CASH FOR CLUNKERS

QUESTION: Is there any type of assistance on the federal or state level for CIDs who have been hit hard because of the economic climate?

ANSWER: To find an answer, I turned to Clifford Treese who knows all and sees all when it comes to this kind of stuff. Unfortunately, neither one of us could find any government assistance for financially distressed HOAs. The administration has cash for clunkers but no cash for condos. 

FHA REGULATIONS

The Community Associations Institute published an update on the Obama Administration's FHA insurance regulations. CAI believes the new regulations "would be a serious burden for condominium associations, and lead to market confusion that could hinder the housing and economic recovery."  Provisions that most impact associations include:

• The FHA will require 50% of the units to be owner-occupied or sold to owners who intend to occupy the units.[Boards should consider amending their documents to limit rentals.]
• The FHA will not insure a loan if more than 15% of the units in the development are 30 days past due on their assessments. [Boards need to be aggressive in their collection efforts.]
• The FHA will require associations to fund at least 60% of the reserves called for in their most recent reserve study. [This will cause the most difficulty for HOAs. If they want to be eligible for FHA financing, boards must figure out what combination of dues increases and special assessments can quickly bring their reserves to the 60% funding level. In the alternative, boards might decide to forego FHA eligibility. However, this may impact marketability and resale values of units in their development.]

Originally scheduled to take effect on October 1, the regulations have been delayed to November 2, 2009. See CAI's summary for more detail. In addition, Clifford Treese sent me a copy of the FHA's June 12, 2009 letter on this issue.Mr. Treese specializes in insurance and risk management for common interest developments and is President of Association Information Services.

TAKING CONTROL FROM
THE DEVELOPER

QUESTION: When does the membership officially take control of the HOA from the developer?

ANSWER: It varies depending on the type of project.  Initially, the developer has three votes for each lot or condominium he owns. In a single phase project, Class B converts to Class A when either the total number of Class A votes equals the total number of Class B votes or on the second anniversary of the conveyance of the first lot or condominium in the project, whichever occurs first. In a multiphase project, Class B converts to Class A either on the second anniversary of the first conveyance in the most recent phases or four years after the first conveyance in the project, whichever occurs first.

Fiduciary Duties. Even when developers control the board of directors, they cannot use their power to their own benefit at the expense of the association. Corp. Code §7231, Raven's Cove v. Knuppe Development.

Thank you to attorney Helene Fransz for this response. Ms. Fransz represents builders of common interest developments. For more information on this issue, see transfer of power.

PETITION DEMANDING
 RESIGNATION

QUESTION: We believe the board is mismanaging our reserves. They depleted our reserve account from several hundred thousand dollars to under $50,000 on poorly prioritized and self-serving projects. Owners circulated a petition asking the president and another board member to resign. It was signed by 75% of the membership. Do members have the right to demand their resignation?

ANSWER: Yes, members have a right to circulate a petition demanding that directors resign. Although directors are not obligated to step down, sometimes discretion is the better part of valor. If they don't resign, it will further inflame the membership and the directors will be recalled. It is impressive that 75% of the membership support the demand. Your two directors should pay attention to the numbers and let common sense prevail.

DOGS, PROSTITUTION & PARKING

Feedback #1: I doubt there is an Animal Control agency in the United States that would concur with having dogs under voice command or e-leash walking or running on public streets. Having physical control over your pet is for protection of the owner and the pet. There is no alternative to a leash. -James L.

Feedback #2: I believe dogs not on leashes is controlled by state or local law. I believe the county's leash law requires a physical leash no longer than six feet. This applies to dogs on both public and private property and would likely supersede the CC&Rs. You also note that the board could be sued in the event that someone is injured because of a failure to enforce the leash requirements. You might also note that the dog owner gets sued and, if the owner knew, or should have known of the animals dangerous propensities, they may be facing punitive damages. I do not believe the punitive damages would be covered by insurance. -Richard P.

Feedback #3: [Regarding drugs and prostitution] I once had luck curbing illegal activities by “ignoring” what was being sold and sending a violation for operating a business out of the home based on “clients” visiting the property. -Marla H.