Train Wreck Update
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  California's Leader in Community Association Law June 17, 2018
ANTI-CONSUMER
SENATE BILL 1265


SB 1265 is set to be heard by the Assembly Housing Committee this Wednesday, June 20 in the State Capitol building at 9:00 a.m. in Room 126. If you can attend and voice opposition to the bill, please do so.

Emails opposing Wieckowski's legislation were forwarded to the committee. Following are a few from this week. -Adrian

Train Wreck #1. Thank you very much for the information you presented. I originally voted for the bill, but I see now that I was wrong. I am opposing SB 1265. I own several properties in HOA communities and am a member of and have served on many boards over the past 40 years. Thank you. -Delores L.

Train Wreck #2. Calling out Sen. Wieckowski as being associated with CCHAL (Center for California Homeowner Association Law) is right on. He was also behind SB 407. Unfortunately, he was just re-elected to State Senate District 10. We can probably expect more ill-conceived bills. -Paul C.

RESPONSE: For those who don't remember, SB 407 was last year's bill allowing politicians of every stripe, both elected and un-elected, to take over common areas (free of charge and without insurance) to speak and hold rallies.

Train Wreck #3. Your article last week said litigants should not serve on the board. I sued my association 5 years ago and won because they failed to repair a water leak. Does that mean I can never serve on the board? That does not seem fair. -Pat M.

RESPONSE: You can serve on the board. You would make a good director based on your experience. Someone who is in active litigation against the association should not simultaneously be on the board. The conflict of interest creates too many complications. It is better for the person to be off the board until the litigation has concluded. As soon as the litigation is over, the person would be eligible to serve on the board. This common-sense provision is prohibited by the CCHAL/Wieckowski bill.

Train Wreck #4. I read a newsletter from the Center for California Homeowner Association Law (CCHAL) and thought SB 1265 seemed good. After reading your newsletter I've changed my mind. It made me wonder about the latest CCHAL newsletter I received regarding AB 2912. CCHAL's 'NO' position seems sensible but I thought their 'YES' on SB 1265 seemed sensible too. What do you have to say about AB 2912? -Janice S.


RESPONSE: I asked Nathan McGuire, Vice-Chair of the California Legislative Action Committee, for his analysis of Assembly Bill 2912. Following is his response:

"Many owners have expressed frustration with the constant stream of bad legislation coming out of Sacramento in the last decade. This is in large part because those drafting and sponsoring legislation don’t understand community associations or are biased against them.

For the most part, groups like CAI’s California Legislative Action Committee (CLAC) have been playing defense, working to defeat bad legislation or make it less bad. As a proactive measure, CLAC sponsored Assembly Bill 2912, which seeks to protect association finances.

Unfortunately, homeowner associations are occasionally targets of fraud or embezzlement. Boards can take steps to prevent fraud, but not all boards have the guidance to implement sufficient measures.

Introduced by Assemblymember Jacqui Irwin, the bill would require associations to implement simple measures to prevent fraud with clear guidelines on the handling of association funds.

Most of the requirements are already standard practices for many associations. If passed, the bill would:

  • Require fidelity bond insurance in an amount not less than current reserves, plus three months of assessments;
  • Require monthly review of financial statements rather than quarterly; and
  • Prohibit electronic transfers of funds without board approval.

Boards are not required to meet monthly to review financials. They can designate a board member or board members to review the financials monthly and ratify the financials at their next meeting.

Support. We support AB 2912. Protecting association finances is of critical importance. The bill has passed out of the Assembly and is making its way through the Senate. The next stop is the Senate Judiciary Committee. For more information, check out CLAC’s recently renovated website." -Nathan McGuire, California Legislative Action Committee

NOTE: I agree with Nathan's recommendation. Safeguarding association finances makes sense. I have not seen CCHAL's opposition to the bill but I'm not surprised. They seem to be on the wrong side of most issues. -Adrian Adams

DEALING WITH
PROBLEM BOARDS

Problem Boards. I don't think last week's question about problem boards was fully answered. -Ann R.

RESPONSE: Having worked with boards for over 30 years, There are five types of boards. They almost always fall into one of the following categories:
1. Bad Boards
2. Dysfunctional Boards
3. Marginal Boards
4. Good Boards
5. Exceptional Boards
Bad Boards. Fortunately, truly bad boards are few in number. They tend to be self-serving and driven by personal agendas. It has been my experience they don't follow legal advice and I eventually withdraw from representation (a polite way of saying I fire them). Once their path of destruction is visible to everyone, they usually get sued or thrown out of office, or both. A good board is then elected to clean up the mess.

Dysfunctional Boards. Dysfunctional boards consist of directors who are at each other's throats. Nothing gets done because they are too busy fighting each other. There are strong personalities on differing sides of every issue and they are unyielding in their opinions. Sometimes they hate each other and engage in personal attacks. Each side develops a following and splits the community. Feelings run deep and it takes years to recover from the strife. Fortunately, dysfunctional boards are also few in number.

Marginal Boards. There are a fair number of marginal boards. Their directors serve because no one else will. They put in their time and try to avoid difficult decisions. They minimize rule enforcement and avoid spending money. They rationalize that doing nothing keeps dues down. Many owners get frustrated with such boards but not enough to volunteer their own time to serve on the board. It's not until some crisis hits that more qualified volunteers step up.

Good Boards. Most boards are good boards. They volunteer their time, address community issues, and generally make good decisions. They enforce the rules, repair the common areas, and fund the reserves. However, they can be slow to act and sometimes make mistakes. Even so, they care about the membership and their intentions are good.

Exceptional Boards. Exceptional boards are not the norm. Being on top of everything all the time, consistently communicating with members, responding quickly to complaints and never making mistakes is not sustainable. I've worked with many such boards over the years but the demands on their time and constant criticism from a minority of perpetually unhappy owners eventually wears them down.

All five categories have their detractors. Unhappiness with bad, dysfunctional and marginal boards is fully justified.
If members have such boards, they should do something about it. See ten steps for dealing with bad boards.

Complaints about good and exceptional boards are most often from owners who don't like rules. They go ballistic when the board enforces rules against them. Too often they engage in whisper campaigns against directors and threaten lawsuits. They run up the association's legal bills and bully people until they get what they want. They complain endlessly about their "bad" board while directors struggle to bring the scofflaws into line.

COMMENT:
Complaining seems to be part of the human condition. When someone says they have a bad board, I dig a little deeper to see which category the board falls into and then respond accordingly.

Concentration Camp HOAs. As I read newsletters from Adams Stirling, it is clear to me that your firm is hell-bent on making HOAs pretty much like concentration camps. Deny all possible rights of members and give absolute power to a small group of volunteers who can behave in any manner they see fit without accountability or repercussions.

If A&S were honest, they would admit that HOAs are established by corrupt politicians in their own corrupt image, basically their bastard step-children. Give all the power to a small group of people so they can rule the masses. To even suggest that they are "angels" is complete stupidity. -Gregg G.

RESPONSE: You might cut back on coffee and consider moving to a cabin far away from civilization. Far, far away.

 
DISCRIMINATION LAWSUIT
DISCLOSURES

I received a number of questions about the lawsuit over large dogs on elevators I reported last week. Readers asked about litigation disclosures. Here is one of them:

QUESTION. Regarding informing members of the details of a lawsuit, I assume you mean that members have a right to know what the issues are but not specific legal advice given to the board or anything falling under attorney-client privilege. -Shelly D.


RESPONSE: You're right, attorneys and boards can talk to members about the litigation but not about legal advice given or received. Members are naturally curious about ongoing litigation, and boards can and should inform them about the case. Members often push for details but directors should stick to what's a matter of public record, i.e., in papers filed with the court. Directors should not talk about litigation strategy or settlement strategy. Such things have a way of getting back to the other side.
 
NANCY SIDORUK

Following are a few of the many emails we received about Nancy joining the firm.

Congratulations #1. Wow!!! That’s wonderful news!! Nancy is WONDERFUL!!! -Jeremy W.

Congratulations #2. Congrats on Nancy joining your team. She's so good! Please give her my best. -Skip. D.

Congratulations #3. Wow! -Rosy A.

Congratulations #4. Nancy is my favorite attorney! She is easy to work with and extremely knowledgeable. Congratulations! -Linda L.

 
*****

HIRING. We are still looking for experienced litigation and HOA attorneys for Riverside, Palm Desert and San Francisco's South Bay. If you are interested, contact me. -Adrian
 
*****

Grandfathered Rules? I have a bet with another homeowner. He states that if you bought your home prior to revisions to the CC&Rs or rules that you are grandfathered under the old rules. New or changed rules that affect your separate interest do not apply. -David J.

RESPONSE: If you said new rules apply to everyone, you win the bet. In a unanimous decision in Villa de Las Palmas v. Terifaj the California Supreme Court ruled that CC&R amendments apply to all owners, regardless of when they purchased their units. Rules, like CC&R amendments, apply to everyone unless the board grandfathers existing conditions. The exception is rent prohibitions. Civil Code §4740 exempts owners from rent prohibitions unless the prohibition was in effect prior to the date the owner bought into the development.
Adrian J. Adams, Esq.
 
Boards should contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC

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POLICY

To comply with new federal regulations and reduce legal exposure, boards should adopt anti-harassment, neighbor dispute policies.
See Policy Description.

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Reprinted from
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