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November 24, 2006
My HOA Has Liened My Property For Not Fixing Damage Caused by the Association - Can They Do That?
Whenever I receive emails from owners whose homes have been damaged in the course of destructive testing in a lawsuit, I cringe. Of course, readers who were taken care of do not have reason to write.
This is just such a letter (modified to keep from pointing to one association, as this happens more than I would like to see).
"I am a home owner looking for help with an unfair lein from my HOA. A few years ago, the HOA won a lawsuit against the original builder for defects. The net proceeds were about $________. The board began repairs shortly after the win. Unfortunately, the board was inept, and the HOA lawyers and builders ran the association out of money within a year. There is another lawsuit pending against them.
The problem is that the roof was a major problem. The builder removed the roof during the lawsuit, in order to assess problems, just as the winter rains began. He covered it with tarps. Then, after going through the entire rainy season without a roof, my ceiling collapsed and parts were open the sky. The unit was rendered unihabitable.
The HOA kept promising to make repairs although they have not done so yet. The roof was taken off two years ago! I requested arbitration under the CC&Rs but they refuse to answer me.
After all this time, they placed a $___[huge, 5 figures] ____ special assessment against my unit. Of course, I can not refinance, rent or sell the unit in its present condition and therefore I cannot pay the assessment. I did try to sell the unit, but the realtor said I needed to make about $5000 in repairs just to sell it. I did not have the money and the HOA had not made the repairs, so I stopped making the monthly dues payment to accrue the repair money. I informed them in writing of what I was doing and why and they did not answer in writing. One of the board members with a conscience reported to me how the association lawyer advised the board that they were putting me in a psoition to make a lost use claim against them.
This week they filed a lein against my unit. They say they are beginning foreclosure proceedings against me.
How much should I expect to pay a property lawyer to represent me in arbitration? My guess is that it is more than the cost of the repairs, but counting nearly three years of lost use, damages and repairs needed, I think they owe me much more than the amount of the lien. Thus, I think I should fight them on this. What do you think?"
First of all, I believe that if all of the above facts are true, this person should be able to find an attorney that would pursue the case. Most cases that I am aware of that involved liens that are lopsided or unfair, or even that are fair in the first place but which involve sympathetic owners, tend to resolve in settlement discussions with cash settlements without going to trial. The public abhors liens, so if one of these went to trial, and the facts were as stated, without valid defenses, the HOA could find itself being "punished" royally.
As for how much one should pay a lawyer to take on a case like this, one could look until they find an attorney that might take on something like this on a contingency or partial contingency basis. Where would one look? I have to suggest contacting the local Community Associations Institute Chapter or any local HOA group that puts out a directory and calling all the lawyers to see who might be interested in taking the case. Even if an attorney would not take it, one with integrity would be willing to recommend an honest lawyer who has a good reputation that does speak to and represent owners. I know because other attorneys representing HOAs in this state in a situation where an owner has a complaint against the HOA have sent the owners with complaints to talk with me. If I cannot help them, either because of time constraints or the fact that I do not litigate, I try and help them find a knowledgeable attorney who can help them. Of course, it a fact that not every HOA attorney will represent individual owners, but those that do generally "help" things get settled sooner and reasonably. An attorney who knows nothing about HOA law can mislead an Owner and/or delay proceedings or make accusations or threats that are groundless and sometimes because of the lack of knowledge actually protract the litigation process causing everyone to pay more to get to a resolution.
This is a case that demands attention, if indeed the facts are as stated. And sometimes it simply comes down to the "squeaky wheel" gets the grease. But I would suggest this owner talk to attorneys in his or her area, striving to find one that understands HOA laws in California, and does not like mistreatment, from whichever side it comes.
When the Association designates certain units for destructive testing in a construction defects lawsuit, at the VERY LEAST it would be my feeling that those units should get first attention when a "fix" is identified and at the VERY LEAST what was destroyed in testing should be moved to the top of the list for being repaired at the first reasonable opportunity. If any of these cases goes to trial, I do not believe the HOA will receive much sympathy if a home is destroyed to pursue a claim and then not repaired. Years ago I took one of these on and the Association told the owner it ran out of money and could not fix the hole in the dining room floor. They told the owner to put a board and rug over it. NOT ACCEPTABLE!
On the other hand, sometimes (all too often really) the Board determines that there is not enough money left after a lawsuit to repair all identified construction defects, and I could envision a situation where the owner whose unit was used for destructive testing might not get prioroty in making repairs that others are not going to get. Still, the damage that was caused needs to be repaired!! There is no question in my mind about this, even if it takes a special assessment to do it. Leaving an owner without a home, when others still have use of their homes, albiet with some identified defects, should not be considered a viable option.
if this owner gave all relevant facts, I would suggest he or she keep looking, actively and immediately, to find a lawyer that is local enough to at least threaten or file a lawsuit, or engage in meaningful arbitration or mediation, to resolve this.
But there is one thing that everyone should know. In California, there is case law that says an owner cannot withhold assessments and put them into an escrow account or whatever they might claim to do to separate out the money and then use that to pressure the Association to take action. The requirement of paying assessments goes on even if you do not like the flowers, the maintenence performed (or not performed) or the paint color. So discontinuing paying an assessment can lead to a lien and extra charges associated with it, and to foreclosure. In this case, the owner needs to find legal counsel asap because of the pending lien issues.
Posted by Beth Grimm at 9:36 AM
Rebuilding After Lawsuit - What if There Is Not Enough Money?
Have you heard of this scenario? I have, too many times [from a reader]:
"A few years ago, the HOA won a lawsuit against the original builder for defects. The net proceeds were about $____ million. Due to many factors, the association out of money long before all of the defects were repaired. Now, the Board wants each owner to pay a $10,000 special assessment to finish the work that needs to be done. Is this right?"
Right? Maybe not. Fair? Maybe not. Realistic? Yes, unfortunately.
Lawsuits are not the answer to everything in a defect situation. In fact, there are times when an association is better off to simply take the money it would spend on a lawsuit and what it has in reserves to make the necessary repairs! Of course, this is to be determined for each case by many factors, such as:
(1) What is the extent of the damages?
(2) What is the financial capability or repair capability of the contractor(s) responsible for the defects?
(3) What is the urgency in getting the defects repaired?
(4) What will it cost to fix the damages vs. what will it cost to pursue the contractor or developer in court (both in terms of dollars and in terms of time)?
The laws have changed in recent years to require certain procedures before lawsuits against developers and builders can be filed, in an attempt to force a process whereby the developer or builder has an opportunity to come in and do testing themselves, whereby owners are involved in the disclosures and decisions, and whereby the parties are encouraged to seek a solution outside of court rather than in litigation.
But the fact remains, sometimes litigation turns out to be the best (or at least most productive) option. Even when it is, and the HOA receives a fair judgment, it is often not enough to make all repairs that have been discovered. And so, in that case, HOAs have to disclose what proceeds were received, how they will be spent, and what will not be fixed that was included in the demand for damages.
After the lawyer takes their cut, which sometimes was based as an hourly rate for time spent, and sometimes is based on a contingency, the Board has to manage the remaining funds and expenditures wisely to get the most "bang for the buck." Unforetunately, in many cases Boards do not do a very good job of allocating resources and before everyone knows it, there is a serious shortfall considering all of the work that has been identified as needing to be done.
Then, its a matter of removing projects from the priority list, or going to the members for the funds needed to fix everything that has been identified as a problem. If Owners will not approve the special assessment needed, then they are stuck with required disclosures about the problems that have been identified.
Sometimes in a lawsuit a party "overblows" the impact of the thing sued upon hoping that by exaggerating the impact, the party will recover enough to do adequate repairs, even after paying the attorney. But more often, there is just a considerable shortfall.
It is difficult to move through the litigation process without a special assessment, either for legal costs and the attorney, or for replenishing reserves from which money was taken to fund the lawsuit, or to make up the shortfall.
Is it fair? Maybe not. But life is not always fair ... is it!
Posted by Beth Grimm at 9:28 AM
November 16, 2006
Does the Board Need to Have a Membership Meeting to Fine Someone?
There are many frustrated people in California, simply because answers are hard to find. Free answers at least. One of my readers asked this of me: "I need some clarification between CC1363 (g) and CC1357.100 - .130 (Adopting or Changing Operative Rules). My question is: Can a Board of Directors implement and enforce a monetary penalty for violations without having a membership meeting first? I am currently a homeowner. My attempts to get clarification from other sources failed because they were not attorneys. I just want to make sure the Board is following proper procedure. Thank you!"
The law in California is complicated but the first inquiry in any event is the governing documents. I have seen a few sets that have some requirements for passing rules, and setting a fining policy could be interpreted as rules. However, notwithstanding anything in the documents (a good legal phrase meaning basically ignore what is in the documents), this is what California law says on the subject:
A Board has to implement a fining schedule and circulate it to members before any member can be fined. The schedule has to be sent out to members when it is approved by the Board and thereafter, when changed. CC1363 (g)
However, when Civil Code Section CC1357.100 et seq. (Adopting or Changing Operative Rules) was signed into law effective the beginning of last year (2005), it added some steps to the process before implementation. The fine schedule is considered to be operating rules and so is subject to that statute. The law requires circulation of new or changed operating rules to the membership so that the members will know what is being proposed and will have an opportunity for commenting on the proposed rules. The period of time is often referred to as the "comment period". Members must have at least 30 days notice before the Board will take action on proposed rules, and must be able to attend the Board meeting where the action is proposed to be taken. There are some exceptions to this circulation requirement, such as if the rule simply reflects California law or some provision in the governing documents (and why, you say? because the Board is not exercising its own discretion or judgment, it is following existing legal requirements).
The Board must then consider implementation at an open BOARD meeting, not a membership meeting. The owners do not get to vote on the rules, only comment (except that if there ARE provisions in your governing documents consult an attorney on this so you are not steered in the wrong direction by the law).
There is a lot more to the inquiry. The fine schedule cannot conflict with the regulatory (called governing) documents of the Association. Once the schedule is circulated and the Board is considering fining an owner, the owner must be given a hearing before any fine is imposed. The law nicely calls it a meeting, ... if the Board is considering meeting to consider disciplinary action, the owner must be given notice and an opportunity the attend the "meeting." There are technical timing and notice requirements on hearings. Whew, the things a person must know just to accomplish a seemingly simple task!!!
Posted by Beth Grimm at 8:24 PM
November 14, 2006
Annual Meeting Minutes - Do We Have To Wait A Year to Approve?
Annual Meeting Minutes - In the coming years, California HOAs, especially in light of the elections reforms of 2006, are going to have to figure out how to handle them, in the stages of drafting and approval. Recently, an astute manager sent me a question about approval of minutes. She had obtained some materials that lead her to believe that when annual meetings of an organization are as far as a year apart, there may be a better way of handling the drafting and approval of minutes than simply waiting until the next annual meeting to seek approval of the members.
She sent me the question as to whether interim approval and finalization of minutes is appropriate, and I went to the website I have found to be very informative and appearing to also be very authoritative (www.parli.com) and asked the question. I received the following feedback which I believe is pertinent, important, and which deserves - in the current elections reform for HOAs - due consideration.
The question: Is there a way that HOAs can finalize approval of the minutes of the annual meeting before a year is up and the next meeting occurs?
I believe the answer if you are using Roberts' Rules is "yes", based on the response I received from the provider at www.parli.com, which I will share with you:
"Thank you for writing. First, let me respond to a committee approving the minutes. This is very common in parliamentary organizations where there is one meeting a year, for example our state meetings and our district meetings. A common practice is for the presiding officer to appoint several members present to serve on the committee. This does not have to be the case. An organization could have a regular committee to do this.
…
Minutes Approval Committee: In organizations that meet yearly or semi-annually, it is best to have a committee correct the minutes of the meeting. Those who serve on this committee have the same responsibility as the secretary to take accurate minutes. These members need to pay close attention to the business presented at the meeting because the organization is relying on them to see that the content is correct.
…
In organizations where not much business takes place, the Minutes Approval Committee members may only need to write down on paper the essential business transacted. If organizations where meetings are complicated, then the members of the Minutes Committee need to have the same form as the secretary to keep an accurate account of the meeting.
…
Often times in small organizations, the presiding officer appoints the members of the committee at the meeting. This may not be a good approach. The best approach might be to have this as a standing committee with members who are trained in taking and writing minutes. Having this pool of talent available and trained, can be a place to look for future secretaries, or for a secretary pro tem in the absence of the secretary."
I believe this is a very good approach, especially given the fact that the new elections reform is wreaking havoc with the annual meetings processes. Some associations are doing away with them. Others are turning them into a social affair, and/or using them as a "kickoff" for the annual elections for the Board. All these may be very good ideas. There are issues and questions that are going to arise about quorum. If the meeting is held in conjunction with the secret ballot elections, then the quorum may be established with the help of the return ballots. In a very small association, or any association that has been able to engender interest by any means, the quorum may be established. If there is no quorum, there will be no action taken at the annual meeting, in which case a "report" may be helpful in establishing a record of the successes or failures, and might take the place of minutes.
In any event, if/when your HOA does have annual meetings a record must be made, preferably in the form of minutes and preferably by someone (the secretary) with or without the help and benefit of a "Minutes Approval Committee". Of utmost importance is to consider what skills are needed by the Secretary and the Committee Members to understand what should be put in the minutes, and maybe even more importantly, what should not! If you want more on this subject, visit www.californiacondoguru.com for a more detailed article passing along more information about how to make the "Minutes Approval Committee" work for you, and also visit www.parli.com for much more information on parliamentary procedure, questions and answers, and resource materials to help your association cope.
Posted by Beth Grimm at 12:04 PM
November 11, 2006
Recall of the Board - How Hard Is It?
Wanting to recall a board is a common desire of an owner or owners who are frustrated with the Board's actions. Sometime the issues are about parking, sometimes pets, but probaby the most common complaint is about financial issues. From the standpoint of the Owners, it looks like the Board is misspending funds. And when Board Members get peppered with questions, they often close down. And when Owners want records and verification for the expenditures, many Boards get tight lipped and closed fisted. Sometimes it's a defensive response. Sometimes it's just because no one has ever shown any interest in doing any of the volunteer work to figure out the budget or in any other capacity, and so the other members of the Association are completely in the dark about finances, by their own design. However, special assessments tend to get the Owner's attention. They serve as a wakeup call, and the immediate reaction often is this (from a reader):
Our Board just passed a special assessment and demanded that it be paid immediately. There was no meeting about it, no warning, no explanation, and a lot of us are upset. I had a meeting with several other Owner's and we all signed a Petition to Recall The Board. We asked for a meeting for the Recall - just like the law says we can do. The Board did not give us notice of when the "Special Meeting" will be called and I advised the other members that we need to pick the time and the place of the 'Special Meeting.' What happens if the BOD decides not to show up at our meeting? Are they automatically recalled?"
The simple answer is "no" the Board is not recalled just by virtue of the fact that they do not acknowledge a meeting called by Owners for recall. In the "old days" (pre the new elections law requirements), the Corporations Code had a process similar to that described above that was enforceable. It basically allowed homeowners to proceed to schedule a recall meeting if the Board did not answer a valid petition asking for recall properly, i.e., by scheduling a meeting within 30-90 days out, and providing notice within 20 days of the petition to the members. However, that process, though it still exists within the Corporations Code, is hobbled by the new elections law requirements. Even in the "old days" if a group of owners did schedule a meeting it often ended in chaos because many times, the Board would just ignore the results and then the battle was who had rights to the checkbooks and accounts, or the old Board claimed that the owners did not do the proper procedures and the matter often ended up in court or one side or the other got tired of the fight and gave up.
Today, it is harder for a group to proceed on their own, if the Board is resistent to honoring a valid petition for recall. The Board should, because if the Board members fail in their duty to follow the law, they could conceivably end up with some personal liability. However, the question is how to properly respond to a petition. In the "old days" scheduling, noticing and proceeding with the recall meeting and vote would be a legal and appropriate response (assuming the petition was "valid" and satisfied the legal requirements). The meeting would be held, the vote usually was decided by the result of the "proxy war", and the sides went their ways when the results were in. Sometimes the Board voted in, because of cumulative voting, ended up consisting of two strong members from each "camp" and one "fence-sitter." As it happened then, the "fence-sitter" (or a kinder word might be neutral) became the most powerful person on the board as they were always the "tie breaker".
Today, the process is more convoluted. The new elections law requires a written secret ballot by mail and the good news is (from the owner's perspectives) each Owner can vote in private, by mailing their ballot from home to be held, protected and counted by an independent source. The bad news is that there is no road map now for getting there. The Corp Code requires "calling a meeting". The elections law requires voting by mail. The Board may decide to try and satisfy neither, or both. Even if the Board decides to send out ballots and to call a meeting to deliver and count the ballots, the members may end up in a barrage of pre-meeting hit pieces and be confused about choosing. Neighbors may be pitted against neighbors. The proxy gatherers may go out in force. However, the issues and questions surrounding proxy distribution and use complicate the process considerably. No matter which side is being represented, there is likely a challenge from the other side on almost every step of the way, because there is no clear guidance on how the recall should proceed.
For example, the Board may decide not to distribute proxies thinking it not necessary to use them. It is true that because the new law says the returned ballots count as if the person was at a meeting, no proxies are necessary to establish quorum. And the Board may decide not to accept any proxies. But if the association documents allow members to vote by proxy, I would have to question the legality of that position.
And there is the question of how the election for Board members should proceed if the Board or any director is recalled. If the whole Board is recalled, who is going to conduct the election of the successors? If it is the Board that is recalled, owners may come unglued as the risks continue of the actions complained of that lead to the recall. If it is not the Board, then who will it be? A prudent Board could appoint the Inspectors of Election to conduct the election for the Board but what Board is likely to have that much insight or desire to make things easier for the "insurgents." And even if the Board is pragmatic and has a process in place for someone else to conduct the election of the successors, who makes decisions during the "in between" time, especially if a contract comes up for renewal or if there is a weather event that causes severe damage to the complex or an accident in the pool that needs addressing or something like that. It's like a boat without a rudder.
In the "old days" the recall and relection of successors (if the Board was removed) would commonly occur the same night. But now that is quite difficult because of the election law requirements of having to send the ballot out 30 days before the votes are to be tabulated. Some boards may try to combine the ballots into one - the question of the recall, and the election of successors in case the recall is successful. But this is difficult as the slate of proposed candidates cannot really be firmly established until one knows if the entire Board is going to be recalled. And even then, though the incumbents and the proponents of recall may have their slates identified, the neutrals have not had an opportunity to weigh in on the nominations for the Board that would be in effect if the Board is recalled.
So you can see, it gets quite complicted. There is an article on my website called "Recall in An HOA - A Blesssing or a Curse! I suggest you read it (http://www.californiacondoguru.coat the Guru site) and then decide if there is not a better way to address grievances. Groups of owners do not always think like individuals. There are such things as forcing a meeting to discuss a difficult ballot measure or special assessment, inviting a face-to-face with the concerned owners and the Board, asking for a group or representative mediation on an issue. The owners are entitled to seek help to enforce the document proviisions against Boards doing things in violation of the documents, and a good legal representative may be able to help apply pressure in the right places. The members can ask for an arbitration on the issue, ask for a neutral opinion from an expert, etc. The key is find the right buttons to push to get what you want and need, and what is legal. If the button is too hard to push (it is stuck) you may have to resort to desperate measures such as attempting recall. However, given the difficulty in trying to integrate proper procedures under the new Davis Stirling requirements and the Corporations Code, a group of owners will probably need legal counsel or at least a savvy advisor.
Leading a group of owners through recall is more difficult than ever. A Board can put up a lot of hurdles, but it is not out of the question. Sometimes the threat or pressure of a recall effort will scare board members off. No one likes to be threatened with that sort of action. There is nothing precluding a group of owners from going to court and asking the court to direct the processes for the election, laying out what is acceptable and what is not. It may be possible that less money would be expended and more accomplished by doing this. A group can fight hard and make all the wrong mistakes, even with paid legal counsel, and this area of actions has become so complicated as to necessitate a real expert and a real good fight to achieve a legally successful recall effort. I am guessing the cost of the process is doubled or tripled from earlier times because of the many more hurdles that can be put up by the opposition. In my experience, it used to take between $1500 and $3000 to get to a successful recall meeting and election; now I would guess the cost to be more like $3000-$6000. Some have been able to accomplish the effort without help or expenditures like this, but if those efforts were achieved by bullying and threats, one can almost predict that the other side will be back with a vengence. I have seen situations where in one association they end of with several recall efforts within the course of a year or two. I hope you do not end up there if you are considering such an effort.
Posted by Beth Grimm at 1:26 PM
Special Assessments - Is Documentation of Need Required?
Here is a question by a reader about special assessments in California. I have left blanks in the amounts so as not to identify the specific association or sender,
"I live in a ___ unit condo complex and the BOD decided to charge the homeowner's $______ as a special assessment without supplying documentation or getting a vote by the homeowner's. This amount is more than 5% of our operating budget for the year and no explanation was given. I have filed a small claims court complaint. Is this common?"
I do not know how common the small claims complaint thing is but it seems odd to me that a board would not tell the owners what the special assessment is for. I know it happens, but it is not the way to go. If a Board needs to consider a special assessment, it does have the authority to assess one that is less than 5% of the budgeted gross expenses for the Association for the fiscal year without a vote of the members. Before I would expend the energy to file a small claims court action, though, I would make a list of questions for the Board to answer and submit them in writing, ask the Board to address the need at a special membership town-hall type meeting or through a communication to owners or on the websiite or some other way. If the Board did not comply, I would ask for records relating to the special assessment under Civil Code Section 1365.2. Owners have rights and there are punishments for withholding financial records.
On the flip side, many boards will discuss needs for a special assessment ad naseum at board meetings and get frustrated that owners who demand information do not come to board meetings to see what is going on. It is not in the Board or association's bests interests though to minimize information about the need for a special assessment. It is in the best interest to MAXIMIZE communications. People can usually understand need, what they cannot understand is "secrets".
And if the assessment was for more than 5% of the budgeted gross expenses for the fiscal year, it may be illegal and unenforceable. If it is an "emergency assessment" then it may be higher, but there are requirements of notice to members and criteria for what qualifiess as an "emergency assessment."
So ask the questions beforehand, make the effort to get the information, and document your efforts, so you do not end up in small claims court with "egg on your face". If you are going to go to court, you may as well go with two causes of action instead of one: i.e., a claim of illegal assessment and a claim of failure to provide records under the statute. There is a "$500 per" possibility of penalty for each violation of failure to provide records as specified by Civil Code Section 1365.2.
And Boards, do not let this happen!
Posted by Beth Grimm at 1:20 PM
November 6, 2006
Flying Mac and Cheese - A Nice Break From The Realities of CID "Lawyering"
Sometimes its nice to get a glimpse of real life fun, even if you are a lawyer. I just felt like sharing this....
Ever gone out to dinner with your 1 and 3 year old grandkids on the night just before a meeting with a Board of Directors? All dressed up? I like spending as much time with children and grandchildren as I can, so if I have an evening meeting close to where they live, I try to meet up with my daughter and son-in-law and the kids for a quick dinner. Here's how it goes, flying mac and cheese while being serenaded by the song most recently learned by my grandson in preschool (tonight it was Happy Birthday). Sticky fingers, sticky faces and sticky kisses. Spoons flying every which way (with mac and cheese flying, dropping and some of it even making it into the mouth). A mad grab to get the salt and pepper, then the ketchup, then the menus, knives, forks and the other condiments out of reach just before the grab, first from one child at one end of the table, then from the other at the other end of the table. A game of 52 packet pickup with the sweetner packets. Broken crayons squashed into the top of the table and on the floor. And big bear hugs on the way out. My advice: take your rain poncho along! And come early, come often........
Posted by Beth Grimm at 9:52 PM
November 5, 2006
Insurance Rates Skyrocket - Where Does an HOA Get the Money to Pay?
Question from a reader: "Our earthquake insurance costs skyrocketed this year? What can we do about it?"
Wow, this is a big problem today. Most HOAs are getting slammed with high bids for renewal of earthquake insurance (if they are lucky enough to even get a quote) and this again raises the age old question of where the balance lies between insurance and risk. There is an article on my website (the californiacondoguru) called "Earthquake Insurance, To Buy or Not to Buy, That is the Question", and I highly recommend that you read it. It talks about what to do before saying "No" to earthquake insurance. Some Boards assume that because the cost is so high, its best just to drop it. I do not support that philosophy. I believe there are some prudent steps that should be taken to involve the membership in the decision, and to gather sufficient information so that the members and the Board can determine together what the best option is for the Association. And of course, the governing documents have to be consulted to see if purchase of it is a requirement, or just an option left with to the discretion of the Board. And even if the decision to purchase it or not is left wiith the Board, it may be that the vote of the owners is required to pass a special assessment to get it. And it may be that there is not time to take a vote on a special assessment before the premium comes due, so what to do? what to do?
If a Board is facing double or triple insurance (or exponentially higher) premiums for insurance deemed to be prudent and/or necessary by the Board, which increases have been a common occurrence in recent years, without sufficient warning to allow for prudent budgeting, the money has to come from somewhere. Some boards deal with this by imposing an emergency assessment (not ruling on the legality here, just saying it happens). Others borrow from the reserves. Others respond by asking the owners to approve and pay an assessment for the cost. Because of delays and special voting requirements taking effect July 1 of this year, in California balloting owners for approval of any special assessment has become quite a bit more difficult, time consuming and costly, so Boards may try to avoid this remedy if they can find the money elsewhere and pay it back over time.
Good Idea? Bad Idea? It depends completely on the circumstances of the individual HOA, what the documents require or allow, what the capabilities and interests of the members are, and the level of risk that can reasonably be borne.
Posted by Beth Grimm at 7:54 PM
November 4, 2006
HOMEOWNER BILL OF RIGHTS - AARP's Proposal - Take a Look - Read Between the Lines
There are many versions of Bills of Rights for Homeowners who live in common interest developments in California and elsewhere. AARP is floating a proposal that is 69 pages long. Its a difficult, tedious read, but I suggest you take a close look. While it is a pleasing read for the most part, there are some things that you should know. The proposal contains many suggestions for rights that are already embodied within California law. But some of the suggestions in the proposed Bill of Rights go a step too far past the line that needs to be drawn from the administration side of things, just to keep a reasonable balance. What benefit is common interest living if not having the advantage of being part of a community that shares, and therefore makes affordable to many , very nice housing, desisrable amenities, and someone else to do the financial planning and "dirty work" of enforcing the regulations.
AARP purports to speak for its members; hopefully it is going to be true to them with this process by explaining the ramifications of some of the provisions of the Bill of Rights. It may look good to individuals who know little about the administration of an HOA. And of course it is understandable that the group would introduce a Bill of Rights it believes protects its members from unreasonable conduct by a Board of Directors. However, a cautionary note is needed because trying to elevate each individual's interests above the interests of the community as a whole can lead to serious problems. (Have you not heard of too many chiefs, not enough indians?) It is important for all (not just seniors - because we will all be there someday) to closely review the proposal for rights, and especially the part about individual autonomy being a right of each owner. Can you see where I am going. If everyone can express themselves in an unfettered, uncontrolled manner, there are sure to be neighborhood wars. Emphasizing individual automony over the group interests does not foster a consensus-building society or good neighbor relations. And it can seriously hamper cost and time efficient administration and management of the community.
What I am suggesting is that it is important to read between the ilines, and understand the ramifications of a Bill of Rights that gives short shrift to the responsibilities that come with common interest living. Take a look next week on my website (http://www.californiacondoguru.com) for a new article that examines the Bill of Rights very closely. While I am sympathetic to owners who are subject to "closed-minded boards", I am also cognizant that HOAs need powers of enforcement, assessment collection, and support from the community simply to survive.
Look for the article.
Posted by Beth Grimm at 10:12 PM
November 1, 2006
Should, or May, HOA Managers and Attorneys Act as Inspectors of Election?
The new law on elections in California requires choosing or electing Inspectors of Election for most HOA elections, to provide an unbiased source for monitoring elections and tabulating ballots.
The possible choices are limitless, although suggestions are made in the statute, including public elections pollworkers, CPAs or notary publics. An Association can use members or vendors; however, if the HOA wants to use the vendors, the Election Rules must specify that as an option.
HOAs need to consider the choices for any election. Thought needs to be given about whether any special expertise is needed, or the election is likely to be controversial. In many cases, association Members may suffice as inspectors. With regard to any election, consider the likelihood of controversy. Using a Member where a trained Inspector of Election who could handle some controversy would be a better choice could result in mayhem at a meeting where the election is hotly contested or the measure is hotly opposed. Appointing anyone who is controversial will probably result in controversy with regard to the election. And you certainly do not want Inspector(s) likely to walk out of a meeting if there are heated discussions about the process.
As to using Association vendors, consider this. The Association’s attorney can be accused of a conflict of interest if he or she ends up having to make the ultimate decision as to whether or not to accept proxies or ballots that would make the difference in the board makeup. He or she could be the right one to provide guidance as to what laws might apply if there is a question about a ballot or proxy. Still, it is probably best if the final decision is left up to an independent Inspector as to whether a ballot or proxy should be deemed valid. Management, the Board and Inspectors should be encouraged to raise any questions ahead of the meeting if it any can be identified as the date approaches. If a question arises during a meeting that requires a legal opinion, it seems to me that the Board and Inspectors could wait to announce the results of the election until legal counsel can be consulted. The notice could ultimately be done subsequently by mail once the legal ruling is obtained. I am certain questions will arise at elections for which there are no apparent answers. Inspectors may feel comfortable ruling on the issues that arise, or not. But there has to be a reasonable way to address problems that are not resolvable on the spot.
As for managers, many Associations will want to use the managers, simply because they are most familiar with elections and the processes. Just keep in mind again, that there may by a challenge to a manager making a decision as to whether or not to allow counting of ballots that do not conform exactly to the stated rules or instructions. The decision could in essence end up to be to accept one board slate or another and this could put the manager in a very untenable position, and could subject the election to challenge, justified or not. It would be fairly easy for a disgruntled slate of board members to argue that the manager had a bias.
On the other hand, the manager may be in the best position to do the work the most efficient and cost effective manner.
So, before choosing Inspectors, think about it.
Posted by Beth Grimm at 9:40 PM