BOARD MEMBERS AS CC&R EXPERTS?

FREE RIDERS

QUESTION: While checking your website on suspension of common area privileges, I was shocked when I read, "If there are multiple owners of a unit/lot, the suspension of rights/privileges for one owner suspends the rights/privileges of all residents of that unit/lot. The suspension also extends to renters." With all due respect, an HOA is not a military organization where group discipline is used to demand compliance with an order.

ANSWER: If the owner of a unit is delinquent and his privileges are suspended, the people residing in his unit are also suspended, whether family members, guests or tenants. Otherwise, the suspension is meaningless. If residents were not included in the suspension, they would continue to enjoy the association's amenities without paying for them. Giving people a free ride at others' expense is a poor business practice we reserve for our federal government.

BOARD MEMBERS AS
CC&R EXPERTS?

QUESTION: As a board member, am I expected to be an expert on our CC&Rs? I wish I were but, for example, when a homeowner asks who is responsible for repairing damage caused by a water leak in a common wall, I don't feel qualified to give a definitive answer.

ANSWER: I know that some homeowners expect every board member to read and understand every line of their CC&Rs. That is an unrealistic expectation. Volunteer directors are not experts and can get themselves in trouble if they try to be. As a practical matter, boards should have a general understanding of how things work but should defer to an HOA attorney to interpret their CC&Rs.

Maintenance Chart. When it comes to maintenance duties, boards should have legal counsel prepare a maintenance chart that lays out all common maintenance issues and who is responsible for each--the association or owners. That requires a thorough review of your governing documents in conjunction with the Davis-Stirling Act and applicable case law. The chart is then published to the membership. Making everyone aware of their respective duties can minimize or avoid expensive litigation.

RECORDING MOTIONS
 IN MINUTES

QUESTION: Is there an established doctrine that the individual making a motion and the individual seconding the motion be identified by name in the minutes? I have seen this done by a professional minutes taker, however, my colleague disagrees. What is the accepted rule?

ANSWER: There is no law that requires the name of the person making the motion and the one seconding the motion. While some associations do, many associations simply state that a motion was made and seconded. Over the years, I have seen both practices and both are acceptable. Even though boards of directors are not required to use parliamentary procedures for their board meetings, Robert's Rules of Order serve as a useful guideline for taking minutes. According to Robert's Rules,

The name of the maker of a main motion should be entered in the minutes, but the name of the seconder should not be entered unless ordered by the assembly. (Robert's Rules, 11th ed. p. 470.)

For those associations that can afford it, a professional minute taker provides greater consistency and a quicker turn-around for minutes.

BOYFRIEND
CONFLICT OF INTEREST

QUESTION: We have a board member whose live-in boyfriend is a licensed contractor. She gives him copies of the bids we get on various projects so he can submit a lower bid. Is this legal or ethical? Can board relatives even bid on projects?

ANSWER: It is clearly inappropriate for your ethically-challenged director to provide insider information to her boyfriend.

Problems. It is not illegal for a director's relative to bid on projects ifdone properly but doing so is fraught with peril. Most boards wisely disallow the practice because of the inherent problems when directors benefit from contracts awarded to themselves or relatives.

Censure. Your self-serving director should resign from the board if she wants her boyfriend to bid on HOA projects. If she refuses to resign and continues to leak information, she can be censured by the board and an executive committee created to review bids. In addition, your board should adopt an ethics policy.

UNDERFUNDED HOAs

As boards everywhere already know, the recession has created significant funding problems for their HOA budgets. That has led to deferred maintenance and underfunded reserves.

The problem is serious enough that California's Department of Real Estate issued a "Consumer Warning."

SANTA MONICA BANS
SMOKING

In addition to San Rafael's no smoking ordinance I reported on last week, the city of Santa Monica banned smoking for new tenants of apartments and condos. The ordinance was approved on October 2 and included language giving neighbors the right to take smokers to court if they violate the ban.

Last week I asked if any condominium associations had banned smoking inside units. At least three have done so:

No Smoking #1. Our association prohibits smoking in all areas with the exception of a single location on the roof deck. Because we have a passive ventilation system that is constantly introducing fresh air into the units, smoking inside the units would quickly cause cigarette smoke to propagate between units and is therefore prohibited. In addition to our CC&R restriction, we have a separate smoking restriction policy. -Brian H., San Francisco

No Smoking #2. We amended our documents in 2010 to become a non-smoking facility both within individual units and in the common area. We made an exception for two older residents to continue smoking on their balconies only. These two have now passed away, so we are a smoke-free complex. -Angela D., Los Gatos

No Smoking #3. We successfully amended our CC&Rs to ban smoking throughout our seniors 112-unit condo (including inside units). -Steve R., Torrance

Adrian J. Adams, Esq. Adams Kessler PLC

CHAIN AND WHEEL HUB BOARD MEETINGS

CHAIN AND WHEEL HUB
BOARD MEETINGS

QUESTION: Board members can't discuss HOA business outside a meeting unless it's among less than a majority. Our board meets monthly and it is not enough time to discuss everything in our board packet. We have five board members, can I speak to one or two directors one day and the other one or two another day?

ANSWER: Not really. What you describe is known as a "hub & spokes" board meeting with you at the hub. This type of meeting is not directly addressed by the Davis-Stirling Act. Because it is a gray area, we can turn to the Brown Act for guidance. The Brown Act regulates the meetings of public legislative bodies and local public agencies and was used as a model for the Davis-Stirling Open Meeting Act.

Chain Meetings. The Brown Act prohibits such communications, whether direct, by intermediaries or electronically. Gov. Code §54952.2(b). In a chain meeting, also called a serial meeting, "A" talks to "B" who talks to "C" who, in turn, talks to "D." In a wheel hub, directors are spokes with "A" at the center--the directors never talk to each other, they all talk individually to A. When deliberations and decisions are made through chain communications or via wheel hubs, they deprive members of their right to see how board decisions are made. If a board were sued under the Davis-Stirling Act for a wheel hub or chain meeting, I suspect the courts would interpret Davis-Stirling using the same principles found in the Brown Act.

RECOMMENDATION. Directors should not discuss board business outside of noticed meetings. I know it puts a significant burden on directors who already have busy home and work schedules. To compensate for the restriction, many boards rely more heavily on their managers to handle day-to-day operations and they schedule more "quickie" board meetings between regular meetings, i.e., short meetings to address one or two issues (following proper notice to the membership).

SPECIAL ASSESSMENT
 CONFLICT

QUESTION: To approve special assessments, our CC&Rs require a majority of homeowners. Our bylaws require 75% to approve same. Does one supersede the other?

ANSWER: Both are superseded by the Davis-Stirling Act. The Act states that a majority of a quorum is sufficient to approve a special assessment. If the law had not addressed special assessments, then your CC&Rs would have trumped your bylaws. This hierarchy of authority was not previously spelled out anywhere. However the Davis-Stirling rewrite (effective January 1, 2014), states that any inconsistencies between governing documents and the law or between governing documents are resolved in the following order of authority: the law, the CC&Rs, articles of incorporation, bylaws and operating rules. (New Civil Code §4205.)

ADJOURNED
ANNUAL MEETING

QUESTION: In the event an annual meeting must be postponed on the day of the meeting, what is the procedure to postpone the meeting? And are mailed-in ballots still valid?

ANSWER: The meeting is simply adjourned to a later date by those in attendance at the meeting. Language to that effect is often found in most bylaws. In addition, it is covered by Robert's Rules of Order: 

... in the absence of a quorum, the assembly may fix the time to which to adjourn, adjourn, recess, or take measures to obtain a quorum.

... If there is important business that should not be delayed until the next regular meeting, the assembly should fix the time for an adjourned meeting and then adjourn.

... the chair calls the meeting to order, announces the absence of a quorum, and entertains a motion to adjourn [to a later date]. (Robert's Rules, 11th ed., pp. 347-349.)

If a date was not selected and announced when the meeting adjourned to a later date, the board sets the date (which usually requires coordination with the Inspector of Elections) and gives notice to the membership. As long as the ballots were not opened, they remain valid and are brought to the adjourned meeting by the Inspector. Once quorum has been achieved, the ballots are opened and counted.

RECOMMENDATION: If your governing documents are silent, you may want to amend them to address this and other election issues. 

SMOKING BANNED
INSIDE CONDOMINIUMS

The City of San Rafael, a suburb of San Francisco, passed an ordinance this week banning smoking in condominiums. They become the ninth city to ban smoking in multi-unit housing (which includes condominiums).

I believe this trend is irreversible and may accelerate. In addition, we will likely see associations amending their CC&Rs to ban smoking throughout their developments (including inside units). If readers are aware of condo associations that have already done so, please let me know. I would like to monitor the trend. -Adrian Adams

EMAIL NOTICE OF BBQ

QUESTION: Does the Davis-Stirling Act preclude our association from using member email addresses to invite members to an association organized neighborhood BBQ?

ANSWER: Yes, you can use emails to send invitations. Limitations on electronic notifications are on official notices and disclosures, i.e., those mandated by statute. The most common official notifications are notice of board meetings. Such notices cannot be given electronically unless members execute an "unrevoked consent" giving the association permission to give notice by email.

FEEDBACK

Relevant. Excellent newsletter. Hit some very relevant points. -Donald A.

Term Limits #1. Thank you for your newsletter. I continue to pass it along to my entire condo association so they can stay abreast of things. Meanwhile, the question about term limits is a good one. I've been president most of the last 25+ years. I would love term limits. I tried to resign but no one else wants the job. -Esme G.

Term Limits #2. Thank you for the article. I've been been on the board now for over 10 years. Every year elections come up and no one ever sends back their ballots, so the board remains the same. No one wants to take the extra time and energy to take care of problems and resolve issues that arise in the complex. It takes a lot of time and energy to do walk-thrus, get bids, watch the finances, etc. The homeowners never come to monthly meetings either, it's always just the board. -Barbara K.

Adrian J. Adams, Esq. Adams Kessler PLC

TERM LIMITS

TERM LIMITS

QUESTION: How long should a board member remain on an HOA board? We have a couple of members who have been on the board for several years and refuse to leave.

ANSWER: Refuse to leave? As long as the membership keeps electing them to the board, directors properly occupy their seats. Having long-term directors can be good or bad depending on the particular directors. Good directors bring institutional memory and a steady hand to the association's business. Their experience saves money for the membership. One director I work with has been on his board for over 20 years. He has consistently been one of the best business-minded directors I've ever dealt with.
On the other hand, some long-term directors start out sharp and then turn autocratic over time and slow to adjust to changing circumstances. When that happens, they need a nudge to step down and let someone else serve on the board.

Term Limits. To encourage "new blood" on the board, some associations amend their bylaws to implement term limits along with staggered two-year terms. The best term limits are those that allow directors to serve two consecutive terms and then step down for one year--provided someone else is willing to serve. If no one else runs for the board, the limit is lifted and the director can continue to serve.

ATTORNEYS' FEES

A recent appellate court decision dealt with attorneys' fees in a dispute over an election. A homeowner brought a challenge to an election and the association prevailed in the action. The court found some of plaintiff's actions, including filing a complaint barred by the statute of limitations, "frivolous." The association sought attorneys' fees under Civil Code §1363.09(b), which provides:

A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

The court awarded the association $15,000 in attorneys' fees. Plaintiff appealed. The appellate court agreed with the lower court that plaintiff's lawsuit was frivolous. Even so, it reversed the fee award. The court decided that the statute cited above did not explicitlyauthorize recovery of attorneys' fees. However, the court left open the door that an association could recover its fees under their own CC&Rs. See That v. Alders Maintenance Corp.

WHO PAYS FOR
BALCONY DAMAGE?

QUESTION: Who is responsible for paying for the deck when the owner tiled it without approval? The HOA or the owner?

ANSWER: The owner. However, the owner could have some defenses depending on the situation. To minimize any defenses (or avoid the problem altogether), boards should adopt written rules and regulations regarding the tiling of balconies and then strictly enforce those restrictions. Associations should either (i) ban tile altogether or (ii) implement tough installation guidelines pursuant to a consultant's specs written specifically for the association. In addition, the association should record a covenant making the owner (and future owners) responsible for all maintenance and damage that may arise from the installation of the tile.

CAN HOA CONTRACTOR
BUY A UNIT?

QUESTION: Can a contractor hired by the HOA buy in the same complex? Would this constitute a conflict of interest?

ANSWER: Yes he can buy into the complex. No, it’s not a conflict of interest . . . unless he is elected to the board and votes on his own contracts. Contractors are generally good to have around; it's the lawyers you have to watch out for.

SMALL HOAs

QUESTION: My daughter is president of a 9-unit HOA. With so few units, are they held to the same standards of larger associations? Do they have to send out annual disclosures?

ANSWER: Unfortunately, they are held to the same standards and subject to all compliance expenses even though small associations have very little money and are usually self-managed. 

During its rewrite of the Davis-Stirling Act, the California Law Review Commission recognized the burden the Act imposed on small HOAs. The CLRC looked at how to lighten the load and started by trying to define "small" HOAs. The project proved to be difficult and was tabled. The CLRC might take up the issue again at a later date, but I doubt it.

Neighbor-To-Neighbor Battles- Leave It Up To The Neighbors To Duke It Out?

Neighbor-To-Neighbor Battles- Leave It Up To The Neighbors To Duke It Out?

I say no. But I also say, seek a balance. A Board is not required to expend association sums to sue. The balance is somewhere in between doing nothing and taking aggressive action. And if you are one of the neighbors, don't count on the Board to be the "deep pocket" when you sue the neighbor. Try hard to diffuse the situation, or get the neighbor to mediation. Don't retaliate. If you end up in court you want to be the party that tried hard to resolve the situation. Here is why:

The problem: Neighbor A (single lady) lives in the upper unit and she has hardwood floors and walks like an elephant, even though she is 85 years old ... stomp, stomp, stomp. The local realtors know she didn't want anyone below her because when they were showing unit B, the "stomper" was always trying to chase off buyers. Neighbors B who bought the lower unit liked the location, the condo, and the price (lowered because of the nuisance disclosure) and felt like they could make friends with anyone by taking cookies upstairs. They endured some stomping, and they took lots of cookies upstairs. Things didn't work out exactly like they thought they would.

Neighbors B like to barbecue out on their front deck. Though they try hard to be good friends with the upstairs neighbor, they can't get neighbor A to stop "stomping". Neighbor A can't get neighbors B to stop barbecuing. She says she is allergic to barbecue smoke. They tell her to keep her sliding glass door shut. She says she does, and the smoke still gets into her unit. Neighbor A starts sweeping her deck when neighbors B barbecue. Since there are slats in the deck there is always a lot of dust raining down on neighbors B. Neighbors B start barbecuing more often, going from once or twice a week to every other day. Neighbor A starts showering late at night, claiming she has to wash off the barbecue smoke before bed. Neighbors B start flushing the toilet when neighbor A is in the shower and playing TV late at night, very loud. They claim they need to "drown out" the shower noise. Neighbor A starts stomping more, .... And ... you get the picture.

They both file complaints with the Board and neighbor A wants a development-wide ban on barbecuing, neighbors B want the stomping, the sweeping and the late night showering to stop - what would you do?

The solution: The Board invites the parties to a meeting - there are 12 board members, me, and neighbor A and neighbors B. The Board listens carefully to all parties, then we confer, sending the parties on their way. We brainstorm a solution, and I am asked to issue a "demand" in writing, to the parties.

Neighbor A is to lay rugs and pads down in the traffic areas, and remove her hard soled shoes when in the unit. She can wear supportive slippers or soft soled shoes (she is 85 after all). She is to stop stomping and stop sweeping when neighbors B are barbecuing. The Board offers to have the association's maintenance worker add a strip of insulation around the sliding door to help keep out the barbecue smoke. She is to shower by 10pm.

Neighbors B are to limit barbecuing to no more than 2 days a week (which was the pattern before the fight heated up). Alternatively they could move the barbecue to the back porch which is not below neighbor A's deck (although the board believes she never used the deck) and barbecue every day if they want. They are to stop flushing purposefully when neighbor A is in the shower and turn down the TV.

The decision letter stated that these were viable solutions but if these neighbors did not follow the Board's directives, and either continued to cause a nuisance, the Board would consider disciplinary action. The letter also noted that if they continued to "prod" each other in the same ways, and both remained part of the problem, there was going to be no further action on the part of the Board, and that they would have to sort it out themselves without the help of the Board. The Board suggested that if the problems continued, the parties should go to mediation and provided contact information for local mediators.

These people continued to fight, no one gave an inch, and neighbor A got a lawyer and sued neighbor B and the Association. Neighbors B got a lawyer and cross-complained against neighbor A and sued the Association.

On behalf of the Association I filed a motion for summary judgment to extricate it from the dispute and recited the facts, offering the letter (written by me on behalf of the Association) to the court as evidence of the board's attempt to get the parties to resolve the matter.

The court granted the motion and the Association was let out of the litigation. This had happened once before in my career and in that case the parties deflated, once the deep pocket was out of the picture. But that didn't happen here. The parties fought viciously in court spending a lot of money until the Judge "nonsuited" both parties (and dismissed the case), and there was an article in the local newspaper entitled "Judge Douses Barbecue Case."

Both parties then demanded an audience before the Board. The Board listened to each party's attorney, neither party would come, neither was willing to be in the same room with each other. The first attorney made her case to the board claiming failing health of the now 86 year old woman. The second attorney did much the same, but also asked to show the board a video tape (yes, this was quite a few years ago) of the neighbors B and their doctor stating that Mr. B's health was threatened. I and the Board graciously declined to watch any video tapes and noted that we could certainly believe that the parties' health had deteriorated during this long and arduous battle, between them.

Another letter was issued, and this time the parties were told this: One of the board members had volunteered to meet with the parties together with a mediator or with each party separately if they couldn't stand to be in the same room with a social worker (this was a seniors' development where there was such a person available) to try to come to an agreement. If they refused, they would be back on their own. She (the Board member) would opt out.

Neighbors A's attorney had the gall to call me and threaten to sue the Board if it did not take action against the stomper. I told her I thought not and asked her how she intended to do that when the judge had thrown the case out of court? She dropped the subject and went away. Maybe she didn't know I knew.

Both parties suffered greatly in health but apparently neighbor A was as strong as a grisled old bird. Mr. B died within 6 months of a heart attack or stroke. Mrs. B moved back East to live with one of her adult children. Unit B went back on the market. I never heard another peep from anyone. Maybe the stomper was too tired to stomp anymore.

What is the moral of this story?

If you are the board: if the Board recognizes a duty to investigate the situation and attempts to resolve the problem via reasonable demands, it may be vindicated and even let out of any litigation the parties file against each other. If unable to get out on a summary judgment motion, it will certainly be more likely to get a defense verdict if sued, if it has made an effort! I have learned this through two cases, different associations, where neighbors were being unreasonable, and continued to be even after the boards proposed very reasonable solutions. In these two cases the association and board members were let out on summary judgment motions. The court recognized there was nothing the board could do. And in many other cases, boards received reasonable treatment in court  (namely beneficial verdicts and attorney fees awards) after being able to show the attempts made to help two disputing parties resolve their differences.

If you are one of the neighbors: escalating the dispute by retaliating and creating a vicious circle doesn't resolve the fight; it makes things worse! An escalated fight adversely affects one's life, one's peace-of-mind and ultimately, one's health. And for a double whammy, it creates a necessary adverse disclosure issue if one wants to sell or rent their home to get out of the situation!

These kinds of battles in court require endless sums of money and often leave the parties battered and bruised. Don't let it happen to you.