Preparing for and Dealing with Disaster

Preparing for and Dealing with Disaster

An unfortunate reality is that occasionally communities can be confronted with disaster, when earthquake, wildfire, or other calamity can transform a community within a few hours. Planning for the unthinkable can improve the association’s recovery prospects. Preparedness: Enhance communication. Embark upon an aggressive campaign to build email contact points for every association resident or owner. The ability to flash bulletins to owners is critical in emergencies and saves labor and postage and increases communication in normal times. Check the association insurance. Does the association have replacement cost or code upgrade coverage? What is covered? Some years ago an association sustained hundreds of thousands of dollars of landscaping and irrigation equipment destroyed in a major brush fire. Fortunately, their policy covered landscaping and the insurance paid to restore common area hillsides. Does the association have earthquake coverage? Check the deductible and inform members of the amount that will be association responsibility in the event of major seismic damage. A meeting with your broker may reveal gaps or inadequacies in the association’s insurance protection. Create emergency policies and plans. The manager should be empowered to respond to emergencies, and each director should know association policy regarding who makes emergency calls to vendors if the manager is not available. Risk management. Is the association adjacent to any hillsides or other brush areas? When was heavy vegetation last cleared from the association perimeter? Your local fire department or a consultant may provide a risk assessment. The Emergency: Immediate Actions. Call first responders. Call management. Issue an update via email and bulletin board, avoiding unsubstantiated reports or anything promoting panic. If evacuation is not...
Keep the Lawyers at Bay [Ten Tips]

Keep the Lawyers at Bay [Ten Tips]

Serving as a volunteer director is often thankless, but it shouldn’t be risky. Here are ten ways to reduce if not prevent personal risk from your service. 1. Learn and follow the Business Judgment Rule Found at California Corporations Code 7231 and 7231.5 and contained in most bylaws, the Rule protects volunteers from liability while acting in good faith, for the association’s best interests, and upon reasonable inquiry. 2. Insurance is necessary Only serve if the association has directors and officers (“D&O”) insurance coverage. Civil Code 5800 protects directors from personal liability if the HOA with more than 100 memberships has $1,000,000 of D&O insurance or $500,00 if less members. 3. Refuse compensation Whether called a “stipend” or assessment reduction, reject any form of renumeration for board service. Upon receiving even one dollar of compensation the director is no longer a volunteer and loses all the immunities of volunteers. Reimbursement for a director’s time serving the HOA is not reimbursement – it is compensation. Reimbursements are repayments of out of pocket expenses. 4. Don’t get mad… or even “Good faith” doesn’t just mean a pure heart. However, it certainly does exclude any willful, malicious or retaliatory intent. The nastiest homeowner has the same rights as the saintly ones. Enforce the rules evenly. 5. Don’t take matters into your own hands HOA governance is a team sport, not an individual event. What you think is valid instruction may be viewed by the board (and the HOA’s attorney) as interference. A director (even the president) must use restraint and wait for the board to act. 6. Follow the corporate process Is...
Is Our HOA Now a Free Speech Zone?

Is Our HOA Now a Free Speech Zone?

Dear Kelly, Thank you for your always insightful columns. I have a question regarding the new state law supporting use of common facilities for political activities, and one on first amendment rights. The new law allows residents to use common facilities for political meetings without charge. May the HOA limit attendance to only residents, residents and guests according to its adopted policies, or may/must these programs be open to all? Can an HOA prohibit the display of political signage on front lawns? For example, must the HOA allow residents to have campaign signs? Are there limitations to this allowance like size, length of display time, etc. as established in the HOA rules and policies? With what promises to be a contentious election season this year, this information will be quite timely. B.S., Murrieta Dear B.S., The new law you mention is Civil Code 4515, which bars associations from charging a fee or requiring insurance as a condition of holding meetings which relate to “common interest development living, association elections, legislation, election to public office, or the initiative, referendum, or recall processes” (Civil 4515(b)(1)). That is a very broad (and vague) array of topics, but the association can still require a deposit or insurance for other uses of the common facilities. Also, while the statute says the association cannot bar the use (if the facility is available), that does not mean the HOA has to give carte blanche. For example, if someone wants to hold an event and serve alcohol, the association could reasonably allow the meeting, but not allow food or alcohol to be served without a deposit or...

Improved Condo Loan Guidelines

In 2009, the Federal National Mortgage Association (FNMA, aka “FannieMae”), and Federal Housing Administration (FHA) imposed new requirements for condominium loans. Administered by Housing and Urban Development (HUD), the rules required that henceforth an entire project would need to receive approval in order for any units to obtain FHA/FNMA loans. Some of the requirements were problematic. Member delinquency limits were too strict. Managers were required to obtain a type of employee dishonesty insurance which was unavailable. Worst of all, the signer of the certification application had to make sweeping promises (more on that below). Many managers and HOA law firms, including mine, shied away from these certifications because they exposed the signer to unacceptable responsibility. Some banks and other service providers assisted with FHA/FNMA certifications, but thousands of associations could not qualify even if they had a representative willing to sign the HUD application. On September 13, 2012, HUD announced new guidelines in its “Mortgagee Letter: 2012-18”. The changes are good news for condo owners. [This column, for space reasons, can only address highlights of the new guidelines. Developers or sellers of condominiums should review the entire document at www.HUD.gov or www.hoahomefront.com] Here are the changes: Mixed–use projects The new guidelines give more flexibility regarding non-residential condominiums. As before, 75% of the project must be residential, and exception requests may be submitted if no more than 35% of the space is non-residential. Now, an exception may be requested even if the project has more than 35% non-residential space. Investor ownership Previously, no one owner could have more than 10% of the units in the project. Now, investors can own...
How is the HOA Doing?

How is the HOA Doing?

If you read this, you probably either live in a common interest development (“CID” or “HOA”) or are considering it. How does one determine whether a CID residence is a good investment, or if your HOA is healthy? Is it simply price and “location, location, location”? A well-run association in a poor location may be more desirable than a poorly run association in a great location. Consider these factors: Maintenance Is the property well-maintained? Peeling paint, dead plants strewn in the walkway, and laundry hanging from balcony rails are not good signs. Some associations pinch pennies, deferring maintenance so to artificially hold the line on assessments – never a good idea. Board meetings HOA boards must by law meet at least quarterly, and most boards in all but the smallest associations meet at least monthly. Boards that meet infrequently (or too frequently) may be disorganized. Can you observe a meeting? The conduct at the meeting speaks volumes about the way the CID actually operates. Board minutes Board minutes must by law be made available to members within 30 days, and are a very informative resource. Are there minutes? Do they reflect regular meetings? What do they tell you about what the Board is addressing? Rainy day money – reserves The law requires HOAs to have very detailed reserve funding disclosures, so read those disclosures! A short-sighted HOA skimps on reserve fund saving to artificially avoid assessments increases, but that is actually a form of growing indebtedness. Some day that association will need to get a loan or impose a special assessment because it is not ready for major repairs....