March 2009
A Journal for California Community Association Leaders
echo-ca.org
Tough Love in 2009?
ALSO INSIDE THIS ISSUE:
• How Much Maintenance is Enough? • Do Budgets and Reserve Funds Relate? • File a Proof of Claim in Bankruptcies
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Contents
Maintenance Manuals page 12
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Is Tough Love in Order in 2009? Boards are facing challenging financial problems in 2009. Decisions will have to be made about buildings, facilities and grounds maintenance. Where to put the dollars, if any can be found, is the question. This article provides creative approaches that may be applicable to your association.
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How Much Maintenance is Enough? Title 7 of Division 2 of the California Civil Code creates new standards and maintenance requirements for common interest developments built after 2003. These requirements pose special risks for managers and directors. This article examines how the failure to comply could affect a “new” association.
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Do Budgets and Reserves Relate? There is no causal relationship between operating costs and reserve expenditures. This article discusses how associations need to tackle planning for these two kinds of costs as two distinctly separate exercises. Plans and budgets will be much better if you do.
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File a Proof of Claim in Bankruptcies Forecasts call for a big increase in the number of bankruptcy filings in 2009. If your association receives a bankruptcy filing from an owner, don’t panic because there are remedies. This articles discusses the need to file a Proof of Claim promptly.
Departments 28 Directory Updates 33 News from ECHO 34 ECHO Bookstore 36 Calendar of Events
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38 ECHO Volunteers 38 About ECHO 41 ECHO Marketplace 41 Advertiser Index
The ECHO Journal is published monthly by the Executive Council of Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent person should be sought. Acceptance of advertising does not constitute any endorsement or recommendation, expressed or implied, of the advertiser or any goods or services offered. We reserve the right to reject any advertising copy. Copyright 2009 Executive Council of Homeowners, Inc. All rights reserved. Reproduction, except by written permission of ECHO, is prohibited. The ECHO membership list is never released to any outside individual or organization.
Executive Council of Homeowners, Inc. 1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours: Monday–Friday 9:00 a.m. to 5:00 p.m.
Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer David Levy Secretary Dorothy Kopczynski Directors Paul Atkins John Garvic Diane Rossi Richard Tippett Steven Weil
Jerry L. Bowles Robert Rosenberg Kurtis Shenefiel 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 Tough Love page 6
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March 2009 | 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.
Race to Win ECHO Annual Seminar June 13, 2009
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By Beth A. Grimm, Esq.
Is Tough Love in Order in 2009? 2007 was tough for homeowner associTheationyearboards financially, 2008 was worse, and now in 2009 we are facing problems that are even more challenging. Decisions will have to be made about homeowner association buildings, facilities, and grounds maintenance. Where to put the dollars, if any can be found, is the question.
Recently the discussion at an ECHO Resource Panel meeting was about, as is common these days, the problems that association boards face every day because of foreclosures and shortfalls in the reserves. We shared thoughts and came to some conclusions that may work to help convince boards to honor their “fiduciary duties� under the law without scaring them into running
ECHO Journal | March 2009
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for the hills or getting them “run out of town on a rail.” Here is a reality: “Tough Love” is in order in many associations. A big part of the problems boards face today is, of course, a shortage of funds in reserves for big projects. This has long been a problem for many associations, especially those that are self-managed (who do not have someone reminding them on a regular basis of their fiduciary duty). Now this virus is spreading rapidly to many more associations because of the foreclosure crisis, the fallout of the sub-prime loan debacle, and the raiding of reserves to pay the shortfall in operating expenses resulting from these recent conditions. Boards need to take measures that may be painful to the members, but they are necessary. That may mean pushing a special assessment to do a needed project through the membership, even if the result is more foreclosures, or turning the heat off in the swimming pool.
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“Tough Love” is in order in many associations. It is also important to acknowledge that a big part of the reason that many homeowner associations are in trouble today is pinching pennies too tightly in the past years, assuming that, when the big projects came up, the board would be able to find sufficient options for members to be able to pay, such as through a bank loan or individual equity loans, and/or including special assessments. But guess what? You cannot squeeze blood out of a turnip; today a lot of those options have either dried up (property equity, for example) or become more difficult (like qualifying for a commercial loan when delinquencies are high.) That does not mean building maintenance or reconstruction has to come to a halt or life as we know it should stop. 8
March 2009 | ECHO Journal
There are some viable cost cutting options today that are not always available and there may also be light at the end of the tunnel for some of the important projects since competition and market factors are driving the cost of services and products down. In past years, the mind set has commonly been to lump projects together to save money, such as replacing siding when painting was accomplished, or combining those projects with a re roofing project—even if not all the siding needed to be replaced or the roofs were not at the end of their life—to take advantage of the economy of scale. The common assumption was that doing things on a larger scale led to an overall savings and also that a better plan was getting one loan over imposing smaller separate assessments or raising the regular assessment Today, what is different is that boards need to focus on the other side of the equation too. For example, if we bite off more than we can chew, will we cause the solid owners to go down with the less fortunate? For example, consider an association that cannot obtain a loan. If there is a big assessment that 10 percent of the owners cannot pay so that their homes go into foreclosure, will they take down another 10 percent (or more) who cannot withstand the added expense of the assessments that were not recovered from the foreclosures? Will this situation result in a revolt by the owners? It’s a serious concern, but not the only one for sure. All this said, homeowner associations are not without remedies. Here is some food for thought: Cut the fat. Like the government, some associations would do well to cut the fat, but where and how? Here are some suggestions. Think in these terms: tighten the belt, but do not cut off the circulation, to make it through these times. • Review all HOA contracts, decide if you are getting your money’s worth and consider whether you want to seek competitive bids for some services (but see warnings below before going off in the wrong direction). • Consider temporary closure of less-used facilities that are draining funds and offering little benefit to owners; considering alternating days or weeks in offering services makes sense. • See if there are any non-necessities or amenities that can be reasonably be cut out of any contract or service that the assoECHO Journal | March 2009
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ciation is receiving. Investigate whether there are any viable energy savings alternatives. • Look at technology if you have a paid office staff or equipment to see if there is anything that can be done electronically or technologically to minimize staff needs or replace a piece of machinery that needs to be maintained with something more efficient. • Ask the question as to whether association work crew volunteers might be a solution to some of the work normally done by paid contractors. Hey, it’s a fair question to ask if a bake sale each week might help keep the lights on in the clubhouse. • See if there are any “green” alternatives available for utilities or amenities that might lessen costs. • Last but not least, get on the web and research what cities, counties and towns are doing to cut costs. They are in the same boat you are; the tax base is threatened and their income has been cut drastically. Do not defer projects that are necessary to prevent or resolve safety issues, or that are critical, or maintenance that is necessary to preserve or enhance the condition of the major components of the association. Holding onto reserve funds too tightly, anticipating doom ahead and thereby deferring all projects because of the state of the economy could result in disaster. Don’t let the “house” come tumbling down around you. Consider using contractors for specific tasks that, when accomplished on an ongoing basis or priority schedule over time, might get the association through these hard times without compromising the integrity of the buildings, carports or recreational facilities. You could consider whether hiring a contractor with pertinent licenses as an employee to work on the facilities is cheaper than hiring an outside contractor. (How that plan worked for one association was discussed in the January ECHO Journal.) And I believe that you will find that contractors who have been serving homeowner associations for years and recommending major maintenance and lumping jobs together are often willing to think outside the box and offer services on a smaller or “menu-type” of scale. And even when substantial rehabilitation projects are necessary, and you want to make sure the work will last, that the contracts are solid, and you cannot cut out the important
[team, management, or integrated] components, consider that the marketplace has become more competitive than it has been for a long time. Costs for products like asphalt are at an all time low. So get busy. Understand that such creative ideas are important factors in winning over the owners who want to be on the “right side” and enjoy the savings they can achieve by doing a big project in the current economic environment. Of course, be sure as always to investigate licenses, bonding, insurance (homeowner association specific when required) experience and capabilities of contractors and beware of the contractors from other fields, such as residential remodels, that are swooping in and begging for work. While these contractors may be able to do small jobs, they may not have the right kind of insurance and they often have little or no experience working with large complicated multi-residence building structures. It is time to think outside the box—but keep these pointers in mind. • Do not scrimp on professional assistance. • Do not choose a contractor who is too hungry without paying considerable attention to the things previously discussed. • Do not fail to do due diligence. • Do not drop good management to save money. • Do not assume your association will be sufficiently creditworthy to qualify for a loan. • Be sure adequate funds can be raised before signing a big contract. • Do not delay too long if you are facing a substantial project. Do not overlook the importance of educating the owners at your association to get their support. Once they know what the board knows, they will more easily align their thinking about these tough decisions with those of the board and rally to support the tough choices the board must make.
Beth Grimm is a community association attorney in California. She is a member of the East Bay Resource Panel and the Legal Resource Panel and is author of various publications and books about condominium living and the law and a frequent contributor to the ECHO Journal. You can take advantage of free information on her website at www.californiacondoguru.com ECHO Journal | March 2009
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By Tyler Berding, Esq. and Steven Weil, Esq.
Maintenance Manuals for New Associations
How Much Maintenance is Enough? M
any of the statutes in the Davis-Stirling Common Interest Development Act (“Act”) address common area maintenance and the calculation and levying of assessments needed to maintain and reserve for that maintenance. Directors and managers face the challenge of implementing these statutory directives, a task especially difficult during an economic downturn. Decisions have to be made: what must be repaired and what can be deferred; should we replace a component with a “short term” fix or with one that is more costly but will last longer? When the CC&Rs say common areas must be maintained in “First Class Condition,” is that different from requiring simply that common areas “be maintained”? Answering these and similar questions can affect habitability, enjoyment of the project and property values. For new developments, the issues are even more complex. Title 7 of Division 2 of the California Civil Code (“Title 7,” which was called “SB 800” before its enactment) creates new standards and special statutory maintenance requirements for residential common interest developments constructed after 2003.1 These requirements, which can require compliance with a project
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“Maintenance Manual,” pose special risks for managers and directors because the failure to comply could reduce the recovery available to associations in construction defect claims or create liability to members or others if the new maintenance standards are breached. An association’s governing documents can add yet another dimension. Typical CC&Rs for new projects often contain specific requirements that the board must follow, including complying with the provisions of the maintenance manual and conducting all necessary inspections specified in such manuals. Most maintenance manuals are detailed, but the “maintenance” that is required usually consists not of repairs, per se, but rather periodic inspections of various components. The ones that we have reviewed have few actual specifications for work to be performed for which contractor’s bids could be obtained. Nevertheless, must the manuals be followed completely and, if they are 1 Section 938 of the California Civil Code states that Title 7 is applicable to: “...new residential units where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003.”
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not, what is the consequence? This article is intended to help boards and managers navigate the liability risks created by the new maintenance standards contained in the manuals.
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Background Managers and directors are given little statutory guidance for determining the extent of maintenance required by a common interest development. Section 1364 of the Act says: (a) Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest. So, while we can understand from this what parts of the project must be maintained by the association, the Act does not outline exactly how, how often and at what expense that maintenance should be undertaken.
A homeowner is obligated to follow all reasonable maintenance obligations and schedules communicated in writing... The lack of statutory maintenance standards was partially addressed in Title 7 for developments with residential homes sold after January 2003. Title 7 is actually a series of statutes intended to address mediation and related procedures for resolving construction defects. To set a “benchmark” for the performance of building components, we compare that performance in light of how the project was maintained after original construction. Civil Code §907 provides these maintenance guidelines: A homeowner is obligated to follow all reasonable maintenance obligations and schedules communicated in writing to the homeowner by the builder and product manufacturers, as well as
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commonly accepted maintenance practices. A failure by a homeowner to follow these obligations, schedules, and practices may subject the homeowner to the affirmative defenses contained in §944. Importantly, the term “Homeowner”, as defined by Title 7, includes a community association in a common interest development. The operative phrase is “reasonable maintenance obligations and schedules” provided by the developer of the project as well as “commonly accepted maintenance practices.” Civil Code §907 requires that “reasonable” written maintenance obligations and standards, if provided by the developer, be followed along with “commonly accepted” maintenance standards. But what if these two sets of standards conflict? On the other hand, what if the maintenance manuals prepared and delivered by the developer provide little in the way of actual specifications for necessary “maintenance”? The Maintenance Manual has two main purposes: to provide guidance to the association and to penalize it for failing to comply with the manual should it later bring construction defect claims against the developer. In light of this second purpose—to provide a defense to claims—the standards in the manual can overstate the maintenance activities that a particular component of the building may require. But are those maintenance requirements nevertheless “reasonable”? The maintenance manual thus poses for a board a dilemma: comply with the manual literally, or provide “less” maintenance and risk undermining the association’s position in potential litigation with a developer or homeowner. Solving this dilemma requires a careful analysis of the maintenance manual for each particular development, a good understanding of the type of components required to be maintained (siding, roofing, metal fences, etc.) and how they function in conjunction with other components of a project. Here are some ways a board can address these issues: Determine Actual Maintenance Specifications First and foremost, it is important not to assume more about the requirements of a typical maintenance manual than actually exists. Maintenance manuals are largely inspection schedules, and most lack a specific
scope for any actual work to be performed. The ones that we have reviewed say little about the scope of work necessary for repairs or replacement. So the first thing that the board or management should do is determine exactly what the manuals require and to understand the difference between doing inspections and doing actual work. Here are some typical examples: In one manual, under the “roofing” section, it lists the following: “Maintenance Suggestions—A competent roofing contractor should be employed to inspect all roof components and provide a detailed report to the association.” The accompanying “timetable” merely says that the “inspection” should take place annually and that repairs should be performed as soon as problems are discovered or reported. It then goes on to relate all of the damage that might occur if repairs are not done. In another, the only specification for work is: “Keep roof and drains clean and free of debris.” The rest of the roofing section is simply an inspection schedule and an admonition that failure to properly “maintain the roof may result in deterioration of the roof system and water infiltration.”
To be fair, they don’t claim to be specification sheets. And further, some of the suggestions above do fall into the category of maintenance “work.” But most focus on inspection schedules for an extensive array of project
An expert can specify how a particular building component should be maintained and on what schedule. components, some minor repair or replacement of components, and reporting on the results of these inspections. For the most part they defer any decisions on serious work to contractors or other professionals, which brings us to the next paragraph. Keep this in mind: If the manuals don’t specify the work
to be done, no one can argue with the findings of the association’s own expert. Get an Expert’s Opinion An expert, either a contractor or design professional, is one with the necessary experience and education to specify how a particular building component should be maintained and on what schedule. The proper expert will also understand the “standards” of the industry and from that can conclude what is a “reasonable” maintenance program to be adopted by the board of directors. They should start with the list of components that the manual identifies and add their own opinions on how often the component should be inspected and what to do if problems are found. An opinion by an expert who has reviewed the various provisions of a developer-written maintenance manual can identify and provide the reasonable maintenance requirements of specific building components, providing actual specifications for which bids can be obtained. Such an opinion will go a long way to filling in the gaps left in the manuals provided by the builder. Continued on page 18 ECHO Journal | March 2009
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Maintenance Continued from page 17
A board or its manager, having solicited and obtained the recommendations of a qualified expert on the maintenance standards and, more importantly, the specifications to be used to maintain and repair particular building components, are unlikely to be faulted for following those recommendations instead of the far more generic recommendations set forth in a maintenance manual provided by the developer.
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Review the Budget Determining whether or not the developer’s Department of Real Estate-approved budget is adequate to perform the maintenance required is another means of testing the validity of the developer’s maintenance manual suggestions. Obviously, if the maintenance manual requires maintenance at a level for which funds are not available, it casts doubt on the developer’s suggestions. Any maintenance or repair that the association performs must be funded. We reviewed the budget for one association and compared it to the maintenance manual provided by the developer. There was only $6,240 included for “routine maintenance and inspections,” and there was no breakdown between the two categories. It is impossible with a cursory review to tell if that amount of money will fund the various inspections and other “routine maintenance” suggested by the manual, but an expert’s review of the inspection schedule will clarify that. Much more important, however, is whether the cost of the actual repair work (reroofing, painting, component replacement) has been properly funded in either the reserve or operating budget. This information is not going to be available from a maintenance manual that provides no specifications and must be obtained from whomever the association retains to do its periodic reserve studies, or from local experts, including contractors and design professionals who would normally be retained to provide bids for the association’s repair projects. It is unlikely that an outside expert would necessarily disagree with the inspection schedules set forth in the typical maintenance manual, because all competent experts agree that periodic inspection is important. But their opinions are necessary,
not only in resolving any conflicts between the maintenance manuals and industry standards but also to estimate properly the cost of the actual work necessary. It is the cost of the work, not the cost of inspections, that will have the greatest impact on an association’s budget. Get a Legal Opinion Once an outside expert has determined a schedule for maintenance inspections and repairs that comports with reasonable industry standards; and if that determination conflicts with provisions of the maintenance manuals or the developer’s budget, an opinion from the association’s legal counsel will give the board and management the assurance they need that following their own expert’s guidelines will not subject the association, the board, or management to liability for any variance from the provisions of the developer’s maintenance manual. Counsel can also review the association’s governing documents to determine if they contain any provisions that require the board or management to follow any particular set of guidelines. Finally, counsel can provide the type of “safe harbor” analysis that can be used to document the board’s investigation and decision-making process and to help gain for the board the “business judgment rule” protections afforded by the Civil and the Corporations Code. Summary The issue is this: must an association strictly comply with its Maintenance Manual or is it free to adopt and implement “lesser” maintenance techniques that are still adequate and “reasonable” and that will reduce maintenance costs without compromising the association’s legal position should defect lawsuits arise? Answering this question requires an independent technical and legal assessment of the development, the Maintenance Manual, the budget and the governing documents. Resolving these issues is important both for the protection of a community and the credibility of its board and management team.
Tyler Berding and Steven Weil are the founding partners of Berding & Weil, LLC, a community association law firm located in Alamo, CA. Berding is the immediate past president of ECHO, and Weil is currently a member of the ECHO board. Both are frequent speakers at ECHO events and contributors to the ECHO Journal. ECHO Journal | March 2009
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By Graham Oliver
The Relationship: Operating Budgets and Reserve Fund Contributions W
e could make this the shortest chapter in history by simply saying, “There isn’t one!” That’s right, there is no real relationship between the operating budget of a co-owned property and its reserves funding—whether it be a condo, a townhouse, or a gated homeowner’s association. If operating costs get higher, they do not cause expenditures for major repairs (and hence the funding needed to pay for them) to become higher. As well, properties with high operating costs do not necessarily spend more on major repairs than properties with low operating costs.
This example will show why. We have Condo A and Condo B, both about the same size. Condo A has operating costs that include 24-hour front-desk security seven days a week. Condo A was designed poorly, at least in respect to its heating, ventilation and air-conditioning. Heat escapes in winter through single-ply windows. Heat comes in during the summer due to big expanses of glass facing south. Condo A has an oilburning heating system. These and other things contribute to high operating costs. Condo B has a one-shift per weekday security per-
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son. Its architect was energy-savvy and took pains to design this structure in an energyefficient manner. The fuel used in Condo B is natural gas but it is supplemented by solar panels on the roof. Both buildings, however, have about the same contributions requirements for their reserve fundsâ&#x20AC;&#x201D;say, $40,000/year. But Condo A has an operating budget of $400,000/year and Condo B an operating budget of $200,000/year. For Condo A, the contribution to reserves would be equal to 10% of its operating budget and for Condo B it would equal 20%. So, if the â&#x20AC;&#x153;ruleâ&#x20AC;? were 10%, Condo A would be funding properly and Condo B would be underfunding, by half. Do bus driverâ&#x20AC;&#x2122;s salaries have a relationship to the price of Lexus cars? Yes, I guess they do. Bus drivers require pay hikes over time. Lexus cars prices will increase over time. But to suggest that bus driversâ&#x20AC;&#x2122; wages should be tied to the price of Lexus automobiles would be unacceptable, to put it mildly. Thereâ&#x20AC;&#x2122;s no â&#x20AC;&#x153;realâ&#x20AC;? relationship between them. To end this part on a light note, someone found, we kid you not, that there is a very close correlation between the salaries of school teachers in Minnesota and the price of rum in Havana. Not one of us, weâ&#x20AC;&#x2122;re sure, would argue that one causes the other! Funding should be determined by a thorough line-by-line study of anticipated repairs and replacements. Itâ&#x20AC;&#x2122;s as simple as that. An over-simplified rule-of-thumb like a percentage of the operating budget may be easy to understand, but it doesnâ&#x20AC;&#x2122;t make sense. Predicting Operating Costs and Reserve Fund Expenditures Itâ&#x20AC;&#x2122;s useful, we believe, to examine the differences between the two kinds of â&#x20AC;&#x153;money out.â&#x20AC;? One kind, anticipated operating costs, end up as an Operating Budget. The other kind, estimated expenditures from the reserve fund, end up as part of a Reserve Plan, which usually results from a Reserve Study. What, actually, are some of the more typical operating costs? The biggest single category for multi-unit condos is utility costsâ&#x20AC;&#x201D; electric power, gas perhaps (or oil), and water. Staff costs can be high as wellâ&#x20AC;&#x201D;a building superintendent, a property manager, a front-desk security person. Calling in Continued on page 24
ECHO Seminars They’re lifesavers for your association. North Counties Seminar Saturday, March 21, 2009 8:00 a.m. to 1:15 p.m.
Seminar Agenda 8:00 Registration and Sponsor Tables 8:45 Welcome and Introductions 9:00 Meetings, Meetings and More Meetings! Barbara Zimmerman, Esq.; Steve Lieurance, CCAM 9:50 New Facilities Technologies for Your Association—David Kuivanen, AIA; Steven Saarman 10:35 Break 11:05 Disaster Preparedness Diane Kaye, CCAM; Robert Smylie 11:50 Ask the Attorneys—Sandra Bonato, Esq.; Robert Hall, Esq. 12:40 Questions and Answers 1:10 Drawings for Sponsor Prizes 1:15 Adjourn
Rohnert Park Community Center 5401 Snyder Ln., Rohnert Park Registration Feet: $40 Non-Members: $50
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, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517
Relationship Continued from page 22
repair people for minor repairs, contracting out the landscaping and snow removal work are other on-going costs. The biggest category for townhouse developments or single-family homes would be costs related to grounds maintenance. One of the principal characteristics of these operating costs is their predictability. They are, simply, very predictable. For one thing, the forecasting horizon is short. One year in most cases. And we all know (think of weather forecasts) that the weatherman’s outlook for tomorrow is likely to be a lot more accurate than his outlook for next week. 24
March 2009 | ECHO Journal
Anticipated operating costs can be “out,” of course, but they’re not likely to be out by much. Reserve fund expenditures have an “air” of predictability. They’re derived from a “study,” which has the sound of something quite profound and unassailable. And they’re presented in voluminous detail, which seems impressive. But reserves expenditures, in actual fact, are often astoundingly out-ofwhack. It’s not unusual to estimate that a boiler overhaul will cost $X only to find that when they “open her up” they find it has deteriorated so much that a new boiler is required. It‘s also not unusual to incur damages that are by their very nature almost defined as unpredictable—damage from severe weather conditions, new state and
municipality laws that require special safety and security installations, and so on. Reserve fund plans generally span 20 or 30 years; and even if you build in an inflation factor, it doesn’t begin to insulate the plan from cost changes that bear no relationship to ordinary inflation calculations. Controlling Operating Costs and Reserve Fund Expenditures Operating costs are also relatively more controllable than major repair expanses. If a severe winter resulted in higher outlays for water damages, you might cut back on the flower beds a bit to keep the “grounds” category within budget. You can decide to give the resident manager a raise in pay, or not to do so. The results of some operating cut-
backs, however, are quite visible. When housekeeping is less frequent, or if the front desk is not occupied on weekends, people are apt to notice and, of course, complain. But that’s another story. Reserve fund expenditures are generally intended to be made “as scheduled” in the reserves plan. But sometimes they have to be incurred earlier than the plan called for. If balcony railings have become unsafe, there’s no choice but to get them fixed. So the timing can be off from the planner’s estimates. Similarly, the cost of the work can differ, sometimes greatly, from the predicted levels. It’s easy to imagine that a boiler replacement job predicted in 2008 to be carried out in 2014 might be required earlier, or come in at a price at some considerable variance from the plan numbers.
There is no causal relationship between operating costs and reserve expenditures.
Given our observations on predictability and controllability, it’s not hard to see why simple ratios or rules-of-thumb are (1) hard to arrive at, and (2) likely to be quite unreliable. Please keep that statement in mind even though there are some rules-of-thumb that, in a pinch, you may want to consider using. Let’s summarize by restating the position we staked out at the start. There is no causal relationship between operating costs and reserve expenditures. Tackle your planning for these two kinds of costs as two distinctly separate exercises. Your plans and budgets will be much better if you do.
Graham Oliver is the president of Oliver Interactive, Inc. His company is principally involved with reserve fund issues and offers software and other tools to help planners and boards create and maintain healthy reserves. He is, also, the coauthor of the well-reviewed book Reserve Fund Essentials.
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.
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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
2009 2:35:17 25 ECHO Journal | March 4/23/08 PM
26
March 2009 | ECHO Journal
By Sandra Gottlieb, Esq. and David Swedelson, Esq.
File a Proof of Claim in Bankruptcies W
ith the world’s economy in turmoil and a significant increase in the unemployment rate, experts are forecasting a big increase in the number of bankruptcy filings in 2009. If your association receives a Notice of Bankruptcy filing by one of its owners, don’t panic as there are
some remedies. But you must take quick action to protect the association’s rights. When the association receives a Notice of Bankruptcy, the association, or its legal counsel, should file a Proof of Claim to ensure that amounts due the association by the
debtor (the delinquent homeowner who filed bankruptcy) are accounted for and that the court and all of the parties involved in the bankruptcy proceedings are aware of the association’s claim. Continued on page 29 ECHO Journal | March 2009
27
Directory
UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.
Additions to Member Listings The Inspectors of Election LLC P.O. Box 12782 La Jolla, CA 92039 Contact: Marc Poland Tel: 800-350-8333 Fax: 800-350-8334 www.theinspectorsofelection.com Email: marc@theinspectorsofelection.com
The LLC provides complete election support service for common interest developments in accordance with Davis-Stirling and the California Corporations Code. Martin-Walker Construction, Inc. P.O. Box 7427 Spreckels, CA 93962 Contact: Traci Walker Tel: 831-455-9397 Fax: 831-455-9635 Email: hwalker@mwc-inc.com
Changes to Member Listings CJM Association Services, Inc. 7139 Koll Center Parkway, Ste. 300 Pleasanton, CA 94566 Tel: 925-426-1508 Fax: 925-426-1494 Contact: Joe Marquez www.CJMASI.com Email: Joe@CJMASI.com
We provide full service management, bookkeeping and consulting to associations throughout the Bay Area. Our mission statement is very simple: â&#x20AC;&#x153;We Care.â&#x20AC;? Franciscan Property Management LLC 443 Waverley Street Palo Alto, CA 94301 Tel: 650-321-1010 Fax: 650-321-1444 28
March 2009 | ECHO Journal
Proof of Claim Continued from page 27
We have been told by bankruptcy judges that, notwithstanding what is stated in the Notice of Bankruptcy (where it is often stated that there is no need to file a Proof of Claim), all creditors (and the association is a creditor if it is owed assessment monies from the debtor/delinquent homeowner) should file a Proof of Claim as there is a possibility that the debtor/delinquent owner will convert their bankruptcy from one form to another where a Proof of Claim is required. It is a mistake for an association to believe that it can rely on the debtor to name the association as a creditor to whom money is due. If the debtor does not list the associa-
Think of the Proof of Claim as a notice to all parties of the association’s right to payment. tion as a creditor, and if the association fails to file a Proof of Claim, the result could be non-payment to the association by the bankruptcy estate,, which could result in the termination of the association’s right to collect payments (delinquencies) from the delinquent homeowner once the bankruptcy is discharged. Think of the Proof of Claim as a notice to all parties of the association’s right to payment. Contained within the bankruptcy notice will be the date upon which the Proof of Claim must be filed. Normally, the Proof of Claim needs to be filed within 90 days after the date set for the meeting of the creditors (in a Chapter 7 bankruptcy). Our advice is to file the Proof of Claim as soon as possible after receiving the bankruptcy notice, keeping in mind that unsecured claims are usually paid last, if at all. Further, even if the homeowner files a Chapter 13 bankruptcy (as
Looking different isn’t enough. Being different is. With a team that brings over 60 years of experience specializing in HOA management, Compass has the resources and depth of understanding to address the issues facing your association. Compass Management Group tackles our clients’ challenges head-on, always delivering creative solutions, clarity of vision and technologies that simplify management tasks and communication for everyone. Through our proven strategies, we’ve earned our clients’ trust and loyalty and solidified long-term working partnerships. Discover what being different really means.
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Continued on page 37 ECHO Journal | March 2009
29
By Thomas Douma
Green Issues for Reserve Studies A
s board members and managing agents have discovered over the last two years, energy costs have become a runaway item that has put stress on keeping assessments down. Despite recent falling oil prices, energy costs are at record levels and are forecast to stay there for the near future. Normally reserve studies do not become heavily involved with operating budgets, but progress with new products and new technologies are changing that situation. Before going further with specific suggestions, we need to discuss the pressing need for Reserve consultants to work more closely than ever with the managing agent and the board treasurer. Many choices regarding the reserve study now have significant impact upon the operating budget in terms of energy usage. Even cosmetic decisions such as the roof color have implications on the air conditioning costs for an association. This is even more important when analyzing the type of roof, replacing electrical/mechanical systems, swimming pool and domestic hot water heating, and window glazing. All these items have major impacts upon the energy consumption for the association. Therefore, it is crucial that the reserve consultant consider the full long-run cost of each component. The usual “like for like” replacement may be the lowest short-run cost and still have the largest long-run cost when viewed over the full life of the component and including the implications for energy consumption. A good example is the composition and color of the roof, especially where there are high temperatures and the associa30
March 2009 | ECHO Journal
tion has flat roofs. Newer, high reflective and lighter colored roofs may cost more initially, but they last longer and produce immediate energy savings. If a study of the energy savings shows a positive cash flow over the life of the component, then the board should consider early replacement of such reserve components. Examples of components that offer opportunities include: • Replacing heat pumps and boilers with solar hot water panels for both swimming pools and domestic hot water usage. Many associations are using the tops of trellises and carports as collection areas for the panels. Some have even designated open areas for installation of the panels. • Survey all the pumps and electrical motors and replace older, inefficient components with newer, variable speed motors connected to load demand controls. • Have calculations performed before replacing windows and sliding glass doors. Such options as thermal-paned glazing, high-E glazing, and reflective coatings are proving very successful. South- and westfacing glazing is especially vulnerable to heat build up, and even installing awnings may yield substantial savings. • Review existing air conditioning installations to calculate potential savings that may be gained by upgrading to newer high SEER (Seasonal Energy Efficiency Ratio) rated systems. If roof mounted systems are used, coordinate the roof and air conditioning replacements to obtain better savings.
• Replace parking lot lighting, security lights and common area/hallway light fixtures with newer compact
fluorescent and even LED (light emitting diodes) systems. â&#x20AC;˘ Check water usage and consider more drip irrigation (which also cuts down on dry rot problems) and better planting schedules with drought resistant plants. More efficient sprinkler controls are also available to minimize water usage during rains.
â&#x20AC;˘ While most associations are non-profit corporations, investment groups are emerging that will package solar voltaic systems in return for federal and state tax credits and a share in the energy savings. This may reduce or almost eliminate the initial cost of the system, while significantly lowering the electrical costs to the association and may even produce surplus energy for
sale to local utility companies or neighboring associations. All of these issues are emerging as important consideration for the reserve study, especially in this climate of budget tightening by members of the association and the continued high cost of energy. We recommend you work with your reserve consultant, managing agent, and an in-house group within your association. By coordinating these efforts, you can hold the line on growing energy costs and help keep the assessments at the lowest level consistent with good conservation policies.
Tom Douma is the president of SRI, an ECHO member company that performs reserve studies in California and Hawaii. He is a frequent speaker at ECHO seminars.
ECHO Journal | March 2009
31
Learn How Your Association Can Successfully Meet Todayâ&#x20AC;&#x2122;s Challenges Tackle the tough issues facing associations at the Spring 2008 ECHO
Registration Fee: $40 Members $50 Non-Members
San Francisco Seminar April 4, 2009 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
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
News from ECHO
Green Issues for Reserve Studies As everyone has discovered over the last two years, energy costs have become a runaway item that has put stress on keeping assessments down. Normally reserve studies do not become heavily involved with operating budgets, but progress with new products and new technologies is changing that situation. If a study of the energy savings shows a positive cash flow over the life of any reserve component, then the board should consider its early replacement. Examples of components that offer such opportunities include: Replacing heat pumps and boilers with solar hot water panels for both swimming pools and domestic hot water usage. Many associations are using the tops of trellises and carports as collection areas for the panels. Some have even designated open areas for installation of the panels. Survey all the pumps and electrical motors and replace older, inefficient components with newer, variable speed motors connected to load demand controls. Have calculations performed before replacing windows and sliding glass doors. Such options as thermal-paned glazing, high-E
glazing, and reflective coatings are proving very successful. South- and west-facing glazing is especially vulnerable to heat build up, and even installing awnings may yield substantial savings. Review existing air conditioning installations to calculate potential savings that may be gained by upgrading to newer high SEER (Seasonal Energy Efficiency Ratio) rated systems. If roof-mounted systems are used, coordinate the roof and air conditioning replacements to obtain better savings. Replace parking lot lighting, security lights, and common area/hallway light fixtures with newer compact fluorescent and even LED (light emitting diodes) systems. Check water usage and consider more drip irrigation (which also cuts down on dry rot problems), and better planting schedules with drought resistant plants. More efficient sprinkler controls are also available to minimize water usage during rains. While most associations are non-profit corporations, investment groups are emerging that will package solar voltaic systems in return for federal and state tax credits and a share in the energy savings. This may reduce or almost eliminate the initial cost of a system, while significantly lowering the electrical costs to the association. All of these issues are emerging as important considerations for the reserve study, especially in this climate of budget tightening by members of the association and the continued high cost of energy. Work with your
reserve consultant, manager and an in-house group within your association. By coordinating these efforts, you can hold the line on growing energy costs and help keep the assessments at the lowest level consistent with good conservation policies.
File a Proof of Claim in Bankruptcies With the world’s economy in turmoil and a significant increase in the unemployment rate, experts are forecasting a big increase in the number of bankruptcy filings in 2009. If your association receives a Notice of Bankruptcy filing by one of its owners, don’t panic as there are some remedies. But you must take quick action to protect the association’s rights. When the association receives a Notice of Bankruptcy, the association, or its legal counsel, should file a Proof of Claim to ensure that amounts due the association by the debtor (the delinquent homeowner who filed bankruptcy) are accounted for and that the court and all of the parties involved in the bankruptcy proceedings are aware of the association’s claim. Remember when filing a Proof of Claim that you list the outstanding assessments and also
any late fees, interest and collection costs (including attorneys fees) owed by the debtor up to the date the debtor filed for bankruptcy. The are known as “pre-petition assessments.” Postpetition assessments, those that become due after the bankruptcy petition is filed, must be kept current by the debtor so long as he/she is the legal, equitable or have possessory ownership interest in the property. If the homeowner fails to pay post-petition assessments, the association can seek relief from the automatic stay in the Bankruptcy Court. If your request for relief from the automatic stay is granted by the Court, the association could commence collection efforts against the debtor for failure to pay the post-petition assessments including, but not limited to, recordation of a lien and, if necessary, foreclosure proceedings. While bankruptcy is an obstacle to collection, it is not insurmountable. Associations that are dealing with bankruptcies need to work closely with their attorneys to avoid making mistakes. Important Upcoming Events Saturday, March 21 North Counties Seminar 8:00 a.m. to 1:00 p.m. Community Center, Rohnert Park Thursday, March 26 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club, San Francisco Saturday, April 4 San Francisco Spring Seminar 7:30 a.m. to 1:00 p.m. Fort Mason Center, The Firehouse, San Francisco ECHO Journal | March 2009
33
2008 ECHO Business & Professional Directory $20.00 Non-Member Price: $25.00
Condominium Bluebook 2009 Edition $18.00 Non-Member Price: $25.00
Homeowners Association and You $13.00 Non-Member Price: $20.00
Community Association Statute Book—2009 Ed. $15.00 Non-Member Price: $25.00
This directory lists all business and professional members of ECHO as of December 2007. Current addresses, telephone and fax numbers, email addresses, and a short description are included. This directory is an invaluable tool for locating service providers that work with homeowner associations.
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.
A practical problem solving guide to all aspects of community association living. 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.
Contains the 2009 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 associations.
Robert’s Rules of Order $7.50 Non-Member Price: $12.50
The Board’s Dilemma $10.00 Non-Member Price: $15.00
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.
In this essay, attorney Tyler Berding confronts the growing financial problems for community associations. Mr. Berding addresses board members who are struggling to balance their duty to protect both individual owners and the corporation, and gives answers to associations trying to avoid a funding crisis.
California Building Guidelines for Residential Construction $52.50 Non-Member Price: $60.00
Homeowners Associations— How-to Guide for Leadership $35.00 Non-Member Price: $45.00 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.
Reserve Fund Essentials Questions & Answers About Community Associations $18.00 Non-Member Price: $25.00 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.
$18.00 Non-Member Price: $25.00 This book is an easy to read, musthave guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful financial tool.
The Condo Owner’s $15.00 Answer Book Non-Member Price: $20.00 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.
This easy-to-read manual is an excellent tool to understand a new home. It contains chapters covering more than 300 conditions that have been sources of disputes between homeowners and builders, offers homeowner maintenance tips, and defines the standards to which a residence should be built.
CID Leadership Two-Disc DVD set $30.00 Non-Member Price: $40.00 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 Non-Member Price: $25.00 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
Board Memberâ&#x20AC;&#x2122;s Guide for Contractor Interviews $20.00 Non-Member Price: $25.00 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.
Bookstore Order Form Executive Council of Homeowners 1602 The Alameda, Suite 101, San Jose, CA 95126 Phone: 408-297-3246 Fax: 408-297-3517 TITLE
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Yes! Place my order for the items above. Board Memberâ&#x20AC;&#x2122;s Guide for Management Interviews $20.00 Non-Member Price: $25.00 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.
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Calendar of Events
Save these dates! Thursday, March 5 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Tuesday, March 10 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Friday, March 13 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek
Wednesday, April 1 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101 San Jose Saturday, April 4 San Francisco Spring Seminar 7:30 a.m. to 1:00 p.m. Fort Mason Center, The Firehouse, San Francisco Friday, April 10 East Bay Resource Panel 9:30 a.m. Christison Company 3090 Independence Dr., #100, Livermore
Wednesday, March 18 Wine Country Resource Panel 11:45 a.m. Wednesday, April 15 Eugene Burger Mgmt. Co. Wine Country Resource Panel 6600 Hunter Dr., Rohnert Park 11:45 a.m. Eugene Burger Mgmt. Co. Saturday, March 21 6600 Hunter Dr., Rohnert Park North Counties Seminar 8:00 a.m. to 1:00 p.m. Saturday, April 25 Rohnert Park Comm. Center South Bay Spring Seminar 5401 Snyder Ln., Rohnert Park 7:30 a.m. to 1:00 p.m. Campbell Community Center, Thursday, March 26 Roosevelt Room San Francisco Luncheon 1 W. Campbell Ave., Campbell 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club San Francisco
Thursday, May 7 North Bay Resource Panel 9:30 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, May 8 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd. Suite 950, Walnut Creek Monday, May 11 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland Tuesday, May 12 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Wednesday, May 20 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt Co. 6600 Hunter Dr., Rohnert Park Thursday, May 21 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco
Wednesday, June 1 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Suite 101 San Jose Wednesday, June 10 South Bay Resource Panel 12:00 Noon Il Fornaio 302 Market St., San Jose. Friday, June 12 East Bay Resource Panel 9:30 a.m. Christison Company 1090 Independence Dr., # 100 Livermore Friday and Saturday June 12 & 13 ECHO Annual Seminar Santa Clara Convention Center Santa Clara Wednesday, June 17 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park
Regularly Scheduled Resource Panel Meetings Resource Panel Maintenance North Bay East Bay East Bay Accountants Central Coast South Bay Wine Country Legal 36
March 2009 | ECHO Journal
Meeting
Location
First Wednesday, Even Months First Thursday, Odd Months Second Friday, Odd Months
ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael Angius & Terry, Walnut Creek
Second Friday, Even Months Second Monday, Odd Months Second Tuesday, Odd Months Second Wednesday, Even Months Third Wednesday, Monthly Quarterly
Christison Company, Livermore Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Il Fornaio Restaurant, San Jose Eugene Burger Management Co., Rohnert Park Varies
Proof of Claim Continued from page 29
Alternatively, a Chapter 13 can be converted to a Chapter 7 bankruptcy if the debtor has lost or is unable to demonstrate his ability to repay their debts. Keep in mind that if a lien is recorded and a Proof of Claim is filed, the association is in a much better position to receive money on its secured claim for delinquent assessments; therefore do not delay having a lien recorded. Conversely, if a lien is not recorded and the association is an unsecured creditor, its debt will not be acknowledged until after the secured creditors, who will have a priority over the associationâ&#x20AC;&#x2122;s unsecured claim, are paid.
opposed to a Chapter 7), it is possible that the Chapter 7 can be converted to a Chapter 13 if the debtor/delinquent homeowner misstates his or hers assets.
Remember when filing a Proof of Claim that you list the outstanding assessments and also any late fees, interest and collection costs (including attorneys fees) owed by the debtor up to the date the debtor filed for bankruptcy. The are known as â&#x20AC;&#x153;pre-petition assessments.â&#x20AC;? Post-petition assessments, those that become due after the bankruptcy petition is filed, must be kept current by the debtor so long as she is the legal, equitable or
have possessory ownership interest in the property. If the homeowner fails to pay postpetition assessments, the association can seek relief from the automatic stay in the Bankruptcy Court. If your request for relief from the automatic stay is granted by the Court, the association could commence collection efforts against the debtor for failure to pay the post-petition assessments including, but not limited to, recordation of a lien and, if necessary, foreclosure proceedings. While bankruptcy is an obstacle to collection, it is not insurmountable. Associations that are dealing with bankruptcies need to work closely with their attorneys to avoid making mistakes.
Sandra Gottlieb and David Swedelson are partners in the community association law firm of Swedelson & Gottlieb and are principals of Association Lien Services, with offices throughout Northern and Southern California. Their firm is a member of ECHO and Ms. Gottlieb is a frequent speaker at ECHO events. ECHO Journal | March 2009
37
Honor Roll
About
ECHO Honors Volunteers Mike Muilenburg 2008 Volunteer of the Year ECHO Resource Panels Accountant Panel Richard Schnieder, CPA 707-576-7070 Central Coast Panel Jim Harmon 831-425-3622 East Bay Panel Scott Burke, 408-536-0420 Mandi Begley, 925-937-0434 Legal Panel Mark Wleklinski, Esq. 925-691-1191 Maintenance Panel Brian Seifert, 408-536-0420 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 Maria Birch, 707-584-5123
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 2009 | ECHO Journal
SF Luncheon Speakers John Allanson Tyler P. Berding, Esq. Ronald Block, PhD. Doug Christison, PCAM, CCAM Karen Conlon, CCAM Rolf Crocker, CCAM Ross Feinberg, Esq. David Feingold, Esq. Tom Fier, Esq. Kevin Frederick, Esq. John Garvic, Esq. Beth Grimm, Esq. Brian Hebert, Esq. Roy Helsing Stephen Johnson, CFP Julia Lave Johnston Garth Leone Nico March Kerry Mazzoni Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.
Marin Seminar Speakers David Feingold, Esq. Linnea Juarez, CPAM, CCAM Wanden Treanor, Esq. Glenn Youngling, Esq.
Association Finances Seminar Speakers Joelyn Carr-Fingerle, CPA Bill Erlanger, CPA James Ernst, CPA John Garvic, CPA Donald Haney, CPA
Peninsula Fall Seminar Speakers Jeffrey Barnett, Esq. Tyler Berding, Esq. Robert Hall, Esq. David Kuivanen Karl Lofthouse Steven Saarman Chris Sigler
Recent ECHO Journal Contributing Authors November 2008 Derek Eckert Tom Fier, Esq. Kerrington Fier Mike Muilenburg Andrea L. O’Toole, Esq. Steven S. Weil, Esq. December 2008 Tyler P. Berding, Esq. David West Paul W. Windust, Esq. January 2009 Tyler P. Berding, Esq. Joelyn K. Carr-Fingerle, CPA Jeanette Catellier, PCAM Jan A. Kopczynski, Esq. Alfred D. McKelvy February 2009 Jeffrey A. Barnett, Esq. David H. Levy, CPA Brian E. Martin, Esq.
ECHO
What is ECHO? ECHO (Executive Council of Homeowners) is a California non-profit corporation dedicated to assisting community associations. ECHO is an owners’ organization. Founded in San Jose in 1972 with a nucleus of five owner associations, ECHO membership is now 1,525 association members representing over 150,000 homes and 325 business and professional members.
Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the benefits designated for homeowner associations. If your company wants to reach decision makers at over 1,525 homeowner associations, you can become an associate member and join 325 other firms serving this important membership.
What are the Benefits of ECHO Membership? • Subscription to monthly magazine for every board member • Yearly copy of the Association Statute Book for every board member • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento
ECHO Membership Dues HOA Size 2 to 25 units 26 to 50 units 51 to 100 units 101 to 150 units 151 to 200 units 201 or more units Business/Professional
Rate $120 $165 $240 $315 $390 $495 $425
ECHO Journal Subscription Rates Members $50 Non-members/Homeowners $75 $125 Businesses & Professionals
How Do You Join ECHO? Over 1,800 members benefit each year from their membership in ECHO. Find out what they’ve known for years by joining ECHO today. To apply for membership, call ECHO at 408-297-3246 or visit the ECHO web site (echo-ca.org) to obtain an application form and for more information.
Race to Win ECHO Annual Seminar June 13, 2009 Saturday, June 13, 2009 8:00 a.m.–4:30 p.m. Santa Clara Convention Center Santa Clara, California 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 12, 5:00–7:30 p.m. Food, Music, Socializing, Prizes Cost: $40—See Registration Form
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. The special rate is available until May 30.
R E GIS T R AT ION FOR M Yes! Please reserve my space at the 2009 ECHO Annual Seminar. Name ___________________________________________________________________ Association/Organization ___________________________________________________ Address _________________________________________________________________ City __________________________________________ State _____ Zip____________ Daytime Phone ___________________________________________________________ Names of Additional Attendees: 1. _________________________________________ 2. ________________________________________ Please reserve tickets for: No. Amount $75 ___________ $___________ Seminar Only (members) $___________ Seminar Only (non-members) $90 ___________ Seminar Buffet Lunch $40 ___________ $___________ $40 ___________ $___________ Friday Reception $___________ 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
San Francisco Luncheon Ad
ECHO Marketplace
Advertiser Index
The place to find business and professionals for your association Affirmative Management . . . . . . . . . .22 Alpha Restoration & Waterproofing . . .8 American Asphalt . . . . . . . . . . . . . . .18 American Management Services . . . .10 Angius & Terry . . . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . . .29 A.S.A.P. Collection Services . . . . . . . . .9 Association Reserves . . . . . . . . . . . . .18
Advertise your business to thousands of association directors in California in the ECHO Journal.
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.
CACM Ad
Bayridge Group . . . . . . . . . . . . . . . . .16 Berding & Weil . . . . . . . . . . . . . . . . . .44 CACM . . . . . . . . . . . . . . . . . . . . . . . .41 Collins Management . . . . . . . . . . . . .29 Community Association Banc . . . . . . .22 Community Management Services . . .19 Community Reconstruction Solutions .37 Compass Management . . . . . . . . . . .29 Cool Pool Service . . . . . . . . . . . . . . . .16 Cornerstone Community Mgmnt . . . . .8 County Bank . . . . . . . . . . . . . . . . . . . .2 Draeger . . . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . . . .24 Ertech . . . . . . . . . . . . . . . . . . . . . . . .24 First Bank Association Bank Services . .28 Flores Painting . . . . . . . . . . . . . . . . . .25 Helsing Group . . . . . . . . . . . . . . . . . .16 Hill & Company. . . . . . . . . . . . . . . . . .43 M&C Association Services . . . . . . . . .25 M. L. Nielsen Construction . . . . . . . . .28 Massingham and Associates . . . . . . .15 Pelican Management Group . . . . . . .18 PML Management Corp. . . . . . . . . . .11 Pollard Unlimited . . . . . . . . . . . . . . . .14 R. E. Broocker Co. . . . . . . . . . . . . . . .14 Rebello’s Towing Service . . . . . . . . . .15 REMI Company . . . . . . . . . . . . . . . . .19 Saarman Construction . . . . . . . . . . . . .9 Statcomm . . . . . . . . . . . . . . . . . . . . .14 Steve Tingley Painting . . . . . . . . . . . .17 Steve’s Painting Services . . . . . . . . . . .10
ECHO Journal | March 2009
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New election rules: $500 In today’s economic crisis, there may be some items that associations can cut to reduce costs. ECHO membership is not one. Let’s face it, educated board members are better fiduciaries, which helps them to avoid costly law suits and possibly personal liability. ECHO is the premier resource in California for board member education. ECHO offers new articles each month with practical and easy to understand advice about current California requirements, and what may be on the horizon. ECHO staff is available by phone or E-mail to answer members’ questions about association problems or to recommend competent professional services when necessary. And with discounted member rates at more than a dozen educational events throughout the year, ECHO is simply the best educational resource for California homeowners. Avoid Litigation Each year, as a member benefit, ECHO sends every board member a copy of the updated Community Association Statute book. Every issue of the ECHO Journal and every seminar examine one or more aspects of compliance with association law, because one of the major causes of expensive litigation is ignorance of the law.
Mailing ballots: $200 Make Better Financial Choices Many associations struggle to understand reserve funding requirements and strategies, the benefits and disadvantages of using special assessments, proper collections practices, and even how to determine what components the association is required to maintain. At a time when wise financial planning is essential, ECHO members have access to a wealth of articles about reserve funding, budgeting, insurance, collections, and much more. Fight Costly Regulation Every year, Sacramento legislators introduce more legislation that confuses the job of California board members and increases the costs of compliance. ECHO is committed to fighting unnecessary regulation in California and promoting the interests and welfare of common interest developments. Hire Competent Professionals ECHO offers a variety of articles and publications to help members evaluate their service providers, including questions to ask prospective management firms and contractors. All ECHO Journal articles are available to members at no cost, and publications are sold to members at a discount.
Avoiding a lawsuit: Priceless. Spend a Little, Get a Lot The cost of ECHO membership is minimal. In a worsening economy, associations are looking to cut big expenses from their budgets. Yet, ECHO membership is as little as 25¢ per unit each month. For that small cost, here’s what every board member receives as part of being a member of ECHO: • A subscription to the ECHO Journal • An annual copy of the current Community Association Statute book • Unlimited access to ECHO’s library of past articles • Telephone consultations with ECHO staff about their problems • Reduced fees for ECHO events • Discounted prices on publications • And much more… In These Tough Economic Times, ECHO Membership is a Necessity As the only California organization devoted exclusively to board member and homeowner education, ECHO is a one-of-a-kind resource that your association can’t afford to lose.
Condominium Conversions Did You Get What You Paid For?
Condo conversions are not new condominiums. They are older rental apartments that were converted to condos. So, what’s wrong with that? Nothing, if the financial plan that came with your condo is up to the task of maintaining a building with 20-30 years of deferred maintenance. How do you know? You probably don’t unless someone
has taken a close look at the homeowner association’s budget and compared it to the actual condition of the buildings. The fact is, very few condominium conversions were sold with repair budgets that are adequate to meet the needs of the project. What does this mean to you? If the budget is inadequate, it will mean either increased homeowner assessments or a gradually deterio-
rating condominium project. Or both. In either case, you didn’t get what you paid for. If you’d like to know the truth now about what you bought, call us. If you want to wait and see what happens, ok, but either way, we’ll be here when you need us. Berding | Weil, LLP 3240 Stone Valley Road West Alamo, California 94507 925-838-2090 www.berding-weil.com