MAGAZINE
Connect
2 0 2 1 I S S U E T W O • T H E P U B L I C AT I O N O F C A I - G R E AT E R I N L A N D E M P I R E
MANAGI NG SITUATIONS CRIME STORY: EMBEZZLEMENT UNDERSTANDING FLOOD INSURANCE AMENDING CC&RS BY COURT APPROVAL CONSTRUCTION DEFECT CLAIMS DURING COVID
and more!
MAGAZINE
Connect
T H E P U B L I C AT I O N O F C A I - G R E AT E R I N L A N D E M P I R E
W W W. C A I - G R I E . O R G
TABLE
4
of CONTE NTS
Advertisers Index
EXECUTIVE COMMITTEE President Mr. Nick Mokhlessin, BrightView Landscape Services, Inc. President-Elect Ms. Gina Roldan, ProTec Building Services Vice President Mr. Ty Jaglowski, Environmental Concepts Landscape Management, Inc. Secretary Ms. Jessica Sedgwick, CMCA, AMS, Associa-PCM, AAMC Treasurer Ms. Lana Hamadej, PCAM, Avalon Management Group, Inc., AAMC Past-President Ms. Jackie Fromdahl, Painting Unlimited, Inc.
BOARD DIRECTORS Mr. Adam Armit, Andre Landscape Service, Inc. Mr. Patrick Gabriele, Estates at Canyon Crest Riverside, Inc. Ms. Mitzi Jimenez, CMCA, AMS, Associa-PCM, AAMC Mr. Tim Peckham, CMCA, AMS, PCAM, Powerstone Property Management Mr. Robert Riddick, CMCA, Sunnymead Ranch PCA Mr. Robert Serdoz, Elite Pest Management, Inc.
COMMUNICATIONS COMMITTEE Committee Co-Chair and Editor in Chief Mr. A.J. Jahanian, Esq., Beaumont Tashjian
5 President’s Message
Mr. Nick Mokhlessin
6 Stemming A Watery Confusion: Understanding Flood Insurance Mr. Michael Berg
8 Editor’s Link
Mr. A.J. Jahanian, Esq.
9 CLAC: Buck-A-Door Program Overview 10 EXCLUSIVE INTERVIEW Crime Story: Embezzlement MS. Terri Guest
13 Director’s Message Mr. A.J. Keefe
15 The Importance of Effective Communication: During a Construction Defect Claim in the New Normal Mr. Ritchie Lipson, Esq.
19 Education Overview Manager and Homeowner Leader Education in 2021 CAI-GRIE Chapter Staff
20 Help Me, Honored Judge... You’re My Only Hope: 5 Tips to Successfully Amending Your CC&Rs by Court Approval Mr. Daniel C. Heaton, Esq.
23 Community Now! 2021 CAI National Annual Conference and Expo
13 2020 TOPS Awards: The Winners
Committee Co-Chair Ms. Kimberly Lilley, CMCA, CIRMS Berg Insurance Agency Committee Member Mr. Eric Zarr, CMCA, AMS, FirstService Residential, AAMC
CHAPTER STAFF Executive Director Mr. AJ Keefe, CAI-Greater Inland Empire Director of Marketing and Design/Production Mr. Sean Floody, CAI-Greater Inland Empire Administrative Assistant Ms. Elda Pfitzinger-Thomas, CAI-Greater Inland Empire All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Connect or the Community Associations Institute–Greater Inland Empire Chapter. Information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting or other professional services and should not be relied upon without the consultation of your accountant or attorney. Connect is an official quarterly publication of Greater Inland Empire Chapter of the Community Associations Institute (CAI–GRIE). The CAI– GRIE Chapter encourages submission of news and articles subject to space limitation and editing. Signed letters to the editor are welcome. All articles submitted for publication become the property of the CAI– GRIE Chapter. Reproduction of articles or columns published permitted with the following acknowledgment: “Reprinted with permission from Connect Magazine, a publication of the Greater Inland Empire Chapter of the Community Associations Institute.” Copyright © 1998–2021 CAI-Greater Inland Empire Chapter.
CONTACT Advertising, Articles or Correspondence CAI-GRIE Chapter Headquarters 5029 La Mart Dr, Ste A • Riverside, CA 92507-5978 (951) 784-8613 • info@cai-grie.org CAI-GRIE Chapter CAI-GRIE.org
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CAI–GREATER INLAND EMPIRE The CAI–Greater Inland Empire (GRIE) Chapter hosts educational, business and social events that provide the Chapter’s Business Partners various opportunities to promote their companies’ products and services to Community Association owners and managers serving the Community Association Industry. It is expected that all participants in Chapter events – whether they be educational, business or social – will conduct themselves in a professional manner representative of their business or service organization so as not to detract from the experience of others seeking to benefit from their membership in the Chapter. For more information, visit cai-grie.org
Advertisers Listed Alphabetically by Company Company
Page/Location
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CONNECT MAGAZINE • ISSUE TWO 2021
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PRESIDENT’S MESSAGE MR. NICK MOKHLESSIN
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he first few months of 2021 have been exciting. As more and more venues are opening back up we are seeing face to face to face events again. The feedback from the recent events have been amazingly positive. I have had calls from members of other chapters and how impressed they have been seeing the Greater Inland Empire chapter planning and holding safe, responsible events that are still engaging and fun. The chapter staff continues to work diligently with the committees to ensure that our events for 2021 continue in this positive trend for the rest of the year. I look forward to seeing more of you at the upcoming events: May 4 – Education Expo Star Wars Theme – SilverLakes - Corona May 14 – Cornhole Tournament – Citrus Historic Park – Riverside June 24 – Country Fair – Long Shadow Ranch Winery – Temecula
visit cai-grie.org Volunteer Today!
O P F *List as of April 16, 2021 ISSUE TWO 2021 • CONNECT MAGAZINE
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STEMMING A WATERY CONFUSION –UNDERSTANDING FLOOD INSURANCE BY: MR. MICHAEL BERG, CIRMS, CMCA, MBA, BERG INSURANCE AGENCY
A
rose, by any other name, may smell as sweet. But a flood by any other name is just a watery mess. It might be that a pipe bursts in a home and floods rooms and hallways, or a levee breaks somewhere upstream and washes out a town. The cost of repairs to damaged property can be, and likely will be, extensive. In a general perspective, a flood can take on any number of imagined or perceived incarnations. But in the insurance world, a “flood” is a very specific event. Luckily, a property owner can buy insurance to cover the mitigation and repair costs of the loss. With the purchase of an insurance policy, an insured may receive financial assistance for costs associated with property repair after a loss. The insurance company defines a number of events, called “perils,” for which that assistance will be available. And, as a rule, “water” is an excluded peril. This is because water can damage property in many different ways. So, to clarify, insurance companies add coverage for certain occurrences of water damage, and then define those occurrences. For example, imagine a home or condominium unit with a burst pipe under the kitchen sink. Water is everywhere, but that’s not the event, water isn’t the peril. The peril is the sudden discharge of water from
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a plumbing source. When that happens, the insurance company will provide assistance with the cost of repairs (subject to other policy conditions, of course). Or, maybe water has backed up through a toilet and spilled some very unsettling debris onto the bathroom floor. Water isn’t the peril. The peril is the backup of a sewer or drain. If that peril is covered by the insurance company, the insurance company will assist with the cost of cleanup and repairs. So what about water that inundates large portions of land, or water that flows out of a lake or reservoir after a dam fails? Well, water isn’t the peril. In this case, the peril is flood. Insurance carriers define a flood as: A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area, or two or more properties from: • Overflow of inland or tidal waters • Unusual and rapid accumulation of runoff of surface waters from any source • Mudflow If a property is located in a normally dry area as defined above, and it is overrun by surface water, water isn’t the peril. The peril is a flood, and if flood insurance had been purchased by
the property owner, then the insurance carrier will be tapped to assist with the cost of repairs. How does a property owner know if they should purchase flood insurance? The Federal Emergency Management Agency (FEMA) has mapped and identified locations in relation to flood risk. The Agency maintains a rating scale for these locations known as Special Flood Hazard Areas (SFHA). The scale includes a requirement for the purchase of flood insurance for properties located in regions of particularly high risk of damage caused by a flood. If a property is in an SFHA where flood insurance isn’t required, the owner may still make the purchase if it gives them peace of mind. However, if flood insurance is required by the SFHA zoning, financial institutions will require the purchase of flood insurance in order to secure a property loan. What is in a name? Well, for insurance carriers, quite a lot. Your property may be flooded, but it may not be a “flood.” Find the actual source of the water to determine how insurance may play a part in property repairs. Michael Berg, MBA, CIRMS, CMCA is the owner of Berg Insurance Agency and may be reached at michael@ berginsurance.com
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EDITOR’S LINK MR. A.J. JAHANIAN, ESQ. BEAUMONT TASH JIAN
T
his edition of Connect brings us more unique insights from esteemed contributors, as our CAI-GRIE chapter continues on its “Journey to the Top”. As we finally begin to sense normalcy following a unique and trying year, now, more than ever, we rely on our community’s devoted experts and association volunteers, to guide us through both familiar and new challenges ahead. With this second issue of Connect for 2021, our authors discuss effective handling of construction defect claims and venturing through the cumbersome process of amending CC&Rs through the court system, among other critical topics. These articles and more, will certainly provide community leaders with the tools necessary to effectively respond to these issues and elevate the Greater Inland Empire through 2021 and beyond. As always, it is my pleasure to serve as your Editor of Connect magazine. We will continue to use Connect as an opportunity to show that, with the help of volunteers and readers like you, no challenge is too great for our chapter.
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Y R O T S E CRIM BY: MS. TERRI GUEST, CIRMS, CMCA, BERG INSURANCE AGENCY
I
t seems that, more and more in our industry, we hear about community associations being taken advantage of by those they should trust. Community managers, members of the boards of directors and even vendors conspire to embezzle funds from the associations they work with. These people are often seen as criminals who care nothing for those from which they steal. Their co-workers and fellow board members feel tricked and taken advantage of, believing they never really knew them at all - thinking that those they believed were friends were actually faking it just to make a cash grab. I’m here to tell you another side of the story. I’m an insurance agent who specializes in community associations. One of my best friends was convicted of embezzlement from a company we both worked for, and I had no idea. There were clues, but I didn’t realize what was really going on because she was my friend, and I didn’t believe she could be capable of something like that.
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While the company is not part of the CID industry, I thought it might be helpful to interview her; to share the other side of the story in order to provide help and hope. To protect her identity, we will call her “Mary” (M). T: How did this start? M: I was in a relationship with someone. He informed me that he had used my work credit card to purchase flights for his daughter for custody visits. I freaked out, but instead of turning him in, I became scared and selfish and decided to try and figure out how to fix things at work. But I wasn’t scared enough to make positive choices. I guess I was more scared of getting caught and losing my son. I then continued to make bad choices and used the card myself to help get my stepdaughter flights, as well as pay for food and some bills in an attempt to get us caught up. It was not rational, it was not right, but that is what happened and is the sad, embarrassing truth.
always been the rock, the friendly shoulder. Dumped by the boyfriend? Call Mary. In trouble with the parents? Call Mary. Looking back, I realize she rarely reached out to anyone for help. We were all so close, but we had no idea that her world was imploding. There were signs, but we didn’t see them until it was almost too late. T:
T:
Did you feel like you were owed this money by the company? Did you feel like it was making up for something? M: No, that wasn’t the feeling. They didn’t owe me a thing. I made the choice to allow what happened and continued until I could no longer look at myself in the mirror. I remember visiting “Mary” on vacation with my family. We stopped at a store to pick up some souvenir t-shirts. She picked out a super cute leather jacket and decided to buy it. When she pulled out the company credit card, I questioned her about it. She assured me that she always paid it back and just did it “to get the points”. Because we worked for the same company for many years, and I knew how respected she was there, I reconciled this in my head as a perfectly logical answer. In truth, it wasn’t. T:
Did it feel wrong, or did you mentally reconcile it in some way? M: Absolutely it felt wrong. I kept telling myself “just one more ticket or some more groceries or an electric bill and then I’ll stop.” It wasn’t all the time, it came in spurts. But it absolutely felt wrong. That’s why I finally turned myself in—I couldn’t handle what was going on inside my head. The guilt was horrible and painful. I was completely disgusted with myself The thing about “Mary” is that everyone turns to her for advice when they have a problem. I’ve known her since 4th grade, and it has always been this way. In my friendship circle, she has
What were your emotions during this time? M: Money became a struggle and things continued to get more stressful. The guilt then began to set in. As time went on and things weren’t getting better or caught up, I was just deeper in a bad situation. I knew that if I didn’t find a way to stop it, my problems would get so much worse. I hoped that turning myself in would help me some legally. I decided to write a letter to the company explaining everything, guiding them to what they would need once I was gone, providing them with all my logins and passwords. By ‘gone’, “Mary” meant, gone. While she didn’t tell this part of the story when I interviewed her, I know it all too well, and it is the part that breaks my heart the most. “Mary” felt that the only way to protect those that she loved and to get herself out of this terrible situation, was to kill herself. Obviously, she did not succeed, and I am thankful for that every day. So is she, and so are her friends and family. M: My life was good, I was not living on the street, I wasn’t eating out of the garbage bins, I had clothes and was a good mother. When I look back at the events, it is very tough to watch the slow-mo that plays in my head. After a LOT of therapy, I have been able to work on dealing with everything. Personally, I realized the incredible people I have in my life and never want to take that for granted. If it weren’t for my family and friends, I couldn’t have made it through. I am a stronger person today for things I have gone through. I don’t feel like I am dumb or ignorant. I knew right from wrong. I would tell others that none of what happened was worth it on so many levels. It doesn’t affect just you; it affects everyone you know. I will live with the guilt of what I have put CONTINUED ON PAGE 12 ISSUE TWO 2021 • CONNECT MAGAZINE
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everyone through, every day, for the rest of my life. I hope that I never forget or get complacent as I want others to learn from my terrible choices. “Mary” went on to serve 10 months in a work release program and 11 years later continues to pay back the money she owes per the judgement she received. While she no longer has use of any company credit cards, she did discover a similar pattern and helped her employer (who knew of her past) uncover a string of fraudulent charges by the office manager. “Mary” explains how she figured it out: M: The one thing that was strange is she never allowed anyone else to help with the books. She handled all the cash and check deposits as well as paid all the bills. When she was out of the office for a 3-week vacation, she finally allowed someone else to handle reconciliations and deposits. I noticed discrepancies in postings but didn’t want to rock the boat and be wrong. Then, when the decision was made to expand the company, financials were being reviewed by investors. They point blank asked me if I believed if embezzling was taking place (they all knew of my history) and I told them I had suspicions, so we dug deeper. I pulled records from offsite storage and found accounts that the investors knew nothing about. We were able to track cash and checks that were given to her but never posted. “Mary” is still one of my dearest friends, which is how we were able to have some tough conversations to write this article. While she is still the rock and friendly shoulder in our friendship circle, she knows that we have her back and always will. That’s what friends are for. If you or someone you know is struggling with suicidal thoughts, understand that you are not alone. Get the help that you need. The National Suicide Prevention Lifeline provides 24/7 free and confidential support for people in distress, prevention and crisis resources for you or your loved ones. Call 1-800-273-8255 or visit suicidepreventionlifeline.org Terri Guest, CIRMS, CMCA is a Sales & Marketing Rep for Berg Insurance Agency. She can be reached at terri@berginsurance.com
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DIRECTOR’S MESSAGE MR. A.J. KEEFE
CA I -G R E ATER I NL A ND EM PI R E C H A P TER
C
autious optimism reigns supreme as we progress further into 2021. There are a few great indicators that lead us to believe we are on the right track like Axe Throwing in March 2021 having more attendees than Axe Throwing in January 2020 and our Mini Golf Event having close to 70 players attend as a new event. These outcomes breed optimism along with more positive news such as our golf Tournament with every tee booth sold and 144 golfers in the field. What a great trajectory for our chapter and reason to be optimistic on our journey to the top. With any journey though you must remain cautious because one false step or gust of wind can take you off the path. Our gusts of wind are coming by way of venues re-opening later than anticipated and the possibility of changing dates or venues. We have come across this with mini golf, multiple expos, our bowling tournament and even our National Conference. We wanted to let you know that we are always acting in your best interest when confronted with these obstacles. We take multiple things into consideration when searching for a solution such as your schedules, event quality, geographical location, participant attendance, and overall value. This is occurring so much less than last year but nonetheless we have had to reschedule events and were are extremely grateful for the patience you have all provided us. Keep an eye out for the ever changing updated calendar of events!
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TEAM OF 2 SPONSOR • Accurate Termite & Pest Control • Animal Pest Management Services, Inc • BrightView Landscape Services • Environmental Concepts Landscape Management, Inc. • Hutton Painting • Jain Irrigation Inc. • Painting Unlimited, Inc. • Prendiville Insurance Agency • ProTec Building Services
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THE IMPORTANCE OF EFFECTIVE COMMUNICATION
DURING A CONSTRUCTION DEFECT CLAIM IN THE NEW NORMAL! BY: MR. RITCHIE LIPSON, ESQ. , KASDAN TURNER THOMSON BOOTH LLP
E
ffective communication within a homeowners’ association is always important. Once an association brings a construction defect action against the builder, communication and cooperation among the board, community association manager, and the construction defect attorney become essential. With the outbreak of COVID-19, how we communicate and do business in the future will most likely remain permanently changed. A construction defect action by a homeowners’ association usually begins with a Notice of Commencement of Legal Proceedings under the Calderon Act (Civil Code § 6000 et seq.), which concurrently meets the need for a Notice of the Claim pursuant to SB800. However, before the attorney may prepare such notice, the attorney must investigate the defects in the community and discuss the identified defects with the board and the community manager. This conversation is the key to defining the scope of the action desired by the association. Sometimes, associations are concerned only about a few key issues. Other times, the association has a plethora of concerns about the construction of its community and wish to pursue all issues completely. The attorney, board members, and manager should discuss these issues and the scope before the attorney prepares and serves the requisite notice on the builder. After the notice is served, California provides for certain statutory time frames in which the builder can investigate the claimed defects, provide construction documents to the association, perhaps perform repairs, and for the parties to mediate the dispute. During this time period, the builder will generally want to visually inspect and photograph the claimed
defects. Seeing unknown people walking through the community and photographing various areas can be alarming for some residents. Thus, the construction defect attorney will develop an inspection schedule for the community and send out a representative from the attorney’s office to guide and monitor the builder’s investigators. The attorney will share the schedule with the board and manager who can provide feedback on the schedule and share the schedule with any concerned residents. Good communications with the manager, board, and members is essential at this point. With today’s “new normal” it is important to develop a detailed COVID-19 compliant inspection program that all experts, those for both the HOA and the defense, are required to follow. This protocol should be communicated to owners so that they feel safe from increased exposure, while at the same time keeping the claim moving forward. After the inspections, the builder’s attorney may provide some feedback on the inspections to the association’s attorney. They may also reveal how the builder views the case. The association’s attorney CONTINUED ON PAGE 16 ISSUE TWO 2021 • CONNECT MAGAZINE
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will then share this information privately with the board and manager to develop the best strategy for addressing the defects at mediation, which is part of the Calderon Act. Calderon mediation generally occurs near the end of the 180-day window, after the parties have completed some inspections and consulted with experts. Although not required, board members may attend the mediation as the association’s elected representatives. At the mediation, the construction defect attorney will provide periodic updates to the board members as to the status and progress of negotiations as advised by the mediator. If the mediation is successful, the attorney will provide an update and recommendation to the board as to a proposed settlement and will provide further information or answers to questions that board members may have. If the mediation is not successful, the attorney will provide a recommendation on how to proceed. This recommendation will include the filing of an action in Superior Court or binding arbitration. Again, effective and proactive communications between the attorney and the association client is crucial at this point in the claim. Throughout this process, the construction defect attorney, board members, and community manager must remain in regular, consistent communication to best facilitate the association’s construction defect action on behalf of all members of the community. The diligent attorney will use a combination of methods to keep the board and manager informed and will develop a communications plan at the beginning of the legal relationship. Common methods are weekly or monthly updates sent via email to the manager and board members, regular attendance at board meetings (both in executive and regular sessions, as appropriate), and frequent written updates suitable for sharing with all members during key periods in the process. It seems we have now become comfortable on how to handle meetings via Zoom or some other delivery service. This type of online setting allows boards and owners to ask questions and participate from their own home without any additional risks of exposure to the coronavirus. It has also been our experience that attendance has improved online versus the in-person meetings we conducted pre-pandemic. Ritchie Lipson, Esq. is Director of Client Relations for Kasdan Turner Thomson Booth LLP. The Kasdan Firm has recovered in excess of 1.2 Billion Dollars for its clients. For the past 20 years, Mr. Lipson has worked with commercial investors, municipalities, school districts, homeowner associations and residential property owners, to assist in the fair resolution of their claims for defective construction.
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THE RECOGNIZED AUTHORITY IN COMMUNITY ASSOCIATION LAW FioreLaw.com (877) 31-FIORE
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EDUCATION OVERVIEW MANAGER AND HOMEOWNER LEADER EDUCATION IN 2021 O BY: CAI-GRIE CHAPTER STAFF
ur goal to offer a mix of in-person and virtual education opportunities in 2021 is continuing to move forward. As always, our primary focus is to better serve our members’ individual needs, but now we are also focused on creating comfortable and safe environments as we welcome members back to in-person events. The Chapter Education Committee is working hard to schedule qualified industry experts to present at our Education Expos, but schedule adjustments are unavoidable due to restrictions at some of the venues. As venue restrictions continue to loosen, we expect the scheduling changes will become less of an issue, but appreciate our members’ flexibility and understanding as we move forward. In addition to our four (4) upcoming Education Expos, the M-205 PDMP courses are also scheduled to be in-person. For those looking for a virtual approach, we also have four (4) Online Education Courses on the horizon. Below is a schedule* of all the in-person and virtual education opportunities:
FLEX 20
JUL
21
JUL
27
JUL
28
JUL
5
AUG
TBD *SCHEDULE IS SUBJECT TO CHANGE
AUG
9
SEP
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VIRTUAL
M-205 PMDP VISIT WWW.CAIONLINE.ORG TO REGISTER HELD VIRTUALLY THROUGH CAI-NATIONAL
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BASIC ESSENTIALS: PART 1 LEGAL HELD VIRTUALLY ON ZOOM
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BASIC ESSENTIALS: PART 2 MANAGER HELD VIRTUALLY ON ZOOM
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IN-PERSON
EDUCATION EXPO TOPIC TBD RIVERSIDE, CA
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IN-PERSON
EDUCATION EXPO CONSTRUCTION DEFECT: IT’S ALWAYS RELEVANT TEMECULA, CA
Registration for these opportunities will be announced by email and on the Chapters’ Instagram and Facebook accounts (@CAIGRIE). To register for education or for a complete list of events updated in real-time, visit CAI-GRIE.org. ISSUE TWO 2021 • CONNECT MAGAZINE
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5 TIPS TO SUCCESSFULLY AMENDING YOUR CC&RS BY COURT APPROVAL BY: MR. DANIEL C. HEATON, ESQ., RICHARDSON|OBER|DENICHILO
B
y all accounts, amending your association’s CC&Rs is one of the most important, yet potentially difficult, challenges for California community associations. The need to amend CC&Rs was placed at the top of many communities’ 2021 agendas with the passage of Assembly Bill 3182, which prohibits unreasonable rental restrictions and limits an association’s ability to place caps on the number of rentals. AB 3182 also includes a requirement that all California associations amend their Governing Documents to conform to the new law “no later than December 31, 2021.” (Civ. Code § 4741(f).) An association that refuses to comply could face a civil penalty of up to $1,000, as well as pay attorney fees to the complaining party. (Id. § 4741(g).) 20 |
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Most associations have a difficult, if not impossible, time obtaining sufficient participation from their members to amend CC&Rs and Bylaws. The problem of “voter apathy” is often compounded by CC&Rs that require that amendments be approved by a “supermajority” (i.e., 67% or 75%) of the membership. This can make it very difficult for an association to make important and necessary changes to the CC&Rs through the regular voting process. Fortunately, all hope is not lost. The Civil Code provides an additional method to obtain approval of amendments to CC&Rs when an association is unable to garner the percentage of votes required by the CC&Rs themselves. Civil Code section 4275 allows an Association to “petition the superior court … for an order reducing the percentage of affirmative votes necessary for such an amendment.” This provides “a safety valve for those situations where the need for a supermajority vote would hamstring the association.” (Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472.)
advance by sending notices that include the purpose and rationale for proposed amendment, or include that information with the ballots. Document all efforts made by the Board or the association’s management to encourage the owners to participate and vote. If the number of ballots returned is well below the threshold required by the Governing Documents, consider postponing the opening and counting of the ballots so that additional efforts can be made (posting notices, sending email blasts, holding townhome meetings, or even direct calls) to encourage owners to return their ballot. Not only will this increase the chance that a regular vote may be successful (possibly eliminating the need for a separate petition), but it also demonstrates to the Court that the association has done all it can to encourage member voting. TIP #2: DON’T STOP AT FIFTY PERCENT (“There’s Always a Bigger Fish”) To qualify for relief through the petition process, Section 4275 requires that at least 50% of the membership vote in favor of the amendment. (Id. § 4275(c)(4).) However, keep in mind that the Petition is a discretionary process, which means that the Court is not required to grant the association’s request just because the minimum statutory requirements are met. The higher percentage of affirmative votes, the better chance that the Court will view the proposed amendment as something that the community desires. Continue to engage in the above efforts to encourage additional participation until enough ballots have been returned to provide a greater than 50% approval of the measure. Civil Code section 4275 contains a host of procedural “hoops” an association must jump through before the Court can exercise its discretion to relax the amendment requirements found in the Governing Documents themselves. The following tips will increase an association’s chance for success in its efforts to amend its CC&Rs through a Section 4275 court petition
Governing Documents and the Civil Code. (Civ. Code § 4275(c)(2).) The association is also required to make “[a] reasonably diligent effort … to permit all eligible members to vote on the proposed amendment. (Id. § 4275(c)(3).)
TIP #1: FRONT LOAD THE PROCESS (“In My Experience There is No Such Thing as Luck”)
Thus, the stronger the association’s efforts to (1) educate and inform members regarding the reason and need for the proposed amendment, and (2) provide opportunities to encourage and permit all eligible members to vote on the proposed amendment, the more likely the Court is to grant your Petition.
A Section 4275 petition should not be viewed simply as an “alternative” to the regular voting process. Balloting on a proposed amendment must be conducted in accordance with the
Because the association will be required to demonstrate to the Court that each proposed amendment is reasonable (id. § 4275(c)(5)), have that discussion with the membership in
TIP #3: ENSURE THAT THE PETITION MEETS ALL PROCEDURAL REQUIREMENTS (“Do. Or Do Not. There is No Try”) Section 4275 outlines several procedural requirements that must be included in an association’s Petition or else the Court will either require supplemental papers leading to unnecessary delay, or worse, simply deny the Petition outright. For this reason, experienced legal counsel should be involved throughout the process so that they can guide the association in the steps that are necessary to fashion a petition that not only meets all the statutory requirements, but also presents the material in a manner that is easily digestible for the Court. CONTINUED ON PAGE 22
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At a minimum, the Petition must describe: • The efforts made to solicit approval of the members as required in the CC&Rs; • The number of affirmative and negative votes received; and • The number or percentage of votes required to approve the amendment under the CC&Rs. The Petition must also include copies of the following documents as exhibits: • The association’s Governing Documents; • A complete copy of the amendment; • Copies of any notice and solicitation materials used to solicit member approval; • A brief explanation of the reason for the amendment; and • Any other document relevant to the Court’s determination. TIP #4: ASSIST IN EDUCATING THE COURT (“Stay on Target”) Judges are not always familiar with the various provisions of the Davis-Stirling Act, or community associations in general. Moreover, many judges have never encountered a CC&Rs amendment petition under Civil Code section 4275. Take every opportunity to educate the Court regarding the various statutory requirements and the next step in the court approval process in order to fashion a favorable court order. Section 4275(b) provides that upon filing the Petition, “the [C]ourt shall set the matter for hearing and issue an ex parte order setting forth the manner in which notice shall be given.” Notice to the homeowners must be provided at least 15 days prior to the hearing on the Petition. (Civ. Code § 4275(c)(1).) The more you guide the Court as to the next step in the process and show that everything requested is tied to the specific provisions of Section 4275, the quicker and easier that process becomes. TIP #5: COMMUNICATE WITH MEMBERS TO REDUCE INFORMAL OPPOSITION (“I Find Your Lack of Faith Disturbing”) While rare, some members of the association may formally oppose the Petition. Generally, if there is a vocal (or even significant vote-driven) opposition to the proposed amendment, the association should consider what concessions are needed to the amendment itself to garner more universal support. Even in circumstances without votes against the amendment, some homeowners may later send an email to the Board, management, or even legal counsel that broadly expresses opposition to the proposed amendment and the Petition. Encourage and be receptive to an open dialogue with the members for transparency and to understand the nature and extent of the position of the membership on the amendments. That may lead to owners withdrawing their opposition and even changing into voices of support. If your association is unable to reach the oft unattainable “supermajority” approval requirements of most CC&Rs, all hope is not lost. Effectively using the Court approval process in Civil Code 22 |
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section 4275 will help your Association comply with this new statutory obligation to amend your Governing Documents. Daniel C. Heaton is a Senior Associate at Richardson|Ober|DeNichilo LLP, specializing in litigation on behalf of community associations throughout California. For more information, please visit rodllp.com.
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