CMCA Governance and Legal Issues 4 — Questions and Answers
Question 1: What is 'alternative dispute resolution' (ADR) and why might a board prefer it over litigation?
- A method of amending governing documents without a member vote
- Processes like mediation or arbitration that resolve disputes without going to court (Correct answer)
- The board's internal grievance committee review process
- A state agency that adjudicates HOA disputes
Correct answer: Processes like mediation or arbitration that resolve disputes without going to court
ADR—including mediation and arbitration—resolves disputes faster and less expensively than litigation while preserving community relationships.
Question 2: When providing notice for an annual meeting of members, the notice period required by most state laws and governing documents is typically:
- 24 hours before the meeting
- At least 10 to 30 days in advance (Correct answer)
- Exactly 60 days before the meeting
- No notice is required if the date is published in the budget
Correct answer: At least 10 to 30 days in advance
Most governing documents and state statutes require advance written notice of member meetings—commonly between 10 and 30 days—to give owners adequate time to prepare.
Question 3: A board adopts a new rule prohibiting political signs on balconies. An owner claims this violates their First Amendment rights. In a PRIVATE community association, this argument is:
- Always successful because freedom of speech is absolute
- Generally unsuccessful because the First Amendment restricts government, not private entities (Correct answer)
- Successful only if the community has more than 500 units
- Automatically valid if the owner has lived in the community for over five years
Correct answer: Generally unsuccessful because the First Amendment restricts government, not private entities
The First Amendment restricts government action, not private associations; however, some states have enacted specific laws protecting political sign display in HOAs.
Question 4: An association's board wants to amend the CC&Rs. This typically requires:
- A simple majority vote of the board alone
- A supermajority vote of the membership (commonly 67%–75%) (Correct answer)
- Approval from the local municipality
- Unanimous consent of all unit owners
Correct answer: A supermajority vote of the membership (commonly 67%–75%)
Amending the CC&Rs usually requires a higher threshold—often two-thirds or three-quarters of all members—because it changes the fundamental property rights of owners.
Question 5: The 'open meeting' requirement in many states means that:
- Any member of the public may attend and vote at board meetings
- Board meetings must be held in locations accessible to all owners, with homeowners allowed to observe (Correct answer)
- All deliberations must be broadcast on local television
- Board members must leave the room during any member comment period
Correct answer: Board meetings must be held in locations accessible to all owners, with homeowners allowed to observe
Open meeting laws generally require board meetings to be accessible to owners as observers, though the board may hold certain sensitive matters in executive session.
Question 6: A manager discovers that a former board treasurer improperly transferred association funds. The manager's FIRST obligation is to:
- Keep the matter confidential to protect the association's reputation
- Immediately report the situation to the board and recommend involving legal counsel (Correct answer)
- Conduct a personal investigation before alerting anyone
- Send a letter directly to the former treasurer demanding repayment
Correct answer: Immediately report the situation to the board and recommend involving legal counsel
Financial misconduct must be promptly reported to the board so they can take immediate action, including involving legal counsel and potentially law enforcement.
Question 7: Which principle requires that board-adopted rules must be reasonably related to a legitimate purpose of the association and applied uniformly?
- The rule of perpetuities
- The reasonableness and uniformity standard (Correct answer)
- The doctrine of promissory estoppel
- The privity of contract doctrine
Correct answer: The reasonableness and uniformity standard
Courts evaluate association rules under a reasonableness standard—rules must serve a legitimate community purpose and be enforced uniformly to be upheld.
CMCA Governance and Legal Issues 4
What is 'alternative dispute resolution' (ADR) and why might a board prefer it over litigation?