Appointment of HOA Board Members in Executive Session

Hello,

I am a HOA member in California and here is what I got going on:

Over the past six months the Association Board of Directors has seemed to appoint 3 new board members. They appointed them all within executive session. There was no community comment, no election, they just hand picked them and installed them. Now, my reading of the Davis-Sterling act, Section 4935, says nothing about appointing board members.

When I called a special meeting to ask the board about it they said the association attorney advised them that it was a personnel matter. I pointed out to the Board that they were not employees but volunteers. That fell on deaf ears. The Property Management Company seems to think that all this is just fine.

Now, here is my question. I am familiar with solving HOA disputes within the small claims court in California. You have to be brief and very concise. I am looking for any suggestions or strategies that might be interesting or successful.

For example, in California if you can prove to the court that the Association has committed statutory violations a homeowner can make a claim and collect up to $500 per violation from the association. So, in the case above you would appointing 3 board members would equate at a suit of $1500.

Additionally, in California small claims court can issue injunctive relief, or order the reversal of the illegal appointments. Although, I have found it is rare to get a Judge/Commissioner to do this, usually they will just award the monetary claim.

So any ideas?

Thanks!

Personnel are employees, under contract, one way or another, to the association. Directors, as required under Corporation Code, are volunteers, and as such are not entitled to compensation while specifically performing the task of director.

There are five specific topics that can be discussed in Executive Session and one is personnel. This would not fall under personnel. The argument could be that elections, by their very nature, are done in the open and the votes must be counted in a open meeting, whether the annual or special meeting of the members or they could be at an open session of a Board of Directors meeting. All meetings must be properly noticed, including having the election of directors on the notice or agenda.

The reason why it is done in executive session, in my opinion and supported by documents, is that the property management company and the attorney want TEAM players on THEIR side. They want total control over the process whenever they have the opportunity. They want to insure that when all said and done, they are still i control, without any chance of a contract being terminated by new board members. It is also useful if the association hasn't had ballots counted for a number of years due to a lack of quorum. This is very true for associations of 100 units or more.

IMO, small claims commissioners are not that educated on association law and if the association told the commissioner that they went on the advise of counsel and management, the commissioner most lightly tell tell to reappoint in open session. If you have regular elections that ballots are actually counted, then this can be rectified at the next go around.If you don't have elections because of quorum and you are a larger association, you may be SOL.

I think that Larry is closer to the gist of topic in his reply than Richard (with whom I usually agree).

The CEO of our Mgmt. Co, when we asked her some time ago, said that directors and committee members sort of fall into a "grey area" re: whether they're "personnel." At the time, we directors needed to make a decision about a committee chair who overstepped her authority. Otherwise very competent, we met in executive session to discuss her infraction and agreed that the president would meet with her about this one instance of improper conduct. We directed the president to tell her that she must refrain from such behavior in the future.

So we treated the issue as a "personnel matter." So I think that "matter" is an important word here. When vacancies occur on the Board, and we have a new one, it seems to me that the Board can discuss the pros and cons of each applicant in executive session, and we have in the past. Our reasoning is that mentioning reservations about a candidate or, bringing up dues delinquencies or uncured violations of our rules should not be discussed in an open meeting.

We vote for our choice in an open meeting.

I do see Richard's point about the PM wanting to control who's on the Board. Our HOA attorney wouldn't be involved.

And with Larry, JasonS, I don't believe you'd have any chance on "winning" anything in small claims court. (I'm not involved in the legal profession.) To learn more, go to Davis-stirling.com for HOA attorneys opinions on filling vacancies and other CA HOA topics. Also check your bylaws for your Board's role in filling vacancies.

But, Jason, given your concern here, I'm thinking you have other issues with your current Board. Care to share?

Richard,

I am very much in agreement with what you wrote above. I did not make it clear that if they had consulted me I would have advised against appointing new board members in ES. Given the nature of the job, I would not even interview the candidates in private.

What the board did falls into a murky area, but given the requirements for an agenda they handled it badly.

Even so, pursuing a remedy in court is unlikely to make any substantial change. Running for a seat on the board would be a far more effective solution.

I see your point Richard & Larry, but, let's say the candidate already has been fined or whatever. Then, the ES is not for disciplinary purposes but to discuss the traits of the candidate, e.g., always late with dues; constant complaints about non-existent problems; statements in open meetings' Open Forums with belligerent remarks. Or never attended open meetings even though a long time resident, etc. In other words, non-discipline matters that, to a board wouldn't help further the best interests o the HOA. Our directors think that we'd be very reluctant to discuss the personal shortcomings of candidates in an open meeting

But, of course, the considerations of candidates food a Board vacancy legally must be listed on the ES agenda two days before the ES. Our Board does appoint the new director at an open meeting, but I don't know if that's legally required.

I don't even know if letting homeowners know that there is a vacancy is legally required. Can't look it up right now. Our invitation to fill the vacancy is posted in our elevators, will be in our Feb. News, and is on our web site.

Now, IMO, if Jason's Board isn't even publicly inviting applications for the vacancy or revealing that the vacancy exists, he and others should recall the Board or elect new directors at the next annual meeting when homeowners actually do have a voice.

Again, I don't have time, Richard, but I'm fairly certain that actual ES agenda items must be posted, e.g. : "Consideration of Candidate(s) for Vacant Board of Director Position." (In our HOA, where the open meeting follows the ES, the latter agenda would say: "Vote for Candidate to Fill Board Vacancy." I think a sample ES agenda is on the davis-stirling.com site. Obviously, names of alleged rules violators, dues delinquents, etc. would not be posted.

Hello Lary,

Thanks for your response. Yes the board does have the ability to appoint people. However, it needs to be done in a transparent and public manner according to California Law.

This was not done and there were no emergencies to put people on the board. There was no reason they could not have done an election.

The action taken undermines the entire governance concept that underpins mutual benefit corporations which are what HOAs are in California.

It will cost me $30 to go to court, I have weeks of paid time off for a court date, and the interest to make things right. So no waste of time for me.

As, for the run for the board comment, I would love to but we seem to not have elections, we have appointments.

Cheers

Richard,

Thanks for the CC 7224. However, the re-write recent Re-write/Re-org of Davis Sterling was supposed to self contain much of the other stuff that was scattered throughout the corporations code. For example, when the old D-A act referenced the Corporations Code those items have been brought in.

Cheers

So, Jason, are you indeed under developer control? What do your governing documents say about when control will go to you homeowners? Upon sale of XX # or % of units/lots? A date? This probably is in your bylaws. If under developer (declarant) control, are elections required to be held?? Perhaps they aren't and that's why you haven't had any yet. I wasn't aware that your HOA is so new. It could very well be that the homeowners have very little vice at this point.

Most CA corps code relevant to HOAs is pretty tidily found in some of the 7000 numbers. But, Jason, where in CA law will I find confirmation of your quote: "Yes the board does have the ability to appoint people. However, it needs to be done in a transparent and public manner according to California Law." In other words you may be correct, but I just don't recall the "law" that appointments must be done in public.

The reason to not have an election to fill spots left by directors who die, resign, get recalled, etc. is the time needed per D-S and the $$ the HOA would need to spend to mail ballots, etc. Postings inviting candidates also would be needed, of course. So if your docs say the Board may appoint such positions it will, just as ours does.

Geez, my typos are getting worse & worse! I meant "voice" in my above, not "vice"!

Thanks for directing me to the suggested ES agenda format, Richard. We use one that's about midway between the d-s.com first suggestion and your version.

Yes, John 46, I think you may be right.

Richard,

My development was sold as fast as it could be built. The builder was out very fast, six months and they were done.They did a horrible job of transitioning the development to the homeowners and the PM was bad also.

This is an opinion from the law firm of Adams-Kessler, pretty know to us as Davis-Stirling.com, about the appointment of directors.

"Open Session. While interviewing candidates may be done privately, the appointment of a director should be done in open session. Voting to fill a vacancy does not fall into any of the approved categories for executive session. The vote to fill an empty seat needs to be on the meeting's agenda."

If you click on personnel issues, in their main menu section, one of the topics allowed in ES, Personnel Issue, There is nothing in regards to the appointment of directors.

It's not so much about what it says, as about what it doesn't say. I would be the first to acknowledge that the both Civil Code, in particular, the Davis-Stirling Act and Corporation leave much to be desired, maybe in the future, I'll get a chance to slowly fix some of those areas.

Outside of privately meeting or interviewing potential candidates,the rest of the process MUST be done openly.

Personnel a legal definition.....

Law Dictionary: http://thelawdictionary.org/personnel/#ixzz2rZWPjZ5h

What is PERSONNEL?
Employees working in a certain company/organization or firm.

So what is an employee?

employee n. a person who is hired for a wage, salary, fee or payment to perform work for an employer. This is important to determine if one is acting as employee when injured (for worker's compensation) or when he/she causes damage to another, thereby making the employer liable for damages to the injured party.

HOA Board Member = elected, unpaid, member, position within a California non-profit mutual benefits corporation.

HOA Board Member would be akin to a Trustee at a University or School Board Member, both of which are NOT employees of the particular institutions that they oversee.

Personnel are not just PEOPLE as opposed to OBJECTS or MATERIAL.

I can see no reason why any court would see a board member as an employee. Doing so would be foolish. Oh, and HOAs are not an exception, they are just non-profits.

I seriously doubt that I can even find case law to support the ridiculous notion that BoD are employees of the HOA.

Like it or not, CA Civil Code §4935 does not differentiate between appointing Directors and other personnel matters. However, it does not require executive session for personnel matters, it only gives the Board the option of using executive session.

It appears that your Board is exercising that option.

As for asking for volunteers. I agree that your Board should have asked if anyone wanted to serve. However, there is no requirement in CA statutes that they do this except for elections. Of course, looking at it from another perspective, when notice of the meeting was posted, members could have contacted the Board and asked to be considered if they were interested.

Personally, I agree that any Board should not actually appoint an individual in executive session. However, they should be able to discuss the issue of who to appoint in executive session and then return to the open session to take the vote. The reality is, what I personally believe can only affect my Association.

Associations must do what is legal. Based on your posts, it appears that your Board is doing this.


However, appointing someone to the Board would be considered a personnel matter. Since any Director appointed by the Board may be removed by the Board, a good argument can be made that this is indeed a personnel matter.

Again, per CA Civil Code §4935 [emphasis added]:

(a) The board may adjourn to, or meet solely in, executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member's request, regarding the member's payment of assessments, as specified in Section 5665.
(b) The board shall adjourn to, or meet solely in, executive session to discuss member discipline, if requested by the member who is the subject of the discussion. That member shall be entitled to attend the executive session.
(c) The board shall adjourn to, or meet solely in, executive session to discuss a payment plan pursuant to Section 5665.
(d) The board shall adjourn to, or meet solely in, executive session to decide whether to foreclose on a lien pursuant to subdivision (b) of Section 5705.
(e) Any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership.

Per USLegal.com, personnel generally means a body of persons employed in an organization or workplace. The term is generic and doesn't typically distinguish between classifications of those employed, such a full or part-time, temporary or permanent, etc.

Per The Fair Labor Standards Act, scroll down to page 6, “Employee” means any individual employed by an employer"

Per The Fair Labor Standards Act, scroll down to page 8, “Employ” includes to suffer or permit to work."

Per the department of labor website some volunteers are not considered employees but only those who volunteer for public service, religious or humanitarian objectives. I don't think COAs or HOAs fall into those categories.

Jason,

It appears that the best way to make changes in your Association is to gather support and get elected to the Board so you are part of the decision process.

Hope this helps,

Tim

Tim

I am going to happen to disagree with you on this. Trying to tie voting to fill a vacancy on the board with personnel is quite a stretch.

The opinion of the attorney who maintains Davis-Stirling.com, states under Personnel Issue: 4. Personnel Issues. Personnel matters which include, but are not limited to, hiring, firing, raises, disciplinary matters and performance reviews.

What this should tell me is that personnel issues in this instances are for EMPLOYEES of the association. In my overall experience, this is seldom used, usually reserved for larger associations and resort, generally run by an onsite manager or general manager.

You mention that when notice of the meeting was posted, members could have contacted the Board and asked to be considered if they were interested. The problem is that for ES, there is no requirement for posting the specifics of discussion in ES, as the session is not open to the members and members do not have access to the minutes of such meeting.

In addition, there is no requirement to post an announcement that there is a vacancy on the Board. The Open Meeting Act was creating to stop Board from doing the exact same thing as you saying is ok. If you review the five topics that are allowed in ES, litigation, matter relating to the formation of contracts, member discipline, personnel matter, or member assessments, each of this topic may lead to possible litigation or legal action, as such have been reserved for discussion in ES. How would the appointment of a director fall into a matter that should be discussed in ES.

As I said before, I don't see a problem with interviewing the candidates in private, because that candidate's circumstance may fall into one of the approved discussion topics. They may be late in their assessment, they may be under contract to handle pest control at the complex, they may already be in litigation with the association, they may have not taken their Christmas light down for six months.

But under no circumstance, should the availability of a position on the Board of Directors be withheld from the general membership. I saw it happen in my association for 8 years and I will fight tooth and nails to make sure that the spirit of the Open Meeting Act is followed.

In the end, we may need to agree to disagree.

Tim

Then I agree we are on the same page.

Joanne,

It's best not to reactivate an old thread or to mix the same issue from different States as it can become difficult for those just reading the forum to be aware of the differences.

Additionally, it is also because laws change over time and laws vary from State to State.

With changing laws, what may have been good information in 2014 may be bad information in 2015.

With varying laws, what may be good information for someone from CA may be bad information for someone from AZ or VA, etc.

Please start a new thread with your question.