New Law Affects Disputes, Meetings and Fees

The state Legislature enacted a number of new laws in 1996 that affect community associations in important ways.

The most significant new law, sponsored by Assemblywoman Jackie Speier (D-Burlingame), amends four sections of the Civil Code governing alternative dispute resolution, open meetings, assessment collection and lien procedures.

The law provides a homeowner with the right to submit a conflict over unpaid assessments to mediation or arbitration. Previously, state law excluded delinquent assessments from the types of disputes that associations had to attempt to resolve through mediation or arbitration.

Under the new law, the delinquent owner may request mediation or arbitration to resolve conflicts with the association over amounts owed.

The owner must pay the delinquent assessments, late charges, interest, collection costs and a maximum of $450 in attorney’s fees and indicate in writing that the payment is being protested.

The written notice of protest must be mailed by certified mail within 30 days of the recordation date of the lien.

The association must notify the owner that the dispute can be resolved using alternative dispute resolution, civil action or any other procedures that may be available to the association.

An owner is allowed to use alternative dispute resolutions two times in one calendar year or a maximum of three times in five years.

Here is a summary of the new law’s other key provisions:

* Homeowners may speak at board meetings.

The law requires that all members be allowed to speak at all association meetings and all board meetings, except executive sessions. However, the board may establish reasonable time limits for homeowner input before the association or board meeting.

Most associations do provide a time for owners to speak at their meetings. However, I still often hear of boards that conduct secret meetings and of dictatorial presidents who make important decisions without informing the other board members. These illegal practices place the association in jeopardy of being sued.

A board may deliberate in closed executive session to discuss third-party contracts, such as the termination of the contract with the management company. However, many attorneys recommend that the board’s vote should be taken in an open board meeting and that the decision should be noted in the board meeting minutes.

* Assessment collection procedures and lien requirements. The Civil Code was amended to include the following:

“Before an association may place a lien upon the separate interest [lot or unit] of an owner to collect a debt that is past due under this subdivision, the association shall notify the owner in writing by certified mail of the fee and penalty procedures of the association, provide an itemized statement of the charges owed by the owner, including items on the statement which indicate the principal owed, any late charges and the method of calculation, any attorney’s fees and the collection practices used by the association, including the right of the association to the reasonable costs of collection.

“In addition, any payments toward such a debt shall first be applied to the principal owed, and only after the principal is paid in full shall such payments be applied to interest or collection expenses.”

In the past, many associations have applied payments to the amount that was first incurred, the first-billed, first-paid accounting method. For example, if there were late charges on an owner’s account, those late charges would be paid first before the next month’s assessment.

If the owner’s payment did not completely cover the amount owed, then the assessment for the next month would be considered delinquent because of the balance owed for the previous month’s late charges. Associations using this accounting method will have to revise their procedures to comply with the new law.

After a lien is filed, the association must notify the delinquent owner within 10 days by sending a copy of the lien and the recording date by certified or registered mail. The association cannot begin the foreclosure process until a 30-day waiting period has expired.

* Disclosure of insurance coverage. A new law sponsored by state Sen. Cathie Wright (R-Simi Valley) pertains to a community association’s obligation to disclose insurance information to its owners.

In the 60-day period before the beginning of the association’s fiscal year, the association must distribute a summary of the association’s insurance coverage relating to property coverage, general liability, earthquake and flood insurance.

The information must include the name of the insurer, the type of insurance, the policy limits and the amount of the deductibles, if any.

As I often remind “Condo Q&A;” readers, I am not an attorney, and information provided here should not be considered legal advice. Associations and homeowners should consult legal counsel regarding any or all of the requirements that these new laws impose.

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‘97 ‘Bluebook’ Covers the Basics “The Condominium Bluebook” is an excellent resource for condominiums, planned developments and other forms of community associations. The 1997 edition contains all of the recent changes in the law.

Copies of “The Condominium Bluebook” can be obtained by sending your check for $20, made payable to Condo Consulting Services, to Condo Consulting Services, P.O. Box 5068, Thousand Oaks, CA 91360. Allow four weeks for processing your order. The cost includes tax, postage and handling.

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Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions received. Send questions to Condo Q&A;, Box 5068, Thousand Oaks, CA 91360.