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The Importance of How Boards Decide Actions

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By Kelly G. Richardson, Esq., CCAL, HOA Homefront Column 

In the HOA world, corporate formalities can often seem to discourage and frustrate quick decisive action. However, there are important reasons the process must be followed, and the corporate process is a critically important legal protection for volunteers. 

Volunteer immunity from Civil Code 5800(a)(1) is limited to acts “performed within the scope” of the officer/director’s association duties. This echoes similar language commonly found in directors and officers insurance policies. Volunteers who skip the HOA approval process and act without board authority may be outside of the protections of both the statute and the insurance. This could be a disaster for volunteers who “take the bull by the horns” instead of waiting for their board colleagues to decide upon a particular action. 

Corporations are legal fictions recognized by law as “persons” with rights to own property, sue, and be sued. However, as legal fictions, corporations only act through boards, and board actions are proven through written minutes. Minutes prove that a legal commitment is the corporation’s.  Without minutes documenting corporate authority, a volunteer may not be able to prove a vendor commitment was the HOA’s and not theirs personally. While that scenario would be a nightmare for the volunteer, it can easily be avoided by waiting to sign contracts until the board approves them. Managers and volunteers should insist that board authority to act is confirmed in writing and then soon as possible is recorded in minutes.

Corporate powers come from statutes and governing documents, and actions outside that corporate authority are called “Ultra Vires,” a Latin term meaning “outside the powers.”  In business corporations, officers often are the primary deciders, but in HOAs boards are the primary decision-maker. If an officer acts outside those powers and without board approval, it is not corporate action, and the officer is exposed to risk.

Sometimes urgency requires an immediate decision to be made — such as calling an emergency contractor, for example. Boards may take emergency actions via email, under Civil Code Section 4910(b)(2). If that isn’t possible, it’s critical that directors acting for the corporation in emergencies as soon as possible obtains formal corporate approval, called “ratification” of the action taken, which ratification must be documented in minutes. 

California’s Open Meeting Act (Civil Code §4900-4955) contains many mandatory governance procedures — in addition to those in the governing documents. That law requires advance notice of board meetings, bans actions outside of board meetings, limits use of executive sessions, and requires prompt availability of draft minutes.

Boards violating the Open Meeting Act often invoke explanations of efficiency or convenience. However, boards violating the legally required corporate process by deliberating outside of open meetings may expose those decisions to legal challenge as outside the corporate authority. 

Sometimes directors step out ahead of the board in their zeal to “get things done,” acting without documented board authority. However, what if the board later disavows the director’s action, leaving the director personally exposed to that contract liability? What if it turns out that the action turns out to be a mistake and wasn’t really the best for the HOA? The board might refuse to ratify the action, leaving the director personally exposed.

Board motions, votes, and recorded minutes prove that the corporation is liable, not you. Embrace them- they protect you.

What Condo Owners Should Know Before a Special Assessment Hits

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Story by Robyn A. Friedman For The Wall Street Journal

That beautiful Miami Beach penthouse with the fabulous ocean views comes with more than a high price tag. It also comes with the risk that the condominium association may levy a special assessment against your unit that can run into the thousands, or even hundreds of thousands, of dollars, a factor that is having a chilling effect on sales of older condominiums not only in Florida, but nationwide.

According to the Community Associations Institute, an industry group, special assessments are charges levied by a condominium or other community association to pay for expenses that cannot be covered by the existing budget or cash reserves. These expenses can result from a fire or other disaster, unplanned maintenance or repairs.

Nowhere is the issue of special assessments more pressing than in Florida, where new legislation was enacted after the June 2021 collapse of Champlain Towers South, a 12-story condominium in Surfside, that left 98 dead. That legislation requires so-called “milestone inspections” of certain condo and cooperative buildings to ensure they are structurally sound, and to verify the adequate funding of association reserve accounts. In response, condo and coop boards have been levying special assessments against unit owners to cover necessary repairs so their buildings will pass the inspections and to cover reserves.

Janet Stone bought a two-bedroom condominium in Ormond Beach, Fla., in November 2021 for $379,000. The retired special-education teacher finished up her last class in Las Vegas and then drove to Florida to begin her retirement. Less than a year later, in the fall of 2022, she was hit with a $102,000 special assessment, payable in seven payments over two years, in amounts varying from $3,529.60 to $23,310.58.

Stone went back to work, and every cent she earned went toward paying her assessment. She made her last payment in January 2025. “I hope that the building is now structurally and fiscally sound,” she said.

Stone had reviewed the governing documents of the condo association, but not the minutes of board of directors meetings, where there was talk of the coming assessment. That is why prospective condo buyers should review all relevant documentation before they buy, including the association budget and reserve schedule, and talk with residents of the building.

According to Mark F. Grant, a partner at Greenspoon Marder in Fort Lauderdale, Fla., and a certified specialist in condominium and planned-development law, condo-unit buyers routinely obtain an estoppel letter from the association before closing. In Florida, that document details any outstanding fees due by the condo-unit seller, as well as any actual or pending special assessments, to give buyers notice of their potential liabilities. Stone said she received an estoppel letter that referred to the possibility of concrete-restoration work but that there was no dollar amount included.

If you’re hit with a special assessment, here are some things you can do.

Contest it.

Every state has strict legal requirements that a condo’s board of directors must follow to levy a proper special assessment. If they fail to follow either the statutes or any requirements set forth in the condominium’s governing documents, that may present the chance for an owner to contest the assessment because it wasn’t adopted correctly, according to Grant. Florida law, for example, requires that unit owners be provided with at least a 14-day notice before a board meeting at which a special assessment will be considered. Some condo documents require even more notice. After the meeting, the board is required to send out a resolution confirming the amount of the special assessment, how much each owner owes and when the payments are due, Grant said.

Explore financing options.

Borrow the funds to pay the special assessment from friends or family, or consider asking the board for a payment plan. If you have sufficient equity, you could also get a home equity line of credit. Chantel Bonneau Stewart, a certified financial planner at Northwestern Mutual in San Diego, recommends establishing a Heloc even before you need it. “It can be a way to finance a very large expense, such as an assessment, over a number of years, rather than having to deliver a very significant amount of cash sooner,” she said. Stewart said that condo owners might also be able to borrow from their 401(k) plan. While distributions from a 401(k) can trigger taxes or penalties, a loan paid back with interest isn’t considered a taxable distribution, she said. The plan dictates the term and other provisions, so read the fine print.

Check your insurance policy.

Condo owners typically carry a homeowners insurance policy called an HO6. Check to see if it has loss-assessment coverage—most do. That coverage can protect condo owners from paying out of pocket for a special assessment when the costs exceed the association’s master insurance policy limits, said Loretta L. Worters, a vice president at the Insurance Information Institute. But there are limitations: The assessment must be from a loss that would have been covered by your individual policy, such as a fire or hurricane, so it won’t help cover the cost of assessments done solely for repairs needed to satisfy inspection requirements.
 

Non-Resident Directors Spark Debate in Lower Manhattan Co-op

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Financial District, Manhattan HABITAT Magazine

At a large co-op in Lower Manhattan, one of the nine board members recently sold his apartment and moved to another state. A second member is living in a foreign country with his family and subletting his apartment, saying he will eventually return to the building. Both are still serving on the board of directors. Is this legitimate? What can shareholders do if they’re unhappy with the arrangement?

The law does not dictate that co-op directors must be residents of the building, or even shareholders in the cooperative, replies the Ask Real Estate column in The New York Times. However, a cooperative’s governing documents could contain such qualifications and requirements.

Start with the bylaws. Do they allow people who don’t live in the building to serve on the board of directors? Do they require shareholders who have sold their shares to relinquish their board seats?

It’s possible that the bylaws are silent on these questions. But if residency is required, shareholders could compel the resignation of the nonresident directors, says Leni Morrison Cummins, chair of the condominiums and cooperatives practice at the law firm Cozen O’Connor.

The situation at this Lower Manhattan co-ops raises a larger issue facing many co-ops: Is the board serving the interests of the residents, or of investors? Over time, cooperatives have allowed shareholders not just to have their primary residence elsewhere or rent to a subletter, but to buy shares as investors.

“This,” Cummins says, “has led to many cooperatives having split populations: one of residential shareholders and one of investor shareholders.” Typically, she adds, resident shareholders want to invest to make their daily lives better and to maintain restrictions on occupancy and sublets. Investor shareholders, on the other hand, often prefer to keep costs down and to loosen restrictions on occupancy and sublets.

Shareholders can vote to create a residency requirement, but if your building has many investors, this could be difficult. “If the shareholders don’t amend the bylaws to restrict board membership, try to develop a meaningful relationship with the nonresident board members and share your concerns,” advises Andrew Bart, senior counsel at the law firm Kagan Lubic Lepper Finkelstein & Gold.

And remember that a housing cooperative is a democracy, so disgruntled shareholders can participate in the next election. “Campaigning and collecting proxies can take some effort,” William Geller, counsel at the firm Braverman Greenspun. “But if the (shareholders) wants to change the direction of the building, that can be a very effective way to get things done.”

Whisper Listings Spark Debate Over Fairness in Co-op and Condo Sales

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HABITAT Magazine

They’re called whisper listings — co-ops and condos and other homes available for sale only to those in the know, before they’re added to a public multiple listing service, known as an MLS.

One brokerage, Compass, has taken the concept to a new level, Crain’s reports. The brokerage has rolled out a curated, Compass-brokers-only website that potentially allows the brokerage to keep the buyer- and seller-side brokers’ fees in-house. Compass says the program is intended to give homebuyers and -sellers a lift in a tight housing market. Prospective buyers can bid without being muscled aside by as many competitors, while sellers can tweak pricing without coming across to the general public as desperate.

Critics see whisper listings a bit differently.

“Let’s be clear,” Brown Harris Stevens CEO Bess Freedman writes in the website Inman. “Any brokerage that advocates for only marketing listings internally is not putting the client’s interests first, but rather it is an attempt to pad its own pockets. Private listings minimize competition for the client.”

But Rory Golod, president of growth and communications at Compass, says the program helps ensure fairness for sellers by preventing them from having to combat the impression that if the asking price for their home has been lowered, or if the property has been on the market for a long time, then it is of low quality or somehow less desirable.

According to a recent Compass filing with the Securities and Exchange Commission, the so-called private exclusives program is designed to test prices, obtain industry insights and generate early buzz before a property is added to an MLS. The brokerage contends that private listings help sellers avoid having “negative insights” about their homes, namely data on price drops and days on the market, published online and available to prospective buyers.

Of the roughly 2,300 listings in New York City for which Compass alone was the marketing agent, about 500 were cordoned off in mid-March as private exclusives, according to a Crain’s analysis of the brokerage’s data. Of those, 370 involved co-ops, condos or townhouses in Manhattan, the borough Compass focuses on the most.

Among the opponents to whisper listings, unsurprisingly, is StreetEasy, the popular Zillow-owned data service that relies on open listings. “StreetEasy believes in fair, transparent and equal access to real estate information, and is staunchly against anything that prevents it,” says StreetEasy General Manager Caroline Burton. “Hiding listings from the public — especially in a market like New York, which faces the biggest housing shortage in the country — not only exacerbates this issue, but puts buyers, sellers and agents at an extreme disadvantage.”

City Partners With AI to Rework Condo Property Tax Assessments

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New York City HABITAT Magazine

The robots are coming! The robots are coming!

New York City’s arcane, unfair and unloved property tax system is about the get help from a new source: artificial intelligence.

The Department of Finance has partnered with technology firm C3 AI for a six-month pilot program that will explore using AI to calculate the assessed value of the city’s residential condo properties, Crain’s reports. The program will use machine learning along with market and sales data, and it will investigate how practical it is to base property tax bills on sales comparisons for condo buildings with more than 10 units. Under the current system, co-op and condo assessed values are based not on sale prices but on the the value of comparable rental properties. (Assessed values, a fraction of market values, are part of the equation used to calculate property tax bills.)

C3 AI’s “approach is considered a more fair and transparent way to assess properties,” and the program could boost property tax revenues if successful, according to a notice published in the city record.

C3 AI’s appraisal platform would allow the city to identify and resolve data discrepancies, appraise several properties simultaneously and identify sites that require additional judgment, according to a promotional video on the company’s website. Every appraisal comes with “an evidence package and sales comparables that explain how the AI property value was generated.”

Valuations play a huge role in New York’s notoriously byzantine and controversial property tax system. Although officials tend to undervalue buildings, which leads to a lower tax bill, owners still frequently go to court to challenge their valuations.

The city released its tentative property tax assessment roll for fiscal year 2026 in January, which put the overall market value of the city’s buildings at about $1.6 trillion, up 5.7% year over year. It anticipated a 7.3% increase in the market value for condos, co-ops and rental apartment buildings.

If successful, the C3 AI pilot program could lead to a longer-term contract. Meanwhile, the organization Tax Equity Now New York (TENNY) is in the middle of a lengthy legal battle seeking to upend New York’s overall property tax system. The group argues that it breaks federal fair-housing laws by overtaxing neighborhoods where people of color make up the majority of residents and breaks the state real property tax law by overtaxing rental properties compared to owned homes.

The current law puts a cap on annual property tax increases, which has had the effect of lowering tax bills in neighborhoods where property is appreciating rapidly, while punishing neighborhoods that are experiencing slow or no appreciation in values.

The TENNY suit dates back to 2017, and the Court of Appeals revived it last year.