Manager Reverses Board Decision
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  California's Leader in Community Association Law April 28, 2019
MANAGER REVERSES
BOARD DECISIONS

QUESTION: Can a management company not comply with a vote from the board? Can they arbitrarily reverse over a thousand dollars in late fees levied against a board member and justify it by stating they do it for board members?

ANSWER: Regarding your first question, managers (whether an employee of the association or employee of a management company) are agents of the association who take their direction from the board of directors. However, they should never be mindless robots. They can and should evaluate instructions given to them. Sometimes they need to push back when boards give improper instructions. If a board directs a manager to take actions which are not legal, I hope the manager would refuse and tactfully tell directors why.

If, however, instructions are legal and reasonable, the manager is obligated to carry them out. If he/she does not, the board can terminate the agent's services and retain someone else to carry them out.

Late Fees. When it comes to reversing late fees and fines, i
t's the board's decision to waive them, not the manager's. If a manager, without board authority, reverses late fees, you have a problem--especially when it's a board member receiving preferential treatment. Boards and their managing agents are supposed to act evenhandedly in their enforcement of rules and the collection of delinquent assessments, fees and fines.

RECOMMENDATION: The board should not act precipitously if a managing agent refuses to carry out instructions--the manager might be justified. Directors should find out why the manager balked. If the refusal was justified, the board may need to reverse direction. If the refusal was unjustified, it may be time to find a new manager. If so, boards should involve legal counsel whenever terminating an employee or a management contract. You want to make sure you follow proper procedures so you don't create potential liability for the association.

 
ALTERING
COMMON AREAS

QUESTION: Our board president wants to designate a portion of our common area as a fenced enclosure for dogs to be off leash. Can the board authorize this change or does it require an owner referendum or CC&R amendment?

ANSWER: The board is in charge of managing the common areas for the benefit of the membership. Dog parks are popular because they provide a open space for dogs to run and play and do their duty without impacting non-pet owners. I've noticed that dog parks are now included by some developers in planned developments.


Give Notice. The board should notify the membership of its plans and invite everyone to a board or town hall meeting to get their input. Members often provide good feedback on such things. If the board's plans are unreasonable, directors will likely receive stiff opposition from impacted members.

Decision Maker. The board could put the decision before the membership. The downside is getting members to vote. Unfortunately, apathy has a way of killing things. In my opinion, the board can make a decision on its own to fence off an area of reasonable size and location to create a dog park. If the park does not get used or creates a nuisance, the decision can be reversed.

Capital Improvement Cost. All of this assumes funds are available to install a fence. Installing a dog park is a capital improvement since it creates an amenity that did not previously exist. Most governing documents require membership approval for any capital improvement exceeding 5% of the budget. Also, if a special assessment is required, boards have a 5% limit. Anything beyond that requires membership approval.
 
POLICY OR RULE?
TIME LIMIT FOR OWNERS

QUESTION: The Civil Code says a board can establish a reasonable time limit to address the board in a meeting. When setting the limit, does the board need to create an agenda item and vote? Our board recently instituted a 3-minute rule and said it was a policy and not a rule, therefore no board action was required. I say they need to handle it like any other board action, agenda item and vote.

ANSWER: The Davis-Stirling Act states, "A reasonable time limit for all members of the association to speak to the board or before a meeting of the association shall be established by the board." (Civ. Code §4925.) For most associations the three-minute limit is a policy, not a rule. The difference has to due with penalties.

Fines. If the board fines members who violate the speaking limit, then the board adopted a rule not a policy. If so, the proposed rule must first be distributed to the membership for a 28-day review. (Civ. Code §4360(a).) The rule is then adopted by the board in a meeting and recorded in the minutes. If there are no fines attached to the limit, the speaking limit is a policy.

Informal & Fluid. It is not uncommon for the
president to adjust time limits from meeting to meeting. If only a few people attend and the board wants a robust discussion on a particular topic, the president can allow members to speak for more than three minutes. If the meeting has a large attendance and everyone wants to speak, the president might limit speakers to two minutes so as to allow as many people as possible to speak.

Reasonable Limits. Time limits set by the board must be reasonable. A 15-second limit is not sufficient for a person to say anything meaningful. A 10-minute limit means the business portion of the meeting might never start. Three minutes per person is fairly standard for associations.


Publishing Guidelines. Guidelines should include a time limit for the open forum itself. Thirty minutes in large associations is common. This sets an upper limit. Obviously, the open forum portion of the meeting will end sooner if only a few people address the board. Additional guidelines should include things such as (i) speakers may not give their time to other people, (ii) no audio or video recording by attendees, (iii) no rude or threatening comments, and (iv) check all weapons with the manager.

RECOMMENDATION:
Boards should adopt meeting guidelines and print them on each open meeting agenda. This gives attendees notice on how open forums will be conducted.
 

Vote No #1. [Regarding SB 323] I sent the email to the list of politicians and certainly hope it makes a difference! Thank you for your newsletter. -Doug S., Glenda C., Tom T., Gary M., Ken M.

Vote No #2. Wouldn't the undesirables have to be elected by the members? I doubt if members when given the facts, would elect undesirable people. I think this is a pure waste of time, or someone has an agenda. -Joe N.

RESPONSE: Senator Wieckowski's and the Center for California Homeowner Association Law's (CCHAL) campaign against community associations is baffling. Why change the law to force associations to allow felons, sex offenders, delinquents and litigants on their boards? Plus, they increased the potential for identity theft in HOA elections.

You ask how "undesireables" can get elected? There are two ways it can happen. The first is if not enough people run for the board. That means those who are nominated automatically get elected. The second way is also common--ignorance. If the membership is unaware of a nominee's background, they vote for the person with the best bio or campaign flyer. That means someone has to alert the membership that a particular candidate refuses to pay a special assessment, ignores the rules, has been convicted of violent crimes, etc.

If no one is willing to tell the membership (due to apathy or fear), enough people could vote for the person to get him/her elected. With cumulative voting, fringe candidates can always get themselves elected. Once on the board, cumulative voting makes it almost impossible to get them off, which is why I encourage associations to amend their bylaws to eliminate cumulative voting.

Those of you who support the flawed CCHAL/Wieckowski bill need to rethink your position.

Vote No #3. First, I love your letters and your humor. I see there is another bill (670) coming down the pike by a wizard named Friedman. Now I think there are two great opportunities here since both bills 670 and bill 323 destroy the spirit and intent of the community housing programs and the benefits they provide. But what the hey, lets support both bills PROVIDING they contain riders--term limits for all elected officials, pay limits (with increases subject to voter approval), no retirement package, and all health benefits cease when they retire. -Jim K.

RESPONSE: AB 670 deals with Accessory Dwelling Units (ADUs) otherwise known as "granny flats." The bill voids restrictions in CC&Rs that prohibit ADUs. It allows owners to convert their garages into living units or build a second unit on their lot up to 1,200 square feet in size. It's a signature issue of Governor Gavin Newsom to create affordable housing in the state and is receiving a lot of support. The bill is opposed by CAI's California Legislative Action Committee (CLAC) because of the negative impact it would have on community associations. I keep a summary of bills and cases by year on our website. The ones for 2019 can be found here.

 
*****

Painting Fences #1. I wanted to let you know that associations can insure their volunteer exposure by purchasing a workers comp policy from CAIS. We offer a national workers comp program in all 46 competitive states that extends coverage to board members and volunteers working on behalf of the association. All retail insurance agents can access this program through our website. Premium range from $364 in California -Gary Deck, Community Association Insurance Solutions, LLC

Painting Fences #2. One little item, electrical, plumbing--no license, no insurance if there is a fire or damage. -Harold R.

Painting Fences #3. Certainly volunteer safety is #1. However, OSHA/Work Comp risks are not the only considerations regarding volunteers working for HOA. California labor laws rarely see any type of work as volunteer services and are very aggressive in collecting payroll taxes. I’m not aware of an HOA/common interest development exclusion, similar to what municipalities have for ‘clean up days’ etc. -Michael S.

RESPONSE: If owners volunteer their time, they aren't employees and labor laws do not apply. As volunteers, they aren't paid anything so there is nothing to withhold. As long as the association takes reasonable steps to avoid injuries and it carries appropriate insurance, there shouldn't be a problem.


Painting Fences #4. As a contractor with an inclination to teach, I encourage DIY owners on safe projects to at least get a consultation on whatever they want to do. If they can’t find a willing contractor, then take close-up and global pictures of the fence, or even take one of the fence boards to the paint store for advice. Paint salesmen sometimes like to get out in the field to make a sale or just to stretch and see where their product is going. -Michael C.

Painting Fences #5. Our rural association experienced snowstorms this winter that resulted in 6 or 7 trees falling across the road. Neighbors brought out their chainsaws and spent most of a day clearing huge trees and brush.

Trees fell on two cars parked in the easement--one car was totaled and the other damaged. Is the HOA responsible for any of this damage? Would the HOA have been liable if one of us had been injured while clearing the road?

At the time of this writing, there are still branches hanging over the road. What is a reasonable amount of time for the branches to be cleared? I enjoy reading your emails and learn a lot! Thank you! -Suzanne B.

RESPONSE: Normally, each owner's insurance takes care of damage to their car. It's possible the insurance carrier could pay for the damage and then subrogate against the association if it could show (i) the association was responsible for trimming the trees and (ii) the board was on notice that winter snows would cause trees to fall on the cars, and (iii) the board's failure to act led to the damaged cars. However, the cost of hiring lawyers to litigate the matter makes it unlikely.

If the association organized homeowners to remove the trees and one was injured, it's possible the person could file a claim against the association, thus the need for worker's comp insurance for volunteers. If, however, homeowners jumped into action on their own, it is unlikely an injured volunteer could hold the association responsible for their injuries.

For the remaining branches over the road, any immediate danger of additional damage likely ended with the passing of winter. Even so, if the association is responsible for keeping the trees trimmed, the board should take action to eliminate any foreseeable danger. Another consideration is potential fire hazards. In light of last year's devastating wild fires, it's possible brush needs to be cleared and some trees need to be eliminated.

 
*****

When is a Condo a PUD? Thank you once again for the very informative newsletters and excellent website. The questions regarding what would seem to be townhomes, patio homes, or single family homes constructed under approved condominium plans is interesting. There are quite a few of these in Santa Cruz County, often consisting of 3 or 4 units on lots that would not allow for subdivision into typical single family home lots. I own one unit in a four-unit development. When one of the units was put on the market, I attempted to correct a few things that had been changed from the original plan: fencing, parking etc. One interesting document I located was Attorney General Opinion No 02-407 on the issue of when is a condo a planned development? Apparently Bill Locklear, AG at the time, went with, "If it looks like a duck and quacks like a duck it is a duck" reasoning backed up with a good argument and case law. -Dan M.

RESPONSE: Thank you for alerting me to the AG's Opinion. I had not previously seen it. It's fascinating--a condominium project classified as a planned development. It makes interesting reading for lawyers. Another wrinkle in the world of common interest developments.

 
*****

Insurance #1. This is in response to the homeowner who did not have the option to buy earthquake insurance. Our association recently purchased earthquake insurance for our common areas at a low purchase price, which has allowed our homeowners to add on to this policy by purchasing coverage for their own units. This allows individual homeowners to opt in or opt out. This was perfect for our association where half our homeowners wanted earthquake insurance and half did not. Love the newsletter! -Suzanne S.

Insurance #2. I am the treasurer of our 28-unit condo association. I have been trying to negotiate lower insurance premiums. I am not interested in changing the deductibles but 70% of policy has items that do not apply to us at all. We are being charged for items which we’ll never claim for. The insurance agent says that these are “condo packages” approved by the State of California and therefore not negotiable. If this is true, it’s hard to comprehend.

RESPONSE: I asked Michael Berg of the Berg Insurance Agency (a Farmers' Agency specializing in community associations) to comment. He responded that insurance policies are not written in an a-la-carte format. Insurance carriers present the Department of Insurance with a product and the Department determines its suitability for consumers in California. He said the product comes at an approved base rate but the carrier often has flexibility on pricing. Boards should review the policy's declarations page. If premiums are shown for different coverage lines, costs can be lowered by reducing coverage for that line. If there is no premium listed, the coverage is included in the package.

Adrian J. Adams, Esq.
 
Boards can contact us for friendly, professional advice.

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


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