There were too many responses to my article on contractor licensing for me to print them all. Following is a sampling:

Contractor #1. What if a board member serves as project manager? -Jim P.

RESPONSE: As long as the board member is not paid to oversee the project, there is no violation. The association, through its board, is the owner-builder and as such is not required to be licensed. Make sure you put something in the minutes delegating authority to him to oversee the project on behalf of the association.

Contractor #2. With regards to managers acting as contractors, does this apply to in-house managers who are employed by and work exclusively for an HOA? -Claire M.

RESPONSE: Because your manager is an employee of the association, he is exempt. If you were paying a third party (a management company) to oversee the project, there could be exposure.

Contractor #3. The management contract for our association calls for the management company to “monitor the activities of the contractor… including…the obtaining of contract documents, certificates of insurance, copies of bonds, warranties, releases of liens and other necessary or prudent documentation.” -C. L.

RESPONSE: The case that triggered the Legislative action involved a construction manager who engaged in various oversight activities for an owner. Those activities included the following:

…assist, on behalf of the Owner, in coordinating the activities of the various workers to enable them to complete their assigned tasks in an organized and efficient manner, on time and on budget; to maintain records such as insurance certificates, as well as the financial books and records for the project; to keep the Owner apprised of the status of the project; to be the onsite “point person” to respond to issues as they arose; and generally to act as the Owner’s agent with respect to the various parties connected with the development of the project. Plaintiff had no responsibility or authority to perform any construction work on the project, or to enter into any contract or subcontract for the performance of such work. (The Fifth Day v. Bolotin (2009) 172 Cal.App.4th 939, 948.)

The court decided that these activities did not make the consultant a contractor. The Legislature disagreed and revised the law to broaden the definition of who needed a contractor’s license. By implication that means that a manager who engages in the above activities would be subject to criminal and civil penalties if not licensed as a contractor.

Contractor #4. WOW! This is a big one. I agree that managers should not oversee construction projects. To do this the HOA manager should not act in the capacity of a general contractor. They should hire a general contractor when multiple trades are involved in the same project. They should never put themselves in a position of coordinating the work between sub contractors or dictating the “means and methods” of work. Managers should not oversee the actual work of the project which includes (from Merriam-Webster): administration, care, charge, control, direction, governance, government, guidance, handling, intendance, management, operation, conduct, presidency, regulation, running, stewardship, superintendence, superintendency, supervision. -Mike G.

RECOMMENDATION: Legislators have a way of targeting one thing and hitting something else. Perhaps if they were members of the NRA, their aim would be better. If a management company would volunteer to be sued, I could nail down how broadly the contractor licensing requirements will be interpreted. Until then, all I can do is recommend that boards and management companies take a close look at how they handle construction projects.

QUESTION: For 12 years I was able to put a Happy Birthday sign for one day on a common area. Nothing was said to me about the sign. Now I got a letter from the management company that I can no longer do that?

ANSWER: For years I rolled through a stop sign at particular intersection without being molested. One day a cop gave me a ticket. He was not sympathetic to my argument about the years of precedent I had set. He must work for your management company.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: If an HOA changes its name, do the original CC&Rs and bylaws still remain the governing documents even if the board has not yet paid to have them updated with the new name?

ANSWER: Yes, the documents are still valid even though they contain the old name. CC&Rs are recorded against all property in the development so they remain intact regardless of what you call the development. It is like a young lady getting married, she is still the same person and her credit card debt follows her regardless of the name change (not that she has any debt…I’m just saying it would if she did). In the same way, bylaws follow the corporation not the name. Even so, the board should be diligent about updating documents.

Loss of Name. Sometimes an association will inadvertently lose their corporate name because it was suspended for failing to file tax returns or statements of information. When that happens, it could end up with one name for the corporation and another for the development (via the CC&Rs).

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: I serve on the board of a townhome association. We have a potential buyer of a unit that is a limited liability company. If the LLC becomes an owner and the LLC has 50 members, will all 50 members have rights to use the common area facilities?

ANSWER: Good question. Because of the uncertainty and to avoid potential litigation over the issue, we address it when we restate CC&Rs and bylaws for our clients. We define who does and does not hold voting and common area usage rights for (i) those who merely hold a security interest in the property, (ii) tenants, (iii) trusts, (iv) corporations, (v) partnerships, and (vi) other ownership entities. Doing so eliminates the problem. Your association should consider doing the same. If you have questions, contact us.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: Some in our association want to change the rules and allow dogs off leash. Can we eliminate our leash rule if it violates the rules of Santa Cruz county?

ANSWER: Unless your governing documents state otherwise, your association is not obligated to adopt and enforce the county’s pet ordinance. Because homeowner associations and local governments each have their own jurisdictions and enforcement powers, they operate independently and the ordinances of one do not void the rules of the other.

That means your association can eliminate its leash rule. Doing so, however, does not mean residents can turn their dogs into free range pets. Owners still fall under county ordinances, which means the county can fine them for not keeping their dogs on a leash. The reverse is also true. If the county drops its leash ordinance, your association is not obligated to follow suit–your HOA can continue to enforce its own leash rules.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: Can a board add Wi-Fi to the clubhouse and charge homeowners for the monthly fees without a vote of the owners?

ANSWER: Depending on the cost, yes. Wi-Fi stands for “Wireless Fidelity.” It is a user friendly term for “IEEE 802.11b direct sequence,” the specifications used for establishing wireless local area networks. People have become so dependent on the internet that Starbucks offers free Wi-Fi in their stores, which is why you see so many people spending their days sipping grande, nonfat, no whip, one pump sugar-free, no foam, extra hot, double vanilla lattes while working on their laptops.

So it’s no surprise that associations are now installing Wi-Fi in their clubhouses. Unless the governing documents state otherwise, boards have the authority to provide Wi-Fi service if funding does not exceed a 5% special assessment or increase dues over 20%. If members believe Wi-Fi to be a complete waste of money, they should make their feelings known to the board. They also have the option of running for the board on a platform of pulling the plug on Wi-Fi.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: Can a board make owners use one company for cable/TV/phone, negotiate a contract (and rack up legal fees for review), and then add those costs to dues? Doesn’t each owner have the option of who should provide them with those services? And if the board can negotiate a contract for the entire project, doesn’t it have to go to a vote of the membership?

ANSWER: It depends on your governing documents. If they grant the authority to do so, your board can enter into bulk cable agreements without membership approval. Absent any authorizing language, however, the board must take it to a vote of the membership. This issue was litigated last year in Pennsylvania. The board of the River Park House OA entered into a contract with Comcast which required all residents to pay for cable so the entire association could obtain a substantial discount on the service fees. One of the members argued that (i) cable television was a luxury not a necessity, (ii) not everyone used the service and (iii) the board lacked authority to contract for the service. He refused to pay for the service and the association sued.

Proper Authority? The association argued that it had the best interest of its residents in mind when it contracted for the bulk rate. The court, however, was more interested in whether the association had the authority to do it. The court examined the association’s governing documents and found language authorizing the board to incur expenses related to “operations, health, maintenance and safety decisions.” The justices determined that cable television did not fit into any of those four categories. Although the board acted in good faith, it acted outside the scope of its authority and the court ruled against the association. (River Park House Owners Association v. Crumley 47 A.3d 870 (Pa. App. 2012).)

Necessity? One of the appellate judges dissented. He felt that “[i]n today’s real estate world, cable television and internet services are as much of a condominium necessity as general landscaping services and, therefore, the Council acted properly in levying the cable television minimum fees.”

COMMENT. I believe the result would be the same if bulk cable agreements were litigated here–a board would need authority either from the governing documents or by a vote of the membership before contracting for the service.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: We have a board member who refuses to sign a rather benign ethics pledge. All the other board members signed it. This person voted to authorize the pledge but now refuses to sign it. What actions can the board or the membership take short of recalling this fool?

ANSWER: Adopting an ethics pledge is something all boards should do. Even though directors cannot be forced to sign a pledge adopted by the board, the membership has a legitimate interest in knowing that a director refused to sign it. That means an article can be placed in the association’s newsletter listing which directors signed the pledge and which ones did not. Knowing which directors are ethically-challenged could affect members’ votes when it comes to recalls and reelections.

Bylaw Amendment. If you want to make ethics pledge mandatory, you need to amend your bylaws to make it a qualification for serving on the board. Then if nominees refuses to sign it, they cannot run for the board. Even if they mount a write-in campaign, they can be barred from serving regardless of the number of votes they might receive.

RECOMMENDATION: Boards should talk to legal counsel about drafting an ethics policy and appropriate language for a bylaw amendment.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: I have a question concerning abstentions at board meetings. We have seven board members. With six directors present at a recent meeting, three members voted yes, one voted no, one was absent and two abstained. Is the motion approved?

ANSWER: No, the motion is not approved. With six directors present, you needed a majority (four) to approve the motion. The two abstentions essentially acted as “no” votes since they were not “yes” votes. Because three is not a majority of six, the motion failed.

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP

QUESTION: If an owner is called into a hearing for the actions of a tenant, can the tenant join him at the hearing? Can the board refuse the tenant since the owner is the one being fined, not the tenant?

ANSWER: The board cannot prohibit the tenant from appearing with the owner. Even though the board will be fining the owner, the fines are because of the tenant’s behavior. Due process requires that the owner and tenant have a right to defend themselves. How can the tenant dispute evidence at the hearing if he is barred from attending?

Adrian J. Adams, Esq.
ADAMS & KESSLER LLP