WHAT CAN MEMBERS OF A HOA DO IF THE HOA HAS STOPPED FUNCTIONING?
We have encountered increasing instances of small residential developments with Home Owners Associations (“HOA”), where the HOA has ceased to function at all. What rights and remedies are available to the HOA members when the HOA has not been active? The California Davis-Stirling Act sets forth the laws and regulations pertinent to HOAs, however there are also other laws which provide guidance and legal recourse under these circumstances.
Under California Corporations Code § 7210, an HOA must have a governing board. The board must hold regular meetings and a quorum must be present in order for business to be conducted. Cal. Corp. Code § 7211(a)(8). Like board meetings, annual meetings are required by law. See Cal. Corp. Code § 7510. In addition, the Davis-Stirling Act, which governs HOAs, outlines several violations of HOA rights and responsibilities, including failure to follow proper election procedures and failure to enforce CC&Rs.
Where the HOA ceases to function it most likely does not have a governing board in place, or the board is not performing its statutory duties. Under these circumstances, members have a variety of remedies, including:
1. Receivership - In the absence of a governing board, a member of an HOA may petition the superior court to appoint a third party as the association's manager pursuant to California Code of Civil Procedure § 564(b)(9).
2. Hire an HOA management company – these companies vary in the services they provide, but typically they will offer Administration, Violations Enforcement, Financial, Customer Service, Legal Advice, Communication, and Maintenance Services. An HOA Management company must be hired via a community decision.
3. Election at annual meeting - elect board members, but be sure to check that you meet the requirements for a “voting quorum”. Pursuant to California Corporations Code § 7512(a), the quorum is usually no less than one-third of the membership, though the bylaws may set a higher threshold.
4. A special meeting - the members are entitled to call a special meeting of the HOA members pursuant to California Corporations Code § 7510(e). HOA members may call and give proper notice of an unscheduled meeting which is meant to handle a specific, time sensitive issue, such as the failure of the governing board to handle urgent HOA business.
5. Right to demand a recall - a recall election of non-performing board members is an option if you and your fellow homeowners cannot wait until the next election. It is important to review the governing documents in order to determine the possibility of a recall. Recalls are permitted under California Corporations Code § 7222.
6. ADR (Alternative Dispute Resolution) – this route is required in some instances by the Davis Stirling Act and is fact specific, so be sure to check your obligations to engage in ADR before resorting to litigation.
7. Litigation – members can file a lawsuit against their HOA for a court order, such as receivership mentioned above, or to direct the governing board to fulfill its statutory duties.
These rights and remedies are statutorily derived and may have pre-conditions before they are made available. The best strategy is to consult with a real estate attorney who can help guide the members and recommend the most efficient and effective course of action. If you have any questions regarding this topic, please do hesitate to contact our office.
The foregoing is not intended to be exhaustive, and the information provided above does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only and do not create an attorney-client relationship. The experienced and knowledgeable attorneys at Blake Law Firm are available to answer questions on partitions and help you navigate any other real property issues.