Journal_09_11 by Echo

November 2009

A Journal for California Community Association Leaders

echo-ca.org

When Your CC&Rs Hate You

ALSO INSIDE THIS ISSUE:

• Fraud Warnings • Effective Board Meetings • Who is a Member in Good Standing?

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Contents Fraud Warnings —page 14

When Your CC&Rs Hate You It is no surprise that the initial governing documents drafted by developers contain provisions designed to protect them from construction defect claims. This article explores recent developments in CC&Rs drafted by developers and what can be done to avoid the traps for an association that may have a construction defect claim.

Fraud Warnings for California Homeowners As homeowners continue to worry about home loan delinquencies, defaults and foreclosures, loan modification and foreclosure rescue frauds grow. This Consumer Alert issued by the Department of Real Estate describes these frauds and offers helpful advice to owners.

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

Effective Board Meetings Holding effective board meetings is a necessity for efficient governance. This article discusses some of the impediments to holding good meetings and offers tips to directors about what they can do to improve their board meetings.

Who is a Member in “Good Standing”? When is a member in good standing? The term “good standing” is not defined in the Davis-Stirling Act or other statutes. The author discusses common definitions and actions an association can take to clarify its meaning for their association.

Departments 29 Directory Updates 32 News from ECHO 33 Legislation at a Glimpse 34 ECHO Bookstore

36 Events Calendar 38 ECHO Volunteers 40 Misleading Solicitations

Treasurer Diane Rossi Secretary Dorothy Kopczynski Directors Paul Atkins John Garvic Robert Rosenberg Richard Tippett Steven Weil

Jerry L. Bowles David Levy Kurtis Shenefiel Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc. Design and Production George O’Hanlon

41 Advertiser Index

ECHO Mission Statement

When Your CC&Rs Hate You —page 6 November 2009 | ECHO Journal

Vice President Karl Lofthouse

41 ECHO Marketplace

On the Cover 4

President David Hughes

The mission of ECHO is to advance the concept, interests and needs of homeowners associations through education and related services to board members, homeowner members, government officials and the professionals in the industry.

ECHO 2010 Seminars Yes, it’s already next year. The 2009 seminars are behind us, but we are already preparing next year’s events. Do not forget to mark these dates in your calendar for ECHO 2010 seminars: • Jan. 30—Marin Seminar, San Rafael • Feb. 6—Sacramento Seminar, Sacramento • Feb. 20—Central Coast Seminar, Scotts Valley • March 20—North Bay Seminar, Rohnert Park • April 17—South Bay Seminar, Campbell • June 19—Annual Seminar, Santa Clara

November 2009 | ECHO Journal

WHEN IT CREATES A COMMUNITY association, a developer drafts the initial set of governing documents. Not surprisingly, those documents usually contain certain provisions designed to protect the developer, particularly from later construction defect claims.

By Matt Malone, Esq.

When Your CC&Rs Hate You How Developer Protections in Governing Documents Work to Block Association Defect Claims y now, most readers are probably aware of the basic protections that a developer adopts in the governing documents to protect itself from future litigation: arbitration provisions, mediation requirements, and the pre-litigation procedures of Title 7 and the Calderon process.1 All are important, but by 2009, these provisions are now old hat. This article explores the more recent developments in CC&R drafting by developers and their counsel,2 as well as what can be done to avoid the traps these newer provisions have set for an association that may have a construction defect claim.

Don’t Make a Claim without a Member Vote, or How to Make Defect Litigation Much, Much Harder For Associations—Part 1 First among the newer developer self-protection provisions is the requirement that a member vote be held before an association can “initiate a construction defect claim.” While this provision would certainly require a member vote before

the association could bring a lawsuit, its intent is far broader. By using the language “construction defect claim,” the provision could be read to require a member vote before the association could give any notice to the builder that defects were present. This would include notice required by either California Civil Code Section 1375 or Title 7, which are prerequisites to a defect claim, and trigger certain time periods during which each side must provide information to the other and the builder can investigate and offer to repair alleged defects. 1 California Civil Code Section 1375 et seq. 2 It also follows the recent article by Tyler Berding entitled, “When Do Statutes of Limitation Begin to Run on Construction Claims?” (ECHO Journal, August 2009). In that article, Mr. Berding discusses a CC&R provision, which we will not cover further here, purporting to waive the developer’s control over an association’s ability to bring Title 7 claims, and the effect that provision has on the statute of limitations.

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Practically, the effect of this provision is enormous. Statutes of limitations run quickly—indeed, under Title 7, some can run as quickly as one year after the association takes control from the developer. Serving the statutory notice to the builder stops the statute from running for a period of time. But if the association cannot even get the notice out until it holds a member vote and gets quorum, statutes may run before there are even enough votes to make a decision. The association stands to lose its rights because it must wait for member approval in order to “initiate a construction defect claim.” This could also be read broadly to apply to virtually any communication from the association to the developer regarding construction deficiencies, basically crippling the board of director’s ability to bring such issues to the developer’s attention. And that is exactly what the provision is designed to do. Ask yourself: When Microsoft wants to make a claim against another company, does it hold a shareholder meeting to authorize a notice of that claim or the resulting lawsuit? No, and the reason is straightforward: delay could be potentially disastrous to the claim. Further, the board of directors of Microsoft has the responsibility to conduct the business of the company, including making necessary claims. That is not a responsibility that is delegated to the shareholders. But then, Microsoft’s governing documents were not written by the very people Microsoft might have to sue. New associations, however, are forced to work with governing documents written by developers—the same developers whom the association may have to sue to remedy defects or budget deficiencies. And it is in the interest of those developers to make it as hard as possible for an association to bring that case. Don’t Hire an Attorney on Contingency for Construction Defect Cases, or How to Make Defect Litigation Much, Much Harder For Associations—Part 2 Similar provisions requiring member approval pop up in the context of fee arrangements with attorneys. Here’s one example from a recent set of CC&Rs: “Litigation/Arbitration: The Board has authority to enter into a contingent fee contract with an attorney in a matter involving alleged design or construction defects in the Project, only as to the facilities or improvements the Association is responsible for maintaining as provided herein, and then only after getting the vote at a duly noticed and properly held member-

November 2009 | ECHO Journal

ship meeting, of a majority of a quorum of the Members other than Declarant [developer].” So, in order to hire a law firm to represent the association for a contingent fee for defect cases, or any other cases involving facilities the association must maintain, the association must get member approval. What if the case is about something else? Under this provision, the board could hire a contingency attorney all on its own. Only for “facilities” and “maintenance” cases, e.g., construction defect cases, does the board need to go to its members in order to hire an attorney on a contingency fee contract. Why might an association want to hire an attorney on a contingency fee contract? To answer that, first a little background: A contingency fee agreement is one in which the client does not pay the attorney’s hourly rate as the attorney works the case. Instead, the client agrees that a portion of the recovery, if any, is paid to the attorney as that attorney’s fee for services. Thus, the client does not have to put up any money for attorney’s fees during the prosecution of the case. Similarly, the attorney takes the risk that if there is no recovery, he or she does not get paid. For a new association looking at a potential construction defect action, a contingency fee agreement can have certain advantages. New associations are typically without sufficient money in the budget to pay an attorney’s hourly rate, especially for the hours required in pre-litigation discussions or in litigation itself. (In some cases, new associations don’t even have sufficient funds from the developer to meet maintenance obligations, much less to hire counsel.) The use of a special assessment is hardly palatable, and in an era of foreclosures and delinquencies, it may create more problems than it solves by piling further obligations on people who are already having trouble paying their mortgages. This leaves a contingency arrangement as, occasionally, the only realistic way in which an association can obtain competent, experienced counsel to represent its interests. So why require a member vote before an association can enter into such an agreement for defect cases? It is yet another way to make litigating a defect case harder for an association. If the association is too poor or underfunded to pay an attorney’s hourly rate, but they can’t hire one on contingency because they cannot get a quorum of members together (a frequent problem, particularly in new associations), then guess what? They ECHO Journal | November 2009

cannot hire a competent attorney to bring their defect case. That is exactly the goal of the developer in inserting this provision. One more thing to remember: While the association is struggling to muster a quorum on a vote to hire an attorney on contingency, the various statutes of limitations on its defect claims are running. So not only must the association struggle to obtain counsel, but it risks missing the statute of limitations deadline while it tries to get the required vote. And if you observed that this is the same problem identified in the last section with regard to member votes to “initiate a defect claim,” you’re exactly right. The very design of these “member vote” provisions is to delay the association from bringing its claim and increase the chance that the association will miss the deadline imposed by the various statutes of limitation.

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The Architect You Never Knew You Needed And Can’t Pay For, or How Inspection Requirements Can Trap an Association Here’s another provision that has been popping up in developer-drafted CC&Rs for some time now: The Association shall cause inspections of all infrastructure to be routinely made in conjunction with the Association’s manager. The Board shall engage professionals to conduct inspection of these components of the Project if the Board or the Association’s manager deem that such inspection by professionals, such as an architect, a civil engineer, structural engineer, landscape architect or other such professional is warranted. Inspections shall be made at least yearly and, for appropriate items or events, more often. Let’s be blunt: The entire purpose of this provision is to provide the developer a defense to a construction defect claim. How? After all, that provision seems innocent enough. Why shouldn’t an association hire necessary professionals? But here’s how it works. Say the association discovers leaks two years after taking over control from the developer. In those intervening two years, there were no obvious problems; so the issue of hiring an architect or engineer didn’t come up. When the association later sues for defects, the developer points to this failure and argues that the defects could have been discovered earlier if the board had engaged the services of a professional. Thus, the developer argues, it is the association’s fault that the defects were not repaired, because the manager and/or board should have hired a professional. Just like that, the developer has an

immediate defense with which to attack the association’s claim, and one that might work even if there were defects in the project at the time of turnover. Of course, the problem facing many new associations is a financial one. Even if they wanted to hire an architect, engineer or other professional, they may simply lack the funds to do so. Combine that with everdecreasing assessments as new homeowners more often default, and the reality is that hiring an expert is simply outside the realm of possibility for an association. Now, a response may be that this provision has other purposes. Proper maintenance is, after all, the obligation of the association and delineating those requirements—along with the option of hiring professionals—gives specificity that benefits both the board and the membership. And the provision does leave discretion over the decision to the board and manager. All of this may be true. But if you have any doubt that the actual goal of this provision is to provide a defense to the developer, take a look at the clause which almost always follows: For a period of ten (10) years after the date of the last Close of Escrow in the Project, the Board shall also furnish to Declarant [the developer]: (a) the report of each inspection performed for the Board, whenever such inspection is performed and for whatever portion of the Common Area that is inspected, within thirty (30) days after completion of the inspection; and (b) the most recent inspection report for any portion of the Project, within ten (10) days after the Association’s receipt of a written request therefore from Declarant. This section obligates the association to send all inspection reports to the developer for ten years. If the goal of the provision describing the inspections was to spell out the association’s obligations for its benefit and that of its members, why did the developer insert this provision to make sure it gets a copy of those reports? Why does the developer even care? And why is the obligation for ten years as opposed to five or three? The answer to all these questions is the same: The provision is designed to protect the developer against defect litigation by the association. Why does the developer want the inspection reports? So it knows exactly what maintenance the association is (and is not) doing. Why does it want the reports for ten years? Because the absolute final statute of limitations for defect claims for latent defects is ten years. Read together, these provisions

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require not only that the association maintain the project, but that it provide records of that maintenance to the developer for as long as there is even the potential for the developer to be sued. The developer can even request all of the records itself and the association has ten days to provide them. This gives the developer all the maintenance records it needs to prepare a “lack of maintenance” defense to an association’s defect lawsuit. The purpose of this clause is obvious. Managers need to be alert for these provisions as well. Board members are unlikely to know about these obligations unless a manager informs them. If a manager fails to do so, the consequences can be severe. An association may face a defense to their defect suit, and they may potentially lose their case. No board member, and no manager, wants to have a finger pointed at them for that problem. The 90 Percent Solution or Why CC&Rs Can Be Harder to Amend Than the U.S. Constitution If you’ve managed to get this far into the article, I know what you’re thinking. Yes, these provisions are detrimental, but can’t an association just amend them out? It can certainly try. But to succeed, it may need an impossibly overwhelming vote: 90 percent of members and first lenders. Here’s how that provision reads: Amendments Regarding Initiation of Construction Defect Claims. Notwithstanding anything to the contrary contained in this Declaration, this section shall not be amended without the vote or approval by written ballot of at least (a) ninety percent (90%) of the voting power of Members of the Association other than the Declarant and (b) at least ninety percent (90%) of the First Lenders. Now, ask yourself: In what other situation is a 90 percent member vote required for approval of an action? None. To bring litigation? Nope, the board can do that on its own in many circumstances, and even when a member vote is required, a majority of quorum will do the job. Under most CC&Rs, an association can shut itself down and sell off its property with less than a 90 percent majority. Think about that for a second: It takes a more owner votes to amend out the developer protections in these CC&Rs than it would take for the association to cease operations completely. Even the supermajority of states required to ratify an amendment to the U.S. Constitution—75 percent, your high school civics teacher would remind you—is less than

If you think you have a problem with a CC&R provision, get the advice of competent, experienced counsel. this! And keep in mind that the vote is not just of members but also 90 percent of first lenders. Its two super-super-majorities rolled into one and it is unheard of anywhere else in association law. And most likely, it will be impossible to achieve. By now, you do not need to be told why this language exists. All the provisions we mentioned earlier are designed to protect the developer from association defect litigation. This one is designed to prevent an association from amending the CC&Rs to remove those very protections. What Can an Association Do? So, you’re in an association that is riddled with defects, or you are managing one, and the CC&Rs have one or all of the above provisions. What should you do? 1. Make the claim anyway if the statute of limitations deadline is looming. It’s risky, but sometimes it’s the only way to stop the statute of limitations from running. Hire an attorney on an hourly or fixed-fee basis to file the necessary statutory notice or just to get the complaint on file, so as to avoid the member vote for contingency arrangements. This will require some up-front cost, but it will not be substantial. Yes, the CC&Rs may require a member vote to initiate a claim in the first place, but a board is charged with acting in the best interests of the association and managing the business affairs of the association. So, if a statute of limitations might be running on a claim, a board has the duty to do what it can to preserve that claim and then get the required vote. If a board sits on its hands and waits for a member vote, only to watch the statute of limitations expire, will that “member vote” provision shield it from a breach of fiduciary claim for missing the statute? Maybe, but I wouldn’t want to defend them. 2. Of course, do what you can to obey the CC&Rs. If a statute of limitations is not about to expire, the board has an obligation to go through the procedures to the best of its ability, including putting the required provisions out to member vote. Review your CC&Rs and know exactly what your obligations are.

3. Whatever your decision, if you think you have a problem with a CC&R provision, get the advice of competent, experienced counsel. Obviously, if you follow #1, you’ll need to do this. But it is a good idea even if the issue has not reached a statutory red alert stage. Each set of CC&Rs is a unique animal, and while this article has discussed these provisions generally, they may be slightly different in your association’s governing documents. Paying a small up-front fee to have an attorney spent a couple of hours reviewing your association’s situation is money well spent, especially if helps avoid liability for the association on the back end for not acting properly in pursuing its defect claims.

Courts have invalidated self-serving provisions in governing documents intended to protect developers. Will a Court Bail You Out? What if an association decides not to abide by these provisions that are obviously intended to benefit the developer at the expense of the membership and the best interests of the association? Courts have invalidated similar self-serving provisions in governing documents provisions intended to protect developers. Mandatory binding arbitration provisions that require an association to waive its right to have its claims heard by a jury, for example, have been invalidated as being over-reaching and oppressive contractual provisions. And CC&Rs are part of the contract with the developer. As discussed above, CC&Rs written in the last few years contain many provisions that limit the association’s rights or that require surprisingly high levels of reporting or maintenance obligations. Some of these would probably survive a legal challenge while others, being too overreach-

ing, would not. How to deal with these from a strategic point of view, taking into account the specific verbiage, the nature of the defects, the interests of the members and other factors requires a careful analysis by competent experienced counsel and the engagement of the board. There is never an excuse for letting an important claim be lost to a statute of limitations while you ponder the enforceability of CC&R provisions written by a developer for its own protection. When that much is on the line, and if compliance with the developerprotection provisions would cost the association its claim, the decision to proceed without compliance will probably be understood by a court. Keep in mind that, in most cases, unless a developer has a continuing ownership interest in the project, it is the members, not the developer, who have the standing to object to a board’s failure to comply.3 Since it is for the member’s ultimate benefit that a claim would be made, it is likely that a court would ignore pleas to the contrary from the developer. 3 The majority of cases hold that once a developer has no further ownership interest in the project, it cannot enforce the CC&Rs. See, e.g., Bramwell v. Kuhle (1960) 183 Cal.App.2d 767, 776; Kent v. Koch (1958) 166 Cal.App.2d 579, 586; La Mancha Dev. Corp. v. Sheegog (1978) 78 Cal. App. 3d 9, 14. But in one case [B.C.E. Development, Inc. v. Smith (1989) 215 Cal.App.3d 1142] where the CC&Rs granted the developer a continuing right to approve architectural modifications and this power went unchallenged by the owners after completion of the subdivision, the court held that the developer’s successor-in-interest had standing to enforce the documents. Because the developer’s control had been permitted by the owners for so long (nearly 20 years had lapsed between the recordation of the CC&Rs and the litigation challenging the developer’s right to enforce them), the court held that the owners effectively ratified the developer’s actions.

Matt Malone is an attorney in the litigation department of Berding|Weil, Alamo, California. He represents individual homeowners, commercial real estate owners and common interest developments in complex construction defect actions. ECHO Journal | November 2009

November 2009 | ECHO Journal

HOME LOAN MODIFICATION AND foreclosure rescue programs— beware of scammers and con artists, who usually demand the payment of money up front.

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to be nonprofits, to be attorney backed or affiliated, and/or to be affiliated with the federal and state governments [e.g., they suggest the backing of the Obama administration, a member of Congress or some other elected official, or of a government agency or department (HUD, FHA, the California Department of Real Estate, the California State Bar)] that have appeared all over the State of California. Many of the individuals have criminal and/or disciplinary records, and many of the companies are just fraud factories and high-pressure sales mills operating out of telephone boiler rooms that are in the “business” of offering impressive sounding but nonexistent loan services so that they can steal your money. Some are operating nationally, and some are even operating outside of the country.

ECHO Journal | November 2009

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Loan Modifications and the Unscrupulous Con While there are â&#x20AC;&#x153;foreclosure rescueâ&#x20AC;? scammers who promise to save homeowners from foreclosure or to delay a foreclosure via litigation and/or bankruptcy filings, after a notice of default is recorded, the most common type of fraud relating to home loans is Loan Modification fraud. Because of the current economic situation, you may not be able to afford your mortgage payment, or you may be in foreclosure. If you are not able to negotiate a deed transfer to your lender in lieu of foreclosure, to sell you home through a â&#x20AC;&#x153;short sale,â&#x20AC;? or to refinance your home loan, an option that may be available is a â&#x20AC;&#x153;loan modification.â&#x20AC;? What is a Loan Modification? That is where you and your lender or the loan â&#x20AC;&#x153;servicerâ&#x20AC;? on behalf of the lender or loan â&#x20AC;&#x153;investorâ&#x20AC;? (both the loan servicer and lender will be referred to below as â&#x20AC;&#x153;lenderâ&#x20AC;?) agree to modify one or more of the terms of your home loan. The terms could be a lower interest rate, an extension of the length of the loan (like making a 30-year loan into a 40year loan), a conversion of an adjustable rate loan to a fixed rate, a rate freeze, the deferring of some of your payments, or any other modification of loan terms. The goal of a successful loan modification is to help you keep your home and to give you a real, meaningful, sustainable, and longterm adjustment to your current home loan that works for your financial situation. But loan modifications are not possible for every homeowner, and the loan modification

“success rate” is currently very low in California. The available data suggest that loan modifications vary from lender to lender. Many lenders have guidelines for loan modifications. If your financial situation meets the guidelines, a loan modification is possible with the necessary showing of financial hardship on your part. If you do not meet the guidelines, a loan modification may not be possible; it really depends on your lender and your hardship. This is where the scammers come in. They often falsely claim that they can guarantee to “negotiate” you into a loan modification, make huge and hollow promises, exaggerate or make bold statements regarding their modification successes, publicize their supposed expertise, ask for money up front, and then take your money and leave you in worse shape than before. They may simply take your money and run. Please read and review the section captioned “Signals of Fraud to Watch Out For” below. Things to Do to Protect Yourself from Becoming a Loan Modification Scam Victim A. Do It Yourself (and Do It As Soon As Possible)—You can contact your mortgage lender directly and request a loan modification that works for you and your lender. Don’t wait to call if you cannot make or believe you will not be able to make your mortgage payments. Be persistent; call back many times. Make detailed notes about your attempts to call, when you have left messages, with whom you speak, what was said, and what offers are discussed and/or made. The Department of Real Estate has some practical tips for you for working directly with your lender on a loan modification. Those consumer tips can be accessed at www.dre.ca.gov/faq_home.html. B. Other Free and Safe Options—If you don’t believe you can negotiate a loan modification yourself, or if you do not want to, there are free and safe options available to you. 1. The U.S. Department of Housing and Urban Development (HUD) offers Foreclosure Avoidance Counseling through non-profit agencies in California. Go to HUD’s web site at www.hud.gov, or call 800-569-4287 to find counselors. HUD also offers information to homeowners facing the loss of their home. 2. Hope Now Alliance—This is a cooperative effort of home loan counselors and lenders, and it consists of HUD

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ECHO Journal | November 2009

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November 2009 | ECHO Journal

intermediaries. Visit www.hopenow.com or call 888-995-HOPE. C. Locate and Work with a Licensed and Qualified Person or Companyâ&#x20AC;&#x201D;If you donâ&#x20AC;&#x2122;t want to negotiate a loan modification by yourself (or believe you are unable), and if you also decide not to use the free counselors provided through HUD or the Hope Now Alliance, you can hire a representative to negotiate for you. But beware; you need to find someone who is legitimate, licensed and qualified by experience and training. And remember that you do not have to pay anything up front. 1. California licensed real estate brokers can perform loan modification work, and licensed real estate salespersons can do such work under the supervision of their employing broker. While it is currently legal for a real estate broker to charge you in advance of performing the loan modification services before a Notice of Default is recorded, you do not have to pay anything in advance of a successful loan modification, and all broker fees are negotiable. You should go to DREâ&#x20AC;&#x2122;s web site at www.dre.ca.gov, review and check the information on advance fees and loan modification services, carefully review the public license information on the real estate broker (that information will include any disciplinary history), and look for any Desist and Refrain Orders (D&Rs) that have been issued against companies and individuals. If a D&R has been issued, that means that DRE has determined the individual or company is unlicensed or has operated unlawfully. 2. California licensed lawyers can also perform loan modification work, but only when such lawyers render those loan modification services in the course and scope of their practice as an attorney at law. Lawyers can also currently charge fees in advance (typically called a retainer), and even after a Notice of Default has been recorded. But lawyers must have a written fee agreement with you. And as is the case with real estate licensees, you do not have to pay anything in advance of a successful loan modification, and all legal fees are negotiable. Just as you should do with real estate licensees, check out lawyers by going to the website of the California State Bar, www.calbar.ca.gov. Check the lawyerâ&#x20AC;&#x2122;s bar membership records and look for any Continued on page 20

Incumbent ECHO Directors Reelected at Annual Meeting he 2009 ECHO Annual Meeting was held Friday, October 16, 2009, at the ECHO office in San Jose. Paul Atkins, Jerry L. Bowles, David Hughes and Steven Weil were reelected to threeyear terms on the ECHO board. Three board officers will continue to serve in their past capacities: David Hughes—President, Karl Lofthouse—Vice President, and Dorothy Kopczynski—Secretary; and Diane Rossi was elected as Treasurer. ECHO members owe special thanks to these directors who have generously contributed their time and effort to ECHO business in recent years. In addition to the elections, Executive Director Oliver Burford presented a year-end status report for the organization. Results of the just concluded 2009 California Legislative session were reviewed and briefly discussed. Brief biographies of the four directors elected for terms ending in 2012 are below: Paul Atkins is a former member, vice president and president of the board of directors at the Spyglass Ridge Homeowners Association, a 27-lot planned development in Pacifica. He holds a BS in electronics engineering and for 38 years has worked as a systems engineer with Northrop Grumman Electronic Systems in San Jose. Paul, a native Californian, and his wife Georgia have 4 grown children and 6 grandchildren. His hobbies include attending dog shows and tinkering with computers. Jerry L. Bowles is a 35-year resident at Brookvale Terrace in Santa Cruz. He has served on the board of directors of Brookvale since the park was bought by its residents and converted into a resident owned park in 1993. He retired from the Central Fire Protection District of Santa Cruz County in 1997 as assistant chief whose duties included managing

and accounting for the district’s budget and assets. Currently he serves as chairperson for the Santa Cruz and Santa Clara chapter of Resident Owned Parks, Inc; state vice president for Resident Owned Parks, Inc.; and president of the Santa Cruz chapter of the Retired Public Employees Association of California. He was named the ECHO Volunteer of the Year for 2006 by the Board of Directors. David Hughes is the manager of the painting division at Draeger Construction, Inc. He was previously the Northern California Sales Manager for the Dunn Edwards Paint Co. He holds both a Bachelor’s and Master’s Degree in Fine Arts. He is a past chairperson of the ECHO Maintenance Resource Panel and was also a founding member of both the East Bay and San Francisco Resource Panels. He continues his membership on all three panels. He was named the ECHO Volunteer of the Year for 1998 by the Board of Directors. He is a frequent speaker at ECHO seminars and contributes to the ECHO Journal. Steven Weil is a founding partner, former managing partner and current member of the Executive Committee at Berding and Weil, a construction defect and homeowner association law firm. He received his law degree from the University of San Francisco and his Bachelor’s degree in History from the State University of New York. Since 1980, he has practiced law, emphasizing corporate law, director compliance with legal and ethical standards of general corporate and community association practice, enforcement of governing documents and insurance disputes. His practice also includes assisting clients with fair housing discrimination, breach of fiduciary duty claims and legal and political challenges to corporate and community authority. He has contributed many articles for publication in the ECHO Journal and speaks regularly at ECHO seminars. ECHO Journal | November 2009

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November 2009 | ECHO Journal

discipline. Also, demand to meet and speak in person with the lawyer whom you are paying to represent you. Unfortunately, some loan modification business models have claimed lawyer involvement but they are just unlawful schemes to avoid the prohibition against the collection of advance fees by a real estate licensee after a Notice of Default is recorded. In others, lawyers are just a “front” or non-participating “magnet” for business from desperate homeowners. In addition to looking at the license records, contact the Better Business Bureau to see if they have received any complaints about the person or company. But please understand that this is just another resource for you to check, and the loan modification provider might be so new that the Better Business Bureau may have little or nothing on them (or something positive because of insufficient public input). Also, and very importantly, ask the loan modification “specialists” (whether they are real estate licensees or lawyers) about their financial, mortgage and real estate experience, the options and methods they use to renegotiate home loans, when they were first licensed, whether their license is still active, whether they have ever been disciplined, where, when and how they got their experience, what data they have to prove their past successes, what evidence they have of prior successful dealings with your lender, and also ask them to define a loan modification and the process that they will undertake and the time that they will spend to successfully negotiate a long-term, affordable and sustainable modification for you. Signals of Fraud to Watch Out For 1. Demand for payment up front (advance fee payment). While not unlawful if paid to licensed persons in the certain limited situations discussed above, the demand or request for advance payment should alert you to the possibility of fraud. If you are already strapped for cash, you should not pay any money up front. Use the money for a mortgage payment, moving expenses, or a security deposit on a rental. Remember, once the scammers have your money (whether paid by cash, check, debit card, credit card or wire transfer), it will likely just vanish.

2. Promises or guarantees of success. No such guarantees are possible, and there are no assurances of a successful loan modification. In fact, some lenders will not work with for-profit third party representatives. 3. Too good to be true testimonials, such as “We Modified Terri G’s Adjustable Rate Loan, Which Had Spiked to 8 Percent, to a 2.5 Percent Fixed Rate Loan.” False advertising is rampant. Remember the old adage, “If something sounds too good to be true, it is probably false.” 4. Claims that a loan modification company is attorney-backed, attorney-affiliated, or attorney-based, especially where no lawyer or law firm is identified or mentioned. In one case, loan modification scammers used the name of a dead lawyer to commit their fraud. 5. Claims that a loan modifier is operating under a California Finance Lender’s (CFL) license issued by the California Department of Corporations. This is unlawful according to the Commissioner of the Department of Corporations. 6. A request that you grant a “power of attorney” to the loan modifier. The scammer may use the power of attorney to sell the home right out from under you. 7. A request that you transfer title to your home to the loan modifier or some third party. This is likely evidence of a scam where these scam artists will strip all of the remaining equity in your home. 8. Promises that you can repair your credit history by the payment of rent to the loan modifier or some third party. 9. Lease/rent-back scams, where you are told to transfer title to a third party, rent the home from that party, and then buy it back later. Transferring your deed gives the con artists the ability to evict you and sell the home. 10. Instructions to pay someone or some company other than your home loan lender or servicer. Sometimes the bad guys tell you to pay them your mortgage payment. Always pay your lender/servicer, and no one else. 11. Claims that a loan modification company will file a bankruptcy or other frivolous case for you to “force” a lender to negotiate a loan modification. So-called “forensic loan reviews” may fall into this category. 12. Assertions by the so-called loan modifier that you should just sign documents that

they have filled out, without reviewing them first. You must carefully read and understand all of the documents you sign. Be especially wary of promises by salespeople that they will “take care of everything” and you need only to sign “a bunch of forms with boring legalese.” 13. Lawyers or real estate licensees who tell you that they have no time to meet with you face-to-face. 14. Unlicensed people or companies. 15. Instructions from a loan modification provider that you should not contact your home loan lender or servicer, a lawyer, an accountant, or a non-profit housing counselor. Example: “From today on, talk only to me.” 16. Being advised to miss payments in order to improve your chances of getting a loan modification. While there are lenders who will not modify loans for borrowers who are current on their mortgages but who are in danger of default, following this advice may create other negative consequences and can put you on the path to foreclosure. 17. High-pressure sales tactics or warnings that “you must act today,” “tomorrow may be too late,” or “I need some money from you today so that I can save your home.” It is impossible to list all of the red flags that might suggest fraud, since the scammers and con artists continue to adapt and evolve, and modify and refine their stories, pitches and cons. They are ruthless, cunning and clever. To stay ahead of law enforcement, they change their names, addresses and bank accounts, and may re-cast themselves as nonprofits or bogus law firms. Please be alert, be cautious, be skeptical, and do your own homework using reliable and legitimate sources. And remember, don’t rush! You are always able to “slow down” or “pause,” and you should tell the provider of Foreclosure Rescue and Loan Modification services that you want to check out their license status with the DRE or the California State Bar, as

well as references. Any service provider who objects to your “checking them out” may have something to hide, like no credentials or license (or bogus credentials)—so be wary. If You Have Been Scammed or Become Aware of a Loan Modification—or Foreclosure Rescue—Scam, Report Fraud and File Complaints With... 1. The DRE if a real estate licensee is involved or if the person or company is unlicensed. If the person or company is unlicensed, the DRE will file a Desist and Refrain Order. If the person or company is licensed, the DRE will commence disciplinary action, www.dre.ca.gov/cons_complaint.html. 2. The California Attorney General, at www.ag.ca.gov/consumers. 3. The District Attorney, Sheriff, local police and local prosecutor in your community. 4. The California State Bar if a lawyer is involved, or if an unlicensed person claims to be a lawyer at www.calbar.ca.gov. 5. The California Department of Corporations, at www.corp.ca.gov, if a loan modification entity or person claims to be operating under a California Finance Lender License. 6. The Federal Trade Commission, at www.ftc.gov. They have an excellent fact sheet on Foreclosure Rescue Scams. 7. Federal Bureau of Investigation (FBI), at www.fbi.gov. 8. HUD, at www.hud.gov. 9. The Federal Deposit Insurance Corporation (FDIC), at www.fdic.gov. 10. The United States Attorney in the District in which you live. Look in your phone book or on the Internet. 11. The Better Business Bureau in your community. 12. The Chamber of Commerce in your community. 13. The California Department of Consumer Affairs, at www.dca.ca.gov, and your local Department of Consumer Affairs. 14. File a Small Claims Court action. ECHO Journal | November 2009

By Ken Bade, PCAM

Effective Board

November 2009 | ECHO Journal

Meetings o understand what an effective board meeting is one must first define “effective.” Webster’s II New Riverside Dictionary defines “effective” as “producing or designed to produce a desired effect.” Before a board of directors can operate effectively, they must garner an understanding of what is keeping them from their goal. Therefore, before we delve into how to conduct an effective board meeting, it might be helpful to understand some of the issues that make them ineffective. Eliminating these common problems will certainly lead to more productive and shorter meetings.

ECHO Journal | November 2009

Effective board meetings start with strong leadership from the president. That leadership must provide a clear understanding of the board’s purpose, which is the successful operation of the organization. As the elected representatives of the association, the board is charged with oversight of the community’s finances, infrastructure and condition of common and private properties—no small task in and of itself. Comparable to a city council, the board must weigh and consider what is best for the entire community while trying to place self interests on the back burner, often without much help or participation from fellow owners. At least, that is the case until the board must make an unpopular decision. Understanding the purpose and overcoming the first obstacle I mentioned becomes paramount. If the board allows too much homeowner involvement during the meeting, business cannot be completed. So how do we engage those present while still getting the work accomplished? This requires a firm but fair board president who decisively establishes the rules of engagement from the beginning and stands by them. Timed agendas and time limits for owner comments related to agenda-specific items are imperative.

Provide everyone who attends with a detailed agenda containing all the action items the board will be voting on at the meeting. Provide everyone who attends with a detailed agenda containing all the action items the board will be voting on at the meeting. Owner commentary should be limited to the agenda items and permitted only at the beginning or the end of the meeting with a time limit of three minutes. If an owner wishes to bring other items to the board’s attention and those items will require action from the board, they should be acknowledged, noted and placed on the agenda for the next regular board meeting. They should be Continued on page 26 24

November 2009 | ECHO Journal

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.

The manual on residential construction 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 the sources of disputes between homeowners and builders, offers comprehensive homeowner maintenance tips, and defines standards to which a residence should be built. It is consumer-oriented, written in simple language for a homeowner to understand. Order today from ECHO! Call 408-297-3246, fax at 408-297-3517 or email: info@echo-ca.org

Effective Board Meetings Continued from page 24

added to the current meetings agenda only if the board is certain adequate time to deal with them will be available. [Editorâ&#x20AC;&#x2122;s Note: In California, boards are strictly regulated by DavisStirling about the addition of new and unposted items to an agenda during a meeting.] The board must also ensure that if the item is to be considered during the current session, enough information is available to discuss fully, deliberate and make an informed decision on the issue. Establish time limits for board members. Three minutes per board member is sufficient in most cases. Provide opportunity for opposing comments and curtail discussion when the president feels that both sides have had adequate opportunity to present their side or the discussion becomes redundant. However, board members may, during deliberations, ask specific owners questions to clarify a point if desired, but this should not be allowed to reopen discussion from the audience. Remember that the board was elected to make decisions on behalf of the members, and those decisions should be in the best 26

November 2009 | ECHO Journal

interest of the association. That requires listening and being well informed; it does not mean being badgered and bullied from the floor during a board meeting.

Controlling the emotional side of the equation often proves a formidable task, but one that must be undertaken nonetheless. Another significant detractor to conducting an effective meeting is being drawn into a debate with an impassioned homeowner during the open forum or homeowner commentary portion of the meeting. This one is hard to avoid as board members are often as passionately in favor of or against the ownerâ&#x20AC;&#x2122;s position as the owner. Again, the president has primary responsibility to control this situation. Unfortunately, he or she may be the one who is engaged in the raging debate with

the audience member or board member. It takes a significant amount of self-control to avoid this pitfall, and it may fall to another member of the board to intervene and get things back on track. While it is human nature to defend your position, it is obviously counterproductive to the conduct of an efficient meeting. Controlling the emotional side of the equation often proves a formidable task, but one that must be undertaken none the less. Many boards find that judicious use of parliamentary procedure can help. Last but certainly not least is preparation. How simple would it be if everyone was prepared to work when the meeting is called to order, and the agenda items checked off like clockwork? I think everyone has attended a board meeting where the directors arrive moments before the appointed hour, sit down and proceed to rip open the board packet the manager so diligently provided five to seven days ago. Everyone present has seen the massive agenda and knows full well that the five detailed requests for proposal are listed as action items. No doubt this is going to be a long meeting. Failure to familiarize oneself with the material to be discussed almost certainly leads to an ineffective meeting. It may sound simplistic, but reading and understanding the content of the board packet goes a long way to being effective. Prior preparation allows board members an opportunity to ask for clarification in advance of the meeting. This not only facilitates clearing agenda items, but it also allows the manager to provide any additional information the board might need to make its decision. To fulfill their fiduciary obligations, board members must be effective. To reach that desired result, they are empowered to hire professionals such as accountants, attorneys, engineers, landscape contractors and management firms to provide them with detailed professional guidance and information. Consulting with these professionals provides the board with both expert guidance and a level of protection under the law that will help them to be more effective.

Ken Bade is the CEO and president at Lewis Management Resources in Tucson, Arizona, an Associa company. This article was previously published in Association Times, a publication of Associa, Inc.

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

Additions to Member Listings Real Estate Property Management P.O. Box 90269 San Jose, CA 95109-3269 Contact: Judi Jurkowski Tel: 408-307-0332 Fax: 408-280-7805 www.realestatepm.net Email: judi@realestatepm.net Real Estate Property Management (RPM) specializes in the management for condominiums and planned unit developments. RPM was created by former HOA board members who understand firsthand what boards of directors and residents expect.

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Changes to Member Listings HOA Accounting Services Tel: 888-854-9444 Fax: 888-857-3999 Address remains the same.

M & C Association Management Services provides community association management and developer services to Fremont, Pleasanton, Santa Clara, Stockton, Modesto, Copperopolis and the surrounding foothills.

Law Offices of Lisa K. Strom Tel: 408-796-4630 Fax: 408-854-8213 Change in telephone and fax only

Since 1990, our sole focus has been to deliver performance that enriches communities and enhances the lives of the people we serve. M & C is proud to be an Accredited Association Management CompanyÂŽ (AAMCÂŽ), which is the Community Associations Instituteâ&#x20AC;&#x2122;s highest GHVLJQDWLRQ DZDUGHG WR PDQDJHPHQW Ă&#x20AC;UPV

West Management Co. 15 Embarcadero Cove Oakland, CA 94606 Tel: 510-434-7980 Fax: 510-981-8358

3OHDVDQWRQ Â&#x2021; )UHPRQW Â&#x2021; 6DQWD &ODUD Stockton 209.644.4900 Â&#x2021; 0RGHVWR Â&#x2021; &RSSHURSROLV For management proposal information, please visit www.mccommunities.com or email info@mccommunities.com ECHO Journal | November 2009

November 2009 | ECHO Journal

? ?

By Ann Rankin, Esq.

Who is a Member in “Good Standing”? A

ssociation directors and members frequently ask, “When is a member in good standing?”

Bylaws Define “Good Standing” The term “good standing” is not defined in the Davis-Stirling Act or other statute. To find out who is, or is not, in good standing, you must, in most cases, refer to the association’s bylaws. The bylaws basically govern the association as a corporation and discuss how the corporation should work. In contrast, the CC&Rs are a recorded document whose main purpose is to govern the uses of the real estate assets. Common Requirements for “Good Standing” The most common requirements governing eligibility for voting and for running for the board of directors are first a requirement that the member be current in payment of all association dues and assessments and second a requirement that the member’s privileges of membership have not been suspended as a result of breaking association rules or violating the governing documents. Some bylaws also require that board members reside in the development but that does not relate to “good standing.”

The bylaws also often contain requirements that directors must satisfy in order to continue to serve on the board. Common requirements include: • The director must own a “unit” or a “lot,” and if such ownership ceases, so does membership on the board; • The director must not have been convicted of a felony; if convicted, the member may be removed from the board by the other directors; • The director must not have missed three regularly scheduled board meetings within the same calendar year; • The director must not have been declared mentally “incompetent” by a court; if he has been, then he may be removed from the board by the other directors. Although the governing documents typically require that association members and board members own property within the development, they usually don’t limit membership to people having any particular percentage of ownership. So, if a member lives with a “significant other” and deeds even one percent of the ownership of

ECHO Journal | November 2009

the unit or lot to the significant other, that significant other is still a member. Suspension of Members’ Rights for Violation of CC&Rs or Rules The Corporations Code allows an association to suspend a member’s right to use the common areas and to vote. However, such suspension may occur only after the member has been given notice of the alleged violation and an opportunity to be heard. The member may request that the board sit in executive session while holding the hearing. Of course, the board has no power to suspend a member’s right to use his own unit, residence or lot. What To Do If Your Bylaws Fail to Address These Issues We recommend that your bylaws specify what a member must do in order to be in “good standing,” and that they also specify reasons why other board members may remove a board member who fails to continue to qualify for board membership. If your current bylaws don’t include these provisions, we advise you to amend them to add the provisions. These provisions encourage owners to pay their assessments and dues on time, which helps association cash flow. It encourages compliance with rules and governing documents. And it allows a quick way of getting rid of board members in situations where continued membership on the board is obviously a bad idea, as in a case where a member has been convicted of a felony, or simply loses interest and fails to show up for board meetings. Corporations Code §7132(c)(3) specifically allows the articles of incorporation to specify restrictions and conditions on membership. Corporations Code §7151(d) allows the bylaws to specify the “qualifications, duties and compensation of directors.” Corporations Code §7151(d) says the bylaws can provide for the manner of suspension of membership rights consistent with the requirements of Corporations Code §7341. Corp. Code §7341 imposes due process requirements for suspension of a member’s rights.

Ann Rankin is the principal at the Law Offices of Ann Rankin in Oakland, California. The firm practices mainly in the areas of common interest development law and construction defect litigation. She is a member of the Legal Resource Panels. 30

November 2009 | ECHO Journal

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News from ECHO sales mills operating out of telephone boiler rooms that are in the “business” of offering impressive sounding but nonexistent loan services so that they can steal your money. Some are operating nationally, and some are even operating outside of the country.

Fraud Warnings for Homeowners in Financial Distress As homeowners continue to feel the pinch from the recession, and as home loan worries, delinquencies, defaults, and foreclosures continue to occur in California, loan modification and foreclosure rescue scams are growing and soaring. The FBI has said that a “rampant mortgage fraud climate” currently exists, and that California is one of the top states for loan fraud. Whether they call themselves foreclosure prevention or rescue consultants, forensic loan auditors, loan restructuring agents, debt settlement specialists, loss mitigation experts, loan modification specialists, mortgage modification consultants, or some other official or important sounding title, there are thousands of dishonest and rogue individuals and companies (most of whom are unlicensed, many of whom use lofty sounding names, and some of whom falsely claim to be nonprofits, to be attorney backed or affiliated, and/or to be affiliated with the federal and state governments) that have appeared all over the state. Many of the individuals have criminal and/or disciplinary records, and many of the companies are just fraud factories and high-pressure 32

November 2009 | ECHO Journal

To find their homeowner victims, they scour foreclosure notices, they get information on adjustable rate loan resets from title companies, and they use other tools. Quite simply, the bad players look for homeowners who are in foreclosure, who are struggling to make home loan payments, or those who need to modify their mortgages to find relief from financial distress. Once they find their victim targets, they market hope, and all too often, it is false hope. The scammers advertise on the radio, in newspapers, through the Internet, via email and the U.S. mail, and on television. Some even go door-to-door. While there are people and entities in the business of modifying loans that are licensed, legitimate and qualified, you must be cautious and beware. Don’t let the fraudsters take your hard earned money. And don’t be the next victim of the con artists.

Who Is a Member in “Good Standing”?

Holding Effective Board Meetings

Association directors and members frequently ask, “When is a member in good standing?” The term “good standing” is not defined in the Davis-Stirling Act or other statute. To find out who is, or is not, in good standing, you must, in most cases, refer to the association’s bylaws. The bylaws basically govern the association as a corporation and discuss how the corporation should work. In contrast, the CC&Rs are a recorded document whose main purpose is to govern the uses of the real estate assets.

Before a board can operate effectively, they must garner an understanding of what is keeping them from their goal. Therefore, before we delve into how to conduct an effective board meeting, it might be helpful to understand some of the issues that make them ineffective. Eliminating these problems will certainly lead to more productive meetings.

The most common requirements governing eligibility for voting and for running for the board of directors are, first, a requirement that the member be current in payment of all association dues and assessments and, second, a requirement that the member’s privileges of membership have not been suspended as a result of breaking association rules or violating the governing documents. Some bylaws also require that board members reside in the development but that does not relate to “good standing.” We recommend that your bylaws specify what a member must do in order to be in “good standing” and that they also specify reasons why other board members may remove a board member who fails to continue to qualify for board membership. If your current bylaws don’t include these provisions, we advise you to amend them to add the provisions.

First, a board meeting is not a meeting of the members; their involvement is specifically limited. It is the board’s job to help the membership understand this. A board meeting is not a meeting of the High School Debate Club. I’m not referring to the required discourse a board must engage in to reach a decision; I’m referring to debate between board members and owners who choose to attend the meeting. While sometimes necessary between board members, this interaction with audience members must be avoided for a meeting to be effective. Effective board meetings start with strong leadership from the president. That leadership must provide a clear understanding of the board’s purpose. As the elected representatives of the association, the board is charged with oversight of the community’s finances, infrastructure and condition of common and private properties—no small task in and of itself. Comparable to a city council, the board must weigh and consider what is best for the entire community, often without much help or participation by fellow owners.

2009 Legislation at a Glimpse As of October 15, 2009 Bill No.

Author

Subject

Status

Position

Summary

AB 49

Feuer

Water Reduction

Failed passage; two-year bill

Watch

Would require the state to achieve a 20% reduction in urban per capita water use in California by December 31, 2020.

AB 121

Hernandez

Judgment Lien Extension

Signed by the Governor

Neutral

Under certain conditions, this bill would allow creditors to extend judgment liens on specified personal property by filing a continuation statement in the office of the Secretary of State. The statement must be filed no earlier than six months before the lien is scheduled to expire.

AB 300

Caballero

Water Supply

Failed passage

Oppose

Would regulate water supplies to subdivisions of 50 units or more. The bill is long, controversial and will likely become a two-year bill.

AB 313

Fletcher

Tax-based Assessments

Signed by the Governor

Oppose

After December 30, 2009, would prohibit associations from levying assessments based upon the taxable value of the separate interests within the association. Associations that levied assessments based upon taxable value on or before December 30, 2009 would be exempted.

AB 370

Eng

Unlicensed Contractors

Signed by the Governor

Support

Would increase fines for unlicensed contractors.

AB 473

Blumenfield

Recycling Mandate

Vetoed by the Governor

Support if Amended

Would require an owner of a multi-family dwelling with five or more units to arrange for recycling services.

AB 566

Nava

Mobilehome Conversion Approval

Vetoed by the Governor

Support

In deciding whether to approve or disapprove a subdivision map, would allow a legislative body or advisory board to consider whether a majority of the residents in a mobilehome park approve conversion of the park to resident ownership.

AB 869

Mendoza

Mobilehome Park Managers

Failed passage; two-year bill

Support

Defines “Park Manager” and “Certified Mobilehome Park Manager.”

AB 899

Torres

Disclosure Documents Index

Signed by the Governor

Support

Would require associations to distribute a list of all legally mandated disclosures to their members annually, if requested. Clarifies and improves provision allowing the electronic distribution of records.

AB 1061

Lieu

Low WaterUsing Plants

Signed by the Governor

Support

Would render void and unenforceable any provision in the governing documents of an association that has the effect of prohibiting low water-using plants or prohibits or restricts compliance with local conservation ordinances. Allows associations to enforce landscaping rules and regulations.

AB 1328

Salas

Contract Restrictions

Vetoed by the Governor

Neutral

Extends to 5 years contract length restrictions for water or energy efficiency programs for associations when the board reasonably anticipates verifiable savings to the association. Requires the board to provide notice of the contract length before approving it.

SB 23

Padilla

Mobilehome Safety Plan

Signed by the Governor

Support

Would require all owners or operators of mobilehome or manufactured home parks to adopt an emergency preparedness plan. Requires that the plan be posted and that an enforcement agency determine park compliance.

ECHO Journal | November 2009

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 homeowners associations who want to learn how to manage and operate the affairs of their associations effectively.

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.

ric ReP duce ed

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.

Reserve Fund Essentials $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 homeowners 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.

2009 ECHO Annual Seminar Program Book $15.00 Non-Member Price: $20.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2009 ECHO Annual Seminar held on July 13, 2009. It also contains vital information for association directors, such as assessment collection policies, internal dispute policies, and much more.

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

Bookstore Order Form Board Memberâ&#x20AC;&#x2122;s Guide for Contractor Interviews $20.00 Non-Member Price: $25.00

Executive Council of Homeowners 1602 The Alameda, Suite 101, San Jose, CA 95126 Phone: 408-297-3246 Fax: 408-297-3517 TITLE

QUANTITY

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.

SUBTOTAL CALIFORNIA SALES TAX (Add 9.25%) TOTAL AMOUNT

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.

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

ECHO Events Calendar

Dates for your calendar Thursday, November 5 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, December 9 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose

Monday, January 11 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland

Wednesday, February 10 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose

Monday, November 9 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland

Friday, December 11 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Tuesday, January 12 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz

Friday, February 12 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Tuesday, November 10 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Friday, November 13 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek Wednesday, November 18 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Wednesday, December 2 Maintenance Resource Panel 12:00 Noon Location TBD

Wednesday, December 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgemt. Co. 6600 Hunter Dr., Rohnert Park Thursday, January 7, 2010 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Friday, January 8 East Bay Resource Panel 9:30 a.m. Angius & Terry 1900 N. California Blvd., Suite 950, Walnut Creek

Wednesday, January 20 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Saturday, January 30 Marin County Seminar 7:30 a.m. to 1:30 p.m. Embassy Suites Hotel 101 McInnis Parkway San Rafael Wednesday, February 3 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

Wednesday, February 17 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Saturday, February 20 Central Coast Winter Seminar 7:30 a.m. to 1:30 p.m. Hilton Hotel, Scotts Valley Friday and Saturday June 18 & 19, 2010 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Saturday, February 6 Sacramento Seminar 8:00 a.m. to 1:00 p.m. Marriott Rancho Cordova 11211 Point East Dr., Rancho Cordova

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

November 2009 | ECHO Journal

Meeting First Wednesday, Even Months First Thursday, Odd Months Second Friday, Monthly Second Monday, Odd Months Second Tuesday, Odd Months Second Wednesday, Even Months Third Wednesday, Monthly Quarterly

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

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YOU helped us send 350 bicycles to Africa. Now WE are giving $10,500 to Childrenâ&#x20AC;&#x2122;s Hospital Oaklandâ&#x20AC;ŚEverybody WINS Special thanks to all who donated: Jean Bates and Associates M&C Association management services Willis Management Group Inc Massingham and Associates Collins Management

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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 | November 2009

ECHO Honor Roll

About ECHO

ECHO Honors Volunteers Tyler Berding 2009 Volunteer of the Year ECHO Resource Panels Accountant Panel Richard Schnieder, CPA 707-576-7070 Central Coast Panel John Allanson 831-685-0101 East Bay Panel Scott Burke, 408-536-0420 Mandi Newton, 925-937-0434 Legal Panel Mark Wleklinski, Esq. 925-280-1191 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 A. Barnett, Esq. Sandra Bonato, Esq. Jerry L. Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

November 2009 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey A. Barnett, Esq. 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. Beverly Gordon, CCAM Sandra Gottlieb, 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, PCAM, 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

North Bay Winter Seminar Speakers Sandra Bonato, Esq. Robert Hall, Esq. Diane Kaye, CCAM David Kuivanen, AIA Steve Lieurance, CCAM Steven Saarman Robert Smylie Barbara Zimmerman, Esq.

Recent ECHO Journal Contributing Authors July 2009 Andrew Baugh, Esq. Melanie J. Bingham, Esq. Matt Malone, Esq. Marjorie Jean Meyer, PCAM Matt D. Ober, Esq. Carole Robinson Brian Seifert August 2009 Tyler P. Berding, Esq. Damon Burk Michael Gartzke, CPA Patrick Hendry Tracy Neal, Esq. Judy O’Shaughnessy David C. Swedelson, Esq. September 2009 John D. Garvic, Esq Roy Helsing John Schneider

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.

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 Non-members/Homeowners Businesses & Professionals

$50 $75 $125

How Do You Join ECHO?

October 2009 Tyler P. Berding, Esq. John D. Garvic, Esq. Geri Kennedy, CCAM Karl Lofthouse Marcia Nylander Dick Tippett

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 408-2973246 or visit the ECHO web site (echo-ca.org) to obtain an application form and for more information.

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The Condominium Bluebook 2009 edition Everything about Homeowners Associations

408-295-7767 or 877-295-FLOW

$18.00 Member Price This well-known compact guide for the 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.

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Complete Service and Repair Plumbing Copper and CPVC Repipes AquaTek Plumbing, Inc. has been servicing residential and commercial customers faithfully since 1982. Call us today for more information about AquaTek and the full spectrum of plumbing services we provide.

Order today from ECHO! Call 408-297-3246, fax at 408-297-3517 or email: info@echo-ca.org ECHO Journal | November 2009

Alert Regarding Misleading Solicitations he Secretary of State’s office has been advised that solicitation letters are being sent to California businesses encouraging them to comply with their California Corporations Code filing obligations by submitting fees and documents to a third party rather than by filing directly with the Secretary of State’s office. These solicitations are not being made by the California Secretary of State’s office and are not being made by or on behalf of any governmental entity. The solicitations request that a fee and a completed form be submitted in order for the business to comply with applicable

November 2009 | ECHO Journal

California or other law. The solicitations tend to have one or more of the following characteristics: • Appear similar to a Secretary of State Statement of Information form; • Contain an official-looking seal; • Quote a specific statute or other law on the form to be filled out and returned; • Imply that failing to return the form and pay the requested fee may place the entity in legal jeopardy, or might cause the entity’s filings with the California Secretary of State to be in default or noncompliant status;

• Contain a reference to a “file number,” “Corp Number,” “Corporation Number,” or “Control Number” that does not match the number assigned to the entity by the California Secretary of State; • Reference or quote Corporations Code sections inapplicable to the type of entity being solicited, such as Code sections applicable to corporations when soliciting a limited liability company; • Reference an “annual fee” or “annual payment” rather than a filing fee and that is Continued on the next page

ECHO Marketplace

Adver tiser Index

The place to find business and professionals for your association Affirmative Management . . . . . . . . .12 Alpha Restoration & Waterproofing . .8

WILLIAM FISHER ARCHITECTURE (831)246-0117 FAX:(831)457-0246 INC. MODERN-ARCHITECTURE.COM

603

FRONT ST. ARCHITECTURE. SANTA CRUZ 95060 CONSULTATION.

LOCKING MAILBOXES Professional Installation & Sales

805-929-0555

www.lockingmailboxes.us

American Asphalt . . . . . . . . . . . . . .24 American Management Services . . .10 Angius & Terry . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . .20 AquaTek Plumbing . . . . . . . . . . . . .39 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .17 Bayridge Group . . . . . . . . . . . . . . . .12 Berding | Weil . . . . . . . . . . . . . . . . .44 Coastal Termite Control . . . . . . . . .16 Collins Management . . . . . . . . . . . .17 Community Association Banc . . . . . .16

CA License #911384 - Bonded

Community Management Services . .24 Compass Management . . . . . . . . . .11 Condominium Financial Mgmnt . . . .37

Advertise your business to thousands of association directors in California in the ECHO Journal.

Cool Pool Service . . . . . . . . . . . . . .20 Cornerstone Community Mgmnt . . . . .8 Draeger . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . .31 First Bank Association Bank Services30 Flores Painting . . . . . . . . . . . . . . . .27 Focus Business Bank . . . . . . . . . . .10 Helsing Group . . . . . . . . . . . . . . . .12 Hill & Company. . . . . . . . . . . . . . . .43

Continued from page 40

in excess of the filing fee for a Statement of Information; • Provide an estimated processing time for “minutes” to be prepared and mailed to the entity; • Indicate the submitted information will be treated as private and confidential. These companies have no affiliation with the California Secretary of State’s office and no business is required to go through another company in order to file its documents with the Secretary of State’s office. Statement of Information forms and instructions are available through our website at www.sos.ca.gov/business/be/ statements.htm, and the fee required to file the statement is $25 for California stock and foreign corporations, and $20 for California nonprofit corporations and all limited liability companies. Also, the Statement of Information can be submitted for filing directly by mail to Secretary of State, Statement of Information Unit, P.O. Box 944230, Sacramento, California 94244-2300, in person (drop off) at 1500 11th Street,

Sacramento, California, 95814, or, for most corporations, by using a credit card through the internet at https://businessfilings.sos.ca.gov. If you have received a solicitation letter that seems misleading or confusing, please contact the California Attorney General’s office at the California Department of Justice, Public Inquiry Unit, P.O. Box 944255, Sacramento, California 94244-2550 or through the California Attorney General’s website at www.ag.ca.gov/consumers/ general.php. The telephone number for the Public Inquiry Unit is (800) 952-5225 (toll free in California) or (916) 322-3360. Please note that submitting the fees and filings required by the Corporations Code to a third party for filing with the Secretary of State does not meet the business entity’s statutory obligation to file a Statement of Information with the Secretary of State. Also, please note that each business entity is required to keep records, books and minutes of its proceedings, but such items are not filed with the Secretary of State.

M&C Association Services . . . . . . . .27 M. L. Nielsen Construction . . . . . . .30 Massingham and Associates . . . . . .31 Pelican Management Group . . . . . . .16 PML Management Corp. . . . . . . . . .39 Pollard Unlimited . . . . . . . . . . . . . .31 Pro-Craft Builders . . . . . . . . . . . . . .18 Professional Association Service . . .18 R. E. Broocker Co. . . . . . . . . . . . . .20 REMI Company . . . . . . . . . . . . . . . .17 Saarman Construction . . . . . . . . . . .9 Statcomm . . . . . . . . . . . . . . . . . . .37 Steve Tingley Painting . . . . . . . . . . . .2 Varsity Painting . . . . . . . . . . . . . . . .37

ECHO Journal | November 2009

Officers and Directors Update Association Presidents or Secretaries President Name

Term of Office:

to:

Address City and State

Zip:

Business phone ( Home phone (

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

) )

Date

Association Name

Vice President

Association Address

Name:

Term of Office:

to: City

Address: Zip

City and State Business phone ( Home phone (

County

Zip

County

Zip

Management company or manager Address

)

City

)

Email:

Management phone (

Secretary

Dues statements should be mailed to:

Name

Term of Office:

)

to:

Address City and State

Zip

Business phone ( Home phone (

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

) )

1. Type of Association:

Treasurer Name

Term of Office:

to:

Address

[ ]

Condo

[ ]

2. Total Number of units: 3. Average Monthly Assessment/unit:

Zip

City and State Business phone ( Home phone (

(Please check one)

4. Annual Meeting Date: 5. Type of Management:

)

Volunteer self-management

[ ]

Management company

[ ]

On-site manager

[ ]

Other

[ ]

)

Board Member Term of Office:

Name

to:

6. Does your association have earthquake insurance? Yes [ ]

No [ ]

Address Zip

City and State Business phone ( Home phone ( Email

) )

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

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