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Association board keeps making new policies

A board's misguided strategy is running up bills, raising fees and miring the association in rules and regulations. What can a titleholder do?

December 02, 2012|By Donie Vanitzian

Question: We're on our third management company because the board directors think they won't have to do anything as long as they hire a company to do it all for them.

Our directors are so inept, the most recent management company has convinced them that the only way to get out of their indecision and gridlock is to make more policies. The management company refers all board policy decisions and actions to its attorney, saying "the attorney makes policy."

Costs have escalated substantially, our fees have risen, and we're mired in rules, regulations and numerous attempts at rewriting the governing documents. How does the board fix this "policy" problem and get out of this costly downward spiral?

Answer: This isn't a policy problem, it is a board problem, and the board gets out of its costly downward spiral by looking at itself.

Owners elect board directors, and if owners are dissatisfied, they have a solution: Vote the old board out and vote a new one in. If several owners share your opinion, you have the nucleus for removing the existing board and probably the management company and its attorney. The process for board removal should be in the association's governing documents.

Your board appears to be complicating matters unnecessarily. So-called policies already exist in the association's governing documents and the law. Associations that let attorneys make more "policy" risk needing to raise fees and incurring overall higher operating costs shared by every titleholder.

When all else fails to resolve a particular problem, it is only then that the board — as representatives of the titleholders — consider making new policy. It is the board's duty to enforce the policies, rules, regulations and governing documents. From time to time, boards may seek opinions from counsel, but it is the board that makes the final decisions.

Before a new policy can take effect, it must go through a set procedure that includes open meetings with motions, seconds and recorded votes published in the minutes and distributed to all titleholders. Owners must be given a timely opportunity to object. It is far better for board members to encourage early, open debate than to waste assets fighting their own removal or challenges to unwanted rules, regulations and policies. When owners' objections are successful, a similar rule or procedure cannot be enacted for at least one year.

Hiring a management company to "do it all" is a breach of each director's obligations to the titleholders, as such duties cannot be delegated. These directors need to step up to the task of performing their statutory obligations rather than fencing in owners by creating more policies.

The late Stephen Glassman, an attorney specializing in corporate and business law, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.

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