CMCA Governance and Legal Issues 2 — Questions and Answers
Question 1: Under the business judgment rule, a board member is protected from personal liability when making a decision if they acted with:
- Personal financial interest in the outcome
- Reasonable care, good faith, and in the best interest of the association (Correct answer)
- Unanimous approval from all homeowners
- Approval from the association's attorney on every vote
Correct answer: Reasonable care, good faith, and in the best interest of the association
The business judgment rule protects board members who act in good faith, with reasonable care, and in the best interest of the association, even if the decision later proves unwise.
Question 2: Which governing document typically establishes the boundaries of individually owned units versus common areas in a condominium?
- Bylaws
- Rules and regulations
- Declaration (CC&Rs) (Correct answer)
- Operating budget
Correct answer: Declaration (CC&Rs)
The Declaration (CC&Rs) legally defines unit boundaries, common elements, and limited common elements within a condominium community.
Question 3: A board calls an executive session. Which of the following topics is MOST appropriate for executive session?
- Approval of the annual budget
- Discussion of pending litigation against the association (Correct answer)
- Election of board officers
- Review of the community's reserve study
Correct answer: Discussion of pending litigation against the association
Executive sessions are typically reserved for sensitive matters such as pending litigation, personnel issues, and member disciplinary hearings.
Question 4: When an owner requests to inspect association records, the manager should first:
- Deny the request until approved by the board attorney
- Charge a substantial fee to discourage frivolous requests
- Consult the governing documents and applicable state law for inspection rights and procedures (Correct answer)
- Require the owner to obtain a court order
Correct answer: Consult the governing documents and applicable state law for inspection rights and procedures
Record inspection rights are governed by state law and the association's governing documents, which specify what records are available, timelines, and any applicable fees.
Question 5: A homeowner submits a written complaint about a neighbor's violation. The board's first step in the enforcement process should be to:
- Immediately fine the alleged violator
- Conduct an independent investigation to verify the violation (Correct answer)
- Forward the complaint directly to the association's attorney
- Ignore the complaint if the board has not personally observed the violation
Correct answer: Conduct an independent investigation to verify the violation
The association must independently verify a violation exists before initiating enforcement action to ensure fair and defensible enforcement.
Question 6: What is a 'proxy' in the context of a community association annual meeting?
- A written authorization allowing another person to vote on an owner's behalf (Correct answer)
- A document extending the annual meeting to a later date
- A reserve fund transfer authorization
- A temporary board appointment pending an election
Correct answer: A written authorization allowing another person to vote on an owner's behalf
A proxy is a written document by which an owner authorizes another person—often another owner or the board secretary—to cast their vote at a meeting.
Question 7: The Fair Housing Act prohibits community associations from discriminating in housing-related activities based on which protected class?
- Occupation and income level
- Political affiliation
- Familial status (Correct answer)
- Pet ownership
Correct answer: Familial status
The Fair Housing Act includes familial status (families with children under 18) as one of seven protected classes against which housing discrimination is prohibited.
CMCA Governance and Legal Issues 2
Under the business judgment rule, a board member is protected from personal liability when making a decision if they acted with: