ECHO Journal - June 2014 by Echo

2014 ECHO Seminars p.7

Decision-Making in Community Associations. p.8

When is Construction Really Complete?

Problem Solving

p.16

p.22

Serving Community Associations

Construction Contracts

p.26

Why Associations Matter p.32

June 2014 echo-ca.org

Decision-Making Who Decides, the Board or the Members? p. 8

ECHO 1960 The Alameda STE 195 San Jose, CA 95126 Change Service Requested

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news from ECHO

News From ECHO June 2014 I want to thank everyone who participated with us at our Second Annual ECHO Oakland Seminar and Trade Show. Your commitment to ECHO’s mission of Serving Community Associations through Board member education is much appreciated. We hosted over 50 professional vendors and 21 speakers offering expert advice and information on a wide variety of subjects key to the success of your communities. Attendance by Board members was light, however, so we are working to find ways to encourage more of you to attend our future events. ECHO educational seminars are the only face-to-face opportunities for Board members to get the information you need from the finest experts in the industry. We are all for Internet research—and we strongly encourage you to use echo-ca.org as a resource—but there’s nothing like hearing the fine points on an issue of concern and get your questions answered directly by an expert. I want to thank those who attended all four sessions in our HOA University track for their dedication to understanding the fundamentals of Board responsibilities: Paul McGillicuddy, Liz Waska, Samuel Jason, Thomas Lewis, Laura Lai, Mark Borson, Tara Brady, David Vandel, Barbara Robinson, Ann Loper, Yolanda Meider, and Ron Freier. Congratulations to you all! Our speakers are listed on page 25, and deserve our thanks for their hours of preparation and willingness to share their knowledge and expertise with our attendees. I would also like to congratulate Audrey Moy, Buzz Barbato, and Marie Eastman, who each won a $100 VISA card in our passport program during ECHO Oakland! Registration for ECHO San Jose is now open, and I encourage you to sign up and attend our signature educational event, which is shaping up to be the biggest and best in years. Fill out the form on page 15, or visit our website at www.echo-ca.org/events. Best,

Brian Kidney Executive Director

June 2014 | ECHO Journal

CONTENTS

16 8

JOB

22 32

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Decision-Making in Community Associations Most bylaws and CC&Rs identify which decisions are to be made by the board and those which are to be made by the members. The Corporations Code and the Davis-Stirling Common Interest Development Act also allocate certain voting rights as between the board and the members.

When is Construction Really Complete? During project closeout, many differing interests and perspectives— some of them conflicting—create a complex dynamic. Pinpointing whether or not construction is truly “over” isn’t always a simple, straightforward matter.

Problem Solving Whether you are an owner, a board member, or a manager, here are some thoughts and philosophy about problem solving, along with some actual tips.

Construction Contracts When your property manager reports to a board that one portion or a significant element of the common area is in need of repair, the first question that usually arises is whether or not the Board should itself (without reliance on legal counsel) contemplate negotiating the two contracts that are usually needed before work can start.

Why Associations Matter It is important to bear in mind the necessarily unique and local aspect of associations—that ultimately every association is its own local community of people carrying on their lives with their spouses, with their children, by themselves, with family, with friends, with neighbors, with others. Each association uniquely impacts those who live within it.

The ECHO Journal is published monthly by the Educational Community for Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy. Copyright 2014 Educational Community for Homeowners. All rights reserved. Reproduction, except by written permission of ECHO is prohibited. The ECHO membership list is never released to any outside individual or organization. ECHO 1960 The Alameda, Suite 195 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours Monday-Friday 9:00am to 5:00pm Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer Diane Rossi

DEPARTMENTS

News from ECHO

2014 ECHO Educational Calendar

Secretary Toni Scurti Directors Jerry L. Bowles Stephanie Hayes Robert Rosenberg Brian Seifert Steven Weil

John Garvic David Levy Kurtis Shenefiel Wanden Treanor

ECHO San Jose — August 22-23

ECHO Volunteers

NEW at echo-ca.org

ECHO Bookstore

Advertiser Index

Legislation at a Glimpse

Director of Communications Tyler Coffin

ECHO Event Calendar

Legislative Consultant Government Strategies, Inc.

Executive Director Brian Kidney Director of Marketing & Membership Toni Scurti

Design and Production Design Site ECHO Mission Statement Serving Community Associations

June 2014 | ECHO Journal

This almost happened to your HOA ECHO’s Advocacy in Sacramento Makes a Difference Your homeowners association is a community, with an identity that defines the look and feel of your neighborhood and enhances your property values. So when a well-meaning legislator wanted to override association CC&Rs and rules to enable renters and homeowners to grow and sell edible plants, and to allow outside visitors on their premises for such purposes, we spoke up and opposed AB 2561.

ECHO voiced your concerns in Sacramento. We told them: You make decisions as a community. We believe decisions about property, in a community governed by mutual consent of the owners, should be made by those owners. You care about safe, secure neighborhoods. We were concerned about security issues relating to operating a business and inviting the public at large onto private residential property. You care about preserving your neighborhood’s aesthetic and property values. Since most homeowner associations have established uniform architectural and landscaping rules to preserve and enhance property aesthetics and values—often a key reason that owners purchase(d) property in the association—overriding these standards could substantially, and negatively, affect property values. 6

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You want to avoid liability and expensive disputes. There are the miscellaneous ancillary issues of increased water use, pesticide and herbicide control, disposal of dead plant material, noxious odors, triggering Americans with Disabilities Act requirements, and other potentially disruptive matters that could become administratively burdensome to associations, many of which are managed by volunteers.

ECHO intervened with the Author and Committees and achieved the following results:

• Allowing outside visitors to home

agriculture sites is no longer part of the bill.

• Amateur agriculture is now limited only to exclusive use back yards, and is subject to reasonable restrictions.

2014 ECHO educational calendar

ECHO Seminars Now there’s one near you. If you’ve ever wished that ECHO would hold a seminar closer to your association, chances are that we’ll be nearby during 2014. Don’t miss an opportunity to get the education you need with guidance from some of California’s top HOA attorneys and professionals. Take a look and mark your calendar. We can’t wait to see you there!

Santa Rosa

Sacramento

Marin Walnut Creek Oakland San Francisco

San Jose Campbell Santa Cruz

August 22-23 ECHO San Jose Annual Seminar & Tradeshow (see page 15)

Fresno Monterey

San Jose Convention Center, San Jose

DATE

EVENT

October 4 October 18

Monterey Educational Seminar Walnut Creek Educational Seminar

June 2014 | ECHO Journal

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DECISION-MAKING IN COMMUNITY ASSOCIATIONS

WHO DECIDES THE BOARD OR THE MEMBERS? by Steven S. Weil, Esq.

Introduction: It has often been observed that community associations are actually “mini-governments.” The “citizens” (owners) elect “officials” (directors) to make both small and large decisions affecting their lives and assets. These decisions relate to property values, membership safety, long-term financial planning, use of property and maintenance of amenities.

June 2014 | ECHO Journal

ometimes, the members disagree with the decisions made by directors and call special meetings to remove the board, to challenge its authority or to reverse its decisions. CID attorneys are often called upon to analyze these challenges and determine a question that goes to the very heart of how a community operates: who has the authority to make decisions for a community association—the board or the members. Actually, a better question is: which decisions are made by the board, which by the members, and which by either. This article discusses these issues.

all corporate powers shall be exercised by or under the direction of the board.” This provision, or one similar, is frequently found in community association bylaws. These legal principles mean that, unless the members are given the specific right to vote on an issue, all decisions of a community association should be made by, and solely by, the board.

Governing Documents and Statutory Law— Specific Allocations of Authority Most bylaws and CC&Rs identify which decisions are to be made by the board and those which are to be made by the members. The Corporations Code and the Davis-Stirling Common Interest Development Act also allocate certain voting rights as between the board and the members. Typical (but not universal) examples of each are

4 Approving regular assessment

increases of up to twenty percent (20%) and imposition of “emergency” and “unforeseen maintenance assessments”

Authority vested in the members (requires a membership vote)

4 Electing and removing directors 4 Approving regular assessment

increases greater than 20 percent of an existing assessment

4 Approving special assessments

greater than 5 percent of budgeted gross expenses

4 Amending governing documents

Authority vested in the board

4 Entering into contracts of less

than one year relating to goods or services for the common area

4 Entering into management contracts

4 Acquiring certain types of insurance

Decision-Making Authority—The Basics To put the issue in perspective, it is useful to consider Corporations Code §7210. In part, that section says that, subject to any limitations in the articles of incorporation or the bylaws relating to actions required to be approved by the members, “the activities and affairs of a corporation shall be conducted and

4 Incurring expenditures for

capital improvements up to five percent (5%) of the association’s budgeted gross expenses for a fiscal year

4 Approving, preparing and

distributing financial information (budgets, etc.)

4 Conducting board meetings and electing officers

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Areas of Dispute Associations sometimes encounter controversies that trigger strong emotions among directors, the members, or both. These controversies sometimes turn political—the board will try to force the members to accept a decision, or maybe a petition signed by at least five percent (5%) of the members demands a special meeting to reverse the decision or to compel the board to do something else. These competing views of how an association operates often turn on how the board and the members believe decisions should be made and implemented in their community. In our practice, we routinely encounter these disputes in many contexts. They include disputes relating to the commencement, continuation or settlement of construction litigation; a change in roofing material or paint color; pursuing CC&R violations; selecting, retaining or terminating management companies; the disclosure or distribution of

“sensitive” association records; and decisions whether to make large scale renovations to the common areas, at what price and by which contractors. Each of these situations requires a careful legal analysis and a realpolitik calibration of what actions really must, can or should be taken or approved by the board, the members, or both. There are times when a board may perceive its fiduciary duty requires an action with which the members may vehemently disagree. In those cases, it takes a fair amount of political courage for directors to stand firm and resist the temptation to “put the matter up for a vote.” Indeed, I believe there are times when a board breaches its fiduciary duty by asking the members to vote on an issue that clearly falls within the sole authority and obligation of the board.

A Case in Point— Earthquake Insurance In the last few years, multiple natural catastrophes in California and throughout the nation (earthquakes, floods, landslides) have increased an awareness of the need to protect association members and assets from harm. At the same time, the strangely fluctuating earthquake insurance market—with often astronomical premiums, decreased coverage, higher deductibles and real financing implications—have made acquiring earthquake insurance more problematic. These “real world” concerns, however, exist in the context of governing document provisions that either require the board to obtain earthquake insurance, allow it to obtain “any other insurance deemed prudent,” state that the issue should be voted upon by the members or, finally, are completely silent on whether the board can, should or must obtain earthquake coverage.

Where the board must obtain earthquake insurance Many bylaw provisions are precise in their requirement that a board June 2014 | ECHO Journal

must obtain earthquake insurance. This can pose very real practical and political problems for the board. It may be unable to obtain bids (sometimes required), the coverages available may be of little value because the limits are too low and the deductibles too high, or, simply, the cost may be prohibitive. On the other hand, if buildings are damaged when the “Big One” strikes, do any of us doubt that lawsuits will be filed against directors who failed to obtain earthquake insurance when the governing documents required it?

Where the board may obtain earthquake insurance More typically, a bylaw provision will allow the board to obtain “such other insurance as it deems prudent” or will not address the issue at all. Does this take the board “off the hook”? Sad to say, some boards believe this type of provi-

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sion is a “free pass” to avoid completely dealing with earthquake coverage. As discussed below, such boards are, it seems to me, as much at risk as directors who ignore a bylaw provision requiring the acquisition of this type of coverage.

Where the members decide Finally, every now and then, we encounter a bylaw provision that states that earthquake insurance may be obtained, but only with the approval of the membership.

Resolving the Dilemma! Let’s not be wishy-washy. In my opinion, the duty imposed on each director to use good faith and to make decisions that he or she believes are in the best

interest of the community requires all boards to research earthquake coverage and determine whether, and at what price, it is available. The level of analysis may be higher or lower, depending on each development’s unique facts—location, known structural deficiencies, and so forth. If the governing documents require a board to obtain earthquake coverage but none can be obtained, a record of that fact should be maintained and communicated to the membership. The board should then seek an amendment to the governing documents to eliminate the provision requiring the board to obtain the coverage. If the governing documents allow the board to obtain earthquake insurance “as deemed prudent,” the board should determine whether it is, in fact, reasonable to obtain and pay for the coverage. If the premium can be paid without an increase in assessments (or without an increase beyond 20 percent of the existing budget), no membership vote

is required. The board should, however, advise the membership of its decision and the reasons therefor. Can the board ask the members to approve an assessment to pay for earthquake coverage when the documents give the board discretionary authority to purchase the insurance or not? This is probably the most sensitive issue of all because it invites the board to avoid its obligation to make its own judgment by foisting the issue on the membership. Even worse, the outcome of the vote can be manipulated since a vote to approve an assessment to pay for the insurance would require the vote of only a majority of a quorum of members while, in many cases, a membership vote on the decision to acquire the insurance itself could require a majority of the total membership. In other words, if the vote is posited as an assessment increase, it would require less membership approval than if the vote were only on the pure issue of whether the coverage should be obtained.

In reality, there is no simple answer to the question of whether the board has breached its fiduciary duty by putting the matter to a membership vote. A “clean” way of dealing with the issue is to secure a governing document amendment that puts the burden on the members, not the board. Short of that, asking the members to vote on an issue that should be decided by the board definitely raises the specter of post-earthquake claims for breach of fiduciary duty even if the members rejected the insurance proposal. Finally, where the governing documents do allow the members to decide, it will usually be true that the board’s duty is limited to acquiring relevant information and then candidly and reasonably submitting the matter to a membership vote. In extreme cases, the board’s general fiduciary duty to operate the development in the best interests of the community might require it to obtain earthquake insurance even where the membership refuses. However, this will be the exception and not the rule.

Conclusion: As a practical matter, the most important “vote” the members make is for the directors who represent them. That is because almost all decisions affecting a community are made by the association’s directors and not the members. The members’ right to vote is always spelled out in the governing documents; if not found there, such a right usually does not exist. In certain cases, a board will be able to look to the members to make the final decision on particularly important matters but, where the authority to make a decision clearly rests with the board, its failure to exercise that authority could subject it to future claims. Steve Weil is one of the founding principals at Berding|Weil LLP in Walnut Creek. He has practiced community association law since 1984 and has dealt with virtually every kind of challenge facing directors, managers and community association members. He is a member of the ECHO board of directors.

June 2014 | ECHO Journal

ECHO SAN JOSE 42nd Annual Seminar & Trade Show August 22-23, 2014

This August, ECHO San Jose returns to the San Jose Convention Center for its 42nd year! ECHOâ&#x20AC;&#x2122;s Annual Seminars are the only opportunity to receive objective, in-person training for board members (or future board members!). Come for answers, and enjoy the camaraderie of your fellow board members. Registration always includes a buffet lunch, 12 educational sessions, access to a vibrant exhibit floor and hundreds of prizes. Visit the ECHO website for complete event details: www.echo-ca.org/events 14 echo-ca.org

Weâ&#x20AC;&#x2122;ll cover a dozen important subjects, including: HOA UNIVERSITY: important training in the four major areas of board operations. Attend all four sessions and earn a certificate. DROUGHT RESPONSE: how to mitigate the impact of the drought and related regulations. MANAGING THE MANAGER: learn how to get the most from your most important service provider.

Event Information Location: ECHO San Jose is in downtown San Jose at the San Jose Convention Center. Special hotel rates are available for a limited time. Visit the registration page on the ECHO Website for details. www.echo-ca.org/events

Professional, personal, boardfocused training.

EGISTRATION:

Join us at ECHO San Jose!

Yes, reserve ______spaces for the ECHO San Jose 42nd Annual Seminar & Trade Show. Amount enclosed: $__________ (attach additional names) Name: Email Address:

You may register online, by fax or mail, or by contacting the ECHO office. Price: $89 Members ($99 after August 1) $119 Nonmembers ($129 after August 1)

HOA or Firm: Address:

www.echo-ca.org/events

City: State:

REGISTRATION:

Zip:

Phone:

SPONSORS

Visa/Mastercard No. Exp. Date: Signature: Return with payment to: ECHO, 1960 The Alameda, Ste 195, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Phone: 408-297-3246; Fax: 408-297-3517

June 2014 | ECHO Journal

JOB WHEN IS

CONSTRUCTION REALLY By David Kuivanen, AIA

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COMPLETE? June 2014 | ECHO Journal

hen Yogi Berra observed, “It ain’t over ‘til it’s over,” he was talking about baseball, but he could just as well have been describing a homeowner association’s construction project. During project closeout, many differing interests and perspectives—some of them conflicting—create a complex dynamic. Pinpointing whether or not construction is truly “over” isn’t always a simple, straightforward matter.

Adding to the challenge is the fact that numerous individuals and entities have an interest in declaring construction complete. At the most basic level, association directors and association managers often hear such laments as, “The contractor says the job is done, but when is someone coming back to touch up the paint in my unit?” or “All of the new roof tiles are on, but nails are scattered all over my driveway and in the plants!” In addition to the individual homeowners, others who have a strong interest in the project closeout process include the maintenance staff members, who must know how to maintain and operate the newly constructed or reconstructed facilities; the contractor, who is anxious to finish the work, collect the retainage and final payments that usually amount to the profit for the job, and move on to the next project; and the lending agencies, which may be withholding final payments on loans until the work is completed and accepted. Then, too, there are the subcontractors and suppliers. Some of them may not be quite done or may be waiting for another subcontractor to complete work before they can finish theirs; some will be providing warranties for products and equipment; or some may still be waiting to be paid fully. And don’t forget the insurance companies that maintain 18 echo-ca.org

a risk position until all of these issues are satisfied; the code and building department officials who will issue the necessary permits and certificates of occupancy; and the community association manager or directors, who may want to keep the contractor on the job to perform work that should by all rights be considered maintenance or warranty work rather than a part of the original contract for construction. Whew! Again, as Yogi would say, “You got to be very careful if you don’t know where you’re going, because you might not get there!”

Starting out right Defining and determining exactly when construction is complete definitely can be a complex procedure. Knowing when “it’s over” becomes easier, though, if you have clearly defined what will constitute the end of the project at its very beginning. In other words, your contract for construction should set the terms and conditions for completion and establish the requirements and duties for all parties involved. Just how complex project closeout is depends to some degree on the scale, size, timing and phasing of the construction or reconstruction effort. Small projects of short duration, or simple maintenance work, will not usually involve all of the steps of a larger project. For example, the contract for a small project may not spell out the need for the association to make progress payments as construction proceeds, or it may not require that the contractor turn over extensive as builts (detailed plans that depict exactly what was built). Other issues, though, should be spelled out in the contract no matter how small the project; these include insurance, liens, permits and warranty information. Some projects are large and multi phased, requiring several sequential closeouts. Each individual phase will usually necessitate its own ending in order to determine proper payment of the contractor at the termination of each part of the work, as well as to allow incremental occupancy of the buildings and to complete permit periods.

Having a solid understanding of the two key stages of project completion is essential to a smooth and successful completion of constriction, no matter the project’s size or timing. The project closeout process takes the project from the point defined by the industry and by your contract documents as Substantial Completion, to the point defined as Final Completion and payment of the contractor.

Substantial Completion The date of Substantial Completion is established by the architect’s or construction manager’s inspection—with important legal significance. Substantial Completion is defined by Section A 201 of the AIA’s (American Institute of Architects) General Conditions of the Contract for Construction as “... the stage in the progress of the work when the work or designated portion thereof is sufficiently complete in accordance with the contract documents so that the owner can occupy or utilize the work for its intended use.” Unless defined otherwise in your contract for construction, this is the date the contract time ends, insurance responsibilities are transferred from the contractor to the owner, and warranty periods begin. This is also the date that the statute of limitations time period begins for various litigation claims. Because of these important issues, the architect or construction manager (who, in the case of a small project, may be your association manager or a homeowner appointed to manage the project) should not perform a Substantial Completion inspection until the project has actually reached that stage. If the contractor calls for an inspection prematurely, the request should be denied, and the work should be completed as required. Once the contractor is satisfied that the project is substantially complete according to the contract documents, the contractor should prepare a comprehensive list of the items yet to be completed or corrected (that bit of paint touchup, for example). This list is typically called a contractor’s punch list, and it should be reviewed by the architect or construction

manager on site to verify that the work is, indeed, substantially complete. (“You can observe a lot just by watchin’!”) At this point, a determination is made of how much time will be allowed for completion of the punch list work, and the date is set on which the owner will occupy the work or portion of the work. The contractor is responsible for correcting all of the items on the punch list and anything else that does not conform to the contract documents. When the project has been judged substantially complete, the architect or construction manager issues a Certificate of Substantial Completion, attaching the punch list, for mutual approval of the contractor and owner. At the same time, the retainage can be adjusted as provided in the contracts. The cost of completion of the work or items remaining may be a factor in releasing retainage. Small projects with a simple management process may have no retainage, but may instead have preset payment schedules to coincide with stages in the job.

Final Completion Now we’re well into the home stretch. After the punch list work has been completed, and all other contract requirements have been satisfied, the contractor submits a request for the architect’s or construction manager’s final inspection of the work, along with a final application for payment. Contract requirements that must be satisfied are often numerous and will undoubtedly include the following:

Assurance of payment (or another means of satisfaction) of all payrolls, bills for materials and equipment, and other indebtedness connected with the work for which your HOA might in any way be responsible.

Submittal of lien releases or waivers for all contractors and entities involved in the work (these may require review by your association attorney to be sure they are appropriate).

Consent of any surety to the final payment. June 2014 | ECHO Journal

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Submittal of a list of any exceptions, debts, or known claims that have arisen in connection with the work that has not been paid or otherwise satisfied. The contractor typically must furnish a lien bond or indemnity bond for each item. If these items are minor, they can be waived by mutual agreement.

Submittal and confirmation of documentation for all additive and deductive change orders, unit pricing, allowances, deductions for any uncorrected work, and any adjustments for liquidated damages.

Submittal of all warranties and guarantees for all work and materials so covered, including certificates of inspection for any product or material on which those warranties depend.

Verification that all necessary certificates of insurance during the period of the work are on file.

Submittal of as built drawings and documentation on the actual progress of the construction.

Approvals of homeowners stating that work is complete.

Submittal of a Project Manual that includes warranty information, maintenance instructions, and manufacturer’s information on the products used. When all of these items are submitted, verified, and complete, the final payment is due to the contractor.

Is It Over? Well...not exactly! The

end of a construction or reconstruction project is really just the transition to the next stage the warranty and maintenance period. Routine inspections -and verification and maintenance of the systems and materials as recommended by the manufacturer’s instructions —are key to prolonging their life and getting the most value for your association’s construction dollars.

David Kuivanen, AIA, is an independent architect and ECHO member, offering architectural and forensic consulting services, specializing in site investigations, destructive testing, repair recommendations and litigation services since 1980. He can be reached at 818.571.7711 or Dpkuivanen@dpkarch.com. June 2014 | ECHO Journal

PROBLEM 22 echo-ca.org

Whether you are an owner, a board member, or a manager, here are some thoughts and philosophy about problem solving, along with some actual tips:

As the meeting starts, the Directors and manager notice an owner pull out a handheld digital recorder and push the start button. The owner is a longtime critic of the Board and manager. This action is viewed as an attempt to intimidate the Board. The owner is told to turn it off and put it away. A heated exchange follows and the owner storms out. The next day flyers are posted around the complex announcing that the Board is conducting secret meetings and refuses to permit recordings of their meetings at which tens of thousands of dollars ownersâ&#x20AC;&#x2122; money is spent. Many owners recognize the complainer as a perpetual gadfly Beth Grimm, Esq.and ignore the flyer. However, some other owners have no idea what is going on but wonder why the Board refuses to permit a recording if they have nothing to hide. Confidence in the integrity of the Board begins to erode.

SOLVING By

June 2014 | ECHO Journal

Do not put the blinders on and ignore the good traits or decision-making capabilities or ideas of fellow board members, even if you do not like them personally. View things objectively, as if you were on the outside looking in.

Don’t muddle around in the eddy (fast churning water moving in a circular motion and creating great danger of drowning). Get outside of the situation to clear your lungs so you can breathe.

Learn some people skills (especially active listening) so that you really “hear” the problem. You cannot listen while you are talking — or arguing.

You may have to be the one that thinks outside the box, gets creative, or breaks the log jam of immature or irrational thinking by offering up some practical solutions or compromises.

Don’t let it get to the point that the board is paralyzed. And if that happens, imagine what it would be like to find a cure!

Every time a board or Association must call upon a lawyer to help resolve a dispute, there are costs involved (and usually 2 attorneys doubling the costs!).

When you get a special opportunity, be decent and civic minded, solutionoriented, and don’t pass it up later thinking the opportunity will come again. Speak a word of kindness, even when it is difficult because of the way another person is acting. I guarantee you the potential to feel better for it, even if “they” don’t. It takes two sides to ramp up the combat. And combatants often end up in court facing potentially huge attorneys’ fees and costs and blame everything and everybody around them and never take responsibility for their actions. Don’t be that person. Don’t put on the blinders and miss what is going on before your eyes. Don’t pass up the opportunity to do something great, even if it seems small. Someone has to — to make the world a better place.

Don’t miss the chance to be the change that you want to see. Don’t miss the opportunity when it presents itself to act in a manner that will bring some relief to a pressure-cooker situation. When you can contribute to the solution, instead of throwing your hands up at the problem, you can pat yourself on the back and feel really good about your day.

Beth A. Grimm, Esq. is an independent attorney practicing in Pleasant Hill. Beth is the ECHO East Bay Resource Panel Chairperson, 2012 ECHO volunteer of the Year, and author of several publications on community associations. Visit www.californiacondoguru.com for helpful resources, facts, FAQs, and information.

Don’t be part of the problem — be part of the solution. Complete paralysis of a board or worse, like when the infighting escalates to derisive political factions or litigation leads to extraordinary legal costs, is unfair to all owners.

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ECHO honor roll

ECHO HONORS VOLUNTEERS Resource Panels

Seminar Speakers

Recent Contributing Authors

Accountant Panel Marco Lara, CPA 650-632-4211

Marin David Feingold, Esq. Wanden Treanor, Esq. Glenn Youngling, Esq.

November 2013 Tyler Berding, JD, PhD John R. Schneider James H. Ernst, CPA, MS-Tax Tom Fier, Esq. Burt Dean

Central Coast Panel John Allanson 831-685-0101 East Bay Panel Beth Grimm, Esq. 925-746-7177 Cindy Wall, PCAM, CCAM 925-830-4580 Legal Panel Mark Wleklinski, Esq. 925-280-1191 Maintenance Panel Judy O’Shaughnessy 408-839-6926 North Bay Panel Diane Kay, CCAM 415-846-7579 Stephany Charles, CCAM 415-458-3537 South Bay Panel George Engurasoff 408-295-7767 Wine Country Panel Pam Marsh 415-686-9342 Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry Bowles Oliver Burford Joelyn Carr-Fingerle, CPA Chet Fitzell, CCAM John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

Santa Cruz John Allanson Jeffrey Barnett, Esq. Diane Rossi, PCAM Ron Duncan Toby Goddard Piret Harmon South Bay Sharon Pratt, Esq. Rosalia Tapia, Esq. Matthew Harrington, Esq. Terin Reeder Robert P. Hall, Jr., Esq. Stephanie Hayes, Esq. Wine Country Carra Clampitt Bill Gillis, Esq. Steve Lieurance, CCAM Jim MacMillan Michael Cantarutti Paul Schultz, CLCA. Oakland David Levy, CPA Ian Brown, CCAM Mike Hughes, Esq, Dennis Socher Wanden Treanor, Esq. Gavin Leonard Alex Noland, Esq. Dave Rosenblatt, CACM Ricky Chu Paul Windust, Esq. Chris Sigler Toni Rodriguez Scott Sommerfield Sandra Gottlieb, Esq. Steve Weil, Esq. Amy Tinetti, Esq. Bob Burton, CCAM John Stander, Esq. Jordan O’Brien, Esq. Beth Grimm, Esq. Ann Rankin, Esq.

December 2013 Sandra M. Bonato, Esq. Katherine Naegele Derek Eckert Ann Rankin, Esq. Burt Dean January 2014 Douglas Christison, PCAM Barbara Ellen William S. Erlanger, CPA Joelyn K. Carr-Fingerle, CPA Tyler P. Berding, JD, PhD February 2014 Jeffrey A. Barnett, Esq. David Kuivanen, AIA Elizabeth Lanham Sharon Glenn Pratt, Esq. March 2014 Teresa Powell & Brian Seifert Sandra L. Gottlieb, Esq. Marc Dunia Charlotte Allen April 2014 Thomas Connelly Burt Dean Walt Grady, CPA Andrea L. O’Toole, Esq. Emily K. Clark, Esq. Michael Hardy, Esq. May 2014 Scott Sommerfeld Pat Wendleton, Esq. Sharon Glenn Pratt, Esq. Glenn H. Youngling, Esq. Ken Bade, PCAM

June 2014 | ECHO Journal

26 echo-ca.org

CONSTRUCTION CONTRACTS For Board of Directors of Common Interest Developments By Robert Hall Esq.

hen your property manager reports to a board that one portion or a significant element of the common area is in need of repair, the first question that usually arises is whether or not the Board should itself (without reliance on legal counsel) contemplate negotiating the two contracts that are usually needed before work can start. These are the contracts with the architect/construction manager on the one hand, and the contract with the general contractor or trade contractor (such as a roofer) on the other.

June 2014 | ECHO Journal

ithout a written agreement prepared by association counsel, and an association goes ahead and hires a contractor for a simple re-roof, let alone the start of a major reconstruction project, significant risk exists for a number of events to occur while the repair work is underway that can have great impact on the association. Legal counsel selected should be knowledgeable not only of common interest development legal issues but also of construction law in general.

Board members also should consider the legal environment they operate under, such as the

safe harbor protection a board receives if an expert, in this case an attorney, is hired to assist the board before the repair process starts. The fiduciary obligations of board members and statutory “standard of care” provided in Corporations Code Section 7231 should be factored into the board’s decision on this issue as well.

When contemplating repair work of any sort, the document that starts the process following negotiations is a good contract. As board members (“board” and or “board members” and “owner” are used interchangeably), having a general understanding of what a contract is, and its major pieces, will help you understand the process, ask better questions posed to the association’s legal counsel, and reduce the risk of board and contractor misunderstandings over contract issues later as the repair work starts.

Contracts are signed by someone called a “party” to an agreement. A contract protects both “sides” to an agreement if negotiated properly. It

will spell out the scope of the work, who does what, how much the project will cost, and how long it is supposed to take.

There are a few different types of contracts and a number of different documents that should be included in a contract. The association may contract with both an architect, and or a construction manager, and a general contractor, or depending upon the complexity of the scope of work, with just a general contractor. However, even with simple repair scopes, such as replacement of gutters or a re-roof, a board should strongly consider the retention of a construction manager to help give the board the “safe harbor” it deserves.

What is a contract? A simple explanation of its function is that it should record the terms of the agreement between the parties. Generally, a very simple definition of a renovation/ repair contract is that it will state the services/products that will be provided and the delivery approach and terms for those service(s), the agreed upon price, and the fact that both parties have agreed on everything (usually with a signature on the signature block when the contract is written). Renovation/repair contracts have several classifications. One classification relates to how the contract is “priced,” as opposed to how the services/products will be “delivered.”.

As for pricing, there are three different and commonly used types of approaches in the building trades: lump sum,

cost plus, and cost plus with maximum price. Each of these “pricing approaches” have pluses and minuses, depending upon the owner’s risk tolerance for price increases. No matter what type of “price approach” that is agreed upon, there are generally three “delivery” methods a contractor can offer to an owner. These approaches have come to be known as:

Design-bid-build: The owner enters into a separate contract with both an architect and a general contractor after the contractor supplies a bid; 28 echo-ca.org

Design build: One firm, such as a

general contractor, provides all services including design;

Construction manager at risk:

The owner enters into a contract with a single entity who then manages other contractors and designers. Another subpart of this approach is where the owner can hire one entity to act as the owner’s agent but the owner remains “at risk.” This variation is called construction manager “as agent.”

Most contracts are offered to an owner using a “standard form” that are created by industry organizations and, while they gener-

ally reflect certain recognized standards, they do tend to reflect the bias of that industry. Standard contract forms have several advantages, including their ease of use, attorney time for review is reduced, and they are usually easier to interpret by the parties and or courts, if necessary.

However, these standard/generic contracts do tend to reflect industry bias. This is a another major

reason why a board/owner should consider the assistance of legal counsel, since a series of addendum paragraphs and revisions to the electronic version of industry forms can somewhat deflect the industry bias in whatever form that is used.

The generic contract form provided by the American Institute of Architects (AIA), or some variation, appears to be the one used most often.

Most construction contracts, including the AIA forms, consist of several subparts, including the main agreement, a form called general conditions (which attempts to list the rules and procedures during the work), special conditions (usually prepared by the architect), and finally, the building plans and specifications.

When using the AIA forms, where a series of agreements are intended to be used together, there are two main contract labels, or the “A” and “B” series. The “A” series reflects the contracts between an owner and

contractor and the “B” series reflects the contracts between architect and owner. A third series, or the “G” series, is a group of documents that are generated while the work is in progress, such as change orders and clarification requests .

Other types of contracts an association will usually encounter is an agreement with either the architect, and or the construction manager. Essentially, the

architect develops the project design, and typically in the case of common interest developments serves as a team member with the owner’s construction manager during the design process and answers questions that may arise during the work.

Adopting “safe harbor” considerations, the board should

consider obtaining an agreement with the construction manager requiring it to be the owner’s agent, if the “construction manager as agent” approach is used. The construction manager can then be considered an independent resource to assist the owner in supervising the work, ensuring compliance with contract

June 2014 | ECHO Journal

documents for a successful project delivered on time and within budget. Both of these agreements typically involve major safe harbor considerations for board members and should be reviewed by association legal counsel. Whether a board should start with an architect or construction manager is beyond the scope of this article, but in either case the agreement between owner and architect/construction manager

should be thought of as the first agreement to consider before repair work associated with a major reconstruction project starts. Robert P. Hall, Esq., is Senior Counsel with Flynn Riley Bailey & Pasek, LLP. Bob has been an active member of ECHO and speaker at ECHO events for many years. He provides further information about this topic above and related information on his blog site at http://www.constructioncicerone.com.

Building Repair Documents, Decks, Stairs, Settlement, Construction Defects, Expert Witnesses, Forensic Engineers, Moisture Intrusion, Investigations, Drainage, Seismic Retrofit Engineers, Soft Story Specialists.

Serving Northern & Central California Common Interests • Association Managers • Construction Managers HOA Boards • Restoration Contractors • Legal Council www.Qengineers.com • Direct: 408-583-0323 ext.813 A SUBSIDIARY OF QUILICI ENGINEERS, INC.

30 echo-ca.org

NEW

New legislation, quick tips, and fresh insights — we’re adding new information to our website daily.

Articles Is Your Reserve Budget Just an Illusion?

Even associations that update their reserve studies every three years may be unaware of major flaws in their long-term budgets. Here are a few tips to help you avoid some hefty financial consequences. Educational Topic: Reserves

at echo-ca.org

Major Reconstruction Projects: An Attorney’s Perspective

Unexpected (and unpleasant) major reconstruction is almost inevitable in the life of every association. But when problems occur suddenly, where do you turn? From choosing the “right” expert, to adjusting the project scope, to drafting the contract, each decision can have a huge impact on the success of the project and the association. Educational Topic: Repairs

7 Quick Tips on HOAs and Project Permits

Most HOA construction projects require a variety of permits. While you won’t be pulling the permit itself, you should know how the board can participate in the process, and which steps will facilitate a successful project and a safer association. Educational Topic: Permits

Checklist for Construction Contracts

Here it is: the (mostly) definitive checklist. Identify the 12 key provisions that need to be addressed in every contract. Learn what they mean, and how they could affect your project and HOA. Educational Topic: Contracts

Upgrading to Energy Efficient Windows

Winter happened, and so did the rains. You may have realized that your owners’ windows have served their useful life. How do you recommend new windows? What’s the best method for choosing a new product? And how do you make sure that replacements don’t compromise the structure of the association’s building? Educational Topic: Windows

Facebook Join Our Facebook Community Want to see pictures from our last seminar? Comment on our legislative activity? We only put the latest news up on Facebook, and we’d love to hear from you. Share your experiences, read important and amusing HOA news, and connect with fellow HOA owners on ECHO’s Facebook page. facebook.com/echoorg

ECHO Journal Read the ECHO Journal on the ECHO website before it arrives at your door. We usually post the latest issue on or before the beginning of each month. Log in to browse the latest articles, or read from a huge library of past issues. Find in: echo-ca.org/journal

June 2014 | ECHO Journal

32 echo-ca.org

Why Associations Matter By Barrett R.P. Schaefer, Esq

June 2014 | ECHO Journal

alifornia is estimated to have well over 40,000 community associations, ranging from small two-unit associations to planned developments with literally thousands of homes. These associations collectively spend many billions of dollars every year, with budgets that can range into the millions of dollars. The money is spent for the millions of people who own and reside at California’s community associations. Associations are everywhere and all together spend a lot of money.

That all is impressive no doubt. But while these vast numbers and statistics can awe and amaze, it also is important to bear in mind the necessarily unique and local aspect of associations—that ultimately every association is its own local community of people carrying on their lives with their spouses, with their children, by themselves, with family, with friends, with neighbors, with others. Each association uniquely impacts those who live within it. Associations are even much more than that. They are communities that participate in, and are a necessary part of, the fabric of a larger local community. On a daily basis, association communities impact households that are not a part of associations, and they impact innumerable businesses. They operate in ways that affect not just their own residents, owners and investors, but also the local community, businesses, and others. A homeowners association’s board of directors might decide to reduce the regular assessment when faced with

It is important to bear in mind the necessarily unique and local aspect of associations—that ultimately every association is its own local community of people carrying on their lives with their spouses, with their children, by themselves, with family, with friends, with neighbors, with others. Each association uniquely impacts those who live within it.

a tightening budget in order to keep more potential buyers interested, for example. Or they might decide after great deliberation to let it remain the same. This can be a contentious and difficult decision, and it may require some skillful and creative budgeting, but it can really help the community. The decision can affect the desirability of that association’s properties, and therefore it can be expected to impact association property values over the short and even long term. The impact is broader than just that, though, since the decision then can substantially impact appraisals of nearby properties not within the association—after all, appraisers will be examining property sales at the association in connection with proposed nearby property sales and refinances. This means one board vote—even one board member’s vote—can ultimately and dramatically make it easier or more difficult for someone to refinance or purchase a new home, whether or not the property happens to be within that particular association. Another example would be a board decision to finally address some badly deferred maintenance or repairs. That decision could be expected to have a positive ripple effect upon the values of nearby non-association properties as well.

34 echo-ca.org

The way an association responds to claims of local crime can similarly impact the local community both within and beyond the association. By being responsive and taking appropriate action to reduce or eliminate undesirable activity, an association can have a substantial impact upon the safety and wellbeing of both association residents and those living in surrounding areas. When a nuisance is stopped, or if the police are called to address a particular unwanted activity, local residents are not just put on notice but are reassured that safety and welfare are active values in the community. That impacts both quality of life and property values for a community beyond just the association. Community associations also are an integral part of the financial fabric of local communities. They hire property managers, security companies, pest control businesses, landscapers, accountants, general contractors, towing companies, electricians, and much more. Indeed, an association is a veritable beehive of a micro-economy focused upon a specific local community that materially feeds

into the larger local economy. These hives of activity even serve as an indicator of financial wellness and wellbeing within the local area.

In short, our community associations matter.

Most readers of this article are board members. Make sure to recognize and appreciate the importance of what you do. You help to keep local economies running, and you impact the wellbeing of families and others both within and outside your association. Nobody other than your board—and you—will make so many decisions so specifically sculpted and customized for your particular association. You help decide what is important, what is not important, how matters are addressed, who should carry out which tasks, which vendors are hired, and so on. As a former board

member, I know sometimes it can seem like a difficult and even thankless series of chores. But you should take a step back and realize the great opportunities you have to do good and the good you have done. When you finally leave the Board, you will have the satisfaction of knowing you made a difference for even years to come. Appreciate the impactful difference you have made upon your own quality of life and that of your neighbors. Ultimately, community associations are critical to innumerable aspects of our local communities. It is important to keep in mind how they integrate into and are a necessary and material part of the fabric of local regions. We should be proactive in both knowing and caring about what happens within associations, whether or not we own or reside within one. Barrett R.P. Schaefer, Esq., is an independent attorney with offices in San Rafael. Barrett focuses on issues relating to common interest developments, and is a member of the ECHO North Bay Resource Panel.

 Detailed on-site inspections, inventories and component descriptions  Meets or exceeds all requirements and disclosures of California Civil Code 1365  30 year funding model projections  Includes color photos of components  21 years of reserve study experience

Call today for a free proposal 800-500-8505 or FAX 800-500-7305 Email info@ara-llc.com Visit us at www.ara-llc.com 4040 Civic Center Drive, Suite 200 San Rafael, CA 94903

June 2014 | ECHO Journal

Beyond Privatopia Member Price: Non-Member Price:

The Board’s Dilemma $20.00 $25.00

The rise of residential private governance may be the most extensive and dramatic privatization of public life in U.S. history. In Beyond Privatopia, attorney and political science scholar Evan McKenzie explores emerging trends in private governments and competing schools of thought on how to operate them, frm state oversight to laissez-faire libertarianism.

Condominium Bluebook 2014 Edition Member Price: Non-Member Price:

$17.00 $25.00

This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequently-asked questions about associations, along with succinct answers.

In this essay, attorney Tyler Berding confronts the growing financial problems for community associations. Mr. Berding addresses board members who are struggling to balance their duty to protect both individual owners and the corporation, and gives answers to associations trying to avoid a funding crisis.

2014 Condominium Greenbook Member Price: Non-Member Price:

$17.00 $25.00

This companion to the Condominium Bluebook is an in-depth guide to all aspects of association finances, including accounting methods, financial statements, reserves, audits, taxes, investments and much more. Not for the accounting novice, this is a tool for the treasurer or professional looking for specific information about association finances.

Questions & Answers About Community Associations

Member Price: Non-Member Price:

$29.00 $45.00

$18.00 $25.00

To make these a sustainable investment, new buyers, owners and board members need to understand “best practices basics” of how this form of housing works and have more realistic expectations of this form of “carefree, maintenance free” living.

For 12 years, Jan Hickenbottom answered homeowners’ questions in her Los Angeles Times column on community associations. Now collected in one volume, readers can find answers to almost any question about CIDs.

Community Association Statute Book—2014 Edition

Board Member Handbook

$15.00 $25.00

Contains the current version of the Davis-Stirling Common Interest Development Act, the Civil Code sections that apply to common interest developments and selected provisions from other codes important to associations.

Home and Condo Defects Member Price: Non-Member Price:

$12.95 $17.95

Construction defect litigation can be confusing, expensive and fraught with legal pitfalls. This eye-opening guide, written by accomplished construction-defect attorneys, is an essential tool for board members who need to understand the legal process.

Robert’s Rules of Order Member Price: Non-Member Price:

$7.50 $12.50

A step-by-step guide to the rules for meetings of your association, the current and official manual adopted by most organizations to govern their meetings. This guide will provide many meeting procedures not covered by the association bylaws or other governing documents.

36 echo-ca.org

$10.00 $15.00

Condos, Townhomes and Homeowner Associations

Member Price: Non-Member Price:

W NETION I ED

Member Price: Non-Member Price:

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This publication is the essential guidebook for HOA Board members, dealing with governance, finances, insurance and maintenance issues. Revised and updated in June 2012.

Reserve Fund Essentials Member Price: Non-Member Price:

$18.00 $25.00

This book is an easy to read, must-have guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful financial tool.

The Condo Owner’s Answer Book Member Price: Non-Member Price:

$15.00 $20.00

An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowner associations. The question-and-answer format responds to more than 125 commonly-asked questions in an easy to understand style. A great resource for newcomers and veteran owners.

ciation o s s A unity Book Comm Statute dition 2014 E

Dispute Resolution in Homeowner Associations Member Price: Non-Member Price:

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This publication has been completely revised to reflect new requirements resulting from passage of SB 137.

Publications to answer your questions about common interest developments Order Online at www.echo-ca.org

Bookstore Order Form Board Memberâ&#x20AC;&#x2122;s Guide for Contractor Interviews Member Price: Non-Member Price:

EDUCATIONAL COMMUNITY FOR HOMEOWNERS 1960 THE ALAMEDA, STE 195, SAN JOSE, CA 95126 PHONE: 408-297-3246, FAX: 408-297-3517

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$15.00 $25.00

This report is a guide for directors and managers to use for interviews with prospective service contractors. Questions to find out capabilities and willingness of contractors to provide the services being sought are included for most of the contractor skills that associations use.

SUBTOTAL CALIFORNIA SALES TAX (Add 8.625%) TOTAL AMOUNT

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Board Memberâ&#x20AC;&#x2122;s Guide for Management Interviews Member Price: Non-Member Price:

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This guide for use by boards for conducting complete and effective interviews with prosp ective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.

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June 2014 | ECHO Journal

directory updates

All current listings may be found in our Professionals Directory available online at www.echo-ca.org.

New Members Teevan 2247 Union Street San Francisco, CA 94123 Contact: Jesse Ladomirak Tel: (415) 474.TVAN GET Insurance Services and Associates 1060 Willow St. San Jose, CA 95125 Contact: Tom Gurske Tel: (408) 279.7171

Law Offices of Barrett R. P. Schaefer 790 Mission Ave. San Rafael, CA 94901 Contact: Barrett Schaefer, Esq. Tel: (415) 485.2200 R& R Handyman Services 1966 Tice Valley Blvd. Walnut Creek, CA 94595 Contact: Todd Rowe Tel: (866) 377.0003 Boland Insurance, Inc. 120 D Oliva Court Novato, CA 94947 Contact: Kevin Boland Tel: (415) 898.4370

Become an ECHO Professional Member and receive the benefits of membership. To learn more, visit our membership page at www.echo-ca.org

38 echo-ca.org

advertiser index

about ECHO

ACE Property Management.................11 www.acepm.net

Pollard Unlimited.................................39 www.pollardunlimited@comcast.net

Applied Reserve Analysis....................35 www.ara-llc.com

R.E. Broocker Co...................................11 www.rebroockerco.com

Angius & Terry......................................13 www.angius-terry.com

Rebello’s Towing..................................20 www.rebellos.net

Association Reserves...........................30 www.reservestudy.com

Silicon Valley Civil & Structural Engineers..............................................30 www.Qengineers.com

Benjamin Moore Paint & Company...19 www.benjaminmoore.com Berding|Weil .........................Back Cover www.berding-weil.com Collins Management............................11 www.collins-mgmt.com Compass Management Group............34 www.gocompass.com

Steve Tingley Painting, Inc..................24 www.tingleypainting.com The Manor Association........................30 info@TheManorAssociation.com Union Bank...........................................20 www.HOAbankers.com

WHAT IS ECHO? Serving Homeowners to Build Strong Community Associations The Educational Community for Homeowners (ECHO) is a nonprofit membership corporation dedicated to assisting California homeowner associations. ECHO provides help to homeowner associations on many fronts: finances, legal issues, insurance, maintenance and management. Members receive help through conferences, trade shows, seminars, online education, a monthly full-color magazine and discounted publications.

Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the benefits designated for homeowner associations.

Community Management Services....29 www.communitymanagement.com Cornerstone Community Management.........................................21 www.cornerstonemgt.biz

Benefits of Association Membership

Focus Business Bank...........................12 Focusbusinessbank.com

• Subscription to monthly magazine • Access to members-only online education • Updates to the Association Statute Book • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

Flores Painting & Drywall....................28

ECHO Membership Dues

Forster Construction Management.....30 Forster_CM@yahoo.com

Association Membership HOA 2 to 25 units...........................$130 HOA 26 to 50 units.........................$180 HOA 51 to 100 units.......................$275 HOA 101 to 150 units.....................$375 HOA 151 to 200 units.....................$450 HOA 201 or more units..................$575 Professional Membership.................$499 Association Management Membership.......................................$499 Individual Membership.......................$75

Ekim Painting.......................................21 www.ekimpainting.com

Mutual of Omaha Bank.......................35 www.mutualofomahabank.com M & C Association Management Services...........................2 www.mccommunities.com Neighborhood Association Management.........................................13 www.neighborhoodam.com

How Do You Join ECHO?

PML Management................................19 www.pmlmanagement.com

Over 1,700 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for the membership, sign up online at www. echo-ca.org.

Office 1960 The Alameda, Suite 195 San Jose, CA 95126-2308

For information about advertising, membership and ECHO, call us at 408-297-3246 or visit the ECHO website.

For more information about membership and ECHO, call us at 408-297-3246 or visit the ECHO website.

August 2013 || ECHO ECHO Journal Journal February June 2014 2014

39 39

legislation at a glimpse

Worried about new regulations from Sacramento? So are we. Here’s what we’re doing about it. Thanks to the continued efforts of ECHO’s Legislative Committee, our members, lobbyist, and other organizations, we’re improving next year’s laws. Here’s what we accomplished in May: “Entrepreneurial Agriculture” bill amended to apply only to back yards. AB 2561 would have overridden association rules to permit virtually unregulated planting by individual owners on association property in both front and back yards. We believe that landscaping decisions are best left to individual HOA communities, and voiced our strenuous objections. Now, AB 2561 has been amended to apply only to private back yards, subject to reasonable restrictions by the HOA. We are seeking further amendments dealing with the use of pesticides.

“Attorneys at Dispute Resolution” bill amended to provide equal rights. AB 1738 originally placed associations at odds with their members by allowing owners to bring any third party (including an attorney) to any dispute resolution proceeding without notice. While ECHO would have preferred to remove attorneys from the meet and confer process altogether, we sought a bill that, at minimum, treated HOA boards and owners equally. Now, AB 1738 allows both an HOA and an owner to invite a third party, and requires that association and owner give each other advance notice.

ECHO Amendments to “Renters and Charging Stations” bill gives associations more oversight. AB 2565 was intended to give renters in HOAs the authority to install electric vehicle (EV) charging stations. The bill addressed the agreement between lessors and lessees, but exposed associations to liability and conflicted with existing regulations related to EV charging stations in associations. ECHO’s Legislative Committee submitted amendments to conform this bill to existing regulations, giving associations more authority in the approval process. Those amendments were taken in the Senate.

ECHO-sponsored bill clarifies “who pays for what” in exclusive use common areas. Most associations struggle to determine who maintains, repairs, or replaces certain components when their documents are silent, and current law doesn’t help. ECHO’s bill will reduce confusion when it comes to maintenance, repairs, or replacement of exclusive use common area.

“Prohibition on Yard Maintenance Fines” bill amended to improve safety and oversight. This bill would have prevented an HOA from imposing fines for “yard maintenance” during a drought. ECHO asked the author to amend the bill to deal water-usage only, and allow HOAs to continue to require

What Do You Think? Read more about HOA legislation on our website orr visit our Facebook page and join the discussion. On the web: echo-ca.org/hoa-advocacy, On Facebook: facebook.com/echoorg

40 echo-ca.org

legislation at a glimpse

Other Legislation Bill Information

Summary

AB 968

Common Area Maintenance

Support

ECHO is sponsoring legislation to clarify who maintains and repairs “exclusive use common area” in associations. Current law is ambiguous about responsibility for repair and replacement, which has caused terrible building practices and unnecessary litigation. This bill will clarify that the association is responsible for repair and replacement of “exclusive use common area” unless the association’s governing documents provide otherwise.

Author: Gordon Status: Amended 5/27. In Senate Transportation & Housing Committee.

AB 1360

Electronic Voting

Support if Amended

This bill authorizes an association to conduct elections or other membership balloting by electronic voting. It also requires an association to provide each member with an opportunity to indicate that he or she will be voting electronically and to provide a member who did not indicate so with a paper ballot.

Author: Torres Status: Passed Assembly. In Senate Judiciary Committee.

AB 1738

Attorneys at Dispute Resolution

Support if Amended

This bill would require that association dispute resolution procedures, including internal dispute resolution (IDR), permit a member or the association to include their attorney (or another person) to participate in the proceeding if advance written notice is provided.

Author: Chau Status: Amended 5/1. Passed Assembly. In Senate Judiciary.

AB 2100

Drought and Under-Watering Fines

Support

This bill would prohibit an association from imposing a fine or assessment against a member for reducing or eliminating watering of vegetation or lawns during a declared emergency due to drought. Associations may require that landscaping be safe and otherwise maintained.

Author: Campos Status: Passed Assembly. In Senate.

AB 2188

Solar Energy Permits

Support if Amended

This bill would expedite permits for solar panel installations. This bill inadvertently applies to common interest developments which are already regulated and have unique and necessary installation policies.

Author: Muratsuchi Status: Amended 5/8. Assembly third reading.

AB 2430

HOA Transfer Fees and Disclosures

Watch

This bill would require that a seller provide a prospective purchaser with certain current documents that the seller possesses free of charge. It would also require that the seller be responsible for compensating an association, person, or entity for providing documents under these provisions.

Author: Maienschein Status: Amended 5/7. Passed Assembly. In Senate Judiciary.

AB 2565

Electric Vehicle Stations

Support

This bill would compel a lessor in a common interest development to permit a lessee to install an electric vehicle charging station, provided the lessee agrees in writing to various requirements related to costs, insurance, and potential damages.

Author: Muratsuchi Status: Amended 4/21. Assembly third reading.

SB 391

Fees on Recorded Documents

Oppose

In order to fund affordable housing, this bill would impose a $75 fee on each document to be recorded in California.

Author: DeSaulnier Status: Passed Senate. In Assembly Appropriations Committee.

June 2014 | ECHO Journal

ECHO event calendar

RESOURCE PANEL CALENDAR ECHO Resource Panels meet during lunch on weekdays to enable managers, professionals and board members to hear about important topics presented by experts in the industry, and share experiences and issues. The meetings are open to all ECHO members, and those interested in learning about ECHO, offered in a casual atmosphere where the cost of attendance is the price of your lunch. The sessions last about an hour and a half. Check-in with the ECHO Panel Secretary for details and to register.

Please join us: DATE

PANEL LOGISTICS

PANEL SECRETARY

TOPIC

June 11, 11:45 a.m.

South Bay Resource Panel Buca Di Beppo 1875 S. Bascom Ave, Campbell

Rosalia Tapia, Esq. 408-369-0800, ext. 205

TBD

June 13, 11:45 a.m.

East Bay Resource Panel Massimo Restaurant 1603 Locust St., Walnut Creek

Cindy Wall, PCAM 925-830-4580

Drought

June 18, 11:45 a.m.

Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati

Pam Marsh 415-686-9342

Reserve Analysis

July 8, 11:45 a.m.

Central Coast Resource Panel Michael’s on Main 2591 S Main St., Soquel

Ann Thomas 800-537-4098 ext.7530

An architect’s perspective about building in Santa Cruz

August 13, 11:45 a.m. South Bay Resource Panel Buca Di Beppo 1875 S. Bascom Ave, Campbell

Rosalia Tapia, Esq. 408-369-0800, ext. 205

TBD

Cindy Wall, PCAM 925-830-4580

Trees

Pam Marsh 415-686-9342

Managers’ Expectations of Vendors

August 15, 11:45 a.m.

East Bay Resource Panel Massimo Restaurant 1603 Locust St., Walnut Creek

August 20, 11:45 a.m. Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati

REGULARLY SCHEDULED RESOURCE PANEL MEETINGS Panel

MEETING

location

Maintenance

First Wednesday, Even Months

ECHO Office, San Jose

North Bay

First Thursday, Odd Months

Contempo Marin Clubhouse, San Rafael

East Bay

Second Friday, Even Months

Massimo Restaurant, Walnut Creek

Accountants

Second Monday, Odd months

Scott’s Seafood Restaurant, Oakland

Central Coast

Second Tuesday, Odd months

Michael’s On Main, Soquel

South Bay

Second Wednesday, Even Months

Buca Di Beppo, Campbell

Wine Country

Third Wednesday, Monthly

Serv-Pro, Cotati

Legal

Quarterly

Varies

42 echo-ca.org

Nominating Committee Seeks Candinates for ECHO Board of Directors

he Nominating Committee for the ECHO Board of Directors is seeking expressions of interest from persons who are interested in serving on the ECHO Board of Directors. Four positions on the board will be up for election at the ECHO Annual Meeting that will be held in November. These positions are for three-year terms. Current directors whose terms expire in 2013 are Robert Rosenberg, Diane Rossi, Brian Seifert, and Kurtis Shenefiel.

Board members are expected to attend four three-hour board meetings held each year, generally at the ECHO office in San Jose. Each board member also serves on one or more committees that hold regular meetings

throughout the year. In addition board members are expected to attend the Annual Meeting and a two-day board retreat each November. Board members receive no reimbursement for these activities. Nominees must also be members of ECHO, either through their homeowners association or business and have thorough familiarity with the organization and the CID industry. Persons interested in being considered for nomination should obtain and complete a nomination and qualifications form, available by request from the ECHO office. Every potential candidate, including incumbents, must submit a full form. All completed forms must be submitted to the ECHO office no later than July 24, 2014 , to be considered by the nominating committee. Those requesting nomination may be requested to interview with the nominating committee. The committee will meet in late July to prepare recommendations for board consideration. May 2014 | ECHO Journal