Oct 23

QUESTION: In about 5% of my associations, recruiting a quorum of board members is no longer possible. A Berkeley professor who lived in one of my HOAs suggested a lottery in which members would be drafted to serve as a director. He said it was done in medieval times in Italian city-states where every male citizen was subject to being drafted to sit on the city council. Do you have any thoughts on this?

ANSWER: Women might object to the “every male citizen” part but it may come to that. With the legislature annually increasing the burden on associations, it becomes ever more difficult to find volunteers to serve on boards. Your solution sounds plausible if your bylaws are amended to require it (and the HOA throws in a free helmet). I am curious to know if it’s been tried by any HOAs in the United States. Perhaps some of our readers will know the answer.

CONTINUING PROBLEMS WITH
FHA CERTIFICATION
 

Every time I mention the current administration by name, I get swamped with emails from readers who love him and those who don’t. So as to avoid any controversy, I will be more circumspect. Readers should be aware that the administration of “You Know Who” or “He Who Must Not Be Named” continues to mishandle issues involving FHA certifications for condominium projects.

Negative Impact. This is having a significant negative impact on an already damaged housing industry. Attached is an article from the St. Petersburg Times describing why so few associations can get certified and the potential legal jeopardy it creates for boards of directors. Boards can be subjected to penalties up to $1 million and 30 years imprisonment if the certifications they submit are found to be incorrect.

ASSIGNMENT OF RENTS

QUESTION: One of our owners, who rents out his unit, is $6,500 behind in paying HOA dues. We were told we could require the delinquent owner’s tenant to pay his rent to the association rather than to the owner. Our property manager says that this is theoretically possible but it should be avoided because it would unduly expose us to a risk of lawsuit, given that our CC&Rs do not contain an explicit “assignment of rents” clause. Is this correct?

ANSWER: Your manager is correct. I don’t want to step on any toes but your board should be getting its legal advice from an attorney not a manager. Boards who rely on managers for legal counsel create unnecessary risk for the manager and the board. Directors could lose the benefits of the Business Judgment Rule in the event they were sued.

CC&R Provision. Our firm routinely includes an assignment of rents provision in the CC&Rs we restate for associations. We have successfully used it to collect rent from delinquent owners (with renters) and we have successfully defended it in court. As with anything the board does, there is a risk of litigation. Amending your CC&Rs lowers (but does not eliminate) the risk of litigation and increases the likelihood of prevailing in the event you go to court. If you decide to amend your CC&Rs, make sure the provision is drafted by an experienced HOA attorney–there needs to be specific language in the provision.

 

MORE FEEDBACK
RE BOARD EMAILS

Board Emails #1. I personally love the new law eliminating discussion between board members, in our community it gets out of hand with so many emails going back and forth and so many decisions being made via email. -Debbie S.

Board Emails #2. Don’t we need to apply just a tad of common sense to this issue? Surely, it’s OK to discuss and handle routine business matters by email. -Jim S.

Board Emails #3. It seems that most HOA boards operate in accordance with the law and in a positive manner towards their members. It is the few who want to skirt the laws and take advantage of their members that cause restrictive laws to be passed by the Legislature. -E.C.

Board Emails #4. If a board is worried about delegating too much authority to the president, they can form an Executive Committee (Corp. Code §7212) with two or more directors, but less than the entire board, to handle issues between board meetings. The board should carefully craft the purpose and authority of the Committee so it can do what is intended and not run amok. -Richard Neuland, Esq.

FURTHER ANALYSIS

Emails between directors are not entirely precluded by the amended Open Meeting Act.

Minority of Directors. The amended Act allows for fewer than a majority of directors to discuss or comment on an item of business so long as the email exchange does not become a “series” of emails involving a majority of the board.

Majority of Directors. A majority of directors can also email each other, provided their emails do not involve an “item of business.” The amended Act defines “meeting” 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. (Civil Code §1363.05(k)(2)(A))

An “item of business” is then defined to mean:

any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a majority of the directors. (Civil Code §1363.05(k)(1), emphasis added.)

To be an “item of business” the matter must be an “action” within the authority of the board. Use of the word “action” twice in the amendment suggests that the purpose of the communication must be to propose an action or consider taking an action. If the necessity of this nexus between the communication and a possible or proposed plan of action is correct, then a majority of directors can exchange emails without violating the Open Meeting Act, depending on the exchange.

For example, a majority of directors can discuss the implications of the changes in the Davis-Stirling Act or talk about the deteriorating quality of food at the clubhouse restaurant without violating the communication constraints imposed by amended Civil Code §1363.05. These kinds of discussions are not at the level of an item of business and no action is being proposed.

Thank you to Curtis C. Sproul, Esq. of Sproul Trost LLP for his input on this aspect of the amended Open Meeting Act.

MOBILE APP FEEDBACK


Congratulations on the well deserved award. I enjoy reading your newsletter–it is well formatted and visually appealing. -Joe G.

Congratulations on receiving the Silver Award for the Davis-Stirling website. In my opinion the decision of the International Academy of Visual Arts and W³ Awards to select you as the recipient merely confirms what has clearly been your place as the premier website for information about homeowner associations in California. I view your selection as one that enhances the credibility and importance of the actual award. -Bond S.

Congrats on the honors. They are well deserved! -Jim

RESPONSE: Thank you to these and the many others who sent a congratulatory note. This past week we added Android tablets to the list of mobile devices (iPhones, iPads, Blackberries and Android phones). We will add more devices as the marketplace shakes out winners and losers in the mobile device wars. I will announce them as we add them.

-Adrian J. Adams, Esq

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Oct 16

am pleased to announce that Adams Kessler PLC has been awarded the “Silver Award” from the International Academy of Visual Arts and W³ Awards for our Davis-Stirling Mobile App. The W³ Awards are internationally recognized and honor creative excellence for outstanding websites, web video and mobile apps.

App Description. Our Mobile App gives users instant access to a fully indexed Davis-Stirling Act as well as our website’s forms and commentary regarding budgets, reserves, elections, recalls, board meetings, the Open Meeting Act, etc. The App allows board members, managers and homeowners to look up information with the stroke of a finger.

Free Download. The App can be downloaded onto iPhones, iPads, Android phones and Blackberries. If you have not already done so, you should give it a try. -Adrian Adams

RENTER FEES

An interesting ruling was issued on Friday. It is a lower court decision so it cannot be cited for authority but it addresses the issue of whether owners can be charged a fee related to their renters. In the case of Ken Watts v. Oak Shores Community Association, the five-week bench trial resulted in a well-reasoned decision that members who rent-out their properties can be charged a fee for the burden their renters put on the association. As was noted in the court’s decision, Oak Shores fully justified its fees.

RECOMMENDATION: As long as an HOA can show that fees related to renters are reasonable and merited (and not pulled out of thin air) this case demonstrates that such fees can survive a legal challenge. Boards should be cautioned not to levy fees on renters “just because.” They should consult with legal counsel to evaluate if the association has a legitimate basis for such fees.

COLLECTION NOTICE

QUESTION: Civil Code 1367.1(k) states “upon written request by an owner identifying a secondary address for purposes of collection notices, the association shall send additional copies of any notices required by this section to the secondary address provided.” Would this include billing statements and or late statements?

ANSWER: Some may argue that billing statements and late statements do not qualify as “collection notices” but why take the chance? Which is less expensive, a postage stamp or a year of litigation? Whenever in doubt, give notice. (Thank you to Richard Witkin, Esq. for feedback on this question.)

FEEDBACK

I’m sorry I could not print all the emails I received on this issue. Following is a sampling. -Adrian

Director Emails #1. Surely SB 563 must be one of the most ludicrous pieces of bureaucratic legislation produced. In this day and age and its modern means of communication, boards are now no longer permitted to use one of the more efficient means of communication in a busy world. This is absurd. If a member wishes to make some urgent alteration to their property, the email system is a wonderfully quick answer to their problem, rather than waiting for a formal board meeting. In Mr Bumble’s immortal words, “The law is an ass.” -Peter A.

RESPONSE: I agree, at times it can be. It points up the importance of supporting CAI’s Legislative Action Committee. Community associations need a strong lobby to counteract corrosive legislation pushed by the California Association of Realtors and proposed legislation by hostile “consumer advocates” wanting to cripple collection efforts HOAs need to stay financially afloat.

Director Emails #2. I have to honestly say, the restriction on board discussions by email is absolutely anal. We are currently undergoing replacement of a large hot tub. It had been a 3-month ordeal as we must deal with our city’s Health & Building Departments. This project, as with our recent window replacement project and reroofing project, requires massive email communications between the board, contractors, the project manager & our property manager to make decisions. If we can no longer do this, we will be posting meeting notices daily. -Joseph L.

RESPONSE: Administrative and oversight tasks can still be handled via emails if delegated to the president and/or manager. Once delegated, the president and manager can make decisions and retain the right of email consultation with directors. The new statute specifically exempts delegated matters from meeting requirements:

“Item of business” means any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a majority of the directors. (Civil Code §1363.05(k)(1))

Director Emails #3. Changes to the Open Meeting Act underscore the need for policy governance in every common interest development so work can get done between board meetings. Every community manager makes daily decisions that affect the association(s) they serve, but there are certain limits to our levels of authority, and there should be. That being said, it appears that with these changes to the law boards will need to either wait to conduct business at scheduled meetings or expand the decision making authority of their managers. Since the former may not always be possible, the best way to accomplish the latter is for boards to develop policies for managers to follow when they need to ask the board but can’t. -Dirk F., Manager

RESPONSE: I agree. The unintended consequence of SB 563 is that boards will have no choice but to delegate more authority to their president, manager, officers and committees so as to keep business flowing between meetings. Boards will need to work with management and legal counsel to develop policies that describe the parameters of the delegated decision-making authority.

Director Emails #4. If the president, vice president and treasurer were to discuss via email a financial matter in their roles as officers, would this constitute an illegal board meeting? -Jenson C.

RESPONSE: Matters delegated to officers can be discussed without violating the Act. Civil Code §1363.05(k)(1).

Director Emails #5. What does this new law mean regarding maintenance situations? Our board meets once a month. Can we vote to allow board members to conduct business electronically in an emergency situation. -Jean S.

RESPONSE: You can’t vote to bypass the new restrictions. However, you have the following options: (i) delegate authority to the president and/or manager to handle maintenance issues between meetings, (ii) address emergency issues via email unanimous written consent, and (iii) call special meetings of the board.

Director Emails #6. I am stunned and angered by the new legislation.  All of us work. We don’t have time for phone calls, letter writing and additional meetings to conduct our business in a timely manner. This is so dictatorial that I find it offensive that HOAs have to endure so many restrictions that it becomes almost impossible to be responsible and pro-active board members. Whoever churns out this stuff has no idea what havoc and frustrations they are thrusting on HOAs. This is wrong, unjust and just plain unacceptable. If you think I am angry, you are correct. -Dawn B.

RESPONSE: For some reason, the Legislature thinks that volunteer board members are equivalent to full-time paid city council members with a bevy of staff at their beck and call and large budgets.

RECOMMENDATION: Other law firms may have a different interpretation of what boards can and cannot do once the new restrictions take effect January 1, 2012. Boards should consult with legal counsel on how best to implement the changes.

-Adrian J. Adams, Esq

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Oct 09

QUESTION: According to the new law, boards can no longer make decisions by email. Can we still discuss business by email but not vote by email?

ANSWER: Not anymore. Starting January 1, boards cannot discuss board business or make decisions via email unless it is an emergency.

No Discussions. Changes to the Open Meeting Act state that boards of directors “shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail.” (Civil Code §1363.05(j)(2)(A)). A “meeting” is then defined to include hearing, discussing or deliberation by a majority of the board on any item of business within the authority of the board (Civil Code §1363.05(k)(2)(A)).

Emergency Meetings. Emergency meetings are exempted from the prohibition against email discussions and votes. An “emergency meeting” is defined as one where

there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice as required by this section. (Civil Code §1363.05(g)).

Email. “Electronic transmissions may be used as a method of conducting an emergency meeting if all members of the board, individually or collectively, consent in writing to that action . . .” (Civil Code §1363.05(j)(2)(B)).

Teleconference. If one or more directors refuses to consent to an action via email, the president or any two directors may convene an emergency meeting (Civil Code §1363.05(g)) where directors physically gather in a single location or meet via teleconference. (Civil Code §1363.05(k)(2)(B)). Once a quorum is present, the proposed emergency action can be approved by a majority of directors present. Assuming a five member board, if four directors attend, three must agree to the proposed action; if three directors attend, two must agree.

Minutes. If a paper document is prepared, circulated and signed, it must be made part of the minutes of the next open meeting of the board. If the consent was done by email, the email describing the emergency action together with the email approvals by each of the directors must be printed and filed with the meeting minutes. (Civil Code §1363.05(j)(2)(B)). Only the signed consent needs to be filed with the minutes–not the discussion. As with regular meeting minutes, the minutes should reflect the action taken by the board, not a transcript of the discussion.

MEMBER ATTENDANCE
AT VIRTUAL MEETINGS


Starting January 1, 2012, a majority of the members of the board, in different locations, may attend board meetings electronically. For open meetings of the board, notice of the electronic conference must identify at least one physical location so that members of the association may attend. At least one member of the board must be present at that location. Participation by board members in an electronic conference constitutes presence at that meeting as long as all board members participating in the meeting are able to hear one another as well as members of the association who wish to speak on matters before the board (i.e., Open Forum). Civil Code §1363.05(k)(2)(B).

MINUTES TO RENTERS


QUESTION: Is there anything prohibiting an association from giving meeting minutes to renters? Is it a good or bad idea?

ANSWER: There is nothing in the Davis-Stirling Act that either prohibits renters from or entitles them to receiving minutes (or any other HOA records). I see no harm in providing minutes to renters. As residents, renters may have an interest in participating in the affairs of the association (I’m referring to business affairs) and want to contribute by joining a committee.

If a renter becomes disruptive, the courtesy of providing minutes can be withdrawn. One caveat–some associations have no requirement that directors be members of the association. In those situations, renters can be elected to the board of directors. Once elected, they would be entitled to the minutes, books and records of the association as would any other director.

FEEDBACK

Robert’s Rules. Thanks for mentioning the new 11th edition of RONR. My wife and I, both members of the National Association of Parliamentarians, just returned from the biennial convention in Florida, where the new edition was officially released. There is an “In Brief” edition of RONR, with an 11th edition updating. It is much more suitable for persons who just want to know and use good parliamentary procedure, without getting into the nitty-gritty details that seldom come up. It is available, along with the full version, through this link to the NAP Online Store. -Bob Hall, NAP Webmaster, just retired.

Speed Bumps. We’re in a 55+ community and considered speed bumps about 10 years ago. We wound up with humps which are gentler but serve the same purpose. We didn’t think that the bumps used in shopping centers were appropriate here and the humps have worked out very well. -Steve K.

Speed Bumps. Speed bumps are silent policemen for communities. Good bad or indifferent, they work. You slow down or risk tearing up your car, jarring your kidneys and cracking your teeth. Speed humps with a gradual rise and fall that slow vehicles are easier on everyone and do the job just fine. I feel the speed bumps are a necessary evil in some communities and it is fitting they be used, especially if the community has young kids that use the streets. -Jack S.

Plumbing Repairs. Because our building is 35 years old, we assume a plumbing drain problem inside a unit extends to the entire line. So instead of repairing the immediate problem, we replace the line serving the unit and the units above and below. We allocate $8,000 per year for unidentified plumbing work in the Reserve Study. We attack the problem from the outside of the building wherever possible to minimize the inconvenience of repairs inside units. This almost always requires removal and replacement of stucco, but it is no worse than cabinet, drywall, painting inside the unit. It is much easier to coordinate work on the outside which means it gets done sooner. This policy has virtually eliminated weekend plumbing emergencies. -Mike G.

-Adrian J. Adams, Esq

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Oct 02

QUESTION: Can the board install a new component (speed bumps) from reserves? If I understand correctly, it can’t come from reserves since it is a new component which will alter the appearance of the complex, and it can’t come from the operating fund either.

ANSWER: By definition, the installation of speed bumps would be a capital improvement, i.e., the addition of a component that did not previously exist. As such, a fair argument could be made that speed bumps cannot be funded from reserves since reserve monies are set aside for existing common area components.

Contrary Argument. However, the streets themselves are existing reserve items and adding safety features to streets such as reflectors, additional striping, signage and the like are elements of streets that legitimately fall within the discretion of the board of directors. If the cost is relatively minor, it could justifiably come from street reserves. If the cost is significant, it would likely require a special assessment to pay for the improvements. If a safety concern can reasonably be demonstrated and the cost to install is a small percentage of the street funds, I suspect a judge would side with the board on using reserve funds for that purpose.

RECOMMENDATION: Since this issue is open to debate, boards should discuss with legal counsel how best to balance any safety and cost concerns related to reserve expenditures.

ROBERT’S RULES OF ORDER

The 11th edition of Roberts’ Rules of Order became available this week. The Davis-Stirling Act requires that membership meetings (such as Annual Meetings) be conducted in accordance with a recognized system of parliamentary procedure. Civil Code §1363(d). Board meetings, on the other hand, are not required to use parliamentary procedures. Even so, most boards use a relaxed or less formal version of Robert’s Rules to conduct their meetings.

While there are 120 changes in the 11th edition, few will impact HOA meetings. Attached is a “cheat sheet” to the new Robert’s Rules. One change is notable; the former method of asking a question, “Point of Information,” has been renamed “Request for Information,” in hopes that members will understand they should use it to request information, not provide information.

Thanks goes to Jim Slaughter, an attorney with Forman Rossabi Black, PA who practices association law in N. Carolina and is Past President of the American College of Parliamentary Lawyers, for alerting me to this update.

UNFINISHED BUSINESS

QUESTION: Davis-Stirling requires members to be given meeting agendas at least four days prior to the meeting. If some items are not addressed in the meeting, should the minutes reflect that?

ANSWER: Yes, any unfinished business should be noted as such in the minutes, otherwise there will be disconnect between the published agenda and the minutes. Unfinished agenda items can be marked “carried over to next meeting” or noted in some fashion to show that they were not addressed in the meeting and will be on the agenda for the next meeting. If an agenda item was taken up by the board for discussion and a motion was made but not voted on, the matter should be marked as tabled.”

FEEDBACK

Minutes. While reading your minutes commentary, I am reminded of a saying of my law professor many moons ago about appropriate brevity: “Appropriate length is like the skirts on Broadway–short enough to be interesting and long enough to cover the subject.” Karl L.

Legislature. You mentioned the legislative session ended September 9th. When does the next session begin?  Is the public allowed to observe? Is notice with an agenda posted in a prominent location for citizens to view? -Paige B.

RESPONSE: I checked with our legislative guru Skip Daum for answers:

When does the next session begin?
The second half of the biennial session convenes 1/4/12.
Is the public allowed to observe?
Always… either in person or at www.calchannel.com
Is notice with an agenda posted for citizens to view?
Yes: www.senate.ca.gov and www.assembly.ca.gov

LA Times. The discussion I had with the LA Times “Readers Rep” in 2005 got me nowhere. I think having their authors billed as HOA specialists is akin to having a self-proclaimed racist writing a column on fair housing. Sure, they are somewhat familiar with the issues but their take on them is biased and does not serve the public well. -Marla H.

-Adrian J. Adams, Esq

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