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OFFICER
VOTING REVISITED
QUESTION: I'm wondering about your
statement that officers can't vote. We have 5 directors on
our board, four of which are officers (president, VP, secretary, and
treasurer). Does that mean only one director, the one who is not an officer, can
vote?
ANSWER:
A lot of people are confused by the difference between officers and
directors. Directors are elected by and represent the membership, while officers are
appointed by the board to keep minutes, oversee financials, etc. Merely being an
officer does not give one the power to vote. In many sets of bylaws, officers
need not be directors. When directors cast votes, they may incidentally be
officers but when they vote, they vote as directors, not officers.
The president, vice president,
treasurer, and secretary are allowed to vote if they are directors--but they are
doing so as directors, not officers.
D&0 INSURANCE
REQUIRED
QUESTION: Our HOA has been paying
$2,669.00 per year for $2 million D&O liability coverage. I recently read that
volunteer officers cannot be sued for anything other than fraud. Our past 8 years
of
coverage has cost over $16,000. Is this necessary?
ANSWER:
You bet it's necessary. Directors can be sued at any time for any reason, or no reason at
all. Homeowners seem to sue their boards on a fairly regular basis for some of
the silliest reasons. Even though the
business judgment rule protects directors
from personal liability for mistakes
in judgment, they still
need Directors & Officers (D&O) insurance to defend them when they are sued. Litigation is quite
expensive and unless your association has a lot of extra money to spend on lawyers, you should buy insurance.
Not only is it prudent but you may not have a choice since most
CC&Rs require that associations carry D&O insurance.
SIGNING
CHECKS
 QUESTION: Our
bylaws require our president to co-sign all checks. However, our management
company contract includes verbiage that they have authority to
sign checks for all bills authorized by the board. Our
president was not aware of his duty and hasn't co-signed a check in the 3+ year history of
our HOA. Which takes precedence--the management contract or our bylaws?
ANSWER:
Your bylaws control. Management contracts are typically permissive, i.e., the management company
may sign checks, whereas bylaws are usually mandatory--the
president shall co-sign checks. If your management contract is mandatory
(the company must co-sign all checks), then it is time to renegotiate the contract. If
the company refuses, it's time for a new management company. No reputable
company would force a board into violating its duties under the bylaws.
MANAGEMENT
COMPANY ABUSES
QUESTION: My HOA is managed by a
horrendously unethical management company. We retained a new management company
and gave our old company a 60-day notice of termination but
they refuse to provide us with an accounting of our finances. What recourse do we have against this
company? Should we report them to the Better Business Bureau and the Department
of Real Estate?
ANSWER:
Most management companies are ethical and hard working. They are diligent in
producing financial records and stoic when dealing with difficult owners.
Unfortunately, there are a few truly bad companies that are unethical in their
handling of accounts.
Whenever the services of a management company have
been terminated, the company must immediately turn over all
association records.
Refusal to turn over records is a breach of the professional code of conduct for management
companies.
Managers and management companies are governed by voluntary codes of ethics
established by two different organizations and you should only retain companies
that are members of these organizations:
You can report the company to CAI and
CACM as well as the Better Business Bureau. This may help curb the company's abuses
against other associations but
probably will not get your records any time soon. Suing the
company may be the only effective means of recovering your records.
Very truly yours,
Adrian Adams, Esq.
Adams Kessler PLC |
