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connect A PUBLICATION OF THE GREATER INLAND EMPIRE CHAPTER OF CAI
ISSUE THREE 2019
THE BALCONY BILL
SB 326 and It’s Impact on Community Associations
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connect A PUBLICATION OF THE GREATER INLAND EMPIRE CHAPTER OF CAI
www.cai-grie.org
OFFICERS Adam Armit................................................................................. President Landsystems/HortTech Jackie Fromdahl...................................................................President-Elect Painting Unlimited, Inc. Bob Harvey, CMCA, AMS, PCAM........................................Vice President Associa-PCM, AAMC Eric Zarr, CMCA, AMS................................................................. Secretary FirstService Residential, AAMC Lana Hamadej, PCAM..................................................................Treasurer Avalon Management Group, Inc., AAMC Robert Serdoz...................................................................... Past-President Elite Pest Management, Inc.
BOARD DIRECTORS George Gallanes, CMCA...................................... Sunnymead Ranch PCA Brian Henry.........................................................................Park West, Inc. Valerie Hernandez...............................................Villa Park Landscape, Inc. Pat King..............................................................Solera Oak Valley Greens
Table of Contents Features
Departments
4 SB 326: The Balcony Inspection Provisions and Their Impact Common Interest Developments
6 Editor’s Link
By Ritchie Lipson, Esq.
8 Handling Requests for Disability-Related Accommodations or Modifications By Tyler Kerns, Esq.
By A.J. Jahanian, Esq.
12 Lake Elsinore Storm Game Photos 11 President’s Message By Adam Armit
19 Executive Director's Message By AJ Keefe
Robert Riddick, CMCA......................................... Sunnymead Ranch PCA CHAPTER EXECUTIVE DIRECTOR AJ Keefe
14 Using Tablets for Board Members By Blake Morlet, CMCA
STAFF DJ Conlon, CMCA Elda Pfitzinger-Thomas EDITOR IN CHIEF A.J. Jahanian, Esq..........................................................Beaumont Tashjian PUBLICATIONS COMMITTEE Terri McFarland........................................Broadband Agreements by MFC Gina Roldan.......................................................... ProTec Building Services DESIGN & PRODUCTION
16 Beyond the Maintenance Matrix By Tina Neubauer, CMCA, CIRMS and Tiffany Smith-Nguyen, Esq.
20 Don't Fear the Annual Meeting! By Matt Ober, Esq., CCAL
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 Greater Inland Empire Chapter of the Community Associations Institute.” Copyright © 1998–2019 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 / info@cai-grie.org
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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 THREE 2019
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ISSUE THREE 2019 • CONNECT WITH GRIE
BY RITCHIE LIPSON, ESQ.
SB 326: The Balcony Inspection Provisions and Their Impact Common Interest Developments History
The Governor signed SB326 on August 30, 2019. This new law will have a substantial impact on Common Interest Developments (CIDs) throughout the State of California. The bill was introduced as a response to the Berkeley balcony collapse at the Library Gardens Apartments on June 16, 2015, when thirteen students fell forty feet from a fifth-floor balcony that failed, killing six and injuring seven. The cause of collapse was determined by the California Contractors State License Board to be “Dry rot along the top of the joists suggests long-term moisture saturation…of Oriented Strand Board (OSB) in direct contact with the joists. Additional locations of water damage and dry rot were found on the wall OSB sheathing and the face of the doubled deck joists along the deck edge to wall interface by severely rotted structural support joists.” The load of the 13 students were found to be “well within the design limits of the balcony structure.” What Communities are Affected and What Inspections are Required?
The bill adds Sections 5551 and 5558 to the California Civil Code and amends Section 6150 and applies to buildings with three or more multifamily units which contain exterior elevated elements. The Inspections are “of the load-bearing components and associated waterproofing elements of exterior elevated elements.” The bill defines load-bearing components as “components that extend beyond the exterior walls of the building to deliver structural loads from the exterior elevated element to the building.” Exterior elevated
elements are defined as “decks, balconies, stairways, walkways, and their railings that have a walking surface that is elevated more than 6 feet above ground level, and are designed for human occupancy or use, and that are supported in whole or in substantial part by wood or wood-based products.”
Who is Qualified to Complete the Inspections?
Inspections can be completed by any of the following: 1. Licensed Architect; 2. Licensed Structural Engineer. Continued on page 6
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SB 326 Continued from page 5
EDITOR’S LINK
A.J. Jahanian, Esq. is an associate attorney with Beaumont Tashjian who devotes his career to serving common interest developments. He can be reached at ajahanian@ HOAattorneys.com
With summer coming to an end and schools resuming in seemingly the blink of an eye, it might be easy to forget this summer’s upswing in earthquakes. The surge was an unfortunate, but necessary reminder that we, Californians, live in one of the few earthquake capitals of the world. While the quakes may not have caused the extensive damage that history has shown Mother Nature to be capable of, they did heighten our awareness as to the precautions and planning community associations need to take into consideration. While we may not be able to prevent or foresee earthquakes and the damage (or lack thereof) they may cause, we can and should be prepared. In this Issue of Connect, we explore how to prepare for earthquakes by, among other things, adequately insuring our communities. Interestingly enough, Senate Bill 326 was also approved by the Governor, which impacts associations’ inspection duties for balconies, decks or other elevated components. Whether the uptick in earthquakes motivated the Governor’s decision or not is unclear, but what is clear, is that community associations’ precautionary responsibilities in light of this summer’s natural events are as important as ever. As always, it is my sincere pleasure to serve as Editor of Connect Magazine. With these articles, our goal is to spread awareness and shed light on those pertinent issues impacting our communities. With your participation and concern, we can ensure that our communities are adequately protected in 2019 and beyond.
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What is the Scope and Purpose of the Inspections?
The purpose of the inspection is to “determine whether the exterior elevated elements are in a generally safe condition and performing in accordance with applicable standards.” The inspector shall perform a visual inspection in a “statically significant” random sample of locations to provide 95% percent confidence the sample results are reflective of the whole projects’ condition. A visual inspection is defined as “the least intrusive method necessary to inspect load-bearing components, including visual observation only or visual observation in conjunction with, for example, the use of moisture meters, borescopes, or infrared technology.” However, if the inspector observes conditions that indicate water intrusion, further inspection is required, and the inspector “shall exercise their best professional judgment in determining the necessity, scope, and breadth of any further inspection.”
What Type of Reporting is Required?
A written report that is stamped by the inspector and incorporated into the reserve study of the association and it must be maintained for 2 inspection cycles in the association records and must contain the following info: 1. Identification of the load-bearing components and associated waterproofing system. 2. The current physical condition of the load-bearing components and associated waterproofing system, including whether the condition presents an immediate threat to the health and safety of the residents. 3. The expected future performance and remaining useful life of the load-bearing components and associated waterproofing system. 4. Recommendations for any necessary repair or replacement of the load-bearing components and associated waterproofing system. If, after inspection of any exterior elevated element, the inspector advises that the exterior elevated element poses an immediate threat to the safety of the occupants, the inspector shall provide a copy of the inspection report to the association immediately upon completion of the report, and to the local code enforcement agency within 15 days of completion of the report.
What Type of Repairs Must be Completed?
After receipt of the report, the association shall take “preventive measures immediately” including preventing occupant access to the exterior elevated element until repairs have been inspected and approved by the local enforcement agency. The new law further provides that the continued and ongoing maintenance and repair of the load-bearing components and associated waterproofing systems in a safe, functional, and sanitary condition shall be the responsibility of the association as required by the association’s governing documents.
When are the Inspections Required?
The initial inspections must be completed by 1/1/2025 and every nine years thereafter. Important Considerations: 1. There is a significant risk to waiting as the statute permits local governments or enforcement agencies to enact an ordinance or other rule imposing requirements greater than the statute. 2. The statute is vague and shifts much of the responsibility for compliance with the inspector. These professionals who are required to stamp the report will more than likely require intrusive/destructive testing to comply with the intent of the statute. 3. The reports will become part of the permanent records of the association. Reports indicating potential issues with construction may negatively impact the value of the community. 4. Inspect early a. to reduce and mitigate damage b. avoid the last-minute rush that will occur near the deadline c. allows time to bring SB800 claims for defects discovered
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Ritchie Lipson, Esq. is Director of Client Relations for Kasdan LippSmith Weber Turner, and leads the business development efforts in California, Arizona, and New Mexico. For the past 20 years, Ritchie has limited his practice to representation of commercial investors, homeowner associations and residential property owners, to assist in the fair resolution of their claims for defective construction. recovering over $100 million for clients. He is licensed in Arizona and the District of Columbia only.
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Handling Requests for Disability-Related Accommodations or Modifications
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A
ssociations are occasionally faced with a request from a homeowner or resident seeking an “accommodation” or a “modification” based on a disabilityrelated need. Sometimes boards of directors are skeptical as to whether the resident is truly disabled or whether the requested accommodation or modification is actually necessary. Boards (and managers) should be mindful that there are limitations on what “proof” they can request from the resident. If not handled properly, residents’ requests for accommodations or modifications can end up becoming the basis for a discrimination complaint against the association. Under the federal Fair Housing Act (“FHA”), it is unlawful for an association to refuse to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling (a reasonable accommodation). It is similarly unlawful to refuse to permit reasonable modifications of existing premises occupied by a disabled person, at the expense of the person requesting the modification, if such modifications may be necessary to afford such person full enjoyment of the premises (a reasonable modification). The FHA defines a person with a disability to include individuals with a physical or mental impairment which substantially limits one or more of such person's major life activities; individuals with a record of having such an impairment; or individuals being regarded as having such an impairment. As an example of a request for a reasonable accommodation, consider an association with governing documents that require residents to park their vehicles in their garages and not on the driveway area in front of the garage. A resident who uses a wheelchair
BY TYLER KERNS, ESQ.
accessible van with a ramp might not be able to fully extend and access the ramp when parked within the garage and, therefore, might request an accommodation allowing them to park the van on the driveway. Another, and increasingly common request for accommodation, is to be able to keep an emotional support animal that exceeds an association’s weight limit for pets. Further, a request for a reasonable modification would be if there is a step at the entrance to the front door of a unit and a resident who uses a wheelchair wants to install a ramp to clear the step. Pursuant to the FHA, the information that an association can require from a resident relating to a request for a reasonable accommodation or a reasonable modification depends on whether the resident’s disability is readily apparent and whether the disability-related need for the accommodation or modification is also readily apparent. There are three possible scenarios relating to what information can be requested: (a) If the resident requesting the accommodation or modification has a disability that is obvious or is otherwise known to the association, and if the need for the requested accommodation or modification is also readily apparent, then the association may not request any additional information about the resident’s disability or the disability-related need for the accommodation or modification. (b) If the resident’s disability is known or is readily apparent but the disability-related need for the accommodation or modification is not known or readily apparent, then the association may request only such information as is necessary to evaluate the disability-related need for the accommodation or modification. (c) If the resident’s disability is not known and is not readily apparent, then the association can request information that (1) is necessary to verify that the resident meets the FHA’s definition of a disabled person, (2) describes the needed accommodation or modification, and (3) describes the relationship between the resident’s disability and the need for the accommodation or modification. Take, for example, the resident who uses a wheelchair and requests to install a ramp to clear the step at the entrance to the front door of their unit. Given their use of a
wheelchair, the disability is readily apparent. The disability-related need for the ramp is also readily apparent since the ramp would allow them to access their unit while using the wheelchair. In this case, the association should not ask for any additional information about the resident’s disability or the disabilityrelated need for the requested modification. However, in the case of the resident requesting to keep an emotional support animal that exceeds the association’s weight limit for pets, it is likely that neither the resident’s disability nor the disability-related need for the emotional support animal is known or readily apparent to the association. If neither the resident’s disability nor the disability-related need for the emotional support animal is known or readily apparent, then the association can request information verifying that the resident meets the FHA’s definition of a disabled person and describing the relationship between the resident’s disability and the need for the emotional support animal. When an association receives a request for a disabilityrelated accommodation or modification, the association should consult with legal counsel to determine what information, if any, is appropriate to request from the resident. Legal counsel can also assist in evaluating whether the request is for a “reasonable” accommodation or modification. Associations need not grant unreasonable requests, but the association would need good cause to deny a request as being unreasonable. Lastly, pursuant to the FHA, associations must provide prompt responses to requests for accommodations or modifications. An undue delay in responding to a request may be deemed a failure to permit a reasonable accommodation or modification, which could result in liability.
Tyler Kerns, Esq., is a Senior Associate Attorney at Kriger Law Firm in San Diego County. Kriger Law Firm represents community associations in San Diego, Riverside, San Bernardino, Orange, and Los Angeles Counties and surrounding areas.
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PRESIDENT’S MESSAGE Can you believe it is already Fall? This year, like many others, has seemed to have gone by in an instant. Just as we start to see Adam Armit, the leaves on our Landsystems/ HortTech, is 2019 trees transition, CAI-GRIE President. so too, it’s time to start transitioning into 2020 and beyond. Jackie Fromdahl, our President-Elect has been working tirelessly to find new venues, come up with new social events and find new ways to maximize the educational offerings. Last quarter I told you about our Executive Director search. I am happy to report that our new CED – AJ Keefe – is now fully on board and working on our collective behalf. He has been on staff for a few months and is starting to get in a groove. If you have not yet met him at an event, I encourage you to drop by
the Chapter office and say hello. Along with the theme of change that fall brings, many of you have asked what are DJ’s plans? I am happy to report that DJ will continue to be on staff in some capacity through November. We will be planning a nice send off for her at the TOPs Awards Breakfast, so I encourage every one of you that has worked alongside DJ to attend that event to say good-bye. If you want to take some time to reminisce with her, you still have a bit more time, but you know how time flies so make sure and connect soon. We have a few big events to wind down the year. As of writing this message, Monte Carlo is just a few weeks away and October brings a host of events including the Chapter’s CLAC Benefit Fundraiser. This event is going to be awesome, with an upscale outdoor vibe. Our annual meeting will be at our October Educational EXPO Experience on October 22nd where we have 13 dedicated volunteers looking to fill five spots on the board. The SoCal Regional Legal Forum: California
Communities is in Newport Beach this year on October 18th. A new event – Pins & Pockets – that combines bowling and billiards into one event is scheduled for November 1st at an awesome new location in Lake Elsinore. As mentioned above, the TOPS Awards Breakfast is in December, however it was originally scheduled for Friday, December 13th but in an effort to work with the management companies that have their own holiday parties that day, we moved it to Thursday, December 12th – and this year it is at Pechanga Resort & Casino for the first time! As we are rounding out my term, I want to really emphasize how wonderful it has been for me to serve as the chapter President. The outlook for CAI-GRIE has never been brighter and I hope I have done well on your behalf. I am leaving you in very capable hands with Jackie and am excited to continue to serve alongside you all to make CAI-GRIE the best it can be.
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Tablets are more than a 2014 TOPS AWARD WINNING ARTICLE
fun and easy way to surf the web, stay in touch with
Using Tablets for Board Members Another Step Toward Going Green by Blake Morlet, CMCA
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friends or order your latest household items. These great technological devices allow access to just about any data imaginable while you’re on an airplane, waiting at the dentist or from the comfort of your living room. Tablets can be a valuable tool for association managers and board members to be more efficient, effective and utilize amazing technology to go green.
W
hy use tablets? Tablets allow board members to have access to years’ worth of documents, access to content from anywhere, efficiencies in operations, transfer of community history to subsequent board members and their use takes another step toward going “green”. The use of tablets increases efficiency by becoming one source for all association information. Tablets provide board members with instant access to board packets and financial reports, governing documents, association contracts, minutes, resolutions, legal opinions, site plans, maps, and educational information. They also offer the opportunity for board members to attend meetings by telecommuting, a big benefit in reducing canceled meetings due to lack of quorum. Simply put, it allows board members to have a wealth of information available to quickly answer their own questions and make informed business decisions. The Avalon Management Group, Inc., AAMC® set out to determine the level of effectiveness of using tablets when implemented in the CID industry. After beta testing every tablet on the market, we determined that Apple’s iPad is the most effective solution for our needs. The performance and reliability of the iPad made it an easy choice over its competitors. While the initial investment is significantly higher than other tablets on the market, we found that the investment was worthwhile due to very few technical problems encountered during testing. Candidly, client feedback after the first few months of implementing the beta iPad program was how much fun board members were having using the iPads to be more efficient. Following two years of field testing with board members, managers, accountants and senior management, we received overwhelmingly positive feedback. Board members were amazed at how convenient it became to review board packets, financials or photos to prepare for upcoming meetings. Using wifi access and/or broadband connection from the cellular company, board members are able to access up-to-theminute information from virtually anywhere in the world. The ease of access to current and historical documents, legal opinions, financial data, homeowner history and other pertinent information continually increases
the efficiency and effectiveness for long-time board members and newcomers alike. Many clients have become accustomed to using the tablet to search the governing documents or board reports in PDF format, making their job easier than having to search hard copies manually. Board member email addresses were created using their association’s website domain (president@yourhoa.com) which gives board members a non-personal email address to use for association business. Board members really liked the association-specific email as it would give incoming board members access to historic information in addition to reducing the likelihood that their personal email would be subpoenaed in the event of legal matters. One of the most important factors in addition to easy access of information is the cost-savings in reduced paper and the ability to take one more step toward green technology. On average, we calculated a savings of 15,000 sheets of paper each year, per association. With over 323,000 associations across the United States, think of how much paper the CID industry could save by using this technology. Also consider the savings in toner, printer repair and maintenance, labor and postage costs associated with the distribution of paper monthly board information packets. Your management company and association can save thousands a year by utilizing this green technology. While there are many factors to consider regarding implementation and technicalities of utilizing tablets for your association or your clients, the use of tablets for board members has proven highly beneficial, in our experience. This use of technology has proven to be a win-win for all involved. Blake began working in the CID industry in 2009 when he joined Southern California’s premiere association management company, Avalon Management Group, Inc., AAMC® quickly advancing to the position of Senior Manager. Mr. Morlet attended Chapman University in Orange, CA earning a Bachelor of Science in Business Management. Mr. Morlet was born and raised in Southern California and is also a licensed California Real Estate Broker and technology professional. Mr. Morlet was a featured presenter at the CAI National Conference held in Orlando, Florida in May 2014.
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BY TINA NEUBAUER, CMCA, CIRMS AND TIFFANY SMITH-NGUYEN, ESQ.
2016 TOPS AWARD WINNING ARTICLE
Beyond the Maintenance Matrix Understanding the Difference Between Maintenance and Insurance Responsibility
M
s. Jones, an owner at Golden Slumber Condominium Association had a pipe burst underneath the bathroom sink causing damage to the interior of the unit. The manager tells Ms. Jones she cannot file a claim on the Golden Slumber Condominium Association’s insurance policy, known as the “master policy,” because any pipes that service her unit are her responsibility to maintain as is the interior of the unit including any damage that the water caused. Is the manager correct? The question of maintenance and insurance responsibility comes up more often than not when it comes to claims filing and whether the association’s insurer will pay for some or all of the damages. Many managers and boards are under the impression that maintenance responsibilities and insurance responsibilities are the same. If maintenance responsibility for the component that failed or was damaged
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lies with the homeowner, then surely the responsibility to insure it also lies with the homeowner. Well we are here to tell you… not exactly. Insurance adjusters will sometimes receive the maintenance matrix from managers with instructions to deny a claim. Unfortunately that’s not exactly how it works and here is why. Maintenance responsibilities and the duty to insure often differ even under the same set of CC&Rs. To add to the confusion, actual insurance coverage may exceed an association’s duty to insure under the governing documents. In short, responsibility for maintenance of a component does not always determine who is responsible for insuring that component and the association’s insurance may cover components for which the association is not usually responsible.
Let’s go back to the example. Ms. Jones is smart and has a personal unit owners policy referred to as an HO6, she files a claim with her carrier and waits to hear from her adjuster. The savvy adjuster knows the association insurance game and asks for the association’s governing documents. He pays close attention to the insurance section that specifies the insurance responsibility of the community. In his investigation he determines that the Golden Slumber Condominium Association must have a “walls-in” policy. This includes coverage for the interior of the units including the fixtures, as opposed to a bare walls policy where none of the interior components are covered. The savvy adjuster requests that Ms. Jones file a claim with the master policy. Why you ask? Simple. While the duty to maintain the pipe is the responsibility of the unit owner, the ensuing damage is likely covered under the master policy because the CC&Rs
require the Golden Slumber Condominium Association to insure the interior of the units. In this example, the Golden Slumber Condominium Association’s CC&Rs specified the Association had the duty to carry a “walls-in” policy. Not all CC&Rs are this specific and some are actually quite vague, focusing on policy limits and allowing the board to determine the type of policy. Most CC&Rs also only set a minimum duty to insure, and in some cases, the policy purchased by the association may actually be more comprehensive than strictly required. Back to Ms. Jones. In this example, the manager’s assertion that maintenance and repair responsibility for the burst pipe belongs to Ms. Jones is correct. The master policy may not pay to repair the pipe. The onus for those Continued on page 18 CONNECT WITH GRIE • ISSUE THREE 2019
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Beyond the Maintenance Matrix Continued from page 17 repairs would be on Ms. Jones, but the ensuing damage would likely be covered by the master insurance policy (subject to the deductible),
association’s insurance policy pay for it? This is a question association attorneys and insurance professionals sometimes get. Try to think of the association’s insurance policy as an asset the association acquires for the benefit of the association and its
...Think of the association’s insurance policy as an asset the association acquires for the benefit of the association and its members in case of an unfortunate event. even though Ms. Jones is responsible for maintenance of the interior of her unit. Why you may ask? Remember that in this case, the Golden Slumber Condominium Association has a “walls-in” policy that covers some aspects of the interior of a unit. But that’s not fair! The interior of the unit is not the Golden Slumber Condominium Association’s responsibility. Why should the
members in case of an unfortunate event. It “belongs” in part to each of the members. Since the members pay for the policy through their assessments, they should be entitled to receive the benefits of the policy. This is not to say that an association is helpless in protecting its master insurance policy from minor or nuisance claims by members. Deductibles and clear protocols
regarding who is responsible for payment of the deductible – and under what circumstances – can help ward against expensive premiums and nuisance or minor claims. Associations that are concerned about whether their insurance meets or exceeds their insurance responsibilities or that wish to establish clear deductible protocols are encouraged to have their policies and governing documents reviewed by qualified professionals. Communication is key. Be sure to communicate the basic information about your insurance policy, including any changes, to the association’s membership. Make the notification clear and concise so that all unit owners are aware of their insurance responsibility and can work with their individual agent or broker on selecting the appropriate insurance protection for their individual needs. Remember, the association’s maintenance responsibilities are not the same as the association’s duty to insure and each association’s governing documents are unique. If you have any questions about responsibility or coverage, contact the association’s insurance broker or legal counsel. Tina Neubauer, CMCA, CIRMS is Vice President/ Director of Marketing at Roy Palacios Insurance Agency, Inc. and Vice President of agency operations and business development within the organization.
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EXECUTIVE DIRECTOR'S MESSAGE
Hello! My name is AJ Keefe and I wanted to take a second and introduce myself as the new Executive Director for your CAI- Greater Inland Empire Chapter. I’ve had the pleasure to meet many of you at the multiple events we have held over the last few months and I look forward to AJ Keefe, meeting everyone else soon. I find the CAI-GRIE's new Executive DIrector. best way to plot your path forward is to take a look back, that being said, I hope you enjoy the award-winning articles we have published from years past in this month’s issue of Connect.
format. If you aren’t already following us on social media, I would suggest doing so to see some of the additional efforts we are putting forth to keep you all informed and up-to-date with chapter happenings. We also have quite a few new events on the calendar for 2020 so please keep an eye out for those to be published.
Speaking of the future, we have some exciting developments coming your way in 2020. We are currently in the midst of overhauling our website to deliver all of the great information it currently has in a more user-friendly
If you have any feedback, comments or would just like to chat, please feel free to reach out anytime. I can be reached at aj@cai-grie.org.
For a quick update on the immediate proceedings of CAIGRIE, DJ has agreed to stay with us through November to ensure a smooth transition and make sure all your hard work continues to bear fruit. We have an action-packed final quarter of 2019 ahead of us and I’m eager to roll up my sleeves and dive in.
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2018 TOPS AWARD WINNING ARTICLE
DON’T FEAR THE A The Annual meeting seems to cause the most angst of all the association corporate obligations, perhaps it is due to that cloud of apathy that hovers over the perennial planning and execution of the annual meeting.
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f course, the importance of your association’s annual gathering of members cannot be overlooked. California Corporations Code Section 7510 (b) reminds us that a “regular meeting of members shall be held on a date and time, and with the frequency stated in or fixed in accordance with the bylaws, but in any event in each year in which directors are to be elected at that meeting for the purpose of conducting such election, and to transact any other proper business which may be brought before the meeting.” While the annual meeting seems to center on the membership’s election of directors, the meeting can and should play a broader role in the life cycle of the community. The
atmosphere surrounding the annual meeting reveals something about the health of the community. A well-run, transparent, efficient community will look upon their meeting with optimism − a chance to share with the members what the association accomplished in the past year and its plans for the coming year; a chance to thank and acknowledge the work of community volunteers and recruit active members to vital committees. A community driven by political maneuvering, absence of due process, favoritism, lack of communication and poor financial health and disclosure foretells an annual meeting plagued by angst, suspicion, or reluctance to attend or participate, and is likely to leave your community unable to achieve quorum.
BY MATT D. OBER, ESQ., CCAL
ANNUAL MEETING! As we edge into the Fall and begin preparing for year-end disclosures and annual meeting preparation, let’s review some tools for successful annual meetings.
Everyone Loves a Party An annual homeowner’s association meeting can be a social event − an opportunity for members to come together and share information about their community. Use this once-a-year opportunity to bring your community together and provide an environment for new members to meet and old members to become reacquainted. When members connect with each other while things are good, they are less likely to lash out or draw swords when difficulties arise. There is no science involved, just tried and true methods that build community.
A well-attended annual meeting provides much needed energy and enthusiasm to carry the volunteer-led organization through another year. A pre-meeting social hour or postmeeting wine event are excellent ways to foster good relationships among members and in turn, increase participation at membership meetings. Be creative; step outside that box and do what you can to bring your community together.
Let Your Agenda Do the Talking Let your meeting agenda give the members a reason to attend. While the bulk of the agenda is the election of directors, the annual meeting agenda is an excellent tool to pique the interest of your members and
just may get them to show up. A wellstructured agenda is essential. First, check to see if your association bylaws contain a “set” annual meeting agenda. If so, know that the bylaw agenda is the minimum required and doesn’t prevent the association from expanding on it. Second, use the agenda to outline for the members what issues are on the horizon. A president’s report is of value but should describe some of the topics the members can expect to be briefed on (particularly if the community has a large project or financial matter on the horizon). In this way, you can use the annual meeting as an opportunity to showcase what you accomplished in the prior year and what your plans are for the future. Continued on page 22 CONNECT WITH GRIE • ISSUE THREE 2019
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Don’t Fear the Annual Meeting! Continued from page 21 Third, use your agenda to highlight your committees and list each committee presentation that will be made. Allowing committees to report on their efforts for the year not only piques the curiosity of the members about what the association is working on but also energizes your volunteers by giving them an opportunity to showcase their work.
Showcase Your Talent Bring your community experts together to update the members about key community issues and to field questions from the members in attendance. Throughout the year, the board or management must call upon experts to assist the association in complying with the applicable laws and the governing documents. Whether insurance, legal, construction related or reserves, the protection of the Business Judgment Rule requires reliance on experts and consultants. Often these issues generate questions and concerns in the minds of the members. A great way to reassure the membership that the board has matters well under control is to bring your team of experts together to address the members on any number of the issues facing the community and allowing your experts to respond to member questions. The residual benefit of having your community’s experts and professionals attend is an increase in annual meeting attendance.
Can You Hear Me Now? Surprisingly, a few communities still overlook the requirement that members be given an opportunity to speak at all meetings, not just board meetings. Although hidden within the Open Meeting Act (granting Members the right to attend board meetings) subsection (b) of Civil 22 |
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One of the benefits of the often-maligned mail-in, double envelope, secret ballot process is that the ballots returned count towards quorum. Code Sections 4925 gives any member the right to speak at any meeting of the association or the board. And what better time for member comments then while your inspectors of election are counting the election ballots! Use the sometimes-awkward lull of the ballot tabulation where tensions may be high to allow members to speak.
Is There Anybody Out There? The Challenges of Meeting Quorum Where there is no quorum, there is no members’ meeting. Corporations Code Section 7512 defines quorum as one-third of the voting power, represented in person or by proxy, unless the bylaws set a different quorum. And despite a trend by some communities to eliminate quorum requirements in the bylaws, many believe that requiring a certain minimum number of members to care enough to show up is a good thing. One of the benefits of the oftenmaligned mail-in, double envelope, secret ballot process is that the ballots returned count towards quorum. Civil Code Section 5115 (b) reminds us that if your bylaws require a quorum, each ballot received by the inspector of elections shall be treated
as a member present at a meeting for purposes of establishing a quorum. So, while everybody may love a crowd, in reality, as long as the inspector receives a quorum of the ballots back, a party of one will do the trick.
Proxies Are Not Dead, Yet One would expect that in this age of the secret written mail-in ballot, where anyone can vote and respond by mail, that the proxy would be obsolete. But for many communities proxies still help establish quorum where members simply are not interested or knowledgeable enough to vote and would rather have someone else vote for them. While actual member participation is preferred, using proxies to at least achieve quorum increases the chances of meeting quorum. Don’t ignore the “proxy for quorum purposes only as a path to a successful annual meeting.” There remain members who for whatever reason have no interest in voting and no desire to allow another to vote for them. They would rather just sit this one out. And if these members are off-site owners, the chances of obtaining their active participation are less likely. Consider the annual “Proxy for Quorum Purpose Only.” This is the no obligation commitment by an owner to allow the association to use the member’s vote to achieve quorum for the annual meeting (at a minimum) and for any purpose where a quorum of the membership must be established to do any association business. And only for that purpose. If requested annually, this form of proxy serves as an effective tool in the membership meeting arsenal.
The Adjourned Meeting Counting the returned ballots toward quorum should ease the burden of convening your annual meeting; however, the reality is that
many communities still do not meet quorum. Adjourning the meeting to another date and time in the hopes of meeting a reduced quorum has become the norm. For many communities whose bylaws provide for a reduced quorum of 25%, 30% or even 10% for an adjourned meeting, the annual meeting and election of directors is viewed as a two-date event, with little hope placed on meeting quorum on the initial try. Corporations Code 7512 (d) allows for a meeting to be “adjourned.” The idea of adjourning a meeting that could not be convened for lack of quorum is a bit of an oxymoron. Nevertheless, in the absence of a quorum, “any meeting of members may be adjourned from time to time by the vote of a majority of the votes represented either in person or by proxy, but no other business may be transacted.” In short, a motion is made by a member in attendance and a majority of members in attendance vote to adjourn to a later date. The bylaws typically will provide for the time period within which the adjourned meeting can take place such as “no less than 5 days and no more than 30 days.” No meeting may be adjourned for more than 45 days. (Corp. Code 7511(d)) Finally, if the new date is not set at that time, notice to the membership of the adjourned meeting date is required. This may not be an issue if you already have enough ballots to meet a reduced quorum; however, in the event your association is shy of ballots sufficient to meet the reduced quorum for your adjourned meeting, notice to the members may encourage much needed participation. Be mindful of the quorum requirements in your bylaws and arrive at your initial annual meeting with an adjourned meeting date in mind. This will improve your association’s ability to meet quorum and conduct a successful election the second time around. In the event your association’s bylaws do not provide for a reduced quorum upon
adjournment, all is not lost. Adjourning the meeting to a subsequent date and providing notice allows the board and manager another opportunity to get members to return their ballots, solicit proxies and obtain quorum.
When All Else Fails – Once is Not Enough but How Many is Too Many? We often hear of associations that fall short of meeting quorum, despite good faith efforts to get the vote out, frustrating the main purpose of these annual gatherings – to elect new leadership. Some of us work with communities that year after year fail to obtain enough participation to elect directors. The vicious cycle of failed annual meeting attempts breeds a sense of futility in returning a ballot and, even worse, a stagnant board of directors that remains in power year after year. An association’s bylaws and the Corporations Code remind us that a director serves until her term is up and her successor is elected. The consequence of failing to achieve quorum, therefore, is that your directors remain for another term, or successive terms, until you meet quorum. This begs the question: how many times does an association attempt to convene an annual meeting until it calls it quits? The Civil Code doesn’t provide a minimum number of attempts. The answer depends upon a few key factors which may or may not be present in your association. First, a community should make a good faith attempt to meet quorum. Applying some of the methods discussed above helps demonstrates that an association has made a reasonable effort to convene its annual meeting in the face of challenges by a few disgruntled owners. Second, if your bylaws provide for a reduced quorum, it’s a given that you are going to make a second attempt at your annual meeting. And by most accounts, even if your
bylaws do not provide for a reduced quorum, adjourning to a second attempt at meeting quorum is just good sense. After two attempts to reach quorum and convene an annual membership meeting, without more, most associations will not make a third effort. The existing directors remain in place and the business of the association marches forward. If, however, your association is within reach of quorum after two adjourned meeting attempts, a third try at the brass ring may be in order. In any event, regardless of the outcome, communication to the membership is needed. Advise the members of the attempts made at meeting quorum, what efforts were made, and the number of members you were short of quorum. Remind them that pursuant to the bylaws and the Corporations Code the directors remain in place and will continue to govern. And finally, reassure your members that despite the failure to meet quorum the business of the association will continue.
Matt D. Ober, Esq., CCAL is a senior partner at Richardson|Ober, and a recognized leader, noted author, featured speaker and faculty member on all facets of the community association industry. Mr. Ober is a Fellow of the CAI National’s College of Community Association Lawyers (CCAL). He is also a contributing author of CAI’s California Law Course for Common Interest Development managers and is a two-time past President of CAI-GRIE. Matt can be reached at matt@ richardsonober.com. CONNECT WITH GRIE • ISSUE THREE 2019
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