Board member refuses to prove he is an owner

Started by CharlesM15 • 32 replies • 1208 views

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CharlesM15 (California)
Posts: 25

Posted:

We have a board member of our HOA that was recently discovered to not be an owner and therefore not qualified to be a board member. This person was not on the title/deed to the home. We found out the reason the home was titled in his wife's name only was because he has a large judgement against him. Now his wife has changed the title/deed to a living trust which he says means he is now an owner. He refuses to allow anyone to read the trust to verify he is a trustee owner and not just a beneficiary of the trust which would not qualify him as an owner. What complicates the matter further is he is well liked by some of the board members who are siding with him refusing to prove his eligibility.
Has anyone run into this situation in the past? If so please tell me how you rectified the dilemma.
Thank you in advance for your input.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By CharlesM15 on 07/31/2020 2:43 PM
We have a board member of our HOA that was recently discovered to not be an owner and therefore not qualified to be a board member. This person was not on the title/deed to the home. We found out the reason the home was titled in his wife's name only was because he has a large judgement against him. Now his wife has changed the title/deed to a living trust which he says means he is now an owner.

For the sake of accuracy: You mean either the wife, the husband or someone else /claims/ that the title/deed to the living trust names the husband as a trustee owner. This claim has not been verified.

Quote:

Posted By CharlesM15 on 07/31/2020 2:43 PM
He refuses to allow anyone to read the trust to verify he is a trustee owner and not just a beneficiary of the trust which would not qualify him as an owner.

Since he will not provide proof; since the possibility that he is not a member jeopardizes the Association's being in compliance with state law; and per the statutes cited at https://www.davis-stirling.com/HOME/Member-Defined, he must be assumed to be a non-owner. I would state to the Board the implications of violating California law, and how the risk of a member claiming votes by the board are not lawful is unacceptable. After all, this non-member's replacement might vote a completely different way. I think your Board is already on shaky ground for past votes where this non-member voted.

Motion to the board to turn this over to the HOA attorney for the attorney's advice. State that you hope that the HOA attorney might prepare and send a letter like the following or similar, depending on what the HOA attorney thinks of the situation:

==== Start Rough Draft of Possible Letter ====

Dear Mr. ____,

The California Civil Code requires all HOA/Condo directors to be owners. Compliance with state law, including ensuring that all votes by directors are lawful, is of the utmost importance. The Board has a strict fiduciary duty not to place the Association in a position where its Board's votes are open to legal challenge by owners.

This board has asked you to provide proof that you are an owner. You have refused. The Board is left with no choice but to suspend your service as a director. This is effective immediately. Should you provide proof by August 7 that you are an owner, then you will be re-instated. If you fail to provide this proof, the Board will be obliged to seek a replacement.

Thank you for your cooperation,

Board of Directors

===== End Rough Draft =====

I have not been in this situation. I read https://www.davis-stirling.com/HOME/Member-Defined and think this is interesting.

The meeting where this is discussed should be held in executive session, and the person in question should be asked not to attend.

MarkM19 (Texas)
Posts: 1,457

Posted:

I thought Ca. was a community property State. That means he has equal rights to the property doesn't it?
This has always been something I have wondered about.

I get what this guy is saying about not wanting to have to show the Board his Trust documents to prove Charles's point. The same people that are interested will be privileged to his confidential data.

Charles would you have run for the Board if every candidate had to disclose all of their financial data?

Looking forward to following this topic.

BenA2 (Texas)
Posts: 1,273

Posted:

I agree with others about California being a community property state, so he is a defacto owner regardless of whose name is on the title.

BillH10 (Texas)
Posts: 1,217

Posted:

Mark and Ben

We in Texas are also a community property state. Please do not conflate the definition of community property and rights thereto with the definition of the named owner of a parcel of land on a title deed to property.

As an example: party one, an unmarried person, secures a title deed to property. This person subsequently enters into a relationship with another party (party 2) and substantially co-mingles the assets of the union, including the property. Party 2, not named on the deed to the property, has no rights regarding participation in HOA or condominium voting or whatever as they are not a named owner on the deed. Party 2 however has all rights under the community property provisions of the law. Party 2 may subsequently participate as an owner in the Association when the deed is changed to reflect the name of Party 2.

Our guidance on this issue from counsel is, and has been, the name of the owner must be on the deed to exercise the privileges afforded amd accorded an owner in the recorded documents of the Association.

I am not familiar with what takes place when a property is held in a beneficial trust, my comments only pertain to the difference between a named party on a deed and the definition of community property.

JohnC77 (California)
Posts: 562

Posted:

If the property is in a Living Trust with both the husband and wife as owners then they are both owners.

CathyA3 (Ohio)
Posts: 6,299

Posted:

In Ohio, a person who is legally married to the owner is also considered to be an owner, whether or not both names are on the deed. But they must be legally married, my state does not recognize common law marriage or other forms of domestic partnership.

Where I live, many trust documents are considered public records and can be found on the Recorder's web site. It sounds like the wife in the original post just recently created this trust, so presumably it was recorded in the OP's county and may be available for the board to see without going through the assumed owners.

CharlesM15 (California)
Posts: 25

Posted:

Thank you all for your response.
Yes California is a community property state.
If the community property law applied to deeds and titles a person with a judgement against them would not be able to dodge their responsibility and would have a lien put on the property even though they were not named on the deed/title. This is the specific reason this person avoided being on the deed/title of the home.If in fact their were to be a divorce, the community property law kicks in at that time as the sharing of an asset which forces the property to be sold or a payout to one of the spouses.
Furthermore our CC&R's specifically state a person must be named on the deed/title to their property to be considered a home owner. In fact that is California law. The Davis/Stirling Act.
I hope that clarifies this more.
Looking forward to your input.

DouglasK1 (Florida)
Posts: 2,045

Posted:

Quote:

Posted By CharlesM15 on 07/31/2020 2:43 PM
We have a board member of our HOA that was recently discovered to not be an owner and therefore not qualified to be a board member.

Just to clarify, are you sure your documents require directors to be owners? This varies by association, many bylaws as originally created do not require directors to be owners since this allows the developer to put anyone on the board while they are in control. If the bylaws are not amended after turnover, they could still have that language.

In my last association, a lot of people assumed directors had to be owners even though the bylaws said otherwise.

Escaped former treasurer and director of a self managed association.

AugustinD
Posts: 5,144

Posted:

I echo what BillH10 posted. Furthermore, and as the OP seems to know, California law says the same as what BillH10 posted. California is a "community property state," but IMO this phrase is a loaded term under some circumstances, including what the OP describes. In California, simply being married to someone whose name is on the title for real estate does not assure that, following death, divorce or something else, the surviving spouse now owns the real estate.

The OP's board would be correct to seek proof that this person is an owner.

On the other hand, the real conundrum may turn out to be that a majority of the directors refuse to establish that this person is an owner.

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By AugustinD on 08/01/2020 8:29 AM
In California, simply being married to someone whose name is on the title for real estate does not assure that, following death, divorce or something else, the surviving spouse now owns the real estate.

A living trust does that.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By JohnC77 on 08/01/2020 9:28 AM

A living trust does that.

If the husband here is only a trust beneficiary, and not a trustee, it appears that in California, this does not make the husband a member of the HOA.

I find https://www.davis-stirling.com/HOME/Member-Defined and other California-based sites instructive on the point.

KerryL1 (California)
Posts: 14,550

Posted:

Whether or not Charles' HOA documents require a director to be an HOA Member, CA law, eff. 1/20 does require this. If it hasn't already, Charles' HOA needs to revise their Election Rules and that requirement must be a part of the new Rules.

Unless he shows proof he is an Owner, thus a Member, he is disqualified from serving on the Board. Augustin is correct. The suggested letter looks good, but, Charles, a quick phone call to your HOA attorney should help a lot. It seems to me that the slot is vacant and the Board should declare is so. I don't think this meets the criteria to be discussed in executive session, though. Another good question for the attorney.

This issue is in CA SB 323/CA Civil Code (Davis-Stirlng) 5100 et. seq.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By KerryL1 on 08/01/2020 10:55 AM
I don't think this meets the criteria to be discussed in executive session, though.

At KerryL1's prompting, my thoughts on this have changed some. Here is where I am now: I think I was wrong to say the person in question should not be allowed to attend a board meeting on this matter. California Civil Code 4935(b) states in part:

"The board shall adjourn to, or meet solely in, executive session to discuss member discipline, if requested by the member who is the subject of the discussion. That member shall be entitled to attend the executive session."

The guy in question is being told in so many words: 'The Board has no evidence you are an owner. You claim otherwise. Prove it. Until then, under California statutes and the condo/hoa's governing documents, you are no longer a director.' I think this situation is close enough to "member discipline" to invoke the protections of Civil Code 4935(b). I grant that the guy does not seem to be a HOA/condo member, and so maybe he does not deserve the protections of 4935(b). But who knows? Maybe he is a co-trustee and so a member. Also I think civility; respect for the guy's privacy; precluding a claim of defamation by the guy; and so on argue for giving the guy in question the right to request (1) that a discussion of his being a director be held in executive session; and (2) that he be allowed to attend.

I can imagine part of a meeting, on this topic, where the HOA/condo attorney attends to give advice about, say, the implications of past board decisions being made by vote of an illegal director. During this part of a meeting, I think it is reasonable to interpret Civil Code 4935(a) to be saying that such an attorney-client discussion amounts to 'considering litigation,' and so 4935(a) allows the discussion to be in executive session. The line is not clear but I think the line must be drawn.

CharlesM15 (California)
Posts: 25

Posted:

Defined. As provided for in Civil Code §4160, membership in a California homeowners or condominium association is coupled with an ownership interest in a common interest development. This requirement is frequently mirrored in an association's governing documents, i.e., members must be owners of real property (lots or units) subject to the association's CC&Rs. In short, a person must be on title to be a member.

Spouse Not On Title (Community Property). A spouse not on title does not have the right to vote in elections or run for the board by virtue of being married to someone who is on title. When it comes to real estate, rights flow to a person on title. Those with community property rights may, at a later date, have claims to equity in the property. In California, most property acquired during marriage is owned jointly by both spouses and is divided upon divorce, annulment, or death. While community property might be presumed, such rights are not guaranteed:

Family Trusts. “ ‘Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee.... A ... trust ... is simply a collection of assets and liabilities. As such, it has no capacity to sue or be sued, or to defend an action.” (Greenspan v. LADT, LLC (2010) 191 Cal. App. 4th 486, 522.) Because a fmily trust is not a legal entity, it cannot hold title to property. It must be in the name of a trustee who holds legal title to the property on behalf of the trust with language similar to the following: "John D. Smith as Trustee of the John D. Smith Family Trust dated 1/1/15."
Accordingly, the person on title (not the beneficiaries), are deemed members of an association. As members, trustees have the power to vote in membership elections and serve on the board. Frequently, the person living in the association is the trustee. Sometimes, however, the resident is a beneficiary of the trust or a tenant authorized by the trust to reside at the property. In that case, the resident has the right to use the facilities, but not the right to vote or serve on the board. Under Civil Code §5105(b), regardless of the association's bylaws, and with certain specified exceptions, directors must be members.

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By CharlesM15 on 08/01/2020 1:44 PM
Defined. As provided for in Civil Code §4160, membership in a California homeowners or condominium association is coupled with an ownership interest in a common interest development. This requirement is frequently mirrored in an association's governing documents, i.e., members must be owners of real property (lots or units) subject to the association's CC&Rs. In short, a person must be on title to be a member.

Spouse Not On Title (Community Property). A spouse not on title does not have the right to vote in elections or run for the board by virtue of being married to someone who is on title. When it comes to real estate, rights flow to a person on title. Those with community property rights may, at a later date, have claims to equity in the property. In California, most property acquired during marriage is owned jointly by both spouses and is divided upon divorce, annulment, or death. While community property might be presumed, such rights are not guaranteed:

Family Trusts. “ ‘Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee.... A ... trust ... is simply a collection of assets and liabilities. As such, it has no capacity to sue or be sued, or to defend an action.” (Greenspan v. LADT, LLC (2010) 191 Cal. App. 4th 486, 522.) Because a fmily trust is not a legal entity, it cannot hold title to property. It must be in the name of a trustee who holds legal title to the property on behalf of the trust with language similar to the following: "John D. Smith as Trustee of the John D. Smith Family Trust dated 1/1/15."
Accordingly, the person on title (not the beneficiaries), are deemed members of an association. As members, trustees have the power to vote in membership elections and serve on the board. Frequently, the person living in the association is the trustee. Sometimes, however, the resident is a beneficiary of the trust or a tenant authorized by the trust to reside at the property. In that case, the resident has the right to use the facilities, but not the right to vote or serve on the board. Under Civil Code §5105(b), regardless of the association's bylaws, and with certain specified exceptions, directors must be members.

That is one attorney's opinion. I can find 10 that will disagree with him.

KerryL1 (California)
Posts: 14,550

Posted:

Say, JohnC, 10 not needed; just 3 citations would be enough. Please enlighten us.

JohnC77 (California)
Posts: 562

Posted:

Charles,

Only 2 bodies can remove this person, if you think they are not an owner, the board or the membership. It appears the board won't, so you're left to the membership.

The statue says effective 1/1/2020 a NOMINEE can't be nominated to the board. It doesn't apply to a person already on the board until they are up for reelection. In order to remove them either by the board or membership now, the language had to be in your governing docs, prior to Jan of this year.

KerryL1 (California)
Posts: 14,550

Posted:

Calif. Corporations Code 7221. Declaring a Seat Vacant. b. "...The board, by a majority vote of the directors who meet all of the required qualifications to be a director, may declare vacant the office of any director who fails or ceases to meet any required qualification that was in effect at the beginning of that director's current term of office."

Since Charles informs us that the qualification in their CC&Rs (yes, unusual) is that directors be "members" of the Association, and this CC&R was place when Director X became a director, the other directors "may" declare his seat vacant. But it appears that they are not required to.

So, what do you have in mind, Charles? Are you on the Board? When is the next election? Does your HOA have updated election rules?

JohnC77 (California)
Posts: 562

Posted:

Quote:

Posted By KerryL1 on 08/01/2020 3:54 PM
Calif. Corporations Code 7221. Declaring a Seat Vacant. b. "...The board, by a majority vote of the directors who meet all of the required qualifications to be a director, may declare vacant the office of any director who fails or ceases to meet any required qualification that was in effect at the beginning of that director's current term of office."

Since Charles informs us that the qualification in their CC&Rs (yes, unusual) is that directors be "members" of the Association, and this CC&R was place when Director X became a director, the other directors "may" declare his seat vacant. But it appears that they are not required to.

So, what do you have in mind, Charles? Are you on the Board? When is the next election? Does your HOA have updated election rules?

I believe Charles posted this:

What complicates the matter further is he is well liked by some of the board members who are siding with him refusing to prove his eligibility.

SheilaJ1 (South Carolina)
Posts: 291

Posted:

What douglas said, Bylaws originally created never require ownership, so the builder can be on the board if incorporated. State law doesn't matter, if the bylaws don't require ownership, then you're SOL.

Go ahead and spend tons on attorney's to prove the nonowner cannot be on the board. Or simply vote to change the bylaws while the directors term expires. Zero cost.

Post the the exact wording of the CC&R's where it states directors must have ownership.

KerryL1 (California)
Posts: 14,550

Posted:

Good point, Sheila. I'm wondering too, why this would be in the CC&Rs. Can you cite it for us, Charles?

Still, CA new law is that directors in 'Common Interest Developments MUST be members, which does supersede any association's gov. docs.

KerryL1 (California)
Posts: 14,550

Posted:

JohnC77 (California)
Posts: 562

Posted:

Charles

You need to read §5105, and then read it again. If you don't understand how it works, you will need to speak to an attorney.

SheilaJ1 (South Carolina)
Posts: 291

Posted:

Quote:

Posted By KerryL1 on 08/01/2020 6:33 PM
Good point, Sheila. I'm wondering too, why this would be in the CC&Rs. Can you cite it for us, Charles?

Still, CA new law is that directors in 'Common Interest Developments MUST be members, which does supersede any association's gov. docs.

Members but not necessarily owners. Corps. have many classes of members. Class A usually the builder. Most HOA's neglect changing the bylaws after the other classes cease to exist. Looks like its time for a change.

Not sure when the new law was put in place, if charles can post the incorporation date. The law is probably not retroactive.

BenA2 (Texas)
Posts: 1,273

Posted:

Quote:

Posted By BillH10 on 07/31/2020 6:06 PM
Mark and Ben

We in Texas are also a community property state. Please do not conflate the definition of community property and rights thereto with the definition of the named owner of a parcel of land on a title deed to property.

As an example: party one, an unmarried person, secures a title deed to property. This person subsequently enters into a relationship with another party (party 2) and substantially co-mingles the assets of the union, including the property. Party 2, not named on the deed to the property, has no rights regarding participation in HOA or condominium voting or whatever as they are not a named owner on the deed. Party 2 however has all rights under the community property provisions of the law. Party 2 may subsequently participate as an owner in the Association when the deed is changed to reflect the name of Party 2.

Our guidance on this issue from counsel is, and has been, the name of the owner must be on the deed to exercise the privileges afforded amd accorded an owner in the recorded documents of the Association.

I am not familiar with what takes place when a property is held in a beneficial trust, my comments only pertain to the difference between a named party on a deed and the definition of community property.

I know an attorney who said just the opposite. The question is if the person is an owner. If they are an owner they are a member of the association. County records are only as accurate as what is reported to them. They do not, in and of themselves, determine ownership.

If, for example, I buy property and neglect to disclose that I'm married, the sale would go through and my name would be on the title with the county. The county records would be inaccurate and would not change the fact that my wife is an equal owner.

JohnC77 (California)
Posts: 562

Posted:

I am the beneficiary in a trust with my wife. She is on the note and on the grant deed. But, according to our lawyer, we both hold a security interest in the property. If she passes, I am the owner of the property. On our rental properties, I am the owner of record, but she hold a security interest in all the rental properties. If something were to happen to me, she becomes the owner.

If I were to pull title, the owner of the property is the John and Jane Doe Living Trust.

The link here is pretty good reading explaining the new rules. https://hoalaw.tinnellylaw.com/sb-323-signed-the-new-state-of-hoa-election-laws/

GeorgeS21 (Florida)
Posts: 3,808

Posted:

JohnC,

I’m trying to draw a distinction between ownership and future ownership based on death and transfer.

I’m in a will that notes I will be the owner of property currently deeded to another person - is this the same as what you are saying?

CharlesM15 (California)
Posts: 25

Posted:

Thank you everyone for your input.

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