Reader Questions - Adding More Directors: Fees at Time of Sale

Dear Mr. Richardson,

At our HOA meeting last night – it was announced by the board that they are adding a 6th member, a 2nd member at large! I’m perplexed! Can they do that? Can you please shed some light on this!

D.B., Reseda

Dear D.B.,

The number of authorized directors normally is found in the bylaws. The most common number of directors is five, but what is important is what your bylaws say, not what most associations do. If the bylaws only authorize five directors, the sixth is not a director. What the bylaws say is more important than what the board says. The board normally may appoint to fill a vacancy caused by resignation or disqualification, but the members vote on vacancies caused by a term expiring or because of recall. So, I would need to look at your bylaws to be sure, but the sixth person is most likely not a director, and not entitled to vote or attend closed sessions meetings.

If your board needs more help, rather than create a new “director” position, perhaps create a committee. Committees can help the board, and also help to discover potential future directors. Committees should have a defined scope, noted in the motion creating the committee, and recommend actions to the board within the committee’s scope of responsibility. Perhaps this sixth person would be a great committee chair. Have people serve on the committee and advise the board on topics within the scope of the committee.

Regards,
Kelly

Kelly,

I am in a large scale HOA. In the beginning, the developer charged a [significant] transfer fee to all buyers through escrow. When the developer turned the property over to the association, they transferred the right to collect this fee to the association.

We have a management company that does all of the paper work required through escrow for sales and the seller also pays for the paperwork and also this fee through escrow. I understand the laws changed in 2007 or earlier and this change said an association may only collect the amount needed to cover its cost and if they have a management company that does all of the paperwork, they may not also charge a fee. Is it legal for the association to continue to collect this fee?

Your response is appreciated,

B.C., Hemet

Dear B.C.,

Civil Code 1368 covers what an association may or may not charge at the time of acquiring a residence in an HOA. There are two types of charges referenced in this law (and in your question). The most common type is the charge for generating the various disclosure documents which a member can demand to pass along to a buyer. The HOA can charge its actual cost, for preparing the documents or may pass along what its management firm charges, so long as it is a reasonable charge. The less common is the transfer fee that is required by some CC&Rs to be paid to a Community Service Organization (“CSO”) for services the CSO provides to the HOA community. If the CC&Rs provide for a transfer fee there may be disclosure obligations regarding the transfer fee.

So, regarding document fees, the question is, are they reasonable? With respect to validity of a transfer fee, someone needs to review the governing documents.

Thanks,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.