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SERVING HOA BOARD MEMBERS & HOMEOWNERS

JANUARY / FEBRUARY 2020

Legal Changes for HOA Elections PAGE 8

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MISSION STATEMENT Fostering a better quality of life in community associations through education, advocacy and networking.

ECHO 1671 The Alameda, Suite 205 San Jose, CA 95126 408.297.3246 | info@echo-ca.org www.echo-ca.org

BOARD OF DIRECTORS & OFFICERS PRESIDENT

DIRECTORS

David Hughes

Jerry L. Bowles

VICE PRESIDENT Adam Haney

Rolf Crocker Sarah Dunia John Gill, Esq.

TREASURER

Mark G. Guithues, Esq.

Karl Lofthouse

David Levy, CPA

SECRETARY Sandra Long

Diane Rossi Katrina Solomatina, Esq. Wanden Treanor, Esq.

Resource Panel Luncheon Calendar Echo Resource Panels Luncheons are offered in a casual atmosphere with the goal to engage community managers, professional service providers, HOA board members and homeowners. At each luncheon important topics related to HOAs are presented by industry experts and offer the opportunity to share experiences and issues. Echo is committed to creating an accessible and collaborative environment that reflects our mission to build stronger communities through education.

EXECUTIVE DIRECTOR

David Zepponi MEMBER ENGAGEMENT MANAGER

Hannah McAuley MEMBERSHIP & SALES ADMINISTRATOR

Jacqueline Price The ECHO Journal is published bi-monthly 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. © 2019 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.

REGISTER ONLINE

Register at www.echo-ca.org/events Registering online helps to provide Echo with an accurate number of attendees.

DATE

PANEL NAME

ORGANIZER(s)

Thursday February 27, 2020 11:45 a.m. – 1:00 p.m.

East Bay Resource Panel

Cynthia Heskett

Thursday March 5, 2020 11:30 am – 1:30 pm

North Bay Resource Panel

Stephany Charles & Diane Kay

Thursday March 19, 2020

Wine Country Resource Panel Pam Marsh & Sarah Dunia

11:45 am – 1:00 pm Friday March 27, 2020 11:45 am – 1:00 pm

Central Coast Resource Panel

Laura Yelland

ECHO journal | January/February 2020

3

Register at www.echo-ca.org/events | Promo Code: MARIN2020

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www.echo-ca.org | events@echo-ca.org Echo is the only statewide organization created solely for HOA board member and homeowner education in California. For more than 47 years, Echo has continued to be a leader in quality educational programs that build stronger communities.

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TOPICS Case Law and Legislative Update DAVID F. FEINGOLD, ESQ., RAGGHIANTI FREITAS, LLP

ADUs and Voting GLENN H. YOUNGLING, ESQ., YOUNGLING LAW FIRM

The Need for Strategic Planning WANDEN P. TREANOR, ESQ., LAW OFFICES OF WANDEN P. TREANOR

Fair Housing Issues MATT D. OBER, ESQ., RICHARDSON | OBER | DENICHILO, LLP

How to Deal with Difficult Issues and Difficult People STEPHEN LIGHTFOOT, ESQ., LIGHTFOOT LAW FIRM

Ask the Attorneys Open Forum There are a limited number ofof reduced rate hotel rooms available ($153 per night*).

The discounted rate expires 2/7/20.

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KEVIN BOLAND January/February 2020 | ECHO journal INSURANCE AGENCY

Features 8

Legal Changes for HOA Elections

BY SANDRA L. GOTTLIEB, ESQ., CCAL

14

A Practical Overview of ADUs

BY MARK G. GUITHUES, ESQ.

18

Back to the Future: Modernization of an Association

BY KRISHNA YALAMANCHI

24

Are You Really Covered?

BY KEVIN BOLAND, LUTCF, CIC, AI

14

18

Happenings

3

Resource Panel Luncheon Calendar

4

Marin Educational Seminar

6

Executive Director’s Message: I Have a Dream, Too...

BY DAVID ZEPPONI

10

Save the Dates: Educational Seminar Calendar

22

The Self-Managed HOA: Setting Evaluation Criteria for the HOA & Its Staff

BY JOHN CLIGNY, AMS, CAMEx, CCAM-HR

27

Welcome to Our New Professional Members

29

Santa Cruz Educational Seminar

33

Legislative Review

34

Echo Bookstore Offerings

24

ECHO journal | January/February 2020

5

news from ECHO

EXECUTIVE DIRECTOR’S MESSAGE

Raison d’Etre – The Reason for B What a beautiful phrase, raison d’etre (reason for being). It is

I Have a Dream, Too... every board member should consider and collectively agree.

The phrase engenders humanity. The words roll from one’s ton This weekend I reflected on the wordsstark of Dr. business loudest, andand not the strategic.

It doesn’t of have to senses adds the element humanity to th Martin Luther King, Jr., the great American civil be this way. a board: Strategic planning, execution and evaluation; missio rights leader whose words, in March of 1963, management. The business realities should be reflective of com marked the turning point for the civil rights HOA board members also should have a dream common values of individuals in the community. movement in the United States. Dr. King’s “I for the association, encapsulated in a vision

Have a Dream” address is so powerful, dynamic statement and executed through its are mission andof humans Communities are imperfect – because they made and resilient, that all can learn from and apply operational planning. To be an executive on the relating. Humans using. Human living. Basically, humans bein his immortal message in many ways and many board of an HOA means that you can dream, and being human, communities sometimes forget that managem contexts to advance HOA communities. you should dream big for your community.

establish norms for a successful community. In a sense, the the boards community.

Its purpose establish orderNot and elevate So, I have a dream: A dream that all HOA Board members are is theto leaders of the HOA. have the strength and courage to stand up and andonly managing the mundanenorms but planning progress pace by establishing and for constraints to lead because they have earned the respect of the future of the association. So, if a member is to benefit all.

the homeowners and communities they serve; constantly focused on the detail, how can they It seems apparent that boardasleadership must understand an a dream which creates meaningful change look to the horizon, Dr. King did, and dream respectful of individual rights and theowners collectivein order about could be? a sense of community and gene towhat orchestrate rights of the community. That through clarity of and protect community values. The purpose of a board, therefo vision and the eloquent, respectful execution of Leadership is about listening and empowering build community based on common values for the good of al authority, all HOA communities thrive.

– it’s about having a dream, building a path, It takes time to orchestrate a community.

It atakes conquering obstacles and advancing visiontime for to know Where is the dream in your community?

Doto you Challenging courageous time listenthe tofuture. the voices and times buildrequire a vision reflective of com sometimes feel that your association and boardyou is will leaders.

Let’s pay homage one of member America’s and satisfie be more effective as atoboard reacting and not leading? It’s an unfortunate greatest leaders and apply “the dream” to your your reason for being on the board. reality of HOA management that laws and risk community. Then you too will have a dream. management often drive agendas. A ECHO volunteer is committed to helping homeowner boards and resident board can easily fall into the illusion of leadership ing and advocacy – this is our “raison d’etre”. by being caught up in the doing, the urgent or the

Sincerely,

Sincerely,

ECHO EXECUTIVE DIRECTOR

David Zepponi Executive Director

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January/February 2020 | ECHO journal

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Legal Changes for HOA Elections

BY SANDRA L. GOTTLIEB, ESQ., CCAL

The new election law is generating a lot of questions and a lot of commotion amongst community association industry professionals.

The timing of the bill and its requirements cause for swift movement for many associations throughout the state.

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January/February 2020 | ECHO journal

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or any elections held after January 1, 2020, the new law requires that all Election Rule changes must be made more than 90 days prior to an election (including director elections, special assessment votes, governing document amendments, and other votes that require secret balloting). In other words, this needs to be an agenda item at your next board meeting if you have an annual meeting after the beginning of the year.

The new law requires Election Rules to include several statutory statements/ requirements; we have listed these below.

Note that because the changes are required by the new law, directly adding the newly required statutory language to your Election Rules will arguably not invoke the 28-day member comment period for rule changes, meaning an association would be able to make changes without the member comment period. However, we don’t believe this is advisable or practical, considering that making

changes to rules is almost always a substantive process and some of the key parts of the new law are optional in nature and will in fact require the statutorily required 28-day member comment.

While the new law restricts what board member qualifications an association can require, here are some of the qualifications that associations can, but are not obligated to impose. Remember, the following qualifications must be in the Election Rules in order to enforce them.

• An association may require a nominee for a board seat to be current in the payment of regular and special assessments (as long as board members are also subject to these requirements) and provided that – The nominee hasn’t paid such assessments under protest.

– The nominee isn’t subject to an approved payment plan.

• An association may disqualify a nominee if that person would be serving at the same

time as another person who holds joint ownership in the same separate interest who is either already nominated or an incumbent director.

• An association may disqualify a nominee who has been a member of the association for less than one year.

• An association may disqualify a nominee that has a past criminal conviction that would prevent the association from purchasing or maintaining a fidelity bond.

Associations will need to further review its election rules to ensure that they comply with the following statutory requirements or contain the following statements:

• Voting rights can no longer be suspended, the only basis for which an association can withhold a member’s ballot is for a person not being a member at the time when ballots were distributed.

Continued on page 10

ECHO journal | January/February 2020

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Legal Changes for HOA Elections Continued from page 9

10

• An association cannot deny a ballot to or from a person with a general power of attorney for a member.

• Under duties for the inspector of election, it must include a statement that the inspector of election must deliver, or cause to be individually delivered to each member, at least 30 days before an election, both the ballots and either a copy of the election rules or a statement in 12-point font that reads, “the rules governing this election may be found here {insert web address}.” Read: if the association doesn’t have a website, it should January/February 2020 | ECHO journal

consider establishing one if it will cost less to maintain it than printing costs for the rules for each vote the association holds requiring a secret ballot under the civil code.

• Election rules may no longer permit 3rd parties who are under contract with the association to act as an inspector of election. Read: managers are no longer permitted to be an inspector, so budget accordingly.

Election rules will also need to contain the following notice requirements:

• General notice of the procedure and deadline for submitting a nomination shall be issued at least 30 days before the nomination deadline (unless individual

notice has been requested by the member).

• General notice of the following shall be made at least 30 days before ballots are distributed (unless individual notice has been requested by the member).

• The date and time by which and the physical address where ballots are to be returned by mail or handed to the inspector(s) on the date of the election.

• The date, time and location of the meeting at which ballots will be counted.

• The list of candidates’ names that will appear on the ballot.

• A statement that the association must retain election materials, a candidate registration list and a voter list as defined in the statute.

• A statement that members are permitted to verify the accuracy of their individual information on the candidate registration list and the voter list at least 30 days before ballots are distributed; the association or member shall report any errors or omissions to either list to the inspector or inspectors of election, who shall make corrections within 2 business days.

• A statement that pursuant to Civil Code Section 5105, the association must disqualify a nomination for candidacy if the nominee is not a member of the association, except for rights provided to developers under the DRE regulations and the association’s CC&Rs.

• A statement that if the title to a separate interest parcel is held by a legal entity that is not a natural person, the governing authority of that legal entity shall have the power to appoint a natural person for voting purposes.

• A statement that the association shall not disqualify a nominee if that person has not been provided the opportunity to engage in internal dispute resolution.

• If the association has any board member qualifications that are no longer permitted under the new law, these may be stricken from the rules without member comment (please see below for additional qualifications).

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Legal Changes for HOA Elections Continued from page 11

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As previously stated, associations will be required to offer internal dispute resolution to any nominee that it intends to disqualify. If an association fails to do so, that nominee will have the right to be nominated, even if they fail to meet one of the director qualifications.

And finally, under the new law, Civil Code Section 5145 has been amended to require courts to invalidate elections unless, by a preponderance of the evidence, the association can show that its non-compliance with the election laws or its Election Rules did not affect the outcome of the election. Therefore, associations should take extra care to follow the election procedures as it will be difficult to prove through a “preponderance of the evidence” that the violations did not impact the election’s outcome.

Any inconsistencies with the new election laws found in the bylaws will automatically be invalidated. Associations do not need to amend their bylaws solely for this purpose. As long as the election rules comply with the law, it will suffice. Of course, for clarity and to avoid conflicts, amendments to the bylaws should be addressed.

It should be clear that most associations will need to amend their Election Rules to ensure compliance with the new law.

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ECHO journal | January/February 2020

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A Practical Overview of ADUs S

BY MARK G. GUITHUES, ESQ.

ince 2015, California’s Legislature has attempted to reduce the State’s housing shortage by enacting laws which encourage the construction of accessory dwelling units (ADUs). It has done so by forcing local municipalities to reduce local zoning and permitting barriers for such “affordable housing.” Along the way, the State has nullified any HOA covenant, restriction or governing document (CC&Rs, architectural guidelines, etc.) which “prohibits or unreasonably restricts” the construction or use of ADUs or junior accessory dwelling units (JADU) from being constructed on single-family residential lots. This basically means that owners can build or convert spaces into ADUs and JADUs at their homes.

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January/February 2020 | ECHO journal

ADU Defined. ADUs are additional living quarters on single-family lots (not condominiums) that function independently of the primary dwelling unit.

Also known as accessory apartments, accessory dwellings, mother-in-law units, or granny flats. ADUs may be attached to or detached from the primary dwelling unit, and provide complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, cooking, eating and sanitation.

JADU Defined. JADUs are smaller than ADU’s, with less amenities. JADU’s must be no larger than 500 square feet. These may be bedrooms or converted garages which have an entrance from the main home and an entrance to the outside from the unit. These units must have cooking facilities, including a sink and stove, but are not required to have a dedicated bathroom in the JADU space. A bathroom must be available in the primary residence or otherwise nearby in an accessible location.

Streamlined Approval. The new laws focus on expediting and streamlining the local government procedures and approvals required for ADU/JADU applications. For example, the processing time may not be greater than sixty (60) days. Many applications will only require ministerial approval, meaning reduced administration procedures such as notice of a hearing to the neighbors. In addition, impact fees, such as permitting fees, utility connection fees, etc., are to be significantly reduced and may be imposed on a tiered basis depending on size of the unit. Expect cities to be on board with these new living spaces, which can be used in meeting their State mandated requirement to provide a certain quantity of affordable housing.

Association Aesthetics. Associations may impose “reasonable restrictions” on ADUs and JADUs that do not unreasonably increase the cost to construct, effectively prohibit the construction of, or extinguish the ability to otherwise construct, an ADU or JADU consistent with existing law. That generally looks Continued on page 16

ECHO journal | January/February 2020

15

A Practical Overview of ADUs Continued from page 15

like the standard for limitations on solar installations, which logically means that an association might limit the color and finish appearances somewhat, but not much else. Some of the more significant issues facing planned developments include: Multiple ADUs/JADUs. The new laws will allow a combination of living spaces, on a single-family residential lot, such as the original house plus an ADU and two JADUs. For example, owners can build several combinations, including a detached ADU on the property and converting the garage or other unlivable area into a JADU. Garage and Other Conversions. The ADU statutes will allow garages and other types of conversions of traditionally unlivable space into ADUs or JADUs based on size. Once converted, these spaces may be rented to third parties as legal living spaces.

Municipalities may require replacement of the parking in certain situations, or conversely may elect to remove all parking requirements as they pertain to these homes.

Setbacks. Setbacks are reduced to “no more than four feet from the side and rear lot lines.” If an association’s architectural guidelines or other governing documents have more restrictive setbacks, those provisions will be void and unenforceable. A question is whether an association will be able to enforce view restrictions, if any, contained in its governing documents.

Association Parking.

Associations are prohibited from requiring residents to park within the garages if the owner is converting that garage into an ADU or JADU. Governing documents requiring garage parking will be considered a restriction that prohibits the construction of an ADU, and therefore void and unenforceable.

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January/February 2020 | ECHO journal

Additionally, where parking structures, such as a garage, are demolished to construct an ADU, the owners are not required to replace those off-street parking spaces.

Association’s should require that driveway parking is to be filled before street parking is used. If such parking is not created, issues will be created with on-street parking.

Enforcement. Enforcement issues will increase, with potentially inconsistent results. For example, consider whether associations should continue to enforce garage parking requirements against owners who do not convert their garages to ADUs. Should it enforce off-street parking requirements against owners who choose to fill their garages with storage, game rooms or simply choose not to park therein?

Owner Occupied and Rentals. The ADU laws allow local agencies to require owner occupancy of either the primary residence or the ADU as part of the permitting application.

The local agency may also require the applicant to agree to rentals of terms longer than thirty (30) days. Associations will need to review their local ordinances for existing or revised occupancy and rental requirements and adopt appropriate provisions within their governing documents.

Governing Documents and Policies. Associations will need to work with legal counsel to review or prepare restrictions to these documents to ensure they do not conflict with the ADU laws or impose restrictions that unreasonably increase the cost to construct or effectively prohibit the owner’s ability to construct and use ADUs or JADUs consistent with these new laws.

ADU Rule Suggestions Require an applicant for an ADU/JADU to be an owner-occupant.

Require the ADU/JADU be architecturally consistent with the main residence.

Require that, so long as the property is operated as an ADU/ JADU, that some portion of the property be resided in by the owner.

Require that the property be used for rental terms longer than 30 days.

Require that if a garage is converted into an ADU/JADU, that the residents fill the driveway spaces (including parking in tandem) before parking on the street.

Owner and Director Takeaway: The purpose of AB 670 and its companion bills is to address what the Legislature defines as a severe housing crisis by significantly increasing the supply of affordable rental units in California. As there are numerous, complicated pieces to the over-arching statutory scheme applicable to ADUs, HOA boards and management professionals will need to prepare for upcoming challenges in implementing architectural restrictions within their planned development communities.

Mark G. Guithues, Esq. is an attorney and founding partner with the law firm Community Legal Advisors, Inc., with offices in Orange County, San Diego, Inland Empire and Coachella Valley. Mr. Guithues has been serving as general counsel to common interest developments for 25 years and also serves on the 2020 Echo board of directors.

ECHO journal | January/February 2020

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BY KRISHNA YALAMANCHI

Modernization of an Association

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January/February 2020 | ECHO journal

The most frustrating are often the result of the most mundane and tedious responsibilities of association management: keeping records, maintaining mailing lists, paying bills, notifying members, scheduling and managing meetings, dealing with maintenance requests and simply being transparent with members. These routine duties can consume a workday and expose the association to risk.

To be sure, the details of business is a fundamental part of the proper management of the HOA. The question then is how to streamline the mundane and make the information gathered work to the benefit of the association through improved transparency and productivity. Especially in these days of rapidly increasing process and paperwork, application technologies appear to be good solutions for many.

In this discussion, technology was the answer and it opened a new world of rapid and effective management. Today there are several programs and services which are perfect for HOAs and the advancement of business productivity and transparency. The availability of inexpensive personal computer-based and mobile technologies has brought association management Back to the Future.

The following was prepared by a former board member and leader in technology transformation of HOAs. The story begins…

HOA BOARDS FACE many challenges.

Continued on page 20

ECHO journal | January/February 2020

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Back to the Future Continued from page 19

HOA Lamentation The association had been running reasonably well over the years, not hugely efficient but good enough for the management of day-to-day activities. There was no orchestrated, proactive management strategy or push for operational efficiency. The association was doing okay but it could be doing exceptionally well.

There was a growing frustration among homeowners and board members, many of whom worked in the tech industry and modern business environments, that more contemporary operational management would move the association from “meh” to magnificent while providing better service, compliance and stabilization of dues with the modernization of decades old management systems.

Accordingly, the board began a process of assessment, identification and prioritization of the management and compliance systems to determine the best investments into a more modern business environment for the HOA. The board wanted to bring the association back to the future of efficient management.

Opportunities for Improvement An internal look of the systems and processes uncovered some flags of concern. A review noted that there was an overconcentration of work with two vendors. These two vendors did 71% of the business of the association. Unto itself, not necessarily a huge problem but probably not the best management practice. The greater 20

concern was that the board had little to no performance oversight and there were no clear metrics for performance. Without metrics and the tracking of these, how would the association be able to evaluate performance. This combined with the concentration of vendors, created significant risk to the association.

In addition, residents talked about the waste created from work that was often redundant and time-consuming with little or no member involvement or feedback. Day to day workflow was exceedingly complex for simple and routine problems with information difficult to obtain.

Regularly, resident requests would be met with a statement, “I’ll have to look into that and get back to you in a day or two.” Which only served to frustrate the community and cause a backlog of mundane work that could be instantaneous done if proper systems were in place.

Further, the complexity of the often-manual systems and the resulting lack of transparency, created a rift between the board and management. The system, although working, was perceived as ineffective for the modern needs of the association.

Membership Assessment Leadership realized that the shortcomings of association operations must be overcome for it to thrive. An effort was put forth to assess what the community perceived as most urgent.

The association formally and informally surveyed the community to ascertain homeowners’ perceptions of the association. At pool parties and other informal gatherings, the board collected information

January/February 2020 | ECHO journal

from its members by asking key questions of them. It was easy to gather information about perceptions of the association operations from residents in informal settings such as pool parties and receptions. This formed the basis for a broader electronic surveying process.

The association formulated questions and used an electronic surveying tool, SurveyMonkey, to more formally collect data from all homeowners. Thus, the process of collecting information about members’ perception of operations and the activities of management was reasonably easy to conduct and not expensive.

The data collected provided the board with a legitimate foundation from which to identify and prioritize the most critical areas of need for the association.

In the questioning, the board set out to determine the aggregate perception of the community quantified in what is known as the “net promoter score” of the association.

The net promoter score quantifies whether a person is likely to recommend the community to another, noncommunity member (promote the community). This process is typically used in brand management of products like Tesla or Apple, but the technique also worked well for the association.

The unfortunate but honest outcome of the data collected was that the association had a lot of work to do to improve the promoter score.

Identification of Board Goals Using the survey tool, the board was able to identify why it didn’t score as hoped. Problems were isolated, defined and then

solutions developed to remedy the deficiency starting with the areas of greatest perceived need.

These included: 1) building trust, 2) better service, and 3) improved curb appeal.

The Board Focused on Perceived Need: Better Service with Greater Efficiency - Automate Tasks The board reconsidered how the association was doing things and investigated the systems used to run the HOA operations. After review, the board automated the routine and simple processes as much as possible by using inexpensive and readily available software solutions designed for these purposes. Following are some examples of the automation processes.

Trusted Paints. Quality Results.

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4/12/17 8:39 AM

Banking System The association changed the manual banking system to an electronic, seamless process.

This improved efficiency, security and member service. Checks are now deposited, tracked and images saved electronically – rapidly available to managers by simply clicking a button.

Reconciling statements is fast and easy and the review of checks is instantaneous. Transactions can be approved simply and easily by the click of a button which helps to ease compliance issues and provides a record of the transaction.

Communication Processes Getting the word out to members efficiently and effectively is critical for association management. The HOA had been using a legacy email system for more than twenty years. In Continued on page 30 ECHO journal | January/February 2020

21

THE SELF-MANAGED HOA

Setting Evaluation Criteria FOR THE HOA AND ITS STAFF “What gets measured, gets managed.”

Peter Drucker

22

January/February 2020 | ECHO journal

Homeowner Associations are organizations. As organizations they are governed by an elected volunteer board of directors whose primary duty is oversight of the association’s operations and ensuring that the governing documents of the association are followed and enforced. Often, the self-managed HOA will “delegate” many organizational responsibilities to a paid manager, or other staff. In either case, an important task of the board of directors will be setting evaluation criterion for itself, manager and staff.

Peter Drucker (1909-2005, Claremont Graduate University), best known as the ‘founder of modern management,” stated simply but eloquently of organizations, “what gets measured, gets managed.”

Heeding those five words will change the trajectory of your HOA

BY JOHN CLIGNY, AMS, CAMEx, CCAM-HR

John Cligny, CAMEx, CCAM-HR, AMS, is the co-founder of Association Consulting Group and is a veteran portfolio manager and industry thought leader. John advises and educates HOA clients and management companies on a wide range of community management topics and provides expert testimony in litigation.

SELF-EVALUATION OF BOARD PERFORMANCE

• Is the board in compliance with its fiduciary duty?

EVALUATION OF MANAGEMENT AND STAFF

and allow the board of directors to set effective evaluation criterion for itself, manager and staff.

So, how do we measure and what do we measure?

One of my pet peeves is that boards of directors spend too much time discussing what the HOA should “do” and not enough time discussing what the HOA should “be”. Don’t misunderstand, there are a lot of things the HOA board has the power and duty to “do.” Your HOA’s Bylaws probably have a section under the “Board of Directors” entitled “Powers and Duties” that list many of the powers and duties of the board that allow it to effectively administer the affairs of the association. These powers and duties should be seen in the context of administrative oversight and can be used to create initial evaluation criterion to measure both board, manager and staff performance and compliance against these measurable activities. To be sure, your board may create additional measurable metrics for the HOA including compliance to policies, rules, regulations, short- and long-term strategic goals, budget, reserves and investment goals, as well as contacts for vendors, manger and staff.

Setting evaluation criterion for the HOA and staff is a critical task of a board whose focus is on good governance.

Depending on the number of employees and staff and the administrative complexity of your HOA, the board’s responsibility is to regularly evaluate itself and monitor the performance of its manager or key staff members. Evaluation criterion can be broad or specific and the board will need to consider this carefully to effectively monitor its own performance and the performance of the manager and staff.

As Peter Drucker states, setting evaluation criterion begins with something to “measure.”

Something to measure, starts with boards of directors who embrace their responsibility to oversee the operations of the HOA and create thoughtful and meaningful goals and policies that enhance the quality of life and community experience for current and future members.

BOARD’S EVALUATION CRITERION MAY INCLUDE:

• How well is the board communicating the goals of the HOA, and its accomplishments and challenges to members?

• Does the HOA have both a short-term and long-term strategic plan?

• How well prepared are board members for board meetings?

• Is the board supportive in receiving differing opinions from board members?

• Does the board have a process for actively recruiting new board members?

• Does the board have a process for orienting, educating and developing board members?

• Is there a clear distinction between the role of the board and the role of the manager or staff?

• Do contracts, employee agreements and job descriptions contain clear performance expectations and standards of measurement?

• Are the manager or staff members in compliance with contracts, employee agreements and job descriptions?

• Do the manager, employees and staff understand the HOAs goals and strategies?

• Are the manager, employees and staff implementing board policies consistently and equally among all members?

• Do the manager, employees and staff effectively communicate the goals of the HOA to members?

• Do the manager, employees and staff encourage member comments and questions?

• Is there a process for the board to hear feedback from the manager, employees, staff and members?

• Are contracts, employee agreements and job descriptions reviewed and revised as the goals and strategies of the HOA are developed and revised?

ECHO journal | January/February 2020

23

BY KEVIN BOLAND, LUTCF, CIC, AI

Are You Really Covered?

Understanding the Different Types of Insurance Policies & Coverages in HOAs Inquisitive board members often ask “What is the difference between ‘Walls-In and Walls-Out’ insurance coverage, and what about a homeowner’s investment in upgrades, are they insured, and by which policy? Because of these frequent inquiries and a common coverage gap found in many homeowners’ policies today, this article was written to help anyone who lives in an association insure their home properly. As volunteer board leaders, it benefits us all to share what we learn with fellow homeowners at HOA open meetings, at Echo Resource Panel Luncheons and Educational Seminars and in our HOA newsletters.

24

January/February 2020 | ECHO journal

The Walls-Out Master Property Policy

it is important to know if an association is a PUD or a condominium and to read the CC&Rs carefully to avoid a risky coverage gap!

As many veteran board members and managers know, the CC&Rs set the governing rules for which building components the Master Property Policy insures as common area, and which building components the owners must insure in their personal homeowner policy.

For condominium associations, most of the CC&Rs stop their coverage at the unfinished drywall. This is commonly called a Walls-Out Policy, meaning that the Master Policy will pay to rebuild the structural framing of the home including the roof, chimney, rain gutters and downspouts, wood or stucco siding, windows and door frames, appurtenant fencing and sheds and main plumbing and utility lines. Everything inside the drywall is the responsibility of the condominium owner.

For planned unit developments, most CC&Rs require the association to cover a minimal area on the lot such as painting the exterior siding or replacing the top roofing material. This is because in planned unit developments owners own their lots, similar to a single family home, so the CC&Rs often require the owner to insure the entire building on their lot. This is why it is important to know if an association is a PUD or a condominium and to read the CC&Rs carefully to avoid a risky coverage gap!

When boards choose to insure with a WallsOut Master Policy, the homeowner needs to insure their interior building components such as: kitchen cabinets and counter tops, sinks and plumbing pipes, bathrooms, hard wood flooring or carpets, AC system, hot water heater, furnace and ducts, lighting fixtures and outlets, and the cost of painting the interior. Also, all interior upgrades made since the IDOC, or initial date of construction, must be insured by the homeowner, not the association. This is a big financial exposure, but not to worry, because owners can cover this exposure by getting the right type of building coverage in their homeowner’s policy,

or what is often referred to as the H06 policy. H06 is the insurance company’s term for a condominium insurance policy.

Interior Building Components: The Big Coverage Gap

The smart way condominium owners can protect themselves when the association has a Walls-Out Master Policy, is to add interior building component coverage to their homeowner’s policy. A simple call to the owner’s insurance agent is all it takes! An owner can ask if their policy has dwelling or building coverage and at what limit. If the Master Policy insures only from the drywall out, it’s recommended to get a minimum of $50,000 for the interior building components listed above. If the home is large or an upscale condominium, much higher limits may be needed.

Too many homeowners don’t have this type of building coverage or adequate coverage in the individual policy or H06. It is the most common coverage gap in individual condominium policies.

The Walls-In Master Property Policy A Walls-In Master insurance policy offers more coverage than a Walls-Out Policy and typically will pay for damage to the interior building components as they were constructed on the IDOC, or initial date of construction, with one exception – no coverage for any upgrades made by current or previous owner(s). This means if the original flooring in a home built in the 1970s was lovely yellow linoleum and the counter tops were egg white Formica, that’s all the Master insurance will pay for today after a fire or water loss. If the home has custom hardwood flooring and granite counter tops today, the unfortunate homeowner will have to pay out of pocket to replace these upgrades post fire, unless they are in love with yellow linoleum flooring and egg white Formica!

Continued on page 26 ECHO journal | January/February 2020

25

Are You Really Covered?

Continued from page 25

The Walls-In Master Property Policy – With Upgrades Included

What accidents are covered by a Master Property Policy?

Fire or Arson Lightning Strikes Wind Storm Smoke Damage Theft Explosion Falling Objects (i.e. trees, drones, aircraft, or even meteors – it’s happened!)

Interior Water Damage if Sudden and Accidental (i.e. broken pipe or appliance) Vandalism Volcanic Action Collapse of Roofs or Walls Freezing of Pipes Sudden Leakage of Fire Sprinklers

As can be inferred from the title above, this third type of Master Policy will pay for all interior building components and pay for any upgrades made since the IDOC. This is the broadest form of Master Property Coverage for associations today. Some boards choose this broad coverage because they are aware that many homeowners don’t buy the right type of coverage for interior building components, and want to protect them, and they don’t want the “eye sore of an unfinished home(s)” in the community after an Urban or Wild Fire.

In summary, condominium associations can be insured three ways today: Walls-Out, WallsIn or Walls-In with Upgrades Included. Also, CC&Rs of Planned Unit Developments often require the owner to insure the entire home on the lot. Insurance companies look to the CC&Rs to determine what the Master Property Policy will insure, so it is imperative that a homeowner read the CC&Rs. It’s the smart way to learn how to insure one’s home before major fire or water damage, or the other Covered Perils listed at the end of this article. The worst time to learn about a coverage gap is after the accident, so the wise homeowner will talk to their insurance agent and get properly insured!

By communicating often, dedicated board members are doing a great service to protect their fellow homeowners. As Ben Franklin said, “Involve me and I learn!”

Thawing of Ice, Snow or Sleet Sinkhole Collapse Hailstones Riot & Civil Commotion Motor Vehicle Collisions Terrorism (if not opted out) Flood and Earthquake require separate policies

Please share this article with fellow association members so they can also learn how to insure their homes properly.

26

January/February 2020 | ECHO journal

Kevin Boland, LUTCF, CIC, AIC, is a twentyyear Farmers Agent specializing in HOA Master Policy Insurance. He also serves on the board at his North Bay PUD Association.

Kevin is a past chairperson of the North Bay ECHO Resource Panel. Questions are welcome: kboland@farmersagent.com.

Learn more about your HOA insurance at www.kevinbolandinsurance.com

NEW PROFESSIONAL SERVICE PROVIDERS

WELCOME TO OUR

New Professional Service Providers Save time and money on two of the largest recurring line items in a community’s budget: landscape maintenance and outdoor water use. Botanicon provides third-party landscape vendor management, quality assurance monitoring, horticultural consultation and training opportunities for boards and landscape committees.

Our consultants have decades of experience in the landscape and irrigation industries, so put our knowledge to work for you. With Botanicon, you have subject matter experts on your side to navigate the complexities of horticulture and irrigation, guide decision making and provide continual support.

We conduct on site walk-throughs, follow up on punch lists, create community wide plant palettes, phased designs for renovations, water auditing and management, draft site tailored maintenance specifications and scope of work. To take the stress and time out of landscape oversight, call or email us today. We are happy to discuss your individual site needs.

Tiffany Faulstich tiffany@botaniconsd.com | 619-513-0033 www.botaniconsd.com

Find all of ECHO’s Professional Members Online. Visit the Professional Service Provider DIrectory at www.echo-ca.org

BrightView is the nation’s leading commercial landscape company. With a steadfast focus on you and your goals, we’re changing the way landscape services are delivered.

From design to development, maintenance and enhancements, our depth of experience makes us a seamless partner for the entire lifecycle of your landscape. Our focus is local, our resources are national. Contact BrightView today!

Wolfgang VonEigen Wolfgang.VonEigen@brightview.com | 925-348-4178 www.brightview.com

The restoration process can be a traumatic experience. That’s why Fire & Water Damage Recovery is committed to returning our clients to their normal lives as quickly as possible. Since 1998 over 30,000 residential and commercial property owners have counted on our friendly, affordable care to quickly restore their property to a safe, pre-incident state. Fire & Water Damage Recovery was created with the client in mind to provide an unsurpassed level of workmanship at a competitive, reasonable price. FWDR is a family-owned and operated local company with four locations to insure a quicker response and better service to San Francisco, Oakland, San Jose, and Stockton. Over the years we’ve helped thousands of Northern California families and business owners get their lives and businesses back on track in a timely manner.

Carolyn Wells carolyn@waterdamagerecovery.net | 510.394.0980 www.waterdamagerecovery.net Continued on page 28 ECHO journal | January/February 2020

27

New Professional Members Continued from page 27

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ACE Property Management, Inc. • 1290 Kifer Road, Suite 309, Sunnyvale, CA 94086 Office: 408-217-2882 • Fax: 408-217-2889 28

January/February 2020 | ECHO journal

Since our founding over 30 years ago, the Tinnelly Law Group has been devoted entirely to the representation of homeowner’s associations (“HOAs”), condominium projects and common interest developments throughout California. Our firm has an unparalleled understanding of the unique legal landscape faced by HOAs and their boards of directors. We have successfully represented our clients’ interests in a variety of transaction and litigation matters.

Our firm strives to serve clients with the utmost care and attention. We work in close partnership with HOA boards of directors and their community management professionals to address their legal needs in the most effective and cost-efficient ways possible. We are committed to building lasting relationships with our clients and to advancing the professional standards of our industry.

Steve Tinnelly, Esq. steve@tinnellylaw.com (650) 425-9444 www.tinnellylaw.com

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Register at www.echo-ca.org/events Promo Code: SANTACRUZ2020 Registration is free when you apply the promo code!

1. Type the link indicated above into your browser. Click “Register Here” for the event you wish to attend.

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ECHO journal | January/February 2020

29

Back to the Future Continued from page 21

tech terms, it was a dinosaur.

Simple email processes such as distribution groups and tracking processes were cumbersome or non-existent. These challenges led to the purchase of a new email system which easily integrated with customer records and efficiently distributes and tracks open and click through rates of its messages. The development of targeted emails has become equally easy. Now the association can automatically push (send) notifications of deadlines for compliance and important events. This is done through text messaging and email.

A big productivity gain is the addition of tracking functions with messaging. Now the association will know the effectiveness of messages sent. This allows the community to focus distribution of information through the best channel for the intended recipient.

They will be able to track whether the email has been opened or clicked through which implies the message has been read.

In addition, an improved communication system allows community maintenance and repairs to be more efficient and helps to prioritize work to be done.

The system allows residents to

Sample of tracking functions from push notifications via email.

send in video and snapshot photos of the project needing attention or repair (this was difficult via email because of file size limitations).

Management can review these and prioritize the corrective work.

Conversely, a work order can automatically communicate with residents about the progress the work order and letting them know when it is completed.

Employing more sophisticated ways of communicating with residents, especially with the advent of mobile phone photos, video and texting, has been a big advancement for resident relations. Using mobile devices and SMS texting the association can quickly address some of the most challenging service issues: repairs, maintenance and rules compliance. The transition to this “new” technology was virtually

seamless because most residents already were using texting and photo functions on their mobile devices for personal and business reasons.

Privacy & Security Systems Based on the homeowner survey, it was clear that residents consider their privacy and security as critically important. Improving the systems to help residents know when the pool vendor, landscaper, or other vendor will be working in the area is important for security. The vendors do not have access to phone numbers or email addresses of HOA residents to inform them, but now vendors can be electronically tracked, and residents can see where they are working and, if needed, lodge questions about unexpected activity. Vendors and management will be able to push out a message of the activity which provides a greater sense of security for the homeowner.

Paperwork Processing The old “paper trail” is no longer! Now, new and existing residents process mandatory and voluntary compliance work electronically. This includes an electronic signatures on documents of importance. The use 30

January/February 2020 | ECHO journal

of an electronic signature service makes it easy for the association to find and collect signatures on critical documents. Even the busiest international homeowner usually has access to the internet and email. They can sign critical documents in a timely manner simply by going online.

Further, the association now encrypts and stores important documents in the cloud which means information is accessible through any internet connection if the user has their access credentials. The service is performed almost instantaneously and very convenient worldwide.

It’s a snap for routine tasks to be completed, especially those which previously took a great deal of time and money. The old system was time-consuming because simple service requests

caused a disruption to workflow and searches for physically filed paper documents. The processes are now simple, mobile and fast.

Still, a few residents want or need paper documents. The association employed an outside service provider that specializes in on-demand printing of documents. Simply place an order on a mobile phone or other device it will print and send the requested documents to the residents.

These include paper statements, ballots, violation notices and other common documents. It is easy and cost effective and provides necessary communication options for those homeowners who are not as comfortable with technology.

Landscaping and Irrigation Systems The community needed to Continued on page 32

landscape contractors (800) 891 - 7710

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We Know Homeowners Associations Locally owned and operated since 1955 Regular site walks with your account manager 24-Hour customer service & emergency response Tree Care

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ARE YOU TIRED OF MAINTENANCE HASSLES? ALL YOUR MAINTENANCE NEEDS IN ONE PLACE. ProTec provides your HOA peace of mind knowing all your community maintenance needs are being resolved. Through the implementation of a Common Area Maintenance Program (CAMP) coupled with an extensive list of in-house services such as Maintenance, Repair, Construction, Plumbing, Painting, Lighting and Specialty Cleaning; we are sure to streamline the community maintenance process. All the while improving your quality of life and delivering quality service your community can be proud of.

Learn more about our services at www.ProTec.com/services.

Serving Southern California & Southern Nevada CA B-803435 C-33 C-36 ı NV B-80330 C4-80340

ECHO journal | January/February 2020

31

(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 Back to the Future Continued from page 31

boost curb appeal and that began with evaluating the landscaping.

Proper watering of the landscape was an issue. Water usage in some California communities can be very expensive, especially during droughts when curb appeal takes a backseat to the need for water.

Automation of irrigation is almost a necessity in communities with large planted common areas. The board recognized the aesthetic need for better control of irrigation in the community to maintain appearance. It also knew that a new irrigation system

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

and controller would save the community money over the long run. The decision was not difficult to improve the “curb appeal” of the community by installing a remotely operated and managed landscape irrigation system.

The system selected was managed remotely by a cloudbased sprinkler controller.

Installing this system saved more than 56% on the HOA water bill, while consuming 40% fewer gallons annually.

The HOA community in this article started with a very low net promoter score from its homeowners. The board took notice and acted. They

initiated wise steps to assess the situation, determine and validate the areas causing the poor scores, and instituted costeffective technological solutions to provide greater service to the homeowners, and accurate and readily available information for members. Further, new automated systems resulted in better compliance, more community engagement and a reduction of operational expenses.

By embracing technology the community escaped the bonds of outdated legacy systems and streamlined operational efficiency and effectiveness – propelling their HOA back to the future.

Krishna Yalamanchi is happy to share with boards the vendors he has spoken with and those he selected. In addition to serving on an HOA community board of directors, Krishna owns HOA Alchemy, LLC, a software company dedicated to helping HOAs modernize their business management and compliance systems.

The source code used for these systems is open to all. Krishna can be reached at krishna@HOAalchemy.com.

Invite-a-Homeowner Program Echo puts homeowners first! We are proud of this legacy and want to share it with as many homeowners as possible. Considering there are approximately 14.5 million HOA residents and more than 50,000 HOA communities in California, the opportunity for growth is enormous. Help us to grow by inviting homeowners to join Echo.

Last month, the Echo board of directors approved the extension of the special Invite-a-Homeowner Program to encourage individual memberships.

All new individual members will receive a special rate of $50 for their first year of membership. They must be recommended by an existing HOA board member, professional service provider member, or community manager member. It is our hope that through membership growth, our programs and influence will increase accordingly and help to build knowledge and passion for communities through education, connection and resources.

Please join today!

32

January/February 2020 | ECHO journal

Legislative Review For the most up-to-date information, visit the HOA Advocacy section at the ECHO website: www.echo-ca.org/hoa-advocacy

The California legislature and Governor have completed their work for 2019. With the exception of those bills that may carry over into 2020, the remaining legislation has been signed, vetoed, or failed passage. Review the final disposition of each bill below.

Current Legislation

AB 670 AUTHOR: Friedman SUBJECT: Accessory Dwelling Units STATUS: Signed by Governor.

POSITION: Watch SUMMARY: Would void provisions in common

interest development governing documents that effectively prohibits or unreasonably restricts the construction or use of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use that meets the minimum standards established for those units. However, the bill would permit reasonable restrictions that do not unreasonably increase the cost to construct, or effectively prohibit the construction of these units.

SB 323 AUTHOR: Wieckowski SUBJECT: Elections: Felons, Inspectors, Email

Disclosure STATUS: Signed by Governor.

POSITION: Oppose SUMMARY: Requires an association to disqualify a person from nomination as a candidate for not being a member of a common interest development at the time of nomination or for being convicted of certain felonies. Authorizes an association to disqualify a person from being nominated or from serving on the board for specified reasons, including the failure to pay regular assessments. Defines email addresses as association records for the membership list. Allows the rules of an association to permit association employees or contractors to serve as inspectors of election. Allows members to sue over violations of bill provisions in superior court.

SB 326 AUTHOR: Hill SUBJECT: Inspection of Elevated Components STATUS: Signed by Governor.

POSITION: Watch SUMMARY: Requires the association to cause a

reasonably competent and diligent visual inspection of the load-bearing components and associated waterproofing systems to determine whether the exterior elevated elements are in a generally safe condition and performing in compliance with specified standards. Requires the inspector to issue a report, and the association to take immediate action if the exterior elevated element poses an immediate threat to the safety of the occupants.

SB 434 AUTHOR: Archuleta SUBJECT: Managing Agent: Production of Records STATUS: In Senate Inactive File.

POSITION: Watch SUMMARY: Requires a managing agent whose

management agreement has been terminated to produce client property and client records within a specified period of time pursuant to a written request by a common interest development association, except as specified.

SB 652 AUTHOR: Allen SUBJECT: Right to Display Religious Items STATUS: Signed by Governor.

POSITION: Watch SUMMARY: Prohibits the governing documents of a

common interest development from prohibiting the display of religious items, as defined, on the entry door of a common interest development member’s separate interest. The law makes an exception during the time that maintenance, repair, or replacement work is performed.

SB 754 AUTHOR: Moorlach SUBJECT: Election by Acclamation STATUS: Signed by Governor.

POSITION: Support

Summary: Requires, when the number of director nominees at the close of the nomination period is not more than the number of vacant director positions on the board, that the director nominees be considered elected by acclamation if the association includes 6,000 or more units, and the board complies with specified notice requirements, and the board disqualifies a candidate for specified reasons.

ECHO journal | January/February 2020

33

The ECHO Bookstore is your source for valuable information on the duties of HOA board members. Find these and other informative publications, including FREE downloads, online at www.echo-ca.org.

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January/February 2020 | ECHO journal

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Saturday, June 13, 2020 | Santa Clara Convention Center

E X H I B I T O R S T O D AT E Associa Northern California

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IQV Construction & Roofing

Cagwin & Dorward Landscape Contractors

OMNI Community Management, LLC

Chapman & Intrieri, LLP

Rebello’s Towing

CIT Bank

Saarman Construction

CM Squared, Inc.

Signature Painting & Construction, Inc.

Common Interest Management Services EmpireWorks Reconstruction and Painting

Socher Insurance Velocity Construction

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