Focus L.A.’s Premier Source of Information for Community Associations November/December 2015 People First The Legislative Year That 2015/2016Was Case Law Update 2015 Wrap-up
JANUARY 13 Skirball Educational Luncheon 23 Essentials of Community Leadership Workshop 27-30 CAI National Law Seminar FEBRUARY 03 Tricks of the Trade 09 Long Beach Evening Program 12 PCAM Luncheon 23 Westside Evening Program 25 SF Valley Educational Luncheon (Thurs.) MARCH 3-4 PCAM Case Study National Course 08 Managers-Only Breakfast Workshop 23 South Bay Educational Luncheon 30 Valencia Educational Breakfast APRIL 01 CA CID Law Course 05 Ask an Expert 07 Westside HOA Marketplace 16 Essentials of Community Leadership Workshop 17-18 Legislative Day at the Capitol 20 Downtown Educational Luncheon MAY 4-7 CAI National Conference 10 San Gabriel Valley Evening Program 16 Annual Golf Tournament 25 Culver City Educational Luncheon JUNE 07 Westside Evening Program 09 San Fernando Valley HOA Marketplace 15 Culver City Educational Luncheon 21 Managers-Only Breakfast Workshop 23-24 M-206 CAI National Course JULY 15 Bowling Tournament 16 Essentials of Community Leadership Workshop 20 South Bay Educational Luncheon 27 Valencia Educational Breakfast AUGUST 02 Managers-Only Breakfast Workshop 13 Wine Night 24 SF Valley Educational Luncheon SEPTEMBER 13 Long Beach Evening Program 21 Downtown Educational Luncheon 22-23 M-203 CAI National Course 24 Essentials of Community Leadership Workshop 27 Ask an Expert OCTOBER 04 Managers-Only Breakfast Workshop 21 CAI State Legal Forum 26 Valencia Educational Breakfast NOVEMBER 01 Westside Evening Program 05 Casino Night 09 San Gabriel Valley HOA Marketplace 12 Essentials of Community Leadership Workshop 16 Skirball Educational Luncheon DECEMBER 02 Holiday Happy Hour Mark Your Calendar Now! 2016 CAI-GLAC CALENDAR OF EVENTS Note: Dates may be subject to change. Please visit our website for current event dates, times and locations. JANUARY 13 Skirball Educational Luncheon 23 Essentials of Community Leadership Workshop 27-30 CAI National Law Seminar FEBRUARY 03 Tricks of the Trade 09 Long Beach Evening Program 12 PCAM Luncheon 23 Westside Evening Program 25 SF Valley Educational Luncheon (Thurs.) MARCH 3-4 PCAM Case Study National Course 08 Managers-Only Breakfast Workshop 23 South Bay Educational Luncheon 30 Valencia Educational Breakfast APRIL 01 CA CID Law Course 05 Ask an Expert 07 Westside HOA Marketplace 16 Essentials of Community Leadership Workshop 17-18 Legislative Day at the Capitol 20 Downtown Educational Luncheon MAY 4-7 CAI National Conference 10 San Gabriel Valley Evening Program 16 Annual Golf Tournament 25 Culver City Educational Luncheon JUNE 07 Westside Evening Program 09 San Fernando Valley HOA Marketplace 15 Culver City Educational Luncheon 21 Managers-Only Breakfast Workshop 23-24 M-206 CAI National Course JULY 15 Bowling Tournament 16 Essentials of Community Leadership Workshop 20 South Bay Educational Luncheon 27 Valencia Educational Breakfast AUGUST 02 Managers-Only Breakfast Workshop 13 Wine Night 24 SF Valley Educational Luncheon SEPTEMBER 13 Long Beach Evening Program 21 Downtown Educational Luncheon 22-23 M-203 CAI National Course 24 Essentials of Community Leadership Workshop 27 Ask an Expert OCTOBER 04 Managers-Only Breakfast Workshop 21 CAI State Legal Forum 26 Valencia Educational Breakfast NOVEMBER 01 Westside Evening Program 05 Casino Night 09 San Gabriel Valley HOA Marketplace 12 Essentials of Community Leadership Workshop 16 Skirball Educational Luncheon DECEMBER 02 Holiday Happy Hour Mark Your Calendar Now! 2016 CAI-GLAC CALENDAR OF EVENTS Note: Dates may be subject to change. Please visit our website for current event dates, times and locations.
2015 BOARD OF DIRECTORS Officers Katy Krupp, President Fenton, Grant, Mayfield, Kaneda & Litt, LLP, 949-435-3800 Lisa Tashjian, Esq., President Elect Beaumont Gitlin Tashjian, 866-788-9998 Michael Lewis, CCAM®, CMCA®, AMS®, PCAM®, Vice President Concept Seven, LLC, 310-622-7012
FINANCE
Anda Bewhite, MBA, CCAM®, CMCA®, AMS®, PCAM®, All West Management
Joanne Peña, CMCA®, AMS®, PCAM®, Secretary Horizon Management Company, 310-543-1995 Meigan Everett, PCAM®, Treasurer Gold Coast Property Pros, 424-238-2333 Matt D. Ober, Esq., Past President Richardson Harman Ober, PC, 626-449-5577
LLP P r OG r AM s /LUNCHEON s Linda
Beaumont
NEWSWORTHY 4 People First 6 Follow the Law 8 The Legislative Year That Was 12 2015/2016 Legal Case Law Update 20 What Does The Future Hold For The Construction Defect Industry: A Lawyer’s Perspective 22 News From Sacramento 24 Board of Director Education: Understanding Special Assessments 28 CC&R Provisions –Most Popular Revisions CHAPTER UPDATE 2 Note from the Editor’s Desk 3 Message from the President NOTEWORTHY 16 Highlights from Diamonds Are Forever Casino Night & Awards Gala 26 Recap of Autumn Festival HOA Marketplace FYI 30 CAI-GLAC Membership News 32 2016 Upcoming Events 32 Advertisers Index 32 Advertising Information
GOLF TOU r NAMENT Teresa Agnew, Roseman & Associates, APC Ryan Dudasik, EmpireWorks Reconstruction
Jolen Zeroski, CMCA®, Union Bank HOA Services
StAy
D irec TO rs Greg Borzilleri PCW Contracting Services, 949-285-7802 Donald Campbell, CMCA®, AMS®, PCAM® Cabrini Villas HOA, 818-504-9600 Pamella De Armas Silicon Beach Insurance Services, 310-490-8689
on Willshire Brian
Katy Krupp, Fenton, Grant, Mayfield, Kaneda & Litt, LLP
This publication seeks to provide CAI-GLAC’s membership with information on community association issues. Authors are responsible for developing the logic of their expressed opinions and for the authenticity of all facts presented in articles. CAI-GLAC does not necessarily endorse or approve statements of fact or opinion made in these pages and assumes no responsibility for those statements. By submission of editorial content to CAI-GLAC, the author acknowledges and agrees to abide by the editorial and policy guidelines. Copyright © 2015. All rights reserved. Reproduction in whole or in part without written permission is prohibited. CAI is a national, not-for-profit association created in 1973 to educate and represent America’s residential community association industry. Office Address: 6402 Arlington Blvd. #500, Falls Church, VA 22042 Tel: 888/224-4321 • Web Site: http://www.caionline.org 130 N. Brand Blvd., Ste. 305 Glendale, CA 91203 Office: 818-500-8636 Fax: 818-500-8638 CoNNeC teD: Arcadia, CA
Lisa Tashjian, Esq., Gitlin Tashjian
Web Site Lynne Collmann, CMCA®, AMS®, Savoy Community Association s ATELLITE P r OG r AM s Ruth Moffitt, CMCA®, AMS®, PCAM®, Valencia Management Group AAMC® Craig Phillips, CCAM®, CMCA®, AMS®, PCAM® International Tower Owners Assn. s OCIAL Donald Campbell, CMCA®, AMS®, PCAM®, Cabrini Villas HOA Angel Fuerte, FRESHCO Painters Inc. w INE NIGHT Joanne Peña, CMCA®, AMS®, PCAM®, Horizon Management Company Jolen Zeroski, CMCA®, Union Bank HOA Services
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 1
National
CHAPTER EXECUTIVE DIRECTOR
On the Cover Anoakia Estates Homeowners Association,
A Historical Note About Anoakia Estates Homeowners Association in Arcadia Baldwin is a well-known name in San Gabriel Valley history. One of two daughters, Anita Baldwin was born to City of Arcadia founder and first mayor E.J. “Lucky” Baldwin and Jenny Dexter in 1876. Lucky died in 1909, leaving his daughters as the primary heirs to the Baldwin fortune. In 1913, following her divorce from husband Harry Hull McClaughry, Anita commenced construction of her own home, which she named “Anoakia”—a three-story, fifty-room estate 19.1 acres in Arcadia. It was completed in 1915 at the cost of more than $225,000. Anita lived there until her death in 1939. After her death, Anoakia became a girls school until 1990 and then lay vacant for 10 years. Although the City of Arcadia tried to preserve it as a historical site, funds were insufficient and it was eventually purchased by Orange County developer Arcadia Oaks and formed into a common interest development consisting of luxury homes on half-acre lots.
The
MA r KETPLACE
Joan Urbaniak, MBA, CMCA® 2015 COMMITTEE CHAIRS AwA r D s
Inc. MEDIATION s E r VICE s Matthew
Linda Healey, CCAM®, PCAM® The Californian on Wilshire, 310-234-5905 Dick CastlegatePruessHOA, 626-584-0000 Lynn WarnerRugerClub Villas HOA, 818-703-7090
Alan Denison, Stay Green Grode, Esq., Gibbs, Giden, Locher, Turner, Senet & Wittbrodt, Healey, CCAM®, PCAM®, Californian Moreno, Esq., SwedelsonGottlieb Gardner, Esq., Richardson Harman Ober PC FOCUS Magazine Matthew Gardner, Esq., Richardson Harman Ober PC Membership Directory Stephen S. Grane, Alante/MCS Insurance Services
PUBLICATION s Matthew
& Painting LEGI s LATIVE ACTION
COMMUNITY OUT r EACH Meigan Everett, PCAM®, Gold Coast Property Pros EDUCATION
Design Build Associates
F Or THE FINAL IssUE OF THE YEAr, we decided to look back and offer a wrap-up issue on some of the topics and legislation impacting our communities. In addition, our outgoing president, Katy Krupp, illustrates the successes that we have seen in our Chapter this year.
Stonemark Construction Management Timothy Cline Insurance Agency, Inc. Vista Paint Corporation
BrO nze American Heritage Landscape ASR CBI-CollinsConstructionBuilders, Inc.
FRESHCO Painters, Inc.
Poindexter and Company, CPAs Seacoast Commerce Bank Silldorf & Levine, LLP
Leading off and echoing Katy’s message about “We the People,” Lynelle Glysson writes about the importance of maintaining community relationships. Injecting a personal touch into the daily routine lowers the heat on simmering Helpingtensions.our communities stay on the straight and narrow path is one of the ways we serve our clients. Neda Nehouray knows that it can be difficult to talk about not only what our boards should be doing, but how they are doing it. Following some of these tips protects both the communities and our volunteer directors. Matt Ober takes us back through the year in legislation. From turf to clothes lines to budget reports, the legislative update is always an important review to keep us informed.
F rOM THE EDITOr’s DE s K nOTe
Jeff Beaumont offers a short summary of the cases handed down throughout the past year. These cases provide some helpful insight on how courts expect our communities to craft our association documents to minimize legal challenges, especially when it comes to rentals, pets, collections and elections.
2 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter 2015 SuperCAI-GLACSponsors PlaTinum ALLBRIGHT 1-800-PAINTING A-One AccurateConstructionTermite& Pest Control Animal & Insect Pest Management, Inc. Behr Paint Corporation Benjamin Moore & Co. Best Alliance Foreclosure & Lien Services Fenton, Grant, Mayfield, Kaneda & Litt, LLP Ferris Painting, HiGuard-Systems,Inc.Inc.TechPainting&Decorating, Inc. NPG—Nelson Paving Pacific Western Bank Payne Pest Management Popular Association Banking Preferred Commercial Painting, Inc. R.W. Stein Painting, Inc. Securitas Security Services USA, Inc. Steven G. Segal Insurance Agency, Inc. Union Bank HOA Services GO lD Beaumont Gitlin GeneralCritterBrickman/ValleyCrestTashjianBusters,Inc.PavementManagement, Inc. Law Offices of Michael A. Hearn Miller Law Firm S.B.S. Lien Services Select Painting Stay Green Inc. Tinnelly Law Group silver American Technologies, Inc. Association Reserves, Inc. California Waters Mission Landscape Services Mutual of Omaha Bank/CondoCerts PCW Contracting Services Professional Services Construction, Inc. Reserve Studies Incorporated SAX Insurance Wolf,UniversalSwedelsonGottliebSherwin-WilliamsAgencyPaintProtectionServiceRifkin,Shapiro,Schulman & Rabkin, LLP
Finally, Jeanne McDonald focuses on restating your governing documents. The end of the year is a great time to look back at some of the legislative changes, court cases and community issues to see how your CC&Rs have survived, and whether there are solutions to those challenges. Our thanks to Katy for reminding us that this Chapter, and our associations, are really about “We the People” working together to create a community this past year. Warm regards, Matthew Gardner,EditorEsq.
We thank our 2015 sponsors who have made a substantial contribution to ensure our continued success this year. Contact the Chapter Office at 818-500-8636 to sponsor a program or an event.
Robert von Esch looks at the reawakening of the construction defect claim. The down economy limited the number of buildings going up the last few years, but Rob sees that we are starting to see a building surge throughout Los Angeles. We are also seeing new types of challenges, both with insurance and the emergence of green technology. After wrapping up the budget season, Alexandra Spargo re-visits the special assessment treatment. This article gives a few pointers on how and when to go the emergency assessment route, and how to silence the critics of an increase.
CAI-GLAC does not necessarily endorse or approve statements of fact or opinion made in these pages and assumes no responsibility for those statements. Authors are responsible for developing the logic of their expressed opinions and for the authenticity of all facts presented in articles.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 3
I hope you have enjoyed reading my take on, “We, The People” and have found it entertaining as well as insightful.
What I am most excited about is the “Coaching to Credentials” Manager Mentor Program that was launched this past spring. I encourage any manager looking for guidance toward earning the PCAM® (Professional Community Association Manager) designation to get involved with this program. You can be assigned a mentor to help guide you through the maze of required classes and inspire you toward your designations. There is a tremendous wealth of knowledge, experience and camaraderie found within every member of this chapter. All you need to do is hold out your hand and ask for help. I am quite certain that our chapter board of directors will continue on the path of creating an environment in which community association volunteer leaders, community managers and business partners can idea-share and mentor each other. I will miss my fellow board members. It has been a wonderful six years serving with you. I will still be at events and available anytime you need to see a familiar face. Have a wonderful holiday season, and I look forward to 2016 with hope, joy and much success!
The editors of and contributors to this magazine have done a brilliant job at bringing you articles that are newsworthy and topical, as well as showcasing what the members of our extraordinary chapter are doing. It seems fitting that the last subject of my spin on the Preamble of the Constitution should be Liberty, or rather “to secure the blessings of Liberty to ourselves and our posterity…”
THIs w ILL BE MY FINAL INs TALLMENT of the President’s Message for 2015.
The old adage, history has a way of repeating itself, has become quite evident in our daily lives.
What is liberty? Is it freedom? Is it giving people the leeway to get a job done in a non-traditional way? Is it latitude? How much rope to you give someone before they have gone too far? How does Liberty affect our HOA life?
Lucky for us, the Davis-Stirling Act provides HOA boards of directors the framework to govern their associations, voice opinions, adopt policies and procedures, and create beautiful living environments. We are lucky to live at a time when freedom of speech is the norm and our Liberty is not generally questioned. I thank our forefathers for fighting for our civil rights and Liberties and am grateful to be a part of this CAI community that keeps on fighting for our rights and freedoms within our communities. As I write this article and reflect on the past year, I am proud of our chapter’s accomplishments and ability to achieve the goals we set forth at the Strategic Planning last November. We have increased our membership by 7% over last year and received praise from CAI National by receiving the award for our high retention rate. Social media has become a strong vehicle to get our messages out to a wider community. We can now be seen on Facebook and Twitter. The Website has been redesigned and is clear, concise and more user-friendly. I encourage you to visit the site at www.cai-glac.org and give it a test drive! We are reaching more managers, community association volunteer leaders (CAVLs) and business partners by way of our regional luncheons. Rotating the luncheons to the South Bay, San Fernando Valley and Torrance has proven to be a great benefit. We are now attracting a broader range of members that we were unable to capture before because of distance and time away from their very busy lives. The decision to bring back the spirit of acknowledgement with F rOM THE PrE s IDENT messaGe we, The People an Awards program at our Casino Night was fabulous. The program was fun, lively and nothing says thank-you better than a little public applause from our peers.
— Katy Krupp 2015 Chapter President To learn more about CAl’s newest service and how mediation can benefit you, call the Chapter Office at 818-500-8636.
4 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter C
We all have governing documents, ethical practices, state statutes and legal obligations to adhere to, but often you can take some steps to ease the problem.
Peo Ple First
ommunity management entails many things, such as maintaining the common areas, mechanical systems, plumbing, HVAC, boilers, building maintenance, budgets and much more. All of that is important, but within your property is something more valuable: people. You are a people manager more than anything. When you have a 100-unit building, you work with at least 100 different personalities. What rattles one person doesn’t faze another. We value different things—and the most important thing to one, doesn’t even matter to another. As a community manager you get to juggle all the different concerns and requests from a multitude of personalities. After managing the different personalities in several different associations, here are the top three traits that I found make for a great people manager. resPecT. Respect is given in many ways. All walks of life should be given respect just because they are fellow human beings. I do my best not to make assumptions. You never know what kind of day someone has just had or the struggles they have encountered. One of the best ways to show respect is to listen. Active listening is hearing the other person without forming your response before they are done. This can be difficult to do, but with practice it becomes easier. Listen for the motivation behind the concern. Is it fear? Anger? Frustration with a long-outstanding issue? When you have a resident who is confronting you with an issue, do not take it personally. I have found that many times they are just glad to have someone listen to them. You can show respect by follow-up communication. I had a resident who had a clanging noise coming from the pipes in the walls of his unit. The engineer and I were determining what the cause could be. We had a plumber open a wall and wrap the pipes and secure them, but the noise would then travel to another part of the unit. After doing this several times, we contemplated a permanent fix. The engineer said we could have a damper put on the water supply to minimize the impact of the water pressure. To reassure the resident that we continued to investigate a permanent solution, I kept him informed periodically with emails on our progress. emPaThy. When a resident comes to you with a concern, big or small, put yourself in their shoes. Whether it is an insect scurrying across their kitchen floor or a flood from the above unit that has destroyed their newly-remodeled home, we can all imagine what it might feel like to be in their position. Personally, you may not think the concern amounts to much, but to the resident it may be of the utmost importance. I find that agreeing with their frustrations can help ease their anxiety. I like to say, “You’re right—this is frustrating.” And then I follow with, “This is what I can do in this situation.” You may not be able to do everything they request.
self- r esPecT. Sometimes, even after your best efforts to solve problems and be understanding, residents will still be dissatisfied. This is the time to remember your self-respect. You determine how people treat you. If someone treats you with disrespect, you can politely and firmly disengage from the discussion. I have had to tell people, either on the phone or in person, “I cannot allow you to speak to me like that and I will be discontinuing this discussion.” More often than not, people are embarrassed by their behavior afterward and will apologize. But, even if they aren’t and don’t, you can still set the level of expectation of being treated respectfully. How people treat you is a reflection of them, not of you. You can maintain your self-respect regardless of how others behave.
>>> By Lynelle Glysson, CMCA®, AMS®
Lynelle Glysson, CMCA®, AMS®, is the onsite manager at Empire West Homeowners Association in West Hollywood. She can be reached at lynelle@empirewesthollywood.com.
Their home is often the resident’s biggest asset and they have an emotional attachment to it. That emotion will reveal itself when they communicate with you. Remember, while you are in the middle of getting bids for that exhaust fan that needs replacing or scheduling that next board meeting, everything you do involves the people in the building. And people matter.
Another trick I have learned that helps to be empathetic is imagining a family member in their situation. When an elder resident is upset about an issue in the building, imagine treating them how you would want your grandmother to be treated. Or, just treat others in the manner you would want to be treated.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 5 Contact our Southern California Commercial Relationship Officer today! Larry Hooper, Vice President (714) 864-5171 Toll Free: www.associationbankers.comLHooper@bpop.com800-233-7164 Our DEDICATED experts understand the needs of community associations. We offer: • Financing for building repairs/improvement projects • Competitive fixed rates with terms up to 15 years • Excess FDIC insurance coverage limits Lockbox, cash management, and other depository services are also available. ©2013 Banco Popular North America. Member FDIC. PACIFIC UTILITY www.PacificUtilityAudit.comAUDIT1-800-576-1010Since1989 • Determine whether or not you are entitled to refunds as a result of utility company over charges, and secure those refunds for you... retroactively. • Enable you to enjoy on-going utility savings as you avoid needless overcharges and utility billing errors in the years ahead. • Obtain the lowest possible water, sewer, telephone, trash, gas and electric utility bills in the Whatfuture.We Can Do For You:
6 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter As A COMMUNITY MANAGEr, IT Is MY jOB TO ADVIsE MY BOA rDs on how to properly run their community association and adhere to the laws that govern associations. There are many areas we community managers need to monitor, analyze and factor, including the association’s governing documents, state laws, city ordinances, corporation codes, etc. Unfortunately, however, despite advising boards of the right path, there are some association directors who ask that question: “Well, what happens if we don’t actually follow the law on this? Is there some sort of HOA police that will come after us?” Too often, board members take the laws that govern their communities lightly and think that there will not be any consequences to these decisions. Some common examples that I have encountered of boards disregarding their requirements include failing to conduct reserve studies, not distributing the year-end budget disclosure FOLLOW THE L Aw package by the required legal deadlines, and also not responding to owner requests for documents. While it’s true that not all homeowners will take legal action against a board or their association that fails to follow the letter of the law, ignoring their responsibilities not only puts the association at risk but the individual board members at risk as well. If an owner requests documents in accordance with Civil Code, and the association fails to produce those documents, an owner may file a small claims suit against the association and be awarded up to $500 per each separate request for documents if the court finds that the association unreasonably withheld documents. If an owner asks for a reserve study, for example, which is required to be conducted (an on-site study once every three years and an update every year in between), but the board opts not to conduct a reserve study and informs By Neda Nehouray, CMCA®, AMS®
an owner it is not available, an owner can sue the association for up to $500 for failing to produce the document. This is just one small repercussion. Often, not conducting these studies also affects lending and refinancing to prospective buyers and existing owners, as lenders are requiring the production of more documents in order to lend to applicants. Apart from these repercussions, not having the right documentation and guidance with an updated reserve study cripples the board from using a relevant document to help navigate their finances for future planning.
While it is a difficult path for a disputing owner to pursue, we don’t want any of our associations or individual directors to be questioned or be faced with such potential challenges. If we encounter a board that seems to consistently violate the law and make decisions against our recommendation, we ultimately decide to part ways from the relationship. While the board may want to gamble with the repercussions and take the law lightly, as professionals, we do take a stand and have to make sure that we are not responsible for the board’s poor decisions.
Many reputable management companies will do the same. When managing the association in accordance with the law, properly planning financially, and following your governing documents, I find that associations generally save more money in the long run and end up becoming desirable communities. Having an organized, logical and reasonable board results in a better-run and more efficient association. Also, making the right and smart decisions usually ensures partnering with a reputable management company who will also represent the community professionally and efficiently.
Neda Nehouray, CMCA®, AMS®, is the CEO and President of HOA Organizers, Inc., a full-service management company located in Lake Balboa. She can be reached at info@hoaorganizers.com.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 7
While the board thinks that they are doing everyone a favor by saving a few hundred dollars by not upholding their legal responsibilities, the long-term damages can far outweigh the short-term perceived benefits. After advising boards of the possible repercussions, I also remind them that they have a fiduciary responsibility to the association. They should be making decisions using the business judgment rule and seeking guidance from professionals. Generally board members are not held personally liable for damages, as long as they act in good faith and what they believe to be in the best interest of the association. When I am faced with a board that does not want to follow the law, I remind them that their decision could bring into question whether or not they are truly acting in good faith, and there could be a question of whether they would be personally liable if action were taken against them by an owner.
aB 349 - arTificial Turf is allOweD in cOmmuniT y assOciaTiOns, effecTive immeDiaTely AB 349, effective immediately as an urgency statute, amends Civil Code § 4735 to make void and unenforceable any provision of an association’s governing documents or policies that prohibit, or include conditions that have the effect of prohibiting, the use of artificial turf or any other synthetic surface that resembles grass. The justification for this being an urgency statute was not only that California is in its fourth year of drought, but also, supposed “stories” of community associations discriminating against homeowners who sought to replace lawns with artificial turf. For years, artificial turf was a subject of dispute between homeowner and association. Given the Governor’s mandate that Californians collectively remove 50 million square feet of lawns to conserve water, it was just a matter of time before the legislature put an end to a community association’s aesthetic control over landscaping within the community, now giving a green light to everything from drought tolerant plants to artificial turf. By Matt D. Ober, Esq., CCAL
8 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter
THE LEGIsLATIVE YEAr THAT WAS
★★★
Another legislative year has come and gone, with community associations again coming under scrutiny. Among the more than 2742 bills introduced early in the legislative year, The Community Associations Institute (CAI) tracked 55 bills impacting community associations, dealing with a broad range of issues including: drought, artificial turf, clotheslines, transfer fees, disclosures, and electric vehicles. The following presents a brief overview of significant Common Interest Development legislation from 2015.
2015
CommuNIty A SSoCIAtIoN LeGISLAtIoN
aB 596 - mODificaTiOns TO annual BuDGeT rePOrT DisclOsure requiremenTs - fha / va AB 596, operative July 1, 2016, amends Civil Code § 5300 to add subsections (a) 10 and (a) 11, requiring community associations to include in their annual budget reports to members a separate statement describing the association’s status as an approved Fair Housing Administration (FHA) or Department of Veterans Affairs (VA) approved condominium project. Despite strong opposition by CAI-CLAC as unnecessary and inefficient, the bill requires each such disclosure to be in at least 10-point font on a separate piece of paper. The disclosure must include specific language abo ut the certification and indicate 1) whether the community association is a condominium; and 2) if so, whether the condominium is FHA or VA certified.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 9
aB 786 - use iT Or lOse iT - fines Okay for Those not using recycled water In 2014, while prohibiting an association from fining owners for the consequences of reducing or eliminating watering during a drought related declared state of emergency, the legislature carved out an exception allowing fines against owners in communities that use recycled water for landscape irrigation. AB 786 reverses that short-lived exception. This bill amends Civil Code § 4735 adding subsection (d) allowing a community association to fine or assess an owner that receives recycled water and fails to use it. AB 786 was a surprise. Originally drafted to require an association to irrigate all of its common areas with recycled water in order to be able to fine an owner for not watering and enforce its watering rules, even if an owner received his own recycled water but didn’t use it. As enacted, the bill applies only to members who fail to water when they receive recycled water.
aB 807 - Transfer fees - notice must recorded Before December 31, 2016
C ONTINUED ON PAGE 10
The legislature seems ever concerned about hidden fees that are imposed upon transfer of real property. It seems every few years the legislature comes up with new complicated transfer fee disclosure requirements, or seeks to tweak those already in place. 2015 is one of those years. AB 807 amends Civil Code § 1098 regarding fees imposed by deed, covenant or other document affecting transfer of real property that requires a fee be paid upon transfer. Existing law requires that as a condition of payment, the one imposing the fee to record a document describing the transfer fee and certain specifics of the fee imposed, along with a specified disclosure about the transfer fees due.
AB 349 also adds language to Civil Code § 4735 that allows an owner’s water-efficient landscaping modifications to remain, after the drought related state of emergency has ended.
CAI-Greater Los Angeles Chapter
800-345-8866 • Toll
Email: steve@segalins.com • www.farmersagent.com/ssegal STEVEN G. SEGAL INSURANCE AGENCY, INC. Over 37 years of experience specializing in: Condominium Associations • Planned Unit Developments • Hard to Place Associations Earthquake Coverage • High Rise Condominiums • Workers Compensation License No. 0E24660 C ONTINUED FROM PAGE 9 The legislative year That was
In 2014, the legislature determined that with respect to solar energy systems, perceived delays caused by conditioning a local government’s approval of solar equipment were not acceptable, and prohibited a city or county from conditioning its approval of the solar energy system on the association’s approval. AB 1236 extends this law to city and county approval of electric vehicle charging stations. An association will no longer be able to rely on a city or county requiring an association to approve an electric vehicle charging station before an owner receives his permit to proceed. This author recommends, therefore, that associations adopt EVCS installation policies, and become proactive in making owner’s aware that approval by the association is separate and apart from approval by the city or county. Moreover the specific EVCS Civil Code statutory mandates must be satisfied prior to installation. AB 1236 does nothing Free: Free Fax: 800-262-0973
Existing law carved out an exception for any fee contained in a document (other than CC&Rs) recorded against the property on or before December 31, 2007. The information about the transfer fee must not be incorporated by reference from another document. This bill adds a requirement for transfer fees recorded on or before December 31, 2007. The exception from recording this additional transfer fee notice does not apply to any such fee that is 1) not separate from the CC&Rs or 2) incorporated by reference from another document. In other words, for any transfer fee that is contained within the CC&Rs or that has been incorporated by reference from another document, that transfer fee is unenforceable unless a separate document prepared in accordance with Civil Code § 1098 is recorded on or before December 31, 2016.
aB 1448 - nOT in my Back yarD - except clotheslines and Drying racks AB 1448 adds Civil Code § 4750.10 to require associations to allow members’ clotheslines and drying racks in order to promote energy conservation. The bill limits such conservation methods to an owner’s designated exclusive use common area backyard. Balconies, railings, or any part of the building structure shall not be utilized for these devices.
aB 1236 - nO cOnDiTiOns TO elecTric vehicle charGinG sTaTiOn aPPrOval By lOcal GOvernmenT
As with virtually all other environmental-related legislation that places restrictions on an association’s ability to prohibit such conservation measures, AB 1448 allows reasonable restrictions on backyard clotheslines and drying racks, so long as such reasonable restrictions do not “significantly increase” the cost of using such devices.
Toll
10 www.cai-glac.org | November/December 2015
swimminG POOls m ainTenance requiremenTs
The bill’s language is unclear at best particularly since the definition of what constitutes mold is not scientifically established. The law declares “substandard” any building or portion of a building that has visible mold growth, mold being loosely defined as microscopic organisms or fungi that can grow in damp conditions in the interior of a building.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 11 to change the owner installation requirements contained in Civil Code § 4745. sB 655- fines anD criminal PrOsecuTiOn fOr mOlD Senate Bill 655 mandates that building owners in multi-unit residential buildings, and possibly association managers, remedy mold or face fines and possible criminal prosecution.
sTill TO cOme… Not every bill makes it to the Governor’s desk, or is signed into law. A few bills float around as two-year pieces of legislation. Others are not quite ready for prime time and are vetoed only to make their way back before us in the future. One significant piece of legislation we will continue to track is AB 1335 which is likely to find its way back before the Governor in one form or another. This bill sought to impose a $75 fee on each recorded document up to a maximum of $225 per each single transaction per parcel of real property, with certain exceptions. The stated goal of the legislation is to pay for more affordable housing. While the goal is praiseworthy, the bill’s special carve out for single property sales results in millions of dollars of “exempted” fees, and makes charging non-profit associations these fees seem excessive, unfair and improper.
AB 1335 is currently stalled in the Assembly and likely to be addressed during the next legislative session.
Matt D. Ober, Esq. CCAL is a senior shareholder of Richardson Harman Ober PC where he specializes in the exclusive representation community associations throughout Southern California. Matt can be reached at mober@rhopc.com.
Recent Changes in swimming pool regulations (Title 22 and 24 of the California Code of Federal Regulations) significantly impact how associations service their community pools. To begin with, the Health & Safety code now includes within its definition of public pools, pools within private community associations. Other significant changes include: (a) strict monitoring of pools, (b) availability of written maintenance records, (c) mandated health restrictions for employees and (d) daily testing of pool water for community associations with 25 or more separate interests. Associations are urged to make sure their pool service vendor is complying with the new pool regulations.
A board member accused the current and former board members of fraud and mishandling of funds. Accused board members struck back with a recall campaign through a website alleging the member as a convicted criminal and published his settled sexual harassment lawsuit. The member filed a lawsuit naming certain board members as defendants for defamation-related claims. The court ultimately held that the member’s defamation claims arose from protected activity; specifically, board members are limited public figures and a showing of malice is required to support a claim of defamation. The lesson to learn from this case is to avoid the appearance of endorsing or otherwise supporting statements for or against a recall and/or candidates for director.
H AN s ON V. jQD LLC, DBA Pr O sOLUTION s U. s . Dist. - (2014) Lexis 94742
12 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter LALEGAL2015/2016CAsEwUPDATE t he foLL ow ING IS A S umm A ry of ImP ortAN t C ALIforNIA AND f eDer AL C ourt DeCISIoNS from thIS PAS t ye A r whIC h ImPAC t C ommoN IN tere S t DeveL oP meN t S . Some CAS e S A re P ubLIS heD AND S ome A re Not. “PubLIS heD ” C ourt DeCISIoNS A re LAw, AND bINDING, whIL e “uNP ubLIS heD ” C ourt DeCISIoNS A re Not LAw. A LthouGh Not LAw, uNP ubLIS heD DeCISIoNS A re extremeLy vAL u A bL e AS they ILL u S tr Ate how C ourt S ADDre SS vA rIou S ISS ue S C ommoNLy fAC eD by C ommoN IN tere S t DeveL oP meN t S . Court DeCISIoNS IN terP ret S tAte S tAtute S AND P rov IDe A P r AC t ICAL APPLICAt IoN of the LAw S . BEL A Ir rIDGE HOMEO w NErs Ass’N V rO s ENBEr G (2015) Not Officially Published – May Not be Cited (Not Law) –(2015) LEXI s 4311
Notice and agenda provided by a local government to the public cited the incorrect statutory provision for authority to hold closed session. The court found that notice substantially complied with the Brown Act (Government Code §54950 et seq.). The Brown Act applies to government, not CIDs; rather Associations are governed by the Open Meeting Act (Civil Code §4900-4955). However, the Brown Act can provide guidance for conducting board meetings. This case indicates that minor mistakes in agenda references will not prevent holding closed sessions if the agenda item is clear and will not mislead or confuse members.
In this case, the association petitioned the court to reduce the percentage of affirmative votes necessary to amend CC&Rs (which required supermajority to amend) after seeking a vote of the membership. As a result of voter apathy, the board repeatedly extended the voting period and deadline. The association also sought lender approval, which was required by the original CC&Rs. Opponents of the restated CC&Rs challenged these procedures and also contended that the proposed amendments included unreasonable restrictions. The court found that extending the deadline to vote is not prohibited by law, that lender approval efforts were reasonably diligent and that the burden is on members to show CC&R provisions are unreasonable. This case demonstrates the importance of not only making reasonable attempts to allow members to return their secret ballots after the thirty day period required by law for CC&R amendments, but also the importance of properly documenting attempts to amend. Boards should also regularly review their governing documents to ensure same are consistent with law and meet the needs of your community. Please contact our offices should you wish to obtain a quote for BGT to review and amend your governing documents.
Comments and discussions should be kept neutral at a board level and, where feasible, work internally to resolve disputes. Of course, it is prudent to seek legal counsel in the event of a recall of one or more board members.
In this federal case, an association contracted with a debt/ assessment collection company to collect assessment arrearages from delinquent owners. The collection company then obtained control of the delinquent owner’s accounts and charged the owner directly for “costs” associated with its services while the association assumed no liability for the company’s fees. The court found that this “no-cost” business model may be unlawful because the amounts recovered against a delinquent owner exceeded the costs incurred by the association. The court reasoned that the company may not collect fees and costs from a delinquent owner when the collection assessment fees are never actually incurred by the association. The court conclusively held that the collection agency violated the Fair Debt Collection Practices Act and the California’s unfair competition law. By Jeffrey A. Beaumont, Esq. CCAL
CAsTAIC L AKE wATEr AGENCY V. NEwHALL COUNTY wATEr DIsTrICT 238 Cal. App. 4th 1196 (2015)
GLA ss NEr V. sMITH (2015) Not Officially Published – May Not be Cited (Not Law) –(2015) Lexis 3201
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 13
IN r E C ATHY D AVENPOr T, DEBTOr (Otter Creek Homeowners Association) 534 B.r . 1 (2015)- Arkansas
In this bankruptcy case, a homeowner debtor purchased real property, then later filed a Chapter 13 petition and failed to make further payments to the association. The CC&Rs expressly stated that easements, covenants, restrictions, conditions and charges shall run with the land, thereby passing with the transfer of property to the debtor. The court found that post-petition assessments and fees are non-dischargeable because they run with the land and are post-petition debts for which no proof of claim was filed by the creditor. A trend towards owners filing bankruptcy has continued to emerge in the industry, creating a roadblock to the collection of delinquent assessments. Consult with legal counsel to monitor bankruptcies and make reasonable attempts to collection delinquent amounts to the extent allowed by law.
C ONTINUED ON PAGE 14 Sharing
The “takeaway” from this case is that boards can, and many times should, play a role in facilitating true neighbor-toneighbor disputes. The trend in the law is moving towards holding boards responsible for getting involved, unless the matter does not involve a violation of the governing documents, affect the common area or otherwise affect components for which the association is responsible.
Kr AU s V. Gr ILLI (2015) Not Officially Published – May Not be Cited (Not Law) –(2015) Lexis 846 In this case, a homeowner planted “fast-growing” shrubs along the boundary between his backyard and the neighbor’s backyard. The shrubs grew to an extensive height and blocked the adjacent property owner’s sunlight and ocean views. The adjacent property owner contended that the shrubs height violated the City’s Municipal Code. The court held that
rYLAND ME ws HOMEO w NErs Ass OCIATION V. MUNO z 234 Cal. App. 4th 705 (2015)
the plants were a hedge in violation of local ordinances and ordered either the removal or maintenance of the hedge at the height specified by local ordinance.
An owner installed hardwood floors in a condominium unit without prior association approval and authorization. The floor modification caused a significant increase in sound transfer and noise to the unit below. The association sued the owner to enforce the nuisance provision of CC&Rs and bring the owner into compliance. The court granted an injunction with the directive to find a compromise in modifying the flooring to reduce the level of noise that could be heard from outside the unit, as well as the interim remedy of using throw rugs. The court balanced the consideration of the circumstances of all parties involved, including the residents below who were adversely affected by the upstairs owner’s violation of the our withexperiencecommunity
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14 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter noise and nuisance restriction. Depending on the given facts, associations should consider alternative or interim solutions as a way to resolve disputes between neighbors.
T HE V ILLA s IN wHI s PEr ING PALM s V. T EMPKIN (2015) Not Officially Published – May Not be Cited (Not Law) –(2015) LEXI s 3425 In 2005, the board of The Villas in Whispering Palms began enforcing a pet restriction set forth in the CC&Rs, effective as of 1979. The court found that the board’s decision to strictly enforce the pet restriction after many years of granting variances was reasonable and entitled to judicial deference. Specifically, there was no indication or evidence of selective or arbitrary enforcement of the restriction when the board took no action to enforce the pet restriction for many years and then reassessed the need for enforcement after investigating the community’s opinion and notifying owners that the rule would be strictly enforced from that point forward. In addition, when the board learned of the violations, it levied fines, sent violation letters, and gave owners an opportunity to address the board. Boards must ensure consistent and uniform enforcement of the governing documents.
TrILOGY AT GLEN IVY MAINTENANCE AssOCIATION V. sHEA HOMEs, INC. 235 Cal. App. 4th 361 (2015) In this case, the association and homeowners filed suit against the developer for breach of fiduciary duties, unfair business practices including improperly diverting funds, and breach of implied covenant of good faith and fair dealing. The court held that the developer’s anti-SLAPP motion lacked merit for failure to establish an anti-SLAPP analysis. Specifically, the association used the word “repudiation” to describe a species of fiduciary breach, leading the developer to claim that the complaint was about speech. However, the court was not persuaded since the developer failed to show that the association’s suit came from the developer’s conduct taken in furtherance of the developer’s constitutional right of free speech. The court observed that if the association’s injury was caused by the defendant’s conduct that does not rest on protected speech, then it will not trigger an anti-SLAPP defense. In sum, developer controlled boards owe fiduciary duties to the association. During developer transition, evaluate transition procedures and obligations set forth in the governing documents, BRE file and other relevant resources, such as bank statements.
HOAbankservices.commore. C ONTINUED FROM PAGE 13 2015/2016 LEGAL CASE LAW UPDATE
wATT s V. O AK sHOrE s C OMMUNITY Ass OCIATION 235 Cal. App. 4th 466 (2015) In this case, an association enacted rules and regulations and charged fees to non-resident homeowners who rented WITH 20 YEARS IN NEIGHBORHOOD.THE ©2015 MUFG Union Bank, N.A. All rights reserved. Member FDIC. Union Bank is a registered trademark and brand name of MUFG Union Bank, N.A. Smartstreet is a registered mark of MUFG Union Bank, N.A. No matter what size your community is, managing it can be a daily challenge. Union Bank ® Homeowners Association Services is here to help. For over 20 years, we’ve streamlined the assessment collections process for community associations with specialized tools and services powered by Union Bank product solutions and our proprietary Smartstreet® technology. We offer a customized HOA lockbox with same-day processing to accelerate payment collection, reduce mail-in times for checks, and provide homeowners with convenient online payment options. Whatever your needs, Union Bank provides solutions that make it easier to control your daily financial operations. Contact us today at 866-210-2333 to learn
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 15 Risk Management Solutions… Professionally it’s what we know; Personally it’s what we do! (800) 237 2669 17141 Ventura Blvd. #202 Encino, C A BuildersShoppingApartmentCondominiumSandrahttp://farmersagent.com/smacdonaldsmacdonald@farmersagent.com91316MacdonaldInsuranceAgencyLicense:0573169AssociationsBuildingsCentersRiskOfficeBuildingsWorkersCompLifeInsuranceEarthquake their homes to short-term vacation renters. The homeowners brought an action challenging the various regulations and fees adopted, including an annual fee imposed on owners who rented their homes. The court upheld the rules adopted by the association that restricted minimum rental periods to seven days and imposed fees on owners who rent their homes. The court found that associations could adopt reasonable operating rules and impose fees on its members relating to short term rentals of condominium units where the CC&Rs gives the board of director’s broad power to adopt rules for the development, and nothing prohibited the board from adopting rules governing short-term rentals. Although the most prudent approach is to amend the CC&Rs regarding use restrictions, this case appears to be an extension of Friars Village Ass’n v. Hansing (2013) 220 Cal. App. 4th 405, which stands for the proposition that rules and regulations are generally considered reasonable if they are rationally related to the protection, preservation and proper operation of the property and the purposes of the association as set forth in its governing instruments, and are fair and nondiscriminatory.
COASTCENTRALCOUNTYKERNEMPIREINLANDCOUNTYORANGEANGELESLOS A FULL SERVICE COMMUNITY ASSOCIATION LAW FIRM General Legal Counsel Governing DocumentDisputeLegalAmendmentsEnforcementOpinionsContractsResolution Civil Litigation InsuranceEnforcementBad Faith Construction Assessment Collections JudicialJeffreyForeclosureA.Beaumont, Esq.IntoTurningwww.bgtlawyers.com866.788.9998CommonInterestsCommonGround
Jeffrey A. Beaumont, Esq. CCAL is senior partner for the law firm Beaumont Gitlin Tashjian—a full service community association law firm with offices through Southern California. He can be reached at jbeaumont@bgtlawyers.com.
November 14, 2015 Los Angeles Athletic Club DiamonDs are Forever Casino Night & Awards Gala A reCord 238 ChApter members And frIends attended the Casino night & Awards Gala on november 14 at the Los Angeles Athletic Club in downtown Los Angeles. many attendees carried out the “diamonds Are forever” theme with beaded gowns and fancy tuxedos, and the ambiance was perfect with the Club’s paneled-wood accent. highlights of the evening’s festivities were an awards presentation in the true hollywood fashion, when chapter members were recognized for their “industry excellence” and a half-Carat diamond Raffle, won by one lucky lady, Lucky Barbero. Our thanks to the Social Committee for putting on such an awesome event: Co-chairs don Campbell (Cabrini Villas hoA) and Angel fuerte (freshCo painters, Inc.), Josh Abramson (ALLbrIGht 1-800- pAIntInG), Jennifer brunston (Action property management), Leslee Jones (Alliance environmental Group), Alison Kronebusch (reconstruction e xperts, Inc.), Angelique madrigal (ross morgan & Company, Inc. AAmC), edward newman (G4s secure solutions UsA, Inc.) and stephanie sanders (dunn- edwards paints).
C HAPTER A PPRECIATION Angel Fuerte FRESHCO Painters, Inc. Diane Hilliard, CMCA, AM s , PCAM Ross Morgan & Company, AAMC O UTSTANDING S ERVICE Greg Borzilleri PCW Contracting Services R OOKIE M ANAGER OF THE Y EAR Angel Maldonado SeabreezeCompanyManagementAAMC P ORTFOLIO M ANAGER OF THE Y EAR Martha Olvera, CMCA Horizon Management Co. C OMMITTEE OF THE Y EAR w ine Night Committee E XCELLENCE IN E DUCATION joanne Peña, CMCA, AMS, PCAM, Horizon Management Co. Not Pictured: jeff Beaumont, Esq., Beaumont Gitlin Tashjian
GreaterAssociationsCommunityInstituteLosAngelesChapter Presents
Thanks To our sponsors James BoNd Sherwin-Williams Paint PlayiNg Cards Guard-Systems, Inc. CasiNo ChiPs G4S Secure Solutions USA, Inc. CraPs TaBle Dunn-Edwards Paints shakeN NoT sTirred haPPy hour Securitas Security Services USA, Inc. diamoNds are Forever r aFFle ALLBRIGHT 1-800-PAINTING skyFall souveNir PhoTos Pacific Western Bank 007 eNTerTaiNmeNT Preferred Commercial Painting, Inc. oCToPussy WiNe McKenzie Rhody, LLP ThuNderBall aWards Law Offices of Michael A. Hearn asToN marTiN ParkiNg Hi-Tech Painting & Decorating, Inc. sPeCTre hors d’oeuvres Baldwin Real Estate Management Nu Air Services, Inc. Sandra Macdonald Insurance her ma JesT y The QueeN Nu Air Services, Inc. goldeN eye PhoTo BooTh Allegra Professional Group, LLC CeNTerPieCes On Time Building Maintenance, Inc. NoT For your eyes oNly sWeeT shoPPe FRESHCO Painters, Inc. Nu Air Services, Inc. E DITOR S AWARD Michael Lewis, CMCA, AM s , PCAM, Concept Seven, LLC Phil s ilver, 2311 Fourth Street HOA INNOVATIVE M ANAGEMENT jake Parvino, CMCA SeabreezeCompanyManagementAAMCK EYSTONE AWARD Lionel Harris, PCAM All West Management 2015 Board oF direCTors K EYSTONE AWARD Timothy Cline, CIr M s Timothy Cline Insurance Agency, Inc. ON -S ITE M ANAGER OF THE Y EAR Gregg Lotane, PCAM The Wilshire R ISING S TAR Anda Bewhite, CMCA, AM s , PCAM All West Management C OMPANY S POTLIGHT s cott Management Company S PECIAL R ECOGNITION Matt Ober, Esq. Richardson Harman Ober PCS PECIAL R ECOGNITION Michael Lewis, CMCA, AM s , PCAM Concept Seven, LLC 2015 s ocial Committee Chairs Don Campbell, Angel Fuerte making announcements P RESIDENT S AWARD joanne Peña, CMCA, AM s , PCAM Horizon Management Co. DIAMOND R AFFLE W INNER Lucky Barbero with Raffle Sponsor Josh Abramson
DiamonDs are Forever Casino Night & Awards Gala 18 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 19 AAB_Innov_CAI-GLAC_Cardoza_QtrPg_120115.pdf 1 12/1/2015 5:14:16 PM
226SurplusCorp.Regionalpropertythatandcostasdefectivesubcontractor’sawork,wellastheofaccessingrepairingwork,isnotdamage.Steelv.LibertyInc.Corp,Cal.App.4th1377
California passed Assembly Bill 802 and it will become effective January 2017. AB 802 will require public utilities to monitor the energy usage of commercial and multifamily buildings above 50,000 square feet gross floor area and to make this data available to the owners of said buildings through standardized energy use metrics. In my opinion, this regular and standardized monitoring will give birth to breach of warranty and misrepresentation claims concerning the energy efficiency of a building or the “green” components therein. It will also give rise to claims for the negligent installation of the “green” components from the standpoint that the reason the energy efficiency is less than promised is due to the fact that the builder failed to properly install the components. insurance cOveraGe
The insurance carriers for the builders will aggressively challenge their duty to cover construction defect claims. There has been a swell building within the insurance industry regarding whether a “construction defect” is an “occurrence” and/or constitutes “property damage” within the meaning of the standard commercial general liability policy held by most Thebuilders.insurance carriers are repeatedly asserting that their insurance policies are not designed to guarantee that a builder performs its job correctly. In June 2014, the Second District Court of Appeal, which encompasses Los Angeles County, noted that the law is in conflict concerning whether construction defects that are incorporated into a whole property constitute property damages for purposes of a CGL policy, particularly where the defective work or material must be removed or repaired to comply with building code or health and safety standards.
20 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter As an attorney handling construction defect cases in Los Angeles County, I have two simple opinions about the state of the construction defect industry: 1) there are an abundance of condominium and apartment development projects underway and/or approved and therefore there will be a rise in the number of claims and lawsuits; and 2) the claims and lawsuits will be more complicated and require greater sophistication from the attorneys, clients, and property managers.
■ How will construction defect claims evolve? 3 changes on the horizon. enerGy efficiency & Green cOnsTrucTiOn There will always be the same culprits in construction defect claims in my opinion: window leaks, roof leaks, plumbing leaks, and stucco cracks. However, there are some new claims that will likely arise due to a shift in our environmental and energy use policies.
■ What does the future hold for the Los Angeles condominium and apartment marketplace? Promise! The future of the Los Angeles condominium and apartment construction market is bright. Polaris Pacific, a brokerage and advisory firm that focuses on urban West Coast Markets, reported in its March 2015 “Los Angeles Market Report” that approximately 891 condominiums were currently under construction as follows: 281 in the Westside, 351 in Downtown, 133 in the Tri-Cities, and 126 in Hollywood. It further reported that 8,997 condominiums were approved for entitlement as follows: 4,327 in Westside, 377 in Koreatown, 3,212 in Downtown, 970 in Hollywood, and 201 in the TriCities. It also reported that a total of 16,431 apartments are currently under construction. This data indicates that there are many new projects underway. Polaris Pacific also reported that 32.7 percent of condominium sales were cash transactions and that the average time on market was 72 days. This data indicates that there is a strong supply of buyers that will not be deterred by the potential existence of construction defect claims or lawsuits (hereinafter collectively referred to as “claim” or “claims”). Based on all of the above data, the construction defect claim filings will likely increase in the following years. This prediction is based on a simple truth: more construction = more construction defect claims.
WHAT DOES THE FUTURE HOLD FOR THE CONSTRUCTION DEFECT INDUSTRY: A LAWYER’S PERSPECTIVE ➤➤➤ By Robert A. von Esch IV, Esq.
The Second District Court of Appeal then held that
The Fifth District Court of Appeal recently held that the Right to Repair Act (SB 800) must be followed by a plaintiff in a residential construction defect case. McMillin Albany, LLC v. Superior Court (Aug. 26, 2015, F069370). This means that a plaintiff must give the builder notice and an opportunity to repair before filing a lawsuit. The McMillin Albany decision is in direct conflict with two earlier decisions from the Fourth District Court of Appeal and the Second District Court of Appeal (hears appeals stemming from Los Angeles County): Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, 219 Cal. App. 4th 98 (2013) and Burch v. Superior Court, 223 Cal. App. 4th 1411 (2014). Liberty Mutual and Burch both held that a plaintiff does not need to
■ Conclusion There is a sharp increase in the number of condominiums and apartments being built and planned. There will be a corresponding increase in the number of claims. These claims will involve defects and legal theories that are common to all in the condominium and apartment industry but, will also incorporate new and challenging theories and conditions. Green building requirements, energy efficiency legislation, insurance coverage challenges, and the application of the Right to Repair Act will require all involved to refine their approach to the construction defect claim process.
take that to the bank. Member FDIC Equal Housing Lender LENDER mutualofomahabank.com Lisa Ann Rea VP/Regional Account Executive Toll805-907-8452Free866-800-4656, ext. lisa.rea@mutualofomahabank.com7500 pick the right tools for your next project. With community association lending expertise like ours, you’ll get the job done right. AFN46039_0913
follow the Right to Repair Act so long as he is asserting claims for “property damage.”
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 21
The stage is set for the California Supreme Court to resolve this conflict within the California Court of Appeal and make a final decision regarding the exclusiveness of the Right to Repair Act in 2016. This decision will have a profound impact on how construction defect claims are handled, as well as the timing and cost involved.
riGhT TO rePair acT
Robert A. von Esch IV, Esq. is a junior partner at the Law Office of Michael A. Hearn, a firm that specializes in construction defect law. Robert can be contacted at rob@mhearn.com. (2014). This holding has not resulted in all builders insurance carriers refusing to cover construction defect claims but, it is illustrative of a growing trend for insurance carriers to claim that there is no coverage. This trend is making it more difficult to settle construction defect claims and means that construction defect firms will need to be prepared to take more of their cases to trial. This trend also means that claims are likely to increasingly involve both the builders and the shareholders of the builders in order to recover the profits that were earned by the builders and the shareholders for the sale of the condominiums or apartments at issue.
Additional contributors not pictured: Birndorf Law Offices, Horizon Management Company, Evelyn Lifton, Gregg Lotane, The Californian on Wilshire HOA, The Wilshire Condominiums and Valencia Management Group.
22 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter potential opponents. 2016 is the second half of the legislative session. More than 2,800 bills were introduced in 2015 and about 40 of those bills had, or could have had an effect on common interest developments. Before the end of February another 1,2001,600 bills will be introduced. We will keep you posted. cai’s washinGTOn Dc lOBBy summiT More than 100 CAI Chapter leaders and advocates convened to discuss Federal issues that affect common interest developments. Attendees then personally met with their own Senators and Representatives on Capitol Hill. imPOrTanT feDeral issues Denial by FEMA to fund debris removal from association property during and after a disaster F rOM s AC r AMENTO news Left to Right: Michelle Gibson (Glen Towers Owners Association), Joanne Pena , Katy Krupp (Fenton Grant Mayfield Kaneda & Litt, LLP), Michael W. Rabkin, Esq. (Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP), Teresa Agnew (Roseman & Associates, APC), Kim Province (The Miller Law Firm), Miranda Legaspi, Platinum Security, Inc.), Sascha Macias (FirstService Residential), Alan Denison (Stay Green Inc.), Meigan Everett (Gold Coast Property Pros), Steve Little (Steve Little State Farm Insurance Agency, Inc.), Diane Hilliard (Ross Morgan & Company, Inc. AAMC), Elliot Katzovitz (Elliot Katzovitz Insurance Agency, Inc.), Steve Roseman, Esq. (Roseman & Associates, APC), Alexandria Pollock (Seabreeze Management Company, Inc. AAMC), Carmen Harper (SK Management Company, LLC), David McLeroy clac c hallen G e y ielDs $8,600! Our Thanks to challenge contributors Modification of the condominium FHA certification procedures HAM radio operators’ legislation that prohibits associations from barring antennas Association payment priority Denial of delinquent assessments as a consumer debt by the Consumer Financial Protection Bureau and therefore outside its jurisdiction Condominium flood insurance Deed-based transfer fees Details on each of these can be seen on CAI’s new web site. lOcal aDvOcacy With 2016 as an election year, you have an excellent opportunity to guide your elected officials along the community association path. Individuals and small groups can arrange meetings in the legislators’ local district offices or even conduct a tour of your associations with them. Lobbying materials, facts and opinions are available through your Chapter Delegate and Chapter Liaison and on CLAC’s Website www.caiclac.com.
(Professional Services Construction, Inc.), Noreen Husain (Seabreeze Management Company, Inc. AAMC), Cynthia Croy (SK Management Company, LLC), Greg Borzilleri (PCW Contracting Services), Mimi Cortes (SAX Insurance Agency), Diana Stiller, Christina Bielfelt (Condominium Administration Co.), Pamella De Armas (Silicon Beach Insurance Services), Denise Bergmans (Condominium Administration Co.), Lisa Tashjian, Esq. (Beaumont Gitlin Tashjian), Matt Ober, Esq. (Richardson Harman Ober PC) and Dave Brock (Beven & Brock).
Skip Daum is our Legislative Advocate for CAI's California Legislative Action Committee and may be reached at caiclac@aol.com.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 23 w hat is clac? T HE C ALIFORNIA L EGISLATIVE A CTION C OMMITTEE (CLAC) IS A VOLUNTEER COMMITTEE OF THE C OMMUNITY A SSOCIATIONS INSTITUTE (CAI) CONSISTING OF HOMEOWNERS AND PROFESSIONALS SERVING COMMUNITY ASSOCIATIONS . CAI IS THE LARGEST ADVOCACY ORGANIZATION IN A MERICAN DEDICATED TO MONITORING LEGISLATION, EDUCATION ELECTED STATE LAWMAKERS , AND PROTECTING THE INTERESTS OF THOSE LIVING IN COMMUNITY ASSOCIATIONS IN C ALIFORNIA clac’s missiOn 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. Our Thanks TO 2015 clac cOnTriBuTOrs January 1 – nOvem Ber 30 GOAL: $24,645 100% 118 Wadsworth Ave. HOA 446 San Vicente HOA 558 Evergreen Street HOA 826 2nd Street HOA 909 El Centro, Inc. 914 Lincoln Blvd. HOA 948 20th Street HOA 999 El Centro, Inc. 1082 West Del Amo Pacific CA 1144 Seventeenth Street HOA 11767 Sunset Blvd. Assn. 1242 Berkeley Street HOA 2017 Ketch to Jib Townhouses HOA, Inc. 2641 4th Street HOA 4424 Whitsett Avenue HOA 3rd Street, Inc. 7th Street HOA ALI Condominiums OA Artesia HOA Avis BeaumontHOA Gitlin Tashjian Bell Canyon Association Berkeley Townhouse HOA Beven & Brock Birndorf Law Offices Bodger Park Condo HOA Bougainvillea Townhomes HOA Burbank Blvd. HOA California Ave HOA Cardiff Court OA, Inc. Carolwood HOA, Inc. Casa De Valley View OA, Inc. Casa Loma Association, Inc. Chateau Delgany Estates COA Chateau Goshen HOA Concept Seven, LLC Condominium Administration Co. Continental Court HOA Coro Community Management & CulverConsultingCentrale HOA Diana Stiller, PCAM Del Prado HOA Eight on Twenty HOA Elliot Katzovitz Insurance Agency, Inc. Evelyn Lifton, PCAM Fenton Grant Mayfield Kaneda & Litt LLP FirstService Residential Five Ten Forty Inc. Florwood Estates HOA Forest Park Village HOA George Skrbin Glen Towers Association Gold Coast Property Pros Gorham Park HOA Inc. Greg Lotane, PCAM Harbor Knolls HOA Harbor Village Owners Association Hayworth OA Heritage Townhomes OA Hermosa Surf Condos Hillcrest Meadows HOA Hillcrest Rolling Hills HOA Hopi IdahoHOAVillas HOA Idaho West Town Homes HOA International Tower Owners Assn. Joanne Peña, PCAM Kelton Arms COA Lawford HOA Marine Village HOA Monterey Pines HOA Oak Hill Condo HOA Oak Street HOA Ocean West COA Old Orchard I HOA Pacific Regency HOA Park Crest HOA PCW Contracting Services Platinum Security, Inc. Polynesian OA Janet Powers, Esq., CCAL Profesional Services Construction, Inc. Rancho-Glen HOA Richardson Harman Ober PC Ridgeley Vista Chateau HOA Roseman & Associates Ross Morgan & Company, Inc. AAMC Roxbury Park COA S. Manhattan Place HOA SK Management Company, LLC SAX Insurance Agency Savoy Community Association Seabreeze Management Company Seascape-Redondo HOA, Inc. Shoreham Villas HOA Silicon Beach Insurance Services Silver Spur Court HOA Silverview Townhomes HOA Inc. South Bay Estates HOA South Hermosa Townhomes HOA Inc. Stay Green Inc. Steve Little State Farm Insurance Agency Stratford-Compton Park Townhomes OA Textile Building OA The Angels Landing Group 7 Fountains The Californian on Wilshire The Collection at Downtown Burbank POA The Galaxy HOA The Miller Law Firm The Vista Pacifica HOA The Wilshire Condominiums Valencia Management Group AAMC V.I.P. Goshen Assn. Inc. Villa Capri Townhomes HOA Villa Cordoba HOA Villa Cynthia HOA Villa Pacifica Condo HOA Villa Serena CA Vogue Condominiums Association, Inc. Westside Townhouses I HOA West Wind Townhomes HOA Wilshire Regent HOA Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP Woodbury Maintenance Corp. Yale St. HOA m ichael w. rabkin, esq. achieves clac emeritus status michael w. rabkin, e sq. was recognized at the CLAC Annual meeting in october and at our local November luncheon for his many years of volunteer legislative work as a CLAC Delegate representing the Greater Los Angeles Chapter and as Legislation Committee Chair, during which time he provided important recommendations that were essential to our ho A advocacy efforts.
Special assessments are often implemented in homeowners associations in order to meet the financial obligations of the HOA. Per Civil Code Section 5605, the board of directors has the authority to approve a special assessment of up to 5% of the current year’s budgeted expenses without a vote from the owners. Any increase over 5% must be voted on by secret ballot. Many boards are very surprised to learn that the process of passing a special assessment takes a minimum of 60 days, unlike an emergency assessment which does not require a vote from the owners. Many boards face confusion when determining if their situation can be classified as an emergency. Civil Code Section 5610 has a specific definition for what constitutes an emergency: 1. An extraordinary expense required by a court order. 2. An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.
» The meeting must be held at least 30 days after the ballots are mailed to all owners to allow for the minimum 30 day open poll period mandated by civil code. The manager will then mail a meeting notice and a ballot to the owners, detailing the meeting information, the purpose of the special assessment, the amount and how it is to be paid. The association’s governing documents will determine the quorum needed for each specific association and may also hold other pertinent information in regards to passing a special assessment. For example, some documents require that special assessments be billed as variable even if the monthly assessments are not billed on a variable dues schedule.
After the meeting has been held another notice must be mailed to all owners informing them whether or not the measure was approved. If the special assessment was approved, it can be billed to the owners’ assessment accounts no less than 30 days and no more than 60 days after the notice is mailed. Most boards tend to be overwhelmed by lengthiness of the process that must be followed (not to mention possible additional fees such as mailing and postage costs). The best thing to do is to avoid special assessments altogether.
24 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter
Board ▶▶▶AssessmentsSpecialUnderstandingEducation:Directorof
3. An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the annual budget report under section 5300. However, prior to the imposition or collection of an assessment under this subdivision, the board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment. In most situations special assessments do not meet the above criteria and therefore cannot be treated as an emergency.
Once it has been determined that the special assessment is not an emergency as defined by Civil Code, then the board needs to determine the following: The total amount of the special assessment and if the total amount is to be paid all at once or over time with monthly installments The date, time and location of the meeting that will be held to open and tally the ballots
T HIS ARTICLE GIVES A FEW POINTERS ON HOW AND WHEN TO GO THE EMERGENCY ASSESSMENT ROUTE , AND HOW TO SILENCE THE CRITICS OF AN INCREASE
The manager for the association, or if necessary legal counsel, can help boards determine how best to proceed with the ballot process.
.
By Alexandria Spargo, CMCA
One of the best defenses to avoid a special assessment is to properly fund a reserve account. Per civil code an association must have a reserve study performed at a minimum of every three years. The reserve study will make a recommendation on how much should be contributed to the reserve account each month in order to properly save for upcoming reserve item repairs and maintenance. Boards should try to follow the reserve specialist’s recommendations as closely as possible in order to properly fund the reserve Aaccount.verycommon contributor to a history of special assessments is the board’s unwillingness to increase the monthly assessments. Per Civil Code Section 5605, notwithstanding more restrictive limitations placed on the board by the governing documents, a board has the authority to increase the assessments by up to 20% of the preceding fiscal year’s assessment amount without a vote of the Towardowners.the end of every fiscal year, if the association is professionally managed, the management company presents to the board a proposed budget that it feels properly reflects the amount of revenue the association needs in order to meet its fiscal responsibilities. In most associations, the proposed budget will recommend an increase. Unfortunately, more often than not, the board chooses to keep the assessments the same. Boards would rather decrease reserve funding or defer much-needed maintenance in order to meet operating costs without raising revenue. Over time it is inevitable that a situation will arise where a common area element has failed and is in need of an immediate repair. Because the board has not budgeted properly, the only way to pay is with a special assessment. The stress, the unhappiness of the owners, the inconvenience financially and practically can all be avoided so long as the Board is willing to increase the monthly assessments to truly meet the Association’s needs.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 25
Alexandria Spargo, CMCA, is a portfolio manager at Management Professionals, Inc. AAMC in Torrance. She can be reached at alexandria@ mpimail.net.
One of the most common arguments against raising the assessments is the fear of scaring away potential buyers. The savvy buyer knows that lower-thanexpected assessments are a red flag and a history of large special assessments can be seen as very unfavorable. Buyers and current owners will appreciate the stability that proper funding provides and, in the long run, it will lead to a happier more prosperous community.
November 4, 2015 26 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter
We
Glendale Embassy Suites Community Associations Institute Greater Los Angeles Chapter Presents
More than 75 HOA board members and managers attended our November 4 Homeowners Association Marketplace at the Glendale Embassy Suites. Local community managers and boards had the opportunity to first network with service providers in a relaxed Meet and Greet reception, and then attend an educational presentation where a panel comprising Alan Denison (Stay Green Inc.), Matt Ober, Esq. (Richardson Harman Ober PC), Steven Segal (Steven G. Segal Insurance Agency) and Les Weinberg (Reserve Studies Inc.) presented new developments in the law and answered questions posed by Neda Nehouray, CMCA®, AMS® (HOA Organizers, Inc.). sincerely appreciate the hard work of our HOA Marketplace Committee members who planned this event: Committee Chair Alan Denison (Stay Green Inc.), Sascha Macias (FirstService Residential), Jeremiah Masopust (Servpro of Burbank, Chatsworth, Van Nuys & Crescenta Valley), Lisa Ann Rea (Mutual of Omaha Bank/ CondoCerts), Mike Roberts (Oakridge Landscape), David San Filippo (Critter Busters, Inc.) and Rickey Teems (Securitas Security Services USA, Inc.)
BA r Spo NS or SpopArKINGNSor Thank You To o ur Sponsors & Exhibitors ASSESSMENT RECOVERY S.B.S. Lien Services ATTORNEYS Beaumont Gitlin Tashjian Tinnelly Law Group BANKING Mutual of Omaha Bank/CondoCerts Union Bank HOA Services CONSTRUCTION MANAGEMENT Bethco Builders Design Build Associates CONTRACTORS ProTec Building Services, Inc. DECKING WICR, Inc., Waterproofing & Decking DUCT CLEANING Action Duct Cleaning Co., Inc. EXTERIOR BUILDING MAINTENANCE Alliance Building & Construction FINANCIAL MANAGEMENT Mission Association Financial FIRE & WATER CLEANUP & RESTORATION American Technologies, Inc. BELFOR Property Restoration FOUNTAINS California Waters INSURANCE Brian Berce Insurance Agency Silicon Beach Insurance Services Timothy Cline Insurance Agency, Inc. LANDSCAPING StayMissionBrickman/ValleyCrestLandscapeGreenInc. PAINT SUPPLIERS Benjamin Moore & Co. Dunn-Edwards Paints Vista Paint Corporation PAINTING CONTRACTORS Ferris Painting, Inc. FRESHCO Painters, Inc. R.W. Stein Painting, Inc. SKY Painting PEST/TERMITE CONTROL Accurate Termite & Pest Control SECURITY Guard-Systems, Inc. SURVEILLANCE CAMERAS Mulholland Security Centers, Inc. CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 27
1. Maintenance and repairs. Older CC&Rs often state the association maintains and repairs the common areas and the owner maintains and repairs the unit, but for most boards that leaves a lot of questions. What about glass panes? Drywall? Pipes in the walls? Adding to the CC&Rs a maintenance and repair chart that details repair for each component down to the door hinges is a popular addition to a set of CC&Rs. The association is free to decide who takes care of each item, the association or the owner, regardless of whether the item is common area or part of the unit. But a maintenance chart may not cover the question of shifting responsibility because of the source of damage. If an owner sets fire to their unit, for example, and the common area is damaged, it is obvious that the owner is responsible for the repair costs. But what about water damage to a unit that originated with an unexpected roof leak or pipe break? The CC&Rs can delegate responsibility for this kind of situation, and for the flip side: common area damage originating from a source inside a unit through no fault of the owner. They can specify, for example, that the maintenance chart still applies unless the other party acted with gross negligence or intentional malfeasance. There is a potential complication, though. Many older sets of CC&Rs require the written approval of up to 75% of the mortgage holders of each unit for any amendment that affects the association’s responsibility to maintain or repair common area. In most cases, it is basically impossible to get the mortgage holders’ approval. Because lenders often sell their book of home loans and these sales are not a matter of public record, the only way to locate the current mortgage holder is by asking the homeowner. Even if a ballot is sent to a mortgage holder, it is very rare for them to actually return a ballot.
28 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter
Mortgage holder approval may be needed for other amendments as well. Any association with this requirement in their CC&Rs will need to discuss it with their attorney before deciding whether to attempt an amendment.
CC&R PROVISIONS –
2. p et restrictions. California Civil Code Section 4715 provides that an association’s governing documents shall not prohibit an owner from keeping at least one pet. If an association has a preexisting pet prohibition, it is grandfathered in, but a subsequent amendment could mean that each owner must be allowed to keep at least one pet. The statute is poorly worded; it is not clear it only applies to amendments to the pet restriction or to any amendment to any governing document. Again, any association with a prohibition against pets that wishes to amend their governing documents should discuss it with their attorney first.
Another issue is the ability to adopt pet rules that go further than the CC&Rs. Can your rules prohibit certain dangerous dogs breeds or add a weight limit on dogs? That depends on how much authority the CC&Rs grant to the Board for adopting pet rules. Some CC&Rs specifically allow pet restrictions to be added to the rules; others do not go that far. Not to be too repetitive, but a board should talk to their association’s attorney before adding more pet restrictions to your rules than those in your CC&Rs. MOST POPULAR REVISIONS By Jeanne McDonald, Esq.
Amending CC&Rs is a very common project for many homeowners associations, especially those formed in the 1970s or 1980s or even earlier. If a full-scale restatement is not attempted because of cost considerations, because the document is up-to-date and just needs a bit of tweaking, or for other reasons, many associations choose to make a few amendments to address their most pressing needs. But many of the most popular revisions have been the focus of government regulations, whether on the state or federal level, and there may be other issues that need to be considered as well. This article will address these CC&R provisions and the competing factors that every board should consider when deciding whether to amend them.
3. r ental restrictions. Adding rental caps or prohibiting rentals in the first year of unit ownership have become very popular additions to CC&Rs. But there are several factors that should be taken into account before attempting these amendments. First is Civil Code Section 4740, which bars any such restriction from applying to the project’s current owners. It only applies to buyers who take title after the CC&R amendment is recorded. That won’t have much effect, of course, on the prohibition against rentals in the first year of ownership, but it will take an entire new generation of owners before a rental cap can take full effect. In the meantime, the board will have to keep careful track of which owners are subject to the rental cap.
Another factor is the availability of FHA loans. If a condominium project does not meet the requirements for FHA certification of the project, none of the project’s owners or buyers will be eligible for an FHA loan. The FHA will not certify the project if the CC&Rs have a rental cap that requires more than 50% of the units to be owner-occupied.
Since most if not all homeowners associations want less than 50% rental units, the effect of a rental cap is to bar owners from qualifying for FHA loans. Since almost all reverse mortgages are also offered through the FHA, the owners will not qualify for these either.
Jeanne McDonald, Esq. is the principal of Law Offices of Jeanne McDonald, a full-service law firm serving Southern California. Jeanne can be reached at jeannemcdonald@ jhmlawoffice.com.
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 29
4. i nsurance require M ents. It’s not uncommon for older CC&Rs to require the association to carry insurance on the entire project, including the unit interiors. The association’s policy must cover cabinets, tile work, and other unit build-outs. Even if an owner attempted to insure his or her own unit improvements, a knowledgeable insurance carrier would defer to the CC&Rs and refuse to cover the unit interiors under the owner’s policy. This can result in excessive claims on the association’s policy for unit damages, including damages that are caused by a source inside the unit. The association can amend the CC&Rs so the association is required to insure the common area, only, and to obligate the owners to insure their own unit components. This is just a sampling of some of the more common CC&R amendments. Amendments to other provisions can raise other issues, not the least of which is the possibility of conflicts with other governing document provisions or with statute. This should not discourage associations from making amendments—they can be crucial to improving a development’s administration and its quality of life—but it is important to make sure that amendments are carefully thought out and handled with an attorney’s assistance.
30 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter January Pauline MacLean American Technologies, Inc. feBruary Mahendra s ami Union Bank HOA Services march Erik Mendez, CMCA®, AM s ®, PCAM® ONIT Property Management, Inc. aPril Mahendra s ami Union Bank HOA Services may Nathalie weinstein Adams Stirling PLC June Martha Olvera, CMCA® Horizon CompanyManagement July Diane Hilliard, CCAM®, CMCA®, AM s ®, PCAM® Ross Morgan & Company, Inc., AAMC auGusT Tina Nakamura, CMCA®, AM s ®, PCAM® Property Professionals,ManagementLLC,AAMC sePTemBer Ariel Hess, CCAM®, CMCA®, AM s ® Scott Management Company OcTOBer w illiam reimbold, MBA, CMCA®, AM s ® SF Valley Management, Inc. nOvemBer j oanne Peña, CMCA®, AM s ®, PCAM® Horizon Management Company DecemBer TBD 2015 recruiters of the month NE w CAI- GLAC MEMBErs! welcOme A s OF DECEMBEr 4, 2015 BU s INE ss P r OFE ss IONAL s r EC r UITE r Applied Reserve Analysts, Inc. CAI National California Custom Chimney Sweep CAI National California Pool Service CAI National Fiore Racobs & Powers APLC CAI National M G Skinner & Associates CAI National United Guard Security CAI National COMMUNITY A ss OCIATION s Torrance-Windemere HOA JoanneCMCA®,Peña,AMS®, PCAM® COMMUNITY MANAGEMENT COMPANIE s Bentley Community Management, Inc. Jose Glez, CIRMS COMMUNITY MANAGE rs Ann Bitter Nels Atha, Common Interest Services, Inc. CCAM®, CMCA®, AMS® Drew Coppola Neda Nehouray, HOA Organizers, Inc. CMCA®, AMS® David Diers CAI National The Village Condominium Association Gregg Evangelho Tina Nakamura, Property Management Professionals, LLC AAMC CMCA®, AMS®, PCAM® Elsa Endow Tina Nakamura, Property Management Professionals, LLC AAMC CMCA®, AMS®, PCAM® jackie Gomez Ruben Vigil Anchor Management Services, Inc. j ohn Graves CAI National Chris Holigores William Reimbold, SF Valley Management, Inc. MBA, AMS®, PCAM® Luise McCaffrey CAI National Heather Village HOA Kimberly Pollard CAI National Kimberly robinson CAI National Palos Verdes HOA Vanessa Torroba Neda Nehouray HOA Organizers, Inc. CMCA®, AMS® Destiny Vaca Tina Nakamura, Property Management Professionals, LLC AAMC CMCA®, AMS®, PCAM® Fang z hu Dave Brock, PCAM® Beven & Brock Community Association Homeowners And Board Members! CAI’s educational workshop, The Essentials of Community Association Volunteer Leadership, provides the perfect opportunity for board members and homeowners living in community associations to learn essential, relevant, and timely information that an help you lead your communities to harmony and prosperity. Course Topi C s i nClude: ● Maintenance ● Rules ● Finance ● Reserve Funds ● Meetings You’ll leave the eight-hour Saturday workshop with new ideas, solutions to problems, handouts for future reference, and the knowledge that there are resources and people to help you with your leadership responsibilities. u pCoM ing dATes January 23, 2016 – Location TBD April 16, 2016 - Torrance The eSS en TIALS o F communityassociation volunteer leadership Approved by the Department of Real e state as a proper use of association funds. Visit www.cai-glac.org for details and registration
COMMUNITY MANAGE rs robert Avila, CCAM®, CMCA®, AMs® Bel Air Ridge HOA jim Boutross Blair House HOA jermaine Bowen, MBA, CMCA®, AMs® UNIGLOBE Management Tina Crago, CCAM® International Tower Owners Association Dirk Foster, CCAM®, CMCA®, AMs®, PCAM® Two Eleven Spalding Condo Association Linda Franzese, CMCA® Pacific Coast Management sabrina French Property Management Professionals, LLC AAMC Lynelle Glysson, CMCA®, AMs® Empire West HOA Diane Hilliard, CCAM®, CMCA®, AMs®, PCAM® Ross Morgan & Company, Inc. AAMC Thomas Kim, CMCA® Park Villas Condominium Assn.
COMMUNITY A ss OCIATION s Del Amo HOA Century Hill Association, Inc.
Wolf,
TO rENE w ING MEMBErs! Our
Paragon Management Group, LLC Seabreeze Management Company, Inc. AAMC Sierra Property Management Vines Management, Inc.
JohnJacksonHoffmanH.O.A.Guard-Systems,ManagementInc.SpecialistBrownCompanyInsuranceServicesR.SinnerInsuranceAgency, Inc.
W.C. Service
CAI-Greater Los Angeles Chapter November/December 2015 | www.cai-glac.org 31 BU s INE ss P r OFE ss IONAL s ABC Builds, Inc. ACE Duraflo Pipe Restoration, Inc. Action Duct Cleaning Co. Alante/MCS Insurance Services Allana Buick & Bers, Inc. Allegra Professional Group, LLC American Technologies, Inc. Benjamin Moore & Co. Berding-Weil, LLP Birndorf Law Offices City National Bank Duramax Building Products Fassberg Mediation Service, Inc. Finley’s Tree and Landcare, Inc. G4S Secure Solutions USA, Inc. Golden West Security Inc. Gothic Grounds
Mulholland Security
Prendiville Insurance
Tracy robinson Action Property Management
Martha Olvera, CMCA® Horizon Management Company jacob Parvino, CCAM®, CMCA® Seabreeze Management Company
Uther Lai, AMs® Pro/Service Realty & Management Linda Lang Concept Seven, LLC susan Larson, CCAM®, PCAM® FirstService Residential
COMPANIE s Appleby Property Management, Inc. EGL Properties, Inc. HOA Organizers, Inc.
Seacoast Commerce Bank Sotomayor Law Terminix International The Miller Law Firm Urban
Lori Tamboline Ross Morgan & Company, Inc.
LaBarre/Oksnee Insurance Agency, Inc. Hillshafer & Carter, LLP Centers, Inc. Inc. Environmental, Inc. Agency
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North Hollywood Terrace OA Old Orchard I HOA Renaissance HOA The Collections at Downtown Burbank Village Palos Verdes HOA COMMUNITY MANAGEMENT
As OF NOVEMBEr 30, 2015
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Robert W. Little Insurance Agency, Inc. Tree Care, Inc. Company, Inc. Rifkin, Shapiro, Schulman & Rabkin, LLP
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Tracy wolin, CCAM®, CMCA®, AMs®, PCAM® The Diplomat COA sarah zemer Ross Morgan & Company, Inc,. AAMC
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Property
Martha Perkins Associa-PCM
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COMMUNITY A ss OCIATION LEADE rs
Diane Lortie-Dudasik, CCAM® Metropolitan Property Services LLC Angel Maldonado Seabreeze Management Company AAMC Laurie Mark, CMCA®, AMs® Valencia Management Group AAMC Catriona McCarthy, CCAM® Seabreeze Management Company Debra McGary, CCAM®, AMs® Horizon Management Company Nancy Mohni, CCAM®, CMCA®, AMs®, PCAM® Tina Nakamura, CMCA®, AMs®, PCAM® Property Management Professionals, LLC AAMC sue Nelson, AMs® Horizon Management Company
09 Long Beach Educational Program for HOA Boards – 6:00 p.m. Renaissance Long Beach Hotel, 111 E. Ocean Blvd., Long Beach, CA 90802
PCAM Case Study Location TBD 08 Managers Only Breakfast Workshop – 9:00 a.m. Blair House HOA, 10490 Wilshire Blvd., LA, CA 90024
25 Chapter Board of Directors Meeting – 8:30 a.m. Chapter Office, Glendale 30 Valencia Educational Breakfast for HOA Boards and Managers –8:30 a.m. Hyatt Regency Valencia, 24500 Town Center Drive, Valencia, CA 91355 A P01rIL
29 Chapter Board of Directors Meeting – 8:30 a.m. Chapter Office, Glendale
MA r 03-04CH
California Common Interest Development 8-Hour Law Course –8:00 a.m. Location TBD 05 Ask an Expert Breakfast for Managers – 8:30 a.m. Location TBD 07 Westside Homeowners Association Marketplace – 5:30 p.m. DoubleTree by Hilton Torrance-South Bay, 21333 Hawthorne Blvd., Torrance, CA 90503
16 Essentials of Community Leadership Workshop – 8:15 a.m. Location TBD 17-18 Legislative Day at the Capitol Hyatt Regency, Sacramento 20 Downtown Luncheon Program for HOA Boards and Managers –11:30 a.m. City Club, 555 S. Flower, 51st Floor, Los Angeles, 90071
aDverTisers i n Dex 18 ALLBRIGHT 1-800-PAINTING 19 Alliance Association Bank 34 Animal & Insect Pest Management Inc. 29 Association Reserves, Inc. 15 Beaumont Gitlin Tashjian 11 CBCI Construction, Inc. 10 Farmers Insurance Group –Steven G. InsuranceSegalAgency, Inc. 21 Ferris Painting, Inc. 21 Mutual of Omaha Bank/ CondoCerts 7 NPG-Nelson Paving 32 Poindexter & Company, CPAs 5 Pacific Utility Audit 5 Popular Association Banking 29 Preferred Commercial Painting, Inc. 5 R.W. Stein Painting, Inc. 19 Reserve Studies Inc. 15 Sandra Macdonald Insurance 9 Select Painting & Construction 13 Sky Painting 25 SwedelsonGottlieb 8 Timothy Cline Insurance Agency, Inc. 14 Union Bank HOA Services 31 Witkin & Neal, Inc. 2016 CALENDA r OF EVENT s
25 SF Valley Luncheon Program for HOA Boards and Managers –11:30 a.m. Warner Center Marriott, 21850 Oxnard Street, Woodland Hills, CA 91367
23 South Bay Luncheon Program for HOA Boards and Managers –11:30 a.m. DoubleTree by Hilton Torrance-South Bay, 21333 Hawthorne Blvd., Torrance, CA 90503
19 Chapter Board of Directors Meeting – 8:30 a.m. Chapter Office, Glendale 23 Westside Evening Educational Program – 7:00 p.m. Regatta Seaside HOA, 13600 Marina Pointe Drive, Marina del Rey, CA 90292
12 PCAM Luncheon – 11:30 a.m. City Club LA, 555 S. Flower St, 51st Floor, Los Angeles 90071
32 www.cai-glac.org | November/December 2015 CAI-Greater Los Angeles Chapter aDverTisinG infOrmaTiOn Dimensions & Rates: Artwork must not exceed the exact dimensions of that size ad. For more information, call the Chapter office: 818-500-8636. Ad Size Ad Dimensions Members Non-Members ⅛ page 3½" wide x 2" (Horizontal)high $200 $400 ¼ page 3½" wide x 4¾" high (Vertical) $300 $600 ½ page 7½" wide x 4¾" (Horizontal)high $425 $850 Full Page 7½" wide x 9.75" high (Vertical) $800 $1,400 Payment: Rates are subject to change without notice. By credit card, check or cash. Minimum three-insertion contract. Rates subject to change without notice. Advertising Sales: Please contact the Chapter office for advertising specifications and deadline information at: 818-500-8636. j ANUA r Y 13 Skirball Luncheon Program for HOA Boards and Managers –11:30 a.m. Skirball Cultural Center, 2701 N. Sepulveda Blvd., Los Angeles 90049 22 Chapter Board of Directors Meeting – 8:30 a.m. Chapter Office, Glendale 23 Essentials of Community Leadership Workshop – 8:15 a.m. Location TBD 27-30 CAI National Law Seminar New Orleans, LA FEBrUA r Y 03 Tricks of the Trade for Business Partners – 9:30 a.m. Blair House, 10490 Wilshire Blvd., Los Angeles, CA 90024
The following rules apply to the campaign: Each time you recruit a new member, you receive points toward your membership recruitment total. Points will accrue from January 1 through December 31, 2015. The more members you recruit, the more you’ll increase eligibility for the Grand Prize. Points are based on the following membership categories:
• In the case of a tie, a random drawing will determine the Grand Prize winner.
Services Silicon
Gr
reCruITer
All 2015 recruiters (except the Grand Prize winner) who have achieved a minimum of 10 points will go into a raffle drawing held in January 2016 (when all the 2015 results are in). Gift Certificate
The member who has recruited the most new memberships in the previous month will be recognized at the next luncheon and awarded a $50 gift certificate.
THE GREAT ESCAPE Three Contests… Three
l os a ngeles e vents RULES
benefits of CAI
One (1) point for each business partner member recruited in a category already existing in the 2015 Membership Directory.
CurrenT SpOnSOr S American Technologies • Centurion Group • Dunn-Edwards Paints Infinity Property Beach Insurance SKY Paintng Prizes 2015 Membership recruiter Contests it’s a chance to win a weekend away or an evening out, you can win BIG by the membership with colleagues and friends 2015! AnD pr IZe 3-Day, 2-Night Vacation Package ($1,000 Value) Member with the highest number of points as of December 31, 2015 will be awarded the Grand Prize. 20 pts. needed to qualify.) r AFFLe Evening Out On The Town ($500 Value)
(Minimum
CAI-GLAC’s
• To receive recruiter credit, you must be listed as the CAI member responsible for recruitment on the printed application form submitted, or be identified through CAI National membership reports.
•
Whether
Services •
sharing
Two (2) points for a business partner in a sector of business not yet represented in the Chapter. Two (2) points for an individual HOA board member or community manager. T hree (3) points for recruiting a management company.
during
• Completed applications and membership dues for qualified applicants must be received at CAI between January 1, 2015 and December 31, 2015 to be counted toward the Grand Prize.
reCruITer-OF-THe-MOnTH $50
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