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.