Can Trustees Vote?

QUESTION: Our attorney said we cannot exclude owners who have their homes in a living trust from voting or being on the board. Unfortunately, one of our members has been raising quite a stir by insisting that trustees are not owners and so should not be allowed to vote or be on the board.

ANSWER: I suspect the homeowner who is raising a fuss does not have a law degree. If he does, he needs to go back to school. Your HOA attorney is right–trustees are owners and have the right to vote and serve on the board.

Estate Planning. A member who, for estate planning purposes, changes the title of his property from “John E. Smith” to “John E. Smith as Trustee of the John E. Smith Family Trust dated 1/1/15″ does not cease to be a member nor does he lose his membership rights and privileges. He is still the owner of his property and a member of the association.

AMENDING
COLLECTION POLICIES


QUESTION: Is an association legally required to amend their collection policy to address the appellate case Huntington v. Miner related to partial payment acceptance?

ANSWER: I asked my two collection attorneys, Richard Witkin and Wayne Louvier for their feedback on this one.

Reasons to Amend. There is no legal requirement that your collection policy be amended. Even so, any language in the policy which is inconsistent with the law should be amended, especially since it is within the control of the board to do so and (i) so as to avoid having uninformed directors or managers relying on unlawful provisions and (ii) to avoid being accused of misrepresenting the law.

Partial Payments. Another reason is to make sure current and future boards and managers know they must accept partial payments. Huntington Continental v. Miner specifically addressed this issue and ended the widespread practice of refusing partial payments when a lien is recorded or foreclosure initiated against a unit.

Restrictive Endorsements. Another caution involves partial payments containing restrictive endorsements like “deposit of this check constitutes acknowledgement that my account is paid in full.” Payments with restrictions should be returned to the owner with a request that the payment be re-submitted with the restriction deleted.

RECOMMENDATION. Even though there is no case or statute requiring the amending of collection policies, common sense dictates that policies be adjusted to comply with changes in the law. Accordingly, boards should have their policies reviewed by legal counsel.

ADAMS KESSLER OPENS
NEW OFFICE IN TEMECULA

I am pleased to announce the opening of our ninth office.

This one is in Temecula, the heart of Southern California’s wine country, hot air ballooning and large gated communities. Our address is:

ADAMS KESSLER PLC
41593 Winchester Rd., Suite 200
Temecula, CA 92590

HOA LAWYER
WANTED


I am expanding my legal team in the Inland Empire and need a bright, committed lawyer with at least five years experience.

I place a high value on legal analysis, writing skills and the ability to work with people. Litigation experience is a plus.

You will be working out of our Temecula office. Contact me by email or at:

Adrian Adams, Managing Director
Adams Kessler PLC
2566 Overland Avenue, Suite 730
Los Angeles, CA 90064

 

FEEDBACK

Escrow Documents #1. I am responding to a reader’s comment about agents insisting that documents come from the management company. I have been a realtor for 40 years and litigation has become very common especially if it concerns seller disclosures. Most owners do not keep all documents and if just one is missed, the buyer is at risk of being sued. We are not stubborn or trying to cost the seller money but are trying to protect the seller from a potential lawsuit. -Janis S.

Escrow Documents #2
. If I were a prospective buyer, how can I be guaranteed that the seller has up-to-date documents? They could have been revised. For a nominal $100 charge I would want the peace of mind of knowing that the documents are accurate, current, and complete. If the seller balks at such a trivial amount, I would be highly suspicious of the entire transaction. If I received the seller’s documents and later discovered they were not current and I subsequently suffered some sort of financial loss because I relied on obsolete information, I would be filing suit against the seller. -Hank J.

Escrow Documents #4. I am a Realtor and on the board of directors. I have a problem with how many management companies are using a third party to provide HOA documents to escrow. It works like this: Management Company emails documents to third party, third party emails all the documents to the escrow officer. Escrow then charges $100.00 to download and print the documents. Management company charges $150.00 for transfer fee. It all adds up and the seller pays $600.00 by time all is done. New civil code says management company must list costs for each document and use only the documents requested. I have had this happen on two transactions lately where we had all documents, except one which we had to get from this third party, and pay $350.00! -Joan S.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Drought Emergency & Reserves

QUESTION: In light of the drought emergency, can reserve funds be used for drought-friendly landscape renovations?

ANSWER: I checked with Robert Nordlund, President of Association Reserves, Inc. to see what he thought. Following is his response:

Existing Landscape Reserves. Many associations already have landscape-related projects in their reserve study, the most common being tree trimming. Many others have periodic landscape renovation projects to freshen up the appearance and health of their greenscape. If an association has a landscape renovation reserve component, those funds could be used for replanting and redesigning with drought-tolerant plants.

Borrowing. If they don’t have funds already set aside, another strategy is to borrow from reserves with these borrowed funds expected to be recouped by savings from lower water usage. While borrowed reserve funds must be repaid within twelve months, the following allows for the delay of repayment:

…the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration. (Civ. Code 5515(d).)

Savings. If you find that a $50,000 landscape renovation project would result in a projected $50,000 water savings over three years, and if your reserve balance can support the expense without delaying necessary reserve projects, an updated reserve study can provide the necessary documentation. The result is a zero-interest loan from reserves to implement the project.

Additional Points. Make sure the project meets your architectural requirements. You don’t want to replace grass in your greenbelts with artificial turf if you’ve been denying homeowner requests for similar projects in their front yards. If you are installing artificial turf (or something else that will need renovation or replacement), remember to add it to your reserve component list.

SUE ANDERSON
JOINS ADAMS KESSLER

I am pleased to announce that Sue Anderson has joined our firm as Director of Business Development.

Sue brings over sixteen years of experience in client development, quality control systems and client relations. She previously worked for a large agency handling Fortune 100 companies. This was followed by a position as Director of Business Development for the 4th largest security services company in the U.S.

Ms. Anderson’s many talents will be put to good use working with Nathalie Ross enhancing our firm’s quality controls and developing our growing array of legal services.

Sue earned her Bachelor of Arts degree from DePauw University in Indiana and is an active member of the Community Associations Institute and the Women’s Leaders Forum.

For more information about our legal services, contact Sue Anderson by email or by phone at (800) 464-2817.

FEEDBACK

Recall Petition. I think you overlooked something. If HOAs have yearly elections and terms in office are for 2 years and staggered and the recall affects board members not up for election, they would still be subject to recall as they would still have one year left to serve. If their term is up you would be correct and it is a waste of time. – Gary S.

RESPONSE: I considered those issues in my opinion. Even if only part of the board changes, it’s still a different board. At that point, if the membership is unhappy, they can submit a petition recalling some or all of the directors.

Escrow Documents. Most associations charge for copying and sending documents required by escrow because it takes time and there are some costs. A new law allows homeowners to submit documents in their possession. A lot of people don’t know this including the realtor who sold my townhome this year. He insisted I pay to have the management company prepare and send the documents even though I was on the board then and had most of the documents in my possession. My realtor finally agreed that it was within my right to submit what I had. Realtors tend to be stubborn. -John A.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Elections and Recalls

QUESTION: Less than sixty days before our annual meeting a group of homeowners submitted a petition to recall the existing board. As required by statute, the board gave notice of a special meeting. It will take place a month after the annual meeting. Under the circumstances, what is the effect of the petition?

ANSWER: In my opinion, it’s voided by the intervening election.

Pre-Election. Recall petitions submitted close to an annual meeting are the most ill-conceived kinds of petitions. The petitioners should have their heads examined. If a recall is held prior to the annual meeting and is successful, the new directors only fill the remaining terms of the ones they replaced. That means they may be up for reelection in thirty days. It’s a huge waste of time and money.

Post-Election. If the recall is scheduled to follow the annual meeting (as you described), the petition is no longer valid. The board for which the petition was submitted no longer exists. Even if the same directors are elected, it’s a new board with new terms in office. If the petitioners want to recall the newly elected board, they need to submit a new petition (and then explain why members should recall the board they just elected).

RECOMMENDATION: To avoid this kind of nonsense, associations should amend their election rules to put reasonable limits on recall petitions.

POINT OF ORDER

QUESTION: Our chairperson stated that the only time a homeowner can call a “point of order” is at the annual meeting. My understanding is that an owner can raise a point of order at board meetings if they know the board is not following parliamentary rules.

ANSWER: Sorry, I agree with your chair. You can’t interrupt the board’s meeting to raise a point of order.

Point of Order. For the uninitiated, a “point of order” is a parliamentary procedure issue. It can be raised whenever a member notices procedural rules aren’t being followed correctly. For example,

…point of order, the speaker’s time has expired.
…point of order, the speaker’s language is offensive.

…point of order, the motion conflicts with our bylaws.

The issue must be raised immediately by interrupting the chair, otherwise the right is waived.

Standing. The key is the definition of “member.” For board meetings, only directors are members of the board. Accordingly, only board members have standing to raise points of order in their meetings. A homeowner has no standing just as a citizen has no right to interrupt House proceedings in Congress with a point of order. They will be promptly escorted from the chamber if they do.

Membership Meetings. Homeowners can, however, participate in membership meetings and raise points of order. With the advent of secret balloting, that right is largely moot. Except to count ballots and announce the results, almost no business is conducted anymore at membership meetings.

ESCROW DOCUMENT
FEES

QUESTION: Is it a state law that the association charge new buyers for twelve months of minutes and all HOA docs?

ANSWER: State law does not require that associations charge document fees. Rather, it allows it. And most associations do. See escrow documents. However, it is the responsibility of the seller to pay for the documents. (Civ. Code §4530(b)(8).)

FEEDBACK

Humor #1. I really enjoy your newsletter and I am positive your sense of humor (slightly warped) is the result of years of dealing with homeowner associations. -Kat

Humor #2. You have such a funny sense of humor. I read your weekly newsletter just for your hilarious comments. -Cassie T.

Open Forum. THANK YOU for pointing out the option of allowing for member comments from the audience, at the discretion of the president (or policy of the board). This opportunity is sometimes overlooked in advice given on HOA meeting operations. It is an important way to improve member satisfaction with the value of their association. Here in Santa Barbara, local government allows for public comment both at the beginning of open meetings, and, if one signs up on the request form in advance, on any agenda item, after board discussion, but before any votes are taken. -Howard G.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Suspicious Inspectors of Election

QUESTION: The Davis-Stirling Act states that ONE or THREE independent third parties must be chosen as inspectors of election. Since tabulations must take place in public, it appears suspicious when there are only two at the table when the law requires one or three. If the Inspector brings someone to open the ballots, does he count as an inspector because he is touching and unfolding ballots? If the assistant SORTS the ballots (touching the ballots) and asks questions to the Inspector about ballots, does he become an inspector?

ANSWER: There is nothing suspicious or inappropriate in what you describe. The Davis-Stirling Act addresses the number of inspectors (one or three) not the number of assistants (unlimited). (Civ. Code §5110(a).) What’s more, the Act actually requires that election rules:

Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties. (Civ. Code §5105(a)(6).)

That means you can have one inspector and half a dozen assistants who register people, open envelopes and tabulate votes–all under the supervision of the inspector. Touching an envelope does not magically make someone an inspector. Under that reasoning, mail carriers become inspectors when they deliver envelopes to the inspector. I don’t think the Post Office has that in their job description.

RECOMMENDATION. The British government distributed posters to the people of England during World War II to help get them through the Nazi aerial bombardment. One of them read, “Keep Calm and Carry On.” That applies here. Don’t over-think the inspector issue or you’ll give yourself a stroke.

DOES DAVIS-STIRLING
APPLY?

QUESTION: Does the Davis-Stirling Act pertain to a nonprofit mutual benefit corporation? I am told it only pertains to public nonprofit corporations.

ANSWER: An association’s corporate status does not matter–if it meets the definition of a common interest development (CID), Davis-Stirling applies. By the way, most HOAs are nonprofit mutual benefit corporations not public benefit corporations. Some associations are not even incorporated and still fall under the Act. In addition, associations in existence prior to the Act are also bound by it.

PARTICIPATING IN
BOARD MEETINGS

QUESTION: Our board says members are not allowed to speak until the end of the meeting. Therefore, we are not allowed to express our opinions before an action is taken on an item on the agenda. Should we not be allowed to speak when that item comes up for discussion?

ANSWER: Members have a right to observe board meetings but they don’t have a right to participate in the board’s discussions and votes. This is the same policy followed at city council meetings–once the public forum is closed, citizens cannot interrupt council meetings to comment on issues. It’s even more restrictive on state and federal levels where there is no right to an open forum when the legislature/congress is in session.

Open Forum. The only time members have a right to participate in meetings is during the “open forum” portion of an open meeting (Civ. Code §4925, §5000(b)) and only for a reasonable time established by the board. Members can ask questions but directors are limited in how they can answer them.

Inviting Comments
. Although members do not have a legal right to participate in board discussions, the president can invite comments from the audience on particular items of business if he so chooses. This is at the discretion of the board. Once comments have been received, discussion can be closed and a vote taken by the directors.

FEEDBACK


Drought Self-Help. A board member discovered a watering device o
n a homeowner’s patio area. Water was dripping everywhere so the board member decided to climb over the wall and confiscate the watering device and refuses to give it back to the homeowner. What are the board’s rights? -Reader

RESPONSE: I understand your board member’s good intentions but directors should not be jumping fences and confiscating things from members’ patios, balconies, yards, etc. It makes them vulnerable to legal action for trespass and theft. There are better ways to address water wasters. Start with a phone call or letter and proceed to hearings and fines. If this fails, bring in the lawyers. If your hyperactive board member continues to act without authority, you should censure him.

Artificial Turf #1. A neighbor installed “Easy Turf” on his tennis court only to find it gets too hot to use between mid-morning and evening–something for HOAs to consider before installing it in the common areas. It would resolve the issue of not wanting children and pets playing on the grass. -Jean R.

Artificial Turf #2. With the drought situation, the HOA is considering the elimination of grass from common areas and parks within our association. Can the board do this without member consent? -Larry P.

RESPONSE: Boards have broad latitude to respond to emergency decrees and legislation. But they need to carefully weigh the pros and cons before installing it, especially if it covers large areas since surface temperatures can soar to 200º and sanitation can be a problem when dogs relieve themselves on it. Finally, there is a cost issue–the larger the cost, the more likely the membership will need to approve it.

Artificial Turf #3. Another problem with artificial turf is the removal of viable earth that is replaced with decomposed granite as a base, rendering the area unplantable, and presenting a cost issue that the HOA sometimes gets stuck with if the area needs to be restored or dug up for underground utility repairs. -Jeanne M.

RESPONSE: At least decomposed granite is better than the recycled ground up rubber tires being used by some. It may provide a “cushion” under the grass but it has toxicity issues. (See EPA website.)

Ceiling Speakers. Is the ceiling part of the fire rated floor-ceiling assembly? If so, just like with recessed lights cutting a hole in the ceiling is a no-no. The accepted practice is to build a 5-sided drywall box in the ceiling into which the light or speaker will fit. This effectively maintains the fire rating of the ceiling. Without a building permit and the inspection that goes with it or someone knowledgeable, this happens all the time and reduces the building’s ability to restrict the spread of fire. -Mike G.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Delegating the Budget

QUESTION: Our CC&Rs state “The Board shall prepare an operating budget.” However, the board delegates it to the general manager. If the budget is created and passed in violation of our CC&Rs, is it valid?

ANSWER: It is not a violation of the CC&Rs for the board to delegate preparation of the budget. The Corporations Code specifically authorizes the delegation of duties. (Corp. Code §7210.)

Nondelegable Duties. There are only a handful of duties that boards cannot delegate, i.e., cannot be assigned or transferred to someone else. They include the following:

•  Attending board meetings and voting on motions.

    •  Filling vacancies on the board. (Corp. Code §7212(a)(2).)

    •  Appointing executive committees.

    •  Approving settlement agreements (Elnekave v. Via Dolce.)

CONCLUSION: A manager or a budget committee can put together a draft budget for the board’s review and approval. Once approved by the board, an “Annual Budget Report” and “Annual Policy Statement” must be delivered to the membership 30 to 90 days prior to the start of the association’s fiscal year. (See Disclosure Checklist.)

SPECIAL ASSESSMENT
BANKRUPTCY


QUESTION: Last year we voted to replace the wood siding with plaster as the wood needed repair. The assessment was $5,000 and every owner paid but one. He has now declared Chapter 7 bankruptcy. Should we report his arrearage to the bankruptcy court or wait until his unit sells to try to claim this assessment delinquency?

ANSWER: I asked Richard Witkin, or collection attorney to answer. Following is his response:

Lien Recorded? Your ability to collect the assessment depends on whether you recorded a lien before your delinquent homeowner filed for bankruptcy. The special assessment is a personal obligation of the owner. If no assessment lien was recorded to secure this obligation, then the obligation is unsecured and can be discharged (avoided) in a Chapter 7 bankruptcy proceeding.

Consequences. In general, if a debtor receives a “discharge” from the bankruptcy court, the association cannot collect an unsecured debt. If, however, the delinquent assessment was secured by a lien before the bankruptcy petition was filed, the association can (most likely) enforce its assessment lien against the property even after the owner receives a discharge from the court. Some exceptions apply.

RECOMMENDATION: You should have an attorney review your collection policies and advise your board on how best to proceed.

SURROUND SOUND
IN THE CEILING

QUESTION: If an owner has surround sound and installed 17 ceiling speakers, is that considered common area air space? Is that any different than an owner installing recessed lighting?

ANSWER: More often than not, any installation above the ceiling intrudes into common area space, which gives the association the ability to regulate the installation. I’ve seen highrise documents where that is not the case. Someone needs to review your documents to see how the boundaries of a unit are defined.

Nuisance. If the speakers intrude into common area space, the owner needs association approval for the installation. As a practical matter, the small intrusion into common area air space won’t matter if the speakers are acoustically insulated so they don’t transmit sound and vibration into surrounding units. If the speakers create a nuisance, the association can force the owner to abate the nuisance by properly insulating them or by removing them from the ceiling.

RECOMMENDATION: Start with a soft approach. He may be oblivious to the problem and readily cooperate. I know that’s a stretch but it’s worth a try. If he sends the board a gift, such as a bird, you can get your attorneys involved.

TRIP HAZARD

QUESTION: Our insurance carrier sent a letter asking for our plan to correct trip hazards in our asphalt. We have limited reserves and other deferred maintenance projects that some feel take priority over asphalt. Does the board have an obligation to fix the asphalt or is it okay to wait?

ANSWER: A trip hazard can result in injuries that range from minor to catastrophic. If the board does nothing despite a warning letter from the association’s own insurance carrier and someone is severely injured and sues, the letter will come into evidence. Juries have a habit of punishing defendants who refuse to heed warnings.

RECOMMENDATION: Always give priority to safety hazards. If you don’t have the funds, levy a special assessment. It’s cheaper than a lawsuit.

FEEDBACK

Reporting Rentals #1. Are you saying that an HOA can no longer impose a rental cap in the community? If so, are old caps grandfathered in? -Pat G.

RESPONSE: Existing caps are grandfathered. For more information, see “Limitations on Rent Prohibitions.”

Reporting Rentals #2. Offsite addresses are not necessarily rentals or part-time residences. Many residents use PO Boxes, employment addresses and other options as mailing addresses but may actually live full time in the unit. The rental question for lenders is definitely an important issue because Fannie Mae, Freddie Mac, FHA and the VA require their lenders to obtain this data. Second homes, PO boxes and employment addresses can actually be used as primary residence numbers as far as the agencies are concerned. This is an issue we deal with every day. -Greg Pater, CEO HomeWiseDocs.com

*****

Artificial Turf #1. Why would an HOA not want artificial turf? -Ted S.

RESPONSE: Artificial turf is becoming more acceptable, especially since higher-end products are almost indistinguishable from the real thing. However, there are still issues with (i) unresolved toxicity concerns, (ii) surface temperatures (which can soar to 200º), and (iii) sanitation issues when dogs pee and poop on it.

Artificial Turf #2
. Several years ago I installed artificial turf on my sidewalk parkways. I discovered that since the parkway is city property (which I, by ordinance, have a duty to maintain) I would need an encroachment agreement from the city. I called and found out I would have to pay a fee of $1,048.00. Astounded I said, “Excuse me, but I am about to spend $2,500 dollars to improve city property and eliminate the need for water and you want over a thousand  bucks? “Yes.” I did it anyway without paying the fee. If I go to jail, I will plead insanity and hope for public sympathy. Tell the boys and girls in Sacramento to eliminate barriers to installing artificial turf. -Bob P.

RESPONSE: I will tell them. But you have to remember they don’t think you earned your money. They believe your money is their money.

*****

Hillary’s Emails. Great column, folks. Well-balanced advice. And I bet you get readers either saying: “I should have listened to you more carefully” or making sheepish excuses. Re Gary P’s question in last week’s “Feedback,” the answer is no, he is not setting too high a high standard. Depending on the contract with the email provider, the provider or customer or both may be liable for spoliation and related sanctions, and even potential criminal charges in some circumstances.

But the good news is, until contacted by a person who knows the right questions to ask, the email providers themselves frequently do not know what they have which might be recoverable–frequently without great time and expense. There are also simple ways for small firms to assure their electronically stored information (ESI) is properly preserved.

By the way, Hillary is about to receive a big surprise. There is NO WAY a legitimate vendor would have “permanently deleted” ANY email knowing the legal holds which MAY apply to the work (unless they were paid enough to cause them to have a temporary memory lapse, i.e., enough to pay for a great defense attorney and fund a full retirement account, because whoever did this has destroyed their reputation in the ESI profession). -Michael Ferrari, Integrity Group, Electronic Discovery Management

*****

Paint Colors. A subcommittee of our board spent the better part of a year choosing a selection of exterior color schemes. We posted the schemes on the community board and asked for votes. Even after choices were made based on a membership vote, people groused. Lincoln and you were correct! -Nancy K.

RESPONSE: Now that I’m in the same category as Lincoln, I will immediately stop attending plays.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Reporting Rentals to Banks

QUESTION: Is my HOA required by law to gather data with regard to occupancy (owner or renter) in our development? I am unable to refinance because most lenders require this information.

ANSWER: No, there is no such requirement. Some boards may have stopped tracking rentals since they can’t do anything about them–a perverse gift of the California Association of Realtors (CAR). In 2011, CAR pushed through legislation crippling the ability of associations to adopt rental caps.

As a practical matter, most associations provide such information (as best they can) to assist owners with the refinancing and sale of their units since lending institutions recognize the damaging effect too many rentals have on property values and the stability of community associations.

Even though there is no statutory duty to gather rental information, if the matter were litigated, an argument could be made that (i) the information is vital to members, (ii) impossible for members to collect, but (iii) within the board’s power to gather, therefore, (iv) boards have a duty to provide the information. Litigation, however, is not the best solution because of the cost, the uncertainty of the outcome, and the further delays it would create in the sale of units.

RECOMMENDATION: Lobby your board. The association’s management company can determine the number of rentals by looking at billing records and making phone calls. Those with offsite billing addresses are either landlords or part-time residents. Telephone calls to those individuals would provide the information you need. If there is a cost to gather the data and the board is unwilling to pay it, offer to pay. It is considerably less expensive than litigation and will provide a much faster result.

PAINT COLORS

QUESTION: We are in the process of selecting paint colors for the exteriors of our buildings. The board chose three color schemes for membership review but several members are unhappy with the choices. Please advise.

ANSWER: It’s impossible to please everyone, especially when it comes to paint colors (or carpet, wallpaper, lobby furniture, etc.). Putting it to a vote of the members is the best way to handle the situation. If the board leaves the membership out of the decision-making process, unhappy owners would have a clear target—the board—and may threaten to sue or launch a recall.

Benefit of Owner Vote. If the membership makes the selection, there is no one to recall. It also makes a lawsuit less likely since unhappy owners would have to sue the association as a whole and then try to convince a judge that the majority’s decision should be reversed. I don’t see that happening.

Voting Formalities. In this case, a membership vote does not require secret balloting, which is reserved for specific kinds of votes. It can be done electronically or by paper. If paper ballots are used, they can be signed or unsigned. Although not required, it’s still a good idea to use an independent inspector of elections.

DROUGHT EMERGENCY
AND ARTIFICIAL TURF


Readers asked if the Davis-Stirling Act or the drought emergency voids existing HOA restrictions on artificial turf. Attorney Curt Sproul of the law firm Sproul Trost, LLP provides the answer:

Davis-Stirling. The recent amendment to Civil Code §4735 (dealing with architectural and landscaping guidelines) fell short of prohibiting artificial turf. That amendment said that “architectural or landscape policies are void if they prohibit or include conditions that have the effect of prohibiting the use of low water-using plants as a group or as a replacement of existing turf.” Although low water-using, artificial turf is to plants what a toupee is to real hair.

Governor’s Order. On April 25, 2014, the Governor adopted the following provision:

[HOAs] have reportedly fined or threatened to fine homeowners who comply with water conservation measures…To prevent this practice…I order that any provision of the governing documents, architectural or landscaping guidelines, or policies of a common interest development will be void and unenforceable to the extent [that the provision] has the effect of prohibiting compliance with the water-saving measures contained in this directive, or any conservation measure adopted by a public agency or private water company, any provision of [the Davis-Stirling Act] notwithstanding.

The Order does not mention artificial turf but does indicate that public agencies and private water companies could go further than the restrictions currently set forth in Civil Code §4735 and issue directives overriding HOA restrictions (including those related to artificial turf). That has not yet happened.

SUMMARY. HOA restrictions on artificial turf are still valid. However, that may change. Currently, there is a bill in the legislature to add the more generic “landscaping” to the statute which, according to the author, would stop HOAs from prohibiting artificial turf (see AB 349).

FEEDBACK

Drought #1. As usual your newsletter is of current value. Our HOA will take advantage of the SCE offer for power and water saving devices. We will also install separate irrigation water services as that will reduce our potable water rates. -Eric D.

Drought #2. Perfectly timed letter. I applaud your water conservation tips. We converted to all drought resistant landscaping with CA native and Australian native plants, drip irrigation and more. We’ve required conversion to low-flow toilets, faucets, dishwashers, showers since 2007, and adhering to SF’s 2009 ordinance that low-flow conversion must occur during unit sales. A suggestion to HOAs. If landscape is on separate intake line, it may be worth the $5k – $7k to install a separate meter as most counties don’t add a waste water tax as the water goes in the ground, not down the drain. -Joseph L.

Drought #3. PUDs can also pursue installing a new irrigation system to use recycled water for watering the landscape. Talk to your Water District. -Diane W.

Drought #4. Everything you say is right! Unfortunately, nearly all boards are run by retired people who have not kept up with the times and are afraid of changing the landscaping. I would contact the mayors to initiate inspections by qualified engineers. I find native California gardens much more attractive than my over-watered crabgrass. -Mark in MdR

Drought #5. I noticed your Article referencing Water Management for HOA’s – our specialty for over 24 years in California. California Sub-Meters is the oldest and largest Water Sub-meter company in California—something associations should consider. -Tom Rogers, www.CalSubMeter.com

Hillary’s Emails. When I was involved in e-discovery systems for corporate litigation, a key criteria was being able to tell the judge and opposing counsel that you were providing all emails including ones that the user had deleted. The ability to restore user deleted emails is fairly standard for company email servers but when I checked with several email providers who support modest sized systems (under 10 users for us), they all said they removed deleted emails after a short time and subsequently could not restore them. I wanted to see if I am taking too high a standard or if possibly any of your readers might have encountered the same issue and found providers who offer the ability to produce deleted emails for smaller users like us? -Gary P.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Drought Emergency

This week Governor Brown imposed unprecedented mandatory water restrictions. To address the worsening drought, he ordered a 25% reduction in water usage throughout the state. Because of growing scarcity, water rates will likely spike which will adversely affect association budgets. That means boards need to look for ways to save water.

Master Metered HOAs. This is particularly difficult for master metered developments since they have no control over water usage by members inside their units. Boards can, however, hire a plumber at HOA expense to inspect all units in the complex for water leaks, for high water usage toilets, and to install water savers on showers and faucets. If presented properly to the membership, everyone should cooperate.

Some of my clients have already implemented inspection programs and made a complete list of leaky faucets, valves, supply lines, drains, toilets, shower heads, etc. throughout the development. The list also includes units that need water saving devices. Arrangements can then be made to make repairs, change toilets and install water-saving devices at a discounted rate to owners if they agree to the repairs.

For those who refuse, boards can hold hearings, impose fines, and send lawyer letters to persuade the recalcitrant to cooperate.

Common Areas. For PUDs and condominium associations alike, landscaping is an obvious source of savings. It can be addressed in a variety of ways such as (i) installing drought resistant plant materials, (ii) installing artificial turf where appropriate, and (iii) replacing old irrigation systems with “smart” systems to reduce water usage.

RECOMMENDATION: Boards should meet with plumbers, legal counsel and management to set up an inspection/repair program for all plumbing in the development along with retrofitting with low-water devices. Boards should also meet with landscapers for ideas on how best to reduce water usage. Contact us if you need assistance.

ABANDONED
PERSONAL PROPERTY

QUESTION: We foreclosed on an owner but he left behind personal property. During the 90-day redemption period can he get his property or would it be considered trespassing? If he doesn’t retrieve his belongings, when and how can they be removed?

ANSWER: I asked attorney Wayne Louvier to address this issue:

90-Day Hold. When real property is sold subject to a right of redemption (Civ. Code §5715(b)), the association’s right to possession is deferred until the redemption period has expired and after its title has perfected. (First Nat. Trust & Sav. Bank of San Diego v. Staley, (1933) 219 Cal. 225, 227; Code Civ.Proc. §1161a (b)(2) & (3).)

Accordingly an association has no right to either evict an owner or the owner’s tenant, or to enter the property to remove personal property until after the 90-day redemption period expires. Once the redemption period ends and title transfers, the association can dispose of personal property using legally proscribed methods.

Abandoned Personal Property. Personal property abandoned on residential premises can be removed as provided for in Civil Code, §§1951.3 and 1980 through 1991. The process requires notice to the former owner (or tenant) of his right to reclaim the abandoned property. The association must allow for recovery within 15 to 18 days of the notice (depending on how notice is given) and indicate that it may be disposed of by public auction thereafter.

The property must be left in the vacated premises or stored elsewhere during the reclamation period. After that period has passed, if the property is believed to be worth less than $700, it may be disposed of as the association sees fit. If it is worth $700 or more, it must be sold at public auction. The proceeds, after all costs are deducted, go to the county which allows the owner to claim the excess within a year.

“Lost Property.” The law makes a distinction between property which is “abandoned” and that which is “lost.” Abandonment requires intent to leave the property behind. (Civ. Code §2080.7.) Without intent to abandon, the property is deemed lost and the association would follow procedures in Civil Code §2080 through 2080.10 which involve informing the owner, if known, and, if the owner is unknown and the property unclaimed, turning it over to the police or sheriff. If the police/sheriff will not accept the property, the association can follow the procedures for abandoned property described above.

Commercial Premises. Disposal of personal property from commercial premises follows procedures beginning in Civil Code §1993.


Wayne Louvier, Esq.
Adams Kessler PLC        


RECOMMENDATION: Because the law has specific and sometimes complicated requirements, always consult an attorney to be sure proper notices are given and procedures followed.

COLLECTION POLICY

QUESTION: Our board is planning on voting on a new collection policy. Don’t they first need to send it to all homeowners for a 30-day review and follow the same legal requirements as for any new/revised rule?

ANSWER: Yes, it needs to go to the membership for review and comment. Your collection policy falls under the definition of an “operating rule,” which is broadly defined as any rule or regulation that applies to the management and operation of a common interest development or the conduct of its business and affairs. (Civ. Code §4340.) For more information, see “Adopting and Amending Rules.”


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Airbnb Rentals

QUESTION: Wondering if Davis-Stirling addresses Airbnb and how associations can deal with problems created by short-term rentals.

ANSWER: No it’s not addressed by the Act and yes you can do something about the problem.

Growing Problem. For those unfamiliar with Airbnb, it is a website for people to rent out their homes or even rooms on a short-term basis, whether it be a night, a weekend or a week. The service has become popular with tourists seeking lodging outside of hotels. Airbnb was founded in 2008 and in seven short years has grown to a $20 billion company with over 800,000 listings.

The problem with Airbnb short-term rentals was recently the subject of a front page article by the Los Angeles Times, “Homes as Inns Put New Pinch on Housing.” The reporter observed that landlords have discovered they can make more money renting their houses a few days at a time rather than months at a time. This has led to “a whole cottage industry” that cities are struggling to regulate because of the negative impact it’s had on the rental market. Long-term, stable renters have been pushed out by transient renters. Many municipalities now require short-term rentals obtain a license and pay a transient occupancy tax the same as hotels.

Impact on HOAs. Homeowner associations also suffer problems related to transient renters such as security issues, rules enforcement problems, higher maintenance costs, and increased administrative expenses because they require greater supervision. To meet the challenge, one association restricted short-term rentals and imposed a fee on landlords to offset the expenses they created.

Lawsuit. An unhappy landlord promptly sued the association over the restrictions and fees and lost. (Watts v. Oak Shores.) He appealed, and again lost. Thanks to his aggressive litigation, we now have favorable case law on the subject and he has a bill for $1.2 million in legal fees.

Published. We reported on the case three weeks ago. This past week, the court reclassified the case from unpublished to published, which means it can now be cited as case law. The court’s three major rulings are significant: (i) association’s have the right to restrict short-term rentals, (ii) boards can impose a reasonable fee to offset expenses associated with renters, and (iii) courts should defer to boards on decisions related to the maintenance, control and management of common areas.

Prohibiting Short-Term Rentals. If associations want to prohibit short-term rentals, they should be able to do so without the necessity of amending their CC&Rs. Most already have provisions in their CC&Rs that give them the authority they need. The first, found in many documents, prohibits owners from using their units for hotel-like operations. The second prohibits owners from running a business in the development. The third is the nuisance provision found in all governing documents. And, finally, most documents give boards broad powers to adopt rules and regulations for the benefit of the membership.

RECOMMENDATION: Associations wanting to restrict short-term rentals and/or impose fees on landlords should have legal counsel review their documents and make recommendations. To read the court’s decision, see Watts v. Oak Shores.

SOFTWARE MARKETING
WANTED

We are looking for someone to market our Smart HOA management software.

It’s a base plus commission that will grow as sales increase.

If you are interested, please contact us at maureen@smarthoa.com.

BOOTLEGGED
HARDWOOD FLOORS

A common problem encountered by condominium associations is bootlegged hardwood floors.

Violation. In Ryland Mews HOA v. Munoz, a new owner installed hardwood floors in violation of the CC&Rs and created intolerable noise conditions for the owner below. When confronted, Munoz refused to mitigate the problem claiming his wife suffered severe allergies.

Lawsuit. The association sued Munoz for the following CC&R violations: (i) creating a nuisance that unreasonably interfered with the quiet enjoyment of another owner’s condominium, (ii) altering his unit in a manner that increased sound transmission to an adjoining unit, and (iii) failing to get written approval from the architectural committee.

Court Order. The association asked the court to issue a preliminary injunction that Munoz relieve the problem pending trial on the merits. The court agreed and ordered Munoz to install rugs over 80% of his floors. Munoz appealed and lost, thus providing us with more case law on how to handle hardwood floors (and hard-headed owners). Munoz’ violation of the CC&Rs and his refusal to compromise saddled him with an order to install rugs and a looming trial that could result in fines, an award of attorneys’ fees, and an order to remove his hardwood floors.

COMMENT: Having an allergy does not give an owner the right to ruin his neighbor’s life. There are plenty of hypoallergenic rugs and other products on the market that could have simultaneously resolved the allergy and noise problems. It took a court to order Munoz to be a good neighbor. Even that was not sufficient, it took two courts. Some people are just not suited for condo living. To read the case, see Ryland Mews HOA v. Munoz.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Director Abstentions

QUESTION: We have a 5-member board and a recent vote on a motion was two “for” and one “against” with two abstentions, does the measure pass since abstentions automatically count as “yes” votes?

ANSWER: Abstentions do not automatically count as yes votes. Abstentions are confusing when people conflate them with silent acquiescence. If a director verbally states, “I abstain,” it is not counted as a yes or a no vote, it’s a non-vote. In the scenario you describe, the motion fails. Since all five directors are present, you need three “yes” votes to pass a motion. Because only two voted for the motion, it fails. The outcome is different when you have silent acquiescence.

Silent Acquiescence. In a more common scenario, one director votes against, two vote in favor and the other two are silent. In that case, the two unresponsive directors are counted with the majority. The president properly announces the vote as four-to-one in favor and the motion passes.

NOTE: For a more complete discussion of the topic, see “Abstentions & Recusals.”

RE-VOTE FOR A NEW
AMENITY

QUESTION: The membership voted to add an amenity to the common areas but the board dropped the ball and wants to hold another vote to see if the result is the same. Are they allowed to hold another vote? How can we hold the board responsible to fulfill the initial directive of the members?

ANSWER: The board can hold a second vote but it would not be the same as the first one, i.e., “Do you want the amenity?” Instead, it would be a vote cancel the first vote. Since the membership already voted to install the amenity, it would require an affirmative vote NOT to install the amenity. You can hold the board’s feet to the fire through letters, open forum, and the election of new directors.

PAYING FOR
RESERVE REPAIRS

QUESTION: Can operating funds be used for reserve items? Any pitfalls?

ANSWER: There are no legal restrictions on using operating funds for reserve repairs. The considerations are more practical in nature, “Are sufficient funds available to cover the reserve repair without running the budget into a significant deficit?”

Two scenarios come to mind when you might want to use operating funds: (i) the component is not listed in the reserve study or (ii) there are insufficient funds in the reserve account.

MEMBER SURVEYS

QUESTION: We are reviewing our CC&Rs and would like input from members on board priorities, solutions, proposed changes, etc. This will give us an idea whether proposed changes would receive support before we go through the expense of sending a secret ballot. Can we survey members and do we need permission to publish responses?

ANSWER: Yes, you can survey your members and no you don’t need permission to publish responses, provided you keep them anonymous.

No Secret Ballot Needed. By statute, a secret ballot must be used for special assessments, election and removal of directors, amendments to the governing documents, and grant of exclusive use of common area property. (Civ. Code §5100(a).) Since a survey does not fall into any of these categories, it can be done electronically via an online service such as SurveyMonkey.com or SurveyGizmo.com. Even though secrecy is not required, members will be more forthcoming in their opinions if they are assured their responses are anonymous.

FEEDBACK

Director Emails #1. When it comes to board member emails, I do not agree with using names instead of positions. I would establish an email address for President@MyFriendlyHOA.org and then then set the account to forward a copy to JohnSmith@gmail.com. In the past I used GoDaddy to host these things, but Google Mail has some great corporate options that can host the domain’s email. -Jim S.

Director Emails #2. A simpler and less expensive way to handle HOA emails is used by members on my HOA board. We set up a dedicated email address that is used only for HOA emails. -Chris H.

*****

Marijuana #1. With today’s technology the THC content in oils and waxes exceeds that of the plant it is extracted from, thus, there are numerous ways to use the medication, or just get high, without the smoke. At least that’s what my cousin told me. -Scott C.

Marijuana #2. Just to add to your marijuana smoking in unit discussion, in 2009 California added marijuana smoke to the state’s Prop 65 carcinogen list. Thus, wherever cigarette smoking is banned, so is marijuana. In many municipalities, this extension was implemented, such as San Francisco where the Board of Supervisors applied the current ban of smoking in multi-unit complex common areas to include marijuana. The prohibition was also applied to all public areas where cigarettes are banned. -Joseph L.

Marijuana #3. What happens in cases where the smoker is using “medical” marijuana around the pool and on their balconies? We have a few “wake and bake” residents that are generating complaints by other residents.

RESPONSE: If you already have a ban against smoking at the pool, you can enforce it against cigarettes, cigars, pipes, e-cigarettes and marijuana alike. If smoking on balconies is creating a nuisance because smoke is drifting into adjacent units, you can adopt a rule against smoking on balconies.

*****

Humor #1. I have been reading your newsletter for years and always find them entertaining and informative. Thank you for the humor and the good advice. Almost 88-year-old condo owner and board member. -Doris Y.

Humor #2. Over the years I thought the photo that accompanies your signature was taken after you had prevailed over a particularly difficult case. But, over the last several newsletters I’ve concluded that grin is the grin of an amused (and perhaps bemused) deeply philosophical student of life and culture. -Longtime Reader


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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Hillary’s Emails

QUESTION: With all the news regarding Hillary’s emails, should our board set up a dedicated email account for official business?

ANSWER: Unlike federal employees, there is no requirement that boards use “official” email accounts. However, there are practical reasons for doing so.

1. Litigation. Even though homeowners do not have a right to inspect emails between directors, that changes when litigation is filed. As part of discovery, a director’s emails can be subpoenaed. When board members use personal accounts for HOA business, their personal emails can end up in plaintiff’s hands for the world to see if not carefully sifted from the record. That means sleepless nights deleting 30,000 “private and personal” emails, making it look like the board is hiding something. When people start deleting emails, plaintiffs and judges are understandably skeptical.

2. Confidential Information. Another benefit to an “official” HOA account is it becomes less likely that confidential HOA business will be viewed by family members. Many couples share email accounts and see each others’ communications. A family member is less inclined to log into a board member’s HOA account and read confidential communications.

3. More Cautious. Finally, using an HOA account should make directors more careful about what they write since emails are no longer personal but rather business emails that belong to the association. Knowing the emails are retained by the association should make directors more cautious and businesslike in their communications. That raises an issue that needs clarification–conducting business by email.

No HOA Business. By statute, boards cannot conduct association business by email. (Civ. Code §4155.) That does not mean directors are prohibited from emails altogether. Directors are allowed to (i) conduct emergency meetings, (ii) send emails to management and vendors, (iii) send emails to legal counsel, and (iv) send administrative emails to each other about meeting dates and times. For a more complete discussion, see “Email Meetings.”

RECOMMENDATION: Boards should reserve a domain name for their associations and establish an email account for directors. Setting up an account is easy and the cost modest. Email accounts should not be a generic “president@myfriendlyhoa.com” since they need to be terminated once a director is no longer on the board. Rather, use the director’s name, “j.smith@myfriendlyhoa.com.” Finally, boards should adopt an official “Email Policy” for directors that complies with the Davis-Stirling Act so board members know what they can and cannot do with emails.

FEEDBACK

More feedback on my March 1 newsletter.

Presidential Authority #1. One of the best newsletters. -Theresa S.

Presidential Authority #2. Surprised you were referring to Richard Nixon. I immediately assumed you were referring to President Obama, without a second thought! -Janice M.

RESPONSE: Perish the thought.

Presidential Authority #3. Your response about President Nixon actually made me laugh out loud. I am sure your agility is a great asset to the practice of law. Semper Fi to you and our country. -Pat S.

******

Marijuana Garden #1. What about excessive water usage? At many associations, dues pay for water used throughout the complex. It would seem to me that boards should be able to prohibit the practice of some activity (such as growing marijuana) that uses considerable water. -Larry M.

RESPONSE: A good argument for prohibiting marijuana gardens in master-metered properties.

Marijuana Garden #2
. In your last newsletter, you said a homeowner has no legal right to grow medical marijuana. What about smoking medical marijuana as prescribed by a doctor? We have a smoking ban and if I can’t smoke in my unit, where can I use my legal medicine? -John D.

RESPONSE: When it comes to “reasonable accommodation” so pot smokers can get their medicine, it has already been determined that employers are not required to accommodate an employee’s wish to use medical marijuana in the workplace. It’s unclear whether a nonsmoking association would be required to accommodate smoking in a unit. Even if accommodation is considered, smokers are not entitled to engage in an act that endangers the health and quiet enjoyment of their neighbors.

Secondhand smoke has been declared a human carcinogen and courts are increasingly protecting the rights of nonsmokers to be free from exposure to it. Earlier this week a judge in Washington D.C. issued a temporary restraining order against a pot smoker when neighbors sued alleging negligence, nuisance and trespass from secondhand smoke. Last year a California jury awarded damages against an HOA for not resolving a secondhand smoke dispute.

Pot smokers who disregard the health and well-being of others expose themselves to legal action for (i) breach of CC&Rs, (ii) intentional and negligent infliction of emotional distress, (iii) assault & battery, (iv) trespass, and (v) nuisance. I’m sure an enterprising young attorney could think of other causes of action to add to the list.

In summary, there are other ways for pot smokers to consume their medicine–weed brownies come to mind. I don’t know firsthand but I understand they can be quite potent.


Adrian Adams, Esq.
Adams Kessler PLC

“Much More Than Just a Law Firm!” We’re friendly lawyers–boards and managers can contact us at (800) 464-2817 or info@adamskessler.com.

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