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August 25, 2006
DOG LOVERS - LISTEN UP - DOGS AT THE POOL
Here is an email I received from a dog lover. " What is the rule of law for California with regards to dogs on leash in the "pool area" ... if dogs are on the leash, and are not a threat to anyone, because of their distance from others, it seems cruel not to allow a dog to sit outside in the sun as opposed to having to stay inside. Pets add a lot of the life of people, and to exclude pets from all condos, is not realistic and unlawful. I live by the pool and I will say that the kids down there are a lot louder then the noise my dog makes."
I sympathize and empathize with this person. I had to put my dog of 16 years down last year and she was the best behaving dog I have ever seen. Without professional training she healed pretty much from the day she learned to walk with me. She never bit anyone and never barked in her whole life except for one time when a strange man came to the door at night one time and spoke without knocking through the screen door. She would have sat by my chair at the pool and watched the activity without batting an eye. She was a great companion. But I never took her to a community swimming pool - why? Because there were rules about that.
How many dogs do you see at the public pools? Seeing-eye dogs, maybe. And I know someone is going to tell me that their complex allows dogs at the pool. Heck, one time a board member told me their association has a swimming time at the pool when the dog owners can swim with their dogs. (No one asked my opinion - the statement came at a seminar when someone came to a booth I was manning and told me that.) I get calls from managers who say that certain owners or tenants are taking their dogs to the pool and letting them swim, and they want a letter from me because their letters and demands have gone unheeded.
I am not a believer that dogs or any pets or animals (other than a bona fide service animal) should be allowed at the swimming pool or in the clubhouse. That is because these facilities were not built for the dogs. They were built for human use and enjoyment. A dog run is for a dog's exercise and enjoyment, although I know of one association that built a dog run for people to exercise their dogs and the dog owners opt instead for exercising their dogs in the adjoining park, I assume, because people are not picking up after their dogs in the dog run.
I believe rules excluding dogs from these places are justified. Maybe one dog owner is a good "parent" but another is not. How is a board or management expected to deal with this reasonably? How about the owner that brings their dog during the day and is the perfect "parent" and then brings the pet back after dark and lets them swim under cover of darkness. What about the dog owner who has a dog that is perfect until a child approaches and then goes into protective mode? What about the dogs that shed, exude odor or spread dander around.
Yes, children can be a pain too and a dog owner may be justified in saying that children at the pool are more of a nuisance than his or her dog. And they are probably right - but children are different. They are a protected class in the eyes of the law, and they are exactly what swimming pools, parks and playyards are all about.
If your association wants a dog park, and there is space for it, it may work out for the owners. But if not, I think it best not to expect that the Association will allow dogs and other pets at poolside.
Posted by Beth Grimm at 10:37 PM
August 24, 2006
Can We Save $$ By Drafting Our Own Document Amendments?
This is a question I frequently have to answer: "We put together a CC&R committee last year and came up with a revised set of CC&Rs by taking our old ones and redlining them - can you review it and let us know if it is OK?"
The natural assumption of the Association Board or Committee Member is that it should be a lot cheaper if they do the drafting; at least that seems to be the case in California. So a group of people gather CC&Rs from their HOA friends, go to the library and pull the Davis Stirling Act, and have at it.
Then ... I have to tell them that it may cost more to get a good set of updated documents, because now I have at least double everything to review (the original documents, the changes, and often a list of board or committee notes, minutes, thoughts and concerns). I have to expend extra time and energy looking for what is missing and what needs to be written, and trying, in a nice way, to let the bodies that spent their whole last year working on this project that it is quite faulty.
Think about it - if a committee has among its members an HOA expert, they do not need the review of an HOA expert. If they do not, the documents are likely to be inexpertly written, so then I have to spend as much or more energy telling the Board and Committee members why I cannot use many of their provisions as I would just providing well written provisions. I am good at massaging egos but I would always rather preserve my energy for doing the best job possible. I, like many attorneys, have a format for amended or restated governing documents that is user friendly. I do not often find older documents that are in a format that is user friendly. I know the basis things that are in my documents related to current laws (and California seems to be annually prolific on adding new ones) are up to date, accurate and understandable. When I get a committee draft it is like looking for needles in a haystack, and making sure all are found before finishing the review.
And the other problem is of course that the Board and Committee members are sometimes hurt (pride of authorship) if their writing is picked apart. Sometimes they are even too bent out of shape to work with the one who had to tell them their work was inadequate or to keep the steam up on taking the project to fruition, which involves (in successful campaigns) a lot more work on the campaign end of things, like contacting owners and discussing the changes with them. In many cases a telephone calling or door-to-door campaign is necessary to garner enough interest to get enough votes back to pass amendments to the governing documents like the CC&Rs. If the Board or Committee is too frustrated with me for suggesting changes to their work product, the project becomes much more difficult (and it is a challenge to begin with).
I love working with boards and committees to rewrite, update and amend documents. When an attorney has a high level of knowledge of cases, laws, and experiential disasters from solving problems other boards have gotten themselves into, others in the room can be quite impressed, and that is gratifying.
So the answer is "no" - writing CC&Rs, Bylaws and other association documents should be left to the experts. Helping the Association's expert is the key, and that involves the willingness to answer questions of the attorney, read the drafts and participate in the meeting(s) where feedback and education about the provisions is requested or offered.
If you would like more information, there is a newsletter on the front page of my website explaining in more detail the process and importance (in California) of amending outdated governing documents. Just go to visit the guru at http://www.californiacondoguru.com.
Posted by Beth Grimm at 1:11 PM
August 23, 2006
Borrowing from Reserves - Is it Healthy?
There are a lot of complaints coming in about Boards borrowing from or using reserve funds for expenditures other than repairs or maintenance of components for which the funds are collected. In California, the laws are toughening up on reserve planning, borrowing and spending. Look for articles on this coming soon on my website http://www.californiacondoguru.com. I will be printing excerpts from a series of Legal Digests on this subject authored by me a few years ago covering expenditures, planning and investing guidelines. This subject never grows old. And it never resolves itself when a Board ignores inadequate funding.
Borrowing from homeowner association reserve accounts is rather like borrowing from your children's education investment accounts or from your own retirement investment accounts. If you have specific monies set aside for these things in IRAs or other investment accounts, you know there are controls against taking money out - very stringent controls ... more stringent controls than on an associations' reserve accounts. You just should not do it unless: (1) it's absolutely necessary; (2) you follow the legal requirements, and (3) you have a plan to pay it back. If you continue to borrow without regard to these factors, it will likely catch up with you.
The same goes for borrowing from the reserves. Sure, there are things that come up, like double or triple insurance premiums due on a short leash; however, when you as a Board Member find yourself on a "robbing-Peter-to-pay-Paul" syndrome, you can get into trouble both as an owner (who has to pick up the monetary slack) and as a Board Member (who could have personal liability as a fiduciary). Intentional raiding of reserves could expose a Board Member to serious losses. Negligence is accidental and carelessness may be forgivable, but continuing these practices after noting the resulting problems can cause you (if you are in the driver's seat) to cross over into the realm of punitive remedies (meaning a judgment against you that punishes that conduct, and rewards a victim beyond actual losses).
Check out the website and look for what's new in the next few weeks. The issue of reserves is a hot topic and its time to focus on that. For starters, if you are a Board member or owner in a community association (homeowners association) in California, you need to know that there are legal restrictions on borrowing (found in Civil Code Section 1356/1365.5), such as:
"The Board of Directors shall not expend reserve funds for any other purpose than the repair, restoration, replacement and maintenance of major components which are the obligation of the association, or related litigation. ... However, the board may authorize the temporary transfer of moneys from a reserve fund to the association's general operating fund to meet short-term cashflow requirements or other expenses, if the board has provided notice of the intent to consider the transfer in a notice of meeting, which shall be provided as specified in Section 1363.05. The notice shall include the reasons the transfer is needed, some of the options for repayment, and whether a special assessment may be considered. If the board authorizes the transfer, the board shall issue a written finding, recorded in the board's minutes, explaining the reasons that the transfer is needed, and describing when and how the moneys will be repaid to the reserve fund. The transferred funds shall be restored to the reserve fund within one year of the date of the initial transfer, except that the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration. The board shall exercise prudent fiscal management in maintaining the integrity of the reserve account, and shall, if necessary, levy a special assessment to recover the full amount of the expended funds within the time limits required by this section. This special assessment is subject to the limitation imposed by Section 1366. The board may, at its discretion, extend the date the payment on the special assessment is due. Any extension shall not prevent the board from pursuing any legal remedy to enforce the collection of an unpaid special assessment."
The intent of these sections is, of course, to establish legal limits on use of reserve monies and prevent borrowing unless the Board provides notice to the owners of the intent to borrow and discusses and takes action at an open meeting. Associations may borrow from the reserves to meet unanticipated operating shortfalls. (If the shortfall was anticipated, it should have been resolved in the budget process.)
Questions as to this statute arise as to what constitutes a legitimate borrowing including disagreements over the words "short-term cash-flow requirement”, and to what extent may funds be used for additional capital improvements (necessary or unnecessary). Professionals sometimes disagree on the exact intent embodied in the "one-year" payback time which changed in 1995 from the previous "three-year" payback deadline. Questions arise as to the effect of borrowing from reserves on the "disclosures" required by Section 1365 and 1365.2.5. Associations contemplating borrowing from reserves should consult knowledgeable professionals. This is an area where legal claims may arise.
Posted by Beth Grimm at 9:53 PM
August 22, 2006
When a Board Member Resigns, Can He/She Take It Back?
Something totally unexpected happens at a board meeting. It takes the Board members by surprise and scares them out of their wits. A newly elected board member comes to his/her first board meeting and finds out that the Board members are catty and do a lot of name calling, or that a couple of members sit in the front row and harrass the board for the better part of the meeting. A member of the Association that has proven themselves to be very difficult, abusive, threatening or controlling comes in with a handful of proxies to the annual election (perhaps a thing of the past with the new election rules but perhaps not) and is elected to the Board. The other Board members are certain they cannot work with him/her. Resignations abound in these situations. Volunteer Board members often react to what is in front of them, without thinking about the consequences. That is one thing.
Then, perhaps some of the other Board members talk to the one, two, or more, that have resigned and ask them to stay on, promising that they will be supportive, or watch the other person's back, or other Board members or Owners who supported them in the elections beg them to reconsider saying that nothing meaningful can be accomplished without the Board member's assistance or participation. Sometimes that resigning Board member has second thoughts. He or she may decide to withdraw, withhold or take back their resignation. Can they do that?
It depends. The real question is: was the resignation effective? If not, there is no change in trying to "take it back." If it is effective then the question becomes: do the remaining Board members want to appoint that person to fill the vacancy created on the Board by their own resignation. (And can they?) The answer to that would depend on whether there was any language in the documents that prevented that - the re-appointment. There usually is not.
As to whether the resignation is effective ... there are many questions to consider. One thing to do is to check the governing documents for the Association (would normally be a subject covered in the bylaws) and California law (Corporations Code Section 7224 specifically) to find the answer to the question. The bylaws may have specific language stating either that the resignation needs to be accepted to be effective, or to the contrary, that no acceptance is necessary and the resignation is effective when it is given. Some documents say it must be given in writing. Some specify to whom and/or how it must be presented. Most bylaws say that a board member continues to serve until their successor is elected; however, those same documents usually also say that if a Board member resigns, the remaining Board members may appoint a successor that would fill assume that Board member's position for the remaining term of that Board member. In fact, if the Board is down to one person, that person may appoint directors to fill the vacant positions.
It is also very important to consider the words and/or actions involved. Perhaps the resignation is equivocal. Perhaps there is an effective date in the future provided (in which case the resignation is delayed until that date). Perhaps the Board member intended to resign from an office rather than from the Board. Maybe the Board member was intimidated into resiging or resigned under duress. Maybe the other Board members decided the Board member had to resign because he or she had his unit for sale or had sued the Board (neither of which requires of a Board member that they resign, but for many reasons may be the "right" thing to do if either causes the Board member to lose sight of what is best overall for the other members of the Association or he or she loses their long-term vision or interest). Sometimes a Board member says he or she wants "to quit" - and then the question becomes whether that equates to a resignation. Again, it depends (at least I believe that) on what is intended, what the documents say, and what the law says. California Corporations Code Section 7224 says:
"7224 (c) Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective."
So what happens if all Board members resign? California Corporations Code Section says:
"7220(e) If a corporation has not issued memberships and (1) all the directors resign, die, or become incompetent, or (2) a corporation's initial directors have not been named in the articles and all incorporators resign, die, or become incompetent before the election of the initial directors, the superior court of any county may appoint directors of the corporation upon application by any party in interest."
Thus, any member can petition the Court to appoint directors. However, maybe that sounds easy. It's not. It requires a court petition and probably an attorney to help with the court processes. So where does the money come from for filing fees, attorney fees and expenses? The Banks holding the Association funds will not release them to a person not serving on the Board. There is no way to pay the Association bills.
And while everyone is waiting for that to happen (someone to do something like petition the court), those Board members that resigned could find themselves personally responsible for any losses that occur based on their decision to leave the ship without a captain.
So, it is wise to give thoughtful consideration to resigning ... and then to trying to renig on the resignation.
Posted by Beth Grimm at 9:31 PM
August 9, 2006
Frustrated? No One Listening? Opportunities For Face-To-Face Meetings
I put this blog under Owner frustration but it could just as easily go under Board frustration. In California, if either an owner or the Board has been attempting to resolve a situation or dispute with the other, sometimes the written word (as suggested in an earlier blog as a means of addressing problems) does not work. I always think it is a good idea to work on establishing the best "paper trail" possible because if someone else is reviewing a situation, they generally glean the most credible information from the written word. Of course, the written word can work for or against you. Writings that contain facts and accurate statements are more credible than personal attacks and offensive language. Oral communications often become "he said-she said" arguments. Still, there are many cases where a face-to-face exchange may have a better result than a written "demand".
In California, owners have various options that command an audience with the Board. Pursuant to Civil Code Section 1363.05, homeowners are entitled to address the Board at any open meeting. The Board can set parameters on time (meaning time of opportunity or length of "time"), and if an owner is very offensive in their approach, it may lead to ejection from the meeting or adjournment (get legal advice on these matters if they are remedies you want to consider). Also, Owners have a right to request a meeting with the Board to discuss payment options on overdue assessments (Civil Code Section 1367.1) or request an "internal dispute resolution" meeting (dubbed IDR - Civil Code Section 1363.810 and following). If the Owner requests an IDR meeting, the Board has to comply. It may include one board member or all, but the usual advice is no less than 2 (because of the "he said-she said" possibilities). On the other hand, if the Board asks an owner to attend an IDR meeting, the Owner has the choice whether to attend or not.
There is another option available to Owners or to the Board, as a means of dispute resolution, (short of litigation and coming face-to-face in court). It's called ADR (alternative dispute resolution). Under California law, owners and boards are required in many instances when a CC&R or rule violation or board failure is involved and someone wants a court order or declaration from a judge to try and get the other side to engage in some form of ADR. (Civil Code Section 1368.520 and following) There are various forms of ADR, two of which include arbitration or mediation. If either party refuses, and there is a lawsuit, a judge can take a refusal to participate in ADR into consideration in determining an attorney fees award, so there is incentive to participate written into the law.
In a future blog I will address more face-to-face options including the reality of "hearing"s. Look for that in the Board frustration category!
Posted by Beth Grimm at 9:26 PM