Journal_07_11

November 2007

A Journal for Community Association Leaders

echo-ca.org

Construction in Seismic Regions

ALSO INSIDE THIS ISSUE:

• CPA Management Letters • Questions About HOA Elections • Mistakes in Contract Approval

Change Service Requested ECHO 1602 The Alameda, Suite 101 San Jose, CA 95126

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Contents CPA Management Letters on page 14

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6 Construction in Seismic Regions Innovations in building techniques have greatly increased structural safety in seismic regions. Unfortunately, many improperly inspected structures lack the necessary components to withstand a powerful earthquake. This article explores repair options for inadequately reinforced structures.

14 CPA Management Letters to Associations

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Managing association finances is a complicated operation, but there are a number of steps that associations can take to improve their financial standing and minimize potential risks. Michael Gartzke, an experienced association CPA, details some of those steps.

20 More Questions About HOA Elections Since the adoption of the new elections laws in 2005, numerous questions have arisen that are not clearly answered in the Civil Code. Adrian Adams, Esq., offers answers to some of the problems.

24 Common Mistakes in Approving Contracts

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There are numerous risks associated with entering into contracts; yet it is one of the most common tasks of a board. This article reveals a few of the dangerous pitfalls contained in contract negotiations, and provides suggestions to help reduce association liability.

Departments 19 2007 Legislation at a Glimpse 28 Calendar of Events 29 Directory Updates 31 Officers/Directors Update Form 34 ECHO Bookstore 36 News from ECHO

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38 ECHO Volunteers 38 About ECHO 41 ECHO Marketplace 41 Advertiser Index

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.

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

On the Cover Construction in Seismic Regions Page 6 4

November 2007 | ECHO Journal

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.

CommonSense

By Tyler P. Berding, Esq.

The Assessment Dilemma I

had a call the other day from a woman (let’s call her Mrs. X) who was very troubled over recent increases in her homeowners’ association assessment. “I probably can’t live here much longer if this keeps up!” she said. Turns out the board of directors had raised the assessments by 20% on top of similar increases a year ago. They also levied a special assessment to fix some unexpected problems with the buildings. “You know what they did when I complained?” She said, “They handed me your book and said to read it!” She was referring to the treatise we wrote a couple of years ago entitled “The Uncertain Future of Community Associations,” a discussion of the perils of under-funding association reserves. According to my caller, the board was using the book as at least part of the justification for the assessment increases.

Mrs. X was concerned because the assessments for her association were higher than “comparable” associations in her neighborhood. We talked for a long time about this issue. Her worry about rapidly increasing assessments perhaps pricing her out of her home was not misplaced. This particular assessment had now reached close to $500 a month, not an insignificant sum, especially when added to the occasional special assessment. For a young buyer, or a person living on a fixed income, rapidly increasing homeowner assessments can be frightening, especially in a down economy when wages may not keep up with inflation.

What was happening here? According to Mrs. X, her association was well maintained and, at least from her perspective, didn’t seem to need much in the way of repairs. So why the sudden need to increase owner contributions? The board’s reference to “The Uncertain Future” would indicate that they were worried about underfunding. A casual glance around a well-maintained association may not reveal the source of their concern.

Perhaps they had been forced to play “catch-up” from years past when a series of boards of directors had taken the easy way out and failed to gradually increase the reserve contributions. Or, possibly, a

newly discovered issue with some building component has caused them to ratchet the assessments up rapidly to deal with the new problem.

We don’t know what the reason was, and neither did Mrs. X, but those reasons, and numerous others, can easily create a budget shortfall. And that’s the dilemma that many associations face— do we do what we should and increase our funding to keep up with inflation or to take care of a newly discovered problem of some sort or to make up for years of funding neglect—or do we take the politically expedient course and ignore the problem?

Whatever the reason, if assessments are raised quickly the owners are not going to like it and the board will undoubtedly take flak because of it.

Board members know that some owners will have difficulty finding the extra funds regardless of how worthy the cause, and some may eventually be priced out of their homes as a consequence.

But if the increased assessment represents the true cost of operating and maintaining the property, how can the board do otherwise? Mrs. X is right—the cost of living in some associations is rising too rapidly, but the board is also right in doing what it’s doing, assuming that the estimates upon which the increases are based are correct. If so, what these rapid increases actually represent is the realization, pure and simple, that the true cost of ownership has been understated for a long time.

What I fear is that examples like this one are just the tip of the iceberg and that we are going to see many owners priced out of their homes over the next decade or so as more boards come to understand the real cost of operation. Ignoring that for too long is probably what got us to this point and the fix is going to hurt a lot of people.

It’s a real dilemma, to be sure.

Tyler Berding is a founding partner of Berding & Weil, a construction defect and homeowner association law firm and a former member and the immediate past president of the ECHO board of directors.

ECHO Journal | November 2007

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By Justin Bettner, P.E.

Construction in Seismic Regions A Safety Issue Uncovered hroughout the last fifty years, there has been an increasing awareness of the need to provide a higher level of safety to building occupants in seismically active regions. Knowledge gained from observations of earthquake damage, testing, and computer modeling has resulted in stricter building codes and, consequently, a more stringent design and construction approach.

Public and commercial buildings now have more shear panels, tie-down bolts, welds, deeper sections and robust ductile framing systems. In the multi-family and single-family residential realm, units that would normally be composed of merely wood, nails, and plywood sheathing are now being built with metal straps, metal clips, larger foundations, and even steel walls.

the housing market, for example, increasingly large numbers of custom and tract houses are being built in record time and at lower costs. It is theorized that at one point, building officials could not perform inspections as often as desired, because they did not have the resources to face the building boom.

During this time that safety awareness has increased, there has also been a large, unprecedented, building boom. Urban growth has accelerated to a point where demand for quick, affordable construction is higher than ever. In

This article explores two case studies of residential buildings where seismic restraining elements were omitted during construction. Both buildings were built within the last 25 years and both are in the highest seismic zone (zone 4).

T

Unfortunately, the end result is a significant amount of construction that has not been built per the original engineer’s intended design. In other words, it is fair to say that many structures may be missing the critical elements needed for seismic restraint. As a result, if enough components are missing during a large enough earthquake, excessive damage and even collapse may occur.

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We will discuss the field analysis methods, the missing critical components, and the required repairs to solve these issues.

Figure 1

Figure 2

Case Study 1: Condominiums, San Francisco, California The first case study is a group of condominiums in a large development just south of San Francisco, California (see Figure 1). The buildings were undergoing a series of improvements that included new windows, siding, and roofing. During the course of removal of the existing exterior finishes, it was noted that many seismic hold-downs were not installed in critical areas as highlighted in red in Figure 2.

Figure 3a

Hold-downs are steel ties that prevent the building from overturning during an earthquake (see Figures 3a and 3b), which is achieved by anchoring the structure to the ground.

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November 2007 | ECHO Journal

Figure 6 Figure 3b

Figure 4b

Figure 7

These buildings had additional structural compromises including shear transfer clips not being installed in many locations; specifically the redlined area illustrated in Figure 5.

Shear transfer clips (see Figure 6) are steel plates that allow earthquake forces to be transferred from each floor level into the walls at each adjoining level.

Figure 8

Figure 4a

To address the problem, a repair was engineered consisting of a strap nailed to the walls of the building and anchored to the foundation via epoxy-anchored bolts (see Figures 4a and 4b). Special care had to be taken regarding the bolt locations because the foundation had tension-cable reinforcement (also known as a “post-tension� foundation).

Figure 5

Simply put, shear transfer clips prevent sliding (see Figure 7). The repair method involved installing the clips in the appropriate locations as indicated in the red outline in Figure 8.

Case Study 2: Single-family Residence, Southern California This case study consists of a single-family residence located in Southern California (see Figure 9).

Various metal seismic restraining components were observed to be missing in the basement of the house. This prompted an extensive review of the building’s seismic continuity. However, the owner did not want the interior or exterior finishes to be

Continued on page 11 ECHO Journal | November 2007

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Construction in Seismic Regions Continued from page 8

454 So. Airport Blvd.

South San Francisco CA 94080 Figure 9

removed or damaged for the investigation.

Because the components under scrutiny were made of steel, X-ray technology was used to determine the existence of the hardware. Xray locations were randomly chosen by a professional statistician to avoid bias in the assessment.

X-rays are a form of high energy, shortwave radiation. They have the ability to pass through relatively dense materials with lightlike behavior. In the case of a building assembly, the radiation passes through wood and lightweight finishes but is absorbed by denser materials like steel. As a result, X-ray photography can give a clear representation of the metal components in a wall assembly.

In this investigation, the X-rays were taken on site using a small, low power, battery-powered X-ray tube. An X-ray sensitive reusable film was placed behind the object of interest.

The region around the machine was cleared of occupants and the X-ray tube was energized, thus exposing the film to the radiation. The image was then developed on site with a digital scanner and stored on a laptop computer. Figure 10 shows a resulting X-ray depicting a hold-down.

In another location, X-rays showed that no hold-down existed. Multiple X-ray images were taken and eventually it was concluded

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Figure 11

Figure 10

that the hold-down wasn’t installed (see Figure 11).

Similarly, X-ray photography was used to look for horizontal seismic steel straps. In an earthquake, a building will tend to “tear” apart between regions of different mass and geometry as illustrated in Figure 12a. Steel straps of proper length and thickness can prevent this from occurring (see Figure 12b).

Figure 12a

The X-rays revealed the existence and non-existence of seismic straps. Figure 13a shows a seismic strap installed, whereas 12

November 2007 | ECHO Journal

Figure 12b

Figure 13a

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 Figure 13b

Figure 13b shows no strap was installed in the intended location.

With regard to the straps and hold-downs mentioned, it was decided in court that each missing component be installed per the original engineer’s plans.

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

Conclusion The seismic restraining components discussed in these two case studies, such as the hold-downs, clips, and straps are essential for any building in a seismic zone. Generally, the absence of these components is not visible without removing exterior finishes to make that determination. However, non-evasive

Continued on page 39 ECHO Journal | November 2007

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By Michael J. Gartzke, CPA

CPA Management Letters to Associations What They Are and What They Should Contain

E

ach year, most homeowner associations will engage a CPA to review or audit their annual financial statements and/or prepare their annual income tax returns. These compliance services meet the requirements of the association’s governing documents, the California Civil Code and tax law. For many, this annual ordeal ranks somewhere between standing in line at the DMV and a root canal. Yes, it’s necessary but what does the association get from these services? In my years of providing accounting services to homeowner associations, I have noted that association boards of directors as well as their managing agents are receptive to observations and suggestions that I

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November 2007 | ECHO Journal

make that arise as a result of my providing the income tax and financial statement services.

Accounting standards require CPAs to communicate “matters coming to the auditor’s attention that, in his judgment, should be communicated to the audit committee because they represent significant deficiencies in the design or operation of the internal control structure, which could adversely affect the organization’s ability to record, process, summarize and report financial data consistent with the assertion of management in the financial statements.” In addition, “the auditor may also identify matters that, in his judgment, are not reportable conditions as defined above; however, the auditor may

choose to communicate such matters for the benefit of management.” (AICPA Auditing Standards) I have found that the “management letter” can be the most discussed portion of the documents that I provide an association at the conclusion of an accounting engagement. CPAs who have provided services to associations for years have become knowledgeable of the wide range of disciplines that affect association operations.

While we can’t (or won’t) take the place of your manager, lawyer, insurance agent or maintenance experts, we can offer recommendations on a wide variety of issues for the association to consider in future operations. What follows is a

sampling of financial and other issues that I have encountered that should be considered in improving association operations.

Cash and Investments Cash and investments are typically the largest assets that an association has. Many times, these assets will be under-invested either in non-interest or low-interest checking and saving accounts.

Sometimes, checks will be held for days or weeks without being deposited, reducing the average balance on deposit which means less interest or paying bank charges because of low balances.

Continued on page 17

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November 2007 | ECHO Journal

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Bank investments such as higher interest money market accounts and certificates of deposit are available to associations. Many associations have opted for US Treasury bills and notes for a portion of their reserve investments. Principal is guaranteed if held to maturity and, in most cases, the interest income is California tax-free.

Some associations will have over $100,000 in cash in the same bank. Because FDIC insurance does not cover balances over $100,000, there is the possibility of loss for balances over $100,000. Some associations have placed funds in mutual funds to take advantage of the rising stock market. These funds are subject to market fluctuations and also early withdrawal penalties if redeemed within 5 years of the investment. Capital losses on securities sales are only deductible against capital gains received by the association for income tax purposes.

Signature cards are frequently not updated when officers change. Reserve accounts require the signature of two officers or an officer and director of the association. No one else is allowed to withdraw or expend funds from an association reserve account.

Some managing agents will use a commingled cash account where funds from multiple associations are deposited in the same bank account. California law restricts this practice to managing agents that provided this service in February 1990 or earlier. CPAs are concerned about the controls that the managing agent uses to safeguard your association assets and that they are accounted for properly.

Are bank statements being reconciled monthly? Are copies of bank statements and reconciliations being provided to the board at least quarterly in compliance with Civil Code requirements? Is the association able to segregate (by using two different people) the issuance of payments for bills and the mailing of the checks? Does the board approve maintenance and nonrecurring invoices for payment?

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Assessments The prompt and efficient collection of assessments is the lifeblood of association operations. When the economy is strong, collections are generally easier. Increases in members’ equity in their property will convince most people to not risk the loss of that

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equity by failing to pay assessments. The economy is cyclical and some members who purchase at the “top of the market� will find their equity eroded or completely gone in a down real estate market. It is important to establish a diligent collection policy that is consistent and equal to all members. Late notices and late payment penalties should be sent on the sixteenth day of the month (or later if your governing documents specify a later date). Follow-up should be made and further collection activity should be pursued (pre-lien letters, lien filings, small claim judgments and/or foreclosure as necessary).

Lenders are wary of providing financing to unit owners in associations where large amounts of delinquent assessments exist.

I have noted, fortunately on infrequent occasions, that board members will fall behind in paying their assessments. If the delinquency is large enough, a disclosure will be made on the financial statement indicating the amount due from the officers and directors. Some associations simply have an inadequate monthly assessment. Political pressures not to raise assessments or increase them enough conflict with the reality of

increased costs. Many times, reserve funds will not be funded at the level specified in the budget or reserve study. Over time, this underfunding of reserves will generally result in a large special assessment.

Speaking of reserve funding, California law has mandated disclosures about reserve information for 15 years now. Many more associations are obtaining the required reserve information either through a reserve study professional or on their own. As with high delinquent assessments, lenders are frequently reluctant to lend on units in associations with low reserve fund balances.

Other Operational Issues Employee vs. Independent Contractor—Is the association using independent contractor workers who should be classified as employees? The IRS has a checklist of 20 factors to review when making this determination.

Areas such as who controls the worker, licensure, and how the worker is paid go into making this determination. Are workers covered by insurance, especially workers compensation?

Insurance—Is the association carrying the proper kinds of insurance in accordance with ECHO Journal | November 2007

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its governing documents and the Civil Code?

Does the board meet with its insurance agent annually to discuss necessary coverages and policy limits?

Statement of Nonprofit Corporation—Is the association filing its annual statement with the California Secretary of State listing current officers and other required information? Failure to file this form can result in the suspension of the corporation by the Secretary of State and the loss of corporate powers (ability to contract, sue, and collect assessments). Changes of address during the year can result in this form not being received from the Secretary of State by the association. Thousands of California corporations have been suspended.

Minutes—Are minutes complete? Are they signed? Are executive session minutes included with regular minutes and improperly disclosed? Are relevant accounting issues such as major expenditures, assessment changes, open/close bank accounts, tax elections and budget approval included?

Taxes—Has the association filed 1099 forms for independent contractor services? Is the association paying property tax assessments that are only chargeable against residential parcels? Does the association have tax-exempt status with California? Are income tax filings up to date? (This is another area that can cause a corporation to be suspended.)

Professional Organizations—Is the association a member of ECHO or another trade organization? Can the board members benefit from the seminars and newsletters published by these organizations?

Other topics such as record retention, accounting system recommendations and comparative financial information are worthy of discussion with your CPA. Ask your CPA about any of these issues. We welcome the opportunity to provide guidance in these areas and to provide a service that you really want! We can attend board meetings and/or annual meetings to present relevant information. Your CPA is part of your professional team.

Michael Gartzke is a certified public accountant with a practice in Goleta, CA, that emphasizes accounting for California common interest developments. He is also the executive director of the South Coast Homeowners Association, which has a membership of more than 140 community associations in Santa Barbara County.

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2007 Legislation at a Glimpse As of October 15, 2007 Bill No.

Author

Subject

Status

Position

Summary

AB 567

Saldana

Common Interest Development Bureau

Hearing cancelled in Assembly 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 by the Support legislature; Signed by the governor

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

To Senate Inactive File; Two-year bill

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 by the Support Restrictions in legislature; Board Meetings Signed by the governor

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 Senate; Amended in Assembly; Two-year bill

Support

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

Watch

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

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

ECHO Journal | November 2007

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By Adrian Adams, Esq.

More Questions About HOA Elections H

are aware of this restriction, boards should include it in their election rules.

Official Ballots Only QUESTION: Can members create and distribute their own election ballots?

ANSWER: No. According to Civil Code Section 1363.03(e), ballots shall be delivered “by the association� to every member.

As with municipal, state and federal elections, voters cannot substitute their own ballots for official ballots. To make sure owners

Write-In Candidates QUESTION: Can we write in candidates on our ballots if they were not previously nominated?

ANSWER: Under Civil Code Section 1363.03(j) associations may adopt election rules that permit write-in candidates. It would seem from the language of the statute that unless your election rules provide for write-ins, they are not allowed. However, there may be an exception. If your rules are silent as to write-ins, check your nomination procedures. If nominations are allowed from the floor of the annual meeting, then

omeowner association members in California continue to raise questions about how elections should be conducted under the new law that went into effect in 2005. This article provides answers to some of the more interesting questions that have been asked recently.

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November 2007 | ECHO Journal

write-ins are impliedly valid, provided the write-in candidate (i) is actually nominated at the meeting, (ii) accepts the nomination, and (iii) meets the qualifications of a director.

Inspecting the Voter Sign-In List QUESTION: Prior to the counting of ballots, can owners inspect the sign-in list? We want to know who casts ballots.

ANSWER: Although there is no requirement that inspectors allow access to the voter sign-in list, there may be good reason to allow it prior to opening the outer ballot envelopes (the ones with the voter identification information).

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Challenging Ballots. For example, if a person not on title (such as a spouse) or a member not in good standing (who had his or her voting rights properly suspended) were to vote, the ballot could not be challenged if other owners don’t know the person mailed in a ballot. If the challenge is not made prior to the opening of ballots, no challenge may be made since the challenged ballot can no longer be identified and removed from the tabulation process. Although California’s Election Code Section 15105 is not binding on associations, it provides guidance on this issue: Prior to processing and opening the identification envelopes of absent voters, the elections official shall make available a list of absent voters for public inspection, from which challenges may be presented. ...All challenges shall be made prior to the opening of the identification envelope of the challenged absent voter.

Recommendation. After the polls have been closed and prior to opening the envelopes, owners should be allowed to inspect the registration or sign-in list if they request it.

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Access to Inspector’s Voter Tally QUESTION: During an election, can owners demand from the Inspector of Elections a running tally of who returned their ballots?

We want to know who voted so we can lobby owners who have not yet voted.

After the polls close and prior to opening the envelopes, owners should be allowed to inspect the registration or sign-in list...

ANSWER: There is no requirement that inspectors provide such information. As provided for in Civil Code §1363.03(c)(3), inspectors of election must perform the following duties:

• determine the number of memberships entitled to vote and the voting power of each; • determine the authenticity, validity, and effect of proxies; • receive ballots; • hear and determine challenges and questions arising out of the right to vote; • count and tabulate votes; • determine when the polls close; • tabulate the results of the election; and • perform any acts as may be proper to conduct the election with fairness.

Providing a tally of owners who cast votes is not listed as one of the inspector’s duties.

Verifying Information. Some could argue that inspectors should supply a list because they must prepare it anyway. That argument is not valid since the statute [Civil Code Section 1363.03(f)] allows but does not mandate that inspectors verify voter information prior to the meeting; they could wait until the meeting.

Extra Expense. If an association wants the inspector to prepare and disseminate a running tally of who has or has not voted, it needs to make arrangements with the inspec-

tor to provide this service. There will likely be an additional charge for the time involved in providing such information.

Witnessing the Counting of Ballots QUESTION: What does the requirement that members can “witness” the counting of ballots mean?

ANSWER: Unfortunately, Civil Code 1363.03(f) does not define what it means; it merely states that: All votes shall be counted and tabulated by the inspector or inspectors of election or his or her designee in public at a properly noticed open meeting of the board of directors or members. Any candidate or other member of the association may witness the counting and tabulation of the votes.

County Guidelines. Because the statute does not define “witness,” we can turn to California’s election code for guidance. State and county guidelines are fairly uniform that observers must be allowed sufficiently close to observe the process but not the actual votes on the ballots. This means that observers cannot stand over the shoulder of a ballot counter. Instead, they must sit or stand at a reasonable distance and observe the counting process.

Who May Observe? As provided for in Civil Code Section 1363.03(f), observers may only be candidates or members of the association. Lawyers representing candidates do not qualify.

Disruptive Observers. Anyone who disrupts the election process may be ejected from the area. The person may also be fined, provided the association’s rules provide for it. Using the guidelines found in Election Code Section 15104(e), observers may not: • touch any voting materials or equipment; • touch election personnel; • assist in the tabulating of votes; • talk to ballot counters while they are processing ballots; • make loud noises or distract ballot counters; • use cellular phones, pagers, two-way radios, cameras, audio or video recording devices, or camera phones during the balloting; • eat or drink while votes are tabulated; or • in any way interfere with the conduct of the election.

Adrian Adams is a principal in the Los Angeles firm of Adams & Kessler LLP. This article is reprinted from the Davis-Stirling.com Newsletter.

ECHO Journal | November 2007

23

Association Affairs

By Beth A. Grimm, Esq.

Common Mistakes in Approving Contracts R

eviewing up and accepting contracts is a regular and important requirement for homeowner associations boards. However, I see many boards that make mistakes in awarding contracts for work on association complexes. This article identifies some of the most common mistakes I see—and believe me, I see these every day.

Failure To Check Out Free Information: Boards and managers often forego checking out a contractor. For construction contracts, the California State Contractor’s License Board (www.cslb.ca.gov) has a wealth of information on: protections, the vendor’s principals, bonding information, insurability, complaints, claims, laws protecting the consumer, and licenses that are required and are held. And another source of free cross check information is references. Certainly, contractors and vendors will be loathe to give out names of persons who would give poor references; however, this is one way to find out if a contractor has worked for many associations. This information may prove to be very valuable, as you will see further along in the article.

Acceptance of Fuzzy Terms: Boards and managers often respond on the basis of bid or proposal forms provided by the contractor rather than considering a “negotiated” or more balanced contract.

Proposals and form contracts provided by contractors or vendors are always favorable to them, not to their association clients. Such documents are often

24

November 2007 | ECHO Journal

one-page forms with handwritten notes on the front page and a reverse side that has another 20–30 terms printed in light-colored ink using very small, crammed-together type font that is rather hard to read. The bid offered may be vague to non-specific as to time, place, manner, phased work, and protections. What is emphasized is the price. This means the association’s obligation is clear, but the contractor’s is not. And it is always as important to read the backside of such forms as it is the front.

Ignoring Limitations on Authority: Many homeowner association governing documents have limitations on contracts. Entering into a contract that has a term of more than one year is a common prohibition, although laundry equipment, cable, and management contracts are some that are commonly listed in the exceptions to this rule. Some documents also require owner approval for certain contracted work (an example might be for capital improvements that exceed 5% of the budgeted gross expenses for the fiscal year or for borrowing that requires collateral). Ignoring the limitations does not automatically void a contract, but it does make a board and its manager look bad and such practices could lead to a claim for breach of fiduciary duty.

No Way Out: Many contracts are very vague or non-committal about termination provisions. In other words, it’s easy to get in but not easy to get

out. And if the contract encompasses a lot of work or the term is for a long period of time, finding a graceful way out can become very important if the association finds that it is unhappy with the contractor’s work, conduct or reliability. A poor working relationship is hard on all the parties. Specifics on incremental evaluation, assessment of work (such as a phased contract), and/or the ability to terminate the contract with or without cause on reasonable notice can become extremely important.

Failure to Treat Insurance Requirements, Indemnification and Other Protections Properly: Associations need to be concerned about insurance protections; many assume that asking contractors if they have insurance (liability, bonding, workers compensation, etc.) is enough. It’s not. If the HOA contract does not require by its terms that the contractor carry specific types and levels of insurance, does not require that the HOA be named as an additional insured when possible, does not require a contractor to carry workers compensation insurance, and does not require the contractor to carry and provide proof of a proper endorsement that pro-

vides protection for working in an HOA (for construction contracts—this is critical), there is little recourse to terminate the contract if the contractor stops paying for the insurance and it lapses, or they lose their license and it lapses. And, it is critical to understand the indemnification provisions so as to make sure that the HOA cannot be held responsible for the contractor’s mistakes or negligence. (See more on this below under Failure to Seek Legal Review.)

Failure to Keep Owners “In The Loop”: HOAs that find themselves under the “microscope” with owners may have failed in these areas: • failure to seek multiple bids (to give a fair comparison of what terms, experience, offerings, and contractors are available), • failure to keep owners sufficiently informed to garner trust, • failure to respond well to those who raise questions, • failure to recognize the importance of consensus building.

It is especially important with regard to a very large contract that will require owner participation (such as approval of a special

assessment) to provide the owners sufficient information as the process moves forward to build trust and confidence so that these things do not happen: • Owners demand copies of bids claiming they can find contractors who charge less, • Owners actively raise opposition in response to a proposal because they do not have a full understanding of the necessity of the work, the competence of the contractors, the trust in the board in choosing the right “team” geared for successful execution of the contract.

Failure to Seek Legal Review: There are many things an experienced attorney will look for in a contract that a board or management may miss. The points listed in this article are just some of the things that attorneys are trained to spot and get corrected on behalf of the board and association.

Beth Grimm is frequent contributor to the ECHO Journal. She is a Bay Area attorney who authors books, writes articles and newsletters, is active in ECHO and other groups that serve the public who live in CIDs. ECHO Journal | November 2007

25

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November 2007 | ECHO Journal

By Tom Fier, Esq.

When Good Intentions

GO WRONG T

his article addresses ten real-life examples of situations faced by boards of directors. Not all decisions are easy. Be careful not to ignore a problem and hope it will go away. In this litigious world, if you have a question, seek advice. Surround the board with competent advisors. This will make your job easier.

Sometimes, good intentions go bad. When things go wrong, there are always lessons to be learned. Read on.

Scenario #1 In an attempt to save money and time, the board hires one of the board members to install windows at a 100-unit condominium complex. The job is estimated to cost $300,000. Final bill comes in at $375,000.

Special assessment amount of $3,000 per unit is not enough. The board has to ask for more money. Irate members look into what happened. They discover that board did not bid the job, and there was a conflict of interest. Homeowners sue board for breach of fiduciary duty and negligence.

What went wrong? This board had been self-managed for 15 years. The board was simply not aware that it was doing anything wrong. Prudent business practice would have been to obtain three bids for the job and to stay away from hiring a board member to do the work.

Lesson to be learned: Board members must educate themselves concerning homeowner issues. They can do this by reading informative sources such as the ECHO Journal and by attending seminars. They need to be aware of current issues facing boards, what to look out for and how to avoid mistakes like this one.

Scenario #2 A condominium complex has private streets that intersect with public streets. At one such intersection a car was making a right-hand turn. The line of sight of the driver was blocked by a tree and bushes that were growing on the corner. The car hit a 10-year-old on a bicycle. The child died of multiple head and internal injuries.

What went wrong? The board did not have regular landscape walkthroughs to view the property.

Lesson to be learned: Do periodic, regularly scheduled landscape walkthroughs to discover any situation that needs attention. Particularly, view landscape areas that impair driving or create visibility hazards. Correct them immediately as a matter of safety. In addition the association should maintain adequate insurance.

Consult a knowledgeable insurance broker about your insurance needs.

Scenario #3 A homeowner in one association complains that there are inadequate barriers in and around the tot lot. Young children can easily escape the reach of parents and wander into the street. The association board ignores the complaints or does not act to investigate or remedy the situation. A young toddler runs out of the tot lot, wanders into the street and suffers permanent, serious injuries. The association is sued for $2 million and settles for $1 million.

What went wrong? The board should listen to homeowner complaints and investigate to determine if they are legitimate and then take steps to remedy the situation. The excuse in this case that there was no money to install a fence around the tot lot did not fly with the parents of the seriously injured child. The board only had $1 million of insurance; however, the association was protected under the Civil Code and the excess judgment could not be collected against it.

The association’s insurance was later cancelled and new insurance costs tripled.

Lesson to be learned: Do an annual “risk management� survey. Evaluate potential risks around the entire association complex and take steps to alleviate them. Maintain adequate insurance!

Continued on page 30 ECHO Journal | November 2007

27

Calendar of Events

Upcoming Events into the New Year Thursday, November 1 North Bay Resource Panel 9:30 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, November 2 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Monday, November 12 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant, Oakland Tuesday, November 13 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, November 14 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose

Wednesday, November 21 Wine Country Resource Panel 11:45 a.m.

Lanahan & Reilley 600 Bicentennial Way, Suite 300, Santa Rosa Wednesday, December 5 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101, San Jose Friday, December 7 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, December 19 Wine Country Resource Panel 11:45 a.m.

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

Thursday, January 3, 2008 North Bay Resource Panel 9:30 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, January 4 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Tuesday, January 8 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, January 9 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Monday, January 14 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant, Oakland

Wednesday, January 16 Wine Country Resource Panel 11:45 a.m.

Lanahan & Reilley 600 Bicentennial Way Suite 300, Santa Rosa Friday, February 1 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, February 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101, San Jose Wednesday, February 20 Wine Country Resource Panel 11:45 a.m.

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

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

November 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 listings in the 2005 ECHO Directory of Businesses and Professionals.

Additions Association Copy Services 3450 3rd Street, Suite 1A-205 San Francisco, CA 94124 Contact: Allison Cease Tel: 650-362-0462 Fax: 650-362-0462

Looking different isn’t enough. Being different is.

With a team that brings over 60 years of experience specializing in HOA management, Compass has the resources and depth of understanding to address the issues facing your association.

Compass Management Group tackles our clients’ challenges head-on, always delivering creative solutions, clarity of vision and technologies that simplify management tasks and communication for everyone. Through our proven strategies, we’ve earned our clients’ trust and loyalty and solidified long-term working partnerships. Discover what being different really means.

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408.226.3300 | 650.563.9900 | 831.583.9900

See our demo at www.gocompass.com today!

www.hoacopy.com Email: info@hoacopy.com

Photo copying, binding and scanning services to the community association industry.

Blue Turtle Roofing 710 C Street, Suite 203 San Rafael, CA 94901 Contact: Jeff Johnson Tel: 415-458-2455 Fax: 415-453-1943 www.blueturtleroofing.com

We are the Bay Area’s first green-certified roofing company, giving you cool roofs that are Title 24 compliant.

Continued on page 37 ECHO Journal | November 2007

29

Good Intentions

son to sue. The board members should have never made this comment, if it were true.

Continued from page 27

Scenario #4 In a multi-story stock cooperative, there was a clause in their bylaws that all people who wanted to reside in the building had to be interviewed. A couple appeared. One person was in a wheelchair. They planned on moving into a unit on the fourth floor. The board casually mentioned that if there were a fire or emergency, there was no elevator and this might be a problem. The couple sued for discrimination.

What went wrong? The prospective homeowners were “testers� and looking for a rea-

30

November 2007 | ECHO Journal

Lesson to be learned: Stop interviewing.

Be careful of any comments that could be interpreted as discriminatory or derogatory.

Be aware of current laws concerning discrimination in housing and disabilities.

Scenario #5 A thirty-year old common interest development has 200 single-family houses. The association owns the streets. Sidewalks are uneven because of trees. An individual slips and falls on the uneven sidewalk and breaks her ankle. The board says the association is not responsible and that it doesn’t have the money to fix the sidewalks. Individual sues.

What went wrong? The board failed to maintain the sidewalks. Thus, it was negligent in its duty to maintain the common area.

Lesson to be learned: Maintain the common areas. Deferred maintenance can create risks that are not worth the gamble. If there is insufficient money, bite the bullet and initiate a special assessment.

Scenario #6 The board of a condominium association removes a tree in front of a unit but does not contact homeowner to tell her. The homeowner claims her right to privacy has been violated.

Continued on page 32

Officers and Directors Update Association Presidents or Secretaries

President Name

Term of Office:

to:

Address City and State

Zip:

Business phone ( Home phone (

) )

Date

Email

Association Name

Vice President

Association Address

Name:

Term of Office:

to:

Address:

City

City and State

Zip

Business phone ( Home phone (

Please complete and send to: ECHO 1602 The Alameda, Suite 101 San Jose CA 95126-2308 Tel: 408-297-3246 | Fax: 408-297-3517 Or email changes to: info@echo-ca.org

)

County

Zip

County

Zip

Management company or manager Address

)

City

Email:

Management phone (

Secretary

Dues statements should be mailed to:

Name

Term of Office:

)

to:

Address City and State

Zip

Business phone ( Home phone (

Please complete the items listed below. This information is for use in the ECHO Office and will assist us in the planning of future programs.

) )

Email

1. Type of Association:

Treasurer Name

Term of Office:

to:

Address

Business phone (

[ ]

2. Total Number of units:

4. Annual Meeting Date:

Volunteer self-management

)

Board Member Name

Term of Office:

to:

City and State

[ ]

Management company

[ ]

On-site manager

[ ]

Other

[ ]

6. Does your association have earthquake insurance?

Yes [ ]

Address

No [ ]

Zip

Business phone (

Email

Condo

5. Type of Management:

)

Email

Home phone (

[ ]

3. Average Monthly Assessment/unit: Zip

City and State

Home phone (

(Please check one)

PD

) )

Please provide information for additional board members on an attached sheet.

Note: All officers and directors are entitled to receive copies of the ECHO newsletter. A special subscription rate of $50/year is available to those homeowners who live in an ECHO member association but are not on the board.

Good Intentions Continued from page 30

What went wrong? The homeowner felt slighted by the board’s action and felt the board should have notified her of planned action. She believed that the right to privacy was a “property” right.

Lesson to be learned: Although the board had the authority to take out the tree, the board should have notified the homeowner before removal, so that she could state her position. Remember: a board must maintain good public relations so that homeowners do not feel at the mercy of the board.

Scenario #7 Board member “X” is incommunicado for weeks. Other board members do not like this member and they want to replace him. Board member “X” comes alive and insists that he remain on the board. The board refuses and turmoil and dissention ensues. The situation leads to recall.

What went wrong? The board needed to read its bylaws to ascertain the procedure for declaring a vacancy.

Lesson to be learned: Before taking any action, consult your governing documents and the law that governs your non-profit corporation. Follow the procedure that is required; do not make any exceptions.

Scenario #8 A CID of 200 homes was built in 1992.

Leaky windows cause damage. The developer convinces the association board not to sue him, promising that he will attempt repairs.

But the developer never repairs. The association filed a lawsuit in 2003. The Court says that the developer dissuaded the board from suing and dismissed the lawsuit.

What went wrong? The board trusted the developer to repair and he “strung” the board along until the 10-year statute of limitations expired.

Lesson to be learned: When you have construction defects, you must be aware of compliance with the statute of limitations in order to sue; consult an experienced attorney promptly to guide you through this complex series of laws.

Scenario #9 A townhouse complex is built to circle a pool. The pool fence is iron and contains an iron gate. Mom, pregnant, is in her garage with a 20-month-old baby. Her phone rings and she goes into the house. The baby crawls 32

November 2007 | ECHO Journal

under iron fence and falls into pool. A neighbor sees, from her second story window, the baby in the pool and runs down to pool.

Mom discovers baby is gone and sees him floating in pool. Both neighbor and mom forget keys and cannot get in the pool area.

The neighbor climbs the fence to rescue baby, but he again cannot get out of pool area because he does not have a key. The baby dies and a lawsuit is filed.

What went wrong? Fence surrounding pool had enough space underneath for a

baby to crawl under it. Locked gate that requires a key from the inside is dangerous.

Lesson to be learned: Check fence around pool or other potentially dangerous areas for “safety.” Strictly adhere to safety codes. Never keep inside gates to pool area locked.

Change to a latch or “escape bar.”

Scenario #10 A 100-unit townhouse complex has extensive common area and open space. The city has a leash law. Homeowners congregate with their dogs off leash on Sunday mornings. A small girl gets mauled by dog, leaving

a permanent scar on face. A lawsuit is filed against the association. (Homeowner is a former board member).

What went wrong? Association never enforced the city leash law.

Lesson to be learned: Know your local laws and take steps to enforce them. This applies to leash laws, but also speed laws. Association should have put up signs in common area park that there is a leash law.

Conclusion An association has the duty to enforce the CC&Rs. It also has a fiduciary duty towards its members. This means that it must act in the best interests of its members and the association.

The decisions it makes must meet the tests of either the “business judgment rule” or the “judicial deference rule.” The business judgment rule is that the board of directors must perform its duties in good faith, in a manner that it believes to be in the best interests of the association, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances [Corporation’s Code §7231(a)]. The judicial deference rule comes from the case of Lamden v. La Jolla Shores Clubdominium Homeowners Association (1999) 21 Cal.4th 249, which states that the courts will defer to a board’s decision when a board, on reasonable investigation, in good faith, and regard to the best interests of the association and its members, exercises discretion within the scope of its authority in making maintenance and repair decisions. If both of the tests are met, the board should be protected from liability.

Rules enforcement must be uniform and fair. Do not let emotions get in the way of reasoned decisions. Review your association for “risks” and take steps to alleviate them.

Listen to homeowner concerns. Do not fall into the trap of tabling items on the agenda because you do not want to make a difficult decision. Someone has to make those decisions. Be informed. Avoid problems. Be creative in problem solving. Know your governing documents. Know your community. Be sensitive to what the homeowners want.

Know your procedures. Follow them.

Establish priorities. Be informed.

Tom Fier is an attorney at law with a homeowner association practice in San Mateo, CA. He is the immediate past chair of the ECHO Legal Resource Panel.

ECHO Journal | November 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

Signature

Name (please print) Association (or company) Address City Daytime Telephone

State

Zip

AMOUNT

News from ECHO

Safety Issue Uncovered In the last fifty years, building codes and techniques have improved along with an increasing awareness of the need for safety in seismically active regions. Observations of earthquake damage, testing, and computer modeling contributed greatly to technical innovations in earthquake-safe designs.

Safety awareness increased alongside an unprecedented demand for new housing.

Unfortunately, the resulting boom in custom and tract housing projects may have overwhelmed the available inspectors. It is theorized that at one point, the quantity of work prevented building officials from performing necessary inspections.

The result of these oversights is a significant amount of construction that has not been built per the original engineer’s design. Buildings without the critical elements needed for seismic restraint may be significantly damaged or even collapse in a large earthquake.

The absence of essential components (such as hold-downs, clips, and straps) are not visible 36

November 2007 | ECHO Journal

without removing exterior finishes. However, use of non-evasive methods such as X-ray technology can help to determine the location of any missing components.

The proper installation of these components is affordable relative to the potentially large amount of damage that can result if they are not installed.

Hiring an engineering consultant for design during construction projects can help to ensure that each building has the proper hardware installed, and may prevent a significant loss of life and property.

Contract Review Contract execution is an important task for homeowner association boards. Unfortunately, some common mistakes in contract negotiations can significantly increase association liability. Take precautions to avoid these pitfalls: Investigate Free Information: Look at the State Contractor’s License Board and the Better Business Bureau for important information about a contractor’s license, insurance, and business practices. Make sure to call any references.

Negotiate Specific Terms: Make sure that terms such as the length of project, type of materials, hours and protections, are not left out. Confirm that the association’s contractual requirements are met.

Stay Within Limits of Authority: The governing documents often place limits on contractual arrangements. Failure to observe these limits can open the door to a lawsuit for breach of fiduciary duties.

Don’t Get Stuck: Make sure that the association can terminate contracts if necessary, and have an attorney inspect the terms.

Insurance! Confirming that contracted employees maintain the proper type and amount of insurance is critical, and the absence of proper insurance can be disastrous. Make sure that all contractors are properly insured, and that their insurance does not lapse during a project.

Talk to the Owners: Inform the membership about important work, gather multiple bids, and make sure that the membership knows why the work is necessary. Failure to communicate can engender distrust and may lead to legal troubles.

Seek Legal Review: An experienced attorney will see problems and omissions in a contract that a board or management may miss. Make sure that important contracts are reviewed by a legal professional.

Legislative Update The 2007 Legislative Session is now over, and only two of the bills on ECHO’s watch list have been signed into law: AB 691 and SB 528.

AB 691 modifies the provision in the Civil Code that legally defines a Certified Common Interest Development Manager.

Formerly, that provision was scheduled to expire on January 1, 2008. The new expiration date is now January 1, 2012.

SB 528 (effective January 1, 2008) requires that associations include an agenda with the notice of a regular board meeting. Board members may not deviate from the agenda, except in the following circumstances: • A majority of the board of directors present at the meeting determines that an emergency situation exists; • The board determines, by a specified vote, that there is a need to take immediate action and that the need for action came to the attention of the board after the agenda was posted and distributed; • The item appeared on an agenda that was posted and distributed for a prior meeting that occurred not more than 30 calendar days before the date that action is taken on the item and, at the prior meeting, action on the item was continued to the meeting at which the action is taken.

Business-Professional Directory Continued from page 29

Cleary Bros. Landscaping P.O. Box 3577 Danville, CA 94526 Contact: Martin Cleary Tel: 925-838-2551 Fax: 925-838-8716 www.clearybros.com Email: martinc@clearybros.com

Cleary Bros. Landscaping, Inc., a family owned and operated business, has served the Bay Area since 1987. Cleary Bros. has developed skilled teams to accommodate all landscaping needs, including construction, maintenance, tree care and hydroseeding.

Community Reconstruction Solutions 855 Hinckley Road Burlingame, CA 94010 Contact: Maria Gonzalez Tel: 650-692-3030 Fax: 415-520-5755 www.communityreconstructionsolutions.com

Email: info@communityreconstructionsolutions.com

You don’t know what the day will bring.

That’s why you need Russell & Mallett, LLP. We’re experts in all aspects of community association law, construction defect litigation and general corporate matters, including rewriting governing documents.

You’ll find us accessible, resourceful, affordable and very, very effective. Call us today at 925.947.4915 to see how our practical, expert advice can work for you.

Russell & Mallett, LLP 2900 Camino Diablo, Suite 200, Walnut Creek, CA 94596 • 925.947.4915 • Fax 925.947.4920

We believe you’re better served when you’re better informed. Call today for your free copy of the Russell & Mallett, LLP Law Library. Everything you need to know about community association law.

Changes Angius & Terry Collections, LLC 1451 River Park Drive, Suite 125 Sacramento, CA 95815 Tel. & Fax remain the same From: GAF Materials Corp.

To: GAF-Elk Roof Corporation Everything else remains the same

ECHO Journal | November 2007

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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

November 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. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Recent ECHO Journal Contributing Authors 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 August 2007 ArLyne Diamond, Ph.D. Patti Jo Lewis, PCAM Marilyn Lincoln Graham Oliver Garth M. Stanton September 2007 Adrian Adams, Esq Tyler P. Berding, Esq. Beth A. Grimm, Esq. Bill Leys Larry Mesplé October 2007 Jeffrey A. Barnett, Esq. Tyler P. Berding, Esq. Gregory W. Marler, Esq. John Stevens

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.

Construction in Seismic Regions Continued from page 13

methods for determining the existence/nonexistence of these critical items using X-ray technology are available. Upon determining the location of the missing components, the removal and remediation of the exterior finishes was very minimal and a cost effective way to improve structural integrity and preserve aesthetic appearance.

...a building without the proper seismic hardware can be unsafe in an earthquake, jeopardizing the lives of the inhabitants.

The proper installation of these components is affordable and the money spent is small relative to the potentially large amount of damage that can result if they are not installed. Additionally, components may be inadvertently omitted and a building without the proper seismic hardware can be unsafe in an earthquake, jeopardizing the lives of the inhabitants. Hiring an engineering consultant for design during construction, renovation, or remodeling of your building(s) to ensure that it has the proper hardware detailed and installed is highly recommended to avoid structural problems in the future.

Justin Bettner, P.E. is a structural engineer with the engineering firm of Allana, Buick and Bers. He holds degrees in civil and structural engineering from the University of California, Berkeley, and has worked extensively on improving the structural safety of condominium developments throughout California.

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November 2007 | ECHO Journal

ECHO Marketplace

Advertiser Index

The place to find business and professionals for your association

Your Ad Can Be Here You read this, didn't you? Thousands of officers and directors of homeowner association boards will also read your ad each month in the ECHO Marketplace. Your ad can be here for as little as $60 per month.

Marketplace Ads must run a minimum of six consecutive issues.

To place your ad in the ECHO Marketplace and for more information about other advertising opportunities, please call 408-297-3246 or visit the ECHO web site at echo-ca.org/media_kit.php Reserve Studies and Mold Sampling Foundation and Drainage Analysis

SBI, LLC 800-710-3774 • www.sbiusa.net

Alpha Restoration and Waterproofing 11 American Management Services . . . .12 Angius & Terry . . . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . . .29 Arborist Onsite . . . . . . . . . . . . . . . . . .13 A.S.A.P. Collection Services . . . . . . . .33 Association Reserves . . . . . . . . . . . . .39 Bayridge Group . . . . . . . . . . . . . . . . .13 Berding & Weil . . . . . . . . . . . . . . . . . .44 California SubMeters . . . . . . . . . . . . .25 Community Association Banc . . . . . . .29 Community Management Services . . .33 Compass Management . . . . . . . . . . .29 Cool Pool Service . . . . . . . . . . . . . . . .39 Cornerstone Community Mgmnt . . . .18 Corum Painting . . . . . . . . . . . . . . . . . .2 County Bank . . . . . . . . . . . . . . . . . . .22 Draeger . . . . . . . . . . . . . . . . . . . . . . .18 Ekim Painting . . . . . . . . . . . . . . . . . . .30 First Bank Association Bank Services . .40 Flores Painting . . . . . . . . . . . . . . . . . .39 Gachina Landscape Management . . .17 Greater Bay Bancorp . . . . . . . . . . . . .23 Helsing Group . . . . . . . . . . . . . . . . . . .8 Hill & Company. . . . . . . . . . . . . . . . . .43 M&C Association Services . . . . . . . . .16 M. L. Nielsen Construction . . . . . . . . .37 Management Cost Controls . . . . . . . .30 Massingham and Associates . . . . . . .10 Pelican Management Group . . . . . . .33 PML Management Corp. . . . . . . . . . .12 Pollard Unlimited . . . . . . . . . . . . . . . .11 Pratt & Associates . . . . . . . . . . . . . . .13 R. E. Broocker Co. . . . . . . . . . . . . . . .40 Rebello’s Towing Service . . . . . . . . . .16 REMI Company . . . . . . . . . . . . . . . . .41 Russell & Mallett LLP . . . . . . . . . . . . .37 Saarman Construction . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . . . .11 Steve Tingley Painting . . . . . . . . . . . .42 Steve’s Painting Services . . . . . . . . . . .40

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