Condo Law in California

HTML clipboard In an effort to minimize potential liability and calm homeowners’ concerns, the following report is submitted by the Association’s legal counsel.

Whereas, on or about the night prior to Christmas, there occurred at a certain condominium (hereinafter “Unit” with identifying numbers redacted for privacy purposes) a general lack of stirring by creatures therein, including, but not limited to a mouse (an issue under review with the Association’s pest control company). Socks had been affixed around the chimney in the hope that St. Nick aka Santa Claus (”Claus”) would arrive sometime thereafter. The Board asked our firm if the hanging of socks was a violation of the governing documents. After extensive review by one of our associate attorneys, it was determined that no violations occurred. The CC&Rs and Condo Plan identify the mantle as part of the Unit. As such, owners are allowed to decorate their mantles.

Occupancy Restrictions. The minor residents, i.e. children residing at the aforementioned Unit in conformance with the Association’s occupancy restrictions, (which allow no more than two residents per bedroom and one for the unit i.e., the 2 + 1 rule), were in their beds and engaged in dreams of candies, nuts and/or sugar plums (also not a violation of any Association rules). According to declarations submitted by the owners of the Unit, members in good standing, they too retired to their beds.

Security Incident. Suddenly, and without prior notice or warning, there occurred a disruption in the common areas. One of the aforementioned residents immediately rushed to a window to investigate the cause of the commotion. Whereupon was observed, with some degree of wonder and/or disbelief, an unregistered sleigh being pulled through the air by approximately eight (8) undocumented reindeer, having breached security by failing to stop at the guard station at the front gate. (The Board is reviewing possible changes to security procedures to avoid such incidents in the future.) The unlicensed driver of the nonconforming vehicle appeared to be the previously referenced Claus.

Co-Conspirators. Said Claus was giving direction to the reindeer and specifically identified the animal co-conspirators as: Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donder and Blitzen (hereinafter the “Deer”). Upon information and belief, it is further asserted that an additional co-conspirator named Rudolph may have been involved. The Association’s management company is checking its records to see if it has any contact information for Claus and his Deer.

Rules Infraction. According to members who witnessed the incident, the vehicle and Deer trespassed upon the common area roofs without Board permission and in clear violation of the Rules & Regulations. Because of possible insurance implications, the Association’s insurance broker was notified. The potentially unsafe vehicle was filled with what appeared to be items of unknown origin or nature. Suddenly, without prior invitation or permission, either express or implied, the vehicle arrived at the Unit, and Claus entered via the exclusive use chimney in further violation of rules requiring all guests use front doors only.

CC&R Violation. The aforementioned unauthorized guest was clad in a red suit and carried a large sack containing toys, together with other unknown items. Claus was smoking tobacco in a small pipe in clear violation of a recent CC&R amendment against smoking in Units. (The smoking ban is currently subject to legal challenge by a chain-smoking couple who believe they should have been grandfathered. The unbudgeted legal fees created by the litigation my result in an emergency special assessment after the first of the year. A copy of the complaint is available for review in the management office.)

Hardwood Floors. The boots worn by Claus also made excessive noise on the hardwood floors and woke the owners in the unit below–a matter scheduled for discussion at the next regularly scheduled board meeting to determine if acoustical standards should be raised for future hard surfaced floor installations. Members are invited to express their opinions on this important issue during the Open Forum portion of the meeting. The agenda for the meeting will be posted on bulletin boards at least four days prior to the meeting.

Nonprofit Status. Claus immediately filled the stockings of the aforementioned minor children with toys and other small gifts. (Out of an abundance of caution, we asked the Association’s CPA to determine if this jeopardizes the Association’s nonprofit status.) Upon completion of the task, Claus touched the side of his nose and flew up the chimney to the roof where the Deer waited as lookouts beside the overloaded sleigh. (The Maintenance committee will meet with the Association’s roofing contractor to examine the roof for potential damage. If any is found, the Unit owner visited by Claus may be specially assessed for the damage.)

Claus quickly departed for an unknown destination. However, prior to his departure Claus was heard to exclaim: “Merry Christmas to all and to all a good night!” Or words to that effect.

QUESTION: Regarding married couples on the board, would this also apply to a brother and his sister, living in two townhomes situated right next to each other? Our board has three directors. Consequently, two of those positions are held by this brother/sister team.

ANSWER: There is no conflict of interest if there is no shared ownership of their townhomes. Also, an argument can be made that siblings disagree more than they agree. If you want to prohibit relatives from serving on the board, you need to amend your governing documents.

RESTRICTING RELATIVES

QUESTION: Our association is having a problem with too many relatives on the board. They are telling everyone that its illegal to amend our bylaws to restrict relatives from serving at the same time.

ANSWER: It is not illegal. You can amend your documents to require that only owners may serve on the board and then restrict co-owners from serving at the same time. That should resolve the problem.

READER COMMENTS ON
BOARD FELONS

• On the subject of a convicted felon serving on the board, you failed to mention that the association’s D&O policy could be canceled (or a claim denied) if the board knowingly allowed a felon to serve. We had this occur at a property we manage (attorney accused of embezzlement in another state, served time, moved to California, wanted to serve on the board). An owner Googled his name and found out he was a convicted felon. The board contacted their insurance broker, who advised that their policy would be canceled if they allowed him to serve. -Kevin Wiley, Manager

• There is a problem on the Crime/Dishonesty policy for any HOA who has a convicted felon serve on their board if they were convicted of any theft. The employee dishonesty bond (which no doubt has been extended to bond the board members too) would not apply if this person stole from the HOA because of a standard bond exclusion that any prior theft would preclude coverage on a claim. The HOA should ask to see if a special endorsement could be granted to cover this person or should not allow them to serve on the board if any defalcation risk exists (and he would be treasurer) as all board members should be bonded which might even be a CC&Rs requirement. Dorothy McCorkindale, Wells Fargo of California Insurance Services

SPOUSE NOT ON TITLE

QUESTION: I am a newly appointed board member. Some people say I cannot be on the board since I am not on the deed; our condo is in my husband’s name. Others say that because California is a community property state, it is automatically assumed I am an owner.

ANSWER: Community property laws come into play in death and divorce, not director qualifications. Whether or not you qualify for the board depends on your bylaws. If your bylaws do not require that directors be owners, then a spouse not on title can serve on the board. If your governing documents require that directors be owners, then you need to be on a recorded deed to serve on the board.

READER DEFENDS SPOUSES
ON BOARDS

My husband and I both ran for the board last week because the previous board almost drove us into bankruptcy. I would respectfully suggest that you also talk about where it ISN’T a conflict of interest for a husband and wife to serve on the board. We both ran to help save our investment because the people running the board were, in our opinion incompetent to do so. The time that my husband has devoted to the board has meant time away from our family as he cleans up historical messes of which we were not apprised when we purchased our unit. So please go easy on this “conflict of interest” thing. Sometimes there is another side to the story, and you might not want to so readily advocate legislating couples off of the board. Maybe the community, who knows the couple, is capable of deciding based on their character. What do you think? I certainly had an overwhelming show of support. Terri H.

IGNORING NEW POOL
SAFETY LAW

I continue to receive e-mails and phone calls about the Virginia Graeme Baker Pool and Spa Safety Act, which requires all pools be equipped with anti-entrapment systems. Associations are being told not to worry about compliance because (i) inspectors do not have time to inspect HOA pools, (ii) the state is developing its own standards that will not be ready until mid-2009, or (iii) compliance can wait until pools are resurfaced, renovated, replumbed or drained (L.A. County advisory).

Needless to say, enforcement agencies are in disarray. Personally, I would not rely on anyone’s assurances that you can ignore or delay compliance with federal law. If someone were injured or died because your pool was not in compliance, you face criminal penalties (up to $1.8 million), imprisonment, and civil liability despite “official” assurances to the contrary. In addition, your association’s insurance may deny coverage if you knowingly ignored the law and continued operating your pools and spas.

RECOMMENDATION: Boards should have a licensed professional inspect their pools and spas to find out if they are in compliance with the new law. If the professional determines you are in compliance, get it in writing. If you are not in compliance, close the pool, pull permits and schedule the work. If you do not have enough money, levy an emergency special assessment. If a governmental agency tells you to hold off on the conversion, close your pool until the county/state gets its act together. If you are unsure, consult legal counsel.

QUESTION: We have two married couples who want to run for the board. Is there any Civil Code that addresses two persons from the same household (both on title) from running for the board. This would allow two households to control a five member board.

ANSWER: Married couples on the board create potential conflicts and can cause problems (but not always). You need to amend your bylaws to prevent this from happening. When we amend bylaws, we routinely add director qualifications, including restrictions on co-owners from serving together on boards.

CONTRACTORS
AT BOARD MEETINGS

QUESTION: Can I, as a director, invite our landscape contractor to a board meeting? I am concerned about the need to spend extra monies to plant a slope. The landscape chair and the president are refusing any access to the contractor’s expertise or to allowing us to ask related questions of him.

ANSWER: Even if you invited the contractor, he could not address the board unless the board approved. Also, it’s not fair to to put the contractor in the middle of a fight between board members. You can raise the issue in an open meeting and try to persuade your fellow directors to invite the contractor as part of their due diligence.

CONVICTED FELONS
ON BOARDS

QUESTION: A board member elected to our treasurer position is a twice convicted felon, one for burglary and one for criminal negligent homicide. The board claims this felon has paid his debt to society and therefore is trustworthy.

ANSWER: There is nothing in the law that prohibits convicted felons from serving on boards. The Corporations Code states, however, that boards may declare vacant the office of any director who has been convicted of a felony. Corp. Code §7221(a). Some associations include this restriction when they amend their bylaws.

RENTERS AT MEETINGS

QUESTION: Renters have always been welcome to our meetings. There’s never been a problem until the last meeting. A person who lives with an owner was kicked out of a meeting because he was causing trouble. This was fine, but management told us it is “illegal” to allow non-owners in our meetings.

ANSWER: Although only members have a “right” under the Open Meeting Act to attend board meetings, it is not “illegal” for renters to attend. Boards may allow non-members to attend if they wish. I provide more detail on my website under “Renters”.

MEETING TIMES

QUESTION: I have been looking at several HOAs and find that many have their board meeting at 10:00 in the morning when only a few of the retired homeowners can attend. Is this legal?

ANSWER: Yes, it’s legal. Meeting times are set by the board for the convenience of director schedules so they can attend to the association’s business.

Just loved your condo fire story. It was not until my neighbor’s home burned down that I learned about fires. A fireman told me that you have only about four minutes to get out once a fire starts. The fire next door started from a bad surge protector. The neighbor told me she woke up to the sound of the fire alarm. She went into the hallway from her bedroom and saw smoke coming from the adjacent bedroom.

She saw six-foot long sparks arcing out of the surge protector which caught the drywall on fire. She put her robe on, got her two dogs and one cat out. The house was too much on fire to get anything else. That was about four minutes. There she stood outside in her robe and slippers as six fire trucks battled the blaze. Her home was a total loss. That day I went out and bought all new surge protectors.

The following website will help consumers find all kinds of items that have been recalled: www.cpsc.gov. -DeeDee G.

DRYER VENT FIRES

The following was submitted by Rose Coughlin, owner of Focused Resources, specializing in environmental health & safety compliance.

The biggest accidents waiting to happen are clothes dryers. The combination of heat, natural gas, lint and the potential for static electricity for the ignition source are all found in dryers. Here are the problems I have observed over the years: • Lint traps are not cleaned, especially by renters. • Walking out of the condo leaving the dryer unattended. • Improperly ventilated dryer enclosures.

HOAs should publish warnings requesting that lint traps be cleaned after every drying event and that no dryer should be left unattended. In addition, HOAs should have regular inspections and violations should be written up. Finally, a fire extinguisher should be placed within proximity of the dryer.

POOL SAFETY

QUESTION: Our gated homeowners association has a fenced pool that needs a key to get into. Our CC&Rs state that anyone 14 or younger must be accompanied by a homeowner. Would we need to comply with the new pool safety act?

ANSWER: I don’t think you can rely on your rules to protect you–children don’t always follow rules. In addition, older people as well as children can drown if caught in pool suctions. I recommend installing the federally mandated safety equipment—it’s a lot less expensive than drownings, statutory fines, and litigation. The deadline for compliance is December 19, 2008.

QUESTION: Our board is concerned about the uproar when we hint at removing pines and eucalyptus trees that pose a fire hazard along the perimeter of a canyon. The trees are on community property and are the responsibility of the HOA. In the event of a fire, the canyon will act as a chimney engulfing the trees and spreading to the houses. The fire department has recommended that we remove this threat.

ANSWER: That’s not even a close call. Remove the trees. In light of the loss of over 1,000 homes in Southern California a week ago from fast-moving wildfires, prudence dictates following the advice of the fire department. People love trees and will fight the board to prevent them from being removed, until their homes are destroyed by fire, at which point they will sue the board for not removing them. A homeowner sent the above picture of the destructive Montecito fire.

CONDO FIRE LAST WEDNESDAY

Fires are not limited to brush and trees. The following was sent by Mike Gruby, manager of a condominium association in San Diego.

Last Wednesday night my wife and I returned to our condominium building just as the frantic screaming of a woman erupted from the second floor. We both thought it was a wild party, then an attack, and only when I heard the word FIRE did real meaning set in.

I pulled the fire alarm and turned to go upstairs, then went back to the fire hose cabinet, grabbed the fire extinguisher and ran upstairs. I passed the woman screaming, “My house is on fire -my dog is inside”, and headed for the fire hose cabinet. I knew the extinguisher was useless. With the fire bell blaring other residents were filtering out of their units and a couple people were at my elbow.

As we pulled the fire hose off its hangers, I was remembering the time I asked a Pacific Beach Fire Chief if we should get rid of these fire hoses because they were no longer needed by code and cost us money to maintain them. He said to me, “I have personally knocked down 3 fires with hoses like this before the other firemen even got their hoses into the building.”

One guy opened the valve, one on the hose, and one untangled the kinks, but the smoke and heat was so intense we were pushed back. Jerry arrived and took the hose while I ran to direct the firemen to the source. Jerry hit the door with strength he did not know he had, broke the lock and knocked down a roaring fire from the door way using the 1 1/2″ fire hose on a domestic water line stand pipe. I returned with a fireman who put on his air mask and took the hose into the the unit and finished the job.

All of this was not longer than 5 minutes.

Our building was built in 1969 and typical of the 3 story, wood frame condos throughout San Diego. We only have fire sprinklers in the garage, and the manual fire alarm system is in the hallways, not the units. Our fire alarm system is monitored and notified SD Fire Department within 1 minute. The drywall protection contained the fire to one unit. Water damage went to the first floor.

The next evening I conducted a briefing for the residents and I can assure that it was unanimous that WE WILL NEVER CUT COSTS ON FIRE PROTECTION AND MAINTENANCE OF ALARM SYSTEMS.

Sadly the little Pug dog, whose barking urged his owner out of her bath, did not make it. He was the hero. His rescue may have been stymied because as the owner ran out, the door closed and locked behind her.

FIREPLACE CHIMNEYS

Another fire hazard is the fireplace chimney. Chimney Fires. The chimney vents hot gases, soot and embers from the fireplace. Over time, the inside of the chimney is coated with soot, which can lead to chimney fires. According to the National Fire Protection Association, there are 26,000 residential chimney fires each year.

Carbon Monoxide Poisoning. In addition, bird nests or other obstructions in chimneys can lead to carbon monoxide poisoning when gases are forced into units.

Inspection & Maintenance. Associations should inspect and clean all common area chimneys on a regular basis. Depending on the type of materials burned in fireplaces and their frequency of usage, chimneys could need cleaning every year.

RECOMMENDATION. Boards should consult with a professional chimney sweep and have their chimneys inspected. Once that is done, the chimney sweep can recommend an appropriate cleaning schedule.

QUESTION: The board wants to publish the names of delinquent owners in our newsletter. First is this legal and two is it a good idea?

ANSWER: Associations cannot publish the names of owners where the board voted to foreclosure on their units. Civil Code §1367.4(c)(2) However, there is nothing that prohibits publishing the names of delinquent owners. For guidance on this issue we can turn to the State, which routinely publishes the names of delinquent taxpayers. We can look to its procedures because courts have already noted the quasi-governmental nature of homeowners associations and analogized assessments to taxes. Chantiles v. Lake Forest II

California’s Procedures. According to the state’s website: California mails each person on its list a certified letter providing the person an opportunity to pay their taxes before the list is published. To avoid being published, taxpayers must do one of the following: (i) pay the liability in full, (ii) establish an installment agreement, (iii) enter into an offer in compromise, or (iv) substantiate a bankruptcy filing.

Association’s Procedures. If an association wants to publish the names of delinquent owners, I recommend the following:

1. Amend the governing documents to include publishing names as one of its collection policies.

2. Amend its collection policy to include sending a certified letter, return receipt requested, to the owner giving him/her an opportunity to pay before the list is published.

3. Distribute or mail the list to members only (not renters). Do not post the list in the common areas where visitors can see it.

4. Title the list “Delinquent Owners.” Do not characterize owners as “Deadbeats of the Month” or any other pejorative term, and do not state whether foreclosure has commenced against their units.

5. Include a disclaimer such as: “This information was last updated on <date>. Payments made after <date> are not reflected.”

6. Be consistent in publishing names (perhaps quarterly) and be even-handed by publishing all names (unless they have paid in full, worked out payment plan, or declared bankruptcy).

RECOMMENDATION. In my opinion, the above procedures are reasonable. However, in our litigious society, there is no guarantee a disgruntled owner won’t claim defamation. Also, there is an unresolved question about whether publication would trigger the Fair Debt Collection Practices Act. Not everyone is going to agree with my analysis so boards should seek and follow the advice of their association’s legal counsel on this issue.

READER COMMENT REGARDING
DEFERRED RESERVE CONTRIBUTIONS

Deferment of current obligations to future generations is a time honored American tradition, hence our national debt and social security system. However, HOAs should take great caution in deferring Reserves contributions. Depleting the fund every time there is a potential cash shortage may deprive current and future owners of important options. HOA Board Members should only reduce or eliminate Reserve funding when there is no other alternative.

Many attorneys, accountants and reserve analysts consider deferral of reserve payments as borrowing from reserves, which, of course, requires approval at an open meeting. Additionally, such a change in reserve funding will typically result in deferral of selected repairs/replacements, which also requires disclosure to the membership. Prudent management would also include these steps prior to implementing any significant changes to the reserve funding plan. Scott Clements, CMI Reserve Studies Inc.

QUESTION: Certain members of the board are too nosey. They ask new residents where they work and what they do, how much money they make. How much did they pay for their European vehicle? They watch everyone’s comings and goings and relate this information to other occupants of the building. I personally feel this invades and violates the right to privacy.

ANSWER: Those same directors would probably be just as nosey if they were not on the board. Members can politely decline to answer their questions.

READER COMMENTS
MID-YEAR BUDGET INCREASES

#1. Thank you again for a supportive position on mid-year budget adjustments. As a practitioner and trainer of managers, I have always interpreted the Civil Code to be exactly as you have stated in your newsletter. We use the mantra to reticent boards, to “send, then amend,” meaning publish timely to preserve their authority to amend the budget with 30 days notice any time during the year, of course you lose the elapsed months. Sometimes getting the board to adopts a truly “sufficient budget” in today’s economy may take time beyond the publication deadlines! -Lisa Esposito, Chief Operating Officer Massingham & Associates Management, Inc.

#2. Some newer CC&Rs have a provision that states that the board can approve mid-year increases if the budget is insufficient. Managers and board members should check their CC&Rs first, and if they are considering restating their CC&Rs they should add that provision. For those HOAs that do not have it in their CC&Rs, we attempt to strengthen the HOA’s position by putting a disclosure in our budget packet that says that the board reserves the right to do a mid-year increase if the approved budget is insufficient to meet expenses and reserve transfers. -Sue Nelson, Horizon Management Company

REDUCING RESERVE
CONTRIBUTIONS

QUESTION: Due to the current economic situation, associations are not collecting adequate assessments to cover their operating expenses. To cover the expenses, it would seem prudent to fund reserves at a less amount or fund at zero percent until the association becomes solvent. Is it possible to reduce or eliminate reserve allocations? If so is it possible to make the change mid year?

ANSWER: Yes to all three questions: (i) in the current economic climate it is prudent to reduce expenses wherever possible; (ii) associations can reduce reserve allocations; and (iii) reductions can be done mid-year. Notice of the changed reserve funding plan must be given to the membership. Also keep in mind that large-ticket reserve components will still need repair/replacement and if reserve monies are not available, special assessments will result.

DOES LAWSUIT
REQUIRE RESIGNATION?

QUESTION: Our president is named as a defendant in a suit by a homeowner for breach of fiduciary duty. Should the president resign temporarily as a matter of ethical conduct until the suit is settled? Should he recuse himself from all voting or what, if anything, is required in the law under such circumstances?

ANSWER: There is a presumption of innocence in the American legal system. Being sued by an owner does not disqualify a director from serving on the board. More often than not, such lawsuits have no merit and are filed for the sole purpose of harassing a director. Allowing questionable litigation to force directors off the board would only encourage more lawsuits.

LITIGATION SPECIAL ASSESSMENT

QUESTION: Is it legal for a member of the board to use association money to defend himself in a legal case which was initiated by an association member? It does not seem right that a board member can use the members’ money to defend himself–all the other members may be penalized by a special assessment because of it.

ANSWER: Yes, it’s legal for the association to fund the defense of a director who has been sued for his actions as a director. Most governing documents require that associations defend their directors. It is also provided for in Corporations Code §7237. Too many litigious members forget that when they sue their associations, the entire membership may suffer as a result.