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By Mark Petrie, Legal Assistant at SwedelsonGottlieb

Shakespeare’s Hamlet complains about the “law’s delay” as part of the reason he considers suicide. If he had lived today and tried to revive a California corporation’s suspended status with the Secretary of State, his decision would have been easy. Extended delays are placing California corporations (including homeowner associations) at serious risk of litigation exposure and may make them ineligible for disaster relief such as SBA funds, as well as causing them to suffer the extended suspension of other benefits of incorporation. Arguably, the greatest risk of suspended status is exposure to litigation, as the association may not prosecute nor defend a legal action without active status.
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Prepared By David C. Swedelson.

We are amazed by the number of board members and managers that do not know that there is a Vehicle Code Section (§22658) that addresses how and when California condominium and planned development community associations can tow vehicles that are not legally parked. Compliance with the Vehicle Code is required, and non-compliance could subject the Association to potential fines, legal liability and damages.

On January 1, 2007, changes and amendments to the provisions to California Vehicle Code §22658, relating to towing from private property, including common interest developments, went into effect. No longer can an association instruct security services or a towing service to tow vehicles that may not be authorized. Rather, the association must comply with the new stringent laws.
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What happens when owners do not pay their assessments, default and then allow their property to be lost through foreclosure? The answer is clear; their former association does not have enough money to pay the bills and/or the other owners must cover the deficit. This was the subject of an LA Times article that many of you might find interesting.

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By David Swedelson, Esq. and Sandra Gottlieb, Esq.

As we near the end of 2010, we thought it timely and appropriate to provide you with a report as to the status of the assessment collection problems that continue to plague many California community associations as a result of the recession. The following information and opinions come from our perspective as experts in the field and as the operators of one of the leading assessment collection services in California.

We had hoped that we would have better news to report by now. We don’t! All of the reports we have seen indicate that our nation’s economy, while improving, is still a mess, and community associations (condominiums, planned developments and stock co-ops) are unfortunately suffering as a result. Unemployment remains high, creating an ongoing and significant problem. Recent government reports indicate that nationally, unemployment is now at 9.4% (increasing rather than decreasing).
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By SwedelsonGottlieb, Community Association Attorneys
There tends to be a great deal of confusion over service, companion and therapy animals, and, particularly, service, companion and therapy dogs. While the Americans with Disabilities Act does not generally apply to community associations unless an association opens its common areas and recreational facilities to the general public (e.g. allowing people other than residents and their guests to use the association’s pool, rent the association’s clubhouse or take lessons at the association’s tennis court), state and federal fair housing laws do apply to community associations. Association boards and managers should be aware that homeowners do have the right, subject to certain restrictions, to bring service, companion and therapy dogs into their separate interests, even when those dogs violate pet restrictions contained in an association’s governing documents (e.g. keeping or bringing the dog into the association’s development violates restrictions on the number of dogs, dog weight limits or dog breeds).
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By Sandra L. Gottlieb, Esq. and Stephanie Rohde, Esq.

Now that the rainy season is soon upon us, many associations have been scrambling to get their association roofs repaired or replaced to avoid water intrusion issues (leaks). In every roofing contract that we have prepared or reviewed, the most important issue is the warranty.

A roofing contract should include two types of warranties, the manufacturer’s warranty and the roofing contractor’s warranty. Typically, the manufacturer’s warranty will cover a long period of time (10-20 years), and may include materials and possibly workmanship, but generally excludes “incidental and consequential damages.” This means if something goes wrong (and the new roof leaks), the manufacturer will cover the work that was performed under the contract (i.e., it will pay to replace the roof, but not the cost of labor) but will not do anything about the resulting damage from the leaks, like the damaged ceiling, walls, furniture, carpet, etc. This is an especially important consideration and issue in a roofing contract, where poor workmanship can result in extensive water damage and/or mold intrusion throughout both the common area and individual units. And in our experience, workmanship is usually the source of the leaks, not the material.
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CAR has let it be known that it plans to introduce a bill in 2011 that will effectively restrict or limit the fees that community association management companies now charge for such things as ownership transfers and compliance with Civil Code Section 1368. This is likely going to be a very contentious issue, as these are fees that the owners of the specific property that is making the request should be required to pay directly to management. If CAR’s legislation were to become effective, it is likely that owners in escrows would only be required to pay the actual costs of duplication, etc. As a consequence, the associations would themselves end up paying the fees for the manager’s services, which would in turn be paid by all owners. How can community associations budget for these fees when they have no idea how many requests they will get in a fiscal year? Why should all owners pay for a service that benefits only one owner? This proposed legislation will negatively impact management and associations.

For example, consider the result that occurred when the legislature amended Civil Code Section 1365.2 a few years ago. That code section deals with an association’s obligation to provide owners with records. Civil Code Section 1365.2 limits the fees and charges that can be charged to the requesting owner. As a result, the additional fees charged by the manager for finding, compiling and preparing the requested association records for production ends up getting paid by all owners and not the owner that made the request. Management companies are entitled to be paid for these extra services, and the payment for these services should come from the owner requesting the service.

This proposed legislation seeks to overturn the 2007 Court of Appeal decision in Berryman v. Merit Property Management that held that the documentation and transfer fees charged by management are products of market forces and are not subject to statutory control.

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Karen Conlon from the California Association of Community Managers (CACM) reports that in this most recent legislative session, Senate Bill 294 was introduced for the purpose of consolidating and downsizing the numerous boards, commissions, etc. that exist in California. To protect the CACM manager certification standards in the Business & Professions Codes, CACM asked that the sunset provision in B&P Section 11506 be extended and NOT eliminated as a result of this bill. By doing so, manager certification standards would be preserved. The Senate B&P Committee agreed to this request. Follow this link to see the portion of the bill that reflects the extension of the sunset provision to January 1, 2015 (the sunset provision was originally due to expire January 2012). SB 294 was signed by the Governor and chaptered into law. Congratulations to CACM.

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By David Swedelson, SwedelsonGottlieb Partner, Condo Lawyer and HOA Attorney
These days, going “green” is all the rage. So, it is no surprise that lately we are getting more and more inquiries from boards wondering how they should respond when homeowners request authorization to install solar panels. If the owner wants to install the solar panels on the common area, such as the roof of a condominium building, the answer is easy: “NO.” Owners do not have the right to install any type of modification on the common area, and solar panels are no exception.

However, it is a different story when owners request permission to install the solar panels on their own roof. As you might suspect, the answer is more complicated. Regardless of what the association’s governing documents may say, Civil Code Sections 714 and 714.1 limit the ability of a homeowners association to restrict the installation of solar panels within a separate interest. Civil Code Section 714 says, among other things, that a community association cannot enact a covenant, restriction or condition which limits or restricts an owner’s ability to install a solar energy system. In fact, any such covenant, restriction or condition is considered “void and unenforceable”. If homeowners want to install solar panels on their separate interest (meaning on their own home or yard), they must submit an architectural application as would be required for any other exterior improvement or modification. However, because of the limitations of the Civil Code, the architectural committee (or board) cannot deny the application for solar panels simply because solar panels do not fit in with the aesthetics of the development.
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It is mid-October, and many California community associations and managers are busy working on their 2011 budgets that will need to be sent out by the end of November. In addition to the budget, however, there are several other documents and disclosures that are required by California statutes to be made on an annual basis. Most associations provide those documents and disclosures with the distribution of the association’s next year’s budget. As we have done every year for as far back as we can remember, SwedelsonGottlieb has published its Annual Disclosure Checklist for 2010–2011. If you are unable to download the PDF file utilizing the foregoing link, please contact Mark Petrie of our office.

You may also wish to download my recent article on Budgeting For Bad Debt.

Contact Information
Los Angeles
 11900 W Olympic Blvd #580
Los Angeles, CA 90064
310.207.2207
In California: 1.800.372.2207
Fax: 310.207.2115
San Francisco
 415.762.1889
Fax: 415.762.1888
Orange County
 One Park Plaza #600
Irvine, CA 92614
949.209.4322
Fax: 949.209.4323
Ventura County
 805.650.7899
Fax: 805.988.0570
Palm Desert
77711 Flora Rd #358
Palm Desert, CA 92211
760.479.5474

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