Optional Insurance Coverage Overview
p.10
Avoiding Illegal Board Activity and Lawsuits
The Science Behind Irrigation Water Management
p. 18
p. 24
Serving Community Associations
Why Does A Homeowner Association Need Insurance?
Reality Check — The Truth about People, Pets, and Parking p. 30
New San Francisco Airbnb Law p. 36
May 2015 echo-ca.org
p. 10
ECHO 1960 The Alameda STE 195 San Jose, CA 95126 Change Service Requested
PRSRT STD U.S. Postage PAID Modern Litho 210
news from ECHO
News From ECHO May 2015 A Tale of Two Cities could be rewritten about homeowners associations in the East Bay and South Bay. How each faces similar issues, and but sticks to their knitting. So, instead of asking boards from each area to venture into the other, we’re hosting seminars in each. Come to our East Bay Seminar on May 9 at the Concord Hilton or our Annual Seminar at the Santa Clara Convention Center on June 20, or be bold and attend both. Both seminars will feature our HOA University track of sessions designed to give new board members the basics on HOA governance. We’ll cover governance, fiduciary duty, management, finance and insurance. For those who attend all the sessions at either venue, we’ll provide a Certificate of Completion, acknowledging your commitment to independent board member education. In addition to our HOA University, the East Bay Seminar will offer sessions on: litigation, how to avoid it and what to do when you can’t; contracts with vendors; and an interactive scenario driven session facilitated by three attorneys where you’ll be asked to grapple with three real life situations to help you navigate turbulent HOA waters. At the Annual Seminar, we’ll run three concurrent tracks of educational sessions. In addition to HOA University, you’ll hear about: legal quicksand dangers; fair housing pitfalls; what directors wish members knew; a legislative update from Sacramento; construction defect claims; energy rebates; and new collections rules. At each Seminar, we’ll have a room full of professionals, waiting to answer your questions and offer their insight on new ways to tackle thorny problems. We’ll serve you continental breakfast and buffet lunch. Parking is discounted in Concord and free in Santa Clara. So, liberate yourselves from despair, join us for HOA board member education at either or both events, and leave the revolution to Dickens.
Best,
Brian Kidney Executive Director
May 2015 | ECHO Journal
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CONTENTS 10 36 30
18
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Optional Insurance Coverage Overview The mechanics of coordinating individual policies for each owner and making sure such coverages, conditions, exclusions, etc. coordinated make the purchase of a master policy to cover the perils that owners are collectively subject to a necessity, not an option.
18
Avoiding Illegal Board Activity and Lawsuits While boards should not cave in to false accusations, it is always wise to avoid litigation. Here are what I have identified as the “top five pitfalls” for boards to avoid.
24
The Science Behind Irrigation Water Management Water Districts Across the country agree that landscapes are overwatered by 30 percent to 60 percent on average. The negative impacts result in soil erosion from excess water runoff, poor health of the landscapes, a tremendous waste of water to suburban properties, and the enormous waste of electrical power used to pump the water from its source and deliver it to us.
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Reality Check – The Truth About People, Pets, and Parking After years of being in this industry, there is one truth which those of us in the professional arena will hold up as being a universal... YOU CAN’T WIN ‘EM ALL! And it’s important to realize that for the good of your community, sometimes it’s not even in your best interests to try.
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New Airbnb Law Legalizing Short-Term Rentals Does San Francisco’s new Airbnb law (effective February 1, 2015) supersede the declaration of covenants, conditions and restrictions’ (“CC&Rs”) short-term rental provisions, or require changes to CC&Rs to address Airbnb? The brief answers to both questions are “No.”
DEPARTMENTS
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 2015 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 Secretary Carly Melius
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News from ECHO
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ECHO 43rd Annual Seminar & Tradeshow in Santa Clara – Saturday, June 20th
8
2015 ECHO Educational Calendar
9
NEW at echo-ca.org
Directors Jerry L. Bowles John Garvic Adam Haney Stephanie Hayes David Levy
East Bay Regional Seminar in Concord – Saturday, May 9th.
Executive Director Brian Kidney
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ECHO Bookstore
43
Advertiser Index
44
ECHO Event Calendar
45
ECHO Volunteers
46
Legislation at a Glimpse
Robert Rosenberg Brian Seifert Wanden Treanor Steven Weil
Director of Marketing & Membership Carly Melius Director of Communications Tyler Coffin Legislative Consultant Mazzoni and Associates Design and Production Design Site ECHO Mission Statement Serving Community Associations
May 2015 | ECHO Journal
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Half Price for ECHO HOA Members!
ECHO ANNUAL SEMINAR 43rd Annual Seminar & Trade Show Saturday, June 20, 2015
The Annual Seminar is now free for ECHO HOA Members! We’re returning to the Santa Clara Convention Center for our 43rd Annual Seminar. Take advantage of all the resources available to your HOA at the Annual Seminar: • 12 classes featuring top industry experts. • Members-only HOA University & Certificate. • Hundreds of fellow board members and HOA professionals. • Up-to-the-minute information on new legislation and drought restrictions. ECHO’s Annual Seminar is the only educational trade show designed for HOAs. Get your information straight from the source, and build a strong, healthy community.
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Visit the ECHO website or call ECHO for complete event details: Online www.echo-ca.org/events Phone 408.297.3246
Event Information
sessions
Location:
HOA UNIVERSITY
Santa Clara Convention Center 5001 Great America Pkwy Santa Clara, CA 95054
• 9:00-10:15
Finances
David Levy, CPA
• 10:45-12:00 Management David Zepponi
Time:
• 1:30-2:40
Insurance
John Allanson
8:00 am to 4:30 pm
• 3:20-4:30
Legal
Wanden Treanor, Esq.
food:
LEGAL
Continental breakfast in the morning, and a lunch buffet in the afternoon are included in admission.
• 9:00-10:15
Quicksand
Sandra Gottlieb, Esq.
Parking:
• 10:45-12:00 Fair Housing Amy Tinetti, Esq. & Issues Andrea O’Toole, Esq.
Plenty of free parking is available in the parking structure behind the Santa Clara Convention Center.
• 1:30-2:40
Directors & Members
Lodging:
• 3:20-4:30
To be announced!
The Santa Clara Convention Center is immediately connected to the Hyatt Regency Santa Clara. Special rates are available through the ECHO website, or by calling the Hyatt at (408) 200-1234.
Hot Topics
Register: Members: $50, Nonmembers: $100 Registration includes lunch and access to all sessions. Register online, or return the form on this page.
• 9:00-10:15
Legislative Update
Steve Weil, Esq.
John Garvic, Esq. & Kerry Mazzoni
• 10:45-12:00 Construction Tyler Berding, JD, PhD. Defect Claims • 1:30-2:40
Energy Rebate! Ken Kosloff
• 3:20-4:30 Collections
Terin Reeder & Stephanie Hayes, Esq
Yes, reserve ______spaces for the ECHO Annual Seminar 43rd Annual Seminar & Trade Show. Amount enclosed: $__________ (attach additional names)
EDUCATION
FOOD
NETWORKING
Name:
• 3 tracks, 12 topics • Professional instruction
• Huge buffet lunch • Prize-filled exhibit floor
• Over 300 HOA board members • 100 professional vendors
Email Address: HOA or Firm: Address: City: State:
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
May 2015 | ECHO Journal
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2015 ECHO educational calendar
San Francisco
May 9
June 19-20
East Bay Educational Seminar (see page 16)
ECHO Annual Seminar (see page 6)
Concord Hilton, Concord, CA
Santa Clara Convention Center Santa Clara, CA
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NEW
at echo-ca.org
New legislation, quick tips, and fresh insights - we’re adding new information to our website every day. Log in to read the articles below. Not sure how to access your free account? Email ECHO at: newaccount@echo-ca.org.
Articles Protecting Your HOA from Fraud and Embezzlement
Fraud is a constant threat to associations, and a problem that cannot be entirely eliminated. Nevertheless, associations that take simple precautions to reduce the opportunity for fraud are far less likely to become victims. This article suggests several steps that boards can take to protect themselves. Educational Topic: Fraud
Electric Vehicle Charging Stations: Green Amenities for HOAss
Electric vehicles are not a passing fad, and many communities are beginning to look at charging stations as amenities that serve existing owners and increase property values. This article examines the most common types of charging stations, and offers information to HOAs who want to understand the options that are currently available. Educational Topic: Electric Charging Stations
State Law Mandates Carbon Monoxide Detectors
California law requires all homeowners to install carbon monoxide detectors. While this requirement does not necessarily extend to associations, some boards may want to consider whether the association should adopt responsibility for the upkeep of these detectors, especially in buildings where toxic gases can travel through common area elements into nearby units. Educational Topic: Safety
When Disaster Strikes: Emergency Planning for HOAs Disasters may be rare, but getting caught off guard during a major storm, earthquake, or fire can have catastrophic consequences for your community. This article suggests ways that communities can plan for the unlikely, look out for each other, and protect the association. Educational Topic: Disaster
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
May 2015 | ECHO Journal
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OPTIONAL INSURANCE
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COVERAGE OVERVIEW By John Allanson
May 2015 | ECHO Journal
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W
hy does a homeowner association need insurance in the first place? The association is made up of improvements that are commonly owned, and used, by individual owners. The mechanics of obtaining individual policies for each owner and making sure such coverages, conditions, exclusions, etc. are coordinated make the purchase of a master policy to cover the perils that owners are collectively subject to a necessity, not an option. Typical items that should be covered under an association master policy are shown in the Association Insurance Checklist. Ideally, the CC&Rs would specify the amounts and types of each of these coverages for the association to purchase. The reality is much different, however, as many CC&Rs are very brief on the subject of insurance. It is also a matter of being practical; many of the actual amounts cannot be specified since they are subject to change over time (such as amounts of property coverage). In reality, for most CC&Rs the insurance requirements as stated are a bare minimum at best and at worst could seriously shortchange the association if strictly adhered to. Your own polices should be reviewed annually to check on exactly what level of coverage you now have versus what you should have. One of the best ways to monitor both existing insurance and the bidding and purchase of new insurance is to prepare a worksheet to give to your current or prospective broker that specifies the types and amounts of coverage you wish to have in place, as well as requesting that the broker provide written recommendations and reasons for any deviation from the coverages specified. This helps to ensure that you are getting an “apples for apples’ comparison; it also helps to evaluate the type and quality of advice you are getting from various individuals. 12 echo-ca.org
Since most master documents are incomplete on the subject of insurance requirements, having an insurance specification sheet as part of your documents can help provide continuity in the insurance purchasing process and ensure proper protection as your board changes through the years.
INSURANCE “OPTIONS” The three major areas of discussion for added coverage we encounter most frequently are earthquake, flood, and building code upgrade coverages. Your broker can be a valuable resource to assist you in identifying areas where additional coverage may be needed and to help keep you abreast of new developments in policy coverages, terms, and conditions. The biggest problem with the “optional” coverages is that many people assume that they are automatically included in the master policy. Two of the more important coverage gaps, flood and earthquake, will normally be addressed in the annual insurance disclosure form that is to be sent out annually to each
unit owner. The other options, as listed in the checklist, should certainly be reviewed at the board level on an annual basis. If the board and its broker feel that the association needs any additional coverage, then the question is whether the board will make the decision or should it be put to a general membership vote. The danger of the board making decisions to buy or not buy insurance is that if someone decides to sue over the failure to procure adequate coverage, many D&O policies will not provide coverage for this. This leaves the board members who made the disputed decision in an uncomfortable position, to say the least. In general, most boards will make decisions such as changing insurance companies, deductibles, increasing building or liability coverages, and other adjustments to existing coverages on a board level. Decisions to purchase or cancel additional insurance such as earthquake or flood or to make major coverage revisions in the master policy are better left to a membership vote. Not only does this address the D&O problem mentioned above, but it allows the individual owners the opportunity to ask questions, understand the issues, and make an informed decision on the extra coverage.
predications in major disasters such as Hurricanes Katrina and Sandy, and the Loma Prieta and Northridge earthquakes. This increase in loss severity impacts rates to allow for anticipated variations in future claims costs.
Coverage for Earthquake The market for commercial earthquake insurance is relatively stable at the moment, as we have had relatively little activity in California since the Northridge earthquake. Since the market is subject to periodic adjustments in pricing and coverage offered, and policy forms and language will differ from carrier to carrier, it is important to work with a broker that is familiar with the finer points of earthquake policies and how they work for homeowner associations. The market is challenging, and long term pricing is unpredictable, due to the following factors:
The insurance industry has experienced loss settlement costs in excess of actuarial
Predicting earthquakes has been difficult, since there have been fewer than 40 events of sufficient statistical magnitude over the last 200 years. The inability to accurately predict loss frequency impacts rates. The vast majority of buildings in California are within 10 miles of a fault zone. Most of these buildings were constructed prior to modern building codes and as such are more susceptible to damage from quakes. The concentration of risk and the ageing pool of insured structures affects the rates as well.
Currently, most major commercial carriers no longer offer earthquake insurance. Since the vast majority of the carriers with major market share are writing freely today, the commercial market is dominated by two types of carriers. Specialty insurance companies who in the past have provided coverage for difficult-to-place properties or unusual risks have stepped in and are offering earthquake coverage. Most of these carriers are small, carrying AM Best size ratings of I-VIII. A second type of specialty insurance carrier dominating the marketplace is the so-called non-admitted or surplus lines carrier. These can have a longer track record and are often better capitalized than the first category, but are “non-admitted� which means they do not participate in the California Guarantee Fund. This fund is financed by premium taxes and provides a promise that the State would step in and assist in settling claims for insolvent carriers. In many cases, however, the surplus lines market is the only source for this coverage.
May 2015 | ECHO Journal
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Coverage for Flood A paradox of our current drought in California is that many properties are still at risk for flood due to rapid and uncontrolled run off of rain water or tidal action. Since most insurance companies won’t cover the peril of flood, the coverage is primarily underwritten by the Federal government. The coverage form itself differs in many respects from the property coverage in your master policy, however. The flood policy typically covers the habitational buildings only, and not fences, walkways, etc. Detached garages and parking structures are not covered unless separately insured. Owners improvements and betterments are generally not covered either.
Component Reserve Analysis and Construction Project Management
Pollard Unlimited, Inc
Professional Service – Competitively Priced
Roger Pollard President Office: (209) 879-9113 Fax: (209) 879-9252 Email: pollardunlimited@comcast.net
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A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water. What this means is that the flood policy won’t do your association any good if your storm drain plugs up and water damages a unit, unless enough water backs up to trigger coverage. One other misconception of flood insurance is that mud slides are covered. Mud slide is only covered if the mud is moving as part of a flow of water; the more typical scenario where a saturated hillside gives way after the rains have stopped would not be covered under a flood policy. Flood insurance is required for properties located in designated flood zones by lenders whose portfolios are federally insured or who wish to sell their loans. Flood insurance policy forms and guidelines differ in many respects from those used for single family homes or other commercial structures, and have changed substantially in recent years, so make you’re your broker is up to date on this important coverage. Your broker can assist you in determining if your association lies within one of these zones or you can contact your city or county planning office.
Coverage for Building Code Upgrade Building code upgrade coverage addresses the problems encountered in rebuilding an older association after a fire or other disaster. The standard
commercial property coverage states that the policy will pay to rebuild the structures with “like kind and quality of materials.” Depending on the current building codes in your municipality, you may be required to rebuild to current codes rather than as originally built. Under most policies, you would be responsible for the additional cost for these so called “code upgrades.” Many cities have passed ordinances that allow the city to require demolition of the undamaged portion of a building if it is over 50 to 75% destroyed and substantially out of compliance with current codes. This brings up two additional issues: your policy won’t reimburse you to destroy undamaged portions of a building nor will it pay you the cost of the demolition and clean up for the undamaged portion. The cost of the upgrades, demolition, and reimbursement for demolition of the undamaged portion are all addressed by adding building ordinance and code upgrade coverage to an association’s property policy. Different carriers approach the problem in different ways. Some automatically include the coverage for a fixed amount; others require that the insured specify the amounts. Some contracts will provide the coverage, but will subtract any money paid for upgrades from the overall amount available for the loss. Others will provide this coverage as an additional amount. The most accurate way to assess your risk is to obtain an estimated reconstruction cost for your buildings as built and another one based on current codes. The difference between the two is the appropriate amount of coverage. You will also want to check with your building department to review their policies regarding demolition of undamaged portions of older buildings. As a practical matter, however, obtaining accurate reconstruction bids from a contractor is not always practical, however, so working with a broker that is familiar with building codes and construction costs will help you determine an appropriate amount of coverage. This overview has touched briefly on what is a challenging subject. Your management professional, attorney, and insurance broker are all able to give your further guidance to help ensure that your association’s insurance dollars are being put to their best use. John Allanson is the principal at Allanson Insurance Agency in Aptos CA. He is the chair of the Central Coast Resource Panel.
INSURANCE CHECKLIST FOR CONDOMINIUM ASSOCIATIONS PROPERTY
DIRECTORS AND OFFICERS LIABILITY (D&O)
• Habitational buildings ______________ (amount)
• Coverage amount______________ (per occurrence)
• Parking structures __________________ (amount)
• Coverage amount______________ (per occurrence)
• Other buildings (clubhouse, etc.) _________________________________________ (amount)
• Deductible amount _______________________
• Retroactive date for prior acts ______________ • Fences, walkways _____________ _ _ ______ (amount) • Current and former board members covered? • Pool, spa __________________________ (amount) ____________ • Lights, sprinklers systems, signs FIDELITY COVERAGE (CRIME) _________________________________________ (amount) • ______________ Bond amount ______________ • Other misc. property_____________________ (amount) • Deductible _______________________ (amount) • Replacement cost endorsement?______________ • Extended replacement cost endorsement? Percentage? _______________________________ • Blanket endorsement? __________________________ • Owners improvements and betterments covered? _______________________________________________ • Coinsurance percentage applicable _________________ • Agreed amount endorsement?_______________ • Building code upgrade needed _________ (amount)
(Suggested amount is total cash plus 3 times monthly dues)
• Deductible? ______________________ (amount) • All employees covered?____________________ • Property manager covered?_________________
BOILER & MACHINERY/Equipment Breakdown • Direct damage amount_________________ _____ • Consequential damage amount ________________ • Items covered: ____________________________
WORKERS COMPENSATION
• Earthquake coverage _____________ (amount) • Board members covered?___________________ _____________________________________ (deductible) • Volunteers covered?_______________________ • Flood coverage _____________________ (amount) • Any direct payroll?__________________________ _____________________________________ (deductible) • Landscaping included? ______________________________
OTHER
LIABILITY
• Does policy language follow the CC&Rs or does it supersede the CC&R definition of which building components are to be covered?______
• Coverage amount per occurrence
___________________________________ (amount)
• Coverage amount (aggregate) ________________________________ (amount) • Deductible __________________________ ______________ • Medical payments ___________________ (amount) • Non-owned auto included? ________ ___________________ • Umbrella coverage _________________ (amount)
• Unit owner improvements covered?______ __________ • Cyber liability needed?__________________________ • Employment practices liability needed?______ __________ ___ __________ ___ ______ ___ (Please note this checklist is intended as a general outline of coverages to be reviewed when evaluating insurance policies. It is by no means all inclusive. Each individual association has its own unique exposures which should be reviewed with an insurance professional. It is our hope that this checklist will provide assistance to you in this process.)
May 2015 | ECHO Journal April
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New For 2015, FREE Attendance for ECHO HOA Members!
EAST BAY REGIONAL SEMINAR Saturday, May 9, 2015
A mini tradeshow with lots of HOA professionals
Learn how to conduct meetings and elections properly!
ECHO HOA Members: Register for FREE Today!
Join other HOA owners and ECHO members at the Concord Hilton for a new ECHO event. While similar in length to our convenient half-day seminars, the East Bay Seminar offers more in-depth instruction, more professional exhibitors, a buffet lunch, and a members-only board training course. Complete event details and online registration is available at our website: www.echo-ca.org/events Visit the ECHO website for complete event details: www.echo-ca.org/events
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Learn how to interpret your key financial documents
Bring your Insurance questions!!
YOUR REGISTRATION INCUDES: n • Continental Breakfast • Buffet lunch • In-depth instruction • Access to professional exhibitors • Members-only board training course; a certificate will be issued to those participating in all three sessions.
Event Information
AGENDA
Location:
LITIGATION – ann rankin, esq.
Concord Hilton 1970 Diamond Blvd., Concord, CA 94520
Most HOAs face litigation at some point, whether to collect unpaid assessments, defend against a liability claim, or obtain redress for construction defects.
Time:
CONTRACTS – JOHN GILL, esq.
8:00 am to 2:30 pm. Classes begin at 9am Buffet lunch served to all attendees at noon.
Learn about essential contract terms, working with qualified professionals, specifications, bidding and selection of a contractor, and the role of the board, the manager, and others.
REGISTRATION & parking: ECHO HOA members: FREE Nonmembers and walk-ins: $50 Parking at the Concord HIlton is $7.50 with 50% discount voucher. Return the form on this page, call the office or register online at www.echo-ca.org/events.
SCENARIOS – Andrea O’Toole, Esq., Beth Grimm, Esq., Mark Wleklinski, Esq. Do you know what to do with a difficult board member, a dispute between neighbors which involves the association, or a critical need to make major unfunded repairs? Participate in this facilitated/interactive session to learn how to perform at your best.
HOA University
SPONSORS:
(ECHO Members Only) Financial – David Levy, CPA
Don’t know a balance sheet from a bank statement? Learn how to interpret your key financial documents, the laws that affect your finances, and how to set appropriate goals for financial stability. Yes, reserve ______spaces for the ECHO East Bay Seminar
Insurance – David StompE HOA insurance is complicated and expensive. What policies do you really need? Should individual members purchase supplementary insurance? How comprehensive is your coverage? Bring your insurance questions.
Name: Email Address: HOA or Firm: Address:
Legal – Alex Noland, Esq.
City: State:
Zip:
Phone: Signature: Return to: ECHO, 1960 The Alameda, Ste 195, San Jose, CA 95126 Phone: 408-297-3246; Fax: 408-297-3517
This session covers some of the toughest challenges for HOAs: governing the association responsibly while avoiding liability. Learn how to conduct meetings and elections properly, when to deal with disputes between neighbors, and so much more.
Complete all three sessions to earn an HOA University Certificate of Completion!
May 2015 | ECHO Journal
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AVOIDING ILLEGAL BOARD ACTIVITY and LAWSUITS By Sharon Glenn Pratt, Esq.
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May 2015 | ECHO Journal
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o CID wants to be sued, and in the event that a board is faced with defending a lawsuit, it of course wants to be found not liable for whatever is being alleged.
One of the best ways to avoid litigation is for the board to encourage transparency and to steer clear of suggestions of impropriety. The other is to recognize possible conflicts before they get to a point of such contentiousness that a lawsuit ensues. Conflicts can be resolved via an alternative dispute resolution procedure. While boards should not cave in to false accusations, it is always wise to avoid litigation. Here are what I have identified as the “top five pitfalls” for boards to avoid.
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Deviating from Governing Documents
Conflicts of Interest/ Self-Dealing
If your CID has an up-to-date, comprehensive set of governing documents, then those CC&Rs, Bylaws, Articles and Rules, etc. provide the “roadmap” for the board to follow. A good board should never disregard the language in its governing documents. In instances where the governing documents do not reflect “the way we’ve always done things” or the as-built condition of a project, it is incumbent upon the board to either start the process for amending the governing document to match the current reality (as long as it complies with the law) or to correct the activity that is contrary to the governing documents. The board has a duty to enforce the governing documents. This includes reasonable investigation, and acting in good faith with regard for the best interests of the community association and its members. Know your governing documents, and consult them often.
Some of the examples of conflicts of interest are blatant. The board votes to waive its own assessment payments in exchange for services provided as officers of the corporation. The president uses her clout to get extra landscaping for her own front yard. Other conflicts are less obvious, such as a director’s relative being hired to perform a service. To avoid impropriety, a director should both disclose the conflict and abstain from voting on contracts or transactions from which he or she stands to benefit. Although abstention is not always mandatory under Davis-Stirling, in cases where the interested director has a material financial interest and the conflict is not disclosed, the contract or other transaction may be void or voidable.
Ignorance of the Law
The old adage that ignorance of the law is no excuse particularly applies to boards. One of the duties of the board is to seek proper expert advice so that it is knowledgeable about the applicable law before it makes a decision. For example, if a board unknowingly violates the law on fair housing by enacting a rule that discriminates against children, it has exposed the association to liability for substantial damages and attorney’s fees. While directors are not expected to be law professors, they are expected to get adequate legal advice before exercising their business judgment.
Violations of the Open Meeting Act Violating the Open Meeting Law by making decisions via email, or behind closed doors, or without proper notice is such a frequent and pervasive problem that it deserves separate mention. What motivates a board to flaunt the law in this regard? It may be an effort to accomplish things more quickly via email or to reach out of town directors via email. It may be that the directors have no idea that only subjects listed under CC §4935 may be covered in executive sessions. Again, ignorance of the law is not an excuse. The purpose behind the open meeting law is very important — to allow the owners to attend, observe, and participate in the corporate governance of their own association. Directors may believe that the owners are not interested because nobody shows up for board meetings. Unfortunately low attendance is not a defense to a violation of the open meeting statutes. Boards should avoid any emails that are sent to a quorum of directors, because simply hitting “reply all” can turn the email into an illegal meeting. Meeting via email is allowed only in emergencies. Agendas for board meetings should cover everything to be discussed and voted on by the board, and they must be posted at least four (4) days prior to the meeting, with the notice of time and place. Remember the words of the CID Open Meeting Act: “The board shall not take action on any item of business outside of a board meeting.” May 2015 | ECHO Journal
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Mismanaging the Money Of course, one of the most damaging things a board can do is to mismanage the money of the CID. There are multiple statutory restrictions on the treasury of a CID, from budget reporting to the reserve funding plan to the disclosures of insurance, loans, and accounts. Unless governing documents impose more stringent standards, a financial statement should be prepared and distributed annually to members. There are also strict requirements on keeping the association’s funds in federally insured financial institutions. With regard to reserve funds, directors may vote to borrow money from reserves, but must repay the reserve account within one year. Funds should not be comingled. The fiduciary duty that directors owe to the association includes making prudent and fiscally responsible decisions to protect the assets of the corporation, which of course includes its accounts. This is an area where the manager, the treasurer and all of the officers must be very well versed on everything that the law requires, and everything that the governing documents require. The board must always be vigilant in knowing how the money of the CID is managed.
Amazon customers gave it a five-star rating 2015 Condominium Bluebook A Complete Guide to Condominium Living
Member Price: $17.00 Non-Member Price: $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.
Order today from ECHO!
Call 408-297-3246, fax at 408-297-3517 or visit us online at store.echo-ca.org
Sharon Glenn Pratt is the managing attorney of Pratt & Associates in San Jose, California. She is a specialist in common interest development law and litigation, and has been practicing in the San Jose area for 29 years. May 2015 | ECHO Journal
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The Science Behind Irrigation Water By Tom Del Conte
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Water Districts Across the country agree that landscapes are overwatered by 30 percent to 60 percent on average.
Management May 2015 | ECHO Journal
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T
he negative impacts result in soil erosion from excess water runoff, poor health of the landscapes, a tremendous waste of water to suburban properties, and the enormous waste of electrical power used to pump the water from its source and deliver it to us.
There are a myriad of reasons behind this travesty in conservation practices. In most irrigation intense regions of the country, the stewards of the irrigation are the landscapers. Unfortunately, the landscaper is typically only gauged by how green the landscape is at any given time. The landscape will be green by accurate watering, but it also will be green by overwatering 10 percent, 50 percent, 200 percent and so on. The grossly overwatered lawn will definitely die, but so slowly over a season or two that the decline in the lawn’s condition will not be noticeable to the customer. Yet, if under-watering by only 10 percent, brown spots will occur and the landscaper’s contract will be in jeopardy. Combine this with the fact that water expenses are not usually shared with landscapers, nor are there any objective water budgets established, and you have a recipe for serious overwatering. What incentive does a landscaper have to employ sharp water management strategies? If it is not something the customer places sincere value on, then why would a contractor invest in building a serious water management program or hire personnel with such advanced skill sets? To hire people with these advanced skill sets would raise the cost, and thereby the pricing, above the minimalist competitor. Further, for many common interest developments, water is one of the Top 5 expenses. Yet it is a line item typically accepted “as is.” The irrigation comes on at night and all of the over watering that runs down the gutter disappears by sunrise, and along with it goes an enormous amount of association money. There are some very good irrigation managers serving the landscape industry. However,
26 echo-ca.org
while almost all gardeners profess to have good irrigation management skills, few have found the absolute need to hone this skill. The reason is the marketplace; managers and HOA boards have yet to consider this a serious value. Real water management requires a serious skill set! Usually the low-cost service provider has not acquired the skills, or hired those who have the skills and talent to use this science of proper landscape water application. One landscaper has said, “I have been waiting 25 years for the price of water to go up, so my skill set will have more value to the market!” From a good contractor, there is much more potential than just mowing lawns, trimming shrubs and removing weeds. The truth is a good water manager can have a cost saving for property development that is multiple times the price difference of a contractor without water management talent. The cost savings will not only be in the water savings, which can be huge, but in asphalt life span, plant life and improved curb appeal leading to increased property values. The largest benefit of proper water management is staving off the very gradual decline to a landscape that occurs over a season or two, when plants are regularly subjected to the unfriendly environment of excessive water. Advancing a landscape properly is an integrated horticultural program that requires, among other things, creating the proper environment for the plants we select to thrive. Water management is without a doubt the most critical aspect in creating this plantsatisfying horticultural environment.
Most people think irrigation management is a simple matter of giving the plants “a drink of water.” However, there is indeed a science and an objective process with which to properly manage irrigation water and a method to determining an accurate budget for water costs. This begs the adage, “If you can count it, you can manage it.” To count it, there are two basic pieces to the equation. The first question to ask is, “How much water is leaving the landscape? This is a concept known as “evapotranspiration.” The second question to ask is, “How is the replacement water applied to the landscape?” This is commonly referred to as the “precipitation rate.”
While these are closely related, it is important to keep these two concepts separate in one’s mind.
Evapotranspiration Evapotranspiration is the measurement of water that leaves the landscape as a result of 1) soil evaporation and 2) plant tissue transpiration (transpiration is the plant equivalent to human perspiration).” The sum total of both of these dying components is referred to as evapotranspiration, or “ET,” and is the total amount of water lost from the landscape. ET is measured in inches of water lost over a time period. These amounts vary by region according to climate and hours of sunlight. The ET numbers also change throughout the season. There are plenty of sources to get real-time ET values in every region for each day. However, daily monitoring becomes too burdensome and impractical unless automated. The most practical ET values to use for landscape irrigation systems are 20-year historical averages of each month’s ET for your region. For instance, the 20-year historical average ET for an East Bay Area of the San Francisco region is 3.8 inches of ET in April, 5.2 inches for the entire month of May and 6.4 inches for June, and so forth. For the time period over the entire year, this same area has a cumulative ET of 32.4 inches of lost water from the landscape. There is one more very important component to the ET concept. That is a factor for the type of plants. We all realize that some plants transpire more water while others transpire less water. Therefore, we need to apply a factor to the ET value for plant types. ET is provided form a host of government agencies, mostly associated with agriculture. So that we can all count on a consistent ET number as provided to us, the ET provided by agencies is a standardized value always based upon a certain crop type, pasture grass. The standardized number is labeled as ETo. Since the number is always for a certain crop type, we need to factor the ETo for our type of plant material in our suburban landscapes. While there are differing opinions of the various factors that could be considered, the factors of ET for landscaping generally range as
follows: Cool-season turf 75 percent of standard ET (ETo), warm-season turf 60 percent of ETo, typical shrub beds is 40 percent of ETo, and plants native to the area are 20 percent of ETo. Therefore, if ETo for June is 6.4 then ET for warm-season grass in June should be 6.4 inches x 75 percent = 4.8 inches of ET required for this grass in June in the San Francisco East Bay Area. Now, understanding that ET is simply a number of inches of water that the landscape requires, you can calculate a water budget for the area of your landscape. For instance, if your annual ETo is 36 inches of water and you have 10,000 square feet of landscaping, then you would require 30,000 cubic feet of water annually. That 30,000 cubic feet of water equals 300 units of water as characterized on most agencies’ water bills. You might ask why the budget does not consider the plant type factor. Most professionals recognize the industry is not advanced enough yet and watering
systems lack efficiencies, so most water agencies and professionals are recommending water budgets based upon the full standard base ETo, without applying crop factors.¹ (The author’s opinion is that it is acceptable to use the base ETo to create the water budget for your development.) The water budget is a baseline to set as a target with legitimate numeric basis. You will use the water budget number to compare the actual water use from your water bills and you will know the amount of water that should be attainable if there is a reasonably efficient irrigation system and a good water manager. The budget sets a line to measure. If your water steward can manage to this volume of water, a little or a lot under, you can be confident that you are inside a calculated amount, and no longer guessing if you are using too much water.
Precipitation Rate
Precipitation rate can be thought of as the opposite of ET. As we have learned, ET is the measurement of how much water is lost and now required. Precipitation rate is the amount of inches of water applied by our irrigation systems and measured as precipitation per hour. ET is to determine how much water we need as determined by nature – and that is rather simple. Precipitation is using the watering irrigation systems we have built to deliver the water at a rate that hopefully matches ET. Each type of sprinkler head has a precipitation rate at which it applies water. Some sprinkler heads apply water at a rate of 2 inches per hour, while others put the water down at half an inch per hour.² By knowing the inches of water our sprinkler system will apply in an hour – the “precipitation rate” – we can use the number of minutes of watering run times to try to apply the amount of effective precipitation to match the required evapotranspiration rate. So irrigation systems that water at a higher
May 2015 | ECHO Journal
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Why Having A Water Budget Matters
precipitation rate, such as most spraytype sprinklers, which average 2 inches per hour, do apply water faster and, hence, should run fewer minutes. Irrigation that waters slower, such as rotor sprinkler heads, which average a half an inch per hour, will need to water a longer amount of time to get the same amount of water applied in order to accommodate ET. We know that ET changes throughout the season.š The most practical way to set your timers is to adjust the run times to match the ET for each month. While we can access the ET values daily, resetting the timers more often than monthly is not practical or cost effective. After we know the precipitation rate for the various types of sprinklers, and we set them for the proper amount of minutes to match the ET, the next step is to insure we are watering in accordance with the monthly ET requirements. If we set the irrigation system only once per year and leave it on the same setting all year, we will indeed be significantly overwatering, as we would be watering all year for the month with the highest ET of the year. Unfortunately, this practice 28 echo-ca.org
is commonly done and results in large amounts of wasted water during the months of the year that have significantly lower ET water requirements. The irrigation manager should expect to make slight modifications over a period of a season or two to fine tune the relative watering to accommodate the imperfections of the irrigation system and the unique property site conditions. These unique adjustments will require a fair amount of tweaking and monitoring of the effects of the landscaping as fine-tuning adjustments are made over the course of time. There is a program on the market for $5.99 per year at www.sprinklertimes. com that performs all of these calculations to set the watering schedules on a monthly basis for each climate zone in the United States. Sprinkler Times is an easy-to-use online program and app that calculates monthly run times for each zone. Most importantly, the program has an adjustment feature to manage and fine-tune the system over time. The instructional videos walk through the concepts in a very simple and concise manner.
Proper water management begins with counting it to a manage it. Create a landscape irrigation water budget for the site by using ETo to calculate the depth of water, in inches, required over the square footage of the property. The water budget can and should be broken down each month of the season and should represent the amount of water that should be used for the landscape each month of the season. Next, understand the precipitation rates ² (and the distribution uniformity) of each sprinkler zone. Factor the inches of ET for the various plant types that are being watered to determine the inches of water required for the plant type in each irrigation zone. Use the minutes of irrigation run time to match, as nearly as possible, the effective precipitation for each irrigation watering zone to the monthly ET requirements of each zone. While the sprinkler type will get you close, fine-tuning will be essential for effective water management. The landscape lawn and plant material itself will show you how close you are to a good schedule. Watch the plants and soil and make the adjustments on a zone-byzone basis. The Sprinkler Times program will manage this process, but do not print all monthly schedules as that will discourage the fine-tuning adjustment function. (The fine-tuning adjustment video in the Sprinkler Times program describes this excellently.)
Lastly, review your water bills against your water budget to see how much water you saved. Be proud that you are using green and professional water management practices, are conserving as much water as your system will support and are using tools to save money on one of your largest budget line items. Some landscape companies have built the capacity to create such budgets from water meters. Also, many water districts are beginning to calculate the water budges for the property and send them to their water customers.
Yes, there is a science available to manage irrigation management. A fine water management program will have rewards well beyond the obvious. If you can count it, you can manage it. Some associations adopt a strategy to hire higher levels of talent and save on their overall cost while improving overall performance. Beyond the money saved form accurate water applications, there is avoidance of asphalt damage, soil erosion, disease infestation and the absence of plant replacement over the years. But the largest value comes from curb appeal, as an integrated landscape management program that includes the invaluable component of water management will actually reverse a declining landscape and promote a healthy horticultural environment required to actually advance the landscape and create curb appeal of pride.
1. This assumes the sprinkler controllers are conventional irrigation timers without outside sensors and without the ability to make automatic adjustments to watering regimes based on outside weather inputs. Timers that do have an ability to communicate with outside sensors and make daily automatic watering adjustments are Smart Times, which are available. 2. It should be noted that the precipitation rates of irrigation systems are never uniform, and the irrigation manager should understand the effective irrigation precipitation rate, which is factored for distribution uniformity (DU). Tom Del Conte is a certified water auditor and operates a full-service landscape and irrigation management company, Del Conte’s Landscaping of Fremont, Calif. The firm services the greater San Francisco Bay Area.
May 2015 | ECHO Journal
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NO BIKES
NO PARTIES
NO FIREWORKS
Reality Check - The Truth
By Helen Loorya, PCAM速, CCAM速, CMCA速
NO TRASHING 30 echo-ca.org
NO BONFIRES
NO DIVING
NO SMOKING
About
NO FIRES
NO LOUD MUSIC
People, Pets, and Parking
NO PETS
NO PARKING
NO DRINKING May 2015 | ECHO Journal
31
Y
ou’ve used your newsletter to inform people. You publish and distribute the rules annually. You have the pool rules on a sign in the pool area. You have parking signs. You send friendly reminder letters and have a demonstrated track record of consistent follow-through. So how come those people down the street painted their house an unapproved color without architectural approval? Why doesn’t that guy who runs a tree service park his pickup truck in his garage at night when the rules clearly state no commercial vehicles are allowed? The rules clearly state that residents may bring three guests to the pool area so why is this household holding a reception in the pool area? What’s the matter with people anyway? After years of being in this industry, there is one truth which those of us in the professional arena will hold up as being a universal...YOU CAN’T WIN ‘EM ALL! And it’s important to realize that for the good of your community, sometimes it’s not even in your best interests to try. What sets association administration aside from many other professions and efforts is that we are dealing with people in their own homes. In a world that is moving faster and faster, becoming less user-friendly by the minute, “home” has taken on greater meaning as each person’s “safe place” from the world “out there.” Couple that with the very large streak of “I-don’t-want-to-and-you-can’tmake-me” that runs through some of us, and you have all the ingredients you need to develop a war zone. And some associations have done just that. Hence, we have the “condo commandos” and the “snoop groups” and other endearing efforts that have, over time, given association living the popular reputation that it
now holds. We’ve all opened up the Sunday real estate section of the paper and seen new developments advertised and in big, bold print it states, “No Association!” Not exactly a testament to success. It doesn’t have to be that way. But we need to do a “reality check” about the whole issue of enforcement. And the reality is that the same truths that apply in any neighborhood anywhere, apply in an association as well. There is always going to be that percentage of homeowners who just march to a different drummer no matter what you do. The only edge an association has is a legal right to nag. Yes, we can impose fines, we can initiate an alternative dispute resolution, we can even file suit, but the flip side of that is that some people won’t pay the fines, most people haven’t heard about or even care about “ADR,” and very seldom is it in the best interest of your community to spend association funds to sue Mr. Jones because he painted the trim on his house Forest Green and it was supposed to be Meadow Green. So, you say, what good are the rules if you can’t enforce them? Well, you have to recognize that you can enforce them although it is probably not a realistic expectation that you will have 100 percent compliance 100 percent of the time. But if you have 90 percent compliance 100 percent of the time, maybe that is good enough. A 90 percent success rate is probably better than most businesses experience; so can it be good enough for your association? Probably. The following are a few guidelines for your association and board members to use in developing a “philosophy” about enforcement issues in your community. While it is important to have an enforcement policy, it is equally important to have an enforcement “philosophy”. Your philosophy will determine (loosely folks!) how much room you will allow in interpreting your policy and allowing variances to its strict adherence.
ONE: Know your community. Are you a middle income working-class community with tot lots and a large population of children and household pets, or are you a retirement community
with a gated entrance and manicured lawns? The definition of such endearing terms as “noxious and offensive activity” can have completely different impacts, depending on the profile of your community. An acceptable noise level in a working-class community with significant numbers of schoolaged children may be different from an acceptable noise level in a retirement community. And it is important to know the difference because, if someone who should have considered moving into a retirement community moves into the working-class community, there may need to be a “reality check” about expectations!
TWO: Be able to define your comfort zone. • This is, and should always be, an ongoing dialogue within your community. • Do you have an overall good feeling about the way things look and feel within your association? • Do most of the people follow the rules most of the time? • Do most people respond when you remind them to clean up their entry area or take their holiday decorations down? • When things drift too far out of compliance, do you know when you need to beef up your attention to enforcement and how far back it has to come in order to fall within your comfort zone again? You may be willing to look the other way about noise, but speeding is serious. You may be willing to allow unapproved additions to the exterior that are mere personal expressions like a wreath or decorative element on a door or entry area, but extending a private patio into the common area is not acceptable under any circumstances.
April 2015 | ECHO Journal
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THREE: Help your residents to have realistic expectations.
FOUR: Pick your battles. Use “process” to your advantage.
When someone reports a violation and wants action, your first response doesn’t have to be whipping out an association “nastygram” that cites the article and section number of the CC&Rs being violated and demands compliance within 72 hours. It is important to ask people who are reporting a problem whether or not they have brought it to the attention of the person who is causing the problem. Encourage people to talk to each other first. And remember what your mother told you; it’s not what you say—it’s how you say it! Be courteous and polite at all times!
• The truth is, you just can’t win them all. And it is not in the best interests of your community to squander association monies and energy on insignificant problems. So when reviewing your enforcement issues, follow the same process you use in any problem solving situation:
We can use the newsletter and conversations with management to educate and remind people to take some responsibility for participating in the issues that affect them. Provide real life responses and words that people can use to address sensitive issues. Often times people report a problem to the board or management for no reason other than they just don’t know what to say. If your next-door neighbors play their television too loud and the first time they know it is a problem for you is when they get a violation letter from the association, chances are they are going to less than hospitable to you when they run into you in the carport. If people talk to each other, maybe they find out their neighbor is hard of hearing and didn’t know his or her television was bothering anyone. Maybe your neighbors do let their kids out to play too early on Saturday mornings, but is saying something worth the risk that you will feel like walking on egg shells every time you run into each other? Is it possible your own kids made a lot of noise on Saturday mornings when they were little? There are any number of times in the life of a community when bending the rules a little provides a reasonable allowance for who we are and how we live. Maybe noise is not such a big deal if your community has many little people and providing a safe, nurturing community for them to grow and develop in is more important. 34 echo-ca.org
• Define the problem. • Determine how you will address it. • Implement the solution. • Analyze the results. • Repeat the process. • If your solution is not getting the desired result, analyze the probable outcome of taking it to the next level and whether or not the result will be worth the effort involved. • Document your findings. • Move on! If you go through this process, you have served you association well even if the best business decision you make is that the issue is not worth pursuing.
FIVE: Use positive peer pressure. It works.
How many times have you heard parents chuckle over their use of “reverse psychology” when dealing with their children? Plenty of times. It works. It can work for your association as well. You can spend a lot of energy sending letters to homeowners to clean up their yards, remove oil spills from their driveways, and park the pickup in the garage. Or you could sponsor a “House of the Month.” Consider the association that has worked out an arrangement with a local restaurant to provide gift certificates for free dinners for two each month. The restaurant has won the good will of the community and free publicity, people read the newsletter to see who won this month and everyone’s yard look just a little better than it might otherwise. Consider “Good Neighbor” recognition for the owner who is always the one who picks up around the pool area just because it needs to be done. Extra effort that is recognized becomes contagious.
At a recent industry seminar, a very well-intentioned attorney made the following statement: “When you’re wrong, admit it. When you’re right, don’t back down.” With all due respect, I would modify that stand to, “When you’re wrong, admit it. When you’re right, don’t back down — most of the time.” Being right is not always the most important thing. Rules are about people. They are developed for the overall good of a community and their enforcement is in everyone’s best interest— most of the time. People are human and, like it or not, they have flaws. Completely reasonable and sane people can be totally unbending about the most unexpected, and sometimes insignificant, things. Be willing to bend when it makes sense to bend and when bending will bring about a better result than heavy-handed enforcement. Do a reality check. Rules are important. People are more important. We just need to keep that in mind. Helen Loorya is the past president of Steward Property Services, Inc., Petaluma, CA. The firm is a member of ECHO.
Nominating Committee Seeks Candidates for ECHO Board of Directors
T
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 2015 are Jerry Bowles, Stephanie Hayes, David Hughes, and Steve Weil.
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, 2015 , 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 2015 | ECHO Journal
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36 echo-ca.org
GOVERNING DOCUMENTS SUPERSEDE THE
NEW AIRBNB LAW LEGALIZING SHORT-TERM RENTALS By Hanh Pham, Esq.
May 2015 | ECHO Journal
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C
lients ask whether San Francisco’s new Airbnb law (effective February 1, 2015) supersedes their declaration of covenants, conditions and restrictions’ (“CC&Rs”) shortterm rental provisions or whether they need to amend the CC&Rs to address Airbnb. The brief answers to both questions are “No.” Airbnb is a website for people to rent out lodgings, usually on a daily basis. The new Airbnb law, San Francisco Administrative Code Chapter 41A legalizes short-term rentals but imposes a number of restrictions, discussed below. San Francisco’s Planning Department will enforce the new law.
The new law does not change CC&Rs’ current restrictions; it imposes additional restrictions. Your association should send notices to its homeowners to familiarize them with the new law’s important requirements, including the following:
•
38 echo-ca.org
The 90 Day Rule. The law limits rentals where the host is not present in the unit to a maximum of 90 days per year. Violators who continue to rent out their
apartments beyond 90 days would be subject to a $416-aday fine for the first offense and $1,000 a day thereafter. •
Only Primary Residence May be Rented. Permanent
residents (those residing in their units for at least 275 days per year) are allowed to rent out their primary residences, but not locations in which they don’t live or second or vacation homes. If you are a new resident, you must have occupied this specific unit for at least 60 consecutive days prior to your application. If you own a multi-unit building, you may only register the specific residential unit in which you reside.
•
•
•
Registry and Permits. Hosts
must register and obtain a permit from the planning department to engage in short-term renting and pay a $50 fee every two years. Hosts will also need to obtain a city business license. Short-term rentals will be listed and tracked by the city in a registry. This information will not be available to the public unless a public records request is filed.
Insurance Requirement.
Hosts must be covered by liability insurance with at least $500,000 in coverage. Alternatively, they may offer their units for rent through a hosting service that offers at least this much coverage.
Hotel Taxes Must Be Paid.
The 14% San Francisco hotel tax must be collected and paid to the city. Airbnb has already started
collecting and remitting such taxes for its San Francisco hosts. Your association should also send reminders to homeowners regarding the CC&Rs’ rental restrictions. Typically, CC&Rs prohibit rentals of less than 30 days and require the Owner/landlord to provide certain tenant information to the association. The reminder should also advise homeowners that they will be subject to a fine, suspension of membership privileges, and/or a lawsuit for injunctive relief and attorney’s fees incurred to enforce the rental restrictions in the CC&Rs if they violate these provisions. If you need assistance in preparing reminders to the homeowners or summarizing the Airbnb law to them, please contact our firm. By choosing to communicate with us without such prior approval, you understand and agree that our firm will have no duty to keep confidential any information you provide. Hanh T. Pham, Esq., is an Associate with The Law Offices of Ann Rankin in Oakland, California, serving Common Interest Developments.
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SERVING NORTHERN CALIFORNIA SINCE 1963! May 2015 | ECHO Journal
39
BOOKSTORE The ECHO Bookstore is your source for publications providing essential information for HOA Board Member service obligations. Order online at echo-ca.org or fill out form on the facing page. W NETION I ED
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.
Construction Defect Claims Member Price: Non-Member Price:
$19.95 $25.00
New buildings can conceal extensive faults. It’s a board’s worst nightmare—rainstorms damage buildings and bring owner complaints. Is legal action necessary? With this new book, you’ll learn about the resolution process for construction problems, and how to handle complex claims.
Community Association Statute Book—2014 Edition Member Price: Non-Member Price:
$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.
40 echo-ca.org
2015 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:
$18.00 $25.00
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.
Board Member Handbook Member Price: Non-Member Price:
$15.00 $25.00
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:
$15.00 $25.00
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 Member’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
TITLE
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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 Member’s Guide for Management Interviews Member Price: Non-Member Price:
$15.00 $25.00
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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May 2015 | ECHO Journal
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directory updates
All current listings may be found in our Professionals Directory available online at www.echo-ca.org.
New Members Distinct Property Management 630A Water Street Santa Cruz, CA 95060 Contact: Nora Brink Tel: (831) 420.0202
Johnson Mediation Services 614 James Street Livermore, CA 94551 Contact: Lori Johnson Tel: (925) 250.2680
Farmers Insurance | Ritchey Insurance Agency 3037 Hopyard Road Suite R Pleasanton, CA 94588 Contact: Deborah Ritchey Tel: (925) 474.3470
R.E. Roofing & Construction, Inc. 941 S. McGlincy Lane Campbell, CA 95008 Contact: Miles Proctor Tel: (408) 626.9320
Become an ECHO Professional Member and receive the benefits of membership. To learn more, visit our membership page at www.echo-ca.org
42 echo-ca.org
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about ECHO
ACT: Advanced Construction Technology............................................27 www.advconsttech.com American Management Services........13 www.acepm.net Applied Reserve Analysis....................39 www.AppliedReserveAnalysis.com A.S.A.P. Collection Services.................38 www.asapcollect.com Associa Northern California M & C Association Management Services...........................2 www.mccommunities.com Association Reserves...........................23 www.reservestudy.com Compass Management Group............21 www.gocompass.com
Malarkey Roofing.................................33 www.malarkeyroofing.com Mutual of Omaha Bank.......................29 www.mutualofomahabank.com Neighborhood Association Management.........................................27 www.neighborhoodam.com PAS: Professional Association Services, Inc..........................................29 www.PAS-INC.com PML Management Corporation..........28 www.pmlmanagement.com Pollard Unlimited.................................14 www.Pollardunlimited@comcast.net R.E. Broocker Co...................................14 www.rebroockerco.com
Eugene Burger Management Co.........38 www.ebmc.com
Silicon Valley Civil & Structural Engineers................13 www.Qengineers.com
Flores Painting & Drywall....................21 Email: FPDinc@sbcglobal.net
Steve Tingley Painting, Inc..................39 www.tingleypainting.com
GET Insurance......................................23 email: getinsurance4u@aol.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.
Benefits of Association Membership • 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
ECHO Membership Dues
Office 1960 The Alameda, Suite 195 San Jose, CA 95126-2308
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.................$500 Association Management Membership.......................................$500 Individual Membership.......................$75 Journal Subscription............................$30
How Do You Join ECHO? 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. For more information about membership and ECHO, call us at 408-297-3246 or visit the ECHO website. August 2013 ||| ECHO ECHOJournal Journal February 2014 ECHO Journal May 2015
43 43
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
May 7, 11:45 a.m.
North Bay Resource Panel Contempo Marin Clubhouse 400 Yosemite Dr., San Rafael
Denise Wolford 415-458-3537
Tenants & Owners
May 12, 11:45 a.m.
Central Coast Resource Panel Michael’s on Main 2591 S Main St., Soquel
Ann Thomas 800-537-4098 ext.7530
TBD
May 20, 11:45 a.m.
Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati
Pam Marsh 415-686-9342
Earthquake & Flood Insurance
June 8, 11:45 a.m.
East Bay Resource Panel Massimo Restaurant 1603 Locust St., Walnut Creek
Cindy Wall, PCAM 925-830-4580
TBD
June 13, 11:45 a.m.
South Bay Resource Panel Flames Eatery 88 S. 4th Street, San Jose
Geri Kennedy 408-398-4227
Management
Wine Country Resource Panel Serv-Pro 377 Blodgett St., Cotati
Pam Marsh 415-686-9342
Marketable Properties
June 20, 11:45 a.m.
Perspective on Vendors
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
Flames Eatery, San Jose
Wine Country
Third Wednesday, Monthly
Serv-Pro, Cotati
Legal
Quarterly
Varies
44 echo-ca.org
ECHO honor roll
ECHO HONORS VOLUNTEERS Resource Panels
Seminar Speakers
Recent Contributing Authors
Accountant Panel Adam Haney, CPA 888-786-6000 x317
Marin David Feingold, Esq. Wanden Treanor, Esq. Glenn Youngling, Esq.
October 2014 Tyler Berding, JD, PhD. David C. Swedelson, Esq. Christine Kehoe Thomas Connelly Elizabeth Lanham
Central Coast Panel John Allanson 831-685-0101 East Bay Panel 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 Susan Hoffman, PCAM 510-683-8614 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 Diane Rossi, PCAM Nora Brink, CCAM Brian Seifert Jeffrey Barnett, Esq. Wine Country Carra Clampitt, CCAM Jeffrey Farnsworth, CCAM Christi Spina Barrett Schaefer, Esq. San Jose John Allanson Ian Brown, CCAM David Levy, CPA Alex Noland, Esq. Jerry Bowles Bruce Stanton, Esq. Ricky Chu Dave Rosenblatt, CCAM Judy O’Shaughnessy David Kuivanen, AIA Diane Rossi, PCAM Brian Seifert Aaron Majors Dave Langridge Kelly Moss, CCAM Paul Schultz Sandra Gottlieb, Esq. Steven Weil, Esq. Stephanie Hayes, Esq. Bob Burton, CCAM Tyler Berding, JD, PhD Chris Sigler Regan Brown John Garvic, Esq. Kerry Mazzoni
November 2014 Sean Andersen, RS Jeffrey A. Barnett, Esq. Tom Fier Colletta Ellsworth-Wicker, PCAM Richard Tippett December 2014 Sandra M. Bonato, Esq. Tom Fier Sara McLean Paul Schultz January 2015 Tyler Coffin Sara Montecino Stephanie J. Hayes, Esq. Steven S. Weil, Esq. February 2015 Tyler Berding, Esq. David Levy, CPA Carra S. Clampitt, CCAM Shelly L. Coleman, Esq. Regan Brown Robert E. Aune, Esq. March 2015 Paul P. Terry, Jr., Esq. Patricia Wendleton David Swedelson, Esq. Robert M. Nordlund, PE, RS Bob Gourley April 2015 Julie Adamen Thomas Connelly Robert Rosenberg Rosalia Burgueño Tapia, Esq. Burt Dean
May 2015 | ECHO Journal
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legislation at a glimpse
The 2015 Legislative Session has begun! The bills below represent the ECHO Legislative Committee’s early review of the 2500 bills introduced in Sacramento this year. The list – and the impact of each bill – will change as authors amend the language in their bills. We anticipate major changes in the months ahead. For the most up-to-date information, visit the HOA Advocacy section at the ECHO website: www.echo-ca.org/hoa-advocacy
Current Legislation Bill Information
Summary
AB 52 & AB 54
ADA Lawsuit Relief
Support Status: In Assembly Judiciary
This bill aims to provide relief to small businesses who are the frequent targets of attorneys who use the Americans with Disabilities Act solely to generate income. Although most HOAs are not subject to the ADA, HOAs who rent out facilities to the public or have a commercial component may benefit from this relief.
AB 349
Turf & Low Water-Using Landscapes
Oppose Status: In Assembly Housing
This bill would further narrow the ability of an HOA to restrict low water-using landscaping. It would void any provision of the governing documents or HOA guidelines that prohibit the use of low waterusing landscapes that require “not more than a specified amount of water,” including artificial turf. ECHO believes that the Legislature should evaluate the safety of artificial turf (see SB 47) before considering this bill.
AB 587
Mobilehomes: Nonpayment or Late Payments
Support Status: In Assembly Judiciary
Current law prohibits the State from issuing a new title to a mobilehome buyer when of any outstanding charges or liens exist as a result of the previous owner’s failure to pay certain fees and penalties, including the vehicle license fee. This bill would waive those fees and allow for the title transfer.
AB 596
FHA Approval Disclosure
Oppose Unless Amended Status: In Assembly Housing
This bill would require a common interest development to disclose its status as a Federal Housing Administration (FHA)-approved condominium project. This information is publicly available online, making this obligation is unnecessary. It also creates a potential liability for associations. ECHO favors an amended disclosure that would inform recipients that the information is available directly from the FHA.
AB 1152
Limiting Construction Defect Lawsuits
Oppose
This bill narrows the options for associations seeking recovery for construction defects. Recent case law allowed associations to recoup damages through sources and methods not outlined in Section 896 of the Civil Code. This bill would establish Section 896 as the sole remedy for construction defect claims.
Author: Gray & Olsen
Author: Gonzalez
Author: Chau
Author: Daly
Author: Frazier Status: In Assembly Judiciary
What Do You Think? Read more about HOA legislation on our website or visit our Facebook page and join the discussion. On the web: echo-ca.org/hoa-advocacy, On Facebook: facebook.com/echoorg 46 echo-ca.org
legislation at a glimpse
Current Legislation (continued) Bill Information
Summary
AB 1335
Fees on Recorded Documents
Oppose
In order to fund affordable housing, this bill would impose a $75 fee whenever a document is recorded in California. Associations record numerous documents, including governing documents and liens.
Author: Atkins Status: In Assembly Housing Committee
AB 1448
Clotheslines as Solar Energy Systems
Oppose Status: In Assembly Judiciary
This bill would identify clotheslines as a “solar energy system” and prohibit associations from restricting or prohibiting the installation and use of clotheslines. This bill does not allow an HOA community to establish its own guidelines to address safety, building penetration, or aesthetic considerations.
SB 47
Synthetic Turf Study
Support
This bill would require and fund a study to analyze the environmental and health impacts of synthetic turf. ECHO believes that the Legislature should establish the safety of these artificial turf products before requiring HOAs to permit them (see AB 349).
Author: Lopez
Author: Hill Status: In Assembly Appropriations Suspense File
SB 244
Mobilehomes: Injunctions
Support
This bill would extend, indefinitely, the right of a mobilehome park to petition the court to enjoin a continuing or recurring violation of a reasonable rule or regulation of the park.
Author: Vidak Status: Consent Calendar. In Assembly.
SB 290
Substituted Service of Process
Support
In a foreclosure proceeding, associations are required to provide certain notices by personal service. When an owner is unavailable, this bill would allow the association to serve the owner by “substituted service,” a less restrictive process.
Author: Vidak Status: In Senate Judiciary Committee
SB 328
Notice of Pesticide Use by Landlords
Watch
This bill would require that a landlord or the landlord’s authorize agent provide a current tenant with notice about the use of pesticides at the dwelling unit. ECHO is monitoring this bill to see how such a requirement might affect HOAs who use pesticides on common area landscaping.
Author: Hueso Status: Referred to Judiciary Committee
SB 419
Sale Signs in Mobilehomes
Watch
This bill would permit the use of yard-arm style “for sale” signs in mobilehome parks, some of which are common interest developments.
Author: McGuire Status: Referred to Judiciary Committee
SB 477
Mobilehomes: Property Tax Postponement
Support
This bill would allow qualified individuals and owners of mobile or floating homes, some of which are common interest developments, to seek postponement of ad valorem taxes. This option is already available to owners of real property.
Author: Leyva Status: In Senate Finance Committee
SB 655
Mold & Substandard Housing
Watch
This bill specifies that visible or otherwise demonstrable mold growth, excepting mold caused by inadequate housekeeping practices or ventilation, is a “substandard condition” and could cause a building in which such a condition is found to be deemed substandard.
Author: Mitchell In Senate Housing Committee
May 2015 | ECHO Journal
47
Half Price for ECHO HOA Members!
ECHO ANNUAL SEMINAR 43rd Annual Seminar is returning to Santa Clara! Saturday, June 20, 2015 • Find out more on page 6
The Annual Seminar is now free for ECHO HOA Members! We’re returning to the Santa Clara Convention Center for our 43rd Annual Seminar. Take advantage of all the resources available to your HOA at the Annual Seminar: • 12 classes featuring top industry experts. • Members-only HOA University & Certificate. • Hundreds of fellow board members and HOA professionals. • Up-to-the-minute information on new legislation and drought restrictions. ECHO’s Annual Seminar is the only educational trade show designed for HOAs. Get your information straight from the source, and build a strong, healthy community.
Visit the ECHO website or call ECHO for complete event details: Online www.echo-ca.org/events Phone 408.297.3246