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May 31, 2007
Some People Don't Want Resolution - They Want To Be Vindicated
Some people do not necessarily want to find a solution for a problem, they just want to be right, at any cost. How do I know this? I see it often.
Recently, I got a call from a reader of my blogs and visitor to my website... who, by the way, complemented me on the website and blog (a usual opening to a question). Conversations often start out this way, and then they are followed by "My problem is ..."
Then, this caller asked me outright if the "Freedom of Information Act" applied to HOAs. The caller wanted to know it if would guarantee him rights to get certain documents. I told him that there were statutes in California that required the HOA to turn over many records, and asked if he wanted the citations to the statutes that do regulate the dissemination of information. (The Freedom of Information Act doesnot regulate the dissemination of information in a California HOA.)
No, he said. What he wanted were copies of complaints that owners had apparently made against him. He admitted to having violated the governing documents - having cured the violation and yet wanted to know who complained.
I told him that an HOA is not required to release any complaints that neighbors made, and that doing so would open the door to retaliation. And, I suggested he did have the right to pay a visit to the neighbors and ask them if they had any complaints, and/or tell them they could come to him before going to the board and he would work with them, if they did have any complaints.
No, he said, he wanted copies of the written complaints. His parting "shot" was that he would make his case with the association and let them spend money on an attorney.
Sometimes people lose site of the idea that a situation can be resolved without butting heads. But that gets in the way of "being right". Everyone can't be right all the time.
Posted by Beth Grimm at 9:31 PM
May 18, 2007
All About Minutes - What Goes in Them? Everything? Nothing?
I get many inquiries about minutes. So I decided to put the most recent questions into one blog.
Question: "Our BOD puts copies of the monthly minutes on our doorsteps. Many owners do not live onsite. For the "Financial Report" section, the only reference is that the motion to approve the financial report was approved. There is no information about the financials. What rights do we have? Can anyone require them to put at least that minimal information in the minutes?"
Answer: Generally what goes in the minutes are statements about whether there was a quorum, who was present, statements of what reports were given, motions and action on the motions. There certainly are associations that list financial information in the minutes, or attach reports, but there are also those that do not. There is no specific law that says what must go in the minutes. Occasionally governing documents have some specifics (would usually be in the Bylaws). However, in regard to the question, the best opportunity to get the Board to include financial reports with the minutes is through voluntary compliance. If that does not work, the owners who cannot come to meetings and get the information by being present can request copies of financial reports that have been generated, whether interim or annual. The association can charge for the copies.
Question: "The Board recently approved a request of an owner to remove [a fireplace/deck/etc.] that was declared unsafe. There may be other similar improvements in the development that are unsafe. The request was an architectural request and the Board in our association makes the decisions on architectural applications. The action did not appear in the minutes. Isn't the Board required to list all actions that are taken in the minutes of the meetings?"
Answer: I would say generally, the answer is yes. However, there are times when the Board takes action in executive session and although those actions should be logged in the executive session minutes, those minutes are not open to review or copying by the members. And there are associations that do not list architectural decisions in the board meeting minutes (although they should if the Board is making the decisions). For more, see the next question.
Question: "About executive session minutes. New board members need to know what the prior board's actions were with respect to a legal matter. Must executive actions be recorded in special minutes and if so, are they privileged as to new board members? I would think that minutes of executive sessions should be kept and that successor board members would have access to them in their role as current board members. Your thoughts?"
It is my belief that in California anyway, Boards should make sure that all action items are noted either in open meeting minutes, or, where the meeting is an executive session (as allowed by law), in the executive session minutes. However, there seems to be some disagreement among attorneys about this. Some recommend not even taking executive session minutes because if they should become discoverable in a court case, the decisions or actions could lead to liability that does not otherwise pertain or the "discovery" of such minutes might hurt the association's case, especially if there were notations constituting harmful admissions of some kind. Some feel that all actions must be noted, and that everyone present must be disclosed, and that the action items must all be listed in th open meeting minutes of the next open board meeting. That last item, I do not agree with. California law requires that if the Board meets in executive session at times that are not the same evening or day as the open meeting, that at the next open meeting, the Board must note that an executive session was held, and the purpose must be stated. This makes sense because that would let the owners know whether the purpose was legitimate (a personnel matter, a contract negotiation matter, that it was about litigation, a disciplinary matter, or an attorney-client privileged matter).
As for any director's right to review of executive session minutes from prior boards, California law (Corporations Code) allows board members access to all association records. However, case law suggests that there are times when this unfettered access can be limited. In a California case, a board member was denied access to proxies. He wanted to see who voted for him, but the court decided that the director was elected and so there was no need to view the proxies. So, it is conceivable that a board member may be denied access to certain association records such as executive session minutes. One such scenario might be if the board member is suspected of disclosing association confidences.
Hope this helps!
Posted by Beth Grimm at 7:36 PM
May 16, 2007
ASSESSMENT COLLECTIONS - HOW MUCH CLOUT IS FAIR GAME?
There are two sides to every issue. On the one hand, there are the owners who are against assessment increases, and against the serious remedies for non-payment of assessments. And many, many people on both sides of the issue are afraid that the foreclosure rates will seriously increase in the coming months. It is crisis time. It is hard to support the tough remedies. Few people want to see a family lose their home.
So what's the other side? Try this: what about those people that can afford to carry their own fair share of the burden, but fail under the burden of trying to cover the debts of others?
Here is a question sent by a reader:
"I am on the board of directors of the HOA at my condominium. We have several owners that are behind on their monthly fees ranging from a few months to a year and a half. These add up to tens of thousands of dollars that we desperately need for repairs and reserves. We have jumped through all of the usual legal hoops; letters, fines, liens, etc. with no results except the animosity of the offending owner. Unfortunately, these people usually wind up declaring bankruptcy and we are the last ones to belly up to the money trough and end up with nothing. In the meantime, we have provided these people free water, sewer, hot water and trash service for the entire time they have refused to pay, leaving the other owners to subsidize them.
If this were an individually metered complex and the owner stopped paying for a utility, it would eventually be shut off. Since a large part of the monthly HOA fee pays for common utilities like these, we are in effect the utility provider. As such, do we have the ability to stop delivering these services based upon nonpayment? I put this question to our property manager, and their legal people said we do not. All we could do is take away their common area privileges like the spa, etc. What are our options?"
So, how would you like to be sitting in this person's chair? It's a tough place to be.
As for shutting off utilities, some associations do have such a right written into their governing documents and do threaten to shut off the utilities, and do shut them off when the bill is not paid. But as to whether this legal or not, or a good idea or not, it is something that should be left to the Association's individual legal counsel to discuss with the association. It's a serious remedy. Still, it is not as drastic as taking someone's home away by foreclosing, so it would seem to be a more palatable option than selling the home on the auction block.
In any case, as I said, there are two sides to every controversy. It is helpful to understand that in setting policy and choosing courses of action.
Posted by Beth Grimm at 9:07 PM
May 10, 2007
DOGS - MUST HOAs ACCEPT THAT AN OWNER CAN HAVE ONE?
OKay, I am tired of dancing around the question, and several readers have asked - does an HOA board in California have to allow dogs?
And before answering, I will add the caveat - listen to your own legal counsel - there is debate on this very issue going on all over the State.
What does the law say?
1360.5. PETS WITHIN COMMON INTEREST DEVELOPMENTS.
(a) No governing documents shall prohibit the owner of a separate interest within a common interest development from keeping at least one pet within the common interest development, subject to reasonable rules and regulations of the association. This section may not be construed to affect any other rights provided by law to an owner of a separate interest to keep a pet within the development.
(b) For purposes of this section, “pet” means any domesticated bird, cat, dog, aquatic animal kept within an aquarium, or other animal as agreed to between the association and the homeowner.
(c) If the association implements a rule or regulation restricting the number of pets an owner may keep, the new rule or regulation shall not apply to prohibit an owner from continuing to keep any pet that the owner currently keeps in his or her separate interest if the pet otherwise conforms with the previous rules or regulations relating to pets.
(d) For the purposes of this section, “governing documents” shall include, but are not limited to, the conditions, covenants, and restrictions of the common interest development, and the bylaws, rules and regulations of the association.
(e) This section shall become operative on January 1, 2001, and shall only apply to governing documents entered into, amended, or otherwise modified on or after that date.
What on earth does that mean, with regard to the question of dogs?
I happen to believe the following words are key: ... "from keeping at least one pet within the common interest development ... [and] ... “pet” means any domesticated bird, cat, dog ... or other animal as agreed ....." and that they mean that an HOA Board (unless there is an exception based on the retroactivity clause) has to allow an owner have a dog, unless or until the dog has proven itself worthy of exile.
Some Boards have adopted "no dogs rules", but they allow other pets - risky in my view, but they are at least in some cases getting legal advice that it is okay to do so ... so be it - I am not here to criticize other attorneys. And it only takes two attorneys to disagree to be headed toward a lawsuit. And this is an issue that is ripe for litigation. However, the more conservative view, again, my opinion, and to avoid litigation over the meaning of the statute, is to allow the dog. That does not mean you cannot take action against an owner who allows a dog to be present that is a menace to society. Unreasonable barking and pooping without pickup are still generally actionable nuisances.
More commentary: This new statute raised eyebrows in 2001. For example, how difficult was it going to be to “expel” a problem pet? And if any rule on any subject was amended did the Association lose the right to prohibit pets if a prohibition existed before this statute took effect? Those questions still exist. And it is important to know about a California appellate case that was decided in 2004 that allows for a “companion pet”. The case is called Elebiari v. Auburn Woods I and it involved an association that attempted to enforce a “no dogs” rule (other pets were allowed) when the owner claimed the dog provided good company and improved her mood.
The truth is that it is getting harder and harder to prohibit any pets but to prevent the invasion of dangerous breeds of dogs, some associations are adopting CC&R amendments that ban certain types of dogs, specifically breeds that are uninsurable by some companies. The legality of that has yet (at least at the appellate level) to be clearly established; and as far as I know, there is no case law specifically forbidding such an amendment. If an amendment is approved by the owners, I believe, though, that it is necessarygrandfather existing pets at least until they die or are removed from the development, or become a nuisance subject to the governing document provisions (assuming they exist) on expelling the dog from the development. The proposal makes sense given the risk of substantial loss if there is an attack by any dog and since these dogs are identified to have the propensities.
Making sense is good. There are still those that would argue against such a proposal, and some that would flaunt their new-found power given by the statute by harboring a dangerous dog, but the world is not perfect now, is it? Whenever I hear that "my rottweiler" or my "pit bull" is the family baby and would not hurt a flea, my mind flashes to horrible stories reported of children being seriouisly injured and in some cases killed by the "family pet". In too many cases, it was a dog on the "list". Where do you think insurance actuaries who recommend these exclusions get their information from ... the news stories? or the facts?
Posted by Beth Grimm at 10:20 AM
May 8, 2007
Does Anyone Care About the Homeowner Who Has No Resource?... I mean Recourse .....
From a visitor of the condoguru site:
"I am beginning to feel the anger that the anti-HOA folks feel. I'm beginning to understand their position about HOA's. There is always a song and dance why we can't or shouldn't have
* Term limits for Board members. We currently have the same people on the board that we had 10 years ago and it is being run like a dictatorship of the worst kind.
* 100% funding. Even if we have problems coming up with a solution as to what is 100% funding is it is a disaster unless we have adequate funds. Our board of directors will NOT levy any special assessments nor will they increase our dues. That's how they get re-elected every year; homeowners love that. So maintenance is deferred year after year after year.
* Management Companies giving legal advice to board members and not being held legally liable for a thing they do. The board members are usually ignorant and rely on the management companies and believe anything they are told.
* Ombudsman... too costly? What is it costing us homeowners to not have one?
Does ANYBODY care about the homeowner who has no recourse?"
To this reader: Yes. Many do care about the owners, and everyone else involved. To comment:
TERM LIMITS: On the question of term limits, the reason in most cases that board members remain on the board for many years is that they cannot find replacements to serve. And as often happens, once a board member has served more than 5 or 10 years, they begin to feel resentful when owners who are not willing to serve start to criticize what they are doing or have been doing. Some do get dictatorial. It's not a pretty picture. And taking a nonpaying job that makes a person a target of disdain for trying to run a business while minimizing the "cost" to owners is less than fun; it is extremely challenging and a pain in the ___s. Establishing term limits could backfire as it limits the pool of willing volunteers, which is already shrinking as the laws continue to get tougher and more complicated, and the costs continue to rise without any viable means of conrolling them. And it could confuse the people serving who are not up to speed on association issues if it destroys continuity. The answer to this dilemma is getting more people to run for the Board, so there is reasonable turnover.
RESERVES ISSUES: It is nothing short of a small disaster that so many HOAs in California are seriously underfunded in reserves. Likewise, it is very sad that most buyers are not informed well enough to understand the reserves disclosures. However, some people care enough to write books on the subject - watch for the book "Condominium Answers" a national answer book which will be released this fall by Sourcebooks (author: yours truly) - the first three chapters are on what a person can do to avoid getting into a bad deal when buying a condo. The next three are about finances in HOAs. The next three are about how things work, basically, and the last two chapters are what to do if one does not like what they have gotten into, including how to get out of a bad situation.
The unfortunate fact with regard to finances and reserves is that the issue of how hard to hit current owners for past as well as future expenses is always a subject of debate. Should current owners have to bear the burden of years of underfunding? They already in many cases have to bear the cost of seriously deferred maintenance. And one has to consider the flipside which is that many California HOA owners would be forced out of their homes if immediately charged with assessments sufficient to pay up and fund reserves to 100%. And as to those that are forced out because they are unable to pay the special assessment needed to fund the reserves, the other owners will have to make up the difference, thereby presenting an extra burden for those who can afford to pay their own fair share. It's a difficult problem. The only realistic answer is addressing those things that require fixing right now, and using diligence in planning to bring up the reserves levels in the coming years at a reasonable pace with the goal to reach 100%. And the other critical thing is to be honest in disclosures. California law requires quite a graphic explanation, now, of the plans for the future, which was not the case in past years. So .... pay attention to them if you are thinking about buying a condo or townhome. And if your association has not given a Civil Code Section 1365.2.5 disclosure worksheet to you, ask for the equivalent information. It is this sort of accountability that will engender better planning, not strapping current owners with the burden of the past and future.
MANAGEMENT ISSUES: Truly, management companies should not give legal advice - and yet I often see communications (ugh, the emails) and management reports that flat out give [bad] legal advice. But on the flipside, boards often expect that managers should advise them on actions that have legal ramifications (after all - they are required to get some training about the laws, right?) and the boards do not want to spend money on legal fees, so this puts managers in a very difficult position.
I think we will very likely see more managers being held responsible though, for their own negligence or bad acts, or possibly even for giving legal advice without a license, in the coming years. (There was a seminar about this at a recent national law conference - guess what - some lawyers on the East Coast are really up in arms about this!) The truth is that most management contracts have indemnification provisions intended to protect the managers and the market place in many areas does not allow for much negotiation by Boards to make these provisions mutual, however, the question is whether these provisions will really fully protect managers who do make serious mistakes. In some other states, boards have sued the managers challenging the indemnification clauses. And I am told by some experts at recent national law and management conferences (although you must not take this as legal advice, only as information) that in some states, managers are losing these cases.
OMBUDSMAN IN CALIFORNIA: On the subject of a state ombudsman - it sounds pretty good to imagine that one can call the state ombudsman and get resolution to all the frustration. But there are no guarantees that such an agency will be a success. Staffing it with knowledgeable people and getting it up and running will be very expensive. Many forms of state agency have been discussed. The truth seems to be that no department of the state wants it unless it is self-sustaining (meaning paid for through sources outside the state coffers).
Ultimately, the cost could be very high to HOA owners, who are already feeling the effects of increased costs each year due to many things. And everyone in the industry from the managers, board members and down to the owners are paying a price due to the addition each year of expensive statutory compliance obligations in California. Who is winning the war? Condos that are supposed to be "affordable" often turn out not to be. One could say it is the attorneys who are winning the war, but that would be unfair too. It is not the HOA attorneys in this state pushing for complicated legislation, believe it or not. In most cases, it is constituent pressure on a legislator for more laws regulating boards. Not to say we are problem-free in this industry; however, California law has gotten so complicated that the average person (and many attorneys) cannot even fully understand the ultimate obligations for various actions or the number of statutes involved in answering one simple question. For example, if a board is having trouble with owners leaving out garbage cans for days on end after pickup, and wants to adopt a deterrent fine, it cannot consider even the most minimal fine until it has: (1) reviewed its governing documents to see if fining authority is apparent, reviewed the laws on fining, and tried to reconcile the two to determine what controls, (2) proposed a fines policy for proper circulation to owners and the legally required comment period (subject to a complicated set of statutes), (3) circulated the adopted legal fines policy (subject to complicated laws), (4) given proper legal notice of a hearing (and again, reconciling complicated laws on process with what is in the governing documents), (5) holding a hearing, (6) giving proper written legal notice of the board's decision (subject to statutory mandate about timing and contents), and then (7) collecting the fine if the conduct continues, via a small claims court process that requires board participation or hiring an attorney. What seems the most simple task is extremely complicated.
Let's say that the state approves an ombudsman program - one has to determine what is the better use of the money collected from the owners (as that is the group that will pay for this state agency), and all of the following have been considered:
Gathering and Dissemination of Educational Materials
Provision and Arranging of Low Cost Mediation Services
Enforcement of Laws through Fines and Other Punishments Against Board Members
Due Process Hearings for Accused
$5 per year per door (what has been suggested as a reasonable contribution by the state officials) will not begin to cover sll of the above processes, so look for higher costs than that or selective services (my bet is the focus will be on punishing uneducated board members). Take into consideration the buffer of costs (or should I say "waste") inherent with a state-run bureacracy and understand that the price for a state agency will be high - with no guarantee of happiness or justice.
All that said, maybe a state ombudsman is the answer to many homeowners' "prayers". If homeowner complaints engender more widespread education and accountability, that is a good thing. It is important to understand, however, that the flip side is that an ombudsman or state agency may just be an added cost of living in an HOA. Time will tell, because it is clear that the subject will keep coming up, again and again...
People do care! And I think it a favorable-odds bet that for each and every homeowner that is upset, there is probably also a board member and/or a manager that is just as frustrated within their role in this industry. My mantra: for every problem there is a solution, but before you decide which one to choose, sit at the other side of the table for a minute, and check out the view.
Posted by Beth Grimm at 7:33 PM
Disruptive Owners - Can't Get Through a Meeting? Try This...
One of my readers wrote in and asked if there was any legislation that would pertain to what a board can do about disruptive owners. The writer said that they had two owners in the association that come to every board meeting, that aren't satisfied with the homeowners forum time, and that interrupt the Board on every item of business that is discussed.
I experienced this on one very memorable occasion. At this association, two owners came to every meeting and harrassed the board and manager on everything the board tried to discuss. The number of other members that attended had dwindled down to a few diehards. It was almost impossible for the Board to get any business done. When described to me, it hardly seemed possible that two adults could or would create so much mayhem on a regular basis.
These are some of the things the board attempted, at my suggestion.
Get a gavel, and use it to keep order. It is a tool that usually engenders more respect than a meek - "please stop talking".
Have the homeowner forum at the beginning of the meeting, and let the attendees know that once it is over, then the board will move into the business portion and that comments from the audience are welcome only when invited.
Use an egg timer for the homeowner forum time.In most cases, even difficult people will have to acknowledge the ding as the end of their time to talk, and perhaps even give it more respect than the President of the Board who tries to keep order.
Try a timed agenda and the egg timer, to help everyone stay on track and as a reminder that time is limited.
Adopt a meetings policy that spells out the possible ramifications of disrupting the meeting. Usually, it is harder for a person to argue with a piece of paper than the Board President.
Bring in a video camera on a tripod and let the members know that the meeting will be taped. Usually, that is a deterrent to bad conduct (note: that is a tactic used by some attorneys in deposition to control the conduct of an overbearing and disgustingly difficult attorney who is there to question someone).
Another tactic that can be used sparingly was described in an earlier email and that involved adjourning the meeting and calling an emergency meeting after everyone has left to do the business that needs to be done.
Problem attendees might be subjected to a call to a hearing to consider fines (if the governing documents allow for fines).
A study and use of Roberts Rules to keep order in the meetings might help as sometimes disorganization works against a board's best efforts to get through business.
At this association, the board was stymied no matter what it tried, so I was asked to attend the meeting. Sure enough, the two trouble makers showed up, sat in the front row, and exhibited rude and thoughtless behavior. The two commented after every owner spoke in the forum time, declined to have their own few minutes, and then started in on the board once the business began. Usually, my presence engenders some cooperation, especially when I stand up and explain to the group that the board needs to get through business and the attendees must let it, or the meeting will be adjourned. Often, an authoritative presence leads the other attendees to jump in and verbally chastise the problem attendees. Sometimes they are empowered with an authority figure present.
But in this case, there was simply no respect of any kind exhibited by the two trouble makers. So, (hope I do not offend anyone but this is a true story, I said a little prayer. "God, if you have any ideas, I would like to know what they are. I'm plumb out and this board deserves a break.") Somewhere in the distance I heard sirens, but paid little attention., as usually happens when sirens are a common sound.
This meeting was taking place in a County Library. About 10 minutes after my "prayer", the night librarian popped in and said, "I have some bad news. There have been some car breakins in the parking lot. The good news is that only two vehicles were broken into - they are a Mercedes [something or other] and a BMW [something or other]. There were some items recovered, some laptops and things."
The two trouble makers shot out of the front row and ran outside. Both were tied up for the rest of the meeting with the police.
The moral of the story: Don't ever give up!
The truth is that - if these people continued to harrass (which, after the implementation of all processes described above seemed to dissapate), a board could, if the governing documents allow for suspension of membership rights, arguably (but consult your own attorney on this) call a hearing (California has laws on the procedure) and suspend rights of the owners to attend the meetings for a period of time. That was to be the next step in this case. A board could seek a restraining order; however, that can be expensive and there are no guarantees of success as many judges would wonder why a board had such a lack of control of meetings, so choose that remedy "judiciously".
And a board could use the "adjournment method" as an alternative, but that is not a pleasing long term prospect (and again, please check with your own attorney to see what he or she thinks of this remedy).
Most of the above steps will cure any problem with disruptive owners because in most cases, even the most aggressive owners have come respect for rules, discipline or the thought of appearing on tape acting like a child.
At any rate, I hope some of this helps. It is very frustrating to try and get through any kind of business with disrespective attendees. Sometimes the problem attendees are sitting at the board table, in which case the additional remedy of a "discussion with" or letter from the association attorney reminding the board member of his or her "fiduciary duty" to act in a business-like manner might help.
Posted by Beth Grimm at 7:27 PM