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.