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By David Swedelson, senior partner, SwedelsonGottlieb, California condo lawyer and HOA attorney

“Homeowner Associations Are Not Required to Create Reserve Accounts?” This was the title of a recent Los Angeles Times column on community association law written by two individuals who I do not believe are really community association legal experts (one is an attorney, and the other went to law school, so why the Times has them writing this column is not understood). Their lack of HOA legal expertise is evidenced by their inane and often incorrect responses to the questions they are responding to.

I often question if the questions are real, as in over 25 years of representing California community associations, I have never encountered or even heard about some of the fact situations that they claim they are responding to. Other times, I just chuckle and shake my head (literally), as I cannot believe their responses to the questions. Usually, they are very cynical, and typically they suggest that owners sue their condo or HOA association and its board. More often than not, I am concerned that owners at community associations are reading the incorrect information that they publish and are relying on the poor advice.
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By David C. Swedelson and Sandra L. Gottlieb, California Condo Lawyers and HOA Attorneys

It’s fall, and that means that most community association board members and management are busy finalizing their budgets (this applies to most community associations that have a calendar fiscal year). Unlike the old days, the budget is not all that California community associations need to be concerned about. What about all those disclosures that are required annually? Are you sure that your association is in compliance? Never fear, SwedelsonGottlieb is here with our updated annual disclosure checklist. Follow this link for a PDF copy of our checklist which we provide annually, setting out all of the statutory disclosures that California community associations are required to provide to the owners/members.
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By SwedelsonGottlieb, Community Association Attorneys

So, your Association has a homeowner who is delinquent on his assessments. Before you are able to make any progress on collection and before a lien is recorded, you receive notice that he has filed for bankruptcy. What happens next?

The moment a debtor files for bankruptcy, an “automatic stay” is imposed. The automatic stay prevents creditors from taking any action to collect from a debtor. This is intended to give the debtor some breathing room and allow him to clearly evaluate his financial position without having to fend off creditors. Therefore, all collection efforts must cease until the automatic stay is either lifted or terminated.
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By SwedelsonGottlieb, Community Association Attorneys

We have all heard the terms “Senior Lien”, “Junior Lien”, “First Mortgage”, “Second Trust Deed” and whatever other variations of those terms are out there. Here we are going to explain exactly what those terms mean and how they relate to a foreclosure action.

A lien is simply a way to secure a debt to a piece of property so that the association has some priority especially over the delinquent owner’s unsecured debts. When someone owes money to another, that debt can be secured by recording a lien. That debt is then attached to the property, and the lien must be paid before the property can be sold. The property becomes collateral for the debt. If the borrower fails to pay the debt when due, the lien holder can force the sale of the property in a foreclosure action in order to get paid.
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By Sandra Gottlieb, Senior Partner SwedelsonGottlieb; Condo Lawyer and HOA Attorney

We know that there is a tendency to classify some condo and HOA staff as independent contractors rather then employees. Some community association boards want to do this because they think that such a classification will mean that their association will not have to pay for all of fees, charges, taxes, etc. that are normally associated with an employee. They also think that they can avoid vacation pay, payroll taxes, medical insurance, etc.

The staff member may want the independent contractor classification as then they believe that they will not have taxes deducted from their checks, that they can then write off their car and other expenses and benefit in other ways.

Well, the government knows what you are doing and they are not happy about it. There has been an increasing effort by the State and Federal governments to address this “problem”. The fact is that in many situations, that staff member is not really an independent contractor, as they work full time at the association, use the equipment, etc. provided by the association and get their direction from the association.
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By David C. Swedelson, Senior Partner SwedelsonGottlieb, California Condo Lawyer and HOA attorney

Interesting article in the October 23, 2011 edition of the Los Angeles Times regarding recent rule revisions by the Federal Housing Administration (FHA). Follow this link to read the article. We have been reporting on this issue, follow this link to read our blog post from August 21, 2011, “CAI Slams latest FHA Guidance”. As pointed out by the article, a little-publicized switch in federal mortgage policy is causing problems for condominium sellers, buyers and homeowner association boards across the country.

The recent series of rule revisions by the Federal Housing Administration has apparently caused thousands of common-interest developments to become ineligible for FHA mortgages. The article suggests that this has abruptly shut off loan money for would-be buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments – sometimes 20% or higher versus the FHA’s 3.5% minimum – that they often cannot afford.

The FHA defends the rule changes it has adopted, which focus on community association budgets, insurance and financial reserves, as having been prudent and designed to avert losses from delinquencies and foreclosures. The FHA nonetheless acknowledges that thousands of community associations have failed to obtain or apply for required recertifications under the new rules. “Out of approximately 25,000 common-interest developments nationwide with expiration dates for FHA eligibility between last December and Sept. 30 of this year, only 2,100 – just 8.4% – have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesman.”
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Blog posting by David C. Swedelson, Condo lawyer and HOA attorney; Senior Partner SwedelsonGottlieb

Amazing story out of Florida involving an attorney/owner of a condominium who asked her condo association to place a trash receptacle in the mail room so she could have a convenient place to dispose of her junk mail. When her association declined the request because of a concern about having to maintain that trash receptacle (as owners may put more than junk mail in the trash), the owner decided that she would just dump her mail on the floor. This is a true story; you can’t make this stuff up.
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Blog post from David C. Swedelson, Condo Lawyer, HOA Attorney and Senior partner SwedelsonGottlieb

We are often asked how a building contractor’s poor workmanship was approved by the City’s inspector from the Department of Building and Safety. Now we know one reason; some inspectors are taking bribes to look the other way or not even inspect.

The LA Times reports that Raoul Germain, a City of Los Angeles building inspector, has been sentenced to 21 months in prison after pleading guilty to taking bribes. Germain was caught as part of an FBI sting operation in which he approved work in exchange for thousands of dollars in bribes. The Times notes that that in some cases, Germain never visited the construction sites.

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By David Swedelson, Condo lawyer / HOA and Community Association Attorney; Partner, SwedelsonGottlieb

It has been assumed by many that if a California community association holds its foreclosure sale (as part of the assessment collection process) and after the sale the delinquent owner files bankruptcy, that the bankruptcy did not impact the sale. Not so, according to the United States Bankruptcy Court for the Central District of California, which recently held that the filing of a bankruptcy petition by a borrower (in our case a delinquent owner) can void a trustee sale even where the petition is filed after the trustee sale, so long as the borrower/delinquent owner files the bankruptcy petition before the execution and recordation of the trustee’s deed upon sale. [In re: Gonzalez (Bkrtcy. C.D.Cal. August 1, 2011) 456 B.R. 429].

As we know, a delinquent owner has the ability to file a bankruptcy to stay or stop a trustee sale prior to the actual sale. And many delinquent owners do. Many people believe that once the trustee sale occurs, the bankruptcy filing by the owner does not impact the sale. Wrong!
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Assembly Bill 771 (Betsy Butler), which amends Civil Code Section 1368 regarding documents to be provided the buyer in an escrow, was sponsored by the California Association of Realtors and initially sought to place a cap on fees that may be charged by management companies and others who provide documents upon sale or transfer of a separate interest. This bill was opposed by all industry trade groups and was ultimately revised to remove the cap. As signed by the Governor, the bill sets out the items which are to be provided to a buyer as well as an estimated fee for each.
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