I am a new board member at my community, and we are self-managed, meaning we do not have an outside management company. I am concerned that we are not meeting regularly enough, and that we do not have a clear understanding of our responsibilities. Our entire board is pretty new. Is there a resource for us to learn what is required of us?
— Mike M.
This is a great question, and since I began this column, numerous self-managed associations have contacted me with similar questions; concerned that they are not adhering to civil codes and legal requirements.
Just last week, I spoke with a local board of directors that was only meeting once a year, if that.
California Civil Code requires that associations meet quarterly, at a minimum, to review the association’s financial statements.
I looked into that association a little further, and as it turned out, it unfortunately had its corporate status suspended for not filing the required statement of information, a relatively easy $20 filing with the secretary of state required every two years.
Because this association did not understand its legal obligations, it opened itself up to significant liability exposure. Having a clear understanding of legal requirements governing associations is imperative to militate against liability, ensure that the community is fiscally sound and that the community’s maintenance needs are being met.
As a self-managed community, it is the board’s obligation to understand federal, state and local statutes, as well as case law governing homeowners associations.
The California Legislature has implemented a number of statutes governing homeowners associations, but the Davis-Stirling Act is one of the most critical laws with which your board of directors should be intimately familiar with.
A great resource is the 2011 Condominium Bluebook by Braden E. Bickel, which contains the Davis-Stirling Act in its entirety as well as case law and a host of other useful references.
A copy can be ordered from your preferred online book retailer. Please keep in mind, however, that associations are also governed by a range of statutes that address issues such as taxes, health and safety as well as the California Corporations Code.
As a professional management company, we are well-versed regarding our associations’ legal obligations and we work diligently to train board members so that they, too, understand their obligations and are able to make well-educated and informed decisions.
I always recommend that an association hire a professional management company. Many associations initially think a management company may be too expensive.
In reality, when considering all the potential fines, penalties and liability communities face, I firmly believe it is too expensive not to hire a good management company.
Additionally, many professional management companies offer tailored service packages for self-managed associations that do not wish to sign up for full-service management.
These packages include professional assistance with important functions, such as monthly financial statement preparation, delinquency management and enforcement of homeowner obligations.
That said, if your association prefers being self-managed or is not willing to assume the expense of a professional management company, I encourage you to speak with your association’s attorney and ask to be educated on your association’s legal obligations.
I also encourage you to obtain a copy of the Davis-Stirling Act. And, of course you are also always welcome to call or email me with questions. As a professional expert in the property-management industry, I feel it’s my fiduciary duty to have an open-door policy to answer questions and help guide association board members, even if our company does not manage that board member’s association.