Journal_10_06 by Echo

June 2010

A Journal for California Community Association Leaders

echo-ca.org

Major Reconstruction Projects ALSO INSIDE THIS ISSUE:

• Rescuing the Board from E-Mails • Governing Document Amendment • Questions to Ask Potential Banks

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Contents Governing Document Amendment —page 18

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.

Major Reconstruction Projects in HOAs Every association will face major reconstruction projects during the life of the development. The projects may be anticipated but also completely unanticipated and hence unreserved. This article offers insights on how an association can deal with this complex issue.

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.

Board members who make a practice of replying to e-mail from members soon become inundated. This article lists some of the legal and practical problems with board member replies to e-mails from homeowners and suggests adopting rules to solve the problem.

Rescuing Board Members from E-Mail

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.

Governing Document Amendment

Board of Directors and Officers

Sooner or later every homeowner association is faced with the question of whether or not to amend its legal documents. This article offers some common questions and their answers concerning the whys, whens and hows of governing document amendment.

President David Hughes

Questions to Ask Potential Banks Selecting a bank for an association is just as important as choosing any other vendor and should be given careful consideration. Interest rates, charges and fees vary widely and can have a serious impact on the association’s bottom line. Read this list of questions to ask during the selection process.

Departments 28 News from ECHO

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

29 Legislation at a Glimpse 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 Major Reconstruction—page 6 4

June 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.

Be an HOA Survivor ECHO Annual Seminar June 19, 2010 See page 42 for details

June 2010 | ECHO Journal

By Tyler P. Berding, Esq.

Major Reconstruction Projects in Community Associations An Overview of the Unexpected very community association will face a major reconstruction project several times in the life of the development. This may

occur because of clearly anticipated problems, such as reroofing or repainting, but it also will occur because of completely

unanticipated (and unreserved-for) problems such as dry rot repair, soil subsidence and leaks in windows, siding, and foundations.

ECHO Journal | June 2010

The Davis-Stirling Act only requires that a community association reserve for those components that visual inspections into accessible areas reveal have a useful life of 30 years or less. But what about components in areas that are not visible or accessible? What about areas under staircases that sponsor dry rot due to long-term intrusion of water? Framing components under siding that has allowed water to enter slowly for years without any way to get it out except evaporation? Deteriorating concrete walkways or driveways due to the invasion of roots or soil subsidence due to unconsolidated fill? Or, balcony railings rotting off at their interior supports? Three people in Antioch were severely injured recently when such a railing collapsed. None of these building components would be included in the usual reserve or maintenance budget; yet the association in a typical condominium, and in many planned developments, is nevertheless responsible for necessary repairs. This scenario has played out in many associations—unexpected repairs for which there was no reserve funding.

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None of these building components would be included in the usual reserve or maintenance budget; yet the association is responsible for repairs. So now, you have a collapsed balcony or maybe a lot of rotted siding and no funds to repair any of it. What to do? Finding the Right Expert The first thing to do is to retain the services of someone who can advise the association on the proper means of repair. General contractor, architect, engineer, or construction manager? Which expert will you need? A lot depends on the complexity and extent of the problem. If, for example, you have a failed balcony support beam—something that has rotted due to years of water intrusion—just replacing the failed beam may not

be enough. You don’t want it to happen again. The first thing would be to retain someone who is a pro with waterproofing. Would you choose a building consultant or an architect? Architects are more expensive, but for a very complex waterproofing issue you want someone who has enough skill and understanding to redesign the system to make it watertight. On the other hand, if the basic design is sound, but the materials have failed to do their job, a materials consultant who specializes in waterproof membranes may be the right choice. In our practice, we would start with the architect or an engineer because this particular balcony railing example involves a life-safety issue and because a redesign and/or strength calculations may be necessary. If their opinion is that the problem is relatively simple to solve such that a redesign of the waterproofing system or a recalculation of the strength of the system is not required, and the project simply requires a rebuild of the original design, then a building consultant or a general contractor might provide the specifications. But if the basic structure has proven inadequate for other reasons, such as deflection over time or failed joists or columns, a structural engineer might be necessary to do the proper calculations and provide a redesign of the structural components. A few hours of an architect’s time will usually be enough to determine the level of expertise required for the project; so if in doubt, hire an architect first.

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Bidding the Job Once the problem has been analyzed and the plans and specifications for repair have been drawn, the bidding process can start. Normally a list of preferred bidders is prepared. This preference usually comes from past experience or specialty. For political, as well as economic, reasons several bids should be obtained. Even if the board or management favors a particular contractor—perhaps because of a successful project performed earlier—it is advisable to obtain at least three bids to demonstrate due diligence in the bidding process. When the bids are opened, it is up to the board, with management’s recommendations, to choose the right contractor. Price may not be everything. Past performance, specialty, and availability may also have important roles to play. All of those factors ECHO Journal | June 2010

should be considered before the final choice is made.

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Drafting the Contract Your attorney can assist in reviewing and negotiating the contract. There are a lot of considerations, and good contract drafting is a topic all of its own. But here are some of the considerations: • Is this a cost-plus or a lump sum contract? • Does the owner furnish all plans and specifications (and accept responsibility for them) or is there an element of “designbuild” in the contract? • Are there unconscionable provisions—a provision buried in fine print, or a disclaimer of all express or implied warranties? Courts will often not enforce such provisions. • What are the payment provisions? Will there be progress payments or a lump sum at the end of the job? Will the owner hold back (retain) a portion of the payment to be sure that all mechanics liens are cleared? What if the project is delayed? Should there be penalties for that? What about incentives for bringing in the job sooner? • How are we to deal with changes? • Who bears the responsibility for misleading drawings or specifications (see 2 above)? • What insurance will the contractor be required to carry? • What warranties or indemnity will the contractor be required to provide? • What licenses must the contractor have? • Will the owner have the right to stop work and under what circumstances? We could go on, but you get the idea. There are many questions that must be asked, and they can only be answered in the context of a particular job. Your attorney, working with your architect or engineer, can fashion a contract that is appropriate for the job. Funding the Project How will the association pay for all of this, especially if it is a job that no one expected to have to do? Generally speaking there are only a few options. If the job is contemplated and funded in the reserve fund, then there is no problem. But what about those surprise projects? The association can borrow the money— either from a bank or from itself. It can go to its reserves, but generally funds borrowed from reserves must be repaid within a year.

Or it can go to the members for a special, or increased monthly, assessment to pay for it. If the proposed special assessment is no more than 5 percent of the existing budgeted expenses, or the job requires no more than a 20 percent increase in the regular monthly assessment, the board can simply impose it; otherwise it will have to go to a vote of the members, not usually an easy thing to win. But a big job can quickly outdistance those statutory maximums and if the member vote does not approve the new assessment, recourse to a bank may be the only option.

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If all goes well and the job is completed on time and on budget, terrific! But if the contractor defaults, either because he does not complete the job or is proceeding so slowly that it will not be completed on time, or because work has been rejected by the inspectors, it may be time to consider termination of the contract. But before that happens, consult with the association’s attorney to be sure that the contract provisions are followed so that the association will not itself be in breach.

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How will the association pay for all of this, especially if it is a job no one expected to have to do? A big, unexpected construction job is probably one of the most disruptive events in an association’s life. Some associations never recover. This can be avoided with early inspections of all building components, whether visible and accessible or not, so that failure can be anticipated in enough time to reserve adequately for the costs. Like cancer, early detection offers the best chance for a cure.

Tyler Berding is a founding partner of Berding|Weil, LLC, a community association law firm located in Alamo, CA. He has taught real estate and community association law at California State University East Bay and is the immediate past president of ECHO. Questions or comments can be directed to Dr. Berding at www.berding-weil.com or www.condoissues.com.

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June 2010 | ECHO Journal

By Ann Rankin, Esq.

Rescuing Board Members from E-Mail ’m in trouble at work! The association board business is taking up all my time! The homeowners send me emails 24/7 and they all want an immediate reply!” “Answering homeowner e-mails is a constant task, and none of the owners are ever satisfied with my responses!” If you’re a board member of a common interest development association, the above complaints may sound all too familiar. What is wrong with this picture and what can you do about it?

“I

Problems with Board E-Mail Communications with Association Members Here’s a list of legal and practical problems with board member replies to e-mail communications from homeowners: If board members make a practice of replying to e-mail communications from members, they will soon be inundated and will have difficulty prioritizing tasks or getting any-

thing else done. Board members are volunteers; most of them don’t sign up to be on duty 24 hours a day, 7 days a week when they run for office. As soon as the other homeowners find out how time-consuming the board’s job has become, because of the proliferation of e-mails and their demands for immediate replies, no one else will want to run for the board, except perhaps for a few masochists. Replying to e-mails may create a situation in which a particular board member is making a unilateral decision without board deliberation, voting, or appropriate minutes; this circumvents the board process. Such decisions may not have the support of other board members and may sometimes be ill considered, but they may bind the association if the board member had apparent authority to make the decision. When board members make decisions by e-mails rather than in open board meetings, it circumvents the intent of the Open Meeting Act, Civil Code 1363.05, which requires the board to circulate an agenda prior to each open board

ECHO Journal | June 2010

meeting; to allow association members to attend the open board meetings, and to allow members to address the board on matters of association business. If everything is done behind the scenes via e-mail, the members are deprived of their rights under the Open Meeting Act. The practice of board membersâ&#x20AC;&#x2122; immediately replying to e-mails from owners creates unrealistic and never-ending expectations from the owners. Can you imagine the board members of publicly-traded corporations spending hours a day replying to e-mails from shareholders? Neither can I.

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What Can Board Members Do to Get Out of E-Mail Hell? This writer has advised some associations whose board members were roasting in email hell to adopt an operating rule to solve the problem. Such a rule does not fall within the parameters of those that must be circulated among the members under Civil Code 1357.100 et. seq. An example of such a proposed rule follows. If youâ&#x20AC;&#x2122;re in e-mail hell, I recommend you try it. This proposed rule assumes that you have a property manager. If you are a self-managed association, you can still adopt the rule but you will have to require that the members send their e-mails to one or more designated board members who will periodically collect, organize and prioritize them and place them on the agenda for the next board meeting if appropriate.

www.CACM.org/career.aspx Contact Vicki Vandruff at 800.363.9771, ext. 14 for additional information. Look for the Certified Community Association Manager (CCAMÂŽ) designation after the applicantâ&#x20AC;&#x2122;s name. These managers have successfully completed training on maintenance, reserves, budgets, governance, rules enforcement, insurance and contracts specific to California.

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June 2010 | ECHO Journal

SAMPLE RULE Snake Pit HOA Rule Regarding Communications with the Board of Directors The board of directors of Snake Pit Homeowners Association hereby adopts the following rules pursuant to the associationâ&#x20AC;&#x2122;s declaration of covenants, conditions and restrictions: 1. Findings. a. The board of directors consists of unpaid volunteers who donate their time to the association. b. The board of directors is required by law to create an agenda for each board meeting, to follow the agenda, and to make decisions only at board meetings and only after giving all board members the chance to deliberate, undertake necessary study and other due diligence, and make a reasoned decision. Continued on page 16

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Rescuing Board Members from E-Mail

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Continued from page 14

c. Members of the board of directors, as fiduciaries, need to prioritize their time at board meetings in order to be sure to attend to the most important issues at hand. d. The Open Meeting Act, Civil Code 1363.05, requires that board decisions be made at open meetings, except for issues that are allowed by statute to be discussed in executive sessions. All association members are required to be provided with an agenda of each open board meeting and are required to be able to listen to board deliberations, and to provide input to the board during the open forum time.

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If everything is done behind the scenes via e-mail, the members are deprived of their rights under the Open Meeting Act. e. A number of association members are in the habit of sending e-mails directly to board members’ personal e-mail accounts, between board meetings, and requesting the board members to provide an immediate response. If the board members were to do so, it would preclude their being able to deliberate upon the issues at hand in an open board meeting. Also, if the board members replied to e-mails between meetings, this would deprive the other members of the opportunity to listen to board deliberations on the issue at hand and to provide input during the open forum time. Further, this practice could preclude board members from prioritizing their time, as they are required to do as fiduciaries. f. The association employs a managing agent whose job it is to work with the board to prepare agendas, to carry out board directives, and to provide the board with correspondence and with other materials requiring matters that may require attention of the board and board decisions.

June 2010 | ECHO Journal

g. Counsel for the association has pointed out that the association is a corporation, and that it is not usual for corporate board members to be expected to reply to emails from their constituents outside of board meetings and that making decisions outside of regular or special board meetings may violate the Open Meeting Act. h. The board wishes to adopt a procedure that will enable the board members to prepare appropriate agendas for board meetings with the assistance of the manager; that will allow the board members to discuss all board business except for those subjects that may be decided upon in executive session at open board meetings; and that will allow board members to prioritize their time appropriately. Now therefore, the board enacts the following operating rule: a. All member communications requesting board action or response are to be directed, in writing, to the property manager. The property manager will periodically notify the board members of the issues and will assist them by organizing the communications and preparing an appropriate agenda for each board meeting. b. Board members will no longer reply to emails between board meetings and may block e-mails sent by members who attempt to communicate with them directly. All board decisions will be made at regular or special board meetings. The meetings will be conducted as required by the Open Meeting Act. All board resolutions will be voted on by the board members, constituting at least a quorum, sitting at regular or special board meetings. The following matters may be discussed by the board in executive session: Litigation, formation of contracts with third parties, personnel issues, member discipline, and member requests for payment plans for delinquent assessments. --------------------------------------------This article is general in nature. It is not a substitute for qualified legal advice. Contact an attorney with expertise in common interest development law if you require specific legal advice.

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 ECHO Legal Resource Panel. ECHO Journal | June 2010

By John Paul Hanna, Esq.

Approaching Governing Document Amendment ventually every homeowner association is faced with the question of whether or not to amend its legal documents. Here are some common questions and answers:

• Members may be misled into believing the docu-

Are Associations Legally Required to Amend Their Documents? No, but— • Directors can be misled as to their duties and responsibilities by relying on outdated provisions. • The legal documents may not accurately set forth the legal requirements for preparation and distribution of financial reports. • The legal documents may provide certain time limits for notices of meetings that may no longer be legally correct because of statutory changes.

• Documents may fail to take advantage of liberalized

June 2010 | ECHO Journal

ments accurately describe members’ rights, legal procedures, etc.

rules regarding meetings, participation by members, telephone meetings, etc. What is the Effect if HOA Documents Conflict With New Legislation or New Case Law? In cases of conflict between the association legal documents and the law (statutory or case law), the law will, in most cases, prevail.

What Documents Will The Attorney Need to Review in Order to Update the Association Legal Documents? In addition to the three basic documents (Articles of Incorporation, Bylaws, and Covenants, Conditions and Restrictions), the attorney should also review the subdivision map creating the project and, in the case of a condominium, the condominium plan. The attorney should also be given a current preliminary title report showing how title is held to the common area, and what the title company indicates is the status of title to a lot or unit in the project. In some cases, particularly in projects that are 15 or 20 years old, mistakes may have been made that were never corrected. The ideal time to correct the old records is when the association legal docu-

ments are being given their first major overhaul. There may be inconsistencies between the subdivision map and the condominium plan, on one hand, and the Declaration of Covenants, Conditions and Restrictions, on the other. There may also be inconsistencies between the project legal documents and the grant deeds by which title was conveyed to the original purchasers of units or lots; this may require amendments to the condominium plan, and occasionally amendments may be required to the subdivision map. What Documents Should Be Amended? The basic HOA legal documents that may need amending are: â&#x20AC;˘ Articles of Incorporation â&#x20AC;˘ Bylaws

ECHO Journal | June 2010

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• Declaration of Covenants, Conditions, and Restrictions (CC&Rs) Why Should HOA Documents Be Amended? • To eliminate obsolete provisions. • To eliminate provisions no longer observed or enforced. • To eliminate provisions that conflict with current laws. • To eliminate provisions required by the Department of Real Estate in a start-up project that are no longer needed. • To eliminate developer privileges no longer being used, such as two-class voting or exemption from use restrictions. • To improve poorly drafted documents by clarifying ambiguous provisions. • To tailor documents to fit the living experience of owner/members. • To provide for changes in technology (satellite dishes, home office use, etc.). • To make documents more “user friendly” via better organization and add a table of contents and descriptive paragraph headings, etc. • To eliminate or correct mistakes and errors. How Often Should Association Documents Be Amended? Association documents should be updated approximately every 5 years to incorporate all the changes in statutory and case law. Is It Necessary to Retain Counsel to Amend, or Can the Members Do It By Themselves? The analysis of HOA documents to determine whether or not amendments are desirable, and, if so, how the documents should be amended, requires a degree of expertise that can only be provided by a legal specialist, that is, an attorney who specializes in the drafting of HOA documents. Unless an association has such an attorney as a member, and that attorney is willing to contribute his or her time to amend the documents, the association should retain legal counsel for that purpose.

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June 2010 | ECHO Journal

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Can an Association Save Money By Creating a First Draft In-House? Attempts by boards or committees appointed by boards to save on attorneys’ fees by creating an initial draft of the documents seldom, if ever, result in any savings. An experienced association attorney can quickly review a set of documents that was drafted some years ago and determine whether they are salvageable or should be

scrapped in favor of a more modern format. However, when presented with a draft that purports to update the project legal documents, the attorney is forced to read every sentence very carefully and to compare it with his own checklist of current legal requirements. This process can be quite time-consuming. If an association wants to be helpful in providing its attorney with some suggestions or amendments, it should provide a list of points to cover, such as the number of directors, the length of the term of office, the number of pets, the number of vehicles, etc. In other words, give the attorney the basic facts, or the basic principles, but do not try to draft the actual language. That is what you are paying the lawyer to do. What Should It Cost to Amend Association Documents? The cost to amend can vary widely, depending upon the type of common interest development and the age and condition of the legal documents. The fees can be as low as $500 for a simple amendment of one or two provisions, and anywhere from $3000 or higher for a complete updated set of the three basic legal documents. What Is Better—A Fixed Fee or An Hourly Rate? The advantage of a fixed fee is that the association can budget for that amount, and the membership knows what to expect. But fixed fees do not always result in lower fees because attorneys tend to set fixed fees based upon their estimates of how much time it will take at their hourly rate. Most attorneys will include some “cushion” in the fixed fee to protect themselves against unanticipated variables. Beware of fixed fees that are set unrealistically low because they may be “loss leaders” intended just to get the association’s business, with the expectation that other business will follow for which higher rates can be charged. Like everything else in life, the rule is: “You get what you pay for.” The hourly rate is not always determinative of how much the job will cost. The “bottom line” should be the total fee charged, regardless of hourly rate, but equally important are the quality of the job and the efficiency of the service. What Variables Determine the Cost of Amending Project Documents? The following are examples of variables that can affect the total cost of amending legal documents: ECHO Journal | June 2010

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• Repeated revisions. • Multiple additions. • “Wordsmithing” efforts by the directors, committees or members. • Asking an attorney to explain in writing the reason for a particular amendment or amendments. • Asking an attorney to appear at a question and answer session. • Asking an attorney to help the board “sell” the amendments to the membership. • Asking an attorney to write a detailed summary of the amendments to the members. • Asking the attorney to draft a letter to the members, or a ballot, proxy, notice of meeting to vote on amendments, etc. • Misjudging the members’ desire and willingness to have the project documents amended. Boards would be well advised to seek member approval before committing association funds to the amendment process. Ideally, the association will get the money up front; that is, it will have enough funds on hand, either through a special assessment or funds “earmarked” for the purpose of 22

June 2010 | ECHO Journal

amending the documents, before authorizing an attorney to start drafting. Is It Better to Record Amendments to Existing Documents or Revise the Entire Document? If the legal documents are reasonably upto-date and in fairly good shape, only one or two sections may need to be amended; in such cases it is preferable to attach some simple amendments rather than to create a whole new document. However, if the documents are in need of multiple amendments, or are extremely outdated (for example, over 10 years old), it is far better to start with a brand new up-to-date set of documents. It is more efficient, and therefore less expensive, for an experienced attorney to provide an up-to-date modern format for the project legal documents, tailored to fit the project, than to try to review every paragraph of existing documents and decide which paragraphs to keep, delete or modify. What Is Grandfathering? An association may wish to amend its documents but be reluctant to impose new restrictions on current members. For example, an association may wish to reduce the

number of pets allowed to be kept by one member, but will allow a member who presently has more than the new lower number of pets to keep his or her pets until the member moves out or until the pets die. A “grandfather” clause is used to exempt current owners from a particular rule, for a specified period. How long Should It Take to Amend HOA Documents? Two to four weeks is a reasonable time for an attorney to produce an acceptable first draft of updated and amended documents. What Happens After The Documents Are Revised? The current documents will indicate what vote is required for approval of amendments. Some older documents require a super majority vote such as 75 or 80 percent of the total membership. As part of the amendment process, that requirement should be changed to a simple majority vote. If the association can get a simple majority to vote for an amendment, but not the higher percentages, there is a statutory procedure for lowering Continued on page 24

New election rules: $500 In today’s economic crisis, there may be some items that associations can cut to reduce costs. ECHO membership is not one. Let’s face it, educated board members are better fiduciaries, which helps them to avoid costly law suits and possibly personal liability. ECHO is the premier resource in California for board member education. ECHO offers new articles each month with practical and easy to understand advice about current California requirements, and what may be on the horizon. ECHO staff is available by phone or E-mail to answer members’ questions about association problems or to recommend competent professional services when necessary. And with discounted member rates at more than a dozen educational events throughout the year, ECHO is simply the best educational resource for California homeowners.

Avoid Litigation Each year, as a member benefit, ECHO sends every board member a copy of the updated Community Association Statute book. Every issue of the ECHO Journal and every seminar examine one or more aspects of compliance with association law, because one of the major causes of expensive litigation is ignorance of the law.

Mailing ballots: $200 Make Better Financial Choices Many associations struggle to understand reserve funding requirements and strategies, the benefits and disadvantages of using special assessments, proper collections practices, and even how to determine what components the association is required to maintain. At a time when wise financial planning is essential, ECHO members have access to a wealth of articles about reserve funding, budgeting, insurance, collections, and much more. Fight Costly Regulation Every year, Sacramento legislators introduce more legislation that confuses the job of California board members and increases the costs of compliance. ECHO is committed to fighting unnecessary regulation in California and promoting the interests and welfare of common interest developments. Hire Competent Professionals ECHO offers a variety of articles and publications to help members evaluate their service providers, including questions to ask prospective management firms and contractors. All ECHO Journal articles are available to members at no cost, and publications are sold to members at a discount.

Avoiding a lawsuit: Priceless. Spend a Little, Get a Lot The cost of ECHO membership is minimal. In a worsening economy, associations are looking to cut big expenses from their budgets. Yet, ECHO membership is as little as 25¢ per unit each month. For that small cost, here’s what every board member receives as part of being a member of ECHO: • A subscription to the ECHO Journal • An annual copy of the current Community Association Statute book • Unlimited access to ECHO’s library of past articles • Telephone consultations with ECHO staff about their problems • Reduced fees for ECHO events • Discounted prices on publications • And much more… In These Tough Economic Times, ECHO Membership is a Necessity As the only California organization devoted exclusively to board member and homeowner education, ECHO is a one-of-a-kind resource that your association can’t afford to lose.

Governing Document Amendment Continued from page 22

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the voting requirements. Certain lender protection provisions may require a two-thirds or three-quarters vote of the members. There may also be provisions requiring that certain amendments be approved by the city or county in which the project is located. Some basic legal rights cannot be changed by amendment without 100 percent approval. Current law requires amendments of the governing documents to be approved by secret written ballot. The amendment can be executed by the President and Secretary of the association, who certify and declare, under penalty of perjury, that the requisite number of members have voted to approve the amendment, and cause it to be recorded (in the case of the Declaration), filed in Sacramento (in the case of the Articles of Incorporation), or simply adopted (in the case of the bylaws). What Can Be Done to Obtain Member Support for Amending Documents?

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June 2010 | ECHO Journal

The amended Declaration, with the recorder’s stamp on it, should be kept with the official records of the association. The certified amended Articles of Incorporation should also be kept in the association’s minute book. The original executed copy of the amended Bylaws should also be kept in the association’s minute book. Copies of the documents should be provided to all of the members. Only the Declaration must be recorded in the county. The Articles and the Bylaws do not need to be recorded. The old documents should be kept in the association’s archives for historical reference purposes.

John Paul Hanna is a principal in the law firm of Hanna and Van Atta in Palo Alto, CA. The firm, an ECHO member, has counseled homeowners associations for many years. Hanna is a member of the ECHO Legal Resource Panel and is the author of a number of publications relating to real property law.

Rental Restriction Bill Still Being Debated In Sacramento Interested Associations Should Consider Approving Rental Caps Now

B 1927, a bill that would require future rental restrictions in CC&Rs and rules to be approved by at least 2/3 of all owners entitled to vote, has passed out of the Assembly on a bi-partisan vote. The bill now goes to the Senate, where a more rigorous scrutiny will likely be applied.

However, the fact that the bill moved out of the Assembly without opposition should give pause to any association that is seriously considering adopting a limit on the number of rentals allowed in the community. If the bill (in its current form) does make it out of the Senate and is signed by the Governor, associations will have only until December 31, 2010 to make such changes to their documents using amending provisions that authorize approval by a smaller percentage of members than 2/3. After December 31, 2010, such authority would need to have been in the documents before this past February. Because the future is so uncertain, associations that currently plan to have rental restrictions approved by court petition (socalled “1356 Petitions”) should not delay. The bill as currently drafted would require future supermajority votes for rental restrictions unless a different and lower percentage

to approve a rental restriction was in the CC&Rs before February 17, 2010. That’s the date the bill was introduced this year. However, between now and December 31st, associations are not yet subject to this bill. AB 1927 also might never actually become law. Still, for associations that intend to ask owners to approve limits on the total number of rented properties that would be permitted at any one time, waiting to see what the legislature and Governor do by October could be risky, inflexible and leave too little time. With Fannie Mae, Freddie Mac and FHA clamping down on the maximum number of rented properties permitted in a community and refusing to underwrite or guarantee mortgage loans where a stated percentage is exceeded, associations across the state are looking at the advantages of rental caps to keep property marketable. AB 1927 could make this much more difficult in many communities if an absolute, minimum 2/3 approval of the membership is in the future permanently required. Now would be the time to consult with the association’s attorneys to determine if AB 1927, if approved, would harm the association’s ability to responsibly restrict rentals. ECHO Journal | June 2010

By Geri Kennedy, CCAM

Questions to Ask Potential Banks election of the banking relationship for a homeowner association is just as important as the choice of any other vendor and should be given careful consideration. Interest rates, charges and fees vary widely and can have a serious impact on the association’s bottom line. Choosing the local bank or a board member’s favorite broker may not be the best path. Common interest developments are unique in their banking needs. The association has multiple deposits throughout the month, usually has dual signature requirements and often has a volunteer keeping track of the funds. Although the CID is usually a non-profit organization, it is still considered a commercial account by the bankers and brokers; thus, it does not qualify for

June 2010 | ECHO Journal

many of the “special deals” advertised, which are frequently limited to personal accounts. Officers and any other signers on the account may change at least once a year. It can be quite time consuming to keep up with all those signature cards if your funds are scattered in several banks. The following list of questions will yield helpful information when a board is choosing the right place for its association funds: 1. Does the bank have personnel or a specialized department familiar with the homeowner association industry? This can make a huge difference in the frustration and efficiency levels for your treasurer or bookkeeper. 2. Are all accounts insured by FDIC insurance?

a. Remember that this insurance is limited to $250,000 per institution, per taxpayer identification number (through 12/31/2013). b. Many association documents require that funds be deposited into FDIC insured accounts (as opposed to SIPC insurance for most brokerage accounts or special internal insurance programs offered by some banks). 3. What are the terms and fees for the account in question? a. How many checks can be written per month without charge? b. How many deposits can be made per month without charge? c. Will the operating and reserve checking accounts earn interest?

d. Is on-line banking offered and, if so, are there charges? e. What are the charges for returned items, stop payments, wire transfers (in and out of the account)? f. If this is an interest bearing account, how often will the rate change? (Money market accounts frequently begin with a higher interest rate that drops much lower in 3–6 months.) 4. How are signature cards handled? a. What personal information is required from the board members? b. Do board members have to go into the bank in person? c. Can the management company be authorized to discuss the account or

make transfers within the bank without being an actual signer on the account? d. How difficult is it to update the signature card when there is a change in directors or officers? (Do the outgoing officers have to sign off?) 5. What will be required to open the account? a. Articles of Incorporation b. Minutes c. Notarized copy of the list of the current officers d. Federal tax identification number 6. Will the bank provide a “duplicate original”; i.e., mail a second copy of the bank statement directly to the association’s treasurer in addition to the manager or bookkeeper? If so, is there a fee?

7. Does the bank provide lockbox services for assessment payments? (This program allows members to mail assessments payments directly to the bank for immediate deposit into the association’s account.) a. What are the charges? b. Is there automatic payment deduction (ACH) available for the homeowners and, if so, are there any fees for that service? c. Can the homeowner make online payments? d. What is the method of reporting to the association? Can it be made compatible

Continued on page 31 ECHO Journal | June 2010

News from ECHO

Rental Restriction Legislation

Of course AB 1927 may never actually become law. But because the future is so uncertain, associations that currently plan to have rental restrictions approved by court petition (so-called “1356 Petitions”) should not delay. Waiting to see what the legislature and Governor may do between now and October could be risky, inflexible and leave too little time.

Assembly Bill 1927, legislation that would require future rental restrictions in CC&Rs and rules to be approved by at least twothirds of all owners entitled to vote, has passed out of the Assembly on a bi-partisan vote. The bill now goes to the Senate, where a more rigorous scrutiny will likely be applied. Nonetheless, the fact that the bill moved out of the Assembly without opposition should give pause to any association that is seriously considering adopting a limit on the number of rentals allowed in the community. If the bill in its current form does pass out of the Senate and is signed by the Governor, associations will then have only until December 31, 2010 to make such changes to their documents using current amending provisions that authorize approval by fewer than twothirds of members. The bill as currently drafted would require future supermajority votes for rental restrictions unless a different and lower percentage to approve a rental restriction was in the CC&Rs before February 17, 2010. That’s the date the bill was introduced this year. However, between now and December 31st, associations are not yet subject to this bill. 28

June 2010 | ECHO Journal

Amending Governing Documents Sooner or later every homeowner association is faced with the question of whether or not to amend its legal documents. Here are some common questions and answers: Are associations legally required to amend their documents? No, but— Directors can be misled as to their duties and responsibilities by relying on outdated provisions. The legal documents may not accurately set forth the legal requirements for preparation and distribution of financial reports. The legal documents may provide certain time limits for notices of meetings that may no longer be legally correct because of statutory changes.

Members may be misled into believing the documents accurately describe members’ rights, legal procedures, etc. Documents may fail to take advantage of liberalized rules regarding meetings, participation by members, telephone meetings, etc. What is the effect if HOA documents conflict with new legislation or new case law? In cases of conflict between the association legal documents and the law, the law will, in most cases, prevail. Why should HOA documents be amended? • To eliminate obsolete provisions. • To eliminate provisions no longer observed or enforced. • To eliminate provisions that conflict with current laws. • To eliminate provisions required by the Department of Real Estate in a start-up project that are no longer needed. • To eliminate developer privileges no longer being used, such as two-class voting or exemption from use restrictions. • To improve poorly drafted documents by clarifying ambiguous provisions. • To tailor documents to fit the living experience of owner/members. • To provide for changes in technology (satellite dishes, home office use, etc.). • To make documents more “user friendly”—better organization, add a table of contents and descriptive paragraph headings, etc.

• To eliminate or correct mistakes and errors. How often should association documents be amended? Association documents should be updated approximately every five years to incorporate all the changes in statutory and case law. What should it cost to amend association documents? The cost to amend can vary widely, depending upon the type of common interest development and the age and condition of the legal documents. The fees can be as low as $500 for a simple amendment of one or two provisions, and anywhere from $5000 or higher for a complete updated set of the three basic legal documents. Is it better to record amendments to existing documents or revise the entire document? If the legal documents are reasonably up-to-date and in fairly good shape, only one or two sections may need to be amended; in such cases it is preferable to attach some simple amendments rather than to create a whole new document. However, if the documents are in need of multiple amendments, or are extremely outdated (e.g., over 10 years old), it is far better to start with a brand new up-to-date set of documents. It is more efficient, and therefore less expensive, for an experienced attorney to provide an up-to-date modern format for the project legal documents, tailored to fit the project, than to try to review every paragraph of existing documents and decide which paragraphs to keep, delete or modify.

2010 Legislation at a Glimpse As of May 20, 2010 Bill No.

Author

Subject

Status

Position

Summary

AB 1726

Swanson

Voting Quorums Amended 5/3. Senate First Reading.

Support

In the event that there is not a quorum for a member meeting or an election of directors, would automatically reduce the quorum requirement for the next meeting to 33 percent of the members entitled to vote. Exempts associations whose documents establish a lower quorum requirement.

AB 1793

Saldana

Synthetic Grass Amended 4/20. In Senate Housing.

Oppose

Voids provisions in governing documents that prohibit the use of artificial turf or any other synthetic surface that resembles grass. Allows associations to adopt rules that establish design and quality standards.

AB 1927

Knight

Rental Rights

Amended 4/20. Senate First Reading.

Oppose

For governing documents amended, adopted or recorded on or after January 1, 2011, requires that 2/3 of all owners vote to approve rental or lease restrictions. Requires owners to disclose rental restrictions prior to transfer of title.

AB 1975

Fong

Submetering

Amended Support if 4/29. Hearing Amended in Assembly Appropriations 5/19.

Requires that every water purveyor that provides water service to a multi-unit residential structure for which a construction permit has been issued on or after January 1, 2012 provide submeters for each unit.

AB 2016

Torres

Deed Requests

Senate First Reading.

Support

Clarifies that a request by an association for notification of a trusteeâ&#x20AC;&#x2122;s deed of sale does not constitute a request for a document that either effects or evidences a transfer or encumbrance, or that releases or terminates any interest, right or encumbrance, of an interest in real property.

AB 2120

Silva

Mobilehome Law Disclosure

Amended Neutral 4/29. Assembly Third Reading.

Each year, would require that the management provide a copy of the Mobilehome Residency Law to each resident, or send a notice when a significant change is made and inform residents that they can obtain a copy by submitting a written request.

AB 2502

Brownley

Delinquency Collection

Amended 5/10. In Assembly Judiciary.

Oppose

Regulates third parties performing collection services for HOAs, as well as the formation of payment plans between associations and delinquent members. Allows members to have counsel present when discussing a payment plan, provided they give 48 hours notice to the association.

SB 995

Strickland

Conversion Plans

In Senate Local Government. Hearing cancelled.

Watch

Provides that a stock cooperative or community apartment project for senior citizens established before the Davis-Stirling Act, that is converting to a condominium, shall not be required to file a condominium plan to the Department of Real Estate.

SB 1427

Price

Default Notices

Amended Support 5/12. Sen Third Reading.

When a property is purchased at a foreclosure sale and is not being maintained, requires a governmental entity to provide notice of violations to the property owner before imposing fines for nuisance abatement.

ECHO Journal | June 2010

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

New Member Listings Condo CPA, Inc. P.O. Box 3136 Santa Cruz, CA 95063-3136 Contact: Mary Champagne Tel: 831-440-9697 Fax: 630-832-3950 Toll free: 877-900-1040 www.condocpa.com Email: mary@condocpa.com Our firm works with over 400 community associations, providing audits, reviews, compilations, tax return preparation, tax and financial planning, and more. We work exclusively with community associations including condominiums, cooperatives, Townhomes, homeowner associations, and real estate management firms. Ross Painting 4316 Redwood Hwy., Ste. 200 San Rafael, CA 94903 Contact: Dan Ross Tel: 415-455-0766 Fax: 415-455-0181 www.rosspainting.com Email: dan@rosspainting.com Full service painting contractor; Northern Californiaâ&#x20AC;&#x2122;s only PDCA accredited full service painting contractor; Diamond Certified for 8 years.

Continued on page 34 30

June 2010 | ECHO Journal

Questions to Ask Potential Banks Continued from page 27

with the associationâ&#x20AC;&#x2122;s accounting program? e. Will the bank assist with ordering coupon books? 8. Does the bank provide a debit card for petty cash expenses? a. What limitations can be placed on the card for security? b. What fees may apply? 9. Does the bank provide any CD placement service for excess funds? a. How does the service work? b. What is the procedure for placing or withdrawing funds? c. How often are statements provided? d. Are statements in summary form, or individual reports on each placement? e. Is there a fee for coordinating the placement? f. How are renewal reminder notices provided? g. What controls are established to determine where the funds are deposited? h. What controls are established to assure that the CD placements are not â&#x20AC;&#x153;doubled up;â&#x20AC;? i.e., not making two or more deposits into one outside bank and thereby exceeding the FDIC limits? 10. Is there any form of automatic sweep that can be set up if funds on deposit exceed the $250,000 FDIC limit? 11. Does the bank provide a loan program for associations? a. What amounts and terms are available? b. What documentation is required? c. What fees are involved? d. What is the turn-around time for approval and funding? e. Will the loan remain with the originating bank or be bundled and serviced by some other entity in the future? With this information in hand, the association is better prepared to make a good business judgment regarding the investment of association funds.

Geri Kennedy is a vice president with First Bank Association Bank Services. She is a member of the ECHO Legislative Committee and several regional resource panels. She is a past member of the ECHO board of directors.

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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

3 3OHDVDQWRQ Â&#x2021; )UHPRQW Â&#x2021; 6DQWD &ODUD OHDVDQWRQ Â&#x2021; )UHPRQW Â&#x2021; 6DQWD &ODUD S Stockton tockton 209.644.4900 209.644.4900 Â&#x2021; Â&#x2021; 0RGHVWR Â&#x2021; &RSSHURSROLV 0RGHVWR Â&#x2021; &RSSHURSROLV For management proposal information, please visit www w.mccommunities.com or email inffo@mccommunities.com

ECHO Journal | June 2010

By David Block, Ph.D.

Additional Commentary to “Got Lead?” n article entitled “Got Lead?” published in the May 2010 ECHO Journal, summarized the health effects associated with lead poisoning as well as how lead hazards are created and abated. The article also briefly described the new Lead Renovation, Repair, and Painting (RRP) law passed by Congress in 2008 and recently promulgated into regulation by the USEPA in April 2010. The intent of this commentary is to expand and clarify how the RRP law will apply to work performed in California because the state has its own lead reduction and control laws and regulations with several elements more stringent than those found in the Federal program. Consequently, homeowner associations, contractors, and building owners need to be cognizant of when California lead regulations and policy supersede the criteria set forth in the Federal RRP rule, and vice versa. A common component of both the Federal and State programs is that when the presence of lead based paint is presumed or known, the work areas must be sectioned off from unaffected areas in order to contain the spread of lead dust. Another common element is the performance of a thorough visual

June 2010 | ECHO Journal

inspection to ensure that visible dust and debris has been properly cleaned prior to removing the containment. However, in addition to the visual inspection, the federal RRP regulations require a form of a “whiteglove” test as part of the cleaning verification process. This additional step requires qualified contractors to wipe affected areas with a clean, white cloth, and qualitatively compare the degree of discoloration, presumably from dust dispersed during work activities, to a color chart produced by the USEPA. Conversely, one element where the State policy supersedes the RRP regulations is the process for pre-determining the presence of lead paint in potential work areas prior to project initiation. The Federal RRP program allows certified contractors to use colorimetric swabs for making negative lead paint determinations. However, the California Lead Poisoning Prevention Branch of the Department of Public Health Services does not recognize the validity of the swabs. As a result, in California, this presents only two viable options for pre-testing work area(s) for lead-based paint: 1) have the work area(s) tested for lead by a State certified Inspector/Assessor, or 2) assume the pres-

ence of lead based paint without performing third party testing and follow the appropriate containment and cleaning procedures required by the RRP regulations. Another major regulatory conflict between the Federal and State lead programs concerns how waste material is managed and disposed. Under the Resource Conservation and Recovery Act (RCRA), the Federal hazardous waste control law, lead containing materials generated as a result of renovation and repair activities in residences, are exempt from being classified as a hazardous material and can legally be disposed in municipal and construction & demolition landfills. In contrast, the California Hazardous Waste Control law does not include this exemption. As a result, in California, contractors disposing of debris that contains presumed or known lead based paint have three (legal) options available to them. These options are: 1. Assume the debris is hazardous and dispose of the material under a hazardous waste manifest into specialized landfills. 2. Submit a representative sample of the debris, which may include wall board, non-recyclable lumber, and other material

in addition to paint, to an environmental laboratory for determination of the total amount of lead in the debris. 3. Use “generator knowledge” to classify the waste debris as non-hazardous. The first option is the most costly, but least mentally taxing. The second option is ultimately less costly than the first option, provided the amount of lead in the debris is less than the maximum level set forth under RCRA, but can delay the completion of a project as everyone waits with baited breath for the laboratory results. Debris characterized as non-hazardous in this manner can be disposed of in municipal as well as construction and demolition landfills. The third option is likely the most practical approach but has its own set of risks and liabilities. For example, a residence constructed in the early 1960s, towards the decline of the lead-paint era, can be assumed to have one, maybe two coats of lead-paint, if any, with the paint likely diluted to acceptable levels when mixed in with the remainder of the debris. A contractor can then use “generator knowledge” to classify the debris in the first example as non-hazardous. However, one important clarification to make is that the building owner or HOA would be defined as the “generator” of the waste depending on who hired the contractor. Therefore, if a contractor is found to have improperly disposed of hazardous waste, the generator (owner or HOA) could be liable for improper disposal of hazardous wastes, including fines, penalties and additional disposal costs. As consultants, we have been contacted by representatives from insurance, restoration and renovation companies as well as HOAs to evaluate the most prudent way to comply with the new RRP regulations. While, on the surface, this task may appear daunting, please keep in mind that these laws exist to protect public health, and that a generally conservative approach is often the most prudent and economical in the long run. For more information regarding the information presented herein, you may contact the CLPPB (1-800-597-523) or the California Department of Toxic Substances Control (1800-728-6942).

David Block is a principal toxicologist at Block Environmental Services, Inc. in Pleasant Hill, CA, an ECHO member firm. ECHO Journal | June 2010

Consent to Receive Documents Electronically A Sample Form The California Legislature in 2009 approved AB 899, a bill sponsored by ECHO, to allow (among other provisions) for annual distribution to association members of a number of documents by electronic means if those members consented in writing to such means of transmissions. In response to a large number of requests to the ECHO Office, Attorney Tom Fier, a member of the ECHO Legal Resource Panel, has prepared a form reproduced on page 35 that associations may use to allow members to give their approval. This form is provided as general information, and associations may want to consult with their own legal counsel about its use.

Business Professional Directory Updates Continued from page 30

Valleycrest Landscape Maintenance 20551-B Corsair Blvd. Hayward, CA 94545 Contact: Patrick Belhumeur Tel: 510-760-7587 Fax: 510-487-8834 www.valleycrest.com Email: pbelhumeur@valleycrest.com

Changes to Member Listings Garvic & Associates 520 So. El Camino Real, # 830 San Mateo, CA 94402 Contact: John D. Garvic, Esq. Tel: 650-342-0873 Fax: 650-342-9560 (Change in suite # only) 34

June 2010 | ECHO Journal

CONSENT TO ELECTRONIC TRANSMISSION OF DOCUMENTS 1. Consent I/We __________________________________________________________________________________________________, (Print Name[s])

of _____________________________________________________________________________________________________ (Property Address)

(City) _________________________________________________________ (State) ________ (Zip Code _____________) Check one: [ ] Agree to receive all communications from the Association electronically. [ ] Consent to the electronic transmission of the following documents only: A. Assessment and Reserve Funding Disclosure Summary; B. Pro Forma Operating Budget or Pro Forma Operating Summary; C. Assessment Collection Policy; D. Notice of Assessments and Foreclosure; E. Insurance Coverage Summary; F. Board Minutes; G. Alternative Dispute Resolution Rights; H. Internal Dispute Resolution Rights; I. Architectural Changes Notice; J. Secondary Address Notification Request; K. Monetary Penalties Schedule; L. Reserve Funding Plan Summary; M.Review of Financial Statement; and N. Annual Update of Reserve Study. 2. Right to Documents in Non-electronic Form I/We have the right upon written notice to the Association to receive the above listed documents in paper or nonelectronic form. 3. Withdrawal of Consent I/We may withdraw my/our consent at anytime by informing the Association in writing. 4. Compliance This consent conforms to Civil Code ยง1350.7 and Corporations Code ยง20. Date: ___________________________________________________________________________________________________ Signature:_______________________________________________________________________________________________ Residence Address: ______________________________________________________________________________________ _____________________________________________________________________________________________________ Electronic Address: _______________________________________________________________________________________

Date: ___________________________________________________________________________________________________ Signature:_______________________________________________________________________________________________ Residence Address: ______________________________________________________________________________________ _____________________________________________________________________________________________________ Electronic Address: _______________________________________________________________________________________

ECHO Journal | June 2010

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 develop ments 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, Govern ment 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.

Dispute Resolution in Homeowner Associations $20.00 Non-Member Price: $25.00 This publication has been completely revised to reflect new requirements resulting from passage of SB 137.

Publications to answer your questions about common interest developments Now Order Online at echo-ca.org

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

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

QUANTITY

This report is a guide for directors and managers to use for interviews with prospective service contractors. Questions to find out capabilities and willingness of contractors to provide the services being sought are included for most of the contractor skills that associations use.

SUBTOTAL CALIFORNIA SALES TAX (Add 9.25%) TOTAL AMOUNT

Yes! Place my order for the items above. Board Memberâ&#x20AC;&#x2122;s Guide for Management Interviews $20.00 Non-Member Price: $25.00 This guide for use by boards for conducting complete and effective interviews with prospective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.

q Check q Visa q Mastercard Credit Card Number Exp. Date

Signature

Name (please print) Association (or company) Address City Daytime Telephone

State

Zip

AMOUNT

ECHO Events Calendar

Dates for your calendar Wednesday, June 2 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

Thursday, July 1 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, July 21 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

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

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

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

Wednesday, August 4 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose

Saturday, September 25 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Hilton Santa Cruz Scotts Valley

Friday, June 11 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek

Monday, July 12 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland

Wednesday, June 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr, Rohnert Park Friday and Saturday June 18 & 19, 2010 ECHO Annual Seminar Santa Clara Convention Center Santa Clara

Tuesday, July 13 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Thursday, July 15 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco

Wednesday, August 11 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, August 13 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, August 18 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park

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

June 2010 | ECHO Journal

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

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

You make your associations feel right at home. When you manage a portfolio of over 100,000 homes, there’s no room for error. So when CFO Michelle Burge of Professional Community Management wanted to upgrade operations, Union Bank took the lead. We designed a customized HOA lockbox solution that handles over 250 associations with critical information that is seamlessly integrated into their accounting system. And with CoveragePlusSM deposit insurance, Michelle’s clients know their funds are protected above FDIC limits. For HOAs, that’s definitely an asset. Michelle Burge, CFO, Professional Community Management

To put our HOA Banking expertise to work for you, visit us at HOAbankers.com or call us today. Western Region: Jolen Zeroski, 800-669-8659 Jason Lee, 800-660-4053 Stephanie Shade, 800-660-4053

National Sales: Mickel Graham, PCAM 866-210-2333 Pamela Hazard, CMCA, Team Leader 800-669-8659

CoveragePlusSM deposit insurance is not connected with or guaranteed by the FDIC. CoveragePlusSM protects against the risk of bank insolvency and no other risk. Restrictions apply. Ask your relationship manager for details. HOAbankers.com

ECHO Journal | June 2010

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.

June 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 Thomas Miller, Esq. Larry Pothast Larry Russell, Esq. Steve Saarman Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.

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

February 2010 Central Coast Seminar Speakers Sandra Bonato, Esq. Beth Grimm, Esq. Stephanie Hayes, Esq. Donald Odell, Esq. John Schneider March 2010 Wine Country Seminar Speakers Carra Clampett, CCAM Bill Gillis, Esq. Darryl Orr Zeke Ortiz Barbara Zimmerman, Esq.

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

Who Should Join ECHO? If your association manages condominiums or a planned development, it can become a member of ECHO and receive all of the benefits designated for homeowner associations. If your company wants to reach decision makers at over 1,450 homeowner associations, you can become an associate member and join 350 other firms serving this important membership.

Benefits of ECHO Membership

Recent ECHO Journal Contributing Authors February 2010 Beth A. Grimm, Esq. Ann Rankin, Esq. Brian Seifert March 2010 Jeffrey A. Barnett, Esq. Ed Edrosa Sharon Glenn Pratt, Esq. Lise K. Ström, Esq. Richard Tippet April 2010 Tyler P. Berding, Esq. Sandra M. Bonato, Esq. Burt Dean Beth A. Grimm, Esq. Greg Pater May 2010 Jeffrey A. Barnett, Esq. Sharon Glenn Pratt, Esq. Kim MacFarlane John R. Schneider Pat Wendleton, Esq.

• Subscription to monthly magazine for every board member • Yearly copy of the Association Statute Book for every board member • Frequent educational seminars • Special prices for CID publications • Legislative advocacy in Sacramento

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 Marketplace

Adver tiser Index

The place to find business and professionals for your association

months managementt fee e for for FREE! FREE!** 2 mon ths managemen fee W e’ll bea ompetitors pr We’ll beatt an anyy ccompetitors price ice b byy 25%. M ore SService: ervice: calls & emails rreturned eturned same da y. More day. *Prorated rorated W ork ccompleted ompleted b Work byy deadline deadline.. *P Neighborhood Association Management, Inc. (800) 811-0841 x22 Dee@Neighborhoodam.com www.Neighborhoodam.com www.Neighborhoodam.com

Access Association Services . . . . . .17 Affirmative Management Services . .20 American Asphalt . . . . . . . . . . . . . .30 American Management Services . . .10 Angius & Terry . . . . . . . . . . . . . . . . .3 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .14 Berding | Weil . . . . . . . . . . . . . . . . .44 CAB/Mutual of Omaha . . . . . . . . . .16 CACM . . . . . . . . . . . . . . . . . . . . . .14 Collins Management . . . . . . . . . . . .17 Common Interest Mgmnt Services . .25 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 . .34 Flores Painting . . . . . . . . . . . . . . . .31 Focus Business Bank . . . . . . . . . . .10 Gachina Landscaping . . . . . . . . . . .17 Hill & Company . . . . . . . . . . . . . . . .33 M&C Association Services . . . . . . . .31 M. L. Nielsen Construction . . . . . . .34 Massingham and Associates . . . . . .22 Pelican Management Group . . . . . . .20 PML Management Corp. . . . . . . . . .16 Pollard Unlimited . . . . . . . . . . . . . .24 Professional Association Services . .14 R. E. Broocker Co. . . . . . . . . . . . . .24 Real Estate Property Management . .25 Rebello’s Towing Service . . . . . . . . .39 REMI . . . . . . . . . . . . . . . . . . . . . . .21 Saarman Construction . . . . . . . . . . .9 Scuba Pool Repair . . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . .24 Steve Tingley Painting . . . . . . . . . . . .2 Steve’s Painting Services . . . . . . . .21 Union Bank . . . . . . . . . . . . . . . . . .39

ECHO Journal | June 2010

Saturday, June 19, 2010 8:00 a.m.–4:30 p.m. Santa Clara Convention Center Santa Clara, California 125 Booths in Trade Show, Hundreds of Prizes, New CACM Course, Buffet Luncheon, Ice Cream Social and more! Join the Friday Night Gala! Annual Seminar Reception Friday, June 18, 5:00–7:30 p.m. Food, Music, Socializing, Prizes Cost: $40—See Registration Form

Special Hotel Rates Don’t miss out on the special room rate of $89 single or double at the Hyatt Regency adjacent to the Santa Clara Convention Center. Call the Hyatt Regency at 800-233-1234 and mention the Executive Council of Homeowners or go online to: http://santaclara.hyatt.com/ groupbooking/clara2010exch. The special rate is available until June 1.

ECHO Annual Seminar June 19, 2010

CACM Course Friday, June 18, 2010 Room 209–210 Open for Members Only

to expect. How do you use a reserve study as a planning tool? How does it drive the association’s budget?

Reserves—What, Why and How The legislature has put a microscope on reserve studies during the past couple of years, and we expect more attention to be placed on the process. You may not need to be a reserve specialist but you do need to know when to call in a specialist, what information to gather, and what

What if the association does not have reserves needed for a project? These questions and much more are discussed. (3 CACM CE Units) Instructor: Ken Kosloff Tuition: $110 Call the ECHO Office to register.

Educational Program Session Tracks

Saturday Morning 9:00 to 10:10

Saturday Morning 10:50 to 12:00

Saturday Afternoon 1:30 to 2:40

Saturday Afternoon 3:20 to 4:30

HOA UNIVERSITY Rooms 209–210

Administration Tsuki Morgan, CCAM

Legal Considerations Tom Fier, Esq.

Finances David Levy, CPA

Insurance Dennis Socher Charlotte Allen

LEGAL Rooms 203–204

Legislative Update John Garvic, Esq. Kerry Mazzoni

New American Community —Managing In The Future Larry Pothast, PCAM

New FHA Lending Requirements Beth Grimm, Esq. Greg Pater

Conflict Resolution for Directors David Feingold, Esq.

MANAGEMENT & FINANCIAL Mission City Meeting Room 2

The Butterfly Effect Julie Adamen

Ethics for Board Members Karen Conlon, CCAM Sandra Gottlieb, Esq.

Strategic Planning for Board Members Debra Warren, PCAM

People, Pets and Smoking Lisa Esposito, CCAM Wanden Treanor, Esq.

FACILITIES MANAGEMENT Mission City Meeting Room 1

Traps for the Unwary in New Construction and Conversions Tyler Berding, Esq. Jan Kopczynski, Esq.

Maintenance in Tight Times Robert Hall, Esq. Geri Kennedy, CCAM Richard Tippett

What Happens When Boards Violate the Davis-Stirling Act Steven Weil, Esq. Andrea O’Toole, Esq.

Going Green: Save Water, Save Money Sharon Serpico Hanson Water Agency Representatives

REGISTRATION FORM Yes! Please reserve my space at the 2010 ECHO Annual Seminar. Name ___________________________________________________________________ Association/Organization __________________________________________________ Address _________________________________________________________________ City __________________________________________ State _____ Zip____________ Daytime Phone ___________________________________________________________ Names of Additional Attendees: 1. _________________________________________ 2. ________________________________________ Please reserve tickets for: No. Amount Seminar Only (members) Before June 1 $75 ___________ $___________ Seminar Only (members) On or after June 1 $85 ___________ $___________ Seminar Only (non-members) $90 ___________ $___________ Seminar Buffet Lunch $40 ___________ $___________ Friday Reception $40 ___________ $___________ TOTAL $___________ Visa/MasterCard No. ______________________________________________________ Expiration Date ___________________________________________________________ Cardholder’s Signature ____________________________________________________

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

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