Issuu

2018 Northern California Community Association Financial Survey p.8

How To Avoid Litigation: Tips From a Community Manager p.16

Serving Community Associations

How Can Board Members Fulfill Their Fiduciary Duties? p.22

Serving On The Board: Itâ€™s About Team Building and Leadership p.26

November/December 2018 echo-ca.org

What is the Long-Term Solution for Your Community Associationâ€™s Latent Liabilities? p. 8

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

PRSRT STD U.S. Postage PAID Modern Litho 210

Call: 408-292-8300 x2

Private property towing specialists

THE REBELLO’S DIFFERENCE • 24 Hours / 7 days a week • 20 Minute response time • Uniformed, polite, professionals • Licensed with indemnity insurance • Fire lane tour and tow • Parking permit enforcement • Insurance compliant with - Compliance depot - Registry monitoring • Customized parking permits • We have a city business license, and a special use permit to perform private property towing.

Our Drivers: • Are licensed with the city of San Jose • Are licensed by Bureau of Security and Investigation • Are paid hourly and never a commission • Must pass a rigorous three month training program • They must pass traffic incident management training

Available to Qualified Property Managers: • • •

Fire lane painting and maintenance Parking permits to go with your parking program Omadi login, on our website, for instant access to tow info and pictures

Ask Us How To Reduce Risk, Minimize Complaints and Eliminate Aggressive Towing

www.rebellos.net service@rebellos.net

696 Kings Row, San Jose, CA 95112 696 Kings Row, San Jose, Phone: 408-292-8300 x2 CA 95112 408-292-8300 x2

news from ECHO

Share the Passion Invite-a-Homeowner You can feel it in the air: The caressing dew of an autumn mist and the approaching kiss of a brisk winter evening. The seasons are changing as are we at ECHO. It is with great appreciation that I accepted the ECHO board invitation to join the great legacy of the Executive Council of Home Owners as its next Executive Director. I am excited to work for a cause and organization that advances the public good and helps the people of California have better lives in a safe and orderly way. ECHO is the California association that puts homeowners first! And I am proud of this legacy. Over the foreseeable future, we will be working to dust off old programs and activities, enrich some and eliminate others. This process is part of a healthy evolution of any vibrant organization. We will be working to enhance our voice and create a place for tremendous learning and opportunities to engage members while always remembering to keep our homeowners first when designing our future. So, as you put the finishing touches on your annual budgets and look to the holidays, it is a wonderful time to consider breathing life into your HOAs and empowering homeowners to participate in our greater community of activity. Change starts with a few and builds inertia through positive thought and well-planned execution. At this stage, it is important to see the possibilities of your association and feel the passion of shaping change and encourage others to join in our mission at ECHO to build communities through education, knowledge, sharing and advocacy. There are approximately 14.5 million HOA residents and 54,000 HOAs in California. ECHO would like to expand its reach and harness the power of homeownership and empower community development. This year, the ECHO Board of Directors has approved a special Invite-a-Homeowner program to encourage individual memberships. All new individual members will receive a special membership dues rate of $50.00 per year if they are recommended by an existing HOA board member, vendor member, or professional manager member. It is our hope that by increasing participation in ECHO, our programs and influence will increase accordingly and build knowledge, passion and a commitment to better communities. Sincerely,

David Zepponi Executive Director November/December 2018 | ECHO Journal

CONTENTS

4 echo-ca.org

2018 Northern California Community Association Financial Survey It’s a little bit daunting…..those reserve funds that keep getting depleted year after year. How does your association keep up with inflation and the hidden defects that pop up, most especially in older units and with hefty price tags. Is it time to review and investigate beyond the parameters of your current reserve study to see if there are other areas to be considered? The numbers can’t and shouldn’t be ignored. We invite you to dive in feet first and educate yourself on the possibility of what might happen if you do.

How to Avoid Litigation: Tips From a Community Manager Let’s face it…..Litigation for HOA’s is costly, potentially damaging to the dynamics of a homeowner’s association and can essentially paralyze the Association and prevent or delay handling routine business that needs to be tended to. While avoiding litigation entirely is not always feasible, there are some key tactics that Boards can consider. Educate yourself on these important tips from the Community Manager’s point of view.

How Can Board Members Fulfill Their Fiduciary Duties? Most board members of community associations understand that they owe their members a "fiduciary duty." But what does that term mean, and how can board members satisfy this important legal obligation? What does this mean for conflict of interest, disclosures to your association members as well as notifications of meetings so that HOA Boards are managed in the best interest of their members. This overview highlights many key areas that are constant to members of HOA boards.

Serving on the Board: It’s About Team Building and Leadership

3 6 7 13 25 31 32 33 34 36 37 38

News from ECHO 2019 ECHO Educational Calendar Marin Seminar — Saturday, February 2nd, 2019 Seasons Greetings From Our New Office Santa Cruz Seminar — Saturday, February 23rd, 2019 ECHO Professional Directory ECHO Volunteers ECHO Event Calendar ECHO Bookstore New Professional Members Advertiser Index Legislation at a Glimpse

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 2018 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 1671 The Alameda, Suite 205 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

Whether newly elected or a long-time, committed board member, coming to the table with an open mind and a desire to reach a consensus is tantamount to becoming a successful board serving the members of its community. When the proper groundwork has been laid out, you will find serving on the board is not a burdensome chore, but a rewarding experience that you will value. Sherry Harvey shares some of her observations about board service. Sherry Harvey is a Community Manager at Community Management Corporation in Chantilly, VA.

DEPARTMENTS

The ECHO Journal is published bi-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.

BOARD OF DIRECTORS AND OFFICERS President David Hughes Vice President Adam Haney Treasurer Diane Rossi Directors Sandra Bonato David Levy Jerry L. Bowles Karl Lofthouse Rolf Crocker Sandra Long Sarah Dunia Wanden Treanor John Gill Executive Director David Zepponi Marketing Communications Specialist Priscilla Ann Ornido Design and Production Design Site ECHO Mission Statement Fostering a better quality of life in community associations through education, advocacy, and networking.

November/December 2018 | ECHO Journal

2019 ECHO educational calendar

Invite-a-Homeowner Individual members will receive a special annual membership dues rate of $50 (originally $95) if they are recommended by an existing HOA board member, vendor member, or professional manager member!

2019 ECHO Educational Seminars

Wine Country

Marin East Bay

If you’ve ever wished that ECHO would hold a seminar closer to your association, chances are that we’ll be nearby during 2019. 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!

Feb. 2

Feb. 23

Marin Educational Seminar (see page 7)

Santa Cruz Educational Seminar (see page 30)

Peacock Gap Golf Club San Rafael, CA

Hotel Paradox Santa Cruz, CA

FREE Attendance for ECHO HOA Members!

Join us at the Marin Educational Seminar Saturday, February 2, 2019

8:00 AM to 12:30 PM

TOPICS

Case Law & Legislation Update Risk Management –Recovery –Lesson Learned How Board Governance Has Changed (Or Not) Hot Topics 2019

Event Link: bit.ly/echoMarin19 Promo code: X3XTFV As an ECHO member, you may register for free when you apply the promotional code.

How to apply the promo code to you order 1. Type the above link into your browser and select “Register” located in the top right. 2. Click the “Enter Promotional Code,” link in the top-right of the Register window. 3. Find “Enter Code,” type in the code and click “Apply Code.” 4. Confirm your entry was successful. You should see the “Price” and “Fee” update to reflect the discounted amount.

ADDRESS

Peacock Gap Golf Club, 333 Biscayne Dr, San Rafael, CA 94901 PRICE

FREE for Pre-registered ECHO HOA Members $50 Nonmembers and Walk-ins.

November/December July/August 2018 2018 | | ECHO ECHOJournal Journal

721

2018 NORTHERN CALIFORNIA

COMMUNITY ASSOCIATION

FINANCIAL SURVEY By Tyler Berding, Esq. and David Levy, CPA

November/December 2018 | ECHO Journal

Introduction

n 1996, Berding | Weil published “Latent Liabilities” a treatise which explored the long-term impact of underfunding reserve accounts of community associations. Some of the data came from our clients, and some from Levy, Erlanger & Company LLP. We predicted that most multi-family community associations were severely underfunded for long-term maintenance and repairs, which could lead to the deferral of significant maintenance obligations and potentially shorten service for common interest assets.

Subsequent financial surveys by Levy, Erlanger & Company LLP, with our assistance, have shown this problem to be systemic—affecting most community associations. This year’s survey finds community associations to have only 51% of the necessary reserve funds on hand. This shows that the problem is not getting better—in 2016 the number was 50%—but in 1995 the percent funded was 63%. This represents a decrease in percent funded by nearly 20% over the last thirty-three years. Since “Latent Liabilities” was published, we have further documented this problem in “The Uncertain Future of Community Associations” and similar treatises. Community associations are slowly running out of cash. Borrowing from reserves for regular and newly discovered maintenance issues has trended upward, and when the reserves run out, special assessments and bank loans increase. The fundamental cause of this cash shortage is the inability or 10 echo-ca.org

unwillingness of Boards of Directors to increase assessments sufficiently to keep up with inflation coupled with the discovery of needed repairs not anticipated by the reserve budget.

most dry rot, corrosion, and other structural deterioration can be found, but rarely computed as part of the study. More intrusive inspections are necessary but seldom done as part of a typical survey.

Discovery of “hidden damage” has pushed many older associations to the financial edge. Too many aging associations suffer from long-term deterioration which, when discovered, carries a price tag that greatly exceeds the resources of the membership. Dry rot in balconies, entry structures, roof underlayment, and wall framing, and deterioration of utilities like electrical lines and plumbing, is becoming more common and are rarely a reserve budget line item. We have documented this problem in another treatise: “The Perils of Hidden Damage” which describes how these problems lie undetected for years.

Years of underfunding of reserves coupled with the late discovery of hidden damage places a heavy financial burden on the owners of attached housing. This burden is heavy enough, sometimes, to question whether many have reached the end of their service lives—are they actually obsolete? Compare the resources and expenses of your community association to other, similar associations, and investigate beyond the parameters of a typical reserve study—especially in older associations. Review the data in this survey and compare it to your own. Then ask yourself, are the components now in your reserve study the only areas of concern, or could there be others? If your reserves have less than 100% of the funding required by your reserve study and if your association was built over 20 years ago, it’s time to take a sober look at the association’s financial and physical condition.

Boards of Directors in older associations cannot rely entirely on a reserve study to predict their future funding. By statute in California, as in many other states, reserve studies are required only for those components which are visible and accessible—siding, roofs, streets, etc. The elements hidden under the outer skin of a building are not included. This is where

Also, if your association has not undertaken an investigation of components that could harbor hidden damage, consid-

eration should be given to a random intrusive survey of possible concealed damage. This has more than just a financial justification. In 2015, 6 students were killed and another 7 injured when a balcony collapsed on an 8-year-old building in Berkeley, California. The safety of occupants (and guests) is also a compelling reason to look closer.

The 2018 Survey Background This survey, while not the first of a kind, is one of the largest and most recent. It includes financial data from nearly 3,200 Northern California community associations. This survey is the product not only of hundreds of hours of work, but also the cooperation of almost two hundred management companies and self-managed associations, and funding by several leading California professional organizations: Berding|Weil, LLP, a construction and community association law firm, Levy, Erlanger & Company LLP, community association accountants and consultants, The Helsing Group, management consultants, Heritage Bank of Commerce, and the Community Associations Institute (CAI). The financial data used in this survey comes from the 2017 and 2018 year-end balance sheets and income statements of 3,151 community associations representing 313,069 individual units. Comparative data was also taken from several prior financial surveys done by Levy, Erlanger & Company LLP starting in 1992, and assisted by Berding | Weil in 2006, 2008 and 2013.

Unfunded replacement reserves $(8,677) average per unit

funded has declined by nearly 20%, and the unfunded replacement reserves balance has exploded. Based on extrapolation of survey data to the over 50,000 California community associations, the aggregate unfunded reserves totals approximately $43 billion! If that deficit were subtracted from presumed equity, the value of many homes in community associations would dropâ€”in some cases, dramatically.

2018 Average percent funded 51%

Percent Funded 1995 Survey Replacement reserve cash $2,325 average per unit (857 surveyed associations)

Replacement reserve obligation $3,693 average per unit (167 surveyed associations)

Average Income and Expenses 2018 Survey

Unfunded replacement reserves $(1,368) average per unit 1995 Average percent funded 63%

Assessments, operations $398 (70%) (2,226 assns. reported data)

In the roughly 23 years from 1995 to 2018, the percentage that reserves are

Assessments, replacement $140 (30%) (2,143 assns. reported data)

The 2018 Survey Results Percent Funded 2018 Survey Replacement reserve cash $8,394 average per unit (1,908 surveyed associations) Replacement reserve obligation $17,071 average per unit (1,908 surveyed associations) November/December 2018 | ECHO Journal

2018 Regular assessments * $534 monthly average per unit (based on 2,225 assns. reported data)

Expenses, administration $131 (32%) (3,137 assns. reported data) Expenses, maintenance $171 (42%) (3,093 assns. reported data) Expenses, utilities $108 (26%) (3,008 assns. reported data) (100%)

Expenses, operations $356 (64%) ** Expenses, replacement $201 (36%) (2,423 assns. reported data) Expenses, total $557 (100%) (3,129 assns. reported data)

____________________

* Totals may NOT equal the sum of positive values in the above detail line items because the detail line items only reflect the average per unit per month (PUPM) for those associations which report the specific income or expenses.

Not all associations had or reported each line of income or expenses. ** Implied based on average total expenses PUPM from 2018 survey data less replacement-related expenses PUPM from 2018 survey data. Some 2018 litigation-related expenditures were included in administrative costs.

Average Income and Expenses (Continued) 1995 Survey Assessments, operations $225 (82%) (912 assns. reported data) Assessments, replacement $50 (18%) (647 assns. reported data) 1995 Regular assessments * $275 monthly average per unit (based on 912 assns. reported data)

Expenses, administration $62 (32%) (929 assns. reported data) Expenses, maintenance $93 (48%) (929 assns. reported data) Expenses, utilities $39 (20%) (929 assns. reported data) (100%)

Expenses, operations $201 (77%) ** Expenses, replacement $60 (23%) (929 assns. reported data) Expenses, total $261 (100%)

____________________ * Totals may NOT equal the sum of positive values in the above detail line items because the detail line items only reflect the average per unit per month (PUPM) for those associations which report the specific income or expenses. Not all associations had or reported each line of income or expenses. ** Implied based on average total expenses PUPM from 1995 survey data less replacement-related expenses PUPM from 1995 survey data. Some 1995 litigation-related expenses were included in administrative costs.

12 echo-ca.org

From

New Year, New ECHO - We are relocating! Itâ€™s been quite a year for us all. As the holiday season is upon us, the team at ECHO reflect on the past year and those who have helped to shape our business. We look back with appreciation for your loyalty and look forward to moving into the New Year together. It is our pleasure to inform you that we are relocating to new business premises well in time for the start of the New Year. Don't worry, it's just down the street from our original location, and our other contact information will remain the same. Please update your records with our new address: Educational Community for Homeowners (ECHO) 1671 The Alameda, Suite 205 San Jose, CA 95126 As a valued ECHO Member, we thank you for taking the time to update your records. We hope that 2018 has been just as memorable for you, your colleagues and your loved ones, and look forward to working with you in the years to come. Thank you for your continued support and partnership of ECHO.

November/December 2018 | ECHO Journal

Comparison of 2018 and 1995 Survey Results (Per Unit per Month - PUPM)

2018

1995

Percentage Increase

Assessments, average

$534 $275 94%

Expenses Administration

$131 $62 111%

Maintenance

$171 $93 84%

Utilities

$108 $39 177%

Operating total

$410

$194

Replacement expenditures

$201

$60

235%

Total expenses, average * $557

$261 113%

Implied monthly (deficit)

$(14)

$(23)

The annual increase in administrative expenses over the last 23 years has been approximately 5% per year, maintenance expenses 3-1/2% per year, utilities 7-1/2% per year, and replacement reserve expenditures 10% per year. While regular monthly assessments have increased by approximately 4% per year since 1995, total expenses overall have increased by approximately 5% per year during the same period. Hence, after more than three decades, half of the lifespan of the community association industry, the average association is still operating at a loss when reserve expenditures are included. These losses are cumulative and reflect the growing imbalance of the reserve account.

Conclusion

14 echo-ca.org

When we look at the actual dollars being expended, the average common interest development has a continuing monthly deficit of $23 per unit in 2018 compared to approximately $14 per unit in 1995. It is troubling to note that association obligations continue to outdistance income. This is due in part to the increasing demands on replacement reserves in aging California community associations. Since operating expenses (insurance, water, management, etc.) must be paid, how is the monthly deficit being funded? Funds which should go to reserves are increasingly subsidizing operating expenses. In the 1995 survey, operating assessments were budgeted at $225 per unit, and actual operating costs (administration, maintenance, and utilities) totaled only $194 per unit – a 14% surplus. However, by 2018, operating assessments were budgeted at $398 per unit, but actual operating expenses

(administration, maintenance, and utilities) totaled $410 per unit – creating an ongoing 3% deficiency. With replacement reserve funding on the decline in many associations, it is not a surprise that unfunded reserves continue to increase. In the 1995 survey unfunded reserves were only $1,368 per unit; by 2018 they had skyrocketed to $8,677 per unit – an average 16% per year increase! These trends, which we noted in 2006, 2008, 2013 and 2016 and in various articles and treatises over the past three decades, continues to erode the ability of community associations to maintain their infrastructure. The average association has only about half of the funds it must have on hand for the known longterm repair of the buildings and nothing available for any unknown or unexpected major repairs. What is the long-term solution? Voluntary digging deeper into the pockets of owners who do not believe that they will still be here when the next roof goes on? Mandatory funding of reserves as required in some other states, such as Florida and Hawaii? The solution is a more intense investigation of aging infrastructure coupled with a rational review of the real cost of ownership and developing the political will to meet that cost with the additional dollars necessary to protect owner equity. That’s a lot to ask, and it will fail often. But the continued education of Boards of Directors and owners can make inroads. We hope that happens before it is too late. A free copy of the 38-page 2018 Northern California Community Association Financial Survey is available online at www.hoa-cpa.com. Tyler Berding, Esq. is a founding partner of Berding | Weil, a construction defect and homeowner association law firm, and a form member of the ECHO board of directors. All publications mentioned in this article may be found on his firm’s website: www.berdingweil.com. David Levy, CPA is a partner at Levy, Erlanger & Company, CPAs, in San Francisco. He is a current member of the ECHO board of directors and a frequent speaker at ECHO seminars. His firm may be found online at www.hoa-cpa.com.

16 echo-ca.org

How to Avoid Litigation: Tips from a Community Manager By Sandra Long, CCAM, CMCA, AMS, PCAM

November/December 2018 | ECHO Journal

n a time and country of litigious individuals and groups, it is prudent practice for volunteer Boards of Directors of homeowner associations to avoid litigation if at all possible. Litigation is costly, potentially damaging to the dynamics of a homeowner’s association and can essentially paralyze the Association and prevent or delay handling routine business that needs to be tended to. While avoiding litigation entirely is not always feasible, there are some key tactics that Boards can consider, regardless of whether your community is 5 units in a condominium complex or 500 townhomes in a planned development, professionally managed or self-managed.

Review Governing Documents Annually It is recommended to review your association’s governing documents on an annual basis. Governing documents include the CC&R’s and Bylaws and also extend to rules, regulations, and policies. In addition to familiarizing the Board with the governing documents through a review, it is also recommended that the documents are periodically reviewed by legal counsel to be sure that they are not contradictory to federal, state, or local law, and are in harmony with each other. It is good practice to have your CC&R’s and Bylaws revised and restated; however, this may not be financially feasible for all associations to embark on this project every few years. In lieu of a full rewrite project, spot amendments are an 18 echo-ca.org

option to help bridge the gap between outdated documents and newer, updated ones. Your association’s attorney will be able to guide the board through the process and be able to recommend if a full governing document rewrite is necessary or if an amendment will suffice. More often than not, governing documents for an association are referred to when there is a problem or question regarding maintenance responsibility or election procedures. Rather than reactively looking through the document when a situation is presented, it is a prudent business practice for volunteer board members, and their professional community manager, to review their documents annually. Maintenance responsibilities can often be confusing for both board members and homeowners and frequently the source of disconnect between a homeowner and the association. It is recommended that the Association publish periodic newsletter articles, or other communication, to the membership as

a reminder of what is the individual homeowner’s responsibility to handle (e.g. dryer duct cleaning) versus what is the Association’s maintenance responsibility (such as gutter/downspout cleaning). Clear and frequent communication can decrease the potential for problems later. As a professional community association manager, I keep hard copies of the governing documents and rules for each association that I manage at my desk, with specific sections highlighted and flagged for easy reference – such as maintenance responsibilities, pet restrictions and board member terms.

Review Rules and Be Sure They Are Reasonable and Enforceable

In addition to annual reviews of the governing documents by both the board and legal counsel, it is recommended that the rules are reviewed and revised, as needed, because the needs and dynamics of the community shift over time. What was once a problem with recreational vehicles may no longer be an issue and, on the other hand, problems with a vague fine policy may need to be addressed. Many of the homeowner associations that I manage review their pool season and daily hours annually as the needs of the community shift. One of my association had a terrible situation with noise emanating from the pool area with a busy and hot summer season that caused a disturbance to adjacent units. The Board considered the reports of the noise complaints, reviewed the current hours of their pool and ultimately changed their pool hours to have the pool area close an hour earlier each night. This was a small but important change, as it decreased the complaints from the neighbors around the pool area and yet still allowed for use and enjoyment of the pool by residents and their guests during the summer season. This is a good time to note that rules must be reasonable and enforceable. Having enforceable rules is critical. Often, an association will have good intentions with rules, but may skip the test to be sure that they are reasonable and enforceable. Removing holiday decorations from a front door within 15 days following a holiday is reasonable. Expecting the decorations to be removed within 24 hours after a holiday is not. It is recommended that the association’s legal counsel review any proposed new and/or revised rules prior to approval and formal adoption to be sure that the rule, or change, is not in conflict with the governing documents or any laws. Boards often skip this critical step due to the time and cost of a legal review; however, it is a small price to pay to be sure that your association’s documents are legally sound, reasonable and enforceable. Professional community association managers are not attorneys and should not provide this legal review. Per Civil Code §4360(a), the Board must give formal notice of a proposed rule change at least 30 days before making the rule change and formally adopting the change. Within 15 days of making

the rule change, the Board must provide general notice of the rule change. It is always advised to add the date that the Board formally adopted the new/revised rule to the document so it can later be referred to. In addition, an explanation of the new or revised rule is recommended so as to provide the membership with background and context of where this is coming from and why. This can easily be accomplished through a newsletter article or a cover letter.

Partner with Industry-Specific Professionals Another way to avoid litigation is to hire professionals with specific areas of expertise to provide thorough inspections and recommendations to the Board

for consideration and to partner with the Board on certain projects. There are many qualified and local industry-specific professionals available to assist homeowner associations. This includes law firms, CPAs, construction managers, insurance agents, general contractors, painters, roofers, plumbers, engineers, reserve study analysts, and, of course, community association managers. We encourage boards to use these resources as it provides an avenue of expertise and removes the individual directors from personal liability for decisions that they make while on the Board. Directors and Officers insurance, in addition to the association’s general liability policy, covers board negligence, breach and fiduciary duties provided the errors and omissions were within the scope of the director’s duties, performed in good faith and not grossly negligent. Having the association’s insurance agent come to a board meeting annually to talk

November/December 2018 | ECHO Journal

How Do You Join ECHO? Over 2,000 HOA residents 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.

20 echo-ca.org

to the Board about coverage, their policy, deductibles, premiums and any recommendations is a great way to lean on industry-specific professionals and help remove individual director liability. Another example is hiring a professional construction manager to perform a thorough inspection of the facilities, write a technical project scope, request proposals from qualified bidders, review licenses and insurance for the bidders, provide recommendations to the board, and then to oversee the actual construction project. This helps to reduce the legal risk of the Association for a poorly managed project that “goes sideways,” or way overbudget, if it was under-managed, or worse yet, unmanaged. There is no dearth of professionals to pick from. ECHO is a fantastic resource for board of directors to find these industry-specific professionals who are experts in their field and willing to roll up their sleeves to assist an association. Not hiring industry-specific experts can only increase the potential for litigation if something does not go as planned.

Respond to Issues in a Timely Manner Not responding to a homeowners-association related issue in a timely manner to an issue can only increase risk of litigation. A board of directors should promptly review and consider issues that come up and not defer the discussion, investigation, or resolution. One of the biggest potentials for litigation involve water-related leaks and subsequent damage stemming from faulty or un-maintained plumbing, roof leaks, backed up gutters/downspouts and decayed wood. It is critical that the board have the issue investigated by an expert in that field (such as a licensed and insured roofer) and identify a resolution. Communication is key: a homeowner that reported the issue should be informed that the Board has been advised of the situation, will meet to discuss it

(at the next regularly scheduled board meeting, or at a special meeting if the issue cannot wait) and will work towards a resolution as quickly as possible. The homeowner should be welcomed to contact the community manager (or the Board if the association is self-managed) if they have any questions or concerns throughout the process. Keeping all involved parties current as more information becomes available is helpful all the way around and can decrease the potential for litigation. In addition to an association promptly responding to maintenance-related issues, it is also wise to respond to neighbor issues in a timely manner. The Board should meet to review the reported issue and determine what involvement and responsibility the Association does (or does not) have. Again, communication is key and all parties involved should be kept abreast of the situation, estimated timeframes for review, response, and resolution, and advised as quickly as possible if the issue is outside of the Associationâ€™s jurisdiction so that reasonable expectations can be set.

It is recommended that the Associationâ€™s legal counsel be brought in to review the situation and provide recommendations if there are any questions regarding responsibility for water-related leaks and/or homeowner reported issues. An hour of legal time can decrease the potential for litigation later down the road. In summary, a Board of Directors should review their governing documents and rules on an annual basis to be sure that they are in legal compliance, are not contradictory or vague and are reasonable and enforceable, partner with industry-specific professionals on financial, maintenance, and legal matters, and respond to issues in a timely manner with clear and frequent communication to all parties involved. While this is not a guarantee that an association will steer completely clear of the risk of litigation, it certainly can help mitigate the risk. Sandra Long, CCAM, CMCA, AMS, PCAM, has over 15 years experience managing homeowner associations in the Bay Area and is the General Manager for Professional Association Services (PAS) out of Fremont, CA. Sandra is also a current Board member of ECHO.

November/December 2018 | ECHO Journal

22 echo-ca.org 22 echo-ca.org

How Can Board Members Fulfill Their Fiduciary Duties? by Jan A. Kopczynski, Esq.

“Fiduciary Duty: A duty to act for someone else’s benefit, while subordinating one’s personal interest to that of another person. It is the highest standard of duty implied by law (e.g., trustee, guardian).”

November/December 2018 | ECHO Journal July/August 2018 | ECHO Journal

23 17

ost board members of community associations understand that they owe their members a "fiduciary duty." But what does that term mean, and how can board members satisfy this important legal obligation? This article explains.

For many years now, it has been well established that corporations – including nonprofits such as homeowners associations – have a fiduciary relationship with their members. But as we know, a homeowners association is not an actual person, and therefore it must act through its board of directors just as publicly traded companies do. As such, California law requires that individual board members owe their members a special duty to ensure that the affairs of the corporation are managed in the best interest of the members. Another aspect of this duty is that directors must avoid any conflicts of interest; i.e., they cannot make decisions that enrich themselves at the expense of the homeowners they represent. The failure of a board of directors to adhere to this heightened standard of care and loyalty can, and often does, result in serious liability to the corporation for failing to comply with this duty.

But how does this fiduciary concept play itself out in real world? For example, as of 2013, boards of directors have an obligation – a legal duty – to disclose to association members that a lawsuit may be filed against the association's builder for construction defects. Such notice must be provided to members, and a membership meeting must occur, no later than thirty days prior to filing of the claim (absent an emergency). (See Civil Code section 6150.) Failure to do so would be a breach of the board’s duty. Let's consider another scenario: Does a homeowners association have a fiduciary duty to notify its members that it has filed a claim against an ordinary vendor for breaching its contract with the association? Given the answer to the first question above, one might believe the answer is yes. As it turns out, this question was squarely addressed in 2003 by the Court of Appeal in a case known as Ostayan v. Nordhoff Townhomes Homeowners Assn., 110 Cal. App. 4th 120 (July 2003). The circumstances that gave rise to that case took place in 1997 when the plaintiff, Mr. Ostayan, purchased an uninhabitable condominium for the sum of $25,000 in the North Hills of Los Angeles. The condominium had previously been damaged by the 1994 Northridge earthquake. As a result of his purchase, he became a dues-paying member of the Nordhoff Townhomes Association. During the period Mr. Ostayan owned his condominium, the association was involved in a dispute with its insurance

carrier over coverage arising out of the 1994 earthquake. The dispute with the carrier was often discussed by the association's board of directors at their meetings. In fact, the association had sent its members, including Mr. Ostayan, three written notices about the insurance dispute. Negotiations with the insurance carrier ultimately broke down, and the association filed a bad-faith lawsuit against the carrier. The problem was that the association did not inform its members of the litigation until a week after Mr. Ostayan had sold his unit to a third party for $53,000. As it turned out, in 2002 the association ended up settling its lawsuit against its insurance carrier for $20 million, and each unit owner received $180,000 of the settlement. But because Mr. Ostayan had sold his unit by the time of the settlement, he did not receive any of the settlement proceeds; he was no longer an owner of the condominium. Believing he was entitled to some of the settlement funds, he filed suit against the association, alleging breach of fiduciary duty, based on the theory that the association owed him a duty of notification with respect to the association's claim against its insurer. The implication of Mr. Ostayan’s lawsuit was that, had the board timely informed him that it was suing the association's insurance carrier for failing to provide funds to repair the condominiums, Mr. Ostayan would have waited until the conclusion of the lawsuit before selling his unit. But without such notice, he sold his unit for a small gain, and in doing so he failed to reap the benefit of the $180,000-per-unit settlement with the insurance carrier. In effect, Mr. Ostayan lost out on an additional $127,000. Notably, the trial court disagreed with Mr. Ostayan and found in favor of the association, ruling that the association did not owe him a duty of notification regarding the insurance claim. The Court of Appeal agreed and ruled that the association did not have a fiduciary duty to notify Mr. Ostayan (or its others members) that it had filed a bad-faith lawsuit against its insurer where the governing statutes and the association's governing documents did not require such notification. The court ruled that filing the action was within the scope of the association's inherent authority. And even if the association had such a duty

24 echo-ca.org

of notification, it satisfied that duty in this case by disclosing its dispute with the insurer in three separate written communications to its members, which included plaintiff at the time.

From this one case, board members can learn several valuable points: First, board members must remember that they are fiduciaries, and therefore they must act carefully and in the best interest of the members of the association. This is a heightened standard of care that carries with it severe penalties if breached. In short, directors must act with due diligence, exercise sound business judgment, and place the interests of the members above their own (i.e., no self-dealing).

Second, in exercising its fiduciary duties,

boards of directors are required to follow the associationâ€™s declaration of covenants, conditions, and restrictions (CC&Rs). That is the key document that contains "the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes." (See Civil Code section 4250.) Boards must also follow the statutory duties that are set forth in the Davis-Stirling Common Interest Development Act (Civil Code section 4000 et seq.) and the Nonprofit Mutual Benefit Corporation Law (Corp. Code section 7110 et seq.). These laws are lengthy, complex, and require careful analysis. Boards should not hesitate to engage outside legal counsel to help navigate the various legal requirements.

Third, despite the heightened standard of care, a board memberâ€™s fiduciary duties are not unlimited. Indeed, the Ostayan opinion is another in a growing line of appellate opinions that affirms the power of a community-association board to exercise discretion and sound business judgment in its affairs with its

members and third parties. And if the board does its due diligence and acts carefully, the board will be protected from frivolous claims. (See Lambden v. La Jolla Shores Homeowners Assn., 21 Cal. 4th 249 (1999) and Nahrstedt v. Lakeside Village Condominium Assn., 8 Cal. 4th 361 (1994).)

Keeping the above principles in mind, the safest course of action is to keep the homeowners informed about important association activities as required under the association's CC&Rs and the statutes in effect at the time. Doing so provides the board with powerful evidence in a later dispute with a member that the board met its fiduciary responsibilities. Jan A. Kopczynski is a founding partner of ROCK LAW LLP in San Francisco. He has been representing California homeowners associations for more than eighteen years. November/December 2018 | ECHO Journal

By Sherry Harvey, PCAM

Serving on the Team Building 26 echo-ca.org

Board: Itâ€™s about and Leadership November/December 2018 | ECHO Journal

hether you are a newly elected board member or one who has served for several years, you should come to the table with an open mind and a desire to build consensus. Being a board member means that you are part of a team of volunteers who have decided, for whatever reason, that they want to be a part of the decisionmaking process for their community.

You may offer a special talent or have specific expertise that can benefit the community. Serving on the board may help you gain experience that enhances

your career goals or you simply have the time and want to help in any way you can. Maybe you were recruited by a neighbor, committee members or even your management company. What now? The most important reason to serve on the board, in my opinion, is for the betterment of the community for you, your family and your neighbors. Key elements with which board members should familiarize themselves are the associationâ€™s governing documents that define the boardâ€™s authority. If you have a management company, they hopefully will provide you with a Board Member Handbook that will describe your role as a board member, your fiduciary responsibility, specific board responsibilities from decision-making to administrative tasks, and how to conduct board meetings. Other vital information will include professional conduct at meetings, parliamentary procedure, the operating budget, and appropriate insurance coverage, as well as how to avoid personal liability. Armed with the above information, itâ€™s important to come to all meetings

prepared. Read the management report in advance of the meetings. If you have questions, ask them prior to the meeting so that your manager (if your association is professionally managed) can have ample time to find the answers. This will help the meeting time be more effective. There is nothing more frustrating to those attending the meeting than for fellow board members to come unprepared and want to discuss issues at great length. The management report and agenda should provide ample information so that decisions can be made in an effective and timely manner. Both volunteers and staff alike can suffer burnout from meetings that extend beyond two hours. Remember that the board meeting is a business meeting of the association. You are there to conduct the business and should come prepared just as you would at any other business meeting. Board members should recognize they are part of a team and not take a confrontational position with fellow board members or their management company. No one should have to work or conduct business in a hostile environment. Rea-

lize at times you will not always agree, but take the position that even disagreement can bring compromise and consensus. Be concise with your opinion and thoughts and then be sure to listen to others. Always be respectful of your fellow board members and staff, as well as the homeowners. The tone of the board can set the tone of the community. So, if you want to have a healthy, vibrant and successful community, you should reflect that image as a board member. It is also important to understand the role of your management company, if applicable. They serve as your agent, not your employee. They act on behalf of the board and facilitate the decisions of the board. Remember that they are professionals and should be treated as such. It can be detrimental to a board and its community to consistently be at odds with their management company. They are there to offer their best expertise based on their experience, training and education to ensure that the board members do not compromise their fiduciary responsibility. A board should trust and rely on their management companyâ€™s vast experience and unlimited resources. If your board has lost trust in the management company, have a frank discussion with the companyâ€™s CEO regarding whatever problems exist. Perhaps a different manager can restore your trust, eliminating the need to start all over with a new company. If you recognize that, as a board member, you are part of a team of volunteers, committees, and management experts, you will be rewarded when you use those resources to make decisions that are based on sound business judgment. This, in turn, will inspire others to serve and build a team of future leaders who will want to emulate your leadership. By doing so. you will find serving on the board is not a burdensome chore, but a rewarding experience that you will value.

Sherry Harvey is a Community Manager at Community Management Corporation in Chantilly VA. This article has been previously published in Association Times, the monthly publication of Associa Corp.

November/December 2018 | ECHO Journal

FREE Attendance for ECHO HOA Members!

Santa Cruz Educational Seminar Save the Date! Saturday, Feb 23rd, 2019 8:00 AM to 12:30 PM /

Event Link: bit.ly/echoSantaCruz19 Promo code: JFKVLQ As an ECHO member, you may register for free when you apply the promotional code.

TOPICS

• Case Law & Legislation Update • How New Laws Affect Financial Management & Health of Your Association • Painting Bids Trends & Making a Decision

ADDRESS

Hotel Paradox 611 Ocean Street, Santa Cruz, CA 95060 PRICE

FREE for Pre-registered ECHO HOA Members $50 – Nonmembers and Walk-ins

Is Your Board Receiving ECHO Benefits? Members receive the ECHO Journal, free training, and digital downloads from the ECHO website.

Boards change frequently, so keep your HOAâ€™s information up to date! Send us: 1. Board Names 2. Mailing Addresses 3. Email Addresses Send everything to account@echo-ca.org or ask your property manager to do so on your behalf. Thanks for being an ECHO member! Questions? We can help: Email: account@echo-ca.org. Phone: 408-297-3246

September/October 2018 November/December 2018 || ECHO ECHO Journal Journal

25 31

ECHO honor roll

ECHO HONORS VOLUNTEERS Resource Panel Chairs

Seminar Speakers

Recent Contributing Authors

Accountant Panel Adam Haney, CPA 888-786-6000 x317 ahaney@cidcllc.us

Annual Seminar Lisa Black, Esq. Jeffrey Cereghino, Esq. Rolf Crocker, CCAM Lisa Esposito David Feingold, Esq. John Garvic, Esq. John Gill, Esq. Sandra Gottlieb, Esq. Adam Haney, CPA Matt Haulk, Esq. Susan Hoffman, PCAM Michael Kennedy, Esq. Cindy Koester, PCAM David Levy, CPA Julie Mouser, Esq. Rob Rosenberg Amy Tinetti, Esq. Wanden Treanor, Esq. Wendy Weber Steve Weil, Esq.

September/October 2017 David C. Swedelson, Esq. Bob Gourley Berding & Weil LLP Cagwin & Dorward Julie Adamen

Central Coast Panel John Allanson 831-685-0101 East Bay Panel Ann Marquis-Fisher amarquisfisher@yahoo.com Legal Panel Mark Wleklinski, Esq. 925-280-1191 markwlek@aol.com Maintenance Panel Cassidy Rajkovich cassidy@brookcm.com North Bay Panel Stephanie Charles scharles@charlesps.com Diane Kay kay_star@comcast.net Denise Wolford (415) 458-3537 denise@charlesps.com South Bay Panel David Zepponi 408-297-3246 x4 Wine Country Panel Pam Marsh 415-686-9342 Pamela.Marsh@benjaminmoore.com Sarah Dunia sarah.dunia@cagwin.com Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry Bowles Oliver Burford Joelyn Carr-Fingerle, CPA Chet Fitzell, CCAM John Garvic, Esq., Chair Roy Helsing Geri Kennedy, CCAM Wanden Treanor, Esq.

32 echo-ca.org

East Bay Charlotte Allen Susana Cendejas, Esq. Andrea O’Toole, Esq. Monterey Sandra Bonato, Esq. Melissa Ward, Esq. Wendy Weber San Rafael David Feingold, Esq. Wanden Treanor, Esq. Glenn Youngling, Esq. Santa Cruz Sharon Pratt, Esq. Diane Rossi, PCAM, CCAM Brian Seifert Jennifer Stearns, CCAM Rosalia Tapia, Esq. Wine Country Carra Clampitt, CCAM Susan Hoffman, PCAM Amy Tinetti, Esq.

November/December 2017 Debra Warren Joelyn Carr-Fingerle Wendy Weber Sandra L. Gottlieb, Esq., CCAL January/February 2018 Robert DeNichilo, Esq. John P. Gill, Esq. Oliver Diaz Rolf Crocker March/April 2018 Jennifer M. Jacobsen, Esq. Paul W. Windust, Esq. Andrea L. O’Toole, Esq. Derek Eckert John P. Gill, Esq. May/June 2018 Susan L. Hoffman Thomas Connelly Kevin Boland Rolf Crocker, AMS, CCAM July/August 2018 Carra Clampitt, CCAM Pat Wendleton, Esq. and Sharon Glenn Pratt, Esq. Andrea L. O’Toole, Esq. and Burt Dean Jeffrey A. Barnett, Esq. John P. Gill, Esq. September/October 2018 Katrina Solomatina, Esq. Charlotte Allen Pete Pearson Robert DeNichilo, Esq. Scott Swinton November/December 2018 Tyler Berding, Esq. David Levy, CPA Sandra Long, CCAM, CMCA, AMS, PCAM Jan A. Kopczynski, Esq. Sherry Harvey, PCAM

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

LOCATION

INQUIRIES

TOPIC

Thursday, January 3, 2019 11:45 a.m.

North Bay Resource Panel Edgewater Condominiums, Novato

Denise Wolford, CCAM 415-458-3537

TBD

Tuesday, January 8, 2019 11:45 a.m.

Central Coast Resource Panel The Back Nine Grill, 555 Highway 17 Santa Cruz, CA

John Allanson 831-685-0101

TBD

Monday, January 14, 2019 11:45 a.m.

Accountant Resource Panel Scott’s Seafood Grill & Bar 2 Broadway, Oakland

Adam Haney, CPA ahaney@cidcllc.us

TBD

Wednesday, February 6, 2019 11:45 a.m.

Wine Country Resource Panel Rohnert Park Community Center Meeting Room #2 5401 Snyder Ln., Rohnert Park

Pam Marsh 415-686-9342

TBD

Friday, February 8, 2019 11:45 a.m.

East Bay Resource Panel Massimo Restaurant 1604 Locust St., Walnut Creek

Ann Marquis-Fisher amarquisfisher@yahoo.com

Annual Legal Update

Have questions? Email events@echo-ca.org

REGULARLY SCHEDULED RESOURCE PANEL MEETINGS PANEL

MEETING

LOCATION

Maintenance

First Wednesday, Even Months

ECHO Office, San Jose (Note new address)

North Bay

First Thursday, Odd Months

TBD

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

The Back Nine Grill, Santa Cruz

South Bay

Second Wednesday, Even Months

TBD

Wine Country

Third Thursday, Odd Months

Rohnert Park Community Center

Legal

Quarterly

Varies

November/December 2018 | ECHO Journal

BOOKSTORE The ECHO Bookstore is your source for great information on the duties of HOA Board Members. Order online or fill out the form on the facing page. Robert’s Rules of Order Member Price: $7.50 Non-Member Price: $12.50 A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents.

2019

2019 Condominium Greenbook Member Price: Non-Member Price:

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.

Board Member Handbook Member Price: Non-Member Price:

Non-Member Price: $17.95 Construction defect litigation can be confusing, expensive and fraught with legal pitfalls. This eye-opening guide, written by accomplished construction-defect attorneys, is an essential tool for board members who need to understand the legal process.

34 echo-ca.org

$15.00 $25.00

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

Construction Defect Claims Member Price: Non-Member Price:

$19.95 $25.00

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

Home and Condo Defects Member Price: $12.95

$17.00 $25.00

2018

Condominium Bluebook 2018 Edition Member Price: $17.00 Non-Member Price: $25.00 This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequentlyasked questions about associations, along with succinct answers.

2018 Digital Downloads Free for ECHO Members

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

Publications to answer your questions about common interest developments Order Online at www.echo-ca.org

Bookstore Order Form

EDUCATIONAL COMMUNITY FOR HOMEOWNERS 1960 THE ALAMEDA, STE 195, SAN JOSE, CA 95126 PHONE: 408-297-3246, FAX: 408-297-3517

TITLE

QUANTITY AMOUNT

2018 Statute Book Board Member Handbook Owner Information Form SUBTOTAL

Clubhouse Usage Policy

CALIFORNIA SALES TAX (Add 8.75%)

and Reservation Form HOA Investment Policy

TOTAL AMOUNT

Yes! Place my order for the items above. Check

Board Code of Ethics

Visa

MasterCard

Credit Card Number Exp. Date

Consent to Electronic

Name (please print)

Transmission

Association (or company)

Signature

Email Address City

State

Zip

Daytime Telephone

November/December 2018 | ECHO Journal

new professional members

Welcome to our

NEW PROFESSIONAL MEMBERS

Collins Realty Collins Realty is a medium sized brokerage located in Vallejo, CA and services the communities of Napa, Benicia, Fairfield, Vacaville, American Canyon and Suisun City. This powerhouse team of 15, with 4 agents specifically dedicated to HOA Management, is headed up by Broker Lori Collins! Selling real estate since 2001, Lori has been very active in the local Association of Realtors serving multiple times on the Board of Directors and as President in 2008 as well as awarded REALTOR of the Year and given the President’s Award in 2009. Whether a buyer or seller, single home, multi-family or HOA community, Lori’s team is here to partner with you to ensure success in all of your real estate needs. Contact: Lori Collins • Tel: (707) 564-6500 ext: 101 Email: Lori@loricollins.com • Web: www.collinsrealty.realtor

CommuniTAS Management HOA Property Management

CommuniTAS Management CommuniTAS Management is an innovative community management company that provides full service management to medium and large sized residential communities, and customized service programs for smaller communities. Founded in 2012, CommuniTAS concentrates on providing stellar customer service to both homeowners and Board members. Our principal strength is cutting operating costs while maintaining or increasing services to the community to ensure that the budget is controlled and monthly assessments remain reasonable. We pride ourselves in helping our communities maintain reserves at 70 percent or fully funded levels.

Common Networks At Common Networks, we believe that everyone should have access to faster, more affordable, and hassle-free internet service. Built from the ground up, CA based Common Networks currently services Alameda and Santa Clara and prides itself on its transparency with uncomplicated fees and service. The next best thing in residential wireless service for one flat fee with installation and equipment for free and no hidden fees or contract obligations. Common Networks services residential, planned communities and small businesses. They are excited to be able to reach out to the local HOA Board Members in their current territory and begin forging those business relationships. Contact: Arun Madan • Tel: (650) 284-9242 Email: arun@common.net • Web: www.common.net

Velocity Construction Velocity Construction Services, Inc. offers construction services to homeowners, apartment owners, homeowners associations, property managers, and businesses throughout the San Francisco Bay Area. With 30+ years of construction experience leading the way coupled with an A & B contractor’s license, Velocity Construction Services can quickly define the direction of any given project. Specializing in multi-family residences as well as commercial buildings, services performed by Velocity include dry rot repairs, seismic upgrading, remodeling, building envelope repairs, comprehensive building inspection reports, maintenance, consulting, and many other construction services. Contact: Michael Nielsen • Tel: (510) 657-6432 Email: Michael@velocityCSinc.com Web: www.velocitycsinc.com

For commercial operations, we have a commercial condo division that has a customized “red carpet” service program available for our business community owners. Residential HOAs: Christine Cubillas • Tel: (408) 261-7155 Email: Chris@communitas4hoas.com Commercial OAs: Grace Hanamoto • Tel: (408) 261-7155 Email: Ghm@communitas4hoas.com 36 echo-ca.org

Find all of ECHO’s Professional Members Online. Visit our Professionals Directory at www.echo-ca.org

advertiser index

about ECHO

WHAT IS ECHO? Ace Property Management..................29 www.acepm.net Applied Reserve Analysis....................21 www.appliedreserveanalysis.com Benjamin Moore Paint & Company...........................................24 www.benjaminmoore.com

Cornerstone Community Management.........................................12 www.cornerstonemgt.biz IQV Construction & Roofing................29 www.iqvinc.com Levy, Erlanger & Company..................15 www.hoa-cpa.com

Berding Weil..........................Back Cover www.berding-weil.com

Mutual of Omaha Bank.......................19 www.mutualofomahabank.com

Cascade Building, Inc. .........................25 www.cascadebuildinginc.com

Rebello’s Towing....... Inside Front Cover www.rebellos.net

Common Interest .................................11 www.commoninterest.com

White and MacDonald.........................29 http://wm-llp.com

Effective January 1, 2019, ECHO will increase HOA Board membership dues slightly. Payments received before this date will be honored at the current dues rate. Vendor and management firm dues were unchanged. Individual memberships will go up to $95; however, if the individual is recommended by an existing member vendor, management firm or HOA Board, the membership assessment drops to $50, a nearly 50% savings! Should you have any questions or concerns, please reach out to ECHO. Thank you for your continued patronage and support of ECHO!

ANNOUNCEMENT: Rescheduled 2018 Annual Meeting. The ECHO 2018 Annual Meeting has been rescheduled from November 1, 2018 to January 16, 2019 at 9:30 AM. The Annual Meeting will be held in the new ECHO offices at 1671 The Alameda, #205, San Jose, CA. Proxies already submitted will be used in the election of Board of Director members. On the agenda will be the election of Board of Director members and general business as necessary.

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 bi-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 bi-monthly magazine • Members-only online education • Updates to the Association Statute Book • Frequent educational seminars • Special prices for CID publications

ECHO Membership Dues Association Membership HOA 0 to 25 units...........................$150 HOA 26 to 50 units.........................$195 HOA 51 to 100 units.......................$295 HOA 101 to 150 units.....................$395 HOA 151 to 200 units.....................$495 HOA 200+ units..............................$595 Professional Membership.................$500 Association Management Membership.......................................$500 Individual Membership.......................$95 Journal Subscription............................$15

How Do You Join ECHO? Over 2,000 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.

New Office

For more information about membership and ECHO, call us at 408-297-3246 or visit the ECHO website.

1671 The Alameda, Suite 205 San Jose, CA 95126 August2014 2013 || ECHO ECHO Journal Journal February

legislation at a glimpse

Read the 2018 Legislative Session Wrap-Up It’s over! The 2018 legislative year ended on September 30th, the final day for Governor Brown to sign or veto bills. The bills below represent the ECHO Legislative Committee’s review of the 2500 bills introduced in Sacramento this year. Watch an upcoming issue of the ECHO Journal for our analysis of those bills that become effective January 1, 2019, and how they may affect your community. For the most up-to-date information, visit the HOA Advocacy section at the ECHO website:

Current Legislation Bill Information

Summary

AB 1760

Emergency Vehicle Parking

Watch Status: Died

Makes a prohibition or restriction in the governing documents of a common interest development relating to parking, including, but not limited to, onstreet parking, void and unenforceable with respect to an emergency vehicle owned or under the control of a member.

AB 1917

Extension of Declaration

Watch

Allows for extensions to the terms of the declaration, as specified. Prohibits extension of the terms of the declaration from exceeding the initial term of the declaration or 25 years, whichever is less.

Author: Frazier

Author: Steinorth Status: Died

AB 1943

Manufactured Housing Title Ownership

Watch

Specifies that a registered owner of a manufactured home in a mobilehome park that is converted or proposed to be converted to a resident-owned subdivision, stock cooperative, or condominium project, may submit written evidence of that owner’s resident ownership in order to comply with this requirement.

Author: Waldron Status: Signed by Governor

AB 2141

Annual Statement Deadlines

Watch

Changes the time requirements for the distribution of the annual policy statement to members of a common interest development to be within 31 to 91 days before the end of the fiscal year.

Author: Cunningham Status: Died

AB 2912

Fidelity Coverage and Electronic Transfers

Watch

Requires an Association to maintain fidelity bond coverage, as specified. Prohibits transfers greater than a specified amount or a certain percentage of an Association's total combined reserve and operating account deposits, whichever is lower, without prior written approval from the Board. Requires the Board to review financial documents and statements on a monthly basis.

Author: Irwin Status: Signed by Governor

AB 3041

Prohibition of Transfer Fees

Watch

Prohibits the creation of a transfer fee, other than excepted transfer fee covenants, as defined, with respect to real property as a fee payment requirement imposed in any covenant, restriction, or condition contained in any deed, contract, security instrument, or other document affecting the transfer or sale of real property. Excepts certain transfer fee covenants from a notice requirement.

Author: Cunningham Status: Signed by Governor

AB 3156

Electric Vehicle Charging Stations

Watch

Clarifies that equipment that meets the definition of "electric vehicle service equipment" is electric vehicle service equipment whether or not it is necessary to tether the equipment to a vehicle to permit the transfer of electric energy.

Author: Mullin Status: Died

38 echo-ca.org

legislation at a glimpse

Current Legislation (continued) Bill Information

Summary

SB 721

Deck & Balcony Inspection Requirement

Watch Status: Signed by Governor

This bill would have required regular inspection and repairs inspection of building assemblies and associated waterproofing elements, including decks and balconies, for buildings with more than a certain number of multifamily dwelling units by a licensed architect, civil or structural engineer, or building inspector or official at certain intervals. Amendments have removed common interest developments from the scope of this bill.

SB 1016

Electric Vehicle-Dedicated Meters

Watch

Requires, with respect to an electric vehicle charging station placed in a common area, the homeowner to agree to pay costs associated with installation. Requires the owner of a charging station, wherever located within a subdivision, to maintain a liability coverage policy, and provide the association with a certificate of insurance, as specified.

Author: Hill

Author: Allen Status: Signed by Governor

SB 1128

Consent to Email, Election by Acclamation

Watch Status: Vetoed by Governor

Authorizes the recipient of a document sent by a common interest development association to consent to or revoke consent to electronic delivery by email. Requires at least 28 days general notice by an association before making a rule change. Requires the director nominees of an association to be considered elected by acclamation in certain circumstances. Makes other changes to elections provisions.

SB 1173

Time Share Exemption from Notifications

Watch

Exempts from notice requirements under the Davis-Stirling Common Interest Development Act, interests regulated in the Vacation Ownership and Time-Share Act of 2004.

Author: Roth

Author: Vidak Status: Signed by Governor

SB 1265

Election Qualifications and Procedures

Oppose Unless Amended

Regulates how association governing documents may specify the qualifications for candidates for a common interest development board and any other elected position, and the qualifications for voting. Requires the association to disqualify candidates for specified reasons. Deletes exception that allows associations to use a paid third party as inspector of elections. Adds other requirements to election rules.

Author: Wieckowski Status: Vetoed by Governor

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

November/December 2018 | ECHO Journal