California Condo & HOA Law

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 13, 2010

RENT SKIMMING - HOA Foreclosure - Desperate Situations

A few months ago I did an E-Newsletter on the rent skimming law in California. For those who do not know what that is, it is when someone buys properties at a foreclosure sale held by a junior lienholder or HOA, rents them out, takes the rents and does not pay any money to the senior mortgage holder whose debt is still viable. This person is "skimming" the rents and often continues to do so until the senior mortgage holder forecloses. There are legal penalties for doing that and there is more on this in the E-News Archives on my website. And HOAs that take properties back at foreclosure sales when the owners do not pay the assessments are at risk if they rent the place out, and "skim" the rents.

However, the HOAs are often in a very difficult position, today more than ever before in my history as an HOA attorney (more than 25 years). The economy and rising number of people who simply cannot pay, or simply "walk away", is hurting the HOAs. The inclination of many banks today to stall foreclosures lest they become owners of HOA properties and be held responsible for the upkeep of the property and assessments is very troubling. It is understandable, given that they are in "business" and have their own set of problems and criteria, but it is hurting HOAs!

I have received the calls from Boards that are desperately trying to find some means of collecting assessment money, or collecting the debt from unpaid assessments, about homeowners and investors who have either committed suicide, skipped town or simply crawled within themselves because of their financial plights. So pushing those parties for reimbursement can be like pushing a dead horse.

If an HOA is considering going through with a foreclosure sale and (assuming the property is upside down or unmarketable for any reason) "skimming rent", I suggest first exhausting all possible options (considering all circumstances) with the owner. I suggest contacting the lender to see what the plan is with regard to foreclosure (although many lenders will not communicate with the association until it owns the property).

If these things lead to a dead end, then the HOA may be left with the difficult (but probably reasonable under this scenario) position of taking the property back at its own scheduled sale and collecting rent from the current occupant, or legally evicting them and getting a rent-paying tenant in there.

Once the HOA becomes the owner of the property, then I would suggest communicating with the bank and encouraging it to move forward with foreclosure if the debt is in arrears (which it most certainly would be), or to consider looking at a short sale. If the HOA has exhausted all avenues considering pursuing the owner, and notified the bank encouraging them to move on the property, it seems really that any party that might pursue the HOA under the rent skimming law would have a lot of explaining to do, and difficulty characterizing themselves as any kind of "victim" of the HOA's action.

These measures are suggested as a way to potentially minimize the possible ramifications under the statute that was designed to punish people who take advantage of the downtrodden and then skim the rents instead of taking proper ownership responsibilities with regard to the property. There are no guarantees of course.

The law was not designed to punish HOAs that have fallen victim of owners who no longer take responsibility and banks that are unreasonably delaying foreclosures to protect themselves and hopefully, if any HOA is pursued under this law, the judge would take into consideration the lack of willful or malicious intent. I know of no cases where the HOA has been pursued and know that attorneys have presented this as an option to consider when all else fails.

Posted by Beth Grimm at 10:52 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 3, 2010

More on Noise and Renters-A Pesky Subject in HOAs and Condos

I probably get as many emails on noise issues than any other subject (except maybe for dogs). Anyway, there are all kinds of variations. This one has to do with renters, teenagers, and nose-thumbing, in a manner of speaking.

Here is the email:

"My husband and I own a condo and below us lives a family of five. For the past three years the owner [leaves for an extended vacation] and leaves his college age niece and nephew at home. They play music so loud during the day that it will shake the pictures on our walls and have had quite a few parties where we have had to call the police due to city noise violations and we are unable to sleep.

All of the above breaks the rules of our HOA, so they have been fined. When we go down to ask the niece and nephew to turn the music down, they refuse. The owner will not respond to our HOA and claims there is no one in the unit so the noise is not from them. The niece has been especially bad now that her family thinks the fines can't be collected. Our HOA says that litigation is our only option, but is it possible for the HOA to take them to small claims for the fines and hopefully change their behavior? It seems that HOA fines and rules are pointless if they can't be enforced."

Yes, it is possible for either the HOA or the offended owner, or both, to take the owner with the offending resident relatives to small claims court. The offended owner could also name the neice and nephew as defendants too, if one could get the names. The claim would be public and private (per the CC&Rs) nuisance. Assuming what this writer says is true, and there is no convincing counter story, a small claims court referee or judge might have a few choice words for the owner, neice and nephew. An individual can sue in small claims for up to $7500 in damages. An association can sue for the fines. The claim of nuisance is personal to the party disturbed. Nuisance damages are hard to quantify, but the more eggregious the claims, and the better the proof or more convincing the story ("he said, she said" can get dicey), the more likely the plaintiff (person bringing the claim) is to recover some monetary damages. Even if there is no damage award, or just a minimal one (sometimes a hearing officer will send a message but award only $1), dragging the offending parties into court may have some positive effects. They won't like it.

As for bringing the association into such a lawsuit, either by pushing it to sue as a plaintiff, or naming it as a defendant, either is a judgment call. An offended owner can do the latter. But no one can force the HOA to sue in small claims if the HOA is not willing to bring a claim against the owner for the fines. If the offended owner so desires, he or she could name the HOA as a defendant too - and the claim would not be for nuisance but for failure to enforce the CC&Rs. Bringing the association in would give it a chance to make a cross claim against the owner (assuming a true account of the facts) for the fines already imposed. But the association may not sue the actual "sh_t disturbers" as the HOA does not have a legal relationship with them. And the Board may not appreciate being brought into the fray. Depending on what kind of message an owner wants to send to the association, and how realistic or assertive the association has been in addressing the violations, it may or may not be to the advantage to involve the association as a defendant. Hopefully, it would agree to file a complaint. The two matters with the same defendants could be heard together. Bringing in the HOA as a defendant would be a judgment call. It is not necessary.

Posted by Beth Grimm at 10:21 PM

May 23, 2010

Fake Security Cameras - A Good Idea?

In the past I have suggested that an association in a highrise building with some entry by seedy people who were perceived to be undesirable gamblers put up signs that the building was "under surveillance" as a means of discouraging visits by people who would not want to be photographed entering thee premises. (The association did not want to spend the money for security cameras.)

Since then, there have been some discussions each year at the annual CAI law seminar about cases involving security issues where owners who were harrmed sued claiming that having the security personnel created expectations about their safety. The suggestion was that associations had to be careful if they hired security because it could create a false sense of security, and therefore, if there was any crime on site, having ineffective security could be worse than none at all. Thus, it could backfire.

I do not know of any case where an association put up signs indicating that the premises is "under surveillance" and got burned for it. However, it could get "sticky" if there was a crime and the police asked if there were any tapes. On the other hand, "under surveillance" can mean a lot of things not necessarily involving tapes.

Here is an email from a reader who wants to know the ramifications of going a step further and installing "fake cameras" in site to give the impression that people were being taped.

"Thank you for all that you do for the HOAs. I have a quick question. When we had a reserve study performed, the person doing the study said that the fake cameras that we have around the property were against the law. He explained that 2 years ago a woman was raped at an HOA that had cameras, she was under the impression that the cameras were working cameras, but when she found out they were not, she sued the HOA and won. Do you know if this information about the cameras is correct, and the law changed to no fake cameras are allowed at HOAs?"

It is possible that there was a case; however, sometimes people mix up info from various cases when they hear too much information at a seminar or multiple seminars. There was a case many years ago where a woman was raped but that fight was over security lighting.

Anyway, it is conceivable that there was such a case, but I am not aware of it - does anyone out there know of one?

If an association creates an "illusion" of security without providing any, I do think it could be a problem. In some cases, bright motion lights might work as well. They can tend to deter nighttime theft and related security issues.

Posted by Beth Grimm at 10:33 PM

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

May 3, 2010

Must a Board Give An Owner A Chance to "Cure" Before Fining?

In a recent email message a reader writes:

"Beth, is it required for the HOA to send a Notice and give the condo owner a chance to remedy the issue before a fine is issued ?"

The answer in California law is that it is necessary to give a hearing notice before fining, but the law does not require that the board give an owner a chance to cure. Whether it is fair or not really it depends on the circumstances. For example, If someone has done something or failed to do something that can be reversed or fixed by the owner, I believe the board should give the owner the opportunity to fix the problem before a fine will be considered. But if the problem cannot be fixed, or the owner has been warned on prior occasions, or the situation if left unattended might invite others to do the same thing, the board might be justified in fixing it right away without further warning.

Posted by Beth Grimm at 9:19 PM

March 24, 2010

Rent Skimming - A Warning to HOAs and Condo Associations

Here is a common scenario in California (and likely throughout the US):

A manager or board member calls with several questions related to the recent acquisition of a unit through the HOA's foreclosure. There may or may not be a person currently residing in the unit so what do you do with them? The HOA may be interested in renting the unit. The unpaid assessment debt may be huge and of course the HOA is interested in recouping those costs. The senior lender(s) may also be in the process of foreclosure (and there may be extremely long delays in their processes).

So what do you do? You get legal advice. See the prior post on the business judgment rule. And hopefully it is good advice.

There are risks with renting in California. California Civil Code Section 890 is a "rent skimming law" enacted to prevent people from buying at foreclosure sales and "skimming the rents off" until the lender forecloses. It also has components for civil actions and criminal actions (for those who do this multiple times, and who "squat" in foreclosure properties and then rent them out to unsuspecting people, take the money and run). There are some protections for individual owners who use the money to pay certain costs. There are no specific protections for homeowners associations, even though they were surely not the "target" in mind when the statute was enacted.

There are hurdles to selling the property as well. Title companies tend to shy away from insuring HOA foreclosed properties - at least in the short term after foreclosure.

Associations are really suffering in these situations when the banks delay their foreclosures. It can take weeks, months or even more than a year before a bank follows through with its foreclosure. So what is an association to do? Especially if someone is living in the unit.

There are things that can be done to try and avoid legal liability. One possibility might be to "escrow" rents collected for a period of time in order to have some money available unless there is a claim. But you have to understand the risks of the statute and make sure that all bases are "covered" to the best possible extent if you are going to take the risks involved.

I cannot stress enough that it is important to understand the law in this area. So get thee to a good lawyer before you get thee into court on a surprise charge of rent skimming!

Posted by Beth Grimm at 3:27 PM

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

February 22, 2010

May an HOA or Condo Board Turn off the Water or the "Juice" for Unpaid Assessments?

Many associations are having a difficult time collecting assessments these days. They are looking for "incentives" to get people to pay. Here is an example of a common question:

"I am in a 10 unit complex. There is one DWP meter for the complex paid by the HOA. [Approximately 1/3] of our annual budget goes to water. If an owner fails to pay dues can the HOA shut off water to that unit? Would our bylaws need to cover this?"

First of all I would say emphatically that an HOA or Condo Association could get into trouble turning off anyone's water if there was no provision in the governing documents (CC&Rs for Condos or HOAs) allowing it.

Secondly, I would not advise amending the documents (even with owner approval) to allow for disconnection of water, electricity or utilities for non-payment of assessments, unless we were talking about a separate corporation in the case of water that acts as a water company.

Third, the potential for trouble if the water, gas or electricity is turned off seems to me to greater than the potential benefit. Without electricity or gas for heat, cooking, etc. accidents can happen (candle use, use of gas and propane stoves indoors, failure of oxygen machines, battery pack wheelchairs and the like used by those who need it) and worse things can happen such as attempts by residents to tap into the services illegally causing damage. Without water toilets don't work, people cannot wash, children go thirsty.

You may get different advice from other attorneys, but turning off basic services is not a remedy I would recommend. And when there is only one system without shutoffs, I do not even know how it would be accomplished realistically.

Posted by Beth Grimm at 9:14 PM

February 5, 2010

Don't Get Bamboozled Into A Lawsuit!

Okay, now I have seen it one too many times and feel the need to vent. There is no such thing as a "slam dunk" in court.

The scenario is this. A party - it may be a homeowner, it may be an HOA or Condo Association board - goes to an attorney and that attorney gets all excited about their "case". He or she says "THIS IS SOMETHING YOU SHOULD LITIGATE, DEFINITELY. IT's A "SLAM DUNK".

Some other word may be used instead of slam dunk. It may be "a great case", "a winner", "you are clearly in the right", or something like that.

I am going to keep this to the homeowners association context because that is where my experience lies. Guess what, it does not always matter if you are in the "right". And many times, the situation seems like you are in the "right" and then you find out you are in the "wrong" - wrong frame of mind I mean.

Something that happens all too often is the attorney says (taking a retainer up front), I need a $5,000 retainer to get the lawsuit started. Since its such a good case it should not be protracted or cost a lot more than that.

What the client hears is "for about $5,000, we can win this case."

When the attorney turns around and says "I need another $5,000 to take this to the next step, now remember, you may be able to recover your attorney fees in this case." the client hears: "{For whatever reason is imagined}, another $5,000 should win it and then you will not only win but get your legal fees back."

... and so on, and so on, until things are up around $25,000 or $80,000 or more. And then the client is in so deep they do not know what to do next.

I do not know whether it is the client who does not hear the attorney, or the attorney who does not present ALL POSSIBILITIES, INCLUDING THE BEST AND WORST POSSIBLE SCENARIOS in any matter that ends up in court. People do not understand additionally that once a lawsuit is filed, and the attorneys fees mount in cost, that one cannot simply drop the lawsuit and expect no ramification. Dismissing a lawsuit does not dismiss the possibility (in California at least) that the other side might file to recover their fees, calling the dismissal a failure to "prevail".

Don't get sucked into a lawsuit without a full understanding of what can happen. To come next, a blog about a true case called: "There's No Such Thing As A Slam Dunk!" And don't forget to look back at this blog: "Should You Get a Second Legal Opinion Before Suing?"

Posted by Beth Grimm at 7:43 PM

December 29, 2009

What Constitutes a Good Reserve Study? Who Should Prepare?

Here are some questions from a loyal blog follower about reserve studies:

"I have searched all over the net and can't find any information about reserve studies. How does an HOA find a qualified company, how does an association know if there reserve study is any good, etc. My nephew has a property management company and he only uses engineering companies ...."

To find these qualified individuals, there are resources. APRA is (Association of Professional Reserve Analysts) can be found at WWW.APRA-USA.COM. You can sign up there for a free E-Newsletter with news and articles about reserve studies. In California, CAI (Community Associations Institute) has 9 geographically located Chapters with directories listing vendors that provide studies (www.caionline.org is the national website to find the local chapters). If you attend expos and seminars put on by APRA, CAI and other industry groups like ECHO (Executive Council of Homeowners) at www.echo-ca.org you can talk to the vendors in person.

A good reserve study has a good component list (those components the Association is obligated to maintain) and a good funding plan that outlines the anticipated life and how the association will raise the money for anticipated repairs and replacement (using reserve funds, special assessments, loans, and otherwise). Contractors, engineers, and financial vendors such as CPAs can be very helpful. It's hard to know if a reserve study is a good one unless you are well versed in HOA finance and building maintenance. But using the right kind of professionals (people who know California law, can assess buildings as to condition, can do financial planning, and the like) for assistance is helpful.

In California, the pertinent laws are found at Civil Code Section 1365-1365.1 and you can get access on my webpage (www.californiacondoguru.com) to The Davis Stirling Act where these laws are found. You can also purchase low cost Primers on the subject of what should be set aside and why, and what investments are proper for reserves. And there is a series on Assessments too, such as how to collect assessments and how to get a large special assessment to pass when needed for repairs.

Just visit the Publications page and look for the Reserves and Assessment Primers.

Posted by Beth Grimm at 11:50 AM

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 18, 2009

Approving HOA Meeting Minutes - What Is The Purpose? What About Timing?

I often get questions about meeting minutes from owners and from board members.

Sometimes it's "how can I get them" or "do they have to be sent to members"?

An owner has a right to get copies of minuntes of HOA and CONDO membership meetings and open board meetings, even if they have not yet been approved as final. (Notice I said "open" which does not include executive session meetings). The Davis Stirling Act says so. And it says they can request them - although owners may have to pay for copies. It does not say the Board of the HOA or Condo association has to send them out. But the Board does have to notify owners each year how they can obtain meetings minutes. In fact, this is an item that is included in the brand new "Disclosure Index" that will be required as part of the annual disclosures made in 2010.

Sometimes the question is "what if they are in draft status and not yet approved as final minutes?"

Boards must provide them upon written request from an owner, whether they are in draft status (in which case they still have to be prepared within 30 days) or have been approved in final form. As for annual meeting minutes, since the meeting only happens once a year, usually (get it? "annual" meeting?), they often remain in draft status for the entire year, only to be brought up at the next meeting.

So, the next logical questions are: "What is the purpose of minutes and what kind of problems are posed when a body waits an entire year to approve the minutes?"

The purpose is easy - minutes are intended to constitute the official record of the meeting, including the establishment of a quorum, the items of business that were discussed, what reports were given, and what action was taken. They ARE NOT a record of what he said or what she said about any item of business or about the board or management or whatever else he or she had to say.

It is important, of course, that they NOT ONLY BE KEPT, but that they be accurate. So, one might ask, how can anyone remember from year to year what happened at the last meeting?

Well, duh, that is what the minutes are for.

Minutes are generally approved by the body constituting the meeting - such as the board for board business meetings, and the membership for membership meetings. In the HOA and CONDO world, how many associations have good attendance by the membership (or for that matter any attendance at all) at the annual meeting? How many HOAs and Condo Associations can count on the same people coming every year to the annual meeting? How many HOAs and Condo Associations can count on the members' memories as the best record of the annual meeting from year to year (especially if wine or beer or, G_D forbid, hard alcohol is served - which it might take to get owners to come to the meeting)?

To top things off, the legislature of California has made approval of minutes at the annual meeting even more difficult. The election law allows the association to count ballots returned by mail toward the quorum for an election, and there are 4 subjects covered by the law (if you want more info check out "Elections After SB 61) on the Guru Website "Main Page"). Approval of minutes is not one of them. So the quandary arises as to whether the returned ballots constitute the quorum for the annual meeting, or just for the election for the measure on the ballot, and if not for the meeting, how do you get a quorum to approve minutes?

Well, practical measures require thinking outside the box here. My suggestions are:

1. Use a committee to review annual meeting minutes within 30 days or so after the annual meeting and make a recommendation to the board as to whether they present an accurate record, or need to be modified. (You can read more about this in my blogs of Feb 21, 2007 and November 14, 2006, and on the www.parli.com website) OR

2. Tie the ballot measure to the annual meeting so you can take advantage of the quorum established by the ballots and people present (counting one per home either way of course). This is not something that the law says you can do, but it is something many HOAs and Condo associations DO, upon advice of counsel. So you may find that your election is challenged on it (but if no one comes to meetings, what is the chance of being challenged on approval of meeting minutes – big deal!). OR

3. If you want to "fix" your association so the law does not bite you, have your bylaws amended so that the ballots received in the election that is tied to the membership meeting count toward the quorum for the meeting. (And yes, I am available – thank you very much.)

You can read more on this subject in the blogs mentioned, including another on my May 18, 2007 (this) blog answering the question: “Our BOD puts copies of the monthly minutes on our doorsteps. Many owners do not live onsite so they do not get them. Is this legal?” OR You can visit my NEW blog called Condolawguru as that blog is republished there.

And of course, yes, I do have Primers that cover minutes including these points and more – see the Operations Primers – Operations – 1 and the Operations Forms, available on the Guru Website in the Webstore.

Posted by Beth Grimm at 9:42 AM

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 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

October 19, 2009

What if the Property Manager is on the HOA or Condo Board?

Here is a good question about "cross purposes".

"Dear Beth, Can a homeowner be on the board and work for the property management company. and if not what can we do?"

It's not against the law. In fact, for some HOAs and Condos it works well. The key is having a degree of separation.

It needs to be clear which duties the person is getting paid for as the manager and which duties he or she is doing for the HOA or Condo as a director. That is an unpaid position in most cases, and the governing documents usually say "no compensation" for board members.

It can work well in HOAs and Condo associations that are not able to afford higher cost outside services, and it can raise all kinds of political issues, if not handled properly. If the person does not educate themselves on HOA and Condo management, that, too, can be a real problem for the association. The working relationship needs to be disclosed. The director may not vote on matters related to his or her contract - he or she must abstain. There is more about this in the Vendor Primer on my website (click on the Webstore or Publications link).

It may seem like some kind of a conflict, especially if the person does things that tick people off or that seem "untoward". But it can work, and there is no law prohibiting it, but there is a required disclosure law when a director has some kind of financial benefit or advantage stemming from his or her position on the Board.

Posted by Beth Grimm at 2:49 PM

October 5, 2009

If You Sue Your HOA, Are You Suing Yourself?

I received the following question the other day:

"If a member of an association sues the association, is he suing himself? Looking for info on that if you could point me in the right direction. The HOA's documents say "each and every owner shall be liable for an assessment"."

Good question. Certainly, If an HOA or CONDO owner sues the homeowners association - the owner is a member of that association and so indirectly becomes a "psuedo-defendant" (not in name but in effect) in the lawsuit because of the shared responsibility as an owner for the association's liabilities.

Thus, if an assessment is needed for legal costs incurred, or to pay for damages, all homeowners share in paying those costs including the owner who filed the lawsuit.

It becomes an even more complicated question when you think about the association's insurance coverage for a lawsuit. If there is no insurance coverage and the association takes a hit, the owners take a hit. If there is insurance coverage, and the subject of the lawsuit is a covered event (such as a lawsuit for an accident in the common area or is a breach of fiduciary duty claim and there is commercial or directors/officers liability coverage), then owners may avoid a special assessment to pay for the lawsuit or any damages. However, the association may thereafter encounter higher premiums for the same coverage next time around when purchasing insurance, or may have trouble getting coverage (depending on the nature and severity of the claim) which also filters down to the owners.

So, are you suing yourself? Not directly. Are you affected as an owner in the Association by a lawsuit filed against it, even if you file it? Yes.

Posted by Beth Grimm at 8:55 PM

September 30, 2009

Is an HOA or Condo or Owner Responsible for A Tenant's Dog's Bite?

A dog can be "man's best friend." It can also be "man's worst enemy." Vicious dogs are a menace to all that are within their reach. Unpredictable dogs are ... well ... unpredictable. There are 11 breeds of dogs that have been identified by some insurance companies as uninsurable. Some HOAs and Condo Boards want to ban these dogs from the development.The requirements for this are for another blog. This blog is about whether HOAs or Condo Associations are responsible for injuries caused by dogs that are kept in the development. There is a case on this. The premise of the case decision is that the absence of actual knowledge of dangerous propensities of the dog is a factor in determining who is or is not responsible for injuries caused by the dog. In the case, it was a tenant's dog that ran out of a unit and knocked down a 71 year old resident causing injuries. Neither the owner of the unit (the landlord), the landlord's property manager, or the HOA Board had any knowledge that the dog in question (the tenant's dog) was dangerous. No complaints had been made to the HOA. Even though the injured party presented testimony of a dog expert that Jack Russell terriers should not be confined to a small area such as a condominium, the judge found that was not conclusive evidence the dog was vicious and likely to attack. So that took care of any "should have known" allegations.

The judge found that neither the unit owner landlord, the property manager, nor the homeowner's association had previous knowledge of problems with the tenant's dog and so they are not liable for negligence or any other cause of action to the injured party.

Here is a quote from the case: "Consequently, it is well established that a landlord does not owe a duty of care to protect a third party from his or her tenant's dog unless the landlord has actual knowledge of the dog's dangerous propensities, and the ability to control or prevent the harm," the judge ruled. The same goes for the association and others that were pursued for damages.

The owner of the dog would have liability; however, the common problem here is that tenants often are without the financial capacity or protection (because they often fail to insure) to compensate a "victim" so that person's attorney often looks around for a "deeper pocket".

The decision discussed is based on the 2006 California Court of Appeal decision in Chee v. Amanda Goldt Property Management, 50 Cal.Rptr.3d 40.

What you should not take away from this blog is a misconception that you are completely safe if you are in an HOA, on the Board, managing the property, or anyone other than a dog owner whose dog causes injury to others. There are plenty of cases that hold HOAs and others responsible for injuries caused by animals when those persons have some responsibility because of their management role over the property where the animal is kept and they fail in some way to assure that those using the property are safe from danger. The key is - when any danger is indicated or reported, or there is a situation where the danger should have been apparent, it is time to do something about it ... what to do depends on the circumstances. Watch for a blog on an idiot, a biker chick, an aggresive german shepard, a pig's ear, and two police officers for a real life question about what to do in a situation where there is an aggressive dog on premises in violation of the rules of the association.

Posted by Beth Grimm at 8:57 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

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

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 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 6, 2009

More on Hardwood Floors/Allergies/Intolerable Noise

Some days questions come in that make me take pause as there is no easy resolution. Here is one that recently came in:

"We have a section in our CC&Rs that state that no unit can install hard-floor coverings when they live above a unit, and/or make alterations that will increase the sound transmission from one unit to another. The Architectural Committee at my community approved our upstairs neighbors to install hardwood floors throughout their unit because [of allergy issues] to carpeting. Now the footfall noise has increased tremendously to such a degree that we cannot sleep if our upstairs neighbors are awake. ... I don't know how we could ever sell our property with the degree of noise that is now being transmitted from above. ... I was not made aware of this application or approval until I heard the construction going on above me and asked about it. Does the Architectural Committee and/or Board have the ability to unilaterally approve such an exemption without my involvement when it would impact another home owner (me and my family) so tremendously?"

This is the long and short of it.

**Most documents do allow boards or architectural committees to make decisions about alterations.
**Some documents have restrictions that would effectively limit what can or cannot be approved.
**Laws through cases and statutes do exist to protect people with disabilities and assure that they, too, can have quality of life, and boards have to deal with those potential issues when considering requests like this for alterations.

So many times, a board is caught between a rock and a hard place (or should I say ... a hardwood floor).

What are the options in this situation?

Boards and ACC:

Check with an accoustics professional BEFORE APPROVING ANYTHING to see what the options are for protecting the neighbors below! And require that cork or some equivalent type of underlayment be included in the installation.

If this was not done ... then the problem is left in the hands of an owner, and an association may be exposed to some possible repercussions.

Other things for all parties to look at:

Rugs and padding that are made of nonallergenic fibers for the areas where traffic occurs. With active children, these tend to be the areas of the longest stretch of running capability.

Rubber based floor coverings such as those used in commercial buildings that deaden noise.

Felt or other soft protecting coasters for furniture and tables holding speakers, TVs, etc. and all furniture, and appliances that have noise making capability.

Requiring removal of shoes - wearing soft sole shoes or slippers when in the home.

Speaking in lower terms as noise echoes through rooms with hard surface flooring.

White noise machines.

Communication, communication, communication.

When parties clam up or retaliate, the problems escalate. Irresponsible actions lead to lawsuits and these are some of the worst for all parties because there is no easy resolution. If parties are obstinate, and the aggrieved party cannot get any kind of satisfaction through attempts to communicate, these are options:

Seek mediation of the issues. If the neighbors or board won't talk to you, call a local mediation service and see if they can get the other parties to the table.

Seek recovery for nuisance in small claims court. Perhaps a hearing officer can help prod the parties to take more assertive action to address the noise issues ... the claim would be nuisance, the request would be for monetary damages, and you can talk to the small claims court advisor about how to file. Some small claims courts have classes on filing a small claims action.

Seek an injunction ordering some kinds of accomodation. For this you will need a lawyer. Also, sometimes a letter from a lawyer laying out the legal possibilities and claims can engender more cooperation or bring a party to the "mediation" table to avoid protracted legal claims.

Posted by Beth Grimm at 6:07 AM

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

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 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

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 27, 2009

HOA Disclosure of Delinquent Accounts - Is It A Breach Of Privacy?

I got a phone call in the office the other day. The person on the other end just said (no hello, how are ya, I am, or I have a question): "Is it a breach of privacy to disclose a homeowner's debt?" I was on my way out to a meeting so I said, "It can be, I'm on my way out to a meeting, sorry, you can call back tomorrow if you want a consultation," and hung up.

(Brevity and lack of manners lends itself to brevity and lack of manners I guess, my apologies if you are out there.) If I had thought it through I would have made it clear that disclosure of private information about the debtor's particular situation is probably a breach of privacy. It is certainly a no no.

Anyway, some Boards want to disclose the names of homeowners who are delinquent; they want to post it on the mailboxes, in the common area, publish it in the newsletter, announce it on a loudspeaker from the back of a pickup truck while driving through the development, things like that. They see it as a way to "make them pay", either from embarrassment or humiliation. But it they can't pay, I think some Board members just consider that a fair trade ... a way to extract a pound of flesh. Not very humane in my opinion. But I cannot come down too hard, I have seen plenty of owners who thumb their nose at the HOA.

Anyway, California law requires HOA Boards to consider recording of liens and moving into foreclosure processes in open meetings. There was a lot of screaming when this legislation was proposed, some of it not so publicly loud - from the angle that Boards would now actually have to consider each delinquency situation in the open, rather leaving the undesirable processes to their collections agent or manager, to conduct behind closed doors. But the other screaming came from issues about privacy. Boards and owners were concerned about public disclosure of debt situations. So, the lawmakers put in some parameters - consider the actions to lien or file a Notice of Default not by name or address, but by APN #. Of course anyone could call the local assessors office and find who is behind in assessments with a parcel number. But at least they would have to work for the information.

Thus, while I do not believe it is patently illegal to post the names of delinquent owners (although you had better be right or the HOA is in for a defamation claim), I do believe the practice should be discouraged. I could see the possibility at some point, of some owner who is embarrassed and humiliated, intentionally on the Board's part, getting some kind of relief in court for breach of privacy. One might use the California statutory mandate to consider properties by parcel number rather than name or address as support for the position that it is not right to humiliate people because they are in debt. And that is consistent with the Fair Debt Collection Practices Act. Maybe there is a pertinent case already from that angle that could be cited as persuasive.

The statute I am referring to is California Civil Code Section 1367.1 which contains the processes for nonjudicial foreclosure.

Yes, it's frustrating for Boards and many are having serious issues finding money to pay the bills, because of delinquencies, but public shame is not on my list of suggestions for successful collections.

Posted by Beth Grimm at 10:22 AM

January 26, 2009

Smoking in HOAs - Is it a Fundamental Right?

Smoking, should we feel sorry for the smokers, or those who have to smell it?

Many want to know if HOAs can ban smoking in common areas, exclusive use common areas (like balconies and patios), or in units.

There are more decisions coming down all over the US on smoking, and the ones I have seen are not in favor of the smokers. There are more City ordinances banning smoking in public areas, office buildings, restaurants, bars and office buildings. So, should we feel sorry for the smokers?

I guess we should feel sorry for anyone that can't kick the addiction but luckily, the spreading interest in protecting the public from smokers helps some. I was a smoker years ago, I had a hard time stopping, but when the ban in California reached restaurants and office buildings, it became harder to smoke than to not.

Yes its hard to stop, but there is no civil liberty disturbed or fundamental right violated when smoking is banned. Smoking is harmful to the smoker's health, and those around the smoker. I have friends that smoke, but I can hardly spend time with them because they always have to go off and take a smoke break, and so I either sit alone in the restaurant or stand outside to talk to them, neither of which is pleasant. When I have friends over, the two smokers spend the evening outside off by themselves and everyone else hangs out and visits. I find myself spending less and less time with these friends. Besides the nuisance, I see them slowly killing themselves and each other with the double dose of smoking and inhaling the second hand smoke of the other.

So besides the health issues, it adversely affects friendships.

And as for banning smoking - we would not let people spray bug spray in our faces, should we let them blow smoke?

I usually try not to take sides on serious issues here in the blog, because I want to present both sides to the public, as an informational thing, and commonly look for balance, but on this one I am firmly on the side of the non-smokers, and so, I believe, is the law.

There are cases that support bans in the common areas, including exclusive use common areas. As for smoking in units, if it is happening and there is no reasonable way to block the transmission into neighboring units, I believe it clearly qualifies as a nuisance.

There is no fundamental right to smoke. And don't get me started on those stinky, offensive cigars.

Posted by Beth Grimm at 9:09 PM

November 23, 2008

Small Claims Court - What Can One Accomplish There?

A reader recently sent this question:

"What legal scope would you see small claims handling with HOA laws. I read they would defend new election laws ensuring secret ballot. Would you think any subject that is clearly defined in the Civil Code? Special Assessment maxes, monthly assessmet increase? This is one of the few the Governor signed!"

The Small Claims courts are unpredictable but I believe they for the most part try to follow the law. One is asked, when appearing there, if you will forego a judge and settle for a referee. Most do that. The referees are not as experienced as judges, but they for the most part try to find the right solution under the law and equities.

That said, I have heard all sorts of things about elections challenges working, going bad, and being pulled up to Superior Court by the defendant Associations. I think a lot probably depends on what is at stake. If someone takes a challenge to small claims court and asks for a viewing of ballots and recount, it seems likely that the referee or judge would tell the parties to arrange it. The official probably will not make an official order to that effect, because that would be considered an injunction and small claims court referees and judges are not authorized to give injunctive orders (telling someone to stop doing things or start doing things). They can accomplish much the same thing, however, by telling one party or the other to do something or stop doing something under a threat of granting damages (a monetary award) if they do/do not listen. A small claims court judge/referee can tell the parties to go out in the hall and talk and try to resolve the matter. They can tell the parties they are going to continue the matter, call them back in 30 days, and see if the problem is resolved. In other words, they can put pressure on the parties to fix the problem.

If someone goes there and asks for a new election, I do not believe there is much predictability in what the judge/referee will say. If there are blatant errors, there could be fines imposed, and so the judge/referee could make threats about that if the election was not rescheduled. If the defendant HOA does not like the outcome/judgment, it can appeal and the matter is heard all over again in a courtroom, with a judge. If the owner does not like the outcome, he or she is out-a-luck. That was the one shot.

If an HOA passes an assessment that is illegal, meaning in violation of a law, then the court officer can grant a judgment to the owner who challenged it for whatever the judge or referee feels was that owner's share of the "illegal" assessment but he or she cannot order the HOA to pay everyone else back. Those people would have to come in on their own. I could imagine, again, however, a judge or referee continuing a hearing - telling the HOA to fix the problem, or suffer the consequences. I have actually seen some real theatrics and unbelievable things happen between the small claims referees and appellate judges and so I cannot say the forum is predictable at all.

However, the California legislature has seen fit to offer it up as a remedy in more and more cases and statutes relating to HOA issues, simply to try and provide a forum that does not cost an owner with a beef against his or her HOA an arm and a leg to get a reasonable resolution of a nagging problem. One can always try it. Just be advised that a decision against the plaintiff (party bringing the action) is the final word on the subject, even if you do not like it. The idea is that the forum is provided as cheap and quick way to address problems, cost effective because attorney representattion is not allowed at the small claims hearing level (although I have seen that violated by attorneys appearing as so-called girlfriends or boyfriend witnesses), and thus, the claimant must not be allowed to "try it on", and then go to plan B if plan A failed.

Posted by Beth Grimm at 5:25 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

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

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 20, 2008

Security Lighting - How Important is It?

This question was passed to me at a seminar today and it is on an important topic.

"I am a single middle aged woman and live alone. The walkways leading to my unit are quite dark, and I feel that more lighting is needed. I do not feel safe at night walking to my unit. I have asked the Board to install more lighting in the common area by my unit, but they refuse, saying if they put it in for me, they will have to put it in for everyone. What is their responsibility?"

This scenario is very similar to one in a leading case in California, Frances T vs. Village Green. Its an older case decision that has withstood the test of time as binding authority. It was raised in the recent case Ritter vs. Churchill which is discussed in a recent blog, where the court pointed out that an HOA/Board can be responsible when safety issues are involved on the same plane as a landlord.

In the case (out of the Supreme Court of California), FRANCES T. v. VILLAGE GREEN OWNERS ASSOCIATION, Sept. 4, 1986, the condominium unit owner brought an action against the condominium owner's association and individual members of its board of directors for negligence, breach of contract and breach of fiduciary duty regarding quite serious injuries she sustained when she was attacked in her condominium unit.

The Court held (among other findings) that: "(1) plaintiff stated an actionable cause of negligence against association for its failure to provide adequate lighting in common areas; (2) plaintiff stated a cause of action for negligence against directors for their failure to take action to avoid harm and for taking actions contributing to risk of injury to residents."

Let this case be a lesson. In the case, the owner asked the Board to put up security lighting.The Board refused. The owner put up some lights and the Board "ordered her to remove them because they were placed in areas subject to association's exclusive authority. The owner was shortly thereafter the subject of a brutal act which which occurred in her unit.

The HOA and the directors were found culpable in Frances T. The court likened the duty of the Board to that of a landlord. Since there had been a burglary in the development, there was foreseeability that criminal activity might occur.

Although one would like to believe that Boards cannot be held responsible for criminal acts of third parties, or for preventing them, they are responsible for dealing reasonably with a safety issue or potential hazard, whatever that might be. They are not expected to hide in the bushes and ward off criminals, and probably are not required to hire and pay for security, but improving lighting in the common area to make residents feel more safe??? That does not seem like an unreasonable request. At the least, it may also help to prevent accidents.

That said, I must offer a cavaet. I would not profess to give legal advice to this association one way or the other, or say the Board is right or wrong, without knowing other pertinent factors such as - do other residents feel the same way? Is the person that is asking prone unnecessarily or unreasonably to fear? Is there existing lighting that the Board feels is adequate? Has there been any criminal activity reported in the neighborhood? Are there people hanging around that do not belong in the Association? Is it a long walk from the parking areas to the units? Are there lots of bushes where someone might be able to hide?

These are all pertinent questions that go directly to the issue of whether there is any "foreseeability" that there might be a crime if the area remains in its current "lit" (or "unlit" state? And they are important ones.

Posted by Beth Grimm at 7:05 PM

September 15, 2008

May A Board Decide To Add A Capital Improvement Without Seeking Owner Approval?

I love it when I get really good meaty questions from readers that, when answered, can help others. This is a good one that works:

FROM A READER: "So here is the question. Can an association randomly just add something to reserves and then build it. Kinda the “If you build it they will come” mindset. I looked at Davis Stirling and our CC&Rs and found nothing really concrete either way. I have read two articles on this subject by two different attorneys and one said that so long as the new improvement fell within budget it was OK. (Assuming that reserve spending was a budget item). The other article noted that “The discretionary addition of new facilities which were not previously part of the development’s original construction, which exceeds 5% of the budget, requires membership approval."

This person is asking for my thoughts on the subject. Here goes ...

Some documents do require a Board to seek membership approval for any capital improvement that exceeds 5% of the budgeted gross operating expenses for a year. Not all do. If there is no such requirement, it is still possible that owner approval must be obtained if the improvement is going to cost more than 5% of the budgeted gross operating expenses, and a special assessment for that amount is needed to pay for it.

As for an opinion that it is okay if it is "in the budget" means that if the Board budgetted for it in the operating budget for the coming fiscal year, it would be a valid expenditure without member approval, so long as the regular assessments were not increased to pay for it (or other increases in the aggregate) more than 20% over the year before,

In some cases, Boards make decisions to add a capital improvement if there is enough "fluff" built into the budget to cover the cost. Sometimes Boards use "windfalls" or leftover funds from special assessments that were paid in for some project for capital improvements.

Not all people (board members, managers and attorneys included) are into "full disclosure" to the members, or even a survey before any capital improvements are made. However, I believe that it is important to see where the members stand before spending the money for something new ... especially in these days when HOA budgets are being tested to the max with foreclosures and rising delinquency numbers.

If the Board tends to spend money whenever it is available for unplanned improvements and other things that might be perceived by members as unnecessary, and there are no limits in the governing documents on spending on capital improvements, I would say that should be of concern to the members.

Posted by Beth Grimm at 5:47 PM

September 12, 2008

Reroofing Next Year? Look for Energy Efficient Requirements

2009 will be rung in with some new energy efficiency requirements including changes in California Building Regulations (Title 24). The California state website is a wealth of information about everything California and references below will point to it. Don't underestimate the value of a visit there to find out what is happening (www.ca.gov). See other blogs on its wide scope, for now, read about new building standards relating to use of energy efficient materials.

See the Article below, which was sent to me by a reader (I got permission to republish it). I did some research to find out what is driving the statement about the cool roof regulations being effective July 9, 2009. I had not heard of a new law on the subject. I found that there are California Building regs that are adopted and will be in effect by that time for certain residential buildings in certain zones. There is a 450+ manual available online (CEC-400-2008-016-D[1]) with the regulations (roof requirements start on page 358) that can be found by navigating through the California Energy Department site on the California website (go to www.energy.ca.gov). There is also a bill that will carry penalties if signed into law for unlicensed contractors or contractors who avoid getting permits and fail to honor energy efficient building construction regulations in 2009 (see AB 785 – listed today as “enrolled” but not yet “chaptered” – meaning not yet signed into law by the Governor, found in the Legislature section of www.ca.gov).

Thank you readers for helping me stay on top of these kinds of issues that affect homeowner associations in California. If you are planning a reproofing project [other building or landscaping also] in 2009 or after, be sure to seek bids from contractors familiar with the new energy efficient building requirements so you don’t get “burned”!

***
THE ARTICLE

For Immediate Release: September 9, 2008
Media Contact: Adam Gottlieb - 916-654-4989
Scientists Promote "Global Cooling"
With White Roofs and Cool Pavements
Scientists Call For International Effort in World's Largest Cities

SACRAMENTO -- California scientists today announced a formula to calculate how much carbon dioxide (CO2) can be offset by increasing the reflectivity of urban surfaces like rooftops. The news was announced at the California Energy Commission's Fifth Annual Climate Change Research Conference.
"White roofs can cut a building's energy use by 20 percent and save consumers money," says California Energy Commissioner Art Rosenfeld. "The potential energy savings in the U.S. is in excess of $1 billion annually. Additionally, by conserving electricity we are emitting less CO2 from power plants," Rosenfeld added.
Together with Rosenfeld, Lawrence Berkeley National Laboratory (LBNL) scientists Hashem Akbari and Surabi Menon have successfully quantified the effects of white roofs in populated settings in terms of CO2 offset. In a study to be published in the scientific journal Climatic Change, Akbari, Menon, and Rosenfeld estimate that replacing nonreflective, dark roofing materials with white ones on an average house with 1,000 square feet of roof would result in an equivalent CO2 offset of 10 metric tons annually. With an offset value of $25 per metric ton, that could be worth $250, according to European CO2 markets.
Scientists have known for centuries that putting white roofs on homes and buildings is a simple and effective way to reflect the sun's powerful rays. Similarly, cool-colored pavements aid in the reduction of "urban heat islands." When rooftops and pavements are more reflective, global warming can be reduced.
Since 2005, commercial buildings with flat roofs in California have been required to have white roofs. Residential sloped roofs are also becoming more efficient. Beginning in 2009, new residential roofs and retrofit constructions in California will be required to have "cool-colored" roofs which reflect a higher fraction of the sun's rays than current roofing materials of the same color.
Because white roofs act as a geo-engineering technique to cool the earth on a global scale, Akbari, Menon, and Rosenfeld propose an international campaign to organize 100 of the world's largest cities in tropical and temperate zones to develop programs to require white roofs and "cool pavements" when roofs are initially constructed and pavements installed. The projected estimate for worldwide CO2 emissions in 2025 is 37 billion metric tons; a proposed global CO2 offset would be 44 billion metric tons, valued at $1,100 billion, and enough to offset more than one year of the total global CO2 emissions.
"This idea of a 'cool cities' campaign could lead to significant energy savings, improved air quality, reduce the heat island effect in summer, and more importantly, cool the globe," says Hashem Akbari. "This simple and effective idea can organize the world into taking measured steps to mitigate global warming. Our findings will help city leaders and urban planners quantify the amount of CO2 they can offset using white roofs and cool pavements."

Note: A copy of the LBNL Research Highlights of the journal article is available for downloading as an Acrobat PDF file.

# # #

Posted by Beth Grimm at 12:33 PM

September 10, 2008

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 9, 2008

RULE SETTING - WHAT RULES ARE RIGHT and REASONABLE?

Board members and owners in homeowner associations (HOA)s commonly have questions and concerns about setting rules to live by. Parking is one area of considerable consternation. People, pets, and pools are just a few others. In this blog, I will use parking as the example for rule setting considerations.

Where does a board start?

Surveying owners is a very good place to start: Pull all of the vehicle related sections from the HOA regulating documents, propose some hypotheticals or suggested rules, and ask for membership feedback. Be sure to identify any problems or concerns that the board sees – the members are sitting on the other side of the table – remember that their view is usually much more different – tunnel vision you might say.

Keep These Perspectives in Mind: Board Members commonly want to know what they can do. Owners commonly want to know what Boards cannot do. You can turn discussions around to the positive by including language in rules like: “This is the problem or concern [articulate it] … and this is the solution we propose: [state rule.]”

Do Not Be Afraid to Explain Current Rules That Are Based on Prospective Concerns: HOA Boards that have to deal with a lack of adequate and convenient parking (which seems to be an epidemic in urban HOAs) have to do something to control parking, or it can easily get out of hand. A resident sees another break the rules, and he does the same, and so on and so on, until the rules become blurred beyond recognition. Of course there are boards and board members that abuse power. However, most boards just want to be able to enforce a few rules of common courtesy, not turn into the “parking police”.

This Is An All-Too-Common Scenario: If residents begin to park in guest-designated parking areas or are allowed to fill up their garages or carports with “stuff”, others will use their neighbors as their excuse to do the same. People will push the envelope. If the original plan was that each unit would have 2 parking spaces, there will be people that want 3, and if the Board allows that, some people will want 4. If the Board does not remain diligent in enforcement, pretty soon enforcement of the standards or rules becomes much more “challenging”. If you have ever raised children – perhaps you can recall that during the teenage years, fraught with hormones and power struggles, boundary setting was a matter of “survival”. Left to determine their own standards, people commonly forget about the good of the community. It’s a particularly serious problem in HOAs: “If my neighbor can do it, than I don’t see why I can’t.”

The Earlier the Better Is A Good Mantra: If HOAs do not implement reasonable guidelines and boundaries early in the game, residents’ expectations and sense of “entitlement” can quickly blossom out of control, issues become more thorny, and the Board may find itself in a real briar patch. This is true in other areas as well, such as deck and carport storage, installation of hard surface flooring on upper story condos, looking the other way when pets are off leash or someone is out walking without the obligatory doggy doodoo bag, allowing skateboarding, bike riding and sports activities in the parking lots, ignoring rowdiness and drinking at the pool, etc., etc. etc.

Posted by Beth Grimm at 12:49 PM

August 2, 2008

HARDWOOD FLOORS - CREATING A NIGHTMARE ALL OVER CALIFORNIA

This subject crosses over into so many areas in HOAs that I just added it to several categories: enforcement, neighbor-to-neighbor issues, board frustration, owner frustration, legal issues, general CID issues, etc., etc. Here are a bunch of sorry stories sent to me via email and notice the twists:

FROM BOARD MEMBER/OWNER: I am the _________of the ________HOA in _______. A couple years ago we changed our 20 year policy against hardwood floors when one of the owners agreed to install sound-dampening underlayment and get signed “approval” (something akin to a memo of understanding?) that they were OK with the installation. The then-seated board bought into this and now it’s the policy under our architectural guidelines. Now all downstairs units who go to sell after signing the form approving upstairs hard surface flooring have to disclose that agreement to prospective buyers. Personally, I would NEVER sign such an agreement for my upstairs neighbor, but I wonder if she’d sue me for refusing to sign it and thereby not letting her increase the (perceived) value of her unit? It seems like anything is possible in lawsuitland.

This angers me to some extent because I bought a second floor unit (rather than my preferred upstairs choice) because at the time of my purchase the old “no hard surface flor in upstairs units” policy was in effect. Since I wanted hardwood, I had to buy downstairs. Ugh."

UNFORTUNATE DOWNSTAIRS OWNER: I live in the lower unit a condo complex, it's and very small (16 units) and very old building (built in 1950) a few months ago the unit above me was sold and before the new owner moved in she had the carpet removed and the original wood floors refinished....I'm going crazy, I've dealt with it this long because the owner lives alone and I console myself with the fact that she has no children or pets but even with just one person creating the noise it's still a huge problem, she keeps odd hours a frankly the lack of a buffer makes the sound of everything she does travel right into my home. I know she didn't consult the board before doing this because I'm on the three person board, but I also know that our Rules and Regulations don't anything with regards to flooring, only that no noise from one unit should be heard in another unit. I'm worried about how this will affect my property value or ability to rent the unit, especially if she sells or rents to people who do have children or pets.

OWNER LIVING UPSTAIRS THAT CONVERTED TO HARDWOOD FLOORING AND HAD CHANGE IN FAMILY CIRCUMSTANCES: We had our laminate flooring installed over a year ago. We asked our neighbor if he/she had any noise issue and he/she said no. Then our circumstances changed. We [had a baby, got a dog, had a relative(s) move in temporarily, got a new stereo system, a large plasma TV, new speakers, etc.]. The neighbor started complaining about the noise."

The notes go on to say that these writers had obtained architectural approval and that the underlayment that was presented to the Board/ACCs was considered sufficient. And so these owners want to know what they can/should do about the complaints. Two of the writers are selling, and have their properties in escrow, and want to know what to do about disclosures.

The following additional questions were asked:

"Do we have to get acoustical testing done if [the Board/Neighbor] asks for it?"

"If the [Board/Neighbor] decides to sue us for nuisance, would he/she have a case?"

"If the neighbor had complained about the noise earlier we could have [asked the contractor to fix the problem/added some padding or changed the accoustics], but now, we do not know what to do."

"Our board has been notified about the problem - [we] do not know if they will get involved with this issue."

ANOTHER UNFORTUNATE OWNER LIVING BELOW UNIT THAT CONVERTED TO HARD SURFACE FLOORING: I am the original owner of a condo flat that I purchased 15 years ago. Way back then the original builder wisely did not allow hard surfacing flooring in the above units because of the noise level. It was for this reason that I bought the lower unit and I have been happy ever since.

In September of 2007 the unit above me changed hands. It turns out the buyers wanted to put in hardwood floors. The selling real-estate agent (who happens to sit on the board) consulted the CC&Rs and told the buyers that there was nothing stating that hardwood floors were not allowed in the upper units and further that it wasn't even necessary to apply to the Architectural Review Committee (ARC) to make this improvement. For this reason, the buyer simply bought the unit and then removed the original flooring and put in hardwood everywhere.

Needless to say, this has created a tremendous nuisance of noise in my condo. Several months back I complained to the board. The board responded by telling me was no violation of any process or rule by the installation of the hard surface flooring above and that there is nothing I can do.

I've read the language of the CC&Rs concerning improvements and it clearly states that all Improvements that are affixed to the common building must first be approved by the Architectural Review Committee. When I raised the point with the board that the owners did not go to the ARC process, I was told that after launching my complaint, the ARC reviewed the materials used for the floor and that the ARC would have approved the work anyway so it would not have made a difference if they had gone through the normal process in advance.

In summary, a board member has profited from the sale of a unit that required the rules be bent, the board and the ARC have done nothing to enforce their rules, the members of the ARC know nothing of the original builders restrictions on hard surface flooring nor do they know anything about sound level guidelines etc.

This leaves the ball in my court. I have given my contact info to the owners upstairs but they won't get in touch with me. I suspect they don't want to since they believe they have nothing to gain as they have already installed the floor. The board and the ARC really want to sweep the issue under the rug I'm guessing because they don't want any trouble for themselves.

I wonder if there are any building codes, nuisance laws etc. that may protect me in this case? Is there any California condo law that states the noise level cannot change following installation of new improvements in a neighboring unit? Is the ARC required to inform neighboring units when improvements are seeking approval in another unit? I really think if I can show the new owners/board/ARC that they have violated some rule or process that would allow legal action to be taken, they might do something to remedy the situation.

****
So, here are some key questions that I have answered before, and will answer again:
I wonder if there are any building codes, nuisance laws etc. that may protect me in this case? Is there any California condo law that states the noise level cannot change following installation of new improvements in a neighboring unit? Is the ARC required to inform neighboring units when improvements are seeking approval in another unit?

With regard to any given flooring-noise related issue that is brought to my attention, I cannot of course say unequivocally one party [among whom might be the board, the upstairs neighbor, or the downstairs neighbor] is right or wrong, or would win in court if suing or being sued. All I can do is set out a sense of what questions might arise and let the parties or their attorneys have some criteria to consider. The bottom line is that the courts are not really very good at solving these issues unless there is a clear cut "wrong" that can be identified, and in some cases, there is not. I have heard from readers who want to sue, and also readers who have sued or been sued and ended up in court spending a lot of money without getting a satisfactory result. So, I recommend the best course of action is to get all of the possibly culpable parties to the table with a good "neutral" party, possibly a mediator or facilitator of some kind - to see if there is any possible resolution short of ending up in court. If you have been reading my blogs on this subject, you will in fact have seen suggestions for EVERYONE involved, whether the victim of the noise or the perpetrator, or the Board of the HOA. Without reiterating every blog, I will go back over the basics.

1. It is my belief that hard surface flooring added in second story units causes many problems, if not on one day or with one set of residents upstairs and downstairs, then in the future with changes in lifestyles/residents.

2. There are certain questions to ask when reviewing these types of issues with the view toward either "presenting" incentives to get the people to the table, or toward taking legal action. These questions include the following: (certainly there may be more in any given situtation but these are the basic starting point):

Is this a pre-existing condition or did something change, i.e., flooring, neighbors, change in family circumstances, residents (number or age), and if there was a change that is now creating a problem, will it be remedied any time soon?

Did you do anything to cause or exacerbate the noise issue(s)?

Did you do anything to mitigate or minimize the problems or condition leading to the problems?

Did any of the parties violate the governing documents in their actions?

Was there any requirement or duty to make disclosures?

If so, were those disclosures made to the right party?

Are there any viable solutions that do not involve expecting the impossible, such as moving when economics or life logistics do not allow it?

Liability depends on facts and circumstances. Did any party have a duty to the other party? Yes, that of a reasonable, prudent person.

Did any party breach that duty to the other person? That is determined by the facts.

If so, did that breach cause the damages or pain and suffering, nuisance, etc.?

And finally, this is a key question that demands honesty:

Are you just part of the problem, or also part of the solution?

If any of the parties can prove the answer to be "yes" to these questions, there may be a case looming in your future.

Possible causes of action include: nuisance damages under the law for public nuisance and any document provisions prohibiting nuisances (yes, even if permission is given for the alteration).

Possible action for breach of fiduciary duty on the part of the board, the architectural committee, or even the developer, if any contributed to the cause of the nuisance by ignoring, refusing to honor, or leaving out architectural review provisions that allowed one party's actions to destroy the quiet enjoyment of the other party or made their home unmarketable or life intolerable.

Possible action for breach of prudent person duty against neighbor who puts modifications into play that destroy one's peace and quiet and make a home unmarketable.

Possible action for breach of fiduciary duty on the part of an HOA board that fails to enforce documents or reasonable standards in those documents.

Possible action for breach of fiduciary duty for inconsistent treatment of owners with regard to flooring alteration matters.

And probably a whole lot more ...

Take heart. These are serious issues. Do not set processes in motion (or lack thereof) that fail to recognize alterations to hard surface flooring in second story units can ruin people's lives. And even in a case where many problems already exist, and parties feel they are at the end of their respective ropes, there are usually additional things that can be done that they did not think of (some are noted in earlier blogs).

Property values are an important subject, of course, but come on ... peace of mind, restraint, understanding, compromise, and human compassion should be more important. Unless a building is CONSTRUCTED in a manner that focusses on eliminating noise between units, alteration of it in any manner that increases noise transmission ranges from risky to downright irresponsible.

This is such a common subject of my blogs, writings, and the emails I get that I have not only written articles and spoken on the subject throughout the Bay Area and some outer reaches, I have developed several publications with further information on the topic. If you check the publications page, you will see several items which include, but are not limited to, the following, that pertain in part or in whole to this topic and other nuisance situations:

BOOK: THE CONDO OWNERS ANSWER BOOK
PRIMERS:

***4 ON ENFORCEMENT INCLUDING ONE THAT FOCUSES SPECIFICALLY ON DIFFICULT NEIGHBOR-TO-NEIGHBOR ISSUES LIKE THIS ONE
***4 ON ARCHITECTURAL CONTROL THAT FOCUS SPECIFICALLY ON ALL MATTERS RELATED TO ARCHITECTURAL APPROVAL, THE PROCESS, PROBLEMS AND FORMS, ac-2 BEING THE ONE MOST TOPICAL AS TO HARD SURFACE FLOORING ISSUES
***E-NEWSLETTER ARTICLES - AVAILABLE IN ARCHIVED FORM - ON THE SUBJECT

These helpful items are available at a very low cost, given the amount of information contained within ... take a peek..... visit THE GURU (at http://www.californiacondoguru.com.

Posted by Beth Grimm at 1:45 PM

August 1, 2008

Uninsured HOA Funds - Who Pays For the Losses?

An interesting question came up at a legal resource panel this morning. Hopefully most everyone knows that many D&O policies for Boards of HOAs carry an exclusion of coverage for failure to insure, meaning, for example, that if an HOA fails to carry earthquake insurance and the Board or HOA is sued by someone who bears a loss because of that failure, the D&O Insurance would likely decline to provide a defense for the Board or HOA, or coverage for damages.

So, the question is "Does that play out the same way in the case where a Board invests the HOA money in an uninsured account, or the deposits exceed the FDIC insurance limits of $100,000 for the corporation, the bank goes bust, and the HOA loses part of its investment?

I would say "you betcha."

With the cavaet - the facts may have bearing one way or the other. What comes into play are factors like: does the policy language specifically identify types of insurance contemplated, or identify generally coverages such that the uninsured accounts fall into the category? Are there cases in the jurisdiction that play out this scenario to rely on? (I know of none in California but remain to be enlightened.) Was the decision not to get the insurance within the hands of the Board or was it determined by a shortage of available coverage in the marketplace, or was it simply a voluntary termination of or failure to get coverage based on the cost?

As we know, FDIC insurance does not cost money outright; it is there for every FDIC insured investment product. I believe that makes it even more eggregious to ignore the value of it (but maybe that is just me). Granted, the accounts may not be the highest interest bearing accounts .... but

The answer is an unequivocal yes - anticipating the next question to be - does the Board have a duty to protect the association funds?

And the next question I would anticipate is: "So who pays for those losses?"

The answer is the members of the association most likely, because most documents have what are called "indemnification clauses" that assure board members will be protected from claims for negligence, etc. However, there is a "good faith" element to the protection in many cases which means, if there is, that the board members might be liable for losses if they did not act in good faith. The burden of proof would be on the owner to prove the lack of "good faith" which may be a difficult burden, but not necessarily an impossible one.

Boards, for your members, do everything possible to protect the funds of the HOA. Your "job" (volunteer as it is) is not to make money with the association funds, but to seek the best return while protecting the principal so that the funds will be available when needed.

Posted by Beth Grimm at 1:07 PM

July 29, 2008

AFFORDABLE HOUSING ... BMR UNITS ... WHAT IS THE ANSWER?

I have been writing about the problems owners of BMR (Below Market Rate) units experience when the majority of owners want to upgrade or when rehabilitation of the condo building is needed and it takes a large special assessment. I worked with a BMR owner for about a year trying to find solutions - communicating with the Association representatives and City representatives, to no avail. The solutions offered (get a room-mate, sell the place, etc.) were simply not acceptable. Most BMR contracts have prohibitions on room-mates and even if the City will lift them - how many do you need to fund a $10,000 special assessment? And if even if they sell, they are responsible personally for the special assessment, and limited in collecting on the gain if there is one, and have to go somewhere else. Where will that be?

I recently received an email from another frustrated BMR unit owner. This person got into a situation where the monthly assessment doubled in a few years, and two large assessments (over $10,000 each) were imposed in a five year period. I referred that owner to my earlier blogs on the subject, and asked for suggestions on solutions. Legislation has been proposed in California that would allow BMR unit owners to vote independently of other owners on whether they wanted to approve special assessments proposed by the Board, and which actually allows the BMR faction in a common interest development to veto special assessments they cannot afford.

One of the bills (which are AB952 & AB567) is discussed in an earlier blog if you want to read about it.

This is the feedback I received from this reader:

"First of all, BMR units do not belong in high end residences and if they choose do have BMR units they need to offer concessions to the BMRs for costs and improvement assessments since generally BMRs have less expensive amenities (meaning decorations, fixtures, appliances, and sometimes even parking arrangements). Most importantly, all CID residences should assess the HOA dues based on mainly on square footage; at least that way the smaller units aren't subsidizing the larger ones which seems to be the case where I live. I also believe if the developers and DRE were honest about the start up costs (meaning they did not tend to "low ball" budgets in order to sell units), people could make a decision based on more accurate information. If you really want to live in a certain residence or area you will end up having to pay the cost of living for that area. I've been beating my fists against the wall for four years and have decided to walk away. I cannot handle the financial strain or the emotional impact which is just as stressful.

What really distresses me is that the local agencies that work very hard to put people into "affordable" housing, and then turn their backs on those same people when they start to "go under", blaming state laws for their inability to assist homeowners. There are solutions, but they require a government and society that supports social justice and ours isn't quite there yet."

It is true of course that local officials work hard to create "affordable" housing (BMRs)intermixed with other housing by setting requirements and quotas for developers. But I have yet to see a case where those people are farsighted enough to actually propose and carry out a feasible long term solution to keep costs in proportion to the intent of the original plan for the BMR owners which is to "afford" to live there. And the "solutions" that have been proposed such as the legislation giving BMR owners veto power over the imposition of assessments that require an owner vote, which essentially would lower the standards in any development with BMRs to the lowest common denominator, is definitely not the answer. In an earlier blog I made the suggestion that BMRs pay a smaller increase or special assessment than other units and that if this is written into the developer documents, people will know from the start how things will work and costs will be allocated. Of course, the comments back include the issue that this would affect the marketability as between developments with BMRs, and those without BMRs.

The truth is, as I have written, that its a Catch 22 to combine BMR units with regular units where one would expect to profit from the investment. It does not seem to work well for either group, because those not BMR tend to want to spend money to maintain, improve, and upgrade and BMR unit owners just want to be able to survive.

Any other suggestions? Send them on to me through my website at http://www.californiacondoguru.com.

Posted by Beth Grimm at 9:13 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

July 7, 2008

MORE ON PARKING - WHAT RULES ARE RIGHT?

I like it when people email me their questions and concerns. It gives me the perspective of both sides. There would be fewer disputes in the HOA world if people could see clearly in all directions, and have some understanding and compassion for others in their own actions, whether a director or a homeowner or anyone else.

Here is the latest comment on parking:

"There was some good reading on your blog about condo community parking (where, how, ethics, etc.), so I thought it would be helpful if you could provide information about what HOA's can't do as far parking rules. In my community, they banned all residents from parking anywhere but their garages. I understand that residents cannot park in the visitor parking places, but they banned the street as well. This makes myself as well as many others upset mostly because we have tandem 2-car garages (one car in front of the other). So its nice to be able to use the street to park the car in front temporarily while we use the car in the back of our garage. So while there is no other parking literally for miles, I guess my question is: Can they banish residents to only use their garage for parking and not provide any other places at all?"

They can, and do. HOA Boards that have to deal with a lack of adequate and convenient parking have to do something to control parking, or it can easily get out of hand. Of course there are boards and board members that abuse power, and I believe it is fair to acknowledge that.

However, the problem above started with tandem parking. Whoever invented that? Of course its inconvenient. And it causes all kinds of problems. Why have it? ... So more can be crammed into a smaller area, obviously, which means more bang for the buck for the persons who created the "footprint" and plan for the development.

Who pays? The citizen who buys there. Is that fair? Did you not think of the ramifications when purchasing?? I am guessing not. So whose fault is it? Who should pay?

If the HOA lets people park on the street temporarily, people will park on the street permanently, and if there are set hours, people will move their cars every so many hours. If a lot of people park on the street, a lot more will start parking on the street. People will think since there is plenty of street parking, its okay to have extra cars. I can almost guarantee that will happen over time. And HOAs that did not start controls early in the game, which left open the door to parking expectations, can develop big problems. And those problems become the owners problems. Bumper to bumper street parking has occurred in many HOAs where parking is limited - and especially where tandem garages were implemented to save space.

That said, the HOA gets its authority for parking and other rules from the governing documents. If the documents say that the streets may be used for parking or that the open parking spaces are restricted to non-exclusive use, then the documents control what can be put into rules on those points and the HOA Board should not adopt rules that conflict with the language.
If, however, the documents say that the Board can adopt rules related to parking in the development, then that controls over what the owners might want.

That's the best answer I can give you. My experieince is that Boards that come to me for advice generally tend not to adopt overly restrictive rules until there is a good reason. In some cases, I may be the culprit by suggesting more rules than they have, simply because I have seen many times what a lack of restrictions in the areas of people, pets and parking can lead to over time.

I would be surprised if anyone got "nailed" for parking on the street just long enough to move cars around in the garage, but if someone wants to run off to the store, the movies, or the park, while parking the car that is usually used more often on the street, then I assume there could be ramifications for that .... and right or wrong, you out there can be the judge of that. I imagine your sympathies will come down on the side of whichever problem you face ... wanting to park your car on the street at times for convenience ... vs. having to look at and maneuver through a crowded "parking lot" on your street every day.

Posted by Beth Grimm at 11:04 AM

June 30, 2008

LIMITING RENTALS IN CIDS - MORE ON THIS SUBJECT

There are some lease limitation cases going on here in California and also in other states that I am watching. I am in the process of rewriting my article on my website called "Lease Limitatiton Amendments - Are They Legal." Here are some of my thoughts on the subject:

I have always felt that a good clause that can be supported by objective reasonableness should uphold, and they have - but I have always believed (from reading the cases from all states that I could get my hands on)- that there are at least 2 mandatory criteria:

1. the necessity of grandfathering current lessors until they transfer their property (from a vesting rights viewpoint)
2. the necessity of providing a hardship clause (from a reasonable-ness standpoint)

The legislative moves across the country (which closely align to what California legislators are looking at) have proved this out focussing on the issue of "consent" by owners.

The last formal survey on rentals and the effects and subseqent study I know of was the 1985 DRE commissioned study that showed (through a rather small sampling but maybe adequate at that time), that there tended to be more problems in high percentage rental developments). Experience for boards proves that to be true again and again.

One rendition I heard about with regard to the California legislation that is proposed (SB2259) was that it was triggered by a complaint that a man that was called into military service was denied the right to lease his home during his tour of duty, because of a lease limitation provision.

I have discussed this with other attorneys in California. Some attorneys complain that if the limitation says 30% the HOA can not not approve a hardship request because it would make the units unmarketable via purchase by FNMA or Freddie Mac. Others like me believe that that is a perfect example of a hardship that should be approved.

Attorneys are polarized on these things. Boards are put to quite a task these days in considering financial hardships. Something occurring frequently today that did not seem to be as prevalent an issue last year (before the subprime and other mortgage crisis and economically difficult times) is that more and more owners could not be pushed over the brink when they could otherwise pay their assessments if they could just rent their units. In an HOA where the delinquencies have gone from 10% to 40%, giving owners a boost that would enable them to pay the assessments makes sense. The approval might be tied to keeping the assessments current if an owner claims if they can rent, they can pay. Just an observation, not legal advice.

This is a very topical issue and I am very appreciative that it is being discussed, and it is encouraging to see that the trial courts are upholding these clauses. However, it will take only one bad apple to spoil the batch in California. We could be on the brink. One board could screw it up. And since the new election laws are closely tied and controlling in any election to amend documents to add a lease limitation clause, I could see an association messing up the voting process, so be careful!

I wish the HOA attorneys best of luck with these cases because there is a need for a remedy to keep rentals in any HOA from getting out of hand.

However, ... a word of caution. Those of us who truly understand the need, the cases, and the right way to do things believe leasing limitations are and should be legal and they are (if well written) and should be found reasonable under the circumstances. But most of the rest of the world (including my former real property law professor) either believe they are an unreasonable restraint on alienation, or think they are "discriminatory" or "unconstitutional" (a favorite claim of anyone challenging the HOA restrictions, whatever they may be).

Just my thoughts. I would like to hear yours.

Posted by Beth Grimm at 10:27 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 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 19, 2008

California Overregulation is Overburdening Small Associations

There are many small associations in California that cannot afford management. The Davis Stirling Act is intended to regulate HOAs, and the average person cannot comprehend a lot of what is in it. Yet, the legislators keep passing more complicated laws. And furthermore, the California Law Revision Commission has worked on an entire new Davis Stirling Act, that is longer, and in some cases, simpler, and in other cases more complicated. Still, average persons will not be able to self-regulate without doing their homework, committing to learning what is needed to run the association and trying to understand the laws.

I get emails almost every day from some of the smaller association Boards who are overwhelmed with all of the laws. Some even are bold enough to write that they intend to ignore one or another of the laws - and this comes up a lot with the new complicated election laws. I mean, can you imagine being a member of a 4 unit HOA, and having to go outside the association to find an inspector of election to receive the 4 ballots (because all of the owners are ineligible to serve as inspectors), open the double envelopes on each and announce the election results of the Board election each year?

Here is a recent email from a frequent reader.

"Beth, I agree with your comments on the micromanaging by the legislature. We are just trying to have our lawns mowed and pay our bills. As the treasurer of our small HOA (I am also a CPA), we feel overly burdened by Davis-Stirling. We are entirely self managed and this compliance is too time consuming. I envision a point when no one will want to be on our board."

Touche! I agree.

Well,I am here to help after all. I know you do not want to pay me over $300 an hour to hold your hand, so for those of you who want help, check out http://www.californiacondoguru.com, the publications page. You can purchase THE DAVIS STIRLING ACT IN PLAIN ENGLISH and many other affordable Plain English tools at very low prices. Also, if you spend the time to peruse the website, you can get a lot of information for free. When people call or email me and ask if I know a good resource for gathering information about HOA stuff, well, I have to ask myself if they just did not take the time to look!

My best...

Posted by Beth Grimm at 9:33 PM

Who Has To Fix The Fence?

Here is a question I recently received on maintenance of fences in a Caliornia HOA.

"I own a SFR and I live next to an easement/common area owned by our HOA. During the winter, a portion of the fence blew down due to heavy winds. I believe the cost of repairing the fence should be shared by us and the HOA.

We live in California and according to California Civil Code 841: adjacent landowners equally contribute to maintain walls and fences between them, unless one of the two landowners chooses to let the remaining sides of his property remain unfenced.

However, the HOA sent us back a letter stating that according to HOA's CCRs, the HOA is not responsible, but I am responsible for the fence and its maintenance and repairs.

My question is doesn't California Civil Code supersede any HOA by-laws?"

MY ANSWER: Sometimes the law controls and sometimes governing documents control. If a law says "Notwithstanding the declaration [or governing documents] ... blah, blah, blah, the word "notwithstanding" bacially it means it doesn't matter what the governing documents say - the law controls. If the law says "Unless the declaration provides otherwise," ... the words "unless the declaration provides otherwise," mean that the declaration would take precedence.

In this case, the law (Civil Code Section 841) says neither. In fact, it is not even in the Davis-Stirling Act. It is in a section of California law that simply codifies some "common law" principles.

In this case, California law relating to property restrictions and equitable servitudes is more specific to the situation and it prevails. (It's a bunch of legal jargon but what it means is that since there is a more specific law, and an agreement that binds properties and commits owners to property restrictions, it controls - it is more specific to the issue.)

I am not providing a legal opinion here because I have not been asked to review the documents or provide one. While it is fair to say that the governing documents will control with regard to fence maintenance, I did not review them to figure out how the allocation on party fences (those shared by two property owners) is made. HOA CC&Rs often have regs on party fences, and then the question has to be answered as to whether the fences between the common area and a separate interest lot are treated as party fences would be (shared expense),as common area maintenance is (HOA expense), or as the sole obligation of the owner of the Lot.

Posted by Beth Grimm at 9:06 PM

May 15, 2008

CAN HOMEOWNERS GET BALLOTS BACK?

FINALLY, I get a brief question that is easy to answer. From a reader:

"A brief question if I may – In an HOA vote [ 2 envelope system ] on an assessment; can a member request the return of a ballot previously mailed to the management company if the request is made before the ballots are opened? …. or is this return precluded by law?"

California Civil Code Section 1363.03 provides that ballots are not revocable once provided to the Inspector of Election. So the easy answer is that an owner is not entitled to get their ballot package back - in California any way.

The statute itself is unequivocal in its terms, but that is not to say that there can be NO exceptions. Facts or circumstances may occur that could affect that premise. Some examples might be fraud, coercion, mistake, or other issues related to voting materials. So I never say never.

Posted by Beth Grimm at 10:32 AM

May 13, 2008

Is There A Stranglehold on HOAs in California?

Imagine that you own a business. Imagine that the legislators keep passing laws that make it tougher and tougher to collect for the goods or services that are offered. Imagine that your earning capacity is limited to collecting just enough money to budget for the coming year. Imagine then, that the bills (and bad debts of other customers) keep mounting and your ability to increase prices for your goods or services is limited, in fact, imagine that you have to go to your customers and ask them to approve any increases.

Imagine that you are a volunteer trying to run this business. Then, as icing on the cake, imagine that you have to tell your customers that they have to pay not only for their goods and services, but those purchased by their neighbors who cannot pay because they have gotten themselves into an upside down financial dilemma.

Imagine all this, and then imagine how long your business would survive and until it folded, how unhappy (AND uncomplimentary!) the customers would be.

Now, imagine how that translates into running an HOA in California. Boards are required to collect assessments sufficient to pay the bills but are limited in increases (Civil Code Sectiond 1366 and 1366.1) They are limited in collecting unpaid assessments by Civil Code Section 1367.4, meaning they have to wait to exercise serious collection remedies until the owner is REALLY in debt. The HOAs have to spend considerable sums to collect the assessments that remain unpaid by owners. The Boards have to continue to maintain the properties and pay the bills in spite of rising construction costs, increased costs in insurance, increases in management costs because of compliance requirements, increases in water and utility costs, increased legal compliance costs and on top of all that - these volunteer Board Members trying to run these ailing "'businesses" have to put up with Board bashing by the members who do not want to pay more.

HOAs take a bath (meaning lose thousands of dollars) every time a lender forecloses on a property in their development, which is occurring more and more often - and which is often stalled by the Lender's own processes. In this day and age of 100% plus lending, there are usually insufficient proceeds from the sale by the lender to pay the Association's lien. And guess what? They (the Boards) have to go to the other owners and ask for more money to make up the shortfalls, which include maintaining those owners' properties that have gone into default or bankruptcy.

How can one expect an HOA to survive in this day and age? The members have to pull together to make them work. Support is needed, volunteers are needed, everyone has to bite the bullet. And shooting the messenger is not nor has it ever been the answer to a crisis situation.

When you talk to your legislators, remind them that there are many of you who live in HOAs that are suffering at the hands of the ever tighter collection laws (making it difficult to collect debt). There are many states that have what is called a "super lien" in their state law, meaning that HOAs can collect up to 6 months of delinquent assessments from a lender that forecloses, even if there are not enough proceeds to cover the debt. California HOAs could benefit from such a lifeline, but the legislators in power will not hear of it. What state does more to protect the lenders and banks that make the "creative loans" and put people so abundantly in homes they really cannot afford? I would truly like to know.

Posted by Beth Grimm at 10:11 AM

April 28, 2008

LEASE LIMITATION PROVISIONS – WHAT IS THE LEGISLATURE DOING IN CALIFORNIA?

AB 2259, introduced by Assembly Member Mullin, most recently amended the ASSEMBLY on MARCH 28, 2008, places limitations on enforcing lease limitation restrictions. The bill, if approved by the Assembly and Senate and signed into law, would amend Section 1368 of the Civil Code (which relates to disclosures upon sale) and would add Section 1360.2 to the Civil Code which would provide protection to owners who are in opposition to leasing restrictions by giving them vested rights (explained below) that except them from approval of rental limitation restrictions by the necessary percentage of members.

The legislature put this language right in the bill: “SECTION 1. The Legislature finds and declares that the rights of common interest development owners to rent or lease their properties, as the rights existed at the time they acquired them, should be protected by the State of California, and the rights of subsequent owners should be governed by the status of those rights at the time they acquire them.” Of course, they are talking about lease limitation restrictions in this bill, but this wording signifies many lawmakers’ mindset, i.e., that restrictions in the documents should be frozen in time for each owner, which is in direct opposition to a long string of appellate case findings that uphold amendments to the documents based on the premise that when an owner purchases in an HOA, they do so with the understanding that the documents can be revised and changed by a majority or supermajority of owners.

More specifically on the issue of each Owner’s rights, the bill says: The right of an owner in a common interest development to rent or lease his or her separate interest, as vested at the time the ownership began, shall not be restricted during the duration of ownership, except as provided in subdivision (b).” Do you see what this means? The word “vesting” means that each Owner would be protected as their rights to lease cannot be changed after purchase.

The only exception would be that an owner could waive their “vested right” described above, under Section (b) of the statute, which says: “(b) An owner of an interest in a common interest development may waive the right related to the renting or leasing of an ownership interest vested in the owner at the time ownership commenced, pursuant to procedures established by the common interest development to facilitate the a waiver.”

This means that the HOA could adopt procedures giving owners the option to waive their rights. Such a waiver could be written in as a “grandfathering” of all current owners which is sometimes done, though not all attorneys agree that it should be done. It would seem to resolve the issue of any owner who does not want to be subject to the restriction. Watch the bill, it may change. At this time it is not an outright prohibition on leasing restrictions but that could change. There are many that oppose the bill, including the CAI California Legislative Action Committee. Others are proposing amendments.

This is a controversial bill, on a controversial topic. Watch my website (http://www.californiacondoguru.com) for updates on the blog, and check out the current article about "Lease Limitatiion Amendments - Are They Legal In California?" Also, I will be doing an E-Newsletter on the subject so go to the website and sign up to receive it – its free! And it might be an indicator that if a Board is considering proposing such an amendment, now might be a good time. The bill if signed into law will change things.

Posted by Beth Grimm at 10:41 PM

April 2, 2008

CONTRACTS - CAN WE SEE THEM?

In California, homeowners in HOAs have a right to review most if not all of the Association contracts ("executed contracts not otherwise privileged under law" - Civil Code Section 1365.2). Unless the vendor has forced a clause that says its contract is confidential" for some reason (which might not be legal but as yet is to the best of my knowledge "untested" in court), then an owner has a good case for reviewing the contract.

However, there may be a reason to take a close look at the contract before it is made available for review and/or copying. It is important to "redact" (black out sufficiently so it cannot be detected) any information that could lead to identify theft.

Posted by Beth Grimm at 9:32 PM

March 10, 2008

What Controls in HOAs - the Documents or the Law?

Below is a question I received from a reader in the State of Washington. While I cannot answer anything that might be perceived as giving legal advice in another state, I can give a practical answer to the question:

"Which controls, the governing documents or state law?"

My answer is a common "lawyerly" answer. It depends ... on how the law and the governing documents are written. In California, if you see the word "notwithstanding" preceding a provision in the law, that generally means the law controls over the governing documents.

An example of this would be a law that says, "Notwithstanding anything in the Declaration, the Association shall maintain the .... and the Owners shall maintain the .... ." On the other hand, if the law says: "Unless the Declaration otherwise provides, the Association shall maintain the ... and the Owners shall maintain the ...." and there is a clause in the Declaration on the subject, then the Declaration would control.

You have to be careful though. Civil Code Section 1366 is a prime example of a difficult law that is hard to interpret. It says:

" Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, quorum means more than 50 percent of the owners of an association. This section does not limit assessment increases necessary for emergency situations."

This kind of language even gives lawyers fits. What it means is that Boards can raise assessments up to 20 percent each year, and can impose special assessments that do not exceed 5% of the budgeted gross expenses, without a vote of the membership. If a vote is required, the approval requirement is a majority of a quorum and for this purpose, the law controls as to quorum, and not the governing documents.

Would you have interpreted the statute that way? Wouldn't it be nice is the answers were as simple as black and white?

Posted by Beth Grimm at 8:46 PM

March 8, 2008

Setting the Record Straight on Homeowner Forum

I wrote a blog awhile back about homeowner forum time. An owner had written in and said that the Board was requiring homeowners to fill out information cards before the forum time and they had to state their name and the subject of their comments. The owner found this very offensive, and I would too, if the motive was improper.

Thus, I wrote the blog from the perspective that if the Board was doing this in order to censor the comment, that would be inappropriate, as there is nothing in the law that allows the Board to censor homeowner comment in the forum time.

Luckily, and feeling much like Dear Abbey now, I received a few emails from board members in response to my query for information on the topic, explaining why they require comment cards, and it makes sense. They want to be able to verify

(1) That the person speaking is actually a member of the association, and
(2) That persons speaking on the same subject matter can be grouped in the forum.

I believe this is a very good idea. And so I stand corrected and admit that new information has changed my perspective on this topic.

And, lest anyone think that my views on freedom from censorship should allow members to act out, threaten, cajole, defame, or make a general arse of themselves, well, that is not true. It is always my assumption in answering inquiries that people will be inclined to be civil. But of course, that is a rose colored glasses view of the world. I will say that anyone speaking on any subject will be much more likely to get more of the right kind of attention if they appear rational (as opposed to highly emotional - making people wonder if they are thinking straight), prepared, pragmatic and civil.

For those that are interested, I am reading a very good book called "Choosing Civility" which is about "The Twenty-Five Rules of Considerate Conduct". In the Foreward, the author, P.M. Forni, who is a cofounder of the Johns Hopkins Civility Project says: "Civility is a wonderfully effective tool to enhance the quality of our lives."

If anyone stopped for a moment and thought about this, in any HOA situation, it would make sense. It applies equally both ways in any communication. Why? Because people tend to react in the same way they are approached. If you lead with anger, you are likely to get it back. The same goes for leading with impatience, distrust, disdain or contempt, or, as a contrast, compassion, kindness, consideration, understanding and acknowledgement of position, even when you do not agree with the points being made.

Really people, everyone could try a little harder without breaking a leg.

Posted by Beth Grimm at 8:57 AM

February 20, 2008

More on Noise - Can a Developer Be Held Responsible?

Just today, during my HOACHAT at noon on issues including noise and hard surface floors (which is a free offering you can join on Wednesdays through my website at http://www.californiacondoguru.com) one of the "attendees" asked: "Can a developer have responsibility when there are noise issues through the walls and floors of a condo?

Noise is a problem in many stacked and wall-to-wall condos. Sometimes alternations and modifications are made by owners in condos that were not meant for hard surface floors. But that is for another blog.

Sometimes a developer will tell you that space is left between the walls of the adjoining condos and that reduces the noise (well, sometimes they will say it eliminates noise transmission but I think that anyone - including me - that has lived in such a condo situation and fell for that line knows better). Sometimes the developer will say, "Sure choosing the laminate flooring upgrade is fine because we add soundproofing," and you think - "Great!" ... And you buy, ... and then experience - "not so great results." I wrote an earlier blog suggesting that the extra money developers collect for installing laminate or hardwood floors in stacked units or townhouses should be placed into a fund to be used later to mediate flooring noise issues. Maybe this sounded like a "flip" comment, but ... why not?

And the answer of course is "Yes", a developer can have some responsibility. And that is apparently what happened in a Colorado case back in 2005. The case took place in Arapahoe County Colorado and it is reported that some of the residents were awarded punitive damages against the developer (as much as $150,000 each, plus costs of trial) and others settled with the developer before the matter came to trial. The owners' attorney's name as reported is David TeSelle. The articles say that the developer had to outfit units with soundproofing materials

I am not representing that this case controls anything in the legal arena, and there is always more to anything than meets the eye. If there were lots of big cases granting damages for noise pollution, builders and architects would have moved noise control to the top of the list of concerns. It does not appear to me that this has occurred, because the noise complaints continue to rage all around the state and in fact, in the nation. I have not located appellate level cases on this subject but feel free to send me some if you read this and know of some so I can add them to my musings.

But I am saying take heart, anyone can be sued for anything, and (hopefully) in matters that escalate to litigation, the culbable party or parties will be "outed" and have to compensate those that are wronged or taken advantage of. I am a California attorney and do not know Colorado law, or the particulars in the Arapahoe County case; however, further research could be done if one wanted to find out more.

My point in discussing this case and this topic is to say that developers need to get on board. And owners need to speak up, to the developer, to the homeowners association, and to each other, if there are noise issues in your building (unless, of course, you want to "move out quietly").

If you visit http://rismedia.com you can find an article about buyers and sellers combatting noise issues, and the gist of the article is that condo builders and architects should take heed. Certain building design and construction is critical if one wants to seriously reduce or eliminate noise transmission between the units.

The article says that while developers or architects might at first refuse to make noise isolation issues a priority because of the cost, they may come to their senses the next time around and spend the money, if they are plagued with complaints from the residents of a building they were responsible for. The article acknowledges that "Quiet does not happen by accident, it has to be engineered ..." and suggests that when you are thinking of buying a condo, it makes sense to set up a sound test, like making sure the neighboring toilets are flushed, the jacuzzi tub next door is filled (and I assume the jets are turned on), the neighbors walk around in their usual foot attire, and run televisions and sound systems.

Nice thought, but it could certainly slow down sales, in more ways than one, especially if potential buyers are given access to current resident neighbors. Short of such a comprehensive test, I think it wise to make sure you have the opportunity to go into a unit during the day, and at night as well, that is next door to a condo with active kids, even if it is not the one you are slated to buy. There is a probably a very good reason that "models" are often built close together and often isolated from the "inhabited" condos or townhouses.

Is it fair to expect a noise-pollution free environment in a condo or townhome? Maybe, if you are willing to pay a premium for it, but in most cases, probably not. But it should be fair to expect that you will not hear the neighbors whispering, talking at low volume, getting a drink of water, having sex, watching TV at a reasonable volume level. If you want more protection, ask developers about the construction of the walls, floors, and ceiling, and whether there is any vibration reducing construction, and write it down, and then talk to an accoustic specialist. This bit of information might help you if you want some more comprehensive research before buying. And accoustics specialists can also be located on the web.

Noise isolation and control may be moving up the priority list of amenities, and well it should. New technology encourages wall mounted window sized TVs, and surround sound systems.

Noise disputes are never easily resolvable, and they make people do things they would not otherwise ever consider doing! And worst of all, they make people sick! If you do not believe me, visit http://newscientist.com and read the articles including one entitled "Hidden Harm from Noise Pollution". In the article which appears in issue 2365 of the New Science magazine, December 22, 2007, the article claims: "Noise kills in much the same way as chronic stress does, by causing an accumulation of stress hormones, inflammation and changes in body chemistry that eventually lead to problems such as impaired blood circulation and heart attacks."

Now, don't get me wrong because while I am saying that noise pollution or transmission disturbances in condos and townhomes can be insidious and must be taken seriously, I also believe that all parties should work toward resolving the issues by means other than litigation. Just because there is noise, and just because it is disturbing, that does not mean there will be big bucks in your future. Visit earlier blogs to help sort out how culpability might be determined, and do not expect that this will be the last blog on the subject.

Posted by Beth Grimm at 8:54 PM

December 30, 2007

Getting Relief in Small Claims Court

I receive many many emails every week from individuals who have a story to tell about their boards, and board members who have a story to tell about other board members or owner misconduct. Some are continuing sagas of perceived misdeeds for many years. Sometimes the person writing to me is right. Sometimes an association has been very poorly managed. Sometimes there actually is theft, misuse of funds, embezzlement etc. Sometimes to get there an owner has to be persistent and enforce their rights to review records via authority in the Civil Code (Section 1365.2 to be specific in California). Likewise, sometimes a resident or owner has engaged in misconduct that is actionable under the law.

Some incidents are one time "fouls". I tend to see this with elections issues. Watch for a blog on this subject in the near future. Elections issues can be brought to small claims court. There are things to know and understand about the processes and ultimate remedies are not yet established as the law has some more or less "open ended" language.

I have had many telephone consultations with individuals (homeowners and board members who find themselves unable to cope with what other board members are doing) and Boards as well, to help them get their arms around problems and have advised many to try their luck in small claims court. Some of the reasons I send people in that direction are: (1) that they cannot really afford to hire an attorney to pursue the issue (and I know of no legal aid society to help them, (2) that I do not know where else to send them; (3) that I feel that they may get help there, if they are willing to do the actual footwork to get there; (4) that their claims are resolvable in small claims court and the remedies are clearly available in the law, and/or (5) that I do not believe they have a good case or are willing to do the footwork necessary to seek out facts that support what they say, and they do not want to believe me, and so I think that "testing" their theories there (in small claims) is the cheapest and least painful way for them to get a reality check.

In California, an individual can ask for damages of up to $7500 in small claims court. An individual can ask for fines of up to $500 each for many violations in the HOA arena, if they can provide proof or adequate information to support their allegations, and an individual can ask for reimbursement of attorneys fees in getting help to prepare a case. A Board can ask for up to $5000 in damages ($2500 if more than 2 claims are filed in a year). An individual or individuals can ask for certain relief with regard to elections that they believe are mishandled.

I am not making any guarantees about success. Success depends on clearly being right, being organized, having believable evidence and/or testimony available, and, I believe, being courteous and respectful of the hearing officer and the other party (no matter how much you might despise them).

Each district small claims court has an advisor that a person can call for free assistance in getting the correct forms completed and preparing a case to take to small claims. The advisors are not advisors on the law itself. But they can help immensely in explaining the process and how to organize the information you want to present. You will need a lawyer to provide you legal opinions and feedback on the pros and cons of your case.

Many boards believe that small claims court judges and hearing officers are biased toward owners. I have seen some "miscarriages" of justice in small claims courts, but not often. Likewise, I have seen serious "miscarriages" of justice in arbitrations. In both procedures, the hearing officer/decisionmaker is not locked into the law. Small claims officers can give orders based on equity or law. Arbitrators can make mistakes that are irreversible. Mostly, I think the hearing officers and judges try to be fair and just need to be properly educated on the subject matter. Plaintiffs and defendants need to provide sufficient backup information and/or testimony to support a cause of action, not just disatisfaction. This rings true for both sides. Being right is not enough. A rambling party can easily lose the hearing officer's attention, or piss them off. Many claimants are simply dissatisfied with their associations or an owner's conduct.

Many owners complain about continuing dire financial straights or large special assessments to pay for shortfalls, underestimation of costs, or deferred maintenance. But that does not mean that they "have a case". Associations are run by volunteers. And mistakes are made, but whether they are "actionable" under the law depends on the extent of the evidence of misdoings, and "proving it up" in court.

I do believe owners are at a disadvantage in that there is no identifiable "plaintiffs' bar" (group of attorneys that exclusively represent owners). That I think is why the legislature in California keeps crafting small claims remedies.

But small claims court is not a place to go and "rag on the judge" about how much you hate the Board, or from the Board perspective, what a pesky troublemaking resident a person is. Its a "mini court" of sorts where decorum, truth, and respect should reside. It's not a legal aid society, and it's not a "split the baby" forum, at least most of the time it is not. I would guess that the party that is "in the right" and that is organized, prepared, on time, respectful, and ready to offer proof of their "cause" has a very good chance of succeeding.

Watch for more blogs on use of small claims for elections issues and collections issues.

Posted by Beth Grimm at 2:30 PM

November 16, 2007

Should You Get a Second Legal Opinion Before Suing?

When a doctor gives you very bad news, especially something that involves a lot of pain, anguish or terminal qualities, it would probably be a normal reaction to say "I want a second opinion." How often does that ring true for legal issues, such as a costly lawsuit?

Some associations in California have suffered some very big losses pursuing legal actions when there were holes in the cases that were either overlooked, or not disclosed to the Board. It happens. It might be because of an over-zealous attorney, an individual or firm that needed to boost fees to cover overhead, a young and not yet seasoned attorney who was not up on the supporting authority. It might be that one attorney simply failed to ask enough questions, or questions pertinent enough to elicit the information creating the "holes". Someone may have overlooked something in the records. It may have been an attempt to "save" a Board that created the problem - by covering up the issues. It may have been that the Board misinterpreted the "legal ease". Some attorneys' prose is better and more understandable than others.

It is the board, and often the owners, who suffer greatly at a "lost case" scenario. Of course, this runs true for individuals as well. Many are "sucked" or "suckered" into lawsuits, or inappropriately advised so as to be reckless in their endeavors. And since, in California, probably as in other states, either side can easily be hit with hundreds of thousands of dollars in legal costs, theirs .... and the other parties (since if they prevail - they may have to reimburse the other side's fees and costs), the risks of filing a legal action come with a high price tag. And you cannot expect to back out and dismiss when you are forced to recognize the weaknesses, without the exposure to a motion from the other side to collect their attorneys fees and costs expended to date to defend.

A simple inquiry to an attorney from whom you seek advice, and then another, for a second opinion, is:

"What are the worst and the best possible scenarios in going forward with this [lawsuit, action, etc.....]?" You will want the attorneys to acknowledge not only the best scenaro, but also the risks. You can ask for the attorney's opinion on the "chances", but truly, there is no such thing as a "slam dunk" (I will expand on this in an article to come soon), and so if your attorney says:

"You cannot lose" or "we don't need to discuss the downside, I expect you to win", I hope you have asked the above question, and I hope you realize that you probably can lose. Things can happen and facts or circumstances can arise after the case is filed that can have a seriously detrimental effect (remember these famous words: "if the glove does not fit, you must acquit"). Surprises and unknowns wreak havoc sometimes.

There might be an isolated or unusual situation where the only options available involve a lawsuit, and so you have to look at a lawsuit - but - ask the attorney for all of the options related to "causes of action" and find out whether including all in a "bucket" sort of mentality might jeopardize your ability to "prevail" and collect reimbursement of fees. If you win one count and lose one, its unlikely you will recover all fees, and may not recover any.

And get a second opinion asking the same questions: "What is the worst possible case scenario with this action?" and "What is the best case scenario with this option." And then you might also tag on "What are the other options - all of them." (In other words, "What are our options or what will happen if I/we do not sue?")

Some attorneys need to be more careful as well, in presenting too pretty a picture about a legal process that exposes a client to a multi-thousand dollar risk. Some have gotten sued for failure to properly advise clients of the upside and the downside of a proposed course of action.

Believe me when I say, if someone or some association loses a bundle of money, or is exposed to large losses, they will be advised by attorneys to look at all possible avenues of recovery. That "laundry list" includes the professionals advising the Associations and individual clients.

However, it is very important not to point the finger in the wrong direction without justification and evidentiary backup. That, too, can lead to a large and painful judgment.

Posted by Beth Grimm at 11:03 AM

October 23, 2007

What Happens If Boards Do Not Follow The Law?

Here is a question recently posed to me:

"Please advise me if there are any consequences for an HOA Board of Directors if the Davis Stirling laws and rules are not carried out. Who would impose any consequences? Who would know? Does being a volunteer board relieve of consequences? Thank you very much."

Answer: There are many consequences in the Davis Stirling Act and being a volunteer board member does not insulate a person from liability. There are protections for volunteer board members that provide insulation in lawsuits if the Association carries the certain amounts of insurance coverage (which by the way are understated compared to industry suggested amounts). The language for this is in Civil Code Section 1365.7.

There are penalties that the Association must pay to members in some cases, which might be attrirbuted to board members ... if the board members ignored the law, for failure to provide records that must be provided (Civil Code Section 1365.2); for failure to follow the election laws (Civil Code Section 1363.03, 1363.04 and 1363.09); for failure to honor the open meeting requirements (Civil Code Sections 1363.05 and 1363.09; and for failure to provide escrow information when requested by the selling owner (Civil Code Section 1368).

The best thing is to follow the law, of course. The next best thing is to have a justifiable excuse ready if you cannot. Impossibility and impracticability may get you somewhere in court if left to defend yourselves, but it is certainly no guarantee.

As for who might know, or bring charges? That would be up to members and the way members find out what is going on is to attend meetings and read association publications, financials, etc. A lot of information is supposed to be distributed each year to members.

Posted by Beth Grimm at 10:51 PM

September 28, 2007

NOISE ISSUES, WHERE WILL LIABILITY LIE?

Each time I write about noise issues, I get several emails. So I will write more on the subject.

This is quite a difficult one. A very recent question involves a 4 or 5 year old child that is autistic. The upstairs child is up all night, and so the parents are up all night. The downstairs owner finds the noise intolerable and wants to know what their rights are.

This is truly a difficult issue. I guess before assessing any potential liabilty I would ask some questions. What are the parties doing to minimize the noise? Have the upstairs neighbors been notified? They are not always aware of the problem. If so, have they done anything to minimize the nightime disturbances? I do not even know all the possibilities, whether there are changes in habits that might help, medications, change of bedrooms, carpetting or noise reduction methods that could be implemented. As for the complaining party, my question would be" "What have you done to protect yourself in this difficult situation?" Again, I do not know what the possibilities might be but I would explore white noise, earplugs, change of bedrooms, talking to the neighbors, trying to find out whether nightime noise can somehow be converted to daytime noise which, I assume, would not be as disturbing (disturbing, yes, but not as disturbing).

I know of a situation where a family with an autistic child was the brunt of neighbor complaints. This family dealt with complaints about daytime noise(nightime noise was not an issue in this situation). They encouraged their children (one who had autism and the other who did not) to play upstairs in their bedrooms instead of downstairs over the neighboring unit, purchased a small trampoline for the upstairs carpeted bedroom so their son could jump without disturbing the neighbors, attempted as much as possible to take the children out during the day and on weekends, purchased rugs and pads from the floors that were over another unit, and still, this family had to live with constant complaints by the downstairs neighbors to the HOA.

I have in past years dealt with exactly the sort of situation complained of in this blog. Strong-arming a family dealing with a noise issue involving a disability or medical condition that exacerbates noise is not the answer. Autism, ADHD, and tourets syndrome are just such conditions, and it would not surprise me if any family being pursued or disciplined for these issues would fight back with a discrimination claim.

Still, that does not leave the family with the child problem off the hook. Both parties have to try and mitigate the problems by making reasonable concessions. And, if that does not resolve the problem, the parties might try mediation, or looking at other options if a lawsuit is to be considered. I personally do not think a lawsuit is the right approach here, but if it were to happen, the concessions made by either or both parties would probably be considered. And as for the HOA, the developer, the flooring installer, or any other party that might be named as a defendant 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?
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.?

If any of the parties can prove the answer to be "yes" to these questions, they may have a case.

But again, way before getting there, think about your actions, starting from Day 1 of the development: the planning stages, configuration of buildings and units, the flooring choices that make sense and do not, and the fallout from exercising options.

And I will say just a few more things.

Conversions from apartments to condos are a very common source of noise issues.
Boards that try to opt out of these disputes or shift the responsibility for resolution of them by relinquishing control in flooring choices are not then immune from exposure to liability.
Allowing hard surface flooring in stacked units often leads to these to noise issues.

I am not by writing this inviting answers to a specific situation and potential legal dispute. I am offering this blog as food for thought. There are not a lot of cases on noise issues, and there are not clean answers to all of the problems that exist, but what there is - is the responsibility to act responsibly under the circumstances, and think before you sue. I do recall reading about a case in an Alameda superior court several years ago where a jury awarded about $700,000 in damages to an owner who found theselves in a very untenable situation. I believe it went something like this: the upstairs owner installed hardwood flooring. The association board or architectural committee either approved it, or the hard surface floors were not allowed per the documents and the board ignored them in spite of the owner's complaints (I think it was the latter). The upstairs owner exacerbated matters by purchasing a piano and playing at all hours of the day and night, and knew this bothered the downstairs neighbors.

As I recall, the upstairs owner was found responsible for about 2/3 of the damages and the association was held responsible for about 1/3 of the award.

I cannot find a case cite for this case. It was not a binding appellate decision that I can recall. But it makes sense. The parties that enabled the problem and exacerbated it were held liable for serious damages.

I believe it could happen to you, if you are more a part of the problem than the solution.

Posted by Beth Grimm at 11:03 PM

September 6, 2007

More On Contracts - I Promised This

What are some common mistakes that managers and boards in HOAs make in approving contracts?

Here is one of several mistakes that I pointed out in a recent E-Newsletter (which you can access ... and sign up for ... on my website at http://www.californiacondoguru.com):

No Way Out: Many contracts are very vague or noncommital about termination provisions. In other words, it’s easy to get in, but not easy to get out. And if the contract encompasses a lot of work or the term is for a long period of time, and the HOA finds it is very unhappy with the contractor’s work, conduct, reliability, etc.; finding a graceful way out can become very important. A bad working relationship is hard on all the parties. Specifics on incremental evaluation, assessment of work (such as a phased contract), and/or the ability to terminate the contract with or without cause on reasonable notice can become extremely important.

Look for the other common mistakes at the guru site ... simply "Enter" and scroll to the bottom of page two ... you don't know about the site yet?? Tell your friends, or maybe your enemies?? Anyone you think needs to know! That's the guru at http://www.californiacondoguru.com.

Posted by Beth Grimm at 7:24 PM

July 7, 2007

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

June 11, 2007

Termites - Who Is Responsible?

Many people in HOAs have difficulty with responsibility for termites. The question often arises, who is responsible for treatment and eradication?

Question recently submitted: "In our documents, no reference is made to the term Planned Unit Development but that is what the board claims we are. We have lived here for more than 20 years and have had several instances of termites in one of the three exterior walls of our unit. The first two times, the HOA paid for eradication - the termites were in the experior wall. Then, the third time, the HOA refused.. but the work was still under warranty so further treatment was completed. The next time the Board refused to pay and there was no warranty. The HOA attorney says Civil Code ( Stirling Act) says that each unit owner is responsible for termites within their unit but we believe we are still dealing with an exterior wall. The termite company that I called said the same thing our "in-house" (association) termite company said - that the building can't be tented, we cannot tear open the exterior wall, the treatment will always be a "band-aid " approach by treating from within my unit to through the wall to exterior "dead space" before the stucco... and the cost is more than $500!!! The HOA has done nothing to treat these termites recently from the exterior, even though it is a known termite area...what can we do?"

Basically the answer is this: unless the CC&Rs (aka Declaration) say otherwise, in California the Davis Stirling Act - Civil Code Section 1364 essentially (paraphased) says that in a planned development, the owners are responsible for reasonable termite treatment and prevention with regard to their lots and in a condominium development, the association is responsible for reasonable termite prevention and treatment in the common area (which is usually the building except for the airspace that are the units). The scheme can be changed by a vote of the members to amend the documents.

There is a leading case in California that stands for the proposition that if the Board has a plan for dealing with termites, even though a spot treatment which may need to be repeated, it is not required to accept the demand of an owner for a different (and in the case more invasive) treatment such as tenting the units. The court applied the business judgment rule essentially saying that it would not second guess the Board on this subject.

The most common problem for owners in a planned development is how to contend with neighbors who take no measures to protect their units and will not willingly participate in a treatment for the entire building. Because of the law and documents that impose an obligation on the individual owners to take reasonable measures with regard to termites and pests, one owner who wanted to initiate treatment for his or her dwelling but needs to treat the neighbors as well to make the treatment effective would probably be able to get some relief in small claims court or superior court for the cost of any work done that was needed (the owner would have to prove this), which the neighbors refused to approve or contribute.

In any event, this is just general guidance/information. Legal counsel should be consulted if you need a legal opinion. There are factors that may enter into the final determination as to who is responsible.

Posted by Beth Grimm at 9:11 PM

May 10, 2007

DOGS - MUST HOAs ACCEPT THAT AN OWNER CAN HAVE ONE?

OKay, I am tired of dancing around the question, and several readers have asked - does an HOA board in California have to allow dogs?

And before answering, I will add the caveat - listen to your own legal counsel - there is debate on this very issue going on all over the State.

What does the law say?

1360.5. PETS WITHIN COMMON INTEREST DEVELOPMENTS.

(a) No governing documents shall prohibit the owner of a separate interest within a common interest development from keeping at least one pet within the common interest development, subject to reasonable rules and regulations of the association. This section may not be construed to affect any other rights provided by law to an owner of a separate interest to keep a pet within the development.

(b) For purposes of this section, “pet” means any domesticated bird, cat, dog, aquatic animal kept within an aquarium, or other animal as agreed to between the association and the homeowner.

(c) If the association implements a rule or regulation restricting the number of pets an owner may keep, the new rule or regulation shall not apply to prohibit an owner from continuing to keep any pet that the owner currently keeps in his or her separate interest if the pet otherwise conforms with the previous rules or regulations relating to pets.

(d) For the purposes of this section, “governing documents” shall include, but are not limited to, the conditions, covenants, and restrictions of the common interest development, and the bylaws, rules and regulations of the association.

(e) This section shall become operative on January 1, 2001, and shall only apply to governing documents entered into, amended, or otherwise modified on or after that date.

What on earth does that mean, with regard to the question of dogs?

I happen to believe the following words are key: ... "from keeping at least one pet within the common interest development ... [and] ... “pet” means any domesticated bird, cat, dog ... or other animal as agreed ....." and that they mean that an HOA Board (unless there is an exception based on the retroactivity clause) has to allow an owner have a dog, unless or until the dog has proven itself worthy of exile.

Some Boards have adopted "no dogs rules", but they allow other pets - risky in my view, but they are at least in some cases getting legal advice that it is okay to do so ... so be it - I am not here to criticize other attorneys. And it only takes two attorneys to disagree to be headed toward a lawsuit. And this is an issue that is ripe for litigation. However, the more conservative view, again, my opinion, and to avoid litigation over the meaning of the statute, is to allow the dog. That does not mean you cannot take action against an owner who allows a dog to be present that is a menace to society. Unreasonable barking and pooping without pickup are still generally actionable nuisances.

More commentary: This new statute raised eyebrows in 2001. For example, how difficult was it going to be to “expel” a problem pet? And if any rule on any subject was amended did the Association lose the right to prohibit pets if a prohibition existed before this statute took effect? Those questions still exist. And it is important to know about a California appellate case that was decided in 2004 that allows for a “companion pet”. The case is called Elebiari v. Auburn Woods I and it involved an association that attempted to enforce a “no dogs” rule (other pets were allowed) when the owner claimed the dog provided good company and improved her mood.

The truth is that it is getting harder and harder to prohibit any pets but to prevent the invasion of dangerous breeds of dogs, some associations are adopting CC&R amendments that ban certain types of dogs, specifically breeds that are uninsurable by some companies. The legality of that has yet (at least at the appellate level) to be clearly established; and as far as I know, there is no case law specifically forbidding such an amendment. If an amendment is approved by the owners, I believe, though, that it is necessarygrandfather existing pets at least until they die or are removed from the development, or become a nuisance subject to the governing document provisions (assuming they exist) on expelling the dog from the development. The proposal makes sense given the risk of substantial loss if there is an attack by any dog and since these dogs are identified to have the propensities.

Making sense is good. There are still those that would argue against such a proposal, and some that would flaunt their new-found power given by the statute by harboring a dangerous dog, but the world is not perfect now, is it? Whenever I hear that "my rottweiler" or my "pit bull" is the family baby and would not hurt a flea, my mind flashes to horrible stories reported of children being seriouisly injured and in some cases killed by the "family pet". In too many cases, it was a dog on the "list". Where do you think insurance actuaries who recommend these exclusions get their information from ... the news stories? or the facts?

Posted by Beth Grimm at 10:20 AM

April 25, 2007

Singling Out Children - What Can We Do?

The following is a somewhat common complaint ... especially common in a development that started out either being advertised as a community for seniors or mature people or a smaller community that attracted more "mature" (meaning older) residents. In 1988 the Federal Laws changed such that seniors communities have to have certain attributes to continue to prevent younger residents. Since many developments no longer qualified after the law changed, younger families began to move in to these developments and it created an uncomfortable situation for many. So here is a recent common complaint from the younger set:

"I feel as we are being targeted for having kids and the kids can't go outside with out being yelled or cursed at. There is no place to play but we live in a court so the kids want to use the street for basketball and frisbee, but the neighbors continually complain. What can we do? "

And here is a complaint from the older set:

"We have children in our neighborhood running wild. There is no place for them to play so they play in the parking lot. I pray every day that I do not run over a child - can't the Board stop this? Maybe if the rules were enforced, these families would move on - somewhere meant for kids. What can we do?

I could say "... Just learn to get along!" But it would not matter which of the above parties I said that to ... the differences do not go just fade away through logical thinking. Everyone wants to be comfortable in their living situation.

So, here are some suggestions I have made in this scenario:

If you have a clubhouse or meeting room, try to arrange some Saturday parties or activities to achieve interaction between the older and younger families, the children and adults. Put up a sign announcing the activities and make them inviting. There are many possibilities: ask for volunteers of older folks to share stories with the younger ones, have a reading hour with volunteers and children's books, set up a game afternoon for cards lor games like "Go Fish" or "Old Maid", puzzles or even charades.

If there is no place to play, but the street or parking lot, consider allowing some activities, possibly limited at times of the day when the areas are least busy, with volunteers to oversee or supervise the activities, warn of cars, blow a whistle, get everyone to the side of the street, in other words, the kinds of oversight that one might use at a pool to give everyone a break or address a situation where the pool needs to be emptied.

Look for a solution, an area in the development that might be developed into a small tot lot and explore that as a possibility - if the children of the younger variety.

Seek out and provide information about programs, parks, schools, churches or other places nearby where children can get involved in activities.

There is no easy answer - but someone needs to make an effort to find common ground between the "youngsters" and "oldsters". Otherwise, you may face "war", political stress and ongoing complaints at board meetings, demands and complaints back and forth between and among neighbors, and at the worst, a Fair Housing Complaint based on comments, actions, rules or something else going on that makes families with children feel like they are being mistreated. Real or perceived, this kind of ultimate result is painful for all involved.

Posted by Beth Grimm at 7:23 PM

March 15, 2007

"I don't want to follow the law." What Can Happen?

Many Boards in California of HOAs that do not have professional management (and some that do) are fed up, tired, hungry, and just want to go home. The laws are overwhelming. Need I say it again ..... seriously overwhelming. They picture the feds, the state, the other board members and the association members are all lying in wait for them to do something wrong. Well why not just take a stand - we are fed up. The costs are too high ... the members won't like it if we spend the money to (it could be anything but these are some examples I am hearing about) get a reserve study, get election rules, send out double envelope ballots, hire election inspectors, build up the reserves, purchase earthquake insurance (when the documents require purchasing it) , etc. etc. etc.

So what is the worst that can happen? .........................................................#$!*&%*#
(Before launching into this, please be advised that I hate to be the bearer of bad news, that I am doing everything within my power and time constraints, and that I have been hammering the state leaders, to provide more low cost education, simpler laws, and processes that do not require the services of a rocket scientist (or lawyer) to figure out.)

That said:

1. A board that does not follow the law subjects the entire Association to legal claims for damages of any kind (damages meaning monetary losses, loss in value of homes. personal injury, etc.) and fines (for records inspections rights violations, meetings violations, elections violations and that kind of thing).
2. A board that knowingly does not follow (=ignores) the law can lose the protections provided by insurance for acts of board members as one of the components of the coverage is negligence (accidental mistakes), and knowingly violating the law is not negligence. It is much worse.
3. A board that knowngly does not follow (=ignores) the law can lose the protections provided by statute (Civil Code Section 1365.7 and Corporations Code Section 7231 and 7231.5) for acts of board members as one of the components of the coverage is good faith (accidental mistakes), and knowingly violating the law is not negligence. It is much worse.
4. HOAs in California are mostly incorporated as Non Profit Mutual Benefit Corporations under the jurisdication of the Attorney General's Office, and so failure to follow the law can bring down the AG's hammer (maybe not as likely as an arrow coming from the membership because the AG's office often responds that they do not have the resources to pursue HOA owner complaints - but still, a possiblity that should not be ignored).

Often, the board member or manager will say something like: "Well, everyone else is doing it (meaning ignoring the law), so why can't we? I say, "If you choose to drive 95 down the freeway in a 65 mile zone, because everyone else is doing it, but you get caught, what do you think the police officer is going to say?" Here is the scenario most likely - "Well, I caught you and I am going to throw the book at you." What is unsaid is "I just heard you admit you knew you were going to fast." On the other hand, if you are going 45 mph in a 35 mph zone and no one is around, the police officer might just let you off with a warning, especially if you say: "Sorry officer, I did not know this was a 35 mph zone." In many cases, what the officer is trying to determine is whether you really did know, or made an innocent mistake. How do I know these things? My son is a police officer.

I think come "judgment day" for any Board that is not following the law might present a similar picture, but I would never tell a Board to "count on it."

Either can have serious ramifications for the Association and each board member that does it. It can have fallout that reaches other board members if the majority of the Board chooses to ignore the law. It can, in the worst cases, lead to individual liability on the part of the board members, extreme and unanticipated special assessments for the members, and maybe even punitive (that means "just for punishment") damages.

Make an effort to learn what to do, work to get on track, and although the laws are complicated, don't ignore the fact that they exist hoping you won't get caught. ............... And last but not least, as Collin Powell has said: "Get mad .... and then get over it!"

Or, if you cannot get over it and need a cause, gather up some of your cohorts and write to or visit your local legislator and plead your case as a board member (or board members) trying to do the right thing. Tell the legislators how complicated and difficult it is to try and figure out what is right. Let them know that placing the focus on punishment for those who are trying, instead of providing readily available education, is just not fair.

Posted by Beth Grimm at 10:42 AM

March 10, 2007

May an Association Ban Smoking in a Person's Home?

Smoking has been proven hazardous to the health of the smoker. Second hand smoke has been proven hazardous to the health of those forced to inhale it. Questions that often arise these days in homeowner associations are: (1) May we ban smoking in the common areas? and/or (2) May we ban smoking in the units?

The answer is yes, in some localities under some conditions. This is California. One would think the seminal cases might happen here. But they have not, at least not to the best of my knowledge. However, they have happened.

In Boston, a jury found that heavy smoking were grounds for eviction of the tenants. In 2005, when this judgment came down, the news story by Ralph Ranalli and Jonathan Saltzman, of the Boston Globe reported:

"In a case that tobacco law specialists say is one of the first of its kind in the nation, a Boston Housing Court jury ruled that a South Boston couple could be evicted from their rented water-view loft for heavy smoking, even though smoking was allowed in their lease. The landlord who rented the Sleeper Street unit to Erin Carey and Ted Baar ordered them out within a week last November, after neighbors complained of the smoke odors filtering into their apartments.
Carey and Baar, who each smoke about a pack a day and run an information technology sales business out of the one-bedroom unit, fought the eviction, arguing in court that the converted warehouse's shoddy construction and aging ventilation system were to blame for the wayward odors.

Last Friday, a jury ruled in favor of the landlord and the eviction. Even though the landlord could have written a nonsmoking clause into the lease and didn't, the jury found that the couple's heavy smoking violated a more general clause banning ''any nuisance; any offensive noise, odor or fumes; or any hazard to health.' Although the verdict is not binding on other courts, tobacco law specialists said the decision is one of the nation's first to declare smoking a nuisance serious enough to become grounds for eviction."

In November of 2006, in Golden, Colorado, "The Denver Channel.com" reported: "A judge has upheld a homeowners association's order barring a couple from smoking in the town house they own.

Colleen and Rodger Sauve, both smokers, filed a lawsuit in March after their condominium association amended its bylaws to prohibit smoking.

'We argued that the HOA was not being reasonable in restricting smoking in our own unit, nowhere on the premises, not in the parking lot or on our patio,' Colleen Sauve said.

The Heritage Hills #1 Condominium Owners Association was responding to complaints from the Sauves' neighbors who said cigarette smoke was seeping into their units, representing a nuisance to others in the building.

In a Nov. 7 ruling, Jefferson County District Judge Lily Oeffler ruled the association can keep the couple from smoking in their own home.

Oeffler stated "smoke and/or smoke smell" is not contained to one area and that smoke smell 'constitutes a nuisance.' She noted that under condo declarations, nuisances are not allowed.

The couple now has to light up on the street in front of their condominium building."

This activity across the country, although not binding in any court in California, indicates a possible trend. And many, many, many Californians are sensitive to smoke. It was not that long ago that a bill was introduced in Sacramento that would have provided that allowing smoke to waft through walls could be actionable in the courts. The bill did not survive. But the idea of preventing smokers from being allowed to cause a nuisance that adversely affects others has not.

Posted by Beth Grimm at 10:05 PM

March 6, 2007

May The Association Control The Size of Pets - Namely Dogs?

I get asked a lot of questions about pets. This is one of them. Associations generally should be able to control the size of pets, through the deed restrictions, CC&Rs (which require owner approval if amended) and/or rules (assuming the authority is in one of the recorded or regulatory base documents of the Association or in the law of the jurisdiction). In California, there is a law allowing owners to have a pet. There is an exception in the case of an association that had a pet restriction before the law took effect, and that has not amended any of the governing documents since that date. However, the law allows for reasonable rules.

The question of course, is "what is reasonable?" In California, the burden is on the owner to prove a rule is unreasonable and a pet size rule should be upheld if the association enforces it consistently (and not just against non-board members or their friends) and there is a monitoring method that is fair. Such a rule should not be imposed to target a specific pet because chances are, if the pet was already in the development by the time the size limitation which would otherwise exclude it, the HOA probably has to "grandfather" that pet (let it stay until it moves away or dies).

There is at least one "unreported case" in California upholding a pet weight limitation. "Unreported" means the case cannot be asserted as binding authority for the position the judges took, but it is an indication of how at least one appeallate court felt about weight limits.

Pet weight limits can be difficult to define. What if a pet that is under 25 lbs gets fat in its old age and the Board lets it stay? But the dog next door who weighs 26 lbs but is mean has to go? Why is a weight limit being imposed? Boards can address conduct, barking and aggressive behaviors with other rules. Is it because pets have to be carried by the owner (such as in a high rise trying to avoid problems with pet dander)? If barking is the issue, a loud yappy dog can be a lot more disturbing that a big woof ........ woof. Is it really a breed issue? Some associations prohibit dogs on the insurance "hit" lists (meaning those that cannot be insured against for bites or attacks).

I believe a board can impose a pet size limitation in the right circumstances. But that's always the question. What are they? For that, you will need good legal advice based on the need, facts, existing documents, and circumstances in your own development.

Posted by Beth Grimm at 1:56 PM

February 22, 2007

Failure to Apply for Architectural Approval - How Do You Get The Members Attention?

In many HOAs, the governing documents require that members apply to an Architectural Committee, or the Board (which in some cases acts as the Architectural Committee if volunteers cannot be recruited), and get written approval before beginning construction on any improvements or changes to the exterior of the homes, units or structures. In many HOAs, the owners ignore these requirements and it leads to serious problems. Owners start constructing things and making changes and at some point the Board understands that there is a big problem brewing. If owners continue on track, at some point, the governing document provisions providing control over architectural style, aesthetics, and the look and character of the development will fall. They will become unenforceable. Talk about individuality ... it could sprout and spread like a bad weed. The whole purpose of having architectural limitations is to preserve the original look, style, architecture, and consistency of the buildings and improvements. This vision began with the developer of the property and lives in the owners who are in favor of reasonable controls.

Once the Board is dealing with 2 or 3 or 4 or more works of "improvement" that were commenced without regard for the approval process, it knows real stress (as if that has not occurred already). A decision has to be made on many fronts:

What is it going to do about the changes that have already been made - ignore them? Ask the owners to apply for retroactive permission? Force the owners to remove or change the improvements?

What if the changes are something that would have been approved if asked? Is that something that is worth addressing? What if those owners decide to make more improvements, but the new ones are not something that would be approved?

What is the Board going to do about changes that would not have been approved? Demand that they be removed? Negotiate a settlement of some kind that would help to avoid precedent?

I cannot answer these questions or provide any kind of advice without knowing specifically what is happening, and this column is not for advice anyway, but I can suggest some ways to avoid this kind of scenario.

1. Give the owners the scoop, early and often, as to what the documents require, when they must apply, where to apply, how and to whom. I said often. I said often. I said often. Do you get it now? You can publish a box in your newsletter everytime one goes out. You must, under California law, circulate the architectural processes and procedures each year with the annual budget packet. You need to include these procedures and processes with all new owner packets.

2. Keep on top of the situations where owners have not applied prior to commencing construction of improvements that require approval. Get stop notices out immediately in any situation where you can, with a warning that proceeding with the construction, painting or whatever is occurring will be at owner's risk of having to remove or redo the job. If the Board is diligent with these, word will spread.

3. Consider disciplinary action. Develop a fine schedule that works as it should - as a deterrent more than a fund raising tool, but consider a hefty fine fine for failure to apply for architectural approval when the application is required. What do you think - is $1000 too steep? $500? $250? Be sure the fining policy allows for daily, weekly or monthly fines. Fines have to be sufficient to "deter". A $50 per month fee might not work as punishment for a room addition that sends the neighbors balistic, for example. But be sure that you are not adopting a fine schedule for which there is no authority in your documents or the law, or that conflicts with limitations in the association governing documents. And be sure to follow all requirements related to distribution of the fine schedule to members for comment before adoption (a California requirement.)

4. Check the documents to see if the Board has the right to charge back attorneys fees and costs to the owner of the unit or lot involved, as a reimbursement assessment, when the fees and costs are incurred in attempting to enforce the governing documents.

5. Negotiate agreements when necesary that help prevent precedent, that disclose to future purchasers any agreements made to remove improvements on sale, that "grandfather" existing situations that cannot be remedied because of facts, circumstances or cost concerns.

6. In addressing architectural violations, do not give advantages to "friends" or "favorites". In other words, if you are taking action on specific types of violations, make sure that all owners with the same violations are getting letters and being asked to do the same thing. If you are holding hearings and fining people, make sure these actions are consistent. However, I understand that you may end up in a position where the Board has to take one or more matters a step further, asking for court intervention, and in this case, it may not be fiscally prudent to move to this point with all current situations. Perhaps it is time to ask the court for a declaration of what is right, or an injunction mandating action, or damages. If you cannot afford to take the maximum action against any or all of the owners in the same boat, document the reasons as to why you are moving forward. If the Board has determined that legal intervention is needed to "stop the bleeding" or for some valid reason, it should be acceptable to choose one situation and not the others. And the reason as to why one existing problem is being "taken up higher" and not others needs to be palatable, for any potential hearing officer who has to respond to complaints of favoritism or inconsistent treatment to understand and accept them.

Why would I ever suggest a hefty fine for the "simple act" of failing to seek architectural approval? If you have ever had to get an attorney involved in a situation where residents have commenced various "projects" without regard to the required approval process and the documentary architectural controls, you know that it does not take much activity to incur costs and fees upwards of $1000. So ............... starting out with the threat of a fine of $1000 for failure to apply for architectural approval when application is required seems a reasonable place to start. Fines and fees may always be waived, suspended or deferred if the facts and circumstances warrant it; but the point here is getting the owners' attention about the application requirements prior to construction. That might do it.

A Board's "job" is not easy. What I am suggesting here is to just think about these things. Diligence and deterrence .. these principles are important and helpful in many areas, and this is one of them.

Posted by Beth Grimm at 6:30 PM

How To Get Document Amendments Approved When Owner Apathy Reigns

In California, there is a way to try and get updated documents (specifically the Declaration of Covenants, Conditions and Restrictions - i.e. - CC&Rs) approved if the members do not come through. If the CC&Rs require a percentage of approval that is higher than 51% (many of the older documents require 2/3 or 75% approval) but the board is not able to get that kind of return on the ballots, the Board may file a court petition asking for court approval of the docs. There must be at least 51% approval to ask the court to approve the amendments.

Once the petition is filed, the owners need to be notified and they can respond to the court proceedings and appear if they want to. It can be costly. Sometimes the form of notice required is costly. The court could require that all members be notified of the proceeding by personal service or certified mail instead of first class mail. Some judges are more lenient. As a matter of proof of a good faith attempt to get the members to vote, the Association would have to present to the judge all efforts to get members to vote and convince the judge that it made a good effort, and that apathy is the reason why the updated documents did not pass.

The costs could could reach or exceed $4000-$5000 (even if there is no material resistence) to $50,000 or more (if opposition is vehemently waged). While the Association often can ask for reimbursement of attorneys fees for actions related to the documents, in this case, at least in California, the Association cannot recover the attorney fees or costs from anyone since the petition is seen as a non-adversarial process.

Civil Code Section 1356.

It is nice to know that this process is available, but the better plan is to do the footwork needed to get owners to vote, even if that means block assignments, a major campaign, going door-to-door, or making phone calls to get owners to vote. Many Boards do not believe they can ever get enough members to vote to approve updated documents when a high percentage of approving votes is needed, but most will exceed all expectations, if they get enough people involved and just give it a serious effort.

Posted by Beth Grimm at 5:53 PM

February 21, 2007

Recall Elections Under the New Law - How Hard Can it Be?

I am receiving lots of calls about recall elections. Practitioners all over the state are faced with inquiries from groups of owners and board members who are looking for information as to how recall elections should be conducted under the new elections law. In some cases members have petitioned for it. In others, boards have received these petitions.

I have spoken with different attorneys about how these processes might be handled under the new law. I believe there are at least two viable approaches:

(1) Prepare two ballot packages to be mailed at the same time, one for the recall election itself and one for electing board members if the recall is successful (which would have "write in" capabilities because potential candidates will necessarily be identified ahead of the recall meeting), with complete instructions to owners as to how the processes at the meeting will be handled for both elections, in case both are needed.

OR

(2) Prepare a ballot package for the recall election, and appoint a person (choosing a professional in some capacity would be wise) to take charge of the second election process in case the Board is recalled. Consider a Resolution that would preclude the Board, if recalled, from taking action in the interim before the election for directors for any business other than proceeding with the election, except, of course, any business that MUST be conducted during that period. Make sure the person appointed has limited authority and knows how to conduct the election under the new laws.

The elections laws are too new to have worked out the kinks, but I think the key is to look for the most fair and above-board practices that attempt to comply with what is written in the law as closely as possible, with regard to all elections that are subject to the new law, board elections and recall elections being two of the types that are subject to it.

Posted by Beth Grimm at 8:56 PM

December 31, 2006

New Committee Requirements for HOAs

In California, beginning January 1 this year, the law changes and requires more of committees, some committees anyway. A reader sends this question:

"I read (somewhere) that starting January 1, 2007, committees will be required to take minutes at any meeting. Also, our Bylaws state that committee meetings and notice of such meetings shall conform to the same requirements contained in the Bylaws for meetings held by the Board of Directors. I interpreted this to mean that committee meetings are then open to homeowners to sit in and listen (to "attend", not to participate). The Board won't answer the questions about this, will you?"

I can answer the question as to the new law - after January 1, committees that "have decision-making power" are required to keep minuteds, and owners have a right to inspect those minutes. The law itself does not require that committee meetings be open to members or that notice be posted or sent out. However, if a set of bylaws has requirements about meetings, chances are they should be honored. I say "chances are" because I have not reviewed the documents in question but I do have experience with members adopting their own "interpretation" of language that does exist. Sometimes it is right and sometimes it is off the mark.

I can imagine situations where it would be a problem for committees to have to provide notice of their meetings and/or allow owners to attend. Say it is a 5000 unit association and there is a social committee to plan events, or an architectural commiittee to review plans, or a nominations committee whose job it is to find willing volunteers to serve. If notices had to be sent to owners or posted everytime there was a meeting by one of these committees, it could become quite cumbersome.

There is a situation where notice must be given of committee meetings. If a majority of the board serve on or attend the meetings and intend to discuss association business, then I believe that the meeting would qualify as a meeting that requires notice to owners, because it would actually satisfy the definition of a "meeting" under Civil Code Section 1363.05.

Posted by Beth Grimm at 6:12 AM

December 19, 2006

Can a Non-Member of an HOA be a Candidate or Serve on the Board?

A lot of Associations have run happily for years, never knowing or really paying attention to who is qualified to or is serving as a board member, some simply because it is so hard to find board members that no one questions the right to serve when volunteers step forward. And here is the kicker - if the other board members like the board member who turns out to not be qualified, and they find out about it, they tend to look the other way. But if they do not like the Board member, and he or she turns out not to be qualified, they demand the immediate resignation.

So what's the law say? The advent of Civil Code Section 1363.03 has brought this to a head in many associations. Why? Because an HOA in California has to adopt Election Rules, and those rules have to state qualifications for serving on the board. In an earlier blog I addressed the difference between qualifications to actually serve, and qualifications to actually be nominated, as I believe it is important to pay attention to detail if you are trying to help a board cope with new (or any for that matter) laws.

In this blog I am sticking to member vs. nonmember service. If the HOA bylaws say that a board member MUST be a member of the Association, then that provision is enforceable. However, the important attention to detail is "who then, is a member?" The reason I bring this up? Some argue that since they have a legal right to a share of the property by community property laws, that they are in effect an "owner" or a "member" (members are usually owners and vice versa but read the fine print). So, is that true? Not if the governing documents define an owner or member as as "record" owner", as that generally means the owner's name must show up in the official property records of the county.

Some argue that since they are "buying the property", they are the owner/member and can serve on the board. Again, "record owner" may be a factor. Some membership definitions include contract purchasers, and some include contract sellers instead. So if one is buying a property on contract, they may or may not be entitled to serve on the Board.

As usual, there is more to this than meets the eye. Look for the definition of member, owner, and qualifications for board service in answering this question.

And the other question that arises is whether a person that has been serving for years who is not a member must get off the board when someone discovers that the documents say that board members must be members of the association. I would say this - it certainly is a good idea. If the Board continues to allow someone to serve that is not a member of the Association, when the Bylaws state that Board members must be members of the Association, and the person therefore clearly does not qualify, a member can challenge decisions of the Board.

Sometimes documents require a hearing before any Board member's position can be vacated because of non-qualification. That needs to be explored too.

Like the discovery that the Association has been charging assessments in a manner contrary to what the documents state as the correct allocation, the changeover from accidental (or purposeful) noncompliance, may require finesse, to avoid legal challenges and claims.

And you wonder why attorneys get paid the big bucks. Does this all confuse you too much? Then take this away: Do your best to comply, to follow all rules and requirements, treat people fairly, and govern responsibly.

And get the proper kind of professional help when you need it.

And one more thing: find out more about the new elections laws in California and also about checking for qualifications for board members at http://www.californiacondoguru.com.

Posted by Beth Grimm at 5:57 PM

December 17, 2006

If an HOA Owner Signs A Ballot - Does That Invalidate It?

Under the new HOA elections laws in California, owners are invited to return their ballots inside an inner envelope that is unmarked. This package is intended to be returned inside a larger envelope that is addressed to the inspector(s) of election for the association. The owner is supposed to sign the outer envelope beneath his or her return address identifying the separate interest they own.

In an email I recently received, a reader asks this question: As I understand it, the new elections law says:
"In order to preserve confidentiality, a voter may not be identified by name, address, or lot, parcel, or unit number on the ballot." So, what happens if a member voluntarily signs or writes his name on a secret ballot - is the ballot still valid? "

I say the answer to that question is probably "it depends" (not an uncommon attorney answer) - in this case - on who is in charge. I would say count it. The law says that the voter "is not to be identified", not the voter "is not to identify himself or herself". This means the Association is not to have identifying marks, numbers or signature blanks on the ballot that it wants returned. The Association is not supposed to be able to identify who the voter is that voted this way or that way. The Association is only supposed to be able to identify that the person returning the ballot is indeed an owner in the development and/or the person that is entitled to vote on behalf of the owner.

However, the law does not contemplate the inability of Boards to fully explain processes to owners, or the inability of owners to follow instructions, and we all know that both scenarios occur. So, if an owner signs the ballot, it seems to me that he or she is voluntarily waiving the right to secrecy, not the right to vote. I believe the vote should be counted, unless there are other factors to be considered that might suggest further inquiry.

The secrecy offered by the statute is for the protection of the owner, and if an owner ignores that protection, then I would say it still should not trip up their opportunity to vote. The cases I have reviewed related to questions that come before inspectors of election seem to me to encourage counting votes, when it seems obvious the owner intended to vote, even if they screwed up the proper return of the package. If the owner can be identified as one with the right to vote, then he or she should be able to do so.

An additional problem that has arisen in some associations is that owners do not want to sign the outer envelopes because of the possibility of identity theft, so they sign the inner envelopes. Should their ballots be counted? Again, I believe so, as long as during the check in the inspectors can verify the owner's name and, if checking signatures (although I do not believe it necessary to do so in most elections), the signature.

Other attorneys might say something different .. and there may be more to this question than meets the eye, so do not take this as legal advice for any given situation. Some legal counsel are sticking tight to "the rules" - so tight in fact that many owners may be robbed of voting for lack of being able to read and follow instructions. Is that bad? Maybe so. Maybe not.

If you want more information on the "What Ifs" in the new election laws, or want to know what they say, visit the Guru at http://www.californiacondoguru.com, and click on the link to the information on Elections After SB 61.

Posted by Beth Grimm at 7:36 PM

December 12, 2006

What To Do If Board Meets In Secret

An email I received recently claims that the Board of the Association meets "in secret" in one of the Board Members homes and the sender wanted to know if this was illegal and what he could do about it. That is not really an uncommon complaint and it may or may not be a problem. If the Board holds all of the meetings in a Board Member's home, that is not necessarily a problem, especially when there is no clubhouse. However, if all of the meetings are in a Board Member's home, and homeowners are not notified of any of the meeting dates and times, or allowed to come, then there is a problem. There are only a few subjects that entitle a Board to meet "in secret". In California, those subjects are basically related to discussions of threats of or pending lawsuits, with or without legal counsel present, contract negotiations, personnel matters, and disciplinary matters. These subjects are considered appropriate for "executive sessions" (which are essentially the same as a "secret" meeting when homeowners are not invited to attend). In addition, holding an executive with the association counsel to discuss attorney-client privileged matters of a legal nature are appropriate. All other board meetings must me disclosed, and owners have a right to at least 4 days' notice, either by mail, posting in the common area, newsletter, provisions in bylaws, etc.

So what happens if a Board is not complying with these requirements? The requirements are found in Civil Code Section 1363.05 which is part of the Davis Stirling Common Interest Development Open Meetings Act (which is similar but not exactly the same) to "the Brown Act" which relates to public meetings. If a Board violates the provisions of Civil Code Section 1363.05, then 1363.09 provides a remedy to owners. It says, in pertinent part:

"1363.09. REMEDIES. (Operative July 1, 2006.)

(a) A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by an association of which he or she is a member, including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues. Upon a finding that the election procedures of this article, or the adoption of and adherence to rules provided by Article 4 (commencing with Section 1357.100) of Chapter 2, were not followed, a court may void any results of the election.

(b) A member who prevails in a civil action to enforce his or her rights pursuant to this article shall be entitled to reasonable attorney's fees and court costs, and the court may impose a civil penalty of up to five hundred dollars ($500) for each violation, except that each identical violation shall be subject to only one penalty if the violation affects each member of the association equally. A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

(c) A cause of action under Section 1363.03 with respect to access to association resources by a candidate or member advocating a point of view, the receipt of a ballot by a member, or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after tabulation may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court."

As you can see, there are some remedies that could apply to a violation of the meetings act and also the new elections laws. It's best to comply, of course. If an Board has extenuating circumstances that lead it to believe it can have closed meetings, it should seek the opinion of a knowledgeable attorney. There are some circumstances that would suggest seeking court approval of alternative meeting structures to deal with disruptions or other potentially serious problems.

Posted by Beth Grimm at 10:58 PM

November 24, 2006

My HOA Has Liened My Property For Not Fixing Damage Caused by the Association - Can They Do That?

Whenever I receive emails from owners whose homes have been damaged in the course of destructive testing in a lawsuit, I cringe. Of course, readers who were taken care of do not have reason to write.

This is just such a letter (modified to keep from pointing to one association, as this happens more than I would like to see).

"I am a home owner looking for help with an unfair lein from my HOA. A few years ago, the HOA won a lawsuit against the original builder for defects. The net proceeds were about $________. The board began repairs shortly after the win. Unfortunately, the board was inept, and the HOA lawyers and builders ran the association out of money within a year. There is another lawsuit pending against them.

The problem is that the roof was a major problem. The builder removed the roof during the lawsuit, in order to assess problems, just as the winter rains began. He covered it with tarps. Then, after going through the entire rainy season without a roof, my ceiling collapsed and parts were open the sky. The unit was rendered unihabitable.

The HOA kept promising to make repairs although they have not done so yet. The roof was taken off two years ago! I requested arbitration under the CC&Rs but they refuse to answer me.

After all this time, they placed a $___[huge, 5 figures] ____ special assessment against my unit. Of course, I can not refinance, rent or sell the unit in its present condition and therefore I cannot pay the assessment. I did try to sell the unit, but the realtor said I needed to make about $5000 in repairs just to sell it. I did not have the money and the HOA had not made the repairs, so I stopped making the monthly dues payment to accrue the repair money. I informed them in writing of what I was doing and why and they did not answer in writing. One of the board members with a conscience reported to me how the association lawyer advised the board that they were putting me in a psoition to make a lost use claim against them.

This week they filed a lein against my unit. They say they are beginning foreclosure proceedings against me.

How much should I expect to pay a property lawyer to represent me in arbitration? My guess is that it is more than the cost of the repairs, but counting nearly three years of lost use, damages and repairs needed, I think they owe me much more than the amount of the lien. Thus, I think I should fight them on this. What do you think?"

First of all, I believe that if all of the above facts are true, this person should be able to find an attorney that would pursue the case. Most cases that I am aware of that involved liens that are lopsided or unfair, or even that are fair in the first place but which involve sympathetic owners, tend to resolve in settlement discussions with cash settlements without going to trial. The public abhors liens, so if one of these went to trial, and the facts were as stated, without valid defenses, the HOA could find itself being "punished" royally.

As for how much one should pay a lawyer to take on a case like this, one could look until they find an attorney that might take on something like this on a contingency or partial contingency basis. Where would one look? I have to suggest contacting the local Community Associations Institute Chapter or any local HOA group that puts out a directory and calling all the lawyers to see who might be interested in taking the case. Even if an attorney would not take it, one with integrity would be willing to recommend an honest lawyer who has a good reputation that does speak to and represent owners. I know because other attorneys representing HOAs in this state in a situation where an owner has a complaint against the HOA have sent the owners with complaints to talk with me. If I cannot help them, either because of time constraints or the fact that I do not litigate, I try and help them find a knowledgeable attorney who can help them. Of course, it a fact that not every HOA attorney will represent individual owners, but those that do generally "help" things get settled sooner and reasonably. An attorney who knows nothing about HOA law can mislead an Owner and/or delay proceedings or make accusations or threats that are groundless and sometimes because of the lack of knowledge actually protract the litigation process causing everyone to pay more to get to a resolution.

This is a case that demands attention, if indeed the facts are as stated. And sometimes it simply comes down to the "squeaky wheel" gets the grease. But I would suggest this owner talk to attorneys in his or her area, striving to find one that understands HOA laws in California, and does not like mistreatment, from whichever side it comes.

When the Association designates certain units for destructive testing in a construction defects lawsuit, at the VERY LEAST it would be my feeling that those units should get first attention when a "fix" is identified and at the VERY LEAST what was destroyed in testing should be moved to the top of the list for being repaired at the first reasonable opportunity. If any of these cases goes to trial, I do not believe the HOA will receive much sympathy if a home is destroyed to pursue a claim and then not repaired. Years ago I took one of these on and the Association told the owner it ran out of money and could not fix the hole in the dining room floor. They told the owner to put a board and rug over it. NOT ACCEPTABLE!

On the other hand, sometimes (all too often really) the Board determines that there is not enough money left after a lawsuit to repair all identified construction defects, and I could envision a situation where the owner whose unit was used for destructive testing might not get prioroty in making repairs that others are not going to get. Still, the damage that was caused needs to be repaired!! There is no question in my mind about this, even if it takes a special assessment to do it. Leaving an owner without a home, when others still have use of their homes, albiet with some identified defects, should not be considered a viable option.

if this owner gave all relevant facts, I would suggest he or she keep looking, actively and immediately, to find a lawyer that is local enough to at least threaten or file a lawsuit, or engage in meaningful arbitration or mediation, to resolve this.

But there is one thing that everyone should know. In California, there is case law that says an owner cannot withhold assessments and put them into an escrow account or whatever they might claim to do to separate out the money and then use that to pressure the Association to take action. The requirement of paying assessments goes on even if you do not like the flowers, the maintenence performed (or not performed) or the paint color. So discontinuing paying an assessment can lead to a lien and extra charges associated with it, and to foreclosure. In this case, the owner needs to find legal counsel asap because of the pending lien issues.

Posted by Beth Grimm at 9:36 AM

November 1, 2006

Should, or May, HOA Managers and Attorneys Act as Inspectors of Election?

The new law on elections in California requires choosing or electing Inspectors of Election for most HOA elections, to provide an unbiased source for monitoring elections and tabulating ballots.

The possible choices are limitless, although suggestions are made in the statute, including public elections pollworkers, CPAs or notary publics. An Association can use members or vendors; however, if the HOA wants to use the vendors, the Election Rules must specify that as an option.

HOAs need to consider the choices for any election. Thought needs to be given about whether any special expertise is needed, or the election is likely to be controversial. In many cases, association Members may suffice as inspectors. With regard to any election, consider the likelihood of controversy. Using a Member where a trained Inspector of Election who could handle some controversy would be a better choice could result in mayhem at a meeting where the election is hotly contested or the measure is hotly opposed. Appointing anyone who is controversial will probably result in controversy with regard to the election. And you certainly do not want Inspector(s) likely to walk out of a meeting if there are heated discussions about the process.

As to using Association vendors, consider this. The Association’s attorney can be accused of a conflict of interest if he or she ends up having to make the ultimate decision as to whether or not to accept proxies or ballots that would make the difference in the board makeup. He or she could be the right one to provide guidance as to what laws might apply if there is a question about a ballot or proxy. Still, it is probably best if the final decision is left up to an independent Inspector as to whether a ballot or proxy should be deemed valid. Management, the Board and Inspectors should be encouraged to raise any questions ahead of the meeting if it any can be identified as the date approaches. If a question arises during a meeting that requires a legal opinion, it seems to me that the Board and Inspectors could wait to announce the results of the election until legal counsel can be consulted. The notice could ultimately be done subsequently by mail once the legal ruling is obtained. I am certain questions will arise at elections for which there are no apparent answers. Inspectors may feel comfortable ruling on the issues that arise, or not. But there has to be a reasonable way to address problems that are not resolvable on the spot.

As for managers, many Associations will want to use the managers, simply because they are most familiar with elections and the processes. Just keep in mind again, that there may by a challenge to a manager making a decision as to whether or not to allow counting of ballots that do not conform exactly to the stated rules or instructions. The decision could in essence end up to be to accept one board slate or another and this could put the manager in a very untenable position, and could subject the election to challenge, justified or not. It would be fairly easy for a disgruntled slate of board members to argue that the manager had a bias.

On the other hand, the manager may be in the best position to do the work the most efficient and cost effective manner.

So, before choosing Inspectors, think about it.

Posted by Beth Grimm at 9:40 PM

October 14, 2006

Who Has Right To Attend HOA Meetings?

I received this question recently and it is a fairly common one in that it deals with people being barred from HOA meetings:

"I'm a co-owner in a unit of our HOA. I have a power of attorney to represent our interests. The management company rep and the board claim I have no right to attend meetings. If I show up, they ajourn the general meeting to an executive session, which is held in secret at a boardmember's home. In these secret executive meetings, many decisions have been made that affect common use area access, parking, landscaping, etc., without the residents' knowledge, comments, quorum or vote."

There is a lot going on in this question. Owners of units or lots in common interest developments have a right to attend open Board meetings in developments subject to the Davis Stirling Common Interest Development Act, and do not need a power of attorney to do so. Even if an Association's documents had a regulation prohibiting more than one owner of a unit from attending meetings, I would doubt the enforceability of it. There may be extenuating circumstances of course. As always, it would be helpful to hear the other side of things. I can think of a few situations where an owner might be barred from meetings.

Some people consider themselves owners of property based on "community property" laws. Even so, some documents consider "record owners" to be members and someone who is not on title would not be treated as a member, even if in the eyes of the law they were a "co-owner". This might be the case if someone was buying a unit on contract and was not listed on title in the official County records or if someone received an interest in exchange for some kind of consideration.

There may be another explanation. Sometimes an Association will exclude persons claiming to be members (right or wrong) from meetings based on conduct. Abusive tendencies sometimes lead Boards to adjourn the meeting and reconvene behind locked doors to conduct the business at hand. This is a remedy I have suggested in some extreme cases; however, it is not something I would suggest as a matter of course to an association, without examining the facts and circumstances related to conduct, business underway, etc.

I do not know the circumstances behind the situation that lead to the stated questions, and am not by this blog inviting more information on the specific situation, but am saying that if a Board bans members of the Association from attending meetings that are not protected with a veil of confidentiality under Civil Code Sections 1363.05 and following (The Common Interest Development Open Meetings Act), without special circumstances being involved that might justify the decision, there is a problem.

Posted by Beth Grimm at 9:30 PM

September 30, 2006

Restraining Orders - Who, What, Why? How?

I receive lots of questions about how to deal with dangerous people in a CID. Board members often inquire about restraining orders. Here's a recent question asked of me:

"Can a community , i.e., the HOA, get a restraining order on someone who visits one of the residents here? This person is believed to be very dangerous and has been arrested in the past. We believe the police are watching this person and may be getting ready to arrest them. Even so, can we (the HOA) request a TRO out on him so he cannot come into the community."

It's not cheap or easy to get a restraining order. Get legal advice and assistance if you are serious about considering the possibility. The association has to be able to have papers prepared properly for the court, identify the person and serve papers on the person. The court papers require specificity about what orders are desired, and declarations supporting the allegations need to be prepared. Sometimes there are three court visits involved, sometimes only 2. The 3 would include a temporary restraining order, a preliminary injunction, and eventually a trial, if there is resistance. If someone gets a temporary restraining order, that is not the end of things. The court allows the defendant a proper hearing to show cause why the restraining order should not be extended. Court proceedings are far from inexpensive. There are situations where individuals can get "stay away" restraining orders without the assistance of an attorney to keep someone who has threatened them away from them or places they live or work. Superior Courts in California should have packets for individuals to get which state exactly what is needed to file for the restraining orders.

For associations, it is not as easy. That is because the Association does not have its personal safety at stake. It is an entity, not an individual.

The Association would have to have some proof supporting the need to keep the person away, proof that they are a threat. That means witnesses must come forward and made statements that would become a matter of public record. Lots of times owners or residents are not willing to do that. Sometimes there is a belief or someone knows for sure that the person has harmed someone or been convicted of a felony involving serious criminal behavior; sometimes someone knows that its a registered sex offender, but even being a released convict alone is not enough to keep someone out of a neighborhood (if they are out of prison legally). There would have to have been some threats of some kind to residents or some conduct that justifiably gives people a reason to fear for their safety. Even known or suspected gang members probably cannot be banned by a restraining order from entering an HOA, unless the police have something to offer or owners under a threat can offer testimony as to the propensity . (If a community is gated, of course, access is more difficult.)

If entry is unauthorized and someone is on parole, or if that someone is in a location that their parole terms say they should not be, or if the parolee is consorting with people that they are banned from being around, and the police are called or the parole officer is contacted it is possible that passing certain information on may result in a parole violation or arrest, and that may take the person out of the picture. However, please note that I am neither providing legal advice here nor advising any such contacts without getting legal advice and assistance because HOA reps have to be very careful not to defame someone. People often make incorrect assumptions or get their hands on information that is slightly skewed by the time it reaches them.

If the Board has witnesses willing to come forward, and analyzes the benefits that support the expenditure, and assuming the money for the court action is legally available to be spent (again, I am suggesting legal advice be sought in your own state), and restraining orders are approved by the court, then they are filed with the police department and a violation of a restraining order subjects the violator to arrest.

If the person is coming into the development at the invitation of a resident, and there has been no conduct exhibited that supports the need for a restraining order, it will be difficult to impossible to get one, but an association can spend a lot of money trying.

Posted by Beth Grimm at 9:38 PM

May 12, 2006

Should Husband and Wife Both Serve On The Board?

Is it illegal for both husband and wife or two live in roommates to serve on the Board in one association? Here is the plight of one owner who questions whether it should be allowed:

"We have a 5 member board of directors and 2 of the board members are living together as a married couple. Between them they own 4 units. Is there anything in the law that prohibits a husband and wife or a cohabitating couple from sitting on a board of directors at the same time? This gives a lopsided vote and more power on decision making to the board in my opinion. Can you help?"

I cannot provide legal advice in this answer, but can provide some feedback that may help. In a 5 person board, having 2 people from the same unit is not quite the lopsided view of a 3 person board with a husband and wife serving. But still...

It gives the perception of imbalance for sure. It is not illegal for any number of persons from one unit or married persons to serve at the same time on an HOA Board; at least this is the case in California. However, it would not be allowed if the Declaration of Restrictions, Bylaws, or Articles of Incorporation (as the governing documents are called in California) had a prohibition against allowing more than one Owner of a single property in the development or a husband and wife (regardless of the numbver of units owned) from serving on the Board. However, the question arises as to whether it is fair to prevent two people who are cohabiting or are married that own two units from serving on the Board together. They represent the same proportion of units that two strangers serving on the Board would represent. The more common restriction might be that two people from the same Unit could not serve on the Board at the same time. Either of those prohibitions would probably be rare in any set of documents prepared by the developer, because restrictions on board members (qualifications) are usually nonexistent, as it is important to a developer for employees and representatives of the developer to be able to serve. Even non-owners are generally able to serve during the early stages. I do not believe putting a restriction on service that is different than what the Bylaws say into a rule is legal, as Bylaws generally contain the requirements and qualifications for serving on the board and the Bylaws would require homeowner approval for amendments.

But here's the flipside. In some associations there are a very limited number of people wiling to serve on the Board. It happens in some cases that a husband and wife or two Owners of one unit are both willing and qualified to offer something to the Board. Sometimes no one else will serve and that is the only option left. I have seen a few situations where it actually serves the Association well to have a full board of people qualified with skills to divide up and do the work, even if two of them are married, related or otherwise connected. And, I have seen situations where the two people have been on the Board together for years, and the Association is served well by the participation of these people who have special skills and business expertise, and then all of a sudden, someone with an ax to grind or someone who simply starts paying attention finds out and assumes there is some impropriety or imbalance, without specific facts to back it up.

Still, even in the best of situations, I have seen members whisper and gossip and complain about a board made up of 2 owners from one Unit or even when each owns a unit. I have seen recall efforts based on this very single issue, justified or not.

I think it is best if an Association has the opportunity to avoid board service by multiple members of the same "family", but do not offer a blanket statemnt or judgment about any given situation because I have seen benefits and drawbacks to both sides of the issue and have seen situations where I thought there should not be a prohibition and situations where I thought there should be. The question is whether the Association is being served well or not in either case.

Posted by Beth Grimm at 10:13 PM

March 9, 2006

Records Inspections - A Few Things to Think About

In California, many of you are probably aware of the new laws on inspection of records that kick in July 1, 2006. Members will have more rights than ever to see detailed association financial records, right down to the checks and check stubs. But there are some things to get straight.

There are some conflicts in the new law with existing law. A big question arises as to whether members can get membership lists or not (names, addresses and voting rights of fellow members), and whether Associations may still be able to provide an alternate for mailings to giving the list out (such as by accepting the ready to mail communications, and using a mail service at the Owner's expense). Civil Code Section 1363(f) says: "Members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with Article 3 (commencing with Section 8330) of Chapter 13 of Part 3 of Division 2 of Title 1 of the Corporations Code. The members of the association shall have the same access to the operating rules of the association as they have to the accounting books and records of the association." The Corporations Code allows for the alternate method of mailing out owner communications if they have asked for the list. The new law, however, found at Civil Code Section 1365.2, does not seem to allow for this alternate mailing offer except as to owners who have "opted out" from having their names and addresses given to other owners who request a membership list. So how do they "opt out" if they do not know they can? It would be up to the Association to tell them. And up to the Association's legal counsel to advise which law actually controls on this particular question.

For Associations, it seems that you could require an owner to bring their own copy service to the association site, or manager's office, or wherever you and the owners agree the records shall be produced, rather than having to provide copies made at your own facilities. But if you are not willing to bring the records to the Association site, or you cannot agree on an alternative site with the owner, then you may have to provide copies of the requested information. You can estimate the cost, but the law does not provide you with a clear mechanism to collect it, or to withhold records until it is paid.

For Owners, you are entitled to see a lot of association records, but do you need them all? If you ask for everything you are entitled to under the statute, the Association can "throw in the kitchen sink" meaning include all records and reports that you get each year anyway, and charge a cost similar to that of a copy service, or actual costs of a copy service, which are probably more than 20-25 cents per page, front and back. Therefore, for example, if you ask for 3 years worth of checks, front and back, you may be paying hundreds of dollars for costs of producing the records. (And yes, I believe an association could probably recover the copy costs and the costs of going to small claims court by producing a cost sheet from a copy service if you resist paying, or in some cases if appropriate pursue reimbursement assessments for their costs against you, so be prepared to pay up!) And all information relating to bank account numbers of the checks and where they were deposited will likely be redacted, another charge to you, of up to $200. Most accounting services today for management companies and otherwise use computerized checks so a check register may have all the information you need about payees and amounts, at least for starters on your quest to answer questions about association use of funds. Furthermore, if you have received a review prepared by an independent CPA, which is required to be provided to you at no charge each year if your association grosses more than $75,000 in revenues, you can see a lot about what money went where. So why be obnoxious about your needs?

Applying this new law will be a balancing act, and balancing needs and obligations is much easier if opposing parties take a reasonable approach at the outset, before any grudges are formed.

Posted by Beth Grimm at 1:09 PM

December 26, 2005

What Constitutes A Board Meeting?

I received this email from a reader and I think many people would like answers to his question:

"Dear Beth,
I serve on an association board of directors and have a question regarding what constitutes a meeting of the board. I am aware of the rule that a meeting is defined as any congregation of a majority of the members of the board at the same time and place…. We have a president who will contact another board member individually requesting that he sign and approve various documents and then repeat the process with a further board member. He always approaches the two board members over whom he has the most influence and the remaining two board members, of the five person board, are always excluded from the process. Technically, he does not meet with the other members at the same time and place, but the outcome is the same as two board members are always excluded from being able to have their input and are never made aware that such decisions are being made behind their backs. The president maintains that what he does constitutes proper approval by the board of directors even though such decisions are not made at duly called open meetings of the full board. What are your thoughts on this?"

I imagine this happens more than anyone would like to admit. If indeed action is being taken outside of meetings and the president is signing contracts, etc., without board approval, then that is against the law and there is a possibility of making a successful legal challenge to block such practices. However, it is more likely the case is that no law is being broken because a person like the president can have a lot of influence by making the individual contacts to get support for measures he or she intends to raise at a meeting. It is not illegal for any board members to contact other board members individually and exert whatever influence they wish to exert to get them to try to agree with some proposal that is coming up at a meeting. However, action items actually decided at a meeting by majority approval, (or outside a meeting if by unanimous written consent) do not usually give rise to a legal challenge. All Board members must be notified of meetings.

I have actually served on a Board (as a new board member) where it seemed all the important business was somehow turned into a "consent" item and discussion on the action items was discouraged because of the practice complained of here. There was always majority support for all of these ideas I had not even heard anything about. It was very frustrating, so I can relate. Some ways to try to effect a change to this practice (because in and of itself if there is actually a meeting, it is not illegal) is either to insist on discussion on matters that are brought up and seemingly already decided and if the discussion is intelligent or thought provoking, maybe those upon whom the president is exerting pressure will see that there is actually a better way to do business. Try at elections to change the Board makeup by working to get board members elected that would be in favor of reserving discussions on Board business to Board meetings. If you see no hope of changing the Board makeup or the way the majority decides things before the meeting, then decide if you want to put yourself through the meetings and give service to the Board. There may be ways you can find to be effective like bringing good ideas to the Board, remaining positive and working toward more discussion etc. In my case, I did not find serving on the Board worth my time, but I worked with others to change in the Board makeup and over time things did change. It sounds like new blood may be important. Sometimes it is just a matter of lambs following the shepherd because it's just easier than thinking on their own, and if the decisions start to get a lot of challenge or flack, the lambs resign and leave the door open to new appointments. Of course, few would call me a lamb. But I am a realist. And I do not like to take the slow road myself, and often when I run into a quandry, I stop and think about how to best use my time, for the optimum result. In a situation like the one described, I look for a way over, around or through the invisible barrier. And I often come to the conclusion that teaching others how to do something and helping them to get into a position that will allow them to use that knowledge and bloom is better use of my time than banging my head against seemingly immovable wall. Likewise, in the above described situation, I moved aside strategically to help the right two people get through the door that had the patience, time, and inclination to work for a gradual change. And it came, and not so gradually. And it was good for the organization. And I moved on. ...

Posted by Beth Grimm at 12:01 AM

November 8, 2005

Contract Termination Clauses - How Important Are They?

I am reminded today of the laxity with which many Associations treat contracts. I was reviewing one Association's communication to owners about a half million dollar assessment for rehabilitation work (about $10,000 per unit) and came across the statement "We were able to get a favorable contract with a no-penalty termination clause." The reason I was brought in was to write a ballot measure for the special assessment but of course the curious sort that I am lead to some questions. My first question: "So you already signed a contract before the assessment was approved to pay for it?" (Answer: "Yes" but we can pull out anytime if we run out of money.) Now I know that there is no one on the board with business acumin, and I know in this case the manager of the Association would not give legal advice to the Board about the contract, and I know no one asked me as the Association attorney to review the contract, so I wonder if the contract really says there is "no penalty" for terminating it (when all the work seems to be integrated and terminating the contract prematurely would have to cause a disruption in the work of some kind) or if the Board really just does not understand what the termination provisions require (especially if they are based on proving a breach of contract).

Then there is the employer-employee situation: the Board President calls me and says the Board has fired the on-site manager and told her not to come back to work, and has changed the locks. They want to know if that is ok. I ask: "Is there a contract with this employee, or any promises recorded anywhere, or were any promises made?" The President has no idea about any of this. She is newly on the Board and hell-bent on "cleaning things up."

And last, but not least, there is the Board President who calls and says that they are having a problem with their manager. They gave written notice of termination and the manager came back with a letter saying that under the termination clause of the contract the Board is committed to the contract terms until next August. This is 10 months away. I asked why the Board did not consult the contract before issuing a 60 day termination letter. The answer: we did not have a copy of the contract. When I asked why the Board did not ask the manager for a copy, since the managing agent had all the Association records, the Board President said the Board did not want to "alert" the manager that the Board was looking for a new manager. Well, since the contract termination clauses require the Board to "alert" the manager of any perceived breach of contract and give the company 30 days to cure, this excuse did not carry much weight and would likely fail in court.

So how does one avoid these potentially serious dilemmas? There are many ways but the top of the list is to have someone who can read and interpret contracts (like a lawyer, duh!) tell you what the contract says and perhaps most importantly: how you terminate it if you are not satisfied with what is being provided!

Other ways to avoid potential mishaps like the above:

Do not accept a contract that requires that you show "cause" or "breach" to terminate, especially with regard to management or important ongoing services. Beware of contracts that automatically rollover if "not terminated within [a certain number of days] prior to (or before) the expiration date. In these contracts, if you miss the opportunity to give notice of termination within a particular period of time (sometimes a very limited period each year), you can be committed for another period of time (usually a whole year, but sometimes less or more). Demand a clause in the contract that allows for 60 or less days notice of termination, without cause! An automatic rollover is not bad if there is a way to terminate the contract within 30 or 60 days if you are unhappy with the services. And please keep in mind that when you are handed a contract by a vendor, it is likely the contract is favorable to the vendor, not you, and the terms are negotiable. Of course, you may not be able to get what you want and then the question becomes: "Do I go elsewhere? ... Or settle for what I can get." I know that with regard to management contracts, there are many managers and companies that will accept a 60 day termination clause, without cause. I believe the CACM (California Association of Community Association Managers) model contract allows for reasonable termination without cause.

If you are looking at a contract for construction services, especially extensive and costly services, look for a termination clause that is based on some reasonable measure, such as phases or buildings or a measure of fencing, etc. ("at the end of each [phase, area of fencing, or building]". A contractor who has any savvy at all (which can be an indication of professionalism in the way you are treated) should offer some reasonable termination provisions. In fact, California contracting laws prevent contractors from collecting "up front" the entire amount of the contract as a measure of protecting the consumer who might be duped into giving a flakey contractor a fistfull of money only to see the dust fly as the truck drives away off into the distance (never to be seen again).

Having to show cause or breach to get out of a contract or suffer extensive losses before you can "jump ship" is not beneficial to you. And forcing parties to continue to work together when the relationship has "gone south" can be very painful and unproductive. Having to "buy out" a contract term can be very expensive. Firing someone or some company and hiring another while still under contract with the first creates two contract disputes to deal with. Don't make these mistakes. Treat contracts with care and respect. And understand the legal ramifications. In the eyes of the law, you cannot ignore contractual obligations and requirements.

Posted by Beth Grimm at 1:33 PM

September 9, 2005

Board Member Liability Protection - How to Optimize It

These days, it's getting tougher and tougher to recruit good board members in common interest developments. One has to ask what makes people serve when board members all over the state of California face thankless service, undeserved criticism, false assumptions, low (actually no) pay, sometimes long hours, the need to solve often complicated and difficult decisions, bad press and threats of being sued by every disgruntled homeowner. Board member liability is a big issue. So what protection is there?

Civil Code Section 1365.7 provides some protection for "volunteer" board members (those who are not working for the developer and who own only one or two units and not more)in residential CIDs (common interest developments). The condition is that an association must carry policies of insurance providing coverage for general liability and individual liability of officers and directors of the association for negligent acts or omissions with the minimum amounts of coverage of $500,000 if 100 or fewer separate interests and $1,000,000 if more than 100 separate interests. The statute wording means essentially that a board member cannot be sued personally for amounts up to the Association's coverage but there are other conditions as well. And an Association that sticks to the statutory limits is probably not giving adequate protection for board members because in today's world, these coverages are considered on the low side.

There are other requirements of course. The protection is not intended for rogue directors. The actions of the board member (1) must be performed within the scope of the director’s or officer's association duties, (2) must be performed in good faith, and (3) must not be wanton, willful, or grossly negligent.

Good faith is determined by motive and intent. Most board members are well-intentioned (in spite of what you read in the newspapers). Sometimes that is hard to determine for sure, but it is easy to claim innocence, so a lack of good faith would have to be fairly obvious. The scope of duties could be generally defined but there are situations where the lines blur. For example, what if a board member is out walking the neighborhood looking for rules violations and confronts an owner about the car parked on the lawn, and thereafter the confrontation elevates to a fist fight. What if a board member causes a contractor to leave the site by trying to micromanage the work, after the board member has been warned by the other Board members and the association's attorney that they are not to interfere with or have contact with the contractor. What if a Board member is sued for defamation for bad-mouthing a contractor? What if the Board member misspends association funds (like the one who bought himself an expensive airplane ticket to return early from visiting his father to attend a controversial association meeting). Are these examples performance of the duties or acting within the scope of what would be expected of a board member? Willful and wanton behavior is an act that is intended to or likely to cause distress or harm of some kind. Gross negligence is a lot worse than ordinary negligence. Making a mistake such as poor budgeting is usually ordinary negligence, but making a mistake involving conduct that one knows is wrong, is against the law, or is ill advised crosses the line. These points can be argued by lawyers. The best protection comes from acting reasonably.

There is also protection in the Corporations Code (7231 and 7231.5) in statute commonly known as the "safe harbor" statutes. If a board member acts in a manner he or she believes is in the best interests of the (in an incorporated) Association and with reasonable inquiry or reliance on information, opinions, reports, statements, or other data, financial or otherwise, prepared by officers or employees believed to be reliable and competent in the matters presented, or by independent counsel, accountants or other persons qualified to give opinions, the board member cannot be sued for the action. Again, "good faith" plays a large part in things.

Associations should also carry directors' and officers' liability insurance that protects the Association and Board members from liability (including payment of damages and/or defense costs of any lawsuit). Most governing documents include a requirement to carry this insurance, but many do not specify a minimum, so the statute mentioned above becomes the guide. However industry standards suggest more coverage than the statute dictates. If the association documents do not provide the authority for insurance coverage then I would have to suggest a document amendment. It is critical to provide protection for those willing to do service.

Many board members are covered by individual homeowner's insurance policies purchased to provide protection on their individual units. Many homeowners' policies include some coverage for service on nonprofit boards. This is something a board member might want to explore.

And most governing documents provide indemnification protection for board members that says board members are entitled to a defense of a lawsuit against them or payment for damages they might be adjudged for actions taken on behalf of the Association. The Corporations Code provides authority for corporations to "indemnify" any person threatened with a lawsuit for specific causes of action related to corporate service, or action brought by the Attorney General, and to pay judgments, fines, etc. (Corporations Code Section 7237)

One area where board members can lose some of these protections is by accepting compensation for services as a board member. The statutes only protect uncompensated (volunteer) board members. The Association's insurance policy may have limitations too - it is wise to check this if there is any compensation. Some Associations provide assessment waivers for board members (although not a commonly recommended practice) and it is important to understand that if a board member receives an assessment waiver in any proportion or amount, that could be considered compensation for purposes of analyzing liability protections.

So - there are some common protections and thank goodness for this. Most board members deserve protection from lawsuits and judgments that are a result of acting on behalf of the Association. But it is important to remember that the protections come through good faith actions, keeping within the normal scope of a board member's duties, not accepting compensation, and consulting with the right kind of experts or seeking information from the right (reliable and informed) sources. It is important to optimize the protections, so that Board members can stop losing sleep at night everytime a disgruntled owner threatens to sue. Unforetunatetly, it seems to be a common practice here in our state to threaten a lawsuit before asking how things might be resolved.

Posted by Beth Grimm at 9:16 PM

August 14, 2005

The Department of Fair Housing May be on the Prowl- Watch Your Rules!

Do you have rules singling out children? Rules that may discriminate against any of the protected classes? A local (California)law firm recently sent around an alert. One of the Associations represented by the firm apparently received a letter directly from the Department of Fair Housing about rules of the association. The Association was accused of discriminating against children. A rule as simple as "Children are not allowed to play in the common area" can get an Association in trouble. It suggested by this firm that the Department of Fair Housing has resorted to "surfing" the web for such rules. A simple google search for the word "children" could turn up thousands of Association sites and the offensive rules.

A few years ago, legislation was introduced by Senator John Burton, a powerful legislator, and it passed into law, that requires California Associations to remove all discriminatory language from the governing documents (which include rules). [SB 1148] Since that time, knowledgeable California attorneys have encouraged Associations to get their governing documents reviewed. Clauses or rules like that stated above may seem harmless to some Boards that are dealing with out-of-control children; however, the language can lead to discrimination claims. Clauses that prohibit renting to persons other than "single families" or that limit occupancy to a "single family", adopted because of an experience with 12 people living in a 2 bedroom condo may seem harmless but can lead to a discrimination claim. A simple change of a rule to state "There is no playing, climbing trees, bike riding or ... in the common area" is more easily defensible because it applies across the board, from children who want to dig in the dirt, to thirty-somethings who want to toss a frisbee or football in the common area. A change from "Owners are responsible for the conduct of their children" to "Each Owner is responsible for the conduct of their family members, tenants ... etc." is a simple way to get the results wanted with alternate language that will not trigger a discrimination claim. So, Boards do not have to give up on reasonable rules, they just have to think differently (try the perspective of minimizing risk of legal action against the association - which should be a part of any risk assessment analysis conducted by a Board).

An Association can be held guilty of discrimination simply for failure to remove discriminatory language. Check out http://www.californiacondoguru - for more on this -and review articles and FYIs on this topic. At the height of discussion on this - around the time the legislation was proposed and for a year or two thereafter, there were a lot of alerts sent out and many Associations did send in the documents to attorneys and receive letters for their files either blessing the documents or outlining the appoach to take with regard to potentially discriminating language. But after the initial storm of interest, the volume of review projects dropped off to nothing. Perhaps because there was no ongoing alert of this problem. Perhaps managers dropped this from the checklist of possible document issues for Associations, perhaps Boards became resistent to paying legal fees for the review and letter. Some advised that Boards could wait until an Owner or resident, or the City or County sent a letter about the language, and assumed they could clean it up before the Department of Housing got involved. The statute allows a Board 30 days to get rid of the language once notice is given.

However, times change. This year AB 394 was introduced in California because the legislator introducing it does not feel that the Burton Bill resolved the issue of eradicating discriminatory language in CC&Rs. If this bill passes, Owners will be able to strike language from CC&Rs and rerecord them, thereby superseding prior documents and rendering them null and void. Common Interest Developments are excluded but it still applies to any CC&Rs for developments that do not have an Association. Absolutely, this carries with it a number of serious problems if an Owner can disrupt the priorities established for CC&Rs, but aside from that, it illustrates the desperation of legislators to eradicate discriminatory language from CC&Rs. This recent move by the Department of Fair Housing, if it is true, may have been triggered by this renewed interest in removal of discriminatory language in CC&Rs.

Now, if it is true that the Department of Fair Housing has people "surfing the web" for potential violations, it is time to put this back on the "top burner" and keep it there, until your association has been "blessed". I realize it seems a bit self-serving for an attorney to be encouraging Boards to seek a legal "review", but truly, it is worse to be caught with your pants down! Defending a discrimination complaint is much more expensive and frustrating than taking care of business up front that needs to be taken care of. Since more and more associations are publishing rules and regulations on the web for all to see (which by the way I am not in favor of), there is much more exposure to liability for an innocent oversight. And be advised that a complaint might come from an owner or tenant within the development, even if the Fair Housing Department does not find anything interesting on the web. And if your Association receives a complaint or request FROM ANYONE that suggests there is discriminatory language in any of the Association governing documents, get help from a knowledgeable CID attorney (don't go to your family law or estate attorney for this, or even a real estate attorney with no specific CID credentials!)immediately! This is serious business!!

Get thee to the website and check it out. If you read my blogs, you know I believe in preventive law. If you do not take measures to avoid a discrimination claim, and the Association does receive a Fair Housing Complaint letter, you will have to pay not only for a full review, and advice of what to correct, but also to defend and satisfy the Fair Housing Department requirements, which can be quite severe.

Posted by Beth Grimm at 10:39 AM

July 29, 2005

Board Member Mania - What's Up?

It seems lately that Board members are tripping over themselves all over the place these days - I get so many calls from board members that need help because the Directors are fighting with each other or the hired help or the members. Sometimes a Board member is harassing employees, staff or owners. Sometimes they are threatening each other. Sometimes one or more is taking information from executive session meetings and attorney-client privileged information to the owners because they can't get the board to agree to what they want. Sometimes a Director comes to a board meeting drunk and obnoxious. Sometimes the board won't seek legal advice when one board member thinks it is critical to do so. Wow, seems Board mania is a contagious disease. What's up?

My theory is that the problems Boards face are getting tougher; expenses are increasing drastically for HOAs; many are facing very serious construction rehabilitation issues and/or shortfalls in reserves and operating accounts; the economy (credit based and overencumbered loans) makes it tough to raise assessments or pay large special assessments, legislative micromanagement and negative press present undeniable hurdles; homeowner education is leading to more diversity in thinking on the boards, and therefore more disagreements; and society in general seems more stressed, always hurried and meaner in spirit. Oh yeah - and there is also the ever present threat, "I'll sue you!" California is such a litigious state. I wonder if there are so many attorneys because there is so much litigation, or it is the other way around.

So are there solutions? Yes there are. Since I practice in California, I cannot speak for other states but these are solutions found by me to be workable and successful in some of the situations involving Board infighting. Training in mediation, negotiation and people skills can help greatly to neutralize heated board meetings. Who wouldn't benefit from a "Dealing with Difficult People" mediation course? (...well, maybe one of the really difficult people!) Appointment of outside inspectors of election can take the heat out of a contested election. Parliamentary procedure can help greatly too, if the Board understands how to use it appropriately. It is after all required by law to be used at all association meetings. Board members who leak confidential information, start rumors about other board members, undermine the Board's role and threaten protections important to the Association, can sometimes be "neutralized" without resorting to such a drastic and politically upsetting course such as recall or court action There are a couple of options at least - the Board can take away their "office" position on the board if they hold office (appointment and taking the officer position away - not to be confused with unseating a Director from the Board) is usually a Board perogative. In a really drastic situation, or when a board member is suing the Association or the rest of the Board members, the Board may want to appoint a duly constituted "executive committee" consisting of all Directors except the problem board member for purposes of dealing with executive session discussions and meetings with the attorney. Board members who harass employees or scare off contractors can be relieved of their role in oversight and instructed not to approach employees, staff or contractors, by the Board. If a Board member comes to the meeting inebriated, he or she can be asked to leave. Of course if you need a them for a quorum and they pass out in their chair or on the clubhouse couch you may want to let them stay (ha ha).

From my view (of course taking into consideration that most of what I see are the problems Associations face) the position of serving as a Board Member in an HOA is getting ever increasingly complicated for many reasons including complicated laws, threats of lawsuits, shortage of money for the budget, discovery of serious problems, trying to conduct business in the face of insulting or difficult board members or insulting or difficult owners, and sometimes because of excessive meetings and time requirements when something big is happening. It seems to me that every year, the fights get more serious, the job of each Director gets harder and the pool of volunteers willing to serve is shrinking. The stress encountered in the thankless "job" wears good board members down and the burn out rate is high. Often, board members are recruited because the were innocent owners who showed up at a meeting and did not think quickly enough to decline when asked to serve. Once on the board, they find they are either not qualified to serve or they had no idea about what was required, that they do not have the time or energy to do any work or review the board packets and come to the meetings informed; sometimes they find that there is too much infighting (sometimes they are unfortunate enough to become the "swing vote" and are subjected to intense pressure from both "sides", or they find that it is hard to get off the board once they are in the "hotseat" because no one else is willing to step up to the plate.

How happy would that make you?

Posted by Beth Grimm at 10:17 PM

June 24, 2005

DEVELOPER "LOW BALLING"

I was asked the question the other day from a reader - "I live in a fairly new association (8 years old) and we do not have fancy amenities. I pay $175 per month for assessments. Yet the brand new development being built by the same builder across the street, with very similar structure, and very similar amenities, are being offered with assessments at $125 per month. What's up?" I answered that there could be several reasons for that. One possibility is due to what I call "developer low-balling". At least in California, there are DRE (Department of Real Estate) recommended budgets that characteristically are set too low for continued operations. The developers use those budgets to estimate expenses. Sometimes the developer will bear some of the initial operating costs (like landscaping, irrigation, insurance costs, etc.), until the project is built out. If they spend extra to keep the lawns and common areas very green during the sales period, and pay the costs, homeowners are hit with an increase immediately when the last units are sold. Sometimes the owners cannot afford to keep all of the irrigated landscape green and have to make changes to plants that need less water. Sometimes components are not listed on the original reserve study because they either were not built out when the study was first done or were added later to make an area look nicer, and these things were not apparent when the preparer did his or her inspection. So, it is very common for assessments to increase considerably (there are legal limits of course) in the first 2 or 3 years after the developer relinquishes control. Illegal?? Not really. Misleading - yes, quite. But it can be a combination of things, some within the developer's control, some not. It's kinda like when you sign a contract for a remodel job and the costs just escalate - seemingly for no good reason. (I always secretly estimate for myself another 25% add on to any bid for any work on the house.) That's life in the world of property ownership.

Posted by Beth Grimm at 9:45 AM

June 1, 2005

When to Amend? That is the Question.

When should associations amend, update or restate their governing documents? Well, I can only speak for California - and I would say because of the prolific legislature, every year would be good. Ha, you say, that is simply not possible, nor affordable. True. Amending or restating the governing documents requires a process, often considered long, dull, and demanding on the Board members and committee members. It requires owner approval, sometimes a "supermajority of votes" like 75% or more. It costs a lot of money. It requires trying to get owners to respond (kinda like trying to get a turtle to run). It sometimes draws out the biggest complainers in the Association and sometimes requires the Board to go "face-to-face" with the meanest, most critical residents. It's work. It's important. And it's usually do-able with a good plan or strategy and the help of a competent professional.

However, it's not the only solution to getting a guiding document that is a useful tool in providing information about what new laws there are and how they affect existing (old or even fairly new) documents. If your association documents are more than 10 years old, and you are trying to use them in today's world, you are at a distinct disadvantage. If they are more than 20 years old, you probably have given up on them (or if you are using them you may be doomed! ("Doomed" - a favorite word of my study partner in law school that I still find useful in some contexts).

Even if your documents are only 2-5 years old, a "tune-up" may be required to keep you abreast of requirements for board members, managers and owners in CIDs.

Get more information on amending and restating documents, and in case you can't do that for some reason, on getting a document "tune-up" at http://www.californiacondoguru.com.

Posted by Beth Grimm at 11:30 AM

May 24, 2005

Fines - Are They A Viable Means Of CC&R Enforcement?

"FINES UPHELD IN COURT" This is a headline you may have read lately. One thinks "Alas, all is not lost." There have been some recent newspaper reports about a case in Santa Barbara saying that a court upheld $277,000 in fines imposed by a homeowners association against an owner. The owner was described as "the neighbor from hell". Ever had one of those? If so, then you are probably thinking "there is a God." The person had continuing, multiple rules violations. They included things like: blocking horse trails, putting screens around his property, and installing flood lights which caused the “parking lot” or “ballfield” look on the property.

The Owner apparently refused to comply with the association's rules, and the board fined him $100 per day. This was the first time out-of-the-chute (according to the newspaper articles) for this association to fine anyone. As you can probably imagine, the Board had to have been at its wit’s end with this Owner. Luckily (and probably quite justifiably), the court said:

“Hope Ranch did not abuse its discretion in finding continuing violations of the building guidelines or in imposing monetary penalties against [the owner] until such time that [the owner] demonstrated that the violations had been cured. Despite warnings and extensions of the correction or abatement periods, defendants delayed, failed to respond and have their own intransigence to blame for the large amount of the accumulated penalties.
. . . [the] Board acted upon reasonable investigation, in good faith, with regard to the best interests of the Association, and not in an arbitrary manner and its actions are entitled to deference ... The amount of $277,000 as a monetary penalty is not unreasonable on its face given the contribution of [the owner's] own actions and inactions to the amount of the penalty ... The monetary penalties ... were not impermissibly punitive because [the owner] could have prevented the imposition of damages by simply curing the violations and providing evidence to Hope Ranch in a timely manner showing that the violations had been cured.”

This ruling provides hope; it illustrates that courts are willing to uphold fines when boards act reasonably in enforcement options. However! Do not rush to rely on newspaper reports as the status of the law in this State. The case has been divided into parts to be heard and there is not a final judgment yet on all issues. Even when it is final, and even if in the final judgment there is a ruling in favor of upholding the fines, there still is a chance of appeal of the case. Until an appeals court hears the case, there is no binding decision that will prevail in other fines cases. And even then, any decision may be deemed not fit for publishing which is fairly common in HOA cases - it means the decision cannot be recited as binding legal authority.

I don't want to sound like a "doubting Thomas" because the treatment of fines in this case by the court is very important and very hopeful since the legislature has taken away the right of associations to collect fines via most means, leaving the necessity of filing a court action as the ultimate remedy. But there is more to this situation than the impression given by the press (ah, what else is new). I am in the process of researching and following the case, anticipating a full-blown article about enforcing the governing documents to come in the summer edition of The California Homeowners Legal Digest. Are you a subscriber yet? If not, get on board! Visit http://www.californiacondoguru.com and sign up!

Posted by Beth Grimm at 2:42 PM

May 19, 2005

Lease Limitation Clauses - Are They Legal in California?

Lots of board members in condominium and townhome homeowner associations ask about lease limitation restrictions. Usually, boards want to propose the clauses to Owners for approval so that rentals in the development can be limited. The desire often arises because of bad experiences with rented units. Boards often find that there are more problems with rented units than owned units. Further exploration raises important questions about financing options - because they are limited in high percentage rental developments. The higher the rental percentages, the more likely that there will be financing issues. There are pros and cons to these provisions. Find out more at http://www.californiacondoguru.com.

Posted by Beth Grimm at 10:46 PM