Published in the ECHO Journal, December 2012
This article is all about recall: what to do when served with a petition, how the process works, what the pitfalls are, how it can be used to boost the participation of the members, and what the most common situations are that lead to a recall effort in a homeowners association and how to avoid it. The word “recall” (the colloquial term for removal) is bandied about loosely and frequently in response to someone’s dissatisfaction with Board actions. Most people do not really understand the intricacies: what it means to the community, how much steam (energy) and money is required whichever side you are on, how difficult and divisive it can be, and in some instances – how it can actually energize the community and counter apathy.
Beginning at square one – the most common questions are:
“Can we recall a board if we circulate a petition and get it signed by owners?”
And [from a board]:
“May we fire a Director?”
The desire to “fire” may be directly triggered by the “heat” of the situation. The answer to whether a board can remove a director is usually no, but there are some exceptions (below). And as for the concerned owners’ side, circulating a petition for signatures and presenting it to the board demanding the director be removed is not a legal way to recall an HOA board member.
Because the directors are elected by the members, they can only be removed by members (see Corporations Code Section 7222), with a couple of exceptions. A board by majority vote can remove a director that has been adjudged by a court to be of unsound mind or who has been convicted of a felony and a director can be removed from the board if he or she has missed more meetings than allowed by the bylaws. If a director no longer is qualified to serve under qualifications that appear in the bylaws, the board can remove him or her – that is sometimes called vacating the director’s seat. A director or member may seek to remove a director or directors by filing a court petition asking a judge to remove the person(s) for fraudulent or dishonest acts or gross abuse of authority or discretion in exercising authority. (See Corporations Code Sections 7221 and 7223.) It is not an easy task to unseat a board member who does not want to step down voluntarily. But keep in mind, as the evidence or angst piles up against a director, it is appropriate for a board to first ask the director(s) to resign voluntarily, before matters are made “public” within the association at least.
There are other ways to harness or debilitate a director who abuses his or her authority, including censure, commitment to a Code of Conduct, exclusion from meetings, or “neutralization” by taking their title (as officer) away from them. Don’t get the actions confused though. Taking a director’s “office” away does not remove them from the board. But a director who goes from being President to holding no office becomes a lot less powerful, even though they remain on the board.
Now, back to recall. A special meeting of the membership may be called for a recall election but it’s not always necessary. In California, there are election rules in the Davis Stirling Act that allow owners to vote by mail, without attending a special meeting.
But keep in mind, having a special meeting, which may be called by the President of the Association or a majority of the board, or 5% of the owner/members presenting a valid petition, can be very beneficial for the entire association! Besides possibly a proposal for a huge special assessment, it is the one single topic that brings the largest percentage of the membership out of their caves to see what is going on!
If 5% of the owner/members sign a valid petition calling for a special meeting the subject of which is recall, the board is required under the law set a date, so long as the petition is valid. A petition may be faulty or inadequate, especially when prepared by a novice or non-professional. Recall is a valid subject for a petition, but sometimes the signatures are faulty (because tenants are allowed to sign or two people from the same unit sign and the proponents consider both signatures to count toward the 5%). Novice preparers often forget to petition not only for recall, but for a subsequent election when the request is for recall of the entire board. If the petition is to remove the whole board, it is important to have in the works a process for a new election. The demand commonly has to be spelled out because many practitioners, and most owners, fail to understand the intricacies of setting up a proper process, given the complicated nature of trying to integrate the petition-for-a-meeting-process of the Corporations Code provisions with election requirements of the Davis Stirling Act provisions. And sometimes the board and its attorneys rely on the naiveté of the proponents for recall, scheduling the recall election but arguing the petitioners did not ask for a subsequent election, and thus one was not scheduled, leaving a real predicament – a ship without a captain, i.e., no board in place. I always hope owners with a righteous cause for recall can see through this kind of ploy and head it off, but truthfully owners are generally not sophisticated enough to make sure all ducks are in a row, and to protect them such that they are not shot down one by one, by an unidentifiable sniper. Yes, it can be a dirty game.
When the petition is valid, the law says the meeting shall be scheduled in not less than 35 days or more than 90 days from the date of the petition. The notice of the meeting must be sent to members within 20 days of the presentation of the petition of a meeting. If the board does not comply with these mandates the owners can call a meeting. That opens the door to potentially serious consequences because leaving the owners to call a meeting often leads to fights over which group’s processes prevail, whose action is legal, who gets control of the books, the checkbooks, the administration of the association. It often leads to two groups claiming to be the “real” board, to lawsuits and to thousands in legal fees to sort it out. So boards – in my playbook – it makes the utmost sense to set the meeting date, and give owners proper notice of it. Taking it from there, the truth is that the owners are likely to support whichever “cause” presents itself in the most professional, businesslike, and sensible manner. So I advise: engage in meaningful communications with owners, put your accomplishments or concerns (depending on which side of the board table you are sitting on), conduct yourselves like professionals at all times, be pragmatic, and when necessary, counter misinformation that is being circulated with verifiable facts, not spitballs!
Under current election laws, a ballot for the recall should be sent through the mail or delivered to members at least 30 days before the ballots will be counted. The best use of the meeting (in my view) is to allow the proponents and the board to make a presentation to the owners on the issues and after that opportunity, to have the ballots counted, either at the special members meeting or a subsequent board meeting.
The law complicates the meeting process. The Corporations Code contemplated that voting would occur at the meeting, but the Davis Stirling Act requires the ballots to be sent out ahead of time – at least 30 days before counting, so there are different ways to arrange the process. The meeting could be scheduled before ballots are sent out, or during the voting period, or the day the voting period will wrap up. Most boards and owners would have trouble figuring out the best process, yet if a proper process is not put in place, then the election can be challenged by whomever loses. So it is important to comply with the law, and that means getting help from an experienced and knowledgeable professional. But I can tell you that few concerned owner groups want to spend the money for involved assistance of a knowledgeable attorney. And many throw their money away working with an attorney that specializes in some other area of the law and doesn’t sort out the differences between the Corporations Code, the Civil Code and the association documents for a living.
Recall efforts are often very emotional matters and commonly create or stem from serious political unrest. Sometimes the board wants to remove a director but the effort more often starts with a group of homeowners who are unhappy with something the board is doing. Disputes seem to arise naturally over very expensive rehabilitation projects, roofing changes, paint color changes (and the added expense that goes with them), and any expensive special assessment related differences of opinion. Sometimes the fight is over management; sometimes there is simply a serious issue with transparency, and sometimes board egos are the cause. Sometimes a group of owners believes (and sometimes actually discovers) that the board is guilty of poor, irresponsible or illegal exercise of fiscal responsibilities. The catalyst is often only one or two dissatisfied (or disgruntled) owners but the cause can escalate when they start talking to other owners. It is less difficult to garner support if one can point out the specific areas of concern and back up the concerns with facts. A recall effort that is lead by only one or two people who cannot garner additional support generally goes nowhere. Many owners find it incredibly frustrating when they truly believe leadership is abusing its authority and no one seems to care. Apathy is a common barrier to a recall effort. People just do not want to get involved. The only way to get people involved is to threaten their “pocket book”.
If a dissatisfied owner (or two) starts asking questions, and he/she/they are met with great resistance to records or information requests, that just adds fuel to the fire. If the board tends to hide out, to respond poorly to owner inquiries, to conduct business via email or without following the open meetings laws, to ignore situations that could lead to serious liability or losses, or the angry or worried owners can point out flagrant or extreme scenarios or losses, they can wake up the most apathetic of owners, and the one or two people soon can give rise to a group of concerned homeowners, who usually call themselves The Concerned Homeowners!
My litmus test for an owner who comes to me for advice on recalling a board is whether they can get enough owners involved to become a meaningful and dedicated group. If the call to arms by the homeowner(s) fizzles for lack of interest, they are going to be wasting their money, because one or two owners are not enough to make a dent in the board’s armor. Thus I would be discussing a different course of action to right any wrongs.
What should a board do when faced with a demand for recall?
The board should schedule a meeting within the timelines of law, presuming things are beyond a simpler resolution, such as a meeting with the petitioners. As noted above, the law has been interpreted to allow the owners to call their own meeting if the board refuses. For that reason, in my opinion it is much more responsible as well as advantageous for the board to be the one calling the meeting. If that happens, reasonable controls can be put in place to prevent (or at least minimize the possibility of) mayhem and subsequent legal battles. The board members who want to fight to keep their positions should be willing to stand up and be counted and speak up, just like the opposing faction is going to do. Fair procedures are those that allow equal opportunity for comment from those subject to recall and the proponents of it. Homeowners not involved in the conflict should be given a reasonable opportunity to be present or participate and to be heard if they have opinions. Resisting the laws requiring such a meeting just breeds further distrust of the board and facilitates the ability of the concerned owners to gain allies.
Last but not least, if there is one good thing I can say about recall meetings – although they are very difficult for a number of reasons – they tend to bring association members out of the woodwork and get them off their apathetic “derrieres”. I have yet to be present at a recall meeting where someone did not say – “This is the most people I have ever seen at an association meeting!”
By Beth A. Grimm, a community association attorney in California, East Bay Resource Panel Chairperson and author of various publications and books and hundreds of publications about condominium living and the law, and a frequent contributor to THE ECHO JOURNAL, and responsible for the widely popular website “californiacondoguru.com”.