August 2010
A Journal for California Community Association Leaders
echo-ca.org
Left Holding the Sand Bag
ALSO INSIDE THIS ISSUE:
• Boards That Violate Davis-Stirling • Strategic Planning for Boards • Board Members with Hidden Agendas
Change Service Requested ECHO 1602 The Alameda STE 101 San Jose, CA 95126
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Contents Strategic Planning for Board Members—page 20
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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.
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Left Holding the (Sand) Bag
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The ECHO membership list is never released to any outside individual or organization.
Boards That Violate Davis-Stirling
Executive Council of Homeowners, Inc.
The Davis-Stirling Common Interest Development Act has an awful lot of “dos and don’ts.” What happens if a board doesn’t comply with all these mandates? Will directors who do not comply be removed from office, fined, arrested, or put in jail? This article explores the issues.
1602 The Alameda, Suite 101 San Jose, CA 95126 408-297-3246 Fax: 408-297-3517 www.echo-ca.org info@echo-ca.org
Strategic Planning for Board Members
Board Members with Hidden Agendas Owners who get elected to a board so that they may further their own agenda have come to be known as “rogues,” a term that brings back memories of the lovable rogues of Hollywood. Unfortunately, our modern day rogues have very little in common with these fond images. They are more like rogue waves—unpredictable and usually very disruptive.
Departments 28 News from ECHO 29 Legislation at a Glimpse 30 Directory Updates
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34 Management 36 ECHO Bookstore 38 Events Calendar 40 ECHO Volunteers 41 ECHO Marketplace 41 Advertiser Index
On the Cover Left Holding the Sand Bag —page 6 4
August 2010 | ECHO Journal
Copyright 2010 Executive Council of Homeowners, Inc. All rights reserved. Reproduction, except by written permission of ECHO, is prohibited.
The chance of flooding in cities around San Francisco Bay is not just speculation. It has happened in the past and it will happen again. This article discusses what the consequences to CID associations may be.
Most successful businesses have embraced strategic planning. Since the benefits of developing a strategic plan are generally positive, why don’t associations enthusiastically proceed along the same path? This article provides answers to this question and gives an overview of how to develop a plan.
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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.
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 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.
A Tip of the Hat to 2010 Annual Seminar Sponsors PLATINUM BENEFACTORS Angius & Terry Management Solutions GOLD BENEFACTORS Advance Construction Technology American Management Services, Inc. Berding|Weil LLP BCT Bob Tedrick Construction Cool Pool, Inc. ERTECH, Inc. First Bank Association Services Hughes Gill Cochrane, PC PetersenDean Roofing, Inc. Richard Avelar & Associates Saarman Construction, Ltd. SILVER PATRONS American Asphalt Cagwin & Dorward Statcomm, Inc.
ECHO Journal | August 2010
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“From Antioch to North Richmond to Redwood City, a slowly rising Bay could endanger the properties of as many as 270,000 Bay Area residents and cause some $56.5 billion in damage by the end of the century unless measures are taken to protect them, scientists warn. But surprisingly, few cities are taking action.” —San Jose Merucury News, June 13, 2010
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“November 5, 2008… In the event of projected flooding sandbags are available at the Benicia Corporation Yard. Some assistance may be available but residents should bring shovels and plan to fill and load the bags themselves.” —Web site for the City of Benicia, California
By Tyler P. Berding, Esq.
Left Holding the (Sand) Bag Who Will Pay for the Damage Caused by Rising Sea Levels? It Could be Your Association.
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HE CHANCE OF FLOODING IN CITIES IN
and around San Francisco Bay is not just speculation. It has happened many times in the past and it will happen again and again if sea levels continue to rise or a “perfect” storm joins with normal high tides. It’s easy to see why. Take a look at one of the several interactive devices (e.g.,
http://geology.com/sea-level-rise/sanfrancisco.shtml) used to illustrate the first areas around the bay that will flood when the sea rises. It should come as no surprise that they are the same locations where the bay was originally filled to create housing and commercial developments. These lowlying areas—Redwood Shores, Alameda,
ECHO Journal | August 2010
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Vallejo, Alviso and many others—were bay bottom and tidelands just a few decades ago. Now there are thousands of homes. The flood danger is obvious. And, thousands of new homes are projected for a dozen or more major developments being proposed for additional tidelands and other low-lying locations around the bay: “At least 12 major developments with as many as 56,000 new homes are planned at the edge of the Bay over the next 5 to 20 years… many are in low-lying areas experts say are potentially vulnerable to flooding associated with long-term sea level rise. Some cities and counties have strategies to deal with that problem, others do not.”1 But what is different today from developments built, say, three or more decades ago is that many of these new developments will be built as community associations and much of the expensive engineered facilities necessary to protect these developments from storms, rising tides and sea levels will not be owned by cities or the state, but instead will be the responsibility of homeowners. Streets, storm sewers, parks, parking lots, and sidewalks in old developments are owned and maintained by cities and counties using tax dollars raised from a much broader tax base. In newer projects these “public” works are instead made the responsibility of private owner’s associations. The advent of the community association was a boon to taxstarved local governments who saw them as a way to promote development and raise new tax dollars while avoiding liability for these new facilities. The proposed new developments around San Francisco Bay will tempt local cities and counties to vest the responsibility for necessary flood control improvements to local community associations or small, special districts. Responsibility for levees, berms, pumps, riprap, and retaining walls built by the developers of these large projects could eventually find themselves maintained and repaired by homeowner associations. The beginning step of this massive shift of responsibility away from governments and onto landowners, one that has been widely used for many years, is the use of local improvement, levee, or reclamation districts. Much of the Sacramento delta, a system of sloughs and islands on which more and more housing is being built and proposed is main-
800-330-7068 • www.scubapoolrepair.com 1 San Jose Mercury News, Ibid.
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August 2010 | ECHO Journal
tained by such “special” assessment districts, not the state or local cities or counties. The taxpayers within those districts pay for all levee maintenance and repair work. Originally these districts were formed to give farmers quasi-governmental authority over the properties in a particular area. It also shifted fiscal responsibility away from larger jurisdictions and a broader base of taxpayers. But a flood disaster in an agricultural area will only inundate crops. The same disaster in a residential community will be much worse. It matters who is in charge and who is responsible for maintenance of such critical facilities. A large community association functions in a manner similar to a special district— ownership of public works is handed off by the developer to the association when development is complete, and the owners, through assessments, pay for the ongoing maintenance and repair. Cities and counties, which gain considerable tax benefits from new development, are able to shift the longterm responsibility for the cost of maintaining improvements associated with that development to property owners. This can be done with either a community association or a special district.2 By this mechanism, developers avoid longterm responsibility for such projects. The homes and buildings within the development are sold off in the near term. The developer takes the profits and is protected from longterm liability not only by the assessment arrangement that shifts the cost of future repairs to owners, but also by various statutes of limitation that cut off legal liability in just a few years after the project is complete. After that, the property owners within the association, or within the local special district, are on their own. So just as the liability for landscaping, streets, parks, even schools and unstable hillsides3 have been shifted to local homeowners in recent years, there is no reason why the flood control improvements necessary to build housing on former tidelands won’t be similarly vested in the buyers of all of this new housing. Their maintenance and repair obligations start
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2 A special district would usually be the choice if the facilities to be maintained include multiple new developments or community associations. 3 In this case the district is called a “GHAD” or Geologic Hazard Abatement District and provides a vehicle for developers and cities to dispose of responsibility for unstable, and thus unusable, pieces of land left over from larger developments.
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immediately, and over time, the facilities may prove inadequate to forestall the inevitable rise in sea level, leaving homeowners on the hook for a lot more. There is another problem. We have written many times about the looming failure of community associations to keep pace with the growing cost of maintaining even simple common area components; but can you imagine what will happen if much more sophisticated, not to mention critical, improvements are to be maintained solely by owner assessments—that levees and retaining walls, essential to keeping the waters of San Francisco Bay from flooding hundreds or perhaps thousands of homes, will be dependent upon the willingness of individual homeowners and their associations to provide adequate funding? It’s one thing to let the landscaping go to seed or to allow chuckholes to exist in the parking lot, but a crumbling bay levee is at another threat level altogether. Of course, the proponents of new bay shore development contend that it will be good for the economy, for the tax base, and, ironically, for the environment, since it will shorten commute times for many Bay Area workers. But these benefits are all short term—if they exist at all. In fact the “bene-
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fits” are more likely to be realized only by the developers and the local taxing authority. There is lots of land available for necessary higher-density infill away from the shoreline on higher ground that would not be threatened by tides and sea level. It costs more to develop, perhaps and may not provide the economies of scale offered by salt ponds and tidelands, but its eventual owners would not inherit the potential for both fiscal and physical disaster. Anyone concerned with these new bay shore development proposals should ask the city one simple question: “Who will be responsible for keeping these flood control improvements working in the years to come?” Don’t be surprised by the answer.
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.berdingweil.com or www.condoissues.com.
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By Steven S. Weil, Esq. and Andrea L. O’Toole, Esq.
What Happens When Boards Violate Davis-Stirling? Is There Such A Thing As “Condo Police?” HE DAVIS-STIRLING COMMON INTEREST DEVELOPMENT Act has an awful lot of “dos and don’ts”: send out a budget, estimate reserves, hold hearings, offer mediation, create a collection policy, don’t lien without a meeting, etc. But what happens if a board doesn’t comply with all these mandates? Will directors who do not comply be removed from office, fined, arrested, or put in jail? If so, by whom? Fellow directors? An association committee? The
T
Department of Real Estate or the Attorney General? The District Attorney? The Condo Police? Background Common Interest Developments (or “CIDs”, the term used to describe most homeowner and condominium associations in our state) are required by law to be operated in accordance with the Davis-Stirling Act. Most CIDs are also
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non-profit mutual benefit corporations and thus are subject to various provisions of the Nonprofit Mutual Benefit Corporation Law. CIDs are subject to a host of other state laws, including the Unruh Civil Rights Act and the Fair Employment and Housing Act (these latter two generally dealing with discrimination). The subject of whether boards of directors comply with all of these laws is the subject of much interest on the Internet, web sites, and in e-newsletters. With such interest comes a great deal of scrutiny and claims that, in fact, directors do not comply with the laws. Frequently, association members seek relief from the California Department of Real Estate or the state Attorney General or even ECHO or sue for relief in Superior Court or its Small Claims division. Others simply think they are entitled to remedies for legal violations without taking any action whatsoever. Let’s start by dispelling some myths and rumors. The Department of Real Estate and the California Attorney General Many are surprised to learn that the California Department of Real State (DRE) plays a fairly limited role when it comes to enforcing the Act or other perceived board improprieties. When it comes to CIDs, generally the DRE’s function is to protect purchasers from fraud or misrepresentation in connection with sales of lots or units in a CID. The role of the DRE as to CIDs is surprisingly limited. During the nascent stages of the project—until 25% of the properties are sold—any amendment to the governing documents to change how an association operates requires the consent of the Department. (See Business & Professions Code §11018.7) After that, DRE consent is not required. Here is what the DRE web site (http://www.dre.ca.gov/sub_faq_cid.html) says about its power to deal with disputes: Q: What about homeowner associations disputes? A: We suggest that members refer to their governing documents (Articles, Bylaws, Declaration, etc.) for dispute resolution remedies. The California State Attorney General’s office provides some oversight for incorporated homeowner associations. Depending on the nature of the problem, you may consider seeking the advice of a private attorney or contacting your local district attorney’s office.
If the subdivider still owns interests within the project, we recommend that the association and/or owners contact the Department of Real Estate for possible assistance. The Department’s powers are generally limited to preventing the subdivider from marketing the remaining units in the project, if wrongdoing is substantiated. While the DRE can issue a “Cease and Desist Order” to bar a Subdivider from continuing to sell property if it determines that misrepresentations or other violations of relevant regulations and laws have been violated (Business & Professions Code §11019), the DRE itself is not charged with enforcement of the Act against “homeowner” directors. The California Attorney General (AG) may be the “Chief Law Enforcement Officer” of our state but that department generally will not enforce the Act. In theory, the AG will investigate alleged violations of the Corporations Code (typically complaints that boards have refused to hold meetings or permit inspection of records) but, in reality, no one in the field consulted by this author has ever heard of the AG actually doing more than simply passing an owner’s objection on to CID operations and requesting a response.
The role of the DRE as to CIDs is surprisingly limited. The AG’s office may be more active when it comes to discrimination complaints. A CID may not discriminate in the provision of services or the enjoyment of housing benefits under the Fair Employment and Housing Act at Government Code §12900 et seq (FEHA). The AG can enforce that and similar laws. The Act (at Civil Code §1360) prohibits an association from unreasonably denying a resident the ability to modify a condominium unit to facilitate access for the disabled and the violation of this law, being a probable violation of FEHA as well, could be acted upon by the AG. FEHA violations can include imposition of compensatory and punitive damages, an award of attorney fees and costs, and other remedies. Finally, it is doubtful that homeowners claiming their boards have violated the Act will get relief from the local District Attorney (DA). The DA prosecutes those who violate criminal laws. Other than a claim that ECHO Journal | August 2010
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directors have embezzled funds, the DA will not uphold the kinds of laws that affect most CID operations.1 Penalties for Violation of the Davis-Stirling Common Interest Development Act While the Act has almost 100 statutes (not including many subparts), very few contain “punishments” for their violation. Here are some that do: Distribution of the Budget—Assessment Increases by Board Action—Self Policing A CID board can, without membership approval, increase annual assessments up to twenty percent and can impose a special assessment of up to five percent of budgeted
1 We’ve encountered two situations in the last year in which a DA did get involved in affairs affecting firm clients. In one, a director obtained an injunction barring a member from harassment, including contacting that director by email. The injunction was violated and the DA is pressing charges. In another, an association’s treasurer stole about $150,000 in reserve funds, admitted the crime, and was prosecuted by the DA. More recently, we’ve got a client who requested that the police charge with a crime a director who stole funds but, to date, the authorities have not done so, citing the fact that the director has fled the country.
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gross expenses. But, under §1366(a)2 this “taxing power” only exists if the board has, thirty days prior to the beginning of the fiscal year, distributed the annual budget. That disclosure, under §1365(a), includes the budget, summary of reserves, percentage of funding and deficiency, representations concerning adoption of funding plans, existing loans, and procedures relating to reserve calculations. If the board has not complied with this budget disclosure, assessment increases and special assessments (perhaps other than for emergencies) require the approval of a simple majority of members. The failure to comply with the law can have a significant and negative impact on operations. At a minimum, a costly election with an uncertain outcome will be needed to finance expected services and reserve contributions. And, if owing to apathy or opposition the members’ consent cannot be obtained, the board and reserve study preparer will have to revise their projections. Services may have to be cut. Reserve borrowing may be required. Claims, or at least certainly embarrassment and expense, will ensue. Membership Inspection Rights Protected in Small Claims Court While directors have the absolute right to inspect all association records and property under Corporations Code §8334, member inspection rights are limited and defined in §1365.2. A member (including their agent, such as an attorney) may inspect (and that includes the right to copy) a universe of documents ranging from minutes and the membership list to the management contract and copies of checks and invoices. A proper request might include some records that, if disclosed, could result in identify theft or breach of privacy rights. An association and its officers, directors, and agents (that would include managers and in house management employees) can be held liable for damages resulting from the distribution of such information, or the failure to “react” if the disclosure was intentional, willful, or simply negligent. [§1365.2(d)(3)] And, a member may enforce his or her basic records inspection rights by suing in Small Claims Court. If it finds that the withholding of records was unreasonable, the Court shall award reasonable costs and attorney fees and may impose
2 Unless otherwise indicated, all further statutory references are to Civil Code provisions contained in the Act. ECHO Journal | August 2010
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a civil penalty of up to $500 for each records request. (But, if the association wins the suit, it will not be entitled to its attorney fees unless it can show that the owner’s suit was frivolous, unreasonable, or without foundation). Election Law Violations: Rescinding Votes and Awarding Damages Not only did the legislature introduce a whole new set of voting requirements when it adopted the series of election laws starting with §1363.03, it authorized many of those requirements to be enforced in Small Claims Court (a forum that does not require nor permit legal representation) while others still must be pursued in Superior Court.
The remedies for improper conduct— the violation of the various election laws —can be severe. The remedies for improper conduct—the violation of the various election laws—can be severe. Remedies include: • voiding the results of any election of directors or action taken by the board of directors; • injunctive relief requiring the association to conduct new votes, hold new meetings, or distribute documents; • monetary awards for damages or “restitutionâ€? (for, as an example, the improper use of association funds for campaigning); • imposition of a civil penalty of $500 for each violation; • recovery of attorney fees and costs.
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August 2010 | ECHO Journal
The issues subject to these remedies include election votes to authorize assessment increases, governing document amendments, grants of exclusive use common area, and the election of directors. They also include actions arising out of the use of association funds for campaigning and for violations of the Open Meeting Act (including the failure to properly post agendas or the approval of corporate action) (see §1363.05). A member can, under §1363.09, obtain relief in Small Claims Court for claims relating to access to association resources by a candidate or a member expressing a point of view on a
matter being voted upon, or relating to ballot and ballot counting issues. Enforcement of Other Rights Penalties Under the Vehicle Code CIDs may tow vehicles as authorized by Vehicle Code §22658. It is not an associationfriendly law. Its many specific requirements are deceptively difficult to implement properly. The failure to do so can come at great cost. An association (or its agent) who fails to comply with some of the notice requirements may be guilty of a criminal infraction punishable by a fine of one thousand dollars.3 Towing company violators are subject to even worse penalties for failing to follow the statute including fines of up to $2,500 and/or imprisonment for up to three months. [Vehicle Code §22658(l)] Damages actually sustained by someone as a result of an improper tow can also be awarded. Disclosures to the State Section 1363.6 and Corporations Code §8210 require an association to make certain disclosures to the state of the names of the directors and officers of the corporation and changes to the association’s street address. The address of the manager and other similar information must also be provided. Failure of an incorporated association to comply has very bad (not to mention embarrassing and inconvenient) consequences. They include suspension of the association’s corporate status, which, in turn, means the association cannot use the courts to pursue or defend claims or take advantage of the “corporate shield” that might otherwise immunize directors and members from personal liability for claims against the association. Also, contracts entered into by the incorporated association during the period of its suspension are voidable. And, on the embarrassing side, when a corporation’s status is suspended for failure to comply with
3 Here is an example of the complexity of the statute. It provides, among other things, that “A property owner or owner’s agent or lessee who causes the removal of a vehicle parked on that property pursuant to the exemption set forth in subparagraph (A) of paragraph (1) of subdivision (l) and fails to comply with that subdivision is guilty of an infraction, punishable by a fine of one thousand dollars ($1,000).” (Vehicle Code §22658(d)) 4 For a thoughtful and comprehensive discussion of these issues, see “Suspension of a Homeowner Association’s Corporate Status” at http://www.berding-weil.net/articles/suspensionof-hoa-corporate-status.php.
these reporting requirements, it could permanently lose its name if, in the meanwhile, the name is registered for another project.4 Corporate Formalities While the AG may have little interest or funding to pursue violations of the Corporations Code, members can do so by bringing suit on their own. In the appropriate case, a Court can compel an association to hold a meeting when it refuses; dictate quorums; cause the removal of directors; and award attorney fees and costs for violations.
An association that fails to comply with some of the notice requirements of vehicle towing may be guilty of a criminal infraction. Summary Pursuing many types of violations of DavisStirling and other laws affecting homeowner associations does not require attorneys. Some are self-executing (like the ban on assessment increases), while others can be pursued in Small Claims Court. And, while some government agencies have some oversight of California CID operations, that oversight is narrow and they will not “police” board action. The most potent enforcement tool however may the political one. An educated membership taking advantage of the Internet and trade publications can and should hold boards to high standards of compliance with the law. Directors that fail to do so, aside from putting themselves and their associations at risk, are subject to the highest form of penalty: rejection by the membership and removal from power.
Steven Weil is one of the founding principals at Berding | Weil LLP in Alamo. He has practiced community association law since 1984 and has dealt with virtually every kind of challenge facing directors, managers and community association members. He is a member of the ECHO board of directors. Andrea O’Toole is an attorney at Berding | Weil. She practices in the corporate and business law department, specializing in real property and common interest development law. ECHO Journal | August 2010
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By Debra A. Warren, PCAM, CCAM, CMCA
Strategic Planning for Board Members
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M
OST SUCCESSFUL BUSINESSES HAVE EMBRACED THE
concept of strategic planning and the results attained drive the direction, resources, and decisions made in the daily course of doing business. It guides the leadership and unites the employees and partners through common goals and objectives. Since the benefits of developing a strategic plan are generally positive, why don’t community associations enthusiastically proceed along the same path? There are several answers to this question. One answer is simply the perception that creating a plan is complicated and requires a lot of time and money. Another answer is that many community association volunteers believe that the 30-Year Reserve Study is their plan. While this financial tool is an important part of a comprehensive plan, it does not include
many factors that contribute to the overall health of the community. Some of these factors are changing demographics, local economic conditions, and aging landscaping and design elements. A complete plan will also consider the needs and wants of the individual community members. Let’s first tackle the perception that creating a plan is complicated and requires a lot of time and money. If we look at some of the examples used in the business environment—SWOT analysis (Strengths, Weaknesses, Opportunities and Threats), Team Alignment, or Scenario Planning—this might be a true statement. But we can take the essence of these models and apply three simple steps—preparation, development, and
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LOCAL SERVICES ı NATIONAL RESOURCES
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implementation—and we now have a process that can be used by any size community association.
understanding the legal structure will help you fulfill your obligations as a board member.
Step 1—Board Member Preparation Before you can begin to initiate projects and programs, it is necessary for you to have a general understanding of your association. This is true even if you don’t have a strategic planning process. So to prepare for service on the board, as well as for planning, ask yourself these five questions.
Do You Understand the Financial Condition of Your Association?
Do You Understand the Legal Structure? The CC&Rs, Articles of Incorporation and Bylaws provide you with information about the structure of your community. First the CC&Rs define maintenance and financial responsibilities of the association and the members. All of the funding for the association comes from the members, and the formulas and limitations on assessments are also found in the CC&Rs. Next are the Articles and the Bylaws, which set forth the rules for operating the association as a corporation. These documents contain information about meetings, elections, and distributing information to the membership. You don’t need to memorize any of this information, but 22
August 2010 | ECHO Journal
The objective of this second question is for you to look at the big picture, not at how much it costs to change a light bulb. You will need four documents to provide you with the necessary information. You will need the most current month’s balance sheet and revenue and expense report along with this year’s budget and the most recent reserve study. This year’s balance sheet will tell you how much cash you have, how much money is owed to the association and how much the association owes to vendors and/or lenders. The current revenue and expense report will tell you if you are operating within budget for the current fiscal year. The current budget will provide information on all the services and projects funded for this year and the cash flow schedule in the reserve study will inform you of the funding required over the next 30 years to keep your association’s common elements properly maintained.
Do You Understand the Human Resources Available to Your Association? Allocating human resources, including the time of the volunteer board of directors, is equally as important as the financial resources. Therefore, it is important to be aware of the services outsourced to professionals versus the services that are absorbed by volunteers. Do you have a professional management firm? What projects does the board choose to manage by volunteers? Will you be delegating projects to volunteer committees? Every association is different so a quick assessment of human resources will be helpful to the planning process. What is Important to Your Members? If improving the landscaping is important to you, it is likely that you will be most familiar with others in your community who share the same desire. As a decision maker for the entire community, it is necessary to have some form of outreach to understand clearly the priorities and needs of all the members in your community. Ask your committee representatives for their perspective on needs, 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.
Strategic Planning Continued from page 22
conduct an annual survey, or develop a task force to ask members what is important to them.
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What Conditions are Present in Your General Community? Conduct some general research into your surrounding community to determine factors that will impact your association and its members. Gather information about the status of the employment and housing market in your community. Keep track of plans for new development or other changes to property use in your area. If there are other community associations in your neighborhood, work to establish a process for sharing information. By investing time in the process of learning about your community, you will not only create a strong basis for service to the association, you will also establish a solid foundation to begin the process of developing an effective plan. Step 2—Developing the Plan Developing a strategic plan for your association will require a commitment by the board and each of its members. Each member should be prepared to invest 10–15 hours to complete the plan. Although this time commitment is divided into four specific tasks, it is important to move through the process as steadily as possible. Purpose and Values Set aside one to two hours to discuss the purpose of your association and your core values. Every association is different and your values will be determined by your region, demographics, and size. There are many books and tools that can help with this process. One question can help with this definition: “What makes your community unique?”
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August 2010 | ECHO Journal
Develop the Agenda for the Planning Session Select a time period when all board members can attend and a location that will minimize disruptions. It is recommended that you not conduct this session in conjunction with a board meeting at the end of a long day. Instead try to set aside time on a Saturday morning or on a weekday when you can begin by 1:00 in the afternoon. The goal is to create 4 to 6 hours of uninterrupted time. When developing the agenda, you will also need to decide if a facilitator will be used to help with the discussion. A facilitator is a neutral party who is responsible for keeping
the discussions on point and for making sure that everyone participating has equal opportunity to share ideas and opinions. The goal at the end of the day is to have a plan that was developed by all board members, not by the president or the strongest voice in the room. The most sustainable plans are developed by all members sharing ideas and opinions. Brainstorming—The Master List The first part of the planning session involves all participants sharing ideas, priorities, and projects. You will want to make sure you have a current, mid-term and long-term perspective. What do we want to complete in the next year? Three years? Five years? The goal is to have a master list that can be used for a detailed discussion. This is the portion of the planning session that benefits the most from the services of a facilitator. The role of the facilitator is to assure that all attendees are participating, that differences of opinion can be shared in an accepting environment and that all ideas receive the same consideration. The facilitator may also use a variety of tools to create a list that is manageable as the group moves into the next phase of the planning day. Allocating Resources and Prioritization In this final step of the planning session, the group talks about each item on the list, estimates the financial and human resources required and assigns a priority to each item. It is common for some items to gather support during the discussion and others to be eliminated as more pressing matters are identified. The plan will be based on the final list of priorities and is generally drafted after the session is completed. The most critical step in finalizing your activity is to complete the plan. It can be tempting to get attached to creating a perfect document to post in the Club House or on the community web site. Author Patrick Lencioni, says “Don’t let the perfect be the enemy of the good.” What is most important is that you finish the plan, so you may experience the benefits. Once the plan is in place it will move into the implementation phase where constant review, analysis, and modifications will take place as circumstances change. Step 3—Successful Implementation Implementing your strategic plan occurs over a period of time. It will be necessary to incorporate the results of your plan into your reserve study and into the operating budgets for future years. Generally speaking you
Additional Resources The Table Group, Patrick Lencioni Library www.thetablegroup.com Carter McNamara, MBA, Ph.D. Field Guide to Non Profit Strategic Planning and Facilitation www.authenticityconsulting.com
West Management Co., Inc. Lost in the wilderness of accounting, collections, repair and legal matters? Looking for a guide?
should begin or reevaluate your plan six months before the beginning of your fiscal year so that the planning results can be included into your next budget. If you have available resources to implement projects in the current year, that will be a bonus. Successful implementation also requires regular review. Schedule a portion of every board meeting for reviewing progress, monitoring outcomes, and reallocating resources or deadlines. Complete the review by communicating the results to all stakeholders. There are many benefits that your community will experience when the board is guided by a strategic plan. The board’s actions will be consistent because they will be based on the priorities established in the plan. Projects can be scheduled in a proactive manner to take advantage of pricing opportunities and timing. Board members will benefit because the decisions required for implementation can be placed on an Annual Calendar and they will have adequate time to prepare. Management benefits because they can proactively calendar the scheduled activities and communicate clearly with the association members. And finally, members benefit as the resources they contribute are being allocated strategically to meet their needs.
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By following this simplified process and adding your own sense of commitment and discipline, your community will have a guide for current and future leaders, members and partners.
Debra Warren is the principal at Cinnabar Consulting in San Rafael. Cinnabar provides businesses with the tools they need to maintain healthy and successful organizations by creating and implementing comprehensive training programs, providing team assessment and development, and facilitating effective meetings. She was previously the owner and CEO of Powar Management. ECHO Journal | August 2010
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e have all experienced owners who get elected to an association board so that they may further their “own” agenda. While most of the time owners come to the realization that the board’s function is to administer the association in its entirety, there is always one or two who insist that things have to be their way. These misinformed people have come to be known as “rogues.” This term may bring back fond memories of the lovable rogues of Hollywood fame, i.e., the Maverick brothers, Bret and Bart; Robert Wagner in just about any role he played; Paul Newman and Robert Redford (pick a movie). Well, you get the picture. Unfortunately, our modern day rogues have very little in common with these fond images. They are more in tune with the visions of rogue elephants and rogue waves—unpredictable and usually very disruptive. Our rogues include, but are not limited to, the following types:
W
The Developer Representative This is the person on the board who represents the developer after the association is turned over to the owners. There may still be enough unsold units to entitle the developer to
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August 2010 | ECHO Journal
have a seat on the board. This person’s company crafted the governing documents and he thinks he knows every way to get around them. The Owner with a Single Goal This is the owner who has been told 100 times that she cannot have red drapes. She is sure that when she gets on the board she will be able to change everyone’s mind. She has never read the governing documents and can’t see why there should be a problem. The Retired Owner with Lots of Free Time This owner has memorized the governing documents and is willing to measure every blade of grass to make sure it is within the acceptable height limit. He knows that if everyone would just listen to him everything would run smoothly all of the time. The Former Board Member with a Grudge This person didn’t get what she wanted the first time she was on the board. She thinks there is a better chance now that there is “fresh blood” with which to deal. She is positive that with enough repetition she can get the newbies to interpret the governing documents her way.
The New Board Member with a Grudge This person has been warned and fined for various violations of the association rules. The rules are way too restrictive and he wants these rules changed or abolished. Governing documents are only guidelines. No one is expected to actually follow them all of the time. It’s the management company’s fault that the board is enforcing the documents. Quite a cast isn’t it? We have all had to experience one or more of these colorful characters. There is only one way to deal with each and every one of them: When you get elected to the board, take the time to become familiar with the governing documents. Everything you need to know is right there. Leave your preconceived notions and agendas at the door. Always act in the best interests of the association. The Developer Representative As an elected board member, your main concern must be the owners and the association, not the developer. The Owner with a Single Goal Make sure you give this owner a complete copy of Continued on page 33
By Brenda L. LeClair, CMCA
Board Members with Hidden Agendas
News from ECHO
Left Holding the (Sand) Bag The chance of flooding in cities in and around San Francisco Bay is not just speculation. It has happened many times in the past and it will happen again and again if sea levels continue to rise or a “perfect” storm joins with normal high tides. It’s easy to see why. Take a look at one of the several interactive devices used to illustrate the first areas around the bay that will flood when the sea rises. It should come as no surprise that they are the same locations where the bay was originally filled to create housing and commercial developments. These low-lying areas—Redwood Shores, Alameda, Vallejo, Alviso and many others—were bay bottom and tidelands just a few decades ago. Now there are thousands of homes. The flood danger is obvious. And thousands of new homes are projected for a dozen or more major developments being proposed for additional tidelands and other lowlying locations around the bay. But what is different today from developments built, say, three or more decades ago is that many of these new developments will be built as community associations and much of the expensive engineered facilities necessary to protect these 28
August 2010 | ECHO Journal
developments from storms, rising tides and sea levels will not be owned by cities or the state, but instead will be the responsibility of homeowners. Streets, storm sewers, parks, parking lots, and sidewalks in old developments are owned and maintained by cities and counties using tax dollars raised from a broad tax base. In newer projects these “public” works are instead made the responsibility of private owner’s associations. The proposed new developments around San Francisco Bay will tempt local cities and counties to vest the responsibility for necessary flood control improvements to local community associations or small, special districts. Responsibility for levees, berms, pumps, riprap, and retaining walls built by the developers of these large projects could eventually find themselves maintained and repaired by homeowner associations.
What Happens When Boards Violate Davis-Stirling? The Davis-Stirling Common Interest Development Act (Act) has an awful lot of “dos and don’ts”: send out a budget, estimate reserves, hold hearings, offer mediation, create a collection policy, don’t lien without a
meeting, etc. But what happens if a board doesn’t comply with all these mandates? CIDs are required by law to be operated in accordance with the DavisStirling Act. Most CIDs are also non-profit mutual benefit corporations and thus are subject to various provisions of the Nonprofit Mutual Benefit Corporation Law. The subject of whether boards of directors comply with all of these laws is the subject of much interest on the Internet, web sites, and in e-newsletters. With such interest comes a great deal of scrutiny and claims that, in fact, directors do not comply with the laws. Frequently, association members seek relief from the California Department of Real Estate or the state Attorney General or even ECHO or sue for relief in Superior Court or its Small Claims division. Others simply think they are entitled to remedies for legal violations without taking any action whatsoever. Let’s start by dispelling some myths and rumors. Many are surprised to learn that the California Department of Real Estate (DRE) plays a fairly limited role when it comes to enforcing the Act or other perceived board improprieties. When it comes to CIDs, generally the DRE’s function is to protect purchasers from fraud or misrepresentation in connection with sales of lots or units in a CID. While the DRE can issue a “Cease and Desist Order” to bar a Subdivider from continuing to sell property if it determines that misrepresentations or other violations of relevant regulations and laws have been violated, the
DRE itself is not charged with enforcement of the Act against “homeowner” directors. The California Attorney General (AG) may be the “Chief Law Enforcement Officer” of our state but that department generally will not enforce the Act. In theory, the AG will investigate alleged violations of the Corporations Code (typically complaints that boards have refused to hold meetings or permit inspection of records) but, in reality, no one in the field consulted by this author has ever heard of the AG actually doing more than simply passing an owner’s objection on to CID operations and requesting a response. The AG’s office may be more active when it comes to discrimination complaints. Finally, it is doubtful that homeowners claiming their boards have violated the Act will get relief from the local District Attorney (DA). The DA prosecutes those who violate criminal laws. Other than a claim that directors have embezzled funds, the DA will not uphold the kinds of laws that affect most CID operations. Important Upcoming Events Thursday, Sept 15 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco Saturday, September 25 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Hilton Santa Cruz/Scotts Valley Friday October 15 Annual Membership Meeting 10:00 a.m. ECHO Office, San Jose
2010 Legislation at a Glimpse As of July 20, 2010 Bill No.
Author
Subject
Status
Position
Summary
AB 1726
Swanson
Voting Quorums Amended 5/3. Senate Third 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. Senate Third Reading.
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 6/9. Senate Third Reading.
Oppose
For governing documents initially 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 6/28. Passed Senate Natural Resources.
Support if Amended
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
Amended 6/22. In Assembly concurrence file.
Support
Clarifies that a request by an association for notification of a trustee’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
Signed by Governor.
Neutral
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 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 DavisStirling 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 5/12. Assembly Second Reading.
Support
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 | August 2010
29
Directory UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.
New Member Listings Adams Kessler PLC 2566 Overland Ave., Suite 730 Los Angeles, CA 90064 Contact: Adrian Adams Tel: 310-945-0280 Fax: 310-945-0281 www.davis-stirling.com Email: adams@davis-stirling.com Adams Kessler PLC is a law firm specializing in the representation of common interest developments throughout California, including residential, commercial, resort, and retirement communities. Morris Polich & Purdy, Attorneys at Law One Embarcadero Ctr., # 400 San Francisco, CA 94111 Contact: Elizabeth A. England Tel: 415-984-8500 Fax: 415-984-8599 www.mpplaw.com Email: eengland@mpplaw.com Condominium disputes, all aspects of real estate and escrow problems including purchasing and sales, title insurance and escrow problems, commercial and residential construction disputes, broker commission disputes and seller and/or broker misrepresentation.
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August 2010 | ECHO Journal
Valley Landscape 27050 Moody Road Los Altos Hills, CA 94022 Tel: 650-948-9474 Fax: 650-948-0113 Contact: George Schriner Email: george@valleylandscape.net Valley Landscape is a full-service professional landscape maintenance company specializing in residential communities and servicing property managers for over 30 years. Owner supervised. We can improve your landscape and cut water costs. 24 hour emergency services.
Changes to Member Listings Coast Landscape Management 103 Camino Oruga Napa, CA 94558 Tel: 707-251-8872 800-578-8810 Fax: 707-251-8869 Pollard Unlimited 4061 E. Castro Valley Blvd., # 104 Castro Valley, CA 94552 Tel. & Fax remain the same
6(59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 ‡ )5(0217 6 (59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 ‡ )5(0217 PLEASANTON ‡ &233(5232/,6 ‡ 02'(672 ‡ 6$17$ &/$5$ PLE ASANTON ‡ &233(5232/,6 ‡ 02'(672 ‡ 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 CompanyŽ (AAMCŽ), which is the Community Associations Institute’s highest GHVLJQDWLRQ DZDUGHG WR PDQDJHPHQW ÀUPV
3 3OHDVDQWRQ ‡ )UHPRQW ‡ 6DQWD &ODUD OHDVDQWRQ ‡ )UHPRQW ‡ 6DQWD &ODUD S Stockton tockton 209.644.4900 209.644.4900 ‡ ‡ 0RGHVWR ‡ &RSSHURSROLV 0RGHVWR ‡ &RSSHURSROLV For management proposal information, please visit www w.mccommunities.com or email inffo@mccommunities.com
ECHO Journal | August 2010
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ECHO Central Coast Fall Seminar Don’t miss this opportunity to learn how to you guide your association through critical times. Register today for the ECHO Central Coast Fall Seminar. Seminar Agenda to be announced in future issues of the Journal.
Central Coast Fall Seminar
Yes, reserve ___ spaces for the Central Coast Seminar. Amount enclosed: $__________ (attach additional names)
Saturday, September 25, 2010
Name: _______________________________________________________
8:00 a.m. to 1:00 p.m.
HOA or Firm: _________________________________________________
Hilton Santa Cruz/Scotts Valley
Address:_____________________________________________________
6001 La Madrona Drive, Santa Cruz
Registration Fee: $40 Non-Members: $50
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
Board Members with Personal Agendas Continued from page 27
the governing documents and ask that she become very familiar with them. She will generally come to understand why all of the rules are for all of the owners. The Retired Owner with Lots of Free Time He has finally gotten himself elected to the board and thinks his efforts to make the place run perfectly have been validated. Fortunately, he only has one vote and can only run the board members if they let him. He will have to be taught how to “work with others.” The Former Board Member with a Grudge This person will try to convince everybody that she is looking out for the entire association. In reality she just wants things done her way. Make sure that she has a very legible copy of the governing documents and that she references them often. Don’t ignore her efforts; engage her energy in a productive manner for the association. The New Board Member with a Grudge Now that this person has been elected to the board, he should come to the realization that all of the rules really are for all of the people. He normally is very surprised to learn how disruptive a single owner can be when they choose not to follow the rules. Don’t let anyone bully you into doing anything just his or her way. The governing documents were written for the whole association to enable people to live in relative harmony within a closed community. If there is really a problem that needs to be addressed, the directions are in black and white on how to go about getting the documents changed. HINT: Look in the governing documents! The most effective board members are the ones who know how to say that they will take anything under advisement. Then they research the question from all perspectives. When they come back to the owners with an answer, they can be confidant that they have followed the guidelines of the governing documents.
Brenda L. LeClair is an account executive with Certified Management, an Associa firm, in the Kona, HI, office. This article has been previously printed in Association Times, a publication from Associa. ECHO Journal | August 2010
33
By Paul Collins PCAM, CCAM
Custom-Tailored Management Package For Smaller Associations E
VERY COMMON INTEREST DEVELOPMENT IS
unique. Therefore, most management companies offer a variety of custom service packages to meet the unique needs for each of its clients. Many smaller associations lack the need or the resources for full-time management services and opt for self-manage34
August 2010 | ECHO Journal
ment. Although self-management may be the cheapest option in the short term, the inherent responsibilities involved with self-management can be overwhelming to many boards of directors. Those responsibilities may include: • Association law
• • • • • • •
Accounting procedures Bid development Vendor relations Owner relations Facility management Risk management Community leadership
In spite of these difficult requirements, many boards have opted for self-management, resulting in overworked (and underappreciated) directors. Board members are often unaware of the extensive and complex federal and state laws, requirements, accounting procedures, and disclosures with which every association, regardless of its size, must comply. Too often, this can lead to an insolvent association and diminished property values. Further, board members who are operating an association without proper guidance may be vulnerable to personal liability. The Challenge Community associations with fewer than fifty homeowners often struggle to meet maintenance, insurance and administrative obligations while also paying for the additional cost of professional management. Often, management companies are unable to offer significantly reduced prices to smaller associations due to a workload comparable to that of a medium sized development of 50 100 units. Accordingly, many small associations seek scaled down or financial-only management packages, which many small communities have found more in line with their restricted financial resources. Note: A small associations is not defined only by number of units. A small budget, regardless of the number of units, is also a defining characteristic of a small association. For example, a housing development may have 150 homes, but very little common area to maintain and, as a result, low assessments and minimal financial resources. It might be difficult for this association to earmark the majority of their dues towards management fees. For the purposes of this discussion, these large membership, small budget associations are considered “small associations.” Consulting Services For this reason, many management companies offer consulting services to associations who want to manage themselves. The broad scope of knowledge and experience needed to run a common interest development effectively makes it very important that boards seek some professional guidance and assistance to maneuver through these tricky subjects but wisely seek professional advice for the more technical issues. Associations with 10–50 units may be large enough to afford a regular contract with a management company. The very small associations (10 units or less) may be almost entirely self-managed but still seek professional advice on cer-
tain issues, as they arise. The following consulting services offered by management companies can assist board members to run their homeowner associations effectively: • Initial association evaluation • Assist board to develop a system that will accurately and completely record association business. • Verify that a complete set of governing documents is on file. • Verify that vendor contracts and proof of insurance certificates are on file. • Verify that accounting systems and procedures are in compliance with generally accepted accounting procedures. • Verify that your association is carrying required insurance and has copies of all policies and proof of insurance from vendors. Assist the board in limiting their risk exposure. • Verify that association is meeting all owner disclosure requirements including distribution of budgets, year-end financials, and proof of insurance and alternate dispute resolution. • Verify that all required reports (e.g. Reserve Study, pro forma budgets, yearend financial statements, etc.) are on file. • If any required materials are not present in association files, to assist board in procuring missing documents. • Review internal systems, including contracting, owner relations, declaration enforcement and maintenance programs. • Review internal financial procedures, including assessment collection, disbursements, financial reporting, bankcards, reconciliations and budgeting. • Review delinquent owner collection procedures. • Assist board in conducting board meetings in a business-like manner. The goal of using professional management on a consulting basis is to empower the board with the necessary information to effectively self manage their common interest development. Remember, when you work with a reputable management company you are working with an ensemble of knowledgeable and experienced lawyers, accountants, general contractors and other vendors that have been found to be exceptional in their respective fields. Economies of Scale and Cutting Costs Because there are usually fewer homeowners in a small association contributing money “into the pot,” there is a higher per unit cost for all goods and services. For example, a
$500 per month pool maintenance contract will cost $10 per unit per month in a 50-unit complex. However, in a 200 unit complex, the per unit cost drops to $5 per month. Whether you are a large community or a small community, a standard sized pool will require significant resources to maintain, not to mention heat and saving for its long-term repair. These same economies of scale exist for management firms. Whether it is for a 50- or 100-unit complex, many of the redundant tasks that a management company must perform are identical. Of course there is some correlation between size of community and managerial workload, but often that difference is insignificant. Many management companies will not even consider an association of fewer than 100 units for this very reason! Some management companies will gladly contract with a small community, offer basement prices, and then do one or both of the following: • Completely neglect the community and collect the monthly fee. • Bill a lot of “extras.” In either case, the association is at a disservice, but these conditions occur all too often. It is critical to know the primary cost driver of all management companies—employee salaries. Community association management is part of the service economy. Since management companies do not manufacture a product, their value is not derived from producing and selling widgets. A management company’s value is a function of time (and its efficient use thereof). The management firm must pay its employees to perform a service. The company will be profitable only if the employees create enough value within their allotted time to cover the expenses and generate a profit for the firm. Typically management companies are compensated for their time based on a per unit fee schedule (i.e., $15 per unit). If an association has only 15 units, at $15 per unit, the management firm will generate only $225. This sum is hardly enough to produce a financial statement, much less to pay for other management services. Therefore, the challenge for the smaller association is to prioritize its managerial needs with an emphasis of minimizing the amount of time the manager will need to spend dedicated to the community. All this must be done without a lapse in the level of service the association Continued on page 39 ECHO Journal | August 2010
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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.
Be an HOA Survivor
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.
2010 ECHO Annual Seminar Program
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.
This Program Book is suppor ted through a generous sponsorship from Management Solutions.
2010 ECHO Annual Seminar Program Book $35.00 Non-Member Price: $45.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2010 ECHO Annual Seminar held on June 19, 2010. 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 Member’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 Member’s Guide for Management Interviews $20.00 Non-Member Price: $25.00 This guide for use by boards for conducting complete and effective interviews with prospective managers takes the guesswork out of the interview process. Over 80 questions covering every management duty and includes answer sheets matched to the questions.
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AMOUNT
ECHO Events Calendar
Dates for your calendar Wednesday, August 4 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, San Jose 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
Friday, September 10 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Monday, September 13 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland Tuesday, September 14 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz
Wednesday, August 18 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, September 2 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael
Thursday, September 23 San Francisco Luncheon 11:45 a.m. St. Francis Yacht Club San Francisco
Wednesday, October 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, San Jose
Friday and Saturday June 17 & 18, 2011 ECHO Annual Seminar Santa Clara Convention Center Santa Clara
Friday, October 8 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, October 13 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday, October 15 ECHO Annual Membership Meeting 10:00 a.m. ECHO Office 1602 The Alameda, Ste. 101 San Jose
Saturday, September 25 Central Coast Fall Seminar 8:00 a.m. to 1:00 p.m. Hilton Santa Cruz/Scotts Valley Wednesday, October 20 6001 La Madrona Dr, Wine Country Resource Panel Santa Cruz 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
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August 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
Smaller Association Management Packages Continued from page 35
provides its members. Here are some ways to significantly cut the management company’s time on task: 1. Cut down on the number of meetings that your association conducts or at least the number the manager attends. Consider quarterly or bi-annual meetings. Another option is to schedule meetings during normal business hours at the manager’s offices. 2. Do not require the manager to take minutes at the meeting. 3. Do not require the manager to deal with smaller “low-skill” jobs such as day-to-day landscaping or CC&R enforcement issues. 4. Do not require the manager to perform weekly or monthly site inspections. Quarterly walkthroughs supplemented by an active grounds committee ought to suffice. Just because the management company does not perform a given task should not mean that the task can be left undone. These tasks must be delegated to volunteer board members or committee members. Yes, this does mean more work for volunteer homeowners, but it also means lower monthly fees and lower monthly dues. It also means that the homeowners will be more involved in the day to day operations of the community, which almost always equates to a better-run, more harmonious community; nobody has a better idea of what a community needs that the people that live there! Note: Associations with a high volume of volunteer work may wish to purchase a worker compensation policy with an endorsement for volunteers. Hybrid Management Packages Hybrid Management: “Teaming up board and committee members, professional community association managers and professional financial managers into the overall community association management strategy.” The question arises: What tasks should the board perform and what should be delegated to the management company? A hybrid management package should require your management company to provide a qualified manager to consult with the board, as needed, to oversee large complex projects (e.g. painting or re-roofing) or guidance on managing small day-to-day issues. Meanwhile, the management company will administer your association’s financial and legal obligations. The important thing is having a relationship
A second example would be annual disclosures. There are countless documents that must be distributed yearly, or as needed, for a variety of association functions. Note: These requirements change yearly. Thus it will require a professional to keep track of what must be disclosed, when, and to whom.
procedures, and pitfalls to begin mentioning in this article. The following is a list of tasks that a board would be well advised to have handled by a community association management company or a community association financial management company: Fiscal and Accounting Services • Provide owners with dues payment coupons and/or statements. • Set up and maintain a lockbox system for assessment collections. • Offer owners automatic electronic payment of dues. • Assistance in developing an investment strategy of reserve funds. • Reconciliation of all accounts; checking, savings, money market, etc. • Prepare checks as authorized by board. • Provide board detailed monthly or quarterly financials, using the modified accrual method of accounting. • Monitor reserve investment rollover dates. • Assist independent auditors with data gathering. • Review financial statements with board.
A final example is financial accounting, wherein there are too many requirements,
Continued on page 42
with a firm that can provide, when needed, a qualified manager (preferably a CCAM or PCAM) to assist the board with more technical issues. With so much regulation coming in from Sacramento every year (e.g. case law, the Davis-Stirling Act, Corporate Code and other statutes) it may be difficult for a board member to navigate the shark-infested waters of association law and protocols. An example would be administration of annual meetings and elections or special meetings. It is important that an impartial competent party be involved to administer all aspects of an annual meeting to ensure that a fair and legal election is conducted. Having a neutral party convene the annual meeting is critical for associations dealing with controversial issues or a contested election.
ECHO Journal | August 2010
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ECHO Honor Roll
About
ECHO Honors Volunteers Diane Kay 2010 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, 831-708-2916 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, CCAM, 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.
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August 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 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
June 2010 Tyler P. Berding, Esq. David Block, Ph.D. John Paul Hanna, Esq. Geri Kennedy, CCAM Ann Rankin, Esq. July 2010 Charlotte Allen Matt Malone, Esq. Kerry Mazzoni John Schneider Dennis Socher David West
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
Advertiser Index
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Access Association Services . . . . . .15 American Asphalt . . . . . . . . . . . . . .30 American Management Services . . .10 Angius & Terry . . . . . . . . . . . . . . . . .3 A.S.A.P. Collection Services . . . . . . . .9 Association Reserves . . . . . . . . . . .18 Berding | Weil . . . . . . . . . . . . . . . . .44 CAB/Mutual of Omaha . . . . . . . . . .14 Collins Management . . . . . . . . . . . .15 Common Interest Mgmnt Services . .19 Community Management Services . .30 Compass Management . . . . . . . . . .11 Cool Pool Service . . . . . . . . . . . . . .16 Cornerstone Community Mgmnt . . . . .8 Draeger . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . .33 First Bank Association Bank Srvcs . .39 Flores Painting . . . . . . . . . . . . . . . .31 Focus Business Bank . . . . . . . . . . .10 Gachina Landscaping . . . . . . . . . . .15 Hill & Company . . . . . . . . . . . . . . . .33 M&C Association Services . . . . . . . .31 M. L. Nielsen Construction . . . . . . .25 Massingham and Associates . . . . . .34 Pelican Management Group . . . . . . .16 PML Management Corp. . . . . . . . . .14 Pollard Unlimited . . . . . . . . . . . . . .24 Professional Association Services . .18 R. E. Broocker Co. . . . . . . . . . . . . .24 Rebello’s Towing Service . . . . . . . . .42 REMI . . . . . . . . . . . . . . . . . . . . . . .17 Saarman Construction . . . . . . . . . . .9 Scuba Pool Repair . . . . . . . . . . . . . .8 Statcomm . . . . . . . . . . . . . . . . . . .24 Steve Tingley Painting . . . . . . . . . . . .2 Steve’s Painting Services . . . . . . . .17 Union Bank . . . . . . . . . . . . . . . . . .16 West Management Co. . . . . . . . . . .25
ECHO Journal | August 2010
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Smaller Association Management Packages Continued from page 39
• Assist board with preparation of pro forma operating budget. • Collect and process assessment payments. • Prepare and post accounts receivable. • Prepare and post accounts payable. • Assist board in obtaining and reviewing a current and accurate reserve study and funding study. • Pursue collection of delinquent accounts per association’s Collection Policy. • Keep reserve schedule current. Protection of Property Against Risk • Assist in securing coverage and costs for annual insurance premium(s) including; fire, general liability, fidelity, bonds and other statutory coverages • File insurance claims on behalf of association. Records and Correspondence • Maintain association financial records and files in safe condition. • Maintain current membership and mailing list. 42
August 2010 | ECHO Journal
• Maintain membership files on each individual owner. • Provide up-to-date assessment and ownership information to title companies, on request, for use in title transfers and refinancing. • Provide for duplication and mailing of copies of association documents as needed. • Provide for duplication and mailing of correspondence, reports, newsletters, and flyers as required. The following are other managerial functions that can be selected on an as-needed or consulting basis: Rules Enforcement, Maintenance, Repairs and Replacements • Enforce rules and regulations and fine policy. • Receive and follow up on maintenance requests and complaints. • Inspect common area property as needed. • Assist with preparation of contract specifications. • Accept bids for board to review. • Monitor contractual agreements of independent contractors or personnel.
• Obtain written proposals/contracts when requested by board. Meetings of Association • Attend Annual Meeting. • Attend regular meetings. • Arrange for and schedule place, date, and time for general membership meetings. • Prepare and mail meeting notice, proxy, ballot, agenda, etc. • Prepare and present special reports, as requested. • Prepare and present minutes of board meetings. Note: All management companies offer different billing structures. It is important to know which services will be performed under the base contract and which services will be billed as extras. A good way to cut down on extra billing is to assume responsibility for duplication and distribution of mailings, storing archived files onsite, and other administrative tasks.
Paul Collins is the co-owner of Collins Management in Hercules CA, an ECHO member company.
San Francisco Luncheon Thursday, September 23 11:45 a.m. to 2:00 p.m.
Save this date on your calendar
Luncheon Price: $70 Non-Members: $80 Advance reservations are required for this event. Reservations after September 13 must add $15. Cell phone use is not permitted inside the St. Francis Yacht Club. Yes, reserve _____ spaces for the ECHO San Francisco Luncheon. Amount enclosed: $__________ (attach additional names) Name: HOA or Firm: Address: City:
State:
Zip:
Phone: Visa/Mastercard No.
Exp. Date:
Signature: Return with payment to: ECHO, 1602 The Alameda, Ste 101, San Jose, CA 95126 Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Telephone: 408-297-3246; Fax: 408-297-3517