Cable TV Contracts

Aug 6, 2017 0 Views 0 Comments

QUESTION: Our association would like AT&T to install fiber optic cable to units. Our CC&Rs limit the board from entering into agreements longer than 5 years without membership approval. We want to comply with the restriction but AT&T has language in their agreement they refuse to amend that AT&T's ownership of facilities and the ability to service existing customers survives the agreement. Does that violate our CC&Rs?

ANSWER: I don't believe it does. Your board is entering into a bulk service agreement for five years. At the end of five years, you can switch to another provider. The agreement allows AT&T to continue servicing individual customers who choose to keep the programming. That does not violate your CC&R restriction. I would be more concerned with automatic renewals and ownership of the cable.

Automatic Renewal. Boards should be cautious about automatic renewals. Almost all service providers (elevator companies, management companies, landscapers, etc.) have "evergreen clauses" in their agreements. They provide for automatic renewal of the agreement unless the board gives written notice otherwise. They often have a 30-, 60-, or 90-day notice period. Failure to give notice within that period means the contract automatically renews for another term.

The longer the notice period, the more likely a future board will miss the requirement and the contract automatically renews. Boards should either remove the automatic renewal clause or reduce the notice requirement to no more than 30 (or 45) days.


Infrastructure Ownership. Ownership of the cable should be explored. AT&T is investing a lot of money installing it and rightly wants to recoup its investment. If they retain ownership, they have leverage to induce a future board to renew the contract. If the association does not renew with AT&T, another provider would need to install their own cable--a costly and disruptive process.

You should explore sharing the cost of the installation with AT&T so ownership of the cable transfers to the association at the conclusion of the agreement.
Another approach is to negotiate language that if the association renews the agreement for a second term, ownership transfers to the association. I've used both approaches in the past.

RECOMMENDATION: As the industry shifts to fiber optic cable (for fast internet speeds and more bandwidth for live streaming), many associations will be negotiating new contracts. We just installed it in our main office. In addition to using legal counsel to review the contract, boards should consider using a cable consultant (yes, they exist) to assist in the negotiations. Attorneys are good at reviewing legal issues but the cable industry is constantly changing and someone with industry expertise can help negotiate better deals. One consultant I'm aware of is Morgan Fussell (www.morganfussell.com). An internet search should identify others.

DIRECTORS AT
COMMITTEE MEETINGS


QUESTION: Our board consists of five directors. Four or more of our directors regularly attend most all committee meetings. They say they are not doing any business and that avoids the open meeting requirement. Does it?

ANSWER: Not really. The Davis-Stirling Act is much broader in its definition of board meetings than one might imagine.

Meeting Defined. Board meetings are defined as a gathering of a majority of directors at the same time and place to "hear, discuss, or deliberate upon any item of business that is within the authority of the board." (Civ. Code §4090.)

Committee/Board Business. Normally, matters being discussed at committee meetings result in a recommendation to the board for action. That means a majority of directors attending a committee meeting will likely hear and discuss items of business that will be presented to the board, thereby transforming the committee meeting into a board meeting.

Exception. An example where this would not apply is a welcoming committee that does not make recommendations to the board but, rather, meets to coordinate the welcoming of new members into the community and scheduling times to meet them.

RECOMMENDATION: To avoid violating the statute, your board has two options: (i) post a notice and agenda for all committee meetings so members can attend or (ii) limit attendance by directors to less than a quorum.


I wasn't sure the fireplace article would spark much interest but it did. I received more feedback than I can print. Following is a sampling:

Fireplace #1. "As with all things one might enjoy, fireplaces are heavily regulated." Love your opening phrase. For once, Nevada may have been ahead of California. Our home is 19 years old and we could not have a wood burning fireplace when it was constructed. We’ve enjoyed the convenience of a gas fireplace since then. I hope electric is not made mandatory. In my opinion, that would be an overreach but that won’t stop some environmentalists. -Marilyn B.


Fireplace #2. They can watch a real wood burning fireplace on TV. I think Roku has a streaming video available. Love your newsletter! -Ti H.

Fireplace #3. I agree with the electric-only fireplaces. I have a wood burning/gas burning fireplace, but have not used either for years. I placed a number of Luminara battery operated, self-timed candles in there. They turn on for six hours and then go off all by themselves. It’s very convenient, and gives me the romantic mood I am looking for without having to pollute the air and I also don’t have to clean the fireplace. I sure wish they would completely ban wood burning fireplaces in California--not just in new homes. Thank you for your informative newsletters. -DeeDee G.

Fireplace #4. Shouldn't the board have the membership review and agree to any rules (new, amended or to be deleted)? -Ingrid K.

RESPONSE: Any rules adopted by the board must first be circulated to the membership for at least 30 days for comment. (Civ. Code §4360(a).) If adopted, the board must then notify members of the new or modified rule. If the board adopts the change and members are unhappy, 5% or more can call a special meeting to reverse the change. (Civ. Code §4365.) The petition must be delivered to the board within 30 days of the noticed rule change. (Civ. Code §4365(b).) The affirmative vote of a majority of the votes at which a quorum is present is sufficient to reverse the rule. (Civ. Code §4365(d).)

Fireplace #5. Love your newsletter! As a board member for over 10 years, I like this law. -Rick H.


Fireplace #6. The apartment complex in our neighborhood is removing all of the fireplaces. Yes, this is a lot of work, but that is their solution. -Cheryl V.

Fireplace #7. I converted to an electric fireplace insert. It fits nicely inside the fireplace and plugs into a regular outlet just outside the fireplace. The display looks realistic enough that several guests also bought one. I can use it with heat or without heat just for ambience. -Paul C.

Fireplace #8. Always enjoy your weekly column. Regarding the board that banned wood-burning fireplaces in favor of conversion to gas—that seems to be the sort of thing that prompts some disgruntled owners to run for the board just to fight for a rule change that suits themselves (swimming pool hours/rules/heating being yet another contentious issue). I’ve been in associations where various boards have flip-flopped on parking rules, collection enforcement, landscaping and other divisive issues—driving owners crazy about what was allowed/not allowed “this year.” -Frank D.


Manufactured Home. I've been enjoying your newsletter for some time and want to thank you for continuing to provide some good insight that helps many of us be more reasonable in our expectations and attitudes. I am purchasing a manufactured home (they don't call them trailers or mobile anymore) in a park for senior citizens where residents own the land and pay an HOA fee to maintain common areas like streets, pools, tennis courts, walking paths, and a club house. Each owner is responsible to maintain their own home and their lot. Are manufactured home communities with an HOA instead of a landlord subject to Davis-Stirling?

RESPONSE: Yes they are. We represent many parks with manufactured homes (some still refer to themselves as mobile home parks). While yours sounds like a planned unit development (PUD), some parks are configured as condominiums. On rare occasions I run across one set up as a stock cooperative. You can't tell by looking at them what kind of legal entity they are--you have to look at their governing documents. If they meet the definition of a common interest development, they are subject to the Davis-Stirling Act.

Abandonment of DS Act. Our new president claims our HOA is not a common interest development and is changing the rules doing whatever she wants to. We are a mobile home community of 335 lots individually owned. She canceled board meetings until October for owners to attend but will still have meetings just for board members. Is this allowed? FYI, they filed a CID Statement with the Secretary of State in 2004. -Kenneth C.

RESPONSE: It sounds like you are a common interest development and, therefore, subject to the Davis-Stirling Act. Your president does not have the power to suspend the DS Act. She (and your HOA) remains bound by all statutory requirements, including the Open Meeting Act. (Civ. Code §4925.) Violations of the Act by your president can result in fines against the association.

Officers. I enjoy and am informed by your Adams/Stirling Newsletters. Our bylaws state that “Officers other than the president need not be directors.” Our officers have always been chosen by the board of directors from persons who were already elected by the membership. But it seems from the bylaws that the board could legally choose someone outside of the community to be either vice-president, secretary or chief financial officer who was not already a director. Is that true? -Barry M.

RESPONSE: Yes, it's true. That means your board could appoint homeless people to be corporate officers. Without bylaws qualifications, nonmembers can run board meetings, take minutes, and handle the association's money. When I restate bylaws I routinely include a requirement that officers be directors. It may be time to amend your bylaws.
Adrian J. Adams, Esq.



Adrian J. Adams, Esq.

Founder and Managing Partner
ADAMS | STIRLING PLC

Boards can contact us for friendly and professional HOA legal advice.

Veto by Governor

Oct 13, 2018 0 Views 0 Comments

Good news! Anti-consumer legislation sponsored by the Center for California Homeowner Association Law (CCHAL) was vetoed by Governor Brown.

SB 1265 is the bill that stripped away the rights of 13 million homeowners to adopt qualifications for who served on their boards. The bill sought to push felons, litigants and delinquents onto boards.

SB 1128 was also vetoed. The bill as originally drafted was good. It would have allowed associations to avoid costly election balloting if the number of qualified nominees was equal to or less than the number of available seats on the board. Unfortunately, the bill was amended by CCHAL to incorporate the worst elements of SB 1265, making it unacceptable.
Fortunately, Governor Brown vetoed both bills. His veto message noted that homeowner associations are not all alike and one-size-fits-all legislation is not appropriate.

Thank you to the California Legislative Action Committee and their advocate Louie Brown for protecting the rights of homeowners. Also, thank you to Governor Brown for vetoing this flawed legislation.

DANA ROSENBERG
JOINS ADAMS|STIRLING


I am pleased to announce that attorney Dana Rosenberg joined our firm and will head-up our Santa Barbara office.

Litigation. Prior to joining our firm, Dana's litigation practice included both state and federal courts involving real property disputes, fraudulent transfers, easements, use permits, environmental issues, business and contract disputes, and homeowner association disputes.

Transactional. Dana's transactional work includes commercial and residential sales and leasing, business purchase and sales, loans and loan sales, and community association documents. Dana also has an interesting niche in equine sales and leasing, specializing in Arabian horses.

Education. Dana earned her bachelor of arts from UC Irvine where she graduated magna cum laude and Phi Beta Kappa. This was followed by a master of arts in English where she graduated summa cum laude. Dana then earned a juris doctorate from the Santa Barbara College of Law.


We are delighted to have such an experienced attorney join our team providing legal services to our coastal and inland clients from Ventura to Paso Robles. If your association needs legal services, contact us for a proposal.


Board Meetings #1. I attended a board meeting with two board members present for a three-person board. The two directors were married, owning one unit. Is that legal? -Bob B.

RESPONSE: Yes, it's legal. Thanks to the Governor's veto of SB 1265 AND SB 1128, homeowners have the right to establish reasonable qualifications for who may serve on their boards. Co-owners on the board create a voting block that many associations are not comfortable with. This situation can be eliminated by amending the bylaws. Co-owners can serve on the board, just not at the same time. For a list of common director qualifications, see "Director Qualifications."


Board Meetings #2. In a five-member board, only three (a quorum) attend the session. Two of the members of the quorum vote in favor of a proposal; one is opposed. Is the measure passed? -George H.

RESPONSE: Yes, it passes. You need a quorum to conduct business. Once you have a quorum, a majority of the quorum is sufficient to pass a motion.


Board Meetings #3. What if we have a five-director board but can never get more than three owners willing to serve on the board? What do we do? -Steven S.

RESPONSE: You can amend your bylaws to reduce the number of directors to three. Be sure to check your articles of incorporation, they may need to be amended as well. In the alternative, you can change the definition of a quorum to a majority of seated directors. That allows you to keep five seats in case other members want to serve. 


Board Meetings #4. Is it okay for a quorum of directors to attend a non-board meetings to only listen? -Bill B.

RESPONSE: There are limited circumstances under which a majority of directors (or the entire board) can meet without it constituting a board meeting. The circumstances, however, are not addressed in the Davis-Stirling Open Meeting Act.

For guidance, we can turn laws governing public legislative bodies and agencies such as the Brown Act and the Bagley-Keene Open Meeting Act. They allow a majority of board members to attend a conference or similar gathering open to the public and purely social or ceremonial occasions.

Even then, limitations on discussing business still apply. For more information, see Exceptions to the Open Meeting Act.

Board Meetings #5. We have a five-member board. Director 1 contacts director 2 and discusses a matter on the agenda for the upcoming board meeting. They agree on how they will vote. Director 1 then calls director 3 and director 2 calls director 4. They all agree on how to vote.
Is this a board meeting? -Jim K.

RESPONSE: Yes. What you described is a "chain meeting." This kind of meeting is not addressed by the Davis-Stirling Act. It is, however, addressed by the Brown Act, after which the DS Open Meeting Act is modeled.

The Brown Act prohibits such communications, whether direct, by intermediaries or electronically. A court would likely apply the same principles to homeowner association boards.


Board Meetings #6. We have some projects underway and new board members coming on next month. Can we instruct our manager to send them copies of the previous years’ executive meeting notes so they can get up to speed? -Stephanie L.

RESPONSE: I wouldn't. You would be disclosing confidential information involving other matters (disciplinary actions, personnel matters, etc) to non-directors who have no obligation to keep such information confidential. It would be better to wait until they are elected and then provide the information. At that time, your outgoing directors can brief them on the project.


Board Meetings #7. I want to join the board of our association but the meetings are on Saturday mornings which I cannot attend since I am an orthodox Jew. I previously been asked to join the board but explained I couldn't unless the meeting day was changed, but nothing was done. If I formally request the day be changed, is the board required to change it? Is this unlawful religious discrimination if they don't? -Alan S.

RESPONSE: There is no law that directly applies to this situation because serving on a board is a volunteer position. Even though Title VII of the Civil Rights Act of 1964 does not apply, it requires employers to reasonably accommodate sincerely held religious unless doing so would impose an undue hardship on the employer.

Accommodating a well-recognized religious practice, such as observing Saturday Sabbath, qualifies. Using this principle, boards should reasonably accommodate a director's request if possible. Where this can be problematic is if other directors observe Sunday or the best day for most homeowners to attend board meetings is Saturdays. Boards need to balance competing interests when setting their meeting dates and times.

ASSEMBLY BILL 2912
 

In my last newsletter, I reported that Assembly Bill 2912 was signed by the Governor. The bill is designed to prevent fraud and embezzlement related to association finances.

HOA Finances #1. As always, your newsletters are very helpful. I have a question about AB 2912. Does it take affect immediately? -Wally G.

RESPONSE: The new law takes effect January 1, 2019.


HOA Finances #2. If the monthly review of financial statements can be done independent of a board meeting, where is the evidence that it was actually done? -Paul C.

RESPONSE: If the board doesn’t meet monthly or a monthly meeting isn’t held for some reason, financial statements can be sent to each director for review. In the alternative, an executive committee consisting of the treasurer and at least one other board member can review the finances. The review is documented in the minutes of the following open board meeting.

It can be recorded as simply as, “Did everyone review the association's financial records last month? Are there any changes or corrections? I move to ratify the financial state for [month and year]." The motion is then seconded, approved and recorded in the minutes.

HOA Finances #3. We allow our president to transfer funds between our reserves, checking, and savings as-needed to meet operational needs. Since all accounts are in the association's name is this a “transfer” under the bill? -Gary K.

RESPONSE: Good question. The bill does not define transfers. Clearly, any transfer of funds greater than $10,000 that leave the association requires board approval.


Does a monthly transfer of $11,000 from operations into reserves require board approval? I wouldn't think so. The legislature is not worried about money entering reserves. Arguably, the board's approval of regular deposits into reserves occurred when the annual budget was approved.

It's the transfer of money out of reserves that requires separate approval. The requirements of section 5510(a) of the Civil Code are unchanged by AB 2912: "The signatures of at least two persons, who shall be directors, or one officer who is not a director and one who is a director, shall be required for the withdrawal of moneys from the association’s reserve account."

That means any transfer of funds from reserves, even if into another association account, requires board approval. With online electronic transfers, meeting the statutory requirement of two signatures is problematic. No signatures are required for electronic transfers, only the push of a button.

Even if the transfer has prior board approval as noted in the minutes, you still have only one signature--the Secretary's. Moreover, banks don't require two signatures for transfers. Even if directors tried to add signatures to an electronic transfer, there is nowhere to record them. The only way to meet the statute's requirement is to abandon electronic banking and do everything with paper checks.

The legislature's requirements are way behind the times. The two-signature requirement needs to be rewritten. In addition, "transfer" should be defined.


HOA Finances #4. We have our utility bills set for automatic payment. How is that affected? -Gary K.

RESPONSE: If the monies are coming out of your operational account, an annual resolution authorizing the transfers should be sufficient. Make sure someone is monitoring the transfers. If a utility bill suddenly goes from $100 per month to $1,000 per month, board members should investigate.

HOA Finances #5. As I read the new law, the requirement for fidelity insurance does not apply to a self-managed HOA, correct? Your newsletter seems to imply that it would apply to all. Please clarify. -Stuart S.

RESPONSE: The requirement applies to all associations. The bill makes no distinction between large and small associations or self-managed and professionally managed associations. The only reference to managed associations requires the association’s fidelity bond coverage to additionally include dishonest acts by that person or entity and its employees.


HOA Finances #6. In regards to fidelity bonds, we currently carry employee theft and dishonesty coverage, would this suffice in order to be compliant if the coverage itself meets the proposed requirements? -Gordon M.

RESPONSE: As long as your policy covers theft by officers, directors and anyone else handling the association's funds (not just employees), you will be in compliance.

Another point to consider is the amount of coverage. The statute requires
three months of assessments plus reserves. If you are making regular contributions into reserves (as you should), the amount of insurance needed will be greater at the end of the year than at the beginning. That means the insurance you purchase at the beginning of the year should be equal to or greater than the amount of reserves anticipated by the end of the year. If your governing documents require greater coverage, make sure you comply.

Because you are insuring your managing agent, including computer fraud, you should inquire what steps they take to protect their computer servers from hacking. If their protocols are lax and software protections weak (or nonexistent), your association's monies are at risk.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Working Board Meetings

Oct 4, 2018 0 Views 0 Comments

Everyone,

It's been awhile since I published a newsletter and I'm getting lots of emails asking if I had removed readers from the newsletter because they had been bad.

No one has been bad (that I'm aware of). The delay is because I upgraded the security levels on my newsletter and moved to a more secure platform.

I've also been busy hiring people. I've added four more lawyers to the firm and will be announcing them once I get photos.

Adrian

WORKING
BOARD MEETINGS


QUESTION: We would like to have manager-board "working meetings" where no votes are taken. For example, we want to come up with ideas for improving the park. One of our board members said we could only do that if there is no quorum of directors.

ANSWER: Your board member is correct. It doesn't matter that no votes will be taken. If a majority of directors attend a meeting to hear board business, it's deemed a board meeting.

Board Meeting Defined. Board meetings are defined by the Davis-Stirling Act as a gathering of a quorum of directors at the same time and place to "hear, discuss, or deliberate upon any item of business that is within the authority of the board." (Civ. Code §4090.)

Meeting Types. You can still hold working meetings with a majority of directors but only if you give four day's notice and post an agenda. I put together a summary of board meeting types you may find useful.

IS TWO OUT OF
FIVE A MEETING?


QUESTION: In the context of unauthorized board meetings, is majority meant as majority of the the serving board members, or majority of authorized board members? For example, five directors are authorized but only three seat are filled. Two members talk about whether or not to hire a new landscaper--legal or illegal?

ANSWER: Two out of the five authorized directors is not a quorum. You need three directors to establish a quorum to conduct your meetings even with two empty seats. Per the Davis-Stirling Act:

A congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board. (Civ. Code §4090.)

Unless the bylaws state otherwise, a majority of the number of directors authorized in the bylaws constitutes a quorum of the board for the transaction of business. (Corp. Code §7211(a)7.)

ELECTRIC VEHICLE
CHARGING STATIONS

QUESTION: The Davis-Stirling Act requires homeowners to meet certain requirements when installing an electric vehicle charging station. Newer vehicles can now charge from a standard outlet without the need for a charging station. Does that mean we do not need to comply with Civil Code §4745?

ANSWER: Compliance issues depend on how the electricity is supplied and paid for. If you plug into a common area outlet, that means your neighbors are paying to charge your vehicle. I don't know any associations that would agree to that.
 
You can avoid installing an EV charging station if you work out a payment plan with the association based on estimated electrical usage. Otherwise you will need to install a metered outlet or charging station. If you install a charging station, you will need to comply with Davis-Stirling requirements:
•  Comply with the association's architectural standards.
•  Use a licensed contractor to install the station.
•  Within 14 days, provide a certificate of insurance.
•  Pay for electricity usage associated with the station.
See full explanation of the requirements.
MANDATORY PLUMBING
FIXTURE REPLACEMENT


In 2009, the Governor signed legislation requiring all noncompliant plumbing fixtures be replaced with water-conserving plumbing fixtures before January 1, 2019.

Noncompliant fixtures means any of the following: (i) toilets that use more than 1.6 gallons of water per flush; (ii) urinals that use more than one gallon of water per flush; (iii) showerheads with a flow of more than 2.5 gallons of water per minute and (iv) interior faucets that emit more than 2.2 gallons of water per minute.

RECOMMENDATION: Have a plumber inspect your common area plumbing fixtures to make sure they are compliance. Notify your owner of the requirement and help facilitate the use of a licensed and insured plumber to change out fixtures throughout your condominium complex.

GOVERNOR SIGNS
AB 2912


Assembly Bill 2912 was signed by the Governor. The bill is designed to prevent fraud and embezzlement in community associations. The bill was sponsored by the consumer advocate organization "California Legislative Action Committee" (CLAC) chaired by John MacDowell.

Fidelity Bond. The bill requires associations to purchase fidelity insurance in an amount equal to or exceeding current reserves, plus three months of assessments.

Fund Transfers. The bill prohibits transfers of funds greater than $10,000 or 5% of an association’s total combined reserve and operating account deposits, whichever is lower, without prior written approval from the board.

Financial Statements. The bill also requires board members to review financial statements monthly rather than quarterly and prohibits electronic transfers of association funds without board approval. Directors do not have to meet monthly, but managers will need to prepare and send financial statements monthly.

RECOMMENDATION: Since most associations are in their budget season, they should (if they haven't already) add a line item for fidelity insurance.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Call the Governor!

Sep 4, 2018 0 Views 0 Comments

SB 1265 (Wieckowski) is the anti-consumer bill sponsored by the Center for California Homeowner Association Law (CCHAL).

If passed, it will increase the cost of elections and jeopardize homeowner privacy. It prohibits homeowners from adopting standards for who can serve on their boards.

If the bill is signed by the Governor, you will be forced to accept felons, delinquents, those in violation of the CC&Rs, and litigants on your boards and give them access to homeowner records.

To SEND AN EMAIL to Gov. Brown to veto the bill, click the following link, and THEN click on "Contact Your Legislator Now" https://caiclac.com/current-campaigns/

Also, CALL THE GOVERNOR at 916-445-2841, choose option #6 to speak to a person, and then ask the staffer who picks up for a VETO on Senate Bill 1265. They will ask for you zip code. That's it. It only takes a few minutes to send an email and make the call.

ASSOCIATION FINANCES
AB 2912

Many of you have expressed frustration with the constant stream of bad legislation from Sacramento. Bad legislation is due in large part because those drafting and sponsoring it don’t understand associations or are biased against them.

CLAC. Fortunately, CAI’s California Legislative Action Committee (CLAC) has been working to defeat negative legislation or make it less bad. In addition, it sponsored Assembly Bill 2912 which seeks to protect association finances.

Common Sense Protection. Because homeowner associations are targets of fraud and embezzlement, the bill provides boards with guidance on common sense protection of their finances.

AB 2912, introduced by Assembly Member Jacqui Irwin, requires simple measures to protect association finances. It will:

• require fidelity bond insurance in an amount equal to or exceeding current reserves, plus three months of assessments;

• require a monthly review of financial statements rather than quarterly; and

• prohibit electronic transfers of funds without board approval.

Boards are not required to meet monthly to review financials. They can designate a board member or board members to review the financials monthly and ratify them at their next meeting.

Support. Protecting association finances is critically important. AB 2912 passed out of the Assembly and is making its way through the Senate (next stop is the Senate Judiciary Committee). For more information about AB 2912, or to find out how you can support AB 2912, check out CLAC’s recently renovated website as well as the Davis-Stirling website for new laws.

Thank you to Nathan McGuire, Vice Chair of CLAC, for this legislative update.

DIRECTOR/REALTOR
ESCROW DISCLOSURES


QUESTION: I am a real estate agent and currently have a listing of a condo. The title of this condo is under my husband's name and is in a family trust that involves me. Both my husband and I are board members.

We are aware of the repairs needed to be done in this complex that could cost nearly $4 million, and the reserve budget is only $1 million. Hence, future special assessments. Are we to disclose all this to potential buyers? As a licensed real estate agent, I would like to make sure I am doing the right thing and am not being deceitful to the buyer.

ANSWER: In real estate it's all about location, location, location. There is a second, lesser known imperative: disclose, disclose, disclose.

Potential Exposure. You and your husband have double exposure. You have special knowledge as board members and you have fiduciary obligations as Realtors. Put yourself in the shoes of young first-time buyers sinking their last penny into buying a condominium. Would it be important to them to learn the association was badly under-reserved and likely faced a large special assessment?

Jury Sympathy. Withholding information from the young couple could get you sued. A jury would not be sympathetic that you steered the couple into buying a condominium they would lose as soon as an assessment dropped into their laps.

RECOMMENDATION: Realtors on boards face disclosure dilemmas--which is why they should either step off the board or not list and sell units in the association while on the board. If you stay on the board, you should steer fellow directors into raising the dues to increase funding of the reserves and clearly explain to the membership the underfunding problem. It puts the association on the path of healthy finances and reduces your exposure as directors.


SB 1265. The author of the response to the question on black water was outstanding; Clear, complete, succinct, and valuable, as the author went on to advise as to what to do in an emergency.

Too bad such a clear message was not available regarding SB 1265. You failed to state that passage of SB 1265 will disallow open nominations for election to the board, permit the cancellation of future elections for a board, and remove fiscal control of the HOA from the owners and give it to a partnership of a self-perpetuating, unelected board and the property manager. -Marilyn H.

RESPONSE: Thank you for the kudos on the black water article. Regarding the train wreck known as SB 1265, you must have missed my newsletters where I discussed the bill at length in main articles and the Feedback section on June 3, 2018; June 10, 2018; June 17, 2018; July 8, 2018; July 22, 2018; August 5, 2018; and August 19, 2018.

The bill sponsored by the Center for California Homeowner Association Law (CCHAL) takes away your right as homeowners to regulate who sits on your board. CCHAL found a willing accomplice in Sen. Wieckowski to force you to accept felons, delinquents and litigants on your boards of directors.

CCHAL managed to push their bill through the Assembly and Senate. It now sits on Gov. Brown's desk awaiting signature. Hence, our request that everyone immediately write and call Governor Brown and ask him to VETO this dreadful bill.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Sukkahs in the Common Areas

Aug 23, 2018 0 Views 0 Comments

QUESTION: Can someone build a sukkah in the common areas?

ANSWER: Before answering, I should describe a sukkah for readers.

Sukkah Defined. A sukkah is a hut used by religious Jews to symbolize the temporary dwellings Israelites lived in during their forty years of wandering in the desert before reaching the promised land. Sukkahs are used during the week-long holiday of Sukkot (the Feast of Tabernacles or Festival of Booths) for prayer, reading the Torah, taking meals, and sleeping.

Common Area Restrictions. Since most CC&Rs prohibit temporary structures, alterations to the common areas, and nuisances, a sukkah would violate the CC&Rs. Constitutional guarantees of religious freedoms do not override CC&R restrictions--the guarantees protect against governmental interference not private restrictions. Accordingly, there is no constitutional right to build sukkahs in the common areas.

Exclusive Use Common Area. What about balconies and patios? Under the U.S. Fair Housing Act, the California Fair Employment and Housing Act, and the Unruh Civil Rights Act, associations cannot discriminate in housing based on one’s religion. It is very likely associations would be required to reasonably accommodate a request to temporarily erect sukkahs on exclusive use balconies and patios.

Case Law. There are no California cases on this issue but there are two out of New York. Even though out-of-state cases have no authority in California courts, they can be instructive. Both cases involved an Orthodox Jew, Robert Greenberg, who sued his condominium association over his sukkah.

In the first case, Greenberg built a sukkah in the common areas. In the litigation that followed, the court sided with the association. It found that a sukkah in the common areas violated the CC&Rs. The court commented that Greenberg could satisfy his religious obligations by using a sukkah erected by friends or relatives.

Eight years later, Greenberg erected a sukkah on his balcony. The association again intervened and litigation again followed. This time, the court sided with Greenberg because his sukkah was on exclusive use common area.
(Greenberg v. Parkridge.)

RECOMMENDATION: This year, Sukkot is celebrated from sunset Sunday, September 23 to sunset Sunday, September 30. Boards should allow Jewish families to erect sukkahs on their exclusive use common area balconies and patios. Associations can regulate sukkahs by limiting their construction to the start of the holiday and require their removal the day after the holiday ends. Boards can also require they be constructed in such a manner as to not damage the common areas.

Thank you to my partner Jasmine Hale for researching this article.

IDR, WHO’S IN
WHO’S OUT?

QUESTION: Can members bring witnesses or any other support persons to an IDR "meet and confer" with the board?

 

ANSWER: Owners and associations are each allowed to bring one person to an internal dispute resolution (IDR) meeting. That means witnesses (plural) and other people cannot attend--only one person of the owner's choosing.

 

IDR Defined. The Davis-Stirling Act establishes a default procedure where owners and board members can informally resolve problems. (Civ. Code §5910.) If an owner makes the request, the board designates a director to attend the meeting. If the board requests IDR, an owner is not required to attend. If the parties enter into a written agreement during IDR, it can bind the parties so long as the designated board member has authority or it is later ratified by the board.

 

Lawyer Can Attend. What started as a sensible approach to getting owners and boards together to solve problems has, thanks to AB 1738, morphed into a more formal and sometimes adversarial undertaking. The bill, which took effect January 1, 2015 authorized each side to bring their lawyer to IDR. That means an owner can bring a lawyer, or a witness, or a support person. The owner has to decide which one of the three would be most useful in the IDR meeting.

 

RECOMMENDATION: Associations should adopt a clear IDR policy which describes how owners can best identify their issues and proposed solutions and informs owners the association is represented by counsel so they don’t bring their attorney unannounced. Doing so eliminates surprises and enhances the potential for a productive meeting to resolve problems.

Another thank you to Jasmine Hale, for answering this question.
 


Kudos?? I get these updates monthly. Some are more interesting than others. -Barbara W.

RESPONSE: That's odd; my assistant assured me they were all brilliant.

*****


Contaminated water #1. In your article on the black water leak, the management company did their job, and this one director wants to challenge their actions and refuse to pay the bill? I don’t get why he fails to understand the association's duties in an emergency. It seems like this director does not understand his own basic duties. -Tony V.

RESPONSE: The association, through its board of directors, has a duty to immediately clean-up a sewage spill affecting common areas (including common areas surrounding units). It also has a duty to pay the company that performed the work, even if the manager did not seek bids or get prior approval. The board should thank the manager for moving quickly to mitigate the damage. His initiative saved the association from a more costly clean-up and possible lawsuit.

Contaminated water #2. Wow!!! Black water clean-up obviously didn’t affect that director's unit. Otherwise, his would have been first on the list to be cleaned up! Too bad there is always one board member who should not be serving on a board. -Steven C.

RESPONSE: Maybe no one sat him down and explained his duties as a director. Some directors have the mistaken belief that their primary duty is to not spend money. Their primary duty is maintaining the common areas. There is an apt British saying about being penny wise and pound foolish. (The pound referred to is British currency.)

Contaminated Water #3. In general, I agree with your thoughts on what the management company did. However, doesn't the manager have the president's phone number? I would hope he would contact that person (or another board members if not the president), to explain the severity of the problem and then contact a vendor. -Bob F.

RESPONSE: Yes, managers should immediately notify their boards of any common area floods and their actions to mitigate damage.

*****


SB 1265 #1. Love that picture...VERY funny train wreck. -Ted A.

RESPONSE: The wreck occurred in Paris in 1895. Because the engineer was running late, he sped his locomotive into the station to make up for lost time. He had 131 passengers on board when the brakes either failed or were applied too late.

The train traveled 100 feet through the station, broke through a cement wall and plunged 33 feet to the street below. The only fatality was a woman on the street. The engineer was fined 50 francs (~8 dollars).

SB 1265 #2. I support SB 1265; it's about time we get rid of criminals destroying our lives and our life investments and peace of mind. -Heidi P.

RESPONSE: Your comments are counterintuitive. Do you mean replace existing board members with convicted felons, delinquents and litigants? How does that help you? SB 1265 takes away your right to regulate who sits on your board.

I encourage everyone to immediately email their Senator to "Vote No on SB 1265" by clicking here: https://caiclac.com/current-campaigns/. The train wreck of a bill will soon be up for a vote in the senate and needs to be stopped.

*****


Donations & Fundraisers. Contributions to an association would be taxable income. HOAs are supposed to be non-profits, right? -Hank J.

RESPONSE: Yes, contributions and fund raisers could be taxable. An association's CPA/tax preparer will have to decide if the monies are revenue or contributions to capital.

*****


Recording Board Meetings. On your website, under "Recording Unruly Meetings" it says that "Because board meetings are public forums, the board does not need the permission of attendees to videotape them." However in another page of your website, it says: RECORDING MEETINGS Neither individual board members nor attendees at a board meeting have the "right" to electronically record board meetings. Open Meeting Act. Association meetings are not public gatherings."

In one place it says they are public and in another place it says they are not public. So which is it? I'm confused. We have an association member that insists on audio-recording our meetings. -Bob G.

RESPONSE: It is a bit confusing. Board meetings are not public meetings in the sense that the general public can attend them. They are, however, "public meetings" for members.

Because board meetings are the board's meetings, boards can establish rules for the conduct of their meetings. That means they can disallow members from recording their meetings. In the alternative, boards can choose to record and/or broadcast their meetings. Because board meetings are considered public forums within the association, the board does not need the permission of attendees if it decides to record/broadcast meetings.

The reverse is not true. Attendees cannot record the meetings without the board's permission. Attendees can observe the meeting and can address the board during open forum but must follow rules established by the board--no disruptions of the meeting, no recordings, etc. If the board were to allow members to record meetings, permission would not be needed from other attendees since the meetings are deemed public forums within the association.

Just as judges have discretion to allow or not allow recording in their court rooms, boards have the same discretion. Bottom line: If your board adopts a policy of not recording meetings, attendees must put away their cell phones and any other recording devices they might have.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Contaminated Water Clean-Up

Aug 5, 2018 0 Views 0 Comments


QUESTION: We had a black water leak affecting multiple units and our management company hired a remediation company to clean up the mess without first getting an estimate or board approval. As a board member, I do not want to pay for the clean-up since we did not authorize the work. How should we handle it?

ANSWER: Before answering your question, I should define "black water" for readers. There are three categories of water when it comes to building maintenance, clean, gray and black:

Clean water is what comes from your faucet and shower and is drinkable. Clean water lines are under pressure, which means a flood from a water line can quickly cause a lot of damage. Failure to clean-up the water and dry out wall cavities can lead to mold, which is expensive to remediate.

Gray water is waste water that comes from sinks, washing machines, and bathtubs. It contains soap and low-level contaminants. Gray water floods can occur from separated drain lines or backups if the lines become clogged. These lines can clog if people put potato peels, pasta, rice, etc. down garbage disposals.

Black water (also called sewage) is wastewater from toilets that contains fecal matter and urine. It carries high levels of bacteria that can cause diseases such as hepatitis and dysentery. Backups can occur from items being flushed down toilets such as diapers, sanitary pads, etc. If the clog is in a line at the bottom of a stack, the amount of sewage flowing into a unit from other units higher up in the stack can be significant.

Clean-Up. Whenever floods occur in condominiums, they invariably involve common areas and other units. Associations are obligated by the Davis-Stirling Act and their CC&Rs to maintain, repair and replace the common areas. That means associations must move quickly to remove all water from carpets, floors and walls and clean any contaminated areas if gray or black water is involved.

Management. Because these are emergency situations, it should be a standing policy for management to immediately call a plumber to stop the flooding and a remediation company to extract water and dry out walls. Bidding is not necessary. From your question, it sounds like the manager acted properly. If he had not, you would have faced a much larger bill and possible litigation. That means your board should pay the remediation company. If you don't and the company sues, I have no doubt you will lose.

RECOMMENDATION: Whenever floods occur, immediately fix the leak and clean everything. Simultaneously notify insurance of the loss. Then determine fault and, if appropriate, levy a reimbursement assessment to pay the insurance deductible (assuming you have a policy regarding deductibles). See Water Damage Checklist.

VOTE NO
ON SB 1265


The following is an appeal from the California Legislative Action Committee (CLAC) to stop SB 1265 as it now heads to the Senate for a vote. This is the anti-consumer legislation that takes away your right to set standards for who serves on your board of directors. -Adrian

We strongly believe that SB 1265 strikes at the heart of our association’s ability to self-govern by mandating how we conduct community association elections.

SB 1265 threatens the privacy of residents, will drastically increase costs for our associations and will suppress voter participation.

SB 1265 would prohibit our associations from establishing qualifications for an individual to be a candidate for the board. As amended, SB 1265 would disqualify any individual who in the past 20 years has been convicted of a felony for embezzlement, check fraud, etc. However, SB 1265 would not allow our association to bar an individual who has failed to pay their assessment from running for the board. Associations have a fiduciary responsibility to the members and legal responsibilities established by the Corporations Code, which could be violated if an individual is elected to the board is in arrears to the association.

It’s time to STOP a one-size fits all approach to association governance. Here are two ways YOU can help:

1.  Send a letter to your Senator simply by clicking here: https://caiclac.com/current-campaigns/

2.  Join @CAICLAC for our first-ever Twitter Chat on Wednesday, August 8th at 12p.m. -1p.m. PST to make your voice heard!


For more information visit www.caiclac.com or contact us at [email protected]. (Also, see my earlier newsletter articles about the SB 1265 train wreck.)

CYBERSECURITY AFFECTS
ASSOCIATIONS

It's no surprise that technology is taking over every aspect of the business world. This includes homeowner associations.

Thieves that used to break into a business to steal valuables by picking locks or climbing through windows, now hack into computer systems. As a result, cybersecurity and cyber insurance are increasingly important.

In 2018, the Foundation for Community Association Research (FCAR) surveyed more than 600 managers, board members, and professionals to identify the risks and liabilities associated with using technology to conduct association business.

According to the Foundation’s research, 92% report that their associations use computer programs and that ransomware and phishing are the most common forms of attack on community associations. More than half reported that fraud and theft are their top concerns.

To learn more, see 2018 Survey of Cybersecurity in Community Associations.

HELPING MANAGEMENT
COMPANIES


Cat Carmichael has been serving the community association profession for three decades, both as a management company executive and as a banker handling mergers, acquisitions, and succession planning.

Cat currently serves on the Board of Trustees of the Community Associations Institute and is President Elect for 2018 and will be President in 2019.

I learned from Cat that she launched a company called "Strategy 123" which provides consulting services to management company CEOs--advising them on mergers, acquisitions, succession planning and improving operational efficiency.

Congratulations to Cat for providing a valuable service to the industry. To send congratulations or ask questions, email [email protected].


Train Wreck. Isn't it time to mount a campaign to get rid of CCHAL & Sen. Wieckowski? For years, they have proposed and advocated harmful revisions to the Davis-Stirling Act that do nothing more than usurp the rights of association members. -Julian M.

RESPONSE: I better not respond--it would probably get me in trouble.

Donations: Can a 55+ community accept donations from a wealthy member? Also, can the association do a fundraiser to boost reserve funds? -Dianne K.

RESPONSE: Yes, you can do both. Associations can accept donations of cash or property. Also, the donor can restrict the gift to a specific purpose. Treasury Regulations 1.118-1 addresses the topic of contributions to the capital of a corporation. The most important sentence of that ruling is underlined. A fundraiser for boosting reserves is also acceptable. Drop me a line and let me know if your fundraiser is successful.

Thank you to Gary Porter, CPA for his assistance with this question.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Suspending Voting Rights

Jul 22, 2018 0 Views 0 Comments

QUESTION: Our governing documents give the board authority to suspend members’ voting rights when they are delinquent. If a member who owns more than one separate interest is delinquent on only one unit, can the suspension globally apply to all votes that member has? Sometimes even one or two votes can make a difference.

ANSWER: I don't believe global suspension of voting rights is allowed. Typically, an association's bylaws tie voting rights to ownership interests and state that each member gets one vote for each condominium or home owned. Voting rights can then only be suspended for the unit that is delinquent.

Due Process: Before suspending a member’s voting rights, he or she must be given at least 15-day's notice in advance of the intent to suspend privileges (Corp. Code §7341(d).) and given an opportunity to be heard by the board before any suspension can be imposed. This procedure is known as “Due Process.”

How Long Can the Suspension Last? Suspension of voting rights is normally tied to delinquency, not a rules violation. Generally, the suspension will last until the owner’s account is brought current. Suspension for a rules violation is typically for a set period of time such as 30 days unless it is a continuing violation.

RECOMMENDATION: If your association is going to suspend voting rights prior to an election, be sure to calculate the time needed to provide proper notice of hearing, and then send written results of the hearing to the owner
after the hearing. Suspending the voting rights of a delinquent owner may impact the quorum or approval requirements for the election.

Thank you to Laurie Poole in our Carlsbad/San Diego offices for answering this question.

MISSING
ELECTION ENVELOPE


QUESTION: What if one forgets to use the small envelope and just uses the outer envelope with signature as required. Is the ballot valid? Should the votes be counted?

ANSWER: Yes, the ballot is valid and the votes should be counted.

Double Envelope Required. The Davis-Stirling Act requires associations to use election procedures that require a double envelope system with the the ballot in a sealed inner envelope. (Civ. Code §5115(a)(1).) However, a ballot is not invalid because it was placed directly in the outer envelope. This ballot irregularity is similar to what occurs when an owner inadvertently signs their ballot.


Most association votes are covered by the voting procedures of Civil Code §5115. These procedures require associations to give members a method for confidentially submitting votes (e.g., with no name, address, lot parcel or unit number on the ballot), plus a way for inspectors of election to ensure votes are cast by eligible members (e.g., identifying information on the outer envelope).

Envelope Signature Required. Owners must fully comply with certain requirements (e.g., sign the outer envelope) to ensure ballot validity. However, when a member does not use the inner envelope but simply places their ballot within a sealed outer envelope displaying their identifying information, it is the member who has waived a certain level of their vote confidentiality. That confidentiality is essentially lost until the ballot is removed from its outer envelope and placed among the other ballots.

Inspector's Authority. When determining ballot validity, inspectors have authority to make a judgment call. We favor counting votes when the intent of the voter is clear and the irregularity is not an otherwise fatal flaw. Inspectors should also take into consideration any specific requirements of an association’s election rules. Inspectors can:

Perform any acts as may be proper to conduct the election with fairness to all members in accordance with this article, the Corporations Code, and all applicable rules of the association regarding the conduct of the election that are not in conflict with this article. (Civ. Code §5110(c)(8))

RECOMMENDATION: Deciding questions of ballot validity is done by the inspectors and not by the attorney, and similar ballot irregularities should be treated similarly. The Inspector's Report should reflect the handling of such irregularities where appropriate. Although the Davis-Stirling Act only requires preservation of ballots, all election materials should be kept for at least one year

Thank you to Nancy Sidoruk, who covers the Inland Empire, for this article.

FORECLOSURE & DEBT COLLECTION
GO TO U.S. SUPREME COURT


The most commonly used foreclosure proceeding is going head to head with one of the country’s top consumer protection statutes. The U.S. Supreme Court has granted a “petition for a writ of certiorari” opening the arena for an epic showdown.

The issue: Do the sometimes onerous conditions on consumer debt collections apply in foreclosures where the creditor is seeking to repossess the real property only and is not seeking a money judgment.

There are 13 federal appellate courts (known as circuits). California is in the 9th Circuit and is joined by its neighbor, the 10th Circuit, in holding that the FDCPA does not apply to non-judicial foreclosures but…the ornery Fourth, Fifth and Sixth Circuits are sticking together and holding that the FDCPA does apply.


Bets are that, when the bout occurs this fall, the Supreme Court will find non-judicial foreclosure to be the victor in this battle of business vs. consumers. For exciting nighttime reading, see Obduskey v. McCarthy & Holthus LLP.

Thank you to Richard Witkin, our foreclosure guru, for this update.


Kudos. The Davis-Stirling website has been a tremendous source of information for the little person who serves on a board. Most of us have good intentions, however don't really know what the hell we need to do to represent the average homeowner and I am sure you know what good intentions get you, in trouble. THANKS SO MUCH. -Joe C.

Santa Barbara Office. Thank you for the newsletter and the news that you have now opened an office in Santa Barbara. We have used your firm for several years now. Thank you. -James N.

Lawyer Letters. Once again, my compliments and gratitude for your excellent website and your case law index by subject. Along with the rest of the website, it is a resource for all persons interested in the advancement of civil society in HOA governance. Thank you for bringing Kulick v Leisure Village to your readers attention. I recommend adding to your case law library Rogo v. Gottlieb. It illustrates limitations on anti-SLAPP motions. -Dan M.

RESPONSE: Thank you for the tip; I added it to the library. Even lawyers sometimes get themselves in trouble with the letters they write.


Train Wreck #1. Sitting here in the relative safety of Arizona, it is fascinating to watch California lurch into complete insanity. Here is the current lurch: SB 1265 is the bill put forward by the Center for California Homeowner Association Law (CCHAL) and Sen. Wieckowski that strips homeowners of their right to adopt reasonable qualifications for board members. CCHAL and Sen. Wieckowski decided you should accept felons and delinquents on your boards as well as those suing your association and those in serious violation of the CC&Rs. -Bob A.

Train Wreck #2. If SB 1265 is adopted into law, associations will be severely limited in their ability to establish reasonable candidate qualifications. Please continue to voice your oppositions to this bill. -LP

Train Wreck #3. What can be done now to push back against the passage of SB 1265? -Maureen B.


RESPONSE: I will let you know when it's time to send more letters. If this bill is signed into law, it will be the third terrible bill in three years backed by the Center for California Homeowner Association Law (CCHAL).

The first was AB 1720 which tried to inject lawyers into board meetings. CCHAL thought it would enhance meetings if everyone had their lawyers in tow. Fortunately it was defeated.


The second was SB 407 (CCHAL & Sen. Wieckowski) which allows any politician, political party or interest group to take over an association's common areas for free and without insurance to raise funds, give speeches or for any other purpose of "public interest." And, the association picks up the tab. It passed.

The third is SB 1265 (CCHAL & Sen. Wieckowski) which strips away consumers' rights so they can't establish qualifications for serving on boards. It forces homeowners to allow felons, delinquents and litigants onto boards of directors (and give them access to records). CCHAL and Sen. Wieckowski made an exception for felons who commit financial crimes--they can be excluded from boards. 


Train Wreck #4. I couldn't help myself. Neopets (a kid's gaming website) applies the term "scalawag" to animated animal pirates. -Frances W.

RESPONSE: We have a few scalawags in the legislature that some might equate to pirates.

 

Train Wreck #5. For one of your always interesting newsletters, would you comment on whether there is a difference between a “member” and a “resident” in an HOA or private community, or are the terms used interchangeably. Civ. Code §4515(b)(2) references “members, residents, and their invitees or guests,” which suggests the terms are not synonymous. -Roger H.

RESPONSE: Civil Code §4515(b)(2) is last year's train wreck where residents can invite "public officials, candidates for public office, or representatives of homeowner organizations to meet with members, residents, and their invitees or guests and speak on matters of public interest."


A resident is someone who lives in the association. A member is someone who owns property in the development which gives them voting rights and common area privileges. A member can be a resident or nonresident. (See Member Defined.)

The CCHAL statute allows residents to invite politicians to the common areas. It also allows them to invite guests and invitees to hear the politician speak and raise funds. A "guest" is someone you invite to your house. An "invitee" is someone you invite to attend a gathering, entertainment, or to do something.

That means a renter can invite a politician to speak and raise funds using your common areas. In addition, the renter can invite people to hear the speaker. The statute does not limit invitees to residents. That means people from outside the association can be invited into your common areas to participate in a fundraising event.


AB 2912 #1. Are you saying that we should insure our reserve fund plus 3 months of assessments? Could you explain this a little further. Is this common practice? -Helen S.

RESPONSE: Because of embezzlement, it is good practice for associations to insure their funds, add internal controls, and regularly review their finances.

Unfortunately, too many associations are lax in this regard. AB 2912 was introduced to help protect association finances.

AB 2912 #2. Always enjoy the newsletter and find it very informative. In regards to the most recent one and the question regarding insuring the balance in the reserves plus 3 months of assessments. Many lenders require the association’s insurance to meet those specifications to loan on a unit. Thanks for all the info you provide as well as always adding a good laugh! -Laura F.


Marginal Boards. I believe there is very little an owner can do if their board falls into the category of marginal boards except sue them which, as you say, is costly. This leads me to ask, what value is the Davis-Stirling Act as there is not any teeth in the Act? -Mike S.

RESPONSE: The Davis-Stirling Act has as much or more teeth than similar laws dealing with public officials. For example, suing government officials is not always possible, and when it is, it's more difficult than suing board members.

The Act allows you to sue your association in small claims court, it allows fines to be imposed, it provides for IDR and ADR, and it allows for the award of attorneys fees. Association boards can be ordered to comply with the law, and boards can be replaced.

Discourage Volunteers. Associations, like many cities and states can be badly managed. There is no "magic bullet" legislation. Passing ever-restrictive and punitive laws regulating associations is effective at one thing--discouraging good, qualified members from serving on the board.

Too Many Laws. There are already so many laws that lawyers and management companies and professional inspectors of election and consultants and CPAs have become a necessity for associations. In addition to discouraging volunteers, it drives up members' dues. The regulations have become an impossible burden on small associations.

RECOMMENDATION. There is a role for regulation but the excessive and unbalanced regulation imposed by CCHAL is not the answer. It has unintended, negative consequences. More regulation is not the best answer to every problem.

People who are unhappy with their association but keep putting the same people into office should rethink that strategy. It comes down to making a concerted effort to influence directors or replacing them. Suing is always an option but rarely the best one.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Fundraising in the Common Areas

Jul 8, 2018 0 Views 0 Comments


QUESTION: As we enter another election cycle, do you think the new law allowing politicians to use the common areas permits a candidate for public office to raise funds using our common areas?

ANSWER: It's a good question with no clear answer. SB 407 went into effect January 1 this year and no one knows yet the reach of the statute. It states that members or residents can invite "public officials, candidates for public office, or representatives of homeowner organizations to meet with members, residents, and their invitees or guests and speak on matters of public interest." (Civ. Code §4515(b)(2).)

Fundraising Free Speech? A recent US Supreme Court decision (McCutcheon vs. Federal Election Commission) held that donating to a political campaign is an exercise of free speech. Does that make fundraising a matter of public interest? Maybe. Clearly, a court will have final say (unless the legislature clarifies it by amending the statute).

Political Parties. In addition to the Republican and Democratic parties, there is a long list of other parties who could use your common areas to campaign. Following are some:

America First Party (paleoconservatism)
American Indep. Party (strict constitutionalism)
America's Party (Christian conservatism)
American Delta Party (social progressivism)
American Freedom Party (white nationalism)
American Populist Party (libertarianism)
American Solidarity Party (Christian democracy)
Black Riders Liberation Party (black nationalism)
Christian Liberty Party (dominionism)
Citizens Party of the U.S. (centrism)
Communist Party (communism)
Workers Party of America (communism)
Constitution Party (fiscal conservatism)
Freedom Socialist Party Trotskyism
Green Party (environmental socialism)
Humane Party (animal rights)
Independent American Party (paleoconservatism)
Justice Party (social democracy)
Legal Marijuana Now Party (marijuana legalization)
Libertarian Party (libertarianism)
Modern Whig Party (centrism)
National Socialist Movement (neo-Nazi socialist)
Natural Law Party (peace through meditation)
New Black Panther Party (black nationalism)
Objectivist Party (objectivism)
Party for Socialism and Liberation (communism)
Peace and Freedom Party (democratic socialism)
Prohibition Party (temperance)
Reform Party (electoral reform)
Socialist Action (Trotskyism)
Socialist Alternative (Trotskyism)
Socialist Equality Party (Trotskyism)
Socialist Party (socialism, anti-capitalist)
Traditionalist Worker Party (neo-Nazism)
U.S. Marijuana Party (marijuana legalization)
U.S. Pacifist Party (pacifism)
Unity Party of America (centrism)
Veterans Party of America (centrism)
Workers World Party (Communism)

If any of the above parties (and many more not listed) were invited by a resident to use your common areas to speak and raise money (free of charge and without insurance), they probably could.

RECOMMENDATION: Boards should talk to legal counsel about how best to handle this situation should it be raised in their association. Following is another question about SB 407.

PASSED BY
SCALAWAGS


QUESTION: Hello - As I have tried to read all the newsletters that are sent out, I thank you on keeping the people abreast who want to be engaged. For this one item that was passed by scalawags, SB 407, how can it be overturned?

RESPONSE: For readers unfamiliar with scalawags, it's a legal term that does not get used enough. It means scamp, reprobate, someone who behaves badly, a lying no good rascal. It’s also spelled scaliwag and scallywag.

Public Interest.
Unfortunately, SB 407 is here to stay. Politicians want access to community associations so they can campaign for office. They gave themselves (and it seems everyone else in the world via the "public interest" provision) access to your common areas free of charge and without insurance. The poorly worded, expansive bill by Sen Wieckowski will likely remain as-is until litigation erupts over unintended consequences and the statute (maybe) gets tweaked.

HOA's RIGHT TO RESPOND TO
ACCUSATIONS


A recent unpublished case involves a homeowner, Robert Kulick, who published a newsletter accusing board members at Leisure Village in Ventura County of lying and cheating, the general manager of perjury, and the association's attorney of extortion and hate mongering.

He also claimed the board election was rigged and the association would be forced into bankruptcy.


Association Responded. At the board's request, the association's attorney prepared a letter responding to Kulick's newsletter denying that board members were cheats or liars or that the association's attorneys engaged in unlawful conduct. The letter described Kulick's newsletter as a reckless communication that contained unfounded, inaccurate and spiteful allegations. The association distributed its letter to its 2,100 members.

Litigation Ensued. Kulick sued the association claiming he had been defamed by the letter. When his lawsuit was dismissed on an anti-SLAPP motion, he appealed. The court of appeal upheld the trial court's ruling because the content of the association's letter was of public interest regarding a controversy initiated by Kulick when he published newsletters accusing directors, management and attorneys of misdeeds.

OBSERVATION. Homeowners who distribute scurrilous material should not be surprised when someone disputes their allegations and makes a few of their own. To read the case, see Kulick v. Leisure Village.

WEBSITE
CASE LAW UPDATE


In addition to laws passed each year by California's legislature, our courts of appeal and supreme court add "case law" by interpreting statutes.

We have approximately 300 cases on Davis-Stirling.com which are indexed alphabetically by name.

I am pleased to announce the addition of a new page to the website that organizes cases into categories and summarizes the relevant holding of each case. We hope you like it. If there are cases you think should be on our list, drop me a line.

A special thanks to attorneys Wayne Louvier and Aaron Schwarzkopf for assisting me on this project.

SANTA BARBARA
OFFICE OPENS


I am pleased to announce the opening of an ADAMS|STIRLING office in Santa Barbara.

Our office is located at 831 State Street, which is within walking distance of the historic Santa Barbara courthouse.

We represent a large number of clients in Ventura, Santa Barbara and points north. Our new office allows us to work more closely with our growing base of coastal clients.

HIRING. We are continuing to hire attorneys. To learn more, contact me.


AB 2912 #1. Why should any association insure their reserves plus three months of assessments? According to the Davis-Stirling Act associations are not supposed to assess more than the costs for which they are collected. Any association that has three months of assessments in their account(s) must be over-charging their members or not paying their bills. Sounds like legislation backed by insurance companies. -Tamara B.

RESPONSE: The reason for insuring your association's money is because it can be embezzled. I've worked with many associations over the years who have had their funds stolen--some in the millions. In most cases, they were able to recoup their loss through their insurance. Three months of assessments sets a minimum amount stolen by an embezzler. It does not have to be done all at once, it can be done over time.

Fidelity insurance is relatively cheap and not having it could result in a large special assessment to replace embezzled funds. Members get a little touchy when that happens. They start demanding resignations, threaten recalls, and sometimes threaten to sue directors who "allowed" the embezzlement to occur and negligently (or intentionally) failed to ensure the funds.

*****


Rental Prohibitions. I find your newsletter to be very informative and entertaining. Your June 17th newsletter item about grandfathered rules raised the following question in my mind: Does Civil Code 4740 apply to an amendment restricting only short-term rentals? -Mark B.

RESPONSE: It applies to rent prohibitions. I do not believe a requirement that rentals be at least 30 days is a prohibition. Rentals are still allowed, they just can't be less than 30 days. Such restrictions have have been deemed reasonable by the courts. (Mission Shores v. Pheil.)

*****


Far Away #1. I wanted to say how much I appreciated—and laughed at!—your response to Gregg G.’s outrageous diatribe likening HOAs to concentration camps: "You might cut back on coffee and consider moving to a cabin far away from civilization. Far, far away.” What a perfect response!

As you know far better than I do, not everyone who lives in an HOA is reasonable and rational, and because people can’t be reasoned out of anything they haven’t been reasoned into, your response didn’t try to do the impossible, but simply and calmly offered two very practical and helpful suggestions. Bravo! -Scribner M.

Far Away #2. I always try to read your informative newsletter promptly. Today’s was helpful until I reached the outrageous and vicious item by Gregg C. I have immense pity for his neighbors/owners who are exposed to him, as well as for the association’s board of directors. He must live a miserable life since he’s lost touch with reality. You probably gave all your readers a wake-up call! -Marilyn B.

WIECKOWSKI BILL NULLIFYING
OWNER RIGHTS ADVANCES


SB 1265 is the bill put forward by the Center for California Homeowner Association Law (CCHAL) and Sen. Wieckowski that strips homeowners of their right to adopt reasonable qualifications for board members. CCHAL and Sen. Wieckowski decided you should accept felons and delinquents on your boards as well as those suing your association and those in serious violation of the CC&Rs.

The hearing before the Assembly Housing Committee on June 20 did not go well. The bill passed on a party line vote. It then went to the Assembly Judiciary Committee on July 3 where it again passed on a party line vote. It will be eligible for a vote on the Assembly floor when the legislature returns from summer recess in August.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Train Wreck Update

Jun 17, 2018 0 Views 0 Comments

SB 1265 is set to be heard by the Assembly Housing Committee this Wednesday, June 20 in the State Capitol building at 9:00 a.m. in Room 126. If you can attend and voice opposition to the bill, please do so.

Emails opposing Wieckowski's legislation were forwarded to the committee. Following are a few from this week. -Adrian

Train Wreck #1. Thank you very much for the information you presented. I originally voted for the bill, but I see now that I was wrong. I am opposing SB 1265. I own several properties in HOA communities and am a member of and have served on many boards over the past 40 years. Thank you. -Delores L.

Train Wreck #2. Calling out Sen. Wieckowski as being associated with CCHAL (Center for California Homeowner Association Law) is right on. He was also behind SB 407. Unfortunately, he was just re-elected to State Senate District 10. We can probably expect more ill-conceived bills. -Paul C.

RESPONSE: For those who don't remember, SB 407 was last year's bill allowing politicians of every stripe, both elected and un-elected, to take over common areas (free of charge and without insurance) to speak and hold rallies.

Train Wreck #3. Your article last week said litigants should not serve on the board. I sued my association 5 years ago and won because they failed to repair a water leak. Does that mean I can never serve on the board? That does not seem fair. -Pat M.

RESPONSE: You can serve on the board. You would make a good director based on your experience. Someone who is in active litigation against the association should not simultaneously be on the board. The conflict of interest creates too many complications. It is better for the person to be off the board until the litigation has concluded. As soon as the litigation is over, the person would be eligible to serve on the board. This common sense provision is prohibited by the CCHAL/Wieckowski bill.

Train Wreck #4. I read a newsletter from the Center for California Homeowner Association Law (CCHAL) and thought SB 1265 seemed good. After reading your newsletter I've changed my mind. It made me wonder about the latest CCHAL newsletter I received regarding AB 2912. CCHAL's 'NO' position seems sensible but I thought their 'YES' on SB 1265 seemed sensible too. What do you have to say about AB 2912? -Janice S.


RESPONSE: I asked Nathan McGuire, Vice-Chair of the California Legislative Action Committee, for his analysis of Assembly Bill 2912. Following is his response:

"Many owners have expressed frustration with the constant stream of bad legislation coming out of Sacramento in the last decade. This is in large part because those drafting and sponsoring legislation don’t understand community associations or are biased against them.

For the most part, groups like CAI’s California Legislative Action Committee (CLAC) have been playing defense, working to defeat bad legislation or make it less bad. As a proactive measure, CLAC sponsored Assembly Bill 2912, which seeks to protect association finances.

Unfortunately, homeowner associations are occasionally targets of fraud or embezzlement. Boards can take steps to prevent fraud, but not all boards have the guidance to implement sufficient measures.

Introduced by Assemblymember Jacqui Irwin, the bill would require associations to implement simple measures to prevent fraud with clear guidelines on the handling of association funds.

Most of the requirements are already standard practices for many associations. If passed, the bill would:

  • Require fidelity bond insurance in an amount not less than current reserves, plus three months of assessments;
  • Require monthly review of financial statements rather than quarterly; and
  • Prohibit electronic transfers of funds without board approval.

Boards are not required to meet monthly to review financials. They can designate a board member or board members to review the financials monthly and ratify the financials at their next meeting.

Support. We support AB 2912. Protecting association finances is of critical importance. The bill has passed out of the Assembly and is making its way through the Senate. The next stop is the Senate Judiciary Committee. For more information, check out CLAC’s recently renovated website." -Nathan McGuire, California Legislative Action Committee

NOTE: I agree with Nathan's recommendation. Safeguarding association finances makes sense. I have not seen CCHAL's opposition to the bill but I'm not surprised. They seem to be on the wrong side of most issues. -Adrian Adams

DEALING WITH
PROBLEM BOARDS


Problem Boards. I don't think last week's question about problem boards was fully answered. -Ann R.

RESPONSE: Having worked with boards for over 30 years, There are five types of boards. They almost always fall into one of the following categories:

1. Bad Boards
2. Dysfunctional Boards
3. Marginal Boards
4. Good Boards
5. Exceptional Boards

Bad Boards. Fortunately, truly bad boards are few in number. They tend to be self-serving and driven by personal agendas. It has been my experience they don't follow legal advice and I eventually withdraw from representation (a polite way of saying I fire them). Once their path of destruction is visible to everyone, they usually get sued or thrown out of office, or both. A good board is then elected to clean up the mess.

Dysfunctional Boards. Dysfunctional boards consist of directors who are at each other's throats. Nothing gets done because they are too busy fighting each other. There are strong personalities on differing sides of every issue and they are unyielding in their opinions. Sometimes they hate each other and engage in personal attacks. Each side develops a following and splits the community. Feelings run deep and it takes years to recover from the strife. Fortunately, dysfunctional boards are also few in number.

Marginal Boards. There are a fair number of marginal boards. Their directors serve because no one else will. They put in their time and try to avoid difficult decisions. They minimize rule enforcement and avoid spending money. They rationalize that doing nothing keeps dues down. Many owners get frustrated with such boards but not enough to volunteer their own time to serve on the board. It's not until some crisis hits that more qualified volunteers step up.

Good Boards. Most boards are good boards. They volunteer their time, address community issues, and generally make good decisions. They enforce the rules, repair the common areas, and fund the reserves. However, they can be slow to act and sometimes make mistakes. Even so, they care about the membership and their intentions are good.

Exceptional Boards. Exceptional boards are not the norm. Being on top of everything all the time, consistently communicating with members, responding quickly to complaints and never making mistakes is not sustainable. I've worked with many such boards over the years but the demands on their time and constant criticism from a minority of perpetually unhappy owners eventually wears them down.

All five categories have their detractors. Unhappiness with bad, dysfunctional and marginal boards is fully justified.
If members have such boards, they should do something about it. See ten steps for dealing with bad boards.

Complaints about good and exceptional boards is most often from owners who don't like rules. They go ballistic when the board enforces rules against them. Too often they engage in whisper campaigns against directors and threaten lawsuits. They run up the association's legal bills and bully people until they get what they want. They complain endlessly about their "bad" board while directors struggle to bring the scofflaw into line.

COMMENT:
Complaining seems to be part of the human condition. When someone says they have a bad board, I dig a little deeper to see which category the board falls into and then respond accordingly.

Concentration Camp HOAs. As I read newsletters from Adams Stirling, it is clear to me that your firm is hell-bent on making HOAs pretty much like concentration camps. Deny all possible rights of members and give absolute power to a small group of volunteers who can behave in any manner they see fit without accountability or repercussions.

If A&S were honest, they would admit that HOAs are established by corrupt politicians in their own corrupt image, basically their bastard step-children. Give all the power to a small group of people so they can rule the masses. To even suggest that they are "angels" is complete stupidity. -Gregg G.

RESPONSE: You might cut back on coffee and consider moving to a cabin far away from civilization. Far, far away.

DISCRIMINATION LAWSUIT
DISCLOSURES


I received a number of questions about the lawsuit over large dogs on elevators I reported last week. Readers asked about litigation disclosures. Here is one of them:

QUESTION. Regarding informing members of the details of a lawsuit, I assume you mean that members have a right to know what the issues are but not specific legal advice given to the board or anything falling under attorney-client privilege. -Shelly D.


RESPONSE: You're right, attorneys and boards can talk to members about the litigation but not about legal advice given or received. Members are naturally curious about ongoing litigation, and boards can and should inform them about the case. Members often push for details but directors should stick to what's a matter of public record, i.e., in papers filed with the court. Directors should not talk about litigation strategy or settlement strategy. Such things have a way of getting back to the other side.

NANCY SIDORUK


Following are a few of the many emails we received about Nancy joining the firm.

Congratulations #1. Wow!!! That’s wonderful news!! Nancy is WONDERFUL!!! -Jeremy W.

Congratulations #2. Congrats on Nancy joining your team. She's so good! Please give her my best. -Skip. D.

Congratulations #3. Wow! -Rosy A.

Congratulations #4. Nancy is my favorite attorney! She is easy to work with and extremely knowledgeable. Congratulations! -Linda L.

*****


HIRING. We are still looking for experienced litigation and HOA attorneys for Riverside, Palm Desert and San Francisco's South Bay. If you are interested, contact me. -Adrian

*****


Grandfathered Rules? I have a bet with another homeowner. He states that if you bought your home prior to revisions to the CC&Rs or rules that you are grandfathered under the old rules. New or changed rules that affect your separate interest do not apply. -David J.

RESPONSE: If you said new rules apply to everyone, you win the bet. In a unanimous decision in Villa de Las Palmas v. Terifaj the California Supreme Court ruled that CC&R amendments apply to all owners, regardless of when they purchased their units. Rules, like CC&R amendments, apply to everyone unless the board grandfathers existing conditions. The exception is rent prohibitions. Civil Code §4740 exempts owners from rent prohibitions unless the prohibition was in effect prior to the date the owner bought into the development.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Large Dogs & Reasonable Accommodation

Jun 9, 2018 0 Views 0 Comments

Sometimes a demand for reasonable accommodation is unreasonable.

Large Dogs. Holly Geraci owned a penthouse in a Chicago highrise. She claimed to have a fear of large dogs because she was attacked by a German shepherd as a child and suffered post traumatic stress disorder (PTSD).

Lawsuit Filed. Residents in the highrise had large dogs that accompanied them on the elevators. Geraci demanded the association provide her with an elevator that prohibited large dogs. When the board declined her request, she sued in federal court.
At trial, the jury did not believe Geraci's fear of large dogs met the definition of disability and found for the association.

Geraci Appealed. On appeal, Geraci objected to testimony by the association's psychiatrist that contradicted her doctor's diagnosis of PTSD. She also claimed that publishing litigation updates to the membership and holding an open forum about the lawsuit was retaliatory and designed to cause her emotional distress and embarrassment.

Association's Rights. The federal court of appeals disagreed on both points. Geraci had the burden of proving she was handicapped and the association had the right to defend itself by disproving her alleged mental impairment.

In addition, the board had the right to tell members about the litigation. No federal law prevents members from knowing why their association is bearing legal costs. It should be expected that members would want to know the details of the lawsuit. The court noted that sending litigation updates and holding open forums to update members on litigation are reasonable measures.

OBSERVATION: Force all other residents to keep their dogs off the elevators? Sue the association and demand the board not tell members? Object to the association defending itself in court? The case injects some common sense into growing demands related to claims of disability. Read Geraci v. Union Square Condominium Assn.

CHECKS AND
BALANCES


QUESTION: I'm curious about the Davis-Stirling Act. Why are there few, if any provisions with penalties when a board does not comply? Seems as if there are no checks and balances.

ANSWER: Good question and given the current political discourse, it allows for a brief reminder on our government’s system of checks and balances.

If Men Were Angels. The idea of checks and balances is to ensure that no one branch of government becomes too powerful. As James Madison wrote in the Federalist Papers No. 51 arguing for the adoption of the system in the Constitution, “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.”

While some disputes in homeowner associations seem like arguments over how many angels can dance on the head of a pin, the law does provide checks on potential abuses by boards of homeowner associations. (And if only angels served on boards, there would be no need for checks on abuses or HOA attorneys for that matter).

Accountability. Although a system of checks and balances does not perfectly square in the homeowner association context as there are not separate branches of governance within such communities, the idea of political accountability built into the system is embedded in homeowner associations.

For example, the Davis-Stirling Act requires election rules that, among other things, allows members access to common area to advocate points of view not endorsed by the board and access to association media under certain circumstances. (Civ. Code §5105.)

There is also the Open Meeting Act under the Davis-Stirling Act (Civ. Code §49004955) for procedures on how boards are to conduct their meetings with the intent of transparency and accountability.

Under California’s Corporations Code (§7110 et seq.), there are provisions on director qualifications (now under assault by CCHAL and Sen. Wieckowski--see below), removing unqualified directors, conflicts of interest, among others checks on a board’s conduct. There is also a board’s fiduciary duty to act in the best interest of the members. And, of course, boards can be recalled.


So while some believe “power tends to corrupt, and absolute power corrupts absolutely,” rest assured the ideals of the Founding Fathers can be found in the laws that govern homeowner association boards.

Thank you to partner Cang Le, head of our firm's litigation department, for answering this question.

NANCY I. SIDORUK
JOINS ADAMS|STIRLING


I am pleased to announce that senior attorney Nancy Sidoruk; joined our firm.

Nancy is a seasoned community association attorney who serves as general counsel to residential, mixed-use, and commercial common interest developments.

Nancy is actively involved in educating association managers and volunteer leaders, and addressing community association legislative issues. She served as President of the Community Associations Institute's Inland Empire chapter; was a delegate to the California Legislative Action Committee and served on its Executive Committee. Known for her focus on education, Nancy is a frequent author and speaker and recipient of many industry awards.

Nancy earned her Bachelor of Arts in Political Science from UC Berkeley, earned a Masters in Business Administration from the University of Redlands, and a Juris Doctorate from the University of La Verne College of Law where she was law review editor-in-chief, moot court finalist and served a judicial externship with the California Court of Appeal.

We are pleased to have such a talented and experienced attorney join our firm. If your association needs legal services, contact us for a proposal.

HIRING LAWYERS
IN NORTHERN CALIFORNIA


We are looking for experienced HOA attorneys for clients in the South Bay.

Candidates should have at least five years' experience working with community associations.

We offer growth opportunities and excellent benefits. If you are interested, contact me at 800-464-2817 or by email. -Adrian Adams


I received ~600 emails opposing SB 1265 and 4 in favor. Below are a few from readers who disagreed with me or had questions. -Adrian

Train Wreck #1. Your article about SB 1265 is in error. You said it lets felons on the board. I read the bill and it specifically excludes felons from serving on the board. -M.B.

RESPONSE: If you take a closer look at the bill and my article, you will notice I referenced sex offender felons and the bill talks about financial felons.

People Behind the Bill. The bill is sponsored by the Center for California Homeowner Association Law (CCHAL), an organization in Sacramento that seems particularly hostile to community associations. Over the years, they sponsored a lot of harmful legislation and this is another piece.

How to Sue HOAs. In addition to bad legislation, CCHAL holds classes teaching lawyers and homeowners how to sue associations. I attended one because I had a hard time believing an organization would promote litigation over reconciliation. Unfortunately, they really are teaching people how to sue associations. For some reason, Sen. Wieckowski has associated himself with this group.


Negating Rights. The bill put forward by CCHAL and Sen. Wieckowski strips consumers (homeowners) of their right to adopt reasonable qualifications for board members. In their original bill, they forced homeowners to accept all felons as board members.

Partial Retreat. Their ill-conceived bill was so reckless that CCHAL and Sen. Wieckowski were forced to revise it. They made a partial retreat by amending the bill so homeowners could exclude financial felons. You, as consumers, would still be required to accept all other felons, including those who commit violent and/or sexual crimes. Thus, if directors discover a felon pedophile was elected to the board, they could not vacate the seat. Once elected, that director would then have access to the association's records.

Destructive Bill. It is perplexing that CCHAL and Sen. Wieckowski think they have the right to impose their will on 9 million consumers, stripping them of their right to exclude felons and delinquents from serving on homeowner boards.


Legal Analysis. Curt Sproul, well respected co-author of Advising California Common Interest Communities published by the Continuing Education of the Bar (CEB), did an excellent analysis of the flawed legislation which he sent to the Assembly Housing Committee. His letter urging opposition to SB 1265 is worth a read.

Train Wreck #2. I think there is misinformation in your newsletter that should be corrected. You state “For some unfathomable reason, Sen. Wiechowski believes owners not in good standing should serve on association boards of directors.” I’ve read and re-read SB1265 and it certainly appears to specifically exclude members who have not paid their assessments. -Bruce U.

RESPONSE: CCHAL and Sen. Wieckowski made a concession on assessments but only as to regular assessments. An owner can refuse to pay special assessments, be in violation of architectural standards, have multiple unpaid fines, be suing the association, and still be on the board if CCHAL has its way.


With low turnout and cumulative voting, a problem owner's friends can put him on the board. Someone who is in violation of the CC&Rs, refusing to pay a special assessment and suing the association creates significant legal challenges for the association. Such individuals have major conflicts of interest. Putting them on the board is not in the membership's best interest.

Train Wreck #3. Your newsletter mentioned privacy issues. What do director qualifications have to do with privacy? -Nancy L.

RESPONSE: In addition to giving felons, delinquents and scofflaws access to association records as board members, CCHAL and Sen. Wieckowski decided to amend section 5200 of the Civil Code to include email addresses in membership lists. If you ask the association to email notices to you, your email address gets added to the membership list, which is then accessible by all your neighbors.

An email blast from a homeowner to the membership means your email address can make its way to unexpected places and into the hands of people who are not members of the association. Giving out your email address should be your decision, not Sen. Wieckowski's.


RECOMMENDATION: The bill is a train wreck. There is nothing redeeming in it. CCHAL and Sen. Wieckowski are taking away your rights as homeowners. As consumers, you currently have the right to set reasonable standards for who serves on your homeowner board. They are taking that away from you.

If this bill passes, CCHAL and Sen. Wieckowski will be forcing you to allow felons, delinquents, litigants, and members not in good standing into positions of authority over you and giving them access to homeowner records. This bill needs to be defeated.

Anyone who has not yet sent an email opposing this dreadful legislation should do so now. Talk to your friends and neighbors and get them to send emails as well.

Please email Chairman David Chiu urging his Committee to "Vote No" on SB 1265. Send your emails to: [email protected]. Our office will print and deliver them to the committee.

*****


Book Clubs. Regarding your Bible study ban story, the legislature passed SB 407 last year which allows political gatherings. Does it apply to Bible studies? -Mike S.

ANSWER: Maybe. The relevant provision in the bill (now Civ. Code §4515), states that associations "may not prohibit a member or resident... [from] peacefully assembling... for purposes relating to common interest development living..."

Bible studies are generally peaceful and usually focus on how one should live. Will a court interpret this to fall under "common interest development living"? I don't know. What is clear, though, is prohibiting a book club because it focuses on religious text is discriminatory in violation of the Unruh Act and FEHA.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

SB 1265 Train Wreck

Jun 3, 2018 0 Views 0 Comments

QUESTION: I read SB 1265. What prompted such a complex bill? HOAs as "quasi-governmental entities?" Retaining signed envelopes of voter ballots? Seems like overkill to me. Our association has had annual elections without difficulty, mishaps or problems. It is hard enough to get people to run for the board without telling them they will be operating in a "quasi-governmental" atmosphere. What do you think of the bill?

ANSWER: The bill is a train wreck. It voids director qualifications adopted by associations. That means a felon sex offender who is suing his association to stop foreclosure of his unit can be elected to the board of directors to serve alongside his spouse and adult son on a five-director board.

This overreaching piece of legislation was authored by Sen. Bob Wieckowski (Freemont) and affects every association in the state.
For some unfathomable reason, Sen. Wiechowski believes owners not in good standing should serve on association boards of directors.

Identity Theft. In addition to voiding director qualifications, the bill allows members to inspect and copy signed envelopes. Members concerned about identity theft now have to be concerned about their signatures being copied and posted on the internet. It also unnecessarily exposes members to breaches of their privacy.

RECOMMENDATION: This bill is awful. SB 1265 will be heard in the Assembly Housing and Community Development Committee most likely on Wednesday, June 13. Please send a letter or email to Chairman David Chiu urging his Committee to oppose the bill. You can send your emails to [email protected]. Our office will bundle and deliver them to the Committee.
 
MY SECONDARY ADDRESS:
@EMAIL ME?

QUESTION: I’m an owner who lives part of the year in Europe. I requested my HOA mail all notices to my secondary address, my email. The board told me they aren’t bound to send notices and disclosures via email. Isn’t my HOA obligated to mail notices to my designated secondary address, even if it’s an email?

ANSWER: You are correct. Civil Code §4040(b) requires an association, upon request from a member, to provide notices to the “secondary address identified in the request.” The Civil Code does not specify what type of address must be provided, so it stands to reason an owner can designate an email address in lieu of a physical address.

Email Notice is Allowed. Civil Code §4040 is clear if any part of the Davis-Stirling Act requires individual notice, an association can accomplish delivery by mail (U.S. or overnight) or by email, fax, or other electronic means so long as the owner consented in writing to receive the notice through the particular method. If a request to use an email as a secondary address is in writing, it is valid for individual notices to be sent.

Types of Notices. Associations are obligated to provide owners the following records, including by email: annual budget report, the annual policy statement, notices of regular and special assessments, and notices of foreclosure. Not all notices must be sent via individual delivery. Associations can deliver the following types of records through general delivery (which can include posting a physical copy of it at a designated location in the association): board meeting notices, rule changes, election and vote tabulation results, and use of reserve funds.

RECOMMENDATION: Civil Code §4045 permits owners to request all general notices also be delivered to them by individual delivery. Submit your request in writing to designate your email as your secondary address (make sure it complies with all the requirements) and also request individual delivery of all general notices so you can continue to be kept abreast while you’re abroad.

Thank you to partner Jasmine Hale in our Los Angeles office for this article.

ASSOCIATION BANS
BIBLE STUDY
 
Several years ago a reader asked about banning Bible studies in the clubhouse. I responded it would be discriminatory and the restriction would likely be struck down if challenged.
 
Clubhouse Activities. Last week, a 55+ homeowners association settled a lawsuit over this issue. The association had allowed members to reserve rooms at its 8,000 square-foot clubhouse for activities such as book clubs, card games, Bible studies, arts & crafts, etc. They had over 30 clubs and interest groups using their common area facilities.
 
Atheist Objects. An atheist objected to Bible studies in the clubhouse and threatened to sue the association. In response, the board banned all religious or faith-based groups from using the common areas.
 
Litigation Erupts. Affected members contacted the Pacific Justice Institute, a nonprofit legal organization that defends religious freedoms and civil liberties. They sued the association for violation of the Unruh Civil Rights Act and the Fair Employment and Housing Act for denying access to the common areas on the basis of religion. In addition to injunctive relief, members sought punitive damages against the association and its directors.
 
Settlement. The association sought to have the complaint dismissed or at least dismiss punitive damages. The judge refused and trial was scheduled for this month. The parties went into mediation and the association agreed to a number of concessions, including giving faith-based groups equal access to common area facilities.
 
RECOMMENDATION: Associations cannot engage in discrimination and expect a successful outcome. State and federal laws are quite clear in their prohibition of discrimination. Boards should have legal counsel review their policies to ensure they are non-discriminatory. In addition, boards should adopt an anti-harassment policy.


Stickers #1. Twenty years ago the local chamber of commerce was looking for a way to ban window flyers as they created a lot of trash in parking lots. The solution was ADA. The ordinance (Los Angeles) bans putting anything on the front or rear window of a vehicle as it may obstruct the view of the driver and disabled person may not be able to remove them. It does permit such items to be put on the side windows. I think this would apply to those stickers. -James S.

Stickers #2. It can be very dangerous if the sticker is stuck to the center of the front windshield and blocks the view of the driver. Several years ago, the owner of a stickered car windshield, wanted to file a lawsuit against the HOA for blocking his ability to drive his car in a safe manner. He had no way to get the sticker off the glass and thus could not drive his car safely. It caused financial loss. He wanted money to pay for his taxi and time lost. The HOA now puts stickers in the lower left hand corner of both the windshield and driver's side door window. Also don’t damage car paint....What would you do..... pay or not? - Nancy S. Love your newsletters.

RESPONSE: If an association were negligent in how it applied the sticker and damaged an owner's car, I have a good idea how a court would rule. I recommend against putting stickers on the front or rear windshields. They should be put on the driver's side door window--or better yet, driver's side rear door window.

Stickers #3. Stickers on car windows. An automobile is private property just as your residence. I would consider a sticker placed on my window vandalism. Can you slap a sticker on the front door of a house if they have a violation? No, you send them a notice. Same should hold true if a car is parked in violation. Thank you. -Gary S.

RESPONSE: Cars are treated differently than houses. Houses aren't illegally parked in fire lanes, block other cars. block fire hydrants, and aren't subject to towing like cars. Stickers seem to be an effective deterrent for bad behavior.

*****


Proof of Ownership. Since a property deed need not be recorded, to be valid, we amended our CC&Rs to require deeds be recorded in order to be used as ownership proof, and we barred those fun family sized "land contracts" that some use to skirt the rules. -Laurence A.

RESPONSE:
Whenever we restate documents, we routinely include a provision that deeds must be recorded to establish membership in the association. It makes it easier to verify qualifications for election to the board as well as other issues.

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Managers at Meetings

May 20, 2018 0 Views 0 Comments

QUESTION: Our manager attends our executive session meetings. We have a new board member who is challenging the legality of the manager's attendance. It appears to me that Davis-Stirling is silent on this issue. Are we doing anything improper? 

ANSWER: It is common (and legal) for managers to attend executive session meetings.

Executive Session. Executive sessions are private board meetings involving matters of a sensitive nature. They include legal issues, formation of contracts, disciplinary hearings, personnel issues, payment plans, and foreclosure decisions.

Who May Attend. Because of their confidential nature, members do not have a right to attend executive sessions, except for their own disciplinary hearings. However, that does not mean the meetings are limited to directors only. Boards can invite others to attend, as may be appropriate.

For example, a project manager may be invited to discuss the formation of contracts with potential contractors for an upcoming construction project. Managers are commonly invited to attend to take minutes and participate in the discussions. Managers often have valuable insight and historical knowledge to help the board make prudent decisions. Moreover, they are frequently tasked with carrying out decisions made in executive session.

Exceptions. It would be appropriate for the board to exclude a manager from participating in discussions of the manager’s performance or contract renewal.

RECOMMENDATION: Boards should utilize management effectively. Oftentimes, this means including managers in more meetings, not less. If the cost is sensible and the association benefits from the manager’s presence, including the manager in executive sessions is a good decision.

Thank you to attorney Nate McGuire for answering this question.

PROOF
OF OWNERSHIP

QUESTION: Can a member ask board members to show proof of ownership?

ANSWER: You can ask. However, sitting directors are not required to provide proof.

Records Requests. Members are entitled to inspect certain association records. If a record is not on the list of records subject to review, there is no right to inspect it. A director’s proof of ownership (i.e., property deed) is not on the list. Even if a record is subject to inspection, the request would need to be to the association for its records, not to directors for their records. However, a quick trip to the county recorder’s office should yield the proof you seek.

Director Qualifications. Most associations’ governing documents require a person to be an owner to serve on the board. Qualifications should be confirmed during the nomination process before ballots are mailed. Sometimes confirmation is difficult or circumstances change and a director’s lack of qualification comes to light later.

Politics. While a director is not required to provide proof of ownership, political pressure may do the trick. Or not. A certain POTUS declining to turnover taxes comes to mind.

RECOMMENDATION: If you believe a director is not qualified, you can ask the board to make a determination. If it turns out a director is not qualified, the board may declare vacant the seat of any director who ceases to meet qualifications that were in effect at the beginning of that director's term of office.

Thank you to attorney Nate McGuire for answering this question.

HIRING LAWYERS


We are looking for experienced HOA attorneys for our Palm Desert and for Riverside offices.

Candidates should have at least five years' experience working with community associations.

We offer growth opportunities and excellent benefits. If you are interested, contact me at 800-464-2817 or by email. -Adrian Adams

Kudos #1. So glad you and the newsletter were resurrected--you were both missed! -Trudy M.

Kudos #2. I am certain I join ALL of your readers in rejoicing that you are still with us!!! -FGL

Kudos #3. Oh goodness, please don’t die; we love you and need you around. -Elizabeth B.

Kudos #4. I always find your newsletter fascinating and informative--not only entertaining. Does anyone ever unsubscribe? -Nancy H.

RESPONSE: I once had someone unsubscribe because they were offended by my humor. They thought serving on the board was deadly serious and didn't appreciate me poking fun. I had a drill instructor like that. I didn't dare crack a smile the entire 13 weeks I was in boot camp. As soon as I graduated though...


Hiring Attorneys. It seems like every newsletter issue announces still another attorney joining your firm. If so many attorneys are needed to help manage associations, then something must be going wrong. -Joseph A.

RESPONSE: If all we we did was help manage associations, that wouldn't be so bad. It's all those messy legal issues that keep us awake at night. If the legislature would take a 5-year vacation and then renew it every five years, we wouldn't need so many lawyers. Do you know any good lawyers you can send my way? We are hiring.

*****


Realtors. If a member of the association is a Realtor and is on the board of directors, what then? What happens if board members allow the Realtor to press his business agenda and the board sits silent, what then? Replace the whole board? Or, as you have suggested in the past, we, the members of the association, should all move? -Paul S.

RESPONSE: I wouldn't move just yet. Not all real estate agents are bad and some make good board members. If a real estate agent misbehaves and fellow directors allow it, you have recourse. Here are ten options for dealing with bad boards.
If you decide to move, I bet your Realtor/director would be happy to help.

*****


Trucks #1. Most garages will likely not accommodate king cabs or crew cab pickups that are popular for personal transportation. A king cab has a half-door and a crew cab has a full-sized door. Beds are 6-foot and 8-foot. I'm not even going to discuss the dually pickups... -John A.

Trucks #2. Our CC&Rs prohibit trucks larger that 3/4 ton. Our CC&Rs were rewritten about 3 years ago. I made every attempt to educate our board that 1-ton trucks are daily driven in today's society. They voted to keep the restriction from 1983 intact. Does this current information about trucks allow our community to drive a 1-ton truck? -Tony M.

RESPONSE: If you challenged the reasonableness of prohibiting 1-ton pickups, crew cab pickups, or dually pickups, I suspect the courts would uphold the association's restrictions. Since the Bernardo Villas decision, the Supreme Court declared in Nahrstedt v. Lakeside Village that CC&Rs must be presumed reasonable and deferred to by courts. The burden is on the person challenging the restriction to persuade the court that the restriction is (i) arbitrary, (ii) imposes burdens on the use of lands it affects that substantially outweighs the restriction's benefits to the development's residents, or (iii) violates a fundamental public policy. That's not easy to do.

Trucks #3. Any rules/laws that you know of regarding how many vehicles you can park around your property? We have private streets and one house has two vehicles in the garage, 2 to 3 in the driveway, 2 to 3 more out front, and he often parks a couple around the neighborhood. I believe he has seven vehicles. He is the only one who drives them. -Michele G.

RESPONSE: You should check local ordinances to see if the city has any restrictions. In addition, check your CC&Rs and rules. I bet you already have restrictions in place. If not, your board can adopt rules limiting the number of vehicles and where they can be parked. Since your association owns the streets, it has the right to regulate them.


Trucks #4. My association started putting fairly big warning stickers on car windows when someone parks where they shouldn't. I understand they are very difficult to remove. Isn't it illegal to put a sticker like that on a car window? Or is it only prohibited if placed on the windshield? -Alice O.

RESPONSE: I could not find any laws prohibiting the stickers. I checked the internet and found a number of companies doing a brisk business in them.

Associations that use stickers find them quite effective in discouraging parking violations.

There are sufficient problems with towing that I favor the use of stickers. People tend to go ballistic and sue or threaten to sue when their car gets towed. A sticker costs only pennies and gets a violator's attention without triggering lawsuits.

If you slip a paper notice under a under windshield wiper, violators like to throw them away and claim no notice was ever placed on their car, or the notice blew away, or was removed by a passerby, or dissolved in the rain, or whatever. That does not happen when a large, bright-orange notice is stuck to the driver's window.

The stickers are effective deterrents because they are difficult to remove. You need a razor scraper and soapy water to remove them. Generally, that happens only once. Thereafter, people are careful not to park illegally.

RECOMMENDATION: I don't favor using stickers on a first violation if it can be avoided. If possible, they should be kept in reserve for repeat violators. This will depend on the size of the association and the logistics involved. The larger the development and the frequency of violations will impact the procedures followed.

Adrian J. Adams, Esq.

Boards should contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

The Digital Elite

May 6, 2018 0 Views 0 Comments

QUESTION: The board has about 350 email addresses for our members. They also have access to a private social network that has 39% of the households as members. Would the board be required to send meeting notifications via postal mail to members not included in our "digital elite"?

ANSWER: I’m impressed you have so many signed up for email. Do you need to send snail mail notices to members who are still in the Dark Ages? Fortunately, "No."

Posting Meeting Notices. As long as the association posts meeting notices in a prominent location accessible to all members, there is no requirement to mail notices. (Civ. Code §4045(a)(3).) Posting notices is allowed so long as the association has designated the location in the annual policy statement prepared under Civil Code §5310. Associations that do not post meeting notices need to use another general delivery method (first-class mail, email to members who have consented in writing, billing statement, newsletter or in-house television broadcast).

Mailing Meeting Notices. The exception to posting is if a member asks for individual delivery. (Civ. Code §4045(b).)Members can ask their associations to have meeting notices sent to them by individual delivery which includes postal mail and email. (Civ. Code §4040.) If any of your members have requested meeting notices be mailed or emailed to them, then, in addition to posting in the common area, the association will need to mail or email notices to the members who have asked.

Content. In addition to the date, time, and location of the meeting, the notice must also contain the agenda. (Civ. Code §4920(c).)

RECOMMENDATION: Make sure you have designated a conspicuous location to post the meeting notices and agendas in your annual policy statement. Although you are not required to also email board meeting notices, your “digital elite” members will appreciate receiving notice by email.

WEEKLY LIST OF
WHO HASN’T VOTED

QUESTION: It is time for our annual election. The ballots are being returned to an independent election company. This company is providing a weekly list to the board of all members who have not yet voted. Board members plan to contact these individuals with a request to vote for certain candidates. Is this legal? Do the other candidates have a right to this list so they can do the same?

ANSWER: A strict reading of the Davis-Stirling Act indicates the list cannot be used by directors, candidates, management or anyone else to campaign for certain candidates.

Campaigning: By statute, association money cannot be used for campaign purposes (Civ. Code §5135(a)) Contacting members to urge them to vote for certain candidates qualifies as a campaign purpose (Civ. Code §4920(b)(1).) The association, in paying for the independent election company, has spent funds for the list of members who have not voted. Therefore, directors, candidates or any one else who uses the list to ask members to vote in a certain manner would be using association funds for campaign purposes. All members have a right to campaign for or against any candidate at their own expense.

Equal Access Required: If any member or candidate advocating a point of view related to an election is provided access to association media (such as newsletters, internet websites) the association must provide equal access to all candidates and members advocating a point of view. (Civ. Code §5105(a).) Associations must ensure access to any common area meeting space during a campaign at no cost to all candidates and members advocating a point of view. (Civ. Code §5105(a)(2).)

Early Ballot-Voter Count: The inspector of elections can provide an early ballot-voter count that includes the number of ballots that have been received. Providing a list of who voted is not one of the inspector’s duties (Civ. Code §5110(c)) but is within the inspector’s discretion.

RECOMMENDATION: Voter apathy is a common ailment in most associations and medical research has not yet developed a cure. Contacting members who haven’t voted and asking them to send in ballots may be helpful to meet the quorum of members requirement.

Using a "non-voter" list supplied by the inspector of elections to contact members is allowed, so long as it is not used to campaign for certain candidates. To ensure the list is being used just to encourage voter participation, contact should be made in writing (email or mail).

If non-voting members are to be contacted by phone, it is best to have man
agement make the calls and use a script that does not endorse any particular candidates, but only asks the members to vote.

Thank you to attorney Laurie Poole for this article.


Kudos #1. Was starting to find out where your funeral was held when I received your newsletter. Your newsletters are my second source for information, but now my main source after the death of the Times columnist. -Eric D.

Kudos #2. Great Issue ........Thanks for all your guidance. -Raye P.


Kudos #3. Really Excellent!!! -S.L.

JAMIE HANDRICK


Attorney #1. Congratulations on choosing Jamie Handrick to join your San Diego team. She is so knowledgeable and keeps my boards at ease when working with her. With Laurie Poole at the lead, it should be a winning combination! -Lynn R.

Attorney #2. I send digital salutations & appreciations to you over the mighty Sierra Nevada (Reno) regarding your illuminating missives. I have noticed a trend: nearly every newsletter introduces another lawyer to your firm. May I assume California HOA laws are not only multiplying in number but also growing in complexity? Or am I more accurate in observing how our species is moving away from kind, considerate, respectful, common-sense conversation with neighbors & association boards and moving swiftly & directly into the courtroom? I beseech you to keep “conversing” with your readership, offering kind, considerate, respectful, common-sense words through your engaging wit-n’-wisdom. -Donald M.

RESPONSE: You are right about the trend. There is a growing need for HOA lawyers in California and I've had the good fortune to attract talented ones to the firm. You are also right about California's laws multiplying in number and complexity. Our legislature has gone off the rails with excessive regulation. I don't know if lack of civility is on the rise but litigation seems to be. Despite our efforts to keep associations out of disputes, our litigation department is on overload.

TRUCK RESTRICTIONS


Trucks #1. You said pickup trucks could not be banned where cars are permitted but I wonder if there could be a size restriction, such as “vehicles longer or wider than xx feet or inches may not park in (certain areas)”? Large pick up trucks can be visually disruptive and lower the look of a condo complex. They are also wider than a car and can make passing them on a driveway difficult. Another large pickup might not be able to get through. -LL

RESPONSE: Yes, associations can impose reasonable restrictions on the size and types of vehicles. In my opinion, RVs, tow trucks, tractor-trailer rigs, monster trucks, etc. can all be restricted. Such vehicles are not normal and accepted means of personal transportation, and some are as unsightly as heck.


Trucks #2. Our CC&Rs say we cannot park non-standard vehicles in our driveways and lists campers, trailers and golf carts. The DMV defines carts as a vehicle, which makes them a cheap Tesla. Is the restriction reasonable? -Dave M.

RESPONSE: Yes, golf carts can be restricted. It depends on the community. Some retirement communities allow them and it makes perfect sense. In other communities, not only are they an eyesore, they could represent a safety hazard as a slow-moving vehicle on a fast, busy road. Each community can decide for itself what makes sense for their association.


Trucks #3. I thought the Nahrstedt case overturned the Bernardo case regarding trucks. -Anon

RESPONSE: I'm glad you asked. The California Supreme Court in Nahrstedt v. Lakeside Village criticized the Bernardo Villas decision for failing to apply a deferential standard to the association's CC&Rs. The Court did not overturn Bernardo Villas. Instead, it established a test for evaluating CC&R restrictions.

It held that CC&Rs are presumed reasonable and will be enforced uniformly against all residents of the common interest development unless the restriction is (i) arbitrary, (ii) imposes burdens on the use of lands it affects that substantially outweigh the restriction's benefits to the development's residents, or (iii) violates a fundamental public policy. Moreover, the restriction must be viewed not by reference to facts that are specific to the objecting homeowner, but by reference to the common interest development as a whole.

If the pickup truck prohibition had not previously been litigated and were tried today under the Nahrstedt standard, it might produce a different result. Until that happens, the Bernardo Villas decision stands and blanket pickup truck prohibitions are invalid.

Adrian J. Adams, Esq.

Boards should contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Realtors in Board Meetings

Apr 29, 2018 0 Views 0 Comments

QUESTION: The Davis-Stirling Act allows only members to attend board meetings. Tenants, property managers, real estate agents, spouses and family members (not on title) attorneys, and other representatives cannot, and should not, attend a board meeting on behalf of a member. Can we exclude a real estate agent who wants to represent owners of rental units?

ANSWER: I need to make a small correction to your question. The Davis-Stirling Act does not prohibit non-members from attending board meetings. Rather, it's an authorizing statute which states: "Any member may attend board meetings, except when the board adjourns to, or meets solely in, executive session." (Civ. Code §4925(a).) That means members have a right to attend meetings and boards cannot exclude them.

Boards can, however, exclude non-members. In my experience, most boards allow non-member spouses and tenants to attend meetings, provided they are not disruptive. It is entirely discretionary with boards.

Realtors. The same principle applies to non-member real estate agents. If an agent wants to speak to the board on behalf of his/her landlord clients, the board can allow the agent to attend if they so choose. If it turns out the agent is doing nothing more than pushing his/her business interests or is disruptive, the person can (and should) be excluded from meetings.

RECOMMENDATION: Boards should consider adopting meeting rules to address who may attend meetings, open forum policies, meeting decorum, recording meetings, etc. If you need assistance, contact us.

POWER OF ATTORNEY


QUESTION: Does the board have the right to request a notarized copy of a power of attorney so that it may be kept on file?

ANSWER: Yes, if someone has a "power of attorney" to make decisions on behalf of an owner, the association should have a copy of the authorizing document on file.

Otherwise, they could find themselves in hot water accepting direction from a stranger regarding the affairs of an owner.

BANNING TRUCKS


QUESTION: Our association bans pickups from parking overnight in driveways or in common areas. Parking in garages is permitted since the vehicles aren’t visible when they are in a garage. Our CC&Rs date back to the 70s and, as I understand it, things have changed in 40+ years. Can we still legally ban pickup trucks from parking in driveways and common areas overnight?

ANSWER: Yes, a lot has changed in the past 40 years--computers, cell phones, the internet, drones, recreational marijuana...and trucks. If you allow cars to park in driveways and common areas, you have to allow pickup trucks.

Case Law. This issue was addressed in a 1987 case, Bernardo Villas Management v. Black. The association had a CC&R provision that "No truck, camper, trailer, boat of any kind or other form of recreational vehicle may be parked in the development."
Such restrictions were quite common and boards were obligated to enforce them.

A resident in Bernardo Villas bought a pickup which he used solely for personal transportation and parked in his carport. The board did its duty and sued the resident for violating the CC&Rs. Much to everyone's surprise, the trial court found the restriction unreasonable. Convinced the court got it wrong, the association appealed.

The court of appeal also sided with truck owners and agreed the restriction was unreasonable. The court noted that, "As times change, cultural perceptions--including society's acceptance of certain types of vehicles--also change. The pickup truck no longer has a pejorative connotation. One person's Bronco II is another's Rolls-Royce." The court added that
beauty, even with cars, is in the eye of the beholder.

The next time you're on a freeway, look for pickup trucks. You will notice lots of them--Chevy Silverados, Dodge Rams, Toyota Tacomas, Ford F-150s, and scores of others of all shapes and sizes. The Ford F-150 has the distinction of being the most popular motor vehicle of all time. It has been the best-selling vehicle in the United States for over 30 years.

Pickups used as work trucks with signage, racks and tools can still be banned. Pickups used strictly for personal transportation cannot.

RECOMMENDATION: Your association is 30 years behind the times and should revise its rules. If someone mounts a legal challenge to your restriction, I have a good idea who will win that fight.

JAMIE L. HANDRICK
JOINS ADAMS|STIRLING


I am pleased to announce that attorney Jamie Handrick joined our firm.

HOA Law. Jamie brings years of solid CID-law experience to the firm. She has been in practice 17 years with the past 12 exclusively in community association law.

Jamie represents commercial, residential, and mixed-use associations throughout San Diego County.
She has extensive experience in construction litigation, enforcement of governing documents, civil litigation, collections, and fair housing compliance.

Industry Activities. Jamie is active in industry organizations such as the Community Associations Institute (CAI) and the California Association of Community Managers (CACM). In addition, she conducts boot camps for new association board members and speaks at educational events.


Litigation Counsel. Before specializing in community associations, Jamie practiced eminent domain litigation where she handled high profile cases for the City of San Diego and the Metropolitan Transit Development Board. She also litigated labor and employment issues as well as general civil matters. Jamie's experience has been valuable in her evaluation of potential litigation for associations and advising boards on how best to resolve disputes before they turn into litigation.

San Diego. Jamie joins our team of lawyers in San Diego under our newest partner, Laurie Poole. Jamie will work out of our San Diego office in Mission Valley. We are very happy to have such a talented and experienced attorney in our firm.

If your association needs legal services, 
contact us for a proposal.


Some of you caught that I misspelled "unnecesary" two newsletters ago and appreciated my explanation that the second "s" failed to show up for work. In the next newsletter I brought more smiles by referring to "loose canons." This time, it was right spelling, wrong word.

Typo #1. Your recent newsletter, while quite informative (as usual) was a bit confusing when it referred to "loose canons." I would assume that you were not referring to questionable church teachings or misguided musical practices, but to the fear of rolling shipboard artillery in the days of wooden sailing ships when a loose cannon could be quite dangerous. Keep up the good work! -Steve T.

Typo #2. I especially laughed out loud at this: "Nut-Job? If the owner is a known nut-job (yes, they exist), it makes it difficult for boards to evaluate claims. Even loose canons occasionally hit a target." BTW, I have sent many of these newsletters to the BOD! -Cheech A


Typo #3. The "typo" tua culpa was hilarious! Well done, sir. -Erica G.

NOTE: Loosely translated from Latin, tua culpa means "it's not my fault." -Adrian

*****


Laurie Poole #1. Congratulations on choosing Laurie Poole to join your firm. She is a great attorney--very knowledgeable and conscientious. I have known Laurie for a number of years. She assisted with restating our governing documents a couple years ago, has been our association attorney and I served with her on the CAI board of the San Diego Chapter. She is a great addition to your staff. -Carol L.

RESPONSE: With attorneys Carrie Heieck and Jamie Handrick, Laurie is building a great team of lawyers for the San Diego region. We expect to add additional lawyers and staff to her office over the course of this year.

*****
 

Chinese Translations. My December newsletter regarding an association where most members spoke Chinese was published nationally by the Community Associations Institute. Following is a comment by a reader on the difference between translating and interpreting.

For your information, translation is done in writing. Interpretation is done orally. Despite that many people use translation as an action done orally, that is not correct. -Tia H.
Adrian J. Adams, Esq.
Boards should contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

Confidential Letters

Mar 18, 2018 0 Views 0 Comments

QUESTION: A homeowner keeps sending letters to board members' homes and every letter says it is “confidential to the board” and the board can’t share it with our management company. Does this homeowner have a right to demand that her communications (which ought to go to the manager) be kept private?

ANSWER:
If the board decides the information in the letter needs to be shared with management, it can do so. When carrying out their duties, directors must balance the general welfare of the community against the interests of the individual. (Cohen v. Kite Hill.) That might mean disclosing the information.

Legal Counsel. The same is true with the association's legal counsel. If a director shares something with the attorney and tells him/her not to share it with the other directors, the attorney is not obligated to keep it confidential.

As corporate counsel to the association, an attorney does not represent individual directors or owners. An association's legal counsel represents the association as a corporate entity.

In representing an organization, a member [attorney] shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement. (State Bar Rules of Professional Conduct; Rule 3-600(A).)

When a director starts a conversation with "I have something confidential to tell you that cannot be shared with the other directors," I have to stop them and explain my obligations to the corporation may require that I share it with other directors. At that point, the director can decide whether to proceed.

Misconduct. Similarly for boards, if the owner's letters allege misconduct by the management company, the board has an obligation to investigate the claims. The investigation may involve talking to the management company about the allegations.

Nut-Job? If the owner is a known nut-job (yes, they exist), it makes it difficult for boards to evaluate claims. Even loose canons occasionally hit a target. Boards need to review each letter to see if there is any substance buried in all the craziness. If it's nothing more than an obsession with a particular issue that has already been investigated but gets repeated endlessly, a letter from the association's legal counsel to the overwrought owner may be warranted.

RECOMMENDATION: The owner should be told (in writing) that the board will not keep her letters confidential if the directors feel the information and its source should be disclosed. You can tell her that all letters dealing with routine matters will automatically be sent to the management company.

THREATENED LAWSUIT
DISQUALIFIES CANDIDATE?


QUESTION: Our HOA is in the process of enacting election rules that disqualifies anyone who ever threatened to sue the association. I am going door to door to get petition signatures opposing the rule. I'm told if I do, I am subject to fines under the prohibition against soliciting.

ANSWER: Disqualifying anyone who ever threatened to sue the association is a bit much. I don't believe a court would find that reasonable. Besides, the association could end up with no one left to serve on the board.

Active Litigation. I am in favor of temporarily disqualifying anyone who is in active litigation against the association and/or its directors. It avoids conflicts of interest that inevitably arise when the plaintiff is simultaneously suing the association and voting on board issues. It also avoids the awkwardness of directors serving on the board with the plaintiff. Once the litigation is over, the person can once again be eligible to serve on the board.

Solicitation. As for penalizing you for circulating a petition, that would run afoul of the Davis-Stirling Act. A change in the Act that went into effect January 1 allows members to canvass and petition members. (Civ. Code §4515(b)(4).) In particular, the association cannot prohibit political activities.


Assessment #1. My association is the one in your column about the special assessment. The assessment of $11,500 was for a city mandated earthquake retrofit. -Anon

RESPONSE: The retrofit qualifies as an emergency special assessment. It is an extraordinary expense necessary to repair the common areas where a threat to personal safety is discovered. (Civ. Code §5610(b).) The monies would not have been in the budget or the reserves and must be raised via a special assessment.

This is not something where the board can say to the city, "We cannot comply with your order because the members refuse to fund it." The city will impose fines and take other actions that could be quite unpleasant. If the city red-tags the buildings, everyone will be forced to move out until the work is done.


Assessment #2. Regarding the $12,000 "unnecessary" assessment, I'd like to know why the person thought it was unnecessary. It is possible the HOA is not communicating as well as it could to owners. -Tony V.

RESPONSE: Poor communication is a possibility. Another explanation is that some people are contrary by nature. It does not matter how valid the assessment, they are against it.


Assessment #3. A membership vote on a special assessment must be done by secret ballot. How can this be done, when they need a quorum--which is a meeting with people in attendance? -Meri N.

RESPONSE: Ballots count toward quorum the same as if the person attended the meeting. (Civ. Code §5115(b).)

Spell Check. For the first time I can recall in the years I have been receiving your informative weekly newsletter I see a misspelling in the titled subject: "Unnecesary"! What happened? -Sharon M.

RESPONSE: The second "s" didn't show up for work. It turns out he doesn't work on Sundays.

*****

Laurie Poole. Congratulations to Adams Stirling and Laurie Poole on the addition of Laurie to your fine cast of attorneys. An excellent move on both your parts! Laurie is one of my favorite attorneys: good-natured, no-nonsense and knowledgeable. Well done! -Sharron B.

RESPONSE: Thank you! Yours is one of many congratulatory notes we received. Laurie is an exceptionally well-qualified HOA attorney and we are pleased to have her as a partner.

*****

Renting Rooms. One of my associations meets at the senior center close to the complex. The fee is $100 for 2 hours. Another association meets in the community room at a local church and the charitable donation of $40 for approx 2 hours. -Joe G.

Adrian J. Adams, Esq.

Boards should contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC

Unnecessary Assessment

Mar 4, 2018 0 Views 0 Comments

QUESTION: My HOA wants every household to pay $12,000 for an unnecessary special assessment. And, they didn't get 51% approval vote. Is that legal?

ANSWER: Special assessments do not require approval by 51% of the membership. By statute, approval is by a majority of voting members once a quorum has been established. (Civ. Code §5605(b).)

Emergency Assessment. If the assessment you describe is being imposed without a vote of the membership, it must be an emergency assessment. Although you called it unnecessary, the board must have determined the assessment was required. Very likely, they reviewed the situation with legal counsel and deemed it an emergency.

Fiduciary Duty. Directors are bound by fiduciary duties to act in the best interests of the association, even when it hurts them personally. Don't forget, each of the directors must also pay the $12,000. I'm sure they don't like it any more than you do. Something must have happened to force an assessment that requires them to reach into their own pockets.

Maintenance. It has been my experience that most emergency assessments are related to significant common area repairs without sufficient reserves. Common culprits are elevator equipment failures, deteriorating plumbing, unexpected roof failures, and widespread window leaks.
Most failures are water related, which damage common areas and create potential health issues from mold.

Too often, prior boards fail to adequately reserve for large-ticket items. They think they are doing everyone a favor keeping dues down by deferring maintenance and skimping on reserves. Doing so means subsequent boards are left holding the bag when big ticket items fail and special assessments must be imposed on unhappy homeowners.

Bank Loan. The negative impact of the assessment can be reduced by borrowing the monies needed from a bank so repairs can be made immediately. Repayment of the loan is then spread over a number of years. Instead of each member writing a check for $12,000, they pay a more manageable monthly assessment until the loan is repaid.

RECOMMENDATION: Failure to make needed repairs will likely lead to litigation and higher special assessments. You are better off accepting the assessment and dealing with the problem now.

RENTING ROOMS
FOR BOARD MEETINGS


QUESTION: The board president is insisting we rent a room at a Best Western Inn for our board meetings and have the HOA pay for it. Our management company has an office 20 minutes away and we have a common area park available as well. Can the president force the other board members to rent a room?

ANSWER: The board as a whole makes decisions about when and where regular meetings are held, e.g., the third Tuesday of the month at 6:30 p.m. in the clubhouse. In this case, it involves renting a room offsite and the president is prompting fellow directors for a decision. There is nothing wrong with that--it's a sign of leadership.

Park. The location of meetings, both for the convenience of the board and the membership, is an important consideration. The association's park has the advantage of being close. It also has the downsides of noise, wind, temperature swings, and rain.

Office. The other option you mentioned is the management company's office. It has the advantage of being free and avoiding all the problems of an open-air meeting. Unfortunately, it is a 20-minute drive from the association, which will discourage many members from attending.


Hotel. If the Best Western is close and the cost is reasonable, it makes sense to hold meetings there. That way, weather, noise and distance won't disrupt meetings and discourage members from attending. It is a business decision for the board to make.

OWNERS ON
PROPERTY WALKS


QUESTION: We have an owner who contends that not allowing owners to go on our monthly manager walk is a violation of the Open Meetings Act. Our manager does a visual inspection of the property for maintenance issues and owner violations. Up to two of our five board members go on the walk. Are we in violation by not allowing owners to join in?

ANSWER: No, you are not in violation. Your manager can inspect the property without having to announce it in advance and publishing an agenda to the membership.

Meeting Defined. Including two directors in the manager's inspection does not turn it into a board meeting. Board meetings are defined by the Davis-Stirling Act as a gathering of a majority of directors at the same time and place to "hear, discuss, or deliberate upon any item of business that is within the authority of the board." (Civ. Code §4090.) Two directors accompanying the manager on her property inspection does not constitute a board meeting.

RECOMMENDATION: If your homeowner wants to be involved in property inspections, he/she should run for a seat on the board.

LAURIE POOLE
JOINS ADAMS STIRLING
AS PARTNER


I am pleased to announce that attorney Laurie Poole joined our firm as our newest partner. Ms. Poole brings nearly 25 years of experience as an attorney in the HOA industry.

CCAL Fellow. Laurie is a fellow of the Community Association Institute’s prestigious College of Community Association Lawyers (CCAL) and was recently elected to its Board of Governors.

Case Law. Laurie is also a member of CCAL’s Amicus Review Committee and devotes time to shaping the laws governing California’s community associations. Laurie has already had a significant impact in our courts of appeal. Ms. Poole was appellate counsel in Quail Lakes v. Kozina (2012), trial and appellate counsel in Mission Shores v. Phiel (2008), and trial counsel in Fourth La Costa v. Seith (2008). Through her efforts, nine appellate decisions have become published case law in California.

Legal Practice. Laurie has extensive experience representing common interest developments, including master planned communities, large condominium projects, mixed-use, and highrise developments. The majority of her practice involves interpreting and amending governing documents, advising boards on compliance matters, addressing governance and insurance issues, and enforcement of governing documents.

Industry Activities. Laurie is an active volunteer for the Community Associations Institute (CAI) and the California Association of Community Managers (CACM). She is currently a member of the Board of Directors of the San Diego chapter of CAI, having served as its President. Laurie is a frequent speaker at industry events and has published numerous articles on common interest development law.

Education. Laurie graduated from the University of California, Santa Barbara with a double major in English and Sociology. She earned her Juris Doctorate from the University of San Diego, School of Law where she was a member of the Law Review.

We are proud to have Laurie Poole on our team. If your association needs legal services, please contact us for a proposal.

 
Beekeeping #1. You didn’t mention Africanized bees, a growing problem in the honey bee population. A lot of apiaries are being removed due to this problem. Putting them in HOA is ill-advised. -Jerry I.

RESPONSE: I don't think anyone is advocating using Africanized bees. The European variety (introduced into the Americas in the 1500s) are preferred because of their gentleness and robust honey production.

Beekeeping #2. Bees are everywhere. They have a hive somewhere, we just don’t know where. When we keep bee hives on top of garages we know exactly where the colonies are and can reduce the colony by giving away bees when the colony gets too large. With proper education of residents, bee keeping in urban communities is actually a safer way of dealing with bees. -Margaret V.
Adrian J. Adams, Esq.
Boards should contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC

HOA Beekeeping

Feb 18, 2018 0 Views 0 Comments

QUESTION. Do you have information on guidelines for beekeeping in homeowner associations? The board decided not to allow apiaries deeming them a nuisance but is now revisiting their decision.

RESPONSE: Honey bees are wonderful creatures. They are the world's most important pollinator of food crops. One third of the food we consume relies on bee pollination.

Need for Apiaries. Tragically, bee colonies are collapsing at an alarming rate due to pesticides, parasites, and disease. To offset that, there is a push to place more bee hives ("apiaries") in both rural and urban environments.

In HOAs. Because homeowner associations make up such a large portion of California's housing market (~50,000 associations with over 9 million residents), they are being asked to place apiaries in their developments.

Bee Stings. There is a lot of resistance to apiaries because most people are frightened by bees. They are afraid of being stung. In reality, honey bees are not inclined to sting people. Unlike other stinging insects that sting and fly away, honey bees die after stinging. Their sting, while painful, is relatively harmless. In most, the swelling and pain go away within a few hours. However, for those with sting allergies, it can trigger a reaction that is potentially deadly. Thus, the difficulty in establishing apiaries in urban developments--people fear being stung and associations fear potential liability.

Insurance. Because of potential claims, it is important that associations entering into arrangements with beekeepers have legal counsel review the company's insurance. Not all insurance is created equal. I recently reviewed a policy for an association and found so many exclusions it rendered the insurance meaningless. Proper insurance can minimize an association's potential exposure.

RECOMMENDATION: When it comes to apiaries, urban developments are more problematic than rural settings. The higher density of people and and structures put bees in closer contact with people. Depending on the the insurance, boards may wish to consider an apiary in their development.

PORTABLE
CAR CHARGER


QUESTION: The Civil Code applies to installing an electric charging station. It does not seem to explicitly prohibit the use of portable 120V electric vehicle chargers. Is that correct?

RESPONSE: Owners can use portable chargers (a modified extension cord) to charge their vehicles. What they can't do is plug them into a common area outlet. Doing so means your neighbors are paying to charge your car's batteries.

With proper approvals, you can install a dedicated outlet in your parking space to charge your vehicle at your expense rather than the association's. The cost will depend on where the electrical panels are located and what arrangements you make with the association for tracking your electricity usage.

An alternative to installing a charging station is to pay the association a flat rate to plug into a common area outlet. For more information, see "Electric Charging Stations."

CHANGES IN
MOBILEHOME RESIDENCY LAW


Effective January 1, 2018, changes in the mobilehome residency law clarify the distinction between guest and companions and change the verification process for live-in caregivers.

Additional Occupant. Senior mobilehome residents can now have a live-in companion without first requiring a Medical Needs Plan or without being charged additional fees. A resident can designate one person as a companion per calendar year, except in the case of the companion's death.

Live-in Care. Previously, a live-in caregiver over 18 could live in the mobilehome without a park fee provided it was pursuant to a physician's treatment plan submitted to the park. To avoid an invasion of medical privacy, the legislature changed the requirement from submission of a treatment plan to submission of a written confirmation of the need for a caregiver. Moreover, the park can ask for confirmation only if the need is not readily apparent.

Rules Violations. The change in the law also clarifies the companion or caregiver does not have tenancy rights and any violations of park rules by the person is deemed a violation by the owner. It makes clear that these provisions do not create a duty by park management to manage, supervise, or provide care for a guest, companion, or caregiver during that person’s stay in the park. (See Civil Code §798.34.)

RECOMMENDATION: Mobilehome park associations should update their rules to comply with these changes in the law.

Thank you to attorney Jason Savlov for this article. Those needing assistance updating their rules should contact us.


Incarcerated Director. Can the board declare the seat vacant if the director who killed someone in a bar fight is convicted? -James L.

RESPONSE: Yes, Corporations Code §7221(a) allows a board to declare vacant the seat of a director who is convicted of a felony, regardless of whether it is part of the association's governing documents. If the board is not inclined to suffer the optics of a director on trial for murder, obtaining a resignation may be prudent.

*****


Amending Docs. Our association was faced with the same situation of a super majority being necessary to amend our outdated CC&Rs. What we did was amend just the section on amendments so future amendments no longer required a super majority, only a simple majority. Once that was passed and recorded, we moved forward to amend the entire document. -Rick S.

RESPONSE: That same approach has been successful with associations we work with.

*****


Earthquake Insurance. Our HOA master policy does not cover earthquake damage but some members want that protection. Your newsletter mentions that condominium owners cannot purchase insurance on the structure since it is owned in common with other members of the association.

Our community looks exactly like a condo community but is actually a planned unit development. We each own the land on which our unit sits and the entire structure. The association provides a master insurance policy that covers fire damage but not earthquake. Most of us have a renter's policy or our own condo unit policy, and some of us have our own earthquake policies. -David P.

RESPONSE: I checked with Michael Berg of Berg Insurance about your situation. Put on your seat belt; his explanation illustrates the need for insurance professionals who specialize in community associations.

Mr. Berg responded that many communities are constructed with the characteristics of single family homes but are insured like condominiums. The key is to determine what the CC&Rs require the association to insure.

Governing Documents. If the HOA is required to insure structural elements of buildings and maybe property attached to the interior of the units, the agent writes a condominium style policy even if the buildings were built like townhomes, or brownstones, or row houses, or completely detached structures.

If the association is insuring the structure, the owner should purchase an HO-6 condominium owner’s policy. It is quite common, however, for owners to purchase a policy designed for a single family home. Oftentimes, real estate agents, lenders, and personal lines insurance professionals review the type of product being sold rather than consult with the insurance in place for a community.

Special Form Policy. If the association is required to insure the residential structures for typical property perils (once known as “all risk” coverage but now called “special form”), the policy will exclude earthquake damage. Without an additional stipulation in the governing documents, there could be some confusion on which party should insure the structure for earthquake loss.

If the association insures the structure for typical perils, then the cost to repair earthquake damage would be assessed to the membership (an earthquake loss assessment). Each member should have purchased an HO-6 policy and could then purchase a companion policy providing earthquake loss assessment insurance.

Loss Assessment Coverage. The important note on earthquake loss assessment insurance is that it is only available as a companion to an HO-6 policy and only applies to assessments to repair residential property. So, if an owner purchased a special form policy that protects his property as if it were a single family home, he cannot purchase a companion policy that provides him with loss assessment insurance. That is to say, an owner can’t buy single family home insurance and then an HO-6 earthquake companion policy.

Thank you to Michael Berg (MBA, CIRMS, CMCA) owner of the Berg Insurance Agency.

*****


Kudos #1. Today’s newsletter is outstanding, Adrian. Several critical subjects, especially cumulative voting. -Marilyn B.

Kudos #2. I so enjoy reading your newsletters. -Judy B.

Kudos #3. I enjoy the Davis-Stirling newsletter, and I very much appreciate the time it takes to create them and the great information/education they provide. Keep up the excellent, excellent work! -Elise H.

*****


Common Area Keys. A homeowner (who spends her nights on your website) told us utility rooms are common areas so she believes she has the right to a key to the electrical room. Can we refuse her request?

RESPONSE: I am flattered she spends her nights on my website--it's a clear sign of intelligence.

Although owners have an undivided ownership interest in the common areas, it does not give them unfettered access to them. Associations are created to manage the common areas. Member elect a board of directors to handle that duty. That means boards can restrict access to utility closets, roofs, elevator equipment rooms, etc. Most do so for safety and security reasons. Boards can also regulate the time and manner for member access to pools, clubhouses, tennis courts and other association amenities.

Adrian J. Adams, Esq.

Boards can contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC

Replacing an Incarcerated Director

Feb 11, 2018 0 Views 0 Comments

QUESTION: One of our board members got into an argument in a bar (far from our association with no connection to HOA business) and killed someone. He also shot a second person.

He was quickly incarcerated and will probably stay behind bars for a long time. The board immediately appointed a replacement director but the confined director never resigned. In such a terrible situation, is a written resignation still needed?


ANSWER: The Davis-Stirling Act does not address director resignations. For that, we must turn to the Corporations Code. It states that "Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation..." (Corp. Code §7224(c).)

Still on the Board. If your incarcerated director has not resigned, he is still on the board. Replacing him without a resignation would be deemed an ultra vires act and invalid. An arrest is not sufficient reason to remove a director from the board. It is possible an investigation would exonerate the director and he could resume his duties on the board. From what you described, that seems unlikely, so let's look at your options.


Vacating a Seat. Sometimes, an association's bylaws will authorize the board to vacate a director's seat under certain circumstances. For example, a director fails to attend a specific number of meetings. We routinely add such provisions when we restate an association's bylaws. Without them, a board cannot remove a fellow director, only the membership can.

Removing a Director. For members to recall a director, the association must hold a recall election. Once can be called by the board or by the membership. If the bylaws or CC&Rs provide for cumulative voting, the membership may have difficulty recalling a director. A small minority of supporters can block his removal. That means resignation is your best option.

Resignation. One of your directors should visit your confined director and bring a simple "I resign from the board of directors effective immediately" for him to sign. If, for some reason, that is not possible, an oral resignation should be sufficient, either during the visit or by phone. I suspect your director will readily resign. If an oral resignation is all you can get, record that in the minutes. Doing so creates a written record of the resignation. It is unlikely anyone will challenge the resignation and equally unlikely a court would reject the resignation under the circumstances.

RECOMMENDATION. You should amend your bylaws to add director qualifications and remove cumulative voting. I also recommend eliminating quorum requirements for electing directors. Each of these changes will make your elections run more smoothly and give you the tools you need to remove directors.

EARTHQUAKE
INSURANCE

QUESTION: If my association does not carry earthquake insurance, can I?

ANSWER: Condominium owners cannot purchase insurance on the structure since it is owned in common with other members of the association. Owners can, however, purchase other coverage.

Property. Coverage is available for property improvements such as cabinets and equipment, personal property, and breakables.

Loss of Use. Loss of use coverage is available to pay for living expenses if you need to move out while repairs are being made after an earthquake.


Loss Assessment Coverage. You can also purchase loss assessment coverage which pays special assessments imposed by the association to repair structures in the community. Even if your association has earthquake insurance, a special assessment may be imposed to pay the deductible. Loss assessment coverage is available in amounts from $25,000 to $100,000, and deductible options are available as well.

RECOMMENDATION: Recently, the California Earthquake Authority made significant changes to earthquake policies available to homeowners, including more limit and deductible options. All homeowners should contact their insurance brokers and purchase the coverage described above. We are overdue for a large seismic event.

Thank you to Terri Guest, CIRMS, Berg Insurance Agency for her input on this question.

AMENDING
GOVERNING DOCUMENTS

QUESTION: Our governing documents are pathetically out of date. We tried to do a full restatement but the super-majority requirement was unattainable. We are now advised that even updating Civil Code sections requires a membership vote.

We have items in the documents that are severely non-compliant with the law and require a significant rewrite. It seems absurd that a member vote would be required to bring such clear violations of statutes into compliance. What is your take on this mess?

ANSWER: You are not alone, a lot of associations face the same situation. I have a bit of good news for you--if you want to change outdated references to the Civil Code, you can do so with a simple board resolution, update the numbers, and re-record your CC&Rs. (Civ. Code §4235(a).)

Substantive Changes. More substantive changes require approval by the membership, even if you are bringing your documents into compliance with the law. That means making a big push to get at least 50% of your members to vote for the changes and then petitioning the court to lower the approval from a super majority to a simple majority. We have successfully done this with a large number of associations over the years.

Hierarchy. If you cannot get enough members to vote and miss the 50% threshold, the legislature created a hierarchy which states that any conflicts between your documents and the law, the law controls. See Hierarchy of Documents.

REGINALD SCHUBERT
JOINS ADAMS STIRLING

I am pleased to announce that attorney Reginald "Reggie" Schubert joined our firm.

Developer Experience. Reggie brings to ADAMS|STIRLING a detailed knowledge of business and real estate law. He has more than 13 years' experience representing developer and corporate clients with an emphasis on real estate, finance, strategic planning and execution of business transactions.

Reggie worked as in-house counsel to a developer of multi-family housing and master planned communities. His duties included subdivision planning, condominium development, commercial center development and leasing, finance and defeasance transactions, multi-family construction, land acquisition, entitlement processing, and project dispositions.

Environmental Law. Before going in-house with a developer, Reggie worked in a law firm that handled environmental litigation where he gained extensive experience representing defendants and plaintiffs in lawsuits arising under CERCLA, RCRA, as well as state environmental and nuisance statutes. Reggie handled issues involving soil and groundwater contamination and remediation, insurance coverage disputes, bad faith claims, and declarative relief actions in state and federal courts.

Education. Reggie earned a Juris Doctorate from the University of California, Davis and a bachelors in Economics from California State University, Sacramento.

Contact Us. We are very happy to have such a talented and experienced attorney in our firm. If your association needs legal services, contact us for a proposal.

My article on aggressive assistance animals struck a chord. Following is some or 5h3 feedback. -Adrian


Emotional #1. I am on the board of a 360-unit condominium complex situated in a 25-acre park-like environment. At one of our meetings we had a discussion about the cost of repairs for damage done by dogs and their owners (we have a lot of dogs). I suggest that perhaps we could charge dog owners an extra fee per month to help defray these costs. I am wondering if any other condos do this and/or what you think of this idea. Thanks. -Dolores B.

RESPONSE: Theoretically, pet owners could be charged a fee under the Watts v. Oak Shores decision. You would need credible evidence of the costs to establish a reasonable fee. I am not aware of any associations who are currently charging a pet fee. Maybe our readers know of some.

Emotional #2. I was reading the newsletter and agree with the article on the Aggressive Assistance Animals, especially how the law has been abused. I am wondering if the owner of an assistance animal can be required to provide proof of insurance for both liability and property damage that might be caused by the animal? -Steve D.

RESPONSE: I know associations can require vaccinations and insurance for pets. I will have to do some research on service animals.

Emotional #3.“While the ruling in Vermont is not binding in California, it seems likely our courts would render a similar verdict.” California courts? Are you kidding? Ha! I enjoy your newsletter. Keep it up, especially the humor. -Bob C

Emotional #4. Boards should require a letter from a licensed physician or psychiatrist, not an internet psychic. The owner should be required to submit written proof that the dog has passed beginning and intermediate obedience training at a legitimate training facility such as PetSmart (our dog was trained there). The board should observe the dog obeying basic commands such as sit or down or off without a treat. A dog that exhibits the level of aggression in the article is not an emotional support dog. It is a ticking time bomb. -John A

RESPONSE: Those are all good suggestions but unenforceable. People with disabilities have the right to train the dog themselves and are not required to use a professional service dog training program. You can only ask two questions: (1) is the dog a service animal? and (2) what task has the dog been trained to perform? You are not allowed to request any documentation for the dog, require that the dog demonstrate its task, or inquire about the nature of the person’s disability. A bill was introduced last year (AB 1569) to require verification
from a reliable third-party source of a disability and the owner's need for a service animal. That alone would have brought things under control. As with all good bills, it died.

Emotional #5. In Zatopa v. Lowe, the United States District Court for the Northern District of California came to essentially the same conclusion as it pertains to Aggressive Assistance Animals: so long as reasonable alternative pets are acceptable to the landlord, as here, then the disabled tenant has no right under the disability laws to insist on a pit bull. -Craig C.

RESPONSE: Even though the court ruled that pit bulls do not qualify as emotional support animals, HUD has taken the position that “breed, size, and weight limitations may not be applied to an assistance animal.” A housing provider may deny a request for an assistance animal only where “(1) the specific assistance animal in question poses a direct threat to the health or safety of others that cannot be reduced or eliminated by another reasonable accommodation or (2) the specific assistance animal in question would cause substantial physical damage to the property of others that cannot be reduced or eliminated by another reasonable accommodation.”

Emotional #6. Did you see the news earlier this week about the person who flushed her emotional support hamster down the toilet because the airline would not allow her to take it on the plane? -M.W.

RESPONSE: I do not recommend this solution when boards are faced with aggressive emotional support animals. (The hamster could not have offered much in the way of emotional support if the owner so readily flushed it down the toilet.)

*****

Political Activities. Thanks for your interesting articles, very informative. When can a resident be charged a deposit for using common area club house? We charged a security deposit until this new law came out. -Jacqueline W.

RESPONSE: You can charge for birthday parties, weddings, Super Bowl parties, etc. You cannot charge if someone reserves the room for purposes relating to common interest development living, association elections, legislation, election to public office, or the initiative, referendum, or recall processes. A member or resident shall not be required to pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy, in order to use a common area for these activities. (Civ. Code §4515.)

What if the political event leaves the room in shambles and you have to pay someone to clean it up? You can charge the person who reserved the room, following a properly noticed reimbursement hearing. What if the clean-up is done by staff already on payroll so it does not cost the association anything extra? I don't think anybody knows the answer to that.

What if folding chairs are kept in a locked storeroom? Can the association charge the person to have staff setup the chairs? Yes. What if the staff are on payroll so it does not cost the association anything extra? Good question.

I don't like this statute. It is very intrusive and has a lot of unknowns that may require judicial intervention.

*****

Director's Term. My question arises from the “Reconvened Term” question in your January 28 Newsletter. If the board member’s term starts on the date when the person is elected, when does it end? If a director’s term is one year, does the term end a year after it began or when the next annual meeting is held? In other words, does the annual meeting date have to be pushed back so the director gets a full one-year term?

I think you would agree that a delay in holding the election does not change when annual meetings are held or when board terms end. Thus, for example, if a reconvened meeting delays an election from its usual annual meeting date in May to sometime in June or even later, that director’s term will still end the following May, assuming the association is able to meet the quorum and holds an election. -Jay H.

RESPONSE: You nailed it.

*****

Rentals. I read your website regarding the percentage of renters and its impact on the association. Once a complex is near 50% renters because original docs have no restrictions, is there anyway to reverse that percentage when we restate our governing docs? Can we set a limit at 10% in the restatement which would then apply to/restrict any new owners once implemented? -Steven S.

RESPONSE: When you have a high population of renters in a development, I've found caps hard to pass and to enforce. I think the only real chance you have is to adopt an amendment that requires new owners to live in their unit as their primary residence for at least two years before they can rent out their unit. Over time, the population will change from renters to owner occupants and you will see an increase in property values.

*****

Forcing Legislators to live in HOAs. I love reading your Newsletters--they bring common sense to readers. With all the new laws, how can managers manage anymore? Lawmakers should be forced to lived in a homeowners' association.

Who is going to check if a resident has diarrhea before going into the pool? We are not allowed to ask residents to stop dangerous activities such as riding bikes on sidewalks, climbing trees, driving too fast, and so on or Fair Housing will sue the association.

Yesterday, a lady in her fifties was at the pool with the top of her bathing undone and bottom two sizes too small showing her backside--not a good look for her. I nicely asked that she please tie the top and pull up the bottom of the suit. She said I was harassing her. -Karen E.

RESPONSE: Requiring all politicians be subject to the laws they create would drastically reduce the number of new laws and make them more reasonable. If you are circulating a petition, I will sign it.

Adrian J. Adams, Esq.

Boards can contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC

Aggressive Assistance Animals

Jan 28, 2018 0 Views 0 Comments

Allowing homeowners to have an emotional support animal is not only compassionate but often necessary for the well-being of some residents.

Abused. It is also one of the most abused exceptions to pet restrictions in practice today. All anyone needs is a letter from a medical professional to overcome restrictions. It doesn't matter the "medical professional" is an internet psychic who passes out form letters like candy (for a modest fee).

Weird. The abuse is not limited to the size and number of dogs, it extends to the weird. Some are claiming squirrels, bearded dragons, miniature horses, turkeys, goats, and pigs as necessary to their emotional well-being. The proliferation of animals has created problems for condominium associations, apartment complexes, restaurants, and airlines. Commercial carriers have already put the brakes on what they will allow on their planes. The courts are now injecting some common sense into the issue as well.

Aggressive Animals. Gill Terrace is a no-pet apartment complex in Vermont. Despite their "no-pets" policy, the landlord grants reasonable accommodation to residents with disabilities. However, he drew the line when a resident (Ms. Johnson) asked for reasonable accommodation for aggressive guard dog named Dutchess.


Dog's Behavior. Dutchess is a large mixed breed pit bull that reared up on her back legs, lunged at people and other dogs, and bared her teeth at them. She has a distinct angry bark and growl. Even indoors, Dutchess goes crazy when other dogs walk by the window. Ms. Johnson was not able to control Dutchess and some residents were fearful and stayed indoors whenever the dog was outside.

Lower Court Ruling. The landlord told Ms. Johnson she could have an emotional support animal--just not Dutchess. When Ms. Johnson failed to get rid of Dutchess, the landlord began eviction proceedings. (Gill Terrace Retirement Apts v. Marie Johnson). Even though the dog had not yet bitten anyone, the lower court found sufficient evidence the dog was a threat that it ruled for the landlord. The court concluded that reasonable accommodation does not extend to aggressive assistance animals.

Supreme Court Ruling.
Ms. Johnson appealed. Fortunately, the Vermont Supreme Court upheld the lower court's ruling. It concluded the landlord was justified in denying a reasonable accommodation request for a specific dog on the grounds it posed a threat to others.

RECOMMENDATION: While the ruling in Vermont is not binding in California, it seems likely our courts would render a similar verdict. That means boards of directors can (and should) investigate complaints about aggressive animals and take action when the behavior of a specific animal adversely affects the safety and well-being of residents. If a board knows a specific animal is a threat, failing to take action could have unpleasant consequences if the animal were to attack residents or their pets.

POLITICAL ACTIVITIES
AND FLYERS


In September, I reported on SB 451--the bill that eliminates an association's ability to control its common areas when it comes to political activities and flyers. Effective January 1, HOAs must now allow a wide range of activities in the common areas without charging a fee or requiring insurance.

Assemblies. Associations must now allow residents to reserve common areas (clubhouses, parks, etc.) so public officials, candidates for public office, and representatives for homeowner organizations can meet with members, residents, and their guests to speak about any matter of public interest.

For Free. Previously, associations could charge a fee whenever someone reserved facilities for an event. Now, associations are prohibited from requiring fees, deposits, or insurance when facilities are used for any matter of public interest or matters involving common interest development living (whatever that means).  

Canvassing & Flyers. Members and residents are also allowed, without prior approval, to canvass and petition members and residents and distribute flyers about elections, legislation, referendums, recalls, and other issues of concern to members and residents.

Penalties. Any violation by an association is subject to injunctive relief and/or a penalty up to $500 per violation in civil or small claims court.

RECOMMENDATION: Associations should adopt rules regarding reasonable hours for common area meetings, priority of overlapping events, requirements that common area facilities be left clean and undamaged, when a fee can be charged, when and how flyers may be distributed, etc.

For a more complete description of the statute, see "Political Activities and Flyers" by senior attorney Wayne Louvier.

*****

Board Member Arrested. It has come to my attention that our treasurer was arrested for felony burglary and misdemeanor false financial statements. He was found not guilty due to lack of evidence. As a homeowner I am concerned who has access to the HOA's bank accounts. Would it be prudent to bring this to the board's attention? -GG

RESPONSE: Homeowners always have the right to bring concerns to the board. Directors can then evaluate whether the concerns have merit. An arrest is not proof of guilt. It could be the treasurer was going through a nasty divorce where the spouse brought unfounded charges to gain financial advantage.

Speaking Chinese. Although no longer a California resident, as past president of an HOA I have read and enjoyed you newsletter for many years. I was somewhat taken aback when I read in your December 17 Newsletter that a state as liberal as California has a clause in its constitution making English the official language of the state. Keep up the good work and I hope to enjoy your weekly Newsletter for many more years to come. -James H.

*****

Reconvened Term. If there is a reconvened annual meeting due to lack of quorum, does the elected board member term start with the month of the reconvened meeting or the original? Thank you. -Kathleen M.

RESPONSE: It starts from the date the person is elected.

*****

Water Damage. [Commenting on my article on "Liability for Water Damage and Mold"] We HATE water. It causes 90% of our troubles. The other 10% of our troubles are caused by people. -Esme G.

RESPONSE: Water is an amazing substance. It makes up 71% of the Earth's surface but, unlike other substances, water expands when it freezes causing it to float.
Because ice floats--it serves as an insulator for lakes, streams and oceans keeping the water and all living organisms underneath from freezing. If ice behaved like all other substances, it would sink to the bottom and all bodies of water would become perpetually frozen blocks of ice. At that point, most life on the planet would cease to exist. 

Another remarkable fact is that we can drink water and swim in it without harm even though water is a universal solvent. Almost every known chemical compound will dissolve in water, making it one of the most corrosive chemicals on the planet. That's why water is the enemy of property managers--it destroys almost everything it touches when it leaks into buildings through roofs, windows and pipes.

As Esme pointed out, water causes 90% of the maintenance problems for associations. When it comes to non-maintenance trouble, I've found that 90% of the problems are caused by 10% of the residents. When that happens, call me--I know a guy who knows a guy. He's good at alternative dispute resolutions.

Adrian J. Adams, Esq.

Boards can contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC

Speaking Chinese

Dec 17, 2017 0 Views 0 Comments

QUESTION: The majority of our members speak Chinese. Can our board meetings be conducted and minutes taken in Chinese? If not, are we required to provide a translator?

ANSWER: Good question. There is nothing in statutes or case law that requires your meetings be conducted in a particular language. Nor is there anything on point regarding translation of meetings and records. Even so, there is enough in the law to adopt a reasonable policy.

California Law. Article III, Section 6 of the California Constitution provides that “English is the official language of the State of California.” The Davis-Stirling Act (which governs community associations) and the Corporations Code (which governs corporate entities) are both written in English. That indicates that, at a minimum, all association records must be kept in English.

Conducting Meetings. As a practical matter, if everyone on the board and everyone attending a meeting speaks Chinese, then Chinese should be spoken. If even one person speaks English-only, the meeting should be conducted in English or a Chinese-to-English translator provided at no cost to the attendee. The minutes, as the official records of the association, must be in English. They can be taken in Chinese but must be translated into English whether or not English speakers reside in the association.

Translators. If meetings are conducted in English, HOAs are not required to provide translation into other languages since English is the official language of California. If there are attendees who speak other languages and want to bring a translator to board meetings, they may do so at their own expense. Boards should not exclude a translator just because the person is not a member of the association. If the translator happens to be the member's attorney, you should show the lawyer to the door.

NOTE: Language issues are not unusual. We have a large number of immigrants in California and they often seek out fellow immigrants. I was once legal counsel to an association made up entirely of Spanish speaking members. When I attended meetings, they supplied a translator so I could understand their questions and they could translate my answers. Their management company kept all their records in English.

Thank you to attorney Jennie Park for her research on this issue.

FINDER'S FEES TO
HIRE MANAGERS


QUESTION: The board is paying $45,000 in finders fees to an agency to find another general manager. In 5 years our HOA has had 4 managers. In 3 months, 5 administration employees left. Should the $45,000 be voted on by the membership?

ANSWER: Four managers in five years and the loss of five administration employees?? Something is amiss.

High Turnover. Employees often leave for the following reasons: (i) they are underpaid, (ii) they are badly treated, or (iii) they cannot meet expectations and are let go. It seems unlikely you had four managers and five admin employees who were unqualified to do their jobs. That means working conditions are a problem.

Bad Reputation. Word gets around when an association burns through four managers in five years. That means paying a recruiter to find a manager may be necessary. Can boards pay a finder's fee? Yes. Does it require membership approval? No.

RECOMMENDATION: It sounds like one or more board members and/or homeowners are out of control and need to be medicated (or tasered). Otherwise, the problem of staff turnover will continue. High turnover means membership services decline, costs climb and projects end up on the back burner. Members should demand an explanation.

DOG PREVENTING
MAIL DELIVERY


QUESTION: I own a condo and cannot receive mail due to a neighbor's aggressive dog (deemed so by the USPS). Because of the dog, our mail has been suspended. We have to go to the post office to retrieve our mail. I have been hounding the board but they refuse to deal with the dog's owner.

ANSWER: I'm surprised the board is refusing to act. The loss of mail service is more than enough reason to take action against the owner and his renter. In addition, there is the potential liability the association is exposed to.

Potential Liability. A dog known to the board to be aggressive and deemed so by the U.S. Postal Service creates potential liability for the association. If the dog were to maul a child, can you imagine the lawsuit that would follow? If the damages exceed the association's insurance policy, you will be paying an emergency special assessment. There is also the prospect of punitive damages which are not covered by insurance. That means an even larger special assessment.

Director Liability. If the membership gets hit with a large special assessment because directors sat on their hands rather than deal with a known safety threat to the membership, they could be sued personally.
I am baffled by the board's inaction.

Lawyer Letter. Legal counsel for the association should make a written demand on the owner to immediately evict his tenant or face a lawsuit. It has been my experience that landlords are averse to litigation. The goal of an investor is to make money on rental property, not lose money on legal expenses. Landlords tend to do the right thing when facing litigation over a problem tenant.

RECOMMENDATION. If the board continues to put the community at risk by their inaction, it may be time to recall the board or run candidates against them in the next election. The loss of mail service should be sufficient to motivate members to elect a new board.

YEAR-END
THANK YOU!


A sincere thank you to our readers and clients. Many of your newsletter questions have been added to the Davis-Stirling website to form an ever-expanding database of information free to board members, homeowners and managers alike.

I want to welcome the over 300 new clients who joined the firm this year. Because of your support we have grown to 10 offices around the state with 22 lawyers providing corporate counsel and litigation services to commercial, residential and mixed-use associations.

BEST WISHES. May you enjoy the holidays and have a New Year filled with peace, prosperity and happiness. From all of us at ADAMS | STIRLING, Merry Christmas and Happy New Year. See you in 2018!


Mold #1. Great coverage of the mold issue, mold can be a nothing or it can kill you. Your point of having proof of mold is spot on. -Finn M.

Mold #2. Something to clarify on the insurance aspect of the water intrusion is that most policies provide at least some coverage for mold removal resulting from a covered water loss. Associations can also protect themselves from third-party mold liability allegations with environmental impairment liability (“EIL”) policies with specific extensions for mold. EIL is more common for businesses with significant pollution exposures (gas stations, etc.) but the policies are also available for community associations, though inclusion of third-party mold coverage significantly increases the premiums. -Brian Kalmenson, Abdou Insurance Agency

*****


Appointing Directors. I thought your answer to the board vacancy question was excellent. -T.J.

Appointing Directors. Does a director appointed by the board have the same protection of only being removed by the membership? -Victoria C.

RESPONSE: Only under limited circumstances can directors, whether appointed or elected, be removed by fellow directors.

Boards may declare vacant the office of any director who ceases to meet qualifications that were in effect at the beginning of that director's term of office. (Corp. Code §7221(b).) In addition, the board may declare vacant the seat of a director who has been declared of unsound mind by a final order of court, or convicted of a felony or, if at the time a director is elected, the bylaws provide that a director may be removed for missing board meetings. (Corp. Code §7221(a).)

Adrian J. Adams, Esq.

Boards can contact us for friendly and professional legal advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS | STIRLING PLC