January 2011
A Journal for California Community Association Leaders
echo-ca.org
Executive Sessions
ALSO INSIDE THIS ISSUE:
• Majority Rules • 2010 Legislative Update • CC&R Enforcement
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Legislative Update David F. Feingold, Esq. While Sacramento was relatively quiet this year, you will get a preview of things to come, and hear about all of the disputes that ended up in front of a judge in 2010—and pick up valuable tips to help keep your community out of court!
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The Glass is Half Full Glenn H. Youngling, Esq. Tired of depressing stories of underfunded and underwater communities? See the positives, and pick up tips on how to navigate the rocky shores of collection, special assessments, foreclosures, short sales, and running the community in today’s reality!
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Contents Majority Rules—page 12 6
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Documenting Executive Sessions The Davis-Stirling Act limits when boards can meet in closed or executive session. This article focuses on what California law requires with respect to documenting executive sessions.
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Majority Rules But What If the Minority Won’t Stop Fighting? Majority rules works reasonably well most of the time in associations. But some board members don’t accept that in order for the majority to rule, the minority must support decisions with which it disagrees. This article discusses some ways to deal with such conditions.
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CC&R Enforcement—Important “Don’ts” Association directors have many responsibilities that include enforcing the governing documents, especially the CC&Rs and Operating Rules. The majority of association residents follow the CC&Rs. This article gives some guidelines about handing those who don’t.
Departments 28 Index of 2010 Articles 32 News from ECHO 33 Legislation at a Glimpse
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34 Directory Updates 36 ECHO Bookstore 38 Events Calendar 40 ECHO Volunteers 41 ECHO Marketplace 41 Advertiser Index
On the Cover Documenting Executive Sessions —page 6 4
January 2011 | ECHO Journal
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 2011 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.
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2010 Statutory and Case Law Update, Part I Attorney Jeff Barnett summarizes case law and legislative developments for the 2010 calendar year. California law consists of the statutes enacted by the Legislature, and the common law, which is made by the courts in the form of published decisions of Appellate Courts. Part I addresses only those statutes enacted by the Legislature.
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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.
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.
PRESENTING 2011 ECHO Seminars
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By Deon R. Stein, Esq. and Jesse R. Mattson, Esq.
Executive Sessions Documentation and Minutes any people are unaware that the term “executive session” does not appear anywhere in the California Corporations Code. This is because, for most types of California corporations,1 meetings of boards of directors are always closed to the non-director shareholders/members, and thus there is no need for the executive session concept. However, with respect only to owners associations that manage common interest developments (CIDs),2 the opposite is true: the Davis-Stirling Act (specifically, California Civil Code Section 1363.05) requires that most meetings of CID association boards be open to all members, and the Act limits when such boards can meet in closed, or executive session, to certain specified circumstances.3 Unfortunately, the Civil Code executive session statutes that
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1. E.g., general for-profit corporations, nonprofit public benefit corporations (see Corporations Code §5110 et seq.), nonprofit religious corporations (see Corporations Code §9110 et seq.), and many (but not all) nonprofit mutual benefit corporations (see Corporations Code §7110 et seq.). 2. Most of which are incorporated as nonprofit mutual benefit corporations. 3. The five circumstances specified in Civil Code Section 1363.05(b) are: (1) litigation, (2) matters relating to the formation of contracts with third parties, (3) member discipline, (4) personnel matters and (5) meeting with a member regarding the member’s payment of assessments. Most legal practitioners, including the authors, believe that there are other circumstances where boards may lawfully meet in executive session, such as when a board meets with the association’s attorney to discuss matters that are not “litigation”, because all conversations between an attorney and his/her client are protected by the attorney-client privilege.
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apply only to CID associations were not written as clearly as they could have been. That has created numerous complex and confusing legal questions that could easily take an entire day (or longer) to discuss. Fortunately, this article will focus only on what California law requires with respect to (1) keeping minutes of executive sessions and (2) what documentation is necessary to show that an executive session occurred.4
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Keeping Minutes of Executive Sessions In the authors’ experience, even the threshold question of whether or not California law requires boards to prepare minutes of executive sessions has led to spirited debate among legal practitioners over the years. In our opinion, the relevant starting point for answering this question is California Corporations Code Section 8320(a)(2), which provides as follows: Each corporation shall keep minutes of the proceedings of its members, board and committees of the board.5 Since boards discuss official business and take official actions at executive sessions, executive sessions are “proceedings of [the] board.” Therefore, the authors firmly believe that boards are required to keep separate minutes of all executive sessions. Further support for this conclusion is found in Civil Code Sections 1363.05(d), 1365.2(a)(1)(H) and 1365.2(d)(1)(E)(iv). Each of these sections make express reference to executive session minutes, confirming that the legislature considers “executive sessions” to be “proceedings of the board.” Questions often arise as to how detailed executive session minutes should be, and whether they should be less detailed than open meeting minutes. The purpose of minutes, regardless of whether they are for an open meeting or an executive session, is to document clearly what actions were taken at a particular meeting and why. Then, if such actions are ever called into question in the future, a clear record exists of what actions were taken, and who voted for and against such actions. In many circumstances, it might also be appropriate for minutes to document votes by the board that failed to obtain 4. As noted above, the vast majority of California CID associations are nonprofit mutual benefit corporations. Accordingly, the analyses in this article apply only to such associations. If your association is some other form of corporation, or is not incorporated, other statutes apply, although in most cases, with the same result. 5. Emphases added.
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approval of a majority of the directors. It is the authors’ opinion that executive session minutes should be at least as detailed as open session minutes, and in some situations, even more detailed. That being said, the reality is that executive session minutes are usually shorter than open meeting minutes simply because open meetings deal with more topics and tend to last longer. Remember, the reason why association boards are allowed to meet in executive session is to protect privacy, confidentiality, etc., not so that the board can do “bad” or “wrong” things and hope no one finds out about them. That is why the authors believe that executive session minutes should be as detailed as necessary to document properly each and every action that occurred by the board and why. Documenting the Existence and General Subject Matter of Executive Sessions Next, properly documenting that an executive session occurred and properly describing what was discussed in that executive session without breaking the confidentiality of the proceeding have proven to be quite confusing as well, mostly due to how the legislature worded the relevant statute, California Civil Code Section 1363.05(c). That statute provides as follows: Any matter discussed in executive session shall be generally not ed in the minutes of the immediat ely follow ing meeting that is open to the entire membership.6 This seemingly simple sentence is actually more complicated that it appears, because in practice it is rather counter-intuitive. To illustrate and better explain how to document executive sessions properly in executive session and open session minutes, we offer the following very specific hypothetical series of meetings (please pay close attention to the dates and other details of the meetings in this example): Imagine that a particular board held a board meeting on March 5 (we’ll call this meeting BM #1). At the “open” portion of BM #1, the board discussed normal board meeting topics. Then at the very end, the board had a quick executive session (ES #1) to discuss a lawsuit filed by an owner named Beckham against the association (We’ll call it the Beckham lawsuit, for the purpose of this example.). On March 12, the board met in executive session (ES #2) to conduct a disciplinary hearing against an owner named Owen for a violation of the governing documents.
Board meeting #2 (BM #2) took place on April 6. At the “open” portion of BM #2, the board again discussed normal board meeting topics. Then again, at the very end, the board had a quick executive session (ES #3) to discuss the possible termination of one of the association’s employees for alleged misconduct. Board meeting #3 (BM #3) took place on May 8. At the “open” portion of BM #3, the board again discussed normal board meeting topics. Because there was nothing to discuss in executive session, there was no executive session. So to summarize, there were three “open” board meetings (BM #1 on March 5, BM #2 on April 6, and BM #3 on May 8), and three executive sessions (ES #1 on March 5, ES #2 on March 12, and ES #3 on April 6). Therefore, there should be six separate minutes, three for the three “open” board meetings and three for the three executive sessions. With the two statutes quoted above in mind, let’s discuss the minutes and documentation requirements for each of the hypothetical meetings in the above example: BM #1 (March 5): The minutes of BM #1 must summarize what occurred during the “open” portion of BM #1. With respect to ES #1 (which, as you recall, was part of BM #1), all that the minutes of BM #1 have to say is something like “The board then adjourned to Executive Session” (because that is an accurate summary of what occurred at the end of BM #1). However, the authors recommend that the minutes of BM #1 give a little more detail and say “The board then adjourned to Executive Session to discuss a litigation matter.” The minutes of BM #1 must be approved by the board during the “open” portion of a future board meeting, e.g., BM #2. All members of the association have the right to review and obtain copies of the minutes of BM #1. ES #1 (March 5): The minutes of ES #1 must summarize what actions the board took during ES #1 with respect to the Beckham lawsuit. And remember, because non-director members of the association do not have the right to review and obtain copies of executive session minutes, the minutes of ES #1 must be approved by the board at a future executive 6. Emphases added. ECHO Journal | January 2011
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session (e.g., ES #2), not during the “open” portion of a future board meeting. ES #2 (March 12): The minutes of ES #2 must summarize what actions the board took ES #2 with respect to the Owen disciplinary hearing. Again, the minutes of ES #2 must be approved by the board at a future executive session (e.g., ES #3), not during the “open” portion of a future board meeting. BM #2 (April 6): Here’s where it starts to get really interesting and a little confusing: 1. The minutes of BM #2 must summarize what occurred during the “open” portion of BM #2. 2. With respect to ES #3 (which, as you recall, took place at the end of BM #2 on April 6), all that the minutes of BM #2 have to say is something like “The board then adjourned to Executive Session” (because that is an accurate summary of what occurred at the end of BM #2). Again, however, the authors recommend that the minutes of BM #2 give a little more detail and say “The Board then adjourned to Executive Session to discuss a personnel matter.” (Note: the employee’s name is not mentioned here.) 3. With respect to ES #1 (which, as you recall, was at the end of BM #1 on March 5) and ES #2 (the Owen disciplinary hearing which took place on March 12), the minutes of BM #2 must say the following (even though the Beckham litigation and the Owen disciplinary hearing were never discussed at BM #2): “Executive Sessions Held on March 5 and March 12: The board met in Executive Session on March 5 to discuss a litigation matter and the board met in Executive Session on March 12 to conduct a member disciplinary hearing.” The reason that the minutes of BM #2 have to mention generally what occurred during ES #1 and ES #2 is because BM #2 is the first “meeting that is open to the entire membership” following those two executive sessions (see Civil Code Section 1363.05(c). 4. The minutes of BM #2 must be approved by the board during the “open” portion of a future board meeting, e.g., BM #3. All members of the association have the right to review and obtain copies of the minutes of BM #2. ES #3 (April 6): The minutes of ES #3 must summarize what actions the board took during ES #3 with respect to the employee’s personnel matter. The minutes of ES #3 must be
approved by the board at a future executive session (ES #4?), not during the “open” portion of a future board meeting. BM #3 (May 8): 1. The minutes of BM #3 must summarize what occurred during the “open” portion of BM #3.
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2. With respect to ES #3 (which, as you recall, was part of BM #2), the minutes of BM #3 must say the following (even though the personnel matter was never discussed at BM #3): “Executive Session Held on April 6: The board met in Executive Session on April 6 to discuss a personnel matter.” (Note: again, the employee’s name is not mentioned here.) 3. The minutes of BM #3 must be approved by the board during the “open” portion of a future board meeting (BM #4?). All members of the association have the right to review and obtain copies of the minutes of BM #3. To summarize, each executive session that takes place in conjunction with an open board meeting gets two mentions in open board meeting minutes: one in the minutes of the open board meeting on the date the executive session actually occurred, and one in the next open board meeting’s minutes, as a back-reference for notification purposes to meet the requirements of Civil Code Section 1363.05(c). However, with respect to standalone executive sessions that take place separate and apart from an open board meeting, they only get one mention in open meeting minutes as a back-reference for notification purposes to meet the requirements of Civil Code Section 1363.05(c): in the minutes of the next “meeting that is open to the entire membership”, whenever that might be. It is unfortunate that such simple concepts must be so complex, but thankfully we can blame the legislature (and not the association’s attorney) for that! Of course, please understand that this article won’t necessarily fit every situation that you may encounter, but the authors hope that it will provide a general framework and thought process to help you comply with these important statutes.
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By Janet O. Aronson, Esq.
The Majority Rules What if the Minority Won’t Stop Fighting? ajority rules. That is the simple but essential concept on which a democracy rests, and it works reasonably well most of the time in common interest communities, where volunteer board members set policies and make rules for their self-governing communities.
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But some board members don’t understand, or are unwilling to accept, that in order for the majority to rule, the minority must support decisions with which it disagrees. When these board members find themselves on the losing end of a vote on an issue about which they feel strongly, they
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continue the battle, taking their disappointment into the community and seeking from owners the support they were unable to win from other board members. They rail against the decision, accuse the board’s majority of acting irresponsibly and encourage owners to protest the offending policy or ignore it. This behavior undermines the board’s decision-making process and breeds dissatisfaction and dissension in the community. Instead of being a unifying force, these dissenters create tensions or exacerbate them, and the damage they do over time can’t be overstated. The Duty of Loyalty How should boards respond? Ideally, they should try to prevent these situations from developing in the first place by educating board members about their role, making sure they understand that their fiduciary duty, to put the association’s interests ahead of their own, includes a duty of loyalty to the association. And that duty of loyalty implies an obligation to accept and support board decisions, including decisions they don’t like. Board members who refuse to accept majority rule typically make two arguments: They are the ones who are acting in the best interests of the association; it is the board members in the majority who are violating their fiduciary obligation to the community by making a “bad” decision. The board member, no less than anyone else, has an absolute right to express his/her views, and that Constitutional right to freedom of speech includes the right to complain about board decisions and to speak out against them. These arguments raise some interesting legal questions and the courts haven’t dealt with them directly in the common interest ownership context, but the Colorado Supreme Court came close in a 2004 decision, Krystkowiak v. W.O. Brisben Companies, Inc. The suit involved a dispute between a developer and a neighborhood association that was objecting to the large-scale apartment complex the developer planned to build across from the home of a neighborhood resident. That resident (Krystkowiak) created the neighborhood association to fight the proposal and served on a committee negotiating with the developer. The neighborhood group eventually reached a settlement in which the developer agreed to modify the project’s design in return for which the residents agreed to end their protest. But Krystkowiak wasn’t satisfied
with that resolution. When he continued his protest, the developer sued him, arguing that he was bound to accept the terms of the association’s agreement and that his continued opposition constituted improper “tortuousâ€? interference with the developer’s legitimate business plan. Krystkowiak argued that his first amendment right to freedom of speech allowed him to continue his individual protest notwithstanding the neighborhood association’s agreement to end its opposition. The court agreed, finding that “a member of a neighborhood association does not forfeit his individual rights by virtue of his membership in the organization.â€? When Krystkowiak’s views diverged from those of the association, the court said, “he was free to disassociate from the organization and continue his petition against the development in his individual capacity. ‌The fact that [he] was initially acting in a representative capacity did not subsume his individual rights,â€? the court said. Stand (Down) and Fight On its face, the decision might seem to support the dissident board member who asserts his “Constitutional rightâ€? to rail against a majority decision, but the court made another crucial point. It said Krystkowiak was free to “disassociateâ€? from the neighborhood association when he disagreed with its policy, and that is precisely what dissenting board members should do. If the board makes a decision they don’t like and can’t in good conscience support, they should resign from the board and lead a campaign either to challenge the decision or to replace the board members who voted for it. But they should lead that protest from outside the board, not from within it. It is important to note here that we are not just talking about board members whose views differ from those of the majority. Disagreements are inevitable and desirable; a vigorous exchange of ideas among board members can produce more thoughtful, better formulated decisions. The concern is not with board members who disagree with the majority but with board members who refuse to accept that the debate ends when the board votes, and who express their opposition in ways that undermine the board’s credibility and its ability to govern the community. These board members are arguably violating their fiduciary duty by putting their individual right to speak out ahead of the duty of loyalty that requires them to support
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the board’s decisions. What about their right to freely express their views? The court in Krystkowiak noted properly that people don’t check their constitutional rights at the door when they join an organization. But the court also noted that “First Amendment rights are not absolute… [Those rights] may be limited by contract.” It is “well-recognized,” the court added, “that the First Amendment will not protect people who have contracted away their First Amendment rights.”
The concern is not with board members who disagree with the majority but with board members who refuse to accept that the debate ends when the board votes... Citing that principle, other courts have ruled in favor of companies that have fired employees for making derogatory comments about the company in an Internet blog. The courts have said in these cases that an employee’s right to free speech takes a back seat to the common law duty of loyalty employees owe their employers, under the implied or actual contract between them. Board Member’s Pledge This suggests a strategy that associations can apply by requiring volunteers serving on the board to sign a contract detailing the obligations of board members. And that contract or pledge should include language making it clear that board members are accepting some limitations on their First Amendment right to freedom of expression. The agreement might say, for example: “I agree to abide by the decisions of the majority, including decisions with which I may disagree, and will avoid saying or doing anything that would impede the enforcement of board decisions or otherwise discourage their acceptance by association residents.” 16
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Signing an agreement of this kind may not prevent angry board members from speaking out inappropriately against board decisions, but it would counter their argument that they have a free speech right to do so. Boards that find themselves dealing with a “loose cannon” should also review their procedures to make sure they permit an open debate in which all members are encouraged to express their views. At a minimum, these procedures should require members to listen to others respectfully, without interrupting them and without ridiculing their views. In any participatory democracy, participants are usually more willing to accept majority rule if they don’t feel excluded or abused by it. Of course, there are people who are convinced that they are “right” and everyone else is wrong. Their disruptive behavior as board members can have a toxic effect on the community the board can’t ignore. Where action is required, boards have only two options: They can initiate removal proceedings, which typically require a vote of the owners; or they can file suit, charging the board member with violating his/her fiduciary duty to the association. Litigation, while sometimes necessary, is always a last resort. Boards considering this avenue should be aware that Directors and Officers liability policies, which cover suits in which board members are personally involved, sometimes exclude litigation that pits board members against each other. Even if your board is not currently dealing with a member who refuses to play well with others, you should review your existing insurance policy to make sure it would cover litigation against a disruptive board member, should that become necessary in the future.
Janet Aronson is a partner in the New England law firm Marcus, Errico, Emmer & Brooks, P.C. who concentrates her practice in the representation of condominium and homeowner associations. Her practice includes all facets of community association representation, and she co-chairs the firm’s Collection and Lien Enforcement practice. She played a significant role in passing legislation amending the R.I. Condominium Act to provide Rhode Island condominiums with a super lien for unpaid condominium assessments, and she has more recently been working for the adoption of a super lien for New Hampshire condominium associations. ECHO Journal | January 2011
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By Jeffrey A. Barnett, Esq.
2010 Statute and Case Law Update Part I—Legislative Developments his article provides a summary of statutory and case law developments for the calendar year 2010. Part I offers a discussion of legislation of interest to the common interest development industry that has been enacted as law, as well as bills that were vetoed by the Governor or died in Committee. Part II to be published in the February 2011 ECHO Journal will address important decisions that affect common interest development housing handed down by the California courts during 2010.
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January 2011 | ECHO Journal
SB 1427—Default Notices Effective January 1, 2011, new Civil Code Sections 2924.4 and 2924.5 are added to the Civil Code. The statutes prohibit government entities from imposing fines or penalties for failure of the owner to maintain a vacant property that is subject to a notice of default, that is purchased at a foreclosure sale, or that is acquired through foreclosure, until the government entity provides the owner of the property with a notice of the violation and an opportunity to correct that violation. An exception is
made for specific conditions on the property that threaten public health or safety. The law further prohibits government entities from imposing assessments or liens to recover the cost of nuisance abatement measures with regard to property that is subject to a notice of default, purchased at a foreclosure sale, or acquired through foreclosure, if the assessment or lien exceeds the actual and reasonable costs of nuisance abatement. Finally, the new law prohibits Continued on page 20
ECHO Journal | January 2011
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Statute and Case Law Update Continued from page 18
government entities from imposing such assessments or liens unless the costs that constitute the assessment or lien have been adopted by the elected officials of that governmental entity at a public hearing. By virtue of the new laws, homeowner associations that acquire properties through foreclosure of assessment liens have due process protection against government imposition of fines or penalties for alleged failure of maintenance, and protection against the imposition of assessments or liens that exceed the actual and reasonable cost of nuisance abatement. This bill was supported by ECHO. AB 2016—Request for Trustee’s Deed This bill, effective January 1, 2011, amends Civil Code Section 2924b, a lengthy statute that specifies the procedure for nonjudicial foreclosure of deeds of trust, such as the recording, mailing and posting requirements for notices of default and notice of sale. The new law adds a subsection (f) which allows homeowner associations to file in the recorder’s office, in the county in which the subdivision is situated, a request that a mortgagee, trustee or other person authorized to record a notice of default regarding any of the homes in the subdivision, mail to the association a copy of any trustee’s deed upon sale concerning the home. The request is required to include a legal description or the assessor’s parcel number of all of the separate interests in the subdivision, the name and address of the association, and a statement that it is a homeowner association. If this request is recorded before the filing of a notice of default, the mortgagee, trustee or other authorized person is required to mail the requested information to the association within fifteen business days following the date the trustee’s deed is recorded. The trustee’s deed is valid even if the association is, through error, not properly notified. The benefit to the association of recording the request is to receive reasonably prompt notice of the change in ownership of a property in the subdivision as a result of a foreclosure sale. This in turn permits the association to begin billing the foreclosure sale purchaser for assessments accruing subsequent to the foreclosure sale and to enforce other provisions of the CC&Rs against the new owner, where this may have been impractical during the foreclosure as a 20
January 2011 | ECHO Journal
result of the abandonment of the property or insolvency of the prior owner. AB 2120—Mobilehome Law Disclosure Effective January 1, 2011, Civil Code Section 7918.5 is amended by this bill to allow the management of a mobilehome park to make an election, prior to February 1st of each year, if a significant change was made in the Mobilehome Residency Law (Civil Code Section 798 and following) by legislation enacted in the prior year, to either (1) provide all homeowners with a copy of the new Mobilehome Residency Law, as amended; or (2) provide written notice to all homeowners that there has been a change to the Mobilehome Residency Law, and that they may obtain one copy of that law from management at no charge. Upon receipt of such a request, management must provide a copy within a reasonable time, not to exceed seven days. Mobilehome parks may now conserve resources by electing to notify owners of significant changes in the Mobilehome Residency Law in the prior year and allowing homeowners to request a copy, in lieu of mailing a complete copy of the law to all owners. AB 1726—Voting Quorums: Vetoed This bill would have reduced the quorum for a second election of directors “utilizing the same ballot” if an election of directors could not be held due to the failure to obtain a quorum. The quorum required for the second election would be forty percent of the association’s voting power, unless the association’s governing documents already provided for a reduced quorum. The bill further provided that if a quorum still could not be obtained, the quorum would be thirty-three percent of the association’s voting power, again unless the association’s governing documents provided for a reduced quorum for additional elections. The ballot would have required disclosure in the election materials of the reduced quorum requirements and limited the “drop down” quorum to ballots involving the elections of directors. The bill further permitted the members to override the statutory quorum drop down by presenting a petition with signatures of five percent or more of the voting power of the association calling for a referendum. If a majority of the votes cast pursuant to the referendum were in favor of maintaining the existing governing document quorum requirement, that quorum would control. It also permitted the
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board to vote affirmatively to maintain the use of the current governing document quorum requirements. The statutory drop-down in quorum would have been operative from January 1, 2011 to January 1, 2014. The Governor vetoed this bill on grounds that it is unnecessary because existing law allows members of a homeowners association to amend the governing documents to establish a lower quorum. ECHO opposed this bill. AB 1927—Rental Rights: Vetoed This bill would have added a Section 1360.2 to the Civil Code prohibiting common interest developments from adopting a governing document, or amending a governing document, that prohibits the rental or lease of a separate interest in a common interest development, unless that provision is approved by a vote of the owners of separate interests with voting power in the common interest development. The vote would have been conducted by secret written ballot, like elections of directors. Unless the provision or amendment was so approved, the prohibition against the rental or lease of a separate interest would be void.
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January 2011 | ECHO Journal
Part II to be published in February will address important decisions that affect common interest developments handed down by the California courts. This bill was approved by the Legislature but was vetoed by the Governor. The Governor stated that although the right to rent or lease a unit is important, there is insufficient evidence to indicate that rental restrictions are currently a growing or widespread problem to justify such a wide-ranging rule change. The Governor noted that current provisions in law provide for an amendment process for homeowners associations to make rule changes. ECHO was the sole party opposing this bill. AB 1793—Artificial Turf: Vetoed This bill would have invalidated provisions of the governing documents of a common
interest development if they prohibit, or have the effect of prohibiting, the use of artificial turf or any other synthetic surface that resembles grass. It would have allowed associations, however, to enforce landscape rules and regulations establishing design and quality standards for the installation of artificial turf, and any other synthetic surface that resembles grass, to the extent that they do not prohibit artificial turf. ECHO opposed this legislation. It was vetoed by the Governor who noted that decisions such as these regarding the use of artificial turf can be made by the homeowners and amended into their governing documents through the existing system of self governance. AB 1975—Submetering: Died in Committee This bill would have required a water purveyor that provides water service to a multiunit residential structure or mixed-use residential and commercial structure that is subject to specified building standards, to adopt a general policy requiring the installation of either a water meter or a submeter to measure water supplied to each individual dwelling unit, or to inform, on an individual basis, an applicant for new water service, as to whether a water meter or submeter is required to be installed for each individual dwelling unit. The bill would have implemented these requirements through changes to the Uniform Building Code. ECHO’s position on this bill was to oppose it unless it was amended. The bill died in the Appropriations Committee as of the close of the legislative session. AB 2502—Delinquency Collection: Died in Committee This bill would have clarified the provisions that set forth the order in which payments by homeowners are to be applied by agents of the homeowners association and any third party assigned to collect payments. It also would have prohibited homeowners from waiving their right to have payments allocated in the specified order, and would require homeowner associations and their agents to accept partial payments of the debt, if those partial payments comply with the terms of a written agreement. Furthermore, the bill would have limited the ability of a board to permit a committee to meet with a homeowner who had requested a meeting with the board. Currently, the law requires the board to meet in special session within forty-five days of the homeown-
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er’s request to discuss a payment plan. Current law further provides that if there is no such special session scheduled within the forty-five day period, that the board may designate a committee to meet with the homeowner to discuss the payment plan within that timeframe. Under the proposed legislation, the board could designate a committee to meet with the homeowner if the homeowner authorized the designation of that committee, but, if the homeowner did not, would require the meeting to discuss a payment to take place at the next regularly scheduled board meeting. The bill furthermore would authorize either the association or the owner to have counsel present at the meeting to discuss the payment plan subject to the requirement that the other party must be notified of that arrangement within forty-eight hours prior to the scheduled meeting. The bill further would have required that minutes of an executive session concerning a payment plan be available to the affected owner upon request. It also would have required that all payment plans be made in writing, and that an executed copy of a contract for the payment plan
be sent to the owner within seven days following the execution of the contract. This bill died in the Judiciary Committee as of the end of the legislative term. ECHO opposed the bill. SB 995—Conversion Plans This bill would have provided that a stock cooperative or a community apartment project for senior citizens, established before the Davis-Stirling Common Interest Development Act, that is converted to a condominium shall not be required to file a condominium plan as part of the documents required to be submitted to the Department of Real Estate. The hearing on this bill was canceled. ECHO had a watch position on the bill. It is difficult to understand how an effective conversion of these subdivisions to condominiums could occur without a condominium plan. California Law Revision Commission The California Law Revision Commission continues its development of proposals for recodification and clarification of the DavisStirling Act and for the potential creation of stand-alone bodies of law governing commercial/industrial associations and residential
associations. In December, 2009, the Law Revision Commission staff drafted the proposed legislation for residential subdivisions and submitted it in a tentative recommendation to the Commission. The approach of the staff in this draft is to retain the existing language of the Act and make specific modifications, rather than redrafting the entire Act. The goal of the Commission staff is to relocate provisions in a more logical order, clarify unclear or confusing provisions, breakdown long statutes into shorter sections, provide for consistent terminology, standardize some governance procedures, and make certain noncontroversial substantive improvements. Persons with an interest in reviewing the extensive work to date and who wish to follow developments or submit comments, can do so by going to www.clrc.ca.gov and clicking on “CIDStatutory Clarification and Simplification.”
Jeffrey Barnett is an association attorney with legal offices in San Jose. He is a past member of ECHO's Board of Directors and a current member the Legal Resource Panel, the Legislative Committee and several regional resource panels. ECHO Journal | January 2011
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By Steven S. Weil, Esq.
CC&R Enforcement The Five Most Important Don’ts You Need To Know ssociation directors have many responsibilities. These include adopting a budget, authorizing year-end disclosures, pursuing delinquent assessments, conducting proper elections and enforcing the governing documents, especially the CC&Rs and Operating Rules. The majority of homeowner association residents—owners and ten-
A
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January 2011 | ECHO Journal
ants alike—follow the CC&Rs. Usually, most of those who don’t are unaware of a particular community rule; with a letter or phone call violations are quickly resolved. Of course, this isn’t always the case. Disputes can escalate for lots of
Continued on page 26
ECHO Journal | January 2011
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CC&R Enforcement Continued from page 24
reasons including perceptions of unfairness, incursion of great expense, stubbornness or sincere disagreements over the extent to which the free use of property becomes subordinated to the CC&Rs and decisions of an association’s board or a committee. It falls to the board to determine whether, how and to what extent a CC&R violation will be addressed. Usually, the tools available include imposition of fines; suspension of the right to vote, run for or serve on the board; and denial of access to common area amenities. The procedures used in connection with these remedies may include a simple “conversation,” a noticed disciplinary hearing or the “meeting and conferring” with the owner and a director as part of an internal dispute resolution process. If the violation remains unresolved, the board will evaluate whether to seek mediation, arbitration or to initiate litigation to compel compliance with the CC&Rs. This involves several considerations, including the magnitude and visibility of the violation; precedent, the cost and the chances of a successful enforcement action; and the number and type of other items on the board’s agenda. Input from experienced counsel is essential when the violations have potentially significant consequences for the community. I’ve advised many boards evaluating the pros and cons of aggressive CC&R enforcement. Over the years, I’ve noticed that directors may initially make assumptions about CC&R enforcement that are not always true: Don’t ignore CC&R violations but don’t go to war over minor problems. Not every violation must be aggressively enforced. Some are relatively unimportant (the unauthorized construction of an improvement that cannot be seen and would have been approved had application been made; a one-time violation of the “nuisance clause” occurring during a high-school graduation party) and some will be hard to address (an unauthorized modification made long ago by a prior owner). Each of these may constitute CC&R violations but common sense suggests a board “pause” before “upping the ante” on a claim. Don’t assume “precedent” is irrelevant. A violation cannot be viewed in a vacuum as if the association has had no past and will have no future role in dealing with violations. 26
January 2011 | ECHO Journal
“Precedent” is very important in terms of “looking back” and “looking ahead.” A board seeking to compel compliance with the CC&Rs may face an owner’s defense that the association has waived its right to enforce because it has failed to do so consistently in the past. And, looking ahead, a board that permits a violation may hamper future enforcement efforts. A key consideration in negotiating the settlement of a CC&R dispute is how it will help or hinder future CC&R enforcement. Don’t assume insurance will cover the claim. Insurance will not cover claims initiated by the board to enforce the CC&Rs. Insurance may cover CC&R claims and related lawsuits (typically for breach of fiduciary duty) brought against the board and association. Claims routinely excluded by an insurance policy are those based on “breach of contract” (i.e., the CC&Rs), noise (including those based on noisy floors), discriminatory conduct (even when no evidence of discrimination exists) and claims also asserted against the manager (who will always demand indemnification from the association). The importance of understanding the association’s insurance policy so that coverage issues can be properly handled cannot be overestimated. Don’t think judges are sympathetic. Most directors assume judges and arbitrators will automatically support upholding the CC&Rs. They won’t. Some judges are more
concerned with seeing a dispute from the owner’s point of view rather than the community perspective. With a well-prepared case, even judges and arbitrators who initially may have sympathy for an owner can be persuaded to ultimately rule in the association’s favor but it certainly isn’t a given. Don’t give up trying to settle a dispute. A really surprising thing is that disputes, even those which seem to be the most intractable, can still be resolved without going to trial. Even when there are hurt feelings, strong egos and lots of money at stake, an effective mediator working with lawyers and parties acting in good faith can find their way to a settlement before or even after a dispute escalates into a lawsuit. The key is to avoid over-investing in a particular outcome and being open to alternative points of view. In many cases, decisions relating to CC&R enforcement can be made by the board with input from an experienced manager. In other cases, especially those involving questionable insurance coverage, alleged breach of fiduciary duty or long-term precedent, it will be wise to confer with experienced association counsel.
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. ECHO Journal | January 2011
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Index of 2010 Articles
ASSOCIATION BOARD AFFAIRS Whom Do You Trust?—The Essential Ingredient in Effective Management of Community Associations—Berding, Esq., Tyler P., January Bankruptcy Won’t Work—Berding, Esq., Tyler P. & Bonato, Esq., Sandra M., A pril Approaching Governing Document Amendment—Hanna, Esq., John Paul, June The Disclosure Trap: Part 2—West, David, July
Board Members with Hidden Agendas— LeClair, Brenda L., A ugust
Mandatory or Voluntary Reserve Funding?— Berding, Esq., Tyler P., Sept ember
Ethics for Board Members—Conlon, Karen D. & Gottlieb, Esq., Sandra L., Sept ember
Community Association Financial Health— Berding, Esq., Tyler P. & Levy, CPA, David H., O ct ober
Fight Night or Fight Nice?—Adamen, Julie, O ct ober Decisions, Decisions, Decisions—Bowden, Esq., Gerald, December
A Primer on Converting to and Maintaining Accrual Basis Accounting—Carr-Fingerle, CPA, Joelyn, December
Why Do Boards Hide?—Grimm, Esq., Beth A., December
GENERAL
Fighting Fraud—Kennedy, Geri, December
New Ordinance Requires Certification of Aging Sewer Laterals—ECHO, February
FINANCIAL (ASSESSMENTS, BUDGETS, RESERVES & TAXES)
A Director’s Lament—Krebs, Jan, February
The Importance of Periodic Inspections and Proper Oversight of a California HOA— Schneider, John, July
Why Pursue a Loan to Fund Your Major Reconstruction Project?—Seifert, Brian, February
VOCs—Clearing the Air—Edrosa, Ed, March
Strategic Planning for Board Members— Warren, Debra A., A ugust
Questions to Ask Potential Banks—Kennedy, Geri, June
Is Financing for Condo Loans in Jeopardy?— Grimm, Esq., Beth A., A pril
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January 2011 | ECHO Journal
Smoke Alarms Save Lives—ECHO, March
Making Accommodations—Barnett, Esq., Jeffrey A., May Recreational Use Immunity For CIDs— Wendleton, Esq., Pat & Pratt, Esq., Sharon Glenn, May Rescuing Board Members from E-Mail— Rankin, Esq., Ann, June How “As Is” Really Isn’t How It Is—Malone, Esq., Matt, July What Happens When Boards Violate DavisStirling?—Weil, Esq., Steven S. & O’Toole, Esq., Andrea L., A ugust Components of an Enforceable Rule— Oppenheimer, Esq., Debra J., Sept ember Contract Clauses May Set Traps for Unwary Boards—Shaffer, Esq., John E., O ct ober Helping Lambs Slay Lions—Binding Arbitration Clauses—Kopczynski, Esq., Jan A. & Rothman, Esq., Gabriel P., O ct ober Upstairs, Downstairs—Strategies for Dealing with Noise Disputes—Windust, Esq., Paul W., November LEGISLATIVE Statutory and Case Law Update—2009— Strom, Esq., Lisa K. & Barnett, Esq., Jeffrey A., March Mid-2010 Legislative Update—Mazzoni, Kerry, July Governor Declines to Interfere With CID Operations—Weil, Esq., Steven S. & Bonato, Esq., Sandra M., November MAINTENANCE
How to Select a Towing Company—Dean, Burt, A pril Myths and Misconceptions Regarding FHA Condominium Approvals—Pater, Greg, A pril Custom-Tailored Management Package for Smaller Associations—Collins, Paul, A ugust Left Holding the (Sand) Bag: Who Will Pay for the Damage Caused by Rising Sea Levels?—Berding, Esq., Tyler P., A ugust Short Sales in HOAs—Some Straight Thinking—Grimm, Esq., Beth A., Sept ember Creative Problem Solving Requires Identifying the Real Problem— Rosenberry, Esq., Katharine, November
INSURANCE
10 Biggest Mistakes With Roofing and Waterproofing Projects—Brown, Carl, January
An Association Insurance Survival Kit— Socher, Dennis & Allen, Charlotte, July
How To Get One More Year From Your Roof—Tippett, Richard, January
Building Ordinance Coverage—Cline, Timothy, December
The Joys of Stucco—Tippett, Richard, March
LEGAL
When Is a Permit Required?—Schneider, John R., May Got Lead?—MacFarlane, Kim, May
Thank You For Not Smoking—Strom, Esq., Lise K., January Who Fixes What?—Part I—Grimm, Esq., Beth A., January
Major Reconstruction Projects in Community Associations—Berding, Esq., Tyler P., June Additional Commentary to “Got Lead?”— Block, David, June
Legal Issues with HOA Web Sites—Rankin, Esq., Ann, February
Roofs and Decks—A Maintenance Perspective—Saarman, Steve, Sept ember
Who Fixes What? Part II—Grimm, Esq., Beth A., February
Xeriscaping Saves Money and the Environment—Lewis, Patti Jo, November
Oh No, Not in My Neighbor’s Backyard!— Pratt, Esq., Sharon Glenn, March
What It Takes to Get a Major Repair Job Done—Tippett, Richard, November ECHO Journal | January 2011
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By Marilyn Lincoln
Kids In Condos
hen I volunteered to become a board member many years ago, no one could have prepared me for the challenges that lay ahead. One area that presents the greatest challenges is people, parking and pets. Each of the three has its own degree of headaches. However, in this article, I would like to discuss children in condos. Every board of directors, at one time or another, has had to deal with either teenagers or younger children who break the rules. The board must find ways to reduce the liability from injury or loss of property due to children’s violations. Many corporations, I am sure, have their own unique story to share. Included below are only a few of the incidents that other condominium directors have chosen to share with me during our conversations.
W
Children must be taught by their parents to respect the safety of other people as well as the property. They complained of children painting graffiti on walls and doors, pulling the fire alarm to see how many people would panic, throwing a lit cigarette into a garbage dumpster and scratching residents cars while riding a skate board or bike in an area restricted to them for play. The question is “Does the board or manager have an obligation to discipline? Of course not! However, if a child does something that could result in personal injury or damage to the common areas, some form of action must be in place. Parents must be informed of their children’s actions. Children must be taught by their parents to respect the safety of other people as well as the property. They must be informed of the condominium rules within the common areas where they continue to live and play. The rules and regulations along with the condominium bylaws and declarations do give the board authority to require that the parents control their children. These documents should also assign some obligations to the parents for acts of their children when violations occur within
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January 2011 | ECHO Journal
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Email: info@thehoamanager.com On the web: www.thehoamanager.com ECHO Journal | January 2011
31
News from ECHO
CC&R Enforcement: “Don’ts” You Need To Know The majority of homeowner association residents—owners and tenants alike—follow the CC&Rs. Usually, most of those who don’t are unaware of a particular community rule; with a letter or phone call violations are quickly resolved. Of course, this isn’t always the case. Disputes can escalate for lots of reasons including perceptions of unfairness, incursion of great expense, stubbornness or sincere disagreements over the extent to which the free use of property becomes subordinated to the CC&Rs and decisions of an association’s board or a committee. It falls to the board to determine whether, how and to what extent a CC&R violation will be addressed. Usually, the tools available include imposition of fines; suspension of the right to vote, run for or serve on the board; and denial of access to common area amenities. The procedures used in connection with these remedies may include a simple “conversation,” a noticed disciplinary hearing or the “meeting and conferring” with the owner and a director as part of an internal dispute resolution process. 32
January 2011 | ECHO Journal
If the violation remains unresolved, the board will evaluate whether to seek mediation, arbitration or to initiate litigation to compel compliance with the CC&Rs. This involves several considerations, including the magnitude and visibility of the violation; precedent, the cost and the chances of a successful enforcement action; and the number and type of other items on the board’s agenda. Input from experienced counsel is essential when the violations have potentially significant consequences for the community. Directors may initially make assumptions about CC&R enforcement that are not always true: • Don’t ignore CC&R violations—but don’t go to war over minor problems. • Don’t assume “precedent” is irrelevant. • Don’t assume insurance will cover the claim. • Don’t think judges are sympathetic. • Don’t give up trying to settle a dispute. In many cases, decisions relating to CC&R enforcement can be made by the board with input from an experienced manager. In other cases, especially those involving questionable insurance coverage, alleged breach of fiduciary duty or long-term precedent, it will be wise to confer with experienced association counsel. Majority Rules, But What if the Minority Won’t Stop Fighting? Majority rules. That is the simple but essential concept on which a democracy rests, and it works reasonably well most of the time in common interest communi-
ties, where volunteer board members set policies and make rules for their self-governing communities. But some board members don’t understand, or are unwilling to accept, that in order for the majority to rule, the minority must support decisions with which it disagrees. When these board members find themselves on the losing end of a vote on an issue about which they feel strongly, they continue the battle, taking their disappointment into the community and seeking from owners the support they were unable to win from other board members. They rail against the decision, accuse the board’s majority of acting irresponsibly and encourage owners to protest the offending policy or ignore it. This behavior undermines the board’s decision-making process and breeds dissatisfaction and dissension in the community. Instead of being a unifying force, these dissenters create tensions or exacerbate them, and the damage they do over time can’t be overstated. It is important to note here that we are not talking about board members whose views differ from those of the majority. Disagreements are inevitable and
desirable; a vigorous exchange of ideas among board members can produce more thoughtful, better formulated decisions. The concern is not with board members who disagree with the majority, but with board members who refuse to accept that the debate ends when the board votes, and who express their opposition in ways that undermine the board’s credibility and its ability to govern the community. A court in a recent case noted properly that people don’t check their constitutional rights at the door when they join an organization. But the court also noted that “First Amendment rights are not absolute…. [Those rights] may be limited by contract.” It is “well-recognized,” the court added, “that the First Amendment will not protect people who have contracted away their First Amendment rights.” This suggests a strategy that associations can apply by requiring volunteers serving on the board to sign a contract detailing the obligations of board members. And that contract or pledge should include language making it clear that board members are accepting some limitations on their First Amendment right to freedom of expression. Important Upcoming Events Thursday, January 20 San Francisco Luncheon St. Francis Yacht Club, San Francisco Saturday, February 5, 2011 Marin County Seminar Embassy Suites, San Rafael Saturday, March 5 Central Coast Winter Seminar Hilton Santa Cruz, Scotts Valley
2010 Legislation at a Glimpse Final Results Bill No.
Author
Subject
Status
Position
Summary
AB 1726
Swanson
Voting Quorums Vetoed by Governor.
Oppose
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 40 percent, and then to 33 percent of the association’s voting power. Exempts associations whose documents establish a lower quorum requirement.
AB 1793
Saldaña
Synthetic Grass Vetoed by Governor.
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
Vetoed by Governor.
Oppose
For governing documents initially recorded on or after January 1, 2011, requires that a majority 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
Failed passage.
Oppose unless amended
Requires a water purveyor to either adopt a general policy to require the installation of either a water meter, or a submeter, to measure water supplied to each individual dwelling unit, or to inform, on an individual basis, an applicant for new water service as to whether a water meter or submeter is required to be installed for each individual dwelling unit.
AB 2016
Torres
Deed Requests
Signed by the Governor. Chapter 131.
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 the Governor. Chapter 90.
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
Failed passage.
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
Failed passage.
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
Signed by the Governor. Chapter 27.
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 | January 2011
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Directory UPDATES Updates for listings in the 2008 ECHO Directory of Businesses and Professionals.
Changes to Member Listings Russell & Mallett, LLP 1225 Alpine Rd., Ste. 204 Walnut Creek, CA 94596 (Address change only—telephone and fax remain the same)
6 6(59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 ‡ )5(0217 (59,1* &20081,7,(6 7+528*+287 1257+(51 &$/,)251,$ 672&.721 +4 ‡ )5(0217 PLE PLEASANTON ‡ &233(5232/,6 ‡ 02'(672 ‡ 6$17$ &/$5$ 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 34
January 2011 | ECHO Journal
Joelyn Carr-Fingerle Earns CalCPA Award Fremont CPA Joelyn CarrFingerle has been selected by the CalCPA East Bay Chapter as the recipient of the 2011 LeVerne W. Garcia Award for Outstanding Achievement. This is the highest award presented by the chapter, and it recognizes a chapter member for his or her service to the profession of public accounting, to the community or both. Having just completed her term as chapter president, Joelyn is unique in having been president of two CalCPA chapters: East Bay and Silicon Valley/San Jose. She rose through the ranks of both chapters and has served in a multitude of roles in committees and discussion groups. She was one of the first women to become actively involved in CalCPA and the California CPA Education Foundation. She has served on CalCPA’s board and council and on the steering committees of numerous conferences and special events. She has also served as a trustee of the CalCPA Education Foundation. She is active in support of the South Bay Discussion Group and has spent hours throughout the United States, and especially in California, in support of the accounting profession and the CalCPA East Bay Chapter. The award will be presented to her at Honorees Night on Thursday, Jan. 27. Ms Carr-Fingerle has been an active member of ECHO for many years. She is currently a member of the Legislative Committee, the Accountant’s Resource Panel and the East Bay Resource Panel. She previously served nine years as an ECHO board member including three years as board president. ECHO offers congratulations to Joelyn for this recognition. ECHO Journal | January 2011
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2008 ECHO Business & Professional Directory $20.00 Non-Member Price: $25.00
Condominium Bluebook 2011 Edition $18.00 Non-Member Price: $25.00
Condos, Townhomes and Homeowner Associations $29.00 Non-Member Price: $45.00
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.
To make it these a sustainable investment, new buyers, owners and board members need to understand “best practices basics” of how this form of housing works and have more realistic expectations of this form of “carefree, maintenance free” living.
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.
Community Association Statute Book—2011 Edition $15.00 Non-Member Price: $25.00 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.
New e Pric
Homeowners Associations— How-to Guide for Leadership New Member Price: $15.00 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.
California Building Guidelines for Residential Construction $52.50 Non-Member Price: $60.00 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.
q Check q Visa q Mastercard Credit Card Number Exp. Date
Signature
Name (please print) Association (or company) Address City Daytime Telephone
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AMOUNT
ECHO Events Calendar
Important events to remember Thursday, January 6 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael Monday, January 10 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant, Oakland Tuesday, January 11 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz Friday, January 14 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, January 19 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, January 20 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club, San Francisco
Wednesday, February 2 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101 San Jose
Saturday, March 5 Central Coast Winter Seminar 8:00 a.m. to 1:00 p.m. Hilton Santa Cruz 6001 La Madrona Dr., Santa Cruz
Saturday, February 5 Marin County Seminar 8:00 a.m. to 1:00 p.m. Embassy Suites, 101 McInnis Pkwy., San Rafael
Tuesday, March 8 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz
Wednesday, February 9 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday February 11 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, February 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr.,Rohnert Park Thursday, March 3 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael
Friday, March 11 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Monday, March 14 Accountants Resource Panel 6:00 p.m. Francesco’s Restaurant Oakland Wednesday, March 16 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Thursday, March 17 San Francisco Luncheon 11:45 a.m. to 2:00 p.m. St. Francis Yacht Club, San Francisco
Saturday, March 19 North Counties Winter Seminar 8:00 a.m. to 1:00 p.m. Sally Tomatoes 1100 Valley House Dr., Rohnert Park Wednesday, April 6 Maintenance Resource Panel 12:00 Noon ECHO Office 1602 The Alameda, Ste. 101, San Jose Friday, April 8 East Bay Resource Panel 9:30 a.m. Angius & Terry 1990 N. California Blvd., Suite 950, Walnut Creek Wednesday, April 13 South Bay Resource Panel 12:00 Noon Il Fornaio 302 S. Market St., San Jose Friday and Saturday June 17 & 18 ECHO Annual Seminar Santa Clara Convention Center Santa Clara
Regularly Scheduled ECHO Resource Panel Meetings Resource Panel Maintenance North Bay East Bay Accountants Central Coast South Bay Wine Country Legal 38
January 2011 | 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
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.
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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January 2011 | ECHO Journal
SF Luncheon Speakers John Allanson Jeffrey Barnett, Esq. Tyler Berding, Esq. Ronald Block, PhD. Wendy Buller 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 Jim Shepherd Nathaniel Sterling, Esq. Debra Warren, PCAM, CCAM Steven Weil, Esq. Mark Wleklinski, Esq. Glenn Youngling, Esq.
Seminar Speakers April 17, 2010 South Bay Spring Seminar Tyler Berding, Esq. Sandra Bonato, Esq. John Garvic, Esq. Robert P. Hall, Esq. Geri Kennedy, CCAM Jan A. Kopczynski, Esq.
Kurtis Shenefiel, PCAM, CCAM Richard Tippett September 25, 2010 Central Coast Fall Seminar John Allanson Beverlee Gordon Stephanie Hayes, Esq. Teresa Powell Brian Seifert Steve Weil, Esq October 23, 2010 Peninsula Fall Seminar Jeffrey A. Barnett, Esq. Tom Fier, Esq. Linnea Juarez, PCAM, CCAM Paul Windust, Esq.
Recent ECHO Journal Contributing Authors October 2010 Julie Adamen Tyler P. Berding, Esq. Jan A. Kopczynski, Esq. David H. Levy, CPA Gabriel P. Rothman, Esq. John E. Shaffer, Esq. November 2010 Sandra M. Bonato, Esq. Patti Jo Lewis, PCAM Katharine Rosenberry, Esq. Richard Tippett Steven S. Weil, Esq. Paul W. Windust, Esq. December 2010 Gerald Bowden, Esq. Joelyn K. Carr-Fingerle, CPA Timothy Cline Beth A. Grimm, Esq. Geri Kennedy, CCAM
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 • 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.
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Kids in Condos Continued from page 30
the condominium property. All board members should review their condominium policies to determine that the parents’ responsibilities and obligations are clearly laid out. If your policies are not clear in this matter, you may want to consider amending or modifying your documents. Obviously, not all children or teenagers choose to break the rules. Children, after all, are a very important part of our communities. They have rights too and they will in some cases demand their rights be considered. Unfortunately, some children will act out in a very negative manner if they are constantly ignored and their views or opinions are never allowed to be heard. We as adults need to listen to the children and try not to close them out. There is a method by which the directors may achieve one-on-one positive communication with children. The board organizes director meetings, owner meetings, special meetings, so why not a children or youth meeting? Such a meeting could occur maybe once a year or every second year depending on the specific need. Set this meeting up so
that only the children, without their parents, attend. This would allow the children to feel free to communicate their thoughts, views and opinions to improve condo living for kids. The board could talk to the children and find out what their wants and needs are. Plan socials that include the children and ask them to help with the planning. Children can be very enthusiastic and creative if they are only given the opportunity. Maybe the children would be interested in starting their own Condo Kids Newsletter. This would encourage many of them to become involved in a joint community project. They could organize their own meetings and write stories or suggest ideas for their newsletter. Good communication is the key. If the children are made to feel that they are an important part of the condominium community and allowed to express their ideas and thoughts, you will experience a much happier community—with far fewer negative activities.
Ace Property Management . . . . . . . .15 Affirmative Management . . . . . . . . .31 American Asphalt . . . . . . . . . . . . . .26 American Management Services . . . .8 Angius & Terry . . . . . . . . . . . . . . . . .3 A.S.A.P. Collection Services . . . . . . .21 Association Reserves . . . . . . . . . . .20 Berding | Weil . . . . . . . . . . . . . . . . .44 Collins Management . . . . . . . . . . . .15 Common Interest Mgmnt Services . . .9 Community Management Services . .10 Compass Management . . . . . . . . . .11 Cool Pool Service . . . . . . . . . . . . . .16 Cornerstone Community Mgmnt . . . .16 Draeger . . . . . . . . . . . . . . . . . . . . .11 Ekim Painting . . . . . . . . . . . . . . . . .35 First Bank Association Bank Srvcs . .20 Flores Painting . . . . . . . . . . . . . . . .34 Focus Business Bank . . . . . . . . . . . .8 Gachina Landscaping . . . . . . . . . . .27 Hill & Company . . . . . . . . . . . . . . . .35 M & C Association Services . . . . . . .34 M. L. Nielsen Construction . . . . . . .26 Massingham and Associates . . . . . .23 Mutual of Omaha Bank . . . . . . . . . .14 Pelican Management Group . . . . . . .16 PML Management Corp. . . . . . . . . .14 Pollard Unlimited . . . . . . . . . . . . . .22 PGS . . . . . . . . . . . . . . . . . . . . . . .20 R. E. Broocker Co. . . . . . . . . . . . . .15 Rebello’s Towing Service . . . . . . . . .31 REMI Company . . . . . . . . . . . . . . . .17 Saarman Construction . . . . . . . . . .21 Scuba Pool Repair . . . . . . . . . . . . .10 Statcomm . . . . . . . . . . . . . . . . . . .31 Steve’s Painting Services . . . . . . . .17
Marilyn Lincoln has many years experience in condominium management in Ontario, Canada. She is a member of the Canadian Condominium Institute and has authored a guide on condominium self-management. ECHO Journal | January 2011
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How to make your investment safer Condos, townhomes, homeowner associations and other “shared expenses” housing is the wave of the future in the United States and around the world. But to make it a sustainable investment, new buyers, owners and volunteer board members need to understand “best practices basics” of how this form of housing works and have more realistic expectations of this form of “carefree, maintenance free” living. The new book, Condos, Townhomes, Home Owner Associations—How to Make Your Investment Safer, provides essential training and checklists for • Association Board Members • Owners in Associations • Prospective Buyers of Association Property The book answers vital questions that can help to keep your association from financial ruin: • What overview training should board members have before beginning their service?
• What critical financial and mechanical information should board members track each month? • What information should a buyer look for before buying in an association? The author provides lessons that help you to: • Protect property values • Gain peace of mind • Lessen the need for large, unexpected special assessments Patrick Hohman, author of the book and a 22-year association president, compiled these userfriendly, colorful lessons with the help of industry experts throughout the United States. The paperback, Condos, Townhomes, Home Owner Associations—How to Make Your Investment Safer, is now available from ECHO for only $29 for members and $45 for nonmembers. Order today by calling (408) 297-3246 or order online at www.echo-ca.org.
Preparing Boards for 2011 Don’t miss this opportunity to prepare you and your board for the 2011 economic and legal climate. Seminar Agenda 8:00 a.m. Registration and Continental Breakfast
Central Coast Seminar Saturday, March 5, 2011 8:00 a.m. to 1:00 p.m.
8:45 a.m. Welcome
Hilton Hotel
9:00 a.m. The Team Approach—John Schneider and Donald Odell, Esq.—Discover how serving as a board member can be a rewarding experience.
Registration Fee: $45 Members $55 Non-Members
10:00 a.m. A Refresher on Membership Voting Stephanie Hayes, Esq. See how well your association is following the requirements for using secret ballots in member votes. 10:40 a.m. Break 11:00 a.m. People, Pets and Parking Beth Grimm, Esq.—Tips for dealing with the three classic dilemmas associations face with their residents. 11:50 a.m. 2010 Statute and Case Law Update Sandra Bonato, Esq.—What have the courts and the Legislature done to us this past year? 12:40 p.m. Ask the Speakers 1:00 p.m. Vendor Prizes and Adjourn
6001 La Madrona Drive, Scotts Valley
Yes, reserve ___ spaces for the Central Coast Seminar. Amount enclosed: $__________ (attach additional names) Name: ______________________________________________________ HOA or Firm: ________________________________________________ Address: ____________________________________________________ City: __________________________ State: _____ Zip: ____________ Phone: ______________________________________________________ Visa/Mastercard No. _____________________ Exp. Date: ________ Signature: ___________________________________________________ Orders will not be processed without payment in full. Fees for cancelled registrations will not be refunded. Return with payment to: ECHO, 1602 The Alameda, STE 101, San Jose, CA 95126 Telephone: 408-297-3246; Fax: 408-297-3517