Delegating HOA Board Authority
The Open Meeting Act changed the way HOA board of directors conduct business, and the best way to deal with the added responsibility is to delegate responsibility to committees, managers, or members of the community association. However, there are rules to passing off authority, including certain tasks that cannot be delegated
For California HOAs, the Open Meeting Act has fundamentally changed the way that some HOA boards do business. Under the law, boards can no longer make decisions through an exchange of emails (except in an emergency). Boards that were used to dealing with routine matters that arise between regular board meetings in such a manner have two choices:
- Hold more noticed open board meetings or executive sessions (the new law now requires notice and agenda for nonemergency executive sessions as well as open board meetings).
- Delegate authority to deal with such matters to a committee, or in some cases, to the manager or other individuals.
Delegation to Executive Committees
Corporations Code Section 7210 states that:
The board may delegate the management of the activities of the corporation to any person or persons, management company, or committee however composed, provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.
Corporations Code Section 7212(a) authorizes the board “by resolution adopted by a majority of the number of directors then in office, provided that a quorum is present,” to create one or more committees comprised of two or more directors to exercise the authority of the board to the extent authorized by the resolution creating the committee, except for certain matters that require the vote of the entire board. A committee exercising the authority of the board (i.e. making final decisions on behalf of the board) can only be comprised of directors. However, committees acting in an advisory capacity to the board (leaving the final decision to the full board) may include members who are not directors (Corp. Code Section 7212(b)).
Committees that are comprised solely of directors and carry out some of the duties of the board are referred to as executive committees. Unless stated otherwise in the bylaws, members of such committees are appointed by a majority of the directors then in office. There are certain matters which cannot be delegated to executive committees (or any committee for that matter).
|✘||Any action that requires the vote or approval of the full board (e.g. decision to record a lien for delinquent assessments per Civil Code Section 5673)|
|✘||The approval of any action for which California law requires approval of the association members|
|✘||The filling of vacancies on the board or on any executive committee of the board|
|✘||The fixing of compensation for directors|
|✘||The amendment or repeal of bylaws or the adoption of new bylaws|
|✘||The amendment or repeal of any resolution of the board that by its express terms is not amendable or repealable|
|✘||The appointment of executive committees or the members thereof|
|✘||The expenditure of corporate funds to support a nominee for director if there are more people nominated for director than can be elected|
Any other matter not otherwise prohibited above that is within the authority of the board may be delegated to an executive committee. This could include rules enforcement, architectural review and approval, budget/finance, insurance, pending litigation and/or construction or rehab projects, among other things.
Committees with decision making authority must maintain minutes of their meetings (Civil Code Section 5210(a)(2)). Notice and agendas for executive committee meetings should be given in the same manner as for board meetings.
Delegation to Officers, Manager or Other Individuals
Corporations Code Section 7210 quoted above authorizes the board to delegate some of its management functions to individuals as well as to committees. However, unlike the actions of executive committees discussed above, the actions of these individuals are exercised “under the ultimate direction of the board.” This means that such actions must be reviewed and ratified by the board, and the discretion of such individuals to act on behalf of the board is much more limited. If the board wishes to delegate authority to exercise independent judgment and discretion and to take action that will be binding on the association without the need for additional direction or approval by the board, then the board should utilize an executive committee. If the board wishes to delegate management functions that will be exercised only under strict guidelines and limits and will be subject to review and approval by the board, it may delegate such functions to the manager or another individual.
If the bylaws do not specify the qualifications for serving on a committee, the board should adopt a rule or policy setting forth such qualifications (e.g., committee members must be members of the association in good standing) before committees are appointed. This should help to minimize any questions or disputes about appointment of committee members. As discussed above, executive committees can only be comprised of members of the board, but committees that act solely in an advisory role to the board can be comprised of individuals who are not members of the board.
The formation of committees, appointment of committee members and delegation of specific duties and authority to committees and individuals must be set forth in a resolution adopted at an open meeting of the board. Setting the limits of the authority being delegated is especially important when the board resolution dealing with the formation of an executive committee, since, by definition, such a committee will be operating independently from the rest of the board.
Since many associations have trouble finding enough volunteers to even serve on the board, delegation of any meaningful authority to committees in such a case is not a realistic option. However, where there is a sufficient pool of willing volunteers, delegation of some of the board’s responsibilities can help to reduce its workload and keep the length and frequency of board meetings to a reasonable level. This in turn may encourage other members to step up and volunteer their services as a director.
Michael Hardy is an attorney at the Walnut Creek offices of Angius & Terry LLP. He is a regular contributor to the ECHO Journal.