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

Analysis of SB 323

Oct 21, 2019 0 Views 0 Comments
We were swamped with feedback on the signing of Senate Bill 323 by Governor Newsom. Readers had a lot to say about the bill pushed by the Center for California Homeowner Association Law (CCHAL).
 
In addition, attorneys from around the state discussed internal problems in the poorly drafted bill. Following are some of the complications already identified:
 
Email Privacy. Associations who currently have a list of member emails must now add those emails to the membership list and make them available to any member who asks for them. Even if members intended their email addresses for HOA communications only, CCHAL has made them public. 
 
Most members will not want email address made public. To avoid this, associations need to either (i) purge their existing email list or (ii) send everyone a form allowing them to opt out of the membership list. This needs to be completed before January 1, 2020.
 
RECOMMENDATION: Boards should alert their membership of the pending disclosure and their ability to opt out. Opting out can be done via email.
 
Email Opt Out Problems. Because of poor drafting, SB 323 allows members to opt out in one provision but failed to allow for it in a second provision referenced by the first. New language in Civil Code §5200 defines "Association records" to include Membership lists with email addresses. It allows members to opt out of the membership list pursuant to Civil Code §5220. Unfortunately, Section 5220 does not include email addresses.

A strict reading means members can opt out of everything except sharing their email addresses. I prefer to read 5200 as the authorizing statute so any opt out includes email addresses.Unfortunately, CCHAL opened the door to legal challenges.
 
RECOMMENDATION: Boards should follow the advice of their their legal counsel on how best to handle this situation.
 
Election Confusion. Section 5100 of the Civil Code was amended to require the inspector of elections to deliver to the membership ballots and a copy of the election rules at least 30 days before an election. Section 5115 overlaps duties by making the association responsible for giving notice of the election and for distributing ballots.
 
RECOMMENDATION: Duplicative mailings by the association and the inspector will be costly and confusing. To avoid this problem, one of the parties should delegate to the other the duty of mailing everything. The board should delegate the task to the election inspector or vice versa.
 
Who Can Be An Inspector? Under existing election laws, an association can use their management company or their CPA to handle the election. More often than not, it saved money. That is no longer allowed. Starting January 1, "An independent third party may not be a person, business entity, or subdivision of a business entity who is currently employed or under contract to the association for any compensable services other than serving as an inspector of elections."
 
This will likely cost more since management companies and independent inspectors will need to both be involved preparing election materials. Their will be some duplication of effort. It makes elections more expensive, not less.
 
Volunteer Inspectors. Boards can avoid some expenses by selecting homeowners to be inspectors of election. Unfortunately, inspector duties have increased, which means the risk of error has also increased. If lawsuits are filed, the inspector will undoubtedly be named.
 
If sued, will the inspector be covered by the association's D&O insurance? That may depend on the particular association's insurance policy.
 
RECOMMENDATION: Before appointing homeowners as inspectors of election, boards should make sure they are protected under the association's D&O insurance.
 
Incentives Removed. Under SB 323, no one's voting rights can ever be suspended. An owner can be six months delinquent, ignore the association's rules, have numerous unpaid fines and still vote. Suspension has been an incentive to pay assessments and comply with the association's governing documents. CCHAL took away the incentive.
 
Non-Owner Directors. CCHAL also took away the right of associations to decide for themselves if they want to elect non-owners to their boards. This is a blow to small associations who may want qualified non-owners on their boards. CCHAL's hostility toward tenants is inexplicable. Fortunately, the bill does not prevent boards from appointing tenants to their boards. They just can't be elected.
 
RECOMMENDATION: Have legal counsel review the appointment provision in an association's bylaws to make sure there are no barriers to such appointments.
 
Director Qualifications. Poor drafting created another anomaly. Changes to election requirements provide a handful of mandatory and permissive disqualifications but does not clearly limit associations to those disqualifications. For example, associations are required to disqualify nonmembers from nomination and are allowed by CCHAL to disqualify co-owners, those who have owned for less than a year, delinquent owners, and persons with a criminal conviction that would prevent the association from obtaining a fidelity bond. 
 
The bill seems to imply that no other disqualifying provisions can be used but it does not actually say it.
 
Some believe all existing director qualifications in an association's bylaws will continue to be valid after January 1, 2020. I don't believe that was CCHAL's intent but who knows? (It appears CCHAL's real intent was to create full employment for lawyers.)
 
RECOMMENDATION: Boards should consult legal counsel.
 
Removal of Directors? CCHAL created yet another anomaly. It did not address director removal provisions. That means a member not in good standing could be elected to the board but, once elected, could be removed from the board because the director was (i) not in good standing, (ii) suing the association, (iii) missed three consecutive meetings, (iv) is a registered sex offender, etc.
 
As long as the removal provisions are not worded as a qualifications, they are still valid.
 
RECOMMENDATION: Associations will need to talk to legal counsel about how best to handle this situation. (More employment for lawyers.)
 
New Timeline. The election timeline is now longer. Associations need to sequence their elections as follows (if I missed anything, please let me know):

ANNUAL MEETING TIMELINE

1. At Least 90 Days Prior to the Annual Meeting: Select 1 or 3 inspector(s) of elections and set a date for the annual meeting.

2. At Least 90 Days Prior to the Annual Meeting: Give notice of the election procedure and the deadline for submitting nominations and where to submit nominations.

3. At Least 30 Days Before Ballots Are Distributed: Prepare a candidate registration list and a voter list. The voter list must include each voter's name, voting power and the physical address of the voter's separate interest, parcel number, or both. The mailing address for the ballot must be listed on the voter list if it differs from the physical address of the voter’s separate interest or if only the parcel number is used.

4. At Least 30 Days Before Ballots Are Distributed: Allow members to verify the accuracy of their individual information on the candidate registration list and voter list.

5. At Least 30 Days Before Ballots Are Distributed: Give notice of (i) the date/time/address to return ballots, (ii) the date/time/location of the meeting, and (iii) the list of candidates.

6. At Least 30 Days Prior to the Annual Meeting: The inspector must deliver, or cause to be delivered ballots and a copy of the election rules.

RECOMMENDATION: Management companies and inspectors of election should work out a timeline sequence of events necessary to comply with all the new requirements.

Higher Costs and Litigation Exposure. The legislation is a mess. Associations will incur legal fees, pay more for elections, and have greater exposure to litigation. The bill is like lipstick on a pig--it's ugly.
 
RECOMMENDATION: At a minimum, every association will need to work with legal counsel to amend/restate their election rules. Amending bylaws is discretionary. At some point, boards should amend their bylaws to eliminate invalid provisions. We will be sending a package to our clients with recommended changes and pricing. If you would like a proposal, contact us.


The legislation sponsored by CCHAL generated more emails than I can print. Following is a sampling:

Nightmare Bill #1. NOOOOO!!!!!!!!!!!!!! -Jamie H.

Nightmare Bill #2. Wow what a nightmare! Is there an appeal option to this disaster? -Dino D.

RESPONSE: No, there is no appeal. Someone would have to float a new bill next year to undo the mess created by SB 323. Having just voted it through, it's unlikely the legislature or the governor would reverse direction.


Nightmare Bill #3. Is there a way associations can fight this? -Laurel S.

RESPONSE: See below.


Nightmare Bill #4. If there are 55,000 HOAs in the state, we should be able to get at least 50,000 signatures on a Newsom recall petition. Lets get this rolling! -Robert M.

RESPONSE: I was surprised to discover there are already two petitions to recall the Governor for his mismanagement of the state. See Petition #1 and Petition #2.

Nightmare Bill #5. I have not only signed the recall Newsom petition, I signed up to donate a hundred a month to the campaign. -Anonymous

RESPONSE: I'm not advocating a recall but it would interesting if it actually happened. Legislators and governors might leave associations alone for an election cycle or two.

Nightmare Bill #6. I am all for SB 323! It benefits members! -Kathy M.

RESPONSE: I suspect you have not read the bill. It takes away homeowner rights and takes money out of their pockets. Every association in California will have to rewrite their documents. It will be costly for HOAs, lengthen elections, and create more exposure to litigation.
None of this benefits members.

Nightmare Bill #7. Gov. Newsom should leave us alone and work on the homeless problems. He is trying to solve a non-problem instead of looking at real problems. -Finn M.


Nightmare Bill #8. What happens if an association does not comply and make these updates immediately? This will hurt very small and poor associations such as ours. -Christine K.

RESPONSE: If an association conducts elections without election rules or does so with nonconforming rules, members can challenge and possibly void the election and be awarded a fine of $500 plus attorneys fees. (Civ. Code §5145.)

Nightmare Bill #9. Our association was in the process of amending our bylaws. Now that SB 323 has passed are we required to include it? -Jim M.

RESPONSE: If you are in the drafting phase, you should include SB 323. If your bylaws are currently out for a vote, you can either pull them back and revise them or let the voting continue. It's a business decision for the board to make. Talk to your legal counsel and see if he/she thinks revisions can be made without taking the document back out for a vote.


Nightmare Bill #10. Does that mean an owner can violate all our rules, refuse to comply, refuse to pay fines, and still run for the board? We can't disqualify them? -Don R.

RESPONSE: That is exactly what it means. You can no longer disqualify scofflaws. They can occupy a seat on the board.


Nightmare Bill #11. I am the president of 496 condos. I have a personal list of email addresses about 240 owners and tenants, people who I send an advance copy of the newsletter, alerts for coyotes, community events and warnings. I blind copy all emails for privacy. Would those have to be shared? When they gave them to me, it was with the understanding of anonymity. -Sharlene D.

RESPONSE: If the email list is your personal list, it does not have to be shared. If the list is used by the board to transmit official communications from the board to the membership, it would be deemed a record of the association and would have to be shared with any member who requested it.

Nightmare Bill #12. Does SB 323 allow our signatures to be copied? -Susan R.

RESPONSE: At one point it did. SB 323 was subsequently amended so "Signed voter envelopes may be inspected but may not be copied."


Nightmare Bill #13. Does this apply to commercial associations or just residential? -Jeff L.

RESPONSE: Only residential associations have to suffer under this legislation.


Nightmare Bill #14. My board is asking if this new law is going to affect their upcoming annual election scheduled in January 2020. -Marti M.

RESPONSE: Not every agrees on this issue. Until January 1, 2020, your association's existing bylaws and election rules are still valid and applicable. That means the appointment of a manager as your inspector for the January election is currently valid. Starting January 1, you cannot appoint your manager to be an inspector. However, if he/she was validly appointed in October/November, the appointment may be valid for your January election. The more conservative approach is to hire an independent inspector.


Nightmare Bill #15. I see SB 323 as a good thing. Many people in my association believe the management company is corrupt and this is a good way of showing the truth. -Ted S.

RESPONSE: I don't see how taking away homeowner rights and increasing the cost of elections exposes corruption in a management company.


Nightmare Bill #16. It’s so depressing what is happening to California. -Marilyn B.

Nightmare Bill #17. Thank you for the update on SB 323. Could you clarify the restriction to being on a board with joint owners. Does this imply that an owner who is one of three persons on title is not eligible as a board member? -Frank G.

RESPONSE: If there are three of you on title, only one can be elected to the board. This is often practiced by larger associations but not small ones. Large associations have a large pool of volunteers to draw from. Small associations don't have that luxury and need the flexibility to elect co-owners to the board. You are not required to including this in your election rules--it's discretionary.

*****

Still Ringing. How is it that I only just now notice that your mail comes from ADAMS | STILRING after enjoying your emails for several years? Has your great humor infiltrated the From line or is it an error on my part. Faithful reader. -Helga L.

RESPONSE: It's so close to Halloween that Gremlins are on the loose. I found one changing names and dates in my newsletter. Fortunately, I caught him before he could do any real damage. I put him in a box and shipped him to the legislature where he could be more productive.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Nightmare Bill Signed

Oct 14, 2019 0 Views 0 Comments

This morning you received our latest newsletter summarizing legislation. Our top story was Senate Bill 323, a scary bill sitting on the Governor’s desk, awaiting his signature or veto.

We received word this morning that Governor Newsom signed SB 323, which becomes law on January 1, 2020.
This is really unfortunate.

As Halloween approaches, it is a fitting backdrop for this nightmare legislation pushed by the Center for California Homeowner Association Law (CCHAL).

Increased Election Burdens. Starting January 1, SB 323:

• Limits the right of an association’s membership to set qualifications for board candidates.

• Prevents non-owners from running for the board (a blow to small associations who may want a tenant, such as a CPA, to serve on the board).

Allows associations to only disqualify candidates who (i) have been owners for less than a year, (ii) would be on the board with a joint owner, (iii) has been convicted of a felony that jeopardizes the association’s fidelity bond insurance, or (iv) is delinquent in the payment of their assessments.

• Prohibits associations from ever suspending an owner’s right to vote.

• Requires the inspector of elections to be an entity or individual with no previous contractual relationship with the association, which disqualifies an association’s existing managers, attorneys and accountants, among others. This will increase the cost of elections for many associations.

• Requires associations to post the requirements for running for the board at least 30 days before the nomination deadline.

• Requires associations to post the list of candidates, deadline for returning ballots, time and place of the annual meeting 30 days before ballots are mailed.

• Allows owners to review the signatures of all other owners on the outside mailing envelopes, and to copy voter lists, including parcel numbers. As a condition of casting a ballot, homeowners must give up their right to keep their signatures private.


Email Addresses Made Public. SB 323 also makes your email addresses available to all members by making them part of the membership list available upon request. Members can opt out of having their email addresses included with the membership list, but the bill makes NO allowance for email addresses already provided to associations.

Costly Changes. In addition to loss of privacy, loss of control over email addresses, and loss of rights to set reasonable standards for directors, associations will need to go through costly bylaw amendments and election rule revisions to comply with SB 323.

RECOMMENDATIONS: Associations throughout the state will need to amend their election rules in order to comply with the onerous requirements of SB 323. Many associations will need to amend their bylaws. Associations utilizing member email addresses will need to develop a strategy for handling existing emails as well as for collecting new email addresses. We are developing policies and procedures to comply with SB 323. Contact us for assistance.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

New Laws Affecting Associations

Oct 13, 2019 0 Views 0 Comments

This week's newsletter will summarize significant pieces of legislation signed into law. One is awaiting signature and needs your action.

The new laws affect associations and most will require action by boards to minimize problems created by our legislature.

The first is the very scary SB 323 passed by the Assembly and Senate. It was vetoed last year and needs to be vetoed again this year. My partner, Nathan McGuire, provides a summary. -Adrian

SB 323
NIGHTMARE

Senate Bill 323 is on the Governor’s desk awaiting action. If he doesn’t veto the bill, it will become law on January 1, 2020.

Emails Made Public. In addition to costly and unnecessary election changes, SB 323 will make your email addresses available to all members. With the rising tide of email spam, this bill is a step in the WRONG direction.

Election Problems. In addition to exposing owners' email addresses, SB 323 will:

• Limit the right to establish reasonable qualifications for candidates.

• Prohibit associations from ever suspending an owner’s right to vote.

• Require the posting of names and assessor’s parcel numbers of all members eligible to vote.

• Allow owners to review and copy other owner's signatures from ballot envelopes.

Costly Changes. In addition to loss of privacy, loss of control over email addresses, and loss of rights to set reasonable standards for directors, associations will need to go through costly bylaw amendments and election rule revisions to comply with SB 323.

ACTION NEEDED NOW


1. Call the Governor at (916) 445-2841 and ask him to VETO SB 323.

2. Share CAI-CLAC’s social media posts and TAG the Governor on Facebook and Twitter at @GavinNewsom and @CAgovernor. This will ensure he sees our message.

3. Send a letter asking the Governor to VETO SB 323 here.

4. Forward this to everyone you know in the industry and ask them to get involved.

5. Share information about the dangerous impacts of SB 323 on your own blogs and newsletters to help us get the word out.


You can also stay informed with real-time updates and resources on CAI-CLAC's Facebook Page, Twitter Page and NEW LinkedIn Page.

Nathan McGuire, Esq. is a partner with ADAMS|STIRLING in charge of our Northern California offices and currently serves as Chair of CAI-CLAC.

ACCESSORY DWELLING
UNITS
 
To increase affordable housing in California, Governor Newsom signed Assembly Bill 670 into law. The legislation encourages owners to convert their garages into living spaces and build small accessory dwelling units (ADUs) in their back yards as low-income rentals.
 
Gov. Newsom also signed a number of companion bills to facilitate the construction of ADUs:


AB 68 reduces barriers to ADU approval and construction.

AB 587 provides an exemption for affordable housing organizations to sell deed-restricted land to eligible low-income homeowners.

AB 671 requires local governments to encourage and expedite ADU rentals and requires the state to develop a list of state grants and financial incentives for affordable ADUs.

AB 881 restricts local jurisdiction permitting criteria so ADUs will receive streamlined approval if constructed in existing garages.

SB 13 lowers application approval times and provides a mechanism to get unpermitted ADUs up to code.


Affect on Associations. The legislation voids any restrictions in governing documents that prohibits the construction of ADUs. Townhomes with garages and single-family planned developments will face significant challenges complying with the new laws. Garage conversions and backyard ADUs will exacerbate parking problems, increase the burden on existing amenities, impact rules enforcement, and complicate security.

RECOMMENDATION: Contractors are already advertising their services to convert garages and build backyard ADUs. Our firm is developing guidelines for associations we represent so they can cope with the impact this legislation will have on communities. The laws take effect January 1, 2020. We recommend all associations start revising their architectural guidelines and rules & regs in anticipation of the new requirements. Boards can contact us for assistance preparing guidelines.

EMPLOYEE VS CONTRACTOR
CLASSIFICATION


Assembly Bill 5 codifies the strict test for employee versus independent contractor classification adopted by the California Supreme Court in Dynamex v. Sup. Ct.

All workers are considered employees and can only be classified as independent contractors if an association demonstrates the worker (i) is free from the control and direction of the association in the performance of work, (ii) performs work that is outside the usual course of the association, and (iii) is customarily engaged in an independently established trade, occupation, or business.

RECOMMENDATION: When it comes to handymen and bookkeepers working exclusively for an association, they will need to be reclassified and added to the payroll, either directly by the association or through a management company. If associations already have employees, they may need to update their employee handbooks. Contact us if you need assistance with either of these issues.

STRUCTURAL INTEGRITY
INSPECTIONS


Starting in 2025, Senate Bill 326 requires condominium associations to conduct visual inspections of load-bearing components six feet above ground, supported substantially by wood (balconies). All structures must then be reinspected every nine years.

The inspector must submit a report to the board providing the physical condition and remaining useful life of the load-bearing components and associated waterproofing systems.

RECOMMENDATION: Once inspections commence, older associations will likely discover deterioration in structural components that require unexpected repairs and replacements. To avoid special assessments, boards should start setting aside monies in their reserves. They don't need money to replace every balcony. Instead, they should plan on enough to repair a likely percentage of balconies. Boards should talk to their reserve study specialists now to determine an appropriate amount to set aside.

DISPLAY OF RELIGIOUS
ITEMS ON DOORS


Senate Bill 652 prohibits restrictions on the display of religious items on entry doors and door frames of dwellings. The item displayed can have dimensions up to 3 feet by 1 foot in size.

The most likely symbols will be mezuzahs displayed by Jews on door frames and crosses displayed by Christians on doors.

RECOMMENDATION: Associations should adopt rules regulating such displays, i.e., nothing obscene, only items displayed because of sincerely held religious beliefs, nothing dangerous or would create a fire hazard, displays must be removed when the association conducts maintenance or repairs, etc.

VICTIMS OF
DOMESTIC VIOLENCE


Assembly Bill 446 requires the inclusion of “victim of abuse” disclosure/stamp on the first/cover page of CC&Rs:

If this document contains any restriction based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, familial status, marital status, victim of abuse status, disability, genetic information, national origin, source of income as defined in subdivision (p) of Section 12955, or ancestry, that restriction violates state and federal fair housing laws and is void, and may be removed pursuant to Section 12956.2 of the Government Code. Lawful restrictions under state and federal law on the age of occupants in senior housing or housing for older persons shall not be construed as restrictions based on familial status.

RECOMMENDATION: Everyone will need to add this to the cover page of their CC&Rs starting January 1.


Amending CC&Rs. Our CC&Rs are badly out of date and include a number of provisions that have been superseded by law and by governmental regulations. And, they are ambiguous. We are an over-55 homeowners’ association; average age  is at least 72. We are dealing with attitudes that have become unchangeable because of problems associated with aging. Our members believe that spending money to revise our CC&Rs is “wasting money” while, at the same time, they don’t object to the tens of thousands of dollars spent annually on attorneys trying to defend our outdated and ambiguous documents. Go figure! -Elaine J.

RESPONSE: It's unfortunate you aren't able to rally enough owners to clean-up your documents. At some point, there could be a costly legal issue that will garner enough support to get new documents in place. Or, you might have a large number of young people (55-year olds) move into your community. Young folks are more willing to fix things.
 

*****

Fines Without Hearings #1. Your article refers to a tenant urinating by the dumpster. I don’t believe you can fine a tenant and the owner/member must be called to the Hearing. A better question is: at the Hearing can an ongoing fine be levied each time the tenant does his thing? -Don S.

RESPONSE: I should have been clearer in my response. Sometimes readers refer to owners as tenants. Members of stock cooperatives are frequently referred to as tenants. If the person violating rules is a renter rather than an owner, the association should call the owner to the hearing and fine the owner for the actions of his/her tenant. Sometimes CC&Rs provide that fines can also be levied against a renter as well as the owner. Getting scofflaws to pay fines can be difficult. Most associations find that small claims court and suspending privileges are best for collecting fines.

Fines Without Hearings #2. What, if anything, requires the board to deal directly with a tenant? I find nothing in our CC&Rs or CA law imposing such duty. The board of our 240 unit complex deals only with members in disciplinary matters, taking the position that the owner-landlord member is responsible for the actions of the tenant and that "due process" is owed only to a member and not directly to a tenant. Is our board wrong? -Bob A.

RESPONSE: Your board is correct, the primary contact is the owner.
Some boards improperly exclude renters from disciplinary hearings. Owners can bring their misbehaving renters to hearings so they can offer a defense to their actions (or make them see the error of their ways). The construction of ADUs described above will increase owner/renter issues.

Fines Without Hearings #3. If there is only one hearing but five violations, can they be fined five times for each violation or just the once? We've been told by our management company that we have to send a written notice of violation and wait for 10 working days before we can write another violation because we must allow the homeowner time to receive the written violation notice. In the meantime although we have placed a notice on the car or under the gate of the responsible unit, the person continues to abuse the rules. -Kim S.

RESPONSE: A fine can be levied for each of the five violations. If peeing in the garage warrants a fine of $100 and the perp did it five times, he can be fined $500. One hearing, five violations, five fines totaling $500. Any violations that occur after a hearing notice is mailed will require a separate notice and hearing.

Fines Without Hearings #4. The garage peeing man--forget using board members or an attorney. File indecent exposure with the police if he is being witnessed by another tenant. Simple solution and possibly no legal retaliation from that person to the HOA as the police contain the situation. -Steven C.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Repeated Failures to Pass CC&Rs

Sep 29, 2019 0 Views 0 Comments

QUESTION: There are several CC&R changes our board has wanted to make for years. However, each time they're put to a vote, they fail. I believe the reason they fail is that they haven't been adequately explained to the members. The proposed amendments are simply listed in the vaguest possible terms, such as,"Article IV, Section 24 (g) and (h) regarding maintenance responsibility (drainage and seal and re-stripe)." Is there a way our board can inform members of the rationale of these amendments?

ANSWER:
Members should know what they are voting for (or against). That means boards should fully explain amendments with detailed explanations or meaningful summaries. Doing so is not advocacy. In addition, town hall meetings can be held to answer questions. It is common to have the association's attorney attend meetings to explain the amendments.

Advocacy. If they do so at their own expense, board members can also engage in advocacy, i.e., urging members to vote FOR the amendments. They can distribute flyers, go door to door, send emails, and mail letters, if done at their own expense. Moreover, board members can use the association's media (newsletter, website, etc.) to urge members for to vote for CC&R amendments provided they give equal access to any member advocating a differing point of view. (Civ. Code §5105.)

Voter Guides. Boards can also create voter guides modeled on the ones the state uses for ballot measures. A mailing can go to the membership with an explanation of the amendment plus arguments for and against written by advocates for each side. If you hold town hall meetings, you should easily find someone opposed to your amendments. Ask the person to draft something for the voter guide. If there are several opponents, ask them to work together to draft their arguments. Make sure you establish reasonable guidelines for such as number of words, no foul language, no personal attacks, etc. Don't forget to create incentives to vote.

FINES WITHOUT
HEARINGS?


QUESTION: We have a tenant who urinates in the garage near the trash cans. This is unhealthy and disgusting as well as presents a health problem. Our management company says we have to call the tenant to a hearing before we can fine him, and then the same thing EVERY time this tenant does it. I think that since it's a Health Code violation we can fine him every time he does it without additional hearings. Who's right?

ANSWER: Your manager is right. Anyone accused of violating your rules must be given written notice of each violation and an opportunity to appear at a hearing to defend himself from the charge. Penalties cannot be imposed without a hearing. (Civ. Code §5855.) If there are five violations over the course of two weeks, you don't need five hearings. You can have one hearing for the five violations.

RECOMMENDATION: It sounds like the person has mental issues. If so, fines may not deter him. A letter from association's attorney threatening to sue him might curb his unhealthy activities. If there is a landlord involved, a lawyer letter to him/her is warranted.

ADAMS|STIRLING
SACRAMENTO OFFICE OPENS


I am pleased to announce that partner Jasmine Hale relocated to Sacramento and is opening our Sacramento office.

Jasmine’s instrumental role in the growth of our firm in the Los Angeles region makes her the ideal person to step into this leadership position. Jasmine will assist partner Nathan McGuire, managing partner of Northern California, as we expand into the Sacramento-Lake Tahoe regions.

Jasmine is a fellow of the College of Community Association Lawyers (CCAL) and brings to Sacramento over a decade of expertise in CID law practice. Jasmine speaks and teaches widely on industry standards of care for boards of directors and managers through the Community Associations Institute (CAI) and the California Association of Community Managers (CACM). In addition, Jasmine is a liaison to the California Legislative Action Committee.

Jasmine graduated from Baylor University in Texas with a double major in Political Science and Communications and went on to earn her Juris Doctor from the Pepperdine School of Law in Malibu, California.

We are delighted to expand into the Sacramento-Tahoe regions. If your association needs legal services, contact us for a proposal.

ADAMS|STIRLING
MOVES TO THE CLOUD


To keep pace with cutting edge technology, last month we migrated our Firm's computer network to a "Cloud Desktop" environment. Instead of operating from a local server in our corporate office, we placed our document management system, accounting programs, office productivity suite, time tracking software, internal communications (and everything else) into the cloud.

Security Enhancements. The move offers significant security enhancements for our clients and the Firm. We are using the secure and ultra-stable Citrix platform, which means there is virtually no chance of viruses or malware compromising client data by hackers. Moreover, software security patches are always current and we receive year-round, 24/7 monitoring and support.

Disaster Recovery. Because our servers are housed in hardened Department of Defense-compliant facilities with multiple redundancies for power, cooling, and server hardware in areas of the U.S. with little or no vulnerability to natural disasters, our Firm's network is never down. It allows us to serve our clients regardless of natural disasters that might affect our state, such as fires, floods and earthquakes.

Serving Client Needs. Our investment in our Firm's infrastructure allows our attorneys to operate in a safe, full office environment anywhere in the world. It means we can meet client needs from any device, from any location, day or night. When your association needs assistance, contact us.


Security Camera. I received your latest newsletter--great information on a common sense approach for board members and owners to read about. I have a concern about your article that a director was removed from the security committee by the president. Does the president have the authority to remove or install a committee chair without a vote of the other directors? -Jim W.

RESPONSE: The person who sent in the question did not state he was a director. I got the impression he may have been a homeowner who chaired the committee. Either way, you are correct. If the board put the person on the security committee and made him chair, the president would not have the authority to remove him from the committee unless fellow directors consented to the action.


Paid Director. In regards to "paid directors" in the September newsletter, I don't think most HOAs could afford enough pay to get anyone on the board unless they volunteered. -Bryn S.

RESPONSE: Very true.


What's Our Name? We are an eight-unit condo association which was built in 1971. The name of our HOA is not listed in the CC&Rs. Is there a law that says we have to update our CC&Rs? Most of our members cannot interpret what’s in the CC&Rs. -Yvonne A.

RESPONSE: If you don't have a name, you can adopt any name your members agree to. If you wish to incorporate, check with the Secretary of State for a name not already in use. There is no law requiring you to update your CC&Rs. Common sense dictates you update your governing documents if you can't understand them. We update hundreds each year throughout the state making them current with new laws and easy to understand. Where appropriate, we combine associations into a single entity or convert non-CIDS into common interest developments.


Guest Parking. Is visitor parking covered anywhere in the Davis-Stirling Act? I cannot find anything that the HOA has to provide visitor parking. -Windson W.

RESPONSE: Parking requirements are not found in the Davis-Stirling Act. Such requirements are controlled by local building/planning departments and municipal codes based on density and type of use. Developers sometimes cut corners when it comes to parking and can be held accountable if your association is within applicable statutes of limitations.


Resigning as Treasurer. I am the treasurer of our association. The rest of the board does not t seem to understand there is an urgency that dues be increased and a special assessment levied to keep up with our bills. I want to resign as treasurer but was told by the president, that if I resign from this position, I would need to resign from the board, as no one on the board will take this position. Are there any rules that state you have to resign from the board if you step down from the treasurer position? -Anonymous

RESPONSE: No, there is no such requirement. Any officer can resign at any time upon written notice to the board. (Corp. Code §7213(b).) The resigning officer continues to be a director on the board unless he/she also resigns from the board. However, someone will need to step up and become treasurer, it's one of the offices required by Corporations Code §7213(a).


Renewing Contracts. Are there any statutory requirements that contracts be reviewed or put out to bid every x-number of years? Specially, the management contract for the HOA? -Richard M.

RESPONSE: No, there is no statutory requirement. Some associations solicit proposals from other vendors every few years to make sure their current vendors are at proper market rates.


Email to the Board. If a board has an email address where members can send general suggestions, comments, etc., does this arrangement violate any provision of the Davis-Stirling Act? Would it be considered unethical in any way? -K.B.

RESPONSE: No, the arrangement does not violate the Davis-Stirling Act nor is it unethical. I suspect the practice is limited to smaller associations. It would overwhelm the boards of large associations.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Security Camera Access

Sep 1, 2019 0 Views 0 Comments

QUESTION: I was chairman of our security committee. Only myself and my backup had access to the security camera system. This was to ensure the privacy of our tenants. The president demanded that I give access to board members stating that they have a right to see all HOA records. I refused stating privacy issues. The president removed me from the security committee. Are security camera recordings considered "records"? Does the board have the right to view them?

ANSWER: Yes, security camera recordings qualify as "records" and board members have a right to review them. (Corp. Code §8334.) Their status as records makes them discoverable in litigation, the same as other digital data such as documents, sound recordings, photographs, emails, etc.

The right to review is not the same for homeowners. Video surveillance recordings are not included in the list of records authorized by the Davis-Stirling Act for members to review. Even so, boards can make them available if they so choose.


Full Access. Smaller associations sometimes stream their security feeds and give all owners a password so they can log in from their computers or phones and monitor the cameras in real time. It gives extra sets of eyes on the common areas.

Limited Access. Most associations will provide only limited access to members. There are times when a member would have a legitimate reason to review a particular recording. For example, an owner's car is vandalized and she wants to view footage that would show who caused the damage.

Records Storage. Digital images are generally stored for 30 days and then automatically erased to provide room for more images. The storage time is sometimes set for shorter periods (2-weeks, 10-days, 48 hours) depending on the amount of memory available and the number of camera feeds.

Privacy Concerns.
In California, associations can lawfully install video surveillance cameras in the common areas provided they are not viewing areas where people have a reasonable expectation of privacy, such as restrooms, locker rooms, or the interior of an owner’s unit. (Penal Code §647(j).)

RECOMMENDATION: Boards should adopt guidelines for how security camera data are stored, for what period of time, under what circumstances recordings may be viewed, and by whom.

STOP
SENATE BILL 323


SB 323 is the anti-consumer legislation pushed by the Center for California Homeowner Association Law (CCHAL) that takes away homeowner rights to adopt qualifications for who represents them on their boards of directors.

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 member's signatures on voting materials, thereby invading member's privacy and creating the potential for identity theft.

The legislation needs to be stopped. Following is information from the Chair of the California Legislative Action Committee. -Adrian Adams

*****

Everyone,

You can harness the power of social media to stop SB 323. Tag your Assemblymember and let them know you oppose SB 323. You can use our infographic here with the draft post below.

[Tag your Assemblymember (ex: @AsmKevinMcCarty]: With 55,000 community associations in CA, SB 323 will cost homeowners more than 302 MILLION DOLLARS statewide. Vote no on SB 323. #californiacannotaffordSB323 #CommunitiesUnited

If you’re a constituent, please direct a message to your Assemblymember on Facebook and Twitter by including their names (including @) with information we drafted messages below for you to use. Feel free to edit as you’d like and use our VOTE NO on SB 323 graphic.

Bay Area Chapter Click Here
California North Chapter Click Here
Greater Los Angeles Chapter Click Here
Coachella Valley Chapter Click Here
Greater Inland Empire Chapter Click Here

If you have any questions, please contact us at [email protected]

Sincerely,

Nathan McGuire, Esq.
CAI-CLAC Chair


Kudos #1. Without your website as a resource, boards would be in the dark on a lot of issues. Thank you for your website! -Ty W.

Kudos #2. Thank you to the partners and employees of Adams Stirling PLC who participate in putting out the Newsletter. It is a most valuable resource for keeping HOA boards informed. -John G.

*****
Golf Course. I read last week's article about purchasing a golf course. Is there ever a circumstance when a board could approve the purchase of a golf course or other large asset without a vote of the membership?
 
RESPONSE: Yes. Although governing documents often require membership approval to purchase a large asset, that is not always the case. In some instances, governing documents authorize the board to acquire large amenities (such as a golf course). The authorizing language can be specific or generic. Even with authorizing language, the membership may need to vote on the funding. If the property can be purchased within the financial limitations imposed by the Davis-Stirling Act, membership approval is not required. If, however, a special assessment greater than 5% and/or a dues increase greater than 20% is needed, membership approval is required. If the purchase requires a loan, governing documents might also require membership approval.
 
*****

Noisy Floor #1. Under California Building Code Section 1207.3, all floor coverings between units must meet an Impact Insulation Class (IIC) of 45 if "field-tested."Field testing requires acoustical consulting firms to conduct sound tests on a building. All units in a building have to conform with the CBC. If an owner does not comply, then the HOA should report the owner to the local city building and safety department. That usually gets a visit and a response. -Bruce K.

RESPONSE: Building codes set minimum standards for noise transmission and, as you noted, can sometimes be useful in getting the city involved when dealing with noise problems. Because an IIC of 45 is considered too noisy by many associations, they often adopt higher minimum standards. Following are recommended guidelines for different types of construction:

Housing Wood Construction Concrete Construction
Government 45 45
Entry-level 48 50
Standard 52 54
High 57 60
Luxury 60 62


Noisy Floor #2. When I was the VP of our HOA in Pasadena, we had a CC&R restriction that any wood flooring on the second or third floor was required to have a noise canceling barrier such as cork. We didn’t have any problems with noise once we added that and enforced it. -Rob L.

RESPONSE: In addition to cork, there are other sound deadening materials on the market. The amount of material placed under hardwood floors will vary depending on the type of construction, age of building, and desired level of quiet enjoyment the association wants to achieve. Boards can adopt architectural guidelines setting a particular standard. In addition, CC&Rs can be amended with those standards, which makes it easier to enforce if violations end up in court.

*****

Excluding a Director. If the board decides to exclude a board member to discuss his threat of litigation, wouldn’t this require setting up an executive committee? -Lisa I.

RESPONSE: An executive committee is not required if the person voluntarily recuses himself from meetings involving his threatened (or actual) litigation. If he refuses, the board can form an executive committee (minus the interested director) to handle all matters related to the litigation.

*****

Gun Toting Director. Some commercial policies have firearms exclusions, but I have never seen one on an HOA policy. Could the insurance company argue “intentional acts of the insured”, “criminal acts” or some such argument? It’s an interesting question, but probably not. The bottom line is that a wrongful death claim, with even a hint of HOA negligence, would more than likely have the HOA’s insurance company in a panic to settle before the case goes to a jury trial. -Patrick Prendiville, Prendiville Insurance Agency

*****

Denying Records to Directors. Two directors on our board requested a copy of an engineering report of one of our clubhouses. The president and our general manager are denying access to the report. The general manager said it was only a draft. Do we have the right to see it? -Carol M.

RESPONSE: Although Corporations Code 8334 gives directors the absolute right to see all records, the courts have carved out exceptions. What you described does not fall into one of the exceptions. As a director, you have the right to see draft proposals and bids. I understand and agree with the president's desire not to distribute drafts since they may contain incomplete or inaccurate information. You could, however, go to the office and view the draft but not have a copy. Once the report is finalized, you can receive a copy.

*****

Paid Directors. Are board members permitted to work for the association on a regular basis and receive payment? -L.E.V.

RESPONSE: Directors should never be paid for serving on the board. It eliminates their volunteer status and increases their exposure to potential liability. If directors are paid for services unrelated to serving on the board, it's legal. For small associations, it is not uncommon to pay a director to be a handyman on the project. Unfortunately, under last year's Dynamex vs. Superior Court, the director is deemed an employee of the association unless he can meet a stringent test to qualify as an independent contractor. That means payroll withholdings, overtime, etc.

For larger associations, paying directors for services creates negative optics. It gives the appearance of a breach of ethics. Since they can afford it, it is much better to hire an independent third party for such services. If there is a compelling reason to pay a director for an ongoing service, the director should immediately resign from the board and provide those services with appropriate invoicing.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Noisy Hardwood Floors

Aug 25, 2019 0 Views 0 Comments
 

QUESTION: The owner of an upper unit installed a wood floor less than a year ago that disturbed the tenants below so much that they moved out because they could not stand the noise. The owner is refusing to change the flooring or put down carpeting because of allergy concerns. Can we amend our CC&Rs so that no wooden floors can be installed on the second floor? Can we make it retroactive?

ANSWER: You can amend your CC&Rs to prohibit hardwood flooring. Making it retroactive will not solve your problem. If someone has severe allergies, you must reasonably accommodate their request for a hardwood floor. All the person needs is a letter from a health care provider saying they need the flooring. Allowing it to be installed does not mean the person can destroy the quiet enjoyment of the resident below.

In a 2015 case, Ruben Munoz installed hardwood floors that transmitted intolerable noise to the owner below. Munoz refused to mitigate the noise claiming his wife suffered from severe allergies. The association sued Munoz. The court ordered him to install rugs over 80% of his floors. Munoz appealed and lost. (See
Ryland Mews HOA v. Munoz.)

Your allergic owner can keep her hardwood floors provided she gets a letter from a healthcare provider that the floors are necessary and she eliminates the intolerable noise into the unit below. That may mean installing hypo-allergenic rugs throughout her unit. If that doesn't work, she may need to hire a contractor to remove her hardwood floors and reinstall them with proper soundproofing material.

RECOMMENDATION: You should have legal counsel write a letter to your allergic owner that failure to eliminate the noise will result in a lawsuit against her. If your board is reluctant to incur legal fees, directors should know that failure to take appropriate action could result in a lawsuit against the association by the owner below for failure to enforce the CC&Rs.

WATER HEATER
TIMER


QUESTION: The new president installed a timer on the water heater recirculating pump so that hot water only circulates during the hours of 6-10 am & 5-10 pm. During the remaining hours, it is necessary to open the water faucet a long time to obtain hot water. The timed schedule does not support owners with alternate lifestyle/work careers. Is it legal?

ANSWER: Yes, it's legal. No one is being deprived of hot water--it's only delayed getting to the faucet. The board has the authority to regulate the common areas for the benefit of the membership. That includes regulating the recirculating pump to save electricity. The trade-off is wasted water. It should be noted that installing a timer is the board's decision, not the president's.

RECOMMENDATION: With enough feedback, members might persuade the board to remove the timer. If that does not work, members can elect new directors who agree with their wishes.

ADDING
HANDICAP ACCESS


QUESTION: For years, I have been asking my association to install handicapped access to our pool and walkways. They said it would be ugly and refused. Should the board make an effort to have these things installed once asked?

ANSWER: With some exceptions, the federal law known as the Americans with Disabilities Act (ADA) does not apply to homeowner associations. Other laws, however, do apply.

Under the Federal Fair Housing Act of 1988, boards cannot prevent residents from using their own pool lifts to get into and out of association pools. In addition, if you are handicapped, the board must reasonably accommodate your request for handicap access to common areas. That means allowing you to install appropriate handicapped walkways, rails and the like. The downside is that the installation is at your expense.
(Civ. Code §4760.)

RECOMMENDATION: Because many residents in associations are aging in place, I routinely advise boards to set aside funds in their reserves to make facilities friendly for the disabled. Even though associations are not subject to the ADA, members and their guests benefit when facilities are ADA compliant. The improvements do not need to be made all at once. They can be phased in over time as monies become available.

EXCLUDING A BOARD MEMBER
FROM A MEETING


QUESTION: I'm the treasurer of my association, The board held an emergency meeting without notifying me. The discussion included repairs to my unit caused by a flood. Is it legal that I was not notified about the emergency meeting?

ANSWER: You should have been notified of the meeting. Even so, the board may have had good reason to exclude you from any discussion involving your unit. As an "interested director" you cannot vote on something that benefits you personally. However, you can join the meeting, provide information about the flood, and then excuse yourself from the meeting. That can change if you threaten to sue the association over the flood. At that point, the directors could exclude you entirely so they could consult with legal counsel.


WEBSITE UPGRADED


I am pleased to announce that our website dedicated to commercial and industrial common interest developments has been significantly upgraded. The new website is modeled after our Davis-Stirling.com website so users can easily move between the two.

Commercial and industrial associations are growing in number and popularity throughout California. Because the laws affecting commercial associations are different from residential associations, we indexed the laws on a separate research site dedicated solely to these business oriented developments. You can see the website at CommercialCID.com.

TRACKING
NEW LEGISLATION


In addition to alerts from the California Legislative Action Committee (CLAC) regarding new legislation, you can receive concise, fact-checked monthly legislative reports from Skip Daum, a former Registered Legislative Advocate for CAI.

You can learn more about Skip’s website and newsletter at HOALaws.com.


Recommended Reading. I was the president of my association in La Jolla for 23 years. I think I may have seen it all, a few lawsuits included. Your newsletter is essential for board members to read and use when evaluating their bylaws, planning effective meetings and benefiting from intuitive reserve studies. Committees need to know their goals, activity, reporting and expected results. Though I am inactive now I appreciate those who put their time in to make their properties safe, enjoyable and affordable. I will look for more of your work here! -Daniel D.

*****

Self-Defense. I am on the board of directors and I’ve always carried my firearm concealed whenever I’m working outside on the property for the last 5 years I’ve had the permit. If I am involved in a lethal force incident in the common areas (which is everywhere outside the units), does the HOA face any type of civil liability arising out of a deadly force incident? I’ve seen the declaration page for our policy and in the main portion and in any riders attached there is no mention even ambiguously of coverage (or not) for this type of contingency. -Aaron E.

RESPONSE: If you are on the board of directors and you are involved in a lethal force incident in the common areas, there is a 99.999% certainty the association will be named in any lawsuits that might be filed. Associations have deep pockets and make attractive targets. A plaintiff's lawyer will name everyone even remotely connected to the incident and let the court sort out liability.

Liability? Is it possible the association would have liability? It would depend on the circumstances involved in the shooting. In 2012, the fatal shooting of 17-year old Trayvon Martin by a homeowner association's neighborhood watch leader made the association a target of litigation. Trayvon's parents filed a claim with the insurer and sued the association for wrongful death, pain and suffering, and loss of earnings and expenses.

Insurance Denied Coverage. The association's insurance, through Traveler’s, sued Trayvon Martin’s mother and the association seeking clarification from the court that it had no responsibility to defend the association or to pay any judgment over the teenager’s death. Travelers had denied coverage under the policy’s “wrongful act” exclusion. A settlement was reached between Trayvon's parents and the association for an undisclosed amount,which reported to be in excess of $1 million.

Insurance Exclusion? Whether your association's insurance covers an incident by a board member using a firearm is something you would have to discuss with your association's insurance agent. Maybe some of our readers with insurance expertise will have insight on this issue.

*****


Buying a Golf Course. We have a special interest group that is actively trying to get our HOA to purchase a golf course that is being closed. This golf course is not part of the association. This group has loaded up the election for new board members with these special interest people. My question pertains to a potential conflict of interest of these future board members wishing to get the HOA to actively participate in this effort and the idea of using HOA funds to support and encourage this for-profit business. They have been holding secret meetings and even before the formal HOA board election have decided who will be president, treasurer etc. Once elected, what recourse do community members have that disagree with this path? Can board members be recalled if we find they plan to use HOA funds to promote this effort? -Sharon R.

RESPONSE: Our firm has worked with a number of associations on golf course issues. Some in situations similar to yours.

Property Values. There are many reasons why an association would have a strong interest in what might happen to an adjoining golf course. The potential impact on property values is foremost for active involvement. The fear is that the golf course will be abandoned and turn into an weed infested eyesore and then, at some later date, turned into high-density, low-income housing.

Conflict of Interest. There is no conflict of interest if candidates get on the board with the goal of acting in the best interests of the association. If, however, they have an ownership interest in the golf course, it creates a significant conflict of interest. Holding secret meeting before the election is legal since the candidates are not yet board members. Once on the board, the newly elected directors must comply with the Davis-Stirling Act and hold open meetings (except for executive session meetings).


Board Limitations. The board can use association funds to explore options related to the golf course, retain consultants, and incur legal expenses. In Finley v. Superior Court, a homeowners association used association funds to fight the conversion of the nearby El Toro Marine Base into a commercial airport. The association was sued and the court found in favor of the board's use funds in a political campaign to benefit the association.

The board cannot, by itself, commit the association to buying the golf course. Any purchase would require membership approval. Members with an opposing viewpoint can actively campaign against the purchase. The board should be diligent in getting legal counsel before taking any actions related to the golf course.

*****


E-Bikes on Trails. Can an association that allows bicycles on paths and trails ban e-bikes? Level-2 e-bikes are slower than manually pedaled bicycles as they are limited to 20 mph. -Rod W.

RESPONSE: Yes, an association can ban e-bikes. Boards can regulate how trails are used. To that end, motorcycles are routinely banned from trails intended for bicycles. E-bikes are growing in popularity and drawing more attention. Should they be allowed on trails?

Level-2 E-Bikes. The average cyclist goes about 12 mph on regular bicycles. E-bikes (electric assisted bicycles) come in all shapes, sizes and speeds. Some can achieve speeds up to 28 miles per hour under motor assist. Level-2 e-bikes are not limited to 20 mph. Instead, it's the speed at which the electric motor stops assisting the rider.
The e-bike can still go as fast as the person can pedal. Because of the motor assist, e-bikes help cyclists maintain a higher average speed. One study in Europe found that riders of e-bikes had an average speed much higher than regular cyclists.

Test Period. If an association decides e-bikes create unsafe conditions, it can restrict them from paths and trails.
Perhaps your board can institute a test period with appropriate rules to see if e-bike riders create unsafe trail conditions. If there are no complaints, e-bikes could be allowed. If most riders are safe but one is a speed demon, the one could be suspended from using his e-bike on trails.

*****

Does Age Matter? Do boards have to be balanced? If only younger people are on the board, older people’s needs are not addressed. -Lena R.

RESPONSE: No, there is no requirement that boards be balanced. In fact, some think being unbalanced is a qualification for serving on the board.

*****

Commercial CID Crime Insurance. I am curious whether the fidelity bond requirements set forth in Civil Code §5806 apply to Commercial CIDs. I reviewed the website and did not find a clear answer. The definition of condominium association did not clearly indicate that it only applied to residential housing as opposed to commercial space. -Patrick C.  

RESPONSE: Fidelity bond requirements do not apply to Commercial CIDs. Civil Code §4202 provides that the Davis-Stirling Act does not apply to commercial and industrial common interest developments, as defined in Civil Code §6531. Correspondingly, Civil Code §6582 provides that the entire Commercial and Industrial Common Interest Development Act applies only to commercial or industrial common interest developments.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Self-Defense in the Common Areas

Jul 14, 2019 0 Views 0 Comments

QUESTION: One of the owners was upset over homeless people trespassing our common areas. He claimed he has the right to use his firearm even on common area grounds to protect himself. I said that the law of self-defense does not apply. If a firearm is used inside his dwelling, it might be considered as self-defense but not in the common area.

ANSWER: Self-defense is not limited to a person's home. In California, you have the right to defend yourself and others against imminent harm regardless of location. The right to self-defense does not change based on whether they are inside your home or outside. The benefit of being inside your home is the presumption that you acted in self-defense. (Penal Code § 198.5.)

Firearms in the Common Areas.
Are there any limitations on firearms in the common areas? If the person is not licensed, California laws prohibiting the carrying a loaded firearm in any "public place" apply. (Penal Code §§ 25400, 25850, 26350, 26400.) The term “public place” is not defined, but most California courts have interpreted the restriction to apply if the area is reasonably accessible to the public without a barrier. (People v. Yarbrough (2008) 169 Cal.App.4th 303 (holding a private driveway may be a “public place” as applied to California’s loaded carry restrictions).

Common Areas. Are common areas a public place? If so, then California’s restrictions against the carrying a loaded firearm in the common areas apply. One court has already determined that private association meetings are "public" forums for the limited purpose of free speech by the membership. (Damon v. Ocean Hills.) It is likely courts would also deem common areas a "public place" for the association's membership. Therefore, anyone carrying a loaded firearm in the common areas would need to be licensed. Individuals with a license to carry a loaded firearm are generally exempt from California’s restrictions. (Penal Code §§ 25655, 26010.)

Self-Defense in Common Areas. Even though a person may lawfully defend himself with a firearm in the common areas, if he is not licensed to carry it in a public place, he could face prosecution for the unlawful possession of and or carrying of a firearm in connection with any incident involving it. In addition, if he shoots another person, he will need to prove:

1. He reasonably believed he or someone else was in imminent danger of being harmed;

2. He reasonably believed the use of force was necessary to defend against that danger; and

3. He only used the amount of force reasonably necessary to defend against that danger.

Thank you to attorney Matthew Cubeiro with the law firm of Michel & Associates for his assistance with this question. His firm has a number of practice areas, including firearms law. For more information on gun laws, see www.calgunlawsbook.com

IS A FENCE
REASONABLE ACCOMMODATION?


According to a recent case from the Michigan Court of Appeals, the Fair Housing Act does not give owners of emotional support and service animals an unlimited right to accommodation.

No Fences Allowed. The Fox Bay Civic Association's CC&Rs prohibited fences. A disabled homeowner (Creswell) constructed a fence around her backyard without the Association's approval. She wanted to keep her emotional support and service dogs in her yard.

Invisible Fence. The Association determined that Creswell had alternatives that did not violate the CC&Rs, such as installing a dog run or invisible fence (which the Association offered to install). Creswell refused to take down her fence and the Association sued. The trial court agreed with the Association and Creswell appealed.

Not Mere Suggestions. The Michigan Court of Appeals also agreed with the Association and ruled that Creswell had reasonable alternatives without violating the CC&Rs. The court stated the CC&Rs were "deed restrictions" not "deed suggestions" and disabled owners were entitled to a reasonable accommodation not absolute accommodation. To read the case, see Fox Bay Civic Assn v Creswell.

ARCHITECTURAL COMMITTEE
QUESTIONS


QUESTION: I am on the Architectural Review Committee (ARC). I have questions about the Committee.

ANSWER: Since you have seven questions, I will number and answer each of them.

1. Who makes up the rules for this committee and who adopts them? And how can they be modified?

• Architectural guidelines can be drafted by the ARC but must be adopted by the board of directors in an open meeting after distribution to the membership for review and comment. (See "Adopting & Amending Rules.") Guidelines on how the ARC operates depends on the association and its governing documents. Some leave it entirely to the ARC. In others, the board establishes formal written guidelines so there is consistency from year to year on how the ARC operates.  

2. The chair does not allow homeowners to speak to the committee in opposition to a proposed project but the applicants can speak all they want in favor of their project. Is this fair and legal?

• It's not illegal. Fairness is another matter. My preference is to allow members to express their concerns. By no means do neighbors have veto authority over architectural submissions. Their input, however, might highlight something the ARC should take into consideration. 

3. If a project is disapproved by the ARC, the applicants have the right to appeal that decision to the board. But if the project is approved, no one, not even an adjoining neighbor, may appeal to the board! Is this fair and legal?

• By statute, disapproval by an architectural committee is subject to appeal to the board (unless the board is the ARC, in which case there is no one to appeal to). Approvals are not addressed by the Davis-Stirling Act. Even so, a neighbor who might be unhappy with an ARC approval can "appeal" the decision by (i) writing a letter to the board, (ii) raising the issue in Open Forum at the next open board meeting, and (iii) demanding internal dispute resolution.

4. Should not this committee produce minutes and post them somewhere? All the chair does is make an oral report of the ARC’s decisions at board meetings.

• Yes, architectural committees should keep a written record of their decisions. (See "Architectural Committee Minutes.")

5. There is a curious rule that if a homeowner wants to modify the appearance of less than 25% of his/her front yard, side yard or backyard, he/she can do so without ARC approval. Is this the law? It doesn’t make sense to me. They could put a statue of the Green Giant peeing in the garden and that would be OK??

No, the 25% landscaping rule is not a law, it is something your board adopted or may be in your CC&Rs. Statues of green giants peeing in the garden would normally be covered by your ARC guidelines. You should limit the giant is no more than ten feet tall and require it be tastefully rendered.

6. Is a homeowner in a gated community not also subject to the county planning department’s rules? Such as needing permission from a neighbor before installing a statue or whatever within a few feet of the property’s boundary?

• The Building Department addresses construction and setback issues, not garden statues. The placement of a statue is something the association should address.

7. Is there a state agency that oversees any of these issues?

• No, thank goodness. The state's involvement is rarely helpful. Oversight programs in other states has proven to be costly for associations and disruptive.

FARAH NOURMAND
JOINS ADAMS|STIRLING


I am pleased to announce that attorney Farah Nourmand joined our firm. Prior to joining us, Farah oversaw a boutique law firm specializing in real estate, employment law, business and general civil litigation.

Corporate & Litigation Counsel. Farah's litigation practice included mediations, settlements, law and motion, eviction proceedings, and trials. On the transactional side, Farah oversaw day to day legal affairs as in-house counsel, negotiated and drafted commercial leases, determined property rights, conducted legal seminars, and performed due diligence related to purchases and sales.

Employment Law. Farah's employment law practice included preparing company policies, employee handbooks, and other employment-related documents. In addition, she advised clients on wage and hour claims and employee risk management.

Homeowner Associations. Farah also has practical experience with homeowner associations, having served as a president of her own condominium association for many years. Her experience is an asset when counseling boards of directors.

Education. Farah earned a Bachelor of Arts with a Major in English from the University of Southern California in Los Angeles. This was followed by a Juris Doctorate from the Whittier Law School in Costa Mesa, California. In addition to English, Farah is fluent in Persian and Spanish.

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

HIRING LAWYERS
FOR LOS ANGELES OFFICE
 
We are looking for experienced attorneys for our Los Angeles office.
 
Candidates should have at least five years of 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 had more responses about Battling Betty than I could print. Following is a sampling:
 
Ready to Rumble #1. There is possibly more to this incident than is written. The old guy board member most likely said or did something to provoke battling Betty to say "step outside and I'll beat the crap out of you" Her first amendment right says that she can. The old codger (chicken that he was) didn't step outside to get the crap beat out of him, so there was no harm done! -PK
 
RESPONSE: Violence and threats of violence are never appropriate. The male board member did the right thing by not stepping outside. As noted in the next feedback response, there would have been no insurance to cover injuries and subsequent litigation if the two directors had stepped outside.
 
Ready to Rumble #2. Board members who willingly engage in physical altercations with others will not be covered by the HOA’s insurance policy. Insurance does not cover intentional acts, and it would be hard to argue that stepping into the ring to solve problems is unintentional. On the other hand, if an irate homeowner attacks a board member during a meeting, the association’s worker’s compensation insurance will likely cover injuries sustained by the board member. This is one of the reasons why it is important for associations to carry the insurance, even if they have no employees. Worker’s comp for non-profit associations with no employees is generally inexpensive (between $500-$700 per year), covers volunteer directors, and is an important part of an association’s insurance program. -Erik Strom, Strom-Richards Insurance Agency, Inc.
 
RESPONSE: I agree. I encourage all boards to purchase workers comp insurance even if they don't have employees.
 
Ready to Rumble #3. The inability of people to act like proper ladies and gentlemen isn’t confined to HOAs. Apparently, it’s becoming a widespread problem. Semper Fi -Wayne W.
 
Ready to Rumble #4. Regarding Battling Betty, am I the only woman who caught a whiff of male chauvinism in that scenario? Having been a provider of health care to women & having served recently on an HOA board, I can attest that misogyny is alive & well in the state of California. I certainly concur that threats of physical violence have no place at board meetings, but if the threat of violence was truly the issue in the questioner's mind, then what difference would it have made if the person leveling the threat was male or female? I can't help but suspect that "Betty" blew her top after having endured a tidal wave of abusive, belittling & offensive remarks from the "Old Man" & probably other male homeowners. Now might be a good time for you to address manifestations of gender bias during board meetings. Women own homes too, presumably with the same privileges & responsibilities as males. -Charlotte K.
 
RESPONSE: It's clear Betty blew her top. Whether male or female, such threats are unacceptable. If the male director engaged in abusive, belittling and offensive remarks, Betty and fellow directors should have immediately admonished and/or censured the director.
 
Ready to Rumble #5. I was on a dysfunctional board several years ago. On one night just prior to a board meeting, two directors were trying to pick a physical fight with a homeowner, which a lot of us witnessed. I decided to draw-up a censure for the BOD to vote-on at the next executive session which pertained to the two directors: the President and the Treasurer. They tried to prevent me from presenting it, but the manager insisted that they should read and vote on it. So they did, and the vote was 4-0 to reject the censure. (I abstained.) So censuring didn't work, but politicking in the community later did. -Kevin H.
 
RESPONSE: It's good that you tried the censure. It at least made clear where lines were drawn.
 
*****
Calling Attorneys. Regarding your article on calling attorneys, does the president have to get permission from the board to call the attorney? Or, does the president have discretion? -M.M.
 
RESPONSE: Normally, the president has discretion. Even so, small associations with very limited budgets generally do not call legal counsel unless the board approves it.
 
*****
Cat Meow Fines. Our new board adopted 12 pages of unreasonable rules, such as, if your cat meows for more than 5 minutes you will be fined. After 3 meowing violations, your cat will be removed. Our manager told us to suck it up and the board has the authority to make whatever rules they'd like without input from community members. I believe the community should be able to give feed back as to what they feel is best, not 5 individuals making it up. -Tatum N.
 

RESPONSE: I see from your email you are writing from S. Carolina. In California, we keep our cats so well fed they spend all their time purring or sleeping. If a cat meows, we drop everything and give it more food. I don't know about S. Carolina laws when it comes to adopting rules. In California, boards must circulate proposed rules and take into account membership feedback before adopting them. If the membership finds the rules to be excessive, they have up to 30 days from notice of the rule's adoption to call a meeting to reverse the rule. (See "Petition to Reverse Rule.")

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Ready to Rumble

Jun 17, 2019 0 Views 0 Comments

ANSWER: I know a Marine recruiter who would like to talk to your aggressive board member. A year in the mountains of Afghanistan might burn off some of her aggression. If the Marines deem her unmanageable and decline to recruit her, there are other things the board can do.

Don't Engage. Under no circumstances should the threatened director engage "Battling Betty" in a boxing match. No good would come of it. Any physical injuries and subsequent litigation would likely not be covered by the association's insurance. Perhaps readers with insurance expertise could comment on this next week.


Censure. Any director, including the person being threatened, can make a motion to censure Ms. Betty. Such behavior is unacceptable and the board should express its displeasure in the form of a censure. For more information on when and how to implement a censure, see "Censuring Directors."

Ethics Policy. Your board should adopt an ethics policy. In addition to covering a director's fiduciary duties, it should cover things such as proper interaction with employees and vendors, proper decorum by directors, and conflicts of interest. See sample "Ethics Policy." While you are at it, you should also adopt an "Anti-Harassment Policy."

Lawyer Letter. To discourage future threats of physical harm, the board can direct the association's legal counsel to send a letter to Ms. Betty admonishing her and making it clear such behavior would result in a restraining order if it were to continue. Sad to say, our firm has obtained many "workplace violence" restraining orders over the years to protect association employees and board members from abusive residents. (Code Civ. Proc. §527.8.) On occasion, we've had to threaten a board member with legal action, but that is usually sufficient to stop the bad behavior.

Temporary Restraining Order. If threats of violence continue, the association's legal counsel can seek a temporary restraining order (TRO) against the misbehaving director without a hearing or notice to the other side. The TRO lasts until there is a court hearing (usually in 15 to 25 days). The association's legal counsel can take action against a board member because the attorney does not represent directors but, rather, represents the corporation which speaks through its directors. There are times when the corporation may need to take action against a director.

Credible Threat of Violence. A hearing date follows the TRO at which time a protective order may be issued if the court finds there was a credible threat of violence against by Ms. Betty. A “credible threat of violence” means a knowing and willful statement or course of conduct that would place a reasonable person in fear for his or her safety, or the safety of his or her immediate family, and that serves no legitimate purpose. (Code Civ. Proc §527.8(b)(2).)

Up To Three Years. A workplace violence restraining order is good for up to three years. (Domestic violence restraining orders can last up to five years.) Battling Betty may be required to turn in any weapons she posses and stay away from the protected director a prescribed distance, i.e., 50 or 100 yards. That means Ms. Betty might not be able to attend board meetings except by telephone.

RECOMMENDATION: Your board has a range of options available to it. Talking to the uncivil board member may be sufficient to stop her bad behavior. If not, decisive action should be taken by the board. Otherwise, there could be potential liability for failing to act in the event injuries occur.

CALLING ATTORNEY
FOR EVERY QUESTION


QUESTION: Our board president calls the HOA attorney on every question that arises, regardless of significance or the cost of those calls to the HOA. What can be done to reign him in?

RESPONSE: I've not met your president but I already like him. Associations face increasing potential liability with the myriad of new laws added to the books each year. It is difficult for large associations to comply with all of them and virtually impossible for small associations. (The Legislature needs to provide some relief for small associations.)

Volunteer Under Pressure. Most board members already have busy lives and are volunteering their time to make decisions on matters over which they have no expertise, such as insurance, roofing problems problems, contract negotiations, safety issues, water damage liability, employment law issues (hiring, firing, disciplinary actions), harassment claims, requests for reasonable accommodation, architectural disputes, unusual or excessive records requests, etc. Boards have the added pressure of doing this with owners nipping at their heals, second-guessing every decision, and threatening lawsuits.

Business Judgment Rule. To avoid personal liability, board members are required to make decisions (i) in good faith, (ii) in a manner which the directors believe to be in the best interests of the corporation, and (iii) with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. (Corp. Code §7231(a).) Boards may rely on the advice of persons they believe to be reliable and competent in the matters being presented. (Corp. Code §7231(b).) This means boards can rely on CPAs for financial and tax issues, attorneys for legal issues, etc.

Legal Budget. Boards are increasingly dependent on legal counsel from attorneys specializing in common interest developments. Too many associations, however, are significantly under-budgeted for legal expenses. Some boards innocently believe they can make it through the year without incurring any legal expenses. All it takes is one major flood or, worse, one deranged homeowner to spike an association's legal fees.

Daily Calls. Calling an attorney daily with questions is usually not necessary (unless there is some significant legal matter underway). To keep costs down, some law firms, including ours, offer a retainer program that allows free unlimited brief phone calls (emphasis on brief). This allows the president to pick up the phone and call legal counsel without fear of being charged for every call. That means he/she can quickly find out if an issue can be resolved without legal involvement or is one that could spin out of control unless legal counsel steps in.

RECOMMENDATION: Investigate setting up a retainer agreement with your law firm. In addition, increase your budget for legal counsel. Legal assistance is a necessary business expense that can protect associations from costly litigation and potential liability (that could lead to special assessments). Remember where you live. This is California--one of the most litigious states in the nation. An ounce of prevention...

 

Changing the Look. Regarding building aesthetics, you rightly say that it is impossible to please everyone. However, everyone had a choice to buy or not if they didn't like the aesthetics. In my opinion, to later force an arbitrary change is wrong. In this case, there could be privacy and security issues with front door windows. It has been my experience that board members do not do the proper research to make the decisions that they do. -Paul C.

RESPONSE: As I noted in my last newsletter, feelings run hot when it comes to aesthetic issues. You may not like it but the Supreme Court has already noted that associations have the authority to make decisions for the general welfare that may harm the interests of an individual owner. (Nahrstedt v. Lakeside Village.)

*****

No on SB 323. Thanks for the alert about SB 323. It was referred to the judiciary Committee, too. Gives two chances to stop or amend it. -Henry C.

No on SB 323. May I also suggest sending messages to Governor Newsom, urging him to veto the bill if it should reach his desk. -Michael E.

RESPONSE: We aren't ready for emails to Governor. If this dreadful legislation passes both houses and lands on the Governor's desk, we will alert everyone and ask for letters to the to Governor. In the meantime, anyone who has not yet sent a letter, please click here to send a pre-drafted email to the Assembly Housing Committee.

*****

Motus Insurance Debate. Thank you for continuing to provide one of the best educational resources out there for this industry. While the Motus program has been a hot topic in the newsletter, I think the recent note on it requires a bit of clarification. I don’t think that Motus inferred that master coverage was currently needed to obtain personal coverage. They’d stated that because such a small percentage of condo owners carried personal HO-6 policies, the uninsured majority don’t currently have a good option for earthquake insurance unless the HOA carries a master policy (since earthquake insurance is typically a companion policy to the HO-6 policy).

On California Earthquake Authority (CEA) not being able to do the proper underwriting, this is true as their pricing is based purely on coverage options and geographic territory, not actual policyholder exposure. For instance, an owner in a 400-unit condominium association will have higher exposure to loss assessment than an owner in a 12-unit condominium association, but the CEA will price both owners’ policies identically if they’re in the same geographic territory and carry the same coverage options. I’m a big fan of CEA, though the broad-strokes approach taken for loss assessment pricing is certainly a shortcoming, especially in certain parts of the state where loss assessment really drives premiums. -Brian Kalmenson, Commercial Insurance Specialist, Kirk Miller Insurance Agency

RESPONSE: Discussion of the pros and cons of Motus insurance has been interesting. At this point, I will leave it to the insurance industry to sort out. Those who wish to pursue this further should talk to their insurance agent.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Anonymous Election Flyers

Jun 9, 2019 0 Views 0 Comments

QUESTION: We have someone distributing an election flyer with false statements and inaccuracies with no attribution. Can we add to our election rules that flyers must identify who wrote them?

ANSWER: I believe you can and there are good reasons for doing so.

Reasons for Anonymity. Sometimes a flyer is anonymous because the writer fears retaliation. From my experience, that makes up only 10-20% of flyers. The other 80-90% of anonymous flyers are hit pieces. The writer does not identify himself so he can freely engage in misstatements, half-truths and inflammatory rhetoric, whether it be against candidates for the board or existing board members.

Venomous Flyer. In one association I worked with, someone distributed a venomous flyer throughout the community in the dead of night. The flyer targeted a newly elected director who was the swing vote on a divided board. The next morning, the director found the flyer and read it. He suffered a stroke, went into a coma and died. It put the community into an uproar. The board deadlocked and a provisional director was appointed by the court to fill the open seat. The author of the toxic flyer was never identified.

Benefits of Attribution. As a result of this and other experiences involving anonymous flyers, I am a fan of requiring all flyers identify the author. Doing so helps moderate inflammatory rhetoric and untruths. Knowing the source also helps readers evaluate the credibility of the information.

Plea to Not Elect. In another association, one director mistreated staff and was particularly disruptive at board meetings making it difficult to accomplish any business. When the problem director's seat was up for election and she decided to run for another term, the other four directors signed a flyer which they distributed at their own expense describing all the problems they had with the director. They pleaded with members not to reelect her and made it clear they would all resign if she were reelected. She was not reelected.

Statute. Associations cannot prohibit flyers but they can regulate them. The Davis-Stirling Act allows for the distribution of flyers without prior permission subject to reasonable hours and in a reasonable manner. (
Civ. Code §4515(b)(5).) The reasonable hours and manner provision allows associations to regulate how late people can knock on doors to hand out leaflets, affixing flyers to walls, doors, windows, vehicles, etc. In my opinion, it also allows for the requirement that flyers identify their authors.

California Election Code. The reasonableness of this requirement can be gauged by similar requirements in California's election laws. The Political Reform Act (PRA) of 1974 regulates elections so as to foster public trust in the political system. To promote transparency, the PRA requires political ads include a disclosure that they are “Paid for by,” followed by the name of the committee. "Committee" is broadly defined to include a person or entity making independent expenditures on candidates or ballot measures.

RECOMMENDATION: Not everyone will agree with my recommendation on transparency, i.e., that flyers identify their author. Boards should consult with legal counsel if this becomes an issue in their association.

CHANGING THE
LOOK OF THE ASSOCIATION


QUESTION: I purchased my condo four years ago. I liked the wood front doors. The president passed a rule that everyone replace their front doors with a fiberglass door with windows. I did not want windows in my door and they are charging $1,800 for the new door. This is changing the look, which is why I purchased my home in the first place. Is this legal?

ANSWER: Yes, it's legal. Maintenance and architectural decisions are primary functions of an association. Your CC&Rs probably devote a fair amount of ink to both topics.

Board Decision. It is unlikely the president is doing this by himself. One director cannot pass rules or impose assessments. Most boards I work with have a committee recommend aesthetic changes, give notice of the proposed changes, and invite comments before submitting a project such as you describe to the board for approval.

Cost Approval. The $1,800 price tag you mentioned also indicates full board involvement. The president does not have the authority to require members to pay $1,800 to change their door. Fellow board members would be required to approve the project and its cost.

OBSERVATION: When it comes to aesthetics, it is impossible to please everyone.
As the Court of Appeals noted, beauty is in the eye of the beholder. (Clark v. Rancho Santa Fe.) A door style you love, others will object to and vice versa. In the scores of redecorating projects I've been involved in, I've never had one where every person was happy with the outcome. We always had critics of paint colors, carpet selection, artwork and cost. The California Supreme court observed that "anyone who buys a unit in a common interest development with knowledge of its owners association's discretionary power accepts the risk that the power may be used in a way that benefits the commonality but harms the individual." (Nahrstedt v. Lakeside Village.)

TELL HOUSING COMMITTEE
TO VOTE NO ON SB 323!


The State Senate passed SB 323 and it is now in the Assembly where it will be voted on by the Housing Committee. This problem bill prohibits an association from establishing qualifications for board members and adds a number of burdensome election requirements.

Thank you to all 800 of you who submitted letters to Senators. While our efforts were strong, we now focus our attention on the Assembly Housing Committee. Here’s how you can help:

1. Send a pre-drafted letter to the Assembly Housing Committee.


2.  Share with others the harmful effects of SB 323 and forward this information to your own email lists.

3.  Get involved on CLAC's Facebook and Twitter and LinkedIn channels. Like and share our posts to help us reach more people. You can also tag or direct a message to your Assemblymember with our posts asking them to Vote NO on SB 323. Many are on Twitter.

4.  We’re posting video updates to keep you informed on the latest legislative news. Subscribe to our YouTube Channel for new video alerts.

Thank you for helping us make an impact. The more opposition we generate, the more influence we have. So, please join us and make your voice heard!




Nathan McGuire, Esq.
CAI-CLAC Chair

NOTE FROM ADRIAN: For information on the problems with SB 323, see our February 24 newsletter; see "Feedback" in our March 31 newsletter; and the "Feedback" section in our April 28 newsletter. The bill puts felons, delinquents and litigants on boards; prohibits associations from ever suspending voting rights; adds another 30 days to the election process; and takes away privacy rights. I urge everyone to send a pre-drafted letter to the Assembly Housing Committee. -Adrian Adams

 

Great Newsletter. Always SO impressed with what you're doing. If I could start my career over again, would get into this area on some basis. And your site is a major, major resource. Too bad that our board never wants to check it out, much less pay attention to anything in it. -Monica F.

RESPONSE: Many thanks for your kind words. If you want to attend law school, let's talk.
 
*****


First Class Condition. I’m not sure why developers use some of the CC&R language they do. I agree with you that first-class condition, top quality, or like new would all be problematic terms for even a conscientious HOA to comply with, but the one thing those terms clearly are meant to convey is don’t let the property run down. Don’t defer maintenance to a point where it is obvious. -Tony V.

*****

 
Incentives to Vote #1. I suggest not to raffle off wine or any type of drink requiring someone to be over the age of 21 in the state of California. If you use just the envelope with the name and address on it, it does not identify the age, and if the winner is under 21, the unknowns could be a disaster for the HOA. So my food for thought would just be a gift card, for types of products where alcohol cannot be purchased with it. -Jim W.

Incentives to Vote #2. First let me say THANK YOU for the information that you provide us thru your newsletter. Your recent newsletter "Voiding an Election" was timely. Our president resigned because he moved. The board elected our vice president as president. Our bylaws state: "In the event of a vacancy on the governing board, his successor shall be selected by the remaining members of the board and shall serve for the unexpired term of his predecessor." When the president resigned, his term on the board was to expire this September (2019). The board member (VP) who took his place as president had been elected for a term of office on the board for three (3) years (2021). Which takes precedence? "the unexpired term of his predecessor" (ending in September) or the elected board member whose term ends in 2021? -Joe C.

RESPONSE: You are mixing apples and oranges. There are two different offices. One is that of director elected to the board by the membership. The second is an officer selected by the board. The quote from your bylaws deals with the selection of a replacement director to fill the seat held by your former president. That replacement director is on the board through September 2019, at which point he/she is up for election. The office of president conferred on your VP can run through 2021 (provided the board is happy with the person's performance as president). See Chart of Differences Between Officers and Directors.

Incentives to Vote #3. I am running for our board. Talking to people I have found that most of the non-voters don’t read the candidates statements and don’t follow any of the issues. I think we are better off if they don’t vote. -Finn M.

RESPONSE: Cajoling people to vote so an association can meet quorum does not produce the best results. That's one of the reasons I recommend eliminating quorum requirements for elections.

Incentives to Vote #4. What is the point of voting for the board when we are never told the results of the vote and never given a list of the board members or their contact information. -Suzanne N.

RESPONSE: Someone needs to point out Civil Code §5120(b) to the board and manager. It requires the tabulated results of an election be promptly reported to the board of directors, recorded in the minutes of the next meeting of the board, made available for review by the membership, and within 15 days of the election, reported to the membership. (See a sample notice.)

Incentives to Vote #5. Like you, I do not like the idea of penalizing people for not voting. Voting is both a right and a privilege. With all due respect, I do not like the idea of bribing people or giving them incentives to vote either. If the board gives bounty, it also puts a thumb on the scale to vote for people on the board. -Denyse B.

RESPONSE: My first choice is to amend bylaws to eliminate quorum requirements for the election of directors. It simplifies everything. If it's not possible to amend the bylaws, then bribe members to vote. I've found that people prefer incentives over punishment.

*****


Motus Insurance. As always, I enjoy your newsletter. But I have a suggestion on this one regarding the information provided by Motus Insurance. In paragraph 2 of the response from Motus, it is indicated that a California Earthquake Authority (CEA) policy cannot be purchased without a companion HO-6 policy in force for a condominium unit owner. This is true, but the final sentence of this paragraph suggests that a condominium owner “cannot purchase earthquake insurance when there is no master policy in place.” This is not accurate.

The purchase of earthquake insurance through the CEA (or a competitor) by a condominium unit owner is subject to the HO-6 purchase, not the purchase of coverage by the community. In paragraph 3 the confusion is, I believe, increased with the statement that “The CEA cannot do the underwriting necessary for an individual living in an association without a master policy.” Perhaps what was meant by this is the CEA does not offer enough coverage to protect the exposure of a condominium unit owner living in a community without a master earthquake insurance policy in place, because the typical exposure is greater than the maximum coverage limit available to the unit owner. -Michael Berg (MBA, CIRMS, CMCA), Berg Insurance Agency

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Penalize Members Who Don't Vote

May 19, 2019 0 Views 0 Comments

QUESTION: I am Secretary of a 160-unit development that is less than 1/2 complete. Once the developer turns over control, I would like to restate our governing documents. Elections are costly and their success depends on member participation. What are your thoughts on fining people who don't vote?

ANSWER: There is nothing in the Davis-Stirling Act or the Corporations Code that would prevent you from fining people who don't vote. It might even be effective. However, I don't like penalizing people who choose not to exercise their rights. Rather than punish them, there are two approaches you should try first: (i) offer incentives for members to vote and (ii) eliminate quorum requirements for the election of directors.

Incentives to Vote. The board can raffle off gift cards, bottles of wine, a dinner at a local restaurant, etc. The ballot envelope with the person's name and address can be used as the raffle ticket for the drawing. Normally, any entity that uses a raffle to raise funds must register with the Office of the Attorney General. (Penal Code 320.5) However, raffles are exempt if they do not require any of the participants to pay for a chance to win.

Eliminate Quorum. The best solution is to amend your bylaws to eliminate quorum requirements for the election of directors. "A quorum shall be required only if so stated in the governing documents of the association or other provisions of law." (Civ. Code 5115(b).) Eliminating quorum makes board elections like all other elections at the municipal, state and federal levels. In other words, elections are determined by those who are interested enough to vote.

RECOMMENDATION: Try offering incentives in your next election. If that doesn't work, amend your bylaws. We routinely eliminate quorum requirements in documents we restate. It makes elections thereafter very easy to hold.

FLIP-FLOPPING
CANDIDATE


QUESTION: How do you handle a candidate withdrawing from an election, then 3 days later after being notified by the president that his withdrawal had been accepted, deciding to run again.

ANSWER: If the nominating period closed after he withdrew, your flip-flopper is out of luck. If nominations are still open, he gets to self-nominate and appear on the ballot.

RECOMMENDATION: If the person previously served on the board and was flip-flopping on issues like a fish out of water, someone should let the membership know he shouldn't be on the board. Sending a letter cannot be done at association expense (Civ. Code §5135), it must be done by an individual or group at their own expense.

FIRST-CLASS
MAINTENANCE REQUIRED

A new case was published last week that should cause everyone to pick up their CC&Rs and carefully read the maintenance requirements.

Water Damage. A pipe on the roof broke causing water damage to the plaintiff's bedroom. The association repaired the pipe and roof but not the bedroom. Plaintiffs sued the association for breach of contract and negligence.

No Inspections or Maintenance. The trial court granted a nonsuit in favor of the association. The appellate court reversed. The court noted that the CC&Rs required the association to keep the project in a first-class condition. Witnesses testified the association failed to perform preventative maintenance and roof pipes had not been inspected or maintained in years.

First-Class Condition.
I don't like such language in CC&Rs because "first-class" is hard to define. It's also at odds with reserving for replacement. If a roof has a 20-year life, is it no longer "first-class" when it's ten years old, thereby obligating the association to replace it? Whenever my office restates documents, we replace "first-class" with more appropriate language.

RECOMMENDATION: The primary purpose of an association is to maintain the common areas. Boards should not defer maintenance, especially if their CC&Rs require the project be kept in a first-class condition. Failure to do so could result in liability if persons or property are damaged as a result of common area component failures. (See "Sands v. Walnut Gardens.)

TELL SENATORS "NO"
ON SB 323


Senate Bill 323 (Wieckowski) passed the Senate Housing Committee and is now on the Senate floor. The bill will likely be heard and voted on this week.

It is critical we STOP this problematic bill and it’s negative impacts on community associations. If you recall, SB 323 prohibits an association from establishing qualifications for board members and adds a number of requirements which are unnecessary.


We need your help to STOP SB 323. We’ve updated our online advocacy letter to go directly to your senator asking them to Vote NO on SB 323. Simply send our pre-drafted letter to your legislator by clicking here.

You can read more about the troublesome impacts of SB 323 on our Legislative Session Hot Bills page. If you have any questions, you can contact us at [email protected]

Nathan McGuire, Esq.
Chair of CAI-CLAC


Earthquake Insurance. My last two newsletters had comments in the "Feedback" section from homeowners for and against earthquake insurance called "Motus." Following is a response from the President of Motus Insurance, describing the product:

"While Motus is in complete alignment with your firm's answer that the best insurance is a master earthquake policy that forces all members to participate in the foundational layer of recovery after an earthquake. In a perfect world, all HOAs should have a master policy with full coverage.

Roughly 32,000 condominium associations in California do not have a master earthquake policy. In addition, there are currently 2.5 to 2.8 million condo-like units in California. However, there are only 900,000 HO-6 policies in force. The California Earthquake Authority (CEA) and its competitors require an HO-6 policy in order to buy individual condo earthquake insurance. That means 1.6 to 1.9 million condominium owners cannot purchase earthquake insurance when there is no master policy in place.

The CEA cannot do the underwriting necessary for an individual living in an association without a master policy. They can only offer $100,000 and their rates are usually 3-5 times higher than their single-family home rate. Also, since the CEA is defined as a residential carrier they can't offer coverage for any common area foundations, structures, garages, utilities, etc.

Motus addresses these problems, which is why the Department of Insurance approved the product. It allows carriers to offer commercial rates and coverages to individuals for the first time, ever. With Motus, the association is an additional insured on the loss assessment and interior coverage.

With Motus, the association does not overwhelm its budget. This is for boards that want a master policy but can't afford it." -Daniel Wallis, President, Motus Insurance Services. Attached is a PDF presentation describing the insurance.

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Voiding an Election

May 12, 2019 0 Views 0 Comments

QUESTION: Is there any California statute that allows for voiding an HOA election? Our board is in the process of voiding our election because of ballot irregularities and is holding a new election starting with the distribution of new ballots.

ANSWER: Yes, elections can be restarted. Civil Code §5110(c)(8) states that an inspector of elections may "Perform any acts as may be proper to conduct the election with fairness to all members..." If election irregularities are such that the balloting would produce an outcome that could not be trusted, an inspector could void the election and request a new one.

Board Decision. An election could also be restarted by the board of directors. For example, if a candidate on the ballot was not qualified (Civ. Code §5105(a)(3)) or the ballot failed to provide for cumulative voting as required by the governing documents
(Civ. Code §5115(c)) or a second envelope was not included with the first (Civ. Code §5115(a)) the board could stop the election and restart it with proper ballots and envelopes. The goal is to have an election that reflects the will of the membership and not end up in court due to irregularities.

RECOMMENDATION: Over the years, I've had to advise boards to restart their election with new ballot materials. So as to minimize confusion, I have them use a different colored paper for the ballots and envelopes. Whenever in doubt, boards should pick up the phone and call legal counsel.

CAN THE MANAGER
INSPECT MY GARAGE?


QUESTION: I own a townhouse with two spaces in front of my garage and two inside my garage. Recently, the manager asked to see a picture of the inside of my garage. The CC&Rs require they be used for cars. I have two vehicles in the garage. Do I have to show a photo or let them inspect my garage? They have not asked other owners to see inside their garages.

ANSWER: Yes, the manager can inspect your garage. The purpose of parking rules is to preserve property values by keeping the development from looking like a parking lot.

Garage Conversions. When it comes to garages, people have a way of converting them into storage units, gyms, home offices, game rooms, bedrooms, etc. If all the board or management sees is two cars parked in front of your garage, they have no way of knowing if you are properly using your garage for parking cars. Since they have a duty to enforce the governing documents, they have a duty to ask.

Discriminatory Enforcement. It has been my experience that owners asked to comply with the rules often assume discriminatory enforcement. Without any evidence, they claim that no one else has been asked to follow the rules. That's possible but rarely the case. Management often has multiple notices out and is trying to persuade people to follow the rules without resorting to hearings and fines whenever possible.

Storing Vehicles.
Also, if you are not using the vehicles in your garage but simply storing them, you might consider renting a storage unit for your vehicles or selling them so you can park your other two cars in your garage.

Reasonable Rules. In a 2011 case, Sui v. Price, an owner with a
1987 Mitsubishi van parked it in his exclusive use parking space and left it there when the engine broke down. It stayed inoperable and did not move from 2003 to 2007. After repeated warnings, the association towed the eyesore. Sui sued the association and its president. Sui told the court he refused to move the van because his family, including his children, developed a strong bond with the van. "It was part of their family, just like some people with their pets." The court was not persuaded. It found the association's actions reasonable and ruled against Sui.

RECOMMENDATION: As the Sui case demonstrates, members are subject to rules adopted by their association. In your case, the manager is trying to do her job. A photo emailed from your cell phone to the manager only takes a few seconds. It's not the end of the world for you to send it (unless your garage was converted into storage or has someone living in it).

SEX DISCRIMINATION
AND RELIGIOUS ACCOMMODATION


On April 22, a case was handed down by the United States Court of Appeals for the Third Circuit involving segregated swimming for men and women.

Reasonable Accommodation. The Country Place Condominium Association is a 55+ community located in Lakewood, New Jersey. Approximately two-thirds of the association's residents are Orthodox Jews. The association segregated swim times for men and women to accommodate Jewish religious beliefs related to modesty.

The board adopted rules making over two-thirds of all swimming hours throughout the week sex-segregated. An owner who wanted to swim with his wife, who had disabilities after a series of strokes and needed pool therapy to recover, was fined for violating the policy. He sued the association alleging violation of the federal Fair Housing Act.

Sex Discrimination. Although the case involved sex discrimination versus religious beliefs, the association did not raise religious accommodation as a defense. As a result, the only issue before the court was the segregation of swim times based on gender. The court decided this was a clear case of sex discrimination in violation of the Fair Housing Act.

Discrimination Sometimes Justified. The concurring opinion noted that certain other federal circuit courts covering different parts of the country (including the Ninth Circuit) have concluded that policies which are discriminatory on their face may be justified if it can be shown that the policies benefit the protected class or respond to legitimate safety concerns. (Curto v. Country Place.)

RECOMMENDATION: It's unfortunate the association did not raise religious accommodation as a defense. It would have been interesting to see how the court balanced competing interests. Whenever boards contemplate adopting restrictions based on gender or age (children), they will likely be deemed discriminatory. When rules touch those areas, consult legal counsel.


Open Forum Policy #1. Regarding "a reasonable time limit for ALL members to speak," does that mean everyone should have a right to speak for a specified amount of time, or that the length of the open forum can be limited such that not everyone is allowed to speak? Our board is limiting the length of open forum. I think everyone should be allowed to speak. If there are too many people wanting to speak, there is probably something wrong with the way things are being run. And what if one person has multiple issues to bring up? -P.C.

RESPONSE: Yes, the wording of the statute is problematic. It states, "A reasonable time limit for all members of the association to speak...shall be established by the board." (Civ. Code §4925(a).)

Extended Comment Period. As I noted in last week's newsletter, the board can extend the time for open forums, but at some point comments become repetitious. Moreover, the board has business to conduct.
The longest meeting I ever attended started at 6:00 p.m. and went to 4:00 a.m. the next morning. The president decided to let everyone speak and then speak again before conducting the board's business. By the time the meeting was over the next morning, everyone was exhausted. That is no way to run a meeting.

City Councils. Sometimes it's helpful to see how cities handle similar situations. Chapter 2, paragraphs 7 and 11 of the "Rules of the Los Angeles City Council" address public comment periods. Citizens are limited to one minute of public comment with a minimum ten minutes for the session. The city council can provide an opportunity for the public to address the council on each agenda item before or during the council’s consideration of the item. Boards have that same discretion. The Los Angeles City Council has more flexibility than HOA boards because it meets three times a week. If it met once a month as most association boards do and allowed unlimited public comments, they would never get any business done.

RECOMMENDATION: Having experienced an open-ended forum first-hand, I am opposed to unlimited sessions. They can become filibusters to prevent boards from conducting business. Unlike city council members, board members are volunteers. They need to get the association's business done so they can return to their families and jobs. If some homeowners
aren't able to speak to the board during a particular open forum, they can still write letters and appear at the next board meeting.

Open Forum Policy #2. Like a rule, an HOA board policy [regarding open forum time limits] must go through the regular board approval process with a board vote at a board meeting. Correct? -Robert M.

RESPONSE: No, that's not correct. Time limits are not monthly agenda items; it's a matter of boards conducting their meetings. The person conducting the meeting, normally the president, can adjust times from meeting to meeting depending on the circumstances. I covered this in my April 28 newsletter.

*****

Dog Park. I enjoy reading your newsletter. I just read the item addressing the dog park. This has come up a number of times. This is the poster child of a board assuming a liability it is not obligated to assume. I personally like dog parks and think there are many positives. However, this is the type of decision that should not be made without discussing the impact on it general liability coverage. Specifically, will incidents such as attacks on other dogs or attacks on people be covered under the association’s general liability policy? Will there be limitations on non-association members? Will the association require an indemnification by the dog owner? Will the association require confirmation that the dog be up to date on its shots? I recommend that the board consult with its community association insurance professional. -Joel Meskin, McGowan & Company Insurance

RESPONSE: Good point. Insurance should always be considered when making significant changes to the common areas. In addition to consulting legal counsel when planning a dog park, boards should talk to their insurance agent to make sure their policy provides the coverage they need.

*****

Rule Change #1. I see your version of the Davis-Stirling Act says members must be given 28 days notice. Did this just change in the last year or two? It used to say 30 days. -Rick L.

RESPONSE: Last year's Senate Bill 261 changed the notice requirement for proposed operating rules from 30 to 28 days.
The change took effect January 1 of this year. To see all the changes in laws from year to year, go to "New Laws."

Rule Change #2. I love your newsletters. In your most recent email, the discussion "Policy or Rule" implied that Civil Code §4360 applies for all boards contemplating rule changes. Based on my research, notice and approval of a rule change only applies when a board has the authority to adopt rules granted in the governing documents. Some boards do not have this authority. -Gary R.

RESPONSE: Yes, my response assumes the board has authority to adopt rules. Rulemaking authority is covered on our website. I also covered it in my February 10, 2019 newsletter.

*****

Cumulative Voting. In your last newsletter you mentioned cumulative voting. Cumulative voting is a double edged sword. If can help you or harm you. We live in a complex where only about 20% of owners live here full time. If someone gets on the board who is an obstructionist, it is almost impossible to get them off the board because they are incumbents. So yes, I can see if someone has enough supporters cumulative voting can help them stay on the board. Not having cumulative voting can also prevent new people from getting on the board and also makes it almost impossible to get problem incumbents off the board. So cumulative voting is a double edge sword that, based on your circumstances, can both help or hurt you. -Ray O.

RESPONSE: After weighing all the pros and cons, I come down on the side of eliminating cumulative voting (and proxies, and quorum requirements).

*****

Earthquake Insurance. [In response to last week's feedback on insurance] This is not a healthy decision for a board to make. Our board is considering the MOTUS insurance policy that is exactly what this woman is describing! I don’t believe any board of directors would be fulfilling its obligation by voting to accept an earthquake insurance policy such as the one noted. That plan leaves those owners who decline the plan open for possible financial ruin if there is an earthquake. That would also leave the association with damaged buildings. I think it is obvious at this point that the association needs to buy an earthquake insurance plan, one that demonstrates a board responsibility to all owners, making sure everyone is covered. -Angela D.

RESPONSE: A large earthquake is undoubtedly in California's future. If we knew the date and location, owners could wait until just before the event to buy insurance. Unfortunately, we don't know when and where it will occur--only that it will. That means delaying the purchase of insurance is a roll of the dice. Many who are now avoiding the cost of earthquake insurance will suffer the enormous cost of rebuilding and be burdened with crushing special assessments. Many will have no choice but to walk away from their units.

Into the Cloud. I don't care for gambling, which is why I have earthquake insurance on my home. When it comes to protecting the firm, my partners and I decided to move our entire law practice into the cloud--desktops, phones, billing, accounting software, document management, everything. It will allow the firm to withstand a devastating earthquake and continue to service our clients with little or no interruption. We will complete the transition later this year. 

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Manager Reverses Board Decisions

Apr 28, 2019 0 Views 0 Comments

QUESTION: Can a management company not comply with a vote from the board? Can they arbitrarily reverse over a thousand dollars in late fees levied against a board member and justify it by stating they do it for board members?

ANSWER: Regarding your first question, managers (whether an employee of the association or employee of a management company) are agents of the association who take their direction from the board of directors. However, they should never be mindless robots. They can and should evaluate instructions given to them. Sometimes they need to push back when boards give improper instructions. If a board directs a manager to take actions which are not legal, I hope the manager would refuse and tactfully tell directors why.

If, however, instructions are legal and reasonable, the manager is obligated to carry them out. If he/she does not, the board can terminate the agent's services and retain someone else to carry them out.

Late Fees. When it comes to reversing late fees and fines, i
t's the board's decision to waive them, not the manager's. If a manager, without board authority, reverses late fees, you have a problem--especially when it's a board member receiving preferential treatment. Boards and their managing agents are supposed to act evenhandedly in their enforcement of rules and the collection of delinquent assessments, fees and fines.

RECOMMENDATION: The board should not act precipitously if a managing agent refuses to carry out instructions--the manager might be justified. Directors should find out why the manager balked. If the refusal was justified, the board may need to reverse direction. If the refusal was unjustified, it may be time to find a new manager. If so, boards should involve legal counsel whenever terminating an employee or a management contract. You want to make sure you follow proper procedures so you don't create potential liability for the association.

ALTERING
COMMON AREAS


QUESTION: Our board president wants to designate a portion of our common area as a fenced enclosure for dogs to be off leash. Can the board authorize this change or does it require an owner referendum or CC&R amendment?

ANSWER: The board is in charge of managing the common areas for the benefit of the membership. Dog parks are popular because they provide a open space for dogs to run and play and do their duty without impacting non-pet owners. I've noticed that dog parks are now included by some developers in planned developments.


Give Notice. The board should notify the membership of its plans and invite everyone to a board or town hall meeting to get their input. Members often provide good feedback on such things. If the board's plans are unreasonable, directors will likely receive stiff opposition from impacted members.

Decision Maker. The board could put the decision before the membership. The downside is getting members to vote. Unfortunately, apathy has a way of killing things. In my opinion, the board can make a decision on its own to fence off an area of reasonable size and location to create a dog park. If the park does not get used or creates a nuisance, the decision can be reversed.

Capital Improvement Cost. All of this assumes funds are available to install a fence. Installing a dog park is a capital improvement since it creates an amenity that did not previously exist. Most governing documents require membership approval for any capital improvement exceeding 5% of the budget. Also, if a special assessment is required, boards have a 5% limit. Anything beyond that requires membership approval.

POLICY OR RULE?
TIME LIMIT FOR OWNERS


QUESTION: The Civil Code says a board can establish a reasonable time limit to address the board in a meeting. When setting the limit, does the board need to create an agenda item and vote? Our board recently instituted a 3-minute rule and said it was a policy and not a rule, therefore no board action was required. I say they need to handle it like any other board action, agenda item and vote.

ANSWER: The Davis-Stirling Act states, "A reasonable time limit for all members of the association to speak to the board or before a meeting of the association shall be established by the board." (Civ. Code §4925.) For most associations the three-minute limit is a policy, not a rule. The difference has to due with penalties.

Fines. If the board fines members who violate the speaking limit, then the board adopted a rule not a policy. If so, the proposed rule must first be distributed to the membership for a 28-day review. (Civ. Code §4360(a).) The rule is then adopted by the board in a meeting and recorded in the minutes. If there are no fines attached to the limit, the speaking limit is a policy.

Informal & Fluid. It is not uncommon for the
president to adjust time limits from meeting to meeting. If only a few people attend and the board wants a robust discussion on a particular topic, the president can allow members to speak for more than three minutes. If the meeting has a large attendance and everyone wants to speak, the president might limit speakers to two minutes so as to allow as many people as possible to speak.

Reasonable Limits. Time limits set by the board must be reasonable. A 15-second limit is not sufficient for a person to say anything meaningful. A 10-minute limit means the business portion of the meeting might never start. Three minutes per person is fairly standard for associations.


Publishing Guidelines. Guidelines should include a time limit for the open forum itself. Thirty minutes in large associations is common. This sets an upper limit. Obviously, the open forum portion of the meeting will end sooner if only a few people address the board. Additional guidelines should include things such as (i) speakers may not give their time to other people, (ii) no audio or video recording by attendees, (iii) no rude or threatening comments, and (iv) check all weapons with the manager.

RECOMMENDATION:
Boards should adopt meeting guidelines and print them on each open meeting agenda. This gives attendees notice on how open forums will be conducted.


Vote No #1. [Regarding SB 323] I sent the email to the list of politicians and certainly hope it makes a difference! Thank you for your newsletter. -Doug S., Glenda C., Tom T., Gary M., Ken M.

Vote No #2. Wouldn't the undesirables have to be elected by the members? I doubt if members when given the facts, would elect undesirable people. I think this is a pure waste of time, or someone has an agenda. -Joe N.

RESPONSE: Senator Wieckowski's and the Center for California Homeowner Association Law's (CCHAL) campaign against community associations is baffling. Why change the law to force associations to allow felons, sex offenders, delinquents and litigants on their boards? Plus, they increased the potential for identity theft in HOA elections.

You ask how "undesireables" can get elected? There are two ways it can happen. The first is if not enough people run for the board. That means those who are nominated automatically get elected. The second way is also common--ignorance. If the membership is unaware of a nominee's background, they vote for the person with the best bio or campaign flyer. That means someone has to alert the membership that a particular candidate refuses to pay a special assessment, ignores the rules, has been convicted of violent crimes, etc.

If no one is willing to tell the membership (due to apathy or fear), enough people could vote for the person to get him/her elected. With cumulative voting, fringe candidates can always get themselves elected. Once on the board, cumulative voting makes it almost impossible to get them off, which is why I encourage associations to amend their bylaws to eliminate cumulative voting.

Those of you who support the flawed CCHAL/Wieckowski bill need to rethink your position.

Vote No #3. First, I love your letters and your humor. I see there is another bill (670) coming down the pike by a wizard named Friedman. Now I think there are two great opportunities here since both bills 670 and bill 323 destroy the spirit and intent of the community housing programs and the benefits they provide. But what the hey, lets support both bills PROVIDING they contain riders--term limits for all elected officials, pay limits (with increases subject to voter approval), no retirement package, and all health benefits cease when they retire. -Jim K.

RESPONSE: AB 670 deals with Accessory Dwelling Units (ADUs) otherwise known as "granny flats." The bill voids restrictions in CC&Rs that prohibit ADUs. It allows owners to convert their garages into living units or build a second unit on their lot up to 1,200 square feet in size. It's a signature issue of Governor Gavin Newsom to create affordable housing in the state and is receiving a lot of support. The bill is opposed by CAI's California Legislative Action Committee (CLAC) because of the negative impact it would have on community associations. I keep a summary of bills and cases by year on our website. The ones for 2019 can be found here.

*****


Painting Fences #1. I wanted to let you know that associations can insure their volunteer exposure by purchasing a workers comp policy from CAIS. We offer a national workers comp program in all 46 competitive states that extends coverage to board members and volunteers working on behalf of the association. All retail insurance agents can access this program through our website. Premium range from $364 in California -Gary Deck, Community Association Insurance Solutions, LLC

Painting Fences #2. One little item, electrical, plumbing--no license, no insurance if there is a fire or damage. -Harold R.

Painting Fences #3. Certainly volunteer safety is #1. However, OSHA/Work Comp risks are not the only considerations regarding volunteers working for HOA. California labor laws rarely see any type of work as volunteer services and are very aggressive in collecting payroll taxes. I’m not aware of an HOA/common interest development exclusion, similar to what municipalities have for ‘clean up days’ etc. -Michael S.

RESPONSE: If owners volunteer their time, they aren't employees and labor laws do not apply. As volunteers, they aren't paid anything so there is nothing to withhold. As long as the association takes reasonable steps to avoid injuries and it carries appropriate insurance, there shouldn't be a problem.


Painting Fences #4. As a contractor with an inclination to teach, I encourage DIY owners on safe projects to at least get a consultation on whatever they want to do. If they can’t find a willing contractor, then take close-up and global pictures of the fence, or even take one of the fence boards to the paint store for advice. Paint salesmen sometimes like to get out in the field to make a sale or just to stretch and see where their product is going. -Michael C.

Painting Fences #5. Our rural association experienced snowstorms this winter that resulted in 6 or 7 trees falling across the road. Neighbors brought out their chainsaws and spent most of a day clearing huge trees and brush.

Trees fell on two cars parked in the easement--one car was totaled and the other damaged. Is the HOA responsible for any of this damage? Would the HOA have been liable if one of us had been injured while clearing the road?

At the time of this writing, there are still branches hanging over the road. What is a reasonable amount of time for the branches to be cleared? I enjoy reading your emails and learn a lot! Thank you! -Suzanne B.

RESPONSE: Normally, each owner's insurance takes care of damage to their car. It's possible the insurance carrier could pay for the damage and then subrogate against the association if it could show (i) the association was responsible for trimming the trees and (ii) the board was on notice that winter snows would cause trees to fall on the cars, and (iii) the board's failure to act led to the damaged cars. However, the cost of hiring lawyers to litigate the matter makes it unlikely.

If the association organized homeowners to remove the trees and one was injured, it's possible the person could file a claim against the association, thus the need for worker's comp insurance for volunteers. If, however, homeowners jumped into action on their own, it is unlikely an injured volunteer could hold the association responsible for their injuries.

For the remaining branches over the road, any immediate danger of additional damage likely ended with the passing of winter. Even so, if the association is responsible for keeping the trees trimmed, the board should take action to eliminate any foreseeable danger. Another consideration is potential fire hazards. In light of last year's devastating wild fires, it's possible brush needs to be cleared and some trees need to be eliminated.

*****


When is a Condo a PUD? Thank you once again for the very informative newsletters and excellent website. The questions regarding what would seem to be townhomes, patio homes, or single family homes constructed under approved condominium plans is interesting. There are quite a few of these in Santa Cruz County, often consisting of 3 or 4 units on lots that would not allow for subdivision into typical single family home lots. I own one unit in a four-unit development. When one of the units was put on the market, I attempted to correct a few things that had been changed from the original plan: fencing, parking etc. One interesting document I located was Attorney General Opinion No 02-407 on the issue of when is a condo a planned development? Apparently Bill Locklear, AG at the time, went with, "If it looks like a duck and quacks like a duck it is a duck" reasoning backed up with a good argument and case law. -Dan M.

RESPONSE: Thank you for alerting me to the AG's Opinion. I had not previously seen it. It's fascinating--a condominium project classified as a planned development. It makes interesting reading for lawyers. Another wrinkle in the world of common interest developments.

*****


Insurance #1. This is in response to the homeowner who did not have the option to buy earthquake insurance. Our association recently purchased earthquake insurance for our common areas at a low purchase price, which has allowed our homeowners to add on to this policy by purchasing coverage for their own units. This allows individual homeowners to opt in or opt out. This was perfect for our association where half our homeowners wanted earthquake insurance and half did not. Love the newsletter! -Suzanne S.

Insurance #2. I am the treasurer of our 28-unit condo association. I have been trying to negotiate lower insurance premiums. I am not interested in changing the deductibles but 70% of policy has items that do not apply to us at all. We are being charged for items which we’ll never claim for. The insurance agent says that these are “condo packages” approved by the State of California and therefore not negotiable. If this is true, it’s hard to comprehend.

RESPONSE: I asked Michael Berg of the Berg Insurance Agency (a Farmers' Agency specializing in community associations) to comment. He responded that insurance policies are not written in an a-la-carte format. Insurance carriers present the Department of Insurance with a product and the Department determines its suitability for consumers in California. He said the product comes at an approved base rate but the carrier often has flexibility on pricing. Boards should review the policy's declarations page. If premiums are shown for different coverage lines, costs can be lowered by reducing coverage for that line. If there is no premium listed, the coverage is included in the package.

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.

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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