ACCEPTING HOLIDAY GIFTS

ACCEPTING HOLIDAY GIFTS

QUESTION: I am the president of our association. Members of our board and many employees received envelopes today from our security company. I opened mine to find ten $100 bills. An employee opened hers to find a $100 Visa card. I immediately took custody of all the envelopes and put them in a sealed envelope. To avoid any appearance of accepting kickbacks, I plan to return them to the vendor. Is this the right thing to do?

ANSWER: That is exactly the right thing to do. Even though the act of giving or receiving a gift is not illegal, it becomes a problem if (i) the gift influences a director’s judgment when contracts are awarded or (ii) it gives the appearance that your vote has been influenced. If directors approve contracts based on gifts they receive, the gifts become bribes. That's why most organizations adopt ethics rules setting strict limits on gifts. (See House Ethics Manual for the U.S. Congress concerning gifts.) 

Appropriate Gifts. If your gifts had been nominal (a basket of cookies), the gesture of appreciation by the vendor would have been appropriate. In your case, the gifts are not appropriate. 

RECOMMENDATION: Associations should adopt ethics rules so board members will know where the ethical boundaries are located. We have a sample Ethics Policy on our website that boards can use as a model.

LIEN NOTICE REQUIREMENT

QUESTION: We have four owners of a single property living at three different addresses. The dues for that property are delinquent and we need to send a certified letter. Do we need to send it to three different addresses?

ANSWER: In collection and foreclosure matters, whenever the question is "Should we mail to this address?" the answer is always "Yes." It is better too give too much notice than not enough. 

RECOMMENDATION: You can write one letter with multiple addressees and addresses (all owners on title at all addresses) at the top of the letter and then mail it to everyone. You can also charge the account for all of your collection costs. 

TREE DAMAGE

QUESTION: My tree fell on my neighbor's car. The HOA says it's my responsibility not theirs. Am I liable for fixing my neighbor's car???

ANSWER: Your situation sounds like an Allstate commercial. The first thing you need to do is call your insurance agent. The next thing that comes to mind is, "Why are you dragging the association into this?" It was your tree.

HOA Negligence? The only way the association could be liable is if (i) it owned the tree and was negligent or (ii) you own the tree but the HOA is responsible for maintaining it (and did so negligently). Under those circumstances, the HOA would by liable for the loss.
RECOMMENDATION: If you don't have any insurance (shame on you) and you want to see if there is any way to blame someone else for the loss, you should consult legal counsel. 

CC&R-BYLAW UPDATE REQUIRED?

CC&R-BYLAW UPDATE REQUIRED?

QUESTION: Will my homeowners association have to update its documents to conform to the 2014 Civil Code changes including references to past Civil Code numbers? 

ANSWER: No, you don't need to update your documents. You may need to update them for other reasons--because they are badly written, contain Declarant language, are ambiguous about maintenance duties, etc. but changing Civil Code numbers is not one of them.

Renumbering. The most noticeable change in the Davis-Stirling Act is the renumbering. The current Act is found in sections 1350 to 1378 of the Civil Code. The rewrite moves everything to sections 4000 to 6150 of the Civil Code. For example, Civil Code §1350 becomes §4000 starting January 1, 2014. If your CC&Rs and bylaws refer to the old numbering system, there is no legal requirement that you switch to the new numbering system. Since the existing Civil Code numbers roll over to new numbers on January 1, references in your documents automatically flow to the new Code. In other words, your documents don't become obsolete and unenforceable on January 1 because they refer to old Civil Code numbers.

Conversion Chart. All you need is a conversion chart to find the new numbers. Charts can be found on many law firm websites.

Substantive Changes. Also, the handful of substantive changes in the Rewrite are not sufficient to trigger a restatement of your association's governing documents.

RECOMMENDATION: If your governing documents need amending for other reasons then it makes sense to restate them and convert the Civil Code numbers. Talk to your association's attorney about the merits of restating your documents. 

ELECTRIC VEHICLE CHARGING STATION

QUESTION: I want to install an electric charger for my car. What does the Civil Code consider an "unreasonable" expense? Since my car is over 100 feet from the meter, it will cost me $4,000 to run electricity & install the charger. Isn't that an unreasonable amount?

ANSWER: The reasonableness of the expense is a matter between you and your electrician. By statute, the association must allow you to install a charging station but the cost is yours not theirs. Following is the relevant portion of the EV statute dealing with reasonableness:

(a) ...any provision of a governing document... that either effectively prohibits or unreasonably restricts the installation or use of an electric vehicle charging station in an owner's designated parking space... is void and unenforceable. (b)(2) For purposes of this section, "reasonable restrictions" are restrictions that do not significantly increase the cost of the station... (Civ. Code §1353.9.)

The association is not imposing any unreasonable restriction on you nor did it move the meter so as to drive up your costs. You're simply the victim of sticker shock and you cannot expect your neighbors (the association) to subsidize your costs.

RECOMMENDATION: Before buying that shiny new electric vehicle, owners should investigate the cost of installing the equipment to keep it running.

GROWING POT

GROWING POT

QUESTION: We have a resident who is growing a LOT of marijuana in her back yard. Our CC&Rs say no to this but if the state says it's legal who is right?

ANSWER:

Illegal Conduct. Under the federal Controlled Substances Act, the cultivation of marijuana is prohibited. Most governing documents include a restriction that restricts an owner from using his property to engage in illegal or criminal conduct. If your CC&Rs include such a provision, growing marijuana is a violation and would subject the owner to disciplinary action by the association.

Medical Marijuana. What if the person has a prescription (also known as a “card” or “license”) for medical marijuana? Although federal law does not recognize a distinction between medical and recreational use of marijuana, California does. In 1996, marijuana was legalized for limited medical use. Under California’s Health & Safety Code§11362.77, qualified patients are allowed to cultivate up to 6 mature or 12 immature marijuana plants. Thus, if your resident has a prescription her pot farm is authorized under state law (provided she does not exceed the allowed number of plants).

Conflict of Laws. Obviously there is a conflict between state and federal laws. However, just because the state allows the growing of marijuana does not mean an HOA must allow it. It is still illegal under federal law, which makes it a violation of the governing documents if they contain a provision against illegal conduct.

Nuisance. If your documents do not prohibit illegal conduct, all CC&Rs have a provision against creating a nuisance. Regardless of the legality of the marijuana plants under state law, their presence may still be deemed a nuisance. Marijuana plants have a strong odor that some find extremely unpleasant, and several plants grouped together can produce an overwhelming odor for neighbors or passers-by. Also, they may attract criminal activity, a legitimate concern of the person's neighbors. The strong smell as well as safety and security issues fall under the nuisance provisions of the CC&Rs.

RECOMMENDATION. The first step for an association is to send a warning letter to the owner detailing the nature of the violation. If the resident can't produce a valid prescription for medical marijuana, the association can call the police. If the person has a license to grow marijuana, the association can still proceed under the criminal activity and nuisance provisions of its CC&Rs. The grower could "cure" the violation by moving her plants inside where they can't be seen or smelled.

Who’s got to clean the carpet?

Legal Q&A: Who’s got to clean the carpet?

Question: How long do I have to mail the tenant the itemized security deposit?

Answer: You need to send an accounting for the use of the security deposit within 21 days from the date you took back possession. If you do not have all of the amounts or receipts in time, you should give the tenant an estimate and then send the final amount within 14 days after you receive the final amounts and/or receipts.

Question: I have a lease with a tenant that terminates next month, and he has been given notice that the  lease is not being renewed. If he does not vacate, do I serve a three-day Notice to Quit for Breach  of Covenant?

Answer: You do not have to serve any notice to quit for a tenant who holds over on a fixed-term lease unless you have an automatic renewal clause in your lease. 

Question: Is there a state law that requires a landlord to professionally clean a carpet prior to reoccupancy?

Answer: No, however the tenant is obligated to leave the premises in the same state of cleanliness that the carpet was in when she/he moved in.

Preparing HOAs for 2014

Preparing HOAs for 2014 While January 2014 seems a long time away, now is the time for prudent boards, managers and attorneys to begin preparing for the reorganized and relocated Davis-Stirling Common Interest Development Act. There are some things your HOA can do to be more prepared. Begin collecting consents to receive notifications by e-mail. The new law will permit associations to give electronic notices to members who agree to accept such method of communication. In a large association, the savings of cutting down on postage and paper could be very substantial and small associations will benefit as well. Encourage your members to sign an "opt in" notification. Your association can include it in the next assessment mailing, and have them available at the management office and at board meetings. Remind owners that this will not only save them space and clutter, but will help keep the budget (and therefore assessments) under control. Review your disciplinary hearing policies (or create some). The new law will require that when the association imposes a reimbursement claim against a member, that claim must be handled using the same process as for member discipline. The law currently does not provide much guidance to boards as to how to conduct these hearings, and unfortunately that is not going to change in the new year. In my experience, boards, having little guidance in the law about how to conduct these hearings, often take far too long. The increase in these hearings in the future means your HOA closed sessions are going to become much longer. Consider adopting policies regarding the conduct of disciplinary and reimbursement hearings, including a reasonable time limit on the homeowner opposing the discipline or reimbursement item. SB 822: Community Managers Are Not Contractors     Governor Brown provided a degree of certainty to community association managers by signing Senate Bill (SB) 822 into law, excluding community association managers from the definition of construction consultants for purposes of Section 7026.1 of the Business and Professions Code (regarding construction contractors). SB 822 adds the following language to Section 7026.1 of the Business and Professions (B&P) Code relating to contractors: "(b) The term "contractor" or "consultant" does not include a common interest development manager, as defined in Section 11501, and a common interest development manager is not required to have a contractor's license when performing management services, as defined in subdivision (d) of Section 11500." By way of background, last year Section 7026.1 of the B&P Code was amended by the passage of AB 2237 mandating that a consultant overseeing home improvement construction projects have a contractor's license.   This amendment caused concern among some community association managers who were involved in common area maintenance and repair projects or bid compilation for their communities. If community association managers were considered "consultants," then they too would have to have a contractor's license under Section 7026.1 Is Earthquake Damage Coverage Required for HOAs?   In a recent HOA Homefront, Kelly Richardson addresses a reader's question as to whether a HOA can legally discontinue earthquake insurance. Mr. Richardson advises that there is no law which requires HOAs to have earthquake damage coverage; however, some CC&Rs require it. He goes on to say that management companies should not be making insurance decisions and that this should be left up to the Board of Directors to decide.

UNHAPPY WITH BOARD ACTION

UNHAPPY WITH BOARD ACTION

QUESTION: I am unhappy with a recent board decision. What can I do? What are my rights?

ANSWER: Members who are unhappy with board decisions or indecision can do the following:
1.  Remain Silent. Be part of the silent majority... say nothing and do nothing and hope the problem resolves itself. Things run in cycles, so sometimes it works--you just have to be patient.

2.  Open Forum. Address the board in open forum. Be respectful and clear in describing your position. The board may not be aware of the problem and your bringing it to their attention should get results. If you are hostile, rambling and make unreasonable demands or threats, the board will label you as a "crazy" and reject your request. A letter from the association's attorney might accompany the rejection.

3.  Write Letters. If the board does not respond to your open forum request, follow-up with a couple of letters. Do this for two reasons: (i) the squeaky wheel gets the grease and (ii) boards don't like paper trails that create potential liability for the association. Keep your letters respectful and business-like. Do not engage in personal attacks or hyperbole. If your letter sounds like you have squirrels running laps in your head, imagine how a jury (and your neighbors) will view you when your letter is read in open court. Remember, you are trying to persuade board members not alienate them.

4.  IDR. If the open forum and follow-up letters don't resolve the problem, try Internal Dispute Resolution. I've never seen IDR work but you never know. It keeps the issue in front of the board and it exhausts your friendly attempts to resolve the problem.

5.  Election. If the above actions don't resolve the issue, run for the board or support responsible members willing to run. First, however, examine your motives. If the reason you want on the board is to get something for yourself at the expense of the community, that would be a breach of fiduciary duties. Make sure you and those you support want to serve the community, not your own agendas.

6.  Recall the Board. You can launch a recall of the board. This is a drastic measure and very disruptive to the community. It will permanently damage relationships between neighbors and create life-long enemies. Hence, the issue better be sufficiently serious that it can't wait for the next annual election. 

7.  Litigate. If none of the above works or you're in a hurry to lose money and make enemies, you could always file a lawsuit. Rarely is a lawsuit justified--they are lengthy, expensive, emotionally draining and unpredictable. So carefully weigh the cost of litigation against the hoped-for benefit... and then weigh it again. If you're suing to punish the board because of a perceived sleight or to prove a point, you're one of the crazies.

8.  Move. If you live in a dysfunctional association, sell your property and get out before they cause you financial and emotional damage. Look for a single-family home not in an association or look for a good association. There are lots of them out there and one will be a good fit for you.

ZERO WASTE

Without getting into a debate on whether global warming is due to humans or to solar activity plus the earth's natural weather cycles, both sides should agree that minimizing waste is a worthy goal.

Many community associations are limited in their ability to recycle. Even so, there may be other ways to reduce waste, whether it be water, electricity or refuse. Boards should consider setting up committees to study what can be done to minimize waste in their communities.

There are many internet resources that can be utilized. One of them iswww.zerowaste.com. -Thank you to Larry Stirling for raising this issue.

RESERVE TRANSFER TO PAY FOR LITIGATION

QUESTION: We spent money from reserves for litigation expenses, do we need to repay the reserve fund? Also, should we add a line item in our reserve study for monies we expect to spend on litigation next year?

ANSWER: Yes you need to repay the funds and no you should not create a litigation line item in your reserve account. The current Davis-Stirling Act is a little ambiguous but the language in the rewrite, effective January 1, is clearer.

Temporary Transfer. The use of reserve funds for litigation is deemed a "temporary transfer" (Civ. Code §5520). When temporary transfers are made, boards must explain to the membership the reasons for the transfer and when and how moneys will be repaid to the reserve fund. In addition, the funds must be restored within one year of the date of the initial transfer. (Civ. Code §1365.5(c)&(d); §5515.)

Reserve for Expenses. Even though you anticipate litigation expenses next year, they do not qualify as a reserve item. Reserve accounts are for monies "identified for use to defray the future repair or replacement of, or additions to, those major components that the association is obligated to maintain." (Civ. Code §1365.5(f)(1); §5550.) Legal expenses do not meet the definition of a "component" nor do they meet National Reserve Study Standards.

Operating Expense. The appropriate place for anticipated legal expenses is the association's operating budget. This will likely increase your budget which may require a dues increase or a special assessment for the next fiscal year. In addition, even though a temporary delay in restoring borrowed reserve funds is allowed, boards must exercise prudent fiscal management in maintaining the integrity of the reserve account "and shall, if necessary, levy a special assessment" to repay the funds within one year. (Civ. Code §1365.5(c)(2); §5515.)

CONCLUSION: The statute is a little confusing about the repayment timeline but it is clear that associations cannot leave holes in their reserve accounts by transferring funds for legal expenses and not repaying them.

ADULT SWIM TIMES

ADULT SWIM TIMES

QUESTION: I know associations cannot restrict children from using the pool but is there any way you can have an adults-only swim time? We are unable to do laps in our pool because many parents don't supervise their kids and I have had children actually jump in the pool and almost land on top of the swimmer.

ANSWER: Unless yours is a senior community, you cannot restrict children as it would violate various anti-discrimination laws. Instead, you can set a reasonable time period for "laps only" but open it to everyone. Children who want to swim laps can participate (and some may want to). This makes it nondiscriminatory by placing a reasonable restriction on how the pool is used, not who uses it. You may also want to put lane dividers in the pool to help make it clear the pool is for laps only during those hours.

BUYING VOTES?

BUYING VOTES?

QUESTION: Our board is doing a rewrite of our bylaws and CC&Rs. My problem is that they are offering $5 gift cards to those who return their ballots. Is it legal to use HOA funds in this way?

ANSWER: Yes it is legal. Doing so is not the same as buying votes. Instead, it is an incentive to vote and can be used for both annual meetings and amendment approvals. 

Annual Meetings. Association elections are different from municipal elections in that HOAs must meet quorum requirements and cities don't. For example, in the May 2013 mayoral election in Los Angeles, only 19% of eligible voters cast ballots. The dismal turnout did not derail the election as it would in a homeowners association since no quorum was required. Can you imagine the problems and enormous expense if city, state and federal elections needed 50% of the population to vote before they could count ballots? Because associations are not normal, i.e., they are burdened with quorum requirements, boards must nag and cajole members to vote, and sometimes offer incentives. 

Amendments. Achieving quorum at membership meetings is difficult enough but reaching supermajority votes for amendments and restatements is nearly impossible. Because of that, the Legislature created the "1356 Petition" as a mechanism for realistically amending documents. If an association can obtain at least 50% membership approval, it can ask the court to approve amended or restated CC&Rs. By statute, the association must demonstrate to the court that they made extraordinary efforts to obtain voter participation. Offering $5 gift cards to voters would be one of those efforts (along with extended voting periods, repeated requests to vote, etc.).

RECOMMENDATION: To make board elections more manageable, your association should amend its bylaws to eliminate quorum requirements and cumulative voting for the election of directors. In addition, it should lower CC&R amendment requirements from a supermajority to 50%. Once that is done, future elections will be much more manageable.

DOG GROOMING BUSINESS

QUESTION: We have a homeowner who owns a mobile dog grooming business. While she parks her customized van off-site, we believe she is using HOA water to fill her dog bath tanks almost every day. Can we prevent her from doing this or charge her for the water?

ANSWER: Yes, it would be reasonable for associations that are master-metered, i.e., the association pays for the water, to adopt rules prohibiting members from using water for commercial purposes. Accordingly, you could impose a fine and charge a reimbursement assessment if you could determine they were using the association's water.
Practical Considerations. Determining the amount of water used would be very difficult absent an eyewitness to the violation. Ditto for imposing fines. Any reimbursement assessment or fine must be preceded by a notice and a hearing (due process).

Shop Locally, Think Sustainably, and Manage Environmentally

Shop Locally, Think Sustainably, and Manage Environmentally

The average rate on the 15-year fixed mortgage fell last week to 3.30 percent from 3.31 percent. Five weeks ago, it too hit a record low of 3.26 percent. This means that those who want to buy houses and rent them to residents may find that process more affordable. These owner-landlords will be needing property management sooner than later.These are mainly good times  for property managers. The number of new residents needing rental housing is increasing, rents are rising, and vacancies are filling up. On top of that we learned today (11/10/11) that the average rate on 30-year fixed mortgages fell below 4 percent for just the second time in history. Freddie Mac said the rate on the 30-year fixed loan fell to 3.99 percent, down from 4 percent last week. Five weeks ago, it dropped to a record low of 3.94 percent, according to the National Bureau of Economic Research.

The need for green property managers will increase as well. Many owners and residents care about their local community, the environment and practices that focus on sustainability and safeguarding human health.

A workable definition of Sustainability might include, “…the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non living things on earth.”

“This philosophical interpretation moves well beyond definitions driven by progress oriented economic perspectives that see humans as providing stewardship and the responsible management of resource use.” (http://en.wikipedia.org/wiki/Sustainability).

Begin by Shopping Locally and Supporting Local Merchants

Your reputation as a thoughtful and green property manager will be enhanced if you support local farmers, manufacturers, suppliers and small businesses. In my community there’s a store called Life Source Natural Foods. They go out of their way to provide products and supplies grown locally. They prefer produce, beverages and meats that are pesticide-free, herbicide-free and grown sustainably or certified as organic.

The store thrives and attracts people from all walks of life. The property managers, landlords, attorneys and other professionals who shop there have a reputation of caring and being thoughtful citizens. Local merchants and small businesses appreciate their customer’s loyalty and support. They often reciprocate by sending referrals and new business.

Practices that are Environmentally and Healthfully Appreciated

Our local green property managers avoid using hazardous chemicals and toxic sprays. They utilize organic or non-toxic products and materials in their landscaping and building maintenance procedures.

The U.S. Environmental Protection Agency has a very helpful section on sustainable, environmentally safe practices that we can all be aware of and practice http://www.epa.gov/sustainability/.

The section on “Smart Growth and Sustainable Communities” is introduced with these goals, “Supporting development and conservation strategies that help protect our natural environment and make our communities more attractive, economically stronger, and more socially diverse.”

You’ll learn about green buildings and homes, green energy practices and materials management and safe products for promoting the use of cleaner materials and seeking to reduce material waste and chemical contamination.

Often in my articles I remind managers and owners that our communities don’t care how much we know until they know how much we care. Shopping locally, supporting sustainable, environmentally-considerate programs and practices sends out the message that we care, and reflects both the heart and character of the kind of people we all prefer to do business with.

ANNUAL HOA DISCLOSURE CHECKLIST

ANNUAL HOA DISCLOSURE CHECKLIST

The following is a summary-only of requirements for disclosures made after January 1, 2009. Please refer to the statutes for more complete information.

30-90 Days Before the Start of the Fiscal Year
Operating budget	Civil Code S1365(a), (c); S 1365.2.5
The budget must contain:     Estimated revenue and expenses on an accrual basis.     A summary of the reserves, with specific information required by this Civil Code section.     A statement whether the Board expects to levy any special assessments, and how it will fund reserves.     A description of the procedures used to calculate and establish reserves. Note: Instead of distributing the budget, associations can distribute a summary with a notice that the complete budget is available for review, and that copies will be provided on request at no charge.
Assessment collection policy	Civil Code S1365(d)
A statement of the association's policies in enforcing lien rights or other legal remedies for default in payment of assessments. Note: Send to address of record and any secondary addresses in writing provided by owner.
Statement of insurance coverages	Civil Code S1365(e)
A summary of the association's property, general liability, and earthquake, flood, and fidelity insurance policies. Must include the insurer's name, type of insurance, policy limits, and deductibles. Also give the disclosure statement contained in Civil Code Section 1365(e). Note: You can distribute the policy declarations page instead of the summary, if it contains the required information.
Notification of right to second address	Civil Code S1367.1 (k)
Notification that owners can submit a request to have collection notices mailed to a secondary mailing address. The request must be in writing and mailed to the association in a manner that indicates the association has received it. The association must then send additional copies of any notices required under Civil Code Section 1367.1 to the second address provided.

30-60 Days Before the Start of the Fiscal Year
Regular assessment increase	Civil Code S1366(d)
If the regular assessments are to be increased, notice must be mailed to the owners 30-60 days before the increase takes effect.

1-60 Days Before the Start of the Fiscal Year
Collection policy disclosure	Civil Code S1365.1
Distribute a "Notice Assessments and Foreclosure" using the exact language set out in the Civil Code. Note:  New! The language of this "Notice" was revised effective January 1, 2009. Make sure you have the latest version. Note: Send to address of record and any secondary addresses provided in writing by owner.

1-120 Days After the Start of the Fiscal Year
Review of financial statement	Civil Code S1365(b)
In any year where the association's gross income exceeds $75,000, it must conduct an annual review by a licensed California accountant and distribute a copy of the review.
Right to receive annual report	Corporations Code S8321
If the association's annual income exceeds $10,000, it must prepare an annual report and distribute a notice stating the report is available on receipt of a written request at the association's cost Note: If the association's annual income exceeds $75,000, it must include this notice with the review of its financial statement. Otherwise this notice may be distributed at any time.

Annually
Rules and fine schedule	Corporations Code S7341(c)
The association's procedure for imposing monetary penalties and/or suspension of privileges for violations of the association's rules or CC&Rs (unless the procedure is contained in the Bylaws).
Right to receive minutes	Civil Code S1363.05(d),(e)
Notice of members' right to receive minutes of open Board meetings, and how and where they can be obtained. (Final or draft minutes must be made available 30 days after the meeting on request, at the owner's cost.)
Architectural requirements	Civil Code S1378(c)
Notice of any requirements for association approval of physical changes to property, including types of changes that require association approval and a copy of the procedure used to review and approve or disapprove a proposed change.
Summary of alternative dispute resolution ("ADR") procedures	Civil Code S1369.590
A detailed summary of Civil Code Section 1369.510 to 1369.590, which encourage the use of arbitration or mediation before certain lawsuits are filed to enforce the governing documents.
Summary of "meet and confer" procedures	Civil Code S1363.850
Distribute, along with the ADR summary, a summary of the internal dispute resolution ("meet and confer") procedure to be used to informally resolve any dispute between the association and its members.
Disclosure of asbestos within project	Health & Safety Code S25915 et seq
If the association learns that any building in the project contains asbestos-containing construction materials, it must annually disclose to the owners and all employees the existence and location of these materials, information on how to obtain a contact of any survey identifying these materials, safety procedures (if known), results of lab tests on samples (if any), and (if known) health risks or impacts from exposure to the asbestos. Check statute for details. Note: If the association has adopted an asbestos management plan, other information must be disclosed.

Permanent Association Records and Policies
Election rules	Civ. Code S 1363.03(a)
Associations must adopt election rules containing specific information on campaigning, candidates, and election procedures.
Architectural policy	Civ. Code S 1378
Associations must have established architectural review procedures. If not in the governing documents, the statutory requirements should be put into a set of architectural guidelines.
Membership list and opt-out list	Civ. Code S 1365.2(a)(1)
Keep a membership list with the owners' names and addresses, plus a list of owners who have "opted out" of making their information available to other owners.
Statement of non-discrimination	Gov. Code S 12956.1
Any copy of the CC&Rs or any other governing document recorded with the County Recorder and provided to any person must have a cover sheet containing the paragraph set out in statute, unless that language is given on the document's first page.

BUYING A CONDO

BUYING A CONDO

A friend called and said his daughter was buying a condo. He asked what she should look for when buying one. Following are my recommendations.

1. Maintenance. Don't assume the association takes care of everything, it doesn't. Find out what your maintenance responsibilities are so you can budget for them. Inspect the common areas. If the paint is peeling on buildings, trees are overgrown, lawns are shabby, sidewalks are tilting--roofs and plumbing are probably in a similar condition. Poor maintenance means you can expect stagnant property values and special assessments as water starts infiltrating common areas through roofs, windows, water lines and drain lines--leading to mold and litigation.

2. Reserves. This is an extension of the maintenance issue. Does the association have healthy reserves so it can repair large ticket items? If not, special assessments are inevitable. Reserves in the 70% to 100% funding range are excellent. Reserves below 50% mean probable future special assessments. The lower the reserves, the more imminent the special assessment. If reserves are below 30%, look elsewhere for a condo.

3. Insurance. How much insurance does the association have? If it's at bare minimum levels, you face a higher risk of a special assessment in the event a claim is filed against the association. Is the development in an area deemed high-risk for an earthquake? If so, does the association carry earthquake insurance? If not, are you prepared to lose your investment in the event of significant damage?

4. Litigation. Ask the seller about litigation over the past ten years. Also ask for the past two years of minutes. A slip and fall lawsuit is not a problem. If the association has had ongoing litigation with members over the past ten years, run for the exit. The association is dysfunctional. There will be no peace until the litigants all move or die.

5. Rentals. Inquire about the percentage of rentals in the development. A high rental population creates problems for rules enforcement, maintenance and oversight of the property. If the rentals are nearing or exceed 15%, you should be cautious. If they exceed 30%, it does not matter how beautiful the condo is, you're stepping into quicksand. At 50%, the development is in a death spiral.

6. Pets. If they don't have pet restrictions, is the property a dog patch? If so, barking dogs at all hours of the day and night plus dog doo-doo in the common areas will be a challenge. If they have restrictions, do you have pets that violate those restrictions? If so, are you willing to give up your loved ones for the condo? If your Realtor tells you the rules don't matter because the association will never discover the violation, get a new Realtor.

7. Parking. Is there sufficient parking in the development? If not, it will create problems for you and your guests. Visit the property on a weekend when everyone is home and see what parking is like.

8. Noise. Ask the seller about plumbing noise, crying babies, TV and stereo sounds, etc. from surrounding units. If there is a unit above yours, ask about noise from hardwood floors. If all the above can be heard through walls and floors, it indicates cheap construction--a harbinger of future maintenance problems. It also means you won't get any sleep at night.

9. Finances. Ask for a copy of the budget and annual financial statement - and read them. Ask about delinquencies. A delinquency rate above 15% means that higher dues to make up the deficiency are probable. Also ask about past dues increases. If they proudly tell you that dues have not increased for ten years, it means they kept their dues down by deferring maintenance for ten years. It also means large increases and special assessments are looming.
10. Sales Activity. If you see a lot of "For Sale" signs in the association, you better find out why. Like rats fleeing a sinking ship, they might know something your Realtor isn't telling you.

RECOMMENDATION: It does you no good to sink your last penny into a condo and then lose it the next year when you get hit with a dues increase and large special assessment to cover delinquencies, litigation, artificially low dues and underfunded reserves. Any Realtor can read the MLS and drive you around to look at condominiums. What you need is a Realtor who is knowledgeable of how associations work and respects them. A good Realtor with condo experience will provide invaluable guidance.