Journal_08_06 by Echo

June 2008

A Journal for Community Association Leaders

echo-ca.org

Hit the Jackpot! At At the the 36th 36th ECHO ECHO Annual Seminar

ALSO INSIDE THIS ISSUE:

• New Rules Make Condos Harder to Sell • Water Costs Draining Your Association? • The Duty to Inspect Change Service Requested ECHO 1602 The Alameda, Suite 101 San Jose, CA 95126

PRSRT STD U.S. Postage PAID Sundance Press 85719

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

We’re in this together. We look forward to our continued partnership.

“No Fees No Costs No Risk!”® X

Assessment Collection Program

toll-free 866.320.7222 toll-free fax 866.320.7221 ATCollections.com

Contents Hit the Jackpot! on page 6

2008 Annual Seminar Begins June 20

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.

The ECHO Annual Seminar and Trade Show is only a few weeks away. Send in your reservation now for California’s largest CID conference.

Will New Rules Make Condos Harder to Sell?

The ECHO membership list is never released to any outside individual or organization.

A new issue for condominium associations is looming, again involving lenders. Rules are being rewritten to toughen lending standards for condominiums. These new standards will make it more difficult for condominium owners to sell their units and for prospective buyers to purchase. Read this article to get details.

The Duty to Inspect The responsibility for inspection of an association complex lies with the board. It is the board’s duty to ensure that the inspection is thorough and occurs at least annually. In so doing, the board will exercise prudent asset and fiscal management.

25 16

Water Costs Draining Your Association? Water shortages and the threat of mandatory cuts of water usage are large concerns among all California citizens.For associations that now pay the bill for all water usage in a complex, sub-metering, which promotes water conservation, might be a responsible action for your board to consider.

Departments 28 Calendar of Events 30 News from ECHO 31 Consequences of Employee Misclassification 34 ECHO Bookstore 38 ECHO Volunteers

38 About ECHO 41 ECHO Marketplace 41 Advertiser Index

On the Cover ECHO 2008 Annual Seminar Page 6

June 2008 | ECHO Journal

The ECHO Journal is published monthly by the Executive Council of Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent person should be sought.

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 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.

2008 Legislation at a Glimpse As of May 27, 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 Act violations, and compel associations to disclose those violations.

AB 1892

Smyth

Solar Energy Equipment Restrictions

Amended. Senate Judiciary Hearing June 10

Neutral

This bill would render void and unenforceable any restriction in the governing documents of an association that effectively prohibits or restricts the installation or use of a solar energy system.

AB 1921

Saldana

Statutory Revision of CID Law

Amended. Assembly Third Reading

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.

AB 2180

Lieu

Solar Equipment Approvals

Amended. In Senate

Support

This bill would compel associations to provide written approval or denial of an application to install a solar energy system. The approval or denial must be given within 60 days of the receipt of the application, or the application is deemed approved, unless the delay is the result of a reasonable request for additional information.

AB 2259

Mullin

Rental Restrictions

Amended. Senate Housing Hearing June 10

Oppose

This bill would prevent common interest developments from imposing rental or lease restrictions upon an owner, unless that owner expressly consents to the impairment of that right.

AB 2806

Karnette

Board Member Education

Amended. In Senate

Oppose

This bill would require every member of a board of directors serving at least 12 consecutive months to disclose whether or not they have completed a course dealing with the laws that govern common interest developments. With certain restrictions, associations would be permitted to reimburse directors up to $125 for associated costs.

AB 2846

Feuer

Dispute Resolution Procedures

Amended. In Senate Housing Hearing June 17

Oppose Unless Amended

This bill would permit homeowners who are involved in a dispute over assessments with their association to request alternative dispute resolution or to pay under protest and commence an action in small claims court, provided the amount of the dispute does not exceed the courtâ&#x20AC;&#x2122;s jurisdiction.

SB 127

Kuehl

CID Sale Disclosure Deadlines

Assembly Third Reading

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 1511

Ducheny

Super Liens

Amended. In Assembly

Support

Would allow an association to request that the mortgagee of a property provide the name and address of anyone who purchases that property at a foreclosure sale. The mortgagee or trustee must provide the information within 15 business days.

ECHO Journal | June 2008

June 2008 | ECHO Journal

2008 ECHO Annual Seminar Begins June 20

he 36th ECHO Annual Seminar is just around the corner—only a few weeks away. Many exciting presentations and outstanding speakers are lined up for this year’s seminar. Community association board members and professional members have been ordering seminar tickets for the past month, but plenty of space remains. Send in your reservation now for California’s largest CID conference. The 2008 Seminar and Trade Show will be an all-new, high-paced event, with most activities packed into a Saturday schedule. This year the

event will use the main front lobby of the Santa Clara Convention Center for registration and the adjacent exhibition space. Morning and afternoon educational sessions, the full program book with handouts from all speakers, continental breakfast and an afternoon ice cream social are all included in the Seminar ticket price. Annual Seminar Plan and Special Events On-site registration begins at 12 noon on Friday, June 20, for those who are attending the CACM course on Friday afternoon. Set-up of

ECHO Journal | June 2008

exhibits for Saturday’s Trade Show is also scheduled for Friday afternoon, from 3:00 p.m. to 6:00 p.m. Many of the exhibitors plan to celebrate the “Hit the Jackpot” theme of the seminar in their booths. Registration is still available for the CACM course, Reserves—What, Why and How. The California legislature has put a microscope on reserve studies during the past several years and more attention is likely to continue to be placed on the process. Managers may not need to be a reserve specialist but they do need to know when to call in the specialist, what information to gather, and what to expect. These questions and much more will be discussed. The class will be presented on Friday afternoon, June 20, 2008.

You don’t want to miss the ECHO Annual Seminar— California’s largest annual homeowner association seminar and trade show. The Friday Night Reception to honor exhibitors is open to all members and guests for a $40 fee. Light refreshments will be featured and cash bars will be available. A lively music group will provide entertainment for the reception. The ECHO Volunteer of the Year for 2008 will be announced and there will be a few other special presentations. The party will recognize our loyal exhibitors and sponsors for their major contributions to the Annual Seminar. Registration on Saturday will open at 7:30 a.m. and the Trade Show and refreshments will open at 8:00 a.m.; educational sessions will start at 9:00 a.m. and continue to 4:30 p.m. To give attendees maximum flexibility to allocate their time, the optional Saturday buffet luncheon adjacent to the Trade Show is again available for $40 to those who make advance reservations. Educational Program HOA University, ECHO’s training course for new directors, will be repeated this year. 8

June 2008 | ECHO Journal

The basic responsibilities and duties of homeowner association board members will be explained by a full range of experts. This series of sessions is a “must” for all new or potential board members and also will provide an excellent review for any board members. Those who attend this entire track will receive a special certificate, recognizing their participation and completion of the program. The 2008 Seminar also includes full-day tracks addressing legal and legislative, association financial and management, and building maintenance concerns. As usual there will be a presentation and status report on the legislative bills affecting common interest developments that are now moving through the California Legislature. ECHO Legislative Committee members will be present to provide these updates on current status of legislation affecting CIDs. The full program of educational presentations with speakers can be found on page 43 of this issue. Scholarship Program A limited number of scholarships to cover the cost of Annual Seminar tickets will be available again this year, thanks to the generosity of a number of member businesses and professionals. These scholarships will generally be offered to board members or owners who are first-time attendees at the Annual Seminar and who are residents of smaller, poorly funded associations or associations with other sorts of serious operational problems. Preference will be given to representatives of ECHO member associations, but membership is not mandatory. Recipients are not required to be members of their association board. Anyone who wishes to be considered for a scholarship may apply, preferably in writing, to Oliver Burford, ECHO’s Executive Director, at the ECHO Office. Summary Don’t delay making reservations for current and future board members, committee members, and association members at your association. The 2008 Seminar is the place to get all the up-to-date information about operating your association efficiently and legally; every ECHO member association should participate. Complete the form on page 43 and send your orders to ECHO. You may also purchase tickets via a secure link on the ECHO website www.echo-ca.org.

The American Community is built on trust… that’s why board members choose AMS Serving Northern California CIDS and their Families since 1995...

Full Service Management for Associations.

Fully Certified Association Professionals and Responsive Professional Personnel.

Free HOA Client Website.

24/7 Emergency Assistance.

CPA On Staff to provide Superior Quality Assurance of financial products to our clients.

Locally Owned and Operated American Management Services, Inc. 90 Great Oaks Boulevard, Suite 105 San Jose, California 95119-3414 In The Bay Area - 800-720-1999 408-225-7380 Fax 408-225-7382 Email: Info@amspcam.com Visit us at www.amspcam.com ECHO Journal | June 2008

June 2008 | ECHO Journal

By Tyler P. Berding, Esq.

Lender Backlash? Will New Rules Make Condos Harder to Sell? et us consider the question: “Will the subprime crisis impact community associations?” It is pretty clear that mounting foreclosures of condominiums and town homes will greatly impact community association budgets as owners abandon properties, leaving unpaid assessments. Lenders holding first mortgages on these properties have no obligation to homeowners associations to cover these deficiencies, leaving large gaps in association funding when the units were sold by the banks. Now, a new issue is looming, again involving lenders. Rules for government-backed mortgages and some private mortgage insur-

ers are being rewritten to toughen lending standards for condominiums. A recent article in the Wall Street Journal by Kenny Harney describes steps being taken by Fannie Mae and Freddie Mac as well as by mortgage insurer AIG United Guaranty.1 These new standards will clearly make it more difficult for condominium owners to sell their units and for prospective buyers to close purchases—and they could have some other consequences as well. 1 Kenney Harney, “Condo loans just got harder,” Wall Street Journal, April 20, 2008

The new rules promulgated by AIG include a form of “redlining” (rejection) of loan applications for properties in certain ZIP codes that have been designated as having declining market conditions; higher down payments; and a ban on projects where more than 30% of the units are investorowned. These rules alone could have a major impact on the sale of condos, which are typically bought by low to mid-income buyers who already find it difficult to qualify for a loan. The redline provisions will make it impossible to obtain a loan on properties within those particular ZIP codes. As Harney states: “The ban is irrespective of applicants’ ECHO Journal | June 2008

credit scores, assets or equity stakes.” If the property is located within those ZIP codes or if non-owner occupants exceed 30%, there will be no loan—period. These rules took effect on May 1, 2008. Normally buyers with 20% or more to put down would not be affected by new private mortgage insurer rules, however. Government insurers Fannie Mae and Freddie Mac have also issued changes in their procedures that could have a dramatic effect on condominium loans. Under recently published guidelines, lenders requesting government loan guarantees will be asked to take responsibility for investigating the fiscal health of homeowners associations. According to Harney: “Under Fannie Mae’s changes, most of the due-diligence research on condominium projects’ key characteristics—their legal documentation, the adequacy of condo association operating budgets, percentage of unit owners who are late on association-fee payments, percentage of space allocated to commercial use, and percentage of units owned by investors—must now be performed upfront by loan officers.” 12

June 2008 | ECHO Journal

Government insurers Fannie Mae and Freddie Mac have issued changes in their procedures that could affect condominium loans. He continues: “Not only is this time-consuming and costly, but under the new procedures, Fannie Mae expects the lender to warrant the accuracy of its research. Some condo project legal documents run into the hundreds of pages of text; yet lenders are supposed to take legal and financial responsibility for their accuracy.” This responsibility would also include making certain “that at least 10% of a condominium project’s current operating budget is reserved for “capital expenditures and deferred maintenance.”

Now that’s a rule that could keep a lot of lenders awake at night. First of all, holding to a fixed percentage means that there is no room for interpretation. Harney quotes a reserve budget expert who states that this standard means that non-physical items, such as insurance, in a reserve budget will not count toward the 10%. “Some loan officers will simply look at the ‘reserves’ item and, if its below the 10% mark, might reject the whole building and refuse to take loan applications on individual condo units.” If the rule only requires doing the math and calculating a ratio between reserves and the operating portion of the budget, that’s one thing; but it, of course, will result in largely meaningless information. But if a real determination of adequacy is required, that’s something else again. And if so, it’s going to be difficult to meet these standards with newly-developed projects, much less with older associations for all of the reasons that we have been writing about for years.2 2 Tyler P. Berding, “The Uncertain Future of Community Associations,” January, 2005; www.condoissues.com (.pdf download).

The California Civil Code mandates that a reserve fund be provided for any component that has a projected service life of less than 30 years.3 With new construction, the number of components falling into that category is relatively small—roofing, painting, asphalt, etc. It’s not until a property begins to age that other major components begin to fall within that 30-year window. But when they do, they can be a costly addition. A building component like siding, for example, often has a 40–50 year service life from the time it is new and doesn’t usually fall into the 30year window then. But after 10 or 15 years, that component would belong in the reserve study. Given that a huge number of condominium projects are now in excess of twenty years old, a lot of exterior wood components and such things as plumbing or electrical components, which previously were not in the reserve budget, now should be. However, evaluations like that are difficult to make, even for trained community association professionals. So, how are lenders going to undertake them if that’s required? First, they will have to understand that components listed on the original developer reserve budget won’t necessarily be the only components that should be there in an older

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

3 “At least once every three years the board of directors shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components which the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirements of the common interest development if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association which excludes the association’s reserve account for that period. The board shall review this study annually and shall consider and implement necessary adjustments to the board’s analysis of the reserve account requirements as a result of that review. The study required by this subdivision shall at a minimum include: (1) Identification of the major components which the association is obligated to repair, replace, restore, or maintain which, as of the date of the study, have a remaining useful life of less than 30 years. (2) Identification of the probable remaining useful life of the components identified in paragraph (1) as of the date of the study. (3) An estimate of the cost of repair, replacement, restoration, or maintenance of the components identified in paragraph (1) during and at the end of their useful life.” California Civil Code Section 1365.5(e)(1)

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 | June 2008

Ad_Small_NewEcho_3.08.pdf

3/26/08

1:04:04 PM

Massingham & Associates. Competitive Price. Better Service. Massingham & Associates Management, Inc. has specialized in managing common interest developments since its inception in 1985.

We’re proud to say we’ve grown to be one of the largest community management firms

in Northern California and we could not have accomplished that without great prices and even better service! We continue to be one of a select few full-service management

companies in Northern

California to have earned the prestigious designation of

Certified Management Firm (CMF) by the California Association of Community

7BMVF t 6OFRVBMFE Customer 4FSWJDF t Expertise <

Managers (CACM). > Corporate Office 2247 National Avenue Hayward, CA 94545 P 510 780 8587 F 510 780 7535 800 863 MASS

Citrus Heights Office 6060 Sunrise Vista Drive Suite 2440 Citrus Heights, CA 95610 P 916 676 0024 F 916 676 0032

South Bay Office 550 Division Street Campbell, CA 95008 P 408 559 8001 F 408 371 5130

Concord Office 4085 Nelson Avenue Suite A Concord, CA 94520 P 925 405 4900 F 925 405 4747

For more information please visit us at www.massingham.com or call 800 863 MASS

project. After that, they have to develop the means of evaluating them. They also have to understand that just addressing visible components may not be enough in an older building. What about damage to the interior framing in areas that are not accessible, or corrosion in plumbing lines, or electrical service that cannot keep up with new loads that have been put on it. These are problems that are beginning to appear in the many conversions that have been sold in the past few years; components that are not always “visible and accessible” are beginning to show damage requiring repair or replacement, skewing the original budget and increasing assessments. And just as conversions often involve older apartment buildings, so too does the reserve analysis of older condominiums. That lenders will willingly take on such responsibility is not likely. “‘It’s ridiculous,’ said Phil Sutcliffe, principal of Project Support Services of Lansdale, Pa, who helps put together condominium project financings for developers. Not only does this shift huge paperwork and time burdens on lenders and brokers—who may not have the staff resources to handle the extra work—but 14

June 2008 | ECHO Journal

also forces them to make ‘absolute judgments on things that are not absolute.’”4

Lenders will begin to ask some very tough questions of management and the board of directors. In the end, if lenders are going to be held responsible for the adequacy of an association’s reserves, either they are going to quit lending on condominiums, or they will begin to ask some very tough questions of management and the board of directors. And some of those questions may have merit. If a board has ignored the warning signs of deterioration in an aging building and has not expanded the scope of their investigations to look at components that are not just “visible

4 Harney, Supra.

and accessible,” lenders may start doing it for them, and the results may force some difficult decisions—do we raise assessments sufficiently to accommodate components that were either not in the original budget or that have proven more costly to maintain than originally projected; or do we not do that and take the risk that our project will be rejected for mortgage insurance? This dilemma is not new. Boards have been wrestling with it for years, but several things have happened to force the problem to critical mass: (1) An aging condo stock has begun to reveal components with a decreasing service life that were not previously detected. Condominium projects were constructed in quantity in the United States starting around 40 years ago. That means that many buildings are beginning to show their advanced age through rot, corrosion, and obsolescence, which were not apparent when the projects were newer. (2) We have recently gone through a new phase of condominium conversions that, unlike previous phases, involve older buildings in greater need of repair, which has, in

turn, focused more attention on potential budget underfunding; (3) New lending rules will now force much closer scrutiny of the financial and physical condition of community associations that boards of directors can no longer ignore if they want to preserve any semblance of market value for the units in their project. These new rules are a direct consequence of the sub-prime mortgage crisis and could have a very real impact on community associations. They will undoubtedly put pressure on boards of directors to re-evaluate their reserve budgets; to revisit the issue of CC&R restrictions on non-owner occupancy; and to take more aggressive steps to collect delinquent assessments in order to keep their projects marketable.

Tyler Berding is a founding partner of Berding & Weil, LLP, 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 Journal. Questions or comments can be directed to him at www.berding-weil.com or www.condoissues.com. ECHO Journal | June 2008

By David West

The Duty to Inspect Y

ou and the other board members have been nursing the roof along, hoping for maybe two or three more years use. This past week, a member called to report continuing problems with water intrusion. During the summer, both you and the resident noticed a small problem in the flat roof over the affected unit. You are angry; the manager should have seen the same thing you saw on her monthly inspection. You put the roof problem on the agenda, and now you are ready to ask how the manager could have missed such an obvious problem. 16

June 2008 | ECHO Journal

Bluntly, you ask, “Why didn’t you see the roof problem last summer and do something about it?” The manager pauses, but for just a moment, before responding: “Mr. Smith, I refer you to the management agreement that states the manager shall ‘perform monthly general reviews of the association common areas and facilities from the ground level…’ Since the board has made no other provisions for professional inspection of the Continued on page 18

ECHO Journal | June 2008

Duty to Inspect Continued from page 16

property, it is the board’s responsibility.” Is she right? Generally, the board has a duty of oversight and decision making most often based on issues and information provided by the manager and other professionals. Civil Code and the management agreement define the manager’s duties to the board and the association. If the duty is not articulated in the Civil Code and not contracted in the management agreement, the duty remains with either the board or the association, a rather subtle distinction since the board is charged with the duty to administer the affairs of the association.

454 So. Airport Blvd. South San Francisco CA 94080

A board has a duty of oversight and decision making based on issues and information provided by the manager and other professionals. When we examine this roof issue, we find three duties: the duties to inspect, to repair, and/or to disclose. There is no legislative mandate requiring professional management or no statutory relief of these duties when the association has a management company. Directors are elected by the membership, in accordance with the association’s bylaws and Civil and Corporation Codes, to govern and preserve the association. Let’s start by examining just what this means. Section 7231(a) of California Corporation Code states “A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” (emphasis added). This is probably the best statement of the director’s duty to

June 2008 | ECHO Journal

caretake and thus to inspect. It is a ‘whatever is prudent’ standard. This section continues “(b) “In performing the duties of a director, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following: …(2) Counsel, independent accountants or other persons as to matters which the director believes to be within such person’s professional or expert competence.” The certified manager is, by definition, a competent other person upon whom you, the director, may rely. Paragraph (c) states “A person who performs the duties of a director in accordance with subdivision (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director….” Civil Code Section 1365.7 expands the director’s indemnity: “(d) Nothing in this section shall be construed to limit the liability of the association for its negligent act or omission or for any negligent act or omission of an officer of director of the association.” The association has liability for the board’s mistakes and insurance coverage through its D&O policy. Many directors and professionals assume that Civil Code section 1365.5(e) sets an inspection standard in stating “[A]t least once every three years, the board of directors shall cause to be conducted a reasonably competent and diligent visual inspection… as part of a study …and the board shall review this study, or cause it to be reviewed, annually….” When read carefully, we note that the three-year frequency applies to the study, and the board is to review the study annually. So, does this study fulfill our duty to inspect? We need to examine the concepts of inspect and review for an answer. Under inspection, let’s start with three general categories: conformance (are the draperies the right color), component performance and reserve study. We are not concerned with appearance; our focus is performance; thus we can eliminate conformance. The reserve study is designed to provide a long-term look at expected performance, starting with a description of each component, expected life and remaining life. This document is our trip wire to remind us of funding/replacement deadlines. Our roof issue is really about component performance, which does impact the reserve study.

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 ECHO Journal | June 2008

The performance inspection is a reality check against the reserve study. As caretakers of the asset, the annual review required under Section 1365.5 should be both fiscal and physical. When the board prepares the budget for the following year, the yardstick for future replacements is the reserve study. The physical review of the property should be in-depth, with the intent to find structural problems in their infancy when the solution is cheapest. If we see that the balcony is failing and the stucco cracking, we can at least caulk the joint to prevent further water intrusion (and damage) while we formulate a solution and raise the necessary funds. Given that this is budget time, it is the most appropriate time to look at these problems. There is another aspect of the component performance inspection that is necessary and not generally performed by the reserve preparer. That is an analysis of the current component for serviceability and effectiveness. Most often, this requires an engineer or an appropriate expert who will determine whether to use a different material or application when replacement is needed. This analysis should be performed with sufficient 20

June 2008 | ECHO Journal

time to recover from the sticker shock of the upgrade and incorporate that cost in both the reserve study and budget.

As a practical matter, someone must inspect the property in order to comply with the association’s, not the director’s, duty to prepare and distribute this disclosure summary annually. Under Section 1365(a) (3), these disclosures include:

The physical review of the property should be in-depth with the intent to find structural problems in their infancy....

“(A) Whether the board of directors of the association has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years or less, including a justification for the deferral or decision not to undertake the repair or replacement.

With the budget, the board will also produce the Assessment and Reserve Funding Disclosure Summary required by Civil Code section. This document reasonably requires a more detailed disclosure of the funding liability and the funding plan for the next five years. Transparency—nothing hidden—is the goal.

“(B) Whether the board of directors of the association, consistent with the reserve funding plan adopted pursuant to subdivision (e) of Section 1365.5, has determined or anticipates that the levy of one or more special assessments will be required to repair, replace, or restore any major component or to provide adequate reserves therefor. If so, the statement shall also set out the estimated amount, commencement date, and duration of the assessment.” Inherent in these two paragraphs is the duty to discover necessary repairs, replacements or unusual wear that would necessitate

a special assessment. It is interesting that this duty lies with the association and not with the board. Most governing documents contain such language as “the association may delegate its powers and duties subject to the limitations” or “to conduct the business and affairs of the association.” As with the roof leak, it is this failure to inspect and find early solutions to building problems that may create significant liability for the association, taking needed funds from the association’s coffer and exacerbating maintenance problems and long-term funding solutions. With a roof leak, not only is the association liable for the roof but also the interior repair. More and more, the area of legislative focus is the reserve liability because it is here that the board defines the plan to address replacement and major repairs. The question posed at our board meeting is who has this duty, the manager or the director. Since the board, properly acting for the association, has the right to contract (delegate) with a competent professional for service, we need to look at those agreements and determine if there is any contract for inspection services. As with our roofing example, the most logical place to look is the management agreement; and, as with our example, we need to concern ourselves with the specific language of that section of the agreement. Most agreements vary, but it is important to establish a threshold understanding of that duty; there is tremendous liability in this duty, and most management companies understand this. As in our example, undetected building component failures can cause significant damage; no management company willingly assumes this liability without adequate compensation. When management companies compete for a contract, and boards don’t understand this component and its pricing, most bids do not include a comprehensive inspection clause. Look but you probably won’t find it. You will find “walk through” or some other such benign phrase that does not reach an inspection standard. Without some clear statement assigning the duty of inspection to the manager, the board may be responsible, whether or not qualified, to conduct such inspections. As a competent professional, your manager should be able to evaluate the condition of a building. The legislature gave you, the director, indemnity if you rely on professional advice. Did you ever wonder about the language in Civil Code Section 1363.1 (Managing Agents), where the prospective

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

AYRIDGE GROUP

INC

1777 Borel Place Suite # 314 San Mateo, CA 94402

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

ECHO Journal | June 2008

managing agent is to disclose any “…relevant licenses such as architectural design, construction, engineering, real estate or accounting…” [Section 1363.1(a)(2)]? When read with Business and Professions Code Section 11502 (Certified Common Interest Development Manager; Criteria), it certainly appears that the legislature intended that the managers would fill this role of professional advisors on general matters. It also means that if the manager does not have this skill or duty to inspect, the manager as a general practice should advise the board, in writing, to hire someone to conduct the “diligent visual inspection.” It is also clear that this inspection should occur annually and, that if the manager reports a problem, the board should hire an engineer or other specifically qualified (not generally qualified) expert to investigate.

The responsibility for inspection lies with the board. In summary, what is clear is the lack of a specific statement in Civil Code or in most governing documents assigning the inspection responsibility to the board. It is also clear that component inspections are not automatically part of the manager’s duties. The responsibility lies with the board. Without particular expertise, it is the board’s duty to delegate the inspection responsibility, ensure that the inspection is thorough and occurs at least annually, and if there is a component failure or problem, to hire the appropriate professional to investigate. In so doing, the board will satisfy both the intent of the Assessment and Reserve Funding Disclosure Summary Form and prudent asset and fiscal management. What more could any association member ask?

David West is the managing shareholder in West Management Company, Inc., an ECHO member, and a shareholder in West Construction and Maintenance Company, Inc. He has been in the CID industry for 22 years and in real estate for 33 years. Mr. West holds a law degree from JFK University.

Property Management Solutions Local – Innovative – Committed Through Wells Fargo Specialty Markets Group, you receive the best of both worlds: Dedicated servicing from industry experts Responsiveness to solve problems quickly and find solutions that are right for you Named Best Corporate/Institutional Internet Bank1 The only U.S. Bank to be rated “AAA”2

To learn more, contact our Specialty Markets Group Relationship Manager today.

Jason Lee 415-357-3319 1 2

Global Finance Magazine 2007 Standard & Poor’s Rating Services

3AN &RANCISCO ,UNCHEON / ÕÀÃ`>Þ]Ê Õ ÞÊ£Ç

££\{xÊ>° °ÊÌ ÊÓ\ääÊ«° °

-Ì°Ê À> V ÃÊ9>V ÌÊ ÕL

0REDICTING THE &UTURE OF #OMMUNITY !SSOCIATIONS -«i> iÀ\

/Þ iÀÊ*°Ê iÀ` }]Ê Ãµ° iÀ` }ÊEÊ7i ]Ê *

Õ V i Ê*À Vi\ÊfÈx `Û> ViÊ,iÃiÀÛ>Ì Ã ,iµÕ Ài`Êv ÀÊÌ ÃÊ Ûi Ì

i Ê« iÊÕÃiÊ ÃÊ ÌÊ«iÀ ÌÌi` Ã `iÊÌ iÊ-Ì°Ê À> V ÃÊ9>V ÌÊ ÕL°

9iÃ] ÀiÃiÀÛi ÚÚÚÚÚ Ã«>ViÃ v À Ì i " -> À> V ÃV Õ V i ° Õ Ì i V Ãi`\ fÚÚÚÚÚÚÚÚÚÚ >ÌÌ>V >`` Ì > > iÃ® > i\ " À À \ ``ÀiÃÃ\

ÌÞ\

-Ì>Ìi\

< «\

* i\ 6 Ã>É >ÃÌiÀV>À` °

Ý«° >Ìi\

- } >ÌÕÀi\ ,iÌÕÀ ÊÜ Ì Ê«>Þ i ÌÊÌ \Ê "]Ê£ÈäÓÊ/ iÊ > i`>]Ê-ÌiÊ£ä£]Ê-> Ê Ãi]Ê Ê x£ÓÈ "À`iÀÃÊÜ Ê ÌÊLiÊ«À ViÃÃi`ÊÜ Ì ÕÌÊ«>Þ i ÌÊ ÊvÕ °Ê iiÃÊv ÀÊV> Vi i`ÊÀi} ÃÌÀ>Ì ÃÊÜ Ê ÌÊLi ÀivÕ `i`°Ê/i i« i\Ê{än Ó Ç ÎÓ{ÈÆÊ >Ý\Ê{än Ó Ç Îx£Ç

Are Water Costs Draining Your Association Dry? By Mary L. Wulf

ater is one of our most precious commodities. Thus water shortages and the threat of mandatory cuts of water usage are large concerns among all California citizens. Water districts throughout the state are asking residents to cut their water usage by 10 percent or 20 gal-

lons per day. Some water districts are also looking at restructuring their water rates to penalize the larger users by imposing escalating tiers. Submetering promotes water conservation and might be a responsible solution for your homeowner association if the association pays for all water. What is Sub-Metering? In the past, condominium communities were built with one master city water meter, and that meter ser-

viced the association and all residents. Water and sewer costs were simply included in the homeownerâ&#x20AC;&#x2122;s maintenance assessment. That worked well when water wasnâ&#x20AC;&#x2122;t an issue, and water/sewer costs were a fraction of what they are now. If this is the case for your association, now is the time to look for a responsible solution that reduces the associationâ&#x20AC;&#x2122;s expenses, increases property value and promotes water conservation. Approximately ten years ago, submetering became a popular new Continued on page 26 ECHO Journal | June 2008

Water Costs

Figure 1 Typical submeter installation outside a condominium unit.

Continued from page 25

trend, and now all new communities in California are being sub-metered. Sub-meters are the same type of meters the city uses to measure water usage. They are installed behind the city master meter at each individual condominium unit. Figure 1 shows a typical meter installation outside one unit. Residents are charged the same rate for water and sewer as their city is charging the association. It offers equitable distribution of cost, as well as the peace of mind of knowing that you are paying only for the water you use and not for your neighborsâ&#x20AC;&#x2122; leaks and waterwasting habits. 26

June 2008 | ECHO Journal

How Does Sub-Metering Work? 1. The requirements to sub-meter water mandate that each unit must have an individual hot water heater and an individual water shut-off valve. Your board or manager can contact a sub-metering specialist to obtain an estimate to install sub-meters. The sub-metering company will require a plot map of your community, copy of a recent water bill, and a couple photos of your plumbing configurations where your shut-off valves are located. 2. If the board accepts the estimates, then a meeting between the sub-metering

company and the board should be scheduled. The board members need to have their questions answered before they present the concept of sub-metering to the residents. 3. It is important that the board is well informed and in agreement with the various sub-metering issues prior to addressing the residents. Many boards feel they have a financial obligation to sub-meter water because it saves money, fairly allocates water cost based on usage and thus promotes water conservation. For the meeting with the members, here are some of the questions most frequently asked by association members: • Where will the meters be installed and how will they look? The meters will be installed just above the shut-off valve to each unit. The shut-off valves are usually located just outside the units or in the garages. • What is the service fee to read, bill, and collect for water? The sub-metering company will provide that information based on whether the meters will be billed monthly or bi-monthly. • Who pays the service fee? The service fee is added on the water bill and is paid by the homeowner. • Do we still pay the city water bill? Yes, the association will still receive the city water bill and pay the bill as they have done in the past. • How are meters paid for? Usually, the meters are paid for by funds in reserves. Also, you can ask the sub-metering company if it offers a financing program. • Who owns and services the meters? The meters are owned by the association and most sub-metering companies will service the meter if needed. 4. If you vote to proceed, establish a plan of actions. Start with a projected date and a goal of when you would like the meters installed and to start billing residents for water and sewer. Schedule another meeting with the sub-metering company to review and approve the installation process. 5. Send a newsletter to the residents informing them of the sub-metering process. You will notice immediately that water consumption starts to go down as occupants anticipate having to start paying for their Continued on page 39 ECHO Journal | June 2008

Calendar of Events

Check out these ECHO events Wednesday, June 4 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101 San Jose Friday, June 6 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek Wednesday, June 18 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Drive, Rohnert Park Saturday, June 21 2008 ECHO Annual Seminar Santa Clara Convention Center Santa Clara Thursday, July 3 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Tuesday, July 8 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, July 9 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose

1900 N. California Blvd., Suite 950, Walnut Creek Wednesday, August 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101, San Jose

Monday, July 14 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant, Oakland

Wednesday, August 20 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Dr., Rohnert Park

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

Thursday, September 4 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Thursday, July 17 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club San Francisco

Friday, September 5 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Friday, August 1 East Bay Resource Panel 9:30 a.m. Angius & Terry

Tuesday, September 9 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, September 10 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose Wednesday, September 17 Wine Country Resource Panel 11:45 a.m. Eugene Burger Management Co. 6600 Hunter Dr., Rohnert Park Thursday, September 18 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club San Francisco Saturday, September 20 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Best Western Seacliff Inn, Aptos

Monday, September 8 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant, Oakland

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

June 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 Quarterly

ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael Angius & Terry, Walnut Creek Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Il Fornaio Restaurant, San Jose Eugene Burger Management Co., Rohnert Park Varies

Directory

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

New Associate Members Apollo Management P.O. Box 1945 Campbell, CA 95009 Contact: Kathleen Angel Tel: 408-594-1254 Fax: 408-317-0339 Email: kitty_angel@yahoo.com Community Association Financial 6333 Sierra Ct. Dublin, CA 94568 Contact: Kimberly Valentino Tel: 925-829-8999 Fax: 925-829-3206 www.hoasfinancial.com Email: kvalentino@hoasmanagement.com

Community Association Financial provides financial management services and solutions exclusively for community associations. PABCO Roofing Products 1718 Thorne Rd. Tacoma, WA 98421 Contact: Paul Traba Tel: 916-770-5111 Fax: 209-274-6670 www.pabcoroofing.com Email: paul.traba@paccoast.com

Covering the West for 25 years, Pabco Roofing Products can be found on residential and commercial buildings where quality, style and durability are important.

Continued on page 33 ECHO Journal | June 2008

News from ECHO

2008 Annual Seminar Begins June 20 The 2008 ECHO Annual Seminar is just a few weeks away. Many exciting presentations and outstanding speakers are lined up for this year’s seminar. Community association board members and professional members have been ordering seminar tickets for the past month, but plenty of space remains. Send in your reservation or call the ECHO office to reserve by telephone now. The 2008 Seminar will be an all-new, high-paced event, with most activities packed into a Saturday schedule. This year the event will use the main front lobby of the Santa Clara Convention Center for registration and the adjacent exhibition space. Morning and afternoon educational sessions, the full program book with handouts from all speakers, continental breakfast and an afternoon ice cream social are all included in the Seminar ticket price. HOA University, ECHO’s training course for new directors, will be repeated this year. The basic responsibilities and duties of homeowner association board members will be explained by a 30

June 2008 | ECHO Journal

full range of experts. This series of sessions is a “must” for all new or potential board members and also will provide an excellent review for any board members. Directors who attend this entire track will receive a special certificate, recognizing their participation and completion of the program. The seminar also includes full-day tracks addressing legal and legislative, association financial and management, and building maintenance concerns. As usual there will be a presentation and status report on the legislative bills affecting common interest developments that that are now moving through the California Legislature. ECHO Legislative Committee members will be present to provide these updates on current status of legislation affecting CIDs. The full program of educational presentations with speakers can be found on the ECHO Web site.

New Rules May Make Condos Harder to Sell It is pretty clear that mounting foreclosures of condominiums and town homes will greatly impact community association

budgets as owners abandon properties, leaving unpaid assessments. Lenders holding first mortgages on these properties have no obligation to homeowners associations to cover these deficiencies, leaving large gaps in association funding when the units were sold by the banks. Now, a new issue is looming, again involving lenders. Rules for government-backed mortgages and some private mortgage insurers are being rewritten to toughen lending standards for condominiums. A recent article in the Wall Street Journal by Kennth Harney describes steps being taken by Fannie Mae and Freddie Mac as well as by mortgage insurer AIG United Guaranty. These new standards will clearly make it more difficult for condominium owners to sell their units and for prospective buyers to close purchases—and they could have some other consequences as well. Government insurers Fannie Mae and Freddie Mac have also issued changes in their procedures that could have a dramatic effect on condominium loans. Under recently published guidelines, lenders requesting government loan guarantees will be asked to take responsibility for investigating the fiscal health of homeowners associations. That lenders will willingly take on such responsibility is not likely. In the end, if lenders are going to be held responsible for the adequacy of an association’s reserves, either they are going to quit lending on condominiums, or they will begin to ask some very tough questions of management and the board of directors.

And some of those questions may have merit. These new rules are a direct consequence of the sub-prime mortgage crisis and could have a very real impact on community associations. They will undoubtedly put pressure on boards of directors to re-evaluate their reserve budgets; to revisit the issue of CC&R restrictions on non-owner occupancy; and to take more aggressive steps to collect delinquent assessments in order to keep their projects marketable.

Interested In Additional Board Service? The Nominating Committee for the ECHO Board of Directors is seeking names of persons who are interested in being considered as candidates for positions on the ECHO Board. Four positions on the board will be up for election at the ECHO Annual Meeting that will be held in October. These positions are for three-year terms. Important Upcoming Events Friday & Saturday June 20–21, 2007 ECHO Annual Seminar Santa Clara Convention Center Santa Clara Thursday, July 17 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco

Association Law By Tina Wang, Esq.

Consequences of Employee Misclassification M

any associations are tempted to classify a worker as an independent contractor so as to avoid payroll taxes, health benefits, and workers’ compensation insurance. Doing so is now more risky due to the federal government’s implementation of its new initiative: Questionable Employment Tax Practice (QETP). [Editor’s note: Questionable employment tax practices are employment tax schemes or practices that have no objective other than to avoid federal and/or state employment taxes.] Consequences of Misclassification. Under QETP, federal and state auditors scrutinize independent contractor agreements. If the auditors determine that a worker is improperly classified, the employer may be required to pay penalties, including the following: • Federal and state income tax for the previous three years; • Employee’s share of Federal Insurance Contributions Act (FICA) taxes and the employer’s matching amount; • Federal unemployment taxes of 6.2% of each employee’s compensation up to $7,000.00, and state unemployment insurance equal to 3.4% of compensation up to $7,000.00; and • 0.5% of the total amount of the debt per month for up to 50 months (6% annually) with the possibility of additional penalties for substantial understatement or fraud (applicable in cases where the employer failed to file correct information returns, furnish correct payroll statements, and comply with information reporting requirements). How to Determine Employee Status. In classifying a worker’s status, the IRS generally focuses on the following three factors: 1. Behavioral Control. The higher degree of control an employer exercises over a worker by regulating the following factors, the more likely the worker will be classified as an employee instead of an independent contractor: how to perform the work (e.g., the amount of supervision or training); when and where to do the work; what tools or equipment to use or buy; and whether or not to hire assistants.

2. Financial Control. The more control a worker has over his/her business finances, the less likely he/she will be classified as an employee. 3. Relation of the Parties. Contracts between the parties may help distinguish the type of business relationship, i.e., whether the parties intended to enter into an employment relationship or independent contractor relationship. No one factor is conclusive, but, as a general rule, a worker is an independent contractor when an association has the right to control only the result of the work and not the means or methods of performing the work. See IRS Publication 1779. Example. Painters are generally classified as independent contractors because they are hired on a project basis; supply their own painting supplies and equipment; and do not have set working hours where they need to clock in and out. In other words, the painters control the process. However, not all painters are independent contractors. Some (i) work solely for one association and do not seek or advertise for additional work; (ii) the association controls the means by which the painting is performed by instructing the painters where, when, and how to paint; and (iii) the association supplies the painters with supplies. Such painters are employees, not independent contractors. Avoiding Misclassification. To avoid misclassification, associations should limit the use of “fulltime” independent contractors and instead hire workers on a specific project basis. Additionally, associations should treat workers similarly in similar situations. In other words, if the job duties of two employees are the same or similar, do not hire one as an independent contractor and the other as an employee. Lastly, use agreements that highlight the components of independent contractor status so as to withstand the scrutiny of federal and state auditors.

Tina Wang is an attorney with the Los Angeles law firm Adams & Kessler. This article is reprinted from www.davis-stirling.com by Adams Kessler. ECHO Journal | June 2008

Find the Answers to your Questions on Condo Ownership

An excellent guide to understanding the rights and responsibilities of condo ownership and homeowner associations operation. 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. Order today from ECHO! Call 408-297-3246 Fax 408-297-3517 Email: info@echo-ca.org

June 2008 | ECHO Journal

BusinessProfessional Directory Continued from page 29

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.

W. Charles Perry & Associates 520 S. El Camino Real, # 422 San Mateo, CA 94402 Contact: W. Charles Perry Tel: 650-685-8290 Fax: 650-685-8354 www.wcharlesperry.com Email: charles@wcharlesperry.com

We serve the architectural engineering and construction management needs of the commercial, multi-family, and custom residential real estate markets.

COM PA S S MANAGEMENT GROUP

408.226.3300 | 650.563.9900 | 831.583.9900

Listing Changes Frazee Paint 2633 Presidio Dr Brentwood, CA 94513 Contact: Marcos Ybarra Tel: 925-260-7946 Fax: 925-753-5941 Email: mybarra@frazee.com Web address remains the same Landscape Management Services 1071 N. 13th Street San Jose, CA 95112 Contact: Zachary Smith Tel: 408-277-6390 Fax: 408-277-6391 Email: zsmith@landscapemanagement.com

See our demo at www.gocompass.com today!

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

2008 Edition Community Association Statute Book 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.

ONLY

10 ECHO Journal | June 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

June 2008 | ECHO Journal

ECHO Board of Directors

Nominating Committee Seeks Candidates for ECHO Board of Directors T

he Nominating Committee for the ECHO Board of Directors is seeking names of persons who are interested in being considered as candidates for positions on the ECHO Board of Directors. Four positions on the board will be up for election at the ECHO Annual Meeting that will be held in October. These positions are for threeyear terms. Current directors whose terms expire in 2008 are Lori Burger, Robert Rosenberg, Dianne Rossi, and Richard Tippett. Board members are expected to attend all of approximately six three-hour board meetings held each year, generally at the ECHO Office in San Jose. Each board member also serves on one or more committees that hold regular meetings throughout the year. These two activities involve a commitment of four to six hours per month plus travel time. In addition members are expected to attend the Annual Seminar, Annual Meeting and a

two-day board retreat each November. Board members receive no reimbursement for these activities. Nominees will also be expected to have been recent active participants in ECHO activities and to have thorough familiarity with the organization and the CID industry. Persons interested in being considered for nomination should obtain and complete a nomination and qualifications form, available by request from the ECHO office. Every potential candidate, including incumbents, must submit a full form. All completed forms must be submitted to the ECHO office no later than July 15, 2008, to be considered by the nominating committee. Those requesting nomination may be requested to interview with the nominating committee. The committee will meet in August to prepare recommendations for board consideration. ECHO Journal | June 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 Geri 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.

June 2008 | ECHO Journal

2008 Regional Seminar Speakers Jeffrey A. Barnett, Esq. Sandra Bonato, Esq. Stephany Charles, CCAM Carra Clampitt, CCAM Jeffrey Draeger Lisa Esposito, CCAM David F. Feingold, Esq. Tom Fier, Esq John D. Garvic, Esq. William A. Gillis, Esq. Beverlee Gordon Mark Greening Robert P. Hall, Jr., Esq. Michael Hughes, Esq. Diane Kay, CCAM Geri Kennedy, CCAM David Kuivanen, AIA Bill Mann Andrea O’Toole, Esq. Chris Sigler Brian Smith Richard Tippett Steven S. Weil, Esq. Glenn H. Youngling, 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. Debra Warren Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

ECHO

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

Who Should Join ECHO?

Recent ECHO Journal Contributing Authors

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.

January 2008 Business-Professional Directory

What are the Benefits of ECHO Membership?

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

• 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

March 2008 Jeffrey A. Barnett, Esq. Tyler P. Berding, Esq. Carole Murphy, PCAM Dick Tippett

ECHO Membership Dues

April 2008 Frank Arms Michael Biel Tom Fier, Esq. Walt Grady, CPA Michael Hardy, Esq. May 2008 Meghan Connolly Haupt Beth A. Grimm, Esq Garth Leone Lise K. Ström, Esq.

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.

Water Costs Continued from page 27

water usage. Sub-metering generates big savings and immediately rewards residents for water conservation. 6. After the meters are installed, they are all read on the same day. Figure 2 shows a meter being read. The sub-metering company will send the meter reading and a general information letter to each homeowner. This will inform them how the submetering company reads the meters, bills the residents and collects the money. The company will add a service fee to the water bill. All water bills are mailed to the owners; renters are not billed. The money col-

Figure 2 Reading a submeter.

lected along with accounting worksheets are sent by the sub-metering contractor to the association manager who in turns pays the city water bill as they have always done. After sub-meters are installed, water usage typically goes down 20 to 30 percent. When homeowners start paying for their water, they will be encouraged to conserve and to repair leaks. The results show dramatic reduction in water usage and costs. In addition, when water rates increase in the future, you will not have to raise your homeowner dues to cover the cost of residential water cost ever again.

Mary Wulf is the director of business and development at California Sub-Meters, Inc. ECHO Journal | June 2008

Top Reasons You Should Attend the 2008 ECHO Annual Seminar • Valuable advice from experts in law, accounting, association management, insurance and maintenance. • Information, assistance, product samples and prizes from more than 120 Trade Show exhibitors. • Best practices and proved procedures for associations unveiled in 16 educational sessions. • The latest updates from the California Legislature and Law Revision Commission. • Checklists and other important reference information in the 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 about your concerns by networking with other association directors. • Information about ECHO programs, publications and services that support association leaders. 40

June 2008 | ECHO Journal

ECHO Marketplace

Advertiser Index

The place to find business and professionals for your association Alpha Restoration and Waterproofing 18 American Management Services . . . . .9 Angius & Terry . . . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . . .33 A.S.A.P. Collection Services . . . . . . . .23 Association Reserves . . . . . . . . . . . . .32 Bayridge Group . . . . . . . . . . . . . . . . .21 Berding & Weil . . . . . . . . . . . . . . . . . .44 Burdick Painting . . . . . . . . . . . . . . . . .36 Cal Bay Builders . . . . . . . . . . . . . . . . .27 California Sub-Meters . . . . . . . . . . . .20 Collins Management . . . . . . . . . . . . . .8 Community Association Banc . . . . . . .29 Community Management Services . . .29

Your Ad Seen 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.

M & C Association Management Services provides community association management and developer services to Fremont, Santa Clara, Stockton, Modesto, Copperopolis and the surrounding foothills. Since 1990, we’ve enriched communities and enhanced the lives of the people we serve. M & C is proud to be an Accredited Association Management Company® (AAMC®), which is the Community Associations Institute’s highest designation awarded to management firms.

1341 W. Robinhood Drive, Suite B7 Stockton, CA 95207 Tel: 209.644.4900 Fax: 209.644.4930

1171 Homestead Road, Suite 280 Santa Clara, CA 95050 Tel: 408.241.0023 Fax: 408.241.0093

37161 Niles Blvd. #A Fremont, CA 94536 Tel: 510.795.8308 Fax: 510.795.8422

Compass Management . . . . . . . . . . .33 Cool Pool Service . . . . . . . . . . . . . . . .29 Cornerstone Community Mgmnt . . . .18 Corum Painting . . . . . . . . . . . . . . . . . .2 County Bank . . . . . . . . . . . . . . . . . . .22 Draeger . . . . . . . . . . . . . . . . . . . . . . .19 Ekim Painting . . . . . . . . . . . . . . . . . . .26 ERTECH . . . . . . . . . . . . . . . . . . . . . . .26 First Bank Association Bank Services . .40 Flores Painting . . . . . . . . . . . . . . . . . .32 Helsing Group . . . . . . . . . . . . . . . . . .21 Hill & Company. . . . . . . . . . . . . . . . . .27 Jeff Atkinson Construction . . . . . . . . .40 M&C Association Services . . . . . . . . .41 M. L. Nielsen Construction . . . . . . . . .39 Massingham and Associates . . . . . . .14 Pelican Management Group . . . . . . .32 PML Management Corp. . . . . . . . . . .19 Pollard Unlimited . . . . . . . . . . . . . . . .13 Pratt & Associates . . . . . . . . . . . . . . .21 Professional Gutter Service . . . . . . . . .32 R. E. Broocker Co. . . . . . . . . . . . . . . .13 Rebello’s Towing Service . . . . . . . . . .15 REMI Company . . . . . . . . . . . . . . . . .39 Saarman Construction . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . . . .13 Steve Tingley Painting . . . . . . . . . . . .12 Steve’s Painting Services . . . . . . . . . . . .9 Union Bank . . . . . . . . . . . . . . . . . . . .36 Wells Fargo . . . . . . . . . . . . . . . . . . . .23

171 Town Square Road, Suite 2C 1209 Woodrow Ave., Suite C6 Copperopolis, CA 95228 Modesto, CA 95350 Tel: 209.785.6700 Tel: 209.576.7800 The Leader in Community Association Management Fax: 209.785.6701 Fax: 209.576.2209

For management proposal information, please visit www.mccommunities.com or email info@mccommunities.com The nation’s leader in community association management M&C_ECHOad_apr07.indd 1

4/23/08 2:35:17 PM

ECHO Journal | June 2008

Hit the Jackpot at the 2008 ECHO Annual Seminar Saturday, June 21, 2008 Santa Clara Convention Center Santa Clara, California

Saturday, June 21, 2008

The 2008 CACM Course

8:00 a.m.– 4:30 p.m. Santa Clara Convention Center Santa Clara, California

Reserves—What, Why and How

125 Booths in Trade Show, Hundreds of Prizes, New CACM Course, Buffet Luncheon, Ice Cream Social and more!

Join the Friday Night Gala! Annual Seminar Reception Friday, June 20, 5:00–7:30 p.m. Food, Music, Socializing, Prizes Cost: $40—See Registration Form

Friday, June 20, 2008, 2:00 p.m. Course Fee: $109.00 The California Legislature has put a microscope on reserve studies during the past several years and more attention is likely to continue to be placed on the process. Managers may not need to be a reserve specialist but they do need to know when to call in the specialist, what information to gather, and what to expect. How do you use a reserve study as a planning tool?

How does it drive the association’s budget? What if the association does not have reserves needed for a project? These questions and much more are discussed. (3 hours CEU credit). For reservations, call the ECHO Office.

Special Hotel Rates Don’t miss out on the special room rate of $105 single or double at the Hyatt Regency adjacent to the Santa Clara Convention Center. Call the Hyatt Regency at 800-233-1234 and mention the Executive Council of Homeowners.

Educational Program Session Tracks

Saturday Morning 9:00 to 10:10

Saturday Morning 10:50 to 12:00

Saturday Afternoon 1:30 to 2:40

Saturday Afternoon 3:20 to 4:30

BOARD BASICS Rooms 209 and 210

Administration Debra Warren, PCAM, CCAM

Legal

Insurance

John Gill, Esq.

Financial Linnea Juarez, PCAM, CCAM

LEGAL Rooms 203 and 204

Legislative Update John Garvic, Esq. Kerry Mazzoni

Governing Document Improvements & Updates Glenn Youngling, Esq.

Introduction to Policy Governance® Doug Christison, CCAM Rolf Crocker, CCAM

Ask the Attorney Stephen Weil, Esq. Sandra Bonato, Esq. Jeffrey Barnett, Esq.

MANAGEMENT & FINANCIAL Ballroom H

Help for Associations in Crisis Sandra Gottlieb, Esq.

Self-Managed Associations Kurtis Shenefield, PCAM, CCAM

Record Keeping and Communication Walt Grady, CPA Beth Grimm, Esq.

Delinquencies, Collections & Bankruptcies Lisa Esposito, CCAM Paul Terry, Esq.

MAJOR MAINTENANCE Ballroom G

Legal Considerations Ann Rankin, Esq. Rob Rosenberg, CCAM

Management Considerations

Finance & Funding Karl Lofthouse James Ernst, CPA

Construction Panel Robert Hall, Esq. Jeffrey Draeger David Kuivanen, AIA

Dennis Socher

R E GIS T R AT ION FOR M

June 21, 2008 Do not miss this great educational opportunity. Reserve this date on your calendar.

Yes! Please reserve my space at the 2008 ECHO Annual Seminar. Name ___________________________________________________________________ Association/Organization ___________________________________________________ Address _________________________________________________________________ City __________________________________________ State _____ Zip____________ Daytime Phone ___________________________________________________________ Names of Additional Attendees: 1. _________________________________________ 2. ________________________________________ Please reserve tickets for: No. Amount Seminar Only (members) $75 ___________ $___________ Seminar Only (non-members) $90 ___________ $___________ Seminar Buffet Lunch $40 ___________ $___________ Friday Reception $40 ___________ $___________ TOTAL $___________ VISA/MasterCard No. ______________________________________________________ Expiration Date ___________________________________________________________ Cardholder’s Signature_____________________________________________________

Reserve Now Tickets are non-refundable Order will not be processed without full payment Return with payment to: ECHO 1602 The Alameda, Ste. 101 San Jose, CA 95126 Tel: 408-297-3246 Fax: 408-297-3517