FYI - September 1, 2003 -

NEWS RELEASE - CHANGES TO THE MANAGER CERTIFICATION BILL ARE SIGNED INTO LAW! NOTE ALSO THAT A NEW CID LAW EDUCATION CLASS IS OFFERED!

AB 1423 is the 2003 "cleanup bill" to AB 555 - and has been signed into law! Remember that AB 555 was the bill that became law last year, effective January 1, 2003 (see the following original FYI on this), relating to manager certification. AB 1423 contains some very critical amendments that have become law.

The basics: a manager in California who wants to call themselves "Certified Common Interest Development Manager" must satisfy certain educational requirements, or carry a certification or designation from an industry group that qualifies them. As I understand the category of those who immediately qualify, managers who carry a designation from the California Association of Community Association Managers are most likely "grandfathered" under this new law if they have that designation by July 1, 2003, and many Managers who have designations from CAI (Community Associations Institute), are "grandfathered" under this new law if they have the legal training in California Common Interest Development Law, or get it before July 1, 2004, or if they have taken a comprehensive test as described in the statute. As for any other designations, those that involve a comprehensive test of skills and knowledge in the area of administration and management of CIDS may already qualify, as defined by the statute. Any Managers without specific designations need to have achieved at least 30 hours of education in management, administration and law in the area of common interest development management, and testing in those areas of education.

Classes are being offered all over the state by providers, including CAI (Community Associations Institute, which has ten state chapters) and CACM (California Association of Community Managers), located in Irvine. There are individual providers as well, like me. To make sure the legal classes are available to managers and realtors (and any others who would like the course) throughout the state, I will teach a class anywhere in the state (a DRE approved consumer protection course, with a test, for 8.0 hours of DRE credit. The course is a comprehensive study of the law related to CIDs in California called "The Davis-Stirling Act in Plain English." All that I need to schedule a class (during the week or on weekends) is a commitment for 10 or more people in the class (paid in advance unless agreed prior to the class), and a room in which to teach the class, and commitment for access to water, coffee, and possibly a few refreshments.

There is another very good thing in the new language for this law. Previously, homeowner associations were required to disclose in the Articles of Incorporation or any amendments thereto, and biennially through registration with the Secretary of State, whether their "managing agent" qualified as a Certified Common Interest Development Manager. However, since the language in the statute used the words "managing agent," any association under contract with a company as the managing agent (rather than an individual) had to have a written disclosure saying that their "managing agent" was not certified as a common interest development manager, even if the qualified as "certified." As you can imagine, this created quite a stir. Now, this disclosure is no longer required. However, Managers, must disclose to associations with whom they contract or are considering contracting whether they qualify as a Certified Common Interest Development Manager after September 1, 2003 (the former date for this disclosure was July 1, 2003).

Considerable credit for these very critical "clean-up" amendments goes to Skip Daum (advocate and administrator) and the delegates of THE CALIFORNIA LEGISLATIVE ACTION COMMITTEE (CLAC), the California-specific legislative arm of THE COMMUNITY ASSOCIATIONS INSTITUTE, and Molly Foley-Healey of CAI NATIONAL, the nationwide organization offering educational programs, publications, legislative advocacy, and assistance to and for homeowner associations all over the country. Check out the CLAC website at CLAC. org. and the CAI national website at caionline.org. for more information on both groups.

FYI - February 1, 2003

AB 555 - DUTRA - MANAGER "TITLING BILL"- What Does It Mean To You???

Some call it certification, some call it registration, and some call it a new "titling" law. A new law in California (found at Business and Professions Code Sections 11500 and following) entitles managers of homeowner associations to call themselves "Certified Common Interest Development Managers" if they qualify. Qualifications involve training in management and California law, and/or passage of a test geared to test skills in those areas. Business and Professions Code Section 11500, states that effective July 1, 2003, in order for a person to call themselves a Certified CID Manager, he or she must have within the previous five years passed a knowledge, skills, and aptitude examination given by, or have achieved a "certification designation" endorsed by, a professional association for CA managers, and have received instruction in California law related to management of CIDs within the past five years.

If a CID manager has not obtained a "certification designation endorsed by a professional association for community association managers," then there is specific educational curriculum required: no less than 30 hours of course work in California law and instruction in general management for CIDs. The courses and education include, but not limited to, the following topics: Davis-Stirling Common Interest Development Act, personnel issues, risk management, management as it pertains to CIDs, property protection, business affairs of CA's, a basic understanding of governing documents, codes and regulations relating to activities and affairs of community associations. General management courses also include courses related to: finance issues, contract negotiation and administration, supervision of CID employees and staff, management of CID maintenance programs, management and administration of rules, regulations, parliamentary procedures, architectural standards pertaining to community associations, management and administration of CID's recreational programs and facilities, owner and resident communications, training and strategic planning for community associations, and other activities, risk management, emergency preparedness, implementation of policies and practices, ethics for managers, and standards of practice for CID managers, and current issues relating to CIDs.

The new disclosure requirements are very important too. On an annual basis (which could be after July 1 of 2003) and/or upon presenting a contract for services to a community association, managers must disclose to the Boards of Directors of the Associations they manage the following information: whether or not the CID manager is Certified as defined in Section 11502; the name, address, telephone number of professional association that certified the CID manager; the date the manager was certified; and the status of certification; and the location of his or her primary office. Prior to entering into a new contract the manager, whether certified or not, shall disclose whether the fidelity insurance of the CA manager and his or her employees covers the operating and reserve funds of the CA. (This requirement does not compel or CA or CID manager to require fidelity insurance, just to disclose it).

UNFAIR BUSINESS PRACTICES: On and after July 1, 2003, it could constitute an unfair business practice for CID manager or company that employs manager or company that has a financial interest in company employing a defined manager to hold themselves out to be a Certified CID manager or use any other term that implies or suggests that the person is certified or licensed as a CID manager without meeting the requirements, to state or advertise that he or she is certified, registered or licensed by a governmental agency to perform the functions of a CID manager, to state or advertise the registration or license number, unless it is specified by a statute, regulation or ordinance, or to disclose or misrepresent any item to be disclosed in this code. This is serious business - the possible remedy for unfair business practices is disgorgement of profits.

ADDITIONAL DISCLOSURES: ARTICLES OF INCORPORATION: After January 1, 2003, associations must disclose in any Articles of Incorporation or amendments filed with the Secretary of State a statement which includes the name and address of the association's managing agent and whether the managing agent is certified CID manager

Fidelity insurance policies: Associations need to now disclose as part of their annual insurance disclosures the same information relating to fidelity insurance policies as other required policies.

I suggest that if your manager has not recently (within the past 5 years) obtained a CCAM (through CACM) or CMCA (through NBC-CAM) or PCAM or AMS (CAI) designations - that you look into and take all classes (30 hours total) required. Check with your professional association to see which designations qualify, or which portions of training are counted toward the 30 hour requirement if your certification or designation does not qualify. Any training or certification that did not include any California law education relating to CID management may need to take an approved course (through one of the professional associations or an approved DRE Course in California law). Be advised, please, that there is debate in this area as to what designations or certifications do qualify as of January 1, 2003 when the new law takes effect, and July 1, 2003, when managers will begin to use the title, so please do not presume these FYI statements constitute a legal opinion upon which you should rely. You should consult with your own legal counsel as to whether you individually have the qualifications necessary to hold yourselves out as a "Certified Common Interest Development Manager." This is informational only at this point. There will be attempts made for some "clean-up" legislation right away to clarify things (hopefully it will be successful). For now, we as attorneys have to make a disclosure in Articles of Incorporation that are filed so we are asking the question now of managers. The status of using the title will surely catch on - so it would be wise to sign up for classes at the earliest opportunity. I am in the process of obtaining DRE approval of some 3 hour California law classes so that there are more offerings to help managers get through this crisis time and obtain necessary qualifications with regard to the California Law portion of the requirements. Perhaps other qualified persons will do the same. There are similar suggested curriculum and requirements for Realtors who manage CIDs and those will be described in future communications. Realtors who sell or manage CIDs should have the appropriate management and/or law-related education as well.

Call Community Associations Institute and ask about the classes available. (Tel: 703 548-8600) Call California Association of Community Managers and ask about the classes. (Tel: 949 263-2226) As soon as my law-related classes are approved, I will publish a schedule - if you need classes in your geographic area and believe there are more than 10 people who might attend, I hope I can bring a class to your area. Please contact me about your interest via email on this site.

FYI - JANUARY 1, 2003 HOW ARE YOU GOING TO PAY FOR THE INSURANCE INCREASES THIS YEAR?

Many, many associations are facing substantial increases in insurance costs for the year 2003 (and may have already faced this in 2002). Although many associations budgeted a fairly substantial amount to plan for increases, having heard in the industry about the insurance crisis, most of those well-intentioned actions did not go far enough. I have seen many situations where the association's insurance premiums increased up to three-five times what they were last year.

Associations need to pay for the insurance premiums as they become due. Some insurance companies will provide financing which may become important if the Board does not have money that it can borrow from reserves (reasonably and prudently), or some other budget overage that can make up the increase in costs without going to the membership for approval of a special assessment. The Board of Directors needs to look at various options to cover the insurance costs. If there is a borrowing from reserves, California Civil Code requires that the Board make certain findings, document those findings within the Associations records (minutes of meeting), submit those findings to the membership in written form (Civil Code Section 1365(c) and (d)), and adopt a plan to repay the funds within one year.

If the Board of Directors needs to consider an emergency special assessment or increase in the regular assessments (by "emergency", meaning limits that cannot be achieved without a vote of the membership otherwise), then there are other documentation requirements. However, in drafting the necessary resolutions (written findings and a resolution are required for this kind of activity), the Board needs to be cognizant that emergency assessments allowed in Civil Code Section 1366(b) generally relate to maintenance and repair items. Therefore, the "preamble" for the resolution must be carefully worded to include the fact that master building coverage is included in the premiums. As for other insurance increases (i.e., liability insurance, directors and officers coverage, etc.), arguably those can be wrapped into the assessment, but they are subject to being challenged, especially if the CC&Rs do not authorize or obligate the Board to purchase the insurance.

Short of getting membership approval to pay assessments, which is not often possible when the quotes come in less than 30 days before the insurance premiums are due and the Board has to make a decision as to the renewability of the policy, the emergency assessment is an option to consider if the timing is right. If it is not right, the Board needs to look at other options, and many practitioners in the industry have discussed how to accomplish this. Some have agreed that use of the emergency assessment provision should be acceptable, but we all have to admit that it may be subject to a judicial challenge if the assessment includes sums that provide for other than the property and capital facilities. Why would you use this method then? Boards are caught between a rock and a hard place. There is a fiduciary responsibility to purchase the insurance coverage if the documents require it. This is basically a "one-time" shot though. Boards of Directors need to look very carefully to the future to determine how to deal with increased insurance premiums that aren't a "surprise." The emergency assessment provisions in the code exist for situations that were "unforeseeable," and everyone can agree, by virtue of the chatter in the news, that insurance premiums will continue to increase, likely very substantially.

If you need assistance in proposing the language for an emergency special assessment or regular assessment increase to pay insurance premiums, the cost is approximately $500 for the resolution, a proposed letter to the owners, an unanimous consent form (for taking emergency action if it is necessary), and a letter to the Board explaining the resolution. If you need assistance for making findings for borrowing from the reserves, the cost would be approximately the same, i.e., $500.00, since similar paperwork is required.

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