CAI_LOGO_225Earlier this month, CAI released a Statement of Moratorium on Foreclosure Actions urging community associations to immediately suspend all foreclosure activity and not begin new foreclosure actions until June 1. We question how well thought out this position is as it is not all that realistic for California community associations.

Do not get this wrong. We at SwedelsonGottlieb are well aware of the impact that COVID-19 has had on our world and the fact that over 10,000,000 people filed for unemployment nationwide (so far). We recognize that community association boards are going to need to be sensitive to the fact that many owners may be temporarily (hopefully) unemployed and not able to timely pay their assessments.

As CAI said in its introduction to the Statement of Moratorium, the collection of community association assessments is a very serious and important responsibility of a governing board. Failing to collect assessments may impair a community association’s ability to pays its bills, provide essential services, acquire financing for continued operations, and may impact the ability of a potential purchaser to obtain a mortgage or impact existing owners refinancing of their loans.

Screenshot_4_21_20__10_26_AM-300x110Prepared by the California Community Association Attorneys at SwedelsonGottlieb

By now, most people have heard about the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020 H.R. 748). The breadth and scope of this Act, and the speed at which it passed both houses of a divided Congress and became law, is truly remarkable in these partisan times and speaks to the gravity of the COVID-19 crisis.

The Act is a massive stimulus bill that contains a variety of different programs of grants, loans, credits, debt forgiveness, and tax changes. Each of these programs is administered differently and has different criteria for eligibility.

Two of the Act’s provisions have become of particular interest to community associations: the federal Small Business Administration’s (SBA) new Emergency Economic Injury Disaster Loan Advance Grant program (the EIDL Loans which are available to HOAs), and the Paycheck Protection Program (the PPP which is not currently available to HOAs).

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SwedelsonGottlieb would like to share one of a series of webinars featuring Founding Partner, Sandra L. Gottlieb, and a panel of attorneys from across North America moderated by Andrew Fortin, as they discuss how community associations are responding to and addressing issues arising from the Covid-19 pandemic.

As we continue to navigate the wave of this pandemic, we continue to urge you all to take COVID-19 and your health and wellness seriously, be patient and thoughtful of your neighbors, community and those who are suffering the effects of COVID-19.

COVID-19__Force_Majeure_Event____Shearman___Sterling-300x131The spread of the coronavirus/COVID-19 has caused and will likely continue to cause unexpected interruption in the business of many California community associations. Many of our association clients are in the middle of large common area refurbishment and restoration projects. With increasing restrictions and/or recommendations by public officials and others intended to control the spread of the coronavirus, contractors/vendors may suspend or cease services/work and advance “force majeure” as a defense to the association’s breach of contract claim. It is important that board members and managers understand what force majeure means and how to respond when a contractor/vendor suspends or seeks to suspend their performance due to the coronavirus citing a force majeure clause contained in the contract between the association and the contractor or vendor. Follow this link to read SwedelsonGottlieb’s article that explains exactly what force majeure means and how it could impact your community association. And if you have Force Majeure issues or questions, contact SwedelsonGottlieb via email (info@sghoalaw.com) or call us: 800/372-2207

Screenshot_4_7_20__12_32_PM-1-300x116Recently, an attorney that also represents California community associations sent out a newsletter that dealt with assessment collection during the pandemic. We already addressed this issue in our COVID-19 HOA Guidebook. We certainly do not agree with a lot of what that other attorney had to say on this issue and we know that most other community association attorneys that we have spoken with feel the same way. And we preface our comments by saying that we are certainly sympathetic to all those association owners who have been laid off or furloughed as a result of the COVID-19 pandemic. But we are also pragmatic and realistic about how the non-payment of assessments will negatively impact the hundreds of California community associations we represent.

The newsletter from the other attorney suggested that when addressing unpaid assessments as a result of the pandemic (which may not be that easy for boards to determine), association boards need to balance board duties. That newsletter correctly stated that boards have a fiduciary duty to keep their associations’ operational, meaning that they have to pay the utility bills, pay for insurance, for maintenance of the common area, the cost of dealing emergencies, pay vendors, etc. Our colleague suggested that boards need to balance these obligations against the fact that increasing numbers of members cannot pay their assessments because of the pandemic. The newsletter, however, offered no suggestions on how to do this as there is no way to effectively balance the obligations as associations need the money assessed to pay the association’s bills. Yes, boards can delay any discretionary projects, but most associations do not have significant discretionary projects.

As stated in the introduction, don’t misunderstand our pragmatic approach as suggesting that we are not sympathetic to those owners that have lost their jobs and cannot afford to pay their assessments; of course we are sympathetic. That said, those owners will need to find a way to pay their assessments or at the very least contact their associations to request a payment plan so that their associations can manage their expectation of payments and can continue to operate and meet its obligations.

Screenshot_4_2_20__4_11_PM-300x170The COVID-19 pandemic has disrupted the community association industry both in terms of operations and morale. Community association members, board members, and community managers are presumably staying home to avoid contracting the coronavirus, and are not meeting in person. This seems to have led to a reluctance, by some association boards, to conduct business. Further, the social distancing requirements imposed by our State and local governments are eliminating social interaction that is critical to the functioning of the community.  Along with this, the fear and uncertainty of the COVID-19 pandemic has altered the mood and attitude of board members and professionals involved with operating the community association.

The disruption has become apparent and severe. However, we must examine the “silver linings” and “play with the cards we have been dealt” – so to speak – in order to preserve the integrity of our communities and functioning of same. The business that needed to be done before we all retreated to our homes to be safe still needs to get done and the longer boards wait to do that business, the more likely it is that there will be complications. Below are a few ideas that board members should consider moving forward in the face of this pandemic that may last for months.

1. Meetings.  While in-person meetings should be avoided, associations may still be able to conduct meetings via conference call and/or videoconference (e.g., Zoom). The Davis-Stirling Act sets out a procedure for telephone conference meetings, but the Code requires that someone be at a physical location where the owners can listen to the call via speakerphone and participate during open forum. We believe that the ongoing pandemic would warrant a substantial compliance approach. That is, associations can conduct the meeting via telephone or video conference and attempt to comply with the applicable statutes, as much as possible, while at the same time complying with the State and City social distancing orders now in effect. This way, associations may still conduct business and hold meetings so that the common area components continue to be maintained, insurance policies do not lapse, and other obligations like enforcement of the Governing Documents are met.  In other words, California community associations can still function while the board members and management are at the same time complying with government mandated social distancing requirements.

CoronavirusSwedelsonGottlieb updated its COVID-19 Community Association Guidebook on March 27, 2020. We put this Guidebook together to address our new reality and how California community associations should be dealing with the pandemic. We are all staying at home unless our jobs are essential and we are socially distancing ourselves from one another. The reality is that community associations cannot close down. Associations must continue to operate as they control the common areas where people live, and so much more. And the COVID-19 pandemic has created issues that we have never had to deal with in the past.

SwedelsonGottlieb is open for business; most of us are working remotely. And, we continue to receive inquiries from board members and managers concerning what community associations should be doing to address the COVID-19 pandemic and the impact on their communities. As we explain in the Guidebook, we do not believe that community associations have any direct or legal responsibility to deal with the coronavirus itself as it is each resident’s responsibility to protect themselves from contracting COVID-19. That said, some commonsense things should be kept in mind and we address those things in the Guidebook.

To be clear, this does not mean that associations should not be implementing policies to address the coronavirus, such as taking steps to clean and sanitize to the extent possible the common area, close common area amenities such as pools, gyms and recreation centers or clubhouses. But there is only so much that associations can do. As we explain in the Guidebook, there are things that each California community association can and should be doing, especially when an association learns that a resident has contracted or been exposed to the COVID-19 virus, to limit liability exposure.

CoronavirusIt is not a hoax; it is a pandemic. And as a result, we are receiving inquiries from board members and managers concerning what community associations should be doing to address the coronavirus (COVID-19) pandemic and the impact of same on their communities. To address these questions, SwedelsonGottlieb published a guidebook that explains, among other things, why we do not believe that community associations have any direct responsibility to deal with the coronavirus; rather it is each residents responsibility to take steps to limit their exposure to the virus to avoid contracting the virus. That said, there are some commonsense things that should be kept in mind. And there are employees and staff to consider. Follow this link&amp to read and download SwedelsonGottlieb’s Guidebook. And note that as the information that we are all receiving about the coronavirus and how governmental agencies are dealing with the disease keeps evolving, so will our advice. So be sure to visit HOAlawblog for the latest coronavirus information and advice as it relates to California community associations.

Prepared by the Community Association Attorneys at SwedelsonGottlieb

Proposed_Legislation_Bad_for_Health_Care_Providers_and_Patients-300x278
Senate Bill 323, proposed new law that would impact how California community association conduct elections, was approved by the Senate and Assembly was presented to Governor Newsom for his signature. This proposed legislation will impact and change the procedural requirements for most California community associations’ elections. Unfortunately, this proposed legislation goes too far and it is not the right solution to whatever it is that motivated Senator Wieckowski to author this new legislation.

For example, under current law, Civil Code Section 5200(a)(9), members of a community association can request their association’s list of members, including the members names and addresses. Currently Civil Code section 5220 allows members the ability to opt out and keep their contact information, which they deem private, off the list. SB 323 includes a loophole that effectively eliminates the ability for owners to opt out of having their name and personal contact information provided to another member. This proposed new law requires owners to provide their name and address on the envelope that includes the ballot, which SB 323 would make part of the list of records available for member inspection.

From the Community Association Attorneys at SwedelsonGottlieb

Is_It_Finally_Time_To_Buy_A_Condo_-300x174The U.S. Department of Housing and Urban Development (HUD) has finally published the long-awaited final revisions to the Federal Housing Administration’s (FHA) condominium project approval rules. The FHA does not originate loans for purchasing condos, but rather insures these loans for borrowers who might not otherwise qualify for traditional financing requiring a 20% down payment. In practice, these changes will give more people access to FHA-insured financing, which should in turn provide many Californians with a better chance of purchasing a condo. The new rules go into effect on October 14, 2019.

Some of the most significant changes in the FHA regulations include:

• The FHA is once again authorized to approve and insure up to 10% of individual loans in a condo project (formerly called “spot,” and now called “single-unit” approval), as long as the condo association as a whole is financially stable.  The FHA may also insure these loans if the condo project itself has not obtained FHA approval, which can be an expensive and cumbersome process for many condo associations.

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