Common R ECAP OF THE 2010 L EGISLATIVE S EASON SPRING 2011 FIGHT the blight – Senate Bill 1427 page 10 2010 Annual Awards LUNCHEON & TRADESHOW page 20 LAMDEN does not provide carte blanche protection to associations page 34 The professional provider of education, advocacy and resources for Community Associations
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C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 1
Common
Recap of the 2010 LegisLative season
SPRING 2011
FIGHT the blight – Senate Bill 1427 page 10
2010 Annual Awards LUNCHEON & TRADESHOW page 20
LAMDEN does not provide carte blanche protection to associations page 34
The professional provider of education, advocacy and resources for Community Associations
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E2
2 0 1 1 E V E N T C A L E N D A R All dates, times and locations subject to change. Please visit our website, www.cai-sd.org, for an updated calendar.
JANUARY
13-15 Community Association Law Seminar
Las Vegas, NV
20-22 PMDP M-100 Course The Essentials
of Community Association Management
February 4 Trade Show Legal Update 2011 DoubleTree Hotel,
Mission Valley
26 Essentials of Community Association Volunteer Leadership – Courtyard by Marriott
All articles and paid advertising represent the opinions of authors and advertisers and not necessarily the opinion of either Common Assessment Magazine or the Community Associations Institute – San Diego Chapter. Information contained within should not be construed as a recommendation for any course of action regarding financial, legal, accounting or other professional services and should not be relied upon without the consultation of your accountant or attorney.
Common Assessment Magazine is the official quarterly publication of the San Diego Chapter of the Community Associations Institute. CAI San Diego Chapter encourages submission of news and articles subject to space limitation and editing. Signed letters to the editor are welcome. All articles submitted for publication become the property of CAI San Diego Chapter. Reproduction of articles or columns published permitted with the following acknowledgement: “Reprinted with permission from Common Assessment Magazine, a publication of the Community Associations Institute San Diego Chapter.”
ADVERTISING & CORRESPONDENCE SHOULD BE SENT TO:Common Assessment Magazine
CAI - San Diego Chapter1081 Camino Del Rio South, Suite 207, San Diego, CA 92108
619-299-1376 / fax 619-299-1377 / www.cai-sd.org
President’s Message
Full Steam Ahead!2011 is here and I am pleased to
introduce myself as your new Chapter
President. I would like to extend
my gratitude to Chris Hodge for his
leadership this past year. Like Chris,
I too have been an active member
of CAI since 1980, as an association
manager and, for the past 10 years,
as a Business Partner. It is this
experience that will help me, together
with our Board of Directors, lead this
organization in the coming months.
We have a very active year planned
and our committee chairs are diligently
working with committee members on
fun and exciting events. There are a few changes that have been
made this year as well. It has been decided by the board to have a
Bowling Tournament on March 11, instead of our Annual Billiards
event. In addition, we have added several North County Breakfast/
Education programs.
The theme selected for this year is “Unity and Community.” With
that thought in mind, our Public Relations Committee is working
on outreach projects that we can help to make our own community
better. The Chapter has become members of the North San Diego
County Association of Realtors to promote a better relationship
between homeowner associations and Realtors.
We have recently updated our Manager Scholarship Program to
promote CAI Designations and Education for Community Managers.
We are a very strong Chapter for CLAC and this year – as always – we
must stay focused on what they are doing in Sacramento. Watch for
the CLAC Quarterly Newsletters and E-Alerts when we need your
support.
I look forward to serving the membership of the chapter and
welcome your involvement and continued support. Here’s to a
successful 2011!
Common
Cyndi Koester, PCAM, is the Assistant Vice President, Southern California Regional Account Executive for Mutual of Omaha Bank/CondoCerts. She is the 2011 CAI San Diego Chapter President.
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 5
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E6
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 7
Continued on page 8
Since 2008, the Civil Code has
required property owners to
maintain vacant residential
property purchased at a
foreclosure sale or acquired through
foreclosure of a mortgage or deed of
trust. However, in the recent real estate
downturn, the volume of foreclosures
has been so great that maintenance of
foreclosed properties languished and
blighted areas started to appear. In
response, cities started to go after the
owners with fines and assessments aimed
at getting properties cleaned up.
Civil Code Section 2929.3 permits a
governmental entity to impose fines of
up to $1,000 per day for a maintenance
violation, but requires that the entity give
proper notice, provide the owner of the
property with an opportunity to be heard,
and allow an opportunity to correct the
violation within thirty days unless a specific
condition of the property endangers
public health or safety. However, Civil
Code Section 2929.3(c) also provides that
these provisions could not preempt any
local ordinance. In other words, cities and
other local government entities could
elect to fine property owners pursuant to
either local ordinances or by tapping into
the $1,000 per day mechanism set forth
in the Civil Code. Armed with the Civil
Code and local ordinances, cities started
to aggressively pursue monetary penalties
and fines against owners that failed to
maintain the foreclosure properties (mainly
banks).
Senate Bill 1427 (Price), which
BY JEFF FRENCH, ESQ. & HOLLY AMAYA, ESQ.
Senate Bill 1427 and Maintenance of Foreclosed Properties
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E8
passed the Legislature earlier this year
and was signed into law by Governor
Schwarzenegger on September 30, 2010,
sought to provide some uniformity to the
due process procedures afforded among
local governments, even if the period
to correct is not the thirty-day period
mandated by state law. It establishes that
as a matter of state law, a local entity
must provide notice and an opportunity
to correct maintenance violations.
Specifically, the legislation provides that
prior to imposing a fine or penalty for
failure to maintain a vacant property that
is subject to a notice of default, purchased
at a foreclosure sale, or acquired through
foreclosure of a mortgage or deed of trust,
a governmental entity must provide the
owner of the property with a notice of,
and opportunity to correct, a maintenance
violation. In contrast to prior law, SB
1427 does not impose a time frame on
the period in which violations must be
corrected. However, it still provides that
notice is not required if the governmental
entity determines that a specific condition
of the property threatens public health or
safety.
The legislation further provides that
an assessment or lien to recover the
costs of nuisance abatement taken by a
governmental entity shall not exceed the
actual and reasonable costs of nuisance
abatement, and states that a government
entity may not impose an assessment or
lien to recover nuisance abatement costs
unless those costs are adopted by a body of
elected officials at a public hearing. Arguing
in support of the legislation, Senator Price
noted that many local ordinances fail to
provide adequate notice of violations
to owners, and maintained that some
local government entities may impose
assessments that exceed the actual costs of
abatement.
Early versions of SB 1427 would have
required cities to adopt a schedule of
nuisance abatement costs so property
owners will know the potential cost of failing
to maintain properties. It also sought to
prohibit cities from imposing liens against
properties for nuisance abatement prior
to the adoption of this cost schedule at a
public hearing. The League of California
Cities opposed the inclusion of these
provisions, arguing that abatement
measures may take a variety of forms, and
thus it would not be feasible for cities to
develop a schedule that contemplates every
potential cost. In the face of this opposition,
Senator Price agreed to remove those
provisions.
In a position statement regarding
the finalized legislation, the California
Association of Realtors (CAR) stated
that the bill provides necessary clarity
and due process regarding assessment
and collection of nuisance abatement
costs, and noted that “selling the home
to an individual that will maintain the
property is the best solution to the blight
problem which can devalue homes in a
neighborhood.” The net effect of this
legislation is to cause cities to jump
through a few more hoops when going
after nuisance-type properties. As to
Continued on page 10
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C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 9
San Diego9980 Carroll Canyon Rd., Suite 200San Diego, California 92131858.527.0111 • fax 858.527.1531
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800.300.1704 l www.epsten.com
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Our attorneys handle a continuing and varied stream of association legal matters. We collaborate and share our ever-expanding knowledge with each other, and with our clients. This can be a real benefit to your association, as our attorneys are not likely to be starting from square one when faced with your difficult issue.
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S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E10
association efforts to control these same
issues, there is no impact on associations
other than to slow down some of the cities
that have been working hand in hand with
associations to go after derelict owners.
The new legislation, which was
sponsored by CAR and the California
Association of Retired People, has been
chaptered as new sections 2929.4 and
2929.45 to the Civil Code.
Jeff French, Esq. and Holly Amaya, Esq., are attorneys at Green, Bryant and French, a firm that specializes in homeowner asso-ciation law.
FIGHTING BLIGHT Continued from page 8
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S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E12
Senate Bill 1221Facilitating the Non-Judicial Foreclosure Process by Reducing the Potential for Delay
BY RICHARD SALPIETRA, ESQ., CCAL AND JEAN-MARIE SALVIA, PCAM, CCAM
Boards of directors are spending an increased amount
of time and money to collect the assessments
needed to maintain their communities. When all else
fails, boards must consider foreclosing on a property
in order to remove a non-paying member and capture the funds
needed to keep the lights on. This process is lengthy and leaves
little room for error. With one missed deadline, the association
may be required to start the process over again, further delaying
the collection of assessments from an owner of a distressed
property. Fortunately, with the passing of Senate Bill 1221, the
risk of missing the deadline associated with recording the Notice
of Sale is reduced. However, it is important to keep in mind that
the total period of time associated with the foreclosure process
does not change.
The Non-Judicial Foreclosure ProcessAs is commonly known, a non-judicial foreclosure is the
preferred method used by associations to foreclose on a
property when the assessments are not paid. The procedural
requirements for non-judicial foreclosures are set forth in the
law and are very specific. After specific notices and the filing
of a lien, if the homeowner continues to fail to pay his or her
assessments, the association files a Notice of Default. For the
next three months, there is a redemption period in which the
homeowner may attempt to pay the late assessments. If the
homeowner is unsuccessful, then a Notice of Sale is recorded
and the process culminates in a Trustee’s Sale where the
property is sold to the highest bidder. An auctioneer conducts
this sale as instructed by the association and reports the results
back to the association.
The Impact of SB 1221Existing law requires that when a homeowner fails to pay
his or her common-interest development assessments, the
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 13
association must record a Notice of Default
and mail it to the owner. In the case of a
non-judicial foreclosure, the association
is then required to record a Notice of
Sale not less than three months after the
Notice of Default is filed, stating the time
and place of the sale. The purpose of SB
1221 is to alleviate a potential unintended
consequence arising from the current
law, specifically, a possible delay of the
foreclosure sale that could arise from
innocent delays in the recording of the
Notice of Sale. This is especially important
if those delays create technical violations of
the non-judicial foreclosure law. This new
bill permits the Notice of Sale to be filed
up to five days earlier than allowed under
current law; however, it does not move
the actual sale date of the property or
otherwise shorten the foreclosure process.
The author of the bill states that prior
to the enactment of the current law, SB
306, Notices of Sale were required to be
published in newspapers with general
circulation at least 20 days prior to the
sale of the property and recorded with
the County Recorder at least 14 days
prior to the sale. SB 306 conformed these
dates so that Notices of Sale must now
be published and recorded at least 20
days prior to the sale, but not less than
90 days from the recording of the Notice
of Default. The change is intended to
give the public and those relying on the
recording process as much advance notice
of sales as possible.
The problem is that while publication
dates can be coordinated very precisely
between the association and the
newspapers, the recording process is
subject to greater opportunity for error. If
the recorder closes early on a given day
due to budget cutbacks, or if the Notice
of Sale document is delivered to the
Recorder’s Office the next day, and not
actually recorded until the following day,
at no fault of the association, a technical
violation of the law can occur. If this
happens, the homeowner may successfully
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Continued on page 14
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E14
challenge the foreclosure process, and the
association may have to start the process
over. Existing law prohibits the recording
of the Notice of Sale until at least three
months have passed since the recordation
of the Notice of Default. The interaction of
these two rules leaves the association no
room for error. It must record the Notice
of Sale no less than 20 days before the
sale, and no less than three months after
the recording of the Notice of Default.
Therefore, if there is a one- or two-day
delay in the recording of the Notice of
Sale, the foreclosure sale may also have to
be delayed or a violation of the law may
occur. To address this issue, SB 1221 would
permit a Notice of Sale to be recorded five
days earlier in the process— 85 days after
the recording of the Notice of Default—
rather than the existing 90 days. According
to the author, those extra five days seek
to account for any delays in the recording
process. However, the actual sale date
may not occur any sooner than allowed by
existing law— to be precise, three months
and 20 days after the Notice of Default is
filed.
Continued Challenges for AssociationsWhile SB 1221 should help reduce
timing errors associated with the
recording of a Notice of Sale, it does not
address a significant problem associated
with delinquent owners. There are
homeowners who choose to simply give
up and walk away prior to the initiation
of a foreclosure. These owners have
the misunderstanding that they are not
responsible for assessments once they
move out of the property. Moreover, they
do not understand that they are personally
responsible for their debt; it does not go
away when they turn their backs on it.
Depending upon the total delinquency
in assessments at the time the homeowner
vacates the property, foreclosure may not
be a viable option. The process could take
too long for the association and has no
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Rick Salpietra is an attorney whose firm is located in Rancho Santa Fe, California. His firm’s empha-sis is community association law. He was the President of the San Diego Chapter of CAI in 2003 and 2009, and is currently a board member. He is also a member of
CAI’s National Board of Trustees, and member of the College of Community Association Lawyers (CCAL).
Jean-Marie Salvia, CCAM®, PCAM®, is the Regional Manager for the Carlsbad office of Walters Management.
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E16
SAN DIEGO 2010 CAI-CLAC HONOR ROLLBy Sam Dolnick, CAI-CLAC Delegate-at-Large
This is the second year that the CAI-CLAC Honor Roll is being presented. All individuals involved in common interest communities, whether they are associations, homeowners, professionals, managers or business partners who have contributed funds to CAI-CLAC in 2010 on behalf of common interest communities to assure that our voice is heard in the halls of the California legislature are to be congratulated. CAI-CLAC monitors legislation regarding common interest developments (condominiums, planned developments, stock cooperatives and community apartment projects) that the legislators are asked to deliberate and vote upon each year. The San Diego Chapter reached its 2010 goal of $28,528. Thanks to all contributors.
Each issue of Common Assessment features the names of the contributors and those individuals responsible for obtaining the contribution.
ABSOLUTELY NO FUNDS are given to any political party or to any candidate. All funds are used solely for issue oriented legislation affecting CIDs. However, our legislative advocate must be paid and items like stamps, stationery, phone calls, rent, maintenance of web site and other similar expenses must be paid.
Our congratulations and thanks to the following contributors from January 1 to December 3, 2010.2010 Goal = $28,528 CONGRATULATIONS: GOAL REACHED!!!
Andalucia Townhomes HOA Lisa Isaacson AMS CCAM
Anderson & Kriger, Joel Kriger
Association Reserves San Diego LLC Matthew Swain
Brookfield HOA, Jim Martin
CAI San Diego Chapter Barbara Ozenbaugh, CMP
Clean Earth Restorations
Victoria Cohen
Community Association of Bernardo Heights Becky Groenwold
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 19
it practically impossible. Our team of
advocates explained this to the legislators
in Sacramento. Our opposition made it
necessary for the sponsors of the bill to
change the language to such an extent
that any common interest development
that currently existed would no longer be
affected by the bill, even if it had passed.
While it did pass through both houses, it
was vetoed by the governor.
AB 1975 (Fong) was a bill that you
probably never heard about. It was
proposed legislation that would require
that all associations be sub-metered. Not
such a big deal, right? Many associations
who aren’t sub-metered WANT to be
sub-metered. But here, as Shakespeare
might say, is the rub: the association
would not be able to recoup the costs of
sub-metering from the members of the
association. Homeowners are the only
possible source of funds to do the sub-
metering! CAI was the ONLY opponent to
this bill when it went to hearing. We spoke
against it, explained that in the “real”
world it would not work as proposed,
and it died in the Senate Appropriations
Committee. Yet ANOTHER wonderful
example of why CAI works so hard to
write, track and educate about legislation
that impacts associations.
So imagine a world without the
Legislative Action Committee of the
Community Associations Institute… an
association would be forced to record 280
separate forms with the county recorder to
be notified of foreclosures, forced to pay
280 fees, forced to re-file (and re-pay) 280
times if any of our information changed,
it would never be able to get a loan, it
would be required to approve any artificial
turf requests (on the roof… really?), and it
would be having perpetual bake sales to
try to pay the sub-metering company for
all of the work we were required by law to
have them do… Sounds like a nightmare.
While living in an association may not
be “heaven,” it is still “home” and we will
do everything we can to keep that home
Professional. Capable. Friendly.
Year after year our list of satisfied, well-managed communities grows. Our team of accredited, certified community managers offers unparalleled credibility and integrity. Call Curtis Management today for the highest caliber, hardest working professionals to manage your community. Toll Free 877.587.9844.
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happy. Thanks to all of the associations who contributed to the California Legislative Action
Committee in 2010 to help us do this amazing work. You are making a difference.
Thanks to all who help make associations in California better places to live!
Kimberly Lilley is the Chair of the California Legislative Action Committee Roundtable in San
Diego, a Delegate to the state-wide Legislative Action Committee and serves on the Executive
Committee for state-wide CLAC. She can be reached at [email protected].
Thank you to our Award Banquet Exhibitors Able Restoration
Community Association Banc is a division of Mutual of Omaha Bank. Member FDIC. Equal Housing LenderCACM Affiliate Member. National Corporate Member of Community Associations Institute.
Equal Housing Lender
26
Thank you to our chapter members that have renewed their CAI membership. We appreciate your continued support and participation in our chapter.
4-Points Management Agency .............. 20047 Oaks Mgmt Corp #4 ............................ 2005A. McKibbin & Co. ..................................1997Alante/MCS Insurance Services ............2009Alliance Association Financial Services ................................................2008Andrew Jager ..........................................2007Angelic Luna ............................................2009Aquaspecs, Inc. .......................................2001Arborwell ..................................................2008Artistic Maintenance, Inc. .......................2005Association Reserves San Diego, LLC .2008Bald Eagle Security Services, Inc. .........2009Berg Insurance Agency ..........................2003Bill Greenlee, CMCA ..............................2009Bob Piva Roofing ....................................2009Bonita Vista Community Association ...1982Bruce Becker, CCAM, CMCA, AMS ............1980Byron Mettler, CMCA .............................2009California West Patrol .............................2010CertaPro Painters .................................... 2003Christy Gonzales .....................................2010Clean Earth Restorations .......................2008Coral Tree Plaza Owners Association ...2008Daniel Goodrich, CCAM, CMCA, AMS .............2004DAPA Janitorial Service ..........................2007David Abrams ..........................................2005Debra Weikel, CMCA, AMS, PCAM ............2005Del Mar Pacific General Contractors, Inc. ......................................1997Donald Michaels .....................................2006Dunn-Edwards Corporation ...................2002Equity Management ...............................2010First California Bank ................................2000Frazee Paints ...........................................2009G.R.G. Management Inc. .......................2009Green Valley Landscape & Maintenance, Inc. ................................2008Hidden Ridge at Carlsbad .....................2001HOA Elections of California, Inc. ............2009Hugh Maynard, CMCA ........................... 2005Ian H. Graham Insurance .......................2009Janet Wagner, CCAM, CMCA ...............2006Jessica McKenzie ....................................2010Jill Bronk ...................................................2005Jon Wayne Construction & Consulting 1990Julie Bigelow, PCAM ..............................2009Karina Tatum ............................................ 2006Katy Camp, CCAM .................................2008Kimberly Johnson, CMCA .....................2005La Mesa Colony Homeowner Assn .......2007LaBarre/Oksnee Insurance Agency ......2001Lakeridge Park Condo Association ......2006Landscapes USA, Inc. .............................2010Law Office of Laura Kwiatkowski ...........1993Le Parc Chateau ......................................1999Linda Strom, PCAM ................................2005
Lloyd Pest Control ..................................2006Loren Fisk, CMCA, CCAM .....................2009Lori Graham, CMCA, AMS, CACM ........2006Management Resource Center .............2009Marie Donovan ........................................2000Mario Trejo, AMS ....................................2005Mary-Anne Monck ..................................2003MC Builders Corporation .......................2010Melanie Hudson ......................................2010Mike Lutz ..................................................2006Ned Heiskell, PCAM ...............................2009Nicholas Brennan ....................................2009Nina Stanley .............................................2008Orange Coast Building Services, Inc. ...1999Pacific Green Landscape, Inc. ...............1988Patricia Ginger ......................................... 2006Patrick Morrisey, CMCA ......................... 2009Park West Landscape Maintenance, Inc. ..2010Prater Architects, Inc. ..............................1998R&D Pest Services, Inc. ...........................2009Rancho Del Mar Association .................2009Renaissance La Jolla Community Assn ..2002Richard Johnson ......................................2005Robin Fennell, CMCA .............................2009Rolling Hills Ranch Community Assn .....1999Ronald Phipps, CMCA, AMS, LSM, PCAM .............2011Roy Palacios Insurance Agency, Inc. ......2005S.D. Preferred Property Managers ........1995Sabrina Afkhami, CCAM, PCAM ............2006SCT Reserve Consultants, Inc. ............... 1994Seabreeze Management Company, Inc. ..2009Shannon McMurray, CMCA, AMS ............2008SHE Manages Properties .......................2005Silverado Community Management Service ........................1996Site Plan Advantage ...............................1993Sky Security Services ............................... 2008SmartStreet a Division of RBC Bank ....2004Summit Security Guard & Patrol ...........2003Sunrise Pointe Homeowners Assn ........2008Sunset Hills Terrace HOA .......................2003Susan Fakhouri ........................................2009Susan Thrasher ........................................2009The Golden Girls at MPM Realty ..........2004Three Phase Electric, Inc. .......................2007Traci Mays ................................................2010Tracy McGuffin, CMCA, AMS ................2010Treebeard Landscape .............................2010Varsity Painting ........................................2009Victoria Cohen .........................................2005Westwood Townhomes 11-12 Corp. .....2009WICR .........................................................2000William Cozza ..........................................2010William Stewart, PCAM ..........................2005Zelma Hall, CMCA ..................................2005
October/November/December 2010
Renewing MembersEngineering Associates, P.C., Fairfax, VA
*Hayden Miller-Luczka, CMCA, PCAM,
Community Association Banc/CondoCerts,
Vienna, VA
*Caroline Record, Esq., Berman, Sauter,
Record & Jardim, P.C., Morristown, NJ
*Jeffrey Van Grack, Esq., Lerch, Early &
Brewer, Chartered, Bethesda, MD
The 2011 CAVC (*newly elected or
reelected):
Michael Wm. Shiflett (chair),
InterNeighborhood Council of Durham,
Durham, NC
Victoria A. Cohen (chair-elect), Lake Murray
Terrace, San Diego, CA
Marilyn Brainard, Wingfield Springs
Community Association, Sparks, NV
*Julie Hardy Cramer, Westmont, IL
Fred Mellenbruch, Lake Mission Viejo
Association, Mission Viejo, CA
*Robert Riddick, Moreno Valley, CA
*Robert Rothwell, Henderson, NV
NEWSSTANDContinued from page 26
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 27
Case Study: Another Perspective
The Fall 2010 issue of Common
Assessment, in the Homeowners’
Column, was about a case study
of an association that violated many of
the precepts of its governing documents
and state statutes.
It is interesting to note that
homeowners from six different
associations called stating that the
article must have referred to their
association and wanted verification.
These homeowners were wrong, the
article did not refer to their associations.
However, no calls were received from
the homeowners that were members
of the association that the case study
described. Is there a lesson to be
learned from this?
But there is another perspective on
the original case study — an association
that attempts to its best ability to
do everything correctly, to follow
the governing documents and state
statutes; and the board, when notified of
errors or misinterpretations, makes every
attempt to take corrective action.
The format of this article will follow
that of the previous case study.
Items 1, 2, 3 & 4 (Audit/Review):
The association’s governing documents
called for a mandatory external audit of
the financial statements by a certified
public accountant for each fiscal year
with copies going to the owners. The
members received copies of a “review”
of the financial statements. When this
error, (an “audit” was needed and not a
“review”) was brought to the attention
of the management firm and the board
of directors, an “audit” of the financial
statements was immediately made and
this new “audit” was mailed to each
member.
Effect: The management firm and
board of directors took their fiduciary
duties seriously and when notified of an
error took corrective action.
Items 5 & 6 (Membership
Meetings): The governing documents
stated that annual membership
meetings shall be held between seven
days prior to seven days after the date
of the first annual meeting called by the
Declarant.
Effect: In the over twenty years that
this association has been in existence,
the annual membership meetings
were always held within the time limits
stated. The owners have the satisfaction
of knowing that their attendance was
desired and welcomed.
Item 7 (Conflict of Interest): The
board members sign a code of conduct
which prohibits conflict of interest
between vendors and employees. The
management contract has some clauses
that prohibit a conflict of interest by the
manager as an agent of the association.
So far, to anyone’s knowledge, there has
never been a violation of the conflict
of interest portion of the governing
documents.
Effect: The owners have the
confidence that neither the board of
directors nor the management firm are
hiring contractors, professionals, friends
or relatives to obtain compensation
improperly.
Item 8 (Federal/State Income
Taxes): Federal and State income taxes
are always filed in a timely manner. In
addition FICA taxes are also filed in a
timely manner.
Effect: The homeowners know that
penalties and interest are not charged
by the governmental agencies and
therefore their assessments are used
wisely.
Continued on page 28
Homeowners’ Corner
Readers of this column are encouraged to send their opinions on the above and suggestions for future columns to samdolnick@
juno.com or by phone, 619-697-4854. Sam Dolnick has served as president of his association, is a former homeowner representative of the San Diego Chapter Board of Directors, former homeowner trustee of CAI National, and former director of the CAI Foundation for Community Association Research. He is currently homeowners’ delegate on the California Legislative Action Committee, and president of the Baker/Dolnick Education Foundation.
Guest articles are always welcome!
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E28
Item 9 (Water Damage/Laundry
Machines): Whenever water damage or
water stains on ceilings and walls are
reported to management, a work order
is immediately filled out. An employee
comes to the unit, assesses the amount
of damage and whether or not it is the
association’s or owner’s responsibility
to take corrective action. If it is the
association’s responsibility, repairs are
undertaken.
The governing documents do not allow
laundry machines in the units. Separate
rooms are provided which contain laundry
machines and dryers. Whenever an owner
requests permission from the board for the
installation of washing machines in the unit,
the request is always denied.
Effect: The owners are aware that
everyone is being treated equally and
the governing documents apply to all
consistently.
Item 10 (Corporate Status): Civil
Code 1363.6 Required Filing of Biennial
Statement has always been filed in a timely
manner with the Secretary of State and
thus the corporate status of the association
has never been suspended. As fees were
also paid no penalties were ever assessed.
Effect: Since the corporate status
remains valid the homeowners are
protected and not placed in jeopardy.
Conclusion: This “A Case Study:
Another Perspective” is presented to
show that although there are some
associations that continually violate their
governing documents and state statutes,
there are also many associations that are
run efficiently and honestly. These board
members are aware of their fiduciary
responsibilities and make every effort to
uphold the integrity of their associations.
Homeowners should be alert to the actions
their board members are taking and should
be vigilant in confronting them when the
governing documents are not adhered to.
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C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 29
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S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E30
Do I Really Haveto SHRINK My House?BY JAMES R. MCCORMICK, JR.
Clear Lake Riviera Community
Association has architectural
guidelines in place that limits the
heights of homes within the development.
In March 2005, homeowner Robert Cramer,
a general contractor, submitted plans to
the association’s architectural committee
for construction of a new home. The plans
were approved subject to the height
restriction, and on each page of the plans
the following statement was stamped:
“structure height not to exceed 17 feet
from control point of lot.” The Cramers
were notified of this height restriction
several times during the course of their
construction and they acknowledged the
limitation on the approved plans.
During the construction of their home,
the Cramers were further notified by the
architectural committee that their house
deviated from the approved plans and
that the completed building would violate
the height restriction. Despite this notice,
the Cramers proceeded with construction
and when the house was completed it
exceeded the 17-foot height restriction by
nine feet, impinging severely on the views
from at least two neighboring homes.
Thereafter, the Cramers unsuccessfully
requested a variance from the committee
seeking a ratification of their violation of
the height restriction.
In June 2006, the association filed suit
against the Cramers requesting declaratory
relief of violation of the guidelines and the
approved construction plans, an injunction
to require compliance with the approved
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 31
plans and the height restriction, and
monetary damages. The trial court found
for the association, rejecting the Cramers’
various arguments that the height
restriction was invalid or unenforceable,
and ordered them to bring the house
into compliance with the guidelines. The
Cramers appealed.
On appeal, the Cramers challenged
the validity of the height guideline, the
validity of the architectural committee, and
the grant of injunctive relief. The Appellate
Court affirmed the injunctive relief,
ultimately determining that the trial court
applied appropriate standards of review
and that its decision to require compliance
with the height restrictions was proper.
One of Cramers’ arguments was that
the architectural guidelines and height
restriction were never adopted by a
properly constituted committee. The
association produced evidence showing
that the height restriction guideline had
been enforced since at least 1995. The
Cramers argued, however, that since
there was no direct evidence presented
(i.e., minutes of meetings, tabulation of
votes, etc.) showing that the guidelines
had been adopted, the association could
not enforce the guidelines. The Appellate
Court found “no legal support” for the
Cramers’ claim that the association was
required to provide direct, rather than
circumstantial, evidence to show that its
use restrictions were properly adopted.
The Appellate Court further stated that
simply because the association was
unable to locate a document reflecting
the adoption of the guidelines does not
necessarily support a finding they were
never properly adopted.
The Cramers further contended that
forcing them to bring their home into
compliance with the height restriction was
effectively ordering them to “tear down
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S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E32
their house,” and that the court should
have awarded damages instead.
In reviewing whether to uphold
the decision of the trial court, the
Appellate Court applied a three-part
“hardship doctrine” that is applicable to
encroachment cases. Under this doctrine,
to determine whether to grant or deny
an injunction requiring removal of an
encroaching structure, three factors must
be considered:
1. The defendant must be innocent.
That is, his or her encroachment must not
be willful or negligent. The court should
consider the parties’ conduct to determine
who is responsible for the dispute.
2. Irreparable injury. Unless the rights
of the public would be harmed, the court
should grant the injunction if the plaintiff
will suffer irreparable injury regardless of
the injury to defendant.
3. Hardship to defendant. The hardship
to defendant from granting the injunction
must be greatly disproportionate to
the hardship caused plaintiff by the
continuance of the encroachment and this
fact must clearly appear in the evidence
and must be proved by defendant.
The Appellate Court upheld the
injunction order, relying on the trial court’s
findings that Mr. Cramer knowingly violated
the height regulation and that his actions
were not innocent and, at best, negligent.
Furthermore, the evidence supported
a finding of irreparable harm to the
surrounding neighbors such as loss of view,
loss of privacy and diminution in value.
Importantly, the Appellate Court stated:
If the Cramers were permitted to
use the fait accompli of their home’s
completion to avoid enforcement of the
height guideline, the association would
effectively lose the ability to enforce any
of its guidelines. Members could build
their homes in any manner they pleased,
arguing afterward in response to an action
to enforce the guidelines that compliance
What Boards and Managers Can Learn from this Case
Boards and managers should document adoption of architectural guidelines and should document how and when owners are advised of these regulations and requirements. Additionally, owners’ violations of the regulations and requirements should always be documented in writing. Owners living by the adage, “seek forgiveness instead of permission” subject themselves to being compelled to expend significant sums bringing their homes into compliance with an association’s architectural guidelines. Assuming all of the facts support such a determination, owners who build or modify their residences in violation of their association’s architectural guidelines cannot after the fact seek a variance based on a claim that it would be too expensive to bring the home into compliance.
DO I REALLY HAVE TO SHRINK MY HOUSE?Continued from page 31
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 33
would be unreasonably expensive.
Evidence presented by the Cramers’
expert showed that the house could be
brought into compliance for approximately
$200,000. The Appellate Court found
that the economic damage to Cramers of
$200,000 was not grossly disproportionate
to the $75,000 in diminished value of one
of the surrounding homes and the loss
of value to the other homes and other
damages difficult to quantify.
On the basis of the record before it,
the Appellate Court determined that the
trial court had not abused its discretion in
directing the Cramers to bring their home
into compliance with the height restriction.
James R. McCormick, Jr. is a partner with the law firm of Peters & Freedman, LLP, with offices in Encinitas and Palm Desert and can be reached at [email protected].
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S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E34
T he rule of judicial deference announced
by the Supreme Court in Lamden v. La
Jolla Shores Clubdominium Homeowners
Association (1999) 21 Cal.4th 249 (Lamden) has
been used for the past decade by association
boards throughout California as a shield against
liability for negligence and good faith mistakes
detrimentally affecting homeowners. Division
Three (Orange County) of the Fourth Appellate
District of the California Court of Appeal
explains in Affan v. Portofino Cove Homeowners
Association (2010) 189 Cal.App.4th (Portofino
Cove), that Lamden is not the super-shield some
boards would like to believe it to be.
It is necessary to recount the specific facts of
the Portofino Cove case in detail to understand
the decision’s importance. For some ten years
the board ignored its maintenance obligations
with respect to common area plumbing including
sewer and drain lines servicing a three story
stacked condominium building situated over
an underground parking garage. The Affans
purchased their Portofino Cove condominium in
1986 as a vacation home and suffered sewage
back-ups into their kitchen sink and the sink and
bathtub in the master bathroom six times over a
nine-year span. They made a written complaint
to the association and its management company,
but their complaint did not result in a remedy of
the situation.
The Portofino Cove association changed
managing agents in 2004 to Huntington West
Lamden Does Not Provide Carte Blanche Protection to AssociationsBY LAURI CROCE, ESQ.
C O M M O N A S S E S S M E N T M A G A Z I N E • S P R I N G 2 0 1 1 35
Properties (Huntington), also a defendant
in the lawsuit. In 2005, the Affans again
complained about the very chronic situation
of sewage backing up into their unit, and
Huntington finally addressed the issue
after gaining the board’s approval to do
so. Unfortunately, the plumber’s attempt
to jet-clean the mainline resulted in a
massive sewage eruption into the Affans’
condominium, rendering it uninhabitable.
The association hired an emergency clean-
up company to perform the necessary
remediation, but the association neglected
to restore the Affans’ unit to an undamaged
condition when the association’s insurers
became embroiled in a coverage battle. The
Affans had enough, and filed suit against the
Portofino Cove Association for negligence,
private nuisance, and breach of the CC&Rs
because of its years-long failure to maintain
the sewer system, and its more recent
failure to restore the damage to the Affans’
unit. The Affans also sued Huntington for
negligence and private nuisance based on
its failure to prevent the sewage eruption
and provide for a complete repair of the
unit.
After a bench trial, the trial court found
in favor of the association without even
making a determination on the elements
of negligence or breach of the CC&Rs,
despite compelling expert testimony of
each. The trial court simply stated that the
judicial deference rule of Lamden meant
the association and Huntington were not
negligent and did not breach the CC&Rs
with respect to their respective duties to
maintain the sewage system. The trial
court also determined, however, that the
association was contractually liable under
the CC&Rs to pay for restoration of the
unit following the sewage eruption. Finally,
the trial court determined there was no
prevailing party, and therefore each party
was to bear its own attorneys’ fees and costs
of suit.
The Court of Appeal reversed the trial Continued on page 36
S P R I N G 2 0 1 1 • C O M M O N A S S E S S M E N T M A G A Z I N E36
court on all issues except the issue of the
association’s contractual liability to pay to
restore the Affans’ condominium. The Court
of Appeal emphasized that Lamden is not
an automatic protection against liability, and
analyzed the Portofino Cove association’s
acts and omissions in detail to illustrate its
point. First, the Court of Appeal explained
that Lamden’s judicial deference rule,
under which the court may not substitute
its judgment for that of a board making
a decision in consultation with experts, in
good faith, and in the best interests of the
entire community (even if that decision is
erroneous), applies only when an actual
decision-making process is undertaken and
a conscious decision is made.
The judicial deference doctrine does
not shield an association from liability for
ignoring problems: instead, it protects
the Association’s good faith decisions to
maintain and repair common areas. In
Lamden, the Supreme Court recognized the
essence of an association’s duty to maintain
and repair is a duty to act based on
reasoned decision-making. [189 Cal.App.4th
930, 942. Italics original.]
The Portofino Cove association failed to
act for some ten years demonstrating the
opposite of action required for Lamden to
apply.
Second, the Court of Appeal explained
there must be findings of fact made to
apply the Lamden judicial deference
rule, including findings of a competent
investigation, good faith on the part of the
board, and an analysis of the best interests
of the community. The most important
finding missing in this particular case was
that of a deliberative process of decision-
making on the part of the board. Quoting
from Lamden, the Court of Appeal stated:
Finally, the association did not meet
its burden of proving its decision not to
engage in maintenance was an exercise of
its discretion ... to select among means for
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