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:
