HOA Governance

Associations Could Be Held Liable for the Employees of Independent Contractors

Published on: June 22, 2016 | by Steven J. Tinnelly, Esq.

Labor-Unions-Preventive-Practices-1024x683 On August 27, 2015, the National Labor Relations Board (“NLRB”) published its decision in the Browning-Ferris Industries of California, Inc. case (“BFI Case”). In that case, Browning-Ferris Industries of California, Inc. (“BFI”) retained the services of Leadpoint Business Services (“LBS”) to provide staff to one of BFI’s recycling facilities. The contract between BFI and LBS recognized, and the parties understood, that the personnel staffed by LBS were the employees of LBS. Nevertheless, given the fact that the contract granted BFI with some control over the employees of LBS, the NLRB concluded that BFI was a joint-employer of LBS thereby obligating BFI to comply with federal labor laws.

In adopting a new legal standard for determining joint-employer status, the NLRB emphasized that such a determination should not be based solely on actual control over the employees of another, but the “existence, extent, and object of the putative joint employer’s control.” (Browning-Ferris Industries of California, Inc. (2015) 2015 NLRB No. 672, *12 (Emphasis added).) Otherwise, employers would be able to insulate themselves from their responsibility to comply with federal labor laws. (Id. at p. *21) Accordingly, as long as a company retains (e.g., through the execution of a contract) the authority to control the employees of another, said company shall be given joint employer status. (Id. at p. *2.) This is true even if control is exercised indirectly (e.g., through an intermediary). (Id.)

Many associations retain a community management firm for the purpose of executing the duties of the association. These community management firms in turn employ community managers and support staff to manage these associations. While historically recognized as the employee of the community management firm (and an independent contractor of the association), the BFI Case raises some questions with respect to the nature of the relationship between the employees of a community management firm and the association. Accordingly, associations must be cognizant that a Court may find that it is a joint employer of the community manager (and support staff), notwithstanding the fact that it exercises no direct and immediate control over said manager.

Similarly, associations and management companies must take care when hiring maintenance and service providers for the community. When managers, committee members, or board members are conducting job walks with a contractor’s employee, reviewing specifications, or receiving invoices, the management company and the association may become joint employers. In Heiman v. Worker’s Compensation Appeals Board, Cal: Court of Appeal, 2nd Appellate Dist., 3rd Div. 2007 (“Heiman”), a community association manager hired an unlicensed and uninsured contractor on behalf of the association to install rain gutters on the condominium buildings. An employee of the contractor was seriously injured on the first day of the project and sued the contractor, management company, and association for workers’ compensation. The Court held that the contractor, the association, and the management company were all joint employers because the contractor hired the injured employee, and the management company, as agent of the association, hired the contractor. The BFI Case seems to affirm this decision.

In order to insulate the association from a possible finding of joint-employer status, the association should ensure that its contract with independent contractors, requires all proper licenses and insurance, adequately sets forth the desired results, and sets forth the level of care and skill to be used in accomplishing the desired results. (See Id. at p. 12 (“mere ‘service under an agreement to accomplish results or to use care and skill in accomplishing results’ is not evidence of an employment, or joint-employment relationship”).) The agreement should also include a provision that requires the contractor to indemnify and hold the association harmless in the event a labor dispute arises.

Blog post authored by TLG attorney, Matthew T. Plaxton.

Homeowner Attorneys at your HOA’s Board Meetings? This Could Become the New Normal

Published on: January 29, 2016 | by Steven J. Tinnelly, Esq.

lawyer-hoa-attorney-meeting

Civil Code Section 4925 grants to each member of a homeowners association (“HOA”) the right to attend HOA board meetings (except for executive session meetings). Section 4925 also grants members with rights to speak at board meetings and to address the board during open forum. However, these rights are explicitly granted to the HOA’s “members” (the owners of lots or units within the HOA’s development), not to a member’s agent or attorney. The California Court of Appeal addressed this issue in the 2013 case of SB Liberty, LLC v. Isla Verde Assn. Inc., where it affirmed a HOA’s ability to prohibit a member’s attorney from attending a board meeting on the member’s behalf.

However, Assembly Bill 1720 (“AB 1720”) was just proposed by the California Legislature in order to change this structure by amending parts of Section 4925. If signed into law, AB 1720 will add new subpart (c) to Section 4925 to state:

“The board shall permit an attorney who represents a member to attend any board meeting that the member is permitted to attend, regardless of whether the member attends. Where possible, the member shall give the board at least 48 hours advance written notice that his or her attorney will attend the board meeting.”

AB 1720 follows in the same vein as legislation which became effective January 1, 2015. That legislation (AB 1738) was enacted to grant a HOA member the right to be assisted by an attorney when the member is participating in Internal Dispute Resolution (IDR) with a member of the board.

AB 1720 could be problematic for HOAs by placing boards in a position of having their meetings observed or disrupted by the attorney of a member whom is, or is likely to become, involved in a dispute with the HOA. Such a situation will likely have a chilling effect on the discussions and actions taken at a board meeting where a member’s attorney is present, especially if the HOA’s attorney is not present. While AB 1720’s language currently requires the member to, “where possible,” give the board at least 48 hours written notice that his/her attorney will attend the board meeting, it does not clearly specify whether the attorney must be allowed to attend regardless of whether the member actually provides such notice. Moreover, this notice requirement is presumably intended to provide the HOA with enough time to arrange for its attorney to attend the meeting as well. A mere forty eight (48) hours notice may not be sufficient in this respect. If anything, members should be required to comply with the same timeline currently imposed upon the HOA when it provides notice of board meetings to its members: four (4) days. We will continue to track AB 1720 as it makes its way through the legislature.

‘Substantial Compliance Test’ Possibly Applicable to Open Meeting Act Requirements

Published on: January 5, 2016 | by Steven J. Tinnelly, Esq.

*New Case Law hoa-meeting-agenda

HOA board meetings are governed by the “Common Interest Development Open Meeting Act” (“Open Meeting Act”)(Civil Code Sections 4900 through 4955). The Open Meeting Act is designed to bring a sense of transparency to HOA governance, and is similar in purpose to California’s “Brown Act” (Government Code Section 54950 et seq.) which guarantees the public’s right to attend and participate in public meetings of local legislative bodies (i.e. City Council Meetings). Both the Open Meeting Act and the Brown Act include, among other procedural requirements, language regarding the notice that must be provided in advance of HOA/legislative body meetings, respectively.

In June 2015, the California Court of Appeal rendered an opinion which addressed a notice requirement under the Brown Act. In Castaic Lake Water Agency v. Newhall County Water District, et al, Castaic Lake Water Agency (“Castaic”) moved the trial court to declare void an action taken at a public meeting because the related agenda identified an incorrect Government Code section as the basis for the scheduled action to be taken at that meeting. In dismissing Castaic’s action, the Court held that substantial compliance with the Brown Act is the governing test, and that the notice given by Newhall Water District in the agenda was sufficient to inform the public of the purpose of the meeting.

The holding in Castaic applies only to public meetings of local legislative bodies, and therefore is not directly applicable to common interest developments and HOAs. However, that decision could be persuasive in a factually similar HOA context. If an action taken at a HOA Board Meeting is challenged because the agenda incorrectly cites to a provision that does not accurately identify the basis of the Board’s authority to discuss/take such action, the ‘substantial compliance’ test may be considered to rebuff that challenge. Specifically, a HOA could argue that the agenda substantially complied with the Open Meeting Act and was therefore sufficient with respect to informing the membership of the purpose contemplated by the referenced action item set forth in the agenda.

Blog post authored by TLG Attorney, Kumar Raja.

Modifying Enforcement Policies; Avoiding Claims of ‘Selective Enforcement’

Published on: July 6, 2015 | by Steven J. Tinnelly, Esq.

hoa-pet-restriction One problem that arises in the context of enforcing homeowners association (“HOA”) governing documents pertains to how consistently certain use restrictions in the governing documents are enforced over time. For example, if a HOA has historically failed to enforce a particular restriction, a decision to enforce that restriction against a particular owner may subject the HOA to claims of “selective enforcement” and/or that the HOA’s enforcements efforts are being exercised in an arbitrary and capricious fashion. These claims not only hinder the cost-efficient resolution of disputes, but could significantly undermine the HOA’s enforcement authority.

It is therefore difficult for a HOA’s Board of Directors to modify the HOA’s enforcement policies over time, especially when it desires to enforce a use restriction that was either never enforced or enforced inconsistently by the HOA in the past. However, the recent unpublished opinion in The Villas in Whispering Palms v. Tempkin (Cal. App. 2015) 2015 WL 2395151 (“Villas”) demonstrates that this difficulty may be overcome through providing proper notice to the HOA’s members and through enforcing the restriction consistently thereafter…

AB 2430 Signed: HOA Transfer Disclosure Docs; Seller Paid Fees

Published on: January 12, 2015 | by Steven J. Tinnelly, Esq.

*New Legislation

Civil Code Section 4530 sets forth the responsibility of homeowners associations (“HOAs”) to provide copies of governing documents, financial disclosures and other documents to a homeowner (or a homeowner’s authorized agent) within ten (10) days of a receipt of a request for those documents. This applies in the context of a sale of a property (a unit or lot) within a HOA. The documents to be produced are identified in Civil Code Section 4525, and are commonly known as “Transfer Disclosure Documents.”

Section 4530 does provide a HOA with the right to “collect a reasonable fee” based upon its efforts in producing, preparing and delivering Transfer Disclosure Documents. However, in satisfying this request and in seeking reimbursement, disputes would sometime arise as to whom should pay the fee (i.e., should it be the seller of the property or the prospective purchaser).

Fortunately, AB 2430 (Maienschein), effective January 1, 2015, has amended Section 4530 to specify the seller’s obligation to compensate the HOA for the aforementioned fee. Other notable changes in the law that will result from AB 2430 include:

The HOA must provide an estimate of the fees that will be assessed in producing the Transfer Disclosure Documents, prior to producing them.
The fees must be “separately stated” and “separately billed” from all other fees, fines or assessments that are billed as part of the transaction.
The Transfer Disclosure Documents may not be bundled with any other documents.
If the seller is in possession of any Transfer Disclosure Documents, the seller is required to provide copies to the prospective purchaser at no cost.
The form used for estimating the fees, as described in Civil Code Section 4528, is amended to include the following within the rightmost column of the form: “Not Available (N/A), Not Applicable (N/App), or Directly Provided by Seller and confirmed in writing by Seller as current document (DP).”

AB 2430’s primary benefit is in clarifying the party responsible for a HOA’s costs in producing the Transfer Disclosure Documents (the seller). This should prevent needless billing disputes that hinder property transfers within HOAs. However, HOA Boards and especially management professionals should recognize the need to provide the estimate of fees via the Section 4528 form before producing the Transfer Disclosure Documents, and that failing to do so may inhibit the HOA’s ability to ultimately recovery them.

Are You Prepared for the New Annual Disclosures?

Published on: September 19, 2014 | by Steven J. Tinnelly, Esq.

For many associations with a December year end, September marks the first opportunity for the board of directors to review the first draft of the budget and disclosures materials. As of January 1, 2014, changes to the Davis-Stirling Act now require that budget documents and disclosures be distributed in the form of the Annual Budget Report and the Annual Policy Statement.

Civil Code §5300 requires the Annual Budget Report (“Report”) be distributed to the membership 30-90 days prior to the fiscal year end. Unless the governing documents provide for more stringent standards, the Report must now include the following documents:
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Inspection and Copying of Association Records

Published on: July 1, 2014 | by Steven J. Tinnelly, Esq.

*New Library Article

There are numerous records and items of information maintained and generated by a homeowners association (“HOA”) in the course of its operations. It is common for a HOA member to request copies of such records and information, especially in connection with an ongoing dispute the member may have with the HOA. Upon receipt of such a request, HOA boards and management professionals often have questions concerning the scope of the HOA’s responsibilities in responding to the request and in ultimately providing the member with the requested records and information.

The California Civil Code contains several provisions governing (1) the degree to which a HOA member is entitled to inspect and to copy certain “association records,” (2) the degree to which certain association records are not subject to inspection or copying by a member, and (3) the process through which the HOA must produce or provide access to its records in response to a member’s request. This blog post provides an overview of these provisions, as well as some general guidance for HOA boards and management professionals on this issue.

*Note: Our attorneys have also published this information in a new article entitled “Inspection and Copying of Association Records” that is available for download from our Web site’s library.

Community Website for our Homeowners Association?

Published on: April 16, 2014 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Is it common for an association to create a website and share certain information via this website with owners/residents of the community? If yes, what are the regulations?

Answered – Yes. A community website can be a valuable and effective communication tool by allowing residents to access homeowner association (“HOA”) information 24 hours a day, seven days a week. While there are no specific regulations regarding HOA websites, there are a few pitfalls that should be avoided when sharing community information in a public forum.

A typical HOA website will provide informational tools to the residents, including access to HOA documents, calendar of events, board meeting agendas, contact information, etc. The board may post most of these items within a public area of the website. However, some items will need to be housed in a secure location. For example, access to the HOA’s CC&R’s, Bylaws, and other governing documents should be restricted to a “Members Only” location of the site, and be protected via a user name and password.

The board may also consider posting disclosure notices, such as the Annual Budget Report, Annual Policy Statement, and other community-wide disclosures on the site. As noted above, these documents should be contained within the “Members Only” section of the website. The HOA would still be required to provide these notices to the membership per the General Delivery requirements outlined in Civil Code § 4045; however, keeping a copy on the website provides the members with a quick and convenient location to obtain additional copies, if necessary.

If the HOA allows its members to review assessment account information, or pay assessments online, the members will need to able to access a secure area of the website in order to protect their private information. To protect the HOA from liability from data breaches, be sure to utilize a payment vendor that is PCI Compliant. PCI Data Security Standards include requirements to maintain a firewall to protect cardholder data, encrypt transmission of cardholder data, use and regularly update anti-virus software, assign a unique ID to each user, and regularly test security systems, among other things.

Some HOA websites also include a chat room/forum for residents. Keeping your website social can help build a sense of community. However, it can also be a place for members to voice their grievances. Before including this feature, the board should work with the HOA’s legal counsel to create a Terms of Use Policy, and determine any disciplinary action for violations of this Policy. Residents will need to agree to the Terms of Use prior to being allowed access to the chat room/forum. In addition, the HOA should have someone available to moderate the site, so inappropriate comments can be immediately removed. Due to the time and cost associated with monitoring an online forum, the board may find it more beneficial to instead have a list of Frequently Asked Questions (“FAQs”), as well as a Contact Form, where residents can have their questions quickly answered. Above all, the HOA needs to ensure that the website’s information is kept up to date and relevant to ensure that residents keep coming back.

Blog post authored by Tinnelly Law Group’s Director of Business Development, Ramona Acosta.

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.

HOA Has Standing to Sue Developer Over Parking Rights of HOA’s Members

Published on: April 1, 2014 | by Steven J. Tinnelly, Esq.

*New Case Law

It is not uncommon for a homeowners association (“HOA”) to enter into contractual arrangements with a third party where the rights and responsibilities under that arrangement are between the third party and each of the HOA’s members. Under such circumstances, the HOA’s involvement may be limited solely to collecting fees from the members and passing them on to the third party. Because the HOA (as an entity) is not the beneficiary of the contract, there is uncertainty as to whether the HOA has standing to assert claims against the third party on behalf of the HOA’s members. California Civil Code Section 5980 provides a HOA with standing to initiate legal action “in its own name as the real party in interest and without joining with it the [HOA’s] members” in matters relating to enforcement of the HOA’s governing documents, as well as matters involving or arising out of damage to the common area and/or to a separate interest which the HOA is obligated to maintain or repair. However, there is no statutory provision clearly addressing whether a HOA has such standing in matters pertaining to the rights of the HOA’s members in contracts with third parties.

Fortunately, the recent case of Market Lofts Community Association v. 9th Street Market Lofts, LLC (2014) 222 Cal. App. 4th 924 (“Market Lofts”) provides some guidance on this issue.

HOA Committee Meetings Open to the Membership?

Published on: February 11, 2014 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Our HOA has established several working committees such as Finance and Compliance. Do these committees have to conduct meetings open to the public? Neither one has power to spend money but merely makes recommendations to the Board of Directors.

Answered – No. The provisions of the “Open Meeting Act” (Civil Code §4900) requiring open meetings apply only to “board meetings.” A “board meeting” is defined as “a congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board.” Civil Code §4090(a) (Emphasis added). Therefore, provided that the committee is not comprised of a sufficient number of directors so as to constitute a quorum (typically a majority) of the board, the committee’s meetings are not required to be open to the membership.

As illustrated in your question, most committees are purely advisory in nature and provide their findings/recommendations to the board in an open board meeting. Even where a committee does have some decision-making authority (i.e., to approve homeowner architectural applications or expenditures for an ongoing HOA construction project), an “item of business” contemplated by the Open Meeting Act does not include “actions that the board has validly delegated to…. [a] committee of the board comprising less than a quorum of the board.” Civil Code §4155 (Emphasis added). Therefore, if the board has delegated an action or decision to a committee comprised of less than a quorum of the board, the committee’s decision-making authority would not in itself trigger the Open Meeting Act’s requirements.

Even if your committee is not required to hold open meetings, it may be beneficial for committees with decision-making authority to provide notice to the membership and to post an agenda. Doing so will help prevent claims of impropriety on the part of the committee or the board in situations where a member may object to a decision or action by the committee. You should also refer to your HOA’s Bylaws to determine if there are any additional committee requirements.

Blog post authored by Tinnelly Law Group attorney, Terri Morris.

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.