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September 30, 2008
GOVERNOR BUSY AT WORK VETO-ING 2008 HOA BILLS
I wish I could say I got up early this morning and checked the legislative update pages to see what bills of interest to HOAs have been signed by the Governor and which have been vetoed. But I did not have time; I wanted coffee first!
Then, low and behold, my friend Mike Gartzke, a CPA in Goleta who as a volunteer heads The South Coast Homeowners Association (a group that educates boards and homeowners on the Central Coast) answered my prayers. It pays to have friends in high places.
Here is the scoop, hot off the email:
"2008 CALIFORNIA LEGISLATION – PASS OR VETO
A remarkable amount of HOA legislation was passed by the Legislature at the end of this session. Even more remarkable, the governor vetoed most of it.
AB 567 – Common Interest Development Bureau – This bill would authorize the establishment of a state CID Bureau to provide educational opportunities, a website and toll-free number to field questions. The bureau would be funded from fees levied upon homeowners associations. The initial fee would be $10/unit, every 2 years. A 50-unit association would pay the state $500 once every two years. VETO
AB 952 – Assessment Payment Plans – This bill would require the board and an owner to meet and discuss the reasons why a payment plan is needed, if the owner requests a payment plan. The association would have 45 days to provide a payment plan in writing if the evidence warrants it. The payment plan could last no more than 3 years. Lien enforcement procedures would be suspended if payments are made as required. Reasonable fees to administer the plan are allowed. VETO
AB 1892 – Solar Energy Installations – Would void any CC&R prohibition or restrictions with respect to solar energy systems – Chaptered – now law
AB 1955 – Variable Assessments – Would prohibit associations from levying assessments based upon the taxable value of the property unless it was being done before December 31, 2008 – limited applicability VETO
AB 2259 – Rental Restrictions – Would not allow rental restrictions enacted by HOA members after January 1, 2009 to apply to any owner who owned their separate interest prior to the date the rental restriction passed. Would also require owner to provide name and contact information to the HOA about his tenants. VETO
AB 2806 – Board Member Education – Would require that all board members and candidates for the board disclose to the HOA members whether they have taken a course in Community Association law and when they took the course. It would be effective in 2010, if passed. VETO
AB 2846 – Small Claims Court Disputes – Would expand the options available to an owner in a monetary dispute with the Association to pay under protest and seek relief via Small Claims Court. Chaptered – now law
SB 127 – Transfer Disclosures – Requires that necessary disclosures be made within 20 days of the execution of the purchase agreement or the opening of escrow, whichever is later. VETO
SB 1511 – Defaults/Foreclosures – Would require lenders and trustees to inform the association of new owners who have taken a separate interest as a result of foreclosure or other transfer of title. – Chaptered – now law
Further information on these bills can be found at www.leginfo.ca.gov. We [referring to The Southcoast Homeowners Association] will be discussing those bills that are signed at our annual law and legislative update meeting early next year."
Ditto! [Referring to the HOA Industry.]
Watch for an E-Newsletter on this, coming soon. If you are not on the list for this free newsletter, best be gettin' to http://www.californiacondoguru.com and signin' up!
(And thanks, Mike)
Posted by Beth Grimm at 3:25 PM
September 26, 2008
COMPLAINT ABOUT HOA BOARD MEMBERS - SHOULD WE?
Maybe you have faced this dilemma (from a reader):
"We are a very small association. Neighbors to a board member would like to file a complaint against that board member for various reasons. ... How can we do this without the involvement of the Board member who is the problem? We are afraid this board member will get special treatment and nothing will be resolved. We have discussed the complaints with this neighbor and written letters, but to no avail. The neighbor just doesn't care about being a considerate neighbor. We are all at a loss and are thinking the next step is to file a complaint with the HOA. Please let us know how to go about this since they are a member of the board."
Make the complaint. Put it in writing. Ask the Board to consider taking action under the HOA documents, The Board member involved should abstain from voting on any action that is proposed. If necessary, the other board members can consult with an attorney and exclude the board member being complained of from those discussions, The way to do this would be to form an executive committee to meet with an attorney. Otherwise, the Board member should be treated as any owner would who refuses to meet the Board's demands to comply with the HOA documents. The Board member could stop being a nuisance, or if that does not happen, would get a hearing notice and be invited to an executive session meeting with the board to have the complaints considered. At the hearing the Board would determine if disciplinary action is warranted. If the complainants want to attend the hearing, they can ask. Boards do not always ask the complainers to appear but some allow it, and some even encourage it.
Of course, the complainants may suspect the other board members are playing favorites if nuisance conduct is not abated or subjected to disciplinary actions. In that case, the complainants can always consult an attorney and ask for legal advice as individual members, or even try their luck on the nuisance aspect in small claims court. There is more information on this on my website at www.californiacondouru,com. Look for Articles, E-newsletters on remedies, and publications on the subject.
Board members should not be exempt from the same considerations given in non-board member complaints. HOAs should have processes and procedures in place to afford consistent treatment for all. There is a seres of Primers available covering Enforcement topics that would be helpful to anyone wishing to have more information on enforcing rules and CC&Rs, at a very affordable price on my website (mentioned above).
Posted by Beth Grimm at 3:55 PM
September 20, 2008
Security Lighting - How Important is It?
This question was passed to me at a seminar today and it is on an important topic.
"I am a single middle aged woman and live alone. The walkways leading to my unit are quite dark, and I feel that more lighting is needed. I do not feel safe at night walking to my unit. I have asked the Board to install more lighting in the common area by my unit, but they refuse, saying if they put it in for me, they will have to put it in for everyone. What is their responsibility?"
This scenario is very similar to one in a leading case in California, Frances T vs. Village Green. Its an older case decision that has withstood the test of time as binding authority. It was raised in the recent case Ritter vs. Churchill which is discussed in a recent blog, where the court pointed out that an HOA/Board can be responsible when safety issues are involved on the same plane as a landlord.
In the case (out of the Supreme Court of California), FRANCES T. v. VILLAGE GREEN OWNERS ASSOCIATION, Sept. 4, 1986, the condominium unit owner brought an action against the condominium owner's association and individual members of its board of directors for negligence, breach of contract and breach of fiduciary duty regarding quite serious injuries she sustained when she was attacked in her condominium unit.
The Court held (among other findings) that: "(1) plaintiff stated an actionable cause of negligence against association for its failure to provide adequate lighting in common areas; (2) plaintiff stated a cause of action for negligence against directors for their failure to take action to avoid harm and for taking actions contributing to risk of injury to residents."
Let this case be a lesson. In the case, the owner asked the Board to put up security lighting.The Board refused. The owner put up some lights and the Board "ordered her to remove them because they were placed in areas subject to association's exclusive authority. The owner was shortly thereafter the subject of a brutal act which which occurred in her unit.
The HOA and the directors were found culpable in Frances T. The court likened the duty of the Board to that of a landlord. Since there had been a burglary in the development, there was foreseeability that criminal activity might occur.
Although one would like to believe that Boards cannot be held responsible for criminal acts of third parties, or for preventing them, they are responsible for dealing reasonably with a safety issue or potential hazard, whatever that might be. They are not expected to hide in the bushes and ward off criminals, and probably are not required to hire and pay for security, but improving lighting in the common area to make residents feel more safe??? That does not seem like an unreasonable request. At the least, it may also help to prevent accidents.
That said, I must offer a cavaet. I would not profess to give legal advice to this association one way or the other, or say the Board is right or wrong, without knowing other pertinent factors such as - do other residents feel the same way? Is the person that is asking prone unnecessarily or unreasonably to fear? Is there existing lighting that the Board feels is adequate? Has there been any criminal activity reported in the neighborhood? Are there people hanging around that do not belong in the Association? Is it a long walk from the parking areas to the units? Are there lots of bushes where someone might be able to hide?
These are all pertinent questions that go directly to the issue of whether there is any "foreseeability" that there might be a crime if the area remains in its current "lit" (or "unlit" state? And they are important ones.
Posted by Beth Grimm at 7:05 PM
September 15, 2008
May A Board Decide To Add A Capital Improvement Without Seeking Owner Approval?
I love it when I get really good meaty questions from readers that, when answered, can help others. This is a good one that works:
FROM A READER: "So here is the question. Can an association randomly just add something to reserves and then build it. Kinda the “If you build it they will come” mindset. I looked at Davis Stirling and our CC&Rs and found nothing really concrete either way. I have read two articles on this subject by two different attorneys and one said that so long as the new improvement fell within budget it was OK. (Assuming that reserve spending was a budget item). The other article noted that “The discretionary addition of new facilities which were not previously part of the development’s original construction, which exceeds 5% of the budget, requires membership approval."
This person is asking for my thoughts on the subject. Here goes ...
Some documents do require a Board to seek membership approval for any capital improvement that exceeds 5% of the budgeted gross operating expenses for a year. Not all do. If there is no such requirement, it is still possible that owner approval must be obtained if the improvement is going to cost more than 5% of the budgeted gross operating expenses, and a special assessment for that amount is needed to pay for it.
As for an opinion that it is okay if it is "in the budget" means that if the Board budgetted for it in the operating budget for the coming fiscal year, it would be a valid expenditure without member approval, so long as the regular assessments were not increased to pay for it (or other increases in the aggregate) more than 20% over the year before,
In some cases, Boards make decisions to add a capital improvement if there is enough "fluff" built into the budget to cover the cost. Sometimes Boards use "windfalls" or leftover funds from special assessments that were paid in for some project for capital improvements.
Not all people (board members, managers and attorneys included) are into "full disclosure" to the members, or even a survey before any capital improvements are made. However, I believe that it is important to see where the members stand before spending the money for something new ... especially in these days when HOA budgets are being tested to the max with foreclosures and rising delinquency numbers.
If the Board tends to spend money whenever it is available for unplanned improvements and other things that might be perceived by members as unnecessary, and there are no limits in the governing documents on spending on capital improvements, I would say that should be of concern to the members.
Posted by Beth Grimm at 5:47 PM
September 12, 2008
Reroofing Next Year? Look for Energy Efficient Requirements
2009 will be rung in with some new energy efficiency requirements including changes in California Building Regulations (Title 24). The California state website is a wealth of information about everything California and references below will point to it. Don't underestimate the value of a visit there to find out what is happening (www.ca.gov). See other blogs on its wide scope, for now, read about new building standards relating to use of energy efficient materials.
See the Article below, which was sent to me by a reader (I got permission to republish it). I did some research to find out what is driving the statement about the cool roof regulations being effective July 9, 2009. I had not heard of a new law on the subject. I found that there are California Building regs that are adopted and will be in effect by that time for certain residential buildings in certain zones. There is a 450+ manual available online (CEC-400-2008-016-D[1]) with the regulations (roof requirements start on page 358) that can be found by navigating through the California Energy Department site on the California website (go to www.energy.ca.gov). There is also a bill that will carry penalties if signed into law for unlicensed contractors or contractors who avoid getting permits and fail to honor energy efficient building construction regulations in 2009 (see AB 785 – listed today as “enrolled” but not yet “chaptered” – meaning not yet signed into law by the Governor, found in the Legislature section of www.ca.gov).
Thank you readers for helping me stay on top of these kinds of issues that affect homeowner associations in California. If you are planning a reproofing project [other building or landscaping also] in 2009 or after, be sure to seek bids from contractors familiar with the new energy efficient building requirements so you don’t get “burned”!
***
THE ARTICLE
For Immediate Release: September 9, 2008
Media Contact: Adam Gottlieb - 916-654-4989
Scientists Promote "Global Cooling"
With White Roofs and Cool Pavements
Scientists Call For International Effort in World's Largest Cities
SACRAMENTO -- California scientists today announced a formula to calculate how much carbon dioxide (CO2) can be offset by increasing the reflectivity of urban surfaces like rooftops. The news was announced at the California Energy Commission's Fifth Annual Climate Change Research Conference.
"White roofs can cut a building's energy use by 20 percent and save consumers money," says California Energy Commissioner Art Rosenfeld. "The potential energy savings in the U.S. is in excess of $1 billion annually. Additionally, by conserving electricity we are emitting less CO2 from power plants," Rosenfeld added.
Together with Rosenfeld, Lawrence Berkeley National Laboratory (LBNL) scientists Hashem Akbari and Surabi Menon have successfully quantified the effects of white roofs in populated settings in terms of CO2 offset. In a study to be published in the scientific journal Climatic Change, Akbari, Menon, and Rosenfeld estimate that replacing nonreflective, dark roofing materials with white ones on an average house with 1,000 square feet of roof would result in an equivalent CO2 offset of 10 metric tons annually. With an offset value of $25 per metric ton, that could be worth $250, according to European CO2 markets.
Scientists have known for centuries that putting white roofs on homes and buildings is a simple and effective way to reflect the sun's powerful rays. Similarly, cool-colored pavements aid in the reduction of "urban heat islands." When rooftops and pavements are more reflective, global warming can be reduced.
Since 2005, commercial buildings with flat roofs in California have been required to have white roofs. Residential sloped roofs are also becoming more efficient. Beginning in 2009, new residential roofs and retrofit constructions in California will be required to have "cool-colored" roofs which reflect a higher fraction of the sun's rays than current roofing materials of the same color.
Because white roofs act as a geo-engineering technique to cool the earth on a global scale, Akbari, Menon, and Rosenfeld propose an international campaign to organize 100 of the world's largest cities in tropical and temperate zones to develop programs to require white roofs and "cool pavements" when roofs are initially constructed and pavements installed. The projected estimate for worldwide CO2 emissions in 2025 is 37 billion metric tons; a proposed global CO2 offset would be 44 billion metric tons, valued at $1,100 billion, and enough to offset more than one year of the total global CO2 emissions.
"This idea of a 'cool cities' campaign could lead to significant energy savings, improved air quality, reduce the heat island effect in summer, and more importantly, cool the globe," says Hashem Akbari. "This simple and effective idea can organize the world into taking measured steps to mitigate global warming. Our findings will help city leaders and urban planners quantify the amount of CO2 they can offset using white roofs and cool pavements."
Note: A copy of the LBNL Research Highlights of the journal article is available for downloading as an Acrobat PDF file.
# # #
Posted by Beth Grimm at 12:33 PM
September 10, 2008
If You Send Unsolicited Materials - Beware of Shredding!
I receive lots of calls, as I have said before, from people who "just have a simple question" and I receive files in the mail sometimes, unsolicited, with notes attached like "just wanted your take on these" or "Want to weigh in?"
The answer is no, I do not want to "weigh in" or read unsolicited case materials. And when they come to me, they end up in the shredder.
And no, I do not want to just answer a "simple question" because they are hardly ever as simple as you, the reader, would wish they were and if they are, you can send me an email and, if pertinent to others too, and generic enough, I will answer them on my blog, which is also another great resource.
The truth is that there is lots of free information on my website just for the taking and absorbing (see http://www.californiacondoguru.com). And so, when folks want specific advice, there is a charge - and all of this is explained on the consultation form on the website.
I feel sympathy for people that are struggling and cannot find a knowledgeable resource to respond to their own personal legal issues. However, here are some things many people do not understand. It is important in any given situation for me (or any attorney for that matter) to be able to
(1) Establish an attorney-client relationship so that any discussions I have with people who want to be clients can have appropriate privileges attached.
(2) Make sure before giving advice as to any specific situation that I have the opportunity to explore it and get my own questions answered and get sufficient information so that I am providing useful legal advice.
(3) Have some way to prevent people from walking away from a brief conversation with me, having heard only what they want to, and carrying the (wrong) message out further to others.
and last, but not least
(4) Avoid getting into a conflict of interest situation where I am giving advice to a Board and an owner in the same association, who are fighting with each other.
Attorneys in California are bound by a Code of Ethics, and I take that seriously (wish everyone did), and so that is why, if you send unsolicited materials, or call me and ask "Can't you just answer a simple question?", you may get what you think is a rebuff (but which is really ethics at work).
My best.
Beth Grimm
Posted by Beth Grimm at 11:29 AM
BOARD DECISIONS ON MAINTENANCE - AFTER RITTER V. CHURCHILL CONDO ASSN.
What Criteria is Important As Evidenced in Ritter vs. Churchill Condominium Association?
This recent appellate court decision in California raises some interesting quandaries and (unless appealed and some things change) for HOA Boards and HOA members.
(1) Is a Board safe when it acts on experts’ advice in any given situation, and there is no malice involved? (It would appear so, at least as it relates to personal individual liability).
(2) Is the HOA safe when the Board relies on experts’ advice in any given situation? (Not necessarily – if the decision of the Board is found to be harmful to members – or for that matter – residents, vendors, etc. as well as has been the experience in other serious cases.)
(3) Should all HOA board decisions be given the benefit of the doubt (effecting the “Business Judgment Rule” of deference to Board decisions) when being reviewed by a court? (The answer is “no”.)
In Lamden v. LaJolla Clubdominium, which is a leading case in California supporting the premise that courts should give HOA Board decisions on maintenance deference, the question was whether the Board’s determination on termite treatment should be upheld, when an owner sued to try and enforce a different treatment scheme that was more invasive (spot treatment vs. tenting remedies). In my view, and extremely simplified, the court essentially found that since the Board had a plan and relied on experts in formulating it, the court would not delve into whether the owner’s suggestion was a better plan.
The facts of Churchill have some very distinct differences, and although the court found that the individual board members should not have liability for the decision, the HOA should be required to do some things as demanded by the owners. In other words, the directors were not personally liable for failure to resolve a slab penetration issue, but the HOA as an entity was and would have to resolve the slab penetration issue, at least as to the owners who sued (two separate Ritter individuals).
There was language in Churchill tying in consideration of whether the Board/HOA had the same or similar duties as a landlord would have to maintain the property in a way that did not allow for a hazardous condition or safety issue. The main focus of the Churchill case was from the corporate board perspective, in the context of determining whether it was a contradiction in terms that the board members could be cleared but the HOA could not – and whether the Board’s decision about the slab penetration issue should be given deference. However, slipped in was discussion of the Frances T. case of years ago, establishing liability for HOAs/Boards for failure to take measures that would enhance the safety of residents, and that is a distinction from the Lamden case. In Lamden, owners’ health and safety was not an issue. In Churchill, health, safety, City Code requirements, and quiet enjoyment of property were all issues.
In a nutshell, the HOA was hurt in the first place when, during construction, an important aspect (that was a Code requirement) was missed. Slab penetrations created for pipes and wires should have been properly filled and were not. This fact was missed by the City inspectors who issued permits. That left the HOA in a vulnerable position – fill after the fact, or not. The Ritters raised complaints of odors and smoke invading their units, because of these slab penetrations. The Ritters did some remodeling to their units and they made some changes recommended as a possible means of resolving the problem. The work they did did not solve the problem. Both parties consulted with experts who proposed fixes. The Ritters wanted the HOA to take responsibility to fill the slab penetrations, and the HOA thought the Ritters should have done so when doing their remodeling. The HOA took action to order them to do so, and impose daily fines when they did not. The whole thing ended up in this litigation.
I felt very much like the court was leaning more toward Frances T than Lamden and a landlord’s duty more than that of a corporate board. It seemed to me that the court had determined the owners needed some protection since the HOA had not taken responsibility in the situation. It does not surprise me really that the court found that the HOA could carry some responsibility to remedy a situation even if the Board was not negligent making the management decisions.
What I see as important distinctions between Lamden v. La Jolla Clubdominium and Ritter v Churchill are: safety issues, an identified fire danger issue, and nuisance in penetration of smoking odors, slab penetration filling originally required by city codes (even though overlooked by inspectors), and, I believe the court took offense that the HOA relied too heavily on Lamden by seeking protection for their decision not to repair vs. how to repair.
And last but not least, this decision is not too overly surprising given that the appeals court decision in Lamden (which was overturned the Supreme Court of California) favored court scrutiny and consideration of a Board’s decision regarding maintenance to determine if it was reasonable.
This case may or may not be appealed. One can certainly can understand reluctance of any HOA to appeal such a decision given the reality of facing half a million in an attorneys’ fees award against them (meaning having to pay the other side’s attorney’s fees in addition to their own).
Hindsight is clearer than foresight, of course, and this Board should not be condemned as it did what would be expected, consulted with experts and listened to their advice. However, what can and should be taken away from this case decision, as it stands, is that there is likely a distinction between the way courts analyze decisions of corporate boards when health and safety of people are at stake.
Another thing to take away is that wafting smoke can turn a molehill into a mountain, so do not take it lightly!
Posted by Beth Grimm at 10:01 AM
September 7, 2008
There Can Be A Silver Lining ... With "Due Diligence" and Some Effort.
In case there are any of you out there that are frustrated and do not think you can make a difference in your HOA, read this - its a note from a reader.
Subj: Work in Progress but I can see the Silver Lining
Dear Beth,
The information I obtained from your website was invaluable. At my second HOA meeting, there was a break thru! Per your suggestion, I scoured thru the CC&R and listed my top three violations that had not been enforced by the HOA Board and by the manager. I then emailed the manager to put the Article and section on the agenda for discussion at the meeting. Curiously, the President of the HOA board never showed up for our once a month meeting. As the Treasurer directed the meeting, I can clearly see that she is concerned and is for giving back the power to the owners (our tenancy rate is very high).
Now, red zone towing is enforced, my neighbor’s air conditioner has been removed, the trash in the parking area easement are cleared, and they assured me that they shall be keeping a close eye on everyone to make sure the CC&R is being enforced.
I just wanted to send you a note to let you know that without your information and contribution, this would have never been possible. I would have showed up at the meeting ranting and raving like a maniac, but you put things in perspective, advising logical avenues and course of action. I took that advice and it worked better than what I had hoped for. I just had to write to say thanks so much for sharing your knowledge.
Sincerely,
Leslie Gonzales"
I say, Leslie, thanks for giving people hope. It's easy for me to dole out advice, but as I have said many, many times to many people, I cannot change your HOA necessarily with a demand letter. When providing suggestions on this blog, or services to those who request them, I can enlighten boards and often am persuasive enough to "get their attention" if you have not been able to, but in most instances, where owners are looking for sweeping changes, and Boards are stubborn, or misinformed by professionals, and without great expense on your part, I can tell you what things you might try to get the "right kind" of attention.
Posted by Beth Grimm at 4:24 PM