QUESTION: When a management contract is terminated, what about emails sent and received by the manager? Should they be given to the new management or the board? And how do we even retrieve them? We don't always have a code telling us this is "Association XX."
ANSWER: When HOAs change management companies, they generally ask for financial records only so the issue rarely comes up. It changes if there is litigation—actual or threatened. Then there may be a demand for all emails involving that association. The ease of segregating and transferring emails will depend on how the management company is saving its emails.
What Emails? I know some of you are thinking, "What emails?" Boards are not supposed to hold meetings via email. True. However, there could be a significant amount of of email communication with management about scheduling meetings, requests for bids, instructions on violation hearings, maintenance issues, distribution of financial reports, etc. These communications do not violate the Davis-Stirling Act. As a reminder, boards should be using dedicated email accounts to avoid mixing private emails with board emails.
Litigation. Preserving electronic documents is important for litigation because such communications show when a board learned of a particular problem and what they instructed their managing agent to do about it. They often exonerate the association.
Proper Protocol. I suspect most management companies have no systems in place for segregating and saving email communications due to the relative newness of the technology and the cost to purchase document management software and to train their managers. Implementing a proper system would drive up management fees for HOAs—something companies are loathe to do because the industry is so cost sensitive.
For example, our firm captures, tags with client information, and stores all email communications and saves them to an offsite server that then backs up to another server in another location (and then a third redundant server in yet another location). All servers are in hardened sites to protect against theft. They also utilize fire retardant systems that use inert gases to smother flames without harming the computers.
We also scan and save all documents using the same system. As a result, client records are secure and searchable. That means we can find and download all client files in a matter of minutes. It is possible that larger, more sophisticated management companies have begun moving to such systems. I know from experience, however, that other companies have not done so. Sophisticated computer networks, software, and IT support is expensive.
Transferring Data. You raise the problem of transferring electronic records once your relationship with an association is ended. Putting it on a board member's computer is a bad idea. Because directors come and go and their home computers have little or no protection, the data will eventually be lost. Putting it on the new management company's computer is better, provided they have a way to segregate and protect the data. The best solution may be to burn the records to a CD, label it and give it to the new management company to store with the association's paper records.
I recently spoke at an event with the founder of Association Reserves, Robert Nordlund.
He mentioned a study he recently completed to see if property values were affected by the strength of an association's financial reserves.
He compared the sales price (measured in price per square foot) of units in 100 comparable condominium associations to the their reserve fund strength (measured in % funded).
He found that market values were 12.6% higher in associations with strong reserves (over 70% funded) than in associations with weak reserves (under 30% funded).
I took out my calculator and did the math. If you own a $300,000 condo in an association with weak reserves and persuaded your board to build strong reserves, your property value increases by $37,800. Building reserves is like putting money in your own piggy bank.
I always had a sense that healthy reserves had a positive effect on property values. Kudos to Robert Nordlund for quantifying it.
SIGNED BY THE GOVERNOR
A little bit of good news out of Sacramento, Governor Brown signed Assembly Bill 1412, which corrects a problem created by one of last year's bills.
When an absentee owner fails to annually update their contact information, AB 1412 allows associations to use the last address provided by the owner.
The bill also extends limitations on personal liability to volunteer officers and directors of mixed-use developments. For more information, see AB 1412.
Congratulations to CAI's California Legislative Action Committee for sponsoring this bill.
I had a grammatical error in the ad for lawyers I placed in my last newsletter. A number of you caught the error. Here is one of the comments:
Proof Reader. You am, am you? Yes, someone with business writing skills would be helpful. LOL. -Shelly D.
RESPONSE: Smile. I wish I could blame my auto-correct feature but I can't. The error was all mine. Fortunately, the ad was effective in bringing excellent lawyers to the firm. I hired two more for my Los Angeles and Riverside offices. I'm looking for another for my Northern California office. If you know any HOA lawyers you can send my way, have them call me at 800-464-2817 or send an email.
Restricting Pot #1. You make reference to amending CC&Rs for smoking marijuana in a development, can HOAs make this part of their rules and regulations, pending their amending their CC&Rs? -Sharon B.
RESPONSE: Yes, boards can adopt rules regulating all smoking, including pot.
Restricting Pot #2. How can HOAs steer clear of the Compassionate Use Act of 1996 regarding medical use? Just curious. -Carey C.
RESPONSE: People can take cannabis in other forms without smoking it. I cover this issue in more detail on my website. See Medical Marijuana.
Restricting Pot #3. A few years ago our HOA amended our CC&Rs to exclude all types of smoking, posted "This is a non-smoking zone " sign at our entry. Now we have no issue with odor from any type of smoke leaking to/from decks, open windows. -Astrid L.
I had a lot of feedback on my article about politicians. Here are a couple of comments:
Politicians #1. So, are you saying we can’t charge our normal fees for use of our common house if someone wants to host a candidate or a political rally? -Claire S.
RESPONSE: Yes. In Senate Bill 407, politicians gave themselves a free ride. They get to hold a rally and the association picks up the tab for insurance, clean-up, etc. Is this a great country or what?
Politicians #2. On the new law making the common area available to politicians, if the community is gated can an owner invite the public at large to enter the common area for a political purpose? This would seem to open up a huge amount of potential liability for an HOA. -Debra G.
RESPONSE: Right now, the legislation is a little hazy.
Inviting the Public. In the worst case scenario, the public can be invited in. The statute states that associations cannot prohibit "guests" or "invitees" from attending the event. I have no doubt that a resident holding a political rally will deem the general public to be his guests and invitees. I disagree with this interpretation and oppose inviting the public into private developments because of the cascade of problems and liability exposure that could follow.
Disability Accommodation. Inviting the public to political events in the common areas subjects the association to the Americans with Disabilities Act. Not that it carries any weight in California but the ACLU of Virginia agrees with my position. They believe a campaign rally in a private location open to the public must follow anti-discrimination public accommodation laws and ADA. That means older HOA developments would be forced to retrofit their facilities to make them handicap accessible or face lawsuits from disability activist groups.
Radical Speakers. Another problem involving public access is who might show up. If guests and invitees are interpreted to mean the general public, a resident could schedule the Grand Wizard of the KKK to speak at a rally in your common area park and invite the general public, white sheets and all.
Security. While 99% of all political meetings are peaceful, at some point someone will hold a rally involving a radical group. It could get violent--just look at Berkeley's anti-free speech radicals. If a board suspects a planned event could turn violent, does it have an obligation to hire a security company to keep the peace? It might.
Can the association charge the cost of the extra security to the rally organizer? Not according to the statute--the cost is borne by the association. If the board fails to hire security and people are injured, lawsuits will fly because the board "negligently" failed to ensure safety in the common areas.
Insurance. Insurance could also be an issue. Typical HOA insurance policies might not cover common areas being used for public purposes. That means the association could be paying out of pocket to defend itself against lawsuits.
RECOMMENDATION: The legislature created a mess. To prevent the general public from accessing an association's common areas for political events, associations should require anyone holding such events to provide a typewritten list of his/her guests and invitees. Persons not on that list would not be allowed to attend. That should keep an association's insurance intact and avoid ADA issues. It does not, however, address the problem of radical speakers creating security problems. I could see residents protesting a radical speaker and things getting ugly.
Restating Documents. You speak of amending CC&Rs like it's a walk in the park. Amending our CC&Rs requires a 2/3 majority membership approval. That's impossible, which means we have to go to court. Short of that, how do you propose we amend our docs? -Karani J.
RESPONSE: It's never a walk in the park--it's more like a hike through steep terrain covered with poison ivy. Even so, most associations successfully restate their governing documents. We handle ~30 per year. Contact us if you would like a quote.
Ham Radio Law. Any comment on the bill making its way through Congress that, if signed into law, will permit the instillation of amateur (ham) radio antennas in HOA common areas? Thx and Semper Fi. -Wayne W. W7TFY. (Yep, I’m a “ham.”)
RESPONSE: A ham communications bill (H.R. 1301) failed last session. Another bill (H.R. 555) was introduced this session and passed the House. It is currently in the Senate though no action has been taken on it. See H.R. 555.
Voting. At our last meeting the board had 4 out of 5 members present. They took a vote, 1 abstained, 1 no, 2 yes. Did the motion pass? -Melinda G.
RESPONSE: If the abstention was a vocal abstention rather than quiet acquiescence, the vote failed. A majority of 4 is 3. A vocal abstention is not a "yes" vote. I give a full explanation in "Abstentions & Recusals."