A TRIBE OF GOATS
When landscapers refused to clear brush because of the coronavirus, Joel M. suggested renting goats. That led to questions and comments about including goats in a reserve study if an association owned them.
Tim Cline of the Cline Agency Insurance Brokers was kind enough to lend his expertise to the topic. Following are his comments about insuring goat herds.
Goat Insurance. I haven’t written a lot of agricultural policies in my career, but it’s only in that environment where an association would find the specialty coverage it needed if it owned the goats. (“Cattle and Livestock” coverage to cover an incident/disease/malady that wipes out the entire group of goats). Apparently, the average goat herd suffers a mortality rate of a little over 10%, so the HOA would have to annually replace at least 10% of the brush-eating creatures, even in the best of years.
Risk Management. Like any good insurance broker, I encourage boards to transfer risk whenever possible. Associations wanting to use goats, should rent or lease them, not own them. Let the goat farmer, who has the knowledge and experience and already owns the goats, have the liability and be responsible for caring for them during the off season.
Legal Agreement. Insist on a written contract and make certain the risk transfer is very thorough. Unless the HOA were negligent, the farmer would be responsible for replacing goats that climb their last hill. The simple act of renting or leasing goats (combined with a well-written agreement penned by legal counsel) would solve many of the insurance issues since the goat farmer should have his own insurance.
Website. If associations are interested in renting goats, there is a website dedicated to the issue called, Goats on the Go. FYI, a group of goats is called a "tribe."
COMMENT: Who knew the coronavirus would lead to a discussion about brush clearance and goats? Many thanks to Tim Cline for resolving the crisis over insurance and reserve funding for goat herds. The solution is to rent goats, not own them. -Adrian
Gathering Place? With virtual meetings, why does there need to be a place to gather? What would be the point or necessity? -Ron R.
RESPONSE: Under normal circumstances, if all directors attend an open meeting by phone, notice of the meeting must identify at least one physical location where owners can attend and listen to the board's meeting. (Civ. Code §4090(b).)
These are not normal circumstances. With the coronavirus blazing its way through the population and a statewide stay-at-home order, boards should NOT be designating a physical location where members can congregate to listen to board meetings. Everything should be done electronically.
If it were up to me, that provision would be eliminated from the statute. Many associations do not have the facilities required to satisfy the requirement. There is no need for it--everyone can attend meetings via the internet or by phone.
No Meetings. Our board has indefinitely halted meetings during COVID-19 restrictions. As the current situation is our new normal, this doesn’t seem like the best decision. Does the board have a responsibility to hold regular meetings? The technology certainly exists for virtual meetings. Our board seems uncertain about doing this, despite the reported success of other associations holding virtual meetings. -Laurie B.
RESPONSE: Boards can't completely shut down. They have an obligation to conduct monthly reviews of their association's finances. They also have ongoing obligations to maintain common areas, pay bills and enforce rules. With virtual meeting technology, board members, managers, vendors, and homeowners can easily meet without ever leaving home. Our attorneys are meeting remotely with boards. Many are finding it more convenient to hold virtual meetings. Annual meetings are also being conducted remotely throughout the state. There really is no excuse for boards to shut down their meetings.
Audio Only Meetings? Must meetings be conducted with video? Can we use voice-only meetings? For instance, FreeConferenceCall.com is available. If you use video, you pay, but if you use audio only, you can have up to 1000 participants for a meeting that lasts up to 6 hours for free. Many older people don't like video--too much technology. But, everyone has a cell phone. Access to the conference simply requires you dial a number and enter a code. Would using voice-only violate the open meeting act? -Bruce K.
RESPONSE: Audio-only meetings are acceptable. Members can "observe" the board's meeting by listening to it. Boards will want to make sure the service has the ability to mute all attendees except board members. Otherwise, it could get chaotic.
GoToMeeting. We are using GoToMeeting.com and find it works very well with and without use of the webcam. Since March 19, we use it for all our board meetings and it has the capacity to allow up to 150 participants. Our boards have been very happy with it. It isn’t entirely free, but certainly worth the money. The presenter also has the ability to mute callers after the Open Forum is completed. -Melinda Y.
China Employees. The news reported that 1/3 of Zoom employees are in China. It is possible that corporate and financial data goes through their interface. Therefore, it is subject to hacking as this is what they are so good at. What do you think? -Jan L.
RESPONSE: If true, that could be a problem. China has a habit of stealing everything it can get its hands on. Fortunately, HOA board meetings are generally uneventful with nothing of any value to steal. Listening to a board talk about repairing roofs, pruning trees, and fining owners who don't pick up after their dogs would quickly drive hackers to other sites.
Conference Call #1. Our HOA is conducting its board meetings using conference calls. When I asked how a member can attend, I was told “You can come to the management company office and listen in there” - um, this rather defeats the purpose of not going out. -Sue S.
RESPONSE: Since we have the technology, there is no excuse for not inviting members onto the call. Members should not be told to go to the management office to listen in.
Conference Call #2. We are an HOA with 538 single family homes in northern California. We plan on holding our April board meeting via teleconference call. Our five board members and business managers will be allowed to speak. Members who call in will be muted. Members will send their questions to the manager via email. Member comments and questions will be read by the manager during the meeting. All members will have the option to call into the meeting to listen. We believe this format is acceptable. Do you concur? -Annette L.
RESPONSE: Yes, that works.
Covid-19 Disinfectant. The Department of Pesticide Regulation released Licensing Requirements for COVID-19 Control. Not all companies can meet the requirements, so associations should ask before hiring a company to disinfect the common areas for the coronavirus. As always, associations should only use licensed and insured companies. [Thank you to Jason Payne, Payne Pest Management for the information.]
Emergency Rules. Can a board make a rule requiring any residents or guests in the common area follow CDC recommendations and wear a face covering? -Jerold B.
RESPONSE: Yes, you can include it in emergency rule provisions adopted by the board.
Unopened Ballots. Ballots to amend CC&Rs were not opened because of an insufficient number of votes. Are these unopened ballots subject to homeowner inspection? -Michael K.
RESPONSE: The unopened ballots are part of the election materials that must be retained by the inspector of elections for one year after the date of the election, at which point the materials are transferred to the association. (Civ. Code §5125.) I'm not sure why they would want to, but the unopened envelopes can be reviewed by owners.
Long-Term Rentals. Regarding your response on short-term rentals, I agree. Would long-term rentals expose association members to the same coronavirus risks? -Meri N.
RESPONSE: Long-term rentals do not have the same risks as short-term rentals. Their units are not revolving doors with strangers flying in from all over the world to enjoy a brief vacation in your association and leaving behind whatever virus they might be carrying.
Accounting Guidelines Changed. Our CPA sent a draft of our annual financial statement that applies a new accounting principle which comes from something called TOPIC 606. The explanation in the notes to the financial statements is virtually incomprehensible, but the result is that they seem to be treating the operating fund and the reserve fund as separate entities and creating almost $300,000 phantom income on the 2019 financial statement, as well as restating beginning balances. Is this a proper treatment for a homeowners association? -Colin W.
RESPONSE: There has been a controversial change in accounting standards with CPAs taking opposite sides on the issue. It deals with revenue recognition in deferred replacement fund liabilities. It treats reserve revenue differently from operating revenues. It was a radical departure from how reserve revenues were previously recognized.
I didn't think CPAs could get worked up over something, but apparently they did on this one. They split into two camps with one side adamant the new standard applied to associations and the other side equally adamant it did not. Those opposed argued the new standard was confusing and misleading.
It seems that neither FASB nor the American Institute of CPAs (AICPA) has taken a position on whether ASC 606 applies to homeowner associations. Since there is no consensus on the applicability of the new standard, you can ask your CPA to rewrite your financial statement using the prior industry standard. The bottom line is that boards and homeowners should understand the association's financial statement. Otherwise, it's useless.
Thank you for your informative emails. I rely so much on your guidance. Please be safe! -Maria M.
Adrian & All: Loved this issue. -Sue S.
Thank you for the newsletter. "There are many spouses who are not on title who would make outstanding board members." This is absolutely true. -Steve J.
Thanks to Adrian for the constant update. -Melinda Y.
This made me laugh: "However, the law of natural selection may eliminate them from the gene pool before you get a chance to collect the fines." -Christy B.
I have worked for years as a property manager and as a board member and have used your guidance as my Rosetta Stone. On a personal level, I have never met a lawyer so knowledgeable yet personable with a great sense of humor. Are you single? -Donna W.
RESPONSE: I told my wife she better be nice to me--she has competition.