Monday, November 5, 2012

California Homeowners Association Law Prohibits Meetings by Written Consent

By: Terry Rein
Bosso Williams, APC

Governor Brown recently signed into law Senate Bill 563 which amends the Davis-Stirling Common Interest Development Open Meeting Act (Civil Code § 1363.05) to prohibit the board of directors of a homeowners association (“HOA”) from conducting meetings via e-mail effective January 1, 2012.

HOA’s are involved in the management of subdivisions, condominiums and stock cooperatives.   The new legislation is intended to close an inconsistency between the Open Meeting Act and the Corporations Code concerning a member’s right to attend meetings.  On one hand, the Open Meeting Act provides that “any member of the association may attend meetings of the board of directors of the association, except when the board adjourns to executive session”.  On the other hand, the Nonprofit Mutual Benefit Corporation Law (Corporations Code § 7211) allows boards to take action on a matter without a meeting if all members of the board consent in writing to that action.  The new legislation specifically provides that HOA boards cannot conduct board meetings via e-mail or take action by written consent.

While the purpose of the new law is to ensure that residents be given the opportunity to hear and participate in HOA board decisions, it does so at a significant cost to a board’s ability to take action efficiently.  In addition to specifically prohibiting meetings via e-mail or action by written consent except in emergency situations (as defined in Civil Code § 1363.05(g)), the new legislation also:

Broadly prohibits a board from taking action on any item of business outside of a meeting.  “Item of business” is defined in Civil Code § 1363.05(k)(1) as any action within the authority of the board, except those actions that the board has validly delegated.
Requires that notice of executive session meetings be given to association members at least two days prior to the meeting.  This is in contrast to the existing requirement of four days notice for regular board meetings.
Permits members of the board to participate in meetings by telephone or video conference if at least one board member is present at a physical location where members may participate and if the connection allows all participants in the meeting to hear and be heard.

Critics of the new legislation feel that volunteer boards should have the ability to respond to issues quickly as they arise.  Holding off on approval of any matter until the next board meeting (which may not be for months) may be impossible or impractical for a variety of reasons.  SB 563 mandates additional notices,  which will cost HOAs more money.  The new law is also difficult to enforce.  Even casual conversations would be unlawful, resulting in the potential for litigation.    There appears to be no end to the overwhelming procedural burdens imposed on the board of directors of HOAs.  Unfortunately, SB 563 is yet another trap for the unwary.


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