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2014 ECHO Seminars p.3

When Disaster Strikes!

p.8

Parking

Records Retention

p.14

Serving Community Associations

Emergency Planning for Common Interest Development Boards

p.20

Partial Payments

p.24

The Fine Points of Fining p.28

April 2014 echo-ca.org

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ECHO 1960 The Alameda STE 195 San Jose, CA 95126 Change Service Requested

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2014 ECHO educational calendar

ECHO Seminars Now there’s one near you.

Santa Rosa

If you’ve ever wished that ECHO would hold a seminar closer to your association, chances are that we’ll be nearby during 2014. Don’t miss an opportunity to get the education you need with guidance from some of California’s top HOA attorneys and professionals. Take a look and mark your calendar. We can’t wait to see you there!

Sacramento

Marin Walnut Creek Oakland San Francisco

Register today! Online: www.echo-ca.org; By Phone: 408.297.3246

San Jose Campbell Santa Cruz

May 17

May 31

June 14

ECHO Oakland Seminar & Tradeshow (see page 18)

Fresno Educational Seminar (see page 7)

Sacramento Educational Seminar (see page 33)

Oakland Convention Center, Oakland

Ramada University Hotel, Fresno

Westin Hotel Sacramento

DATE

EVENT

August 22-23 October 4 October 18

ECHO San Jose Monterey Educational Seminar Walnut Creek Educational Seminar

Fresno Monterey

April 2014 | ECHO Journal

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CONTENTS

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20

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When Disaster Strikes! Disasters, natural or resulting from human action, occur with alarming regularity. A disaster could have a significant impact on a Common Interest Development (CID) in a variety of ways. There could be immediate and long-term fiscal considerations that impact operating budgets and reserve funds.

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Parking No property owner wants to tow your car, but they are required to keep the fire lane cleared, or be fined, and if they don’t enforce parking rules, people with extra vehicles store them in open stalls, or people park closer to their unit regardless of parking permits.

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Records Retention Records retention is a difficult issue for most associations. It is often compounded by the lack of professional guidance as to what records need to be retained. Record retention is especially important because of frequent turnover of the board of directors. Each board needs to establish and follow a record retention policy.

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Partial Payments The issue of whether to accept a delinquent owner’s offer of partial payment of their debt comes up often and is usually not taken lightly by homeowner association boards.

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The Fine Points of Fining Monetary penalties serve two purposes. First and foremost, they allow a board to carry out its duty to enforce the governing documents. The second purpose is, of course, deterrence; i.e., to discourage future violations by the owner or by other owners in the development.

The ECHO Journal is published monthly by the Educational Community for Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy. Copyright 2014 Educational Community for Homeowners. All rights reserved. Reproduction, except by written permission of ECHO is prohibited. The ECHO membership list is never released to any outside individual or organization. ECHO 1960 The Alameda, Suite 195 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours Monday-Friday 9:00am to 5:00pm Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer Diane Rossi

DEPARTMENTS

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2014 ECHO Educational Calendar

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News from ECHO

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Fresno Educational Seminar — Saturday, May 31st.

Secretary Toni Scurti Directors Jerry L. Bowles Stephanie Hayes Robert Rosenberg Brian Seifert Steven Weil

John Garvic David Levy Kurtis Shenefiel Wanden Treanor

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ECHO Oakland — Saturday, May 17th.

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Sacramento Educational Seminar — Saturday, June 14th.

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ECHO Bookstore

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Advertiser Index

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ECHO Volunteers

Director of Communications Tyler Coffin

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NEW at echo-ca.org

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ECHO Event Calendar

Legislative Consultant Government Strategies, Inc.

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Legislation at a Glimpse

Executive Director Brian Kidney Director of Marketing & Membership Toni Scurti

Design and Production Design Site ECHO Mission Statement Serving Community Associations

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news from ECHO

News From ECHO April 2014 Not every job an HOA board member must do is glamorous. But they need to be done. We’re devoting this edition of the Journal to some of those tasks. Is your association prepared for a disaster? Do you have a plan? Do you have a policy on fining? Do you implement it fairly and consistently? Do you know where all your association’s records are? Does your association have institutional memory? Or does an individual board member have a closetful of bank statements and meeting minutes? Do you know which version of a document is final? Do you have a parking policy? Do you enforce it? Will the fire department be able to access the facilities in time of emergency? When you have a delinquent homeowner, do you accept partial payments? A new Court case from Orange County may cause you to rethink your collections policy. So, do these issues sound boring? Spending a little time developing policies that anticipate problems or direct day-to-day operations can make or break an association. Knowing your neighbors and creating an environment of fair and consistent management of responsibilities and infractions will help develop a sense of community rather than that stereotypical police state that pits homeowners against each other and the association. I want to also invite you to spend a little time becoming better educated on all manner of issues facing homeowner association board members. Join us for our Second Annual ECHO Oakland Seminar and Trade Show on May 17. We’ll have a dozen sessions with speakers addressing board fundamentals, hot topics and legal issues. This year the educational sessions will be adjacent to the exhibit space, so connecting with vendors offering advice and providing services to your communities will be even easier. And we’ll throw in morning coffee, a full buffet lunch and afternoon cookies to keep you going. See page 18 for details. Best,

Brian Kidney Executive Director

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Fresno Educational Seminar Saturday, May 31st, 2014 8:30 AM to 12:30 PM

Yes, reserve _____spaces for the ECHO Fresno Seminar Amount enclosed: $______(attach additional names) Name: Email Address:

AGENDA TOPICS Join us at the second Fresno Seminar for expert legal guidance and HOA member training. Watch our website for speaker and topic announcements.

HOA or Firm: Address:

ADDRESS

City:

Ramada University Hotel 101 Fountaingrove Pkwy 324 E. Shaw Ave., Fresno, CA 93710

State:

Zip:

Phone: Visa/Mastercard No. Exp. Date: Signature: Return with payment to: ECHO, 1960 The Alameda, Ste 195, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Phone: 408-297-3246; Fax: 408-297-3517

Price $59 $49 – Members $69 $59 – Nonmember Prices go up on May 10th! April 2014 | ECHO Journal

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WHEN DISASTER

STRIKES! Emergency Planning for Common Interest Development Boards By Thomas Connelly

Consider this scenario: You are a board member for your HOA, which represents 146 owners and over 300 residents in a common interest development consisting of 20 buildings with 8-10 dwelling units in each building. In the early morning hours, you are awakened by loud knocking at your door. You open the door and see another resident who is obviously frantic. He tells you that one of the buildings is on fire and that the fire department has evacuated the entire building.

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A

bout 20 residents have been evacuated. You quickly dress and go to the scene to find that four units at one end of the building are actively burning and significantly damaged. What are you going to do? As a member of the HOA board is there any expectation or responsibility for you to take some type of action? Do you know the plan? Disasters, natural or resulting from human action, occur with alarming regularity. All one needs to do is watch the evening news to confirm this. Disasters may occur without warning and at any time of the day, or night. A disaster could have a significant impact on a Common Interest Development (CID) in a variety of ways. As described in the scenario above many residents might be displaced, buildings and facilities may need to be inspected and repaired or razed. There could be immediate and long-term fiscal considerations that impact operating budgets and reserve funds. Needless to say, these unpredictable events present immediate and long-term considerations for an HOA board and property manager. How does the membership of your HOA expect their Board of Directors and manager to respond during, and after, a disaster has occurred? What is your role, as a board member, when a disaster strikes in your community? What role does the property manager assume? Will the manager be available? What resources are available to help with the response and recovery from the disaster? How do standing rules and processes hinder or impact the response and recovery from a disaster? If you don’t know the answer to these questions, then you and your Board have not properly planned for disaster response. And, these are just a few of the many questions that will be asked after a disaster occurs! You will be expected to have the answers.

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Board membership in most CID’s typically consists of owners and residents who volunteer for board leadership roles. Most board members in CID’s have very little or no experience managing disaster responses or large-scale emergencies. Flooding, earthquakes, fires, explosions, weather and storm related events, acts of terror and other disasters are very complex situations that require a coordinated and planned response to achieve optimal mitigation and recovery. Many HOA’s hire contract management companies to perform day-to-day business functions for the association. Do these managers have training and experience in handling disasters or emergencies? Is disaster management one of the functions that they have been hired to perform? If so, will they be available to help you if there was a regional disaster event?

The most effective way to respond, at any level, to a disaster or emergency is to pre-plan the response, roles and responsibilities. Just as it is important to have your own “earthquake kit” to survive for a period of time after a disaster strikes, it is also important to have a formalized plan for response to disasters at a community leadership level. Governmental and public safety agencies all have comprehensive plans for responding to and mitigating large-scale disasters or emergency events. Businesses have formal plans for responding to disasters, particularly when their employees, business continuity and profitability could be compromised. I have found, however, that most HOA’s do not have any formal plans or specialized training to aid in responding to a disaster that impacts their property, property owners and/or residents. In fact, there are no mandates for HOA’s to develop disaster response plans.

So then, why should an HOA consider developing a disaster response plan? There are disaster related board responsibilities that most HOA rules and procedures regulate, particularly relative to the expenditure of HOA money. Additionally, common sense indicates that HOA’s should have some type of formal response plan in place so that they are able to assist their members when a disaster impacting their CID occurs. It is a prudent idea to be prepared, if even at a minimal response level. For the purposes of this article a disaster is defined as any event, naturally occurring or caused by human action or omission, which impacts the use of any property under the purview of the HOA and Board of Directors. The most common disasters impacting CID’s include earthquakes, fires, floods, storm damage, chemical spills requiring evacuation, explosions, mass casualty incidents, building failure or collapse and any other unforeseen event which impacts the use of any dwelling unit. In addition, emergencies and certain police actions should also be considered when developing a disaster response plan as they could restrict residents’ use of CID properties or facilities for a period of time. Examples of this would be a police manhunt for violent and dangerous suspects running at-large in a particular area, or a chemical spill on or near the CID property.

There are two primary functions of emergency and disaster planning. The first is having an effective response to the disaster incident as it is going on and in the immediate aftermath. The purpose is to provide assistance to affected members as quickly as possible. This might include emergency short-term sheltering, providing food and other needed supplies, and attending to other immediate needs as the event is occurring and in the hours immediately following the event. How long this initial support would continue is a policy decision on the part of the HOA Board of Directors and could vary, depending on the type of incident.


To illustrate this concept, let’s consider the building fire scenario above. There are 20 residents (presumably HOA members) who have been suddenly and unexpectedly removed from their homes. They probably didn’t have time to gather adequate clothing, food and other personal items when the fire department ordered them to evacuate. Will you allow them to stand outside in the cold of the night without adequate clothing, or access to food, water or sanitary facilities? Of course not! Does your HOA currently have the ability to provide assistance if this were to occur in your complex tonight? If the HOA has not considered or planned for disasters, then the answer is most likely, No! The second main function of emergency and disaster planning is to restore the affected areas or regions to pre-disaster conditions (a state of normalcy) as quickly and smoothly as possible. In the fire scenario, there are obviously long-term considerations. At least one building that the HOA is responsible for has been damaged significantly. Sure, an insurance policy is probably in force, but how involved will the insurance company be in the immediate aftermath of the fire? Are any of the units in that building currently inhabitable? Can residents access their properties to gather personal items and valuables? Is there a need for the building to be inspected by experts before allowing owners back into their properties? Is there any potential liability to the HOA for failure to inspect before allowing owners back into their units? Who will you want to engage to conduct property inspections for safety and habitability? How are these people going to be paid? Could there be a need for expenditures of association funds in excess of the manager’s discretionary limits? As you can see, there are a myriad of questions to consider when responding to a relatively small fire that impacts a few residents. Without proper prior planning these simple events can become very overwhelming and burdensome for the Board, and the affected HOA members. Research, planning and effective response are all absolutely necessary in order for effective disaster response and recovery to occur. A current Disaster and Emergency Response Plan is a necessity

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for any CID Board of Directors. This is particularly true when HOA members have an expectation that the Board will respond proactively in the aftermath of a disaster or emergency event. The Plan does not have to be restrictively complex or broad, but it must contain enough information so that current Board members can quickly digest and understand their roles and responsibilities in disasters that impact the CID. This leads us to the next question, How is a disaster plan developed?

The first step in development of a disaster and emergency response plan is understanding the expectations the HOA membership has for support and assistance in case a disaster impacts them. In addition, understanding the fiduciary, financial and approval processes outlined in the HOA governing documents is critical. In the aftermath of a major disaster there will normally be a need to authorize emergency expenditure of funds, both immediately and in the long-term. The process outlined in governing documents should not be subverted just because some type of disaster has occurred. As a result, Board members must understand that there will be expectations placed on them in these circumstances which would require them to be available and actively participating in the aftermath of any disaster affecting their CID.

Once the expectations and process questions are answered, then the Board must develop a formal plan, which outlines the Who, What, Where, When, Why and How. The first question to answer is “why”. Why is the plan being developed? This is usually a fairly simple statement, which typically includes high-level general language relative to the formation of the plan and what the primary objectives and outcomes will be. The “who” question outlines responsibilities for specific functions and for whom the plan is being developed to assist. The “what” question is self-explanatory…development of a comprehensive disaster/ emergency response plan that best fills the needs of the entire community. Like the “what” question, the “when” question is fairly simple…when will the plan be activated? This outlines the circumstances that would trigger the activation of the plan. “Where” and “How” will be different for each individual plan. Where will directors be expected to respond and convene? Where will emergency supplies be stored? Where will temporary sheltering be established for those displaced as a result of the event? How will Board members communicate? How will the Board make critical decisions if they cannot all be in the same physical location?

Building Repair Documents, Decks, Stairs, Settlement, Construction Defects, Expert Witnesses, Forensic Engineers, Moisture Intrusion, Investigations, Drainage, Seismic Retrofit Engineers, Soft Story Specialists.

In reality the answers to these questions will inevitably vary for each individual community. They will likely vary for different types of disasters too. It is important to remember that the questions for the development process should never be limited to those listed above. They do, however, serve as a good starting point in the question & answer process.

Development of a comprehensive formal disaster response plan should be coordinated with someone who has experience developing disaster plans and managing emergency or disaster events. Development of a comprehensive formal disaster response plan should be coordinated with someone who has experience developing disaster plans and managing emergency or disaster events. There may be community resources available to help in this regard. Some communities have personnel within their emergency services departments who are available to provide guidance & training. There are also community based emergency preparedness courses that individuals may attend. These courses, however, tend to focus on individual or family preparedness, not disaster response and recovery. There are private companies and consultants available to assist in developing and formalizing disaster and emergency response plans. Typically, the fees charged are well worth the expenditure and outcomes, especially when there is a need to utilize the plan for an event and the response is well coordinated as a result.

Once the plan has been drafted and “finalized” the Board should review and formally adopt the plan. Serving Northern & Central California Common Interests • Association Managers • Construction Managers HOA Boards • Restoration Contractors • Legal Council www.Qengineers.com • Direct: 408-583-0323 ext.813 A SUBSIDIARY OF QUILICI ENGINEERS, INC.

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Once the plan is adopted, the Board should plan formal training in the implementation of the plan at the board level. Fee based companies and consultants are typically very good at developing and administering realistic and effective


disaster training and exercises. Next, the Board needs to communicate the disaster plan and what HOA members should expect from the board in response to any disaster within the community. It is a good practice to periodically review a disaster plan to ensure that it is current and reflects the immediate needs of those it was written to assist, in our case directors, managers and homeowners/ residents in the CID. A great time to do this is shortly after annual board elections. This gives newly elected board members the opportunity to review the plan and understand their individual roles when the plan is activated. This is also an opportune time to conduct periodic training and group exercises.

In summary, Common Interest Developments are as susceptible to experiencing disasters as much as any other individual or community. The Board of Directors will probably be tasked with performing some functions relative to the response and recovery from that disaster. Absent a formalized plan, the response will be disjointed and haphazard, at best. Development of a comprehensive disaster response plan, tailored for the CID’s specific needs will simplify the process for all involved, minimize the impact of the disaster event, and best serve the entire community. Mr. Connelly is the president of Connelly Consulting, a public safety consulting company located in Santa Clara, CA. He is a retired Captain from the Los Altos (CA) Police Department. He was the department’s Operations Division commander and developed the City’s emergency/disaster response plan. He was a member of the Santa Clara County Emergency Managers group, has conducted training exercises for disaster response and recovery, and was a coordinator of emergency/disaster responses. He is a member of the Emergency Management and Homeland Security Professionals Association. Mr. Connelly can be reached at textbk@aol.com or (408) 761-0105. April 2014 | ECHO Journal

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THE CURDS AND By Burt Dean 14 echo-ca.org


WHEY OF PARKING April 2014 | ECHO Journal

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W

hen your car is towed from private property, the question should not be “WHO towed my car?”, but rather it should be, “What was MY VIOLATION of property rules?” Parking is just a routine occurrence, and little or no thought seems needed: However, before you get where you are going it would help to know if public parking is available or will it be metered street parking; is the parking lot public, commercial or residential; before you drive onto private parking lots are there warning signs and what is the locally required language for the signage; are parking violations going to be enforceable, and at what cost of stress, inconvenience and money if the vehicle is not properly parked?

Although CA State regulates private property towing, it gives each city the freedom to write more restrictive municipal codes. Some cities require the properties to pay for permits to allow them to tow vehicle using permitted tow companies, who also pay for their permits. Even before the car is towed, the cost for the private property tow is adding up in the way of permits and license fees to the city. It is not fair to blame the property manager or the tow company for all of the outrageous fees to claim a vehicle, but it is fair to say the vehicle driver controls the outcome from where they park their car. 16 echo-ca.org

What is the first thing the vehicle driver needs to watch for? Parking in an unfamiliar town may have municipal codes regulating different warning signs than what you may be used to seeing on private property. Hayward requires signs that say “Public Parking Prohibited”, whereas San Jose requires signs to say, “Restricted Parking 24 Hours a Day”. Although CA State requires signs at the entrance or exit of the private property to be not less than 17” by 22” with lettering not less than 1” in height, different cities have different municipal requirements as to the rest of the language and the size of lettering above 1”. The warning sign needs to be facing the traffic from the public street onto private property, but some cities may or may not require additional signs throughout the property as a reminder that towing can be enforced by towing, at a cost to the vehicle owner. If the sign is vandalized, behind bushes, or removed, your recourse is to complain to property management, the local police department and/or take the property owner to Small Claims Court. Whatever the problem is, it will never become a theft or wrongful tow as long as the proper permits and licenses were obtained by the property and tow company. The small claims court judge may not rule in the favor of the vehicle owner for inconsistences with vandalized covered or removed signage, because if the driver lives at or frequents access to the property, they should have known the property rules, or could have obtained the property rules before they were towed. The “rule of the road” is that you must know the parking rules before you park your car. That is not unreasonable: If you are parking on commercial property, that is open to the public free of cost, you have one hour to obtain the rules for parking, and then you can move your vehicle, accordingly. On multifamily property, such as apartments, common interest developments (CID), or hotels, you may

live at or frequent that property to visit someone, who is responsible to tell you where to park, or go to the office and ask the rules. If it is fee parking, always pay the fee as directed, and if it is guarded property, follow the directions of the security. Always follow the law for fire lanes and handicap stalls. For the most part, police departments will not take the time to enforce fire lane or handicap violations on private property, but they can. If you get towed by the private property tow company without a police violation, consider it a favor, they can request the police to issue a citation before they tow the vehicle which adds to the cost to claim the vehicle. If you have a driver’s license, you already know you cannot restrict, stop or park in a fire lane, and you cannot park in the handicap stall without a valid handicap placard mounted visible from outside the vehicle. Your argument that you only parked there a second, or you just dropped off the groceries, doesn’t help; the law is clear and if the fire lanes are not maintained by property management, the city can fine the property owner after a few complaints. Not even the property manager can avoid enforcing these laws.

Once you find your vehicle is gone from where you left it, there are only three options for where it is; it was stolen, repossessed, or impounded by police or private property for parking violations. Your immediate response requires that you call the local police or sheriff department. If the vehicle was impounded, they will be happy to respond with who took the vehicle, and where it is being stored; or they will have you complete a stolen vehicle report. State law requires the tow company or property owner to report the impound within one hour of removal from private property, and some cities,


such as San Jose, require the vehicle to be reported within 30 minutes. If impounded, it is necessary to go or call the storage yard to find out the requirement to claim the vehicle. If it was impounded by police or repossessed, you will need to pay release fees to the police or sheriff department, If it was impounded by private property, you need to know their regular working hours to claim your vehicle, and if there are additional “Gate Fees” for afterhours releases, ask what those fees will be. Whenever you are claiming a vehicle, the requirements will be the same; you need to show proof of ownership, such as current registration, and/or current insurance, and you must have current government photo identification, in person. It is logical they cannot release the vehicle to anyone other than the vehicle owner or agent (proof of agency would need to be notarized) in person. The fees are regulated and will not be negotiable; the fees will be posted in the office where you claim your vehicle, which may change between towns and/or tow companies.

property. However, if the lettering is not 1” (minimum), or on a sign 17” by 22”, you may want to check local municipal codes for local variations. If the sign is vandalized, covered by shrubbery, or removed, chances are you could still be towed, and even if you get your car back free, you still have the inconvenience, loss of time, and stress.

Towing and storage fees are expensive, but can be avoided with simple observations. Simple observations of the signage, from where you enter from public parking, to asking the security, shop owner, homeowner or tenant. State law, CVC 22658(l) (1)(C)(ii) does not allow the release of the name of the person who towed your car from residential property, for

fear of retaliation from the person who got their vehicle towed. It will not be car theft, or wrong-ful tow, because the CA law holds the property management and tower harmless beyond certain limitations. No property owner wants to tow your car, but they are required to keep the fire lane cleared, or be fined, and if they don’t enforce parking rules, people with extra vehicles store them in open stalls, or people park closer to their unit regardless of parking permits. It is illegal for the tow company to distribute any of the fees back to security or property management, so property management and security have no vested interest in the tow, other than controlling the problems with cars by enforcing their property rights with properly licensed, permitted and insured tow companies. Burt Dean is the CFO of Rebello’s Towing Service. Previously he owned an association management company. Burt has been a member of ECHO and frequent contributor for many years.

Can I ever park my car and not be subject to towing? Yes, but this is a slippery slope, and it is rarely worth the stress between the time you park your vehicle and when you return to find it still there, or maybe not there. You may be right, but was it worth it? Even if it was improperly towed and you get your money back, is it worth the time, inconvenience, lost time, and stress? You, as a normal citizen, may not have the opportunity to know in advance if the property and tow company are properly licensed and/or permitted; however, after you are towed, and at the impound yard, you have the opportunity to look at the required postings for permits and licenses, along with the regulated fees for that tow company. The typical driver has only a narrow opportunity to investigate and determine if the property has the proper signage at the entrance and exits to the April 2014 | ECHO Journal

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ECHO OAKLAND 2nd Annual Seminar & Trade Show Saturday, May 17, 2014

Mark ECHO Oakland on your May calendar! Our 2nd Annual Seminar and Trade Show in the East Bay will feature 10 attorneys and other HOA experts ready to answer your questions. The 12 sessions at ECHO Oakland address the fundamental educational needs of California HOA members, and offer clear and simple tools to guide you through tough situations, or just to keep you on the right track. Registration always includes: • Lunch on the trade show floor. • 12 educational sessions addressing a variety of HOA hot topics. • Access to a vibrant exhibit floor and hundreds of prizes. Visit the ECHO website for complete event details: www.echo-ca.org/events

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Location ECHO Oakland is at the Oakland Convention Center. Lodging is available for a special rate at the adjoining Oakland Marriott Hotel. Visit the registration page on the ECHO Website for special link to the reduced rate.

REGISTRATION You may register online, by fax or mail, or by contacting the ECHO office. Please visit ECHO website for the most current event information including speakers, topics, and venue information. Members: $99 $89 Nonmembers: $129 $119


Event Information

sessions

Location:

HOA University

Oakland Convention Center 550 10th St. Oakland, CA 94607

Master the fundamentals, get a certificate. You work hard to stay informed. Why not be recognized for you efforts? HOA takes both new and seasoned board members through HOA fundamentals in the areas of Finance, Management, Legal, and Insurance. We’ll send a certificate to board members who choose to attend the complete course: use it when you run for the board, and see your name published in the ECHO Journal.

Time: 8:00 am to 4:30 pm

MORE INFORMATION: Complete event information is available online. Visit our website to learn about: • Discounted lodging. • Speakers and sessions. • Event parking. • And more... www.echo-ca.org/events

REGISTRATION Members: $99 $89 Nonmembers: $129 $119

Hot Topics Some problems are new, some never go away. Whether you’re concerned about the drought, struggling with difficult people, or dealing with smoking problems, we’ve got answers. Hot Topics tackles key problems, new and old, facing California HOAs, and provides crucial insights.

Legal Advice from attorneys, minus the fee.

Registration includes buffet lunch. Register online (requires login) or return the form on this page. Prices increase $10 on May 2nd.

Our top-flight group of HOA attorneys offer clear, expert guidance for HOA board members. They will cover new laws (including important court cases), and will take questions directly from you.

Yes, reserve ______spaces for the ECHO Oakland 2nd Annual Seminar & Trade Show. Amount enclosed: $__________ (attach additional names) Name: Email Address: HOA or Firm: Address: City: State:

Zip:

Phone: Visa/Mastercard No.

SPONSORS

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

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RECORDS RETENTION By Walt Grady, CPA

Records retention is a difficult issue for most associations. It is often compounded by the lack of professional guidance as to what records need to be retained. The association may have a closet full of records, but if they are disorganized and no one can find anything when needed, then it is time to review and organize the records. Record retention is especially important because of frequent turnover of the board of directors. It is also futile if former board members are retaining association records, but no one knows about it. Each board needs to establish and follow a record retention policy.

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What records?

A

ll documents need to be considered. This includes legal, financial, insurance and maintenance records as well as general correspondence. Written documents, computer disks and tapes, equipment specification and instruction books and even pictures all need to addressed.

Why keep records? There are legal requirements for keeping certain records such as board minutes and tax returns. Board minutes are permanent records and need to be retained indefinitely. Tax returns can be audited up to three years from when they are filed. Because they are not filed until after the year is over, supporting documentation needs to be retained for four years. Other records need to be retained for their informational value. For example: for the last roof replacement, what were the specifications, the date of replacement, and the cost and warranty information? Maintenance history and repair records can help to determine when components should be replaced. Still other records need to be retained because of possible future board or legal actions; examples are a history of repeated rules violation by a resident which may lead to future board action, or a history of water intrusion problems which may lead to a construction defects legal action. Architectural control records are particularly important. The board needs to be able to identify each architectural change that has ever been approved and, conversely, each change that has been denied, and it should maintain a history of violation notices.

Too many records Often too many records are retained. Each board member does not have to keep a copy of minutes of meetings as long as the original is properly filed and is available. Detailed monthly financial statements do not have to be retained once annual financial statements have been issued by the CPA. One copy of anything is enough!

Organization

Developer Disclosure Statements Deeds Title Insurance Policies Financial: Annual Corporate Tax Returns Letters granting tax exempt status Issuance of tax ID number Annual CPA Prepared Financial Statements Annual general ledgers Maintenance:

There is no right or wrong method of organization. I recommend separating the records by category: Legal Records Financial Records Maintenance/Facilities Records Correspondence Other Within each category, records should be grouped into: Permanent records Retain for four years Retain till superseded

Blueprints Building Drawings and details of Additions or Modifications Major Component Listings, Specifications and Measurements Other: Documents requesting Architectural Changes Approvals and denials of Architectural Change Requests Notice of violations of Architectural Controls

(Often superseded records in turn should be retained for 4 years.)

Retain one year

Permanent records

Retain for four years Legal: Membership Meeting Ballots, Proxies and Check-in Sheets

Legal: Board Minutes and Notices of Meetings Executive Session Meeting Minutes Membership Meeting Minutes and Notices of Meetings

Financial: Bank Statements and Canceled Checks Paid Bills

Committee Meeting Minutes

Payroll Tax Returns

Original Enabling Documents:

Time Cards

CC&Rs

Monthly General Ledgers

Bylaws

Accounts Receivable Listings

Articles of Incorporation

Deposit slips

Amended Enabling Documents

Dues billing and collection documents

Legal Settlement Agreements 22 echo-ca.org

Client/Attorney Privileged Information file


Correspondence: “Serious” Correspondence

Where should records be kept

Newsletters Other: Insurance Claims History

Retain till superseded: Superseded documents marked by an asterisk(*) should then be transferred to the RETAIN FOR FOUR (more)YEARS category)

Records should be stored together in a safe, dry area, preferably in a storage closet on site or with the management company. Permanent records such as board minutes should be kept in a fireproof cabinet. It is not uncommon for the management company to retain most of the permanent records and the current records.

How should records be kept

Legal Records:

Contracts:* Management Vendor Services Loan Documents* Listing of Rules* Interpretations of Rules under specific circumstances* Nonarchitectural Enforcement Matters* (ex: Parking Violations. Discard when owner sells unit)

Maintenance/Facilities Records:

Warranties and Guarantees* Funding Studies* Equipment Specifications Complete details of last replacement of all major components

Records should be stored in uniform size record storage boxes. If records are to be destroyed after a certain date, write on the box the destruction date. Number the boxes so that they can be kept in order. Keep a separate listing of the contents of each box. It is much easier to look through a ten page listing and find a reference to a box number than it is to sort through ten boxes.

Annual chores At the end of the fiscal year, gather up the current year records. Always take the time to index the boxes prior to adding them to the storage site. At the same time, review the stored record listing sheets for records that have expired and destroy them. Make notations on the listing that the records were destroyed and the date destroyed.

Other Records:

Original Insurance Policies* Employment Contracts* Personnel Files*

Retain one year

A final word Use common sense in determining what records to keep or destroy. If in doubt contact your professionals—attorney, CPA, association manager, insurance agent, banker, or reserve specialist.

Meeting Agendas Monthly Financial Statements “Light” Correspondence, especially if situation has now been resolved or action completed

Walt Grady is a CPA in Alameda, CA. He is a member of ECHO and a past chair of the ECHO Accountants Resource Panel. April 2014 | ECHO Journal

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Partial Payments of Community Association Delinquent Assessments:

To Accept or Not to Accept... By Andrea L. O’Toole, Esq. and Emily K. Clark, Esq.

T

he issue of whether to accept a delinquent owner’s offer of partial payment of their debt comes up often and is usually not taken lightly by homeowner association boards. The offer, by definition, is less than the owner owes to the association. As such, the board’s dilemma is whether to accept less than is owed to the association and to forego further collection efforts on the remainder, or to reject the offer and attempt to collect more or all of the amounts owed, usually in an effort to get the association as close to “whole” as possible. Each collection is unique and, as can be imagined, there are numerous factors to consider at each stage of the collection process. A recent assessment collection case in which the court held that an association must accept a partial payment is garnering a lot of attention and has been the subject of internal discussion at B&W as our attorneys advise our clients on how to address this new case.

April 2014 | ECHO Journal

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I

n Huntington Continental Townhouse Association, Inc., v. The JM Trust, 1 the Appellate Division of the Orange County Superior Court held that the DavisStirling Common Interest Development Act (the “Act”) compels homeowners associations to accept and apply partial payments, even where that payment reduces delinquent assessments owed but not any other amounts due (such as late fees, interest, collection agency fees, attorneys’ fees and costs of collection).

While managers and directors may now be wondering how this case will affect an association’s ability to collect the “other” fees and collection costs to which it is entitled as explained below, we conclude

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that the case is not binding on California homeowner associations and until a definitive applicable ruling is made, there is no prohibition on accepting partial payments.

The Huntington Continental Case A homeowners association filed suit to foreclose on an assessment lien. Thereafter the owner and association entered into a payment plan; the owner made two payments under the plan and then failed to make the next two scheduled payments; the owner later tendered the regular monthly assessments for two months and after that tendered a check of $3,500 to the association (which, according to the Appellate Division, would have brought the owner’s past due account current not including collection fees and costs). Although the association’s president informed the owner that the association’s counsel would apply the $3,500 payment to the owner’s delinquent account, counsel

returned all checks, asserting that it was unable to accept partial payments. The association was awarded foreclosure and damages and the owner appealed. The Appellate Division reversed the court’s award and held that the partial payment had to be accepted. In its decision, the Appellate Division noted that there is nothing in the Act that precludes the acceptance of partial payments of delinquent assessments once collection efforts have been commenced. However, the court found that obligating associations to accept partial payments is consistent with the Legislature’s intent to limit the remedy of foreclosure to only those instances where it is the only viable option for collecting delinquent assessments. The opinion does not address how the late fees, interest and costs of collection are dealt with once the assessment principal is paid. As experienced managers know, the law (Civil Code section 5720) prohibits associations from foreclosing until the assessment principal exceeds $1,800 or is more than 12 months delinquent. Thus, the effect of accepting a partial payment that cures the delinquent


assessment principal but nothing else means the association could no longer utilize its foreclosure rights. Instead, it would need to file suit to collect the remaining amounts or passively leave its lien in place until a transaction on the property (e.g. sale or refinance) might yield a recovery. All this adds uncertainty and delay in the collection process and could have the effect of requiring the community at large to absorb collection costs and fees.

Huntington Continental is not Binding Except in Orange County Perhaps the most interesting and significant feature of Huntington Continental is that it was decided by an “Appellate Division” of the Superior Court. An Appellate Division of a Superior Court only hears appeals of Superior Court matters in which the amount in dispute is less than $25,000 as was the case in Huntington Continental. The Appellate Division’s opinion is “certified for publication,” meaning it may be cited or relied on by courts and parties as precedent.2 However, while it may be binding on other Superior Courts subject to that Appellate Division, it is not binding in other counties. Other courts could use Huntington Continental as persuasive precedent; however, its holding is not binding and associations are not required to accept a partial payment merely because it reduces the delinquent assessments owed. As such, whether to accept the offer of a partial payment is still a decision in which boards must carefully consider weighing all the relevant factors. 1 2014 WL 173800 (Appellate Division, Superior Court, Orange County) (Jan. 13, 2014). 2 Cal. Rules of Court, Rule 8.1115. Andrea O’Toole, Esq. and Emily Clark, Esq. are attorneys with Berding & Weil.

April 2014 | ECHO Journal

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28 echo-ca.org


THE FINE POINTS OF FINING Michael Hardy Esq.

Fines: What Good Are They?

A

lmost all associations use fines to some extent to address violations of their governing documents. Some associations use them quite extensively, others only rarely. Few boards have actually considered the place fines do or should play in the management of the association’s affairs. This article is intended to aid managers and boards in developing or revising a policy on monetary penalties (fines) and in applying that policy in the day-to-day management of the association.

April 2014 | ECHO Journal

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M

onetary penalties serve two purposes. First and foremost, they allow a board to carry out its duty to enforce the governing documents. Without a system of monetary penalties, the only way to deal with owners who violate the governing documents (other than a polite warning letter) would be an expensive and time-consuming legal action (or arbitration/mediation if the owner agrees). The board has a fiduciary duty to enforce the governing documents and can be sued by a member of the association for failing to do so. The imposition of a fine on an owner who has been found to have violated the governing documents fulfills the board’s enforcement duty.

The second purpose is, of course, deterrence; i.e., to discourage future violations by the owner or by other owners in the development. The financial impact of a fine is usually not that significant for most owners, but the embarrassment of being fined by the association may prove to be an incentive against future violations. Of course, some violations occur because owners are not aware of the particular restriction or do not understand the scope of the restriction. Obviously, fines will have no effect on such violations, but if an association finds that a particular violation is being repeatedly violated for such a reason, the restriction needs to be re-written and/or the owners need to be educated about its existence and the penalty for violating it.

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First Things First There is no inherent authority vested in an association to impose fines on its members for violations of the governing documents. It can only do so if such authority is provided in the association’s governing documents. Most CC&Rs or bylaws do give the board such authority, either directly or through the power to adopt rules relating to the management of the development. If no such authority is given in an association’s governing documents, those documents will have to be amended to provide such authority before monetary penalties may be imposed on the association members. Just having the authority to impose fines is not enough. The authority must be exercised by the board through a schedule of monetary penalties properly adopted and distributed to the members. Civil Code Section5850, part of the Davis-Stirling Common Interest Development Act, requires that such a schedule be distributed before any fines are imposed by an association. This document is considered an “Operating Rule” and must therefore be adopted in accordance with the provisions of Civil Code Sections4340-4370, which require (among other things) that a proposed rule be distributed to the members for comment at least thirty days before adoption. It is recommended (but not required) that the schedule of monetary penalties be included as part of a general enforcement policy adopted by the board. Such a policy should set out the steps to be followed in enforcing the governing documents, such as the use of courtesy warning letters for first violations and the use of alternate dispute resolution. A board may chose simply to adopt a schedule of monetary penalties, but an enforcement policy would provide guidance to the members and future boards as to the steps that will be followed for enforcement of the governing documents. This will help to assure fairness and consistency in enforcement, and it will avoid claims that an individual is being singled out for discipline while other member violations are ignored. . Once a schedule of monetary penalties

has been adopted, it must be included, along with the association’s discipline policy (if any), as part of the Annual Policy Statement distributed each year to the members pursuant to Civil Code Section 5310.

How Much is Enough? Like all provisions of an association’s governing documents, fines must be “reasonable.” No statute or case law defines when the amount of a fine is, or is not, reasonable. Like all restrictions, a fine cannot be arbitrary or discriminatory and must be imposed in good faith with the best interests of the association as a whole in mind. That’s not very helpful for deciding how much the fines to be included in a schedule of monetary penalties should be. One factor is the economic status of the community comprising the association. A $50 fine in a condominium project comprised of blue collar families may be sufficient, while the same fine in a community of $3 million single family detached residences may be essentially meaningless to the owners (but it may still accomplish some deterrence from the embarrassment factor discussed above). Another factor is the seriousness of the violation. Actions that create a safety hazard for other persons or involve actual or potential economic losses to the association (repair of common area damage, increased insurance premiums, etc.) justify a higher fine than actions that only have an aesthetic impact, e.g., improper window coverings. Although there are no statistical studies on this issue, it is likely that if an association imposes any fine totaling more than a few hundred dollars for a single violation, it will, if challenged in court, face an uphill battle in proving that the fine is reasonable. This does not mean that an association will never be permitted to impose a higher fine than $200 or $300 for a single violation; depending on the factors discussed above and the particular judge, it is possible that significantly higher fines may be allowed. However, if an association wants to minimize the possibility that a fine will be found to be unenforceable by a court, it should limit


fines to a few hundred dollars per violation at most. Some boards, in order to encourage owners to correct a continuing violation of the governing documents (such as improper window coverings or construction of an unauthorized improvement) may wish to impose a fine for each day (or week or month) the violation remains uncorrected. Such per diem fines are not improper so long as they are authorized in the association’s schedule of monetary penalties. However, boards have to be mindful not only of the amount of each per diem fine but of the total of such fines. For instance, a fine of $5 per day for improper window covering may be reasonable, but if the Board waits until such fines against an owner have accumulated for a year or more before attempting to collect them, a court may decide that a fine of more than $1800 for improper window covering is not reasonable.

Steps for an Enforceable Fine Once a schedule of monetary penalties has been properly adopted, fines may be imposed for violations of the governing documents. The exact procedure followed by a particular association may vary somewhat from association to association, depending upon the association’s enforcement policy, but the Davis-Stirling Act requires a hearing before the board or before an enforcement committee prior to imposition of the fine. The owner subject to the fine must be given at least ten days advance notice of the date and time of the hearing and the general nature of the alleged violation. At the hearing, the owner or the owner’s counsel must be allowed to speak to the board concerning the alleged violation and to provide documentation for the board or committee to consider. A written notice of the board’s decision on whether to impose the fine must be delivered to the owner within fifteen days after the board has made its decision. Some older governing documents provide for an “after the fact” hearing process under which the board imposes a fine and the affected owner then has a

April 2014 | ECHO Journal

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right to request a hearing if he or she wishes to contest it. This process does not comply with the requirements of the Davis-Stirling Act, and it should be abandoned. Any governing document which still calls for use of such a procedure should be amended. Failure to comply with both the requirements of the association’s enforcement policy and the requirements of the Davis-Stirling act will make any fine unenforceable. Thus if the association’s enforcement policy requires that a warning letter (or courtesy notice) be provided to an owner before a fine is imposed and such a letter or notice is not provided, such an omission can be used as a defense in any attempt to collect the fine in a legal proceeding.

Collecting the Fine Okay, the board has diligently followed the requirements of the Davis-Stirling Act and its enforcement policy, held a hearing and imposed a fine, which the

owner has failed to pay perhaps with a very definite statement about the board and what it can do with its fine. Now what? The simplest way to collect is an action in small claims court. It’s fast, inexpensive and doesn’t require an attorney. However, small claims court judges, who are often volunteer attorneys serving as temporary judges, have a reputation for being hostile towards homeowner associations; and, unlike an action in the superior court, there is no right to appeal a bad decision (the defendant in a small claims action has the right to appeal but not the plaintiff ). The board will have to weigh these risks in considering a small claims court action, but it still may be the best way to go in many cases. An action could also be brought in the Superior Court. This process would involve filing a lawsuit and, if the owner contests the fine, eventually participating in a trial. The services of an attorney would be required for such an action, but if the association prevails the attorney’s fees and other costs could be recovered against the losing party

(the judge would decide how much of the fees and costs could be recovered). In some cases, under the Davis Stirling Act, the association may have to attempt mediation or arbitration before filing the lawsuit. (Civil Code §§5925-5960.) One possible problem with such an action solely to collect a fine is Code of Civil Procedure Section 1033, which states that if an action which could have been brought in small claims court (which permits actions for monetary damages up to $5000) is brought in the Superior Court, the court may reduce or even eliminate any costs (including attorney’s fees) which could otherwise be recovered by the party instituting the action. However, if the association is also seeking injunctive relief to obtain a court order requiring an owner to correct a violation of the governing documents, this section would not apply, because such an action can only be brought in the Superior Court. One remedy that is not available to collect a fine is the lien and nonjudicial foreclosure process used for delinquent regular and special assessments. The Davis-Stirling Act expressly prohibits the use of such a procedure to collect fines. (Civil Code §5725(b).)

Summary: Be Reasonable, Have a Plan and Be Consistent The most desirable remedy for a violation of the governing documents is an amicable request to the owner to correct the violation (or not to repeat it). If this doesn’t work, then an association needs to have in place a schedule of reasonable monetary penalties and to diligently follow every step of its enforcement policy and the requirements of California law. It is also important that a board make a reasonable effort to identify all violations and to treat them in the same manner, so that a claim of “selective enforcement” cannot be asserted by the owner subject to the fine. Michael Hardy is an attorney at the Walnut Creek office of Angius & Terry LLP. 32 echo-ca.org


Sacramento Educational Seminar Saturday, June 14th, 2014 8:30 AM to 12:30 PM

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2014 Condominium Greenbook Member Price: Non-Member Price:

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

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Board Member Handbook

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34 echo-ca.org

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36 echo-ca.org


advertiser index

about ECHO

ACE Property Management.................13 www.acepm.net

Ekim Painting.......................................27 www.ekimpainting.com

Angius & Terry......................................36 www.angius-terry.com

Focus Business Bank...........................36 www.focusbusinessbank.com

A.S.A.P Collection Services.................11 www.asapcollect.com

M & C Association Management Services...........................2 www.mccommunities.com

Association Reserves...........................31 www.reservestudy.com Benjamin Moore Paint & Company...13 www.benjaminmoore.com Berding|Weil .........................Back Cover www.berding-weil.com Collins Management............................11 www.collins-mgmt.com Compass Management........................27 www.gocompass.com Condominium Financial Management Inc..................................23 www.condofinancial.com Cornerstone Community Management.........................................32 www.cornerstonemgt.biz

Neighborhood Association Management.........................................36 www.neighborhoodam.com PML Management................................17 www.pmlmanagement.com R.E. Broocker Co...................................11 www.rebroockerco.com Rebello’s Towing..................................41 www.rebellos.net Silicon Valley Civil & Structural Engineers..............................................12 www.Qengineers.com Steve Tingley Painting, Inc..................41 www.tingleypainting.com Union Bank...........................................26 www.HOAbankers.com

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

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

Benefits of Association Membership • Subscription to monthly magazine • Access to members-only online education • Updates to the Association Statute Book • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

ECHO Membership Dues Association Membership HOA 2 to 25 units...........................$130 HOA 26 to 50 units.........................$180 HOA 51 to 100 units.......................$275 HOA 101 to 150 units.....................$375 HOA 151 to 200 units.....................$450 HOA 201 or more units..................$575 Professional Membership.................$499 Association Management Membership.......................................$499 Individual Membership.......................$75

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Over 1,700 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for the membership, sign up online at www. echo-ca.org. For more information about membership and ECHO, call us at 408-297-3246 or visit the ECHO website.

August 2013 || ECHO ECHO Journal Journal February April 2014 2014 Journal

37 37


ECHO honor roll

ECHO HONORS VOLUNTEERS ECHO Resource Panels Accountant Panel Marco Lara, CPA 650-632-4211 Central Coast Panel John Allanson 831-685-0101 East Bay Panel Beth Grimm, Esq. 925-746-7177 Cindy Wall, PCAM, CCAM 925-830-4580 Legal Panel Mark Wleklinski, Esq. 925-280-1191 Maintenance Panel Judy O’Shaughnessy 408-839-6926 North Bay Panel Diane Kay, CCAM 415-846-7579 Stephany Charles, CCAM 415-458-3537 South Bay Panel George Engurasoff 408-295-7767 Wine Country Panel Pam Marsh 415-686-9342 Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry Bowles Oliver Burford Joelyn Carr-Fingerle, CPA Chet Fitzell, CCAM John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

38 echo-ca.org

Regional Seminar Speakers

Recent Contributing Authors

Marin David Feingold, Esq. Wanden Treanor, Esq. Glenn Youngling, Esq.

October 2013 Beth Grimm, Esq. Debra A. Warren, PCAM, CCAM Richard Tippett Sharon Glenn Pratt, Esq. Geri Kennedy

Santa Cruz John Allanson Jeffrey Barnett, Esq. Diane Rossi, PCAM Ron Duncan Toby Goddard Piret Harmon South Bay Sharon Pratt, Esq. Rosalia Tapia, Esq. Matthew Harrington, Esq. Terin Reeder Robert P. Hall, Jr., Esq. Stephanie Hayes, Esq. Wine Country Carra Clampitt Bill Gillis, Esq. Steve Lieurance, CCAM Jim MacMillan Michael Cantarutti Paul Schultz, CLCA.

November 2013 Tyler Berding, JD, PhD John R. Schneider James H. Ernst, CPA, MS-Tax Tom Fier, Esq. Burt Dean December 2013 Sandra M. Bonato, Esq. Katherine Naegele Derek Eckert Ann Rankin, Esq. Burt Dean January 2014 Douglas Christison, PCAM Barbara Ellen William S. Erlanger, CPA Joelyn K. Carr-Fingerle, CPA Tyler P. Berding, JD, PhD

Fresno Geri Kennedy David Levy, CPA Michael J. Hughes, Esq.

February 2014 Jeffrey A. Barnett, Esq. David Kuivanen, AIA Elizabeth Lanham Sharon Glenn Pratt, Esq.

Walnut Creek Stephanie Hayes, Esq. Lisa Esposito, CCAM Rob Rosenberg, CCAM Beth Grimm, Esq.

March 2014 Teresa Powell & Brian Seifert Sandra L. Gottlieb, Esq. Marc Dunia Charlotte Allen

Monterey John Allanson Diane Rossi, PCAM, CCAM Sandra Bonato, Esq. Sacramento Ian Brown, CCAM Bill Erlanger, CPA Don Haney, CPA Deon Stein, Esq.


NEW

at echo-ca.org

New legislation, quick tips, and fresh insights - we’re adding new information to our website every day.

Log in to read the articles below. Not sure how to access your free account? Email ECHO at: newaccount@echo-ca.org.

Articles 5 Steps to Improve Your Meeting Minutes

HOA meeting minutes are vital legal records. Unfortunately, they are rarely done well. Too often, minute-takers include irrelevant information or leave out important details. These 5 tips can help your minutes get back on track. Educational Topic: Minutes

8 HOA Tax Reporting and Filing Deadlines You Should Know

March 15th was the standard tax deadline for calendar-year HOAs. Whether your association filed its return or an extension, your government filing obligations aren’t over. Here are a few more tax and filing deadlines that you or your manager should know. Educational Topic: Taxes

It Could Cost You! Missing the Mark on Employee Classification

Is your hired professional a contractor or employee? The distinction can be murky, and getting it wrong can be shockingly expensive. This article explains the consequences, and lays out several “tests” to help you distinguish between an employee and a contractor. Educational Topic: Contractors

Legislation Voiding Landscaping Rules

A new bill, AB 2561, would void governing document provisions that prevent owners from growing crops for person

or entrepreneurial use in their front or back yards. ECHO opposes this bill, and you can read more specific on our website, or join the conversation on Facebook. Find in: echo-ca.org/hoa-advocacy

Attorneys at Internal Dispute Resolution

If your association has an internal dispute resolution (IDR or “meet and confer”) policy, AB 1738 would allow both associations and owners to bring counsel into that process. ECHO has taken a “support if amended” position, as we seek an amendment that would preserve the informal and internal nature of IDR. Find in: echo-ca.org/hoa-advocacy

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

ECHO Journal Read the ECHO Journal on the ECHO website before it arrives at your door. We usually post the latest issue on or before the beginning of each month. Log in to browse the latest articles, or read from a huge library of past issues. Find in: echo-ca.org/journal April 2014 | ECHO Journal

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ECHO event calendar

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

Please join us: DATE

PANEL LOGISTICS

PANEL SECRETARY

TOPIC

April 9, 11:45 a.m.

South Bay Resource Panel Buca Di Beppo 1875 S. Bascom Ave, Campbell

Rosalia Tapia, Esq. 408-369-0800, ext. 205

Water Heater Changes That Affect HOAs

April 11, 11:45 a.m.

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

Cindy Wall, PCAM 925-830-4580

Water Intrusion Damage

April 16, 11:45 a.m.

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

Pam Marsh 415-686-9342

Smoking in Multi-family Dwellings

May 1, 11:45 a.m.

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

Denise Wolford 415-458-3537

Architectural Controls

May 13, 11:45 a.m.

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

Ann Thomas 800-537-4098 ext. 7530

Water Issues

May 21, 11:45 a.m.

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

Pam Marsh 415-686-9342

Tree care

REGULARLY SCHEDULED RESOURCE PANEL MEETINGS Panel

MEETING

location

Maintenance

First Wednesday, Even Months

ECHO Office, San Jose

North Bay

First Thursday, Odd Months

Contempo Marin Clubhouse, San Rafael

East Bay

Second Friday, Even Months

Massimo Restaurant, Walnut Creek

Accountants

Second Monday, Odd months

Scott’s Seafood Restaurant, Oakland

Central Coast

Second Tuesday, Odd months

Michael’s On Main, Soquel

South Bay

Second Wednesday, Even Months

Buca Di Beppo, Campbell

Wine Country

Third Wednesday, Monthly

Serv-Pro, Cotati

Legal

Quarterly

Varies

40 echo-ca.org


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41


legislation at a glimpse

Attorneys at Dispute Resolution Proceedings Bill Information

Summary

AB 1738

What Does AB 1738 Say?

Support if Amended

This bill by Assemblyman Chau would require that association dispute resolution procedures, including internal dispute resolution (IDR), permit a member or the association to use counsel to explain their position.

Author: Chau Status: In Assembly Housing & Community Development Committee..

How Will AB 1738 Impact Your HOA? We support the effort to place boards and owners on an equal footing in the IDR process. However, we believe that AB 1728 is flawed for three reasons: 1. Involving counsel will increase costs and change the nature of IDR. IDR is intended to be inexpensive and internal. Adding outside counsel will increase the expense and formality of an informal opportunity for association boards and owners to resolve their differences. 2. Involving counsel will escalate tension. Attorneys move IDR closer to formal legal action, and diminish the possibility of an amicable resolution. 3. Associations and owners can use counsel during Alternative Dispute Resolution (ADR). The formal procedure of ADR, a necessary pre-trial process, allows both parties to use counsel; including attorneys in IDR is unnecessary and counterproductive.

What Amendments Would We Support? We support an amendment to AB 1738 that would prohibit associations from using counsel in IDR, except when an owner provides 72 hour, required, advance notice to the association of their intention to use counsel.

Voiding HOA Landscaping Rules Bill Information

Summary

AB 2561

What Does AB 2561 Say?

Oppose

This bill by Assemblyman Bradford would void any provision of the governing documents of a common interest development that prohibits the use of a homeowner’s front or back yard for personal agriculture or entrepreneurial agriculture or prohibits a homeowner from the off-site sale or donation of produce grown on the homeowner’s property.

Author: Bradford Status: In Assembly Judiciary Committee.

How Will AB 2561 Impact Your HOA? 1. Void your landscaping rules. Owners would be permitted to grow “edible plants” in their front or back yards, overriding existing rules and community aesthetic. 2. Permit on-site agricultural businesses. Owners could grow plants for commercial use. Associations could place reasonable restrictions on the hours of operation and prohibit on-site sales, but would need to allow business-related activities and visitors.

Why Does ECHO Oppose AB 2561? 1. HOA communities should be allowed to make aesthetic decisions together. HOAs are unique communities where homeowners share resources and space in common. We believe that overriding governing document provisions approved by the community circumvents the communal nature of effective association governance. 2. Residential HOA communities should be allowed to prohibit commercial enterprises. Many communities work hard to preserve the residential feel of their properties. Forcing HOAs to permit on-site business activities will change family-friendly neighborhoods, increase commercial traffic, and could reduce property values. 3. AB 2561 places unfair, dangerous burdens on associations and owners. This bill does not address the following concerns: who is responsible for increased water usage? Can owners plant trees that could damage property? Is the HOA responsible for mediating complaints about smells related to composting and/or fertilization? Who will be responsible for related pest problems? Can the association prohibit pesticide use? And many more…

What Do You Think? Let us know. Find AB 1738 and AB 2561 on the ECHO website and take our one-question poll. Or visit our Facebook page and join the discussion. On the web: echo-ca.org/hoa-advocacy, On Facebook: facebook.com/echoorg 42 echo-ca.org


legislation at a glimpse

Other Legislation Bill Information

Summary

AB 1360

Electronic Voting

Support if Amended

This bill authorizes an association to conduct elections or other membership balloting by electronic voting. It also requires an association to provide each member with an opportunity to indicate that he or she will be voting electronically and to provide a member who did not indicate so with a paper ballot.

Author: Torres Status: Passed Assembly. In Senate Judiciary Committee.

AB 2100

Drought and Under-Watering Fines

Watch

This bill would prohibit an association from imposing a fine or assessment on separate interest owners for yard maintenance issues related to under-watered plants and lawns during any period for which the Governor has declared a state of emergency due to drought.

Author: Campos Status: In Assembly. Heard in committee on March 23rd.

AB 2104

HOA Regulation of Turf

Watch Status: Read first time.

Current law voids governing document provisions that prohibit the use of low water-using plants. This bill would extend the scope of that law by voiding governing document provisions that prevent owners from replacing “turf” with low water-using plants.

SB 391

Fees on Recorded Documents

Oppose

In order to fund affordable housing, this bill would impose a $75 fee on each document to be recorded in California.

Author: Gonzalez

Author: DeSaulnier Status: Passed Senate. In Assembly Appropriations Committee.

SB SB 992

Drought and Under-Watering Fines

Watch

This bill would prohibit an association from imposing a fine or assessment on separate interest owners for yard maintenance issues related to under-watered plants and lawns during any period for which the Governor has declared a state of emergency due to drought.

Author: Nielsen Status: In Senate Transportation and Housing Committee.

SB 1144

HOA Regulation of Turf

Watch

Current law voids governing document provisions that prohibit the use of low water-using plants. This bill would extend the scope of that law by voiding governing document provisions that prevent owners from replacing “turf” with low water-using plants.

Author: Galgiani In Senate Transportation and Housing Committee.

SB 1243

Regulation of Association Managers

Watch

This bill would extend the effectiveness of existing law that regulates the practice of common interest development managers.

Author: Lieu Status: In Senate Business, Professions and Economic Development Committee.

Learn More Online Review the latest in-depth information. On the ECHO website, we publish frequent bill updates, analysis, links, and even a few bills that don’t make the cut for the ECHO Journal. If you enjoy research and advocacy, you’ll find everything you need online. April 2014 | ECHO Journal

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ECHO Journal - April 2014