Journal_10_02

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:07 PM

Page 1

February 2010

A Journal for California Community Association Leaders

echo-ca.org

Who Fixes What?

ALSO INSIDE THIS ISSUE:

• Legal Issues with HOA Web Sites • Loans for Major Reconstruction • A Director’s Lament

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

PRSRT STD U.S. Postage PAID Sundance Press 85719

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:07 PM

Page 2

6SHFLDOL]LQJ LQ &RQGRPLQLXPV 7RZQKRPHV $SDUWPHQWV 6DQ -RVH +D\ZDUG

6DQ 0DWHR :DOQXW &UHHN

)$;

:H DOVR RIIHU GLVFRXQWHG FDUSHQWU\ UHSDLUV &DOO XV WR ILQG RXW KRZ WR UHFHLYH )5(( FDUSHQWU\ ZLWK HYHU\ SDLQW MRE :H RIIHU PRUH ZD\V WR VDYH \RX PRQH\ &RORU &RQVXOWLQJ Â &RPSOHWH %LG 3UHVHQWDWLRQV Â )XOO\ ,QVXUHG %RQGHG

([WHULRU 3DLQWLQJ 6LGLQJ WULP UHSODFHPHQW )HQFH UHSDLU UHSODFHPHQW 6WXFFR UHSDLU 'HFN UHEXLOGV &RQFUHWH :RUN

6HUYLQJ 1RUWKHUQ &DOLIRUQLD VLQFH

LQIR#WLQJOH\SDLQWLQJ FRP ZZZ WLQJOH\SDLQWLQJ FRP

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:07 PM

Page 3

Trust Relationships Results

Community Associations have placed their

trust in ANGIUS & TERRY LLP to solve their legal problems for over 30 years.

Through the years ANGIUS & TERRY LLP has had a single mission: To provide our clients with exceptional service and superior legal representation all built on the solid bedrock of long term relationships.

For results contact us today.

800.680.4001 www.angius-terry.com Walnut Creek • Sacramento Reno • Las Vegas

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:07 PM

Page 4

Contents Loans to Fund Reconstruction Projects —page 26

6

6

Who Fixes What? Part II “Who Fixes What?” in a common interest development continues. In Part II, you will find out how the Davis-Stirling Act, negligence and past practices affect the outcome of who fixes what, and how to set policy to avoid the disputes that commonly arise over such things as water leaks that involve both common area and individual units.

16

Many associations are establishing web sites and Internet bulletin boards. Although such tools may be useful, they present potential problems that directors and managers need to consider. This article discusses the legal issues related to whether an association can be held liable for the contents of the bulletin board and whether a board may censor postings and if so, whether the board could be held liable for such censorship.

16

26

26

Legal Issues with HOA Web Sites

Loans to Fund Major Reconstruction Projects A loan to fund major reconstruction projects is a viable method to help an HOA through a difficult financial situation. The loan will avoid the costly process of phasing a project and will preserve reserve funds already in place for other major projects or costly emergencies. This article discusses how to apply a team approach, including your property manager, construction consultant, banker and attorney, to the process of receiving a loan.

Departments

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 2010 Executive Council of Homeowners, Inc. All rights reserved.

Reproduction, except by written permission of ECHO, is prohibited.

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

Executive Council of Homeowners, Inc. 1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org Office Hours: Monday–Friday 9:00 a.m. to 5:00 p.m.

Board of Directors and Officers President David Hughes Vice President Karl Lofthouse Treasurer 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

28 News from ECHO 30 Directory Updates 34 ECHO Bookstore 36 Events Calendar 38 ECHO Volunteers 40 Letters to the Editor 41 ECHO Marketplace 41 Advertiser Index

On the Cover Who Fixes What?—page 6 4

February 2010 | ECHO Journal

Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc. Design and Production George O’Hanlon ECHO Mission Statement The mission of ECHO is to advance the concept, interests and needs of homeowner associations through education and related services to board members, homeowner members, government officials and the professionals in the industry.

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:07 PM

Page 5

ECHO 2010 Seminars Yes, they’re already here.

The 2009 seminars are behind us, but 2010’s events already underway.

Do not forget to mark these dates in your calendar for ECHO 2010 seminars: • Feb. 20—Central Coast Seminar, Scotts Valley • March 20—Wine Country Seminar, Rohnert Park • April 17—South Bay Seminar, Campbell • May 1—Sacramento Seminar, Rancho Cordova • June 19—Annual Seminar, Santa Clara

ECHO Journal February 2010:Journal_10_02.qxd

6

February 2010 | ECHO Journal

1/25/10

7:08 PM

Page 6

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 7

P

Part II discusses how the DavisStirling Act, negligence and past practices affect the outcome of who fixes what, and how to set policy to avoid the disputes that commonly arise over such things as water leaks that involve both common area and individual units.

By Beth A. Grimm, Esq.

Who Fixes What?

Part II

“W

ho fixes what” in a common interest development continues. Part I of this article, which was published in the January 2010 ECHO Journal, discussed the basic concepts pertaining to repair responsibilities in California common interest developments. However, the inquiry does not stop at the governing documents, as you will see.

forth a default position if the documents do not define who is responsible.

That law is stated below; and I have interjected some commentary (in paragraphs headed by the word “comment” in bold) to assist in understanding it. As you can see, the legislators felt compelled to include solutions where termite damage is found and repairs are needed.

California Law on the Subject of Maintenance and Repair in Common Interest Developments The law that applies to maintenance in common interest developments in California is found in the Davis-Stirling Act, Civil Code Section 1364.

That section defers to the CC&Rs if they specifically address a maintenance item but it also sets

Civil Code Section 1364. Maintenance, Repair and Replacement Obligations; Termite and Pest Control Responsibilities; Notice of Repair Requirements; Telephone Wiring and Access. (a) Unless the CC&Rs provide otherwise, the association is responsible for repairs, necessary replacements and maintenance of the com-

ECHO Journal | February 2010

7

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 8

&91&35 1003&1"*3 8*5)065 %3"*/*/( :063 1004"7& 8"5&3 Â… 4"7& 5*.& Â… 4"7& .0/&: .BJO %SBJO $PWFSTÂą7(# $PNQMJBODF 3VTUFE 3FCBS 3FNPWBMÂą$SBDL 5SFBUNFOU #SPLFO 1MBTUFS 3FQBJSÂą'JCFSHMBTT 3FQBJS

$PNNFSDJBM 3FTJEFOUJBM

-JDFOTF $

Â… XXX TDVCBQPPMSFQBJS DPN 8

February 2010 | ECHO Journal

mon areas in a CID, other than “exclusive use common areas,� and the owner is responsible for maintaining his or her separate interest and “exclusive use common area.�

Comment: You have to be careful here because a reading of this statute could lead one to believe that owners are responsible for deck, garage or carport repair and replacement in a condominium project (since these areas are often designated as exclusive use common areas), and that is not necessarily the case. Relying on this statute alone without combing the CC&Rs for language relating to responsibility for maintenance of these items or the structures could lead to a problem. Example: If a deck is cantilevered as opposed to free standing, allowing an owner to attempt replacement could jeopardize the structure. Attorney advice with regard to these maintenance issues is a very good idea. (b)(1) In a community apartment project, condominium project or stock cooperative (as earlier defined by Section 1351), the association is responsible to repair and maintain the common areas damaged, destroyed or infested by wood-destroying pests or organisms (to the extent repairs are required) unless the declaration (CC&Rs) has different requirements.

(2) In a planned development, each owner is responsible to maintain his or her separate interest (usually the entire area constituting a “lot�) as damaged, destroyed or infested by wood-destroying pests or organisms unless the declaration (CC&Rs) has different requirements. This obligation could be shifted to the association upon approval of a majority of members of the association, and the association would then be entitled to specially assess for the costs of repair, replacement and maintenance under this subsection.

Comment: Although (b)(2) says that a majority of owners is enough to shift termite responsibility to the association in a planned development, a question could arise if a CC&R amendment is required for the change and the Declaration requires more than majority approval to amend. It would be wise to seek legal advice if there is a conflict between what the Declaration requires to amend and what the statute says is required to change the scheme of termite and organism damage responsibility. Majority approval might be sufficient for a one-time shift; however, if the CC&Rs require, for example, 75 percent to amend, then no amendment can

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 9

be recorded with majority approval, except under a petition process whereby a homeowner association can apply for a lowering of the percentage required for an amendment by a judge (Civil Code Section 1356). (c) The costs of temporary relocation, (if relocation is required) necessitated by repairs and maintenance which is the responsibility of the association, must be borne by the owner(s) of the separate interest(s) affected. (d)(1) The association may require temporary relocation of any occupants of a CID as reasonably needed to afford prompt, effective treatment of wood-destroying pests.

(2) The association must give notice to owners and occupants involved of the need to temporarily vacate not less than 15 nor more than 30 days prior to the date relocation is required. The notice must give the reason for the temporary relocation, the date and time of the beginning of treatment, the anticipated time of the termination of treatment, and must let the occupants know that they are responsible for their own accommodations during the relocation time.

(3) Proper notice can be accomplished by either: (A) personal delivery to the occupants and first-class mail (postage prepaid) to the owners if different than occupants, to the most current address on the association records; or (B) sending a copy of the notice to the occupants and first-class mail (postage prepaid) to the owners if different than occupants, to the most current address on the association records. (e) “Occupant” means owner, resident, guest, invitee, tenant, lessee, subleases, or any person in possession of the separate interest. (f) Owners (or their service providers) have rights of reasonable access to common areas for the purpose of maintaining internal and external telephone wiring, which is designated as “exclusive use” common area by Section 1351(i)(2). The access and placement of exterior wiring is subject to consent of the association, which shall not be unreasonably withheld.

Comment: Subsection (a) provides the general overview, but subsections (b) through (f) provide more specifics on maintenance and repair. If the CC&Rs define the ECHO Journal | February 2010

9

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 10

obligations differently from the statute, the CC&Rs generally control. “Appurtenant” practically speaking means adjacent to, touching, or meant to be a part of and cannot be separated legally from. Sometimes exclusive use areas are described in the governing documents for the association and sometimes they are not. They are described above in Section 1351 (i). Figuring out responsibilities for maintenance, replacement and repair obligations is often difficult because of a lack of specific language so it may be necessary to seek the assistance of knowledgeable legal counsel. Besides reviewing and considering the CC&R provisions and the statutory references and requirements, past and current practices, reserve studies and policies may have some effect should a legal claim arise and consistency of enforcement may become an issue. Since this is a common area of dispute and disagreement, it helps to have an experienced professional assist in handling the issues and questions that arise. Sometimes it requires a CC&R amendment to clarify things.

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

¾

Full Service Management for Associations.

¾

Fully Certified Association Professionals and Responsive Professional Personnel.

¾

Free HOA Client Website.

¾

24/7 Emergency Assistance.

Locally Owned and Operated American Management Services, Inc. 90 Great Oaks Boulevard, Suite 105 San Jose, California 95119-3414 In The Bay Area - 800-720-1999 408-225-7380 Fax 408-225-7382 Email: Info@amspcam.com Visit us at www.amspcam.com 10

February 2010 | ECHO Journal

What seems a simple topic becomes complicated when you have to determine which controls, the documents or the statute, or the case on topic.

As already stated above, in a condominium situation the association is usually responsible to maintain all common area (which includes the buildings) except for exclusive use common areas. In a planned development, the owners are usually responsible for maintenance of everything on the individual lots, unless, as to both of these types of developments, the Declaration says otherwise.

This is definitely an area where you want to have good legal counsel. As you can see what seems should be a simple topic becomes complicated when you have to determine which controls, the documents or the statute, or the case on topic.

ECHO Journal February 2010:Journal_10_02.qxd

The sooner you get the correct information in such a situation, the better for everyone. Boards get into real hot water sometimes if they misinterpret the maintenance obligations. They might collect money for years for repairs to some component that is not the association’s responsibility, or alternatively, fail to collect reserves for a component that is the responsibility. The association can be sued and board members sued for breach of fiduciary duty in either scenario.

1/25/10

7:08 PM

Page 11

COM PA S S MANAGEMENT GROUP

Guiding your HOA in the right direction

How to Set Legally Enforceable Policies and Rules Regarding Maintenance Obligations Now, to answer the rest of the questions: Can the board decide who fixes what if the documents do not say?

Answer: The board (with the right kind of expert help) is in the best position of anyone to decide what the correct interpretation of responsibilities is by analyzing the existing facts and intentions of the developer (by review of the first few reserve studies and any past practices), and by seeking input of a knowledgeable expert about what the law adds to the inquiry.

What if the board is too slow? Can an owner fix something and get reimbursed?

Answer: This is a risk for an owner. If the documents contain language allowing for this, it is clear. If not, then an owner might be able to get some recovery of money spent in small claims or another court venue, or through attempts at ADR (Alternative Dispute Resolution, such as mediation or arbitration). However, there are no guarantees.

What if the reverse is true; i.e., the owner is too slow? Can the board do the work and get reimbursed by the owner?

Answer: This depends completely on what remedies are provided in the governing documents. Look for language on reimbursement assessments, individual assessments, fines, and the like. It is also important to know that, if the association is going to take this kind of action, it is best first to offer the owner a reasonable opportunity to do the maintenance, and also to give the owner notice and an opportunity to appear at a hearing if the owner is going to be charged for something in this scenario. If the documents do not authorize any of these remedies, or entry onto the separate interest property of the owner, then the board may have to go to court.

W

www.GoCompass.com 408.226.3300 | 510.226.0300 | 650.563.9900 | 831.583.9900

Since 1976

We are on call 24/7 for roof leaks, window leaks, deck leaks and structural damage.

During the day, or in the middle of the night, we respond quickly to protect your property from further damage.

We understand you need a proposal submitted quickly and a contractor who is experienced in both small repairs and total reconstruction.

Our crews are well trained and our projects are well organized so your property will be back in excellent condition as quickly as possible.

24 Hour Response: 800-200-0939 East Bay Santa Cruz Sonoma South Bay San Francisco 925-313-0100 831-325-7221 707-778-0500 408-536-0420 415-292-9992 Roofing C-39 Painting C-33 HVAC C-20 Electrical C-10 CA Lic. # 617610 • NV Lic. # 50111 • AZ Lic. # ROC196924 www.draegerconstruction.com

ECHO Journal | February 2010

11

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 12

What’s the benefit of having a maintenance policy?

Answer: Hopefully, the idea of good business judgment and application of the business judgment rule, which is the same type of consideration described in the Lamden case above.

Can the board just adopt a policy or do owners have to vote on it?

Answer: A maintenance policy—or maintenance “matrix,” which is a type of policy defining maintenance responsibilities in chart form (a very beneficial tool, if accurate)—generally can be approved by a board after pre-adoption circulation of at least 30 days to members to allow a comment period.

It would be treated like a rule modification and be subject to the requirements of Civil Code Section 1357.100 and the series following. Some documents require owner approval of rules so it is best to get a legal opinion on the proper procedure. No one wants a rule or policy or matrix that is problematic in enforcement because of a procedural adoption issue.

What if someone causes the damage that needs to be repaired; is he or she responsible to fix it?

Answer: Ahhh, this is a very good question. And it is important to know this!

CONSTRUCTION PROJECT MANAGEMENT & ENGINEERING FOR HOMEOWNERS ASSOCIATIONS From vision to reality, we help you every step of the way. ° Construction administrative services including bidding process ° Pre-construction consulting & coaching ° Over 25 years experience in construction & project management

www.brgicm.com

12

February 2010 | ECHO Journal

Phone: (650)345-2744

San Mateo, CA

How Negligence Fits Into Any Inquiry About Responsibility Most people would naturally go to the cause first and assume that whoever caused the damage that required the repair or replacement is responsible to do the work. By doing so, one may forget to check the documents!

A good example of how the failure to check the governing documents can cause problems is found in the California case Franklin v. Marie Antoinette Condominium Owners Association, Inc. (1993). In this case, a central plumbing system in a condominium association leaked and caused damage to an owner’s hardwood floors. The owner demanded replacement of the damaged flooring. The association was responsible generally to maintain the common area (and therefore responsible to fix the leak) but it was not held responsible to pay for the damaged flooring. This was because of an “exculpatory clause” (one allowing “escape” from liability) in the CC&Rs. The court said: “Although the CC&Rs require the Association to maintain and repair the common area (see §1364, subd. (a)), the CC&Rs do not require the Association to reimburse a

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 13

3AN &RANCISCO ,UNCHEON / ÕÀÃ`>Þ] >ÀV £n ££\{x >° ° Ì Ó\ää «° °

-«i> iÀÃ Ì Li Õ Vi`

Õ V i *À Vi\ fÇä i LiÀÃ\ fnä `Û> Vi ,iÃiÀÛ>Ì Ã ,iµÕ Ài` v À Ì Ã Ûi Ì

i « i ÕÃi Ã Ì «iÀ ÌÌi` à `i Ì i -Ì° À> V à 9>V Ì ÕL°

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

ÌÞ\

-Ì>Ìi\

< «\

* i\ 6 Ã>É >ÃÌiÀV>À` °

Ý«° >Ìi\

- } >ÌÕÀi\ ,iÌÕÀ Ü Ì «>Þ i Ì Ì \ "] £ÈäÓ / i > i`>] -Ìi £ä£] -> Ãi] x£ÓÈ "À`iÀÃ Ü Ì Li «À ViÃÃi` Ü Ì ÕÌ «>Þ i Ì vÕ ° iià v À V> Vi i` Ài} ÃÌÀ>Ì Ã Ü Ì Li ÀivÕ `i`° /i i« i\ {än Ó Ç ÎÓ{ÈÆ >Ý\ {än Ó Ç Îx£Ç

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 14

Exclusively Dedicated to Common Interest Communities t 0nlinF cBTI NBOaHFNFnU systFNs t 0nlinF AC) BnE Dredit carE QaZNFnU systFNs t 0nlinF EPDVNFnt Eelivery t H0" MPBns GPr QrPQFSUy NBJntenancF BnE EeveMPQNFnt t LPckbPx cPVSier BnE EJHJtaM JNaging services t %edicateE DVsUPNFr service teBNs

condominium owner for property damage caused by a central plumbing leak which occurred in the absence of negligence by the Association. The CC&Rs contain an exculpatory clause which states in relevant part: â&#x20AC;&#x153;[T]he Association... shall [not] be liable for... damage to... property in the project... resulting from... water... which may leak or flow from outside of any unit or from any part of the building, or from any pipes, drains, conduits, appliances or equipment or from any other place or cause, unless caused by the gross negligence of... the Association, its Board, officers, the manager or his staff.â&#x20AC;?

Lisa Ann Rea CCAM CMCA AMS Regional Account Executive Toll Free 866.800.4656, ext. 7500 t Mrea@cabanc.com

Community Association Banc A Division of Mutual of Omaha Bank

cabanc.com. National Corporate Member of Community Association Institute. Community Association Banc is a division of Mutual of Omaha Bank â&#x20AC;&#x201C; Member FDIC and Equal Housing Lender.

An example of negligence that would hurt the association would be to ignore a leak in the common area once it has been reported, and allowing it to cause damage by taking the position that it does not have to fix the leak because it is the ownerâ&#x20AC;&#x2122;s responsibility.

A few things important to note that came from this case are: â&#x20AC;˘ Such an exculpatory clause is not against public policy. â&#x20AC;˘ Such an exculpatory clause would not apply if the association had been found negligent. â&#x20AC;˘ Negligence of one party otherwise protected by language in the documents would negate an exculpatory clause. â&#x20AC;˘ An exculpatory clause like this does not negate the responsibility to insure that is otherwise stated in the governing documents.

An example of negligence that would have hurt the association in the above or any similar situation would be to ignore a leak in the

14

February 2010 | ECHO Journal

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 15

common area once it has been reported and allow it to cause damage to a unit or units by the failure to repair, or to take the mistaken position that it does not have to fix the leak because it is in an area of plumbing that is the owner’s responsibility. This can occur by failure of a board to investigate when a leak is reported. And this can lead to responsibility for damages to a unit that would otherwise be the owner’s responsibility.

Recap and Conclusion: Benefits of Good Policymaking As you can see, identifying components and repair, maintenance and replacement responsibilities is an important aspect of running homeowner associations. Similarly, a board can use some good expert help in the area of reserves planning and also interpretation of the documents, law and other factors such as intention of the developer and past practices. It is important to understand that negligence can change responsibilities as well, even those set forth in documents, or a policy or matrix.

However, the importance of good and consistent policies cannot be stressed enough. Remember that boards can get some court deference if challenged on a position related to maintenance obligation if a policy, procedure and/or plan is developed to deal with any or several maintenance requirements. Policy setting is straightforward. And gather all of the information and expert assistance that you need to draft the policy. With regard to maintenance policies, consider setting up a Maintenance Matrix that presents the board’s interpretation of responsibilities for maintenance, repair and replacement of improvements in the development. Such a policy would help greatly in terms of: • Promoting consistency in enforcement of obligations from board to board.

• Identifying problems areas before there is a “fire” to put out (or a complaint).

• Engendering cooperation on part of owners because of a written policy as opposed to an off-the-cuff statement.

Beth Grimm is the principal at the Law Office of Beth Grimm, in Pleasant Hill. She is a member of ECHO and various other industry organizations and is the current co-chair and a long-time member of the ECHO East Bay Panel. She is host of a web site called www.californiacondoguru.com and author of many helpful community association publications.

Pr

Red ice The How-to Guide for uce d Homeowners Associations Hailed as the most complete and useful reference available for homeowners associations, members, officers and directors.

If you want to learn how to manage, operate and participate effectively in your association, you will want to read this book.

Order the book today from ECHO Call 408-297-3246, fax 408-297-3517 or email: info@echo-ca.org ECHO Journal | February 2010

15

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 16

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 17

By Ann Rankin, Esq.

Legal Issues with HOA Web Sites any associations are establishing web sites and Internet bulletin boards for use by owners and residents. This article discusses the legal issues related to whether an association could be held liable for the contents of communications posted on the bulletin board; to issues related to “cyberbullying,” to the application of the Battin Bill, Civil Code 1363.03, to these issues, and to whether a board may “censor” postings and if so, whether the board could be held liable for such censorship.

M

Some associations establish only web sites, but others are considering interactive bulletin boards.1 The bulletin boards can be used so that members and residents can post notices. Some bulletin boards require the association, the manager or someone else to pre-approve notices that are posted and allow the board or a manager to edit or delete notices, for example, if the content is determined to be inappropriate. Although web sites and bulletin boards may

be useful and may provide a convenient forum for communication, they present potential problems that directors and managers need to consider.

First Amendment and “Internet Defamation” In determining whether to establish an electronic bulletin board and, if so, what guidelines to establish, the board needs to consider whether the association could be held liable for the content of the bulletin board. Another issue is whether the bulletin board could be misused in a way that would be harmful to members of the community, or to the community as a whole. The courts have not treated Internet 1 A bulletin board, in the Internet context, is “a computer-based system giving users access from remote terminals to text and programs contributed by one another and stored centrally.” (Oxford English Dictionary 642, 2d Ed. 1989) Bulletin boards allow users to post messages on the Internet and for others to view them, much like a bulletin board in the off-line world.

ECHO Journal | February 2010

17

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 18

Affirmative Management Services Feeling ignored by your property manager?

Need to get more things done?

Recent management changes = Poor service?

Want a more effective manager?

Time for new management? x HOA management is our only business x Weâ&#x20AC;&#x2122;re experienced, knowledgeable & responsive x Make this the year you start solving your HOAâ&#x20AC;&#x2122;s problems x Contact us today for a proposal or to schedule an interview

Weâ&#x20AC;&#x2122;re Here to Improve Your Quality of Life!

Serving Santa Clara County Phone: (408) 244-0909

â&#x2030;

pro craftbuilders MULTI-UNIT SPECIALISTS

License #833862

Email: info@thehoamanager.com

On the web: www.thehoamanager.com

OUR SERVICES: â&#x20AC;˘ Trim and Siding â&#x20AC;˘ New Decks and Rebuilds â&#x20AC;˘ Drywall Repairs â&#x20AC;˘ Doors and Windows

â&#x20AC;˘ Concrete Work â&#x20AC;˘ Reconstruction â&#x20AC;˘ Tenant Improvement â&#x20AC;˘ And Much More

Your Reconstruction Specialists Since 1986 CONTACT US Phone: 408-309-2345 Fax: 408-441-1304 761 Mabury Road, Suite 120, San Jose, CA 95133 pro-craftbuilders.com

3ERVICE %XPERIENCE 3OLUTIONS s s s s s

#ERTIFIED -ANAGERS AND %DUCATED 3TAFF HOUR %MERGENCY 2ESPONSE %LECTRONIC 2ECORDS 2ETENTION #OMPREHENSIVE &INANCIAL 3TATEMENTS % MAIL AND !SSOCIATION 7EB 0AGES

#HRISTY 3TREET &REMONT #!

18

February 2010 | ECHO Journal

03 02/&%33)/.!, !33/#)!4)/.

3%26)#%3 ).#

-EMBERS OF #!)

#!#- %#(/ 777 0!3 ).# #/-

&AX

bulletin boards in the same way that they treat newspapers, radio programs or similar media. Instead, they have provided broad immunities to entities that provide access to Internet bulletin boards.

In addition, conduct known as â&#x20AC;&#x153;cyberbullyingâ&#x20AC;? has become a problem, and the courts have been reluctant to impose liability on the â&#x20AC;&#x153;cyberbullies.â&#x20AC;?

Speech on the Internet is accorded First Amendment protection. â&#x20AC;&#x153;Through the use of chat rooms, any person with a phone line can become the town crier with a voice that resonates farther than it could from any soapbox. With Web pages, mail exploders, and newsgroups, the same individual can become a pamphleteer. â&#x20AC;ŚOur cases provide no basis for qualifying the level of First Amendment scrutiny that should be applied to this medium.â&#x20AC;? (Reno v. American Civil Liberties Union [1997] 521 U. S. 844, 870).

In other words, this is an emerging area of law, and courts are making new rulings all the time.

Federal law provides broad immunity to those who distribute even defamatory statements on a bulletin board or web site.

The U.S. Supreme Court has recognized that technology, through the Internet, has given a powerful voice to all citizens who wish to engage in the political debate, the argument about the human condition, and so on. â&#x20AC;&#x153;Criticism on the Internet is often so recklessly communicated that the harm to its targets may extend far beyond what is covered by rules applicable to oral rhetoric or pamphleteering.â&#x20AC;? (Krinsky v. Doe 6 [2008] 159 Cal. App. 4th 1154, 1164) In addition, â&#x20AC;&#x153;the targets of â&#x20AC;&#x2DC;cybersmearâ&#x20AC;&#x2122; may suffer damage to both personal and business reputations as disinformation and rumors propagate rapidly over the Internet.

In addition, as the level of rational and civil discourse deteriorates, it becomes increasingly difficult to find meaningful contribution in these online conversations.â&#x20AC;? (Lidsky, Silencing John Doe: Defamation &

ECHO Journal February 2010:Journal_10_02.qxd

Discourse in Cyberspace [2000] 49 Duke L. J. at p. 903) Federal law provides broad immunity to those who distribute even defamatory statements on a bulletin board or web site.

“The prospect of blanket immunity for those who intentionally redistribute defamatory statements on the Internet has disturbing implications. Nevertheless, by its terms Section 230 exempts Internet intermediaries from defamation liability for republication.

The statutory immunity serves to protect online freedom of expression and to encourage self-regulation, as Congress intended.

Section 203 (of the Communication Decency Act) has been interpreted literally. It does not permit Internet service providers or users to be sued as ‘distributors,’ nor does it expose ‘active users’ to liability. Plaintiffs are free under Section 230 to pursue the originator of a defamatory Internet publication. Any further expansion of liability must await congressional action.” (Barrett v. Rosenthal [2006] 40 Cal. 4th 33, 62, 63) Communication Decency Act of 1996 Title V of the Telecommunications Act of 1996, Pub. L. No. 104–104 is known as the “Communication Decency Act of 1996” (“CDA” or “Act”). The primary goal of the Act was to control the exposure of minors to indecent material. Parts of the Act have since been struck down as unconstitutional limitations on free speech (United States v.

Playboy Entertainment Group [2000] 529 U. S. 803), but the section at issue here, Section 230, remains intact. Prior to enactment of the CDA, a person who published or distributed speech over the Internet could be held liable for defamation even if she was not the author of the defamatory text and even if she was unaware of the statements. (Stratton Oakmont, Inc. v. Prodigy Services Company, 1995 N. Y. Misc.) The legislative history indicates that Section 230 was enacted as a response to the Stratton case, which was an unreported New York trial court case. (See Senate Report No. 104-230, Second Session, p. 194 [1996].)

In Section 230 of the Act (47 U. S. C.), Congress has granted broad immunity to entities and individuals that facilitate the speech of others on the Internet. As a matter of policy, “Congress decided not to treat providers of interactive computer services like other information providers such as newspapers, magazines or television and radio stations, all of which may be held liable for publishing or distributing obscene and

1/25/10

7:08 PM

Page 19

SAMPLE POLICY Homeowner Association Electronic Bulletin Board Acceptable Use Policy This Acceptable Use Policy (AUP) applies to use of the Association Electronic Bulletin Board.

This is a moderated bulletin board intended for use solely by registered members of the HOA. We expect all participants to treat each other with respect. All comments are reviewed before posting. We will not post comments that contain vulgar language; are obscene; personal attacks of any kind; offensive terms that target specific ethnic, racial, religious, age, or gender orientation; encourages unlawful activity; threatening material of any kind; inappropriate interaction with minors; child pornography; violations of any intellectual property or copyright laws; violations of any written agreements related to confidentiality in arbitration or mediation agreements; or any activity intended to interfere with access to the bulletin board.

Prohibited Activities Use of the bulletin board in any way that is unlawful, harmful to or interferes with the use of the bulletin board is prohibited; interferes with the use or enjoyment of others that use the bulletin board; infringes on intellectual or copyright laws; results in the publication of any threatening or offensive material; is a security risk; or a violation of privacy or confidentiality.

Failure to adhere to these rules or guidelines is a violation of this AUP.

E L P M SA LICY PO

Unlawful Activities The bulletin board shall not be used in connection with any criminal, civil or administrative violation of any applicable local, state, provincial, federal, national or international law, treaty, court order, ordinance, regulation or administrative rule.

Intellectual Property; Copyright Laws; Privacy and Confidentiality Laws The bulletin board shall not be used to engage in any activity that infringes, misappropriates or otherwise violates intellectual property rights; copyright laws; privacy laws or laws concerning confidentiality of the provider or any of its users.

Threatening Material or Content The bulletin board shall not be used to post any comment or material that harasses or threatens the safety of others. In addition, the HOA reserves the right to decline to post any content that is determined to be obscene, indecent, hateful, malicious, racist, defamatory, fraudulent, libelous, treasonous, excessively violent or promoting the use of violence or otherwise harmful to others.

Inappropriate Interaction with Minors The bulletin board will comply with all laws pertaining to the protection of minors.

Child Pornography The bulletin board will not be used to publish, submit, receive, upload, download, or otherwise produce, transmit, distribute or store child pornography.

User Responsibilities Users remain solely and fully responsible for the content of any material transmitted or posted on the bulletin board.

AUP Enforcement and Notice Member’s failure to observe the guidelines as set forth in this AUP may result in the HOA taking actions anywhere from a warning to suspension or termination of the privilege to use the bulletin board. When feasible, the HOA will provide members with a notice of an AUP violation or otherwise allow the member to promptly correct such violation.

The Association is not responsible for the content of any postings other than those specifically approved by the Board of Directors.

ECHO Journal | February 2010

19

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 20

defamatory materials written or prepared by others.“ (Blumenthal v. Drudge [D.D.C. 1998] 992 F. Supp. 44, 49) Courts construing Section 230 have recognized as critical in applying the statute the concern that lawsuits could threaten the “freedom of speech in the new and burgeoning Internet medium.” (Zeran v. America Online, Inc. [4th Circuit 1997] 129 F. 3d 327, 330). In the Zeran case, plaintiff Kenneth Zeran was bombarded with angry and derogatory telephone calls, including death threats, after an unidentified person posted a message on an America Online bulletin board. Zeran informed AOL and they removed the posting.

Lawsuits seeking to hold a service provider liable for its exercise of editorial functions are barred.

However, similar messages appeared.

Zeran was again overwhelmed with calls and threats. He sued AOL for unreasonable delay in removing the defamatory messages, refusing to post retractions and failing to screen for similar postings. AOL successfully moved for summary judgment on the pleadings, relying on Section 230. The Fourth Circuit Court of Appeals affirmed reasoning that the plain language of Section 230 “creates a federal immunity to any cause of action that would make service providers liable for information originating from a third-party user of the service. Specifically, Section 230 precludes courts from entertaining claims that would place a computer service provider in a publisher’s role. Thus, lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions, such as deciding whether to publish, withdraw, postpone or alter content are barred.” (Zeran, at p. 330) Section 203 (c) also encourages interactive computer services and users of such services to self-police the Internet for obscenity and other offensive materials, to aid parents in limiting their children’s access to such Detailed on-site inspections, inventories and asset descriptions • Spreadsheet report format now available on request 30-year threshold and components models • 16 years of reserve study experience • Call today for a free proposal

Continued on page 22 20

February 2010 | ECHO Journal

N

ECHO Journal February 2010:Journal_10_02.qxd

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.

1/25/10

7:08 PM

Page 21

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.

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 22

HOA Web Sites Continued from page 20

material. (Zeran v. America Online, Inc. [4th Circuit 1997] 129 F. 3d 327, 331)

SINCE 1972

Specializing in

PAINTING AND

WATERPROOFING Homeowner Associations s Apartment Buildings s Commercial Buildings

Why Choose Us?

800 540-5898 www.rebroockerco.com

s Prompt & Professional Service s Our Workmanship is Guaranteed s Detailed, Competitive Estimates at No Charge s Color Consultation & Sample Application s Traditional Acrylic Coatings s Ceramic Paint Coatings

217 Old County Road, #7 San Carlos, CA 94070 %#(/ -EMBER 3INCE s 3TATE ,ICENSE

At common law, “primary publishers,” such as book, newspaper, or magazine publishers are liable for defamation on the same basis as authors. Booksellers, news vendors, or other “distributors,” however, may only be held liable if they knew or had reason to know of a publication’s defamatory content.

(Zeran at p. 331; Prosser & Keeton, The Law of Torts [5th ed. 1984] §113, pp. 810–811; Restatement 2d Torts, §581, subd [1]) The distinction is a practical one. “Publishers are ordinarily aware of the content of their copy.

It is not reasonable, however, to expect distributors to be familiar with the particulars of every publication they offer. Therefore, only a distributor who is aware of defamatory content shares liability with the publisher.”

(Barrett v. Rosenthal [2006] 40 Cal. 4th 33, 45)

As the Supreme Court has recognized, owners of planned developments “comprise a little democratic society.”

It is important to note that Section 230(e) has no effect on the enforcement of other laws intended to protect individual rights, such as Sections 223 and 231 that deal with “cyberstalking” and obscenity; Section 110 that relates to the sexual exploitation of children, such as the Children’s Online Privacy Protection Act; laws against child pornography; laws pertaining to intellectual property or copyright; any relevant State laws; or violations of the Electronic Communications Privacy Act of 1986 (or any of its amendments), which is intended to protect privacy and confidentiality issues.

Continued on page 24 22

February 2010 | ECHO Journal

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 23

Preparing Boards for 2010 Don’t miss this opportunity to prepare you and your board for the 2010 economic and legal climate.

Seminar Agenda 8:00 a.m. Registration and Continental Breakfast

Central Coast Seminar Saturday, February 20, 2010 8:00 a.m. to 1:00 p.m.

8:45 a.m. Welcome

Hilton Hotel

9:00 a.m. The Team Approach—John Schneider and Donald Odell, Esq.—Discover how serving as a board member can be a rewarding experience.

Registration Fee: $45 Members $55 Non-Members

10:00 a.m. A Refresher on Membership Voting Stephanie Hayes, Esq. See how well your association is following the requirements for using secret ballots in member votes.

10:40 a.m. Break 11:00 a.m. People, Pets and Parking Beth Grimm, Esq.—Tips for dealing with the three classic dilemmas associations face with their residents.

11:50 a.m. 2010 Statute and Case Law Update Sandra Bonato, Esq.—What have the courts and the Legislature done to us this past year?

12:40 p.m. Ask the Speakers 1:00 p.m. Vendor Prizes and Adjourn

6001 La Madrona Drive, Scotts Valley

Yes, reserve ___ spaces for the Central Coast Seminar.

Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517

ECHO Journal February 2010:Journal_10_02.qxd

HOA Web Sites Continued from page 22

An HOA Bulletin Board May Be a “Public Forum” “The right to speak on political matters is the quintessential subject of our constitutional protections of the right to free speech.

Public discussion about the qualifications of those who hold or wish to hold positions of public trust presents the strongest possible case for application of the safeguards of the First Amendment.” (Conroy v. Spitzer [1999] 70 Cal. App. 4th 1446, 1451) As the Supreme Court has recognized, owners of planned development units “comprise a little democratic sub-society.”

(Nahrstedt v. Lakeside Village Condominium Association [1994] 8 Cal. 4th 361, 374) Because of a homeowner association board’s broad powers and the number of individuals potentially affected by the board’s actions, the legislature has mandated that boards hold open meetings and allow the members to speak publicly at the meetings.

(Civil Codes §§1363.05, 1363, 1350–1376) These provisions parallel California’s open meeting laws regulating government officials, agencies and boards. Accordingly, board meetings are “public forums.” (Foothills Townhome Association v. Christiansen [1998] 65 Cal. App. 4th 688, 695–696) Further, posted statements, such as the manner in which a homeowner association would be governed, an inherently political question of vital importance to each individual and the community as a whole would be considered “issues of public interest.” (Chantiles v.

Lake Forest II Master Homeowners Association [1995] 37 Cal. App. 4th 914, 922) To date, no court has been faced with the task of determining specifically whether a homeowner association Internet bulletin board is a “public forum.” We can look to the facts in Damon v. Ocean Hills Journalism Club (2000) 85 Cal. App. 4th 468 to assist us in developing a logical assumption. In Damon, appellant was employed by a homeowner association as its general manager.

Homeowners became displeased with the quality of his services. Criticism was expressed at association board meetings and in the newsletter of respondent. He sued the association for defamation, but the court threw his case out of court, stating he was suing as a way of punishing the owners for voicing their opinions, as they had a right to do.

24

February 2010 | ECHO Journal

1/25/10

7:08 PM

Page 24

The Court of Appeals reasoned that the statements the manager complained of were made in a public forum, so they came within section (a)(3) of California Code of Civil Procedure §425.16 which states that “(e) as used in this section, “act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issues” includes: “(3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issues of public interest.” The statute provides a procedure for a court to dismiss at an early stage non-meritorious litigation meant to “chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” (California Code of Civil Procedure §425.16 (a))

It is a well accepted legal principle that certain forms of conduct mixed with speech may be regulated or prohibited.

In Damon v. Ocean Hills Journalism Club (2000) 85 Cal. App. 4th 468, the court held that “the board played a critical role in making and enforcing rules affecting the daily lives of Ocean Hills residents. Those rules were promulgated at board meetings, which were televised, open to all association members, and served as a place for open discussion among directors and members.” The court further determined that “the Village Voice [newsletter] was a public forum in the sense that it was a vehicle for communicating a message about public matters to a large and interested community. All interested parties had full opportunity to read the articles in the newsletter. It is in this marketplace of ideas that the Village Voice served a very public communicative purpose promoting open discussion, a purpose analogous to a public forum.” (Damon at p. 476-477) The Village Voice Newsletter was a “public forum” and the statements concerned matters of “public interest” to the members of the association

within the meaning of California Code of Civil Procedure §425.16.

What Guidelines for Bulletin Board Use are Permissible?

It is a well accepted legal principle that certain forms of conduct mixed with speech may be regulated or prohibited. As pointed out long ago by Mr. Justice Holmes of the United States Supreme Court, “The most stringent protection of free speech would not protect a man in falsely shouting fire in a theater and causing panic.” …A man may be punished for encouraging the commission of a crime or for uttering “fighting words,” …These authorities make it clear that it has never been deemed an abridgement of free speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language either spoken, written, or printed.” (Church of Christ in Hollywood v.

Superior Court of Los Angeles County [2002] 99 Cal. App. 4th 1244, 1253) Civil Code 1363.03 (a)(1), which is a portion of the “Battin Bill,” requires that associations provide equal access to “association media” to all candidates for association office, and to all persons who want to express a point of view that is different from the board’s point of view prior to an “election.”

CC 1363.03(a)(1) provides, as pertinent: “An association shall adopt rules, in accordance with the procedures described by Article 4… that do all of the following: (1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided for all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for the content.”

Thus, an association may not restrict candidates’ statements on a bulletin board, nor may it edit or redact the content of members’ statements that are related to an election.

The final issue is what guidelines, if any, are permissible. Section 230 (c) provides protection from liability for the “Good Samaritan” blocking and screening of offensive material. (Offensive material is not defined within the Act.) In particular, section 230 (c)

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 25

Painting smiles... at the right price.

“I received what I feel to be the best painting contractor performance ever" Patricia Arnold

Thank you for helping us raise over $20,000 at our annual Halloween Bash for

1.888.VARSITY License #809250

(A) and (B) states that no provider or user of an interactive computer service shall be held liable on account of, “any action taken voluntarily in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable, whether or not such material is constitutionally protected; or any action taken to enable or make available to information content providers or others the technical means to restrict access to materials described in (A) above.”

A sample use policy for an association bulletin board or web site is printed on page 19 as guidance for board members and managers.

Congress has granted broad immunity to those that moderate, revise, edit or restrict content to Internet bulletin boards and similar electronic message boards for the abovestated reasons. WebContent.gov2 states, “Moderation or editing of content is a good 2 A web site developed by government web content managers to share best practices and provide requirements and guidance for managing government agency web sites.

approach to ensure that inappropriate comments or material is not posted; however be prepared that there may be accusations of censorship.”

Congrees has granted broad immunity to those that moderate bulletin boards.

Conclusions 1. Associations have broad statutory immunity from liability for defamatory content that is placed on a bulletin board. However, it would still be wise to place a disclaimer on the bulletin board. The disclaimer could be worded as follows: “The content of the bulletin board is solely the responsibility of the authors of the postings. An association is not responsible for this content and neither endorses or opposes the content of any of the postings”;

2. If owners or residents use the bulletin board for “cyberbullying,” their victims will have little recourse. If someone posts a defamatory statement that includes false facts, as opposed to negative opinions, that person may be held liable for defamation; 3. In California, when a bulletin board is used for candidates’ statements, or for any statements related to an “election,” an association may not edit or redact the contents of the statements under the Battin Bill; 4. An association may issue guidelines that ensure that the bulletin board is not used to engage in unlawful activities; to violate child protection and exploitation laws; or to post threatening or “inappropriate” material or content. The statute does not define the term “inappropriate.”

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 Panel.

ECHO Journal | February 2010

25

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:08 PM

Page 26

here are several ways to fund a major reconstruction project available to homeowners. The most obvious and best is to have adequate reserves and use the amount allotted for a particular construction project.

This method does not affect the reserve budgets designated for other construction projects and does not increase dues. However, if reserves are not adequate,

T

26

February 2010 | ECHO Journal

which is often the case, alternate funding methods are required. One funding method may be to use the entire reserve amount for the one major reconstruction project. This however could leave an association in a financial problem if another major project arises or an emergency occurs. Alternatively, it may be possible simply to raise the assessments for a designated period to make

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 27

By Brian Seifert

Why Pursue a Loan to Fund Your Major Reconstruction Project

up a shortfall in reserves. This however typically results in â&#x20AC;&#x153;phasingâ&#x20AC;? a project; i.e., completing the work over two or more years. Another alternative would be to levy a special assessment on each homeowner. This of course can cause an undue burden on the membership but will avoid phasing. Combination of these methods is also a viable alternative. Another method is to pursue a loan

from an institution that specializes in funding major reconstruction projects for common interest developments. This method often results in a small burden of increased dues over a relatively short period but preserves reserves and avoids phasing. With current Continued on page 29

ECHO Journal | February 2010

27

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 28

News from ECHO

Legal Issues with HOA Web Sites Many associations are establishing web sites and Internet bulletin boards for use by owners and residents. But there are legal issues related to whether an association could be held liable for the contents of communications posted on the bulletin board; to issues related to “cyberbullying,” to the application of the Battin Bill, Civil Code 1363.03, to these issues, and to whether a board may “censor” postings and if so, whether the board could be held liable for such censorship.

Some associations establish only web sites, but others are considering interactive bulletin boards. The bulletin boards can be used so that members and residents can post notices. Some bulletin boards require the association, the manager or someone else to pre-approve notices that are posted and allow the board or a manager to edit or delete notices, for example, if the content is determined to be inappropriate. Although Web sites and bulletin boards may be useful and may provide a convenient forum for communication, they present potential problems that directors and managers need to consider.

Congress has granted broad immunity to those that moderate, revise, edit or restrict con28

February 2010 | ECHO Journal

tent to Internet bulletin boards and similar electronic message boards for the above-stated reasons. WebContent.gov, a web site developed by government web content managers to share best practices and provide requirements and guidance for managing government agency web sites, states, “Moderation or editing of content is a good approach to ensure that inappropriate comments or material is not posted; however be prepared that there may be accusations of censorship.”

Associations have broad statutory immunity from liability for defamatory content that is placed on a bulletin board.

However, it would still be wise to place a disclaimer on the bulletin board. The disclaimer could be worded as follows: “The content of the bulletin board is solely the responsibility of the authors of the postings. An association is not responsible for this content and neither endorses or opposes the content of any of the postings.”

If owners or residents use the bulletin board for “cyberbullying,” their victims will have little recourse. If someone posts a defamatory statement that includes falsehoods, as opposed to negative opinions, that person may be held liable for defamation.

In California, when a bulletin board is used for candidates’ statements, or for any statements related to an “election,” an association may not edit or redact the contents of the statements under the Battin Bill.

An association may issue guidelines that ensure that its

bulletin board is not used to engage in unlawful activities; to violate child protection and exploitation laws; or to post threatening or “inappropriate” material or content. The statute does not define the term “inappropriate.”

Why Pursue a Loan to Fund a Major Reconstruction Project There are several ways to fund a major reconstruction project available to homeowners. The most obvious and best is to have adequate reserves and use the amount allotted for a particular construction project. This method does not affect the reserve budgets designated for other construction projects and does not increase dues. However, if reserves are not adequate, which is often the case, alternate funding methods are required.

One funding method may be to use the entire reserve amount for the one major reconstruction project. This however could leave an association in a financial problem if another major project arises or an emergency occurs.

Alternatively it may be possible simply to raise the assessments for a designated period of time to make up a shortfall in reserves. This however typically results in “phasing” a project; i.e., completing the work over two or more years. Another alternative

would be to levy a special assessment on each homeowner. This of course can cause an undue burden on the membership but will avoid phasing. Combination of these methods is also a viable alternative. Another method is to pursue a loan from an institution that specializes in funding major reconstruction projects for common interest developments. This method often results in a small burden of increased dues over a relatively short period of time but preserves reserves and avoids phasing. With current favorable lending rates, this is a very viable solution.

A loan to fund major reconstruction projects is a viable method to help an HOA through a difficult financial situation. The loan will avoid the costly process of phasing a project and will preserve reserve funds already in place for other major projects or costly emergencies. Apply a team approach, including your property manager, construction consultant, banker and attorney, to the process of receiving a loan.

Important Upcoming Events Saturday, February 20 Central Coast Winter Seminar Hilton Santa Cruz/Scotts Valley 6001 La Madrona Dr., Santa Cruz Thursday, March 18 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club, San Francisco Saturday, March 20 Wine Country Seminar 8:00 a.m. to 1:00 p.m.

Rohnert Park Community Center 5401 Snyder Lane, Campbell

ECHO Journal February 2010:Journal_10_02.qxd

Loans for Major Reconstruction Projects Continued from page 27

favorable lending rates, this is a very viable solution.

Pursuing a loan for a major reconstruction project requires a team of professionals to guide the board through the process. The coordinating liaison is typically the property manager. That person will help assemble the rest of the team required to complete the processâ&#x20AC;&#x201D;the construction consultant, banker and attorney. The construction consultant will provide a specification detailing the necessary work required to complete the construction project. Additionally, they will coordinate receiving bids from qualified contractors, which will ultimately determine the amount of money required. The consultant will also be able to estimate contingency expenses that may occur during the project and insure this amount is included in the loan to avoid any shortfalls during the project. Many construction consultants will also work with an association to determine future reserve funding required after a project is complete. Also, if a current reserve study is not available and the bank will require this, the consultant can often provide one.

The banker and bank play a key role to the success of receiving the loan. Not all banks understand or provide funding for reconstruction projects for CIDs. It is imperative that an association work with an experienced banker for funding the project. The banker will know all the requirements and proper paperwork necessary to complete the loan application process. They will be able to provide some options and alternative methods for paying the loan back in a way that fits the homeowner association. The banker will work closely with the other team members to insure the process is not bogged down and allows for a successful loan.

Your attorney will be the key legal advisor insuring that the loan process and payback method fall within the associationâ&#x20AC;&#x2122;s CC&Rs and the laws of the state. The attorney will work closely with the other team members to insure the loan process moves along and stays within the law.

One of the key benefits to receiving a loan for your reconstruction project is avoiding phasing the construction. As mentioned earlier, phasing is the process of completing a project over an extended period, usually two or more years. One of the key benefits from not phasing is a financial savings to the

1/25/10

7:09 PM

Page 29

homeowner association. Usually there are construction cost increases annually, either material or labor. As an example, although many construction products experienced cost decreases during the economic downturn, asphalt-based roofing products, such as composition shingles, did not decrease, and in fact increased, in cost during much of the economic crisis. The asphalt roofing market continued to experience high demand because of natural disasters in other areas of the United States, which kept the cost of shingles high. Recently this has changed and the prices are decreasing some. Labor costs can increase, even if the contractor does not pay more to its employees. Burden costs such as taxes, workersâ&#x20AC;&#x2122; compensation insurance, and other insurance costs continue to increase annually. That cost will be passed on to the consumer. By having to phase your project, you could be paying more to complete the work. Usually, the additional construction costs are greater than the cost of borrowing money.

One of the key benefits to receiving a loan for your reconstruction project is avoiding phasing the construction.

Another benefit to completing a project in one job is construction consistency. Your complex may have been built in phases and perhaps you have noticed that construction varied, sometimes greatly, from one phase to another. This has to do with the particular contractor in each phase and perhaps architect and plan changes. The same is true for reconstruction and can result in inconsistent construction. Additionally, color lots often change year to year, or within a year. Again, using roof shingles as an example, when the manufacturer colors the granules for a shingle, they do this in lots. Although the color is close, lots do vary. If a roof project is phased, almost assuredly you will receive different lot colors, which causes variation in the look of the finished product. One contractor may install flashings differently from another.

Although both ways are functional, they may not look the same. Your construction manag-

er will help to maintain consistency, but it may still vary.

Two more benefits from not phasing are warranty and owner appreciation. Phasing the project will also phase the warranty.

Someone will have to keep track of which section is under which warranty and which contractor. This can become very confusing, particularly if there is a change in property managers. Phasing the project can cause discord among the owners with complaints about why their building was not included in the first phase. They often ask why they have to wait a year or two or more to get the work done on their unit when they are paying the increase from the beginning. Avoiding phasing a project solves all of the problems listed above, and a loan may be the solution.

Perhaps the greatest benefit to funding your reconstruction project through a loan is preserving your reserves. In some cases, it may in fact allow you to build reserves where virtually none existed before. Often, associations are under-reserved for major reconstruction projects but do have some money set aside. A loan can supplement the reserves to complete the job and not deplete the remaining reserves earmarked for other projects. Additionally, if the decision is made to deplete the reserves completely for one project, this can cause an undue, substantial financial burden should a costly emergency arise. A loan also gives an association the ability to begin a reasonable refunding plan for the reserve amount used to complete the project. Both your association manager and reserve analyst can help with this task.

In summary, a loan to fund major reconstruction projects is a viable method to help an homeowner association through a difficult financial situation. Apply the team approach to the process of receiving a loan including your property manager, construction consultant, banker and attorney. The loan will avoid the costly process of phasing the project and allow for both consistency and happy owners. Finally, it will preserve the reserves already in place for other major projects or any costly emergency that may arise.

Brian Seifert is a technical consultant and construction manager with Cox Associates in Scotts Valley. He is the current chair and a long-time member of the ECHO Maintenance Resource Panel. He is also a frequent contributor to the ECHO Journal and speaker at ECHO seminars.

ECHO Journal | February 2010

29

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 30

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

Additions to Member Listings The Bridgeport Company 1 Annabel Ln. Suite 217 San Ramon, CA 94583 Contact: William Bavelas Tel: 925-824-2888 Fax: 925-335-1615 www.bridgeportcompany.com Email: bill@bridgeportcompany.com Engineers—On Call 30 Union Ave. Suite 200 Campbell, CA 95008 Contact: Joseph Quilici, P.E. Tel: 408-583-0323, ext. 11 Fax: 408-583-0329 www.qengineers.com Email: jquilici@qengineers.com Engineering and construction drawings for all building repairs. Structural, building envelope, construction defects, litigation support, construction management. At your site—in your office. Streamline and expedite your engineers—on call!

Hanford-Freund & Company 47 Kearny St. San Francisco, CA 94108 Contact: J. Timothy Falvey Tel: 415-981-5780 Fax: 415-296-0725 www.hanfordfreund.com Email: info@hanfordfreund.com Hanford-Freund & Company has been a leading provider of association management services in San Francisco for five decades. We put our experience and professionalism to work for our clients in every property we manage.

30

February 2010 | ECHO Journal

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 31

James Hardie Building Products 3811 Naughton Ave. Belmont, CA 94002 Contact: Christopher Baughman Tel: 408-569-1507 www.jameshardie.com Email: christopher.baughman@jameshardie.com Manufacturer of siding that offers solutions for low-cost, high-value exterior cladding.

Changes to Member Listings James Ernst Accounting 110 Stony Point Rd. Ste. 100 Santa Rosa, CA 95401-4118 All other information remains the same Northwest Insurance P.O. Box 1180 Santa Rosa, CA 95402 Contact: Casey Roberts Email: croberts@nwinsure.com Telephone and Fax remain the same.

Karen Smith State Farm Insurance P.O. Box 23405 Pleasant Hill, CA 94522-0406

6(59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 Â&#x2021; )5(0217 PLEASANTON Â&#x2021; &233(5232/,6 Â&#x2021; 02'(672 Â&#x2021; 6$17$ &/$5$

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

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

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 | February 2010

31

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 32

New Ordinance Continued from page 37

obtain a compliance certificate that indicates their sewer laterals are without defects and have proper connections. Specifically, owners are required to test and, if needed, repair and/or replace property sewer laterals prior to selling their property; or when obtaining any permit for the construction or modification of the property estimated to be greater than $100,000; or when increasing or decreasing EBMUD water service.

Condominium Impact For complexes that have individuallyowned units in a multi-unit building, the triggers above are impractical to implement.

Thus, specific to condominium-type properties, within a 10 year period from the date of the Regional Ordinance adoption, the community association is required to verify that all the sewer laterals located on the property function in accordance with the Regional Ordinance requirements. Upon verification, a compliance certificate will be issued to the community association. The compliance certificates are valid for 7 years when either no repairs are needed or isolated repairs are done, and for 20 years when the lateral is fully replaced.

---------------------The Regional Ordinance is scheduled for adoption on February 9, 2010 and implementation is anticipated in late 2010. Additional information regarding EBMUDâ&#x20AC;&#x2122;s Regional Ordinance and Private Lateral Repair and Replacement Program will be forthcoming, and some information is available on the EBMUD website: www.ebmud.com.

At this time, the Regional Ordinance only impacts the EBMUD, including the cities of Emeryville, Oakland and Piedmont. Other EBMUD cities already have lateral ordinances in place. However, as the EPA looks at other failing sewer systems, other cities around the bay may be required to make similar changes. Associations within the EBMUD should immediately investigate the cost of replacing their sewer laterals and begin budgeting for the repairs. Associations in similarly situated areas may want to examine their own infrastructure and consider budgeting for future repairs or replacement.

32

February 2010 | ECHO Journal

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 33

Massingham & Associates.

Competitive Price. Better Service.

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

Weâ&#x20AC;&#x2122;re proud to say weâ&#x20AC;&#x2122;ve grown to be one of the largest community management firms in Northern California and we could not have accomplished that without great prices and even better service! We continue to be one of a select few full-service management companies in Northern

California to have earned the prestigious designation of

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

7BMVF t 6OFRVBMFE Customer 4FSWJDF t Expertise <

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

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

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

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

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

ECHO Journal | February 2010

33

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:09 PM

Page 34

2008 ECHO Business & Professional Directory $20.00 Non-Member Price: $25.00

Condominium Bluebook 2010 Edition $18.00 Non-Member Price: $25.00

Homeowners Association and You $13.00 Non-Member Price: $20.00

Community Association Statute Book—2010 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 2010 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

e Pricuced Red Homeowners Associations— How-to Guide for Leadership $25.00 Non-Member Price: $25.00 This well-known guide and reference is written for officers and directors of homeowner associations who want to learn how to manage and operate the affairs of their associations effectively.

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 Answer Book $15.00 Non-Member Price: $20.00 An excellent guide to understanding the rights and responsibilities of condo ownership and operation of homeowner associations. The question-and-answer format responds to more than 125 commonly-asked questions in an easy to understand style. A great resource for newcomers and veteran owners.

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 June 13, 2009. It also contains vital information for association directors, such as assessment collection policies, internal dispute policies, and much more.

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 35

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 Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 36

ECHO Events Calendar

Dates for your calendar Wednesday, February 3 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

Thursday, March 4 North Bay Resource Panel 11:45 a.m.

Contempo Marin Clubhouses 400 Yosemite Rd., San Rafael

Wednesday, April 7 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

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

Tuesday, March 9 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz

Friday, April 9 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

Friday, February 12 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek 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 Santa Cruz/Scotts Valley 6001 La Madrona Dr., Santa Cruz

Friday, March 12 East Bay Resource Panel 9:30 a.m.

Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, March 17 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, March 18 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco Saturday, March 20 Wine Country Seminar 8:00 a.m. to 1:00 p.m.

Rohnert Park Comm. Center 5401 Snyder Ln., Rhonert Park

Saturday, May 1 Sacramento Seminar 8:00 a.m. to 1:00 p.m.

Marriott Rancho Cordova 11211 Point East Dr., Rancho Cordova Monday, May 10 Accountants Resource Panel 6:00 p.m.

Francesco’s Restaurant Oakland

Wednesday, April 14 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose

Thursday, May 20 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco

Saturday, April 17 South Bay Spring Seminar 8:00 a.m. to 1:00 p.m.

Campbell Community Center 1 East Campbell Ave., Campbell

Friday and Saturday June 18 & 19, 2010 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Wednesday, April 21 Wine Country Resource Panel 11:45 a.m.

Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

Thursday, July 15 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco Thursday, September 16 San Francisco Luncheon 11:45 a.m.

St. Francis Yacht Club San Francisco

Regularly Scheduled ECHO Resource Panel Meetings Resource Panel Maintenance North Bay East Bay Accountants

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

Location ECHO Office, San Jose Contempo Marin Clubhouse, San Rafael

Central Coast

Second Tuesday, Odd Months

Pasatiempo Inn, Santa Cruz

South Bay

Second Wednesday, Even Months Third Wednesday, Monthly Quarterly

Il Fornaio, San Jose Eugene Burger Management Co., Rohnert Park Varies

Wine Country Legal

36

February 2010 | ECHO Journal

Angius & Terry, Walnut Creek Francesco’s Restaurant, Oakland

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 37

New Ordinance Requires Certification of Aging Sewer Laterals n the aging municipal infrastructure that surrounds the San Francisco Bay, local utilities struggle to maximize water efficiency and minimize environmental impact. But broken pipes and increasing demand are contributing to higher water rates and environmental problems. Despite years of repairs in some areas, sudden surges in water runoff can overcome the existing sewer system. In the East Bay, although the system has separate pipes for storm water runoff and sewage, storm water can seep into cracked and aging sewer systems during storms, resulting in excessive flows and the discharge of partially treated sewage into the Bay.

I

The East Bay Municipal Water District (EBMUD) is one utility plagued by outdated

infrastructure. Established in 1944 to halt the discharge of raw sewage into the Bay, EBMUD has long struggled to develop a system that meets the sewage needs of its district. Now, EBMUD has adopted the Water Supply Management Program 2040 (WSMP 2040), its plan for providing water to its customers over the next 30 years. The plan grew out of a settlement agreement with the U.S. Environmental Protection Agency and the Regional Water Quality Control Board, and requires EBMUD to adopt a plan to keep the Bay healthy. Although this plan only affects the cities within the EBMUD, other bay-centric cities may adopt similar ordinances in the future.

The Regional Ordinance The WSMP 2040 is a comprehensive plan that will impact all areas of EBMUD’s water management system. However, the plan also contains requirements for individual homeowners and common interest developments, requiring owners to certify all sewer laterals on their property within the specified timeframe.

EBMUD currently maintains the city sewer, but many private residences have cracked or improperly installed “laterals” that connect to the city’s system. To help EBMUD reduce sewage runoff, a new Regional Ordinance requires property owners to Continued on page 32 ECHO Journal | February 2010

37

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 38

ECHO Honor Roll

About

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, 650-543-5619 Beth Grimm, 925-746-7177 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 Barnett, Esq. Sandra Bonato, Esq. Jerry Bowles Joelyn Carr-Fingerle, CPA John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

38

February 2010 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey Barnett, Esq. Tyler 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.

Seminar Speakers September 19, 2009 Central Coast Seminar Jacquie Berry John Garvic, Esq. Linnea Juarez Lise Ström, Esq. October 17, 2009 Peninsula Fall Seminar Brian Campisi Joelyn Carr-Fingerle, CPA John Garvic, Esq. Kerry Mazzoni

January 30, 2010 Marin Seminar Sandra Bonato, Esq. David Feingold, Esq. Wanden Treanor, Esq. Glenn Youngling, Esq.

Recent ECHO Journal Contributing Authors September 2009 John Garvic, Esq Roy Helsing John Schneider October 2009 Tyler Berding, Esq. John Garvic, Esq. Geri Kennedy, CCAM Karl Lofthouse Marcia Nylander Dick Tippett November 2009 Ken Bade, PCAM Matt Malone, Esq. Ann Rankin, Esq. December 2009 Sandra Bonato, Esq. William Erlanger, CPA Lucinda Hoe Marilyn Lincoln Steven Weil, Esq. January 2010 Tyler Berding, Esq. Carl Brown Beth Grimm, Esq. Lise Ström, Esq. Richard Tippett

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

Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the benefits designated for homeowner associations.

If your company wants to reach decision makers at over 1,525 homeowner associations, you can become an associate member and join 325 other firms serving this important membership.

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? 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.

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 39

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

Find the Answers to your Questions on Condo Ownership

408-295-7767 or 877-295-FLOW

www.aquatekplumbing.com

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.

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

Order today from ECHO! Call 408-297-3246 Fax 408-297-3517 Email: info@echo-ca.org ECHO Journal | February 2010

39

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 40

Letters to the Editor

A Director’s Lament ECHO received the following thoughtful comments from one of our long-time members. We thought others of our readers might like to read about some concerns that this member sees.

40

February 2010 | ECHO Journal

Dear Editor: I am a director of a common interest development (CID) homeowner association (HOA) located in Santa Cruz County, California. As such, we are subject to a host of governmental regulations.

Central to these is California’s Davis-Stirling Act regulating the operation of CIDs. Ours is a senior development with 23 residential units. The Unruh Act (now part of the California Civil Code) requires residents to be at least 62.

Paradoxically according to the Act, if we had at least 35 units, the minimum age would have been 55. With our age restriction of 62, we attract older folks who over time are likely to develop age-related disabilities.

Furthermore, our development was set up in the 1980s for moderate-income residents, thus subject to Santa Cruz County’s Measure J affordable housing regulation that sets a limit on the sales price and rental charge of a residence, and on the income of a resident. Ironically, exceeding the specified income limit does not preclude one from owning residential units. It simply means the owner can’t reside there. Federal rent subsidies under “Title 9” make it easier for investors to keep their units rented at the maximum allowable rental charge. As a consequence, about half of our units are rentals.

It appears that banks are reluctant to write favorable mortgages for CID units if more than 30 percent of all units are not owner-occupied. Thus the large proportion of rentals in our development is an impediment to any prospective buyer in need of financing.

The affairs of the association are overseen by a board of directors. Our bylaws stipulate that there are to be five directors. One year we were only able to field four candidates for the annual election; these days rarely more than five. Strong objections are voiced whenever consideration is given to having a willing renter on the board. With such a small pool of able and willing candidates—some capable owner-residents are either unwilling to serve (“That’s not what I came here for in my final

years”), while others feel they have done enough.

Thus it is difficult to assemble a fully functional board, capable of managing the affairs of the association.

Any development has its day-to-day demands in terms of upkeep, routine services, and enforcement of rules and covenants. But as a development ages, such as ours, someone must deal with leaking roofs, infested plywood siding, falling fences, a deteriorating parking lot, and broken water pipes.

Many homeowner associations contract with property management firms to provide management services ranging from “financial” or “limited” to “full management.” The latter is somewhat of a misnomer; contract management for major repairs or component replacements alluded to above, as well as professional legal and accounting services, are bound to cost extra.

Despite the stringent regulation of the financial affairs of CIDs by the Davis-Stirling Act, there are no regulations requiring even “certified CID managers” to use generally accepted accounting principles. I have found the monthly financial reports prepared by a succession of our property management firms to be quite bewildering.

Last time around we again chose “limited management” although searching for a firm that really could provide “full management.” Thus, again a lot of responsibility for execution of a gamut of services rests on the shoulders of a few homeowner association directors, further concentrated if some of these directors do not reside in the development. All this is largely to the benefit of non-resident home owners who typically show little interest in the affairs of the development as long as they keep their units rented. (There are exceptions: We would not even have a functioning board if it weren’t for two active, non-resident directors.)

Some of our problems could be ameliorated at the state level. Civil Code section 51.3 should be amended to qualify as senior citizen any person 55 years of age or older regardless of the number of dwelling units in a senior citizen housing development. This would not only potentially increase the

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 41

ECHO Marketplace

Adver tiser Index

The place to find business and professionals for your association

Advertise your business to thousands of association directors in California in the ECHO Journal. number of resident owners, but also the pool of candidates for director of the association.

Section 11502 of the Business and Professions Code should be amended to require CID managers (individuals and firms) to adhere to generally accepted accounting principles, to be reviewed periodically by a licensee of the California Board of Accountancy (CPA). This should go a long ways to overcome problems with financial reports.

Unfortunately, the federal Title 9 rent subsidy program and Santa Cruz County’s Measure J affordable housing program work at cross purposes for developments such as ours, promoting moderate cost housing while encouraging rentals rather than ownership. I see no ready solution here.

What can we as an association do to immediately improve our operation? (1) Retain a property management firm for “limited/ financial management” with the proviso that bookkeeping and financial reporting practices be CPA-certified to conform to generally accepted accounting principles; and (2) retain a resident manager—possibly a director of the association—to handle other management duties under the supervision of the board of directors.

Jan Krebs The Editor Replies: You are discussing problems that many CID owners throughout the state and the country face. Unfortunately the original concept that community associations would be happy groups of neighbors gladly working in

concert to manage their homes has been realized in only a few associations. Instead, in the majority of associations, apathy is rampant and only a few owners are willing to share in community activities. Mistrust and divisiveness have become the rule. This state of affairs has resulted in passage of massive amounts of legislation that mostly does little good because there is no enforcement behind the laws; but for those associations that try to comply with many of the laws, operational costs increase, often with little benefit to the associations but with increased liability for those few owners willing to volunteer.

We need a coalition of common interest development owners and professionals to make a strong push on the legislature and state officials to demand help in fixing the problems now facing the housing segment in which 25 percent of California citizens live.

We need some state agency or board to represent our interests in Sacramento. The way we will make such a thing happen is by becoming more active in state politics. A few years ago ECHO helped push a bill through the Legislature to create an Office of an Ombudsperson for homeowner associations.

This bill was vetoed by the governor who stated that adequate services were already provided by the Department of Real Estate and the Department of Consumer Affairs. I end by asking every reader to consider what help you have received from either agency concerning operational difficulties in your association.

Affirmative Management . . . . . . . . .18 American Asphalt . . . . . . . . . . . . . .30 American Management Services . . .10 Angius & Terry . . . . . . . . . . . . . . . . .3 Applied Reserve Analysis . . . . . . . . .20 AquaTek Plumbing . . . . . . . . . . . . .39 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .15 Bayridge Group . . . . . . . . . . . . . . . .12 Berding | Weil . . . . . . . . . . . . . . . . .44 Coastal Termite Control . . . . . . . . .14 Collins Management . . . . . . . . . . . .37 Community Association Banc . . . . . .14 Community Management Services . .30 Compass Management . . . . . . . . . .11 Cool Pool Service . . . . . . . . . . . . . .20 Cornerstone Community Mgmnt . . . . .8 Draeger . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . .33 First Bank Association Bank Srvcs . .32 Flores Painting . . . . . . . . . . . . . . . .31 Focus Business Bank . . . . . . . . . . .10 Helsing Group . . . . . . . . . . . . . . . .12 Hill & Company. . . . . . . . . . . . . . . .20 M&C Association Services . . . . . . . .31 M. L. Nielsen Construction . . . . . . .32 Massingham and Associates . . . . . .33 Pelican Management Group . . . . . . .14 PML Management Corp. . . . . . . . . .39 Pollard Unlimited . . . . . . . . . . . . . .33 Pro-Craft Builders . . . . . . . . . . . . . .18 Professional Association Service . . .18 R. E. Broocker Co. . . . . . . . . . . . . .22 Real Estate Property Management . .12 RealManage . . . . . . . . . . . . . . . . . .22 REMI Company . . . . . . . . . . . . . . . .15 Saarman Construction . . . . . . . . . . .9 Scuba Pool Rerpair . . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . .39 Steve Tingley Painting . . . . . . . . . . . .2 Varsity Painting . . . . . . . . . . . . . . . .25

ECHO Journal | February 2010

41

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 42

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

Email

Association Name

Vice President

Association Address

Name:

Term of Office:

to: City

Address: City and State

Zip

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:

Email

Treasurer Name

Term of Office:

to:

Address

[ ]

Condo

[ ]

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

City and State

Zip

Business phone (

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

)

Volunteer self-management Home phone (

(Please check one)

PD

[ ]

)

Email

Board Member Term of Office:

Name

to:

Management company

[ ]

On-site manager

[ ]

Other

[ ]

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.

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 43

Avoid Making Costly Mistakes in Your Association Seminar Agenda Leading Your Association Well in 2010 8:00 Registration and Continental Breakfast

Wine Country Seminar Saturday, March 20, 2010 8:00 a.m. to 1:00 p.m.

8:45 Welcome—Oliver Burford, ECHO Executive Director 9:00 2010 Legislative Update—Barbara Zimmerman, Esq. Learn about the new laws affecting associations in 2010.

In addition, learn what legislation may be coming down the pipe.

9:30 Keeping the Coffers Full—Zeke Ortiz, Marizco Landscaping; Darryl Orr, Pacific Landscapes Reducing Landscape Costs—Zeke and Darryl offer hip tips on how to reduce your association’s landscape costs.

10:15 Break 10:45 Enforcing Governing Docs—Bill Gillis, Esq. Iron Fist or Velvet Gloves?—No, you can’t just “lock ‘em up.” Is one method better than the other? Is there a middle ground? Bill will highlight the pros and cons of different approaches, preparing you to adopt the most effective policy for your association.

11:45 The ‘One Hour’ Board Meeting—Carra Clampitt, CACM It’s not a myth—Yes it can be accomplished! Learn how to orchestrate or participate in an effective, efficient and productive board meeting. You'll leave with tips on how this can be a reality for your board.

12:15 Round Table Discussions Meet the experts face-to-face—Your chance to get free advice from the experts. Go from table to table to get the information you need.

12:50 Vendor Prize Drawings 1:00 Adjourn

Rohnert Park Community Center 5401 Snyder Ln., Rohnert Park Registration Fee Members: $45 Non-Members: $55

Yes, reserve ___ spaces for the Wine Country Seminar.

Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517

ECHO Journal February 2010:Journal_10_02.qxd

1/25/10

7:10 PM

Page 44

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