COLORADO RELIABLE FULL SERVICE HOMEOWNER’S ASSOCIATION MANAGEMENT Co.
HAVE A “Q”? BECAUSE WE HAVE YOUR “A” – AN AMAZING COMPLIED LIST OF HOA Q & A – ARTICLE BY HOAQANDA.COM
HAVE A “Q”? BECAUSE WE HAVE YOUR “A” – AN AMAZING COMPLIED LIST OF HOA Q & A – ARTICLE BY HOAQANDA.COM
Posted by AccordPM on May 4, 2011
JUSTIFIED EXPENDITURES
Q.
Can the board of directors of our association spend association funds on what amounts to a political issue? The board wants to spend funds to stop a nearby development, based on the belief that it will harm the value of homes in our community.
A.
Absent a prohibition in the association’s bylaws or CC&Rs, the boardcan probably justify the expenditure so long as they act:
1. In good faith;
2. In the best interest of the association;
3. After becoming fully informed, and
4. After deliberating as a body before deciding.
SPECIAL MEETINGS
Q.
Who can call for a special meeting of the members of a homeowners association?
A.
A special meeting can be called by the board, the chairman of the board, the president, or any group of members, consisting of at least five percent. Top
VOTING BY PRESIDENT OF BOARD
Q.
Historically, the President of our homeowner association board has voted only to break ties. Is this procedure required by law?
A.
No. The President of your board may vote on any matter unless prohibited by your bylaws. This is possible, but it would be highly unusual.
RECUSAL BY BOARD MEMBER
Q.
When is it appropriate for a member of our homeowner association board to recuse himself?
A.
A board member should recuse or disqualify himself or herself because of self interest, bias or prejudice. If a board member does not recuse himself or herself when required, he or she will have a conflict of interest. If a board member votes on a matter where he or she has a conflict of interest, he or she violates his or her fiduciary duty.
ELIGIBILITY TO SERVE ON BOARD
Q.
I own a townhome, however, I don’t reside in it. Am I still eligible to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners to be members of the board. Some do not. There is nothing in the Colorado Corporations Code to prohibit you from being a member.
CHRISTMAS LIGHTS
Q.
Our homeowners association has a restriction against members attaching anything, including lighting, to the common area. The common area includes the roofs and exteriors of the buildings. We interpret this to mean that members cannot attach Christmas lights to the exteriors of their townhomes. Can the board make an exception to the restriction so members can put up their lights?
A.
I believe your board will be safe in making a temporary exception to the restriction, however, don’t be shocked if someone complains.
Any rule concerning Christmas lights should include the following:
1) The first date they may be installed,
2) The last date for their removal,
3) Any limits on the number of lights permitted (if applicable),
4) The type of hardware permitted to be used for installation, and
5) Any daily fine to be imposed if the lights are not removed on time.
BOARD REFUSES TO ENFORCE CC&Rs
Q.
I live in a zero-lot-line homeowner association where the CC&Rs (Covenants, Conditions and Restrictions) make the association responsible for exterior stucco repairs and maintenance except for situations where a member of the association has caused the damage. Each member of the association is responsible for interior repairs.
My neighbor has planted ivy in her yard which has attached itself to the exterior of my townhome in an area where only my neighbor has access. I am concerned that the ivy will eventually damage the stucco leading to water intrusion and interior damage. The board of directors seems to be reluctant to request that my neighbor remove the ivy. What should I do?
A.
You should advise your board of directors in writing of their obligation as set forth in your CC & Rs . Specifically, you should point out that the board should either require your neighbor to remove the ivy, or agree to recommend to the full membership , a proposed amendment to the CC & Rs that would require the association to make both exterior and interior repairs caused by exterior plants.
It is highly unlikely that your board will choose to amend the CC & Rs as such. It is more likely that they will agree to request the removal of the ivy.
If the board fails to do anything, you probably will have documented your file sufficiently to hold the association responsible if damage takes place in the future. Also, to be safe, I recommend that you send copies of your correspondence to any new members who join the board at a later date.
RIGHT TO PRIVACY
Q.
I am on the board of directors of my homeowners association. May the board discuss individual delinquencies (identifying names) at regular board meetings? The association’s law firm has advised us that we may do so. I do not feel comfortable in having these types of matters discussed in public. What is your opinion?
A.
Discussions concerning individual delinquencies (identifying names) should only take place during executive sessions. This means that members of the association will not be present other than board members. The Colorado Civil Code requires that the board of directors must adjourn to executive session to consider litigation and member discipline.
The Colorado Constitution guarantees the right to privacy. While it is unclear whether the Constitution protects a person from an invasion of privacy by a homeowners association (as opposed to the state), it may. The right to privacy has been liberally interpreted by all courts. Lastly, the intrusion into private affairs by an individual may constitute a court for which the plaintiff may collect damages including punitive damages.
I strongly disagree with your counsel’s opinion and suggest that your board discuss association delinquencies only during executive committee sessions.
HIRING CONTRACTORS
Q.
We live in a common interest development. Based on the recommendation of our management company, our board of directors obtained three bids for landscaping maintenance and then selected the company with the highest bid. The bids were for identical work. Since all three companies were proposing to do the same work, shouldn’t our board have selected the lowest bid? Our monthly assessments are already too high and many of us live on fixed incomes.
A.
The board should use its best judgment in deciding which company to use, based on all facts available. This is their legal duty. While the three companies may have submitted bids for the same work, it does not logically follow that all three companies will provide the same quality of work. Sometimes experience is helpful in determining which company will provide the highest quality work and, likewise, who will be the most reliable contractor. One of the advantages of hiring an established local management company, is that they have experience with contractors and can provide valuable recommendations to the board of directors.
REMOVAL OF TREES BY BOARD
Q.
Our homeowners association consists of twelve townhomes. We have a three person board which includes two members who live off-site. The two off-site board members just voted as a majority to remove several beautiful, twenty-five year old trees because they want to save money on tree trimming. The ten members of the association who live on-site are furious about the decision. The trees are being removed within a week. Is there anything we can do?
A.
If the board of directors has a good reason, in their reasonable judgment, to remove the trees, they may do so.
While I recommend that you present a petition signed by the ten members to your board in order to influence their decision, they may legally exercise their reasonable judgment and remove the trees.
This situation illustrates the critical importance of electing board members who will represent the majority of members. Members of associations should take the subject of board elections very seriously.
BOARD REFUSES TO SUE DEVELOPER
Q.
I live in a large condominium community with extensive common areas. The community is only two years old. While we have several serious construction defects, the board refuses to sue the developer because they want to avoid litigation and would rather special assess to repair the defects. Do I, as a member of the association, have the right to sue the developer for these defects?
A.
Yes. As a member of a condominium association, you have standing to file suit. You should immediately consult with a construction defect attorney concerning your rights because they can be lost if you delay taking action.
DISCLOSURE OF DELINQUENCY TO MEMBERSHIP
Q.
Is there ever a time when it is appropriate for the board of directors of a homeowners association to inform the membership of a serious delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection action has reached the stage of a lawsuit. When an association becomes involved in litigation, the members are entitled to notice. The filing of a suit places the matter in the public domain and is material to the financial condition of the association. ColoradoCivil Code protects the association as plaintiff from liability for defamation or disclosure of private information under the “litigation privilege.” Top
WAIVING LATE FEES
Q.
Our board of directors recently waived a late fee for a board member because “she puts in so much free time.” Other members of the association are required to pay a late fee whenever they pay late, without exception. What are your comments?
A.
I strongly recommend that the board cease the policy of waiving late fees for this or any other board member because such a policy creates a legal defense for other members of the association who pay late fees and get fined. If the board ignores my advice, at the very minimum, the board member who is receiving the special benefit should be recused from voting on such a waiver. Lastly, the receipt of such a benefit may have the legal effect of eliminating the board member’s statutory protection because it can be argued that volunteers do not receive compensation, and that the waiver of a fee is in fact compensation. In short, it’s asking for trouble to make exceptions such as the one described. Top
FAILURE TO HOLD ANNUAL MEETING
Q.
The board of directors of our homeowners association has not held an annual meeting to elect new directors for more than 18 months even though our bylaws require an annual meeting to be held. I have requested that our “annual” meeting be held, but have been ignored. What can I do?
A.
If a corporation with members is required by its bylaws to hold a regular meeting and fails to do so for a period of sixty days after the date designated, or if no date has been designated, for a period of fifteen months after its last regular meeting, the superior court of the county may summarily order a meeting to be held upon application of a member after notice to the board giving it an opportunity to be heard. Top
QUESTION ABOUT POTENTIAL BOARD MEMBER
Q.
A member of our homeowner association who is running for the board has been chronically late in paying her monthly assessments. She has had every excuse under the sun but is now paid up. Other than the chronic delinquencies, she is bright, knowledgeable and seems to work hard. What do you think?
A.
Members of an association who have consistently paid their assessments late, are generally not ideal board members. You should ask the following questions before you vote for her:
Will she retaliate against the board and / or management company because she has been required to pay late fees and collection costs? This is a common problem.
Will she attempt to liberalize the association’s collection policy to make it easier for members who don’t pay on time? This is also a common problem.
Will she vote unreasonably against every proposed increase in monthly assessments because she is having financial problems? Likewise, this is a common problem.
I strongly recommend that you elect board members who are “model citizens” to the extent possible.
NON-OWNER DIRECTORS
Q.
I own a townhome, however, I don’t reside in it. Am I still eligible to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners to be members of the board. Some do not. There is nothing in the California Corporations Code to prohibit you from being a member. Top
LIABILITY PROTECTION OF BOARD MEMBERS
Q.
I am considering running for election to the board of directors of my homeowners association. What types of protections are available to protect me against legal liability for negligent acts?
A.
Under the Colorado Civil Code, a director cannot be held personally liable if the director is acting:
(1) As a volunteer (not paid);
(2) Within the scope of the director’s authority;
(3) In good faith;
(4) In the absence of willful, wanton or gross negligence; and
(5) The association has both general liability and directors/officers liability insurance coverage ($500,000 minimum for 100 units or less, or $1,000,000 minimum if over 100 units).
Not withstanding the above, the association may be held liable for negligent acts of the board of directors.
In addition, the ColoradoCorporations Code also provides immunity if the director is acting:
(1) In good faith,
(2) In the best interest of the corporation,
(3) In accordance with the business judgment rule, and
(4) As a volunteer (not paid).
Immunities are not absolute. You should contact legal counsel for additional information and obtain comprehensive insurance coverage from a knowledgeable insurance broker. Top
PREPARING TO BE A DIRECTOR
Q.
I was recently elected to the board of directors of my homeowner association and am somewhat at a loss as to how I can best prepare for my responsibilities. Can you provide me with a list of what I should do?
A.
I suggest the following:
First, read the following:
1) Bylaws of the association;
2) CC&Rs (Covenants, Conditions and Restrictions);
3) Rules (if applicable);
4) Contract with management company;
5) Latest reserve study;
6) Most recent budget;
7) Minutes of board meetings for the last twelve months;
8) Minutes of the last annual meeting of owners (members);
9) Monthly financial reports for the last twelve months;
10) Insurance policy(ies) of the association; and
11) Management company inspection reports for the last twelve months.
Your management company should provide you with any of the items listed that you need.
Ask your management company representative to provide you with an update, along with current legal compliance schedule for associations. Review their web site for possible helpful information.
Ask you association attorney for an update, if any legal matters are pending. Review their web site for possible helpful information. Normally, a law firm will not charge for such an update. Top
NEGLIGENCE OF BOARD
Q.
During the recent rains, the roof to my condominium leaked through a crack causing damage to my furniture and other personal property. I have been informed by the association’s insurance company that the master policy excludes coverage for my personal property. I don’t have insurance. Can the association be held liable for not maintaining the roof?
A.
Possibly. If the board of directors fell below the standard of care in maintaining the roof, they could be liable for negligence and would then be responsible for paying your damages. The fact that the roof leaked is insufficient, by itself, to prove negligence on the part of the board. For example, if the crack was new, the board would probably not be held liable for negligence. If the crack was old and the board failed to have the roof inspected, it would be more likely that a court would hold them liable. The facts of your case must be fully investigated before an educated opinion can be offered.
The lesson is clear. It is prudent for all condominium owners to obtain insurance to protect their property. It is inexpensive compared to the risk of harm an owner can suffer. Top
SELF-MANAGED ASSOCIATIONS
Q.
Our association, which consists of twelve townhomes, has been self-managed for many years in order to save money. Our newly elected board of directors is considering the possibility of hiring a management company which would result in an increase of our monthly assessments. The board claims that we should save money in the long run. What is your experience?
A.
In my experience, I have found that self-managed associations have higher expenses in the long run than those with professional management. Overall, self-managed associations pay more for maintenance and repairs, have more collection problems and pay out more legal fees because more mistakes tend to be made by the boards of these associations. Self-managed associations tend to keep many lawyers working overtime.
DISCLOSURE OF LITIGATION
Q.
Is there ever a time when it is appropriate for the board of directors of a homeowners association to inform the membership of a serious delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection action has reached the stage of a lawsuit. When an association becomes involved in litigation, the members are entitled to notice. The filing of a suit places the matter in the public domain and is material to the financial condition of the association. Colorado Civil Code protects the association as plaintiff from liability for defamation or disclosure of private information under the “litigation privilege.”
WHEN DOES A CONFLICT EXIST?
Q.
Please define “conflict of interest.”
A.
A conflict of interest exists where an individual’s duty to one party leads to the disregard of a duty to another. It exists when an outside influence affects a person’s ability to make an independent, unimpeded, objective decision or when a person owes duties to separate parties with conflicting interests.
Whether or not a conflict of interest exists depends on the facts of a particular situation which must be evaluated on a case-by-case basis. Top
BOARD REFUSES TO OBTAIN RESERVE STUDY
Q.
Our board of directors refuses to obtain a reserve study for our homeowner association. Can board members be held legally liable for negligence if they won’t obtain a reserve-study?
A.
Yes. Negligence is a civil wrong (tort) that has the following elements:
(1) The defendant must owe a legal duty to conform to a certain standard of care for the protection of the plaintiff,
(2) The defendant must have breached his duty by failing to conform his conduct to the required conduct,
(3) The breach must be a legal cause of the plaintiff’s injury, and
(4) The plaintiff must have suffered actual harm.
The Colorado Civil Code, with few exceptions, requires the board of directors of an association to obtain or prepare a reserve study at least once every three years. Whenever a board is required by law to do something, it owes a legal duty to act accordingly. Failing to obtain or prepare a legally required reserve study constitutes a clear breach of duty. If such a breach causes harm to members of the association, the legal elements of negligence have been satisfied and the members may successfully prevail in a suit.
Failure to obtain a serve study can result in any one or more of the following types of harm:
(1) It may result in a large special assessment being imposed which some members of the association may find difficult or impossible to pay.
(2) A member of the association may find it difficult to sell or refinance his or her home which may cost money or even result in a foreclosure. Buyers and lenders are becoming more knowledgeable and are often refusing to become involved with associations that do not comply with the law.
(3) Owners may suffer the consequences of being a member of an association involved as a defendant in litigation brought by another member. Top
LEGAL PROTECTIONS FOR BOARD MEMBERS
Q.
I am considering running for election to the board of directors of my homeowners association. What types of protections are available to protect me against legal liability for negligent acts?
A.
Under the Colorado Civil Code, a director cannot be held personally liable if the director is acting:
(1) As a volunteer (not paid);
(2) Within the scope of the director’s authority;
(3) In good faith;
(4) In the absence of willful, wanton or gross negligence; and
(5) The association has both general liability and directors/officers liability insurance coverage ($500,000 minimum for 100 units or less, or $1,000,000 minimum if over 100 units).
Not withstanding the above, the association may be held liable for negligent acts of the board of directors.
In addition, the Colorado Corporations Code also provides immunity if the director is acting:
(1) In good faith,
(2) In the best interest of the corporation,
(3) In accordance with the business judgment rule, and
(4) As a volunteer (not paid).
Immunities are not absolute. You should contact legal counsel for additional information and obtain comprehensive insurance coverage from a knowledgeable insurance broker.
BOARD MEETINGS BY E-MAIL
Q.
May our board meetings be held by email communication?
A.
No. Members of the board may participate in a meeting through the use of a conference telephone or similar communications equipment, so long as all members participating in the meeting can hear one another. It is necessary that board members be able to confer with each other in order to comply with their legal duties.
RECALL OF BOARD
Q.
What are the most common reasons that boards of Directors of homeowner associations are recalled?
A.
The most common reasons for recalls are:
(1) The board violates or has violated the law;
(2) The board has failed to operate within the business judgment rule ;
(3) They fail to plan ahead, resulting in large special assessments;
(4) board members act in an autocratic, arrogant, and secretive manner;
(5) Deferred maintenance has been allowed, resulting in lower property values and the potential for special assessments;
(6) They refuse to enforce the CC&Rs and/or Rules;
(7) The board refuses to permit members of the association to adequately address issues at board meetings;
(8) They fail to treat all members equally;
(9) The board misuses “executive session”; and
(10) The board’s collection policy is either too harsh or too lenient.
PROCEDURE FOR RECALL
Q.
The majority of homeowners in our association are outraged by the conduct of our board of directors. The next election won’t be held for another eight months. Our bylaws are silent on the subject of recalling the board. What can we do?
A.
The Colorado Corporations Code sets forth the procedure for recalling a board of directors. It involves calling for a special meeting, sending out proxies and then voting. An association attorney can assist you with the details.
PARLIAMENTARY PROCEDURES
Q.
Our homeowner association bylaws require that we adopt a system of Parliamentary Procedure. What is Parliamentary Procedure and what is its purpose as it relates to a homeowner association?
A.
Parliamentary Procedure is a set of rules of order. Following is one of the basic rules:
All members have equal rights, privileges and obligations which are to be ensured by the chairperson;
To learn more of the basic rules, consult with an Attorney who specializes in HOAs.
REQUIREMENT OF MINUTES
Q.
Is the board of directors of our association required to keep minutes of meetings?
A.
Yes. The corporations code requires associations to keep minutes of meetings of the board of directors. However, the corporations code does not require the board to keep minutes of executive sessions. Any matter discussed in executive session must be generally noted in the minutes of the board of directors.
BOARD REFUSES TO REPIPE BUILDING
Q.
Our condominium building has old galvanized pipes that have been leaking for several years. The board makes repairs, but has refused to repipe the building because our reserves are inadequate. What is their legal duty?
A.
The board should borrow the funds to repipe the building if possible. If a loan is not available, the board should immediately begin the process of increasing assessments so the work can be done at the earliest possible time.
Given that the board has knowledge of the deteriorating pipes, the association will probably be liable for the total cost of all repairs resulting from future leaks. Repiping will cut off the association’s liability.
PIPE REPAIRS COVERED BY INSURANCE
Q.
Will the association’s insurance policy cover the cost of repairs resulting from the leaking of our building’s old galvanized pipes?
A.
Most insurance policies will not pay for such damage if it determines that the board knew of the deteriorating pipes and failed to replace them. Insurance policies generally cover only sudden, unexpected losses. Losses from old deteriorating galvanized pipes are expected. Top
RECORDING VOTES
Q.
When the board of our condominium association votes, is it required that the minutes record how each member voted?
A.
No. It is sufficient for boards to record only whether the directors voted for or against a particular motion. However, any individual director may require that his or her vote on a particular matter be recorded in the minutes.
EMERGENCY MEETINGS
Q.
Who can call an emergency board meeting?
A.
The president of the board or any two directors other than the president. A notice and agenda are required even though less than four days notice is provided. Members can attend emergency board meetings excluding executive sessions. Top
VIOLENCE AT BOARD MEETINGS
Q.
We recently had an incident at a board meeting where one member pushed another. Can we install a video camera in our community room and record our board meetings on video tape?
A.
Yes. Installing cameras and recording the meetings is likely to deter such future conducts.
BORROWING M0NEY
Q.
Can the board of our homeowner association borrow funds from a bank for our association?
A.
The authority for associations to borrow money is found in the association’s governing documents. Absent any limitations in the governing documents, associations can borrow money if approved by the board of directors.
SUSPENDED CORPORATION
Q.
Our Association’s management company recently informed the board that the corporate status of the association had been suspended. How does a homeowner association become suspended and what are the consequences?
A.
Possible reasons for suspension are:
•Failure to pay taxes,•Failure to file taxes,•Failure to file a Statement by Domestic Nonprofit Corporation, or•Failure to file a Statement by Common Interest Development.
The consequences include the loss of:
•The right to bring and defend lawsuits,•The right to collect assessments,•The right to enforce contracts with contractors and vendors, and•The right to enter into contracts.
A suspended corporation (association) can be revived. When this occurs, a Notice of Revivor is provided by the Secretary of State.
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HAVE A “Q”? BECAUSE WE HAVE YOUR “A” – AN AMAZING COMPLIED LIST OF HOA Q & A – ARTICLE BY HOAQANDA.COM
Posted by AccordPM on May 4, 2011
JUSTIFIED EXPENDITURES
Q.
Can the board of directors of our association spend association funds on what amounts to a political issue? The board wants to spend funds to stop a nearby development, based on the belief that it will harm the value of homes in our community.
A.
Absent a prohibition in the association’s bylaws or CC&Rs, the boardcan probably justify the expenditure so long as they act:
1. In good faith;
2. In the best interest of the association;
3. After becoming fully informed, and
4. After deliberating as a body before deciding.
SPECIAL MEETINGS
Q.
Who can call for a special meeting of the members of a homeowners association?
A.
A special meeting can be called by the board, the chairman of the board, the president, or any group of members, consisting of at least five percent. Top
VOTING BY PRESIDENT OF BOARD
Q.
Historically, the President of our homeowner association board has voted only to break ties. Is this procedure required by law?
A.
No. The President of your board may vote on any matter unless prohibited by your bylaws. This is possible, but it would be highly unusual.
RECUSAL BY BOARD MEMBER
Q.
When is it appropriate for a member of our homeowner association board to recuse himself?
A.
A board member should recuse or disqualify himself or herself because of self interest, bias or prejudice. If a board member does not recuse himself or herself when required, he or she will have a conflict of interest. If a board member votes on a matter where he or she has a conflict of interest, he or she violates his or her fiduciary duty.
ELIGIBILITY TO SERVE ON BOARD
Q.
I own a townhome, however, I don’t reside in it. Am I still eligible to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners to be members of the board. Some do not. There is nothing in the Colorado Corporations Code to prohibit you from being a member.
CHRISTMAS LIGHTS
Q.
Our homeowners association has a restriction against members attaching anything, including lighting, to the common area. The common area includes the roofs and exteriors of the buildings. We interpret this to mean that members cannot attach Christmas lights to the exteriors of their townhomes. Can the board make an exception to the restriction so members can put up their lights?
A.
I believe your board will be safe in making a temporary exception to the restriction, however, don’t be shocked if someone complains.
Any rule concerning Christmas lights should include the following:
1) The first date they may be installed,
2) The last date for their removal,
3) Any limits on the number of lights permitted (if applicable),
4) The type of hardware permitted to be used for installation, and
5) Any daily fine to be imposed if the lights are not removed on time.
BOARD REFUSES TO ENFORCE CC&Rs
Q.
I live in a zero-lot-line homeowner association where the CC&Rs (Covenants, Conditions and Restrictions) make the association responsible for exterior stucco repairs and maintenance except for situations where a member of the association has caused the damage. Each member of the association is responsible for interior repairs.
My neighbor has planted ivy in her yard which has attached itself to the exterior of my townhome in an area where only my neighbor has access. I am concerned that the ivy will eventually damage the stucco leading to water intrusion and interior damage. The board of directors seems to be reluctant to request that my neighbor remove the ivy. What should I do?
A.
You should advise your board of directors in writing of their obligation as set forth in your CC & Rs . Specifically, you should point out that the board should either require your neighbor to remove the ivy, or agree to recommend to the full membership , a proposed amendment to the CC & Rs that would require the association to make both exterior and interior repairs caused by exterior plants.
It is highly unlikely that your board will choose to amend the CC & Rs as such. It is more likely that they will agree to request the removal of the ivy.
If the board fails to do anything, you probably will have documented your file sufficiently to hold the association responsible if damage takes place in the future. Also, to be safe, I recommend that you send copies of your correspondence to any new members who join the board at a later date.
RIGHT TO PRIVACY
Q.
I am on the board of directors of my homeowners association. May the board discuss individual delinquencies (identifying names) at regular board meetings? The association’s law firm has advised us that we may do so. I do not feel comfortable in having these types of matters discussed in public. What is your opinion?
A.
Discussions concerning individual delinquencies (identifying names) should only take place during executive sessions. This means that members of the association will not be present other than board members. The Colorado Civil Code requires that the board of directors must adjourn to executive session to consider litigation and member discipline.
The Colorado Constitution guarantees the right to privacy. While it is unclear whether the Constitution protects a person from an invasion of privacy by a homeowners association (as opposed to the state), it may. The right to privacy has been liberally interpreted by all courts. Lastly, the intrusion into private affairs by an individual may constitute a court for which the plaintiff may collect damages including punitive damages.
I strongly disagree with your counsel’s opinion and suggest that your board discuss association delinquencies only during executive committee sessions.
HIRING CONTRACTORS
Q.
We live in a common interest development. Based on the recommendation of our management company, our board of directors obtained three bids for landscaping maintenance and then selected the company with the highest bid. The bids were for identical work. Since all three companies were proposing to do the same work, shouldn’t our board have selected the lowest bid? Our monthly assessments are already too high and many of us live on fixed incomes.
A.
The board should use its best judgment in deciding which company to use, based on all facts available. This is their legal duty. While the three companies may have submitted bids for the same work, it does not logically follow that all three companies will provide the same quality of work. Sometimes experience is helpful in determining which company will provide the highest quality work and, likewise, who will be the most reliable contractor. One of the advantages of hiring an established local management company, is that they have experience with contractors and can provide valuable recommendations to the board of directors.
REMOVAL OF TREES BY BOARD
Q.
Our homeowners association consists of twelve townhomes. We have a three person board which includes two members who live off-site. The two off-site board members just voted as a majority to remove several beautiful, twenty-five year old trees because they want to save money on tree trimming. The ten members of the association who live on-site are furious about the decision. The trees are being removed within a week. Is there anything we can do?
A.
If the board of directors has a good reason, in their reasonable judgment, to remove the trees, they may do so.
While I recommend that you present a petition signed by the ten members to your board in order to influence their decision, they may legally exercise their reasonable judgment and remove the trees.
This situation illustrates the critical importance of electing board members who will represent the majority of members. Members of associations should take the subject of board elections very seriously.
BOARD REFUSES TO SUE DEVELOPER
Q.
I live in a large condominium community with extensive common areas. The community is only two years old. While we have several serious construction defects, the board refuses to sue the developer because they want to avoid litigation and would rather special assess to repair the defects. Do I, as a member of the association, have the right to sue the developer for these defects?
A.
Yes. As a member of a condominium association, you have standing to file suit. You should immediately consult with a construction defect attorney concerning your rights because they can be lost if you delay taking action.
DISCLOSURE OF DELINQUENCY TO MEMBERSHIP
Q.
Is there ever a time when it is appropriate for the board of directors of a homeowners association to inform the membership of a serious delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection action has reached the stage of a lawsuit. When an association becomes involved in litigation, the members are entitled to notice. The filing of a suit places the matter in the public domain and is material to the financial condition of the association. ColoradoCivil Code protects the association as plaintiff from liability for defamation or disclosure of private information under the “litigation privilege.” Top
WAIVING LATE FEES
Q.
Our board of directors recently waived a late fee for a board member because “she puts in so much free time.” Other members of the association are required to pay a late fee whenever they pay late, without exception. What are your comments?
A.
I strongly recommend that the board cease the policy of waiving late fees for this or any other board member because such a policy creates a legal defense for other members of the association who pay late fees and get fined. If the board ignores my advice, at the very minimum, the board member who is receiving the special benefit should be recused from voting on such a waiver. Lastly, the receipt of such a benefit may have the legal effect of eliminating the board member’s statutory protection because it can be argued that volunteers do not receive compensation, and that the waiver of a fee is in fact compensation. In short, it’s asking for trouble to make exceptions such as the one described. Top
FAILURE TO HOLD ANNUAL MEETING
Q.
The board of directors of our homeowners association has not held an annual meeting to elect new directors for more than 18 months even though our bylaws require an annual meeting to be held. I have requested that our “annual” meeting be held, but have been ignored. What can I do?
A.
If a corporation with members is required by its bylaws to hold a regular meeting and fails to do so for a period of sixty days after the date designated, or if no date has been designated, for a period of fifteen months after its last regular meeting, the superior court of the county may summarily order a meeting to be held upon application of a member after notice to the board giving it an opportunity to be heard. Top
QUESTION ABOUT POTENTIAL BOARD MEMBER
Q.
A member of our homeowner association who is running for the board has been chronically late in paying her monthly assessments. She has had every excuse under the sun but is now paid up. Other than the chronic delinquencies, she is bright, knowledgeable and seems to work hard. What do you think?
A.
Members of an association who have consistently paid their assessments late, are generally not ideal board members. You should ask the following questions before you vote for her:
Will she retaliate against the board and / or management company because she has been required to pay late fees and collection costs? This is a common problem.
Will she attempt to liberalize the association’s collection policy to make it easier for members who don’t pay on time? This is also a common problem.
Will she vote unreasonably against every proposed increase in monthly assessments because she is having financial problems? Likewise, this is a common problem.
I strongly recommend that you elect board members who are “model citizens” to the extent possible.
NON-OWNER DIRECTORS
Q.
I own a townhome, however, I don’t reside in it. Am I still eligible to be a member of the board of directors?
A.
It depends upon your bylaws. Some bylaws permit non-resident owners to be members of the board. Some do not. There is nothing in the California Corporations Code to prohibit you from being a member. Top
LIABILITY PROTECTION OF BOARD MEMBERS
Q.
I am considering running for election to the board of directors of my homeowners association. What types of protections are available to protect me against legal liability for negligent acts?
A.
Under the Colorado Civil Code, a director cannot be held personally liable if the director is acting:
(1) As a volunteer (not paid);
(2) Within the scope of the director’s authority;
(3) In good faith;
(4) In the absence of willful, wanton or gross negligence; and
(5) The association has both general liability and directors/officers liability insurance coverage ($500,000 minimum for 100 units or less, or $1,000,000 minimum if over 100 units).
Not withstanding the above, the association may be held liable for negligent acts of the board of directors.
In addition, the ColoradoCorporations Code also provides immunity if the director is acting:
(1) In good faith,
(2) In the best interest of the corporation,
(3) In accordance with the business judgment rule, and
(4) As a volunteer (not paid).
Immunities are not absolute. You should contact legal counsel for additional information and obtain comprehensive insurance coverage from a knowledgeable insurance broker. Top
PREPARING TO BE A DIRECTOR
Q.
I was recently elected to the board of directors of my homeowner association and am somewhat at a loss as to how I can best prepare for my responsibilities. Can you provide me with a list of what I should do?
A.
I suggest the following:
First, read the following:
1) Bylaws of the association;
2) CC&Rs (Covenants, Conditions and Restrictions);
3) Rules (if applicable);
4) Contract with management company;
5) Latest reserve study;
6) Most recent budget;
7) Minutes of board meetings for the last twelve months;
8) Minutes of the last annual meeting of owners (members);
9) Monthly financial reports for the last twelve months;
10) Insurance policy(ies) of the association; and
11) Management company inspection reports for the last twelve months.
Your management company should provide you with any of the items listed that you need.
Ask your management company representative to provide you with an update, along with current legal compliance schedule for associations. Review their web site for possible helpful information.
Ask you association attorney for an update, if any legal matters are pending. Review their web site for possible helpful information. Normally, a law firm will not charge for such an update. Top
NEGLIGENCE OF BOARD
Q.
During the recent rains, the roof to my condominium leaked through a crack causing damage to my furniture and other personal property. I have been informed by the association’s insurance company that the master policy excludes coverage for my personal property. I don’t have insurance. Can the association be held liable for not maintaining the roof?
A.
Possibly. If the board of directors fell below the standard of care in maintaining the roof, they could be liable for negligence and would then be responsible for paying your damages. The fact that the roof leaked is insufficient, by itself, to prove negligence on the part of the board. For example, if the crack was new, the board would probably not be held liable for negligence. If the crack was old and the board failed to have the roof inspected, it would be more likely that a court would hold them liable. The facts of your case must be fully investigated before an educated opinion can be offered.
The lesson is clear. It is prudent for all condominium owners to obtain insurance to protect their property. It is inexpensive compared to the risk of harm an owner can suffer. Top
SELF-MANAGED ASSOCIATIONS
Q.
Our association, which consists of twelve townhomes, has been self-managed for many years in order to save money. Our newly elected board of directors is considering the possibility of hiring a management company which would result in an increase of our monthly assessments. The board claims that we should save money in the long run. What is your experience?
A.
In my experience, I have found that self-managed associations have higher expenses in the long run than those with professional management. Overall, self-managed associations pay more for maintenance and repairs, have more collection problems and pay out more legal fees because more mistakes tend to be made by the boards of these associations. Self-managed associations tend to keep many lawyers working overtime.
DISCLOSURE OF LITIGATION
Q.
Is there ever a time when it is appropriate for the board of directors of a homeowners association to inform the membership of a serious delinquency in the payment of monthly assessments?
A.
Yes. A board may disclose a delinquency when its collection action has reached the stage of a lawsuit. When an association becomes involved in litigation, the members are entitled to notice. The filing of a suit places the matter in the public domain and is material to the financial condition of the association. Colorado Civil Code protects the association as plaintiff from liability for defamation or disclosure of private information under the “litigation privilege.”
WHEN DOES A CONFLICT EXIST?
Q.
Please define “conflict of interest.”
A.
A conflict of interest exists where an individual’s duty to one party leads to the disregard of a duty to another. It exists when an outside influence affects a person’s ability to make an independent, unimpeded, objective decision or when a person owes duties to separate parties with conflicting interests.
Whether or not a conflict of interest exists depends on the facts of a particular situation which must be evaluated on a case-by-case basis. Top
BOARD REFUSES TO OBTAIN RESERVE STUDY
Q.
Our board of directors refuses to obtain a reserve study for our homeowner association. Can board members be held legally liable for negligence if they won’t obtain a reserve-study?
A.
Yes. Negligence is a civil wrong (tort) that has the following elements:
(1) The defendant must owe a legal duty to conform to a certain standard of care for the protection of the plaintiff,
(2) The defendant must have breached his duty by failing to conform his conduct to the required conduct,
(3) The breach must be a legal cause of the plaintiff’s injury, and
(4) The plaintiff must have suffered actual harm.
The Colorado Civil Code, with few exceptions, requires the board of directors of an association to obtain or prepare a reserve study at least once every three years. Whenever a board is required by law to do something, it owes a legal duty to act accordingly. Failing to obtain or prepare a legally required reserve study constitutes a clear breach of duty. If such a breach causes harm to members of the association, the legal elements of negligence have been satisfied and the members may successfully prevail in a suit.
Failure to obtain a serve study can result in any one or more of the following types of harm:
(1) It may result in a large special assessment being imposed which some members of the association may find difficult or impossible to pay.
(2) A member of the association may find it difficult to sell or refinance his or her home which may cost money or even result in a foreclosure. Buyers and lenders are becoming more knowledgeable and are often refusing to become involved with associations that do not comply with the law.
(3) Owners may suffer the consequences of being a member of an association involved as a defendant in litigation brought by another member. Top
LEGAL PROTECTIONS FOR BOARD MEMBERS
Q.
I am considering running for election to the board of directors of my homeowners association. What types of protections are available to protect me against legal liability for negligent acts?
A.
Under the Colorado Civil Code, a director cannot be held personally liable if the director is acting:
(1) As a volunteer (not paid);
(2) Within the scope of the director’s authority;
(3) In good faith;
(4) In the absence of willful, wanton or gross negligence; and
(5) The association has both general liability and directors/officers liability insurance coverage ($500,000 minimum for 100 units or less, or $1,000,000 minimum if over 100 units).
Not withstanding the above, the association may be held liable for negligent acts of the board of directors.
In addition, the Colorado Corporations Code also provides immunity if the director is acting:
(1) In good faith,
(2) In the best interest of the corporation,
(3) In accordance with the business judgment rule, and
(4) As a volunteer (not paid).
Immunities are not absolute. You should contact legal counsel for additional information and obtain comprehensive insurance coverage from a knowledgeable insurance broker.
BOARD MEETINGS BY E-MAIL
Q.
May our board meetings be held by email communication?
A.
No. Members of the board may participate in a meeting through the use of a conference telephone or similar communications equipment, so long as all members participating in the meeting can hear one another. It is necessary that board members be able to confer with each other in order to comply with their legal duties.
RECALL OF BOARD
Q.
What are the most common reasons that boards of Directors of homeowner associations are recalled?
A.
The most common reasons for recalls are:
(1) The board violates or has violated the law;
(2) The board has failed to operate within the business judgment rule ;
(3) They fail to plan ahead, resulting in large special assessments;
(4) board members act in an autocratic, arrogant, and secretive manner;
(5) Deferred maintenance has been allowed, resulting in lower property values and the potential for special assessments;
(6) They refuse to enforce the CC&Rs and/or Rules;
(7) The board refuses to permit members of the association to adequately address issues at board meetings;
(8) They fail to treat all members equally;
(9) The board misuses “executive session”; and
(10) The board’s collection policy is either too harsh or too lenient.
PROCEDURE FOR RECALL
Q.
The majority of homeowners in our association are outraged by the conduct of our board of directors. The next election won’t be held for another eight months. Our bylaws are silent on the subject of recalling the board. What can we do?
A.
The Colorado Corporations Code sets forth the procedure for recalling a board of directors. It involves calling for a special meeting, sending out proxies and then voting. An association attorney can assist you with the details.
PARLIAMENTARY PROCEDURES
Q.
Our homeowner association bylaws require that we adopt a system of Parliamentary Procedure. What is Parliamentary Procedure and what is its purpose as it relates to a homeowner association?
A.
Parliamentary Procedure is a set of rules of order. Following is one of the basic rules:
All members have equal rights, privileges and obligations which are to be ensured by the chairperson;
To learn more of the basic rules, consult with an Attorney who specializes in HOAs.
REQUIREMENT OF MINUTES
Q.
Is the board of directors of our association required to keep minutes of meetings?
A.
Yes. The corporations code requires associations to keep minutes of meetings of the board of directors. However, the corporations code does not require the board to keep minutes of executive sessions. Any matter discussed in executive session must be generally noted in the minutes of the board of directors.
BOARD REFUSES TO REPIPE BUILDING
Q.
Our condominium building has old galvanized pipes that have been leaking for several years. The board makes repairs, but has refused to repipe the building because our reserves are inadequate. What is their legal duty?
A.
The board should borrow the funds to repipe the building if possible. If a loan is not available, the board should immediately begin the process of increasing assessments so the work can be done at the earliest possible time.
Given that the board has knowledge of the deteriorating pipes, the association will probably be liable for the total cost of all repairs resulting from future leaks. Repiping will cut off the association’s liability.
PIPE REPAIRS COVERED BY INSURANCE
Q.
Will the association’s insurance policy cover the cost of repairs resulting from the leaking of our building’s old galvanized pipes?
A.
Most insurance policies will not pay for such damage if it determines that the board knew of the deteriorating pipes and failed to replace them. Insurance policies generally cover only sudden, unexpected losses. Losses from old deteriorating galvanized pipes are expected. Top
RECORDING VOTES
Q.
When the board of our condominium association votes, is it required that the minutes record how each member voted?
A.
No. It is sufficient for boards to record only whether the directors voted for or against a particular motion. However, any individual director may require that his or her vote on a particular matter be recorded in the minutes.
EMERGENCY MEETINGS
Q.
Who can call an emergency board meeting?
A.
The president of the board or any two directors other than the president. A notice and agenda are required even though less than four days notice is provided. Members can attend emergency board meetings excluding executive sessions. Top
VIOLENCE AT BOARD MEETINGS
Q.
We recently had an incident at a board meeting where one member pushed another. Can we install a video camera in our community room and record our board meetings on video tape?
A.
Yes. Installing cameras and recording the meetings is likely to deter such future conducts.
BORROWING M0NEY
Q.
Can the board of our homeowner association borrow funds from a bank for our association?
A.
The authority for associations to borrow money is found in the association’s governing documents. Absent any limitations in the governing documents, associations can borrow money if approved by the board of directors.
SUSPENDED CORPORATION
Q.
Our Association’s management company recently informed the board that the corporate status of the association had been suspended. How does a homeowner association become suspended and what are the consequences?
A.
Possible reasons for suspension are:
•Failure to pay taxes,•Failure to file taxes,•Failure to file a Statement by Domestic Nonprofit Corporation, or•Failure to file a Statement by Common Interest Development.
The consequences include the loss of:
•The right to bring and defend lawsuits,•The right to collect assessments,•The right to enforce contracts with contractors and vendors, and•The right to enter into contracts.
A suspended corporation (association) can be revived. When this occurs, a Notice of Revivor is provided by the Secretary of State.
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