Homeowner association’s board can’t barter payment of assessments

Question: My small homeowner association is self-managed, and all board directors are homeowners and volunteers. There is no property management company. The board treasurer does all the association’s bookkeeping and is audited by the other directors and a licensed certified public accountant yearly. As payment for the bookkeeping, the treasurer has been exempt from paying monthly association dues. These bookkeeping duties are not offered to any other homeowners. Is this legal and in compliance with the law?

Answer: The Davis-Stirling Act does not provide exceptions or exemptions to the requirement of paying assessments for owners or board directors regardless of the work they do for the association. The board cannot barter association assessments for work performed or waive payment of assessments for any owner regardless of the reason or alleged justification. If it does, it is acting unlawfully.

Assessments are made against association titleholders and become an obligation of that owner when assessed (California Civil Code Section 1367). The treasurer cannot escape payment because he or she voluntarily does work that the Legislature anticipated volunteer homeowners would do when approving common-interest developments and self-management nearly 30 years ago. The current board has a duty to collect all of the treasurer’s unpaid assessments.

In performing its due diligence, the board should have obtained several bids for the work. By not doing so, it is very likely that the board has violated its duty to the owners by not seeking competitive bids from several accountants before deciding to hire the treasurer.

A board may vote to reimburse approved expenses to directors but may not offset assessments. Receiving credit (or an offset) for association assessments or dues is, in essence, a payment, and because that director is receiving compensation, he or she is no longer considered a “volunteer” as defined by law. As a consequence, that director is not covered by any of the association’s insurance policies for those actions “including, but not limited to, bodily injury, emotional distress, wrongful death, or property damage or loss as a result of the tortuous act or omission of the volunteer officer or volunteer director,” according to Civil Code Section 1365.7(c).

Because that director may no longer be covered by the association’s insurance policy, that is a change requiring the notification of all titleholders in accordance with Civil Code Section 1365(f)(2). That notification should explain the ramifications that the board’s actions will have on all the other titleholders.

Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.