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January 29, 2008
NEW HOA AGENDA BILL - DOES IT LIMIT HOMEOWNER FORUM?
I have been writing about Owner frustration more than Board frustration because weighing the incoming emails, more HOs seem to be willing to write about it than Boards. And, there is this, the issues raised are worthy of a blog.
Here is the latest question, and it came in context from an Owner who mentioned the new Agenda law, so I am wondering if the boards and/or attorneys are using the new Agenda law to try and control Homeowner Forum content. This was the question:
Can the Board force homeowners to submit in writing before the Board Meeting starts items the owners wish to discuss during the open forum?
My answer: I do not see anything in the new law that allows this Boards to limit subject matter in the comment time. The board can let a homeowner say what they want to, and move on, using the new agenda law to say that no action can be taken on the homeowner comment, which may be a better approach than trying to say a homeowner may not talk about his or her issues or concerns. If a member raises an issue and the Board cannot talk about it, then another option for the Board is to ask the member to submit their request in writing, but to require them to submit their subject before the homeowner forum occurs, that does not feel right to me. It smacks of the possibility that the Board may misuse that information.
[I wrote the above and the prior two sentences before I heard from some Board members as to their purpose for asking about subject matter, so I have a different perspective now, and refer you to my March 8, '08 blog on the subject. My view has changed but I wanted to leave this blog in tact so you could see how more information often turns the conversation around in discussing what is reasonable and what is not. So I suggest reading this older blog with the understanding that I might have just erased it and no one would then get the real picture of how asking a simple question - like "why do you want to know what subject we are going to address" might have resolved this difference of opinion.]
Perhaps the Board's intentions are based on a misunderstanding of the new law. If the Board is receiving legal advice, that assumption may be a stretch to find good where other motives may be lurking. It seems likely to me that in some cases the intent might be to (1) make it harder for members to address the board, (2) get an opportunity to object or stop someone from addressing the Board, (3) try to control content in the homeowner forum, or (4) intimidate or discourage owners from speaking who might show up poorly on paper.
People: understand that if an owner plans to address the board on some outrageous subject, they will shoot themselves in the foot! So let 'em talk their 3 or 5 minutes! If the Board is more business-like in their manner of receiving the blast, the attendees will immediately see who is the right party to place their trust in. If the speaker is logical and rational in their approach, and the Board is also so, the attendees will have respect for the process. There need not be fear about what someone says. If they criticize the Board or management, so be it. Everyone is entitled to their opinion. And that is just what it is, an opinion. If someone raises a big political issue, it is better for the Board to know what is coming so it can respond appropriately, without trying to address issues that are discussed through the rumor mill.
I personally see no good purpose to be served by forcing something that is not in the law. It just creates stress for everyone.
That said, of course, a Board might have a need to set some limits on the forum time so that the whole time set for the meeting is not used up by owners attacking the Board or management, and that (setting a time limit on comment) is allowed. 3-5 minutes seems to be the going allotment of time per member as far as I can tell, leaving about 20 minutes to a half hour before the meeting or during it for members to speak up. If someone has more than 3-5 minutes of "presentation", they should do it on paper and submit it. A writing engenders more accountability than a spoken presentation anyway. It becomes part of the permanent association record.
Perhaps Boards are mislead by the limitations and restrictions in the new California Agenda law, and feel "hobbled" about speaking of certain matters, but all the Board has to do if someone asks the Board to take action on something that is not on the agenda is say "We cannot address new business at this meeting that is not on the agenda," or "You are entitled to your thoughts, if you want more information on the subject .... or you want to submit the request to the Board, ... [please do so in writing ... or tell them how to get additional information]."
If someone out there can provide me with feedback on the necessity for this practice, and the actual source of authority other than the new Agenda law (which I do not see as support for this practice), I will review it, and comment. Until then, I believe it might be perceived as an improper intent to "chill" homeowner comment.
[You can contact me through my website at http://www.californiacondoguru.com.]
I remain open-minded; I have changed my opinions before, given sufficient evidence to support an argument. And perspective can be an important consideration.
[See my blog of March 8 to see how feedback can change an opinion.]
Posted by Beth Grimm at 8:18 PM
California HOA Elections - Is Small Claims the Right Venue?
I get several emails every week about elections issues. Many are generated simply because of the confusion in the law. Some are generated by sore losers. Some are generated by people who fail to pay assessments and complain alot about things, but still think they should be able to serve on the Board (withholding assessments is not the way to get there, folks). Some are really incredible stories about what their boards did during the elections process, to thwart the efforts of wannabe candidates.
My experience in following up with some of these is that some HOA Boards, and/or some attorneys that are advising them, are way, way out in left field in the way they conduct elections.
One particular area of concern is Boards that are, or are advised to, start suspending voter rights after ballots have been sent out to owners, and the buzz is that the election might not go the way the Board wants it too. Sometimes a Board will "revive" a voter suspension clause that has been sitting in the dust for years, just before an important election wherein some minority candidates have indicated an interest in running. Sometimes the revival comes through "alleged" violations that are not justified.
Now, no one out there has to get their shorts in a bind if they do things in a fair and above-board manner. Anyone reading this with a guilty conscience may well come back and blast me for saying this, but when a Board and/or its attorney does something like what is described above, the owners deserve a reasonable chance to challenge that election, and it should not cost them a fortune to do it.
To some degree, I am willing to backtrack from earlier communications I had with the author of the Elections legislation, at least on one point . (Note that there are still a bunch of issues created by the new laws that require a fair amount of creativity in reconciling practicalities, document provisions, the Corporations Code and the Davis Stirling Act, and that leave HOAs open to varying legal interpretations, don't get me wrong.) And what point is it that deserves this "backtracking"?
It's simple - abuses that I have seen. I now believe that many challenges should be able to be brought at the small claims court level. In some cases, the wrongdoing is so obvious that it begs attention.
True, small claims court hearing officers may not have the expertise to fully understand and interpret the HOA election laws, which are complicated (and which many an attorney - even HOA trained - have trouble agreeing on), but Defendants can appeal and get higher authority if they feel justified in doing so. And some of the scenarios that have been presented to me smell so bad that it would be obvious to any lawyer looking for elements of fairness that, as the old saying goes "something is rotten in the State of Denmark." [Not meant as a blow to Denmark, just making a point.]
The law on remedies for elections says this:
"1363.09. REMEDIES. (Operative July 1, 2006.)
(a) A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by an association of which he or she is a member, including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues. Upon a finding that the election procedures of this article, or the adoption of and adherence to rules provided by Article 4 (commencing with Section 1357.100) of Chapter 2, were not followed, a court may void any results of the election.
(b) A member who prevails in a civil action to enforce his or her rights pursuant to this article shall be entitled to reasonable attorney's fees and court costs, and the court may impose a civil penalty of up to five hundred dollars ($500) for each violation, except that each identical violation shall be subject to only one penalty if the violation affects each member of the association equally. A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.
(c) A cause of action under Section 1363.03 with respect to access to association resources by a candidate or member advocating a point of view, the receipt of a ballot by a member, or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after tabulation may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court."
I have commented in my book THE DAVIS STIRLING ACT IN PLAIN ENGLISH:
"Comment: The remedies are potentially quite severe for failure of an Association to comply with these new rules related to elections. Recovery of damages is available a well as court orders to void the election. And as you can see, owners will have access to resolve some of the issues in small claims court. The latitude and attitude of the small claims hearing officers is yet to be determined, and it is not crystal clear what remedies and what errors can be addressed there. It is more likely that an owner would be seeking a recount or new election than dollar damages, which is the remedy of small claims court. But what is clear is that there are new penalties that can be imposed on the Association by the court for failure to comply. This is a turn of events."
Now I have to say that it is my belief that most HOAs try to be fair in their elections and if they are, and they try in good faith to comply with the new law, it would be my hope that no small claims court officer would unravel their election or penalize the Board. The law is tough to understand. But I do believe that some situations deserve consideration. And some legal advisors are not acting in the best interests of the association. Attorneys are required by California ethical rules to take their direction from the Board, that is true, and that may lead them to think they should support the Board to the detriment of the members, but that is not true. Attorneys should be considering the entire HOA and should be acting in a manner that is in the best interests of the HOA, not of any individual board member. Zealousness in holding onto a client is no excuse or justification for innapropriate advice.
Posted by Beth Grimm at 7:42 PM
January 24, 2008
HOW TO "SHARPEN YOUR SAW"
It's Time to "Sharpen The Saw" - It's a New Year and there are some things that we all can do to make this one easier. One of my New Year’s resolutions is to add more “tools” to the “tool kit” to help Boards cope with all of the challenges brought on by complicated laws, hard to understand documents, and lots of responsibilities.
So what solutions might you find to the day-to-day challenges that arise? Where do you start?
First, you might outline all subjects that you think need attention. For example, my list of things to get together includes: book outlines, primers to write, items to put up on the website, list of classes to develop, list of trips coming up, and seminar outlines. What will yours include?
Here are some suggestions:
KEEP AN ONGOING TO DO LIST: Think about it. How can you keep everything you need to do in your head? You need a TO DO list. Why? There are many reasons but one very important one is that it is a stress reliever. If you transfer thoughts in your head to a list, they sit somewhere else for the time being and your mind is not clogged or overtaxed with these things. And they are still there everytime you look at it.
Another very important reason (related to your mental health) is the feeling of accomplishment or achievement each day. It helps keep your spirits up. Many of us do not even realize how much we do each day, until we actually see it! Crossing tasks off the list does just that - it provides a good feeling, a relief, and a sense of achievement. It is one of my favorite tasks each day. And of course, it helps get things done on time and that is important in order to be successful in your work. The absolute worst attorneys, managers, professionals, and board members (or any leaders for that matter) are those who do not get things done on time. They complicate things for everyone else.
CREATE POLICIES and/or CHECKLISTS: The # of laws relating to HOAs in California is staggering. Coordinating laws with the governing documents is a daunting task. You need something easier to work with. It’s that simple! Remember: K.I.S.S. in 2008! I hate to be sexist, but here goes: women will understand this: it is much easier to navigate shopping with a shopping list, rather than taking the recipe to the local market to shop. If you have a list, you will know when you are done, and can avoid the impulse decisions and mistakes. For men, perhaps it is easier to envision the greater ease in having directions to a location before you leave home, (gotta love that GPS system), rather than to have to navigate a complicated (or for those of us over 40 - impossible to read) road map, especially while driving. And who wants to stop and ask for directions anyway? A policy, rule, or checklist may be taking the easy way out, and why not? Here are some types of policies and rules that may help you out, and I am sure you can imagine others.
Meetings/Agenda Policy: The California statutes have many requirements for meetings and the new agenda law that became effective January 1, 2008. To add insult to injury, one has to also compare the governing documents for the HOA to determine what requirements exist for meetings. Things that are important include notice timing and requirements, procedures during the meeting, when and how members can speak (the homeowner forum), what happens if anyone disrupts the meeting, who may attend, and what happens if an item is raised that is not on the agenda for the meeting. A 1-2 page policy on the specific procedures would be a breath of fresh air. This kind of thing benefits not only the Board and management, but also the members who attend the meeting and need to understand the processes. And a policy that includes a procedure for handling disruptions can be given to a member to silence them. Believe it or not, it's harder to argue with a piece of paper than a living, breathing Board President.
Compliance Policy (Nicer Name) or Enforcement Policy/Fines Policy: The laws on enforcement and getting compliance are also quite complicated. There are statutes on fines, disciplinary hearings, IDR (Internal Dispute Resolution), ADR (Alternative Dispute Resolution), filing a lawsuit, suspension of membership rights, and there are limitations on various remedies. And, again, each HOA has governing documents that may add to or contradict the laws. It’s not easy to sort this all out, particularly after a violation needs to be addressed. What is the first step? A policy with timelines and requirements for letters and notices, steps for addressing violations (maybe with distinctions between serious and less serious ones), a fines schedule (which is required by law if any HOA is going to fine any owner), and other remedies that may be considered would sure help. Again, a 1-2 page policy or checklist of steps would be the easy way out - but why not?
Parking/Towing Policy/ and Contract: Last year, we were talking about a new law that made towing vehicles from CIDs seemingly more complicated. As it turned out, it was actually easier to cope with in some ways. The pre-tow notice requirements were, at least in my estimation, clarified and simplified. However, there were other things that indicated the need for a clear and understandable tow policy and a protective contract. The tow companies and drivers were burdened with many additional requirements by the new statutes. HOAs need protection from the risk of assuming any liability from the tow driver’s and tow companies mistakes. The HOAs have to assign someone to be on site to authorize a tow. And that person is responsible for determining when a tow was warranted and legal. It is obvious that the person given authority to ask for tows has to have a list of tow situations that is clear. How does one get such a list?
A good policy...
There are many other subjects that might be worthy of a policy such as maintenance responsibilities, satellite dish placement and screening, architectural standards, reserves savings and investments; cross-protections from embezzlement and fidelity issues, check authorizing and signing limitations, and maybe a Code of Ethics for Board Members. I am sure you can think of some too.
CREATE RULES: Much of the discussion on creating policies applies likewise to rules. In many cases, the distinction is difficult to describe. Both contain regulations of one kind or another. But a different analogy for rule-setting might work better. Think of the fact that most of society is willing to live within reasonable parameters. There is a troublesome “fringe”, to be sure, but most want to act responsibly and get along with those around them. So let’s focus on the masses for a moment. If people know what is expected of them, they are likely to accept it. And if the rules are written in a positive vein as opposed to “you can’t do this” and “you can’t do that”, even better. And, the truth is that while neither owners or tenants (or maybe even board members) will ever read the CC&Rs, most will at the least read the rules.
I suggest you make a New Year’s Resolution to make your life easier, through the use of a TO DO list upon which you might place the following: “Develop checklists, policies, and rules on these subjects: ... blah, blah, and blah (add your own).”
And check out my website at http://www.californiacondoguru.com for the January E-Newsletter with more on this subject, and watch for upcoming notices of classes, publications, WEB CHATS, and other tools that are and will be available in the coming year.
Posted by Beth Grimm at 9:30 PM
January 16, 2008
FORECLOSURE IS NOT THE END OF THE ROAD FOR MANY.
These are difficult times. Homeowners who get into the purchase of property on creative loans or who have lost their means and are at risk of losing their homes have to make decisions about things that involve their financial future. Knowledge is the key to making the best decisions. The options may not all be desirable, but there may be some less desirable than others.
One of these pieces of information that is important to understand is what happens if you own a home in a California HOA and the bank or the association forecloses, what are the odds that either (the lender or the HOA) will pursue you for the losses they experience when the mortgage or assessments are not paid?
This specific question was asked recently:
"We recently had our condo foreclosed by the bank. At that time it had a lien on the property by the homeowners association. Now they are suing us for the assessment fees the lien was for, even though the property has been sold. Are we still liable and can they win by law?"
I would not want anyone reading this blog to consider the contents as legal advice because there are many factors that could affect the lender's, the HOA's, or the debtor's rights in a debt owed situation. The information is just that, information and ideas as to what can be done, or what might happen in any given situation. If you own property in a common interest development in California, and foreclosure is a possibility, either by the bank or the HOA, letting your home go back to the lender or be sold at an HOA sale may not be the least painful option for you. If you have a chance a short sale at a loss may be "less problematic." And there is a difference whether the foreclosure sale is conducted by the lender or the HOA. If there is a chance of a payment plan or workout with both entities, then even if it is a stretch or you have to give up something else, it will probably be much better than suffering a foreclosure. Maybe bankruptcy is the best option. Why would you want to do what you can to avoid a foreclosure? Aside from possible tax ramifications for debt that is "forgiven", there are other considerations. And why is it fair that HOAs should have this extra option of pursuing the debt personally against an owner when an HOA property is foreclosed?
While most lenders in California, at least as to first purchase money mortgages (not talking about refinancing), do not have the right (because of the loan provisions) to seek losses from homeowners whose homes are foreclosed, HOAs are not so limited. An HOA hasthe right to seek unpaid assessments and all of the reasonable costs that accrue with regard to the collection matter from the individuals who owned the property during the period of unpaid assessments when it was foreclosed by the lender. In fact, an HOA is entitled to pursue more than one avenue of recovery (such as foreclosure and a personal debt recovery action) until the debt is paid. If a home is foreclosed by the HOA, and sold at a sale arranged by the HOA, then the debt is would be considered satisfied, but if the bank forecloses and there is not enough money to pay the outstanding HOA debt, the HOA may take measures to recover the losses from the owner who suffered the foreclosure.
People may ask: why is this so? In simple terms, loans are governed by a deed of trust (contractual agreement) and laws that govern lenders and protect homebuyers.
Consider these differences:
If a lender does their due diligence with regard to examining financial capability, and requires a certain down payment, the risk on the loan they make can be minimized, even if they end up having to take the property back. An HOA does not have the luxury of examining the financial capability of a buyer or of asking for some collateral. What the HOA does have is a set of CC&Rs that require owners to pay assessments, and provide remedies if the assessments are not paid, one of which is often foreclosure.
If a loan goes bad, the lender is the only party that is hurt by that (except of course in the case where investors are counting on good lending decisions). When a homeowner does not pay their HOa assessments, everyone else who owns property in the association pays the price for that.
The lender has no obligation to maintain the property it takes back in foreclosure. If it carries a big inventory, this tends to be problematic for the neighbors. In an HOA, the Board must continue to maintain all properties to a certain standard, or take action to attempt to get the owner to do that. That includes the property of the delinquent owner. If that property is allowed to bring the values down of surrounding property, that hurts the other owners. They (through the Board) can be faced with the difficult decision of whether to let the foreclosed property be, or collect extra money to fix it up and then try to recover that money from the Owner (which may be the person that owned before the foreclosure, and/or the lender that took the property back).
It's hard to feel bad for the lenders - they are the ones with the most choices. It's not hard to feel bad for the owners who got in over their heads for whatever reason - which could include a complete lack of understanding of an ARM loan, or for the HOAs (and other homeowners in them) that suffer when the individual loses their home or "walks away".
Posted by Beth Grimm at 8:33 PM
January 10, 2008
Who Is Responsible for Unsavory Guests?
One of my readers had some questions about responsibility in an HOA. I thought they might be of interest:
1. Who is responsible for adults or other people who visit my children when they are in my home?
An Owner of a unit or lot is responsible for the actions of anyone that resides in or visits their property. The responsibility can also flow to "uninvited" guests as it would be assumed that these guests are on the property because of the residents or visitors of your home.
If these visitors cause a nuisance or destroy property or cause injury and they are identified with a particular unit, it is possible that the Owner of the unit or lot could be held responsible.
2. Do the neighbors have any standing to sue me and try to take my condo away from me for unsubstantiated rumors?
The process to sue and "take someone's condo away" would be involved. In talking about neighbors, and not the Board, the neighbors could file a lawsuit for nuisance or any other viable cause of action (such as if an injury to property or person) was brought. If a neighbor was able to get a judgment, attachment of property is possible, but probably not likely, unless something really eggregious is involved.
In talking about association action through the Board, failure to pay assessments might lead to loss of a unit through foreclosure, but fines if imposed are not a proper basis for foreclosure.
If any owner allows any drug activity in a unit or home and there is criminal activity discovered, an owner could lose their home to the authorities as real property can be seized in some cases, under federal law.
Sometimes threats are tossed about on all sides in a difficult situation where a threatening or unsavory element of society is present, and sometimes things are just overblown. But it is important for owners to understand that whomever they place or allow in their home or on their lot, or whomever they draw into a homeowners association by virtue of the residents or guests of their home can get them sued or arrested - so it is important to pay attention to these kinds of issues.
I have seen many situations where owners placed tenants that were involved with a criminal element that became a real problem, and then the owners wanted the Association to solve the problem, when it was really the owner's responsibility to do the "cleanup" of the situation.
In any given hearing or court proceeding, the outcome will be based on what the hearing officer or judge believes. A hearing officer will not believe unsubstantiated rumors; however, in a civil court, all one party has to prove is that it is more likely than not that a situation occurred, which can be proved by circumstancial evidence. And there are elements of a case that need to be proved, such as, in a nuisance claim, that there is a nuisance, and in a property damage claim, that the perpetrator was the cause of the damage. These are simple paraphrasing of what can be complicated legal claims and theories, but intended only to make the point that due process requires proof of some kind (to be believed by the board, the hearing officer, judge or jury) before disciplinary action or legal punishment can be imposed.
So it all comes down to proof that is offered and what the hearing officer believes.
3. What can I do to protect myself from further harassment or legal action?
The best thing to do in the event an owner is worried about what might happen because of visitors to the residence is to have the visitors meet residents of the home outside the complex and/or seek legal counsel to assist and help assess the situation.
Posted by Beth Grimm at 8:58 PM
January 9, 2008
The Perils of the Uneducated Manager
Sorry, I have been away the last week in Hawaii. I needed to get out of the raging California weather (relatives in the midwest, ignore this!).
A reader asked me if I would write about the perils of the uneducated homeowner as manager. This person noted that the association needs a competent manager who can help the Board!
Not necessarily as easily said as done, at least for the small associations. I do not know how large an association this person was writing about, but imagine that it probably is a smaller association. The thing that is harder for the smaller associations is twofold (1) harder to bear the expense and (2) harder to find willing managers to serve the smaller associations. But nothing is impossible, so keep looking until you find the right people. If you cannot afford full service management, look for companies that offer "menu" services, or people that are willing to "train on the job". Just beware that someone who does not know what they are doing can create legal liability and put large sums of money at risk so make sure to ask the right questions. I believe that CAI (Community Associations Institute) - the National organization in Alexandria, Virginia, offers a publication that assists HOAs in asking the right questions of a management applicant. I am in the process of putting together a publication as well. Watch my publications page at http://www.californiacondoguru.com
Any HOA can run into considerable problems if operating with an uneducated board or manager. By uneducated, I mean in the ways of running an HOA, not seeking higher education such as Phd or Masters material. Although it's not rocket science, it involves running a non-profit business that is taking people's money and investing it in their future. A home in California is the number one investment for many people. One can only hope (or take a more assertive step and make sure) it is being invested wisely. An HOA is also like a city, with elected officials making decisions for spending the HOA members' money to get important services. So some expertise in these areas is helpful, of course. Anyone who has served (successfully) in a leadership position in a volunteer organization will also have something to bring to the table. If you find volunteers, or paid managers, with all of the above qualities and experience, give yoursel a pat on the back. If you don't, seek out the right kind of person to run your "ranch".
I could say the same for managers and boards. Training in the area of HOA management and operations is critical. Homeowner associations are a different "animal" than apartments or other forms of property managed real estate. There are a host of legal requirements and a lot of "fiduciary" responsibility involved in doing things properly. And having some "people skills" (such as mastering active listening) all help to form good leadership.
Those wishing to manage HOAs in California can take classes through CACM (go to cacm.org) and CAI (go to caionline.org), and through providers like myself (a handful maybe, in the State). There are no state sponsored classes at this time that I know of, although there probably should be. In order to call themselves a "Certified Common Interest Development Manager" in California, there are educational requirements and some of the management designations are "grandfathered" in the law.
To be an educated board, there are more options. In addition to the above, there is ECHO - EXECUTIVE COUNCIL OF HOMEOWNERS (go to echo-ca.org or call information in San Jose if you want to speak with someone about offerings). there are attorney firms that put on classes and some management companies have board orientation programs.
Above all, whomever is chosen to lead or manage the association must stay abreast of the changing legal requirements for disclosures, owner rights, board obligations and everything else in the Davis Stirling Act. One does not need to know the law inside and out (that is for the attorneys who serve HOAs) but it is important to understand that laws exist in many areas and seek out help in setting up association rules, policies, procedures, accounting and finances from those who understand what is required.
Don't put an ad in the local newspaper if you are looking for a manager. Go to the organizations that can help you find trained people. And if you are using local resources, send them to the industry classes that are offered and get them the education they need. By 2009, there may be legal requirements for board training. Get the jump on it. Check with the above and also watch my website at http://www.californiacondoguru.com) and get on my newsletter and class email lists to keep up with offerings.
Posted by Beth Grimm at 1:56 PM