FOR MANAGEMENT COMPANY
QUESTION. Can our treasurer also work as a paid employee accountant of our management company? -Julie R.
RESPONSE: It is not illegal but it weakens financial controls, creates potential conflicts of interest, and has the appearance of impropriety. Your treasurer has mixed loyalties — he receives his paycheck from the management company but is also an officer of your association.
If he prepares (or oversees) the accounting records for your association, you lose the independent review you would expect from your treasurer. Even if he does not prepare them, will he be critical of his employer's handling (or mishandling) of your association's monies? To avoid potential problems, your board has three options: (i) the treasurer stops work for the management company, (ii) the treasurer steps down from the board, or (iii) you change management companies.
Offsets. Does disallowing offsets only apply to condominium associations or does it apply CIDs in general? -Robert M.
RESPONSE: It applies to all common interest developments (condominiums, planned developments, stock co-ops and community apartment projects). Members who lose the use of recreational facilities because of the pandemic do not have the right to reduce (offset) their assessments. See Duty to Pay Assessments.
Capital Improvements. We would like to add solar to our pool house cabana. Since this item is not included in our reserve account, can you provide some guidance on the options available for associations to fund capital improvements? -Maryann N.
RESPONSE: You can fund the cost through a special assessment approved by the membership. If the initial cost is significant and the special assessment large, you can get a bank loan. Because it is paid back over time, the impact on the membership is significantly reduced. The special assessment and bank loan will need to be approved by the membership. Another option is to find a solar installer that will set up a payment plan.
5% Limitation. Even if the work can be done without a special assessment, check your governing documents. Most CC&Rs contain a provision requiring membership approval for capital improvements that cost in excess of 5% of the association’s budgeted gross expenses for the year.
Prepay Assessments. Another way to improve cash flow for those associations with unexpected pandemic related delinquencies is to ask members who have not lost their jobs to voluntarily prepay three, four or six months of assessments. Doing so provides a cushion for the association to pay its bills until laid-off owners can return to work and get caught up on their bills.
With prepaid assessments, the association can avoid disturbing money in the reserve account. Often, reserve funds are in laddered CDs or similar investments that might charge a fee for early withdrawal. If the association could avoid those fees, everyone benefits.
Many people would love to help their neighbors in need, but are not sure how. This would be a great opportunity, and would come at virtually no cost to the owners who choose to prepay their assessments. -Deon S.
FDIC Limit. I thought I would remind fellow HOA treasurers that if they decide not to re-invest a maturing CD and add the monies to their reserve account, to make sure the association does not exceed the $250k maximum amount protected by the FDIC. The limit is per depositor per bank. -David B.
Finance Committee. Is mandatory to have a finance committee? We went without once for three years and our finances showed it. -Jill B.
RESPONSE: Unless a finance committee is required by your governing documents, boards have no obligation to appoint one. Sometimes boards appoint such committees because they don't have anyone on the board with financial or accounting experience. Other boards, however, have a talented treasurer and don't feel the need for a finance-budget committee.
Notify Members. Do we have to notify owners if the board is not putting money into reserves due to delinquent assessments? -Susan B.
RESPONSE: Yes, it's always a good practice to notify the members. You should make a motion that is recorded in the minutes of an open meeting and also let members know in a letter or newsletter that you are temporarily suspending transfers into reserves.
Readers asked about requirements for cleaning their recreational facilities. It will depend on requirements established by their county or city. If neither one sets guidelines, then look to state and CDC guidelines.
Deep Cleaning. Before opening their facilities, associations should have them deep-cleaned. Even if associations have their own onsite staff, they may want to use an independent cleaning service.
Daily Cleaning. Using staff or a cleaning service, have all facilities thoroughly cleaned each night. Some may need to clean twice a day. Some may need to put a supply of Clorox Wipes at their facilities so members can wipe down surfaces before touching them.
Newsletters & Signage. Boards will need to carefully review applicable health department orders to make sure they are in compliance when they open their facilities. Posting signage will be important, as will s regular letters/newsletter to members keeping them informed what they can and cannot do when using the facilities — social distancing, face coverings, wiping down surfaces, limits on gatherings, etc.
RECOMMENDATION: Carefully follow cleaning and signage requirements established by applicable governing bodies. For some associations, cleaning schedules will be outside their budgeted expenses and will put pressure on cash flow already impacted by delinquencies. Boards will need to take a serious look at how to reduce expenses to cover the costs.
USING RESERVES TO
On May 12, Adrian Adams will join reserve fund expert Robert Nordlund (Association Reserves) to address how boards can use their reserves to preserve cash.
The webinar discussion will include deferral of maintenance, reallocation of contributions, and borrowing funds in the midst of a pandemic. Additional information and signup is available here.
COUNTY ORDERS. Many orders contain detailed requirements. To avoid potential liability, boards should carefully review them and consult legal counsel about how best to open their facilities.
NorCal Counties. Cal/OSHA and the California Department of Public Health issued new guidelines for industries, which can be found on the Resilience Roadmap. It provides detailed information to which many counties are now deferring, rather than creating their own guidelines.
Butte County published their plan to reopen the county, which is linked to in the chart. They opened low-risk Stage 2 businesses and this outlines how they plan to reopen future businesses with State approval.
Calaveras County rescinded its Health Orders and is following the State’s Order. They are allowing low-risk Stage 2 businesses to open and anticipate moving to other State 2 businesses shortly.
El Dorado County opened low-risk Stage 2 businesses and believes they will be able to open all of Stage 2 shortly as they have already submitted their plan to the Governor.
Lake County is now following all Governor’s Orders. They allowed low-risk Stage 2 businesses to open.
Mendocino County Recreation must be initiated within 50 miles of a person's residence, but urged to remain in one County. Stage 2 low-risk workplaces may open pursuant to its Resilience Roadmap. Dog parks, golf courses, tennis courts and swimming (presumably pools as there is nothing stating otherwise) may open, subject to social distancing and compliance with protocols in Section 16 of the Order.
Mono County opened low-risk Stage 2 businesses pursuant to a press release on May 8.
Monterey County is allowing Stage 2 businesses openings pursuant to the Governor’s Order. All other portions of the prior order remain.
Nevada County rescinded their order and is following the State’s Stay-at-Home Order.
San Joaquin County has a new order keeping their golfing guidelines in place, allowing singles tennis and opening low-risk Stage 2 businesses.
Solano County has a new order allowing low-risk Stage 2 businesses to open. All guidance is now under the same link as the order.
Sonoma County amended their order to open low-risk Stage 2 businesses. They also amended their park closure Order, which is posted in the Notes tab.
Tulare County rescinded all prior orders and adopted the State’s Orders unless more specific information is included.
SoCal Counties. Los Angeles County posted reopening protocols for retail, golf courses and trails. The city of Los Angeles revised its safer-at-home order which expires May 15. Trails and golf courses are open. City beaches are closed.
Kern County will follow the State’s phase 2 reopening business plan. However, the county administrator stated they would not fine businesses that open which are not allowed to fully reopen.
Orange County beaches are open with non-stationary activities of walking, running, swimming, surfing, paddling, boating, kayaking, etc. Not permitted is sunbathing, building sand castles, bringing coolers, umbrellas, grills, group activities such as volleyball, spike ball, etc. Refer to OC Parks for more information on the beaches.
Riverside County rescinded three health orders mandating facial coverings, social distancing, and prohibiting short-term rentals. School closure order was amended to include only K-12. Vocational schools and higher-learning institutions can open. The County is following the state’s phase 2 reopening business plan.
Palms Springs has an amended order dated May 7, 2020 for trails, golf courses, parks, recreational facilities, including pools, tennis courts, and pickleball courts. Pools can open pursuant to the May 6, 2020 Riverside guidance. Order states the requirement for written infection plan is not necessarily intended to require adding or increasing staff, but instead may be enforced in any manner deemed reasonably acceptable. Also states that HOAs are not required to make their pools available to residents.
San Diego County has a new health order effective May 10 that incorporates a definition of reopened business which follows the state's roadmap for reopening businesses. San Diego is following the State’s phase 2 reopening plan.
San Luis Obispo County is following the State’s phase 2 reopening plan and is currently applying to the State to further loosen restrictions.
San Bernardino County issued a new health order making face coverings optional but encouraged. The County is following the State’s phase 2 reopening plan.
Santa Barbara County's new order is effective May 8 and expires on May 31. New pool requirements for homeowner associations allow up to six individuals from one living unit to be at the pool at a time. Can also use pool deck and restrooms. Pool furniture is not allowed to be used and must be removed, roped off, or rendered unusable. Requirements also issued for tennis and pickleball. The county is following the State’s phase 2 reopening plan with guidelines in health order.
Ventura County relaxed guidelines to follow the State’s phase 2 reopening plan. The order continues closure of swimming pools, spas, hot tubs, saunas, steam rooms other than at a single-family residence. The stay-at-home order continues for those 70 years old with active or unstable comorbidity or older than 75 years of age.
Updated Chart. For a list of county restrictions and links to their orders, see County Orders as of 5-10-20. An updated chart is posted on the website. 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.