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March 27, 2006
Deck Maintenance, Repair and Replacement - Who is Responsible?
As you can imagine, I get questions everyday, some I can put a generic answer to, and some I cannot. Here's one:
We live in a penthouse condo in a large complex in California. The decks are also roofing over 3 units below so they are in that grey zone of "exclusive use common area". We are willing to accept SOME responsibility for renewing the deck surface when it becomes necessary, and of course 100% responsibility for damage to a unit below us ( if we do not keep up our own deck surfacing), but some penthouse owners think the entire HOA should pay for a new roof/deck.
I have had more than one inquiry along these lines. Common Questions:
Question: Our docs now say that the HOA fixes the structure part of the deck but amendments have been proposed that would make the penthouse deck owners responsible for half the costs. The HOA has been paying for the structural repairs/replacements to date. Can the Board just arbitrarily start charging the penthouse owners for half their decks when others have been replaced at no cost to the owner?
Answer: When a person buys into a common interest development (shared costs and amenities, with CC&Rs), they are charged with the knowledge that the responsibilities or use restrictions may change by less than 100% approval. Sometimes people think they cannot be changed without their approval. Not the case.
Question: We are way outnumbered by the owners who do not have decks so they can easily vote this responsibility over to us by amending the documents. Is this fair? Can we legally stall the vote on the changes that would affect us?
Answer: Again, if you buy into a CID there is a valid legal argument that you knew or should have known that the documents could be changed that contain the responsibilities. From your perspective, this seems unfair because you bought in expecting these items would be maintained, and they are part of the building, and expensive to fix. It is true also that the fact some serve as roofs for other unit patios rolls into the responsibility for roofs. There may be a challenge open to the wording in the amendment - does it change all pertinent provisions? or create a conflict with provisions that did not get changed? Do your documents prohibit changing the maintenance scheme without getting the mortgagees (lenders) vote as well as the owners?
But look at the other side. All of the other owners may be frustrated at having to pay for the penthouse decks when they get no benefit.
There is one case I know of where the owners sought court approval of an amendment when more than half of the voting power approved it but the approval percentage did not reach what was required by the CC&Rs. The case is called "Blue Lagoon". This process of asking for the court to approve an amendment when an association cannot get the supermajority percent approval required by the CC&Rs is blessed in Civil Code Section 1356. However, using this process, I believe a Judge would be hard pressed to help the Association if the voting resulted in something that was unfair, just because one group outnumbered another.
This same kind of thing happens in situations where there is the need for a seawall and those that do not live by the waters edge feel they would not benefit from it so they do not want to pay as much as those who would be benefited. Or a situation where the condos in the back of the development are more susceptible to crime and are asking for a security wall to be constructed, lights to be installed, etc., that will not be of any perceived benefit to those living in the front by a well-lit street. Or a situation where there is one Lot of open space at the end of a development and a slide results threatening two or three houses in the development but not the others. Those who do not live next to the slide do not want to pay. Should they? What happens when you have a pool and some owners do not want to use it and therefore do not want to pay? Must they? (Generally, this is the only "yes" I can give here witha strong likelilood that there is usually nothing in the governing documents that contradicts me).
You need a knowledgeable attorney to advise on either side of these issues - such as how to craft measures to deal with what is fair. How to enroll the members when all should pay, and how to protect those who feel that they are at a disadvantage and could end up with the whole burden for fixing something. There are many things to consider, and the big question is, who decides what is fair and what is reasonable under the circumstances. I do not have a generic answer for this, so I will take the lawyers way out ... It depends ...............................
Posted by Beth Grimm at 6:12 PM
Elections - What to Do Now - Especially in the Face of Apathy
Many Association representatives are contacting me and others asking for help with elections rules. I have a list, but for now have recommended waiting just a couple more weeks. Why? Because there is some really difficult law on the books, and a sorry attempt to correct the problems in the works, a cleanup bill (AB 1560) that after being massaged by all that have their hands on it, may fix some parts of the elections law, and complicate others. Once the amendments are back in the hands of the author, he may decide what he wants to pick and choose from the list and we could end up with a bigger mess.
The issue still is that no matter what a board does with the existing, or changed law, it will come into conflict with existing laws or governing document provisions and the new law is unclear on exactly what it overrides, and what it does not override. If you want to see a comprehensive list of all of the things that are wrong with the elections law, go to the Californiacondoguru website and take a look. Click on the Elections link or the What's New link and you will find a path to this list. I did not put this list together to be spiteful or insight (a freudian slip perhaps?) the author of the elections legislation. I put it together so that the public would be aware of the problems the industry is having coping with this legislation. And I think it is obvious that this elections reform law should be rolled back at least 6 months so that it can be fixed. According to my resources, that option has not been offered, but simply put, good sense dictates the need to take a closer look, and according to the most obvious problems, (see my memorandum listing the problems), more than 20 good reasons.
As for panic - do not do so. The law is in such a state of flux right now that if you get guidance from a knowledgeable resource and act in good faith in the coming elections, and attempt to do the voting by secret ballot as close as you can to the statutory requirements as they exist (remember, they could change any day), you should be able to have an election that will stand in court. Just make sure to document everything supporting the good faith part of it. And the reason I say do not panic, there is nothing you can do to change the current storm over this bill short of a plea to Senator Battin to amend his clean up bill to delay the implementation of Civil Code Sections 1363.03, .04, and .09 another 6 months.
And as for any association that has an apathy problem, how are you going to comply with the requirement to sent out a ballot to the members 30 days before the counting is done when you do not have sufficient candidates to require voting to fill the positions? I assume the same thing you have always done, do whatever is reasonable under the circumstances to get a board seated, whether the ultimate result is a legal election, or other means (acclamation or appointment) because you cannot get enough candidates or interest for a valid election.
Many associations have the first annual meeting, maybe an adjourned meeting (if the documents call for one), and if there is no contest for the director positions, announce the results by acclamation. Document the efforts to get members to run, the efforts to get people to the meeting (don't forego the proxies) and the efforts at the meeting to get volunteers to run. I do not see a barrier necessarily to doing as you always do by recruiting volunteers at the annual meeting to fill open spots.
There is nothing in the new law that will solve the problem of apathy and the difficulties in recruiting board members and in fact, I think it will make it a lot worse for associations that cut out the annual meeting and vote instead by mail for directors. If you can't get names on the ballot, why send it out? I think this will be the case in more than half to 90% of the association in this state. The public voting system does not have that problem because everyone and their brother want to run for President. In fact, they have to weed out the wanna-be "contestants". Not so in HOAs -people are not lining up to serve. Even the biggest complainers often just want to sit back and take potshots, rather than serving as a volunteer on the board.
Stay tuned. Those of you that have asked me to help with your elections rules, we will get there. Very soon I think. Those that have jumped the gun to adopt rules under Civil Code Section 1363.03 may well have to rethink their process and rules.
Posted by Beth Grimm at 9:59 AM
March 24, 2006
Meeting Confidentiality - Here We Go Again
This is only one person's perspective, and the names are withheld of course to avoid making anyone mad or embarrasing anyone, but this comment was sent to me:
"Recently, our association manager issued a memo requesting that Board Members keep all matters discussed at the monthly Board meetings confidential. These meetings are open for all homeowners and if you attend you hear the nitty-gritty of the discussions and who voted for what but if you don't a Board member cannot discuss the topics of conversation. Granted, the minutes of the meeting will provide the relevant points of the meeting."
At first glance, this looks like the manager may be trying to keep secrets. However, assuming that does not make sense. The matters discussed at an open meeting are not confidential when homeowners are allowed to attend, as they should be unless a meeting qualifies as an "executive session", which would be the case as described in Civil Code Section 1363.05(b): "Any member of the association may attend meetings of the Board of the association, except when the board adjourns to executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member upon the member’s request, regarding the members payment of assessments as specified in Section 1367 or 1367.1. The Board shall meet in executive session, if requested by a member who may be subject to a fine, penalty, or other form of discipline, and the member shall be entitled to attend the executive session."
It does not seem that meetings are being closed when it is not right to do so, or that minutes are not available for inspection. It is certainly possible that the manager had less than laudible intentions in such a memo, if this is in fact what it said. But it is also possible (as I have been asked to assist in matters like this) that any or all of the board members have said things outside of the meetings related to what was discussed that either (1) mistated or mischaracterized what happened or what was said, (2) left out or missed important details, (3) raised controversy or rumor, (4) disclosed confidential discussions held in execitive session, that should not be disclosed, and/or (5) encouraged owners to pressure the board to revisit decisions that were made after a pragmatic investigation of all of the facts and options, in open board meetings, with no attendance by homeowners (in an apathetic community).
It could be the manager was attempting to correct some activity like that. If so, there may be a better way to handle the problems. Even so, it is hard to judge a comment like this without the full panalopy of facts and circumstances surrounding the distribution of the memo. Jumping to conclusions, though, is not the answer.
Posted by Beth Grimm at 10:06 PM
Creaking Bed - Worthy of Fine?
Here is a problem that is more common than you can imagine. The question posed to me on the website was: "My HOA has levied a fine against me because my bed creaks; can they do that?"
In California, before a Board can impose a fine on any owner there are steps required to provide the owner with a fair opportunity to present their side of the situation. Civil Code Section 1363(h) says: " When the board of directors is going to meet to consider or impose discipline upon a member, the board shall notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the meeting. The notification shall contain, at a minimum, the date, time, and place of the meeting, the nature of the alleged violation for which a member may be disciplined, and a statement that the member has a right to attend and may address the board at the meeting. The board of directors of the association shall meet in executive session if requested by the member being disciplined. If the board imposes discipline on a member, the board shall provide the member a written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action. A disciplinary action shall not be effective unless the board fulfills the requirements of this subdivision."
This law does not require that the Board wait until an owner can attend the meeting, or compromise the date (although there are many boards that try to accomodate an owner) It does, however, require that the Board do its due diligence and actually consider the matter at a meeting that the homeowner is invited to, and requires a timely written decision.
Now to the creaking bed. This is really not much different than a situation where someone in a below unit has to listen to beds moving across a wood floor, the headboard hitting the wall, or other "bedroom" noises. Believe it or not, these are fairly common complaints. Wny? Because many condominiums and townhouses with up/down units do not have very good soundproofing, or because owners install hard surface flooring such as hardwood or laminate, and do not put rubber casters under the bed, or because owners are not sensitive to the fact that the downstairs neighbors have to listen to everything above a whisper in the bedroom when the units are "stacked" on one another. Its a common complaint (the nighttime noise) when a day sleeper lives below a night person or insomniac who watches tv all hours of the night. Nighttime flushing of a toilet or running a shower can drive the neighbors below crazy. These kind of complaints seem to be exacerbated in a condominium conversion, or development that does not prohibit installation of flooring materials that increase sound transmission between units. The question is: What should a board do about these noises?
To be pragmatic, the Board has to look at whether there is a violation of the governing documents. There is often a nuisance clause that prohibits activities that "disturb the quiet enjoyment" of the neighbors. And a situation like any of the above puts the Board in the very difficult position of determining what is reasonable nighttime noise. There may be a prohibition on hardwood, laminate or tiled flooring surfaces in the living room and bedroom. If someone installs the product without approval, there may be recourse in that area. In any event, the Board's position is not an enviable one, and the owner who lives below is not in an enviable position either. It is really up to the owner who lives above to make a reasonable accomodation if some condition in their unit is causing extra noise. But sometimes the lower unit owner can help themselves by either working with the upstairs owner, asking for courtesies about what shoes are (or are not) worn on the floors, what action is encouraged or discouraged of children, or creating a source of "white noise" in their own space .
Maybe in the case of the creaking bed, ordering that it be repaired was not unreasonable. The owner commented that she did not feel the board should fine her when it was not her fault that the bed was broken (apparently it was broken bhy movers).
So there you are. You be the judge here - to fine or not to fine.
Posted by Beth Grimm at 9:10 PM
March 9, 2006
Records Inspections - A Few Things to Think About
In California, many of you are probably aware of the new laws on inspection of records that kick in July 1, 2006. Members will have more rights than ever to see detailed association financial records, right down to the checks and check stubs. But there are some things to get straight.
There are some conflicts in the new law with existing law. A big question arises as to whether members can get membership lists or not (names, addresses and voting rights of fellow members), and whether Associations may still be able to provide an alternate for mailings to giving the list out (such as by accepting the ready to mail communications, and using a mail service at the Owner's expense). Civil Code Section 1363(f) says: "Members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with Article 3 (commencing with Section 8330) of Chapter 13 of Part 3 of Division 2 of Title 1 of the Corporations Code. The members of the association shall have the same access to the operating rules of the association as they have to the accounting books and records of the association." The Corporations Code allows for the alternate method of mailing out owner communications if they have asked for the list. The new law, however, found at Civil Code Section 1365.2, does not seem to allow for this alternate mailing offer except as to owners who have "opted out" from having their names and addresses given to other owners who request a membership list. So how do they "opt out" if they do not know they can? It would be up to the Association to tell them. And up to the Association's legal counsel to advise which law actually controls on this particular question.
For Associations, it seems that you could require an owner to bring their own copy service to the association site, or manager's office, or wherever you and the owners agree the records shall be produced, rather than having to provide copies made at your own facilities. But if you are not willing to bring the records to the Association site, or you cannot agree on an alternative site with the owner, then you may have to provide copies of the requested information. You can estimate the cost, but the law does not provide you with a clear mechanism to collect it, or to withhold records until it is paid.
For Owners, you are entitled to see a lot of association records, but do you need them all? If you ask for everything you are entitled to under the statute, the Association can "throw in the kitchen sink" meaning include all records and reports that you get each year anyway, and charge a cost similar to that of a copy service, or actual costs of a copy service, which are probably more than 20-25 cents per page, front and back. Therefore, for example, if you ask for 3 years worth of checks, front and back, you may be paying hundreds of dollars for costs of producing the records. (And yes, I believe an association could probably recover the copy costs and the costs of going to small claims court by producing a cost sheet from a copy service if you resist paying, or in some cases if appropriate pursue reimbursement assessments for their costs against you, so be prepared to pay up!) And all information relating to bank account numbers of the checks and where they were deposited will likely be redacted, another charge to you, of up to $200. Most accounting services today for management companies and otherwise use computerized checks so a check register may have all the information you need about payees and amounts, at least for starters on your quest to answer questions about association use of funds. Furthermore, if you have received a review prepared by an independent CPA, which is required to be provided to you at no charge each year if your association grosses more than $75,000 in revenues, you can see a lot about what money went where. So why be obnoxious about your needs?
Applying this new law will be a balancing act, and balancing needs and obligations is much easier if opposing parties take a reasonable approach at the outset, before any grudges are formed.
Posted by Beth Grimm at 1:09 PM
Elections in California HOAs - The Trials and Tribulations Continue
I wish I could talk and think about something else each day when I get into the workflow of my practice, but so much of what I do involves taking about association elections, and the new law found in Civil Code Section 1363.03, .05, and .09. Why? I draft many restated and updated documents for associations and have at least 20 projects currently in the works at various stages. The conclusion I have reached on these projects is that putting minimal attempted interpretation in the actual documents, and attaching Exhibits that reflect the new laws that can be "changed out" by a Board when the statutes change on this topic (and some others) may be the best way to go. This is because I can write a paragraph today that must be changed tomorrow because of what is happening in Sacramento. And I have to suggest bylaw amendments to Associations that have to deal with the new law so that they can achieve a quorum if they want to contuinue to have meaningful meetings, and meet seemingly vanishing capability for minimal ballot return. Which means, of course (in order to get approval for the amendments), an election, possibly under the new standards. And every day I advise Associations and others on where we are right now, which is in a state of flux - meaning one elections format that stands today, and another if you are taking any action near or after July 1, 2006. And every day I am reminded, because of my involvement of legislative matters, that the current law may be amended in ways that encompass every election in an HOA instead of the BIG 4, and that may also make the statute effective IMMEDIATELY - making compliance impossible on the short term.
The California legislators do not know when to leave something alone. And so in some cases such as the new elections laws, it just goes from bad to worse!
I feel sorry for the proponents of the secret double envelope ballot legislation. They fight (and keep fighting) so hard for it. They think it is good. And there are some good conceptual ideas in it - for associations that get owner participation without begging for it. The new law has a feel-good sound to it. People can vote in the privacy of their own homes, without influence from any outside source, and everyone gets an equal shake in running for the Board, or so it seems. But what happens to those that cannot get anyone (or enough names for a contested election anyway) to voluntarily put their name on a ballot 30 days or more before an election or annual meeting - which is the more likely scenario. What then? Send out a double envelope secret mail ballot anyway? That would be an exercise in futility and a costly one at that. And what of the associations that have 10 or fewer owners and 3-5 serve on the board currently - will the other owners step in to help with the elections and volunteer to be inspectors so that association does not have to pay $500, $1000. $2000 (or more) for an inspector for each election? Not likely. My guess is the 3-5 serving have been trying for decades (a little bit of fecitiousness is needed to lighten things up) to get other owners involved without luck, so since no board member can be used in the ballot receiving or counting process, outside the association you go, to look for an inspector of elections.
The costs for associations (which means the per household cost - for all of you proponents out there) - on this one compliance issue are likely to be substantial. Why? Associations are going to need a very knowledgeable HOA attorney to advise them how not to end up violating something in their governing documents and other California laws. Ca' ching. And they are going to need inspectors of election that know what they are doing - ca' ching! ... And if they miss a step (which it is almost impossible not to do under the new law as it complicates elections) they are likely going to have to do it all over again! Double ca' ching!...
It may seem simple, but its just not! This new elections law is definitely not a “one size fits all!
This is the latest on the things to keep in mind about the new law that are important:
**If an Association Board adopts its Elections Rules, which are required by the new law before July 1, 2006, it probably does not need to circulate them to owners before adoption by the Board pursuant to the rules passage protocol required by Civil Code Section 1357.100 et seq. They probably are not subject to any owner petition to terminate the rules. However, there may be benefit to circulating the elections rules. Work with an attorney who can help you determine the differences.
**And if the Board takes a “minimalist” approach with its Election Rules and incorporates other pertinent information into its instructions to its Inspector of Election as an alternative, it may be able to avoid circulation and a chance of an owner petition to terminate any of the election rules. But again, less is not always more.
**After July 1, 2006, the requirements of Civil Code Section 1357.100 on passage of rules clearly apply because the new elections statutes say so. (Civil Code Section 1363.03) But some rules still will not require circulation even under the new law if they simply regurgitate the mandates of the statute itself and do not include discretionary provisions. Still, you will want to know the possible benefits of pre-adoption circulation. It may weigh favorably on the "good faith" component of trying to comply with a law that creates conflicts at every turn.
My web site has further information on the front page about adopting Elections Rules and what to watch out for. Neither the information in this blog nor the site constitutes legal advice but it is important for the general public which means board members, homeowners, managers and yes, those family law, trust and other attorneys who think they can step in here and help their associations to take a closer look on what can happen if things go wrong. As I heard an attorney say the other day (and this was a knowledgeable attorney in this area) - Associations are thrown into "Alice and Wonderland" with this new law and they don't have any way out but to try and comply.
And hopefully, a "good faith" showing will be worth some points if an election process or result is challenged.
and stay tuned! This roller coaster ride is not over yet.
Posted by Beth Grimm at 12:11 PM