10 Things Community Association Boards Are Doing Right

 

By Pejman D. Kharrazian, Esq.

 

 

Community associations play a crucial role in maintaining and enhancing the quality of life within residential communities. In California, where community associations are prevalent, boards are implementing innovative and effective strategies to ensure their neighborhoods thrive.  Here are the top ten things community association boards are doing right:

  1. Promoting Sustainability

Many community association boards are prioritizing eco-friendly initiatives. This includes installing solar panels on common area buildings, installing electric vehicle charging stations, promoting water conservation through drought-resistant landscaping, and encouraging recycling and composting programs. These efforts help the environment and also reduce costs.

  1. Enhancing Communication

Effective communication is key to a well-functioning community. Good communication helps build trust and fosters a sense of community. But remember that some things can not be shared with the membership, such as private, confidential, or privileged information! Leveraging technology and digital tools can also enhance communications.

  1. Fostering Community Engagement

To create a vibrant and cohesive community, many community association boards organize regular social events, such as block parties, holiday celebrations, and community clean-up days. These activities provide residents with opportunities to connect with their neighbors and build relationships. Engagement also helps recruit volunteers, such as committee members, and create a volunteer pipline and succession plan for engaging future volunteer board members.

  1. Promoting Emergency Preparedness

Community association boards are developing comprehensive emergency preparedness plans, including drills, community workshops, and the distribution of emergency supply kits to residents, ensuring the community is ready for natural disasters like wildfires and earthquakes.

  1. Maintaining Property Values

Many boards are proactive in ensuring that common areas, landscaping, and facilities are well-maintained. Regular upkeep enhances the aesthetic appeal of the community and helps maintain property values. This includes having a reserve funding plan, and making difficult decisions about raising assessments or levying special assessments when necessary.

  1. Implementing Fair and Reasonable Policies

Boards are striving to create and enforce fair and reasonable policies. They work to ensure rules and regulations are clearly communicated and consistently applied, avoiding favoritism or arbitrary decisions, which helps maintain harmony and reduce conflicts in the community.

  1. Focusing on Inclusivity

Recognizing the diverse population of California, many community association boards are making efforts to be inclusive and considerate of all residents. This includes accommodating different cultural practices, ensuring accessibility for individuals with disabilities, and fostering an environment where everyone feels welcome and respected.

  1. Seeking the Advice of Professionals

Boards face a myriad of challenges, from legal compliance to financial management, and community relations. To navigate these complexities effectively, it is crucial for boards to seek professional guidance. Leveraging this expertise ensures the success and stability of the community. And doing so helps satisfy the due care requirement of the Business Judgment Rule (found in California Corporations Code section 7231) that provides certain legal protections to a board’s decisions.

  1. Embracing and Utilizing Technology

Community association boards are adopting software for managing community operations, from handling maintenance requests to managing payments. These digital solutions streamline processes, improve efficiency, and enhance the overall management of the community. Boards are partnering with their management companies, who are developing tailored technology solutions that fit the needs of community associations.

  1. Providing Education and Resources

Well-informed boards and residents make for a better community. Many boards promote educational resources and training. This includes board workshops and seminars as well as classes on topics like home maintenance and emergency preparedness for owners. Educated residents are more likely to comply with community guidelines and participate actively in the community. Two well know organizations that have educational opportunities and resources for owners are the Community Association Institute (CAI) and Educational Community for HOA Homeowners (ECHO). The California Association of Community Managers (CACM) also provides educational resources. Finally, Epsten, APC offers a wide variety of training opportunities to community managers and directors, contact us for more information.

I’d Like to Submit a Complaint. . .

 

By Jacquelyn Quinn, Esq.

 

One of the most important roles of a community association board is enforcement of its association’s governing documents, including CC&Rs, Bylaws, and Rules and Regulations. One way a board may become aware of alleged violations of the governing documents is through owner-submitted complaints. In some communities, reviewing owner-submitted complaints can be a full-time job and boards are often left wondering whether they have to address each and every complaint that is received.

Boards might decide to streamline this process by establishing an owner complaint process, which details how an owner can submit an alleged violation and what information the board is expecting to accompany a submitted complaint. The following are a few items to consider including when creating an owner complaint process:

    1. Written complaints only. It can be very difficult for a board to respond to a complaint when it’s not in writing, so requiring that all complaints be in writing is helpful.
    2. No anonymous complaints. A board can make reasonable efforts to keep the identity of a complaining owner concealed, but anonymity cannot be guaranteed if an owner requests the board to act.
    3. Details, details, details. Specify what information is expected to be included in the written complaint (i.e. the description of the alleged violation, the section of the CC&Rs or rules that owner alleges was violated, the name (if known), the address of alleged violator, the approximate date and time of the alleged violation, a photo of the alleged violation (if appropriate), names of any witness (if applicable), and any other information the complainant deems relevant for the board’s review).
    4. Next Steps. Specify that the board has the right to elect to not take action on any complaint if, in the board’s sole discretion, there is insufficient evidence of a violation or it is determined that there has been no actionable conduct.
    5. Follow up. Include that the complaining owner will not receive a follow up from the board about any action taken. Owner discipline is a confidential matter that other owners do not have a right to receive information about. A complaining owner may want to know what action the board took in response to their complaint, but they do not have a right to that information. If the board reveals such information, the association may find itself in hot water.

Having a comprehensive complaint process is beneficial as it helps manage expectations. The association’s expectations for owners regarding what information is expected when they submit a complaint, and an owner’s expectations about how their complaints will be handled. Such a process can also minimize the number of meritless complaints a board receives when complainants are required to identify this type information, and sometimes make them realize that the behavior they observed may not actually be prohibited. If you wish to discuss such a policy for your association please consult with your association’s management company and legal counsel.

Mastering the Architectural Review Process

By Rhonda R. Goldblatt, Esq.

Reviewing architectural applications is typically part of a community association manager’s bread and butter. However, the architectural review process can be fraught with stumbling blocks, and architectural disputes with homeowners can be drawn-out, expensive affairs. A few practice tips for processing architectural applications are listed below to help master the architectural review process:

1. The clock is ticking. An association’s declaration typically includes a deadline to respond to architectural applications, and may even provide that failing to respond by the deadline deems an application approved. Associations can consider calendaring response deadlines to ensure an application is timely processed.

Note that if an association’s declaration does not include a response deadline, that does not mean the association has unlimited time to respond. Civil Code section 4765 states an association’s architectural approval procedure “shall provide for prompt deadlines. The procedure shall state the maximum time for response to an application or a request for reconsideration by the board.” If an association’s declaration is silent on deadlines, boards can consider adopting architectural rules with that information.

2. Get familiar with Civil Code section 4765. Section 4765 includes other important standards, including the requirement to respond to an application in writing, and providing a written explanation as to why an application was disapproved, along with a description of the appeal process. The law also requires associations to make decisions on an application in good faith, and prohibits making unreasonable, arbitrary or capricious decisions. Further, associations must provide the membership with annual notice of the architectural review process.

3. Pay attention to the special cases. The Civil Code includes special standards for certain proposed improvements, including solar energy systems, electric vehicle (“EV”) charging stations, EV-dedicated TOU meters, accessory dwelling units (“ADUs”), and junior ADUs. Remember that the law prevails over an association’s governing documents in the event of conflict. Boards may want to consider adopting separate policies for processing these types of special applications to ensure compliance with the law.

4. Know thy governing documents. Associations must follow their own procedures, and may face liability for failing to do so. Adopting clear, concise procedures in the first place can help associations stay on the right side of the law. Boards can also consider asking their community association counsel for help drafting those procedures, and/or reviewing the procedures on a regular basis to ensure consistency with the law.

5. Keep a written record. Maintaining well-organized records of architectural decisions can help protect an association from liability in the event of a homeowner challenge. Relying on memory alone can lead to trouble. The members of a board or architectural committee can change, key witnesses can move away, memories fade, and managers can switch accounts.

When in doubt as to how to process an architectural application, remember that you can always consult your friendly community association counsel for assistance.

** This article was published on San Diego Community Insider Magazine – Spring 2024 Edition.

[Podcast] HOA’s Responsibility to Support CLAC with Kieran J. Purcell, CCAL

Don’t miss Epsten, APC attorney and Managing Shareholder Kieran J. Purcell, CCAL’s recent participation on the “HOA – It’s a True Story” podcast hosted b @thegbgroupinc. In this episode, Kieran explains the importance of HOA participation in following HOA legislation. Listen now: https://lnkd.in/ghABQfzP

What’s on your Agenda?

By Jon H. Epsten, Esq., CCAL

Over the last several months, several questions concerning agendas have resurfaced. For ease of reading, I have listed some of these questions below with a shortened version of my responses.

Please be on the lookout for practice tips on preparing agendas in future publications.


Question:

Why do we need an agenda?

If the Board intends to discuss a matter at a board meeting, the topic must be on the agenda. No worries. A procedure exists for adding certain items to the agenda (discussed below).


Question:

How much topic detail is necessary on the Open Meeting agenda?

The purpose of the agenda is to place attendees on notice as to what is going to be discussed during the meeting. It is beneficial to have a well-thought-out agenda. Boilerplate agendas are discouraged. Look at your agenda objectively from an uninformed owner’s perspective. If you read your agenda, you would know what the Board discussed at the meeting. Think of the agenda as a legal document that can be used as a tool to defend the Association. An agenda is also a tool to reference historical matters, such as when the Board approved or considered an item.


Question:

Should the Executive Session Agenda have the exact details as the Open Meeting Agenda?

The Board needs to have a clear understanding of what can be discussed in Executive Session (ref. Civil Code section 4935). The Executive Session agenda should tie into what is allowed to be addressed in the Executive Session (e.g., legal matters, personnel matters, member discipline, assessment payment plans, etc.) The Executive Session agenda will have less detail than other meeting agendas, as the items to be discussed may be deemed privileged. For example, if the Executive Session discussion covers collection matters, the owner’s name should be omitted. Similarly, discussions of ongoing or anticipated litigation should be noted in the agenda in general terms. It is a good practice to briefly consult with legal counsel if you have any questions on the description of items to be placed on the Executive Session agenda.


Question:

Who should prepare the agenda?

Oddly enough, the law contains little guidance in this matter. While “the board” is ultimately responsible for deciding what goes on the agenda, the law does not state that any particular director or officer may determine what goes on the agenda. Unless there are rational and substantive reasons for rejecting a request from a director to add an item to the agenda, a requested agenda item should be included. Note that the Board determines what to include on the agenda, and there is no procedure for owners to dictate to the Board the agenda for board meetings. In smaller communities, the agenda is typically prepared by the association manager. In larger communities, the agenda is generally prepared by the General Manager in conjunction with a designated board member. In either event, we suggest that a board member (typically the Board Secretary) be appointed to work with the association manager on agenda topics.


Question:

What do we do if an owner raises a topic outside the agenda at an Open Board Meeting?

The law allows the Board, among other things, to briefly respond to statements or questions posed by a person speaking at a meeting, ask a question for clarification, make brief announcements, and make a brief report on the Board’s activities. However, unless the item falls into one of the categories listed below, it cannot be added to the agenda for that board meeting.


Question:

Can we add items to the agenda after it has been published to the Owners?

Yes, under certain circumstances (Civil Code section 4930(d)(1)(2)(3)] such as an emergency, where immediate action is needed or where the item appeared on the agenda 30 calendar days before the action is taken and at a prior meeting the item was continued. A board motion and vote must be taken to add the item under the conditions mentioned above to the agenda, and we recommend the minutes of that meeting reflect the motion to add the item and the particular statutory provision that would allow the addition of the item.

 

If you have any questions, please contact a member of our Community Associations legal team.

The Maintenance Matrix: An Incredibly Helpful Tool

By Lindsay J. Anderson, Esq.

One of the perks of living in a common interest development is that maintenance, repair, and replacement responsibilities for various components are divided between the association and the owners.  This means that the expense of maintaining, repairing, and replacing some components are shared across the entire community (or a portion of the community, depending on what your governing documents provide) while the expense of maintaining, repairing, and replacing other components are borne by the individual owners.  These responsibilities can also be split up so that specific maintenance and repair items are the responsibility of the owners while replacement of the item is the responsibility of the association.  Sharing the cost burden of common components can help to ensure that the community is maintained at more uniform level.  However, maintenance, repair, and replacement responsibilities are not one size fits all and vary widely from community to community.

So, how can the board and management know who is responsible for what?

The particulars are found in the community’s governing documents which include condominium plans, tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  There are also statutory defaults found in the law for maintenance, repair, and replacement responsibilities which can be found in Civil Code section 4775, but it is important to note that these statutory defaults do not apply if the CC&Rs provide for a different breakdown of responsibility.

The board and management can review each situation on a case-by-case basis when a determination needs to be made on responsibility.  This will involve reviewing the governing documents for each component as issues arise and may require consultation with the association’s counsel if the documents are ambiguous.  There are two main problems with this approach.  First, these questions often pop up during emergencies and answers need to be ascertained quickly which can lead to unnecessary stress for the board and management.  Second, this can mean that the owners do not understand what their responsibilities are.

Alternatively, if an association has planned ahead, the association’s board and management can turn to their handy dandy maintenance matrix!  A maintenance matrix is a compilation of the maintenance, repair, and replacement responsibilities in a clear and concise chart which depicts the specific assignments for each component.  A maintenance matrix is prepared by reviewing all of the governing documents and the statutory defaults in advance so that it can be referred to when questions arise about responsibilities.

Adopting a maintenance matrix is one of the most effective ways of ensuring that owners, the board, and management understand who is responsible for each component.  Consultation with legal counsel during the process of preparing a maintenance matrix is crucial to help avoid any potential errors in the matrix which can lead to liability.  Carefully examining inconsistencies and discrepancies up front can save the association time and money down the road.

Maintenance matrices may be adopted as an operating rule in accordance with Civil Code section 4360 or can be adopted as part of the CC&Rs through an amendment or restatement.  The benefit of adopting a maintenance matrix as a rule is that the maintenance matrix can be adopted by the board at an open meeting after considering any comments made by the membership during the membership’s twenty-eight (28) day comment period.  There is no need for a membership vote if the matrix is adopted as an operating rule.

However, the board may not use a maintenance matrix that it has adopted as an operating rule to make any changes to the maintenance allocation that conflicts with the CC&Rs.  You cannot use it as a wish list.  Civil Code section 4205 establishes the statutory hierarchy of governing documents of common interest developments – law, condominium plans/tract maps, CC&Rs, articles of incorporation, bylaws, and operating rules, regulations, policies, and resolutions.  If there is a conflict between the CC&Rs and one of the sources below the CC&Rs in the hierarchy, the CC&Rs will prevail.  If the maintenance matrix is adopted as an operating rule, it cannot be used to override the CC&Rs given this statutory hierarchy.

Adopting a maintenance matrix as an amendment to the CC&Rs or as part of a restatement of the CC&Rs will allow the association to make changes to the maintenance, repair, and replacement responsibilities.  Amendments to the CC&Rs and restatements of the CC&Rs require membership approval – often the approval of a supermajority – which sometimes can be difficult to achieve given membership apathy.  However, adopting a maintenance matrix through an amendment to the CC&Rs or restatement of the CC&Rs is the best method.

Once a maintenance matrix is adopted or approved by the Board (or the membership, depending on whether a membership vote is required), it can be used by owners, the board, and management to determine maintenance, repair, and replacement responsibilities and can essentially serve as the association’s cheat sheet.

If your association is considering creating a maintenance matrix, your board should contact your association’s legal counsel for assistance in preparing or reviewing the matrix prior to implementation.

Mum’s the Word When Disclosure Leads to Breach of Fiduciary Duty

By Karyn A. Larko, Esq.

It is common knowledge that a director has a fiduciary duty to his or her association and its members.  To be a fiduciary means that the director has accepted the highest duty imposed by law.  This duty obligates the director to act:

    1. In good faith;
    2. In a manner such director believes to be in the best interests of the Association; and
    3. With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

This duty also obligates the director to place the interests of the association and its members as a whole over the director’s personal interests in the event these interests conflict.  This duty is referred to as the duty of loyalty or duty of undivided loyalty.

What may be less known is that one of the most common breaches of fiduciary duty is the disclosure by a director of information that should be kept confidential.

The disclosure of information that should be kept confidential can give rise to both a breach of a director’s duty of care and duty of loyalty.  In accordance with Civil Code section 4935, certain matters are discussed out of earshot of the members in executive session board meetings (i.e., discussions pertaining to personnel issues, the formation of contracts with third parties, litigation and potential litigation, disciplinary actions against members and member assessment issues).  Each of these issues requires the discussion of matters that if made public (i.e., disclosed to any persons other than current board members and management, including other owners) could needlessly and unnecessarily embarrass an owner or employee, compromise the association’s legal position in a dispute, result in the waste of association funds, lead to a claim that an owner’s privacy rights have been breached, or otherwise result in an unfavorable position for the association.  All of these results could lead to litigation and ultimately, to liability for the association.

Another act that is contrary to the interests of an association and damaging is the disclosure of association attorney-client privileged communications (i.e., legal advice) to third parties.  Communications between an association’s legal counsel and the board or management staff are subject to the attorney-client privilege.  This means these communications are protected communications that can be kept confidential from any disclosure, including disclosure during litigation.  In the litigation context, this protection is extremely important as it allows frank and open communication between the board and/or management staff and the association’s legal counsel as to what occurred and the strengths and weaknesses of the association’s position with regard to the claim or claims being made.  This protection also enables the association’s legal counsel and board to properly evaluate what course of action the association should take.

When communications between an association’s legal counsel and board or management  are revealed to others, including owners who are not on the board and family members, this disclosure can result in a waiver of the association’s attorney-client privilege.  This means that the association may be required to disclose all of the communications between the association’s legal counsel and the board or management, including without limitation, communications regarding the strengths and weaknesses of the association’s position and its legal strategy.  The disclosure of this information would, inevitably, be extremely prejudicial to the association’s interests.

A final act that is contrary to the interests of an association is the disclosure to persons other than board members of other sensitive information or documents that could expose the association to potential liability.  Examples of such information and documentation include the release of social security numbers, owner bank account numbers or other financial information, owner or resident health records, owner disciplinary records, plans and specifications for owner alterations (including security systems), vendor bids and proposals and confidential settlement agreements.  It should be noted that this list is by no means all encompassing.

The Significance of Disclosing Information that Should be kept Confidential

As stated above, the disclosure of information that should be kept confidential can lead to liability for the association.  It can also lead, in some cases, to personal liability for the director who discloses the information.  We say this because while California law generally protects volunteer directors from liability for their acts when those acts fall within the scope of their duties as a director, subject to certain requirements being met, this protection does not extend to instances where directors have breached their fiduciary duty to the association and its members.  Likewise, while the governing documents for many associations contain clauses protecting directors from liability, California law (i.e., Corporations Code section 204(a)(10)) expressly invalidates these clauses to the extent they attempt to protect directors from personal liability for breaching their fiduciary duty.

Finally, it is important to know that most directors and officers policies contain an exclusion whereby there is no coverage for a director who has breached his or her fiduciary duty.  Further, some carriers will issue a reservation of rights letter when asked to defend a breach of fiduciary duty claim.  This means that if the director is ultimately found by a judge or jury to have breached his or her fiduciary duty, the carrier is entitled to recover its defense costs from the applicable director.

 

PRACTICE TIPS:

  • When in doubt, do not share information with persons outside of the board and management without first checking with your association’s legal counsel on the advisability of doing so.
  • If participating in a telephonic or video executive session board meeting, do so in private. Do not allow family members or other persons to listen in on executive session meeting discussions.
  • Do not use phrases like “according to our attorney” or “on the recommendation of our attorney” when communicating with persons outside of the board and management as the use of such phrases could be deemed a waiver of the association’s attorney-client privilege.

 

The Corporate Transparency Act (Updated 2/1/2024)

*This article was updated on February 1, 2024.

By Kieran J. Purcell, Esq.

In an effort to enhance corporate transparency and combat money laundering, tax fraud, and other illicit activity, Congress passed The Corporate Transparency Act (CTA) in 2021.  The CTA will be enforced by the Financial Crimes Enforcement Network (FinCEN) of the United States Treasury. FinCEN published the Small Entity Compliance Guide (Guide)[1] to help small entities comply with the requirements of the Beneficial Ownership Information Reporting Rule (Reporting Rule) issued on September 30, 2022.[2]  Although the CTA applies to many types of small business entities, this article addresses some of the most frequently asked questions about how the CTA may apply to common interest developments (CIDs) after it goes into effect on January 1, 2024.

Who must file a Beneficial Ownership Information (BOI) Report?

The CTA requires certain entities to file beneficial ownership information (BOI) reports to FinCEN. These reports contain information about the entity itself and two categories of individuals: (1) beneficial owners and for domestic reporting companies created or registered after January 1, 2024,  (2) company applicants.  Generally, a beneficial owner is an individual who owns or controls at least 25 percent of a company or has substantial control over the company. A company applicant is an individual who directly files or is primarily responsible for the filing of the document that creates or registers the company.

When will initial BOI Reports be required?

BOI Reports can be filed electronically through FinCEN’s secure filing system beginning January 1, 2024. Reporting companies created or registered to do business before January 1, 2024, have until January 1, 2025, to file their initial BOI reports. Reporting companies created or registered after January 1, 2024, but before January 1, 2025, will have 90 calendar days from their creation/registration to file their initial reports. Reporting companies created or registered on or after January 1, 2025, will have 30 calendar days from actual or public notice that the company’s creation or registration is effective to file their initial BOI reports. Additional information about the Reporting Rule and guidance materials are available at www.fincen.gov/boi.

Is my CID a Reporting Company?

“A reporting company is any entity that meets the ‘reporting company’ definition and does not qualify for an exemption. There are two categories of reporting companies: a ‘domestic reporting company’ and a ‘foreign reporting company.’”[3] This article only addresses domestic reporting companies. If your CID is a corporation created under United States laws, including laws of the individual states or Indian tribes, it is a domestic reporting company unless it meets one of twenty-three (23) exemptions.  For many CIDs, the most likely possible exemption is the large company exemption.

Is my CID eligible for a Large Company Exemption?

A CID qualifies for this exemption if it meets all of the following criteria.[4] It has more than twenty (20) full-time employees employed in the United States, the CID regularly conducts its business at a physical location in the United States, the CID filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales.

My non-exempt CID is a Reporting Company; What do I do next?

If your CID is a reporting company, your next step is to identify its beneficial owners. “A  beneficial owner is any individual who, directly or indirectly: (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.”[5] FinCEN expects that every reporting company will be able to identify and report one or more beneficial owner to FinCEN. If an individual qualifies as a beneficial owner, information about that individual must be reported to FinCEN in a reporting company’s BOI report.

“A reporting company can have multiple beneficial owners. For example, a reporting company could have several beneficial owners who exercise substantial control over the reporting company and may have no beneficial owners who own or control at least 25 percent of the ownership interests of the reporting company. There is no maximum number of beneficial owners who must be reported.”[6]

Which individuals exercise substantial control over the CID?

“Reporting companies are required to identify all individuals who exercise substantial control over the company. There is no limit to the number of individuals who can be reported for exercising substantial control. “[7]

While the Reporting Rules lists four (4) Substantial Control Indicators (SCIs) for determining the individual(s) who exercise(s) substantial control over a reporting company[8], we will focus on the two (2) SCI categories which may most commonly apply to CIDs, Senior Officers, and Important Decision Makers.

Senior Officers are defined as an individual holding the position of President, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, or General Counsel who perform similar functions as these corporate officers.  Senior Officers are considered Beneficial Owners.

Important Decision Makers are any individuals who direct, determine, or have substantial influence over important decisions made by the reporting company, such as business or financial decisions. Please note managing agents and employees may be exempt from being beneficial owners. Managing agents, such as community association managers, may qualify for an agency exemption to the definition of beneficial owner if they perform ordinary advisory or contractual services. Employees of the reporting company who are not senior officers and whose substantial control is derived solely from their employment status may qualify for an employee exemption.[9]

What specific information does my CID need to report about each beneficial owner?

  • Full Legal Business name and any trade name or doing business as (DBA) name of the reporting company.
  • Complete current United States address of the reporting company.
  • Each Beneficial Owners must provide:
    • Full legal names
    • Date of birth
    • Complete current addresses
    • Unique identifying number/issuing jurisdiction/image (government issued photo identification, such as a driver’s license or passport)

When must reporting company provide updates or corrected BOI Reports?

An updated BOI Report containing updates, corrections, and additions are to be made within 30 days of the reporting company becoming aware of the change.  CIDs should calendar this date when planning election timelines to make sure updates are reported in a timely manner.  However, as the makeup of the CID Board of Directors may shift throughout the year as seats are vacated and filled through appointment, CIDs should keep the 30-day requirement in mind even outside of normal election cycles.

Consequences of failing to provide timely or accurate BOI Reports

The willful failure to provide timely, complete or updated BOI Reports to FinCEN, or the willful submission or attempt to submit a false or fraudulent BOI report may also result in a civil or criminal penalty, including civil penalties of up to $500 for each day the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may also be held accountable for that failure.

Is my reporting company required to report its company applicants?

A domestic reporting company is required to report its company applicants if it is created on or after January 1, 2024.

A domestic reporting company is not required to report its company applicants if it was created before January 1, 2024.

Efforts are being made to exempt CIDs and/or extend the reporting deadline

In late 2023, the U.S. House of Representatives passed the Protect Small Business and Prevent Illicit Financial Activity Act (H.R. 5119) by a vote of 400-1. This bill would delay the Corporate Transparency Act reporting requirements for one year. Currently, a companion bill is before the Senate.  How the Senate will vote on this issue is unclear at the time this article is being written. However, some industry commentators have stated they believe the Senate will approve a 1-year hold on all Corporate Transparency Acts reporting requirements.  In addition, they have stated it is less likely a CID exemption will be approved.


[1] FinCEN’s Small Entity Compliance Guide, December 2023, Version 1.1 can be found at: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

[2] Beneficial Ownership Information Reporting Rule, Title 31, Section 1010.380 of the Code of Federal Regulations.

[3] FinCEN’s Small Entity Compliance Guide, December 2023, Version 1.1, at 2.

[4] Id. at 12.

[5] Id. at 16.

[6] Id.

[7] Id. at 17.

[8] Id. at 17.

[9] Id. at 30.

 

CHRO or WVRO? So Many Letters, so Little Understanding

Restraining Orders in a Nutshell

By Hannah I. Hughes, Esq.

Concerned about the behavior of a board member towards other members during meetings? Has a homeowner been harassing your association’s management? In this article, we discuss the two types of restraining orders available in California for these situations and the process for obtaining one.

What is a CHRO?

A Civil Harassment Restraining Order (“CHRO”) provides protection to a person who has suffered harassment from someone who is not a close family member or of domestic relation. (Code of Civil Procedure 527.6). This means the person can be a director, volunteer, or other committee member. The conduct must cause a reasonable person to suffer substantial emotional distress and must also cause the victim to suffer substantial emotional distress.

This restraining order is filed in civil court, however, the evidentiary standard is quasi criminal in nature, meaning the petitioner must prove the harassment under the higher standard of clear and convincing evidence. (Code of Civil Procedure 527.6(i)). The general civil evidentiary standard is a preponderance of the evidence, which is anything that tips the scale to 51% probability whereas clear and convincing is closer to 75% probability. In other words, strong evidence will be required, and a “he said, she said” situation will not generally suffice.

What is a WVRO?

A Workplace Violence Restraining Order (“WVRO”) protects employees who have suffered unlawful violence or a credible threat of violence from any individual, that can reasonably be construed to be carried out or to have been carried out at the workplace. (Code of Civil Procedure 527.8). The association, as an employer, can apply for the WVRO to protect its employee(s) against an individual. This restraining order is also filed in civil court and requires the same heightened “clear and convincing” evidentiary standard.

Which restraining order should I apply for?

Whether you obtain a CHRO or WVRO, your situation will differ

Although both the restraining orders listed above prevent unwanted contact, they differ based on the relationship between the parties.

For example, the following situations may apply to a CHRO:

  • An owner is harassing a director on the association’s board,
  • A director on the board is harassing management.

Generally, an association may be able to hire its own legal counsel to file a CHRO on behalf of a director, volunteer (such as a committee member), management, or even an independent contractor. But you should consult your legal counsel to determine if this will be feasible in your particular circumstance.

The following situations may apply to a WVRO:

  • A homeowner has threatened violence or been violent towards all board members,
  • A board member has repeated outbursts and exhibited violent behaviors towards other board members and management personnel during meetings.

The main difference between a CHRO and the WVRO is that the association is named as the petitioner for a WVRO and the individual is named as a petitioner for a CHRO. Additionally, a CHRO has an attorney’s fee provision, meaning the petitioner could possibly recover their attorney’s fees for the CHRO while a WVRO does not contain any such provision.

In both cases, you will apply to the court for a restraining order, serve the other side (personal service is required), and attend a hearing to put on evidence and have the court determine whether a restraining order has been granted. While the case is pending, the judge may find that the facts support entering a temporary restraining order to protect the party until the hearing. When a temporary restraining order is in place, or once a permanent restraining order has been granted, the other side may face criminal charges if they violate the order. The police may also be called when an order is violated.

If you are experiencing threats of violence, or are concerned for your safety, call 911. If you would like more information on how to best protect your association, please contact us.

Using Common Area Facilities for Private or Group Lessons

By Jacquelyn E. Quinn, Esq.

Many associations have common area amenities and facilities available to their residents and their guests.  Such amenities and facilities may include fitness centers, pools, tennis, and other sport courts.  From time to time, associations may receive a request from a resident to use a common area facility for private or group lessons with their personal instructors.  While it might seem like a simple request and boards may be eager to allow such use of the common area facilities, associations should be aware of potential issues that can accompany such use.  Whether a resident wishes to perfect their backstroke, backhand, or back swat, below are a few issues to consider when deliberating on whether to allow a resident to use a common area facility for private lessons with a personal instructor:

  1. Liability: Since the association typically operates, manages, and controls the common area facilities, it is responsible for ensuring the facilities are properly maintained and safe for use. The association could be held liable for damage or injury to an instructor or participant during a private lesson caused by missed repairs or poor maintenance of the facilities.  While similar concerns may arise when a resident chooses to use the common area facilities without an instructor, boards should consult their association’s legal counsel prior to allowing common area facilities to be used for private lessons.
  2. Americans with Disabilities Act (“ADA”): Generally, an association’s common areas are not subject to the ADA unless they are open to the general public. Allowing non-residents to take group lessons at the association’s common area facilities may open the association to an argument that the facilities are “public accommodations” subject to the ADA.  If the facilities are deemed to be subject to the ADA, an association could be required to make costly modifications to the facilities in order to comply with ADA requirements and an association could open itself to claims it violated the ADA.
  3. Insurance & Licensing: Consult with the association’s qualified insurance expert on the risks and insurance implications of allowing private instruction in common area facilities. Does the association have adequate coverage in the event of any incidents? Will permitting this type of use of the common area facilities be considered a commercial use and affect the association’s coverage?  Also, consider requiring any instructor to provide proof of any necessary licensing or certification, adequate liability insurance coverage, and requiring the association and management be named as an additional insured on the instructor’s policies.
  4. Waivers/Releases: Consider requiring instructors and participants to sign agreements releasing the association, its directors, officers, management, etc. from liability arising from any injury that may occur in a common area facility during private lessons. If minors are receiving the lessons, a special waiver signed by a parent or guardian may also be necessary.  Associations might also consider requiring an instructor to indemnify the association and board against any claims or lawsuits filed against them resulting from use of the common area facilities.  While these types of agreements may not provide complete protection for associations in all situations, they may be better than nothing if the association allows certain private lessons.
  5. Register/Rules: The right to use common area facilities is generally subject to reasonable rules and regulations adopted by the board. Boards may consider adopting reasonable rules and regulations regarding private lessons at common area facilities.  Such rules might include requiring the insurance coverage and waivers discussed above, prohibiting instructors from using association facilities without a resident sponsor, requiring all participants be residents of the community, requiring reservations, and clarifying that private lessons may not hinder other residents and their guests from using the facilities at any time.  Adopting reasonable rules pertaining to the use of common area facilities for private lessons gives a board something to enforce in the event a resident or resident’s instructor fails to comply.

In light of the potential for liability and other serious considerations discussed above, a board may find it prudent to simply prohibit owners from using the community’s common area facilities for certain private or group lessons.  However, the decision is ultimately up to the board.

 

** This article was published on CAI-Coachella Valley – 2024 HOA Living Magazine (February Issue).