|
EXCLUSIVE USE
SEWER LINE LAWSUIT
 In December, the courts decided another sewer line case that will impact many associations.
Line Replaced.
Patrick Jennison had a leaky sewer pipe
two feet beneath his condominium's concrete slab that vented sewage into
his unit. The Dover Village Association cut through Jennison's floor,
jack hammered the concrete slab underneath,
and replaced 50 feet of sewer pipe that
connected his condo to the main sewer line.
Owner Billed. Because the damaged line exclusively
serviced Jennison's condo, the Association properly deemed it exclusive use common area. As provided for in the
Davis-Stirling Act, HOAs are responsible for repairs to common areas
while homeowners are responsible for their units and exclusive use
common areas
appurtenant to their units. Civil Code §1364(a).
Accordingly, the Association billed Jennison for the $15,000 it spent
repairing the line. Jennison refused to pay and the Association sued.
Court Review. The court examined the entire text Civil Code 1364(a), which states that owners are responsible for exclusive use common areas
"unless otherwise provided in the declaration." Because the
statute defers to an association's CC&Rs, the court turned to the
Dover Village governing documents. It found that the CC&Rs were
silent as to maintenance duties involving exclusive use sewer lines. The
CC&Rs did, however, specifically designate patios and garages as
exclusive use common areas to be maintained by owners. By expressly
assigning maintenance duties for these exclusive use areas, the court
concluded that all other exclusive use areas were the responsibility of
the Association. Accordingly, the court found for Jennison and against
Dover Village. Dover Village v. Jennison.
RECOMMENDATION:
Most associations have outdated governing documents when it comes to
maintenance duties. To avoid costly litigation, associations should update their documents
to clearly define maintenance responsibilities. Some associations make
the HOA responsible for all maintenance. This usually results in higher
monthly dues and occasional special assessments but spreads the cost
across all owners. Other associations prefer to keep dues as low as
possible and make individual owners responsible for their maintenance
expenses as if they lived in a single family home. Both are legitimate
policies but whichever one is selected must be clearly defined in the
CC&Rs.
LATE FEES
QUESTION:
If a payment is received on or after the 16th of the month, a late
charge is applied. Can additional late charges be applied to the same
unpaid amount every month thereafter? After all, the HOA does not have
the use of that payment.
ANSWER:
No, you cannot levy late charges month after month on the same unpaid
assessment. A late charge is a one-time penalty of 10% or $10 (whichever
is greater) to encourage timely payment of assessments. Civil Code §1366(e)(2).
Thereafter, you can charge interest at 12% until the assessment is paid
(unless your governing documents set a lesser amount). Civil Code §1366(e)(3).
If you applied a late charge every month on the same delinquent
assessment plus 12%, the effective interest rate would be an exorbitant
22%--a usurious rate reserved for credit card companies.
WHO CHAIRS
MEMBERSHIP MEETINGS?
 QUESTION:
An annual meeting to elect directors is a membership meeting, not a
board meeting. It would be a conflict of interest for the board to
conduct the meeting. Regarding a special meeting called by 5% of the
members, can the chair be a person named by 5% of the members?
ANSWER:
No, it's not a conflict of interest for the president to preside over a
membership meeting and "No" petitioners cannot determine who chairs the
meeting.
Robert's
Rules. The President
is president of the entire association, not just president of the
board. As a
result, the President presides over all meetings of the membership as
well as meetings of the board. As provided for in Robert's Rules of
Order, the President serves as presiding officer to, among other things,
chair membership meetings. (Robert's Rules, 10th ed., p. 433.)
Corporations Code. Moreover, by statute the only authority given to petitioners is to call a meeting, not name who runs the meeting. Corp. Code §7510(e).
DAVIS-STIRLING
REWRITE
Gary Kessler wrote an article for CAI's Focus Magazine on the rewrite of the Davis-Stirling Act.
The article provides a good summary of the progress of this major body
of law. Homeowner associations that are not already members of the
Community Associations Institute (CAI) should consider joining. There
are eight chapters throughout California providing significant
educational opportunities for board members and managers. For more
information, check CAI chapter listings in our Business Directory.
FEEDBACK
 FHA Financing.
I don't want social
engineering policy being forced on associations to help a buyer qualify
for a condo;
that should not be the responsibility of an association. Buyers getting
into a property with little or nothing down was part of what caused the
real estate crash.
Our experience with those who have FHA
financing is they will more readily walk away from their condo and let
it go into foreclosure because of their small down payments, "no skin in
the game." They usually discontinue
paying the association fees when they decide to let their
mortgage go, hence placing the burden of the operating
costs on the remaining owners.
Incidentally, FHA standards
require extra fidelity coverage that is not needed by our association.
Why should other owners pay the added cost of this and other insurance
to meet FHA standards to help a less qualified buyer get financing?
-Gary V.
RESPONSE: Good points all. Boards should factor them into their decision-making regarding FHA financing. -Adrian
Pensions and the State Deficit.
I thoroughly agree with you regarding the over-paid pensions
contributing to our state's deficit. The facts have been made public
repeatedly by the media. Where have some people been???? -Judy S.
Sincerely,
Adrian J. Adams, Esq.
Adams Kessler PLC
|
Newsletters are for advertising & general information by
Adams Kessler PLC. Readers should not act on issues raised in our newsletters or website without consulting legal counsel.
|
|
|
|