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.

FHA GOOD NEWS

FHA GOOD NEWS

The Federal Housing Administration's policies have been a significant drag on the housing market which, in turn, has slowed our nation's economic recovery. The Community Associations Institute has been in discussions with the Administration over the past few years asking for more sensible regulations.Last week the FHA finally removed some of the onerous requirements they had imposed on condominium developments.
Delinquencies. Previously no more than 15% of of the units in a condominium development could be more than 30 days delinquent. That meant that owners who were a few days late in paying their assessments could disqualify the entire development from eligibility for FHA insured loans. The Administration revised their requirement from 30 days to a more reasonable 60 days.

Fidelity Bond. In prior newsletters I had reported on the problems with Administration requiring management companies to carry employee dishonesty insurance covering the associations they manage. The FHA now recognizes the problem and modified their requirements. The new  standards now require condo developments with more than 20 units to carry employee dishonesty insurance as follows:

1. The policy must cover all officers, directors and employees of the association and all other persons handling HOA funds;
2. The coverage must be no less than three months assessments plus reserve funds;
3. Their management company, if any, must (i) have its own fidelity coverage that meets FHA requirements; or (ii) the association’s policy names the company as an insured; or (iii) the association’s policy covers management company employees.

Project Certification. Previously, certification created such significant risks for boards of directors that most law firms advised against signing FHA documents. The FHA has seen the light and scaled back on their requirements. Now, an HOA representative need only attest to the following:

1. To the best of their knowledge, the information is true and accurate;
2. They reviewed the application and upon advice of counsel it meets all state and local condo laws;
3. They reviewed the application and it meets all FHA condo approval requirements, and
4. They have no knowledge of circumstances or conditions that might have an adverse impact on the project (such as construction defects, substantial operational issues, or litigation, mediation or arbitration issues).

COMMENTS: With the above changes, I withdraw my objections to directors signing FHA certification applications. Kudos to the Community Associations Institute for their work on this issue. As Neil Armstrong once said, "One small step for man, one giant leap for the housing industry." See Mortgagee Letter 2012-18 for more detail about the changes.

RENOVATIONS VIOLATE CC&RS

In an unpublished decision, the court of appeals upheld the enforcement of CC&Rs related to tile on balconies and encroachments into the common area.

Remodeling. Larisa Garbar bought a unit in a highrise in San Francisco. She raised the ceilings in her unit, tiled her balcony and installed hardwood floors without submitting plans. The board issued a stop work order and requested that she immediately submit plans. When it learned of the raised ceiling, the board put her on notice of her encroachment into the common areas. As part of a major waterproofing project, the association removed the tile from her balcony. A dispute arose because Garbar sought to re-tile her balcony despite prohibitions in the CC&Rs and warnings that doing so would void the manufacturer's warranties related to the waterproofing.

Lawsuits Fly. The association filed suit. Garbar denied that her new ceiling encroached upon the common area. She claimed her unit’s boundary extended to a concrete slab that separated the unit from the floor above. She also claimed that balcony tile would actually protect the waterproofing (note: industry evidence shows otherwise).

Ruling. The court found in favor of the association. The CC&Rs were clear and explicit when it came to tile on balconies. The court also concluded that the space above Garbar's ceiling was common area.

RECOMMENDATION: Even though the case is unpublished and cannot be cited as precedent, it shows that courts will defer to recorded restrictions and reasonable enforcement decisions by boards of directors. See Cathedral Hill Tower v. Garbar.

FEEDBACK

Manager Contract #1. Please correct your newsletter, you said something wrong. You are saying that a board needs a reason to change management. That is absurd. No reason is needed and no documentation is necessary UNLESS the board wants to sue for any illegal activities against them. Please do not put out wrong impressions, I'm on a board and I don't need to argue your wrong points when we have HOA stuff to discuss. -Kimberly P.

RESPONSE: Hilarious! Thank you for the comic relief. When you have a manager under contract, they are no longer at-will. You need cause to fire them. If you fire employees willy-nilly, you better have goodEmployment Practices Liability insurance in place.

Manager Contract #2-#9. I received a number of thoughtful responses asking about the 1-year contract limitation commonly found in CC&Rs.  

RESPONSE: The ability of a board to enter into a multi-year employment contract with a manager will depend on the language in an association's governing documents. Following is language found in some old documents that presents no impediment to 3-year agreements. It limits the original developer but not subsequent HOA boards:

Neither Grantor, nor any of its agents, shall enter any contract which would bind the Association or the Board for a period in excess of one (1) year.

Following is more typical language in most of the documents I work with. It limits contracts with vendors, i.e., third parties who providegoods or services to an association. It does not limit employment agreements:

The Association may not take any of the following actions unless approved by a majority of the voting power of Association Members (other than Declarant): (a) Enter into a contract for a term longer than one (1) year with a third person who furnishes goods or services for the Common Area(s) of the Association...

Following is a broader restriction I run into from time to time. It clearly limits manager contracts to one year.

The Board of Directors, on behalf of the Association, may contract with a Manager for the performance of maintenance and repair and for conducting other activities on behalf of the Association, as may be determined by the Board. The maximum term of any such contract ("Management Contract") shall be one (1) year... 

I sometimes run into conflicting language on this issue between an association's CC&Rs and its bylaws. When that happens, the CC&Rs prevail. The order of documentary control is explicitly described in the Davis-Stirling rewrite which takes effect January 1, 2014. It states that in the event of inconsistencies, the following hierarchy determines the outcome: the law, the CC&Rs, articles of incorporation, the bylaws, and lastly the rules. See Civil Code §4205.

Budget Tie. It's clear that the vote to break the tie on the budget should not be in executive session. But how is it justified to have the tie-breaking occur at an emergency open meeting? Shouldn't it be a a special meeting of the board with four-day notice? Or, can time-sensitive matters (if that was the case) be considered "emergencies"? -Carol R.

RESPONSE: Passing a budget is a time-sensitive matter. If not approved and distributed within a 30-90 day window prior to the start of the association's fiscal year, penalties are imposed. Accordingly, an emergency meeting would be justified if the board were up against that deadline. 

DS Rewrite. Isn't the Davis-Stirling Act restriction on what board members may discuss via e-mail or what they can talk about in person outside of board meetings unconstitutional due to our First Amendment right to free speech? It seems to me that the Act can only restrictdecisions made outside of a board meeting but cannot restrict people from discussing things because of our First Amendment rights. -Steve S.

RESPONSE: There is wide misconception about First Amendment Rights. Too many people believe that "free speech" gives them the unlimited right to say whatever they want whenever they want. That is not the case. The courts have imposed time, place and manner restrictions on speech (such as shouting fire in a crowded theater, disrupting city council meetings, protesting on private property, etc.). In addition, the courts make a distinction between political speech and commercial speech. Commercial speech is heavily regulated. As a member of your association, you can talk about board business pretty much whenever, wherever and to whomever you want. Once you are elected to the board, time, place and manner restrictions are imposed. You must reserve discussions about board business with other directors to noticed meetings of the board as described in the Davis-Stirling Act. See speech limitations.

Adrian J. Adams, Esq. Adams Kessler PLC

DAVIS-STIRLING
REWRITE SIGNED INTO LAW 

On Friday, August 17th, Governor Brown signed into law the long-anticipated rewrite of the Davis-Stirling Act. The billreorganizes and renumbers the Act to make it more user-friendly. In addition, the rewrite made substantive changes which I will cover in future newsletters.

Current CC&R Restatements. Associations that are currently restating their CC&Rs and Bylaws do not need to wait for the rewrite to take effect. One of the provisions in the bill allows boards to update their governing documents by replacing old statutory references with new ones without the need for a membership vote: 

Civil Code §4235(a) Notwithstanding any other provision of law or provision of the governing documents, if the governing documents include a reference to a provision of the Davis-Stirling Common Interest Development Act that was repealed and continued in a new provision by the act that added this section, the board may amend the governing documents, solely to correct the cross-reference, by adopting a board resolution that shows the correction. Member approval is not required in order to adopt a resolution pursuant to this section.

Sneak Peak. Although signed a few weeks ago, the rewrite does not go into effect until January 1, 2014 so as to give everyone a chance to familiarize themselves with the new Act. To get a peak at the new Davis-Stirling Act, see Assembly Bill 805. I will be speaking about the rewrite to the annual conference of CPAs later this month. See next article. 

Adrian Adams and Kelly Richardson will be speaking to the "Common Interest Realty Associations Conference" put on by the CalCPA Education Foundation. The event will be held September 20, 2012 at the Burbank Airport Marriott. The conference will highlight:

• State of the Common Interest Industry
• Davis-Stirling Rewrite
• Foreclosure Issues
• CID Fraud
• Financial Statement Disclosure Issues
• Insurance
• Taxes

The program is designed for CPAs, attorneys, association managers and other professionals interested in homeowner association management, taxation and auditing. Other speakers include Ron Stone, John Elhai, Thomas Noce, Patrick Prendiville, Cheryl Martin, and Ron Maddox. If you want to attend, sign up at www.calcpa.org.

DEVELOPER ARBITRATION

On August 16, developers won a major victory in thePinnacle Museum Tower case. The California Supreme Court reversed direction from prior decisions and held that homeowner associations are bound by arbitration provisions in their CC&Rs, even though those provisions were written and recorded by the developers. In other words, associations lose their right to go to court for a trial before a judge and a jury.

The expected benefit to developers is the elimination oflarge jury verdicts by removing juries from the process. Historically, monetary awards by judges and arbitrators are smaller than those given by juries. As a result of the Pinnacle decision, developers may offer smaller settlements for construction defects. If their offers are rejected, HOAs will be forced to prove their cases in binding arbitration. Even so, the arbitration process is streamlined and less expensive than litigation and could produce good results if the association can prove its case to the arbitrator. Only time will tell what effect it will have on the industry.

The bulk of existing associations in California will not be affected by the Pinnacle decision. Only those developments less than 10 years old that have construction defects and an arbitration provision will be affected (unless they are already in litigation).

RECOMMENDATION: If your development is less than ten years old, various statutes of limitations are running on any defect claims you may have. To avoid losing your rights, you should contact legal counsel to determine your best course of action. To read the case in its entirety, see Pinnacle Museum Tower Assn v. Pinnacle Market Development.

ASSEMBLY BILL 2273

Good news! On Friday, September 7, Governor Brown signed AB 2273.
The bill requires lenders to record foreclosure sales within 30 days of the foreclosure. It makes banks accountable for the properties they acquire, i.e., once the sale is recorded, the lender must pay HOA dues and assessments.

As expected, lenders strenuously opposed the bill. Thanks to the thousands of letters you sent to legislators and the efforts of CAI’s legislative advocate Skip Daum and others the bill overcame lender opposition.

JASMINE FISHER
IRONMAN ATTORNEY

Ironman. How did Jasmine do in her Ironman race? -Paige B.

RESPONSE: Jasmine not only survived the grueling race (a 2.4 mile swim, followed by 112 mile bike race, followed by a 26.2 mile marathon), she received a medal. I think she had an unfair advantage, she speaks Canadian.

YUKON TRIP

Comment. As always, a great newsletter. I hope you get rich panning for gold. -Wendy M

RESPONSE: I had so much gold it set off the screening equipment at the airport. They made me empty my pockets and now I have nothing. Such is life. 

Comment. Bring a mosquito net for your head, and lots of bug repellant - I'm not kidding. -Mark D. 

RESPONSE: At one campsite I fed so many mosquitoes they made me an honorary environmentalist. Other than that, the trip was fabulous. We canoed, fished, camped along the river, explored the remains of log cabins and paddle wheel boats from the early 1900s, admired bald eagles and watched for bears. At night around the campfire Judge Stirling read humorous tales of the Yukon such as "The Cremation of Sam McGee" and "The Shooting of Dan McGrew" by celebrated author and poet Robert Service.

FEEDBACK

Budget. In your August 12th newsletter under the topic of "Distributing the Budget" the person's bylaws stated "no less than 45 days prior to the start of the new fiscal year" and D-S states "not less than 30 days nor more than 90." Your reply stated that these two are in conflict. In reality, they are not as the 45-day requirement of their bylaws easily falls within the 30-90 day requirement of D-S. They merely need to send their budget out at least 45-days, but no more than 90-days, to be in full compliance with both. -Bruce F.

RESPONSE: If the budget is sent out out 30 days before the start of the fiscal year, it violates the CC&Rs. Which prevails? The statute. The Davis-Stirling Act gives associations more flexibility when it comes to distributing the budget and controls over any provisions to the contrary in the governing documents. Civil Code §1365(a)4.

Association v. Membership. The feedback from "Diana S." is way off base, at least in the discussion of incorporated associations. There is definitely a specific "entity separate" from the membership. Such corporations, defined in Corporations Code §7110 et seq clearly defines these entities. Corporate officers and directors of the corporation owe their fiduciary duties and responsibilities to that entity, NOT the members. Officers and directors are responsible to maintain the operational and physical assets of the corporation such that it is capable of delivering to the members those goods and services appurtenant to membership in that association. The benefits derived from membership in the association come from the corporate entity, not from the members themselves. Misunderstanding that concept causes many members to expect or demand from boards more than is appropriate. -Ted L.

Adrian J. Adams, Esq. Adams Kessler PLC

Bill Requires Rental Property Owners to Do The Right Thing In the wake of California’s foreclosure crises, unscrupulous property owners who have rental homes that are being foreclosed upon are continuing to accept new tenants, taking large security deposits, and not informing the tenants that the property is being foreclosed upon and the tenant may be forced to move shortly thereafter. In these situations, the tenants have a hard time getting their security deposits back, if at all, and are forced to find a new place to live after the bank takes over. The legitimate rental housing industry has been hard hit in the press as a a result of these unethical owners. As a result, Senator Joe Simitian (D-Palo Alto) introduced SB 1191 to require a property owner who owns one to four units and who has received a recorded Notice of Default for failure to pay the mortgage to inform any new prospective tenant that a Notice of Default has been filed against the property. Ninety-nine percent of all foreclosures are taking place on single family homes and buildings with 2 to 4 units. These default notices are typically filed 5 to 6 months after the property owner has failed to pay the mortgage. The bill doesn’t prohibit the owner from proceeding to sign a rental agreement with the tenant; It simply requires the owner to ensure that the tenant has full disclosure about the current situation. CAA has taken a support position on the bill. The bill has made it through the legislative hearing process and is current on the Assembly Floor for a vote.

MEETING NOTICES

QUESTION: Our HOA posted a board meeting agenda four days ahead of time but it was up for less than half a day. They said they only have to post it four days before, not leave it there for four days. Is that true?

ANSWER: No, it's not true. By their reasoning, boards could post a meeting notice for ten minutes and then take it down . . . or two minutes . . . or thirty seconds. Not only does it not pass the smell test, it violates the Open Meeting Act. The statute calls for a period of time not a point in time: 

Unless the bylaws provide for a longer period of notice, members shall be given notice of the time and place of a meeting . . . at least four days prior to the meeting. (Civil Code §1363.05(f))

Sabotage. If someone is trying to sabotage a board meeting by tearing down notices, that does not invalidate the meeting if the board is unaware of the vandalism. If the board/management is aware that notices have been removed, they have an obligation to re-post them. If the problem is ongoing, the board should invest in a bulletin board that can be locked.

DILIGENT VISUAL
INSPECTION

QUESTION: The law in California requires a "diligent, visual inspection" every three years of property the association is obligated to maintain. What is diligent?

ANSWER: You are referring to language found in the Davis-Stirling Act which requires boards "as part of a study of the reserve account requirements" to "every three years" cause to be conducted a:

a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore, or maintain . . . (Civil Code §1365.5(e))

"Diligent" is not defined in the statute but is clearly more than a cursory inspection. Black's Law Dictionary defines diligent to mean "attentive and persistent in doing a thing." In addition to "diligent," we must factor in what proceeds diligent, i.e., “reasonably competent" and what follows, "accessible areas." 

Reasonably Competent. "Reasonably competent" does not require a particular professional license but there are two national credentials available to reserve study professionals. One is the Professional Reserve Analyst (PRA) administered by the Association of Professional Reserve Analysts (APRA). The second is the Reserve Specialist (RS) administered by the Community Associations Institute. Both organizations require a demonstrated background of training and experience in properly preparing reserve studies before they will issue designations.

Accessible. Inspection of "accessible" areas does not mean tearing off roofs and opening walls. In my opinion, it means getting onto roofs, going into elevator rooms, opening electrical panels, and opening equipment service panels (such as on boilers) to obtain equipment information. A diligent person would do all of the above.

Disclosure. Finally, industry standards require that reserve professionals disclose whether a complete inspection or representative sampling was used, whether field measurements or plans/schematic take-offs were utilized, and whether destructive testing was employed.

Thank you to Scott Clements, RS, PRA, CMI of Reserve Studies, Inc. and Robert Nordlund, PE, RS of Association Reserves for their assistance with this question.

DISTRIBUTING
THE BUDGET

QUESTION: Our bylaws state that the budget must be sent out no less than 45 days prior to the start of the new fiscal year. Davis-Stirling states a 30-90 day window prior to the start of the fiscal year. Does the 45-day requirement conflict with the statute? I can't figure this out.
ANSWER: Your bylaws are more demanding than the Davis-Stirling Act, which means the two are in conflict. Which one prevails? Interestingly, the Act does not always override governing documents but in this case it does. The statute states that "Notwithstanding a contrary provision in the governing documents, a copy of the operating budget shall be annually distributed not less than 30 days nor more than 90 days prior to the beginning of the association's fiscal year."Civil Code §1365(a)4. As long as your budget goes out within that 60-day window, you're fine. For more on resolving conflicts, see "Rules of Interpretation."

FEEDBACK

Laundry Noise. Ha! Not all seniors are in bed by eight p.m.! -Marion K., aged one

RESPONSE: You might not be but I am.

Committee Meetings. I understand that a board member can not enter into committee discussions but can the board member speak during the Open Forum? -John K.
RESPONSE: Of course.

Association v. Membership. When will we stop referring to “the Association” and begin referring to "the Membership"? There is no entity separate from the homeowners. If I am being sued as part of the membership of the Association I would certainly wish to be informed. We continue to speak about the Association as if it is a Landlord to whom all responsibility is transferred without detriment to the individual owner. Each and every one of us who owns a property in a CID is affected by litigation. -Diana S.

NO NEWSLETTER 

Sorry, no newsletters for the next two weeks. I will be spending time in the Yukon with Larry Stirling and assorted Army buddies camping and panning for gold. We fly into White Horse and then head down river for fishing, fun and that glittery stuff.

At the same time, attorney Jasmine Fisher will be in Canada competing in an Iron Man race hitting the water at 7 a.m. to swim 2.4 miles, then biking 112 miles, followed by a 26.2 mile marathon. I think she's nuts. She will come back tired--I could come back rich!

Adrian J. Adams, Esq. Adams Kessler PLC

NOTICE OF LAWSUITS

QUESTION: If my association is being sued, does the board have a duty to tell all the members? Our insurance rates have gone up because of one such lawsuit. It seems the homeowners have a right to know why.

ANSWER: Currently there is no statutory duty to report litigation to the membership. Over the years California  has enacted extensive disclosure requirements for homeowners associations. To date, the legislature has not required HOAs to give members notice of litigation other than intended litigation against developers for construction defects. Civil Code §1368.4.

Escrows & Audits. Nor do boards do not have a duty to volunteer information about litigation when units/lots go into escrow. Although sellers have an obligation to provide relevant information to buyers, associations have no duty to volunteer such information. Kovich v. Paseo Del Mar. Even so, most associations disclose litigation matters when asked. Moreover, any litigation that could have an unfavorable outcome for an association is disclosed in its annual financial statement to the membership pursuant to FASB Statement No. 5, Accounting for Contingencies.
Reserve Borrowing. Litigation disclosures also take place when an association transfers reserve funds to pay for litigation. Such disclosures to the membership occur "in the next available mailing."Civil Code §1365.5(d).

Case Law. The courts have noted, however, that boards have a general duty to disclose facts that materially affect the rights and interests of members. Ostayan v. Nordoff Townhomes. Whether a particular piece of litigation should be disclosed to the membership will depend on the facts surrounding the case and its potential impact on the membership.

Retaliatory? Interestingly, when owners sue their associations and boards disclose the litigation to the membership, plaintiffs sometimes get upset. They would rather that members not know. In one case I was involved in, the plaintiff actually complained to the judge that the disclosure was "retaliatory." He didn't think the membership had a right to know he had sued them. Nor did he think members should be told that a pending special assessment was due to his litigation. The court was not sympathetic.

Litigation Privilege. If an association discloses litigation to the membership, such disclosures are protected by the litigation privilege--a type of immunity given to statements in connection to litigation. The protections are found in Civil Code §47(b) and Code Civ. Proc. §425.16which are construed broadly to protect a litigants' access to the courts without the fear of being harassed by derivative tort actions. Thus, a board's communication to the membership about litigation is immune from tort liability provided it has some relation to the judicial proceedings. Healy v. Tuscany Hills.

RECOMMENDATION: Unless there is a reason to temporarily withhold information, boards should disclose the existence of litigation involving the association. When I refer to litigation I don't mean small claims actions. Such actions are by their nature small with limited, if any, impact on the association. Even so, these are routinely reported to the membership by many associations.

JOB SHARING

QUESTION: Can a couple that own one condo together share one board seat (job-sharing)?

ANSWER: No, they can’t. The membership elects a specific person to the board not the "Occupants of Unit #209." If Mr. Smith is elected to the board, Mrs. Smith can’t fill in when he is out of town. There is an amazing modern convenience today called the telephone. Mr. Smith can attend telephonically if he can't physically attend. Rumor has it that someday telephones will be portable.

CONDUCTING MEETINGS

QUESTION: If board members do not have the knowledge to conduct a meeting, who is responsible to guide them?

ANSWER: No one is "responsible" for guiding the board (unless the duty has been imposed via contract with the management company). The buck stops with the board. If directors don't know how to run their meetings, they have a lot of great resources available to fill that gap.

Written Materials. A simple 16-page illustrated guideline which serves as a basic introduction to parliamentary procedure is the A-B-C's ofParliamentary Procedure. Another more complete but easy to understand guide is the Complete Idiot's Guide to Robert's Rules. Both can be ordered throughAmazon.com.

Classes. Directors can also attend classes offered through the Community Associations Institute that teach boards the basics of parliamentary procedure. In addition, they can hire a parliamentarian to attend meetings and/or give them private training.

Other Resources. Additionally, boards can ask for guidance from their managers and legal counsel, most of whom have a working knowledge of running meetings. Both CAI and CACM teach this topic in their certification programs for managers. Many recording secretaries who take the minutes for board meetings also have a working knowledge of parliamentary procedure and can assist boards with their meetings. And last but not least, YouTube has a number of video training sessions on how to run meetings.

LAUNDRY NOISE

QUESTION: I was wondering if an association could limit my renter from doing laundry in her own unit to the hours of 8 a.m. to 10 p.m.? It does not specifically say washer/dryer or laundry in the noise ordinance.
ANSWER: Yes they can. Just as associations can regulate loud parties, loud music and anything else that might disturb neighbors, the specific disturbance need not be spelled out in your rules. The board has authority under thenuisance provisions of your CC&Rs to regulate noise from washers and dryers.

By 10 p.m. most people are headed for bed (in senior communities they're in bed by 8). If you properly insulate your laundry room against noise and vibration and purchase higher-end "quiet" machines, I bet your renter could run them all night long and no one would know it. If you don't want to spend the money, make sure your tenant washes clothes between 8 a.m. and 10 p.m. If her schedule does not allow it, she could hire domestic help to wash clothes during the day.

FEEDBACK

Committees. Your response to the question regarding manager certification made me chuckle. For those of us in SoCal who pay attention to the influence of the stars and planets---a Taurean's tendency toward down-to-earth practicality and no nonsense approach to finances would make him an excellent candidate for the position of manager. He would have received my vote also. -Susan M.

Ditto. I've got to ditto all the positive feedback that you received. You are a great source of knowledge and I've learned a lot from your newsletter and refer to your letter frequently. Thank you very much. -Sam M.

Newsletter. LOVE the newsletters--they're a big help to our little (37-unit) association. -Pamela D.

Adrian J. Adams, Esq. Adams Kessler PLC