QUESTION: Our association would like AT&T to install fiber optic cable to units. Our CC&Rs limit the board from entering into agreements longer than 5 years without membership approval. We want to comply with the restriction but AT&T has language in their agreement they refuse to amend that AT&T's ownership of facilities and the ability to service existing customers survives the agreement. Does that violate our CC&Rs?
ANSWER: I don't believe it does. Your board is entering into a bulk service agreement for five years. At the end of five years, you can switch to another provider. The agreement allows AT&T to continue servicing individual customers who choose to keep the programming. That does not violate your CC&R restriction. I would be more concerned with automatic renewals and ownership of the cable.
Automatic Renewal. Boards should be cautious about automatic renewals. Almost all service providers (elevator companies, management companies, landscapers, etc.) have "evergreen clauses" in their agreements. They provide for automatic renewal of the agreement unless the board gives written notice otherwise. They often have a 30-, 60-, or 90-day notice period. Failure to give notice within that period means the contract automatically renews for another term.
The longer the notice period, the more likely a future board will miss the requirement and the contract automatically renews. Boards should either remove the automatic renewal clause or reduce the notice requirement to no more than 30 (or 45) days.
Infrastructure Ownership. Ownership of the cable should be explored. AT&T is investing a lot of money installing it and rightly wants to recoup its investment. If they retain ownership, they have leverage to induce a future board to renew the contract. If the association does not renew with AT&T, another provider would need to install their own cable--a costly and disruptive process.
You should explore sharing the cost of the installation with AT&T so ownership of the cable transfers to the association at the conclusion of the agreement. Another approach is to negotiate language that if the association renews the agreement for a second term, ownership transfers to the association. I've used both approaches in the past.
RECOMMENDATION: As the industry shifts to fiber optic cable (for fast internet speeds and more bandwidth for live streaming), many associations will be negotiating new contracts. We just installed it in our main office. In addition to using legal counsel to review the contract, boards should consider using a cable consultant (yes, they exist) to assist in the negotiations. Attorneys are good at reviewing legal issues but the cable industry is constantly changing and someone with industry expertise can help negotiate better deals. One consultant I'm aware of is Morgan Fussell (www.morganfussell.com). An internet search should identify others.
QUESTION: Our board consists of five directors. Four or more of our directors regularly attend most all committee meetings. They say they are not doing any business and that avoids the open meeting requirement. Does it?
ANSWER: Not really. The Davis-Stirling Act is much broader in its definition of board meetings than one might imagine.
Meeting Defined. Board meetings are defined as a gathering of a majority of directors at the same time and place to "hear, discuss, or deliberate upon any item of business that is within the authority of the board." (Civ. Code §4090.)
Committee/Board Business. Normally, matters being discussed at committee meetings result in a recommendation to the board for action. That means a majority of directors attending a committee meeting will likely hear and discuss items of business that will be presented to the board, thereby transforming the committee meeting into a board meeting.
Exception. An example where this would not apply is a welcoming committee that does not make recommendations to the board but, rather, meets to coordinate the welcoming of new members into the community and scheduling times to meet them.
RECOMMENDATION: To avoid violating the statute, your board has two options: (i) post a notice and agenda for all committee meetings so members can attend or (ii) limit attendance by directors to less than a quorum.
I wasn't sure the fireplace article would spark much interest but it did. I received more feedback than I can print. Following is a sampling:
Fireplace #1. "As with all things one might enjoy, fireplaces are heavily regulated." Love your opening phrase. For once, Nevada may have been ahead of California. Our home is 19 years old and we could not have a wood burning fireplace when it was constructed. We’ve enjoyed the convenience of a gas fireplace since then. I hope electric is not made mandatory. In my opinion, that would be an overreach but that won’t stop some environmentalists. -Marilyn B.
Fireplace #2. They can watch a real wood burning fireplace on TV. I think Roku has a streaming video available. Love your newsletter! -Ti H.
Fireplace #3. I agree with the electric-only fireplaces. I have a wood burning/gas burning fireplace, but have not used either for years. I placed a number of Luminara battery operated, self-timed candles in there. They turn on for six hours and then go off all by themselves. It’s very convenient, and gives me the romantic mood I am looking for without having to pollute the air and I also don’t have to clean the fireplace. I sure wish they would completely ban wood burning fireplaces in California--not just in new homes. Thank you for your informative newsletters. -DeeDee G.
Fireplace #4. Shouldn't the board have the membership review and agree to any rules (new, amended or to be deleted)? -Ingrid K.
RESPONSE: Any rules adopted by the board must first be circulated to the membership for at least 30 days for comment. (Civ. Code §4360(a).) If adopted, the board must then notify members of the new or modified rule. If the board adopts the change and members are unhappy, 5% or more can call a special meeting to reverse the change. (Civ. Code §4365.) The petition must be delivered to the board within 30 days of the noticed rule change. (Civ. Code §4365(b).) The affirmative vote of a majority of the votes at which a quorum is present is sufficient to reverse the rule. (Civ. Code §4365(d).)
Fireplace #5. Love your newsletter! As a board member for over 10 years, I like this law. -Rick H.
Fireplace #6. The apartment complex in our neighborhood is removing all of the fireplaces. Yes, this is a lot of work, but that is their solution. -Cheryl V.
Fireplace #7. I converted to an electric fireplace insert. It fits nicely inside the fireplace and plugs into a regular outlet just outside the fireplace. The display looks realistic enough that several guests also bought one. I can use it with heat or without heat just for ambience. -Paul C.
Fireplace #8. Always enjoy your weekly column. Regarding the board that banned wood-burning fireplaces in favor of conversion to gas—that seems to be the sort of thing that prompts some disgruntled owners to run for the board just to fight for a rule change that suits themselves (swimming pool hours/rules/heating being yet another contentious issue). I’ve been in associations where various boards have flip-flopped on parking rules, collection enforcement, landscaping and other divisive issues—driving owners crazy about what was allowed/not allowed “this year.” -Frank D.
Manufactured Home. I've been enjoying your newsletter for some time and want to thank you for continuing to provide some good insight that helps many of us be more reasonable in our expectations and attitudes. I am purchasing a manufactured home (they don't call them trailers or mobile anymore) in a park for senior citizens where residents own the land and pay an HOA fee to maintain common areas like streets, pools, tennis courts, walking paths, and a club house. Each owner is responsible to maintain their own home and their lot. Are manufactured home communities with an HOA instead of a landlord subject to Davis-Stirling?
RESPONSE: Yes, they are. We represent many parks with manufactured homes (some still refer to themselves as mobile home parks). While yours sounds like a planned unit development (PUD), some parks are configured as condominiums. On rare occasions I run across one set up as a stock cooperative. You can't tell by looking at them what kind of legal entity they are--you have to look at their governing documents. If they meet the definition of a common interest development, they are subject to the Davis-Stirling Act.
Abandonment of DS Act. Our new president claims our HOA is not a common interest development and is changing the rules doing whatever she wants. We are a mobile home community of 335 lots, individually owned. She canceled board meetings until October for owners to attend, but will still have meetings just for board members. Is this allowed? FYI, they filed a CID Statement with the Secretary of State in 2004. -Kenneth C.
RESPONSE: It sounds like you are a common interest development and, therefore, subject to the Davis-Stirling Act. Your president does not have the power to suspend the DS Act. She (and your HOA) remains bound by all statutory requirements, including the Open Meeting Act. (Civ. Code §4925.) Violations of the Act by your president can result in fines against the association.
Officers. I enjoy and am informed by your Adams/Stirling Newsletters. Our bylaws state that “Officers other than the president need not be directors.” Our officers have always been chosen by the board of directors from persons who were already elected by the membership. But it seems from the bylaws that the board could legally choose someone outside of the community to be either vice-president, secretary or chief financial officer who was not already a director. Is that true? -Barry M.
RESPONSE: Yes, it's true. That means your board could appoint homeless people to be corporate officers. Without bylaws qualifications, nonmembers can run board meetings, take minutes, and handle the association's money. When I restate bylaws I routinely include a requirement that officers be directors. It may be time to amend your bylaws.
Adrian J. Adams, Esq.
ADAMS | STIRLING PLC