CAI – GREATER LOS ANGELES CHAPTER LUNCHEON

January 15, 2014

Trends UpdateHoarders, Board Member Hostility,

& Controlling Rental Tenants

What is a Hoarder, Exactly?

• Accumulation of “excessive” material in home without the ability to discard and let things go

• Must constitute a nuisance or hazard in order to enforce

• “Organic” materials (garbage, food, pets)• Combustibles or chemicals? Ammunition?

1

Hoarders – Where is the “line”?• Fountain Valley Chateau Blanc HOA v. Dept.

of Veterans Affairs: – Senior citizen, disabled– Papers, books, clothing, boxes, debris in yard etc.– HOA’s roofing contractor: “Can’t move thru yard!”

– Fire department: “No fire hazard”

– HOA demanded removal of items from hallways, living rooms, bathroom, stairwells, etc.

– HOA sued for nuisance (fire hazard); owner countersued for “right to privacy” & CC&Rs

2

Fountain Valley, cont’d:• “Virtually impossible to say Association acted

reasonably”• “Cannot dictate amount of clutter” or

“micromanage housekeeping”• ENFORCEMENT = HAZARD OR NUISANCE• Examples:

– Vermin or mold infestation (contractor confirms)

– Offensive to smell / view (documented written complaints)

– Fire hazard (fire department confirms, nearly impossible)

– Health hazard (health department confirms)

3

Hoarders – Enforcement Options

• Discipline• Involve authorities!

– Fire, health, family

– Rely on outside authority = lower liability

• Right of Entry / Abate Nuisance– Costs? Unless common area is damaged will be

deemed a penalty unless allowed by CC&Rs

• Legal Action– Permission to enter, or else TRO… do not just rely

on access rights in the CC&Rs

4

Bottom Line

• Enforcement requires clear, documented nuisance or hazard

• More than “micromanaging housekeeping”• Involve professionals, authorities for

determination• Follow governing documents, with an eye

towards safety • In difficult cases, seek legal counsel ASAP

5

Hostile Board Members -

• Negative effects:– Meetings– Community– Management/Vendors

– Other Board members

– Liability

6

Board Member Conduct

• Code of Conduct– Disruption– Personal agendas– Maintaining order– Right to be heard

– Confidentiality

– Are the statutory requirements enough?– Is D&O coverage enhanced or impaired by the

Code of Conduct?

7

TYPES OF HOSTILE BEHAVIOR

• Conflict of interest – New Davis-Stirling: “Interested Director” provisions:– Civil Code Section 5350 - January 1, 2014

• Verbal Abuse• Breach of Confidentiality• Anger management

8

Hostile Board Members -• How to control/reduce informally:

– Rely on procedures and protocols

– Firm but polite– Counseling (with or without attorney)

• Executive Session (“personnel matter”)• Document in minutes

• Letter from attorney

9

Protocols: Preserve Order

• Who Runs the Meeting?– Chair/President must be in control– Problem director is President? Board may remove

as terms are fluid

• Parliamentary Procedure– Roberts Rules of Order

– Format• Discussion is through the chair• Follow Agenda• Keep on Point

• Use timer10

Counseling Board Member

• Educate Board re Fiduciary Obligations• Concept of “One Voice”

– Power resides with the Board as a whole, not individual directors

– All directors take part in healthy debate

• Each director has one vote - no veto power• Vote taken and that becomes Board’s decision• All directors must accept / support decision• Manager/attorney roles in facilitation

11

Counseling/Principles

• Duty of Care – Business Judgment Rule/Corp Code 7321(a)

• Duty of Loyalty• Conflicts of Interest• Confidentiality

12

Counseling Board Members

• Emphasize potential liability, effect on others– Hostile working environment claims from

employees/vendors

• Emphasize law and required protocols• Educate re Fiduciary obligations• Request Resignation• Warn of disciplinary / legal consequences

13

Hostile Board Members -• Taking formal action:

– Censure/Official Reprimand• Adopt a motion or resolution

• Open or executive session? Board’s discretion

– Remove from officer position (if any)– Terminate Board Member? What do the

documents say? For cause or no cause?

14

Terminating Board members• For Cause:

– Board may “declare vacant the seat” if• A court has found director of unsound mind,

convicted of felony, or if Bylaws allow for missed meetings or fail to meet qualifications Corp. Code 7221

– Any director, or certain # of members, sue to remove if:

• Fraud, dishonesty, gross abuse of authority/discretion

• Amending By-laws: Clear Qualifications!• “Good Standing,” not delinquent, Owner,• No action or litigation against association 15

Terminating Board members

• Without Cause:– Membership recall action only

• Board members can only act as individuals– Control communications – “Board” does not

initiate recall only 5% of membership

• Association-corporation has no official power to recall a director!

• Use of association media/funds: – EQUAL ACCESS– Watch expenditure of Association funds!

16

Bottom Line

• Protocols and order• Counseling (with/without attorney)

– Role as Director

– Emphasize law and consequences

– Executive Session – Minutes, and/or Letter

• Action if counseling fails– Discipline, Censure, Remove from Office

– Create Executive Committee without the problem Board Member, with legal counsel only

– Terminate - Board qualifications or recall– -Legal Action = Last Resort

17

Duties to Rental Tenants –

• In matters of safety/repair, etc., must act on info from tenants

• Cannot refuse to act on safety/repair issues• Association and Board duties re: safety/repair

owed to all residents alike – identity irrelevant• This includes water leaks, security, dealing

with “nuisances,” violence, harassment, etc.

18

Duties to Rental Tenants –

• “Civil rights” issues apply to all occupants– Disability accommodations

• Civil Code 4760: only “member” may modify property to allow access for disabled persons

– Service animals

– Non-commercial signs

– What about pets? Civil Code 4715: “owner”– EVCS – only if “owner” accepts responsibility

19

Tenants Are Subject to All Governing Documents!

• CC&Rs govern all use of the property• CC&Rs usually require leases to be subject to

the governing docs.• Bylaws relate to corporate protocols, not

usually applicable to tenants.• Rules usually apply to all residents (relate to

common areas/amenities).• Ultimately Owner responsible for Tenant’s

actions. 20

Who is a “Tenant”– Special Issues

• Definition in governing documents• Family members not on title? Is there a

lease?• Trusts/LLC’s – who is the “Owner”?• Generally no right to participate in corporation

– Meetings and vote - NO– Demanding IDR/ADR - NO

• Exceptions: – Unless qualifications prevent, tenants on Board!– Owner designates “representative” for doc review– Attend hearing by Board (or Owner, if allowed)

invitation re: tenant violations/discipline21

Tenants – Discipline

• Governing documents should specifically address– Security deposit for common area damage

• Suspension of privileges affects all residents• Sue for breach of CC&Rs?• Only recourse against Owner?

– Can CC&Rs require tenants to pay fines?

– When/how can Association evict directly?

22

Rental Tenants – Bottom Line:

• In matters of safety/repair, etc., must act on info from tenants

• Owners must be informed of all communications

• Tenants are subject to governing docs!• Tenants have no right to participate in

corporation activities (with some exceptions)• OWNER ULTIMATELY RESPONSIBLE

23

Questions?

THANK YOU!