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connect A Publication of the Greater Inland Empire Chapter of CAI

ISSUE TWO 2014

Got Election Rules? The Services of Professional Inspector of Elections Quorum & Balloting: You’ve Got Questions? We’ve Got Answers Why It’s Important to Use the Services of a Professional Inspector of Elections

How to Establish a Smooth Annual Election AB1360 Fact Sheet Myth vs. Reality Quorum: Whose Job Is It? “First Timer’s” Perspective of Legislative Day


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connect Table of Contents A Publication of the Greater Inland Empire Chapter of CAI

www.cai-grie.org

OFFICERS Kimberly Lilley, CMCA, CIRMS.................................................. President Berg Insurance Agency, Inc. Nancy I. Sidoruk, Esq.........................................................President-Elect Epsten, Grinnell & Howell, APC Lana Hamadej, LSM, PCAM............................................. Vice-President Avalon Management Group, AAMC

Features 4 Got Election Rules?

25 Quorum: Whose Job Is It?

By Nancy I. Sidoruk, Esq.

By Lana Hamadej, LSM, PCAM

10 The Services of Professional Inspector of Elections

26 First Timer’s Perspective of Legislative Day

Alisa Toalson, CMCA, AMS, CCAM ......................................... Secretary Professional Community Management Dana Mathey, CMCA, AMS, PCAM ........................................ Treasurer Euclid Management Company

By Cheri Moulton

BOARD DIRECTORS Greg Borzilleri............................................PCW Contracting Services, Inc. Weldon L. Brown, CCAM, CPM ...................Weldon L. Brown Company Linda Cooley...............................Rosetta Canyon Community Association Dori Kagan, CMCA, CCAM-Emeritus........................ Pacific Premier HOA

& Property Banking

By Fred Bartz

13 Quorum & Balloting: You’ve Got Questions? We’ve Got Answers

27 Lessons in Fairness and Statutory Compliance

By Jan Hickenbottom, CCAM, PCAM & Nancy I. Sidoruk, Esq.

By Jasmine M. Fisher, Esq.

Cyndi Koester, CMCA, AMS, PCAM........................................... Manager Nick Mokhlessin.................................ValleyCrest Landscape Maintenance Robert Riddick, CMCA......................................... Sunnymead Ranch PCA Shelly Risbrudt..............................................Pilot Painting & Construction Kristie Rose, CMCA, AMS, PCAM, CCAM............. FirstService Residential Chapter Executive Director DJ Conlon, CMCA administrative EXECUTIVE ASSISTANT Veronica Robles

18 Why It's Important to Use the Services of a Professional Inspector of Elections

Departments

By Danielle Hallman

6 President’s Message

20 How to Establish a Smooth Annual Election By Betty Roth, CMCA, AMS, PCAM

Editor in Chief Cang Le, Esq. ............................................................Adams Kessler, PLC

22 AB1360 Fact Sheet

Publications Committee Tom Carrasco ....Environmental-Concepts Landscape Management, Inc.

23 Myth vs. Reality

Linda Cooley...............................Rosetta Canyon Community Association Jasmine Fisher, Esq.....................................................Adams Kessler, PLC Lana Hamadej, LSM, PCAM ..........Avalon Management Group, AAMC Jan Hickenbottom, PCAM, CCAM ....................................... Union Bank Kimberly Lilley, CMCA, CIRMS.....................Berg Insurance Agency, Inc. Robert Riddick, CMCA.......................................Sunnymead Ranch PCA Betty Roth, CCAM, CMCA, AMS, PCAM................ Avalon Management Group, AAMC Nancy I. Sidoruk, Esq. .............................Epsten Grinnell & Howell, APC Sheeba Yaqoot, Esq. ................................ Fiore Racobs & Powers A PLC

By Kimberly Lilley, CMCA, CIRMS

8 Editor's Link By Cang Le, Esq.

16 Past President's Perspective Featuring Matt D. Ober, Esq.

By Robert Riddick, CMCA

DESIGN & PRODUCTION Kristine Gaitan..................Rey Advertising & Design/The Creative Dept.

The Greater Inland Empire Chapter of CAI hosts educational, business All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Connect or the Community Associations Institute – Greater Inland Empire Chapter. Information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting or other professional services and should not be relied upon without the consultation of your accountant or attorney. Connect is an official quarterly publication of Greater Inland Empire Chapter of the Community Associations Institute (CAI–GRIE). The CAI–GRIE Chapter encourages submission of news and articles subject to space limitation and editing. Signed letters to the editor are welcome. All articles submitted for publication become the property of the CAI–GRIE Chapter. Reproduction of articles or columns published permitted with the following acknowledgment: “Reprinted with permission from Connect Magazine, a publication of the Community Associations Institute of Greater Inland Empire Chapter.” Copyright © 1998–2014 CAI-Greater Inland Empire Chapter. Advertising, articles or correspondence should be sent to: CAI-GRIE Chapter 5029 La Mart, Suite A • Riverside, CA 92507-5978 (951) 784-8613 / fax (951) 848-9268

and social events that provide the Chapter’s Business Partners various opportunities to promote their companies’ products and services to Community Association owners and managers serving the Community Association Industry. It is expected that all participants in Chapter events — whether they be educational, business or social — will conduct themselves in a professional manner representative of their business or service organization so as not to detract from the experience of others seeking to benefit from their membership in the Chapter.

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Got Election Rules? Why attempting to follow the law isn’t enough.

W

e hope most community associations can answer “yes” to this question, but still come across some that say “no.” This may seem surprising, since it’s been years since election rule requirements became law and since failure to adopt election rules carries multiple risks and potential liabilities. Dangers lurk at every turn for community associations without election rules – from exposing elections to legal challenge, to restricting board authority to appoint an association manager as election inspector. Still think it’s not a big deal? Here’s why election rule compliance is something to take seriously.

Can’t We Just Follow The Code?

In 2006, former Civil Code § 1363.03 changed how most common interest developments conduct elections. The provisions of former § 1363.03 have since been incorporated into Civil Code §§ 5100 – 5130. Community associations must adopt rules and policies covering specific voting and election issues. Attempting to follow Civil Code secret balloting requirements without actually adopting conforming rules is not compliance.

A Double-Whammy!

Community associations without election rules find themselves in noncompliance simply for failure to adopt the required rules, but that’s not all. These associations are also at risk of taking actions which might seem insignificant and might even seem normal – but are nevertheless unauthorized. For example, for a board to appoint a community association manager as inspector of election, the association’s election rules must allow for the appointment. Otherwise, the 4 |

ISSUE TWO 2014 • Connect with grie


By nancy I. Sidoruk, Esq.

manager may be designated to collect ballots on behalf of the inspector… but that’s it. The manager cannot be the association’s inspector of elections unless the election rules allow it. Only independent third parties may serve as an inspector of election or an inspector’s appointed helper. An independent third party may not be a person, business, entity, or subdivision of a business entity who is currently employed or under contract to the association for any compensable services unless expressly authorized by the association’s duly-adopted election rules. (Civil Code § 5110) So, before appointing a community association manager as an inspector of election or as an inspector’s assistant, confirm that election rules were adopted and that appointment of the community association manager is expressly authorized.

What’s The Big Deal?

California law permits a member to bring a civil action against a community association for violation of Civil Code § 5100 et seq. A court may void election results and impose civil penalties of up to $500 per violation. In addition, a prevailing member is entitled to reasonable attorney’s fees and court costs, while a prevailing association is not entitled to any costs unless the action is determined to be frivolous, unreasonable or without foundation. (Civil Code § 5145)

Bottom Line?

Community association managers and boards of directors should review their associations’ rules and regulations to make sure that appropriate election rules were adopted. Once adopted, be sure to carefully review the rules when conducting covered votes. Not

every community association’s rules are the same. Just because one set of rules authorizes appointment of a community association manager or other employed or contracted third party (e.g., CPA) as an election inspector doesn’t mean that all others do, too. If a community association did not adopt election rules or has questions about compliance, the association should contact its legal counsel. Former Civil Code § 1363.03 became effective on July 1, 2006.

1

Election rule adoption must be performed pursuant to operating rule adoption procedures of Civil Code § 4340 et seq.

2

Nancy I. Sidoruk, Esq., is an attorney with Epsten Grinnell & Howell, APC, and president-elect of CAI-GRIE.

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PRESIDENT’s MESSAGE

STEPS TO EFFECTIVE LEADERSHIP – STEP 2 Our Chapter theme this year is “Shall We Dance? Steps to Effective Leadership.” This year I am looking at each of the steps you might explore when considering leadership within Kimberly Lilley, CMCA, CIRMS is Director of Marketing for your organization. Berg Insurance Agency and the • Work in the “trenches” 2014 Chapter President for CAI-GRIE. She may be reached at • Lead Locally Kimberly@BergInsurance.com. • Be a Visionary • Return to Your Roots – Bring Up New Leaders After “working in the trenches” I would encourage you to “lead locally.” There is no need to go outside the membership to harness the skills and passion you need for a successful organization. Benjamin Carson, a recipient of the Presidential Medal of Freedom, said, “I think one of the keys to leadership is recognizing that everybody has gifts and talents. A good leader will learn how to harness those gifts toward the same goal.” Sometimes volunteers are hesitant to contribute their gifts and talents because the time and resources needed to volunteer

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ISSUE TWO 2014 • Connect with grie

are not accurately represented (or perhaps are not defined at all!). Most of us are unwilling to agree to perform a task that has no set parameters; no beginning, middle and end. We are equally hesitant when the only way to volunteer is to donate 40 hours per week of our time. Volunteer opportunities should be clearly defined and then broken down into bite-sized pieces, so volunteers can choose to volunteer for something that will take 2 hours per month, or 10 hours per month… depending on their abilities and availability. In the end, you want to create a structure that volunteers can rely on, that includes some “easy-access” jobs. Most people are more likely to be willing to volunteer if the job only takes a couple of hours of their time each month, so why not break up a bigger job into many smaller jobs? You are more likely to get those jobs filled, AND you have more people who then get involved and possibly move on to serve in different ways once they have had a positive experience serving the organization. To see how you can get involved with the Greater Inland Empire Chapter of CAI, go to www.cai-grie.org and click on “Committees & Committee Chairs” in the left hand side bar. Drop a committee chair an e-mail and find out what sorts of just-right-for-you jobs they have ready to be filled!


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EDITOR’s LINK

Election Shenanigans The founding fathers of this great nation established a democratic system of checks and balances and envisioned great men (later women) being elected to lead. Unfortunately, that vision has sometimes been marred by election shenanigans (see Watergate). Cang Le, Esq.

The great minds of the HOA world also envisioned great men and women being elected to lead their communities. This issue’s theme is HOA elections and all the wonderful things

that elections entail, which, unfortunately, also include election shenanigans. So what is a community to do when it is discovered that there may have been ballot tampering or some election irregularities? Luckily, the great minds of the HOA world (like the founding fathers) provided means to address such shenanigans. The Davis-Stirling Act and California’s Nonprofit Corporations Law set forth certain procedures intended to provide a fair and democratic process for HOA elections, e.g., the double seal envelope and secret balloting procedure, providing members and candidates equal access to campaign media, and requiring inspector of elections, (See Civil Code § 5100 et seq.) If shenanigans are discovered during an HOA election, a member has the right to request a recount, an inspection of the association’s records, and even bring a civil action to void the results of the election. (Civil Code § 5145.) Notwithstanding these safeguards, an individual who is later discovered to not be acting in the best interest of the members may have been elected to the board. Not to fear my HOA brethren, recourses are aplenty – well, there are a few. Members may petition for a recall for an individual director or the entire board (Corp. Code § 7510). If the governing documents provide, a director may be removed for failing to meet certain qualifications. Removing an individual director may be complicated if the governing documents provide for cumulative voting which requires one to utilize a magical formula to determine if a vote to remove the director could even proceed. (Corp. Code § 7222(b).) This magic can be easily solved with the help of a magician or great legal mind who could assist in determining the appropriate recourse for election shenanigans, ballot tampering, or removing a director. Another thing for boards to consider is adopting an ethics policy for directors and amending the bylaws to provide for certain director qualifications. Because as we all know, shenanigans happen, and an association with the foresight to address such issues beforehand may be better prepared to deal with them if and when they arise. We hope that this issue will provide our readers with some insight and education on HOA elections.

Cang Le is a senior associate at Adams Kessler PLC, 11801 Pierce Street, Suite 200, Riverside, California and can be reached at cle@adamskessler.com or (800) 464-2817.

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The Ser a Prof Insp E

The main purpose of the annual meeting of an association is to elect directors. Over the years, the duties of an inspector of elections have evolved and expanded. Most associations’ bylaws proscribe the qualifications and duties of an inspector. However, based on recent law, the legislature created a specific set of criteria an inspector of elections must meet to manage community association elections. 10 |

ISSUE TWO 2014 • Connect with grie

The inspector of elections is an independent third party selected by the board whose official responsibilities regarding the annual meeting and election of directors include the following, pursuant to the Davis-Stirling Act, Civil Code §5110:

Statutory Duties

• Determine the number of memberships entitled to vote and the voting power of each. • Determine the authenticity, validity, and effect of proxies, if any. • Receive ballots. • Hear and determine all challenges and questions in any way arising out of or in connection with the right to vote. • Count and tabulate all votes. • Determine when the polls shall close, consistent with the governing documents. • Determine the tabulated results of the election. • Perform any acts as may be proper to conduct the election with fairness to all members in accordance


rvices of fessional pector of Elections by Cherie Moulton

with the Davis-Stirling Act, the Corporations Code, and all applicable rules of the association regarding the conduct of the election that are not in conflict with the law.

Prior to the Annual Meeting

A professional inspector of elections should be well-versed in community association law with respect to elections, and should analyze each association's governing documents, including the voting rules, to determine any requirements that are specific to that association. A fullservice inspector of elections company should perform and oversee all of the election activities in preparation for, during, and after the annual meeting, including:

A professional inspector's responsibility is significantly more than simply collecting and tabulating ballots and determining the results.

• Determine quorum requirement. • Determine candidate eligibility requirements. • Create and mail candidate solicitation mailing. • Collect candidacy forms and confirm eligibility of each candidate. • Create and mail ballot packages, including: – Notice of annual meeting – Agenda – Voting instructions – Secret ballot – Candidate statements – Submittal envelopes During the polling period, a professional inspector will receive, validate, and maintain an ongoing log of all ballots received by mail, and provide a ballot count toward quorum to the Board or community manager as requested.

During the Annual Meeting

A professional inspector should bring copies of the agenda to the annual meeting and provide them to all those in attendance, along with extra ballots and submittal envelopes for those who have not already voted by mail. The inspector should sign in the members in attendance at the annual meeting, receive and validate ballots cast by the attendees and determine whether a quorum has been achieved. If a quorum is not represented in person or by ballot, the inspector should communicate the requirements for re-convening

the annual meeting. Because a professional inspector is very familiar with the governing documents of a specific association, the Inspector should be aware of the timeframe within which a re-convened meeting must be held, and whether the quorum requirement drops. A professional inspector should prepared to conduct the meeting, if requested, in a professional manner pursuant to Robert's Rules. Upon announcing the closing of the polls, the inspector and assistants should quickly and efficiently open the ballots and tabulate the votes, and then announce the election results. All of the duties must be performed impartially and in good faith.

After the Annual Meeting

Following the election, the professional inspector prepares a detailed report to communicate the tabulated results to the members within the 15-day period required by law, and stores the ballots for safekeeping for the required time period.

The Professional Inspector of Elections The law states that the board can appoint the association’s manager or another third-party as the inspector of elections if it wishes to do so, however, that person should be well-versed in the law, and be able to properly interpret the law and the governing documents. Also, the

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The Services of a Professional Inspector of Elections Continued from page 11

inspector should be able to address the (common) situations where legal questions arise, be able to correctly answer questions regarding election law and common-interest development law, address inquiries and handle disputes. Furthermore, the inspector must be able to properly confirm each member's voting rights, ascertain total voting power of the association (which can become especially complicated when the developer is still involved), validate ballot submissions, and record and report everything properly to successfully defeat a challenge to the election in court, if ever necessary. A professional inspector's responsibility is significantly more than simply collecting and tabulating ballots and determining the results. It is highly recommended that a qualified and professional election management company be selected as the inspector of elections, so the board can be confident that the election is handled correctly, legally and efficiently. Cheri Moulton is Director of Operations for IntelliVote. IntelliVote is a community association election management company with legal oversight, based in Rancho Santa Fe, California.

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ISSUE TWO 2014 • Connect with grie


Quorum & Balloting You’ve Got Questions? We’ve Got Answers.

by Jan Hickenbottom, CCAM, PCAM & Nancy I. Sidoruk, Esq.

S

ure, everyone is busy, busy, busy! Is that the main reason why many community association members don’t bother to return ballots? Are they confused about the double envelope voting process, so they just set their voting materials aside until later…and “later” means missing the deadline? Maybe they don’t vote because they don’t know anyone running for the board. Perhaps a homeowner has even told you, “I don’t want to vote for the wrong people, so I won’t vote at all.” It is very hard to convince some people to participate in the community association voting process. Sadly, this situation has not significantly improved, even since laws were passed in 2006 requiring community associations to adopt election rules (Civil Code §§ 5100 et seq., former Civil Code § 1363.03). Many associations are still unable to attain a quorum until the second or third attempt, if at all. Some homeowners are simply frustrated with the process. And when homeowners are asked if they vote (and, if not, why not?) they often respond with questions of their own. Here, six attorney members of CAI-GRIE respond to a handful of these questions. Q: Some associations don’t reach quorum after one, two or even three or more attempts. Can board members serve until the next annual election? If so, how long can this go on? A: Unless the association’s bylaws or articles of incorporation provide otherwise, a board member remains a board member until the member’s term expires and a successor is elected and qualified, or until

the board member resigns or is removed from the board. (California Corporations Code § 7220(b).) A board member who remains on the board after his or her term expires because no quorum was established at the meeting to elect a successor is commonly referred to as a “carryover director.” For an association with staggered board terms, at each annual meeting the carryover seats on the board would be up for election along with the expiring board seats. If such an association goes several years without establishing a quorum, each director is a carryover director and would continue to hold office until a successor is elected and qualified or until the director resigns or is removed from the board. Dennis M. Burke, Esq., Fiore Racobs & Powers APLC

Q: Must a community association inform owners that an election couldn’t be held for lack of quorum and that the current board members will continue serving? A: This is obviously, and unfortunately, a very frequent occurrence. While we would all like to be able to say that there is significant involvement by the members in community associations, all too often the reality is that apathy and lack of involvement is the rule, and the same few individuals are often required to serve their communities because others will not step forward. Civil Code section 5120 requires that general notice of the results of an election be given within 15 days of the election. Some attorneys argue that based on corporations code section 7512(d) if quorum is not met there can be no meeting, that as a result there is no election and therefore there is no requirement to give notice. However, the spirit of the law in Civil Code section 5120 is that members be given the notice of the result, whatever it may be. Once the Continued on page 14 connect with grie • issue TWO 2014

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Quorum & Balloting Continued from page 13

election has been scheduled and the ballots mailed out, the members deserve to know what occurred. If what occurred was that quorum was not met so there was no election, and the current board will continue serving until the next election, then that should be noted in the minutes and general notice should be given to the membership. Robert M. DeNichilo, Esq. Nordberg|DeNichilo, LLP

a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.” (Nahrstedt v. Lakeside Vill. Condo. Assn., 8 Cal.4th 361, 381 (1994).) Thus, there is a strong risk that rules or restrictions authorizing discipline for failure to return a ballot may be deemed unreasonable. Members should not be fined for failing to submit a ballot. Jeffrey A. Beaumont, Esq. Beaumont Gitlin Tashjian

Q: To offset the cost of trying to reach quorum again, can we fine the owners who don’t submit a ballot?  A: Voting is not an obligation, but

Q: I’ve heard that some associations have a lower quorum for a second attempted annual meeting. Ours doesn’t. Why, and is there anything we can do about it?

a privilege of association membership. Although the Davis-Stirling CID Act (“Act”) imposes many requirements on an association to facilitate elections and voting, the Act is silent with respect to a member’s duty to vote. (Civil Code §§5100 et seq.) Accordingly, where there is no duty to vote, there is no obligation to submit a ballot. Unreasonable restrictions are those which “are wholly arbitrary, violate

A: Yes, some community associations have a reduced quorum for reconvened member meetings, including the annual meeting, if the originally-scheduled meeting does not meet quorum. Whether an association has a reduced quorum requirement for reconvened member meetings is determined by the association’s bylaws. Some bylaws specifically provide for a reduced quorum requirement; others do

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not. If bylaws do not provide for a reduced quorum requirement at reconvened member meetings, the stated quorum requirement applies for all member meetings, reconvened or not. If an association’s bylaws do not provide for a reduced quorum requirement at reconvened member meetings, the association can attempt to amend its bylaws to include such a requirement by having the requisite number of members (as stated in that association’s bylaws) approve the amendment.

Jodi Konorti, Esq. Epsten Grinnell & Howell APC

Q: I don’t want my signature on the outer balloting envelope. Why does the association want me to sign? Does someone really match my signature with something on file? A: These days we should all be concerned with our privacy. The association does not request your signature on the outside envelope to create privacy issues for you. Instead, your signature on the outside of the envelope is required by California Civil Code section 5115(a)(1). Without a signature in the upper


left hand corner of the outside envelope, the ballot may be deemed incomplete and not counted. If you want your vote to count, you should make sure to attach some manner of signature to the outside envelope. James McCormick, Esq. Peters & Freedman, L.L.P.

Q: The association sent out a ballot that says it’s irrevocable. What does that mean? If someone is nominated from the floor at the meeting, can’t I get my ballot back and submit a new one? A: Civil Code section 5120(a) states that once a ballot is received by the inspector of elections, it becomes irrevocable. This means that a member may not change her or her vote after the ballot has been submitted to and received by the inspector. The association should explain this concept to the membership annually. The answer to the second part of the question is NO. Traditionally, many older developments allow members to nominate from “the floor” at the annual meeting. Previously, members could cast their votes via facsimile and were entitled to change their

votes at the meeting. With the adoption of the dual-envelope, secret-ballot system in 2006, most members mail-in their ballots prior to the meeting. Thus, the election has—for the most part—been submitted to the inspector before the annual meeting begins. As a result, floor nominations are oftentimes unnecessary, as the ballots cast are irrevocable and the election is essentially completed before floor nominations are received. To avoid this exercise, associations should amend their governing documents to eliminate floor nominations. Brian D. Moreno, Esq. Richardson Harman Ober PC

Questions posed and responses compiled by CAI-GRIE magazine committee members Jan Hickenbottom, PCAM, CCAM and Nancy I. Sidoruk, Esq., Epsten Grinnell & Howell APC.

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ring Featu

T

his year, Connect will run a series entitled “Past President’s Perspective” where we ask four past presidents of the Greater Inland Empire Chapter of CAI questions about their tenure as president, leadership, accomplishments, and thoughts on the Chapter. This issue we are featuring Matt D. Ober, Esq from Richardson Harman Ober, PC. Why did you become President of CAI-GRIE? I ran for the board a few times before being elected, but was involved on many committees before. At that time, CAI-GRIE was transitioning from a mom and pop operation with a goodole-boy mentality. Lawyers, or anyone from the “city” with a suit and tie, had to work hard to get acquainted with the local folk. At the time, the Chapter was somewhat in a growth phase. We were a few years into a dynamo Executive Director in Joan Urbaniak who saw 16 |

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. r, Esq e b O D. Matt

potential in the GRIE. When elected, the board had many members who had served for years and perhaps needed a break. So when we selected officers at the first organizational meeting, I was elected President-Elect. I laughed the entire drive home. Did someone ask you? Were there other circumstances that led to you becoming President? In addition to the circumstances above, and perhaps being at the right place at the right time (or maybe wrong place at the right time?), based on my years of committee involvement, I had no doubt I was up for the task. When you became President of the Chapter, what was your main goal(s) for the Chapter? (Was there an obvious specific need? Did you have a theme? If so, why did you pick the theme, and how did you think it would further the Chapter as a whole?) If memory serves, I think our theme

that year was either “giving back to our community” or “building community,” I don't specifically recall. I’m not really a fan of themes as they can be limiting or trite. My goal was to professionalize the organization and elevate the importance of business partners (then referred to as vendors) to the Chapter’s growth, and to recognize and acknowledge the contributions of our volunteer members. What did you feel were your biggest successes with the Chapter? Making education a priority and convincing our membership that as an industry one of our primary objectives is to provide cutting-edge, current, topical education. Also, education regarding the role of community managers in the Chapter. What did you feel were your biggest challenges with the Chapter? Getting managers to turn out and interface with Business Partners – an age old challenge.


What do you see as the challenges facing the Chapter today? We are large and spread out. We are ever reliant on e-mail blasts to encourage our members to come to events. As a Chapter, and perhaps an industry, we are focused on the bottom line and remaining in the black; no doubt a critical function. But are we connecting with our members or the community at large in a meaningful way? We need to ask our members. Feedback from members is a powerful tool for the Chapter and a meaningful way to tell our members that we are listening. In addition, the Greater Inland Empire Chapter has grown exponentially in the past 10-20 years with many new CID communities. But has our Chapter kept up with this growth in terms of addressing the needs of these new communities? Community outreach is an essential component of our Chapter and an excellent way for our members to connect with the Chapter, and each other, in a unique way. I encourage us to look for opportunities to give back to our communities and let them know why CAI-GRIE exists and how we can help them. That will build our membership base and provide more business opportunities for our members.

newest attendees are brand new to the industry and especially our Chapter. To grow CAI-GRIE we must welcome them, guide them about how the Chapter works, and help them grow into becoming active new volunteers that can carry the torch in new and innovative ways. Matt D. Ober has served two terms as President of the Greater Inland Empire Chapter. He is an inductee to the organization’s Hall of Fame; recipient of the Chapter’s President’s award; and recipient of the Outstanding Service Award. He is also a threeterm delegate to CAI’s California Legislative Action Committee and a member of CAI’s National Faculty.

What advice/words of wisdom would you impart to the Chapter today? Focus on why people are coming to Chapter events. What is their goal? What do they hope to take away from their attendance? Our members do enjoy networking together and the social events are important networking opportunities, but the Chapter's mission, in large part, is to educate and provide opportunity for business promotion. We are involved because of our businesses and are there to promote what we do and how we can assist others. When our members grow their businesses through CAI, our Chapter grows. Also, as some of us grow older, we should recognize that many of our

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Why is it Important for an Association to Utilize the Services of a Professional Election Inspector? By Danielle Hallman

P

rofessional inspectors of election are neutral, have experience, knowledge, and the dedication to the industry to ensure that your election is conducted accurately, efficiently and -most importantly -- legally. Although the Civil Code allows for a homeowner to be an inspector and in some cases the management company, it is highly recommended that a professional be hired due to the large impact elections have on the association. Liability can become a very important issue to an association if any alleged mistakes occur within an election. This is important because homeowners generally do not have the knowledge of the governing documents, Civil Code and election procedures to handle and ensure an election is conducted accurately. The cost of a professional inspector is far less than the cost of a legal challenge that could arise from errors due to improper industry knowledge and election procedures. Authorizing a manager to perform the duties of an Inspector may also add unnecessary risk to the association during an election. The community manager or their parent company are “currently under contract” with the association, which in some cases, can disqualify a manager to serve as an inspector at all. The Civil Code does provide the opportunity for an association’s election rules to address this by “expressly authorizing or prohibiting” the manager to act and/or be appointed as the inspector of election. More importantly, because the manager or their parent company are “currently under contract” with the association, there could be a perceived conflict of interest, which was one of the leading causes for the election laws enacted in the Civil Code in 2006. Even if the association’s election rules do allow for a manager to act as an Inspector, they may not be versed in the legal requirements and intricacies of handling an election. This could lead to challenges and/or questions regarding the integrity of the entire election. While a homeowner or manager’s intent as an inspector of election may be good, the use of a professional election inspector is a smart business decision by the board of directors.

Danielle Hallman is the President of HOA Elections of California, Inc. HOA Elections has provided election services to numerous community associations throughout the state of California since 2006.

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Steven G. SeGal InSurance aGency, Inc. Over 35 years of experience specializing in: Condominium Associations • Planned Unit Developments • Hard to Place Associations Earthquake Coverage • High Rise Condominiums • Workers Compensation Toll Free: 800-345-8866 • Toll Free Fax: 800-262-0973 Email: steve@segalins.com • www.farmersagent.com/ssegal License No. 0E24660

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How to Establish a Smooth Annual Election By Betty Roth, CMCA, AMS, PCAM

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t was a dark and stormy night…. Wait a minute. It doesn’t need to feel that way when you are prepared for your annual meeting and election of board directors. Even if quorum is not met, a smooth process will alleviate any fears from the membership that everything in your power, as the manager, was done to get as close to quorum as possible and that all correct procedures were followed. Many times, with all the best laid plans, a quorum will still be a distant memory. I have found that preparing for the annual meeting far enough in advance is the key for a smooth election process. With an annual meeting month of February, I begin by obtaining proposals for an inspector of elections company in August of the year before. I make sure that these proposals are on the regular session meeting agenda for September so that the board can make their decision on the company they are comfortable with. These companies give you an array of services so it is important that the board agree to all of the services they will require for the election. I will work closely with this company from this moment on. In October, I start preparing my membership for the upcoming election; getting them interested and nudging them to consider running by placing an article in our newsletter. I also place the decisions for the board to make on the regular session agenda which may include the deadline for the return of the candidate’s applications; date and time of Meet the Candidate’s Night; date and time of the annual meeting; establishing a record date of ownership; approval of the annual meeting agenda; date of ballot mailing and the purpose for the use of proxies if they are utilized. In the November and December newsletters, I include the candidate’s application along with an article

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explaining the process prior to the elections such as who the inspector of elections is and how to contact them; how many positions are available on the board; board terms; what the expectations of a board member are; how long meetings last and when the candidate’s statement is due. The association usually gives the candidate’s the months of November and December to submit their applications. After the deadline, the candidate’s statements can be submitted to the inspector of elections who then assists in the preparation of the ballot mailing to the extent that the association has requested their services. The ballots are mailed out in January, one month before the annual election. Again, I continue to place articles in the January and February newsletters as a constant reminder of the elections and the importance of each member’s vote. I have found it handy to have an onsite locked ballot box that is emptied by the inspector of elections from time to time during the month before the annual elections. I also place flyers in well seen areas of our community and I send out blast emails as useful reminders as well. The day of the annual meeting, the polls open for two hours before the meeting with the inspector of elections on hand. The board also finds it helpful to have legal counsel in


attendance for any unusual questions that might arise. If quorum is made, the announcements are made and a noticed organizational meeting commences. Hooray! If quorum is not met, the membership votes for an adjourned annual meeting for one or two weeks later. The same process happens as with the annual meeting unless quorum is once again, not met. If that is the case, then the Board adjourns to the annual meeting for the following year. I have found that this has been a very streamlined process for our annual elections. It takes work and constant reminding, however, the association benefits from the process because the membership is well informed and has plenty of time to make well thought out decisions. It is important to note that AB 1360 is the CAI CLAC sponsored

bill which will bring electronic voting to common interest developments. Please assist in backing this bill in any way you are asked to help. Most members of the community who do not take the time to vote by double envelope may find it easier to vote online. Again, this is a choice so within

the same election, members will be able to vote by either method. Betty Roth, General Manager, CMCA, AMS, PCAM, Avalon Management Group working on-site at Sunnymead Ranch PCA in Moreno Valley CA.

COMPLIMENTARY PROPER T Y SE RVICE S • • • • • • • • •

COMPUTER COLOR IMAGI NG PROFESSIONAL COLOR CONSULTATIO N ON-SITE CONTRACT OR BID WALK DETAILED WRI TTEN SPECIFICAT IONS CONTRACTOR REFERRAL S UPON REQUEST JOB MONITORING AFTER PAINT ING BEGI NS EL ECT RONIC COLOR DATABASE PROFESSIONAL BOARD/CO MMITTEE PRESENTATIO NS HOA D ISCOUNTS

P roperty S pec ialist: Tim Wilsterman 951.525.0685 twilsterman@vistapaint.com

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Fact Sheet: AB1360 (Torres) Common Interest Developments: Electronic Voting FACT: AB 1360 offers community associations and its residents the option to use an electronic voting system if they choose, in addition to the traditional paper balloting process currently used. • Current voting procedures require residents to mail a paper ballot to their community association to participate in an election, and that option will remain for those who prefer mail-in ballots. • Many companies offer hybrid voting options, such as online ballots accessible to print for mail or hand delivery.

FACT: AB 1360 specifies that any e-balloting system used in a community association election must include certain measures that protect residents’ identities and voting information, some of which would improve current protections in place. • AB 1360 requires that the selected voting system provide a record of times and dates votes are cast and that voters be given a confidential confirmation that their vote has been received. This confirmation does not occur when ballots are mailed, unless an owner specifically requests a receipt for delivery. • Current voting procedures require voters to include their address and signature on the outside of their mail- in ballot, which could enhance an identity thief’s ability to steal their identity. • Many companies offer ballot encryption and liability insurance for their e-balloting systems.

FACT: E-balloting would allow community associations to verify, track and count votes in a more efficient way than the current paper balloting system. • Current voting procedures require residents to mail in a ballot to their community association, which then must be counted and recorded by the elections inspector. Often, community associations do not receive enough hard-copy ballots to reach a quorum and have to send out ballots again and again, which is costly. • Allowing community associations to use electronic voting systems would enable residents to use a preferred technology that would streamline the voting process, helping to ensure community associations reach quorums earlier and avoid additional costs. • Most companies can provide a back-up print out of votes or ballots and a disaster recovery program for lost, corrupted or hacked balloting.

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FACT: E-balloting could help to increase the number of valid, countable votes as sometimes people accidently include their names or miss mark the ballots. • Electronic balloting would offer safeguards against mistakes, such as votes not being received via mail or human error, allowing more votes to be counted and improving the democratic process community associations rely upon.

FACT: Allowing community associations to use e-balloting voting systems would save these associations and its residents’ money and more efficiently use resources. • Based on figures from an online voting vendor, if a community association is able to get 80 of 100 of its members to use an electronic voting system, it would save more than $100 for the association. • That savings estimate only increases for larger associations – for example, a community association with 500 members would save more than $1,000.

FACT: Current electronic voting systems use the same security and encryption levels as online shopping vendors and banking sites. • Electronic voting software utilizes the same 128-bit encryption used to provide safe online banking services. AB 1360 would allow residents to take advantage of the benefits offered by electronic voting systems, and those residents who prefer paper ballots would still have that voting option. • According to a recent e-balloting survey, no company’s electronic balloting program has been hacked or corrupted since 2009.

FACT: People utilize online systems for confidential and sensitive transactions, such as online banking or travel booking, and residents should be able to utilize an online voting system for community association elections. • Electronic balloting provides more people with the opportunity to get involved by using already familiar technology. • According to a recent e-balloting survey, nearly all e-balloting groups achieve a greater voter turn-out compared to paper balloting methods.


Myth vs. Reality on Being a Board Member by Robert Riddick

B

ack a few years ago, (in fact, February 2002) then US Defense Secretary Donald Rumsfeld, in response to a reporter’s question regarding Iraq, was quoted as saying, in-part “…there are also unknown unknowns – there are things we do not know we don’t know.” I remember when he made the statement that included the above verbiage, and that at the time I also marveled at his choice of words, never realizing that a handful of years later I would begin to clearly understand, through personal experience, how those words more often than not are so true. What does Mr. Rumsfeld’s quote have to do with the title of this article, you ask? Well, simply this: When stepping up to take on the role of being a community association board member, especially as a “first-timer,” that role (and

the associated responsibilities) is too often misunderstood in what the overall scope of being a board member actually encompasses. For instance, how many times have we heard a new board member say after a slightly contentious Open Forum meeting “I never thought they (the members) would act like that!” Or, “Trying to figure out the annual budget is a lot harder than I thought.” Or, how about “Another contract to talk about? Are you kidding”? All are examples of new board members not realizing until after they join the board just what the “job” requires of them. And all are examples of the myth of being a board member versus the reality. Here are a few more of those “myths” that you might be familiar with, especially if you are one of those ‘newbies’ just joining your board: Continued on page 24

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Myth vs. Reality

The Magazine Committee is Interested in What You Have to Say!!! We are looking for authors to submit articles for Connect Magazine. The theme for our next issue is “Conservation” which will focus on what “going green” really means; how to conserve not just water, but strategic ways that everyone can help reduce our footprint. The deadline for submitting articles for the next issue is August 1, 2014. It is very rewarding to have an article published and can also serve for points in achieving certain accreditations. This is also a great way to promote your business. We are also looking for interesting and different cover pictures for our magazine. Please let us know if you are interested in submitting a theme relevant photo for the cover of the magazine. Get published and get noticed! We have a new column inviting comments and feedback, both positive as well as a rebuttal on past articles in the magazine. We will select as many comments as we can for this column. The deadline is also August 1, 2014. If you are interested in submitting an article, our policy and guidelines are available on the chapter website, www.cai-grie.org. 24 |

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Continued from page 23

Myth - Being a board member is going to be a ‘piece of cake.’ No big deal, just a few meetings and that’s it. Reality - Being a board member requires a certain dedication-of-effort on behalf of your association, and is nothing less than serious work. Be prepared to do whatever “heavylifting” is required to make sure the needs of the association are met. Myth – Meetings? No big deal if I miss one or two. There’s always the rest of the board to take care of things. Reality – as a board member, one of your major obligations to the association is to attend every board meeting, in order to be ­and stay ­ informed and to make the decisions necessary on behalf of your association. Myth – Everyone likes me because

they wouldn't have voted me onto the board if they didn't. Reality – Everyone might like you, but they voted you onto the board because they believed that you would do a good job, not be popular. Myth – Now that I'm a board

member, I can do pretty much whatever I want around here, and nobody will say anything. Reality – Never assume that your association members don't know what you're doing in regards to the association's business. There's always someone 'taking notes' on what board members do in regards to the association. Count on it! Myth – All of our association

meetings will be smooth, noncontentious, and everyone will leave the meetings satisfied with the outcome of the meetings. Reality – Board meetings will be smooth and non-contentious if you, as a board member, come well-prepared for the meeting, are courteous to the members during the meeting, and are transparent in what you discuss at the

meetings. Association members expect nothing less. Myth – As a board member I don't have to follow all the rules of my association all the time. Besides, “rank has its privileges,” doesn't it? Reality – That kind of thinking is only going to infuriate your association members and almost certainly guarantees a fast-track to being the subject of a recall effort. Is that what you really want? Serving on the board of an association can be very rewarding, no matter what the motivation for doing so might be. The fact that one is willing to “step up to the plate” and serve, speaks volumes about their individual dedication to wanting to be a pivotal part of the governancemaking part of their community, and should be applauded. At the same time, it's also just as important to recognize ­when considering taking that step to ultimately become a board member ­ that there are many things to learn in the process of doing an effective job in that new role. There are tools and resources that are available and could/ should be drawn upon for help and assistance. There is also CAI, and its nationwide network of chapters, that also serve as a valuable resource. And finally, there are community board members within our own CAI chapter, who serve as additional resources whenever you might want to reach out to them. In conclusion, and as Mr. Rumsfeld said those many years back, there is always going to be those things that we don't even know we don't know, but in the end, sometimes the best way of learning what they are is to set aside the myths and deal with the reality of, as in this case, what being a board member really means. Robert Riddick is a PastPresident of the CAI-GRIE Chapter and currently serves as President on the Board of Directors at Sunnymead Ranch PCA.


Quorum: Whose Job Is It?

By Lana Hamadej, LSM, PCAM

I

n over two decades of managing community associations, I have seen very few associations meet their quorum requirements in order to hold the Annual Meeting and elect directors to the board. Some associations try to cajole homeowners into returning their ballots and/ or simply show up at the Annual Meeting by offering socials, prizes or other enticements. One association offered exorbitant raffle prizes to be given out only if there was quorum present. They justified the exorbitant prizes as an offset to the additional monies that would be spent by continuing their attempts to achieve quorum. Needless to say, it did not work. So, the question becomes why it is so difficult to obtain quorum and who

is responsible to make it happen. Let’s first consider that notice, ballots, and accompanying materials are sent out no less than thirty days before the scheduled meeting. Homeowners receive them, set them aside thinking they have plenty of time to return them if they intend to do so and they become forgotten buried in a pile of paper or possibly tossed out inadvertently. This alone results in a number of ballots not returned. While homeowner apathy is certainly one consideration, many believe that it is the exact opposite that causes some associations to go year after year without holding an Annual Meeting. People within communities are generally satisfied with the way the association is

being run, how it looks, and the amount of dues they are asked to pay. Therefore, they see no reason to return their ballot. And often times, associations have an equal number of candidates and open seats on the ballot. This creates the misconception that homeowners do not need to return their ballots and vote because they feel that the number of people running equals the number of seats so why vote. There is also a continued lack of understanding of how the process works which was further complicated years back when the secret ballot, double envelope system was implemented. As a manager, I have actually had Continued on page 26 connect with grie • issue TWO 2014

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Quorum: Whose Job Is It? Continued from page 25

First Timer’s Perspective of Legislative Day by Fred Bartz Currently, I am in my seventh year as a member of our HOA board (Morgan Hill) in Temecula, California. Recently, I had the opportunity as a “first timer” to participate in the annual CAI-CLAC Legislative Day in Sacramento. While I previously have had the opportunity to advocate for other non-HOA issues in Sacramento, this was a totally different experience, when one realizes that there are approximately 50,000 HOAs in California representing approximately 9,000,000 homeowners, and that as part of this event, you are not alone in advocating for or against certain issues. One of the big differences for me is that in the past, our HOA board would basically wait until September to see what bills the Governor did or did not sign, and then figure out what would be the impact of the approved bills on our association. This year, I had the opportunity to be part of the process before those bills possibly go to the Governor’s desk. When you learn that there are over 1,400 lobbyists, and now over 2,700 bills before the state legislature, you realize that going to Sacramento as a large group and meeting with your Assembly person and/or Senator as a “constituent” and explaining your concerns can make a difference. In addition, with the large number of bills, it is difficult for any legislator to be fully aware of the content and implications of any proposed bill. This is why it is very important for all of us to communicate, as a constituent, to our elected representatives, on any concerns regarding pending legislation. Besides meeting our governmental representatives, there were a number of other benefits to participating in the Legislative Day process. First, you realize that there are a number of other volunteers, who put in a lot of time and effort to help educate those who make the laws in the state. Second, you get a much better understanding of the pending bills, and how they might help, or how some might negatively impact HOAs. Last, it was a tremendous opportunity to speak with fellow HOA board members and learn from the experiences they are having locally with their own HOAs. One specific piece of insight that we learned about was that after the Governor had declared an official statewide drought, one HOA fined a homeowner for a brown lawn. Within weeks of this becoming known in Sacramento, there were five separate HOA drought-related bills introduced in Sacramento—some of which we could probably live with, while others could effectively invalidate our HOA architectural process as we know it today. Next year is your opportunity. I would encourage every association manager, board member, and homeowner, to consider participating in the CAI-CLAC Legislative Day process. When developing your community association’s 2015 annual budget, consider budgeting to send one or two of your HOA board members, and/or association manager, to this event. Fred Bartz is president of the Morgan Hill Homeowners Association and a member of the CAI-GRIE Legislative Support Committee (LSC).

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homeowners accuse me of not doing my job in assisting the association in obtaining a quorum. I never thought it was management’s job to do and this was further confirmed, in my opinion, by Civil Code § 5110 which requires that the association select an independent third party or parties as an inspector of elections. Management is not intended to be part of the process. Candidates for the board need to take responsibility and initiative to gain a seat on the board. Candidates are allowed to conduct normal campaign activities that include mailers at their expense, campaign speeches, door to door campaigning. Any of these activities or a combination thereof can prove an effective way in increasing the number of returned ballots received by the inspector and help the candidate achieve their goal of a seat on the board or reelection if already on the board. While candidates cannot solicit ballots or mark ballots for other homeowners, a great idea is to prepare a sample ballot clearly marked as such with the candidate’s recommended votes. Candidates are reminded to review their association’s election rules prior to beginning their campaign. Campaigning can be a daunting task so a well organized group of like minded owners will be beneficial, especially in a time consuming door to door situation.

Lana Hamadej, LSM®, PCAM® is the Vice President of Avalon Management Group, Inc. AAMC® with offices in Canyon Lake and Temecula. She currently serves on the CAI-GRIE Board of Directors as the Vice President has twice served as the Chapter’s President.


Lessons in Fairness and Statutory Compliance By Jasmine M. Fisher, Esq.

Two key cases, Wittenberg v. Beachwalk Homeowners Association and Diamond v. Superior Court (Casa del Valle Homeowners Association), illustrate how Courts are exacting harsh penalties when associations fail to provide certain levels of fairness to members and when boards fail to strictly comply with applicable laws.

M

r. Wittenberg sued his association in connection with a vote to amend the CC&Rs. The Beachwalk board had an extremely low spending cap (anything in excess of $1,000 required member approval) in their CC&Rs. While this cap was historically ignored, the board sought to amend the CC&Rs so they could remove an under-utilized pool and change it into a more beneficial amenity. Despite Mr. Wittenberg’s efforts, the association refused to provide him access to the association’s medial outlets (community newsletter, clubhouse rental) so he could advocate a

contrary position to the board. The court held that when anything requires a membership vote (annual elections, amendments to governing documents, etc.), associations must provide equal access to association media (newsletters, bulletin boards, common areas, etc.) to all members so everyone is able to advocate their position on the issue. In the wake of the Wittenberg decision, boards should carefully review their CC&Rs to see whether they are subject to any limitations on their ability to make improvements

Continued on page 28

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The takeaway from these cases, aside from strict statutory compliance, is that courts expect a level of fair dealing from associations towards their members. Lessons in Fairness Continued from page 27

or changes within their associations. Boards confronted with limiting provisions like Beachwalk’s should seek to amend their CC&Rs to remove these restrictive hindrances to effective association maintenance. In addition to restrictions in the governing documents, boards must also follow the statutory limitations related to impositions of special assessments which are often needed to cover certain types of expenditures. Civil Code § 5605 requires boards to obtain membership approval for a special assessment above 5% of the association’s gross operating budget except in certain instances (i.e. member approval not required when spending is pursuant to a court order, required for safety purposes, or could not have been foreseen in preparing the current year’s annual budget). A common area upgrade required by the government could be approved by the board without membership approval while a cosmetic change above 5% of the gross operating budget would require membership approval. In such instances, membership approval is a majority of a quorum where a quorum is defined as 50% of the members... that’s only a majority of a majority. 28 |

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Boards should also review their CC&Rs to see if they require membership approval prior to making a capital improvement versus effectuating standard maintenance items. As it pertains to associations, “capital improvement” should be thought of as anything involving a substantial discretionary addition, change, or upgrade to the common areas or materials therein. Once a board determines to make a capital improvement, even if they’re not legally required to obtain membership approval, they are often well-served engaging the members in the process. While the Beachwalk board did seek member approval to change the pools and even to amend the CC&Rs, its failure to provide a member equal access to association media caused its ultimate undoing. The Wittenberg Court’s harsh penalty illustrates the importance of “fairness” towards members and how strict statutory compliance is an essential element in upholding board and community decisions. While very dissimilar cases, the Diamond case illustrates a similar lesson for boards to remember: failure to strictly follow the laws pertaining to collections of delinquent assessments will result in the association’s inability

to collect on them. The Casa del Valle board initiated a collection proceeding against an owner (Ms. Diamond). The association could only demonstrate a substantial, not strict, compliance with applicable laws. The Court held that associations must strictly comply (e.g. providing proper notice, inviting an owner to a meet and confer, offering to participate in alternative dispute resolution, and personally serving an owner with notice of a board’s decision to foreclose) in a collection proceeding against an owner or risk invalidation of their lien and having to recommence the process. Another outgrowth of the Diamond case is that associations are now required to personally serve notice of a board’s vote to foreclose via personal service prior to whatever method of foreclosure (judicial vs. nonjudicial) they ultimately select. In the wake of Diamond, associations must alter their prior practices and understand they are required to furnish an additional layer of notice not previously provided to owners. As with Wittenberg, the Court’s requirement for strict compliance and their sense of justice for the owner ultimately led to the association’s undoing. Victor Hugo once said, “Being good is easy, what is difficult is being just.” The takeaway from these cases, aside from strict statutory compliance, is that courts expect a level of fair dealing from associations towards their members. The Courts appear to share Mr. Hugo’s sentiments and boards are well counseled to remember these lessons if they’d like to ensure their decisions aren’t later overturned.

Jasmine M. Fisher is a Senior Associate at Adams Kessler PLC who has been practicing for over 10 years and specializes in representing community associations as their general counsel. You can reach Jasmine at (310) 945-0280 or jfisher@ adamskessler.com.


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Oct. 17, 2014 | San Diego, CA

CAI

Legal

Forum CALIFORNIA COMMUNITIES

A one-day event for California community managers, association board members and other homeowners from Community Associations Institute—the leader in HOA education, advocacy and professional development. Critical updates on important legal requirements that impact how you work. Essential information on key legal developments that impact where you live. For event details and registration, visit www.caionline.org/events/CALaw or call CAI Member Services at (888) 224-4321 (M–F, 9–6:30 ET).

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ISSUE TWO 2014 • Connect with grie


5029 La Mart, Suite A Riverside, CA 92507-5978


Connect Issue 2