Building Permits

QUESTION: Our CC&Rs state the Architectural Control Committee may require a person submitting plans to obtain approval of governmental agencies. Is there a legal obligation for our association to do this and what are the dangers and legal ramifications to the association if it does not?

ANSWER: There is no obligation that your architectural committee demand proof that owners obtain building permits since the language in your CC&Rs is permissive rather than mandatory. Despite the language, homeowners have an independent obligation to obtain permits. Policing that obligation falls to the city or county in which the association is located.

Good Practice. Even so, many condominium associations require proof of a building permit before an owner’s remodel/construction can proceed. The reason is that construction in a condominium impacts common areas. Requiring a permit as part of the architectural approval process means the association can have a reasonable expectation that any alterations to the common areas will comply with building codes.

RECOMMENDATION: Every association should have written architectural standards with approval procedures. In addition, boards should seriously consider using a remodeling agreement (drafted by HOA legal counsel). Approval of architectural applications can be conditioned on the owner signing the agreement which obligates him to: (i) obtain a building permit, (ii) use licensed and insured contractors, (iii) not deviate from plans without approval, (iv) follow the rules, and (v) other requirements as may be appropriate. In addition, any significant alterations to the common areas should require a recorded covenant obligating the owner to maintain those alterations.

SWIMMING POOL
“GUESTS”

QUESTION: A renter today allowed his cleaning crew of three woman to bring 11 children, teens and adults to our community pool. Yes, they had a key. They were in the pool for three hours including feeding everyone lunch. The renter was not there since he goes to work at 7 a.m. and comes home after 8 p.m. What liabilities go along with this activity? Can we do anything?

ANSWER: Yes, there is plenty you can do. Neither the owner nor his tenant has the right to allow vendors, contractors, or domestic help (plus families and friends) to use the association’s facilities.

Liability. The potential liability is the same as if members used the pool, i.e., injuries and/or drownings that result in lawsuits. However, the chance for injuries increases with the number of children–especially if they are unsupervised. Another negative is the unhappiness of your members over strangers using the pool.

Rules & Regs. If you don’t already have pool rules, your board needs to adopt rules that: (i) the pool is for residents and guests only, (ii) guests must be accompanied by the resident, and (iii) guests are limited to three. The number of guests can vary from association to association so long as the limitation is reasonable. With rules in place, interlopers can be asked, politely, to vacate the pool area (or any other common area facility).

Rekey the Pool. In addition, the unauthorized “guests” can be required to surrender their key to the association. If they refuse, you should not get into a wrestling match with the person. Instead, you can rekey the facilities and charge the thoughtless owner for the expense (following a reimbursement hearing).

Hearing & Fines. You can also hold a disciplinary hearing with the owner and his tenant. If the board finds the tenant violated the rules, fines can be levied and pool privileges suspended for up to thirty days.

Discrimination. The real danger for associations is the drafting of the rules. Too many get themselves in trouble for discrimination against families with children. There are plenty of rights advocacy groups out there that will happily sue associations for discrimination. You want to make sure you’re not one of the suees.

RECOMMENDATION: Have legal counsel review your rules.

FEEDBACK

Newsletter #1. Adrian, you make my day with your humor. It is difficult being a board president and I appreciate all the smiles I can get! -Vickie B.

Newsletter #2. I am inspired, informed and stimulated every Sunday by your newsletter. Thank you so much for providing us with your knowledge and wisdom! -Denyse B.

Newsletter #3. I just want you to know I appreciate your weekly newsletter. The questions posed are interesting and make me aware of issues facing other groups. Keep up the good work! -Sammie B.

Newsletter #4. Loved, LOVED your joke about growing freeways via watering them! -Gary F.


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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Protecting Committees

QUESTION: I know that board members are legally protected but what about committee members (like a rules committee, newsletter committee, finance committee, etc.)? Are they also protected under the Civil and Corporations Code?

ANSWER: Unfortunately not. By statute, board members have a higher level of protection but the same is not true for committee members. They do, however, frequently have protections under the association’s governing documents and and its insurance policy.

Advisory Role. One way to reduce potential liability is to make sure your committees are advisory only. Without decisionmaking authority, they make a much smaller target. Two exceptions to advisory-only committees are executive and architectural committees. The first is made up entirely of directors and the second derives its authority from the governing documents. The surest way to protect all volunteers is for the association to purchase insurance to cover them.

RECOMMENDATION: Proper D&O Insurance is a must. Make sure your association’s policy covers committee members as well as board members. Adopt an ethics policy so committee members know what constitutes proper and improper behavior. And, adopt committee charters so members know they are advisory only. Finally, if your governing documents are silent about protections for committee members, you should consider amending your documents.

WHEN A
DIRECTOR SUES


QUESTION: Our HOA has only five owners and all owners are on the board. Can an owner, under the D&O coverage, sue the board for an issue as an individual owner? My thought is that you can’t sue yourself, yet they wear two hats…board member and homeowner.

ANSWER: Yes, a director can sue his association. Your D&O insurance may deny coverage but it does not prevent him from suing.

Suing Himself. You’re right that, as a practical matter, your fellow director is suing himself when he sues the association. He can do it because, from a legal perspective, he is not suing himself. He is suing a separate legal entity–the association.

ADR. Before your unhappy director can sue, he must first determine if the governing documents require binding arbitration rather than litigation. If so, he must follow the governing documents. If your documents are silent, the plaintiff can go into court. Depending on what he seeks and why, the Davis-Stirling Act may require that he first endeavor to submit the dispute to alternative dispute resolution.

Recusal. During the litigation, the plaintiff director must recuse himself from any discussions or votes related to his lawsuit. If he refuses, the board can form an executive committee (minus the plaintiff) to work with the association’s attorney on the lawsuit. If the governing documents prohibit a director from serving while in litigation with the association, the board can vacate his seat.

Insurance. A consideration for the plaintiff is that the association’s insurance may refuse to defend. Some insurance policies exclude coverage if one director sues another director. D&O insurance is designed to protect directors from third-party claims, not infighting between directors or claims against current or former directors for imprudent business practices. This is known as an “Insured vs. Insured” exclusion.

Special Assessment. If the carrier denies coverage, the membership could be specially assessed to raise the funds needed to defend against the action. If that happens, the plaintiff may find himself an outcast. He should be careful about pooing where he eats.

RECOMMENDATION: The board should avoid litigation and make every effort to work out their differences.

Thank you to Mike Rey of the Mike Rey Insurance Agency for his input on this issue.

FEEDBACK

Droughts make people do funny things. As Mark Twain observed, “Whiskey’s for fightin’…water’s for killin’.” Let’s hope we don’t have any of either as HOAs deal with the drought. Following are a few more comments from readers.

Water Bills #1. Our docs allow the board to implement water saving measures, which could mean installing individual water meters per unit. Unfortunately, most multiplexes have several water line entry points into the unit–one for kitchens, another for bathrooms, etc. Thus, a single meter isn’t possible. I think the state needs to mandate that all new multiplexes being built have a separate meter for each unit. -Joseph L.

Water Bills #2. Our association had water meters put in at each townhouse which seems the fair way to go. We pay for our own water usage. -Suzy P.

RESPONSE: Fortunately, townhouse construction has a single line entering the unit. In your case, submetering makes sense. As noted by Joseph L., it may be impossible to retrofit condominium complexes with submeters.

Water Bills #3. Great drought map link. Thanks. -Scott C.

Water Bills #4. (Concerning the fairness of billing owners for their water usage by the number of residents in each unit…) The elderly lady may not use the pool but she still pays for it. -Don H.

RESPONSE: True. But the pool enhances her property values and she and her guests can use it if they choose to. Moreover, her assessments are not increased by the number of people using the pool whereas the number of people living in a unit directly affects water usage (and monthly dues).

*****

Drought. I noticed the freeways were being watered. -Suzy P.

RESPONSE: You shouldn’t be critical of the state–they are trying to grow more freeways.


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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Allocating Water Bills

QUESTION: I rented my condo to a family of six--two adults and four children. The HOA now wants owners to pay for water based on the number of occupants rather than equally as is currently done. Can the HOA legally require me to pay for water based on the number of occupants?

ANSWER: In light of the drought and the unequal usage created by a unit full of renters, allocating expenses based on usage has two advantages for the association: fairness and conservation.

Fairness
. On the equity side, why should an elderly widow who lives alone subsidize water for a unit with six renters–especially when the landlord is making money on the rental? The more equitable approach is for each owner to pay their own share of water usage.

Conservation. Making owners pay based on usage also creates an incentive to conserve water. Owners will use less water when the money flowing out of their pocket is tied to the water flowing out of their faucet.

It Depends. Whether the association can change its billing practice depends on its governing documents. If the CC&Rs clearly require that the cost of water must be shared equally regardless of usage, the association must amend its documents before it can change its billing.

Renters. If the CC&Rs are silent on the issue, the association bill owners based on estimated usage. In Watts v. Oak Shores, the court of appeals supported the association’s authority to allocate cost. Watts was a landlord whose renters increased the association’s expenses. The board estimated those costs and assessed Watts. Watts sued and lost. He then appealed and lost. (He has now petitioned the Supreme Court–we don’t know yet whether the court will hear his petition.)

Reasonable Allocation. I believe the principles delineated in the Watts decision have a broader application than just renters. If an association is master metered, it could estimate water usage based on the number of people living in a unit. The court of appeals wrote that:

Nothing in the language of [Civ. Code §5600(b)] requires the exact correlation between the fee assessed and the costs for which it is levied… In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive… The most reasonable interpretation of [Civ. Code §5600(b)] is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. (Watts v. Oak Shores.)

According to the California Water Resources Control Board, residential water use averages averages 77 gallons per person per day but ranges from 43 gallons to 427 gallons per person depending on the locale. A map of California published by the New York Times shows water usage around the state. An association could use such numbers to estimate water usage and levy appropriate charges.

RECOMMENDATION: Condominium associations should have legal counsel review their governing documents to see if they can bill owners based on water usage. If not, they need to amend their documents. If documents are silent or allow it, boards should contact their local water board for per person average water usage. In addition, boards should implement additional water conservation by addressing leaks inside owners’ units. For assistance, contact us.

Attorneys Russ Higgins and Steve Roseman will be speaking at an event hosted by the Channel Islands Chapter of CAI. They will cover creative approaches to handling:

  • Nuisances. What to do about noisy people and pets, smoking, estate sales, and a host of other complaints.
  • Remedies & Enforcement. Navigating through ADR/IDR, pros and cons of monitoring compliance, options for disciplinary actions and effective enforcement policies.
  • Board Meetings. From drinking during meetings to disruptive homeowners, how do you maintain order?
  • Q&A. There will be time for attendee legal questions.

The program is Thursday, June 11 from 6:00-7:15 p.m. at the Courtyard Marriott, 600 E. Esplanade Drive in Oxnard. Managers, board members & homeowners who are CAI members are FREE. Contact Executive Director Leah Ross for questions and to register.

HOA LAWYER

I am looking for a lawyer for my Temecula office. If you know a good candidate, please contact me by email or:

Adrian Adams, Managing Director
Adams Kessler PLC
2566 Overland Ave., Suite 730
Los Angeles, CA 90064
(800) 464-2817
FEEDBACK

A passing comment by a reader about escrow documents created quite a discussion the past few weeks. I am printing a few more comments and then stopping so we can move to other topics. Some of the feedback was quite lengthy and had to be edited down because of space limitations.

Escrow Documents #1. A property transaction requires not just disclosures but reams of follow on communications. We have one unit where we had to process over 85 communications despite having produced the most extensive disclosure known to the California HOA industry. On top of the disclosures, we are asked to produce lender certs, escrow demands, attorney letters-all sorts of data submittals, and always in a hot rush. Our managing agent charges $500 and spends about 8-10 hours for each transaction. Then they have to deal with all the “we are too busy to read anything for ourselves” from the “professionals” who call and e-mail for repetitive hand holding. This is no “scam;” this is a critically important service. -Laurence

Escrow Documents #2. Realtors may be stubborn (May 17th newsletter) but they are looking out for the seller’s best interest. Governing documents are amended over time and photocopied. Recently a seller provided his own copies rather than pay for them. Unfortunately, he was a missing page that limited the weight of pets. The buyer moved in and was cited for having a dog 13 pounds over weight. The matter was finally resolved in small court but ended up costing the seller more than what it would have cost to have the documents transferred professionally. -Rita S.

Escrow Documents #3. I have been a RE Broker for 36 years. Today’s transfer fees include many tasks that cost time and money–more than just providing documents. Besides providing the most current documents, someone has to answer lender questions, follow up with the title company, get a copy of the deed, answer realtor questions, change the HOA records and files, send correspondence to the new owner, prepare information regarding method of payment for new owner and various other tasks. All of this takes time and money. -Nancy 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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Runoff Election

QUESTION: In the event of a runoff between a sitting director and a non-director, is the latter required to attend the board meeting at which ballots of the runoff election are counted? If the outside director wins the election when does his term start?

ANSWER: Unless your bylaws require that a candidate be present when the results are announced (which I’ve never seen), he does not need to be present. If he wins, his term starts immediately unless your bylaws state otherwise.

ELECTIONS IN
SMALL ASSOCIATIONS

QUESTION: We are a small 6-unit condominium project. Each owner is a board member. Can we waive the secret ballot requirements for assessments and modifications to the governing documents?

ANSWER: The Davis-Stirling election requirements are particularly burdensome on small associations. There have been discussions in Sacramento about exempting small HOAs but, to date, that has not happened.

Informal Elections. Some small associations have taken matters in their own hands and unilaterally dispensed with the voting requirements. They get together each year in the living room of one of their units and, by consensus, declare all the owners elected to their respective seats. They do the same thing for assessments and amendments, i.e., decide such matters via voice votes. If someone wants secret ballots, they circulate slips of paper, write down their votes, fold the slips and pass them to the Secretary (or a spouse) to tally the results.

RECOMMENDATION: I can’t recommend the practice since it violates the Act. I’m simply reporting how some associations handle the problem.

EXECUTIVE MINUTES

QUESTION: Can a member appointed by the board act as recording secretary in executive session meetings?

ANSWER: There is nothing that would legally prohibit it. But as a practical matter, it would be more prudent to hire someone who does not live in the development. They would be less likely to gossip about what happens in executive session.

FEEDBACK

Escrow Documents #1. Our association posts its governing documents on its website. This is available publicly to Realtors or anyone else who wishes to view or download a copy. If requested, printed copies are provided by the manager for a fee based on costs. Since the documents are posted, Realtors seem satisfied with downloading. -Gordon C.

Escrow Documents #2. Escrow document charges are a scam! Our property manager created a very simple website. All governing documents (CC&Rs, amendments, condo plan, articles of incorporation, bylaws, rules and operating policies) are accessible online. When a property is listed, we give access to the listing agent and leave the responsibility of downloading and transmitting the documents to the agent and new buyer. There is absolutely no reason in this day and age for there to be a charge for this. If the lender wants another document filled out about occupancy, litigation and other stuff, our manager does this for $125. -Mike G

Escrow Documents #3. My management company averages 260 disclosure document requests a month asking for almost 1,200 documents. It takes time and money to process those requests. Using a third party allows us to reduce the cost about 25% from what it would otherwise cost to replace documents homeowners have misplaced. The average sales commission on a $750,000 home is $45,000 but realtors complain because the management company charges a few hundred dollars for the effort it takes to accommodate their request because they don’t “trust” the seller. If I were a homeowner and my realtor asked me to pay for something I already had and could provide for free, I would suggest they take it out of their commission. -Roy H.

Escrow #4. I noticed the feedback for escrow documents and wanted to chime in with my experience. Not only was I charged for email pdf copies (around $150-175) I was informed a printed physical copy was another $100!!! They didn’t even have copies of the prior full year of board meeting minutes! I contacted the property manager who kept insisting the 3rd party company had it all so I went back and had to complain twice to the 3rd party company because the property manager kept throwing it back at them. With this 3rd party BS everyone points the fingers at everyone else. That disconnection is a huge liability and disappointment considering what these “professional property management” companies charge. -Margot B.

**********

Trustees #1. I agree 100% with your response on trustees. The real problem is when, for example, the home is in the name of a spouse or a trust for the spouse and the other spouse wants to run for the board. He is clearly not an owner and most covenants only allow for an owner to run for the board. Our association amended its bylaws to alleviate this problem, however, no one thinks about this issue until it happens. -Paul M.

Trustees #2. In my trust where I am currently listed as sole trustee, I have my partner listed as successor trustee. In addition, I have a provision in the trust that states he is part owner (I list the percentage) of the condo unit that is recorded in the name of the trust. The HOA’s attorney stated that only I can act for the trust per the public documents. He said the association does not recognize ownership interests that are not part of the public record. Is that legal?

RESPONSE: The HOA has a smart attorney. I agree with him.

Trustee #3. It’s ironic that some people who are very vocal lack the legal knowledge in the specific area they are griping about. I always respond by asking them where they obtained their law degree. -John A.

Trustees #4. “Trustees are owners and have the right to vote and serve on the board.” How about a trustee who has a parent living in the unit but had an attorney write a letter stating the trustee authorizes the parent to vote for the trustee? Since the parent is not the owner of record, is this legal? -Phyllis J.

RESPONSE: Since the parent is not an owner, any attempt at proxy voting by the parent is void. By statute, a member can give their proxy only to another member. (Civ. Code §5130(a)(1).)


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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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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