Manager as President

Nov 11, 2018 0 Views 0 Comments

QUESTION: Can we operate without a president? The manager refuses to allow us to have a president claiming we would be sued. To compensate, the manager has taken over the president's powers. How long can we function this way?

ANSWER: You should not be functioning that way at all. By law, all corporations must have a president, secretary and treasurer. (Corp. Code §7213(a).) It is possible there are efforts behind the scenes to resolve the problem and the situation is temporary. If not, the scenario you describe is troubling.

Business Judgment Rule. If the board is truly accepting legal advice from a manager, especially when there is a threat of litigation, directors have legal exposure. It puts them outside the protection of the business judgment rule. Without that shield, board members can be held personally liable for the decisions they make. (See Palm Springs II HOA v. Parth.)

RECOMMENDATION: Your board should put the association's insurance carrier on notice of the threat of litigation you referenced. Next, directors should retain an experienced association lawyer for its legal advice. Finally, they should appoint one of their directors as president.

ALCOHOL AT
POLITICAL MEETINGS


QUESTION: Is it permissible for attendees at a political meeting using HOA facilities (at no charge and with no insurance requirement) to bring alcohol for their personal consumption?

ANSWER: It depends on your rules. Despite the new legislation allowing political rallies on common areas, associations can adopt reasonable restrictions on the use of its common areas, including restrictions on alcohol consumption.

Restrictions on Associations. What associations cannot do is adopt rules that require a member or resident to pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy for using common areas to peacefully assemble and freely communicate with one another and with others with respect to common interest development living or for social, political, or educational purposes. (Civ. Code §4515.)

Restricting Alcohol. Given the current state of affairs in our nation's politics, restricting alcohol at political meetings seems prudent.

TEMECULA OFFICE
OPENED
 
I am pleased to announce the opening of our newest office in historic Old Town Temecula.
 
Known for its wine country and hot air ballooning, Temecula is a rapidly growing hub for community associations throughout the region.
 
Our office will be managed by senior attorney Nancy Sidoruk. Nancy and her team will provide legal services in the Inland Empire and Coachella Valley. The address is:
ADAMS | STIRLING
41911 5th Street, Suite 302
Temecula, CA 92590

Contact us for a proposal for legal counsel and board training services.


Creepy Neighbor #1. I always find your newsletter an important resource to add to my understanding of what it means to live in a community of self-governing citizens.

As a psychotherapist, I have to take issue with your casual misuse of the word “bipolar.” The creepy guy you mention who trespasses in the space of other residents is more likely to be character/personality disordered with boundary issues. Thank you for your always enlightening newsletter. -Diane C.

RESPONSE: I can't claim credit for the description, "crazy, bipolar" is  how he described himself. His bipolar condition is likely not the underlying problem. As you pointed out, he seems to have boundary issues.

Creepy Neighbor #2. Bipolar people are not “crazy.” They don’t usually go into garages to scare females. Bipolar is caused by the absence lithium in the system and it is treatable with medication prescribed by a psychiatrist. It sounds like this man has poor impulse control and acts out. Whether or not the board can require him to seek treatment is something your firm can advise them on. -John A.

RESPONSE: It has been my experience that residents with mental issues are very difficult for boards to handle. Without proper treatment, they often do not respond to cease and desist letters, hearings, fines, suspension of privileges or threats of litigation. It is always a slow, frustrating process dealing with residents with mental illness.

*****

Election #1. Love your articles...just a question about your comment regarding elections by acclamation. I believe the opportunity for write-in candidates would be eliminated if the board chose not to mail out ballots. Could you address this please? -Rick H.

RESPONSE: The Davis-Stirling Act states that associations can adopt election rules that permit nominations from the floor and write-in candidates. (Civ. Code §5105(b).) By implication, unless an association's bylaws or election rules provide for write-in candidates, they are not allowed.

If election rules provide for write-ins, balloting cannot be waived since there is a chance someone could write-in a candidate. To avoid uncertainty, many associations amend their governing documents to eliminate write-ins so elections by acclamation can take place.

Election #2. The board canceled our last election claiming there were not enough ballots for a quorum even though our election rules state that no quorum is required for electing directors. The board dismissed everyone and then opened ballots. The board claims this was legal. If our bylaws say we don't need a quorum can we still hold the annual meeting and open the ballots that are turned in? -Monica W.

RESPONSE: Yes, you can (and should). If your bylaws do not require a quorum for the election of directors, ballots should be opened at the annual meeting and counted in front of the membership. (Civ. Code §5120(a).) The results must then be (i) reported to the board, (ii) recorded in the minutes of the next meeting of the board, (iii) made available for review by the membership, and (iv) within 15 days of the election, reported to the membership. (Civ. Code §5120(b).)

If your association's election rules are being violated by the board, members have one year to take legal action to address the violation.

Election #3. We are a 4-unit association and we all agree on a CC&R amendment. Do they have to use the written secret ballot to to approve it or can we use a vote by acclamation since we all agree? -N.S.

RESPONSE: Election requirements under the Davis-Stirling Act are especially burdensome on small associations. Unfortunately, your 4-unit association is required to follow the same requirements as a 400-unit association. That means you are required to publish written election rules, seek nominations, mail out double-envelope ballots, and allow for 30 days of balloting.

In my experience, many (most?) small associations of ten units or less follow a much more relaxed approach to elections. As long as no one objects to the process, members attend the annual meeting and elect directors by a show of hands or voice vote. Some use secret balloting by passing around slips of paper and writing down their choices.


Election #4. What if one forgets to use the small envelope and just uses the outer envelope with signature as required. Will the ballot votes be counted? -Linda W.

RESPONSE: Yes, the votes should be counted. (See ballot irregularities.)

*****


Fidelity Bond #1. I just wanted to clarify that associations are  not purchasing fidelity “bonds.” They are purchasing a fidelity (employee dishonesty) crime (non-employee coverage) policy. A bond is a different instrument. This may be semantics, but we should be using the proper terminology in the industry. -Joel M.

Fidelity Bond #2. If an association has a $500,000 employee dishonesty limit which is in compliance with Fannie Mae formula, does the computer and funds transfer fraud have to be $500,000 or can it be a lower limit and how is that formula determined? -Jon C.

RESPONSE: The coverage requirements for "computer and funds transfer fraud" must be an amount equal to or greater than the combined amount of the reserves and total assessments for three months (unless the governing documents call for greater limits). If that comes to $500,000, then that is the amount of coverage needed.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Members Painting Fences

Apr 14, 2019 0 Views 0 Comments

QUESTION: Our board is calling for the community to help paint the common area fences. We prefer it be done professionally by licensed contractors. We paid for a professional paint job last time and I don't want our maintenance being done by amateurs without licenses and warranties. We pay dues to have the common area maintained professionally, not do-it-yourself. What can I do?

ANSWER: It is not unusual for small associations to engage in self-help projects to keep costs down. As long as the projects do not require much skill and the potential for injury is low, it becomes a team building event that benefits the association by keeping costs down.

Evaluate Risk. Risky ventures should be avoided. For example, I would not recommend climbing ladders to clean gutters. Nor would I favor volunteers performing electrical or plumbing repairs. The potential for harm to persons and property is too high. Such work should be done by licensed and insured contractors.

Equestrian Trails. Lower risk projects can be done by volunteers. I personally worked with volunteer homeowners cutting in equestrian trails for an association. We had our occasional brush with rattlesnakes and poison oak but never suffered anything more than sore muscles.

Insurance. Painting fences has little potential for property damage or injury. Even so, if the board moves forward with the project, it should first talk to the association's insurance broker to make sure it has proper coverage in the event volunteers are injured.

RECOMMENDATION: If enough owners agree with you about using professionals to paint the fences, you should lobby the board. If the board disagrees and moves forward, you and like-minded owners should run for the board and change the policy once you are elected.

MEMBER
CORRESPONDENCE


QUESTION: What is the proper protocol for responding to member correspondence? Can we share the correspondence with the entire board? Under what circumstances, if any, can the board discuss member correspondence in executive session?

ANSWER: Most correspondence can go into open meeting board packets for review and discussion by directors. The membership does not have a right to see the correspondence or know who sent it. These are private communications that do not fall into any of the categories of records subject to membership review.

Open Meetings. If the board discusses particular pieces of correspondence in the meeting, it can reference the general topic of the letter without mentioning names. The appropriate person can then be directed to send a response.

Executive Session. Some letters are appropriate for executive session discussion, i.e., letters threatening lawsuits, letters from deranged owners, etc. Those need to be discussed privately and sometimes with legal counsel about how best to handle the situation.

Between Meetings. If a letter is received between meetings that needs immediate attention, the person designated by the board to respond can email the letter to the board along with a draft response. With feedback from directors, the response can be sent. This does not violate the Open Meeting Act if authority has been delegated to someone to handle correspondence (for example, the manager, president or secretary). (Civ. Code §4155.)


RECOMMENDATION: If you have not already done so, boards should designate someone to determine if correspondence received between meetings needs an immediate response or can wait for the next board meeting. Authority should be delegated to the person to send responses as-needed. If input is needed from legal counsel, they should have the authority to forward the letter to the association's attorney. Executive session meetings can be called as-needed to discuss the best course of action.

CC&R RESTRICTION ON
RAISING DUES


QUESTION: If our CC&Rs state a maximum annual increase of 10%, can the board raise them 20% based on the Davis-Stirling Act?

ANSWER: Yes they can. Notwithstanding more restrictive limitations in the governing documents, boards of directors may increase regular assessments (dues) up to 20% of the association's preceding fiscal year without membership approval. (Civ. Code §5605.)

The failures by some boards to keep their association's budgets current with rising costs often forces future boards into the uncomfortable position of significant assessment increases. Thus, the 20% override established by the legislature.

VOTE NO ON
POLTERGEIST SB 323!

It's time to send emails to stop the Center for California Homeowner Association Law's (CCHAL) poltergeist bill.

As described in earlier newsletters, Senate Bill 323 forces homeowners to accept felons, delinquents and litigants onto their boards of directors. CCHAL dictates what you can and cannot do in setting standards for your boards, complicates the election process, and exposes all owners to identity theft.

We need your help to encourage the Senate Housing Committee to vote no on SB 323. Please send an email to the Committee when you receive this. You can use your own wording or copy and paste the message below into your email and send to members of the Housing Committee.

EMAIL SUBJECT: VOTE NO on SB 323 (Wieckowski)

EMAIL BODY: SB 323 is anti-consumer legislation that will negatively impact my association. It takes away our right to set standards for who represents us on our boards of directors. It makes elections more complicated, increases the risk of litigation, and exposes homeowners to identity theft when they vote. Please VOTE NO on SB 323.

SEND YOUR EMAIL TO THE FOLLOWING LEGISLATORS:
[email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]

 
Husband and Wife on the Board. What you forgot to address: if husband and wife are on the board--only one (1) vote per unit is allowed per CC&Rs and bylaws--so there may be a problem if majority rule is needed during a board meeting. -Meri N.

RESPONSE: The one-vote per unit restriction applies to membership votes, not director votes. If husband and wife are both on the board, both get to vote on issues brought before the board. When it comes to membership votes (election of directors, gov doc amendments, etc.), only one of them gets to vote. In most marriages, it's the wife (according to my wife).
 
*****


Handyman #1. You know I adore your Sunday morning newsletter and look forward to reading it every week (or whenever you have time to publish). But this morning, it got my blood percolating a bit when I read the part about employee classification. Handyman? How about maintenance person? Seems like whoever edits your newsletter needs to be reeducated! -Susan K.

RESPONSE: I asked my assistant to immediately enroll me in a Reeducation Camp. She eagerly complied (a little too eagerly, I thought).


Handyman #2. Regarding employee classification, how does an association distinguish between a resident handyman and member that volunteers to do the same work? -Gary G.

RESPONSE: Unpaid volunteers don't need to be classified as employees or independent contractors--they're volunteers. As such, the court case I cited does not apply. Even so, make sure you get workers' comp insurance for your volunteers.

*****

Planned Development #1. Regarding the question about planned units versus condos, when I purchased my unit I received a deed outlining the plot I own. Doesn't that prove it is a planned unit? -Ester V.

RESPONSE: Probably, but I would still want to see your governing documents and your deed. If your development comes with a condo plan, it means you bought a condo that looks like a lot. I see this with mobile home parks. Owners think they bought a lot but in reality they bought a cube of air with the outline of the lot that extends downward 10 feet and skyward thirty feet. The owner can then slide his personal property (the mobile home) into the cube of air.

Mobile home parks can also be structured as planned developments where owners actually own the land. It depends entirely on the governing documents.


Planned Development #2. I manage a community that is made up of all freestanding “single family” homes that are legally condos. They function as a planned development, in that owners are responsible for the structure and the interior but they are legally defined as condos and their documents state the same. I believe the developer did this so the city would allow more homes to be built in a condensed area. They are very close together but it was permitted since they are “condos.” It has caused a lot of confusion, especially with new owners. -Chelsi R.

Planned Development #3. I have another unusual condominium for you. We were originally sold as patio homes but are incorporated as condominiums. We are stand-alone homes with a house address. Our ownership goes 5' down into the earth from ground level and 25' up from that same point. Our docs state that ownership includes "the single family structure within" yet the association takes care of the outside walls including stucco, termites, and the roof! And you are right, there are insurance issues. I have always wondered why the association buys our structure's insurance (and thus has control) when it is not stated in our docs. That means they control the deductible. The biggest issue for us personally is that they dropped earthquake insurance a few years ago (against owners' objections) and it is apparently impossible for us to buy it ourselves just for our unit. I call our community a "hybrid" because we really don't match the strict definition of a condo. P.S. I LOVE your newsletter and your sense of humor. I started subscribing to it when I got on our board 15 years ago and still do even though I left the board after 4 years. Keep up the wonderful work!!!!!. -Jeanne M.

RESPONSE: Thank you for the kudos! Your patio home's legal structure is similar to the mobile home park I described above. It's remarkable the variations developers use to get their projects through the DRE.

Planned Development #4. You referred to an unusual condominium project with detached SFRs. You mentioned you have only seen one of these before. I believe I may have a listing in a development with similar circumstances. My client is attempting to sell their home now. I believe the “condo” designation has placed a stigma on the development. Marketing properties in the complex is a challenge and sellers are willing to take a significant financial loss while selling their homes. The CC&Rs are rather complex for a layperson. -Robert B.

RESPONSE: Not just laypersons, the documents can be complex for lawyers as well.

*****

Vacation Rentals #1. What happens when your HOA has failed to update or revise CC&Rs that have not changed since 1981 and contain numerous outdated, poorly drafted, and superseded provisions? We are a senior community, average age about 74, with many members who are easily frightened by absurd statements made by those who oppose any and all changes in the documents, no matter how meritorious! Although there are over 1700 units, the fear of potential (and constantly threatened) litigation is so relentless that it is nearly impossible to find capable persons willing to serve on the board of directors. -Elaine J.

Vacation Rentals #2. I strongly disagree with part of your last post. I have 40 years experience selling real estate in Palm Springs and neighboring cities. The developments with average sale price of $400,000. A buyer finds a home they love and the home is priced at $550,000. These neighborhoods are considered vacation destination’s or vacation hotspots and usually second homes or part-time residents. The buyer considers the income potential and pays the higher price. This increases the average sale price in the area. Developments allowing short-term rentals have greater appeal and a higher sales price. -Mark S.

RESPONSE: Your example is the exception I referenced in my article. Some associations are not typical residential developments. Many in the Palm Springs area are second homes and investment properties for snow birds. They fly in from northern states and Canada during the winter and then fly home when it warms up again. During the six months their units sit empty, they like to rent them out as short-term rentals.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Husband and Wife

On the Board of Directors

Apr 7, 2019 0 Views 0 Comments

QUESTION: Is it legal to have a husband and wife (who own one house in the HOA) BOTH be on the board of directors?

ANSWER: Yes, it's legal. There is no law prohibiting a husband and wife from serving on the board at the same time. However, your bylaws might. Check the section that deals with the election of directors and their qualifications. When we restate an association's governing documents, we routinely include a provision that co-owners cannot both serve on the board at the same time.

Small Associations. However, not all associations want the provision. Small associations, in particular, have difficulty persuading people to serve on the board. It is not uncommon in small self-managed associations for a retired couple to be on the board. It's because they have the time to manage the association's affairs. Sometimes, small associations also elect tenants to their boards. It is not uncommon for a renter who is a retired CPA to be on the board serving as treasurer to help manage the finances.

CCHAL Bill. Unfortunately, the legislation pushed by the Center for California Homeowner Association Law (CCHAL) takes away the right of homeowners to decide for themselves how to structure their boards. If their legislation (SB 323) passes, it will prohibit homeowners from electing a tenant to their board. Worse, it prevents homeowners from disqualifying felons convicted of violent crimes, sex offenders, owners delinquent in the payment of special assessments,and owners suing their association from serving on their boards. Finally, as a condition of casting a ballot, homeowners must give up their right to keep their signatures private.

RECOMMENDATION: CCHAL's legislation is bad for homeowners and needs to be stopped. If you have not already done so, sign up for CLAC's email alerts. When possible, donate time and money to CLAC to support their mission to protect homeowners. The California Legislative Action Committee (CLAC) is a volunteer organization consisting of homeowners and professionals serving homeowner associations by monitoring legislation, educating lawmakers, and protecting the interests of those living in community associations.

EMPLOYEE AND PRESIDENT
ARE MARRIED


QUESTION: Our board president is married to the maintenance supervisor employed by our community. Is this a conflict of interest?

ANSWER: No, it is not automatically a conflict of interest. It is a potential conflict. Conflicts of interest arise when the board makes decisions regarding the maintenance supervisor, such as pay raises or disciplinary action.

Recusal. Whenever matters involving the supervisor are brought before the board, the president must recuse herself from any discussion or vote involving her husband.

Employee Classification. On a related note, boards need to be aware that a resident handyman man will need to be classified as an employee and put on the payroll (either the association's or the management company's). With last year's decision in Dynamex Operations West vs. Superior Court, all workers are considered employees and may only be classified as independent contractors if the worker (i) is free from the control and direction of the association in the performance of work, (ii) performs work outside the usual course of the association's business, and (iii) is customarily engaged in an independently established trade, occupation, or business.

RECOMMENDATION: Associations that use the services of a handyman who is paid as an independent contractor should have it reviewed by legal counsel. If he does not meet the Dynamex test, he needs to be reclassified. Otherwise, the association could be subject to fines, unpaid withholdings, and unpaid overtime.

PLANNED DEVELOPMENT
OR CONDO?


QUESTION: Our complex is a single-family attached, planned development. Unfortunately, over the years, a few of our amendments and rules have inserted the word "condo" to the changes. When property is sold as a condominium, buyers are under the assumption they are only responsible for walls-in insurance instead of the entire unit. Our CC&Rs state on the first page that we are a planned development. Is there anything that can be done to fix this situation?

ANSWER: From your description, it sounds like you have townhouse style development. Townhouses can be legally structured as condominiums or single-family attached homes. As a planned development, each owner owns the structure and the lot upon which it sits. Even though the association has not ownership interest, it is often assigned the duty of exterior maintenance.

Condominiums. If the townhouses are condominiums, the owners own air space from the unfinished interior surfaces of perimeter walls, ceilings and floors inward. The homeowner also owns any improvements to their airspace such as paint on the walls, carpets, hardwood floors, cabinets, countertops, electrical fixtures, etc. The structure surrounding their airspace is owned in common with other members.

Unusual Condominium. I know of one development with standalone single-family homes on lots. It looks like a planned development but it's not. The governing documents clearly define the houses as condominiums. It did so by defining ownership from the finished exterior perimeter surfaces inward. In other words, homeowners own the structure surrounding the airspace--the house. This is highly unusual and I know of only one development with this legal structure.

RECOMMENDATION: I would have to see your governing documents to know for certain whether your development is legally structured as condominiums or a planned development. If your governing documents are sending mixed signals, you need to restate them to get rid of any errors. Otherwise, you will continue to have problems with insurance as well as potential problems with title.


In last week's newsletter, a reader believed his board had a duty to tell members that eliminating short-term rentals would cause property values to drop by 30%.

Vacation Rentals #1. I disagree that there is a decrease in value due to the elimination of short-term rentals. Allowing transient housing causes a drop in value, not an increase in value. In addition, upon removing transient housing, the HOA can receive FHA and VA financing, which also has been determined to increase value. That is why the State of California demands that unit owners receive a statement on HOA budgets that give FHA and VA status. In the required language, the state mandates that unit owners are made aware that with FHA or VA approval, an individual unit will have an increased pool of buyers which enjoy FHA or VA approval. -Jon E.

Vacation Rentals #2. I question the 30% drop in property values with short term rental restrictions. Many don’t even notice that a lot of CC&Rs have no rentals less than 30 days already. Allowing short-term rentals means keys, codes, and rules given out on a weekly basis which would be unmanageable in my opinion. -Lissa M.


Vacation Rentals #3. Was the Davis-Stirling Act enacted to allow a volunteer board with little or no experience in managing property to enact a regulation that might significantly affect the value of an owner's property? When has an HOA board had the authority to pass a ruling [regarding short-term rentals] that might potentially destroy the association or seriously affect the value of a property? They have a fiduciary responsibility to the owners NOT to affect their property values. I disagree strongly, this is a matter that better be submitted for a community vote or this board is courting disaster. -Walter D.

RESPONSE: Members already have a say when it comes to short-term rentals. If the proposed regulation is added to the CC&Rs, the membership must vote to approve it. If it is added to the rules only, it must be circulated to the membership for review and comment before it can be approved by the board. If the board approves the rule and the membership is unhappy, they can veto it.

Vacation Rentals #4. Excellent Q&A about vacation rentals and property values. And glad to know that the association can make determinations about allowing them. You rightly pointed out security issues, trash, rules enforcement problems, nuisance noise from parties, parking problems, higher maintenance costs and increased administrative expenses. This issue also consumes unnecessary time at board meetings that could be otherwise spent on making the community better rather than on damage control. Investors who buy in our community for the purpose if income property typically make no investment in the actual community and our board meetings often get sidetracked dealing with these items. Most of our long-term renters are decent neighbors but it’s good to know that we can place a restriction on short-term vacation rentals. -Robert C.

*****


Smoke Detectors. Regarding missing smoke detectors, if the CC&Rs state that owners must comply with state and local ordinances, doesn't that make it a violation that becomes the association's responsibility to pursue? -Paul C.

RESPONSE: You make a good point, which is why we don't include such language when we restate governing documents. If any violation of a state law or local ordinance is a violation of the CC&Rs, it means boards (1) need to know all laws and ordinances and (2) enforce them. That creates too much exposure for my taste. If an association wants to enforce a particular ordinance, such as no smoking in multi-family structures, it should craft a rule similar to the ordinance. If, at a later date, the association wants to get out of the business of enforcing the ordinance, it can drop the rule. This gives an association a lot more flexibility.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Vacation Rentals

Affect Property Values

Mar 31, 2019 0 Views 0 Comments

QUESTION: Our board discussed eliminating vacation rentals. The board is aware neighboring properties show a decline in property values as high as 30% for developments adopting this exclusion. I feel our board has an obligation to share this information with property owners prior to residents voting. My fellow board members do not share my views. Your thoughts?

ANSWER: I have to side with your fellow directors. Short-term rentals bring large numbers of tourists into places that were not designed to accommodate them. Your board's obligation is to preserve the development for its intended purpose--a residential development, not turn it into a cash cow for investors.

Problems. Allowing vacation rentals to flourish in your development will turn it into a condo hotel with a steady stream of people flowing into and out of the development. This creates security issues, trash, rules enforcement problems, nuisance noise from parties, parking problems, higher maintenance costs and increased administrative expenses.

Existing Owners. Members who bought into the development to have a home to live in, raise kids, and retire in will not be in favor of crowds of suitcase toting vacationers invading their association. If, however, your association consists almost entirely of offsite owners, short-term vacation rentals may be appropriate. 

RECOMMENDATION: Your board will need to determine the nature and purpose of your existing development and make decisions accordingly. For more information, see Short-Term Rentals.

SMOKE DETECTOR
INSPECTION


QUESTION: A resident reported that a condo sold without the state mandated requirement for smoke detectors. Is the board required to investigate to make sure this safety issue is corrected?

ANSWER: Various codes and ordinances require all dwelling units to have operable smoke alarms.

Disclosure Requirements. Disclosure involving smoke alarms is between the seller and buyer of a condominium, not the association. Sellers must provide buyers with a written statement that the property is in compliance. California Association of Realtors (CAR) forms cover such disclosures. Their transfer disclosure statements also include carbon monoxide detectors if the unit has gas appliances, fireplaces and/or an attached garage.

Highrises. If the condominium association is a highrise, it will have a central alarm system tied to smoke detectors throughout the building. The association will be responsible for maintaining the detectors and periodically testing them in conjunction with the fire department. Even so, disclosure requirements are between seller and buyer regarding the unit's smoke detectors, not the association.

REMOVING
MEETING NOTICES


QUESTION: Our association has a kiosk where it posts meeting notices. The statute does not specify how long the notice must be posted. Common sense would suggest from 4 days prior to the meeting until the meeting. What if somebody takes the notice down after 10 seconds, 10 hours, 1 day? Is the meeting notice compliant?

ANSWER: The Davis-Stirling Act requires notice for a period of time not a point in time. "Unless the bylaws provide for a longer period of notice, members shall be given notice of the time and place of a meeting . . . at least four days prior to the meeting. (Civ. Code §4920(a).)" That means an open meeting notice must be posted and remain posted at least four days in advance of the board's meeting. (Executive session meetings require a two-day notice.)

Vandalism. If someone tries to sabotage a meeting by tearing down notices, it does not invalidate the meeting if the board is unaware of the vandalism. If the board is aware, it has an obligation to re-post the notices. We are currently working with an association where a board member being sued for embezzlement is breaking into the message board and tearing down board meeting notices. We sought and received a temporary restraining order to stop the director's vandalism.

HOUSE SOLD--IS
PRESIDENT STILL ON THE BOARD?


QUESTION: The president of our condo association is selling her condo and will close escrow On April 9th 2019. She wishes to resign pending her replacement at a meeting on April 1, 2019. There are some members of the association who are saying that since her house sign says "sold" she is no longer an owner and cannot vote for a replacement.

ANSWER: The sign on the lawn is irrelevant. It means the unit is in escrow. If if falls out of escrow, the sold sign will be removed.

Your president remains an owner and qualified to serve on the board until title transfers at the close of escrow. That means she is still on the board and can vote for her replacement at your April 1 meeting.


SB 323 Is the bill backed by the Center for California Homeowner Association Law (CCHAL) which limits homeowners' rights in setting qualifications for directors. Members could no longer prohibit violent felons, registered sex offenders, delinquent owners and active litigants from serving on the board. The bill also exposes members to identity theft by allowing owners to copy ballot envelopes with members' signatures and mailing addresses.

CCHAL #1. Vote No on SB 323. This bill is appalling. NO NO NO. -Gail Y.

RESPONSE: Like poltergeists, the Center for California Homeowner Association Law and Senator Wieckowski are pushing legislation that has no purpose except to harm homeowners. It is hard to understand their motivation.

CCHAL #2. Senator Wieckowski is out of his mind! Yes, yes, yes-I adamantly oppose this bill. Do not pass SB 323! -Sue B.

CCHAL #3. This is the most outrageous false claim against CCHAL I've ever read. The people decide who they vote for to be on the board, plain and simple. If someone has been rehabilitated and the majority agree they are qualified to be a board member it is not up to DS to stop it. -Rebecca B.

RESPONSE: You might not have read the legislation. CCHAL is not creating rights--it is taking them away. CCHAL is taking away the right of homeowners to decide for themselves director qualifications.

CCHAL #4. I am so happy to be OUT of California. Such a litigious state!!! No one seems to have any common sense left in the state legislature! -Francyne W.

CCHAL #5. Why is Senator Bob Wieckowski still in Sacramento? Can't he be recalled and/or censured for this type of legislation? It is totally irresponsible. Can't someone look into his background to see why and who are behind this methodology? Adding these types of individuals to a board seems counter-productive to the fiduciary requirements of the CC&Rs and bylaws. -Julian M.

CCHAL #6. Just a note to thank you for all the information you provide. -Bliss S.

*****


Security Camera #1. The security camera issue reminded me of an objection one of our residents had regarding his neighbor’s Ring Doorbell which he claimed was invading his privacy because it recorded him when he entered and exited his unit (they face each other.) After checking with local law enforcement and our legal team, no one could find anything pro or con about this issue. About a week later I got a call from the neighbor with the Ring Doorbell letting me know that the complainant was outside watering the landscaping completely nude! We can only imagine the fallout if a little Girl Scout came up the walk selling cookies. -Anonymous

Security Camera #2. Maybe you could explain why anyone should be prohibited from pointing a camera towards any building, window, or other common area which is visible by a person standing on their own lot? If the issue is invasion of privacy, that depends upon a legal right to expect privacy doesn’t it? -Anthony V.

RESPONSE: Security cameras can zoom into bedroom windows and record private activities, eyes can't. The recording can then be loaded onto the internet...something else eyes can't do. Some associations allow security cameras but put limits on where they can be mounted and the directions they can be pointed.

Security Camera #3. How about the new "ring doorbell camera"? Any owner who wants to install one can do it, since there is no expectation of privacy. The only way for an association to restrict these devices is to define the installation as requiring board approval since it is requires some kind of holes to install it? -Nancy M.

RESPONSE: I agree, there is no expectation of privacy for persons standing at your front door. For single family homes, association approval is not required. For condominiums, installation of the device involves a common area doorjamb in a common area hallway. That normally requires association approval.

*****


Paradise Fire #1. It was my understanding, subject to individual HOA CC&Rs of course, that in case of total destruction, the members could vote to close out the HOA and sell off the land, and distribute any HOA assets. I don’t recall you covering why people might choose that option even though there is collectable insurance. They may just not want to rebuild in that location. -Anthony V.

RESPONSE: For some, that may be a logical option. See the next comment from Christopher L.

Paradise Fire #2. Until November 8, 2018 the Camelot Owners Association in Concow was “alive and well” However, the Camp Fire wiped out every residence in the HOA, and there were no community owned structures. There is nobody living there, including board members, and the roads and two upper crossing bridges, and a park area with some picnic tables was about all the HOA maintained along with the “meadow” which was used as an evacuation staging area. Now that there is no Purpose for the HOA, at least until the County/State removes All debris and property owners are allowed to return “to live” which may take up to two years, Are the property owners obligated to continue to pay dues for Nothing? In this case, should the HOA Board offer the common areas for sale, divide up the proceeds to the land owners, and terminate the HOA? Thank you. -Christopher L.

RESPONSE: Your CC&Rs should describe the mechanism needed for dissolving the association. Your board will need legal counsel to walk them through the process and to address any insurance issues involving the common areas. You will need one or more town hall meetings with the membership to go over everything. At some point, you need a vote by the membership to dissolve the association and sell everything. You may need a single buyer for the entire development so to eliminate potential legal issues involving the common areas.

*****


Speed Bump Insurance. In regards to your reader’s question about speed bumps, I can tell you that Farmers Insurance covers an association that gets sued due to an accident related to speed bumps, regardless if the speed bumps were present at the time the policy was written or installed subsequent to policy inception. Boards do not need to make changes to the policy in order to be covered, although I recommend they notify their agent, as the insurer may have guidelines about how the speed bumps should be marked in order to minimize risk.

Farmers provides a Loss Control Guide that property managers and directors can use when evaluating potential hazards on the property. It includes a checklist that asks if speed bumps are installed in necessary areas and painted a contrasting color so that they are clearly visible to drivers. -Erik Strom, Farmers Insurance

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

THEY'RE BAA-AACK!

Director Qualifications, Felons, and Privacy Issues

Feb 24, 2019 0 Views 0 Comments

Remember the classic horror film "Poltergeist" by Steven Spielberg where a family's home is invaded by malevolent ghosts? After escaping the ghosts and moving to another home, the youngest daughter puts her hands on the television and says, "They're baa-aack."

CCHAL. Last year, the Center for California Homeowner Association Law (CCHAL), an organization hostile to community associations which trains owners and lawyers how to sue associations, sponsored legislation that took away homeowners' rights to adopt qualifications for who represented them on their boards of directors.

The train wreck legislation was carried by Senator Bob Wieckowski and ultimately vetoed by Governor Brown. Unfortunately, Sen. Wieckowski reintroduced the same flawed bill this year. (Senate Bill 323.)

Felons on Boards. The bill makes extensive changes to the Davis-Stirling Act. In addition to voiding existing director qualifications throughout California, the bill prohibits associations from adopting director qualifications except as allowed by the bill. As a result, associations will be forced to accept onto their boards:

  • sex offenders,
  • violent felons,
  • felons convicted of burglary, robbery, wire fraud, racketeering, and criminal fraud,
  • delinquent owners, and
  • members who are suing their associations.

Privacy Issues. The bill also forces members to include their email addresses on membership lists which are then turned over to other members upon demand. And, it allows owners to copy other members' signatures on voting materials, thereby invading member's privacy and creating the potential for identity theft.

Attorneys' Fees. In another hostile move against associations, the bill allows a member to be awarded attorneys’ fees for consulting an attorney for small claims court. The whole point of small claims is to keep attorneys out of the process. This puts them in the mix and forces associations to pay for them.

RECOMMENDATION: We will let everyone know when it's time to write legislators. In addition,
I urge everyone to sign up for CLAC's email alerts and to donate time and money to CLAC to support their mission to protect homeowners. The California Legislative Action Committee (CLAC) is a volunteer organization consisting of homeowners and professionals serving homeowner associations by monitoring legislation, educating lawmakers, and protecting the interests of those living in community associations.

REASONABLE
ACCOMMODATION
 
QUESTION: Our association has curbs from the driveway to the street which are extremely steep and the front ends of cars scrape as they drive up. Recently a homeowner asked to place a product called "Steep Driveway Ramps" between his driveway and the street allowing him to safely push his 92-year-old father from his driveway to the street.
 
Without this apparatus, his father is house-bound and getting from the driveway to the street is dangerous. He said he nearly tips the dad out of the chair each time. I am in favor of allowing this homeowner to purchase and keep this wedge in place all the time. Other board members are opposed saying he will be the only one and it will look ridiculous. If the HOA prevents them from doing this, is it breaking any laws, especially for disabled people?
 
RESPONSE: Yes, it is. I would hate to stand in front of a judge and try to defend your board's decision. "Your Honor, the board refuses to remedy a dangerous situation for a disabled owner because they don't like the appearance of the safety feature." The judge would likely make me repeat it and... "speak up so everyone in the court could hear the board's position."
 
Reasonable Accommodation. The law is quite clear, the association must allow the owner to install the safety feature. When a disabled owner makes a request for reasonable accommodation and the person's disability is obvious, reasonable accommodation is required under the Federal Fair Housing Act and California's Fair Employment and Housing Act.
 
Discrimination. Discrimination under the Fair Housing Act includes “a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing premises occupied or to be occupied by such person if such modifications may be necessary to afford such person full enjoyment of the premises.” 42 U.S.C. §3604(f)(3)(A). The statute also makes unlawful any “refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” 42 U.S.C. §3605(f)(3)(B).
 
RECOMMENDATION: Your board should reconsider its position. If directors are still uncertain, they should talk to legal counsel about the consequences of being sued by the State of California for discrimination.


Paradise Fire #1. Regarding dissolution of the association, perhaps their legislator could get a law passed lowering the requirements in disaster situations. -S.W.

Paradise Fire #2. These are good articles. In our proposed CC&Rs, we have Article XII "Damage and Destruction." -Lou Ann F.

Paradise Fire #3. I see that your article about the Paradise HOA doesn't mention the homes destroyed. Since our association only has a single building, it hadn't occurred to me that individual units (in the Paradise project) would have fire insurance. This helps to explain why your article about the '"new'" requirement for fidelity insurance suggested purchasing a policy. That's already included, as a rider, to our fire insurance. -Robert F.


Paradise Fire #4. Thank you for your useful newsletter. -Connie

Paradise Fire #5. I found the question about the Paradise association serving no purpose interesting. Our association is in the middle of a forest so it could happen to us. I understand that there are legal implications on terminating an association. What if the members simply stop paying dues and the directors resign? Would the association not self-destruct? -Finn M.

RESPONSE: What you describe is the worst possible solution to the problem. Even if the board dissolves and everyone stops paying assessments, the association continues to exist as a legal entity.

No Insurance. With no one paying assessments and no one on the board, the association's insurance will lapse. That means the association will be exposed to potential liability in the event there is an injury in the common areas. The association could be sued but there would be no insurance to defend it or cover any losses. Liability would then flow to owners through special assessments imposed by the courts.

Individual Protection Lost. Worse, without insurance, members lose the protections provided by the Davis-Stirling Act. (Civil Code §5805.) It means every member of the association could be named individually in the lawsuit. (See Commercial General Liability Insurance.)

Disclosure. If an owner in an association that ceased to function came to me for advice, I would tell them to sell and get out as fast as humanly possible. But, then there is the problem of disclosure to a potential buyer.

*****


Due Process. You mention “due process” as a part of levying fines. Please elaborate on what that means. -Dean D.

RESPONSE: There are two forms of due process, procedural due process and substantive due process. Both are essential in how associations handle disciplinary matters with members. For an explanation of both, see "Due Process."


Speed Bump Insurance. Hi, you have the best website I have ever seen. What an education! Could you tell me when it comes to capital improvement regarding speed bumps, does our insurance cover any accidents regarding this improvement or do we need to increase the insurance or specify in the policy. Thank you. -Hans N.

RESPONSE: Yes, your insurance should defend the association if it is sued due to an accident related to a speed bump. To be safe, you should raise the issue with your insurance broker and have him/her confirm in writing that it's covered. Perhaps some of our insurance agent readers can provide more information on this issue.


Security Cameras on Condo. A homeowner installed security cameras around his condo. The cameras are facing into the common areas such as a sidewalk, their front door, and an area adjacent to the pool. Is this allowed? -John K.

RESPONSE:
It is not against the law for an owner to install security cameras. Persons in the common areas have no expectation of privacy because they are "in the public" and can be seen by others.

However, residents are often uncomfortable with individual owners "spying" on them. Because associations can adopt rules, the board can regulate how security cameras are used, restrict the number and placement of cameras, or prohibit them altogether.

The association can regulate the attachment of CCTV cameras to common area railings, balconies, ceilings and walls. Boards can also adopt rules that require cameras to blend into the structure and be unobtrusive. The rules can also prohibit the pointing of cameras toward other residents’ windows and balconies.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Paradise Fire

Dissolving an Association

Feb 10, 2019 0 Views 0 Comments


QUESTION: I am a homeowner in the Paradise Pines Owners Association. On November 8, the Camp Fire struck our association. It was the largest fire in California history and wiped out the town of Paradise and many homes in our association.

Many owners lost employment, many are still displaced and will never return. Homeowners are finding themselves in dire straits whether their home survived or not.

Our association serves no purpose for what is left. Many of us would like to dissolve our association. Are their special circumstances to dissolution due to this disaster?


ANSWER: The Camp Fire was stunning in its speed and destructive power. I understand the desire by some to never return to the area. Your ability to dissolve your association depends on your governing documents and various approvals. 

Governing Documents. Your CC&Rs should have a section labeled "Damage/Destruction to Improvements" or something similar. It addresses destruction of common area elements, reconstruction costs, insurance, and possible membership approval regarding reconstruction or dissolution.


Amenities. For a planned development such as yours, dissolving the association could be difficult to justify. If common area amenities were damaged or destroyed (a clubhouse, playground, etc.) but homes remain largely intact, dissolving the association may not be an option since rebuilding amenities may be fully covered by the association's insurance.

Property Values. Restoring amenities would increase property values. A home in an association with amenities has more value than the identical home in the same location without amenities. For that reason, existing mortgagees (lenders) might have a voice in the decision.


Sale of Common Areas. Dissolution of the association means the common areas must be sold since there will be no entity to maintain them. Depending on the configuration of your common areas, they may have little or no value. If the common areas cannot be sold and if the county is unwilling to take ownership, a court may be unwilling to dissolve your association even if the membership approved the dissolution.

Board & Membership Approval. Because of the significant impact of dissolution, it must be approved by the board of directors (Corp. Code §§7911(a)(1) & 8610(c)) and 100% of the membership (Corp. Code §8724).

RECOMMENDATION: Your board needs to consult legal counsel about possible dissolution of your association and the various legal requirements for doing so. For more information, see "Dissolving an Association."

AUTHORITY TO FINE
FOR VIOLATIONS


QUESTION: I am on the board of my association. Can we fine members who violate our rules? Do our governing documents have to give us permission to do so? Our complex is 40-years old with no mention of fines. The authority to enact fines, I think, would have to be voted on by our membership. That thought to me is like trying to get drivers to pass fines for speeding!

ANSWER: Adopting fines does not require a vote of the membership. The board can implement rules and sets fines once rulemaking authority has been established. CC&Rs and rules are related so I will address both.


Enforcing CC&Rs. The ability of an association to enforce its CC&Rs is well established. CC&Rs are enforceable equitable servitudes and, unless the CC&Rs state otherwise, can be enforced by the association. (Civ. Code §5975(a).) Moreover, associations have a duty to enforce their governing documents. (Nahrstedt v. Lakeside Village.) If a board fails to enforce them, members can go into court to to compel enforcement. (Ekstrom v. Marquesa.)

Enforcement Mechanism. What's missing from the Davis-Stirling Act and case law is any mention of how enforcement occurs. The Act simply states that CC&Rs are enforceable. (Civ. Code §5975(a).) The enforcement mechanism is left to associations to decide. Most use three methods: fines, suspension of privileges, and litigation. The same applies to enforcing rules.

Adopting Rules. To adopt rules, an association must have rulemaking authority conferred by law, the CC&Rs, articles of incorporation or bylaws. (Civ. Code §4350(b).) Some older developments are silent on rulemaking authority. Fortunately, governing documents in newer developments all have rulemaking authority since the Department of Real Estate requires it. (Cal. Code Regs, tit. 10, §2792.21(a)(7).)

Even older association without rulemaking authority have statutory authority to adopt rules for specific matters such as election rules (Civ. Code §5105), architectural rules (Civ. Code §4765), IDR policies (Civ. Code §5905) and collection policies (Civ. Code §5730).

Authority to Fine. If an association has authority to adopt rules, the ability to enforce those rules using monetary penalties (fines) is implied. The court of appeal in a 1995 case, addressed this issue. The plaintiff in the case had challenged the association's authority to impose fines pointing out the CC&Rs did not grant the association the power to impose fines.

The court did not dispute plaintiff's assertion but, instead, noted the governing documents gave the association the authority to enact rules: "
The right of the Corporation to establish uniform rules and regulations pertaining to the use of the Common Area..." (Liebler v. Point Loma.) The conclusion by the court is that the authority to enact rules necessarily carries with it the authority to enforce those rules, whether by fines or otherwise.

Imposing Fines. Once an association has authority to adopt fines, the Davis-Stirling Act sets conditions on their use. To impose monetary penalties, an association must adopt a fine schedule and give notice to the membership. Fines must be reasonable and appropriate to the violations. Moreover, they can only be levied after due process has been followed.

RECOMMENDATION: Your board should have legal counsel review your documents and provide a legal opinion on your authority to adopt and enforce rules.

MICHELLE FASSBERG
JOINS ADAMS|STIRLING
 
I am pleased to announce that attorney Michelle Fassberg joined our firm.

Education. Michelle earned her Juris Doctorate from the University of Southern California School of Law. Prior to USC, Michelle graduated with honors from UC Davis with a Bachelor of Arts in Communications and Psychology.
 
Experience. Michelle comes to us with experience in real estate law where she drafted nationwide loan documents, nondisclosure agreements, purchase and sale agreements, condominium riders, loan modification and assumption documents, and related legal agreements.
 
Michelle is a welcome addition to the firm. If your association needs legal services, contact us for a proposal.

Kudos #1. Thanks for another year of your most excellent newsletter; always informative, often humorous, never dull. -Kit C.

Kudos #2. This is my first newsletter that I have received and I love it wish you all a happy healthy holiday. Thank you. -Sharon S.

Kudos #3. Kudos to whoever does the graphics for your newsletter. It is in support of the good humor with which you are able to treat serious business. I am on a small board in Palm Springs and we have all members subscribe. Whether they read it or not is up to them but the pictures must certainly enhance the attraction. Your Rhode Island Red chicken in the recent edition is a good example of this. Cluck cluck. -Earl R.


Smoking #1. What a great picture illustrating the smoking article! -Jerold B.

RESPONSE: If Frankenstein's monster recoiled from smoking, boards should pay attention when members express concerns about secondhand smoke. The trend statewide is for associations to restrict or ban smoking altogether.

Smoking #2. Our rules require complaints be verified by a staff member (a smoker lacking a sense of smell), management (either not onsite or also lacking a sense of smell), or a watch person (doesn't answer phone, slow moving or disinterested) to "investigate." As a result, many complaints are unresolved. Short of changing the board, management or the rules, do you have any suggestions? -Jean S.

RESPONSE: You covered most of your options. If no one is willing to investigate and you can't get support changing the board, management or rules, you may have no choice but to file suit. The upside is that courts have been sympathetic to owners suffering from secondhand smoke. The downside is the cost of litigation and uncertainty of the outcome.


Smoking #3. Thanks for the newsletter. Can the board make "no smoking rules" without revising the CC&Rs? Our new CC&Rs and bylaws were just granted by court less than a year ago. -Cecil L.

RESPONSE: Yes, a prohibition on smoking can be done through a rule change. Even so, somewhere down the road you should amend your CC&Rs to add the prohibition. Doing so makes it easier to enforce since the restriction is automatically presumed reasonable by courts and and much easier to enforce. 

Smoking #4. I’m a bit confused by the article on smoking. California determined low levels to be a hazard, there is also a mention of a complete ban on smoking but finally there’s a suggestion that if detection of smoke is slight then a possibility no action needs to be taken. Please clarify. -John B.

RESPONSE: Yes, a board could make a good faith determination that a slight (barely detectable) odor is not sufficient to trigger action by the association. Also, the odor might not truly exist--the owner could have "phantom smell syndrome."


Cooking Odors #5. In addition to secondhand smoke, cooking odors can be a problem. Though I am not in favor of docking anyone's eating habits, this issue has come to our board. We have a nuisance rule and are in the exploratory research on this issue on how to approach it. -Jim W.

RESPONSE: Yes, this comes up from time to time in condominiums, especially when an owner cooks fish or strong ethnic foods with garlic, curry, etc. Sometimes, the offending owner will prop their hallway door open and/or open windows causing the cooking odors to waft into common areas and surrounding units. The problem is further exacerbated if the owner fails to turn on the exhaust hood over the stove. I've dealt with all these issues over the years. There are a variety of solutions to the problem. You should work with legal counsel to address it.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Smoking Investigation

Dec 2, 2018 0 Views 0 Comments

QUESTION: An owner is complaining about the health hazards of cigarette smoke coming from a nearby unit. She claims it violates the "no illegal, obnoxious or offensive or nuisance activities" provision of our CC&Rs.

Her attorney is demanding we take action to remedy health hazards affecting the owner's young daughter. Is the board obligated to take action even though there is no specific ban on smoking in units?


ANSWER: Yes, it is. The nuisance provision of your CC&Rs is sufficient to require action by the board.

Carcinogen and Nuisance. Secondhand smoke is a known carcinogen and has been classified by the State of California as a toxic air contaminant. The courts have deemed even low levels of exposure as a nuisance. Cities throughout California have already passed ordinances banning smoking in apartments and condos. Many associations have also imposed complete bans on smoking, including inside units.

Fiduciary Duty. Directors have a fiduciary duty to investigate. That means your board must investigate her complaint, either personally or by delegating the investigation to management or to an expert. Based on the outcome of the investigation, the board could determine the infiltration is so slight as to not constitute a nuisance or there is enough to be deemed a nuisance.

Appropriate Action. If smoke cannot be detected or is only slight, the board should send a letter to the owner (or the the owner's attorney via the association's attorney) of the investigation and their determination that no further action will be taken.

If the board decides the smoke is a nuisance, it can order the neighbor to abate the nuisance by taking steps to stop the transfer of smoke into the neighboring unit. If that is not possible, the board can require that he stop smoking in his unit.

RECOMMENDATION: As many other associations have already done, you might consider amending your CC&Rs to eliminate smoking altogether. This will also help with the growing problem of pot smoking in units affecting neighboring units.

STEFAN HERPEL
JOINS ADAMS|STIRLING


I am pleased to announce that attorney Stefan Herpel joined our firm's litigation team.

Clients. Before joining ADAMS|STIRLING, Stefan  worked as a litigation partner in a large law firm where he represented corporations such as Marriott International, Ritz-Carlton, Wyndham Worldwide, and American Airlines.

Trial Attorney. As a trial attorney, Stefan handled boundary disputes, eminent domain, easements, partition actions, defamation (for national media clients), products liability, and securities fraud (class action defense).

Supreme Court.
In addition to trial court experience, Stefan argued in the U.S. Courts of Appeals for the Third and Sixth Circuits, the Michigan appellate courts, and the U.S. Supreme Court (where he briefed and argued Bennis v. Michigan).

Media. Stefan's media appearances include Rivera Live (former MSNBC legal talk show); Burden of Proof (former CNN legal program); America and the Courts (C-Span); and All Things Considered (National Public Radio).

Education. Stefan earned his Juris Doctorate from Michigan Law School, Ann Arbor, MI, where he served as senior editor of Law Review. He also received a Bachelor of Arts in Economics and English from the University of Michigan, An Arbor, MI.

25th ANNUAL
HIGHRISE MANAGER LUNCHEON
 
Wednesday, December 12, is the 25th anniversary of our annual highrise managers' luncheon.
 
This is exclusive to onsite managers.
 
We host 50-60 managers each year to enjoy an elegant lunch, review changes in the law, discuss things relevant to onsite managers, and enjoy each other's company.

For more information, see the Wilshire House Managers' Luncheon.
 
YEAR-END
THANK YOU!


This will be our last newsletter of the year.

We wish everyone holiday greetings and a heartfelt thank you for your questions and feedback.
You keep things interesting and relevant.

We also want to welcome the almost 400 new clients who joined the firm this year. Because of your support, we have grown to 12 offices around the state with 30 lawyers providing corporate counsel and litigation services to commercial, residential and mixed-use associations. We are grateful to be able to serve you and your communities.

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 2019!


Wildfires. Great, as always. Thanks for mentioning that the reserve specialists may have extra photos of common areas. We take hundreds of photos that are never used, but we keep on file, and would be happy to give to our clients to assist with insurance claims.

Thanks for keeping the public informed! -Scott Clements, RS, PRA, CMI

*****


Living Trust. As a former bank commercial loan officer I disagree that a living trust cannot own property. A bank will not make a real estate loan to an entity that is not the fee simple legal owner.

The loan is made to the living trust with all trustees as the guarantors. -John A.


RESPONSE: I hate to disagree but trusts are estate-planning tools, not entities capable of owning real estate. A living trust is a legal document that transfers ownership of property to a person or institution called a trustee. The trustee manages the property for the benefit of one or more beneficiaries.

Because trusts are not entities (they are not registered with Secretary of State) nor are trust documents public, there would be no way of knowing who to serve in the event an association needed to sue for delinquent assessments or foreclose if the trustee were not on the deed.

In the example I gave, ownership of a condominium is not owned by the "John D. Smith Family Trust." For the transfer of ownership to be effective, it must be transferred to a trustee, such as Mary Jones as Trustee of the John D. Smith Family Trust.

*****


Email Meetings #1. I am on the board of a small association. Our directors have full-time jobs and can't call a special meeting every time we need to make a decision. It's too burdensome. We handle routine, day-to-day decisions by email. I understand the need for transparency but the law should be changed to allow for routine operational decisions to be made by email. -David S.

RESPONSE: This is a common complaint by boards of associations both large and small. The Open Meeting Act has made it difficult for volunteers with full-time jobs to conduct business for their associations—especially small associations which are self-managed.

The legislature’s intentions were good but the practical effect has been mixed. Regulations imposed on governmental entities, such as the Brown Act, are not always appropriate for volunteer organizations which is why the Open Meeting Act is a stripped down version of the Brown Act. Finding the right balance is an ongoing struggle.


Email Meetings #2. Does the prohibition on email preclude two board members emailing, texting or speaking to each other concerning a potential issue to better understand if there is a need for board action? -Ron L.

RESPONSE: It is precluded if your board consists of three directors, since two out of three constitutes a quorum. If your board is five or more directors, two directors can text, email, telephone, and meet to discuss board business.

*****


Raising Dues #1. Last week's newsletter--does this mean HOA boards can increase monthly dues 20% every year? If so, then this would mean our monthly assessments could legally double within four years!! The statute seems to have been addressing high rates of inflation some 40 years ago. You reported our rate of inflation is now less than 2%! If legislation on assessment increases was caused by inflation rates, should it not have a clause that actually links them to inflation rate changes? -Andrew B.

RESPONSE: Yes, boards can raise dues 20% per year indefinitely. However, that will never happen. There are two limiting mechanisms. First, directors are raising their own assessments along with everyone else's, something they have no interest in doing. Second, if boards did embark on endless increases, the membership would rise up and replace them.

Even though inflation is now less than 2%, there is still merit in the 20% allowance. Too many boards go ten or more years with no increase in assessments despite inflation.
As a result, the budget actually shrinks from year to year and boards compensate by deferring maintenance and cutting contributions to reserves.

At some point, chickens come home to roost and a subsequent board is forced to make painfully large increases in assessments to get the association's fiscal house in order.


Raising Dues #2. Referring to your newsletter from 11/18, you said the Davis-Stirling Act specifically overrode CC&Rs when it came to dues increases. How can it be determined in which instances Davis-Stirling overrides governing documents?

RESPONSE: If governing documents conflict with the law, the law prevails (see hierarchy of documents). There are times when a statute specifically overrides documents and other times when it defers to them. To help you maneuver through the process, I posted "Rules of Interpretation" on our website.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Fining a Family Trust

Nov 25, 2018 0 Views 0 Comments
QUESTION: We have a number of condos owned by family trusts. If we have to pursue the owner for rules violations or unpaid assessments, who do we go after?
 
ANSWER: For fines and delinquent assessments, go after the trustee of the trust.
 
Trust Deed. You cannot go after the trust itself because it is neither an entity nor a legal person such as corporations are. A trust is a mechanism for transferring assets to a beneficiary without going through probate. As such, it cannot own property or be sued.
 
Because a trust cannot own property, a condominium in a living trust must be owned by a trustee on behalf of the trust. That person's name appears on a recorded deed similar to the following: "John D. Smith as Trustee of the John D. Smith Family Trust dated 1/1/15." Or, "Mary Jones as Trustee of the John D. Smith Family Trust dated 1/1/15."
 
Rules Violations. If the occupants of the unit violate the rules, you call the trustee in for a hearing and levy fines against the trustee.
 
Collections. For delinquent assessments, you can go into court for a money judgment against the trustee in his/her capacity as trustee of the trust. Or, if you decide to foreclose, you record a lien against the property. The lien can be foreclosed and the unit sold nonjudicially without going into court. Fines cannot be included in a nonjudicial foreclosure but they can be included if you pursue a judicial foreclosure through the courts.
 

RECOMMENDATION: Contact our office for more details on collection options.

E-MAIL MEETINGS
LIMITED BY DAVIS-STIRLING


QUESTION: At our last board election, an attorney did a board orientation. Someone asked whether email communications beyond scheduling meetings were okay for board members. The attorney stated that since meetings are defined as a quorum of directors hearing, discussing, or deliberating on board business, emails are arguably "okay" since the directors wouldn't be "hearing" anything. A bunch of us in the audience were wondering... is this really true?

ANSWER: No it's not true. The Open Meeting Act does not state "hearing, discussing, and deliberating," it uses the word "or." If the board does any one of those things, it's a meeting. A meeting is defined as:

A congregation of a majority of the members of the board 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(a).)

Effective January 1, 2012, boards of directors "shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail" except for emergencies. (Civ. Code §4910(b).)

Administrative matters such as scheduling meetings and deciding what to include on the agenda are acceptable emails between directors. It is possible the attorney was referencing emergency meetings as an exception to email meetings by directors.

TROY KENNEDY
JOINS ADAMS|STIRLING


I am pleased to announce Troy Kennedy joined our Los Angeles office.

Experience. Prior to joining us, Troy gained valuable experience handling complex civil litigation involving breach of contract, fraud, trademark infringement, real estate disputes, intellectual property, and probate law.

Troy drafted agreements for cases that settled and took to trial those that did not. This included a class action lawsuit against lenders who inappropriately denied loan modifications and foreclosed on mortgages.

Education. Troy earned a Bachelors of Science in computer engineering from Syracuse University, Syracuse, New York and then received a Juris Doctorate, cum laude, from St. John's University School of Law, Jamaica, New York.

Troy is an outstanding addition to the firm and we are very happy to have him on the team. When your association needs legal services, contact us for a proposal.

WOMEN'S INITIATIVE
LAUNCHED AT ADAMS|STIRLING


I am pleased to announce that law partners Jasmine Hale and Laurie Poole launched a "Women’s Attorney Initiative" (WAI) for the firm.

They created WAI to support the professional development of our women attorneys, to identify the unique challenges they face in their legal careers, to promote work/life balance, and to provide a network for advancing leadership opportunities in the firm as well as the legal community at large.

We have a diverse and growing pool of women attorneys who are invaluable to our operations. We believe the Initiative strengthens the culture of the firm and better serves our clients. Kudos to Jasmine and Laurie for putting it together.


Wildfires #1. Documentation of the pre-fire condition of the common areas may be important in processing insurance claims. The photographic inventory from an association's most recent reserve study may be useful. Often, reserve study providers shoot many more photos than actually appear in the reserve study.

I know if a client asked our firm for those photos, we would provide them at no charge. We did so in another fire and heard later that our photographs were instrumental in their insurance claim. -
Robert Nordlund, Association Reserves, Inc.

*****


Raising Dues. Your newsletter is invaluable for smaller associations who do not have funding to support hiring a stand-by attorney. If an association’s bylaws require a 70% affirmative membership vote to raise dues, does this supersede the law that allows boards to raise regular dues up to 20%? -Maggie L.

RESPONSE: No it does not.

Many older sets of CC&Rs, especially those from the 1970s and early 1980s, have significant limitations when it comes to raising the money needed to maintain the common areas. Some I've worked with over the years had a 3% cap on assessment increases. Others, like yours, required a super-majority approval by the membership for any increases--something that is virtually impossible to achieve.

These kinds of limitations crippled associations during the economic stagflation under President Carter (1977-1981). At that time, the country suffered a combination of stagnant economic growth, high unemployment, and high inflation. Inflation hit 13.5% during the Carter years. By contrast, today's inflation rate is 1.9%.

To address the problem, the 1985 bill (AB 314) authored by Assemblyman Larry Stirling created Civil Code §1366(b) which overrode CC&R limitations on assessment increases and allowed boards to increase regular assessments up to 10% without a vote of the membership. The provision was subsequently amended to 20%, which then transferred into the 2014 rewrite of the Davis-Stirling Act to become Civil Code §5605(b).

Accordingly, the 70% membership approval requirement in your CC&Rs is void and your board can increase regular assessments by up to 20% without membership approval.

RECOMMENDATION: You should consider amending your CC&Rs to bring them current with the law.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

California Wildfires

Nov 18, 2018 0 Views 0 Comments


Adams|Stirling is deeply saddened by the tragic losses from California's wildfires. They have had a devastating impact on families and communities, including many of our clients.

Notify Insurance. Managers, boards of directors, and residents should immediately put their respective insurance carriers on notice of any damage from fire, smoke/soot, water (from fire hoses), and air-dropped fire suppressants. Make sure you document all losses with photographs and keep receipts of expenses incurred.

Follow Up. If you notify your insurance broker by phone, make sure to follow up in writing with an email or letter. If you don't get an acknowledgement, follow-up again to make sure your claim is being processed and an adjuster has been assigned. Because of the large number of fire-related claims that will be filed, any delay in filing your claims could result in significant delays in processing them.

Notify Counsel. Associations should notify legal counsel of any losses suffered so they can provide advice on insurance claims, issues involving possible looting, security, clean-up, and reconstruction. Legal counsel can also assist in the event a carrier is slow to respond or, worse, denies coverage. If you need our assistance, please call (800) 464-2817.

CC&R CAP
ON ASSESSMENTS

QUESTION: If an association's CC&Rs state a maximum annual assessment increase of 10%, can the board raise assessments 20% based on the Davis-Stirling Act?

ANSWER: Yes, it can. Regardless of any contrary provisions in your CC&Rs, the board can raise regular assessments up to 20% without membership approval. This is one instance where the Davis-Stirling Act specifically overrides governing documents.

Calculation. The 20% increase is based on the association’s regular assessments for the prior year, including operations and reserve contributions.

Timing of Increase. Assessment increases are conditioned on timely distribution of a budget report, which must be distributed 30-90 days prior to the end of the association’s fiscal year. Failure to meet this requirement nullifies any increase levied by the board, which then requires membership approval.

Duty to Assess. By statute, boards are required to levy assessments sufficient to perform their duties. (Civ. Code §5600.) The legal duty falls on board members, not the membership. That explains why boards sometimes raise dues when they would rather not, and why they don't seek membership approval unless the increase exceeds 20%.

Thank you to my partner Nathan McGuire for answering this question.

KATHY MILLS JOINS
ADAMS|STIRLING


I am pleased to announce Kathy Mills has joined our San Diego office.

Community Associations. Prior to joining our firm, Kathy spent many years representing community associations, advising boards of directors, amending and restating governing documents, reviewing and negotiating contracts, providing legal opinions, and litigating matters.

CID Development. In addition to HOA experience, Ms. Mills has valuable experience counseling developers on the Subdivision Map Act, the SB 800 construction defect process, the Real Estate Settlement Procedures Act, and the Interstate Land Sales Act. She assisted with project planning, securing public reports from the DRE, and obtaining approval of subdivision documents from city/county planning departments for condominium, single family, highrise, mixed-use, master planned communities, and condo conversions.

Education. Kathy received her BA, magna cum laude, from Washington & Jefferson College in Washington, Pennsylvania where she was Phi Beta Kappa with a double major in Economics & Political Science. Kathy went on to earn a Juris Doctorate from the Penn State Dickinson School of Law, in Carlisle, Pennsylvania.


We are delighted to have such an experienced attorney join our San Diego legal team. If your association needs legal services, contact us for a proposal.

ALISON GREINER
JOINS ADAMS|STIRLING


I am also delighted to announce Alison Greiner has joined our firm's Temecula office and will work with our growing base of San Diego and Inland Empire clients.

Experience. Alison is a 15-year attorney who brings valuable experience representing clients in various areas of the law, including corporate formation and transactions, premises liability, contracts, real estate transactions, human resource issues, workers' compensation, personal injury, litigation and dispute resolution.

Education. Alison earned a BA in Communications with an emphasis in Public Relations from San Diego State University. This was followed by a Juris Doctorate from the University of San Diego School of Law.

Alison is a wonderful addition to our San Diego/Inland Empire team. If your association needs legal services, contact us for a proposal.

6th ANNUAL
ABCs of HOAs


I will be speaking at an event in Los Angeles hosted by HOA Organizers, Inc.

It is a free event with a catered lunch and raffle prizes where board members can learn, interact, and meet with industry professionals.

Program. I will speak on new laws affecting associations and boards of directors. Neda Nehouray (HOA Organizers) will speak on board management responsibilities and procedures. Dr. Lori Baker-Schena (Baker Schena Communications) will speak on how boards can strengthen their leadership skills and enhance performance.

There will be a Q&A to allow attendees to address specific inquiries to the panel.

When: Saturday, December 8 from 11AM to 3:30 p.m.
Where: Olympic Collection, 11301 W. Olympic Blvd., L.A.
RSVP: [email protected] or (818) 778-3331 x509
25th ANNUAL
HIGHRISE MANAGER LUNCHEON
 
Wednesday, December 12, is the 25th anniversary of our annual highrise managers' luncheon.
 
This is exclusive to onsite highrise managers.
 
We will greet old friends and meet new ones, review 2018 changes in the law, pass out cool swag and prizes, and eat good food.

For more information, see the Wilshire House Managers' Luncheon.
 


Fraud Insurance. "Computer and Electronic Transfers Fraud" (C&ET Fraud) coverage can be added as a sub-limit under the HOA’s crime policy. Some carriers offer as little as $10,000 for C&ET Fraud and some can only insure up to $750,000. These limits do not need to match the total crime limits.

The language in the bill does not specify an actual limit. It states, “The association’s fidelity bond shall also include computer fraud and funds transfer fraud.” If an HOA carries a $1,000,000 Crime policy, are they required to carry $1,000,000 in Computer and Electronic Transfers Fraud? Or can they carry a significantly smaller sub-limit and still be in compliance? I know what the safe answer is but the reality is the difference in premium could be substantial. -Pat L.

RESPONSE: You are right, the bill does not specify an actual limit for C&ET Fraud insurance. It is implied--reserves plus three months of assessments. (Assembly Bill 2912.) In my opinion, the C&ET Fraud policy and crime policy can each be different amounts so long as each meets or exceeds reserves plus three months of assessments.

*****


Kudos. Your newsletter ROCKS! Bet you knew that already!  -Lisa I.

*****


Manager/President. Regarding the manager acting as president of the board (“The manager refuses to allow us to have a president claiming we would be sued. To compensate, the manager has taken over the president's powers.”) Obviously we only know one side of the situation, but as a manager, I can’t think of any circumstance where that would be appropriate. Final recommendation, fire the manager and hire someone who won’t overstep their position.” -Lisa H.

RESPONSE: If the manager is truly dispensing legal advice (practicing law without a license), refusing to allow the board to appoint a president, and taking over the president's powers, he/she has significantly overstepped boundaries and the board needs proper legal advice on pending matters. They also need to reign in the manager.

*****


Meeting Quorum. In the Feedback section, did the board cancel the election because there wasn’t quorum or did they cancel the annual meeting because there wasn’t quorum? And, follow up, if the meeting requires quorum, but the election doesn’t, can you hold the election without the meeting? -Lisa H.

RESPONSE: It appears the meeting was canceled for lack of quorum. However, the purpose of an annual meeting is to elect directors and if no quorum is needed to elect directors, the meeting should not have been canceled. Opening and counting ballots could (and should) have been done at the annual meeting so attendees could observe the opening of ballots and tabulating of votes.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Crazy Bipolar Neighbor

Nov 4, 2018 0 Views 0 Comments
QUESTION: We have an owner who startles female tenants by entering their open garages. He was sent a warning letter but did it again with new female tenants moving in at 10 p.m. His said he is a friendly, concerned, crazy, bipolar neighbor. I consider it trespassing. Am I off base?
 
ANSWER: You are not off base to be concerned. I suspect female residents would be more than startled. Your neighbor's "crazy bipolar" comment does not help.
 
Criminal Trespass. There are many types of criminal trespass. In general, a person must willfully enter onto another's property with the intent to interfere with property rights (such as burglary or vandalism) or intent to harm the person, or refuse to leave the property upon request. (See Penal Code §601 §602 for a full list of factors.)
 
Scaling a fence to enter a property shows willful entry and may be prosecutable depending on intent. If the intent is to retrieve an errant football, a district attorney will decline to prosecute. Similarly, walking into someone's open garage to greet a neighbor would not be deemed a crime.
 
Civil Trespass. Criminal trespass and civil trespass are essentially the same. The difference is enforcement. Governmental authorities enforce criminal trespass whereas an aggrieved owner enforces civil trespass via litigation.
 
In California, civil trespass now includes invasion of privacy. Under Civil Code §1708.8(a), a person is liable for invasion of privacy if he knowingly intrudes onto private property without permission to capture a visual image, sound recording, or other physical impression of a person engaging in a private, personal, or familial activity.
 
Entering a garage to check on someone's well-being would not qualify as an invasion of privacy.
 
Breach of CC&Rs. Your best bet is to take action under the CC&Rs. If your neighbor continues to enter garages after being told to stop, he can be fined under the nuisance provision of your CC&Rs.
 
RECOMMENDATION. The board should call your "crazy bipolar" neighbor to a hearing and make it clear that entering garages uninvited is unacceptable and if he continues it would subject him to fines and suspension of privileges.
IS CANCELING AN ELECTION
TO SAVE MONEY LEGAL?
 
QUESTION: For our election, only three candidates volunteered for the three open seats. The president wants to cancel the election to save money. Is this against the law?
 

ANSWER: I don't believe it is against the law. Your president is not really canceling the election, the election will be determined by acclamation rather than balloting. Unfortunately, there is nothing in the Davis-Stirling Act addressing acclamation, so it's unclear.

Argument Against Acclamation. The argument for mailing ballots, even when seats are uncontested, is found in Civil Code §5100(a), which states:

...election and removal of directors... shall be held by secret ballot...

Arguments for Acclamation. There are two arguments in favor acclamation. The first is that balloting is required only when an election requires a vote. If the election is uncontested, there is no need for a vote. Second, the law does not require idle acts nor does it favor form over substance. (Civ. Code §3532Civ. Code §3528; Letitia V. v. Superior Court (2000) 81 Cal.App.4th 1009, 1016.) Sending out ballots would be an idle act since the outcome is already known. I find these two arguments persuasive.

Legislation. This year's Senate Bill 1128 removed any ambiguity by explicitly allowing associations to avoid the cost of mailing ballots when an election is uncontested. Unfortunately, the cost-saving measure was hijacked by the Center for California Homeowner Association Law (CCHAL) which added language that stripped away homeowners' rights regarding candidate qualifications. Thankfully, the altered bill was vetoed by the governor.

RECOMMENDATION: Dispensing with balloting in uncontested elections makes the most economic sense. To remove any ambiguities, associations should amend their bylaws to waive balloting in uncontested elections (along with eliminating write-ins, floor nominations, quorum requirements, proxies and cumulative voting).

CHANGING
DIRECTOR QUALIFICATIONS


QUESTION: Can boards change director qualifications without amending the bylaws? Our previous board changed the qualifications and added that a recalled board member could not join the board for three terms (6 years.) Is this legal or reasonable?

ANSWER: Arguably, it is legal. The court of appeal in Friars Village v. Hansing ruled that boards can adopt director qualifications via a rule change provided the qualifications are "reasonably related to the performance of the Board and will serve to protect its overall mission--protecting the best interests of the Association."

Limited Applicability? However, the court's decision was based on a specific set of circumstances coupled with the language in the association's governing documents. As a result, it is unclear if the decision opened the door to all associations freely adopting director qualifications via rule changes.

Opposing View. Personally, I'm not a fan of creating qualifications via rule changes. It means they can change from election to election by majority vote of each new board of directors. I believe the better approach is to establish qualifications by amending the bylaws. It creates more stability in the election process and directly involves the membership in approving such standards.

Reasonable?
Some owners are so disruptive, there is good reason to keep them off the board for a period of time once they are recalled. Is six years reasonable? I don't know how a court would rule. Your community will have to decide for itself how best to handle the situation.

ORANGE COUNTY
OFFICE
 

I am pleased to announce our Orange County office is growing! Partner Jasmine Hale is now overseeing the office and attorney Jennie Park is joining senior attorney Wayne Louvier and client relations director David Rico on our Orange County team.

We look forward to meeting managers, board members, and homeowners at future Orange County CAI and CACM events.

Contact us for a proposal when your association needs legal counsel or would like board training.


Balconies #1. You state “bicycles should be encouraged” on balconies. Did you really mean that? The following statement seems to imply the opposite. This is my first newsletter and I’m looking forward to more. -Judy M.

RESPONSE: You were close. Bicycles, i.e., riding bicycles, should be encouraged. Storing bicycles is an important issue. Some associations allow storage on balconies, some provide secure cages in their parking structure, some have bike racks in the common areas. Each community is different and should work out what is best for them.


Balconies #2. Our board had a difficult homeowner who refused to remove three huge pots with large plants in them. The company that did our decksk said the pots would eventually damage the deck. Rather than fine the homeowner the board opted to send them a letter stating they were responsible for any damage to the deck. Despite the potential cost the pots remained. -John A.

RESPONSE: The board should realize they are simply postponing the battle. It happens now before damage occurs or it happens later when common areas and units below suffer water damage.

If the board does not want to force the owner to remove the pots, it should call him in for a hearing. The board needs to make it abundantly clear that large pots will damage the waterproofing membrane and the owner will be responsible for all resulting damage to the balcony and surrounding common areas and lower units.

The hearing and decision need to be recorded in the minutes. The letter with the board's decision along with the first letter giving notice of liability should to be kept in the person's file. The board will need them when wood rot and related water damage occur because of the heavy pots. The board should also consider scheduling annual inspections of the person's balcony.

*****

Fidelity Bond. Your series of articles on the new fidelity bond requirements were helpful. I'm still unclear about the computer/transfers fraud. What are the coverage requirements? Are they the same as the fidelity bond---reserves plus 3 months of assessments? -J.A.

RESPONSE: Yes, they are. The new statute, effective January 1, 2019, states that coverage for computer fraud and funds transfer fraud be part of the fidelity bond. That means an amount equal to or greater than the combined amount of reserves and total assessments for three months (or better).

Similarly, if the association uses a managing agent or management company, the association’s fidelity coverage must include dishonest acts by that person or entity and its employees at the bond's full limits (or greater). It should be noted that the new statute defers to the governing documents if they require greater coverage amounts.

RECOMMENDATION: I encourage boards, managers and insurance agents to jump on this. Time is growing short.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Regulating Bicycles on Balconies

Oct 28, 2018 0 Views 0 Comments

QUESTION: Can an HOA prohibit keeping your bicycle on your own balcony?

ANSWER: It is common for associations to regulate what can be kept on balconies, including bicycles.

Nuisance. Without rules, people would hang laundry over balcony railings and store refrigerators, weight lifting equipment, boxes, etc. on their balconies. Some put chicken wire around the balcony to turn it into an aviary. Others turn their balconies into mini-rain forests with hundreds of hanging and potted plants. They aggravate neighbors and damage balconies.

Reasonable Rules. The key to rulemaking is making them reasonable. Some associations allow bicycles on balconies while others do not. As a rule, bicycles should be encouraged. Your association must decide how best to handle where to store them.
To accommodate bicyclists, some associations provide secure storage, such as chain-link enclosures in the parking structure.

RECOMMENDATION: Talk to your board about forming a committee of homeowners to study the issue and recommend a solution.

UNRELIABLE DIRECTOR
RUNNING FOR THE BOARD


QUESTION: We have a board member who resigned twice from his first term position and then asked to be reinstated. The board granted his request.

He was then elected for a second term and made president. Within months he resigned again. He is thinking about running again in the fall election. Can a person be on the ballot when he keeps resigning?

ANSWER: Unless your bylaws provide otherwise, he can keep running, getting elected, and resigning indefinitely. It's up to the membership to elect someone more reliable. To that end, it's okay for members to send campaign material (at their own expense) pointing out this owner's penchant for resigning.

CC&Rs MYSTERIOUSLY
AMENDED


QUESTION: When I moved into my HOA 29 years ago, the CC&Rs made the association responsible for maintaining the exterior of the buildings. Now our CC&Rs state that homeowners are responsible for the exterior. The members never voted to make such a change. Is this legal?

ANSWER: Except under limited circumstances, boards cannot amend CC&Rs without approval of the membership. Boards are allowed to (i) delete developer marketing language, (ii) delete discriminatory language, and (iii) update Civil Code references. All other changes require membership approval.

Member Approval. Changing maintenance obligations requires membership approval via secret ballot. If the board recorded a maintenance amendment without membership approval, the amendment is not valid. (Taormina Theosophical Community v. Silver.)


RECOMMENDATION: Do a little investigation and find out when the amendment was approved and whether it was by the membership or the board. If it was recorded without member approval, the amendment is void.

UNINSURED GRANDFATHERED
GARDENER
 
QUESTION: Our gardener of many decades, who will be turning 70 soon, is neither licensed, bonded, nor insured. Years ago, when the HOA began using only workers or companies who were insured, he was "grandfathered." Does our board have a duty to ask him to get insurance or quit?
 
ANSWER: I cringe whenever I hear boards are hiring workers without insurance. Whether old or young, workers are subject to injury. Without insurance, your association is exposed to significant potential liability.
 
Worker's Comp. If your grandfathered gardener works primarily for your association, he is likely not an independent contractor. He will be deemed an employee. In addition to liability for injuries, this creates a separate set of problems related to payroll withholdings and overtime.
 
If he is truly an independent contractor, but unlicensed and uninsured, your association automatically becomes his employer if he is injured. (State Compensation Ins. Fund v. Workers' Comp. Appeals Board.)
 
In either scenario, your association could face large special assessments since there is no cap on damages if your gardener is injured, including claims for pain and suffering. With insurance, the claims are limited and the loss is paid by insurance.
 
RECOMMENDATION: To protect your association, you can either (i) require your gardener carry insurance, (ii) make your gardener an employee of your association and insure him, (iii) make him an employee of your management company and they insure him, or (iv) stop using him. You should talk to legal counsel about how best to handle this.
 
NEW
SAN DIEGO OFFICE
 
I am pleased to announce the opening of a new San Diego office in prestigious Tower 591 in Mission Valley. Our address is:
 
ADAMS | STIRLING PLC
591 Camino de la Reina
Suite 905
San Diego, California 92108

Our legal team in San Diego is Jamie Hendrick, Carrie Heieck, Nancy Sidoruk, and Candace Schwartz under the leadership of Laurie Poole. We look forward to building more long-term relationships with clients in beautiful, vibrant San Diego.
 


SB 1265 & 1128. I read your article about Governor Brown's veto of Senate Bills 1265 and 1128. Thank you for persuading the Governor to veto these horrible bills. -C.T.

RESPONSE: I had a small role in opposing the move by the Center for California Homeowner Association Law (CCHAL) to strip 13 million homeowners of their right to qualify who served on their boards. Two organizations were in the forefront in persuading the Governor to protect consumer rights: (1) the Community Association Institute's California Legislative Action Committee (CLAC) and their legislative advocate Louie Brown and (2) the California Association of Community Managers (CACM) and their legislative advocate Jennifer Wada.

*****


Board Meeting #1. In the context of unauthorized board meetings, is "majority" meant as majority of the the serving board members, or majority of authorized board members? Example: Five members are authorized but only three seats are filled. Two members talk about whether or not to hire a new landscaper. Legal or illegal? -Steve C.

RESPONSE: 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.) A "quorum" is defined as "a majority of the number of directors authorized in the bylaws." (Corp. Code §7211(a)(7).)

In the scenario you posed, two directors talking about hiring a new landscaper does not violate the Open Meeting Act. Even so, your board is operating with only three directors. That means two directors effectively control the voting. In the spirit of openness, you should save your discussions for board meetings. Also, you should make a concerted effort to fill your empty seats.


Board Meeting #2. What if director 1 contacts director 2 and discusses a matter on the agenda without discussing how to vote? Then director 1 calls director 3 and the same thing occurs. Then director 1 calls director 4, etc. Is this okay because they don't discuss how to vote? -Sue O.

RESPONSE: No, it's not okay. It's still a chain meeting because the directors are discussing an item of business that will come before the board. (Civ. Code §4090.)

Board Meeting #3. It has always been my understanding that motions must be approved by a majority of the authorized board, not those who are present. Thus, if 3 out of 5 show up, a vote of all 3 must be positive in order to pass an action item. Please clarify this. -Maggie L.

RESPONSE: A majority of the authorized seats constitutes a quorum. (Civ. Code §4090(a).) Unless your bylaws define "approval" to mean a majority of authorized directors, any decision by a majority of the directors at a duly noticed meeting where a quorum is present is the act of the board. (Corp. Code §7211(a)(8).)

For example, if you have a 5-director board, three directors constitute a quorum. If three directors attend a duly noticed meeting, the board can conduct business. At that meeting, a majority of the quorum (two) is sufficient to approve motions (unless your bylaws state otherwise).

NEW FIDELITY BOND
REQUIREMENTS


Fidelity Bond #1. The new fidelity bond requirements take effect on January 1, 2019. Do all HOAs have to be in compliance by that date or can they comply upon renewal? -Tianna T.

RESPONSE: Assembly Bill 2912 did not make allowance for renewal dates. All associations must be in compliance on or before January 1, 2019.

Exposure to Litigation. If a statutory bond is not in place January 1 and the association suffers a loss on January 2, the board may be forced to impose a special assessment to cover the loss. Angry homeowners will likely threaten (and file?) lawsuits against directors for their failure to comply with the statute.

Bond Requirements. Before January 1, 2019, associations need to (i) establish proper limits for their bond in an amount equal to or more than the combined amount of the reserves and total assessments for three months, (ii) cover all persons handling funds, including officers, directors, employees, managing agents and the management company, and (iii) carry coverage for computer/funds transfer fraud.

Computer Fraud. The computer fraud requirement is especially important since cyber fraud continues to escalate sharply. The prevalence and sophistication levels seem to increase daily.

For example, a hacker could easily access a treasurer's computer and completely wipe out the association's accounts by electronically transferring all operating and reserve funds to an offshore account. If a management company is targeted, the cyber criminal could access a manager’s entire portfolio and empty all accounts.

Time is Short. To get a proper fidelity bond in place by January 1, 2019, boards must (1) determine the highest level of reserves to insure through December 31, 2019 plus 3-months' of assessments, (2) identify officers, directors, employees, and managing agent/companies to include, and (3) add computer/transfer fraud coverage.

Carrier Policy Forms. The carrier may need to amend its policy forms to accommodate the computer/transfer fraud element as well as increased limits and managing agent elements. A proposal must then be presented to the board, approved and bound. If a particular carrier cannot meet the new statutory requirements, you will need to seek coverage elsewhere.

Recommendation: Contact your insurance agent now and start the process.

Fidelity Bond #2. If an association carries a crime policy as well as a directors and officers (D&O) policy, does it need a fidelity bond? -Diane B.

RESPONSE: A crime policy and fidelity bond are the same. The coverage is also referred to as employee dishonesty insurance. Even if an association already has a fidelity bond/crime policy, it is unlikely it meets all the requirements that go into effect January 1, 2019. Boards and managing agents should immediately contact the association's insurance agent and give them a copy of the Assembly Bill 2912 and ask for a proposal that satisfies the new requirements.

Fidelity Bond #3. We were wondering about the new fidelity bond law. Does the manager as additional insured have to carry the same limits as the association? -Wendy G.

RESPONSE: The new fidelity bond requirement
does not make the manager an additional insured. It requires the association to maintain prescribed levels of insurance to protect it from loss in the event the managing agent steals the association's money.

Unless the governing documents require greater coverage amounts, the association shall maintain fidelity bond coverage for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for three months. The association’s fidelity bond shall also include computer fraud and funds transfer fraud. If the association uses a managing agent or management company, the association’s fidelity bond coverage shall additionally include dishonest acts by that person or entity and its employees.

Fidelity Bond #4. For computer and electronic transfers fraud, is there a specified amount that is required (at least $10,000 or the three months of assessments plus reserves) or is it that there is just coverage included in the policy? If it is just that the coverage is included, do you have a percentage recommendation for the amount that should be included in the policy?

RESPONSE: I'm not sure I followed your question. It doesn't matter if an employee steals cash, alters checks, or electronically transfers funds into his account--t
he statute requires insurance "equal to or more than the combined amount of the reserves of the association and total assessments for three months." For a small association, the fidelity bond might be $50,000. A large association might need $5 million.

The $10,000 requirement you referred to is not an insurance requirement, it's an approval requirement. The statute requires prior board approval whenever there are transfers greater than $10,000 or 5% of an association's total combined reserve and operating account deposits. As I pointed out in my October 14 Newsletter, the transfer requirement is ambiguous and needs clarification in future legislation. I also discussed the two-signature problem related to reserve transfers.

Thank you to Tim Cline, CIRMS of the Cline Agency for his assistance with these questions.

Adrian J. Adams, Esq.

 

Boards can contact us for friendly, professional advice.

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

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