WHAT IF THE BOARD DELEGATES TOO MUCH AUTHORITY TO MANAGEMENT?

In the future I will likely be paring down to one blog so I am posting duplicate blogs on both sites for a while. Open to feedback as to which you prefer, this site or my California Condo & HOA Law blog. I have been segregating the info as between what I think homeowners need to know (this blog) and what HOAs and everyone else needs to know (that blog) but the truth is knowledge is power for everyone and you are all entitled to the same information!

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What if the board delegates too much authority to management?

I think the real question is “how much is too much?

Here is an inquiry from a member concerned about the Board delegating too much to management:

“I have a question and hope that what I say makes sense.  If the board of directors make a decision that is legal without legal counsel; does that mean that there’s no legal implications if something goes awry.  For example, if they allow the manager to preside over meetings, take minutes, advise the board; that doesn’t mean that their are no legal implications if poor decisions are made, or the manager does something wrong as a result of these decisions.  Our manager is indemnified against any claim.”

The answer to the question is that the association and board will be on the hook if the manager is giving them legal advice and the Board is taking the advice.

Many managers are well versed in the law, meaning familiar enough to do certain things like take minutes, conduct elections, draft policy and advise the board on some matters. Managers are not supposed to be giving legal advice, meaning advising the board on what to do when legal situation arises that calls for legal advice. Putting together a disclosure package is not giving legal advice. Advising the board on fining requirements and helping to draft policy is not giving legal advice. Advising the board as to pros and cons of any situation, decision or on actions that could carry legal ramifications would be crossing the line, in my view.

And many managers are not well versed in the law regulating homeowner associations.

I think what the reader wants to know is if legal implications go away because a board relies on the advice of management.  There is some individual legal protection for board members in California law if the directors follow advice of a person qualified to give it (often referred to as safe harbor laws). These laws do not prohibit legal action against the association if some act of the board or management gives rise to a legal complaint. But they may protect the directors themselves.

The same is not true related to advice of management, if it can be construed as needing legal advice. Managers should not give legal advice. If the Board follows relies on such advice and it turns out it is not valid, there is no individual protection that will kick in because of the safe harbor statutes. And in fact there could be some adverse outcome because of the board’s careless taking of legal advice from a non-lawyer.

And finally, I will say that a board loses the trust of the membership  if meetings are not conducted by and for the Board, with the manager standing by offering information and reports when asked. Allowing or asking management to run meetings is indicative of poor leadership, in my view.

 

 

 

 

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