Journal_09_12 by Echo

December 2009

A Journal for California Community Association Leaders

echo-ca.org

E-Delivery Comes to Homeowner Associations

ALSO INSIDE THIS ISSUE:

• A Check on Board Power • Solar Energy Tax Credits • El Niño is on Its Way!

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Contents Solar and Other Energy Tax Credits —page 16

E-Delivery of Budget Packages Beginning January 1, 2010, California’s community associations may distribute their budget packages and most financial disclosures to owners over the Internet. This article outlines the new law, identifies which disclosures can be made electronically, and what degree of owner consent is required.

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. 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.

The Davis-Stirling Act contains many laws that outline membership rights and board prerogatives. Among the most important are the laws regulating board meetings. This article highlights the check on board power contained in the Act as well as rights and powers that are reserved to the board.

A Check on Board Power

Board of Directors and Officers

There has been a lot of talk about alternative energy devices, energy efficient improvements and government incentives. You’ve no doubt read about how you can save taxes by installing these improvements. This article discusses the government incentives available and how they apply to associations.

President David Hughes

El Niño is on Its Way!

Secretary Dorothy Kopczynski

The National Weather Service issued an El Niño Advisory for the winter of 2009–2010. This means that this coming winter is predicted to be a heavy rain season, when roof leaks and water damage are inevitable. This article offers tips on how to start preparing now for the coming winter.

28 Directory Updates 32 News from ECHO 33 Legislation at a Glimpse 34 ECHO Bookstore 36 Events Calendar 38 ECHO Volunteers

Treasurer Diane Rossi

Directors Paul Atkins John Garvic Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles David Levy Kurtis Shenefiel Wanden Treanor

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

41 Advertiser Index

ECHO Mission Statement

E-Delivery of Budget Packages —page 6 December 2009 | ECHO Journal

Vice President Karl Lofthouse

41 ECHO Marketplace

On the Cover 4

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

Solar & Other Energy Efficiency Tax Credits

Departments

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

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

ECHO 2010 Seminars Yes, it’s already next year. The 2009 seminars are behind us, but we are already preparing next year’s events. Do not forget to mark these dates in your calendar for ECHO 2010 seminars: • Jan. 30—Marin Seminar, San Rafael • Feb. 6—Sacramento Seminar, Sacramento • Feb. 20—Central Coast Seminar, Scotts Valley • March 20—North Bay Seminar, Rohnert Park • April 17—South Bay Seminar, Campbell • June 19—Annual Seminar, Santa Clara

December 2009 | ECHO Journal

THIS ARTICLE OUTLINES THE NEW law, identifies which disclosures can be made electronically and which cannot, and what degree of owner consent is required and why. In the second part of this series (to be published in a future issue of the ECHO Journal), we’ll tell you how to get ready.

By Sandra M. Bonato, Esq.

E-Delivery of Budget Packages Yes, a Brand New Law Says Associations Can! eginning January 1, 2010, California’s community associations may now distribute their budget packages and most annual financial disclosures to owners over the Internet. Owners’ written consent to receive their budgets by email will be required. Once that consent is obtained, however, budget distribution can become virtually paperless. The 21st century has at last arrived!

AB 899 (Torres) AB 899 (Torres) was signed into law on October 11, 2009 and becomes effective on January 1, 2010. Sponsored by ECHO, AB 899 began as an effort to list in one location in the

Davis-Stirling Common Interest Development Act all the annual financial disclosures that associations must make. By listing them in this new Index, omitting an important disclosure would be far less likely. Once the Index was developed, ECHO’s effort turned to proposing changes in existing law to allow associations to make each of the listed disclosures available to consenting association members through their email addresses rather than by hard copy through the mail. Thousands of pages of paper, printing costs and postage could be saved.

ECHO Journal | December 2009

The changes in Davis-Stirling are both historic and simple. Existing law (Civil Code §1350.7) was amended in AB 899 to permit all notices listed in the new Index to be distributed electronically, by following the member consent requirements in Section 20 of the Corporations Code, which in turn requires compliance with similar provisions in the Electronic Signatures in Global and National Commerce Act [15 U.S.C. Sec. 7001(c)(1)]. Section 20 and federal law describe how the members of corporations can receive documents electronically. In this simple fashion, the authority to make many disclosures by email was achieved.

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What’s in the New Index? To know what documents can be sent electronically starting in 2010, you need to know what’s in the new Davis-Stirling index. There you will find listed the following disclosure documents that associations must send to their members and that most associations compile and distribute once a year at budget time: • Pro Forma Operating Budget (which includes the Reserve Study) • Reserve Funding Plan • Annual Update of Reserve Funding Plan • Assessment and Reserve Funding Disclosure Summary (form) • Assessment Collection Policy • Statutory Notice / Assessments and Foreclosure (form) • Secondary Address Notification Request • Insurance Coverage Summary • Board Minutes Access • Alternative Dispute Resolution Summary • Meet-and-Confer Program Summary • Architectural Changes Notice • Monetary Penalties (Fine) Schedule • Year-End Review of Financial Statement

$52.50 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 the sources of disputes between homeowners and builders, offers comprehensive homeowner maintenance tips, and defines standards to which a residence should be built. It is consumer-oriented, written in simple language for a homeowner to understand. Order today from ECHO! Call 408-297-3246, fax at 408-297-3517 or email: info@echo-ca.org

December 2009 | ECHO Journal

With a member’s written consent, each of these documents can be provided electronically to that member’s email address, beginning in 2010. E-delivery will satisfy the association’s obligation to make the listed disclosures to that member. What Other Notices Can Already Be Sent Electronically? The law has for some time authorized the following documents and notices to be edelivered, with member consent: • Notices of Proposed and Adopted Rule Changes • Rule Changes Themselves • Notices of Member Petitions to Reverse Rule Changes

• Notices of Year-End Financial Reports ($10,000 to $75,000 in annual revenue) What Disclosures Still Cannot Be E-Delivered? The Index does not include all notices and disclosures that associations must make to members. Even if a member consents to edelivery, the following must still be prepared in written form and mailed or delivered as otherwise stated in the law: • 30 to 60 Day Notices of Assessment Increases and Special Assessments • Collection and Foreclosure Notices • Notices of Use of Reserve Funds • Disclosures to Sellers • Notices of Disciplinary Proceedings and of Sanctions Imposed • Notices of Construction Defect Litigation, Resolution and Repair Plans In short, if a particular disclosure or notice is not on the Index or not otherwise expressly permitted by law to be electronically delivered, then it can’t be. Can We Obtain Member Consent by Simply Adopting a Rule? No. Even if an association’s rules or other governing documents seemingly authorize edelivery of documents, neither Davis-Stirling nor the Corporations Code allows for e-delivery on any authority other than each member’s individual written consent to receive disclosures by email. And because email boxes are generally personal to individuals, arguably each owner of a lot or unit (not simply one) will need to sign the consent form. In our next article, we’ll tell you how to get ready to maximize your association’s edelivery of disclosures pursuant to this exciting new law and will give you downloadable forms to take maximum advantage of the new law. We’ll also talk about important principles for keeping a record of document distribution in the electronic era.

Sandra Bonato is a partner in the Alamo office of Berding | Weil. She is a member and former chair of the ECHO Legislative Committee. She is a frequent speaker at ECHO seminars, and articles written by her are a regular feature in this Journal. ECHO Journal | December 2009

I T WOULD BE IMPRACTICAL TO require that every act and decision for an association be approved by its membership. On the other hand, it would be equally unwise to allow a board of directors to have sole control over the operation of an association. Where should the lines of power be drawn?

December 2009 | ECHO Journal

By Steven S. Weil, Esq.

A Check on Board Power Common Interest Development Open Meeting Act he Davis-Stirling Common Interest Development Act (DSA) and the Corporations Code contain many laws that reflect the tension between membership rights and board prerogative. One of the most important is the law regulating the conduct of board meetings. These are contained in Civil Code section 1363.05. They are so important that this statute is referred to as the “Common Interest Development Open Meeting Act” the only statute within the DSA called an “Act.” This article highlights the check on board

power contained in the Act as well as rights and powers that are reserved to the board. It’s mostly written as a “Q&A” reflecting the kind of questions about board meetings posed to us by our clients and their managers. Also, we’ve tried to handle these issues on an informal, practical and general basis. Quick Background Most associations are non-profit corporations and thus subject to the Corporations Code. It requires the board to

ECHO Journal | December 2009

keep and permit the inspection of board meeting minutes but otherwise gives members virtually no rights concerning board meetings. Member rights under the DSA were originally minimal but over the years expanded to address posting of notices (and special notices for meetings to consider reserve fund borrowing); access to draft minutes; requiring executive session for certain assessment collection issues; and, most recently by generally limiting board discussions to those contained in a notice (an agenda) published four days prior to the meeting.

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December 2009 | ECHO Journal

Current Law—What You Need to Know about Limits on Director Discretion Q: The directors want to meet for a “study session” to go over a draft budget; is this a board meeting? What is the definition of a meeting and why is it important? A: A board meeting “happens” when a majority of the board meets to discuss or vote on association business that is the subject of ongoing board meetings or a planned agenda. An informal work study session attended by a majority is probably a “meeting.” The significance of labeling a gathering a meeting is that it requires the posting on common area of a notice and an agenda four days prior and members are entitled to attend. The idea is to compel boards to meet in the open and so publicly defend or speak for their positions and votes. Q: Do members have the right to attend all board meetings? A: Yes, except for emergency board meetings or those held in executive session. In general, these should be infrequent; so the general rule is that members can attend all board meetings and thus “monitor” the doings of their elected representatives. Q: How do the members know if the board has had an emergency or executive session meeting? A: Minutes of an emergency meeting must be taken and available to members, just like an “open” meeting of the board. Minutes of executive session meetings, if kept, are not subject to membership examination but the subject matter of an executive session meeting must be included in “open session” minutes. Q: What subjects are proper for executive session? A: The Act says that executive session meetings are to consider litigation, contract formation, member discipline, payment plans and foreclosures. Executive session meetings are also proper to consider claims

strategies or other confidential issues, especially when legal advice is sought or considered. Q: How do members know what the board discussed or decided in executive session? A: This is one area where the law permits the board wide latitude to be “discreet.” There is no specific legal requirement for what information a board publishes about its executive session meetings. Here are some examples: “The directors met with an owner to discuss an alleged violation of the CC&Rs” or “The directors met with counsel to consider hiring experts to investigate roof concerns” or “The board met to discuss the contractor’s last proposal to make repairs” or “counsel’s analysis of the association’s risk of getting sued for opposing the construction of a nearby strip mall.” Practice Point Executive session meetings permit the board to weigh risks, benefits, costs and the consequences of one course of action or another without disclosing its strategies or concerns. This is essential to help the board discharge its “fiduciary duty.” However, sooner or later, a smart board will want to “go public” to explain and defend decisions made. Q: Why are published agendas so important? Can’t the board just amend the agenda at the meeting to talk about whatever it wants or whatever comes up? A: No! The main point of the 2008 amendments to the Act was to limit board discussion only to those items contained in an agenda posted on common area at least four days prior to the meeting. This is another check on the arbitrary exercise of power because it requires directors to frame their meeting in advance and to telegraph to members exactly what issues are planned for discussion and action and prevents the board from acting on any other issue, subject to some exceptions. Q: Can a board be “tricky” and try to say something is an exception to the agenda rule and talk or vote on things not included in the agenda? A: The exceptions are pretty strict as to decision making but less so in relation to “comments.” The board can ask fellow directors, committee members or the manager to make a report or otherwise respond to questions “from the floor.” And, if there are emergencies or late breaking situations requiring immediate action, in some situations, these can be acted on as well, even if

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not posted on the agenda. Boards should not use the exceptions to hide behind a failure to properly agendize a meeting.

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Practice Point In light of the “can’t discuss it unless it was on the agenda” rule, decisions about what will be included in the agenda can be very important (and sometimes very political). Should the manager set the agenda? The board? The President? The Act doesn’t speak to this and it isn’t usually addressed in an association’s governing documents. In general we think the board should set the agenda for the “next meeting” but the President should be given the discretion to add topics based on situations that arise between the last board meeting and the posting of the agenda for the next board meeting. Each agenda for a meeting should include (perhaps at the end) “adoption of agenda for next meeting.” Q: How specific must the agenda be? A: The Act doesn’t say; the agenda should be specific enough to give members meaningful notice as to what might be discussed at a meeting. For example, a reference to “Landscaping Issues” may not really convey that the board will debate a complete renovation of common area trees and irrigation systems; a reference to “architectural matters” may not be adequate to communicate consideration of an owner’s request to add a second story addition that would negatively impact neighbor privacy. On the other hand, agendas which are too specific may unnecessarily limit the board’s ability to consider issues likely to come up. *** In our experience, very few boards abused their power before the Act and few do so now. Still, the Common Interest Development Open Meeting Act is a good law that helps directors and members focus on the key issues affecting the association. Proposing posting of and respect for the notice and agenda requirements facilitates prudent decision making and confidence in the board’s integrity. The law strikes a reasonable balance between the need for confidentiality and openness that is the hallmark of a wellrun organization.

Steven Weil is a founding partner at the law firm of Berding | Weil in Alamo. He is a member of the ECHO board of directors. His practice focuses on legal issues affecting community associations. This article was previously published in Berding | Weil’s Community Association Alert. 14

December 2009 | ECHO Journal

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December 2009 | ECHO Journal

By William S. Erlanger, CPA

Solar and Other Energy Efficiency Tax Credits here has been a lot of talk about alternative energy devices and energy efficient improvements and what kinds of government incentives there are to encourage the purchase and installation of these kinds of expenditures. You or your manager has no doubt been sent articles or flyers from vendors about how you can save taxes by installing solar heating devices, new windows, new water heaters, insulation, etc. This article will discuss what, if any, kinds of gov-

ernment incentives there are and how they apply to homeowner associations. At the present, California does not give homeowner associations or their members any sort of income tax incentives for the purchase and installation of solar or other energy efficient improvements. The federal government, however, does have different kinds of tax credits available. First, you need to know the difference between a tax credit and a tax

ECHO Journal | December 2009

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deduction. A tax credit is a dollar for dollar reduction in your or your associationâ&#x20AC;&#x2122;s income tax. A tax deduction merely reduces the amount of income subject to income tax. Tax credits then are worth much more than tax deductions. You are also going to have to learn the â&#x20AC;&#x153;lingoâ&#x20AC;? of these kinds of federal tax credits: â&#x20AC;˘ Residential energy efficient propertyâ&#x20AC;&#x201D; Internal Revenue Code (IRC) Section 25D â&#x20AC;˘ Qualified energy efficiency improvementsâ&#x20AC;&#x201D;IRC Section 25C(c) â&#x20AC;˘ Residential energy property expendituresâ&#x20AC;&#x201D;IRC Section 25C(d) â&#x20AC;˘ Residential Energy Efficient Property Is: â&#x20AC;˘ Qualified solar electric property expendituresâ&#x20AC;&#x201D;IRC Section 25D(d)(2) â&#x20AC;˘ Qualified solar water heating property expendituresâ&#x20AC;&#x201D;IRC Section 25D(d)(1) â&#x20AC;˘ Other expenditures: geothermal heat pumps, fuel cells and small wind electric generators By â&#x20AC;&#x153;qualifiedâ&#x20AC;? is meant that the manufacturer has certified that the property meets the IRSâ&#x20AC;&#x2122;s criteria for the tax credit. Solar water heating property expenditures does not include any amount spent to heat swimming pools or hot tubs (IRC Section 25D(e)(3)). However, if you install a storage tank to hold the solar heated water for domestic use, this would qualify for the credit. If the heated water were going to a swimming pool or hot tub, then this would not be a qualifying expenditure with respect to the tax credit. The tax credit on these expenditures is equal to 30 percent of the total expenditure. Total expenditures include not only the actual device but also its installation. Moreover, these credits are the best credits available because they do not expire until the year 2017 (this, of course, is always subject to change) and the credits are unlimitedâ&#x20AC;&#x201D; more about this later in the article. Qualified Energy Efficiency Improvements Are: â&#x20AC;˘ Certain insulating materials â&#x20AC;˘ Exterior windows and doors â&#x20AC;˘ Metal roofs The meaning of the term â&#x20AC;&#x153;qualifiedâ&#x20AC;? is the same as in the previous paragraph. Eligible costs only include the cost of the device and NOT its installation. The credit is set to expire after 2010. The credit is equal to 30 percent of the cost but is limited to $1,500 in total for both 2009 and 2010 combinedâ&#x20AC;&#x201D; more about this later in the article.

December 2009 | ECHO Journal

Residential Energy Property Expenditures Are: • Energy-efficient building property such as electric heat pump water heaters, high efficiency central air conditioners or high efficiency natural gas, propane or oil water heaters • High efficiency natural gas or propane furnaces • Advanced main air circulating fans The meaning of the term “qualified” is the same as in the previous paragraph. Eligible costs include both the cost of the device and its installation. The credit is set to expire after 2010. The credit is equal to 30 percent of the cost but is limited to $1,500 in total for both 2009 and 2010 combined—more about this later in the article. Minor Housekeeping Matters The year that counts for determining what year you can claim the credit is the year that the installation is complete. In other words, if you install solar electric panels and the work begins in December 2009 but is not finished and paid in full until March 2010, the credit year is 2010. If you receive subsidized financing from any governmental program, then any amount received must be subtracted from the total of otherwise qualifying expenditures the association made. Homeowner associations, generally, are not the ones that get these tax credits; like a partnership, the qualifying expenditures “pass-through” to the owners in the association (IRC Section 25D(e)(6)). In the words of the Internal Revenue Code, “such individual shall be treated as having made the individual’s proportionate share of any expenditure of such association.” In most CC&Rs, the wording “proportionate share” usually refers to the division of assessments. If your CC&Rs say, for example, that assessments are divided equally among the owners, then the solar or other energy-efficient expenditures are likewise divided equally among the owners. The same methodology would apply if the CC&Rs say that assessments are divided among the owners based on a variable percentage. If your CC&Rs say assessments are partially divided on an equal basis and partially on a variable basis, the advice of legal counsel should probably be considered about how solar and other energy-efficient expenditures are divided among the owners. It is the expenditures that are allocated to the owners and not any tax credit. Individual owners are informed of the total amount of

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Order the book today from ECHO Call 408-297-3246, fax 408-297-3517 or email: info@echo-ca.org ECHO Journal | December 2009

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and what kind of qualifying expenditures have been allocated to them. Individual owners calculate their credit amount on Form 5695. As stated previously, tax credits from residential energy efficient property are unlimited. Tax credits from the two other kinds of expenditures are limited to $1,500 for 2009 and 2010 combined with each other and combined for both years. Management will need to notify the associationâ&#x20AC;&#x2122;s owners, probably no later than January 31 of each year, if the association incurred any qualifying solar or energy-efficient expenditures and what their respective share was for the prior year. A simple example will illustrate how this all works out: Facts A 20-unit condominium building installs a solar water heating device (to be used for residential purposes) and a solar electric panel to provide electricity to the building. The total cost of the equipment is $200,000 and installation is another $100,000. The work was paid and completed by December 31, 2009. The association paid for the work with a special assessment to the owners of $300,000. According to the CC&Rs, assessments are divided equally among the owners. Results Total allowable expenditures to be allocated to owners = $300,000 ($200,000 equipment + $100,000 installation). Notice to owners by January 31, 2010 stating they each are allocated qualifying solar expenditures of $15,000. Each owner has an available tax credit for the 2009 year of $4,500 ($15,000 X 30%). While this article discussed, in general, solar and energy-efficiency federal tax credits, you should consult with your individual income tax preparer on the treatment of these tax credits in your individual income tax return. This article only discussed in a general way what kinds of qualifying energy efficient expenditures there are. You and management need to discuss thoroughly with any vendors whether or not any contemplated work qualifies for the tax credits and to get a written certification from them that the work does qualify.

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Bill Erlanger is a partner at Levy Erlanger & Co, CPAs, in San Francisco. He is a long-time member and a past chair of the Accountantsâ&#x20AC;&#x2122; Resource Panel.

Learn how to handle the toughest issues facing your homeowner association Seminar Agenda 8:00 a.m.

Registration and Continental Breakfast

8:45 a.m.

Welcome

9:00 a.m.

Legislative Update Sandra Bonato, Esq. See what Sacramento is doing—and wants to do— to your community.

9:30 a.m.

You be the Judge! David Feingold, Esq. Feuding neighbors, leaking decks and slanderous statements. Become a sitting judge and see if you agree with how the courts handled association disputes in 2009—and take away valuable lessons to apply immediately.

Oliver Burford

10:20 a.m.

Break

10:45 a.m.

40 Days and 40 Nights Glenn Youngling, Esq. Follow our fictional director Fred Freetime through his last 40 days—and 40 nights. From agendas to meetings to minutes and beyond. After this session you will handle every common issue with ease, by simply asking, “what would Fred do?”

11:35 a.m.

12:25 p.m.

12:55 p.m. 1:00 p.m.

Have to Do Something! Wanden Treanor, Esq. From sounds to smoke to sleaze, the demands on a community association board of directors to—do something—are greater than ever. Learn when how to respond and apply extraordinary solutions to ordinary problems. Questions and Answers All Speakers Bring your questions and concerns, get some answers and, most importantly, find out that you are not alone. Drawings for Door Prizes Adjourn

Don’t leave your association to fate. Learn how to deal successfully with the most pressing issues facing you and your association by attending the Marin County Seminar.

Marin County Seminar Saturday, January 30, 8:00 a.m. to 1:00 p.m. Embassy Suites, 101 McGinnis Ave., San Rafael Member Registration Cost: $45 Yes, reserve _____ spaces for the Marin Spring Seminar. Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517

December 2009 | ECHO Journal

By Lucinda Hoe

El Niño is on Its Way! he Climate Prediction Center of the National Weather Service issued an El Niño Advisory July 9, 2009 for the winter of 2009–2010. El Niño occurs when there are warmer than normal ocean surface temperatures in the Pacific Ocean. Changes in the ocean affect atmosphere and climate patterns and atmosphere changes affect ocean temperatures. It means that this coming winter is predicted to be a rainy one. With a heavy rain season predicted, roof leaks and water damage are inevitable. Start preparing now.

Roofs Clogged drains create ponding on flat roofs. The weight of the water and the natural tendency of water to drain cause roof leaks. Clear drains so water will drain properly away from the roof area. Vents Wind in the kind of storms that are predicted blows water up and into vents and eaves. Some of the leaks that may be reported are not actual leaks, but rather water entering openings in the

ECHO Journal | December 2009

building. Temporary protection can be placed to discourage the water from entering. Painted Surfaces

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Severe water damage can occur to any painted surface if the paint is failing (i.e., peeling, flaking, missing). Water can get in between the paint and the component surface. Water can then seep into surrounding areas causing even more damage. In the majority of cases the water-damaged component will have to be replaced. These replacements can be costly. Inspect painted surfaces and have the areas repainted as necessary. This will save a lot of money in the end. Gutters Gutters and downspouts need to be cleaned of leaves and debris to allow proper drainage. The diverters at the base of the buildings need to be checked to make sure they are in place and set to drain away from the buildings. Downspouts directed into surface drains should be checked to make sure the connections are secure. Downspouts should be flushed to make sure they are running clear. Surface Drains Drains throughout the common area need to be checked to make sure that they are clear of the debris that accumulates around them, preventing water from draining. The drains should be flushed and snaked or jetted, if necessary, to ensure clear flow of water. Brow Ditches Brow ditches are the main artery to divert water from slopes. Making sure that they are clear for a good flow of water is very important to prevent flooding. Low-Lying Areas Sandbags can be placed to discourage flooding and mudslides. These are just a few tips to start you on the road to getting ready for the rainy season. Whether it’s an El Niño season or not, be prepared by starting now.

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

December 2009 | ECHO Journal

Lucinda Hoe is Executive Vice President at NN Jaeschke in San Diego, California, an Associa company. This article was previously published in the Association Times, the monthly newsletter of Associa.

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.

By Marilyn Lincoln

Condominium Buyers and Owners Should Be Better Informed! his article is for the benefit of all new condominium and current owners who frequently should be at least a little more interested in how their property is managed. For years I have believed that association owners across the world lack the information they need regarding group ownership. Unfortunately, many condominium owners have no idea, until after they move in, what living in a community association really means in regards to rules, regulations, bylaws and declarations. I feel part of the responsibility to inform these buyers bet-

December 2009 | ECHO Journal

ter lies in the hands of the real estate agents and the lawyers, if any, involved with closing the sale. The condominium market has a lot of appeal, especially for semi-retired buyers and seniors who no longer want the responsibility of outside yard work and building maintenance. I want to help the prospective buyers, current owners and inexperienced directors become better informed regarding the daily operations and management of their condominium properties.

Buying a condominium unit should be investigated thoroughly by a prospective buyer before such a purchase is completed. This lifestyle is not for everyone, but it can be one of greater enjoyment if the property one is contemplating buying is fully understood in regards to its operations and management. A perfect example is the condominium town home complex that my husband and I managed for 15 years that came up for sale in 1991. We thought â&#x20AC;&#x153;What a great opportunity to buy our unit and become owners within our well-managed

complex!â&#x20AC;? Having been residential managers of this and other properties for years, we had no reservations about taking over the complete management of our condominium corporation. We called our first meeting of homeowners and everyone voted on improvements to be made, rules and regulations to be followed, etc. Then a nightmare began

Continued on page 30

ECHO Journal | December 2009

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

Additions to Member Listings Freddie Freitas, Jr. General Contracting and Maintenance, Inc. P.O. Box 2625 Petaluma, CA 94953 Contact: Freddie Freitas, Jr. Tel: 707-794-0132 Fax: 707-794-9342 Email: k_bruce04@yahoo.com Installation and remodeling services from foundations (and everything between) to the roof. Servicing Marin, Sonoma and Lake counties since 1984. Homeowners Management Co., LLC 3478 Buskirk Ave., # 342 Pleasant Hill, CA 94523 Contact: Jason Brown Tel: 925-937-1011 Fax: 925-937-1030 Email: jbrown@hmcpm.com www.hmcpm.com Homeowners Management Company is a full service property management firm delivering tailored financial, administrative and operational management solutions to homeowners associations in the East San Francisco Bay Area since 1989.

December 2009 | ECHO Journal

J & M Gutter, Inc. 44844 S. Grimmer Blvd. Fremont, CA 94538 Contact: John M. Silva Tel: 510-770-8515 Tel: 510-490-2494 Email: john@jmgutter.com J&M Gutter believes â&#x20AC;&#x153;serviceâ&#x20AC;? means putting the customerâ&#x20AC;&#x2122;s needs first: fast response usually within the same day; the highest quality work at fair prices; courtesy to customers and residents. Standing behind our work with fast follow-up service. Poolside Concierge, Inc. 201 Los Gatos-Saratoga Rd., Ste. 223 Los Gatos, CA 95030 Contact: David McElaney Tel: 408-786-1096 Fax: 408-317-1720 Email: dave@psc-pool.com Poolside Concierge specializes in providing weekly pool and spa service and equipment maintenance. As a licensed contractor in California, we are licensed to handle all pool equipment repairs and installation. We service all of San Francisco Bay communities.

Changes to Member Listings Bickel & Associates 6114 La Salle Ave., Ste. 510 Oakland, CA 94611 Address change onlyâ&#x20AC;&#x201D;all other information remains the same. Hanna & Van Atta, Attorneys at Law Contact: John Paul Hanna Email: jhanna@hanvan.com Fax: 650-321-5639 All other information remains the same. M. L. Nielsen Construction, Inc. Contact: Suzy Silvestre, Business Development Manager All other information remains the same.

6(59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 Â&#x2021; )5(0217 PLEASANTON Â&#x2021; &233(5232/,6 Â&#x2021; 02'(672 Â&#x2021; 6$17$ &/$5$

M & C Association Management Services provides community association management and developer services to Fremont, Pleasanton, Santa Clara, Stockton, Modesto, Copperopolis and the surrounding foothills. Since 1990, our sole focus has been to deliver performance that enriches communities and enhances the lives of the people we serve. M & C is proud to be an Accredited Association Management CompanyÂŽ (AAMCÂŽ), which is the Community Associations Instituteâ&#x20AC;&#x2122;s highest GHVLJQDWLRQ DZDUGHG WR PDQDJHPHQW Ă&#x20AC;UPV

3OHDVDQWRQ Â&#x2021; )UHPRQW Â&#x2021; 6DQWD &ODUD Stockton 209.644.4900 Â&#x2021; 0RGHVWR Â&#x2021; &RSSHURSROLV For management proposal information, please visit www.mccommunities.com or email info@mccommunities.com ECHO Journal | December 2009

Better Informed Continued from page 27

when a few owners decided to remove their existing garage doors to replace them with a more modern style. Another owner ordered new bedroom windows. Both parties neglected to consult with the corporation prior to making their replacements. We had to inform these owners to remove the upgrades and replace them with the original windows and garage doors. They had no idea that they owned exclusively only the inside of their unit. All other areas are called the common areas and are owned by everyone as a group. They could not understand why they needed written permission from the board for any changes or alterations they were considering to the outside common area. They assumed that, because they bought and now owned their condo, it was the same as buying a semidetached home. Unfortunately, they had not completed their homework in regards to condominium living, which does include the management of such a property.

Many problems and misunderstandings could be completely avoided and eliminated if only the owners were better informed. Our very first year of owner management was extremely challenging and at times very frustrating. At one of the earliest meetings, we witnessed heated arguments that almost escalated into physical fighting. At one point we had to attend court to defend of one our directors who had enforced a declaration by delivering a letter to an owner, notifying him of his violations. Fortunately, we did have directors insurance, which covered all our legal costs. Some of the problems that our corporation experienced years ago continue to exist in many of todayâ&#x20AC;&#x2122;s condominium communities. I have confirmed this while interviewing owners and directors from other associations.

Continued on page 37 30

December 2009 | ECHO Journal

Massingham & Associates. Competitive Price. Better Service. Massingham & Associates Management, Inc. has specialized in managing common interest developments since its inception in 1985. Weâ&#x20AC;&#x2122;re proud to say weâ&#x20AC;&#x2122;ve grown to be one of the largest community management firms in Northern California and we could not have accomplished that without great prices and even better service! We continue to be one of a select few full-service management companies in Northern

California to have earned the prestigious designation of

Certified Management Firm (CMF) by the California Association of Community

7BMVF t 6OFRVBMFE Customer 4FSWJDF t Expertise <

Managers (CACM). > Corporate Office 2247 National Avenue Hayward, CA 94545 P 510 780 8587 F 510 780 7535 800 863 MASS

Citrus Heights Office 6060 Sunrise Vista Drive Suite 2440 Citrus Heights, CA 95610 P 916 676 0024 F 916 676 0032

South Bay Office 550 Division Street Campbell, CA 95008 P 408 559 8001 F 408 371 5130

Concord Office 4085 Nelson Avenue Suite A Concord, CA 94520 P 925 405 4900 F 925 405 4747

For more information please visit us at www.massingham.com or call 800 863 MASS

ECHO Journal | December 2009

News from ECHO

E-Delivery of Budget Packages Beginning January 1, 2010, California’s community associations may distribute their budget packages and most annual financial disclosures to owners over the Internet. Owners’ written consent to receive their budgets by email will be required. Once that consent is obtained, however, budget distribution can become virtually paperless. The 21st century has at last arrived! AB 899 (Torres) was signed into law on October 11, 2009 and becomes effective on January 1, 2010. Sponsored by ECHO, AB 899 began as an effort to list in one location in the Davis-Stirling Common Interest Development Act all the annual financial disclosures that associations must make. By listing them in this new Index, omitting an important disclosure would be far less likely. The following items are listed in the index: • Pro Forma Operating Budget (which includes the Reserve Study) • Reserve Funding Plan • Annual Update of Reserve Funding Plan • Assessment and Reserve Funding Disclosure Summary (form) • Assessment Collection Policy 32

December 2009 | ECHO Journal

• Statutory Notice/Assessments and Foreclosure (form) • Secondary Address Notification Request • Insurance Coverage Summary • Board Minutes Access • Alternative Dispute Resolution Summary • Meet-and-Confer Program Summary • Architectural Changes Notice • Monetary Penalties (Fine) Schedule • Year-End Review of Financial Statement Once the Index was developed, ECHO’s effort turned to proposing changes in existing law to allow associations to make each of the listed disclosures available to consenting association members through their email addresses rather than by hard copy through the mail. Thousands of pages of paper, printing costs and postage could be saved. The changes in Davis-Stirling are both historic and simple. Existing law (Civil Code §1350.7) was amended in AB 899 to permit all notices listed in the new Index to be distributed electronically, by following the member consent requirements the Corporations Code, which in turn requires compliance with similar provisions in the Electronic Signatures in Global and National Commerce Act. The law has for some time authorized the following documents and notices to be e-delivered, with member consent: • Notices of Proposed and Adopted Rule Changes • Rule Changes Themselves • Notices of Member Petitions to Reverse Rule Changes

• Notices of Year-End Financial Reports ($10,000 to $75,000 in annual revenue) Even if a member consents to e-delivery, the following must still be prepared in written form and mailed or delivered as otherwise stated in the law: • 30 to 60 Day Notices of Assessment Increases and Special Assessments • Collection and Foreclosure Notices • Notices of Use of Reserve Funds • Disclosures to Sellers • Notices of Disciplinary Proceedings and of Sanctions Imposed • Notices of Construction Defect Litigation, Resolution and Repair Plans In short, if a particular disclosure or notice is not on the Index or not otherwise expressly permitted by law to be electronically delivered, then it can’t be.

El Niño Is On Its Way! The National Weather Service issued an El Niño Advisory last summer for the winter of 20092010. El Niño occurs when there are warmer than normal ocean surface temperatures in the Pacific Ocean. Changes in the ocean affect atmosphere and climate patterns and atmosphere changes affect ocean temperatures. It means that this coming winter is predicted to be a rainy

one. With a heavy rain season predicted, roof leaks and water damage are inevitable. Start preparing now. Roofs: Clogged drains create ponding on flat roofs. Clear drains so water will drain properly away from the roof area. Vents: Wind in the kind of storms that are predicted blows water up and into vents and eaves. Temporary protection can be placed to discourage the water from entering. Painted Surfaces: Severe water damage can occur to any painted surface if the paint is failing (i.e., peeling, flaking, missing). Inspect painted surfaces and have the areas repainted as necessary. Gutters and Downspouts need to be cleaned of leaves and debris to allow proper drainage. The diverters at the base of the buildings need to be checked to make sure they are in place and set to drain away from the buildings. Downspouts directed into surface drains need should be checked to make sure the connection is secure. Surface Drains throughout the common area need to be checked to make sure that they are clear of the debris that accumulates around them, preventing water from draining. The drains should be flushed and snaked or jetted, if necessary, to ensure clear flow of water. Low-Lying Areas: Sandbags can be placed to discourage flooding and mudslides. These tips will start you on the road to getting ready for the rainy season. Whether it’s an El Nino season or not, be prepared by starting now.

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

Author

Subject

Status

Position

Summary

AB 49

Feuer

Water Reduction

Failed passage; two-year bill

Watch

Would require the state to achieve a 20% reduction in urban per capita water use in California by December 31, 2020.

AB 121

Hernandez

Judgment Lien Extension

Signed by the Governor

Neutral

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 300

Caballero

Water Supply

Failed passage

Oppose

Would regulate water supplies to subdivisions of 50 units or more. The bill is long, controversial and will likely become a two-year bill.

AB 313

Fletcher

Tax-based Assessments

Signed by the Governor

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 370

Eng

Unlicensed Contractors

Signed by the Governor

Support

Would increase fines for unlicensed contractors.

AB 473

Blumenfield

Recycling Mandate

Vetoed by the Governor

Support if Amended

Would require an owner of a multi-family dwelling with five or more units to arrange for recycling services.

AB 566

Nava

Mobilehome Conversion Approval

Vetoed by the Governor

Support

In deciding whether to approve or disapprove a subdivision map, would allow a legislative body or advisory board to consider whether a majority of the residents in a mobilehome park approve conversion of the park to resident ownership.

AB 869

Mendoza

Mobilehome Park Managers

Failed passage; two-year bill

Support

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

AB 899

Torres

Disclosure Documents Index

Signed by the Governor

Support

Would require associations to distribute a list of all legally mandated disclosures to their members annually, if requested. Clarifies and improves provision allowing the electronic distribution of records.

AB 1061

Lieu

Low WaterUsing Plants

Signed by the Governor

Support

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. Allows associations to enforce landscaping rules and regulations.

AB 1328

Salas

Contract Restrictions

Vetoed by the Governor

Neutral

Extends to 5 years contract length restrictions for water or energy efficiency programs for associations when the board reasonably anticipates verifiable savings to the association. Requires the board to provide notice of the contract length before approving it.

SB 23

Padilla

Mobilehome Safety Plan

Signed by the Governor

Support

Would require all owners or operators of mobilehome or manufactured home parks to adopt an emergency preparedness plan. Requires that the plan be posted and that an enforcement agency determine park compliance.

ECHO Journal | December 2009

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

Condominium Bluebook 2010 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 homeowners associations who want to learn how to manage and operate the affairs of their associations effectively.

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.

ric ReP duce ed

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.

The Condo Owner’s $15.00 Answer Book Non-Member Price: $20.00 An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowners 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.

2009 ECHO Annual Seminar Program Book $15.00 Non-Member Price: $20.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2009 ECHO Annual Seminar held on June 13, 2009. It also contains vital information for association directors, such as assessment collection policies, internal dispute policies, and much more.

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

ECHO Events Calendar

Dates for your calendar Wednesday, December 2 Maintenance Resource Panel 12:00 Noon Location TBD Wednesday, December 9 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, December 11 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Tuesday, January 12 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, January 20 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

Wednesday, December 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgemt. Co. 6600 Hunter Dr., Rohnert Park Thursday, January 7, 2010 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, January 8 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Monday, January 11 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland

Thursday, January 21 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco Saturday, January 30 Marin County Seminar 7:30 a.m. to 1:30 p.m. Embassy Suites Hotel 101 McInnis Parkway San Rafael Wednesday, February 3 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

Saturday, February 6 Sacramento Seminar 8:00 a.m. to 1:00 p.m. Marriott Rancho Cordova 11211 Point East Dr., Rancho Cordova Wednesday, February 10 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, February 12 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek Wednesday, February 17 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

Thursday, March 18 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco Saturday, March 20 North Counties Seminar 8:00 a.m. to 1:00 p.m. Rohnert Park Comm. Center 5401 Snyder Ln., Rhonert Park Saturday, April 17 South Bay Spring Seminar 8:00 a.m. to 1:00 p.m. Campbell Community Center 1 E. Campbell Ave., Campbell Thursday, May 20 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco Friday and Saturday June 18 and 19, 2010 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Saturday, February 20 Central Coast Winter Seminar 7:30 a.m. to 1:30 p.m. Hilton Santa Cruz/Scotts Valley Thursday, July 15 6001 La Madrona Dr., San Francisco Luncheon Santa Cruz 11:45 a.m. St. Francis Yacht Club San Francisco

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

December 2009 | ECHO Journal

Meeting First Wednesday, Even Months First Thursday, Odd Months Second Friday, Monthly 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 Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Il Fornaio, San Jose Eugene Burger Management Co., Rohnert Park Varies

Better Informed Continued from page 30

I have discovered numerous problems and misunderstandings. These problems could be completely avoided and eliminated if only the owners were better informed. I sincerely want to help other condo owners and directors enjoy the peace and harmony that we now have within our community. Owners can make a difference in their community, if they would only take the time to better educate themselves regarding the operations of their valuable investment. I am aware of certain cases where owners had no choice other than to sell their investment. This was due to poor management that resulted in large special assessments and continuous substantial increases to their condominium fees, which owners could no longer afford, especially those on fixed incomes.

aged. Whether you are self-managed or professionally managed by a management firm, it is very important to confirm in both cases that you are being managed with the utmost standard of care in accordance to your bylaws, declarations, rules and regulations and the condominium laws for your state. I strongly recommend to anyone who is considering buying or is a new resident of a condo to do his or her homework regarding what it means to live in a community association. Be sure that you are able to accept and live with all the advantages and very few disadvantages of group ownership.

Over the last 26 years, I have learned a lot about being a volunteer director, owner and manager. The success of any corporation highly depends on the expertise of its board of directors and how well a property is man-

Marilyn Lincoln has 26 years experience in condominium management in Ontario, Canada. She is a member of the Canadian Condominium Institute and has authored a guide on condominium self-management.

Seasons Greetings from ECHO

ECHO Journal | December 2009

ECHO Honor Roll

About ECHO

ECHO Honors Volunteers Tyler Berding 2009 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 Newton, 925-937-0434 Legal Panel Mark Wleklinski, Esq. 925-280-1191 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 A. Barnett, Esq. Sandra Bonato, Esq. Jerry L. Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

December 2009 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey A. Barnett, Esq. 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 Sandra Gottlieb, Esq. 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 August 2009 Tyler P. Berding, Esq. Damon Burk Michael Gartzke, CPA Patrick Hendry Tracy Neal, Esq. Judy O’Shaughnessy David C. Swedelson, Esq. September 2009 John D. Garvic, Esq Roy Helsing John Schneider October 2009 Tyler P. Berding, Esq. John D. Garvic, Esq. Geri Kennedy, CCAM Karl Lofthouse Marcia Nylander Dick Tippett November 2009 Ken Bade, PCAM Matt Malone, Esq. Ann Rankin, 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.

Fire Alarm Systems Fire Sprinkler Systems Testing, Service, Design & Installation

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

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408-295-7767 or 877-295-FLOW

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Complete Service and Repair Plumbing Copper and CPVC 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. An excellent guide to understanding the rights and responsibilities of condo ownership and homeowner associations operation. 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. Order today from ECHO! Call 408-297-3246 Fax 408-297-3517 Email: info@echo-ca.org ECHO Journal | December 2009

Government Affairs

HUD Policy for Condominium Project Eligibility he Federal Housing Authority (FHA) issues loans to borrowers on terms that are often better than national market rates. To qualify for a housing loan, a borrower must purchase a qualified property. In the case of condominiums, the FHA has a long list of requirements that define an eligible condominium.

Earlier this year, in response to the drastic changes in the housing market, the FHA released new guidelines for condominium loans that dramatically raised the bar for eligible properties. Among many changes, the new guidelines required associations to fund their reserves at 60 percent, keep the owner occupancy rate at 50 percent, and maintain a delinquency rate below 15 40

December 2009 | ECHO Journal

percent. Those guidelines were set to become effective on November 2. The new restrictions prompted an immediate backlash from association interest groups. Those groups pointed out that guidelines were unrealistic and would further depress a floundering housing market. The FHA responded by delaying the implementation date, and on November 6 they issued amended guidelines. The amendments ease some of the new requirements and further delay their effective date until December 7. Reserve Requirement The FHA has removed the requirement that eligible associations obtain an annual reserve study

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Adver tiser Index

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Advertise your business to thousands of association directors in California in the ECHO Journal. HUD Policy

Owner Occupancy The FHA continues to require that eligible associations have an owner occupancy rate of at least 50 percent. However, the new guidelines include language that loosens the requirement. They state that “[a]t least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units. Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).” Delinquency Rate The FHA has not changed its requirement that associations maintain a delinquency rate that does not exceed 15 percent. Associations seeking FHA eligibility will need to monitor their delinquency rate closely.

Condominium Financial Mgmnt . . . .14 Cool Pool Service . . . . . . . . . . . . . .24 Cornerstone Community Mgmnt . . . . .8 Draeger . . . . . . . . . . . . . . . . . . . . .13 Ekim Painting . . . . . . . . . . . . . . . . .31 First Bank Association Bank Services30 Flores Painting . . . . . . . . . . . . . . . .29

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and maintain their funding level above 60 percent. The new guideline says that the association’s budget must provide for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10 percent of the budget.

Angius & Terry . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . .24 AquaTek Plumbing . . . . . . . . . . . . .39 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .19 Bayridge Group . . . . . . . . . . . . . . . .14 Berding | Weil . . . . . . . . . . . . . . . . .44 Coastal Termite Control . . . . . . . . .18 Collins Management . . . . . . . . . . . .37 Community Association Banc . . . . . .18 Community Management Services . .28 Compass Management . . . . . . . . . .13

“Spot Loan” Approval Process In the original set of guidelines, the FHA announced that it would stop using its “spot loan” approval process for applications in condominiums that were not pre-approved. The FHA will allow spot approval until February 1, 2010, after which it will eliminate the practice. FHA Concentration Requirements To qualify for FHA loans, the original guidelines required that associations have fewer than 30 percent FHA backed loans. The new guidelines raise that maximum to 50 percent. Established associations may also qualify for several exemptions to the 50 percent limit, but new associations and conversions may not.

Focus Business Bank . . . . . . . . . . .12 Helsing Group . . . . . . . . . . . . . . . .14 Hill & Company. . . . . . . . . . . . . . . .43 M&C Association Services . . . . . . . .29 M. L. Nielsen Construction . . . . . . .30 Massingham and Associates . . . . . .31 Pelican Management Group . . . . . . .18 PML Management Corp. . . . . . . . . .39 Pollard Unlimited . . . . . . . . . . . . . .31 Pro-Craft Builders . . . . . . . . . . . . . .20 Professional Association Service . . .20 R. E. Broocker Co. . . . . . . . . . . . . .24 REMI Company . . . . . . . . . . . . . . . .19 Saarman Construction . . . . . . . . . . .9 Statcomm . . . . . . . . . . . . . . . . . . .39 Steve Tingley Painting . . . . . . . . . . . .2

Pre-Sale Requirements In the case of new construction, the FHA guidelines previously required that 50 percent of all units be sold before an association could qualify. The new guidelines temporarily reduce that requirement to 30 percent and provide information about how to calculate the pre-sale percentage. Beyond the changes above, the FHA expands on all of the new policies in two letters from November 6. Links to those letters are available on the ECHO website on the News page: echoca.org/news. ECHO Journal | December 2009

Officers and Directors Update Association Presidents or Secretaries President Name

Term of Office:

to:

Address City and State

Zip:

Business phone ( Home phone (

Please complete and send to: ECHO 1602 The Alameda, Suite 101 San Jose CA 95126-2308 Tel: 408-297-3246 | Fax: 408-297-3517 Or email changes to: info@echo-ca.org

) )

Date

Association Name

Vice President

Association Address

Name:

Term of Office:

to: City

Address: Zip

City and State Business phone ( Home phone (

County

Zip

County

Zip

Management company or manager Address

)

City

)

Email:

Management phone (

Secretary

Dues statements should be mailed to:

Name

Term of Office:

)

to:

Address City and State

Zip

Business phone ( Home phone (

Please complete the items listed below. This information is for use in the ECHO Office and will assist us in the planning of future programs.

) )

1. Type of Association:

Treasurer Name

Term of Office:

to:

Address

[ ]

Condo

[ ]

2. Total Number of units: 3. Average Monthly Assessment/unit:

Zip

City and State Business phone ( Home phone (

(Please check one)

4. Annual Meeting Date: 5. Type of Management:

)

Volunteer self-management

[ ]

Management company

[ ]

On-site manager

[ ]

Other

[ ]

)

Board Member Term of Office:

Name

to:

6. Does your association have earthquake insurance? Yes [ ]

No [ ]

Address Zip

City and State Business phone ( Home phone ( Email

) )

Please provide information for additional board members on an attached sheet. Note: All officers and directors are entitled to receive copies of the ECHO newsletter. A special subscription rate of $50/year is available to those homeowners who live in an ECHO member association but are not on the board.

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