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New-Newsletter-Template-300x167In case you missed it, Issue # 59 of our ‘Community Association Update’ newsletter is available now!

Topics covered in this issue include:

  • Email Discussions Between Board Members are not “Meetings”
  • Are Your HOA Volunteers Covered for Injuries?
  • What if Our HOA’s Insurance is Canceled Due to Risk of Wildfires?
  • Court Steps in to Force Recalled Board to Step Down

A link to the newsletter is here.

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hoa-email-meeting-300x207*New Case Law

The Open Meeting Act (“OMA”) contains various provisions regulating how the board of directors of a homeowners association (“HOA”) may meet and conduct business. One of the most common questions we receive pertains to whether email exchanges between board members on items of HOA business constitute a “board meeting” under the OMA, even if those emails are merely for discussion purposes without any vote (or “action”) being taken on the item.

Fortunately, we finally have an answer to this question from the California Court of Appeals via its ruling in LSNU #1, LLC v. Alta Del Mar Coastal Collection Community Association (“Alta Del Mar”) that will have a significant, immediate and beneficial impact on HOA governance throughout California. That answer is no. Email exchanges/communications between HOA board members that merely discuss items of HOA business are not within the statutory definition of a “board meeting” under the OMA and are therefore lawful.

In Alta Del Mar, the HOA board was discussing, over email, two items of business that are relatively routine for HOAs: whether to approve a homeowner’s landscaping plans and whether to fine another homeowner. The plaintiff homeowner in Alta Del Mar claimed that this email discussion was considered a board meeting and thus violated the OMA by not affording the homeowner notice and an opportunity to be heard.

The Court rejected this argument with reference to two central provisions of the OMA upon which the homeowner relied in making their argument: Civil Code section 4090 (defining what constitutes a “board meeting”) and Civil Code section 4910 (prohibiting a board from “acting” on items of business outside of a board meeting).  The Court’s interpretation of these provisions is summarized below:

  • Email exchanges between board members are not a “gathering” of the board, and therefore do not constitute a “board meeting”.

“By sending e-mails to one another through cyberspace, often hours or days apart and from different homes and offices, the Association’s directors did not simultaneously gather in one location to transact board business, and therefore they did not conduct a “board meeting” within the meaning of [the OMA].”

  • The OMA prohibits the board from “acting on” items of business outside of a board meeting, not from “discussing” those items via email outside of a meeting.

“By discussing items of Association business in e-mails… the directors did nothing contrary to the purpose of the OMA, because they took no action on those items in the e-mails. Although the OMA prohibits the board from acting on items of Association business outside a board meeting…it does not prohibit the board from discussing the items outside a meeting.” 

California HOA lawyers Many HOA boards find it difficult to reserve all discussion on items of HOA business solely for the board’s regularly scheduled meetings. This is due to a variety of common factors, such as the large amount of business that must be discussed/acted upon at any given meeting, the intervals at which regularly scheduled Board meetings typically take place (monthly), and the need to share information regarding unforeseen or exigent issues that may arise between Board meetings.  The Court’s holding in Alta Del Mar now confirms the ability of an HOA’s board members to freely email with one another to discuss items of business facing their community. This will allow for HOA boards to be in a better position to take appropriate and timely action on those items during their actual meetings.  

 

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Marina-Pacifica-300x149It’s our privilege to welcome Marina Pacifica Homeowners Association to Tinnelly Law Group’s growing family of HOA clients.

Located in the heart of the Long Beach Marina, Marina Pacifica is on 18 acres with over 550 units featuring 6 pools, 6 spas, 3 lagoons, a gym, clubhouse and 24/7 security. And it doesn’t end there – in addition, boat slips are located on site along with laundry facilities, underground parking garage and gated bridge access to shopping at the Marina Pacifica Mall, making this community one-of-a-kind!

California HOA lawyers Our HOA lawyers and staff look forward to working with Marina Pacifica’s Board and management team.

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hoa-workers-comp-insurance-300x178Homeowners Associations (“HOAs”) rely on the efforts of their volunteer directors, officers, and committee members to perform all manner of tasks needed in assisting the HOA with its operations. Participation by these HOA volunteers in common tasks such as site inspections, including slope inspections, landscape committee walk-throughs, and even meeting room set up and take down can all create a risk of personal injury to the volunteer. If such injury were to occur, would the volunteer be covered by the HOA’s insurance policies?

The answer is yes with respect to an HOA’s worker’s compensation policy, but only if the HOA affirmatively “opts-in” to such coverage by adoption of a written declaration. California Labor Code section 3363.6(a) provides that: “…a person who performs voluntary service without pay for a private, nonprofit organization, as designated and authorized by the board of directors of the organization, shall, when the board directors of the organization, in its sole discretion, so declares in writing, and prior to the injury, shall be deemed an employee of the organization” for purposes of being covered under a policy or workers compensation insurance. Absent such a written declaration, injured volunteers will likely be excluded from the definition of an “employee” and not covered under the workers compensation and insurance laws. (Labor Code section 3352(a)(9).).

In the course of our experience representing HOAs and community associations throughout California, we are finding that many HOA Boards form committees of volunteer homeowners without making this written declaration.  To make matters worse, they often fail to even memorialize the formation of the committee and the persons to serve as its members. This is problematic. At a minimum, Boards should memorialize the creation of the committee and the names of its members within the minutes of the Board meeting in which the Board passed the motion to form the committee.

The better approach is for the Board to pass a written resolution that memorializes (a) the Board’s creation of the committee, (b) the Board’s appointment of named individual volunteers to serve as members of that committee, and (c) the Board’s adoption of a formal charter for the committee that defines the scope of authority and responsibility vested in the committee’s members. This resolution and charter should be drafted by the HOA’s lawyer and made part of the Board’s meeting minutes.  As the composition of the committee changes (i.e., as different people are appointed or removed from the committee by the Board), the Board may simply document those changes in its meeting minutes without having to pass a new resolution or amend the charter.

California HOA lawyers If your HOA Board has not made a written declaration to “opt-in” to workers compensation coverage for volunteers, the HOA may be exposed to direct claims of personal injury. Adding so called “participant” or” volunteer” accident insurance coverage to the HOA’s general liability policy may be another option but, in any event, Boards should confirm adequate insurance coverage for their volunteers with their HOA’s insurance agent, and verify precisely what their insurance carrier requires in terms of a written declaration for the purposes discussed above.

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fire-gb0de99a85_1920If your homeowners association (“HOA”) is located in a high-risk fire area, what can your Board of Directors do if the current master policy of fire and casualty insurance on your condominium or townhome buildings is not renewed? Due to the massive wildfires that have swept California over the past two years, many insurance companies (and their re-insurance partners) are reassessing their willingness to underwrite fire and casualty insurance in the state.  Those carriers that are willing to write coverage are limiting their risk exposure by greatly reducing the coverage limits available for purchase. To compound this problem, the premiums being quoted are 5-10 times the amount of the prior year’s premium for much less coverage.

In order to protect the HOA and the members’ investment in their homes, members should contact their own insurance broker and inquire into purchase of an HO-3 policy that will cover the portion of the condominium (or townhome) building containing that member’s unit. An alternative insurance product, combining “Building Property” coverage with the member’s HO-6 unit policy, may also be available. Members should also consider adding “Loss Assessment” coverage to their current unit policy to offset exposure to future special assessments.

Many HOAs are finding that they are unable to purchase “full replacement” coverage for the attached common buildings at any price. These HOAs are electing to purchase whatever reduced coverage is available and affordable and passing the increased premium costs back to the members as a special assessment. With the current lack of any legislative solution from Sacramento, combining reduced coverage under the HOA’s master policy with individual purchase of an HO-3 policy may represent the only available option for members to protect their investment for the foreseeable future.

HOAs facing this problem should carefully consult with their insurance broker and legal counsel to assure that the Board is acting reasonably and obtaining the maximum amount of fire and casualty insurance coverage that is available and affordable. Boards of Directors should also consider whether any amendments to the HOA’s governing documents are needed to limit the risk of claims against the HOA for underinsuring the project and requiring members to obtain additional building property coverage on their individual unit policy.

California HOA lawyers Non-renewal of an HOA’s master casualty and liability insurance policy can have disastrous effects on the HOA’s finances and the value of the member’s separate interests. This is why HOA’s should immediately contact their legal counsel in the event they receive a notice of non-renewal.

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New-Blog-Post-1-300x170*New Case Law

The Court of Appeals recently ruled in Lake Lindero Homeowners Association, Inc. v. Barone that Corporations Code section 7616 may be used to validate a recall election removing the former board of a homeowners association (“HOA”), in addition to validating the election of a new HOA board.

In this case, the board was properly served with a recall petition for the entire sitting board.  The HOA held an election meeting on December 19, 2019; however, quorum was not present. In compliance with the HOA’s bylaws, a majority of the members at the December 19, 2019 election meeting voted to adjourn the meeting to December 23, 2019, wherein only 25% of the votes of the membership would be required to constitute a quorum, as opposed to the usual 50%.

Thereafter, at the election meeting on December 23, 2019, the necessary quorum of 25% of the membership was present. The recall of the entire board passed, and a new board was elected and certified.

In January of 2020, Plaintiffs filed a complaint seeking a declaration under Corporations Code section 7616 validating the December 2019 recall election and the election of the new board. Plaintiff’s action was necessitated by Defendant Barone, and other prior board members, refusal to recognize the validity of the December 2019 recall. The trial court granted Plaintiff’s request for declaratory relief and validated the December 2019 recall. Defendant Barone appealed.

Defendant argued on appeal that Corporations Code section 7616 pertained to validating elections only and did not authorize Plaintiff’s action or the trial court to validate a recall election. The Court of Appeals disagreed with Defendant Barone’s narrow reading of the statute.

First, the Court found the statutory text of Corporations Code section 7616 to evidence a clear legislative intent providing trial courts with broad authority to determine the validity of board elections.  While the Court acknowledged recall elections are not expressly referenced in the code section, the Court looked to subdivision (d) of Corporations Code section 7616 to support its holding, which authorizes the Court to “…direct any such other relief as may be just and proper.”

The Court concluded Corporations Code section 7616(d) was broad enough to serve as a “procedural vehicle” to clarify Plaintiffs recall rights under the HOA’s bylaws, even though the statute does not expressly mention recall elections. The Court reasoned that it was “just and proper” to enter an order confirming the recall, as it could not determine the validity of the election of the new board without first addressing the recall. The Court further concluded that having validly confirmed the recall and subsequent election of the HOA’s new board, the same code section authorized the trial court to enter an order confirming Defendant Barone had no authority to act on the HOA’s behalf.

California HOA lawyers This case is an unfortunate example of an HOA board of directors refusing to recognize the will of its membership in exercising their rights to control the leadership of their community. HOA boards which are unclear about the procedural aspects of their board elections should consult with a qualified HOA lawyer for guidance. 

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New-Newsletter-Template-300x167In case you missed it, Issue # 58 of our ‘Community Association Update’ newsletter is available now!

Topics covered in this issue include:

  • Paying for Increases in your HOA’s Insurance Premiums
  • Addressing Requests for Installation of Solar Panels on Shared Roofs
  • What Happens When a Delinquent Homeowner Dies?
  • Evidence of Violations is Necessary
  • How to Direct Questions from Potential Homebuyers

A link to the newsletter is here.

Need to be added to our mailing list? Click here to sign up. Links to previous editions of our newsletter can be found here.

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hoa-ev-charging-300x178For more than a decade, the California Legislature has passed laws making it easier for residents to install electric vehicle (“EV”) charging stations within HOAs. For example, in 2011, the Legislature enacted what is now Civil Code section 4745, which nullified any provision in an HOA’s governing documents which prohibited homeowners from installing EV charging stations. In 2012, the Legislature amended the law to provide HOAs with some control over the installations. That is, it allowed HOAs to impose “reasonable restrictions.” More changes were made in 2018 with Senate Bill 1016.

Consistent with California’s commitment to green energy, Assembly Bill 1738 was codified paving the way for mandatory EV charging station installations in multifamily dwellings (i.e., condominium projects) during specifically defined construction activities. Through AB 1738, Section 18941.11 was added to the Health and Safety Code requiring the Department of Housing and Community Development to research and develop “mandatory building standards for the installation of electric vehicle charging stations in existing multifamily dwellings….” These installations are to occur “during specified retrofits, additions, and alterations to existing parking facilities for which a permit application is submitted….”

Compliance with the new legislation may be difficult for some communities; particularly, those with aging infrastructure and inadequate electrical systems. Indeed, the underground electrical systems servicing many condominium projects do not provide sufficient electricity to enable multiple residents to install EV charging stations. Extensive (and costly) upgrades may be necessary, which raises issues concerning funding and membership approval.

California HOA lawyers Once these standards are incorporated into the California Building Code, common interest developments will need to inquire with its experts concerning the association’s infrastructure and ability to comply with the new standards, particularly during projects impacting the association’s parking facilities. Associations impacted by the Bill should be prepared to undertake the necessary installations and should start reserving for the expense now.

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*Asked & Answered

Untitled-1Asked – Our insurance was cancelled and with the new policy the premium sky rocketed. There is not enough money in the operating account or budget to pay for the new premium. Can we pay from reserves?   

Answered – California has suffered significant wildfire damage in recent years.  Coupled with several years of severe drought and increased wildfire risk, fewer and fewer insurance companies are willing to write policies for communities that may experience wildfire damage.  In addition, admitted carriers are highly regulated by the Department of Insurance, which limits the amounts they may charge for insurance premiums.  This has caused many associations to be cancelled or non-renewed by admitted carriers or those in the “primary” market.

As a result, HOAs are left to purchase insurance from the non-admitted or “surplus” market. Carriers in the surplus market are less regulated and, when demand is high and supply is low, prices skyrocket.  The HOA’s CC&Rs generally include language specifying that the association “shall” purchase insurance, and may require coverage to provide for “full replacement cost.” If the association does not purchase the insurance as required by the governing documents, the association and its board of directors could be exposed to liability for failure to obtain adequate coverage.

So, what is an HOA to do if it doesn’t have the money to pay for the skyrocketed insurance premiums? Yes, an HOA may temporarily borrow funds from reserves in this situation without membership approval because this act would be needed to “meet short-term cash flow requirements or other expenses.” (Civ. Code § 5515(a).) This action should only be taken with the guidance from the association’s legal counsel due to the significant procedural requirements that must be satisfied under Civil Code section 5515. Those requirements include, among others, providing the membership with notice of the board’s intent to borrow the funds.  The notice must additionally include the reasons the transfer is needed, the options for repayment, a description of how the funds will be restored to the reserve account within one (1) year of the date of the transfer, and a whether a special assessment will be utilized for that purpose.

A special assessment will likely be the mechanism utilized to restore the borrowed reserve funds. However, special assessments greater than five percent (5%) of an HOA’s annual budget cannot be imposed without membership approval.   Civil Code section 5610 fortunately exempts boards from having to comply with this membership approval requirement in situations where the special assessment (regardless of its amount) is needed to address an emergency expense which “could not have reasonably been foreseen by the board when preparing and distributing the annual budget report.”  While this emergency special assessment could allow for the board to restore the borrowed reserve funds the first time, the question then becomes whether levying a similar assessment in future years would remain a legally valid option as the assessment would no longer be tied to an unforeseen expense.  HOAs should therefore consult with legal counsel on this issue before imposing an emergency special assessment to understand its implications on future budget planning.

HOAs should also consult with legal counsel and their association’s insurance professionals for guidance as to how the increased premium expense may be mitigated carrying forward. For example, boards may be able to reduce their association’s insurance premiums by increasing deductible amounts. To illustrate, if the HOA has a $5,000 deductible, an increase to $25,000 or higher may be sufficient to generate a significant premium decrease under the master policy. That is because more risk (the higher deductible amount) is being transferred from the association’s master carrier onto the individual homeowners and the carriers of their respective HO-6 insurance policies.  The HO-6 (aka “unit owner’s insurance”) policies are designed to cover anything that the association’s master policy does not—namely, anything below the deductible on the association’s master policy.  Most sets of CC&Rs fortunately allow the board to make these adjustments to deductible amounts without triggering the need for any membership approval or vote on the matter.

Other options may include reducing the scope of insurance coverage the association is required to purchase under the CC&Rs. For example, if the CC&Rs require full replacement cost, or an ‘All-In’ policy, consider an amendment to a ‘Bare Walls’ policy, which only covers the common areas.  This type of amendment would likely require membership approval and should therefore only be considered if the board is ready to devote the time and resources needed to properly educate the membership and secure enough participation in the voting process. We typically recommend in these situations that the board conduct one (or more) townhall meetings to show the cost comparisons of (a) the special assessment(s) and/or assessment increase(s) that would be needed to maintain All-In coverage over the coming years versus (b) shifting to Bare Wall coverage for the association and each homeowner only incurring a minor increase in premium under the average HO-6 policy.

California HOA lawyers This is often successful in giving the membership a clear and powerful explanation as to why voting for the amendment is in their best interest; in our experience, this substantially increases the likelihood that the ballot measure will be successful.

-Blog post authored by TLG Attorney, Steven J. Tinnelly, Esq. and Ramona Acosta, PCAM.

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Newsletter-Issue-57-300x167In case you missed it, Issue # 57 of our ‘Community Association Update’ newsletter is available now!

Topics covered in this issue include:

  • AB 1410 – Speech on Social Media; Room Rentals; Enforcement During Emergencies
  • AB 1738 – EV Charging Stations in Existing Multi-Family Developments
  • SB 897 – Accessory Dwelling Units
  • Artus v. Gramercy Towers
  • Fowler v. Golden Pacific Bancorp, Inc.

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