Oct 21

QUESTION: Board members can’t discuss HOA business outside a meeting unless it’s among less than a majority. Our board meets monthly and it is not enough time to discuss everything in our board packet. We have five board members, can I speak to one or two directors one day and the other one or two another day?

ANSWER
: Not really. What you describe is known as a “hub & spokes” board meeting with you at the hub. This type of meeting is not directly addressed by the Davis-Stirling Act. Because it is a gray area, we can turn to the Brown Act for guidance. The Brown Act regulates the meetings of public legislative bodies and local public agencies and was used as a model for the Davis-Stirling Open Meeting Act.

Chain Meetings. The Brown Act prohibits such communications, whether direct, by intermediaries or electronically. Gov. Code §54952.2(b). In a chain meeting, also called a serial meeting, “A” talks to “B” who talks to “C” who, in turn, talks to “D.” In a wheel hub, directors are spokes with “A” at the center–the directors never talk to each other, they all talk individually to A. When deliberations and decisions are made through chain communications or via wheel hubs, they deprive members of their right to see how board decisions are made. If a board were sued under the Davis-Stirling Act for a wheel hub or chain meeting, I suspect the courts would interpret Davis-Stirling using the same principles found in the Brown Act.

RECOMMENDATION. Directors should not discuss board business outside of noticed meetings. I know it puts a significant burden on directors who already have busy home and work schedules. To compensate for the restriction, many boards rely more heavily on their managers to handle day-to-day operations and they schedule more “quickie” board meetings between regular meetings, i.e., short meetings to address one or two issues (following proper notice to the membership).

SPECIAL ASSESSMENT
CONFLICT

QUESTION: To approve special assessments, our CC&Rs require a majority of homeowners. Our bylaws require 75% to approve same. Does one supersede the other?

ANSWER: Both are superseded by the Davis-Stirling Act. The Act states that a majority of a quorum is sufficient to approve a special assessment. If the law had not addressed special assessments, then your CC&Rs would have trumped your bylaws. This hierarchy of authority was not previously spelled out anywhere. However the Davis-Stirling rewrite (effective January 1, 2014), states that any inconsistencies between governing documents and the law or between governing documents are resolved in the following order of authority: the law, the CC&Rs, articles of incorporation, bylaws and operating rules. (New Civil Code §4205.)

ADJOURNED
ANNUAL MEETING

QUESTION: In the event an annual meeting must be postponed on the day of the meeting, what is the procedure to postpone the meeting? And are mailed-in ballots still valid?

ANSWER: The meeting is simply adjourned to a later date by those in attendance at the meeting. Language to that effect is often found in most bylaws. In addition, it is covered by Robert’s Rules of Order:

… in the absence of a quorum, the assembly may fix the time to which to adjourn, adjourn, recess, or take measures to obtain a quorum.

… If there is important business that should not be delayed until the next regular meeting, the assembly should fix the time for an adjourned meeting and then adjourn.

… the chair calls the meeting to order, announces the absence of a quorum, and entertains a motion to adjourn [to a later date]. (Robert’s Rules, 11th ed., pp. 347-349.)

If a date was not selected and announced when the meeting adjourned to a later date, the board sets the date (which usually requires coordination with the Inspector of Elections) and gives notice to the membership. As long as the ballots were not opened, they remain valid and are brought to the adjourned meeting by the Inspector. Once quorum has been achieved, the ballots are opened and counted.

RECOMMENDATION: If your governing documents are silent, you may want to amend them to address this and other election issues.

SMOKING BANNED
INSIDE CONDOMINIUMS

The City of San Rafael, a suburb of San Francisco, passed an ordinance this week banning smoking in condominiums. They become the ninth city to ban smoking in multi-unit housing (which includes condominiums).

I believe this trend is irreversible and may accelerate. In addition, we will likely see associations amending their CC&Rs to ban smoking throughout their developments (including inside units). If readers are aware of condo associations that have already done so, please let me know. I would like to monitor the trend. -Adrian Adams

EMAIL NOTICE OF BBQ

QUESTION: Does the Davis-Stirling Act preclude our association from using member email addresses to invite members to an association organized neighborhood BBQ?

ANSWER:Yes, you can use emails to send invitations. Limitations on electronic notifications are on official notices and disclosures, i.e., those mandated by statute. The most common official notifications are notice of board meetings. Such notices cannot be given electronically unless members execute an “unrevoked consent” giving the association permission to give notice by email.

FEEDBACK


Relevant
. Excellent newsletter. Hit some very relevant points. -Donald A.

Term Limits #1. Thank you for your newsletter. I continue to pass it along to my entire condo association so they can stay abreast of things. Meanwhile, the question about term limits is a good one. I’ve been president most of the last 25+ years. I would love term limits. I tried to resign but no one else wants the job. -Esme G.

Term Limits #2. Thank you for the article. I’ve been been on the board now for over 10 years. Every year elections come up and no one ever sends back their ballots, so the board remains the same. No one wants to take the extra time and energy to take care of problems and resolve issues that arise in the complex. It takes a lot of time and energy to do walk-thrus, get bids, watch the finances, etc. The homeowners never come to monthly meetings either, it’s always just the board. -Barbara K.


Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Oct 07

QUESTION: How long should a board member remain on an HOA board? We have a couple of members who have been on the board for several years and refuse to leave.

ANSWER: Refuse to leave? As long as the membership keeps electing them to the board, directors properly occupy their seats. Having long-term directors can be good or bad depending on the particular directors. Good directors bring institutional memory and a steady hand to the association’s business. Their experience saves money for the membership. One director I work with has been on his board for over 20 years. He has consistently been one of the best business-minded directors I’ve ever dealt with.

On the other hand, some long-term directors start out sharp and then turn autocratic over time and slow to adjust to changing circumstances. When that happens, they need a nudge to step down and let someone else serve on the board.

Term Limits. To encourage “new blood” on the board, some associations amend their bylaws to implement term limits along with staggered two-year terms. The best term limits are those that allow directors to serve two consecutive terms and then step down for one year–provided someone else is willing to serve. If no one else runs for the board, the limit is lifted and the director can continue to serve.

ATTORNEYS’ FEES

A recent appellate court decision dealt with attorneys’ fees in a dispute over an election. A homeowner brought a challenge to an election and the association prevailed in the action. The court found some of plaintiff’s actions, including filing a complaint barred by the statute of limitations, “frivolous.” The association sought attorneys’ fees under Civil Code §1363.09(b), which provides:

A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

The court awarded the association $15,000 in attorneys’ fees. Plaintiff appealed. The appellate court agreed with the lower court that plaintiff’s lawsuit was frivolous. Even so, it reversed the fee award. The court decided that the statute cited above did not explicitly authorize recovery of attorneys’ fees. However, the court left open the door that an association could recover its fees under their own CC&Rs. See That v. Alders Maintenance Corp.

WHO PAYS FOR
BALCONY DAMAGE?

QUESTION: Who is responsible for paying for the deck when the owner tiled it without approval? The HOA or the owner?

ANSWER: The owner. However, the owner could have some defenses depending on the situation. To minimize any defenses (or avoid the problem altogether), boards should adopt written rules and regulations regarding the tiling of balconies and then strictly enforce those restrictions. Associations should either (i) ban tile altogether or (ii) implement tough installation guidelines pursuant to a consultant’s specs written specifically for the association. In addition, the association should record a covenant making the owner (and future owners) responsible for all maintenance and damage that may arise from the installation of the tile.

CAN HOA CONTRACTOR
BUY A UNIT?

QUESTION: Can a contractor hired by the HOA buy in the same complex? Would this constitute a conflict of interest?

ANSWER: Yes he can buy into the complex. No, it’s not a conflict of interest . . . unless he is elected to the board and votes on his own contracts. Contractors are generally good to have around; it’s the lawyers you have to watch out for.

SMALL HOAs

QUESTION: My daughter is president of a 9-unit HOA. With so few units, are they held to the same standards of larger associations? Do they have to send out annual disclosures?

ANSWER: Unfortunately, they are held to the same standards and subject to all compliance expenses even though small associations have very little money and are usually self-managed.

During its rewrite of the Davis-Stirling Act, the California Law Review Commission recognized the burden the Act imposed on small HOAs. The CLRC looked at how to lighten the load and started by trying to define “small” HOAs. The project proved to be difficult and was tabled. The CLRC might take up the issue again at a later date, but I doubt it.

NO NEWSLETTER. Sorry, no newsletter next week. My office manager is insisting I do some work around the office to help pay the bills. It seems there is a case going to trial that needs my attention.


Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Sep 30

QUESTION: Can a committee member attend a meeting via phone, vote on a measure, then disconnect?

ANSWER: Board members and committee members alike can attend their respective meetings by telephone, make motions, participate in discussions and vote, provided it’s a conference phone or speaker phone where participants can all hear each other. Corp. Code §7211(a)(6); Civil Code §1363.05(k)(2)(B). The statutes address director meetings but the same would apply to committee meetings. So, can a committee member (or director) call in to vote on one measure and then hangup? It may be poor form but there is nothing prohibiting it.

BALCONY TILE

I read with great interest the court’s decision in the Cathedral Hill case about tiling balconies.

PLEASE oh please stop telling people not to tile their balconies…you’ll take away a significant portion of my business fixing their dry rotted decks.

Regardless of what membrane is placed on a deck, unless the deck has been DESIGNED to have tile placed on it, the framing and substrate in 99% of condo decks are NOT suited for tile. I see plenty of well meaning folks who put tile on their decks (or had some dolt do it) and in 3-7 years they have major leaks, dry rot and mold issues. The picture above shows a dry rotted 8×14 beam. The job started at $3,800 for repairs to edge flashings and quickly went north of $40,000 after we exposed the damage. If owners are allowed to tile their decks, there are minimum standards that must be met. -Bill Leys, The Deck Expert.

TAXES ON FEES

QUESTION: When a condo association charges visitors to park in the common area, how is income treated? Is it subject to tax? Does the money go into reserves?

ANSWER: Your question is a little unusual; very few associations charge visitors to park in the common areas. Fortunately, I knew who to call about your question–CPAs who specialize in common interest developments. Last week I was one of the speakers at their annual conference so your question was timely. 

Non-Dues Income. First, as a reminder, nonprofit associations are required to file tax returns and, if necessary, pay taxes. Failing to do so can result in a suspension of your association’s corporate status. Parking fees would be considered non-member or non-function income, depending on whether your association is filing tax returns pursuant to IRC Sec 277 or 528. In either case the fees would be subject to income tax. That said, a portion of parking maintenance expenses could be allocated to non-membership (non-function) expenses and used to reduce the taxable income.

Operating Budget
. As income, the fees are included in the association’s annual pro forma budget. The extra income is used to offset expenses in the budget, whether operational or reserves, which reduces membership dues needed for the year.

RECOMMENDATION: There are variables that could affect how parking fees would be treated for tax purposes. For example, are the fees paid by homeowners as part of their assessment or as rent, or by visitors as fees? Make sure your board talks to your association’s tax preparer on how best to handle this issue.

Thank you to Gary Vogel, CPA who specializes in accounting and taxes for homeowners associations and Ronald Stone, PhD, CPA who teaches at the College of Business and Economics at Cal. State Northridge, for their assistance with this question.

FEEDBACK

Kudos. Adrian, another great piece of work from you. Keep it up as it’s being passed on to all our board members and the presidents of other associations who really appreciate reading your fine work. It keeps us on our toes and more knowledgeable of what is happening. -Al

Manager Contract #1. (Regarding comments last week by Kimberly P.) Just this morning I was bemoaning having a board member who merely ‘warms the chair’–when she’s there at all. I’m ‘thanking my lucky stars’ that we don’t have someone who’s ignorant and vocal. -Nancy H.

RESPONSE: As Abraham Lincoln once remarked, for some board members it is “Better to remain silent and be thought a fool than to speak and remove all doubt.”

Manager Contract #2. Our association has a 30-day notice of termination clause in the contract with our management company. A reason for termination is not required. The same holds true for the management company; they may also terminate the contract by giving 30 days notice and are not required to give a reason. -Dennis D.

RESPONSE: Termination of contracts are controlled by the provisions contained in the contract. It sounds like you have a good termination provision.

Management Contract #3. The discussion last week about manager contracts was a little confusing. -Len R.

RESPONSE: I think that’s because associations can retain managers in different ways–each with a different mechanism for termination. Managers can be employees of an association (either under contract or at-will) or they can be employees of a management company who are assigned to the association.

Management Company. If the manager is an employee of the management company and the board is unhappy with the manager, the board can demand from the company that a new manager be assigned to the account. The process is fairly painless.

No Contract Employee. If the manager is an employee of the association without a written contract, the board could still be in a position where they need cause to fire the manager. Employment law in California is quite protective of employees and “at-will” has many, many exceptions.

Employee With A Contract
. If the employee has a 3-year contract (as described in the original question from a reader), termination of employment normally requires “cause” per the terms of the agreement. If employment under a written agreement were at-will, what is the point of the contract? Most contracts provide stability for their employee manager by requiring good cause for termination so the manager can’t be fired at the whim of an incoming board.

RECOMMENDATION: What all this means is that boards better talk to a lawyer before they start firing managers as advocated by Kimberly P.

5-Year Contract
. Let’s hypothetically say the CC&Rs limit contracts to one year. What is the validity of an agreement if the association enters into a 5-year contract with an elevator company? The board did not review the fine print on the back when they signed it and now they want out. -Warren D.

RESPONSE: A fair number of boards stumble into this problem. That’s why contracts should always be reviewed by legal counsel before the board signs them. CC&Rs typically limit vendor contracts to 1-year. However, bulk cable TV agreements, elevator contracts and laundry machine contracts are frequently in the 5-year range. The companies will either refuse to enter into 1-year contracts with an association or they will offer significant discounts for 3- or 5-year contracts. That’s why many associations change the 1-year limitation when they amend or restate their CC&Rs.

Enforceable Contract. Is a 5-year contract valid when the CC&Rs limit them to one year? Probably. Venders have a right to rely on contracts negotiated and entered into by boards of directors. If the association breaches the contract by improperly firing the elevator company, the association can be sued for money damages. If the association can convince a court that the elevator company knew the board did not have the authority to enter into such an agreement, they may be able to avoid liability. That can be a risky venture–there are no guarantees in litigation except that it will be expensive and unpredictable.

FHA Loans #1. Because of FHA loans, I’ve seen our foreclosures and delinquencies along with investor purchases go up significantly. I am not in favor of FHA loans. The foreclosure rate in our neighborhood is proof. When I purchased 21 years ago I had a 30-year loan at 9.9% and had to put 20% down. The turnover rate and investor owned properties brought on by FHA loans has turned me off to ever owning in a condominium development. -Maureen C.

FHA Loans #2. The problematic loan questions are always those the lenders themselves add to their certificates. While having the FHA clarify their needs it will help us to explain to owners that the lenders are asking questions far in excess of what FHA requires, it remains to be seen if the lenders themselves back down to FHA requirements. If they don’t, I would suggest the problem is not going to go away. -Roy Helsing, The Helsing Group, Inc.

Free Speech #1. Free speech indeed is misunderstood. The First Amendment was designed to protect people from punishment for speaking against the government. It has morphed into any speech against anyone. With everyone being offended about everything, with no coping skills, a lack of empathy, a child not permitted to slug the bully on the playground to put him in his place, and the internet providing an easy forum, we are simultaneously seeing people mouthing off incessantly and people cowering in silence. Both camps are miserable, wretched, unhappy people. -Stephany Y.

Free Speech #2. Some of our directors are so unnerved by the new restrictions that they fear that even talking to another director outside of a formal meeting could be viewed as a violation of the law. In my opinion, two directors standing on the sidewalk and discussing if the grass needs more water is not a meeting or a violation of the open meeting law. Please correct me if I am wrong. -Dennis D.

RESPONSE: You’re right. Not everything qualifies as board business. Moreover, directors can talk to each other about board business as long as it is not a majority of directors. I cover this in detail on my website under “Board Meetings.”


Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Sep 23

The Federal Housing Administration’s policies have been a significant drag on the housing market which, in turn, has slowed our nation’s economic recovery. The Community Associations Institute has been in discussions with the Administration over the past few years asking for more sensible regulations. Last week the FHA finally removed some of the onerous requirements they had imposed on condominium developments.

Delinquencies. Previously no more than 15% of of the units in a condominium development could be more than 30 days delinquent. That meant that owners who were a few days late in paying their assessments could disqualify the entire development from eligibility for FHA insured loans. The Administration revised their requirement from 30 days to a more reasonable 60 days.

Fidelity Bond.
In prior newsletters I had reported on the problems with Administration requiring management companies to carry employee dishonesty insurance covering the associations they manage. The FHA now recognizes the problem and modified their requirements. The new  standards now require condo developments with more than 20 units to carry employee dishonesty insurance as follows:

  1. The policy must cover all officers, directors and employees of the association and all other persons handling HOA funds;
  2. The coverage must be no less than three months assessments plus reserve funds;
  3. Their management company, if any, must (i) have its own fidelity coverage that meets FHA requirements; or (ii) the association’s policy names the company as an insured; or (iii) the association’s policy covers management company employees.

Project Certification. Previously, certification created such significant risks for boards of directors that most law firms advised against signing FHA documents. The FHA has seen the light and scaled back on their requirements. Now, an HOA representative need only attest to the following:

  1. To the best of their knowledge, the information is true and accurate;
  2. They reviewed the application and upon advice of counsel it meets all state and local condo laws;
  3. They reviewed the application and it meets all FHA condo approval requirements, and
  4. They have no knowledge of circumstances or conditions that might have an adverse impact on the project (such as construction defects, substantial operational issues, or litigation, mediation or arbitration issues).

COMMENTS: With the above changes, I withdraw my objections to directors signing FHA certification applications. Kudos to the Community Associations Institute for their work on this issue. As Neil Armstrong once said, “One small step for man, one giant leap for the housing industry.” See Mortgagee Letter 2012-18 for more detail about the changes.

RENOVATIONS VIOLATE CC&RS
In an unpublished decision, the court of appeals upheld the enforcement of CC&Rs related to tile on balconies and encroachments into the common area.

Remodeling. Larisa Garbar bought a unit in a highrise in San Francisco. She raised the ceilings in her unit, tiled her balcony and installed hardwood floors without submitting plans. The board issued a stop work order and requested that she immediately submit plans. When it learned of the raised ceiling, the board put her on notice of her encroachment into the common areas. As part of a major waterproofing project, the association removed the tile from her balcony. A dispute arose because Garbar sought to re-tile her balcony despite prohibitions in the CC&Rs and warnings that doing so would void the manufacturer’s warranties related to the waterproofing.

Lawsuits Fly. The association filed suit. Garbar denied that her new ceiling encroached upon the common area. She claimed her unit’s boundary extended to a concrete slab that separated the unit from the floor above. She also claimed that balcony tile would actually protect the waterproofing (note: industry evidence shows otherwise).

Ruling. The court found in favor of the association. The CC&Rs were clear and explicit when it came to tile on balconies. The court also concluded that the space above Garbar’s ceiling was common area.

RECOMMENDATION: Even though the case is unpublished and cannot be cited as precedent, it shows that courts will defer to recorded restrictions and reasonable enforcement decisions by boards of directors. See Cathedral Hill Tower v. Garbar.

FEEDBACK

Manager Contract #1. Please correct your newsletter, you said something wrong. You are saying that a board needs a reason to change management. That is absurd. No reason is needed and no documentation is necessary UNLESS the board wants to sue for any illegal activities against them. Please do not put out wrong impressions, I’m on a board and I don’t need to argue your wrong points when we have HOA stuff to discuss. -Kimberly P.

RESPONSE: Hilarious! Thank you for the comic relief. When you have a manager under contract, they are no longer at-will. You need cause to fire them. If you fire employees willy-nilly, you better have good Employment Practices Liability insurance in place.

Manager Contract #2-#9. I received a number of thoughtful responses asking about the 1-year contract limitation commonly found in CC&Rs. 

RESPONSE: The ability of a board to enter into a multi-year employment contract with a manager will depend on the language in an association’s governing documents. Following is language found in some old documents that presents no impediment to 3-year agreements. It limits the original developer but not subsequent HOA boards:

Neither Grantor, nor any of its agents, shall enter any contract which would bind the Association or the Board for a period in excess of one (1) year.

Following is more typical language in most of the documents I work with. It limits contracts with vendors, i.e., third parties who provide goods or services to an association. It does not limit employment agreements:

The Association may not take any of the following actions unless approved by a majority of the voting power of Association Members (other than Declarant): (a) Enter into a contract for a term longer than one (1) year with a third person who furnishes goods or services for the Common Area(s) of the Association…

Following is a broader restriction I run into from time to time. It clearly limits manager contracts to one year.

The Board of Directors, on behalf of the Association, may contract with a Manager for the performance of maintenance and repair and for conducting other activities on behalf of the Association, as may be determined by the Board. The maximum term of any such contract (“Management Contract”) shall be one (1) year…

I sometimes run into conflicting language on this issue between an association’s CC&Rs and its bylaws. When that happens, the CC&Rs prevail. The order of documentary control is explicitly described in the Davis-Stirling rewrite which takes effect January 1, 2014. It states that in the event of inconsistencies, the following hierarchy determines the outcome: the law, the CC&Rs, articles of incorporation, the bylaws, and lastly the rules. See Civil Code §4205.

Budget Tie. It’s clear that the vote to break the tie on the budget should not be in executive session. But how is it justified to have the tie-breaking occur at an emergency open meeting? Shouldn’t it be a a special meeting of the board with four-day notice? Or, can time-sensitive matters (if that was the case) be considered “emergencies”? -Carol R.

RESPONSE: Passing a budget is a time-sensitive matter. If not approved and distributed within a 30-90 day window prior to the start of the association’s fiscal year, penalties are imposed. Accordingly, an emergency meeting would be justified if the board were up against that deadline.

DS Rewrite. Isn’t the Davis-Stirling Act restriction on what board members may discuss via e-mail or what they can talk about in person outside of board meetings unconstitutional due to our First Amendment right to free speech? It seems to me that the Act can only restrict decisions made outside of a board meeting but cannot restrict people from discussing things because of our First Amendment rights. -Steve S.

RESPONSE: There is wide misconception about First Amendment Rights. Too many people believe that “free speech” gives them the unlimited right to say whatever they want whenever they want. That is not the case. The courts have imposed time, place and manner restrictions on speech (such as shouting fire in a crowded theater, disrupting city council meetings, protesting on private property, etc.). In addition, the courts make a distinction between political speech and commercial speech. Commercial speech is heavily regulated. As a member of your association, you can talk about board business pretty much whenever, wherever and to whomever you want. Once you are elected to the board, time, place and manner restrictions are imposed. You must reserve discussions about board business with other directors to noticed meetings of the board as described in the Davis-Stirling Act. See speech limitations.


Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Sep 16

QUESTION: Can a current board obligate future boards to a contract for our general manager? Our board, three of whom are up for reelection this month, gave our general manager a new 3-year contract.

ANSWER: Yes they can. Just as the lame duck administrations of U.S. Presidents continue to function until their term is over, boards can operate until their terms end.  While it drives some people crazy and makes others giddy (it depends on whose ox is gored), it’s perfectly legal.

Good Managers. In the situation you described, the manager may be doing an excellent job. Unfortunately, perfectly good managers are swept away when homeowners unfairly lump them together with the old board. More often than not, they throw out the baby with the bathwater when they clean house by getting rid of accountants, managers, lawyers, landscapers and anyone else associated with the old board. The newly negotiated contract you describe will slow down the incoming board and force it to evaluate the manager. They may discover the manager isn’t so bad after all.

Bad Managers. If the manager truly is incompetent or corrupt (or both) and needs to be fired, he will undoubtedly give the new board cause to terminate his services. Before doing taking action, the board must properly document bad behavior and give appropriate warnings. It cannot create a pretext for termination–that will only backfire. If the board is patient, a bad manager will eventually fire himself.

RECOMMENDATION: Employment litigation is quite costly and can be avoided if disciplinary actions and termination are handled properly. Accordingly, boards should work closely with legal counsel when dealing with personnel issues.

HUD NEGLECTS
HOA PROPERTIES

When HUD forecloses on owners who default on FHA insured loans, HUD takes ownership of the property. Unfortunately for associations, the properties go into HUD’s REO Department and are promptly neglected. Properties are left unoccupied and unmaintained. Squatters sometimes take over, windows are broken, weeds grow knee-high and graffiti proliferates.

When an association makes demands on HUD to maintain the property, they are ignored. Hearings and fines are meaningless because associations have no jurisdiction over the federal government. A form letter is the standard response to association demands. As noted in the letter, HUD has adopted a policy of selling their properties “as-is” with no repairs, improvements or warranties. Since federal bureaucracies move at a snail‘s pace (if they move at all), the properties fall into ruin. The City of St. Paul sued HUD to stop this practice and lost. United States v. City of St. Paul.

PENALTY FOR
REPEAT VIOLATION

QUESTION: Can an HOA apply fines when an owner receives a second warning of a violation, even though the first violation warning occurred three years ago?

ANSWER: Yes, the association can fine for the violation. Even though three years lapsed between violations, boards can take into account the severity and frequency of all violations involving the owner (is he a chronic violator of HOA rules?), the circumstances surrounding the particular violation (accidental or intentional), and the attitude of the homeowner toward the hearing process. If the owner is hostile toward the association’s rules, directors and the hearing process, the board will be more inclined to fine the owner than someone who apologies for the violation and gives assurances that it will not happen again.

TIE VOTE
OVER BUDGET

QUESTION: Our board tied 2-2 when voting on a new budget with a dues increase. One board member was out of town. An emergency meeting has been called when all five directors can attend. The president is calling this an executive session since it is just to vote–no discussion, really–but other board members believe this is an emergency open session. Who is correct?

ANSWER: The open session directors win. Voting on the budget does not fall into the six allowable reasons for holding an executive session meeting.

FEEDBACK

Davis-Stirling Rewrite #1. It’s “sneak peek not sneak peak–unless you’re being stalked by a mountain. Is your website going to be updated to reflect the rewrite of Davis-Stirling any time soon (what a headache that will be!). -Nancy H.

RESPONSE: Must have been all those peaks I peeked at on my way to the Yukon. The website will be updated but it will be a slow, time-intensive process. I have 2,000-3,000 pages on the website that need to be updated or completely rewritten with about 15,000 internal links to update.

Davis-Stirling Rewrite #3. Thanks for all your information. Is there anything in the rewrite that would make it easier for board members to communicate via email? -Dave K.

RESPONSE: Sorry, no. There are lots of other changes but not when it comes to email communications between directors. I will address all the changes next year as we get closer to the change-over date.

Davis-Stirling Rewrite #4. I was disappointed to not find clear definitions of funds and accounts in the Act. “Reserve Fund” is undefined and used interchangeably with “Reserve Account.” Also, it doesn’t address assessments receivable. These amounts are on the balance sheet and should be proportioned between reserves and operations. The problem is they are a non-cash asset that generally overstates the equity of the association. If you have significant A/R you are in effect borrowing from Reserves just to maintain cash for operations. By not providing for fund groups as part of the financial reporting system, associations impacted by the real estate crises will either be in violation of the statute or spend significant time and energy trying to comply with the statute.

AB 2273 #1. OMG, good news for sure that the governor signed AB 2273. We don’t currently have the problem in our complex but I sent a letter every time you asked us to. After 16+ years of involvement with our association, I fully understand the problem at issue and that we could easily be the victim in the future. Thanks for your hard work and for letting us know about these things so we can help. Three cheers that we beat the lenders lobby. -Jan B.

AB 2273 #2. It’s too bad that a provision wasn’t added to the bill to require banks to pay back assessments as soon as the deed is recorded. This would have gone a long ways towards solving our budget problems. Granted, the lending industry would have vigorously opposed the requirement and it would have to be a “cram down.” As a retired bank executive I’m disgusted with the current crop of bankers. -John A.

CalCPA Conference. I would really like to attend the conference in Burbank on September 20. I cannot, however, register because I do not have an “account” and cannot create one as I am not an attorney or a CPA. I am on the board of a condo association and would really like to get the information that will be presented at this conference. How do I go about signing up? -DeAnn M.

RESPONSE: I checked with the conference coordinator and she said to call 800-922-5272 for assistance signing up.


Adrian J. Adams, Esq.
Adams Kessler PLC

Adams Kessler PLC
“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Sep 09

On Friday, August 17th, Governor Brown signed into law the long-anticipated rewrite of the Davis-Stirling Act. The bill reorganizes and renumbers the Act to make it more user-friendly. In addition, the rewrite made substantive changes which I will cover in future newsletters.

Current CC&R Restatements. Associations that are currently restating their CC&Rs and Bylaws do not need to wait for the rewrite to take effect. One of the provisions in the bill allows boards to update their governing documents by replacing old statutory references with new ones without the need for a membership vote:

Civil Code §4235(a) Notwithstanding any other provision of law or provision of the governing documents, if the governing documents include a reference to a provision of the Davis-Stirling Common Interest Development Act that was repealed and continued in a new provision by the act that added this section, the board may amend the governing documents, solely to correct the cross-reference, by adopting a board resolution that shows the correction. Member approval is not required in order to adopt a resolution pursuant to this section.

Sneak Peak. Although signed a few weeks ago, the rewrite does not go into effect until January 1, 2014 so as to give everyone a chance to familiarize themselves with the new Act. To get a peak at the new Davis-Stirling Act, see Assembly Bill 805. I will be speaking about the rewrite to the annual conference of CPAs later this month. See next article.


Adrian Adams
and Kelly Richardson will be speaking to the “Common Interest Realty Associations Conference” put on by the CalCPA Education Foundation. The event will be held September 20, 2012 at the Burbank Airport Marriott. The conference will highlight:

  • State of the Common Interest Industry
  • Davis-Stirling Rewrite
  • Foreclosure Issues
  • CID Fraud
  • Financial Statement Disclosure Issues
  • Insurance
  • Taxes

The program is designed for CPAs, attorneys, association managers and other professionals interested in homeowner association management, taxation and auditing. Other speakers include Ron Stone, John Elhai, Thomas Noce, Patrick Prendiville, Cheryl Martin, and Ron Maddox. If you want to attend, sign up at www.calcpa.org.

DEVELOPER ARBITRATION


On August 16, developers won a major victory in the Pinnacle Museum Tower case. The California Supreme Court reversed direction from prior decisions and held that homeowner associations are bound by arbitration provisions in their CC&Rs, even though those provisions were written and recorded by the developers. In other words, associations lose their right to go to court for a trial before a judge and a jury.

The expected benefit to developers is the elimination of large jury verdicts by removing juries from the process. Historically, monetary awards by judges and arbitrators are smaller than those given by juries. As a result of the Pinnacle decision, developers may offer smaller settlements for construction defects. If their offers are rejected, HOAs will be forced to prove their cases in binding arbitration. Even so, the arbitration process is streamlined and less expensive than litigation and could produce good results if the association can prove its case to the arbitrator. Only time will tell what effect it will have on the industry.

The bulk of existing associations in California will not be affected by the Pinnacle decision. Only those developments less than 10 years old that have construction defects and an arbitration provision will be affected (unless they are already in litigation).

RECOMMENDATION: If your development is less than ten years old various statutes of limitations are running on any defect claims you may have. To avoid losing your rights, you should contact legal counsel to determine your best course of action. To read the case in its entirety, see Pinnacle Museum Tower Assn v. Pinnacle Market Development.

ASSEMBLY BILL 2273

Good news! On Friday, September 7, Governor Brown signed AB 2273.

The bill requires lenders to record foreclosure sales within 30 days of the foreclosure. It makes banks accountable for the properties they acquire, i.e., once the sale is recorded, the lender must pay HOA dues and assessments.

As expected, lenders strenuously opposed the bill. Thanks to the thousands of letters you sent to legislators and the efforts of CAI’s legislative advocate Skip Daum and others the bill overcame lender opposition.

JASMINE FISHER
IRONMAN ATTORNEY


Ironman. How did Jasmine do in her Ironman race? -Paige B.

RESPONSE: Jasmine not only survived the grueling race (a 2.4 mile swim, followed by 112 mile bike race, followed by a 26.2 mile marathon), she received a medal. I think she had an unfair advantage, she speaks Canadian.

YUKON TRIP

Comment. As always, a great newsletter. I hope you get rich panning for gold. -Wendy M

RESPONSE: I had so much gold it set off the screening equipment at the airport. They made me empty my pockets and now I have nothing. Such is life.

Comment. Bring a mosquito net for your head, and lots of bug repellant – I’m not kidding. -Mark D.

RESPONSE: At one campsite I fed so many mosquitoes they made me an honorary environmentalist. Other than that, the trip was fabulous. We canoed, fished, camped along the river, explored the remains of log cabins and paddle wheel boats from the early 1900s, admired bald eagles and watched for bears. At night around the campfire Judge Stirling read humorous tales of the Yukon such as “The Cremation of Sam McGee” and “The Shooting of Dan McGrew” by celebrated author and poet Robert Service.

FEEDBACK

Budget. In your August 12th newsletter under the topic of “Distributing the Budget” the person’s bylaws stated “no less than 45 days prior to the start of the new fiscal year” and D-S states “not less than 30 days nor more than 90.” Your reply stated that these two are in conflict. In reality, they are not as the 45-day requirement of their bylaws easily falls within the 30-90 day requirement of D-S. They merely need to send their budget out at least 45-days, but no more than 90-days, to be in full compliance with both. -Bruce F.

RESPONSE: If the budget is sent out out 30 days before the start of the fiscal year, it violates the CC&Rs. Which prevails? The statute. The Davis-Stirling Act gives associations more flexibility when it comes to distributing the budget and controls over any provisions to the contrary in the governing documents. Civil Code §1365(a)4.

Association v. Membership. The feedback from “Diana S.” is way off base, at least in the discussion of incorporated associations. There is definitely a specific “entity separate” from the membership. Such corporations, defined in Corporations Code §7110 et seq clearly defines these entities. Corporate officers and directors of thecorporation owe their fiduciary duties and responsibilities to that entity, NOT the members. Officers and directors are responsible to maintain the operational and physical assets of the corporation such that it is capable of delivering to the members those goods and services appurtenant to membership in that association. The benefits derived from membership in the association come from the corporate entity, not from the members themselves. Misunderstanding that concept causes many members to expect or demand from boards more than is appropriate. -Ted L.


Adrian J. Adams, Esq.
Adams Kessler PLC

Adams Kessler PLC
“Legal solutions through knowledge, insight and experience.” When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Aug 12

QUESTION: Our HOA posted a board meeting agenda four days ahead of time but it was up for less than half a day. They said they only have to post it four days before, not leave it there for four days. Is that true?

ANSWER: No, it’s not true. By their reasoning, boards could post a meeting notice for ten minutes and then take it down . . . or two minutes . . . or thirty seconds. Not only does it not pass the smell test, it violates the Open Meeting Act. The statute calls 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. (Civil Code §1363.05(f))

Sabotage. If someone is trying to sabotage a board meeting by tearing down notices, that does not invalidate the meeting if the board is unaware of the vandalism. If the board/management is aware that notices have been removed, they have an obligation to re-post them. If the problem is ongoing, the board should invest in a bulletin board that can be locked.

DILIGENT VISUAL
INSPECTION

QUESTION: The law in California requires a “diligent, visual inspection” every three years of property the association is obligated to maintain. What is diligent?

ANSWER: You are referring to language found in the Davis-Stirling Act which requires boards “as part of a study of the reserve account requirements” to “every three years” cause to be conducted a:

a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore, or maintain . . . (Civil Code §1365.5(e))

“Diligent” is not defined in the statute but is clearly more than a cursory inspection. Black’s Law Dictionary defines diligent to mean “attentive and persistent in doing a thing.” In addition to “diligent,” we must factor in what proceeds diligent, i.e., “reasonably competent” and what follows, “accessible areas.”

Reasonably Competent. “Reasonably competent” does not require a particular professional license but there are two national credentials available to reserve study professionals. One is the Professional Reserve Analyst (PRA) administered by the Association of Professional Reserve Analysts (APRA). The second is the Reserve Specialist (RS) administered by the Community Associations Institute. Both organizations require a demonstrated background of training and experience in properly preparing reserve studies before they will issue designations.

Accessible. Inspection of “accessible” areas does not mean tearing off roofs and opening walls. In my opinion, it means getting onto roofs, going into elevator rooms, opening electrical panels, and opening equipment service panels (such as on boilers) to obtain equipment information. A diligent person would do all of the above.

Disclosure. Finally, industry standards require that reserve professionals disclose whether a complete inspection or representative sampling was used, whether field measurements or plans/schematic take-offs were utilized, and whether destructive testing was employed.

Thank you to Scott Clements, RS, PRA, CMI of Reserve Studies, Inc. and Robert Nordlund, PE, RS of Association Reserves for their assistance with this question.

DISTRIBUTING
THE BUDGET

QUESTION: Our bylaws state that the budget must be sent out no less than 45 days prior to the start of the new fiscal year. Davis-Stirling states a 30-90 day window prior to the start of the fiscal year. Does the 45-day requirement conflict with the statute? I can’t figure this out.

ANSWER: Your bylaws are more demanding than the Davis-Stirling Act, which means the two are in conflict. Which one prevails? Interestingly, the Act does not always override governing documents but in this case it does. The statute states that “Notwithstanding a contrary provision in the governing documents, a copy of the operating budget shall be annually distributed not less than 30 days nor more than 90 days prior to the beginning of the association’s fiscal year.” Civil Code §1365(a)4. As long as your budget goes out within that 60-day window, you’re fine. For more on resolving conflicts, see “Rules of Interpretation.”

FEEDBACK

Laundry Noise. Ha! Not all seniors are in bed by eight p.m.! -Marion K., aged one

RESPONSE: You might not be but I am.

Committee Meetings. I understand that a board member can not enter into committee discussions but can the board member speak during the Open Forum? -John K.

RESPONSE: Of course.

Association v. Membership. When will we stop referring to “the Association” and begin referring to “the Membership”? There is no entity separate from the homeowners. If I am being sued as part of the membership of the Association I would certainly wish to be informed. We continue to speak about the Association as if it is a Landlord to whom all responsibility is transferred without detriment to the individual owner. Each and every one of us who owns a property in a CID is affected by litigation. -Diana S.

NO NEWSLETTER

Sorry, no newsletters for the next two weeks. I will be spending time in the Yukon with Larry Stirling and assorted Army buddies camping and panning for gold. We fly into White Horse and then head down river for fishing, fun and that glittery stuff.

At the same time, attorney Jasmine Fisher will be in Canada competing in an Iron Man race hitting the water at 7 a.m. to swim 2.4 miles, then biking 112 miles, followed by a 26.2 mile marathon. I think she’s nuts. She will come back tired–I could come back rich!

Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.”
When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Aug 05

QUESTION: If my association is being sued, does the board have a duty to tell all the members? Our insurance rates have gone up because of one such lawsuit. It seems the homeowners have a right to know why.

ANSWER: Currently there is no statutory duty to report litigation to the membership. Over the years California  has enacted extensive disclosure requirements for homeowners associations. To date, the legislature has not required HOAs to give members notice of litigation other than intended litigation against developers for construction defects. Civil Code §1368.4.

Escrows & Audits. Boards do not have a duty to volunteer information about litigation when units/lots go into escrow. Although sellers have an obligation to provide relevant information to buyers, associations have no duty to volunteer such information. Kovich v. Paseo Del Mar. Even so, most associations disclose litigation matters when asked. Moreover, any litigation that could have an unfavorable outcome for an association is disclosed in its annual financial statement to the membership pursuant to FASB Statement No. 5, Accounting for Contingencies.

Reserve Borrowing. Litigation disclosures also take place when an association transfers reserve funds to pay for litigation. Such disclosures to the membership occur “in the next available mailing.” Civil Code §1365.5(d).

Case Law. The courts have noted, however, that boards have a general duty to disclose facts that materially affect the rights and interests of members. Ostayan v. Nordhoff Townhomes. Whether a particular piece of litigation should be disclosed to the membership will depend on the facts surrounding the case and its potential impact on the membership.

Retaliatory? Interestingly, when owners sue their associations and boards disclose the litigation to the membership, plaintiffs sometimes get upset. They would rather that members not know. In one case I was involved in, the plaintiff actually complained to the judge that the disclosure was “retaliatory.” He didn’t think the membership had a right to know he had sued them. Nor did he think members should be told that a pending special assessment was due to his litigation. The court was not sympathetic.

Litigation Privilege. If an association discloses litigation to the membership, such disclosures are protected by the litigation privilege–a type of immunity given to statements in connection to litigation. The protections are found in Civil Code §47(b) and Code Civ. Proc. §425.16 which are construed broadly to protect a litigants’ access to the courts without the fear of being harassed by derivative tort actions. Thus, a board’s communication to the membership about litigation is immune from tort liability provided it has some relation to the judicial proceedings. Healy v. Tuscany Hills.

RECOMMENDATION: Unless there is a reason to temporarily withhold information, boards should disclose the existence of litigation involving the association. When I refer to litigation I don’t mean small claims actions. Such actions are by their nature small with limited, if any, impact on the association. Even so, these are routinely reported to the membership by many associations.

JASMINE FISHER
JOINS ADAMS KESSLER

I am pleased to announce that attorney Jasmine Fisher has joined Adams Kessler PLC. Jasmine is an experienced attorney who comes to us with a strong background in homeowner association law including CC&R and bylaw restatements, corporate counsel work with boards, collection matters and litigation.

In addition, Jasmine will handle operating agreements, entitlements, land use and zoning approvals with local governments, project financing and acquisition issues for the firm (see full bio).

Proposals. Jasmine is an outstanding addition to Adams Kessler and joins attorneys who collectively have more than 75 years of HOA law experience plus the resources of Judge Larry Stirling (ret.), former legislator and author of the Davis-Stirling Act. If your association would like a proposal for legal services, contact us at info@davis-stirling.com or 800-464-2817.

JOB SHARING

QUESTION: Can a couple that own one condo together share one board seat (job-sharing)?

ANSWER: No, they can’t. The membership elects a specific person to the board not the “Occupants of Unit #209.” If Mr. Smith is elected to the board, Mrs. Smith can’t fill in when he is out of town. There is an amazing modern convenience today called the telephone. Mr. Smith can attend telephonically if he can’t physically attend. Rumor has it that someday telephones will be portable.

CONDUCTING MEETINGS


QUESTION: If board members do not have the knowledge to conduct a meeting, who is responsible to guide them?

ANSWER: No one is “responsible” for guiding the board (unless the duty has been imposed via contract with the management company). The buck stops with the board. If directors don’t know how to run their meetings, they have a lot of great resources available to fill that gap.

Written Materials. A simple 16-page illustrated guideline which serves as a basic introduction to parliamentary procedure is the A-B-C’s of Parliamentary Procedure. Another more complete but easy to understand guide is the Complete Idiot’s Guide to Robert’s Rules. Both can be ordered through Amazon.com.

Classes. Directors can also attend classes offered through the Community Associations Institute that teach boards the basics of parliamentary procedure. In addition, they can hire a parliamentarian to attend meetings and/or give them private training.

Other Resources. Additionally, boards can ask for guidance from their managers and legal counsel, most of whom have a working knowledge of running meetings. Both CAI and CACM teach this topic in their certification programs for managers. Many recording secretaries who take the minutes for board meetings also have a working knowledge of parliamentary procedure and can assist boards with their meetings. And last but not least, YouTube has a number of video training sessions on how to run meetings.

LAUNDRY NOISE

QUESTION: I was wondering if an association could limit my renter from doing laundry in her own unit to the hours of 8 a.m. to 10 p.m.? It does not specifically say washer/dryer or laundry in the noise ordinance.

ANSWER: Yes they can. Just as associations can regulate loud parties, loud music and anything else that might disturb neighbors, the specific disturbance need not be spelled out in your rules. The board has authority under the nuisance provisions of your CC&Rs to regulate noise from washers and dryers.

By 10 p.m. most people are headed for bed (in senior communities they’re in bed by 8). If you properly insulate your laundry room against noise and vibration and purchase higher-end “quiet” machines, I bet your renter could run them all night long and no one would know it. If you don’t want to spend the money, make sure your tenant washes clothes between 8 a.m. and 10 p.m. If her schedule does not allow it, she could hire domestic help to wash clothes during the day.

FEEDBACK

Committees. Your response to the question regarding manager certification made me chuckle. For those of us in SoCal who pay attention to the influence of the stars and planets—a Taurean’s tendency toward down-to-earth practicality and no nonsense approach to finances would make him an excellent candidate for the position of manager. He would have received my vote also. -Susan M.

Ditto. I’ve got to ditto all the positive feedback that you received. You are a great source of knowledge and I’ve learned a lot from your newsletter and refer to your letter frequently. Thank you very much. -Sam M.

Newsletter. LOVE the newsletters–they’re a big help to our little (37-unit) association. -Pamela D.

Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.”
When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Jul 29

Concerns have been raised because the California Legislature suspended the Brown Act (claiming it will save $96 million over the next three years). The suspension means that boards no longer need to (i) post meeting agendas, (ii) include a description of items to be discussed in closed session, and (iii) disclose what occurred in closed-session meetings.

What impact does this have on homeowner associations? None. The Brown Act applies to governmental agencies not common interest developments. HOAs are governed by the Davis-Stirling Open Meeting Act, which has not been suspended. Association boards are still required to post agendas and report what occurs in executive session meetings. Boards affected by the legislature’s suspension of the Brown Act are county boards, school district boards, water boards and city councils.

COMMENT: I can think of better ways for California to balance its budget. Hiding behind closed doors is not one of them.

DIRECTORS AT
COMMITTEE MEETINGS?

QUESTION: Can a majority of directors attend committee meetings without violating the Davis-Stirling Open Meeting Act?

ANSWER: This issue is not covered in the Davis-Stirling Act. Whenever Open Meeting issues are unclear, we can look to public agency rules for guidance. There are two: the Bagley-Keene Act and the (now suspended) Brown Act.

Bagley-Keene Act. The Bagley-Keene Open Meeting Act governs meetings of local governments and closely parallels the Brown Act. Bagley-Keene states that boards have three duties: (i) give adequate notice of their meetings, (ii) provide an opportunity for public comment, and (iii) conduct their meetings in open session, except where a closed session is specifically authorized. All three principals were incorporated into the Davis-Stirling Open Meeting Act.

As provided for in Bagley-Keene, not all board gatherings violate the Act. A majority of directors can gather for the following purposes provided they do not discuss board business among themselves:

  • A conference or similar gathering open to the public. (Gov. Code §11122.5(c)(2))
  • An open and publicized meeting organized to address a topic of state concern. (§11122.5(c)(3))
  • A purely social or ceremonial occasion. (§11122.5(c)(5))
  • An open and noticed committee meeting, provided board members who are not members of the committee attend only as observers. (§11122.5(c)(6))

Brown Act. In addition to the above, the Office of the Attorney General issued an opinion that under the Brown Act board members may attend committee meetings provided they do not ask questions or make statements. (81 Ops.Cal.Atty.Gen. 156.)

CONCLUSION: In my opinion, if homeowner associations follow state guidelines, a majority of directors can attend committee meetings provided (i) the committee meeting is open to the membership, (ii) notice has been given (the same as board meeting notices), and (iii) directors who are not members of the committee do not participate in committee discussions (otherwise it becomes a board meeting and should have been noticed as such).

Kudos to board member Anne Seifert for bringing this to my attention. For more information, see Guide To Bagley-Keene Open Meeting Act.

EXECUTIVE SESSION
VOTING

QUESTION: Can the president of the board of directors vote at an executive session other than to break a tie??

ANSWER: The president can vote on all issues in all meetings of the board (Robert’s Rules, 11th ed., pp. 487-488.), whether open or executive, provided he/she does not have a conflict of interest.

FEEDBACK

Newsletter #1. CONGRATULATIONS on another great newsletter. I was just introduced to your letter four months ago and wish I had known about it sooner. Keep up the good work, it’s very much appreciated and very helpful. -Al. H

Newsletter #2. Love your weekly newsletter. Send it to all the area reps in our condo complex (an area rep. watches over the 20 small streets of condos and reports any problems at monthly meetings). -Jeannine D.

ADA Compliance. I just read your recent Davis-Stirling Newsletter and want to thank you for including my question regarding ADA pool compliance. As always, your response was thoughtful and informative. Thank you very much for taking the time to respond and publish this information. -Pat C.

Manager Certification. In addition to certifications, HOAs should inquire about a manager’s experience with plumbing, construction, solving problems, construction management etc. I do not think this is covered in any of the certification requirements. -Michael G.

RESPONSE: I know some boards ask prospective managers about their maintenance experience. Others focus on financial training. Some prize computer skills. I’ve attended interview sessions where directors ask really inappropriate questions about age, ethnic origin, marital status, number of children, etc. I had one director ask a candidate his birth date–not because she wanted to know his age, she wanted to know his Zodiac sign. In the discussion that followed, she based her hiring decision entirely on his sign. He was Taurus and that’s all she needed to know–she voted for him. He turned out to be a good manager. Who’s to say?

Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.”
When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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Jul 22

QUESTION: Are we in trouble? We just found out our manager (for the last 2 years) is not certified nor licensed. What should our board do?

ANSWER: There is no need to flee the country; you’re not in trouble. There is no requirement that association managers be certified nor is their any licensing requirement (except for business licenses for management companies). There is, however, a requirement that managers make certain disclosures to the associations they manage.

Certifications. Even though certifications are not required, they are important. Designations are offered through the California Association of Community Managers (CACM), the Community Associations Institute (CAI) and the National Board of Certification of Community Association Managers (NBC-CAM). Following is a list of some of the more common designations:

DESIGNATION                                                              FROM

AAMC    Accredited Association Management Company      CAI
AMS      Association Management Specialist                      CAI
CCAM  Certified Community Association Manager              CACM
CMCA  Certified Manager of Community Associations       NBC-CAM
LSM     Large-Scale Manager                                           CAI
PCAM  Professional Community Association Manager          CAI

RECOMMENDATION: Boards should look for professional designations when hiring a manager. They show that a manager has achieved certain levels of training in the management of common interest developments. If the manager is an employee of the association, boards should encourage and pay for the continuing education of their managers. It is worth the cost because knowledgeable managers help steer their associations through the maze of regulatory compliance thereby reducing potential liability and making it easier for volunteer directors to meet their fiduciary duties.

MANAGEMENT FEES

QUESTION: How much (in general) does a property management company charge a homeowner’s association to manage the community?

ANSWER: Management fees will vary depending on (i) the location of the development (north, south or central California and inner city versus rural), (ii) the type of development (condo or single-family homes), (iii) the size of the community (500 units or 5), (iv) the level of service being sought (financials only or full management) and (v) the quality of managers assigned to the account (seasoned managers with professional designations or kids fresh out of high school). The best way to compare prices is to get management companies to bid (apples to apples) on the management services you desire.

RESERVE WEBINAR
REMINDER

This Wednesday (July 25) I will be participating in a follow-up webinar with reserve specialist Robert Nordlund. There were so many questions from our May webinar that this one will focus on answering questions on the legal aspects of reserves.

To sign-up for this free offering, click on one of following links: 11:00 a.m. session (Pacific Standard time) or the  1:30 p.m. session.

ADA POOL COMPLIANCE

QUESTION: We are a gated community of private detached homes. If we allow rental of of our community park (including the pool) for weddings, parties and fundraisers where non-residents attend is the HOA subject to the new ADA pool requirements?

ANSWER: This question keeps popping up. You are referring to the new ADA “public accommodation” pool requirements under Title III that go into effect January 1, 2013. The new regulations state that swimming pools open to the public must have at least two accessible means of entry. “Accessible” is defined as swimming pool lifts, sloped entries, transfer walls, transfer systems and pool stairs. Such requirements do not apply to private organizations such as homeowners associations. However, there are exceptions.

Renting to the Public. Renting your pool facilities to the public is one of the exceptions. If you are renting to the general public and the “weddings, parties and fundraisers” you referred to involves swimming, you will need handicap access at least for the duration of the events. That can be accomplished with a portable chair lift. If guests accidentally swim in the pool (somebody falls or is pushed into the pool)–you don’t need to provide handicap access. However, other facilities, such as bathrooms, may need to be modified for handicap access under other provisions of Title III.

Renting to Members. If your association rents its facilities to members only, ADA requirements do not apply. If your members invite guests who are not members, ADA rules might apply but it is unclear. I can tell you from experience that handicap advocates tend to be aggressive and look for excuses to chase associations and businesses through the courts. That does not mean they would prevail but the association would have to endure the expense and uncertainty of a lawsuit.

RECOMMENDATION: Even if not required, boards should plan on making all facilities ADA compliant. This not only benefits handicapped members of the association, it avoids potential litigation. In the long run, it’s cheaper to upgrade your facilities than to litigate over them. In the meantime, when it comes to renting out your facilities, boards should talk to legal counsel about how best to reduce their risk.

FEEDBACK

Unruly Homeowners #1. DON’T send those people to Barstow!!! Barstow is a nice little town (maybe we could improve it by getting rid of Walmart). Ruby Ridge would be a much better fit for renegades. I implore you to have a little sympathy for the high desert folks. Thank you for all your hard work. -Tom G.

Unruly Homeowners #2. I enjoyed your response about the unruly homeowner who should live in a mobile home on a one acre lot in Barstow. Actually, the Lucerne Valley would be much better because it’s less crowded or maybe by the Trona Pinnacles. -John A.

RESPONSE: I had been shipping dysfunctional condo owners to North Dakota but state officials slapped me with a restraining order–something about an environmental disaster. I will take pity on Barstow, I didn’t realize we had so many alternate sites for anti-social homeowners–Ruby Ridge, Lucerne Valley, Trona Pinnacles . . . (hope they don’t require an environmental impact report).

Unruly Homeowners #3. Thank you for another interesting newsletter. I appreciate your comments on free speech and that there are limits, especially in meetings and other formal, organized events. At City Hall, the council here allows attendees three minutes at the beginning of the meeting. Anybody who fills out an index card with their name and topic is called to the podium in turn. It works because every speaker is timed and respectfully asked to sit down when the light comes on at the end of their three minutes. Nobody gets extra time and nobody is prevented from speaking. Everyone feels heard and occasionally the council learns something that matters. HOAs should have a similar process that is consistently used so that nobody appears to get favor and nobody feels treated unfairly. Residents who feel they have legitimate gripes, recommendations or compliments can also write to directors just as we write city council members and legislators. -Al P.

Managers. Thanks for the kind words for managers. You’re right, it’s difficult to please everyone and sometimes it’s difficult to please anyone in this job. -Alex F.

Signature Cards. Your piece on bank signatures is important. As a former Sr. VP and CFO of a nationally chartered bank, I can tell you that banks stopped matching signatures at least 40 years ago. Signing the check is a minor ministerial duty at the end of the control process. There are a number of other “pre-signing” risk management processes that should be in place as the work is authorized, completed and approved for payment. -Don H.

Adrian J. Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight and experience.”
When your association needs legal assistance, contact us at (800) 464-2817 or info@adamskessler.com.

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