A conflict of interest describes a situation where one stands in a position to derive a personal benefit from actions or decisions they make in their official capacity. In the HOA context, the concerns regarding conflicts of interest typically stem from situations in which a director acts contrary to his duties to the association in order to advance the director’s personal interests, and/or to exploit his authority to obtain some form of benefit (monetary or otherwise) for himself, his family or friends. For example, a director is in a position to vote to award a maintenance contract to a company owned by the director or the director’s spouse. In that circumstance, the director is considered an “interested director” and the approval of the contract is considered an “interested transaction.” Situations involving conflicts of interest implicate the duty of loyalty that directors must uphold in their role as fiduciaries of the association.
Disclosure of Material Facts A contract that was approved by an interested director may become void or voidable pursuant to Corporations Code Section 310 unless the material facts of the conflict are fully disclosed at the time the contract was approved:
The material facts as to the transaction and to the interested director’s conflict are fully disclosed or known to the membership and such contract or transaction is approved by the members, with the interested director abstaining from voting; or
The material facts as to the transaction and the interested director’s interest are fully disclosed or known to the board or committee, and the board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the interested director or directors and the contract or transaction is just and reasonable as to the corporation at the time it is authorized, approved or ratified. (Corp. Code §§ 310, 7233; Civ. Code § 5350(a).)
Interested Transactions: Disclosure & Recusal In order to avoid problems and liability exposure resulting from transactions involving interested directors, boards must ensure that (a) full disclosure was made of all material facts regarding the interested director’s conflict, (b) the interested director recused himself from the board’s discussion and vote on the proposed transaction, and (c) the contract or transaction was “just and reasonable at as to the [association] at the time it is authorized, approved or ratified.” (Corp. Code §§ 310, 7233; See also “Interested Transactions.”)
Prohibited Actions by Directors & Committee Members A director or member of a committee is prohibited from voting on the following matters affecting the director or committee member: (Civ. Code § 5350(b).)
Discipline of the director or committee member (i.e., the vote to impose a fine against the director or committee member);
An assessment against the director or committee member for damage to common area or facilities (i.e., the vote to levy a reimbursement assessment against the director or committee member);
A request, by the director or committee member, for a payment plan for the director or committee member’s delinquent assessments;
A decision whether to foreclose on a lien on the separate interest of the director or committee member;
Review of a proposed physical change to the separate interest of the director or committee member (i.e., voting to approve the director or committee member’s architectural application); and
Most homeowners associations are formed as nonprofit mutual-benefit corporations under the California Corporations Code. For nonprofit mutual-benefit corporations, “any number of offices may be held by the same person unless the articles or bylaws provide otherwise.” (Corp. Code § 7213(a).) Therefore, unless otherwise stated in the provisions of an association’s articles or bylaws, one director may hold multiple offices (i.e., one director may serve as the President and Secretary, or the Secretary and Treasurer, etc.).
Directors Vote, Not Officers However, the number of votes entitled to be cast by an individual director is not affected by the number of offices held by that director. Directors vote on board actions, not officers. Thus, regardless of the number of offices held by an individual director, that director is entitled to cast only one (1) vote. (See also “Directors vs. Officers.”)
The liability protections afforded to a corporation’s directors include a legal doctrine known as the “Business Judgment Rule.” In the context of HOAs, the California Supreme Court in the case of Lamden v. La Jolla Shores Clubdominium HOA(1999) 21 Cal.4th 249 adopted a rule which it termed as analogous to the Business Judgment Rule: the “Rule of Judicial Deference.” The Rule of Judicial Deference (aka “Business Judgment Doctrine”) generally requires courts to defer to maintenance decisions made by HOA boards even if a reasonable person would have acted differently in the same situation:
“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 within the scope of its authority under relevant statutes, covenants and restrictions 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. Thus, we adopt today for California courts a rule of judicial deference to community association board decisionmaking that applies, regardless of an association’s corporate status, when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors.” (Lamden, at 253.)
The justification for such deference is premised upon “the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Lamden, at 270-271.)
“Generally, courts will uphold decisions made by the [board] so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy.” (Nahrstedt, at 374.)
So long as the board acts in accordance with its duties, in good faith, and in a manner it believes to be in the best interests of the association and its members, its decision will generally be upheld. (Lamden, at 265; Dolan-King v. Rancho Santa Fe Assn.(2000) 81 Cal. App. 4th 965, 979.) Courts generally afford boards with the presumption in favor of their actions being taken in good faith. (Beehan v. Lido Isle Community Assn. (1977) 70 Cal. App. 3d 858, 865: (…“Every presumption is in favor of the good faith of the directors. Interference with such discretion is not warranted in doubtful cases.”).)
Limitations on Judicial Deference The Rule of Judicial Deference does not necessarily extend to every action (or decision not to act) that the board may take. Notably, the rule set forth in Lamden was tied solely to board decisions concerning “ordinary maintenance”:
“The precise question presented, then, is whether we should in this case adopt for California courts a rule-analogous perhaps to the business judgment rule-of judicial deference to community association board decisionmaking that would apply, regardless of an association’s corporate status, when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors.” (Lamden, at 260.)
The California Court of Appeal has stated the importance of noting “the narrow scope of the Lamdenrule. It is a rule of deference to the reasoned decisionmakingof homeowners association boards concerning ordinary maintenance. It does not create a blanket immunity for all the decisions and actions of a homeowners association. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria.” (Affan v. Portofino Cove HOA (2010) 189 Cal.App.4th 930, 940.)
Notwithstanding the Court’s reference to the “narrow scope of the Lamden rule,” the Rule of Judicial Deference is still being expanded in the wake of the Affan holding. In the 2015 case of Watts v. Oak Shores Community Association, the California Court of Appeal touched on the Affan holding, noting that its articulation of the Lamden rule “gives ‘deference to reasoned decisionmaking of homeowners association boards concerning ordinary maintainenace.’…[b]ut there is no reason to read Lamden so narrowly. In fact, courts have given deference to board decisions that do not concern ordinary maintenance. Thus, for example, in Dolan-King v. Rancho Sante Fe Assn.(2000) 81 Cal.App.4th 965, 979, the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.” (Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 473.) The Court in Watts ultimately upheld an association’s ability to adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units. At the heart of the Watts holding was the Court’s belief that “common interest developments are best operated by the board of directors, not the courts.” (Id.) This was reiterated in Eith v. Ketelhut (2018) 31 Cal.App.5th 1, where the Court deferred to a board’s decision that a homeowner’s growing of grapes on his property for the cultivation of wine did not affect the residential character of the community and was therefore not prohibited business activity under the CC&Rs.
However, there are various decisions that a board may make to which the Rule of Judicial Deference may not necessarily apply, including:
Situations where the board unreasonably fails to investigate maintenance and repair issues. (Affan v. Portofino Cove HOA (2010) 189 Cal.App.4th 930.)
Situations where substantial evidence supports a finding that the board acted in bad faith. (Ridley v. Rancho Palma Grande HOA (2025) 114 Cal.App.5th 788.)
Scope of Liability Protection The Rule of Judicial Deference “provides protection from personal liability for the individual directors of a non-profit homeowners association. It does not follow and is not true that the same rule of judicial deference will also automatically provide cover to the [association] itself. There is a difference between the standard of care, which is a reflection of the duty expected of decision makers, and the judicial deference rule, which is a modified standard of review for determining whether the actual decisions-makers will be held liable for their poor decisions.” (Ritter & Ritter v. Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 125.)
An association’s board of directors generally has the power to “delegate the management of the activities of the [association] to any person or persons, management company, or committee however composed, provided that the activities and affairs of the [association] shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.” (Corp. Code § 7210.) Because of the limitations placed on the board’s ability to conduct association business (i.e., the prohibition on actions without a meeting), as well as the fact that directors serve in the capacity of unpaid volunteers, a large portion of the board’s duties, powers and authority in managing the association are often delegated to other parties such as the association’s managing agent or committees of the association that assist with the association’s day-to-day operations.
Non-Delegable Duties There are certain duties and powers of the board which may not be delegated to other persons, either as a result of an explicit legal requirement and/or in order to avoid liability. Those non-delegable duties generally include:
Approving settlement agreements on behalf of the association. (Elnekave v. Via Dolce HOA (2006) 142 Cal. App. 4th 1193.)
Delegating “Items of Business” The “Common Interest Development Open Meeting Act” (“Open Meeting Act”) is codified at Civil Code Sections 4900 through 4955. One of the Open Meeting Act’s provisions prohibits HOA boards from “tak[ing] action on any item of business outside of a board meeting.” (Civ. Code § 4910(a) (Emphasis added).) Because of the various notice requirements applicable to board meetings, this “no action without a meeting” requirement may inhibit the board’s ability to act on time-sensitive matters or other issues that arise between the board’s scheduled meetings.
The term “item of business” used in Civil Code Section 4910 is significant. “Item of business” is defined as:
“…any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a quorum of the board.” (Civ. Code § 4155(Emphasis added).)
Unless an association’s bylaws or articles state otherwise, officers are appointed by a majority vote of the board of directors. (Corp. Code § 7213(b).) The appointment/selection of officers by the board is typically performed in an open board meeting immediately following an association’s annual meeting where directors are elected by the membership. The meeting where officers are selected by the board is often defined as an “Organizational Meeting” in association governing documents.
Because officers serve at the pleasure of the board, the board may change officers at any time with our without cause, unless otherwise stated in the association’s governing documents. (See “Officer Removal & Resignation.”)
Open to Membership The appointment/selection of officers does not fall within the matters specified under Civil Code Section 4935 which the board may act upon in executive session. The selection of officers is therefore performed during an open board meeting that members have the right to attend and observe.
Officer Qualifications Unless required by the association’s governing documents, officers are not required to be directors or members of the association. Any qualifications for officers are often found in an association’s bylaws.
Removal
While directors are elected by the membership, officers are generally appointed by the board and thus “serve at the pleasure of the board.” (Corp. Code § 7213(b).) Serving at the pleasure of the board allows for the board to remove or change its officers at any time with or without cause, unless otherwise stated in the association’s governing documents.
Distinct from Removing a Director from the Board Removing a director from an office (i.e., president, secretary, treasurer, etc.) is distinct from removing a director from his seat on the board. (See “Removal & Recall of Directors.”) A director who is removed from his officer position continues to serve on the board and maintains all of his powers and authority as a director.
Resignation An officer may resign at any time upon written notice to the association without prejudice to any rights the association may have under contract with the officer. (Corp. Code § 7213(b).)
Filling Vacancies Unless otherwise provided in an association’s articles or bylaws, a vacancy created by the removal or resignation of an officer is filled by a majority vote of the board. (Corp. Code § 7213(b).)
Parliamentary procedure is a body of rules, ethics and customs used to govern meetings of organizations, legislative bodies, clubs and other deliberative assemblies. As discussed below, a homeowners association’s adherence to a system of parliamentary procedure is a legal requirement solely in the context of membership meetings. (Civ. Code § 5000(a).)
Robert’s Rules of Order The most widely adopted system of parliamentary procedure by private organizations is Robert’s Rules of Order (“Robert’s Rules”). Robert’s Rules was first published in 1876 by U.S. Army Colonel Henry Martyn Robert and is currently in its eleventh edition. Robert’s Rules and related resources may be found online.
Board Meetings & Committee Meetings There is no statutory requirement that an association’s board meetings or committee meetings be conducted in accordance with a system of parliamentary procedure such as Robert’s Rules. Associations typically refrain from doing so in order to avoid onerous and unreasonable formalities (i.e., requiring directors to “obtain the floor” before making motions or speaking). Boards and committees typically utilize more flexible procedures, unless otherwise required by the association’s governing documents.
Membership Meetings Adhering to a system of parliamentary procedure often only becomes a legal necessity in the context of an association’s membership meetings:
“Meetings of the membership of the association shall be conducted in accordance with a recognized system of parliamentary procedure or any parliamentary procedures the association may adopt.” (Civ. Code § 5000(a).)
While there are various systems of parliamentary procedure which may be utilized by an association, Robert’s Rules is the most common.
**NOTE – Various topics categorized under the MEMBER MEETINGS & ELECTIONS area of this website may include references to procedures contained within Robert’s Rules. Those procedures may not apply to an association that uses a different system of parliamentary procedure.
Unless an association’s bylaws or articles state otherwise, officers are appointed by a majority vote of the board of directors to execute powers and duties that are either stated in the bylaws, or which are commensurate with the specific office held. (Corp. Code § 7213(b).) An association’s directors typically serve as its officers; however, there may be instances where an association’s governing documents permit non-directors to serve as officers. The office of an officer is distinct from that of a director in several respects. (See “Directors vs. Officers.”)
Required Officers Associations that are incorporated must have the following officers:
Serving as the primary liaison between the board and the association’s manager;
Serving as the primary liaison between the board and the association’s legal counsel;
Co-signing association checks with either the secretary or treasurer;
Serving as the general supervisor of the association’s general operations (i.e., communicating with association vendors), except in instances where some of those duties have been delegated to other parties such as the association’s manager; and
Serving as an ex officio member of certain association committees.
Secretary Unless otherwise provided in the association’s governing documents, the secretary’s duties generally include:
Ensure that appropriate meeting minutes are taken and approved;
Sign a copy of the approved minutes;
Ensure that proper notice is provided of board meetings and membership meetings;
Oversee the preparation and maintenance of the association’s membership list;
Co-sign association checks with either the president or the secretary.
“Director at Large” There is no officer position entitled a “director at large” (or “member at large”) referenced or required under the Corporations Code. The term “director at large” is commonly used within the HOA industry to describe a director that has the powers and rights of other directors, but is not designated as an officer nor tasked with the additional duties associated therewith.
Resignation An officer may resign at any time upon written notice to the association without prejudice to any rights the association may have under contract with the officer. (Corp. Code § 7213(b); See also “Officer Removal & Resignation.”)
There is no law that explicitly establishes qualifications for persons wishing to serve on an association’s board of directors. There may be qualifications established in provisions of an association’s governing documents—typically in its bylaws. However, those provisions often include language that merely “encourages” adherence to stated qualifications, rather than making them mandatory requirements. Where director qualifications are entirely absent from an association’s governing documents, there may be circumstances where any person (i.e., non-owners, tenants, etc.) may be eligible to serve as a director and ultimately elected to the board.
Adopting Director Qualifications In order to make adherence to specific director qualifications mandatory, an association may be required to formally amend its bylaws or its election rules. The limitations and requirements applicable to doing so will depend upon various factors, such as the nature/purpose of the desired qualifications and the language already contained within the governing documents.
Amending the Bylaws An association’s bylaws may be amended according to the procedures and voting requirements contained within the bylaws. Bylaw amendments to incorporate director qualifications will often require membership approval through a formal election utilizing secret ballots. (See “Amendments to Bylaws” and “Elections Requiring Secret Ballots.”) Where a director ceases to meet required qualifications in effect at the beginning of the director’s current term of office, Corporations Code Section 7221(b) allows the board to declare the director’s seat vacant. (See also “Removal & Recall of Directors.”)
Director Qualifications vs. Candidate Qualifications
Director qualifications govern who remains qualified to continue to serve on a HOA’s board of directors. Candidate qualifications, by contrast, govern who is qualified to run for and be elected to the HOA’s board of directors in a director election.
Candidate Qualifications within Election Rules Associations are required to adopt election rules that comply with the requirements set forth in Civil Code Section 5105. (See “Election Rules.”) Election rules are “operating rules” that may be adopted and amended by the board without membership approval. For information on the types of candidate qualifications that may or must be adopted as part of the election rules under Civil Code § 5105, see “Candidate Qualifications.” Persons who do not satisfy the candidate qualifications in effect at the time of nomination are disqualified from nomination. (See “Candidate Nomination”.)
“Reasonable” Director Qualifications Once adopted, director qualifications may be enforced provided that they are “reasonable.” Reasonableness is determined by whether the qualification is rationally related to the protection, preservation or proper operation of the association. (Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670.)
Director qualifications that are commonly adopted by associations 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 board meetings as a director
Not having a familial relationship with another sitting director
Not being a co-owner with another sitting director
