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PENALTIES CAPPED
AT $100
 The Legislature in Sacramento seems to specialize in bad legislation. A bill that was signed into law on Monday and went into effect yesterday is truly awful. The bill changes disciplinary procedures effective immediately.
Moving forward, boards cannot impose fines more than $100 per violation. If an association’s fine schedule has penalties less than $100, the lesser amount must be used.
Written Findings. The statute makes an exception if the violation would result in an adverse health or safety issue on the common area or another member’s property. The Legislature then complicated matters by requiring boards to make a written finding specifying the adverse health or safety impact in a meeting open to members. For example, if a resident smokes pot in his unit creating a health issue for the young couple next door with an infant daughter, boards must disclose it to the membership in an open meeting and include their finding in the minutes. I envision defamation claims.
Meaningless Fines. If an owner turns his unit into a short-term rental in violation of the CC&Rs, he pays a small $100 fine and continues his rental business. The fine becomes the cost of doing business. The same thing with architectural violations. In wealthy associations, an owner could reach into his wallet and pull out a $100 bill to pay a meaningless fine and continue violating the rules.
Right to Cure. The amended statute gives members the right to cure the violation prior to the hearing. They always had that right. That is the whole point of a hearing--to induce compliance with the rules. If curing the violation would take longer than the time between the notice of the hearing and the hearing date, the board cannot impose discipline if the person provides a financial commitment to cure the violation--whatever that means.
IDR. If the person does not agree with the board's decision, he/she can request internal dispute resolution--another meaningless addition to the statute since members already have that right.
Notification. Another change is the notification requirement. Instead of fifteen (15) days, boards must give the person written notice of the board's decision within fourteen (14) days or the board's decision is void.
Once associations revise their disciplinary procedures, they must notify members individually. Posting them on the association's website is not sufficient. The new procedures must be mailed or emailed to members in accordance with the preferred delivery method specified by each member.
RECOMMENDATION: Boards need to revise their fine schedule to comply with the new requirements. Their enforcement procedures will need to adjust their fine schedule, include members' cure rights, add an IDR option, include written resolution procedures, and add the new time frame for notifying members of disciplinary actions. Boards can contact us for assistance.
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Join Adrian Adams and Laurie Poole on July 16 at 12:00 noon for a special webinar, where they will answer your legal questions and dive into today’s issues.
QUESTION: Can the interest gained on the investments in the reserve account be put into the operating account to offset the taxes? -John C.
RESPONSE: Yes, it can. As I pointed out in our last newsletter, if the interest is part of your reserve study's funding plan, it stays in reserves. If your reserve analyst calculated the interest earned as net after tax, it can go toward taxes. Boards should work with their reserve study provider and their CPA to decide which is the best approach for their association.
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DISCLAIMER. Our newsletter provides commentary, not legal advice. Boards needing legal advice should have an attorney review the facts and law for their particular situation. We serve as corporate counsel to California associations.
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