Fiscal Responsibility Report: How Director Inaction Increased HOA Compliance Costs

 Date: Dec 31 2024 Category: Association Governance / Financial Transparency

Summary To comply with new federal regulations, the Radius at Whisman Station HOA Board in Mountain View CA was required to submit specific documentation by October 31, 2024, to secure a discounted administrative rate. While the majority of the Board complied well in advance, Director Patrick Szeto failed to meet the deadline. Despite a subsequent opportunity on November 1 to rectify the delay and potentially save the Association money, the required action was not taken, resulting in unnecessary additional costs to the HOA.

The Federal Requirement: Corporate Transparency Act In September 2024, the HOA management company notified the Board of the Corporate Transparency Act (CTA), a federal law requiring Homeowners Associations to report "beneficial ownership" information to the U.S. Department of the Treasury. Compliance is mandatory, and non-compliance carries significant civil and criminal penalties.

The Financial Incentive for Timeliness To encourage efficiency, the management company offered a tiered pricing structure for the administrative work required to file the report:

• Discounted Rate: $250.00 if all Board members submitted their FinCEN IDs by October 31, 2024.

• Standard Rate: $299.00 if received between November 1 – November 15.

• Late Rate: $495.00 if received after November 15.

Timeline of Events

• September 30: Management distributed detailed instructions and the pricing deadline .

• October 15: A reminder was sent to the Board emphasizing the deadline to "minimize costs" .

• October 16–19: All other Board members confirmed via email that they had completed the requirement and successfully submitted their IDs .

• October 31: The deadline for the $250.00 rate passed without a submission from Director Patrick Szeto.

The Missed "Grace Period" On November 1, an attempt was made to salvage the lower rate. An email was sent to management asking if the HOA could still receive the discounted price if Director Patrick Szeto submitted his ID that same day.

Management confirmed that if the submission was made immediately that day, they would appeal to their supervisors to honor the lower rate .

Despite this specific prompt and the opportunity to potentially reverse the financial penalty, the filing was not completed at that time. Consequently, the HOA was ineligible for the lowest rate solely due to the inaction of a single Director.

Why This Matters While the dollar difference between the pricing tiers may seem minor relative to the total budget, the principle of fiscal responsibility is significant. Homeowner assessments should not be used to pay avoidable penalties or higher fees caused by a Director's failure to read emails, follow administrative instructions, or meet standard deadlines. Governance requires attention to detail and a commitment to avoiding waste of community funds.

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Legal Authority for this Disclosure This report is published in the interest of transparency regarding Association governance and the expenditure of HOA funds.

• California Civil Code § 4515(b)(6): This statute explicitly protects the rights of members to use social media or other online resources to discuss "issues of concern to members and residents" and "association governance," even if the content is critical of the association or its governance.

• Common Interest Privilege (California Civil Code § 47(c)): California law protects communications made without malice between interested persons (such as HOA members) regarding a matter of common interest. The financial management of the Association and the avoidance of unnecessary penalties are matters of common interest to all members who pay assessments.

• Fiduciary Duty of Care (Cal. Corp. Code § 7231): Directors are required by law to act with "such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use." Failing to submit a mandatory compliance form by a known deadline—despite repeated reminders and a grace period—raises legitimate questions regarding adherence to this statutory standard of care.

• Governance Transparency: The information above is derived from administrative emails and pricing notices, which are non-confidential business records regarding the administration of the Association, distinct from privileged legal advice or personnel matters.