HOA Board Authority and Its Limits: What Your Board Can and Cannot Do to You

The Hedge | Brutal Honesty Over Hype Since 2008

HOA boards in California have significant authority — but that authority has specific statutory limits that most homeowners don’t know and most board members don’t fully understand. A board that exceeds its authority creates liability for the association and grounds for legal challenge by affected members. Understanding where the lines are drawn is practical self-defense for any California homeowner.

What Boards Can Do

Under Davis-Stirling, HOA boards have authority to: enforce CC&Rs and association rules, levy assessments within limits established by the governing documents, manage common area maintenance and repair, adopt reasonable rules governing use of common areas, enter into contracts on the association’s behalf, and pursue enforcement action against members who violate governing documents. These are substantial powers that courts generally support when exercised in good faith within the governing documents.

What Boards Cannot Do Without Member Vote

Davis-Stirling requires member approval for: special assessments exceeding 5% of the association’s annual budget; emergency rules that would significantly alter member use rights; amendments to the CC&Rs or bylaws; decisions to spend more than 5% of the annual budget on a single discretionary item (in most associations); and certain significant contracts. A board that takes these actions without the required member vote has acted outside its authority — the action is voidable and the board members may have personal liability for breach of fiduciary duty.

The Business Judgment Rule

California courts apply the “business judgment rule” to HOA board decisions — deferring to board decisions that were made in good faith, after reasonable inquiry, and in the association’s best interest. This rule protects boards from personal liability for reasonable decisions even if those decisions turn out badly. It does not protect boards that acted in bad faith, with a conflict of interest, or without adequate information. If you believe your board has made a decision with a conflict of interest — awarding a contract to a board member’s company, for example — that falls outside the business judgment rule’s protection.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.