I received a number of emails from directors asking me to validate legal advice given to them by their managers.
Secondary Advice. It seems a few managers have been offering opinions on liability related to opening or not opening amenities. In some cases, managers passed on legal advice from their management company's attorney.
Personal Liability. This gives me the hives (a skin rash triggered by stress). Boards should be getting counsel from an attorney representing their association, not from a manager or secondhand from a lawyer representing some other entity. If a board is sued over opening or not opening their amenities, directors will not be protected from personal liability by claiming they acted on legal advice from a manager or hearsay from somebody else's attorney. That defense will not hold up in court. An appellate case released yesterday deals with directors who were found personally liable for breach of their fiduciary duties, a case I will report on next week.
Corporate Counsel. Directors need corporate counsel with whom they can meet, talk to, ask questions, get explanations, and receive legal opinions. Doing so protects directors under the Business Judgment Rule. Relying on someone not licensed to practice law or secondhand opinions from an attorney not representing their association provides no protection whatsoever.
Value of Managers. Some boards put managers in a difficult position by asking them for legal advice so they can avoid attorney fees and save a few dollars. Boards should not do that to their managers. They put their managers at risk along with their association and themselves personally. Managers are most valuable when they flag potential legal problems and advise boards to seek legal counsel.
RECOMMENDATION: If they have not already done so, boards should retain an experienced HOA attorney to advise them on legal issues surrounding the opening of their amenities (and any other legal issues that may arise). I make this recommendation not to increase HOA expenses but to keep directors out of trouble. You are volunteers and you don't want your personal assets on the line just because you tried to save a few dollars for your association.
Hot Tubs. I know the state says pools can open but spas should remain closed. I am wondering why spas should not open. The virus is killed by properly maintained spas and it doesn't like heat. I don't see why we can't open our spa. -Michael W.
RESPONSE: Some health directives don't make any sense. Neither the CDC nor the state is ordering the closure of spas. Some counties are only recommending closures. Other are ordering closures, and still others make a distinction between indoor and outdoor facilities. Santa Clara County, for example, is allowing outdoor swimming pools and hot tubs to open, but requiring indoor pools and spas to remain closed (a distinction not made by the state).
Boards and managers faced with directives that don't make any sense should contact their county supervisors and health department officers. It does not hurt to put pressure on officials to issue directives that are rational and reasonable. Or, as the Centers for Disease Control put it, "feasible, practical, and acceptable."
Taking Temperatures. It seems to me that taking the temperature of someone before allowing them into a common area facility does not fall under HIPAA privacy rights. Taking a temperature is not only prudent but may be necessary to prevent HOA liability if illness and damages result from such a failure. -Daryl H.
RESPONSE: I agree; the privacy protections in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) do not apply. HIPPA set standards for transmitting electronic health data and only applies to: (i) health care providers such as doctors, dentists, hospitals, nursing homes, and pharmacies that transmit health information electronically; (ii) companies that pay for health care, such as health insurance companies and health maintenance organizations (HMOs); and (iii) health care clearinghouses that process information so it can be transmitted between covered entities.
Based on the above, businesses and homeowner associations are not subject to HIPAA. That means they can take the temperatures of persons entering their facilities. A number of our clients are already doing so. Condominium highrises have onsite staff who can perform such tasks and are sometimes described as cruise ships turned on end. As such, they are more vulnerable to the spread of the coronavirus and often impose extra precautions, such as taking temperatures.
Reserves. Should the cost of reserve studies and revision of governing documents be paid out of our reserve account or the operating account? -George B.
RESPONSE: I believe annual reserve updates and 3-year onsite visits can be added as a line item in your reserve study since they are related to repairing and replacing major common area components. You also have the option of adding the expense to your operations budget since it is an ongoing annual expense. You just have to remember to increase the line item every three years for the onsite visit.
Restating Documents. Classifying the cost of restating your governing is problematic. It cannot properly be deemed a reserve item since it does not fit into any repair or replacement category. Unfortunately, it cannot be classified as an operational item either since it is not an ongoing annual expense to the association. Instead, it's an expense incurred every ten years or so. The only logical place to put it is in reserves where monies can build up over time, which is where most associations put it. That way, monies are available when needed to restate documents. Otherwise, they become excess monies in your operations budget that roll over from year to year, subjecting them taxes. Maybe our CPA readers and reserve analysts can add their thoughts to this issue.
HOA Documents. How do we know if our HOA documents are in compliance with current state law? -Larry D.
RESPONSE: Diligently read our newsletter and carefully comb through our website OR have your association's legal counsel review your documents and advise your board on whether they need to be updated.
Balcony Inspections. This question relates to the relatively new balcony inspection requirement. Balconies, stairways and landings are referred to as exterior elevated elements. What if an association has balconies that are built over garages or other living space so that if the balcony fails, there would be no dangerous collapse in which the balcony falls to the ground. Are those balconies exempt from the balcony inspection requirement? -Chris
RESPONSE: If your balconies collapsed, would those standing on them suffer serious injuries or death? If so, follow the inspection guidelines imposed by Civil Code §5551. If you are unsure if they fall under the statute and want to insulate your board from potential legal liability, either (i) get a written opinion from an engineer/architect/legal counsel that the balconies do not fit under the statute's requirements or (ii) have them inspected along with other elevated wooden structures.
We added a column for state guidelines so readers can compare their county's guidelines against the state's. Some counties diverge significantly from what the state allows or disallows.
NorCal Counties. All Northern California counties which are opening gyms and pools, are also opening schools, movie theaters, family entertainment centers, professional sports (without live audiences), wineries, bars, zoos, museums, gyms and fitness centers, hotels for tourism, card rooms and racetracks, campgrounds, RV parks and outdoor recreation.
All counties following the state with regard to golf courses were updated to match the state’s guidance.
Butte County, Madera County, Mono County, Monterey County, Nevada County, Placer County, Shasta County, Solano County, Stanislaus County, Sutter and Yuba Counties, and Yolo County have been updated to track pool and gym openings effective 6/12.
Calaveras County has been updated to track pool and gym openings effective 6/12. Their 6/10 press release indicates that its lodging order will be rescinded on 6/12.
Mendocino County’s order expires on 6/12. As of now, it is unclear whether a new order will be put in its place. Santa Cruz County has a new order removing lodging restrictions. Tehama County has a new Roadmap to Recovery with links to sector guidance. Pools and gyms are open, but spas are closed.
SoCal Counties. Kern, Orange, Riverside, San Luis Obispo, San Bernardino, San Diego, and Santa Barbara Counties are allowing the following to open on June 12: pools, schools, movie theaters, family entertainment centers, professional sports (without live audiences), wineries, bars, zoos, museums, gyms and fitness centers, hotels for tourism, card rooms and racetracks, campgrounds, RV parks and outdoor recreation.
Los Angeles County is not allowing wineries, bars, movie theaters, gaming facilities, and family entertainment centers (including theme parks) to reopen, but allowing the other sectors on the above list to reopen.
Riverside County announced Coachella and Stagecoach festivals are cancelled for the remainder of 2020.
Updated Chart. For a list of county restrictions and links to Health Department orders, see County Chart 6-12-20. The chart is also posted on our website. Thank you to readers for sending us information about their counties. If we missed anything, please contact us.
|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 actually hire us. It's okay, we're friendly. You can call us. Keep in mind we are corporate counsel to associations only.