Diversity, Equity and Inclusion in Community Associations

By Susan M. Hawks McClintic, Esq., CCAL

DEI is a term you might be hearing and reading about in the news lately.  DEI stands for diversity, equity and inclusion.  DEI is tied to civil rights laws and preventing discrimination in employment and housing based on someone’s characteristics.  In California, the characteristics protected by law include:

Race, color, ancestry, national origin, citizenship, immigration status, primary language, religion, disability (mental or physical), sex and gender, sexual orientation, gender identity or expression, genetic information, age, familial status, source of income, medical condition, marital status, military or veteran status, or citizenship.

At its core, DEI is about providing equal housing opportunities without harassment or discrimination based on these characteristics.

In California housing, including community associations, harassment of someone because of these protected characteristics is prohibited by the law.  Harassment includes verbal, written, or physical conduct that belittles or shows hostility toward an individual on the basis of these characteristics.  If a community association receives allegations of behavior that might constitute harassment the association is obligated to investigate and address any behavior which may be unlawful to the extent the association has the authority to do so in its governing documents.  The behavior may be subtle, rather than overt, and may be an accumulation of seemingly small events that result in someone feeling unwelcome in the community.

If any incidents between community members, residents and guests are reported to the community association, they may not specifically refer to harassment or discrimination.  The person reporting an incident or incidents may not use those specific terms or even be aware they might have harassment or discrimination claims.  Whether the report raises those concerns or not, the association should be aware of the potential for harassment or discrimination to be the basis for the behavior described in the allegations.

When the association receives a claim of an incident between community members, residents and/or guests, the board should determine whether the alleged behavior, if true, is behavior that might violate the association’s governing documents and/or which may be unlawful harassment or discrimination.  If there is insufficient information to make this determination, more investigation may be needed to attempt to verify what occurred and to evaluate whether any enforcement action against the alleged offender is needed.

It is understandable that if faced with allegations of harassment, board members may not feel qualified to investigate and determine whether a neighbor’s alleged harassing conduct was based on discriminationatory factors.  Remember that in many cases, the board may not need to definitively determine whether the alleged conduct was based on discriminatory behavior.  Harassing behavior can be a violation of the governing documents regardless of the reasons for the behavior.

Any investigation should be fair and impartial and appropriate in scope to the allegations made.  This process is similar to any other investigation of violations of the governing documents but the subject matter is likely to be more sensitive and personal than other types of potential violation investigations.  The board and management need to be sensitive to the nature of the complaint and in some situations may want to bring in a third party to perform the investigation particularly if the allegations are made against a board member or manager.

If the allegations are made against a board member or manager, that person should not be part of the group investigating the allegations or be involved in making any decisions as a result of the investigation.  The association’s investigation should be as fair and impartial as possible and, in some situations may be best handled by a third party to try to avoid any claims of bias or favoritism in the investigation process.

At the conclusion of the investigation, the board or committee created by the board to investigate the reported incident(s) will determine what they believe occurred, whether what occurred violates the governing documents and whether to take any disciplinary action or other steps.   (Generally, any unlawful harassment based on the characteristics protected by the law will be a violation of the association’s governing documents.  This should be addressed by the association with its legal counsel.)

The association’s objective is to provide an environment free from harassment and discrimination.  It is important for community association leaders to be able to recognize when a situation might involve unlawful harassment and discrimination and understand the potential role of the community association when situations arise within the community association which may constitute unlawful harassment.  Community association leaders are not expected to be experts in identifying and evaluating unlawful harassment but rather to be aware of circumstances where investigation and expert assistance may be needed.

Planning & Preparing for Effective Meetings

 

By Susan M. Hawks McClintic, Esq., CCAL

Meetings are the primary mechanism for conducting business in common interest developments, so effective meetings are a key element in the health

Ineffective meetings in common interest developments, especially when addressing sensitive topics, can easily devolve into shouting matches, threats, and even news coverage. Fortunately, these meetings are rare. More common is apathy or frustration with how business is conducted, which results in very few homeowners attending association meetings, even when important topics are discussed. Whether the concern is a potentially volatile meeting or disinterest, there are ways to conduct meetings that are productive and beneficial for the community.

Community associations hold an annual membership meeting and board meetings at regular intervals throughout the year to conduct their business. Occasionally, special meetings of the members may be held to conduct a membership vote on matters other than the annual election of directors. California law and community association governing documents impose different requirements for board meetings and membership meetings, so it is important to be clear in the meeting notice and agenda about which type of meeting is being held.

For both board meetings and membership meetings, there are procedures and processes dictated by law and the community association’s governing documents related to notices and how to conduct business; these will be discussed below for each type of meeting. The primary sources of information for conducting meetings are in the association’s bylaws, the Common Interest Development Act beginning at Civil Code § 4900 for board meetings and § 5000 for member meetings, California Corporations Code beginning at § 7211 for board meetings and § 7510 for member meetings for incorporated associations, and California Corporations Code at § 18330 for unincorporated associations.

Beyond these requirements for meetings, there are some practices that can help make meetings more effective. Effective meetings can serve multiple purposes beyond just conducting business. They can create confidence in the board and a greater sense of community among the members. Ineffective meetings can lead to conflicts between the board members and the members of the community association.

Board Meetings

Board meetings are held for the purpose of conducting board business. The board president presides as the chairperson and is responsible for leading the board members through the agenda items and keeping the discussions focused on those agenda items. Board meetings are required to be open to attendance by the association members unless certain sensitive topics are to be discussed and statute allows for a closed-door conversation.

The first step in keeping board meetings productive and effective is to establish rules of order and decorum. Some of the rules will be different depending on whether one is a board member or an association member attending the meeting. Board meetings are for the board to conduct board business. Association members who are not on the board should be limited to observing the meetings, except during the designated association member comment periods.

While some of the rules should probably “go without saying,” they need to be said and should also be written down and read as a reminder to the attendees at the beginning of each meeting. The board may want to have copies of the rules readily available for board members and audience members. For an electronic meeting, the rules could be posted on a slide. These rules of decorum can include a reminder that members who are not on the board may only speak during the homeowner comment period unless specifically addressed by the board, that only one person may speak at a time, that all meeting attendees must refrain from interrupting speakers, and that speakers must stay on the topic of the agenda item being discussed. The chair of the meeting or another designated board member should enforce these rules so that all attendees maintain trust in the board and know that differing opinions may be presented and will be considered in a respectful, businesslike manner. Healthy associations are those that are open to new ideas and respectfully consider dissenting opinions.

The second step is to set the meeting agenda in advance. Common interest development board meetings must have an agenda per California Civil Code § 4920. The agenda must be posted with the meeting notice at least four days in advance of the board meeting, except in an emergency. For a meeting held solely in executive session, only two days’ notice is required. These timelines for notice of the meeting may be longer if required by the association’s governing documents.

The agenda can include time limits for each agenda item to keep the meeting moving, but flexibility should be allowed as long as the discussion remains productive and on topic. The board can adopt protocols for determining how a decision is made to extend a discussion beyond a designated time period. Options can include approval by a majority of a quorum of the board or approval by any two board members.

The third step is for the chair of the meeting to keep the meeting on topic and maintain the rules of order or decorum. The president usually acts as the chair of the meetings. As a side note, most bylaws define the roles of the board officers and list their duties. The bylaws also usually provide for the delegation of some of these duties to other board members or association management, as well as making provisions for assigning these duties to another officer in the absence of the assigned officer. It is very common for many of the administerial tasks (such as taking meeting minutes, posting meeting notices and agendas, creating financial documents, and other similar tasks) to be delegated to management representatives, with oversight by the officers and directors.

The chair of the meeting can keep the meeting moving forward by following the agenda and requiring that discussions remain focused on the agenda item being considered. A specific amount of time can be allotted to each agenda item and the time extended only by agreement of a majority of the directors’ present, to avoid “going in circles” on a topic without reaching a conclusion. If conversations tend to go on for longer than needed to adequately address agenda items, a motion can be made and approved by a majority of the board to discontinue discussion and call for a vote.

The chair of the meeting should also maintain decorum by ensuring that only one person at a time is speaking, that all speakers stay on the topic under discussion, and that any time limit for a topic is enforced unless extended by the board.

Board meetings are for conducting board business, and often owners/members not on the board will be limited to observing and making comments during one or more designated comment periods. At least one owner comment period is required by law at open session board meetings. The timing of this comment period can be designated by the board. The law does not address any time limits or set out any specific time during the meeting for owner comments.

Most commonly the comment period is at the beginning of the meeting, but some associations choose to allow comments for each agenda item as it arises on the agenda, and other associations only allow comments at the end of the meeting. The disadvantage of only allowing members to comment at the end of the meeting is that it does not allow the members to comment in advance of the board’s consideration of agenda items during the meeting. This seems to defeat one of the primary purposes of the owner comment period – namely, owner input on an agenda item prior to the board considering the item. So, a comment period should be allowed before the board conducts its business.

The board may set reasonable time limits for comments by individual owners as well as an overall time limit for owners’ comments. These time limits should be set by the board in advance of meetings and stated on the posted agenda for each meeting so members are informed of the time limits before the meeting. Typically, individual owner comments are limited to two to three minutes and the overall owner comment period to 15 minutes. These time limitations can vary depending on the size of the community and the number of owners who regularly attend board meetings.

The board may decide to extend these time limits for a particular meeting or topic if they believe that additional time is needed to allow individual owners sufficient opportunity to comment. This most commonly occurs when the board is considering a large project or a significant change in policies or procedures.

The board is not obligated to provide any response to owner comments, but it does promote community goodwill if easily answered questions are addressed and other comments, even negative ones, are acknowledged.

Membership Meetings

Membership meetings are not board meetings and are treated differently in the law than board meetings. Membership meetings are either annual meetings to hold the board election and conduct any other items of business set by the board in the notice and agenda for the meeting, or special meetings to address a specific topic.

Special meetings of the members can be called by the board or by a petition signed by association members. For incorporated associations, Corporations Code § 7510(e) provides that special meetings “for any lawful purpose” may be called by the board, by the board president or chairperson, by other persons specified in the bylaws (which is rare), or by 5 percent or more of the members. Some association bylaws set a higher percentage of the members required to call a special meeting. Legal counsel for the association should be consulted upon receipt of any member petition to determine if the meeting is properly called and whether the association’s governing documents may set a higher percentage of the members to call a special meeting than the 5 percent set by § 7510(e) noted above. The minimum requirements for members to call a special meeting for unincorporated associations should be set forth in the governing documents.

Membership meetings are held for the members to conduct business, primarily in the form of voting. The primary business conducted at most membership meetings is the election of directors at an annual membership meeting. Infrequently, special membership meetings are held for other types of votes, such as approval of capital improvement projects and document amendments.

Membership meetings are typically conducted by the board. The opportunity for members to speak at membership meetings is different than the opportunity to speak at board meetings as discussed above. Civil Code § 5000 requires that the board permit any member to speak at any membership meeting and allows the board to set a “reasonable time limit for all members to speak.” Section 5000 specifically references the overall time for members to speak and does not mention any per-person limitation, although a per-person time limit may be set in the meeting procedures. The agenda should include a designated time for homeowners’ comments.

Larger associations often ask members who wish to speak at a membership meeting to complete a form requesting to speak and identifying the agenda item or topic of the member’s comments, so the president or other chair of the meeting can call on those members who wish to speak in an orderly manner by topic. Smaller associations generally allow members to take turns speaking merely by raising their hand and being called on in turn by the chair of the meeting.

Civil Code § 5000 also requires that all membership meetings be conducted using some form of parliamentary procedure to maintain order and allow opinions to be voiced respectfully. This procedure should not be overly complicated and difficult to follow. The board does not need to adopt a one-hundred-page tome on parliamentary procedure. There are simplified forms of parliamentary procedure available that do not require interpretation by a professional parliamentarian. The goal of the procedure is to maintain decorum and ensure fairness to all members wishing to speak. The board should not censor statements (unless the statements are discriminatory, offensive, or inappropriate) or show favoritism or preferential treatment toward any individual members.

As with owner comments at board meetings, the board is not obligated to provide any response to owner comments, but it does promote community goodwill if easily answered questions are addressed and other comments, even negative ones, are acknowledged.

Conclusion

When association meetings are conducted in an orderly, calm manner, they are much more likely to be productive and create positive relationships in the community than if they are disorganized, unruly, and unproductive. Setting meeting procedures in advance and consistently enforcing the use of those procedures throughout the meeting will help set a positive tone for the interactions among the board members and association members. This positive tone can greatly benefit the community as a whole and lead to more productive, effective governance of the community.

 


 

* This article was originally published in the ECHO Journal  March – 2023 edition and was adapted from the original article, Planning & Preparing for Effective Meetings as authored by Susan M. Hawks McClintic, Esq., CCAL.

Epsten, APC Attorneys, Susan Hawks McClintic & Kieran Purcell Receive National Recognition as CCAL Fellows

Epsten, APC is pleased to announce that Susan (Sue) M. Hawks McClintic, Esq., Managing Shareholder and Kieran J. Purcell, Esq., Shareholder have been granted fellowship in the College of Community Association Lawyers (CCAL). More than 4,000 lawyers practice community association law in the United States, yet fewer than 175 attorneys nationwide can distinguish themselves as CCAL fellows.

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AB 502

Elections by Acclamation – Governor Signed AB 502

By Susan M. Hawks McClintic, Esq.

Assembly Bill 502 (“AB 502”), which provides for election by acclamation for all California residential community associations, was signed by the Governor and chaptered on October 5, 2021. AB 502 amends Civil Code section 5100 and adds a new section 5103 to the Civil Code.

You might recall that new legislation last year gave associations of over 6,000 units the right to elect directors by acclamation if, as of the close of nominations, the number of director nominees was not more than the number of director positions to fill at the upcoming election. This right will be now extended to all California residential community associations as of January 1, 2022, subject to certain notice requirements. The requirements include providing an initial notice to the members at least 90 days before the deadline for submitting candidate nominations. This notice must contain the following information: the number of board positions to be filled at the upcoming election, the manner in which nominations can be submitted, the deadline for submitting nominations, and a statement informing the members about the possible election by acclamation. A reminder notice between seven (7) and thirty (30) days before the deadline for submitting nominations is also required. Other requirements include acknowledging receipt of any nominations within seven (7) business days of receipt, advising the nominee if they qualify as a candidate, or the reason a nominee is not qualified to be a candidate and how the nominee may appeal the disqualification. To qualify to conduct an election by acclamation, the association must have held a regular election in the last three years, i.e., a director election utilizing the secret balloting process.

Also, AB 502 provides that “an association may disqualify a nominee if the person has served the maximum number of terms or sequential terms allowed by the association.” This allows for term limits. However, AB 502 also provides that if an association disqualifies a nominee because that person is termed out, then the association’s election rules shall also require a director to comply with the same requirement.

To learn more, register to attend our Legal Symposium.

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Association Loans?

By Susan M. Hawks McClintic, Esq. & Jon H. Epsten, Esq.

You may have heard that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020 includes the Paycheck Protection Program (“PPP”) to help businesses keep operating during this pandemic.

The PPP gives small businesses access to short-term cash flow assistance to help cover operating expenses, including payroll. Loans received under the PPP are forgivable under certain circumstances, meaning all or a portion may not be required to be prepaid. A primary goal of the PPP loan program is to help businesses keep or rehire employees once businesses can return to normal operations.

It is uncertain whether community associations or property owner associations are considered businesses which are eligible to receive loans under the PPP.

The loan applications are being administered by some FDIC banks so we encourage any associations with employees to discuss the PPP program with their bankers as soon as possible, as it is expected that funds will be depleted soon.

Other loan programs may be available to community associations and property owner associations through the Small Business Administration (SBA) or the association’s bank. In addition to the PPP loan program, the Economic Injury Disaster Loan (EIDL) program is gaining attention. These loan programs, including the qualifications and applications, can be found on the SBA website (www.sba.gov).

Keywords: COVID-19, Coronavirus

Emergency Rules – Discretionary or Not Discretionary? That is the Question

By Susan M. Hawks McClintic, Esq.

We are all being forced to address issues and make decisions that even a month ago, we did not imagine. Boards of directors and managers are put in the position of responding to Federal, state and local government orders that impact their communities while trying to make decisions for the overall well-being of the residents of their communities.

In responding to these government orders and the COVID-19 pandemic, does the board need to adopt rules to address changes in common area use, conduct of meetings and other related issues? We believe the answer depends on whether the board is responding to mandatory government orders or taking discretionary actions.

Since the shelter-in-place order from Governor Newsom went into effect on Thursday, March 19, 2020 and the various orders from counties and cities have been issued, some California community associations have either elected or been ordered to close some or all of their common area amenities during this pandemic.

If your county has ordered your community association to close some or even all of your association’s common area amenities, then we do not believe that your community association is required to adopt emergency rules to comply with these closures because they are required by law and the board has no discretion regarding those closures. (Civil Code section 4355(b)(4)). Note that if the board wants to adopt rules to address the closures, the board can do so under Civil Code section 4360(d) without following the usual process of notifying the owners of the proposed rules and allowing a comment period.

If your community association has taken a proactive approach and closed common area facilities that are not required to be closed under a government order or made other changes in use of the common area in an attempt to protect the health and well-being of the community’s residents, then we recommend adopting an emergency rule regarding those discretionary common area closures or changes in use. This same approach should be applied to any other discretionary emergency rules your board makes in response to this COVID-19 pandemic.

Civil Code section 4360(d) of the Davis Stirling Common Interest Development Act allows community associations to adopt emergency rules without first receiving member comments if “an immediate rule change is required to address an imminent threat to public health or safety or an imminent risk of substantial economic loss to the association.” The caveat is that an emergency rule is only effective for 120 days (unless the rule provides for a shorter period) AND the emergency rule cannot be readopted under the same procedure.

If your community association is contemplating adopting such a discretionary emergency rule, then the board should meet (via emergency meeting procedures, if necessary) to determine whether the proposed rule must be adopted to address an imminent threat to public health and safety. If the answer is “yes”, then the rule must be drafted and the community notified of the new emergency rule. If the board anticipates that the emergency rule must be effective for longer than 120 days, then during that 120-day period, the association should readopt the emergency rule using the rule-making procedures outlined in Civil Code section 4360(a)-(c). (See below.)

Civil Code §4360. Rule-Making Procedures

(a) The board shall provide general notice pursuant to Section 4045 of a proposed rule change at least 28 days before making the rule change. The notice shall include the text of the proposed rule change and a description of the purpose and effect of the proposed rule change. Notice is not required under this subdivision if the board determines that an immediate rule change is necessary to address an imminent threat to public health or safety or imminent risk of substantial economic loss to the association.

(b) A decision on a proposed rule change shall be made at a board meeting, after consideration of any comments made by association members.

(c) As soon as possible after making a rule change, but not more than 15 days after making the rule change, the board shall deliver general notice pursuant to Section 4045 of the rule change. If the rule change was an emergency rule change made under subdivision (d), the notice shall include the text of the rule change, a description of the purpose and effect of the rule change, and the date that the rule change expires.

(d) If the board determines that an immediate rule change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association, it may make an emergency rule change, and no notice is required, as specified in subdivision (a). An emergency rule change is effective for 120 days, unless the rule change provides for a shorter effective period. A rule change made under this subdivision may not be readopted under this subdivision.

Keywords: COVID-19, Coronavirus

AB 2912: Fraud & Embezzlement Prevention Adds New Requirements for Community Associations and Management

By Susan M. Hawks McClintic, Esq.

The new law effective January 1, 2019, which will likely have the greatest impact on most community associations is AB 2912 addressing association finances.

AB 2912 adds or amends Civil Code sections 5380, 5500, 5501, 5502 and 5806.  These new laws add the following requirements:

  1. Associations must maintain fidelity bond/insurance coverage in a minimum amount equal to or exceeding current reserves, plus three months of assessments. The association’s fidelity bond/insurance must include computer fraud and funds transfer fraud. If the association uses a managing agent or management company, the association’s fidelity bond coverage shall additionally include dishonest acts by that person or entity and its employees.
  2. Any transfers greater than $10,000 or 5% of an association’s total combined reserve and operating account deposits, whichever is lower, are prohibited without prior written approval from the board.
  3. The board must review various financial documents and statements on at least a monthly basis rather than quarterly. These documents and statements include the check register, monthly general ledger, and delinquent assessment receivable reports. This review requirement may be met when every member of the board, or a subcommittee of the board including the treasurer and at least one other board member, reviews these documents and statements independent of a board meeting if the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.

As a result of this new law, the board may need to take the following actions:

  • Include fidelity coverage in the budget and be sure any existing coverage meets the minimum requirements.
  • Address fund transfer limitations in any management agreement and in other instructions and authorizations to management.
  • Set up a board subcommittee to review financials monthly.

Creating Community: From Developers to Community Associations

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By Susan M. Hawks McClintic, Esq.

If you are looking for a newly built home in San Diego County, the odds are that home will be in a community association. When done right, community associations provide an immediate sense of community for new homeowners.

Community associations are typically found in condominiums or planned developments where the homeowners share common amenities such as pools, clubhouses, parks and playgrounds. According to a 2016 study by the Community Associations Institute, there are approximately 45,400 community associations in California, with an estimated 9.16 million residents.

In San Diego County, the vast majority of new homes are located in developments with community associations. Community associations are usually set up as a nonprofit corporation with a board of directors. While the development is being built, the board of directors consists of representatives of the developer and some homeowners.

Eventually, the association is turned over to the homeowners. This usually occurs after a certain number of properties have been sold. It’s important to have a good transition team, not only for the handover but also to set up long-term goals and success for the association.

“Strong, focused leadership at the outset of a community sets the tone for the future of the community,” said attorney Susan Hawks McClintic, co-managing shareholder at Epsten. “Developer representatives on the board of directors can play an important role in transitioning from constructing buildings to building relationships and a sense of community.”

The board of directors guides the community association. By serving on the board during the development, the developer is able to continue the vision of the original development plan. As the transition continues, that vision is passed on to the new homeowner board members.

“You may have heard some grumblings about someone monitoring whether you mow your lawn or paint your house the right color, but community associations offer many positives. Besides, do you want your neighbors to paint their house bright purple?” McClintic said. “In the 2016 study by the Community Associations Institute, 87 percent of the responding residents in community associations rated their experiences with the association as positive or neutral.”

It’s important for homeowners to get involved. Serving on the board is not for everyone, but all homeowners can attend meetings. Anyone interested in becoming a board member can learn the statutes and laws and get training on how to lead an effective association.

Homeowners need to share their vision of community from the start. Should it be a place with social events so neighbors can meet one another? Is a community garden important? What about quiet time? Planning some long-term goals is a great way to get the conversation started about the vision for the community.

Don’t hesitate to bring your ideas to the table. Working with the developer representatives on the board of directors is the best way to create a welcoming community and lay the groundwork for preserving the value of that community’s properties.

[1] This article was originally published by the San Diego Union-Tribune on August 16, 2017

It’s Short Term Rental Season.  Do You Know What Your Governing Documents Allow?

By Susan M. Hawks McClintic, Esq.

*As published in Quorum Magazine, March 2017

Attorney Susan Hawks McClintic from the law firm of Epsten, APC presented “What You Need to Know About Short Term Rentals” at CAI-CV’s February 10, 2017 Educational Program Luncheon and Mini Trade Show.  The following is a summary of the portion of the presentation regarding what to consider about short term rentals and your community association’s governing documents.

Do you know your community and what it wants?

The Los Angeles Times reported in “Coachella by the numbers: a breakdown of the festival’s $700-million impact” (April 22, 2016) that an estimated 9,000 renters were expected to stay in Airbnb homes during the 2016 Coachella and Stagecoach Music Festivals, which was double the amount of people from 2015.  Consequently, real estate sales outlets are marketing to investment home buyers the profitability of renting out their residences as short term rental properties.  Promotions include the lucrative rental income possibilities during the Coachella Valley festival season.  And more and more of those investment home buyers are purchasing real estate here for the very purpose of increasing income by renting out their residences as short term rental properties.  An impact of this trend is that long term single family rental properties are becoming more and more scarce.

As these music festivals and other events grow in popularity and frequency and the market of available short term rental properties increases, the frequency and variety of issues/problems for local community associations related to short term rentals will surge.  Consequently, the time is now for Coachella Valley community associations to “take the temperature” of their community to determine whether prohibiting or allowing short term rentals is in the best interests of their community as a whole.  Some fundamental questions to ask to arrive at an answer are:  What is the make-up of the membership in the community? – Long term residents, Snowbirds, Rentalpreneurs? What are the common complaints the board of directors or the community manager are hearing from your membership? What do the majority of the homeowners in the community want?

Once the will of the community is known, the next step is to review the association’s governing documents to confirm that the language in these documents gives the community the ability to effectuate the community’s goals regarding short term rentals.  No matter whether the community wants to eliminate, restrict, or allow short term rentals, the governing documents should at a minimum contain language which gives the association the needed tools to lessen any negative impacts of short term rentals upon the community.  If your own association’s governing documents are lacking in this department it may be time to amend them.

Do your CC&Rs allow, prohibit or restrict short term rentals?

Community associations need the authority to allow, restrict, or prohibit short term rentals.  The document which grants the association this authority is the CC&Rs.  CC&Rs can allow short term rentals either by express language or silence.  Conversely, prohibitions or restrictions of short term rentals must be expressly written into the CC&Rs.  Unfortunately, not all CC&Rs contain clear, express language (i.e. “no owner shall rent their unit/lot/dwelling for less than thirty (30) consecutive days).  Most commonly associations are forced to rely on older documents containing broad prohibitions such as “each separate interest shall be used for residential purposes only” or “the separate interests shall not be used for transient or hotel occupancy purposes.”  But what does “residential purposes” or “transient or hotel occupancy purposes” mean?  The first place to look for a definition is the rules and regulations.  If the rules and regulations fail to offer any guidance, the association can adopt a rule that provides a definition.  Another option is to define what a transient use is or what a residential purpose isn’t by looking at the city’s municipal code regarding short term rentals and occupancy.  A strong argument can be made that if a homeowner needs to obtain a business license or permit from the city and/or pay transient occupancy tax to the city, then the residence is not being used for a residential purpose and is actually being used in a manner that is akin to a hotel or business use.

Do your CC&Rs Have Sufficient Nuisance Provisions?

Nuisance and/or harassment CC&Rs provisions are important tools an association has to lessen the negative impacts short term rentals can have in a community.  Be sure, however, that the language of these provisions is broad enough to cover those impacts.  To make this determination you need to examine the typical issues/problems your association experiences with short term rentals. For example, noise complaints, trash issues, or trespassing problems.  Next, does the language of your CC&Rs nuisance and harassment provisions cast a wide enough net to cover these common complaints?  If the answer is “no,” then amending your nuisance and/or harassment provisions is in order.  An example of a broad nuisance provision is: “No one may engage in any type of harassment, illegal, noxious or offensive activity towards any owners, residents, association representatives, management representative, board members and/or vendors working in the community.”

Do you know your rules and regulations?

If your CC&Rs do not outright prohibit short term rentals, but rather allow them with or without restrictions , then your association needs to determine whether it should adopt rules to further regulate them.  However, there is a caveat.  Rules and regulations do not have the same presumption of reasonableness that is accorded to recorded covenants.  You are probably thinking, “Ok, so what?” If rules and regulations are unreasonable that means they are not valid and, therefore, unenforceable.  In order to have a chance of overcoming judicial challenge, the association must adopt rules that are reasonable and not arbitrary and capricious.  What is “reasonable” you ask? Who knows?  We do know what is considered “unreasonable.”  A rule is unreasonable if it is (1) wholly arbitrary; (2) a violation of fundamental public policy; and (3) imposes a burden on the use of the affected land that far outweighs the benefit. Sui v. Price (2011) 196 CA4th 933.  Besides making sure that the rules and regulations you adopt are reasonable, you also need to make sure that the CC&Rs give the association the authority to implement rules over the entire community and not just the common area.  If your association’s CC&Rs contain limited rule making authority, any rule the association adopts regulating an owner’s use of their residence will be unenforceable.

Does your fine schedule contain appropriate fine amounts?

Are the fine amounts in your fine schedule high enough to deter behavior that would violate the short term rental restrictions/prohibitions?  Remember that fines should be used as a deterrent rather punitively.  The purpose of fines is not to make money for the association.  However, to be a deterrent the fine amounts must be reasonably high because if the fine amounts are too low, then a landlord homeowner will consider the payment of a fine as the cost of doing business.  So what fine amount is high enough to be considered reasonable, yet also be an effective deterrent?  A strong argument can be made to support the idea that the fine amount should be the equivalent amount a homeowner would have received if they rented out their house in violation of the prohibition or restriction.  A deterrent is something that discourages or restrains someone from acting.  If a fine would prohibit an owner from making any sort of profit from renting out their home in violation of the governing documents, that is a great deterrent.  Consequently, if a homeowner can rent out their house during Coachella for $5,000 a weekend, then the association should consider writing into its fine schedule language that states “a violation of the short term rental prohibition [or restriction] may result in a fine of up to $5,000 per violation.”

Do your rules and regulations have adequate lease and leasing requirements?

If your governing documents allow or even restrict short term rentals, then it may be helpful for your association’s rules to have lease and leasing requirements.  These requirements provide the association the information it needs from the landlord homeowners regarding their tenants to be able to enforce its governing documents and protect the interests of the other residents.

Some lease and leasing requirements include:

  • Lease agreement must be in writing
  • The landlord homeowner must notify the association of the following information in writing at least a certain number of days before the lease begins:
    • The names and contact information of all tenants
    • The make, model and license plate number of all tenants’ vehicles
  • Copies of the lease must be provided to the association
  • The association must be provided with the address and telephone number where the landlord homeowner can be reached
  • Landlord must provide tenants with copies of the governing documents

Do your governing documents prohibit the advertising of short term rentals?

Does your association want to prohibit homeowners from advertising their homes as short term rentals?  Know that unless your governing documents specifically state that short term rental advertising is a violation of the governing documents, then advertising is only circumstantial evidence of a violation.  Having a specific fine amount for violating the advertisement prohibition that is high enough to deter homeowner landlords from violating this prohibition is also prudent.

Keep in mind that prohibiting advertising can be an administrative burden as it takes time for community managers to monitor the many various rental websites.  However, an association can always request that other homeowners help monitor these websites if they so choose as long as the homeowner can send screen shots or print outs of the prohibited advertisement to the association.

Do your rules and regulations sufficiently address parking issues?

Does your association have parking issues during the festivals?  If the answer is “yes,” then your association may want to consider implementing parking restrictions/prohibitions in an effort to combat those issues.  Just remember that the parking restrictions/prohibitions must apply to all residents in the community equally and not just the homeowners who are renting their homes out to short term renters. For example, if your community experiences increased traffic congestion and disruptive, late night noise during the music festivals, then adopting a rule which prohibits all parking on the community streets during the music festivals may be in order.

The issues that come with having short term rentals in one’s community are not going away any time soon.  Association communities will to continue to have to grapple with the problems that short term rentals bring.  However, if your association is pro-active in making sure that the governing documents contain the appropriate definitions, restrictions and requirements, your association should have the tools it needs to address most problems that accompany short term rentals.

 

Pesticide Applications Made Without Using a Licensed Pest Control AB 2362

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By Susan M. Hawks McClintic, Esq.

Beginning January 1, 2017, a common interest development association or its authorized agent must provide notice to an owner and any tenant if a pesticide is to be applied to a separate interest or common area without using a licensed pest control operator.  Under certain circumstances, notice will also be required to owners and any tenants of separate interests adjacent to the area of application of the pesticide.

This new law is adopted as part of the Davis-Stirling Common Interest Development Act as Civil Code section 4777.  Landlords and licensed pest control operators are already subject to these notice requirements which will be extended to include common interest development associations.  The primary purpose of this new law is to apply the same notice requirements to pesticide applications by unlicensed pest control operators.

The definition of what constitutes a pesticide is very broad.  “Pesticide” for purposes of this law includes any substance that is intended to be used to control, destroy, repel or mitigate any pest or organism, including antimicrobial pesticides.  Spraying a can of pesticide purchased at a local store should be treated as a pesticide application for purposes of these notice requirements.

This law has a list of information that must be included in the notice such as the pests to be controlled, the name and brand of the pesticide and the approximate date, time and frequency of the application.  The law also requires specific wording of a cautionary statement regarding pesticides that must be included in the notice.

If the pesticide application will be to a separate interest, at least 48 hours’ prior individual notice must be given to the owner and any tenant of that separate interest.  If the application will be performed by broadcast applications (spread over an area greater than two square feet) or using total release foggers or aerosol sprays, the owner and any tenant in an adjacent separate interest that could reasonably be impacted by the pesticide must also receive the notice.

If the pesticide application will be to a common area, if practicable, notice must be posted in a conspicuous place in or around the common area in which the pesticide is to be applied.  If posting notice isn’t practicable, individual notice must be given to the owner and any tenant of a separate interest that is adjacent to the common area.

After receipt of the notice, an owner or tenant can agree to an immediate pesticide application.

If the pest poses an imminent threat to health and safety, the notice may be posted after the pesticide application.

A copy of the written notice provided to any owner and tenant must be attached to the minutes of the board meeting immediately following the application of the pesticide.

As you can see, these notice requirements are very detailed and must be carefully followed.  In my opinion, the simplest and best solution for most associations is to always use licensed pest control operators to apply any pesticides.