Monthly Archives: September 2014

The Latest Case-Shiller Home Prices

The home prices of 20 large metro markets measured by Case-Shiller increased 6.7 percent over the past 12 months to July.  However, there is a marked deceleration in the price growth.  Price gains were in the double-digits for most of 2013 and as recently as April of this year.    Increased inventory and lower home sales […]

News Corp To Acquire Move, Inc.

News Corp is staking a claim in the online real estate world, and betting on the REALTOR® brand. From REALTOR® Magazine: The global media and information services company that owns such venerated titles as The Wall Street Journal and Barron’s announced Monday its intent to purchase Move Inc., operator of realtor.com®. The company is News […]

REALTORS® Expect Modest Price Growth in Next 12 Months, as of August 2014 Survey

REALTORS® expected home prices to increase modestly in the next 12 months, with the median expected price increase at 3.5 percent, according to data gathered from the August 2014 REALTORS® Confidence Index Survey. [1] Local conditions vary with expectations anchored on factors such as the level of inventory, the state of the local job market, […]

Change Could Ease Lender Restrictions

The Dodd-Frank act requires that originators make a good faith effort to verify a borrower’s ability to repay their mortgage and imposes stiff penalties if they do not (ATR and QM rules). This makes sense for the safety of the borrower and the market. Some originators have expressed concern, though, pointing to a need for […]

15 Things Landlords Can Do Today to Prepare for Winter

There’s no doubt that in most parts of the country, winter weather is just around the corner. As a landlord, you may think of fall maintenance at your rental properties as raking leaves and tending to flower beds. However, fall is the best time to prepare your rental property for winter weather. The Farmer’s Almanac […]

Read more on 15 Things Landlords Can Do Today to Prepare for Winter

Sales of Homes for Investment Purposes On the Decline

As reported in the August 2014 REALTORS® Confidence Index Report, sales to investors fell to 12 percent of home sales in August, from the average of about 18-20 percent in 2010-2013. One reason for the decline is that as foreclosures have eased there are now fewer available distressed properties for sale. Distressed sales (foreclosed property […]

Makeover the Master: 4 Ways to Spruce Up a Master Bedroom

By Melissa Dittmann Tracey, REALTOR® Magazine Only 2 percent of more than 1,700 home owners say they have achieved their design vision in their homes, according to a survey by the remodeling website Houzz (2014 Houzz Decorating Trends Survey). And the master bedroom is where many say they still have a lot of work to […]

Good Faith Requirement

QUESTION: I listened to your webinar last week on reserves and have a question. You said that directors must carry out their duties in “good faith.” What does that mean?

ANSWER: As fiduciaries, boards are held to a higher standard. To avoid personal liability for their decisions, the Business Judgment Rule requires directors to act in good faith, in the best interests of the association, and with reasonable inquiry. The good faith element is sometimes referred to as bad faith or lack of good faith when the requirement is violated by a director.

Common Area Repairs. An example of bad faith is for a board to knowingly cause a vendor to breach his contract so the association can cancel the agreement and enter into a less expensive one with another company. The board is arguably acting in the best interests of the association (saving money by reducing the cost of the construction project) but they are doing so in bad faith. One enterprising board did this following the Northridge Earthquake.

Scheming. Their association suffered significant earthquake damage and entered into an agreement with a contractor for extensive repairs. After work commenced, a new director was elected to the board. He convinced his fellow directors they could save a lot of money if they hired a different company to do the work. The problem was how to get rid of the existing contractor. They met in executive session and schemed how to disrupt the work and make it impossible for the contractor to meet his obligations so they could fire him. Being conscientious directors, they recorded their meetings.

Judgment. The board carried out their plan and fired the contractor. He sued. The board’s tape recordings became Exhibit “A” in the proceedings. The damage award against the association was substantial and drove it to the edge of bankruptcy. Not only did the directors breach the requirement of good faith and fair dealing with the contractor, they breached the good faith element of the Business Judgment Rule and exposed themselves to personal liability.

RECOMMENDATION: Boards should adopt an Ethics Policy and make sure their directors follow it. They should reprimand or formally censure directors who violate the policy. And, depending on the seriousness of the breach and if permitted by the bylaws, remove the misbehaving director.

20-POUND DOGS 

QUESTION: Our CC&Rs say we can’t have a dog over 20 pounds. Does this violate Civil Code 4715?

ANSWER: Weight pound limitations on dogs are not uncommon in condominium projects, especially midrises and highrises.

Condo Limitations. In stacked condominiums with long elevator rides, a German Shepherd, Mastiff or Pitt Bull can be a scary proposition for passengers. Even if it’s friendly, a large dog can do a lot of damage if it is hyperactive and likes to jump onto people. Imposing a weight limitation resolves the safety problem for residents.

Pet Prohibitions. In my opinion, Civil Code §4715 does not apply to reasonable restrictions on size and breeds of dogs. Instead, it addresses blanket prohibitions.

No governing documents shall prohibit the owner of a separate interest within a common interest development from keeping at least one pet within the common interest development, subject to reasonable rules and regulations of the association.

Service Animals. Service animals are the exception to weight and breed restrictions. Such limitations do not apply to a service animal assisting a disabled person.

WHO CONTROLS
EXECUTIVE SESSION?


QUESTION: I am wondering if the board can exclude the manager (an employee of the management company hired by the HOA) from executive session meetings?

ANSWER: Yes, the board can exclude the manager. It’s the board’s meeting, not the manager’s. The only exception is if the board contractually obligated themselves to have their manager at every meeting or, in the reverse, never hold a meeting without the manager being present.

Save Money. If such a provision is in the contract, it tells me the agreement was not reviewed by legal counsel. Bypassing the association’s attorney allows the board to save a few dollars in the short term so they can pay a lot more later. It’s a business model used by many but not one I recommend.


Adrian Adams, Esq.
Adams Kessler PLC


“Legal solutions through knowledge, insight, and experience.” We are friendly lawyers; you can contact us at (800) 464-2817 or info@adamskessler.com.

Latest GDP and Forecast

The economy grew solidly in the second quarter, expanding at a 4.6 percent annualized rate. Business spending and residential investment from new home construction are leading the way. Such a fabulous growth rate, if it can be sustained, will mean fast-paced job creation and meaningful wage growth. Unfortunately, the latest pop in GDP looks to […]