CONNECT 2011 Issue Four

CAI-GRIE’s mission is: To make a positive contribution to the Common Interest Development Community through education and networking.

connect A Publication of the Greater Inland Empire Chapter of CAI

ISSUE FOUR 2011

2011 TOPS Awards Las Vegas Holiday Style

A) B) C) D) E) F) G) H) I)

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ISSUE FOUR 2011 • Connect with grie

2011 Board Appreciation Article of the Year – Jan Hickenbottom, CCAM, PCAM Association of the Year – Sunnymead Ranch PCA Chairperson of the Year – Deborah Maglasang, CCAM, CMCA 2012 Board of Directors Business Partner of the Year – Rodent Pest Technologies, Inc. 2011 President Ken Carteron and 2012 President Robert Riddick, CMCA 2011 Executive Appreciation 2011 President Ken Carteron

connect Table of Contents A Publication of the Greater Inland Empire Chapter of CAI

www.cai-grie.org

OFFICERS Ken Carteron............................................................................. President Seacoast Commerce Bank Robert Riddick...................................................................President-Elect Sunnymead Ranch Planned Community Association Weldon L. Brown.............................................................. Vice-President Weldon L. Brown Company Lana Hamadej, LSM, PCAM. ................................................... Secretary Avalon Management Group Kimberly Lilley, CMCA, CIRMS ................................................ Treasurer Berg Insurance Agency, Inc. BOARD DIRECTORS Linda Krebs ..................................................... Flower Lighting & Electric Matt D. Ober, Esq., CCAL ........................Richardson Harman Ober, PC Shelly Risbrudt......................................................Bemus Landscape, Inc.

Features 4

Robert Serdoz.............................................. Elite Pest Management, Inc. Alisa Toalson, CMCA, CCAM......Professional Community Management

By Liz Williams

10

What to Look for In Construction Contracts

By Azadeh Saghian, Esq.

14

The Three Step Process for Financing Renovation Projects

By Fred Lewis

16

The Complicated Decision to Pursue (or Not to Pursue) a Construction Defect Claim

By Dennis Althouse, Esq.

Gina Roldan.........................................................Vista Paint Corporation Kristie Rose, CMCA, AMS, PCAM, CCAM.....Merit Property Management

Tips for Managers on the Bidding Process

Gwen Wertz.......................................................... CommerceWest Bank

19

CAI 2011 Legal Forum Casts Off from the Queen Mary

Sherry Neal, PCAM, CCAM ............................................. Past-President

Contributed by the Connect Editorial Committee

Walters Management Chapter Executive Director DJ Conlon, CMCA Administrative assistant Michael Kennedy Editor in Chief Kelly Richardson, Esq., CCAL.....................Richardson Harman Ober, PC Publications Committee Lana Hamadej, LSM, PCAM........................ Avalon Management Group Jan Hickenbottom, PCAM, CCAM........................................... First Bank Kimberly Lilley, CMCA, CIRMS.....................Berg Insurance Agency, Inc. Sherry Neal, PCAM, CCAM................................. Walters Management Nancy I. Sidoruk, Esq. . ...........................Epsten Grinnell & Howell, APC

Departments 2

6

2011 TOPS Awards President’s Message

By Ken Carteron

8

Editor’s Link

By Kelly Richardson, Esq.

12

A Note from the Executive Director

Jasmine Termaine, Esq...................................... Beaumont Gitlin Tashjian

By DJ Conlon, CMCA

DESIGN & PRODUCTION

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Kristine Gaitan..................Rey Advertising & Design/The Creative Dept.

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 Community Associations Institute of Greater Inland Empire Chapter.”

Copyright © 1998–2011 CAI-Greater Inland Empire Chapter.

Advertising, articles or correspondence should be sent to: CAI-GRIE Chapter 5029 La Mart, Suite A • Riverside, CA 92507-5978 (951) 784-8613 / fax (951) 848-9268

CLAC Corner: End of Session Update

By Skip Daum

21

New, Renewed & Rejoined Members

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2012 Chapter Calendar of Events

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2011 TOPS Awards Cover photo courtesy of Antis Roofing & Waterproofing

The Greater Inland Empire Chapter of CAI 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. connect with grie • issue FOUR 2011

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by liz williams

Tips for Managers on the Bidding Process

The selection of a qualified vendor is consistently one of the most important decisions that any board or manager faces. Whether it is for pool service, landscaping, or for asphalt maintenance, having the proper selection process and criteria in place can greatly influence the level of success of your project.

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ISSUE FOUR 2011 • Connect with grie

T

ypically, the process begins with the board issuing a request for bids, but sometimes these requests are vague. Here, the first step for the manager is to gain an understanding of what the board wants. What is the board seeking to accomplish with this project? Does the budget that the board has established realistically support the desired outcome? Answers to questions like these help the manager gain a mutual understanding with the board as well as help set realistic expectations for the project.

The next step is to determine and establish a clearly stated scope of work. For example, in the context of asphalt paving, does the asphalt need to be replaced or overlaid, or will a simple sealcoat and new striping be sufficient? One of the most effective ways to set a scope of work is to hold a job walk with the manager, at least one director, and a select group of pre-qualified and trusted vendors. This allows everyone to openly discuss and establish a scope of work and to establish further clarity as to the board’s expectations for the work. It is vitally important as a manager to insist upon a clear scope of work. Without it, it is almost impossible to arrive at an objective decision regarding the project. Making the commitment to give your board an “apples to apples” comparison allows them to move quickly and with confidence in their final decision.

After that, a vendor must be selected. Unfortunately, we sometimes find ourselves bidding against contractors who are not insured, are not licensed for the work they are

bidding, or who have no license at all. A qualified paving contractor will be able to furnish proof of insurance as well as a C12 – Earthwork and Paving License and a C32-Parking and Highway Improvement License.

To check the status of any contractor’s license as well as their workers compensation insurance status, visit www.cslb.ca.gov. Additionally, get references and ask to see recently completed projects. A reputable contractor will be proud to show you their work. Ensure that only qualified, licensed and insured vendors in good standing are used in your bidding process. The liability involved in using an unqualified vendor is just not worth the risk to your communities’ residents, your clients, or your business.

Now that your pre-qualified vendors have been given a clear scope of work, it is important that they be given an adequate time-frame to produce their proposals. Of course, there will occasionally be that lastminute request that can’t be avoided, and your best vendors will always be glad to help, but rushed jobs increase the probability of mistakes and omissions. In the end, the goal of the association manager and vendor is to present the board with the best possible value and quality for their project and that sometimes takes time.

Your vendor will appreciate it.

Once you have received the bids, the time to review and evaluate them begins. Beware of a strict “low-bid” acceptance policy. What is cheapest can often turn out to be the most expensive. You do not want to accept projects that are either over-bid or Continued on page 6

connect with grie • issue FOUR 2011

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Tips for Managers...

Continued from page 5 under-bid. Not every low bid is bad, particularly with pre-screened vendors and a clear scope, but if a bid looks unusually low, it is usually because something is missing. In that case, call the vendor to confirm the correct scope has been bid. Missing items can add up in the form of change-orders later.

Many times the final cost of a low-bid plus change-orders is more expensive than that of the mid-priced bidder.

Additionally, provide your board the opportunity to meet the competing vendors. Allowing the vendors to present their company and solutions can further help the board gather the necessary information they may require and allow them to have their questions answered in real-time.

Finally, using qualified vendors and proceeding through a well-run bidding

PRESIDENT’s

process, you have provided your board with the proper information to select the service provider for the job. Sometimes the board is ready to move quickly and the work is awarded and scheduled right away. Other times, the awarding of the work is delayed. In either case, communicate changes in the status of the outstanding bid to your vendors and once the work is actually awarded, notify every vendor of the outcome of the bid. You will be contacting these service providers again and clear communication will make future bid requests that much easier for you.

Each bid, each board, and each vendor is different, but hopefully this simple guide can help the manager navigate the vendor selection and bidding processes with some practical steps.

Liz Williams is the Director of Business Development for AMS Paving.

At the CAI-CLAC Annual Planning Meeting in Laguna Woods, CLAC Public Relations Chair Jill Van Zeebroeck presents At-large Delegate Glennon Gray, PCAM (President/ Owner, Euclid Management) with recognition for his efforts on behalf of CAI to reduce the potential adverse impact of AB 771.

MESSAGE

2011 was a great year for our chapter. We went “All In to Win”!

At the close of every president’s year I am sure – like myself – we all sit back to reflect on what we accomplished and what we left on the table for the next term.

So, as I reflect, I realized that even while having as much fun as we did, we accomplished some pretty impressive things: • We created a true Business Plan specifically for our chapter which was submitted to National and will be available for updating and utilizing from here forward.

Ken Carteron • The Legislative Support Committee (LSC, formerly CLAC) created a new charter and it was ratified by the Pacific Western Bank board.

• The LSC – with the generous donations of the entire chapter has exceeded our annual goal contributions for a second year in a row.

• We established Electronic Voting for our Annual Board of Directors election.

• We instituted electronic registration for events.

• We established a formal policy for measuring our Executive Director's performance.

We accomplished the Treasurers goal of having enough cash in the bank that we have a nest egg for the first time in several years (if not the Chapter history).

We did all of the above while having the most fun I have had in this chapter in a long time. We truly stayed with the 2011 Chapter Theme. We “ante’d up” and “went all in”… and we believe all members DID win!

In closing out my year, I would like to thank all of my committees for their efforts and their support! Thank you also goes out to my board of directors and especially to my executive board – “Four of my Best Hands…” However I (we) could not have accomplished half as much as I (we) did in my term without one of the best Executive Directors in the industry pushing me through this year. Thank You DJ! Ken Carteron 2011 Chapter President

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ISSUE FOUR 2011 • Connect with grie

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It is truly amazing to realize the fourth and final issue of Connect Kelly G. Richardson is Co-Founder and Managing Partner of Richardson Harman Ober PC. Mr. Richardson is also the Managing Editor of Connect magazine and Chair of the magazine committee.

of the year is already complete, and with it my term as 2011 Editor. I hope you have enjoyed

these four issues, including this last one. I look forward to working on the committee with Betty Roth Member FDIC

*CDARS is a service mark of Promontory Interfinancial Network, LLC. FDIC Insured up to $50 million per Tax ID.

as Editor in 2012 and, continuing to work to build Connect and of course the Greater Inland Empire Chapter.

The magazine this year has been blessed with an amazing committee. I started to list the “MVPs” but realized that so many have been outstanding this year in writing, in finding authors, in developing topics, and in helping develop the four themes which we presented this year. So, thanks to the entire Committee. Also thank you to DJ Conlon… much of the magazine’s layout, appearance and quality is because she puts many hours into each issue as well.

Enjoy this issue, themed on construction and repair questions, and look for continuing great things from Connect and the Chapter in 2012.

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ISSUE FOUR 2011 • Connect with grie

connect with grie • issue FOUR 2011

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By Azadeh Saghian, Esq.

What to Look for in Construction Contracts

B

oard members and managers often have to hire contractors, and most know that contractors should be licensed and insured. But what other items should laypersons look out for when evaluating a construction contract? Consider some of the following recommendations.

Parties. The names of the parties to the agreement should be specified.

The contracting party is the HOA. The directors will sign the contract on behalf of the HOA. Scope of Work. The scope of work stipulates what will be the exact nature of the work to be performed. The more details the scope of work provides, the better. An ambiguous or incomplete description of the project may give rise to disagreements and make it difficult to hold the contractor accountable for the contracted work.

Permit. Many construction projects require permits from the city.

The contract should specify which party will pay for permit fees. Proper documentation of permits should be submitted to the HOA. License. The contractor should have the appropriate licensing issued by the state of California. The Contractors State License Board (CSLB) protects consumers by licensing and regulating California’s construction industry. There are about 300,000 licensed contractors in the state. CSLB activities include administering examinations to test prospective licensees, issuing licenses, investigating complaints against licensed and unlicensed contractors, issuing citations, suspending or revoking licenses, and seeking administrative, criminal, and civil sanctions against violators. In fiscal year 2010-11, CSLB helped recover nearly $45 million in ordered restitution for consumers.

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ISSUE FOUR 2011 • Connect with grie

Insurance. The contractor should obtain worker’s compensation and liability insurance. Certificates of such insurance and copies of the insurance policies should be provided to the HOA. Worker’s compensation insurance protects the HOA in case a contractor’s employee is injured while on the job.

Liability insurance protects the HOA from claims of bodily injury or property damage. Excess liability coverage is always a good idea. It is usually used to supplement the general liability policy.

The contract should specify that any deductibles or self-insured retentions must be declared to and approved by the HOA. The contract should also specify minimum limits the contractor must carry and whether the association is named as additional insured on the policy.

Payment. The amount and schedule of payment must be specified. Progress payments are the norm, oftentimes in the form of percentages based on the completion of different phases of the project. A percentage, usually 10%, is retained by the association at the conclusion of the work until everything is signed-off.

Time of Essence. Contractors are notorious for delays in completion time of projects. A time is of the essence clause ensures that contractors, to the fullest extent possible, carry on the work in a timely manner. The contract should specify that progress payments may be withheld in whole or in part should the contractor fail to comply with the time of essence clause.

Indemnification. Indemnification clauses are important because they ensure that the contractor will “defend, indemnify and hold harmless” the HOA and its respective directors, officers, agents, and employees from claims or liability arising out of the contract. The indemnity clause should apply to any wrongful or negligent acts or omissions committed by the contractor or the contractor’s agents, employees or subcontractors.

Warranties. If the contractor promises to stand behind contractor’s work, be sure to include that promise in the contract.

The manufacturer’s warranty against defects in the building material product is also important to note.

Continued on page 12

connect with grie • issue FOUR 2011

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What to Look For...

Continued from page 11 Providing and Storing Materials. The contract should specify which party (the contractor or the HOA) is responsible for providing the materials, equipment, tools, machinery, water, light, heat, utilities, transportation and other facilities and services necessary for the execution and completion of the project. The location where the materials will be stored should be specified.

Attorney Fees. Without an attorney fee provision, typically each side bears their own fees and costs.

Governing Law. The governing law clause specifies that the contract will be governed by the laws of the state of California.

While the above list is by no means exhaustive, it should provide managers and board members a good starting point for important terms to be included in all construction contracts.

Terminating the Contract. If work is not performed satisfactorily, there should be a provision for terminating the contract.

Claims Procedure. When a contract has been breached, the courts often look to the terms of the contract itself for guidance.

The claims procedure section of the contract should specify how each party may bring a claim against the other (i.e. “In the event of any dispute, controversy or claim arising out of this contract, the parties agree to resolution by binding arbitration with the American Arbitration Association” or another recognized dispute resolution provider)

Azadeh Saghian is an attorney with the law firm of Adams Kessler, PLC

A note from the Executive Director As we wind down 2011, I reflect on

doesn't matter what their need is...we have a member that can

what a great year we have had in

help. This is what we do...we serve this industry for the benefit

spite of the still struggling economy.

of community associations. Reach out and make them aware

You as members have come together

of us!

and helped build this Chapter back DJ Conlon, CMCA Chapter Executive Director

I'm proud to announce two things that our Chapter is

to one of the best Chapters in

hosting in 2012. First, the PCAM Case Study is being held in

California. Together we have increased

the Greater Inland Empire. Managers, if you're working toward

membership, increased revenues and I

your PCAM, get those last minute classes in and take the

think most of all, increased awareness of each other and how

case study right here in your own back yard! Second, the 3rd

we all work together. It isn't just one membership category

Annual CAI Legal Forum: California Communities that is hosted

that makes this work…it's all three: Communities, managers

by the eight California Chapters as well as CLAC is being held

and business partners. I think that everyone took President

at our very own Pechanga Resort & Casino! Yes, we are the

Ken Carteron's theme and literally "Went All In" and from my

geographical "host" Chapter. This is very exciting and I want to

viewpoint...we all won!

extend an invitation to serve on one of the various committees

In 2012, the Chapter will have its first Community

that work to put this event on. If you missed it on the Queen

Volunteer Leader President..in other words, our first Chapter

Mary this year (see recap article on page 19), you don't want

President that is a homeowner/board member as their

to miss next year. Let's show the rest of California what a great

membership category. Robert Riddick is excited about next

chapter we are by putting on the largest and best event so far!

year and brings a positive outlook and energy to everything

In closing, I want to thank the 2011 Board of Directors, all

he does. I'm looking forward to not only working with him

the Committee Chairs, Committee Members and the rest of the

but I want to help him fulfill his vision for the Chapter which

membership for a great year! You all rock!

is to increase our community association membership and really reach out to associations and their board of directors and let them know that we're here to educate and help them. It

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ISSUE FOUR 2011 • Connect with grie

See you in 2012.

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connect with grie • issue FOUR 2011

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By FRED LEWIS

The 3 Step Process for Financing Renovation Projects

Homeowner association loans are available and may be easier to obtain than you think from financial institutions which have departments or divisions specializing in homeowner association banking services. The requirements for obtaining a loan are straightforward and can be determined ahead of time during the early stages of planning a renovation project.

There are three major areas to review in order to be properly prepared to discuss financing the association’s project with a homeowner association lender.

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ISSUE FOUR 2011 • Connect with grie

Identifying the Scope and Cost of the Project To apply for a loan or approach the association’s membership for approval of a special assessment, first establish the scope of the project. Experts in the type of renovation contemplated should be consulted to analyze and develop a comprehensive scope of work. Once the scope of work has been established, arrange onsite meetings with several prospective contractors approved by the board of directors. There may be multiple areas of repair that will require different specialty contractors or a general contractor covering all areas. The goal of the onsite meetings with the prospective contractors is to discuss the specific scope of work already determined for the renovation project and obtain written bids to complete a uniform scope of work. Each contractor will be bidding on the identical scope of work to complete specific areas of the renovation project.

Construction management companies can assist the association in determining the scope of work and costs to complete as well as manage completion of the project. Large projects should have independent oversight to manage completion of the project.

The bids can then be used to prepare the base amount of the association’s project budget. It is important to note that the base cost estimated to complete the project as determined from the bids does not represent the total cost of the project. The project budget should also include estimated legal expenses, management and construction management costs, lending fees, and a contingency amount to cover unforeseen or under estimated costs.

Identifying the Funding and Legal Aspects of the Project The method for repayment of the loan is the second area to analyze. Does the association need a special assessment or has extra cash been allocated in the budget? By adopting a special assessment that allows for member prepayment, the association only needs a loan for the members that do not prepay. If a special assessment is not utilized, a budget line item must be established that provides for sufficient cash flow to repay both loan principal and interest. Regular reserve allocations must be maintained along with other vital services and expenses. This usually requires that assessments be increased to cover the expense of repaying the loan. When a special assessment is used to repay the loan, avoid the mistake of leaving the special assessment revenue and loan repayment expense out of the budget. Special assessment income and/or principal and interest loan payments must be reflected in the association’s annual budget. The best practice is to have all cash flow items anticipated by the association included in the annual budget in

order to manage a potential deficiency in special assessment revenue compared to loan repayment requirements.

Loans are subject to the restrictions of the CC&Rs, Bylaws and Articles of Incorporation. The process of executing legal requirements for special assessments, borrowing money and pledging assets usually requires lead time. The attorney should be consulted early in the process to determine the steps necessary to properly authorize and implement a special assessment and loan. Be aware that a special assessment, borrowing money and pledging assets may have differing requirements for member approval. The governing documents may allow the association to borrow money without member approval. On the other hand, there may be a restriction for pledging assets to a lender for loan collateral which requires member approval.

Financial Forecasting and Cash Flow Analysis The third subject to analyze is the association’s financial position now and during the loan term. Are assessment delinquencies under control? If delinquencies are elevated, check with your prospective lender to determine its underwriting criteria – excessive delinquencies may create a problem for the lender. Make sure that prior owner delinquent assessments are charged off and pursued through collection. Does the association have an up-to-date reserve study? What other components will need to be repaired during the life of the loan? Will projected cash flow be positive during the entire term of the loan?

A lender will require the association to have positive cash flow during the loan term which results in a stable contingency amount remaining for unforeseen repairs after repayment of the loan and scheduled reserve expenses. A lender should be willing to prepare a cash flow projection that can be used to determine whether there will be positive cash flow during the loan term.

The association board should be aware of projected cash shortfalls (negative cash flow) ahead of time in order to make revenue changes that ensure the association will have positive cash flow during the loan term. Be proactive in the management of your association’s cash flow. Make sure that all the association’s cash flow requirements are covered, not just repayment of the bank loan.

With review and preparation completed in these three major areas, you are ready to discuss financing your project with an HOA lender. This will make it much easier to obtain financing for the association’s renovation project.

Fred Lewis is an Association Loan Officer in First Bank’s Association Bank Services Division.

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By Dennis L. Althouse, Esq.

The Complicated Decision to Pursue (or Not to Pursue) a Construction Defect Claim

Y

ou are pleasantly surprised – Homeowners are finally attending meetings en masse. After 6 months, your new association meetings finally have more members than cookies in attendance.

The meeting starts and you find out why they are here. You hear reports of many significant roof and window leaks during the last storm. While you are pleased to finally have a meeting not involving the pool, pets or parking, you now grow concerned that your choice of home investment may have been a bad one.

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ISSUE FOUR 2011 • Connect with grie

You have probably heard horror stories of developers refusing to respond to serious problems. When the developer is not responsive to major problems, the decision to litigate is easy.

But what if the board is only aware of five leaking windows in four units in a 30-unit association? Does that warrant a lawsuit? What about leaking roofs in five of twelve buildings? At what point does filing a lawsuit make sense for an association? What factors should be considered?

Although there are many factors that may affect the

decision to file a lawsuit, some of the most fundamental considerations are: • The extent of the defects and the anticipated repair cost; • The potential of future damage and the urgency of repair; • The association’s ability to finance repairs on its own; • The association’s ability to forestall repairs for the 18 to 24 months while the pre-litigation and litigation processes run their course; • The homeowners’ interest and willingness to endure the claim process; and • The applicable statute of limitations.

3. The Association’s Ability to Finance Repairs on Its Own The ability to finance repairs will, of course, largely depend upon the cost of the repairs and the association’s financial resources. Unfortunately, one typical obstacle for new associations is the

developer’s failure to adequately set up the association’s reserves, thereby leaving it without the necessary funds on hand to make repairs, let alone significant repairs.

If sufficient funds are not available, the association may also consider a special assessment or a loan to finance repairs.

Continued on page 18

1. Nature and Extent of Problems This is the greatest consideration – and one which will require consulting construction experts. Leaking windows, roofs and plumbing could arise from a much larger systemic problem, or might merely be isolated events requiring simple repairs. The expense of a construction consultant to determine the cause and extent of the problems, and a rough estimate of the cost to repair, is money well spent and a critical initial consideration. It may be that the problems can be easily repaired, in which case your decision is also easy. If the problems prove to be complicated or expensive, then your investigation and decision process must continue.

2. The Potential Damage to the Association Property and the Urgency of Repair The board must take all reasonable steps to mitigate and prevent damage.

Again, expert input will help weigh the risks of delaying repairs while litigation is ongoing against the immediate necessity of repair. Ultimately, the board must recognize and fulfill its fiduciary duty to take what action is necessary, even if it means imposing an unpopular special assessment.

In addition, the board must decide whether to make permanent repairs or interim repairs until further funds can be obtained through litigation.

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The Complicated Decision...

Continued from page 17 4. The Association’s Ability to Wait 18 to 24 months for Repairs While the Pre-litigation and Litigation Processes Run Their Course Once it is aware of the problems, the association must determine whether it can forestall permanent repairs, such as a total roof replacement, or get by with no repairs or interim repairs during a period of pre-litigation and possible subsequent court action. A construction defect claim for new associations starts with the prelitigation procedure outlined at Civil Code Section 895, et seq. (“SB 800”).

The SB 800 pre-litigation phase typically takes about 6 months to complete, assuming the process is followed to completion. Often, and unfortunately, it is a much shorter process due to developer non-compliance or disinterest.

If the SB 800 process is unsuccessful, the association may file a lawsuit. Once filed, a typical construction defect case will take 18 to 24 months from initial filing to trial. During this time period, and depending on its finances, the

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ISSUE FOUR 2011 • Connect with grie

association will have to deal with the ongoing problems, temporary repairs (and complaints from owners about the difficulty of selling or refinancing homes).

5. The Homeowners’ Interest and Willingness to Endure the Claim Process While the board is the ultimate decision-maker on the issue of pursuing a lawsuit, it will need the assistance of its owners. Residents will need to cooperate with multiple inspections of the property and individual units, testing and documentation of damages. Interested owners make this job much easier, while disinterested owners can become obstacles. In the end, the board needs to decide what it must do to protect the interests of the association as a whole, rather than worry about whether the owners are willing to assist in the pursuit of litigation. Typically, most owners will understand the importance of the claim and will support the board’s actions as a means of protecting everyone’s investment.

6. The Statutes of Limitation There is no point in pursuing claims barred by a statute of limitations, so it is important to, as soon as possible, determine which statutes of limitations may apply to the various defects identified. While there is an outside ten year statute of repose (CCP Section 337.15), many defects now have shorter statutes of limitations, some as short as 1 year, under SB 800. If the time has expired, there is no point in pursing litigation. If the time is about to expire, litigation may need to be filed immediately.

Once a board has considered these factors, it should be ready to make the decision. (Make no mistake, this is a board decision which cannot be delegated to the membership.) After making the right decision, the board and the community can move forward in the direction which best serves that community.

Dennis Althouse is a Partner with the law firm of Richardson Harman Ober, PC.

CAI 2011 Legal Forum Casts Off from the Queen Mary contributed By the Connect Editorial Committee

T

he second annual CAI Legal Forum: California Communities was held on October 21, 2011, at the Queen Mary in Long Beach.

For those who have never been to the Queen Mary, the “on ship” feel really made it a unique setting for a conference as opposed to the typical hotel ballroom. The Legal Forum was hosted by CAI’s eight California chapters and CAI’s California Legislative Action Committee, and provided updates and information on legal requirements affecting community managers, association board members and other homeowners. The day’s programs were offered on two tracks, one for community managers and one for board members and other community leaders. The programs were presented by expert panels, including government officials, seasoned management professionals and attorneys who practice in the area of common interest development law. They included a variety of topics designed to inform attendees on the latest updates to applicable laws and regulations, as well as modern communications and management tools used by homeowners, managers and business partners.

The morning session provided several options, as was the case throughout the day, and this led to a difficult choice as to which programs to attend. While this writer is always interested in hearing what other lawyers advise regarding management of architectural standards, my personal interest in social media won out, and I opted to attend the session on Communications in the Social Media Age. This is an area that I believe will be of increasing importance in the next few years, as association members will increasingly turn to tools such as Twitter and Facebook to express their opinions. As a result, boards and managers (as well as the association’s legal counsel) need to understand these tools in order to properly use them to effectively respond to association members, and also to leverage these communication tools for the benefit of association members and boards. The program even highlighted the ease of using tools like Twitter, by having the audience “tweet” questions during the presentation, highlighting how many in the audience were already

using these social media tools.

Given that the event was the CAI “Legal Forum” several sessions were devoted to providing legal information for managers, including “Manager Legal Musts from A to Z,” which covered everything from assessments to zero delinquencies in 90 minutes, and a session for managers explaining the boundaries between acting as a manager and inappropriately acting as a lawyer by giving advice to a board. A separate session provided legal basics and an introduction to Community Association Law for Board Members and other homeowners. Other sessions provided updates on the Builder Fix It Law (SB 800), and updates on pending changes to Federal Mortgage regulations.

Steve Ford presented the lunchtime keynote address, focusing on the importance of character, integrity and how time and people change. One telling example of how we must all be able to adapt and change was a story Mr. Ford told of a Russian doctor who operated on his father, former President Gerald Ford, to save his life after a stroke, who spoke to Steve after the operation and told him, “When I was a boy, your father was my enemy, now I am one of the doctors trying to save his life.” The keynote was described by one attendee as “warm, heartfelt and entertaining.”

The afternoon session included a preview of the upcoming revisions to the Davis-Stirling Act, with the panel reassuring attendees that based on what they have seen, the revisions are largely aimed at reorganizing and “cleaning up” the current Act. While we may have to learn some new statute numbers, there is little to fear in the revisions. Expect the revisions to the DavisStirling Act in 2014.

The last program of the day was a lively “Panel of Pundits” session with audience members asking a panel of lawyers various questions and getting the advice of the panel on a wide variety of issues.

The day ended with a reception in which attendees and presenters mingled and discussed the day’s events before heading out into the spooky, Halloween decorated grounds of the Queen Mary.

connect with grie • issue FOUR 2011

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CLAC Corner: End of Session Update

By Skip Daum

T

he first half of the biennial legislative session will have

common areas and damages to other property, electric bills to

ended before you read this. Nevertheless, there are a

be paid by the member, and the member must disclose these

few important bills for you to be aware of and plan to

conditions to buyers who shall also be responsible for them.

implement.

Perhaps most important are two bills that directly affect

As such, I expect few applications for such installations. (The bill, although signed, has serious flaws because it violates the

HOA operations. The first is Senate Bill 563 (by Mark

constitution’s provisions regarding a “taking” of real property

DeSaulnier, Chairman of the Senate Transportation and

as well as a conflict with existing law which requires a vote of

Housing Committee). Essentially the bill, which takes effect

the members to grant an exclusive use common area for such

January 1, 2012, prevents boards from meeting without

installations. We made these flaws known to the Governor

notice to members. It was asserted in the hearings that

who agreed and while signing SB 209 also penned a “signing

some boards met without notifying the members of the

message” intending to fix these flaws. SB 880 was amended

time, place and agenda items and were therefore deemed

on September 7 to do just that, but as I write this it is still

to be less than transparent. The bill in its initial form would

pending a hearing.)

have even prevented directors from speaking to one another

Senate Bill 561 (Corbett) requires delinquent assessment

about association matters outside of a noticed meeting.

payments to be credited to the HOA prior to the debt

However, CAI-CLAC lobbied the bill for months, and it was

collector. This would essentially curtail the ability of the HOA

finally changed to not only delete that provision but to allow

to ever get the money it is owed, because associations are

for electronic consent on matters brought up in emergency

not debt collectors and licensed collectors will not work for

meetings. While this measure is of concern to some, the

free -- which may happen if their fees are last to be paid.

larger issue of “secret meetings vs. transparent operations”

We opposed the bill and it has been made a “two year” bill

prevailed. All boards should take notice!

meaning that it will be held in committee until January.

Assembly Bill 771 (Betsy Butler) was sponsored by the

Senate Bill 150 (Lou Correa) deals with association

California Association of Realtors and initially capped fees that

attempts to limit the number of rental units in the project.

may be charged by parties which provide documents upon

As signed into law, it is imperfect, and associations may wish

sale or transfer of a separate interest. This bill was lobbied

to review their governing documents and this law before

heavily as well and it was ultimately revised to remove the

attempting a rental limit in 2012.

cap. In addition, the bill enumerates the items which are

CAI-CLAC is continually on guard for you, helping to save

to be provided as well as an estimated fee for each. This

you money, keeping your association liability minimal, and in

bill improves existing law because it provides for better

general, helping your communities’ market value remain as

disclosures to all parties in a transaction. As finally amended,

high as it can be while fostering harmonious communities.

there was no opposition and the Governor quickly signed it.

Two other bills have limited application, but you need to

Skip Daum, President of Capitol

know about them. Senate Bill 209 (Ellen Corbett) strongly

Communications Group, has been CAI-

encourages associations to allow and install electric vehicle

CLAC’s Legislative Advocate Since 1994.

charging stations upon a member’s request. There are numerous conditions which must be adhered to by the member including insurance covering the association’s

20 |

ISSUE FOUR 2011 • Connect with grie

New, Renewed & Rejoined Members September 1 through OCTOBER 31, 2011

NEW MEMBERS

Avalon Management Group, Inc., AAMC Karyn Elizabeth Raymer Cresta Verde Landscape Ruth Wilson Crestmont Homeowners Association Samantha Jobelius Crestmont Homeowners Association Steve Mulkey Crestmont Homeowners Association Paul Zubowicz Duramax Building Products Viken Ohanesian Equity Management Robert Supalla Gardner Air Dirk Gardner

Beacon Property Management, Inc. Cindy Addington Shelley Coppi Tina Sullivan

Sure Kare Property Management Shirley Prasser, CMCA, AMS

Beall Financial & Insurance Services, Inc. Richard Beall

The Cove Homeowners Association Carole Grisamore Anna Machado Desha Porter

Behr Process Corporation & The Home Depot USA Brian Emmert

The Inspectors of Election, LLC Marc Poland

Brandywine Village Homeowners Association Sue Saurer

Villas del Paseo III Homeowners Association Elisabeth De Roes Mary Encinas

Condominium Management Services Sara Revello PCAM Dutchman Sean Van Wyk East Highlands Ranch Homeowners Association George Einfeldt LSM, PCAM

Voit Management Pamela Voit, CMCA, AMS, PCAM Walters Management, AAMC Darlene Lamb John Thorpe, AMS, PCAM

Elite Community Management Deirdre Bitting CMCA, AMS Timothy McLean CMCA, AMS

REJOINED

Elite Pest Management Robert Serdoz

Bill & Wag’s Inc. John Gonzales

Painting Unlimited, Inc. Mark Fromdahl

Empire Management, Inc. David Leavitt CMCA, AMS Gail Leavitt CMCA

Gothic Grounds Management Tad Black

R.A. Johnson Company, Inc. Travis Johnson

Environmental-Concepts Landscape Management, Inc. M. Tom Carrasco

RightStop Restoration Desiree Martini

Equity Management, AAMC Keren Calder, CMCA Lisa Locke, CMCA, AMS, PCAM

Los Amigos Owners Association John Beal John Matulich Paddy Miller Jim Ward

Riverside Braemar, Inc Drew Shields Seacoast Commerce Bank Ken Carteron The Judge Law Firm Community Association Lawyer James A. Judge, Esq. The Vanderbilt II Group Ann Platte Ward Construction, Inc. Rodger Ward Weldon L. Brown Company Jennifer Jahn

RENEWED

Anthony Walton Able Restoration Rick Gosliga Alliance Association Financial Services Beth Steven American Technologies, Inc. Alina Rodriguez Andre Landscape Jeremy Andre Artistic Maintenance, Inc. Shannon Smith Avalon Management Group, Inc., AAMC Catherine Gorman Blake Morlet

Fenton, Grant, Mayfield, Kaneda & Litt, LLP Katy Krupp Fox & Stephens, CPA’s Bob Stephens Ian H. Graham Insurance Sylvia Tagle Incline Consultants Elma St. John New Castle Court Homeowner Association Kelly Bondi Doug Gleason Pat Kappelman

Avalon Management Group, Inc., AAMC Mark Jones, AMS, PCAM

Heritage Construction Dan Chasteen Law Offices of Edward W. Hess, Jr. Edward Hess McDonnell Roofing, Inc. Brandon Ewart Merit Property Management Kristie Rose, CMCA, AMS, PCAM Pine Ridge Villas Homeowners Association Vickie Boucher Christopher Renno Cheryl Stout Michael Thomson Saddleback Fence and Vinyl Products Jeffrey Ferguson Service 1st Lighting Catherine Gregory

Pacific Western Bank Paseo del Sol Master Association Board Member Pirritano Insurance Agency Peter Pirritano Prendiville Insurance Agency Matthew Lawton, CIRMS Rey Insurance Services, Inc. Mike Rey SCT Reserve Consultants, Inc. Michael Graves, RS Seabreeze Management Company, Inc. Michelle Howard, CMCA, AMS, PCAM Sun Chase Homeowners Association Peter King connect with grie • issue FOUR 2011

| 21

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ISSUE FOUR 2011 • Connect with grie

2011 TOPS Awards Las Vegas Holiday Style A) B) C) D) E) F) G) H)

Community Outreach – Walters Management Committee of the Year – Business Partners Industry Innovation – Environmental-Concepts Landscape Management, Inc. Legislative Action Support – Voit Management Manager of the Year – Kristie Rose, CCAM, CMCA, AMS, PCAM President's Award – Lana Hamadej, LSM, PCAM Rising Star – Tiffani Reynolds Hall of Fame – Sherry Neal, CCAM, PCAM (pictured with Matt Ober, Esq., CCAL)

connect with grie • issue FOUR 2011

| 23

5029 La Mart, Suite A Riverside, CA 92507-5978

2012 Calendar of Events JANUARY 17 Mini Trade Luncheon – RCC 20 Reign Hockey Game 30 PCAM Reception 24 Board Meeting

JUNE 9

21 26

FEBRUARY 9-10 M-203 PMDP Course

Holiday Inn – Ontario 16 Breakfast 25 BFC 28 Board Meeting

JULY 12-14 PCAM Case Study 19 Mini Trade Luncheon 24 Board Meeting

MARCH 9 Spring Billiards 22 Mini Trade Luncheon

Pechanga Resort & Casino 27 Board Meeting APRIL 6

16

19 21 24

IE Olympics Dave & Buster's CA Legislative Day Sacramento Breakfast Essentials Board Meeting

MAY 2-4

11

22 24

National Conference Las Vegas CLAC Wine Night Wiens Winery Board Meeting Mini Trade Luncheon – RCC

Monte Carlo Night Pechanga Resort & Casino Breakfast Board Meeting

AUGUST 3 Bowling Tournament 16 Breakfast 25 BFC 28 Board Meeting SEPTEMBER 11 Mini Trade Annual Mtg Luncheon 28 Golf Tournament 25 Board Meeting OCTOBER 12 Fall Billiards 19 Legal Forum: CA Communities

Pechanga Resort & Casino 23 Board Meeting/2013 Planning NOVEMBER 3 Essentials 15 Mini Trade Luncheon 27 DARK – No Board Meeting DECEMBER 13 TOPS/Holiday Board Meeting