SELF-MANAGED ASSOCIATIONS

Q. 
Our association, which consists of twelve townhomes, has been self-managed for many years in order to save money. Our newly elected board of directors is considering the possibility of hiring a management company which would result in an increase of our monthly assessments. The board claims that we should save money in the long run. What is your experience?

A. 
In my experience, I have found that self-managed associations have higher expenses in the long run than those with professional management. Overall, self-managed associations pay more for maintenance and repairs, have more collection problems and pay out more legal fees because more mistakes tend to be made by the boards of these associations. Self-managed associations tend to keep many lawyers working overtime. Top

JUSTIFIED EXPENDITURES

Q. 
Can the board of directors of our association spend association funds on what amounts to a political issue? The board wants to spend funds to stop a nearby development, based on the belief that it will harm the value of homes in our community.

A.  Absent a prohibition in the association's bylaws or CC&Rs, the board can probably justify the expenditure so long as they act:

1.      In good faith;

2.      In the best interest of the association;

3.      After becoming fully informed, and

4.      After deliberating as a body before deciding. Top

BOARD WON'T FIX LEAKY ROOF

Q. 
We live in a three story condominium complex that is over twenty years old. The roof needs replacement, but the association does not have the funds to replace it. It has been patched numerous times, over several years, but still leaks when it rains. Our roofer tells us that patching will only slow the water down and that we must replace the roof. This has been confirmed with a second opinion. The board has attempted three times to get a special assessment passed, but has failed to get one approved due to a combination of indifference and people on the lower floors refusing to pay the cost. Our ceiling, walls and furniture has been damaged. What can be done?

A. 
The board can approve an emergency assessment where there is a threat to personal safety on the property. While your situation may be a legal stretch, the board should immediately discuss the option with its legal counsel. Absent a special assessment and repair, your option is to sue the association for failing to maintain the common area. Top

CONFLICT OF INTEREST

Q. 
Our management company has been using the husband of an employee to provide maintenance services to our association for several years. We just learned of the relationship because it was not previously disclosed to us. Is this a conflict of interest for the management company?

A. 
Absolutely. Whenever a management company uses a related party to provide services, it must be disclosed in writing, in advance. This type of conduct does not reflect positively on the management company to say the least. Top

WAIVING LATE FEES

Q. 
Our board of directors recently waived a late fee for a board member because "she puts in so much free time." Other members of the association are required to pay a late fee whenever they pay late, without exception. What are your comments?

A. 
I strongly recommend that the board cease the policy of waiving late fees for this or any other board member because such a policy creates a legal defense for other members of the association who pay late fees and get fined. If the board ignores my advice, at the very minimum, the board member who is receiving the special benefit should be recused from voting on such a waiver. Lastly, the receipt of such a benefit may have the legal effect of eliminating the board member's statutory protection because it can be argued that volunteers do not receive compensation, and that the waiver of a fee is in fact compensation. In short, it's asking for trouble to make exceptions such as the one described. Top

BOARD REFUSES TO PROTECT MEMBER

Q. 
We live in a community of new single family homes that has an association and common area. Behind our home is a common area hillside that is draining water onto our lot because of an inadequate drainage system. The water is starting to lift our patio slabs and do other damage. We are concerned that with a heavy season of rain, the damage will become very serious. Our homeowners association refuses to sue the developer for construction defects because our home is the only one significantly impacted by the flow of water. Are we out of luck?

A. 
No. If the association refuses to protect your rights, an experienced construction defect attorney can file a derivative suit to protect those rights. You should consult an attorney immediately because you can lose your rights if you wait too long. Top

EXPIRATION OF CC&Rs

Q. 
We live in a condominium building that is thirty-five years old. We like it because of its great location, low density and mature landscaping, but are concerned about the future. What happens if, in the future, the development becomes an under improvement for the area and the buildings become obsolete?

A. 
California law provides that for condominium projects over fifty years old that are uneconomic and obsolete, 50% or more of the members may vote to sell the entire project pursuant to a court supervised partition action.

I am not aware of any such sales that have taken place in California. However, I expect it will become common in twenty-five to thirty years. Top

DAVIS-STIRLING ACT

Q. 
What exactly is the Davis-Stirling Act?

A. 
The Davis-Stirling Common Interest Development Act consists of sections 1350 through 1378 of the California Civil Code. These code sections deal exclusively with common interest developments, which includes community apartment projects, condominiums, planned developments, and stock cooperatives. Other laws which affect common interest developments are the Federal Communication Commission Regulations, California Health and Safety Code, Corporations Code, Vehicle Code, Code of Civil Procedure and Government Code. Top

HIRING SECURITY GUARDS

Q. 
The board of directors of our homeowners association is considering the possibility of terminating the contract with our security guard company and then hiring the guards directly in order to save money. Our management company is in favor of the idea. What are your comments?

A. 
I strongly recommend against it. Taking such action will create a substantial list of potential liabilities. This column does not permit an adequate discussion of the risks involved. Don't do it. Top

DUTIES OF ARCHITECTURAL COMMITTEE

Q. 
I am on the board of directors of my homeowners association. We have an architectural committee. Traditionally, the architectural committee has been concerned with building code compliance. Is this an appropriate matter to be commented upon by an architectural committee?

A. 
No. Architectural committees should be concerned about compliance with the CC&Rs, rules and regulations and the appearance of proposed modifications. Compliance with building codes should be left to the local city or county. If your architectural committee assumes responsibility for making comments on possible code violations, it places your association in a position to be held liable in the event that it makes an error in judgment. There is no reason for an association to assume that responsibility. Top

TREES

Q. 
My neighbor's tree is only inches from the property line. Do I have the absolute right to cut roots and branches that encroach onto my property?

A. 
No. You do not have an absolute right. You have only the right to act reasonably. I suggest you talk to a consulting arborist before you do any cutting to make certain that you don't damage the tree and get yourself into trouble. Top

NO PERSONAL LIABILITY FOR MEMBERS

Q. 
It appears that the president of the board of directors of our association may have said something that will result in a defamation suit being filed against the association. If the association is sued and a judgment is entered against it, can the individual homeowners be held personally liable for the judgment?

A. 
No. However, this should not give you great comfort. If the association has a judgment against it, the judgment creditor can force the association to special assess every member to pay the judgment. Top

DISCLOSURE OF LITIGATION

Q. 
Is there ever a time when it is appropriate for the board of directors of a homeowners association to inform the membership of a serious delinquency in the payment of monthly assessments?

A. 
Yes. A board may disclose a delinquency when its collection action has reached the stage of a lawsuit. When an association becomes involved in litigation, the members are entitled to notice. The filing of a suit places the matter in the public domain and is material to the financial condition of the association. California Civil Code Section 47 protects the association as plaintiff from liability for defamation or disclosure of private information under the "litigation privilege." Top

RIGHT TO PRIVACY

Q. 
I am on the board of directors of my homeowners association. May the board discuss individual delinquencies (identifying names) at regular board meetings? The association's law firm has advised us that we may do so. I do not feel comfortable in having these types of matters discussed in public. What is your opinion?

A. 
Discussions concerning individual delinquencies (identifying names) should only take place during executive sessions. This means that members of the association will not be present other than board members. The California Civil Code requires that the board of directors must adjourn to executive session to consider litigation and member discipline.

The California Constitution guarantees the right to privacy. While it is unclear whether the Constitution protects a person from an invasion of privacy by a homeowners association (as opposed to the state), it may. The right to privacy has been liberally interpreted by all courts. Lastly, the intrusion into private affairs by an individual may constitute a court for which the plaintiff may collect damages including punitive damages.

I strongly disagree with your counsel's opinion and suggest that your board discuss association delinquencies only during executive committee sessions. Top

INCORPORATION OF ASSOCIATIONS

Q. 
Are all homeowner associations corporations?

A. 
No. However, in California 99% are corporations. The others are unincorporated associations. Top

LAW FIRM WON'T SUE MANAGEMENT COMPANY

Q. 
The management company for our townhome association gave our board of directors some very bad advice which resulted in our association losing several thousand dollars. Our association law firm refuses to get involved in a suit against the management company. Our board is finding it difficult to find an association law firm that will sue any management company. Is this common?

A. 
Yes. Most association law firms get the vast majority of their business from management companies and thus, most of these law firms refuse to represent associations against management companies. Your board should continue to interview association law firms. If they are diligent, they will find a competent firm. Top

CONTRACTING WITHOUT A LICENSE

Q. 
What is the penalty for contracting without a license when one is required?

A. 
Contracting without a license is a misdemeanor punishable by up to one year in county jail and/or a fine of up to $15,000. Top

PRACTICING LAW WITHOUT A LICENSE

Q. 
The management company of our association has offered to re-write our rules.  The hourly rate is far below what our attorney would charge for the same work.  Do you have any recommendations or comments?

A. 
Yes.  Your management company would not be doing the same work as your law firm.  Only attorneys are permitted to offer legal advice.  Writing rules for an association comes dangerously close to practicing law and may cross the line.  I recommend that any new rules be written by your attorney or at least, reviewed and approved by him or her. Top

POSSIBLE KICKBACK

Q. 
The management company for our homeowners association has a website with links to various vendors that they use for various management clients.  The vendors are required to pay the management company a fairly substantial fee in order to be listed.  Is this a disguised form of kickback?

A. 
Possibly. Without knowing the amount of money involved it is difficult to determine if the fee is reasonable given the cost of service provided or whether it's a means for the management company to generate income as a result of providing business to the vendors.  In any event, at the minimum it creates the appearance of a conflict and, in my opinion, is evidence of poor judgment. Top

CONFLICT OF INTEREST

Q. 
When is it appropriate for a member of our homeowner association board to recuse himself?

A. 
A board member should recuse or disqualify himself or herself because of self interest, bias or prejudice.  If a board member does not recuse himself or herself when required, he or she will have a conflict of interest.  If a board member votes on a matter where he or she has a conflict of interest, he or she violates his or her fiduciary duty. Top

WHEN DOES A CONFLICT EXIST?

Q. 
Please define "conflict of interest."

A. 
A conflict of interest exists where an individual's duty to one party leads to the disregard of a duty to another. It exists when an outside influence affects a person's ability to make an independent, unimpeded, objective decision or when a person owes duties to separate parties with conflicting interests.

Whether or not a conflict of interest exists depends on the facts of a particular situation which must be evaluated on a case-by-case basis. Top

IS A CONTRACTOR'S LICENSE REQUIRED?

Q. 
Are handymen required to have a contractor's license? 

A. 
It depends.  Work on a project for which the combined value of labor, materials, and all other items on one or more contracts is less than $500 does not require a contractor's license.  However, work which is part of a larger project, whether undertaken by the same or different contractors, may not be divided into amounts less than $500 in an attempt to meet the $500 exemption.  Also, unlicensed handymen must provide the purchaser with written disclosure stating that they are unlicensed by the Contractors State License board, or the $500 exemption does not apply. Top

BILLING MEMBERS FOR LEGAL FEES

Q. 
When a homeowners' association is required to obtain legal advice in order to respond to a member of the association, can it charge the member for the attorney's fees?

A. 
No.  A homeowners' association is entitled to recover its attorney's fees from a member only when it prevails in a court proceeding or arbitration, usually in connection with the enforcement of the governing documents of the association. The only exception, is when the CC&Rs state otherwise. This is very uncommon. Top

REGULATIONS OF ASSOCIATIONS

Q. 
Our homeowners association is not being run properly by the board of directors.  Is there a government agency that has the power to oversee homeowners associations?

A. 
Unless the developer is still involved as an owner, no such government agency exists in California.  Every member of the association has the right to enforce the governing documents through the process of Alternative Dispute Resolution (ADR) which involves either mediation or arbitration, or through use of the courts.

If the developer is still involved, the California Department of Real Estate will have jurisdiction over some matters.

Some disputes are political in nature and have nothing to do with enforcement of the governing documents.  These types of disputes can only be resolved through the election process.  A board of directors of an association has the power to do a great deal of good or harm.  Consequently, electing a quality board is critical to the success of your association. Top

PARKING IN FIRE LANE

Q. 
Our homeowners association has an owner who insists on parking his vehicle in a marked fire lane.  What can we do?

A. 
The association may cause the removal (towing) of any vehicle, without notice, if the vehicle  is:

(1)      Parked in a marked fire lane;

(2)      Parked within 15 feet of a fire hydrant;

(3)      Parked in a space designated for handicapped persons without proper authority; or

(4)      Parked in a manner which interferes with any entrance to, or exit from, the common interest development or any separate interest contained therein.

If the offending vehicle is parked in an unauthorized area other than one of those areas set forth above, all of the following requirements must be satisfied before the vehicle may be towed:

(1)      A sign (not less than 17 x 22 inches in size with lettering not less than one inch in height) must be placed at each entrance to the common interest development that contains:

a)      A statement that public parking is prohibited and that all vehicles not authorized to park will be removed at the owner's expense, and 

b)      The telephone number of the local law enforcement agency.

          The sign may also indicate that a citation may be issued for the violation.

(2)      If the identity of the registered owner of the vehicle is known, or readily ascertainable, the president of the association, or his or her designee shall, within a reasonable time, notify the owner of the removal by first-class mail.

(3)      If the identity of the owner of the vehicle is not known or ascertainable, the president of the association or his or her designee shall immediately notify the Department of Justice in Sacramento in accordance with Section 22853 of the Vehicle Code. Top

CODE VIOLATION ON COMMON AREA

Q. 
Our association has built steps within the common area that don't meet the requirements of the building code.  What are the ramifications?

A. 
If someone is injured on the steps, the fact that they don't meet code will make it much easier for the plaintiff's attorney to prove that the association was negligent.  In short, it increases your association's risk.  The steps should be corrected to meet code. Top

POOLS AND SPAS

Q. 
I work for a small company that manages homeowner associations.  What is the minimum age allowed by law for unsupervised children to use a swimming pool or spa?

A. 
Unsupervised use by children under the age of fourteen is prohibited.  In addition, warning signs are required in accordance with Section 3119B.5 of the California Building Code and Title 22, Section 65539(c) of the Code of Regulations - Environmental Health.  Your pool maintenance company should be familiar with these requirements. Top

BOARD REFUSES TO OBTAIN RESERVE STUDY

Q. 
Our board of directors refuses to obtain a reserve study for our homeowner association. Can board members be held legally liable for negligence if they won't obtain a reserve-study?

A. 
Yes. Negligence is a civil wrong (tort) that has the following elements:

          (1) The defendant must owe a legal duty to conform to a certain standard of care for the protection of the plaintiff,

          (2) The defendant must have breached his duty by failing to conform his conduct to the required conduct,

          (3) The breach must be a legal cause of the plaintiff's injury, and

          (4) The plaintiff must have suffered actual harm.

The California Civil Code, with few exceptions, requires the board of directors of an association to obtain or prepare a reserve study at least once every three years. Whenever a board is required by law to do something, it owes a legal duty to act accordingly. Failing to obtain or prepare a legally required reserve study constitutes a clear breach of duty. If such a breach causes harm to members of the association, the legal elements of negligence have been satisfied and the members may successfully prevail in a suit.

Failure to obtain a serve study can result in any one or more of the following types of harm:

          (1) It may result in a large special assessment being imposed which some members of the association may find difficult or impossible to pay.

          (2) A member of the association may find it difficult to sell or refinance his or her home which may cost money or even result in a foreclosure. Buyers and lenders are becoming more knowledgeable and are often refusing to become involved with associations that do not comply with the law.

          (3) Owners may suffer the consequences of being a member of an association involved as a defendant in litigation brought by another member. Top

LEGAL PROTECTIONS FOR BOARD MEMBERS

Q. 
I am considering running for election to the board of directors of my homeowners association. What types of protections are available to protect me against legal liability for negligent acts?

A. 
Under the California Civil Code, a director cannot be held personally liable if the director is acting:

          (1) As a volunteer (not paid);

          (2) Within the scope of the director's authority;

          (3) In good faith;

          (4) In the absence of willful, wanton or gross negligence; and

          (5) The association has both general liability and directors/officers liability insurance coverage ($500,000 minimum for 100 units or less, or $1,000,000 minimum if over 100 units).

Not withstanding the above, the association may be held liable for negligent acts of the board of directors.

In addition, the California Corporations Code also provides immunity if the director is acting:

          (1) In good faith,

          (2) In the best interest of the corporation,

          (3) In accordance with the business judgment rule, and

          (4) As a volunteer (not paid).

Immunities are not absolute. You should contact legal counsel for additional information and obtain comprehensive insurance coverage from a knowledgeable insurance broker. Top

WRONGFUL LIEN

Q. 
I live in a townhouse development with an association.  The management company recently fined me for an alleged parking violation and then liened my property for non-payment.  The fine was only $25.  The lien fee is $350.  What can I do?

A. 
A monetary penalty imposed by an association as a disciplinary measure for failure of a member to comply with the governing documents, except for late payments, may not be treated as an assessment which may become a lien against the member's separate interest.  In short, the lien must be removed because it is not permitted by law.  In addition, your management company  is in violation of the Federal Fair Debt Collections Practices Act.  They have created a legal liability for your association as well as themselves. Top

DAMAGE TO PERSONAL PROPERTY

Q. 
During the recent rains, the roof to my condominium leaked through a crack causing damage to my furniture and other personal property. I have been informed by the association's insurance company that the master policy excludes coverage for my personal property. I don't have insurance. Can the association be held liable for not maintaining the roof?

A. 
Possibly. If the board of directors fell below the standard of care in maintaining the roof, they could be liable for negligence and would then be responsible for paying your damages. The fact that the roof leaked is insufficient, by itself, to prove negligence on the part of the board. For example, if the crack was new, the board would probably not be held liable for negligence. If the crack was old and the board failed to have the roof inspected, it would be more likely that a court would hold them liable. The facts of your case must be fully investigated before an educated opinion can be offered.

The lesson is clear. It is prudent for all condominium owners to obtain insurance to protect their property. It is inexpensive compared to the risk of harm an owner can suffer. Top

LIEN PROCEDURES

Q. 
Our association management company filed a lien against my home after giving me only ten days notice to pay my monthly assessment. They also charged me $495.00 for recording the lien. Can they do this?

A. 
No. Management companies are required to comply with the Federal Fair Debt Collections Practices Act. Among other requirements of the Act, a thirty day written notice is required before a lien can be recorded to enforce payment of an assessment. Your management company should immediately release the lien, waive the fee and obtain legal advice before they get themselves and your association into serious legal trouble. Top

WRONGFUL LIEN

Q. 
The management company for our homeowner association recently hired a lien service to collect delinquent assessments from a member of our association. The lien company sent the debtor a written notice stating that he had 30 days to dispute the debt and that a lien would be recorded if the debt was not paid within ten days. The debtor did not pay within the ten days and the lien service has recently started a foreclosure. The debtor claims that our lien service has violated the law and demands that we stop all collection action. The lien service is owned and operated by an attorney. Who is correct?

A. 
The debtor is correct. The federal Fair Debt Collections Practices Act requires that a debt collector provide the debtor with a 30-day notice before taking any collection action. Your association should immediately consult with another attorney that specializes in collection law. Your association may be liable for substantial damages, however, it appears that your association may have an excellent malpractice claim against the lien service. Top

FAILURE TO DISCLOSE

Q. 
We recently purchased a townhome only to find out that the former owners had previously been notified in writing by the board of directors that their patio cover did not meet the architectural requirements of the community.  What can we do?

A. 
Section 1368 (a)(5) was recently added to the California Civil Code to deal with this type of problem.  Under this section, a copy or a summary of any notice previously sent to the owner that sets forth any alleged violation of the governing documents that remains unresolved must be provided to the prospective purchaser as soon as practical before transfer of title.

Any person or entity who willfully violates this section can be held liable to the purchaser for actual damages and, in addition, a fine not to exceed $500.00. Top

DISCLOSURE REQUIREMENTS OF ASSOCIATION

Q. 
Is a homeowner association required to make disclosures concerning the condition of the common area to prospective buyers of homes?

A. 
No. An association's disclosure obligation is to existing owners, not prospective owners. Owners who intend to sell are required to make such disclosures to prospective buyers.

If an association makes a disclosure to a prospective buyer and it is inaccurate, the association could be held liable. Top

 

SAFETY GLASS

Q. 
My rental home was built before shower doors and sliding glass doors were required to have safety glass. My property has standard glass in both the shower doors and sliding glass door. I prefer not to spend the money to replace the glass. Is it necessary?

A. 
I strongly recommend that you replace the ordinary (annealed) glass with tempered glass or laminated glass, both of which are considered safety glass. Ordinary glass can break into dangerous shards that can cause horrific lacerations, resulting in major injuries and possibly death. The cost of replacement is nominal when contrasted to the possible harm from an accident.

Replacing ordinary annealed glass with safety glass will help to prevent injuries resulting, in part, from common accidents as well as earthquakes, wind storms, and even explosions.


Conflict of Interest with Law Firm

Q. 
Our homeowner association needed a referral to a law firm that would represent us on a contingency basis. Our management company made a referral and our board of directors subsequently signed an agreement with the law firm that was referred to us. The retainer agreement called for the law firm to receive 40% and the management company to receive 10%. The management company was required to provide some minor administrative assistance to the law firm. The case settled for millions of dollars and consequently the management company was paid several hundred thousand dollars for less than $2,000 worth of services! The members were never informed of the arrangement. As a member of the association, I am very concerned about this situation. What do you suggest?

A. 
You should be concerned about your board, the law firm representing your association and your management company. The situation you described calls for a confidential consultation.

Association Sued by Member

Q. 
Our management company recently recorded an assessment lien against the property of a delinquent homeowner. Before recording the lien, they carefully read the CC&Rs and then followed the requirements, only to find out afterwards that the CC&Rs were outdated and did not reflect the current law. As a result, we were sued by the delinquent homeowner and forced to pay a large sum of money to settle the case. Can we recover from our management company?

A. 
I believe you have a good negligence case. Your management company fell below the standard of care by failing to comply with the current legal requirements. The recordation of liens can have serious consequences and should be supervised by an attorney.

The situation you have described clearly illustrates the importance of amending your association’s CC&Rs in order to make certain they reflect current law.

Pitbull

Q. 
Our management company recently recorded an assessment lien against the Someone just moved into our condominium association with a large pitbull dog. It hasn’t attacked anyone, but it is very aggressive and nearly everyone is concerned about it. Our CC&Rs are silent on the subject expect for permitting members to own up to two domestic animals. What should we do?

A. 
It would have been easier to prevent this problem by amending your CC&Rs before the pitbull was brought onto the property. Attempting to deal with the problem after the fact is much more difficult, but not impossible. The dog may constitute a nuisance which is probably a violation of your CC&Rs. More facts are needed to adequately answer your question. The lesson is clear, however: It is far better to address these types of issues with a CC&R amendment before the anticipated problem becomes a real problem.