What to Do When Your HOA Has No Functioning Board of Directors?
July 23, 2019
Do you live in a condominium or a townhouse? If so, you are likely a member of a homeowner’s association, or HOA. You may have received letters or postings from the board governing the HOA, filled with members like you. You might have thought, “Why are they bothering me? I pay my monthly HOA fee, don’t I?”
I recently encountered an HOA that did not have a governing body. Instead, the president was the only board member, making binding decisions on behalf of the rest of the HOA. That was not only wrong, but also illegal. Under California Corporations Code § 7210, an HOA must have governing board. That board must hold regular meetings and a quorum (a majority of directors) must be present to conduct any business. Cal. Corp. Code § 7211(a)(8). If an HOA’s bylaws require five directors and only one or two remain, the only power the remaining board members have is to appoint new members to fill vacancies until there is a quorum. Cal. Corp. Code §§ 7211(a)(7)-(8), 7224(a). The board has a legal duty to represent the HOA at large, not serve one individual’s whims.
What I found was that no one, not even the board president, had read the bylaws. They acted like tenants in an apartment complex, believing the property manager made all of the decisions and accordingly deserved deference. There had been no board meetings for at least three years, nor annual meetings. Like board meetings, annual meetings are required by law. See Cal. Corp. Code § 7510. Members were frustrated by rising monthly fees, but had no opportunity to voice their concerns because there were no meetings. They wanted makes changes, but did not know how.
If you find yourself in a similar situation, here are some steps to help your HOA get back on track.
Appointment Power. First, if the current HOA president is merely ignorant of the law, rather than engaged in a power grab, you can coax this individual to use his or her appointment power to appoint members to fill vacant spots until there is a quorum. While it would be ideal to elect new directors, if the membership as a whole is disengaged, it could be extremely difficult to reach the voting quorum required by the bylaws. When you need a functioning board quorum in order to conduct business, the easiest way is to find one or two HOA members willing to serve and appoint them.
But what if the remaining board director is either too disengaged to be reached or, worse yet, consumed by power? Under these circumstances, you have the following options:
1. Petition for receivership. In a desperate situation, you can go over the board director’s head and petition for a receivership.
When there is no board, an HOA member must petition the superior court to appoint a third party to manage the association pursuant to California Code of Civil Procedure § 564(b)(9). Once appointed, the receiver has the power to run the association, including, but not limited to, collecting monthly assessments. The downside, of course, is that an HOA in receivership loses control over the amount of the assessments and over the services being provided. Further, the HOA is required to pay the receiver for his or her services. By contrast, volunteering to be a board member is a much smaller headache.
2. Election at annual meeting. If your HOA holds annual meetings, do your best to ensure that you have enough owners present to constitute a voting quorum. The number of voters constituting a quorum is set by your bylaws. Pursuant to California Corporations Code § 7512(a), the quorum is usually no less than one-third of the membership, though the bylaws may set a higher threshold. If you cannot achieve the quorum required by your bylaws, try to petition a court of appropriate jurisdiction to accept the number of owners who attended as a voting quorum. Cal. Corp. Code § 7515(c). Only the “owner of a separate interest” can vote; not the owner’s spouse or anyone else who is not on title. Cal. Civ. Code § 4160.
3. Call a special meeting. If your HOA is so dysfunctional that it does not even hold annual meetings, you have the power to call a special members’ meeting pursuant to California Corporations Code § 7510(e). Calling a special meeting requires only that you get a petition signed by five percent of the members. In a small HOA, that can be as few as two people.
If you are able to exercise the second or third option, you should be on the right path. Your HOA will have enough directors on the board to reach a quorum and legally conduct business. Your HOA is out of immediate danger.
Educating the HOA is how to prevent this from happening again. At board meetings, stress the importance of members reading their bylaws and familiarizing themselves with their Covenants, Conditions, and Restrictions (“CC&Rs”). Most HOA members probably put these documents away in a drawer when they purchase their homes and never look at them twice. They are certainly not easy reading—drafted by lawyers, the text is usually dry and formal. Notwithstanding, all HOA members should have at least have some familiarity with what their governing documents require.
If your HOA membership as a whole is still too disengaged to attend board meetings, you may need to resort to greater measures, such as a newsletter or in-person efforts to talk with your neighbors. If even a handful of people remain interested and engaged, you may have enough of a cushion to sustain the loss of one or two board directors.
As for the HOA I mentioned in the beginning: once its members understood the dangers, their remaining board director was able to appoint enough people to form a quorum. The new board has a lot of battles ahead, but it has already won a major victory.
Kara L. Wild is a Senior Associate in the Firm's Oakland/East Bay office. Ms. Wild can be reached at (510) 832-7770, ext. 105 or firstname.lastname@example.org