Condo Association Governance Review Questions

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M.F. from California writes:

Dear Mister Condo,

When we moved into our condo in November 2011, of course, we received the CC&Rs (master that applied to all 1000+ homeowners in the HOA) and the separate CC&Rs that applied to the condo SBA (special benefit area of almost 200 condos). We were told that condo homeowners have a 1/170 responsibility for maintenance (rebuilding of the condos due to destruction, i.e., earthquake). But now clarifying information has just come from the HOA attorney that the maintenance and rebuilding of the condos is actually based upon a division of five (5) different phases (or construction of parcels) in the SBA. That is, the original builder and the original bylaws specified this obligation based upon the phases, or roughly 34 units in each of 5 phases, but the parcel or phase sizes are not exactly uniform.

My question/concern goes to the issue of due-diligence, transparency, and accountability for who, what, how, when and why this information is only disclosed to homeowners long after the review, submission and vote of major CC&R changes in 2012 based upon the premise that the condo homeowners had a mutual obligation determined by the 1/170th ownership principle. On the issue of earthquake (EQI) insurance, a small group of 120 condo owners had to force successful mediation of the issue to rescind a wrongful and secret special assessment voted by the board without homeowner consent or participation in the process.

Mister Condo replies:

M.F., the HOA attorney is the right professional to offer a legal opinion on this situation. It would appear that the condo’s governance documents addressed the issue of maintenance and the percentage of unit ownership formula to be applied for common fees and special assessments. It would also appear that there was some confusion on the part of sitting Board members at the time of common elements, limited common elements, and the governance of the various phases of the association, which would appear to be several smaller associations functioning together as one larger association. This is not particularly uncommon but it is easy to understand how Board members with limited knowledge of such things could misinterpret the governance documents and lead the association down the wrong path. As you have pointed out, when the mistake was caught by a group of unit owners, they brought suit and won on the issue of Earthquake Insurance. The same process applies in all instances of wrongful governance. The burden is on the unit owners to bring suit against the Board to correct the wrongful interpretation of the governance documents. It can be costly for both the owners bringing the suit and the association that has to defend against the suit but that is just the reality of the legal system in action. It is also one of the reason that community association attorneys are an important part of every community association. Their expertise in these matters can prove invaluable and, while costly, will usually end up saving the association money in terms of law suit prevention. Of course, the Board is made up of volunteer leaders who were voted into their positions by the democratic vote of the community association unit owners. If they aren’t doing the job properly, it may time to elect some new leaders. At the very least, existing Board members should be offered the opportunity to get additional education on their roles as leaders. Your local chapter of CAI can be your best ally in getting them that education. Good luck!

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