Who’s the Boss? The National Labor Relations Board’s new standard for determining joint employment may make community associations and management companies responsible for contractors’ pay, benefits and legal liability. Review your agreements with business partners now.

By Robert M. DeNichilo, Esq., and Greg Coulter, Esq.

Reprinted with permission from CAI’s Common Ground TM magazine, September/October 2016

whos_the_boss_250_250A BOARD MEMBER OR MANAGER tells a landscape company’s employee that he or she can only work during certain hours on particular days of the week or directs the employee to plant flowers in a specific way or location. Or, if a board believes the association isn’t receiving the level of service it expects, it may try to require its management company to fire a manager or replace him or her on the account. These situations aren’t all that uncommon.

Since the association is contracting for these services, the board (and maybe its manager) probably believes the contractor—and not the association—employs those individuals. However, under certain circumstances, the association could be found to be a “joint employer” of a contractor’s employees, which means a lot more fiscal responsibility and legal liability.

In a 2015 case known as Browning-Ferris Industries of California (# 32-RC-109684), the National Labor Relations Board (NLRB) overturned a long series of cases in the collective bargaining arena. With the decision, the circumstances expanded under which an entity that contracts for services can be found to be a joint employer. The decision could have far-reaching implications for both community associations and management companies, making them responsible for the employees of landscapers, painters, managers and others who provide services to an association.

Continue reading “Who’s the Boss? The National Labor Relations Board’s new standard for determining joint employment may make community associations and management companies responsible for contractors’ pay, benefits and legal liability. Review your agreements with business partners now.”

California Regulations Mandate Stricter Maintenance Requirements for Community Association Pools

HOA PoolThis article was published in the CAI Orange County Regional Chapter’s OC View Magazine. Click Here to view the published version.

Community pools provide welcome relief from summer heat. They also impose certain obligations on operators of those pools, including community associations. Recent regulations adopted by the California Department of Health define “public pools” to include pools maintained by community associations. The most dramatic changes are set forth in Title 22 of the California Code of Regulations (the “Regulations”) which were amended effective January of 2015. Others are contained in the California Building Code contained in the California Code of Regulations, Title 24, which also were amended, effective January 2014. Associations should know that local health agencies are starting the process of enforcing these new standards. Because some of these changes significantly impact the way associations must service, monitor, and track activity at community pools, associations would be well-advised to note the requirements and implement any necessary changes to ensure compliance now and down the road.

Specifically, there are several amendments to the Regulations that affect association management of community pools, including (1) new parameters for water characteristics; (2) strict daily monitoring of public pool facilities and requirements for written records; (3) enforcement of specific safety and first aid equipment; (4) requirements that a public pool have at least one keyless exit and self-closing latches; and (5) imposition of health restrictions for employees or pool users.

Continue reading “California Regulations Mandate Stricter Maintenance Requirements for Community Association Pools”

California Appellate Court Affirms Association’s Right to Impose Restrictions on Hardwood Flooring

FlooringOne of the consistent issues plaguing condominium associations is that of unapproved hardwood floors, often installed in an attempt not only to improve or beautify the unit, but also help alleviate dust allergies. However, when installed over a lower floor unit, they can lead to conflict over increased noise. In the case of  Ryland Mews Homeowners Association v. Munoz (2015), 234 Cal. App. 4th 705, the appellate court affirms an association’s right to require prior community association approval before installation of hardwood floors.

The Ryland Mews court found that, even in the case of hardwood floors installed to combat dust allergies, the increased noise resulting from the removal of carpeting and installation of hardwood floors constituted a nuisance to the residents of the lower floors, justifying the granting of a preliminary injunction which required the installing owner to place throw rugs over much of the flooring. Continue reading “California Appellate Court Affirms Association’s Right to Impose Restrictions on Hardwood Flooring”

What Does it Take to Amend the CC&Rs?

One of the questions that we are often asked is “What is required to amend the CC&Rs?” Civil Code section 1355 (Civil Code section 4270 starting in 2014) provides that an amendment to CC&Rs is effective after all of the following requirements have been met . . .

amendmentsOne of the questions that we are often asked is “What is required to amend the CC&Rs?” Civil Code section 1355 (Civil Code section 4270 starting in 2014) provides that an amendment to CC&Rs is effective after all of the following requirements have been met:

  • The requisite approval of the percentage of owners as required by the governing documents has been obtained,
  • Written certification of the approval by an officer of the association, and
  • Recordation of the amendment

While the specific approval required must be determined by looking at the specific set of CC&Rs, most such documents require the approval of a super-majority of owners, typically 67% of the total voting power. If the CC&Rs are silent on the required percentage of owner approval necessary to amend the CC&Rs, then Civil Code section 1355 provides that an amendment may be approved by a majority of all members.

If there are multiple classes of membership, it is not uncommon for the CC&Rs to require the approval of a super-majority of each class of members to also be required. In addition, certain types of amendments may require the approval of first mortgagees (the banks who hold the mortgages on the various units or residences in the association), or even the city. The types of amendments which require the approval of the first mortgagees are spelled out in the CC&Rs, and typically are limited to amendments which could adversely impact the security interest of the mortgagee, such as amendments changing the manner in which assessments are imposed or allocated among the various owners.

How Do We Vote?

Once the required approval percentage is determined, the Davis-Stirling Act requires that voting on the proposed amendment must be done by the double envelope secret ballot process set forth in Civil Code section 1363.03(b) (Civil Code section 5115 starting in 2014), with the votes counted at an open meeting so that the vote counting can be observed by the members. The ballot must contain the proposed amendment to be voted on by the members.

Continue reading “What Does it Take to Amend the CC&Rs?”

California Department of Real Estate Warns of Dangers of Underfunded Reserve Accounts

One of the most difficult choices a board makes when preparing an association’s annual budget is whether to increase assessments to fund the association’s reserve account, or to keep assessments low and delay funding the reserve account until a later day, if at all. The reasons boards may under fund reserves are varied. It may be as innocent as the reality that association is having difficulty collecting assessments and all the money collected is necessary to meet operating expenses, or it may be a misguided desire by the board to artificially keep assessments low in fear that the members will not support an increase in order to fund the reserve accounts. After all, it can be a so easy to make the choice to keep assessments low. Raising assessments, even if it is necessary to fund reserve accounts, is rarely a popular decision. It is much easier to put off funding the reserve account, keep assessments low and keep the members happy, at least in the short term. However, failing to properly fund reserves is rarely, if ever, a good decision for the board to make. While some boards rely on what is a technically accurate statement that associations in California are not legally required to fund reserve accounts that is a dangerous and often short sided understanding of reserve accounts, and their importance to the financial health of the association. Whatever the cause, failing to fund reserve accounts pursuant to a plan developed in conjunction with the reserve study can place the association’s financial health at risk. So much so, that the California Department of Real Estate recently took the extraordinary step of issuing a consumer warning for underfunded homeowners associations.

Failing to properly fund reserve accounts results in a significantly increased likelihood of large special assessments, possibly in the thousands or tens of thousands of dollars to pay for necessary repairs. In addition, underfunded reserves can lead to lower property values within the association as buyers become wary of properties which are likely to be subject to large special assessments. Lastly, failing to properly fund reserves may make the properties in the community ineligible for federal loans issued by Freddie Mac and Fannie Mae, reducing the market of potential buyers, further reducing property values.

While the DRE consumer warning is not the only reason that boards should take steps to ensure they are properly funding reserve accounts, it highlights the importance of doing so. The risks in failing to fund reserves are too great to be ignored. Boards should heed the DRE warning and use their best efforts to start properly funding that reserve account piggy bank.