| Webstore |
|
The New Laws! First and Foremost - Assessment Collection Laws Revamped!! · Associations are required by law to note any matters that are discussed in executive session in the minutes of the next open board meeting that immediately follows the executive session. · Associations are precluded from recording a lien sooner than 30 days after the "pre-lien" notice currently required by law is sent to the homeowner. (Previously, the Association was able to record a lien as soon as its own policy allowed after the required notice). · Penalties attach under this new law for failure to release any lien that was recorded in error within 21 days of realizing it was filed in error. The "person" who recorded the lien is the one responsible for releasing it if recorded in error. · The late fees and interest that can be charged are limited to what is provided in the governing documents (where before, the statutory limits of $10 or 10% of the delinquency (for late charges) and 12% per annum (for interest) were the standard). · If the association misses any of the technical timelines or requirements in recording or pursuing a lien, it must stop the process, release the lien, and start all over again.
How Could This Happen? - Need for a Huge - Unanticipated??? - Assesment! Flying The U.S. Flag - What’s The Latest? For those of you who follow my writings, you probably have read the article I previously distributed widely relating to flying of the U.S. flag. I encouraged homeowner associations to look for reasonable means for homeowners to fly flags, given the situation relating to the September 11th tragedy, and people’s need to display their patriotism. Since I wrote that article which discussed the parameters of Section 434.5 of the Government Code (a statute which prohibits associations from having restrictions that unreasonably limit someone’s ability to fly the flag), California has passed a measure and added it to the Davis-Stirling Act (Civil Code Section 1353.5). This new section which passed through both the Senate and Assembly easily and was signed by the Governor, was chaptered into law as Chapter 178 on July 11, 2002. It provides the following: That all homeowners throughout the state should be able to display a flag of the United States. That owner of a separate interest in a common interest development is included within the group of owners who have a legal right to display the flag of the United States (within the restrictions found in Subdivision b of Section 434.5 of the Government Code which you can be found on this web site. That a homeowner who is unlawfully prohibited from flying a flag is entitled to recover costs and attorney’s fees incurred in enforcing his or her right to do so. That the homeowner has the right, within the common interest development, to display this flag in their manner of choosing on their separate interest lot or within their exclusive use common area (which would apply in a condominium situation to a balcony or patio). Under the statute, “display of the flag of the United States” is defined to mean “a flag of the United States made of fabric, cloth, or paper displayed from a staff or pole or in a window, and does not mean a depiction or emblem of the flag of the United States made of lights, paints, roofing, siding, paving materials, flora, or balloons, or any other similar building, landscaping, or decorative component. If anyone has to sue to enforce this right, they are entitled to recover attorney’s fees and costs if they win. The next questions that are going to arise (I can anticipate your thoughts!) are: What to do about the paper flag that people have taped in their windows, reprinted from newspapers, that have faded and have become tattered and torn? (My suggestion is to send the homeowner a nice new clean plastic version of the same size of the flag and ask them to substitute it for the torn and tattered or faded newspaper copy). What to do if the noise from a flag pole is disturbing the neighbor? (My suggestion is to consider fining the owner or other disciplinary action for the noise complaint, but not ordering that the flag be removed necessarily). What to do when someone is hammering nails into the side of the building to hang their flag in their exclusive use common area? (My suggestion on that is to require them to remove the nails from the structure and repair the area and display the flag in a different manner. If the Board can make a suggestion, I think it is wise). There are certainly other issues that can come up, but for all intents and purposes, associations need to be extra careful about setting prohibitions on flying the flag or displaying it. The “United States flag” is not construed, in my opinion, to include confederate flags or flags of other countries. As I have said previously, if the association gets proactive and suggests ways for people to fly flags within the parameters acceptable to the association, the association is more likely to gain more community support and compliance, rather than focusing on one person as flying a flag and sending them nasty letters. Water Leaks - Handle With Care! Should You Or Shouldn't You Exclude Water Leak (AND MOLD ISSUES) Claims From Insurance And Association Responsibility? Perhaps you recall that in April, I gave you information about the hard insurance market, water claims, and exclusions by insurance companies (or attempts of exclusions) from old claims. I talked about the critical importance of the association overseeing water leak situations, and making sure that they are repaired, whether the repair involves insurance proceeds, money from the association, or is completely the homeowners' responsibility (if there is a threat to common area or a component that is the responsibility of the Association). This is especially true in a condominium situation where the association owners own the buildings in common. In a planned development, it may be important also, at least from the stand point of mold relating to roof leaks, where the association is responsible to maintain the roofs, or for common area buildings. Some associations are choosing (upon attorney recommendation) to provide in their CC&Rs; that water damage to interiors of units from water leaks, whatever the source, are the owners' responsibility. Some association documents have provisions requiring the association to insure the unit. Shifting the responsibility for the water damage relating to the unit, in these times, is probably the best way to respond. The homeowners, in this case, would be expected to provide their own insurance for water damage to the interior of the unit. This shifts the basis of claims history to each individual, and takes the heat off of the Association for poor claims histories, which in the current market can preclude Associations from the possibility of even getting insurance, at any cost. In the case of Franklin v. Marie Antoniette Condominium Owners Association (19 Cal. App.4th 824, 23 Cal.Rptr. 2d 744), the court ruled on a water claim in favor of the association. The court found that the association was not negligent and not responsible to replace expensive hardwood floors added by an Owner. The basis for this decision was a clause in the CC&Rs; that provided Owners were responsible for damage from water leaks, whatever the cause. (Association negligence was excluded, and would shift responsibility to the Association, as the clause was stated.) Extra care needs to be taken these days with regards to document writing, and associations may want to look at amendments to the CC&Rs; that makes it clear that the Association is insuring only original construction or replacement to "builder's grade", and make sure that the documents say that owners are responsible for water damage from water leaks, whatever the cause. An Association may be better off To take this kind of action and give the owners continual notification that the owners must carry their own insurance to protect their units if they want that protection, including the "upgrades" coverage, loss assessment to cover insurance deductibles, insurance for belongings (personal property, including drapes, carpeting, etc.) and coverage for accidents in the unit. Assessment Collections May Get More Difficult You may want to contact your local Legislator, as quickly as possible. A telephone call would help, a letter would help, and whatever you can do to get through to make a point. Homeowner associations have a very difficult time collecting assessments from people who are either unable to pay, or are stubborn or belligerent. AB 2289 is a bill that has been introduced by Assemblywoman Christine Kehoe. Ms. Kehoe apparently has been told, and appears to believe, that homeowner associations are offensive in their assessment collection processes, and anxious to foreclose. Through CLAC, ECHO, and other industry organizations, the masses are trying to educate the Legislators as to already existing difficulties involved in assessment collection processes. For example, associations have to go through a myriad list of technical requirements that are not required of lenders who need to foreclose on loans for non-payment. Associations are required by statute (CC 1367 and CCP 2924) to provide owners with a specified (within tight time limitations) pre-lien letter, copy of lien, letter after lien, notice of default, notice of sale, posting of notice of sale on the front door or closest accessible area, and publishing in a newspaper of general circulation. In many cases, additional communications have been sent in an effort to get the attention of the debtor. AB 2289, when first introduced, would have hobbled some associations by placing a minimum on the amount of assessments that must be delinquent before an association could sell the unit to through nonjudicial foreclosure to collect the money. That limit was $5,000. This would mean that some associations would have to wait as much as four to five years before they could actually take the ultimate action to collect. That "minimum" was removed, after the CID industry "clamored" through CLAC via a special poll (in which specific information was brought to the legislators that helped them through the difficulty in that bill) that the bill was unfair. However, alternate amendments have been discussed which could be worse. These include extra disclosures on all of the paperwork involved in processing the lien and collections, possible requirements to try other methods than nonjudicial foreclosure first, offering meetings and payment plans, and increasing the overall technical procedural requirements. Some amendments discussed would require the association to bear the cost of foreclosure. The lenders of California are not held to such high standards. Associations are already saddled with problems of being expected to conduct zero-based budgeting (collecting just enough money necessary to run the association), while at the same time having to incur costs and climb hurdles that are designed to protect the deadbeat or person who ignores responsibility - to collect the assessments that are due and owing of the association. Collections of assessments is already difficult enough. Your local Legislators are likely to be voting on AB2289 in the near future. Should your association be hobbled by additional hoops to jump through before exercising an important, and effective, means of collection? I suggest you make the call. Mold Reporting & Insurance Claims Handling of water intrusion issues and insurance claims based on them is important - especially in the event an association is renewing or changing carriers. Some policies protecting boards and associations from liabilities are based on "occurrence" meaning the date the event happened is the critical date. Others ("claims made") are based on the date the claim is opened. One danger would be that if the Association has coverage that includes water intrusion and subsequent mold claims, and the Association changes to coverage that is not the same type, there may be gaps where the Association is not covered at all. Another danger is in failure to report an incident in a timely manner. Most policies require reporting of a claim within a specified period of time. Sometimes the penalty for failure to do so threatens the very coverage itself (the language of the policy stating that if the claim is not made within a certain timeframe, the company does not have to honor it). Insurance professionals (brokers) who have been in this business a long, long time say that the current insurance crisis in California is "cyclical." This "cyclical process," in the "olden days," apparently used to occur every five to seven years, but the last "hard" market was around 1985. We apparently are in the painful end (or beginning?) of such a cycle. The insurance market is once again becoming an extremely "hard market", meaning that that insurance can be hard to get, is increasingly (and in some cases exponentially) more expensive, and coverage is declining for the rate paid. If this is true (the "cyclical" nature of things), that's about the only good news - it will pass eventually, not unlike a stubborn and painful kidney stone. According to some insurance representatives, homeowner associations merely need to "weather the storm." Whether the actual problem is "cyclical" or simply indicative of changing times, associations need to understand what is happening so "denial" does not prevent forward thinking and planning. What does this all mean to homeowner associations and the people who own property in them?
FYI -March, 2002- by Beth A. Grimm, PLC ( ADR — PART II — The Difference Between Mediation and Arbitration — ARBITRATION (This FYI ties into the one in January AND completes the discussion of ADR Methods.) NON-BINDING ARBITRATION: The parties may agree to non-binding arbitration, or they may find themselves in the process by virtue of a contractual clause or a judicial mandate. In many courts, cases are directed to arbitration depending on the level of damages. Arbitration proceedings are much like trials, with a presiding party or parties (usually one arbitrator or three with one chosen by each party and a neutral chosen by the two party arbitrators) sitting to hear and see the evidence and render a decision. However, they are less formal than trials (fewer technical rules). The arbitrator is not usually required to adhere to the rules of evidence (as would be the case at trial, especially a jury trial). This means that evidence, testimony, hearsay and records that may be excluded in a trial setting could come before the arbitrator in an arbitration, if be or she wanted the information to be considered. Likewise, it might be excluded. Sometimes discovery is non-existent and other times it is limited in an arbitration proceeding (the taking of depositions, asking of interrogatory questions, and requests for admissions). Other times there is as much discovery conducted as in a trial. Discovery is usually controlled by agreement of the parties but the rules may be set by the arbitrator. (Discovery can be the most expensive part of the trial, including deposing witnesses, serving questions on parties and witnesses, investigating defects, destructive testing, viewing subject matter, etc.) In a non-binding setting, there tends to be less money invested in discovery and witnesses because the process is non-binding so less is at stake. In choosing it, the parties are indicating a desire to settle, whereby proof of fault may not be the biggest most important goal. The decision would tend to be more of an advisory nature (but often a good indication of what can be expected at trial). Many see non-binding arbitration as simply another layer of costs in the dispute, and do not want the investment in time or expense without a guaranteed resolution. In binding arbitration, the proceedings, in my experience, take on a more adversarial air, with more investment on each side of the issue because of the binding aspect. (See below) BINDING ARBITRATION: Binding arbitration is just that - binding. An arbitration is held, the arbitrator renders a decision, the decision is presented for court-approval, and a court order gives the decision the court powers of enforcement. This attribute is sometimes cited as a great advantage and other times, a disadvantage, depending upon the experiences different people have had with the process. Binding arbitration decisions are not generally subject to judicial review except in very specific cases. Generally, unless the arbitrator committed fraud or corruption, or either party was not allowed to present their case, or their was gross abuse of the process or parties, the binding arbitration decision will stand. In California, an arbitrator can do something really stupid and/or regrettable, he or she can misinterpret the facts or the law, and according to the Moncharsh Case [3 Cal. 4th 1], the decision will stand. The court in that case felt it important to stress that by submitting to arbitration, the parties agree to bear the risk of a mistake in return for quick, inexpensive and conclusive resolution. On the other hand, many people laud the binding arbitration process precisely because of its finality. Parties that have been involved in trials and appeals (including the attorneys providing representation) well know that a case can seem never-ending and that the costs can become so prohibitive in the review and appeal stages that sometimes the parties resort to making less-than-desirable choices based on burnout and/or potential bankruptcy. Frankly, from a legal point of view, there are also times when factual, legal, proof or client control problems surface that were not present (or apparent) in the beginning, and the concept of “early resolution” with finality looks pretty appealing. Binding arbitration is being used more and more. Health care contracts have for years required agreement to binding arbitration for dispute resolution before services would be provided. The securities industry has largely adopted this concept and banks write binding arbitration clauses into their contracts with you to keep and use your money. In California, because of the Moncharsh case, many are fearful that arbitrators may have more power and flexibility than Judges, without the accountability. Often, people feel severely limited in their choices when binding arbitration is mandatory and so resent the process. It is possible though, that the concept of binding arbitration is saving the public more money and grief than can be quantified. Expensive trials cost everyone in the end — the very cost of doing business and defending oneself increases.
Failure to Readily Provide Minutes Can Bite You! Wake up Associations and Managers - shabby or loosely-kept, disorganized record keeping can cost you big bucks!! I, along with attorneys in this industry, have been giving advice for years about what documents must be provided to owners, and what the association can charge for providing those documents. What we may not have emphasized enough is the importance of a system enabling you to be able to retrieve important records. Well-kept minutes and resolutions books are critical! Time savings in retrieving records has become more important than ever. Under most circumstances (unless a protective order is warranted), the association is required by Corporations Code Sections 8330 through 8337 to provide copies of a membership list (unless the association believes it is being sought for improper purpose) and "accounting books and records of minutes of the association. It is a much disputed area as to what exactly owners are entitled to receive, and Associations are required to provide, with respect to the "accounting books", but I can assure you, the law is clear about minutes of meetings. Sometimes retrieval of records to respond to the requests are incredibly onerous and time-consuming. The association is clearly allowed to charge for copies of documents that are given to homeowners. Any other charges (like administrative time) that are made are called into question by a recent Appellate Court - Moran vs. Oso Valley Greenbelt Assn., decided in September 2001. In that case, a homeowner sued her association claiming it would not provide her with access to the board of director meeting minutes. Although there were a lot of contested issues at the trial about who delayed the process and what the purposes were for wanting these records, there was one point that was undisputed, that the association had tried to charge the homeowner $200 to retrieve minutes, stating that is was the cost of eight hours of the management company's time for sifting through 140 boxes of documents. The copy costs were separate. The trial court ordered the Association to turn over the minutes and denounced the $200 charge, but it did not grant attorney fees. The appeals court reversed the decision on the attorney's fees and sent the matter back to the trial court (ordering that court to give reasons if it was not going to award fees). The recovery of attorney's fees in such an instance is discretionary, but the appeals court said that discretion should be exercised in an impartial manner, (i.e., with legal discretion, not mental discretion). The trial judge may have simply been turned off by both parties who feverishly pointed fingers at each other. Perhaps fees were not awarded because the owner happened to be a paralegal employed by the law firm that represented her. In any case, it is important to review Association policies on records retrieval and owner requests. In the past, I have given advice to associations that it should be appropriate to charge for administrative time in retrieving records, or if someone has to "baby sit" the owner during review so that they don't take any thing from the record boxes. I believe this case calls into question any charges that the association might require in retrieving documents and providing copies to homeowners of documents that are requested - especially those records that are required to be provided under the Corporations Code. Disputes will continue about the detail of financial and other information the associations has to provide, but as far as homeowner association minutes are concerned, the law (including the Davis Stirling Act regulating CIDs) clearly requires provision of minutes to the association members and management contracts may require payment for time that has to be borne by the Association, but charging the owner may be a big faux pas! It would probably be helpful to you to arrange a consultation to reconsider existing policies if charging owners for administration time is included. ADR - The Difference Between Mediation and Arbitration - Mediation By now, most of you probably already know about Civil Code Section 1354, the statute in California that ensures Associations and homeowners attempt to engage disputants in ADR (alternative dispute resolution) before suing in court. There is also the requirement of serving the Request for Resolution on the other party, asking for arbitration or mediation. So what is the difference? If you don't know, you are not alone, the two processes are confused by many, including attorneys. MEDIATION: In Mediation, the parties use a neutral third party to conduct the meeting of the parties. The Mediator's role is to guide the parties through a specific, relatively informal process geared to help identify the interests and the issues of the parties, to encourage the parties to communicate with each other in a safe, neutral and confidential setting, with the ultimate goal being for the parties to work toward brainstorming and formulating their own resolutions to the problems. The process is confidential and the parties should be so apprised. The Mediator usually has the parties sign a confidentiality statement which includes agreement not to repeat what was said or use the substance of the mediation discussions in court against the other party, or call the mediator to any court proceeding as a witness to disclose what was said or done in the mediation. The purpose of mediation is for the parties to try to come to an agreement to resolve the dispute and memorialize that agreement, either formally or informally. Whether it is or shall be enforceable in a court of law depends upon what the agreement says - what the parties have agreed to. If a court proceeding has already been filed, and the matter was referred first to ADR, the agreement can be filed if the parties agree and become a stipulated judgment. Mediation is a good process to choose when the parties involved in the dispute have an ongoing relationship (voluntary or involuntary) such as when the parties are neighbors, family members, employer / employees, business contacts or living in the same homeowners association. It is generally the fastest and least expensive alternative and studies show a high degree of success - especially when all of the parties are there voluntarily - meaning wanting to resolve the dispute (even if they don't believe it possible). In court-referred mediations, the percentage success rate indicated by verifiable studies, while still impressionable, does suffer somewhat because of the fact that one or the other of the parties may not have requested mediation, but may have acquiesced to the other parties' request so as not to appear unwilling to the Judge. According to statistics I've seen, the success rates indicating settlement through mediations (court referred or private) range consistently from 65-90%, the court-referred mediations on the lower side and private mediations on the high side. Time in mediation is an important factor also. Indications are that the average homeowner vs. Association dispute can be solved in about 5-6 hours. MATERIALS BEING MADE AVAILABLE HAVE BEEN WRITTEN OVER THE YEARS AND DO NOT COVER STATUTES OR CASE LAW OR PRACTICAL ISSUES THAT AROSE AFTER THEY WERE WRITTEN.
|