BEEPING HORN

BEEPING HORN

QUESTION: When homeowner A locks his car, the horn beeps. Tenant B screams "I will blow that ****ing car up." So, A locks his car during the day only, not at night. Unfortunately, B works out of his unit and naps during the day so he can work through the night. B is threatening to sue.

ANSWER: Your tenant sounds like an al-Qaeda recruit. First, put the association's insurance on notice of a potential claim. I know it sounds silly but you need to preserve the association's rights under its insurance policy.

Investigate. Next, your board has a duty to investigate the complaint and take appropriate action. If the horn really is a nuisance, "A" needs to stop using his remote. He can manually lock his car or have the beep disabled.

No Nuisance. If the board decides that a beep during the day is not a nuisance, the association does not need to get involved in a neighbor-to-neighbor dispute. The board should, however, document its actions and send a letter to the landlord with a copy to the tenant that it investigated the complaint and found no violation. So the board's cars don't get blown up, you may want your lawyer to send the letter.

NOTE: I don't think it's widely known but God made ear plugs for people with odd sleeping habits. They're also cheaper than a lawsuit. The landlord should consider making the investment (or get a new tenant).

                                           VOTING RIGHTS

QUESTION: We circulated a ballot to amend our CC&Rs. We had to extend the voting deadline three times to get enough ballots. One owner turned in his ballot and then sold his unit. Must we discard his ballot and issue one to the buyer? 

ANSWER: The seller's ballot is still valid. If he was the owner of record when ballots were distributed, he is the one with the right to vote. The buyer can vote in later elections.

CABLE TV CONTRACTS

QUESTION: DRE regulations of the Real Estate Commissioner state on page 282 section (E) that cable contracts can be five years. According to your hierarchy of docs, does that trump the CC&Rs restricting any contract exceeding one year ?

ANSWER: As a side note, California's Department of Real Estate was renamed the Bureau of Real Estate (perhaps to emphasize bureaucratic creep?). The Regulation you refer to is §2792.21 "Reasonable Arrangements--Governing Body Powers and Limitations." Subsection (b)(1)(E) deals with the length of contracts.

Purpose of Regulations. The purpose of the regulation is to establish reasonable standards for developers to use when they form homeowners associations. A developer's proposed CC&Rs must meet these standards or they won't be approved by the BRE.

Hierarchy of Documents. The hierarchy you refer do does not trump your CC&Rs because there is no conflict. The regulation applies to developers of common interest developments and is concerned with  cable contracts that exceed five years. If the developer's attorney drafted CC&Rs that restrict the board from approving contracts greater than one year and the BRE approved it, you're bound by the restriction. Your board would need membership approval for any agreement with a term greater than one year.
RECOMMENDATION: Once the developer has sold his units and turned over control to the membership, you can amend your CC&Rs to modify or eliminate contract limitations. We routinely add longer contract periods when we restate documents for associations. It can also be done with a simple amendment. If you want to take advantage of reduced costs associated with longer contracts, you need to amend your CC&Rs. 

IGNORING LEGAL ADVICE

IGNORING LEGAL ADVICE

QUESTION: If the association sought and paid for a legal opinion, is the board violating their fiduciary duty if they ignore the opinion?

ANSWER: If board members stick their fingers in their ears and refuse to listen to legal counsel, that's a problem. But, if they listen to the attorney's advice, weigh it against other factors and reach a different conclusion, they are not in breach of their fiduciary duties.
Independent Decision. Boards are not required to let experts and lawyers make decisions for them. For example, an attorney and a termite expert might both advise a board to tent their condo buildings to stop a termite infestation. After taking into account the cost of tenting, the financial condition of the association, and the disruption to members who must be moved out of their buildings, the board can decide to spot-treat even though tenting is the superior method.
Business Judgment. This was the scenario in a case that made it all the way to the California Supreme Court. The Court sided with the board and held that, 

...where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion...to select among means for discharging an obligation to maintain and repair a development's common areas, courts should defer to the board's authority and presumed expertise. (Lamden v. La Jolla Shores; Corp. Code §7231(a).)

Bad Advice. A second scenario under which boards can deviate from legal advice is when they believe the attorney is not knowledgeable or reliable in the issues presented. For example, if a divorce lawyer offers legal advice about HOA corporate matters, the board can (and should) disregard the advice. Instead, they should seek counsel from an experienced corporate attorney with expertise in community association law.

RECOMMENDATION: Boards should be cautious about discounting competent legal counsel. If directors are uncertain about the advice given, they should get a second opinion.

CITIZEN'S ARREST

DRAINING POOLS TO SAVE WATER

QUESTION: Since we are in a severe drought and our members barely use the pool, are we obligated to keep it open? It seems like a waste of water and money and we would like to drain it. Does the board have the authority to close the pool?
ANSWER: If they have good reason, boards can close and drain a pool. Often it's done when a pool needs to be replastered. The closure is short-term and the pool refilled with water. Your scenario is different since the closure would be long-term. Doing so could damage your pool.
In-Ground Pools. In-ground fiberglass and concrete pools are built to withstand the pressure of dirt against them when drained. Even so, ground pressure on fiberglass pools can cause side walls and floors to bulge and split. If ground water is high enough, hydrostatic pressure can cause an empty concrete pool to act like a ship and float several inches. This will break the coping/bond beam and damage the surrounding decks and pipes. Insurance does not cover such damage.

UV Damage. Pools built on solid concrete foundations or in a concrete vault are immune to hydrostatic pressure. However, they are not immune to solar damage. Direct sunlight will dry out plaster, causing spider cracks and tiles to pop off. When the pool is eventually refilled, water will seep into the cracks causing the plaster to blister and crumble. This is also not covered by insurance.

Safety Issues. The possibility of someone taking a swan dive into an empty pool should keep boards up at night. Associations that drain their pools should make sure they lock their gates and post warning signs. Even so, drunks have been known to climb fences for midnight swims. Finding a body at the bottom of an empty pool has a way of driving down property values. Plus there is the problem of cleaning up the mess.

RECOMMENDATION: Before an association drains its pool to save money, the board should talk to a pool construction expert, their insurance broker, and legal counsel.

CITIZEN'S ARREST

QUESTION: Our highrise building looks onto another highrise where a resident regularly watches porn on his big screen TV. We asked the neighboring building manager to encourage him to lower his shades. This had the opposite effect. He now leaves his shades completely open, watching in the nude and single-handedly participating. Do we have any recourse?

ANSWER: That is an ugly visual. If the porn junkie is in a building that is not part of your association, your options are limited.

Police. The police can be notified. They will talk to the resident but not arrest him unless they witnessed the illicit activity. To arrest him, you would have to accompany the police to the building and make a citizen's arrest. Penal Code §837 states, "A private person may arrest another: (1) For a public offense committed or attempted in his presence..." 

Public Offense. A "public offense" is defined as a felony, misdemeanor or infraction. (Penal Code §16). Is your neighbor's behavior a public offense? According to California Penal Code §647(a), engaging in lewd conduct in a public place is a misdemeanor.

The catch is the "public place" part of the statute. Lewd conduct by a lone adult in the privacy of his home wouldn't normally interest the police or the courts. In your situation, your neighbor is knowingly making his conduct visible to his neighbors. Accordingly, action can be taken.

RECOMMENDATION: Before you rush over and make a citizen's arrest, you should consider the possibility of retaliation. It's clear your lewd neighbor does not have any boundaries. If a visit by the police does not resolve the problem, your best bet may be a strongly worded lawyer letter to the miscreant.

SOCIAL EVENTS USING HOA MONEY

SOCIAL EVENTS USING HOA MONEY

QUESTION: Can the board use association funds for social events? Our CC&Rs are silent on the subject.

ANSWER: Unless governing documents specifically prohibit it, HOAs can budget for, assess and spend association monies on social events. 

Generic Language. More often than not, there is generic language in governing documents allowing associations to make decisions for the "general health, welfare, comfort and safety" of the membership. A variation is: "The Association may undertake any lawful activity, function or service for the benefit of Owners." Authorizing language is often found in the preamble of the CC&Rs, in addition to the general powers section, and in the assessments section describing the purpose of assessments. It can also be found in the bylaws and articles of incorporation.
Social Event Benefits. Do social events fall under "health, welfare and safety" categories? I believe they do. Part of being a community is knowing your neighbors, interacting with them and developing a positive community identity. Social events help make that happen. Knowing your neighbors also enhances general security for the association. Finally, developing a reputation for a positive community identity raises property values.

RECOMMENDATION: As in all things, moderation. Boards should not go overboard with extravagant parties. HOAs should also be careful about alcohol at their events and check into insurance. Then get everyone together and have steak and beer or cheese and wine, depending on your political persuasion. 

PHONED-IN VOTE

PHONED-IN VOTE

QUESTION: Can a committee member attend a meeting via phone, vote on a measure, then disconnect?

ANSWER: Board members and committee members alike can attend their respective meetings by telephone, make motions, participate in discussions and vote, provided it's a conference phone or speaker phone where participants can all hear each other. Corp. Code §7211(a)(6); Civil Code §1363.05(k)(2)(B). The statutes address director meetings but the same would apply to committee meetings. So, can a committee member (or director) call in to vote on one measure and then hangup? It may be poor form but there is nothing prohibiting it.

FORCE-PLACED INSURANCE

FORCE-PLACED INSURANCE

QUESTION: Can an HOA use force-placed insurance? Force-placed insurance is when the banks buy an insurance policy for homeowners to protect the bank's investment. I'm wondering if an HOA can do the same thing if owners fail to insure their units? The HOA needs a way to protect itself.

ANSWER: Banks are able to “force-place” insurance because of two important conditions: (i) the loan agreement gives the lender authority to do so and (ii) banks has an insurable interest in the property because the home is collateral for the loan.

No Authority to Purchase. Unless an association's governing documents grant authority, boards cannot purchase insurance for an owner and charge back the premium to the homeowner. Even if the governing documents allow it, the association does not have an ownership interest in the unit. Without an insurable interest, it's unlikely a carrier would sell them a policy.

Administrative Nightmare. Assuming an association could purchase individual policies for owners, it creates an administrative problem for the association. To purchase insurance for owners who fail or refuse to purchase their own insurance, the board would have to monitor every owner's insurance. If there are 100 units in the development, there are 100 different insurance policies to monitor with 100 separate expiration dates to calendar and track. Since homeowners could let their coverage lapse at any time during the policy term by simply missing one or more monthly installments, the board would need to monitor their insurance daily and immediately purchase coverage for the owner when it lapsed. 

Expensive. Because force-placed insurance is very expensive, the homeowner has incentive to buy his own insurance as soon as the costly back-billed premiums hit. This creates yet another task for the person monitoring the insurance. Once the homeowner buys his own insurance, the force-placed coverage must be immediately removed and any unused premiums refunded to the homeowner. Forced-place insurance is so complex that even lenders don’t administer their own programs; they rely on third-parties to oversee them.

RECOMMENDATION: Instead of force-placed insurance, associations should consider amending their governing documents to require owners to carry insurance. To protect the association from administrative headaches and potential liability, the amendment needs to exempt the association from the duty of monitoring the provision.

E-CIGARETTES

E-CIGARETTES

QUESTION: My HOA wants to adopt a complete smoking ban--no smoking in the common areas and no smoking inside units. Can we also ban e-cigarettes?
ANSWER: Good question. Electronic cigarettes are battery-powered devices that deliver nicotine in a vapor to the user. According to advocates, they have fewer toxins than regular cigarettes and none of the tar, making them less harmful to users than traditional cigarettes. Moreover, there is no second-hand smoke, no carcinogens in the vapor and no odors; therefore, no problem. Not everyone agrees.

Airlines. The Department of Transportation adopted a policy that passengers cannot smoke e-cigarettes on commercial aircraft. When proposing the ban, the DOT stated:

In light of the unknown health risks with the use of electronic cigarettes by individuals who ‘smoke’ them or the people around them and the growing availability and use of electronic cigarettes, the Department is proposing this amendment … to explicitly ban the use of electronic cigarettes aboard aircraft.

Governments. Two weeks ago, the European Parliament issued strong regulations requiring health warnings on e-cigarettes. Tuesday, the second largest city in the country, Los Angeles, voted to prohibit them in all workplaces as well as parks, city beaches and outdoor dining areas. Contra Costa County, Richmond and Carlsbad have already banned them and other cities around the state are taking steps to either regulate or ban them.

Universities & Businesses. The University of California banned e-cigarettes on all its campuses. It did so because many of the elements in their vapor "are known to cause respiratory distress and disease." According to the U.S. Food and Drug Administration samples of the nicotine liquid they tested had "detectable levels of known carcinogens and toxic chemicals. The National Business Group on Health issued a "Fact Sheet" on why businesses should consider banning them in the work place. 

HOA Common Areas. It is clear from the growing number of regulatory agencies, municipalities and business organizations that associations have sufficient basis to ban e-cigarette use in the common areas. Boards can do so with a simple rule change. The rationale for banning them inside condos, however, is less clear.

Inside Condos. Because condominiums (and most stock cooperatives) have shared walls, ceilings and floors where cigarette smoke can drift into adjoining units, the annoying odors and carcinogens give associations a solid basis for banning smoking inside units, and many already have done so. Banning e-cigarettes, however, may be more difficult to justify since they are not a fire hazard and their vapors might not create detectible odors in adjoining units or cause harm to neighbors.

RECOMMENDATION: If associations decide to completely ban all smoking, including e-cigarettes, they should do so via an amendment to the CC&Rs. If the ban is a recorded restriction, it is presumed reasonable and the burden is on the challenger to prove it is not.