DUTY TO REPAIR
LEAKY SHOWER PAN
Last week I answered a question about how boards can force an owner to fix a leaky shower pan causing damage to a lower unit. I discussed fines, lawyer letters and litigation. That prompted the following question from a reader:
QUESTION: If a unit is defined as air space, isn't the shower pan part of the common area structure and would, therefore, be the HOA’s responsibility to repair? –Mike H.
RESPONSE: The standard definition of a condominium unit is airspace bounded by the unfinished surfaces of perimeter walls, ceilings and floors. Anything inside that airspace is an improvement to and becomes part of the unit. This includes paint and wallpaper on walls; carpet, tile and hardwood on floors; kitchen cabinets and countertops; lighting fixtures; and plumbing fixtures such as toilets, tubs and sinks.
Shower Pans. A shower pan is installed on top of the unfinished floor of a unit. (See How to install a shower pan.) That means shower pans are inside the boundaries of a unit. As such, they are not common area nor exclusive-use common area. Instead, shower pans are part of a unit and the responsibility of unit owners to maintain, repair and replace. (Civ. Code §4775(a)(2).)
RECOMMENDATION: To minimize disputes and potential litigation, condominium associations should have legal counsel prepare a maintenance chart
describing the respective maintenance obligations of the association and its members. In addition, many associations need to amend their CC&Rs. When we restate documents, we include extensive language related to maintenance obligations.
QUESTION. I am a CPA providing tax and accounting services to HOAs and commercial associations. Recently, some of my commercial association clients have questioned the taxation of reserve assessments. Is there any tax law which would make those assessments tax exempt for a commercial association? -Steve M.
RESPONSE: Commercial associations must file Form 1120, whereas residential associations can elect to file either Form 1120 or 1120-H.
Form 1120-H. Although Form 1120-H (Internal Revenue Code 528) carries a tax rate of 30%, it provides a safety net that protects associations from two significant negative occurrences — taxation of excess member income and taxation of reserve contributions.
Form 1120. Commercial associations (and residential associations that file Form 1120) are treated as nonexempt membership organizations under IRC Section 277, which carries a tax rate of 21%. The risks in filing this form are that excess member income is subject to taxation (unless an election is made under Revenue Ruling 70-604) and reserve contributions may inadvertently be taxed because the association failed to comply with all the requirements to exclude reserves from income by treating them as capital contributions.
Reserves. IRC Section 118 defines contributions of capital to a corporation. This code section is used by associations to identify reserve assessments as capital contributions that are not subject to tax. IRC 118 has been interpreted and modified by treasury regulations, revenue rulings, and various court cases. "Reserves as Capital Contributions" explains the requirements for reserve assessments to be considered capital contributions for tax purposes. Failure to comply with all requirements may cause the IRS to challenge the exclusion of reserve assessments from taxable income.
Thank you to Gary Porter of Porter & Lasiewics, CPAs for his assistance with this question. Gary has consulted or directly represented associations in 70 IRS audits,
66 of which were Form 1120 tax returns. All but one of the 66 associations filing Form 1120 were required to pay additional taxes.
Religious Experience. As a board president, I read your newsletter religiously. Not only do all the other board members subscribe, we have lots of regular homeowners reading it too!!! That makes our job more easily understood for all. Plus, I always enjoy a chuckle here and there from your humor. Thank you, thank you, thank you for the time you spend providing this VALUABLE RESOURCE!!!!! Please don't ever stop. –Linda L.
Deer in the Headlights. I agree with the feedback from Leland B. on “driving with eyes closed” that your wit and dry humor are great; it’s a big part of what I look forward to and I pity those who can’t see the humor. We might acknowledge that sometimes the written word may be more difficult to ascertain, since no twinkle in the eye can be seen as a hint. But that shouldn’t apply when the statement itself is obviously not literal. Yet my experience was always having to quickly say that my husband was joking, even when face to face with people sometimes, when I saw that “deer-in-the-headlights” look in their eyes. They were legitimately uncomfortable, and didn’t know how to respond – there was never the slightest indication he didn’t mean it. Thanks for all you do. -Sharon A.
Trying Times. Thanks so much. Very helpful in these times..... –Bill
Statewide Updates. The following Counties have changed tiers:
Calaveras (Orange Tier to Yellow); Contra Costa (Red Tier to Orange); Glenn (Purple Tier to Red); Marin (Red Tier to Orange); Mendocino
(Purple Tier to Red); San Mateo (Red Tier to Orange); Santa Cruz (Red Tier to Orange); Shasta (Purple Tier to Red).
NorCal Counties. Alameda County issued a press release about COVID-19 Testing, Flu Shots, and Voting (Ballot Drop Off) at the Oakland Coliseum October 31 to November 2. 10/29/20 Press Release re: Oakland Coliseum. It issued a 10/28/20 Press Release regarding the timeline for opening middle and high schools. Starting November 9, middle school and high schools submitting a plan can reopen.
Calaveras County moved to the Yellow Tier in the State’s Blueprint.
Contra Costa County issued a 10/29/20 Press Release regarding the move to the Orange Tier and urging safety with the new gathering allowances. The County moved to the Orange Tier and issued a 10/27/20 Press Release indicating that the following may open in the Orange Tier: worship services and indoor cultural activities at 50% or 200 people, whichever is fewer; indoor dining at 50% occupancy or 200 people, whichever is fewer; indoor swimming pools; bars and other businesses that sell alcohol without meals may open for outdoor operations; indoor family entertainment centers that naturally socially distance at 25% capacity; indoor cardrooms at 25% capacity; small amusement parks at 25% capacity or 500 people, whichever is fewer; professional sports venues at 20% occupancy; live outdoor theatrical, musical and artistic performances with a maximum of 50 people. Contra Costa County updated their social gathering order.
Fresno County issued a Non-Medical Employer Screening Tool and a Medical Employer Screening Tool. It also issued Guidance for Early Education and Care Sites.
Madera County has approved Elementary school waivers for: Bass Lake JUESD, Chawanakee, Chowchilla Adventist, ETAA Charter, Golden Valley, St. Joachims, Sherman Thomas and Yosemite USD.
Marin County has moved to the Orange Tier. Marin County has a new Risk Reduction Order which better aligns with the State’s health orders and guidance. They also updated the Appendices of additional business and allowed activities.
Mendocino County has moved to the Red Tier and issued a 10/27/20 Press Release regarding this change. The press release indicates that the following are now open: restaurants may open indoors at 25% capacity or 100 people, whichever is less; gyms may open indoors at 10% capacity; places of worship may open indoors at 25% capacity or 100 people (whichever is less) without indoor singing and chanting activities; retail stores can open at 50% capacity; skilled indoor nursing facilities may have limited indoor visitation.
Mono County’s Weekly Press Briefing provided a number of local updates regarding Halloween activities, outbreaks etc. It updated its order on gatherings. Along with other changes, the order allows gatherings of a maximum of 3 households, up to 12 persons, in compliance with the State Guidelines.
Outdated orders for Monterey County have been updated.
San Francisco issued a 10/30/20 Press Release, temporarily pausing reopenings planned for November 3 due to an increase in cases and hospitalizations. Some reopenings will still proceed: reopening indoor dining at museums at 25% capacity, up to 100 people; expanding outdoor film production from 12 to 25 people with safety protocols; allowing additional outdoor live performances with up to six performers in a drive-in setting; increased real estate showings with social distancing. It issued a 10/27/20 Press Release regarding further openings. Most non-essential offices can open at 25% capacity following Guidance for Offices; gyms and fitness centers can open indoors up to 25% capacity following Reopening Guidance for Fitness Centers and Gyms; customers may also take off face coverings for personal care services on their faces.
San Mateo County moved to the Orange Tier and issued a 10/27/20 Press Release regarding the same and those openings which are now allowed. San Mateo County 10/29/20 Order for Long Term Health Facilities; San Mateo County 10/29/20 Order re Quarantine; and San Mateo County 10/29/20 Order re Isolation.
Santa Cruz County moved to the Orange Tier and issued a 10/27/20 Press Release regarding the same.
Shasta County moved to the Red Tier after an appeal from the County.
Sutter and Yuba issued a video for safe Halloween practices.
SoCal Counties. Los Angeles County amended its health order 10/23/20 – Aligns with state guidance; personal care establishments to be open indoors with modifications. Miniature Golf, Batting Cages and Go Cart Racing can reopen outdoors. Permits K-2nd grade classrooms to reopen with a waiver application approved by County Health Department. Increase percentage of students with IEPs and Els and other high-need students at K-12 campus from 10% to 25%. Revised what’s open in Los Angeles. Updated Guidance on hot tubs in the gyms and fitness center protocols, where an outdoor hot tub can only be used by household groups or in cases where six feet of distancing can be maintained. Indoor pools, hot tubs, saunas and steam rooms to remain closed. Updated what's open. Also amended guidelines for short-term rentals, referring to the County’s guidance on optimizing ventilation.
Riverside County released video of safety guidelines for Halloween and Día de Los Muertos. Recommend to not trick or treat and provided guidance on alternatives. Also said to not wear a mask under a Halloween mask, as will have difficulty breathing. For Día de Los Muertos, practice social distancing and wear a mask at cemetery or have a Zoom meeting to remember loved ones. News release on Halloween alternatives.
Palm Springs announcements: reopening the two lanes of Palm Canyon Drive between Tahquitz Canyon Way and Baristo Road, while still continuing outdoor dining parklets on both sides of the street for “Al Fresco” dining. The city issued a supplementary order for private and public golf courses.
City of San Diego extended the issuance of permits for outdoor city park to places of worship, gyms, and fitness trainers to conduct their business and deferred payment of the permits to January 31, 2021.
San Bernardino County issued guidelines for ski resorts.
READING THE CHART. Because the chart is large and the text small, you can easily make it larger for viewing by holding down the "Ctrl" key on the left side of your keyboard and then using your finger to scroll forward or backwards with the wheel on your mouse. You will see the text grow larger or smaller as you move the wheel. For a list of County restrictions and links to Health Department Orders, see County Chart 10-28-20. The chart is also posted on our website.
|DISCLAIMER. Our newsletter provides commentary based on sketchy information we receive from readers. From time to time, we add a little humor. Some find it amusing. Others are appalled. Some readers are excited when they score free legal advice. Not so. Our newsletter provides commentary only, not legal advice. You need to pay real money for an attorney to review all the facts and give you a legal opinion. We do that too, but you have to hire us. It's okay, we're friendly. Keep in mind we are corporate counsel to California associations only. Ask us for a proposal to represent your association.|| |