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PAYING FOR AMENITIES
QUESTION:  As a member of an HOA, do I have to pay monthly dues for amenities not used or desired by myself or family?
ANSWER:
Yes. It's like paying taxes to California for roads and bridges you
never use. Members cannot deduct a portion of their dues because they do
not use
recreational facilities or because they have a grievance against their
association.
Because homeowners associations would cease to exist without
regular payment of assessment fees, the Legislature has created
procedures for associations to quickly and efficiently seek relief
against a nonpaying owner. Permitting an owner to broadly assert ... [a] "setoff" to such
enforcement action would seriously undermine these rules.
A system that would tolerate a[n] owner's refusal to pay an assessment because the unit
owner asserts a grievance . . . would threaten the financial integrity
of the entire condominium operation. (Park Place v. Naber.)
FORECLOSING ON FINES
QUESTION:
When fines are not paid and your only recourse is small claims court or
a judicial foreclosure, can we change our CC&Rs to reflect a fine
as an assessment to enable a non-judicial foreclosure?
ANSWER: Fines cannot be collected through non-judicial foreclosures (trustee
sales) despite any authorizing language that might be contained in an
association's governing documents. Civ. Code §1367.1(e).
Monetary penalties cannot be treated as an assessment and cannot be included in a delinquent assessment lien.
NO SMOKING IN
PASADENA CONDOMINIUMS
 In
a continuing trend throughout California, another city has banned
smoking in all multi-family units including condominiums and townhouses.
The statute prohibits smoking in all common areas AND inside units.
To read the ordinance, see "Reduction of Drifting Tobacco Smoke in Multi-Unit Housing." I expect a similar trend where condominium associations amend their CC&Rs to prohibit smoking inside units. I believe such amendments would be fully enforceable.
HOMEOWNER
PAYMENT PLANS
QUESTION:
Most times our delinquent homeowners submit requests for a payment plan
through our collection agency. Due to privacy concerns, I'm inclined to
discuss and take action on such requests in executive session
regardless of whether the homeowner has requested same or is present.
ANSWER: Your instincts are right. As provided for in Civ. Code §1367.1(c)(3), the board "shall" meet in executive session to discuss payment plans.
FEEDBACK
 Email Minutes.
My board approves the meeting minutes at their next scheduled noticed
meeting. However, a few days after the meeting, the draft minutes are
sent to all directors to review and forward changes to the recording
secretary. The reason for this is people normally forget what transpired
after a few days, more so after 30 days. Is this practice okay? -Lorna
L.
RESPONSE: I think it's a
good practice because it helps ensure accuracy. It does not violate the
Open Meeting Act because it’s not an email discussion. Instead, it’s
feedback from individual directors to the secretary on corrections and
revisions. The draft minutes then go into the board packet for the next
meeting for board discussion and approval.
Owner Correspondence #1. You are absolutely correct that letters, opinions, and
conversations are not included in the minutes. If a homeowner wants
their concerns heard by the board, they should put them in
writing, send them to the association manager and request the letter be
included in the board packet for board review. Board packets are
generally retained as a business record. -Victoria C.
RESPONSE:
I agree. It is important that owner correspondence be included in board
packets so all directors can read the correspondence and take
membership comments into account when making decisions. Making the
correspondence part of the minutes is the problem. It can lead to
potential liability if statements in the correspondence are defamatory.
It can also lead to a great deal of turmoil in the community. As a rule,
minutes should record what was done at a meeting, not what was said. (Robert's Rules, 11th ed., p. 468.)
Owner Correspondence #2.
Do you think it a good idea to include a "correspondence" section in
the minutes with a very general summary of correspondence? For example,
it might say: "Two letters were sent to owners regarding violations of
our architectural policies; one letter was sent to an owner regarding
assessments more than 90 days delinquent." In this way, owners know what
the HOA is doing, that architectural policies are being enforced, etc.
-Glenn P.
RESPONSE: If done properly, it can be done. The summary must be very general (as you illustrated) and should not use any names.
Owner Correspondence #3.
I have always felt that member input is not given fair consideration.
Why do businesses representing HOAs always refer to member input as
grievances, axes to grind, personal agendas, inflammatory, inaccurate,
and defamatory? -Tom M.
RESPONSE: Most
member input is good. It’s when someone proposes that letters be made
part of the minutes that lawyers point out the risk, i.e., potentially
inflammatory and defamatory correspondence being published thereby
triggering costly litigation. Boards must be cautious about what they
put in their minutes.
IRS Audit #1. I read
the article about action the IRS is taking in Las Vegas against several
HOAs. While your paragraph implies that the IRS is taking action against
HOA reserves; that is not exactly how the article reads. It is not
reserves that the IRS is looking at but, rather, income that an HOA gets
from nonmembers and what expenses are allocated against that nonmember
income. -William Erlanger, CPA, Levy, Erlanger & Co.
IRS Audit #2.
My community rolls over surplus from the operating budget into the
following year's operating budget. Our reserves, presently in excess of
$5 million, are invested. We pay tax on the interest every year and use
the interest to subsidize our reserves. Can we reduce our tax burden if,
instead, we use the interest in our operating budget?
RESPONSE:
Since I'm not a tax attorney, I ran this by HOA tax specialist Bill
Erlanger, CPA. In answer to your question, it is not what is done with
the interest that has anything to do with income taxes. If interest is
earned by the association, it is generally taxable. It does not matter
if the interest is kept in reserves or transferred to operations. Some
kinds of investment interest are not taxable but that depends on a
number of factors that are beyond the scope of the question you asked.
 NEWSLETTER. Sorry,
no newsletter next week. I have depositions and a trial. The following
week I will report on some new cases. In a recession you would think
that litigation would decrease. Unfortunately, it seems to increase.
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