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September 6, 2007
Water Preservation Quandaries - Go With the Flow?
As often happens, one topic leads to another. In a recent blog I mentioned something about many HOA documents having one year limitation on contracts and this lead to some questions about water saving service contracts. Since water preservation is a hot topic, I have had a few quite interesting items come up related to water conservation issues. It brings to mind the quandary of balancing ecological needs and water conservation with common homeowner association restrictions and practices. See what you think:
Question One - Water Saving Service Contracts. Our local municipal government is offering incentives for installation of water saving practices/services in our association and other entities like ours; however, these incentives relate to ongoing services and the minimum contract term is going to be 5 years to take advantage of the incentive program. We have a problem in that our bylaws limit contracts that the Board can approve to one year. Can we take advantage of this without a homeowner vote?
Answer: In California, a large percentage of HOAs have a one year limitation on contracts. (I believe this comes through a Dept. of Real Estate regulation for HOA Bylaws to be approved for initial developments, but do not have a citation handy for it.) As stated in the earlier blog, many boards overlook these limitations. Doing so does not void a contract but it does make the Board look bad and may lead to a breach of fiduciary duty claim. It is better to honor the documents, always.
Now, how to resolve this issue. Like the cable companies that came in years ago (did anyone deal with Astound reps - I did), the company, because of pressure based on these common limitations, allowed in many cases a "one-year-term with automatic roll-over provision-contract". I do not know if this is possible in this municipally-driven situation. Another possibility would be to take a vote of the members to see if they are in favor of getting the incentive. This subject is not one of those that requires the double envelope balloting system and could be accomplished at a membership meeting where a quorum is present or by written ballot under the Corporations Code. The other option is to propose an amendment to the bylaws to allow this type of contract as an exception to the one year rule. That would require voting under the double envelope secret ballot system (see how the legislators can complicate things??). Some common exceptions to the one-year limitation found in California bylaws are: insurance contracts (although the days of 3 year premium-saving insurance contracts are long gone), cable, laundry, and management service contracts.
The issue is whether boards should be able to tie their associations into long term contracts. It makes sense when the contract is beneficial to the membership, but as to various subjects, including common exceptions, the question of allowing one Board to tie up the Association in contracts for several years, even for a beneficial service, can be debatable.
Question Two. Low Flow Toilets: Our board proposed, and the membership passed, a measure that requires Owners to change out high flow (is that the right term?) flushing toilets to "low flow toilets." Can they legally make me change out my toilets? I own them and am responsible for the maintenance of them, and do not want them. They tend to clog rather easily and cause other problems. Can I fight this?
Answer: Yikes - this is a good question. Generally the Association can propose, and members can approve, measures that generally affect the membership. While I would not think the Association Board could demand, based on such a vote, that an owner change out flooring or sinks or tubs or anything that does not have an affect on one's neighbors (unless a defect was found that jeopardized the structures or systems), low flow toilets and shower heads may be a different story. Some people just do not like them. However, because of severe water shortages in this state (California), an Association may be able to justify such a proposal and enforcement of it. All HOA water bills are likely to soar, the State is pushing hard for water conservation efforts, and this is one way of forcing it on people who are holdouts in Associations where the majority of the membership is water-conscious. I do not know of any high court binding authority that specifically applies to this situation, and do not believe there are any laws that support enforcement of such a measure, other than the general premise arising from various cases that stands for the proposition that the restrictions in an HOA can change by owner vote and the will of the majority.
Feel free to send me your thoughts on this.
Posted by Beth Grimm at September 6, 2007 6:11 PM