ECHO Journal - August 2007

August 2007

A Journal for Community Association Leaders

echo-ca.org

Overcoming Resistance to Reserve Funding

ALSO INSIDE THIS ISSUE:

• Protecting Privacy • Board Service is an Honor • Reorganization of Davis-Sterling Act

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The ECHO Journal is published monthly by the Executive Council of 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 person should be sought.

Contents Board Service is an Honor on page 24

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Overcoming Resistance to Funding Reserves When your property gets into an underfunded position, you’re on a slippery slope. How to overcome resistance to funding reserves? This article offers some suggestions for selling a reserve funding plan.

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Protecting Homeowner Privacy More and more personal data is being stolen from “secured” files. If your association has not taken the time to review your vulnerability in protecting homeowner privacy, here are some steps to consider.

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Reflections from a Board President The president of the board of a medium size association reflects on his experience in trying to be an effective president of a community association.

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Board Service is an Honor Stop begging your neighbors to serve on the board. By doing so, you are demeaning the honor of being on a board and diminishing your chances of recruiting candidates who will serve you and your community well.

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Departments 21 2007 Legislation at a Glimpse 28 Calendar of Events 29 Directory Updates 34 ECHO Bookstore 36 News from ECHO 38 ECHO Volunteers 38 About ECHO 40 Association Affairs

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41 ECHO Marketplace 41 Advertiser Index

On the Cover Selling Reserve Funding Page 6

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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 2007 Executive Council of Homeowners, Inc. 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.

Executive Council of Homeowners, Inc. 1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours: Monday–Friday 9:00 a.m. to 5:00 p.m.

Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer David Levy Secretary Dorothy Kopczynski Directors Paul Atkins John Garvic Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles Robert Hood Diane Rossi Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc. Design and Production George O’Hanlon ECHO Mission Statement The mission of ECHO is to advance the concept, interests and needs of homeowner associations through education and related services to board members, homeowner members, government officials and the professionals in the industry.

ECHO Legislative Alert

Oppose AB 952 (Mullin) T

he Executive Council of Homeowners, on behalf of its more than 1,550 community association members and the more than 300,000 homeowners who live in ECHO-member associations, as well as on behalf of the millions of Californians who live in common interest developments (CIDs) throughout the state, asks you to contact your local California Senator and Assembly member to urge them to oppose AB 952 (Mullin).

This bill will be voted on soon in the Senate and will return briefly to the Assembly. If AB 952 passes, it will go to the governor for signature.

AB 952 prevents owners of property within CIDs that contain affordable housing (i.e., units and lots specially set aside and owned by persons with low and moderate income levels) from approving assessment increases or special assessments above current statutory limits unless the owners of the affordable units [also known as below market rate (BMR) units] separately approve such assessments.

Without that separate consent, such assessment increases and special assessments could not be approved at all.

Giving any separate class of owners the unchecked ability to vote down assessments gives those owners disproportionate power to prevent funding of major repairs when they are due. The inability to approve assessments that are needed to maintain property and protect all owners’ investments in their homes will foreseeably result in deteriorated housing and lost property assets for hundreds of thousands of owners. If a small group, voting in its own self-interest, can deny needed assessments, then home values and safety standards in these communities will decline.

The only assessments that AB 952 leaves untouched are emergency assessments. Emergency assessments are available when property is so badly in need of repair that it threatens the personal safety of people. By this standard, housing will fail along with the very investment that affordable forsale housing was intended to promote. AB 952 encourages the failure of housing by preventing owners from collectively maintaining and repairing their homes without the concurrent consent of a subset of owners. A statewide funding problem in CIDs that is already serious would become a disaster.

A key goal of city and county support and subsidies for affordable for-sale housing is to provide homeownership opportunities to less-advantaged persons, to welcome them into communities, and integrate them invisibly into CIDs. AB 952 will insist on the classification of owners, based on information that many managers and boards may not have. This information must necessarily be explored for election purposes under AB 952.

As social policy, AB 952 goes in the wrong direction. It seeks to help less-fortunate owners financially but does so in a way that destroys harmony and promotes division and poor maintenance of homes. CIDs simply cannot function in a class-veto system. Owners who share a common interest in property have to be able to maintain it collectively.

ECHO strongly supports the concept of affordable housing and the integration of persons of a wide range of incomes into CIDs. However, affordability involves more than just the entry purchase price of a home. Affordability also refers to the long-range ability to pay the cost of ownership in maintaining a home, particularly where buildings are attached and ownership is legally shared.

ECHO believes a better answer lies in continuing subsidies from cities and counties so that affordable homeownership remains a viable, sustained goal. If this bill is not re-thought, AB 952 will inevitably sink the whole concept.

AB 952 is detrimental to the health of community associations. ECHO urges you to contact your legislators and ask them to vote “NO.” Contacting Your Legislator Please help ECHO stop AB 952 from becoming law. Write to your district legislators and ask them to oppose AB 952. Legislators listen to their constituents, and with enough help, we can defeat this bill. Just visit the California state legislature web site: www.legislature.ca.gov/port-zipsearch.html, enter your zip code and click “search.” Remember to send your letter to the legislator’s district office, as it is more likely to be read in time.

Influencing legislation on behalf of California CID owners is one of ECHO’s primary goals. We would greatly appreciate your help in gauging the effectiveness of our call to action by sending us a copy of your letter. Simply paste it into an email to Tyler Coffin: tcoffin@echo-ca.org. Thank you!

ECHO Journal | August 2007

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By Graham Oliver

Overcoming Resistance to Funding Reserves O

ne of the most famous books of the last century is Dale Carnegie’s How to Win Friends and Influence People. Published in 1937, it has sold millions of copies (and it’s still selling) and was on the New York Times best-seller list for 10 years.

It addresses two things we all want to do better in our family relationships, among our neighbors, with our staff and our bosses. However, almost nowhere is winning friends and influencing people more important than when matters connected with your condominium or planned development association arise. The way we live and interact together in these communities is a vital part of our everyday lives. Moreover, it’s worth reminding ourselves that our personal views on how our association should be run and what the “rules” should be are not simply incidental issues that are easily dealt with. Quite the contrary.

As you may have already guessed, I’m “going somewhere” with this. And where I’m going is into the reserve fund area, drilling down to a specific element—funding—and from there going one layer deeper right into bed rock… the matter of setting monthly contributions amounts.

First, a startling statistic—consider that a 2006 study of representative condominiums in California found that, on average, common-ownership properties were only 44% funded. That means that (again, on average) properties had less than half the funds required to carry out the major repairs and replacements called for in their reserve plans.

Why? In some cases we might surmise that the plan itself was poorly put together—the funding schedule was incorrectly worked out. In other cases, there may have been delinquencies; i.e., uncollected (or uncollectible) assessments payable by the unit owners. But it seems much more likely the most prevalent reason is that funding required to meet a 100%-funded level was consciously rejected by the boards and by the owners.

How come? We think it’s because two powerful forces are at work: One of them is the reluctance of individuals, be they owners-at-large or individual board members, to agree to higher monthly payments for all the usual reasons. The other one is that the boards, even when they know that the need for an increase is real, are loathe to get into a predictably unpleasant hassle with owners at the Annual General meeting. It’s easier to say “Let’s deal with it later,” or “Let the next board deal with it.”

A huge mistake. When your property gets into an underfunded position, you’re on a slippery slope. Not only will a loan or a special assessment loom in the not-so-distant future, but the fundamental underfunding problem will not have gone away. A need to pay the loan, plus the need to raise fees at the same time, is the fate that awaits. And that’s a very tough row to hoe.

What to do? We have a suggestion. It’s not infallible. It will succeed sometimes, but not always.

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Before we get into that let’s describe what we mean by “resistance to funding plans.”

Well, what’s the first step to increasing unit owner’s monthly fees in order to get more money into the reserve fund? It’s usually initiated by a reserve plan submitted by a Reserve Specialist (RS). The RS has found that in order to meet anticipated expenditures for repairs and replacements, the projected balances in the fund will have to be higher. And to attain these higher balances the RS would have recommended a level of monthly contributions from owners high enough to bring the reserves up to where they should be.

Simple enough, isn’t it? Well, yes, as long as all the board members agree with the higher amounts, and as long as the owners, when presented with those numbers, all nod their heads in agreement.

First let’s deal with the problem of one or more board members who try to roadblock the resolution to raise contributions. Seems to us there may be two reasons for it. One is that they themselves, personally, don’t like the idea of paying higher fees. The other is that, while they themselves, personally, aren’t against it, they know that some of the unit owners will be; and they don’t want to get

involved in a potentially unpleasant free-forall with their neighbors.

If the majority of the board buys into the fee increase, well, the majority rules and motion passed. But if you and other likethinking board members are in the minority, what then? You’re on the receiving end of other board members’ arguments that paint a picture of the outcry the board will face.

(They have a point, by the way. The owners won’t like it. But we’ll deal with that later in this article.) Your colleagues suggest that the board should fiddle with the recommended amounts to bring them down to a more acceptable level or what they think will be a more acceptable level. They try to persuade you that the upcoming Annual Meeting will run along like a schooner going before the wind.

The board will score again! Or will it?

Consider that the board has already bought into the notion that the reserves will, by their decision, become (or remain) underfunded.

If that scenario isn’t distasteful to you, it should be. Look at what a highly respected accounting institute says.

The American Institute of Certified Public Accountants’ Audit and Accounting Guide for Common Interest Realty Associations (CIRA) recognizes the need for funding of reserves stating that “Above all, boards of directors need to be aware that the goal of whatever policies they set should enable them to meet their fiduciary duties to maintain and preserve the common property.”1 We might say, therefore, that when board members are tempted to fiddle with the recommended numbers, one of the members should put the above quote on the table. Our hope is that the recalcitrant members would audibly “gulp” and surrender—all at the same time!

The above, folks, is what I might call the “techno-legal” approach. But we promised to pull Dale Carnegie out of our hat to use the winning friends and influencing people strategy. Let’s introduce one or two of his widely accepted teachings right here.

One in particular that we think would work well here is anticipation; that is, anticipating that some of your fellow board members may want to fiddle; i.e., water down the recommended level of contributions. If you anticipate, you can prepare. Moreover, you’ll 1 We are grateful to Diversified Facility Services, Inc. of California, from whose website we have excerpted this paragraph.

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be following Dale Carnegie’s advice to “Dramatize your ideas.” Here’s how.

Before your board meeting, use a copy of your Reserve Specialist’s spreadsheet that provides the recommended funding level and water it down yourself. Reduce the planner-recommended contributions increase by 50% and see what happens. (This means reducing the increase by 50%, not the entire reserve fund contribution amount.) What you’ll arrive at is a string of annual reserve balances that are inadequate. With those numbers in your pocket you can confidently demonstrate that the watering-down idea should be quickly dismissed. Dale Carnegie advocates, “Throw down a challenge.” What could be more challenging than asking your fellow members if they really want to go to the Annual Meeting knowing that their watered down plan is decidedly dangerous.

Game over? By no means. We’ve had our little skirmish at the board level. Now we start the next world war—getting the plan approved by the owners. Let’s look at tactics that could help to reduce owners’ objections to a required contributions increase. We’ll see how we can win friends and influence people.

Let’s first explore what reasons people give when they do not want to see the plan adopted; i.e., in order to escape the dreaded passing of a motion to demand higher monthly payments.

• The favorite. “I may move some day and I won’t be able to recoup the money I’ve paid into the reserve fund.”

• Alternatively, “I just can’t afford it.

Everything gets more expensive, and this is one increase we can avoid.”

• “How do we know the plan is a good one?

Who’s to say all the repairs on your computer spreadsheets are actually going to be required?”

• “Last year they put new carpeting in the South Wing but did nothing where I live. I keep paying for improvements that benefit others.”

• “What’s the worst that can happen if we don’t raise the fees?”

• “The board is incompetent, dishonest, careless or unintelligent. Or all of the foregoing.”

Let’s take them, one at a time in the above order. An effective2 response to the first one might be something like this:

Construction Project Management and Architecture for Home Owners Associations Construction administrative services including bidding process Pre-construction consulting & coaching Over 25 years experience in architecture, construction and engineering environments

GE BAYRID GROUP INC

1777 Borel Place Suite # 314 San Mateo, CA 94402

Phone: (650) 345-2744 Fax: (650) 292-4926 www.bayridgegroupinc.com

Continued on page 11 ECHO Journal | August 2007

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Selling Reserves Continued from page 9

It’s true, as the saying goes, “You can’t take it with you,” whether it’s about moving or dying. But there is an obligation to pay our way as we go through our lifetimes.

During the occupation of your unit, you have been responsible for part of the wear-out that constantly occurs. You have walked on the carpets, used the elevators, and been around while the winds blew and the rain came down and the sun shone, affecting the paint, the brickwork and the driveways. You have been cooled by the air-conditioning, warmed by the heating system, and showered by the hot water from the boilers. Money is required to bring all the elements of the property up to scratch, and to keep them that way. All that money is spent for your contentment and for maintaining resale values. Besides, if reserve contributions weren’t collected you would walk away some day and leave behind a community that had deteriorated and that had no money to pay for restoring it. Is that really what you’d like to do?

The second one—simply can’t afford it— is a toughie. It’s not easy for people, at a public meeting, to say it, but if the property has a disproportionate number of senior owners, someone stating this might evoke a lot of sympathy. You might, then, want to say something like…

“Yes, on a fixed income, all price increases are hard to take. But the reality is that even though inflation has been relatively low lately, much of what the property spends its money on has seen more rapid cost increases. Some workers’ costs have risen by 15% over the last two years. We were in danger of losing our caretaker by not paying the going rates. The driveway repaving uses oil-based tar; so it’s much more expensive.

You know that certain items in your personal budget have zoomed upward lately—gasoline being a prime example. The alternative is to not do the 2 We really mean “relatively” effective. That is, if one does the things we suggest, it’s likely that the outcomes will be more effective than if one does not do them. “Absolute” effectiveness is the result of a number of factors. In the context of our attempts to win over the other side to our point of view, these factors might include the real or perceived experience of the speaker, the natural intransigence of the complainer, the preparedness of the presenter and his or her ability to address the other party in a clear and objective manner.

And so on.

Continued on page 12 ECHO Journal | August 2007

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Selling Reserves Continued from page 11

repairs, to get less qualified help, to put up with an axle-breaking driveway. Then what happens? Your community begins to look shabby, selling a unit becomes difficult, the people who would have agreed to pay for better upkeep move out, and the spiral continues, downward.

The result is that your investment—possibly your biggest single investment—goes into a nosedive. The increase we’re recommending isn’t really an option. It’s a must.”

Our third item (the plan may not be good) should be easy to answer. If the board has engaged a reputable planner with professional qualifications and an impressive client roster, this criticism should be put to rest quickly. But how, exactly, do you do it?

It depends. If you get the chance to meet with the dissenter one-on-one, you can trot out the specialist’s detailed plan. Point out the exhaustive list of components. Describe how each one is individually analyzed regarding its life expectancy and the costs of repairing or replacing it. Show how the predicted opening and closing balances are computed, including the interest on money percentage.

And, most importantly, demonstrate that if the recommended funding amounts were watered down the balances would become perilously low—maybe even “negative.”

If this objection surfaces at a general meeting, you won’t have the time to go into this much detail but (unless you’ve prepared a flip chart or PowerPoint presentation beforehand) you’ll just have to do it with wellrehearsed words. In fact, why not even do a “What if…” that uses lower funding numbers? That would convincingly illustrate what the balances would look like.

Here’s another idea. Have the reserve planner attend the meeting to explain how he or she went about creating the plan. This idea assumes the planner is a reasonably good speaker and can hold his or her own with the audience. And it assumes as well that the planner’s presentation has been thought through ahead of time. It’s not the place for ad-libs or fancy-footwork. One downer… the planner may charge a fee for attending the meeting if that task wasn’t part of the contract with him or her. It would be money well spent, we believe.

Now we come to the fourth and fifth items on our list, above. Both of them can be handled easily. The notion of paying for some12

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one else’s benefits—well, it happens all the time. The community a mile down the road gets a new park. Bus service in the south end of town is improved and you live in the north end. Your kids have finished school but you still pay school taxes. Our point? Your association is a “community” just like a town, a county, a state or indeed a nation. The argument that every payment must bring direct benefits to the payer is indefensible. Case closed.

The question about the worst that can happen? The answer is… your community will face a quickening downward spiral.

Dilapidated buildings and grounds, more renters and absentee unit owners. Lower resale values, and in time virtually valueless assets. These scenarios are, regrettably, not fictional. But they don’t “just happen.” They happen precisely because when the need for adequate contributions is incontrovertibly demonstrated, people still prefer to go into denial.

Finally, the last “beef” and a nasty one it is.

On a purely technical note, the answer to attacks on the board of directors could simply be that rules are in place in the associa-

tion’s charter (or CC&Rs or constitution or by-laws) that explicitly describe the processes related to the election and removal of directors. These should be at hand and referred to if necessary at the appropriate time.

But quoting from the constitution is not nearly as good as winning over, or at least mollifying, complainers with the kinds of approaches that Dale Carnegie proposes.

There’s a long list of them and they include: • Using the person’s name when you address him or her.

• Listening. Demonstrating that the person’s opinions merit your attention, at least.

• Admitting it, when the board has indeed blundered, and adding what you intend to do to ensure it won’t happen again.

• Making the other person feel important and do it sincerely.

• Asking questions. Making sure you understand exactly what the complaint is about.

Asking what your complainer would have done under the same circumstances.

• Dramatizing your ideas with examples, analogies, charts, and quotes from authorities. We previously covered this fully

where we stressed the need to anticipate questions and objections. If you anticipate, you can prepare!

• Referring to the more agreeable parts of the grievance before explaining why the other parts may not be justified.

Not to be overly “touchy-feely” about it all; there are times when you must close down a debate and state that the parties must finally “agree to disagree.” A board must walk the line between acquiescence and dictatorship.

The board has been elected to head up a democratic, republican society (if we can use the two words in the same sentence)—not a kingdom. The board members’ constituents are also their neighbors, and a happy community isn’t possible where over-the-fence battles prevail.

Graham Oliver is an author and a contributor to reserve fund evolution. He is a past board president and now calls himself a Reserve Fund aficionado. Graham is the co-author of the book Reserve Fund Essentials, from which some of the above ideas were taken. The book may be obtained from the ECHO Bookstore.

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By Patti Jo Lewis, PCAM

Protecting Homeowner Privacy H

ow prepared is your association or your management company in today’s high technology world of information? Have you taken the time to evaluate if association data are in compliance with the latest privacy laws in regards to homeowner personal information? Increasingly personal data is being stolen from “secured” files by individuals who are well versed in breaking through firewalls, security login, and password protected files. If a homeowner’s personal information were lost or stolen from the association database, what is the contingency plan? Are those homeowners notified, and if so, how is this done, when is it done, and how will it affect your association or management company reputation?

These are all questions that need to be asked as the risks related to data theft become more significant.

How Can Association Records Be Protected?

Your association has spent thousands of dollars on preventive maintenance for association assets. They’ve retained a reserve study specialist to assist in evaluating future monetary needs for those assets. The banking selection is set to protect the long-term funds that have accumulated.

Now, how much time has been spent on protecting those “paper” and/or “electronic” records from being stolen, thus putting the association and its members in jeopardy?

• First, take a good look at federal, state, or local laws to determine what homeowner personal records are to be protected. “Personal information” does not include publicly available information. Rather, personal information will usually mean an individual’s name, social security number, driver’s license number, account number, credit or debit card number, in combination with any required security code, access code, or passwords, medical information and family information.

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• Take all reasonable steps to destroy or arrange for the destruction of a homeowner’s records within your custody or control containing personal information that is no longer to be retained by (1) shredding, (2) erasing, or (3) otherwise modifying the personal information in those records to make it unreadable or undecipherable through any means.

• Have an association or management company policy in place on what is considered confidential information and communicate that policy to board members and employees alike.

• Explain to board members and employees how to properly disclose information to members.

• Make sure the association has the most current contact information about the homeowner so that notices are available should they be needed.

• Set up a control system so that data accessibility and preventing hacking into the system are almost foolproof.

• Purchase liability insurance now, just in case records are stolen or become compromised.

What Are Some of the Risks to Your Association or Management Company?

• Lawsuits, either from an association client or from a homeowner.

• Major loss of confidence by the client in a management company’s ability to protect association records.

• Tarnished reputation in the marketplace that could lead to loss of buyers or a loss of current or future clients.

• Depending on federal, state, and/or local regulations, the association and the management company may be in violation of laws that carry strict fines and penalties.

Continued on page 17

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Protecting Privacy Continued from page 14

• Vulnerability to increases in association or management company insurance premiums if your claims are excessive.

• Compromising data is a huge risk to an association or business. Ask yourself a couple of questions: Does the association or management company allow employees or board members to remove hard copy association records or electronic data from the office? Are board members or employees working from home and storing homeowner personal information on home computers or in unsecured file cabinets?

What Happens When a Catastrophe Occurs?

• Implement steps to determine the scope of the breach of information and what measures are in place to restore the integrity of the system.

• Provide quick response to the compromised homeowners with information on what is being done to help protect them from identity theft.

• Know what your obligation is for notifying the homeowners in a timely manner, including what, if any, state laws are in place that outline specific deadlines.

• Safeguard your organization and your owners and residents from negative publicity by immediately releasing pertinent information. Be helpful, not a hindrance.

• Contact your insurance agent immediately to determine if there are things that should be done to reduce further losses.

• Review the required laws and regulations to comply with the crisis management.

If your association or management company has not taken the time to review your vulnerability in protecting individual privacy for your homeowners, today is a good time to get started. Each day that passes is a gamble that you are taking with these records. There are many consulting services and technology vendors that can provide assistance in developing a comprehensive plan for protecting homeowner personal information.

Patti Jo Lewis is the vice president for Systems and Logistics at Lewis Management Resources, an Associa company, in Tucson, AZ. Associa is a community association management services company with offices across the nation This article was originally published by Association Times, a web resource sponsored by Associa.

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By Garth M. Stanton

Presidential Buffet Reflections from a Board President

M

any excellent and learned treatises are available on how to be a good board member and more specifically a good and effective president of the board of directors of a common interest development (CID). This is not one of them. What follows is a more or less random series of idiosyncratic reflections on my experience of serving as the president of the board of directors of a medium size CID (160 units), in this case a market-rate stock cooperative, a nonprofit California corporation, which lends a certain taste to the buffet offerings. I should add the caveat that the only credential I have is that I’ve been through the experience.

Power The office of board president is unique, in reference to the other officers, in that, while democratically elected, the president becomes the CEO of the CID corporation and most of the day-to-day power necessarily flows through him or her. In the boardroom the situation is somewhat more balanced with the president presiding more as “first among equals”—influential, of course, but still having only one vote. In CIDs not operating as corporations, the president’s

role will be to function more as liaison to management but most of this discussion will apply.

As an ideal, never fully realized, the president must be comfortable in wielding the necessary power delegated to him or her but not be captivated by it. I concluded that I needed to be very careful and sparing in the use of raw power— most of the time it only feeds the ego.

Steady as She Goes This, of course, is a nautical term and the imagery of the board president as captain of the CID ship is very apt. It quickly becomes obvious that not everyone is qualified to be captain (or president). That’s not elitism; that’s reality and is not to be puffed up about, but one should have confidence in one’s ability to steer the CID ship.

On the other side of the coin, one also needs a dash of reality and humility in the recognition that, in my case, I couldn’t do it alone. I needed plenty of help. Steadiness and the refusal to panic and run off in all directions is an important quality to have and/or develop. The board and the membership will be reassured to see you

Continued on page 20

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unflappable at the helm. The caveat here, of course, is that you must be flexible in changing course if you find yourself steaming in the wrong direction! Using this same metaphor, run a tight ship. People, the ones you never hear from, respect that.

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Process and Protocol There is one operational parameter that I violated more consistently than any other— not following the Rule of Process. It’s a noisy world and it is easy to get distracted by the cacophony of voices into committing that cardinal sin of boards of directors—micromanaging. It is important to realize that governing is a process, not a series of random events, and that the function of the board is to set policy. While one can’t plan for everything, a good grasp of the process through which you hope to achieve a result will allow necessary adjustments to be made gracefully without everything else disintegrating.

While protocol may get under the skin of the free spirits, as well as frustrating your enemies, it is the glue that binds process steps together in an orderly and rational fashion.

Protocol allows time and a proper space for emotionalism to run its course so that process is not disrupted or, if a valid point is made, adjustments can be duly made. This leads us into the area of board decisions and the role of the president in facilitating that crucial process.

Board Decision Making This is the most important function of a board. It is what I was elected to do and so as president, one who presides, I must guide this process carefully and rigorously. Some of the important elements are: • Strict set-up and protocol in running meetings according to parliamentary procedures. • Require written, factual information on proposed actions by the board in advance.

Require board members to come to the meeting prepared to vote. Board meetings are not debating forums. More gets done and fewer meetings are necessary.

Agendas Use of agendas is a crucial skill to appreciate and learn because it is the single most important tool a president has to prioritize Continued on page 22

20

August 2007 | ECHO Journal

2007 Legislation at a Glimpse As of July 27, 2007 Bill No.

Author

Subject

Status

Position

Summary

AB 567

Saldana

Common Interest Development Bureau

Hearing cancelled in Assm. House Committee; Two year bill

Oppose Unless Amended

This bill would, until January 1, 2013, establish in the Department of Consumer Affairs the Common Interest Development Bureau. The Bureau would, among other things, provide board member education and training resources, investigate and impose fines for Davis-Stirling Act violations, and compel associations to disclose those violations.

SB 948

Harman

Mandatory Board Member Training

Moved to Senate Inactive File

by Author

Oppose

As of January 1, 2009, would require every member of the board of directors of an association to complete at least one course during his or her first full term of office, and at least one course every three calendar years after becoming a member of the board, relating to decisional and statutory law regarding common interest developments. Approved courses may not be offered at a cost higher than $25 and association reimbursement may not exceed $25.

AB 691

Silva

Certified Common Interest Development Managers

Passed Support Assembly and Senate B&P Committee; In Senate

Existing law requires a person to meet certain requirements in order to be called a “certified common interest development manager” and imposes other requirements with regard to common interest development managers. Under existing law, the provisions regulating certified common interest development managers become inoperative and are repealed on January 1, 2008. This bill would extend the operation of these provisions to January 1, 2012. The bill would modify the requirements in order to be called a “certified common interest development manager.” The bill would also revise various definitions.

AB 952

Mullin

BMR Owner Assessment Restrictions

Passed Assembly.

Awaiting floor vote in Senate.

In associations that contain below market rate (BMR) units, would prohibit the board of directors from imposing a special assessment, or an increase in the regular assessment of more than 20%, without majority approval of both the owners of market rate units and owners of BMR units.

SB 528

Aanestad

Topic Passed Support Restrictions in Senate.

Board Meetings Awaiting floor vote in the Assembly.

Would require notices of board meetings to include an agenda for the meeting. Would prohibit the board of directors from considering any item at a meeting unless the item was placed on the agenda when the meeting was announced (emergency meetings are excluded). Permits unannounced discussion of certain topics similar to provisions of the Brown Act.

SB 127

Kuehl

CID Sale Disclosure Deadlines

Passed Support Senate.

Awaiting floor vote in the Assembly.

This bill would impose disclosure deadlines for the seller of a unit in a common interest development. It would require that all disclosures be made no later than 20 calendar days after the execution of a purchase agreement or the opening of escrow, whichever is later. An association must continue to provide documents to the seller within 10 days. This bill affects both mobilehomes and CIDs.

AB 1173

Keene

Mandatory Submeter Installations

In Assembly

This bill, with a certain exception, would require every water purveyor who furnishes water service to any person residing in a multiunit residential structure for which a construction permit has been issued on or after January 1, 2008, to require the installation of submeters as a condition of new water service to that person. The bill would authorize the owner or operator of a multiunit residential structure without water submeters to charge tenants separately for water service as determined by a prescribed allocation formula.

Appropriations

Committee Suspense File

Oppose

Watch

For updates about these bills, please visit the ECHO web site regularly (echo-ca.org).

ECHO Journal | August 2007

21

Presidential Buffet Continued from page 20

the matters that need to come before the board as well as being the means to keep the meeting flowing and on target. As one president, referring to board meetings, has commented, “I don’t like surprises!” And I certainly agree with that. My policy was that it needed two board members to override my decision to not have a certain matter on the agenda. It seldom happened. A good, realistic agenda allows you to limit the matters at hand to what can be accomplished in a reasonable time of about 2 hours. People get tired and cranky after that. A president who permits board meetings to run to midnight, not an uncommon occurrence with our previous boards, has not got his or her meeting under control and little that is constructive can come forth from such marathons.

Gatekeeping Agendas are a specific example of the larger role of the president as gatekeeper. The amount of “stuff” that comes to any reasonably sized complex is staggering, and it will quickly paralyze a board if it is just dumped in their lap for quick decisions. Therefore, 22

August 2007 | ECHO Journal

the president, as chief operating officer, must weed through the pile and decide which are necessary to bring before the board and when. This also applies to matters, such as pet projects, that individual board members might want to bring up. Another factor is that many items must be handled more expe-

In the boardroom, the president presides as “first among equals”— influential, of course, but still only one vote ditiously than is possible with a monthly board meeting, and the president must be empowered to make those decisions, with appropriate expert advice and within parameters set by board policy.

Communications Several aspects are relevant here. First of all is the obvious need and responsibility to

keep the other board members and management properly informed about what is going on. The same applies to communicating with the members of the community. Some guidelines are worth repeating here: • Keep it simple, easy to understand.

Reduce complexity but tell the truth.

• Don’t frighten. Lay out consequences but also options.

• Introduce change carefully, explaining every step along the way to get maximum buy-in.

What I also want to stress here is the role of the president as the chief conduit to management. It is very important that management get its marching orders clearly from this authoritative source.

Under this heading comes another cardinal sin I often committed—trying to do it all by myself. Isn’t it easier and more reliable that way? Well, no, it is not. First of all is the danger of cynicism and burnout. I would say that the absolute maximum length of consecutive service as president on a CID board is two terms of about 3 years each. Then, hang it up, resisting the temptation to think you are indispensable!

Second, other directors were also elected, and they must pull their fair share. So put them to work! They need to develop as effective board members and one must always keep in mind finding a possible successor.

Third, Section 7231 of the California State Corporations Code mandates, under what is often termed the Business Judgment Rule, that “a director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Under these conditions, the person serving as director shall have no liability resulting from errors caused by faulty information or judgments.”

Last, it is essential in these days of ever increasing complexity to hire a (preferably) full-service management firm that has a good track record. A board is not capable nor do they have the time as volunteers to handle the accounting, keep up on new laws and administer maintenance and project management. In addition, board personnel change every year with the election of new people to the board. In order to smooth the effects of these periodic changes so that the ship remains steady, an association management firm is hired. Community association management is an art form, and a good firm is worth its weight in gold. So, listening to the penny-pinchers who object to paying for sufficient management is not a good idea.

Rogue Directors I hesitate to bring up this sensitive subject, but in these days of general apathy towards board service, which reflects a larger cultural malaise, few people run for election to the board. This limits choice, which is at the heart of the democratic process, and increases the odds that persons who have only their own agenda in mind will be elected, often because there is nobody else running. They cannot stop a president, but they can make his or her life miserable by their hubris. Their trademark is a general refusal to work cooperatively in the give and take of board functioning and thus becoming “loose cannons.”

This part of the buffet is distasteful and a full treatment cannot be offered here but, practically, what can you do to ameliorate, if not solve, this situation? The candid answer is “Not much.” They are hard to get rid of.

Requiring strict adherence to processes and Continued on page 37 ECHO Journal | August 2007

23

Board Service Is an Honor

By ArLyne Diamond, Ph.D.

top begging your neighbors to serve on the board. Stop assuming you have to promise a limited time commitment and even more limited responsibility. By doing so, you are demeaning the honor of being on a board and diminishing your chances of recruiting outstanding candidates who will serve you and your community well.

ble of making contributions in knowledge, time commitments, and financial donations.

Serving on Other Types of Boards

If you were invited to serve on a non-profit board you would be told what responsibilities you had for serving on committees, raising funds, working with volunteers, etc.

S

If you were invited to serve on the board of your symphony or opera you’d consider it a high honor—only for those who are capa24

August 2007 | ECHO Journal

If you were invited to serve on a corporate board, you would be taught immediately about your responsibilities, especially those that have now been strengthened because of Sarbanes-Oxley (SOX).

Stop Begging and Demeaning the Role of the HOA Board Member So, why is it that so many people tell me that the way they “induce” people to serve on HOA boards is by promising that they wouldn’t have much responsibility and that the monthly meetings would be very brief.

Brevity, for the sake of “getting us out of here fast,” seems to have taken the place of doing the work we volunteered to do.

Sometimes this goes so far as to make it almost impossible for a healthy discussion about a topic. It also significantly reduces the

amount of time allotted for members of the community to voice their concerns.

HOA board members are so important to the health and well being of the complex in which they serve. These board members are the guardians of our property values, our relationships with our neighbors, maintenance, safety, and of course, our association finances.

If serving on a board were seen as the honor and responsibility it really is, there would be many more nominees than seats to

fill. In that manner, the members of the complex would have some serious choices and would hopefully select the best of the candidates.

In addition, there needs to be ample opportunity to know the candidates. Town Hall meetings, interviews in the newsletters, and the ability for self-promotion are all methods candidates can use to persuade their neighbors that they have much to offer and should be selected.

Continued on page 26 ECHO Journal | August 2007

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August 2007 | ECHO Journal

Continued from page 25

Nominating Committees— Candidate Selection and Campaigning Those associations that create nominating committees tend to find better and more qualified board members. Instead of begging, they interview their neighbors and select those members of the community that have something to offer and are willing to give the time and attention needed. They act as a marketing arm of the community by selling nominees on the belief that there is value to be given and to be gained by serving on the board. They act as a screening device, not recommending those who just want the status of being on a board, or worse even, have a specific axe to grind to the exclusion of looking at the bigger issues.

Serving on a board is not the same as being a member of a committee in your typical large high technology company. It requires knowledge of the laws, the governing documents of the complex, group process, dealing with the people in the audience and in the community who have issues

to be resolved, understanding group decision making and problem solving, consensus building, Roberts Rules of Order (when the meeting is formal), presentations and public speaking. It requires training.

Yet, how many board members of HOAs actually go for training? How many recognize that there is much they could—and should— learn if they are to be responsible and effective?

Is it right to defer to and be controlled by a hired association manager? I think not! I hope not! There are no requirements for association managers to be trained and certified either. Some are good, some are bad; but none has the level of responsibility bestowed upon the board members. These managers are the employees of the HOA, not their leaders or controllers.

Don’t Let Your Association Manager Control You If the members of the board don’t know how to manage the HOA or have time to manage it, they defer to the hired property managers, potentially abrogating their own responsibility and attempting to pass it on instead to the paid professionals.

In my complex, a prior board went so far as to give check-signing responsibility to the property manager, without any controls at all. When that firm was fired, they wrote themselves a bunch of unauthorized checks.

I know of other situations where property managers just made up the rules as they went along—saying that their pronouncements were law when indeed they were not.

If serving on a board were seen as the honor it really is, there would be more nominees than seats to fill Don’t Make It Too Easy—Have Standards In my years of training boards all over the country, I’ve seen the results of what I am suggesting. In psychology the term is “Cognitive Dissonance”—in this context it

means the harder it is to get into the club, the more value people perceive it to be and the more they want membership. Think about the old US Marine Corps or any Special Operations force in the military.

Think about exclusive clubs that have stringent membership requirements.

If we insist on quality representation, well trained and accountable for the standards we set, we will get a much higher caliber board member and much better and more conscious service during their terms of office.

So, stop begging. Recognize and honor the importance of serving on your HOA board and recruit only those people who will offer something valuable and will serve with full awareness and acceptance of their responsibilities.

ArLyne Diamond, Ph.D. is President of Diamond Associates, a management consulting firm. Dr. Diamond trains boards, committees, executive teams, and others throughout the country. Among the books she has written is a Training Manual for Board of Directors of all kinds of groups.

ECHO Journal | August 2007

27

Calendar of Events

Participate in Resource Panels Wednesday, August 1 12:00 Noon Maintenance Resource Panel ECHO Office 1602 The Alameda, Ste. 101, San Jose

Friday, September 7 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

Friday, August 3 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

Monday, September 10 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant, Oakland

Wednesday, August 15 Wine Country Resource Panel 11:45 a.m.

Lanahan & Reilley 600 Bicentennial Way, Suite 300, Santa Rosa Thursday, September 6 North Bay Resource Panel 9:30 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Tuesday, September 11 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, September 12 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Wednesday, September 19 Wine Country Resource Panel 11:45 a.m.

Lanahan & Reilley 600 Bicentennial Way, Suite 300, Santa Rosa

Thursday, September 20 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco Saturday, September 22 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m.

Seacliff Inn, Aptos Wednesday, October 3 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101, San Jose Friday, October 5 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

Wednesday, October 17 Wine Country Resource Panel 11:45 a.m.

Lanahan & Reilley 600 Bicentennial Way Suite 300, Santa Rosa Friday, October 19 ECHO Annual Meeting 10:00 a.m.

ECHO Office 1602 The Alameda, Ste. 101, San Jose Saturday, October 27 Maintenance Panel and South Bay Panel Seminar 8:00 a.m. to 1:00 p.m.

Hyatt Regency SF Airport 1333 Bayshore Hwy Burlingame, CA 94010

Regularly Scheduled Resource Panel Meetings Resource Panel Maintenance North Bay East Bay Accountants Central Coast South Bay Wine Country Legal 28

August 2007 | ECHO Journal

Meeting

Location

First Wednesday, Even Months First Thursday, Odd Months First Friday, Monthly Second Monday, Odd Months Second Tuesday, Odd Months Second Wednesday, Odd Months Third Wednesday, Monthly Quarterly

ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael Angius & Terry, Walnut Creek Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Il Fornaio Restaurant, San Jose Lanahan & Reilley, Santa Rosa Varies

Directory

UPDATES Updates for the business and professional members listed in the 2005 ECHO Directory of Businesses and Professionals.

Additions Golden Pacific Property Services Corp.

800 Airport Blvd., Ste. 301 Burlingame, CA 94010 Contact: Ricardo C. Pimentel Tel: 650-348-7222 Fax: 650-348-7223 Email: pepe@goldpacproperty.com Golden Pacific Property Services Corp. is located in Burlingame, CA and offers the following real estate services: property management for residential, commercial and community properties; property sales and purchases; construction management.

Marizco Landscape Management, Inc. P.O. Box 8160 Santa Rosa, CA 95407 Contact: Zeke Ortiz Tel: 707-546-9100 Fax: 707-546-9600 Email: zeke@marizco.com Marizco Landscape Management, Inc., a single source landscape company—your business partner, managing your landscape investment.

Continued on page 39 ECHO Journal | August 2007

29

Photo Highlights

Protect

Learn to

Your Association

at the ECHO

Central Coast Fall Seminar Seminar Agenda

ECHO 2007 Central Coast Fall Seminar

8:00 8:45 9:00 9:45 10:30 10:50 11:35 12:20 12:50 1:00

September 22, 2007 Seacliff Inn, Aptos Ticket Price: $35

Registration and Sponsor Tables Welcome and Introductions Encouraging Member Participation Reducing Association Liability Break Fortifying Your CC&Rs Managing Member Discipline Questions and Answers Drawings for Sponsor Prizes Adjourn

Yes, reserve _____ spaces for the ECHO Central Coast Fall Seminar.

Amount enclosed: $__________ (attach additional names) Name: HOA or Firm: Address: City:

State:

Zip:

Phone: Visa/Mastercard No.

Exp. Date:

Signature: Return with payment to: ECHO, 1602 The Alameda, Ste 101, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Telephone: 408-297-3246; Fax: 408-297-3517

Association Affairs

By Marilyn Lincoln

Kids In Condos

W

hen I volunteered to become a board member many years ago, no one could have prepared me for the challenges that lay ahead. One area that presents the greatest challenges is people, parking and pets. Each of the three has its own degree of headaches. However, in this article, I would like to discuss children in condos.

Every board of directors, at one time or another, has had to deal with either teenagers or younger children who break the rules. The board must find ways to reduce the liability from injury or loss of property due to children’s violations.

Many corporations I am sure have their own unique story to share. Included below are only a few of the incidents that other condominium directors have chosen to share with me during our conversations.

They complained of children who painted graffiti on walls and doors, pulling the fire alarm 32

August 2007 | ECHO Journal

to see how many people would panic, throwing a lit cigarette into a garbage dumpster and scratching residents cars while riding a skate board or bike in an area restricted to them for play. The question is, “Does the board or manager have an obligation to discipline?” Of course not! However, if a child does something that could result in personal injury or damage to the common areas, some form of action must be available.

Parents must be informed of their children’s actions. Children must be taught by their parents to respect the safety of other people as well as the property. They must be informed of the condominium rules within the common areas where they continue to live and play. The rules and regulations along with the condominium bylaws and declarations do give the board authority to require that the parents control their children. These documents should also assign some obligations to the

parents for acts of their children when violations occur within the condominium property. All board members should review their condominium policies to determine that the parents’ responsibilities and obligations are clearly laid out. If your policies are not clear in this matter, you may want to consider amending or modifying your documents.

Obviously, not all children or teenagers choose to break the rules. Children, after all, are a very important part of our communities. They have rights too and they will in some cases demand their rights be considered. Unfortunately, some children will act out in a very negative manner if they are constantly ignored and their views or opinions are never allowed to be heard. We as adults need to listen to the children and try not to close them out.

There is a method by which the directors may achieve one-on-one positive communication with children. The board organizes director meetings, owner meetings, special meetings, so why not a children or youth meeting? Such a meeting could occur maybe once a year or every second year depending on the specific need. Set this meeting up so that only the children, without their parents, attend. This would allow the children to feel free to communicate their thoughts, views and opinions to improve condo living for kids. The board could talk to the children and find out what their wants and needs are.

Plan socials that include the children and ask them to help with the planning. Children can be very enthusiastic and creative if they are only given the opportunity.

Maybe the children would be interested in starting their own Condo Kids Newsletter.

This would encourage many of them to become involved in a joint community project. They could organize their own meetings and write stories or suggest ideas for their newsletter. Good communication is the key.

If the children are made to feel that they are an important part of the condominium community and allowed to express their ideas and thoughts, you will experience a much happier community—with far fewer negative activities.

Marilyn Lincoln has 28 years experience in condominium management in Ontario, Canada. She is a member of the Canadian Condominium Institute and has authored a guide on condominium selfmanagement.

ECHO Journal | August 2007

33

Books and DVDs from ECHO

Working With Your HOA $22.00 2005 ECHO Business & Professional Directory $10.00 This directory lists all business and professional members of ECHO as of September 2005. Current addresses, telephone and fax numbers, email addresses, and a short description are included. This directory is an invaluable tool for locating service providers that work with homeowner association.

Condominium Bluebook 2007 Edition $18.00 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.

Robert’s Rules of Order $7.50 Homeowners Associations— How-to Guide for Leadership $35.00 This well-known guide and reference is written for officers and directors of homeowner associations who want to learn how to manage and operate the affairs of their associations effectively.

Questions & Answers About Community Associations $18.00 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.

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.

This is a valuable guide to all aspects of community association living designed as a practical problem solving guide. Written by two long-time association residents, it uses easily readable language and provides an insightful overview of community living from the viewpoint of experienced owners.

The Uncertain Future of Community Associations $10.00 For 30 years, attorney Tyler Berding has had a unique vantage point in observing new, aging and “evolving” community associations confront the issues they face. The basic premise is: without clarity, wisdom and “tough love,” community associations are doomed to failure.

Home and Condo Defects— A Consumer Guide to Faulty $10.00 Construction

Finding the Key to Your Castle—Revised 2005 $12.50

This guide is prepared by attorneys Tom Miller and Rachel Miller for anyone having problems with faulty construction on a home or condominium. It explains the various technical aspects of determining who is at fault and who to go after to rectify the situation.

An easy-to-read guide to cooperative living in common interest housing developments, this book covers key points relating to member rights, member responsibilities, association finances, and even to rentals.

Answers to many frequently-asked questions about CID operations are included.

Community Association Statute Book—2007 Edition $10.00 This booklet contains the 2007 version of the Davis-Stirling Common Interest Development Act, the Civil Code sections that apply to common interest developments, and selected provisions from the Civil, Corporations, Government and Vehicle Codes important to community associations.

California Building Performance Guidelines for Residential Construction $52.50 This easy-to-read manual is an excellent tool to understand a new home.

It contains chapters covering more than 300 conditions that have been sources of disputes between homeowners and builders, offers homeowner maintenance tips, and defines the standards to which a residence should be built.

CID Leadership Two-Disc DVD set

$30.00

Board—An orientation for new board members and a refresher for current members. Meetings—How to conduct effective meetings that stay focused and achieve results.

Reserves—How adequately-funded reserves prevent problems in associations. Insurance—Considers insurance to protect multi-million dollar community assets.

Dispute Resolution in Homeowner Associations $20.00 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 Publication Order Form

Board Member’s Guide for Contractor Interviews $20.00 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.

Executive Council of Homeowners 1602 The Alameda, Suite 101, San Jose, CA 95126 Phone: 408-297-3246 Fax: 408-297-3517 TITLE

QUANTITY

SUBTOTAL CALIFORNIA SALES TAX (Add 8.25%) TOTAL AMOUNT

Board Member’s Guide for Management Interviews $20.00 This guide for use by boards for conducting complete and effective interviews with prospective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.

Yes! Place my order for the items above. q Check q Visa q Mastercard Credit Card Number Exp. Date

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News from ECHO

Protecting Homeowner Personal Information How prepared is your association or your management company in today’s high technology world of information? Have you taken the time to evaluate if association data are in compliance with the latest privacy laws in regards to homeowner personal information? More and more personal data is being stolen from “secured” files, by individuals who are well versed in breaking through firewalls, security login, and password protected files. If a homeowner’s personal information were lost or stolen from the association database, do you have a contingency plan?

Are those homeowners notified, and if so, how is this done, when is it done, and how will it affect your association or management company reputation? These are all questions that need to be asked as the risks related to data theft become more significant.

If your association or management company has not taken the time to review your vulnerability in protecting individual privacy for your homeowners, today is a good time to get started. Each day that passes is a gamble that you are taking with these records.

36

August 2007 | ECHO Journal

Overcoming Resistance to Funding Reserves Nowhere is winning friends and influencing people more important than when matters connected with your homeowner association arise. The way we live and interact together in these communities is a vital part of our everyday lives. Plus, it’s worth reminding ourselves that our personal views on how our association should be run and what the “rules” should be are not simply incidental issues that are easily dealt with. Quite the contrary.

Where I’m going is into the reserve fund area, drilling down to a specific element—funding— and from there going one layer deeper right into bed rock—the matter of setting monthly contributions amounts.

A 2006 study of representative condominiums in California found that, on average, commonownership properties were only 44% funded. That means that properties had less than half the funds required to carry out the major repairs and replacements called for in their reserve plans.

Why? In some cases the reserve plan itself may have been poorly put together with the funding schedule incorrectly

worked out. In other cases, there may have been delinquencies, uncollected (or uncollectible) assessments payable by the unit owners. But it seems much more likely the most prevalent reason is that funding required to meet a 100%-funded level was consciously rejected by the boards and by the owners.

How come? We suggest it’s because two forces are at work.

One of them is the reluctance of individuals, be they owners-atlarge or board members, to agree to higher monthly payments. The other is that the boards, even when they know that the need for an increase is real, are loathe to get into hassles with owners. It’s easier to say “Let’s deal with it later,” or “Let the next board deal with it.”

This is a huge mistake. When your property gets into an underfunded position, you’re on a slippery slope. Not only will a loan or a special assessment loom in the not-so-distant future, but the fundamental underfunding problem will not have gone away.

A need to pay the loan, plus the need to raise fees at the same time, is the fate that awaits. And that’s a very tough row to hoe.

What to do? One good suggestion, not infallible but sometimes successful, is to set monthly contributions from owners high enough to bring the reserves up to where they should be.

Board Service is an Honor Stop begging your neighbors to serve on the board. Stop assuming you have to promise a limited time commitment and even more limited responsibility.

By doing so, you are demeaning the honor of being on a board

and may be diminishing your chances of recruiting outstanding candidates who will serve the community well.

Most people who were invited to serve on the board of your symphony or opera would consider it an high honor. If you were invited to serve on a corporate or other nonprofit board, you would be taught about your responsibilities for serving on committees, raising funds, working with volunteers, etc.

HOA board members are important to the health and wellbeing of the complex in which they serve. These board members are the guardians of property values, relationships with neighbors, maintenance, safety, and of course, association finances. If serving on a board were seen as the honor and responsibility it really is, there might be more nominees than seats to fill.

So, stop begging. Recognize and honor the importance of serving on an HOA board and recruit those people who will offer something valuable and will serve with full awareness and acceptance of their responsibilities.

Presidential Buffet Continued from page 23

protocol, ignoring complaints without viable solutions and limiting their exercise of power to the minimum provided by law are some of the measures I would suggest.

Reserves, Reserves, Reserves If there is anything guaranteed to keep a president awake at night, it’s the lack of sufficient reserve funding to handle a large expense with the resultant necessity to approach the membership with a major assessment. Just the thought of this eventuality should be enough to spur efforts to build up your association’s reserves.

Being president is a multi-faceted job requiring leadership, energy, time and, most of all, vision Closing Thoughts Being president of the board of directors is a multi-faceted job requiring leadership, energy, time and, perhaps most of all, vision.

It can’t be done properly on an ad hoc basis.

I have offered some characteristics that seemed important to me in doing the job.

But lists get tiresome, buffets tempt one to overindulge and it is time to focus on the benefits and rewards of undertaking the task, namely the challenge and stretching required to meet that challenge and, returning to my previous metaphor, the satisfaction in bringing the ship into safe harbor.

Finally, there are always many expectations of a president of the board by others, especially those you were elected to serve.

Resist expectations (even your own) and chart your own course, seeking and accepting wise counsel when appropriate. Always take good care of yourself and along the way enjoy the ride!

Garth M. Stanton is past president and currently vice-president of the board of directors of a cooperative in Marin County. The opinions and conclusions expressed in this article are those of the author and do not necessarily reflect the views of the board at his association or its individual members.

ECHO Journal | August 2007

37

Honor Roll

About

ECHO Honors Volunteers 2007 Volunteer of the Year Jeffrey Barnett ECHO Resource Panels Accountant Panel William Erlanger, CPA, 415-981-9350 Central Coast Panel Darrel Louis, 831-212-0300 East Bay Panel Scott Burke, 408-536-0420 Legal Panel Mark Wleklinski, Esq., 925-691-1191 Maintenance Panel Mike Muilenburg, 408-996-3897 North Bay Panel Diane Kay, CCAM, 415-846-7579 Stephany Charles, CCAM 415-458-3537 San Francisco Panel Jeff Saarman, 415-749-2700 South Bay Panel Ann Philipp, 408-536-0420 Wine Country Panel Ron Hamann, 707-584-4788

Legislative Committee Paul Atkins Jeffrey Barnett, Esq. Sandra Bonato, Esq. Jerry L. Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq. 38

August 2007 | ECHO Journal

2007 Annual Seminar Speakers Adrian Adams, Esq. John Allanson Dan Angius, Esq. Frank Arms Jeffrey Barnett, Esq. Tyler Berding, Esq. Sandra Bonato, Esq. Timothy Cline Karen Conlon, CCAM Burt Dean Bill Erlanger, CPA Tom Fier, Esq. John Gachina Michael Gartzke, CPA John Garvic, Esq. Beth Grimm, Esq. Geri Kennedy, CCAM Karl Lofthouse Kerry Mazzoni Hermann Novak Dan Rottinghaus, Esq. Steven Weil, Esq.

SF Luncheon Speakers John Allanson Tyler P. Berding, Esq. Ronald Block, PhD. Doug Christison Karen Conlon, CCAM Rolf Crocker Ross Feinberg, Esq. David Feingold, Esq. Tom Fier, Esq. Kevin Frederick, Esq. John Garvic, Esq. Beth Grimm, Esq. Brian Hebert, Esq. Roy Helsing Julia Lave Johnston Garth Leone

Nico March Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Glenn Youngling, Esq.

Recent ECHO Journal Contributing Authors March 2007 Jeffrey A. Barnett, Esq. Tyler P. Berding, Esq. Robert Booty Michael Gartzke, CPA April 2007 Jeffrey Barnett, Esq. Sandra L. Gottlieb, Esq. Hermann Novak Richard Tippett May 2007 Julie Adamen Tyler P. Berding, Esq. Graham Oliver Dick Tippett June 2007 Adrian Adams, Esq. Tyler P. Berding, Esq. Tom Douma Beth A. Grimm, Esq. David L. Hughes July 2007 Joelyn Carr-Fingerle, CPA Robert L. Castle, CPA Jeffrey A. Goldberg, Esq. Thomas Hill Robert Rosenberg, CCAM

ECHO

What is ECHO? ECHO (Executive Council of Homeowners) is a California non-profit corporation dedicated to assisting community associations. ECHO is an owners’ organization. Founded in San Jose in 1972 with a nucleus of five owner associations, ECHO membership is now 1,525 association members representing over 150,000 homes and 325 business and professional members.

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.

If your company wants to reach decision makers at over 1,525 homeowner associations, you can become an associate member and join 325 other firms serving this important membership.

What are the Benefits of ECHO Membership?

• Subscription to monthly magazine for every board member • Yearly copy of the Association Statute Book for every board member • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

ECHO Membership Dues HOA Size 2 to 25 units 26 to 50 units 51 to 100 units 101 to 150 units 151 to 200 units 201 or more units Business/Professional

Rate $120 $165 $240 $315 $390 $495 $425

ECHO Journal Subscription Rates Members $50 Non-members/Homeowners $75 $125 Businesses & Professionals

How Do You Join ECHO? Over 1,800 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for membership, call ECHO at 408-297-3246 or visit the ECHO web site (echo-ca.org) to obtain an application form and for more information.

Directory Updates Continued from page 29

Valley Credit Union 670 Lincoln Ave. San Jose, CA 95126 Contact: Odilia Goulart Tel: 408-855-1310 Fax: 408-535-2215 www.valleyculorg Email: ogoulart@valleycu.org

Credit union, not for profit financial institution.

Changes From: Allen & Bender, PC To: Michael B. Allen Law Group, Inc. Address, Tel. & Fax will remain the same

Visit ECHO online at

www.echo-ca.org for the most current news and information on homeowner associations

ECHO Journal | August 2007

39

Association Affairs

Reorganization of Davis-Stirling Moving Forward Comments from the Public Solicited by CLRC

R

esults of a two-year effort to reorganize and restate the law that governs homeowner associations and the rights of homeowners within common interest developments (CIDs) in California were released by the California Law Revision Commission (CLRC) on July 16. The Commission is seeking public comment on this tentative recommendation.

The proposed law would continue most of the substance of existing law in a betterorganized and more accessible form and would provide the following benefits to those who must understand and apply CID law: • Related provisions would be grouped together in a logical order. This would make relevant law easier to find and use. It would also provide an organizational structure for any future changes in the law.

• Where there is significant overlap between the relevant provisions of the Corporations Code and the DavisStirling Common Interest Act, the substance of the Corporations Code provisions would be added to the Davis-Stirling Act. This move would

40

August 2007 | ECHO Journal

consolidate relevant law in one location in the California codes and minimize inconsistencies between the two.

• Sections that are currently excessively long or complex would be restated in simpler and shorter sections.

• Consistent terminology would be used throughout.

• Some governance procedures would be standardized so as to simplify routine matters.

• Various minor substantive improvements would be made.

The tentative recommendation is available from the California Law Revision Commission, 4000 Middlefield Road, Room D-1, Palo Alto, CA 94303-4739. The recommendation is also available at the Commission’s website www.clrc.ca.gov in “Reports” , www.clrc.ca.gov/pub/MiscReport/TR-H855.pdf. There is also a link to the CLRC on the ECHO website under “Legislative Advocacy.” Be prepared for a draft 268 pages in length, but it contains many comments and references.

ECHO staff and Legislative Committee members have participated extensively in the development of this recommendation.

One or more representatives from ECHO have attended most of the bimonthly CLRC meetings during the past four years and offered significant input to the Commission through testimony at these meetings. We have, in addition, had regular informal personal contact with CLRC staff attorneys. Both the last Executive Secretary Nate Sterling and the new Executive Secretary Brian Hebert have appeared at ECHO events to discuss the CLRC’s activities and progress.

A formal comment will be issued by ECHO. Members of both the Legislative Committee and the Legal Resource Panel are currently reviewing the draft recommendation. Individual members may discuss their thoughts about the draft with the ECHO office or send their own comments directly to the Commission. Call the ECHO office for assistance if you have difficulties getting the CLRC draft.

The Law Revision Commission often substantially revises its recommendations because of public comment. To receive timely consideration, comments should be submitted by September 21, 2007.

ECHO Marketplace

Advertiser Index

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Marketplace Ads must run a minimum of six consecutive issues.

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ECHO Journal | August 2007

41

Peace of Mind Painting.

Peace of mind Painting includes: •

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“I have used Varsity Painting now on 2 large projects in the Oakland area. For me, using Varsity means I don’t have to worry about anything. Our painting project had unique challenges that Varsity addressed. Their painters clearly make the difference.”

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Serving Northern California since 1993

San Francisco Luncheon Thursday, September 20 11:45 a.m. to 2:00 p.m.

St. Francis Yacht Club

Recent CID Case Law and Court Actions Speaker:

Mark J. Wleklinski, Esq. Chair, ECHO Legal Resource Panel Luncheon Price: $55 Advance Reservations Required for this Event

Yes, reserve _____ spaces for the ECHO San Francisco Luncheon.

Amount enclosed: $__________ (attach additional names) Name: HOA or Firm: Address: City:

State:

Zip:

Phone: Visa/Mastercard No.

Exp. Date:

Signature: Return with payment to: ECHO, 1602 The Alameda, Ste 101, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Telephone: 408-297-3246; Fax: 408-297-3517

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