QUESTION: We had a black water leak affecting multiple units and our management company hired a remediation company to clean up the mess without first getting an estimate or board approval. As a board member, I do not want to pay for the clean-up since we did not authorize the work. How should we handle it?
ANSWER: Before answering your question, I should define "black water" for readers. There are three categories of water when it comes to building maintenance, clean, gray and black:
Clean water is what comes from your faucet and shower and is drinkable. Clean water lines are under pressure, which means a flood from a water line can quickly cause a lot of damage. Failure to clean-up the water and dry out wall cavities can lead to mold, which is expensive to remediate.
Gray water is waste water that comes from sinks, washing machines, and bathtubs. It contains soap and low-level contaminants. Gray water floods can occur from separated drain lines or backups if the lines become clogged. These lines can clog if people put potato peels, pasta, rice, etc. down garbage disposals.
Black water (also called sewage) is wastewater from toilets that contains fecal matter and urine. It carries high levels of bacteria that can cause diseases such as hepatitis and dysentery. Backups can occur from items being flushed down toilets such as diapers, sanitary pads, etc. If the clog is in a line at the bottom of a stack, the amount of sewage flowing into a unit from other units higher up in the stack can be significant.
Clean-Up. Whenever floods occur in condominiums, they invariably involve common areas and other units. Associations are obligated by the Davis-Stirling Act and their CC&Rs to maintain, repair and replace the common areas. That means associations must move quickly to remove all water from carpets, floors and walls and clean any contaminated areas if gray or black water is involved.
Management. Because these are emergency situations, it should be a standing policy for management to immediately call a plumber to stop the flooding and a remediation company to extract water and dry out walls. Bidding is not necessary. From your question, it sounds like the manager acted properly. If he had not, you would have faced a much larger bill and possible litigation. That means your board should pay the remediation company. If you don't and the company sues, I have no doubt you will lose.
RECOMMENDATION: Whenever floods occur, immediately fix the leak and clean everything. Simultaneously notify insurance of the loss. Then determine fault and, if appropriate, levy a reimbursement assessment to pay the insurance deductible (assuming you have a policy regarding deductibles). See Water Damage Checklist.
ON SB 1265
The following is an appeal from the California Legislative Action Committee (CLAC) to stop SB 1265 as it now heads to the Senate for a vote. This is the anti-consumer legislation that takes away your right to set standards for who serves on your board of directors. -Adrian
We strongly believe that SB 1265 strikes at the heart of our association’s ability to self-govern by mandating how we conduct community association elections.
SB 1265 threatens the privacy of residents, will drastically increase costs for our associations and will suppress voter participation.
SB 1265 would prohibit our associations from establishing qualifications for an individual to be a candidate for the board. As amended, SB 1265 would disqualify any individual who in the past 20 years has been convicted of a felony for embezzlement, check fraud, etc. However, SB 1265 would not allow our association to bar an individual who has failed to pay their assessment from running for the board. Associations have a fiduciary responsibility to the members and legal responsibilities established by the Corporations Code, which could be violated if an individual is elected to the board is in arrears to the association.
It’s time to STOP a one-size fits all approach to association governance. Here are two ways YOU can help:
1. Send a letter to your Senator simply by clicking here: https://caiclac.com/current-campaigns/
2. Join @CAICLAC for our first-ever Twitter Chat on Wednesday, August 8th at 12p.m. -1p.m. PST to make your voice heard!
For more information visit www.caiclac.com or contact us at [email protected]. (Also, see my earlier newsletter articles about the SB 1265 train wreck.)
It's no surprise that technology is taking over every aspect of the business world. This includes homeowner associations.
According to the Foundation’s research, 92% report that their associations use computer programs and that ransomware and phishing are the most common forms of attack on community associations. More than half reported that fraud and theft are their top concerns.
Thieves that used to break into a business to steal valuables by picking locks or climbing through windows, now hack into computer systems. As a result, cybersecurity and cyber insurance are increasingly important.
In 2018, the Foundation for Community Association Research (FCAR) surveyed more than 600 managers, board members, and professionals to identify the risks and liabilities associated with using technology to conduct association business.
To learn more, see 2018 Survey of Cybersecurity in Community Associations.
Cat Carmichael has been serving the community association profession for three decades, both as a management company executive and as a banker handling mergers, acquisitions, and succession planning.
Cat currently serves on the Board of Trustees of the Community Associations Institute and is President Elect for 2018 and will be President in 2019.
I learned from Cat that she launched a company called "Strategy 123" which provides consulting services to management company CEOs--advising them on mergers, acquisitions, succession planning and improving operational efficiency.
Congratulations to Cat for providing a valuable service to the industry. To send congratulations or ask questions, email [email protected].
Train Wreck. Isn't it time to mount a campaign to get rid of CCHAL & Sen. Wieckowski? For years, they have proposed and advocated harmful revisions to the Davis-Stirling Act that do nothing more than usurp the rights of association members. -Julian M.
RESPONSE: I better not respond--it would probably get me in trouble.
Donations: Can a 55+ community accept donations from a wealthy member? Also, can the association do a fundraiser to boost reserve funds? -Dianne K.
RESPONSE: Yes, you can do both. Associations can accept donations of cash or property. Also, the donor can restrict the gift to a specific purpose. Treasury Regulations 1.118-1 addresses the topic of contributions to the capital of a corporation. The most important sentence of that ruling is underlined. A fundraiser for boosting reserves is also acceptable. Drop me a line and let me know if your fundraiser is successful.
Thank you to Gary Porter, CPA for his assistance with this question.