Wednesday, October 20, 2021

HOA Homefront: 6 Reasons to Stay in Your HOA Lane

Last week’s column reviewed the roles and limitations of each member of the HOA team. While it can sometimes seem frustrating for volunteer leaders to follow through in their role as directors, there are at least six reasons to do so.

1. Statutory Immunity: Civil Code Section 5800 provides immunity to HOA leaders if the HOA has certain minimum directors and officers (D&O) insurance coverage. The protection is limited to “acts or omissions committed within the scope of the union duties of the officer or director”. (Section 5800(a)(1)). Therefore, if a team member acts outside of their duties, they also act outside the liability protection of this law.

For example, if someone allegedly negligently repaired a gate, it would be described as outside their governing duties and therefore outside their immunity.

2. Insurance: D&O insurance usually has language following Civil Code Section 5800, which means that people acting outside the role of the board may be excluded from the protections of D&O insurance in addition to their statutory immunity.

3. Accountability: If directors become involved in implementing decisions it interferes with the performance of the salesperson hired to execute the decisions (often the manager).

The most common explanation for volunteers stepping into co-management activities is “if I don’t do it no one will.”

However, handling management activities makes it far more difficult to hold the manager or salesperson responsible for their failure to do the job – now they have an explanation – “I can’t do it, they won’t give me a chance.”

Expect your manager and vendors to meet their responsibilities and don’t step in when they fall short – you may find that they rise to the occasion, but if they don’t, hold them accountable. I have heard many times managers express their frustration and dismay because of the director interfering in the manager’s job.

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4. Standard of Care: When stepping out of a board role, directors may take on an entirely different legal risk. For example, the director who personally cuts down a tree may be placed on the standard of care of arborists or tree removal firms. If the tree falls the wrong way and hurts someone, the director probably cannot claim immunity – he acted as a tree remover, not a director.

5. Conflicting Instructions: Directors who step out of their roles often do so in their zeal to protect the HOA and “get things done.” However, this interference increases the potential for overlapping or conflicting instructions for vendors. If the manager asks the maintenance salesperson to repair the broken item tomorrow, and one director to wait for further instructions, and yet another director asks not to repair it but to put some new paint on it If so, what does the seller listen to? Such conflicts can be avoided by staying in the proper lane.

6. Unauthorized Acts: The ultimate limit violation problem arises when a board of directors authorizes vendor expenses without authorization. In that case, the seller can often force the HOA to pay, even if the board has not approved it under the principle of “visible agency.” If the Board does not confirm the unauthorized commitment, the HOA may require that director to reimburse the HOA for expenses.

There are other reasons to be on someone’s street, but hopefully, that’s enough!

Kelly G. Richardson, Esq. A Fellow of the Community Association’s College of Lawyers and a partner in Richardson Ober Denicillo LLP, a law firm known for community association advice. Submit questions at kelly@rodllp.com.

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