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August 30, 2008
PRIVATE INFORMATION, WHY CAN THEY HAVE MINE? AND NOT GIVE THEIRS?
Few people these days want to give out personal information. It is no different in HOAs. For California HOAs, the Board does have access to names and addresses of owners and they get this information through whatever proof of ownership a new owner provides.
So what are owners to do if the Board asks for telephone numbers and email addresses? Owners do not have to give this information - there is no law. However, if the HOA is attempting to set up a telephone or email communication line, or emergency telephone tree for calling residents in the event of an emergency, it becomes impossible if owners are not willing to provide direct contact information for themselves or their tenants. So, when the "big one" happens, do not be surprised if you do not get a call.
Some HOAs encourage owners to communicate and email is a common form, perhaps more common these days than by phone. This can be good, and this can be bad. If a board does not have the sense to ask owners if they want their phone numbers or email addresses distributed to other owners or residents ... BEFORE THEY DO IT. it can lead to complaints, even possibly serious charges.
And then there are the owners who may resent having to give this information, or who are okay with the Board having it but not okay distributing it to others. But do they bother to tell the Board? Not usually. People presume all kinds of things, such as "everyone else must think like me and can read my mind, so they will know what uses should be made of the information and what limitations should be placed on its distribution." A BIG NOT ...... who can read anyone else's mind? Both sides should be clear about what the expectations are in giving this information out.
And, some owners get mad when the Board does not reciprocate with its own information, A reader recently lamented that the Board should be called to the carpet because although it (the Board) had asked for and published the owners telephone numbers and emails, the directors were unwilling to give their own telephone numbers and emails out.
Well, as usual, there are two sides to this point. If the Board members have been harassed at home, bothered with excessive emails, or felt that they were unable to separate their home life with the association business, it might be understandable, right? After all, the board members are volunteers, and people can get unreasonably demanding or pesky. Am I right?
So what should happen, you ask. Here is what I think.
If you want more informatioon on what California law requires, take a look at the explanations on my website at http://www.californiacondoguru.com on the main page with a link to AB 1098 - Records Inspections Law. If you want to look up the statute, then go to the Resources page on that website and click on THE DAVIS STIRLING ACT, and pull up statute Civil Code 1365.2, and read it.
Short of doing that work, if you want the answers,
The Board should ask for owners contact information, so they can be contacted in the event of an emergency. But the Board should also ask if they want their phone numbers and email addresses published so other owners can communicate with them. If they say no, then the Board should heed that. The Board should also ask of they want to "opt out" of having their name and address provided at an owner's request. If an owner says yes, the Board should heed that.
However, this does not mean that owners can avoid ever hearing from neighbors. Per California law, if an owner asks for information on members so he or she can communicate with fellow members or residents, the Board is required (unless an alternative is offered) to release the names and addresses of owners and their voting rights, BUT NOT THEIR TELEPHONE NUMBERS OR EMAIL ADDRESSES! Thus, the Board may be called on the carpet for giving out this personal information. In fact Boards should really be asking owners if they want to opt out of having their names and addresses provided to members. This is because if an owner asks for information on other owners, the Board should not be providing information for owners who have "opted out"? But how will the owners know they can do this unless the Board tells them?
As parting thoughts, if a Board offers an alternative means of communicating with owners, when an owner wants to do that, it can avoid giving out the membership list altogether - by offering the owner who wants to communicate with other members the option of preparing their communication, and having it sent out by the Board (or as many Boards use, a mailing house that gets the owners' labels, slaps them on the envelope, and sends out the communication).
The bottom line is that a member in an HOA has a right to communicate with other members in California, so long as they ask in writing and state their purpose in wanting the membership list. And the Board can offer an alternative - which embodies mailing out the owners communication - at their expense.
Last, but not least, if the Board distributes personal information about an owner which it is not by law required to do, it may find itself facing a breach of privacy or other type of legal claim. In these days of identify theft, that can become a BIG DEAL, so JUST SAY NO - and do not do it!!
Posted by Beth Grimm at 4:21 PM
August 21, 2008
FINES - AN ILLUSORY REMEDY FOR HOAs?
"Illusory" - it means maybe-not-real (although you won't find that definition in the dictionary). The question is: are fines really a viable remedy for HOAs? What if people do not pay them. Ho hum. If had a nickel for everytime that I heard a board member say: "Why fine, they don't pay them. It does no good." I'd be pretty well-to-do.
Read on to see why fining as a means of enforcement may be underrated. First, there are some pertinent questions asked by a reader that I would like to try and answer.
"My name is _________ and I live in a condo in _______________. We have several owners that have been fined over the years for non compliance of thee Association rules. Everything from parking, to disarray of their property. We have issued citations to these owners, but have not been able to collect on these fines. My question is how or can we collect on these outstanding debts? Because of the large number of foreclosures in our complex, collecting these fines would help out a lot."
Can you relate? HOAs are having a tougher time than ever, admittedly. And collection of fines would be nice and helpful. However, if one looks to it as a means of funding the association coffers in any meaningful way, one might be discouraged. Lesson 1: The real purpose of fines is to serve as a deterrent, not a funding source for the HOA. Obviously here, the idea did not work very well. If many fines have been imposed, and none paid, it sounds like it is time to get more assertive, if even more to "send a message" than to "relieve" a budget crisis.
So, as would logically follow, here is more from the same reader:
"Next and last two questions is, where can one go onto the web to locate California laws dealing with condos, and if it is possible to collect these fines, would a lawyer be more appropriate dealing with these collections?"
One can go to the California state website at www.ca.gov and navigate to California Codes - start at Civil Code Section 1351 and end at CC 1378. Or, as a not-so-tedious track, one can go to my website at http://www.californiacondoguru.com and navigate to the resource page (enter the site, click past the acknowledgement, go through the gates of the "First Time Visitor" and check out the left hand bar) and click in THE DAVIS STIRLING ACT and you will see the codes and the titles of each section, You can click on any statute and pull it up. Even even better, one can go to my website and find a book entitled THE DAVIS STIRLING ACT IN PLAIN ENGLISH as well as many other very helpful publications, at very affordable costs.
As to whether a lawyer can be helpful, a lawyer with the right kind of knowledge and experience can
1. Help set up a legal fines policy and make sure that the HOA is taking proper steps before imposing fines.
2. Write letters to owners who are not in compliance and demand compliance and payment of any fines imposed.
3. Take the HOA through the Court process to collect fines.
4. Help the HOA understand how to prepare a small claims case.
#2 and #3 may be overkill unless you are talking about thousands of dollars in fines. #1 is just a good precaution. And #4 can be helpful. The consideration of course is how much the board wants to spend on an attorney to help collect fines. It is possible that Small Claims Court could prove to be a viable remedy, Getting a good policy in place, following through with a proper hearing process (which should be part of the policy) and getting legally grounded fines is the most important thing. A Board can appoint a Board member to do the leg work, get the forms, fill them out, file and attend, if it can find a board member willing to do the work. Attorneys are not even allowed in small claims court unless they are a party to the action. Claims can be made for $5000 for the first two actions in a year (so do the big ones first!), and after that, claims are limited to $2500. These are California limits for HOAs. The limits for owners claims are higher.
The biggest judgment I ever heard of relating to fines was in a Santa Barbara case where a the court upheld $277,000 in daily fines for noncompliance. The name of the case is Hope Ranch Park Association v. William Hargar dba Mariposa Land Development Co.. Mr. Harger and his land development company were fined for making substantial changes to a 37 acre estate without approval. The attorney for the HOA said: "Mariposa did what it wanted... when it wanted." and "Mariposa is a poster child for the rationale behind monetary penalties."
It seems the judge may have agreed. There is a lot more to the story of course, and maybe in this case, the influx of judgment money in that capacity might help the budget, however, most HOAs do not have to resort to that level of fines to get the owners' attemtion.
But follow through does make sense. Fines that are legally imposed are often collected via small claims court hearings. Even if the full fine is not imposed there, some HOAs have had luck with the judge or hearing officer chiding the owner and letting them know they had better fix the problem or risk coming back imposition of a big fine. Some fines are collected when property is refinanced or sold. Boards can notify any potential purchaser of the fines by providing copies of the communications to the selling owners demanding payment, and noting any noncompliance issues. Some fines stay on the books for a long time, and most owners do not like this. They begin to feel uncomfortable eventually and try to take a stand. Some fines get resolved simply through perseverence. All fines should be supported by a fair hearing process, so that the owner has a chance to rebut any charges. I would wager that taking fines into court to collect without having offered the owner good solid notice and a chance to avoid the fine could spell trouble for the HOA's chances of success. A poor showing of the accounting that supports the fines could spell trouble as well. Disorganization, personalized retorts and anything other than business-like behavior in court could hurt the HOA. But a case that is justified, well-prepared and well-presented is more likely than not destined to be a successful one.
Last but not least, there is an entire set of Primers available on my website on the subject of Enforcment, including fines as a remedy. You are not without power to collect fines! And even so, if you have good policies at the outset outlining disciplinary actions that may be imposed for violations of the Association's documents and rules, and if you circulate information about those remedies and procedures, you will deter more misconduct than you will ever know about.
Posted by Beth Grimm at 8:45 PM
August 18, 2008
AT WHAT POINT IS AN HOA MEETING INVALID BECAUSE OF ERRORS?
What do you think happens when a California HOA screws something up in the election process after Civil Code Section 1363.03? That's a good question. Some assume that the election is void (automatically invalidated). Others believe it's no big deal, unless someone challenges the election .... and wins, either in court or because the Board thought the better of going forward with outstanding challenges.
Shiould everything just fall apart? Should everyone panic? My answer is no. What should happen when discrepancies have been discovered is that the complaining parties and the Board should decide what is best for each of them, under the circumstances. Sometimes they need legal advice, and sometimes not, depending on what happened, and how it affects the operations of the association.
The new law for HOAs related to elections says that HOAs "shall" adopt election rules, and specifies what those rules should include. It says that the Board shall select 1 or 3 inspectors of election and specifies who those persons can be. Civil Code Section 1363.03 says alot of things about what "shall" be done. It says that it applies to both incorporated and unincorporated associations. It says:
"(b) Notwithstanding any other law or provision of the governing documents, an election within a CID regarding assessments legally requiring a vote, election and removal of members of the association board of directors, amendments to the governing documents, or the grant of exclusive use of common area property pursuant to Section 1363.07 shall be held by secret ballot in accordance with the procedures set forth in this section.
What the heck does that mean? It means HOAs are supposed to set up procedures per CC 1363.03, and follow those procedures. But what if they don't? Does the statute say that any election that occurs in which the HOA does not do all of the things it is supposed to do is automatically void?@!?
No, it does not. And wouldn't it be a mess if it did say that, since probably more than 60-80% of the HOAs in California do not even know about it, and those that do, are getting mixed interpretations about what consitutes a legal election, because the statute is so "messy" and not a "one size fits all."
So what does that mean?
It means that anytime the Board makes a mistake, or things that occur that are not described in the law itself, a question arises as to whether the election can or should be re-done. It gets dicey because if a board gets complaints about the election, and it requires unraveling an election, and they did more things right than wrong, and the election was fair, a board could be equally charged with inappropriately unraveling an election. For example, There are many possible scenarios for making mistakes. And there are many allegations made that, until explained, sound really bad.
Here are some examples - sent by a reader, with some commentary.
1. All Incumbent Board members were not fairly represented on the ballot. Names and candidate statements were omitted.
What if this was because they did not get their statements in on time? What if they were left off on purpose, and nothing was done to point out the error? What if they were not qualified to serve so their names were omitted? Who can envision all the reasons this might happen, innocently or not so innocently.
2. Election ballots were handed out after the initial ballot mailing. We did not make quorum at the first meeting. The extra ballots were given to a candidate who is running for a board position. She handed out to friends in the condo development so they could vote. She said they lost or misplaced their original ballots.
What if an HOA can never get a quorum of members interested enough to vote, so the HOA can never have a legal meeting? What if this board member is determined to assure that the HoA has a legal meeting so he or she is willing to go out and get more owners to vote by giving them a packet? What if no one else cares? Or can do the same? Is this unprecedented behavior? Isn't this what people have done with proxies for years? Go out and encourage people to vote by giving them the tool to do so?
3. Our existing board is ready to make a motion to disqualify the election due to the above issues and go through the process again, with the above issues being handled correctly.Should we do that?
This person asked for "my thoughts". My thoughts are that with regard to any election where questions, concerns or challenges have arisen, get good legal advice about what to do, from someone who understands these HOA election laws, and follow it. That is a board's best protection, as board members receive some immunity for acting in good faith when a decision is needed and they do not have the expertise to determine what the right and legal thing to do is. "Good Faith" has several components, one of which is to rely on an expert when you do not have the special knowledge needed to make a decision.
And if there is a problem - here are the remedies (none of which indicates an election is automatically void if CC 1363.03 is not perfectly followed).
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.
That's it! There is no automatic "void-you-haVe-to-do-it-all-over" in the law. However, that does not mean that many situations arise that result in unfair elections and in many of those cases, the Board maybe should vote to do the election over. A generic answer to any of these questions being asked without any investigation into what happened in the election process would be a disservice.
Posted by Beth Grimm at 8:54 PM
August 9, 2008
RULE SETTING - WHAT RULES ARE RIGHT and REASONABLE?
Board members and owners in homeowner associations (HOA)s commonly have questions and concerns about setting rules to live by. Parking is one area of considerable consternation. People, pets, and pools are just a few others. In this blog, I will use parking as the example for rule setting considerations.
Where does a board start?
Surveying owners is a very good place to start: Pull all of the vehicle related sections from the HOA regulating documents, propose some hypotheticals or suggested rules, and ask for membership feedback. Be sure to identify any problems or concerns that the board sees – the members are sitting on the other side of the table – remember that their view is usually much more different – tunnel vision you might say.
Keep These Perspectives in Mind: Board Members commonly want to know what they can do. Owners commonly want to know what Boards cannot do. You can turn discussions around to the positive by including language in rules like: “This is the problem or concern [articulate it] … and this is the solution we propose: [state rule.]”
Do Not Be Afraid to Explain Current Rules That Are Based on Prospective Concerns: HOA Boards that have to deal with a lack of adequate and convenient parking (which seems to be an epidemic in urban HOAs) have to do something to control parking, or it can easily get out of hand. A resident sees another break the rules, and he does the same, and so on and so on, until the rules become blurred beyond recognition. Of course there are boards and board members that abuse power. However, most boards just want to be able to enforce a few rules of common courtesy, not turn into the “parking police”.
This Is An All-Too-Common Scenario: If residents begin to park in guest-designated parking areas or are allowed to fill up their garages or carports with “stuff”, others will use their neighbors as their excuse to do the same. People will push the envelope. If the original plan was that each unit would have 2 parking spaces, there will be people that want 3, and if the Board allows that, some people will want 4. If the Board does not remain diligent in enforcement, pretty soon enforcement of the standards or rules becomes much more “challenging”. If you have ever raised children – perhaps you can recall that during the teenage years, fraught with hormones and power struggles, boundary setting was a matter of “survival”. Left to determine their own standards, people commonly forget about the good of the community. It’s a particularly serious problem in HOAs: “If my neighbor can do it, than I don’t see why I can’t.”
The Earlier the Better Is A Good Mantra: If HOAs do not implement reasonable guidelines and boundaries early in the game, residents’ expectations and sense of “entitlement” can quickly blossom out of control, issues become more thorny, and the Board may find itself in a real briar patch. This is true in other areas as well, such as deck and carport storage, installation of hard surface flooring on upper story condos, looking the other way when pets are off leash or someone is out walking without the obligatory doggy doodoo bag, allowing skateboarding, bike riding and sports activities in the parking lots, ignoring rowdiness and drinking at the pool, etc., etc. etc.
Posted by Beth Grimm at 12:49 PM
August 8, 2008
At What Point Does the HOA Board Start Assessing Members for Foreclosure Losses?
Professionals in this industry are bouncing around ideas as to how to deal with the issues related to foreclosures. This is just one of those issues. When a percentage of members of any HOA, whether 1% or 10%, lose their homes to foreclosure or "walk away, it leaves the rest of the homeowners "holding the bag". In other words, there is a budget for the year based on a certain anticipated income which consists of assessments collected from owners. When the Board estimates the income, it is based on the premise that all homeowners will be paying their assessments. Of course, when there is a foreclosure, or multiple foreclosures by the banks or lenders, most if not all of the assessments that fell due during the foreclosure process remain unpaid. Hence, a shortfall in the budget arises. There are various schools of thought about how to best deal with this. Here are some possibilities:
1. Plan ahead - and over or conservatively estimate costs so as to have extra cushion in the budget for possible losses;
2. Include an account for estimated "bad debt" losses;
3. Impose a special assessment or increase in the regular assessment mid-year to make up the extra income that is needed.
This last option may be authorized in your governing documents. The documents may be silent on the possibility. In California - Civil Code Section 1366 sets limits. The Board may not raise the regular assessments more than 20% in any fiscal year without approval of the members (requiring a majority of a 51% quorum). It may not impose a special assessment that exceeds 5% of the budgetted gross operating expenses without approval (same percentage requirement).
These figures are "aggregate" figures meaning if there is more than one increase or special assessment, they cannot add up to more than the limits. Many people assume that Boards can impose an assessment increase only once in a year, or only at budget time, and that is it. Not me. I believe Boards may, if and as needed, if shortfalls are discovered for whatever reason mid year, have more than one increase or more than one special assessment (within the limits prescribed).
However, I have to add a cavaet. The governing documents matter. They should be checked. If there is a provision that says regular assessments are determined only at budget time, it is possible that some would interpret that to mean just what it says, and that the Board either has to propose a document amendment to the owners for approval changing that, or get approval of the members for any subsequent assessment.
There are practitioners that believe documents should be amended to mandate that Boards impose mid year assessments to make up shortfalls due to foreclosure, or impose an assessment to cover the loss at each foreclosure, or that state clearly that when there is a foreclosure, all owners including the foreclosing lender must pay a fair share for the loss (to assure that lenders understand their participation in this contribution).
While this would memorialize the right to do it, I am not one of those that feel that a specific mandate in the documents would be particularly helpful or is necessary. What Boards need to do is pay attention, know what is happening, and understand how foreclosure works, what losses might ensue in any particular situation, stay on top of collections to try and minimize the losses when/if their is a foreclosure, and .... revisit the budget to determine the best way to deal with the losses.
Posted by Beth Grimm at 1:25 PM
August 2, 2008
HARDWOOD FLOORS - CREATING A NIGHTMARE ALL OVER CALIFORNIA
This subject crosses over into so many areas in HOAs that I just added it to several categories: enforcement, neighbor-to-neighbor issues, board frustration, owner frustration, legal issues, general CID issues, etc., etc. Here are a bunch of sorry stories sent to me via email and notice the twists:
FROM BOARD MEMBER/OWNER: I am the _________of the ________HOA in _______. A couple years ago we changed our 20 year policy against hardwood floors when one of the owners agreed to install sound-dampening underlayment and get signed “approval” (something akin to a memo of understanding?) that they were OK with the installation. The then-seated board bought into this and now it’s the policy under our architectural guidelines. Now all downstairs units who go to sell after signing the form approving upstairs hard surface flooring have to disclose that agreement to prospective buyers. Personally, I would NEVER sign such an agreement for my upstairs neighbor, but I wonder if she’d sue me for refusing to sign it and thereby not letting her increase the (perceived) value of her unit? It seems like anything is possible in lawsuitland.
This angers me to some extent because I bought a second floor unit (rather than my preferred upstairs choice) because at the time of my purchase the old “no hard surface flor in upstairs units” policy was in effect. Since I wanted hardwood, I had to buy downstairs. Ugh."
UNFORTUNATE DOWNSTAIRS OWNER: I live in the lower unit a condo complex, it's and very small (16 units) and very old building (built in 1950) a few months ago the unit above me was sold and before the new owner moved in she had the carpet removed and the original wood floors refinished....I'm going crazy, I've dealt with it this long because the owner lives alone and I console myself with the fact that she has no children or pets but even with just one person creating the noise it's still a huge problem, she keeps odd hours a frankly the lack of a buffer makes the sound of everything she does travel right into my home. I know she didn't consult the board before doing this because I'm on the three person board, but I also know that our Rules and Regulations don't anything with regards to flooring, only that no noise from one unit should be heard in another unit. I'm worried about how this will affect my property value or ability to rent the unit, especially if she sells or rents to people who do have children or pets.
OWNER LIVING UPSTAIRS THAT CONVERTED TO HARDWOOD FLOORING AND HAD CHANGE IN FAMILY CIRCUMSTANCES: We had our laminate flooring installed over a year ago. We asked our neighbor if he/she had any noise issue and he/she said no. Then our circumstances changed. We [had a baby, got a dog, had a relative(s) move in temporarily, got a new stereo system, a large plasma TV, new speakers, etc.]. The neighbor started complaining about the noise."
The notes go on to say that these writers had obtained architectural approval and that the underlayment that was presented to the Board/ACCs was considered sufficient. And so these owners want to know what they can/should do about the complaints. Two of the writers are selling, and have their properties in escrow, and want to know what to do about disclosures.
The following additional questions were asked:
"Do we have to get acoustical testing done if [the Board/Neighbor] asks for it?"
"If the [Board/Neighbor] decides to sue us for nuisance, would he/she have a case?"
"If the neighbor had complained about the noise earlier we could have [asked the contractor to fix the problem/added some padding or changed the accoustics], but now, we do not know what to do."
"Our board has been notified about the problem - [we] do not know if they will get involved with this issue."
ANOTHER UNFORTUNATE OWNER LIVING BELOW UNIT THAT CONVERTED TO HARD SURFACE FLOORING: I am the original owner of a condo flat that I purchased 15 years ago. Way back then the original builder wisely did not allow hard surfacing flooring in the above units because of the noise level. It was for this reason that I bought the lower unit and I have been happy ever since.
In September of 2007 the unit above me changed hands. It turns out the buyers wanted to put in hardwood floors. The selling real-estate agent (who happens to sit on the board) consulted the CC&Rs and told the buyers that there was nothing stating that hardwood floors were not allowed in the upper units and further that it wasn't even necessary to apply to the Architectural Review Committee (ARC) to make this improvement. For this reason, the buyer simply bought the unit and then removed the original flooring and put in hardwood everywhere.
Needless to say, this has created a tremendous nuisance of noise in my condo. Several months back I complained to the board. The board responded by telling me was no violation of any process or rule by the installation of the hard surface flooring above and that there is nothing I can do.
I've read the language of the CC&Rs concerning improvements and it clearly states that all Improvements that are affixed to the common building must first be approved by the Architectural Review Committee. When I raised the point with the board that the owners did not go to the ARC process, I was told that after launching my complaint, the ARC reviewed the materials used for the floor and that the ARC would have approved the work anyway so it would not have made a difference if they had gone through the normal process in advance.
In summary, a board member has profited from the sale of a unit that required the rules be bent, the board and the ARC have done nothing to enforce their rules, the members of the ARC know nothing of the original builders restrictions on hard surface flooring nor do they know anything about sound level guidelines etc.
This leaves the ball in my court. I have given my contact info to the owners upstairs but they won't get in touch with me. I suspect they don't want to since they believe they have nothing to gain as they have already installed the floor. The board and the ARC really want to sweep the issue under the rug I'm guessing because they don't want any trouble for themselves.
I wonder if there are any building codes, nuisance laws etc. that may protect me in this case? Is there any California condo law that states the noise level cannot change following installation of new improvements in a neighboring unit? Is the ARC required to inform neighboring units when improvements are seeking approval in another unit? I really think if I can show the new owners/board/ARC that they have violated some rule or process that would allow legal action to be taken, they might do something to remedy the situation.
****
So, here are some key questions that I have answered before, and will answer again:
I wonder if there are any building codes, nuisance laws etc. that may protect me in this case? Is there any California condo law that states the noise level cannot change following installation of new improvements in a neighboring unit? Is the ARC required to inform neighboring units when improvements are seeking approval in another unit?
With regard to any given flooring-noise related issue that is brought to my attention, I cannot of course say unequivocally one party [among whom might be the board, the upstairs neighbor, or the downstairs neighbor] is right or wrong, or would win in court if suing or being sued. All I can do is set out a sense of what questions might arise and let the parties or their attorneys have some criteria to consider. The bottom line is that the courts are not really very good at solving these issues unless there is a clear cut "wrong" that can be identified, and in some cases, there is not. I have heard from readers who want to sue, and also readers who have sued or been sued and ended up in court spending a lot of money without getting a satisfactory result. So, I recommend the best course of action is to get all of the possibly culpable parties to the table with a good "neutral" party, possibly a mediator or facilitator of some kind - to see if there is any possible resolution short of ending up in court. If you have been reading my blogs on this subject, you will in fact have seen suggestions for EVERYONE involved, whether the victim of the noise or the perpetrator, or the Board of the HOA. Without reiterating every blog, I will go back over the basics.
1. It is my belief that hard surface flooring added in second story units causes many problems, if not on one day or with one set of residents upstairs and downstairs, then in the future with changes in lifestyles/residents.
2. There are certain questions to ask when reviewing these types of issues with the view toward either "presenting" incentives to get the people to the table, or toward taking legal action. These questions include the following: (certainly there may be more in any given situtation but these are the basic starting point):
Is this a pre-existing condition or did something change, i.e., flooring, neighbors, change in family circumstances, residents (number or age), and if there was a change that is now creating a problem, will it be remedied any time soon?
Did you do anything to cause or exacerbate the noise issue(s)?
Did you do anything to mitigate or minimize the problems or condition leading to the problems?
Did any of the parties violate the governing documents in their actions?
Was there any requirement or duty to make disclosures?
If so, were those disclosures made to the right party?
Are there any viable solutions that do not involve expecting the impossible, such as moving when economics or life logistics do not allow it?
Liability depends on facts and circumstances. Did any party have a duty to the other party? Yes, that of a reasonable, prudent person.
Did any party breach that duty to the other person? That is determined by the facts.
If so, did that breach cause the damages or pain and suffering, nuisance, etc.?
And finally, this is a key question that demands honesty:
Are you just part of the problem, or also part of the solution?
If any of the parties can prove the answer to be "yes" to these questions, there may be a case looming in your future.
Possible causes of action include: nuisance damages under the law for public nuisance and any document provisions prohibiting nuisances (yes, even if permission is given for the alteration).
Possible action for breach of fiduciary duty on the part of the board, the architectural committee, or even the developer, if any contributed to the cause of the nuisance by ignoring, refusing to honor, or leaving out architectural review provisions that allowed one party's actions to destroy the quiet enjoyment of the other party or made their home unmarketable or life intolerable.
Possible action for breach of prudent person duty against neighbor who puts modifications into play that destroy one's peace and quiet and make a home unmarketable.
Possible action for breach of fiduciary duty on the part of an HOA board that fails to enforce documents or reasonable standards in those documents.
Possible action for breach of fiduciary duty for inconsistent treatment of owners with regard to flooring alteration matters.
And probably a whole lot more ...
Take heart. These are serious issues. Do not set processes in motion (or lack thereof) that fail to recognize alterations to hard surface flooring in second story units can ruin people's lives. And even in a case where many problems already exist, and parties feel they are at the end of their respective ropes, there are usually additional things that can be done that they did not think of (some are noted in earlier blogs).
Property values are an important subject, of course, but come on ... peace of mind, restraint, understanding, compromise, and human compassion should be more important. Unless a building is CONSTRUCTED in a manner that focusses on eliminating noise between units, alteration of it in any manner that increases noise transmission ranges from risky to downright irresponsible.
This is such a common subject of my blogs, writings, and the emails I get that I have not only written articles and spoken on the subject throughout the Bay Area and some outer reaches, I have developed several publications with further information on the topic. If you check the publications page, you will see several items which include, but are not limited to, the following, that pertain in part or in whole to this topic and other nuisance situations:
BOOK: THE CONDO OWNERS ANSWER BOOK
PRIMERS:
***4 ON ENFORCEMENT INCLUDING ONE THAT FOCUSES SPECIFICALLY ON DIFFICULT NEIGHBOR-TO-NEIGHBOR ISSUES LIKE THIS ONE
***4 ON ARCHITECTURAL CONTROL THAT FOCUS SPECIFICALLY ON ALL MATTERS RELATED TO ARCHITECTURAL APPROVAL, THE PROCESS, PROBLEMS AND FORMS, ac-2 BEING THE ONE MOST TOPICAL AS TO HARD SURFACE FLOORING ISSUES
***E-NEWSLETTER ARTICLES - AVAILABLE IN ARCHIVED FORM - ON THE SUBJECT
These helpful items are available at a very low cost, given the amount of information contained within ... take a peek..... visit THE GURU (at http://www.californiacondoguru.com.
Posted by Beth Grimm at 1:45 PM
August 1, 2008
Uninsured HOA Funds - Who Pays For the Losses?
An interesting question came up at a legal resource panel this morning. Hopefully most everyone knows that many D&O policies for Boards of HOAs carry an exclusion of coverage for failure to insure, meaning, for example, that if an HOA fails to carry earthquake insurance and the Board or HOA is sued by someone who bears a loss because of that failure, the D&O Insurance would likely decline to provide a defense for the Board or HOA, or coverage for damages.
So, the question is "Does that play out the same way in the case where a Board invests the HOA money in an uninsured account, or the deposits exceed the FDIC insurance limits of $100,000 for the corporation, the bank goes bust, and the HOA loses part of its investment?
I would say "you betcha."
With the cavaet - the facts may have bearing one way or the other. What comes into play are factors like: does the policy language specifically identify types of insurance contemplated, or identify generally coverages such that the uninsured accounts fall into the category? Are there cases in the jurisdiction that play out this scenario to rely on? (I know of none in California but remain to be enlightened.) Was the decision not to get the insurance within the hands of the Board or was it determined by a shortage of available coverage in the marketplace, or was it simply a voluntary termination of or failure to get coverage based on the cost?
As we know, FDIC insurance does not cost money outright; it is there for every FDIC insured investment product. I believe that makes it even more eggregious to ignore the value of it (but maybe that is just me). Granted, the accounts may not be the highest interest bearing accounts .... but
The answer is an unequivocal yes - anticipating the next question to be - does the Board have a duty to protect the association funds?
And the next question I would anticipate is: "So who pays for those losses?"
The answer is the members of the association most likely, because most documents have what are called "indemnification clauses" that assure board members will be protected from claims for negligence, etc. However, there is a "good faith" element to the protection in many cases which means, if there is, that the board members might be liable for losses if they did not act in good faith. The burden of proof would be on the owner to prove the lack of "good faith" which may be a difficult burden, but not necessarily an impossible one.
Boards, for your members, do everything possible to protect the funds of the HOA. Your "job" (volunteer as it is) is not to make money with the association funds, but to seek the best return while protecting the principal so that the funds will be available when needed.
Posted by Beth Grimm at 1:07 PM