San Diego County Increases Compliance Efforts

By Jacquelyn E. Quinn, Esq.

San Diego County recently increased its Health Order Compliance team and launched a 24/7 call center for the community to submit complaints of businesses and organizations not complying with the Health Order. According to the County, the compliance team’s primary focus is “egregious violations” and businesses not permitted to be open (e.g., bars, indoor gyms, etc.). However, if a complaint regarding your association is submitted a member of the compliance team may contact the association.

According to the County, the compliance team will first contact the association to discuss the complaint and learn about your association’s operations to determine if there is a violation of the health order. If necessary, the compliance team may conduct a site visit. The County states the main purpose of the compliance team is to bring awareness and seek voluntary compliance, but notes it will have the authority to determine whether additional enforcement measures are necessary such as fines ($1,000 per instance) and/or cease and desist notices or closures, etc. Local cities may also have additional enforcement efforts in place.

Keywords: COVID-19, Coronavirus

Association Employee is Diagnosed with COVID-19… Now What?

By Jacquelyn E. Quinn, Esq.

If your association has employees, it may have certain responsibilities if one of them is suspected of having or diagnosed with COVID-19.

The State of California’s COVID-19 Employer Playbook for a Safe Reopening provides guidance on what to do if there is a case of COVID-19 in the workplace and actions employers may consider when reporting cases to local health departments and communicating with employees and vendors.

The California Department of Fair Employment and Housing also published guidance to assist employers and employees with frequently asked questions about how to address employees diagnosed with COVID-19 while upholding an employee’s rights. The State’s FAQ can be found here.

In addition, the Centers for Disease Control and Prevention (“CDC”) has issued a FAQ for businesses when suspected or confirmed cases of COVID-19 occur in the workplace.

Your local county or city may have also issued further guidance that your association should be familiar with. San Diego, for instance, in accordance with paragraph 16 of the San Diego County public health order, requires that employers notify the County Department of Public Health when an employee is diagnosed with COVID-19 and cooperate to identify and provide contact information for any person exposed by the employee at the workplace. San Diego County also recently instructed that employees are not required to undergo COVID-19 testing before being permitted to go back to work, as found here.

If an association employee is diagnosed with COVID-19, contact your legal counsel to discuss appropriate next steps.

Keywords: COVID-19, Coronavirus

Sign, Sign, Everywhere a Political Sign

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By Kieran J. Purcell, Esq.

As the 2020 political season gears up it is not uncommon to see political signs popping up in community associations which often leads to questions like: “Do homeowners have the right to display political signs?” “If so, where can they post political signs? “How soon after the election can we make them take down their signs?”  Chances are your association’s governing documents have a sign provision, and the city or county your association is located in likely has an ordinance governing political signs too.  However, the answers to these questions are found in your association’s governing documents and/or the California Civil Code.  Spoiler alert-you may not like the answers.

An Association May Prohibit an Owner From Posting Political Signs in the Common Area, But Not On or In Their Separate Interest Property. Generally, an association’s CC&Rs provide its board of directors has the sole and exclusive right manage and control the common area.  Some CC&Rs may also provide no signs may be erected or displayed in the common area without permission from the board. Or the CC&Rs may allow specific signs, e.g. one (1) sign of customary and reasonable dimensions offering a condominium for sale or lease.  If so, that means the board does not have to allow an owner to put political signs on the common area, right? And if an owner does place a political sign in the common area and refuses to timely remove it, the association can remove it, right? The answer to both questions is yes. Here’s why.

Civil Code section 4710 provides:

(a) The governing documents may not prohibit posting or displaying of noncommercial signs, posters, flags, or banners on or in a member’s separate interest, except as required for the protection of public health or safety or if the posting or display would violate a local, state, or federal law.

(b) For purposes of this section, a noncommercial sign, poster, flag, or banner may be made of paper, cardboard, cloth, plastic, or fabric, and may be posted or displayed from the yard, window, door, balcony, or outside wall of the separate interest, but may not be made of lights, roofing, siding, paving materials, flora, or balloons, or any other similar building, landscaping, or decorative component, or include the painting of architectural surfaces.

(c) An association may prohibit noncommercial signs and posters that are more than nine square feet in size and noncommercial flags or banners that are more than 15 square feet in size.

Therefore, a homeowner may post political sign(s) not larger than nine (9) square feet, made of the statutorily permitted materials in or on his or her separate interest property, but Civil Code section 4710 does not grant a homeowner the right to post signs-political in nature or otherwise-in the common area.

How Long Can a Political Sign Be Displayed Before/After An Election?  While CC&Rs rarely contain similar provisions, it would be reasonable for an association to adopt a rule with similar time limitations for owners to post political signs within their association, right?  Maybe. Many cities and counties have ordinances establishing time limits for when political signs may be posted, e.g. ninety (90) days before, and ten (10) days, after an election.  Civil Code section 4710 allows an association to prohibit the posting or displaying of noncommercial signs on an owner’s separate interest if the posting or display would violate a local, state, or federal law. Consequently, an association may be able to adopt rules which mirror the same time limitations set out in local ordinances.

Okay, So We Have To Let Someone Post a Political Sign, But Just One Right?

Maybe.  Civil Code section 4710(a) says governing documents may not prohibit noncommercial signs, posters, flags or banners, plural.  Unless prohibiting the sign(s), etc. protects public health or safety or if the posting or display would violate a local, state, or federal law.  Some examples of this would be: (a) if an owner displayed so many flags close to the street it impaired drivers from seeing other cars, (b) the city requires a permit for a flag pole over a certain height and the owner has no permit, or (c) the city limits how many signs can be displayed at one time on private property.

Census Taker Access

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By Jacquelyn E. Quinn, Esq.

It’s almost time for the 2020 Census to begin and associations may find census takers seeking access to the community or information regarding its occupants.  Households will receive an invitation to respond to the 2020 Census between March 12-20. If a household does not respond to the 2020 Census, a census taker may follow up in person to collect their response. This will occur between May-July.

Then comes the question – must associations grant census takers access to the community to gather information from occupants?  In short, yes.

13 U.S. Code Section 223 provides:

Whoever, being the owner, proprietor, manager, superintendent, or agent of any hotel, apartment house, boarding or lodging house, tenement, or other building, refuses or willfully neglects, when requested . . . to furnish the names of the occupants . . . or to give free ingress thereto and egress therefrom to any duly accredited [census taker] . . . shall be fined not more than $500.

An association is required to cooperate with census takers and cannot deny access into the community or giving the names of the occupants of the premises to any census taker who has shown proper identification.  Failure to grant access to the community or furnish names of occupants requested by a census taker may result in substantial fines.  The association may utilize whatever security measures it has in place (e.g., call resident and announce visitor).  It will be up to an individual resident if they choose to open their door or not.

Associations can and should require evidence that the person is an official census taker.  All census takers will be issued a census badge, which includes their name, photograph, Department of Commerce watermark, and an expiration date. Community Association Managers, patrol staff, or homeowners may ask to see a census taker’s badge. When in doubt, contact the nearest Regional Census Center to verify a census taker’s status. https://www.census.gov/about/regions/los-angeles/contact/identify.html

In order to comply with federal regulations, make sure your Community Association Managers, patrol staff, and gate and lobby attendants (if any) understand that access must be granted to census takers. They are allowed to knock on doors, ring doorbells, use call boxes, etc.  Also, census takers are within their rights to ask associations to verify occupancy information (e.g., name and address). While you’re not expected to supply the information immediately, you should provide the requested name and address within a reasonable amount of time.

Please be aware that there is no requirement to provide any information to a census taker over the phone.  If the association receives a phone call from a person claiming to be a census taker requesting occupancy information the association should not provide such information over the phone.

Record Retention: Meet the New Board, Same as the Old Board

By David A. Kline, Esq.

Often I hear members and directors distinguish between events that took place “under the old board” and those that take place “under the new board.” The implication of this distinction is that the election that brought in “the new board” somehow wiped the slate clean or that a new entity was somehow formed.  In reality though, a community association is a single entity that continues despite changes in its membership, officers, directors and management.

There is no legal distinction between decisions made by “the old board” and those made by “the new board.” Rather, the business and affairs of community association are conducted by one body – the board.

Although the board may change its mind from time-to-time, it is important to recognize that decisions made by the board may continue to affect the association into the future, regardless of any changes that may occur in the composition of the board or management.

A recent decision by a Federal District Court in Florida illustrates the problems that can occur when a community association fails to recognize decisions made by “the old board.” (Peklun v. Tierra Del Mar Condo. Ass’n, 2015 U.S. Dist. LEXIS 163554 (S.D. Fla., Dec. 7, 2015), “Tierra Del Mar.”)

In February of 2015, Sergey Peklun took his own life. He had been living with his dog, Julia, at Tierra Del Mar Condominium Association in Boca Raton, Florida. In 2011, he received a notice from the association that his dog’s presence violated the association’s pet restrictions.  He responded to that notice explaining that his doctors recommended keeping Julia as an emotional support animal due to his anxiety and depression. His assertion that Julia was an emotional support animal was supported by letters from two doctors. In September of 2011, the association’s board of directors granted Mr. Peklun a reasonable accommodation to keep his emotional support dog. Then, the composition of the association’s board changed and the association changed management companies.  Can you see where this is headed?

A neighbor complained about the dog’s presence and the association demanded that Julia be removed from the premises. When Mr. Peklun asserted that Julia was a service dog, the association sought evidence of the dog’s certification as such. In 2013, when Mr. Peklun failed to provide that evidence, the association denied Mr. Peklun’s request to keep his dog and demanded its removal.  Importantly, the board focused its attention on whether the dog was trained to provide a service for Mr. Peklun rather than on whether he continued to need the dog as an emotional support animal.

Meanwhile, the complaining neighbor sued Mr. Peklun for an injunction ordering the dog’s removal. The judge issued that injunction based on an affidavit from the association’s president stating that there was no record the board of directors had ever granted Peklun an accommodation. Mr. Peklun took his own life on the day he was to appear in court on a contempt motion for his willful disregard of that court order.

Mr. Peklun’s widow and son sued the association, its president, and the neighbor for intentional infliction of emotional distress and for violations of the Fair Housing Act, among other causes of action. The Court refused to grant the association’s motion for summary judgment on the Fair Housing Act claim. The Court explained that the association was within its rights to inquire whether Mr. Peklun continued to need his dog as a reasonable accommodation.  However, the Court continued, “Because knowledge of the 2011 accommodation…was imputed to [the association’s] current board and also brought to its attention again in 2013, it had an obligation to open a dialogue regarding Julia’s purpose before denying the request.” (Tierra Del Mar, at 48.)

The above case is just one example of the problems that can occur when a community association fails to retain adequate records through a change in management.

  • Are your association’s records maintained in a way that would alert future directors and managers of decisions the board makes today?
  • Does your document retention policy adequately ensure that minutes will not be destroyed?
  • Does your association maintain minutes in a format that is easily searchable?
  • If a new management company has taken over, were the old records reviewed and incorporated into the association’s current files? Or, were they placed in a file box and stored in archives without a second thought?
  • When corresponding with a homeowner, what steps do you take to ensure that the association’s “institutional memory” is as good as that homeowner’s? Does your association maintain an individual file for every unit or lot?

When associations change management companies, it is understandable that emotions may run high.  Rather than simply transferring disorganized boxes from one office to another, it is well worth the association’s efforts and expense for the old management company to index its files and records and to meet with the board and the new management company to explain how those records are organized.

  • What could the Tierra Del Mar board have done in 2011 to ensure that its decision in 2011 would be known by the board in 2013?
  • If you were the old manager, how would you have ensured a smooth transition of association records?
  • If you were the new manager, how would you have incorporated the association’s old records into your own records-management system?

If you have suggestions or best-practices that you would like us to share in our next newsletter, please e-mail us.

Sexual Harassment Training Requirements

By Mandy D. Hexom, Esq.

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NEW UPDATE: Associations That Have Five or More Employees Must Provide Sexual Harassment Training by January 1, 2021
(Rather than January 1, 2020).

Employers with five or more employees no longer have to provide sexual harassment training by January 1, 2020 as previously required under Government Code section 12950 (Senate Bill 1343). Rather, pursuant to Government Code section 12950.1 (Senate Bill 778 signed by Governor Newsom on 8/30/19), an employer with five or more employees (which include seasonal and temporary employees, unpaid interns, unpaid volunteers, and independent contractors), must provide two hours of sexual harassment training to all supervisory employees and at least one hour of sexual harassment training to non-supervisory employees by January 1, 2021.

Subsequently, the employer must provide the training once every two years. This new law also requires an employer to provide initial training for non-supervisory employees within six months of hire.  However, if your supervisory employees received training in 2019, they need not be trained again until two years thereafter. Employers must keep the training documentation for at least two years.

More information about the training requirements, other related requirements, and resources for the required trainings can be found on the DFEH’s website at: https://www.dfeh.ca.gov/resources/frequently-asked-questions/employment-faqs/sexual-harassment-faqs/

AB 5: New Requirements for Independent Contractors

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By Mandy D. Hexom, Esq.

Does Your Association Have Independent Contractors Providing Services?
If so, Assembly Bill 5 Will Further Impact the Ability of Companies Including Associations to Classify Workers as Independent Contractors.

What Are the New Laws?

You may have seen or heard the recent uproar in the news by Uber and Lyft over the so-called “gig worker bill.” Unfortunately, this new bill will impact not just the “Gig Economy,” but almost all California businesses including community associations and community management companies.

On September 18, 2019, California Governor Gavin Newson signed into law Assembly Bill 5 (“AB 5”) to be incorporated into the California Labor Code beginning January 1, 2020, as Labor Code section 2750.3, with an amendment to the definition of “employee” in Labor Code section 3351 and other related amendments to the Unemployment Insurance Code at sections 606.5 and 621.

What is the Proper Classification of Individual Workers?

This new law essentially requires employers to comply with the California Supreme Court decision in Dynamex (Dynamex Operations West, Inc. v. Superior Court of Los Angeles County 4 Cal.5th 908 (2018)) concerning classification of workers as independent contractors rather than employees and creates statutory liability for not complying with these new limitations on worker classifications. AB 5 and the Dynamex case permit California hirers to classify  individual workers as independent contractors only if it meets the ABC Test, which provides workers are employees  unless: (A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under contract and in actual fact; (B) whether the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is “customarily engaged” in an independently established trade, occupation, or business of the same nature as the work being performed for the hiring entity. AB 5 includes some exceptions for certain businesses or industries. However, there are no specific exceptions for community associations or community management companies.

What if There is a Bona Fide Business-to Business Relationship? Should Associations or Management Companies Be Worried?

Yes. AB 5 also provides guidance when there is a “bona fide business-to-business contracting relationship.” AB 5 defines what is a legitimate “business-to-business contracting relationship” and sets forth further requirements to determine whether a “business service provider” is a properly classified independent contractor (e.g., janitorial services, etc.).

  • First, the two parties contracting must both be “business service providers” which are either a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation, which includes nonprofit mutual benefit corporations, such as many common interest developments (Labor Code section 2750.3(e)(a)(1)).
  • Second, the determination of employee or independent contractor status of the business service provider in a business-to-business relationship shall be governed by a different test as opposed to the ABC Test that applies to individuals (Labor Code section 2750.3(e)(a)(1)). This business-to-business test is known as the Borello Test from the California Supreme Court case that historically and previously set forth the applicable test to determine proper worker classification (G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341). The Borello Test has been in use since approximately 1989 and sets forth 12 factors, all of which must be satisfied to have a bona fide business-to-business/independent contractor relationship, not an employer-employee relationship:
  1. The business service provider is free from the control and direction of the contracting business in connection with the work, both under the contract for the performance of the work and in fact.
  2. The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
  3. The contract with the business service provider is in writing.
  4. If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
  5. The business service provider maintains a business location that is separate from the business or work location of the contracting business.
  6. The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
  7. The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
  8. The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
  9. The business service provider provides its own tools, vehicles, and equipment to perform the services.
  10. The business service provider can negotiate its own rates.
  11. Consistent with the nature of the work, the business service provider can set its own hours and location of work.
  12. The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(Labor Code section 2750.3(e)(a)(1)(A)-(L); S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 Cal.3d 341.)

Are There Any Other Considerations Related to Misclassification of Employees?

In addition to this new law, associations should continue to be cognizant of the risks of being deemed a joint employer and plan ahead to minimize their liability for these potential joint employer risks. For example, an association should understand that when it has onsite workers who are employed by their management companies or vendors, these onsite workers could also be deemed employees of the association under the joint employer doctrine and under AB 5 which amends the definitions of “employee” and “employer” in Labor Code section 3351 and Unemployment Insurance Code sections 606.5 and 621.

What Can Associations Do In Response to These New Laws?

Community associations should consult with legal counsel about whether to reclassify all of their workers as employees unless they are confident their workers can meet the ABC Test set forth in the Dynamex case and AB 5. If employees are misclassified as independent contractors, these workers could file a lawsuit in state court or initiate a claim with the Labor Commissioner’s Office, the Employment Development Department, and the Franchise Board, all of which have jurisdiction and authority over worker misclassification matters. If such a claim or lawsuit is filed against an association, these claims are considered “wage and hour” or “misclassification” claims and are typically not covered by the standard Employment Practices Liability Insurance (“EPLI”) policies that cover associations or their management companies. Nonprofit corporations and smaller companies are not financially equipped to participate in protracted litigation or administrative proceedings in an attempt to prove their workers are properly classified.

What are Some Options to Minimize the Risks of Misclassification?

What can associations do to try to protect themselves if they are concerned about workers providing services that may be misclassified as independent contractors by the association or its vendors or contractors?

  • Classify association workers as employees and ensure that your onsite workers are being classified as employees by your vendors or contractors if these workers cannot satisfy the ABC Test.
  • Contact your insurance agent to obtain an EPLI policy for the association that covers wage and hour claims, misclassification claims, third party claims as well as coverage for your independent contractors, especially if there are independent contractors providing services for the association. It is best to make this inquiry now before the next budget disclosures are distributed to the owners in case the association will need to increase assessments to cover increased insurance costs.
  • Timely and immediately notify any applicable EPLI carrier of facts or circumstances that may give rise to a claim if you have any concern you may have misclassified workers as independent contractors.
  • Carefully draft new written contracts or revise existing contracts with vendors or contractors, in order to minimize risks of liability for misclassification claims because it is possible that the association may be deemed a joint employer of the workers provided by the vendors or contractors. For example, an association can require its vendors or contractors to (i) indemnify the association for employment-related claims; (ii) have EPLI insurance including wage and hour, misclassification, independent contractor and third party coverage; and (iii) require an additional insured endorsement in favor of the association on these EPLI policies, if available.

Maintenance Responsibility, Insurance Obligations, and Notifying the Carriers

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By David A. Kline, Esq.

The CC&Rs for common interest developments typically allocate the responsibility to maintain, repair, or replace various components between the owners and the association.  When the CC&Rs are silent, Civil Code section 4775 provides a default allocation of responsibility.

Recently, we have received a lot of questions about how the allocation of maintenance and repair responsibilities relates to an association’s insurance obligations.  To answer these questions clearly, an association’s obligation to insure a component may have nothing to do with its obligation to maintain, repair, or replace that component.

Condo Communities

When it comes to a typical airspace condominium community, each owner’s deed defines his or her ownership interests, generally in reference to the condominium plan.  The condominium plan describes a three-dimensional airspace that is owned separately by each member and divides the entire community (or a phase of the community) into units, common area, and exclusive use common area.  Typically, the interior surface of the perimeter walls and the unfinished floors and ceilings are identified as the boundaries of the condominium units with everything inside these boundaries (excepting structural components such as bearing walls) being part of the units.

Usually, the CC&Rs define “unit,” “common area,” and “exclusive use common area” in a manner that is consistent with the condominium plan.

Planned Developments

When it comes to planned developments, the community is typically comprised of member-owned lots and association-owned common area.

Allocation of Maintenance Responsibility

The CC&Rs generally identify the maintenance, repair and replacement responsibilities of owners and the association.  Sometimes, the CC&Rs simply state that owners are responsible for the maintenance, repair and replacement of their units or lots and any exclusive use common area appurtenant to their units or lots, and the association is responsible for the common area.  More recent CC&Rs might include a maintenance matrix that provides greater detail regarding which components the owners and association are responsible for.  It is not uncommon, especially for newer CC&Rs, to allocate certain maintenance and/or repair responsibilities in a way that deviates from a straightforward unit or lot/common area delineation.

Often, when a sudden loss occurs, such as a fire or plumbing leak, associations assume that the location of the damage or the allocation of maintenance, repair and replacement responsibility contained in the CC&Rs definitively determine the party responsible for the damage.   However, this may only be partially true.

Insurance Coverage

The CC&Rs generally obligate the association to maintain property and casualty insurance.  In some condominium communities and planned developments, especially when the units or homes are attached, the CC&Rs may obligate the association to maintain insurance covering not only the common area, but certain portions of the units or lots as well – portions that the owners may be responsible for maintaining and repairing under the CC&Rs.  For example, the CC&Rs for a condominium community may require the association to insure components within the units, such as cabinetry, built-in appliances and flooring, or even structural components that the owners are generally responsible for maintaining and repairing.  Likewise, the CC&Rs for a planned development may require the association to insure the homes (i.e., the structures) and, possibly, certain improvements located within the homes.  When an association’s policy covers any damaged portion of the residence, owners have a right to file a claim under that policy.  Because the association is the customer of its insurance carrier, the carrier will often ask the association whether the board would like the carrier to process the claim.  Too often, boards of directors instruct the carrier not to process the claim, either because they cite the owner’s repair obligations or because they take issue with the fact that the owner sought to file a claim without first seeking the board’s permission.

When a board instructs the association’s carrier not to process a claim that would otherwise be covered, the board is interfering with the owner’s rights under the CC&Rs and under the insurance policy.  After all, the owner is an “insured” under the policy and the policy is maintained for the benefit of the owners.

If a board instructs the association’s insurance carrier not to process a claim that would otherwise be covered under the association’s policy, the board is effectively obligating the association to pay for the damage to the same extent the carrier would have, had the claim been processed.

In some cases, it may make sense strategically for the board to ask the carrier not to process a claim that would be covered.  For example, if the amount of the damage is only slightly higher than the deductible, the board might opt to pay the small amount of money the carrier would have paid, rather than allow another claim to affect the association’s loss history.  However, in most cases, it will make more sense to authorize the carrier to process the claim.

Directors & Officers Liability Coverage

The decision on whether to authorize the association’s carrier to process a property claim should not be confused with the decision to notify the directors and officers (“D&O”) liability carrier of facts and circumstances that could lead to a potential claim against the association’s board, officers, manager or any other parties who may be covered by the policy.  When an owner threatens to sue a community association or its board, there is no reason not to promptly notify the D&O carrier about that threat.  And, when a lawsuit is filed, there is no reason not to promptly tender the claim to the D&O carrier.  D&O carriers do not base their decisions about renewals and premiums upon the number of claims that they have been notified about.  D&O carriers base their decisions on their determination about the risk of future claims.

Failure to promptly notify the D&O carrier about potential claims could cause the carrier to deny coverage for an expensive claim that otherwise would have been covered.  Placing the carrier on notice of facts and circumstances that could give rise to a potential claim gives the carrier an opportunity to appoint legal counsel for the association and to make an early settlement offer to limit its exposure to liability.  This is why we often say: “Tender early.  Tender often.”

But, That Can’t Be Right, Can It?

Turning back to property and casualty insurance, it may seem counter-intuitive that the association’s policy covers an owner’s unit or house.  After all, why should the association pay to insure an owner’s separate interest when he or she owns it and is responsible for maintaining and repairing it under the CC&Rs?  For that matter, why should assessments be used to buy insurance that pays to repair damage that the owner him or herself may have caused, such as a kitchen fire?  Unfortunately, this train of thought overlooks the realities of common interest living.  If owners were given the option to insure their own property, many owners would fail to do so.  In the event of a major casualty event, such as a fire, an uninsured owner’s unit or home might not be rebuilt.  In a typical planned development with unattached homes, this could result in an eyesore for the rest of the community.  But, in a condominium or planned development where the structural components of one owner’s residence are integrally tied to those of one or more neighboring residences, lack of insurance coverage for one residence could also prevent or seriously delay the repair or reconstruction of multiple residences.

Even when lack of insurance only delays or prevents the repair or reconstruction of the interior of a unit, the appearance of the community and property values may be impacted.

Conclusion

In summary, an association’s CC&Rs and its condominium plan, if applicable, can be helpful tools in identifying when owners will be responsible for repairing or replacing damaged components within the community and for identifying when owners will generally be liable for the costs associated with this work.  However, the association’s insurance obligations may shift this liability to the association – at least in certain circumstances.

What is an Association’s Duty Before a Wildfire Strikes?

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By Kieran J. Purcell, Esq.

Typically, an association is charged with enforcing its governing documents.  Some aspects of pre- and post- wildfire related activities may be covered by an association’s CC&Rs or Rules (e.g., deadlines for reconstruction of damaged property or architectural approval) but many are not (e.g., the association’s ability to compel brush abatement on owner’s separate interest property).  Yet homeowners may look to the association, if not for actual enforcement activity, then for leadership in this issue.

Providing Voluntary Services

If an association is not required to provide pre-and post- wildfire services pursuant to its governing documents, then any services provided by an association are purely voluntary and with that comes risks.

Consider the 2018 O’Malley v. Hospitality Staffing Solutions case in which a hotel employee voluntarily undertook a welfare check at the request of a guest’s spouse.  The employee did not find the injured plaintiff during his welfare check, but she was found by her spouse sometime later.  The injured plaintiff sued the hotel alleging the employee’s welfare check was not thorough enough and had she been found earlier, she would have received more timely medical care and her injuries would have been less extensive.  The court in O’Malley held that if someone is giving aid to another, then the person providing the aid has to exercise due care.  If the person providing the aid fails to exercise due care and that failure increases the risk of harm to another or if harm is suffered because the other relied on that person’s aid, then the person providing the aid may be liable.

So, what’s the lesson to be learned from the O’Malley case?  If an association voluntarily renders services for the protection of others, it must exercise reasonable care in doing so or the association may be liable under a “negligent undertaking” theory of liability for its failure to exercise reasonable care.

Many homeowners assume their association will render some sort of relief or emergency services should a natural disaster occur.  Some associations even provide periodic reminders or create an “Emergency Preparedness Plan” or an “Emergency Preparedness Committee.”  If your association is going to provide such voluntary services, the association should: (1) clearly inform its residents of the services the Association will and will not voluntarily provide; (2) consult with an expert as to how the association can provide the best quality services possible; and (3) confer with its insurance expert to obtain insurance for any insurable risks.

Premise Liability

Negligence arises when an association, through its board of directors, knows or should know there is a risk of property damage, fails to take reasonable action to prevent such damage, and this failure proximately causes property damage.  The types of negligence asserted against associations are myriad and diverse.  Some of the more common varieties concern premises liability.

Could an association be held to the same standard of care as a landlord regarding premises liability?  In short, the answer is “yes.”  In Frances T. vs. Village Green Owners Ass’n, the California Supreme Court held that in certain instances an association has a duty to investigate criminal activity and take appropriate safety measures, just as a landlord would for his or her tenants.  The Court’s rationale for its holding in Francis T. is that, like a landlord, the association manages and controls the common area, so when a hazard is foreseeable the association has a duty to exercise due care for its resident’s safety in those areas that are under its control.  A court might impose a similar duty on your association if a wildfire is foreseeable because your community is located in high risk area for wildfires.  If your community is located within such an area, your association should consult with an expert as to the kinds of wildfire mitigation measures your association should implement as part of its common area maintenance and your association should implement them if it is able.

Breach of the Duty to Maintain

An association could be liable, even if it was not negligent, if it failed to adequately discharge its maintenance duties as required in its governing documents.  In Franklin v. Marie Antoinette Condominium Ass’n., a building component the association had a duty to maintain, pursuant to its CC&Rs, leaked resulting in property damage to an owner’s condominium.  The owner of the condominium sued the association for breach of the association’s duty to maintain and for negligence. The court in Franklin discussed how an association might be liable regardless of whether it acted negligently if the association had a duty under its CC&Rs and it breached that duty.

Good Samaritan Laws

Will an association be protected as a “Good Samaritan”?  California Health & Safety Code section 1799.102(b)(2) offers some protection to “Good Samaritans,” but under fairly narrow circumstances.  In relevant part it provides, “no person who, in good faith and not for compensation, renders emergency medical or nonmedical care or assistance at the scene of an emergency shall be liable for civil damages resulting from any act or omission other than an act or omission constituting gross negligence or willful or wanton misconduct.”  A careful reading of this language shows it may provide immunity to an individual, who renders emergency medical or nonmedical care at the scene of an emergency, but not an association as a corporate entity.

So, what’s an association to do?  A good place to start is by reviewing the association’s governing documents, for example:

Easement Rights

Generally, CC&Rs grant the association and owners nonexclusive easement rights of ingress and egress through the common area and separate interest property for specified purposes, e.g., maintenance the association or owner is obligated to perform under the CC&Rs.  However, do your association’s CC&Rs allow it to access an owner’s separate interest property to do brush abatement, clear debris, or other common pre/post-wildfire activities?  And if so, do the CC&Rs permit the association to impose an individual assessment to recover its costs if it performs these tasks after an owner fails to do so?  Does the association have the authority to: (a) barricade damaged common areas; (b) control or limit access over streets; (c) open gates to admit emergency vehicles; and (d) shut-off utility valves, cap leaks and repair non-common area lines?

Exculpatory Clauses

An exculpatory clause is a provision in an association’s CC&Rs which typically exonerates it from liability for certain types of damages.  California courts have accepted the validity of exculpatory clauses in CC&Rs, which exonerate an association from having to reimburse an owner for property damage caused by a failed component the association had a duty to maintain, when the failure was not due to the association’s negligence.  (See the Franklin v. Marie Antoinette case.)  If your association still has its original 1970’s era CC&Rs, it’s unlikely they will contain such an exculpatory clause.  However, if your CC&Rs were written or amended within the last 20 years or so they may contain an exculpatory clause, and if so, this may impact the association’s liability for property damage after a wildfire occurs.

Insurance Obligations

Most governing documents contain insurance provisions, but they can vary greatly from association to association, so it’s a good idea to consult with your association’s community management team, its insurance broker, and legal counsel to: (1) confirm that your association is meeting its existing insurance obligations and (2) determine if additional insurance coverage is a good idea (e.g., guaranteed replacement cost or anticipated emergency activities coverage).

Damage, Destruction and Partition

CC&Rs often contain provisions establishing the duties and responsibilities of owners in the event their separate interest property is damaged or destroyed by fire or another casualty.  It is common for these provisions to require owners to rebuild, repair, or reconstruct their separate interest property in a manner substantially similar to its condition/appearance prior to the casualty or as approved by the association within a specified period of time.  Is the specified time limit (sometimes as short as 30 days) adequate?  Consider the feasibility of the time limit not only from the stand point of a single property being damaged, but also following a conflagration like the 2007 Witch Creek fires, in which over 1,000 homes were destroyed.  What triggers the start of this time clock?  The date of the loss?  Or, something which sounds logical-like the date owner receives insurance proceeds-which may be difficult or impossible to accurately determine.

The above list of governing document provisions to consider is provided solely for the purposes of discussion and is not intended to be an all-encompassing list.  If your review of your governing documents identifies areas of concern, you may wish to consider working with your community management team and legal counsel to amend your governing documents.

What’s All the Buzz About FHA?

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By Karyn A. Larko, Esq.

You may be hearing rumors that the Federal Housing Administration has made changes to its requirements for insuring condominiums.  The rumors are true and the new requirements will take effect on October 15, 2019.

Before addressing the substantive changes made by the FHA, however, it is important to mention that the certification period for FHA approved condominium projects has increased from two (2) years to three (3) years.  This means that condominium associations who want to maintain their FHA certification will only have to re-apply every three (3) years going forward.  While not as convenient as the “old days” when FHA certification did not expire, it does reduce the frequency with which associations must go through the re-certification process.

The first noteworthy change when it comes to FHA and condominium associations is the addition of spot or single-unit FHA approval.  Under the current FHA guidelines, a project or phase of a project must be FHA certified in order for any unit within the project or that phase to be eligible for FHA.  As of October 15th, it will be possible to obtain FHA certification on a condominium unit within a project that is not certified provided certain requirements are met, including the following:

  1. The project is a completed project consisting of at least five (5) residential units.
  2. The project is not comprised of manufactured housing.
  3. The unit is not part of a project that is FHA certified or has one or more FHA certified phases.
  4. For a project with at least twenty (20) units, the percentage of units within the project owned by the same party or related parties does not exceed 10%. For the purpose of this requirement, a related party is an individual related to another unit owner by blood, marriage or operation of law; a person serving as the unit owner’s officer, director or employ; or a direct parent, subsidiary or other related entity with which the unit owner shares a common officer or director. For a project with fewer than twenty (20) units, no owner may own more than one (1) unit and no related party may own a unit.
  5. For a project with at least ten (10) units, no more than 10% of the units within the project are already FHA insured. For a project with fewer than ten (10) units, no more than two (2) units within the project are already FHA insured.  (This requirement differs from FHA certified projects where the FHA will insure up to fifty percent (50%) of the units.)
  6. The project is at least 50% owner occupied.
  7. The project meets other standard requirements for FHA (e.g., no more than 15% of the units are delinquent in the payment of regular or special assessments by more than sixty (60) days, no more than 35% of the project is mixed use).
  8. The borrower meets certain eligibility requirements.

The second noteworthy change is the expansion of the definition of site condominiums. Under the FHA guidelines, projects consisting solely of site condominiums do not require project-wide FHA certification or single unit approval.  Currently, site condominiums are defined as single family totally detached dwellings encumbered by CC&Rs and a condominium form of ownership, where the units consist of the entire structure as well as the site and airspace, and the owners are solely responsible for the insurance and maintenance costs for their units.  As of October 15th, site condominiums will include condominium projects (other than manufactured homes) consisting of horizontally attached dwellings (i.e., townhomes) where the units consist of the dwelling and land.  The requirement that the owners be responsible for all insurance and maintenance costs pertaining to their units still exists, with the exception of landscaping.