the CFM Distinction

Wednesday, October 26, 2011

Change in HOA email protocol

P.L.C.(Attorney)3478 Buskirk Ave. #1000Pleasant Hill, Ca.
94523OFFICE: (925) 746-7177FAX:
(925) 215-8454EMAIL:
FAX: (925) 609-9135

People have been talking for years about the upsides and downsides of email. One of the downsides - too many directors have found it to be a great and easy way to conduct business. So let's talk about an important new law, namely a bill that was signed by the Governor about a month ago. It's controversial, for sure. It's about board meetings - and increasing transparency in HOAs.

NOTICE OF OPEN MEETINGS is still 4 days: Senate Bill 563 which has been signed into law tightens up the notice requirements for meetings, and puts an end to email meetings. Owners upset with their boards about secret meetings have nowhere to go, really, to complain, so they go to their legislators. Owners get upset when they want to attend board meetings and cannot find out when or where they are. And it irks owners who want to know what is going on when they see board members out and about walking in the development, or hanging out at the pool or at the local pizza parlor talking about association matters and then coming into meetings with a full consent calendar (meaning decisions have already been made). Whether the problems are real or perceived, the squeaky wheel often gets the grease in Sacramento, especially when it points to bad HOA conduct. Most years it seems to be a very hot topic.

The new law, which takes effect January 1, 2012, will amend Sections 1363, 1363.05, and 1365.2 of the Civil Code (part of the Davis Stirling Act). Notice of the time and place of open board meetings isn't new. For years there has been a legal requirement to notify members at least 4 days prior to the meeting of the date and time of the meetings, except for executive sessions or emergency meetings. This notice could be given by posting in the common area, newsletter, by specification in the Bylaws, or by letter, or any method geared to reach the members.

NOTICE OF EXECUTIVE SESSION MEETINGS: This new law requires notice to be given at least 2 days prior to a meeting "solely" for an executive session (meaning it is not held the same time as a board meeting I suspect). At least it allows for meeting notices by email for any owners that consent. The law changes the rules for considering action items that were not on the meeting notice for a regular board meeting.

The new law permits meetings of the board to be conducted by teleconference - not previously in the Davis Stirling Act, but the Corporations Code has allowed for telephone or video conference meetings for a few years now. Most practitioners had already figured out that if a board met this way in an open meeting, it would have to make arrangements for owners to also "attend" by telephone, or video conference thus protecting the rights of members. The new law also requires that the notice of a teleconference meeting identify at least one physical location so that members of the association may attend and requires that at least one member of the board of directors be present at that location.

THE END OF EMAIL MEETINGS with exception (emergency meetings): The new law also prohibits the board from taking action on any item of business outside of a board meeting, and doing business by email. It was bound to happen! I imagine there were a lot of complaints about this. Good HOA lawyers have been discouraging business by email for years. It's just been too tempting, too easy, for directors to communicate that way, often leaving an incriminating "paper trail" even when they claim to not have done business. This doesn't mean the board cannot communicate via email but watch out to avoid any email that says something like: " Do you agree that we should ???" or "I talked to Bill today and he definitely is a 'yes'. What about you?"

Email is a quick and easy way to share information and circulate downloads and items the board needs to review, but watch for that fine line between passing information and setting up a consent calendar.

There is an exception and that is for matters that require an emergency meeting: "... the board of directors shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail, except as specified in subparagraph (B). ... (B) Electronic transmissions may be used as a method of conducting an emergency meeting if all members of the board, individually or collectively, consent in writing to that action, and if the written consent or consents are filed with the minutes of the meeting of the board. Written consent to conduct an emergency meeting may be transmitted electronically."


RECORDS INSPECTION LAW - ACCESS TO EXECUTIVE SESSION AGENDAS. There are also some changes to the records inspection law (Civil Code Section 1365.2); owners will now be entitled to inspect an agenda for an executive session. So how do you protect the privacy of the subject matter? Keep it generic - otherwise the idea of confidentiality is lost. List the "purpose" on the agenda that puts it within the category appropriate for executive session meetings. Those would be discussions about pending or threatened litigation, disciplinary action, contract negotiation, and personnel matters. Suggested sample language: "Discuss disciplinary matter with owner" or "Discuss threat of litigation (or attorney letter regarding litigation)," rather than "Discuss Kim Jones' disciplinary matter with Ms. Jones" or "Discuss litigation threatened by Oleg Stanyon." If the matter to be discussed is pending litigation, the court papers are a matter of public record so you could in that case say "Discuss Dixon v. Association litigation." And the statute does exclude inspection of "... minutes and other information from executive sessions of the board of directors as described in Section 1363.05."

RIGHT TO ATTEND TELECONFERENCE MEETINGS: Added to 1363.05(b) - a member of the association shall be entitled to attend a teleconference meeting or the portion of a teleconference meeting that is open to members, and that meeting or portion of the meeting shall be audible to the members in a location specified in the notice of the meeting.

NEW DEFINITIONS: Here are some of the new definitions:

(1) "Item of business" means 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 majority of the directors.
•(2) "Meeting" means either of the following:

•(A) A congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business that is within the authority of the board.

•(B) A teleconference in which a majority of the members of the board, in different locations, are connected by electronic means, through audio or video or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the association and otherwise complies with the requirements of this title. Except for a meeting that will be held solely in executive session, the notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend and at least one member of the board of directors shall be present at that location. Participation by board members in a teleconference meeting constitutes presence at that meeting as long as all board members participating in the meeting are able to hear one another and members of the association speaking on matters before the board."
As usual, there will be some bristling and complaining about this new law, but the associations that are professionally managed will conform - and there is no telling what the "self-managed" associations will do. It seems that many turn a blind eye to difficult legislation, and there is plenty of it.

Later this month - maybe I will get the opportunity to cover the new small claims court limits, the veto of the turf bill, the results of the transfer fee bill and and other legislation affecting HOAs and Condos. All bills should be final by now. Also watch my blogs for interim information - they are accessible on the main page of this website. Get your friends on the list for the free E-News now! It's never too late.

Beth A. Grimm is an attorney who serves homeowner associations and homeowners alike. She is a frequent contributor to the Echo Journal and other similar publications in the State of California and on a national level. She provides several publications written in plain English to help people who need information about California law as it relates to homeowner associations. She posts a wealth of information on her website. And she was named the Volunteer of the Year in June by the Executive Council of Homeowners.

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