Journal_11_12 by Echo

December 2011

A Journal for California Community Association Leaders

echo-ca.org

2011 Legislation Update

ALSO INSIDE THIS ISSUE:

• Legislature Targets Board Actions By Email • Delegating Board Authority • Rude and Unruly Board Members?

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PRESENTING 2012 ECHO Events February 4, 2012

Marin Seminar

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Embassy Suites, San Rafael

8:00 a.m. to 1:00 p.m.

February 25

Central Coast Winter Seminar

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Hilton Santa Cruz/Scotts Valley

8:00 a.m. to 1:00 p.m.

Wine Country Seminar

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Sally Tomatoes, Rohnert Park

8:00 a.m. to 1:00 p.m.

South Bay Seminar

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Campbell Community Center, Campbell

8:00 a.m. to 1:00 p.m.

ECHO Annual Seminar

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Santa Clara Convention Center, Santa Clara

8:00 a.m. to 4:30 p.m.

Central Coast Fall Seminar

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Hilton Santa Cruz/Scotts Valley

8:00 a.m. to 1:00 p.m.

Peninsula Fall Seminar

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Crowne Plaza Hotel, Foster City

8:00 a.m. to 1:00 p.m.

March 24

April 21

June 22, 23

September 22

October 20

ECHO Journal | November 2011

Notice Requirements for California HOA Meetings —page 28

C 6

2011 Legislation Update

Legislature Targets Board Actions By Email

Executive Council of Homeowners, Inc.

Beginning January 1, 2012, when Senate Bill 563 goes into effect there will be explicit or restrictions on the use of emails by board members to discuss HOA business. One of SB 563’s major impacts is that board “action” via email will be banned except in emergencies. Read the article for more examples of “can’t do no more” situations.

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Board of Directors and Officers

Now that SB 563 has been signed into law, many boards will have to reconsider how they do business. Boards that are accustomed to dealing with routine matters through an exchange of emails will have two choices: (1) hold more noticed open board meetings or (2) delegate authority to deal with such matters.

President David Hughes

Rude and Unruly Board Members?

Secretary Dorothy Kopczynski

Do you have a few board members who are sometimes a bit too closed minded, even rude, and must have their way? Well, it is not uncommon. While you may not have success changing their thinking, you can change their behavior, especially if you understand what motivates it. This article will help you understand difficult board members.

32 News from ECHO 33 Legislation at a Glimpse 34 Directory Updates 36 ECHO Bookstore 38 Events Calendar

Vice President Karl Lofthouse Treasurer Diane Rossi

Directors Paul Atkins John Garvic Robert Rosenberg Brian Seifert Steven Weil

Jerry L. Bowles David Levy Kurtis Shenefiel Wanden Treanor

Executive Director Oliver Burford Communications Coordinator Tyler Coffin Legislative Consultant Government Strategies, Inc.

40 ECHO Volunteers

Design and Production George O’Hanlon

41 ECHO Marketplace

ECHO Mission Statement

41 Advertiser Index

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.

On the Cover 2011 Legislation Update—page 6 December 2011 | ECHO Journal

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

Delegating Board Authority

28 Notice Requirements for California HOA Meetings

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So far, the 2011–2012 California legislative session was largely successful for ECHO’s legislative advocacy. It was not without its challenges. ECHO’s Legislative Advocate Kerry Mazzoni summarizes actions for each of the bills that ECHO tracked in 2011.

Departments

The ECHO Journal is published monthly by the Executive Council of Homeowners. The views of authors expressed in the articles herein do not necessarily reflect the views of ECHO. We assume no responsibility for the statements and opinions advanced by the contributors to the magazine. It is released with the understanding that the publisher is not engaged in rendering legal, accounting or other professiona l service. If legal advice or other expert assistance is required, the services of a competent person should be sought.

To a joyful present and a well remembered past. Best wishes for Happy Holidays and a successful New Year!

By Kerry Mazzoni

2011 Year End Legislative Update he first year of the 2011–2012 California legislative session was a largely successful one for ECHO’s legislative advocacy. It was not without its challenges, however. Among them were SB 209 (Corbett) dealing with electric vehicle charging stations, SB 759 (Lieu) dealing with artificial turf, SB 561 (Corbett) dealing with delinquent assessments, and SB 563 (Committee on Transportation and Housing) dealing with meetings of boards of directors; discussion of this latter bill is covered in a separate article that can be found on page 16 of this issue of the ECHO Journal.

December 2011 | ECHO Journal

Among this year’s successes was the veto of SB 759 (Lieu) that would have prohibited associations from limiting the use of artificial turf by association members. Despite bipartisan support, the governor vetoed the bill on the premise that associations were best suited to make decisions on whether or not to allow artificial turf. ECHO was also successful in halting a number of bills that would have proven problematic for associations. While these bills have not been defeated by the legislature, it is unlikely they will move in their current form due to strong opposition. The

ECHO Journal | December 2011

bills include AB 20 (Halderman) dealing with construction defects and attorney responsibilities and AB 579 (Monning) dealing with attorney fees to local governments. AB 19 (Fong) dealing with water submeters and meters is another bill that was halted early in the legislative process due to strong opposition from a variety of interest groups. At that point the author had already amended the bill with language suggested by ECHO that would clarify the use of meters and sub-meters in CIDs. Currently, the bill is proposed to be amended again and the ECHO Legislative Committee is reviewing those amendments. It is anticipated that the author will honor his commitment to address any concerns that may be raised by ECHO. AB 805 and AB 806 (Torres) are two bills incorporating the California Law Revision Commission (CLRC) recommendations for revisions to the Davis-Stirling Act. These bills have passed the Assembly with bipartisan support and are awaiting action in the Senate Transportation and Housing Committee. The intent of the author and of Brian Hebert, Executive Secretary of the CLRC, is to keep these bills as non-controversial as possible and to resist amendments that are substantive in nature. ECHO has taken a position of “support” on these bills, provided no substantive amendments are taken. The governor signed a number of other bills dealing with CID issues. They include SB 4 (Calderon) dealing with notice for nonjudicial foreclosure sales; SB 337 (Kehoe) preventing a landlord from prohibiting a tenant from posting political signs, provided certain conditions for posting are met; AB 771 (Butler) dealing with document fees; and SB 150 (Correa) dealing with rental and lease rights in CIDs. SB 4, SB 337 and AB 771 were on ECHO’s “watch” list and SB 150 was supported by ECHO. SB 150 “grandfathers” existing lease or rental rights for owners who purchased their property at a time when leasing or renting was permitted in their governing documents. SB 561 (Corbett) is one of the bills still pending before the legislature, and it is a bill of great concern to ECHO. It deals with delinquent assessment collections and would prohibit an association from assigning or pledging the association’s right to collect payments or assessments to a third party. Early negotiations on the bill were difficult and accomplished nothing except to delay movement of the bill. This bill will be a high priority bill for ECHO during the 2012 legislative 8

December 2011 | ECHO Journal

year. Both CACM and CAI also oppose this bill. Senator Corbett was also the author of SB 209, a bill that provides for the installation of electric vehicle charging stations in CIDs. Despite ECHO’s repeated requests and assurances by Senator Corbett that the bill address issues of common area encroachment, she declined to do so; and ECHO was forced to seek a veto from the governor. Though ECHO was not successful in securing a veto given the governor’s interest in alternative energy, the governor did provide a signing message requesting the author to address the common area encroachment issues. ECHO Legislative Committee members developed language to address the governor’s request, and that language is currently in SB 880 (Corbett), a new bill that is expected to move once the legislative session begins in January.

While it is unknown what new bills will be entered when the legislature returns in January, there always seems to be interest in CID legislation. Unfortunately, few legislators understand the complexities of the DavisStirling Act, and as a result advocates for CIDs often end up “playing defense” on bills while also educating ever changing legislators and legislative staff members about how associations work, what the law provides and the challenges facing associations. All of the bills mentioned in this article may be reviewed at the California Legislature web site: www.leginfo.ca.gov/bilinfo.html.

Kerry Mazzoni is a vice president at Government Strategies, Inc., in Sacramento. She has served as ECHO’s Legislative Advocate for the past six years. Kerry was formerly a member of the California Assembly and served as State Secretary of Education from 2000 to 2003. ECHO Journal | December 2011

December 2011 | ECHO Journal

By Stephanie J. Hayes, Esq.

Legislature Targets Board Actions By Email t is very common for board members to communicate with each other and with management via email, and this is often the preferred method of communication on HOA issues. For some time there were no explicit statutory prohibitions or restrictions on the use of emails by board members to discuss or even take action on HOA business, but there will be on January 1, 2012 when Senate Bill 563 goes into effect. One of SB 563’s major impacts will be to ban board “action” via email except in an emergency situation and, in that situation, all board members must unanimously consent to the action in writing (which “written” consent can be given by board members separately via email). Additionally, SB 563 appears to prohibit a majority of the board from even discussing “any item of busi-

ness that is within the authority of the board” via email unless it qualifies as a bona fide emergency. SB 563, which becomes effective January 1, 2012, amends several sections of the DavisStirling Common Interest Development Act, including the “Common Interest Development Open Meeting Act” (Civil Code § 1363.05—the “Act”). The Act has been specifically revised to state “the board of directors shall not take action on any item of business outside of a meeting.” [new Civil Code § 1363.05(j)(1)] Directors are expressly prohibited from conducting a meeting via a series of emails except for an emergency meeting if all of the board members consent in writing (either individually or collectively), and the written consent(s) must be filed with the

ECHO Journal | December 2011

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board minutes. [new Civil Code § 1363.05(j)(2)(B)] Written consent to conduct the emergency meeting may be transmitted electronically. [new Civil Code § 1363.05(j)(2)(B)] SB 563 also makes significant changes to the definition of board meeting. The Act, until December 31, 2011, defines a meeting as “any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board, except those matters that may be discussed in executive session.” Thus, it was okay to discuss the issue outside a board meeting (including by email) if it was not on the board agenda (i.e., scheduled), or it was a matter that could be considered in executive session (e.g., litigation, contracts, member discipline, personnel, member’s payment of assessments). After January 1, 2012, the definition of meeting has been expanded to include any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business that is within the authority of the board. [new Civil Code § 1363.03(k)(2)(A)] Under the new law, there is no exception for executive sessions, which are now included in the definition of board “meeting.” Additionally, the requirement that the item must be “scheduled to be heard by the board” has been dropped. The issue need only be within the board’s decision-making authority, which, in contrast to “any item of business scheduled to be heard by the board,” has a massive scope. With the passage of SB 563, we will advise boards and managers of our HOA clients that the board cannot take action by email except in an emergency. It is not crystal clear that email discussion by a majority of the board is prohibited by the new statute because “action” is not defined. However, we surmise the intent of the statute was to eliminate email discussions among board members. As a result, our advice will be that if a majority of the directors discusses “any item of business that is within the authority of the board” through email, they will be taking a risk if the issue does not qualify as an emergency. The Act already defines emergency as “circumstances that could not have been reasonably foreseen which require immediate atten-

Continued on page 14 12

December 2011 | ECHO Journal

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.

Legislature Targets Board Actions By Email Continued from page 12

tion and possible action by the board, and which of necessity make it impracticable to provide notice as required by this section” (i.e., the Act). [Civil Code § 1363.03(g)] There can be conflicting opinions about whether a particular situation is an “emergency.” In case of a challenging member’s lawsuit, board action via email that is contrary to the restrictions imposed by SB 563 can be the basis for a court finding that the board violated the Open Meeting Act. This could subject the association to a “civil penalty” of up to $500 per violation and a requirement that the association pay the challenging member’s attorney’s fees and court costs. For the above reasons, boards should be extremely cautious about taking action via email and consult with legal counsel before deciding they are justified in doing so due to an emergency. Corporations Code Section 7211(b) permits the board of a California nonprofit mutual benefit corporation (which most HOAs are) to take any action that is required or permitted to be taken by unanimous written consent of the board. The unanimous written consent is board action “outside of a meeting.” But SB 563 states that “the board of directors shall not take action on any item of business outside of a meeting” but allows an “emergency meeting” via email with unanimous written consent of all board members. While SB 563 does not expressly override Corporations Code Section 7211(b), it also does not grant an exception that would allow the use of unanimous written consents as an exception to the broad prohibition on boards taking action outside of a meeting. For these reasons, the safest approach would be for HOA boards to stop using unanimous written consents after January 1, 2012 except in the event of a legitimate emergency, and to consult with legal counsel before doing so.

Stephanie Hayes is a principal with the law firm of Hughes Gill Cochrane, P.C., located in Walnut Creek, California. She is a frequent speaker at ECHO seminars and contributes articles to the ECHO Journal regularly. This article is intended to provide general information and should not be relied upon as legal advice. Please contact your association attorney with specific questions and concerns. 14

December 2011 | ECHO Journal

Comparing Painting Proposals

COM PA S S

By Kevin Scroggins A common mistake that association boards make is assuming that all painters will do a great job. First of all, make sure your contractor has previously painted homeowners associations and has the right insurance for doing work for associations. HOAs are different from apartments or any other project.

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Don’t worry about offending the contractors by monitoring or asking questions. It is your home. Meet the foremen before the contract is signed; you want to know who is walking around your property. Start with written specifications. One contractor may think some steps are not necessary and the other wants to always do the best project possible. For example, one bidder may not include masking windows or back rolling, which saves a lot of labor; or another bidder may entirely omit the prime coat—perhaps in order to outbid the competition. If it is in the specifications, then it’s necessary! Yet another contractor may include everything. Tell the bidders that you will be watching them to ensure that all specifications are followed. State this during job walk because many contractors don’t read the specs unless you make this clear. Search all avenues to make sure that all contractors pay their bills; check their references and look at a project that in progress.

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Homeowners can easily avoid a lot of confusion by simply providing all bidders with a project Specifications. Many paint manufactures offer preparation of specs as a free service; they will not only write the specifications but will also walk contractors thru the project. Make sure that everything in the specs and everything needed for the job is included in price given. Masking windows, priming and back rolling should be included in most paint projects. Don’t let a contractor talk you out of anything included in the specs, and don’t forget to watch the painters after work on the project begins. Paint manufactures stand behind their paint as long as specifications are followed to the letter. Mil thickness back rolling is important; ask the paint supplier to periodically check mil thickness of the film for you and to show you also how you can also check. Get the best paint job you can for the money you spend.

Kevin Scroggins is a principal at Cal Pro Painting Inc., an ECHO member company. He is a member of the ECHO Maintenance Resource Panel.

ECHO Journal | December 2011

By Michael Hardy, Esq.

Delegating Board Authority ow that the governor has signed SB 563 into law, some boards will have to reconsider how they do business. Under the new law, boards can no longer make decisions through an exchange of emails (except in an emergency). Boards who are used to dealing with routine matters that arise between regular board meetings in such a manner will have two choices: 1. Hold more noticed open board meetings or executive sessions (the new law now requires notice and agenda for non-emergency executive sessions as well as open board meetings). 2. Delegate authority to deal with such matters to a committee, or in some cases, to the manager or other individuals.

Delegation to Executive Committees Corporations Code Section 7210 states that: “The board may delegate the management of the activities of the corporation to any person or 16

December 2011 | ECHO Journal

persons, management company, or committee however composed, provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.” Corporations Code Section 7212(a) authorizes the board “by resolution adopted by a majority of the number of directors then in office, provided that a quorum is present,” to create one or more committees comprised of two or more directors to exercise the authority of the board to the extent authorized by the resolution creating the committee, except for certain matters that require the vote of the entire board. A committee exercising the authority of the board (i.e. making final decisions on behalf of the board) can only be comprised of directors. However, committees acting in an advisory capacity to the board (leaving the final decision to the full board) may include members who

ECHO Journal | December 2011

are not directors. [Corp Code § 7212(b)] Committees that are comprised solely of directors and carry out some of the duties of the board are referred to as “executive committees.” Unless stated otherwise in the bylaws, members of such committees are appointed by a majority of the directors then in office. Some of the matters that cannot be referred to executive committees include: 1. Any action that requires the vote or approval of the full board (e.g., a decision to record a lien for delinquent assessments or to initiate foreclosure proceedings per Civil Code Sections 1367.1 and 1367.4); 2. The approval of any action for which California law requires approval of the association members; 3. The filling of vacancies on the board or on any executive committee of the board; 4. The fixing of compensation for directors; 5. The amendment or repeal of bylaws or the adoption of new bylaws; 6. The amendment or repeal of any resolution of the board that by its express terms is not amendable or repealable; 7. The appointment of executive committees or the members thereof; and 8. The expenditure of corporate funds to support a nominee for director if there are more people nominated for director than can be elected. Any other matter not otherwise prohibited above that is within the authority of the board may be delegated to an executive committee. This could include rules enforcement, architectural review and approval, budget/finance, insurance, pending litigation and/or construction or rehab projects, among other things. Committees with decision-making authority must maintain minutes of their meetings. [Civil Code § 1365.2(i)(2)] Notice and agendas for executive committee meetings should be given in the same manner as for board meetings. Delegation to Officers, Manager or Other Individuals Corporations Code Section 7210 quoted above authorizes the board to delegate some of its management functions to individuals as well as to committees. However, unlike the actions of executive committees discussed above, the actions of these individuals are exercised “under the ultimate direction of the board.” This means that such actions must be reviewed and ratified by the board, and the discretion of such individuals to act 18

December 2011 | ECHO Journal

on behalf of the board is much more limited. If the board wishes to delegate authority to exercise independent judgment and discretion and to take action that will be binding on the association without the need for additional direction or approval by the board, then the board should utilize an executive committee. If the board wishes to delegate management functions that will be exercised only under strict guidelines and limits and will be subject to review and approval by the board, it may delegate such functions to the manager or another individual. Committee Members If the bylaws do not specify the qualifications for serving on a committee, the board should adopt a rule or policy setting forth such qualifications (e.g., committee members must be members of the association in good standing) before committees are appointed. This should help to minimize any questions or disputes about appointment of committee members. As discussed above, executive committees can only be comprised of members of the board, but committees that act solely in an advisory role to the board can be comprised of individuals who are not members of the board. Board Resolution The formation of committees, appointment of committee members and delegation of specific duties and authority to committees and individuals must be set forth in a resolution adopted at an open meeting of the board. Setting the limits of the authority being delegated is especially important when the board resolution dealing with the formation of an executive committee, since, by definition, such a committee will be operating independently from the rest of the board. A Realistic Approach Since many associations have trouble finding enough volunteers even to serve on the board, delegation of any meaningful authority to committees in such a case is not a realistic option. However, where there is a sufficient pool of willing volunteers, delegation of some of the board’s responsibilities can help to reduce its workload and keep the length and frequency of board meetings to a reasonable level. This in turn may encourage other members to step up and volunteer their services as a director.

Michael Hardy is an attorney at the Walnut Creek offices of Angius & Terry LLP. He is a regular contributor to the ECHO Journal.

Social Media: Make It Work for You By Sandra Vela-Mora, CMCA, AMS, PCAM Are you ready for “social media” or do you still hope it will fade away? If it’s the latter, you are definitely out of luck. According to Facebook, five years ago there were 12 million active users of its social media website. Today, that number has grown to over 500 million active users with 50 percent of those active users logging in on any given day. As if that weren’t enough, 250 million of those active users access Facebook via mobile devices. What does that mean for us? Social media is not only here to stay; it has become one of the fastest growing forms of instant communication in our society. Currently, people shop online for houses as they shop for other items. Having a presence on Facebook makes your community more “searchable.” As a result, your community’s Facebook page promotes the values of your home! So what does all this mean for community associations? Like all other forms of communication such as newsletters, websites or email blasts, boards of directors must establish rules and guidelines and maintain oversight, authority and ultimate responsibility for any information posted on a social media site. Although this communication platform continues to evolve, below are guidelines every community should utilize when utilizing social media: Fully understand the work involved with social media sites, which includes creation, maintenance and response time to postings. Once this crucial discussion is made, you are ready for the equally crucial decision of who will administer this page. When choosing an administrator, consider a person(s) who is able to dedicate the appropriate, unbiased amount of time and who will always represent the community in a positive, truthful manner. Establish what is considered an acceptable posting and response, emphasizing instances wherein the board must be consulted.

Remember that not everyone wants his or her picture posted, so establish Photo Upload Guidelines. Be sure to get written permission to post pictures of adults and especially children. Even when using social media, maintain the standards you would in any other public written communication. Showing your â&#x20AC;&#x153;personalityâ&#x20AC;? is great, but the standards of appropriate grammar and formatting should never change. Regularly visit and maintain your social media site to ensure the most effective and up-to-date information available. When a community establishes a social media site, it must be monitored regularly so that any incorrect, obscene, derogatory or inflammatory statements are corrected or removed immediately. Take the opportunity to educate and empower your community by quickly answering questions raised or addressing concerns reported.

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By Roger Patching

Rude and Unruly Board Members? Robert’s Rules of Order to the Rescue! o you have a few board members, maybe even a board chair, who are sometimes a bit too closed minded, even rude, and must have their way? Well, it is likely that you do. It is not uncommon. And, while you are not going to have a lot of success changing their thinking, you can change their behavior, especially if you understand better what motivates it. During the Second World War, the United States and its democratic allies invested a fortune in

December 2011 | ECHO Journal

research to understand why so many people in Germany, Japan, and elsewhere, were so willing to believe the unbelievable, do the undoable, and follow leaders who seemed crazy. It was important to victory to understand the ideology and behavior of the enemy. When the Cold War followed, the studies continued for the same reasons. It led to the development of a new field: Political Psychology. We now know that psychologically there are people who are predis-

posed to see reality quite differently. There are, essentially, what we label as anti-democratic “authoritarian personalities” (APs) and “democratic personalities” (DPs). They are formed primarily by the nature of their upbringing in terms of family, education, and peers. Importantly, it is now well understood that the most dangerous threat to the survival of democracy is the AP, whether foreign or home grown. The AP and DP simply see things quite differently because they

ECHO Journal | December 2011

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December 2011 | ECHO Journal

process information through entirely different minds. The AP will unwittingly destroy democratic institutions believing that he is improving democracy. If you have them on your board, you have a problem that should not be trivialized. “Personality Studies” are academically central to intelligence agencies in all democracies. Fascinatingly, part of the genius of the founding fathers that drafted our Constitution and constructed our democracy was that they understood this well before the detailed research prompted by World War II. They had suffered under the rule of an aristocracy, headed by a monarch, and leadership was based upon blood. Clearly a flawed premise for rule, America’s new leaders understood that they needed to create a system whereby no one person or small group would be able to dominate. They needed a process that would block this and instead allow for the will of the many to prevail, and yet not at the expense of the few. They feared the tyranny of the majority as well as that of an elite. They understood, therefore, that their task was to construct a systematic set of procedures so that rules dominated and not people. The rules would become laws and if one violated the laws, they violated the procedure, thereby the democracy. Democracy is the only ideology that is exclusively a set of procedures. It is not who won an election that determines whether or not it was democratic, it is how it was conducted. An arrest is legal only if proper procedures are followed. And, while people can change the law (procedures), they must follow procedures to change it legally. It is the system that rules, not people. This makes no sense to an authoritarian personality. It is, to him, nonsensical gibberish. The AP is the ostensible adult who never psychologically matured and still accepts and desires the dependency and security characteristics of childhood, including the comforts of irresponsibility that accompany having someone else make decisions and be responsible for the consequences. While often loud and boorish, he is, at his core, not a leader but an insecure follower. Do not make him complicated. Psychologically, he is simple minded, lonely, and childlike in his quest for security. Measured on sliding scales depending upon the individual, the dominant attitudinal characteristics of the AP (that you have already witnessed with such board members) are as follows:

A preoccupation with the dominance-submission, strong-weak, leader-follower dimensions of society: He needs to understand the chain of command and where he is in any group. There are only leaders and followers. (“Der Fuhrer” and “Il Duce” mean, in German and Italian, “the leader.”) One’s primary task, then, is to follow, not question. APs identify with power figures. His security comes from the group. He has no scaffolding inside holding him together. Distrust of Reason and Dichotomous (black/white) Thinking: The AP doesn’t trust reason because he doesn’t reason very well. He is suspicious of analytical efforts to evaluate anything and is exceptionally antiintellectual and intolerant. He is not a deep reader or thinker. Information that conflicts with his perception of reality (which is actually the perception of reality of his leader since he doesn’t reach conclusion on his own) is rejected as invalid. If it doesn’t make sense to him, it doesn’t make sense. He is a study in cognitive dissonance. (Because of authoritarian anti-intellectualism in the U.S., campaign managers avoid the topic of the educational background of their candidate, particularly if it includes advanced degrees. Better to have Jimmy Carter be a peanut farmer than a nuclear engineer. The well educated are viewed as over-educated egg heads out of touch with reality. Education is easy to hide in American politics because many people are so antiintellectual that it doesn’t occur to them to inquire about what Clinton, Bush or Obama studied in college, if at all. Whereas educational qualifications would be significant to Exxon board members when choosing the CEO, how much has been discussed by anyone regarding the educational backgrounds of the candidates currently vying for the Republican Presidential nomination?) Psychologically, the authoritarian personality is too insecure to handle information that may “gray” (confuse) what is otherwise a black-white, leader-follower, we-them world. He is more emotional than rational, and that doesn’t mean qualities of the heart such as empathy or compassion. It means that he is consumed more by gut reactions and tantrums than thoughtful reflection. He is an unhappy bully and emotionally indignant when challenged. (Focusing on strong versus weak, he would always favor military force over diplomacy in foreign affairs because he responds to force [the absence of reason] more than reason and he believes most

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people are like him.) Compromise is unimaginable and he prefers threats. Since the world is to him “us versus them,” he has little affection for those different from his group and would be more secure if “they” didn’t exist. Authority consists of both power and responsibility. The authoritarian personality can only focus on power and therefore will automatically irresponsibly abuse power if he has it. Democratic processes were created to constrain his ability to do so. Democratic personalities simply possess attitudinal characteristics opposite to those of the AP. The most important psychological difference is that the DP has an absence of a need to either dominate or submit. It isn’t that the DP can’t follow or issue orders if the position requires it; rather he doesn’t have a need to do either. He has a belief in the worth and dignity of one’s self and all others. He is happy and, because he believes that people have inherent worth, he is inclined psychologically to cooperate and compromise. His focus is on the responsibility that accompanies authority, not the power. Do not, however, view the DP as a marshmallow that can be walked on. He is psychologically enormously more mature and secure than the AP. So, while he is able to compromise, he cannot abide by behavior that either stifles intellectual discourse or hurts people. Were he to do so, he would lose his self respect. It is often forgotten, for example, that we and our allies were assisted in the defeat of Germany by Germans during the war. They helped, quite simply, because of their personalities. They couldn’t go along with the brutal policies of the Nazi regime and maintain self respect. Most were caught and executed as traitors. For democratic personalities, loyalty and patriotism is civically tied to principles, not dictatorial leaders or practices. For the AP, failure to blindly obey and follow is treason. Inherent to Robert’s Rules of Order is the understanding that democratic rule is a process, a body of procedures. If one violates the process, he is violating the democracy. There is no distinction between means and ends since the end of a democracy is the means—a way of doing things. Robert’s Rules delineates behavioral guidelines for decision making. And, while HOAs are encouraged to be relaxed in the conduct of business consistent with Robert’s Rules, it is crucial that the underlying fundamentals be both understood and followed. And, if they are not, it is the responsibility of the Chair to remedy the

problem. This means, of course, that if the Chair has AP tendencies, your democracy is in trouble. One of the most important rules has to do with “Decorum during Debate.” The rule stresses that in debate a member must confine himself to the question, be courteous in his language and deportment, avoid all personalities, not arraign the motives of a member, and emphasize that it is not the man, but the measure, that is subject of debate. It is the duty of the Chair to enforce these behavioral guidelines. If he doesn’t then a speaker who has the floor is open to interruptions and attacks by authoritarian personalities. Indeed, the disproportionate power that the Chair wields with the gavel is to maintain democratic order. It is the Chair’s responsibility to be impartial in order to facilitate the presentations of reports and the differing sides of debate in a depersonalized atmosphere that is free from intimidation by either a board member or the Chair. The Chair can do this because he presides over the debate process but doesn’t participate nor vote, unless there is a tie.

The same rules regarding behavior necessary for “Decorum during Debates” are essential for group email communications. Robert’s Rules were drafted before the arrival of email but it is clear that group email communications are now common and can invite debate. Consequently, the same guidelines for civility, particularly the absence of attacks on personalities, apply to official group email communications. And, again, it is the obligation of the Chair to discipline, consistent with procedures delineated in Robert’s Rules, offenders as well as educate them accordingly. If the Chair fails to do so then a board member should make a motion recommending that the Chair resign due to a failure to impartially administer the rules. It is very important to note, however, that the set of guidelines provided by Robert’s Rules for more than a century has become muddied of late. There are now books available regarding the conduct of meetings other than Robert’s Rules that “reference” Robert’s Rules but should not be embraced by HOA boards. This has particularly become a problem in terms of small organizations. For example, there are publications that suggest

that since many HOAs have few members and typically small boards, it is reasonable for a Chair to not only preside with all the power to recognize speakers, monitor behavior, and make rulings during debate, but also be allowed to both participate (debate) and vote. While this may seem modern or more efficient at first glance, it is simply quite wrong and reflects a profound misunderstanding of the concepts underlying democratic practices and procedures. Such a policy would not enhance discussion and debate; it would simply empower the Chair to be a dictator via intimidation. Please note that Robert’s Rules also allows for different practices in terms of small boards of less than 12, but with a major difference. Because protecting the democratic environment is so central, Robert’s Rules mandates strict adherence to rules regarding debate and the role of the Chair with boards of 12 or more and allows, as an occasional option, the slight “relaxation” of the rules with small boards on a case by case basis as determined by the board. It is just an option. Any time when the relaxed process interferes with business in the judgment of any ECHO Journal | December 2011

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member (such as discomfort felt as a result of intimidation by the Chair), a motion can be made to restore strict adherence to the rules. The person making the motion has no need to justify or explain and the Chair, following the motion, can vote but not discuss. And, members can debate the motion but that is meaningless because the idea is to restore the rules of debate. Clearly, this makes the nature of the personalities on the board, particularly that of the Chair, even more important to the nature of the process. It would not be surprising, for example, that a Chair with an authoritarian personality, along with his allies, would move the body of 11 or less to reject the standard version of Robert’s Rules (required for 12 or more) and choose the relaxed option as often as possible in order to increase the power of the Chair. They would see it as strengthening democracy and leadership whereas the DP would recognize it for what it is: a power grab to dominate, dictate, control, and intimidate. Moreover, since the strict rules actually allow the Chair to participate in debate after passing the gavel to someone else, it is recommended that the relaxed option never be used. So, again, if you want to eliminate rude and unruly behavior, while trying to help APs become more psychologically secure and therefore less controlling, stick with Robert’s Rules of Order. The U.S. is the oldest constitutional democractic government on earth. (The U.K. didn’t even begin to approach real democracy until their Reform Act of 1832.) Robert’s Rules is intimately tied to the basic principles that have served democratic decision making quite well for a very long time and should not be repealed if currently in your bylaws. And, if it is not currently the guide cited in your bylaws, it is time that it becomes the guide.

Roger Patching is Emeritus Professor and Department Chair of History and Political Science at Cosumnes River College in California. He is the president/CEO of the 501(c)4 nonprofit, taxexempt, corporation, “Friends of Lake Tahoe,” and sits on the board of a very large condo complex located at Lake Tahoe. He can be reached at PatchiR@emeriti.crc.losrios.edu or via www.friendsoflaketahoe.org.

Know Your Community’s Financial Position By Hilary Lape, CMCA, AMS, PCAM While it is always important to know where your community stands financially, it is especially important to understand the community’s financial condition in today’s economy. There are several recommendations and standards in place for analyzing a community’s financial health, and a few are listed below: Recommendation A: Two to Three Months of Expenses in Your Operating Account(s) (Liquid Funds) at All Times For example, if your community has a total monthly expense budget averaging $20,000, we would recommend that you have between $40,000 and $60,000 in operating funds. By doing this, the association helps to ensure that it can cover monthly expenses plus some unbudgeted expense that may arise, even factoring in assessments that are delinquent and not received. Boards should keep this in mind when considering additional investments. Only funds in excess of two to three months of operating expenses should be considered for investments. Recommendation B: Investments Fully Support the Reserve Funds Industry standard (and in some cases state law) encourages communities to segregate operating funds from reserve funds and recommends that a community’s investment funds correspond to the penny to the reserve fund balance. It is important that the reserve funds be reconciled regularly with the operating account. When a reserve project is completed, the invoice will likely be paid from the operating (checking) account. The investments and reserve funds will not reflect the reserve expense, but the operating account will now be short that amount, which could affect the association’s ability to pay its operating expenses. The association should consider having a reserve money market account that it can use to make the reconciliation (in this case, the reserve money market account would reimburse the operating account for the amount paid for the reserve project).

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Recommendation C: Reserves Funded in Accordance with the Reserve Study Not only is it important to match the full reserve balance with cash, it is also important to review the reserve balance as it compares to the amount recommended by the association’s reserve study. Special attention should be paid to this during budget preparation time. Rather than simply plugging in the recommended annual contribution number, an analysis should be done to determine what the projected year-end reserve balance is and whether an adjustment to next year’s reserve contribution is warranted. For example, if the reserve study recommends a reserve fund balance at the end of fiscal year 2011 of $400,000, and it is determined that the actual balance at the end of FY 2011 is projected to be $300,000, a multi-year plan needs to be established to increase the reserve contribution to make up the reserve deficit. In some states, an annual review of the reserve study is required and this analysis would be completed during that review. Similarly, if the reserves are funded higher than the reserve study recommends, the reserve contribution could be decreased.

Recommendation D: 10–20 Percent of the Total Annual Assessment Amount Should Be Included in Prior Year Equity (This is a Recommendation that Auditors Make So that the Association Has a “Cushion” in the Event of a Major Unanticipated Event.) Prior Year Equity, which auditors frequently refer to as Unappropriated Members Equity or, simply, Members Equity, is the cumulative operating deficit or surplus from the association’s inception. While in the development period, and as long as the declarant is funding the operating deficit, the Prior Year Equity balance is usually $0. Once the declarant is no longer funding the deficit and the association is self-sustaining, the association should work to achieve the 10-20 percent Prior Year Equity level. For example, if your community has budgeted $300,000 for the total annual assessment income, auditors recommend that the amount recorded in prior year equity be between $30,000 and $60,000. Any amount lower than $30,000 would be noted by auditors as not being sufficient and any amount more than $60,000 would be noted as being excessive. Auditors feel that this gives the association additional funds to cover a major unan-

ticipated event that would lead to a substantial operating deficit, such as having to replace interior pipes because of pinhole leaks, or replacing significant landscaping because of an unusually wet or cold winter. So, what happens if you are not adequately funded in Prior Year Equity? In future years’ budgets, the association should consider budgeting for an Operating Contingency (funds not earmarked for any specific expense) or should consider creating a line item specifically to Fund Prior Year Equity in order to bring the balance into the 10-20 percent range. Recommendation E: Delinquency Rate Should Be Between Three to Five Percent of the Total Annual Assessment Income Using the example above with a community that has budgeted $300,000 for the total annual assessment income, the total accounts receivable (delinquent amount) should not exceed $9,000–$15,000 for the association to be financially healthy. It is important that associations do everything possible to pursue collection of delinquent Continued on page 41 ECHO Journal | December 2011

By Pierce Gore, Esq.

Notice Requirements for California HOA Meetings Who, What, When, Where and How omeowner associations in California must comply with numerous statutes concerning meeting notice requirements. Whether it’s an event that occurs regularly, such as a board or members’ meeting, or an unusual event such as member discipline, HOAs and their boards are faced with an extensive array of mandatory notice procedures. Familiarity with these

December 2011 | ECHO Journal

requirements is an important component in the efficient operation of any HOA and in avoiding disputes and litigation resulting from a failure to properly give notice. HOA notice requirements are embodied in several California statutes. The Davis-Stirling Common Interest Development Act (the “Davis-Stirling Act”) and the Corporations Code

contain numerous HOA notice requirements. Unfortunately, these requirements are scattered across several sections in the Civil and Corporations Codes. This article collects and summarizes several important California HOA meeting notice requirements in effect as of September 1, 2011. We advise our HOA association and manage-

ment company clients to update their notice procedures annually and to communicate to their attorney any questions or concerns regarding interpretation and application of new notice requirements. What Kinds of HOA Meetings Trigger Notice Requirements? Most HOAs conduct annual meetings, board

ECHO Journal | December 2011

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meetings and member meetings on a regular basis. Less frequently, there are special memberships and emergency board meetings to address issues that arise between regularly scheduled meetings. In addition, HOA boards go into executive session to consider legal, personnel and disciplinary issues, contracts with third parties, and member payment plans for delinquent assessments. Under California law, each type of meeting has a specific notice requirement. These requirements are mandatory, and compliance is essential to protecting the HOA’s interests and in avoiding costly litigation. Meetings, Meetings, Meetings It’s no secret that HOA members and boards meet on a regular basis. Isn’t that everyone’s favorite feature of HOA membership? Kidding aside, HOAs function as de facto local governments for millions of Californians, and HOA meetings are where important decisions affecting the community are made. There are several types of HOA meetings, and this article does not present an exhaustive list. Rather, it is intended as a guide to the most frequent meetings and their specific notice requirements. 30

December 2011 | ECHO Journal

Regular Members’ Meetings In most HOAs, members meet on a regular basis, usually yearly. Corporations Code § 7511(a) requires written notice “[w]henever members are required or permitted to take any action at a meeting...” The purpose of the meeting, not the frequency, determines whether written notice is required. Written notice of meetings must be given by posting the notice in the common area, mail, electronically or personally. The Common Interest Development Open Meeting Act (the “Open Meeting Act”) mandates “posting the notice in a prominent place or places within the common area...” [Civil Code § 1363.05(f)] It is permissible to deliver notice by two or more methods, for example, posting and email. Mailed notice must be sent to the member’s address in the HOA records, or at an address provided by the member for the purpose of notice. Corporations Code Section 7511(a) defines “member” as “each member who, on the record date for notice of the meeting, is entitled to vote thereat...” Members must receive written notice of meetings not less than 10 days, nor more than 90 days, before the date of the meeting.

If notice is mailed by other than first-class, registered, or certified mail, notice must be sent not less than 20 days before the meeting. The Davis-Stirling Act defines “electronic delivery” to mean “email, facsimile, or other electronic means.” [Civil Code § 1350.7(b)(3)] Electronic delivery also includes posting on an electronic message board or network that the HOA has designated for those communications, together with a separate notice to the recipient of the posting. [Corporations Code § 20] Electronic delivery requires the recipient’s “unrevoked consent.” Corporations Code Section 20 does not expressly require that the consent be written, but we recommend that written consent be obtained and kept on file. The consent may be obtained in an email from the notice recipient. The Davis-Stirling Act lists categories of documents that may be delivered electronically, but does not list meeting notices as a document that may be emailed. [See Civil Code §§ 1350.7(a), 1357.130 and 1357.140] Since members have the right to specify an address for notice delivery, does “address” include an email address?

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In Worldmark v. Wyndham Resort Development Corp., the Court of Appeal ruled that the term “address” includes a member’s email address. [187 Cal.App.4th 1017, 1038 (2010)] Although the case involved a timeshare development, not a HOA, if the Court’s definition applies to the Davis-Stirling Act, members have the right to email delivery of meeting notices, within the same timeframe required for mailed notice. In the absence of any contrary statutory or case law, we advise our clients to email meeting notices to any member who so requests, in addition to mailed or posted notice. However delivered, the members’ meeting notice must state the place, date and time of the meeting. If members may participate in the meeting via electronic transmission or video screen communication, the notice must so advise. [Corporations Code § 7511(a)] Meeting notices must also contain an agenda for the meeting. If the meeting involves an election, there are rules that govern the delivery of ballots. “Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member not less than 30

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days prior to the deadline for voting.” [Civil Code § 1363.03(e)] As most, if not all, HOA annual meetings coincide with some form of election, notice of the annual meeting must be delivered at least 30 days before the meeting, depending on the timing of the deadline for voting. If directors are to be elected, the notice must include the names of all those who are nominees when the notice is given. [Corporations Code § 7511(a)] Annual Meetings Annual meetings are subject to the same notice requirements as regular members’ meetings, and the same rules concerning elections. Special Members’ Meetings A special meeting may be scheduled for any lawful purpose by (1) the HOA board, chairman or president, or (2) a petition signed by at least five percent of the members. [Corporations Code § 7510(e)] The date of a special meeting is set by the board, and may not be less than 35 days, or more than 90 days from receipt of a petition. [Corporations Code § 7511(c)] The board has 20 days from receipt of the petition to set the date and give notice of the meeting. If

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the board does not do so, the petitioners may set the date and give notice that is not less than 10 days or more than 90 days before the date of the meeting. As with regular and annual meetings, at least 30 days of notice is required for special meetings involving an election. [Civil Code § 1363.03(e)] Board of Directors Meetings Board meetings require much shorter notice than members’ meetings. Regular board meetings may be held without any notice if the time and place of the meetings are fixed by the bylaws or the board. Special board meetings require only four days of mailed advance notice to board and HOA members. [Civil Code § 1363.05(f)] Board members may be given 48 hours’ notice delivered personally or by telephone, including a voice messaging system or by electronic transmission. [Corporations Code § 7211(a)(2)] The bylaws may provide for a longer notice period. As notice periods under the Davis-Stirling Act are calculated in calendar days, not business days, the four-day notice minimum can

Continued on page 35 ECHO Journal | December 2011

News from ECHO

Legislature Targets Board Actions By Email It is very common for board members to communicate with each other and with management via email, and this is often the preferred method of communication on HOA issues. For some time there were no explicit statutory prohibitions or restrictions on the use of emails by board members to discuss or even take action on HOA business, but there will be on January 1, 2012 when Senate Bill 563 goes into effect. One of SB 563’s major impacts will be to ban board “action” via email except in an emergency situation and, in that situation, all board members must unanimously consent to the action in writing. Additionally, SB 563 appears to prohibit a majority of the board from even discussing “any item of business that is within the authority of the board” via email unless it qualifies as a bona fide emergency. SB 563, which becomes effective January 1, 2012, amends several sections of The Davis-Stirling Common Interest Development Act, including the “Common Interest Development Open Meeting Act.” The Open Meeting Act has been specifically 32

December 2011 | ECHO Journal

revised to state “the board of directors shall not take action on any item of business outside of a meeting.” Directors are expressly prohibited from conducting a meeting via a series of emails except for an emergency meeting if all of the board members consent in writing (either individually or collectively), and the written consent(s) must be filed with the board minutes. However written consent to conduct the emergency meeting may be transmitted electronically.

Delegating Board Authority Now that the governor has signed SB 563 into law, some boards will have to reconsider how they do business. Under the new law, boards can no longer make decisions through an exchange of emails, except in an emergency. Boards who are used to dealing with routine matters that arise between regular board meetings in such a manner will have two choices: (1) Hold more noticed open board meetings or executive sessions (the new law now requires notice and agenda for nonemergency executive sessions as well as open board meetings). (2) Delegate authority to deal with such matters to a committee, or in some cases, to the manager or other individuals.

Corporations Code Section 7210 states that: “The board may delegate the management of the activities of the corporation to any person or persons, management company, or committee however composed, provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.” Corporations Code Section 7212(a) authorizes the board “by resolution adopted by a majority of the number of directors then in office, provided that a quorum is present,” to create one or more committees comprised of two or more directors to exercise the authority of the board to the extent authorized by the resolution creating the committee, except for certain matters that require the vote of the entire board. A committee exercising the authority of the board (i.e. making final decisions on behalf of the board) can only be comprised of directors. However, committees acting in an advisory capacity to the board (leaving the final decision to the full board) may include members who are not directors. Committees that are comprised solely of directors and carry out some of the duties of the board are referred to as “executive committees.” Unless stated otherwise in the bylaws, members of such committees are appointed by a majority of the directors then in office. Social Media—Make It Work for Your HOA Are you ready for “social media” or do you still hope it will

fade away? If it’s the latter, you are definitely out of luck. According to Facebook, five years ago there were 12 million active users of its social media website. Today, that number has grown to over 500 million active users with 50 percent of those active users logging in on any given day. As if that weren’t enough, 250 million of those active users access Facebook via mobile devices. What does that mean for us? Social media is not only here to stay; it has become one of the fastest growing forms of instant communication in our society. Currently, people shop online for houses as they shop for other items. Having a presence on Facebook makes your community more “searchable.” As a result, your community’s Facebook page promotes the values of your home! So what does all this mean for community associations? Like all other forms of communication such as newsletters, websites or email blasts, boards of directors must establish rules and guidelines and maintain oversight, authority and ultimate responsibility for any information posted on a social media site. As with all things new, it is better to understand them fully rather than be intimidated by them. Social media should be embraced as a wonderful communication tool that will assist us in making our communities the best they can be. Important Upcoming Events Marin Winter Seminar 8:00 a.m. to 1:00 p.m. Embassy Suites 101 McInnis Parkway Sam Rafael

Legislation at a Glimpse As of November 30, 2011 Bill No.

Author

Subject

Status

Position

Summary

AB 19

Fong

Submetering

Failed passage in Assembly Housing.

Support if Amended

For new construction of multi-unit structures, requires the installation of water sub-meters.

AB 20

Halderman

Construction Defect Disclosure

Failed passage in Assembly Judiciary.

Oppose

Requires that an attorney make certain written disclosures to a client in a potential construction defects action. Failure to disclose would constitute cause for professional discipline.

AB 579

Monning

Mobilehome Attorneys Fees

Hearing 5/10 canceled at author’s request.

Support

Would permit the award of attorney's fees to local governments in an action brought by the owner of a mobilehome park to challenge the validity of a local ordinance.

AB 771

Butler

Sale Disclosure Signed by Documents Governor.

Neutral

Provides that the time frame and fee limitation for providing specified documents to an owner of a separate interest apply to an agent of the association.

AB 805

Torres

Davis-Stirling Revision Part 1

Passed Assembly 5/2. Two-year Bill.

Support

This is the first of two bills from the California Law Revision Commission that restate and clarify the Davis-Stirling Act.

AB 806

Torres

Davis-Stirling Revision Part 2

Passed Assembly 5/2. Two-year Bill.

Support

This is the second of two bills from the California Law Revision Commission that restate and clarify the Davis-Stirling Act.

AB 818

Blumenfield

Right To Recycle

Signed by Governor.

Watch

Would establish “Renter’s Right To Recycle Act.”

SB 150

Correa

Rental and Lease Rights

Signed by Governor.

Support if amended

Would require associations to permit rentals by unit owners.

SB 209

Corbett

Electric Vehicle Charging Stations

Signed by Governor.

Oppose

Makes void and unenforceable any prohibition by an association that restricts the installation or use of an electric vehicle charging station. Requires homeowner to pay for all charges and damages associated with installation and maintenance.

SB 561

Corbett

Third Party Collections

In Assembly Judiciary. Two-year Bill.

Oppose

Would require any 3rd party acting to collect payments or assessments on behalf of an association to comply with the same requirements imposed on the association. Makes statement of legislative intent.

SB 563

Transportation & Housing Committee

Electronic Meetings

Signed by Governor.

Support

Prohibits electronic meetings except for emergencies. Prohibits boards from taking action outside of a meeting. Requires boards to provide agendas of executive sessions. Requires boards to give notice two days before an executive session.

SB 759

Lieu

Artificial Turf

Vetoed.

Oppose

Voids provisions in governing documents that prohibit artificial turf. Allows associations to establish design and quality standards.

ECHO Journal | December 2011

Directory UPDATES Updates for listings in the ECHO Directory of Businesses and Professionals, now available online at www.echo-ca.org.

New Members The Prescott Companies 111 Deerwood Road San Ramon, CA 94583 Contact: Susan Green Tel: 415-404-5647 www.prescottmgt.com Email: sgreen@prescottmgt.com

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Become an ECHO Business and Professional Member and receive the many benefits of membership. To learn more, visit our membership page at: www.echo-ca.org/member/

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December 2011 | ECHO Journal

Meeting Notice Requirements Continued from page 31

make mailed notice unreliable, depending on the date of the meeting. For example, if the four days preceding a board meeting include a major holiday or weekend, or both, mailed notice may not be delivered before the meeting. For this reason, the Open Meeting Act requires delivery of notice of board meetings “by posting the notice in a prominent place or places within the common area and by mail to any owner who had requested notification of board meetings by mail, at the address requested by the owner.” Notice may also be given by delivery of the notice to each unit in the development, or by newsletter or similar means of communication. The notice must contain the agenda for the meeting. [Civil Code § 1363.05(f)] Executive Sessions The Open Meeting Act provides for executive sessions so that HOA boards can address matters that involve privileged information or matters of a private nature. [Civil Code § 1363.05(b)] Executive sessions do not qualify as meetings under the Open Meeting Act. If a board goes into executive session during an open meeting, the board will typically announce the topics that will be discussed. If an executive session is held between board meetings, the board may, but is not required, to give any notice, or to distribute an agenda. [Civil Code § 1363.05(j)] Effective January 1, 2012, SB 563 will provide that executive sessions of the board are meetings, but they are not open meetings. The CID Open Meeting Act (the “Act”) will clarify that boards are not required to notice and hold an open meeting before going into executive session but can meet solely for executive session purposes. The Act will also prohibit discussing or deciding association business by email and will require that business be discussed or conducted only in meetings. The sole exception will be for emergency meetings, in which decisions can be made by email with unanimous written board consent pursuant to Corporations Code Section 7211(b). Executive sessions that are not emergency meetings will require two days’ prior posted notice. Emergency Meetings An emergency meeting of the HOA board may be called if there are circumstances that

could not have been reasonably foreseen that require immediate attention and possible action by the board. Emergency meetings may be called by the president or by any two directors other than the president. [Civil Code § 1363.05(g)] As explained above, special board meetings usually require at least 48 hours notice to directors. There are two exceptions to this rule. If the articles or bylaws so authorize, a meeting may be held with less than 48 hours notice, provided that they do not “dispense with” notice of a special meeting. [Corporations Code § 7211(a)(2)] Alternatively, board meeting notice may be waived if directors do any one of the following: (1) sign a written waiver or consent to hold the meeting without notice, either before or after the meeting, and the writing is filed or made a part of the minutes; (2) approve, in writing, the minutes of the meeting and the writing is filed or made a part of the minutes; or (3) attend the meeting without protesting the lack of notice. [Corporations Code § 7211(a)(3)]

Of necessity, boards may not be able to give even 48 hours notice to members prior to an emergency meeting. We advise boards to give whatever notice is reasonably practicable under the circumstances and to post an agenda. Of necessity, boards may not be able to give even 48 hours notice to members prior to an emergency meeting. We advise our clients to give whatever notice is reasonably practicable under the circumstances and to post an agenda. Member Discipline Before a board can meet to consider or impose discipline upon a member, it must notify the member in writing, by either per-

sonal delivery or first-class mail, at least 10 days prior to the meeting, unless the bylaws prescribe a longer period. The notice must contain: (1) the date, time, and place of the meeting; (2) the nature of the alleged violation for which the member may be disciplined; and (3) a statement that the member has a right to attend and may address the board at the meeting. [Civil Code § 1363(h)] Notably, there is no requirement that the HOA notify a tenant of a violation hearing. Notice must be given to the owner/member who may notify the tenant at his discretion. If after a hearing a member is to be expelled or suspended, the HOA must give a minimum of 15 days’ prior notice of the expulsion or suspension, and the reasons therefore. [Corporations Code § 7341(c)(2)] The notice must provide an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion or suspension, by a person or body authorized to decide that the proposed discipline not take place. [Corporations Code § 7341(c)(3)] The notice of discipline may be given by any method reasonably calculated to provide actual notice, including first-class or registered mail sent to the member’s last known address. [Corporations Code § 7341(d)] The provisions of the disciplinary procedure must be set forth in the articles or bylaws, or copies of the provisions must be sent annually to all the members as required by the articles or bylaws. [Corporations Code § 7341(c)(1)] Conclusion Notice requirements may not be the most exciting aspect of HOA management, but they are among the most important. Associations and management companies may want to establish a notice calendar, and update the calendar annually, to incorporate new statutory and case law requirements. Giving timely notice of all HOA events is worth the effort because it prevents complaints from and disputes with members, avoids costly litigation, and improves the efficiency of association management.

Pierce Gore is an attorney who is counsel with Pratt & Associates in Campbell, CA. The firm is a member of ECHO and participates in both the South Bay and Central Coast Resource Panels. ECHO Journal | December 2011

Netwion Edi

Beyond Privatopia $20.00 Non-Member Price: $25.00 The rise of residential private governance may be the most extensive and dramatic privatization of public life in U.S. history. In Beyond Privatopia, attorney and political science scholar Evan McKenzie explores emerging trends in private governments and competing schools of thought on how to operate them, from state oversight to laissez-faire libertarianism.

Condominium Bluebook 2012 Edition $18.00 Non-Member Price: $25.00

Condos, Townhomes and Homeowner Associations Member Price: $29.00 Non-Member Price: $45.00

This well-known compact guide for operation of common interest developments in California now includes a comprehensive index of the book and a chapter containing more than 200 frequently-asked questions about associations, along with succinct answers.

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, Government and Vehicle Codes important to associations.

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Homeowners Associations— How-to Guide for Leadership 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.

FOR Board Members Reserve Fund Specialists Property Managers Unit-Owners, Accountants Lawyers, Builders

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2012 Community Association Treasurer’s Handbook Member Price: $29.00 Non-Member Price: $35.00 The Handbook is an in-depth guide to all aspects of association finances, including accounting methods, financial statements, reserves, audits, taxes, investments and much more. Not for the accounting novice, this is a tool for the treasurer or professional looking for specific information about association finances.

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Reserve Fund Essentials Member Price: $18.00 Non-Member Price: $25.00 Questions & Answers About Community Associations Member Price: $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.

This book is an easy to read, musthave guide for anyone who wants a clear, thorough explanation of reserve studies and their indispensable role in effective HOA planning. The author gives tips to help board members mold their reserve study into a useful financial tool.

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

2011 ECHO Annual Seminar Program Book $25.00 Non-Member Price: $35.00 This 300+ page reference book contains the presentation outlines, text and handouts from the sessions at the 2011 ECHO Annual Seminar held on June 18, 2011. It also contains vital information for association directors, such as assessment collection policies, internal dispute policies, and much more.

Dispute Resolution in Homeowner Associations Member Price: $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 www.echo-ca.org

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

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

QUANTITY

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

SUBTOTAL CALIFORNIA SALES TAX (Add 8.25%) TOTAL AMOUNT

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

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

Signature

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

State

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AMOUNT

ECHO Events Calendar

Save these dates Wednesday, December 7 Maintenance Resource Panel 11:30 a.m. Il Fornaio 302 S. Market St., San Jose

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

Friday, December 9 East Bay Resource Panel 12:00 Noon Massimo Restaurant 1604 Locust St., Walnut Creek

Tuesday, January 10 Central Coast Resource Panel 12:00 Noon Pasatiempo Inn, Santa Cruz

Wednesday, December 14 South Bay Resource Panel 12:00 Noon Buca Di Beppo 1875 S. Bascom Ave., Campbell Wednesday, December 14 Wine Country Resource Panel 11:30 a.m. Annual Christmas Luncheon Double Tree Hotel 1 Doubletree Dr., Rohnert Park Thursday, January 5, 2012 North Bay Resource Panel 11:45 a.m. Contempo Marin Clubhouse 400 Yosemite Rd., San Rafael

Wednesday, January 18 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Wednesday, February 1 Maintenance Resource Panel 12:00 Noon ECHO Office, 1602 The Alameda, Ste. 101 San Jose February 4 Marin Seminar 8:00 a.m. to 1:00 p.m. Embassy Suites 101 McInnis Parkway, San Rafael

Save these dates for the 2012 ECHO Annual Seminar June 22, 23

Wednesday, February 8 South Bay Resource Panel 12:00 Noon Buca Di Beppo 1875 S. Bascom Ave., Campbell Friday, February 10 East Bay Resource Panel 12:00 Noon Massimo Restaurant 1604 Locust St., Walnut Creek Wednesday, February 15 Wine Country Resource Panel 11:45 a.m. Eugene Burger Mgmt. Co. 6600 Hunter Dr., Rohnert Park Saturday, February 25 Central Coast Winter Seminar 8:00 a.m. to 1:00 p.m. Hilton Santa Cruz/Scotts Valley 6001 La Madrona Dr., Santa Cruz Friday and Saturday June 22, 23 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

December 2011 | ECHO Journal

Meeting First Wednesday, Even Months First Thursday, Odd Months Second Friday, Even Months 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 Massimo Restaurant, Walnut Creek Francesco’s Restaurant, Oakland Pasatiempo Inn, Santa Cruz Buca Di Beppo, Campbell Eugene Burger Management Co., Rohnert Park Varies

Learn to

Face

CID Challenges

at the ECHO

Marin Seminar

Saturday, February 4, 2012 Embassy Suites, 101 McInnis Parkway, San Rafael Agenda 8:00 a.m. Registration and Continental Breakfast 8:45 Welcome—Oliver Burford 9:00 Legislative and Case Law Update—David F. Feingold, Esq. Learn what Sacramento has been up to in 2011 and what you need to know for 2012.You will also find out about those association conflicts and disputes that ended up in the courts and pick up valuable tips in the process! 9:45 Hot Topics: Rental Restrictions, Smoking, Emails, Meetings and More—Glenn Youngling, Esq. What are the burning issues facing your association? How are you going to deal with the changes in the law, and other issues that are hot in 2012? We guarantee that we will hit your hot topic, and that you will find you are not alone. 10:30 Break 10:50 Fiduciary Duty in Hard Times, A Participatory Session—Wanden Treanor, Esq. The poor economy persists, values in common interest developments continue to decline and the problems for association directors arising directly from the stormy financial climate have increased. We will present a hypothetical “Board Packet” to the audience and in this quick paced interactive session, you will work with a fictional board and learn new tools to handle the issues facing your community. 12:15 Q&A Session—All Speakers The speakers will answer your questions, and even some you did not realize you had. 12:35 Drawings for Door Prizes and Close 1:00 Adjourn Yes, reserve _____ spaces for the ECHO Marin Seminar. Amount enclosed: $__________ (attach additional names) Name: HOA or Firm: Address: City:

State:

Zip:

Phone:

Ticket Price: $49 Non-Members: $59

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

ECHO Honor Roll

About

ECHO Honors Volunteers Beth Grimm 2011 Volunteer of the Year ECHO Resource Panels Accountant Panel Richard Schneider, CPA 707-576-7070 Central Coast Panel John Allanson 831-685-0101 East Bay Panel Beth Grimm, Esq., 925-746-7177 Mandi Newton, 415-225-9898 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 Toni Rodriguez, 408-848-8118 George Engurasoff, 408-295-7767 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 Chat Fitzell, CCAM John Garvic, Esq., Chair Geri Kennedy, CCAM Wanden Treanor, Esq.

December 2011 | ECHO Journal

SF Luncheon Speakers John Allanson Jeffrey Barnett, Esq. Tyler Berding, Esq. Ronald Block, PhD. Sandra Bonato, Esq. 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 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 June 18, 2011 ECHO Annual Seminar Julie Adamen John Allanson Jeffrey Barnett, Esq. Tyler Berding, Esq. Jacquie Berry Sandra Bonato, Esq.

Jeffrey Cereghino, Esq. Timothy Cline Paul P. Cordova, PE Alan Crandall Bradley Epstein, Esq. Lisa Esposito, CCAM John Garvic, Esq. Beverlee Gordon Sandra Gottlieb, Esq. Patrick Holman Linnea Juarez, PCAM, CCAM David Kuivanen, AIA Kerry Mazzoni Evan McKenzie, Esq. Steven Saarman Brian Smith Deon Stein, Esq. Wanden Treanor, Esq. Steven Weil, Esq.

Recent ECHO Journal Contributing Authors September 2011 Julie Adamen Tyler P. Berding, Esq. Timothy Cline Beth A. Grimm, Esq. Judy O’Shaughnessy October 2011 Tyler P. Berding, Esq. Steven Weil, Esq. November 2011 Timothy Cline, CIRMS Beth A. Grimm, Esq. Pete Pearson Paul Windust, Esq. Glenn H. Youngling, 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 • 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 (www.echo-ca.org) to obtain an application form and for more information.

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Community’s Financial Position Continued from page 27

accounts, in accordance with applicable federal and state law and the association’s governing documents and established collection policy. It is also important that the association, in accordance with the collections attorney, periodically review delinquent accounts and make the decision to write off accounts that are not collectible or where further collection effort is not cost-effective. Many boards hesitate to write off uncollectible accounts, but, often, it is the best decision for the board to make. Recommendation F: Establishment of the Allowance for Doubtful Accounts The Allowance for Doubtful Accounts line item is what is referred to as a “contraasset” and appears in the asset section of the balance sheet as a negative number (to counter the accounts receivable asset). The purpose of the Allowance for Doubtful Accounts is to reflect more accurately the association’s financial position. Without the Allowance, the association’s balance sheet would show the entire delinquent amount as a collectible asset. The Allowance for

Doubtful Accounts posts as a negative number to “decrease” the accounts receivable number to reflect more accurately the association’s assets. Prior to each fiscal yearend, associations should review their delinquencies and, if an Allowance for Doubtful Accounts has not previously been established, create the line item. There are many different ways to calculate the Allowance for Doubtful Accounts (usually by percentage or specifically identified delinquent owners), so talk with your managing agent and association auditor to determine the right number for your association. If your association has an Allowance for Doubtful Accounts line item, the number should be adjusted each year to reflect any changes in the delinquent amount.

Ace Property Management . . . . . . . .19 American Management Services . . . .9 Angius & Terry . . . . . . . . . . . . . . . . .3 A.S.A.P. Collection Services . . . . . . .22 Association Reserves . . . . . . . . . . .24 Berding | Weil . . . . . . . . . . . . . . . . .44 Collins Management . . . . . . . . . . . .18 Community Management Services . .14 Compass Management . . . . . . . . . .15 Cool Pool Service . . . . . . . . . . . . . .23 Cornerstone Community Mgmnt . . . .14 Ekim Painting . . . . . . . . . . . . . . . . . .8 First Bank Association Bank Srvcs . . .8 First Bank Association Bank Srvcs . .23 Flores Painting . . . . . . . . . . . . . . . .34 Focus Business Bank . . . . . . . . . . .30 Helsing Group, The . . . . . . . . . . . . .24 M & C Association Services . . . . . . .34 Massingham and Associates . . . . . .27 Master Plumbing & Sewer . . . . . . . .43 Mutual of Omaha Bank . . . . . . . . . .12 PML Management Corp. . . . . . . . . .12 Pollard Unlimited . . . . . . . . . . . . . .26 R. E. Broocker Co. . . . . . . . . . . . . .19 Rebello’s Towing Service . . . . . . . . .25 REMI Company . . . . . . . . . . . . . . . .23 Saarman Construction . . . . . . . . . .22 Statcomm . . . . . . . . . . . . . . . . . . .26 Varsity Painting . . . . . . . . . . . . . . . .31

Hilary Lapp is the HOA Division Director at Community Management Corporation in Fairfax, VA. This article has been previously published in Association Times, the monthly newsletter for Associa management companies. ECHO Journal | December 2011

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.

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