By Matt D. Ober, Esq., CCAL
It’s here. The “Natural Disaster” few saw coming and fewer still think they are prepared to handle. Yesterday, the California Department of Public Health issued a statement that the gathering of 250 people or more should be postponed or cancelled. Smaller gatherings in facilities that do not allow for “social distancing” of six feet should be cancelled or postponed. Gatherings of people at high risk of illness should be limited to no more than 10 people.
While our communities may have fire, flood and earthquake disaster preparedness plans in place, it is unlikely that many of us anticipated a virus would shut down our community or our country. So how does a community association continue to govern in the face of such uncertainty, if not outright panic? Rest assured you have trained for this. Whether a planned development, large scale, high-rise or condominium community, community association managers and boards have the skills to keep their communities operating while reassuring residents. You must use the tools you have – exercise business judgment, rely upon experts, provide full and fair disclosure, and perhaps above all, COMMUNICATE! Let residents know what you know. Tell residents what you or the board are doing and why, and reassure them that the association is taking every advisable precaution to do its part. Maintaining a sense of normalcy and avoiding overreaction, while taking advised precautions is the best way to reassure the community in these uneasy times.
As in all decisions a board of directors must make, the business judgment rule requires that the directors act in good faith, in the best interest of the association as a whole, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. That means directors should continue to rely upon experts in making decisions in response to the threat of the coronavirus. Consider sites such as the Center for Disease Control (CDC) the California Department of Public Health (CDPH), or the Community Associations Institute (CAI) for the latest in information on addressing the risk in your community.
Below are a few frequently asked questions regarding business in the face of the coronavirus.
Q: What is Social Distancing? How do I apply it in my community? This is a practice recommended by public health officials to slow down the spread of the virus. It is the creation of physical space between individuals. A space of approximately six (6) feet is advisable. Consider reconfiguring furniture or workspace, or clearing walkways, to provide a “bubble” or social distance of protection between individuals, if possible. If scheduled meetings are in rooms that do not allow for 3 to 6 feet between people, relocate that meeting or event to a larger facility if possible, or consider postponing if it isn’t urgent. Alternatively, consider telephone or video conferencing formats for your meetings for the time being.
Q: Can the board of directors conduct board meetings or an annual meeting and election by conference call? Does this situation constitute an emergency meeting? Civil Code Section 4090 (b) allows board meetings by conference call. The notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend, and at least one director or a person designated by the board shall be present at that location. Therefore, if all directors attend an open meeting by phone, notice of the meeting must identify the on site physical location with the conference phone where owners can attend if they wish. And, the board must designate a person who will be present at that location. This person need not be a director.
A meeting by conference call does not necessarily mean the meeting is an emergency. A meeting by conference call can take place for a regular scheduled meeting, a special meeting, or an emergency meeting. However, an emergency meeting arises when there are circumstances that the board must address and requires a meeting when a notice cannot be provided. How that emergency meeting is conducted is a different question and can be conducted by conference call, email, or in person.
Given the coronavirus concerns, a community can take the precautionary measure of not holding in person meetings and still comply with the open meeting act. To comply, designate an onsite location for those few who wish to attend in person, but also set up a board meeting conference call through any conferencing services such as “go to meeting” or zoom. Such services require all participants to register and sign on, allowing the Board to monitor who is attending. Make sure that only members attend and control who speaks during open forum and when. The one concern of course is you don’t know if anyone is recording.
Action Without Membership Meeting. The Civil Code does not address (or prohibit) membership meetings by conference call. Corporations Code Section 7510 does address conducting membership meetings electronically. Section 7510 (f) allows for a meeting of the members by electronic transmission or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members a reasonable opportunity to participate in the meeting and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation
For association’s concerned about conducting director elections by written ballot outside of an annual meeting should check their bylaws to determine if director elections are required to be held during the annual meeting. Many association bylaws require director elections to take place during an annual meeting. That being said, the coronavirus has placed us in unchartered territory and Corporations Code 7513 (a) may provide a way to conduct director elections without an in-person meeting. Corp. Code Section 7513 (a) states that “unless prohibited in the articles or bylaws, any action which may be taken at any regular or special meeting of members may be taken without a meeting if the corporation distributes a written ballot to every member entitled to vote on the matter.” Thus, unless the association articles or bylaws mandate that director elections be held during the annual meeting of members, the election of directors can take place solely by written ballot. The ballots can be counted by the Inspector of Elections at a board meeting, even one conducted by conference call as described above. Since the designated-on site person need not be a board member, the Inspector of election can be on site with the conference phone, for those members who wish to attend and observe the ballot count.
Q: Should we close our pool and spa facility? What about out meeting space recreation centers? According to the Centers for Disease Control, there is no evidence that COVID-19 can be spread to humans through the use of pools and hot tubs. Proper operation, maintenance, and disinfection (e.g., with chlorine and bromine) of pools and hot tubs should remove or inactivate the virus that causes COVID-19. https://www.cdc.gov/coronavirus/2019-ncov/php/water.html. That being said, the concerns about crowds and social distancing should be addressed so that the risks of those using the facilities are reduced. Of course, it goes without saying, that increased care should be used in cleaning and maintenance in all sports and recreational facilities.
For those communities with clubhouses and recreation facilities available for rent to residents, non-association events it may be difficult to cancel them outright since these are private. However, you should suggest postponement if possible, or require the resident to pay for any additional cleaning of the facility required to address the risk of the virus. For future rentals or general use by members or residents, consider reducing the maximum capacity per room allowed to allow for safe distancing discussed above. A temporary (120 day), emergency operating rule change pursuant to would be available for this purpose.
A Note to Our Senior Communities. By all accounts seniors are particularly susceptible to COVID-19, especially those who with existing medical conditions (diabetes, heart disease, etc.) A further complication is that senior communities tend to schedule many group activities and gatherings (sewing club, needlepoint, bridge club, yoga, tai chi). Senior communities thrive on the availability of group activity. This places unique burdens on those who lead or manage senior communities. Consider postponing large meetings or group activities. Move large meetings outdoors (weather permitting); move smaller gatherings to larger rooms if possible. Encourage smaller committees or groups to meet in homes if large enough space is available. Finally, to avoid your senior resident’s feeling isolated, communicate to your residents as often as possible with the most up to date information about the virus, its impact on the community, and what the association is doing to manage it.
Q: Should I contact the association’s insurance company? Perhaps the last person one would consider calling during a pandemic is the insurance agent. But there is no better time than now to check in with your insurance carrier and find out what your community, or your board is covered for. Does your policy contain virus exclusion? Are you covered for liability related to or resulting from actions taken in response to the virus? If the association suffers damages as a result of the virus or quarantine, is your association covered. A simple call may provide a bit of much needed reassurance.
Q: Should we waive late fees and interest for members who are delinquent in assessment payment due to the COVID-19 virus? By all accounts, the coronavirus has and will continue to have significant economic impact upon our Members. Business income and hourly wage income is likely to suffer, and household income may be impacted. It is likely that some Members will struggle to keep up with expenses, including monthly assessment payments. While by no means required, a show of compassion in times like these goes a long way toward building community and reassuring Members. Consider waiving interest and late fees for those Members suffering economically as a result of the virus. Perhaps defer commencement of assessment collection for 30, 60 or 90 days for those out of work, or whose businesses are suffering due to this pandemic.
While this list is by no means exhaustive, each of these steps not only strengthens your community during this difficult time, but also allows your community to contribute to a broader effort at containing the spread of the coronavirus.
The Richardson|Ober|DeNichilo team is committed to serving your community as an ongoing resource and general counsel. If you have any questions, please don’t hesitate to contact us.
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