Failure to Pay Vendors

QUESTION: I have a board that is refusing to pay vendors, including the management company. Is there a Civil Code stating they have an obligation to pay vendors?

ANSWER: There is nothing in the Davis-Stirling Act stating “Boards must pay their vendors.” However, there are plenty of other statutes and legal principals to address nonpayment. The primary one is contract law.

Contract Law. A contract is “an agreement to do or not to do a certain thing.” (Civ. Code §1549.) Assuming contracts (either direct or implied) exist between the association and unpaid vendors, Civil Code sections 1549-1701 apply. If a board refuses to pay vendors, they are in breach of contract.

To win in court, unpaid vendors must prove (i) they entered into a contract with the association, (ii) they performed their duties under the contract, (iii) the association breached the contract, and (iv) the vendor suffered damage. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

Case Law. In a 2005 case, the association was required to levy a special assessment to satisfy a judgment in favor of a vendor after the board refused to pay for work he did for the association. (O’Toole v. Kingsbury Court.)

RECOMMENDATION: If your board does not have any money, they had better plan on a special assessment, reducing expenses, and raising dues.

If it’s not a matter of money but, rather, a dysfunctional board, your vendors should send a letter reminding directors of their contractual obligations and making it clear the matter will be put before a judge if they don’t pay their bills.

Boards don’t like to be sued, especially when know they will lose. Also, insurance carriers will not defend a breach of contract action. That means the board will be defending a losing case out of pocket.

Thank you to attorney Jennie Park for preparing a response to this question.

SECRETARY OF STATE
ONLINE

California’s Secretary of State has been expanding available records on its website. You can now view Statements of Information, CID Statements, Articles of Incorporation (described as Registration), and Amendments to Articles online.

If you do a “business search” of your association’s name, you will get results that shows the agent of process for your HOA and a link embedded in your association’s name.

If you click on your association’s name, it will take you to another screen with various documents in a pdf format.

Sometimes it says “Image unavailable. Please request paper copy,” but that may be temporary as they populate the site with documents. If California stays on track, you can view more of your records and print them as needed.

HIRING LAWYERS

I need attorneys in our rapidly growing Northern California, Orange County, Riverside, and Los Angeles offices.

Candidates should have at least five years’ transactional and/or litigation experience.

I value clear legal analysis, business writing, and people skills. To properly represent our wide range of clients, candidates must be service-oriented.

We offer growth opportunities and excellent benefits. If you are interested, contact me at 800-464-2817 or by email. –Adrian Adams

Drought Over. If an HOA uses recycled water for front yards and common areas, can it forbid someone from planting drought tolerant plans and/or installing artificial turf in their front yards? The law is confusing. Please help clarify. -Roberta Z.

RESPONSE: You’re right about the law being confusing. The legislative history of Civil Code §4735 states the intent is to reduce the use of potable water to irrigate landscape. This implies that associations using recycled water can prohibit owners from installing artificial turf or plants that don’t fit with the association’s landscape guidelines.

However, the better argument is that recycled water is only an issue when requiring people to water their lawns. With the lifting of the drought emergency, associations can now fine members who refuse to water their landscaping. Despite that concession, California wants everyone to continue water conservation efforts despite the lifting of the drought emergency. That means associations cannot prevent the installation of artificial turf and drought tolerant landscaping in landscaped areas under a member’s control.

*****

Harassment & Discrimination. My understanding of this overreaching legislation is as follows: An HOA (legal counsel) should draft a policy that says, “if we receive an accusation of harassment by a protected class, we will proceed to investigate as follows: <listing the steps to be followed> After the board/management investigates and attempts resolution, per the published policy, they should be “safe.”

I don’t appreciate this HUD legislation, but we need to remain calm, think about what it is asking us to do, then do it. Next step: write our legislators and tell them how absolutely onerous and overreaching this legislation is to our homeowner associations. -Victoria C

RESPONSE: You summed it up pretty well. If a homeowner reports discriminatory or harassing conduct by an employee or vendor of the association or another homeowner, associations may need to intervene. A derogatory comment by one owner against another does not mean boards must roll out the artillery. It depends on the nature and intensity of the behavior.

A written policy drafted by legal counsel will help boards know when and how to investigate complaints and intervene. That might mean warning letters, hearings and fines, suspension of privileges, suspension of voting rights, and legal action seeking restraining orders. Or, the investigation may conclude that no action is necessary. If boards have guidelines and follow them, they create a safe harbor for themselves and the association.

*****

Website Suggestion. Since you asked . . . I would LOVE an index for the newsletters! I know I read something there but can’t find it again and sometimes it isn’t just the first topic I’m looking for. This would be super helpful. Going w-a-y back would be great, but even starting now . . . Thanks! (can’t imagine how I did this job before your website!) -Trudy M.

RESPONSE: Thank you for the feedback. I only post the current and prior year’s newsletters on the website because the laws keep changing. If I kept all of them posted (I started writing in 2004), a lot of them would no longer be accurate.

I do, however, move information from newsletters to website pages to keep everything current. Website pages are fully indexed and searchable. You can look up topics in the “Main Index.” Doing so takes you to Menu pages with a wide range of topics related to the one you’re interested in.

In addition to the Main Index, you can use “Google Search” (in the upper right-hand corner of the website) to find what you need.

 

Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Drought Emergency Over

As everyone is aware, this winter produced rivers of water in the sky. On April 7, Governor Brown issued Executive Order B-40-17 ending the drought emergency in all California counties except Fresno, Kings, Tulare, and Tuolumne where groundwater supplies are still at issue.

Permanent Changes.The Order leaves in place numerous conservation measures and additional measures are on the way as explained in “Making Water Conservation a California Way of Life.

Landscape Changes. Even though the drought is mostly over, elements of the emergency legislation will continue. For example, associations cannot prohibit low water-using plants or artificial turf in landscaping design. And, owners who installed water-efficient landscaping cannot be forced to return their landscaping to its original condition. That means owners who installed drip irrigation systems, built rain gardens, planted drought-tolerant plants, installed artificial turf, etc. get to keep what they installed. Associations cannot force owners to tear out everything and go back to grass lawns.

Hearings & Fines. Homeowners who let their grass die and did nothing to install drought-tolerant landscaping can now be required to water their lawns and replace dead turf. Owners who refuse can be called to disciplinary hearings where penalties may be imposed.

RECOMMENDATIONS: Although things are back to normal, I don’t recommend rushing out and fining everyone. That could trigger bad press and bad press generates bad legislation. Work with homeowners and give them time to get their landscaping back into shape. If you get a recalcitrant owner, create a paper trail. You may need to show a judge that you did everything possible to work with the owner before taking disciplinary and/or legal action.

Thank you to Nathan McGuire for providing background information for this article. Anyone wanting to adopt or update their landscape guidelines should contact us.

Harassment #1. In your latest newsletter, you discuss the new harassment rules. You state that boards should take steps to investigate and end harassment. I sit on the board of an HOA with 647 single-family residences in an 55+ community. The only control we have is our age restriction. We could make all the rules we want but we would have no authority to enforce them. -Mike S.

RESPONSE: If you are a 55+ community, you have rulemaking authority. Adopting harassment guidelines will help protect your association from potential liability. It gives you a road map for handling allegations of harassment.

Harassment #2. Your article on harassment was very informative, thank you for that. However, what if a board member is harassing a resident and other board members see it, know it and just won’t get involved? What can be done? -Pam N.

RESPONSE: If it’s harassment that does not fall into a protected category, you can go to court for injunctive relief. If it’s harassment based on a protected category, you can file a complaint with the Department of Fair Employment and Housing.

Harassment #3. In no way, manner, shape, or form is an HOA a housing provider. This is just another ridiculous example of the federal government over-reaching its authority and redefining what a housing provider is to suit its own liberal agenda. An HOA is a governing body, period. The really sad part is there are plenty of liberals in Sacramento, and elsewhere, who will carry on with this kind of insane thinking pattern. -John A.

Harassment #4. This is why I want less government. Seldom does one size fit all. We have people in DC or Sacramento that have no idea what needs to be done and don’t have to live with the laws they pass. Government is harassing the citizens. -Theresa S.

Harassment #5. This is a good example of unintended consequences. However, it will be costly to ALL residents. Which would not make the squabbling parties very popular in their neighborhood. I heard a long time ago of someone moving because of neighbor conflict. Boards should be proactive in informing the community about the cost involved to neighbors and friends when disagreements require outside intervention between the parties. -Betty M.

Harassment #6. The board also needs to raise assessments to cover the legal costs of defending themselves against such lawsuits, especially if you have the community whiner filing the actions. -William C.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

HOA HARASSMENT LAW

Last year, federal regulations were changed to address harassment and discrimination claims. The changes affect community associations. Even though associations are not housing providers, they are deemed so for the purposes of this statute.

New Law. Effective October 14, 2016, boards of directors are required to address members’ claims of harassment on the basis of race, color, religion, national origin, sex, familial status, and disability. This includes harassment by other residents, board members, managers, and vendors. The law requires that boards take prompt steps to investigate and end harassment. (Code of Fed. Reg. §100.7(a)(1)(iii).)

Harassment. To determine if harassment is taking place, boards can evaluate the nature of the unwelcome conduct, the context in which the incidents occur, the severity, scope, frequency, duration, and location of the conduct, and the relationships of the people involved. It does not require that the complaining party suffer psychological or physical harm, only that the alleged harassment occurred.

HUD Complaints. There may be legitimate circumstances where boards can intervene but there will also be unwarranted claims from hyper-sensitive individuals as well as false claims from vexatious individuals.

For example, a board member gives an owner a dirty look or tells them to be quiet while the board conducts its meeting. (In one of our associations the person claimed racial discrimination.) Or an owner is fined for violating the rules. (The person filed a claim of racial discrimination with the Department of Fair Employment and Housing.) Or two residents don’t like each other and one seeks to harm the other by filing a claim. (Former boyfriend and girlfriend who lived in adjoining units had a falling out and claimed hostile environment.)

When harassment is alleged, boards must investigate. If the board determines a complaint is unfounded, unhappy parties can run to the Department of Housing and Urban Development (HUD) and complain against the board. Under new federal regulations, HUD will have authority to investigate the board.

Burden. Because there is no cost to claimants for filing such claims, some residents will use this as a tool to harass their associations. These claims will create an expensive administrative burden on HOAs since legal counsel will be tasked with responding to the complaints. This intrusion by the federal government into the affairs of homeowners associations is unprecedented.

The burden the new regulations create will likely outweigh any intended benefits regulators had in mind. Associations are not cities with paid city council members, police forces, and governmental immunities. They are nonprofits run by volunteers with no expertise and few resources for dealing with harassment (whether real or imagined). Civil remedies already exist. Making boards an arm of the federal government is going to make it harder to recruit and keep volunteers on boards.

RECOMMENDATIONS: Boards should work with legal counsel to adopt anti-harassment rules for their associations. The policies need to cover the reporting and investigation of alleged harassment. The policies need to include procedures for adopting findings and taking appropriate actions.

Thank you to my partner Jasmine Hale for the background information on the new regulations.

TRANSIENTS, TRASH
AND TROUBLE


I will join attorney Brian Moreno (Swedelson Gottlieb) to speak on the growing problem of short-term vacation rentals (STRs) in HOAs and what managers and boards can do to address the problem. We will cover:

• Pressure on boards to allow STRs
• Problems & legal risks
• How to restrict STRs
• Enforcement mechanisms

When & Where. The lunch seminar for boards and managers will be held this Wednesday, April 19 from 11:30 a.m. to 1:30 p.m. at the Skirball Cultural Center in Los Angeles.

RSVP.
Register online at www.cai-glac.org.


Legislation. It seems unlikely I am the only Davis-Stirling fan who has left California but still have many friends there. Could you create a list by state of legislation directly impacting HOA homeowners? -Mel S.

RESPONSE: Every state has its own HOA legislation (as does Canada). The Community Associations Network has a list of the laws.

*****

Hackers #1. The hacking episode must have been highly stressful. Your upgrade lingo is so far over my head that I feel like you have been initiated into a secret cult. -Larry S.

Hackers #2. Oh my goodness. You’re a victim of your own popularity and relevance, Adrian! What a pity that today we’re all potential victims. -Marilyn B.

Hackers #3. I am horrified that you had to defend your website against a foreign country’s hacking. I truly appreciate the dedication and tremendous resources you dedicated to keep your website up and running and even better. Your efforts are greatly appreciated. Thanks so much. -Lisa E.

RESPONSE: Thank goodness the hackers weren’t Russian. They could have derailed my presidential plans.

*****


Vexatious #1. Perhaps HOAs can do more in advance to steer vexatious persons away from becoming members. It might help to promulgate the message forthrightly (on websites, flyers, etc.) that “if you don’t like being subject to lots of rules, then you won’t be happy owning a condominium (and neither will your neighbors).” Would it be legal to pass a rule requiring that each HOA member include such a statement as part of the MLS listing when they put their unit up for sale? -David S.

RESPONSE: I like your idea. People who hate rules (or lack a sense of humor) should not live in associations. You could pass your rule but I don’t know that anyone would comply.

Vexatious #2. Ten days ago we dealt with a malicious homeowner. She was taken kicking and screaming into a 72-hour psychiatric hold. The process involved the police and others. She’s still at the rehab facility. -Michael O.

Vexatious #3. About the angry malicious homeowner creating legal expenses for the HOA, doesn’t the Davis-Stirling law provide that if the homeowner looses in court, the HOA can recover legal fees? -Arthur R.

RESPONSE: Yes, it gives the court discretion to award legal fees. In our most recent case, we received a large award for the association. It should stop our vexatious stream of lawsuits. She will likely move to another association and restart her criminal enterprise.

Vexatious #4. Your newsletter has been positively inspirational to me on more than one occasion. I had some recommended passengers for the move to Barrow, but as it didn’t work out and they are still here. At least for the time being they are much less “influential” due to a recent board election. Certainly, the pen is mightier than the sword, the disruptive persons exposed their own bullying tactics and unstable mentality as they posted to “Nextdoor.” The recent election put them out to pasture. The ability to have good communication is absolutely vital to all homeowners’ associations! -Elaine J.

Adrian J. Adams, Esq.

 


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Davis-Stirling Upgrades


I am pleased to announce significant upgrades to the Davis-Stirling website that improves speed and enhances security against hackers.

Website Rating. Davis-Stirling.com is already the largest website of its kind in the industry. There are over 378 million websites in the United States. Each is rated by the volume of traffic it receives. Davis-Stirling.com ranks at 129,139–a remarkable statistic, especially for a statewide legal website. Currently, we have over 700,000 sessions per year with over 3 million page views.

Ukrainian Hackers. The downside to our exceptionally high ranking is that we become an attractive target. Late last year Ukrainian hackers hit Davis-Stirling.com. Because I do not keep client data on the website, there was nothing to steal so the hackers planted malware in an effort to corrupt the website and anyone using it. Alarms immediately went off and we stripped the malware before it could do any harm.

Hardened Against Attacks. Following the attack, I spent a lot of money hardening the website against hackers. My website team went through thousands of pages tweaking the code and moving everything to a service known as Cloudflare.

Cloudflare is one of the most comprehensive DNS services on the internet for making content lightning-fast and shielding it from web threats such as denial of service (DOS) attacks, malware, and spambots. It used cached content for massive scaling to allow our website to handle heavy traffic without slowing down service.

Better Monitoring. In addition, I upgraded our internal content management system to DNN Evoq. This powerful program allows me to better monitor content on our three websites (Davis-Stirling.com, AdamsStirling.com, and CIDlaw.com). In addition, it allows improved management and publication of digital data while optimizing it for mobile platforms to give fluid, responsive pages for those of you who access the website on smartphones and tablets.

More Features. This sophisticated program also gives me the ability to add more features to the websites–features I will announce later in the year. You can see the improvement in speed and scalability at www.AdamsStirling.com and www.Davis-Stirling.com.

NOTE: If you have ideas on features you would like to see on our websites, feel free to contact me. I will try to work them in.

ANGRY, MALICIOUS
HOMEOWNER


QUESTION: We have an owner who complains about everything our board and architectural committee either does or doesn’t do. On a weekly basis, we receive from 2 to 13 angry, vindictive and threatening letters or emails from him. In addition, he files small claims actions against various neighbors, members of the board, the ARC, and the association. He then dismisses them but only after defendants spend time and money preparing a defense. As a result, most homeowners will no longer volunteer for board or ARC positions. How do we protect ourselves from this angry, malicious person?

ANSWER: These kinds of owners are incredibly difficult to deal with. Your options are quite limited. Short of recruiting an angry-owner whisperer, you either go to court for relief or suffer until the person moves (or dies).

Restraining Order. On a few occasions we have successfully petitioned courts for orders that the person cease their daily barrage of emails and letters. We were able to show the court that the harassing communications were frequent, unrelenting and voluminous. It didn’t hurt that the writings were also unhinged. 

Vexatious Litigant. Having the person labeled a vexatious litigant is another possibility. A homeowner in one of our associations had a history of filing lawsuits against her prior HOA. That association successfully had her declared a vexatious litigant. That meant she was barred from filing any new litigation in propria persona without first getting the court’s permission.

She then moved into our client’s association and started filing lawsuits. We discovered the earlier vexatious litigant ruling and filed a motion to have the complaint dismissed. She then hired a lawyer and refiled her complaint in an attempt to avoid dismissal.

The court ruled that obtaining representation after commencing litigation (in violation of the earlier court ruling) did not relieve her of the prefiling requirement and her complaint was dismissed. She appealed and earlier this week the court of appeal ruled in our favor.

Legal Expenses. The problem with going to court is the legal expense incurred by an association as well as the uncertainty. It costs money to try and stop malicious homeowners with no guarantee a court will restrain the person. Even when the court issues an order, there is no assurance the person will comply with the order. That means more legal fees going back to court.

NOTE: I wish I had a magic wand to fix broken people–whether angry, malicious, or mentally unstable ones. Unfortunately, I don’t. As noted in the Feedback section below, sending them to Barrow, Alaska fell through as a solution. Maybe our readers can relate some approaches that worked for them.

I want to thank readers for all the feedback on shipping dysfunctional homeowners to Barrow. There were far more responses than I could reprint.

Barrow #1. I like your sense of humor, especially sending troublesome members to Borrow, Alaska. -Charanjit S.

Barrow #2. Quite witty today. -Tanya C.

Barrow #3. WOW! How refreshing and what a great sense of humor! -Andy H. & Millie T.

Barrow #4. Thank you for your information. I’ve been sick since last year and hope to feel better soon. Please keep writing to me; it lifts my spirits a lot. -J.H.

Barrow #5. Our association has four residents that need a one-way ticket to Barrow, Alaska. Is it possible to get a group discount on the quickest chartered flight for them? -Debbie D.

RESPONSE: So many readers signed up owners for the trip that my staff put together a group rate with FedEx. I called Barrow’s town council to make sure they had enough housing since we were about to double their population. This was the first they had heard of the plan and they were horrified. The idea got them so heated, the town went through a climate change event. The plan had to be abandoned. They threatened to sue until I agreed to fund construction of a new building as a safe space for traumatized citizens to retreat to. My staff is diligently looking for an alternative site to send malicious owners.

*****

Iditarod. When visiting Fairbanks a few years ago, it was interesting to see the different locations of the Iditarod starts. I always thought they started from the same place each year only to find they start at different locations in and around Fairbanks. From your adventures, we find that there is life outside of HOAs. Thanks for sharing your fun vacation with us. -Tim S.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Attorney at Every Meeting

QUESTION: Our board does not have a law firm on a regular retainer. We are on a “pay as you go” basis. Our lawyer does not attend board meetings. This, in my opinion, results in less than desirable management of delinquencies and failures to seek legal advice as matters arise. Is the board in breach of its fiduciary duties?

ANSWER: First, let me say that I am grateful my clients do not require me to attend all their board meetings. I haven’t asked my wife’s opinion but I suspect she would want me to attend them all.

Small HOAs. Small HOAs do not have great demand for legal services so it is cheaper for them to pay as they go. There is nothing wrong with this arrangement and most follow this model.

Large HOAs. Large associations have ongoing legal issues. The increased demand is because they have more members. People, for some reason, have trouble getting along. When the late great Rodney King asked his association if they couldn’t all get along, they rioted.

It has been my experience that associations with a lot of legal work often choose a retainer arrangement where they pay a nonrefundable annual fee in exchange for reduced hourly billings and other perks.

Attending All Meetings. Some associations run into issues where they need legal counsel at every meeting for a period of time until those issues are resolved. Where boards get into trouble is when they face a particular problem and decide not to call legal counsel so as to avoid the expense. It is not uncommon that the money they save on a phone call is swallowed up in legal fees when the issue explodes into litigation. A simple phone call or email to legal counsel is like a flu shot–it might hurt a little but it can save a lot of discomfort later.

RECOMMENDATION. The quickest way for an association to reduce its legal budget is to relocate troublesome members to Barrow, Alaska. This tiny, isolated town is located in the Arctic Circle where, from November through January, the sun never rises.

Problem homeowners can’t get into trouble because they spend all their time shoveling snow. I’ve found this solution to be quite effective and offer it as part of our retainer program. To sign-up, email my assistant Maureen.

MELINA TREANTOS
JOINS ADAMS STIRLING

I am pleased to announce that Melina Treantos joined our firm as Client Relations Director for Northern California.

Melina has over a decade of experience in multiple areas of the common interest development industry. Her expertise includes escrow processing, association accounting, new community forward planning and client relations.

As an active member of Community Associations Institute, Melina serves on multiple committees and earned the Certified Manager of Community Associations (CMCA) designation in 2015.

Contact Melina at (800) 464-2817 or by e-mail.

FEEDBACK

Recycled Water #1. There are specific regulations about recycled water. A site supervisor has to be certified by a local jurisdiction in the use of recycled water. You have to ensure that the recycled water doesn’t come into contact with people (particularly kids and dogs). There is a litany of other regulations that must be followed from cross connection prevention to spill notifications. Check the State Water Resources Control Board and your Regional Water Quality Control Boards for more information. In the Los Angeles area, the Sanitation Districts of Los Angeles County is an excellent resource. -Charles G.

Recycled Water #2. Everyone seems to be overlooking the warning signs about recycled water used at the parks. I once called my water district and a person there told me it’s possible to get hepatitis from the water. How many people bring their little babies to the park who crawl around on the grass? Who is going to start the conversation about this? -DeeDee G.

*****

Volunteers. With regard to getting people to serve on the board, I have always used the method of telling the membership it is their responsibility to serve and participate. If they do not step forward, the board can send the association into “receivership” for lack of a board.

Each owner can anticipate a special assessment (and increased dues) in amounts that can start at about $10,000 per owner. This will depend on the number of units in the property. I had one property (5 units) in receivership and each owner had to pay $25,000. Tell them to please check with their own attorney. Even better, have an attorney write the notice to the membership. -Nancy S.

*****

Safety #1. Regarding safety and security committees, I would agree with your position that it creates a greater liability to not create such a committee for fears of buying liability. Your statement is correct that arming that committee, or even a licensed and insured third-party contractor, creates an insurance nightmare. As far as Directors & Officers (“D&O”) insurance goes, we’ve never had a problem procuring that coverage for communities that have armed security; it’s the General Liability (“GL”) coverage that is the issue. This is because D&O policies all have exclusionary language for claims arising out of bodily injury, whereas bodily injury is right in the wheelhouse of the GL policy. Each time an association client of ours has brought on armed guards, we’ve had to place them with a specific insurance carrier that doesn’t take issue with that particular exposure. Typically the rates are higher and the association no longer qualifies for most umbrella programs. The ones they do qualify for will usually exclude claims from the discharge of any firearm; clearly not ideal. Due to these impacts, we always advise clients to think long and hard about the decision to arm any entities. –Brian Kalmenson, Commercial Insurance Specialist | Michael Abdou Insurance Agency, Inc.

Safety #2. As far as the increased crime in California I have a hunch (as you probably do) that it has to do with the fact that these smart progressive Californians voted to approve Proposition 47 in November 2015 that made many felonies misdemeanors. At the time I thought to myself, “Why would anyone vote for this since it is going to increase crime?” Some people think you can “love” everyone into doing the right thing. NOT so. Crime immediately went up in our neighborhood tenfold. In fact there are many more brazen daylight robberies and burglaries. A Marin County judge said his hands were tied. SF had over 26,000 car break-ins in 2015 (reported ones)–so many that the police could not follow-up or even take reports (you enter it online). -Janice C.

*****

Dog Sledding. It’s great that you and Larry could enjoy the frozen tundra and see the sled dogs run. I think one of the reasons why your newsletter is so popular, besides great info, is your fearlessness about sharing what seems to be common sense. Someone beat us to the book title “The Death of Common Sense.” -Tony V.

RESPONSE: Judge Stirling has a knack for planning delightful trips. In a lodge 130 miles outside Fairbanks in the Alaskan Mountains, we saw Northern Lights dance across a beautiful starlit sky. We could see thousands upon thousands of brilliant stars as bands of green swirled and shimmered. In Los Angeles, I see more stars sipping lattes than I see in the sky, so the wilderness light show was spectacular.

During the day, we went sledding across dazzling snow-covered terrain with giant moose crossing our trail. Our team of dogs was quick, smart and strong, and they loved to pull sleds. Steering the sled is not as easy as it looks–I have a newfound appreciation for racers of the 1,000-mile Iditarod.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Quitters

QUESTION: Are volunteers allowed to run for the 2017 board of directors if they “quit” by not attending 75% of the 2016 meetings? Also, we have trouble getting volunteers because most members don’t want to be on the board, yet complain endlessly.

ANSWER: Complaining endlessly seems to be part of the human condition. Finding volunteers is also problematic and Sacramento makes it a little harder each year with excessive regulation.

Bylaws. Unless your bylaws have a provision disqualifying someone who was elected but refused to serve, your quitter can run, get elected, and refuse to serve endlessly. At some point, the membership will catch on and vote for someone else (assuming you can find someone else).

Amendments. In the meantime, your association should amend its bylaws to add director qualifications, eliminate cumulative voting, add election by acclamation, and eliminate quorum requirements for the election of directors. It will make your elections easier and help filter out problem members from getting on your boards.

RECOMMENDATION: If you can’t find anyone to run for the board, announce that you are raising dues by 20% and imposing a 5% special assessment.

SAFETY AND SECURITY
COMMITTEE

QUESTION: Recently, we’ve seen an increase in vagrancies, home & car break-ins, and trespassing. I’m trying to organize a safety committee, one that would oversee risk concerns and advise the board. Unfortunately, our management company said that due to liabilities we could not form a safety committee. I realize this is a touchy subject, but would greatly appreciate any light you could shed on this matter.

ANSWER: I have great respect for mangers and management companies but legal advice is not a service they should be offering. Attorneys are generally better at that sort of thing.

Vagrants. More than 20% of the nation’s homeless live in California. Despite all the social spending from Sacramento (or because of it), the problem seems to be getting worse. In recent years, California has seen a dramatic increase in property crimes while Texas, Illinois, New York and Florida have seen decreases. As a result, many California cities have been adopting ordinances against sleeping in cars, camping in public places, panhandling, and urinating in public.

Safety Committee. The ordinances are only as good as the enforcement. In addition to appealing to the police for help, associations should tighten their security policies and procedures. Many think that forming a safety committee creates unacceptable levels of liability for the association–I disagree. An unsafe community where the board does nothing creates more liability than forming a committee that makes safe/security recommendations.

Insurance. Your association’s D&O insurance typically covers committees of the board. A safety committee can inventory potential problems and make recommendations regarding lighting, security cameras, and so on. Provided the board acts on those recommendations, it makes the community safer and protects the association from potential litigation. Where HOAs run into problems is when they arm their committees. You may have trouble getting D&O insurance if you arm your volunteers with 45 caliber hand guns.

RECOMMENDATION: If your community is suffering from vagrancies, home and car break-ins, and trespassing, it’s time for the board to step up and do something. They should either form a committee to survey the development and make recommendations. Or, hire a security consultant to do it. Then, implement the recommendations.

RECYCLED WATER


QUESTION
: You’ve got a great website for reviewing the Davis-Stirling Act. However, I can’t find anything about how Davis-Stirling applies to HOAs that use recycled water. Ours is responsible for maintaining front yards. We converted the irrigation to recycled water. Does this exempt us from the Davis-Stirling Act?

ANSWER: If you can’t find what you need in the Main Index of the website, use the website’s search feature. I added “Google Search” to the website. It costs me a little extra each year but it gives you a dedicated Google search engine exclusive to the Davis-Stirling website. You can find it in the upper right of the website.

Drought Emergency. Converting to recycled water does not exempt you from the Davis-Stirling Act. It does, however, exempts you from the “state of emergency” provision declared by the governor when it comes to watering lawns. It means you can impose fines against owners who fail to water their lawns. (Civ. Code §4735(c).)

Moot. In your case, the exemption is meaningless since your HOA waters the lawns. Even so, switching to recycled water is a smart move since you can keep up lawns without incurring significant water bills. Also, the way the Oroville dam is dumping water to avoid a collapse, it looks like the drought emergency may be over.

FEEDBACK

Children #1. My kids grew up surrounded by lakes, streams, and irrigation ditches in Wyoming. In an area where ponds and streams are common, parents learn to watch their kids around water and kids learn to be careful. In So. California, it seems like many feel the need to fence them off.  If you fence off a pond then fail to maintain the fence does it open you up to more liability? -Daren W.

RESPONSE: Many boards are so risk averse that fences seem to be the only way to reduce liability. Insurance companies have learned that little ones who drown in swimming pools can be very costly. Hence, fences around pools. I grew up in S. Dakota and Missouri and played in streams on my folks’ property. I survived. Californians are so litigious that boards are naturally paranoid. There should be a happy medium where rules and signage should be sufficient. Can boards fence off an amenity? Yes. If they don’t maintain the fence, can the association be liable? Yes. Boards should talk to legal counsel for a common sense way to deal with the problem.

Children #2. I am sure there are many associations out there that need to address the issue of young kids in the association’s swimming pool. How specifically would you address this issue without using the word “adult supervision.” Would you still be able to use an age requirement for these young kids? How would you word it? Would you be able to say, “Anyone 13 and under need the supervision of a competent swimmer?” Thanks. -Tim S.

RESPONSE: That works…at least until the DFEH says it doesn’t.

Children #3. One Association I managed had a lake. The city required that a fence be put around it to keep ANYONE from going in the lake. It seems that a fence be put around the stream as a safety issue to prevent small tikes from drowning. -Joe G.

RESPONSE: Depending on the layout of your development, that could be costly and impractical (and unsightly). Rules and signage may be your only option.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Children in the Stream

QUESTION: Two boys ages 6 and 10 were playing in our common area stream. When I asked about their parents, a man came out and said, “Where does it say in the rules children must be with their parents?” Do I have to worry a Fair Housing claim if I tell the children not to play in the stream? I really think it should be a rule that no children should be in the common areas without adult supervision.

ANSWER: If you are a neighbor telling children not to play in the stream, you don’t have to worry about Fair Housing claims. The association, however, could become a target if it adopts discriminatory rules.

State Agencies. When it comes to alleged discrimination, employees of the Department of Fair Employment (DFEH) are rarely neutral investigators. Some are zealous advocates for whomever files the complaint. I once had to go to the head of the DFEH to get an investigator pulled from a case because she was a nut.

Potential Liability. DFEH investigators, unfortunately, don’t focus on the big picture. Attempts by the association to avert injuries seems to be of little concern to the DFEH. It doesn’t matter that if an unsupervised child is injured in the common areas, the association will be sued.

Discrimination. They believe it’s their job to stamp out any perceived discrimination. For example, another association similar to yours was admonished by the DFEH because they had a rule that “children are not allowed to play in the…lake or streams.” The DFEH decided this was discriminatory because “This rule specifically targets children.” The DFEH ordered the association to revise its rules “to delete the word children wherever it appears.”

Minors. To satisfy the DFEH, rules must be narrowly tailored. For example, if you require “minors” to be supervised, the rule is deemed too broad. A minor is anyone under 18, which is considered too restrictive. If a 15-year old can get a driving permit, it is unreasonable to say they must be supervised while in the common areas.

Parental Supervision. If you require that anyone under 15 have “parental” supervision, the rule is also too restrictive. Any adult can do the job. Even “adult” supervision can be too restrictive. Some argue that a 16-year old is sufficient to supervise children.

RECOMMENDATION: Although heavy-handed, there is some logic in the positions taken by the DFEH. It means that association boards must be more careful how they word their rules and regulations. It may cost a few dollars but boards have their rules reviewed by legal counsel. It is less expensive to adopt properly drafted rules than to defend poorly drafted ones.

JOSEPH HUDACK JOINS
ADAMS STIRLING


I
am pleased to announce that attorney Joseph “Joe” Hudack joined our team.

In addition to a Juris Doctorate degree from Western State College of Law (magna cum laude), Joe has more than 25 years experience in corporate and commercial real estate.

Real Estate. His experience includes handling transactional real estate matters for companies such as Fluor, Walmart, and Dial. His responsibilities included drafting, negotiating, executing and closing acquisitions, sales, leases, subleases, and lease terminations. He also owned and operated a development company and was a national real estate consultant for companies such as Home Depot, Newell Rubbermaid, and Viad Corp.

Certifications. Joe’s certifications and licenses include:

    • CCIM (Certified Commercial Investment Member)
    • MCR (Master of Corporate Real Estate)
    • Licensed Real Estate Broker
    • Former licensed Contractor and Real Estate Appraiser

Inland Empire. Joe works out of our offices in the Inland Empire and serves as corporate and litigation counsel to associations throughout California. Joe is an impressive addition to the firm. To write him a note, see his contact information.

FEEDBACK


Donations #1
. A deceased member’s transfer of assets by will, trust or gift is not a taxable event. It is true that the transfer is not a charitable deduction in computing the estate or income tax. Therefore, while there is no tax benefit to the transfer, there is no tax paid either. Therefore, except for the missing charitable deduction, it is unlikely that such a transfer to an HOA will have any tax paid consequences. Readers should seek counsel from competent tax professionals before taking action. It is hard and sometimes impossible to fix these transactions after they have been done incorrectly or without informed consent. -Donald W. Haney, CPA, MBA, MS(Tax)

Donations #2. There should be a way for wealthy people with no heirs to hook up with people with few assets and no benefactors. Sounds like an arrangement made in heaven. -LLP

Donations #3. I do love your letter–your office is so very helpful in their replies. Rather then leaving your home to your HOA, consider the Salvation Army to help people in need, the USO to help veterans, your local church to help people, or your local animal shelter. That is what I am doing because I seriously believe those folks need the money more then my HOA neighbors. -Jim K.

Donations #4. Now you are talking. We all now know what to do with our millions. -Karen N.

*****


View #1.
My wife and I are as much tree lovers as anyone. But this does not mean neighbors should let one or more of their trees damage adjacent homeowners’ driveways or let them shed leaves during storms (especially Liquid Ambers) that wind up in the street to block sewer gratings and flood streets and driveways. As our president pointed out, for every right there’s a responsibility. Or, there are no one-sided coins. -Andrew B.

View #2. For trees, the correct answer would be to plant the correct tree in the proper location so as to get the view that was paid for and the beauty and benefits of the trees. -Richard B.

View #3. One paragraph noted “Association Trees” however, in one association it is the lot owners’ trees that are blocking views. -Joe G.

RESPONSE: That’s why I noted that “Getting homeowners to trim their own trees is much more difficult–they tend to be uncooperative when it comes to trimming their trees. To address this issue, you better add extra legal fees to your budget.”

*****

Technology. I saw that you hired a technology expert. It seems that property management companies align themselves with one particular web provider. What that means is when an association outgrows that particular provider, they are left with 2 solutions: make due with inefficiencies or find a new property management company. Do you recommend associations own their own domain address and contract with the webmaster directly? -Stephanie L.

RESPONSE: Yes, boards should reserve their association’s domain name. Even if they don’t set up their own websites, it keeps others from purchasing the name and misusing it.

Ownership Expenses. If an association builds their own website, it requires some expense on the front end and then ongoing maintenance costs. Plus, you need someone who can update information on the site.

Management Company. Sometimes it is more convenient to assign those duties to a management company. Some management company websites allow owners to file maintenance requests through the website as well as access to financial reports related to members’ payment of dues and special assessments.

Business Decision. The bottom line is it’s a business decision on your part. Either option is fine. You have to decide which one is best for you.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Donations To Associations

QUESTION: Is it possible to set up a mechanism by which older homeowners could leave their assets to their association when they pass? I have friends who are well off but have no family to leave their money to.

ANSWER: Yes, both the living and the dead can transfer assets to their associations–one more easily than the other.

Estate Planning. An association’s ability to receive donations of cash and property is sometimes found in their governing documents. Even if not explicitly spelled out, they still have that authority as corporations. That means they can receive cash and property via someone’s will. As part of their estate planning, owners can simply name their HOA as a beneficiary in their will or trust. When they pass, their assets transfer to the association. The transfer would be taxable since homeowner associations are not 501(c)(3) charitable organizations.

Charitable Organizations. Homeowners can also make transfers while they are living. The transfer would, however be subject to taxation. Even though homeowner associations are nonprofit, they are not tax deductible organizations. If an association wants to make the gifts tax deductible, they could set up a separate tax exempt Community Service Organization (CSO) with its own board of directors.

Limitations. The independent CSO could then oversee fund-raising and charitable services. A significant limitation is that the recipient association cannot receive a direct benefit from the CSO–the funds raised cannot be used for maintenance of the common areas or to supplement their reserves. . To ensure compliance with the laws governing charitable organizations, the CSA must register with the Attorney General’s Registry of Charitable Trusts which oversees them. In addition, it must annually file tax returns with the IRS and the Franchise Tax Board showing that its funds are being used for charitable purposes.

Charitable Services. For a senior community, charitable services might include transporting seniors to their doctors, changing the batteries in smoke alarms in their homes, or holding educational classes.

Thank You. Many thanks to the members of our CID lawyers organization–a group of over 70 HOA lawyers from around the State who share ideas on novice or difficult legal issues that arise from time to time. Some have experience setting up Community Service Organizations and shared their expertise on this issue.

NOTE: If readers have wealthy friends with no heirs, I’m available for adoption. It’s one of the many services we offer. -Adrian

6th ANNUAL DRM
EDUCATION SYMPOSIUM

Free Legal. Desert Resort Management will be holding its annual education symposium for board members and homeowners. I will host one of their round table discussions where attendees will be briefed on new laws and their impact on associations.

Future of HOAs. In addition, there will be two keynote speakers. Andrew Brock, Senior VP of Associa, will discuss the future of community association living and what it means for boards of directors.

Battlefield Lessons. Scott McGaugh, New York Times Bestselling Historian and Marketing Director for the USS Midway Museum, will be sharing some lessons from the battlefield such as training, building trust, and using teamwork to help unite communities.

Date & Location. The Symposium will be held at the Agua Caliente Casino Resort Spa in Rancho Mirage this Tuesday, February 7 from noon to 6 p.m. For more information and to RSVP, go to their Symposium Website.

ERICA GREATHOUSE
CHIEF TECHNOLOGY OFFICER

I am pleased to announce that Erica Greathouse joined ADAMS | STIRLING as Chief Technology Officer (CTO). Prior to joining our firm, Erica spent 25 years overseeing implementation of technology for other law firms.

For fourteen of those years, Erica served as Director of Information Technology for Cox, Castle & Nicholson, a nationwide real estate law firm.

As CTO, Erica will work with our Technology Committee to improve our firm’s legal services through technology.

Among other things, Erica will develop and oversee our e-discovery procedures, telecom operations, video conferencing, social media policies, and risk management. Erica is an exciting addition to the team.

FEEDBACK


View #1
. In 1990 my HOA was sued over a view issue. I was on the ARC and a principal witness (we won). At the depo, the opposing attorney asked me to define “view.” I responded by asking her to define view in the context of the instant case. After a minute of contemplation she blurts out, “it’s difficult to define view.” To which I added, “let the record show that opposing counsel cannot define view, so therefore, I won’t.” Semper Fi -Bob P.


RESPONSE: You highlight the problem with views–everyone has trouble defining them.

View #2. Haven’t the courts already defined a view in Ekstrom v. Marquesqa? It says a view is defined as “a view of the ocean or neighboring golf course visible in any direction from anywhere on a homeowner’s lot, inside or outside one’s house.” Further, it says “The word (obstruct) means to block from sight or be in the way of (and thus even one palm frond would block some portion of a view) and the term (view) means that which is visible to the naked eye while standing, sitting or lying down anywhere in one’s home, or anywhere on one’s lot, looking in any direction one wishes.” -Bob I.

RESPONSE: The court took an extreme position which will likely be tempered in subsequent decisions. Some lower court decisions have already shied away from that definition. I’m reluctant to join the court’s overbroad definition since it would only encourage more litigation. Will a palm frond obscuring 1% of a corner of a 180% view justify a lawsuit and a favorable decision? I don’t think so. The court’s intemperate language is too broad to be equitable in its application.

I was involved in an action where an owner sued his neighbor over view obstruction from two windows—a guest bedroom where you had to stand in a corner with your back flat against the closet to see a partial view, and a guest bathroom where you had to stand on the toilet to see the view. Under Ekstrom’s sweeping definition, the plaintiff should have won. He didn’t.

View #3. Trees should be pruned based on the health concerns of the trees, not the view concerns of the condo association. In many cities, it is illegal to top trees, as you suggested for height restrictions (as well it should be, because topping creates poor structure from defensive growth, and ultimately more cost to the association in upkeep). I want trees in my view. They create lower cooling costs, shade, and privacy. But in most cases, it seems HOAs should just plant nothing, since the plants are rarely appreciated for their natural beauty, treated for their health, nor considered worth financial investment. -Colleen M.

RESPONSE: In a perfect world, trees would only be pruned to maintain their health. Unfortunately, that is hard to balance against the rights of owners who paid a fortune for a view of the ocean. Somewhere there is a happy medium but I’m not sure anyone has found it yet.

Congrats #1. Just saw your announcement that Nathan joined your firm. Great recruit!!! I had the pleasure of working with him in Sacramento a couple years back and hold him in high regard. -Bruce R.


RESPONSE: Nathan is an outstanding attorney. Not only that, he’s a good man. I’m very happy to have him. His email address didn’t appear in last week’s newsletter. If people would like contact Nate, see his Contact Information.

Congrats #2. Congratulations on your growth! Glad however to have you back in the game. Missed your often satirical, missive/musings. -Liz D.

Congrats #3. No apologies necessary. I get so much from your newsletter that I don’t mind waiting for it. Thank you for all you do. -Diana H.

Congrats #4. Good luck to a terrific company….you have always been helpful. -Ruth H.

Congrats #5. Woo-hoo! Glad to see you’re back. Thought I’d been dropped from your list. -Robert M.

Congrats #6. Congratulations…  I quite often refer to your site for general knowledge! Oh, how I wish we had someone like you in Reno, NV. -Caroline K.

RESPONSE: Hmmmm…

Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

What Is A View?

Hi Everyone,

I apologize for the delay in my newsletter schedule. I didn’t run off and join the Foreign Legion. Instead, I’ve been busy hiring people and renting office space. We are growing.

I am staffing offices in Northern California, adding three, maybe four additional attorneys to the firm and two more staff members.

The first in a series of announcements follows my article on Protected Views.

WHAT IS A
PROTECTED VIEW?


QUESTION
: Some owners in our HOA have great views, others none at all. If the ocean is only visible from a corner of the lot and can be covered by one hand at arm’s length, is that a view? We are spending $60,000 per year on idiotic tree trimming.

 

RESPONSE: I understand the need to keep costs under control. To define a view we have to start with your governing documents.

Typical CC&Rs. View protection language in CC&Rs is never precise.  The following two provisions are typical:

…nor shall any tree, shrub or other landscaping be planted or any structures erected that may at present or in the future obstruct the view from any other lot…

No tree, shrub, or other landscaping shall be planted or any structures erected that may unreasonably obstruct the view from any other lot.

What is a “view” and what does “unreasonably obstruct” mean?

Dictionary Definition. Dictionary definitions of “view” are not much help:

Black’s Law Dictionary: “the outlook or prospect from the windows of one’s house.”

Dictionary.com: “View is a general word, referring to whatever lies open to sight: a fine view of the surrounding country. Prospect suggests a sweeping and often distant view, as from a place of vantage: a beautiful prospect to the south.”

Many CC&Rs include language giving the architectural committee or the board authority to determine when an obstruction is unreasonable. Older documents often do not–they provide no definition and no arbiter for determining what is reasonable or unreasonable. That’s where courts come into play.

Case Law. Following are some cases where various view disputes were addressed:

In Seligman v. Tucker (1970), the association’s CC&Rs had a view-protection clause but no standard for determining what view was protected. The court made its own determination that the view being protected was the original view when the houses were built. It decided that a down-slope neighbor who was building a second story on his house unreasonably obstructed plaintiff’s view of the San Fernando Valley. The defendant was ordered to remove his second story.

In Ezer v. Fuchsloch (1979), trees on a neighboring lot had grown such that they almost completely obstructed plaintiff’s view of the ocean. The court interpreted the view language to mean that trees and shrubs had to be trimmed to rooftop height to preserve views. Defendants argued that their 25-foot tall pine tree had an independent right to exist without being trimmed. The court found the “tree rights” argument interesting but unpersuasive. The defendant was ordered to trim all trees and shrubs to rooftop level.

In Zabrucky v. McAdams (2005), the view protection language was unclear as to whether owners could add second stories to their houses. As part of its analysis, the court found that to significantly obstruct any owner’s view of the ocean would depreciate the economic worth of their property as well as dramatically reduce their enjoyment of their home. Since much of the value of properties depended on their views of the ocean, the court broadly interpreted the CC&Rs to prohibit second stories.

In Ekstrom v. Marquesa (2008), the CC&Rs protected views by requiring all trees be trimmed to rooftop level. The board made an exception for palm trees since trimming them would kill them.

When advised by legal counsel that the board’s exception was contrary to the CC&Rs, the board adopted a definition of view that would avoid trimming most palm trees. They defined “view” to be that which is visible from the back of the house, six feet above ground level, standing in the middle of the outside of the house looking straight ahead to infinity, with nothing to the left or right of the lot lines being considered part of the home’s view.

The court rejected the board’s definition. It ruled that the architectural committee had discretion to determine whether any particular palm tree exceeding roof height in fact blocked a view, but the association did not have discretion to exempt trees that blocked views. The association had to trim palm trees even it killed them.

What Is A View? From these cases, it is clear that courts will enforce view protection language in CC&Rs. Unfortunately, they have yet to define a view. If the ocean is only visible from a corner of the lot and can be covered by one hand at arm’s length, is that a view? Probably not. The courts would likely look at those areas of a lot where owner activities primarily occur–from the patio, around the pool, and from the main windows in the house.

RECOMMENDATION. If your CC&Rs state that all vegetation must be trimmed to rooftop height, then you have no choice but to trim all common area trees to that height as often you need to. If your CC&Rs state that view obstructions cannot be unreasonable, then adopt guidelines for determining what obstructions are reasonable and budget accordingly. Getting homeowners to trim their own trees is much more difficult–they tend to be uncooperative when it comes to trimming their own trees. To address this issue, you better add extra legal fees to your budget.

NATHAN MCGUIRE
MADE MANAGING PARTNER OF
NORTHERN CALIFORNIA OFFICES


We are pleased to announce that Nathan McGuire joined ADAMS | STIRLING as Managing Partner of our San Francisco, Sacramento and Stockton offices. He and his team will handle the Firm’s growing base of Northern California clients.

“Nate” McGuire has been named Super Lawyer Magazine’s “California Rising Star” for the last 5 years running and is the recipient of an AV Preeminent Peer Review designation from Martindale-Hubbell, which signifies the highest level of excellence.

In addition to extensive experience as general counsel to common interest developments, Nathan has broad experience in real estate subdivision development, purchase and sale agreements, escrow issues, restrictive covenants, easements, deeds, and other issues affecting real property.

Nate is an active member of the Community Associations Institute and the Building Industry Association and a frequent author and speaker on community association topics. He is also a delegate to the California Legislative Action Committee and serves on the Executive Committee as Vice Chair.

Nathan graduated with distinction from St. Mary’s College with a BA in English and Philosophy. He earned his Juris Doctor from U.C. Davis School of Law.

You can reach Nathan at: NMcGuire@AdamsStirling.com.
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email us.

Christmas Gifts for Board Members

QUESTION: Our association’s corporate counsel gives a seasonal gift to board members. I’m uncomfortable receiving them and wonder whether it is ethical for a law firm to give gifts to directors and ethical for directors to accept them.

ANSWER: For a law firm to give gifts to clients at the end of the year as a token of appreciation is common and acceptable. We do the same. The gifts, however, must be appropriate.

Appropriate Gifts. Giving directors an Alaskan Cruise or a new car or cash would, in my opinion, be inappropriate. Acceptable gifts are more along the lines of tickets to a baseball game, a fruit basket, a nice bottle of wine, dinner at a restaurant, etc.

NOTE: If you feel awkward receiving such gifts, send them to me. I can recycle them.

INVOLUNTARY DISSOLUTION
OF CORPORATIONS


A
law took effect January 1, 2016 making corporations subject to administrative dissolution if they have been suspended by the Franchise Tax Board or the Secretary of State for at least 48 months. (AB 557.)

Many boards are often unaware their association has been suspended because their communities are small and self-managed or frequently change management companies.

In addition to the penalties associated with suspension, dissolution could have a significant financial impact because the cost to reincorporate is much greater than a simple revivor.

RECOMMENDATION: All boards should check their association’s corporate status on the Secretary of State’s website. If you have been suspended, you should immediately take steps to revive your corporation. If you need assistance, contact me.

CAN RESERVES PAY
FOR A LANDSCAPE DESIGNER?


QUESTION
:
Our building is thirty years old and our landscaping is at the end of its lifespan. All homeowners agree it needs to be replaced. Many want to hire a landscape designer to design an attractive low-water landscape. The designer’s fee is $25,000. Landscaping is not currently in our reserve study. However, the board ordered a new study and landscaping will be added. Can we pay for the designer out of our reserves?

ANSWER: Yes, you can pay for a designer from your reserves. It is a legitimate part of the cost of replacing your landscaping.

Missing Component. Landscape replacement is often overlooked by associations when putting together a reserve study. Belatedly adding the component is within the board’s authority and does not require a vote of the membership.

Impact on Reserves. Using reserve funds to replace your landscaping means your existing funds will dip. Depending on the adjusted level, you may need to increase your annual contributions to keep the funding at safe levels for future component replacements.

RECOMMENDATION: Work with your reserve analyst to revise your reserve study to establish proper future contributions. Otherwise, special assessments may be in your future.

DIRECTOR’S VOTE
A PROTECTED ACTIVITY


As
frequently happens, there are winners and losers when a board votes on an issue. Normally, the vote is recorded in the minutes and the board moves to the next agenda item.

In a case published a few days ago, the losers wouldn’t let go of an issue. In a duly noticed meeting, a 9-member board voted six to three to renew a contract with the association’s management company. Three directors who voted against the contract sued the six directors who voted in favor.

The association’s attorneys moved to dismiss the action with an anti-SLAPP motion. The court of appeal agreed and ruled that a director’s vote at a board meeting constitutes a protected activity under the anti-SLAPP statute.

NOTE: This was a smart decision by the court. A ruling in the other direction would have opened the door for losing directors in all future votes to go running into court to arbitrate their disagreements. This would have been an enormous waste of association and court resources and would have paralyzed HOA operations. Kudos to the court on its decision. (See Lee v. Silviera.)

Congratulations to attorneys Fred Whitney and Constance Trinh of Neuland, Whitney & Michael for their win on behalf of Friar’s Village.

THANK YOU!


A sincere thank you to all my readers for your support this year. Your newsletter questions and feedback have been delightful.

Clients. In addition, I am grateful for our many clients, both long-term and new. Many of you have been with me for over 20 years. In addition, new clients join the firm each year and this year over 130 associations were kind enough to select us for their legal services.

Attorneys. Because of your support, ADAMS | STIRLING has grown to 17 exceptional lawyers who are dedicated to representing residential, mixed-use, and commercial associations.

BEST WISHES. May you and your families enjoy the holidays and have a New Year filled with peace, prosperity and happiness. From all of us at Adams Stirling, Merry Christmas and Happy New Year. See you in 2017!
Adrian J. Adams, Esq.


Adrian J. Adams, Esq.
ADAMS | STIRLING PLC

We are friendly lawyers. For quality legal service, boards should call (800) 464-2817 or email.