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Principal Office

Started by JamesB37 • 24 replies • 334 views

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JamesB37 (California)
Posts: 351
Posted:
The very first paragraph of our bylaws:

Article 1

1. General Plan of Ownership.
1.1. Name.
The name of the corporation is XXXXXXXXXX Maintenance Association, hereinafter referred to
as the "Master Association." The principal office of the Master Association shall be located in
XXXXXXXXXX County, California.

Note the 'shall be located'.

There is another article further in that gives the BOD the authority to move the principal office but it clearly states "from one location to another within the County of XXXXXXXXXX, as provided in Article I hereof"

Our current Property Management Company only has one office and it is located in an adjacent County! Also, the 'statement of information' form currently on file with California Secretary of State lists the PMC's address in the adjacent County as the principal office.

It appears to me that the principal office HAS to be located within our County and it is not. Now what?
BillH10 (Texas)
Posts: 1,217
Posted:
The principal office of the association is not necessarily the location of the office of the property management company.

Where is the office of the Registered Agent?
JamesB37 (California)
Posts: 351
Posted:
The box marked 'street address of California's Principal Office' on the Secretary of State form lists the business address of the current PMC.

Further down on that form (Statement of Information) there is a section for 'Service of Process' and lists the HOA presidents name in the box marked 'California Agents First Name' and also lists the PMC business address

MaxB4
Posts: 3,513
Posted:
I have associations throughout the state of California. I have only one office, which may or may not be in the same county as the association. I follow Corporation Code §1502 and Civil Code §5405.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 7:48 AM

Our current Property Management Company only has one office and it is located in an adjacent County! Also, the 'statement of information' form currently on file with California Secretary of State lists the PMC's address in the adjacent County as the principal office.

It appears to me that the principal office HAS to be located within our County and it is not. Now what?
Yes, the HOA i in violation of the Bylaws. But from experience, I advise not pursuing this. I am not convinced a court would do anything more than order the HOA to either amend the bylaws using the proper procedure, or issue "injunctive relief" that would simply be a court order to move the office to a location inside the county limits.

If you insist on pursuing this, the correct first step is IDR as described at the Davis-Stirling site. Make your request for correction of this bylaw violation as un-emotional and just-the-facts as possible. If you want help with what you should write, ask and it will be given.

Unfortunately, and is common, you started attempting to correct violations using the wrong procedure. It is not like the Board is the only party here violating the bylaws, covenants and state statutes, or simply failing to read and comply with them.
JamesB37 (California)
Posts: 351
Posted:
Ellen, thanks for your comment. I really think 'we' need to look at 'intent' when it comes to some of the decisions and actions for both the BOD and the homeowners. Also keep in mind that the BOD has the fiduciary duty to act in good faith in the best interest of the corporation...

I don't really expect them to do anything, I am just trying to document a growing number of instances that I have discovered with our HOA not following it's own rules and not acting in the best interests of the HOA. (I don't expect the BOD to know everything but I do expect our Property Management Company to not be making the mistakes that they are)

Max - what do you do if the Bylaws require the office to be in the same county as the HOA? Or have you never run across that situation
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By ElleN on 03/09/2023 9:52 AM
Posted By JamesB37 on 03/09/2023 7:48 AM

Our current Property Management Company only has one office and it is located in an adjacent County! Also, the 'statement of information' form currently on file with California Secretary of State lists the PMC's address in the adjacent County as the principal office.

It appears to me that the principal office HAS to be located within our County and it is not. Now what?
Yes, the HOA i in violation of the Bylaws. But from experience, I advise not pursuing this. I am not convinced a court would do anything more than order the HOA to either amend the bylaws using the proper procedure, or issue "injunctive relief" that would simply be a court order to move the office to a location inside the county limits.

If you insist on pursuing this, the correct first step is IDR as described at the Davis-Stirling site. Make your request for correction of this bylaw violation as un-emotional and just-the-facts as possible. If you want help with what you should write, ask and it will be given.

Unfortunately, and is common, you started attempting to correct violations using the wrong procedure. It is not like the Board is the only party here violating the bylaws, covenants and state statutes, or simply failing to read and comply with them.

State Civil Code or State Corporation Code would take precedence. There is nothing that states the principal office has to be in the same county as the association, and quite frankly, I don't know why it is constantly in the Bylaws. It is possible it's there for the developer or declarant purposes.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 10:30 AM
I don't really expect them to do anything, I am just trying to document a growing number of instances that I have discovered with our HOA not following it's own rules and not acting in the best interests of the HOA.
What is your end goal? To force a group of unpaid volunteers to do their "jobs"?

The best solution is to get on the board yourself, preferably with a majority who feel as you do; are willing to roll up their sleeves and slog through the Davis-Stirling site to get help understanding their obligations per the bylaws, covenants and statutes. Then you can learn what a "reserve study" is and make sure it is up to snuff. Last you get to help decide on assessment increases and be the bad guy when reserve study says an assessment increase is needed.

I am not aware of any state statutes that conflict with the bylaws on this point. Absent a conflict, the Bylaws control.
JamesB37 (California)
Posts: 351
Posted:
My end goal is to replace the majority of the Board of Directors this summer, and yes, I plan on running I have a like minded neighbor who is also running and we only need one more. And it's not about just being an 'unpaid volunteer'. It's about trusting people do the the right thing. Not to abuse the authority given to them, not to profit from their position. If they don't want to do the job, then step down - there are people who are at least willing to try. Let's face it there are some people that live a miserable life and being Board President or a Director gives them some sense of satisfaction/authority/respect/ that they can't get elsewhere. (We don't need people like that - just look at the political circus that is going on all around us)
JamesB37 (California)
Posts: 351
Posted:
I forgot to add - our reserves are currently funded to 107%....
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 10:59 AM
My end goal is to replace the majority of the Board of Directors this summer, and yes, I plan on running I have a like minded neighbor who is also running and we only need one more.
Attaway.

When it comes to reserve funding, can you please define what "percent funded" means to you?
MaxB4
Posts: 3,513
Posted:
James,

I currently handle 72 associations, of which 3 are in the county of my office. I file paperwork with the Secretary of State every two years and if there was a problem, I think the SOS's office would have had an issue by now.

State Corporation Code nor State Civil Code specifically state the principal office must be in the same county as the association, therefore, IMO, state rules trump Bylaws.
JohnS111 (New York)
Posts: 228
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 7:48 AM
The very first paragraph of our bylaws:

Article 1

1. General Plan of Ownership.
1.1. Name.
The name of the corporation is XXXXXXXXXX Maintenance Association, hereinafter referred to
as the "Master Association." The principal office of the Master Association shall be located in
XXXXXXXXXX County, California.

Note the 'shall be located'.

There is another article further in that gives the BOD the authority to move the principal office but it clearly states "from one location to another within the County of XXXXXXXXXX, as provided in Article I hereof"

Our current Property Management Company only has one office and it is located in an adjacent County! Also, the 'statement of information' form currently on file with California Secretary of State lists the PMC's address in the adjacent County as the principal office.

It appears to me that the principal office HAS to be located within our County and it is not. Now what?

This is a non-issue. Just have the property manager make a filing with the Secretary of State to update the principal office so that the principal office is listed in the right county. But be sure it's a place where mail will actually be received by the HOA, since people may send tax notices and lawsuit filings to that address, and it'll be considered valid.

Or amend the bylaws to allow the office to be elsewhere. The bylaws don't allow the board or owners to change the office to elsewhere?
JamesB37 (California)
Posts: 351
Posted:
Ellen, it is an indicator of the strength of our Reserve Fund and that we have a very low risk of needing a special assessment

Max - interesting, thanks for you comment
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 11:38 AM
Ellen, it is an indicator of the strength of our Reserve Fund and that we have a very low risk of needing a special assessment.
What is your understanding of how "percent funded" is calculated?
ElleN (Idaho)
Posts: 4,420
Posted:
James, example:

The estimated cost today of replacing the roofs at a certain condo association is $100,000. The association has no other common elements for which it is responsible. The association has saved up $50,000 in its roof reserve fund. Is this enough information to compute what the "percent funded" figure is? If so, what is the percent funded figure? If not, what other information is needed?
JamesB37 (California)
Posts: 351
Posted:
Things like what is the interest rate the reserve fund is earning, what is the inflation rate, what is the annual deterioration rate of the fund
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By ElleN on 03/09/2023 11:50 AM
If not, what other information is needed?

Simple, useful life and remaining life.
If the useful life for the roofs is 10 years and the remaining life is 5 years, then the association, according to your numbers, is 100% funded.
JamesB37 (California)
Posts: 351
Posted:
I should add - we currently have over $8,000,000 in our reserve fund. The HOA pays for an onsite visit every two years and a 'credentialed Reserve Specialist' prepares a report indicating current levels as well as a recommended monthly contribution rate going forward. When you pay people for their expertise in things like this, wouldn't it be foolish not to listen to it?
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 11:55 AM
Things like what is the interest rate the reserve fund is earning, what is the inflation rate, what is the annual deterioration rate of the fund
See Max's response.

I think you need to study up.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JamesB37 on 03/09/2023 11:59 AM
I should add - we currently have over $8,000,000 in our reserve fund. The HOA pays for an onsite visit every two years and a 'credentialed Reserve Specialist' prepares a report indicating current levels as well as a recommended monthly contribution rate going forward. When you pay people for their expertise in things like this, wouldn't it be foolish not to listen to it?
James, boards should consult at length with the HOA's reserve company and take their advice. If a board does not like, for example, any estimate of the useful life or any estimate of the remaining useful life, then adjustments should be discussed. Once these adjustments are made, the counsel from the reserve studies should be followed.

Tell me how this 107% figure was calculated. Or google on "percent funded" "HOA" "calculation".
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By ElleN on 03/09/2023 12:06 PM
Posted By JamesB37 on 03/09/2023 11:59 AM
I should add - we currently have over $8,000,000 in our reserve fund. The HOA pays for an onsite visit every two years and a 'credentialed Reserve Specialist' prepares a report indicating current levels as well as a recommended monthly contribution rate going forward. When you pay people for their expertise in things like this, wouldn't it be foolish not to listen to it?
James, boards should consult at length with the HOA's reserve company and take their advice. If a board does not like, for example, any estimate of the useful life or any estimate of the remaining useful life, then adjustments should be discussed. Once these adjustments are made, the counsel from the reserve studies should be followed.

Tell me how this 107% figure was calculated. Or google on "percent funded" "HOA" "calculation".

As part of California's Annual Budget and Disclosure Statement, HOA's are required to disclose the percent funded to their membership. It is very possible that his number came from that document.
KerryL1 (California)
Posts: 14,550
Posted:
James has a lot on his plate.He has taught himself a great deal through hard work. I don't think grilling him on his knowledge of reserve funding is helpful in his situation.

As we know, very few directors understand reserves or their "percent funded." Even fewer new directors understand this. That does not mean they should not serve on HOA boards. That topic is not even close to James' dilemma and his plan of action. Reading his other posts might help prompt advice that could be useful for him.

I do agree with ElleN, James to not pursue this particular topic. I know w you want to accumulate a bunch of error this Board makes, but it feels like grasping at straws and, imo, will not help you at all.

ElleN (Idaho)
Posts: 4,420
Posted:
Kerry, I think many newbies come here saying, for example, there's $500,000 sitting in the association's bank account and they do not understand why their assessments are going up.
ElleN (Idaho)
Posts: 4,420
Posted:
https://www.davis-stirling.com/HOME/Statutes/Civil-Code-5570#axzz2CojkjgpM

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