When Is The Right Time To Amend Your Governing Documents

From time to time we are asked whether an association should amend its CC&Rs. As one can expect, there is no black and white standard. Many factors go into the decision and age of the documents alone is not determinative. But among the key factors driving a CC&Rs amendment is a change in the law that renders CC&Rs outdated. A recent amendment to Civil Code Section 4775, addressing exclusive use common area responsibility, is one example. Among the most fertile ground for community association disputes is the line between repair and maintenance of exclusive use common area. Many CC&Rs, particularly those in older communities, do not adequately identify or define maintenance and repair responsibility for exclusive use common area components such as patios, balconies, doors and similar components. And when there is uncertainty between owner and association about who repairs what, enforcement challenges and disputes are inevitable. In the absence of well-defined CC&Rs, we look to existing Civil Code Section 4775 which currently provides: “Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common area, other than exclusive use common area, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.”  The problem with the above language is that it is vague and ambiguous and for years left much to interpretation as to what exactly the owner was responsible for and where does maintenance begin and repair or replacement end. Fortunately our legislature has heard our concerns and provides a degree of...

Exercising Collection Options: Flexibility in Action

After years of a depressed California housing market, some communities are starting to see a rebound. As these properties increase in value, associations are taking another look at their collection efforts. Boards are asking if the changing economy is renewing an opportunity to recover delinquencies. The answer may depend on what approach the association takes on its collections: non-judicial or judicial. Up until the housing bust hit California in 2008, the collection process under both non-judicial and judicial foreclosure was equally effective. Owners had access to the equity in their residence, and usually the threat of a lien or foreclosure would be enough to lead to a sale, request for a line of credit, or re-finance to satisfy the delinquent balance. However, the decline in property values removed those options from consideration. Owners staring at lien or foreclosure notices from lenders and homeowner associations no longer had the means to bring their accounts current. Further complicating collection efforts was the enactment of legislation protecting homeowners from foreclosure. Beginning in January of 2013, lenders were required to balance their interests against the Homeowner’s Bill of Rights (HBR). The legislature approved safeguards in the HBR that essentially stalled lenders from pursuing foreclosure while simultaneously considering a homeowner’s request for loan modification. The impact has been noticeable. Once the lenders began complying with the HBR, lender approved short sales and foreclosure sales dropped in California while lenders reviewed loan modifications. While homeowners facing foreclosure have seen the benefits of the legislation, the process has left many associations wondering when and if the lenders will step in and take action. With that uncertainty...

What Do Directors Need to Know?

Let’s imagine that you are one of those dedicated individuals that care about your community and want to help it improve (the chances are very good if you are taking the time to read this magazine). You realize that the best way to serve is to volunteer your time and effort to meet the needs of your homeowner’s association. You see the request from your association for nominations, suffer through a contentious campaign, and prevail to become an elected director on your association’s board. After a brief celebration with your friends and neighbors, you realize something. Now what? It is not enough to have the drive and desire to be a director on your Board. You need the skills and the knowledge to make the right decisions and avoid the wrong ones. So where do you start? Governing Documents The first step should be looking at the association’s governing documents (Articles, CC&Rs, Bylaws and Rules). These documents are the essential elements of successful management. The CC&Rs will lay out the major maintenance responsibilities and duties of the association: assessments, collections, common area, etc. The Bylaws will give the board a roadmap on how to administer and govern consistent with its corporate duties: meetings, notice, minutes, elections, etc. The Rules will specify how the board can approach day-to-day living and enforcement of association authority: common area use, discipline, etc.  Every association will have different needs and duties that should be laid out in your documents, so it is not enough to know generally what information is located where. A director must be familiar with these documents before he or she...