The Echo Journal – Issue 6 2021 by Echo

CRITICAL DECISIONS

DID CALIFORNIA SAY GOODBYE TO THE SINGLE-FAMILY HOME?

LEGAL RESOURCE DIRECTORY

When to engage legal counsel and how to find the right law firm

Understanding the impact of SB-9 & SB-10 on your HOA

A valuable resource for HOA board members

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SERVING HOA BOARD MEMBERS & HOMEOWNERS

ISSUE SIX 2021

2021 Legal Showcase

& Legal Resource Directory

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MISSION STATEMENT Fostering a better quality of life in community associations through education, advocacy and networking. Echo 5669 Snell Ave., #249 San Jose, CA 95123 408.297.3246 | info@echo-ca.org www.echo-ca.org

BOARD OF DIRECTORS & OFFICERS PRESIDENT

DIRECTORS

Adam Haney

Jerry L. Bowles

VICE PRESIDENT Sandra Long TREASURER

Brian Campisi Rolf Crocker Sarah Dunia John Gill, Esq.

Karl Lofthouse

David Levy, CPA

SECRETARY

Katrina Solomatina, Esq.

Mark T. Guithues, Esq.

Click to Visit the Echo YouTube Channel

Wanden Treanor, Esq.

CHIEF EXECUTIVE OFFICER

David Zepponi dzepponi@echo-ca.org OPERATIONS MANAGER

Connor Zepponi connor@echo-ca.org MEMBERSHIP & SALES MANAGER

Jacqueline Price jprice@echo-ca.org ADMINISTRATIVE ASSISTANT

Patty Kurzet pkurzet@echo-ca.org The Echo Journal is published bimonthly by the Executive Council of Homeowners (Echo). The views of authors expressed in the articles herein do not necessarily reflect the views of Echo. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy or image.

HOA Education On Demand! Echo has launched its YouTube Channel! Echo Members have exclusive access to our entire library of HOA-focused educational programming including Community Conversations, Educational Seminars, Workshops, Ask the Attorneys and Ask the Experts. There’s also limited free content available to HOA homeowners and board members. The presentations listed below are free to HOA homeowners and board members. Click a title to watch! Balcony Inspection & Reporting Law: One Year Later The Importance of a Strong Banking Relationship Identifying Harassment in Your HOA Preparing the HOA for Taxes Avoiding HOA Reserves Quicksand Board Ethics and Decorum After the Dust Settles: Surfside Disaster & Case Law Exposed Breaking Up Is Hard to Do Board Decision Making: When Is Enough Enough for a Decision?

© 2022 Executive Council of Homeowners (Echo) All rights reserved. Reproduction except by written permission of Echo is prohibited. Echo member information is never released to any outside individual or organization, unless agreed to by the member.

For more information visit www.echo-ca.org ECHO journal | ISSUE SIX 2021

Features 8

When to Engage Legal Counsel and How to Select the Right Firm

BY J. SPENCER EDGETT, ESQ.

Did California Say Goodbye to the Single-Family Home?

BY A. JEANNE GROVE, ESQ.

The Self-Managed Association: A Christmas Carol: Lessons in HOA Governance

BY JOHN CLIGNY, AMS, PCAM, CCAM-HR

Risky Business: Common Employee Practice Pitfalls for Self-Managed Communities BY JASMINE F. HALE, ESQ., CCAL

Happenings 3

CEO’s Message: Maintain, Repair, and Replace: An Important Part of Leadership

Welcome to Our New Professional Service Providers

ISSUE SIX 2021 | ECHO journal

Echo Legislation Tracker: 2021 Legislation

BY MARK T. GUITHUES, ESQ.

Online Meeting: Coastal HOA Properties Threatened by Commission

HOA Education on Demand: Echo Launches YouTube Channel

2022 Legal Resource Directory

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SB 326 is a new law that requires associations to conduct visual inspections of exterior elevated elements and load-bearing components six feet above ground, including: balconies, decks, patios, and elevated walkways - by no later than January 1, 2025. The law requires that the inspection is conducted by a Licensed Structural Engineer or Architect to generate a report summarizing the findings and repair recommendations. Our Project Management team will advise you through the inspection and repair process.

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CEO’S MESSAGE

Raison d’Etre – The Reason for

What a beautiful phrase, raison d’etre (reason for being). every board member should consider and collectively agr and Replace:

Maintain, Repair, An Important Part of TheLeadership phrase engenders humanity. The words roll from one’

stark business senses and adds the element of humanity we care and appreciateexecution the commitment the In the world of HOA management, an axiom for a board: Strategic planning, andofevaluation; m individual homeowners who step up to build better a board is to “maintain, repair, and replace” the management. The business realities should be reflective o communities! common area assets of an association. Properly values of individuals in the community. doing so will improve the quality of life incommon the

Echo Board Leadership community and should protect property values. Fair Communities arehas imperfect – because are made of hum Echo a similar maintain, repair,they and replace enough. axiom asusing. we transition in these challenging times. humans relating. Humans Human living. Basically, In 2022, Echo will enter its 49th year. We are The board of an HOA, therefore, is responsible for being human, communities sometimes forget that man the oldest nonprofit association in the state of assessing, planning for, and managing the common establish norms fordevoted a successful In a sense, California exclusivelycommunity. to supporting better assets of the association. They have important management of HOA associations, and oneorder of community. Its purpose is to establish and ele tools at their disposal, such as the reservethe study, the oldest in the country. Echo would not have the budget, and reports from the community. It is progress andhappened pace by establishing norms and constrain without the vision and dedication of its the duty of the board to estimate the needs of the to benefit all. board of directors. These committed HOA industry association and maintain, repair, and replace the professionals volunteer for the Echo board of common assets as needed. It seems apparent leadership must understan directors, that not toboard build their businesses but to give back to the HOA homeowners and boards they owners For volunteers, this takes time and commitment. As in order to orchestrate a sense of community and serve. I would like to acknowledge their time and andand protect community values. The purpose of a board, the we celebrate the holiday season with tidings selfless devotion to the Echo mission to build better joy, let’s remember the immense commitment ourcommunity build based on common values for communities through education, networking, andthe good boards make to ensure that HOA communities are advocacy. properly maintained and that assets are repaired It takes time to orchestrate a community. It takes time to k or replaced for the benefit of all. For those who It has not been an easy 49 build years, and this yearreflective has time to listen to the voices and a vision o serve or have served as volunteer leaders on an been one of the most challenging. It was marked bethemore effective as a board member and sa HOA board, we simply say thank you. At and Echo you willby COVID-19 pandemic, continuing from 2020

your reason and for persisting being on the board. into 2022. We expect that the cost of

maintaining and growing our very small nonprofit will

ECHO is committed torise helping homeowner boardsand and res continue to as we fight inflationary pressures adopt new ways is to deliver value to Echo members. ing and advocacy – this our “raison d’etre”. Continued on page 29

Good luck and stay safe, Sincerely,

ECHO CHIEF EXECUTIVE OFFICER 6

ISSUE SIX 2021 | ECHO journal

David Zepponi Executive Director

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WHEN TO ENGAGE LEGAL COUNSEL AND HOW TO SELECT THE RIGHT FIRM BY J. SPENCER EDGETT, ESQ.

There is a misconception that legal counsel is only needed when things go wrong, that is, once a lawsuit is threatened or initiated. There are also times when homeowners associations resist contacting counsel to avoid legal fees and instead make decisions (that may require legal expertise or guidance) without advice or assistance of an attorney. However, all communities would be better served by having legal counsel retained and available to provide professional guidance when necessary.

When Should Legal Counsel Be Consulted? In general, if there’s a question about whether an attorney should be consulted on a particular issue, then one probably should be. That could mean simply contacting an attorney to ask whether they believe a particular issue warrants the expense of legal analysis and assistance. Simply put, not all matters require the assistance of counsel. For example, not every contract warrants legal review; however, it can be difficult to determine which contracts should be Continued on page 10

ISSUE SIX 2021 | ECHO journal

CRITICAL DECISIONS ECHO journal | ISSUE SIX 2021

Critical Decisions Continued from page 8

reviewed by counsel, as there is no bright-line test. The amount at issue in the contract does not always drive the decision; take, for example, a $10,000 contract to re-stripe parking spaces and a $750 contract for roof repairs. The attendant risks associated with the scope of work or services being provided must also be considered. The potential exposure to liability for damage or injury is certainly higher for roofing work than for restriping parking spaces.

An Ounce of Prevention Is Worth a Pound of Cure As the saying goes, “An ounce of prevention is worth a pound of cure.” With that in mind, legal counsel should be viewed similarly to a primary care physician, who performs regular physicals and

screenings to protect against illness or disease that can be serious if not detected and treated early. Engaging legal counsel early can often avoid missteps that could unnecessarily land an association in costly litigation. And when litigation is unavoidable, legal counsel can provide guidance to ensure that actions are not taken and things are not said or memorialized in writing that could undermine a successful outcome to the litigation. Sometimes legal counsel is contacted after a long simmering dispute has come to a head with a lawsuit being filed against the association or board members, at which point the legal fees will be significant and unavoidable. In such a situation, it would have been better to engage legal counsel at the first sign of controversy to allow the attorney

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the ability to provide guidance that may have avoided escalation to the point of a lawsuit being filed in the first place. Other times, based on the desire to avoid legal expense, associations take action that is contrary to their governing documents or law, which results in costly litigation. In many situations, early intervention by legal counsel can avoid a lawsuit; therefore, spending a few hundred or thousand dollars at the outset may save the association tens of thousands of dollars or more in legal fees and possible monetary damages.

Fiduciary Duty, Protection from Liability and the Business Judgment Rule Directors have a duty to use their “best judgment” when making decisions. What this means is that while performing the activities of the board, each director has a duty to act in good faith, in a manner they believe to be in the best interests of the association, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would under similar circumstances. In order to meet this standard, before making a board-related decision, a director must inquire into the matter and rely on others with particular experience and competence when necessary. Those individuals include other directors, committees, or employees of the HOA whom the director believes to be reliable and competent, as well as legal counsel, accountants, and other professionals. Reliance on professionals, including legal counsel, can protect the association and individual board members from liability under a legal doctrine commonly referred

to as the business judgment rule. In general, the courts will not insert or substitute their own judgment for the informed business decision made by the board of directors, so long as the decision was made in good faith, upon reasonable investigation and inquiry that includes, if necessary, reliance on the advice of knowledgeable professionals – for example, attorneys (even if that professional advice turns out to be incorrect).

Engaging Legal Counsel to Help Avoid Litigation Is Money Well Spent The cost of legal fees for any matter that goes to trial or arbitration will easily range from $50,000 to $100,000 or more – and the cost can be much greater if one side does not prevail and the other side is awarded damages and possibly reimbursement of

their attorney fees. In light of this, spending a few hundred or thousand dollars to obtain advice of counsel that may prevent this expense is well worth it and a prudent practice. In fact, boards likely have an obligation, in many instances, to consult legal counsel on matters that require legal expertise to protect the interests of the association and its members.

Selecting and Engaging Competent Legal Counsel Is Critically Important The representation of community associations is a specialized area of the law, and the counsel selected should have particular expertise in this practice area. There are many firms in California that specialize in the representation of community associations or have attorneys in the firm that specialize in this area

of law. There are also attorneys that have more specialization in a particular aspect of community association law. Typically, general counsel will be able to provide guidance on most issues that impact the day-to-day operation and management of a community association. There are some attorneys that are not litigators (meaning they do not represent clients in court) but rather focus their practice on corporate counsel work such as interpreting governing documents, drafting amendments to governing documents, reviewing and revising vendor contracts, and assisting with other matters that arise in the general operation and management of the community. Litigators are attorneys who represent parties in disputed matters that may lead to a lawsuit Continued on page 12

ECHO journal | ISSUE SIX 2021

Critical Decisions Continued from page 11

and can handle taking a matter to trial if a lawsuit is filed. There are also attorneys who handle corporate counsel work as well as litigation. Finally, there are some specific issues that may require even more specialized legal expertise, including construction defect litigation, insurance claims, disability rights, discrimination claims, fair housing claims, and bankruptcy, to name a few. Boards should speak with general counsel to confirm whether their firm has the requisite experience to handle the specific issue that is being dealt with. If the firm does not have the requisite experience, they may be able to refer someone who does, and may even associate with or engage outside counsel to assist

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in a particular matter. When on the fence about whether to seek guidance from an attorney, it is good business practice to ask whether the expense of the legal action is justified by the potential results and exposure to liability. Many attorneys will not charge to determine whether their services should be engaged and can provide an estimated budget if they are retained for a specific issue. Associations that are professionally managed can request a referral from their community management company. Industry trade groups also can be a good resource for legal referrals. Otherwise, a comprehensive online search for homeowners association law firms can yield a great many of them to select for interviews. As part

of the selection process, ask for references from current or former clients. Ultimately, one should not be dissuaded from seeking legal advice based on the initial cost of engaging counsel since the cost of not engaging legal counsel can be far greater and more damaging to the homeowners association in the long run. J. Spencer Edgett, Esq., is a partner with Chapman & Intrieri, LLP. Since 2004, Spencer has primarily focused his practice on representing community associations both as general counsel and in successfully litigating and resolving numerous complex multimillion-dollar construction defect claims. Mr. Edgett also regularly advises and assists community association managers and board members on all aspects of management and operations including fiduciary responsibilities, drafting and revising governing documents, vendor contract negotiations, collection matters and enforcement issues.

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ISSUE SIX 2021 | ECHO journal

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Did California Say Goodbye to the Single-Family Home? By A. Jeanne Grove, Esq.

Summary of SB-9

In September 2021, the California Legislature passed major land use bills that could end California’s single-family housing zone as we know it. These are Senate Bill 91 and Senate Bill 10,2 which came into effect on January 1, 2022.

ISSUE SIX 2021 | ECHO journal

SB-9 will significantly reduce the zoning barriers to allow single family residential parcels to be split and allow for building two units on each parcel. SB-9 has two components, a zoning component and a subdivision component. The zoning component requires a local jurisdiction to approve the development of two units on any single-family property. The subdivision component requires a local jurisdiction to ministerially approve the division of a parcel. Each of the two new parcels may not be less than 40% of the original lot. Neither new lot may be less than 1,200 square feet. The applicant must provide a signed affidavit declaring an intent to occupy one of the units for a minimum of three years. The created units may not be used for short-term rental. It also prevents the serial division of lots; the division may only be done once. Despite the broad brush that SB-9 seems to take, there are many exceptions in the new law that result in its quite limited application. First, SB-9 is limited to urbanized areas and urban clusters.3 Even if the property is in an urbanized area or urban cluster, SB-9 applies only in areas that are not prime farmland, wetlands, very high fire severity zones (see https://egis.fire.ca.gov/FHSZ/), hazardous waste

sites, earthquake fault zones, 1% annual flood hazard zones and regulatory floodways, lands identified for conservation, or habitats for protected species. Second, SB-9 does not apply to properties that have rent control restrictions (e.g., properties that were built 15 years ago or more, or have been tenantoccupied for the past three years4 or are subject to the current Wildfire Anti-Price Gouging Act5 or that have had an Ellis Act eviction in the past 15 years.6) SB-9 also does not allow the demolition of restricted low to moderate income housing.

Summary of SB-10 SB-10 allows a jurisdiction to up-zone a residential or residential mixed-use zoned property to allow for up to 10 residential units on one parcel. It only applies if a parcel is within half a mile of both a major transit stop and an urban infill site. An urban infill site means the parcel is adjoined by 75% urban uses, zoned as residential or residential mixed use, and urbanized or part of an urban cluster.7

Does a common interest development (CID) need to amend its governing documents in response to SB-9? No, SB-9 does not explicitly require CIDs to amend the governing documents in order to conform to the new law. But it is important for board members who are tasked with enforcing their governing documents to understand that they may need to comply with the new requirements of SB-9. If the subject property does not fall under one of the many exceptions of SB-9 (summarized above), then the new law will allow an owner of a parcel to build two units on a parcel and/or divide the parcel into parcels, allowing for two units on each. It is recommended that CC&Rs and other governing documents be reviewed to determine whether they adequately address such a circumstance.

Does SB-9 affect the powers of an architectural committee, or board powers, when considering homeowners’ alteration approval requests? Yes and no. SB-9 and SB-10 both address density. They also prohibit a local government from imposing standards that would have the effect of preventing development under these laws. The law does not address board powers to prevent such density. If a homeowner submits an alteration approval request, the board will need to determine whether the

property is subject to SB-9, and if so, whether the CID is required to comply with it despite governing documents that may state otherwise. This question will inevitably become the subject of litigation, and courts will eventually need to determine whether CIDs must comport to the restrictions of SB-9 (and SB-10).

How does SB-9 impact leasing rules in HOAs? SB-9 does not allow the subdivision or development of additional units on parcels that were built 15 years ago or more and are therefore subject to state rent control, properties that have been tenant-occupied for the past three years,8 those that are subject to the current Wildfire Anti-Price Gouging Act,9 or those that have had an Ellis Act eviction in the past 15 years.10 Additionally, SB-9 may limit a homeowner’s ability to erect an ADU (accessory dwelling unit) or a JADU (junior accessory dwelling unit) on their property if the property has been developed based on SB-9.11 However, if an owner is allowed to develop an additional unit on the same parcel of land pursuant to SB-9, then the owner may be allowed to lease that new unit.

Does SB-9 affect occupancy regulations in an HOA? In general, SB-9 relates to development of units, not occupancy of units. However, it does impose some occupancy restrictions on lots proposed for development. An applicant for a single-family-zoned parcel proposal for a lot split must sign an affidavit that one of the units will be owner-occupied for at least three years. If a unit is developed pursuant to SB-9, it may not be used for short-term rental.12

How does SB-9 affect maintenance/repair issues in an HOA? Presumably, if an owner is allowed to build an additional unit pursuant to SB-9, the governing documents will also apply to that new unit, and the owner will be required to comply with the same maintenance/repair requirements with respect to that new unit.

How does SB-9 affect AB-3182? AB-3182 generally limits a common interest development from stopping owners of ADUs from renting out those units. It also prohibits HOAs from Continued on page 16 ECHO journal | ISSUE SIX 2021

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Did California Say Goodbye to the Single-Family Home? Continued from page 15

unreasonably regulating leasing of units. AB-3182 also requires HOAs to amend their CC&Rs if they set a cap on leasing of less than 25%. By comparison, SB-9 relates to the development of additional units on a single-family parcel, including the development of ADUs. If a property owner develops units pursuant to SB-9, AB-3182 will generally allow the owner to rent those units (however, SB-9 does prohibit short-term rentals). In summary, SB-9 and SB10 do not include affirmative requirements directed at CIDs specifically. The new laws do not expressly prohibit a CID from restricting increased density where the state law and local zoning otherwise allow it. But the 16

ISSUE SIX 2021 | ECHO journal

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laws are likely to have unexpected effects on CIDs, particularly when it comes to architectural controls, leasing, and enforcement of the governing documents. Board members may find themselves in the middle of a battle between local control and state control over land use. There may be questions of whether the state law preempts the control these CIDs once had. Senator Toni Atkins, the author of SB-9, insists that SB-9 is not intended to remove any powers of an HOA and that “SB 9 would not override CID or HOA restrictions.” Unfortunately, Senator Atkins’ letter is not included in the bill itself, so it is of questionable value when applying the new law. For this reason, expect many issues to arise when board members and homeowners alike grapple with SB 9/10’s applicability to

their development and question whether an HOA may restrict or impose limits on parcels where an owner applies to increase the residential density. CIDs and their members will need to affirmatively seek court clarification when such issues arise. In light of the questionable applicability of SB-9/10 to CIDs in the future, it is recommended that board members consult with an experienced attorney to determine whether the new laws apply to the development, and if so, whether governing documents should be amended to proactively address and prevent issues under SB-9/10 before they arise. A. Jeanne Grove, managing partner and co-chair of the Real Estate Practice Group at KDV Law, practices real estate litigation, including HOA disputes. She regularly counsels HOAs on their day-to-day operations and compliance matters. Ms. Grove is also a California licensed real estate broker.

1 Government Code Sections 66452.6, 65852.21, 66411.7 (2022). 2 Government Code Section 65913.5 (2022). 3 Go to the following link for a map of the affected areas: https://bit.ly/3FDhn27 4 Government Code Section 65852.21(a)(3)(c) 5 Penal Code 396 (2021). 6 Government Code Section 65852.21(a)(4). 7 Go to the following link for a map of the affected areas: https://bit.ly/3FDhn27 8 Government Code Section 65852.21(a)(3)(c). 9 Penal Code 396 (2021). 10 Government Code Section 65852.21(a)(4). 11 Government Code Section 65852.21 and 66411.7. 12 Government Code Section 65852.21(e).

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ECHO journal | ISSUE SIX 2021

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Competitive rates, secure deposits and a streamlined banking experience. CIT offers a range of solutions to manage and grow HOA funds safely and effectively: • Choose from the Premium Sweep Account, Premium CD, Premium Ladders CD and Premium Money Market • Enjoy the ease of dealing with one bank to serve all your HOA banking needs • Get a competitive rate of return to grow your reserve funds • Access your funds when needed with the flexibility of investment options And with our HOA Premium Reserve Solution, you get the security of knowing your funds are protected and secured by a surety bond.

Let’s get started. Visit cit.com/CABReserves Roxanne Jolicoeur 925.963.9733 | Roxanne.Jolicoeur@cit.com

Premium reserve products are for new money only (money not currently held by CIT Bank, N.A.) Funds in excess of FDIC insurance coverage limits are covered by a third-party issued surety bond. Such excess funds are not subject to FDIC deposit insurance. The surety bond providing excess coverage over FDIC insurance may be cancelled at any time upon 30 days’ written notice. Should a notice of cancellation be given, CIT will contact the client to discuss alternatives to provide for the continued safety of funds. May not be available in every state. ©2020 CIT Group Inc. All rights reserved. CIT and the CIT logo are registered trademarks of CIT Group Inc. Deposit and loan products are offered through CIT Bank, N.A., the FDIC-insured national bank subsidiary of CIT Group Inc. MM#7870

ISSUE SIX 2021 | ECHO journal

LEGAL SHOWCASE ADVERTORIAL

STATEWIDE

ALTERRA ASSESSMENT RECOVERY Alterra provides comprehensive, attorney-supervised assessment collection services to HOAs and condominium developments throughout California. We’re the HOA collection team you’ve been looking for. systems designed to ensure compliance with complex statutory requirements and to manage the collection process with complete efficiency. Our highly automated, paperless platform gives our team robust management tools and real-time information to avoid delays and reduce costs.

24/7 Client Access to Real-time Status Reporting

Our dedicated team recovers nearly $200,000 of debt every month for our clients. Alterra Assessment Recovery was founded by the principals of Tinnelly Law Group, a premiere California HOA law firm that’s been in business for over 30 years. The firm sought to expand its service offering in response to the frustrations of its clients dealing with the challenging environment of assessment collection. Those clients welcomed the opportunity to work with a collection team who shared the firm’s commitment to quality, responsive and efficient service. Unlike typical collection firms, Alterra does not believe a “one-size-fits-all” approach is the answer for every file. Alterra guides each client throughout the process, ensuring that any action to be taken is the right one based upon the particular facts of the homeowner, the property and any senior lienholders.

What Sets Us Apart? • Comprehensive Service Offering. Our team can assist with whatever is

•

required to resolve your HOA’s collection challenges quickly and cost-efficiently. Industry-leading Systems. Our highly-automated, paperless platform maximizes efficiency and streamlines our processes to save time and reduce costs. Innovative Web Portals. Our client portal provides robust 24/7 status reporting. Our innovative homeowner portal streamlines communications to avoid delays and expedite resolution. Attorney Supervision & Support. Our expert HOA lawyers ensure compliance with statutory requirements and render legal assistance when needed. Proven Results. Our dedicated team recovers nearly $200,000 of debt every month for our clients.

Industry-Leading Systems & Innovative Web Portals Alterra is driven by industry-leading

Our robust client portal, AlterraONLINE, provides 24/7 real-time status reports and related information to our HOA clients and their management. Reports are highly customizable and can be configured to be automatically generated and sent to our clients whenever they desire, free of charge.

Streamlining Communications with Delinquent Homeowners Our innovative homeowner portal, contactalterra.com, helps streamline our communications with delinquent homeowners and assists them in their efforts to bring their accounts current. It provides access to various information and request forms to expedite the resolution of matters and avoid delays. Our skilled team is supported by advanced systems and expert HOA lawyers to deliver results. Trust us with your collection needs; we’ll get the job done, done right, and as quickly and efficiently as possible.

27101 Puerta Real, Suite 250 Mission Viejo, CA 92691 (888) 818-5949 | www.alterracollections.com ECHO journal | ISSUE SIX 2021

THE SELF-MANAGED HOA

A Christmas Carol

Lessons in HOA Governance

Dickens’s A Christmas Carol tells the story of Jacob Marley, aka Scrooge, and his Christmas Eve visitations by three spirits: the Ghost of Christmas Past, the Ghost of Christmas Present, and the Ghost of Christmas Future. These three spirits take Scrooge on a wild adventure of reliving his past innocence as a young man, his present moral condition, and, finally, his likely future of loneliness, isolation, and neglect. How does this iconic Victorian tale make for a fitting holiday wish for self-managed HOAs? How indeed! The wisdom of his three spirit visitors reminds Scrooge that life is not deterministic, but that the present and future are built on past experiences, attitudes, and actions that influence the present and shape the future. HOAs are organic, made up of a community of homeowners (ownership of their separate interest), with joint ownership of common areas. They are bound together by “equitable servitudes,” reciprocal agreements, and covenants between property owners and the association that include, among other things, the payment of assessments, 20

ISSUE SIX 2021 | ECHO journal

property use restrictions, governance obligations and responsibilities, and the observance and enforcement of rules and regulations. HOAs are also subject to the law of entropy, meaning in its simplest definition that all things tend toward disorder over time. This is true of organizational systems (boards of directors and HOA governance) and common area components (siding, roofs, landscaping, hardscape, asphalt, balconies and decks, etc.). As in Dickens’s Christmas Carol, HOA boards of directors need to be gently reminded that effective and successful governance is subject to past actions that influence present conditions and decisions that will impact the association and its current and future members. If Scrooge’s spirits took us on a trip to your association’s past, present, and future, what clarity we would have! The Ghost of HOA Past is the first spirit to visit us. Scrooge’s spirit took him to a simpler time, an age of innocence and optimism. The spirit takes us back to a time of newly built homes and common areas, the smell of construction and fresh paint, meeting new

BY JOHN CLIGNY, AMS, PCAM, CCAM-HR

neighbors, and enthusiasm for self-governance after the transition from developer control. Unfortunately for Scrooge, the past was also the time when he came to value money more than relationships and moral character. For the HOA, past actions of unprepared and ill-advised boards may have planted the seeds of dysfunctional governance, board overreach, inadequate and unrealistic budgeting and reserve funding, and deferral of required or scheduled common area maintenance. At the time, board decisions and policies seemed reasonable and appropriate, and assessments were kept “low.” To ensure the goodwill of the members, board members declared, “It’s a new development, we won’t need to do anything for years,” and now disorder and decay have begun. The Ghost of HOA Present forces us to confront the consequences of choices made in the past. For Scrooge, this was the comparison of his present life of loneliness and isolation with the joyousness and community of the Christmas season. According to the US Census Bureau, for 2021, the average homeownership duration is roughly 10.5 years. The 10-year mark is when most HOA board members experience their first “uh-oh” moment of revelation. Past priorities and decisions to keep assessments flat and defer reserve funding and common area maintenance because “it’s a new development” have created a present reality of distrust, accusations, and fear of large assessment increases or special assessments. Governance decisions have become more about “what’s the minimum we can do” or “let’s delay the project another year” rather than thoughtful, informed strategic planning. In this environment, board members can become paralyzed and homeowners apathetic. Community engagement, good governance, and proactive problem solving are forgotten and boards are often left with simply kicking the can down the road. The Ghost of HOA Future is the scariest of the three. Scrooge’s past actions and present attitudes and conditions were predicted by the third spirit to result in the death and lonely funeral of a disliked man, identified by the name on the tombstone, Ebenezer Scrooge. Successful futures for homeowner associations are highly correlated with effective board leadership (governance) and thoughtful planning, not

HOA management. Many California homeowner associations are now 25+ years old. This means that many HOAs are nearing the end of their original 30-year reserve studies. In other words, they have gone through a complete cycle of required maintenance, repairs, and replacement of common area components. Scrooge’s third spirit assures us that past and present actions will have consequences in the future. Scrooge couldn’t be guaranteed a different future, but he woke up Christmas morning a changed man, resolved to be kind, generous, and compassionate. Many factors are out of the control of the HOA board, including government regulations, inflation, staffing, insurance, utilities, and social and political issues. In the same way that Scrooge hoped to alter his future by controlling his present actions, HOA board members can exert control in several governance areas to shape their communities for a successful future. • Establish clear governance objectives – These should be concise declarative statements backed up with adopted policies and communicated clearly to community members. • Establish a board member code of ethics and standards – Board members are bound by the sound business judgment rule and fiduciary duty. A board member code of ethics and standards assures community members that board member expectations are clear and board members are accountable. • Establish clear written expectations for the community manager or management company – Management expectations should be agreed upon, be ethical and legal, and be regularly monitored by the board of directors. • Update the reserve study annually and commit to a multi-year funding plan and maintenance schedule – The reserve study is the driving document of the budget. Spend time on it and work with your reserve specialist to make sure that it is accurate. Carefully consider and commit to a multi-year funding plan and follow the suggested maintenance schedule. Continued on page 22 ECHO journal | ISSUE SIX 2021

The Self-Managed HOA Continued from page 21

• Budget for the present and future needs of the HOA, not the past – Start early, be realistic, and be responsible. Never start the budget with an assessment amount; always start with the recommended reserve contribution and

operating expenses. Those will dictate the assessment amount. Always consider inflation and cost-of-living adjustments for vendors and service providers and increases in insurance and utilities. • Communicate, communicate, communicate – Be transparent and honest with community members.

Keep them apprised of reserve projects and maintenance and repair schedules. Most of all, let them know if projects are being deferred or if assessment increases or special assessments are being considered or are necessary to meet future obligations.

A Holiday Wish

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ISSUE SIX 2021 | ECHO journal

At the end of A Christmas Carol, “Bah! Humbug!” became “Merry Christmas.” The weight of the past and decisions of the present could be changed and possibly alter the future for the better. My holiday wish for California HOA board members is to rise above your current circumstances and past actions. Be courageous, resourceful, and realistic. Commit to leading your communities with integrity and honesty. Commit to establishing governance objectives that provide for your HOA’s financial stability and security. Refrain from deferring scheduled maintenance, and plan wisely for present and future owners. To be sure, 2022 and beyond will be full of challenges and unknowns; make it a Merry Christmas by being rigorous in controlling governance essentials. John Cligny, AMS, PCAM, CCAM-HR, is a veteran portfolio manager and community association management executive. As co-founder of Association Consulting Group, John is a trusted advisor primarily focused on educating and advising community association board members on effective governance to promote a positive public opinion of homeowner associations and community management. John is a frequent speaker and panelist on a wide range of community association topics and issues

LEGAL SHOWCASE ADVERTORIAL

There is no substitute for Expertise. HOA Law is what we do. Representing California HOAs exclusively for over 30 years.

We pride ourselves on being sensitive to our clients’ interests and being able to craft sensible and effective solutions to their problems. The trust we have earned has resulted in client relationships that span decades. Tinnelly Law Group is devoted entirely to the unique legal landscape that HOAs and their Boards of Directors face. Virtually all of our efforts are directed toward the representation of HOAs. Our firm prides itself on being sensitive to the interests of HOAs and being able to craft pragmatic, sensible and effective solutions to their problems. Our firm believes there is no substitute for expertise. We have been representing HOAs exclusively since our founding in 1989. Our firm has developed a special expertise in the areas most important to Boards of Directors in their efforts to manage the affairs of their HOA: general counsel, governing document interpretation and enforcement, assessment recovery, alternative dispute resolution (ADR)

and litigation. We also dedicate a substantial amount of time and resource to publishing educational whitepapers, blog posts and newsletters addressing trends in HOA law and popular issues encountered by our clients and their management. We are constantly looking for ways to expand upon the value we add for our clients. One of our websites, FindHOALaw. com, is a comprehensive library of HOA law and legal information. Its thousands of pages of content and easy-to-use interface provides our clients and their management with a powerful tool for learning about the unique body of law governing HOAs in California.

We understand the importance of responsive and accessible attorneys and staff. Our technology and office policies ensure open and immediate lines of communication with our clients and their management. Our firm understands that cost-efficiency should be a central tenet of every professional services firm. We have made significant investments in cutting edge, cloud-based technology to improve our efficiency and to provide significant cost savings for our clients. This technology drastically improves the efficiency with which we access, manage, store and secure our clients’ files and information, while expanding the ability of our clients to communicate with our attorneys. The result is more effective handling of client matters at a reduced expense to our clients. Our firm believes that excellence requires a commitment to continued improvement—both in the way we service our clients’ needs and in our knowledge of the changing laws which relate to the representation of HOAs. We pride ourselves on being sensitive to our clients’ interests and on being able to craft sensible and effective solutions to their problems. The trust we have earned has resulted in client relationships that span decades.

27101 Puerta Real, Suite 250 Mission Viejo, CA 92691 (949) 588-0866 | www.tinnellylaw.com ECHO journal | ISSUE SIX 2021

5 LOCATIONS STATEWIDE

TINNELLY LAW GROUP, PC

R I S KY B U S I

Common Employee Practice Self-Managed Commu

ISSUE SIX 2021 | ECHO journal

INESS

ce Pitfalls for unities

BY JASMINE F. HALE, ESQ., CCAL

elf-managed associations are a risky business. A quick internet search will bring up countless articles on the risks of self-managed homeowner associations, covering everything from record-keeping challenges to keeping up with legal compliance requirements. Too often, these articles fail to address one of the largest sources of self-managed association risk: employee claims and issues. This article aims to provide an overview of common employee practice pitfalls and solutions to help lower risk and liability exposure for boards and general managers of self-managed communities with employees. First and foremost, every association that has an employee, even just one, must have an employee handbook. Boards often feel the time and expense of adopting a handbook is wasteful, and so they skip this essential best practice. For others who have at least adopted an employee handbook, many boards treat it as a one-and-done exercise. Employee handbooks should be routinely updated to comply with the myriad changes in the law. For instance, in 2021, the California Family Rights Act was updated to apply to employers with five or more employees and mandated certain changes to arbitration agreements. Employee handbooks should include legal requirements, such as anti-harassment statements and harassment reporting policies, but also practical considerations such as job duties and expectations, processes Continued on page 26 ECHO journal | ISSUE SIX 2021

Risky Business Continued from page 25

for requesting reasonable accommodations, and benefits and leave policies. Failure to have a properly drafted job description can hamstring an association when an employee in a protected class is failing to meet their performance expectations; the association is prevented from terminating the underperforming employee without significant risk exposure. Associations that skip implementing an employee handbook not only run the risk of increased claims due to not having legally required policies in place, but they exclude themselves from requiring an employee to go through an internal process before pursuing legal action. Next, self-managed communities (whether through the general manager or the

board) often fail to follow standard employee management best practices, such as performing periodic employee reviews. Or, when associations do perform employee evaluations, they lack candor for fear of providing critical feedback. Problem employees can sometimes be trained into better performing employees. However, if they aren’t receiving feedback, or the feedback they receive is routinely positive, they have no way of knowing improvements are needed. A lack of performance reviews or, worse yet, a history of positive reviews suddenly followed by negative ones, can substantially hinder an association from claiming that its termination or negative employment action was for a lawful business reason. Legal counsel often receives pleas from associations wishing

for an expeditious termination of an employee who has received glowing written reviews, with the board assuring that such reviews mask the reality of a longstanding challenge. Associations find it frustrating to receive counsel explaining that their risk exponentially increases because what is on paper is what matters most in employment litigation. One of the best ways to protect an association from employee claims of wrongful termination and discrimination is by providing periodic employee reviews that offer honest feedback. Boards or general managers should at least schedule regular reviews but also should provide feedback as often as needed, especially when issues and the need for improvement are first noticed. Constructive feedback does not have to be bad or undesirable. Identifying areas where an employee’s performance is overall positive, followed by areas where improvements are needed, can be a learning opportunity for the employee especially if assistance is offered and used by the employee to improve. Failure to properly classify employees (e.g., claiming someone is an independent contractor when they really qualify as an employee or listing someone as exempt when they are legally non-exempt) and lack of appropriate wage and hour tracking systems are other areas of liability exposure for self-managed associations. The complexities of employee classification merits its own article. Associations that did not evaluate their independent contractor relationships in 2020 after the addition of Sections 2775 Continued on page 28

ISSUE SIX 2021 | ECHO journal

KAUFMAN, DOLOWICH, VOLUCK, LLP (KDV LAW) The KDV Law team applies their diverse backgrounds to reach creative and effective solutions based on the unique circumstances of each of their clients. SERVING SAN FRANCISCO AND WINE COUNTRY

Our full spectrum of services allows clients to rely on one law firm for all of their real estate needs. The Real Estate Practice Group at Kaufman, Dolowich, Voluck, LLP (KDV Law) handles transactions, consulting and litigation on behalf of clients across the nation. Our full spectrum of services allows clients to rely on one law firm for all of their real estate needs. We take a transaction through all stages, including contract negotiations, contract drafting, due diligence, and complex hurdles such as zoning, contamination, land use and taxation matters. When disputes arise, we work to achieve equitable, cost-effective solutions that meet our clients’ goals. A. Jeanne Grove, Co-Chair of the Real Estate Practice Group and Managing Partner of the Sonoma office has nearly two decades of experience litigating and resolving HOA disputes. Most recently, Ms. Grove was featured as an HOA legal expert in the Daily 360 Journal and other news media outlets to address the Surfside tragedy and its impact on HOAs nationwide. She has also been

at the forefront of discussions regarding California’s newest laws, SB-9 and SB-10, which are poised to dramatically expand development of multi-unit properties across the state. Ms. Grove’s practice includes real estate and business litigation, including HOA and co-ownership issues, purchase/sale disputes and nondisclosure claims, and boundary, title, development, and construction matters. This full spectrum of real estate legal experience serves HOAs well, as they face a myriad of different real estate issues in the governance of their properties and their members. Based on her deep litigation experience, Ms. Grove regularly counsels HOAs on how to avoid conflicts, by managing their day-to-day operations and compliance matters. The Real Estate Practice Group co-chaired by Ms. Grove also offers 40+ years of experience representing developers and HOAs with condominium conversions, subdivision projects, and CC&Rs.

Ms. Grove and KDV Law have been prominent leaders of diversity in the legal profession. Ms. Grove was awarded a California State Bar Real Property Section Morning Star Award for excellence in real estate law in 2013, and in 2017, she received the Minority Bar Coalition Unity Award for advancing the cause of diversity in the legal community at-large. KDV Law achieved Mansfield Rule 4.0 certification in 2021, one of only 118 firms nationwide to achieve this status, representing the firm’s ongoing success with diversity and inclusion initiatives. Ms. Grove and the KDV Law team apply their diverse backgrounds to reach creative and effective solutions based on the unique circumstances of each of their clients.

A. Jeanne Grove, Esq. Co-Chair of the Real Estate Practice Group and Managing Partner of the Sonoma office

Sonoma Office: (707) 509-5260 San Francisco Office: (415) 926‑7600 jgrove@kdvlaw.com | kdvlaw.com

ECHO journal | ISSUE SIX 2021

SAN FRANCISCO & WINE COUNTRY

LEGAL SHOWCASE ADVERTORIAL

(408) 345-4000 http://wm-llp.com We counsel: • Condominium Associations • Planned Unit Developments

• Mixed Use Associations • Commercial Associations

We provide general counsel to Associations including the following services: • Construction Defect and Civil Litigation • Dispute Resolution

Risky Business Continued from page 26

to 2787 to the California Labor Code should absolutely review their classifications to ensure their employees and contractors are appropriately categorized. Associations should also review how employees list their hours and, budget permitting, consider migrating toward automated or software-based systems that take the guesswork and potential for errors out of the equation. Lastly, self-managed associations with employees must have adequate workers’ compensation insurance coverage and should consider having an employment practices liability (EPL) insurance policy in place as well. While workers’ compensation insurance covers claims arising from on-the-job injuries, EPL insurance protects 28

ISSUE SIX 2021 | ECHO journal

• Governing Document Interpretation • Governing Document Revisions • CC&R and Rules Enforcement

against employee claims alleging that the association violated their legal rights (e.g., harassment, discrimination, wrongful termination, etc.). Failure to have an EPL policy in place can, when an employee claim arises, result in the association having to pay out of pocket for unbudgeted legal expenses. The good news with respect to employer liability is that small changes to existing practices will often result in a meaningful reduction of liability and, quite possibly, an increase in employee satisfaction. Boards need not fear that investing in their association’s employee practices and systems is a bucket without a bottom or somehow will result in increased liability. Simply adopting and periodically updating an employee handbook, conducting honest routine performance

evaluations, auditing employees for proper classification, automating wage and hour tracking, and maintaining an EPL insurance policy can provide a community with a lowered potential for claims being brought in the first place and greater protection when they are filed. Bottom line: When properly communicated to employees as to why changes are being made, and to members as to why costs may increase, boards can increase transparency, lower risk, and demonstrate to all stakeholders that the community is professionally and responsibly operated – a win-win if ever there was one! Jasmine F. Hale, Esq., CCAL, is a partner with Berding Weil LLP, representing clients throughout Northern California in the Bay Area and Sacramento. Ms. Hale has represented community associations for over 15 years and also specializes in employment law.

You’re not alone. Join Echo’s exclusive Board Members’ Club. • • •

Meet other board members Share ideas and information Learn peer-to-peer It’s part of your membership! Sign Up for the Board Members’ Club Here

CEO’s Message Continued from page 6

Echo adapted its business model in order to remain a resource for quality education and to support HOA boards and engaged homeowners. Echo transitioned from in-person events to more than 26 online events serving more than 4,200 registrants. We established the Echo YouTube channel and expanded its video content; delivered six Journals, four of which were printed, two electronic; distributed six Insight e-newsletters; and published the Statute Book & Legal Directory. Our reach broadened: registrations more than tripled since 2019 and we expanded into Southern California and across the United States. We are grateful for those who stuck with us and continue to support our elusive value proposition that knowledge builds community. We deliver knowledge and connections to homeowners and industry professionals based simply on the non-commercial premise that people with homes also need an advocate and a center from which to build their communities.

New Leadership at Echo The world has changed and continues to change for HOAs and for Echo. New challenges, new opportunities, and new leadership. Stability, adaptability, and resolve are essential for any business, but even more so for an association, such as Echo or an HOA. We operate to provide a valuable service and our leaders are committed to serving others. These servant leaders have sustained Echo over these many years and are deserving of our appreciation and support. At the November Echo board

Invite a Homeowner Membership Program Help educate homeowners. Invite them to be individual Echo members for only $50 with a member referral. Click here for more information. Contact Jacqueline Price (408) 297-3246 x203

meeting, our leadership changed. The volunteer president for the past 12 years, David Hughes, decided it was time to step down and let new leadership step up. Adam Haney was unanimously elected by his board peers to serve as David’s successor. Sandra Long assumed the vice chair position, Mark Guithues accepted the post of secretary, and Karl Lofthouse remained treasurer. We appreciate all that David has done to lead the association through years of maintenance, repair, and replacement. He leaves a legacy of outstanding leadership. David, as president, always put Echo and the membership first. He often said to me that Echo is the only association of its kind that focuses on HOA communities and board development. That is our purpose. His servant leadership style has been embedded in the Echo culture. It is an important concept for all volunteer board members, including HOAs, to embrace. Integrity, selfless commitment, and a dedication to mission … thank you, David, for your leadership and friendship as president of Echo.

Inflation Drives Modest Dues Increase Facing increasing inflationary pressures, the Echo board of directors approved the 2022 budget including a modest 4% dues increase for professional service providers (PSPs) and HOA community memberships. Individual and benefactor memberships will remain unchanged. The new budget includes the expansion of services to members, and it is hoped that many who have participated in Echo’s online educational programs in 2021 as nonmembers will join in 2022 and enjoy the benefits of being a member. We also hope that our HOA boards will encourage (or thank) their management firms, vendors, and neighboring HOAs to support Echo and its mission to build better HOA communities. Happy New Year, and thank you for being an Echo member.

ECHO journal | ISSUE SIX 2021

WELCOME TO OUR

New Professional Service Providers

Be Heard | Move On Resolve disputes online with legally enforceable results. We resolve your dispute by having an experienced Arbitrator hear both sides of the story, review evidence, and render a decision. It only takes 2 to 3 weeks and is 100% online and in six easy steps. Empowering businesses to resolve disputes efficiently and cost-effectively, that’s what FairClaims is all about. WHY FAIRCLAIMS? With nearly a decade of experience in online dispute resolution, we’ve resolved thousands of disputes worth tens of millions of dollars. We believe there is a way to deliver high quality results efficiently and cost-effectively. How do we do it? (1) Our mediators are some of the top HOA attorneys in California – they don’t need to be educated and spend their time mediating instead. (2) We streamline the experience with the latest technology to make the whole process more efficient. (3) We offer fair, flat rate pricing – pick from 2, 3 and 6 hour mediation packages to best match your needs. Stephen Kane (562) 244-9447 kane@fairclaims.com fairclaims.com

ISSUE SIX 2021 | ECHO journal

Homeowners Management Company (HMC) is a fullservice community association management firm delivering tailored financial, administrative and operational management solutions to common interest developments and homeowners associations in both Northern and Southern California. HMC Property Management manages around 50 community associations including planned unit developments, condominiums and mixed-use (residential and commercial) developments. Our long-term success is based on an absolute dedication to conscientious, personalized service, as well as transparency and open communication with board members and homeowners. HMC Property Management employs an award-winning team of highly experienced and educated community association managers, accountants, bookkeeping, and administrative personnel to maintain our high service standards. We take a different approach when it comes to management fees. Our base management fee includes many of the monthly “extras” most firms charge separately for. We provide the best customer experience available at a fair and competitive price with transparent communication and reporting. We look forward to working with you! Tasha Parmelee President of HMC 925-937-1011 HMCPM.com

Consulting Experts for Every Stage of Your Building’s Life Pie established its Northern California presence in 2017 in response to a growing demand from several clients and continued growth in the market. While we utilize a fun and flexible workspace located in San Jose, our team is supporting clients throughout the Bay Area, and across California. Whether it’s a campus housing project in San Diego, a San Francisco downtown high-rise, a performing-arts building in Sacramento, or a major corporate headquarters in Mountainview, our Pie California staff has no shortage of opportunity to serve its many clients. Property Loss | Design | Assessments | Performance Testing & Monitoring | BECX Michael Ermisch mermisch@pieglobal.com 669.238.4441 Toll Free: 855.380.8812 pieglobal.com

The Ultimate Coatings Company LLC was founded in 2005 on the premise that the future of architectural paints and roof coatings was at hand with our acrylic paint inventions, stateof-the-art, THERMO-SEAL®, our highly heat- reflective (infrared “solar-reflective”) exterior finish paint, and our ECO-THERM® ELASTOMERIC, a highly, solarreflective, “cool roof” and cool wall, waterproof coating system. As a per batch, factory direct manufacturer, selling these products in custom and stock colors principally to commercial customers, we have proven their effectiveness as an original early adopter in our category of “green” energy efficient paints and coatings. We offer the holy grail of paint solutions for HOAs and other large facility building owners for their entire “building envelope” (walls and roof). As a Cool Roof Rating Council (CRRC) Wall Rating Program Founding Member, we are part of making history with our support as our category of cool wall paints. We look forward to helping Echo member HOAs to achieve excellent cool wall and cool roof advantages that extend maintenance repaint cycles and beat the heat for air conditioning use reduction savings in the summertime. Michael Biel biel.michael@gmail.com (800) 226-9180 ultimatecoatings.net

Echo membership benefits you and your HOA. Join today! OUR MISSION STATEMENT Fostering a better quality of life in community associations through education, advocacy and networking.

www.echo-ca.org ECHO journal | ISSUE SIX 2021

The Echo Legislation Tracker: 2021 Legislation By Mark T. Guithues, Esq.

at an open meeting. Each of the above notices has specific statutory required language. ECHO EXECUTION: The key to implementing these new acclamation requirements into an election is to send out the initial election notice about six months before the actual date (election +30 days = time to send ballots; +30 days = send intro to candidates; +30 days = original request for candidates; +60 days = new notice of election and distribution of rules). This adds up to 150 days of notice according to the new law. Add time for mailing and mail houses (and remember to arrange for the independent inspector of elections). A second reminder of the election must be sent between 7 and 30 days before the deadline for submitting nominations.

For more information on HOA Advocacy, visit the Echo website: www.echo-ca.org/article/hoa-advocacy/ AB 502 (DAVIES) – ELECTION BY ACCLAMATION Election by acclamation occurs when there is the same number of candidates (or fewer) than there are open seats on the board. An association can declare those candidates who ran as board members without spending money printing and sending ballot mailings, reconvening the meeting multiple times for lack of quorum, or counting ballots. Echo supported AB 502 because of the time and dollar savings to HOA communities. Under AB 502, election by acclamation can occur if an association (a) does not use delegate voting; (b) attempted to hold a regular election by sending out ballots within the past three years; (c) provided individual notice of the election and procedures for nominating candidates at least 90 days before the deadline for submitting nominations; (d) distributed a reminder notice between 7 and 30 days before the deadline for submitting candidate nominations; and (e) voted in favor of acclamation 32

ISSUE SIX 2021 | ECHO journal

AB 611 (SILVA) – SAFE AT HOME Existing law requires every association to create a membership list and to distribute the list under certain circumstances. Associations are also authorized to withhold or redact information from association records in specified instances, including, but not limited to, when the release of the information could reasonably compromise the privacy of an individual member of the association. Under California law, victims of domestic abuse or sexual assault and other specified persons may apply for participation in an address confidentiality program called Safe at Home. This program designates the person’s actual address as confidential. Echo supports AB 611 because it adds new Civil Code Section 5216 requiring an association, upon request of an association member who is an active participant in the Safe at Home program, to (a) use the provided Safe at Home designated substitute off-site address for all association communications to such member; and (2) not include any information that would reveal the name, community property address, or email address of the Safe at Home participant to members of the association or the public.

ECHO EXECUTION: Upon request of a member who is an active participant in the Safe at Home program, associations are required to redact the participant’s personal information from membership lists, mailboxes, bank listings, resident directories, electronic keypads, unit property numbers, and internet web portal accounts. The HOA will send all information and notices to an address designated by the Secretary of State as a substitute address.

the year for budgeted recurring large bills like landscape, irrigation, and insurance, and approving nonrecurring bills during the monthly financial reporting at meetings. Associations should use insurance, rather than bonds, to cover the enhanced panoply of covered perils and parties identified by the legislature. It is important to work with insurance professionals who are intimately familiar with these enhanced insurance requirements.

AB 1101 (IRWIN) – FINANCIAL CONTROLS AND INSURANCE Existing law requires managers, at the written request of the board, to deposit funds into a California bank, savings association, or credit union that is insured by the federal government (e.g., FDIC). Echo closely watched AB 1101, which expands the types of government insurance to include the National Credit Union Administration Insurance Fund (NCUAIF) or a guaranty corporation meeting specified requirements, in addition to the FDIC. Existing law requires written board approval for transfers of more than $10,000 or 5% of an association’s total deposits. AB 1101 requires written board approval for all (reserves or operating) transfers over $5,000 or 5% of the estimated income in the budget for associations of 50 separate interests or less, and the lesser of $10,000 or 5% of the estimated income in the budget for associations with 51 or more separate interests. AB 1101 prohibits, without qualification, the commingling of association funds with the funds of the managing agent (usually the management company) or with other funds. Current law requires fidelity bond coverage for directors, officers, and employees, including for dishonesty and computer fraud. AB 1101 allows the use of insurance for such purposes and adds a requirement that crime insurance, employee dishonesty coverage, computer fraud, funds transfer fraud, and fidelity coverage be endorsed to include the association’s manager in addition to its directors and officers.

SB 9 (ATKINS) – LOT SPLITTING Most associations (if not condominiums) are made up of single-family residences. Echo opposed SB 9 because it requires the local municipality to approve owner-requested lot splits of single-family parcels, making each lot into two if the lot size meets certain minimal standards. When combined with last year’s accessory dwelling unit (ADU) and junior accessory dwelling unit (JADU) laws, this allows for the creation of up to six, eight, or even ten units on what was once a single-family parcel. It was originally thought, based on written assurances from the author, that this bill would not apply to associations, but such limitations never quite managed to get into the language of the new law, leading attorneys to differ and leaving the courts to ultimately decide whether SB 9 lot splitting can occur in associations.

ECHO EXECUTION: Association funds need to be deposited in FDIC-insured accounts, which now include guaranty corporations and the NCUAIF. Regardless of whether funds are being transferred from reserves or operating (assuming more than 50 units), written board approval is needed to pay bills larger than $10,000. Boards can accomplish this by approving a motion at the beginning of

ECHO EXECUTION: One can imagine having a single-family residence divided into two lots, each with its own ADU and JADU. This (now) six-plex, for which the legislature requires little to no parking, will create major parking and density issues for associations. It is presently unclear how assessments will be reallocated when there is a subdivision of a lot, how view rights and setback requirements historically preserved in CC&Rs will operate, and how height requirements will be enforced.

SB 391 (MIN) – EMERGENCY POWERS AND PROCEDURES; (ZOOM STYLE) VIDEOCONFERENCE MEETINGS Existing law allows a board meeting to be held by videoconference if the notice identifies a physical location where members of the association may gather to attend. COVID-19 made gathering illegal, and so videoconference meetings continued without an identified physical location, arguably in violation of Continued on page 34 ECHO journal | ISSUE SIX 2021

The Echo Legislation Tracker Continued from page 33

the old law. Echo supported new Civil Code Section 5450, which established an emergency power and procedure expressly allowing teleconferences without an established meeting place if gathering in person is unsafe or impossible. Power: In order to use videoconferencing without an identified gathering space, the association must be in an affected area where (a) a federal state of disaster or emergency is declared; (b) a state of emergency is proclaimed by the governor; or (c) a local emergency is proclaimed by a local governing body. If no emergency exists, there needs to be a physical gathering location following the old rules. Right now, COVID is providing the required qualifying state of emergency. Procedure: If an association wants to hold videoconference meetings now without a gathering location, it needs to do the following: (1) Give a Newly Required Notice: Written notice of the first meeting handled under this new protocol shall be by individual delivery (mailed first class or via email to those who have so agreed). This should be done now so all future meetings during COVID are consistent with this new law. (2) Change the Notice/Agenda: The meeting notice/ agenda now needs to include (in addition to other required content like business to be discussed at the meeting): (i) clear technical instructions on how to participate; (ii) the telephone number and email address of a person who can provide technical assistance; and (iii) a reminder that a member may request continued individual delivery of meeting notices, with instructions on how to do so. (3) Verbally Track How Directors Vote: Because some homeowners will attend telephonically, as opposed to by video, they will be unable to see how each director votes. Therefore, roll call must be conducted for each director vote. Finally, if ballots are scheduled to be counted and tabulated at the meeting, the meeting must be conducted by videoconference with the camera placed where members can witness the inspector of elections tabulating the votes. ECHO EXECUTION: This statute takes effect immediately. Since there is a declared federal state of emergency, associations can and should feel 34

ISSUE SIX 2021 | ECHO journal

free to hold meetings by videoconferencing. The association’s next notice should be provided by individual delivery, which includes mailing to the members or emailing those members who have consented to receive notices by email. Subsequent/ reminder notices may be posted. Such notices must include the normal agenda items, plus the technical assistance information. The roll call vote requirement and, of course, placement of the video camera where ballots will be opened and counted, should also be conducted. SB 392 (ARCHULETA) – DOCUMENT DELIVERY Associations must deliver certain notices and documents by “individual delivery” – meaning by mail or overnight delivery, or by email, fax, or other electronic means if the member has consented in writing or by email to electronic delivery. After January 1, 2023, associations will be required to deliver notices and documents in accordance with the preferred delivery method specified by the member, or, if the member has not provided a preferred delivery method, by traditional mail to the address last shown in the association’s records. Associations are already required to solicit on an annual basis the members’ address or addresses for delivery. The notice provided by the association will need to provide the option of receiving notices at a mailing address, a valid email address, or both. It also must disclose that a member does not need to provide an email address to the association. If the association maintains a website for communicating with its members, that website may be designated in the annual policy statement as the location for posting general notices to the members. Associations are required to keep and disclose the membership list to members, including the name of the member, mailing address, and property address. Members may now opt out of sharing their email addresses. A member’s personal information is prohibited from being sold for any purpose without the member’s consent, or from being transmitted to third parties without the consent of the member unless required by law. A member may bring an action against an association for injunctive relief and actual damages caused by the association’s use of the member’s information in violation of the new statute. ECHO EXECUTION: Each year, when associations solicit their members’ contact information, they now must allow a member to specify a preferred delivery method (mail, email, or both), and they must provide a “simple method” for advising the association

of such delivery preferences. This means associations will need to continue tracking whether members wish documents to be delivered by mail, email, or both, and whether the member has a secondary delivery address and a designated representative. Associations also need to review current practices in how membership information is handled in order to avoid prohibited transmissions of such information. If an association has a website, it may now designate the website as the location for posting general notices. SB 432 (WIECKOWSKI) – ELECTIONS – SB 323 CLEAN-UP SB 323, the election law overhaul of 2020, resulted in a number of ambiguities in the recent law on association election procedures. Echo supported SB 432 because it clarifies a number of these questions. SB 432 was combined with AB 502 and associations may now implement and enforce director term limits, appointed and sitting directors must meet the same qualifications as candidates must, and communities need not send out pre-ballot notices during non-director elections. The bills clarified that the candidate list must include the name and address of the candidates. Also useful, the bills expanded the period for a recall (previously 90 days under Corp Code 7511) to 150 days, which will allow both a recall and an election to occur simultaneously. ECHO EXECUTION: If an association amended and passed new election rules last year, they are generally enforceable; however, they should be reviewed to see if they should be updated to address these new laws regarding director qualifications, term limits, elections by acclamation, recall elections, and notice requirements for assessment and amendment votes. Mark T. Guithues, Esq., is the founding partner of Community Legal Advisors Inc., a six-attorney law firm providing assessment collections and general counsel to many hundreds of community associations. Mark also is a member of and serves as the secretary for the Echo board of directors.

Wade into the sea of coastal policy.

Join the Echo Coastal Resource Panel today and make a difference.

COASTAL HOA PROPERTIES THREATENED BY COMMISSION

Online meeting February 12, 2022, 9:00 AM – 10:30 AM Echo has launched a new initiative to contend with the California Coastal Commission’s (CCC) growing efforts that threaten California coastal property rights and property values. The commission now embraces the most extreme predictions of sea level rise (beyond that of other climate experts) to set policy and decide how you can – or cannot – use and protect the beach and coastal bluff homes. The CCC also has redefined “existing” developments as those developments that were completed prior to January 1, 1977, which effectively prohibits many needed shoreline protection and home improvement projects on property developed since then. To deal with these and other CCC activities, Echo has announced the formation of the Echo Coastal Resource Panel to educate, inform and alert coastal HOAs, homeowners and government officials on concerns about the actions of the commission and to activate coastal HOAs as coastal policy is developed in coming years. The panel, led by HOA volunteers, will draw on expert legal and public affairs advice to share information and provide support on HOA issues with the CCC. The Echo Coastal Resource Panel promises to add a new layer of support in confronting the CCC’s interpretation of the Coastal Act, scientific understanding of sea rise and domineering leverage on coastal cities and counties. We are seeking volunteers with interest and/or expertise to participate and help track California Coastal Commission actions and proposals, and to organize participation and respond to objectionable policies. Echo invites HOA community members to learn more about the mounting coastal issues facing them and hopes to find advocates for homeowner interests. The voice of homeowners should be heard in the ongoing conversation to protect the California coastline and to reasonably protect the property rights and values of coastal homeowners. The first online meeting of the Coastal Resource Panel is scheduled for Saturday, February 12, 2022, from 9:00 AM to 10:30 AM. All are encouraged to attend. To stay informed of coastal issues or to get involved, click the link above and join today! .

Jeff Raimundo is a member of Pajaro Dunes North Association and volunteers as the Echo Coastal Resource Panel chair. His email address is: jeffraimundo.coastal@gmail.com. ECHO journal | ISSUE SIX 2021

ECHO 2022 LEGAL RESOURCE DIRECTORY

ARBITRATION & MEDIATION

ATTORNEYS

FairClaims

Adams Stirling, PLC

Robert Aune Mediation & Arbitration Services

Angius & Terry, LLP

777 S. Alameda, 2nd Floor Los Angeles, CA 90021 (562) 244-9447 fairclaims.com

Four Embarcadero Center, Ste. 1400 San Francisco, CA 94111 (415) 433-6400 auneassociates.com

ASSESSMENT COLLECTION SERVICES Allied Trustee Services

YOU R PREMI ER A SSESSMEN T C OLLEC TI ON SOU RCE S I NCE 1 9 9 3

Allied Trustee Services Stefan Murphy 990 Reserve Drive, Ste. 208 Roseville, CA 95678 (800) 220-5454 smurphy@alliedtrustee.com alliedtrustee.com

5250 Claremont Ave., Ste. 141 Stockton, CA 95207 (800) 464-2817 adamsstirling.com 1990 North Carolina Blvd., Ste. 950 Walnut Creek, CA 94596 (800) 680-4001 angius-terry.com

Barbara C. Zimmerman Law Office 131 Story Circle, Ste. 500 Santa Rosa, CA 95401 (707) 578-7555 bcz-law.com

Baydaline & Jacobsen, LLP 4 Embarcadero Center, Ste. 1400 San Francisco, CA 94111 (916) 669-3500 bayjaclaw.com

Ramona Acosta, PCAM 27101 Puerta Real, Ste. 250 Mission Viejo, CA 92691 (888) 818-5949 contact@alterracollections.com alterracollections.com

A.S.A.P. Collection Services 331 Piercy Road San Jose, CA 95138 (408) 365-9600 asapcollect.com

Jill Jackson 2175 North California Blvd., Suite 500 Walnut Creek, CA 94596 (925) 838-2090 jjackson@berding-weil.com www.berding-weil.com

Chapman & Intrieri, LLP

2236 Mariner Square Drive, Ste. 300 Alameda, CA 94501 (510) 864-3600 cnilawfirm.com

Richardson Ober DeNichilo LLP 234 E. Colorado Blvd., Ste. 800 Pasadena, CA 91101 (626) 449-5577 rodllp.com 36

ISSUE SIX 2021 | ECHO journal

Hanna & Van Atta

John Paul Hanna, Esq. 525 University Ave., Ste. 600 Palo Alto, CA 94301 (650) 321-5700 jhanna@hanvan.com hanvan.com

Hopkins & Carley 70 S. First St. San Jose, CA 95113 (408) 286-9800 hopkinscarley.com

Amy K. Tinetti, Esq., CCAL 2820 Shadelands Drive, Ste. 160 Walnut Creek, CA 94598 (925) 926-1200 atinetti@hughes-gill.com hughes-gill.com

Hutchinson & Bloodgood, LLP 579 Auto Center Drive Watsonville, CA 95076 (831) 724-2441 hbllp.com

Clark Hill PLC

One Embarcadero, Ste. 400 San Francisco, CA 94111 (415) 984-8500 clarkhill.com

Community Legal Advisors, Inc. Mark T. Guithues, Esq. 509 N. Coast Highway Oceanside, CA 90254 (760) 529-5211 mark@attorneyforhoa.com attorneyforhoa.com

8880 Rio San Diego Drive, Ste. 800 San Diego, CA 92018 (619) 489-3100 flanaganhoalaw.com

Hughes Gill Cochrane Tinetti, PC Berding | Weil LLP

Alterra Assessment Recovery

Flanagan Law, APC

Community Legal Advisors, Inc. Mark T. Guithues, Esq. 509 N. Coast Highway Oceanside, CA 90254 (760) 529-5211 mark@attorneyforhoa.com attorneyforhoa.com

Ericksen Arbuthnot

2300 Clayton Road, Ste. 250 Concord, CA 94520 (510) 832-7770 eriksenarbuthnot.com

Kasdan Turner Thomson Booth LLP Ritchie Lipson, Esq. 1990 N. California Blvd., Suite 1060 Walnut Creek, CA 94596 (866) 578-3328 ext. 317 rlipson@kasdancdlaw.com kasdancdlaw.com

ECHO 2022 LEGAL RESOURCE DIRECTORY

ATTORNEYS CONT’D.

Kaufman Dolowich Voluck, LLP Jeanne Grove, Esq. 425 California St., Ste. 2100 San Francisco, CA 94104 jgrove@kdvlaw.com (415) 826-7630 kdvlaw.com

Kriger Law Firm

8220 University Ave., Ste. 100 La Mesa, CA 91942 (619) 589-8800 krigerlawfirm.com

Law Offices of Barrett R.P. Schaefer 790 Mission Ave. San Rafael, CA 94901 (415) 485-2200 bschaeferlawfirm.com

Law Offices of Wanden P. Treanor PO Box 998 Larkspur, CA 94977 (415) 891-8200

Tinnelly Law Group, PC

200 Tamal Plaza, Ste. 135 Corte Madera, CA 94925 (415) 945-9998 lightfootlawfirm.com

Ramona Acosta, PCAM 27101 Puerta Real, Ste. 250 Mission Viejo, CA 92691 (949) 588-0866 ramona@tinnellylaw.com tinnellylaw.com

Michael B. Allen Law Group, Inc.

Youngling Law Firm

Lightfoot Law Firm

66 Bovet Road, Ste. 250 San Mateo, CA 94402 (650) 347-5000 mballenlaw.com

Noland Law, PC

100 Pine St., Ste. 1250 San Francisco, CA 94111 (415) 481-0825 noland-law.com

Pratt & Associates, APC

634 N. Santa Cruz Ave., Ste. 204 Los Gatos, CA 95030 (408) 369-0800 prattattorneys.com

1108 Irwin St. San Rafael, CA 94901 (415) 454-1090 younglinglaw.com

White & MacDonald, LLP 1530 The Alameda, Ste. 215 San Jose, CA 95126 (408) 345-4000 wm-llp.com

Ragghianti Freitas, LLP Law Offices of Deon R. Stein Deon Stein, Esq. 885 University Ave. Sacramento, CA 95825 (916) 640-0102 dstein@deonstein.com deonstein.com

Law Offices of Eric S. Canfield 905 Melaleuca Ave., Ste. C Carlsbad, CA 92011 (858) 692-9292

Law Offices of John D. Garvic 3 East Third Ave. San Mateo, CA 94401 (650) 342-0873 garviclaw.com

Law Offices of Kevin D. Frederick, Esq. 605 Middlefield Road Redwood City, CA 95063 (650) 365-9800 kevinfredericklaw.com

Law Offices of Mark J. Wleklinski 560 Lennon Lane, Ste. 100 Walnut Creek, CA 94598 (925) 280-1192

Law Offices of Tom Fier

675 Mariners Island Blvd., Ste. 106 San Mateo, CA 94404 (650) 572-1900 tomfier.com

1101 5th Ave., Ste. 100 San Rafael, CA 94901 (415) 453-9433 rflawllp.com

Richardson Ober DeNichilo LLP 234 E. Colorado Blvd., Ste. 800 Pasadena, CA 91101 (626) 449-5577 rodllp.com

Scherer, Smith & Kenny, LLP 140 Geary St., 7th Floor San Francisco, CA 94108 (415) 433-1099 sfcounsel.com

SwedelsonGottlieb

Sandra Gottlieb, Esq. 350 Sansome St., Ste. 300 San Francisco, CA 94104 (415) 762-1889 slg@alslien.com lawforhoas.com

Wolff Law Office

George Wolff, Esq. 580 California St., 12th Floor San Francisco, CA 94104-1000 (415) 788-1881 george@wolfflaw.com wolfflaw.com

BYLAW & CC&R REVISIONS Richardson Ober DeNichilo LLP 234 E. Colorado Blvd., Ste. 800 Pasadena, CA 91101 (626) 449-5577 rodllp.com

Tinnelly Law Group, PC Ramona Acosta, PCAM 27101 Puerta Real, Ste. 250 Mission Viejo, CA 92691 (949) 588-0866 ramona@tinnellylaw.com tinnellylaw.com

The Miller Law Firm

235 Montgomery St., Ste. 930 San Francisco, CA 94104 (415) 437-1800 constructiondefects.com

ECHO journal | ISSUE SIX 2021

ECHO 2022 LEGAL RESOURCE DIRECTORY CONSTRUCTION DEFECT LITIGATION

GENERAL COUNSEL

RESERVE STUDIES Applied Reserve Analysis

Berding | Weil LLP

Community Legal Advisors, Inc.

Jill Jackson 2175 North California Blvd., Suite 500 Walnut Creek, CA 94596 (925) 838-2090 jjackson@berding-weil.com www.berding-weil.com

Mark T. Guithues, Esq. 509 N. Coast Highway Oceanside, CA 90254 (760) 529-5211 mark@attorneyforhoa.com attorneyforhoa.com

Chapman & Intrieri, LLP

Pratt & Associates, APC

2236 Mariner Square Drive, Ste. 300 Alameda, CA 94501 (510) 864-3600 cnilawfirm.com

Hughes Gill Cochrane Tinetti, PC Amy K. Tinetti, Esq., CCAL 2820 Shadelands Drive, Ste. 160 Walnut Creek, CA 94598 (925) 926-1200 atinetti@hughes-gill.com hughes-gill.com

634 N. Santa Cruz Ave., Ste. 204 Los Gatos, CA 95030 (408) 369-0800 prattattorneys.com

Tinnelly Law Group, PC Ramona Acosta, PCAM 27101 Puerta Real, Ste. 250 Mission Viejo, CA 92691 (949) 588-0866 ramona@tinnellylaw.com tinnellylaw.com

INSPECTOR OF ELECTIONS Kasdan Turner Thomson Booth LLP Ritchie Lipson, Esq. 1990 N. California Blvd., Suite 1060 Walnut Creek, CA 94596 (866) 578-3328 ext. 317 rlipson@kasdancdlaw.com kasdancdlaw.com

Liberty HOA Election Services, Inc.

The Miller Law Firm

Professional Association Services, Inc.

Rachel M. Miller, Esq. 235 Montgomery St., Ste. 930 San Francisco, CA 94104 (415) 437-1800 rachel@constructiondefects.com constructiondefects.com

Wolff Law Office

George Wolff, Esq. 580 California St., 12th Floor San Francisco, CA 94104 (415) 788-1881 george@wolfflaw.com wolfflaw.com 38

ISSUE SIX 2021 | ECHO journal

Deanna M. Libert, Owner 1175 Branham Lane, #18787 San Jose, CA 95118 (408) 482-3525 deanna@hoaelection.com hoaelection.com

42612 Christy St. Fremont, CA 94538 (707) 539-5810 ext. 352 pas-inc.com

Professional Election Inspectors PO Box 659 Murphys, CA 95247 (209) 559-1448 info@pro-ei.com pro-ei.com

4040 Civic Center Drive, Ste. 200 San Rafael, CA 94903 (800) 500-8505 appliedreserveanalysis.com

Association Reserves, Inc. 1278 Indiana St., Ste. 400 San Francisco, CA 94107 (415) 694-8931 reservestudy.com

The Helsing Group

4000 Executive Parkway, Ste. 100 San Ramon, CA 94583 (925) 355-2100 helsing.com

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INAUGURAL MEETING

The Echo Journal – Issue 6 2021

Articles inside

CEO’s Message Maintain, Repair, and Replace: An Important Part of Leadership

Online Meeting: Coastal HOA Properties Threatened by Commission

All-New 2022 Statute Books Will Be Available Soon!

2022 Legal Resource Directory

Echo Legislation Tracker 2021 Legislation

HOA Education on Demand: Echo Launches YouTube Channel

Welcome to Our New Professional Service Providers