Assembly Committee Hears Condo Woes : Legislation: Testimony heard on lawsuits against developers and association boards, and embezzlement by managers.

An Assembly committee recently held three days of hearings on development problems, financial concerns and other issues of importance to condominium and homeowner associations in California.

The Select Committee on Common Interest Subdivisions, chaired by Assemblyman Daniel Hauser (D-Arcata), heard testimony from public officials, association managers, accountants, attorneys and homeowners.

The testimony will be reviewed to help determine the needs of community associations, and although the committee will not write specific bills, it will recommend legislation to the Assembly Speaker and the Committee on Housing and Community Development.

The committee heard testimony on the increasing number of lawsuits against developers and volunteer homeowner board members.

Board member Ed Baker of Mission Village Condominium Assn. in San Diego testified to the difficulties of running a community association like a business while being threatened with a lawsuit by indignant owners every time the board of directors tries to enforce the governing documents of the association.

The committee learned about associations whose funds were misappropriated or embezzled by management company personnel.

Some of the participants recommended that the Legislature consider forming a state agency similar to the Bureau of Condominiums in Florida, which licenses community association managers. Hawaii also has a state agency that licenses managers and provides mediation services to associations to reduce lawsuits.

The California Assn. of Realtors and the Institute of Real Estate Management believe that only real estate brokers should be licensed to manage community associations.

Other organizations, such as Community Associations Institute, oppose any requirement that managers be real estate brokers because the education and testing of brokers primarily deals with the selling, leasing and financing of real estate--skills that are seldom needed by community association managers.

What can the Legislature do to minimize the legal conflicts, financial problems and management burdens of community associations? Should community association managers be licensed after passing required training courses in the community association field? Is a new state agency needed?

“After the developer completes a project, there is no regulatory oversight,” said Carol Silverman, research associate with the Institute of Urban and Regional Development. “It makes sense to have an agency that would protect the consumer.”

Condo Q&A; would like to find out how readers feel about these issues:

1--Should a new agency be created in oversee California’s homeowner associations, planned unit developments and other forms of community associations?

2--Should community association managers be licensed by the state?

3--Should community association managers be required to be real estate brokers?

4--Should volunteer homeowner board members be required to take some form of training on the meaning of association legal documents and the laws that govern community associations?

Write your numbered answers on a post card only and add brief comments if you want. Send your post card to: Condo Q&A;, P.O. Box 5068, Thousand Oaks, Calif. 91360. Mail by Dec. 1. Answers and comments will be printed in future Condo Q&A; columns.

Should All Owners Get Financial Statements?

QUESTION: I live in a 34-unit condominium that is managed by the volunteer board members. I went to a board meeting this week, the first one that the board has held in five months. At this meeting, the treasurer was absent and she did not provide a financial statement.

Although no financial report was given, there was some discussion that an increase in assessments may be necessary. Should all homeowners be receiving financial statements on a regular basis? Should I be concerned about the infrequent meetings and lack of participation by the treasurer?

ANSWER: Check the association’s bylaws to find out how often the board is supposed to meet. According to California law, Civil Code Section 1365.5, the board should be reviewing, at least on a quarterly basis, the financial records and reconciled statements from the bank or savings and loan institution where the association’s operating funds and reserve funds are deposited.

Normally, only the board members would receive the financial statements. However, copies should be provided to other owners if requested. All owners should get an annual financial report.

If the treasurer is a volunteer, it may be difficult to require that she prepare a financial report each month. However, I believe that even volunteers should have some guidelines from the board on what their responsibilities are. Of course, the board’s procedures should comply with the state law.