The Law Journal, Fall 2018 by CACM-California Association of Community Managers

IN THIS ISSUE LOWER THE TEMPERATURE WITH EFFECTIVE DISPUTE RESOLUTION PROCEDURES: Minor disputes in a community association can escalate quickly. Don’t let tempers flare! Internal Dispute Resolutions can be an effective tool in resolving disputes. Get an inside perspective on common mistakes boards and associations make and how to avoid them. CONTRACT PROVISIONS & REVIEW: A proposal is not a contract. It does not identify the issues which can arise, nor does it allocate any risk. Be prepared with contracts that don’t leave key issues open for your association to be forced to deal with when things aren’t going well.

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Association Owned Solar Energy Systems: A Checklist of Considerations for California CIDs BY DIRK PETCHUL, ESQ. – BERDING | WEIL, LLP

olar energy systems (“SES”) have enjoyed ever-improving cost effectiveness and a simultaneous increase in popularity with California homeowners. A great deal of attention has been paid (by individual Common Interest Developments (“CIDs”), our community management professionals and our state legislators) to association member-installed systems, and, more specifically, the restrictions that have been legislatively

imposed upon California CIDs (by Civil Code §§ 714, 714.1 and 4746), which vary significantly limit a CID’s right/power to prohibit or restrict such installations by an association member.

Important Considerations For Your Community Consider Capital Improvement Restrictions: Unless you are replacing a pre-existing association SES, the

installation of an association SES will almost certainly constitute a “capital improvement.” Review your governing documents carefully to identify restrictions imposed upon capital improvements. The most common is a requirement of membership approval (through balloting) for capital improvements above certain threshold values. Continued on page 2

THE

Law Journal

A Practical Review of Community Management Law Published by

California Association of Community Managers, Inc. 23461 South Pointe Dr., Ste. 200 | Laguna Hills, CA 92653 949.916.2226 | www.cacm.org

2018 CACM LAW SEMINAR ADVISORY COMMITTEE CHIEF EDITOR Fred Whitney, Esq. Neuland, Whitney & Michael, APC

GUEST EDITOR Margaret G. “Gen” Wangler, Esq. Fiore, Racobs & Powers, A PLC

COMMITTEE MEMBERS Corrine Crawford, CAMEx, CCAM-ND The Management Trust – Southern California, ACMB Mark Guithues, Esq. Community Legal Advisors, Inc. John Hansen, Esq. Baydaline & Jacobsen LLP Zer Iyer, Esq. Angius & Terry LLP Linda Mootry, CAMEx, MCAM-ND The Management Trust – Central Division Alex Sohal, Esq. Adams Stirling PLC Katrina Solomatina, Esq. Berding | Weil, LLP The CACM Law Journal is distributed four times annually to members, affiliates and supporters of the California Association of Community Managers. DISCLAIMER: CACM does not assume responsibility for the accuracy of articles, events or announcements listed. Please be advised that the opinions of the authors who contribute to the Law Journal are those of the author only, and do not necessarily reflect the opinions of CACM and other industry attorneys. Please note that in a constantly evolving industry there are frequently multiple interpretations of the controlling statutes and case law. The information contained in these articles is of a general nature and not intended as legal advice. If you have any questions, please discuss them with your association’s legal counsel.

Land of DISCOVERY SAVE THE DATE!! 2019 LAW SEMINAR & EXPO NORTHERN CALIFORNIA January 24-25, 2019 Santa Clara Conv. Ctr. Hyatt Regency

SOUTHERN CALIFORNIA March 14-15, 2019 The Disneyland Hotel & Convention Center

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Association Owned Solar Energy Systems... Continued from page 1

How will the Purchase be Funded? – Installing an SES can be a significant expense. Does the association have available funds to cover the purchase? If so, review the governing documents to assure they do not contain limitations on how those funds can be used. If not, (a) will a special

Why are Current Electric Charges so High? – Are the association's large electric bills primarily charges for actual electricity usage, or does the association’s bill include significant demand charges caused by spikes in the association's usage at various times during the month? If the latter, the association could potentially derive greater benefit from a battery storage system (or

When being carefully evaluated, associations should involve both a qualified roofing consultant and an experienced solar energy consultant. assessment or increase in regular assessments be required (and if so, will it require membership balloting/approval pursuant to Civil Code 5600 et seq.?), or (b) will an association loan be required (if so, do the association’s governing documents require membership approval for such a loan?)? Purchase or Lease? – In the case of individual homeowners, the market seems to have evolved such that a purchase is most advantageous in most situations. However, due to their non-profit nature, associations often do not have the legal right to benefit from certain significant tax credits and other financial benefits that are enjoyed by individual homeowners. As such, an association may derive greater benefit from a lease transaction (where the tax credits and other benefits can still be claimed/obtained by the actual purchaser, and passed through to the association by/through the terms of the lease). These issues should be carefully evaluated in consultation with experienced solar energy and tax consultants. If the association chooses a lease, it should review its governing documents to determine if the proposed lease requires membership approval.

a combined battery/SES) to avoid the costly spikes. The Roof and Its Warranty – A typical roof has a life expectancy of 15 to 30 years, and requires periodic maintenance during that life. The existence of an SES on a roof can significantly increase the cost of both periodic maintenance and roof replacement since both will likely require that all or a portion of the SES be removed/ replaced. This added expense can diminish the overall benefit the association derives from the proposed SES. The installation of an SES and its removal/ replacement can impair or even void warranties that the association may otherwise have on its roof and the SES itself. When being carefully evaluated, associations should involve both a qualified roofing consultant and an experienced solar energy consultant. Rights of Members to the Common Area Roof – As a result of recent amendments to Civil Code § 714.1, California law now provides that an association may not “establish a general policy prohibiting the installation or use of a rooftop solar energy system” by an association resident

(provided it is on the roof of the building in which that owner resides, or on certain garages or carports adjacent to that building). Nothing in this poorly drafted legislation addresses the hierarchy of the competing rights of the association and association residents to the use of a given roof area for the installation/ use of an SES (nor has any case law yet provided guidance in this regard). At this time it is considered probable that if an association installs its own SES on a common area roof, its right to do so would preempt any later demand for the same roof space by an association resident. However, if a resident is the first to install an SES on that same roof area, it would appear unlikely that a California court would (during the expected life of that system) require its removal to make room for the association SES. The takeaway from this uncertainty is (a) if the association is going to consider installing its own SES, it should do so sooner rather than later, and (b) in all cases, an association contemplating the installation of an SES on a common area roof should consult with its own legal counsel prior to legally committing itself to do so.

ABOUT THE AUTHOR Dirk Petchul, Esq. is an attorney with the law firm Berding | Weil, LLP, with offices in Costa Mesa, Walnut Creek and San Diego. He has been serving as general counsel to common interest developments for over 20 years.

Effective Use of Dispute Resolution Procedures to “Lower the Temperature” BY TIM FLANAGAN, ESQ. – BERDING | WEIL, LLP

inor disputes in a community association can escalate quickly. Often the reaction is to dismiss the dispute with the hopes that it will go away on its own. Board members and managers should resist this temptation, and instead consider offering Internal Dispute Resolution (“IDR”) to the owner. IDRs can be an effective tool in resolving disputes.

What is IDR?

If an owner requests IDR with the association, then the association must accept. However, if the association requests IDR of an owner, the owner may reject the request.

IDR is designed to be an informal dispute resolution process between an owner and the association. The IDR process is outlined in Civil Code §§ 59005920. If the association does not have a formal IDR procedure, it can use the “default procedure” in Civil Code § 5915. Under the “default procedure,” either party to a dispute may invoke IDR by requesting IDR in writing. If an owner requests IDR with the association, then the association must accept. However, if the association requests IDR of an owner, the owner may reject the request. If the owner rejects the request, and the association is attempting to enforce the governing documents, the next step may be offering alternative dispute resolution, such as mediation, a more formal process that will typically involve legal counsel. The Code also provides that the board shall designate a board member to participate in the process, and that the participation must be in good faith, meaning that both parties should go into the process with an eye on resolving the dispute. The board member and the owner may be assisted by an attorney or another party at their own cost. Any resolution must be put into writing and will be binding on both parties.

Common Mistakes Not participating in the meeting in good faith. This is a difficult obstacle to overcome, especially if the owner is a well-known complainer or trouble maker in the community. That being said, the IDR will not be successful if there is not a good faith effort, so attempt to wipe the slate clean and go in with an open mind. The owner, who may have felt disregarded or disrespected in the past, may respond positively. Also, select a board member who does not have any negative feelings towards the owner, or who has the least amount of animosity or “history” with the owner. Having the entire board, or a majority of the board, participate in the IDR. This is in direct conflict with the Civil Code, which provides that “a” director shall be designated to participate in the IDR process. Having the entire board participate eliminates the benefits of IDR by making it more formal and less likely to reach a resolution. It may create a dynamic where the board lines itself up against the owner rather than trying to resolve the dispute. Some boards want to participate in the IDR because they do not want to relinquish control or they may be concerned about what the designated director might say or do. In order to move past this, the board should first meet to review the written request by the owner, discuss the matter and any potential resolution, and identify the board member best suited to participate in the IDR. Once the board member is selected, the board may or may not give that member authority to resolve the dispute. The board may instruct the director to report back with any proposed settlement. If the IDR concerns a monetary dispute, the board can give the member the authority to settle up to a certain dollar amount. Continued on page 5

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Bankruptcy Terms You Should Know AUTOMATIC STAY - Arises on BK filing, bars all collection actions, contempt and fines for those violating it. CHAPTER 7 – LIQUIDATION BK – Debtor wants to get a 'fresh start' and avoid paying existing debts. CHAPTER 11 - For companies and heavily indebted individuals – seeking a plan to pay off a portion of its/his/her debts. CHAPTER 13 - PERSONAL REORGANIZATION – Individuals seeking time to pay a portion of their debts – 3-5 year plan. CREDITOR – The party to whom money is owed. DEBTOR – The party who owes the money and files the BK petition. DISCHARGE – The final step in a successful (for debtor) BK. Remaining pre-petition unsecured debts are wiped away. DISMISSAL – Not a Discharge! Resume all collection activity for all amounts. IN REM ORDER - Very useful when multiple BKs are filed to thwart payment. Ask BK lawyer. MOTION FOR RELIEF FROM THE AUTOMATIC STAY - Request for permission to proceed with collection despite the BK. MOTION TO AVOID LIEN - Danger! Call lawyer ASAP. Attempt to invalidate HOA lien. PETITION - Document filed by debtor to initiate BK. Way too early for creditor to give up. PLAN - Debtor's Chapter 11 or 13 proposal to make payments over time on way to hoped for discharge. POST-PETITION - Liabilities of the debtor arising after filing of BK. Generally, not subject to discharge. PRE-PETITION - Liabilities of the debtor arising before the filing of the BK. Subject to discharge. PROOF OF CLAIM - Formal statement of nature of debt and amount due to creditor. Rights may be lost if not timely filed. SECURED CLAIM - A debt for which property is security. Creditor can pursue security even after discharge. UNSECURED CLAIM - No security for the debt. If discharged, debt is uncollectible.

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The Basics of Bankruptcy Law and its Effect on Assessment Collections BY RICHARD G. WITKIN, ESQ. – WITKIN & NEAL, INC.

nowing the basics of bankruptcy (BK) will assist you in coordinating the appropriate response to a bankruptcy filing with the association's attorney and with the board of directors. In all cases, it is strongly recommended that associations retain an attorney that specializes in bankruptcy law involving homeowners associations.

What to Do When Notified of a Bankruptcy 1. Request copies of any documents related to the filing. (The Notice of BK Case Filing and/or the Petition). 2. Notify the billing department and outside collectors to immediately cease all debt collection efforts – an “automatic stay” has arisen. 3. Be prepared to restore privileges that were suspended due to non-payment of assessments or other debts owed to the association. 4. Contact an attorney that specializes in bankruptcy law involving associations ASAP for review of the petition, filing of a Proof of Claim, and possible other actions. 5. Advise the billing department to separate the owner's billings – pre- and postpetition accounts.

Possible Outcomes of the Bankruptcy Case Dismissal – The debtor fails to follow through properly on his/her filing. As a result, the Court dismisses the case. Proceed as though the BK never happened, free to collect for all amounts due. Re-combine pre-petition and post-petition accounts back into one account. Discharge (Chapter 7) – The debtor completes his/her filing and earns the right to a fresh start. Remaining unsecured debts are avoided and no longer enforceable (unless avoided, an assessment lien recorded pre-petition may remain enforceable, consult BK attorney). Plan Confirmed (Chapter 13) - The debtor may have up to five years to pay a court-approved portion of his/her debts. If the debtor fails to complete the plan, the BK may be dismissed. If the debtor completes the plan, he/she may receive a discharge of the remaining pre-petition and post-petition assessments – see Goudelock v. Sixty-01 Ass’n, (2018), D.C. No. 2:15-cv-01413.

Effect Recorded Assessment Lien on Bankruptcy Proceedings 1. An assessment lien recorded before a BK petition changes the debt from unsecured to secured with the security being the owner's separate interest. 2. Although a debtor may receive a discharge of his/her personal liability for a debt, the creditor can still foreclose on the security unless the assessment lien is avoided by court order. 3. The amount that the creditor can claim against the security includes all prepetition debt and, in most courts, post-petition debt as well. 4. If the security has no value beyond any liens senior to the assessment lien, the

debtor can file a Motion to Avoid Lien. Creditor must contest the motion or lose the right to pursue the security, and may also lose the right to payment of its claim.

Conclusion The initial filing of a bankruptcy petition has no effect on the association's right to collect delinquent assessments (except that the association must wait until the automatic stay is terminated). If the BK is dismissed at any point, as often occurs, the association can resume efforts to collect all amounts due. If the association's debt is secured by an assessment lien at the time that the BK is filed, the association can pursue the security (property) even if the debtor receives a discharge. If the association's debt is unsecured, the association may still receive a substantial portion of the amounts owed through a court-approved payment plan in a Chapter 11 or 13 proceeding but … only if the association files a timely Proof of Claim. There are several avenues to payment. Best advice: Record a lien as early as possible, and consult a BK attorney ASAP.

Effective uses of Dispute Resolution Procedures... Continued from page 3

Allowing the meeting to lose focus due to the lack of a facilitator. Have the board member who is participating in the IDR explain at the outset that the parties are there to focus on the dispute and try in good faith to find a resolution, and then have the owner explain his or her position and ideas for resolution. The board member should then explain the association's position and ideas for resolution. Finally, the two sides should engage in a dialogue to see whether compromises can be made to resolve the dispute. In some cases, the board should consider requesting that its attorney participate in the IDR to assist the board member in explaining the association's legal position. The association should let the owner know in advance that its attorney will be present so that the owner can invite his or her attorney to attend. If the association does not have its counsel present, and the owner brings an attorney, it is recommended that the IDR be postponed so that the association can have its attorney present. It is a good practice for the association to ask the owner, in advance, whether he or she plans to bring an attorney.

How to Make IDR Effective The board should take every request seriously, discuss the issue beforehand and enter into the process with an open mind. Keep the timeline short so that the owner who requested the IDR is not waiting too long causing frustration which can hinder a resolution. Consider drafting a request form to assist an owner in requesting IDR. The form should be drafted so that the owner must think about the dispute and focus on the issues. Additionally, the form should have the owner indicate whether he or she will be bringing an attorney or a third party to the IDR meeting in order to avoid surprise.

ABOUT THE AUTHOR Tim Flanagan, Esq. is an attorney with the law firm Berding | Weil, LLP in San Diego. He has been serving as general counsel to common interest developments for 12 years.

In this edition of The Law Journal, our talented authors address a wide range of legal issues. Each article focuses on one of the "domains of knowledge" in Business & Professions Code §11502. This statute lists the many areas of law and management skills that must be mastered in order to be called a “certified community association manager.” From what to expect when an owner files a bankruptcy petition to navigating issues related to solar energy systems in common areas, this edition provides you up-to-date information meant to assist you in guiding the communities you serve. My thanks to all of the authors, and to the members of The Law Journal Editorial Committee, for making it so easy to provide you with this issue. ABOUT THE AUTHOR Richard G. Witkin, Esq. is an attorney with the law firm Witkin & Neal, Inc. located in Los Angeles. He has been serving as general counsel to common interest developments for 31 years.

Margaret G. "Gen" Wangler, Esq. is an attorney with the law firm Fiore, Racobs & Powers, APLC in Palm Desert. She has been representing community associations for the past 30 years.

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Understanding the Architectural Review Process BY MELISSA BAUMAN WARD, ESQ. – HUGHES GILL COCHRANE TINETTI, PC

Planning Ahead: Using Architectural Rules and Guidelines The association’s architectural rules should guide the board’s actions. It is risky to consider architectural applications without rules in place and difficult to enforce your aesthetic vision and desire for harmonious community appearance if that vision is not clearly stated. Further, some application requirements, such as solar site surveys and determination of equitable allocation of usable roof space for solar projects pursuant to new Civil Code § 4746 may

Good rules minimize disputes. arguably be required by an association only if such requirements are included in the rules. Rules can make your job easier. Include pre-approved items, e.g., paint colors within an approved palette, garage doors of a particular make and model, or specific types of satellite dishes installed in specific locations. Finally, good rules minimize disputes. Adopt clear and customized rules that reflect the requirements of the governing documents, the realities of the types of applications likely to be submitted by owners, and the aesthetic vision that the board wants to create or maintain.

Remember to follow your own guidelines and review standards. Those procedures must be fair and reasonable and your substantive decision must be made in good faith, and be reasonable, not arbitrary or capricious.

Timing Is Everything Owners are often on tight deadlines with regard to obtaining permits and hiring contractors. Weather may be a major factor, with rain or snow limiting the months in which certain types of construction can take place. The appearance of unnecessary delay leads to disputes. The most important date: when an architectural application is complete. This date triggers the beginning of the time period in which a board or committee must consider and decide upon an application. Do not just glance over the submitted documents and make a cursory determination that the application is complete. For example, rooftop solar energy system applications must include detailed information regarding how the panels are attached to the roof and a solar site survey. If the application is not complete for any reason, it must be returned to the owner with that explanation. Once you have accepted the application and considered it, rejection on the basis of noncompleteness will be much harder to argue (although not impossible). Some types of applications

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have special deadlines for a decision to approve or disapprove once a complete application is submitted, and most CC&Rs include deadlines for consideration, after which an application may be “deemed approved.” A “deemed approved” hammer may make future enforcement challenging because a community may have noncompliant components legally installed only because a volunteer architectural committee could not decide on or respond to the application within an arbitrary period of time. If you have a “deemed approved” clause in your CC&Rs for general architectural applications, consult with your association's legal counsel about possible amendments. In the meantime, meet your deadlines! The most common types of architectural applications that have special statutory deadlines for consideration or are “deemed approved” are solar energy systems (Civil Code § 714 – 45 days) and electric vehicle charging stations (Civil Code § 4745(e) – 60 days). Special care must be taken before determining that an application is “complete” because this determination starts the clock on the strict statutory deadline for these particular types of applications.

Using Consultants Reviewing some plans may require the assistance of experts. For example, in a custom home development, a

consulting architect should review the plans and make recommendations. If an architectural application requires technical analysis, the board must consult with the appropriate expert to assist it in the decision making process. Who pays for the cost of the expert? Ideally, the applicant should pay those costs. The authority to recover the cost should be in the CC&Rs or, at a minimum, the rules. Finally, make sure your rules specify who qualifies to be an expert consultant. The new solar energy statute states at Civil Code § 4746(b)(1)(A) that a person authorized to create a solar site survey (which includes the very important “determination of equitable allocation” of roof space for the solar system) may be a “licensed contractor or the contractor’s registered salesperson knowledgeable in the installation of solar energy systems.” Similarly, an experienced and licensed acoustical engineer may be required to provide data necessary to determine whether an application to install hard flooring should be approved.

ABOUT THE AUTHOR Melissa Bauman Ward, Esq. is an attorney with the law firm Hughes Gill Cochrane Tinetti, PC in Walnut Creek. She has been serving as general counsel to common interest developments for 10 years and has been a business and real estate attorney for over 25 years

Best Practices for Use of a Maintenance Manual: Before and After the 10 Year Mark BY MELISSA A. PASEK, ESQ. – RILEY PASEK CANTY LLP

he most important and challenging obligation of any association board of directors is maintaining and repairing the common area components. Most associations are aware that with the passage of SB800 in 2003, builders created comprehensive maintenance manuals and schedules that associations are obligated to follow per Civil Code § 907 and the governing documents. Further, and per Civil Code § 944, failure to follow these guidelines can cause hidden damage to the buildings and can also potentially affect the value of an association’s potential construction defect recovery. Many associations struggle to comply with the maintenance manuals because they often require yearly inspections of a boilerplate list of components that may not be necessary. Additionally, the costs of the inspections are rarely included in the association budget or reserve study and associations may not have the funds to cover the inspections. Many times the builder does not provide a copy of the maintenance manual at the time of turnover and the association is left to create its own maintenance manual. Best practices for complying with the developer’s maintenance manual requires the association rely on experts to review and analyze the maintenance manual, the governing documents and the project maintenance history to

develop an appropriate inspection and maintenance schedule. So, how much maintenance is required under the maintenance manual and what is the most cost-effective method for compliance? By definition, most potential defective conditions are latent defects which are hidden defects that cannot be observed by a routine visual observation or walk around of the project. Furthermore, reserve study inspections generally only include inspection of components accessible and visible. Therefore, associations cannot rely on reserve study inspections to ensure adequate maintenance. Instead, the association must engage construction and design professionals who specialize in investigating and identifying problematic building components and developing appropriate maintenance and repair guidelines. It is important for associations to retain legal counsel to review the association’s governing documents, reserve study and maintenance manual to flag any contradictory provisions and to provide a legal opinion on appropriate maintenance obligations. Ideally, the association will then have a program in place that will identify any potential problems early and often so that they can engage the builder in a claims process to

either repair the problems or pay for the repair of the problems. Failure to do so prior to the expiration of the 10 year statute of limitations will leave the association responsible to pay for the repairs, rather than seeking recourse from the builder. In the worst case scenario, significant defects are discovered after the 10 year period and the association has insufficient reserve funds available, requiring a special assessment to the membership. For older associations that do not have the option of making a claim to the builder, it is even more critical that the association establish very clear and concise maintenance duties as between association and owner so that deferred maintenance items can be addressed on an as needed basis. One of the most problematic areas for older buildings are exclusive use balconies and decks. Civil Code § 4775 (a)(3), effective January 1, 2017, provides that unless an association’s CC&Rs state otherwise, owners are responsible for maintaining their exclusive use areas but the association is responsible for necessary repairs and/or replacement. This section changed prior law which assigned exclusive use maintenance to the owner and was widely interpreted to include both maintenance and any necessary repairs. Because the new code section does not clearly define

“maintenance”, “repair” or “replacement” conflicts can easily arise between the association and an owner regarding responsibility for the same. For example, two critical areas of deck maintenance involve deck coatings and deck drainage and these responsibilities must be clearly delineated. For this reason, associations should consult with legal counsel to review the governing documents to determine if it is necessary to amend the CC&Rs to more carefully define exclusive use balcony and deck maintenance as between the association and owners. In conclusion, associations should actively engage construction professionals and legal counsel to assist in developing appropriate maintenance and repair programs as early as practicable following builder turnover to timely evaluate building performance and protect the value of the association’s property.

ABOUT THE AUTHOR Melissa A. Pasek, Esq. is an attorney with the law firm Riley Pasek Canty LLP in Danville. She has been serving as general counsel to common interest developments for 28 years.

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Contract Provisions and Contract Review The Myths of “Boilerplate” and “Legalese” BY JOHN R. MacDOWELL, ESQ., FIORE, RACOBS & POWERS, A PLC

The witness on the stand in Pomona late last spring wasn't familiar with American slang. Struggling to explain that he didn't understand a legal document, he testified that "It was all just mumbo!" Sometimes contracts seem like they are just mumbo, or gobbledygook, legalese, or boilerplate. But the words in contracts, and even the commas, have meaning. If things always went smoothly, maybe everyone would do what is right and fair without a written contract. However, sometimes things don't go smoothly. The contractor will be buying materials and contracting with subcontractors, and bringing trucks and workers onto the project; the workers will be digging holes, opening roofs, and climbing on ladders and scaffolding. The time to consider problems that could arise is at the start of the relationship, when everyone is getting along and looking forward to a successful project, not after something has gone wrong. A good contract identifies the potential risks; allocates them fairly; and does so clearly. If the language is not clear, the ambiguity becomes just another thing to fight about. Although a contractor proposes a contract along with the bid, an association should create a bid package with specifications and a scope of work that includes its own contract prepared by legal

counsel. This A complete contract addresses a multitude of issues: ensures clarity and • Whether the contractor gets • When the work starts and eliminates the paid only after submitting ends potential risk in conditional mechanics lien • What happens if there is the contract releases delay (whether the cause of favoring the • Where the contractor is to the delay matters) contractor. store materials • Who gets building permits • What happens if the • Who is responsible for A proposal is contractor doesn't perform compliance with jobsite not a contract. A under the contract safety regulations proposal submitted by the contractor will itemize the Taking responsibility for responsible for injury or work to be performed and set damage suffered by a third damage, even if the association out a price, but it won't include party is indemnification, and is is partly at fault, but not if the much else. It does not identify an important part of allocating association bears sole the issues which can arise, nor risk in a contract. responsibility for the injury or does it allocate any risk. It Indemnification isn't the damage. A reasonable contract leaves key issues open for issue when the contractor will also require the contractor agreement at another time. doesn't do what it promised. to include the association as an When submitting a proposal, That is a breach of contract, additional insured under its the contractor should expect and is dealt with in other insurance policy. That way, the that these key issues will be contract provisions. insurance company can provide addressed in a comprehensive Indemnification is the issue the defense and contract. The proposal when someone else suffers indemnification. Even if the becomes a part of the contract, injury or damage arising from association is an additional usually as an exhibit, and it's the work of the contractor, and insured, the contract should best not to sign the proposal brings a claim (including a still require the contractor to until a contract is signed. lawsuit) against the association indemnify the association. The contractor should be to recover for the injury or An important contract responsible for things under its damage. The association will function is to allocate risk. control, which include most want the contractor to defend Legal counsel can identify aspects of the job. the association against the missing issues in a contract and In most cases, the claim, and to indemnify the have contract language at the contractor should also take association by paying any ready. When associations work responsibility if someone settlement or judgment. This is with counsel to review makes a claim against the fair to both sides. The contracts and proposals, they association for damage or contractor has full control over benefit! injury arising out of the work. the work and the jobsite, and The person or entity making ABOUT THE AUTHOR the association relies the claim might be the injured John R. MacDowell, completely on the contractor worker of a subcontractor, an Esq. is an attorney to do its work safely. The with the law firm owner whose furniture was contractor also has the ability Fiore, Racobs & ruined by a freak rainstorm Powers, A PLC in to buy insurance to protect during a roofing project, or any Orange County. He itself and its customers. has been serving as other third party (that is, A reasonable general counsel to anyone other than the common interest developments for 25 indemnification provision contractor or the association). years. makes the contractor

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LEGAL