« Dogs - Big and Little - Leash Laws Rule! | Main | Can the President Handpick Committees? »
June 10, 2006
STATE OMBUDSMAN OR ENFORCER?
SB 551- Lowenthal - recently amended (see www.ca.sen.gov - put in the bill number and pull up the text) ... Watch it. Read it. Send your opinions on it - here are mine. This bill is going to be heard soon in Assembly Housing Committee. You are welcome to your opinion. The legislators need to hear it.
I am dismayed to see that the proposal for a state oversight agency in this bill is moving from an educational, data collection, and ombudsman program as recommended by the California Law Revision Commission after several hearings on the possibility of an oversight agency, to a bureau, including enforcement, citations and fines, before any viable effort has been made by the State of California to assist volunteer board members by providing educational resources, an internet resource and help line.
Education is the key to success in homeowner associations - whether voluntarily sought or imposed. The concept of enhancing educational opportunities and providing resources, and even initiating an ombudsman program, were and are laudable goals.
Here are some factors that have influenced my decision to write to the legislature opposing this bill, and to encourage others to do the same, much as I would prefer to show support for the educational, data collection, and dispute resolution components:
1. The legislature passed a bill that was signed into law more than 3 years ago that required HOAs to register and pay an annual fee.
“1363.6. ASSISTANCE WITH IDENTIFICATION OF COMMON INTEREST DEVELOPMENTS; SUBMISSION OF INFORMATION BY EACH ASSOCIATION; TIME; NOTICE OF CHANGE OF ADDRESS; PENALTY FOR VIOLATION OF FILING REQUIREMENTS; AVAILABILITY OF INFORMATION.
(a) To assist with the identification of common interest developments, each association, whether incorporated or unincorporated, shall submit to the Secretary of State, on a form and for a fee not to exceed thirty dollars ($30) that the Secretary of State shall prescribe, the following information concerning the association and the development that it manages: ... (e) The Secretary of State shall make the information submitted pursuant to paragraph (4) of subdivision (a) available only for governmental purposes and only to members of the Legislature and the Business, Transportation and Housing Agency, upon written request. All other information submitted pursuant to this section shall be subject to public inspection pursuant to the California Public Records Act, Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code. The information submitted pursuant to this section shall be made available for governmental or public inspection, as the case may be, on or before July 1, 2004, and thereafter.”
The “law” was sold as a process for identifying HOAs in the state so that they could be located ... and so that the state could reach the HOAs and send educational materials. The money was to be used for a database that would be public information. In speaking with persons that sought the database to reach associations and offer valuable services, I learned that the database has not been refined to incorporate the information provided by HOAs. Here is an example of money being collected that is not being used for the purpose intended. I believe this is quite telling about the State’s use of funds collected to assist HOAs.
2. Last year, a law was passed that suggested the State would move toward offering educational materials.
“1363.001. ON-LINE EDUCATION COURSE REGARDING ROLE, DUTIES, LAWS AND RESPONSIBILITIES OF BOARD MEMBERS AND PROSPECTIVE BOARD MEMBERS AND NONJUDICIAL FORECLOSURE PROCESS.
To the extent existing funds are available, the Department of Consumer Affairs and the Department of Real Estate shall develop an on-line education course for the board of directors of an association regarding the role, duties, laws, and responsibilities of board members and prospective board members, and the nonjudicial foreclosure process.”
To date, it appears that nothing has been done to find funds to follow through with this.
3. There is nothing in the proposed statute providing for mandatory educational or training programs or counseling such as are often ordered when a Department of Fair Housing complaint results in a finding of a violation. These training sessions are also often mandated as a part of conciliated agreements. Mandatory education is a better place to start than punishment.
4. The California legislature has passed bills that have been signed into law in the past two years requiring Boards to meet with owners in internal dispute resolution processes and alternative dispute resolution processes, payment plan meetings and duly noticed disciplinary meetings, setting forth detailed schemes for these and in all cases requiring Association participation if an Owner makes the request, and in most cases making the Association pay the costs or part of the costs. But it has not given these programs time to work.
5. The California legislature has passed bills that allow small claims court judges and referees to fine associations and board members for failure to satisfy complicated procedures relating to records inspection requests and elections processes, but has not given these statutes time to work.
6. The bill proposes collection of a fee that is and cannot be fully protected from usurpation of the legislative budget process - and that could at any time reach the level of $20 per household collected biennially.
Please be aware that there is a parallel bill - AB 770 - that still reflects an ombudsman program emphasizing the educational processes and the ombudsman program. However, there is ongoing pressure in Sacramento to satisfy influential groups that are demanding an enforcement arm and it is my belief that the provisions of AB 770 could be amended at any time to include enforcement aspects. Changes happen in committee meetings all the time. The truth is that at any time we could be focusing on one of these bills while the other slips through absorbing the provisions opposed in the other bill, or the less inocuous bill could be dropped.
We have seen a similar occurrence with Elections Reform. And it is important to understand that bills like that one and this one relating to oversight, while touted as a consumer protection bills, can in fact end up costing the consumer a lot of money in compliance costs.
I have HOA and homeowner clients and I see the injustices flowing from each side of the table. I also see the daily struggles of HOA board members trying to absorb the complicated technical requirements for the various legally required processes. I am a trained mediator and mediate many disputes. I have a website that offers an abundance of free information geared to help board members, homeowners, realtors, managers and potential buyers in HOAs. I have written two books and provide a subscription newsletter on a bimonthly basis which serves as a Plain English explanation of the laws and practical problems (and solutions) for common HOA problems. I run a blog answering questions submitted through the website in an attempt to educate. In short, I do something the State should be doing to assist HOA Boards and Owners with their legal rights and requirements. I see the State’s failure to focus on education before enacting laws meting out punishment of board members as a disturbing threat to the HOA model which requires volunteer service.
Why? Soliciting candidates for Director positions in HOAs is a serious, growing problem. Given studies done by industry-involved information gatherers, and my own personal experience with hundreds of clients, I think it fair to opine that the vast majority of Associations in the state struggle to find willing volunteers to serve as things are now. The shift of focus from an “ombudsman program” to an enforcement bureau is disturbing, at best.
I have witnessed what I consider to be “rabid” dislike by some legislators for HOAs and feel that many harbor grudges for HOAs basing their concern on what have been presented to them as the worst examples if homeowner association leadership, without regard to the realities and the bigger picture, and without regard to the difficulties Boards face in trying to do a very difficult, technically legally complicated and thankless job.
And as happens, I sometimes end up eating my words - in more ways than one. For years, I opined that if there was a state agency to handle and investigate CID complaints, then maybe there would not be so much knee jerk legislation coming down. Legislators would have somewhere to send complainers and at least there would be a look at both sides of the issues complained of (or so I assumed), rather than the one-sided view given a legislator by a caller. I supported Attorney Jim LIngl's draft of a CID oversight bill (AB1250 I think, proposed some 10 or so years ago). In that day, though, I had more hope of a balanced agency and some state assistance, rather than envisioning Associations paying for their own demise.
I am all grown up now, having years and years of HOA and HO representation and assistance, hundreds of articles written and courses taught and learned, and work on probably 50-75 HOA bills under my belt. And the picture is changing. HOAs are blasted in the news. Board members are condemned in print and even sometimes in legislative history, and one time Associations even got dissed in a bill preamble. It seems like every coworker, sibling, friend or friend-of-a-friend has a complaint about their homeowners association. There are organized groups that condemn organized groups. There are groups that single out individuals solely based on their membership in industry groups. Negativity seems to be closing in on the model from the public's perspective.
The idea of oversight is a popular one, coming from the owner community, until they decide they might want to get involved in leadership in their association. If the job of board members gets any harder, which is certain to occur with each new piece of detailed, complicated legislation, the day will come when the norm is to ask the question: "Why the heck would anyone want to serve?"
Am I saying board members who do not follow the law do not need to be punished? No. What I am saying is that education needs to come first. Institution of processes such as dispute resolution and small claims remedies written into the law in recent years need to be given a chance to work. As homeowners and Board members learn of these (of course, through limited educational opportunities available at the time), that will provide "incentive" to learn more, to do the right thing instead of the wrong thing. Boards all over the state are inheriting problems that began to fester years prior, and having to deal with angry and frustrated homeowners who did not understand what they were buying into in a "CID".
The biggest problems in this state for HOAs are a lack of guidance for the volunteers who are willing to step up and serve and a shortage of willing volunteers. So I am concerned about the trends toward punishment of innocent volunteers who have been willing to step up to the plate. They could practice "preventive" law if there was somewhere to go - a hotline perhaps - to get answers to questions about how to do something. Should they be expected to read the Davis Stirling Act and understand it? I challenge anyone to try it. Should they be required to read 20 year old documents and rely on them in today's world? Again, I challenge anyone to read and interpret the documents with the law. It is clearly impossible for the average person to read association governing documents, and the law, and decide which controls in any given situation! Even the documents written in the past year or two cannot keep up with the changes in the law, and besides that, new laws on elections make it harder than ever to conduct a voting campaign to update governing documents to reflect new laws.
It is not even easy for knowledgeable HOA attorneys to read governing documents and come up with black and white standards of duty and responsibility in all aspects. The latest elections laws are again a perfect example illustrating the difficulty of deciding how to resolve conflicts. And an example of a law needing cleanup to make sense, and an example of how hard it is to update documents when the law is in a state of flux. Take a look at the issues surrounding the new elections laws on my website http://www.californiacondoguru.com (click on the link to SB 61 -Election materials and you can see for yourself).
State legislators hear only from owners who have a complaint with their board. Many of those calls likely reflect a lack of understanding of the limitations the extra layer of "rules and regulations" carried in HOAs, to protect property values and provide safeguards against unreasonable behaviors in close, densely populated housing developments. I believe the legislators and aides tend to by sympathetic, either because of a lack of understanding of the importance of protecting the integrity of the CC&Rs and rules, or else just because they are hearing from constituent.
The legislators need to hear from Board members that are frustrated about their roles and want meaningful guidance. They need to hear about how hard it is to be a board member (who wants to understand their legal obligations) and how hard it is to recruit board members. It's up to you to save yourselves, and this bill - SB 551 - is the place to start. Express your opposition. I can lead you to the well, but .......
And homeowners - be careful what you wish for. You will be the ones "taxed" to pay the costs for this new agency (or bureaucracy) if it comes to fruition. Don't be mislead when you see that a fee is to be paid by a homeowners' association; you are the association. By now, if your association is moving into the times and keeping up with the new laws, you are probably feeling the crunch of added compliance costs. If not yet, wait until you have a year of the new elections law under your belt.
The pendulum needs a push in the direction away from being forced to "walk the plank" without first offering a lifevest. And the benefits and drawbacks of a costly State oversight agency have to be examined very carefully.
Posted by Beth Grimm at June 10, 2006 10:53 PM