Maintaining Cash Flow
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  California's Leader in Community Association Law May 3, 2020
MAINTAINING
CASH FLOW

QUESTION: We have a lot of homeowners out of work who stopped paying their assessments. We know we can borrow from reserves. The board wants to know if we can we stop making reserve contributions? -Erin S.

RESPONSE: Yes, in addition to borrowing from reserves, you can boost your operational cash by temporarily reducing or stopping your reserve contributions. The pandemic has created an emergency situation for some boards. It's a temporary situation and boards can use monies scheduled for transfers into reserves to cover operational shortfalls.

Mid-Year Budget. There is no need to adopt a new mid-year budget. Budgets are projects and sometimes, as now, associations experience unexpected shortfalls in cash receipts and/or unexpected expenses. Next year's budget will probably need adjustments.

Defer Maintenance. Another means of preserving cash is to defer nonessential reserve expenditures. I don't mean critical maintenance but maintenance that does not create a safety issue or lead to property damage.

Certificates of Deposit. Reserve funds are typically invested in CDs. When they mature, boards should consider not reinvesting the money. Instead, leave it in their reserve account so the money is readily available to cover operational shortfalls if they need to borrow it.


Reimbursement Required? Since we are experiencing a lockdown of our clubhouse, pool, spa, health club, library, etc. and are still paying full HOA dues, are we going to get a reimbursement?  -Crystal K.

RESPONSE: No. The association still has to maintain recreational facilities and put monies into reserves. Plus, boards may have to compensate for lower cash flow due to unexpected delinquencies. Reimbursements are unlikely and offsets are not allowed.

 
MORE
FINANCIAL ISSUES

Monthly Financial Statements. My board does not distribute monthly financial reports at its meeting open to owners. Is this allowed? -James G.

RESPONSE: Boards have no obligation to distribute monthly financial statements to meeting attendees. Those are working statements which boards must review. It is not unusual for interim reports to be inaccurate on some points. Corrections and adjustments are made in subsequent statements. Even so, boards should routinely include a summary "Treasurer's Report" in their minutes and then post them for membership review.

Annual Financial Statement. For HOAs with a calendar fiscal year, has there been any extension beyond 120 days (April 30th) for sending out the financial reviews to owners? -Palma G.

RESPONSE: Management company operations suffered major disruptions and many CPAs are currently overwhelmed. No judge in his/her right mind is going to ding you for being late in the middle of a pandemic. Publish the statement as soon as it can be done.

 
INSTALL STAIRCASE
HANDRAILS?

QUESTION: The board is discussing placing handrails on the main entry lobby stairs of our historic building. While we are not required to put in the railing, last year the previous board sought a proposal to do the work as we are a senior community.

Members were surveyed and felt the work would damage the aesthetics of the 100+-year-old grand lobby and a new railing was not needed. However, we were told that once a proposal has been received to conduct work that may improve safety, the board would now be liable if the work is not done and someone falls on the stairs. Is that the case? -Carl H.

RESPONSE: Boards should always side with reasonable safety measures. You never get sued for making the common areas safer. You can get sued, however, when you know something is unsafe; you do nothing about it; and someone is seriously injured or dies as a result.

You have a community of retirees, you identified a safety problem and a reasonable solution. Not doing the work arguably exposes you to potential liability. If sued, you can defend by showing the results of the membership  poll. However, a jury may not find that compelling. The problem is that members do not owe a fiduciary duty to the association. The board does.

Imagine an 80-year-old tumbling down the stairs. Then picture being in court, under oath, testifying how you identified a safety problem but decided not to implement a solution due to aesthetic considerations.

RECOMMENDATION: You should seek a formal legal opinion from your association's legal counsel.

 

Deaf Attendees. Friday, a reader asked how a deaf could attend Zoom meetings. It appears Zoom has made allowances for deaf attendees by including a feature for closed captioning. See screenshot of Meeting Settings. (Thanks to Erica Greathouse for the information.)

Hot Tub. Do spas need to be closed completely or can they remain open as long as residents practice social distancing? -Robert R.

RESPONSE:  If your county ordered the closure of all pools, it includes hot tubs. (I'm curious, how does one maintain social distancing in a hot tub?)


COUNTY ORDERS. Below are changes in county restrictions. Protests and civil disobedience are on the rise.

Beaches & Restaurants. Over the weekend there were protest rallies around the state, including Los Angeles, San Diego and San Francisco. Governor Newsom overrode Orange County health officials and shut down beaches. Huntington Beach residents flooded the streets to protest the Governor's order. Modoc County is defying the Governor's shutdown order and is allowing diners back into restaurants and is reopening other businesses.

NorCal Counties. Construction and landscaping are now considered essential businesses by all NorCal counties. Some Bay Area counties closed tennis courts due to shared equipment (tennis balls). Other Bay Area Counties close “common recreational spaces” without mentioning tennis courts but they appear to include them. El Dorado County’s stay-at-home directive expired on April 30 and residents will “be guided primarily by the Governor’s Order.” Restrictions on nonessential travel to the area remain in effect.

Santa Cruz County adopted new beach closure hours. Beaches are only open for non-sedentary activities when open and may be traversed to engage in water activities in the ocean during “beach closure” hours. Golf courses are also open subject to requirements. Essential businesses have been expanded. Lake County’s new order consolidated all addendums and clarified their golf guidelines.

Butte County pool openings are unclear. We've been told, but can't verify, that pools are open subject to social distancing and gatherings of no more than ten. Monterey County has an updated order that takes effect 5/4. It expands essential businesses and opened golf courses subject to protocols. Placer County allowed their county orders to lapse on 5/2 but are following the state's shelter in place order.

Solano County amended its order to open golf courses subject to protocols. The order is poorly written regarding pools. It appears they remain closed: “At least public pools used for general recreation are closed (i.e. lap swimming may be allowed). It seems that tennis is now okay for members of the same household. Entities that manage facilities or activities allowed by the order must take measures to reduce crowding.

Sutter and Yuba Counties amended their order effective 5/4, which greatly expands what is open. Tuolumne County now allows golfing with no cart if social distancing is practiced. Sonoma County opened golf subject to specific requirements and extended their order until rescinded. Mono County added a face covering order. Nevada County gyms remain closed, dog parks can open if seating is closed, hand sanitizer provided and people bring their own water and waste bags and people social distance.

SoCal Counties. San Diego has a new order effective May 1. Everyone two years and older must wear a face covering anywhere in public when they are within six feet of another person or when entering a business. There was a relaxing of restrictions for parks and golf courses as long as they enforce social distancing. Parks will allow visitors to sit on grass and picnic. Members of the same household can play active sports such as basketball or volleyball. Beach parking lots are still closed, but in addition to running, hiking, equestrian or bike riding at the beach, they allow swimming, body surfing, boogie boarding, surfing, kite surfing, paddle boarding, kayaking, snorkeling and scuba diving in the ocean and bays connect to the ocean if can effectively social distance. All indoor and outdoor private spaces allow for gatherings of family and same household members. Therefore recreational amenities were changed on the chart to allow for family and same household member gatherings.

Updated Chart. For a list of county restrictions and links to their orders, see County Orders as of 5-3-20. If we missed anything, please contact us.

 
 
The chart is GREAT! Thanks for that. Some counties (like El Dorado) have no info listed. -Scott L. 
 
RESPONSE: It's been added. Readers have been very helpful sending us links to missing information.
 
Hello Adrian!! Thanks for keeping me on the list of newsletter recipients, I really enjoy them. I have forwarded it to my HOA clients and many have said they already get it; well done! It has been a pleasure to know you and your firm for all these years, I am sure your efforts have made the industry better than it was 20 years ago. -Carl B.
 
As the newly elected president of my HOA, I very much appreciate your newsletter. It is filled with practical advice offered in succinct and friendly language. It has been very helpful, especially during COVID-19. -Carl H.

RESPONSE: FYI. Since the start of the pandemic, we've distributed over 800,000 newsletters. They are multiplying almost as fast as the coronavirus. Thank goodness they are all electronic. It saves trees.
 
Boards can contact us for friendly,
professional advice.


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

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