WATER DAMAGE AND MOLD
QUESTION: A leak in the roof caused rain water to drain into a lower unit causing mold to grow on drywall. Who is responsible for removal of the mold and repairs?
ANSWER: The first place to look is in your CC&Rs to see if they address the issue. Assuming it is a common area roof the association is obligated to maintain, the association is not automatically liable just because the roof leaked. Only if the association were negligent (or intentionally caused the leak) would it be liable for the damage.
No Negligence. If the association is not negligent, each side pays for its own damage--the association repairs the common areas and the owner his unit. If the association's negligence caused the leak, then the association is responsible for repairing all damage and removing the mold.
No Presumption. Because there is no presumption of negligence whenever a homeowner suffers damage, the onus is on the damaged party to prove the association breached its duty of care. The owner must point to some act (or failure to act) by the association that resulted in foreseeable harm to the owner.
Burden of Proof. For example, the owner must show the association knew or should have known of the potential roof leak. Were there reports of other leaks, thereby putting the association on notice? Were the roofs past their useful life as noted in the association's reserve study? If the roofs were well-maintained with no reports of leaks, it's unlikely the damaged owner could prevail in an action against the association.
Mold. Mold is always a consideration whenever there are water leaks. Mold is natural to the environment and already exists in the air everyone breathes, both indoors and outdoors. (See Chart of Indoor Molds.) If the number of mold spores inside a unit are similar to outdoor levels, then everything is fine. If the count inside a unit is significantly elevated, it means there is active mold in the unit that needs to be removed. If, as you noted, mold is visible on the drywall, it must be removed. If it's a small amount of surface mold, it can be removed with bleach and water. If it's more extensive, it will require removal of the drywall.
Responsibility. If the mold is on a common area wall for which the association is responsible, the association is obligated to remove it regardless of who was at fault. If another party caused the water damage and mold, the association can then bill that party for reimbursement (following a properly noticed hearing). If the mold is on a wall the owner is obligated to maintain, then the owner makes appropriate repairs and goes after the party that caused the damage. Normally, everyone turns it over to their insurance.
Insurance. Insurance will cover water damage from a sudden leak but will not pay for mold removal or personal injuries associated with mold. That is why it is important to thoroughly dry everything immediately following a water leak. Promptly removing all moisture avoids mold growth.
RECOMMENDATION: Associations should have restoration companies on speed dial. If there is a large water leak, they should immediately bring in fans, water vacs, and dehumidifiers to remove all moisture. In addition, the source of the water leak should promptly be repaired. The damage and subsequent repairs should be documented. See Water Damage Checklist.
In what appears to be the first case of its kind, I served as an expert in a title insurance action that focused on how use rights are created in CC&Rs.
Luxury House. The owner of a lot in Palm Desert built a large custom home, pool and other amenities for the purpose of selling at a profit. The house overlooked a golf course and had large open-space areas around the house with berms on property lines to act as noise and privacy buffers from adjacent properties. The home was sold to Mr. Pasternack.
Neighbor's Construction. With the association’s approval, the owner of an adjacent lot removed Pasternack’s improvements, berms, landscaping, and underground irrigation lines and began building structures on the property line, including a 2-story house less than 8 feet from the line.
Litigation Erupts. A survey revealed the seller had overbuilt Pasternack's lot. Improvements and structures sold to Pasternack spilled onto adjoining lots and the common area in violation of the CC&Rs and building codes. Litigation erupted with the filing of claims and counter-claims by all parties. Because his property rights were impaired, Pasternack demanded that his title insurance company, Fidelity National, defend him. They denied his claim.
Title Insurance. Pasternack prevailed in his litigation against the seller and then sued Fidelity National for not defending him on the cross-claim. Fidelity National pointed out that their policy covered "use rights" as defined in the CC&Rs. They then argued that CC&Rs do not confer use rights. Instead, they restrict property rights, nothing more.
Use Rights. I argued that "use rights" were created in the negative. In other words, restrictions such as setback requirements, tree height limitations, open areas, and berms created rights to views and privacy that benefited all owners, including Pasternack. Accordingly, his property rights were impaired when the association failed to enforce the CC&Rs, thereby damaging the desirability, attractiveness, and use of Pasternack's property.
Court's Decision. The court agreed and ruled that Pasternack suffered a loss of property rights which Fidelity had a duty to defend. It ordered Fidelity to reimburse the substantial legal bills Pasternack incurred defending his rights in the first action. (Pasternack vs. Fidelity National Title Insurance Company, Nov. 21, 2017, Case No: 30-2014-00742249-CU-IC-CJC.)
COMMENT: Kudos to attorney Greg Hatton for successfully asserting Pasternack's rights.
JOINS ADAMS STIRLING
I am pleased to announce that attorney Tom Quilling joined our firm.
Tom brings to the firm extensive experience in business, commercial and real estate litigation, transactional work, and architectural expertise.
Land Use. As Deputy City Attorney for San Dimas, Tom handled matters involving the Subdivision Map Act, zoning laws, land use approvals such as general plans and zoning amendments, specific plans, conditional use permits, and variances. His private practice involved construction, environmental and real estate law related to contractors, owners, developers, public agencies, architects, and engineers.
Litigation. Tom’s litigation experience includes environmental litigation, real estate land use, zoning and regulatory litigation, and class action defense. Tom represented real estate developers, cities, redevelopment agencies, and housing authorities in construction-related cases for public works contracts and construction claims management. His clients included the Walt Disney Concert Hall in the defense of a multi-million dollar construction lawsuit. He also represented the City of Los Angeles in a complex, multi-million dollar marine construction lawsuit.
Architectural. As a former architect, Tom reviewed and utilized residential building codes, regulations and ordinances, and conducted project site analysis with emphasis on land planning and urban design.
Education. Tom earned a Juris Doctorate from Loyola Law School, Los Angeles, CA and a Bachelor of Science in Architecture, with academic honors, from the University of Wisconsin, Milwaukee, WI.
We are very happy to have such a talented and experienced attorney in our firm. If your association needs legal services, contact us for a proposal.
Vacancy. As I read the question; “We had a director resign upon the successful appointment of her successor.” If she had not yet resigned and voted for her replacement the entire vote was improper and void. The seat was not vacated if she was still on the board and able to vote. If she resigned she can’t vote if she vacated, then the vote is a tie 2:2. -Gary S.
RESPONSE: By statute, directors can make their resignation effective at a future date. (Corp. Code §7224(c).) A resigning director can then participate in the selection of his/her replacement, provided the selection takes place prior to the effective date of the resignation. (Mayo v. Interment Properties.) If the resignation is offered so it takes effect upon the appointment of a successor, the appointment of a successor and resignation become simultaneous. As soon as the appointment is made, the resignation becomes effective. That's why the two unhappy directors I discussed in my last newsletter can't have a "do-over." The resigning director is already off the board and the new one on. Even if the board now voted 4 to 1 to undo their vote, they can't. Doing so would have the effect of removing a director, which the board cannot do. That requires a vote of the membership.
Opening Ballots #1. Regarding board members opening ballots, we hired a notary public for our membership votes. There is no conflict of interest and she keeps the records for us. I like your newsletter. -Trish Y.
Opening Ballots #2. Is it legal for board members who are subject to a recall to choose the inspector for counting the ballots? -Victoria S.
RESPONSE: Yes, it is. Until such time as directors are actually recalled (which might never happen), they continue to function as duly elected directors.
Reserves Minimum: Counselor, I enjoy your newsletters! In the Oct 29 edition you discuss reserves and your advice was excellent. What I need to know is what is the recommended minimum level and what factor do you use? The article mentions 17% and 70% but doesn't endorse either. And, 70% of what--annual expenditures, I presume? -Charles Q.
RESPONSE: 100% funding is ideal but may not be necessary. If your association's reserves are in the 70% range, they are deemed "healthy" and the chances of special assessments are quite small. If they are 7% funded, you're staring at special assessments in the near future. See "Fully Funded Reserves" for an explanation of how funding is calculated.
AV Rated. You wrote that your new attorney is "AV Rated." What does that mean? -T.J.
RESPONSE: Attorney ratings are performed by Martindale-Hubbell, a company founded in 1868 that provides services to the legal profession. One of their services is peer review attorneys. They do so by inviting lawyers and judges to provide their opinions about a lawyer's expertise and ethics.
The first letter in a rating denotes the attorney's legal ability as A, B, or C (preeminent, very high, good). The second letter "V" stands for "very high" and signifies adherence to high professional standards of conduct and ethics. A lawyer cannot receive a legal ability rating (A, B or C) unless he or she has first received a “V.”
Martindale-Hubbell's peer review ratings are considered the gold standard in attorney ratings. An "AV" rating is the highest rating offered and is a testament to the fact that a lawyer's peers rank him or her at the highest level of professional excellence. I've had the good fortune to be rated by my peers as AV Preeminent, something I am grateful for. Other attorneys in our firm have also received such ratings.
THANK YOU. I want to extend a special thank you to all the new clients who joined our firm in November. They are listed in the side column.