Posts for Tag : HOA

standard

NEW FORMAT FOR BUDGETS AND ANNUAL DISCLOSURES UNDER AB 805

By Hanh Pham, Esq., Law Offices of Ann Rankin

As their fiscal year’s end approaches, some associations are asking whether they need to update their budgets and annual disclosures to comply with AB 805.

 

Yes!  Associations and managers should learn the new formats of the “Annual Budget Report” under new California Civil Code Section 5300 and the “Annual Policy Statement” under new California Civil Code Section 5310’s and use them to insure full compliance with the new law.

 

AB 805 restated and re-codified the Davis-Stirling Common Interest Development Act (“Act”).  The Act took effect on January 1, 2013 but becomes enforceable on January 1, 2014, which gives managers, boards, and attorneys one year to familiarize themselves with the reorganized Act.

 

Many clients are also concerned that they need to overhaul their governing documents to comply with AB 805.  The law does not require associations to update their governing documents.  However, if they do not, existing and future boards of directors will lack guidance as to what the law requires and may rely on superseded provisions.  Since the new law mostly affects corporate matters such as notice, delivery of documents, the budget, and disclosure requirements, the association can amend those provisions in their bylaws and declaration of covenants, conditions and restrictions to incorporate the new requirements.  Alternatively, the new law permits associations to update their governing documents by a board vote to correct the old Civil Code references and insert the new ones.  Amendments are more critical for self-managed associations who have board members that are unknowledgeable about changes in the law and need more guidance.

 

Regardless of whether you amend your governing documents, your association should comply with AB 805 by distributing an annual budget report and annual policy statement 30 to 90 days before the end of its fiscal year, as summarized below:

 

A. Annual Budget Report:  AB 805 requires associations to provide an annual budget report, which includes the following:

 

  1. A pro forma operating budget;
  2. An Assessment and Reserve Funding Disclosure Summary form;
  3. A statement as to whether the association has any outstanding loans;
  4. Certificates of insurance for property and liability coverage and an insurance summary containing, in at least 10-point boldface type, the following statement:

 

“This summary of the association’s policies of insurance provides only certain information, as required by Section 5300 of the Civil Code, and should not be considered a substitute for the complete policy terms and conditions contained in the actual policies of insurance. Any association member may, upon request and provision of reasonable notice, review the association’s insurance policies and, upon request and payment of reasonable duplication charges, obtain copies of those policies. Although the association maintains the policies of insurance specified in this summary, the association’s policies of insurance may not cover your property, including personal property or real property improvements to or around your dwelling, or personal injuries or other losses that occur within or around your dwelling.  Even if a loss is covered, you may nevertheless be responsible for paying all or a portion of any deductible that applies. Association members should consult with their individual insurance broker or agent for appropriate additional coverage.”

 

Any member who wishes to obtain a complete copy of the reserve study, reserve study plan, or insurance policies must provide a written request to the association or its management company. 

 

When preparing the documents in the annual budget report, your association should request that its budget preparer and insurance adjuster replace all references to former Civil Code Section 1365 with Civil Code Section 5300, to conform to AB 805.

 

B. Annual Policy Statement:  AB 805 also requires associations to provide members with important information about the association’s policies, including the following:

 

  1. The name and address of the person designated to receive official communications to the association;
  2. Each member’s right to submit a written request to have the association’s documents sent to two different specified addresses;
  3. Its location for posting notices of member and board meetings;
  4. Each member’s right to submit a written request that the association’s general notice be sent by individual delivery;
  5. Each member’s right to receive copies of the board’s meeting minutes (other than executive sessions) within 30 days of the meeting by sending a written request to the person identified in paragraph (1) above;
  6. Its statement of assessment collection policies (this item may be satisfied by attaching a copy of an updated Delinquent Assessment Collection Policy, which refers to the new Civil Code sections under AB 805);
  7. Its statement describing its policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments (this item may be satisfied by attaching a copy of an updated Delinquent Assessment Collection Policy);
  8. Fine schedule (if the board has not adopted a fine schedule, it should prepare one and mail it to the members for a 30-day comment period before adopting it at a duly-noticed board meeting and attaching it to the annual policy statement);
  9. A summary of its dispute resolution procedures, which should refer to the new Civil Code Sections under AB 805;
  10. A summary of the Association’s requirements for approving physical changes to a separate interest or portion of the common interest development (this item may be satisfied by citing relevant provisions of the declaration of covenants, conditions and restrictions and rules regarding alterations requiring architectural approval and the architectural review procedures); and
  11. The mailing address for overnight payment of assessments.

 

The information contained in this article is for informational purposes only and does not constitute legal advice.  Anyone obtaining information on this site should consult with an attorney.  The information herein is generalized and not related to any specific set of facts.  Neither this article’s content nor any transmissions between you and our firm through this article are intended to provide legal or other advice or to create an attorney-client relationship.  In communicating with us through this article, you should not provide any confidential information to us concerning any potential or actual legal matter you may have. Before providing any such information to us, you must obtain approval to do so from one of our lawyers.

 

By choosing to communicate with us without such prior approval, you understand and agree that our firm will have no duty to keep confidential any information you provide.

standard

Rescuing Your Board Members from E-Mail Hell!

By Ann Rankin, Esq. at the Law Offices of Ann Rankin

 

“I’m in trouble at work! The Board business is taking up all my time! The homeowners send me emails 24/7 and they all want an immediate reply!”

“Answering homeowner emails is a constant task, and none of the owners are ever satisfied with my responses!”

If you’re a board member of a common interest development association, the above complaints may sound all too familiar.

What is wrong with this picture and what can you do about it?

Problems with Board E-Mail Communications with Members: 

Here’s a list of legal and practical problems with Board Member replies to E-Mail communications with homeowners:

  1. If the Board Members make a practice of replying to e-mail communications from Members, they will soon be inundated and will have difficulty prioritizing tasks or getting anything else done. Board Members are volunteers; most of them didn’t sign up to be on duty 24 hours a day, 7 days a week when they ran for office. As soon as the other homeowners find out how time-consuming the Board’s job has become, on account of the proliferation of e-mails and demands to reply to them immediately, no one else will want to run for the Board, except perhaps for a few masochists.

2. Replying to e-mails may create a situation in which a particular Board Member is making a unilateral decision without Board deliberation, voting, or appropriate minutes. This circumvents the Board process. Such decisions may not have the support of other Board Members, and may sometimes be ill-considered, but they may bind the Association if the board member had apparent authority to make the decision.

3. When Board Members make decisions by e-mails, rather than in open board meetings, it circumvents the intent of the Open Meeting Act, Civil Code 1363.05, which requires the Board to circulate an agenda prior to each open Board Meeting; to allow association members to attend the open board meetings, and to allow members to address the Board on matters of association business. If everything is done behind the scenes via email, the Members are deprived of their rights under the Open Meeting Act.

4. The practice of the Board immediately replying to e-mails from members creates unrealistic and never-ending expectations from members. Can you imagine Board Members of publicly-traded corporations spending hours a day replying to e-mails from shareholders? Neither can I.

What Can Board Members Do to Get Out of E-Mail Hell?

I have advised some Associations whose Board Members were roasting in E-Mail Hell to adopt an Operating Rule to solve the problem. Such a Rule does not fall within the parameters of those that must be circulated among the Members under Civil Code 1357.100 et. seq. An example of the proposed Rule follows. If you’re in E-Mail Hell, I recommend you try it. This proposed Rule assumes that you have a property manager. If you’re self-managed, you can still adopt the Rule but you’ll have to require that the Members send their emails to one or more Board Members who will periodically collect, organize and prioritize them and put them on the agenda for the next Board Meeting if appropriate.

SNAKE PIT HOA RULE REGARDING COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board of Directors of Snake Pit Homeowners’ Association hereby adopts the following Rules pursuant to the Association’s Declaration of Covenants, Conditions and Restrictions, as follows:

1. Findings.

a. The Board of Directors consists of unpaid volunteers who donate their time to the Association.

b. The Board of Directors is required by law to create an agenda for each Board Meeting, to follow the agenda, and to make decisions only at Board Meetings and only after giving all Board Members the chance to deliberate, undertake necessary study and other due diligence, and make a reasoned decision.

c. The Board of Directors members, as fiduciaries, need to prioritize their time at Board Meetings in order to be sure to attend to the most important issues at hand.

d. The Open Meeting Act, Civil Code 1363.05, requires that Board decisions be made at open meetings, except for issues that are allowed by statute to be discussed in executive sessions. All Association Members are required to be provided with an agenda of each open Board Meeting and are required to be able to listen to Board deliberations, and to provide input to the Board during the Open Forum time.

e. A number of Association Members are in the habit of sending e-mails directly to Board Members’ personal e-mail accounts, in between Board Meetings, and requesting the Board Members provide an immediate response. If the Board Members were to do so, it would preclude their being able to deliberate upon the issues at hand in an open Board Meeting. Also, if the Board Members replied to e-mails between meetings, this would deprive the other Members of the opportunity to listen to Board deliberations on the issue at hand and to provide input during the Open Forum time. Further, this practice could preclude Board Members from prioritizing their time as they are required to do as fiduciaries.

f. The Association employs a managing agent whose job it is to work with the Board to prepare agendas, to carry out Board directives, and to provide the Board with correspondence and with other materials requiring matters that may require attention of the Board and Board decisions.

g. Counsel for the Association has pointed out that the Association is a corporation, and that it is not usual for corporate board members to be expected to reply to e-mails from their constituents outside of Board Meetings; also that making decisions outside of regular or special Board Meetings may violate the Open Meeting Act.

h. The Board wishes to adopt a procedure that will enable the Board Members to prepare appropriate agendas for Board Meetings with the assistance of the manager; that will allow the Board Members to discuss all Board business except for those subjects that may be decided upon in executive session at open board meetings, and that will allow Board Members to appropriately prioritize their time.

NOW THEREFORE, the Board enacts the following Operating Rule:

a. All Member communications requesting Board action or response are to be directed, in writing, to the property manager. The property manager will periodically notify the Board Members of the issues, and will assist them by organizing the communications and preparing an appropriate agenda for each Board Meeting.

b. Board Members will no longer reply to e-mails between Board Meetings, and may block e-mails sent by Members who attempt to communicate with them directly;

c. All Board decisions will be made at Regular or Special Board Meetings. The meetings will be conducted as required by the Open Meeting Act. All Board Resolutions will be voted on by the Board Members, constituting at least a Quorum, sitting at Regular or Special Board Meetings. The following matters may be discussed by the Board in Executive Session: Litigation, formation of contracts with third parties, personnel issues, member discipline, and member requests for payment plans for delinquent assessments.

 

This article is general in nature. It is not a substitute for qualified legal advice. Contact an attorney with expertise in common interest development law if you require specific legal advice.