Renting Common Area Facilities
QUESTION: If a board grants a member exclusive use of the association's clubhouse for a particular activity, does that constitute an exclusive use of the common area requiring approval of 67% of the membership under the Davis Stirling Act?
ANSWER: No it does not. Some associations allow facilities to be rented for weddings, birthday parties, etc. This is not an exclusive use easement described in Civil Code § 4600. Instead, it's a short-term license. It allows a member to use the facilities for a limited purpose for a limited period of time. Members who reserve the facilities are sometimes charged a rental fee by the association.
Rental Agreement
Many associations require written agreements for private events. The agreement includes provisions that hold the association harmless, indemnify the association, and establish hours of use, noise, trash, parking, and insurance.
Special Event Insurance
Optimally, the owner should produce evidence of both bodily injury and property damage liability coverage and agree to have his insurance carrier name the association as an "additional insured." Unfortunately, it's nearly impossible (except for the most expensive of carriers) to get a company writing a personal lines homeowners policy to add an endorsement extending coverage to a common interest development. As a result, more communities require the owner to purchase a one-day special-event policy that names both the owner and the association as insureds. These policies are readily available and are written for all kinds of special events, including weddings, anniversaries, birthday parties, bar mitzvahs, etc.
Cost of Insurance. The cost of a special event insurance policy can range from $250 to $400, with the premium dependent on the number of guests, the type and extent of the celebration (music/dancing), and whether food and alcohol are being served. Alcohol has the single greatest potential for liability. As a result, some associations prohibit alcoholic beverages, even when the event is catered, and the server is licensed and insured. Having the association named as an "additional insured" is important since most boards do not want claim activity from parties to spoil the association's insurance loss history.
Alcohol at Association Events
Associations are allowed to serve alcohol at their events as long as they (i) are not selling the alcohol, (ii) are not charging admission to attend, and (iii) are not serving anyone under the age of 21. "No social host who furnishes alcoholic beverages to any person may be held legally accountable for damages suffered by that person, or for injury to the person or property of, or death of, any third person, resulting from the consumption of those beverages." (Civ. Code § 1714(c)) Wine and cheese served at annual meetings or beer at association picnics rarely create a problem. However, if an association serves hard liquor, the likelihood of an incident increases, and the risk of litigation rises, especially if participants drove to the event.
Charging Admission. If an association charges admission to an event where it is serving alcohol, it can be liable for injuries or deaths that may occur as a result of alcohol consumption. (Ennabe v. Manosa) If money changes hands, whether charging admission, charging for drinks, or accepting "donations" for the event, the association's exposure to liability is significantly increased.
Obviously Intoxicated. Serving alcohol to an obviously intoxicated participant could result in a misdemeanor: "Every person who sells, furnishes, gives, or causes to be sold, furnished, or given away, any alcoholic beverage to any habitual or common drunkard or to any obviously intoxicated person is guilty of a misdemeanor." (Bus. & Prof. Code § 25602(a))
Catering. If the association hires a bartender or caterer to serve food and alcohol, the board should ensure the person/company has insurance and that the association is named as an additional insured for the event. The board should also contact the association's insurance agent to determine whether the amount of insurance is sufficient and whether the association should purchase its own coverage for the event.
BYOB Events. Sometimes associations will hold events where members are allowed to "Bring Your Own Beverage." Even though the association is not serving alcohol, there continues to be exposure to liability if participants get drunk and injuries occur. Participants should be told they cannot bring liquor to the event, only beer or wine. Volunteers should be assigned to watch for anyone who is visibly drunk and gently guide them home. The board should make sure the association's insurance will cover any alcohol related injuries.
Liquor License. For information about liquor licenses, see California's website for Alcoholic Beverage Control.
Insurance. General liability policies do not cover liquor liability. Associations need to obtain "host liquor liability" insurance. This is a special liability form that covers individuals or organizations (not engaged in the business of distilling, selling, or distributing alcoholic beverages) that sponsor or host events where liquor is served without charge. Special event insurance can be purchased through the association's insurance agent or through "The Event Helper."
Recommendations. If the association is sued, it may ultimately avoid liability, but it will have to endure the litigation. It is better to avoid the problem altogether by limiting the alcohol to beer and wine and not allowing guests to consume too much. Whenever the association is serving alcohol at an event, the board should take some sensible precautions to minimize potential liability. Some of those precautions include:
- make the premises safe,
- invite members only, not the general public,
- do not charge admission,
- do not charge for the drinks,
- serve only beer and/or wine (and non-alcoholic drinks and food),
- establish a 2-drink limit (handout two drink tickets per attendee),
- do not serve anyone under the age of 21 (check IDs),
- do not serve a visibly intoxicated person,
- stop serving alcohol well in advance of the event's ending time,
- provide transportation home for those who may need it, and
- take out host liquor liability insurance for the event.
Alcohol at Private Events
Sometimes owners will reserve the common areas for a private party that may include serving alcohol. As part of its application for reserving the clubhouse or any other common areas for private events, associations should include an indemnity and hold harmless agreement. The agreement protects the association against injuries or losses arising from the event. The hold harmless portion of the agreement means the host agrees not to file claims against the association. The indemnity portion means the host will pay the association's legal fees and any judgment if a third party sues the association. Associations can also require the event sponsor to obtain insurance for the event and name the association as an "additional insured."
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with community association issues, subscribe to the Davis-Stirling Newsletter.