When is Pro Per Representation Proper for Incorporated Homeowners Associations?

Most homeowners associations are in fact nonprofit mutual benefit corporations, subject to the same legal principles and rules as commercial corporations. For example, members of the board of directors of a homeowners association are held to the same standards regarding their fiduciary duties as the corporate officers of large companies.

As such, because a significant number of homeowners associations are organized as corporations, it is imperative that associations be aware of certain legal doctrines applicable specifically to corporations. While a corporation maintains all of the rights and powers of a natural person to carry out its business, there are limitations placed upon its representation in a court of law. Numerous California courts have held that, subject to limited exceptions, a corporation cannot be represented either in propia persona (self-representation) or through an officer or agent unless that officer or agent is an attorney. The rationale for this rule is that a corporation can only act through its agents, and any non-attorney acting as the agent of the corporation in court is engaged in the unlicensed practice of law. While an attorney board member of an association can represent the association in his or her capacity as an attorney, it is strongly advised that an association seek the assistance of outside legal counsel to handle its legal affairs.

In CLD Construction, Inc. v. City of San Ramon 120 Cal.App.4th 1141 (2004), a self-represented corporation’s filing of a complaint was deemed a curable defect, which means that the court allowed the corporation time to obtain legal representation before dismissing the case on these grounds. While the court affirmed a corporation’s inability to represent itself before a court of record, it ultimately held that “ it is more appropriate and just to treat a corporation’s failure to be represented by an attorney as a defect that may be corrected, on such terms as are just in the sound discretion of the court.” This defect can generally be cured by giving the corporation reasonable time to retain an attorney.

As stated above, because so many homeowners associations are incorporated, it is essential for the Board of Directors and the property manger of an association to know when this common law rule of procedure regarding self-representation is applicable. While the general doctrine that corporations cannot be self-represented or represented by a non-attorney agent is generally applicable to incorporated associations, there are limited exceptions for actions heard in small claims court.

The procedural hearing requirements for small claims actions are set forth in California’s Code of Civil Procedure Sections 116.510 et seq. With regard to homeowners associations, Section 116.540(i) specifically provides that “[a] party that is an association created to manage a common interest development, as defined in Section 1351 of the Civil Code, may appear and participate in a small claims action through an agent, a management company representative, or bookkeeper who appears on behalf of that association.” As such, an association can in fact appoint a non-attorney agent or representative, including the property manager, to appear on the association’s behalf in a small claims action.

Actions subject to small claims court jurisdiction are described in Section 116.220 of the Code of Civil Procedure. California small claims courts generally retain jurisdiction over the following types of actions:

1. For the recovery of money, provided that the amount of the demand is not in excess of five thousand dollars ($5,000);
   
2. For the enforcement of payment of delinquent unsecured personal property taxes, provided that the amount is not in excess of five thousand dollars ($5,000) and the legality of the tax is not at issue
   
3. For the issuance of a write of possession, provided that the demand is not in excess of five thousand dollars ($5,000);
   
4. For the confirmation, correction, or vacation of a fee arbitration award, not in excess of five thousand dollars ($5,000), between an attorney and a client; and
   
5. Actions brought by a natural person if the amount of the demand does not exceed seven thousand five hundred dollars ($7,500).
   

In addition to the above, the Davis-Stirling Common Interest Development Act has also been amended to include new provisions for 2006, which allow associations to appear through a non-attorney agent or representative in a small claims action for: the recovery of delinquent assessments for an amount less than eighteen hundred dollars ($1,800) (Civil Code §1367.4(b)(1)); the defense of an action to enforce a member’s right to inspect and copy association records (Civil Code §1365.2(f)); and the defense of an action regarding the violation of the association’s election procedures (Civil Code §1363.09(c)).