Shifting Employees to Management
Adams Stirling PLC
  California's Leader in Community Association LawSeptember 20, 2020

QUESTION: Is an association's liability reduced if employees are shifted from the association's payroll to the management company's payroll?

RESPONSE: There is some benefit to shifting an associations employees to a management company, but it's mostly one of convenience.

Cost Savings. There are no significant cost savings since salaries, worker's compensation insurance, health insurance, and the employer's portion of payroll taxes are passed through from management to the association.

Potential Liability. Potential liability might be reduced, but it does not go away since management contracts routinely indemnify the company; e.g., if the company is sued, the association is obligated to defend the company and pay most judgments. In addition, the association will likely be viewed as a co-employer since it exercises a great deal of control over the employees. Finally, recent HUD and DFEH regulations make associations responsible for investigating and eliminating harassment in the association, including harassment of vendor employees. Failure to do so can result in liability.

Convenience. At best, shifting employees to the management company is more convenient because it reduces the hassle of dealing with payroll, scheduling employees, hiring and firing, etc., all of which will be handled by the management company.

RECOMMENDATION: Transferring employees to a management company's payroll can reduce potential liability if the company has good HR policies and procedures in place. Do they have an HR department and an updated Employee Handbook? Do they have a system for hourly employees to clock in and out so as to avoid wage and hour claims? If they have good systems in place, it reduces the risk of claims being filed. Boards will want to have legal counsel review the management contract before signing it.


QUESTION: As I understand it, a deed in lieu of foreclosure will not eliminate any liens junior to the one with the lender’s interest. It is handled very much like a grant deed transfer and does not eliminate past due assessments. But, a trustee’s deed as the result of a foreclosure will remove any junior liens or encumbrances from the property as well as any past due assessments. Is that correct? -Robert B.

RESPONSE: Yes, your understanding is correct. A purchase money lender will be in the first position. As the senior lien holder, if a first mortgagee forecloses, it wipes out all junior liens. An association can still sue the delinquent owner for a personal money judgment since assessments are a personal obligation of the owner, but the property no longer serves as security.

Lien Protections. If an association's assessment lien (Notice of Delinquent Assessment) is recorded prior to the recordation of a deed in lieu of foreclosure, the party accepting the deed takes it subject to the assessment lien which can be enforced against the property. If the deed in lieu is from the owner to the first mortgagee, the lender is not personally liable for past assessments, but the property is subject to the association's lien and the assessment lien can be foreclosed upon for the amount secured by the lien.

Notice of Non-Acceptance
. Also of interest, because a deed in lieu can be recorded by the grantor alone, without the consent of the grantee, Civil Code Section 1058.5(a) allows the grantee to refuse the recorded deed in lieu by recording a Notice of Non-Acceptance. This prevents owners from unilaterally undermining the lender's right to foreclose and extinguish junior liens.

Deeds In Lieu not Favored. Finally, due to the fact that a property remains subject to all other liens in a deed in lieu transaction, as a rule, a lender will not accept a deed in lieu when there are junior liens which the lender could, as mentioned above, extinguish through a foreclosure action. Usually, an escrow is opened in the deed in lieu transaction and a policy of title insurance is issued in favor of the grantee, assuring that there are no junior liens on the date that the deed in lieu records. Otherwise, the property owner could record a junior deed of trust the day before the deed in lieu records and the lender would take the property subject to same.

RECOMMENDATION: General information about liens and foreclosures can be found in our Assessment Collection Menu. Boards should always work with legal counsel or their assessment collection service whenever they have questions about delinquent assessments. This is particularly important since the pandemic has complicated the entire collection process. Many thanks to Richard Witkin of Witkin & Neal for his assistance with this question.

NorCal Counties. Contra Costa County has a new Order to align with the State's Blueprint guidance. At this time, the County does not have different reopening rules for business and activities beyond what is required by the State. The Order allows the following additional businesses to reopen: personal care services that involve close contact with the face may operate outdoors (excludes tattooing, piercing and nonmedical electrolysis); racetracks and cardrooms may operate outdoors; music, television and film production may resume; professional sports without live audiences may resume.

Mono County issued a press release indicating that the Mammoth Lakes has adopted an urgency ordinance to enforce Mono County Health Orders. That press release can be found here: Mammoth Lake Press Release dated 9/11/20 re: Ordinance to Enforce Health Orders.

San Francisco has new Health Directives related to the following: indoor operation of gyms and fitness centers up to 10% capacity; indoor personal care services with restrictions; hotels and lodging opening for tourists; drive-in movies and gatherings; specified outdoor gatherings with health guidelines. Guidance links for gyms and fitness centers has been posted in the “notes” section of our chart.

Santa Clara County has a new Order related to required testing for certain persons: Santa Clara County Order dated 9/16/20 re Testing.

SoCal Counties. Los Angeles County updated its tennis/pickleball protocols to prohibit group lessons of more than four (4) students.

Orange County schools are allowed to reopen for in-person instruction starting 9/22.

San Diego County made minor changes to its health order on 9/10 with clarifications to reopening schools.

Santa Barbara County updated its face covering order to align with State’s Blueprint for safer economy.  Effective 9/18/20 through 10/17/20. 

Ventura County released Halloween guidance, similar to Los Angeles County’s guidelines.

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 9-16-20. The chart is also posted on our website.

Timeline Calculator #1. Thank you, thank you, thank you for creating such a wonderful and useful tool. Awesome effort, maximum benefit for all. I'm truly grateful for the creativity and thought into this. You guys are the best in supporting this HOA industry. -Tina W.

Timeline Calculator #2
. I was very excited to see your Election Calculator. When trying to use it, the form wouldn't let me enter the date for counting ballots. -MaryAnn C.

RESPONSE: We had a few emails similar to yours. The calendar will not accept dates that do not allow enough time to complete the election. Dates that are too soon are grayed out. You can see at a glance when viewing the pop-up calendar the earliest possible date for conducting your annual meeting — those dates are not grayed out. The other issue we discovered is the calculator worked on iPhones but not Androids. We did a little more coding and corrected the problem. We welcome all feedback on any issues that users might encounter.

Timeline Calculator #3.The election timeline calculator — very cool tool. -T.G.

Timeline Calculator #4. Woo-hoo it works! Great application. -Candice S.

Timeline Calculator #5. Thank you very much for creating the Election Timeline Calculator. I can’t use the date 12/03/20 for our voting deadline. Am I mistaken about our date being 12/3/20? -Donald S.

Timeline Calculator #6. Do you have an Election Calculator for Florida condominiums? -Merrill F.

RESPONSE: We did not create one for Florida; we don't practice law in your great state. We've had many requests to open offices in Florida, Texas, Arizona, Nevada, Missouri and Illinois. California keeps us so busy we couldn't possibly open offices in other states.

Timeline Calculator #7. Thank you for the calculator. My inspector provided a timeline for our meetings, but only after we approved the bid, so this is great to prepare an annual calendar for next year for each community. –Jennifer S.

Timeline Calculator #8. Thoughtful to have designed an election timeline calculator! Many thanks. -Denyse B.

Timeline Calculator #9. Your website makes it easy for board members and homeowners to research their respective rights and obligations. Is there a similar website for other states (specifically Arizona?) –Bob D.

RESPONSE: I am not aware of any websites like ours in other states. You might check with the Arizona chapter of CAI to see if there is something similar in your state.

Not Appalled. Hello, I am one of your subscriber’s that appreciates your newsletter, not appalled. :) -Nicole S.

Non-Owner Spouse. Thank you once again for a fabulous newsletter. I do have one dissenting opinion. If a spouse doesn’t see fit to put their partner on title for whatever reason the association shouldn’t have to allow him or her to be on the board no matter how well-meaning. My main concern is the non-owner spouse doesn’t have any fiduciary interest. Their vote may not be in the association's best interest. I have also experienced the spouse that has something to prove or the need to wield power. –Gary S.

Can't Believe what I Missed. I read all of your newsletter/emails and forward them but this is the first time I looked at the rest of your website. I can't believe what I've missed!!! Must be age! LOL. I would like to direct people to all the options on your website, because, if I, Miss Busybody, missed them, I know others are missing them, too. Thank you a million times for all your wonderful efforts. -L.Q.

RESPONSE: Thank you for directing people to our website. We cover every aspect of the law related to community associations in California. In addition to the Main Index of topics, we have over 60 menus dedicated to important subjects, from board meetings to rules enforcement, accounting, architectural issues, assessment collection, discrimination, and dozens of other issues. Wherever possible, we provide practical advice. We also keep track of all the new legislation and case law and provide a free job market.

AB 3180 #1. Several municipalities here in Coachella Valley have passed legislation restricting short-term rentals in designated areas and require permitting in other areas. Would the passage of AB 3182 by the State override and eliminate these local restrictions? Thank you for your on-going excellent advice for board members. –Larry D.

RESPONSE: The bill is not aimed at municipal rent restrictions; it targets community associations. If signed into law, associations will not be able to enforce rent restrictions that don't comply with AB 3182.

AB 3182 #2. I sent my email to Gov. Newsom regarding AB 3182, you made it so easy, thank you. How can these mayors and the Governor get away with such fiduciary mismanagement? I think they should be sued. And, I want a moratorium on laws in California. They're working 24/7 and the laws are slipshod and biased. -L.Q.

RESPONSE: I agree with a moratorium on new laws — the stuff coming out of Sacramento has been awful. If any of our readers have not yet done so, please immediately ASK GOV. NEWSOM TO VETO AB 3182.

Boards can contact us for friendly,
professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner

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 talk to us. Keep in mind we are corporate counsel to California associations only.

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