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CAI-GRIE’s mission is: To make a positive contribution to the Common Interest Development Community through education and networking.



IN THIS ISSUE: HOAs in the Digital Age CLAC Corner: Highlighting New California Laws for 2017 2016 Case Law Update 2016 Legal Forum: California Communities A Needle in a Haystack

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Table of Contents

Dana Mathey, AMS, PCAM........................................................ President FirstService Residential Jeremy Wilson, MBA, CCAM, CMCA, AMS, LSM, PCAM.....President-Elect Associa-PCM Linda Cooley........................................................................ Vice-President Rosetta Canyon Community Association Chet Oshiro................................................................................ Secretary EmpireWorks Phil Hakopian, CIRMS..................................................................Treasurer Cornerstone Commercial & Personal Insurance Services, Inc. Nancy I. Sidoruk, Esq............................................................Past President Epsten Grinnell & Howell APC

BOARD DIRECTORS Greg Borzilleri............................................PCW Contracting Services, Inc. Jackie Fromdahl.....................................................Painting Unlimited, Inc. George Gallanes, CMCA...................................... Sunnymead Ranch PCA



4 HOAs in the Digital Age

11 President’s Message

By Dana Mathey, PCAM

By Farrah Esquer, CMCA, AMS, PCAM & Sandra Gottlieb, Esq., CCAL

2 Editor’s Link 1 8 CLAC Corner: Highlighting By Brittany A. Ketchum, Esq. New California Laws for 2017 By Nancy I. Sidoruk, Esq. 14 TOPS Awards Winners Photos 18 2016 Case Law Update By Cang N. Le, Esq.

16 New Board Member Spotlight Featuring Christy Towner-Quesada, CMCA

Hallie Kirkingburg, CMCA...................................... FirstService Residential Kimberly Lilley, CMCA, CIRMS....................... Berg Insurance Agency, Inc. Robert Serdoz................................................ Elite Pest Management, Inc.

21 2016 Legal Forum: California Communities

Christy Towner-Quesada, CMCA........................... FirstService Residential

By Robert Riddick, CMCA


24 A Needle in a Haystack

Shelly Risbrudt..............................................Pilot Painting & Construction

DJ Conlon, CMCA

By Brittany A. Ketchum, Esq.

ADMINISTRATIVE ASSISTANT Ginny Aronson-Hoke EDITOR IN CHIEF Brittany Ketchum, Esq..........................................Beaumont Gitlin Tashjian PUBLICATIONS COMMITTEE Jeff Baker, AMS.............................................Packard Management Group Chris Branuelas.........................................Rainbow Canyon Villages HOA Linda Cooley...............................Rosetta Canyon Community Association Jackie Fromdahl.....................................................Painting Unlimited, Inc. Kevin Leonard............................................................ Association Reserves

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

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 © 1998–2016 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

Advertisers Alliance Association Bank..........................26 AMS Paving, Inc..............Inside Front Cover Association Reserves.................................23 Beaumont Gitlin Tashjian...........................13 Berg Insurance Agency, Inc.......................16 Diversified Asphalt Products........................7 Elias Bros. Contractors, Inc........................13 EmpireWorks.............................................19

Epsten Grinnell & Howell APC..................17 Fiore Racobs & Powers APLC...................20 Keystone Pacific Property Management, Inc......25 Mutual of Omaha Bank............................12 NPG - Nelson Paving.... Outside Back Cover Steven G. Segal Insurance Agency, Inc.....10 The Management Trust.............................20 Union Bank HOA Services........................22

The Greater Inland Empire Chapter of CAI hosts educational, business 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. CONNECT WITH GRIE • ISSUE FOUR 2016

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HOAs in the Digital Age Assessing and addressing issues with social media and Internet presence


f you are like most people, you use the Internet or social media in your daily life on a regular basis, either personally or for business. From paying bills online to keeping up-to-date with world and entertainment news via numerous social media outlets, many of us would be lost if we were to lose the holy grail of our Internet connection. If the average person uses the Internet so regularly, should your community be using these online options as well? A definite MAYBE! With technology and social media changing so rapidly, it is often difficult for a community association to keep pace with the newest and most hip forms of communication. While many communities may already be using websites and social media, there are still pitfalls and legal concerns that should be addressed, proactively, to protect the entity and its board of directors. This article explores both the benefits and challenges of an association’s Internet presence and the planning and decisions that should occur before plunging into the ever-changing digital world. Before making a decision as to whether the association should have a website and/or social media presence, first consider the demographics of the community and the message or image that will be conveyed. The decision to have an online presence can be different for each community. Are the community members asking for more online options? Does the association have 4 |



extensive recreational facilities or other amenities unique to your community? Remember, the association is a corporation and as such, the board of directors should consider the image or “brand,” as well. Second, also consider who will be maintaining the website and/or social media sites. If the board intends for the management company to maintain the sites, be sure to address this obligation in the management contract, including association protections for the ownership of the sites, and be sure that the manager or company is comfortable maintaining these sites. The board may also consider a board member or other community volunteer, or even a thirdparty provider to create, update and maintain the various sites. There will likely be a charge to maintain the sites whether the work is performed by a third party vendor or by the association’s managing agent. A fee for these services is warranted and can be budgeted, considering the brand of the corporation. Websites can be a beneficial tool to provide communication and resources to the membership, if used properly. The association may choose to include online assessment payment options on the website, as well as the association governing documents, non-compliance reports, and a mechanism for maintenance request submittals. The website can also be used to provide updates to the membership on upcoming or ongoing projects and schedules, including maintenance or construction work, and to notify residents of other community events, such as annual meetings, community garage sales, etc. Documents can include meeting agendas, community newsletters, rules and regulations, meeting minutes (general session and committee minutes, as applicable), CC&Rs, Articles of Incorporation, and Bylaws. We strongly recommend that documents such as minutes, CC&Rs, Article of Incorporation, and Bylaws be watermarked with either “Draft” or “Not for Escrow Use.” The purpose of this watermark is to ensure that official documents are requested through the normal escrow process and to ensure that the documents presented in escrow are complete. Websites should not be used in place of current delivery methods that are required by the Davis-Stirling CID Act.

For example, Civil Code Section 4045 provides that certain documents can be sent by “general notice” or “general delivery.” This code provision includes that the association can post “…the printed document in a prominent location that is accessible to all members…” The question becomes: does posting a notice to the website constitute proper notice under this section? No, it does not at this time because the code specifies that the notice must be a “printed document” and that it must be placed in a “prominent location.” However, posting the notice to the website, in addition to posting the printed document on-site complies with the Civil Code and provides ease of access to those who wish to view the document electronically on the association’s website. An association website can also be used to reflect a positive image of the community and to show off favorable aspects of the community, such as the common area facilities, pool, spa, clubhouse, or other amenities that make the community unique and desirable. In this way, a well-maintained and planned website can potentially increase property values. With the benefits of websites, also come potential challenges and legal pitfalls. If the website is used for online payments, even if through a third-party provider, it is important to ensure the site is secure, to the extent possible, to prevent identity theft. Additionally, board members should be cautious when opening up a message board or other posting board on the association’s site. Message boards can quickly become a place for posting disparaging comments, which could potentially place the association in the midst of a lawsuit for defamation if it does not act quickly to demand the removal of the offending comments. There have been a number of cases in California in recent years that have shown that even if the association is successful in a lawsuit with an owner regarding defamation, infliction of emotional distress, or other claims related to the use or misuse of association internet resources, the benefits of these platforms may be far outweighed by the potential costs to an association if they are misused. For this reason, it is highly suggested that message boards or other similar posting boards not be available on a community website.

Always consult with legal counsel before making the leap into the digital world because once association content is on the Internet, it may be there forever.

Continued on page 6


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HOAs in the Digital Age Continued from page 5

Another potential pitfall can occur where, through use of a website or social media account, the association unintentionally burdens itself with the requirements of ADA compliance by inviting the public to the community. How can this happen? Does your community use the clubhouse as a polling place for the community and surrounding areas? And do you use the association website to announce the polling place to the community? If so, this could potentially require the association to comply with ADA regulations since the public is invited into the community. As a note – “public” as used here does not mean personal guests, family or invitees of owners. For these reasons, the association should consult with the association’s legal counsel to address any potential legal pitfalls associated with the community website, both before it is launched and when there is a stated claim against the association. After the board has evaluated the issues referenced above, the board will need to identify who will be responsible for maintaining the site. The next step is to decide in advance what will be posted to the website and who has the authority to post to the website. Sample recurring items that should be updated on the website would be meeting agendas, meeting minutes, and newsletters. These documents should be updated regularly, in addition to the association’s documents such as rules and regulations, architectural applications, etc. The board should also consider having a standing policy posted to the website that any notice that is sent by “general delivery” or “general notice” to the community, in addition to announcement on upcoming projects and events should be added to the website. This may seem like a fairly simple task, however what happens when a disgruntled committee or board member demands that their statement be posted to the 6 |


website? Setting the standard postings in advance with a requirement that all other items require board approval at a noticed board meeting can help avoid placing the website administrator in a difficult situation trying to balance requests from owners with competing interests and avoid airing the association’s dirty laundry to the community. Remember, online postings should be positive and used as a tool to communicate information to owners and provide resources to the community. Last, the association needs to ensure that the website is kept up to date and timely. There is nothing worse than a website that has documents from two years ago. Association members will quickly become disinterested in a site that provides no value, which makes it difficult to re-gain interest. Once the site is launched, be sure to regularly communicate the presence of the site to members so that it becomes the “go-to” location for up-to-date community resources. Generally, websites are the most common form of online presence for communities, other social media sites like Facebook, Twitter and Instagram have also become options for increased communication to owners. If you use these social media sites in your personal life, you are probably familiar with the negative postings and rants that sometimes overwhelm social media. The same cautions and predetermined posting rules for websites apply to social media sites, as well. However, social media moves much more quickly than a website page. The postings that can be made by others to, for instance, a Facebook page must be addressed quickly by the association if they are negative in nature. Whomever is authorized by the board to maintain and monitor the site, should have appropriate notifications in place so that postings can be monitored and addressed promptly. Additionally, if the board will be posting photographs from a community event, a disclaimer

should be included with the event invitation notifying the residents that an association photographer will be taking pictures of the event and posting to the association’s website. This will allows guests the opportunity to notify the photographer if they do not want their pictures posted. There are many factors to consider when deciding whether to launch and maintain an association website or social media sites including the association’s brand or image, maintenance responsibilities, security issues, and potential legal pitfalls like defamation and harassment claims. Even if the association does not intend to open a website or social media sites, the board should consider claiming the association’s name for websites and social media accounts to prevent other parties from opening sites potentially leading to their posing as official association communications. In any event, boards should consider securing their association name in the name of the association in case a future board decides to pick up where the current board leaves off. Always consult with legal counsel before making the leap into the digital world because once association content is on the internet, it may be there forever. Farrah Esquer, CMCA, AMS, PCAM Cardinal Property Management, AAMC

Sandra L. Gottlieb, Esq., CCAL SwedelsonGottlieb

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CLAC Corner: Highlighting New California Laws for 2017


LAC’s stated mission is to safeguard and improve the community association lifestyle and property values, by advocating a reasonable balance between state statutory requirements and the ability and authority of individual homeowners to govern themselves through their community associations. To achieve that mission, CLAC, through the efforts of its volunteer delegates, regularly monitors and evaluates the potential impact of bills proposed in the California State Senate and Assembly. This article highlights several key Senate Bills (SB) and Assembly Bills (AB) that were on CLAC’s “Hot Bills” list and passed during 2016, plus select new California legislation of interest to community associations. All of the following go into effect on January 1, 2017. 8 |


SB 918: Owners Must Provide Annual Notice of Address

SB 918 adds Civil Code section 4041 to the DavisStirling Act. It requires owners to provide written notice to the association of all of the following on an annual basis: (1) The address or addresses to which notices from the association are to be delivered; (2) An alternate or secondary address to which notices from the association are to be delivered; (3) The name and address of the owner’s legal representative, if any, including any person with power of attorney or other person who can be contacted in the event of the owner’s extended absence from the separate interest; and, (4) Whether the separate interest is owner-occupied, is rented out, if the parcel is developed but vacant, or if the parcel is undeveloped land.

Associations must solicit these annual notices from each owner and enter the new data into its books and records at least 30 days prior to mailing the annual budget report and annual policy statement. If an owner fails to provide the notices set forth in items (1) and (2), above, the property address is deemed to be the address to which notices are to be delivered. Note: As associations begin to deal with new laws, additional issues and questions about their intent and practical implementation can come to light. E.g., what is the “notice” referred to in SB 918—general (Civil Code section 4045) or individual (Civil Code section 4040)? What if an owner does not reply, making the default address the property address, yet the association has actual knowledge that the owner lives off-site? How to deal with increased costs of providing notice to multiple addresses or possible technology/database limitations on storing multiple addressees per property file? Consult with the association’s legal counsel if you have questions on these additional issues and with implementation of Civil Code section 4041, as well as about any other legal requirements discussed in this article.

AB 2362: Pesticide Application

New to the Davis-Stirling Act, Civil Code section 4777 requires a community association or its authorized agent to provide notice to an owner and any tenant and, under certain circumstances, to owners and any tenants of adjacent separate interests, if pesticide is to be applied without a licensed pest control operator to a separate interest or to a common area. The law prescribes the content of the notice and how it is to be provided. Note: Always use licensed pest control operators and licensed contractors.

AB 1963: Construction Defects, Calderon Process Expiration Date Extended

The Davis-Stirling Act requires certain conditions to be met before a community association may file a complaint for damages based upon a claim of construction defects. The applicable law, Civil Code section 6000, was scheduled to become inoperative in 2017 and repealed in 2018. These dates are now extended to July 1, 2024 (inoperative) and July 1, 2025 (repealed), unless further extended. Note: Associations with construction defect related claims should always work closely with legal counsel to ensure timely compliance with statutory requirements.

SB 1431: Gated Communities, Service of Process Existing law (Code of Civil Procedure section 415.21) requires specified persons to be granted access to a community with staffed entry gates for a reasonable period of time for the sole purpose of performing lawful service of process. This bill amends section 415.21 to additionally require granting access to an investigator who is employed by an office of the Attorney General, a county counsel, a city attorney, a district attorney, or a public defender, upon the display of proper identification. Note: Be sure to inform gate attendant staff of this change in the law.

SB 1196: Security and Investigative Services

The Bureau of Security and Investigative Services regulates locksmiths, private patrol operators, alarm company operators, and security services. The Alarm Company Act requires that certain agreements entered into by an alarm company pertaining to alarm systems, including lease agreements, monitoring agreements, service agreements, and installation agreements be in writing, and any initial agreements entered into on or after January 1, 2017, that contain an automatic renewal provision for a period of more than one month must disclose and describe the automatic renewal provision. (Business and Professions Code Section 7599.54) Note: Consult with legal counsel before entering into contracts in general, especially with any concerns about the meaning and impact of contract provisions and about possible governing document limitations on association authority to enter into longterm contracts.

SB 814: Excessive Water Use

When the Governor has issued a proclamation of a state of emergency, or during a period in which an urban retail water supplier has moved to a stage of action in response to a local water supply shortage condition, excessive water use by a residential customer in a single-family residence or by a customer in a multiunit housing complex is prohibited. During these periods, each urban retail water supplier must establish a method to identify and discourage excessive water use. As a method of identifying and discouraging excessive water use, the water supplier may establish a rate structure that includes block tiers, water budgets, or rate surcharges over and above base rates for excessive water use by residential customers. (Water Code, commencing with Section 365)

Continued on page 10


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CLAC Corner Continued from page 9

Note: Visit CLAC’s online Resource Center at for information about water conservation, emergency preparedness, wildfire preparation and more, including the newsletter article, “10 Tips to Maintain Landscape & Conserve Water.”

Other Laws

The above summary does not represent a complete list of all legislation which may impact community associations. For example, several bills were passed which pertain to municipal regulation of “granny flats,” second units and garage conversions (SB 1069, AB 2299 & AB 2406) and expansion of personal data security breach notice requirements involving encryption keys or security credentials (AB 2828). Also be sure to check with your legal counsel regarding case law and other changes to Federal and State laws that could affect your associations. Finally, do not overlook laws passed in prior years, but which took effect during 2016 or will take effect in 2017. For example, beginning January 1, 2017, Civil Code section 4775 will provide that the owner of the separate interest is responsible for maintaining the exclusive use common

area and the Association is responsible for repairing and replacing the exclusive use common area unless the declaration provides otherwise. If an association adopted a maintenance matrix as part of its rules, rather than by way of a CC&R amendment, the matrix might not comply with section 4475 or with the holding in Dover Village Association v. Jennison (2010) 101 Cal.App.4th 123. Also, as of July 1, 2016, Civil Code section 5300 began to require the annual budget report of condominium projects to include a specific separate statement describing FHA and VA approval status. Please visit for more information about CLAC, its mission and accomplishments, including how to get involved with grassroots advocacy, support CLAC through the “Buck-a-Door” program, and participate in the 2017 Legislative Day at the Capitol. Nancy I. Sidoruk is a Senior Attorney with Epsten Grinnell & Howell, APC. Nancy is an immediate pastdelegate of CLAC, having served in that capacity on behalf of CAI-GRIE since 2010, and is a past-president of CAI-GRIE.

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PRESIDENT’S MESSAGE Team We Can jumped out of the starting gate working together planning the 2016 year. As the year progressed we achieved and exceeded our membership goal. We are currently at Dana Mathey AMS, PCAM 615 members, with our A Regional Director for FirstService Residential and community association 2016 CAI-GRIE Chapter volunteer leaders at the top President. in the most memberships, and community managers close behind them. My shout out is to the Membership Committee for a great job of recruiting and maintaining our members. The Education Committee has been instrumental in offering a variety of classes for our community association volunteer leaders, generating knowledge and anticipation for the next scheduled courses. The Committee is excited about offering a new Board Leadership Development course in June 2017. Due to their commitment we have achieved our goal of enhancing our programs through education. We succeeded in offering a new event, “Promenade des Arts,” that showcased local artisans

in many forms: photography, music, contortion, jewelry and more. Attendees experienced networking at its best in a beautiful setting. The event would not have been successful without the hard work of the committee members. Team CAI would not be successful in our mission statement without our volunteer committees, chairs, Board members and our Executive Director DJ Conlon and Administrative Assistant Ginny Aronson-Hoke. I thank each one of you who took time out of your busy schedule to make CAI-GRIE Chapter one of the most respected and prominent chapters in Southern California. I am excited about the amount of nominations that were received and enjoyed the opportunity to recognize the members that went above and beyond at our Annual TOPS Awards Breakfast that was held on December 16th. See the centerspread for photos of winners! As this ride ends another one will begin. It will be time to hand the reins to Jeremy Wilson your 2017 President. It has been a wonderful journey, engaging and working with professionals, the CAI-GRIE staff, and members. Team We Can – Team We Did it!

Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results. Andrew Carnegie


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As the year draws to a close, we are presented with the opportunity to reflect on the past, focus on the present and prepare for the future. Please join me in thanking our 2016 President, Dana Mathey, for her dedication to the Chapter and the great industry we serve – we were fortunate to have her great leadership this past year. Please also join me in reflecting on the articles published Brittany A. Ketchum, Esq., an associate attorney with in each 2016 issue of Connect and in thanking Beaumont Gitlin Tashjian, has devoted her career to the authors – your fellow CAI-GRIE members – representing common for contributing and sharing their knowledge and interest developments. She can be reached at experience. I would also like to thank you – the reader – for providing the Connect Magazine Committee with the opportunity to showcase our special Chapter and build and share the magazine. We hope you learned something new and, perhaps, were able to see “old” ideas from a new perspective. As the busy holiday season quickly approaches, I invite you to take some time to focus on the present and enjoy your hard work and our many accomplishments as a Chapter and as an industry. To that end, this issue includes a look at the successful CAI Legal Forum: California Communities and spotlights the TOPS Awards Breakfast. Enjoy! Looking to the future, this issue seeks to provide your associations with an update on changes in the laws impacting community associations. We also take a look at developing trends in social media and learning from pitfalls – not mistakes, but rather, opportunities to learn and grow. Through the enclosed articles, we hope to bring you guidance and a glimpse of what is on the horizon for your communities in the new year. Thank you for allowing me to serve as your 2016 Editor of Connect. It is always a sincere pleasure working hand-in-hand with managers, service providers and volunteer leaders (i.e., board members) alike to educate, assist and support associations by increasing awareness of the important issues facing communities today. Cheers to 2017!

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Rising Star AJ Schwartz Andre Landscape Services, Inc.

Business Partner of the Year Nancy I. Sidoruk, Esq. Epsten Grinnell & Howell APC

Association Volunteer of the Year Herb Calderon Stonebrook Estates Community Association

Manager of the Year Norma Zermeno, AMS, PCAM Avalon Management Group, Inc., AAMC

Chairperson of the Year Hallie Kirkingburg, CMCA FirstService Residential

Chairperson of the Year Kimberly Chase FirstService Residential

Committee of the Year Membership Committee

Up & Comer Manager Traci Russell, CMCA Avalon Management Group, Inc., AAMC

Community Outreach Volunteer of the Year Sandra Flores CLS Landscape Management, Inc.

Not pictured: Magazine Article of the Year By Tina Neubauer, CMCA, CIRMS and Tiffany Smith-Nguyen, Esq.

Community Association of the Year Medium Category Canyon Heights Association

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Community Association of the Year XL Category Sundance Community Association

2016 Chair Appreciation

Left: 2016 Board of Directors Appreciation Right: Hall of Fame Inductee Kimberly Lilley, CMCA, CIRMS Berg Insurance Agency, Inc.

President’s Award Nancy I. Sidoruk, Esq. Epsten Grinnell & Howell, APC

2017 Board of Directors


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New Board Member Spotlight As part of our continuing series of introducing our newest chapter board members, in this issue we spotlight another new member who ‘came on board’ as the result of our 2015 chapter elections. This issue’s focus is on Christy Towner-Quesada from FirstService Residential. Brittany: Thank you for the opportunity to ask you a few questions. Why did you decide to run for our chapter Board? Christy: I wanted to become more involved with the chapter, as well as advance my education. Brittany: Now that you have been elected to the Board, what would you like to see accomplished during your term?

Christy: I would like to bring new and fresh ideas to the social networking aspect of our organization, which will also help with increasing attendance. Brittany: What are the top three talents, skills or ambitions that you feel you contribute to the Board? Christy: Strong leader, hard worker and event planning. Brittany: How do your talents, skills or ambitions benefit the Chapter and help you to accomplish your goals for the Chapter? Christy: I have extensive experience in mentoring and leadership, as well as event planning in my former life. All of these can expand on the growth and excitement brought to the chapter through other committees. Brittany: What do you see as the biggest challenge for the Board? Christy: Trying to incorporate the millennials that are coming into the industry and have them become more involved with CAI as these will be our future leaders in this organization. Brittany: What do you like to do to relax to take your mind off business? Christy: There are a number of things; problem is not enough time! Being outdoors with my husband and dogs, cooking with my daughter, binge watching TV shows, watching movies and listening to music.

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2016 Case Law Update Business Judgment Rule Does Not Protect Against Violations of the Governing Documents Palm Springs Villas II Homeowners Ass’n, Inc. v. Parth (2016) 248 Cal. App. 4th 268 The California Fourth District held that a director who acts in excess of the authority granted by the association’s governing documents will not necessarily be protected from a breach-of-fiduciary-duty suit by the business judgment rule. The business judgment rule, as codified under California Corporations Code Section 7231, provides that an association director “shall have no liability based upon any alleged failure to discharge the person’s obligations as a director” if the director acts “in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” The director at issue allegedly took the following actions: • Incurred more than $1 million in expenses for roofing repairs, yet never showed invoices to board members and paid for work that was deficient, overpriced, and/or unnecessary; 18 |


• Pledged the association’s assets as security for loans that at least some board members weren’t told about and that the board did not approve; • Entered into a landscaping contract with the approval of two of the other four directors, with no idea whether she had any authority to do so, after a meeting that at least one director wasn’t notified of; • Improperly joined with two other directors to terminate the association’s management contract, and hire a new management company, without prior notice to the other board members; and • Entered into a contract with security agreement without review or approval by the board. The director admitted to “not investigating anything” nor reviewing the CC&Rs and Bylaws on what she could or could not do as a director. She invoked the business judgment rule as a defense against claims that she breached her fiduciary duties and breached of the governing documents. However, her failure to investigate and actions taken outside the authority provided in the governing documents did not avail her to the business judgment rule. As noted by the Court of Appeals, a director “‘cannot close [her] eyes’ to matters as basic as the provisions of the CC&Rs and


Bylaws of the Association and at the same time claim that she “exercis[ed] business judgment.� The Court of Appeals reversed the trial court’s ruling on a summary judgment in favor of the director

argued he had acquired ownership of the common area through adverse position. Under California law (Code Civ. Proc. §§318, 325, 328), a person can acquire legal ownership of another’s land without paying for it

Continued on page 20

Attorneys’ Fees Awarded in Suit to Collect Fines Almanor Lakeside Villas Owners Association v. Carson (2016) 246 Cal. App.4th 761 The Carsons leased their property for short-term vacation rentals even though it violated CC&Rs restrictions that prohibited owners from using their lots for transient hotel purposes and prohibited rentals for less than 30 days. They also disputed rules related to parking, trash storage, use of common areas, and decals for boats. The association fined the Carsons and sued them. The court ruled the association could enforce its rules and awarded attorneys’ fees in the amount of $101,803.15 in addition to $6,620 in fines (approximately 10% of the amount originally imposed by the association). The Carsons appealed and lost. The association was deemed the prevailing party even though 90% of its fines had been disallowed. The court concluded the key issue was the association’s right to enforce rules and impose fines for violations, thereby making it the prevailing party.

No Adverse Possession of Common Areas Nellie Gail Ranch OA v. McMullin (October 3 2016 2016 WL 6395070) – NOT LAW Without approval, a homeowner built a retaining wall on 6,000 square feet of common area. Because of the rural nature of the development, the trespass went undiscovered for several years. When it was discovered and demands went unheeded, the association sued. The homeowner

if he can prove (1) possession of the land was under claim of right or color of title;Â (2) possession was actual, open, and notorious; (3) possession was adverse and hostile to the true owner; (4) possession was continuous








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2016 Case Law Update Continued from page 19

for at least five years; and (5) the person paid all taxes assessed against the property during the fiveyear period. In a common interest development, payment of all taxes on disputed common area is impossible for a claimant to establish. Although common areas have value, they are not separately assessed for taxes. Their taxable value is reflected in the increased market value of members’ properties created by common area pools, clubhouses, riding trails, parks, etc. Property taxes on common areas are, therefore, billed to and paid by all homeowners individually, not by the association. As a result, the fifth element of adverse possession cannot be met by a claimant.

Attorney’s Fees to Enforce Agreement in ADR Rancho Mirage Country Club association v. Hazelbaker (2016) 206 Cal.Rptr.3d 233 An association’s lawsuit to enforce a settlement agreement entered into during alternative dispute resolution (ADR) is deemed an action to enforce the governing documents under the Davis-Stirling CID Act, which entitles the association to recover reasonable attorneys’ fees. Cang N. Le, Esq., is managing partner at Adams Stirling, Professional Law Corporation. cle@

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2016 Legal Forum: California Communities Keeping the Tradition Alive By Robert Riddick, CMCA


he elegant Renaissance Resort and Spa, located in the quiet, yet welcoming Coachella Valley community of Indian Wells, was the site of this year’s much-anticipated and well-attended CAI-sponsored California-centric legal educational conference. For those readers who may not already be aware of, or familiar with, the conference known as the Legal Forum: California Communities, is an event sponsored by CAI (Community Associations Institute), the largest organization in the country whose primary organizational objective is advocating on behalf of homeowners associations located in the United States, as well as a multitude of common interest communities worldwide. This year’s event marked the seventh time that CAI has brought the conference to California homeowners and managers, and the first time it has been presented in the Coachella Valley.

In past years the event has taken place in San Diego, Temecula, Long Beach (twice), Irvine (twice) and now adding the CV to its list of venues. The challenge, as always, was to continue the tradition of presenting nothing less than world-class, value-added legal educational sessions to those who had invested the time, energy and finances to take part in this once-a-year event. The actual hosting of the Legal Forum, as has always been the case in the past, falls on the capable shoulders of the Executive Directors of CAI’s eight California chapters, along with CAI’s California Legislative Action Committee, and deals with community association legal issues that are the focus of a special one-day event designed for community managers, association board members and other interested homeowners. This year, and again as in the past, the Forum was divided into two categories of session-types, with one

being ideally designed for community association volunteer leaders (board members and homeowners), and the other targeting community managers who are tasked daily with managing our common interest communities. No matter which category attendees preferred, there was no shortage of available sessions to learn from. In the category designed for association volunteer leaders, there were sessions that dealt with subjects ranging from short-term rentals to everything you wanted to know about drones, as well as subjects like social media and internet presence in associations. Running concurrently and for the manager-types in attendance, there were sessions that were unquestionably California-specific when it comes to the latest trending topics dealing with association law. Topics that included learning how to Maximize Director and Officer Liability Insurance Coverage for claims against managers, directors and even volunteer committee-members were presented and discussed, along with topics such as The Good, The Bad, and The Ugly: A Guide to HOA Law, as well how to correctly identify Defamation and What to Do About It. No doubt that there were sessions that were designed to appeal to just about every attendee. The “good news” was that each and every session was presented by extremely qualified and capable presenters who themselves were acknowledged experts in their fields. As an added bonus, the keynote address was an enlightening presentation by Dawn Bauman, CAE, Continued on page 22 CONNECT WITH GRIE • ISSUE FOUR 2016

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2016 California Legal Forum Continued from page 21

Senior Vice President Government & Public Affairs, Community Associations Institute, entitled Community Next: 2020 and Beyond: Envisioning the Future of Community Association Living, in which she described for the audience the results of CAI having embarked upon an initiative to forecast the future of community associations, by engaging fifty volunteer stakeholders and subject matter experts from around the world for a year-long deep dive on issues related to community association governance, management public policy and external influences. The audience listened attentively to what she had to say, and left the session with a greater awareness of 22 |


what life in associations just might look like for the next generation of residents. Fascinating stuff? You bet! And, of course, what would a wellmanaged conference be without the supportive industry business-partners, who represented the variety of experts that each and every association relies upon to make sure that all goes well within their communities. Whether the landscapers, the painters, the general contractors, the bankers, the pool specialists, the fence builders, the security providers, the attorneys, the reserve specialists, the insurance carriers and all the other service providers we all rely upon to keep things running smooth and hasslefree, they were at the Forum as well and offered their services and products for those in need of them in

a professional way that spoke volumes about how much they care about how they are portrayed within this industry. In other words, they were all ‘class-acts’ in their presentations. Our California Legislative Action Committee (CLAC) also participated in its annual role of creating a warm climate for encouraging donations targeted for use in continuing advocacy efforts on behalf of California common interest communities, with their fundraiser event that took place the evening before. With the “Rat Pack” as its theme, we were treated to several amazing reincarnations of Frank, Dean, Sammy and Marilyn making their presence felt, and even Ann Margret was “in the house.” All in all, the committee proved again, that when it comes to fundraising, few do it better. Wrapping up, I’m drawn back to the title of this article and what my thoughts are on whether or not CAI was successful in keeping the tradition alive. Not enough can be said about how well this year’s Legal Forum was managed, and equally not enough can be said about the elevated enthusiasm expressed by those who were in attendance. Having had the opportunity to speak with several of those who were there, I was left with an unmistakably positive impression that this year’s Legal Forum may have been the best attended in its brief seven-year run, but it could also be the most informative Legal Forum (based on the variety and content of the sessions offered) that has been offered. Did it keep the tradition alive, by providing superb sessions? Yes! Did it keep the tradition alive by providing nothing less than creamof-the-crop speakers and presenters? Absolutely! And did it keep the tradition alive by providing to those in attendance an exceptional return on their investment of participating in the Legal Forum? You betcha! Did the chapter Executive Directors do an outstanding job of managing the event? But, of course! And lastly,

did the attendees, both community association volunteer leaders and managers, leave with invaluable knowledge that they could use immediately? No question about it! They came, they learned, and they left ready to employ a refreshed and ample amount of knowledge that can and will make all their future endeavors for improving the qualityof-life within their associations that much easier. Robert is the current President of Sunnymead Ranch PCA, and a past GRIE-Chapter President. He is a past Chair of the CAI National CAVL committee, and past National Board of Trustees member. He is also a past member of the GRIE-Chapter Board of Directors, and currently serves as the CAI-GRIE chapter CLAC Liaison, as well as its LSC Chair. He is also currently serving as a Board member for the CAI Foundation for Community Association Research.

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A Needle in a Haystack The Top Five Pitfalls in Responding to Homeowner Requests for Association Records By Brittany A. Ketchum, Esq.


mong the many membership rights and privileges afforded to homeowners under the Davis-Stirling Common Interest Development Act (“Act”) and the association’s governing documents is the right to inspect and copy association records. The records retained by an association are copious, to say the least, and responding to homeowner requests can feel like finding the proverbial needle in a haystack. Too often, such requests stem from, or become, a source of contention. Imagine (or recall from your own experiences) a scenario where a disgruntled homeowner seeks information from management or the board or makes excessive requests for documents from the association. More often than not, when a homeowner asks for “information” or “documents,” the impetus behind the request is to support his or her position in a dispute (or potential lawsuit) with the association. Before creating documents or compiling information for a requesting owner, take reasonable steps to avoid these common pitfalls.

Pitfall #1: Failing to Timely Respond to a Request

The first pitfall in accurately responding to request for association records is failing to produce the records on or before the statutory deadline. Once a proper request for specific “association records” or “enhanced association 24 |


records” is received, the association is required to make the records available to members in the timeframes outlined in the statute. (See, Civil Code § 5210.) The timeframes for complying with a proper request are as follows: records prepared in the current fiscal year must be provided within ten business days and records from prior fiscal years within thirty calendar days. (Civil Code § 5210.) Once a proper request is received, the statutory deadlines are triggered. This begs the question, what constitutes a proper request? A proper request should be made in writing and must specifically identify the requested record, as defined by Civil Code Section 5200. Subparagraph (a) of Section 5200 lists those “association records” members are entitled to inspect and copy while subparagraph (b) outlines “enhanced association records.” Once the request is made, the association must inform the member of any costs associated with the request and the member must agree to bear the costs prior to the production of documents. In addition, a member requesting the membership list is required to state the purpose for which the list is requested which purpose must be reasonably related to the requester’s interest as a member. If the association reasonably believes that the information in the list will be used for another purpose, such as for commercial purposes (e.g., to sell a product or service), it may deny the member access to the

list. If a proper request is received, the membership list must be made available within ten business days of the request. (Corporations Code § 8330.) If the member does not want to inspect and copy the records in person at the association’s on-site business office, or, if no office exists, at a mutually agreeable location, such as the manager’s off-site office, then the member may request specified association records be delivered to the member by mail or by electronic delivery (e.g., email), provided the records are in a format that does not allow the records to be altered. It is important to document records requests and responses in writing; specifically by written correspondence to the homeowner or, if the homeowner made a verbal request in a meeting, in the minutes of a meeting and follow up with written correspondence from the association.

redacting an enhanced association record. (Civil Code § 5205(g).) Prior to making the records available, the association is required to inform the member of the estimated costs and the member must agree, in writing, to the costs associated with copying, mailing and/or redaction of records.

Pitfall #3: Over-Inclusive Response

Unless otherwise addressed in the governing documents, the association is only required to make available those records defined by the Civil

Code as “association records” or “enhanced association records;” the Association has no duty to prepare documents or compile information not otherwise an association “record” per an owner’s demand. Moreover, membership lists are only required to include each member’s name, property address, and mailing address, but must exclude information for members who have opted out and communicated this decision to the association in writing. (Civil Code § 5220.) Only records for the current fiscal year, and for each of the previous Continued on page 26

Pitfall #2: Neglecting to Inform the Owner of any Costs Pursuant to Civil Code Section 5205, the association may bill the requesting member for the “direct and actual” costs of copying and mailing requested documents. For example, an association may bill per page for copying charges and require reimbursement of any and all mailing costs. Although the Civil Code is clear in that the association may bill the member for “direct and actual” costs of copying and mailing, it is unclear whether the association may charge the member for a management company’s service fee in obtaining the record. Before passing on this cost to the member, seek and rely on legal counsel. In addition to the direct and actual costs of copying and mailing, the association may bill the requesting member an amount not in excess of ten dollars ($10) per hour, and not to exceed two hundred dollars ($200) total per written request, for the time actually and reasonably involved in


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A Needle in a Haystack Continued from page 25

two fiscal years are required to be made available with the exception of meeting minutes (both board and member meetings), which minutes must be made permanently available. Therefore, records dating back ten years (excluding meeting minutes) are not association records required to be made available for inspection and copying under the Act.

Pitfall #4: Under-Inclusive Response

A member may bring legal action (e.g., in small claims court) to enforce that member’s right to inspect and copy the association records. If a court finds that the association unreasonably withheld access to the association records, the court is required to award the member reasonable costs and expenses, including reasonable attorney’s fees, and may assess a civil penalty of up to five hundred dollars ($500) for the denial of each separate written request. If the association prevails in the proceeding, it can recover its costs only if the court finds the action to be “frivolous, unreasonable, or without foundation.” (Civil Code § 5235.) To minimize exposure to liability, consult with legal counsel to ensure compliance with requests for records.

Pitfall #5: Forgetting to Redact Records

The association can and should redact records if the information is privileged (e.g., attorney-client or litigation AAB_Innov_CAI-GRIE_HalfPg_Cardoza_120215.pdf 1 12/2/2015 5:59:37 PM

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privileged) or if release of information is reasonably likely to lead to identity theft, fraud or invasion of privacy. Examples of information that may be withheld or redacted include, without limitation, bank account numbers of members or vendors, check numbers, social security or tax identification numbers, driver’s license numbers and bank routing numbers. Privileged information also includes, but is not limited to, records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records; minutes and other information from executive sessions of the board; personnel records other than the payroll records; and interior architectural plans, including security features, for individual homes. Rights of members to inspect and copy records should not be thwarted. A savvy board will seek to maintain transparency with homeowners, while protecting sensitive information in its management and operation of the association’s affairs. Brittany A. Ketchum, Esq., an associate attorney with Beaumont Gitlin Tashjian, has devoted her career to representing common interest developments. She can be reached at


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Connect Magazine Issue Four 2016  
Connect Magazine Issue Four 2016