Journal_07_12

December 2007

A Journal for Community Association Leaders

echo-ca.org

HOA Assessment Collection and Bankruptcy Law ALSO INSIDE THIS ISSUE:

• Checklist for Construction Contracts • Exterior Painting and Maintenance • Creating Effective Newsletters Change Service Requested ECHO 1602 The Alameda, Suite 101 San Jose, CA 95126

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We’re taking the hit together.

With bank foreclosures and Association assessment collection losses approaching record highs, we at Angius & Terry Collections LLC (“ATC”) want to remind our Association clients that we continue to be your partner. We continue to offer our “No Fees X No Costs X No Risk!” Association assessment collection program - even in these tough times. Under this program, ATC looks to the delinquent homeowner with respect to payment of ATC’s collection fees and costs - not the Association. If ATC is unable to collect a delinquent assessment due to a bank foreclosure, or otherwise, there continues to be NO CHARGE to the Association for our fees and/or costs. In addition, we continue to assist our Association clients through Bankruptcy Monitoring and Small Claims Court handling procedures with the most efficient and cost effective services available. ®

We’re in this together.

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Contents Construction Contract Checklists on page 14

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6 Assessment Collection and Bankruptcy Assessments collection is a constant problem that becomes even more difficult when a homeowner files bankruptcy. This article reviews the ways in which a consumer bankruptcy can affect a community association’s efforts to collect delinquent assessments.

14 Checklist for Construction Contracts Certain clauses should be part of every construction contract. They give the association substantial legal advantages in the event of a dispute arising from projects. Learn more about these essential clauses.

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20 Exterior Painting and Maintenance When is it time to repaint? By the time most boards get around to asking the question, it is already too late for paint alone to do an adequate job. The author examines the criteria needed for board members to know what immediate need for painting looks like.

24 Creating Effective Association Newsletters

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A newsletter that residents read can enhance a sense of community, making management easier and helping to improve property values. This article, second of a two-part series on communications, looks at key elements of good newsletters.

Departments 19 2007 Legislation at a Glimpse 28 Calendar of Events 29 Directory Updates 34 ECHO Bookstore 36 2007 ECHO Journal Index 38 ECHO Volunteers

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38 About ECHO 41 ECHO Marketplace 41 Advertiser Index

On the Cover Assessment Collection and Bankruptcy Page 6 4

December 2007 | ECHO Journal

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 Jerry L. Bowles Robert Rosenberg Richard Tippett Steven Weil

Lori Burger John Garvic 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.

CommonSense

By Tyler P. Berding, Esq.

Firestorm 2

007 will set yet another record for California acres consumed by fire. As I write this, after a week of massive destruction, firefighters in southern California are finally achieving some level of control over what may be the most costly fire in California history, perhaps with 1906 excepted.

Nevertheless, massive wildfire destruction is becoming a regular occurrence in this state and certainly has earned enough ink and video footage to put it right up there with other major disasters around the country. Over a thousand homes and several lives have been lost this past week, and by any measure you would care to use, it qualifies as a tragedy of epic proportions. Let’s mourn the loss of life and property, but let’s not deceive ourselves as to the real cause of this destruction.

Whatever loss is tallied in this particular fire, it will be due, not to global warming, criminal acts, or any lack of preparedness by state government to fight the fire, but rather to a callous lack of control over the unbridled development of California wild lands. This is not an environmental piece decrying the loss of habitat for various species or open space, although those are certainly consequences as well. This is an appeal for the primacy of common sense over the pressures of development profit.

California has been burning for thousands of years. Grasslands and chaparral burn. That’s a fact.

Whether by lightning, a careless campfire, or an intentional match, the wild lands of California burn frequently, and that’s what usually prevents the magnitude of fire damage that we are beginning to see. When wild lands burn periodically, the underbrush, which serves to spread fire, is burned off quickly and the larger trees remain. When we suppress this natural occurrence, we simply build up kindling for a much larger fire. When we build homes in this natural undergrowth, we demand fire suppression, and that’s exactly what we get— more kindling for a much bigger future fire like the one we’ve just seen and this time the homes burn too. It’s a vicious cycle for sure, because just

as we protect these homes by suppressing small local brush fires, we are setting the stage for hugely destructive firestorms.

We cannot have it both ways. Life in the suburbs may be appealing, but the cost of massive fire suppression efforts to protect outlying areas is born by everyone in the state, not just the homeowners and insurance companies who pay for the loss. And for what? So more developers can build more homes on more marginal land way outside of established cities that in turn require more water, freeways, and firefighting readiness to protect and service them? Also the cost of service is way out of proportion to the number of homeowners serviced.

There is no economy of scale in rural development. Cities, where population is concentrated, can offer necessary services at much less per resident than in sparsely populated areas.

But you don’t need an economic argument when common sense will do. When we see that the towns that are burning were not even on a map thirty years ago, we have to believe that responsibility for this destruction lies with the city and county planners who allowed this massive wild land development to happen in the first place. Preventing development in fire prone regions of the state would seem to be a logical way to avoid fire tragedy in the future. But self-restraint is hard to come by when developers can make huge profits from building homes in new areas. But restraint is exactly what we need. If the county planners are too easily persuaded, then perhaps the state needs to get involved when it comes to approving development in certain fire-prone regions. In any case, we need to worry less about why wild lands burn and focus more on keeping homes out of harm’s way.

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. Your comments and questions are welcome. You may email Tyler Berding at tberding@berding-weil.com.

ECHO Journal | December 2007

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By Daniel E. Angius, Esq.

HOA Assessment Collection: The Impact of Federal Bankruptcy Laws

C

ollection of homeowner assessments is a constant issue for community associations. This problem becomes even more difficult when a homeowner files a bankruptcy. This article provides a cursory review of the ways in which a consumer bankruptcy can affect a community association’s efforts to collect delinquent assessments.

What is “Bankruptcy”?

The Bankruptcy Code1 is a federal law that provides protection to individuals and corporate entities from the collection efforts by their creditors. It is designed to provide the debtor with shelter from creditors and eventual relief from debts that arose prior to the filing of the bankruptcy petition. Debt that is incurred prior to the

filing of the bankruptcy petition is often referred to as “pre-petition debt.”

What Happens When an Individual Files Bankruptcy?

When an individual debtor files for protection under the Bankruptcy Code, one of the protections afforded to that individual is an automatic stay on all collection efforts by its creditors. (See 11 U.S.C. 362)2 This means that all creditors, 1 See the sidebar on page 9.

2 In some instances, a debtor will be allowed to exempt their home from the Chapter 7 bankruptcy estate by demonstrating that the value of the home does not exceed the secured liens against it.

ECHO Journal | December 2007

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including community associations seeking to collect assessments, are precluded from pursuing that debtor or any of the debtor’s assets. All collection activity must stop immediately.

This is often very frustrating for the association creditor; very often the bankruptcy petition will be filed on the eve of a foreclosure sale and the community association is forced to cancel the sale until the bankruptcy is concluded or the creditor successfully obtains relief from the automatic stay.

What are the Different Types of Bankruptcies?

There are essentially three types of bankruptcies: Chapter 7, Chapter 13 and Chapter 11. This article focuses on the two types of consumer bankruptcies that often impact community association collection activities: Chapter 7 and Chapter 13.

Chapter 7 A Chapter 7 bankruptcy is often referred to as a “liquidation” whereby the debtor seeks an order from the Court “discharging” all of the debtor’s pre-petition debt. In exchange for obtaining the relief from these pre-petition debts, the debtor agrees to surrender all of its assets, if any, to the appointed Chapter 7 Trustee. The Trustee, in turn, distributes the assets of the bankruptcy estate to the various creditors. Those bankruptcies that impact community associations will most often have at least one asset, the debtor’s home.3 Generally, a Chapter 7 bankruptcy can be concluded in as little as three months and rarely takes longer than a year to complete.

A debtor who successfully completes a Chapter 7 bankruptcy receives a discharge.

3 Prior to the amendment of 11 U.S.C. Section 523(a)(16) in 1994, a split in authority existed as to whether post-petition payments were also subject to the discharge order. One set of authorities dismissed the position that the obligation to pay assessments was a covenant that ran with the land and instead found that the obligation to pay post petition assessments was contractual in nature.

This set of authorities concluded that because the contract predated the bankruptcy, the entire obligation to pay, including post-petition assessments, was discharged.

Although section 523 does not explicitly provide for homeowners association assessments, in many instances courts have relied on the legislative intent of the section in concluding that this section applies to assessments imposed by homeowners associations. See In re Rivera 256 B.R. 828 (M.D. FL 2000). The Ninth Circuit has not yet ruled on this issue.

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December 2007 | ECHO Journal

Bankruptcy Reform Act of 1978 The Bankruptcy Reform Act of 1978, Title 11 of the United States Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

11 U.S.C. Section 362 provides in part: (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302 or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of— (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title…

The entry of the discharge order by the court terminates the automatic stay but, at the same time, it precludes any further attempts by creditors, including community associations, to collect on pre-petition debts.4 However, the discharge order does not prevent associations from pursuing any security interest they may have in the debtor’s real property.

For example, consider a debtor that is three months delinquent on his or her assessment payments at the time that the bankruptcy petition is filed. Consider further that this debtor also fails to make the three payments that became due after the filing of the bankruptcy but prior to the entry of the discharge order. This debtor is only personally liable for the three months of assessments which came due after the bankruptcy filing.

However, assuming that the community association’s secured interest in the property is perfected prior to the date of the bankruptcy petition, the community association will be entitled to conduct its foreclosure based on all six months of delinquent assessments.5 Community associations should be careful in their pursuit of unpaid assessments that come due post-petition. The recordation of a lien or an assertion of a claim against the real property (an asset of the bankruptcy estate) prior to the entry of a discharge order, can be deemed a violation of the automatic stay.

[See 11 U.S.C. Section 362(a)(2)(3) and (4)] Unfortunately, California, unlike other states, does not recognize the community association’s secured lien as being “perfected” simply by virtue of the delinquency. In California, in order for a community association’s lien to be “perfected” certain periods must expire and certain filing requirements,

the specifics of which are not the subject of this article, must be met.

Accordingly, it is possible that a pre-petition assessment delinquency could be deemed unsecured and subject to the discharge order. This would mean that as long as the debtor is current on its post-petition assessments, the community association is precluded from foreclosing on the property even if there are unpaid pre-petition debts.

5 Bankruptcy filings can be tracked on the federal courts PACER system. In addition, many collection agencies will also monitor the bankruptcy as part of the services they provide in connection with the collection fees charged.

What Actions Can an Association Take to Protect its Interests in a Chapter 7 Bankruptcy?

Monitor the Bankruptcy—Community associations can avoid many of the pitfalls related to Chapter 7 bankruptcies simply by monitoring the case or instructing their collections agent to closely monitor the bankruptcy.6 Community associations need to make sure that their claims are listed in the debtors’ schedule as “secured” by the property.

File a Proof of Claim—In most instances filing a proof of claim in a Chapter 7 will not be fruitful for the community association because, often, the debtor’s only asset is their home and the various mortgage lenders claims will likely extinguish the value of that asset. However, when there are other assets to be distributed by the Trustee, or where there is substantial equity in the debtor’s home, filing a proof of claim will often yield at least partial payment on the community association’s claim.

Seek a Reaffirmation Agreement—The Bankruptcy Code provides the debtor with an opportunity to reaffirm certain debts that might otherwise be discharged by the bankruptcy. Essentially, this is the debtor’s voluntary written agreement to exempt this debt from the discharge order and agreement to continue payment on the debt either according to the original agreement or according to some other agreed upon terms. A debtor’s desire to keep their home and avoid foreclosure is often an incentive for them to reaffirm their debts to community associations.

Seek Relief from the Automatic Stay—11 U.S.C. Section 362(d) entitles a creditor to obtain relief from the automatic stay for, among other things, “good cause.” In prior cases, good cause included things such as failure to make required post petition payments or failure to maintain insurance on the real property, thereby jeopardizing the interest of

6 The debtor’s failure to make payments according to the terms of a confirmed plan can also be good cause for granting relief from the automatic stay.

Continued on page 11

4 In most instances, the association will also be able to include late fees, interest and attorneys’ fees in this amount. 11 U.S.C. Section 506(b).

The terms “secured interest” and a “perfected lien” are used differently in this article. “Secured interest” refers only to a potential claim that a debt is secured by some collateral. The term “perfected lien” refers to instances where the creditor has taken all necessary steps to ensure that its lien is superior to and cannot be subordinated by any subsequent lien on the collateral (property).

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Assessment Collection and Bankruptcy Continued from page 8

the secured creditors. If a debtor is unwilling to reaffirm the debt and/or the debtor is not making his or her post-petition payments, a community association that is concerned about waiting until the end of the bankruptcy to conduct its foreclosure may wish to employ the services of an attorney and have the attorney file a motion with the court for relief from stay. A community association may also wish to seek relief from the automatic stay to “perfect” its lien on the debtor’s home related to the pre-petition debts.

Chapter 13 In a Chapter 13 bankruptcy, the debtor is seeking to “reorganize” its debt in a way that allows the debtor to get back on pace with their normal monthly payments to its creditors.

In this type of a bankruptcy, the debtor will propose a reorganization plan. This plan will outline specifically how each of the prepetition debts will be resolved. Often, a Chapter 13 plan will propose a payment schedule for those debts secured by collateral, such as the debtor’s home. Often the plan will provide for payment of the debtor’s unsecured debts at cents on the dollar or, in some instances, no payment at all.

This type of bankruptcy poses three unique concerns to community associations in addition to those discussed in relation to a Chapter 7 filing: The community association’s first concern should be with regard to its treatment under the Chapter 13 plan. It is important that a community association do what it can to ensure that the debt owed to it is deemed to be “secured.” Often homeowners will forget to list the assessment debt in the plan or they will list it as unsecured. Community associations should carefully monitor the terms of the proposed plan. Community associations should also monitor objections to the plan made by other creditors. In this regard, a community association should also monitor whether that plan is approved (“confirmed”) by the bankruptcy court.

If the plan is confirmed and the bankruptcy court permits the debtor to proceed with the reorganization plan as proposed, the next problem the community association faces relates to the time in which it receives its payments. Chapter 13 plans can take up to five years to complete. As such, depending

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on the terms of the Chapter 13 plan, the community association may be waiting some time before it starts receiving any payments.

Like with a Chapter 7 filing, a bankruptcy trustee is appointed at the time of the Chapter 13 filing. However, the Chapter 7 Trustee will rarely be responsible for receiving a string of payments from the debtor and distributing them to the creditors. In a Chapter 13 context, unless the order confirming that debtor’s plan provides otherwise, the debtor is required to make its payments to the Chapter 13 Trustee who in turn distributes the payments to each of the creditors.7

Community associations faced with bankrupt debtors should immediately stop all collection activities and monitor the bankruptcy...

The involvement of the Chapter 13 Trustee can often delay the payment of assessments further and can also lead to confusion regarding which payments or portions thereof are intended to be applied to “prepetition” debt and what amount is to be applied to debt or assessments which accrue after the filing of the bankruptcy petition. It is very important that community associations have a detailed accounting of the payments received and how those payments were applied to the delinquent assessments.8 What Can Associations Do When the Plan does not provide for their Secured Interest or when the Debtor Does Not Make the Chapter 13 Plan payments?

Objections to Chapter 13 Plan—In addition to Monitoring the Case, Filing a Proof of Claim (usually beneficial in Chapter 13 cases), and contemplating a Motion for Relief from the Automatic Stay, community associations faced with Chapter 13 bankrupt-

7 Collection agencies will often perform this accounting for an association as part of their collection services.

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December 2007 | ECHO Journal

cies should also contemplate filing objections to the debtor’s proposed plan. Grounds for objecting to the plan include the debtor’s failure to provide for the delinquent assessments as a secured claim and/or failure to provide for ongoing post-petition payments to the association. Community associations may also wish to object to the rate at which any delinquency is being repaid relative to payments made to the other creditors. The community association may also wish to object to any provision in the plan that would modify or extinguish the community association’s right to foreclose on the Property in the event of future delinquencies.

Conclusion—Community associations must be very careful when dealing with bankruptcies. The penalties for violating the automatic stay and/or the discharge order can be very severe. Accordingly, community associations faced with bankrupt debtors should immediately stop all collection activities and monitor the bankruptcy with the following questions in mind?

• Which Chapter is the Bankruptcy filed under—Chapter 7 or Chapter 13?

• What is the status of the case? Has the debtor received a discharge already?

• Is it worthwhile to file a proof of claim?

• Would the debtor entertain a reaffirmation agreement?

• If it is a Chapter 13, how does the reorganization plan treat the debt owed to the association? Does the Chapter 13 plan provide for the payment of ongoing post-petition assessments? If not, is an objection to the plan warranted?

• Is the debtor making its payments under the proposed plan?

• Is a motion for relief from the automatic stay warranted? Is a motion for relief from the automatic stay economically advisable?

• Is the debt substantial enough that enlisting the services of an attorney is justified?

This article is intended for informational purposes only and is not intended to provide legal advice. Each bankruptcy case is different and community associations should contact their attorneys for specific information regarding their specific situations.

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Dan Angius is a founding partner at Angius & Terry LLP, an ECHO member law firm that specializes in community association transactional and construction defect law. He speaks at various ECHO seminars and writes for the ECHO Journal.

ECHO Journal | December 2007

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By Jeffrey A. Barnett, Esq.

Checklist for Construction Contracts T

here are essential clauses that should be part of every construction contract between a homeowners association and its contractors.

These key terms give the association substantial legal advantages in the event of a dispute, mediation, arbitration or lawsuit arising from the construction project. These protections can only be secured by using a properly drafted agreement supplied by the association, or by negotiating with the contractor to include these clauses in the form of contract that the contractor provides. Sadly, many associations routinely sign the contractor’s contract form without change, placing themselves at a strategic disadvantage.

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December 2007 | ECHO Journal

Key Contract Provisions: 1. Type I Indemnity Indemnity is the concept of shifting the risk of a loss from one party to another. There are many forms of indemnity. One common form is referred to as “Type I.” A Type I indemnity protects the association and construction manager from liability against any claim, liability, lawsuit, loss, damage, or expense, including attorney’s fees, arising out of the contract, including personal injury, death or economic loss. The key aspect of a Type I indemnity is that the legal protection applies whether or not the association or its agent is alleged to have contributed to the damages. It excludes only damages or injury caused by the sole negligence or willful miscon-

duct of the indemnitee. It shifts the risk of a lawsuit to the contractor and its insurance carrier.

2. Insurance Contractors should be required to maintain proper levels of workers compensation insurance and comprehensive general liability insurance.

The contract must require that the association be named as an additional insured on the policy, and that evidence of such insurance be provided throughout the performance of the agreement.

As some liability insurance companies prohibit contractors from performing work for common interest developments without a special endorsement, it is important for the contract to require,

and for the association to verify, that the insurance is applicable for the planned work. The endorsements under which associations are named on the contractor’s policy vary. The association should consult with its insurance professional or attorney to assure that the association’s rights under the contractor’s insurance are maximized. A mere certificate of insurance is insufficient.

3. Licensure Work on a project for which the combined value of labor, materials and all other costs on Continued on page 17

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December 2007 | ECHO Journal

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Construction Contracts Continued from page 15

one or more contracts is more than $500 is required to be performed by a licensed contractor. [Business & Professions Code Section 7030.5] The contract should state the contractor’s license number and the license categories held. It is easy to verify that the contractor has the appropriate category of license, and that the license is current and active, at the website maintained by the Contractors State License Board, which is www.cslb.ca.gov.

The association is deemed the employer of an unlicensed contractor for purposes of workers compensation liability and certain tax filing responsibilities. For example, if an employee of an unlicensed contractor is injured while working in an association, the association may be sued for the employee’s lost income, medical treatment and rehabilitation expenses. The hiring of an unlicensed contractor also is below the standard of care required of community association directors and therefore could give rise to a claim by the corporation against the directors for any damages that result. The potential risk here is enormous. Directors must only engage licensed contractors for any project or series of projects costing more than $500.

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4. Entity Status The true legal name of the contractor must be stated in the contract. That name must correspond with the contractor’s license. A routine check should be made to determine whether the contractor is in good standing with the California Secretary of State. Corporations or limited liability companies that are suspended cannot legally enter into contracts. Both issues can be researched quickly at the website of the Secretary of State, which is kepler.ss.ca.gov. It should be noted that limited liability companies cannot hold a contractor’s license.

5. Scope of Work Far too many contracts have an insufficient description of the labor and materials that will be provided under the agreement.

The contract should include a detailed specification of the services and materials being purchased so that the performance of the contract can be objectively measured. In construction contracts of any significant magnitude, plans and specifications should be prepared by an architect or engineer.

ECHO Journal | December 2007

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Clarifying the scope of work is a good way of confirming the parties, expectations about exactly what their respective duties and rights are under the contract.

6. Warranty The specific terms of all labor and material warranties must be included in the contract. The agreement must state the duration and scope of the warranty. For example, the roofing contractor’s warranty can protect against defective materials only or may also cover the cost of repair of damages from leaks to the building and residence interiors.

In major construction contracts, plans and specifications should be prepared by an architect or engineer.

7. Retention Construction contracts should provide that the progress payments to the contractor are subject to retention, typically ten percent of the amount due. The retention is held until a defined date after completion of the contract, as security for the contractor’s obligation to assure that all subcontractors and material suppliers have been paid.

Without such payment, these “strangers” can record and enforce mechanics liens against the common area and/or the separate interests, even if the association had no agreement with them.

8. Completion The contract should set a start and completion date. Consideration should be given to a liquidated damages clause, establishing a daily penalty for late completion. In the absence of a completion date, the law imposes only a requirement of completion within a “reasonable” time.

9. Labor Code Section 2810 Labor Code Section 2810 requires that construction contracts between property owners and contractors include certain disclosures which are intended to protect the employees of the contractor. The informa-

Continued on page 32 18

December 2007 | ECHO Journal

2007 Legislation at a Glimpse Final Status 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

ECHO Journal | December 2007

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By Michael Biel

The Question of Exterior Painting and Deferred Maintenance O

ne recent trend in HOA exterior painting can unfortunately be summed up by a simple question: “When is it time to repaint?”

The unfortunate aspect to this question for associations is that generally by the time the board is getting around to noticing the condition of their building’s paint and surfaces and asking the question, it is already too late for a good paint job alone to renew their appearance.

In this article, I will be your guide to painting, and together we will examine the criteria needed for you to know what immediate need for painting looks like. We will also discuss what the signs are that indicate a board should begin the specification, bidding and painting process for next season now. Of course, I don’t just mean that your association might be able to get together the money. That reasoning is still a symptom of head-in-the-sand logic that has allowed so much of the valuable real estate called homeowner associations throughout California to have badly deferred needed maintenance. So many aging homeowner associations do not realize that as their exterior painting continues to be deferred, other much more expensive problems will 20

December 2007 | ECHO Journal

occur with increased likelihood inside painted walls and trim boards.

Let’s look at why waiting until the buildings shout “Paint me now!” with obvious visible problems is a much more expensive way to go than understanding the basics of why we paint in the first place. At the end of this article there is a short test on those key points to know about when it is time to repaint and what must occur on any excellent paint job, including problem prevention. Pay close attention as you read further!

When paint jobs are properly specified and done, they serve multiple functions.

First and foremost, they are not just to raise your property value, although if well applied and with attention to correct preparation, durability and craftsmanship, an exterior paint job will measurably raise property value. The principal reason to paint, however, is to protect the materials that buildings are made of from both the sun’s radiation and water. Just as a rub-on waterproof sun block lotion leaves your skin unburned when you use it before going to the beach, your paint job blocks out the harmful UV rays of the sun to a sufficient degree that it prevents fade and failure (sun burn) for some years. It should also be a waterproof, but breathable, seal for the system of walls

and trim. Few paints can do this for more than a few years without deteriorating, and none can do it unless surfaces are well prepared prior to the application of finish paints.

A good job using premium paints will last ideally a full six to seven years before there is a need to repaint walls. Trims and fascia (roof edge trim), because they move and seams open on them first, may be ready much sooner, depending upon exposure to strong morning and afternoon sunlight and/or cold fog or snow. Likewise, an entire building in the full sun may need to be redone while others in the shade of trees or a hillside continue to be in great shape.

Whatever the exposure, you cannot rely upon an arbitrary number of years, whether determined from a reserve study or a calculation based on when the complex was last painted. Building elements move and surfaces can become compromised sooner for a myriad of reasons. An inspection by a construction consultant or a top painting contractor every two to three years is the best way to know for certain if painted and caulked areas are holding up properly.

It is the combined effects of the sun’s unseen ultraviolet and infrared radiation together with hot-to-cold weather cycling,

ECHO Journal | December 2007

21

rain and fog that most destroy paint jobs— they dry out and break down paints to cause chalking and peeling and also dry out caulked seams between architectural elements. Examples of the latter are visible at the joints of any trim boards on windows and doors and where they meet walls on their long sides and are a primary indicator that the time to repaint has already begun. Your buildings may also have settling, insect infestations, wood warpage, rusted nails, unadjusted sprinklers pointing at the walls, faulty building materials and dry rot, all of which result in the need to repaint sooner.

Boards face many problems in running associations with their diverse personalities and legal challenges. You know some years have passed since you have painted, but you cannot really remember when it was last done. Was it just five years ago or was it eight? It still looks pretty good; so even though you are now a board member (or manager), you will not bring it up this year.

There are other priorities. Does this sound familiar?

The challenge of paying attention to condition, not just appearance, and finding out 22

December 2007 | ECHO Journal

what is the true condition must become the rule if problems are not to escalate. Are there any discolorations or streaks on walls, high up or lower down? If you can find one, see if you can find others. What are the streaks coming from? Do they look dark or light, rusty, crinkly or wet? Learning the cause may require an expert, but if streaking is occurring in one or more locations, there may be something systemic going on that asks for further examination. You can generally bet it has something to do with non-beneficial penetration of water. This is how leaks are spotted inside units, and outside is no different.

The problem is rarely as simple as the paint in that spot somehow became discolored. It most probably will be that somewhere above or right there at the discoloration moisture got in and deterioration has begun. The most serious kind of deterioration on wood is the onset of the fungus infestation we refer to as dry rot inside the wood underneath the paint surface. This makes the boards look at first normal, but soon, they’ll appear a little sunken, not flat. If the discoloration you observe is streaked rust color, painted-over metal, whether it be nails, flash-

ings, or pipes, has begun to rust. Worse situations await if the rust is on walls that are made of concrete with no nails or flashings in sight. This can indicate deeper water penetrations into the steel rebar reinforcement inside the wall structure, which can mean potentially large costs if the rust is accompanied by deep cracks and/or lifted concrete, known as spalling.

Vertical dark, straight seam lines along wall boards or panels indicate wood joints have opened up. Seams will also look dark where trims meet or at wall-to-trim joints where caulking has failed or is not present at all. These are the most serious ingress points for water to enter a building’s structure and dry rot to begin. But wait, we are talking about not having to wait this long before you paint, right?

When you rub the palm of your hand on the walls on most sunny sides of building(s), does any paint come off on it? If so, this shows the paint has lost its strength and is not holding out water anymore. It says the paint is dried out and has chalked.

Obviously, it’s time to paint even if it looks good from a few feet away. Before this chalk-

ing stage, let’s say a couple of years, paint loses its shine and looks flat. If it has already gone flat, it will also look thin and bone dry.

That was really the time to paint.

Seams with caulk in them will show wobbly caulk that is out of line with the seams and some open spots. That’s the time to caulk and repaint at least the trim boards, after the failed caulk has been completely removed and recaulked properly with premium material. Because seams are the most overlooked part of an exterior paint job, they are where the most awareness must be placed. You would not leave an open seam that leaks on your roof; so why would you leave multiple seams open on your trim boards? This is especially rough when the original construction left many or all seams uncaulked. It’s a shame such cheap contractor practices exist, but it’s your job to spot and remedy them.

Say mold is growing up under the eaves.

It’s black and unsightly. Wait, it’s even growing on your tile roofs. Then it is time to kill it with a biodegradable mildewcide and power wash it away. Repaint time is probably indicated because mildew and molds dig mostly into weaker surfaces that have lost their ability to hold water out. In the case of cementtype tiles, waterproof, heat-reflective maintenance paint coatings on them can save them and prevent a full tear-off and roof replacement, with a huge cost savings. Of course, this is only true if all leaks are professionally repaired first.

Power-washing an entire set of buildings, top to bottom, every few years after a professional paint job will make it last longer since dirt and mildew will be removed and deterioration from these will be reduced. Dark dirt (road grime, dust, soot) concentrates the sun’s heat and is the food for flora (molds) to grow. Power washing will also let you see how far gone your current paint job is by revealing the general condition and any deterioration. This may be the best money you can spend between repainting cycles, but only if a quality painter washes and inspects the buildings for open seams and cracks that need to be resealed.

Inconsistent coating thickness of paints or stains over wood because of no primer, not enough primer or only one coat of finish paint or stain will be accentuated within two to three years following such a paint job.

Walls will look progressively worse by showing the wall material and/or black, moldy Continued on page 39 ECHO Journal | December 2007

23

Newsletters

that get read and not trashed

24

December 2007 | ECHO Journal

By Larry Mesplé

Creating Effective Association Newsletters A

newsletter that more people will read can enhance sense of community in a common interest development (CID). This interest in the community can make management easier and also help to sustain or improve property values. This article, second of a two-part series on communications in CIDs, looks at some key elements of association newsletters for achieving these objectives. Part I was published in the September 2007 issue of the ECHO Journal.

Creating a newsletter that CID residents will read can be a challenge to the writer or editor. The following tools and techniques must be mastered: First, know your readership.

Second, attract that readership.

Third, write well, simply, accurately, and avoid jargon.

Fourth, be direct. Use strong and simple verbs, avoid the passive voice and be specific.

Fifth, be informative. Give readers information that that will be useful to them.

Sixth, don’t be a nag.

Seventh, names make news.

Eighth, graphics and photos add to readability.

Knowing the Readership of a CID Newsletter A CID newsletter is one of the useful voices of the board and association management. To develop readable stories, the newsletter writer must consider the demographics of the association membership, the

configuration of the community, overall location and history of governance. The perspectives of the board, the association manager or of both can help the writer. Successful boards and managers know their communities and should be critically important in developing a newsletter that is relevant to readers. A minimum contribution by boards or association managers to the writer can be no more than topic sentences or a bulleted list of ideas for stories.

Many board members don’t like to write or edit and some association managers are too distracted to devote much time to the development of a newsletter—even though most managers know that a good newsletter can be a very helpful tool.

The effective writer of CID newsletter stories must know something about homeowners associations, life in a CID, and be familiar with the typical problems that boards and managers face. Research about the subtleties of maintenance responsibilities and other unique features for a homeowners association can avoid misleading statements. Every CID is different.

Dick Williams, award-winning PR/marketing professional based in Berkeley states that the “first hurdle” for public relations and advertising to work is to identify your prospects (readers) and direct your efforts primarily to them. This challenge applies in a CID newsletter whether a particular aim is information for the 90 percent of cooperative residents or ECHO Journal | December 2007

25

notices of rules and potential sanctions for the 10% that makes problems for the communities.

Attracting Readers Brenda Townsend Hall, a communications consultant, trainer, and course designer, provides the first five of the tools and techniques for a readable newsletter. At www.sideroad.com/Business_Communication/ writing-newsletters.html she urges that

newsletter writers and editors pay attention to the appearance of the newsletter by keeping it at an acceptable length and employing style for easier reading. Where appropriate she suggests use of charts, graphs and diagrams to convey information more effectively than may be possible with words.

A useful resource for style is Robin Williams’ The Non-Designers Design Book. This classic, published in 1994 by Peachpit Press in Berkeley, discusses desktop publishing design principles, type, font, importance of “white space,” and includes a useful bibliography. Williams’ four basic principles applicable to any written publication are proper use of contrast, i.e., avoiding the same elements everywhere on the page: the same typeface, color, size, line thickness, shape, and spacing.

Another principle is repetition, repeating visual elements to develop the organization and strengthen the unity of a publication.

Alignment is important and provides that nothing be arbitrarily placed on a page.

Every element should have some visual connection with another to create a clean, sophisticated, and fresh look. Finally, proximity is important in that placing several items close to one another makes them into one visual unit rather than several separate units. This helps, Williams writes, to organize information and reduce clutter on the page.

In a typical CID, the newsletter is hardcopy and arrives in the mail or is left at the door by a delivery volunteer. But everyone gets a lot of mail and most of it is “junk.” The first challenge for an effective newsletter is that the envelope containing it not be tossed into the recycling bag before opening.

Whether an item will be discarded or even opened will depend first on the envelope or newsletter fold. If the newsletter arrives from a source familiar to the resident it’s likely the envelope will be opened. After opening the job of attracting readership is the look, feel, and previous experience with the document, including proper application of the design principles noted above.

26

December 2007 | ECHO Journal

How much will the typical CID reader be willing to stop and read? That may depend on the demographics of the CID. Some residents may be put off by more than one page of text. Others may think the newsletter’s information likely to be useful but decide that they are too busy to take the time to read more than a couple of pages. A newsletter in a 55+ homeowners association often includes a community calendar of events or a social column. The clear evidence is that both features are important and eagerly read.

Often, a newsletter may contain necessary forms or inserts regarding special events or association rules. Although yet another page, an insert may be viewed as less daunting than two or more pages of dense text on general association matters. Residents may choose not to read the newsletter at all but reminders and notices in the form of an insert may help increase overall readership.

The CID newsletter should provide information that brings association and community issues home to the reader.

For boards willing to spend the money, a newsletter printed in color on high-quality paper is very attractive to readers. This provides opportunity for colorful strokes, interestingly boxed text and strong photos. But even black-only printing can be enhanced with strokes, boxes and other layout features on pre-printed color stock. Use of photos that show well in tints of black can also strengthen a newsletter’s appeal.

Charts and diagrams are useful, especially in presenting financial information. They must be readily understandable and captioned with text large enough to read easily.

Pasting the typical spreadsheet table converted to a chart is not adequate. Preparing charts with professional desktop publishing software such as Adobe Creative Suite’s Illustrator may be necessary to make people want to look at and able to understand a pie, bar or line chart.

Writing Well, Simply and Without Jargon Topic sentences should break up the columns of copy. The text that follows should illustrate and help the reader understand almost immediately the subject of the paragraph. Sentences need to be kept short. But the writer should not be afraid of semi-colons to expand and illustrate a point without the full stop imposed by a period.

Townsend Hall raises an interesting objection to the use of clichés. She writes that they “…are usually a sign that you haven’t clarified what the message is.” Dick Williams points out, though, that a pithy simile or metaphor joined with a graphic can be very helpful in getting a point across. While most CID newsletters would likely never use it, the slogan “Park in the Red and You’re Dead” with a graphic of a ticking bomb, shotgun, or a stern policeman placed below the slogan is a vivid example. Williams refers to “retina time,” the “mere seconds” that people will usually devote to a message. “People only ‘snap to attention’ when the right …strategies and tactics are used.” For a newsletter to command its fair share of resident attention, it had better stand out from the crowd of mail and media notices everyone receives daily.

A newsletter article must contain accurate information. Checking facts with a board member or the association manager is critical. When including an email address or URL, the writer and editor must always test the URL before including it in the newsletter file that goes to the printer. Email addresses should be scrutinized for accuracy. The writer should phone the addressee or test the email address if there’s any uncertainty.

Be Direct!

Association managers are notorious for using indirect and passive construction when they write. They do this deliberately to avoid liability or from pointing too obvious a finger at particular violators of association rules. But in a CID newsletter the writer must keep in mind that he or she is working to support the board and the association manager. Direct language should and can be used in most cases to give both the board and the manager stronger voices. This balance can be achieved with careful writing.

Use indirect passive voice sentence construction only where absolutely necessary. In all other cases, be direct. “The board knows that visitors are parking in red zones” is preferable to “It has come to the board’s

attention that visitors have been parking in red zones.” And stating a board’s intentions and potential sanctions after introducing a problem makes newsletter content more likely to get a reader’s attention as long as it reflects board policy and not one member’s opinion.

Being Informative People like to know what’s going on in their community, even if they don’t participate themselves. A readable newsletter, Townsend Hall says, should be informative.

In a CID, information useful to residents can include the nature, topic, dates and times of upcoming events including board meetings.

A story can also include links to Web sites to expand its scope for authoritative information on recycling, water conservation, Neighborhood Watch or the other topics most CID boards and association managers deal with regularly.

One management company owner puts it this way: “If a newsletter is solely an extension of the minutes of board meetings, it loses its long-term potential for informing residents.

Business items need to be balanced with general community items of interest.”

In other words, the CID newsletter should provide information that brings association and community issues home to the reader.

Don’t Be a Nag A newsletter that contains a long list of rules, warnings and potential sanctions for violators will not build readership. Worse, it can undermine development of sense of community that is important for the livability and maintenance of property values in a CID. Indeed, a newsletter has the responsibility to point out association problems and the board’s options for solutions, but the overall impression of community affairs should be positive and encouraging. If it is to be a positive force in the CID community, praising and explaining and not pointing fingers and nagging should be the motto and the objective of any newsletter.

Names Make News It’s an old rule of journalism that “Names make news.” A CID newsletter offers plenty of opportunities to apply this principle.

Articles thanking committee volunteers by name, noting the names of event organizers and then thanking and praising them for

their contributions, giving bylines to residents who write a column or article for the newsletter. These are all opportunities to apply the rule. At the same time, the names of rules violators must be kept out of the newsletter and those of chronic complainers are probably best not put into print. There’s little or no value in giving their negativity any prominence by printing their names and inappropriate complaints.

In all newsletter issues, the names and positions of board members should be included to lend credibility to the publication, add substance to the governance of the association, and identify the areas of accountability of members of the board. The name and full contact information for the association manager should also be included in each issue. Nearby should also be appropriate contact information and emergency contact information.

Graphics and Photos Add Readability Most people like to look at photos of their community, neighbors and themselves.

Continued on page 30 ECHO Journal | December 2007

27

Calendar of Events

Upcoming Events into the New Year Wednesday, December 5 Maintenance Resource Panel 12:00 Noon La Pastaia, De Anza Hotel 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 Wednesday, January 23 Legal Resource Panel 6:00 p.m.

Contact: Mark J. Wleklinski Tel: 925-691-1191 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 Saturday, February 23 Central Coast Winter Seminar 8:00 a.m. to 1:00 p.m.

Best Western Seacliff Inn, Aptos Thursday, March 6 North Bay Resource Panel 9:30 a.m.

Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, March 7 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

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

Francesco’s Restaurant, Oakland Tuesday, March 11 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, March 12 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Saturday, March 15 North Counties Seminar 8:00 a.m.-1:00 p.m.

Community Center 5401 Snyder Ave., Rohnert Park Wednesday, March 19 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

December 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 Advance Construction Technology, Inc. 550 Division Street Campbell, CA 95008 Tel: 408-540-5060 Fax: 408-370-2919 Contact: Liz Greer

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.

COM PA S S MANAGEMENT GROUP

408.226.3300 | 650.563.9900 | 831.583.9900

See our demo at www.gocompass.com today!

www.advconsttech.com Email: lizg@advconsttech.com

Carrick & English P.O. Box 629 Burlingame, CA 94011 Contact: Jenny Dito or Ed Ferguson Tel: 650-401-3688 Fax: 650-340-9691 www.carrickandenglish.com Email: edferguson@carrickandengllish.com

Full service property manangement for residential and commercial properties throughout the the Bay Area. Proactive and professional service since 1993.

Continued on page 37 ECHO Journal | December 2007

29

Association Newsletters

in increasing interest, understanding and readability.

than a list of complaints and reports of violations.

Conclusion

Boards and association managers know their communities. The writer and newsletter editor’s job is to absorb as much of that knowledge as possible and then to reach out to the CID reader by using all the principles, tools and techniques for good writing and successful desktop publishing.

Continued from page 27

Graphics that attract the eye and help illustrate the main point of a story and photos that bring human interest into play enliven text. They are also useful if news is short for a particular issue and space needs filling.

Again, color is especially helpful for graphics and photos but they can still be very effective printed in black and white. Whether legally taken from the Web or photos from a CID event, graphics and photos must have sufficient contrast to show well in a newsletter printed in black. In addition, as noted earlier in this article, don’t forget the impact that a slogan joined with a graphic can have 30

December 2007 | ECHO Journal

To be read and to enhance sense of community a CID newsletter needs to be more than plain text in the form of a conventional business letter. It requires informative stories that will interest the readership and speak to the typical resident in clear and direct language about people and events of community importance. It requires pages that catch the eye and graphics and photos to spike interest and that explain points that are difficult to articulate only in text. It requires content that is encouraging, explanatory and upbeat rather than stories that are little more

Larry Mesplé is president of the Sonoma Greens Condominium Association. He works at Management4HOAs, LLC as newsletter editor for more than 30 homeowner associations in Marin and Sonoma counties. Previously he worked in real estate development for three decades.

Construction Contracts Continued from page 18

tion is required to be supplemented if there is material change to the agreement, and the owner and contractor are required to keep the written contract for four years. Among the information mandated for inclusion are the employer identification number of the contractor, workers’ compensation information, specification of vehicles to be used by the contractor, the number of workers to be employed, the number of independent contractors who will be used, and their license numbers. The association can incur material financial liabilities if this Section 2810 is violated.

10. Termination An association may terminate a contract if the contract permits it or if the contractor materially breaches the agreement. Proving a material breach of the contract is often difficult. Therefore, to protect the association’s right to terminate a contractor at any time, it is necessary to include a clause permitting termination without the necessity of proving “cause” (a provision sometimes called termination for “owner convenience”). These clauses are reciprocal, however. There are contracts where the association does not want the contractor to have the right to terminate without cause; thus careful consideration is necessary with regard to termination for convenience. Further, even if the association has the right to terminate without cause, it may still be held responsible for payment of some portion of the contract, including profit earned to the effective termination date.

11. Attorney’s Fees Under California law, the party to a contract must bear its own attorney’s fees in enforcing it unless there is a special statute providing for the recovery or a provision in the contract providing for the recovery of attorney’s fees. Generally, the association will be the party enforcing a contract; so an attorney’s fees clause should always be considered in a contract with contractors. By law, attorney’s fees clauses are always reciprocal; therefore a board should consider whether the clause may be used against it. The association may be able to improve its right to recover all litigation expenses if it includes in this clause the right to recover not only attorney’s fees and costs but also the fees and expenses of 32

December 2007 | ECHO Journal

expert witnesses, whether or not those experts’ fees are otherwise recoverable by statute.

12. Dispute Resolution The construction contract can require that the parties meet and confer in good faith prior to the filing of any dispute resolution process (mediation, arbitration or litigation).

Construction contracts frequently contain a binding arbitration clause. Consideration should be given as to whether or not binding arbitration is in fact in the interests of the association. This clause waives the right to trial by court and trial by jury, the right to have the decision determined in accordance with California law, and the right of appeal, among other important rights. In addition, there are reports of certain arbitrations that have been longer and more expensive than a trial in court. Another drawback to binding arbitration is that not all of the parties who are potentially responsible for the claim, damage or injury, can be brought together to resolve the issues at one time.

An alternative to binding arbitration is non-binding arbitration. The main disadvantage of this procedure is that the parties may spend considerable time and money presenting their case and then have to re-litigate it in court, if the arbitration award is rejected.

Mediation is a procedure whereby a neutral party endeavors to broker an agreement between the two sides. Knowledgeable and experienced mediators can be very effective in resolving disputes without the necessity of litigation. Consideration should be given in construction contracts to a clause requiring that an effort be made to mediate.

Conclusion A checklist of key construction contract terms will assist boards in negotiating better contracts. Legal review of construction contracts is prudent to assure that the agreement is complete and to customize the agreement to an association’s advantage based on the specific materials and services being provided.

Jeffrey A. Barnett is an association attorney with legal offices in San Jose. He is a member of the Legal, Central Coast and South Bay Resource Panels, the ECHO Legislative Committee and a past member of ECHO’s board of directors. He also frequently speaks at various ECHO seminars and writes for the ECHO Journal.

ECHO Journal | December 2007

33

Books and DVDs from ECHO

Working With Your HOA $22.00 2008 ECHO Business & Professional Directory $20.00 This directory lists all business and professional members of ECHO as of December 2007. 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 2008 Edition Available Jan. 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—2008 Edition Available Feb. 2008 This book will contain the 2008 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

2007 ECHO Journal Index Association Board Affairs

Tax Reporting and Filing Deadlines—Michael J. Gartzke, CPA, February

Protecting Homeowner Privacy—Patti Jo Lewis, PCAM, August

Checklist for Construction Contracts—Jeffrey A. Barnett, Esq., December

Balancing Responsibility and Authority in CIDs—Tyler P. Berding, Esq., January

HOA Financial Analysis, Part 1— Michael J. Gartzke, CPA, February

Kids in Condos—Marilyn Lincoln, August

Thoughts for New Association Board Members—Tyler P. Berding, Esq., February

HOA Financial Analysis, Part 2— Michael J. Gartzke, CPA, March

HOA Assessment Collection: The Impact of Federal Bankruptcy Laws—Daniel E. Angius, Esq., December

Regaining Architectural Control—Dana S. Marron, Esq., February

Reserve Fund Fallacies—Graham Oliver, M a y

Top Traits of Great Boards of Directors—Julie Adamen, May Why Have Architectural Control?—Oliver Burford, May

Stealth Reserves—Tyler P. Berding, Esq., M a y Budgeting for Community Associations—Joelyn CarrFingerle, Thomas Hill, Robert Rosenberg, July

The Art of Communication— Beth A. Grimm, Esq., June

Overcoming Resistance to Funding Reserves—Graham Oliver, August

Primer on Duties and Authority of HOA Boards—Jeffrey A. Goldberg, Esq., July

HOA Transfer Fees—Beth A. Grimm, Esq., September

Presidential Buffet—Reflections from a Board President— Garth M. Stanton, August Board Service is an Honor— ArLyne Diamond, Ph.D., August Effective Communication in CIDs: Newsletters Are a Key Tool—Larry Mesple, September

Stealth Reserves—Uncovered— Various, September Is Your Reserve Budget Just an Illusion?—Tyler P. Berding, Esq., October CPA Management Letters to Associations—Michael J. Gartzke, CPA, November

General

When Good Intentions Go Wrong—Tom Fier, Esq., November

To Amend or Not to Amend— John Paul Hanna, Esq., January

The Assessment Dilemma—Tyler P. Berding, Esq., November

The Contractural Community— Tyler P. Berding, Esq., April

Creating Effective Association Newsletters—Larry Mesple, December

Barking Dogs—Adrian J. Adams, Esq., June

Financial (Assessments, Budgets, Reserves and Taxes) Questions to Ask Your Banker— Geri Kennedy, CCAM, February 36

December 2007 | ECHO Journal

California Needs Condominium Conversion Reform—Tyler P. Berding, Esq., June

Neighbor Disputes—Adrian J. Adams, Esq., September It’s Not Easy Being Little—Issues Affecting Small Associations— Gregory W. Marler, Esq., October San Francisco Association Generates Its Own Electricity and Hot Water—John Stevens, October

Insurance

Legislative 2006 Statute and Case Law Update, Part 1—Jeffrey A. Barnett, Esq., March 2006 Statute and Case Law Update, Part 2—Jeffrey A. Barnett, Esq., April

Maintenance

The Annual Dilemma—Beth A. Grimm, Esq., February

Exterior Water Damage—Paul McLaughlin, January

Legal

Realities of Rain Gutter Screens—Gene Simpson, February

Is Your Association’s Corporate Status Suspended?—Michael J. Gartzke, CPA, January

Can You Sleep on a Stormy Night?—Robert Booty, March

Exempt or Nonexempt?—Mark E. Terman, Esq., and Lin M. Meyer, Esq., January

Getting Your HOA to “On Time and On Budget”—Hermann Novak, April

Where There Is Smoke, There Is Controversy—Larry F. Russell, Esq., January

Have Truck, Laptop, Cell Phone, Will Travel—Richard Tippett, April

When Going to Court is Good— Steven S. Weil, Esq., February

What to Do When Presented with Large Variances in Bids— Richard Tippett, M a y

New State Certification of Electricians—ECHO, March Owner of Record—Sandra L. Gottlieb, Esq., April Advantages of Incorporation— Jeffrey A. Barnett, Esq., October

Transitions in New HOAs—Tom Douma, June

Common Mistakes in Approving Contracts—Beth A. Grimm, Esq., November

Independent Contractor vs.

Employee—Robert L. Castle, CPA, July

More Questions About HOA Elections—Adrian J. Adams, Esq., November

Painting for Protection and Apearance—David Hughes, June Waterproof Decks: Keep Up or Pay Up—Bill Leys, September Construction in Seismic Regions—A Safety Issue Uncovered—Justin Bettner, P.E., November The Question of Exterior Painting and Deferred Maintenance—Michael Biel, December

Business-Professional Directory Continued from page 29

Summit State Bank 500 Bicentennial Way Santa Rosa, CA 95403 Contact: Jeff Barnell Tel: 707-568-4926 Fax: 707-573-4632 www.summitstatebank.com Email: jbarnell@summitstatebank.com

Summit State Bank provides a comprehensive suite of banking services including assessment collection, with TOPS Software compatibility, and loans for HOAs. As a community bank, our flexibility and onsite personal attention let us accommodate your special needs.

Water Damage Recovery 852 Northpoint Dr., #1 West Sacramento, CA 95691 Contact: Art Neumann Tel: 800-886-1801 Fax: 916-371-9170 www.waterdamagerecovery.com Email: artneumann@roadrunner.com

Water damage, mold remediation, fire cleanup and sewage mitigation are our specialties.

Customer service and value pricing has made our nine-year old company one of the fastest growing water damage companies in the Bay Area and Sacramento. Multiple locations for guaranteed sixty-minute response time. Our technicians are I.I.C.R.C. certified.

Changes From: Construction Performance Technology To: Construction Performance Builders, Inc. Everything else remains the same

ECHO Journal | December 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

December 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 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 November 2007 Adrian Adams, Esq. Tyler P. Berding, Esq. Justin Bettner, P.E. Tom Fier, Esq. Michael Gartzke, CPA Beth A. Grimm, Esq.

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.

Painting and Deferred Maintenance Continued from page 23

streaking; they will continue to become less durable every year until properly cleaned and recoated. Such signs are a tip-off that the last painting contractor or builder either did not follow the specifications they had for the paint job, used cheap paints, failed to reprime or used only one coat of finish paint or stain.

Speaking of cheap paints, “contractor grade” paints and most flat finishes in exterior paints that do not hold out water are a waste of money. Generally, paints provide only a hair’s thickness per coat when dry, literally 1.4 thousandths of an inch. Two coats at least will always provide substantially more protection. In Bay Area locations, around a third of each paint coat “burns” off due to the sun per year, with even larger deterioration at more exposed locations and climates.

If your goal is to optimize the years between repaint cycles, buy the premium paint and best job for the work required.

Labor cost is the largest part of the cost of a paint job and is where to try to save, not by compromising paint quality. So long as you know what you are paying for and why, you stand a better chance of getting an appropriate job for the money spent.

Now it’s time for your test: • What is the primary reason a building needs to be repainted?

• What is the first tip-off that paint is deteriorating?

• What is the visual clue that caulk has begun to fail?

• What is the most costly indicator to overlook?

• What is the best indicator that water is penetrating wall surfaces?

• What is the best money to spend between paint jobs to know the last paint job is holding up or if there are issues now needing to be remedied?

• What is the best tool to help spot any deterioration in the painted surfaces and lengthen the life of paint if done early enough in the useful life of any paint job?

• What is the reason your buildings should have timely, quality paint jobs?

Michael Biel is the founder of The Ultimate Coatings Company, an ECHO member company.

He has been a sales and marketing consultant to Paul Benson Painting.

ECHO Journal | December 2007

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December 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

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