Should Our Assessments Increase?

Should Our Assessments Increase?

Hello Mr. Richardson, Our board is against raising our fees which have been the same for at least 10 years! Obviously we are not keeping up with inflation. According to our reserve study we are over $1000 per unit underfunded. We have [decades old] buildings. My concerns are falling on deaf ears despite the encouragement of our management company to raise fees. I would deeply appreciate your opinion. J.E., Irvine Dear J.E., Association boards are responsible to budget and spend association funds wisely. If a board decides in advance that it will not increase the budget, it is quite likely such a board has placed as its first priority the artificial preservation of assessments and that the upkeep of the property (and the association’s long-term financial health) is a lower priority. Properly caring for the common property and keeping vendor expenses flat for over ten years is unbelievable (and not in a good way). Because of the fact of inflation, cost increases should be factored into the healthy HOA budget. Otherwise, the association is probably deferring maintenance, hiring cheap (instead of the most competent and appropriate) vendors, and is not properly funding its reserve account. Such association are not financially healthy and are akin to people who live on credit cards. Such an association eventually has to face a day of unhappy reckoning when the deferred bills all come due and the association is forced to borrow. Qualified and certified managers are trained to prepare budgets and should be heeded in this regard. Maintaining property, keeping up with inflation, and depositing faithfully in reserves are all actions preserving the...
Recording Meetings, Secret Budget Talks, and a Dictator President

Recording Meetings, Secret Budget Talks, and a Dictator President

Hello Mr. Richardson, Our board announced that audio recordings of meetings would no longer be allowed. What are your thoughts on this? Does this action by the board violate the Brown Act, the Davis-Stirling or some other statute? Thank you, N.D., Rancho Santa Fe Dear N.D., As private organizations, common interest development associations (aka “HOAs”) are not controlled by the Brown Act (which applies to public bodies). The Davis-Stirling Act contains the “Open Meeting Act,” found at Civil Code 4900-4955. The Open Meeting Act does not require that HOA meetings be recorded electronically, but only that draft minutes of meetings be available no later than 30 days after the meeting. I generally recommend against audio or video recording of board proceedings, except in the rare occasion the association has the proper facilities to record and broadcast meetings (typically only in very large HOAs). Recording meetings often creates two negative problems – it intimidates some, and invites others to grandstand. So long as the policy is clearly stated, association boards can take either policy direction. Best, Kelly To Kelly G. Richardson, We have a question concerning our HOA president. The president is running a construction company that controls all maintenance and repairs throughout the community. She runs the community as a dictatorship and no one on the board is allowed to even speak. We have requested financial records – it won’t work. She told us this could no longer be discussed. M.L., Lake Forest Dear M.L., Some HOA presidents simply let the position get to their head. HOA presidents have very little power in most HOAs, aside from calling and chairing meetings. They have...

Bare Walls or Full Coverage: Insurance Brokers Weigh In

So-called “bare walls” insurance plans are often discussed in associations trying to limit the cost of water damage claims. In a bare walls approach, the HOA insurance does not restore unit interiors, but each owner to insures (via individual HO6 policy) or pays for their own cabinets, wall and floor coverings, and other interior finishes. I consulted several leading insurance brokers on the subject. The experts did not agree on the desirability of a bare walls system. Steven Segal, of the Steven G. Segal Insurance Agency in Sherman Oaks, observed there is “too much exposure both to the association and the individual unit owner.” John Sinner, of the John R. Sinner Insurance Agency in Alhambra, disfavors bare walls insurance, because “it leaves the responsibility of proper interior insurance on the owners.” Sinner said if a unit owner had insufficient interior coverage, the association might have a damaged unit left only partially restored. Joel Meskin, Managing Director of McGowan Program Administrators, a national agency headquartered in Ohio, also does not recommend bare walls insurance, questioning whether unit owners will obtain their own HO6 insurance policies. He said further “I have much more confidence in the association taking care of the issues, and I think the [cost of] insurance obtained by the association will be ultimately be less than the totality of changing to bare walls.” However, Michael Berg of the Berg Insurance Agency in Lake Forest, offered a differing view: “Bare walls is the most equitable sharing of the risk of damage to interior property. It most closely aligns with the maintenance and repair responsibilities of the HOA and the...
The Drought Emergency is Over. Back to Business as Usual?

The Drought Emergency is Over. Back to Business as Usual?

On April 7, 2017, Governor Brown issued Executive Order B-40-17, formally ending the drought emergency, which can be read in its entirety at https://www.gov.ca.gov, the Governor’s web site. The Order is not only confirmation of good news for California, but also immediately changes the applicability of two important statutes in the Davis-Stirling Common Interest Development Act. The Declaration of Drought Emergency was issued by Governor Brown on January 17, 2014, the culmination of several water conservation orders. Shortly after that Declaration, the California Legislature swiftly passed emergency legislation, adding certain protections to the Davis-Stirling Act regarding water conservation. Civil Code 4735 Civil Code 4735(c) prohibited associations from fining or assessing an owner who let their yard “go brown” by not watering it during a declared state of drought emergency. Now that the statewide emergency declaration is rescinded, the statewide prohibition against enforcing landscape maintenance obligations against owners who refused to water their yards also has ended. This section still may apply if a local jurisdiction (city or county) has its own declaration of drought emergency still in place, so managers and boards would be well advised to check with their local jurisdiction for any such local declaration. Civil Code 4736 Civil Code 4736 rendered unenforceable any requirement that an owner pressure wash the exterior of their home, so long as a statewide or local declaration of drought emergency is in place. Associations which require their residents to wash their exterior walls may again enforce that requirement, unless the local jurisdiction has its own declaration of drought emergency still in place. While these drought-related laws are no longer in force,...

Exclusive Use Common Areas: What You Might Not Know

Many condominium buyers do not understand what they bought until long after becoming an owner. Condominiums consist of two elements: A “separate interest”, called the “unit”, and an undivided equal share in everything else, called common area. However, there are usually also hybrid areas, called “exclusive use common area,” devoted to the exclusive use or benefit of a single condominium yet are still common area. Here are seven oft-unknown aspects about this aspect of California condominiums. Exclusive use common areas are not defined by written or oral statements or even contracts. Regardless of what a neighbor, a Realtor® or even a purchase contract may say, exclusive use common areas are defined by written and recorded documents. Exclusive use common area is defined normally in condominium plans, CC&Rs and Civil Code 4145. Exclusive use is not only balconies and patios. Private patios and balconies are normally characterized as exclusive use common area, but exclusive use areas usually include far more than that. Per Civil Code 4145, unless the governing documents say otherwise, exclusive use common areas include “shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, exterior doors, doorframes, and hardware incident thereto, screens and windows or other fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest”. Common examples of exclusive use equipment would be air conditioning or water heater equipment serving single units. It’s not your property. Exclusive use area is for the use by occupants of a single residence, but it is still common area, meaning it is owned by the entire association. The user does not own it any...