Journal_10_10

October 2010

A Journal for California Community Association Leaders

echo-ca.org

2009 Association Financial Health

ALSO INSIDE THIS ISSUE:

• Contract Clause Traps for Unwary Boards • Courts Refuse to Enforce Arbitration • Fight Night or Fight Nice?

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Contents Helping Lambs Slay Lions—page 22

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2009 Association Financial Health This 2010 survey of Northern California associations reveals a weakening of financial strength but an optimistic improvement in the reserves percent funded. Essentially, the average community association has about half of the reserve funds on deposit that its reserve study recommends.

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 2010 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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Boards enter into a variety of agreements with suppliers to provide services to residents. Often they sign them without paying much attention to the terms. This article discusses why the inclusion of an automatic renewal clause in any agreement should be anything but a minor concern.

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22

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Contract Clause Traps for Unwary Boards

28

Board of Directors and Officers

Associations can take solace in the fact that courts are reluctant to enforce CC&R provisions that take away the association’s right to have their disputes heard by a jury. This article discusses two recent court decisions that address the enforceability of binding-arbitration clauses.

President David Hughes

Fight Night or Fight Nice?

Why is there so frequently a lack of civility within associations and, in particular, between board members and homeowners? In this article, consultant Julie Adaman posits the reasons there is so much conflict and takes a look at what can take some of the fight out of fight night.

30 News from ECHO 31 Legislation at a Glimpse 32 Directory Updates 36 ECHO Bookstore 38 Events Calendar 40 ECHO Volunteers 41 ECHO Marketplace 41 Advertiser Index

On the Cover Association Financial Health —page 6 4

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Courts Refuse to Enforce Arbitration Clauses

Departments

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Vice President Karl Lofthouse Treasurer Diane Rossi Secretary Dorothy Kopczynski 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 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.

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October 2010 | ECHO Journal

By Tyler P. Berding, Esq. and David H. Levy, CPA

Community Association Financial Health A Silver Lining in the Midst of Economic Turmoil ommunity associations are not immune from the current economic crisis. When people lose their jobs and stop paying their mortgages, many also stop paying their association assessments. How have California community associations been affected? This survey of nearly two thousand primarily Northern California community associations reveals a mixed bag: a weakening of financial strength (in terms of receivables) but an optimistic improvement in the reserves percent funded (for approximately 1,300 surveyed associations). For purposes of this survey, financial strength has been limited, generally, to looking at cash balances, assessments receivable, the reserve obligation (lia-

C

bility) and resultant reserves percent funded.

The Survey The population of surveyed associations consists of approximately 1,800 mostly Northern California community associations [1,774 in 2009, 1,823 in 2008 and 1,920 in 2007; not all associations are included in all computations if certain specific financial data (e.g. reserve liability) was not available]. Management companies manage the majority of associations and most are within the nine Bay Area Counties. Data is drawn from year-end financial statements for yearends between April 1, 2009 and March 31, 2010 for 2009 data, and similar date ranges for 2008 and 2007 data.

ECHO Journal | October 2010

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Am azon custom ers gave ita 5-star rating

Three leading Northern California professional service providers in the CID industry sponsored the survey: Berding | Weil, Levy, Erlanger & Company CPAs and Pro Solutions.

Survey Results—Assessments Receivable From 2007 to 2009, a period of two years, the overall average number of days of assessment revenues in assessments receivable has increased by more than 40% from 21 days to 30 days (Exhibit A). This means that it now takes an association an average of 30 days to

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collect its assessments, an increase of more than 40% from the previous 21 days.

In terms of dollars, this represents an increase of $17.4 million (not adjusted for inflation) from $17.9 million in 2007 to $35.3 million in 2009 for the roughly 1,800 surveyed associations. If these numbers were extrapolated to the estimated current statewide total of approximately 48,000 associations, total current assessments receivable Days assessment revenues in receivables 2009

2-year percent change

2007

Small associations (2-25 units)

28

19

+47%

Medium associations (26-100 units)

31

24

+29%

Large associations (101+ units)

30

22

+36%

Exhibit B Days assessment revenues in receivables 2009

2-year percent change

2007

Planned unit developments

35

27

+30%

Condominiums

27

19

+42%

Exhibit C Days assessment revenues in receivables 2009

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2007

Urban associations (San Francisco)

16

11

+45%

Suburban associations (Bay Area)

33

24

+38%

Rural associations (Central Valley)

46

39

+18%

Exhibit D 8

2-year percent change

could approximate 27 times the survey number or nearly $1 billion (potentially double the balance of two years earlier).

When one looks at the size of the association (Exhibit B), smaller associations have generally fared better than larger ones.

Generally speaking, delinquent assessments are up by one third to one half from their base in 2007.

When one looks at the type of development (Exhibit C), planned unit developments (PDs, consisting largely of detached single family homes in suburban and rural areas) have generally fared better than condominiums (consisting largely of attached, apartment-style projects in urban and suburban areas). In California, condominiums (including condominium conversions) generally outnumber PDs by a factor of two to one.

When one looks at the location of the association (Exhibit D), urban (represented

by San Francisco) associations have generally fared worse than suburban (other Bay Area counties) in terms of managing delinquencies (measured by days assessment revenues in receivables), and the latter have generally done worse than rural associations (represented by the Central Valley). These results, while counter intuitive relative to a higher expectation of foreclosures in the Central

Size 2,3

2009

2007

2006

Number of associations

1,275

1,137

1,252

687

Small (2-25 units)

46%

38%

47%

43%

Medium (26-100 units)

51%

48%

51%

53%

Large (101+ units)

59%

56%

58%

55%

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2003

Exhibit E

MANAGEMENT SERVICES

Age 2,4

2009

2007

2006

Number of associations

1,275

1,135

1,248

680

New (1-5 years)

63%

56%

75%

80%

Young (6-10 years)

65%

62%

70%

81%

Adolescent (11-15 years)

64%

65%

60%

77%

Mature (16-20 years)

58%

53%

53%

63%

Old (21+ years)

47%

42%

45%

43%

2003

Serving Homeowners Associations Since 1990

SAINT MARY’S COLLEGE

Exhibit F Development Type 4

2009

2007

2006

Number of associations

1,273

1,135

1,180

648

Condominiums and conversions

817

745

650

400

Planned unit developments

456

390

530

248

Condominiums and conversions

47%

44%

46%

52%

Planned unit developments

62%

58%

63%

59%

Exhibit G

2003

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Small associations (2-25 units) Medium associations (26-100 units) Large associations (101+ units) Exhibit H

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October 2010 | ECHO Journal

Valley, might be explained by a smaller sample size and predominance of professional management in our Central Valley sample.

Survey Results—Reserves Reserve Cash Balances From 2007 to 2009, aggregate reserve cash increased by 25% based on an average balance of $202,000 per association in 2007 (1,920 associations, $388 million aggregate cash) vs. $254,000 per association in 2009 (1,774 associations, $450 million aggregate cash).

Reserve Liability From 2007 to 2009, aggregate reserve liability increased by almost 4% based on an average balance of $681,000 per association in 2007 (1,138 associations, $775 million aggregate reserve liability) vs. $706,000 per association in 2009 (1,278 associations, $902 million aggregate reserve liability).

Reserve Percent Funded From 2007 to 2009, the average reserve percent funded increased by approximately 8% based on an average percent funded of 49% in 2007 (1,138 associations) vs. 53% per association in 2009 (1,278 associations) (Exhibit E). Averaging the actual percent funded for each of the 1,278 and 1,138 asso-

Days assessment revenues in receivables 2009

2007

2-year percent change

18%

16%

+13%

27%

26%

+4%

25%

24%

+4%

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ciations made this last computation. The computation results would suggest that, on average during the past two years, association boards are properly paying attention to the importance of funding reserves, despite tough economic times.

On the down side, even the 53% funded is virtually unchanged from similar survey results in 2003 of 54% funded (based on 687 primarily Northern California associations) and 2006 of 53% (based on 1,254 primarily Northern California associations).1 When one looks at percent funded based upon the parameters of size (Exhibit F), age (Exhibit G) and type of development (Exhibit H).

Consistent with prior survey findings, larger associations tend to be better funded than smaller ones. Also, in all size categories between 2007 and 2009, percent funded has generally improved.

Consistent with prior survey findings, newer associations tend to be better funded than older associations. Also, in most age categories between 2007 and 2009, percent funded has generally improved.

Consistent with prior survey findings, planned unit developments are generally better funded than condominiums and

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condominium conversions. This is often due to the fact that PDs have far fewer common area major components than condos, and the fact that condominium conversions often begin their lives in an underfunded state.

Also, in all development type categories between 2007 and 2009, percent funded has improved.

Assessment Revenue From 2007 to 2009, assessment revenue per association increased by 30% based on an average annual income of $213,000 per association in 2007 (1,920 associations, $408 million aggregate assessments) vs. $276,000 per association in 2009 (1,774 associations, $490 million aggregate assessments). The large increase is probably due to special assessments.

Reserve Assessment Allocation From 2007 to 2009, budgeted aggregate reserve assessment revenue increased by 23% 12

October 2010 | ECHO Journal

based on an average annual allocation of $51,000 per association in 2007 (1,920 associations, $98 million aggregate reserve assessments) vs. $68,000 per association in 2009 (1,774 associations, $121 million aggregate reserve assessments).

Reserve Funding Percentage From 2007 to 2009, the allocation of reserves from total assessments increased by approximately 2% from 22% in 2007 to 24% in 2009 (Exhibit I).

When one looks at the size of the association (Exhibit J), smaller associations have generally allocated a lower (though increasing) percentage of assessment revenue to reserves than larger ones: Because the financial statements surveyed were generally prepared on the accrual basis of accounting, as required by California state law and generally accepted accounting principles (GAAP), it is not possible to ascertain the percentage of associations that have ECHO Journal | October 2010

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actually funded the budgeted (allocated) reserve assessments.

Conclusion The current survey shows an increase in the overall average number of days of assessment revenues in assessments receivable.

This means that it takes more time and more effort by associations to collect their assessments. Providing timely information to the directors may help to manage the assessments receivable of the association. Without prompt payment of their assessments by the homeowners, the association cannot operate, so delinquent assessments must be addressed and collection efforts made. Assessments receivable may be reduced through monthly homeowner billing statements, lockbox services, contacts with collection agencies, monthly payment reporting, and homeowner payment history reports.

This 2010 version of our survey reaches conclusions similar to those reached in prior years and finds that the trend toward underfunding of reserves has continued.

Essentially, the average community association has about half of the reserve funds on deposit that its reserve study recommends.

This does not mean that they are halfway to their goal. It means that they have only half of what they should have reserved by that point in time—leaving unanswered the question of where the funding will come from to restore common area components when it’s needed. The long-term impact of this trend is that many community associations will have to resort to special assessments or bank loans in order to perform necessary repairs and rehabilitation.

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October 2010 | ECHO Journal

The trend is especially prominent in older, smaller condominium associations that average less than half of the reserves on deposit than what is recommended. On the other hand, larger, newer, planned developments have above average amounts in their reserve accounts, although less than recommended in most cases. This is largely due to the fact that newer associations have not encountered the unexpected repair and maintenance expenses that often plague older projects. Also, condominium associations have responsibility for more of the structural components of a building than do associations in planned developments.

Deterioration in hidden and inaccessible areas of the buildings—in deck and roof sheathing, framing, and inside of walls—can surprise even an association with well-funded reserves. If an association with underfunded reserves encounters unexpected reconstruction issues, it can severely strain its financial well-being.

Properly funded reserves can not only insulate a community association from surprise expenses, they can add positive value to the homes in the community. As more buyers understand the role that reserves play in a community, the more a well-funded program will be recognized as an asset. This 2010 survey indicates that such recognition may still be a few years away.

Tyler Berding, Esq., Berding | Weil.

David Levy, CPA, Levy, Erlanger & Company 1 “Failure Of Voluntary Reserve Funding,” Tyler Berding and David Levy, ECHO Journal, November 2006.

2 Based on the 2009 Community Associations Statistics book, in Northern California (approximately 15,000 associations total) 49% are small, 32% are medium and 19% are large. Of the surveyed associations in 2009, 20% are small, 48% are medium and 32% are large.

3 Based on the 2009 Community Associations Statistics book, in Northern California (approximately 15,000 associations total) 17% are new, 11% are young, 9% are adolescent, 92% are mature, and 54% are old. Of the surveyed associations in 2009, 8% are new, 11% are young, 9% are adolescent, 10% are mature, and 62% are old.

4 Based on the 2009 Community Associations Statistics book, in Northern California (approximately 15,000 associations total) 53% are condominiums and condo conversions, 45% are planned unit developments, and 2% are other. Of the surveyed associations in 2009, 66% are condos/conversions and 34% are PDs. ECHO Journal | October 2010

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By John E. Shaffer, Esq.

Contract Clauses May Set Traps for Unwary Boards ost condominium associations enter into a variety of agreements with different vendors and suppliers to provide essential services, such as laundry room facilities and landscape maintenance, to condominium residents. Boards often sign these agreements without paying much attention to the legal terms governing the relationships, but imagine the following scenario: Your association’s five-year contract with its laundry room vendor is ending (and not a moment too soon as far as most board members are concerned). Although the company hasn’t done anything terribly

M

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October 2010 | ECHO Journal

wrong, its level of service has slipped steadily over the past couple of years and you’ve found another vendor offering the association a much better deal along with the promise of better service. You send a letter to the laundry company explaining that the association does not intend to renew the parties’ existing agreement and asking the company to remove its laundry equipment from your property at the end of the contract term.

ECHO Journal | October 2010

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Shortly thereafter, however, the laundry company’s in-house attorney responds with a letter indicating cheerfully that the contract, in fact, has already renewed for another five years. The letter explains that the association’s contract included a “self-renewal” clause requiring the association to provide “notice of an intent not to renew no less than 90 days but no more than 120 days prior to the end of the current contract term.”

Since the association failed to provide that required written notice within the contractual window, the contract automatically renewed itself. As a result, not only can’t you take advantage of that better offer (which you better not have signed before getting out of the existing agreement), the association is going to be stuck for another five years with a vendor you don’t like who, having now locked you in for another five years, will have little incentive to try and make you like him better. Adding the potential for future insult to that injury, unless someone is paying attention when this new contract ends, the association could find itself in the same position five years from now. That’s why they call these self-renewal provisions “evergreen”—because they can last virtually forever.

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October 2010 | ECHO Journal

A Major Concern Although such self-renewal provisions are common in contracts for services that are provided regularly— for example, laundry room management, garbage pick-up and elevator maintenance—they often go unnoticed when the contract is being negotiated, because boards tend to focus primarily on price, often to the exclusion of other concerns.

If questioned about the contractual language, vendors will usually downplay its significance, insisting that it is a “minor” provision that protects both parties; and the board can avoid the automatic renewal by providing the required notice. In fact, the inclusion of an automatic renewal or evergreen clause in any agreement should be anything but a minor concern.

Such provisions protect the vendor’s interests while potentially prejudicing the interests of the association. And while it is true that proper notice will short-circuit the automatic renewal of the agreement, given the likelihood that association boards and management companies will change during any five-year period, it is highly unlikely that anyone will notice the automatic renewal provision and the required notification date in time to prevent the renewal.

Somewhat less common than self-renewal provisions, but equally undesirable for community associations, is the “right of first refusal” that many vendors insert in their contracts. A right of first refusal entitles the existing vendor to match the material terms offered by a competing firm at the end of the current contract. Depending on how this clause is drafted, the existing vendor may have the right to exercise its right of first refusal well after the current agreement has expired or been terminated. Like the selfrenewal clause, a right of first refusal can act like fly paper, binding an association indefinitely to a relationship it may well want to end.

Limited Options If you have an agreement with a vendor that includes one or both of these traps—and they are in fact traps—your options are somewhat limited: You can hold your nose, accept the new contract and hope the vendor commits a significant breach that gives you a basis for terminating it.

You can negotiate with the vendor to waive the fly-paper provision. Your prospects here aren’t great, however, because vendors won’t easily relinquish the option of locking a client into a new long-term contract, particularly in a difficult economy when vendors will do all they can to hang on to the clients they have. Most vendors either won’t waive their right under an existing contract or they will demand a buy-out price that associations are unable or unwilling to pay.

You can ignore the objectionable provisions, sign a contract with the vendor you prefer and dare the existing vendor to sue you. Most will do precisely that. One recent example: Anticipating that a laundry company the association wanted to replace would exercise its right-of-first refusal, the board obtained a proposal from a vendor offering to install new equipment under a one-year contract, foregoing the longer-term most laundry vendors require in order to recoup their up-front investment in the equipment they provide. The existing vendor has claimed the offer is a sham and is threatening to sue the association for negotiating in bad faith.

While suing a client is not a recommended business practice, this example illustrates the importance vendors attach to flypaper provisions and the lengths to which they will go to enforce them. Large companies—the ones most likely to have self-renewal or right-

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of-first-refusal provisions—are also likely to have in-house counsel; so litigation costs won’t be a serious concern for them, as they should be for community associations. The vendors also have the law on their side. Many of these provisions may be unpalatable but they are enforceable. If you signed the contract, you accepted its terms, even if you didn’t anticipate how problematic they might become in the future.

Just Say No The best way to deal with undesirable contract provisions is to keep them out of the contract at the start, even if that means accepting a smaller cut of the revenue (on a laundry service contract) or selecting a vendor who charges more. The best way to avoid signing an agreement containing objectionable terms— those discussed in this article and a host of others not mentioned here—is to have your attorney review the agreement terms before signing.

If you elect to proceed without counsel, there are a number of things you can do to minimize the likelihood that you will be contacting your attorney later to ask how the association can get out of this objectionable contract: • Put extended terms (more than two or three years) on your list of undesirable contract provisions. With the exception of laundry service companies, which have a legitimate need to recover their investment in the equipment they provide, most vendors have no justification for locking the association into a long-term agreement, other than that it is clearly in their interests to do so. An association has a much better chance of rejecting undesirable provisions during initial contract negotiations than of persuading a vendor not to enforce them after the contract has been signed.

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October 2010 | ECHO Journal

• If a board decides its preference for a particular vendor outweighs its concerns about the self-renewal clause, it should insist on language requiring the vendor to provide a reminder of the required termination notice at least 60 days before the deadline. The board should also make sure that someone is responsible for keeping track of the non-renewal notification dates for this contract and any others with similar provisions and make sure, as well, to comply with the notice requirements, e.g., sending the notice by certified mail or mailing it to a particular address.

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• If your board is putting a contract out to bid, make it clear to competing vendors from the start that you consider self-renewal and right-of-first-refusal clauses to be non-starters or include a proposed agreement that the association will accept in the bid package.

• If you are skipping the bid process and negotiating with a selected vendor, ask that vendor to provide a copy of its standard contract up front, before the negotiations begin. This is not a standard request, but there is no reason boards shouldn’t insist on it, in the interest of getting flypaper provisions on the table (and preferably out of the contract) as quickly as possible.

John Shaffer is an attorney with the Boston law firm, Marcus, Errico, Emmer & Brooks, P.C. He focuses his current practice in the civil litigation practice group and construction defect litigation.

The firm is active in the community association industry.

ECHO Journal | October 2010

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“Do I believe in arbitration? I do. But not in arbitration between the lion and the lamb, in which the lamb is in the morning found inside the lion.”

—19th Century Labor Union Organizer and Activist, Samuel Gompers

By Jan A. Kopczynski, Esq. and Gabriel P. Rothman, Esq.

Helping Lambs Slay Lions California Courts Refuse to Enforce Binding Arbitration Clauses in Developer-Drafted CC&Rs

hose who read our article in the January 2009 ECHO Journal entitled, “Homeowners Associations have a Right to a Jury Trial in Disputes with their Developers,”1 are already familiar with the growing body of law in California where courts have refused to enforce provisions in developer-drafted CC&Rs that deny homeowners and homeowners associations the right to have their disputes with developers heard in court. These types of one-sided provisions, such as binding-arbitration clauses, judicial-reference provisions and “jury-trial waivers,” have been discussed at length by our state appellate courts over the last ten years.

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October 2010 | ECHO Journal

Since that article was published, two recent decisions have been published by the Courts of Appeal that specifically address the enforceability of binding-arbitration clauses in lawsuits brought by developers against homeowner associations. This article will discuss the impact of those decisions in an effort to provide guidance to board members who may not be aware of how these types of provisions can dramatically affect the legal rights of the homeowner association that they govern.

1 See article: “Homeowners Associations have a Right to a Jury Trial in Disputes with their Developers.”

ECHO Journal | October 2010

23

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But before we get to that discussion, we briefly summarize the earlier appellate opinions that were discussed in the 2009 article: In Villa Milano Homeowners Assn. v. Il Davorge, 84 Cal. App. 4th 819 (2000) (“Villa Milano”), the Court of Appeal found that a developer’s arbitration clause in a set of CC&Rs was not enforceable by the developer in a case brought by the homeowners association to recover damages for construction defects. The court ruled that the arbitration clause was “unconscionable,” and therefore invalid, given that it was not a negotiated term of the CC&Rs and because the developer essentially buried the provision at the end of the 70-page set of governing documents.

In Grafton Partners v. Superior Court, 36 Cal. 4th 944 (2005) (“Grafton”), the Court of Appeal ruled that the right to a jury trial is so fundamental—indeed it is enshrined in the state Constitution—that it cannot be “frittered away or committed to the uncontrolled caprice of every judge or magistrate in the state.”2 The court found that, even in disputes between developers and nonprofit organizations such as homeowner associations, the right to a jury trial is so important that is must be “‘zealously guarded” in the face of a “claimed waiver.” The claimed waiver in that case was a provision in the CC&Rs that purported to waive the association’s right to a jury trial.

And in Treo @ Kettner Homeowners Association v. Superior Court, 166 Cal. App. 4th 1055 (2008) (“Treo”), the Court of Appeal refused to enforce a “judicial-reference” provision contained in a homeowner association’s set of CC&Rs. A judicial referee is an independent lawyer who is hired by the parties to hear their dispute and, in some instances, has the power to decide the lawsuit outside of court. The homeowner association in that case wanted to have its dispute heard by a jury in a court of law, not by judicial referee.

The Treo court found that CC&Rs are not a permissible means of enforcing judicial-reference clauses because neither the association nor the homeowners have actual notice or meaningful reflection to accept or reject such a clause given that clause was drafted by the developer and imposed upon the association before the homeowners took control of the board. The court noted that this problem particularly relates to later purchasers who are not original homeowners under the CC&Rs. As successor owners, these homeowners certainly have no opportunity to

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October 2010 | ECHO Journal

reflect meaningfully on such a provision and choose to accept or reject it.

The above three opinions have been joined by two recent decisions from the Fourth District Court of Appeal in San Diego that speak specifically to the enforceability of binding-arbitration clauses: Villa Vicenza Homeowners Association v. Nobel Court Development, LLC, 185 Cal. App. 4th 23 (May 2010) (“Villa Vicenza”), and Pinnacle Museum Tower Association v. Pinnacle Market Development, LLC, 10 C.D.O.S. 9830 (August 2010) (“Pinnacle”).3 These two opinions go a step further than Villa Milano, Grafton, and Treo and essentially “take the gloves off” in the continuing fight against these types of one-sided developer-drafted CC&R provisions.

Can CC&Rs Require a Homeowners Association and its Members to Arbitrate their Claims against Developers Outside of Court and Without a Jury?

That is the key issue that the Court of Appeal addressed in Villa Vicenza. In that case, the developer, Nobel Court Development, LLC (“Nobel”), purchased a 418-unit apartment complex in 2004 and converted the apartments into condominiums in 2005. Nobel then drafted the CC&Rs and formed the Villa Vicenza Homeowner Association to operate and manage the development. After the association discovered construction defects in the common areas, and upon learning that Nobel did not provide sufficient reserve funds to repair the defects, a lawsuit was brought against Nobel for damages. After failing to resolve the dispute through mediation, Nobel filed a motion to compel the parties to arbitrate their dispute outside of court, relying on the arbitration provision in the CC&Rs. The trial court denied the motion, and Nobel appealed.

At the appellate level, the court relied on the reasoning in Treo to strike down Nobel’s arbitration clause. In particular, the court emphasized the inequity that results from the fact that CC&Rs are drafted long before the homeowners purchase their units and, often2 Grafton at page 956.

3 As of this writing, Villa Vicenza is being reheard by the Court of Appeal regarding four factual-based issues. As such, it may not be cited as controlling law at this time. Nevertheless, the legal principles that are discussed in that opinion are instructive, and they illustrate how the appellate courts are currently analyzing these one-sided provisions that developers are including in CC&Rs.

times before the homeowners association is formed. As such, CC&Rs are almost universally never negotiated between the parties, and the provisions can be difficult or impossible to modify. Moreover, a set of CC&Rs can be extremely long and dense, making it difficult for the association and the homeowners to ferret out the existence of binding-arbitration provisions such as the one in Villa Vicenza.

In short, the Court of Appeal reasoned that developer-drafted CC&Rs do not provide homeowners or homeowners associations with adequate notice or opportunity to reflect meaningfully on how these types of one-sided provisions impact their constitutional rights. As a result, there can be no real agreement between a developer and a homeowner association to waive the association’s right to jury trial through a binding-arbitration provision that is inserted by the developer in a set of CC&Rs. Should the Court of Appeal uphold Villa Vicenza following rehearing, the opinion will provide strong precedent for the point that binding-arbitration provisions in CC&Rs cannot be used by developers to circumvent the constitutional right of homeowner associations to have its dispute heard by a jury.

Pinnacle Museum Tower v. Pinnacle Market Development, LLC: BindingArbitration Provisions in CC&Rs are Not Enforceable by Developers As with Villa Vicenza, the Pinnacle opinion arose out of a developer’s attempt to force a homeowner association to submit its lawsuit against the developer to binding arbitration after the parties were unable to resolve their dispute through mediation. Not surprisingly, given the growing body of legal precedent rejecting such one-sided CC&R provisions, the Pinnacle court refused to enforce the developer’s binding-arbitration provision against the association. In doing so, the justices respected the earlier Treo decision when it observed that, “[t]reating CC&Rs as a contract such that they are sufficient to waive the right to trial by jury does not comport with the importance of the right waived.” The court also commented on the developer’s attempt to characterize the CC&Rs as a contract with the homeowners association such that the arbitration provision should be enforced: “Adherence to the principles articulated in Treo does not create any uncertainty regarding the circumstances when CC&Rs will be characterized as contracts and when

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they will not be characterized as contracts. As Treo clearly stated, “CC&Rs can reasonably be ‘construed as a contract’ and provide a means for analyzing a controversy arising under the CC&Rs when the issue involved is the operation or governance of the association or the relationships between owners and between owners and the association.”

In other words, the Court of Appeal clarified that CC&Rs are a contract intended to govern the relationships between a homeowner association and its members, and even between the members themselves. But CC&Rs are not intended to provide developers with a contractual right to enforce onesided provisions, such as binding-arbitration clauses, that are unilaterally inserted into CC&Rs by the developers themselves.

The bottom line is that the Pinnacle decision is a significant victory for homeowner associations and their homeowner members in their effort to enforce their constitutional rights when developers attempt to enforce these types of one-sided provisions in CC&Rs. 26

October 2010 | ECHO Journal

The End of the Road for Arbitration, Judicial-Reference and Jury-Waiver Provisions? A Final Word of Caution Despite affirming the principle that arbitration provisions in CC&Rs cannot be enforced, the Pinnacle decision isn’t all roses for homeowner associations and their members. Towards the end of its analysis, the Pinnacle court envisions two hypothetical scenarios whereby developers might be able to obtain the necessary agreement of a homeowners association such that a binding-arbitration provision in a set of CC&Rs would be enforceable: There is no reason a developer cannot place a provision in the CC&Rs requiring a homeowner association and its members to decide via the amendment process to ratify a binding arbitration provision. Alternatively, the CC&Rs could provide that the failure of the homeowner association to amend the CC&Rs to eliminate a binding arbitration provision amounts to an acceptance of the provision.

The first scenario is fairly innocuous. If that type of provision existed in a set of CC&Rs, the association’s members would need to take affirmative steps to ratify the

binding-arbitration provision by voting on an amendment to the CC&Rs. That is unlikely, of course, given the punitive nature of such provisions. Thus, in that scenario, even if the CC&Rs contained a binding-arbitration provision, the association would still have to act against its own interests to ratify the provision for it to have any effect. Otherwise, such a provision would be subject to the same standards of unenforceability discussed at length in this article.

It is the second hypothetical scenario that presents more of a concern. In Pinnacle, the fact that the binding-arbitration provision contained in that set of CC&Rs could never be amended without the written consent of the developer was a significant factor in the Court of Appeal’s refusal to enforce it. But what happens if the CC&Rs specify that the arbitration provision becomes enforceable if the homeowner association fails to amend the governing documents in order to eliminate the provision? In one sentence, it appears that the Court of Appeal has opened the door to allow binding-arbitration provisions in CC&Rs to become enforceable as long as the terms require the association to

formally amend the documents in order to remove such provisions.

The problem with this scenario, aside from the fact that the association may not recognize the legal impact of what might seem like a fairly harmless provision, is the fact that often times CC&Rs include provisions that make it extremely difficult to amend them. For example, the CC&Rs at issue in Villa Vicenza included the impossiblyhigh amendment requirement of a majority vote among 90% of the voting members and 90% of the mortgagees. Anyone that lives in a common interest community can immediately recognize how difficult it is to get 90% approval for any association action, much less for amending the governing documents in such a manner. The Pinnacle court does not appear to recognize this real-world aspect of community-association living.

Another problematic aspect of this type of amendment provision relates to the timing of any such amendment. For example, how soon must the homeowners association amend its CC&Rs to eliminate these types of one-sided provisions? Immediately upon learning of the provision’s existence? Before the association files a lawsuit against the developer for damages caused by construction defects? The appellate courts will eventually need to provide further insight into what will ultimately constitute a valid “mandatory amendment” provision as in the second hypothetical discussed in Pinnacle.

For the time being at least, homeowners associations can take solace in the fact that courts will be very reluctant to enforce any type of CC&R provision that takes away the association’s right to have their developerrelated disputes heard by a jury. That said, boards of directors for newer associations should review their governing documents to see if they contain a mandatory-amendment provision similar to the one discussed in Pinnacle. If so, the association may want to seek legal counsel for purposes of amending its governing documents to eliminate this type of provision. Above all, homeowners associations and their members should remain vigilant in making sure that they understand how all of the provisions contained in their CC&Rs affect their rights, no matter how benign such clauses may initially seem. Better to be the lion than the lamb.

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ECHO Journal | October 2010

27

By Julie Adamen

Fight Night or Fight Nice? uch has been written about the lack of civility within community associations and, in particular, between board members and homeowners. Why do these situations arise so often? One person said she thought it was because “condo meetings almost always lend themselves to arguments because, just like a marriage, money is involved.” While there is validity to that statement, I believe the reason there is so much conflict in communities has more to do with a lack of appropriate communication on matters at hand, very poor advocacy and communication skills on the part of individuals, and virtually no consequences for the obstructionists. Add ego, frustration, plain bad manners, and certain psychological disorders, and you have all the ingredients for the average cantankerous association meeting. Let’s look at what

M

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October 2010 | ECHO Journal

can take some of the fight out of fight night.

There Can Be No Civil Discourse If the Association Doesn’t Provide the Basic Structure for It It is the responsibility of all boards of directors to provide the platform for civil discourse for their community. Without this platform, owners and even board members are left to find their own way in how to best communicate within the structure of the association. This hit or miss approach can lead to great frustration, and eventually to outright anger, as members struggle to take part in the process of community governance without a clearly defined path. Though failing to adopt a defined platform for communication is usually benign neglect on the part of the board, it can be very detrimental to civil discourse within the community. It may also give the board the

appearance of being secretive and/or elite, giving rise to a lack of credibility in the eyes if the owners.

Adopt Basic Parliamentary Procedures.

All boards should adopt some sort of basic parliamentary procedure so there is structure within which to conduct their meetings, including membership meetings. Boards should also publish and distribute procedural information to all board members and homeowners. Next, have an agenda for each meeting and follow that agenda. If homeowners are present and wish to address the board, there should be a designated time for them to do so, within or outside the meeting, depending upon the particular laws in your state. Each person should be allowed 3–5 minutes to speak, depending on which rule your board adopts.

Adopting, and following,

Continued on page 33

Advocating Your Position Effectively While Also Being Civil in the Community Association Environment

News from ECHO reduced through monthly homeowner billing statements, lockbox services, contacts with collection agencies, monthly payment reporting, and homeowner payment history reports.

2009 Community Association Financial Health A recent survey of financial statements for nearly two thousand primarily Northern California community associations reveals a mixed bag: a weakening of financial strength in terms of receivables but an optimistic improvement in the reserves percent funded (for approximately 1,300 surveyed associations). These conclusions are similar to those reached in prior years and show that the trend toward underfunding of reserves has continued.

Essentially, the average community association has about half of the reserve funds on deposit that its reserve study recommends.

The current survey shows an increase in the overall average number of days of assessment revenues in assessments receivable. This means that it takes more time and more effort by associations to collect their assessments. Providing timely information to the directors may help to manage the assessments receivable of the association.

Without prompt payment of their assessments by the homeowners, the association cannot operate, so delinquent assessments must be addressed and collection efforts made.

Assessments receivable may be 30

October 2010 | ECHO Journal

The survey reaches conclusions similar to those reached in prior years and finds that the trend toward underfunding of reserves has continued.

Essentially, the average community association has about half of the reserve funds on deposit that its reserve study recommends.

This does not mean that they are halfway to their goal. It means that they have only half of what they should have reserved by that point in time—leaving unanswered the question of where the funding will come from to restore common area components when it’s needed. The long-term impact of this trend is that many community associations will have to resort to special assessments or bank loans in order to perform necessary repairs and rehabilitation.

The trend is especially prominent in older, smaller condominium associations, which average less than half of the reserves on deposit than what is recommended. On the other hand, larger, newer planned developments have above average amounts in their reserve accounts, although less than recommended in most cases. This is largely due to the fact that newer associations have not encountered the unexpected repair and maintenance expenses that often plague older projects. Also, condominium associations have responsibility for more of the structural components of a build-

ing than do associations in planned developments. Deterioration in hidden and inaccessible areas of the buildings—in deck and roof sheathing, framing, and inside of walls—can surprise even an association with wellfunded reserves. If an association with underfunded reserves encounters unexpected reconstruction issues, it can severely strain its financial well-being.

Properly funded reserves cannot only insulate a community association from surprise expenses, but they can also add positive value to the homes in the community. As more buyers understand the role that reserves play in a community, the more a well-funded program will be recognized as an asset. This 2010 survey indicates that such recognition may still be a few years away.

WAM—Walk-around Construction Management Walk Around Management, simply put, means someone is always checking construction work in progress, correcting problems in a timely manner, when sizeable construction projects are underway on your property. There is a serious issue of quality workmanship in all phases of the building industry. In addition to a “Low Bidder Syndrome,” other factors are creating a shadow over the industry; sometimes it appears there is an

epidemic of poor quality work all around us.

Due to the forces of competition to cut costs, few contractors voluntarily offer a full-time WAM superintendent for their projects. Sometimes a part-time foreman is provided, but most often it is a working foreperson, who is also on “piecework” for work he or she personally installs. A foreman cannot successfully accomplish Walk Around Management because it is impossible for him to observe in detail the work of the crew or crews he is charged with superintending.

You can Expect only what you Inspect. Of all the services offered by roofing consultants, on-site inspection of work-in-progress is one of the most important to the roof purchaser. Even the Roofing Contractors Association suggests full-time quality assurance observers on jobs.

In spite of all the warranties offered by product makers and contractors, the best warranty you can get is to have a roof installed right the first time. For an association making its largestever purchase of construction services, the answer is get your own WAM and, by all means, avoid the “Low Bidder Syndrome.”

Important Upcoming Events Friday, October 15 Annual Membership Meeting 10:00 a.m.

ECHO Office 1602 The Alameda, Suite 101 San Jose Saturday, October 23 Peninsula Fall Seminar 8:00 a.m. to 1:00 p.m.

Crown Plaza Hotel, Foster City

2010 Legislation at a Glimpse As of September 20, 2010 Bill No.

Author

Subject

Status

Position

Summary

AB 1726

Swanson

Voting Quorums Passed.

To Governor for signature.

Oppose

In the event that there is not a quorum for a member meeting or an election of directors, would automatically reduce the quorum requirement for the next meeting to 40 percent, and then to 33 percent of the association’s voting power. Exempts associations whose documents establish a lower quorum requirement.

AB 1793

Saldana

Synthetic Grass Passed.

To Governor for signature.

Oppose

Voids provisions in governing documents that prohibit the use of artificial turf or any other synthetic surface that resembles grass.

Allows associations to adopt rules that establish design and quality standards.

AB 1927

Knight

Rental Rights

Passed.

To Governor for signature.

Oppose

For governing documents initially recorded on or after January 1, 2011, requires that a majority of all owners vote to approve rental or lease restrictions. Requires owners to disclose rental restrictions prior to transfer of title.

AB 1975

Fong

Submetering

Amended Oppose 8/2. unless In Senate amended Appropriations held under submission.

Requires a water purveyor to either adopt a general policy to require the installation of either a water meter, or a submeter, to measure water supplied to each individual dwelling unit, or to inform, on an individual basis, an applicant for new water service as to whether a water meter or submeter is required to be installed for each individual dwelling unit.

AB 2016

Torres

Deed Requests

Signed by Governor.

Support

Clarifies that a request by an association for notification of a trustee’s deed of sale does not constitute a request for a document that either effects or evidences a transfer or encumbrance, or that releases or terminates any interest, right or encumbrance, of an interest in real property.

AB 2120

Silva

Mobilehome Law Disclosure

Signed by Governor.

Neutral

Each year, would require that the management provide a copy of the Mobilehome Residency Law to each resident, or send a notice when a significant change is made and inform residents that they can obtain a copy by submitting a request.

AB 2502

Brownley

Delinquency Collection

Amended 5/10.

In Assembly Judiciary.

Oppose

Regulates third parties performing collection services for HOAs, as well as the formation of payment plans between associations and delinquent members. Allows members to have counsel present when discussing a payment plan, provided they give 48 hours notice to the association.

SB 995

Strickland

Conversion Plans

In Senate Local Government.

Hearing cancelled.

Watch

Provides that a stock cooperative or community apartment project for senior citizens established before the DavisStirling Act, that is converting to a condominium, shall not be required to file a condominium plan to the Department of Real Estate.

SB 1427

Price

Default Notices

Passed.

To Governor for signature.

Support

When a property is purchased at a foreclosure sale and is not being maintained, requires a governmental entity to provide notice of violations to the property owner before imposing fines for nuisance abatement.

ECHO Journal | October 2010

31

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Fight Night or Fight Nice?

Continued from page 28

these simple suggestions will go a long way toward promoting civil discourse among your board members and owners.

Communicate Regularly with Owners.

One of the major reasons associations have so many seemingly silly problems is a lack of communication between the board and the owners. When there is an information vacuum (believe me) it will get filled with gossip, innuendo and downright falsehoods. This situation not only adds to the negative image of your association, but it also makes it very hard for a board to remain credible in the eyes of the owners, despite good intentions.

Communicate regularly via newsletter and web site.

Many communities neglect their newsletters because they think they need to publish the New York Times, and the volunteers just don’t have the time or skill to write long and informative prose. Both of these assumptions are incorrect. Newsletters are best when they are two to four pages long. And for boards that don’t include members with the time or skill for writing, there are newsletter services out there that specialize in community association publications. For a very reasonable price, these organizations will take your minimal input and produce a professional, topnotch newsletter.

Turn to the Web. Web sites are very, very valuable for getting out information in real time. Web sites, however, do not diminish the need for a snail-mail newsletter; in fact, quite the opposite is true: the newsletter should be driving members to the Web site for that real-time information. Be aware that if you do go this route, your Web site must be kept up-to-date (and there are several companies that provide this service at very affordable rates). If your owners go to the site looking for the minutes of the last board meeting, and the most recent they can find are minutes from 2002, you have created another credibility problem through very poor communication.

Developing and Maintaining Credibility: The Crucial Element to Effective Advocacy Recently, I attended two meetings of the owners in my own association, in which I am a board member. The meetings pertained to a proposed amendment to our governing Continued on page 34 ECHO Journal | October 2010

33

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Fight Night or Fight Nice?

Continued from page 33

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October 2010 | ECHO Journal

documents. The amendment would change our method of assessing unit owners from staggered assessments based on square footage to a uniform amount for each home.

The first meeting, held 60 days before the second meeting, was informational only, with the board taking questions from about 80

attendees. This meeting went relatively well, and the following week ballots were sent to all owners on the issue. The second meeting was a general membership meeting on the budget, as well as the final date for allowing members to cast their votes on the proposed amendment. The vast majority of owners were in favor of the change because it lowered almost everyone’s dues except the affected few, who will be facing slightly higher dues.

At the second meeting, there was a small group of folks who just didn’t like the changes proposed, and by gosh, they were going to let everyone know about their feelings! As political process, this is the way it’s supposed to work: everyone has a say, tries to persuade others to see their point of view, and then votes on the matter. From my perspective, watching this particular group of “opposition advocates” was fascinating because they made every classic mistake they possibly could for advocating their position, each one leading to a total lack of credibility.

What are those “classic mistakes?” Let’s take a look: Strategies for Being an Effective and Civil Advocate Be Proactive: Come Forward Early in the Process. Whatever the issue you are for or against, you must come forward as early as possible in the process. In this particular situation, complete information about the proposed changes was made available early and often to the owners. Despite this fact, the spokesman for the opposition failed to attend the first owner’s meeting on the issue.

Regardless of why the owner elected to skip the meeting, by not attending the meeting specifically designed for him and other owners to voice their opinions, the decision forced the spokesman to jump in with both feet at the final meeting. The result? He looked like a petulant spoiler instead of an advocate with a bandwagon everyone should jump on.

If you have a position to advocate, get in the mix as early as you can. If, through no fault of your own, you can come in to the process toward the end, you must adjust your message to fit that reality. Acknowledge your “Johnny-come-lately” status (a little self-deprecating humor goes a long way here), and advocate in a clear and concise manner meant to sway—not alienate—as many people as you can in the short time you have to do so. You do not have the luxury of being able to go back and fix what you may have broken with a less-than-stellar presentation.

Be Well-Prepared. In our case in point, the opposition group was prepared to do only one thing: let everyone know how unhappy they were in a most negative and confrontational manner. They were not prepared to present their position with information, facts, answers to objections, or a positive spin on why people should side with them.

If you have a position to advocate, make sure you go in to the arena with all available

arrows in your quiver. Prepare an opening statement on why you are taking the position you are taking. Explain your reasoning and cite facts and events. Provide successful precedents or actions by other associations.

Anticipate objections, have answers to those objections in hand, and present them before anyone has to question you. Summarize your position concisely and reasonably, and thank the group for listening. This method develops credibility for you and your cause.

Be Willing to Change Your Position in Light of Facts. Once again, consider our opposition group. As it turned out, the group had based its entire opposition position on an erroneous assumption. The erroneous assumption was pointed out and explained clearly to the group on several occasions. To make the error clear, the opposition group was also given the background, information, reasoning, and facts for the proposed change, including information from the association’s counsel. Yet, in a stunning example of groupthink, the entire opposition group stuck to their original arguments, regardless of the facts presented to them. Result? No credibility.

Clinging to a position that has no merit does not do you, or the group you may represent, any favors. You will not be seen as a tenacious leader crusading for a just cause; you will be seen as a person foolishly wasting your time and the time of others on a nonissue. Re-evaluate the facts and choose those that most strongly make your point. Letting go of what doesn’t work presents you as the reasonable and thoughtful opposition, and it leaves the door open for you to advocate any position with credibility in the future. If you don’t let go, you are fighting the Battle of the Heart, having left your brains somewhere else. If you advocate a certain position publicly and passionately, only to find that the basic tenet of your position was in error, acknowledge it and move on but don’t give up!

Be Passionate, Not Emotional. It was clear the moment he stepped through the door into the owners’ meeting that our leading opposition advocate was very angry. His small band of followers followed suit, making snide remarks and stage-whispered comments behind their hands, glaring at the crowd, shaking their heads, and harrumphing whenever someone attempted to answer their concerns. This angry, hostile, and negative behavior wasted the group’s credibility with the board and other owners before even one

of them had a chance to speak.

Unfortunately, these folks made the mistake of letting their emotions get the best of them. When emotions rule, people say things they shouldn’t, make baseless accusations and sarcastic remarks, and generally join the ranks of the polite-impaired.

People can become outwardly emotional when they have strong feelings about something, and for some reason homeowners associations and their dealings seem to bring out a lot of strong feelings. When you are trying to advocate a position, it is best to keep your emotions in check, yet let your passion for the subject come through. Nothing loses credibility faster than letting emotions run away with you, regardless of whether you are speaking to one person or to a large group.

And nothing brings more people to your way of thinking than clear, passionate, logical, and positive advocacy.

Don’t Make Empty Threats. Going back to our case in point, the opposition group, having failed to turn the tide of community opinion in their favor because of a poorly thought out position, very poor advocacy skills, and downright bad manners, threatened litigation.

Even at your most desperate, don’t threaten to sue unless you mean it and have a course of action and the wherewithal to proceed. The minute any savvy board member or manager hears a threat, he or she will refer you to association counsel. Even worse for you, the board member or property manager will then be obligated not to speak with you on the issue at hand from that point on.

The situation doesn’t work out all that well if you didn’t really intend to sue and were trying to get something accomplished for yourself or your group, because now you have no one to talk to but yourselves. Threatening litigation stops dialogue and negotiation in its tracks.

Let Go. Whether the position you are advocating “wins” or “loses,” you must let go and move on for the betterment of the community. Nothing is worse than a gloating victor, except maybe the spoiled loser. Either way, you lose credibility for the next position you may wish to advocate.

All You Need to Know You Learned in Kindergarten Common Decency Takes the Fight Out. As a former manager and now a vendor (consulContinued on page 42 ECHO Journal | October 2010

35

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—2010 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 develop ments 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 2010 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, Govern ment 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

New e Pric Homeowners Associations— How-to Guide for Leadership New Member Price: $15.00 Non-Member Price: $25.00 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.

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.

Be an HOA Survivor

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.

2010 ECHO Annual Seminar Program

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

This Program Book is suppor ted through a generous sponsorship from Management Solutions.

2010 ECHO Annual Seminar Program Book $35.00 Non-Member Price: $45.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2010 ECHO Annual Seminar held on June 19, 2010. 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 Member’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 Member’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.

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ECHO Events Calendar

Dates for your calendar Wednesday, October 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, San Jose Friday, October 8 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, October 13 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, October 15 ECHO Annual Membership Meeting 10:00 a.m.

ECHO Office 1602 The Alameda, Ste. 101 San Jose Wednesday, October 20 Wine Country Resource Panel 11:45 a.m.

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

Saturday, October 23 Peninsula Seminar 8:00 a.m. to 1:00 p.m.

Crowne Plaza Hotel Foster City-San Mateo 1221 Chess Drive Foster City, CA 94404 Thursday, November 4 North Bay Resource Panel 11:45 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, November 17 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Friday and Saturday June 17 & 18, 2011 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Monday, November 8 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant Oakland Tuesday, November 9 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Friday, November 12 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

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

38

October 2010 | 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

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.

ECHO Honor Roll

About

ECHO Honors Volunteers Diane Kay 2010 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, 650-543-5619 Beth Grimm, 925-746-7177 Legal Panel Mark Wleklinski, Esq. 925-280-1191 Maintenance Panel Brian Seifert, 831-708-2916 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, CCAM, 707-584-5123

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

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October 2010 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey Barnett, Esq. Tyler 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 Thomas Miller, Esq. Larry Pothast Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Seminar Speakers January 30, 2010 Marin Seminar Speakers Sandra Bonato, Esq. Wendy Buller David Feingold, Esq. Jim Sheperd Wanden Treanor, Esq. Glenn Youngling, Esq.

February 2010 Central Coast Seminar Speakers Sandra Bonato, Esq. Beth Grimm, Esq. Stephanie Hayes, Esq. Donald Odell, Esq. John Schneider March 2010 Wine Country Seminar Speakers Carra Clampett, CCAM Bill Gillis, Esq. Darryl Orr Zeke Ortiz Barbara Zimmerman, Esq.

Recent ECHO Journal Contributing Authors July 2010 Charlotte Allen Matt Malone, Esq. Kerry Mazzoni John Schneider Dennis Socher David West August 2010 Tyler P. Berding, Esq. Paul Collins PCAM, CCAM Brenda L. LeClair, CMCA Andrea L. O’Toole, Esq. Debra A. Warren, PCAM, CCAM Steven S. Weil, Esq. September 2010 Tyler P. Berding, Esq. Karen D. Conlon, CCAM Sandra L. Gottlieb, Esq. Beth A. Grimm, Esq. Debra J. Oppenheimer, Esq. Steven Saarman

ECHO 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 1,450 homeowner associations, you can become an associate member and join 350 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.

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41

Fight Night or Fight Nice?

Continued from page 35

tant) and board member, I still find it fascinating that people will do and say things as board members or homeowners that they would never dream of doing or saying at work, or in their homes. It’s as if they need a little fantasy world where they can vent their frustrations and yet face little or no consequences, and they have found that satisfying world in their homeowners associations.

I always want to ask these people: “Didn’t your parents teach you any manners?”

It seems to me that we could all use a course in manners and civility in this country.

Whether being an advocate for a position in your homeowners association, dealing with the clerk in the market, driving down the freeway, or talking on the phone to the cable company, there are a few basics of human decency to which we should all adhere. As Robert Fulghum said in his book All I Need to Really Know I Learned in Kindergarten: “Everything you need to know is in there [kindergarten] somewhere. The Golden 42

October 2010 | ECHO Journal

Rule and love and basic sanitation. Ecology and politics and equality and sane living.”

altogether or to adjust our talking points for positive advocacy and then continue on.

I emphasize the sane living part of this wisdom-filled treatise on human interaction because this is what really applies to the position I advocate. Civil discourse within the structure of homeowners associations is not only possible, it’s far easier than many would think if we and our associations would only follow some simple, clear, and commonsense tenets.

We must not let our emotions run away with us because doing so makes us lose credibility very quickly, but we must allow our passion for the position to show through. If the tide seems to be going against us, we must not make empty threats. Threats make a mockery of the position for which we advocate, and credibility suffers the same fate.

And, perhaps most importantly, we need to let go once the issue is over. No matter which position we were “for,” it’s the graceful and classy thing to do. And we maintain our credibility for the next issue.

First, our associations must resolve to provide the basic platform for civil discourse, and doing so starts with adopting parliamentary procedures and providing regular communication with owners.

Next, we as owners must do our part, by gaining and maintaining credibility, so the position for which we advocate will be given the attention it is due. We must be proactive, coming in to the process early. We must be well-prepared and have all the pertinent facts that support our position at hand. If facts change, we must be willing to adjust our position to reflect those facts. This may require us either to abandon our advocated position

Lastly, let’s remember the things we learned in kindergarten. Thank you, Robert Fulghum. I wish every association would make your book required reading for all owners prior to purchase.

Julie Adamen is the President of Adamen Inc., a consulting and placement firm specializing in the community management industry. She can be reached through her website, www.adameninc.com or via email at Julie@adamen-inc.com.

ECHO Peninsula Seminar Winning for the Future Seminar Agenda

Peninsula Seminar Saturday, October 23, 2010

8:00

Registration and Sponsor Tables

8:45

Welcome and Introductions Oliver Burford

9:00

Legal Concerns Boards Face Now— An Attorney’s Perspective Tom Fier, Esq.

9:50

2010 Legislation and Case Law Results Jeffrey Barnett, Esq.

Registration Fee: $45 (Early Bird $40 before Oct 12) Non-Members: $55

10:40

Break

Yes, reserve ___ spaces for the Peninsula Seminar.

Amount enclosed: $__________ (attach additional names)

11:00

Is Your 2011 Budget Package Ready?

Linnea Juarez, PCAM, CCAM

11:50

Upstairs, Downstairs—Noise Issues Paul Windust, Esq.

12:40

Questions and Answers

City: __________________________ State: _____ Zip: ____________

1:00

Drawings for Sponsor Prizes

Phone: ______________________________________________________

1:05

Adjourn

Visa/Mastercard No._______________________ Exp. Date: ________

8:00 a.m. to 1:00 p.m.

Crowne Plaza Hotel 1221 Chess Drive, Foster City

Name: _______________________________________________________ HOA or Firm: _________________________________________________ Address:_____________________________________________________

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