ECHO Journal - November 2015 by Echo

Trust Building in an HOA. Do Boards Have the Advantage? p.8

Bank Loans for HOAâ&#x20AC;&#x2122;s, Part 2

Does Your Association Need a CPA?

p.14

Serving Community Associations

p.22

Running a Successful Monthly Meeting

p.28

Summary of California Statutes

p.32

November/December 2015 echo-ca.org

Trust Building in an HOA p. 8

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News From ECHO November 2015 I am excited to announce that traffic on our website is double the readership of the ECHO Journal! If you have found the information on the website useful, we’re delighted, and hope you’ll return often to find the most professional, up-to-date, independent news and advice for HOA Boards on the web. If you haven’t been to the site, please see what others are finding compelling: www.echo-ca.org. Given the shift in information access, we are refocusing our resources to ensure that everyone who uses ECHO as a resource can find what they need, when they want it. To that end, the ECHO Journal will be published bi-monthly, beginning with this issue. The ECHO Journal will continue to offer full length articles providing information and insight from experts in a wide variety of fields relevant to homeowner associations in California. You’ll get updates on legislative activity in Sacramento, news on upcoming seminars and resource panel meetings in your area. The ECHO Journal has been and will remain the gold standard for print media delivery of Community Association news. Beginning in January, ECHO will produce and send to our email distribution list two electronic newsletters per month. The first will focus on a particular topic relevant to community activity at that time. The second will bring you news and information to help you better govern your association. Sign up online at www.echo-ca.org/XXXXX, or simply send me an email with yours and you’ll be added to our list. As we began in 2015, attendance at our Regional Educational Seminars will be free to ECHO HOA Members, and attendance at our Annual Seminar will be 50% off. Thank you for your membership in our community, and your service to your association. As the world around us changes, we will continue to provide our members with important news, information and guidance so HOA Board Members can better serve their communities. Best,

Brian Kidney Executive Director Nov/Dec 2015 | ECHO Journal

CONTENTS 8 14 28

22 4

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Trust Building in an HOA. Do Boards Have the Advantage? For new owners in an HOA, trust in the board is automatic. Very few people come in to a new home in a homeowners association questioning or criticizing the board. Most are happy with their new homes. So, Boards are starting from a position of advantage. People don’t assume they are the enemy. What in the heck happens to change that?

Bank Loans for HOA’s, Part 2 Many HOA’s have difficulty in determining how to ﬁnance their large (and complicated) repair/reconstruction projects. It can take many months of guessing about (1) paying from reserves (2) raising the regular assessment (3) going to a special assessment (4) applying for a bank loan (5) a combination of options, to come to the right conclusion. There is a better way and the Association’s HOA banker should be able to help.

Does Your Association Need a CPA? This article is intended to equip you with the tools necessary to understand why you need a CPA. Then, to help you to identify a qualified CPA for your association, and to recognize the circumstances in which the right CPA can provide basic annual reporting, annual tax return preparation, as well as additional professional services that will provide substantial financial and operational beneﬁts to your association.

Running A Successful Monthly Meeting To reach our goal of shorter, more efficient meetings while still permitting homeowners to air views and opinions and allow the board to discuss, debate and take action on various issues, we streamlined how and what we did.

Summary of California Statutes Relating to Alternative Dispute Resolution and of the Internal Dispute Resolution California Civil Code Sections 5925 through 5965 address your rights to sue the association or another member of the association regarding the enforcement of the governing documents, the non-proﬁt mutual beneﬁt corporation law, and/or the Davis-Stirling Common Interest Development Act.

DEPARTMENTS 3

News from ECHO

2016 ECHO Educational Calendar

Featured at echo-ca.org

The ECHO Journal is published monthly by the Educational Community for Homeowners. The views of authors expressed in the articles herein do not necessarily reﬂect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy. Copyright 2015 Educational Community for Homeowners. All rights reserved. Reproduction, except by written permission of ECHO is prohibited. The ECHO membership list is never released to any outside individual or organization. ECHO 1960 The Alameda, Suite 195 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours Monday-Friday 9:00am to 5:00pm BOARD OF DIRECTORS AND OFFICERS President David Hughes Vice President Karl Lofthouse Treasurer Diane Rossi Secretary Carly Melius Directors Jerry L. Bowles John Garvic Adam Haney Stephanie Hayes David Levy

Robert Rosenberg Brian Seifert Wanden Treanor Steven Weil

Executive Director Brian Kidney Director of Marketing & Membership Carly Melius

San Rafael Educational Seminar — January 23rd.

ECHO Bookstore

Advertiser Index

Legislative Consultant Mazzoni and Associates

ECHO Event Calendar

Design and Production Design Site

ECHO Volunteers

Legislation at a Glimpse

Director of Communications Tyler Coffin

ECHO Mission Statement Serving Community Associations

Nov/Dec 2015 | ECHO Journal

2015 ECHO educational calendar

ECHO Announces it’s first 2016 Educational Seminar! If you’ve ever wished that ECHO would hold a seminar closer to your association, chances are that we’ll be nearby during 2016. Don’t miss an opportunity to get the education you need with guidance from some of California’s top HOA attorneys and professionals. Take a look and mark your calendar. We can’t wait to see you there!

January 23 San Rafael Educational Seminar (see page 21) Embassy Suites San Rafael, CA

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San Rafael

San Francisco

featured at echo-ca.org

Timely tips, fresh insights, and legislative updates — always ﬁnd what you need by visiting our website. To gain access to all of ECHO’s articles, sign up for a free account: email ECHO at newaccount@echo-ca.org.

Articles Emailing Budget Packages and Other Disclosures Mailing annual disclosure packets to your members is expensive and time-consuming. Email is the obvious solution, but California law places important restrictions on emailed information. Learn what you can and can’t send electronically, and what you need to do before sending your ﬁrst email. Educational Topic: Website & Email

HOA Duty to Address Upstairs Neighbor’s Noisy Floors Disputes over noises from upstairs units arise frequently in HOAs. Unfortunately, they are also some of the most difficult to resolve. Sensitivity to noise is subjective, and associations need to take proactive steps to that enable them to handle complaints fairly and quickly. HOAs that adopt clear ﬂooring policies and conduct proper investigations can avoid litigation. Educational Topic: Nuisance

The Threat of Defamation for HOA Boards In heated disputes between owners, we hear the word “defamation” a lot. It’s a serious charge, with real legal consequences. But defamation is more than unpleasant or insulting speech; defamatory statements are false and damage someone’s reputation. What is the real deﬁnition of defamation, and how can boards and owners protect themselves? Educational Topic: Defamation

Amending Your HOA’s Governing Documents Do we have to update our governing documents? How much should it cost? How can we get the association members to support the amendments? Association attorneys answer these questions and many more. Be prepared before you begin the amendment process. Educational Topic: Governing Documents

Facebook Join Our Facebook Community Want to see pictures from recent events? Comment on our legislative activity? We only put the latest news up on Facebook, and we’d love to hear from you. Share your experiences, read important and amusing HOA news, and connect with your fellow HOA owners on ECHO’s Facebook page. facebook.com/echoorg

ECHO Journal Read the ECHO Journal on the ECHO website before it arrives at your door. We often post the latest issue on or before the beginning of each month. Log in to browse the latest articles, or read from a huge library of past issues. Find in: echo-ca.org/journal

Nov/Dec 2015 | ECHO Journal

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TRUST BUILDING IN AN HOA DO BOARDS HAVE THE ADVANTAGE? By Beth A. Grimm, Attorney

ost people expect lawyers to focus laws and cases. That’s what they do, right? We’re good at spouting the law. “Yes”, the law is important and the cases are important and I am an attorney, but I want to talk about the bigger picture in this article. Some people sing about trouble with a capital T. I like to talk about trust with a capital T.

Nov/Dec 2015 | ECHO Journal

f you are in a relationship with anyone, a family member, spouse, relative, fellow worker, or friend, or have a longtime doctor, dentist, or even a dog, you probably already realize that trust is the number one most important “thing” in the relationship. With the dog, it’s easy, because they tend to have unconditional, or should I say blind trust and it takes being ﬂattened completely to waiver. We cling to trust in our doctors to take good care of us, and our friends and spouses to be honest with us, and our family to exercise reasonable familial bonds.

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However, with human beings and emotions involved, trust is not as unconditional nor as one-sided as from a dog’s perspective. It takes a lot less to start the erosion process. As trust erodes, fear, anxiety, and chaos can grab a foothold. Can you imagine? We hear so much about bad boards and bad homeowner associations in the news. Is that the norm? Are we getting good information? We are getting the most salacious information, for sure.

So how can I say Boards have an advantage? This is how: For new owners in an HOA, trust in the board is automatic. Very few people come in to a new home in a homeowners association questioning or criticizing the board. Most are happy with their new homes. Most owners don’t complain, don’t even question what is going on. Most don’t even bat an eye. They send in their money every month and assume it is put to good use … and that is trust. And the masses remain silent, until the board does something to change that. So, Boards are starting from a position of advantage. People don’t assume they are the enemy. What in the heck happens to change that? A good place to start is to understand the deﬁnition of trust: it is a ﬁrm belief in the reliability, truth, ability, or strength of someone or something. Attributes include confidence, belief, faith, certainty, assurance, conviction, credence.

Trust engenders acceptance of the truth of a statement without evidence or investigation. Trust can include a hope or expectation that leadership will do a good job. In law, trust means a confidence placed in a person or persons by making that person/s responsible for property belonging to others or an arrangement whereby property is held in a trust. You have probably heard the term fiduciary responsibility. A fiduciary is someone who is responsible for the safekeeping and/or protection of the assets of another. Board members are fiduciaries.

Then What Do You Think Destroys Trust In An Hoa Board? ........ Here are just a few of the things that I see erode the trust in a board:

Nov/Dec 2015 | ECHO Journal

eroded; it will go straight down the drain.

Responding “In Kind” Not Responding At All When any person reacts to a seemingly irrational person “in-kind”, the relationship becomes one of adversary and not trusted ﬁduciary or leader. Most people know from experience, whether they want to admit it or not, that when a family member, spouse, friend, or even an acquaintance or service personnel comes at you with an insult, anger, demand, highly charged emotional statement, or major attitude, it does absolutely no good to respond in kind. Being humans, it’s difficult not to feel defensive, to want to strike back. It is difficult not to analyze the situation from a “high horse” perspective of what is fair, reasonable or right. Things are not always fair! Angry, distrustful, or emotional people don’t tend to be rational. Smart, professional, responsible adults recognize and exercise choices - and the best choice always is to not respond “in-kind”. If you mirror the problem person’s approach, respect won’t just be

Few things are more grating than having someone ignore your pleas, questions, or requests. Some say silence is golden. I say that is true only when you are not waiting for an answer. If an owner brings a question or concern to the board, for example, in a homeowner forum, and there is no response whatsoever, the person feels like they are being ignored, and that ignites feelings of anger or frustration. It also presents poorly to anyone else at the meeting. There are some things a board can do to encourage owners to come to meetings and participate in the homeowner forum without inviting trouble. For example, a director might open up the forum with a statement like “We welcome your comments, questions, and concerns and we will accept your requests in writing if you run out of time given the ___ minute limit, and be assured we do our best to investigate where warranted and respond where

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Holding Information Too Close to the Vest/Secrecy Most adults learn at some point that neither they nor any person on the other end of any dispute, concern, or distressing situation appreciates secrecy. Hopefully you have learned by now whether you are a board member in your Association or an owner who is in disagreement with a director or the board that keeping secrets without a good explanation erodes trust. Any time a board is faced with difficult decisions because of unanticipated events or new discoveries, the tendency is to want to discuss those things in private. I don’t think it is normally because they want to “protect” the owners, but rather is because they want to avoid discussing difficult topics anywhere but in a controlled environment. Boards have a tendency to keep things too close to the vest when they have bad news or difficult problems to deal with. I say, Boards, it is better to face the difficulties head on and inform the membership in some reasonable forum what is going on, and how you intend to deal with it. For a good example of that, I came across something this spring that shows how a person in governance can work with others of a like mind to overcome a devastating loss, and the secret is to not hide out hoping the problem will go away, and to not run away from office.

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appropriate.” There is certainly much more that can be said. For example, “Thank you for feeling comfortable enough to come forward and address the board...”, although a simple statement, can ease tension in the proceedings and take an angry or frustrated person off guard.

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If you want to see for yourself how a person in leadership can retain their respectability by not only helping to uncover, but also helping to ﬁnd resolution in a very difficult situation, tune into a podcast done back in March or so of this year by Jameson Lingl in his “Ventura Podcast”. It is an interview with Charlotte Craven, a Ventura City Council Member. She served as a councilwoman for about 35 years, and during that time helped to

discover in the 80s a $24 million shortfall in the Ventura City budget. She and other council members, even though not having had anything to do with the problem (two sets of books were being kept by the City Manager), were sued individually for $6 million each. Through all this, she stayed her ground and helped, along with other respectable and hard-working council members, to overcome this very painful discovery and get the city’s budget back on track. Her interview provides a good illustration of fortuitousness and grace under pressure and any director would do well to strive to emulate that kind of an example. Check it out at http://www.VenturaCountyPodcast.com.

Not Having a Plan No one gets anywhere by floundering around like a freshly caught ﬁsh on the ﬂoor of the boat. I realize that in hobbies like watercolor painting there can be “happy accidents”, but I have yet to hear

where a board accidentally resolved a problem with a happy accident. Resolving problems typically takes planning and pragmatism - the bigger the problem, the more planning and pragmatism is needed. When a board is facing an extremely difficult problem, such as planning for rebuilding after a fire or disaster or discovering a considerable budget shortfall, it becomes a delicate situation to take it to the owners. The more that the board can illustrate through transparency and communications to the members that it is working on the situation and formulating a plan, the more the board is likely to retain the trust of those owners who have never known any other condition. If the board fails to get necessary help from experts or persons who have been through similar situations it may find itself floundering and if this occurs in the midst of a board meeting, a townhouse meeting, or a membership meeting of any kind, the foundation starts to crumble and now the board is facing not only the difficult problem but the loss of trust of the members. As the trust is

eroded, more and more questions are raised, and this often sends the board either on the defensive or on the run.

For more on this topic, watch for a second installment on Trust Building and Keeping The second article (Part II) will focus on board and membership meetings because, done right, meetings are one of the very places that boards can build and keep trust ﬂowing.

Beth Grimm is a community association attorney in California. She has served as East Bay Resource Panel chairperson, author of various publications and books about condominium living and the law, is a frequent contributor to the ECHO Journal, and has spoken at various HOA industry groups functions. Visit her at www.californiacondoguru.com for the latest and hottest issues HOAs and homeowners face every day.

Nov/Dec 2015 | ECHO Journal

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BANK LOANS FOR HOA‘S PART 2 By Karl Lofthouse

Nov/Dec 2015 | ECHO Journal

ast month, we discussed considerations leading up to applying for an HOA loan. Here, we cover the basics on applying for a loan and what happens after it is funded.

With a minimum of data filled in on the loan application (including a rough estimate of the project cost) and the following three pieces of information:

1. The latest ﬁnancial statement 2. The current annual budget 3. The reserve study

Considering the Financial Pre-View Many HOA’s have difficulty in determining how to finance their large (and complicated) repair/reconstruction projects. It can take many months of guessing about (1) paying from reserves (2) raising the regular assessment (3) going to a special assessment (4) applying for a bank loan (5) a combination of options, to come to the right conclusion. There is a better way and the Association’s HOA banker should be able to help.

The HOA banker should be able to create a financial projection that would give a fairly good idea of how a loan combination could work in the financing of the project. He/She should be able to determine:

1. How much could come from reserves 2. Whether the regular assessments (and by consequence, the reserve contribution) could or should be raised, and by how much

3. Whether a special assessment would be needed and how much it should be 4. How a loan could be structured within a combination of the above actions By sharing this information with the HOA board treasurer, or the HOA’s agent, they might be able to add pertinent details that could then be combined into the projection, till together they have come up with a financing package that will meet the needs of the Association while at the same time being a loan that will work for the bank. This should be done early in the planning of the project as it will then help smooth out some of the decision making later on. As meetings with the CM, Architects, Contractors, etc. progress, and as the cost information changes, feed those changes to the HOA banker as updates to the ﬁnancial projection and this end product should then become the very basis of the HOA loan. Give the banker the remaining

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items that are requested. He/She will include these along with a narrative that goes with and explains the numbers and submit the loan for approval. The HOA banker becomes part of the project team though need not attend every meeting. And along the way the Association is assured that what is being contemplated, they can actually finance.

It was mentioned above that an HOA bank will not put liens on owners’ homes. This is because the loan is basically being made to the Association and not the individual owners. The bank will have an assignment of the HOA’s lien & collection rights, against future assessment income, to be exercised in the unlikely event of default and will file a UCC-1 with the Secretary of State.

Interest Rates Loans are available with either fixed or variable interest rates. Most HOA’s prefer a fixed rate since it is less complicated, remains constant and makes the annual budgeting easier, particularly when a Special Assessment is involved. Variable rates, on the other hand, periodically change as the underlying index changes, making the future loan costs uncertain.

Collateral

Cash ﬂow of the association The bank views an HOA loan as being cash flow based, rather than equity based, and thus makes the approval decision on the level of revenue of the Association. This cash flow must be positive, meaning that there must enough revenue to meet regular operating and reserve expenditures with enough left over to make the loan payment, with a little bit of cushion (in case something goes wrong). The bank will analyze this cash ﬂow by reviewing

the HOA’s financial statements, tax returns, budget, reserve study, and A/R aging and delinquency reports. The analysis will usually be done in spreadsheet fashion and will incorporate the number of years that represents the entire term of the line and the loan. It is wise for an HOA to be able to demonstrate to the bank that it has followed a plan of regular contributions to the reserve fund, performed routine preventive maintenance and paid close attention to the items that need to be repaired and/or replaced. The reserve study is a wealth of in formation regarding these issues. It might not be exact but when combined with the annual budget an Assn. will have the basics to assist in its future project planning.

What is meant by the “Debt Ratio” on HOA loans? It is the numerical relationship between the certain cash ﬂows of the Association

Nov/Dec 2015 | ECHO Journal

and the loan payments. It is just one of the guidelines, and an important one, used by the bank to determine whether the HOA will have the ability to repay the loan. Here’s how it works. Let’s say that the bank’s “debt ratio” requirement is a minimum of 1.25 to 1. There might be numerous ways to calculate this but here is the standard. The total annual revenue that would be available for loan payments is divided by the annual amount of the payment itself, looking for the above ratio or greater. This total revenue would usually include (reserve contributions, monthly payment of special assessments, monies set aside in the operating budget for loan payments, any interest earned on reserve balances, etc.). So if the annual available revenue is say, $60,000, the annual loan payment could be $48,000 (a loan of about $200,000 for 60 months). When a loan proposal does not meet this 1.25:1 minimum requirement, an experienced banker will consult with the borrowing HOA about alternatives. A longer loan term may be appropriate, or a smaller loan, or maybe even prioritizing the

project into ABC categories, thus lowering the amount of the immediate need.

Delinquencies While thinking about cash ﬂow lending, it is critical to think about the state of the HOA’s delinquencies. An accounts receivable aging report that includes all of the potentially collectable debts (from both current and former owners) may be misleading, both to the HOA itself and to the bank. Consider the following (particularly if the new owners are current with assessment payments). The debts owed by current and former owners are very different. Those of former owners that are often in the 90+ day columns tend to clog up the aging report giving a false impression to a bank’s loan approvers. It looks like the association is not very good at collecting assessments. And the banker might question whether this HOA has an adequate income stream which can help it meet the monthly debt

service (loan payments). So by all means, the HOA should work with its CPA and clean up the aging report when applying for an HOA bank loan. An effective HOA lender considers strongly the cash flow generated by regular and special assessments on current owners, while placing lower importance on income from fines, fees and finance charges as well as past due assessments from former owners. In practice, it is often helpful for an HOA to use separate aging reports – one with historical data for the collection of old debts and one with just the current, relevant information needed for financing.

The Importance of the Reserve Study Most major repairs or improvements in HOA communities are anticipated in a reserve study prepared, of course, by a qualiﬁed third party. When a bank considers making a loan for the capital improvement, which is not anticipated by the reserve study, or which has become more costly due to the unanticipated, the RS would be utilized during the subsequent analysis of the potential loan in the following ways.

1. The annual reserve study expenditures are included in the loan analysis to insure that there will be adequate monies to properly maintain the property while at the same time, making loan payments, during the course of the loan. 2. The costs in the reserve study, which correspond to the project to be completed, are reconciled with the numbers in the contractor’s proposal to assure that they will not be double counted in the loan analysis. It is important to the bank that these annual repairs actually happen throughout the time period that the loan is inplace. This assures that the Association’s asset (the property itself ) will be maintained and projects will not 18

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be deferred, thus property values would remain stable, even increase. It means also that the bank’s asset (the loan) holds its value, as well.

Ensuring an Adequate Construction Budget When confronted with a large or unexpected capital project, and while considering financing for the same, HOAs should note any lack of uniformity in contractor’s estimates, both as a basis of comparison, and also as a guide to the size of a required special assessment and potential bank loan. Some contractors will include all the expected costs, while others will provide a bottom line for just their direct costs. A good quality construction estimate while considering an HOA bank loan should include:

set of loan docs (e.g. laser Pro docs).

Fees: Origination, Legal review, project inspection, document preparation The main fee is the loan origination fee and is usually stated as a percentage of the amount of the approved loan. It is roughly equivalent to “points” on a home loan but will usually be a lower percentage. Its purpose is to cover the banks internal costs of putting the loan together (time spent by different individuals on the analysis, underwriting, approval, documentation and recording on the public record). A Legal review fee is meant to cover the cost of the bank’s attorney in reviewing the loan documents. This should not be necessary if the bank uses a standard

A document preparation fee is sometimes used in conjunction with the attorney’s fee if the loan documents are customized (usually not necessary with an HOA loan or when using Laser Pro docs). The Project inspection fee is sometimes used in larger loans (e.g. over $1MM) or on very complicated projects (such as the complete rebuilding of a clubhouse, where multiple construction disciplines are necessary and project scheduling is long and interdependent) and is usually not needed on simple projects involving only one or two disciplines (e.g. re-roofing or re-siding). Ninety ﬁve percent of HOA loans do not need this fee. As stated above, the main fee is the loan origination fee and is one that is frequently looked at when comparing banks. Some banks when confronted with stiff competition will lower this

1. The contractor’s costs, including all materials, proﬁt and overhead. 2. Any Engineering and or Architectural fees. 3. Permit and any completion bond fees. 4. Administrative costs for monitoring any special assessment payments. 5. Construction management costs. 6. An adequate contingency for unexpected or unforeseen issues (hidden dry rot in siding or roofs could require a larger contingency than upgrading the landscaping or replacing fences). It will be important for the HOA lender to know the total costs while analyzing the potential for a bank loan as future hidden costs could impact the Assns. ability to meet the monthly debt service on the loan.

Nov/Dec 2015 | ECHO Journal

fee, but will add some of the other fees, though unnecessary, such as the attorney or document preparation fees. So it is a good idea to be aware of ALL the fees.

From “Line of Credit” to “Term Loan” The HOA loan is a hybrid loan product which begins life as a “line of Credit” and ends as a “Term Loan”. It makes sense, as the contractor invoices are received at periodic intervals and there is no need to draw money from the loan till it is time to pay an invoice. This line of credit would include certain features. First it would be what bankers call a non-revolving line of credit (NRLOC) meaning that it is a one-time draw ( cannot draw, pay back then draw again). Second, it will be set for a limited time period as it is designed to roughly match the construction schedule. If the roofing project could be completed in four months, then the NRLOC might be set for six months to allow for any construction delays, like weather, etc. And then, thirdly, the payment obligation for Elm Street HOA would be the monthly payments of interest only, on the amount that has been drawn. When the rooﬁng project is on-going, the contractor has begun sending invoices, monies set aside for the project have been used, it is time to begin requesting money from the “line” (making a draw). Elm Street HOA will complete the bank’s “draw request form”, and present it to the bank along with the contractor invoices, plus proof of preliminary lien releases. The bank will then disburse the draw funds into Elm Street’s “reconstruction bank account” and Elm Street pays the contractor invoices (draws are repeated throughout the remainder of the project). When the project is ﬁnished, the money all drawn, the contractors all paid and the six months has expired, the loan automatically converts into a term loan (TL). The TL features would include a time period for the pay-back which would have been pre-determined during loan approval (e.g. 5, 7 or 10 years). The loan is usually fully amortized meaning that there would be no balloon payment at the end. HOA lenders do not place 20

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liens on owners’ homes for the banks beneﬁt. Also, most HOA lenders do not include pre-payment penalties (be sure to check this). And ﬁnally, the payment obligation during the TL period would be principal and interest on the amount of the loan principal balance. Some HOA banks, though not all will allow principal reductions (as many as necessary) during the TL period, then automatically re-amortize the loan, over the remaining term, thus reducing the future monthly payments. This might happen if, for instance, a Special Assessment monthly payer reduces his/her obligation or pays it off early.

Annual financial information is needed After the loan is approved, the money is all drawn, the project is finished and the TL payments have begun, what then? Then the bank will contact the HOA on the annual anniversary date of the beginning of the loan to request certain financial information. This would include the CPA prepared FYE financials and tax return, the annual pro forma budget, a proof of ongoing insurance coverage and finally the A/R aging and delinquency report. These documents will be used to monitor the on-going cash flow and financial situation of the Assn. throughout the course of the loan. The aging report will show that the delinquencies are kept under control. The FYE financials & tax return will show that the same

numbers are reported on both, that the annual reserve contribution is actually being made, as scheduled, that the property is being maintained in accordance with the R/S recommended schedule, thus upholding the property values, and that the reserve account balances are kept in a healthy state. The proof of insurance will show that the association is covered for emergencies. And ﬁnally, a proper annual budget will include a line item for repayment of the loan. If anything is out of order, the bank will make corrective suggestions for the Association.

Expect to move the Association’s banking relationship to the lending bank: The HOA departments in most banks are organized with a primary goal of gathering deposits that can be utilized in lending to other commercial customers of the bank. A secondary function of these HOA departments is to accommodate their HOA client base with loans to be used for improvement projects. So a borrowing Assn. should expect to become a customer of the bank while the loan is in place. Karl T. Lofthouse is Vice President, HOA Specialty Banking Lender, Heritage Bank of Commerce. Karl is Vice President of the ECHO Board of Directors.

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Exp. Date: Signature: Return with payment to: ECHO, 1960 The Alameda, Ste 195, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Phone: 408-297-3246; Fax: 408-297-3517

Nov/Dec 2015 | ECHO Journal

By James H. Ernst, CPA, MS-Tax

DOES YOUR

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NEED A CPA? Nov/Dec 2015 | ECHO Journal

he simple answer is YES. But why? I hope to answer the question of “why” in this article and provide you with information necessary to select the most qualiﬁed CPA for your association.

CALIFORNIA CIVIL CODE According to California Civil Code Section 5305 “Review of Financial Statements” (under the Davis-Stirling Common Interest Development Act): “Unless the governing documents impose more stringent standards, a review of the financial statement of the association shall be prepared in accordance with Generally Accepted Accounting Principles [GAAP] by a licensee of the California Board of Accountancy [Certified Public Accountant – CPA] for any fiscal year in which the gross income to the association exceeds seventy-five thousand dollars ($75,000).” Although there are no Audit requirements under the Civil Code, your governing documents may impose a more stringent standard, which could be an Audit of your financial statements. Therefore, whether you are required by the Civil Code to have an annual Review, or by your governing documents to have an annual Audit, you will need a qualified CPA to provide these services.

WHAT IS A QUALIFIED CPA? To help you identify a CPA for your association, I have listed the various requirements to be a CPA, along with the knowledge that your CPA should possess about our industry, the objective of which is to allow you to select the CPA that is the most qualiﬁed and is right for your association.

WHAT IS A “LICENSEE OF THE

CALIFORNIA BOARD OF ACCOUNTANCY”? A licensee is an individual who has met and continues to meet those requirements established by the California Board of Accountancy (www.dca.ca.gov/ cba) and upon whom has been conferred the title of Certiﬁed Public Accountant (CPA). Such an individual is also referred to as an Accountant – please note that only a CPA can use this title.

WHAT ARE THE LICENSE REQUIREMENTS? Education: Baccalaureate Degree in Business/Accounting or equivalent and 150 semester units. CPA Exam: Successful completion of a rigorous “Uniform CPA Examination” that covers accounting practice, accounting theory, business law and auditing.

Initial Experience: Minimum of two years experience working for a CPA. During this two year period, the candidate must spend a minimum of 500 hours planning and performing independent audits of ﬁnancial statements, preferably those of a homeowners’ association.

Continuing Education : To maintain an active CPA license, the CPA must complete a minimum of 80 hours of continuing education every two years, including courses on fraud and ethics.

Industry knowledge: In addition to the requirements listed above, the CPA must possess knowledge of the industry under examination (e.g., homeowners’ association). Some examples are: understanding specific industry requirements and guidelines; experience in the ﬁeld; and familiarity with the various accounting and operating methods and procedures followed by self-managed as well as professionally managed associations. Although knowledge of a speciﬁc industry is not required to obtain a license, it is required to provide services to the

Common Interest Realty Association (CIRA) industry – more commonly referred to as Homeowners’ Associations.

WHAT DOES YOUR CPA DO FOR YOU?

The primary service provided by your CPA is to perform an annual examination of your association’s financial statements, and to issue an Accountant’s Report on them.

The different levels of service related to the annual examination performed by your CPA are:

Review: This level of involvement that a CPA may have with the financial statements of your association is called a financial statement Review, and is required by the Civil Code if the gross income of your association is over $75,000 for the year. The objective of a Review engagement is to provide limited assurance that your association’s financial statements are in conformity with Generally Accepted Accounting Principles (GAAP). The CPA does not Audit your financial statements and does not express an opinion on them. In order to provide an annual Review, the Professional Standards set by the AICPA (American Institute of Certified Public Accountants), require that the steps taken by your CPA are in the nature of management inquiry and analysis of accounting records.

Audit: An even higher level of involvement that a CPA may have with the financial statements of your association is called a financial statement Audit. Although an Audit is not required by the Civil Code, it may be required by your governing documents. The objective of an Audit engagement is to enable the auditor (CPA) to express an opinion that: “…the financial statements…present fairly, in all material respects, the financial position of [the association] as of [the year end], and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States….”

This Audit is to be conducted in accordance with Generally Accepted Auditing Standards (GAAS) and will include tests of the accounting records of the association and other procedures that the auditor (CPA) considers necessary to enable him or her to express an opinion on the ﬁnancial statements taken as a whole.

Agreed Upon Procedures: From time-to-time, a CPA may be engaged to examine a specific set of financial transactions during an extended period of time. This engagement is referred to as “Agreed Upon Procedures”, which are designed to answer specific questions regarding a specific set of financial transactions. As a result, your CPA will provide a summary of their findings to the board or Management Company for potential corrections or other outcomes. Agreed Upon Procedures do not result in an accountant’s report as noted above under annual Reviews or Audits. Instead, your CPA will provide a report identifying their procedures and disclosing their findings. These procedures are not required by Civil Code, but are based on the reasons that the board or management has requested a special examination of select financial transactions; usually, for consulting and advisory services, litigation or potential litigation, and/or to act as an expert witness.

HOW DOES YOUR CPA DO IT? Whether your CPA is conducting a Review or an Audit or are simply performing Agreed Upon Procedures, he or she is obligated to perform their work in accordance with various AICPA Professional Standards that have been established over time and codified by the AICPA. There are different standards established for the different levels of service being provided, as follows:

Review: The The professional

“[t]he accountant should possess a level of knowledge of the accounting principles and practices of the industry in which the entity operates and an understanding of the entity’s business that will provide him [or her], through the performance of inquiry and analytical procedures, with a reasonable basis for expressing limited assurance that there are no material modiﬁcations that should be made to the ﬁnancial statements to be in conformity with generally accepted accounting principles.” It is important to emphasize that it is the responsibility of the accountant (CPA) to determine what “…he or she considers necessary to achieve the limited assurance contemplated by a Review…” This is not a decision that can be made by the organization being reviewed.

Audit: The professional standards for an Audit engagement require a signed Engagement Letter before an Audit can begin. Once signed, the accountant (CPA) must then follow Generally Accepted Auditing Standards (GAAS) as approved and adopted by the membership of the AICPA. These standards are:

General Standards 1. The Audit is to be performed by a person or persons having adequate technical training and proﬁciency as an auditor. 2. In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor. 3. Due professional care is to be exercised in the performance of the Audit and the preparation of the report.

Standards of Field Work

standards for a Review engagement call for an understanding of the services being provided; therefore, an Engagement Letter is required to be signed by the board and/or Management Company.

1. The work is to be adequately planned and assistants, if any, are to be properly supervised.

The professional standards for a Review require that:

2. A sufficient understanding of

the internal control structure is to be obtained to plan the Audit and to determine the nature, timing, and extent of tests to be performed. 3. Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under Audit.

Standards of Reporting 1. The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles (GAAP). 2. The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period. 3. Informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report. 4. The report shall either contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefor should be stated. In all cases where an auditor’s name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor’s work, if any, and the degree of responsibility the auditor is taking. Nov/Dec 2015 | ECHO Journal

AGREED UPON PROCEDURES The professional standards for Agreed Upon Procedures also call for a signed Engagement Letter before any work can begin. Once signed, the accountant (CPA) must then examine the ﬁnancial activity under question and conduct a complete and through examination of all transactions that are questioned by the board or management.

WHAT PROCEDURES DOES YOUR CPA FOLLOW? As you can see, there are extensive professional standards that your CPA must be aware of in order to complete the engagement properly and timely. To gain the appropriate level of understanding about the association and its ﬁnancial activities, your CPA employs a multitude of procedures that include, but are not limited to, the following:

1. Review and evaluation of internal accounting control.

Review :

“The accountant should possess a level of knowledge of the accounting principles and practices… that will provide him [or her], through the performance of inquiry and analytical procedures, with a reasonable basis [for issuing a report]”. This information is necessary to plan the procedures to be used in the Review engagement.

Audit: In addition to a general understanding, a formal evaluation of the system of internal accounting controls must be made. This requirement is one of the AICPA Standards of Fieldwork listed above that states, “[a] sufficient understanding of internal control is to be obtained to plan the Audit and to determine the nature, timing, and extent of tests to be performed.” 2. Plan further procedures with due professional care as developed

through the internal control review and evaluation.

3. Request those documents from management that the accountant deems necessary in order to perform his or her planned work in an efficient manner and on a timely basis. 4. Perform the appropriate procedures in accordance with the specific level of services being provided:

Review :

There are no specific tests of account balances required. However, in addition to the suggested verification of cash and investment accounts, a Review consists principally of inquiries of association personnel and analytical procedures applied to various ﬁnancial data. This is generally accomplished by a comparison of actual income and expenditures with the board approved budget and, through inquiry of management, a determination is made as to the reasonableness of the financial information.

Audit: In an Audit the accountant will perform detailed examinations of various account balances on a test basis. This requires that “[s]ufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the ﬁnancial statements under Audit.” 5. Report on the results of the engagement. This report, along with the Reviewed or Audited financial statements, is what your CPA has been asked to provide, and it is owned by the CPA. All other ﬁnancial information that follows the accountant’s report, including notes and supplementary information, remains the responsibility of the board of directors.

6. Representation

from the client. Accounting and auditing standards require that the accountant obtain a Representation Letter from members of management whom the accountant believes are responsible for, and knowledgeable about, the financial information being presented. This should be

both the board of directors and the Management Company.

WHAT ESSENTIAL CHARACTER TRAITS SHOULD YOUR CPA DEMONSTRATE? In addition to meeting the professional licensure requirements, having a working knowledge of professional standards, and familiarity with the homeowners’ association industry, there are some character traits that are essential to be a qualiﬁed CPA. Two of the most important traits are:

Skepticism: Most engagements are entered into with the belief by your CPA that the ﬁnancial information has been properly recorded and all supporting documentation will be made available. However, your CPA has been engaged to verify the accuracy of the financial information, not simply to accept the information as presented by management without Review or Audit. This “Professional Skepticism” can give the impression to management that your CPA is being unduly demanding in his or her requests for information and documentation, when in fact, he or she is actually exercising a high level of due professional care. Rather than being concerned that your CPA is asking for too much information, management should be concerned when information and/or supporting documentation is not being requested.

Independence:

“A [CPA] in public practice shall be independent in the performance of professional services….” Independence must be maintained in fact. If your CPA lacks Independence in Fact, he or she is precluded from performing a Review or an Audit, and must withdraw from the engagement. If you perceive that there is a lack of independence, you should address this concern directly with your CPA for resolution prior to the completion of the engagement.

WHAT ADDITIONAL SERVICES CAN YOUR

CPA PROVIDE? In addition to the annual Accountant’s Review or Audit Report, there are many other services that your CPA is qualiﬁed to provide:

Financial Statements: The annual financial statements, notes, and supplementary information that are presented with the accountant’s report are the responsibility of the board of directors. However, it is common practice for your CPA to reformat these financial statements in order for them to be in conformity with Generally Accepted Accounting Principles. This reformatting often includes adjusting your financial statements to be presented using the Fund Accounting Method of Reporting (recommended by the AICPA). In addition, as part of their engagement, your CPA can assist you in preparing all notes to the financial statements, as well as presenting the required supplementary information about reserves. Accounting principles used in the performance of their Review or Audit have been promulgated over the years in various authoritative literature; such as, Financial Accounting Standards Board (FASB) Current Text, Accounting Standards as well as the AICPA Audit and Accounting Guide, Common Interest Realty Associations. The use of GAAP is intended to insure that financial statements of similar organizations (e.g., homeowners’ associations) are presented using a comparable method of accounting and reporting.

Tax Returns: In conjunction with the annual Review or Audit, your CPA is usually engaged to prepare the annual federal and state tax and information returns. However, for those associations that do not require a Review or an Audit, they are still required to file annual tax returns, a service which your CPA is ideally suited to provide.

Bookkeeping: Because your CPA has a unique combination of industry knowledge and professional experience, they are able to Compile or Prepare the monthly financial statements for your association that are easy to understand by the board, management, and membership. “Compiled” ﬁnancial statements will have a CPA’s report, whereas, “Prepared” ﬁnancial statements will not.

Your CPA does not have to be independent when Compiling or Preparing monthly ﬁnancial statements for your association, but they do have to be independent to perform a Review or an Audit.

Management Letter: A required part of an Audit is the issuance of a Management Letter to the board of directors, if the auditor (CPA) “become[s] aware of matters relating to the internal control structure that may be of interest to the [board]. [These] matters…are referred to as reportable conditions.” This Management Letter is intended to bring to the board’s attention any reportable conditions that may exist with regard to the ﬁnancial reporting of the organization. Included in this letter should be recommendations for improvements in accounting procedures and the system of internal control. The auditor may also identify matters that, in his or her judgement, are not reportable conditions, however, the auditor may choose to communicate such matters for the beneﬁt of the board. Although a Management Letter is not a required part of a Review engagement, if there are reportable conditions, your CPA may issue a letter in order to bring these matters to the attention of the board.

Inspector of Election: In accordance with Section 5110 (b) of the Civil Code, your CPA, as a licensee of the California Board of Accountancy, can act as the Inspector of Election for your annual meeting as well as for special elections.

To enable the board to meet this very important element of their fiduciary responsibility, prior to issuing their Review or Audit report, your CPA must be willing to meet with the board and management (including those responsible for preparing your financial statements) to present their findings and to answer questions regarding adjustments, if any, to your financial statements, the financial statement presentation format, notes, and supplementary information, along with any internal control issues identified during the course of their engagement.

Annual Budget: The preparation of an Annual Budget can sometimes be time-consuming and challenging for the uninitiated board member or understaffed Management Company. You should be able to contact your CPA for assistance in this area.

Expert Witness: Occasionally, an association may need the services of a competent and knowledgeable professional to assist in the legal arena. The right CPA has the expertise to act as an Expert Witness in these legal proceedings. DOES YOUR ASSOCIATION NEED A CPA? THE ANSWER IS YES! As you can see, CPAs are uniquely qualiﬁed professionals not unlike your attorney or physician. They bring a level of expertise and excellence to your association that may be unavailable through any other avenue.

directors of a nonproﬁt organization (e.g., a common interest realty association) has a fiduciary responsibility known as a “Duty of Care”. This duty concerns the standard of conduct applied to directors in the discharge of their responsibilities. Directors must exercise their responsibilities in good faith and with a certain degree of diligence, attention, care, and skill.

This article is intended to equip you with the tools necessary to understand why you need a CPA. Then, to help you to identify a qualified CPA for your association, and to recognize the circumstances in which the right CPA can provide basic annual reporting (as required by the Davis-Stirling Common Interest Development Act or your governing documents), annual tax return preparation, as well as additional professional services that will provide substantial financial and operational benefits to your association.

Within the broad scope of this duty of care is a “Duty of Attention”. This duty requires the directors to participate actively in the organization’s activities and operations. One element of such active participation is access to, and the opportunity to ask questions of, outside experts such as your accountant (CPA).

James H. Ernst, CPA, MS-Tax, CCAM is a Certiﬁed Public Accountant and a member of ECHO. His CPA ﬁrm, James Ernst Accounting, has been providing accounting and tax services since 1993, and he specializes in providing professional services for the homeowners’ association industry. He can be reached at 866.289.6000 or jim@ernst-cpa.com.

Ask the Expert: The board of

Nov/Dec 2015 | ECHO Journal

Running A Successful

Succ 28

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Monthly Meeting

by Tim Polk

cess Nov/Dec 2015 | ECHO Journal

hen I joined my homeowner association board approximately three years ago, I did so for the usual reason of wanting a say in maintaining and improving the complex. But when I later became president, I had another goal in mind: to make the monthly homeowners meetings — at the time running two+ hours and, in my opinion, unfocused and inefficient — shorter, less scattered and more productive. And the results? I’d love to say

every meeting now is quick, efficient, and fun — but it’s not. We as a board still go off on tangents, get bogged down in one or more issues, even have tempers ﬂair occasionally. But those meetings are the exception, not the norm. We’ve cut our meetings down to an average length of approximately 75 minutes, have completed numerous small projects and are planning better for the larger, longer term needs of the association.

How did we do it? To reach our goal of shorter, more efficient meetings while still permitting homeowners to air views and opinions and allow the board to discuss, debate and take action on various issues, we streamlined how and what we did. Speciﬁc suggestions I have that any board president and board can utilize or adapt to make their monthly meetings faster, better, and more productive include the following:

Use Introductions

Set the Tone at the Beginning

Don’t Give Each Topic the Same Emphasis

After calling the meeting to order and having the introductions, I remind the board of our goal of a 75-minute meeting and state, in general terms, what are the key issues to be discussed. (We normally devote each meeting to one main topic.)

...or the same amount of time. As president, you must control how much time is spent discussing a topic. The following are several example topics along with comments about handling each of them:

Use an Agenda and Stick To It A lot can happen in a month’s time. Some issues are nagging, difficult, or even contentious. The president must keep the meeting moving by following the agenda, discouraging off-target discussions, and encouraging board members to keep their comments or committee reports brief.

Have Each Meeting Focus On One Main Topic We as a board try to go through general business, such as committee reports, fairly quickly; then we devote the bulk of the meeting to one main issue. One month this topic might be security, another month landscaping, and so on. This allows an extended, meaningful discussion — but on one topic, not six. Also, by always having the main topic discussed last, board members are more likely to wrap up in a timely manner.

Emphasize and Utilize Pre-meeting Reports

¯ǣA request from a homeowner to ﬁx a leaking roof (major problem, requires resolution).

¯ǣA report about a dog conﬁned to a back patio and living in its own feces (serious problem, but board’s authority is limited; person reporting must be instructed to call local humane society).

¯ǣA board member asking for a volunteer to pick up her mail while she’s on vacation (minor annoyance to one person; ask that this be discussed after the meeting has been adjourned).

¯ǣA homeowner’s complaint that a neighbor’s car alarm occasionally goes off at night (minor annoyance unless chronic problem; acknowledge and move on).

Assign Ownership Immediately People are great at complaining, making suggestions and generating ideas. The real challenge, however, comes in follow-through. For every action decided on by the board (even if it is to reconsider the issue at a later date), the following must be established:

¯ What action will be taken? ¯ Which person or group will carry out the action?

We start every meeting by having board members state their name and board title. Homeowners, when speaking, also begin by saying their name and unit number. This helps reduce confusion and allows both board members and homeowners to have a better idea who is speaking. 30

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Encourage board members to read and study the pre-meeting packet of information carefully and write down any questions. If everyone has read the same information, the resulting discussion will then be more focused and more productive.

¯ By when will the action be completed? If a small group or committee is formed, I strongly recommend that one person be designated “team leader” with ultimate responsibility for the committee’s actions.

Limit Process and Instead Focus On Results Some board members will be “process people”; they love discussing options, getting bids, debating what to do, etc. As board president, always attempt to move the board to making decisions. For example:

¯ Discuss the many options, then reach agreement on two main options. Later, reach agreement on ﬁnal solution.

As quickly as possible or prudent, shift the discussion off the problem and onto the solution. Ask what action the homeowner suggests should be taken. Many times this will be impossible or extremely difficult. Tell the homeowner this (any why) and suggest what the board might be able to. The, if appropriate, discuss among the board and state exactly what action the board will take and by when. Often information will have to be collected by a board member or some professional expert. In these instances, invite the homeowner to the following meeting to discuss what has been found out. Thank the homeowner, then move on nicely but forcefully. Transitions include:

¯ǣ Put out bids one time only. Resist the temptation to put out request for bid, change some element, put out another request for bid, decide to do something else, put out another request for bid, etc.. Most board members will approve of these suggestions because they’ll appreciate the quicker, more focused meetings. It may take several meetings, but over time you will reduce the meeting length time and get more done.

Control input from homeowners.

¯ “Thank you for bringing this to our attention. We will do (a) and (b). Now, are there other homeowners’ comments?”

¯ǣ“We appreciate your interest in this matter. We all understand how important properly maintained lawns are, and we will pass along your concerns to the gardeners. Now, are there any other landscape issues from homeowners?”

Make it Fun

Receiving feedback and suggestions from homeowners is an important part of a board of directors’ role. While valuable, however, homeowner comments can go too far, wasting time, energy and goodwill. The following ﬁve-step plan will keep homeowners’ comments focused and productive:

A ﬁnal suggestion I’d like to make is this—try to have a little fun to reduce tension and promote camaraderie among board members. Crack a joke, bring a cartoon to share, or encourage funny comments that don’t belittle anyone. Humor reduces tensions and creates an open, honest atmosphere that will lead to more effective debate and more effective meetings.

Allow the homeowner state his or her problem or complaint. If the owner is upset, let them vent— but just a little. Empathize with them. Empathize means “to understand” and shows the board is concerned about the problem. Examples of empathic remarks are, “We all share those same feelings,” or “This is obviously something that must be remedied as quickly as possible.”

Tim Polk was serving as president of an 188-unit homeowner association in Sunnyvale when he wrote this excellent article. The information and recommendations are as good today as they were several years ago when this article first appeared in the ECHO Journal.

What Board Members Can Do to Promote Efficient Meetings Board members can contribute to shorter, more efficient monthly meetings the following are ways:

1 2

Read the information packet before the meeting and write down any pertinent questions or comments. Don’t offer your opinion on every topic. If everyone

speaks on every issue, the time drag is a signiﬁcant one. Save your input for the very end, and keep it short. State what you believe and why. And remember, you will have a vote in the matter.

3 4

Focus on solutions. Every concern or idea you bring up before the board should also have a corresponding solution, or at least several plausible options. Refrain from continually bringing up the past. More

often than not, the past isn’t relevant. The world is changing rapidly, as are budget requirements, situations, and homeowners needs and concerns. Focus on the issue at hand and possible solutions—not how it was done in the past.

If you take ownership of a project or assignment, follow through. If you

volunteer for something—anything— do it; if you feel that you might not be able to complete the task for whatever reason, don’t volunteer.

Don’t continue indeﬁnitely attempting to inﬂuence or change a project or vote after a majority of the board has approved it. No board member will

prevail on every matter that comes up; when you are on the minority side, accept it graciously.

SUMMARY OF CALIFORNIA STATUTES ALTERNATIVE DISPUTE AND OF THE INTERNAL by Julie Mouser, Esq.

echo-ca.org

RELATING TO RESOLUTION DISPUTE RESOLUTION

Nov/Dec 2015 | ECHO Journal

SUMMARY OF CALIFORNIA CIVIL CODE SECTIONS 5925 THROUGH 5965. PLEASE TAKE NOTICE: California Civil Code Sections 5925 through 5965 address your rights to sue the association or another member of the association regarding the enforcement of the governing documents, the non-profit mutual benefit corporation law, and/or the Davis-Stirling Common Interest Development Act. The following is a summary of the provisions of Civil Code Sections 5925 through 5965, as enacted effective January 1, 2014. In general, Civil Code Sections 5925 through 5965 encourages parties to a dispute involving enforcement of an association’s governing documents, the non-profit mutual benefit corporation law, and/or the Davis-Stirling Common Interest Development Act to submit the dispute to a form of alternative dispute resolution (ADR) prior to filing a lawsuit. The form of ADR selected may be media-

tion, arbitration, conciliation or any other nonjudicial process that involves a neutral party in the decision making process. The intent of the statute is to promote speedy and cost-effective resolution of such disputes, to better preserve community cohesiveness and to channel disputes away from our state’s court system. Under Civil Code Sections 5925 through 5965, the form of alternative dispute resolution may be binding or non-binding and the costs will be borne equally or as agreed to by the parties involved. Any party to a dispute regarding enforcement of the governing documents, the non-profit mutual benefit corporation law, and/or the Davis-Stirling Common Interest Development Act may initiate the process of ADR by serving a Request for Resolution on another party to the dispute. A Request for Resolution must contain: (1) a brief description of the nature of the dispute; (2) a request for ADR; and (3) a notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or the Request will be deemed rejected. If the Request is accepted, the ADR must be completed within 90 days of

the acceptance, unless otherwise agreed by the parties. Any Request for Resolution sent to the member of a separate interest must include a copy of Civil Code Chapter 7, Article 2 (Alternative Dispute Resolution), Sections 5925 et seq., in its entirety. FAILURE OF A MEMBER OF THE ASSOCIATION TO COMPLY WITH THE ALTERNATIVE DISPUTE RESOLUTION REQUIREMENTS OF SECTION 5930 OF THE CIVIL CODE MAY RESULT IN THE LOSS OF THE MEMBER’S RIGHT TO SUE THE ASSOCIATION OR ANOTHER MEMBER OF THE ASSOCIATION REGARDING ENFORCEMENT OF THE GOVERNING DOCUMENTS OR THE APPLICABLE LAW.

Should the association or an individual member wish to file a lawsuit for enforcement of the association’s governing documents that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits of small claims court (as of January 1, 2012, ten thousand dollars ($10,000) for individuals or five thousand dollars ($5,000) for homeowner associations), the law requires the association or the individual to file a certificate with the court stating that one or more of the following conditions has been satisfied: (1) ADR has been completed in accordance with the statute; (2) one of the other parties to the dispute did not accept ADR; and/or (3) preliminary or injunctive relief is necessary. Failure to file this certificate can be grounds for dismissing the lawsuit. There are limited exceptions to the filing of this required certificate for small claims actions, or some assessment disputes. Furthermore, in any enforcement action in which attorney’s fees and costs may be awarded, under Civil Code 5960, the court may consider any party’s refusal to participate in ADR prior to the lawsuit being filed when it determines the amount of the award.

SUMMARY OF INTERNAL DISPUTE RESOLUTION PROCEDURES FOR ASSOCIATION Pursuant to Civil Code Section 5915 (Civil Code Section 5900, et seq.), either the Association or a Homeowner who is

involved in a dispute regarding the Governing Documents, the non-proﬁt mutual beneﬁt corporation law, and/or the Davis-Stirling Common Interest Development Act may invoke the following procedure, which supplements the pre-litigation procedures described above (it does not replace such procedures):

1. The party may request the other party to meet and confer in an effort to resolve the dispute. The request shall be in writing. 2. A member of an association may refuse a request to meet and confer. The association may not refuse a request to meet and confer. 3. The board shall designate a director to meet and confer. 4. The parties shall meet promptly at a mutually convenient time and place, explain their positions to each other, and confer in good faith in an effort to resolve the dispute. The parties may be assisted by an attorney or another person at their own cost when conferring. 5. A resolution of the dispute agreed to by the parties shall be memorialized in writing and signed by the parties, including the board designee on behalf of the association. 6. A written agreement reached under this section binds the parties and is judicially enforceable if it is signed by both parties and both of the following conditions are satisﬁed: (i) The agreement is not in conﬂict with law or the governing documents of the common interest development or association. (ii) The agreement is either consistent with the authority granted by the board to its designee or

the agreement is ratiﬁed by the board. 7. A member shall not be charged a fee to participate in the process.

Julie Mouser, Esq., is a partner with Angius & Terry, a law ﬁrm specializing in construction defect litigation and general counsel assistance for community associations throughout California, Nevada and Florida. She can be reached at: jmouser@angius-terry.com.

Nov/Dec 2015 | ECHO Journal

BOOKSTORE The ECHO Bookstore is your source for publications providing essential information for HOA Board Member service obligations. Order online at echo-ca.org or ﬁll out form on the facing page.

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2015 Condominium Greenbook Member Price: Non-Member Price:

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This companion to the Condominium Bluebook is an in-depth guide to all aspects of association finances, including accounting methods, financial statements, reserves, audits, taxes, investments and much more. Not for the accounting novice, this is a tool for the treasurer or professional looking for specific information about association finances.

Robert’s Rules of Order

Questions & Answers About Community Associations

Member Price: $7.50

Member Price: Non-Member Price:

Non-Member Price: $12.50 A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents.

Construction Defect Claims Member Price: Non-Member Price:

$19.95 $25.00

New buildings can conceal extensive faults. It’s a board’s worst nightmare—rainstorms damage buildings and bring owner complaints. Is legal action necessary? With this new book, you’ll learn about the resolution process for construction problems, and how to handle complex claims.

$18.00 $25.00

For 12 years, Jan Hickenbottom answered homeowners’ questions in her Los Angeles Times column on community associations. Now collected in one volume, readers can ﬁnd answers to almost any question about CIDs.

Board Member Handbook Member Price: Non-Member Price:

$15.00 $25.00

This publication is the essential guidebook for HOA Board members, dealing with governance, ﬁnances, insurance and maintenance issues. Revised and updated in June 2012.

Reserve Fund Essentials Member Price: Non-Member Price:

$18.00 $25.00

This book is an easy to read, must-have guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful ﬁnancial tool.

Home and Condo Defects Member Price: Non-Member Price:

$12.95 $17.95

Construction defect litigation can be confusing, expensive and fraught with legal pitfalls. This eye-opening guide, written by accomplished construction-defect attorneys, is an essential tool for board members who need to understand the legal process.

echo-ca.org

The Condo Owner’s Answer Book Member Price: Non-Member Price:

$15.00 $20.00

An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowner associations. The question-and-answer format responds to more than 125 commonly-asked questions in an easy to understand style. A great resource for newcomers and veteran owners.

ciation o s s A unity Book Comm Statute dition 2014 E

Publications to answer your questions about common interest developments Order Online at www.echo-ca.org Dispute Resolution in Homeowner Associations Member Price: Non-Member Price:

$15.00 $25.00

Bookstore Order Form

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Board Member’s Guide for Contractor Interviews

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This report is a guide for directors and managers to use for interviews with prospective service contractors. Questions to ﬁnd out capabilities and willingness of contractors to provide the services being sought are included for most of the contractor skills that associations use.

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Nov/Dec 2015 | ECHO Journal

directory updates

All current listings may be found in our Professionals Directory available online at www.echo-ca.org.

New Members Bob Kunst Painting, Inc. 112 Mitchell Blvd. San Rafael, Ca 94901 Contact: John Busick Tel: (415) 457.0700

Above All Plumbing, Inc. 30087 Ahern Ave. Union City, CA 94587 Contact: Kimberly Mendez Tel: (510) 475.6114

Flowe.Green LLC 135 Kennedy Ave. Campbell, CA 95008 Contact: Jeff Horwitz Tel: (408) 690.7535

Bay Area Asphalt 545 Nipper Ave. San Jose, CA 95133 Contact: Jackey Kolander Tel: (408) 937.0510 MightyMite Termite 215 E. Hacienda Ave. Campbell, Ca 95008 Contact: Patrick Becker Tel: (888) 262.2870

Become an ECHO Professional Member and receive the beneďŹ ts of membership. To learn more, visit our membership page at www.echo-ca.org

echo-ca.org

advertiser index

about ECHO

Ace Property Management .................19 www.acepm.net

Mutual of Omaha Bank ......................35 www.mutualofomahabank.com

Associa Northern California M & C Association Management Services ..........................2 www.mccommunities.com

PAS: Professional Association Services, Inc. ........................................17 www.PAS-INC.com

Benjamin Moore Paint & Company ..35 www.benjaminmoore.com Berding Weil .........................Back Cover www.berding-weil.com Cornerstone Community Management ........................................34 www.cornerstonemgt.biz Eugene Burger Management .............10 www.ebmc.com

PML Management Corporation .........18 www.pmlmanagement.com R.E. Broocker Co. .................................17 www.rebroockerco.com Rebelloâ&#x20AC;&#x2122;s Towing .................................13 www.rebellos.net Union Bank ..........................................11 www.HOAbankers.com White & MacDonald, LLP ...................19 www.wm-llp.com

WHAT IS ECHO? Serving Homeowners to Build Strong Community Associations The Educational Community for Homeowners (ECHO) is a nonproďŹ t membership corporation dedicated to assisting California homeowner associations. ECHO provides help to homeowner associations on many fronts: ďŹ nances, legal issues, insurance, maintenance and management. Members receive help through conferences, trade shows, seminars, online education, a monthly full-color magazine and discounted publications.

Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the beneďŹ ts designated for homeowner associations.

BeneďŹ ts of Association Membership ÂŻÇŁ dČ&#x2C6;ÂĄÇ&#x2C6;Â°Ç&#x20AC;Ĺ&#x2020;Ć&#x2014;ÇŤĹ&#x2020;ĹşĹŠÇŁÇŤĹşÇŁĹŁĹşĹŠÇŤÄťĹ&#x2DC;ČŠÇŁĹŁÂ&#x2039;ÄŠÂ&#x2039;Č´Ĺ&#x2020;ĹŠĂ&#x; ÂŻÇŁ Â°Â°Ă&#x;Ç&#x2C6;Ç&#x2C6;ÇŁÇŤĹşÇŁĹŁĂ&#x;ĹŁÂĄĂ&#x;Ç&#x20AC;Ç&#x2C6;Ĺ&#x20AC;ĹşĹŠĹ&#x2DC;ČŠÇŁĹşĹŠĹ&#x2DC;Ĺ&#x2020;ĹŠĂ&#x;ÇŁ education ÂŻÇŁ pĆ&#x2014;Ă?Â&#x2039;ÇŤĂ&#x;Ç&#x2C6;ÇŁÇŤĹşÇŁÇŤÄťĂ&#x;ÇŁ Ç&#x2C6;Ç&#x2C6;ĹşÂ°Ĺ&#x2020;Â&#x2039;ÇŤĹ&#x2020;ĹşĹŠÇŁdÇŤÂ&#x2039;ÇŤČ&#x2C6;ÇŤĂ&#x;ÇŁ ĹşĹşĹ&#x2022; ÂŻÇŁ ,Ç&#x20AC;Ă&#x;ĆľČ&#x2C6;Ă&#x;ĹŠÇŤÇŁĂ&#x;Ă?Č&#x2C6;Â°Â&#x2039;ÇŤĹ&#x2020;ĹşĹŠÂ&#x2039;Ĺ&#x2DC;ÇŁÇ&#x2C6;Ă&#x;ĹŁĹ&#x2020;ĹŠÂ&#x2039;Ç&#x20AC;Ç&#x2C6; ÂŻÇŁ dĆ&#x2014;Ă&#x;Â°Ĺ&#x2020;Â&#x2039;Ĺ&#x2DC;ÇŁĆ&#x2014;Ç&#x20AC;Ĺ&#x2020;Â°Ă&#x;Ç&#x2C6;ÇŁĂžĹşÇ&#x20AC;ÇŁ 5 ÇŁĆ&#x2014;Č&#x2C6;ÂĄĹ&#x2DC;Ĺ&#x2020;Â°Â&#x2039;ÇŤĹ&#x2020;ĹşĹŠÇ&#x2C6; ÂŻÇŁ EĂ&#x;ÄŠĹ&#x2020;Ç&#x2C6;Ĺ&#x2DC;Â&#x2039;ÇŤĹ&#x2020;Č˘Ă&#x;ÇŁÂ&#x2039;Ă?Č˘ĹşÂ°Â&#x2039;Â°ČŠÇŁĹ&#x2020;ĹŠÇŁdÂ&#x2039;Â°Ç&#x20AC;Â&#x2039;ĹŁĂ&#x;ĹŠÇŤĹş

ECHO Membership Dues

Office 1960 The Alameda, Suite 195 San Jose, CA 95126-2308

Association Membership HOA 2 to 25 units ..........................$130 HOA 26 to 50 units ........................$180 HOA 51 to 100 units ......................$275 HOA 101 to 150 units ....................$375 HOA 151 to 200 units ....................$450 HOA 201 or more units .................$575 Professional Membership ................$500 Association Management Membership.......................................$500 Individual Membership ......................$75 Journal Subscription ...........................$30

How Do You Join ECHO? Over 1,700 members beneďŹ t each year from their membership in ECHO. Find out what theyâ&#x20AC;&#x2122;ve known for years by joining ECHO today. To apply for the membership, sign up online at www. echo-ca.org. For more information about membership and ECHO, call us at 408-297-3246 or visit the ECHO website. August2015 2013 ||| ECHO ECHOJournal Journal February 2014 ECHO Journal Nov/Dec

39 39

ECHO event calendar

RESOURCE PANEL CALENDAR ECHO Resource Panels meet during lunch on weekdays to enable managers, professionals and board members to hear about important topics presented by experts in the industry, and share experiences and issues. The meetings are open to all ECHO members, and those interested in learning about ECHO, offered in a casual atmosphere where the cost of attendance is the price of your lunch. The sessions last about an hour and a half. Check-in with the ECHO Panel Secretary for details and to register.

Please join us: DATE

PANEL LOGISTICS

PANEL SECRETARY

TOPIC

Dec. 3, 11:45 a.m.

East Bay Resource Panel Massimo Restaurant 1603 Locust St., Walnut Creek

Cindy Wall, PCAM 925-830-4580

TBD

Dec. 9, 11:45 a.m.

South Bay Resource Panel Flames Eatery 88 S. 4th Street, San Jose

Geri Kennedy 408-398-4227

TBD

Dec. 16, 11:45 a.m.

Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati

Pam Marsh 415-686-9342

TBD

Jan. 7, 11:45 a.m.

North Bay Resource Panel Contempo Marin Clubhouse 400 Yosemite Dr., San Rafael

Denise Wolford, CCAM 415-458-3537

TBD

Jan. 8, 11:45 a.m.

Central Coast Resource Panel Michael’s on Main 2591 S Main St., Soquel

Ann Thomas 800-537-4098 ext.7530

TBD

Jan. 21, 11:45 a.m.

Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati

Pam Marsh 415-686-9342

Trees

REGULARLY SCHEDULED RESOURCE PANEL MEETINGS

PANEL

MEETING

LOCATION

Maintenance

First Wednesday, Even Months

ECHO Office, San Jose

North Bay

First Thursday, Odd Months

Contempo Marin Clubhouse, San Rafael

East Bay

Second Friday, Even Months

Massimo Restaurant, Walnut Creek

Accountants

Second Monday, Odd months

Scott’s Seafood Restaurant, Oakland

Central Coast

Second Tuesday, Odd months

Michael’s On Main, Soquel

South Bay

Second Wednesday, Even Months

Flames Eatery, San Jose

Wine Country

Third Wednesday, Monthly

Serv-Pro, Cotati

Legal

Quarterly

Varies

echo-ca.org

ECHO honor roll

ECHO HONORS VOLUNTEERS Resource Panel Chairs

Seminar Speakers

Recent Contributing Authors

Accountant Panel Adam Haney, CPA 888-786-6000 x317

East Bay John Gill, Esq. Beth Grimm, Esq. David Levy, CPA Andrea O’Toole, Esq. Alex Noland, Esq. Ann Rankin, Esq. David Stompe Mark Wleklinski, Esq.

April 2015 Julie Adamen Thomas Connelly Robert Rosenberg Rosalia Burgueño Tapia, Esq. Burt Dean

Central Coast Panel John Allanson 831-685-0101 East Bay Panel Cindy Wall, PCAM, CCAM 925-830-4580 Legal Panel Mark Wleklinski, Esq. 925-280-1191 Maintenance Panel Judy O’Shaughnessy 408-839-6926 North Bay Panel Diane Kay, CCAM 415-846-7579 Stephany Charles, CCAM 415-458-3537 South Bay Panel Susan Hoffman, PCAM 510-683-8614 Wine Country Panel Pam Marsh 415-686-9342 Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry Bowles Oliver Burford Joelyn Carr-Fingerle, CPA Chet Fitzell, CCAM John Garvic, Esq., Chair Roy Helsing Geri Kennedy, CCAM Wanden Treanor, Esq.

Annual Seminar John Allanson Tyler Berding, JD, PhD Ricky Chu John Garvic, Esq. Sandra Gottlieb, Esq. Matthew Harrington, Esq. Stephanie Hayes, Esq. Julia Hunting, Esq. Zer Iyer, Esq. Ken Kosloff David Levy, CPA Kerry Mazzoni John Neal Andrea O’Toole, Esq. Terin Reeder Amy Tinetti, Esq. Chad Thomas, Esq. Wanden Treanor, Esq. Steven Weil, Esq. David Zepponi

May 2015 John Allanson Sharon Glenn Pratt, Esq. Tom Del Conte Helen Loorya, PCAM, CCAM, CMCA Hanh Pham, Esq. June 2015 Ken Kosloff Tom Fier, Esq. Alex Guy and Rob Rosenberg David Larsen, Esq. Steven S. Weil, Esq. July 2015 Jeffrey A. Barnett, Esq. Kurtis Sheneﬁel, PCAM, CCAM Tom Fier, Esq. Bob Gourley Tyler P. Berding, J.D., Ph.D. Ann Thomas August 2015 Tyler P. Berding, Ph.D., J.D. Chris Sigler, B.S.C.E., C.D.T. Charlotte Allen Julie Adamen Robert Booty September 2015 Charlotte Allen Brenda L. LeClair, CMCA Debra J. Oppenheimer, Esq. Steve Castle, CMCA, PCAM John Schneider October 2015 Karl Lofthouse Susan Green Thomas J. Connelly Adrian Adams, Esq. Julie M. Mouser, Esq.

Nov/Dec 2015 | ECHO Journal

legislation at a glimpse

Catch up on 2015 Legislative Session! It’s a wrap! The 2015 Legislative Session is officially over, and all bills have been signed by the Governor, failed passage, or become two-year bills. Check for new laws that may impact your HOA, and look for a comprehensive review of 2015 legislation in an upcoming ECHO Journal.

Current Legislation Bill Information

Summary

AB 349

Turf & Synthetic Grass

Oppose

Effective immediately. This bill further narrows the ability of an HOA to restrict low water-using landscaping. It voids any provision of the governing documents or HOA guidelines that prohibit the use of “artiﬁcial turf or any other synthetic surface that resembles grass.” A late amendment also prohibits HOAs from requiring an owner to “remove or reverse water-efficient landscaping measures” when California’s state of emergency ends. ECHO supports California’s efforts to reduce water consumption in HOAs, but believes that each HOA should be able to establish its own low water-using landscaping standards.

Author: Gonzalez Status: Signed by Governor

AB 587

Mobilehomes: Nonpayment or Late Payments

Support

Now a two-year bill. Current law prohibits the State from issuing a new title to a mobilehome buyer when of any outstanding charges or liens exist as a result of the previous owner’s failure to pay certain fees and penalties, including the vehicle license fee. This bill would waive those fees and allow for the title transfer.

Author: Chau Status: In Senate. Hearing Canelled

AB 596

FHA Approval Disclosure

Oppose Unless Amended

Effective July 1, 2016. This bill requires a common interest development to disclose its status as a Federal Housing Administration (FHA)-approved condominium project and as a federal Department of Veterans Affairs (VA) approved condominium project. This information is publicly available online, making this obligation is unnecessary. It also creates a potential liability for associations. ECHO favored an amended disclosure that would have informed recipients that the information is available from the FHA and VA websites.

Author: Daly Status: Signed by Governor.

AB 786

Recycled Water and Drought Fines

Oppose Status: Signed by Governor

Effective immediately. Associations are not permitted to ﬁne homeowners for failing to water their landscaping during a declared state of emergency due to drought. This bill creates an exemption, and would permit ﬁnes in associations that use recycled water for all irrigation.

AB 1152

Limiting Construction Defect Lawsuits

Oppose

Now a two-year bill. This bill narrows the options for associations seeking recovery for construction defects. Recent case law allowed associations to recoup damages through sources and methods not outlined in Section 896 of the Civil Code. This bill would establish Section 896 as the sole remedy for construction defect claims.

Author: Levine

Author: Frazier Status: In Assembly Judiciary. Hearing Cancelled.

echo-ca.org

legislation at a glimpse

Current Legislation (continued) Bill Information

Summary

AB 1335

Fees on Recorded Documents

Oppose Status: In Assembly

Now a two-year bill. In order to fund affordable housing, this bill would impose a $75 fee whenever a document is recorded in California. Associations record numerous documents, including governing documents and liens. ECHO believes that recorded documents are not the appropriate instrument to fund affordable housing.

AB 1448

Clotheslines as Solar Energy Systems

Neutral Status: Signed by Governor

Effective January 1st. This bill originally identiﬁed clotheslines as a “solar energy system” and prohibited associations from restricting or prohibiting the installation and use of clotheslines. The author worked with ECHO to address safety and oversight concerns, and amended the bill to allow associations to place reasonable restrictions on the use of clotheslines and drying racks.

SB 244

Mobilehomes: Injunctions

Support Status: Signed by Governor

Effective January 1st. This bill would extend, indeﬁnitely, the right of a mobilehome park to petition the court to enjoin a continuing or recurring violation of a reasonable rule or regulation of the park.

SB 290

Substituted Service of Process

Support Status: In Senate Judiciary

Now a two-year bill. In a foreclosure proceeding, associations are required to provide certain notices by personal service. When an owner is unavailable, this bill would allow the association to serve the owner by “substituted service,” a less restrictive process.

SB 328

Notice of Pesticide Use by Landlords

Oppose Unless Amended

Effective January 1st. This bill requires that a landlord or the landlord’s authorized agent provide a current tenant and any tenant of adjacent units (under certain conditions) with notice about the use of pesticides at the dwelling unit if the landlord or authorized agent applies any pesticide without a licensed pest control operator. ECHO supported an amendment clarifying that an association, its officers, directors, agents or representatives would not be considered an “authorized agent” of a landlord.

Author: Atkins

Author: Lopez

Author: Vidak

Author: Hueso Status: Signed by Governor

SB 419

Sale Signs in Mobilehomes

Watch Status: Signed by Governor

Effective July 1st, 2016. This bill would permit the use of yard-arm style “for sale” signs and would authorize management to require the use of a step-in L-frame sign in mobilehome parks, some of which are common interest developments.

SB 477

Mobilehomes: Property Tax Postponement

Support Status: Held in Committee

Now a two-year bill. This bill would allow qualiﬁed individuals and owners of mobilehomes, some of which are common interest developments, to seek postponement of ad valorem taxes. This option is already available to owners of real property.

SB 655

Mold & Substandard Housing

Watch

Effective January 1st. This bill speciﬁes that visible mold growth, excepting mold that is minor and found on surfaces that can accumulate moisture as part of their proper and intended use, is a “substandard condition” and could cause a building in which such a condition is found to be deemed substandard.

Author: McGuire

Author: Leyva

Author: Mitchell Status: Signed by Governor

What Do You Think? Read more about HOA legislation on our website or visit our Facebook page and join the discussion. On the web: echo-ca.org/hoa-advocacy, On Facebook: facebook.com/echoorg Nov / Dec 2015 | ECHO Journal