Waive Coronavirus Assessments?
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  California's Leader in Community Association Law March 26, 2020
WAIVE CORONAVIRUS
ASSESSMENTS?
 
Over the past few days, I've received a large number of emails from board members asking about delinquent assessments related to the pandemic. Should boards waive late fees and interest? Should they waive assessments for a month, three months, longer? Should they waive for some members but not others?

Balancing Board Duties. Boards have a fiduciary duty to keep their associations operational. That means paying utility bills, paying for insurance, maintaining the property, responding to emergencies, maintaining security, paying vendors, etc. At the same time, boards need to balance these obligations against the fact that increasing numbers of members cannot pay their assessments because of the pandemic.

Late Fees & Interest. Members have been laid off through no fault of their own. Accordingly, boards should immediately suspend late fees and interest on all delinquent accounts related to the coronavirus. Older delinquencies having nothing to do with the pandemic can be treated differently. With those accounts, boards can choose to continue late fees, interest and foreclosures.

Foreclosures. While liens can be recorded against new delinquencies, no foreclosure actions should be initiated against them. With older delinquencies, it may be appropriate to move forward with foreclosure actions, up to and including selling units. This would be the case for delinquencies that predate the coronavirus where there is no chance the person will pay the delinquent amounts. For others, foreclosure actions might move forward to the point of sale and then stop if amounts owed will be paid.
 
Waive All Assessments? Waiving assessments altogether is compassionate but also problematic. As noted above, boards have a duty to keep the association operational and pay its bills. It can't be done if no one pays their assessments. What about waiving assessments for delinquent members only? This presents a different problem. Do you waive for delinquent accounts that have nothing to do with the coronavirus? That would not be prudent. Forgiving assessments for those laid off because of the coronavirus is easier to defend but still a problem.

Waive Some Assessments? How do boards decide which ones are pandemic related? How long do they waive assessments? What if there is a rolling waive of layoffs for months to come because of the virus? At what point do boards stop waiving assessments? Also, waiving them creates a budget shortfall that increases the financial burden on everyone else. The best solution is to work out payment plans with members laid off from work.

Payment Plans. Fortunately, most (hopefully all) layoffs will be temporary. The coronavirus will soon peak, stay-at-home orders will be lifted, businesses will restart, and workers rehired. In addition, last night's approval by the Senate of a $2 trillion stimulus package includes cash payments to individuals hurt by the epidemic. Boards should work out payment plans on a case-by-case basis with members. Each will be a little different depending on how long the person has been laid off. Boards should be balanced and reasonable in their payment plans.  
 
Reduced Fees? Readers wrote that some owners were demanding a reduction in assessments since they could not use the association's amenities such as the pool, spa, fitness center, tennis courts, etc. Boards should politely decline all such requests. The loss of use is temporary. Besides, how do boards calculate the amount of reduction and who do they give it to? Many members do not use the facilities or only use them occasionally. Should they get a reduction? Do those who use the facilities more often receive a greater discount than those who don't? This is a non-starter.
 
Conflict of Interest? What about board members who are delinquent? Can they vote on issues involving assessment relief? To avoid conflicts of interest, a director who is delinquent must recuse him/herself from votes involving their own delinquency. They can still vote on matters related to payment plans and foreclosures for others but may want to recuse themselves to avoid any appearance of conflict.
 
Steady the Ship. The storm will soon pass. Board members need to keep a stead hand on the ship's tiller. Homeowners need to be patient.
 
POOLS
AND HOT TUBS
 
Kids in the Pool. I asked the board to close down our two pools and spas. They refused stating, “With all the kids out of school, that could be a problem” which is exactly the problem. Children have no idea what social distancing means. Is there anything I can provide this board to help them understand what they are doing? -Marla M.
 
RESPONSE: My newsletters.
 
Pool Furniture #1. The board president put up a sign the pool area was closed per the city. The city did not close pool sitting areas. She has taken all the chairs and folded them and put them on one side of the pool area so no one can sit on them. I pay a lot of money to this association and want to know if I can at least go into the pool area to sit and get some sun. Are we prisoners in our complex because this woman makes us inmates? I understand the severity of this virus but as long as we practice good sanitation and common sense, should a person like this board president be allowed to rule because she likes control? -Diane C.
 
RESPONSE: Of course, control is the only reason she closed the pool. What other reason could there be?
 
Pool Furniture #2. People who go to the pool & spa areas typically also sit on the loungers, touch the pool/spa handrails, use the pool area shower, etc. Even if it was just going into and out of the pool, infection is still a risk even if water is not the vehicle for spread. Thanks for all that you do. -Brian K.
 
All Pools Closed. Thank you for all your timely information. Realizing this situation changes day by day. In reference to the CDC guidance you provided on community pools. I just spoke to the county of Riverside Department of Public Health, yesterday 24 March. The Governor’s office updated the guidance on shared pools--both public and private shared pools must be closed. The information was published on Riverside County Public Health FAQs quoting the Governor's office. -Ronald Z

Pool Accidents. Thanks for great updates, especially regarding pools and spas. Our HOA of nearly 10,000 homes puts out emails on an almost-weekly basis—even in the non-Covid-19 era—about 24-hour pool closures to allow for sanitization following “accidents”. These are NOT slip, trip, or fall incidents! So, I cannot imagine why anyone would want to use a public pool or spa now. -Frank D.
 
ESSENTIAL BUSINESS

Management. As early as the week before CACM canceled the 2020 Southern California Law Conference, my staff was already observing strict sanitizing procedures for our office, including making arrangements for owners to continue interacting with my staff on a limited basis. As to the issue of being an essential business, common sense already answered that question for me even before consulting with corporate counsel. Legal counsel confirmed that management companies ARE essential businesses. Discussions took place as early as two weeks ago with many of our regular everyday vendors and again the issue of the essential business question was validated. We also mandated immediate implementation of strict compliance with sanitizing procedures and protocols for our various janitorial companies and onsite managers. Gyms and restrooms were closed and social distancing notices were posted in every building with elevators and lobbies. As always, you seem to hit the nail on the head. -Steven C.

Teleconferencing. Our company has been using Jitsi as a teleconferencing mechanism for some time and it works flawlessly and is free. Our staff has been disbursed from our brick and mortar building working remotely from home. All our systems are cloud based and we hold daily meetings with our staff so that we do not lose sight of our main concern, our clients. -Steve C.

Indoor Construction. We are a large condo complex in the Los Angeles area. We were in the midst of a new flooring project for the hallways in 7 buildings, replacing old dog urine stained carpeting with vinyl flooring. The vendor's crew completed 5 buildings, with 2 more to go. We suspended the work. Can we continue if the crew wears gloves and N95 masks, has no contact with owners and residents, and works only in the long wide hallways of the 2 remaining buildings?  -Rick B.

RESPONSE: The work can be done safely. Whether it violates the Governor's stay-at-home order is the question. That is something you should discuss with your association's legal counsel.

Outdoor Construction. Just wondering what your position is on small construction jobs that do not interfere with residents directly. We are a stock cooperative with hundreds of units. Some contractors would like to continue working on out door projects: i.e. building storage cabinets in the carports for a few residents and another involves installing flooring in in an unoccupied unit. Although this is not essential work, it does provide income to these contractors and does not put any residents at risk. Should that sort of work be allowed? -Donna G.

RESPONSE: The virus is crushing the economy and putting people out of work. The outside work you described can be done safely. I see construction projects still in effect around the city. I don't think one or two guys working outside and following social distancing creates a violation. But, I'm just one person. You need to talk to your association's legal counsel for guidance.

 
MISCELLANEOUS

Tax Filings. Thank you for your newsletters, which allows us all to be kept up to date on covid-19. I have a few questions on property values in California. We live in an HOA community in Riverside county. Do you know if California will be re-assessing the property tax on properties in the near future?  Also, is the date to file taxes been pushed back to the middle of July or the middle of August? -Mike B.

RESPONSE: I've heard nothing about tax reductions. Keeping in mind that we live in California and judging from historical actions, taxes move in one direction only...UP. As for tax filings, the IRS extended its deadline for payment of taxes and tiling tax returns from April 15 to July 15. California did the same. You should check online to confirm.


Parking Lot Cocktails. As a former board member at an HOA of almost 500 units, I’ve always enjoyed your helpful newsletters, and now more than ever. I heard indirectly about this idea: within our complex, one neighborhood, sponsored by 2 tenants, having another social distancing social at 5:30 on Wednesday in the parking lot. Bring your own cocktails. Wondered what you thought about this, in particular, whether the BOD should actively discourage this and/or whether it creates any liability. It just seems like a bad idea and an unnecessary risk (what if more than 10 people show up? what if people don’t practice social distancing as they drink more). -Wilhelmina T.

RESPONSE: If they keep it under ten persons and maintain social distancing, they aren't in violation. If the state keeps everyone in lock down much longer, I might join them.


Annual Meetings. It will be very helpful if you could write an article on the essential importance of holding an HOA election and not cancelling or postponing that. Perhaps there are guidelines, only allow a small number of members. We need to cooperate with the wishes of the election company, but the show must go on... as they say. To be frank, we are concerned about board members that don't want changes. -Ted H.

RESPONSE: It's a business decision by the board whether to delay the annual meeting or not. To move forward, arrangements need to be made with the association's management company for printing and mailing of ballots, for hiring an inspector of elections, for the televised opening and counting of ballots, etc. That's assuming new SB 323 compliant election rules have been drafted and adopted. Logistically, this is all possible but it may result in election delays.


ELECTION RULES. Election RulesAll associations must adopt new election rules to comply with SB 323. Failure to do so could subject elections to legal challenge and may result in new elections, monetary penalties and an award of attorney fees. To avoid this, contact us for new election rules. We offer them at an affordable fixed price.
 
KUDOS

That you are daily providing timely information that helps to navigate these scary times is an outstanding service and a model of everyone doing what they can, based on their abilities! -Kit

Love the mask. -Steve C.

Thank you for the continued communications in these challenging and fast-changing times. I think it’s been a great resource for folks in the industry. -Brian K.

Thank you for continuing to provide informative, useful and appropriately humorous advice during this crisis. We all need to adjust to keep moving forward, thanks for doing your part. -Edward F.

That's funny with a mask, great sense of humor, which is what we need. -Hector T.

Adrian, Thank you for DAILY updates on COVID-19’s effects in the HOAs! Greatly appreciated as an important reference on the issue. -Michael S.


 
Boards can contact us for friendly, professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner
ADAMS|STIRLING PLC
 
Contact us for a proposal for legal services.


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