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October 22, 2008
Tough Lessons of 2008 - Some Things We Have (or Should Have) Learned
Life is one big balancing act. Risk vs. Return
Brokerage Accounts for HOAs
Go for higher return .... and "Go For Broke"? Or invest conservatively.
Question posed: "Our Board invests all HOA money in brokerage accounts. One of the Board members is a financial advisor. What do you think about that?"
If the accounts are anything other than FDIC insured or Government backed and low risk accounts, I ask you - "Did the Board learn anything this year about investing (or should I say losing) other people's money?" That is, after all, the key (other people's money). I think people get FDIC and SIPC insurance confused, and that could result in serious problems in an economy like this.
Maintenance Decisions
Question posed: "Our HOA has some very dark walkways and stairways. I have asked for lights to be put up but the HOA says it is too expensive." Yet the Board has no problem approving a couple hundred dollars repair for the pool table felt in the clubhouse. I am concerned."
And well, you should be. There are a number of cases where Board members and HOAs have had to pay damages for accidents due to poor lighting. The Frances T case from many years ago is the leading authority comparing Boards to landlords and we saw this again in a new case called Ritter v. Cunningham. In that case, the judge would not uphold the Board decision as a good business decision because the Board failed to initiate the repairs needed to fill slab penetrations left unfilled by the developer, which carried some potential fire danger as a breach in what would otherwise constitute a sealed fire wall.
Fires and Fire Danger
Question: "I presented my HOA with some information from your site about the new "Barbecue Ban" law. They refuse to even consider banning any barbecues. Our HOA is in the woods, and the other day, I saw a bunch of folks out on a deck (below another deck) watching a barbecue flame light up the night). It's scary!"
Yes it is. California is a tinderbox. Anyone who fails to take reasonable measures to prevent fires is just ignoring the realities. Yes, people like to barbecue. It's one of the perks of outdoor living. However, its a fire danger, people! And no less offensive than watching the sparks light up the sky when an idiot carelessly tosses a cigarette out the window of a car. I see some resistence to this law, and its not good. HOAs that refuse to acknowledge the "Barbecue Ban" law (banning charcoal burning barbecues, and LP barbecues that use a tank more than what would hold 2.5 liters of water and any other mechanism that can have an open flame) on wooden decks, or below wooden decks, or within 10 feet of wood burning structures are likely to receive a letter from their insurance carriers at the next "inspection", if not before, that says: "Take these measures: Ban Barbecues that violate the new law." (I have already seen some of these letters). Of course, it the decks have working sprinkler systems, there need be no ban according to the law, but whose does?
Limiting Rentals in HOAs
California courts are willing to uphold reasonable terms when the members either purchase with knowledge, or approve (by majority or super majority required to amend CC&Rs). So that is good. However, in this economy, otherwise responsible assessment paying owners may be pushed into foreclosure if they can't afford to live in or can't rent their homes, and HOAs can bear the brunt of stringent enforcement without seriously considering hardship situations. That is bad.
Collection of Assessments
"Question - we seem to have a lot of trouble collecting assessments these days. What can we do to protect ourselves as an HOA?"
I plan to do another blog on this very soon. In the meantime, check out the other blogs on Abandoned Property, and the E-News Archives at http://www.californiacondoguru the condoguru site with tons of valuable information (much of it free!).
Posted by Beth Grimm at October 22, 2008 11:33 AM