Allocating Water Bills

QUESTION: I rented my condo to a family of six--two adults and four children. The HOA now wants owners to pay for water based on the number of occupants rather than equally as is currently done. Can the HOA legally require me to pay for water based on the number of occupants?

ANSWER: In light of the drought and the unequal usage created by a unit full of renters, allocating expenses based on usage has two advantages for the association: fairness and conservation.

Fairness. On the equity side, why should an elderly widow who lives alone subsidize water for a unit with six renters–especially when the landlord is making money on the rental? The more equitable approach is for each owner to pay their own share of water usage.

Conservation. Making owners pay based on usage also creates an incentive to conserve water. Owners will use less water when the money flowing out of their pocket is tied to the water flowing out of their faucet.

It Depends. Whether the association can change its billing practice depends on its governing documents. If the CC&Rs clearly require that the cost of water must be shared equally regardless of usage, the association must amend its documents before it can change its billing.

Renters. If the CC&Rs are silent on the issue, the association bill owners based on estimated usage. In Watts v. Oak Shores, the court of appeals supported the association’s authority to allocate cost. Watts was a landlord whose renters increased the association’s expenses. The board estimated those costs and assessed Watts. Watts sued and lost. He then appealed and lost. (He has now petitioned the Supreme Court–we don’t know yet whether the court will hear his petition.)

Reasonable Allocation. I believe the principles delineated in the Watts decision have a broader application than just renters. If an association is master metered, it could estimate water usage based on the number of people living in a unit. The court of appeals wrote that:

Nothing in the language of [Civ. Code §5600(b)] requires the exact correlation between the fee assessed and the costs for which it is levied… In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive… The most reasonable interpretation of [Civ. Code §5600(b)] is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. (Watts v. Oak Shores.)

According to the California Water Resources Control Board, residential water use averages averages 77 gallons per person per day but ranges from 43 gallons to 427 gallons per person depending on the locale. A map of California published by the New York Times shows water usage around the state. An association could use such numbers to estimate water usage and levy appropriate charges.

RECOMMENDATION: Condominium associations should have legal counsel review their governing documents to see if they can bill owners based on water usage. If not, they need to amend their documents. If documents are silent or allow it, boards should contact their local water board for per person average water usage. In addition, boards should implement additional water conservation by addressing leaks inside owners’ units. For assistance, contact us.

Insurance Hammer Clause

QUESTION: One of our members filed a bogus lawsuit against the board and our insurance appointed a law firm to defend us. After a year of being put through the ringer by a nutcase plaintiff and his slimy lawyer, our attorney is recommending settlement. We don’t want our insurance paying him a dime. We know we can beat this guy in court. Are we in our rights to refuse settlement and demand that the case go to trial?

ANSWER: You can refuse settlement but first you should find out if your insurance policy has a “hammer clause.” If it does, you need to carefully weigh the pros and cons of continued litigation. On the plus side, if you take the case to trial and win you discourage others from filing spurious lawsuits against the association. If you lose, it could cost the association a lot of money and a special assessment.

Economics of Settling. Insurance companies don’t look at who’s right or wrong–they look at the economics, i.e., the cost of taking a case to trial verses the cost of settling. Not only are trials costly, there is a risk of losing. A loss could burden the insurance company with damage awards and plaintiff’s attorneys’ fees. to avoid the risk, they like to settle.
Hammer Clause. To ensure that boards cooperate with settlement offers, insurance carriers frequently insert a “hammer clause” in their policies. In the event a board refuses to settle and takes a case to trial and loses, the association, not the insurance company, pays the difference between the rejected settlement offer and (i) any additional legal fees incurred by the carrier, plus (ii) any judgment against the association, plus (iii) any award of legal fees against the association.

Plaintiff Refuses to Settle. Sometimes it’s the nutcase plaintiff who refuses to settle. When that happens, insurance continues to pay for defending the association through trial and sometimes beyond (if the nutcase loses and files an appeal).
Thank you to Tim Cline of Timothy Cline Insurance for his assistance with this question.

Pepper Spray for Employees

QUESTION: Our association has a large onsite staff. A police officer attended our staff meeting because of recent security incidents affecting our employees. He said we should issue pepper spray to them for their safety. I am concerned about liability.

ANSWER: While it’s appropriate to be concerned about liability, it should not outweigh the safety of your employees. If there is a foreseeable risk of harm to your staff and the association does nothing, you could have a bigger liability problem if an employee is attacked and injured.

Proper Product. If you issue pepper spray to employees, make sure you get the right product. Do not get tear gas. Unless you know what to purchase, you should buy from a California store rather than the internet since different states have different laws. A California store will carry the proper type of pepper spray. Also, don’t buy the key chain size; get something larger.

Proper Training. To protect against potential liability, get your employeescertified to use it. Like any weapon, the first step is education and training. You should have a written policy and instruct your employees that pepper spray is only for self-defense, not for apprehending criminals (or subduing unruly board members).

Proper Control. Keep the product locked up when not in use to keep it out of the reach of children and unauthorized adults. You should keep a log where employees check the product in and out with each shift. Otherwise, it may disappear.

RECOMMENDATION: Talk to legal counsel and a security consultant to see if other measures can be taken to protect employees without issuing pepper spray. If you need the product, they can assist with guidelines and proper training.

Thank you to attorney Wayne Louvier for researching this issue. 

Pythons as Pets

QUESTION: If our CC&Rs don’t restrict it, can an owner have a python as a pet? A member found a python that got loose in their garage and the owner still has another one in his unit.

ANSWER: Yes, pythons can be restricted, even if your CC&Rs are silent on the issue.

Domesticated Animals. Normally, CC&Rs have language limiting pets to usual domesticated cats, dogs, fish and birds. A python is neither usual nor domesticated. Most people consider them quite scary. If you were rummaging around in your garage, which would you rather be surprised by–a puppy or a 10-foot snake? As a “pet” you can’t pet them like a kitten, you can’t let them slither around the property unattended, and if you value your life you can never sleep with them. Feeding them is not for the squeamish, not to mention the terrified mice.

Can Be Deadly. Pythons can grow to 23 feet and weigh up 250 pounds. Even though they are not venomous, they can deliver a nasty bite. They are generally docile, until they’re not. A large python can easily kill a person. Last month, one nearly crushed to death a pet store owner before police were able to pry it off him. It was wrapped around his head, neck, and torso. In 2013, two young brothers were strangled in their sleep by a python. In 2009, a python crushed the life out of a two-year-old girl while she slept in her crib. When a python is hungry, people and pets are not safe. Pythons cannot be trained as service animals and if someone claims it’s a “therapy” animal, the person truly needs therapy.

RECOMMENDATION: Owners can give their snakes cute names (Monty comes to mind) but they remain creepy and deadly and associations can ban them if they so choose. A prohibition can be done by amending CC&Rs or by a simple rule change.

Pet Weight Restrictions

Source: Adrian J. Adams, Esq.

QUESTION: Our CC&Rs state that each homeowner may have two pets up to 25 pounds each. A prior board adopted a rule relaxing the restriction to 40 pounds. Is the rule valid? Also, can guests bring pets that go over the weight limit?

ANSWER: Unfortunately, your rule is invalid.

Statute. As provided for in the Davis-Stirling Act, “To the extent of any conflict between the operating rules and the…declaration [CC&Rs], the… declaration shall prevail.” (Civ. Code §4205(d).) If the CC&Rs set the maximum at 25 pounds, then the maximum is 25 not 40. Case law also gives priority to recorded restrictions.

Case Law. In Ekstrom v. Marquesa, the CC&Rs had a provision that protected views by requiring all trees be trimmed so they not exceed the height of the house. The board exempted palm trees because trimming them would kill them. An owner sued and the court found that the CC&Rs were clear and unambiguous and the board’s actions were inconsistent with the restriction. The trees had to be trimmed.

Amend CC&Rs. That means the rule adopted by the board is invalid. To increase weight limits from 25 to 40 pounds, the association must amend its CC&Rs.

Guests. Weight restrictions apply equally to tenants and guests. Some associations prohibit guest pets altogether. I see this primarily in condominiums, particularly highrises. When it comes to guest pet restrictions, they can be adopted by the board as a rule change.


RECOMMENDATION: Your 40-pound rule should be rescinded. That, of course, will create problems with those who already have over-weight pets and others who want them. The only way to avoid legal problems is to immediately put a CC&R amendment before the membership increasing  weight limits from 25 to 40 pounds.

Damaged Driveway

Source: Adrian J. Adams, Esq.

QUESTION: My association billed a resident for damage he caused to a common area driveway. The resident paid but the board intends to keep the money without making  repairs. Any thoughts?

ANSWER: Although there is nothing directly on point about taking money for one purpose and using it for another, the statute “Thou shalt not…” comes to mind—it’s quite authoritative. (Bible, Commandment #8.) The Davis-Stirling Act also comes into play, i.e., association’s are obligated to repair and maintain the common areas. (Civ. Code §4775(a).)

Unsafe Condition. Moreover, if the damage is safety related, I’ve found that juries tend to punish boards who have a a known unsafe condition, do nothing and someone is injured. General Motors is well acquainted with the concept. For some reason, they thought it was a good idea to ignore defective ignition switches. Last week they were fined $35 million. That’s in addition to the enormous legal expense to defend and settle a slew of lawsuits and the cost to replace 2.6 million ignition switches.

Cosmetic Damage. If the driveway damage is purely cosmetic, the board could choose not to make the repair and sit on the money. But that would likely create unhappy homeowners.

CHANGING
MAINTENANCE DUTIES

QUESTION: Is a 75% vote of mortgagees as well as owners required to amend maintenance obligations of CC&Rs?

ANSWER: That depends entirely on the amendment requirements in your CC&Rs. Amendment provisions are normally found in a paragraph at the tail-end of your CC&Rs. It spells out the voting percentages for owners.

In addition, you need to check the mortgagee (lender) provisions–often an entire section toward the middle or end of your CC&Rs. It will list any categories of changes requiring their approval (which might include any changes to maintenance obligations).

FEEDBACK

Paid Directors #1. Please inform me of the name of the complex that pays their board members. I am already packing and ready to move. And to the grouch with no sense of humor NUTS TO HIM! Thanks for your weekly informative e-mails and do not lose your sense of humor. With much appreciation. -Gloria F.

Paid Directors #2. Our board of directors/officers, receive a monthly stipend. All directors are elected by the owners of our association. They are not volunteers. Should we stop paying stipends? -T.C.

RESPONSE: “Stipend” is merely a euphemism for paid directors. If it were me, the stipend would have to be REALLY big to make it worth the risk I take on as a paid director. It’s like robbing a bank for $50. It doesn’t make any sense; the risk outweighs the reward.

Nuts on the Board. From where we stand, most associations are so dysfunctional that members stay as far away as possible from the headaches of participation because “nut jobs” who get themselves permanently planted on boards. -Teresa A.

RESPONSE: The worst case scenario for the membership is a board with truly bad directors. I believe it was Edmund Burke in the 1700s who wrote that, “The only thing necessary for the triumph of bad directors on HOA boards is for good members to do nothing” (or something to that effect). Fortunately, bad boards are the exception not the rule. Most boards have good people doing their best under difficult circumstances.

Corporate Proxies. Corporate vs. HOA proxies–OK, what if your HOA is a corporation as well? Which statute controls in that case? -Robert M.

RESPONSE: The Davis-Stirling Act.

Thank You. Thank you for your personal help and a wonderful internet site. It has been fascinating watching your business grow during the past ten year I’ve lived in this condo. -Dick S.


RESPONSE: It’s been my pleasure providing the service.