BOARD MEETING PRAYER

QUESTION: One board member wants to begin each meeting with a prayer and the pledge of allegiance. How do we handle the request without alienating members?

ANSWER: Interesting question. Although prayer is not illegal, whatever decision you make will please some and alienate others.

Civic Prayer. Civic prayer has been a tradition in our Country since the Pilgrims landed on Plymouth Rock in 1620. The Pledge of Allegiance was added to civic functions in the late 1800s. Both remained relatively noncontroversial until the 1960s when significant change roiled through the nation challenging institutional traditions at all levels. The courts became a battle ground for church/state issues.

Court Review. In the 1983 case Marsh vs. Chambers, the U.S. Supreme Court ruled that prayer at public meetings followed a long, historic tradition and was constitutional. Citing public prayers from George Washington's inaugural address to George Bush's cabinet meetings, the 7th U.S. Circuit Court of Appeals held that "prayers and the invocation of divine guidance have been accepted as part of American political discourse throughout the history of this Republic." DeBoer v. Village of Oak Park, Ill.

Homeowners Associations. Thus far, the church/state battle has not affected homeowners associations because HOAs are private organizations, not governmental entities. As a result, the "wall of separation" argument does not apply to board meetings. Even so, many are uncomfortable with public prayer and each board must decide for itself whether to employ it. It should be noted that a policy adopted by one board does not bind subsequent boards. Even if a board decides to forgo public prayer, I'm sure it will continue privately. "Dear Lord, will that person ever stop talking?"

SMALL CLAIMS COURT
LAW AMENDED

Last week Governor Schwarzenegger signed Assembly Bill 712 amending the Small Claims Court Act. The amendment gives small claims judges the power to grant equitable and injunctive relief when authorized by other statutes to award such relief. Code Civ. Proc. §116.220. The legislative analysis that accompanied the bill gave two examples of how it could impact homeowners associations. In addition to levying fines, small claims judges may (i) order associations to produce records for inspection and (ii) order actions related to association elections and meetings.

UPDATING OLD CC&Rs

QUESTION: Our CC&Rs are 25 years old. The board is divided. Some want to update our documents to keep up with the Davis-Stirling Act. Others argue that the CC&Rs and bylaws are only suggestions and guidelines and don't need updating. Our management company said we should wait because the legislature is constantly changing the laws and the Davis-Stirling Act is going to be completely overhauled. What do you recommend?

ANSWER: CC&Rs and bylaws are more than mere suggestions and guidelines; they are legally enforceable restrictions and obligations. If your CC&Rs are 25 years old, they went into effect prior to the enactment of the Davis-Stirling Act. As a result, they are due for restatement.

Changing Laws. The argument that you should wait because laws are constantly changing means you will never update your documents. The flow of new laws never stops. This argument is like the person who never buys a computer because he is afraid that as soon as he does, it will be outdated. That is a terrible argument for not buying a computer or restating documents. When it's time to update your documents, you should do it.

Major Overhaul. The pending overhaul of the Davis-Stirling Act argument would have merit except that the California Law Revision Commission is not making any substantive changes to the law. It is merely reorganizing and renumbering the statutes, plus rewriting ambiguous sections for clarity. Thus, there are no compelling reasons to wait.

MORE LIABILITY FOR HIRING
UNLICENSED CONTRACTORS

A recent decision by the California Court of Appeal reinforces the importance of avoiding unlicensed contractors. If associations hire unlicensed contractors, they could be liable for wage and hour claims filed by employees of the contractor. Although the case involved a general contractor and its subcontractors, associations who hire unlicensed contractors can be deemed a "general contractor" and the unlicensed contractors as "subcontractors." This means that any unpaid workers will be considered employees of the association and the association will be liable for paying those workers, even it the association already paid the contractor. Sanders Construction v. Cerda (2009) 175 Cal.App.4th 430.

RECOMMENDATIONS. Homeowner association boards should verify each contractor's license with the Contractors State License Board. In addition it should get proof of insurance. Boards should also add a provision to their contracts requiring contractors to indemnify the association for any wage and hour claims by its employees.

FHA RESERVE MANDATE

Feedback #1. I'm surprised to hear your apparent defense of underfunded reserves by your opposition to the new FHA 60% reserve funding requirement. As we all know, underfunding of reserves is a long standing problem which has created major hardships for some associations. Maybe the new proposal needs some modification, but it is clearly a step towards healthy associations and some sort of new rule should be welcomed. -Norm. H.

RESPONSE: Normally I’m a strong proponent of higher reserves. In this case, the FHA's decision to further weaken the housing market and increase foreclosure rates will not produce higher reserves. It will likely reduce reserve contributions as associations struggle to meet operational expenses. The smart approach is to wait until the market is stronger and then phase in the requirement. Higher reserve funding is something the FHA should have done years ago. Instead, it waited until housing was crippled, at which point it doused everything with gasoline. On November 1, it will throw a lit match. That's not going to help build healthy reserves. -Adrian Adams

Feedback #2. Regarding your FHA reserve requirements article, consideration should be given to taking out bank loans to meet the FHA fund requirements. Loan costs would have to be considered of course, but they could be offset somewhat with interest earned in the reserve account. While costly, it seems a better choice than sitting with uncollected revenue on those condos not selling. -Diane H.