Veto by Governor

Oct 13, 2018 0 Views 0 Comments

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

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

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

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

DANA ROSENBERG
JOINS ADAMS|STIRLING


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

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

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

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


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


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

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


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

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


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

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


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

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

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

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

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

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

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


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

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


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

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

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

ASSEMBLY BILL 2912
 

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

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

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


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

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

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

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

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


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

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

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

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

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


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

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

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

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


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

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

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

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

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

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

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.

*****


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

RESPONSE: No it does not.

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

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

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

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

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

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

California Wildfires

Nov 18, 2018 0 Views 0 Comments


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

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

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

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

CC&R CAP
ON ASSESSMENTS

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

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

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

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

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

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

KATHY MILLS JOINS
ADAMS|STIRLING


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

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

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

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


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

ALISON GREINER
JOINS ADAMS|STIRLING


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

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

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

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

6th ANNUAL
ABCs of HOAs


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

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

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

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

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

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


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

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

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

*****


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

*****


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

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

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

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

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Manager as President

Nov 11, 2018 0 Views 0 Comments

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

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

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

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

ALCOHOL AT
POLITICAL MEETINGS


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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Crazy Bipolar Neighbor

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

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

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

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

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

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

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

CHANGING
DIRECTOR QUALIFICATIONS


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

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

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

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

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

ORANGE COUNTY
OFFICE
 

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

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

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


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

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


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

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

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

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

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

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

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

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

Adrian J. Adams, Esq.

Boards can contact us for friendly, professional advice.

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

Regulating Bicycles on Balconies

Oct 28, 2018 0 Views 0 Comments

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

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

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

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

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

UNRELIABLE DIRECTOR
RUNNING FOR THE BOARD


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

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

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

CC&Rs MYSTERIOUSLY
AMENDED


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

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

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


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

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

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


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

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

*****


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

RESPONSE: Board meetings are defined by the Davis-Stirling Act as a gathering of a quorum of directors at the same time and place to "hear, discuss, or deliberate upon any item of business that is within the authority of the board." (Civ. Code §4090.) A "quorum" is defined as "a majority of the number of directors authorized in the bylaws." (Corp. Code §7211(a)(7).)

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


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

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

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

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

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

NEW FIDELITY BOND
REQUIREMENTS


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Adrian J. Adams, Esq.

 

Boards can contact us for friendly, professional advice.

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

Working Board Meetings

Oct 4, 2018 0 Views 0 Comments

Everyone,

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

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

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

Adrian

WORKING
BOARD MEETINGS


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

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

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

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

IS TWO OUT OF
FIVE A MEETING?


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

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

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

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

ELECTRIC VEHICLE
CHARGING STATIONS

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

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


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

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

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

GOVERNOR SIGNS
AB 2912


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

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

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

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

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

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

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

Call the Governor!

Sep 4, 2018 0 Views 0 Comments

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

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

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

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

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

ASSOCIATION FINANCES
AB 2912

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

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

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

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

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

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

• prohibit electronic transfers of funds without board approval.

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

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

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

DIRECTOR/REALTOR
ESCROW DISCLOSURES


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

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

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

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

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

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


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

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

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

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

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

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

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

Sukkahs in the Common Areas

Aug 23, 2018 0 Views 0 Comments

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

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

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

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

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

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

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

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

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

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

IDR, WHO’S IN
WHO’S OUT?

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

 

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

 

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

 

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

 

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

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


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

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

*****


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

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

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

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

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

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

*****


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

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

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

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

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

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

*****


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

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

*****


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

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

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

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

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

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

Adrian J. Adams, Esq.

Boards should contact us for friendly, professional advice.

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