Can the HOA remove a director for unpaid assessments? Prevent a member from using the pool because of a rule violation? Yes. Here’s how.
When a board member or owner stops paying their assessments or continues to break association rules, how should the board respond? For overdue assessments, the association can impose a lien, begin collections proceedings, or even (gulp) foreclose. And for basic rules violations, the board can hold a hearing and impose fines.
But sometimes these options don’t work quickly enough: collections can take a long time, and some owners simply refuse to pay fines, sometimes resulting in a years-long struggle. And if the member is on the board, the situation can become legally complicated.
Another option, one that can have an immediate impact, is to suspend a member’s rights or privileges. The suspension process begins when a board declares the member to be “not in good standing.”
Bylaws Define “Good Standing”
The term “good standing” is not defined in the Davis-Stirling Act or other statute. To find out who is, or is not, in good standing, you must, in most cases, refer to the association’s bylaws. The bylaws basically govern the association as a corporation and discuss how the corporation should work. In contrast, the CC&Rs are a recorded document whose main purpose is to govern the uses of the real estate assets.
Common Requirements for “Good Standing”
The most common requirements governing eligibility for voting and for running for the board of directors are first a requirement that the member be current in payment of all association dues and assessments and second a requirement that the member’s privileges of membership have not been suspended as a result of breaking association rules or violating the governing documents. Some bylaws also require that board members reside in the development but that does not relate to “good standing.”
Removal of a Director “Not in Good Standing”
The bylaws also often contain requirements that directors must satisfy in order to continue to serve on the board. Common requirements include:
- The director must own a “unit” or a “lot,” and if such ownership ceases, so does membership on the board;
- The director must not have been convicted of a felony; if convicted, the member may be removed from the board by the other directors;
- The director must not have missed three regularly scheduled board meetings within the same calendar year;
- The director must not have been declared mentally “incompetent” by a court; if he has been, then he may be removed from the board by the other directors.
Although the governing documents typically require that association members and board members own property within the development, they usually don’t limit membership to people having any particular percentage of ownership. So if a member lives with a “significant other” and deeds even one percent of the ownership of the unit or lot to the significant other, that significant other is still a member.
Suspension of Members’ Rights for Violation of CC&Rs or Rules
The Corporations Code allows an association to suspend a member’s right to use the common areas and to vote. However, such suspension may occur only after the member has been given notice of the alleged violation and an opportunity to be heard. The member may request that the board sit in executive session while holding the hearing. Of course, the board has no power to suspend a member’s right to use his own unit, residence or lot.
What To Do If Your Bylaws Fail to Address These Issues
We recommend that your bylaws specify what a member must do in order to be in “good standing,” and that they also specify reasons why other board members may remove a board member who fails to continue to qualify for board membership. If your current bylaws don’t include these provisions, we advise you to amend them to add the provisions. These provisions encourage owners to pay their assessments and dues on time, which helps association cash flow. It encourages compliance with rules and governing documents. And it allows a quick way of getting rid of board members in situations where continued membership on the board is obviously a bad idea, as in a case where a member has been convicted of a felony, or simply loses interest and fails to show up for board meetings.
Corporations Code §7132(c)(3) specifically allows the articles of incorporation to specify restrictions and conditions on membership. Corporations Code §7151(d) allows the bylaws to specify the “qualifications, duties and compensation of directors.” Corporations Code §7151(d) says the bylaws can provide for the manner of suspension of membership rights consistent with the requirements of Corporations Code §7341. Corp. Code §7341 imposes due process requirements for suspension of a member’s rights.
Ann Rankin is the principal at the Law Offices of Ann Rankin, in Oakland, California. The firm practices mainly in the areas of common interest development law and construction defect litigation. She is a member of the Legal Resource Panel.