ALLOCATING WATER BILLS

ALLOCATING WATER BILLS

QUESTION: I rented my condo to a family of six--two adults and four children. The HOA now wants owners to pay for water based on the number of occupants rather than equally as is currently done. Can the HOA legally require me to pay for water based on the number of occupants?

ANSWER: In light of the drought and the unequal usage created by a unit full of renters, allocating expenses based on usage has two advantages for the association: fairness and conservation.

Fairness. On the equity side, why should an elderly widow who lives alone subsidize water for a unit with six renters--especially when the landlord is making money on the rental? The more equitable approach is for each owner to pay their own share of water usage.

Conservation. Making owners pay based on usage also creates an incentive to conserve water. Owners will use less water when the money flowing out of their pocket is tied to the water flowing out of their faucet.

It Depends. Whether the association can change its billing practice depends on its governing documents. If the CC&Rs clearly require that the cost of water must be shared equally regardless of usage, the association must amend its documents before it can change its billing.
Renters. If the CC&Rs are silent on the issue, the association bill owners based on estimated usage. In Watts v. Oak Shores, the court of appeals supported the association's authority to allocate cost. Watts was a landlord whose renters increased the association's expenses. The board estimated those costs and assessed Watts. Watts sued and lost. He then appealed and lost. (He has now petitioned the Supreme Court--we don't know yet whether the court will hear his petition.)

Reasonable Allocation. I believe the principles delineated in the Watts decision have a broader application than just renters. If an association is master metered, it could estimate water usage based on the number of people living in a unit. The court of appeals wrote that:

Nothing in the language of [Civ. Code §5600(b)] requires the exact correlation between the fee assessed and the costs for which it is levied... In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive... The most reasonable interpretation of [Civ. Code §5600(b)] is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. (Watts v. Oak Shores.)

According to the California Water Resources Control Board, residential water use averages averages 77 gallons per person per day but ranges from 43 gallons to 427 gallons per person depending on the locale. A map of California published by the New York Times shows water usage around the state. An association could use such numbers to estimate water usage and levy appropriate charges.
RECOMMENDATION: Condominium associations should have legal counsel review their governing documents to see if they can bill owners based on water usage. If not, they need to amend their documents. If documents are silent or allow it, boards should contact their local water board for per person average water usage. In addition, boards should implement additional water conservation by addressing leaks inside owners' units. 

CONSERVING WATER DURING THE WORST DROUGHT IN CA HISTORY

RESERVE FUNDS AND DROUGHT-FRIENDLY LANDSCAPING

RESERVE FUNDS AND DROUGHT-FRIENDLY LANDSCAPING

QUESTION: In light of the drought emergency, can reserve funds be used for drought-friendly landscape renovations?

ANSWER: I checked with Robert Nordlund, President of Association Reserves, Inc. to see what he thought. Following is his response:

Existing Landscape Reserves. Many associations already have landscape-related projects in their reserve study, the most common being tree trimming. Many others have periodic landscape renovation projects to freshen up the appearance and health of their greenscape. If an association has a landscape renovation reserve component, those funds could be used for replanting and redesigning with drought-tolerant plants. 

Borrowing. If they don't have funds already set aside, another strategy is to borrow from reserves with these borrowed funds expected to be recouped by savings from lower water usage. While borrowed reserve funds must be repaid within twelve months, the following allows for the delay of repayment:

...the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration. (Civ. Code 5515(d).)

Savings. If you find that a $50,000 landscape renovation project would result in a projected $50,000 water savings over three years, and if your reserve balance can support the expense without delaying necessary reserve projects, an updated reserve study can provide the necessary documentation. The result is a zero-interest loan from reserves to implement the project.

Additional Points. Make sure the project meets your architectural requirements. You don’t want to replace grass in your greenbelts with artificial turf if you’ve been denying homeowner requests for similar projects in their front yards. If you are installing artificial turf (or something else that will need renovation or replacement), remember to add it to your reserve component list.

RECALL WITH AN INTERVENING ELECTION

RECALL WITH AN INTERVENING ELECTION

QUESTION: Less than sixty days before our annual meeting a group of homeowners submitted a petition to recall the existing board. As required by statute, the board gave notice of a special meeting. It will take place a month after the annual meeting. Under the circumstances, what is the effect of the petition?

ANSWER: In my opinion, it's voided by the intervening election.

Pre-Election. Recall petitions submitted close to an annual meeting are the most ill-conceived kinds of petitions. The petitioners should have their heads examined. If a recall is held prior to the annual meeting and is successful, the new directors only fill the remaining terms of the ones they replaced. That means they may be up for reelection in thirty days. It's a huge waste of time and money.

Post-Election. If the recall is scheduled to follow the annual meeting (as you described), the petition is no longer valid. The board for which the petition was submitted no longer exists. Even if the same directors are elected, it's a new board with new terms in office. If the petitioners want to recall the newly elected board, they need to submit a new petition (and then explain why members should recall the board they just elected).

SUSPICIOUS INSPECTORS OF ELECTION

SUSPICIOUS INSPECTORS OF ELECTION

QUESTION: The Davis-Stirling Act states that ONE or THREE independent third parties must be chosen as inspectors of election. Since tabulations must take place in public, it appears suspicious when there are only two at the table when the law requires one or three. If the Inspector brings someone to open the ballots, does he count as an inspector because he is touching and unfolding ballots? If the assistant SORTS the ballots (touching the ballots) and asks questions to the Inspector about ballots, does he become an inspector?

ANSWER: There is nothing suspicious or inappropriate in what you describe. The Davis-Stirling Act addresses the number of inspectors (one or three) not the number of assistants (unlimited). (Civ. Code §5110(a)). What's more, the Act actually requires that election rules:

Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent thirdparties. (Civ. Code §5105(a)(6).) 

That means you can have one inspector and half a dozen assistants who register people, open envelopes and tabulate votes--all under the supervision of the inspector. Touching an envelope does not magically make someone an inspector. Under that reasoning, mail carriers become inspectors when they deliver envelopes to the inspector. I don't think the Post Office has that in their job description.

RECOMMENDATION. The British government distributed posters to the people of England during World War II to help get them through the Nazi aerial bombardment. One of them read, "Keep Calm and Carry On." That applies here. Don't over-think the inspector issue or you'll give yourself a stroke.

DOES DAVIS-STIRLING APPLY?

QUESTION: Does the Davis-Stirling Act pertain to a nonprofit mutual benefit corporation? I am told it only pertains to public nonprofit corporations.

ANSWER: An association's corporate status does not matter--if it meets the definition of a common interest development (CID), Davis-Stirling applies. By the way, most HOAs are nonprofit mutual benefit corporations not public benefit corporations. Some associations are not even incorporated and still fall under the Act. In addition, associations in existence prior to the Act are also bound by it.

PARTICIPATING IN BOARD MEETINGS

QUESTION: Our board says members are not allowed to speak until the end of the meeting. Therefore, we are not allowed to express our opinions before an action is taken on an item on the agenda. Should we not be allowed to speak when that item comes up for discussion?

ANSWER: Members have a right to observe board meetings but they don't have a right to participate in the board's discussions and votes. This is the same policy followed at city council meetings--once the public forum is closed, citizens cannot interrupt council meetings to comment on issues. It's even more restrictive on state and federal levels where there is no right to an open forum when the legislature/congress is in session.

Open Forum. The only time members have a right to participate in meetings is during the "open forum" portion of an open meeting (Civ. Code §4925, §5000(b)) and only for a reasonable time established by the board. Members can ask questions but directors are limited in how they can answer them.

Inviting Comments. Although members do not have a legal right to participate in board discussions, the president can invite comments from the audience on particular items of business if he so chooses. This is at the discretion of the board. Once comments have been received, discussion can be closed and a vote taken by the directors.
 

FEEDBACK

Drought Self-Help. A board member discovered a watering device on a homeowner's patio area. Water was dripping everywhere so the board member decided to climb over the wall and confiscate the watering device and refuses to give it back to the homeowner. What are the board's rights? -Reader

RESPONSE: I understand your board member's good intentions but directors should not be jumping fences and confiscating things from members' patios, balconies, yards, etc. It makes them vulnerable to legal action for trespass and theft. There are better ways to address water wasters. Start with a phone call or letter and proceed to hearings and fines. If this fails, bring in the lawyers. If your hyperactive board member continues to act without authority, you should censure him. 

REPORTING RENTALS TO BANKS

REPORTING RENTALS TO BANKS

QUESTION: Is my HOA required by law to gather data with regard to occupancy (owner or renter) in our development? I am unable to refinance because most lenders require this information.

ANSWER: No, there is no such requirement. Some boards may have stopped tracking rentals since they can't do anything about them--a perverse gift of the California Association of Realtors (CAR). In 2011, CAR pushed through legislation crippling the ability of associations to adopt rental caps.

As a practical matter, most associations provide such information (as best they can) to assist owners with the refinancing and sale of their units since lending institutions recognize the damaging effect too many rentals have on property values and the stability of community associations. 

Even though there is no statutory duty to gather rental information, if the matter were litigated, an argument could be made that (i) the information is vital to members, (ii) impossible for members to collect, but (iii) within the board's power to gather, therefore, (iv) boards have a duty to provide the information. Litigation, however, is not the best solution because of the cost, the uncertainty of the outcome, and the further delays it would create in the sale of units.

RECOMMENDATION: Lobby your board. The association's management company can determine the number of rentals by looking at billing records and making phone calls. Those with offsite billing addresses are either landlords or part-time residents. Telephone calls to those individuals would provide the information you need. If there is a cost to gather the data and the board is unwilling to pay it, offer to pay. It is considerably less expensive than litigation and will provide a much faster result.

PAINT COLORS

QUESTION: We are in the process of selecting paint colors for the exteriors of our buildings. The board chose three color schemes for membership review but several members are unhappy with the choices. Please advise.

ANSWER: It's impossible to please everyone, especially when it comes to paint colors (or carpet, wallpaper, lobby furniture, etc.). Putting it to a vote of the members is the best way to handle the situation. If the board leaves the membership out of the decision-making process, unhappy owners would have a clear target—the board—and may threaten to sue or launch a recall.

Benefit of Owner Vote. If the membership makes the selection, there is no one to recall. It also makes a lawsuit less likely since unhappy owners would have to sue the association as a whole and then try to convince a judge that the majority's decision should be reversed. I don't see that happening.

Voting Formalities. In this case, a membership vote does not require secret balloting, which is reserved for specific kinds of votes. It can be done electronically or by paper. If paper ballots are used, they can be signed or unsigned. Although not required, it's still a good idea to use an independent inspector of elections. 

DROUGHT EMERGENCY AND ARTIFICIAL TURF

Readers asked if the Davis-Stirling Act or the drought emergency voids existing HOA restrictions on artificial turf. Attorney Curt Sproul of the law firm Sproul Trost, LLP provides the answer:

Davis-Stirling. The recent amendment to Civil Code §4735 (dealing with architectural and landscaping guidelines) fell short of prohibiting artificial turf. That amendment said that “architectural or landscape policies are void if they prohibit or include conditions that have the effect of prohibiting the use of low water-using plants as a group or as a replacement of existing turf.” Although low water-using, artificial turf is to plants what a toupee is to real hair. 

Governor's Order. On April 25, 2014, the Governor adopted the following provision:

[HOAs] have reportedly fined or threatened to fine homeowners who comply with water conservation measures…To prevent this practice…I order that any provision of the governing documents, architectural or landscaping guidelines, or policies of a common interest development will be void and unenforceable to the extent [that the provision] has the effect of prohibiting compliance with the water-saving measures contained in this directive, or any conservation measure adopted by a public agency or private water company, any provision of [the Davis-Stirling Act] notwithstanding.

The Order does not mention artificial turf but does indicate that public agencies and private water companies could go further than the restrictions currently set forth in Civil Code §4735 and issue directives overriding HOA restrictions (including those related to artificial turf). That has not yet happened. 

SUMMARY. HOA restrictions on artificial turf are still valid. However, that may change. Currently, there is a bill in the legislature to add the more generic "landscaping" to the statute which, according to the author, would stop HOAs from prohibiting artificial turf (see AB 349).

MANDATORY WATER REDUCTION

MANDATORY WATER REDUCTION

This week Governor Brown imposed unprecedented mandatory water restrictions. To address the worsening drought, he ordered a 25% reduction in water usage throughout the state. Because of growing scarcity, water rates will likely spike which will adversely affect association budgets. That means boards need to look for ways to save water.

Master Metered HOAs. This is particularly difficult for master metered developments since they have no control over water usage by members inside their units. Boards can, however, hire a plumber at HOA expense to inspect all units in the complex for water leaks, for high water usage toilets, and to install water savers on showers and faucets. If presented properly to the membership, everyone should cooperate.

Some of my clients have already implemented inspection programs and made a complete list of leaky faucets, valves, supply lines, drains, toilets, shower heads, etc. throughout the development. The list also includes units that need water saving devices. Arrangements can then be made to make repairs, change toilets and install water-saving devices at a discounted rate to owners if they agree to the repairs.

For those who refuse, boards can hold hearings, impose fines, and send lawyer letters to persuade the recalcitrant to cooperate.
Common Areas. For PUDs and condominium associations alike, landscaping is an obvious source of savings. It can be addressed in a variety of ways such as (i) installing drought resistant plant materials, (ii) installing artificial turf where appropriate, and (iii) replacing old irrigation systems with "smart" systems to reduce water usage.

RECOMMENDATION: Boards should meet with plumbers, legal counsel and management to set up an inspection/repair program for all plumbing in the development along with retrofitting with low-water devices.Boards should also meet with landscapers for ideas on how best to reduce water usage. 

ABANDONED PERSONAL PROPERTY

QUESTION: We foreclosed on an owner but he left behind personal property. During the 90-day redemption period can he get his property or would it be considered trespassing? If he doesn't retrieve his belongings, when and how can they be removed? 

90-Day Hold. When real property is sold subject to a right of redemption (Civ. Code §5715(b)), the association's right to possession is deferred until the redemption period has expired and after its title has perfected. (First Nat. Trust & Sav. Bank of San Diego v. Staley, (1933) 219 Cal. 225, 227; Code Civ.Proc. §1161a (b)(2) & (3).) 

Accordingly an association has no right to either evict an owner or the owner’s tenant, or to enter the property to remove personal property until after the 90-day redemption period expires. Once the redemption period ends and title transfers, the association can dispose of personal property using legally proscribed methods.

Abandoned Personal Property. Personal property abandoned on residential premises can be removed as provided for in Civil Code, §§1951.3 and 1980 through 1991. The process requires notice to the former owner (or tenant) of his right to reclaim the abandoned property. The association must allow for recovery within 15 to 18 days of the notice (depending on how notice is given) and indicate that it may be disposed of by public auction thereafter.

The property must be left in the vacated premises or stored elsewhere during the reclamation period. After that period has passed, if the property is believed to be worth less than $700, it may be disposed of as the association sees fit. If it is worth $700 or more, it must be sold at public auction. The proceeds, after all costs are deducted, go to the county which allows the owner to claim the excess within a year.

"Lost Property." The law makes a distinction between property which is “abandoned” and that which is “lost.” Abandonment requires intent to leave the property behind. (Civ. Code §2080.7.) Without intent to abandon, the property is deemed lost and the association would follow procedures in Civil Code §2080 through 2080.10 which involve informing the owner, if known, and, if the owner is unknown and the property unclaimed, turning it over to the police or sheriff. If the police/sheriff will not accept the property, the association can follow the procedures for abandoned property described above.

Commercial Premises. Disposal of personal property from commercial premises follows procedures beginning in Civil Code §1993.

RECOMMENDATION: Because the law has specific and sometimes complicated requirements, always consult an attorney to be sure proper notices are given and procedures followed.