Reader Questions - Is It Still a Committee Meeting, Excessive Assessments

Dear Mr. Richardson,

Our Budget committee had 2 board members out of its 7 total members. With our recent election, another committee member has joined the board. If all 3 remain on the committee, it is my understanding that they now represent a quorum (we have a 5-member board) and are having ”a board meeting” each time our committee meets. Our restated CC&Rs and Bylaws are silent on these details. Shouldn’t one of them step down from the committee, or can they remain ”ex-officio” and not have a vote?

Thank you,

C.G., Los Angeles

Dear. C.G.,

Yes, you are on target – under the Open Meeting Act, any time a quorum of the directors are talking or present at the same time, it is a “board meeting”. So, if a third director joins that committee, all committee meetings become “board meetings,” and all the legal requirements must apply (four day agenda notice, open forum, minutes availability, etc.). Whenever 3 of your 5 directors are in the room at the same time, it is a “board meeting”, even if one of the directors is simply in the audience listening.

This is one of the unanticipated consequences of this year’s expansion of the Open Meeting Act. Unfortunately, the new director needs to resign the committee, or the committee must start complying fully with the Open Meeting Act.

Thanks,
Kelly

Dear Kelly,

I reside in a large Association. Our association is over 100% funded in its Reserve Account and in its Operating Fund it currently maintains 9.8 times the monthly average of operating expense, which I feel is unnecessary. I’ve read somewhere in the past that maintaining anywhere from 2 to 2 1/2 times the average monthly operating expense is adequately safe. Are Associations allowed to over collect in this manner? This Association has been plagued with litigation for years and I believe it’s their way of building up a slush fund (unauthorized) out of fear of future litigation.

I was wondering if you might address a problem such as this in a future column.

A.N., San Clemente

Dear. A.N.,

Associations with fully funded reserve accounts and extra money in its operating account? Along with unicorns, I didn’t know they existed! However, I understand your point.

A board should set budgets (and therefore assessments) which meet the coming year’s anticipated expenses and deposits into the reserve fund recommended by the association’s reserve study. Bad debt can be an anticipated expense included in the budget, but not “contingencies”. Civil Code 1366.1 states that an ”association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.” This means that the association cannot levy assessments unconnected to reasonably anticipated obligations. Could the association have an assessment to pay off debt? Yes. Could the association impose an assessment to build up an operating cash reserve (apart from its major component reserve account)? No, that is an excessive assessment.

An association which accumulates too much money in operating funds may also draw the ire of its members.

As to the issue of too much litigation, the board should consult with legal counsel and determine how the lawsuits could have been avoided. Rather than building up a fund for lawsuits, first try to avoid them.

Best,
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®.