition of “plant crops” does not include “marijuana or any unlawful crops or substances.” (Civ. Code § 1940.10(a)(3).)
- Personal Property or Exclusive Use Common Area Only – Section 4750 extends only to the use of a homeowner’s backyard or a yard that is “designated for the exclusive use of the homeowner” (i.e., an exclusive use common area yard or patio). (Civ. Code § 4750(a),(d).) This language suggests that homeowners do not have the right to use the HOA’s general common areas (those common areas which are not exclusive use common areas) for personal agriculture.
- “Reasonable Restrictions” Permitted – Section 4750 does not apply to provisions of a HOA’s governing documents “that impose reasonable restrictions on the use of a homeowner’s yard for personal agriculture.” (Civ. Code § 4750(c)(1).) The issue of “reasonable restrictions” is discussed further below.
- Rules Requiring Clearance of Dead Plant Materials & Weeds – Section 4750 does not prohibit a HOA from applying rules and regulations “requiring that dead plant material and weeds…are regularly cleared from the backyard.” (Civ. Code § 4750(e).) However, those rules and regulations may not apply to “straw, mulch, compost, and other organic materials intended to encourage vegetation and retention of moisture in the soil.” (Civ. Code § 4750(e).)
“Reasonable Restrictions” on Personal Agriculture
Section 4750 does not apply to provisions of a HOA’s governing documents “that impose reasonable restrictions on the use of a homeowner’s yard for personal agriculture.” (Civ. Code § 4750(c)(1).) “Reasonable restrictions” are defined as:
“…restrictions that do not significantly increase the cost of engaging in personal agriculture or significantly decrease its efficiency.” (Civ. Code § 4750(c)(2).)
Unlike in the context of solar panels, the Civil Code does not define what types of restrictions on the use of a homeowner’s yard for personal agriculture that would result in a “significant” increase in cost or decrease in efficiency.
Civil Code Section 1940.10. Personal Agriculture Definitions; Tenant Protections.
(a) For the purposes of this section, the following definitions shall apply:
(1) “Private area” means an outdoor backyard area that is on the ground level of the rental unit.
(2) “Personal agriculture” means a use of land where an individual cultivates edible plant crops for personal use or donation.
(3) “Plant crop” means any crop in its raw or natural state, which comes from a plant that will bear edible fruits or vegetables. It shall not include marijuana or any unlawful crops or substances.
(b) A landlord shall permit a tenant to participate in personal agriculture in portable containers approved by the landlord in the tenant’s private area if the following conditions are met:
(1) The tenant regularly removes any dead plant material and weeds, with the exception of straw, mulch, compost, and any other organic materials intended to encourage vegetation and retention of moisture in soil, unless the landlord and tenant have a preexisting or separate agreement regarding garden maintenance where the tenant is not responsible for removing or maintaining plant crop and weeds.
(2) The plant crop will not interfere with the maintenance of the rental property.
(3) The placement of the portable containers does not interfere with any tenant’s parking spot.
(4) The placement and location of the portable containers may be determined by the landlord. The portable containers may not create a health and safety hazard, block doorways, or interfere with walkways or utility services or equipment.
(c) The cultivation of plant crops on the rental property other than that which is contained in portable containers shall be subject to approval from the landlord.
(d) A landlord may prohibit the use of synthetic chemical herbicides, pesticides, fungicides, rodenticides, insecticides, or any other synthetic chemical product commonly used in the growing of plant crops.
(e) A landlord may require the tenant to enter into a written agreement regarding the payment of any excess water and waste collection bills arising from the tenant’s personal agriculture activities.
(f) Subject to the notice required by Section 1954, a landlord has a right to periodically inspect any area where the tenant is engaging in personal agriculture to ensure compliance with this section.
(g) This section shall only apply to residential real property that is improved with, or consisting of, a building containing not more than two units that are intended for human habitation.
Civil Code Section 4750. Personal Agriculture.
(a) For the purposes of this section, “personal agriculture” has the same definition as in Section 1940.10.
(b) Any provision of a governing document, as defined in Section 4150, shall be void and unenforceable if it effectively prohibits or unreasonably restricts the use of a homeowner’s backyard for personal agriculture.
(c)
(1) This section does not apply to provisions that impose reasonable restrictions on the use of a homeowner’s yard for personal agriculture.
(2) For purposes of this section, “reasonable restrictions” are restrictions that do not significantly increase the cost of engaging in personal agriculture or significantly decrease its efficiency.
(d) This section applies only to yards that are designated for the exclusive use of the homeowner.
(e) This section shall not prohibit a homeowners’ association from applying rules and regulations requiring that dead plant material and weeds, with the exception of straw, mulch, compost, and other organic materials intended to encourage vegetation and retention of moisture in the soil, are regularly cleared from the backyard.
Reserve Summary
Included within an association’s annual budget report is a reserve summary that is prepared pursuant to Civil Code Section 5565. (Civ. Code § 5300(b)(2).)
General Requirements
Pursuant to Civil Code Section 5565, the reserve summary (1) must be based on the association’s most recent reserve study, (2) must be based only on assets held in cash or cash equivalents, and (3) must be printed in boldface type, and include all of the following:
- Current Estimates of Major Components – the current estimated replacement cost, estimated remaining life, and estimated useful life of each major component. (Civ. Code § 5565(a).)
- Cash Amounts – as of the end of the fiscal year for which the reserve study is prepared, the reserve summary must include: (1) the current estimate of the amount of cash reserves necessary to repair, replace, restore or maintain major components, (2) the current amount of accumulated cash reserves actually set aside for those purposes, and (3) if applicable, the amount of funds received by the association in connection with a construction defect action. (Civ. Code § 5565(b).)
- Percentage Funding – the percentage that the amount of cash reserves actually set aside for the repair, replacement, restoration or maintenance of major components equals the estimated amount of cash reserves necessary for those purposes. (Civ. Code § 5565(c).)
- Reserve Deficiency – the current deficiency in reserve funding expressed on a per unit basis. This figure is calculated by subtracting the amount of cash reserves actually set aside for the repair, replacement, restoration or maintenance of major components from the estimated amount of cash reserves necessary for those purposes, and then dividing that result by the number of separate interests within the association. This calculation method may vary somewhat if the association has variable, as opposed to uniform, assessments. (Civ. Code § 5565(d).)
Inadmissible as Evidence of Improper Financial Management
The reserve summary is generally not admissible as evidence to show improper financial management on the part of the association. (Civ. Code §5300(d).)
Reserve Funding Plan
Subject to certain limited exceptions, every association is required to prepare a reserve study at least once every three (3) years with a review to be conducted annually to determine if adjustments are necessary to the association’s reserve account requirements. (Civ. Code §§ 5300(b), 5550(a).) One item of information that must be included within a reserve study is the reserve funding plan. (Civ. Code § 5550(b)(5).)
Purpose
As a component of the reserve study, the association is required to estimate the “total annual contribution” to the reserve account necessary to “defray the cost to repair, replace, restore, or maintain” the major components for which the association is responsible and which have a remaining useful life of less than thirty (30) years. (Civ. Code § 5550(b).) The way in which that “annual contribution” will be funded is indicated by the reserve funding plan. (Civ. Code § 5550(b)(5).)
Schedule of Required Assessment Changes
The reserve funding plan must include a “schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserve funding plan.” (Civ. Code § 5560(a).)
Procedural Requirements
- Adopted at Open Board Meeting – The reserve funding plan must be adopted at an open board meeting. (Civ. Code § 5560(b).)
- Assessment Increases and Limitations – If the board determines that an increase in regular or special assessments is necessary to fund the reserve funding plan, any such increase is subject to the provisions found within Civil Code Section 5605 (i.e., the board may not, without membership approval, increase regular assessments by more than twenty percent (20%), or special assessments by more than five percent (5%)). (Civ. Code § 5560(c); See also “Limitations on Assessment Increases.”)
Disclosures
Information from the reserve funding plan is disclosed in the association’s annual budget report, as well as the association’s Assessment and Reserve Funding Disclosure Summary form prepared pursuant to Civil Code Section 5570. (See “Annual Budget Report” and “Reserve Disclosures.”)
Summary of Plan Included within Annual Budget Report
A summary of the reserve funding plan must be distributed to the association’s members each year as part of the annual budget report. (Civ. Code § 5300(b)(3).)
- Right to Request Full Plan
The summary of the reserve funding plan must include a notice to members that the full reserve funding plan is available upon request, and that the association must provide the full reserve funding plan to any member upon request. (Civ. Code § 5300(b)(3).)
Reserve Study
Except as provided below, all associations are required to prepare a reserve study at least once every three (3) years with a review to be conducted annually to determine if adjustments are necessary to the association’s reserve account requirements. (Civ. Code §§ 5300(b), 5550(a).) Once the study is completed, the study is used to prepare and publish a reserve funding plan. The reserve funding plan is in turn used to prepare and publish the association’s annual budget report that includes various reserve disclosures.
Preparation/Review Requirements & Exceptions
Every association is required to prepare a reserve study at least once every three (3) years:
“At least once every three years, the board shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore or maintain as part of a study of the reserve account requirements of the common interest development…” (Civ. Code § 5550(a).)
Exceptions
The only instances where an association would not be required to prepare a reserve study are when:
(1) There are no common area components that the association is obligated to repair, replace or maintain;
(2) The association is an industrial or commercial common interest development, not a residential common interest development; or
(3) The “current replacement value of the major components” is less than “one-half of the gross budget of the association, excluding the association’s reserve account for that period.” (Civ. Code § 5550(a).)
Annual Review & Adjustments by Board
The board is also required to “review [the reserve] study, or cause it to be reviewed, annually and shall consider and implement necessary adjustments to the board’s analysis of the reserve account requirements as a result of that review.” (Civ. Code § 5550(a).)
Required Contents of Reserve Study
Civil Code Section 5550(b) sets forth the following five (5) items of information which, at a minimum, must be included within a reserve study:
- Major Components – The reserve study must identify the “major components that the association is obligated to repair, replace, restore, or maintain that, as of the date of the study, have a remaining useful life of less than thirty [30] years.” (Civ. Code § 5550(b)(1).)
- Remaining Useful Life of Major Components – The reserve study must identify the “probable remaining useful” of the major components identified in item #1 (above) as of the date of the study. (Civ. Code § 5550(b)(2).)
- Estimated Costs of Major Components – The reserve study must include an “estimate of the cost of repair, replacement, restoration, or maintenance” of the components identified in item #1 (above). (Civ. Code § 5550(b)(3).)
- Estimated Annual Contribution to Reserve Account – The reserve study must include an “estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain” the components identified in item #1 (above) “during and at the end of their useful life, after subtracting total reserve funds as of the date of the study.” (Civ. Code § 5550(b)(4).)
- Reserve Funding Plan – The reserve study must also include a “reserve funding plan that indicates how the association plans to fund the contribution” identified in item #4 (above) to meet the association’s obligation for the repair and replacement of all major components with an expected remaining life of 30 years or less, not including those components that the board has determined will not be replaced or repaired.” (Civ. Code § 5550(b)(5); See also “Reserve Funding Plan.”)
Utility Services as “Major Components”
The term “major components” for the purposes of Section 5550 includes gas, water and electrical service to the extent the association is responsible for repair or replacement of those lines pursuant to Civil Code section 4775. (Civ. Code § 5550(c).)
Reserve Account Required
There is no explicit statutory requirement for an association to keep and maintain a reserve account, though such requirements are commonly contained within the provisions of an association’s CC&Rs or bylaws. Even where such provisions are absent, the requirement to keep and maintain a reserve account is generally recognized to exist by virtue of related requirements found within the Davis-Stirling Act as well as California court decisions:
- Required Special Assessments – Boards are required to “exercise prudent fiscal management in maintaining the integrity of the reserve account, and shall, if necessary, levy a special assessment to recover” funds expended from a reserve account. (Civ. Code § 5515(e).) Exercising prudent fiscal management of a reserve account would, by implication, require the establishment and maintenance of a reserve account.
- Duty to Levy Assessments – An association has an affirmative duty to “levy regular and special assessments sufficient to perform its obligations under [its] governing documents and [the Davis-Stirling Act].” (Civ. Code § 5600(a); See also “Duty to Levy Assessments.”) Setting aside a portion of assessment funds in order to perform future repairs or replacements for which the association is responsible is arguably necessary in upholding this duty. Where a board fails to do so, it could constitute a breach of the directors’ fiduciary duties:
“…since the Association’s original directors…admittedly failed to exercise their supervisory and managerial responsibilities to assess each unit for an adequate reserve fund and acted with a conflict of interest, they abdicated their obligation as initial directors of the Association to establish such a fund for the purposes of maintenance and repair. Thus, the individual initial directors are liable to the Association for breach of basic fiduciary duties of acting in good faith and exercising basic duties of good management.” (Raven’s Cove Townhomes, Inc. v. Knuppe Dev. Co. (1981) 114 Cal.App.3d 783, 800-801.)
- Not Subject to Fee Limitation Provisions – Civil Code Section 5600(b) does not allow for an association to “impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.” In the case of Foothills Townhome Assn. v. Christiansen, a member of the association challenged a special assessment levied by the board to fund the association’s reserve account on the basis that such action violated the fee limitation contained within Civil Code Section 5600(b): the member argued that the special assessment “exceeded the amount necessary to defray the costs for which it [was] levied” because there was no explicit requirement for the reserve account to be funded in the first place. The Court rejected the member’s argument and held that restoring an association’s reserve account was a valid basis for levying the special assessment.
- Reserve Study Requirements – The requirement to establish and maintain an adequate reserve account is further supported by the provisions under Civil Code Section 5550. In sum, those provisions require the board to perform reserve studies and to develop a reserve funding plan to address future repairs or replacements of all major elements with an expected remaining life of thirty (30) years or less.
Directors Serving on Committees
There are no general legal restraints on a director’s ability to also serve on a HOA committee, unless the provisions of an association’s governing documents state otherwise. Some sets of governing documents may even require a board member (typically the board president) to serve as a member of every committee (referred to as an “ex officio” member). However, as discussed below, if there are a sufficient number of directors serving on a committee to establish a quorum of the board, it may trigger the need to comply with Open Meeting Act requirements.
Open Meeting Act Issues
HOA board meetings are subject to the requirements contained in the Open Meeting Act. A “board meeting” is defined as:
“…A congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board.” (Civ. Code § 4090(a) (Emphasis added).)
Thus, if there are enough directors serving on a committee so as to establish a quorum of the board, and the committee heard, discussed or deliberated upon any item of business that is was within the authority of the board, the committee meeting would constitute a board meeting subject to the Open Meeting Act’s requirements (i.e., requiring notice of the meeting and the posting of an agenda). These concerns are especially relevant in the context of executive committees that are comprised entirely of directors.
Committee Member Qualifications
There is no law that establishes qualifications for persons wishing to serve on a HOA committee. There may be qualifications established in an association’s governing documents; however, those qualifications typically pertain to directors wishing to serve on the board, not to persons wishing to serve as members of a committee. (See “Director Qualifications.”)
Establishing Committee Member Qualifications
Absent contrary provisions in an association’s governing documents, committees are appointed by the board and serve at the pleasure of the board. (Corp. Code §§ 7210, 7212.) Serving at the pleasure of the board allows for the board to appoint and remove committee members at any time, and to also establish specific qualifications that persons must satisfy before being able to serve on a committee. Qualifications commonly utilized by boards in this respect include:
- Being a member of the association
- Being in “good standing” (i.e., not in violation of the governing documents, delinquent in assessments, etc.)
- Not involved in litigation with the association
- Attending a minimum number of committee meetings
- Being a director (for executive committees)
Executive Committees – Directors Only
The only qualification that would automatically apply to committees is in the context of executive committees. Pursuant to Corporations Code Section 7212(b), only directors (members of the association’s board) are permitted to serve on executive committees.