Protecting Association Deposits

On occasion, we get to cover more complicated subjects in our newsletter. This is one of them.

Wall Street Reform. Following the collapse of the economy in 2008, Congress rushed through a bloated piece of legislation known as the Dodd-Frank Wall Street Reform Act, sometimes referred to as “Dodd-Frankenstein.”

Massive Bill. The extent of the legislation was unprecedented. As the Economist Magazine* noted, “The law that set up America’s banking system in 1864 ran to 29 pages; the Federal Reserve Act of 1913 went to 32 pages; the Banking Act that transformed American finance after the Wall Street Crash, commonly known as the Glass-Steagall Act, spread out to 37 pages. Dodd-Frank is 848 pages long.”

Associations Affected. The Economist described the reach of Dodd-Frank over the economy as one that affects “veterans, students, the elderly, minorities, investor advocacy and education, whistle-blowers, credit-rating agencies, municipal securities, the entire commodity supply chain of industrial companies, and more.” To the “and more” we can add homeowner associations.

Bail-In Provision. When the economy collapsed, the Federal Reserve used taxpayer money to bail out distressed banks that were deemed “too big to fail.” Dodd-Frank now prohibits the Fed from providing emergency funds to failing banks. Instead, distressed banks must rely on depositor funds. This is known as the “bail-in” provision. It requires banks with assets of $50 billion dollars and more (BofA, JPMorgan Chase, Union Bank, Wells Fargo, etc.) to take depositors’ money to offset losses.

Seize Your Money. In other words, if the bank suffers losses from risky investments, it can use depositors’ money (from checking accounts, CDs, money market funds, IRAs, etc.) to cover its losses. It can bail itself out by seizing your money. Previously, banks were obligated to return your money upon demand. Now, under Dodd-Frank, you might get a share of stock in the bank instead of cash.

FDIC Insurance. Even though depositor accounts are insured by the FDIC for $250,000.00 for each depositor, the FDIC has only $67 billion in their fund to resolve account problems. The FDIC has a credit line of $511 billion with the Treasury which can be used as well. Unfortunately, derivative losses could be in the trillions of dollars. That means there will be no money to protect depositors.

Election Issue. Banking industry regulation has become a political issue between candidates Bernie Sanders and Hillary Clinton. They have clashed repeatedly on this issue in their recent debates. Bernie Sanders wants to reinstate Glass-Steagall, which was repealed by President Bill Clinton and was a factor in the collapse of the U.S. economy. Both candidates want to increase banking regulations, which could further impact an association’s deposits.

RECOMMENDATION. For associations who are risk-averse, they should consider moving their funds to smaller local banks and credit unions. To avoid the bail-in provision, the institutions should be smaller than the $50 billion dollar asset limit set by Dodd-Frank.

Thank you to Ted Loveder CMCA AMS PCAM for the genesis of this article. Ted manages one of the many highrise condominium associations we represent. Ted is part of a growing pool of talented and credentialed managers in our industry.

*The Economist, Feb 18th 2012.


: If the board of a commercial CID changes their collection policy, does it require 30-day review and comment period like residential associations?

ANSWER: For commercial and industrial common interest developments there is no notice or 30-day review requirement for adopting and revising operating rules.

In the Commercial CID Act, the procedure for adopting rules is determined by the development’s governing documents. If your documents require advance notice to the membership and a 30-day review period, then you must do so. If your governing documents are silent, the board may adopt rules by a motion at a board meeting. The rules immediately become effective upon notice to the membership.

RECOMMENDATION: Even if not required by your governing documents, it is still a good idea to notify the membership of any proposed rule change. Members like to stay informed and it gives the board a chance to find out if there are any serious problems with the rule change.

Thank you to attorney Wayne D. Louvier for researching this issue. Wayne works out of our Orange County office.


Ballot Envelope #1.
I do so enjoy your newsletter. Often it ranks right up there with the Sunday funnies. May I make a fourth suggestion to your response to Election Envelope #2? That would be to mail the envelope with its signature (and the inner envelope and ballot) in a third envelope with just a regular return address label to the inspector of elections. Please keep up the entertainment; it’s a great way to start the week! -Nancy H.

Ballot Envelope #2. As an inspector, I have always used #9 envelopes for return envelopes and my instructions say this: “
IF YOU DO NOT WISH YOUR SIGNATURE AND ADDRESS INFORMATION TO BE VISIBLE ON THE RETURN ENVELOPE, fill it out as above, place it in another envelope (#10) and address that envelope to Mister Parliamentarian and mail it.” -James S.

Adrian Adams, Esq.
A Professional Law Corporation

We’re friendly lawyers–boards and managers can reach us at (800) 464-2817 or

The Guide to RentPrep’s Amazing Landlord Guides

Here at RentPrep, we work very hard to bring all the latest information together to help landlords of all backgrounds. From brand new landlords to experienced real estate investment experts, our readers deserve every possible advantage to make being a landlord as stress-free and profitable as possible.

That’s why we’ve published a series of “Landlord’s Guide” RentPrep articles that highlight some of the most common issues. We realize that there are aspects of being a landlord that you deal with every day, and other things you’ve never even heard of before and don’t know what to do. RentPrep has many more on the way and we look forward to bringing you help and advice on all the issues that

Take a look through these RentPrep Landlord Guides and learn something new that will help you and your business. If you have any experiences to relate that you think might help out other landlords, please feel free to share them in the comments for each guide.

Landlord’s Guide to Parking at Rental Properties

Everything you ever wanted to know about managing and enforcing parking, for multi-unit buildings to single-family homes, and from rural and suburban to urban.

Landlord’s Guide to Flooring In a Rental Property

Whether you are purchasing a property, maintaining one or renovating one, this comprehensive guide will help you determine what kind of flooring is best for a rental and why.

Landlord’s Guide to Dog Rules and Regulations

More and more tenants are seeking rental properties that allow dogs, so we’ve created a comprehensive list of things to consider about these four-legged friends.

Landlord’s Guide to Changing the Rules of a Rental Property

Few issues cause such a confrontation between tenants and landlords as rule changes, so we’ve outlined some pros and cons, as well as how to make changes the right way.

Landlord’s Guide to Tenant Repair and Deduct

Because there is so much confusion about when and if tenants can withhold rent, RentPrep thought it best to provide a guide that will help landlords know what to do if tenants take this action.

Landlord’s Guide to Slip and Fall Accidents, Part 1 and Part 2

It’s up to landlords to ensure that foot traffic at a rental property is as safe as possible, or else they could be facing a liability lawsuit. This comprehensive guide looks at common hazards, landlord responsibilities and ways to reduce the risk of slip and fall accidents.

Landlord’s Guide to Gas Grill Regulations

Sometimes the most innocent of items can cause a surprising amount of problems, and landlords who don’t have gas grill regulations in place may discover that the hard way.

Landlord’s Guide to Raising the Rent

Raising the rent has to happen eventually, and this guide will help landlords determine when, how and why. We’ll even guide them in figuring out how much to raise it.

Dishwasher Maintenance and Repair Guide for Landlords

A dishwasher is pretty standard in most rental units, but repairs can get quite costly. Here are some things landlords can do on their own to save money, extend the life of the appliance and tips on when to call the repair service.

Landlord’s Guide to Renting Out a Room

Most landlords have separate units to rent, but RentPrep hasn’t forgotten about landlords who are interested in renting out a room. It’s full of tips on choosing the right tenant, how to structure the lease agreement and what your rights (and theirs) are.

Appliance Guide for Landlords

Nowadays, many rentals include some basic appliances, and if landlords are going to buy them and maintain them, it’s helpful to have a guide to make the best decisions possible.

Landlord’s Guide to Avoid Harassment

There are far too many instances of harassment when it comes to landlords and tenants, so this guide is full of ways to avoid it and what to do if it does happen.

Landlord’s Guide to Assistance Animals

Pet, companion animal, assistance animal—what’s the difference? According to the law, quite a lot. This guide spells out the rights of people and their assistance animals and what landlords can and cannot do with regards to them.

Landlord’s Guide to Patio Rules and Regulations

Landlords who don’t realize that standards for the patio or porch should be included in the lease agreement are missing a very important part of renting out property.

Landlord’s Guide to Written Tenant Notice Letters

Providing a written notice to tenants is a very important part and often is legally required by states for landlords to take further action. Here are some tips on doing it right and doing it well.

Landlord’s Guide to Collecting Past Due Rent

Every landlord will encounter this at some time—collecting rent after its due date. Here, RentPrep shares tips and tricks to make it easier and more effective, as well as how to encourage tenants to pay on time.

The Best Landlord Guide to Charging Rental Application Fees

Did you know that in some states, there are restrictions on how much and if you can charge rental application fees? Find out what your state says and whether or not you are doing it right.

Landlord Guide: What Happens When a Tenant Breaks Their Lease?

While a lease agreement is a binding contract, that doesn’t stop some tenants from breaking it. Here’s a  guide on what to do and how to minimize its impact on your business.

Landlord Guide: Tenants, Their Pets & Your Property

The never-ending conflict between tenants, landlords and pets is put into perspective here and also gives guidance on how landlords can best manage the situation.

Landlord’s Guide to Evictions: Who, What, Why & When

Evictions are a part of real estate investing, and landlords will have the least amount of stress and the most success when they understand the process and are fully prepared.

Landlord’s Guide: How to Avoid Bad Tenants

It’s the solution to every landlord’s problems—avoiding bad tenants. While there is no foolproof method, this guide provides some serious help in minimizing the risk of getting those bad apples in your rental unit. (Hint: RentPrep can help!)

The post The Guide to RentPrep’s Amazing Landlord Guides appeared first on RentPrep.

3 Surprising Paint Colors Home Owners Hate

By Melissa Dittmann Tracey, REALTOR® Magazine  Home owners say they like color in their homes but they definitely have some hesitations in using it to decorate their spaces, according to a new survey by Better Homes and Gardens of nearly 400 home owners. The survey found a general consensus that these three colors, in particular, […]

Confrontation Tips for Landlords

Confrontations are part of being a landlord and a business owner, and you definitely have your fair share of complex issues to deal with. Far too many people go out of their way to avoid confrontation and while they may feel better about staying away from anything uncomfortable, this practice can make their business really suffer. Once you learn how to master the steps to effective confrontation, you will be better able to communicate your needs and do what is best for your real estate investments.

What Is Confrontation?

While most people think of confrontation as aggressive fighting, at its heart confrontation really means directly addressing a problem. Of course, a confrontation can escalate into personal attacks, bullying, arguing, and all-out fighting. However, in a business sense, it has to do with the unpleasant job of seeing a problem and working with another party to resolve it. Dancing around an issue, refusing to address it, allowing yourself to be intimidated or bullied, being passive aggressive or letting your business suffer should never be an option.

As a business owner and a landlord, you will have plenty of problems that need your attention, and the sooner you get over your fear of confrontation, the better and more productive you will be. Your business will benefit as well because you won’t let issues go for longer than is necessary and problems will get solved a lot faster than if you put them off again and again.

Why Confrontation Bothers Us

Many people simply hate confrontation because it is hard-wired within us to get along with others. Societal pressures and customs also prevent us from feeling comfortable with confrontation, as it is generally seen as pushy, presumptive and even rude to address issues head-on and engage in discussions where something is going wrong.

Still other people have such a significant emotional reaction from the anxiety that surrounds confrontation—shaking, shortness of breath, red face, sweating, crying and more—so they simply avoid it to stay far away from arousing those feelings. Social anxiety affects every single one of us at some level, and we are conditioned to avoid negative judgements and seek out positive interactions. True introverts or those with actual social anxiety struggle with confrontation even more as their nervousness is heightened.

Typical landlord confrontations can take place in many instances and circumstances. Here are just a few of the more common situations that landlords may find themselves in:

  • Dealing with problem tenants.
  • Delivering official notices.
  • Turning down a rental application.
  • Declining late rent payments.
  • Giving constructive criticism to employees.
  • Withholding some or all of a tenant’s security deposit.
  • Working with outside contractors and vendors.
  • Going through the eviction process.

As you can see, there are plenty of times that landlords need to be able to handle confrontations to solve problems. So is there anything that landlords can do to become better at productive confrontations? Sure there is!

Tips for Productive Business Confrontations

The good news is that there are several strategies that you can use to better prepare yourself physically and mentally for a confrontation. By internalizing these strategies, you will be better prepared for planned confrontations as well as the type that come from out of nowhere when you least expect it.

Here are 7 tips for landlords who want to become better at productive confrontations:

1. Prepare Your Mind

Getting mentally ready for a confrontation is incredibly important in being able to convey all the information and resolve the problem. Visualize yourself dealing with the person in question, and practice out loud or in front of a mirror on what you will say. Finalize a list of points you want to get across and anticipate all kinds of questions. “Interview” yourself as the other person might, and prepare general answers as needed.

2. Focus on the Resolution

Engaging in confrontation does no good if you don’t know where you are trying to end up. In other words, know what you want out of the conversation before it even begins. Is it some kind of action? Exposing a hidden agenda? An admission of something? Is it a conversation that needs to take place “for the records” during eviction? Knowing what your goal is will help guide your conversation to this positive end.

3. Keep Emotions Out Of It

When people get emotional, it often seems that rational thoughts fly out the window. Sticking to fact-based sentences and delivering them in a calm and professional manner is the best approach. It’s OK to be direct and even blunt sometimes during a confrontation. However, anger will never help the situation and may just make things worse.

4. Control the Location

A confrontation should take place in the location of your choosing. It’s always a good idea to schedule such a meeting by communicating ahead of time that you need to discuss a situation, then schedule a time and place that is good for you both. This could be at the rental property, your office or at a vendor’s location. It’s rarely a good location in front of other people, in a busy or stressful environment or too early or late in the day. If a confrontation is happening spontaneously and the situation is no good or you aren’t prepared, you should try to defer it to a better time and place after everyone has had a chance to calm down.

5. Keep It Simple

After you state your problem and explain your desired outcome to the other person, sit back and listen. It’s a mistake to keep talking, add additional explanations, change your position or ramble on. Give the other person a chance to respond after you introduce the issue.  Of course, use your best listening skills to really understand where they are coming from and what they do or don’t understand about what you said.

6. Stick to the Issue

In some cases, it may be tempting to unload a host of pent-up emotions, problems and personal opinions onto someone. However, in order to engage in a beneficial confrontation, stick to the issue at the forefront. It’s never a good idea to run through a litany of past problems, perceived wrongs or other things if they aren’t really relevant to your current problem. Never pull other people into the confrontation unless they are relevant, and always stay confident and on task.

7. Soft On People, Hard on Problems

The old business adage of “go hard on the issue and soft on the person” is the best tip for landlords who must engage in confrontation. Point out your relationship with the person and spend a few minutes talking about how you value it. Stay focused on the issue itself and be honest and direct about what you both need. Of course, be open minded and flexible, because you never know when a solution might present itself that you didn’t even think about. Above all, don’t take anything personally—it’s just business.

Productive Confrontations Are Necessary

By its very nature, a confrontation means that both parties are starting at opposite ends of a problem. As the landlord and business owner, it’s your job to start the process of meeting in the middle. Direct discussions will go a long way in resolving issues that can be harmful to your real estate investment. Always have the courage to say what you need to say and do it as well as you can. Stay honest, don’t argue, and explore solutions from all sides. The more you engage in confrontations, the more productive they will be and the better you will get at engaging people and solving problems.

The post Confrontation Tips for Landlords appeared first on RentPrep.

HUD Anti-Discrimination Laws You Didn’t Know You Were Breaking

In 2015, the enforcement division of the Department of Housing and Urban Development announced 10 separate charges against landlords and property managers for various types of discrimination.

No ethical landlord wants to commit unlawful discrimination. But some honest employees or landlords run into trouble accidentally, despite the best of intentions, by making a mistake during the screening process, asking an innocent but misguided question or making an ill-considered remark that can form the basis of a discrimination complaint.

Let’s look at some of the mistakes made by landlords and property managers that led to discrimination charges.

Asking About Mental Health, Medical Status or Diagnoses

In one Minnesota case, a woman diagnosed with bipolar disorder attempted to rent a house with her partner. Shortly before move-in, the landlord’s agent became aware of the applicant’s history of mental health issues, and called the prospective tenant asking if there were any “issues” she wanted to disclose before moving in. The tenant disclosed her diagnosis of bipolar disorder. The agent asked for more information, but the renter told her it was “none of her business.” Subsequently, the landlord refused to rent the dwelling.

HUD Prosecutors deemed the mere inquiry into the mental health diagnosis to be a violation of 42 U.S.C. Section 361(g)(2)(A), and assessed a $16,000 civil penalty against the landlord, in addition to damages.

Discriminatory Advertising Language

In a Philadelphia case, HUD officials were alerted to a Craigslist rental advertisement containing these words: “Not good for young children.” HUD officials investigated and applied to rent the dwelling. Two HUD test coordinators called the lister, one claiming to have a 2-year old daughter, and the other posing as a single man.

The lister told the female caller that the dwelling was directly above a construction business with a lot of heavy truck traffic. The dwelling would be fine for adults, the lister explained, but dangerous to young children. The lister also told the male investigator that he wanted to rent to adults with no children because of the traffic.

HUD officials deemed the actions of the landlord’s representative to constitute illegal discrimination based on familial status. The advertisement was illegal under 42 U.S.C. Section 3604(c) and 24 C.F.R. Sections 100.75(a) and (c)1.

HUD Department officials asked courts to penalize the landlord for each violation, on top of compensatory damages.

Discrimination Based on Limited English Language Skills

An Asian-American man applied to rent a townhome in Champlin, Minn., together with his mother, who was from Thailand. They planned to reside on the property with two children. The property manager took their information and a credit background check. He also collected an application fee of $40 for each of the two adult applicants.

The son’s credit score came back at 725, and his mother’s was 761. Their income qualified the family to rent the apartment. But the manager sent the son an email stating that their rental application was declined. The reason: Both adults would have to sign the lease contract, but the mother had limited English skills. “As I’m told, legal precedent indicates the contract must be translated to her native language,” the manager wrote. “If not, she could easily break the lease.”

The manager also claimed that a certified translation would be required, costing about $500.

The son informed the manager that he had submitted an inquiry to the Department of Housing and Urban Development based on the manager’s statements about his mother’s English language skills.

HUD’s lawyers determined that denying a lease because of limited English skills, as well as the act of requiring a $500 translation fee, amounted to illegal discrimination under 42 U.S.C. Section 3604(a). The Department of Housing and Urban Development is pursuing the property manager for full compensatory damages, as well as a civil penalty of $16,000 per violation.


In at least two of these cases the landlord had some understandable concern apart from the discriminatory aspects of the cases. If an apartment is unsafe for a toddler, no rental property owner wants to see a child injured or killed, nor does he want to get sued if such an event does occur. Nobody wants to enter into a contract only to see it broken by someone who could claim she never understood the terms. But reading through the filings, the rental property owner’s concerns were not considered in mitigation at all. You would be well advised to take a strict view of housing discrimination compliance.

If your rental property presents a safety issue that could endanger small children, you may want to discuss it with experienced legal counsel who is looking at these precedents along with the issues specific to your property.

Part 3: All About Rent To Own: Protecting Yourself

Rent to own, or lease options can be an effective way to get a foot in the door of home ownership, even if you are not yet approved for a loan or don’t have quite enough for a competitive down payment. If you have assessed both the pros and cons for this option, your next step is to set up an agreement that protects your interests and is fair for both parties. There are some important things to remember when you enter a lease to own agreement.

For instance:

  • Clear Title: Make sure that the title on the home is clear and free of any liens. Such information should be public record and other claims on the property should be a red flag for you.
  • Get Expert Help: Something as important as the lease and eventual sale of a home is not something you want to simply wing on your own. Seek the help of a realtor, property lawyer or other expert that can help you create a contract with parameters that work for you. In most cases, they know to include things that you may have never considered. It might cost you some money up front, but it is worth it to make sure that you are fully covered and it is far cheaper than a down payment.
  • Include an Exit: If you’re considering a lease to own agreement, then your current plan is to say put for a while; however, you should remember that things can change. Jobs end, health issues arise or you may have more personal reasons why you simply don’t want a particular home anymore. This means that there should be a clearly stated exit clause in your contract that allows you to walk away from the home if needed. While you will probably be out of pocket a little bit, one of the benefits of the lease process of a contract is that you have more flexibility than being locked into a property that you own.
  • Stay In The Loop: There should be some amount of transparency between you and the owner that is currently paying the mortgage. For instance, you can request regular copies of mortgage and insurance statements to ensure it is being paid as per your agreement. While many rent to own situations are based on trust in this regard, more than one renter has paid faithfully, only to be evicted by the bank when they find out that the owner has fallen behind on the payments.
  • Fair Price: It is important to get an inspection and appraisal in order to determine the fairest sales price. While the benefit of a lease option is that it can lock in a price in an area where the value may go up, the same is true for if the value depreciates. Your best option is to get what is most fair for the current rate and hope for the best.

Check out Part 1: All About Rent To Own: The Pros and Part 2: All About Rent To Own: The Cons.

The post Part 3: All About Rent To Own: Protecting Yourself appeared first on RentPrep.

Consultant’s Emails

QUESTION: As a vendor, we email our reports to the manager and copy the entire board. The manager told us to stop because it violated the Davis-Stirling Act. Is that true?

ANSWER: No, it’s not true. Sending information to the board does not violate the Open Meeting Act. It is perfectly acceptable for community managers, consultants, vendors, and attorneys to report to the board by email on projects or litigation so the board can monitor their progress.

Noticed Meetings. It would, however, be a violation if the board discussed the information and made decisions by email. Unless it is an emergency, the board must hold properly noticed meetings to discuss and make decisions related to board business.


QUESTION: Our community has over 550 homes with one master association and multiple subassociations. How can a subassociation board communicate their preferences to their representatives on the master board yet stay within the law, especially with time constraints regarding posting of agendas by the master?

ANSWER: Just as receiving information via email (described above) is permissible, sending instructions to your representative via email is permissible. Neither is a violation of the Davis-Stirling Act.


Recall Legal Fees #1
. With the questions posed from HOA members it’s obvious that board members, who are volunteers, rarely know how to handle anything. It’s time to declare HOAs to be a failed business experiment. The experiment didn’t work! Our wallets are drained paying attorneys for advice! -Priscilla K.

RESPONSE: Actually, most HOAs work quite well. According to research conducted in 2014 by Public Opinion Strategies, 90% of residents rated their HOA experience as positive or neutral; 90% said their boards served the best interests of their communities; 83% said they got along well with their neighbors; and 70% said that rules protected and enhanced property values, while only 4% said they harmed property values. It’s mostly the crazies (both on the board and off) who get all the attention, run up legal fees and create bad press. (See “Verdict, Americans Grade Their Associations.”)

Recall Legal Fees #2. As usual I enjoy reading the newsletter. Reading about recall legal fees, the HOA board appears to have a real issue. A wise resolution would be for the entire board to resign in writing and the HOA hold new elections where the resigned HOA board members can re-run for a board position. If you have been on an HOA board, then you can understand the relief to not be re-elected. -Ted S.

Recall Legal Fees #3. We just went through a very ugly recall of two directors. They in turn went to court to be reinstated and of course for costs, I believe their main allegation is that the decision to recall was adopted or advanced by other directors in a secret meeting and for that reason the recall was invalid or illegal. Attorneys of course are involved. My feeling is that if it was done in secret it was in violation of the Davis Stirling Act and therefore illegal. -Anthony L.

RESPONSE: I don’t know about the secret meetings but directors have the right to launch a recall against a fellow director who is out of control.

Recall Legal Fees #4. I agree it is smart to get legal advice. However, if it is given in closed session the directors should pay for it since it does not fall under the required executive meeting matters. The questions you listed are just as important to the members as it is to the directors, the members are being recalled for a reason, I don’t think they would be trusted to not be selective in using the legal advice. -Finn M.

RESPONSE: I disagree. Legal issues surrounding a recall properly fall into approved executive session topics.


Election Envelopes #1. I’m confused with respect to voting envelope instructions. The sample envelope shown appears to be ineligible since the upper left has place for signature but nowhere indicates the required resident address specified in your guidance. Please clarify or explain what I’m missing here. -Mack T.

RESPONSE: You missed the sample I provided via a link labeled “sample envelope.” It shows how to properly configure the outer envelope.

Election Envelopes #2. I have an issue with the 2-envelope secrecy recommendation you gave. You are asking someone to mail an envelope with their home address and their signature on the outside of the envelope. That’s two items of information that an identity thief needs. There are two ways to avoid this…a 3-envelope solution, or a 2-envelope solution where the ballot envelope itself has the homeowner’s address and signature on the outside. That ballot envelope will only be opened and separated from the ballot itself by the inspector of election at the annual meeting. -Bob F.

RESPONSE: I can’t take credit for the two-envelope system, that was your legislature hard at work. If someone is paranoid about signing an envelope, they can (i) put the signed envelope it in a FedEx or UPS package and send it to the inspector of elections, (ii) personally deliver it to the inspector, or (iii) attend the annual meeting and cast their ballot in person.

Election Envelopes #3. Before counting ballots, an election inspector is allowed to unlock the ballot box to see if the ballots are valid. This is not the same as counting the ballots. Our boards and the election inspector routinely count the envelopes before the deadline date for voting, and they then extend the voting time if a quorum is not reached at the designated closing time. This doesn’t seem fair. I have asked this question before, and the replies given were references to various codes. As a layperson, I find the replies inadequate, and would appreciate clarification from you. -John L.

RESPONSE: Counting unopened envelopes to register them in advance of the meeting and/or to determine if quorum has been met is perfectly acceptable. Doing so is not a violation of the Davis-Stirling Act. The Act specifically allows the “inspector of elections, or the designee of the inspector of elections, may verify the member’s information and signature on the outer envelope prior to the meeting at which ballots are tabulated. (Civ. Code §5120(a).)


Voting #1. I am a new HOA member of a condo association. It seems that the only people who ever vote are the four board members. Is this normal? -Steph F.

RESPONSE: Your question is a bit cryptic. If you’re referring to board meetings then, yes, only board members can vote. If you’re referring to membership meetings, all is lost. It’s time to move.

Voting #2. Please give me the logic behind restricting voting to one person per unit when two owners live in the space. -Jim K.

RESPONSE: Voting in federal, state and local elections is based on the number of living registered voters. Chicago is more democratic, they allow the dead to vote as well. Association voting is based on the number of units/lots. If it were based on the number of owners, one unit in a small association with ten investors on title could control the outcome of all elections.

Adrian Adams, Esq.
A Professional Law Corporation

We’re friendly lawyers–boards and managers can reach us at (800) 464-2817 or

Drones, New Legislation, and Associations

In 2015, the California Legislature enacted two bills, Senate Bill 142 and Senate Bill 856, which take the first steps toward addressing the potential for drones to trespass and invade individuals’ privacy.

Civil Code section 1708.8 was first enacted in the 1990s to allow lawsuits for invasion of privacy against paparazzi, or others, who photograph or record private activity without permission. The law provides, among other things, that a person is liable for physical invasion of privacy by knowingly entering onto the land of another in order to make photographs or sound recordings of private activity without permission. The law establishes special penalties for this invasion of privacy. SB 856, effective January 1, 2016, amends Civil Code section 1708.8 by providing that a person also commits a physical invasion of privacy by entering into the air space above the land of another to photograph or record private events.

SB 142 creates a new Civil Code section 1708.10, stating that use of a drone less than 350 feet above ground level without express authority is a trespass. Now, drone operators are subject to civil lawsuits if they fly at less than 350 feet above private property.

The Federal Aviation Administration (FAA), which has jurisdiction over all airspace, also regulates when, where, and how a drone may be operated. As of December 21, 2015, recreational drone users are required to register with the FAA.

Can an association establish reasonable regulations on the use of drones within the project? Probably, yes, within the limits of the rulemaking power in the governing documents. Can an Association prohibit the use of drones altogether, by way of a rule? It is tempting to say yes, but federal regulations may be found to supersede, or “preempt,” both local laws and association rules. To avoid this problem, associations may consider rules controlling the effect of drone use, based on the nuisance provisions of the CC&Rs. For example, rules might prohibit using drones to look into other residents’ private yards or windows, or to harass or annoy others.

John R. MacDowell Fiore Racobs & Powers

John R. MacDowell, Esq. is managing shareholder of Fiore, Racobs & Powers’ Orange County office and is a delegate to CLAC from the Orange County Regional Chapter of CAI. He serves as Vice-Chair for CLAC.

Design Trends to Watch in 2016

By Melissa Dittmann Tracey, REALTOR® Magazine What are the hot trends to look out for in 2016 in home design? Here are a few predictions from the remodeling and design site Houzz on some of the big trends to expect. Contemporary Kitchen by Brooklyn Architects & Building Designers Maletz Design 1. Two shades of kitchen […]

Part 2: All About Rent To Own: The Cons

Many people turn to a rent to own situation, or the option to rent for an agreed upon amount of time with some of the payment going toward the eventual purchase of the home, as a way to buy property. The setup can be quite beneficial to both tenant and landlord when done right. However, some financial experts argue that few other rental situations are as fraught with potential for a negative outcome.

While a rent to own situation can be advantageous to all parties when it is properly and legally done, hopeful renters/purchasers should be aware of a few things that could go wrong.

Financial Loss

Rent to own may be the only option that you currently have toward purchasing a home because of credit or down payment issues, but there is no guarantee that it will work out in your favor. If, at the end of the rental/lease agreement, you do not qualify for a loan or you choose not to buy the home after all, you will lose everything you have paid into it.


While the agreement between you and the landlord might be binding, if he loses the property through foreclosure before you have the option to buy, you are out of luck. You will be left chasing any recompense through small claims court. A friend of mine paid faithfully in a rent to own situation for two years before being evicted suddenly. Their landlord had been collecting rent, but not applying to the mortgage and they were none the wiser until they got the notice to leave.

Housing Market Fluctuations

Although locking in the purchase price of a home several years in advance can be a benefit if the value of the home increases, the market can also take a downturn, leaving you stuck in an agreement to pay more than the house is worth.

Late Payments

Depending on the terms of your agreement, a late payment or two could tank your opportunity to purchase the home and you would also be out of luck for the extra money you paid.

Despite these issues, a rent to own option can be valuable to both you and your landlord as long as you take steps to ensure that you are covered. A handshake agreement is not advised, even if you are dealing with a family member. Spending a little extra on professional help to create a contract that keeps you and your investment safe is the best way to manage a rent to own situation.

Check out Part 1: All About Rent To Own: The Pros

Stay tuned for Part 3 of this series and learn how to protect yourself before you sign on the dotted line.

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