Use Paralegal or Attorney for Legal Advice?

QUESTION: Our homeowners association was recently contacted by a paralegal from a neighborhood legal and bookkeeping service. We were told that the association’s declaration of covenants, conditions and restrictions must be updated every year. He also stated that the association must have an audit done every year.

The cost of the legal work seems very reasonable, but we are wondering whether the advice regarding updating the CC&Rs; is correct. What do you advise?

ANSWER: I recommend that the association obtain the services of an attorney who specializes in community association law and stays informed about all the laws and new legislation that govern common interest real estate developments and nonprofit mutual benefit associations.

Associations do not have to update their CC&Rs; every year. Amendments to the CC&Rs; usually require the approval of either two-thirds or three-fourths of the voting membership. Amendments must be recorded with the county recorder upon certification of the prescribed number of affirmative votes from the full membership.

All condominiums, homeowners associations, planned developments, cooperatives and “own your own” community apartment projects must distribute a financial report each year. Associations with annual income greater than $75,000 must have a financial review prepared by a state-licensed accountant. A full-scale audit is not required annually unless the association’s legal documents specifically state that an audit is mandatory.

Please refer your questions to an attorney who can review your association’s legal documents and advise you. In my opinion, this particular neighborhood paralegal service may not be your best resource.

Roof Still Leaks After $30,000 in Repairs

Q: Our association has spent over $30,000 in the last two years on roof repairs. We still have leaks and we are having difficulty getting any response from the roofing contractor since the recent rains.

Some of the board members have obtained bids for a new roof but we aren’t sure that a completely new roof is necessary. The bids vary greatly in price and scope of the work. We don’t know where to go for help.

A: This is a big decision for your association, especially if your board members aren’t roofing experts. A new roof is usually a very large expenditure. I recommend that you contact some independent roofing consultants and then select one who will examine your existing roof and write detailed specifications for the necessary work. Then you can obtain competitive bids from several roofing contractors based upon the written specifications that the consultant provides.

An independent consultant is an objective third-party who provides professional guidance but does not actually perform the roofing work. The independent consultant sometimes supervises the work of the roofing contractor after the contract has been negotiated and signed.

The consultant saves the board members’ time and energy and sometimes prevents the association from making a disastrous and costly mistake. By using a paid expert to verify the contractor’s licenses, warranties, insurance coverage and references and write the specifications, the board members reduce their liability if problems do arise.

Electrical Repairs Could Shock Board

Q: One of the board members in our homeowners association takes care of minor repairs and painting in our complex. Everyone seems to appreciate his work because of the money he is saving the association.

I recently learned that he has been doing some electrical work in addition to his handyman duties. He is not a licensed electrician. I have talked to the rest of the board members but no one is concerned about the risks and liabilities involved.

If someone is injured because of faulty work, isn’t the association liable? Would the association’s insurance policy cover the association for an injury or damage claim if the board knowingly hires an unlicensed person?

A: In my opinion, the association should play it safe. The board should hire licensed contractors who have sufficient workers’ compensation and liability insurance coverage. Most cities require that permits be issued for electrical work. If the proper permits are not obtained and unlicensed workers are employed, the association is taking a risk that could result in a large property damage or personal injury claim against the association due to fires or electrical shocks.

Your board members should discuss these concerns with the association’s attorney and insurance agent. Are there exclusions in the insurance policy that would allow the insurance company to deny a claim? If a loss is not covered by the insurance company, can the association afford to pay the damage claims?

Board members who focus only on saving the association’s money sometimes lose sight of the risks. They should remember that they have a responsibility to make sound business decisions that protect the association from liability.

The unlicensed board member may not be aware of his personal risk when he performs these good deeds for the homeowners association. An unlicensed person whose work results in personal injury or damages can be taken to court for additional damages of triple the amount of the loss, up to a maximum of $10,000.