California Condo & HOA Law

August 27, 2010

Solar for Condos and HOAs

Lots of people want to "Go Green" and some to more extremes than others. Even in these tough economic times and given the up front investment, some associations are looking seriously at options for adding solar and other "green" options (electric car plug ins and the like). Unfortunately, it is complicated, Here is some information and reference material from a reader:

"Someone just pointed me to your wonderful condo site. Since you clearly know a lot about condos, I was wondering if you've heard of any condos that have bought or leased solar systems. I've been trying to get one in place at my condo and have run into various issues.

I'm particularly interested in whether it might be possible to do various energy-efficiency improvements, including solar, under a PACE program (assuming they start up again, which many people think they will). As I note in this blog post, our HOA board thinks this would be too complicated legally: http://rfrancescato.wordpress.com/2010/07/07/condoizing-solar-part-2/.

However, my fellow green committee member spent a lot of time talking with the San Francisco Mayor's office about this. They were eager to work with a condo, and he thinks that if they think it could be done, then it must be legal.

Have you encountered this kind of issue? I would love to hear your thoughts on this."

The issue in the blog and the San Francisco loan site and the news article to which the blog refers say that both FNMA and Freddie Mac (FHLMC) the two largest home loan servicers, are saying they will not purchase or service loans that are made under programs like the San Francisco PACE program which was providing funding for home loans for homes that featured "green" options.

So add this to other possible barriers to "going green" on the large scale. Other hurdles include:

Ownership/placement issues
Capacity issues
Up front costs
Raising money
Owner approval

It's too bad it's so hard! But keep the faith. What seems difficult today may be easier in the future as barriers are lifted and solutions are offered. It is likely that need, appreciation of the environment, added competition, legislation, incentives and discussions with the loan servicers might lead to solutions. So do not let the hurdles delay studying the options - associations that want to look at all options can take "baby steps" by choosing improved roofing products, irrigation systems and landscaping options, by choosing improved lighting options, and can prepare to be "poised to propose" large scale solar options when the timing and more substantial and workable programs line up in the universe.

Posted by Beth Grimm at 8:23 PM

August 20, 2010

Are Board Members Entitled to See HOA Records?

Here is an email from a board member:

"I find myself in a delicate situation, having served on our Assocaition's board for more than twenty some years during my tenure as Association President. Last year, term ending in June 2010, I requested several documents and records from the Management Company who serves as our Custodian of Records ... None of the records and or documents requested are considered 'privileged' so there remains no reason why the management agent and company withheld such from me. I am seriously considering filing a Small claims action to order production of documents and ask for penalties for their refusal. My question to you is this, can I sue the management company for their failure to produce the requested documents without having to drag the Association into the civil matter? I don't want to create issues with fellow former directors but feel that I have no choice other than to pursue legal avenues to get the information that I had a right to, information and documents that were intentially withheld from me and in direct violation of the California Civil Code."

The association records belong to the association, and if records are being withheld from a board member, that is a problem. But the ultimate decision on any request is the responsibility of the Board. The manager would be acting on behalf of the Association in most situations (a look at the contract would disclose this). Thus I believe that the Association would be the proper party to be sued in any action to seek redress for failure to provide the records.

As to rights, Board members have the right to see all corporate (association) records under Corporations Code Section 8334 which says:

"8334. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the
corporation of which such person is a director."

There is a cavaet. In a case, King v. Oakmore Homes, a director sued to see proxies from an election, and the court said no. There was some discussion in the case that Mr. King might want to see the proxies to see if people who promised to vote for him did, but the court said since he was elected, he did not need to see the proxies. So there are times when a board might be entitled to withhold records, if there is reason to believe there might be an improper purpose in seeing the records. In some cases where a board believes that a director may disclose confidential records inappropriately, it may be okay to withhold records, but it would be important to get legal advice in a situation like that.

The series of Corporation Codes allowing for inspection of records AND Civil Code Section 1365.2 which allows for inspection of many association records by an owner both have provisions for recovery of attorney fees for an unlawful refusal to provide or allow inspection of the records covered. Civil Code Section 1365.2 also allows for a $500 fine for each violation.

So it is important for boards and managers to understand what must be provided. There are specific timelines discussed in the laws.

Posted by Beth Grimm at 9:06 PM

August 4, 2010

HOA Defect Fix Forces Owner Out of Condo-Is There Help For That?

Your HOA or Condo association just settled a big lawsuit - or not - but in any event, you as an owner are forced to relocate - who should pay for the expense? Here is the question from a reader, but take heart, the same thing could happen if there is a fire, flood, or the roof blows off the condo.

"Our HOA just recently consolidated [I think that means conversion of apartment to cooperative or condominium but not sure] and an attempt to equalize the unit construction will begin on our unit next month. They told us they will come into our home to tear up the floors to fix the joist below. We just had twins! As you can imagine, the timing could not be worse. What are owners rights or guidelines toward financial reparation for inconvenience, hardship, relocation, moving expenses, bringing the inside of unit back to the original condition (fixing our hard wood floors, re-painting the walls), etc.

What section of the Davis-Stirling Act addresses these issues and has there been a legal precedent in California.

Any guidance would be appreciated."

Congats on the babies and I agree, not good timing. There is nothing in Davis Stirling about it this situation and usually there is no obligation on the part of the HOA to pay for relocation expenses. You might check with your own HO-6 policy, assuming you carry individual insurance. There maybe some relocation cost allocation. If there is, there may be conditions on when it can be used, but check.

And as for bringing the inside of the unit back to the original condition (like fixing hard wood floors, re-painting the walls, etc.) it really depends. If equalizing the units includes interior repairs, then they should be covered. If not, it may be a battle between the HOA and the homeowner. I would say first: read the governing documents and see what they say. Usually the CC&Rs say that owners are responsible for the interiors such as paint and flooring. However, there may be something in the documents that suggest who is responsible if repairs are made and in the course of that, damage is caused to the interiors.

More commonly though, the CC&Rs would be silent on what happens when repairs to a unit are made. Replacement of hardwood floors or expensive painting or wallpaper can be the source of much fighting and I have seen in some cases, where settlement is not reached, both parties spend more than the cost of the floors or wallpaper fighting over who ultimately pays.

Hopefully, whoever set up the conversion, if that is what occurring, considered these expenses and addressed them in the conversion docs. If not, then the parties are on their own and that means arguments will abound. I might suggest that the absence of any other language than that saying the owners are responsible for the interiors and the HOA or Condo Association is responsible for the common area, that is probably the ultimate defining and controlling language.

If the damage is due to a different event, like a flood or fire, there may be HOA insurance coverage involved.

These questions can be complicated and a consultation with an attorney might help. But again, consider the cost of the repair vs. the cost of the attorney services.

Posted by Beth Grimm at 9:54 PM

July 27, 2010

What Can You Do When the HOA Board Does Not Enforce the Rules?

This is a hot topic. The question sent to me is:

""What can I do about a board that does not enforce the rules? They won’t do anything about people disobeying the rules because they are afraid of retaliation. As a 20 year homeowner, what can I do and where do I start?"

There are many ways to attack this problem. But first, understand that board members are volunteers, they have their hands full these days just trying to keep their HOA or Condo Association "afloat", and they can use help.

So, first, get educated about rules. There are 5 "Enforcement" Primers available on my website for $25 each that will tell you everything you ever wanted to know about rules and enforcing them. And forms to boot! These Primers are intended to assist boards in setting rules and policies that are reasonable, and they being able to enforce them!

Second, run for the board! If you want to help, get your hands in the pot. If you want to know what the board responsibilities are there are two Primers on the website relating to Board Basics (responsibilities) - I (basic) and II (intermediate). There is also an Operations Primer and an Ops forms Primer to assist with operations.

Chronic complainers (about rules enforcement) can become part of the problem. Become part of the solution! Get involved in the leadership in your association. If you are not willing to do that, then at least keep your corner "clean".

Posted by Beth Grimm at 11:42 AM

July 5, 2010

HOA Fees for This and That - What is Legal?

What can boards charge for?

Maintenance? Probably. This is generally described in the CC&Rs assessment section.

Insurance Premiums? Probably yes, for the common area. The documents will describe whether the HOA or Condo Association can charge for insurance for the homes in the development.

Move In-Move Out Fees? It depends on what the governing documents say (should appear in the CC&Rs if it appears at all.)

Security Deposit for Tenants? Same answer.

Damage to the common area? There may be a reimbursement assessment allowed in the CC&Rs and that would usually describe it if the association can charge, and also if the association can lien for the charges if not paid. Associations commonly can lien or foreclose for nonpayment of assessments. This one is one for which someone should seek legal advice as it is complicated.

Failure to maintain a townhome (by an owner)? Probably, and again, the documents would dictate whether the board could collect any charges or reimbursement costs if the association did the work like an assessment or would instead have to treat it as a personal debt.

Pool fee? Depends, the bylaws or CC&Rs may allow for a fee. Commonly everyone in a condo association or HOA shares the cost of maintaining the pool equally, even if some people to not use the pool. However, issuing pool keys or passes may involve a fee or charge or even security deposit paid back upon return of the key, or a key replacement charge.

Fine? There are a myriad of requirements to charge a fine such as the requirement of circulating and adopting a fine schedule and a hearing. Most HOAs have some kind of warning letter first, before the hearing.

Fee for a having a pet? Probably not, but there might be a provision in the documents that allows for it. It is better to treat costs related to having a pet as a reimbursement cost for any damage rather than a set fee for having a pet. This would probably not pass muster with the courts, unless there was justification through some fee or cost to the association in allowing pets.

Fee for having teenagers or small children? (No, would be discriminatory.)

Extra fees for extra vehicles? Depends on the governing documents.

Did I cover everything?

Probably not, but its a start. The bottom line is that the governing documents provide authorization for what the board can and cannot do and what obligations it has, and if a fee is not described in any of them as being authorized, there is probably a problem if the board charges.

Posted by Beth Grimm at 8:25 PM

June 24, 2010

DO YOUR PART IN HELPING WITH QUORUM REQUIREMENTS FOR HOAs

APATHY in HOAs and Condos is a very big problem. If you want to be part of the solution rather than part of the problem, now is a good time to contact your legislator if you live in an HOA or Condo and are experiencing any problem at all getting a quorum for board elections. Many associations do have this problem. A California group called the Community Associations Institute - California Legislative Action Committee (CAI-CLAC) has sponsored a bill that would allow HOAs and Condo Associations to take advantage of a lower quorum requirement for a board election if the Association board makes a good first attempt to get a quorum of owners to respond in an election. The bill has met some unexpected opposition and a critical hearing date has been moved back to allow Californians to weigh in on the bill.

Here is some pertinent information to assist. Note the immediacy please!

FROM CAI-CLAC:

"These Senators NEED to Hear From YOU NOW Regarding AB 1726:

The bill allows Associations to conduct their annual board elections with a lower quorum (33 1/3%) requirement on the second election attempt if their first attempt fails to obtain a quorum of 50% (plus 1) as required by law. (This bill applies to HOAs that have no alternate quorum in their governing docs and won’t affect those HOAs that do have a reduced quorum provision in their governing docs.)

The bill’s hearing has been postponed one week… allowing Condo and HOA owners and board members to weigh in by asking the following senators to vote YES.

FAX YOUR COMMUNICATION TO COMMITTEE MEMBERS:

Ashburn, Roy 916 322 3304
DeSaulnier, Mark 916 445-2527
Harman, Tom 916 445 9263
Huff, Robert (Vice Chair) 916 324 0922
Kehoe, Christine 916 327 2188
Lowenthal, Alan (Chair) 916 327 9113
Oropeza, Jenny 916 323 6056
Pavley, Fran 916 324-4823
Simitian, Joe 916 323 4529"

Tell the Senators who hold the fate of this bill in their hands that your association has had serious problems getting a quorum for board elections, that meeting quorum requirements is difficult or impossible due to association member/voter apathy, and that the failure to achieve quorum threatens the ability to have a valid board election every year. And it is also fair to tell these legislators that without this bill, the law allows an outgoing board to simply APPOINT whomever it wants to fill vacancies when quorum cannot be achieved. This adversely affects the members’ right to elect their chosen candidates. And one more thing, when a board has to hold a new election because of lack of a quorum, and does not have the right to use the "adjourned meeting/new quorum" option, it is costly to the members.

Tell the legislator (lest they miss the message) that you are asking you to vote YES on AB 1726 (Swanson) in the Senate Transportation and Housing Committee on June 29.

Do it, RIGHT NOW! The communications must be received by June 28. The hearing is on June 29.

Let me know if you helped!

Posted by Beth Grimm at 11:36 AM

June 22, 2010

Screaming Babies - Can You Sue Them For Nuisance?

The following is a very difficult set of facts. Some situations are just not conducive to litigation or punishment until it can be established that the parties are not making any compromises or working to find a mutual solution.

Kid noise is the source of many disputes in condominiums and townhomes. It can be a problem in apartments too, but it is easier for a party that is a renter to leave an apartment and find another place to live. And keep in mind that "it takes two to tango" as they say.

Here are the facts as presented to me:

"We are renting a condominium from a friend and have a 1 1/2 year old toddler. On occasion, he has a tendency to scream quite loud, whether it is because he is upset or just wanting to let out steam. To our knowledge, his screaming has never occurred before 9 am. Our neighbors have complained to us about the "noise" coming from our unit since the day we moved in and have now taken the issue up with the HOA.

We got a visit from one of the HOA members yesterday who wants to find a solution before involving the landlord and deciding disciplinary action against them.

We do not understand our rights as renters and what we are supposed to do in this situation. We do not encourage our son to scream, but at his age we do not know what recourse we have. We are doing our best to re-direct his energy into different activities, but we also believe it is a normal phase toddlers go through at his age. We have been in our unit for less than 5 months and have been bothered with this issue on three different occasions.

Do you have any advice? And does the HOA have any legal recourse against us?"

First of all, let me say "kudos" to the board member for seeking some kind of resolution before meting out punishment on the landlord or anyone else.

Let's say that you are the decision maker in this situation having to mete out the punishment, if there is to be any. Who do you think should "win" if a legal battle ensues? Do you think anyone should be punished in this situation?

If you have kids or grandkids that are hyperactive, easily excitable, colicky or just plain heavy footed or noisy, you will sympathize with the tenants who have the child screamer.

If you are single or a couple without children or with perfect children, work at home, work nights and sleep days, are a senior citizen who has "paid his or her dues" and are looking for a peaceful place to live, or are disturbed by loud and unpleasant noises, you will most certainly side with the complaining neighbor.

If you are an HOA lawyer without compassion you might say that any loud noises of this magnitude are a disturbance and should be punishable by the full extent of the authority of the governing documents. Or you might be inclined just the opposite to say this is not the board's problem, that it is a neighbor to neighbor dispute and the board should not get involved.

As for legal rights, the board could impose discipline on the owner of the property including fines, suspension of some of the rights of owners (and tenants by delegation) and the like, according to what the governing documents allow, for each incident. And the board could likewise probably opt out of the dispute and refer the parties to a local mediation service. If taking action against the owner for the screaming baby noise, the board would want to be careful to avoid any action that could be perceived as discriminatory, meaning a violation of the constitutional protections for families with children.

So who is right? Everyone? ... No One? Here are some things I would recommend that the parties consider:

The Renters With the Screaming Child

Move: If you can move to a new place with better insulation or a home without party walls, life will be simpler. Of course, this may not be possible for financial or other reasons.

Check with a medical doctor, psychologist or behaviorist that works with toddlers to see if there is anything that can be done to help the child cope or help you (the parents) deal with the screaming in a manner that minimizes it.Perhaps there is some solution involving a distraction, supplement, food, medication, or something else that can be used to assist in the situation. It would make sense to keep a log of incidents, times, and circumstances surrounding the screaming incidents both for your own use, for informational purposes for any provider, and/or for a documented record in case there are allegations made of noise when it is not your child.

If You Are The Complainer

Remember, every time the child is screaming the parents have a front row seat and so it is at least as disturbing to the parent, and actually doubly so since they have to endure the baby noise, and the neighbors' wrath. Be glad you are not the parent having to cope with complaints about a condition that seems unresolvable related to children noise.

Get some noise cancelling headphones and be glad that the noise is not caused by a stereo with extra high def base on and surround sound speakers placed on a hardwood, laminate or tile floor.

Get surround sound and when the screaming starts turn on a movie about a car race, something like Thunder Road or a musical, or turn on the stereo and listen to some lively music (not so loud it disturbs the neighbors).

Indicate to the neighbor a willingness to talk about the situation and see if there is something you can do to work things out.

And for 3 times in 5 months, have a heart.

Posted by Beth Grimm at 9:46 PM

May 27, 2010

What Can A Small Claims Court Judge Do?

A common question is how much teeth does the law have? In otherwords, what can an owner do if he or she thinks that a board is not following the law? Here's the specific question for today that was sent by a reader:

"I discovered some of your excellent Internet material today and have a question about cases in
Small Claims Court involving damages for violations of law by homeowner associations when
the statutes do not seem to specify any damages. For example, if an association deliberately
violates a board member's right to be present at a board meeting, would the judge conclude
that that is very interesting, but no financial damages will be ordered by the court (I realize
that there may be some non-financial consequences such as a decision that the board
meeting may be void)."

A small claims court judge or referree would likely ask the owner why they are in court, and what they want. There are no monetary loss type of damages specified as a consequence of violating the requirement of allowing owners to attend open meetings or address the board at such a meeting. For this particular question though there are potential consequences in the form of a $500 fine that the judge may impose for any violation of the Open Meetings Act at Civil Code Section 1363.05. The remedies for violation of the Article that encompasses this statute are in Civil Code Section 1363.09. They may not seem clearly stated to a layperson but a judge should understand them.

There is of course, the story of the "other side" to consider and the Judge will want to hear it. Maybe there is a good reason for ousting an owner from meetings.

It is not as easy to find a remedy for something like a board's avoidance of the law requiring it to send out an IDR-ADR or insurance summary or being rude to owners at meetings as one cannot generally show any monetary loss for that.

The small claims judges were given additional authority though, last year by some new law that justifies "injunction" relief if the underlying law that is violated allows for it. It is a somewhat complicated get around but if a person (or board) is trying to enforce a CC&R restriction and takes it to small claims court looking for the judge to order someone to do or stop doing something, and the judge reviews the CC&Rs and sees that owners or the board can get "equitable relief" for the violation (which is an order to do or not do something), a judge or referee might take it upon themselves to make this connection and render an order.

Are you confused yet?

I have done earlier blogs on small claims court remedies, and am considering doing an E-Newsletter in the coming months on the topic. So sign up for the free E-News at the condoguru site if you want to stay on top of things.

As for a simple answer to the general subject of small claims, there are a number of monetary remedies now in the Davis Stirling Act embedded in some of the laws, which were put there by legislators to promote consequences. One has to look for them, and getting good legal advice (I emphasize good - never hurts).

Posted by Beth Grimm at 11:18 AM

May 4, 2010

Public Flogging - What is the Worst That Can Happen?

I receive a lot of emails from all over the country about goings on. I know that people get seriously angry when things happen that they think are unfair. Many come to lawyers wanting to sue. Some, when they find out the cost of a lawsuit (which seems to be a mentality that is hard to shake), turn to things they CAN DO cheaply. But choosing the easier path doesn't always turn out to be the cheapest form of blowing off steam.

Here is one story that you won't want to ignore, which is taken from a Press Release issued by the owner of the property.

"PRESS RELEASE - FOR IMMEDIATE RELEASE

Gatlinburg, Tennessee Home Owners Association Files $1 Million Lawsuit
Against Blog Author and Property Owner

A Tennessee Home Owners Association has filed a $1 million lawsuit against one of its property owners for defamation, libel, slander, and false light invasion of privacy. The property owner, Robert Goodman, has operated a blog that has heavily criticized the actions of the HOA’s general manager and board of directors for alleged violations of both its own HOA controlling documents and Tennessee state law. The HOA board has filed the lawsuit in an attempt to force virtually all content to be removed from the blog and prevent any new entries."

The blog is at www.DeerRidgeOwners.com. I provide this information and not because I have any specific information take on which side is right or wrong, but merely as straight up information of a possible "worst case scenario" to consider illustrating what can happen when an owner speaks out in a derogatory way publicly about his or her association or board, especially in a way that can reach millions of people. Use of the internet communication systems as a mean of lambasting any party can escalate any differences and damages in any lawsuit that might occur.

I have not visited the blog, but it seems it might serve as a model of what-not-to-do if you don't want to get sued. This type of situation could happen in the reverse as well if a board defames an owner (the only defense to defamation is the truth but as you can imagine, there are other potential issues like violating rights of privacy, etc, when negative information about a party is sent distributed publicly). And, even when there is a viable defense, litigation is painful and costly in many ways.

In California there are many ways for an unhappy owner to approach your board or for the board to approach owners about association issues short of public flogging (by either side).

Posted by Beth Grimm at 10:38 AM

March 29, 2010

"PATCH AND DEFER" IS NOT A GOOD OPTION

I recently received the following email from Robert Miller, Forensic Construction Expert, whose website is http://www.forensicconstructionexpert.com/. I think this is a very relevant and growing problem.

“Hello Beth,

I thought I would write to you to see if you have some insight into a growing number of "Patch and Defer" HOA's.

Each year I am asked to investigate a number of serious, ongoing water leaks at HOA properties that have been patched and or deferred.

So far the properties have been less than 10 units. Last year the numbers grew to 40 plus properties. The management companies for the properties are usually a one or two person office.

The directors on the boards seem to be vaguely interested in dealing with fixing the problems permanently.

Have you any suggestions as to what part of the HOA's responsibility clauses could be used to get more positive results?”

My answer would be that most association documents require boards to take proper action to at least “preserve and protect” and sometimes even “enhance or improve” the association properties and this includes requiring owners to keep up their individual lots if the association does not have the obligation for the repairs. Additionally, “fiduciary duty” requires boards to protect the assets of those whose dollars the board holds in trust and is charged to spend wisely. These responsibilities are legal responsibilities.

Unfortunately, that does not mean that all boards will readily understand the duties and responsibilities. Some board members run on the platform that they will keep the assessments low, and that does little to promote important saving for the necessary repairs and replacements of the major components. A very large percentage of homeowners associations in California are underfunded in reserves. Thus, when a question arises about whether investigative, forensics, or rehabilitative work should be done, unfortunately it’s easier to sweep it “under the rug.”

Posted by Beth Grimm at 9:12 PM

March 24, 2010

Business Judgment Rule Applies to HOA and Condo Association Boards

For Boards who do not know: there is some help in the laws of California in the form of legal protection. It is called the "Business Judgment Rule".

Boards of directors get some immunity which helps avoid personal liability for decisions that are made by the Board - if the board member performs his or her duties:

1. In good faith
2. In a manner which the director believes to be in the best interests of the association, and
3. With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

[This protection is found in Corporations Code 7231(c) and applies to incorporated HOAs and Condo Associations.]

The Davis-Stirling Act additionally provides protections for all HOAs and Condo Association Boards if:

1. The act or omission was performed within the scope of the officer's or director's duties;
2. The act or omission was performed in good faith;
3. The act or omission was not willful, wanton, or grossly negligent;

And the association carries insurance as set forth in Civil Code 1365.7(a)

[Note: You can look up the Davis Stirling Act laws on my website by clicking on the Davis Stirling Act. You can look up the Corporations Code section at www.ca.gov by navigating to the "29 Codes of California".]

So if you avoid punching or killing anyone, defaming or purposeful discrimination, stealing money from the HOA, and avoid purposefully violating the law or abusing your powers, and if you consult with attorneys on legal issues, managers on management issues, insurance reps on insurance issues, qualified contractors on construction issues, and treat people as if they are human too, you should be all right!

Posted by Beth Grimm at 12:41 PM

March 10, 2010

Recording Board Votes - Is It Required?

Owners often want to know how board members vote on business matters. One way to find out is to go to the board meetings. Another may be to review minutes. Here is a question related to this subject:

"When votes are recorded in regular board meeting minutes, should those votes show each director's vote (yea, nea, or abstain)?"

My answer: Some associations do record this, some don't. I do not know what Roberts Rules say. There is nothing in the Davis Stirling Act or Corporations Code that I know of requiring anything other than whether the measure proposed passed or failed. Look for the answer about Roberts Rules on www.parli.com. You can ask questions there too.

Posted by Beth Grimm at 10:16 PM

March 5, 2010

Can Owners Have Information On Other's Loan Questionnaires in an HOA or Condo?

I have been writing alot about loan issues, FHA certifications, etc. Here is an interesting question from a frustrated owner related to financing issues. An owner attempted to sell his unit but the buyer could not get financing for purchase of the condo unit. His/her lender did not approve the loan and apparently the problem was tied to the lender's questionnaire. He knew that other units had sold and so wanted to know what lenders were approving sales and how their questionnaires differed. This left the owner in a dilemma and he came to me with this question:

"So my question is this. As a homeowner am I entitled to see the HOA certifications that the association filled out for the properties that were sold. I am hoping to find out the banks that are allowing loans so I can advise my buyers to try and get qualified for them."

My answer is this: There is no legal basis or support for this request so the HOA or condo association would probably say no. There are privacy issues involved.

But in California a member can legally ask for a membership list - names and addresses of other owners - upon stating a valid purpose. Wanting to communicate with other owners is a valid purpose. Armed with the names of owners and addresses of properties that sold recently an owner could communicate with them. However, one could also get the new owners' names by calling the local assessor's office and giving the address so why press the association for the list of all owners and take a chance on getting into a row over this.

And if contacting the new owners, tread lightly, the new owners might be turned off to a communication asking who their lender is.

Posted by Beth Grimm at 9:18 PM

February 22, 2010

Are HOA or CONDO Association Bylaws Normally Recorded?

Here is a question about Bylaws:

"I am wondering if By Laws have to be recorded? Is it standard that they should be? And, what procedure is used to change By Laws and do they have to be approved/reviewed by the Homeowners prior to adoption/recording?"

Bylaws generally are not recorded (in California) but sometimes there is a reason to do it. For example, if the original Bylaws were recorded, then any amendments should be so that the last record standing is not incorrect. In the "really old days" it seems some Bylaws were recorded. I come across that situation occasionally. And also, I heard an attorney say the other day that he was considering advising a board to propose something for an amendment to the Bylaws and record it as a recorded restriction because the development consisted of a cooperative with no CC&Rs.

Homeowner association Bylaws amendments would normally have to be approved by members and the Bylaws would say that. There are some amendments that can be made by Boards if the Bylaws say that, but the Corporations Code limits what those changes can be.

Posted by Beth Grimm at 9:02 PM

February 18, 2010

HOA - Condo Board Voting by Email - What Are the Chances?

Here is a recent question posed to me via email about board voting:

"When the Board votes by e-mail, is it required that ALL Board members cast a vote or is it acceptable to consider the matter approved if the majority of the Board voted to approve while some Board members did not cast a vote?"

Easy answer in California, and probably elsewhere:

It's not okay to vote by email.

And, furthermore, it's not appropriate to vote by a telephone "tree".
And surprise: It's not okay for any board member to vote on board actions via proxy either!

That is not to say that internet meetings or telephone meetings are out of the question. But in California, if an association documents do not prevent it, corporate boards (most HOAs and Condo Associations are corporations in California) can meet through modern means such as the internet or telephone conferencing. It is important to know the rules, and also critical to make arrangements so owners can "attend" and exercise their rights to address the board - at least as to all required open board meetings.

And finally, although "written unanimous consent options" are somewhat commonly available, the option should be used sparingly, and the word "unanimous" is key.

Posted by Beth Grimm at 10:58 AM

January 16, 2010

Who Fixes What in a Condo or HOA?

When anyone in a shared amenity situation has a question about who maintains what, there are a number of things to consider. Naturally, a simple and inexpensive problem may be easier to solve than a complicated one. If there is not a big investment, the sides (board and owner or neighbor-to-neighbor) are less inclined to fight about it. One or the other may just make the repair and let it go. However, that can lead to issues in the future. Once a board establishes a pattern of fixing something it is not responsible for, or requires some owners to fix something they are not responsible for, and then finds out that it was an improper assessment of responsibility, it can open up a can of worms. Getting off on the wrong foot with regard to maintenance responsibility can spiral out of control.

If you want to see an example of how things can spiral out of control, sign up for the E-news on my website. A full E-newsletter on the subject is coming out next Wednesday and it will be posted on the website a few days after that in the E-news archives.

The things to consider in sorting out responsibility in any maintenance dispute or question include:

[Ownership of the item] It is important to know who owns the property that is damaged. The maintenance and repair obligation does not always fall on the owner, but establishing this basic fact will surely come into play if there is no documented responsibility in the HOA or condo association documents.

[Governing Documents] What, if anything, do the governing documents for the HOA or Condo Association (which include Articles of Incorporation, Bylaws, and CC&Rs; or Rules and Regulations, if these items exist) say?

[California - or other state's - Law on the Subject] What does the law (including statutes and cases) say?

[Location of Damage] Is the damage or work that is needed in a common area or in an exclusive use common area (area accessible or used by only one or a few, as opposed to all owners), or in an individual’s separate interest area (separate interest means that part of the property that is owned by an individual such as a unit or on a lot)?

[Cause] What or who caused the problem? Can the cause even be determined? Are there disagreements as to the cause? Was negligence, carelessness, or intentional conduct the cause?

[Past Practice] Has this problem come up before and how was it handled then? Are there any issues likely to arise about what has been done in the past?

[Legal Exposure] Is there any advantage or disadvantage, problem, or legal exposure if the association does the repair and it turns out that it was not the responsibility of the association, or vice versa with regard to an owner(s) making the repair?

[Precedent] Would the association benefit by retaining control over the repairs and what is to be done, or set an undesirable precedent?

***

It is important to consider all of these things …and then … there is a lot more to doing the right thing and averting disaster. The NEW! Maintenance Primer available on my website at www.californiacondoguru.com contains comprehensive information about who fixes what in an HOA or Condominium Association and addresses policy setting. Additionally, ECHO (Executive Council of Homeowners, www.echo-ca.org) recently published Part I and will publish Part II of an article on the subject written by me in the ECHO JOURNAL. (And ECHO is a great resource - check out the annual seminar coming June 19 – what a place to go if you want to get smarter about living in or running a homeowners association.)

Don’t be caught “in the dark” and wonder who is responsible for the lights!

Posted by Beth Grimm at 12:49 PM

January 14, 2010

Are HOAs and Condo Associations on Their Own with Animal Control?

Here's a good question. Can the local animal control or police department refuse to come into an HOA or Condo Association when called about an animal situation or what would normally be a police matter claiming they do not have to provide services to private communities, i.e. CIDs-common interest developments?

Here is a good answer. People in these communities pay property taxes and special assessments that fund these services too, so I would have to say generally, the answer would be no. Refusing to provide services would be wrong. Listen to this story recently sent to me, some of the names and statements are changed slightly so as to not point any fingers to anyone specifically:

Story: A homeowner called management stating that a huge Rottweiler broke through their neighbor’s fence and into their backyard and ended up jumping up onto a resident, knocking her down and ended up getting inside of their home. The resident was able to confine the dog to one room and contacted 911. The operator said that they (the police) no longer handle animal calls and that they would need to call the [local county animal control office]. They called and were told that it is a gated community and they wouldn't respond saying that it was an association responsibility. When contacted, the [local animal control office] person that answered was very rude and stated that it was the association's problem and then hung up on the manager. [To be fair, there was some talk about holding the personnel personally liable if any injured party sued the association.] The manager then contacted the police department and explained the whole situation to them. The police did end up sending an officer out and demanded that the [local animal control] respond. The [LAC] then called the manager and advised that they would send someone out this “one time” but that they needed management on site to sign the dog over. The person said that they will not be responding to any gated community issues in the future (confined or not). Luckily (or not) the residents were able to get the dog owner to come and get the dog before animal control got there.

The manager went on to report that the [LAC] informed the manager that when calling the [LAC] for assistance, that they [the HOA/Management/ or Resident] had to capture the dog, then call them to pick the dog up!

Does this sound like a recipe for disaster?

As a rule, neither boards, managers or residents are specially trained to deal with loose and especially threatening animals, or sick and injured animals, or animals dumped by the side of the road. Don't people pay taxes to have access to these specially trained people? I say, yes.

I know of no case where any governmental agency that is in place for the protection of people (or animals) has an exemption from acting on behalf of people in homeowner associations, gated or not. The county animal control authorities and the police are paid by taxes and people in associations have just as much right to expect their services as any other taxpayer. If they are not responding properly (as appeared to be the situation here) then something should be done. One thing might be to submit a letter in writing to them to demand they respond when appropriate and suggest that the HOA would hold them accountable so there is a record of the request/demand for services (assuming it is a reasonable communication - a bad example or irrational request/demand does not help).

That way, if the agency does not act appropriately and the association suffers losses, a legal claim against the agency may be supported.

HOAs can be thrown out of court when they go in on animal cases and no one has contacted animal control first and asked for assistance. It is commonly one of the prerequisites to filing animal -related complaints in the courts. It is called "exhausting administrative remedies" first, before coming to court. Thus, I have been recommending it for years (having had experience with the courts in these matters).

To be fair, perhaps there is a specific issue because of a gated community. If animal control or police cannot get access because of a required key or gate code, then I could understand a requirement that someone from the association or management be present when they come to let them in. The police department may require that a gate code be kept on record for purposes of entry, but I doubt animal control offices want the responsibility of keeping or having available to the drivers the code, and even if they want it, an HOA may not want to give it out.

But overall, I believe it fair to say that HOAs and Condo Associations have a right to expect reasonable services (comparable to those offered to the general public) from governmental entities which exist for the safety of the public (or animals) and are supported by taxes paid.

My two cents ...

Posted by Beth Grimm at 2:29 PM

December 2, 2009

HOA Board Adds Improvement - Uses Volunteer Services - Is That Okay?

I get some really interesting questions every day, and here is one about adding improvements without owner approval but with owner involvement. A lot of assumptions are made, some of which may or may not be correct. See below:

"A [type of recreational court] was proposed as no cost to the homeowners. The Board used unlicensed and uninsured homeowners to install it which constitutes a breach of its Fiduciary Duty. The Association is required by the Association’s insurance carrier to hire only individuals who are licensed and insured for the services that they intend to provide to the Association.

Our CC&R’s say that a homeowner is liable for all damages to the common area and or improvements caused by him.

**** I read this to mean the homewoners who put the court in are responsible for the costs to maintain it. Am i reading this right?"

First of all, it is unlikely that the association's insurance policies have any language requiring or limiting use of contractors to licensed and bonded/insured contractors. Certainly, for types of construction requiring a license, a board should use licensed/insured contractors for various reasons that provide certain protections. And some CC&Rs require a board and/or owners to use licensed and bonded/insured contrabuoctors for performing work on facilities or buildings etc.

However, these days, boards are looking more toward using volunteer services when possible. I still would not advocate using volunteer services from unlicensed, unbonded/uninsured contractors for building construction work and utility, electricity or plumbing work. But for digging a court, laying cement or the like? It's a matter of balancing the risks.

As for the question of homeowner liability? If a homeowner does work in the common area that is requested or approved by the board, he or she can hardly be responsible for the costs unless it is something that confers benefit on the individual, and is legal of course.

Here is an addendum question:

"After telling the owners here this would be no cost to them, the Board has approved the cost of $[____] to move the sprinklers in the way of the court.... Not fair, but illegal???"

Sometimes the governing documents are specific and limiting about what expenditures can be made without owner approval. If not, there are legal limits in California law if the expenditure requires a special assessment or increase in reguliar assesments over a certain amount (see other blogs on assessments). Otherwise, there may not be a legal barrier to the action/cost that occurred. Determining that would require a legal opinion involving a review of the documents of the association, the amount of the budget and things like that.

Posted by Beth Grimm at 9:57 PM

November 19, 2009

The New Davis Stirling "Disclosure Index" for HOAs and Condos

After putting out information about the new additions to the Davis Stirling Act for 2010, I got the following question:

"We already include all items in the index in the year end disclosure packet. Are we now suppose to include the index along with all the disclosures beginning next year??"

My first thought was "yes" - I mean, what is the purpose of the Index?

The legislative summary of the bill says: "This bill would also require an association to distribute annually to its members a Disclosure Documents Index, as specified."

However, after rereading the statute, it appears that the association has to provide the index to any owner only upon a request from the owner. Here is the language:

"1363.005. DISCLOSURE INDEX. The association shall, at the request of any member, distribute to the member, in the manner described in Section 1350.7, the following Disclosure Documents Index [see statute for the index] ..."

So it appears that it is not a requirement to send it out with the annual package. However, it seems to me that it has little meaning by itself, other than to inform an owner of what "should be" in the annual package.

So, in order to make it make sense, and to prevent having to send it out individually, upon request, any HOA or Condo Association could simply send it with the annual package.

Another legislative accident ... or on purpose .... or asleep at the wheel. It seems very likely that the intent of the sponsor (Executive Council of Homeowners) was that the index would become a useful tool - which will not happen if HOAs and Condo Associations do not use it.

Posted by Beth Grimm at 9:38 PM

November 12, 2009

DAVIS STIRLING or Davis Stirling, What is Fair in Hearings in HOAs and Condos?

I continue to get questions relating to hearings, due process, notice, opportunity to confront witnesses, continuous fining, etc. and I will share some of these with you, and then will give my comments. Since this is such a pressing matter, I will post this information on both of my blogs, California HOA & Condo Law Blog and Condolawguru.blog. Here is a conglomeration of 3 emails I received:

“First of all, I enjoy reading your blogs on line and look forward to reading more in the future. I have read your article dated June 15, 2009 relating to the rights of homeowners to confront witnesses in disciplinary hearings. I am an owner in a condo development that has restrictions on [vehicles being parked in the driveway/garbage cans being left out too long/stored items in the garage]. There are some exceptions to the rules made; apparently some people are given more leeway than others. Sometimes the rule is enforced, and sometimes it is not. To complicate things, I have a renter and the renter denies violating any of the rules related to the [thing complained of].

The Notice of Hearing has summoned me to appear before the Board ON ____________ and to “state my position at the Hearing”. Since the notice I received does not provide any details of the alleged violation other than a cursory reference to the Rule allegedly violated, I don’t know how I can “state a case” or get a fair hearing. I do not even know what dates to ask my tenant about or tell him that he was cited. Here are my concerns:

The Notice does not state the date and time when the alleged violations occurred. The Notice does not provide details as to the make, model, color, or license number of vehicles involved in the alleged violations. The Notice does not state that the Board investigated the alleged violations and confirmed the validity of the allegations. Should the Board not provide me with some sort of “evidence” to prove beyond a reasonable doubt that the alleged violations did in fact occur? Isn’t the burden of proof upon the management company and the Board to provide evidence that violations did actually occur and were performed by people for whom I am responsible?

How can I or anyone receiving a Notice of this nature be expected to have a meaningful discussion with my tenant, or to answer the alleged charges of violation without having any information? I would appreciate receiving your comments.”

Here are my comments.

I believe that notices relating to violations should refer to specific violations, giving the date, the time and the violation, and in the matter of parking violations, vehicles should be identified.

Why? Because it is only reasonable to identify the problem so that the owner knows what to respond to at the hearing. I had personal experience with a situation 3 times in a condo where I had a tenant and violations were reported. All 3 times the HOA had received information on the WRONG UNIT. The violator was in the unit next door.

I believe that owners have the right to know how the information was reported – a written complaint, a log presented by the manager or person in charge of inspections, etc. It is my belief that no complaint should be addressed unless it is presented in writing to the board, or personally verified by management or a board appointed representative.

Why? Because in my vast experience in handling violations, I OFTEN FIND that people complain because they don’t like the neighbors, that they tend to exaggerate when that is the case, that they often change their stories when they are asked exactly what occurred and when, and that boards are often too lax in the way they document problems, and it often comes back to bite them.

I don’t believe that boards must send out continuous or re-occurring hearing notices for continuing or re-occuring violations IF THE BOARD HAS SET UP THE PROCESS SO THAT THE OWNER CLEARLY KNOWS WHAT TO EXPECT IF THE SAME VIOLATIONS CONTINUE TO OCCUR but I do believe that Boards must have a process whereby the owner is notified each time after the first time (the first time does require a hearing) that a fine is imposed, and why (meaning notice of the date, time, description of the violation, etc.). This is the only way that an owner has a reasonable chance of addressing the action that was taken in a meaningful way (if there is a meaningful excuse or extenuating circumstances that might apply).

I do not believe that owners need the opportunity to CONFRONT witnesses. I am not against having everyone in the same room to talk about what is happening and in many cases, it helps to do so and many boards and owners are fine with this. However, many boards lack the skills to handle a situation where the confrontation becomes uncomfortable. And besides, a picture is worth a 1000 words so boards, why not require a dated picture of the violation whenever possible. With digital cameras, it’s quite easy to eliminate the need for an argument.

That’s my story, and I’m stickin’ to it, yes, I know someone is going to tell me next that “Davis Stirling” says that boards cannot impose recurring fines without a hearing for each violation and that “Davis Stirling” says owners should be able to confront witnesses. I think they are talking about “Davis Stirling” the website (which is a bunch of lawyers, just like me, with a different take on the law) because THE DAVIS STIRLING ACT – THE LAW - does not get that specific.

Posted by Beth Grimm at 8:58 PM

November 9, 2009

What Are The Changes to the Davis Stirling Act Coming in 2010?

The legislative year is essentially over with regard to bills that will be signed, vetoed, die, or be resurrected uncharacteristically, at least as to changes in the Davis Stirling Act. There are some changes which have already been incorporated into THE DAVIS STIRLING ACT IN PLAIN ENGLISH, my best selling publication. This book covers the Act, explanations of how laws came about and how they shake down in the process of implementation, and what they mean - in plain English. And this year I have added forms to the book, including the assessment and reserve study worksheet, the statutory collections policy, and the brand new "Index" for Disclosure Items that must go out with disclosure packages sent by HOA and Condo Associations beginning in 2010. This new index "reorders" things in a way I would not have chosen, but what the heck, at the least it will provide one law that "dictates" what should be included in the annual disclosure package. There are not a lot of places you can go to find that out other than my Condoguru website.

I will soon be updating the website "Disclosure Checklist" and forms on my website - however, I hesitate to do it too soon as people tend to get confused when new laws are incorporated into current requirements. So look for that to happen by December sometime, to be ready for the turnover of the new year.

In the meantime, you should know that besides the new "Disclosure Index" which becomes a requirement next year, there are some changes to the "Assessment and Reserve Study Worksheet (form). HOAs and Condo associations will have to disclose the percentage of interest it expects to get on CID funds and also the inflation rate it has used in calculations for the coming year.

Other addititons:

**The section on what HOAs can and cannot do with regard to low-water-use landscaping has been expanded.

**The notice requirements for electronic notice just got more sophisticated as to the form of consent that is required before the HOA or Condo association can use email as a form of notification. There has to be an "electronic signature" and "unrevoked consent". Compliance with these things are not easy to figure out unless you have help trailing through the maze of applicable laws which fall outside the Davis Stirling Act but are referenced within it.

Anyway, the Davis Stirling Act in Plain English is ready for 2010! And available at the Guru website on the publications page and the Webstore. And if you act quickly, you may be able to beat the price increase that is going into effect any day now (as soon as my web person can get it up on the site).

Posted by Beth Grimm at 10:46 AM

November 5, 2009

Why Do Judges Tend to Make Sorry Mediators for HOA and Condo Architectural and Enforcement Cases?

Some days I pick up my coffee in the morning, got a call, and forget about everything I was planning to do, because the call triggers extreme disdain. This is one of those mornings.

Imagine yourself in a mediation for which you have plunked down several thousand dollars to cover the cost of the mediator, the mediator's administrator, and your attorney. The mediator walks in and says: "Well, I have been out to this site, and it [does/does not] look [okay/good/that bad/that terrible/that objectionable] to me."

If I were in such a mediation advocating on behalf of either party, I might suggest that the party get up and walk out, unless, of course, I was on the side with the mediator. It's clear, right? ... that the mediator has established a bias before anyone opens their mouth.

Heck, I am not saying that mediators should not see or be advised about a condition that the parties are fighting over. In case you missed it, I AM SAYING THAT IT IS MY OPINION THAT MEDIATORS SHOULD NOT INTERJECT THEIR OPINIONS UNLESS SPECIFICALLY ASKED, AND THEN IN PRIVATE CAUCUS ONLY! Because when they do, they skew the whole process. Maybe that works in other areas, but it does not allow the process to work properly in HOA and Condo disputes over rules, regulations, architectural control and restrictions cases.

Mediators who do this kind of thing and/or have insufficient experience in HOA or Condo law do not understand the damage they are doing. And, this kind of conduct indicates to me that the person is quite dangerous and is not going to be helpful in assisting the parties in finding a resolution that will work best for everyone or create the least harm for any particular party.

Very frankly, it is often worse when that person is a retired judge, because the tendency of persons who have spent years “on the bench” is that they have a hard time passing the ball off to the parties so they can settle their own differences.

So, you might ask, what experience have I had to say these things? Well, in one situation I had to ask a retired judge mediator to step out of the room after his opening remarks so I could tell him that if he did not keep his opinions to himself I would walk my clients right out the door. I have conducted many mediations and know what works. I have advocated in many mediations and know what works and know how to corral or muzzle a bad mediator. I have had various trainings at a prestigious university in California and other venues in mediation practices. In the earlier years of my attendance at the university's center for mediation the providers separated judges from the “other” people. Obviously, they recognized a completely different perspective and skill set. But what I heard later after a few annual sessions is that the judges needed to be integrated with “other people” to get the full value of mediation training because it is so different from judging cases. At any rate, at some point, the center for mediation made the decision to mix the two groups. That summer was the last summer I attended any classes. I endured an entire weekend having been put with four judges or retired judges for the breakout groups. I suppose it was because I am an attorney. I suppose the perception was that I would work well with this group being in the same field. The truth is I realized very early on it (the first breakout) that it was going to be a very long tedious weekend. What I learned, which I already had sensed anyway, was that spending any time in a closed room with people who are “hoist” on their own petard (full of testosterone and ego – men or women included) is not my cup of tea. When 4 out of 5 people are arguing and posturing to “run the mediation”, well, … need I say more? I already had a sense of this when doing litigation where I found myself sitting in a sea of fancy suits and black robes for hours on end waiting … waiting … and waiting some more. (The “waste” of time and the roomful of “billable hours” tick … tick … ticking was enough to send me looking for a better alternative). I stopped doing litigation and turned to mediation because I thought it was a much better way to resolve differences. The parties retain their dignity, their empowerment, and their ability to craft a creative resolution that is unreachable in a court of law.

Thus, perhaps you can understand why I get so perturbed when I hear of a situation where a mediator is not a mediator is not a mediator. It hurts the parties and it hurts the cause.

Since I like to offer solutions when possible, I now think a fair question for any mediator prior to sending them any money (and especially when being asked to choose from a panel of retired judges) is: “Do you plan to offer your own opinions as to who is right and who is wrong?” If the answer is anything other than this: “Not unless a party specifically asks me for my thoughts and then, only in caucus with one of the parties that has asked me to do so,” ... definitely consider calling the next person on the list.

Mediators -- I realize that some people are looking for a heavy handed decision maker, and some people want to know your opinion, but the foundation of mediation is helping the parties to come to resolution and not to impose your own resolution upon them. Be an arbitrator if you want to make the decisions for the parties!

I am not saying that making suggestions is bad, and if the mediator has ideas that may not be apparent to the parties about means to an end, then finding a way to interject those ideas or to help the parties think of the ideas themselves can be of great assistance in fulfilling the ultimate goal of resolution. However, I have heard about many situations where parties spent considerable sums of money for mediation, felt pressured into resolution and a settlement agreement, and now find that neither side wants to honor the agreement, that it has caused more harm than good, and thus, mediation gets a bad rap.

And now, I think I will get off my soapbox, and go heat up my coffee and begin my day!

Posted by Beth Grimm at 10:29 AM

November 4, 2009

What Do You Do When Your HOA or CONDO Docs Are Old & Crappy & Not Helpful?

I just got a call this am from the manager of an association in SoCal. Question asked: "Our documents are very old and not helpful. We just got a request from an owner whose garage door broke and they want the board to fix it. The board looked at the docs and tried to interpret them. They don't know what former boards did. How can we decide what to do? How can we get consistency?"

The obvious and best answer of course is to amend and update the governing documents. However, some associations do not want to spend the money or take the time right now for various reasons. Some do not think they can get owners to vote on something. So, here are some interim measures:

If you want to make sure that the board and owners know what changes have occurred in California law (specifically the Davis Stirling Act which regulates HOAs and Condos in the state), there is a product available on my website called "A TuneUp". It is an attachment that states what new laws are in effect that supersede provisions in the existing documents. It does not require a vote of members; it is not a recorded document, but it is informative and helpful and can be supplied with every set of documents that is sent out to new owners and to current owners so that the board and owners are educated and all on the same page about the status of the law and its affect on the existing documents.

If the question is determining who maintains what, as in the above question, then a good interim measure to amending, restating or updating the governing documents is adopting a "Policy on Maintenance Items". The policies I prepare are in the form of a matrix listing the maintenance item, and who maintains it, the association or the owner. I get the information for the matrix from the existing documents, past practice (if known), California statutory and case law, and the reserve study.

A policy is essentially a rule which does not require owner approval, and before the board approves it, it must circulate it to owners as a draft, and allow at least 30 days for a comment period. It must then review it and consider approval at an open board meeting. Then, once approved, the board must send out the final approved version to owners right away.

I am working on a maintenance primer - years ago I did a newsletter when I was sending out the subscription NL called "The California Homeowners Association Legal Digest" and it was a big hit. I am expanding that into a 20 page primer on various issues that I have seen come up. I also address these things in both of my books (Finding the Key to Your Castle and The Condo Owners Answer Book). These are also available on my website. The maintenance primer will be released close to the time of my next free E-newsletter (you can sign up on the site) this month.

It takes only a couple of hours to review documents and prepare a maintenance matrix/policy, a resolution, and instructions to a board on how to implement the policy. The great thing about this tool is that the courts tend to rule in favor of a policy if it consists of an interpretation by the Board which was done in an attempt to work with older documents. Why? Because it promotes consistency and the courts like consistency and often defer to the board's judgment if there is nothing indicating the board was "out in left field" when it came up with the policy. BTW - if you want an example of "out in left field" I recently was called upon to assist some owners in getting fair treatment because the board adopted a rule that clearly and unfairly adversely impacted a small group of owners in a large association. That is too far "out there."

And another thing, asking an experienced attorney to assist in drafting the policy adds a measure of protection if the board is sued for its policy because the board has the corporations code protection gained by consulting with the right kind of expert instead of shooting from the hip. I also recently dealt with issues in an association that arose because of a manager prepared maintenance matrix based on California law (Civil Code Section 1364) without regard to what the documents said, and it is important to understand which controls.

So ... if your board is floundering around trying to determine what to do about questions that come up for which there is NO guidance or CONFLICTING provisions in the governing documents, you can seek out good help and get on the right track now, instead of trying to get back on the "right track" after being hit by the train.

Posted by Beth Grimm at 11:13 AM

November 2, 2009

Should HOA or Condo Board Communicate with Tenant or Owner?

Here is a question I received from a tenant:

"Is it normal for the HOA and Property Management company to send somewhat intimidating and “threatening” notices of violation directly to the renter?"

"Normal" is a moving target and not definable. I prefer to speak in terms like most, some, a few, etc, as relates to the way HOAs and Condos tend to act.

Some HOA boards and some Condo Association boards prefer to communicate with owners rather than tenants because owners are responsible for the actions of tenants and also subject to disciplinary action for rules violations by tenants.

Other boards prefer to first communicate with tenants in order to (1) see if they will correct whatever behavior needs correcting without bothering the owner and/or (2) to "envelope" the tenant into the community rather than making them feel like an outsider.

There is nothing abnormal or inappropriate about either approach.

Posted by Beth Grimm at 9:36 PM

October 26, 2009

Developer Control in an HOA - When Does It End?

Here is a question I received recently about developer control:

"I am a home owner in a 2000+ home master planned community. There were only ### homes built before the original owners sold to a local developer. The new owners are not and have not been building anything additional for economic reasons.

Our HOA board consists of five members, two from the community and three from the current owner which gives him / them the majority.

The question is, ia there anyway for the home owners to get/ take control of the board so we can control the direction our community wishes to go?"

The association governing documents (the Bylaws and also probably the CC&Rs) usually specify when developer "control" ends. "Control" is usually established by giving the developer 3 votes per Lot in a planned development, or Unit in a Condo development, which is often referred to as "weighted voting." This voting scheme commonly ends either when all the Lots or Units are sold out or 5 years after the completion of building. If the development is not built out in 5 years, there may be other language in the documents that locks in an outside date for "turnover". That is the time when the owners generally gain control on the board. Sometimes developers will relinquish control earlier but I do not believe it is not a common occurrence.

Posted by Beth Grimm at 9:52 PM

October 22, 2009

Homeowners - Want Something Done by Your HOA or Condo Board?

I have been getting quite a few emails lately from homeowners who want the board to do something specific that has a cost attached to it. Often there are a few owners that have banded together to accomplish something, only to be met with what seems to be a brick wall when they take their gripe to the Board.

Many boards are avoiding doing many things because of money issues. It's the times, right? And some boards are just resistant to "ideas", preferring to stick to a minimalistic management philosophy such as this: collect money, pay bills.

Many owners have a sense when they contact me that they want to "sue the board" for failure to jump on a proposal to do something. When an owner wants to sue the board to get the particular "thing" done, it costs a lot of money. Sometimes there is a basis to recover the money spent on legal fees; however, even so, a judge can be "mimalistic" in his or her attitude about how much reimbursement should be forthcoming.

If the "thing" costs a lot of money to do, but seems to some of the owners to be a very good idea, the money aspect may be a deterrent to getting neighbor support. So, why not consider at least one other option: spending the money to accomplish or get the "thing" rather than to fund a lawsuit.

People do not understand what it takes to sue someone, and what it takes to win a case. This is one area where a preliminary consultation with an attorney who does have a sense of what it takes to sue, and what it takes to have a chance of winning a case, understanding and able to explain what "cause of action" means and explain it in plain English, can help. I recently had a client who, along with other owners in the association (not a majority, but a reasonable number) wanted to force the board to take action to protect a specific asset of the association. The work to protect this asset would be costly and time consuming and the board frankly did not want the hassle. Absent majority support from the board or membership because of apathy, money, and personal (vs. community) interest in saving the "thing", a lawsuit could be considered premature and possibly futile. Much more information was needed to move forward with the members or with the courts.

One does not have to give up. If you are truly prepared to spend the money for a lawsuit, given the time, energy and monetary issues that attach, and the risks related to winning or losing, and the risks of recovery of that money, perhaps you can at least give some thought to whether that time, energy, and money could otherwise be spent in a more positive way - which might be to take a more positive action. Perhaps there is a way to alleviate the burden on the board and other members and to achieve the ultimate goal by doing, not suing ... Owners ... and boards ... think about that.

Don't be closed minded. Don't bury your heads in the sand.

And check out the newest blog at www.condolawguru.com.

Posted by Beth Grimm at 12:03 PM

October 13, 2009

Condo Law Guru - a new Blog for Owners in HOAs and Condos

In my continuing effort to promote harmony through education about Condo and HOA laws and problem solving methods, I wanted to announce that I have started a new "Blog" that will cover issues most endemic to the questions of owners about Condo and HOA law. Check out the latest post on a new law (AB 712) which relates to small claims court remedies, and it may well affect challenges to HOA and Condo Association elections. Visit the Condolawguru blog.

Posted by Beth Grimm at 10:32 PM

October 12, 2009

CA Corporations - Watch Out For A "Demand" From the So-Called "Business Filing Division"

Every year I fume when I get notices that come in the mail that look deceivingly like they come from the Secretary of State. Most recently, it was a letter asking me (well, I should say "threatening" me because it emphasized penalties for failure to comply) to file a corporate officer's statement for my law corporation. This year, I was distracted enough to fill it out, get out my checkbook, and then I see the FEE IS $235, and I know something is wrong.

Take heart. Don't be hornswaggled (yes, an old Iowa word I believe - not even sure of its origin though) into believing that you have to file this form and send anyone $235!

Myself and others (thanks to Michael Gartzke, CPA in Goleta, Ca) try to get word out periodically to help corporations (like homeowner associations and law firms and the like) avoid unwitting sending in their checks. Don't get me wrong, you can pay someone else $235 to file a form for you that costs $20 or $25 to file, it's your choice. (Hey, I might do it for $235 for you! Ha Ha.)

The more informed way to file the correct documents though, is to go through the Secretary of State website and pull off the form and file it by mail, or file right on line!

Did you know that "they" (someone appearing to be "compliance police" - not exactly what they call it but you get my drift) do something similar with corporate minutes. That comes from the "Corporate Compliance Division". "They" offer to prepare your corporate minutes and imply that having incorrect minutes can lead to all sorts of problems for the corporation, fees and suspension and the like, very similar to this "Business Filing Division" letter. Of course, the cost is considerable.

Is this officer statement thing a scam? Are these illegal scams? Well, probably not technically. If companies can get people to send them money with this kind of solicitation, there may not be any criminal charges that can be filed. But with regard to these recent "officer statement"/"business filing division" solicitations, you can complain to the AG, in fact, the SOS website link above also has links to do just that. If you already sent them your money, I don't know exactly what you can do. Check out the SOS website, the AG site and others, and maybe even try small claims court. There is a legal cause of action called "misrepresentation". However, trying to get the $235 back may be more effort than its worth, and you do, of course, have to complete your filing yourself if you did not use their "service".

Maybe you can just chalk it up to "college tuition". That is what my mother calls it when we, her children, do something rather stupid and thereafter learn an expensive lesson.

And if you are a homeowners association corporation, DO NOT BE FOOLED. As Mr. Gartzke has warned: "... the information that they are collecting is incomplete with respect to a homeowners association. There is no mention of the information needed to provide the data required by the Davis-Stirling Act and they are not going to prepare the companion form Statement of Common Interest Development that accompanies the Statement of Information. Simply put, this does not work for an HOA."

So if you sent in the $235 - be wary that your HOA or Condo Association has still not fully satisfied the two form requirement of the SOS.

And also, the HOA or Condo owners who come up with this information about these "maybe-not-scams-but-certainly-misleading-letters" might not appreciate the "college tuition" joke.

Posted by Beth Grimm at 2:36 PM

October 4, 2009

Finding Out Names of Owners in an HOA-Condo Association

There are a number of reasons any owner might want to know who their neighbors are and how to contact them. In Caliornia, owners are generally entitled to receive a membership list noting names and mailing addresses of owners under Civil Code Section 1365.2 (which you can find under the Davis Stirling Act link at the condoguru site). If an owner wants to communicate with other owners about any subject related to their ownership or the association, they are entitled, and if the HOA Board or manager will not provide the list, if the purpose is validly related to their ownership in the Association (as opposed to something like wanting to solicit business from the members), at the least, the Board or management must make arrangements to mail out the commmunication, at the owner's expense. There is more to the law relating to opting out, and penalties written in it for failure to comply. In some cases, an owner needs only the name and mailing address of one neighbor or just a few. The following reflects a question where the Board and management were not being helpful. See question below.

"I have been scouring the internet attempting to answer a question regarding disclosure of property owner names within an HOA and have been unsuccessful. I found your website useful, but still without results for my desired question. ... ... I was wondering if I am entitled to the name/owner listed on HOA documents of a home within the Association of which I am a member in good standing. I am in the process of building a file for a possible safe streets action against the residents of a particular home; however, if the home is occupied by renters, I would be required to go through the actual homeowners for notification for each police contact. As I am sure you are aware, the owners hold the ultimate responsibility in this area. ... The Management Company has refused the information to me stating privacy rights."

Anyone can contact the local county assessor's office and provide an address and get the name and mailing address of the owner of the property. These are public records. So sometimes it is easier just to call. I think you may be able to get information on up to 3 properties with one call. If you need more names and addresses and want to battle the association for the information the code section mentioned above will give you the info you need. And also, on the website is a link to Records Inspection after AB 1098. There is the Davis Stirling Act in Plain English, a book that explains all the laws. And one more thing - if you have a neighborhood problem like the person who wrote in, you will probably find the Primer available on the website which is the Enforcement Advanced E-4 Primer on Neighborhood Issues invaluable.

Posted by Beth Grimm at 8:38 PM

September 30, 2009

Flying the US Flag in an HOA or Condo - What Is Acceptable?

HOAs and CONDOs need to allow some flag flying because federal and state law don't allow complete prohibitions. However, neither federal nor state law requires approval of flag "displays". I received a recent question about bunting US flags (what will they think of next?).

Here is the question: "Hi Beth, really enjoyed reading your site..Lots of great info. I was wondering if you think a “bunting” US flag would be covered under the freedom to fly the US flag law? Personally I think so but perhaps not since it is not directly called out from what I have read. Your advice is appreciated. Thanks."

I have not seen a case on this - or a newspaper article claiming that a veteran was prevented from flying a bunting flag - yet. They do not seem to be the type of thing that people get emotional about, or at least that reporters get interested in.

I have taken a look and a bunting is a specially draped fabric that has stars in the middle and the stripes fan out from the stars in the shape of a fan and it is a display that hangs from a balcony or wall. I would not consider a "bunting flag" to be what legislators intended. But maybe someone is aware of some legislative history that says otherwise. If so, send it along and I will take a look.

Posted by Beth Grimm at 8:51 PM

September 22, 2009

POOL DEMOLITION AND FILL - IS IT A GOOD IDEA

I have been writing alot lately about pool demolition and fill as I just went through it myself and I get a lot of inquiries from HOAs about whether it is possible in an HOA. I just finished and sent out an E-Newsletter (available on the E-News Archives on my website soon). There is a lot of information in the E-Newsletter about what to consider and what things are important in the process. I have over 2500 recipients that have signed up for the E-news and I always appreciate it when any of them respond and write to me. Here is a good example of helpful information I received from a reader:

"I was forwarded your email about pools.

I am currently involved with an association who is replacing an old damaged pool. When our construction manager went to the city for the permit, she was advised that a replacement pool was required per the city’s master plan. Something else to consider along with your other great information. T."

This indicates that permitting research should definitely be done before signing any contracts. This kind of thing may or may not come up in discussions with the pool demo vendors.

Posted by Beth Grimm at 9:57 PM

September 21, 2009

Sometimes You Can Get Around the Manager in an HOA

Sometimes there is another way to get what you want in an HOA or Condo Association. Here's a question recently sent to me:

"I was wondering if I am entitled to the name/owner listed on HOA documents of a home within the Association of which I am a member in good standing. I need it to deal with problems related to residents of a particular home. The home is occupied by renters, I want to communicate with the Owner. ...

The Management Company has refused to give the owner's name to me stating "privacy rights." However, property ownership is public information and I was trying to avoid a trip to recorder's office for the County Records. "

Thanks for the easy one ... all you have to do is get the address and call the county tax assessor's office and ask for the name and mailing address of the owner of the property (at least this works in Contra Costa County, California).

Why beat your head against a wall?

Posted by Beth Grimm at 10:14 PM

September 11, 2009

BARBECUE FIRES THAT START ON A CONDO DECK, AND BURN DOWN THE NEIGHBORHOOD

Don't kid yourself. If you are one of the wooden structure Condo Associations in California that has not yet banned charcoal or large container propane barbecues from use on decks, you could be sorry. Here is a sample letter one owner wrote to the owners in their complex, and I find it accurate relating to a condo development in the Tahoe area, where the fire danger is high.

"Dear Owners

I am writing because I want to make sure all of you understand what can happen if a fire is started on a deck in any of our units because of the use of a barbecue cooker. Summer is here and it is a dry, hot one and the area around us could be considered nature's "tinder box", beautiful, but dangerous. If a fire starts in our complex and burns down a building or more, or worse, the surrounding area, my question is ... do we have enough insurance to cover us and all of our neighbors' homes, because I believe we (all the owners) could ultimately be held responsible."

Good question. ... Especially since the State has adopted fire regulations that ban use of these types of open flame barbecues within 10 feet of multistructure complexes. Insurance companies are looking at this. Some are recommending rules changes to prevent the hazardous situations. High tenancy and vacation rental complexes are especially susceptible because of the "truth evident" that renters do not tend to take the same precautions as owners since they have no interest in the property.

Posted by Beth Grimm at 9:57 PM

What Rights Does a "Significant Other" Have in an HOA or Condo Association?

Here is the question sent to me.

"Our Board is in dispute as to exactly what the rights are of an individual who has been named by an owner to be his/her “Significant Other”. This “Significant Other” is not married nor is an owner within the HOA. They do not cohabitate within or outside the HOA. Can a “Significant Other” serve on committees?. Can a “Significant Other” run for the Board of Directors? Can they be afforded all the rights and privileges that an owner has without the benefit of ownership?"

The Association documents (in California, the CC&Rs or Bylaws) generally state whether a director has to be a member of the association, or not. They may state who can serve on committees. "Significant others" are not guaranteed the rights of the member they live with.

Posted by Beth Grimm at 9:47 PM

August 29, 2009

To Foreclose or Not to Foreclose an HOA Property - That is the Question

To foreclose or not to foreclose, that is the burning question these days for HOA and Condo Association boards. Moving in the direction of foreclosure used to be the way to get owners to pay delinquent assessments. I say "used to be" because people used to have equity in their homes, and the threat of foreclosure was a real threat.

To pay or not to pay the delinquent assessment is the burning question these days for owners. It used to be a no-brainer. If the HOA or Condo Association could foreclose and force the sale of your home, or take it back for unpaid assessments, the best answer of course was to make arrangements to pay the assessments, whether in a lump sum or on a payment plan (assuming the HOA or Condo board allowed a payment plan).

It used to be - should I say in the "olden days" - pre "recession", that boards could accept payment plans because a small percentage of the owners were delinquent.

It used to be that boards would move toward foreclosure in all but a few situations to collect assessments. That was "pre-recession". Now many HOA and Condo boards are looking at ways to pursue the debt of delinquent assessments against the individual owner(s) during whose ownership the delinquency accrued (yes, that is usually an option available to HOAs, but many, many people do not know that!).

Boy, the "olden days" are gone. The "steel hammer" in the threat of an HOA foreclosure is all but turned to a weak rubber mallet. The desire to stay current with delinquent assessments has all but turned into the sands of time, slipping through the grasp of the average American. Owners who think they are "in the clear" for a delinquency when the bank forecloses are getting unwelcome surprises when served with a subpena for a personal debt action. Short sales are falling apart at the last minute because the parties (seller, buyer and lender) are ignoring the HOA and the accrued assessment debt until it can no longer be ignored - which is the case when a valid HOA lien shows up on the title search.

The collection of delinquent assessments has become an elusive effort in futility in many cases. And for that reason, many HOA and Condo Association boards have stopped offering payment plans. The reality is that the association bills need to be paid ... and in many cases, the income from assessments has dropped dramatically. Associations that used to run with 1% or less in deliqencies are in many cases running with 10% or more today!

What is the answer?

Pray for better times and an economic upturn.
Pray for an improvement in the housing market to where it makes sense to keep one's property.
Pray for help in balancing a precarious budget.
Pray for the well-being of everyone .. And I do mean everyone ... The better off everyone is, the more likely the economy is to start a serious upturn.

And if you are not a religious person, then GET EDUCATED about the facts, options and solutions.

You can find many answers and get help in working out solutions in the various 5 Assessment Primers that are available on my website. Since each is about 20 pages long, and detailed to the max about the specific subject matter, it would be absurd to try and summarize the information in one blog or one article. The information is there for the taking, for a very small price ($25 each). Get educated and whether you are on an association board, in hot water over your own finances, or trying to help out a relative, it pays to have the information needed to make wise decisions. Here are the topics: (California law incorporated)

Basic Assessments A-1 - How To Determine How Much Should be Charged
Assessments A-2 - All About HOA Foreclosure
Assessments A-3 - All About Bankruptcy in HOAs
Assessments A-4 - Coping With the Big Special Assessment
Assessments A-5 - Collections in Hard Times
Assessments A-F - Forms Used in Collections and Satisfaction of Disclosure Requirements

Visit the CaliforniaCondoGuru - See the Publications Page and the Webstore

Posted by Beth Grimm at 3:29 PM

August 28, 2009

SEX OFFENDER IN THE HOA / CONDO ASSOCIATION NEIGHBORHOOD - WHAT TO DO ...

The question of sex offenders in the neighborhood is coming alive again. Not that it ever died. But with the discussions flying about of the release of California prisoners en masse, including sex offenders, the burning questions are coming to me. Here is a good one:

"Our Board [officer] recently had [a relative of his] move onto his property. One of the HOA Members recently found out that the [Officer's relative] is a registered sex offender. Should the Board [Officer] have informed the Board and/or the HOA? Is this considered part of a Director's fidiciary responsibilities?"

Wow, this is a very good question. There is no case law on this that I know about. Board members do have a duty to warn of or take steps to mitigate or eliminate any known dangers to the residents. This can mean so many things, such as brighter lights in the parking lot to avoid nightime attacks, warnings/yellow tape/barriers when there is construction going on, repair of sidewalks when trip hazard "arise", etc.

And in this vein of dealing with sex offenders in the neighborhood, the question also arises: "Once the board knows about a sex offender in the neighborhood, what duty, if any, does it have to inform the other owners and residents in the development?"

Some practitioners take the position that the board has the duty to inform owners and residents about sex offenders in the neighborhood, some advocate petition letting and meetings, some want warnings posted, and some advocate proposing amendments to the CC&Rs that prohibit sex offenders from living in the neighborhoods.

And others (like me) take the position that it is not the board's responsibility to get involved in advocating picketing or to try and figure out if the sex offender presents a danger or not, or to alert the neighborhood. Why do I take that position? Because once "Pandora's box' is open, the question becomes how much information should be provided to residents? And what precautions should be taken? And what communications should be sent out? And what puts the board over the line? What leads to panic, to lower property values. What damage can be done in starting the ball rolling?

In the case above, I do believe that if any board member knows about a sex offender in the neighborhood, whether it be the [Officer's ****], the manager's cousin, the landscaper's crew supervisor, or the resident of 3B, it does make sense to bring it up for discussion, and make a reasonable determination of what to do about it. Thus, there will be documentation rather than rumor or conjecture about what the Board did. I do believe any board member who has invited a sex offender to live or work in the neighborhood has a duty to let the other board members know, so that situation can be dealt with reasonably. If the problem involves contractors on site, the Board can take measures to assure those persons either are not hired or they are doing work where they will not have any contact with residents, and/or perhaps they will be "supervised" closely. If the offenders live in the development, that is different.

Once a resident sex offender is disclosed to the members though, a question does arise as to whether the resident poses a threat and if so what measures should be taken. My take is that before the board goes there, I believe there are more appropriate methods to deal with members. Those more appropriate methods would be to - possibly through a newsletter, on the association website, or postings in the common areas, inform the members that it is their right to access public websites, identify where sex offenders live, and take their own measures to protect their families and loved ones. The sites have specific warnings about use of the information and I believe Boards can get into trouble by "misusing" the information. The information is geared toward allowing people who want to check the lists to take measures to protect their "own".

Certainly, once the members are receiving information about how to check for sex offenders in the neighborhood, there is a strong likelihood that a few or many will find out about the situation with the board officer's relative or any other residence in the neighborhood where a sex offender lives and adopt their own methods to "deal" with the situation, and it will likely become very uncomfortable for any of the residents in the homes housing the sex offenders or the neighbors. That is not something the Board can “fix”.

So, what I am saying is that sweeping the information that there is a sex offender in the neighborhood under the rug does not seem the wise path to me, but neither does "taking up the charge" to chase the sex offender out of the neighborhood.

If you want more information about my thoughts on this subject, there is an article on the Guru website in the Articles section called “Caught Between a Rock and a Hard Place”, and a blog written in 2006 discussing whether Megan’s List is a blessing or a curse.

Posted by Beth Grimm at 8:55 PM

August 25, 2009

EVALUATING VENDORS FOR HOAs and CONDO ASSOCIATIONS INCLUDING MANAGERS

Should the HOAs and Condo Associations regularly evaluate vendors of the association, or just let them continue to serve until there are complaints or an uprising?

Evaluations at least on an annual basis are as important, in my view, as choosing the right contractor in the first place. This is for at least these reasons:

(1) It provides the contractor, the board, and manager the opportunity to speak with each other about job performance, any gripes or concerns, and any other matters that may have arisen (such as owner harassment or use of contractor, etc.).

(2) It tends to resolve issues and diffuse differences if any have arisen between the parties, and to pave the way for a smoother year in working together.

(3) It tends to remind the board and vendor that renewal of the contract is important, so that the parties are not lingering without the benefit of a contract and a clear understanding of the terms and obligations.

I once suggested to a manager who was fumed about a board’s request that the manager submit to a formal “evaluation” after the owners had been polled about satisfaction with the management that I thought it was a good idea, for both parties. The seemingly defensive posture indicated to me some concern that the manager either was expecting very bad comments or was suspecting the board might be looking for a way to get out of the contract and simply did not want to be confronted. However, the truth is that the dragon you see is much less dangerous than the one that is lingering in the cave behind you. In other words, you can better deal with issues that you can see than those that you can’t see coming. Anyway, Boards should, in my view, have some vendor evaluation processes in place.

Waiting until there is a fire to put out (burning differences) or restlessness among the "natives" (owner members) does not work well.

You can find out much more about choosing vendors, managers, and others to serve the association in a new Primer (available soon on the condoguru website, in the webstore and on the publications page) which contains information on all aspects of choosing, contracting with, and evaluating vendors and managers, and which includes a sample Resolution that a board could use as a basis for evaluating vendors and managers.

Posted by Beth Grimm at 9:45 PM

July 27, 2009

Landscape Noise in HOAs and Condos - Is It Negotiable?

II have written alot about noise issues in condos and HOAs. Most involve hard surface floors, children, dogs and such. Here is a new one!

From a reader: "I''m emailing now to mention a situation of my own that I've not seen you address, in case the topic is of interest to you or your readers. Given all your terrific material on neighbor-neighbor noise issues, I'm surprised this problem hasn't come up more often: landscaping noise! I know leaf-blowers are intensely controversial in other settings, but I'm not sure how often people are bothered by their use, or the use of other heavy machinery (in my case, the leaf-blowers are actually the least of it!) in landscaping operations performed by the
HOA and its agents.

I work at home, and I'm being driven slowly batty by this. When the machines descend outside my unit (literally *right* outside -- I hear them bumping against my front door from time to time!), they're here for sometimes as long as an hour, and meanwhile, there's no place inside where I can work, read, take phone calls, or even just sit and relax. It's physically and psychologically miserable! Our manager has indicated that exploring quieter landscaping alternatives is out of the question, as these machines are the "most efficient" ..., and also rejected my request for advance notice of the days when they'll be around my unit (so that I can arrange to be away, or at least to have a car on hand for a quick escape), indicating that while there is a regular schedule, last-minute changes are often "necessary." ... If this were an issue between neighbors, and the noise were of this magnitude, I'd expect the other person to work with me to find a solution ... However, the HOA's position is 100% unyielding, and it's not clear to me whether I have any recourse beyond my lone ballot in the next Board election. So what I'm wondering is whether ... HOAs ... have unlimited powers to interfere with individual "quiet use and enjoyment." Or, do they have any of the same courtesy obligations to residents that neighbors have to one another?"

Answer: These are good questions. It looks like this owner has reasonably tried to find out the kind of information needed so that he/she can find a resolution to the problem. If an HOA or manager wanted to minimize this kind of issue, he or she might include in the HOA or Condo newsletter or a note posted somewhere in the common area a schedule for the days the landscapers would be working around the buildings. It is certainly okay to add a cavaet that the schedule is subject to change if the landscapers or board needs to alter it or schedule emergency work.

This situation does not only bother people who work at home, but also can be very disruptive to naptime for children, or relaxation time for seniors, TV soap time for "addicts" (like my grandmother) and others. I remember one time I was traveling with my children and grandchildren in Santa Fe, New Mexico and we were staying in a townhome. I offered to babysit my granddaughter while my daughter and son in law took a walk downtown. The baby was about 1 1/2. She went down for a nap and it promised to be an easy and relaxing afternoon ... until the landscapers went to work. It seemed like they were beating at the door with the machines, and standing outside the baby's window with the blower for an eternity. The baby woke up terrified and it took about an hour to calm her down. It was very upsetting, to me and to her.

There is a lot of room for improvement in this situation. If the manager can at least let this owner know what the usual schedule is, the owner can try and plan for it, maybe saving up errands to be run when the offensive machines begin their cacaphony. As for the owner, the purchase of sound deadening or noise reduction earphones might help. Try a sporting goods store or gun shop, or maybe a radio shack - to purchase the noise reduction earphones and some nice pleasant music.

This kind of situation might benefit from a "mediation" but the expense is really not necessary. The work has to be done, the question is when, and how difficult it would be to ask the landscapers to try to keep to a particular schedule around the building involved to accomodate a person who is a "work at home".

This is not rocket science. All it takes is a little common sense and compassion for a fellow human being.

Posted by Beth Grimm at 9:11 PM

July 24, 2009

Good Standing - Board Members - Dialogue Continued - for HOAs and Condos

I did a blog essentially similar to this in October 2007 and republished it just before this blog. As I said in that text, there is quite a bit of misunderstanding about these terms ("good standing"), and when they can be asserted to prevent someone from serving on the board, and when they can be used to prevent an owner from participating in association elections. And of course, there is today's world (and economy) some things have changed since I wrote the blog in October of 2007.

A new question arises - if an owner/board resolve an assessment delinquency or other CC&R violation via a written settlement agreement, does that resolve the violation itself, such that the owner would then be in good standing?

I would say, that "depends".

As for an example, if the settlement agreement is that the late fees and interest are to be deducted if the owner pays by "XXX" date, and the owner does pay by that date, they would be in good standing on the date they pay (assuming the docs say that they have to be "current" in their assessment payments to be in "good standing"). If the agreement involves a payment plan, the good standing issue would be resolved wwhen the payment plan was fulfilled. Thus, the agreement itself in either case would not settle the question of good standing.

Any other violation could bring in all sorts of discussions. If an owner has an unapproved pet that violates the governing documents but agreement is reached that the pet is legally/properly "grandfathered" (allowed to stay until it dies or moves away), then violation is resolved.

But if someone has erected a deck that is ordered to be removed within 30 days, that would be considered a violation until it is resolved.

So, the question of when the violation is resolved and good standing is resumed is a question of fact, depending on the situation, the type of violation, and how it is to be resolved.

Confused yet?
That is why you get help! Hopefully, the right kind of help.

Posted by Beth Grimm at 11:13 AM

July 18, 2009

The Saga on Fines in HOAs and Condos Continues ...

It's time for more on fines. I receive a lot of inquiries and questions. Here's one ... (or two) ....

"I have read your recent blog regarding fine hearings for "continuing violations" and whether hearings are required. I have a related question for which I would love to see a response on your blog. I have heard that many condo associations simply send out fine letters and have a sentence in the fine letter letting the violater know that they can challenge or appeal the fine at the next board meeting. ... Do you believe this practice is proper?"

And

"As a follow up, it has also been suggested to me that as a practical matter, there are no real consequences to the Association in engaging in this practice. This is because if a homeowner goes to an attorney to complain that due process has been violated and the attorney sends the Association a threatening letter, the Association can just rescind the fine and there will be no damages. The idea is that what attorney will want to waste his time over a $50.00 or $100.00 fine. So my question is: is there any real risk to the Association in engaging in this practice? "

These are valid questions. First of all, I do believe that sending fine notices out without offering owners a hearing, at least on the first "go-round" for a violation (perhaps you have seen my blog on repeat violators), is in direct contradiction with California Civil Code Section 1363(h) which says:

" (h) When the board of directors is to meet to consider or impose discipline upon a member, the board shall notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the meeting. The notification shall contain, at a minimum, the date, time, and place of the meeting, the nature of the alleged violation for which a member may be disciplined, and a statement that the member has a right to attend and may address the board at the meeting. The board of directors of the association shall meet in executive session if requested by the member being disciplined.

If the board imposes discipline on a member, the board shall provide the member a written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action. A disciplinary action shall not be effective against a member unless the board fulfills the requirements of this subdivision."

So when a board is going to consider imposing disciplinary action upon an owner, the Board must provide the owner with at least 10 days notice of the meeting (so that the owner can attend if he or she wants to do so, and present their "side" or "defense" to the proposed charges against them. There is more to the point, which is that the law is intended to provide an owner fair notice of the charges, the proposed discipline (including fines), the chance to defend, and, at and/or after the hearing, the decision of the Board. (See below for reference material that is available.)

So, I believe the practice that you describe is contrary to California law, which I believe is the least that is required. Some documents may require more steps, more or earlier notice, or tougher requirements than the law, in which case my position would be that the Board should honor the documents.

As for challenging fines that are imposed, an owner does have options including paying an attorney to write a letter, and yes, if that choice is made, it may cost more than the fine itself. Additionally, an owner could pay the fine under protest and then challenge it in small claims. In fact, I believe that if an owner does pay an attorney and the fine is dropped, he or she could still challenge the fine in small claims court, and ask for reimbursement for the attorneys fee that was paid in place of asking for reimbursement of the fine. It would seem that if the Board did not follow proper protocol and the owner was forced to hire an attorney or pay the fine under protest as the only options, the owner might have a good chance of getting a judgment to cover the attorney's fees. Small claims is not a venue that welcomes (or even allows) attorney representation; however, in a scenario like this it would be possible that a small claims officer could find the price paid for the attorney constitutes fair compensation. Small claims court is a court of equity, and California law allows recovery of attorneys fees if the HOA or Condo Associaiton, or any owner, has to resort to court to enforce the CC&Rs, and this is a "reciprocal" type of right/situation which would apply.

It is best to consult with a lawyer if you want legal advice of course. But if you want information on the laws, the California website is one place to look. The other is my website at www.californiacondoguru.com where you can fine among the the FYIs the July 2003 publication about this law when it was new, or a series of Enforcement Primers that provide comprehensive information about enforcement for beginers, immediate-level boards, managers or owners.

Posted by Beth Grimm at 6:16 PM

July 5, 2009

Why Do So Many HOA and Condo Association Mediations Fail?

Mediation seems to me the perfect way to resolve HOA and Condo Association disputes, whether the parties are the HOA and an owner, or two or more owners, or the Condo Association and a vendor, or all of the above. The forum provides a perfect opportunity for all parties to keep control of the dispute and where it goes. It is the perfect opportunity to "be heard". It is the perfect opportunity to craft a creative resolution, if creativity is needed to achieve a reasonable resolution of the dispute.

So if it's so perfect, then why does it fail?

Here are some of the reasons.

Many people are completely unreaslistic about what is within the realm of possibility. They commonly misconceive that they have a better chance of "getting a judge to listen" to their litany of issues and "weigh in" on their side. All I can say is: "Good luck with that!"

Sometimes its the mediator. They know not what they are doing. Mediators short on experience with HOA and Condo problems commonly do better with disputes revolving around money. Who owes whom what? If there are any emotions involved, forget it. And if the mediator has little or no regard for what the disputants might need to get onto the table, or what amount of spouting off is needed to get them pliable enough to get real, or what amount of "massaging" might be necessary to get the parties talking to each other, or on the contrary, when the "spouting off" is beginning to carry over into the arena of distancing the parties further, then hours can be wasted.

If the parties to the dispute are blocked by their attending advocates, such as when lawyers will not let their clients talk at all in the mediation, the process can be stifled.

If the parties come kicking and screaming to the proceeding, such as when a judge orders them to get themselves to mediation before he or she will consider a matter further, or when parties come just to satisfy the statute that is the precursor to litigation, it wastes everyone's time.

And last, but not least, a mediation may be over even before it begins if neither the mediator nor the HOA board or advocate has any sensitivity to how put off an owner or owners will be - without any warning or preamble - coming into a room where there are perhaps 5 or more board members, the HOA or Condo manager, and the association's attorney all trying to crowd onto one side of the table - or perhaps even worse, crowding in around the one remaining chair. The owner(s) in that scenario are already building resistance, feeling outnumbered and overwhelmed.

How are the above problems solved because if they are ... that will take the parties a long ways toward resolution. Let me count the ways ...

1. Open-mindedness, experience, and an educated mediator (to the process).
2. Open-mindedness, experience, and an experienced (to the process) advocate who can leave their ego at the door.
3. Good communication between the Board and its advocate, and a willingness to "participate" and not hide behind the attorney.
4. A willingness on the part of the owner or party that is in the minority in number to "participate" and not flee.
5. And last but not least, the insight of a good mediator to set out the processes ahead of time and explain what the parties might perceive as "lopsidedness". For example, simply notifying an owner that the board will be present because any decisions require majority action explains why the table is lopsided. Some owners are put off because only the manager shows, and they want to address the board. Being up front about who will be there any why is very helpful. Inviting the owner to bring a legal or other representative or someone for moral support is not in my book a negative.

And one last thing I would say (from experience) is watch out for "retired judges" passing themselves off as mediators. While there are some very good ones out there, who are able to listen instead of "direct" the "participants" to the resoluton he or she (the retired judge) believes should occur, there are also those who exude testosterone when it comes to ego and power (men and women judges alike). I have had training with people like that, and been in mediations with people like that.

Strong advocacy and positioning without regard to reality and openness to discussing creative resolutons can get in the way at a mediation because that process is in the best scenario a forum that presents an opportunity for the parties to come to their own resolution, with the help of a good facilitator who knows what they are doing, It is good to ask for references to people in this industry or other HOA or Condo boards or owners that have been in successful mediations, and call the references.

And try it ... you could be very pleasantly surprised!

Posted by Beth Grimm at 6:19 PM

June 17, 2009

HOA / CONDO Association Rules Violations & Due Process - The Continuing Debate

There is a continuing debate going on about HOA and Condo Association hearings. And it is an interesting one. Debate is healthy. It stirs interest in a topic. The point under discussion: what is required of a board to address a situation where there is a continuing or recurring (someone wrote and asked me to stop using re-occurring which is fine with me) violation of the rules? And what is the difference between continuing and recurring?

I think we all agree that continuing means something that goes on day to day without changing, such as a paint color or vehicle parked without being moved. "Recurring" would be something that happens, and then happens again, and then happens again, such as slamming a door or parking a vehicle in the wrong place each day. Whew! Glad we can agree on something (or do we???).

Now, the big question is about imposing fines for these violations - after notice and a hearing of course. Does the Board have to hold more than one hearing for continuing or recurring violations. You can read my earlier blog for what I, and some colleagues have opined. My question for this day is:

Are HOA and Condo hearings on par with criminal proceedings, where due process is critically important? Obviously the stakes are much higher in a criminal proceeding, and "state action" is clearly involved because the penalties come straight from the Penal Code.

Fining an owner for continuing or recurring conduct - once they have been clearly given the message that such conduct will subject them to a fine or suspension of other rights (such as pool use - yes, that too), is in my opinion fundamentally fair.
And what is also important is that it is fair to the volunteer board members and the rest of the community, that violators should be subject to some penalty.

One commentator weighed in and said that a board could give notice and hold the hearing, and then provide the owner with a "probationary" period, with the cavaet that if "probation" was violated, another fine would be imposed. I do not think that is a bad idea - it might make alot of sense in a situation like pool abuse, where fines are imposed for disruptive conduct at the pool, and the "probation sentence" is that if the same conduct recurs, the punishment is suspension for the season.

But of course (there is always a "but" isn't there?), if there is reason to suspect the proof or complaint is unreliable, then imposing any fines is risky and possibly unfair.

That is why we should focus some discussion on what is reliable and credible proof/evidence. If the board can have it independently confirmed, then it is reliable. If more than one person has complained, it likely is reliable information, but certainly more investigation can be performed. If it is Joe Blow and Patty Mouth throwing insults and complaints about each other's conduct, there is reason to investigate and seek out further truths (or possibly even "butt out").

As to fining into infinity, at some point the Board has to make a decision to "sh__" or get off the "p_t" (anyone familiar it that saying)? This decision should be a good sense one. If someone constructed a deck over common area for all others to see, then this situation would dictate more assertive action than "forever fines". If the owners' tenants cannot control themselves at the pool and create turmoil every time they attend, then they should be banned for a reasonable period each time it occurs. Evidently, some "training" is required here. If an owner lets their dog poop in the laundry room every time they do laundry, then a fine each time, possibly even escalating, might be "fine".

If an HOA or Condo Association is challenged on a fine or fines, the most likely venue is small claims court, which is a court of "equity" (fairness in other words).

So, I say again, HOA and Condo Association hearings and fines or suspension of use of facilities are not on par with criminal proceedings. And HOAs and Condo Associations are not police, judges, or jailers who have it in their power to confine people to bread and water, or solitary confinement, or time in jail, or the electric chair. Certainly, there are boards that have taken action with regard to fines that is unreasonable, unfair, unwarranted, and downright ridiculous. But that does not taint the pool of volunteer board members that are just trying to do the right thing when dealing with the perpetual violator (at least not until there is some appeal court case in California or legislation that dictates processes and procedures further).

Posted by Beth Grimm at 10:01 AM

June 16, 2009

WHOM AND HOW MAY AN HOA OR CONDO OWNER CONTACT THE BOARD? VENDORS?

Here are a couple of questions that came in recently, a bit unusual as the questions go, but pertinent:

Can by law a home owner in a condo complex get in touch with a board
of directors member thru email ?

There is no law on this. Boards are not required to accept or respond to emails, so if the Association policy is to communicate otherwise, such as coming to a meeting and addressing the Board during homeowner forum time, or the old fashioned "write a letter" method, I would suggest following it. Remember directors are volunteers and are providing a service to the HOA or Condo Association, and may not want to be inundated with emails. There may be required channels of communication through management so that there is assurance that all communications relating to association business go through one portal.

By law, can a member of the association get in touch with one of the
vendors that works for the association ?

Again, there is no law, however, whether it is a good idea would depend on "motive". If you want to tell the vendor what to do or complain about something, I would say the better way to proceed is through the appropriate means of communication with the association board or manager. A homeowner can be reprimanded, subject to paying extra costs, and even subject to disciplinary action if he or she interferes with a vendor and the work they are trying to accomplish for the association.

Of course, if the contact relates to something constructive, like arranging inspections or entry as needed, that is normally okay, unless a liasion is appointed to communicate with owners over such things.

If you want work done by a vendor used by the Association, that might be allright too, but the Association should know, and the vendor should make it clear any work for the owner is under separate contract with the owner.

So, without a law, and given that associations have varied practices and policies in these areas, I have provided the common lawyer-like answer of "it depends" [on association policy]. The Association may not have one at the present; however, if an owner becomes overenthusiastic or abusive with communications, the Board will likely adopt one.

Posted by Beth Grimm at 10:28 AM

June 15, 2009

Must an HOA or Condo Board Allow "The Accused" to Confront Witnesses?

As part of a series on hearings (see E-Newsletter for June on the subject of whether multiple hearings are required for continuing or re-occurring fines - in the E-news Archives at http://www.californiacondoguru.com), I thought I would write about my opinion on whether owners subject to disciplinary action have the right to "confront witnesses".

If you read the E-Newsletter on fines, you will see that HOA and Condo boards are not really "state actors" (governmental or public entities) and therefore not necessarily subject to legal "due process" standards in all cases. There are some court decisions suggesting otherwise in the country. In any case, the position I see as viable is that at the least, HOA and Condo Boards should engage in fundamental fairness in holding hearings (which process is governed by California law) and in considering disciplinary action such as fines or suspension of membership rights for violations of the governing documents or rules.

I am not necessarily in the "camp" that believes owners in HOAs or Condo Associations have the right to technically "confront" witnesses that have complained of conduct which put the owner before the board in a disciplinary hearing. In other words, cross-examination, in my view, should not be a right that extends to homeowner associations. However, a board that is intuitive can, if inviting both parties (the accused and the accuser) to the hearing, and allowing each to present their side of things, find out a lot about what is going on, which will help in making a reasonable decision about whether disciplinary action should be imposed.

For any situation that can be independently verified - I do not believe the "accuser" or "complainer" needs to be invited to the hearing at all.

And, if it appears there is any chance of actual physical or abusive "confrontation" by the accused, or the accuser, get some legal help from an experienced practitioner in formulating a plan for the hearing, or protecting identities, or whatever you believe is needed.

Watch for more on this. In a later blog, I will address whether I believe tenants should be invited to hearings when they are the subject of the conduct being examined.

If you want extensive detailed information on enforcement, hearings, policy setting, etc., check out the Enforcement Primers available on my website in the webstore at http://www.californiacondoguru.com.

Posted by Beth Grimm at 9:02 PM

June 10, 2009

SHOULD HOA BOARDS LET OWNERS KNOW WHO IS BEING FORECLOSED?

I have written a lot about foreclosures, bankruptcies and delinquencies and know they have put a lot of strain on homeowner associations and everyone associated including the "dues-paying" owners and all HOA vendors. I have received an email that I believe deserves answering, although you may not agree with my answer - and you are certainly entitled to your own opinion. Here goes (the email question):

"Love your site...it is very helpful... I have a question I thought you may be able to help with...I understand if you cannot answer... What are your feeling in regards to a Board's responsibility in terms of letting owners know about foreclosures within our complex...some members feel it is our fiduciary duty to notify all residents regarding foreclosures, while others feel we shouldn't say anything, especially if the resident in foreclosure is current on their monthly HOA dues...the same question has been posed for both foreclosures discovered doing "Google" searches, as well as foreclosures recorded in our county documents.... Thanks for any feedback..."

Here is my response (and I have answered the question similarly in an earlier blog about the idea of publishing the names of persons who are in collections):

To what end???!!!

Is the purpose to

Let everyone know what units are vacant or will be soon so the burglars and thieves can step in in the dark of night? (Because that could happen.)

Let everyone know the value of the places are going down because of foreclosures leading to a mentality of "that place is going to the dogs" or "sell and get out quick"???!!! (Because that could happen.)

Let the "vigilantes" loose on those who owe money so that they can hassle them, threaten them, or worse (setting the Association up for a lawsuit if the action taken is offensive enough)???!!! (Again, could happen...)

Or

Try and shame the owners who cannot pay or have decided to walk away into paying???!!! (That does not work, people either pay, do not have the money to pay, or have made an economic decision that in better times might not have been made.)

I have to say ... if you are in it for the shame game... then [I could say] shame on you [ but I might make some people mad]. Are we back in the days of the witch-hunt or scarlett letter?

I have said before, collections should be carried out in a "reasonable manner", business-like and professionally, taking advantage of all practical options, and a board does have a fidiuciary duty to be diligent in its attempts to collect outstanding delinquencies as those negatively impact the HOA's bottom line. However, "laying shame" on those whose homes are being foreclosed?????". That is not one of the items that is included in my "tool kit".

If you want to know what is included, visit the guru at http://www.californiacondoguru.com and check out the very affordable Primers in the webstore. There are 6 on assessments alone, 3 of which deal specifically with collections processes.

Posted by Beth Grimm at 11:40 AM

May 31, 2009

HOA and CONDO Disciplinary Hearings - Which is Best? Open or Closed Sessions?

While we are on the subject of enforcement (did you see the last post on fines?) there are other prickly issues to consider.

We were talking about the California Civil Code section that speaks to what matters can be heard in executive session ... and disciplinary actions are included (see Civil Code Section 1363.05 - the Common Interest Development Open Meetings Act). The statute says that the meeting to consider discipline shall be held in exec session if the member requests it, which is totally incongruous. Why? because owners (1) do not know they can request an open session and (2) usually do not want their "dirty laundry aired in "open session" hearings.

Thus, I have taken the position that the Boards should put in their letters/notices to owners of a hearing that the meeting will be held in executive session unless the member requests an open meeting . In doing this, ...

1. The Board is letting the owner know it is the board's intention to hold the meeting in exec session BUT
2. That if the owner does not want it heard in executive session, they do have the option to ask that it not be.

Of course, this is not in perfect alignment with the statute, but I feel that it should overcome any argument by an owner that the board held a hearing in executive session without their (albeit implicit) consent.

Most boards just hold the hearings in executive session without regard for the technical issues around the statute language. However, I have seen a board get challenged on not allowing an owner a hearing in an open meeting. If the owner wants the hearing in open session, they have that right because of the way the statute reads. On the other hand, if the Board feels that having a hearing in open session presents other issues such as violation of someone else's privacy (a witness perhaps), it is best to seek the assistance of knowledgeable legal counsel to set up a reasonable process. Sometimes, different people's interests collide and there is not a way to technically satisfy both without "bending" (notice I did not say "breaking") the law.

My take on witnesses is that when a board holds a hearing, it normally states the charges and complaints but does not give out names specifically or share anything with an owner that could be embarrassing or damaging to others. Other legal practitioners take a different position that anyone charged with any violation has a right not only to know who complained, but to confront them. If a violation can be verified by someone not involved, then why create stress and promote actions that could result in retaliation? If the matter cannot be verified by anyone else, and there are no other witnesses, and it has become a "he said, she said" situation, much can be learned by holding a "meeting" of the two parties, by a person that is intuitive, a good listener, and interested in finding out what actually is occurring, before disciplinary action is meted out.

The law is what it is .... but it is not always easy to figure out what to do when interests collide, so get help when needed.

There are 5 Enforcement Primers available on the condoguru website so you can find out alot more about rule setting, policies, hearings and good enforcement practices if you wish to avail yourself of this valuable and affordable resource.

Posted by Beth Grimm at 7:11 PM

HOA and CONDO Association Fines -How Many Hearings Are Required!

In case you missed it, there has been a discussion on the website of a colleague about what is required with regard to fine hearings. Question: is there a hearing required every time that a fine is being considered for a violation of the rules or other governing documents?

Some legal practitioners believe a hearing is required for each violation, except continuing violations for which a daily or weekly or other fines might be imposed. Some believe that more than one fine can be imposed - but there should be a limit, for example, one colleague has expressed a "3 Strikes - Rule" philosophy, essentially suggesting that the purpose of fines is to deter bad conduct and "If three fines haven’t done the job, then fines are not going to work and the board must either stop wasting its time on enforcement attempts for this violation, or move on to injunctive relief.".

I have a different take on fining for repeat violations. I do agree that it is an important subject. I take a different approach because I believe that volunteer board members should not have to be parents, reminding their owners who are acting like irresponsible or spiteful "children" again and again and again that there are ramifications to bad behavior.

So, I thought I would write and give my take on fining for repeat or continuing violations ... without the need for multiple hearings.

My position is that it is appropriate for HOA and Condo Association Boards to impose multiple fines for bad behavior without having multiple hearings. I suggest specifically addressing the ramifications of reoccurring and/or continuing violations in multiple formats, and the more the better, ... at the least, (1) in the fine policy, (2) in the letter to the owner who is subject to disciplinary action, (3) in the hearing, and (4) in writing in the hearing decision letter to the owner. That provides at least 4 opportunities for an owner who is subject to the fines to understand that the conduct cannot continue without repercussions!

I recommend the following theme be included in all 4 venues: “Continuing and/or re-occurring fines may be imposed for continuing or re-occurring violations of the same or similar nature.” (Of course, the final hearing decision letter would say "A fine will be imposed each time the violation noted below is repeated [or each day that the violation continues, or for ongoing nuisances like loud music plus other loud disturbances - each time a loud disturbance from your unit occurs, among those noted below].

Does that satisfy any potential "due process" requirements (if in fact they exist - there is a whole other debate on how far "due process" invades HOAs and Condo Associations since they are not governmental agencies). I think "yes".

With 4 notices in the least (and 5 or more if explanatory warning letters are sent, which I believe are a very good idea, prior to the pre-hearing notice letter) that continuing or re-occurring violations will subject them to continuing or re-occurring fines, what excuse does the owner have for not correcting the conduct? As far as I am concerned, this way of dealing with the continuing and re-occurring bad conduct constitutes reasonable due process.

I mean, how many times should you have to take time out of your life and money out of the association coffers to "remind" someone ...

Not park resident vehicles in guest parking spaces
Not let your dog bark all day and night
Not let your guests create a disturbance at the pool such that others cannot enjoy it
Not disrupt an association meeting
Not let your children vandalize property or throw rocks and debris at passing cars
Not to leave the dog poop behind for others to step in

I could go on and on ... but 4 warnings should be due process enough for any continuing OR re-occurring similarly offensive behavior. And, yes, I know that fines are hard to collect; however, if a board wants to, at any time, it can go to small claims court to enforce the fines, and if it does not want to expend the time or money to do that, remember that if the fines letters are in the file, they and the total fines due can be presented with any escrow demand that might come through from sale or refinance of the property.

So - there are ways to make life a bit easier if you are a board member, and ways to engender more accountability if you are an owner who (or whose tenants) are habitual rules violators.

Just my "two cents worth" on the subject!

And for the other "98 cents" worth, visit the California Condo Guru where you will find free articles on enforcement, FYIs on fines, hearings, and adoption requirements for new rules and rule modifications, and best of all, incredibly useful (and affordable) Primers. Be sure to peruse the Publications and/or the Webstore to find the set of Enforcement Primers which were written to assist boards in formulating enforcement policies and practices that work. You will find a series of 5 Enforcement Primers that cover basic rule setting and enforcement, sample forms and letters, and for everyone who encounters problematic neighbors or violators, advanced Primers on Noise and Nuisance issues, Neighbor to Neighbor disputes, and Parking and Towing matters. It is my belief that success in enforcement comes through organized, professional and business-like handling of these matters, combined with good efforts to engender cooperation, communication, and peer pressure as part of the process of getting owners to conform voluntarily with the rules and regulations of the association. You will recognize that as a recurring theme throughout the tools I produce for the benefit of boards, owners, managers, association vendors and anyone who deals with home owner and condominium owner associations.

Posted by Beth Grimm at 6:44 PM

May 29, 2009

Does an HOA or Condo Owner Have To Pay Assessments Even If Their Home is Foreclosed?

I get this question at least two or three times a week.

Question: I'm not sure if I need an attorney. My condo was recently foreclosed. Now I have received a complaint from my HOA for dues that I did not pay before my condo was foreclosed. I thought they would take the money that I owed through the foreclosure, but I guess they never opted to get their money through the foreclosure proceedings. Now am I personally obligated to pay them?

Answer: I am going to assume this foreclosure was by the bank, and not the HOA. If the HOA foreclosed and went to sale, it would get a Trustees Deed to the property and that would settle the debt with the HOA.

An HOA or Condo Association can pursue a debt through foreclosure (so long as the documents allow it) or by personal judgment. When a lender forecloses, the association does not “opt” to get money or not. If there is leftover money from any sale of a home through a bank (or any other lienholder for that matter) foreclosure, those first in line (meaning their secured interest is first in priority) get paid first and the trustees have a list. If there is enough money to pay the existing lien, the association should receive it. If not, in these days of the recession economy, more and more HOAs and Condo Associations are going after the owners who defaulted to collect the association debt personnally, because there is no equity in many of the homes.

If you want to know all about HOA or Condo foreclosures, or all about HOA or Condo bankruptcies and what the effect is on HOAs and Condo Associations in California, visit the Californiacondoguru and go to the Webstore. There are several Primers there for you, 5 on assessments alone, including Foreclosures, Bankruptcies and Collections.

Posted by Beth Grimm at 1:13 PM

May 18, 2009

Earthquake Retrofit Information - A Great Resource

Many associations and owners read the articles on my website that relate to earthquake insurance and can see that I believe the insurance is very important and that if a board is considering dropping it, doing due diligence with regard to all options and presenting owners with proper information is really critical. Because of the writings, I often receive information from persons that are familiar with various aspects of the subject matter. In this blog, I want to introduce you to one of the resources that has come across my desk. Below is an article written by a person who has considerable knowledge, and information available on his website, related to retrofitting buildings for earthquake protection.

Read the article if you are interested and you will see his website noted at the end.

"Earthquake Retrofits: Solutions for Low-Rise, Wood-Framed Condominiums

The floor layouts that make many condominiums and townhouses economical to build and maintain also make them vulnerable to earthquake damage. A typical condo unit has many openings in the front and rear walls: either garage doors, entries, windows, or sliding patio doors. Since there is another unit next door, the side walls cannot have any openings. Large openings (or several smaller openings) in walls reduce the ability of the wall to resist earthquakes forces.

Retrofitting an individual unit with extensive openings in the front and rear walls often requires a heavy steel “moment-frame” in both of those walls. Moment-frames are very costly to fabricate and install. But the same traits that make condominiums economical to build in the first place could (with some creative legal and engineering solutions) also make them more economical to retrofit. From a strict engineering standpoint, it would work just as well to install only two moment-frames in an entire building, not two in every unit. You would still need to tie the whole building to the frames, but this process would be much less expensive than installing moment-frames in every unit. If both the front and rear walls of the building need moment-frames, they could be installed in different units; this could allow greater flexibility in construction and lessen the disturbance to occupants.

The above solution would work easily for an apartment building, where the manager could simply say, “Your unit is the one with slightly less storage because of the seismic retrofit frame.” But with condominiums you could run into all sorts of issues—for instance, is an easement required for structural elements that clearly cross property lines? If the moment-frame that strengthens an entire building is within an individual unit, would the association have right-of-entry to perform inspections? Do the owners of the unit with the frame pay less in assessments because they are giving up space? Are they compensated because there will be more disturbance to their unit during construction?

For many homeowner associations, addressing the above issues could allow a much more economical retrofit of a building as a whole versus retrofitting individual units as completely separate entities. Community associations exist to achieve solutions to common problems, so a cooperative solution should be within reach.

Some ideas:
• Talk to your association’s legal counsel: clearly a single building shared by several property owners already has other shared elements such as the roof, possibly fire alarm systems, etc; a common structural system to resist earthquakes is very similar to these.
• Volunteer to have a moment-frame installed in your unit: homeowner associations hardly ever come to unanimous agreement; people who are resistant to retrofitting may be happier to know that their unit will have much less construction disturbance than yours.
• Place bids on how much to compensate units with frames or other retrofit hardware installed: Maybe in your particular building the moment-frame would block off a storage closet in which ever unit receives the frame. How much money would you want in exchange for losing that closet? If you want $2,500 (remember, this closet is gone forever) but your neighbor will accept less than that, then the frame would go in the neighbor’s unit. Many factors could affect how much “compensation” a unit owner would accept. An absentee owner with a unit vacant between tenants might not mind construction disturbance as much as an owner who uses their unit for a home business.

Thor Matteson is a structural engineer with almost 20 years of experience designing houses, multi-family buildings, seismic retrofits for masonry and wood-framed buildings, and many other unique projects. His book, “Wood-Framed Shear Wall Construction—an Illustrated Guide” was published in 2004 by the International Code Council (available at his website, www.shearwalls.com). Mr. Matteson works with associations to make their complexes more earthquake-safe. You can e-mail him at thorm@sti.net. This article should not be used a substitute for professional services or advice for a specific project or property."

Posted by Beth Grimm at 8:05 PM

May 13, 2009

Posting HOA or CONDO Meeting Minutes on an Open Website - Why Not?

In a recent message a very astute Board member asked me the question that follows about meeting minutes. The Board and manager were at odds about posting board and membership meeting minutes on the HOA website that was not password protected (not because of legal advice but because of cost savings). Board members in favor of "transparency" (a laudible goal) would tend to be in favor of doing what is suggested, but managers and attorneys exercise caution. This is a good example of where a little understanding goes a long way in the world of HOAs and Condo Boards and associations.

Question/Observation: "I, for one, can't understand why multiple lawyers would advise [our management company] not to put minutes on websites, when minutes are supposed to be (by law) available to all HOA members."

My response: The reason for that kind of advice being commonly circulated is that (we) lawyers have seen many sets of minutes that contain potentially harmful information - namely, too much information - usually about discussions that took place or statements about members, etc., that are or can be harmful to the association in some way. Minutes are not part of public records so they are private to the association.

Naturally, it is good to have them so readily available for the reason of being accessible to owners who want to keep up with the business of the association. But they can be damaging if poorly written or if they contain any information that could be perceived as defamatory, very personal to an owner (privacy issue), or confidential and executive or attorney-client privileged and that kind of thing.

It is advisable to either (1) password protect websites (which can be like handing out pool keys, their reach sometimes extends far beyond what was intended), or (2) Take great care to stick to posting information that would be otherwise subject to public review, such as pictures, recorded filed documents, basic information given to realtors about the community, etc. If you post board members names and numbers, comments from owners, discussion groups etc., watch out for trouble!

I once - in searching my own name on the internet - was linked to an HOA website where executive session minutes were posted discussing topics subject to an attorney-client privileged matter and my name came up through a statement by the manager, included in the minutes, about an article I had written. Proper credit was given for the article, but I am sure the attorney for the Association was not happy about such accessibility to private and very confidential information. Ouch for that HOA!!

Posted by Beth Grimm at 10:35 AM

May 11, 2009

Charging Owners For Repairs - What is Protocol?

When may an association charge owners for repairs? A recent question that came through on email related to an owner who had received a bill for some work done on the outside of his home, which I presume is in a condo development.

This is the question:

"My condo association has sent me a bill for supposed repairs damage done to the stucco outside our garage. They never sent me a notification of this alleged damage and now they are charging me. When I called the management company to inquire about this issue, she couldn’t even give me a date of the damage. Our units all have the garages in an alley way that is public. Do I have any rights regarding this charge and issue?"

There are many questions that arise:

Does the association have any reliable evidence or reason for believing this owner is responsible? It would be important I believe to let the owner know why you (the association) are charging them - why it is that you (the association) believe that they are responsible.

Do the governing documents (CC&Rs, Bylaws, any other regulations) give the Board authority to charge an owner for repairs? It is important to make sure that the authority to make charges against any owner exists in the documents that regulate the association.

Is there a hearing required before charges can be made? California law does have some hearing requirements before imposing disciplinary action and you can find these on my website at http://www.californiacondoguru.com in the section on FYIs, july 2003. (Enter as a first time visitor or returning visitor and click on FYIs.)

And it is also important to note that the governing documents would describe what kind of development the person lives in. This person characterizes their home as a condo and I have no reason to doubt them. However it is important to note that owners of homes in a planned development (which includes most townhouses) can have more responsibility with regard to repairs, including exterior repairs, than an owner in a condo association.

This blog does not constitute legal advice, it merely raises the types of questions that would come up in an analysis of the question of whether charges to an owner were justified and legally enforceable.

Posted by Beth Grimm at 7:02 PM

May 8, 2009

Work Parties - Workers Compensation Coverage - Is It Necessary?

Questions often arise for Boards about workers compensation insurance. Should a board purchase it for the association even if there are no employees; does it cover board members who are running errands or doing any physical jobs for the association, does it cover work committees, does it protect the HOA when someone is hurt on the job working any construction project?

I have been providing some thought provoking articles about ways to save money these days, and some of the discussions involve work parties and a discussion of the risks. Here is some information from an insurance professional who attended a program that I gave for the South Coast Homeowners Association recently, at which the subject of workers compensation insurance came up. I appreciate it when someone shares their investigative findings with me, so I can share them with you! Here goes...

"As an insurance agent, I am getting many questions on the 'If Any' Work Comp policies. I’ve done some research and found that there are policies available that will cover not only the uninsured employee of a contractor but also board members, committee members and volunteers helping out around the association. A perfect example is a member of the landscaping committee of an association in Ventura that was poked in the eye while examining the health of a bush and was rushed to the urgent care. Luckily the injury was minor and her health insurance took care of most of the bill but what would happen if she lost her eye? In this litigious society I can picture her suing the HOA for her disability."

$500 or $600 is not very much vs. a PPD suit.

What do you think?"

I agree.

This information came from and a big Thank you goes out to ...

Barbara J. Terry, of Bill Terry Insurance Agency
Santa Barbara, California

Posted by Beth Grimm at 10:17 PM

May 6, 2009

CHOOSING A VENDOR FOR AN HOA - INCLUDING MANAGEMENT

Boy, is this a great subject. A question from a reader about how the process works to choose a manager or get the board to put contracts out to bid caused me to do some research and talk to some friends in the "biz" and I came across a GREAT blog article on the subject which can be found on the same site that hosts my blog, namely, communityassociations.net.

The article is written by a long time community associations (same as HOA) manager, Gayle Hasley, who actually wrote a software program on how to keep track of everything that needs keeping track of as a manager. The software is incredibly helpful to HOA managers and in fact, it is helpful to everyone who comes into contact with, works with, provides services for the HOAs, and determines how to resolve legal issues for any HOAs or condos the manager manages. Why? Because it puts the historic information of all aspects of the HOA at the manager's fingertips.

This incredible community associations management software can be seen at http://www.campro.us.

The wonderful blog article on choosing association vendors can be viewed at http://www.communityassociations.net/CAM_blog/2009/02/choosing_a_vendor_.html.

The article sets out how to go about choosing vendors, what is important, and what is not, how the bidding process works, etc. It is a comprehensive article and I could not say anything on this subject that tops what is contained in the article.

Check it out!

Posted by Beth Grimm at 11:54 AM

April 9, 2009

Small HOAs and CONDOs - What Are The Options Legislatively and Otherwise?

"Small" HOAs and Condo Associations - Maybe we should be talking about the differences between ultra small (10 and under) and small (25 and under, as NL says, or 50 and under as the CLRC says) associations - because there are some considerable differences. Both of these groups suffer many similar maladies:

***Are seldom professionally managed
***Are subject to the same laws that large associations have to follow
***Have the hardest time finding enough board members to serve
***Have the hardest time raising money for services or projects AND
***Have the hardest time with the new election rules

The California Law Revision Commission (CLRC) is studying these things. And below are excerpts from a letter provided to the CLRC (and also sent to me) by a California homeowner who is concerned:

[Dear Brian Hebert - Who is Chair of the CLRC]

... "I believe that the number of units in an association is the best measurement in what constitutes a small homeowner’s association. If the purpose is to simplify the requirements for small associations, then the number of units is the only factor that matters since all the operations of the association have to be performed by a limited number of persons.
...
I would like to address election procedures in smaller homeowner associations. We are a 7 unit association. Due to our small size, we elect 4 directors who are also the officers. Since we have a limited number of residents, most of the homeowners have been willing to serve on the board for a few years and then find another homeowner to take their position when they grow weary of the work. Up until our 2008 elections, we never had more than 4 candidates in any given year who wanted to serve on the board. Any homeowner who was willing to take on the job of a board member could have the position and the homeowners would unanimously approve them. We did not use secret written ballots until 2007 and it wasn’t really secret in 2007 since only 4 candidates were willing to take the 4 board positions. If you want to do the work, the homeowners will vote for you.
...
In 2008, the position of secretary became available due to our former secretary of 3 years tiring of the position. Our election was conducted in accordance with the law using secret written ballots. All 7 homeowners returned their ballots. The outgoing board has only 3 of the 7 homeowner votes. The incoming board still has only 3 of the 7 homeowner votes. We also have space for a write in candidate for each position although no homeowner wrote in a candidate.
...
We also used secret written ballots to pass amendments to our bylaws this year. Homeowner’s 2 thru 6 voted in favor of passing the amendments. Homeowner’s 1 and 7 did not return their ballots. What’s the point in using a secret written ballot when the results will never be a secret? If they aren’t secret in a 7 unit association, they could never be secret in an association less than 7 units.

In-person voting in our small association would save us some time, although the results will still not be secret. There is a significant difference in a 7 unit vs. a 25 unit association. At a certain size association, secrecy could be attained. I hope you hear from other size associations on this issue.

I know the commission has received comments from others that imply smaller associations have contempt for the law. Our association does not have contempt for the law. We simply are asking that the law be reasonable and equitable. It presently is neither.

NL"

Let's take a look at just the elections for a moment. In a 7 unit association with an upcoming election for the 3 director positions, who is currently serving? who will run for the board? who will serve as inspector of elections? ...

None of the inspectors may be related to any of the board members in any way, they must be independent. And given that some members have shown they are totally apathetic and not willing to vote, let alone serve, that exacerbates the situation. Must the Board go outside the HOA or Condo Association to find and/or hire an inspector of elections?

What if the owners want to gather in a room and choose directors among them based on who are willing to do the work on a volunteer basis, maybe using a calendar to "divvy up" the next few years of service? Can they do that? Not under the current law on elections.

I do not believe that small HOAs necessarily have contempt for the CLRC or the law itself, per se - but I find that once a small association is introduced to the vast array of laws that apply to them, I do believe they develop contempt for the complicated nature of the laws that apply - especially when they do not have the resources to keep up with them.

Am I saying small associations should not be subject to the Davis Stirling Act? Not even close. What about the meetings laws - should they apply? Yes, they should. What about budget and reserves planning and assessment collection, should they do it? An emphatic "yes" for condo associations with buildings to maintain, or HOAs with shared amenities!

But the complicated election laws? In a 7 unit association, as NL says, there is no secrecy to the voting. Everyone can figure out how everyone voted, even if the Association uses a double envelope ballot system for elections. So come on ... yes, I agree, think "ultra small" vs "small".

And check out the recently issued Memorandum MMO9-19 at the CLRC website http://www.clrc.ca.gov!

Posted by Beth Grimm at 10:11 AM

April 2, 2009

A FLAG FLYING STORY WITH A GOOD ENDING

I don't know about you, but I like a flag flying story with a good ending. So many times, people take a "no win" position and stand firm to the "end", which usually is not good. A reader sent me this email and I am always gratified when the information I publish helps to resolve a delicate situation (or an indelicate one!).

"Dear Beth,

I want to thank you for your website. It was extremely helpful with my situation.

Last week, the head of the HOA came to my townhouse and told me that my American flag would have to come down because it is on 'common use area'. It is actually on the wood directly next to my front door.

It is in no way a safety issue for anyone. It has been in the same place for the nine years that I have been renting this townhome. He told me I could put it out back one my patio. I said that would not be happening because in our rule book only American flags can fly.

He said the rule book was vague and I would still have to remove it. I showed him the flag that was on my fathers coffin, a WWII vet, and only a court order would bring my flag down. Then I found out about your website from my wonderful next door neighbor. I did my homework and went to the board meeting with my proposed resolution and with a copy of H.R.42. When I asked when I could bring up 'new business', the head of the board asked me what it was about and that I really was not supposed to be there because I was a renter. I explained my resolution in detail and he said not to worry about my flag and that it can stay. I said thank you and left the meeting. ... Again, thank you for what you do.

TC

God Bless America!"

Posted by Beth Grimm at 3:37 PM

March 25, 2009

IRS RULING 70-604 - WHAT IS IT?

I am not a tax attorney. I am not a CPA. I will state that right off. However, it is my belief from everything I have read and heard about including the ruling that this is an important ruling, and HOAs and Condo Associations that file as same need to put an election to the members each year to vote on what to do about this resolution. It does not require the double envelope voting package, however, some associations do put it on the ballot with the other measures for the annual meeting for purposes of convenience (because people do not tend to come to meetings!).

Here is a question/complaint I received recently about this ruling and the homeowner election:

"They [meaning the association] put it on the ballot without ever explaining it to us. After all the ballots were submitted, they then explained what it was we were voting on.

Also, as far as the vote, they only gave us two options.
Rolling over the surplus, or not rolling over the surplus.
They never provided the option of having the surplus returned to us.

Seems to me they should have explained all of this before sending out the
ballots, or at least enclosed with the ballots."

I agree with this reader that this measure needs to be explained. As I understand it's origin, quite a few years ago the IRS started an effort to tax HOA assessments. After all, it would be quite productive, wouldn't you say? For the government at least; but obviously, it would place a huge burden on HOAs and COAs.

It did not seem fair to the industry folks and homeowners in HOAs or COAs to be taxed on money collected for maintenance on buildings and grounds, or even lawsuit proceeds that were intended for that purpose. After all, investors can write off these fees, and some (although I am NOT giving an opinion here and do not believe it myself - so consult your own CPA or attorney) believe homeowners can deduct them from taxes.

Anyway, the outcome was this ruling. HOAs and COAs must get approval of the members to either roll over any assessments collected and not used in one year into the budget for the following year, or put the excess money into the reserves, or else there is the possiblity of being taxed on the overage as a "profit". If there was a vote to return it to members, that would avoid the tax issue of course. However, in most cases that and more needs to be collected the following year either to pay the increase in the budget or to fund underfunded reserves, so it seldom happens that a board votes to return any overages. In fact, these days, overages are uncommon.

Approval of the election is important, whatever the measure. Not all experts agree on how to word the options regarding the overages, or which is more acceptable (roll into the operating budget or reserves) and what accounting entries are required. So there. I cannot answer that one for you. Work with your own (hopefully experienced, educated and HOA-savvy experts).

Posted by Beth Grimm at 8:20 PM

March 19, 2009

HOAS & CONDOS - SHOULD THEY HAVE FIDELITY BOND INSURANCE?

I get questions all the time about whether an HOA or a Condo Association must have fidelity bond insurance. The answer is: not unless the governing documents require it! There is no legal requirement in California that requires the boards to procure it. But it would be legally required if the Bylaws, the Articles of Incorporation, or the CC&Rs said it was required. Last time I checked, the rule of thumb was, I believe, 3 Xs the amount of money in the HOA or Condo Association reserves accounts, or maybe that was all accounts. I am not the one to determine that, talk to a provider to find out the standard in the industry.

The next question is, well, if the documents do not require it, why have it?

One reader sent me an email saying "The 2009 Condo Bluebook states this type of insurance is not required by law, but is required by some governing documents. It is advisable for large associations to obtain this type of insurance. Page 82 near the bottom."

The Bluebook is a good publication and hats off to my colleague Brandon Bickel for publishing it. I will say, however, that not all practitioners, boards, managers or even insurance providers necessarily agree on what should be. My feeling is that all HOAs and Condo Associations should protect their funds with fidelity bond coverage. And for proper protection, be sure to investigate how it works and who should or should not be on the bank signaturue cards for the protection purchased to be effective.

I think its a "no brainer". Boards should procure fidelity bond coverage to protect the association's assets.

There is more risk in today's world than ever before of theft. The economy is in a bad way (one might say it s _ _ ks if one were not an attorney writing for a wide audience). And HOAs and Condo Associations are managed by volunteer board members - who tend to have the following problems (I think its safe to say):

In more cases than not, Boards are without the assistance of a professional manager or any other professional or knowledgeable help.

More often than not, Board Members lack specific expertise that would help them identify inconsistencies in the financials.

More often than not, Board Members do not even have time to review the financials regularly.

Sometimes, hopefully not often, Board Members serve with bad motives or without a conscience. And

Sometimes, people do things out of desperation they would not do under different circumstances.

And today, when people are desperate for money, where will the bad people turn? To a pile of money that is not being watched over carefully enough.

There have been a number of instances where Board members or managers have absconded with HOA or Condo Association funds. Sometimes its even been the "soccer mom" who always brought cookies to the board meetings - the person you would least likely suspect of having the capability to pilfer funds belonging to others.

And like the matter of wondering whether to make the swimming pool safe (triggered by the Virginia Graeme Baker Pool Act), it only takes one bad incident to bankrupt an association.

I know HOAs and Condo Associations are very pressed for funds these days, but the problem would be much worse if there were no funds at all.

Posted by Beth Grimm at 10:22 AM

March 16, 2009

TURNOVER OF RECORDS AND MANAGEMENT

Questions about management turnover come up all the time. HOA boards get frustrated with HOA or condo management in various ways.

Sometimes the board of the HOA or condo association created the merciless swirling and scary "eddy" and everyone goes down together.

Sometimes the manager has become a real problem. (Sometimes they do not know what they are doing - imagine that!)

Managers come in different "flavors" when it comes to transitioning:

Some cling with claw like tenacity, even when the blood begins to seep from the wounds.

Some conveniently "lose" records or turn over a disarray of "stuff" relishing the difficulties the board will have in straightening out the bookkeeping and materials.

Some cut out early on the contract termination clauses and do nothing during their "lame duck" (just an analogy) period "in office" (again, just an analogy), leaving the Board in a lurch. Don't get me wrong, some boards pull out early and do not understand that the manager has certain things they need to do to "wrap up".

On the other hand,

Some managers work with boards in a professional and business-like way, even when relations have broken down, just to keep things reasonable and copacetic, and to make the transition more smooth for all (sometimes to "be the better 'person').

It is good to remember that sometimes relations break down over very little and can later be repaired, and sometimes managers are asked back by a new or changed board. And it is always good to strive for a good reputation for being reasonable under any circumstances.

Now, all that said, here is a common question:

"Our condominium’s property management company has been the keeper of all and complete financial and legal documents ... what is the recourse of an HOA when it changes to another property management company to have the previous company turn over all documents to the new company?"

Right off the bat, the manager generally does keep all the records unless the contract with management says otherwise. (A "contract" duh you might say - what a concept!)

So first look to the contract for the termination provisions/requirements, and, hopefully, some guidance and requirements related to turnover of records.

If there are guiding provisions, and either party does not do what is required, there is recourse in the form of a "breach of contract" cause of action, allowing for recovery of commonly anticipated losses for such a "breach".

However, EVEN IF THERE IS NO GUIDANCE IN THE CONTRACT, that is not an excuse to be sloppy, mean, spiteful, lackadaisical (word?) or careless about record turnover. And it does not mean there is no remedy for losses. Managers would be expected, as a general rule, to keep the records of the HOA and most contracts specify what type of records must be kept. Thus, there would be a reasonable expectation that the common HOA records would be turned over at time of transition in some form that is business-like. Managers do not always turn over their reports, confidential or otherwise, believing them to be their work product; however I believe that in most cases a board would be entitled to have them as part of the historical record. There is commonly a lot of "meat" in those reports.

Sometimes people get upset because management wants to turn over electronic files and boards want paper. Sometimes managers refuse to allow boards to utilize the same programs for continuation of the recordkeeping that management used, citing trade secret or lack of "license" for certain use of programs types of arguments which make sense. However, if the information that is turned over in electronic form is incomprehensible because the underlying program access is denied, that could cause losses that a board might recover. In fact, if the records that are turned over are a mess, a board might be able to recover some or all of the costs of paying someone to go through and pull out what the board needs for its financial and other records.

But then, if there is no contract defining what records must be kept and who keeps them, or general confusion arose during the working relationship over who was keeping what records and no one did anything about it for a period of time, and/or there is little to no guidance as to who had what duties, there is little chance of making a good enough argument to recover losses for trying to restore some semblance of records.

There is one common way that this happens. No one is appointed as the "gate keeper" of records or communications, the one that receives and disseminates communications to all proper parties. When there is no "gatekeeper", boards and management tend to send out all kinds of communications and emails that cross, do not reach all pertinent parties, or are lost in the process. When board members email each other or the manager directly for example, but not all emails are sent to all board members or the manager, things start to get out of hand. I have adopted a policy where I will accept only one person from any HOA (manager or board member) as my point of contact with the understanding that that person is responsible to

Transmit what I send to all the board members and the record keeper for the HOA or Condo Association records.

Receive all communications that are for me and digest or piece them together in such a way that I am answer one set of questions or hearing one cogent set of facts and not hearing from 5 different board members what is up.

In essence ... a "gatekeeper".

No matter how ugly it gets, the party (or parties) that remain(s) above-board, business-like and professional in the transition process is/are winner(s) in my book, and quite possibly (in case my opinion does not matter) in the eyes of any hearing officer or court.

Posted by Beth Grimm at 5:53 PM

March 11, 2009

For Every Problem, There is a Solution

What do you do when you discover a problem in an HOA or Condo Association? It could a conflict in the documents or an inconsistency in HOA or Condo Association practices, it could be a law that was broken that a board knew about or did not; it could be just about anything. Problems arise every day. The way a board or an owner or group of owners approaches them is very important. Different approaches can complicate getting to resolution of the "problem".

I can tell you what not to do:

Do not start pointing fingers.
Do not start finding fault with each other.
Do not look for someone to blame.
Do not start making assumptions.
Do not jump to conclusions.
Do not shut out the people who might have important knowledge.

Now, I will make some suggestions as to what to do.

Fully investigate any situation before acting.

When Boards are in disagreement over an issue or hooked on making a point (right or wrong), they sometimes do or say things that are self serving, but not true. Sometimes they have made assumptions, or imagined things based on their perception. So be careful about accepting statements at face value.

Fact check statements and information whenever possible to assure that the board is moving forward with as much and proper information as possible.

Go to the right sources to help identify as many solutions or courses of action as possible to resolve any problem, which would include those with knowledge that will help.

If people clearly strongly disagree with each other, or have what looks like obvious bias', handle negative statements about each other with care and a balanced attitude.

Do not shut out persons you think are at fault or who make convenient targets. Give people a chance to explain themselves, whether a board member, managing agent, homeowner or association vendor.

Deal with things up front, and not in whispers, rumor or ill-conceived intention. Don't sweep potential problems under the rug.

Look at every problem as a challenge......

For there is a solution. And things become a lot easier to deal with when you are on course and looking for a solution as opposed to muddling around in the problem. (It's the idea of being "in control" again.)

Posted by Beth Grimm at 9:24 PM

March 10, 2009

How Do You Diffuse the Power of A Director Who is Misusing it?

I have seen documents called a "Code of Conduct" or "Code of Ethics" for HOA and Condo Association directors and I have crafted my own, from those ideas and through my own experiences.

I want to share my document and believe if more HOAs and Condo Associations used it, more board members would have a sense of what is expected of them. It is posted on my website at www.bgcondolaw.com in the "forms" link. There is also a Primer available that discusses what is expected of Boards (Board Basics I Primer in the webstore).

And if the form I suggest which is more or less an "agreement" and "acknowledgement" of obligations and conduct was utilized to its full extent, it could serve other purposes as well, such as serving as a basis for disciplinary action if needed.

Failure to honor it might serve as a basis for taking action to form an executive committee of the board to deal with board member confidence breaches. If a board member is doing things that are detrimental to the association and cannot be removed by the Board, there are ways to diffuse their powers and abilities or keep them out of meetings where confidential information that might be improperly disclosed is discussed.

One way is properly seating an "executive committee" of all "disinterested" board members that can meet in executive session - the purpose which would be to be able to discuss matters that if disclosed to the actual problem board member, could result in detriment to the HOA or Condo Association.

It is not meant for board members to come up with a way to "disinclude" certain board members with opposing views from discussions, or as a substitute for a preliminary meeting where all board members are invited to come and discuss their concerns with each other and with the board member dubbed the "problem" board member.

Posted by Beth Grimm at 12:11 PM

March 5, 2009

HOA DELINQUENCIES - ONE FOR THE REALTORS

My readers supply me with such great questions that make me think, now why is that????? And thinking about a problem, taking what I know, and visualizing (or actually writing down) how to answer the questions is the only way to get your arms around it.

Here are some questions asked by a realtor (MC in Southern California):

QUESTION ONE: "Do you have any gems I can pass along to REALTORS??? CAR sent an article out stating that Fannie Mae may start considering delinquency rate before issuing loan - can't be more than 15%. Is that true?"

My response: The national HOA and Condo organization CAI (Community Associations Institute) has expressed concern about this to FNMA people and the response from Fannie Mae was that this is "just a guideline", not a line in drawn in the sand (my characterization of the information I received, not an exact quote), but the truth is, its a FNMA guideline that is published to lenders and developers and FNMA must, by all standards, tighten up because of the really bad mortgage situation, so .... I am assuming it will become a consideration for lenders - I think that the lenders who want to sell loans to FNMA and have to certify that their loans are within the guidelines will take it to heart. The "guidelines" on owner occupancy that have been published have become the "standard" for many lenders, those that want to sell to FNMA and those that recognize that a high percentage of rentals tends to lead to problems not experienced by developments with a high percentage of owner occupants.

QUESTION TWO: "Yesterday, I spoke with the escrow department of a large management company and I asked for the delinquency rate and the manager said that for the Buyer to receive that info, they must pay Condo Certs. She also said that I was the first Realtor to ask that question. What do think about this problem?"

My response: The seller is entitled to the information, so I would ask them to get it, or to provide the buyer with written authorization to get the information on his or her behalf. These are part of the HOA or Condo financial records that an owner can see (not the names and addresses, but the total delinquencies or rate, I would say, under Civil Code Section 1365.2) and so if you go through the owner, you should be able to get this information without "paying" another entity for it. HOAs and management agents are not obligated to give realtors, lenders or buyers this kind of information. And most are loathe to create a legal relationship where none otherwise exists (for good reason, I would say, as California is quite a "sue happy" environment).

Condo Certs is a very commendable repository for document exchange and I assume there are warnings on the site about not being responsible for the information and that is probably why people are referred there. I do not know if they ask HOAs and Condos for the delinquency rate but I would not be surprised, as their goal (besides being a commercial enterprise of course) is to facilitate the transfer of information and documents in a sale or transfer of property, and to do that, certain information is needed. They do ask for the owner occupancy ratio, a longstanding bone of contention between HOAs, Condos and managing agents. Statements about anything that carries potential liability for sellers, HOA or Condo Associations or their management agents are harder to get because of the risk of being quoted, misquoted, or sued over it. That is why they tend to disclose only those documents of information that are required by law (Civil Code Section 1368).

AND MORE GENERAL INFORMATION ON THE SUBJECT OF FNMA GUIDELINES:

I did a blog earlier on the subject of the new FNMA Guidelines that was about teaching lenders how to comply with them; however, when it came to having to certify that an HOA or Condo develop was adequately funded a big roadblock popped up, since anything can happen the day the financials go out, or before, and not be reflected in them. And no lender or realtor is likely to get the information about the percentage of delinquencies without having to go through proper channels.

And so, I say, Realtors! Stay informed on the hottest issues! And send me your questions through the website at http://www.californiacondoguru.com.

AND

You may want to sign up for my E-newsletter on the website if you are not already signed up. It's free. And I will be blogging about these things too so you might tell your realtor friends to get on board and follow the blog. I will be discussing these issues in the coming months.

Posted by Beth Grimm at 10:04 AM

February 26, 2009

DOES TAKING SECURITY MEASURES INCREASE RISK TO HOA or Condo Association?

Since we are on the issue of security, I have heard from some readers about it. This, received today:

"Some years ago, our board discussed the possibility of putting security cameras in the garages (we are stacked units with gated garages underneath). We have had occasional theft from cars, items taken, even battery removal, and homeowners felt we should have enhanced security. It was decided against because the board was informed that, if the cameras failed and there was a theft, the liability to the association would be even greater. Could you comment on that aspect?"

My thoughts on that are:

If no HOA or Condo Association ever took any security measures because they feared it would increase the risk of liability, then those HOAs and Condo Associations would be in trouble and lots would have suffered more vandalism, parking issues, crime, etc. that needed the security and did not get it.

It is true that any entity, including any HOA or Condo Association or its Board that provides owners and residents with a "false sense of security" can get into more trouble than no security at all.

It is also true that taking responsible security measures can prevent crime.

So what is the key here? "False sense of security" is the key.

In other words,

If there is evidence of a failure to follow through with representations about security, that could be a problem.

If security measures are taken and there is a lack of diligence on the part of the HOA / Condo Association or security personnel cause more problems than they resolve, that could be a problem.

As some particular examples:

An HOA / Condo board puts up security cameras in the parking area and fails to keep them in working condition or never really turns them on ... but only puts them there so vandals will know they are there, and hopes to deter crime ... can that lead to liability? It could, if an owner claimed that the board gave owners a false sense of security. If the HOA or Condo board notifies residents that it is placing security cameras in the parking areas but that does not mean it will assume liability for any vandalism or theft, will that help? It might.

What if an HOA or Condo board hears about a possible rapist in the area but does nothing to add security to the parking area and a resident is raped. Is that HOA or Condo association or board liable?

What if that same HOA or Condo board hears about a possible rapist in the area and adds security cameras in an effort to deter or catch a rapist and neither happen, yet there is a rape, is that HOA or Condo board or association liable?

The board hears about the rapist in the area, and hires drive through security guards to patrol the areas, and the security guard shoots someone he or she thinks is the rapist. Is the HOA or Condo board liable?

You can bet that in any of the above cases, the HOA or Condo board or association may be sued, in fact, will likely be sued, as people love to point fingers, even for acts that are far outside the realm of reason. That is the reason to have GOOD INSURANCE COVERAGE.

But does that mean give up on security for fear measures will backfire? No, it does not. What it means is

Choose what seems to be the right means for any situation where there are indications that security is needed.

You might poll the owners to see what they favor, or not.

Be sure you have a good contract with a security company that shields the HOA or Condo association from liability for the bad or negligent acts of the personnel.

Try bright lights on motion detectors or alarms or loud music on motion detectors for dark areas where crime seems to occur or undesirables seem to gather after dark.

If you use security cameras, or in any case, include notices to residents that while the cameras or other measures are being taken and the intended purpose is to deter crime, that residents should not get lax about their own responsibility to be watchful, avoid leaving valuables in vehicles, lock vehicles, etc. and that the measures are not intended to give owners a false sense of security.

In other words, although it sounds simple to say take reasonable measures in light of the problems you are trying to address, it helps to keep the members informed, and understand that in most if not all cases that have been filed against HOAs and Condo Boards, the HOA or Condo Association often becomes a "target" because it is a possible source of cash (yes, lawyers think that way). The cases are probably about even in terms of arguing the Board did too much that went wrong or did not do enough. Associations continue to be considered a "deep pocket" in assessing possible defendants, and that the entity is probably always going to be included in any lawsuit where there is an accident or crime on premises, no matter what it does. However, being able to show it acted reasonably under the circumstances, and took reasonable action in light of the situation, may provide a partial or full defense to any such action.

Posted by Beth Grimm at 10:25 AM

February 24, 2009

The Need for Security vs. The Desire for Privacy - Which Wins?

Security Cameras, Can They Be A Breach of Privacy?

Here is an interesting contradiction sent in by a reader:

"I am currently on the "Security Committee" of my Condo Association. We are in the process of looking for way to make the complex safer for those who live here. The conversations have taken a strange turn, however, with some in the committee suggesting that we install security cameras everywhere. This may make sense from one perspective, as we may be installing HOA-Owned Laundry Machines in the Laundry rooms, and we have had some vandalism in the Gym. However, they are also advancing the idea that the clubhouse should also be camera-equipped as well.

A lot of this concerns me, as I am a big advocate of privacy rights. I might understand if there was a practical reason to do so. But we have had no incidents of theft or vandalism in the Clubhouse. Moreover, members rent it to use, sign a contract, are issued a key, and are responsible for leaving it as they found it.

Is it an unreasonable expectation for Clubhouse renters to view this as a private space for their contracted time? And if this is even legal, what steps does the HOA need to take to alert the membership that virtually everything they do in the common areas will be filmed?.

In addition, they are advocating a website wherein all residents can log in and monitor the common areas.

I could find nothing in Davis Sterling that addresses this. I'm wondering if you could give me some ideas about where else to look."

There is nothing in the Davis Stirling Act about this. When a Condo Association (or HOA for that matter) is considering installing security cameras, it does have to consider these types of things though. I do not know of any California resource or case that gives a definitive answer about where the line is drawn on an issue like this that involves security vs. privacy issues. If the Board was considering viewing restricted common area or exclusive use common area, there would be a stronger argument that a breach of privacy would occur.

However, as to common area that is nonexclusive to all owners, what I can say with certainty is:

There is no expectation of privacy in the common areas; however, if the Board is considering installing security cameras at the least, I think that it ought to

Survey the owners to get their feedback on the locations and cost
Consider whether the area(s) in question is/are a problem area
If they are installed, make sure the owners/residents receive some kind of notice

As for having a website where all owners can view areas covered by the cameras, that is a bit cheeky. I do not believe it is illegal, but sounds a bit "voyeuristic" (is that a word?) . I think the better approach might be to have recordings made that could be viewed if there is a problem in any of the areas covered or have some plan for viewing by a security company or committee or some small audience that has a role to fulfill.

If anyone wants to weigh in, send an email.

Posted by Beth Grimm at 9:48 PM

February 23, 2009

Managers Recommending Contractors Who Are Affiliated with Management - Is it Right?

As a followup to a very recent blog, another possible issue has been raised by some boards and owners that I should discuss. Some management companies own maintenance companies and some have their own affiliations with maintenance and construction contractors, landscapers and the like. In other words, some management companies benefit by the Association or owners hiring the contractors recommended by them.

Is that legal?

I know of nothing making it illegal.

Must the management company or contractor make that clear to the HOA and/or owners? In other words, are there disclosure requirements?

That is an interesting question because there are disclosure requirements if a corporate (which in California includes most HOA and Condo Associations) board member gains financial benefit in any contract being considered by the Board. If such benefit is not disclosed, the board member has breached their fiduciary duty. However, if it is disclosed, the transaction is legal, and the benefit does not subject the board member to a conflict of interest claim.

With a manager it is different. To the best of my knowledge, there is no legal duty to disclose such an affiliation.

So the question is - is it "right" to use affiliated contractors that benefit the management company and is it right to not disclose the relationship?

My take: the working relationship and any financial advantage should definitely be disclosed, and HOAs contracting with the management company should be allowed to choose a "degree of separation" and/or bids from contractors not affiliated with the management company.

If there is no "give" in this relationship, there are other companies to consider.

.

Posted by Beth Grimm at 9:19 AM

February 14, 2009

CC&Rs and Rules Conflict, What Controls?

Lots of people wonder about how to set HOA rules, and others wonder about other rule-related things, like this reader who sent this email:

"I'm sure you can provide clarification for me...Our HOA CC&Rs and Rules and Regulations differ over the same issue. Also, they add items in the Rules and Regulations that aren't even addressed in the CC&Rs."

It's a quandary for the average person who does not understand the legal technicalities, so I will break it down.

The authority to set rules must appear in the documents that regulate the HOA (often called the "governing documents"). Usually this authority appears in the Bylaws. It may have language that limits the authority such as "The Board may adopt rules that govern the common area." Or it may be open ended "The Board may adopt rules."

The documents may say that the Board may propose rules to the owners and the owners must approve them, which would require a homeowner vote. In California, there is a long series of statutes about how to pass rules that does not require a homeowner vote, but does require pre-adoption circulation to members to allow them to comment on the proposed rules. These statutes can be located on the Resource Page through the link to the Davis Stirling Act on my website at http://www.californiacondoguru.com. The Civil Code Section is 1357.100. You can also find the laws at the California state website.

Now, what if they differ? Here is the basic thought process and the answer.

When a question about any rule is brought to me the answer would be found by first determining the extent of the authority for the particular rule. As an example, if the regulating documents (usually it would be in the Declaration aka CC&Rs) say there must be a 10 foot setback from the fenceline for any structure, and the Board has imposed a rule that says there must be a 5 foot or a 20 foot setback from the fenceline, the rule would be unenforceable, because the recorded regulatory document (CC&Rs or Declaration) would control, and they are specific on the subject matter, not open ended. However, if the CC&Rs say that the Board may set standards for architectural control, then adopting a rule (which might also be disguised as an architectural standard) that says there is a 5 foot setback requirement would be a legally valid rule.

So, the answer is, if the authority is there in the regulating documents for setting rules, the language is important. If nonspecific, the Board has more lattitude. If specific, the Board has less lattitude.

There may be other things that come into play here about the validity of any rule, such as common sense. If the Board adopts a rule that says no pets are allowed that do not fit in a carrier for transporting to and from the building and the Board tries to enforce it against someone who is blind and needs a guide dog, well that would be downright insensitive, bone-headed, and illegal too, because of the Fair Housing laws.

You can find out a lot more about rules and enforcement of them in the Primers available on my website (http://www.californiacondoguru.com). I have a set of 4 available that cover the basics, the intermediate stuff, and advanced that deal with issues like parking and towing, and neighbor to neighbor disputes. This is not asking anyone to learn rocket science, and it gets a bit technical, but understanding the basics of rule-setting is one of the most fundamental and important aspects of living in an HOA. Emotions tend to get in the way of good sense so pragmaticism pays off. One would not want to go off "half-cocked" and get aggressive about enforcing a rule that is not enforceable, or challenging the Board publicly on a rule only to find out it is a perfectly legal rule.

Posted by Beth Grimm at 9:36 AM

February 13, 2009

Notice of HOA Meetings: 4 Days or 96 Hours - What Does it Mean?

What is the notice requirement for HOA open Board meetings in California? Boards must post notice or get it to homeowners (various forms allowed by Civil Code Section 1363.05 which you can look up on my webstite at http://www.californiacondoguru.com on the Resource Page/Davis Stirling Act) at least 4 days before the meeting.

So ... I have received two series of emails this week complaining because the Board in its posting fell short of 96 hrs. posted (for those of you slow on the uptake, 4X24=96).

One example was that the notice went up on the Common Area Board at 11am on Tuesday for a 1pm meeting on Friday. Thus, technically it was up there most of Tuesday, all of Wednesday, all of Thursday and more than 1/2 of Friday, not 96 hours, but arguably for the better of 4 days, not 4 - 24 hour days of course (but who has night vision???).

We could go round and round about this. If someone took this "egregious" error to court, I would hope the judge would say "Get a life." Of course, if there are other areas of abuse on the part of the Board that can be proved, that is a different story.

Posted by Beth Grimm at 1:38 PM

February 6, 2009

Solar Energy - What Are The Trade-Offs? What Do You Need to Know?

In today’s world, owners are, by their own initiative, seeking to be environmentally conscious. Outside clothes drying is coming back strong (we already talked about this in a separate blog). Solar installations are in vogue. One can place anything on their own home or in their own yard, but be careful if you are in a development where architectural approval is needed for changes to the exteriors of the buildings or erection of things on the roof or common area or other areas. Why? Because you may go out and spend a lot of money for something you cannot install.

This is what California law says on the subject (paraphrased), and some commentary:

If you purchase a solar system without checking first with the HOA Board and getting approval of a system and placement of it, the installer will probably recommend a roof system. The owner in a condo does not own the entire roof, but just a share of it (usually signified by a fraction of 1 over the total # of units) so there are attorneys that take the position no owner may have a solar installation in a condo. And, for those attorneys that would believe the law allows for a solar installation even on a condo roof, there is a statute that requires 2/3 membership approval for any grant of exclusive use of common area to any owner (see Civil Code Section 1363.07) so even then, a Board could be found to be acting outside its legal authority to grant an owner the right to place a solar system on the roof of a condominium building. This puts a Board in a "damned if you do" and "damned if you don't" say yes to solar - in a condominium development. So maybe the answer here is to put a voting measure to the members of the condo association to see if they want to allow individuals to have solar energy systems placed on the roofs. If there are more owners than space, a condo board might look at (or appoint a committee to look at) some system that could serve more than one owner.

In a townhouse or "planned development" situation, it is different. An owner actually owns the roof, even if the association maintains it, and thus, the owner has more rights that are not conflicting with other laws (like in the condo situation). The homeowner’s association does not own the roof in this situation, but it certainly does have an interest on what might be placed on it if it maintains it. So, the Board cannot say no, but it can say "wait, there are some restrictions."

In any case, the Association Board or architectural committee has a say in what might be installed (or what might not be installed). Some HOA boards have been forward-thinking and have adopted a policy on solar installations explaining what is acceptable, getting whatever approval requirements are needed accomplished as part of the process. Those that do head off many disagreements. Others do not even know what options there are and so owners go ahead and do whatever they want, driving the board crazy.

It’s like having a satellite dish policy. If a Board is proactive, and the owners are directed to what is acceptable, when they shop, they will be able to tell the salesperson what is acceptable, rather than having the salesperson tell them what is acceptable ("practicing law without a license??").

People are mostly like sheep - really! - The majority of people tend to follow, not lead, and the average person does not want to cause trouble if they can avoid it, so giving written guidance to owners tends to set boundaries that are accepted.

Sometimes, owners just do not like the fact that the Board has any say at all so they do not ask for approval. Some owners get themselves into a real dilemma by signing a contract for an expensive system and of course, that results in more incentive to fight for it.

Some limitations that any association may impose on solar systems were found to be reasonable by the legislature when Civil Code Sections 714 and 714.1 were approved. However, after these statutes were enacted, a new law was passed that prevented giving the roof common area up to any one owner for a solar installation. This creates a real dilemma - one law won't allow an Association to prevent any solar installations, but does allow associations certain controls. Another law requires a board to seek member approval for any exclusive use of the roof such as in a condo association.

I don't even believe attorneys agree on which law controls. And of course, there are Owners who want to know why a Board should have any say at all? The answer is so that aesthetics and maintenance issues that may arise may be addressed (such as allowing the same or similar systems so that aesthetics are consistent, protecting warranties, etc.). Certain systems may allow for reasonable maintenance of the roof and removal of the systems when roofs are replaced. And of course, if the roofs are tile roofs, walking on them and installing systems can break tiles, one has to know how to walk on the tiles to keep from breaking them. Some roof warranties may be adversely affected or even voided unless the roofing contractor installs the system or can send a person up to supervise installation of a solar system. There is more at risk in a solar installation than the owners' ability to facilitate solar power (which of course is also an important consideration.) These would be concerns of the association. See the notes and highlighted portions below.

The statute permitting solar installations says this:

714. (a) Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of, or any interest in, real property that effectively prohibits or restricts the installation or use of a solar energy system is void and unenforceable.

SO, ostensibly, the associations may not prohibit systems (above) - but may provide reasonable limitations (see below).

(b) This section does not apply to provisions that impose reasonable restrictions on solar energy systems. However, it is the policy of the state to promote and encourage the use of solar energy systems and to remove obstacles thereto. Accordingly, reasonable restrictions on a solar energy system are those restrictions that do not significantly increase the cost of the system or significantly decrease its efficiency or specified erformance, or that allow for an alternative system of comparable cost, efficiency, and energy conservation benefits.
...
(d) For the purposes of this section:
(1) (A) For solar domestic water heating systems or solar swimming pool heating systems that comply with state and federal law, "significantly" means an amount exceeding 20 percent of the cost of the system or decreasing the efficiency of the solar energy system by an amount exceeding 20 percent, as originally specified and proposed.
(B) For photovoltaic systems that comply with state and federal law, "significantly" means an amount not to exceed two thousand dollars ($2,000) over the system cost as originally specified and proposed, or a decrease in system efficiency of an amount exceeding 20 percent as originally specified and proposed.
(2) "Solar energy system" has the same meaning as defined in paragraphs (1) and (2) of subdivision (a) of Section 801.5.

Note that the statute allows for HOA application and approval processes.
This is important too. Hopefully, the HOA board is evolved enough to have
a reasonable policy on solar installations (I have written many so know some HOAs are aware of this statute). Read on:

(e) Whenever approval is required for the installation or use of a solar energy system, the application for approval shall be processed and approved by the appropriate approving entity in the same manner as an application for approval of an architectural modification to the property, and shall not be willfully avoided or delayed.
(f) Any entity, other than a public entity, that willfully violates this section shall be liable to the applicant or other party for actual damages occasioned thereby, and shall pay a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).

(g) In any action to enforce compliance with this section, the prevailing party shall be awarded reasonable attorney's fees.
...
The following are very important portions of the law, as without them, the other members of the HOA are not protected from the costs associated with installation, damage or removal of systems.

714.1. Notwithstanding Section 714, any association, as defined in Section 1351, may impose reasonable provisions which:
(a) Restrict the installation of solar energy systems installed in common areas, as defined in Section 1351, to those systems approved by the association.
(b) Require the owner of a separate interest, as defined in Section 1351, to obtain the approval of the association for the installation of a solar energy system in a separate interest owned by another.
(c) Provide for the maintenance, repair, or replacement of roofs or other building components.
(d) Require installers of solar energy systems to indemnify or reimburse the association or its members for loss or damage caused by the installation, maintenance, or use of the solar energy system.

There are questions in the minds of many about how far any Owner or Board can go in making demands about solare, and there is the conflicting law to consider in condo associations about having to get other owners (who also own a share in the roof) to agree to the use.

Maybe its a good idea to look at all the possibilities, such as other types (than roofing systems) of photovoltaic systems or other types of installations that may be used in already granted exclusive use areas such as patios, balconies or back yards, or perhaps group systems that can be installed for those owners that want to take advantage of solar energy and contribute to the costs.

It's complicated. It's best to work with solar experts to determine what systems are available for your HOA, and only one attorney (as two might disagree and confuse you) on this and get a written opinion to back your policy, as there is protection from individual liability for boards if they act in good faith (which includes getting the advice of an expert where expertise is required).

Posted by Beth Grimm at 5:06 AM

February 2, 2009

The Questions About EQ Insurance Never Stop Coming!

I get quite a few emails from people who are frustrated, about this ... about that ... about the other .... and especially about earthquake insurance. Some say: " I can't believe our board is spending $@!$%!*& on earthquake insurance. If there's a big one, everyone is going down together anyway, so why not use the money for something with a reward!"

Others say: "I have been speaking with my neighbors and we cannot believe that the Board has dropped the EQ insurance on our homes. Many owner/neighbors agree with us that we should purchase EQ insurance and we believe we have sufficient funds to do so. Are there any actions we can take to make this happen? A petition perhaps?"

There are actions, yes. Will they be fruitful? That is to be determined.

In California if 5% of the members sign a petition asking the Board to call a special meeting to take action on something (this is in an incorporated HOA and falls in the Corporations Code), the Board is required to call a meeting and there are certain timelines involved for getting out notices and scheduling the meeting. However, there is a possible glitch when it comes to asking for action on earthquake insurance. If the cost requires an assessment that is more than the Board can approve (more than 20% increase in regular assessment or a special assessment that is more than 5% of the budgeted gross assessments for the fiscal year), there are election requirements for a different kind of vote than can be taken at a meeting (double envelope secret ballot system) so this complicates things.

Additionally, the petition has to be for a "valid" purpose. Thus, if your HOA documents say the Board makes the decision on earthquake insurance, rather than the members, the Board can come back with: "That's not a valid purpose because the owners cannot usurp the Board's authority or power." And attorneys fight over this all the time, i.e., whether a petition on this subject could trigger a homeowner vote or not.

I think it unfortunate when Boards drop EQ coverage based on cost alone and do not explore risk alternatives. I have written about these on my blog, and I have several articles that are free on my website at http://www.californiacondoguru.com. But I also understand the realities HOAs are facing right now with the foreclosures and delinquent assessment accounts increasing and the bottom line moving up all the time.

I might even question whether keeping the swimming pool open is as important as having earthquake insurance protection - however, others might shoot me for saying that. Because its true (I can hear it now), the pool is a sure thing, the "big one" is not.

Even if an HOA board decides to put the question to a vote of the members, which I do think it legally could do even if it has the discretion to make the decision, there still are likely to be a number of homeowners upset by the outcome. That is because even when a Board sends out a vote, it commonly comes back about about half and half for and against meaning communities are commonly split on the question, and alot of that depends on "place in life" considerations of the owners (see articles referenced below that I have written on the subject). Also, when a Board takes a vote - it commonly fails to explain to owners what alternatives are available, what owners can do themselves to try and cover any "gaps" in coverage, and what can happen if there is no insurance and there is a quake.

There is no foundation on which to build if there is an earthquake that severely affects any HOA, where if there is insurance, at least there is some kind of "foundation" to start with. But that's my opinion and concern. If you want to know more about the pros, cons, how to go about analyzing the risks and getting questions answered, visit my website. You will probably find just about as much free information there as anywhere else about analyzing the cost vs. benefit for HOAs.

Posted by Beth Grimm at 10:06 AM

January 28, 2009

DOES A CONDO COMPLEX HAVE TO HAVE A BOARD?

The following is a question I received recently.

"Does a condo complex have to have a board? Why can't we just abolish the board and simply hire a property manager as apartment complexes do? Where can I find info about this concept?"

A COA (Condo Owners Association) - and the same applies to an HOA (Homeowners Association) can decide collectively that it wants to do away with a board but I would not recommend it. It would probably require an amendment of the Bylaws as I have not seen any that do not provide for a board. I have seen the chaos when there is a lack of strong leadership in any community. Take the chaos times ten if there is no board.

There are exceptions of course, in some smaller communities, where the owners have taken it upon themselve to manage the COA. In that case, the owners are essentially acting as the Board, collectively. The Bylaws can be amended to provide that all owners are board members. Again, I have a hard time recommending that simply because I have seen the chaos and fighting when there is no strong and decisive leadership. In any COA that is working, that is what you will find, strong and decisive leadership with the capacity to gain consensus.

A COA can hire a manager and pass on much of the daily duty type of stuff, but it cannot pass on the liability for errors and so if a board or COA hires a manager and tells them to "run with it" without providing any guidance or oversight, that, too, can lead to problems.

That said, many COAs and HOAs are experiencing difficulty in getting anyone to serve. If unmanaged or self-managed, it might be easier to get board members to serve if there is an intermediary doing the research, learning the lay of the land, and advising the Board on the proper way to manage the HOA, and running interference with (or providing a buffer from, depending on whether you are a "half empty" or "half full kind" of thinker) the deadbeats, rules violators, etc.

I also would caution any COA or HOA that lets itself cross the line trying to be like an apartment. Landlords generally carry more risk of liability for what happens in any of the units than an HOA Board.

What is needed is some kind of reasonable leadership, and/or some money to pay for a manager. And that will have to come from the membership.

But thanks for sharing your concerns. You are not alone.

Posted by Beth Grimm at 10:48 AM

January 18, 2009

Tough Choices for HOAs - Is Tough Love in Order?

I recently sent out an E-news (free signup on my website) about the tough choices HOAs have today considering the assessment income dilemmas many have faced due to the foreclosure crisis. You can see this E-news archived on my website at http://www.californiacondoguru.com.

I have received a lot of great feedback, and some questions. I like it when the dialogue rolls, as we all can learn from each other.

Two of the hot button issues that touched a nerve relate to suggestions that Boards might consider (among many other things) the possibility of using volunteer work crews to do some of the otherwise paid-for work around the complex, and I also suggested that in some cases, the Boards might be considering whether to have the heat turned off in the pool, for a season, or alternate weeks, and that kind of thing.

I got feedback from both sides on both points.

I got emails from Board members that were aghast because they have heard at seminars or received legal advice saying don't ever use volunteer work crews as it would be a big problem if someone got hurt (some seemed to have been convinced that this is one of the worst things that could even be suggested, outrageous, in fact).

Well, its like anything else. Desperate times call for desperate measures, and anything a Board does or does not do comes with some kind of a risk, so the point is to minimize the risks.

Don't have volunteers do things they are not qualified to do.
Don't send them into a risky situation.
Don't have them do things that are hazardous or a safety issue.
Don't send them out with chainsaws and ladders.
Don't have them hang from trees or buildings with ropes.
Don't have them stand on high scaffolds.
Don't ask them to use their own vehicles unless they are insured (and are willing to sign a waiver/hold harmless agreement).
Do check with your insurance carriers and see if there is a way to get protection for the workers (such as forming a special work committee).
Do ask the volunteers to sign waivers of liability/hold harmless agreement and promises not to sue.
Do not let persons do work who do not have health insurance.

Minimize the risk, maximize the benefit, that is the way to think!

If you have workers sign waivers of liability, that should provide considerable protection, unless you then put them at risk or do something that constitutes negligence, such as asking them to stand under a failing deck and try to brace it, when they are not qualified or insured to do so. (Some things seem quite obvious, don't they?)

And the other statement that drew a nerve related to considering whether to continue to heat the swimming pool. Mind you it was among many suggestions, but the mere idea got the dander up of some readers. I am not advocating for any position in any HOA with regard to turning the heat off in the pool in alternate weeks, or more. As a contrast, an HOA in Palm Springs might run into less complaining about it (because the pool would tend to heat itself much of the year), whereby a vacation rental condo development in Tahoe where the owners want the pool as an amenity to offer might go ballistic at the suggestion.

I received notes from Board members saying they had decided to do it and it saved their association as much as $20,000 a month. I heard from others saying they would sue the HOA if the heat was turned off, noting that they used the pool everyday and bought their condo because of it. Some owners believe it to be some kind of fundamental right. Some want to scream discrimination. I heard from others saying why don't they turn the heat off in the spa instead claiming the board members did not like to swim but loved to party in the spa.

The question was asked - is it legal to turn the heat off in the pool? Or I should say that some claimed: "It's illegal to turn off the heat in the pool."

I know of no reason, statute, or case authority that suggests turning the heat off in the pool would violate a law. If you do, clue me in please.

Of course, the fact remains that anyone can sue anyone and so I cannot say for sure that would not happen. It's probably much less likely that would happen in Iowa (my birth state) than California though.

That's California for ya. I have heard that in any town in California, it is harder for one lawyer to make it than for two, in fact if there are two or more, they are all more likely to live well. (Get it?).

Posted by Beth Grimm at 4:04 PM

January 1, 2009

Time To Sharpen the Saw!

I am sure you all enjoyed the holidays may have commenced the web surfing for information. I wish you all the very best of everything in 2009. Life probably won't get alot easier, however, here is something to remember.

You can have a good attitude, or you can have a bad attitude, it takes the same amount of energy to achieve either.

If you are just getting to this after the first of the year ...

It's Time to "Sharpen The Saw" (A reprint from an E-Newsletter of January 2008)

I hope you are looking forward to 2009 as much as I am. One of my New Year’s resolutions is to add more “tools” to the “tool kit” to make working in this industry of HOAs less painful, more enjoyable, and most of all, a breeze! Everyone should enjoy their work. It takes a good amount of your energy and it is important to have enough left over to live life the way you really want to - with gusto!

So what solutions might you find to the day-to-day challenges that arise?

Considering checklists, policies, and rules is a good place to start, as good checklists, policies and rules will help all involved in any association. How do you begin?

First, you might outline all subjects that you think need attention. For example, my list of things to get together includes: putting together more Primers (affordable educational tools), more items to put up on the website, and more use of internet/technology options to make things easier. I will of course also be planning for some fun ... and you should too.

Yours might include: a checklist of things that need to be done, ways to eliminate time wasters, making tasks easier such as enforcement of the documents (esp. in the areas of parking, pets, smoking, noise, nuisances, neighbor-to-neighbor disputes, meetings issues, board education) by writing easy to understand rules and policies, better ways to communicate with boards, creating important paper trails, finding ways of managing stress, and/or locating other areas of help (such as a list of training classes to look for).

Now, you need to know what tools are available.

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. 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. I look forward to it. And I do not even have to mention how important it is to get things done on time 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.

I keep on ongoing list on my computer and open up the file and add things every single time I think of something that needs to be done - yes, event the little things, like “remind _____ to ______.” I used to keep handwritten notes and sticky notes but they just get lost. I keep one list that includes work projects and personal tasks that need to be done. I prioritize by putting pressing things at the top of the list, and things that can be timed or done later fall to the bottom. It’s just a simple word document and I keep it in two locations, on the computer and a back up drive, and print it off every once in a while (such as before a weekend when I may not be at the computer). And each Friday afternoon that I am working, I start at the bottom, just to review anything that might have fallen through the cracks. These days with PDAs, gift calendars, computer calendar reminders and popups, there is no excuse to bumbling along, hoping you get everything done today that needs to be done. Find the easiest method available to create a TO DO list. You can list these items on a calendar or your PDA but if you calendar the date something is due, there is no time to do it before that day gets here. And if you calendar the start date and it passes you by, you do not have a constant reminder that work needs to be done on that project. And of course, you should not to rob yourself of the pleasure and satisfaction that can be achieved every day of scratching off or deleting those things that you have accomplished. I guarantee it will make you feel good to witness your accomplishments and see that TO DO list shrink.

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 2009! 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. One of the hardest things about taking the recipe is that you probably didn’t give any thought to separating those things you do not need to buy, with those that you do, and the other is that you have no “scratch off” list. If you do that to the recipe, you will ruin it. 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, down to the turns and mileage (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? It will make you feel good to have something simple to rely on. The backup materials are always there if more detail or information is needed. Here are some examples you might consider.

***Meetings/Agenda Policy: The California statutes added some new requirements forequirements for meetings including the agenda law disclosure 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 approach the board (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. I could give you a 4-5 page recitation of the provisions on these subjects taken from the law and your governing documents. Or, I could provide you with a 1-2 page policy on the specific procedures paraphrased. This kind of thing benefits not only the Board and management, but also the members who attend and crave 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 often works that way.
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 process has begun to address a violation. What is the first step? Ish.... who wants to pull out everything that must be considered (law books, governing documents, and correspondence or notes from past similar violations) when they are in a rush with 50 other things on the TO DO list, and try to figure out where the best place to start is? And who wants to reinvent this wheel in a week, two weeks, six months or a year later when another violation occurs? Think about how much easier it would be to have 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. Again, 4-5 pages or more of quotations from the laws and the governing documents can be distilled down to a 1-2 page policy or checklist. You can believe me when I tell you that this will (1) simplify your life, (2) provide support for the HOA if a legal claim is filed, (3) help the Board and management save time, energy and frustration, AND (4) help the HOA members understand what is expected of them. Believe it or not, this will be a huge benefit to everyone involved.

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 technical requirements by the new statutes - and it became apparent that the HOAs needed protection from the risk of assuming any liability from the tow driver’s gaffs, or tow companies mistakes. The HOAs had to assign someone on site or to be on site to authorize a tow. And that person was responsible for determining when a tow was warranted and legal. It became obvious that the person given authority to ask for tows had to have a list of situations that was crystal clear. How does one get such a list? By pulling together the statutes on towing and the governing document provisions on towing. It’s not necessarily easy to do, but once done, can digest the material from 4-5 pages down to 1 or 2. And, having specific rules prevents residents as well as the “hired guns” (tow company drivers) from claiming ignorance or confusion in a tow that is ultimately challenged. Coupling the policy with a good contract is essential, in order to get the clarity for all parties about obligations and liabilities down pat. (And yes, Boards and Managers, if HOAs do not have proper protection, they might be sued if a tow driver and owner get into an altercation over a vehicle and either party is hurt. The purpose of the addition of a good contract is that it includes proper indemnification protection for these kinds of situations. Such an incident was reported to have happened in an HOA!)

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, processes to follow if Board Members get out of line (such as disclosing confidential information, missing meetings, or refusing to participate in meetings), 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 conform to a good program 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 - that is, the rules. And if they are written in a positive vein as opposed to “you can’t do this” and “you can’t do that”, they will invite acceptance. 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 give the rules a glance to see what they can and cannot do, even if only with regard to a single subject, like a basketball standard.

***Parking Rules: [Yes, again, parking is an important consideration.] Take for example this rule: “No one may park in visitor parking that lives here.” As opposed to “The Visitor Parking is reserved for visitors. Residents have parking available as follows: ...... blah, blah, blah. We do not wish to be “parking police”; however, violations of these rules may result in a tow, fines, or other actions needed to curtail violations.” Or one might say: “Resident parking is in [describe the areas here] .... and Guest parking is in [describe the areas here].. . See Section ___ of the CC%Rs.” And then at the end of all the rules list the remedies that may be considered for any violation. These remedies will serve as the “deterrent factor”. It is fair to assume for HOAs (unlike some municipalities) that the purpose of the rules is to serve as a deterrent, not a “money-making proposition” through the collection of fines. You may find it valuable to get into more detail with vehicle rules such as describing what vehicles are allowed on site, what are considered commercial vehicles, and what restrictions there are on vehicle presence or use on the premises (such as speed limits, working on vehicles for repairs, etc.).

Pet Rules: Pet rules can also be stated in the positive. Ex.: “Pets are welcome here, so long as the pet owner follows protocol, as follows: ..blah, blah, blah.” In the event we have a pet problem (which often equates to a pet owner problem), these remedies will be considered:
Consider other subjects: Pool Rules, Rules on Satellite Dish Installations, Clubhouse Rules (or Use Policy), Architectural Rules (and/r Policies), Laundry Room Use, How To Enjoy the Common Area (and avoid damaging it), Use of Streets, Parking Areas and Sidewalks, etc., etc., etc.
You get it now, right? It is easier for everyone to understand the parameters, expectations, obligations, responsibilities and ultimate remedies if they have a checklist, policy, rule, or directions, or a grocery list as opposed to handing them the Davis Stirling Act, the CC&Rs, or any other substantial and tedious reading material. And you do not have to pay a fortune to get the rules and policies together. You can have an attorney draft the rules and policies and checklists (some are available on the web for free such as HOA annual disclosure checklists). However, a board member or manager can do it, or even a committee member who wants to take a whack at it. These items should be reviewed at least by an attorney though, who is familiar with HOA practices, simply because the attorney (hopefully) will bring legal expertise into the equation and let you know if the rules you drafted are not consistent with your governing documents and the law. I particularly prefer that someone who works for the HOA or serves on the Board or a committee take the first effort at writing the policies and rules so that I can get the “flavor” of the particular community and let the Board and management determine what areas they consider important to address. I would like to see their “druthers” in other words. Then, I can clean them up and make them “presentable” so-to-speak. Obviously, some communities need emphasis on some areas, and others, on other areas.

As for process, any policy or rule that touches and concerns homeowners probably falls under the catchalls of the “Rules Passage” statutes, and may well require circulation to the owners prior to Board approval. There are exceptions found in the series of statutes that apply in Civil Code Section 1357.100 and following. Look these up, or get help.

I did not even get to suggested rules and policies for areas of smoking, noise, nuisances, neighbor-to-neighbor disputes, satellite dishes, specific meetings issues, board education, dispute resolution policies and the like in this edition. I want to save something for next time, and let you get back to work.

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.”

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 12:15 PM

December 28, 2008

TERMINATING AN HOA IN CALIFORNIA, HOW HARD IS IT?

Many people ask about terminating an HOA. Often, it's because the owner is tired of the Board, or upset with what the Board is doing, but they do not want the job.

Newsflash! If there is no HOA board then there are likely to be problems in getting the money needed to maintain the property that is owned in common or by the HOA, which caused the development to be set up as a "common interest development" in the first place.

In California, as long as the HOA has maintenance obligations to the members, it usually takes 100% approval to terminate the HOA, so if there are 4 owners, that is a lot different than trying to convince 100 owners to say yes. It is possible there might be a particular process within the governing documents for termination that might supersede the Nonprofit Mutual Benefit Corporations Code that requires 100%. In any event, if there is common area that is maintained by the HOA, it is very hard to terminate, and probably not very wise, unless the owners can agree on a reasonable means of making sure all contribute to maintaining the common area or there is some way to split it up by agreement. In a condo, it would involve setting up some other scheme whereby owners would own the buildings as tenants in common and the question is: if you take away the rights to collect assessments for an HOA, what are you going to do to make sure you have enough protection without the HOA to collect everyone's fair share to maintain the building.

So, it can by done, but it won't work very well in most CID situations.

Posted by Beth Grimm at 8:51 PM

December 26, 2008

THE MOST IMPORTANT THINGS YOU NEED TO KNOW ABOUT BANKRUPTCY

I am in the process of working on a Primer that tells readers what to expect when a homeowner account goes into bankruptcy and the HOA is trying (hoping, pleading, whining, threatening, etc.) to collect the outstanding assessments. But I told a reader who is anxious for some information right away (because she is on a board and a homeowner account went to bankruptcy) I would write a brief blog on what is critical.

1. The HOA needs to have a good enough collection policy in place that a lien goes on a property with delinquent assessments at the earliest possible time. I realize that Boards do not like to authorize liens on their friends and neighbors; however, if a homeowner goes into bankruptcy and there is no lien, there is no secured place in line to collect money. Unsecured creditors generally get zip. Secured creditors generally get paid something, sometimes all, sometimes only a percentage of what is owed, but usually more than zip.

2. Once an owner files bankruptcy, there are two classes of assessments, those called "Pre-Petition", that are wrapped into and disposed of within the bankruptcy process and those that are "Post Petition" (those that are not disposed of within the bankruptcy process). The definitive date is the date the BR petition is filed.

3. Once a bankruptcy is filed, things are generally locked in - meaning the delinquencies outstanding become part of the Pre-petition assessments and costs that are considered in the bankruptcy. If an owner files a Chapter 7 bankruptcy, that is generally known as a "no asset" bankruptcy and creditors can expect nothing on the dollar. If the owner files a Chapter 13 bankruptcy, there is a plan to pay all or a part of the debt (usually only a part - meaning usually only the secured creditors - leaving the unsecured creditors at great risk) as that type of bankruptcy is a reorganization of debt.

4. If an HOA gets a notice of a bankruptcy, then the HOA needs to respond and file a Proof of Claim. The HOA should receive this form if the bankruptcy court is allowing claims, such as in a Chapter 13. It is important to note the security interest (the lien) if one is recorded so that the HOA makes the secured debt group. A lien cannot be recorded AFTER the Petition for Bankruptcy. That would be a violation of the "stay". The "stay" is something imposed on creditors that prohibits them from actively pursuing collection against a debtor when the bankruptcy has been filed. It protects the debtor.

5. The HOA debtor should be paying post petition assessments to the HOA but if he or she does not, the HOA is still limited in what it can do to collect and should consult an attorney about options. If it actively pursues an assessment that is imposed after the bankruptcy is filed, it might find itself in contempt of court.

There is much, much more to say about bankruptcies and how to get involved, weigh in on any payment plan, seek a lift of the stay so certain actions can be taken, followup with the court, stay on top of plan payments, etc. Watch for the Primer coming soon. (Check out the other Primers too in the Webstore at http://www.californiacondoguru.com.)

Posted by Beth Grimm at 2:06 PM

December 10, 2008

RIGHTS AND RESPONSIBILITIES

Sometimes an HOA Board forgets that homeowners have rights too, and sometimes homeowners forget that along with the rights come some responsibilities. This message from CAI (Community Associations Institite) sent out recently is a reminder that if the persons sitting on both sides of the table have a better understanding of each (the rights and responsibilities each has), the community will function more effectively and efficiently. The battles that go on drag people down and cost money, so ... take a look, ... and see what you think. You will also find an article on my website (http://www.californiacondoguru.com) about homeowner rights and responsibilities. It is always good to remember there are two sides to every issue that arises. Sometime one side is wrong and the other is right; however, in HOA battles, the lines tend to get blurred by emotional responses.

****

This, from CAI ...

"CAI's Rights and Responsibilities

Principles for Homeowners and Community Leaders
[Note, you can download the Rights and Responsibilities document (PDF) by pasting this into your browser: http://www.caionline.org/rightsandresponsibilities/rights.pdf]

More than a destination at the end of the day, a community is a place you want to call home and where you feel at home. There is a difference between living in a community and being part of that community. Being part of a community means sharing with your neighbors a common desire to promote harmony and contentment.
This goal is best achieved when homeowners, non-owner residents and association leaders recognize and accept their rights and responsibilities. In all cases, this entails striking a reasonable, logical balance between the preferences of individual homeowners and the best interests of the community as a whole. It is with this challenge in mind that Community Associations Institute (CAI) developed Rights and Responsibilities for Better Communities.
Community associations exist because they offer choices, lifestyles, amenities and efficiencies that people value. Yet, with all of their inherent advantages, community associations face complicated issues, none more common than the challenge of balancing the rights of the individual homeowner with those of the community at large. Managing this critical and delicate balance is often the essence of effective community leadership.
By encouraging community associations to adopt Rights and Responsibilities for Better Communities, CAI strives to promote harmony, community, responsible citizenship and effective leadership. In the process, we make life better for the more than 60 million Americans who live in community associations.
Let Rights and Responsibilities Help Your Community
The process of formally adopting Rights and Responsibilities will give communities an excellent opportunity for the kind of dialogue that facilitates awareness, builds consensus, and promotes greater community involvement.
Once adopted, Rights and Responsibilities will serve as an important guidepost for all those involved in the community—board and committee members, managers, homeowners and non-owner residents. The document will also serve as an excellent tool to educate new homeowners and residents about their own rights and responsibilities.
As greater numbers of associations adopt Rights and Responsibilities—and adhere to its principles—there will be less potential for conflict within communities. Ultimately, this will improve the image of managed communities across the nation, leading more people to understand the nature and value of community association living.
Adopting Rights and Responsibilities can also create positive publicity for your community—and reduce the kind of negative publicity often created by conflict.
How You Can Make it Happen
Adopting Rights and Responsibilities for Better Communities is easy!
• Download the Rights and Responsibilities document (PDF) found here...
http://www.caionline.org/rightsandresponsibilities/rights.pdf

Distribute the document throughout your community, announcing and publicizing where and when adoption will be considered.
• Explain why this is important to your community and the benefits it can create.
• Review and discuss the merits of the principles at an open meeting of your board.
• Solicit input from homeowners.
• Have your board vote to adopt a resolution endorsing Rights and Responsibilities for Better Communities. The principles will be more meaningful to homeowners and community leaders if they are formally adopted.
Announce Your Commitment
Once you have adopted Rights and Responsibilities, please share the good news with CAI by completing the simple online adoption form found here:
http://www.caionline.org/rightsandresponsibilities/adoption_form.cfm
That way we know you have joined other community associations realizing the benefits of enlightened governance and involved and engaged residents.
Like any endeavor involving people, community living cannot be free of conflict. Utopia does not exist. With all of their inherent advantages—and there are many—community associations often face difficult issues. While adopting Rights and Responsibilities will not eliminate all conflict, its adoption can stimulate communication, promote trust and cooperation, clarify expectations and build a greater sense of community. CAI urges you to take advantage of this opportunity.
Rights and Responsibilities was developed as an ideal standard to which communities could aspire, a goal-based statement of principles designed to foster harmonious, vibrant, responsive and competent community associations. The principles were not designed to be in complete harmony with existing laws and regulations in 50 states, and in no way are they intended to subsume existing statutes. Where there are inconsistencies, community associations should adhere to the spirit and letter of all applicable laws. If you have a question, we suggest you consult with your attorney."

Posted by Beth Grimm at 10:36 AM

November 28, 2008

HARD SURFACE FLOORS - NOISE ISSUES - THINGS NEVER STAY THE SAME

People send me complaints and also proposesd solutions. Consider the following emails:

"I found you articles on noise interesting. The noise issue has been taken to such an extreme by our HOA that it requires all architectural change application regardless the amount of noise level it might create to be pre-approved by neighbors. Is this fair ?"

My response is that pre-approval of the neighbors would be helpful in many cases. It might be included as criteria, but is not always helpful in considering requests for installation of hard surface flooring. Why? It does not address the necessity of protection in the form of soundproofing. It does not solve any problems related to the future neighbor's and how they might be affected, upstairs or downstairs.

For example, certain neighbors are more sensitive to noise than others, Sometimes personal relationships (good or bad) come into play. One owner might get their neighbors approval because they are friends, or because they are a very quiet occupant. Neighbors who have experience with noise issues will probably be reluctant to approve a flooring change, even if they are friends with the requesting Owner. Owners whose proposals are not approved by their neighbors might be less willing to approve another neighbor's proposal. And neighbors who do not get along could really create an unfair situation. No owner should be allowed to have "veto" power over what their neighbors can or cannot do. And, if you read other blogs on this subject, you will see that circumstances can change rather drastically from one month to the next. Someone may move in upstairs who removes area rugs, or has rambunctious kids, or an active dog, or high heels (as opposed to the tennis - shoe'd prior resident). Or, the downstairs neighbor moves out (the one that is friends with the upstairs neighbor and whose kids play together on a regular basis), and the new neighbor who thought they would have peace and quiet has to endure the upstairs neighbor's noise.

So, getting the neighbor's approval does not do anything to forestall possible problems in the future that arise with regard to the presence of the hard surface flooring.

Consider this email:

"I purchased my one bed room condo over 5 years ago. I totally loved everything about it, until a few months later. The upstairs unit is carpetted. The first residents over me were a 'small framed' couple. There was not a problem. Then, they moved out and a average sized husband and wife moved in. That is when I noticed the creaking in the floor, day and night. Maybe the previous neighbors did not use the bedroom that was over my head, but the new neighbors sure did! I felt like I could hear their every move. I was unhappy with the noise and talked to them but they kept putting me off. Then the owner died and the place was empty for about 6 months and I had peace and quiet. Then a new couple purchased the place and the noise picked up again. The husband who is a big man and wears hard soled shoes has very heavy footfalls. I have approached the new residents quite a few times and talked to them about the noise level. ... Now the resident upstairs is removing the carpeting and putting in laminate flooring. Previous efforts to alleviate the creaking did not work.
Am I in for it? This is so frustrating, what are your general thoughts?

My thoughts are yes, you are in for it. You will probably have to address these problems through specific channels, like alternative dispute resolution (trying to get the upstairs neighbor to talk about what mitigation is needed and/or get the board to be involved), or pay an attorney to get involved and make demands. Not a good situation, to be sure. These are the kinds of problems that arise when there is not a strict ban on changing out carpetted floors to hard surface floors, and the creaking is another issue altogether, perhaps a problem with the building construction, and perhaps just an inherent problem that will not be resolved. Sometimes it is due to use of green wood that later, when it dries out, results in loosened nails and screwing down the flooring works. Here, I am not sure what the problem is, but you will probably have to pay to have that determination made, and get the upper owners permission to send your expert in there. Again, if there is no cooperation forthcoming, you will probably need the assistance of an attorney. Sorry I don't have a better answer. Maybe someone "out there" does. "We" are open to suggestions.

Posted by Beth Grimm at 8:28 PM

November 22, 2008

Termite Repairs in California - Who Repairs the Property Damaged to Get To Them?

Termites issues come up all the time. A reader recently sent me a long involved story of the situation in his condo association. I cannot answer long and involved emails, or, for that matter, any emails that ask for information specific to a particular person or association's situation, because that would be giving legal advice without the important step of interviewing a client. And, unfortunately for those who write, I do not have time to provide free legal advice. That said, the person was kind enough to digest the situation to a question that might help others too. The scenario described in generic terms is:

"In our HOA, termites were located in the area between the ceiling and the roof of our condo. The Association admitted that it is responsible for the treatment of the termites and said that the termite company would open up the dry wall ceiling. The HOA wants to hold us responsible for the repair of the ceiling."

How can we be responsible? The Association damaged the ceiling in going after the termites. The repairs could have been accomplished through the roof (much more expensive for them) to get to the infected area."

This owner said there was nothing in the governing documents related to this issue which I commonly hear. There might be something pertinent to the question of who repairs what. Owners are probably responsible for repairing their units and the HOA is probably responsible for repairing common area, which is the usual threshold scheme of responsibility. The next inquiry (to see whether that scheme shifts) generally is whether there was negligent behavior on the part of either party that caused the damage. The mere presence of termites does not necessarily support any claim of negligence.

In this case, it does not sound like there was any negligence. It is true that the HOA damaged the ceiling in getting to the termites, but that fact alone does not necessarily determine liability. It is much the same as the case where the Board has to go through a floor to get to a slab leak, or has to open up a ceiling of a lower unit to let water escape from a leak that sprung in the common area or a tub that overflowed above and damaged the common area and lower unit. There are several factors that would have to be considered to determine whether the HOA has to repair the portions of the unit that are damaged in doing so.

Were I examining such a question for a client, I would ask a lot of questions about the current situation, past practice and similar situations, whether there were termite preventive measures in place, what recommendations had been made and followed by the HOA with regard to the termites, options explored by the Board for treatment and repair, and I would closely review the governing documents to see what guidance existed there. I would ask if there were any maintenance policies in place, and would consider case authority that exists.

In this case, the owner says the HOA could have approached this problem by going through the roof at a much greater expense. If a court was examining the question of whether the Board's decision and approach to the work was appropriate, these facts would be pertinent (1) whether the Board consulted an expert and relied on that advice to determine the best approach to the problem and (2) why the Board chose one approach over another.

It's more complicated an issue than simply opining that everytime the Board has to go through a unit to fix a problem, it has to repair the unit. There are a lot of considerations.

So I cannot say whether the Board was right or wrong in its determination that the owner should repair his own ceiling. Often, though, when a Board does have to go through a unit to fix a leak or make a repair, often the Board arranges at least for the dry wall to be reinstalled, and sometimes for painting to be done in the area entered, matching as closely as possible the paint on the ceiling or walls, in the area of the repair (although owners would always like to have more). When fixing a slab leak, the Board will often arrange to have carpeting re-stretched - assuming the carpeting is not so old it falls apart. Where the differences come in is when the owner wants a whole room painted, or expensive hardwood flooring replaced, or cupboards that are too old to put back up replaced. In the situation at hand, it appears we are just talking about a ceiling repair, which, if rises to a legal dispute, will cost both parties more than it costs to do the repair.

Unforetunate, to be sure.

Posted by Beth Grimm at 9:29 PM

November 17, 2008

Raiding Reserves - Capital Improvements - What's What?

Here is a recent, and not unusual, question about spending reserve monies:

"This year the new board approved $________ for [several] projects considered "additional work" and maintaining the [______] of the property. There were no hearings on any and in most cases, done without member knowledge of our expense. Our documents require a written majority vote for additional work (above normal and routine maintenance.)
When questioned the President said a vote was not necessary because the funds were taken from the "Reserve" account and not from the budgeted "operating costs".

This defies corporate ownership! Your professional advice?"

First and foremost, do not consider what appears in this column to be legal advice. Second of all, I do not believe the issues "defy corporate ownership" (whatever that means). I believe from what is presented that there is simply some misunderstanding of appropriate expenditures.

There always is the possibility that there are more facts than those presented to me and I do not profess to give legal advice or opinions about whether some act is right or wrong in a "blind" (or for free).

That said, a board does have the right to approve works or projects that relate to components that appear in the reserve study that the HOA is required to maintain, repair and replace, without going to the members, assuming there is sufficient money available in the reserves for the projects that were approved, or funds in the operating accounts if the work involves maintenance and using operating funds for the maintenance work does not cause a shortage in other areas of the budget. The members are supposed to receive the reserve study each year and can see what components are listed, and what projects are coming up. If the Board is not adhering at all to the reserve study funding and component plans, then certainly there may be some legally improper issue to complain about. Boards are expected to utilize, and review and adjust the reserve study each year, and have a new one performed every three years, as needs are reassessed or conditions change relating to the HOA infrastructure (buildings, streets, etc.)

If, however, the Board is asking for a special assessment from the members to pay for maintainence, or to repair or replace reserve items, and that special assessment exceeds what the Board can legally impose without membership approval (more than 5% of the budgeted gross expenses for the fiscal year), a vote of the members must be taken, and approval obtained, unless of course some emergency exists and the money is needed to repair hazards or other issues that require immediacy. (All the requirements and limitations on assessments are found in Civil Code Section 1366, accessible through my website at http://www.californiacondoguru.com, on the Resources page.)

In case you are confused about what constitutes a "reserve" item and what constitutes a "capital improvement" (new item), you may want to refer back to my blog on September 15 titled: "May A Board Decide To Add A Capital Improvement Without Seeking Owner Approval?"

Posted by Beth Grimm at 7:07 PM

Posting of Minutes, Is It Required in California?

The following is a simple question that was sent to me recently.

"Do Hoa's in Bakersfield, California have to post in public the minutes from regular monthly meetings, including Executive sessions minute so that the homeowners can view them?"

The answer is that HOAs in California are not required to post minutes of meetings so that the owners can view them. Some do post the open meeting minutes for the courtesy and convenience of owner review. Some mail them out to owners as a courtesy. What is required is that the HOA provide copies of minutes of open meetings to members that request them in writing, and that they tell the owners each year in an annual disclosure how owners can obtain copies of these minutes. The HOA is entitled to charge an owner for the cost of reproducing and mailing the minutes of a meeting. There is no requirement to post or distribute minutes of executive sessions. Those meetings are limited to certain subjects (described in prior blogs) and are confidential and not for distribution to the membership.

As for timing, upon a proper written request, the Board must make minutes available to the requesting owner within 30 days of a meeting, even though in most cases the minutes will not yet be approved. In such a case they should clearly be marked "draft" status.

These provisions, along with others related to meetings, are found in the Common Interest Development Open Meetings Act which begins at Civil Code Section 1363.05, and is availble by direct link through my website at http://www,californiacondoguru.com on the Resources Page.

Posted by Beth Grimm at 5:43 PM

November 9, 2008

Guest Parking - Can the HOA Give It To Owners?

This question about guest parking comes up all the time - may the HOA assign guest parking for owner use, or even allow owners to use it at all, on a first come, first served basis?

If the governing documents say that common area parking is for guest use, it is best to resolve that issue by amending the documents, before opening up the parking to residents. However, there may be other language in the documents that the average person would miss relating to Board authority to assign parking, exclusive vs. nonexclusive use, etc., so the documents should be thoroughly examined by someone who is sufficiently capable of finding all pertinent language and resolving the conflicts if there are any.

That said, it is also important to examine local planning records as well, especially in an area where the municipality is active in code enforcement or enforcing planning restrictions. In some cases HOAs have ignored the guest parking restrictions in their governing documents to find out that thie City required some allowance for guest parking and has an interest in enforcing it (which makes sense, if the City streets are cluttered with vehicles).

What often happens is that the HOA Board feels a need to allow owners to use the spaces or has let it happen, often because residents have cluttered their garages and/or brought more than the originally contemplated 1 or 2 cars into the development. Whatever the reason, if there is a shortage of parking spaces, Boards tend to open up the guest parking to residents without understanding where the authority comes from and what limitations there might be, and later, after it has been allowed, and residents have put more things in their garages, and brought more cars into the development, the Board will find out there are outside parties that had rights to enforce restrictions, such as the City or County that imposed them on the developer.

So all I am saying is that if an HOA is planning to change the parking scheme or intent that exists in the governing documents, do it right.

Posted by Beth Grimm at 11:43 AM

November 1, 2008

DISPOSING OF ABANDONED PROPERTY

Here is a recent question that is a little different:

"We have sent emails, posted notices with photos for over a month about bikes in our garage. We are down to 5 unclaimed bikes. Is there any law preventing us from giving away these bikes to whomever we wish?"

There is not a law to address this specific situation in an HOA that I know about. Yes, there are some laws related to what to do with abandoned property, and it depends on how someone came about having it on premises. I do not know of any appellate cases in California on the subject and its not likely a case about bikes in a garage will get there. However, I can see how there could be plenty of scenarios where people might leave things behind without saying word one about what to do with the property.

I am going to assume that the HOA, if it disposes of personal property belonging to another, would be treated the same as a landlord. In that case, one would go to the contract or rental agreement, or statutes on landlord and tenant law to find out what one can do with property that appears to be abandoned. You could do that research yourself on the California state website www.ca.gov by navigating to the California Codes, clicking on "Civil Code" and then using the words "abandoned property" for the search. If too many statutes come up add the word "landlord".

I am not going to do the search for you, or give legal advice, but that is a place to start.

Why is it important to speculate about what role the HOA would be scrutinized under? Because the rules for dealing with abandoned property in a rented storage unit and apartment or garage are probably quite different than for landlords. And you have to know where to look. There are sure to be notice requirements in either case prior to disposition of the property. The requirements are probably laced with the cavaet that the law applies "unless there is an agreement to the contrary".

And the likelihood that the owner of the property will return to make a claim for the property disposed of is a key factor as well. If the owner of the property still lives in the HOA, or might be back, it raises the risk of something happening - like a legal claim - if the property is removed.

One thing a board can do is store the property for a reasonable period of time, maybe even survey the neighbors (to add to the documentation that the Board was diligent in trying to find the owners), and check the governing documents to see what "due process" notice is required, before curing a violation in the common area.

Prospectively, if residents are allowed to store items in the carports or garages, or a community garage, or anywhere on site, a board could adopt a rule on disposing of abandoned property, which would of course have to be circulated to owners before final board adoption under Civil Code Section 1357.100 statutes before implementation.

For this association, with the bike issue, I would ask more questions and ask to review the governing documents before ruling definitively on the question.

(And no, I am inviting unsolicited work to do, just explaining what would be required to answer a question like this.)

Posted by Beth Grimm at 3:58 PM

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 11:33 AM

October 13, 2008

What Happens When The Board Becomes a NonFunctioning Entity?

That's a good question. Sometimes, nothing ..... for a long period of time, until the automatic pilot on the ship runs it aground, or into an iceberg. Then, the domino effect of problems begins. I received this email recently from a very frustrated reader, who is not alone:

"I'm a homeowner in planned development that is governed by a HOA. Apathy is rampant. We have no ARC at all, so one of the board members acts as the ARC. Our HOA is in danger of becoming a "non-functioning entity" and then the State will have to step in (and nobody wants that to happen--as you know, whenever the State of California steps in, it always costs somebody a ridiculous amount of money, and often a headache as well). I believe this will happen because the last two remaining board members have had enough abuse and say they are going to resign and it seems there's no one to step up and replace them. We will have no board. My question to you is, what exactly happens when an HOA becomes a non-functioning entity? Nobody on our board knows, and even the management company doesn't know."

Before getting into what happens when there is no board, so long as there remains one board member, although there is no quorum, that board member has the legal authority to appoint other board members. That said, if there are no board members, it may be a long time before anyone sees the result of that (or a short one), but once the signs begin, like ship without anyone at the helm, things start to go awry and the people trying to ride it out will start to feel the effects, some worse than others.

If there is no common area to be maintained, it provides the wayward ship a lot more open water to navigate (meaning it will take longer for the ship to run into trouble). However, these are the things that could happen.

There will be no one to collect and deposit the assessments, so no bills will be paid (that means no maintenance, landscaping, etc. which may or may not matter, depending on whether the HOA has any responsibilities in those areas). In a PD, there is less likelihood that there will be any lights turned out or water turned off, so the most likely problems to start to rear their ugly heads are the lack of architectural control or standards, and the lack of parking regulation.

You may first see little things crop up, like arbors, patio or yard extensions, grottos, garage conversions, larger vehicles in driveways, perhaps leading to commercial vehicles, larger commercial vehicles, boats, RVs, junkers, etc. Perhaps the residents will have problems with construction next door relating to views, setbacks, odd style of fencing, loss of harmony in home colors, roof covering materials, windows, driveway alterations (for more and more vehicles), changes in landscape, sometimes as bizarre as green cement lawns, etc. For some associations, this could take years, and for others, a matter of months. With no structure, no one in charge and no enforcement or simple rules, it is certainly possible that the neighborhoods could go "down hill". That can lead to neighbor infighting, deterioration of property values, and legal battles in some cases. The HOA presents a pretty sizable target.

The State will not come in and take over HOAs as a rule. In some very limited circumstances I believe that cities have taken over crime ridden neighborhoods and restructured them through redevelopment special projects; however, do not hope for, or hope against State takeover because that is not likely any kind of a viable solution.

An HOA may end up in receivership, where the court orders that a receiver take over, collect assessments, and fulfull the HOA obligations; however, this is not likely to resolve any of the disputes related to architectural debacles from failure of any reasonable controls. The Receiver commands a very large salary that must be paid, and he or she has unlimited assessment authority, so do not think you as homeowners are likely to end up paying less in such a situation.

If there is no one to pay the bills, there is no one to pay the Directors and Officers or other liability coverages and so if there is an accident in the development, or a loss in property values and an angry homeowner with money to sue, or any kind of a lawsuit against the HOA, the costs and damages can fall to the individual owners.

It's not a pretty picture to try and imagine. I believe it is more likely to happen with self-managed associations than those that are professionally managed. However, in the above scenario, it looks like management may not be able to save this association. Once the board members who sign the management checks are gone, the managers are usually gone. Of course, if management is authorized to sign their own checks, there may be an interest in continuing with collections of assessments and payment of [some] bills for awhile. But at some point, management will have to throw in the towel as without a board, there is no captain and that can lead to a sinking ship.

Posted by Beth Grimm at 5:27 PM

October 3, 2008

POLITICAL SIGNS - YAY ... OR NAY???

This came in via email recently (and no surprise, given the wild election times in US politics):

"Political Signs - my HOA won't let me have one, ... what do you have to say about that, Ms. Grimm!"

Here is what I say about it in my book, THE DAVIS STIRLING ACT IN PLAIN ENGLISH (available at http://www.californiacondoguru.com on the publications page):

The law in California:

1353.6. NONCOMMERCIAL SIGNS, POSTERS, FLAGS, OR BANNERS; PERMITTED PLACEMENT OF POSTING OR DISPLAY; EXCEPTIONS.

(a) The governing documents, including the operating rules, may not prohibit posting or displaying of noncommercial signs, posters, flags, or banners on or in an owner’s separate interest, except as required for the protection of public health or safety or if the posting or display would violate a local, state, or federal law.

(b) For purposes of this section, a noncommercial sign, poster, flag, or banner may be made of paper, cardboard, cloth, plastic, or fabric, and may be posted or displayed from the yard, window, door, balcony, or outside wall of the separate interest, but may not be made of lights, roofing, siding, paving materials, flora, or balloons, or any other similar building, landscaping, or decorative component, or include the painting of architectural surfaces.

(c) An association may prohibit noncommercial signs and posters that are more than 9 square feet in size and noncommercial flags or banners that are more than 15 square feet in size.

My commentary about the history: "It was not surprising when this new law was approved by the Legislators effective in 2005 – what better way to insure the unfettered display of political signs. Concerns have arisen in some associations over the display of offensive signs that lead to fighting among neighbors (and discrimination claims). Disputes arise in this area as to whether allowing signs on outside walls is allowed in a condominium development when an Owner does not own or have exclusive use of the outside of the building. Legitimate concerns about damage to buildings arise with attachment of signs or banners. This section does not govern display of real estate signs or any commercial signs. Signs for selling or leasing property are required to be allowed (one sign of reasonable dimensions) on a Lot, in a window or in the exclusive use areas in a condo or townhouse, but legal counsel should be consulted if there is a disagreement about where a sign may be placed or how it may be displayed. For more on real estate signs, see Civil Code Sections 712 and 713 which are not part of the Davis Stirling Act."

So, political signs are non-commercial in variety, right? I have written before about, and am a believer in, reasonably allowing owners to express themselves, within the law and the bounds of reason. Some attorneys feel otherwise. It is possible some have seen HOAs suffer from displays of political support. Reasonable time, place and manner restrictions make sense. Such as
"Owners are allowed one sign per candidate or measure, and not more, so as to avoid clutter and distraction."
"Any political signs displayed in the units must be in the windows; no signs may be attached to the buildings as damages may occur."
"Political signs may be displayed no sooner than 1 month before the Election; however, they must be removed within 1 week after the election."
"Any political sign that contains wording other than "Vote", "Vote Yes", or "Vote No" and the candidate's name or Measure Number may be ordered removed, if the sign incites others or incites misconduct."
"Any sign blocking the clear view of an intersection must be removed immediately."
"The posting of any political sign that causes damage to the buildings or grounds may subject the owner of the Lot to a fine and/or maintenance or reimbursement assessment."

These are all examples or rules that I have seen whose viability depend on certain circumstances and my suggesting them does not bless them for all HOAs. However, I will make my message clear with regard to political signs, which is the same as I have taken for flags ... Boards ... find a way if you can, to reasonably allow and regulate the signs, adopt reasonable rules and circulate them to provide guidance to the owners (adhering of course to the law requiring a comment period before final adoption) because if you don't, the residents will take it upon themselves to set the standard for the community, which usually leads to overreaching, dissention, fighting, legal fees and unnecessary battles.

This election coming in November is subject to a heightened awareness in formerly disinterested neophytes, highly and serious emotional issues, and deep seeded patriotism. People are going to want to express themselves. If this energy is not let out with a sign on the lawn or in a window, or on a deck or balcony, it is likely to show up (or blow up) in the boardroom.

Posted by Beth Grimm at 1:45 PM

September 10, 2008

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

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

July 14, 2008

WHO DO THEY THINK THEY ARE - TELLING ME WHAT TO TAKE DOWN?

Sometimes one wonders all of the whys and the wherefores. Especially when they hear only one side of the story.

Here is a recent post from a reader (and see my answer in italics following the questions):

"There is an enclosed balcony in my condo with two open air windows. The
space was unusable due to high winds and salt off the sea. So I built very tasteful clear vinyl wind blocks so I could use the space, very similar to blinds, but clear. I thought this was okay.

Earlier, I had met with the owners of the condo and mentioned I was thinking of putting up something there to block the wind. They said they thought if I didn't put up a big sign with a slogan on it or something that it would be ok.

Within a very short time after putting up the wind blocks, I got a letter from the management company saying the wind blocks violate hoa rules andt they tell me they need to be taken down right away.

Do I have to comply even though I did not enter into a contract with the hoa? If I don't take them down, and there are fines against the owners, willm y rental insurance pay for it? The rental insurance includes legal fees if I am sued.

If I leave them up temporarily or permanently, can you see what problems that might cause?"

First of all, I would be asking the question: If the windblocks are clear and cannot be seen without close scrutiny, why object to their presence? It seems obvious in areas by the coast or otherwise subject to high winds that windbreaks are often needed to allow people to fully enjoy the outdoor spaces adjacent to their living units. One sees them everywhere. Just take a walk along the coast in Carmel or Monterey.

I can understand if the Board would be concerned about deteriorating, scratched or discolored windbreaks or mismatched or patchwork styling, but standards can be adopted for consistency and windbreaks that become a hazard or eyesore can be ordered removed or replaced, with penalties for failure to do so. So I invite the readers to tell me what a good reason is to disallow windbreaks in a situation like this (so I can be informed).

That said, the Condo Board does have the legal authority to set and enforce rules and the rules are presumed reasonable and enforceable unless an owner can (essentially) prove they are against the good of or harmful to the community as a whole (in very loosely paraphrased legal terms). That is a tough burden to meet.

Any disciplinary action would normally be rendered against an owner for a renter's conduct (or misconduct, violation of the rules and regulations, etc.) so it is up to an owner to deal with a tenant who creates a situation where penalties are being considered. Of course, a landlord owner can write into their lease (and should, for their own protection), that if the renter violates the rules or regulations of the Condo Association and there are any penalties involved, the renter has to reimburse the owner, and can (and definitely should) include a clause that says if a renter violates the rules and regulations, that is grounds for the owner to terminate the lease. That probably does not sound helpful to this renter who asked the questions, but it is the way it should be.

Now, for the questions about what can happen if a violation continues.
If the documents allow, and California law has been followed with regard to the processes required, fines might be imposed. If the Condo Board has to get legal assistance and the documents allow, and California law has been followed with regard to the processes required, reimbursement assessments might be imposed. The latter, if unpaid, could lead to liens and such, and possibly even foreclosure, so the penalties can be severe.

I wonder if this renter is not telling me something, like any reason given by the Condo Board for not allowing windbreaks. I wonder if you out there can tell me why a Board would not look for some options in this regard to offer owners (at their own expense) in properties subject to high winds?????

I feel the need to be enlightened on this one.

As to renter's insurance, it is very important to have. However, I do not know of any that pays for fines or legal defense for taking action that one knows is likely to lead to fines or legal action.

Posted by Beth Grimm at 10:26 PM

July 9, 2008

BANK OWNED OR ABANDONED HOA PROPERTY FALLS INTO DISREPAIR - WHAT TO DO?

Because of the economy, the mortgage crisis, and other negative factors for HOAs today, HOA boards and neighbors are having to deal with more and more properties that are being foreclosed and abandoned (owners simply walking away). I am receiving many questions from HOAs and managers asking what to do when the lawn falls into disrepair or dries up and creates an eyesore in the neighborhood. Here is a recent email:

"I have a quick question. Can an HOA maintain/replace a front lawn that is dead or dying on an empty REO (bank owned property), put a lean [sic] on the property for the maint. fee, and collect the maint. fee when the foreclosed property is sold?"

Wish I had a "quick" answer. There are about 16 topics that would need to be discussed to answer this question. I plan to do my next free E-newsletter on this very subject so go to the website at http://www.californiacondoguru.com right away and sign up. If you prefer not to do that, watch the E-newsletter Archives after the end of July to see the newsletter.

What are all the questions that need to be considered to give an answer to the above "simple" question?

Is the Owner responsible for the lawn maintenance, or is the problem that the Owner was providing the irrigation and the water was turned off for lack of payment. This happens in many associations where the HOA maintains the front areas but the Owner is responsible for the irrigation, and when they abandon, the irrigation system breaks down, stops working, or the water is turned off.

What do the documents say about collecting money for something that is an owner obligation? Are there provisions for assessing a reimbursement assessment? Can it be done with, or without, a hearing (because of California law, in California a hearing will likely be required)? Is it necessary to seek a judgment to collect per the documents? Is the assessment subject to the lien (per the documents)? Or Not?

Does the HOA have the money to maintain lawns for abandoned or Bank Owned property in its coffers (these days, it could be expensive if there are several properties in the same boat).

How long would the HOA intend to maintain? Does it give potential purchasers a false sense of security to buy in the development without being aware there are bank owned or abandoned properties in the development? Is that actionable misrepresentation to hide the fact through maintaining the property for an absentee owner?

Do you know if the property is really bank owned or simply in the lien/foreclosure process (in which case it could be many months before the bank assumes any responsibility for the costs)?

As to the above question sent in by the website visitor, generally, HOA documents have some sort of recourse in them for the HOA to collect the costs of performing maintenance what the owner fails to maintain. So if a property is really bank owned, eventually the HOA may be able to recover the costs from the first day the bank took ownership, if the HOA follows the HOA document requirements to make the charges, and if the HOA can locate the right person at the bank to respond.

As for the rest of the questions and answers, watch for the upcoming "E-News" called "What's New In HOA Land" on the subject.

Posted by Beth Grimm at 10:28 PM

June 24, 2008

Requests of the Disabled

Many HOA Boards are confronted with special requests of the disabled. Sometimes they are justified, sometimes not.

Here are some requests that I found to be justified over the years:

An owner who was deaf asked the board if it would provide a sign language interpreter at the board meetings so the person could understand what was going on. The Board said "no", it was too costly. The owner asked if they could bring their own interpreter to the meetings. The Board said "No", that was too disruptive. That Board exposed the HOA to serious damages. The Owner contacted the Fair Housing Dept who took the case, sued, and the HOA paid damages, somewhere in the neighborhood of $30,000 is what I heard.

The Condo HOA CC&Rs prohibited dogs. Owners could have cats. An owner said they wanted to have a dog and would have it. The Board said "No". The owner said they were depressed and the dog brought them happiness. The Board eventually actually did say yes, if the owners kept the dog in their enclosed patio, and carried it to and from the car in a carrier. The people moved away. The Dept. of Fair Housing took the case, and pushed it through the appeals court (even though they lost at the Superior Court) and won. The owners were granted about $8,000 in damages and attorney fees.

Questions often come up about parking spaces. A disabled owner wants a parking space closer to the unit entry and the Board is dealing with a situation where spaces are assigned on the deeds. Does that always absolve the HOA? No. It does not always absolve. Sometime the owners really want special favors for the household residents that are not disabled. For example, in one case that came across my desk, there were two residents, one with a heart condition and one perfectly healthy young (40's) male roomate. While the unit was assigned one parking space very close, the disabled resident demanded assignment of one of the close open parking spaces as a handicapped designated space. This would have given the two residents the assigned spot plus an extra parking space (since the disabled resident was apparently the only person in the complex qualified to park in a disabled space). The Board said "No" to that. So far, no repercussions.

Here is a recent note sent to me by a reader:

"I am a paraplegic. I have resided at my current condo for several years and I have never been able to come to a meeting. I have requested accommodations by perhaps asking that the Board at least have meetings outdoors in the summer. I was told by the Board there was no place outdoors that was quiet enough for meetings (too many noisy kids aroung the pool area). I believe this is just an excuse to keep me away from board meetings. Out HOA has another common area place that would work just fine, but the Board will not even consider it. Do you think that I could request a copy of the minutes (free of charge) as an accomodation?"

My answer would be that an owner can request any accomodation that he or she wanted to - the real question is - will thte Board approve it. In this case, if the Board cannot reasonably accommodate a request to change the meeting place, it seems that it would not be a huge burden to email the meeting minutes to the owner each time there is a new set, so the person could at least have the information. I wonder if the Board has considered having the meetings (if they meet in a board member's unit) with a speaker phone at the board table so that the owner could listen in. I do not know in this case if the owner really would attend meetings if they could, or if they have tried to find a way to get into where the meetings are (as I do not know how many steps there are, whether it is possible for other members to help this one into the meeting room, etc.). I can hear the Board now, though ... No, it's too much trouble because .........

And it may be ... or maybe not. The question the court would want answered is: "Is there a great burden to the other members or high cost in granting the accommodation?" If there is a great cost or burden, then there may be justification for saying "no".

In this latest case, I would guess that there is something the Board could do to accommodate this member's desire to be informed - but I am not going to give any advice as it would be too general to be useful.

I lean toward "giving" whhen it makes sense to do so. And an owner that wants to be informed often wants to be involved. And that is generally a good thing.

There is a statute in California that requires Boards to be as accommodating as possible (if there is not too great a burden) to grant requests that allow the disabled to get to and from their units. It allows the Board to defer the costs to the owner or resident and allows the Board to require reinstatement of the area that was changed with the accommodation when the handicapped person leaves (Civil Code Section 1360). And there are federal anti-discrimination statutes and cases that suggest a Board should make an accommodation for any resident that claims a disability if it is possible to do so (very loose paraphrasing but also indicative of how I feel the statutes and cases go), even if at the resident's expense. Some of the federal statutes are misconstrued to apply when they really do not directly apply (the ADA in particular), so legal advice should be sought (don't quote my opinions or thoughts as legal authority because before giving any specific advice, I would ask a lot of questions about the circumstances).

Still and again, I think Boards are better off to look at the requests with an open, rather than a closed, mind, and look for solutions rather than excuses.

Posted by Beth Grimm at 8:48 PM

June 18, 2008

Renters - Minutes - Do the Two Go Together?

Here is a question that has come up more than once:

"Should the Board distribute minutes to renters?"

One reader says: "Our current Board of Directors sees nothing wrong with sending out our minutes to renters. I objected so the current BOD position is that they will send "sanitized" minutes removing financial information to the renters. ... Our CCRs do not address the subject, but I think all owners should be concerned about inviting the involvement of non-owners into whatever actions or issues are addressed in our HOA minutes. I believe that the HOA should restrict its contact with renters, and that contact should first flow through their owners or property management companies. What is your opinion on this?"

Another reader says: "Our board does not send any communications, including minutes, which are distributed regularly to owners (we are a small association) to renters. My tenants are very interested in what is going on in the association and are planning on buying the place as soon as they can. Should I not be able to give the board my permission so that they can include my tenants in the list of communications about the association, including the minutes?"

So ... what are ya going to do? Two views. Two positions. This is what I think.

The minutes contain information private to the association, and care should be given to handing them out publicly. There is generally no legal requirement to provide the HOA minutes to anyone, but owners in California do have the right to ask and when they ask, can get copies, at cost.

That said, HOAs do want tenants to have copies of the rules and governing documents and so do want them to know something about what is allowed and what is not allowed. And buyers tend to ask for a year's worth of minutes among the documents related to purchase of a property in an HOA these days (if they are savvy). Condocerts.com which is a website that serves as a source of HOA information and documents for lenders, title companies and others who need to obtain documents related to sales of condos and townhouses asks HOAs that list with them to provide minutes for availability of these entities.

Still, I do not see a good reason to go to the extra expense to provide minutes to tenants. It requires the Board, if they send them out, to keep a separate list of recipients as generally, the owner and tenant lists would be kept separate. Associations that post the minutes in the common area (many do) are in essence providing this private information to all who pass by. Good or bad? I would like to say open communication and transparency is good, generally, but when minutes contain sensitive information about HOA financial issues and the need to consider a special assessment, or other matters such as discovery of an association-wide problem, the duty to the owners is to be prudent and prudence I think suggests not to disseminate the information further than the owners.

And I would not be in favor of having two sets of minutes, one sanitized and one not. That could be confusing.

However, renters tend to feel more involved if they get news of association matters and events. Distribution of the HOA newsletter to owners and tenants could be a good thing for the community and could help bring the tenants under the umbrella of good citizenship by understanding the rules or procedures of the association. My recommendation would be to include them in distribution of the newsletter, if it does not contain overly sensitive information, but not if it involves considerable expense as the owner can always provide what they want to their tenants.

My two cents. No cases or laws that I know of on the subject.

Posted by Beth Grimm at 10:24 PM

June 7, 2008

LEASE LIMITATION PROVISIONS - ARE THEY GOOD?

I have done 3 other posts that touch on the subject of Lease Limitation provisions. Based on my research, and experience, I think it time to provide some simple explanations about what they mean. A lease limitation provision might be based on any of the following ideas (or maybe someone out there has something more creative to offer:

Limit on number of units/lots that can be leased at one time.
Limit on leasing for the first year, two, or three after purchase.
Limit on term of lease, for example – one year minimum.

The thinking behind these restrictions is that the properties will not invite investor purchasers but rather would be enticing to persons intending to reside in the property who are interested in a community with limits on leasing. Resident owners that plan to continue to reside in the property like this idea very much. Resident owners that tend to “move up” in the coming years and want to keep and rent their properties out would not be so fond of the idea that they could be prevented from doing so. Investors and leasing owners would not like the idea at all.

The simple truth that many people believe and experience is that high percentage rental communities tend to have many more problems than lower percentage rental communities. Way back in 1985, the last time I know of that any study was done, the California Department of Real Estate commissioned a study and that is what the study showed. So I am not the only one that believes this, no sir.

Another simple truth is that it is harder to get conventional financing for properties in common interest developments because the largest purchasers of residential loans in the country – namely FNMA and FHLMC (more commonly known as Fannie Mae and Freddie Mac – sounds like something right out of the Flintstones) have limits on purchasing loans in high percentage rental communities. So, if your HOA is over 30-40% rentals, and it becomes especially apparent if it gets over 50% rentals, the financing gets tougher to find, through conventional methods at least. However, see below for more on this in today’s market place.

Another simple truth is that renters are generally more transient than residents. Of course I know there will be those that will come out of the woodwork to let me know they have been darn good renters for more than 30 years! But, get real people, the transient part of society tends to have less interest in taking care of the real estate they occupy for temporary purposes than the buyer who has crossed the line into property ownership and has pride in that “piece of dirt”.

Another simple truth is that investors often have different interests than residents. While some investors take great pride in every piece of property they own, others are only interested in the bottom line – how much rent can they pull in – how little can they spend.

Another simple truth is that the provision when it is posed to the members (it should be in the CC&R or recorded regulatory documents ... as opposed to just passing a rule)could “grandfather all owners” in the development at the time the measure is passed, which would put everyone in the development at that time on the “same plane” and alleviate the second two arguments above that owners who want to rent their properties and investors which would mean they would never be prevented from leasing their property. [There are pros and cons to that which have been and will be further explained in communications on this subject written by me.]

And the last, but perhaps hardest bit of truth, is that while the leasing limitation provisions do help keep or lower the percentage of renters in any community, they still can “bite” the innocent. What about the person that thought the restriction was great, until their life circumstances changed, they needed to move away temporarily or permanently, the market went south (what a concept, huh?), and they could not afford to “give away” their property in a bad market.

And, there is a wide range of enforcement tactics out there; some communities are very lax in enforcement since they do not want to enforce such harsh provisions on their neighbors, others are militaristic in their enforcement. The laxity can lead to legal issues, and the militaristic view can do the same.

In order to make a lease limitation restriction fair, reasonable, and able to pass court scrutiny, I believe (and again, this is based on my reading of the cases all around the country and in California), there has to be some kind of hardship provision. This means that if someone is called off to war, and they are going to be doing a duty tour, they should be able to temporarily lease their property during that time! If someone has a medical disaster – either them or a family member – and they need to be somewhere else for a period of time, they should be able to temporarily lease their property during that time! There are those who would disagree even with that. And, of course, there are those that might “embellish” or make up such a story when the Board members know it to be less than true.

And why would an investor vote for such an amendment? So long as they, at least are grandfathered (which wise at the least if an HOA does not want to get into the argument that has occurred in some state cases where the court recognized that such owners may have a “vested interest”), then it is possible that under such an amendment, rentals by others would be on the decrease and the property values could appreciate considerably. I believe this is especially true in a higher percentage rental development where sales are affected by the lack of available financing. It may take longer to get the percentage down, but to many, at least the development would be headed in the right direction.

So, although we know that these provisions can help dramatically in lowering rentals in a common interest development, we know there are pros and cons to them. We do not know for sure where the law is going on these. There have been some Superior Court decisions in the past couple years in Santa Barbara and further south that have upheld lease limitations. More will be reported on these as the time for appeals and any appeals have run. There is also a statute that has been introduced in California that would place some restrictions on enforcing the restrictions.

Please – if you want more information on this – continue to follow this blog (aka California Condo & HOA blog and Beth’s Blog) at http://www.californiacondoguru.com and also sign up for the free E-newsletters from that site. Watch for future Primers on the topic (helpful learning tools available on the website). I will be circulating the next E-News soon, so sign up soon! The Primers, when completed, are inexpensive and helpful.

There is so much to be done to get the word out. People do not seem to fully understand the benefits and the drawbacks and the only way to do that is to follow the articles and posts. Boards often, believing that these restrictions are for the benefit of the community and will sail through, put a ballot out only to be blasted by those who are either uneducated about the provisions, or have the “King of the Castle” mentality. In other words, they have not prepared the membership and it comes back to stifle the process.

Posted by Beth Grimm at 12:57 PM

May 21, 2008

Are the New FNMA Guidelines Realistic?

Adrian Adams of Adams and Aucoin in SoCal just put out a newsletter listing the new requirements FNMA has published. You can read what he has to say by visiting DavisStirling.com (not a government-backed website; its a law firm website - but very informative), and what FNMA has to say by visiting https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp?from=hp.

Here is my take on the new regs. GET REAL FNMA! If this secondary lending organization (known for buying loans in bulk) wants to continue to buy condo loans (and I assume there is a profit in it or who would be in the business of doing it??), I foresee having to back down on some of the new requirements. Why? Here are some reasons:

1. HOAs in California are typically underfunded, meaning shy of having 100% of the money needed to fund improvement, rehab, reconstruction and major projects. Heck, many are having a hard time meeting operating costs. The new regs require lenders to attest to the fact that the HOAs are "adequately funded." At the request of a couple of lenders, I created a lender class to help them learn to read association budgets and reserve studies in order to assist them in making this "representation." After my first class, the concensus was that they either had to (1) go forth with consirable liability exposure, (2) not work with FNMA, or (3) go back to FNMA and discuss these impossible standards.

2. I do not believe associations generally have enough money in reserves to cover large insurance deductibles, such as earthquake insurance. If you remember (those of you immersed in HOA issues), Freddie Mac posed a new requirement - after the Northridge losses - that in order to purchase a condo loan, the HOA had to have the earthquake deductible 100% covered in funds in the association accounts. That did not last long before it was retracted - I believe that would have eliminated the purchase of any HOA loans because HOAs do not have that kind of ability. It would likely make condos unmarketable if the owners had to come up with the assessments to immediately fund earthquake deductibles.

3. The California legislature is being counterproductive to the option of HOAs to invoke amendments that would limit leasing in the developments with the introduction of AB 2259 relating to limiting these provisions. The very reason HOAs consider lease limitation amendments is to counter the FNMA and Freddie Mac regulations that deter the purchase of loans in HOAs with a high percentage of rentals.

4. It seems to me that many new HOAs seeking the FNMA "gold seal" or certification of approval would fail if the number of investor owners had to be less than 10% of the units.

5. If FNMA cuts out the condo associations that are not separately metered, that is a BIG CHUNK of condo associations. Although there seem to be many benefits to doing so, some just cannot afford it, especially in these hard economic times.

6. If FNMA is not going to purchase loans where the HOA is more than 10% delinquencies on the HOA accounts, well, there go more out the door. HOA delinquencies today are doubling, tripling and worse, because of the subprime lending issues, hard economic times, and cumulative effect of California legislation that protects HOA owner/debtors and makes it harder for HOAs to collect assessments. While 10% and under for delinquencies was a reasonable goal a few years ago, it is unreaslistic for many HOAs today.

So, I have to ask the question, FNMA, do you want to buy condo loans or not? Only time will tell.

Posted by Beth Grimm at 12:47 PM

April 28, 2008

WHAT’S NOT TO LOVE ABOUT YOUR NEW CONDO!

How about something upbeat? Because of my new book, I have been asked to write articles for several blog groups. Each has their own preference for content. Being asked to address what is positive about living in a condo reminded me, and might remind you, of the reason many people in California purchase condos.

***

So you are in your new condo! What do you do now? … Enjoy… and if you understand a just a few simple things about what you bought, it make things even better.

A Different Type of Ownership: You probably own what is commonly described as a “unit” which is often further defined as airspace within walls, a floor and a ceiling. It’s similar to owning an apartment but there is much more to it than that. In most cases, you share with your neighbors ownership of everything else, including any pools, clubhouses, all the amenities, and the buildings that house all of the units. Thus, while it may seem strange at first, there can be some real comfort in this. You share the benefits of amenities that would otherwise be quite expensive. And you have others that share in the burdens of decision making and responsibility. You have a group to share maintenance costs, replacement of roofs, insurance, pool repairs, and economy of scale in almost all things. Take heart, owners of single family homes are on their own.

Other Good Things:

“Lock and Go”: When you leave for work every day, or on a vacation for a week or a month, there is still activity (“life”) going on all around your unit while you are gone. It’s usually much more protected than a home sitting vacant, newspapers piling up, no car in the driveway, no lights. It can reduce the risks considerably.

Running the “Ranch”. You have the opportunity to help make decisions by participating in the association governance (as opposed to being under the thumb of a landlord). As an owner, you can serve on the Board, all you have to do is “show up” and you probably will be get the opportunity to serve.

No Lawn To Mow, Weekend Maintenance to Do: You will probably find that you have more time on your hands because your weekends won’t be eaten up by the need to mow the lawn, trim the bushes, or clean the gutters. Yay! Plan that day trip.

Stress Relief. If you do not want to exercise your brain and acumen in helping to make big decisions about the property, you can sit back, relax, and leave it to someone else. Of course, your association is served volunteers so you should take your turn.

You Belong to Something! You are part of a community when you own a condo, a community that is as good as its owners. Meet your neighbors. Talk “across the proverbial fence”. Get involved and be a good pillar.

How To Stay Happy, and Get The Most Out Of Your New Community!

Being a good neighbor will help you enjoy your home and your community. Keeping the noise down to a reasonable level, using your garage for your vehicles instead of storage, lining your drapes with neutral colored liners, keeping your pets inside or on leashes, picking up after them, exercising common courtesies, and safe driving through the complex are things that you can do to set a good example and to engender like behavior from your neighbors. And there is value in having rules and regulations and honoring them. When you live in a condo, it’s true that there are some regulations and restrictions that you would see in a single family home. But if you need help “encouraging” others to be good neighbors, these restrictions and rules can come in handy. The Association can often be more effective than waiting for the fiscally-strapped Cities to enforce ordinances.

Keep these things in mind when wondering.

Posted by Beth Grimm at 9:03 PM

April 10, 2008

How Can Those Guys Do Anything They Want? - The Flip Side

I received lots of messages and even a couple of calls about the blog on free legal advice. Thanks readers! Some were complimentary, thanking me for what I do, and others seemed a little defensive. Truth is, I had no one in particular in mind when I wrote the blog, but I did need to provide some kind of general information about what my own limitations are, because the boundaries seemed to be slipping, and the last thing I want to do is be rude.

To be fair to all of you out there that need help, the following is one of the emails I received:

"I read your blog about homeowners wanting free advice. I hope I have never been one; I have always tried to ask first if my question required legal advice. I understand your frustration; you didn't go to law school to give out free advice; neither would I.

I don't think it is right nor fair for anybody to expect free advice and you certainly have done more than any other attorney with your website answering so many questions.

I do understand a homeowner's frustration dealing with issues of not being able to pay for legal advice, dealing with associations who have no legal representation, along with board members who make their own rules, then state "sue me, we have insurance." I have heard that so many times. And the management company who is giving out legal advice is indemnified by their policy.

The entire paradigm is flawed and I keep hoping and praying for necessary changes that will benefit homeowners, board members, attorneys.... everybody.

Have a nice day."

Believe me, I get it. Many, many, many homeowners are frustrated with their purchase of a home in a homeowners association. Whether frustrated by the neighbors, close living situation, boards, or management, the answers are hard to find. I do encourage questions through my website so I can find out what people want to know and address it on my blog.

This particular message came from a reader who frequents the website and blog, figures out some things by reading the information posted there, and has actually asked for a consultation on some issues. There seem to be many problems with the HOA and management - from this readers perspective, too many to seek legal advice on every one. So the reader submits question after question and many are very suitable to a blog answer. The questions are often common ones and I get feedback from this reader thanking me when I hit one of the questions asked.

Now that is one way to get help. As for other questions, there are not currently enough resources available to help everyone with their issues. It is true that most attorneys who are knowledgeable about HOA law will not represent owners. But there are some. One way to try and find one in your area is to go to caionline.org and find a Chapter in your area (there are 9 in the State). If you are a CAI member you can peruse their directory. Otherwise, you can purchase a directory from your local chapter and start calling all the attorneys in the book and ask them if they, or they know someone else who does, speak with and represent homeowners. Most attorneys will give out names if they know them. And they would know better than I in areas other than the Bay Area, where I am based.

Calling me and asking for a referral in the far reaches of the state will not be fruitful. Mid state, you can contact the Ventura County Mediation Center and you may be able to find someone.

Besides these resources, you can watch 2 bills that have been introduced by California legislators. One involves some incentive for board members to get some education (SB 948) and the other proposes a state omudsman program (AB 567). You can read and watch these bills, and even get on the list for updates, by visiting the state website at http://www.ca.gov, navigating to the legislature and bills, and plugging in the numbers.

While neither of these pieces of legislation is perfect, or liable to come out of the state "legislative grinder" as the be all and end all answer to your prayers, they both have an educational component that if passed, will encourage more HOA education in the state. CAI (the Community Associations Institute) is developing programs for Board members.

On top of all of that, I am working on a third self-help book on condo and HOA living. And there is my recently released national book, which has gotten some incredible reviews about how helpful it is, called THE CONDO OWNERS' ANSWER BOOK. It is available through my website http://www.californiacondoguru.com on the publications page.

So ... if you can just do your homework ... and also hold on awhile, there may be more help on the horizon.

My best ....

Posted by Beth Grimm at 8:16 PM

March 13, 2008

How Should Architectural Review "Appeal" Processes Work?

One of my readers sent in this question about architectural review. He is an architect, working with various HOAs to do architectural review. This is what he has to say:

"My firm provides architectural review services to a number of associations. Some association Boards have a policy of reviewing ARC appeals only to determine one of two things, the applicant is seeking a variance or the applicant is claiming inappropriate procedural actions by the ARC committee. They do not reevaluate the submittal for its subjective merits as evaluated by their architectural consultant and ARC members.

Some association Boards end up reviewing every submittal that was denied by the ARC and expend a great deal of personal time visiting the site and reevaluating the architectural merits of the submittal.

Are there some specific laws that govern the required review / appeal process? Are both doing it right? Is one doing it wrong?"

I am not sure either process is "wrong" because there is no specific definition written in the statute and there might be attorneys who would disagree with me. However, I would interpret California Civil Code Section 1378, since it provides the right of "reconsideration" (as opposed to right of appeal), to mean that if the Board is a different body than the ARC (Architectural Review Committee), and a request for reconsideration is made, then the Board should take a look at the plans that were submitted and analyze whether to accept or reject the ARC's position, or suggest something different (such as conditions).

Here is what the statute says about the subject:

"If a proposed change is disapproved, the applicant is entitled to reconsideration by the board of directors of the association that made the decision, at an open meeting of the board. This paragraph does not require reconsideration of a decision that is made by the board of directors or a body that has the same membership as the board of directors, at a meeting that satisfies the requirements of Section 1363.05. Reconsideration by the board does not constitute dispute resolution within the meaning of Section 1363.820."

One reason there may be confusion about the review process is that some documents provide a right of "appeal" and sometimes that is defined, and people figure it is sufficient under the statute that calls for fair and reasonable processes. However, in the courts the "appeal" standard of review is (very generally) limited to a determination (such as in an owner vs. an HOA case) as to whether the "body" making the decision on the first round abused its discretion, or if there were lower court procedural issues. Therefore, if a Board is reviewing plans in a more objective manner, only to determine if the owner is asking for a variance or is complaining about procedural missteps, the decision to do it that way may relate to some commonality with the court appellate standards of review.

As for my view, I would go looking for a definition, and "Webster's" is a good place to look. Webster's dictionary defines "reconsideration" as "consider again with a view toward changing or reversing." At the National CAI law conference in January, there were a number of cases where the courts in other states turned to the dictionary for definitions that were not apparent in the law or documents being reviewed, so it is not a stretch.

So that's "my two cents worth" on this question ...

Posted by Beth Grimm at 8:45 PM

February 14, 2008

STOP THAT INFERNAL WALKING!

This is my 301st blog! Thought it worthy of some unusual step. Since I have on my plate neighbor to neighbor issues today, I decided to give neighbors their own category on this blog.

So, to kick off this special day, I have more to offer in the way of determining fault, options (or lack thereof) and solutions (to the extent there are any) on issues noise related - namely, to hard surface flooring. By the way, if any of you out there are claiming that you cannot live below carpetted-properly padded unstairs rooms, consider yourself lucky, because there is a whole world of unhappy owners out there living under hard surface flooring, and its getting worse every day because there are more and more and .... (well,. this seems a good place to stop with the madness).

So here is the latest that has come to my attention. Different sources sent me an article entitled "The Case of the Upstairs Condominium" apparently written by a flooring person or an attorney, I am not sure which. None of the parties identified the source of the article (naughty naughty) so I do not know who to thank (except if your initials are DLW give me a call or an email and identify yourself, and I will give you full credit). You may be asking me what a flooring person and an attorney could have in common. The article said that the person had received several calls in recent months from homeowners and homeowner association boards about noise issues related to hard surface flooring. That could be a flooring person or an attorney, right?

Anyway, to get to the point, the article talked about a "test" that can be performed to test "the level of noise transmitted through the assembly ..." of a sound level meter. It takes a specially trained accoustics specialist to read the noise from upstairs created by a specialized piece of equipment called "a tapping machine". This machine, according to the article, imitates the impact on the upstairs floor created by a person walking. The measurement from this test can be expressed as a single number that is called "Impact Insulation Class". According to the article (and by referring to it, I guess I cannot be "blamed" by anyone if this is incorrect information), California's "Title 24 Standards require that floor/ceiling separation assemblies between units in miltifamily developments achieve an 'IIC' rating of not less than 45 when field tested."

So I will add this to my list of considerations published earlier, when one is considering what to do about a noise problem related to hard surface flooring, which (now) is reiterated in a (new) list of questions to ask. As for the HOA, the developer, the flooring installer, or any other party that might be confronted with a noise-flooring issue here are some pertinent questions to ask:

**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?
**Are you just the problem, or also part of the solution?
**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?
**Has anyone arranged for an "IIC" or other flooring impact analysis test to be done?
**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?

I cannot say that this "IIC" test will make or break any situation. First of all, I do not know if it is well recognized in the industry and by the courts (feel free to send me info on this). And, I do not believe it is necessarily the end of the inquiry. As described, it presents a test with a minimum standard, and I for one believe that the standards for condos should be higher than apartments because if someone does not like the upstairs noise in an apartment, they can move. They have little to lose. When one purchases a condo, the solution is much more complicated. If they remain quiet, they risk having a disclosure issue come up after sale. If they make noise, they risk creating an issue where one might not be there for the next person. Believe me, peoples' tolerance levels seem to be all over the map - and when "friends" live upstairs, people are much more tolerant than if they have nothing in common with the upstairs neighbors.

But, the saga continues. And I will continue to say that if attorneys continue to tell developers not to put limitations on hard surface flooring un upper stacked units, and attorneys continue to tell HOAs not to put stringent limitations and standards on the installation of hard surface flooring, and owners continue to be discourteous (like placing speakers on hardwood floors and turning up the base, like refusing to try any form of carpet or padded runners in traffic areas, like giving the neighbor who complains the finger instead of listening to what they have to say), the problems will not go away.

Of course, before condemning attorneys, I should say that the attorney does not make the ultimate decision on what goes into the governing document or the rules or standards. The developers and HOA boards do that. In every set of docs I have written in the past 20 years (ugh, has it been that long) that involves stacked units, I have advised boards to put some limitations or restrictions on hard surface flooring in the upper units. More than half, probably more than 90% (I lost count) have heeded my words and done it, but those that rejected my suggestion either could not fathom that it could ever raise an issue, have put property values ahead of human values, or have had or were considering converting to hardwood or laminate floors. Had they put limitations on the flooring, at least, if the HOA did not want to spend the money to sue someone who installed hard surface floors without getting approval, the neighbor below would have a potential remedy for the violation of the documents. However, this sometimes falls on deaf ears.

It seems simple to me. If there is a prohibition on installing hard surface flooring in upstairs units, or there are standards involving installation of cork or some good form of padding below the new floor, or developers go the extra mile to add good and true soundproofing materials below hard surface or laminate flooring, it eliminates a major problem. That problem is the awful situation that occurs when the parties might otherwise be willing to resolve the issues but are left looking at major reconstruction (raising other potentially serious issues) involving both the upstairs and downstairs units as the only remedy.

People. Wake up!

Posted by Beth Grimm at 11:18 AM

February 9, 2008

My New Book is Out!

"Talk about misconceptions and misunderstandings…the homeowners’ association industry involving condominiums, shared amenity living, and shared responsibility is full of misconceptions and misunderstandings. The general public has processed its share from the negative “connotations” and bad press rampantly played out in the newspapers, magazines and tabloids, and even on TV and in the movies. The tabloids love a good “the board president was run over ten times by a resident who was not allowed to wash his car in the common area” story. X-files presented an episode based on a situation where the board eliminated (yes I mean that literally) owners who did not follow the “rules”. And when Jerry Seinfeld’s father became the subject of a nasty recall battle because he was suspected of pilfering association money when seen driving around in a new Cadillac purchased for him by his son, Jerry, the audiences loved it. Children are now exposed to it at an early age with the latest movie featuring “condo commandos” who seem to run the place without regard for the creatures just trying to find a good place to coexist with people.

So, are there answers to the questions and quandaries that arise? Yes, there are."

For those of you who do not know I had written a national book on condo living and the things that inquiring minds want to know ... I did. What appears above is the introduction to the book.

And it has been released, and is available on Amazon.com. The name of the book is "Condo Questions and Answers" and the publisher is Sourcebooks, Inc.

Hope you like it!

Posted by Beth Grimm at 9:39 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 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

December 17, 2007

Are You Being Defamed? You Don't Have to Stand For It.

I earlier posted a blog that said boards and owners had no right to exert or threaten physical violence against each other - using the axiom "Sticks and stones may break my bones but words may never hurt me."

I feel that I should take this a step further because words can actually hurt a person. I stand by my earlier post that physical violence or threats are not the answer to words that hurt, damage the reputation, or misstate someone's intentions. But a decision does need to be made about whether to do something about such words, or "turn the other cheek."

In our world of homeowner association living, associations generally have access to legal counsel, and the funds to pay for it collected through assessments from all owners. Individual owners do not enjoy this kind of access. First of all, at least in California, most lawyers with considerable HOA knowledge and experience will only represent HOAs and not homeowners. There are many reasons for this, fiscal and otherwise, but that is not the purpose of this blog. The fact is that this creates a lot of stress for the owner-public that is unhappy with its homeowners association and cannot get help. And so, owners tend to be a lot more critical of the Board and individual directors, and the Association vendors, than the board is of the individuals.

Some owners go overboard in their frustration and defame the board members, the Association and sometimes the Association vendors, managers and attorneys in particular. How far overboard can they go without risk?

In California there are statutes that define defamation and guarantee certain rights. Civil Code Section 43 is one. It says:

"Besides the personal rights mentioned or recognized in the Government Code, every person has, subject to the qualifications and restrictions provided by law, the right of protection from bodily restraint or harm, from personal insult, from defamation, and from injury to his personal relations." Defamation includes libel and slander (Civil Code Sectiion 44)

Civil Code Section 45 and 45a define and explain libel which is "a false and unprivileged publication by writing, printing, picture, effigy, or other fixed representation to the eye, which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation."

Civil Code Sections 46 and 47 define and explain slander which is "a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which:
1. Charges any person with crime, or with having been indicted,
convicted, or punished for crime;
2. Imputes in him the present existence of an infectious, contagious, or loathsome disease;
3. Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits;
4. Imputes to him impotence or a want of chastity; or
5. Which, by natural consequence, causes actual damage.

With regard to defamation, 1, 2 and 3 above are important because if a person says or publishes something that says another person is a thief or embezzler (for example), is mentally ill, or is incompetent in serving the association, the subject of the comments may be able to sue for slander and get a monetary damages award without having to prove monetary losses.

This happened in a case in Colorado and an HOA and Board members received a judgment in the amount of $10,000 because of an owners comments published on two websites that publish a lot of criticism about homeowner associations, boards and vendors that serve them, especially attorneys. The Judge also issued an injunction that prevented the owner from (quoted from order of judge):

"1. Publication in any manner or forum, including, but not limited to, the news media, letters to editors, community newsletters, and internet and blog postings of the name of the B Lazy M Ranch Owners Association, the names of its property owners, or the names of its past and present board members;

2. Publication in any manner or forum, including, but not limited to, the news media, letters to editors, community newsletters, and internet and blog postings alleging criminal conduct, civil wrongs, and mental and/or psychiatric conditions, which refer directly or indirectly to the B Lazy M Ranch, the B Lazy M Ranch Owners Association, its property owners, or its past and present board members;

3. Communication by any means, including but not limited to, e-mail, letter, telephone, or in person with any member of the B Lazy M Ranch Owners Association, its property owners, and its past and present board members which in any way alleges criminal conduct, civil wrongs, or mental or psychiatric conditions by any past or present board member of the B Lazy M Ranch Owners Association."

Furthermore, the judge found that enjoining future conduct would not remedy the fact that there were communications published on the two websites that were defamatory and issued this order as well:

"Within 15 days of this Order, the Plaintiff shall contact the American Homeowners Resource Center, the Gazette YourHub, and any other internet website or blog on which she has posted contributions and shall request that all postings made by her which identify or name the B Lazy M Ranch Owners Association, the names of its property owners, or the names of its past and present board members, be removed from said website or blog. Within 30 days of this Order, the Plaintiff shall file with the Court and provide copies to opposing counsel proof of compliance with this Order."

The judgment in this case may be affected by an appeal, if one is filed, and so I will try to follow it and let you know of changes. I will also be posting more information on addressing defamation, as it is a "tort" (civil wrong) and there are remedies.

In all cases where I have been called upon to advise boards, or groups of concerned owners, I have always recommended that the best defense to any defamation claim is to publish facts, and not innuendos, accusations, suppositions, hypotheticals, or assumptions. "Just the facts, M'am." I always say that if you are going to publish something derogatory, that you need evidentiary support for the truth of what you are publishing. If I am asked to draft a communication, I require that the backup information be produced for me so I can verify the truth.

It is interesting to find, as I do in my experience, that the more outrageous or offensive the allegations about HOAs, boards, or even owners when the tables are turned are, the less believable the allegations are. The conduct of producing unfettered criticism without any substantiation with facts can generally be fairly easily countered with a subsequent publication of the facts, if the audience is contained enough. The other thing I see a lot of is someone says something unflattering about another, or, criticizes the other person by sending them (the target person) a communication, and the person assumes they have a defamation claim. The item or comment or statement has to be said or publishes to "someone else" to be defamation. Criticising a person to his or her face is not defamation, unless there are others in earshot and the comments are defamatory.

One last suggestion. If a person feels they are defamed and cannot afford an attorney, he or she can test his or her theory in small claims court in California for a filing fee of about $25, a service fee of $10-$30 or so, and a court appearance. Say an entire board is accused of stealing or embezzling funds through a publication by an owner. I believe that each board member could file a small claims complaint alleging defamation and seek up to $7500.00 (the small claims upper limit) in damages. If a plaintiff is successful there, the perpetrator (defendant) should be deterred from continuing to publish defamatory materials. In fact, based on whether the conduct is so eggregious it could make the"six o'clock news" [a "test" conceived, I believe, by Mary Howell, an attorney in Southern California], the hearing officer is likely to issue fair warning that future publication could result in subsequent multiple damage awards. The more offensive the text, the more likely it is to get the judge's attention and evoke sympathies for the person that is the subject of the derogatory comments.

The small claims remedy is often overlooked but in the hypothetical described, it seems very possible the small claims venue could be an affordable means of addressing defamation. It may not offer the "injunctive" relief (although I believe a hearing officer could issue sufficient warnings to practically effect an order to do or stop doing something), but it is an available venue. In the Colorado case, the HOA and board members were given a $10,000 judgment but I do not believe they recovered attorney fees and I suspect the fees probably equalled or exceeded the award. One has to consider the economic feasibility of pursuing litigation if one does not have the funds to fight based on "principal."

Posted by Beth Grimm at 9:52 PM

December 14, 2007

Would You Like To Win The Next Argument - Or At Least Be Heard?

If you want to win an argument with someone, you may need to try some real tactics - in order to be heard - because that is what it is about - being heard. I am going to concentrate a few messages on this topic, because I expect to be teaching and writing on this subject often in the months ahead. Here are some tactics that tend to work, if there is any chance of having a decent exchange.

One: Let the other person spout off some during the discourse. You cannot get through to someone who is filled with anger, righteousness, indignation, or a burning desire to be "heard"! Once that someone has had a chance to rant (no punching or slapping allowed though), they are as maleable as they are ever going to be and while they are coming up for air - it's your turn.

Two: If you begin to sound like a broken record, you need to STOP IT! - even if you feel you are 100% RIGHT AND THE OTHER PERSON OR EVERYONE ELSE IS 100% WRONG. People will simply become immune to your message. If you shake up your message or your approach, or both, that will probably take the someone you are fighting with or the everyone who disagrees with you by surprise, and may even result in getting someone to listen.

These tips are not for my edification - they really work! You can develop your own listening skills, but if the person on the other side of the table has none, then you have to help them out. It's that simple.

Posted by Beth Grimm at 1:59 PM

December 10, 2007

Bah Humbug - Don't Be A Scrooge, Now or the Rest of the Year!

"T'is the Season - Help Owners Figure Out What They Can Do - Rather Than Focusing On What They Cannot"

That is the theme of my latest E-Newsletter. It relates to "Holiday Displays" and other means of expression.

My feeling is that ... "If Boards would just stop with the jerk "bah humbug" reaction and think about it, there must be a feasible proposal for holiday and other displays in any type of HOA that is fair to all residents. People need a reservoir of joy. There is not enough of that going around."

The E-Newsletter focuses some on the law on "Signs, Flags and Banners … and the Like" - in California, which says (Civil Code Section 1353.6) that “... governing documents, including the operating rules, may not prohibit posting or displaying of noncommercial signs, posters, flags, or banners on or in an owner’s separate interest, except as required for the protection of public health or safety or if the posting or display would violate a local, state, or federal law.”
The law goes on to say that “… a noncommercial sign, poster, flag, or banner may be made of paper, cardboard, cloth, plastic, or fabric, and may be posted or displayed from the yard, window, door, balcony, or outside wall of the separate interest, but may not be made of lights, roofing, siding, paving materials, flora, or balloons, or any other similar building, landscaping, or decorative component, or include the painting of architectural surfaces.”

Okay, it is true that the statute says signs, flags and banners may not be made of lights or, basically, other things that are tacky or may cause damage to the buildings. But I provide a reasonable suggestion that could be refined for most any association that has common area buildings: “Non-twinkle lights may be strung on the balconies so long as they are not nailed, stapled, or glued to the building surface in any manner, and so long as they are not left on past 10 pm. All lighting must be supported by proper outdoor and GFI protected cords.”

This offers protection along with the opportunity to express joy for the season.

So consider telling owners what they can do and see what happens. You can go through the rules process to refine this, and include everything they can't, which sometimes makes the Board look like a scrooge is among them, or simply provide a catchall that says, if you don't see it here, don't do it!

And read the E-News, sign up so that you can get it on a regular basis, and enjoy! ... Just visit me at www.californiacondoguru.com, enter the site, and click on E-Newsletter Archive for the December edition and much more.

Posted by Beth Grimm at 11:12 AM

Ballot Revocation - Is it Legal in California?

Here is an elections question commonly asked: "Based on the new [California] election law, how can a homeowner change his ballot selection AFTER it was mailed?"

The new law found at Civil Code Section 1363.03(f) which states: "Once a secret ballot is received by the inspector of elections, it shall be irrevocable."

However, that is not necessarily the end of the inquiry. If the governing documents allow for proxies, and a proxy giver revokes the proxy before the election, then there is a dilemma that needs to be solved, because proxies are revocable. So I think at that point the issue is whether the proxy holder obtained a ballot for the proxy and sent it in, or not. Civil Code Section 1363.03(3) on proxies says: "The proxy may be revoked by the member prior to the receipt of the ballot by the inspector of elections as described in Section 7613 of the Corporations Code." So there is a period where the proxy giver can revoke the proxy (although it should be done in writing) and obtain and send in their ballot or deliver it as specified by the Board.

This is not revoking a ballot, but needs to be explained because of confusion in the new law relating to proxy use and how it fits with the new double envelope secret ballot procedures.

And there are other pertinent questions that might be appropriate. Were the owners mislead or was incorrect or inadequate information provided on the measure when they got their ballots? Is that why they want to revoke?

Maybe there is a good reason to consider allowing owners a second chance at the apple. If "damage control" is needed to head off an election challenge or additional steps are needed in the election process to be fair to those who are voting, then I say, consider the facts and circumstances before giving an opinion as to what to do in any given situation.

Posted by Beth Grimm at 10:52 AM

Who Fixes What When There Is A Common Area Landslide Into A Townhouse?

Here is a not-so-uncommon question of a nature that involves figuring out who is responsible when a problem starts in the common area and "flows" into the private areas of a townhome development.

I own a small lot in a PUD. A landslide occurred in the common area that resulted in damage to the structures. The soil in the common area of the Association gave way and that resulted in a landslide that slid into the townhouses. I am very concerned about the stability of the soil and also want to know who fixes what. The hill behind our complex is very steep. This slope is owned by the association and is part of the common area. Does the Association have legal responsibility to clean up the townhouses, repair the soil in the common area and stabilize the hill behind my lot?

This is obviously a complicated question and there are many factors that may come into play. Any owner or association that finds itself in this situation needs the assistance of some good experts in soil and in legal responsibility aspects. The parties may need coverage counsel to sort out responsibility of another party such as the insurance carriers.

These are the documents that need to be examined as they will dictate (for the most part, and hopefully) who is responsible for what portion of such an event:

The governing documents of the association: In California, the Bylaws, CC&Rs, Articles of Incorporation and any rules or policies related to repairs and maintenance responsibilities need to be examined. One would be looking for areas of responsibility with regard to repairs, insurance required, and maintenance responsibilities.

The insurance policies: The HOA and each individual owner should have insurance coverage for events like this. The HOA policies would generally cover the structures and the owner's policies would generally cover the belongings and often the fixtures and decorations, possibly the flooring and wall covering. One would be looking for primary coverage vs. secondary language, exclusions that may apply to the situation, covered items, and language relating to litigation defense (and whether the limits include defense costs or they are outside the coverage limits).

Expert reports: The cleanup, repair and stabilization efforts are all very involved, too involved for a board member or contractor without hillside stabilization, geological and/or engineering education and experience.

The Board of the HOA will probably direct efforts related to the hillside cleanup, repair, and stabilization. My guess is in most cases the documents will require it. The owners may have responsibility entirely for the inside of their dwellings and any personal property that was damaged (patio furniture, backyard pool equipment, etc.). The question of ultimate responsibility depends on the document review and expert opinions noted above. If any of the parties feels the other is more responsible or responsible for a portion of the development or private townhome than the documents say, then the next question is: was there negligence or intentional conduct that caused the landslide, or did any party fail in a duty or obligation to do their part to protect the hillside stability or the private yard and home areas?

As you can see, this is not an uncomplicated issue and there are many factors that need to be considered. Boards members can get some protection from liability for the decisions that need to be made by consulting the right kind of experts. In legal terms, this is a component of "good faith" that is required in order for the Board member to get some legal "insulation" from liabiity needed to minimize their risks in making decisions.

Posted by Beth Grimm at 10:24 AM

December 1, 2007

The Effect of the Mortgage Crisis on California HOAs

I received this email from my local Assemblymember (Mark DeSaulnier) via email, today.

"Homeownership is a source of tremendous pride and an important milestone on the road to achieving the American Dream. Unfortunately, many Californians are facing the possibility of home foreclosure due to unforeseen circumstances and events. During this crisis, my office is committed to providing you with the most up-to-date information and resources.

The Assembly Democrats are working on legislation to address the current mortgage crisis. For more information, please visit http://adc.asm.ca.gov/issues/MortgageCrisis. The information and organizations listed on the website may help you, your family and friends through these difficult times.

If you have any questions, please feel free to contact my district office at (925) 372-7990.

Sincerely,

Assemblymember Mark DeSaulnier"

This was my response to him:

"Dear Assemblymember DeSaulnier: I work in the HOA industry and the mortgage crisis is creating a homeowners association crisis as well. The delinquency rate in HOAs is increasing drastically, which makes it very hard for an HOA to operate without collecting extra money from those that are able to scrape by to make up the deficits.

What is being done to protect homeowner associations? You know that they support the infrastructure in California by bearing much of the burden for streets, sidewalks, parks, drainage systems and recreational facilities passed on to them by the municipalities.

Beth Grimm,
HOA Attorney and Resource Partner
www.californiacondoguru.com"

It's very scary folks. The subprime lending fiascos trickle down to the entire populace, including those signing on for loans that are able otherwise to bear the brunt of their own debt. If the burden created by overencumbering property with debt remains on the debtors and lenders and others that are trying to find compromises and workouts on the difficult loans, that is one thing. But we all know that as Californians, we are going to have to pay. In HOAs, it is very likely that all owners, assessment paying or those ducking the debt, are going to be hurt by the times.

So a fair question it is certainly fair to ask: What is being done for the HOAs that are suffering because of purchasers who hold no equity and can't afford to pay their loans?

Posted by Beth Grimm at 3:39 PM

November 30, 2007

MOLD, MOLD AND MORE MOLD - Why Do You Let It Grow!

I got 5 calls this week on mold related issues. Most were from homeowners. They all related to water leak issues. The owners who needed help ranged from one who was facing a nearly $50,000 special assessment for clean up after a water leak in his pipes to one that was waiting for a stalled process of repair initiated by the HOA. Many HOAs have been working for the past few years to take steps to minimize the Association's risks overall (by engendering homeowner accountability and responsibility) when a leak occurs in an owners unit and that leak causes damage to the units of the neighbors below. Isn't it sad that the innocents who live below the incident suffer the most!

Even HOAs that have done the footwork necessary to spread some of the risk by making owners who allow leaks to occur over long periods of time for various reasons carry more accountability, and that have pushed owners into realizing they should also purchase insurance to protect themselves from liability from leaks and to restore their portions of the Units need to remain vigilant!!

Understand that if the Board of an HOA responds to any leak situation with the quip: "It's not our problem," those words may come back to bite - hard!

My approach with HOA Boards is to encourage owners to call when a leak is discovered in any condo or townhouse situation (yes - I said any condo or townhouse situation), to immediately investigate and start the work of creating documentation of the issue, whether it be to send someone out to assess what needs to be done, or to do it. Not all attorneys agree with my suggested strategy. Some tell boards to stay out entirely if a leak occurs in a townhouse where the owner owns the "lot".

In any event, the Board should use and suggest contractors, and consult knowledgeable and experienced vendors and lawyers who know what needs to be done in these situations.

It is important to note that even if the governing documents say an owner is responsible for the damage from leaks, if there is any possibility the leak involves the neighbors, the common area, or the association insurance coverage, all of which might involve duties or responsibilities of the Board ... the Board needs to know exactly what happened and needs to demand, or commandere, action to stop the "hemorrhaging" that occurs in the form of mold when a leak is left unattended.

Any given incident can escalate from a $2500 repair to a $50,000 repair, and beyond, and, when something is left to fester out of control, all parties involved, the HOA, the owner, the HOA insurance carriers, the owner's insurance carrier, and the adjuster all start to point fingers. It is then that a now $50,000 repair can escalate into a hundreds of thousands of dollars legal battle.

The moral of the story - act quickly and with the right kind of help! Document everything that you can. And do not bury your head in the sand as it leaves your *** exposed.

Posted by Beth Grimm at 11:14 AM

Blowing Smoke - It Could Become Harder to Find a Place to Do It.

Are you suffering from cigarette or cigar smoke infiltrating your unit through a ventilation system or wafting its way up to your deck when you are trying to enjoy a very fine California sunny day? Should you have to suffer?

I think not. We are on our way to an even healthier environment thanks to proactive municipalities and, as time goes on, more and more proactive HOAs. We have to temper our actions with the times, but the times, "they-are-a-changin."

People across the country are getting relief. I wrote earlier about a Colorado case where the court upheld an HOAs right to enforce a prohibition on smoking in the common area and to address the nuisance caused by second hand smoke. An owner challenged the ban and lost.

At this time, I am writing about laws, ordinances and regulations closer to home. In October of 2007, the City of Belmont passed an ordinance regulating secondhand smoke which may be one of or the toughest in the US on smokers. The ordinance defines a reasonable distance from areas in which smoking is prohibited, and implements a 14 month phase in period for those multi-unit buildings that are included within the purview of the ordinance. It is not a strict prohibition for smoking in multifamily buildings but does address ramifications when neighbors complain about the smoke. The Belmont City website has an entire page on smoking and the issues and you can go there to get links to many places with excellent information about smoking, the damage secondhand smoke does, and where to get guidance and help. Some of the information presented includes this: "The California Air Resources Board (CARB) in January 2006 declared environmental tobacco smoke (another term for secondhand smoke) a toxic air contaminant." The site includes links to such things as:

Press Release Related to 2006 Declaration: http://www.arb.ca.gov/newsrel/nr012606.htm
Fact Sheet Related to 2006 Declaration: http://www.arb.ca.gov/toxics/ets/factsheetets.pdf
Link to Smokers who would like to quit helpline: http://www.californiasmokershelpline.org/

Talk about proactive!

I remember several years ago when I flew back home from the East Coast. There was a group of young Europeans that got off the plane behind me. One said, "I need a cigarette." His companion replied, "I don't think you can smoke in California." I had to chuckle at this.

Maybe we are getting there?? I used to be a smoker. I quit many years ago, not because of anyone harping on me (although my kids did a good job of it). I found that the less convenient it became to smoke, the more it became a stressful experience, instead being the stress reliever I had convinced myself it once was.

One good thing, it's no longer "cool" to smoke - at least in most circles here in this progressive state. Take a look at the older Hollywood movies and you will see a change - very few of the newer movies glamorize smoking ... we've come a long way baby.

Posted by Beth Grimm at 10:27 AM

November 28, 2007

It's Christmas ... Have a Heart!

Some people love Christmas. Some hate it. Some Boards encourage holiday spirit by holding neighborhood contests for the best displays. Others discourage it by putting the nix on all displays. Sometimes there is good reason but usually, if a director is willing to stop with the jerk "bah humbug" reaction and think about it, he or she can come up with a feasible proposal for displays in any type of HOA that is fair to all residents.

Christmas has become complicated, hasn't it? What is politically correct and what is not? At my grandchildren's school, they don't call it Christmas anymore - everything is "holiday". It's darn hard to remember, not to say the "C word" when you grew up on it.

But alas, yes, a more tolerant and sensitive world would be wonderful.

So let's start it off during the "holidays". Let's try to allow those who want to celebrate do it up right! The sooner you put out some positive feedback to the members, the sooner you will deter the undesirable or overboard conduct. Yeah, I know, there is a requirement of circulation of rules before adoption (30 days) that puts you into January. But maybe there is no preadoption circulation for giving owners some guidance as to what not to do so that buildings and roofs will be unharmed, what to do with windows, doors, and other things that would not be considered a nuisance, and if you want to put it into rules, get the jump on next year.

What can residents do and what are they prohibited from doing? That is the first question people commonly want to know. If the answer is nothing, and then everything, then I urge you to try again.

All I am saying is "Don't be a scrooge" ... (maybe that is politically incorrect too). If you give residents some reasonable parameters, they will likely honor the limits. There may be those wishing to "make a point", but I have to believe that the more reasonable a board is in allowing those who wish to join in the holiday spirit, that those who unreasonably push the envelope will stand out like a sore thumb and have a hard time convincing the news reporters that they are subject to bullying and too-stringent rules.

Happy Holidays everyone! (I am one of the believers that this is the best time of year.)

Posted by Beth Grimm at 12:23 PM

November 19, 2007

Angry and/or Frustrated Person Strikes Again in HOA

I wish the following things did not happen. In the past few months I have received emails from owners who have been threatened by board members in a physical way, board members who have witnessed other board members in physical altercations with their fellow board members or with an owner or resident, and board members who have been threatened with physical violence by members of the association, or their tenants or family members, "better ?? halfs", or the criminal element drawn to an association by a resident. I, myself, received a threatening call from a person who turned out to be a board members mentally challenged son, stating that if I came to a meeting up in the outreaches of Northern California I would be chased all the way back to the County line.

What's the matter with people that they believe physical or other threats are appropriate, or worthy, or justified, or rational, or even any kind of solution?? They almost always escalate matters (unless of course the recipient is knocked out, in which case the matter cannot escalate at that moment, but probably will at a later time).

All kidding aside, this is one of the recent notes to me:

"The President of the Board of our HOA struck a member during a heated discussion. Even though the President may have been provoked, I believe the person should be removed from office. What do you think?"

Well, yes! Of course, ... any officer that strikes someone should be removed from office immediately, by the other board members. If the matter involved self-defense, then get help now either from the police, or an HOA attorney, or both!

Any person that holds any position of authority or leadership for the association, including board member, director, manager, vendor, etc., (that has a propensity toward violence or disrespect toward others) is a serious threat to the HOA, not only because of the propensity toward physical violence or other inappropriate actions, but because of the exposure to liability for the actions of that person, through vicarious liability allegations.

Board members and others in a position of authority must exercise restraint, learn some people skills, and live the old addage: "Sticks and stones can break my bones but words can never hurt me." In my book, there is no excuse for hitting someone when a board member is supposed to be acting as a board member (or any other time for that matter).

I except self defense, consistent with the law, which is just enough force to protect yourself or your family, or your property. But if the situation has arisen, it needs attention.

Now you might get a different answer from someone in ... say, ... Texas or Wyoming or in some area of the country where people feel that they may take liberties and fight back in a physical way or with physical threats - but not in a civilized society. Maybe some people consider this appropriate. I read in newspaper right here in California several years ago that at a board meeting in a CID in California, one board member threatened another by telling him or her that he/she (I cannot remember what the sexes were) that the board member had a gun in a shoe box in his closet at home and knew how to use it. Of course, it may not be prudent to quote a newsstory as they are not always correctely reported, but since this was an HOA that had asked me to come and interview with them, the story caught my eye. I declined the interview by the way.

The person who wrote to me about this incident also asked: "Is there a process whereby the Association President can be removed or impeached?"

The other board members can remove an officer from office, in most cases. It depends, of course, on what the bylaws or other governing documents allow. And this, in my opinion, should happen immediately. Removing the person from the board is another story. Recall elections are quite dicey and difficult under the new HOA election law but it is not out of the question. Legal assistance is probably required to get through the maze of laws, and it is not inexpensive. The members can remove a board member from office this way, but the Board cannot do it alone. And HOAs and HOA members must be extremely careful in dealing with recall so as to avoid defamation claims against them. Allegations made publicly better be true and provable, or other issues arise.

A board or member could seek removal of a board member from office by court order (not a cheap process, but perhaps a good choice in some situations), and this situation probably would qualify as far outside of the board members's good faith or capacity as a board member. At the least, in any situation where a board member is threatening physical violence, acting it out, harassing or bothering others, the board should meet with the director, take him or her out of "office" if the documents allow, consider a removal election if the circumstances warrant it, and, next time, calling the police might be in order.

Do you all know that striking someone can lead to a battery claim, both criminal and civil? Do you know that threatening someone in a manner that leads them to believe you will harm them can lead to an assault charge, criminal or civil? Early on in my days as a legal assistant to my brother (who went on to become a San Francisco Public Defender), we had a case we called the $5,000 punch. A civilian was cut off in traffic, and he got mad. He followed the 20-somethings back to their apartment parking lot, drug the driver out of the car and broke his jaw. The "victim" sued the person that called upon my brother to defend, and the "case" settled for $5,000, probably a good deal for the defendant. We always wondered if the punch was worth it.

It is more serious for HOAs as they can be perceived as a deep pocket, the same way as employers often are, and like employers, the entire HOA can pay for the indiscretions of a board member or manager. Thus, the HOA leadership needs to take charge of and deal with situations like this before they get worse, and neutralize parties that may lead to the type of claims identified here.

Posted by Beth Grimm at 10:24 AM

November 18, 2007

Board Meeting Disruptions - What Can You Do?

Board meeting disruptions are a problem in some associations. Here is a recent question sent to me: "Isn't there a law which protects homeowner meetings from being disrupted? Something that allows members to phone the police?"

Unfortunately, there are few laws that protect the association from troublemakers. Most laws that have been passed in the last few years are for the benefit of homeowners, and provide them specific rights, but there are no laws that protect board members or other owners from those meeting attendees who disrupt the proceedings. There are many things the board can try, to get past a problem like this. Adoption and circulation of a policy outlining the discipline that may be imposed for meeting disruptions is one. Use of a Sergeant of Arms may help. Threatening to adjourn the meeting and recommence behind closed and locked doors is one. Video taping meetings sometimes helps. In any case, to find out what your documents allow, and speak with a knowledgeable HOA attorney to get good advice for your association. The methods I suggest are just some of the things associtions that have consulted me have tried. Some worked for one situation, but not for another. When I advise an association, I ask for a lot of details about the "disrupters".

And in any case, you don't need a policy or law to give you permission to call the police. If someone is out of control and unwilling to listen to reason, and you or the Board feels they are a threat or danger, or a trespasser, or unwilling to leave when asked, it is appropriate to call the police.Sometimes the police are responsive and helpful, and other times they are not.

Posted by Beth Grimm at 10:07 PM

November 16, 2007

CRIME IN NEIGHBORHOODS - CAN YOU POST "NEIGHBORHOOD WATCH" SIGNS?

I commonly get questions about what to do about crime in neighborhoods. There are often various conflicting ideas about what should be done. Here is a question related to a group that wanted to get a neighborhood watch going but met resistance from the Board. The Board's concern apparently involved losing important liability protections including insurance coverage that might flow from helping the owners with the NW program. The Board may have been concerned about encouraging "vigilante" activities. As usual, there are many facets to the question of how far a Board should go in trying to prevent crime, and maybe even, how far the Board should go in "encouraging" owners and residents to act. Here is the question:

QUESTION: Does the Board of Directors have the right to refuse the posting of Neighborhood Watch Signs? How can five members of a board be in charge of the safety of a large residential community?

ANSWER: There are considerations above and beyond the simple question of whether the Board can prohibit the posting of Neighborhood Watch signs. As a simple answer with regard to the question of posting signs (IN CALIFORNIA), it would be my belief that the sign law (IN CALIFORNIA) would allow owners/residents to post neighborhood watch signs in their windows as they would qualify as noncommercial signs and banners which the board may not prohibit. My understanding of the NW signs are that they are small, and usually placed in the windows of the people who participate in the neighborhood watch, so those folks can identify each other, and if someone is in distress they can feel free to go to one of those houses. The law says:

“1353.6. NONCOMMERCIAL SIGNS, POSTERS, FLAGS, OR BANNERS; PERMITTED PLACEMENT OF POSTING OR DISPLAY; EXCEPTIONS.

(a) The governing documents, including the operating rules, may not prohibit posting or displaying of noncommercial signs, posters, flags, or banners on or in an owner’s separate interest, except as required for the protection of public health or safety or if the posting or display would violate a local, state, or federal law.

(b) For purposes of this section, a noncommercial sign, poster, flag, or banner may be made of paper, cardboard, cloth, plastic, or fabric, and may be posted or displayed from the yard, window, door, balcony, or outside wall of the separate interest, but may not be made of lights, roofing, siding, paving materials, flora, or balloons, or any other similar building, landscaping, or decorative component, or include the painting of architectural surfaces.

(c) An association may prohibit noncommercial signs and posters that are more than 9 square feet in size and noncommercial flags or banners that are more than 15 square feet in size.”

Now, as to the Board's duty to respond. In my experience with communities suffering from high or increasing crime rates, the more the owners and residents are watchful and can provide meaningful information to the police, such as descriptions of vehicles and people, timing of unwelcome foot or vehicular traffic, etc., the more likely the community is to get the "better" of any criminal element that may be lurking. The movement has to come from the people, the Board cannot fix the problem alone. Criminals tend to move out of a community if the heat on them becomes too hot. If they know they are likely to be watched, they will commonly go somewhere else.

On the other side of things, the posting of these signs tends to lead people coming into the development, perhaps with purchasing a home in mind, to believe that there is significant crime, so it can be a deterrent to sales, and thereby affect property values.

That said, the Board is not "in charge" of stopping crime. But it does have some responsibility toward the members as a "fiduciary" (person or entity in charge of the assets of others).

My approach would be to advise the Board that it is appropriate to afford those who want to get involved in a NWP with a venue, and have someone attend the meeting who has expertise in dealing with community issues like this (someone from the PD and perhaps an experienced lawyer, and some communities have a person who helps groups prepare small claims court cases to present locally) to explain to those present (board and residents) what sort of things are allowed with the NW and what are not (such as vigilante type of activities - threatening, cornering, approaching or fighting with those who come into the neighborhood intending bad activities). It is important to advise the Board and members that the Board is not charged with stopping crime, but rather, that is for the police. However, it (the Board) does have some duty to warn, and I believe arranging for a town hall meeting for the purpose of discussing the issue and allowing the neighborhood watch to operate and allowing the placement of signs helps meet that burden. If there are identifiable specifics or patterns in activity, then there may be more that is needed. If the criminal element is drawn into the community because of a resident, the group may want to look at the "mass owner/family/resident small claims remedy for nuisance". I do not believe that the insurance in place to protect directors would be problematic, unless of course a board member harassed or shot someone or took some action that was outside the scope of a board member's reasonable duty.

Posted by Beth Grimm at 9:17 AM

November 8, 2007

Move In - Move Out Fees - Are They Legal?

This question came in recently:

"Our board recently increased the move-in and move-out fees and the board will collect [more than $600] for every change of residents in a given unit. I question this fee as being out of line with California Civil Code requirements that fees not exceed the costs of that for which they are imposed. Is this legal?"

I get asked this question by clients and non-clients. Sometimes boards do this and really believe it is the best way to go, or claim the money is for repairs after residents (owners or tenants) move out. Some believe that tenants are the problems, and will not acknowledge that owner move-in move-outs can be just as difficult. If I ask about what repairs were needed as to the last move, or the one before that, or the one before that, I commonly get a blank look. In other words, boards cannot often identify damages that justify the fees. If a Board was challenged on them, I think there may be a need to justify them. If the CC&Rs have such a fee, it might be easier to defend, but boards who adopt these kind of fees in the rules can run into problems trying to enforce them. There are certainly cases where they are justified, such as a case where in a high rise, special security measures might need to be implemented that cost extra money for the Association. Perhaps special parking arrangements have to be made (such as in San Francisco) that result in extra costs. If there is a situation where there is an extra cost, the fee could be justified. Maybe there are extra administrative costs (but do they justify a $600 or $700 or more fee?

Now, what is a board to do about a situation where a tenant (or an owner for that matter?) damages common area when moving in or out? The answer would be found in the governing documents, and it might be in the form of a reimbursement assessment, an individual special assessment, or a damage assessment.

I would go for the "damage" reimbursement for the guilty parties, rather than a flat fee, unless there are extra costs that arise when tenants move in or move out, or have a fee for everyone if the extra costs apply to everyone.

Not all attorneys agree with me. But I think many do.

Posted by Beth Grimm at 10:06 PM

October 26, 2007

Agendas - How Important Are They? What Role Do They Play in Meetings?

California legislators are micromanaging HOAs again. A new law takes effect January 1, 2008, that requires HOA boards to distribute agendas with meeting notices. The catch, the Boards cannot conduct business on any item not on the agenda, except for the exceptions. Here's the short scoop. The longer "scoop" with more questions and answers and ramifications is in an article on my website at www.californiacondoguru.com.

What's the short scoop?

To be specific, first of all, it applies to board meetings, not membership meetings. The requirement for distributing the agenda is tacked on to the meeting notice requirements found in Civil Code Section 1365.05(f).

Question: What if the notice of meetings is in the Bylaws or Association newsletter and that comes out before the agenda is set? Answer: Find a way to distribute or post the agenda at least 4 days before the meeting. That might be with the billing statements when they are mailed, in the newsletter if the timing works, or by posting in the common area. It would be a good idea to include another copy of the notice with it, even if it was already distributed. It may not be necessary, but it makes sense.

Question: What if the HOA does not have any common area to post in? Answer: That is a little more difficult. You can mail the agenda, post it by the mailboxes if there are any clusters, put a kiosk up somewhere near a street if there are private streets, a parking area if there is any, on a street lamp, or anywhere there is space available, that you can get permission. Choose the place all owners are most likely to drive by. If you still cannot find a posting place, but you have a website, posting on the website. Use good faith to try and find a reasonable way to get the agenda before the members.

Question: What are the exceptions? Answer:

 The law applies to “nonemergency” meetings only.
 The law does not prevent the Board or its staff or agents from talking to the members about something not on the agenda. It is not muzzled by this law.
 The law allows Boards to communicate instructions to its management and staff.
 The new law allows for taking action on items that come up before/at the meeting that are not on the agenda if certain findings are made as follows (choose from any one of the following)::

(1) A majority of the board members present at the meeting determine that an emergency situation exists.
(2) Two-thirds of the members present at the meeting, or, if fewer than two-thirds of the board members are present, by unanimous consent of the members present, determine there is a need to take immediate action.
(3) The item was on an agenda for a prior board meeting (within a month prior) and did not get put on the agenda for the meeting when it comes up again.

If these exceptions do not work, consider whether it might be more practical to call an emergency board meeting, even if to take place just before the scheduled board meeting or after, to address matters that come up before the meeting but are not on the agenda. Check my website for more information as time goes on. There may be a debate over what (2) actually means.

The statute says:

"Upon a determination made by the board by a vote of two-thirds of the members present at the meeting, or, if less than two-thirds of total membership of the board is present at the meeting, by a unanimous vote of the members present, that there is a need to take immediate action and that the need for action came to the attention of the board after the agenda was posted and
distributed pursuant to subdivision (f)."

It appears to me that the legislation was written incorrectly and that the #2 was meant to refer to members present that are not actually board members (however, for all practical purposes, the directors are also "members". The first reference to 2/3 of the members, and then the reference to 2/3 of the membership of the board, is confusing, and it is quite difficult to analyze why the reference to (note bolded words) "membership of the board" is even in there. I will be writing to the legislator who wrote the bill for an analysis of what this means, and wonder if that will lead to "clean-up" legislation.

There are many other questions that have arisen and they are answered on the most recent article posted to my website at http://www.californiacondoguru.com/hoarticles/articles.html. Look for “Articles” or “What’s new?”
.

Posted by Beth Grimm at 11:06 PM

October 23, 2007

Management Companies - How Much Power Should They Have?

I get a lot of emails from homeowners who are unhappy with management. Of course, it is predictable if the owner is commonly in trouble for breaking the rules or thumbing their noses at management or the board. (Yes, there are those kind of owners.)

But there are situations where management may have too much power. Here are some comments and questions sent to me, and my thoughts on the matter:

"Our current Management Company just simply came in and took over for the previous Management Company without any notice or approval from the homeowners. They took over 2 months before they even had a license to manage a cid. They had said we had no say in the matter since we had no board of directors, they have been friends and business partners of the previous manager who by their own admission was mishandling our funds. Can they do that?"

First of all, a manager or managing agent has to be hired, retained, or contracted to do work. If a managing agent comes in without a contract or written employment agreement, that company or individual does not have the right to perform services, and does not have guidance, protection or authorization to incur costs. And if there is no board, my question would be who is signing the checks? A manager cannot make decisions for an HOA, write their own ticket and sign their own checks, unless of course there is a court order involved, and the person is acting as a receiver, appointed by a judge, which is in fact something that could happen if there are no board members. However, someone would have had to initiate that process. Without it, the owners could call an election and elect a board. Or if there are any board members at all one, two or more could appoint additional board members to serve.

If no one is willing to step up and serve the association as volunteers to end this situation, then I have little helpful advice to offer. I can see why it would be disturbing, and I can imagine that finding volunteers to serve could be difficult, but there are no miracles here that can solve this dilemma. If there is no board to hire, who is going to fire?

Here is another one:

"My question is about Management Companies. Since the Board of Directors is liable and has a fiduciary duty to the association, how much power and authority should they give the management company? How much power and authority should be legally granted a management company? After all, the management company has a vested interest ($$$) to keep the contract. What I have seen over the years is the board relinguishing most control and relying on the manager, and this is what the manager wants. Also, since most board members don't have proper education and knowledge about HOA law, then how do they know whether what they are doing is legal? If all correspondence goes to the manager, then who monitors what the manager does with the correspondence (i.e. letters from attorneys)?"

This is the classic story about how an HOA gets to the point where the manager does more than just manage, by default more than anything else. The answer to the question about whether the board knows management is acting legally is that the board may never know if it operates in a void. So, attending industry group classes, reading up, looking for information, checking references and using good business judgment are things likely to help give a board member some insight as to how things should go. And the answer to the question about who knows what the manager does with correspondence is no one, unless someone is either watching, or has instructed the manager to forward all communications to the entire board. However, there are boards, such as those described herein that want their burden lifted, that may not want to be "bothered" with correspondence.

Here is one more:

"In our condo association our Management Company has full control; the only exception is signing checks with no co-signature. I believe the Board of Directors allowed this to happen without knowing what they were doing. The Manager talked them into refusing any HOA correspondence from any of the homeowners and routing everything thru him, which "could" be filtered. The only thing that the board members do is attend meetings and make decisions based on advice from the Manager. The Manager has told the Board members that they don't really have to know anything about HOA laws and also gives legal advice. Our association has no legal representation."

I received these comments, no questions attached. I have to assume there was a question somewhere in this like: "What can we do?"

I would say, run for the board, campaign, get elected, attend industry functions, read journals, articles, the web, and get involved. However, there probably is a reason the question was not asked. Because the most common answer to that kind of a suggestion is: "I don't have time."

So what else can I say? ... If no one in the HOA steps up to the plate, it is hard to complain to a court or anyone else about wrongdoing... there is little anyone can do. Is it better if an attorney steps in and directs the activities? Or directs the manager? Or gets rid of the manager? What then? ....

All I can say is stop being part of the problem (the complainer) .... and become part of the solution (offering volunteerism and/or leadership services to the association).

Posted by Beth Grimm at 10:46 PM

October 20, 2007

Clotheslines - Don't Get All Tied Up About Them

Clotheslines are becoming a big issue in HOAs. Most CC&Rs prohibit any kind of clotheslines in HOAs. Big surprise. Most developers assume that people to not want to look at laundry hanging on the line. Most attorneys assume that people do not want to look at laundry hanging on the line. Many boards assume that owners do not want to look at laundry hanging on the line. Many people assume that if clotheslines are allowed, the next thing will be clothes hanging over balconies, over fences, and everywhere. Laundry, laundry ..... everywhere.

There are those who are pushing to change this, in fact pushing for legislation to prohibit associations from having such restrictions. As the energy crunch continues, one can expect the supporters of clotheline options to keep pushing.

Here's a thought. In a planned development with single story homes and back yards, why not consider whether to survey your owners to see if they would approve clotheslines in back yards that do not exceed the fence height? If the members surprise you (suggesting that the majority have no problem with the use of clotheslines), then you could take the next step and get the requisite approval for a CC&R amendment, or propose a rule, circulate it to the members, and approve it.

I certainly can understand and anticipate that the general public probably does not want laundry hanging out on balconies, in front yards, over patio fences, and even in yards when homes are two or more stories and people can't help looking down into yards. But, there are those that would not have a problem allowing people to have clotheslines where they cannot be seen without peering over fences. In fact, there are those that would like to have the option of hanging their laundry outside to dry, not just because it saves power, but because it feels good, and makes the clothes and sheets smell good.

If resistance to reasonable energy saving processes continues, it is reasonable to anticipate that at some point in the future, legislation will force acceptance. It has with solar installations, drought resistant plant requests, and it is conceivable clotheslines could be next.

Posted by Beth Grimm at 10:12 PM

October 11, 2007

"GOOD STANDING" - WHAT IS IT GOOD FOR?

What does "good standing" mean and why would anyone like it?

These are my thoughts on the subject - "Good standing" means current with regard to payments of assessments and not in violation of any governing document provisions, including the CC&Rs and Rules. A "good standing" requirement is great - for board member service. If the Bylaws or CC&Rs provide for it, it assures that the Board sets a good example for the membership and respects the obligations of the governing documents. If the documents contain a "good standing" requirement for candidacy or service on the Board, a Director who does not qualify or falls out of "good standing" can be "ousted".

As to voting, it is my belief that requiring members to be in "good standing" to be allowed to vote complicates elections and due process procedures within the community. Generally, my experience indicates that members who violate the regulations or fail to pay assessments don't care if their voting privileges are revoked (and generally don't even bother to return ballots - although they may attend meetings just to stir up issues). However, I have seen situations where important measures are before the community and a sizable contingent of the community that is in violation of some requirement wants to vote it down, just because (because the members do not agree with anything the board does in some cases). In that scenario, it might make sense to have the right to deny the recalcitrant members the right to vote.

However, that leads to the question about what due process is required before an association board can impose the good standing requirement to disenfranchise members. Some documents do say that members of the association lose voting rights if they are behind in their assessment payments. That may be appropriate for "automatic" discounting the votes, but I do not like it. Other documents allow boards to suspend voting rights if a member is behind in their assessments or in violation of the rules or CC&Rs. Well and good - it would be my position that a hearing must be offered before the Board could suspend rights to vote on these bases. Why do I believe this? Because I have seen too many cases where owners have been taken by surprise, even blindsided, by these requirements in a contentious election. In some cases, the Board never imposed the sanctions in any previous election. In some cases, they have initiated the procedures after the election commenced, and sometimes, the facts lead to the obvious ... i.e., that the Board used the suspension or rights to throw an election. And that, of course, is devious and questionable, reprehensible, and, I should think, legally actionable.

As for suspending rights to use of the Association facilities for lack of "good standing", it may work well as a deterrent to abhorrent conduct, such as in the case of pool, laundry room, or clubhouse use. In other words, if a member (or by delegation his or her tenant) must be in "good standing" to use the association facilities, bad conduct may be minimized. A violation of the pool or other facility rules is a violation of the governing documents. And this is a remedy that may be enforceable against the tenants, whereby most other remedies are only enforceable against the owner, even for tenant conduct.

As a recap, suspension of membership rights for failure of "good standing" can be useful, but it can also be misused. Some boards apply the "good standing" requirement only sporadically, inconsistently, or to exert control in the face of controversial issues (sometimes just to keep members from voting who they don't like, or to keep people out of the pool that they do not like). In the course of using the "good standing" remedy, Boards may fail to provide owners with adequate notice and a hearing (required for such disciplinary actions). That conduct could be found to be improper on the part of the Board. For more on frequently asked questions such as this, visit the Guru at http://www.californiacondoguru.com. You will find questions and answers for members, board members, managers and realtors.

Posted by Beth Grimm at 10:12 AM

September 17, 2007

SHOULD DEVELOPERS PROFIT FROM YOUR WOES? HARD SURFACE FLOORING AND NOISE ISSUES.

The installation of hard surface flooring in stacked units in condominiums OR townhouses very often creates serious problems. A very common scenario is that the upstairs people have kids, dogs, door slamming residents, or high heeled shoes involved; while the downstairs people have a love for quiet and solitude. The proverbial "sh_t" hits the fan at some point, and the complaints start. The upstairs people try to keep the kids or dogs down and the downstairs people take to pounding on the ceiling everytime they hear a noise they do not like.

So who is to blame? Who should "win the fight"? Who's right? Who's wrong?

One thing is for sure ... these are very difficult issues to resolve. In some cases, the only satisfactory result is going to be that one or the other, or both, parties need to move. There are intermediate remedies, like adding carpeting, rugs, padding and the like to traffic areas, trying earplugs or ocean waves as a distraction, or, perhaps one can try to "rise above it." However, unforetunately, it is likely both parties end up completely stressed and uncomfortable in their homes, and hating their neighbors. But with the economy the way it is, the sluggish market, and lending issues that are beginning to arise in an attempt to counter the subprime lending fiascos of the past few years, its just not that easy to move.

The sad thing about some of these situations are that the homes are in brand new developments. The developers collect extra profits to upgrade to laminate or wood floors. The public likes these kinds of floors and the belief is that they add value to the units. However, if the floors lead to noise complaints, the opposite can occur - a unit or the entire complex may lose value if there are rampant noise complaints.

What about developers that claim, when asked, that they use extra soundproofing materials to prevent or minimize noise transmission between units from the flooring, and it turns out they either mislead owners, or the "extra soundproofing" is worthless. Many owners feel duped by these representations.

Here's a thought: how about asking developers that build buildings with poor sound transmission, or that collect extra money for the upgrades to laminate or wood floors, to contribute something to resolve the problems? How about contributing those upgrade profits to be used for items or services that may help resolve the disputes that arise over noise transmission? That money could be well spent on carpeting, rugs and padding for the upper units, white noise machines for the lower units, or mediations to attempt resolution between the disputants.

I think that might be fair. What do you think? My next email on this subject will deal with Boards that take actions that allow upper units to upgrade to hard surface flooring without really sufficient padding, and then leave it up to the owners to "duke it out" and claim its a neighbor-to-neighbor issue. And expect a blog on owners who add hard surface flooring in spite of the prohibitions against it. And frankly, I do not buy the commonly proferred argument that laminate flooring is not hard surface flooring (when documents prohibit it) or that it does not increase sound transmission. It is not a reasonable substitute or "like-kind" product for carpeting and padding. When salespeople have to make disclosures about the increase in noise and "echo" capacity with the laminate flooring (which was the case the last two times I purchased it - in a single family, non CID home), you can believe its true.

Feel free to send me an email. Not everyone agrees with me. I recognize that.

Posted by Beth Grimm at 10:35 PM

September 13, 2007

Managers - Boards - Get Your Act Together! Escrow Demands Demand Attention.

Escrow document packages .... the bane of managers, boards, realtors and last but certainly not least, buyers AND sellers .... are the subject of legislation in California. The realtors are looking for a new process for the transfer of governing documents to purchasers. SB 127 was introduced this year by Senator Keuhl in January. It has been amended several times. The latest version, amended August 27, proposes that selling owners must get the document packages (essentially the governing documents and budget, reserves documents and annual financial report, among other things) to a purchaser within "not less than 20 calendar days after the execution of the purchase agreement to purchase title to the separate interest or execution of a real property sales contract or the opening of escrow, whichever is later." The bill would allow the parties to defer the dates by written agreement.

Why is a bill like this introduced? There are at least two very good reasons. Because purchasers need to see the documents sooner so that they can review them and contingencies can be released in a more timely fashion. Because sellers need to start the process sooner in the transaction than a few days before escrow is supposed to close to get the documents together (since HOAs have 10 days from the date of a written request by seller to provide the documents on behalf of the seller).

In a perfect world, the seller would make the request of the HOA to provide the documents early on in a transaction. And the 10 days the board or manager has to respond would be plenty. But what commonly happens in real life? The seller leaves it up to his or her realtor. The realtor waits until the transaction is about to close to scramble for the documents. The board or manager either has a difficult time getting the documents together (in a self-managed association) or has a busy schedule that does not allow immediate turnaround (in the case of an overworked manager). And even if all of the requests and responses are made in a timely way, the document packages are often incomplete and lacking in important components. Many HOAs and managers have posted documents on a document repository website but have not posted all of the documents that are required, or have not updated the documents available on the site. Many boards and managers refer buyers, sellers and realtors to a website for the HOA insurance information and problems arise there as well. Some lenders have trouble getting the information from the website and some will not accept certifications purchased from the site by buyers or sellers.

There are oh-so-many issues that come up, and that is the impetus for this legislation - to push everyone into moving more quickly with regard to getting the document packages together.

A real estate transaction can fall apart for failure on the part of one or more of the parties to do their due diligence in making requests and responding to requests. Boards, managers, and readers: if these obligations are not taken very seriously, it can lead to lawsuits for negligence and breach of duty and/or statutory penalties. Don't get these timelines in this statute confused. This bill does not extend or shorten the time that the HOA needs to respond but it does force sellers and realtors that have been waiting until the last minute to request documents from the HOA to make the requests earlier in the transaction. And while this may leave more time for correcting errors that occur when document packages are incomplete or faulty, it does not eliminate the liability or penalties for failure to produce a full package on time.

The bill is not law yet, but it could be, if not this year, sometime in the future. As the problems continue, so does the determination of the California Association of Realtors to force some kind of resolutions. To see this bill, and compare it with current law, go to www.ca.gov, navigate to legislation and bills, and pull SB 127, and then navigate to California laws and the constitution, and pull Civil Code Section 1368.

And get your act together! At the very least, keep the documents that need to be distributed together in one place and make them easy to get to for purposes of making copies, post them on a website like condocerts.com, or keep electronic copies available for those who can accept electronic documents. And do your best to respond quickly to demands. The sellers and buyers of the world are counting on you!

Posted by Beth Grimm at 10:31 AM

September 6, 2007

POWER MISER - SHOULD YOU PROHIBIT HANGING OUT THE LAUNDRY?

Like water preservation issues in HOAs - (see earlier blog) - one can find dichotomies and opposing forces existing with regard to power (utility) preservation matters.

Question - Airing Your [Dirty/Clean] Laundry.

Here's a common question: "My Association Board is freaking out. A bunch of us got together and started hanging laundry out in our back yards - should they even be looking over the fences? They cannot do this, can they. Isn't preserving power important enough to overcome a stupid restriction like this?"

Answer: Many governing documents, at least in California, contain strict prohibitions on hanging laundry out in yards, on decks, patio areas, etc. If an Association has a prohibition on hanging laundry out to dry in the yard, back or front, it probably is enforceable, yes, even with power grids screaming over triple digit heat.

However, take a close look at the documents to see if such regulations apply only to those clotheslines that can be seen over the fenceline or from other units, streets or homes.

There are two clear camps on this one: to some, It's a bit irritating to have such restrictions. Some people are not offended by laundry hanging out on the lawns and would prefer to exercise the right to preserve power. Some simply like the smell of sheets and clothing dried in the fresh air. Believe it or not, lawyer part of me aside, and maybe its a midwestern thing - I can relate. Laundry blowing in the breeze and freshly aired bedding and clothing evokes fond memories of growing up in a place where there were no backyard fences and neighbors were neighborly.It may be a European thing too. I have seen evidence of this in several instances. One involved the stringing of laundry across the courtyard in a quaint little hotel in Tellum, Mexico, by a group of visiting Europeans.

On the other hand, I certainly understand that not everyone likes the same things. Many prefer pristine yards and perfectly coifed landscaping, consistency in aesthetics and no clotheslines - obviously so, because I have seen this prohibition in many, many documents.

This might be something you want to look for - if you have plans to skip the dryer and concommitant expense.

Posted by Beth Grimm at 6:53 PM

Water Preservation Quandaries - Go With the Flow?

As often happens, one topic leads to another. In a recent blog I mentioned something about many HOA documents having one year limitation on contracts and this lead to some questions about water saving service contracts. Since water preservation is a hot topic, I have had a few quite interesting items come up related to water conservation issues. It brings to mind the quandary of balancing ecological needs and water conservation with common homeowner association restrictions and practices. See what you think:

Question One - Water Saving Service Contracts. Our local municipal government is offering incentives for installation of water saving practices/services in our association and other entities like ours; however, these incentives relate to ongoing services and the minimum contract term is going to be 5 years to take advantage of the incentive program. We have a problem in that our bylaws limit contracts that the Board can approve to one year. Can we take advantage of this without a homeowner vote?

Answer: In California, a large percentage of HOAs have a one year limitation on contracts. (I believe this comes through a Dept. of Real Estate regulation for HOA Bylaws to be approved for initial developments, but do not have a citation handy for it.) As stated in the earlier blog, many boards overlook these limitations. Doing so does not void a contract but it does make the Board look bad and may lead to a breach of fiduciary duty claim. It is better to honor the documents, always.

Now, how to resolve this issue. Like the cable companies that came in years ago (did anyone deal with Astound reps - I did), the company, because of pressure based on these common limitations, allowed in many cases a "one-year-term with automatic roll-over provision-contract". I do not know if this is possible in this municipally-driven situation. Another possibility would be to take a vote of the members to see if they are in favor of getting the incentive. This subject is not one of those that requires the double envelope balloting system and could be accomplished at a membership meeting where a quorum is present or by written ballot under the Corporations Code. The other option is to propose an amendment to the bylaws to allow this type of contract as an exception to the one year rule. That would require voting under the double envelope secret ballot system (see how the legislators can complicate things??). Some common exceptions to the one-year limitation found in California bylaws are: insurance contracts (although the days of 3 year premium-saving insurance contracts are long gone), cable, laundry, and management service contracts.

The issue is whether boards should be able to tie their associations into long term contracts. It makes sense when the contract is beneficial to the membership, but as to various subjects, including common exceptions, the question of allowing one Board to tie up the Association in contracts for several years, even for a beneficial service, can be debatable.

Question Two. Low Flow Toilets: Our board proposed, and the membership passed, a measure that requires Owners to change out high flow (is that the right term?) flushing toilets to "low flow toilets." Can they legally make me change out my toilets? I own them and am responsible for the maintenance of them, and do not want them. They tend to clog rather easily and cause other problems. Can I fight this?

Answer: Yikes - this is a good question. Generally the Association can propose, and members can approve, measures that generally affect the membership. While I would not think the Association Board could demand, based on such a vote, that an owner change out flooring or sinks or tubs or anything that does not have an affect on one's neighbors (unless a defect was found that jeopardized the structures or systems), low flow toilets and shower heads may be a different story. Some people just do not like them. However, because of severe water shortages in this state (California), an Association may be able to justify such a proposal and enforcement of it. All HOA water bills are likely to soar, the State is pushing hard for water conservation efforts, and this is one way of forcing it on people who are holdouts in Associations where the majority of the membership is water-conscious. I do not know of any high court binding authority that specifically applies to this situation, and do not believe there are any laws that support enforcement of such a measure, other than the general premise arising from various cases that stands for the proposition that the restrictions in an HOA can change by owner vote and the will of the majority.

Feel free to send me your thoughts on this.

Posted by Beth Grimm at 6:11 PM

August 28, 2007

Elections in HOAs in California -Round Two

It's been a year now that we have had a completely revamped elections system for HOAs in California (Civil Code Section 1363.03 and following). The final wrap up of the law came in September 2006, with clean-up legislation that made a complicated and imperfect set of laws somewhat less complicated and imperfect. We are still living in the fallout. Here is an all too common question that comes to me:

"Does the new law require us to change our governing documents?"

Apparently, some attorneys are saying that the answer is "yes". Some managers have decided the answer is "yes". However, the answer is an emphatic "No!" The law does not require amendments to the governing documents.
If there is any exception I have yet to see anything suggesting that. I have seen plenty of documents that present some challenging hurdles (like those below), but I have yet to see a set of documents that presents an impossible hurdle. There are ways to conform the rules to satisfy the documents, at least closely, and the law fills in the blanks for things that are unclear.

It is conceivable that in some cases attorneys say the documents need to be changed so that the Association documents will conform to the attorney's rules because the attorney likes his or her rules and does not want to change them. Maybe the rules are really good, and changing the documents is a good idea to simplify procedures. But still, amending the governing documents is not a legal requirement ... and rules can be adjusted to comport with every set of governing documents I have seen to date.

And then there is the problem of rules that were drafted either without any regard to what the governing documents say, or were drafted after the law was signed, and before it was "fixed". Check your rules! Here are some areas to consider, i.e., the most common areas of controversy:

Board Elections at the Annual Meeting. Obviously, under the new law, board member elections cannot be accomplished wholly at the annual meeting. But if the documents say that elections "shall" be held at the annual meeting, and if they say nominations shall (or possibly even "may") be presented at the annual meeting, then it is my belief that there should be an annual meeting involved in the process and the process must allow for nominations at the meeting. This takes some "finesse" in the process. I believe the annual meeting can be the culmination of the collection of ballots and counting (allowing for turnover of ballots at the meeting after the nominations) or it can occur during the balloting process (while the polls are open), or it can be used as the "kickoff" for the annual board election as a night for candidate statements, etc., and the ballots can be sent out afterwards. (They do have to be counted at a meeting but I believe it can be a board meeting after the annual meeting.)

Qualifications. Lots of Boards would like to add qualifications to the election rules. Since the law says that the rules shall contain qualifications, more and more people are asking what they are and liking what they hear. "Good standing" is a perfect example. It usually means current in assessments and not in violation of the governing documents, although some documents do not define it at all. But the last changes in the law specifically point to the fact that the qualifications to be in the rules are what appears in the governing documents. So yes, you may want to amend the documents to provide qualifications, so you can have them in your rules, but you do not want to prevent any person from running as a candidate based on disqualification, without the backing in the governing documents (most likely - the Bylaws).

Proxies. Some are apparently interpreting the new law to mean that proxies are no longer applicable and they cannot be used. The new law does not say that. In fact, it requires reflecting what is in the governing documents. The new law says that HOAs do not have to distribute proxies, and doing so can complicate the intended mail in balloting process, but it does not say it eliminates proxy use. In fact, the request was made to the legislator authoring the bill that proxies be eliminated, but he purposely did not go that far because it was quite controversial.

Adoption of Rules. Some associations amend their documents (owner approval is required) but do not adopt rules, being under the misimpression that the amendment of the documents is enough. It's not. Some associations have not adopted rules, some on purpose and some that simply have not heard about the new law or just heard about it. The law is clear - HOAs shall adopt rules. So buck up and get help and go through the process to get good rules!

Appointment of Inspectors: Some Associations are using managers or the HOA attorney without having any rules in place. You may get away with it once, but the law clearly says that if a paid vendor of the Association is going to be used, the rules must say that.

Cumulative Voting. Cumulative voting complicates things under a voting process that is accomplished for the most part by the mail. In fact, the California Corporations Code says that an election using cumulative voting cannot be conducted by written ballot. But the new elections law requires that cumulative voting be in the rules if it is in the governing documents. So it cannot be eliminated simply by changing the rules. Now this is a case where you definitely may want to seek an amendment to the governing documents; however, the new law does not require that you amend the governing documents - it just requires you to provide for cumulative voting if its in the documents.

The law certainly may complicate things, and things can be simplified by governing document amendments. However, there is no requirement to change the documents to fit the law.

Posted by Beth Grimm at 9:59 PM

August 13, 2007

Long Term Contracts - Be Very Wary

I am starting a series on contracts that will result in a full blown article which will be posted on my website at some point, and will also trigger the next E-newsletter touting the 5 most common - and worst - mistakes that Boards of Directors make in signing contracts. If you want to get on the list to receive the E-newlsetters automatically, go to my website [http://www.californiacondoguru.com] and enter to get to page 2, and all you need to do is signup - that's the only way I can reach you!

Now, for one of the worst situations I have seen. Some boards get locked into long term contracts without even realizing it - I mean really long term, with really long term rollover provisions. These often occur if the Board or management misses a short "window of opportunity" to terminate the contract. When I say locked in, I mean really locked in. Some of the laundry providers' contracts are the worst. Notice that I did not say "service provider". Some do not provide very good service.

POINT 1: Competive Bidding is the Key! Almost Every Contract is Negotiable.

If you have 3 laundry provider contracts to review, and like the terms of one better than the other, talk to the provider you like the best and negotiate!

POINT 2: Long Term Contracts Are The Bane of Boards.

If you are handed a contract that has a term that is more than a year with a rollover provision for the same term that kicks in if you miss the termination date, and there is not a reasonable way to end the relationship if you do not like the service that you (don't get), then run the other way. My question to you: have you even checked your Bylaws to see if they even allow the Board to enter into such a contract? Many Bylaws have a one year limitation on contracts.

You may hear the song and dance from the provider that entering into a long term contract is necessary to allow the provider to recoup the cost of the installation and/or the machines. You may hear that the long term nature of the contract will save you money, and it may, in certain situations, but in others, it can spell disaster. Of course, I advise you strongly to check with your legal counsel with regard to any contract. However, if you end up with a long term in a contract, with no way out, with an automatic rollover provision for the same or a similar long term, that happens automatically, and you forget to calendar the magical 90 day window to terminate, it can be very frustrating, costly and disastrous. (And can someone please tell me who can effectively calendar some event 5 or 9 years out?)

A laundry service provider (or cable, or other provider "selling" the idea of a long-term contract) does not have to lock you into a long contract to win and keep your business; all they have to do is perform. Believe it or not, there are providers that believe performance and satisfaction is important.

There will certainly be more on contracts to come .... stay tuned!!

Posted by Beth Grimm at 6:52 PM

August 6, 2007

A Manager Violates the Davis Stirling Act - What Can Be Done?

This is a question that came in recently. If an HOA Manager fails to disclose to the Board/Association that they are not certified, what can be done? Can they be reported to the Department of Real Estate?

This is a really good question. First of all, the Department of Real Estate does not regulate CID Managers. The Industry more or less is "self-regulating" and there is no state oversight group. Whatever remedies there are would come from California law, and if the manager holds a designation through CACM (California Association of Community Association Managers) or CAI (Community Associations Institute), there might be a remedy there. However, if the manager holds one of these groups designations, there is a good likelihood that they would qualify as a Certified Common Interest Development Manager as the designations were grandfathered up to the year the law was changed to provide the requirements for certification and since, the requirements for achieving the industry group designations are probably going to coincide with the requirements for Certified CID Managers.

Now, what if a person does not disclose that they are not certified?

The requirement comes from here.

California Civil Code Section 1363.1 says (in pertinent part):

1363.1. (a) A prospective managing agent of a common interest development shall provide a written statement to the board of directors of the association of a common interest development as soon as practicable, but in no event more than 90 days, before entering into a management agreement which shall contain all of the following information concerning the managing agent:
(1) The names and business addresses of the owners or general partners of the managing agent. If the managing agent is a corporation, the written statement shall include the names and business addresses of the directors and officers and shareholders holding greater than 10 percent of the shares of the corporation.
(2) Whether or not any relevant licenses such as architectural design, construction, engineering, real estate, or accounting have been issued by this state and are currently held by the persons specified in paragraph (1). If a license is currently held by any of those persons, the statement shall contain the following information:
(A) What license is held.
(B) The dates the license is valid.
(C) The name of the licensee appearing on that license.
(3) Whether or not any relevant professional certifications or
designations such as architectural design, construction, engineering, real property management, or accounting are currently held by any of the persons specified in paragraph (1), including, but not limited to, a professional common interest development manager. If any certification or designation is held, the statement shall include the following information:
(A) What the certification or designation is and what entity issued it.
(B) The dates the certification or designation is valid.
(C) The names in which the certification or designation is held.
(b) As used in this section, a "managing agent" is a person or entity who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development. A "managing agent" does not include either of the following:
(1) A full-time employee of the association.
(2) Any regulated financial institution operating within the
normal course of its regulated business practice.

Civil Code Section 1363.2 which prohibits commingling an association's funds with other funds has a remedy that allows the prevailing party to recocvcer attorney fees for an action filed under it; but it us limited to 1363.2. If a person holds themselves out to be a Certified CID Manager without being qualified, the ultimate worst possible remedy is "disgorgement" of profits. But, it does not appear to me that failure to make a disclosure at all would rise to this level of wrongdoing.

Here are some possible remedies if a board or owner discovers a manager failed to make the required disclosure that they are not a Certified CID Manager:

The Board could probably terminate the contract without having to follow steps in it for termination as this failure to disclose might be portrayed as misrepresentation or even fraud.

The Board or an owner might be able to seek damages (a money judgment) even without having to prove any losses simply because the manager violated the statute (this is called "negligence per se"). However, it is likely that in order to prevail, the party that wants to seek a remedy might have to show the error was on purpose to collect any serious monetary judgment, or show losses.

I do not know of any cases that provide more definitive information about what the remedy is for non-disclosure - that has been the question of the century with regard to the Davis Stirling Act. Because of a shortage of any identified remedies for violations of the Davis Stirling Act, legislators are writing more and more remedies into the law itself, and many of the current remedies involve the right to bring an action in small claims court for the smaller and limited jurisdiction cases.

Posted by Beth Grimm at 9:57 PM

May Associations in California Force Owners To Plant Greedy-Water Plants?

Homeowners associations are usually allowed to set guidelines relating to what owners in them can plant in their yards. These would normally be called landscaping guidelines.

Sometimes Boards have stringent guidelines that would prohibit native or water conserving plants.

However, in these days of serious water shortages, water conserving landscapes are "in” vogue in many areas and it is "cool" to replace water-greedy lawns with native plants that require less of such a precious resource. Still, Boards and Owners fight over this. And Developers want "green" to make "green."

So are there limits on what requirements can be enforced?

Yes, there are.

See California Civil Code Section 1353.8 which was added to the State Code last year. It says: "The architectural guidelines of a common interest development shall not prohibit or include conditions that have the
effect of prohibiting the use of low water-using plants as a group."

Posted by Beth Grimm at 9:44 PM

August 1, 2007

What If A Pre-Meeting Agenda Is Required But There is No Place to Post?

You may have read the earlier post about a bill in California that is pending that would require Boards to circulate an agenda before each board meeting so that members could see what matters were to be discussed. The bill would also prevent Boards from discussing or taking action on items that were not on this agenda. Of course, this could make life even more difficult for Boards and more expensive for homeowners in associations in California. What else is new, really.

There are exceptions to the rule in the bill (those present can override the requirement on subject matter that is an emergency and needs action), but one would not want to rely on that. If the bill becomes law, which is likely, the disclosure may be difficult for associations that do not have any common area place to "post". The law would require (as to notice):

Notice shall be given by posting the notice in a prominent place or places within the common area and by mail to any owner who had requested notification of board meetings by mail, at the address requested by the owner. Notice may also be given by mail or delivery of the notice to each unit in the development or by newsletter or similar means of communication. The notice shall contain the agenda for the meeting...."

So the question arises - what if there is no common area? Here is a specific note from a reader:

"I see you have discussed the new (pending) law in the blog, but I see no guidance about where such an association as ours (862 separate homes, with no commons buildings, no central bulletin board, etc) would be expected to post."

Does the Board have to send a mailing to each owner? Of course, this could get quite onerous and quite expensive if before each monthly board meeting a mailing had to be arranged. So what are the options?

**If there is an entry gate or this is a gated community, then crafting an aesthetically pleasing frame or box and posting it on the entry kiosk or area is an idea.
**If there is any set of kiosks for mail delivery, this is an option.
**Are billing statements mailed to owners each month or quarter? If adjustments can be made to mail billing statements out so they reach owners at least 4 days before the meeting, the notices and agenda could be sent with the billing statements.
**It is possible that "...or by newsletter or similar means of communication..." could mean posting on the association website (assuming there is one).

So long as you would allow owners to ask for mail delivery of the agenda if they do not have internet service, this would seem reasonable to post the agenda on the website, especially in a community where there is no place else to post the agenda.

If this bill passes and any member challenges the method chosen by the Board to provide notice to the owners, that member will probably have the burden to show that the method used was not a reasonable means of notice. Obviously, it is easier to pre-schedule the meeting dates and times than it is to pre-schedule the agendas as putting the agenda together for each meeting generally occurs shortly before the meeting. If this bill passes, it will definitely present challenges for Boards. Everyone will have to move up the timing for agenda preparation rather than waiting until the last minute. And an item that comes up after the agenda is put together will have to be treated as an emergency matter and handled either by the statutory exception in the proposed bill at the open meeting or, possibly (don't take my word for it - consult your own attorney), via an emergency board meeting as authorized by Civil Code Section 1363.05.

Unforetunately, as with every difficult bill that offers more to the individual owners, the job of the Board gets more and more difficult and the costs of the association increase. There is a trade off for almost every piece of legislation that is passed so no legislation should be considered lightly. Every board in California has the option of contacting their local legislator and discussing these difficulties, but like every other aspect of HOAs, apathy reigns and the legislators probably will not hear from many individual boards or board members on this issue. So who's to blame?

Posted by Beth Grimm at 9:57 PM

July 11, 2007

PREPARE TO BEWARE - Are HOA Transfer Fees Onerous ... Or Not?

You are trying to buy a home in a common interest development (condo, townhome, or single family home with shared amenities or common areas), either your first home, primary, vacation home or rental, or investment property. If you (the buyer) do not ask for an estimate of “good faith” settlement costs at the earliest possible moment from your lender or broker, you may get the surprise of your life down the road a ways. If you are the buyer, or the person refinancing, and you scraped together the down payment, and think all additional costs can be “wrapped into” the loan and amortized over 30 years, think again. And if you are the seller calculating the firm “bottom line”, and subtract the commission only from the amount of proceeds needed to get there, you may end up very disappointed. Alternatively, if you overestimate costs, you are more likely to be happy when the transaction is completed, as you will then come out better than you thought. It's better to feel good than be enraged and in the mood to sue, as was the case of the Browns and the Berrymans mentioned in the blog from July 10.

It is the seller's responsibility to get many disclosures and documents to the buyer, and at seller's cost. A seller can ask the HOA to do it. This saves the seller the work in getting together the documents and the risk in missing some important required document. Using title companies and lenders that offer professional services in a sale closing is advantageous for those reasons. Lenders and title companies take steps to obtain the documents to be placed in escrow and require buyer to initial or sign off on the documents in escrow, so do not think you can avoid having to pay the HOA fees if you copy your own set of documents you got when you purchased and hand them over to buyer.

Fees, fees, and more fees, count on it. Sellers of condos generally have to pay the commission and some closing costs, often the home warranty cost, and the HOA fees for documents and transfer of title. Purchasers generally have to pay closing costs. This varies somewhat even within different jurisdictions in California, but the truth remains, the fees add up. Seller and buyer pay alot for fees. However, in the overall scheme of things, the HOA transfer-related fees are a relatively insignificant expense compared to other costs. Purchasers pay about 8-10 times more for "closing costs" (which include lender and title fees) than the seller pays for HOA fees. Don’t get me wrong, I definitely am not recommending that you avoid using professional resources like title companies to try and save money; you can get yourself into much more costly trouble by avoiding professional help.

Now, just to compare a few things. I recently had reason to examine a good faith closing estimate on a transaction where a piece of property sold for approximately $400,000, with financing of approximately $300,000. These were the fees that were charged (not including the broker fee, appraisal, and the 2 title insurance policies that were required):

LENDER FEES: Tax service $68, credit report $12.50, processing fee to broker $695, processing fee to lender $575, cost of insurance certificate $125. ESCROW FEES: messenger courier $85, email docs to title $50, loan tie in $150, escrow fee $359.50, notary fee $80.00, recording fee $80, home warranty fee to need demand $130 (now mind you, the buyer is not paying for the home warranty - the seller is, but the cost charged to “need demand” is $130 and the policy itself only costs $319).

So there you have it - approximately $2500 in costs not counting points, broker fees, appraisals, warranties and title insurance policies. These costs can easily add $5000-$10,000 or more to your costs depending on the value of the property you are purchasing.

$225-$250, the average cost of the fees related to transferring ownership information within the association, which does require administrative time and work, does not sound so bad anymore, does it? It’s all relative to your mindset and expectations. Maybe it would be a good idea to adjust those accordingly.

Posted by Beth Grimm at 9:17 PM

July 10, 2007

HOA Transfer Fees, What Charges Are Legal, Proper and Acceptable?

A common question, dare I say complaint, of purchasers of property in homeowner associations and realtors who sell them is: “Why are the transfer fee and document costs so high? All you have to do is send over the association documents and they can’t cost that much to copy things - 6 cents a page should do it.”

There have been two cases in the past three years in California (one very recent) providing binding authority, upholding the concept that although there are some restrictions on homeowner association spending and charges for assessments and other costs, the fees that are charged by a management company for transfer of title and the administrative work performed to assist an association in honoring its obligations under Civil Code Section 1368 are not limited by those statutory restrictions. What does this mean? It means that management companies may include in the costs that are charged to the association (or to the seller, for whom the service is provided) a profit margin and sellers (thye usual party responsible to pay the transfer fee) must pay when these costs.

It makes sense and the court discussed this: the ability to include a profit margin applies to all services that are provided to the association, and all vendors are so entitled. The judges in the cases made it clear that neither the laws nor the case decisions said the vendors that serve associations are required to operate as nonprofits (even though the association is a nonprofit organization) with fees charged to associations for services that are provided including services related to transferring title records and rights from one owner to another. They also opined that the market place and competition would provide a sufficient mechanism to keep these costs effectively under control.

So what is a commonly accepted “transfer” fee? I have asked around, and have come up with a range of numbers that seem to be fairly common: around $100 for documents and $225-$250 for the work related to transfer of title and all that entails for companies or vendors under contract to provide services for the HOA. Of course, if there are keys, key cards, vehicle registrations and a host of paperwork outside the usual - or litigation requiring extra disclosures - or the like - these fees could be higher. One might suggest the standard for self-managed associations should be less as a profit margin would not be allowed according to the cases. In other words, associations are more limited in charges that can be made than vendors who have a right to expect a profit. Essentially, the limitations on associations are the cost of copies and the actual cost to the association of providing the Civil Code Section 1368 information.

My information on the common fee estimates comes from speaking with realtors, title officers, reading the cases, and I myself have had personal experience involving purchase of and sale of condominiums. The recent Berryman case confirmed that this range seems to be in the ballpark. Merit is a very large management company and was charging $100 for documents and $225 each for the transfer of title work in two associations, a master and sub-association, because in the case of the Berrymans’ property, it was located in two different associations. The court did not condemn these amounts nor question the reasonableness of them and I think that has some significance. $100 for the cost of the documents may be high for an association to charge unless it orders the documents from a provider, such as condocerts.com, that provides this service, as the cost of copies and mailing alone probably would not add up to $100. The $225-$250 range may be high for associations as well, since, at least as to the case of Berryman v. Merit, the fee included a profit margin and administrative costs that a self-managed association may not incur.

The two cases on this fee issue are:

2007 - Berryman v. Merit Property Management, Inc. and
2005 - Brown v. Professional Community Management, Inc.

Although these cases proved successful for the management companies required to defend claims of unreasonable behavior, don't think this is the end of the inquiry. For each of the past several years and currently, the California legislature is again reviewing several pieces of legislation dealing with proposed limitations on transfer fees of various types

Posted by Beth Grimm at 9:47 PM

July 7, 2007

More on Flowers - and Exclusive Use Areas

Here is a continuing dialogue on planting flowers in the common area:

A reader responds to me (after the prior June 20 blog) "BUT, if the board allows homeowners to plant flowers outside their units and requires them to maintain their area then what happens when the property is sold and the new owner refuses... because....after all, he/she didn't plant those flowers?"

My answer: Use of a recorded agreement could solve this.

Another question: "Also, I would think that the board would have to carefully define what maintenance is required. In order to plant flowers, it requires good soil, plenty of water and fertilizer and possibly insecticide. Not to mention periodic pruning, depending on what kind of plants or flowers are planted."

My answer: I could not have said it better. The requirements and expectations should be outlined - when expectations are carefully defined, everyone fares better. Differences of opinion are more easily resolved.

Reader, perplexed: "I still don't understand what exclusive use of the common area really means or what it encompasses."

My response: I'm a lawyer, and neither do I ... ha ha ... the answer in each case "depends" on a lot of things that should be considered. Its not the same in every assn. And in many, its not defined well. To fully vet the answer, an attorney would need to review the governing docs for the association, Civil Code Section 1351 definitions, and would need to understand the type of development and how the buildings, common area, and everything is situated to answer the question as to that particular association. The attorney would need to know whether the Board is inclined to or would like to allow individual planting areas and the like. And the attorney would now have to factor in the limitations set forth in Civil Code Section 1363.07 relating to transfer of common area for exclusive use (a new law as of last year) to fully answer the question.

Posted by Beth Grimm at 8:23 AM

Managers Giving Advice On Amending Docs - Be Careful ...

I received a question from a reader about amending bylaws. This is it:

"We were told by our management company that changes in the byaws could no longer be decided by the majority of the board but needed the majority approval of the voting membership just like the CC&R's. Is this true?"

Here is the long answer to the short question. There are two things going on that I think are important to point out:

1. What is required for document amendments; and
2. Is the manager giving legal advice on a question that should have been posed to an attorney. (By the way, I see some variation of this just about every day, sometimes innocently - such as a manager responding to a question by spouting what he or she learned at a recent seminar or by reading an industry journal, and sometimes with the intent of avoiding legal fees. )

So on to the answer to these two items:

There are instances where non material Bylaw amendments can be made by a Board (very few). Tthe Corporations Code allows for this so it would only apply to incorporated HOAs. See the following:

7150. (a) Except as provided in subdivision (c) and Sections 7151, 7220, 7224, 7512, 7613, and 7615, bylaws may be adopted, amended or repealed by the board unless the action would:
(1) Materially and adversely affect the rights of members as to voting, dissolution, redemption, or transfer;
(2) Increase or decrease the number of members authorized in total or for any class;
(3) Effect an exchange, reclassification or cancellation of all or part of the memberships; or
(4) Authorize a new class of membership.

I am not going to recite all of the exception statutes - they cover just about everything. Suffice it to say that the board could not make any material changes at all, and certainly none related to membership, voting, elections and recall, the number of board members, terms, or anything meaninful to the members. The safest assumption always has been that amendment of the Bylaws in a homeowners association requires membership approval and the requirement for the percentage is normally stated in the Bylaws.

When a board is considering amending the bylaws, it is always best to get good legal advice from a practitioner experienced in the particular field of law. Managers do not generally know the Codes as well as an experienced HOA attorney, nor have they seen as many mistakes or misconceptions as an experienced and educated HOA attorney (although there may be many that know more than an inexperienced HOA or non HOA attorney). And this situation is a particularly good example of how the answer can get convoluted by complicated laws. As for recent changes in the law ...

The changes in the elections laws for homeowner association that took effect last year (2006) may be what the manager was referring to, but I am not sure without talking to the manager whether he or she fully understands the impact of the new election laws. The new law does "muddy up the waters" because the new elections requirements do relate to document amendments. The new laws (in a nutshell) provide that anytime the Board is conducting an election to amend the bylaws (or other governing documents) the election must be conducted per the new double envelope secret ballot system . Some might loosely interpret it to mean that all amendments require membership approval but I do not believe that to be the case exactly. See the language:

"Notwithstanding any other law or provision of the governing documents, an election within a CID regarding assessments, 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.

So while it is true that the law does pertain to elections for bylaws amendments when an election is required, it does not require that an election be held for amendments to the governing documents. Likewise, it does not require any election of members to approve amendments to the rules, which are also included within the definition of governing documents.

There is a difference, as you can see. Perhaps the manager, in referring to a recent change, was referring to the new elections laws; but if the manager's "opinion" was stated correctly to me, and the change being explained to the board is stated as it occurred, it reflects a misunderstanding of the impact of the changes in the new elections laws. They do not force or authorize elections on any topic - they simply apply to situations where an election is warranted.

Understanding seemingly minor technical differences can be quite important.

So, to get back to the bylaws amendment question, if the Bylaws are silent on a membership voting requirement, and the HOA is incorporated, the statute recited above would allow some amendments without membership approval (assuming the proposed amendments do not fall into any of the exceptions that are noted which collectively cover just about everything important). And if no election of members is required, that no vote would be required and thus, the new election requirements would have no bearing on the process.

And now, you are probably asking - if the Bylaws are silent on voting requirements to amend, and the subject matter of a proposed amendment is material, then what happens? The answer: any measures that fall into the many exceptions to Board approval would still have to be approved by the members, per the Corporations Code.

So, again, the safest and most conservative position to take on considering amendments to the bylaws is that membership approval is required.

Now, the next question... should managers write bylaws amendments and prepare the voting materials?

I think that is fine, but I also believe before presentation to the members, a board needs to have its election rules formulated and if possible, in place, and needs to have a knowledgeable attorney review the proposed amendment measure to assure it is properly stated so that it does not raise other issues of some kind. A very common mistake in proposing document amendments is to propose a change in language, without identifying that it replaces or supplements existing sections or without proposing a necessary corresponding elimination of lexisting anguage in the documents that needs to be modified or eliminated. Without this extra attention, the Association can be left with difficult conflicts in language and impact as between the original document and the amendments.

And I imagine now you are thinking ... attorneys just complicate things ...
I respond ... contradictory and hard to understand laws provide fuel for the fire!

Posted by Beth Grimm at 7:29 AM

July 5, 2007

HEARINGS - Open Or Closed, What's the Standard?

People have considerable confusion about disciplinary hearings in California HOAs, or are they called "disciplinary meetings"? The law in California sort of confuses things. Here is a question from a reader (and then below is some commentary about how to interpret it and make good use of the "meetings", and the Davis Stirling provisions).

"We been sent a letter from our HOA 'Notice to Appear at Hearing'. Our Rules and Regulations say that the hearing shall be a public hearing and shall be open to all owners. Since we are under the understanding that this is a public hearing we hired a stenograher to attend our hearing. The representitive from the management office stated that we can not do this, it is not allowed unless we have their permission to be recorded. Is this true? "

There are a lot of questions in this seemingly simple question and concommitant statements. I do not have the documents for this association but will say that I believe the proper way to interpret whether the documents or law controls about timing and other requirements for disciplinary action, revolves around this conceptual idea: if the documents require more steps or procedures, or more information than the Davis Stirling Act, and timelines that favor the owner subject to discipline, the documents probably will be considered controlling if the statute is silent about control. This is because the law commonly addresses the minimum standards for due process, and the documents may require more.

Here is what the Davis Stirling Act requires:

Civil Code Section 1363(h): "When the board of directors is going to meet to consider or impose discipline upon a member, the board shall notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the meeting. The notification shall contain, at a minimum, the date, time, and place of the meeting, the nature of the alleged violation for which a member may be disciplined, and a statement that the member has a right to attend and may address the board at the meeting. The board of directors of the association shall meet in executive session if requested by the member being disciplined. If the board imposes discipline on a member, the board shall provide the member a written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action. A disciplinary action shall not be effective unless the board fulfills the requirements of this subdivision."

This is what the Davis Stirling CID Open Meetings Act (Civil Code Section 1363.05(b) says about exeutive session meetings related to discipline:

"(b) Any member of the association may attend meetings of the Board of the association, except when the board adjourns to executive session to consider ... member discipline, personnel matters, or to meet with a member upon the member’s request, regarding the members payment of assessments as specified in Section 1367 or 1367.1. The Board shall meet in executive session, if requested by a member who may be subject to a fine, penalty, or other form of discipline, and the member shall be entitled to attend the executive session."

So, the question arises: Does the member need to 'request' a closed or executive session hearing or will it happen naturally?

Many boards, upon their attorneys' advice, hold owner disciplinary hearings in closed executive session proceedings. Most tell the owner this in a letter. Some acknowledge that the member may ask for an open meeting. If the documents require an open meeting for any hearing on proposed disciplinary action, then there is a conflict with the law, and a determination has to be made about which will be followed. Boards generally assume that a closed hearing will better protect the owner's privacy but sometimes owners would prefer an open hearing believing that they can convince other owners present that the board is off base, or in order to invite others to speak on their behalf and pressure the board not to impose discipline. There is no case guidance interpreting which position may be more correct when the document and the law collide like this.

As for inviting a stenographer, or taping a meeting, members must have permission of the Board. Taping meetings is not a right. The Board sets the standards and parameters for association meetings. There are a number of reasons why this is important - (this being for a later blog).

Posted by Beth Grimm at 9:48 PM

June 20, 2007

May Residents Plant Flowers in the Common Area?

You would not believe how troublesome this subject can be. Here are some questions that have been sent to me on the topic:

Is the Board of Directors allowed to allow homeowners to alter the landscaping outside their units? ... What happens when residents plant flowers or trees in the common area, who maintains them? .... We have a disaster. Residents in our association have taken over the common area for gardens, yes! They are planting tomato plants right in the front yards. ...

The short of it is this: Usually, the Board would be allowed to allow residents to plant in the common area. That is because usually, the documents for the Association give the board authority to regulate maintenance of the common area. There could be restrictions or prohibitions on it, so look closely at the documents. Now the question: is it a good idea?

It is interesting how diverse the opinions of Boards are on this. Some boards want to retain the "cookie cutter" look where everything needs to look exactly alike and in that case a Board would probably be against letting owners do anything. Then, at the opposite end of the spectrum, there are the Boards that let residents do whatever they want to do. In these cases, a common problem is that residents get excited about planting, but not the ongoing maintenance of the planted areas, and then the Board becomes responsible for making decisions about what to do. If they