Journal_09_06

June 2009

A Journal for California Community Association Leaders

echo-ca.org

Access to Records Absolute Right for Directors?

ALSO INSIDE THIS ISSUE:

• Financial Reports • Self Help • Disappearing Developer

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Contents Financial Reports—page 14 The ECHO Journal is published monthly by the Executive Council of 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 person should be sought.

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When Absolute Is Not Is a director’s right of access to all corporate records ironclad? Although policy favoring broad access to corporate records is strong, both statutory law and appellate decisions show that a director’s “absolute” right to inspect records is not always so absolute. Get more details in this article.

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 2009 Executive Council of Homeowners, Inc. 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.

Executive Council of Homeowners, Inc.

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Regular accounting reports provide managers and boards with the information needed to make decisions. They also supply legally mandated information to homeowners and government agencies. For these reasons, the State of California has legislated their regular review by boards of directors.

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Financial Reports

Self Help

Office Hours: Monday–Friday 9:00 a.m. to 5:00 p.m.

Board of Directors and Officers

Your board wants to go on a property and correct a CC&R violation themselves. Can you? Even if you have legal authorization, should you? Read this article to learn about the risks and rewards of going onto someone else’s property to resolve a violation.

President David Hughes

The Disappearing Developer

Secretary Dorothy Kopczynski

In today’s economy, many builders are leaving partially-built homes, causing hardships for associations. In the past, builders often made up shortfalls to keep the community well maintained but now cannot support the association.

Departments 29 Directory Updates 32 News from ECHO 33 Legislation at a Glimpse

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1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org

34 ECHO Bookstore 36 Calendar of Events 38 ECHO Volunteers 38 About ECHO

Vice President Karl Lofthouse Treasurer David Levy

Directors Paul Atkins John Garvic Diane Rossi Richard Tippett Steven Weil

Jerry L. Bowles Robert Rosenberg Kurtis Shenefiel Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc. Design and Production George O’Hanlon

41 ECHO Marketplace 41 Advertiser Index

On the Cover Access to Records—page 6 4

June 2009 | ECHO Journal

ECHO Mission Statement The mission of ECHO is to advance the concept, interests and needs of homeowner associations through education and related services to board members, homeowner members, government officials and the professionals in the industry.

Race to Win ECHO Annual Seminar June 13, 2009 See the Seminar Program and Registration Information on pages 42 and 43

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June 2009 | ECHO Journal

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CORPORATIONS CODE SECTION 8334 states: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director.”

By James O. Devereaux, Esq.

When Absolute Is Not Does an Association Director have an “Absolute” Right to Inspect Association Records?

Is a corporate director’s right of access to all of a corporation’s records and documents really so ironclad? Although the law’s policy favoring broad access to corporate records by a director is strong, both statutory law and appellate decisions show that a director’s “absolute” right to inspect and copy records is not always so absolute.

The Corporations Code includes provisions that authorize a court to impose conditions in appropriate circumstances when a director seeks judicial enforcement of his or her absolute right of record access. Also, as discussed in this article,

California appellate courts have upheld balancing of a director’s rights to inspect corporate records against important interests of the corporation and its members or shareholders. These interests include protecting the members’ privacy rights in the voting decisions and the corporation’s right to preserve its attorney-client privilege.

The Corporations Code The General Corporation Law that governs “for profit” corporations includes a provision

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(Corporations Code §1602) that is substantially the same as Section 8334 of the Nonprofit Mutual Benefit Corporation Law. In related provisions, both the Nonprofit Corporation Law (§8336) and the General Corporation Law (§1603) provide that when a director’s lawful demand for inspection of corporate records is denied, the superior court may enforce the director’s right of inspection with just and proper conditions.

The fact that the Code provides for superior court authority to enforce a director’s inspection rights “with just and proper conditions” gives a hint that in using the word “absolute” the Legislature didn’t mean absolutely absolute.

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June 2009 | ECHO Journal

Recent Appellate Decisions California courts have held that a director’s statutory right to have access to all corporate documents represents a legislative judgment that directors are better able to discharge their fiduciary duties to the corporation and its shareholders or members if they have free access to information concerning the corporation. However, in the three appellate opinions discussed below, the courts have held that, in certain particular situations, a director’s “absolute” right of access to corporate records must be weighed against other important legal considerations.

In a 1995 opinion, Chantiles v. Lake Forest II Master Homeowners Association, the California Court of Appeal held that, notwithstanding a director’s “absolute” right of access to all association records, that right must yield to the constitutional privacy rights of association members in their voting decisions.

In Chantiles, a director, who believed that his slate of candidates for election to the association’s board of directors had been “shortchanged,” sought to inspect and copy all of the ballots cast in the association’s recent director election. When the association refused to allow him to have access to those ballots, citing its concern for preserving the privacy rights of individual voting members, director Chantiles sued to compel the association to honor his absolute right to inspect and copy the ballots. The trial court ruled against his unrestricted right of access to the ballots. Instead, the court established a procedure whereby Chantiles’ attorney could inspect the ballots on his behalf. The court’s procedure included guarantees of each member’s anonymity so that it would not be possible to determine how an individual member had voted. Chantiles rejected this procedure and appealed the trial court’s

decision, claiming that the trial court could not lawfully place any limits on his “absolute” right of record inspection.

The appellate court upheld the trial court, holding that the trial court had correctly concluded that homeowners association voting constituted a class of information in which members have a reasonable expectation of privacy. The court explicitly rejected Chantiles’ claim that, because Corporations Code section 8334 expressly gives him an “absolute” right to inspect “all” association records, “this right need not yield to any other right, not even a constitutional right.”

The court concluded to the contrary: “We hold that homeowners association members have a constitutional privacy right in their voting decisions... A homeowners association director’s statutory right to inspect the records of the association must be balanced against this privacy right.”

Three months after the Chantiles opinion was issued, another district of the Court of Appeal came to a similar conclusion as to a director of a “for profit” corporation. In Havilcek v. Coast-To-Coast Analytical Services, Inc. two of the five directors of a corporation who opposed a corporate merger appealed a trial court order denying their request for an order permitting them to inspect the books and records of the corporation. On appeal they contended that they had an absolute right to inspect all the corporation’s records and that the trial court erred by refusing them the right to inspect the records, at least subject to just and proper conditions as provided in Corporations Code Section 1603.

The Court of Appeal agreed with them and reversed the trial court’s decision. The appellate court first ruled that the trial court had erred in finding that the law of Delaware rather than that of California applied to the dispute because the California statutes governing a director’s right to inspect and copy corporate records constituted a strong California public policy favoring broad inspection rights for corporate directors. Even though the trial court should have applied California law, it “is not obligated to grant appellants [the requesting directors] unfettered access to every document ever created by [the corporation].” Instead, the court said, the trial court may impose “just and proper conditions” upon the appellant directors’ otherwise absolute inspection rights.

Sections 1602 and 1603 of the Corporations Code must be read together. Although a director’s “absolute right” to inspect corpoECHO Journal | June 2009

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A court may limit a director’s inspection rights when the director’s loyalties are divided and documents he might obtain could be used to advance his personal interest. rate documents is the general rule in California, according to the Court of Appeal “absolute” does not always mean “absolute.”

As the court explained, “The literal meaning of the words of a statute may be disregarded to avoid absurd result.”

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In Havilcek, the court said that where a corporation determines that an unfettered inspection will result in harm to the corporation, it may decline a director’s request for inspection. And when a court is asked to intervene where a corporation has refused to permit a record inspection by a director, the court may exercise its broad discretion to fashion a protective order imposing just and proper conditions on a director’s record inspection.

Most recently, in January of this year, another panel of Justices of the Court of Appeal reaffirmed the idea that a director’s “absolute” right of access to corporate records is subject to certain limitations. As the Havilcek case discussed above, Tritek Telecom v. Superior Court involved a “for profit” corporation formed under the California General Corporation Law rather than a nonprofit corporation. Tritek Telecom, Inc. originally had three directors, but one resigned leaving the corporation with only two.

Conflicts arose between the two directors resulting in a lawsuit by one of the directors against the corporation and the other director. Ultimately, the director who filed the lawsuit filed a petition under Corporations Code §1603 to enforce his absolute right to inspect the corporation’s books and records.

Over the corporation’s objection that the records to be inspected constituted privileged and confidential attorney-client communications, the trial court granted the

director’s petition. The corporation sought appellate review of that ruling.

The Court of Appeal reversed the trial court’s decision granting the director access to the requested records. The court stated, “...a corporate director does not have the right to access documents that are covered by the attorney-client privilege and were generated in defense of a suit for damages that the director filed against the corporation.”

The court noted that the petitioning director had filed his action to enforce his director’s inspection rights after he filed his shareholder action against the corporation.

Thus, the court said, he was not a disinterested director and the presumption of good faith usually given to a director did not apply to him. Although he is still a director of the corporation, the court stated, “...his filing of the shareholder action makes him [the corporation’s] adversary.

[He] cannot take off his ‘shareholder’s hat’ and swap it for his ‘director’s hat’ and claim an absolute right to access all corporate documents.”

The court held that a court may properly limit a director’s inspection rights when the director’s loyalties are divided and documents he might obtain in his capacity as a director could be used to advance his personal interest in obtaining damages against the corporation in his lawsuit.

These three cases clearly show that a director’s “absolute” right to inspect and copy all association records is not absolute in an ironclad sense. Even though California has a strong public policy favoring corporate directors’ broad inspection rights, that policy is subject to reasonable limits in proper cases.

Limits may include a limited, rather than absolute, access to certain records with restrictions designed to protect the corporation’s or its members’ or shareholders’ rights, as in Chantiles and Havilcek, or an outright denial of access, when necessary, such as in Tritek Telecom.

Conclusion There may be times, though infrequent, when an association is faced with a demand by one of the members of its board of directors for access to certain records of the association where the demand raises a legitimate concern about possible adverse consequences to the association or its members if the access demand is granted. In these circumstances, the board of directors, not including the interested director, must decide whether to permit the requested

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June 2009 | ECHO Journal

access. In making that decision, the board must, as in all its decisions, adhere to the strictures of the prudent business judgment rule which is codified in Corporations Code section 7231. Under that rule, the board members are required to make decisions that they believe are in the best interests of the association and its members and with reasonable care.

California’s strong public policy of allowing a corporate director to have broad access to corporate records should not be taken lightly. But when an association is faced with a demand for access of certain association records, even by a current director of the association, and there is a legitimate concern whether granting the requested access might be in conflict with the interests of the association or its members, the board of directors must make a decision as to the individual director’s demand for record access in good faith, in a manner the other directors believe is in the best interests of the association and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

The duty of inquiry, which is a part of the business judgment rule, may mean that, before deciding to grant or deny a director’s request for access to certain association records, the board should seek the advice of legal counsel. When a director performs his or her duties as a director in accordance with the requirements of the prudent business judgment rule, including its duty of inquiry, that director is protected from personal liability for the good faith decisions he or she makes on behalf of the association.

James Devereaux is a partner at Berding & Weil.

He has been a frequent contributor to the ECHO Journal and a regular speaker at ECHO seminars.

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ECHO Journal | June 2009

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T

THE OLDEST SURVIVING FORMS OF THE Greek language are crude scratches on clay tablets found buried in the ruins of ancient Greek palaces destroyed 3,200 years ago. Known as Linear B, this primitive script does not recount Homeric deeds, record mythological fables or preserve primitive philosophy. Translated, these ancient tablets tell us “Kokalos repaid the following quantity of olive oil to Eumedes ...648 liters.”

By Steven O’Brien

Financial Reports The Need, the Problem and the Solution Hardly soaring prose, this passage would fit perfectly in your association’s financial reports beside the journal entry “Arthur Koenig/Reimbursement for carport damage... $543.92.” What did these illiterate barbarian kings over three thousand years before the California Civil Code have in common with your board of directors? They shared a common need to protect their assets, and enumerating them in writing was the most effective way to account for them. Archaeologists believe that these accounts were kept by a small and specially trained class of scribes who alone understood the meaning of the strange ideogrammatic script.

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Today, we record assets as invisible electromagnetic impulses inside remote computers instead of scratches in clay tablets. This information is then processed and printed out together with your liabilities, income and expenses in your association’s financial reports. Each month that pile of papers with its neatly ordered columns of numbers faithfully reports what your association is worth, how much it owes and is owed, and how well you on the board are managing its financial affairs. Yet, most directors find these documents as difficult to read as ancient Greek tablets.

Whether for a business or a nonprofit homeowners association, regular accounting reports provide managers and

boards of directors with the information needed to make prudent decisions and control daily activities. Furthermore, they supply legally mandated information to homeowners and government agencies. Recognizing the importance of financial reports, the State of California has legislated their review by boards of directors—in essence, forcing boards to go through the motions of fulfilling their fiduciary responsibilities. Specifically, Civil Code §1365.5 states that the board of directors must: • Review, at least quarterly, current reconciled bank statements of the association’s operating and reserve accounts.

• Review, at least quarterly, income and expense statements for the association’s operating and reserve accounts.

The need to require this stems from the widespread aversion board members have to financial reports, which they regard as confusing, cryptic and intended only for highly trained specialists called CPAs. This attitude, coupled with the time constraints most volunteer directors experience, causes them to feel exempt from both understanding financial documents and the responsibility that accompanies them. This is a grave error. While the board may delegate various activities and functions to others, their ultimate legal duty, including the fiduciary responsibility to preserve and protect the assets of the association, is inalienable.

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This development is not only unfortunate but also unnecessary. For most laypersons, financial statements can be easy to read and comprehend once their purpose and format is understood. With a brief orientation, the normal human fear of financials can be easily overcome and reviewing the monthly financial reports can be easy, informative, and even (yes!) enjoyable.

Accounting Periods An association’s basic accounting period is its fiscal year. Comprised of 12 calendar months it may be divided into 12 monthly reporting periods or, less often, four threemonth “quarters.” Whatever the length of the reporting period, they define the “activity” or “transactions” (assessments charged, payments made, checks disbursed, etc.) that occur between their first and last day. Thus, the “March Financials” are the financial statements containing the accounting activity occurring during the March reporting period in addition to the cumulative year-to-date activity.

Often but not always, fiscal years start in January and end in December. Fiscal years may encompass any 12 consecutive months; for example, April to March or June to May. Reconciled Bank Statements State law currently requires that boards review a reconciliation of the association’s operating and reserve accounts quarterly. At the heart of comparing the association’s cash accounts with reconciled bank statements is the test to determine whether your bookkeeper and your banker agree on how much money the association has. Directors often skip this fundamental audit check in their review of the financial reports. Many directors are simply unaware of its importance or do not understand that this check is one of their principal responsibilities pertaining to the protection of the association’s assets.

Reconciliation involves comparing the ending balance in the current month’s bank statement with the cash reported in the corresponding account on the Balance Sheet.

Bank statement balances often must be adjusted to reflect outstanding checks (checks written in the accounting month that have not yet cleared the bank) or deposits in transit (not yet posted). Conversely, miscellaneous bank charges (e.g. check printing charges, returned check charges, etc.) and unrecorded bank deposits (e.g. interest earned) must be reflected in the association’s ledgers. Reconciling the bank and ledger bal-

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accounts payable (bills owed to service providers, utilities, etc.), bank loans, taxes, insurance premiums, etc. Also included here are prepaid assessments, considered a liability because they represent future services owed by the association to homeowners who have paid assessments in advance.

The Balance Sheet The association’s single most important financial report is the balance sheet. It is a concise summary of the association’s financial condition and all other reports are subsidiary to it. For this very reason, it is the report most often requested by mortgage companies and banks when considering loans for homebuyers and associations.

Paradoxically, it is the report sometimes not included in the board’s financial packets.

Representing the fundamental accounting equation, the balance sheet is divided into two parts: assets on the one hand and liabilities and equity on the other. Its name draws on the fact that total assets must balance to liabilities plus equity.

assessments. On the balance sheet, this cash is represented by the totals in the association’s bank accounts. Cash accounts should be separated into those containing operating cash and those holding cash for replacement reserves. This is because, increasingly, state legislation is restricting the use of replacement reserve cash for nonreserve purposes and requiring separate controls for these funds. Mingling reserve and operating cash in common accounts invites charges of misuse of funds. It is best to represent each separate bank account as a separate balance sheet account, thereby making the task of comparing the association’s reconciled bank statements with the balance sheet easier.

In addition to cash, monies or services owed to the association are also considered assets. Therefore, accounts receivable (those assessments, fees, late charges, fines, etc.) that have been billed by the association but not paid by homeowners are considered assets together prepaid taxes and prepaid insurance premiums.

Assets An association’s assets are comprised principally of cash drawn from homeowner

Liabilities Liabilities include all monies or services owed by the association. Included here are

The Delinquency Report The list of delinquent homeowners often receives considerable attention from boards

ances with the relevant adjustments is performed on a reconciliation sheet, often attached to a copy of the actual bank statement. The reconciliation sheet will show the beginning balances, adjustments, and matching ending balances.

Equity/Funds Those familiar with accounting know that the value of assets remaining after all liabilities have been accounted for represents “equity,” a term often equated with “ownership.” Homeowner associations use what is known as fund accounting, where the value of the assets after liabilities have been deducted represents the fund balances. A “fund” is comprised of the prior year’s ending fund balance plus the net of the current year-todate income and expenses. To facilitate their management and conform to Civil Code requirements, operating and replacement reserve fund balances should be reported separately.

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of directors. This report is essential to effectively manage your association’s collection policy, a topic that requires a separate article.

Strictly as a financial report, the Delinquency Report should provide the following information. First, it should contain a list of all delinquent homeowners and their outstanding assessments on an aged basis, that is, delinquent amounts shown in categories of “30day,” “60-day,” “90+ days,” etc. The sum of all delinquent amounts should match the Accounts Receivable total on the Balance Sheet.

Incorporated in or together with the delinquency report should be all the prepaid homeowners and their prepaid amounts.

The sum of the prepaid assessments should balance with the Prepaid Assessments account on the Balance Sheet.

Income and Expense to Budget This report allows directors to see how much income the association has generated and how much expense it has incurred and to compare these amounts with the corresponding amounts budgeted by the association. With this report, directors can manage their association’s financial operations. So critical is it to the board’s ability to control the association’s profit and loss that the California Civil Code requires that boards review it at least every three months.

As its title suggests, the report lists the association’s income and expense on a monthly as well as a cumulative, year-to-date basis. By convention, income accounts are reported above expense accounts. All income accounts should be listed: assessments, interest, special assessment, etc. Being more numerous, expense information is usually presented by major category, such as “Administration,” “Utilities,” “Landscape,” etc. Corresponding budgeted amounts are typically provided in adjacent columns.

Included in the report, often as a summary at the bottom, is a statement of the association’s year-to-date profit or loss. The resulting year-to-date profit or loss figures should balance to the respective Fund Balance on the Balance Sheet. It is important to understand that the statement of profit or loss refers only to the current year’s income and expense and does not reflect balances carried over from the prior year.

Since expenses are compared directly with the budget, directors can readily see whether year-to-date expenses are within budget and manage expenses accordingly. It is expenses that must be managed; the budget itself can18

June 2009 | ECHO Journal

not be changed to accommodate expense overruns. Remember that your current budget was formally approved in the prior fiscal year, is tied to the amount of monthly assessments and replacement reserve plan, and has been published to all homeowners as well as prospective buyers, loan officers, etc.

It is not be to tampered with!

(It is important to note at this point that the Civil Code requires that your budget be prepared on an accrual basis. Under an accrual basis of accounting, cash is posted when it is due whereas under a cash basis, it is posted when it is received. Income and expense reported on a cash basis cannot be compared with a budget prepared on an accrual basis. An accrual basis of accounting is assumed throughout this discussion.)

The Cumulative General Ledger Listing A cumulative listing of all general ledger entries from the beginning of the fiscal year, this report is the association’s ultimate accounting reference document. In it, account by account, are shown all the entries that comprise each account’s balance in the association’s financial reports. Virtually any inquiry may be answered with it by locating the account in question and reviewing all entries from the year’s “opening balance” amount to the current total. It is also a rather bulky report containing a large quantity of detail. For this reason, it is seldom distributed to all board members. However, it is relied on heavily by treasurers, managers and accountants.

Conclusion With the exception of marauding pirates, many of the financial uncertainties that bedeviled the ancient barbarian princes remain a threat to the modern homeowner association. However, in the intervening millennia, enormous improvements have been made in financial recording and reporting.

Understanding those reports is the key that gives the director access to powerful management tools. By overcoming the dread of financial reports and using them to their fullest advantage, directors can comply with legal requirements, meet their fiduciary responsibilities, manage their association effectively and avoid the fate of those ancient Greek kings.

Still the Nation’s Leading Provider of Reserve Studies “I’ve been in this industry for 25+ years and I choose AR year after year because they’re professional, enjoyable to work with, and the reports are accurate and easily understandable for me and my boards.”

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By Debra J. Oppenheimer, Esq.

Self Help

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YOUR BOARD WANTS TO GO ONTO A property and correct a covenant violation themselves. Can you? Even if you have legal authorization, should you?

Read on for the risks and rewards of using authorization to go onto someone else’s property to resolve a covenant violation.

First and foremost, you must review the governing documents for your association, specifically, the recorded Declaration of Covenants.

You are seeking to go onto someone else’s property; thus for your authority to stand on the firmest grounds, it must be spelled out in the recorded Declaration, which is the only protection the association has to a claim of trespass. If you locate authority to go onto someone else’s property, make sure it is the authority to take the action that you want to take. Don’t make the mistake of thinking if your Declaration authorizes you to go onto someone’s property to maintain it that it also gives you authority to install; those are different items and each requires specific authorization. Also, make sure that you know if you do go on someone else’s property and do work that you can recover the costs of that work. While this sounds silly, if there is nothing in your Declaration that states you can recover

the costs, you may have authorization to do work but no authorization to recover the costs of your work.

If you find the authorization to go onto someone’s property to complete the task of correcting a covenant violation, be certain that you follow every obligation prior to entering the property.

Send the appropriate notice or provide the hearing if required. Make sure you jump through every hoop.

If you have authority and you have followed every procedure, should you actually go on their property? Selfhelp is always a risky tactic to employ if the property has occupants. Many people believe their home is their castle and will defend the property. However, if the property is vacant, the risks discussed below are reduced.

One risk to the association and its agents is that the occupant will call the police, claiming breach of the peace, trespassing or criminal mischief. Another concern is the readiness of prop-

ECHO Journal | June 2009

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erty owners to protect their property by force. Seriously, some people are very protective of their property rights and may not be against protecting their property by force, including deadly weapons. The police will generally not enforce the “self-help” provision of the Declaration unless there is an order issued by a court of law. Without a court order, the police will not allow you to “trespass” onto another’s property. You may be issued a citation or just let go with a warning. Either way, you will not be able to correct the violation.

If your concern is that landscaping needs to be installed, there are issues to consider with this as well. One is it is costly. Two, there is no guarantee that the homeowner will maintain the landscaping once it is installed.

Three, how will the association connect a sprinkler system, if that is what is needed or required, as that is inside a home, and there is no provision in any Declaration to go inside someone’s home.

We advise associations to seek a court order before entering onto another’s property to cure a violation. The association should

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June 2009 | ECHO Journal

SILVER PATRONS Bayridge Group, Inc. Draeger Frazee Paint R.E. Broocker Co., Inc. Statcomm, Inc. Law Offices of Wanden P. Treanor PATRONS Aragon Commercial Landscaping Community Association Banc

have its attorney send a letter demanding the violation be cured within a short period of time or further legal action may be taken.

Since the letter is being sent by legal counsel, often this will compel voluntary compliance by the homeowners, as well as provide documentation to the court that attempts were made to resolve the issues prior to litigation.

If there is no compliance in that time frame, the association can proceed with litigation against the homeowners to compel their compliance. The court order will provide that if the owner does not comply within a certain number of days, the association can enter onto the property, correct the violations and charge the owner the costs of the correction.

What is the difference between self-help and litigation to enforce the covenants?

Once the association has a court order to enter a property and cure the violation, the association will have the blessing of the court to enter the property and correct the violations. The entry will not be considered trespassing because it is court sanctioned. So, if the police are called, you can show a certified copy of the court order allowing you to enter the property and the police will uphold the order. Better yet, you should contact the police in advance, let them know what you’re going to do and when, and send them a copy of the court’s order. You should also give the owner notice of what you’ll be doing on the property and when. All this ensures that there is no breach of the peace and the association’s agents are protected from potential harm.

If your board is adamant about using selfhelp to correct a covenant violation, be sure to follow every requirement in your governing documents. Once that is done, give the owner ample notice that someone is going to be on their property and when that will occur; then complete the maintenance work as quickly as possible, and be sure that no damage is done to the owner’s property.

Finally, send a letter to the owner demanding payment for the costs of the work.

Debra Oppenheimer is an attorney at HindmanSanchez in Arvada, Colorado, a legal firm that serves as counsel to more than 1600 homeowner associations. This article is reprinted with permission from the May 2009 issue of the HindmanSanchez newsletter, Community Essentials.

By Allen F. Schafer and Hermann Novak

CMs Working With CMs ommunity Managers (CMs) often rely on Construction Managers (the other CMs) to assist with the management of construction projects. The community manager’s understanding and responsibilities for their community’s needs must often be supplemented with the technical knowledge of designers and construction professionals.

C

What is Construction Management?

Construction management is a project delivery system that augments traditional construction processes. Community managers can entrust a multidiscipline organization to optimize their budget, schedule and quality requirements for a specific project from inception through occupancy. A construction manager acts as the agent for the entire duration of the project with the community manager maintaining control of the support services and construction contracts.

A smoothly operating construction project will easily return an association’s investment in construction management fees. A current example is a phased project to reroof over 50 buildings. A professionally written Project Manual that prescribes specific bidding procedures, improved material quality and higher installation practices has resulted in signif-

icantly lower costs and longer warranty periods than other work recently completed without construction management services.

Construction management is also recommended to avoid a conflict of interest between design professionals and constructors, and to limit financial opportunities from the involved parties unfairly increasing costs. Ethical construction management relies on the checks and balances created by the performance of innovative managers and the cooperation between independent team members.

Qualities of Successful Construction Management A successful project is the result of several human qualities—communication skills, anticipation of results and a passion for professional service. The inherent complexity of today’s construction processes requires clear and timely communications. The right questions must be asked, the correct answers given, consensus obtained, and the positive momentum of the team must be maintained.

Knowledge and the ability to anticipate the consequences of every decision help deliver a project with limited risks.

Although various risks may be virtually unpredictable, analysis of the issues and application of experience will reduce the chances of problems in the project delivery process. The final quality is difficult to measure, but it is apparent from the cooperation between the involved parties—the community manager, the designer, the construction manager and the contractor. For the success of any project, all must act in concert and each must feel like a contributor.

The ability to manage a construction project effectively often relates directly to the quality and completeness of the construction documents. The directions, specifications and drawings are unique to each project, and the documents must suit the needs of each homeowner association. The local enforcement agency must have confidence in the documents to issue timely a Building Permit.

The contractor must clearly understand the Scope of the Work, recognize the specified procedures, and agree to the quality of materials and craftsmanship. The manager applies the documents to achieve the association’s goals.

Continued on page 41 ECHO Journal | June 2009

23

By Dean Williams, PCAM

The Disappearing Developer N TODAYâ&#x20AC;&#x2122;S ECONOMY, MANY BUILDERS ARE LEAVING UNBUILT OR

I

partially built homes, consequently causing hardships for associations.

Imagine a community of 450 lots with a community pool and clubhouse. Now with only 225 homes closed, these association members 24

June 2009 | ECHO Journal

are in for a shock. Association fees may double. In the past, builders would often make up shortfalls in the budget to keep the community well maintained, but most builders are now cash-strapped and cannot support the association. Does the

association board up the clubhouse and shut the pool?

Developers in trouble have been around for many years, but we have seen more and more in the past three years. Underfunded reserves, incomplete roads, building defects and unpaid bills could end up as

ECHO Journal | June 2009

25

Exclusively Dedicated to Common Interest Communities t 0nlinF cBTI NBOaHFNFnU systFNs t 0nlinF AC) BnE Dredit carE QaZNFnU systFNs t 0nlinF EPDVNFnt Eelivery t H0" MPBns GPr QrPQFSUy NBJntenancF BnE EeveMPQNFnt t LPckbPx cPVSier BnE EJHJtaM JNaging services t %edicateE DVsUPNFr service teBNs Lisa Ann Rea CCAM CMCA AMS Regional Account Executive Toll Free 866.800.4656, ext. 7500 t Mrea@cabanc.com

Community Association Banc A Division of Mutual of Omaha Bank

cabanc.com. National Corporate Member of Community Association Institute. Community Association Banc is a division of Mutual of Omaha Bank â&#x20AC;&#x201C; Member FDIC and Equal Housing Lender.

liens on the common property. Developers often create a Limited Liability Corporation for each community and may end up judgment-proof if they run out of funds.

If an association has an inkling that its developer may be in financial distress, involve the associationâ&#x20AC;&#x2122;s attorney as soon as possible. Many associations use the developerâ&#x20AC;&#x2122;s attorney, but that could be a conflict when the two parties have competing interests. If the developer who still maintains a majority of seats on the association board disappears or ignores communications, the homeowners should band together to elect their own board of directors, if authorized in the governing documents. If not, perhaps electing an advisory, or informal, board is a workable option to ensure that the owners are involved in the operations of, and decision-making for, their association.

Keep the local governmental entities informed regarding the financial status of the association. The owners will be looking to them for help. The municipality may hold bond money or guarantee bonds; ask that these not be allowed to lapse without the homeowner board signing off on them. The municipality may also provide insight on the developer.

If there is an outstanding loan on which the developer defaulted, the bank may foreclose on the remaining parcels of land. Work with the associationâ&#x20AC;&#x2122;s attorney to ensure that the bank pays all legally due unit or lot assessments, set up fees and amounts related to newly-closed units such as the working capital, reserve, long-term reserve or mailbox fees. The bank will normally assign a real estate company to work out any sales or leases. The association should alert the company to any open balances in ownersâ&#x20AC;&#x2122; accounts.

Many banks want to work with the associations so they may have a clear title when they make a sale.

If the developer files bankruptcy, a receiver or trustee will be appointed by the court.

Receivers/trustees have the same rights as the developer did, including board appointments and contract approval. Building relationships with these professionals will help ensure smooth operation and management of the association.

Association members will need to make some hard decisions. If there is a major shortfall in funds, additional assessments may be needed. Association budgets will need to be Continued on page 28

26

June 2009 | ECHO Journal

New election rules: $500 In today’s economic crisis, there may be some items that associations can cut to reduce costs. ECHO membership is not one. Let’s face it, educated board members are better fiduciaries, which helps them to avoid costly law suits and possibly personal liability.

ECHO is the premier resource in California for board member education. ECHO offers new articles each month with practical and easy to understand advice about current California requirements, and what may be on the horizon. ECHO staff is available by phone or E-mail to answer members’ questions about association problems or to recommend competent professional services when necessary.

And with discounted member rates at more than a dozen educational events throughout the year, ECHO is simply the best educational resource for California homeowners.

Avoid Litigation Each year, as a member benefit, ECHO sends every board member a copy of the updated Community Association Statute book. Every issue of the ECHO Journal and every seminar examine one or more aspects of compliance with association law, because one of the major causes of expensive litigation is ignorance of the law.

Mailing ballots: $200 Make Better Financial Choices Many associations struggle to understand reserve funding requirements and strategies, the benefits and disadvantages of using special assessments, proper collections practices, and even how to determine what components the association is required to maintain.

At a time when wise financial planning is essential, ECHO members have access to a wealth of articles about reserve funding, budgeting, insurance, collections, and much more.

Fight Costly Regulation Every year, Sacramento legislators introduce more legislation that confuses the job of California board members and increases the costs of compliance. ECHO is committed to fighting unnecessary regulation in California and promoting the interests and welfare of common interest developments.

Hire Competent Professionals ECHO offers a variety of articles and publications to help members evaluate their service providers, including questions to ask prospective management firms and contractors. All ECHO Journal articles are available to members at no cost, and publications are sold to members at a discount.

Avoiding a lawsuit: Priceless.

Spend a Little, Get a Lot The cost of ECHO membership is minimal. In a worsening economy, associations are looking to cut big expenses from their budgets. Yet, ECHO membership is as little as 25¢ per unit each month. For that small cost, here’s what every board member receives as part of being a member of ECHO: • A subscription to the ECHO Journal • An annual copy of the current Community Association Statute book • Unlimited access to ECHO’s library of past articles • Telephone consultations with ECHO staff about their problems • Reduced fees for ECHO events • Discounted prices on publications • And much more…

In These Tough Economic Times, ECHO Membership is a Necessity As the only California organization devoted exclusively to board member and homeowner education, ECHO is a one-of-a-kind resource that your association can’t afford to lose.

Disappearing Developer Continued from page 26

reworked based on the number of closed units/homes. Services may need to be reduced. Contracts should be reviewed to determine if any savings may be available. Be prepared to negotiate fees for fewer services.

Developers like to keep fees low in order to maximize loan qualification by prospective buyers but, with the developers out of the picture and no longer subsidizing operating account shortfalls, owners need to be realistic in their expectations for the association. Will the association reduce services or increase assessments? The homeowner-controlled board must help the owners understand all options and make recommendations based on the advice of their professional consultants.

With the new Fannie Mae eligibility requirements effective March 1, 2009, for condominium loans, 70 percent of the units must be sold or under contract before the remaining units can get approvals for Fannie Mae-backed loans. Fannie Mae also is requir28

June 2009 | ECHO Journal

ing that no more than 15 percent of a projectâ&#x20AC;&#x2122;s units be 30 days or more past due on condominium association fees. These new requirements will exacerbate the already distressed condominium sales and resale market. Existing owners will be hurt the most by these new mandates because they will be expected to pay additional maintenance fees and/or special assessments to cover those owners and the developer who are not paying their fair share; in addition they will have an even more challenging time trying to sell their units. Communities will need to come together now more than ever to work through these hard economic times. This economic morass will eventually endâ&#x20AC;&#x201D;they all do. Until then, owners should support their homeowner-controlled board and understand that better times are ahead.

Dean Williams is the vice president of Developing Communities at the Kramer-Triad Management Group in Ann Arbor, Michigan. The firm provides management services for homeowner associations and is an Associa Company. This article was originally published in the Association Times.

Directory UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.

Additions to Member Listings Cordova Industries, Inc. 862 Hummingbird Drive San Jose, CA 95125 Tel: 408-451-9900 Fax: 408-451-9911 Email: cordovaindustries@gmail.com Contact: Lionel Cordova A full service painting and general contracting company providing the highest quality service to meet any HOA needs. We provide specifications and color rendering custom to your HOA buildings. Covering the entire Bay Area and Central Valley.

Focus Business Bank 10 Almaden Blvd., Suite 150 San Jose, CA 95113-2255 Tel: 408-200-8712 Fax: 408-200-8797 Contact: Teresa Powell www.focusbusinessbank.com Email: teresa.powell@focusbusinessbank.com Focus Bank is a premier provider of HOA specialty banking services, including interest bearing checking accounts, premium rates, web based lockbox, autopay, online banking, investment services and loans.

M & C Association Management Services provides community association management and developer services to Fremont, Santa Clara, Stockton, Modesto, Copperopolis and the surrounding foothills. Since 1990, we’ve enriched communities and enhanced the lives of the people we serve.

M & C is proud to be an Accredited Association Management Company® (AAMC®), which is the Community Associations Institute’s highest designation awarded to management firms.

1341 W. Robinhood Drive, Suite B7 Stockton, CA 95207 Tel: 209.644.4900 Fax: 209.644.4930

1171 Homestead Road, Suite 280 Santa Clara, CA 95050 Tel: 408.241.0023 Fax: 408.241.0093

37161 Niles Blvd. #A Fremont, CA 94536 Tel: 510.795.8308 Fax: 510.795.8422

171 Town Square Road, Suite 2C 1209 Woodrow Ave., Suite C6 Copperopolis, CA 95228 Modesto, CA 95350 Tel: 209.785.6700 Tel: 209.576.7800 The Leader in Community Association Management Fax: 209.785.6701 Fax: 209.576.2209

For management proposal information, please visit www.mccommunities.com or email info@mccommunities.com The nation’s leader in community association management

Continued on page 30 M&C_ECHOad_apr07.indd 1

ECHO Journal | June4/23/08 2009 2:35:1729 PM

Directory UPDATES Continued from page 29

Gutter Helmet of the Bay Area 65 Washington St., #164 Santa Clara, CA 95050 Tel: 408-244-1423 Contact: Kevin Golden www.gutterhelmetca.com Email: info@gutterhelmetca.com Gutter Helmet of the Bay Area provides protection to eliminate gutter cleaning and extend the useful life of your gutters and roof. We are able to solve all types of gutter problems; we can repair or replace your gutters and downspouts.

HOA Care 249 Shipley St., # 12 San Francisco, CA 94107 Tel: 415-298-2472 Fax: 415-276-2398 Contact: Melissa Miller Gonzalez www.hoacare.com Email: info@hoacare.com HOA Care specializes in high-quality condo association management services for buildings fewer than 50 units.

Locking Mailboxes 837 Calimex Nipomo, CA 93444 Tel: 805-929-5000 Fax: 805-980-4973 Contact: James Richards www.lockingmailboxes.us Email: sales@lockingmailboxes.us California certified small business. Sell and service postal receptacles of all USPS approved typesâ&#x20AC;&#x201D;custom-made units to single boxes. Low prices and quick delivery.

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June 2009 | ECHO Journal

SD Deacon Corp of California 7745 Greenback Lane, Ste. 250 Citrus Heights, CA 95610 Tel: 916-919-5467 Fax: 916-729-0900 Contact: Michelle Bullington www.deacon.com Email: michelle.bullington@deacon.com Specializing in waterproofing, building envelope repair, historic preservation and seismic upgrades while also performing smaller scale renovations, kitchen and bath remodels and investigative testing. Our team can compile estimated budgets and provide construction defect litigation support.

Changes to Member Listings All About Homes, Inc. 40087 Mission Blvd., PMB 384 Fremont, CA 94539-3680 Tel. & fax remain the same Law Offices of Mark J. Wleklinski 560 Lennon Lane, Ste. 100 Walnut Creek, CA 94598-2455 Tel: 925-280-1191 Fax: 925-280-1181

Detailed on-site inspections, inventories and asset descriptions • Spreadsheet report format now available on request 30-year threshold and components models • 16 years of reserve study experience • Call today for a free proposal

ECHO Journal | June 2009

31

News from ECHO

ECHO Annual Seminar— June 13, 2009 On-site registration at the 2009 ECHO Annual Seminar will begin at 7:30 a.m. on Saturday, June 13, at the Santa Clara Convention Center. Make your advance reservations for this event now and be a part of California’s largest yearly event planned for homeowner association board members and owners.

Ask your fellow board members and your associates who live in other common interest developments to join you for a day of education and fun at this important event. In these unsettled economic times, convince them that they need to hear updates about every important CID responsibility and issue, to see new products and to share in the large number of prizes and favors distributed by 125 Trade Show exhibitors.

Complete the ticket order form on page 43 and mail or fax it to ECHO today. You may also reserve by telephone to the ECHO Office or on the ECHO website, using your Visa or MasterCard. Plan to attend all day to take full advantage of the information that will be available.

32

June 2009 | ECHO Journal

The Disappearing Developer In today’s economy, many builders are leaving unbuilt or partially built homes, consequently causing hardships for associations. Imagine a community of 450 lots with a community pool and clubhouse. Now with only 225 homes closed, these association members are in for a shock. Association fees may double. In the past, builders often made up shortfalls in the budget to keep the community well maintained, but most builders are now cash-strapped and cannot support the association. Does the association board up the clubhouse and shut the pool?

If an association has an inkling that its developer may be in financial distress, involve the association’s attorney as soon as possible. Many associations use the developer’s attorney, but that could be a conflict when the two parties have competing interests.

If the developer who still maintains a majority of seats on the association board disappears or ignores communications, the homeowners should band together to elect their own board of directors, if authorized in the governing documents. If not, electing an advisory or informal board can be a workable option to ensure that the owners are involved in the operations of, and decision-making for, their association.

Keep the local governmental entities informed regarding the financial status of the association.

The owners will be looking to them for help. The municipality may hold bond money or guarantee bonds; ask that these not be allowed to lapse without the

homeowner board signing off on them.

If there is an outstanding loan on which the developer defaulted, the bank may foreclose on the remaining parcels of land.

Work with the association’s attorney to ensure that the bank pays all legally due unit or lot assessments, set up fees and amounts related to newly-closed units such as the working capital, reserve, long-term reserve or mailbox fees.

When “Absolute” Is Not Does an association director have an absolute right to inspect association records?

Corporations Code section 8334 states: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director.” But is a corporate director’s right of access to all of a corporation’s records and documents really so ironclad?

California’s strong public policy of allowing a corporate director to have broad access to corporate records should not be taken lightly. However, there

may be times, though infrequent, when an association is faced with a demand by one of the members of its board of directors for access to certain records of the association where the demand raises a legitimate concern about possible adverse consequences to the association or its members if access is granted. These interests include protecting the members’ privacy rights in the voting decisions and the corporation’s right to preserve its attorney-client privilege.

In these circumstances, the board of directors, not including the interested director, must decide whether to permit the requested access. In making that decision, the board must, as in all its decisions, adhere to the strictures of the prudent business judgment rule. Under that rule, the board members are required to make decisions that they believe are in the best interests of the association and its members and with reasonable care.

Upcoming Events Thursday, July 16 San Francisco Luncheon 11:45 a.m. to 2:00 p.m.

Speaker: Sandra Gottlieb, Esq. St. Francis Yacht Club San Francisco

2009 Legislation at a Glimpse As of May 15, 2009 Bill No.

Author

Subject

Status

Position

Summary

AB 49

Feuer

Water Reduction

Amended Watch 4/13; Appropriations

This bill would require the state to achieve a 20% reduction in urban per capita water use in California by December 31, 2020. ECHO is monitoring this spot bill for its potential impact on homeowner association water consumption.

AB 121

Hernandez

Judgment Lien Extension

Assembly third reading

Watch

Under certain conditions, this bill would allow creditors to extend judgment liens on specified personal property by filing a continuation statement in the office of the Secretary of State. The statement must be filed no earlier than six months before the lien is scheduled to expire.

AB 313

Fletcher

Tax-based Assessments

Assembly second reading

Oppose

After December 30, 2009, would prohibit associations from levying assessments based upon the taxable value of the separate interests within the association. Associations that levied assessments based upon taxable value on or before December 30, 2009 would be exempted.

AB 566

Nava

Mobilehome Conversion Approval

In Assembly Housing; hearing 4/29

Support

Would require a subdivider to obtain the approval of the majority of the residents in a mobilehome park before converting the park to resident ownership.

AB 869

Mendoza

Mobilehome Park Managers

Failed passage

Support

Defines “Park Manager” and “Certified Mobilehome Park Manager.”

AB 899

Torres

Disclosure Documents Index

Assembly Housing; hearing 5/13

Support

Would require associations to distribute a list of all legally mandated disclosures to their members annually.

AB 927

Calderon

Construction Defect Claims

Passed Assembly Judiciary

Watch

Deletes expiration date of provisions regulating the filing of a complaint for damages, by an association, against a developer for construction defects.

AB 1061

Lieu

Low WaterUsing Plants

Assembly third reading

Watch

Would render void and unenforceable any provision in the governing documents of an association that has the effect of prohibiting low water-using plants or prohibits or restricts compliance with local conservation ordinances.

AB 1108

Fuentes

Master Meter Regulations

In Assembly Utilities; hearing 4/27

Oppose Unless Amended

Establishes new guidelines for master meter customers, including requirements that master meter customers maintain all submeter facilities and limits fines for late payments.

AB 1328

Salas

Contract Restrictions

In Assembly Housing; hearing 5/13

Watch

Nullifies contract length restrictions for associations in cases where the board reasonably anticipates that the contract will result in verifiable savings to the association, including establishing a water or energy efficiency program.

SB 23

Padilla

Mobilehome Safety Plan

In Senate Watch Transportation & Housing; hearing 4/28

SB 259

Benoit

Board Elections In Senate Judiciary

Support If Amended

Would require all mobilehome or manufactured home parks to develop and implement an emergency and fire safety plan, as well as appropriate emergency services training for park or community managers and onsite staff.

In the event that the results of an election are invalidated for violation of the elections law, this bill provides that decisions of the improperly elected board shall not be invalidated unless those decisions violate the law or governing documents.

ECHO Journal | June 2009

33

2008 ECHO Business & Professional Directory $20.00 Non-Member Price: $25.00

Condominium Bluebook 2009 Edition $18.00 Non-Member Price: $25.00

Homeowners Association and You $13.00 Non-Member Price: $20.00

Community Association Statute Book—2009 Ed. $15.00 Non-Member Price: $25.00

This directory lists all business and professional members of ECHO as of December 2007. Current addresses, telephone and fax numbers, email addresses, and a short description are included. This directory is an invaluable tool for locating service providers that work with homeowner associations.

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 frequently-asked questions about associations, along with succinct answers.

A practical problem solving guide to all aspects of community association living. Written by two long-time association residents, it provides an insightful overview of community living from the viewpoint of experienced owners in readable language.

Recently revised and expanded.

Contains the 2009 version of the Davis-Stirling Common Interest Development Act, the Civil Code sections that apply to common interest developments and selected provisions from the Civil, Corporations, Government and Vehicle Codes important to associations.

Robert’s Rules of Order $7.50 Non-Member Price: $12.50

The Board’s Dilemma $10.00 Non-Member Price: $15.00

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.

In this essay, attorney Tyler Berding confronts the growing financial problems for community associations. Mr. Berding addresses board members who are struggling to balance their duty to protect both individual owners and the corporation, and gives answers to associations trying to avoid a funding crisis.

California Building Guidelines for Residential Construction $52.50 Non-Member Price: $60.00

Homeowners Associations— How-to Guide for Leadership $35.00 Non-Member Price: $45.00 This well-known guide and reference is written for officers and directors of homeowner associations who want to learn how to manage and operate the affairs of their associations effectively.

Questions & Answers About Community Associations $18.00 Non-Member Price: $25.00 For 12 years, Jan Hickenbottom answered homeowners’ questions in her Los Angeles Times column on community associations. Now collected in one volume, readers can find answers to almost any question about CIDs.

Reserve Fund Essentials $18.00 Non-Member Price: $25.00 This book is an easy to read, musthave guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful financial tool.

This easy-to-read manual is an excellent tool to understand a new home.

It contains chapters covering more than 300 conditions that have been sources of disputes between homeowners and builders, offers homeowner maintenance tips, and defines the standards to which a residence should be built.

The Condo Owner’s $15.00 Answer Book Non-Member Price: $20.00

CID Leadership Two-Disc DVD set $30.00 Non-Member Price: $40.00 Board—An orientation for new board

An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowner associations. The question-and-answer format responds to more than 125 commonly-asked questions in an easy to understand style. A great resource for newcomers and veteran owners.

members and a refresher for current members. Meetings—How to conduct effective meetings that stay focused and achieve results.

Reserves—How adequately-funded reserves prevent problems in associations. Insurance —Considers insurance to protect multi-million dollar community assets.

Dispute Resolution in Homeowner Associations $20.00 Non-Member Price: $25.00 This publication has been completely revised to reflect new requirements resulting from passage of SB 137.

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

Bookstore Order Form Board Memberâ&#x20AC;&#x2122;s Guide for Contractor Interviews $20.00 Non-Member Price: $25.00

Executive Council of Homeowners 1602 The Alameda, Suite 101, San Jose, CA 95126 Phone: 408-297-3246 Fax: 408-297-3517 TITLE

QUANTITY

This report is a guide for directors and managers to use for interviews with prospective service contractors.

Questions to find out capabilities and willingness of contractors to provide the services being sought are included for most of the contractor skills that associations use.

SUBTOTAL CALIFORNIA SALES TAX (Add 9.25%) TOTAL AMOUNT

Yes! Place my order for the items above.

Board Memberâ&#x20AC;&#x2122;s Guide for Management Interviews $20.00 Non-Member Price: $25.00 This guide for use by boards for conducting complete and effective interviews with prospective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.

q Check q Visa q Mastercard Credit Card Number Exp. Date

Signature

Name (please print) Association (or company) Address City Daytime Telephone

State

Zip

AMOUNT

Calendar of Events

Save these dates Wednesday, June 3 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101 San Jose Wednesday, June 10 South Bay Resource Panel 12:00 Noon Allana Buick & Bers 990 Commercial St., Palo Alto Friday, June 12 East Bay Resource Panel 9:30 a.m.

Christison Company 1090 Independence Dr., # 100 Livermore Friday and Saturday June 12 & 13 ECHO Annual Seminar Santa Clara Convention Center Santa Clara Wednesday, June 17 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

Thursday, July 2 North Bay Resource Panel 11:30 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, July 10 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek Monday, July 13 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant, Oakland Tuesday, July 14 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, July 15 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, July 16 San Francisco Luncheon 11:45 a.m. to 2:00 p.m.

St. Francis Yacht Club San Francisco

Wednesday, August 5 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101 San Jose Wednesday, August 12 South Bay Resource Panel 12:00 Noon Location TBD Friday, August 14 East Bay Resource Panel 9:30 a.m.

Christison Company 1090 Independence Dr., #100 Livermore Wednesday, August 19 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Friday, September 3 North Bay Resource Panel 11:45 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Friday, September 4 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1900 N. California Blvd.

Suite 950, Walnut Creek Tuesday, September 8 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Monday, September 14 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant Oakland Wednesday, September 16 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, September 17 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco

Regularly Scheduled Resource Panel Meetings Resource Panel Maintenance North Bay East Bay East Bay Accountants Central Coast South Bay Wine Country Legal 36

June 2009 | ECHO Journal

Meeting First Wednesday, Even Months First Thursday, Odd Months Second Friday, Odd Months Second Friday, Even Months Second Monday, Odd Months Second Tuesday, Odd Months Second Wednesday, Even Months Third Wednesday, Monthly Quarterly

Location ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael Angius & Terry, Walnut Creek Christison Company, Livermore Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Eugene Burger Management Co., Rohnert Park Varies

408-295-7767 or 877-295-FLOW

www.aquatekplumbing.com Fire Alarm Systems Fire Sprinkler Systems Testing, Service, Design & Installation

Tele-Entry & Access Control Emergency Exit Lighting Automated Gates Fire-Rated & Rollup Doors

Complete Service and Repair Plumbing Copper Repipes AquaTek Plumbing, Inc. has been servicing residential and commercial customers faithfully since 1982. Call us today for more information about AquaTek and the full spectrum of plumbing services we provide.

For Information please call: 650 988-9508 or 888 988-9508 or e-mail info@statcomm.com Lic # 675521 Underwriters Lab #UUFX.S8915 Diamond Certified ECHO Journal | June 2009

37

Honor Roll

About ECHO

ECHO Honors Volunteers Mike Muilenburg 2008 Volunteer of the Year ECHO Resource Panels Accountant Panel Richard Schnieder, CPA 707-576-7070 Central Coast Panel John Allanson 831-685-0101 East Bay Panel Scott Burke, 408-536-0420 Mandi Begley, 925-937-0434 Legal Panel Mark Wleklinski, Esq. 925-691-1191 Maintenance Panel Brian Seifert, 408-536-0420 North Bay Panel Diane Kay, CCAM, 415-846-7579 Stephany Charles, CCAM 415-458-3537 San Francisco Panel Jeff Saarman, 415-749-2700 South Bay Panel Geri Kennedy, CCAM 650-348-2691 ext. 1006 Kimberly Payne, 408-200-8470 Wine Country Panel Maria Birch, 707-584-5123

Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry L. Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

38

June 2009 | ECHO Journal

SF Luncheon Speakers John Allanson Tyler P. Berding, Esq. Ronald Block, PhD. Doug Christison, PCAM, CCAM Karen Conlon, CCAM Rolf Crocker, CCAM Ross Feinberg, Esq. David Feingold, Esq. Tom Fier, Esq. Kevin Frederick, Esq. John Garvic, Esq. Beverly Gordon, CCAM Beth Grimm, Esq. Brian Hebert, Esq. Roy Helsing Stephen Johnson, CFP Julia Lave Johnston Garth Leone Nico March Kerry Mazzoni Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Marin Seminar Speakers David Feingold, Esq. Linnea Juarez, PCAM, CCAM Wanden Treanor, Esq. Glenn Youngling, Esq.

Association Finances Seminar Speakers Joelyn Carr-Fingerle, CPA Bill Erlanger, CPA James Ernst, CPA John Garvic, CPA Donald Haney, CPA

North Bay Winter Seminar Speakers Sandra Bonato, Esq. Robert Hall, Esq. Diane Kaye, CCAM David Kuivanen, AIA Steve Lieurance, CCAM Steven Saarman Robert Smylie Barbara Zimmerman, Esq.

Recent ECHO Journal Contributing Authors January 2009 Tyler P. Berding, Esq. Joelyn K. Carr-Fingerle, CPA Jeanette Catellier, PCAM Jan A. Kopczynski, Esq. Alfred D. McKelvy February 2009 Jeffrey A. Barnett, Esq. David H. Levy, CPA Brian E. Martin, Esq. March 2009 Tyler Berding, Esq. Thomas Douma Sandra Gottlieb, Esq. Beth A. Grimm, Esq. Graham Oliver David Swedelson, Esq. Steven Weil, Esq. April 2009 Julie Adamen Colletta Ellsworth-Wicker, PCAM Tom Fier, Esq. Steven Weil, Esq. May 2009 Tyler P. Berding, Esq. Kim Goldsworthy Richard Tippett Glenn H. Youngling, Esq.

What is ECHO? ECHO (Executive Council of Homeowners) is a California non-profit corporation dedicated to assisting community associations. ECHO is an owners’ organization. Founded in San Jose in 1972 with a nucleus of five owner associations, ECHO membership is now 1,525 association members representing over 150,000 homes and 325 business and professional members.

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.

If your company wants to reach decision makers at over 1,525 homeowner associations, you can become an associate member and join 325 other firms serving this important membership.

Benefits of ECHO Membership • Subscription to monthly magazine for every board member • Yearly copy of the Association Statute Book for every board member • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

ECHO Membership Dues HOA Size 2 to 25 units 26 to 50 units 51 to 100 units 101 to 150 units 151 to 200 units 201 or more units Business/Professional

Rate $120 $165 $240 $315 $390 $495 $425

ECHO Journal Subscription Rates Members Non-members/Homeowners Businesses & Professionals

$50 $75 $125

How Do You Join ECHO? Over 1,800 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for membership, call ECHO at 408-2973246 or visit the ECHO web site (echo-ca.org) to obtain an application form and for more information.

Seeking CANDIDATES for the ECHO Board of Directors

COM PA S S

The Nominating Committee for the ECHO Board of Directors is seeking names of persons who are interested in being considered as candidates for positions on the ECHO Board of Directors. Four positions on the board will be up for election at the ECHO Annual Meeting that will be held in October. These positions are for threeyear terms. Current directors whose terms expire in 2009 are Paul Atkins, Jerry L. Bowles, David L. Hughes and Steven S. Weil.

Board members are expected to attend all six three-hour board meetings held each year, generally at the ECHO Office in San Jose. Each board member also serves on one or more committees that hold regular meetings throughout the year. These two activities involve a commitment of four to six hours per month plus travel time. In addition members are expected to attend the Annual Seminar, Annual Meeting and a two-day board retreat each November.

Board members receive no reimbursement for these activities. Nominees will also be expected to have been recent active participants in ECHO activities and to have thorough familiarity with the organization and the CID industry.

Persons interested in being considered for nomination should obtain and complete a nomination and qualifications form, available by request from the ECHO office. Every potential candidate, including incumbents, must submit a full form. All completed forms must be submitted to the ECHO office no later than July 15, 2009, to be considered by the nominating committee. Those requesting nomination may be requested to interview with the nominating committee. The committee will meet in August to prepare recommendations for board consideration.

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ECHO Journal | June 2009

39

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ECHO Marketplace

Adver tiser Index

The place to find business and professionals for your association Alpha Restoration & Waterproofing . .8 American Asphalt . . . . . . . . . . . . . .18

WILLIAM FISHER ARCHITECTURE (831)246-0117 FAX:(831)457-0246 INC. MODERN-ARCHITECTURE.COM

ARCHITECTURE. CONSULTATION.

603 FRONT ST. SANTA CRUZ 95060

SBI, LLC 180 Second Street Suite A Los Altos, California 94022 Voice: (650) 949-3774 Fax (650) 941-3689 Email: tom@sbiusa.net General Contractors • Civil Engineers

Reserve Studies • Energy Surveys Insurance Replacement Cost Analysis Construction Defects Mold Sampling Foundation and Drainage Inspections

American Management Services . . .10 Angius & Terry . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . .31 AquaTek Plumbing . . . . . . . . . . . . .37 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .19 Bayridge Group . . . . . . . . . . . . . . . .16 Berding & Weil . . . . . . . . . . . . . . . .44 CACM . . . . . . . . . . . . . . . . . . . . . .12 Coastal Termite Control . . . . . . . . .16 Collins Management . . . . . . . . . . . .31 Community Association Banc . . . . . .26 Community Management Services . .18 Community Reconstruction Solutions 37 Compass Management . . . . . . . . . .39 Cool Pool Service . . . . . . . . . . . . . .19 Cornerstone Community Mgmnt . . . . .8 Draeger . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . .31 First Bank Association Bank Services30 Flores Painting . . . . . . . . . . . . . . . .29 Helsing Group . . . . . . . . . . . . . . . .16 Hill & Company. . . . . . . . . . . . . . . .26 M&C Association Services . . . . . . . .29

CMs Working With CMs Continued from page 23

Selecting a Construction Manager The crux of construction management is a blend of innovation, team selection and motivation, and experience. The community manager is part of the team. Construction management is an owner-oriented process.

The community manager, working with the association board, must find a firm with the experience, the reputation, the chemistry, the technical capability, and the capacity to fulfill the goals of the project. The construction manager can then take the lead to guide the project to a successful conclusion.

Some construction management firms serve a dual role, providing design services, while the project scope, budget and schedule are being developed together with the community manager. The team’s goal is to review, formulate, recommend and manage a project innovatively. A professional team employs value engineering, construction strategies and expediting as part of their procedures to analyze, design, plan and budget the resolution of the community’s issues.

The construction manager’s typical duties

include proposal preparation, contractor prequalification, and oversight of bidding, contract award and cost control.

Putting it all Together The practice of construction management and the profession of community management have been evolving for three decades.

Likewise, many advances have been made in construction practices and in the creation of new or better materials. Working together, these developments offer great opportunities to provide better solutions to our community needs.

M. L. Nielsen Construction . . . . . . .30 Massingham and Associates . . . . . .17 Pelican Management Group . . . . . . .16 PML Management Corp. . . . . . . . . .11 Pollard Unlimited . . . . . . . . . . . . . .28 Pro-Craft Builders . . . . . . . . . . . . . .39 Professional Association Services . .39 R. E. Broocker Co. . . . . . . . . . . . . .12 REMI Company . . . . . . . . . . . . . . . .19 Saarman Construction . . . . . . . . . . .9 Socher Insurance . . . . . . . . . . . . . . .2 Statcomm . . . . . . . . . . . . . . . . . . .37 Steve Tingley Painting . . . . . . . . . . .28 Steve’s Painting Services . . . . . . . .10

Allen Schafer is corporate senior architect at the Bayridge Group. He is licensed by the California State Board of Architecture and has more than 35 years of experience providing comprehensive architectural services. Herman Novak is the principal at the Bayridge Group and has over 25 years of experience in the architectural, engineering and construction world. He is a California licensed general contractor, a certified mediator and a member of the board of directors of the American Institute of Ethics.

ECHO Journal | June 2009

41

Race to Win ECHO Annual Seminar June 13, 2009 Saturday, June 13, 2009 8:00 a.m.–4:30 p.m.

Santa Clara Convention Center Santa Clara, California 125 Booths in Trade Show, Hundreds of Prizes, New CACM Course, Buffet Luncheon, Ice Cream Social and more!

Join the Friday Night Gala!

Annual Seminar Reception Friday, June 12, 5:00–7:30 p.m.

Food, Music, Socializing, Prizes Cost: $40—See Registration Form

Special Hotel Rates Don’t miss out on the special room rate of $89 single or double at the Hyatt Regency adjacent to the Santa Clara Convention Center. Call the Hyatt Regency at 800-233-1234 and mention the Executive Council of Homeowners or go online at: santaclara.hyatt.com/groupbooki ng/clara2009echo. The special rate is available until May 20.

CACM Course (Open To Managers Only) Friday, June 12, Room 209 2:00 p.m.–5:00 p.m.

Advanced Budgeting This course is designed to take managers to the next level in financial management and help them feel confident about the budget process, reserve funding plans, the effect of litigation on financial operations, the differences between budgeting for a conversion versus new construction, and much more. After successfully completing this course, managers will understand how

to utilize the budget and reserve study to evaluate the community association’s financial status. (3 hours CACM CEU) Registration: $110 Call the ECHO Office to register.

Educational Program Session Tracks

Saturday Morning 9:00 to 10:10

Saturday Morning 10:50 to 12:00

Saturday Afternoon 1:30 to 2:40

Saturday Afternoon 3:20 to 4:30

HOA UNIVERSITY Rooms 209 and 210

Administration Dianne Rossi, CCAM

Legal Deon Stein, Esq.

Finance Linnea Juarez, PCAM, CCAM

Insurance Garth Leone

LEGAL Rooms 203 and 204

Legislative Update John Garvic, Esq. Kerry Mazzoni

Board Hearings: A Valuable Tool Glenn Youngling, Esq.

Budgeting and Disclosures in Lean Times Rob Rosenberg, CCAM

Ask the Attorneys Steven Weil, Esq. Jeffrey Barnett, Esq.

MANAGEMENT & FINANCIAL Ballroom H

Top Traits of Great Managers and Boards Julie Adaman

Association Financial Survival in Tough Times Tyler Berding, Esq. David Levy, CPA

Inexpensive Ways to Solve Homeowner Problems Katharine Rosenberry, Esq.

Investing Reserve Funds in Troubled Times Alan Crandall

MAJOR MAINTENANCE Ballroom G

Solar Energy: It’s Hot! Wanden Treanor, Esq.

Green Construction Ken Kosloff Steven Saarman David Kuivanen, AIA

Understanding Your Reserves Study Report Roy Helsing

Assessment Collection, Foreclosure and Bankruptcy Sandra Gottlieb, Esq.

REGI S TRATI ON FORM Yes! Please reserve my space at the 2009 ECHO Annual Seminar.

Name ___________________________________________________________________ Association/Organization __________________________________________________ Address _________________________________________________________________ City __________________________________________ State _____ Zip____________ Daytime Phone ___________________________________________________________ Names of Additional Attendees: 1. _________________________________________ 2. ________________________________________ Please reserve tickets for: No. Amount $___________ $75 ___________ Seminar Only (members) Seminar Only (non-members) $90 ___________ $___________ Seminar Buffet Lunch $40 ___________ $___________ $___________ $40 ___________ Friday Reception TOTAL $___________ Visa/MasterCard No. ______________________________________________________ Expiration Date ___________________________________________________________ Cardholder’s Signature ____________________________________________________

Reserve Now Tickets are non-refundable Order will not be processed without full payment Return with payment to: ECHO 1602 The Alameda, Ste. 101 San Jose, CA 95126 Tel: 408-297-3246 Fax: 408-297-3517

Condominium Conversions Did You Get What You Paid For?

Condo conversions are not new condominiums. They are older rental apartments that were converted to condos.

So, what’s wrong with that?

Nothing, if the financial plan that came with your condo is up to the task of maintaining a building with 20-30 years of deferred maintenance.

How do you know? You probably don’t unless someone

has taken a close look at the homeowner association’s budget and compared it to the actual condition of the buildings. The fact is, very few condominium conversions were sold with repair budgets that are adequate to meet the needs of the project.

What does this mean to you?

If the budget is inadequate, it will mean either increased homeowner assessments or a gradually deterio-

rating condominium project. Or both. In either case, you didn’t get what you paid for.

If you’d like to know the truth now about what you bought, call us. If you want to wait and see what happens, ok, but either way, we’ll be here when you need us.

Berding | Weil, LLP 3240 Stone Valley Road West Alamo, California 94507 925-838-2090 www.berding-weil.com