10 minute read
Protecting Holiday Gifts from Mr. Grinch
Protecting Holiday Gifts from By James (Jim) McBurney
Since holiday gifts come as both packages and checks, an association’s pre-2000 mailboxes and parcel lockers can be the “weak link in the chain” of mail custody – not only for holiday gift protection but also for yearround mail and package security. Although an association has a legal duty to reserve and disclose old mailbox replacement plans it also has a duty to protect mail and packages in its custody from theft. Whereas the Dr. Seuss classic - How the Grinch Stole Christmas! – is a light-hearted children’s book, there is nothing light-hearted about a 6 or 7-figure mail-related identity theft negligence judgments. This is especially true if the board knew of the theft potential from old common area mailboxes and did not have a plan to replace them.
What Causes Mail and Package Theft?
Although it’s hard to pin down exact causes, contributing factors could include: • Prop 47 emptying California prisons of non-violent offenders to reduce overcrowding. • Increasing opioid and methamphetamine addiction. • Prop 47 reducing theft and check forgeries from $950 to $450 and from a felony to a misdemeanor.
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Theft Can Cause a Mail Stop Notice
Aware of the increasing theft, Post Masters are becoming stricter and sometimes even threaten to stop mail and package deliveries unless old mailboxes are brought up to current USPS security specifications as this email shows: Protecting Holiday Gifts... Continued from page 13
Dear …. [Actual name of Community Manager], “There is a lot of theft being reported at …. [Address of the 138-unit East Bay HOA]. Just in recent days the following customers have contacted the Post Office that their packages are missing from the parcel lockers …. [List of 4 HOA unit numbers]. We have done what we can on our end. You need to have your l units upgraded to the new 4C mail boxes which are more secure. We have spoken in the past and I have told you that you have old [out-ofspec] mailboxes and will need to upgrade to the new 4C-STD mailboxes. If this continues we will not be able to deliver mail to unsecured mail boxes. Please call me if you have questions.”
Key Questions to Ask
Emails like the above, suggest it’s better to answer a few key questions sooner rather than later: • Do the association’s mailboxes meet current USPS security specs? • Are our reserves adequate? Note: Costs are typically about $250-$400 per address and sometimes as low as $200 per address for large associations. • How big are the legal risks of not upgrading for our homeowners, the association and our community management firm? • Is a special assessment needed? • Will new mailboxes be a real estate selling point?
What are the Current USPS Mailbox Security Specs? There are two currently approved USPS security specs.
1) Spec F Cluster Box Units [CBUs] replace old pedestal-mounted [on cement pads] pre-2000 NDCBUs.
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2) USPS STD-4C mailboxes also replace old pedestal-mounted NDCBUs and also old frontloading vertical mailboxes or horizontal USPS STD4B mailboxes usually found in common area kiosks. Both of these USPS specifications are the latest in security protection - and thus - the best “risk reduction” strategy for associations from negligence lawsuits. In fact, even having a plan to upgrade can be a mitigating jury factor against negligence claims since it shows that the association was proactive in reducing “foreseeable risk” of injury to homeowners.
A Negligence Judgment Can Result in a Six Figure Damages Award
In California, a plaintiff may seek punitive damages “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud or malice” Civil Code § 3294. Although simple negligence judgments can be in the 6-7 figures based on compensatory damages alone for mail-related identity theft, if gross negligence or malice under the meaning of Civil Code § 3294 can be proven, juries can also award punitive damages. However, a reasonable association should have a plan in place and execute it to avoid negligence claims altogether.
CACI 400. Negligence Essential Factual Elements [Name of plaintiff] claims that [he/she] was harmed by [name of defendant]’s negligence. To establish this claim, [name of plaintiff] must prove all of the following:
1. That [name of defendant] was negligent; 2. That [name of plaintiff] was harmed; and 3. That [name of defendant]’s negligence was a substantial factor in causing [name of plaintiff]’s harm.” [New September 2003; Revised June 2005, December 2007, December 2011]
In addition to proving these elements, CACI 400 instructs juries to look for “foreseeability of risk and harm.” Also, homeowners associations have a “duty to exercise Due Care” under CC § 1714(a) to which “no exception should be made unless clearly supported by public policy.”
How Mail Related Identity Theft Works
When mail burglars steal mail, they are looking for pieces of personal information names, addresses, phone numbers, Social Security numbers and account numbers, all of which can be found on one outgoing check, depending on how much information the potential victim has printed on the checks. The mail burglars then either make counterfeit checks with the information they find or soak the ink off checks and rewrite them. If they get enough information and a pre-approved credit card application, they can open an account using the victim’s name and their own address. Then they max out the credit cards on a line of credit the victim doesn’t even know exists. In 2018, the Federal Trade Commission (FTC) received more than 3 million identity theft and fraud reports. Mail thieves rack up tremendous debts, buying home electronics and cars, for example. And when they fail to pay the credit card bills, the perpetrator isn’t the one whose name is on the account – it’s the victim. Even though the victim isn’t at fault, the hit to his or her credit can be devastating. Victims of identity theft frequently have a hard time getting loans or being approved for credit cards because of the black marks on their credit history.
Summary
Opioid addiction is currently a national problem being made worse in California by the release of non-violent ex-addicts under Prop 47 to relieve jail crowding and by raising the felony bar for theft and check forgery from $450 to $950. Since it’s well known that new addicts and ex-addicts “steal to support their habits”, old association mailboxes can be “easy pickins”, since it takes about 10 seconds to crowbar open the master door. Thus, prudent homeowners, boards and community managers should check to see where they are in mailbox replacement planning [to reduce “negligence claim risks”] and also reserve and disclose these plans to homeowners and tenants.
James (Jim) McBurney is a Project Manager for Cascade Building, Inc., a specialist in apartment and HOA mailbox upgrades that offers a detailed planning and project management service that can avoid expensive compliance risks and project implementation mistakes while maximizing real estate value for owners. Jim can be reached at 408-733-9479 or at jcmcburney@aol.com.
PART TWO Employee Agreement Recommendations
Self-managed HOAs are diverse: From four-unit buildings in a city to thousands of units, including sub-associations, in a rural country club setting. The options for self-management are equally diverse. An HOA may choose to limit their activities to those of oversight and governance and hire a General Manager and/or award contracts or agreements to third party vendors for day-today management of operations, tasks and projects.
The self-managed HOA should have management and employee agreements and contracts as best management practices. Management agreements may be for specific management tasks such as finances and bookkeeping, common area maintenance, consulting agreements
with or without dedicated “on-site” management. If the HOA hires an employee, that employee should have a management agreement or at least a clear job description and an “at-will”
employment agreement. In this two-part series, vendor agreement recommendations were
addressed in Part 1 and employee agreement recommendations will be addressed in Part 2. At some point in the process of drafting, negotiating and finalizing a management
agreement, it is advisable to consult competent legal counsel to review final documents before signing and executing the agreements. The comments below are guidelines and not legal opinion but guidelines that provide some
essential components and best practices for ensuring agreements are fair to both parties, accomplish the HOA’s goals and objectives, and minimize risk to the HOA if the wheels come off.
Employee agreements are a
requirement when the self-managed HOA decides to recruit and direct hire its management employees. In some cases, the HOA will hire a CEO or General Manager to be responsible for the day to day operational tasks of the community, provide oversight and advise the volunteer board of directors. Often the employed manager will recruit, train and hire required personnel to meet the service level expectations of the HOA. While third-party agreements can provide some “cover” and protection for HOAs, employment agreements for direct hires put HOAs in the role of the employer, necessitating regulatory compliance with all aspects of Federal, State and local employment laws and regulations.
Darren Shaw, MCAM, MCM, PCAM – a veteran California large-scale community CEO and General Manager – identifies the following components as critical for self-managed HOA management employee agreements:
A MULTI-YEAR AGREEMENT WITH A FINITE TERM (EXAMPLE 5 YEARS). Onsite CEOs and GMs need time to learn about a new community and its nuance and to develop relationships with staff, board and committee members.
EDUCATIONAL AND CONFERENCE EXPENSE REIMBURSEMENT. Continuing education of community management professionals is critical to long-term community success and enhanced manager knowledge of trends, laws and best practices that impact community well-being.
ANNUAL SALARY ADJUSTMENT OBJECTIVE CRITERION (LOCAL OR METROPOLITAN CPI) AND BONUS STRUCTURE BASED ON MEASURABLE OBJECTIVES. Management personnel are critical for the effective governance and success of the community. Salary adjustment and performance bonus criterion are a critical part of the employment agreement.
REASONABLE SEVERANCE PACKAGE UPON TERMINATION WITH OR WITHOUT CAUSE. Unfortunately, employment terminations and separation happen. Self-managed association boards need to carefully consider termination clauses and severance packages to avoid expensive time-consuming employment practices lawsuits and claims, and to be respectful of the employee transition. All parties should make every effort for the transition to be a smooth one.
TERMINATION PROVISIONS BASED ON EXPIRATION OF AGREEMENT OR FAILURE TO PERFORM THAT IS CLEARLY DOCUMENTED. Employee termination for non-performance can be tricky and a legal minefield if not addressed properly in the employment agreement. The employment agreement should lay out clearly how the board will evaluate and monitor the performance of the CEO or General Manager, how often the assessment will be conducted, and in what form it will be communicated to the employee. The intent is to make an inherently personal relationship as professional as possible. There should be no surprises for either party to the agreement.
INDEMNIFICATION AND PROTECTION AGAINST LAWSUITS BROUGHT AGAINST THE HOA AND LIABILITY COMPLAINTS. CEOs and General Managers implement management procedures to ensure that association and community goals and expectations of the board are meet. Inevitably, disagreements, mediation and lawsuits happen. Selfmanaged associations that direct hire must extend indemnification and protection to their executive personnel.
Other best practice considerations for effective employee agreements include:
DEFINED ROLES AND RESPONSIBILITIES. Board adherence to Policy Governance standards in part clearly defining roles and responsibilities of management from board leadership.
MANAGEMENT AUTHORITY OVER STAFF. Direct authority over HOA employees must be given to the CEO and/or GM to avoid board meddling with employee issues and direction. Exceptions might be for whistleblower and/or harassment laws and policies.
