Journal_08_03 by Echo

March 2008

A Journal for Community Association Leaders

echo-ca.org

Statute and Law Update

ALSO INSIDE THIS ISSUE:

• Minutes—Association Legal Documents • Today’s Suburbs Tomorrow’s Urban Core

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

PRSRT STD U.S. Postage PAID Sundance Press 85719

$ 0LVWDNH &RXOG &RVW <RXU +2$ 2YHU ,I \RX IROORZ WKH VXSSOLHUÂ·V DQG WKH LQGXVWU\Â·V VHOI VHUYLQJ UHFRPPHQGDWLRQV IRU UHGZRRG DQG FHGDU VKDNH VLGLQJ 6+$.( 3523(5/< 35(6(59(' 127 5(3/$&(' 6DYHG /LJKWKRXVH &RYH +2$ )RVWHU &LW\ 6DYHG 7LEXURQ 0DUVK +2$ 7LEXURQ 6DYHG &REEOHVWRQH &RXUW +2$ 3OHDVDQW +LOO 6DYHG 6S\JODVV 5LGJH 3DFLILFD 5HGZRRG DQG &HGDU VKDNH VXS SOLHUV DGYLVH \RX WR OHW VKDNH Â´DJH QDWXUDOO\Âµ XQWLO LW GHWHULR UDWHV DQG QHHGV WR EH UHSODFHG 'RHV WKDW EHQHILW \RX Â« RU WKHP" :LWK WKH ULJKW SUHVHUYDWLYH DQG WKH SURSHU DSSOLFDWLRQ ZH KDYH EHHQ SHUIHFWLQJ WKLV IRU \HDUV VKDNH FDQ ODVW WR \HDUV 7KH VRRQHU LW LV DSSOLHG WKH ORQJHU \RXU VKDNH ZLOO ODVW )RU D FRPSOHWH H[SODQDWLRQ SOHDVH FDOO IRU RXU 3DLQWLQJ *XLGH

,I \RX KDYH VKDNH VLGLQJ 25 SO\ZRRG 7 VLGLQJ FDOO IRU \RXU )5(( FRS\ RI 7KH +2$ %RDUG 0HPEHUÂ·V 3DLQWLQJ *XLGH

&RPSOLPHQWV RI &RUXP 3DLQWLQJ DQG :RRG 5HSDLU /LF % & %RQGHG DQG ,QVXUHG

Contents Case Law Update on page 6

Attorney Jeff Barnett provides his annual summary of case law and legislative developments, which distills these activities for the 2007 calendar year. California law consists of the statutes enacted by the Legislature, and the common law, which is made by the courts in the form of published decisions of the Courts of Appeal and the California Supreme Court.

Minutes—Association Legal Documents The importance of keeping and writing minutes of meetings of an association board of directors requires knowledge of the purpose and content of meeting minutes. Is there a common sense approach to board meeting minutes? This article by an experienced association manager offers some helpful facts and information to guide those who take on the important responsibility of preparing minutes.

2007 Statute and Case Law Update

Will Today’s Suburbs become Tomorrow’s Urban Core? There is a need today to provide affordable middleincome housing in areas that are already built up. Many of the old suburban cities in the Bay Area provide perfect locations for new urban cores. They have transit, they have services, and they have space. Old apartments and community associations are stealth locations for providing new housing for middleincome people.

Departments 23 Ask the Maintenance Panel 28 Calendar of Events 31 Legislative at a Glimpse 34 ECHO Bookstore

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 2008 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 Lori Burger Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles 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

On the Cover Statute and Law Update Page 6 4

March 2008 | 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.

Hit the Jackpot at the ECHO 2008 Annual Seminar Join hundreds of other homeowners at the ECHO 2008 Annual Seminar and Tradeshow to learn how your association hit the jackpot in todayâ&#x20AC;&#x2122;s legal and financial environemnt.

Mark June 21, 2008 on your calendar for the ECHO 2008 Annual Seminar and Tradeshow.

By Jeffrey A. Barnett, Esq.

2007 STATUTE AND his summary of legislative and case law developments distills the legal developments in the 2007 calendar year that are important to California community associations. California law consists not only of the statutes enacted by the Legislature, but also the common law, which is made by the courts in the form of published decisions of the Courts of Appeal and the California Supreme Court. Only a small percentage of all of the cases ruled on by these Courts is certified for publication. Generally, these cases establish a new rule of law, resolve a conflict in the law, involve an issue of continuing public interest, or review the development of a common law rule.

New Legislation SB 528 Civil Code Section 1363.05â&#x20AC;&#x201D;Agendas Addressing a perceived loophole in the Open Meeting Act, the Legislature adopted amendments to Civil Code Section 1363.05 requiring that, effective January 1, 2008, the notice of meetings of board of directors of a homeowner association contain an agenda. If the agenda is not provided or is incomplete, action taken by the board of directors at the meeting might well be ultra vires, meaning outside the powers of the board of directors and illegal. The statute specifically prohibits the board from discussing or taking action on any item at a non-emergency meeting, unless it was placed on the agenda included in the notice that is posted in a prominent place within the common area and mailed to any

March 2008 | ECHO Journal

owner who has requested notification of the board meetings by mail. Alternatively, the notice and agenda may be mailed or delivered to each unit in the development, or the notice may be included in a newsletter or similar form of communication. The new law allows residents who are not members of the board of directors to speak on issues not on the agenda. It also permits members of the board of directors and the managing or other agent of the board, or a member of the staff of the board, to: (a) briefly respond to statements made or questions posed by a person speaking at the meeting; or (b) ask a question for clarification, make a brief announcement, or make a brief report on his or her own activities, whether in response to questions posed by a member of the association, or based upon his or her own initiative. Section 1363.03 provides some limited additional opportunities for board communications on items that were not included on the agenda in the notice of meeting. Subject to rules or procedures of the board that may be adopted, the board of directors, or a member of the board may: (a) Provide a reference to, or other resources for, information to the managing agent or staff. (b) Request the managing agent to report to the board of directors at a subsequent meeting concerning any matter, or direct, or take action to direct, the managing agent to place a matter of business on a future agenda.

CASE LAW UPDATE (c) Direct the manager to perform administrative tasks that are necessary to carry out Civil Code Section 1363.05(i), the agenda law. (d) Take action in an emergency situation that was not foreseeable and requires immediate attention and possible action by the board and that makes notice impracticable, upon a determination made by the board by a vote of two-thirds of the board members present at the meeting or, if less than two-thirds of the total membership of the board is present at the meeting, by a unanimous vote of the board members present, 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. (e) Take action on an item that appeared on an agenda posted and distributed for a prior meeting of the board that occurred not more than thirty calendar days before the date 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 with respect to each of these items. Tip: Routinely post complete agendas in the common area. If there is currently no place to post the agendas, then create such a place in the common area. AB 691 Business and Professions Code Section 11500—Certification of CID Managers This bill extends the California law relating to the certification of common interest develop-

ment managers from January 1, 2008, to January 1, 2012. It also modifies certain of the requirements in order to be designated as a “certified common interest development manager” and makes a number of technical and non-substantive changes to the certification law. It remains the obligation of persons providing the services of a common interest development manager to an association to disclose whether or not they have met the requirements of this statute so that they may be called a “certified common interest development manager,” the professional association that certified them, and the location of their primary office. The statute also requires the prospective manager to discuss with the board of directors of the association whether the fidelity insurance of the manager or his employer covers the current year’s operating and reserve funds of the association. Case Law Developments 1. Housing Opportunities Project for Excellence, Inc., et al. vs. Key Colony No. 4 Condominium Association, Inc., et al., United States District Court for the Southern District of Florida, Miami Division, 2007 U.S. Dist. Lexis 1191(2007)—Fair Housing Housing Opportunities Project for Excellence, Inc. (“HOPE”), a non-profit fair housing organization, sued a condominium association, its board members and its manager for discrimination against families with children under both the Federal Fair Housing Act and the Florida Fair Housing Act. In particular they

ECHO Journal | March 2008

alleged that a number of rules adopted and enforced by the association and its agents actively discriminated against families with children, including certain rules regarding use of the pool, the club, the beach and general restrictions. In 2001, the association announced that it would enforce occupancy restrictions, limiting the number of occupants to four people on all new rentals and purchases of units. The plaintiffs alleged that enforcement only began in 2003 and then only selectively. One family alleged that they were unable to take occupancy of a unit they purchased because of the birth of a third child. The plaintiffs sought injunctive relief, actual damages, punitive damages, attorney’s fees and costs. The District Court made the following rulings: (a) A complaint cannot be dismissed for failure to state a cause of action unless it is clear that no set of facts could be proved that would support a claim for relief. (b) The standing challenge against HOPE was unsuccessful because a fair housing agency only has to show the deflection of the agency’s time and money from counseling to legal efforts directed against discrimination to satisfy the legal requirement that the plaintiff must be injured. (c) The standing challenge against two couples with children on the grounds that they did not allege that the occupancy restrictions affected them was unsuccessful. These plaintiffs alleged that they lost important social, professional, business and economic, political and aesthetic benefits of association with other families with children that arise from living in integrated communities free from discriminatory housing policies. The Court found that this was a sufficient pleading of standing. The defendants claimed that one family waived challenges to the occupancy restriction by purchasing after the four person per unit rule was in place. The Court denied the plaintiff’s motion on the ground that waivers of statutory rights, such as those under the Federal Fair Housing Act, must be “knowing and intentional.” Mere purchase of a unit after the rule was implemented was found insufficient evidence of a waiver. The association also moved to dismiss the complaint as to two families on grounds that the two-year statute of limitations had expired. These families, according to the complaint, knew of the association’s enforcement of the occupancy more than two years 8

March 2008 | ECHO Journal

prior to the filing of the complaint. However, the court found that the complaint alleged continuing violations. The Court ruled that when the plaintiff alleges a pattern of discrimination and that practice continues into the limitations period, a complaint may be filed within 180 days of the last occurrence of that practice. Based on these principles, the court dismissed the lawsuit against one of the plaintiffs only, but noted that the defendants retained the right to raise the statute of limitations defense later in the case, not based solely on the complaint allegations. The motion of the defendants to dismiss the complaint for failure to state a cause of action was denied as to the plaintiffs’ claims for disparate treatment and disparate impact, but was granted as to the claim for retaliation. The disparate treatment claim was found sufficient because the plaintiffs need only allege that other unit owners, similarly situated to themselves, were treated differently than they were on the basis of their familial status, and specifically that the implementation and enforcement of unreasonably low occupancy restrictions and other rules discriminated against families with children. The disparate impact claim also was found sufficient, the legal requirement being the allegation that a specific policy caused a significant disparate effect on a protected group. The plaintiffs made a short and plain disparate impact claim in the complaint. To succeed at trial, they will be obligated to establish their claim through statistically significant evidence. The court struck down the plaintiffs’ allegations of retaliation. The retaliation alleged was not against one of the individual plaintiffs who engaged in protected activity, but instead was against other individual plaintiffs in relation to their housing rights. The statutory protection against retaliation does not apply to retaliatory actions against third parties. The individual board members and the manager asked the court to dismiss the complaint against them because of immunities granted to officers and directors of non-profit corporations under Florida law, and in the case of the manager that she could not be sued as an agent of the corporation. The court denied these motions because the Fair Housing Act allows claims to be made against such individuals if they are alleged to be involved in the discriminatory acts. The court stated that the manager acting in the course and scope of her employment is still liable

for her own unlawful conduct, noting that an agent has no obligation to carry out her principal’s order to do an illegal act. Tip: The governing documents of associations must be scrutinized to determine whether they may violate the federal Fair Housing Act. Any provisions in violation of the Act must be removed. Occupancy restrictions and rules and restrictions that focus on the behavior of children are potentially subject to legal challenge as “familial discrimination” under the Fair Housing Act. Rules that are intended to protect children from danger may be legally attacked by parents who view the restrictions as unfairly targeting families with children. Managers must refuse to act on requests from the board that may violate the Fair Housing Act and must document their position. Liability insurance and directors and officers policies should be carefully reviewed for coverage of fair housing claims.

Managers must refuse to act on requests from the board that may violate the Fair Housing Act... 2. Haley vs. Casa Del Rey Homeowners Association, 153 Cal.App. 4th 863 (2007)— Governing Document Enforcement This condominium project consisted of nine first floor units and nine second-story units. The first story unit owners over time expanded out their concrete patios into the unrestricted common area. The Haleys lived on the first floor; but in 2003 they demanded all lower unit owners to remove encroachments into the common area, although they previously had encroached themselves. In reply, the association demanded that all lower unit owners remove their encroachments. However, the association also submitted an amendment to the CC&Rs for membership approval that authorized the association to permit first floor patio extensions into the

unrestricted common area, subject to certain design requirements to protect the privacy interests of neighbors. The Haleys sued the association and past and present board members, contending that the association was not enforcing the CC&Rs reasonably and in good faith by pursuing the amendment to the CC&Rs at the same time as it asked, but did not force, owners to remove encroachments, for example, by filing lawsuits. The trial court and Court of Appeal ruled in favor of the Association, finding that the actions taken by the association were reasonable and practical under the circumstances. Of critical importance is the ruling of the Court of Appeal that the decision of the California Supreme Court in Lamden vs. La Jolla Shores Clubdominium Homeowners Association, 21 Cal.4th 249 (1999), extended not only to board decisions regarding the method of maintenance of the subdivision, but also to decisions on the method for addressing violations of the governing documents. The Court recognized that the board had good faith discretion to avoid expensive and time-consuming litigation, and could pursue other remedies to address violations of the governing documents. The Haley court’s extension of the Lamden doctrine to association enforcement decisions is a welcome development. It means that board members can evaluate costs and risks, as well as benefits, in considering other resolutions to violations of the governing documents, including possibly amending the governing documents. Tip: Boards have a duty to enforce the CC&Rs and may do so through demand letters, the meet and confer procedure, the request for resolution procedure, fines, suspension of privileges, and litigation. Boards should carefully assess the benefits and costs of these alternative procedures and document the business judgment supporting the enforcement strategy. 3. Heiman vs. Workers Compensation Appeals Board, 149 Cal.App.4th 724 (2007)—Workers Compensation Liability. This lengthy opinion concerns the liability of a property manager for a condominium association, and the condominium association itself, for workers compensation to an injured employee. The association directed that its property manager replace the rain gutters on the condominium building. The Continued on page 11 ECHO Journal | March 2008

Statute and Case Law Update Continued from page 9

manager hired an unlicensed contractor, Rube’s Rain Gutter Service, to do the job. Rube’s was uninsured for workers compensation. On the first day of the job, a rain gutter held by an employee contacted a high voltage electrical wire and severely shocked and injured the employee. The injured employee claimed permanent disability, filed for workers compensation benefits naming as his employer the manager, the association and individual condominium owners. The Court of Appeal noted that under California law, unlicensed contractors are deemed employees for workers compensation purposes. The court further held that there could be dual employers of an injured employee for this purpose, including the unlicensed gutter service and the association’s management agent. The court went on to find that the manager was the association’s agent, and that the association was not exempt from liability based on “personal” services because the rain gutter repair and installation was in the “trade, business” of the association. However, the court held that the individual owners were not liable for workers compensation as an “employer” because the injured employee did not work sufficient hours and the owners, as principals, have statutory immunity under the Labor Code. The Court did not address any indemnity obligations of the association to the manager under the management contract. Tip: Homeowner associations and their managers should diligently verify that each contractor performing operations on the property is duly licensed for the work to be performed and is adequately insured for liability and workers compensation. 4. Berryman vs. Merit Property Management, Inc., 152 Cal.App.4th 1544 (2007)—Management Charges The plaintiffs were trustees of a trust that sold a home located in two associations managed by Merit Property Management, Inc. They sued Merit alleging that Merit charged them $100 in documents fees and $450 in transfer fees in the two transactions, one-half of which was paid by the buyers. These fees were retained by Merit and not paid to their association clients. The plaintiffs filed a class action alleging various claims against Merit Continued on page 13

454 So. Airport Blvd. South San Francisco CA 94080

Fire Alarm Systems Fire Sprinkler Systems Testing, Service, Design & Installation

Tele-Entry & Access Control Emergency Exit Lighting Automated Gates Fire-Rated & Rollup Doors For Information please call: 650 988-9508 or 888 988-9508 or e-mail info@statcomm.com Lic # 675521 Underwriters Lab #UUFX.S8915 Diamond Certified ECHO Journal | March 2008

March 2008 | ECHO Journal

Statute and Case Law Update Continued from page 11

for its document and transfer fees, and in particular that the fees were in excess of those permitted by California Civil Code Section 1368. The plaintiff’s motion was dismissed in pre-trial proceedings. In upholding the validity of the transfer charges imposed by Merit, the Court of Appeal relied on its earlier decision in Brown vs. Professional Community Management, Inc., 127 Cal.App.4th 532 (2005). Brown held that Civil Code Section 1366.1 did not apply to management companies. That statute prohibits an association from imposing or collecting an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied. The Brown court concluded that management companies were not associations within the meaning of that statute. Following the same reasoning, Berryman held that Civil Code Section 1368(b), which permits an association to charge a reasonable fee for the service of providing certain documents in escrow based on the association’s actual cost, did not apply to a management company. Berryman held that both Civil Code Section 1366.1 and 1368 permit vendors to homeowner associations to make a profit for itself, although that profit would be prohibited if the service was provided by the association directly. The plaintiff’s causes of action against Merit, including violation of the Unfair Competition Law, Consumers Legal Remedies Act, unjust enrichment, constructive trust, accounting, breach of fiduciary duty, negligence and money had and received, all failed based upon the Court’s finding that a management company could impose charges that include a profit without violating Civil Code Section 1368. Tip: Although management companies may make a profit on charges to the homeowner association, associations must continue to limit their own fees for transfer documents to those which can be justified based on actual expenses. 5. Queen Villas Homeowners Association vs. TCB Property Management, 149 Cal.App.4th 1 (2007)—Manager Liability A member of the board of directors of the association received about $134,000 of association money for allegedly providing “extraordinary services” to facilitate the association’s construction defect litigation. She was paid

SINCE 1972

Specializing in

PAINTING AND

WATERPROOFING Homeowner Associations s Apartment Buildings s Commercial Buildings

Why Choose Us?

800 540-5898 www.rebroocker.com

s Prompt & Professional Service s Our Workmanship is Guaranteed s Detailed, Competitive Estimates at No Charge s Color Consultation & Sample Application s Traditional Acrylic Coatings s Ceramic Paint Coatings 217 Old County Road, #7 San Carlos, CA 94070

&$)0 .FNCFS 4JODF r 4UBUF -JDFOTF

ECHO Journal | March 2008

from the association’s checking account with the tacit agreement of the association’s property management company, TCB Property Management. When a dispute arose between the parties, the association filed suit against TCB, claiming that it had breached its duties to the association by failing to prevent the director’s self-dealing or bring it to the attention of the rest of the board of directors. The property management company sought to be released from the litigation based on its management contract, which included an obligation by the association to indemnify, defend and hold the agent and its employees harmless against any and all claims and attorney’s fees arising out of the performance of the agreement. On this basis, the trial court released the management company from the lawsuit. On appeal, TCB was ruled to be potentially liable to the association despite the indemnity agreement in the management contract. The Appellate Court held that indemnification and hold harmless obligations normally deal with third party claims, such as a claim against the manager by a guest who is injured on the property. The indemnity and hold harmless clause in the manager’s contract was not interpreted as an exculpatory clause vis-à-vis the homeowner association and the manager. Tip: It is the board’s responsibility to verify that payments to the property manager and to consultants are appropriate and justified. 6. Marquez Knolls Property Owners Association, Inc. vs. Executive Risk Indemnity, Inc., 153 Cal.App.4th 228 (2007)—Directors and Officers Coverage A homeowner sued the association asserting claims of fraud and breach of duty. The main activity of this association was to mediate disputes between members over the covenants, conditions and restrictions on their properties which, among other things, included a restriction of the erection of structures that obstruct views from other lots. The directors and officers carrier for the association disputed any responsibility to defend or indemnify the association with respect to a dispute concerning the association’s efforts to mediate a dispute between two members concerning construction that blocked the view of another owner. The position of the insurance carrier was that there was no coverage because of an exclusion for development, planning or land-

Continued on page 16 14

March 2008 | ECHO Journal

Tackle the tough problems facing homeowner associations Tackle the tough issues facing associations at the Spring 2008 ECHO

San Francisco Seminar April 5, 2008 The Firehouse, Fort Mason Center San Francisco Seminar Agenda 8:00 8:45 9:00 9:45 10:30 10:50 11:35 12:20 12:50 1:00

Registration and Sponsor Tables Welcome and Introductions Collections, Bankruptcies and Foreclosures Case and Statutory Law Update Break Dealing With Ineffective Boards Improving the Routine Reserve Study Questions and Answers Drawings for Sponsor Prizes Adjourn

The seminarâ&#x20AC;&#x2122;s theme is Tackling 2008â&#x20AC;&#x2122;s Tough Problems Registration Fee: $40 Yes, reserve _____ spaces for the San Francisco Seminar. Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517

Statute and Case Law Update Continued from page 14

Since 1976

_______________________________________

Specializing in Multi Fam ily Reconstruction

Waterproofing · Roofing C-39 · Painting C-33 · Decks · Landings · Handrails · Stairs · Siding · Stucco · Electrical C-10 · HVAC C-20 · Window Replacement · Litigation Support

LICENSE #617610

CONCORD: 925-313-0100 • LOS ANGELES: 310-670-0700 • OXNARD: 805-278-1300 • SACRAMENTO: 916-646-6400 • SAN FRANCISCO: 415-292-9992 • SAN JOSE: 408-536-0420 • TAHOE-TRUCKEE: 530-546-8350

March 2008 | ECHO Journal

scaping of any real property and the design, construction, renovation or rehabilitation of any building, structure or other improvement on any real property. The Court of Appeal held that the exclusions relied upon by the carrier were not applicable because the association itself was not developing, planning, designing, constructing, renovating or rehabilitating any building. The Court noted the important principle that coverage clauses in insurance policies are interpreted broadly, while exclusionary clauses are construed narrowly against the insurer. Tip: Where significant claims are involved, denials by the insurance company of coverage should be evaluated by insurance counsel. 7. Castaneda v. Olsher, 41 Cal.4th 1205 (2007)—Criminal Activity Although this case arises out of a shooting in a mobile home park, the principles are directly applicable to common interest developments. The plaintiff was shot and injured while a bystander to a gang confrontation involving a resident of the mobile home across the street from his. He sued the mobile home park owner contending that the owner had breached a duty not to rent to known gang members, or a duty to evict them when they harass other tenants. In this case, a known gang member was occupying the mobile home across from the victim and was interacting with groups of individuals who were engaging in what as arguably gangrelated activity, including two prior gunshot incidents. In determining the extent of the duty of the property owner to protect residents from criminal activities, the California Supreme Court stated that a court must evaluate the foreseeability of the harm to the plaintiff, the degree of certainty that the plaintiff suffered the injury, the closeness of the connection between the defendant’s conduct and the injuries suffered, the moral blame attached to the defendant’s conduct, the policy of preventing future harm, the extent of the burden to the defendant, the consequences to the community of imposing a duty to exercise care with resulting liability for the breach, and the availability, cost, and prevalence of insurance for the risk involved. The Supreme Court ruled that landlords do not have a duty to refuse to rent to gang members. The Court recognized the difficulty of identifying who is actually a gang mem-

ber, and raised concern that fair housing laws would be violated by the effort to screen them. The Court also held that owners cannot have a duty to evict gang member tenants, which could subject the landlord or property manager to retaliatory harassment or violence; so the courts in California have recognized a duty to evict a vicious or dangerous tenant only in cases where the tenantâ&#x20AC;&#x2122;s behavior made violence towards neighbors or others on the premises highly foreseeable. However, it noted that California law does impose on a landowner a duty to protect tenants and other business invitees from foreseeable attacks by gangs and drug dealers on the premises. The Court ruled that under the facts of this case, a shoot-out between two rival gangs was not foreseeable and that the landlord did not have a tort duty to prevent it by evicting the gang member. The plaintiff alternatively argued that the mobile home park had a duty to hire and deploy security guards to prevent gang violence and maintain brighter lights in the common areas. Under California law, to impose a burdensome duty such as hiring security guards, the plaintiff must show the existence of prior similar acts on the premises or sufficiently serious indications of reasonably foreseeable risk of violent criminal assaults. The Court noted that under the circumstances of the gang confrontation in this case, it is doubtful that a security guard or increased lighting could have prevented the violence. Tip: Homeowner associations are potentially liable for injuries arising from criminal activity. Measured steps should be taken to respond to this risk, and the efforts should be fully documented. 8. Barber vs. Wu-Ye Chang, 151 Cal.App.4th 1456 (2007)â&#x20AC;&#x201D;Criminal Activity A former tenant in a four-unit apartment complex, Barber, was shot by a tenant in the complex who had exhibited bizarre and occasionally violent behavior. For example, another tenant wrote the landlord that the shooter had brandished a gun and uttered threats. The landlord admitted in his deposition that he believed the information provided in this letter. The trial court granted a pre-trial motion determining that the landlord had no liability. On appeal, this decision was reversed. The appellate court held that based on the gun brandishing incident, the Continued on page 40 ECHO Journal | March 2008

March 2008 | ECHO Journal

By Carole Murphy, PCAM

The Legal Documents of the Association T

wenty-five years in the association management business have provided me with plenty of opportunities to review board meeting minutes and observe the various methods used in keeping and writing minutes. The importance of the task requires knowledge of the purpose and content of meeting minutes. How can one find a com-

mon sense approach to board meeting minutes? Here are some helpful facts and information to guide you: Fact 1â&#x20AC;&#x201D;Minutes are the official record of the actions taken by the board at the meeting. They are not a transcript of the meeting. They are a reflection of what was done, not what was said. As their name implies, ECHO Journal | March 2008

ACT_Ad_Echo.pdf

10/4/07

11:01:46 AM

Give us a shot. Local HOA Contractor with expertise in complete reconstruction and maintenance. • Free estimates • Fully licensed, bonded, and insured • All workmanship guaranteed Expertise includes maintenance or replacement of: • Siding replacement and maintenance • All types of deck and balcony • All types of windows • All types of stairs and landings • Destructive Testing and Litigation Support • Leak Investigation • Concrete and grinding replacement • Annual maintenance inspections with the Board

550 Division Street Q Campbell, CA 95008 Q T 408-540-5060 Q F 408-370-2919 4085 Nelson Ave., Ste A Q Concord, CA 94520 Q T 925-356-0771 Q F 925-356-0773 1515 East Tropicana Avenue, Suite 375 Q Las Vegas, NV 89119 NV License: 69413 Q www.advconsttech.com

T 702-739-8010

CA License: 855141

Construction administrative services including bidding process Pre-construction consulting & coaching Over 25 years experience in architecture, construction and engineering environments

GROUP

March 2008 | ECHO Journal

INC

A well-run meeting is the first step to good minutes.

F 702-739-8310

Construction Project Management and Architecture for Home Owners Associations

AYRIDGE

“minute” means “small” and “minutes” should be brief. Fact 2—Bad meetings produce bad minutes. The board of directors should follow parliamentary procedure or at least have an understanding of the fundamentals of running a meeting. Having an agenda and using it as a guideline to run the meeting will help the secretary in taking the minutes. A wellrun meeting is the first step to good minutes. Fact 3—All motions made at a meeting should be included in the minutes whether or not they were approved. It is especially important to list the board members who dissented in a vote so they are not responsible for the consequences of an action.

1777 Borel Place Suite # 314 San Mateo, CA 94402

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

Fact 4—Financial transactions such as opening a bank account, closing a bank account or expensing money out of the reserve account must be noted in the minutes. At the end of each year, if your association has a financial review or an audit, the CPA will read the minutes to verify that all financial transactions were approved by the board of directors. Fact 5—If there is no quorum at a meeting, do not take minutes. It is not a legal meeting. If a meeting is not held because there is no quorum or because the meeting is canceled, a page noting there was no meeting should be added to the minute book or you can incorporate such a note in the minutes of the next meeting. The reality is that you will never remember why you only have 11 months of meeting minutes three years from now when they may be needed for a court case. Fact 6—Minutes are a legal document. After the minutes are approved, they become part of the legal record of the association and may be used in a court of law to justify a board’s action. When writing minutes, ask yourself, “Could I read these before a judge and jury?” Is there anything in them that

would incriminate the association? Is the wording clear enough to explain why an action was taken to protect the association? Fact 7—The minutes of a board meeting become the official record of the association only after they are approved by the board of directors at the next meeting at which a quorum is present. At that time, the secretary should sign the minutes to make them official and the approval is stated in the minutes. The follow information should always be including in board meeting minutes: • The name of the association and the type of meeting (monthly, quarterly, etc.). • The date and place of the meeting. • The time the meeting is called to order and adjourned. • Board members who are present and/or absent and their offices. • Approval of the previous minutes. • Report of the officers and committee members. • The business of the meeting. • All motions made at the meeting and the action that was taken. Note who voted for a motion, who dissented, and who abstained from voting because of a conflict of interest. Minutes should always be signed by the association secretary after they have been approved by the board of directors. It is important to remember who may read the minutes of your association. More and more, new owners, lending institutions, realtors, bankers, and mortgage companies are requesting twelve months of minutes for sales transactions. The minutes of the association can play an important role in both legal and financial business. Approving board meeting minutes is one of the most important actions taken at a meeting. The next time you approve minutes, make sure they are accurate and reflect all actions taken at the meeting. They will become a part of the legal record of the association. How would you rate your minutes? Copyright ©2007 Association Times. Reprinted from Association Times, the newsletter from Associa.

Carole Murphy is the founder and chairman at M & C Association Management Services in Stockton, an Associa company. She has been involved in community association management for over 27 years. Ms. Murphy is a member of the national faculty for CAI and teaches community association management throughout the United States. ECHO Journal | March 2008

Ask The Maintenance Panel By Dick Tippett

Outside Construction Managers Q:

We are faced with several major projects in the next three years and money is tight. Most of our board feels that an outside construction manager is an unnecessary expense. What say you?

Our answer this month comes from Dick Tippett of ERTECH, Inc.

This is a very common belief. The reality is quite different. Contractors only make money when they are removing and replacing siding, or paving, or roofs, for example. And the more that they remove and replace, the more money they make. A good construction manager should be able to show you several ways to accomplish your goals, establish the extent of the work, and protect your association from high-priced Change Orders. In this way, the manager will save the association more than he costs. Construction managers should have their own license and insurance. They should know as much about construction as any general contractor. They should be pragmatists, and the association’s concerns should be foremost in their minds. Not all of the roofs or all of the balconies or all of the piping in an association fail at one time. Nor does all of the siding or the paving. A good construction manager can and should be able to locate the problem areas and design a “fix” that address only the problem areas. This avoids wasting the association’s assets by removing or replacing materials that are in good condition and may not need repair or replacement for several more years. A classic example of this is roof replacement. Roofs in an association age and fail at varying rates. Some will need replacement sooner that expected. Others will last several years longer than their designed working life. A good consultant can examine the roofs and can schedule replacement over a number of years, rather than scheduling all of the roofs for replacement when the first ones fail, which is a waste of money. The same is true even if the roofs are Cemwood or wood shakes.

Spreading the work over several years will save the association the cost of the consultant’s services many times over. Contractors bidding on projects for associations will all have their own approach to doing the work. These approaches will vary widely. Some will be “overkill,” some will be correct and adequate, some will be inadequate or “cut rate.” A good consultant can look at a project and, in conjunction with the board, develop a scope of work and specifications that meet the real project needs. These specifications will ensure that all bidders are pricing the same scope of work. The scope of work and bids should be proper for the work, neither over- nor under-priced. Overpriced and you pay too much. Under-priced in construction means low quality, a shortened working life, and the need to pay to redo the work too soon. There will always be Change Orders for any major project. This is because once work begins on buildings or paving, apparent problems are uncovered that couldn’t be known before siding or roofing or paving was removed. It is in the contractor’s best interest to find as many of these apparent problems as possible. A consultant should look at all such apparent problems and determine which ones are real and which are cosmetic. The real problems should then get corrected and cosmetic items handled in other ways. This is yet a third area where a construction manager can save an association far more than the cost of his time. There’s an old saying in the industry: “Pencil lead costs less than labor and material.” Good planning before work begins will save substantial sums during construction. Good management of the work during construction will save even more money yet. In summary, careful planning by an association and working with a construction consultant can save those reserve dollars from being needlessly spent. Doing work that doesn’t need to be done can be avoided. This means smaller assessments and more opportunity for money in your reserve account to stay in that account and earn more interest.

This column addresses a specific maintenance concern each month that every association faces. Our panel of experts is here to help answer your questions. We hope that you will find this page to be informative, so please Ask The Panel!

ECHO Journal | March 2008

March 2008 | ECHO Journal

By Tyler P. Berding, Esq.

Back to Our Housing Future

Will the Old Suburbs Become the New Urban Core? A New Role for Older Community Associations?

ave we reached the end of the move to the suburbs that started after World War II? The gradual shift of the population from inner city San Francisco, Oakland, and San Jose to the Peninsula, San Leandro, Walnut Creek, and Concord started about then, later followed by further shifts to Antioch, Brentwood, Morgan Hill, Fairfield and even Stockton and Modesto. Similar movements could be found in Sacramento as former residents of that city moved east into the foothills and south to the Central Valley. And of course, entire new cities were created in southern California as immigrants from Los Angeles and populations from other states migrated to Orange, Ventura, and San Bernardino Counties. As the middle classes moved out, the inner cities deteriorated, often followed by an increase in lower income population, the homeless and an increase in crime. But no one really cared because gas was cheap and California had the best system of highways in the country. Also, the Interstate Highway system begun in the late fifties and early sixties created additional four lane freeways between jobs in the inner cities and the new single family housing in more distant suburbs. Prior to 1940, the bulk of California’s population lived in Los Angeles, San Diego, San Francisco, San Jose, the East Bay, and Sacramento. A lot of that housing was high density. Even single family homes were generally built close together on small lots. Everything outside of these cities was largely agricultural and rural. But when the population shift began, it was unstoppable and the new suburbs became the destinations of choice for the World War II generation and eventually their baby

boomer children. Land and houses were relatively cheap, crime was low, and the lifestyle there fit their expectations and California’s good weather. Gradually, however, these commuters began to pay the price for their homes in the suburbs. Long drives to jobs in the cities, traffic tie-ups that made the trip even longer, and the cost of automobile maintenance and gasoline began to represent a higher percentage of a family’s disposable income. Some jobs followed the population into the suburbs. Office parks in cities like San Ramon, Cupertino, and Walnut Creek offered the chance for companies to move where their workers lived, but commute traffic around northern (and southern) California remained heavy; and one to two hour commutes from places like Stockton and Tracy or Morgan Hill, to jobs in the Bay Area were not unusual by the end of the last decade. While rapid transit like Cal Train and BART helped to some degree, the central problem was that affordable housing was gradually getting farther and farther away from jobs. Then came the new millennium and high oil prices and we began to see the cost of the commute rising above the average worker’s ability to pay for the daily drive. Finally, the “California Golden Rule”—that housing prices would always rise—was broken last year, housing prices dropped for the first time in many years, and the wisdom of investing in homes 50 and 60 miles from a job was finally being seriously questioned. The Reason to Redevelop the (Old) Suburbs This new economic reality was recently discussed in an article written by Eduardo Penalver, an associate ECHO Journal | March 2008

professor at Cornell Law School entitled “Silver Lining links housing crunch with high gas prices.”1 “If prices at the pump continue to increase, as many analysts expect, the eventual recovery of demand for new housing may not be accompanied by a resumption of America’s relentless march into the cornfields. The death of sprawl will present enormous challenges, chief among them the need to provide affordable middle-income housing in areas that are already built up. Accommodating a growing population in the era of high gas prices will mean increasing density and mixing land uses to enhance walkability and public transit. This must happen not just in urban centers but in existing suburbs, where growth is stymied by parochial and exclusionary zoning laws.” The need to provide affordable middle-income housing in areas that are already built up! What 1 Penalver, Eduardo M., “Silver lining links housing crunch with high gas prices” Contra Costa Times, January 6, 2007.

March 2008 | ECHO Journal

this means, of course, is that we may have to stop building in the distant (new) suburbs such as California’s central valley and in those southern California counties like Ventura and San Bernardino, and instead concentrate on redeveloping the (old) suburbs, which are easier commutes and have public transit connections to jobs in the inner city. In fact, many of those office parks that moved to the (old) suburbs twenty and thirty years ago might be ideally located if we can provide middle class housing nearby. Why should we spend billions of dollars extending rapid transit to low density new suburbs when we can increase the density of those areas that already have transit? The old suburbs are generally in areas that have seen a big increase in housing prices in the past three decades. Middle class housing is scarce in places like Walnut Creek, Pleasanton, Cupertino, and San Mateo. The challenge in bringing people closer to jobs is to find a way to add more affordable housing in those areas by more efficiently utilizing available space. One urban planning professional who has studied the expansion of the suburban area

and has found (new) suburban low density housing wanting, has said: “We could easily direct all the growth into existing urbanized areas…; (however) we would still have the problem of how to serve the existing low density development and we would still need to build high-speed rail to connect the existing towns.” When asked about increasing density to provide more housing in the urban core, he states: “There is overwhelming evidence that people are willing to relocate to higher-density housing,” which he terms “smart-growth.” “I’ve never heard of a smartgrowth project not selling out.”2 What Locations are Candidates for New Housing in (Old) Suburbs? There are a number of obvious locations for building “smartgrowth” housing that would attract middle income workers back to close-in suburban cities. Abandoned industrial sites are sometimes an option. The cost to clean up these sites can make development there more costly, but that can be overcome 2 Nelson, Eric: “Bay Area Anchors Megaregion,” The Sunday Times, January 13, 2008, pg A8, quoting Gabriel Metcalf, Executive Director of San Francisco Planning and Urban Research and author of “The Northern California Megaregion.”

if sufficient density is permitted by the local municipality. Even obsolete low-density retail sites such as malls that no longer attract sufficient revenue to support them are candidates for redevelopment. The same is true for former military installations like the old Concord Naval Weapons Depot or the Alameda Naval Air Base. [A century ago, Alameda was actually a (new) suburb of San Francisco, with trains and ferries used to commute to work in that city!] The problem with these sites, besides the cost of any environmental clean up, is that they represent enormous planning and financing challenges, attract a lot of public attention, and hence take a long time to convert to housing or mixed uses. Also, we cannot expect one big project alone in a county to deliver the amount of new housing that would be necessary to bring middle income workers back to the (old) suburbs. Further, regional planning is necessary if a region, and not just a city, is to redevelop with higher density and at the same time deliver a high quality lifestyle. “Overcoming low-density, single-use zoning mandates so as to fairly allocate the costs of increased density will require coordination at regional levels…”3 That means that other residents of Contra Costa County should not expect the City of Concord to shoulder the burden of providing all necessary new density within the confines of the Concord Naval Weapons site, for example. Walnut Creek, Pleasant Hill, Pittsburg, Danville and San Ramon also have to assist. But these other cities have no available open space or any significant industrial or commercial sites that could be redeveloped; so how do we acquire more middle-income housing in those cities? The answer is twofold: (1) Accept the idea of a new urban core in some previously low-density suburbs, by (2) making changes in zoning to allow higher density structures and redevelop some existing uses into higher density housing or mixed use. Are the Old Suburbs Ready for a New Urban Core? Not every suburb can accept high-density housing, nor do they have the municipal services that it would require. But isn’t it really just a matter of scale, after all? Maybe Concord could support several thousand 3 Penalver, Ibid.

Free Copy of the 2008 Community Association Statute Book is Coming to You Contains the 2008 version of the DavisStirling 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.

Nowble la Avai

Continued on page 32 ECHO Journal | March 2008

Calendar of Events

Don’t Forget These Important Dates Thursday, March 6 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, March 19 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Drive, Rohnert Park

Wednesday, April 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Drive, Rohnert Park

Friday, March 7 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Thursday, March 20 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club

Wednesday, April 16 Legal Resource Panel 6:00 p.m. Call Mark Wleklinski 925-691-1191

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 Winter Seminar 8:00 a.m. to 1:00 p.m. Community Center 5401 Snyder Ave., Rohnert Park

Wednesday; April 2 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101, San Jose Friday, April 4 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek Saturday, April 5 San Francisco Spring Seminar 8:00 a.m. to 1:00 p.m. The Firehouse, Fort Mason Center San Francisco

Saturday, April 19 South Bay Spring Seminar 8:00 a.m. to 1:00 p.m. Campbell Community Center 1 W Campbell Ave., Campbell Thursday, May 1 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, May 2 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Monday, May 12 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant, Oakland Tuesday, May 13 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, May 14 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Saturday, May 17 Marin Seminar 8:00 a.m. to 1:00 p.m. Embassy Suites 101 McInnis Pkwy., San Rafael Wednesday, May 21 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Dr., Rohnert Park

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

March 2008 | 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 March, May, August, October

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 Eugene Burger Management Co., Rohnert Park Varies

Directory

UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.

Listing Additions B. Taylor Painting, Inc. 217 W. Canfield, # 12 Coeur d’Alene, ID 83815 Contact: Brian Taylor Tel: 208-816-4257 Fax: 208-475-6293 www.btaylorpainting.com Email: brian@btaylor.com

All levels of commercial painting, interior and exterior.

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!

Burdick Painting 705 Nuttman St. Santa Clara, CA 95054 Contact: Tim Connolly Tel: 408-567-1330 Fax: 408-567-1339 www.burdickpainting.com Email: tconnolly@burdickpainting.com

Pacific Western Bank 900 Canterbury Place Escondido, CA 92025 Contact: Ken Carteron Tel: 760-432-1335 Fax: 760-432-1339

Detailed on-site inspections, inventories and asset descriptions • Spreadsheet report format now available on request 30-year threshold and components models • 16 years of reserve study experience • Call today for a free proposal

www.pacificwesternbank.com Email: kcarteron@pwbonline.com

Listing Changes Sunrise Assessment Services 4401 Hazel Avenue, Ste. 225 Fair Oaks, CA 95628 Tel. & Fax remain the same

ECHO Journal | March 2008

March 2008 | ECHO Journal

2008 Legislation at a Glimpse As of February 20, 2008 Bill No.

Author

Subject

Status

Position

Summary

AB 567

Saldana

Common Interest Development Bureau

Senate Trans. & Housing

Oppose Unless Amended

This bill would, until January 1, 2014, 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 violations, and compel associations to disclose those violations.

AB 1173

Keene

Mandatory Submeter Installations

Dead

Watch

For new constructionâ&#x20AC;&#x201D;would compel water purveyors to require the installation of submeters as a condition of new water service to any person residing in a multiunit residential structure. The bill would authorize the owner or operator of a multiunit residential structure without water submeters to charge tenants separately for water service. This bill is no longer active.

AB 952

Mullin

BMR Owner Assessment Restrictions

Senate Inactive File

Oppose

Would prohibit the board of directors from imposing a special assessment or an increase in the regular assessment greater than 20% unless separately approved by owners of low- or moderate-income units in accordance with specified procedural requirements. Requires board to provide those owners with a one year, interest free payment plan.

AB 1752

Calderon

California Earthquake Authority

Submitted

Watch

This bill will affect the California Earthquake Authority, which currently insures some common interest development homeowners. The bill may be modified to include provisions affecting common interest developments.

AB 1830

Lieu

Subprime Submitted Lending Reform Act

Watch

This bill would regulate high cost lending practices and may be amended to impact common interest developments.

AB 1892

Smyth

Solar Energy Equipment Restrictions

Hearing March 9

Watch

This bill would prohibit a declaration or other governing document from limiting or prohibiting the installation of a solar energy system, a solar heating collector, or a solar water heating system, by an owner, on or in the ownerâ&#x20AC;&#x2122;s separate interest or his or her exclusive use common area.

AB 1921

Saldana

Statutory Revision of CID Law

Hearing March 13

Watch

This bill would renumber, consolidate, make minor changes to, and remove discrepancies in those sections of California law that govern common interest developments. If passed, the bill would replace the existing Davis-Stirling Act.

SB 127

Kuehl

CID Sale Disclosure Deadlines

Assembly Inactive File

Support

This bill would impose disclosure deadlines for the seller of a unit in a common interest development. Unless the parties agree otherwise in writing, 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. The bill affects both mobile home and CID owners.

SB 948

Harman

Mandatory Board Member Training

Dead

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. This bill is no longer active.

SB 1137

Perata

Foreclosure Spot Bill

Submitted

Watch

This spot bill will affect homes currently in foreclosure and may be amended to impact common interest developments.

ECHO Journal | March 2008

Back to Our Housing Future Continued from page 27

middle income housing units, but other cities could accept something less ambitious, maybe a couple thousand in Walnut Creek and Pleasant Hill, and a few hundred in Danville or San Ramon? And similarly-sized projects in other Bay Area suburbs. And what do we mean by “high density” housing? That depends on what you are comparing it to. In San Francisco, higher density means taller buildings. The same in Walnut Creek, Pleasant Hill and Concord, but whereas in San Francisco that means going up perhaps 40–50 stories, in the (old) suburbs that might mean ten stories in, say, Walnut Creek, or even just three or four stories in San Ramon, but increasing height limits to allow even buildings of those heights would dramatically increase the density of the housing on a particular lot. The density that can be supported depends a lot on the services available. BART does not go into the San Ramon Valley, so truly high densities there may be decades away. But in Walnut Creek, Pleasant Hill and Concord, where BART and retail services are already clustered around a central commercial core, a change in zoning to permit buildings of say 6–10 stories in height would not greatly change the character of the downtown. It would, however, provide a tremendous boost to plans for new mixed use buildings that would include a lot of housing and other services located within walking distance of transit, jobs, shopping and entertainment. Hidden Opportunities for New Housing But there is another less obvious, some might say hidden, opportunity to increase density in old suburban areas—one that few people have really considered because it involves separate projects, all smaller in scale than those discussed above. We’re talking about redeveloping existing multi-family housing projects into higher density, energy efficient housing for middle income families. There are many apartment complexes that are being converted to condominiums, but that doesn’t increase density and simply shifts ownership of an old, inefficient and often obsolete, building to those who cannot really afford to own it—low and middle income buyers. But if instead of merely shifting the existing structures’ ownership from rentals to owned-units, we were to redevelop the site and increase its density perhaps by two or three times, there could be sufficient finan32

March 2008 | ECHO Journal

cial incentive to create a whole new project, built to modern codes and incorporating energy-saving technology, for example. But how do we do that in the space now occupied by say, 200 low-rise units built thirty years ago? We have to start by identifying projects which are within, or are on the edge of the projected new urban core, and adjust the zoning so that these parcels can be redeveloped with a more urban footprint—say a low to mid-rise building of perhaps 6–7 stories that would support 400–600 homes in or adjacent to the downtown core. By going up in these locations, we can still preserve some of the abundant open space that abounds in older low-density projects, while providing affordable housing located close to the downtown areas of the larger suburban cities. The same model could apply to other locations with smaller downtowns, but the size of the project would be reduced in proportion to the scale of the existing commercial district. What is the Role for Community Associations? Like old apartment complexes, many older common interest developments were built in the sixties and seventies when land was abundant and densities were low. These projects are often spread over many acres and rarely exceed two stories in height with very low density per acre. That limitation might have been appropriate when their locations were semi-rural, but today many of the cities we have been discussing in the San Ramon Valley, and in similar suburban areas elsewhere, have vibrant commercial districts that support a great deal of automobile and pedestrian traffic. These locations could easily handle taller, higher density buildings and would be ideal candidates for urban redevelopment. But whereas old industrial or commercial sites or apartment buildings usually have owners who can act unilaterally to make decisions on the disposition of these projects, the same is not true for common interest developments. Title to those complexes is fragmented among many individuals who each get a vote as to what happens to the development. The attempt to reach consensus on a decision as major as selling the entire complex for redevelopment would be a nightmare scenario. But it has happened. In our treatise, “The Uncertain Future of Community Associations”4 we discuss the disposition of two old condominium complexes in the Sacramento area that had become obsolete

and were beyond the financial capability of the owners to repair. In those cases it took the housing authority of the City of Sacramento to marshal the horsepower and the funding to redevelop the project, in that case using the condemnation power of the city to achieve it and to aggregate numerous individual titles to the property. But it can be done, and there are private sources of financing that could work equally as well. Increasingly, as we have often written, community associations are finding themselves in impossible financial situations— repair costs that exceed any hope of financing by the owners, even through borrowed funds. Where those projects are well-located, in or adjacent to expanding urban cores in old suburban cities, redeveloping them and increasing their density in the process makes more sense every day. Exactly how this can legally be done without necessarily undergoing the trauma of condemnation is a topic for another discussion; but as we have said, we believe it can be done and have been considering at least two projects that are candidates for such redevelopment. The trick is to create enough new value in such a project to be able to protect the interests of the present owners while also covering the costs of the redevelopment and some incentive for those providing the financing for the venture. As these projects mature, we will provide additional details. Five Critical Aspects for Determining Candidates for Redevelopment Anyone seriously thinking about redeveloping an existing community association project must consider the following five criteria: 1. Financing. Regardless of how worthy a redevelopment project may be, unless necessary financing can be secured, it’s not going anywhere. In Sacramento, the financing was obtained through a public agency. But private financing, and even self-financing by the owners, are also possibilities. None are easy. All are possible. 2. Zoning. The most critical aspect for common interest development (CID) redevelopment after financing is the existing zoning and the potential for higher (read, significantly more density) zoning. We have illustrated how zoning determines density. It is our opinion that for a CID 4 Berding, Tyler P., “The Uncertain Future of Community Associations,” copyright 2004.

Continued on page 37

Mark Your Calendar June 20–21, 2008 2008 ECHO Annual Seminar and Trade Show Here are some reasons why you should plan to attend: • Advice from experts in law, accounting, association management, insurance and maintenance. • Information, assistance, product samples and prizes from more than 100 booths in the Trade Show. • Best practices and proved procedures for associations unveiled in 16 educational sessions. • The latest news from the State Legislature and Law Revision Commission. • Checklists and other important reference information in a 300 page Seminar Program Book. • Practical ideas for handling community association leadership issues effectively. • Timesaving tips that will help make your leadership experience more worthwhile. • Exchanges on common concerns by networking with 1000 community association leaders. • Information about ECHO programs, publications and services that support association leaders. ECHO Journal | March 2008

Books and DVDs from ECHO

Homeowners Association and You $13.00 2008 ECHO Business & Professional Directory $20.00

Condominium Bluebook $18.00 2008 Edition

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.

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.

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.

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 provides an insightful overview of community living from the viewpoint of experienced owners in readable language. Recently revised and expanded.

Robert’s Rules of Order $7.50

The Uncertain Future of Community Associations $10.00

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.

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 Construction $10.00

The Condo Owner’s Answer Book

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.

Community Association Statute Book—2008 Edition $10.00 This edition contains 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 $15.00

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

$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 Now Order Online at echo-ca.org

Bookstore Order Form

Board Memberâ&#x20AC;&#x2122;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 Memberâ&#x20AC;&#x2122;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

Will Today’s Suburbs Become Tomorrow’s Urban Core? There is a need today to provide affordable middle-income housing in areas that are already built up to counter the time required and the cost for long duration commutes. People no longer want to afford the cost or time to work in San Francisco, or even San Ramon, and live in Tracy. Many of the old suburban cities in the Bay Area provide perfect locations for new urban cores. They have transit, they have services, and they have space—if they can only embrace the necessary increase in density. Old apartments and community associations are stealth locations for providing new housing for middle-income people. Today there is a need to provide affordable middle-income housing in areas that are already built up! What this means, of course, is that we may have to stop building in the distant (new) suburbs such as California’s central valley and in those southern California counties like Ventura and San Bernardino, and instead concentrate on re-developing the (old) suburbs, which are easier commutes and have public transit 36

March 2008 | ECHO Journal

connections to jobs in the inner city. Why should we spend billions of dollars extending rapid transit to low density new suburbs when we can increase the density of those areas that already have transit? Old suburban cities can identify downtown commercial districts as locations for a new regional urban core. Why? Because there is no real alternative. Many of the old suburban cities provide perfect locations for new urban cores. They have transit, they have services, and they have space—if they can embrace the necessary increase in density, which is of course, the basic point; you can’t have an urban core without urban density. But these areas also have something else—an aging population that increasingly does not want to move away from the familiar suburbs where they raised their families—if they can find suitable alternative housing close to the services they need. Old apartments and community associations are the stealth locations for providing new housing for middle-income people; we just have to re-think the existing land use.

Minutes—The Legal Documents of the Association The importance of keeping and writing minutes of meetings of an association board of directors requires knowledge of the purpose and content of meeting minutes. Is there a common sense approach to board meeting minutes? The follow information should always be including in board meeting minutes: • The name of the association and the type of meeting. • The date and place of the meeting. • The time the meeting is called to order and adjourned. • Board members who are present and/or absent and their offices. • Approval of the previous minutes. • Report of the officers and committee members. • The business of the meeting. • All motions made at the meeting and the action that was taken. Note who voted for a motion, who dissented, and who abstained from voting because of a conflict of interest.

• Minutes should always be signed by the association secretary after they have been approved by the board of directors. It is important to remember who may read the minutes of your association. More and more, new owners, lending institutions, realtors, bankers, and mortgage companies are requesting twelve months of minutes for sales transactions. The minutes of the association can play an important role in both legal and financial business. Approving board meeting minutes is one of the most important actions taken at a meeting. The next time you approve minutes, make sure they are accurate and reflect all actions taken at the meeting. L They will become a part of the toug legal record of the association.

Upcoming Events

Saturday, March 15 North Counties Seminar 8:00 a.m. to 1:00 p.m. How to gain th Community Center today’s 5401 Snyderover Ave., Rohnert Park tou Winter 2008 ECHO Thursday, March 20 North Counties Seminar SanMarch Francisco Luncheon 15, 2008 Community 11:45 a.m. to Center 2:00 p.m. Synder Avenue, Rohnert Park St. 5401 Francis Yacht Club Seminar Agenda

Saturday, April 5 8:00 Registration and Sponsor Tables Welcome and Introductions San8:45 Francisco Spring Seminar 9:00 Collections, Bankruptcies and Foreclosures 8:009:45 a.m. to 1:00 p.m. Case and Statutory Law Update The Firehouse, Fort Mason 10:30 Break 10:50 Dealing With Ineffective Boards Center 11:35 Improving the Routine Reserve Study San12:20 Francisco Questions and Answers 12:50 Drawings for Sponsor Prizes 1:00 Adjourn

T T

Y A

O ca EC Te

Back to Our Housing Future Continued from page 32

redevelopment to succeed, the density of the new project will have to greatly exceed that of the old one. This has two distinct benefits: (1) build more value into the project and (2) achieve goals of more middle income housing close to the new urban cores. 3. Location. The third most critical aspect is location. For a project to fit the new urban core model, it must be within the designated area, or immediately adjacent to it. To convince cities to change zoning so as to increase density, the project has to be part of a larger zone where such increased density makes sense. No city is going to allow a mid-rise building in the middle of a single-family neighborhood, for example. 4. Physical Condition. If the first three criteria are metâ&#x20AC;&#x201D;potential financing, appropriate zoning, and the right locationâ&#x20AC;&#x201D; then we can begin to look at the project itself. Candidates for redevelopment are often those which have suffered the ravages of time and are close to obsolescence. Repairs, expected or unexpected, which have been deferred for so long that it is unlikely that they will ever be completely done are one indication. Visible deterioration, such as rot in the wood exterior portions of the building; overdue painting; no control over ownersâ&#x20AC;&#x2122; use of exterior living areas; leaks into units or common areas that cannot be readily overcome, and deterioration of the building structure due to moisture intrusion, are some examples of conditions that may make a complex ripe for redevelopment. 5. Economic Condition. The criterion that will deliver the coup de grace to an existing project is its own financial condition. If the accumulated assessments are insufficient to get control over the problems above; if the owners are unwilling to assess themselves sufficiently, or at all, to gain the resources to repair the building; if assessment delinquency exceeds the norm; or if units are abandoned or likely to be due to foreclosure, then this project is a candidate for redevelopment, assuming it meets the other criteria. If these five criteria are met or are close, someone should begin to give serious Continued on page 39 ECHO Journal | March 2008

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 Jim Harmon, 831-425-3622 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 Gerri Kennedy, CCAM, 650-348-2691 ext. 1006 Kimberly Payne, 408-200-8470 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

March 2008 | 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. Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

Recent ECHO Journal Contributing Authors 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?

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

• 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

December 2007 Daniel E. Angius, Esq. Jeffrey A. Barnett, Esq. Tyler P. Berding, Esq. Michael Biel Larry Mesplé

ECHO Membership Dues

January 2008 Business-Professional Directory February 2008 Jeffrey A. Goldberg, Esq. Sandra L. Gottlieb, Esq. Stephen Marcus, Esq. Ann Rankin, Esq. David C. Swedelson, Esq. Dick Tippett

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.

Back to Our Housing Future Continued from page 37

thought to redevelopment of the project. The (Old) Suburbs will be the New Urban Cores Old suburban cities will identify downtown commercial districts as locations for a new regional urban core. Why? Because there is no real alternative. People can no longer afford to work in San Francisco, or even San Ramon, and live in Tracy. Many of the old suburban cities provide perfect locations for new urban cores. They have transit, they have services, and they have space—if they can embrace the necessary increase in density, which is of course, the basic point; you can’t have an urban core without urban density. But these areas also have something else—an aging population that increasingly does not want to move away from the familiar suburbs where they raised their families—if they can find suitable alternative housing close to the services they need. Old apartments and community associations are the stealth locations for providing new housing for middleincome people; we just have to re-think the existing land use. “We may discover that it’s not so bad living closer to work, in transit- and pedestrian-friendly, diverse neighborhoods where we run into friends and neighbors as we walk to the store, school or the office. We may even find that we don’t miss our cars and commutes, and the culture they created, nearly as much as we feared we would.”5 Indeed. And if we can find a new use for old condos in the process, we may have found the alchemists’ dream—turning base metal into gold—but in this case into new, well located, energy efficient, affordable housing created from the relics of the past.

Tyler Berding is a founding partner of Berding & Weil, LLC, and a community association law firm located in Alamo, CA. He has taught real estate and community association law at California State University East Bay and is the immediate past president of ECHO. He is a frequent contributor to the ECHO Journal.

5 Penalver, Ibid. ECHO Journal | March 2008

Statute and Case Law Update Continued from page 17

landlord had a duty of care to take certain security measures, although less than hiring security guards. The Court ruled that whether a particular protective measure falls within the scope of a landlord’s duty of care, or is precluded as a matter of law, depends on a “sliding scale balancing formula” that weighs foreseeability against the burden of attending to the measure. Tip: Where a homeowner association board is aware of actual criminal activity, it has a duty to undertake a response to promote safety in the common area. At a minimum, this includes filing a police report. If the recommendations of a qualified security consultant are followed, the board may be protected from liability. 9. El Escorial Owner’s Association vs. DLC Plastering, Inc., 154 Cal.App.4th 1337 (2007)—Construction Defects A condominium homeowner association settled its construction defect case with multiple parties prior to trial and proceeded to trial as to other defendants, including DLC Plastering, Inc. and Alderman Construction, Inc. The trial court found that these parties’ latent construction defects caused $8.6 million in damages, but gave them credit for pre-trial good faith settlements between the homeowner association and other contractors. These settlements reduced the obligation of the non-settling parties to $2,461,495. In a lengthy decision, the Court of Appeal found that: • The homeowner association could not state a valid nuisance cause of action; • The pre-trial good faith settlement proceedings were adversarial and fair; • The court gave proper settlement credits to DLC and Alderman; • The statue of limitations was tolled by the Calderon Act; • The trial court properly rejected Alderman’s claim that it was exempt from liability because it complied with the project’s building plans; • The court properly awarded the homeowner association its experts’ fees as damages, among other rulings. Importantly, the Court held that with respect to the allocation of pre-trial settlements, the court may make adjustments after receiving evidence to ensure that the non-settling defendants do not shoulder liability for acts they did not commit, or be saddled with 40

March 2008 | ECHO Journal

excessive or disproportionate damages. As to the statue of limitations, the Court found that the Calderon Act permits extended tolling by agreement of the parties and does not limit when the agreement must be made, nor does it restrict the language the parties must use about the tolling period. Alderman claimed exemption from liability because it followed plans and specifications for the construction project. However, the plans did not detail how Alderman was to attach newly constructed walls to the original construction. Those walls did not secure a watertight connection. Accordingly, the Court found that Alderman did not comply with the legal standard of “due care” or the common law duty to perform with care, skill, reasonable expedience, and faithfulness the thing agreed to be done, and that a negligent failure to observe any of these conditions was a tort, as well as a breach of contract. Tip: Protect the statute of limitations for construction defects by service of a Calderon notice and extensions of Calderon, if necessary. Make direct claims against subcontractors and do not rely solely on suit against the developer. Recognize that a subcontractor’s compliance with plans is not necessarily a defense to negligent workmanship. 10. Crestmar Owners Association vs. Stapakis, 2007 Cal.App. Lexis 2019 (2007). Stapakis owned the corporation that developed a Long Beach building into condominiums. The CC&Rs required the transfer of all unassigned parking spaces to the association by the early 1980s. In 2004, the development corporation transferred two unassigned parking spaces to Stapakis, who demanded that the association let him use the spaces for his personal uses, and that it pay a quarter century’s worth of back-rent for its use of the two spaces since the early 1980’s. When the association refused, the developer sued. In response, the association sued the developer to cancel the deeds and quiet title to the two spaces. The importance of this case is that the statute of limitations on the Association’s lawsuit to quiet title to the parking spaces was held to commence when the developer pressed an adverse claim against it, so that the association’s lawsuit was timely because it was filed within four years of the demand for possession of the spaces. The developer’s corporation was found to be the “alter ego” of Stapakis for purposes of imposing on him liability for the association’s attorneys fees of more than $20,000, plus costs on appeal.

Tip: This case is strong support for association ownership of common areas unassigned by the developer. It is not uncommon for developers to overlook the transfer of common area parcels to the association. 11. Village Northridge Homeowners Association vs. State Farm Fire and Casualty Company, 2007 Cal.App. Lexis 2004 (2007). Following the Northridge earthquake, the homeowner association entered into a settlement agreement with the insurer to receive 1.5 million dollars in exchange for a release of all claims and causes of action. Two years later, the association sued the insurer for additional benefits and subsequently learned that the insurance policy limits were almost seven million dollars greater than had been represented by the insurer. The insurance company argued that the association could not pursue its claim for additional policy coverage unless it rescinded the prior settlement agreement and returned the 1.5 million dollars, which it was unable to do as the sums had been spent on partial repairs. The Court of Appeal held that the homeowner association was not required to return the original 1.5 million dollar settlement proceeds as a condition of suing for additional benefits under the policy. The Court distinguished personal injury cases which had early held that a return of settlement funds was required as a condition of suing for additional insurance benefits. The Court ruled that the requirement of returning the settlement funds is not necessary where the insurer is alleged to have induced the settlement by misrepresenting policy limits on a property damage claim. The Court noted that otherwise the law would not discourage fraud in the settlement of insurance claims. Tip: Homeowner associations should obtain legal counsel to evaluate legal claims against insurance companies, including the evaluation of insurance limits. It may not be necessary to return benefits paid in claims for fraud based on misrepresentation of other policy provisions, such as coverages and exclusions, in addition to the amount of the policy limits.

Jeffrey A. Barnett is an association attorney with legal offices in San Jose. He is a past member of ECHO’s Board of Directors and a current member the Legal Resource Panel, the Legislative Committee and several regional resource panels.

ECHO Marketplace

Advertiser Index

The place to find business and professionals for your association Access Association Services . . . . . . . .30 Advance Construction Technology . . .20 Affirmative Management . . . . . . . . . .27 All Seasons Roofing . . . . . . . . . . . . . .13 Alpha Restoration and Waterproofing 11 American Management Services . . . .21 Angius & Terry . . . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . . .29 A.S.A.P. Collection Services . . . . . . . .33 Association Reserves . . . . . . . . . . . . .39 Bayridge Group . . . . . . . . . . . . . . . . .20 Berding & Weil . . . . . . . . . . . . . . . . . .44 Cal Bay Builders . . . . . . . . . . . . . . . . .27 Collins Management . . . . . . . . . . . . .20

Your Ad Can Be Here You read this, didn’t you? Thousands of officers and directors of homeowner association boards also read the ads each month in the ECHO Marketplace.

Community Association Banc . . . . . . .29 Community Management Services . . .33 Compass Management . . . . . . . . . . .29 Cool Pool Service . . . . . . . . . . . . . . . .39 Cornerstone Community Mgmnt . . . .16 Corum Painting . . . . . . . . . . . . . . . . . .2 County Bank . . . . . . . . . . . . . . . . . . .22 Draeger . . . . . . . . . . . . . . . . . . . . . . .16 Ekim Painting . . . . . . . . . . . . . . . . . . .30 ERTECH . . . . . . . . . . . . . . . . . . . . . . .30 First Bank Association Bank Services . .14 Flores Painting . . . . . . . . . . . . . . . . . .39 Helsing Group . . . . . . . . . . . . . . . . . . .8 Hill & Company. . . . . . . . . . . . . . . . . .43 M&C Association Services . . . . . . . . .12 M. L. Nielsen Construction . . . . . . . . .37 Massingham and Associates . . . . . . .10 Pelican Management Group . . . . . . .33 PML Management Corp. . . . . . . . . . .41 Pollard Unlimited . . . . . . . . . . . . . . . .11 Pratt & Associates . . . . . . . . . . . . . . .21 R. E. Broocker Co. . . . . . . . . . . . . . . .13 Rebello’s Towing Service . . . . . . . . . .12 REMI Company . . . . . . . . . . . . . . . . .37 Saarman Construction . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . . . .11 Steve Tingley Painting . . . . . . . . . . . .26 Steve’s Painting Services . . . . . . . . . . .14 Wells Fargo . . . . . . . . . . . . . . . . . . . .17

ECHO Journal | March 2008

Learn how others tackle the tough issues facing associations at the Winter 2008 ECHO North Counties Seminar

How to gain the advantage over today’s tough problems Winter 2008 ECHO

North Counties Seminar March 15, 2008 Community Center 5401 Synder Avenue, Rohnert Park Seminar Agenda 8:00 8:45 9:00 9:45 10:30 10:50 11:35 12:20 12:50 1:00

The seminar’s theme is Tackling 2008’s Tough Problems Registration Fee: $40 Yes, reserve _____ spaces for the North Counties Seminar. Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, Suite 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517

!SK US