ey, I am right back on schedule - an October newsletter in October in spite of fall color hunting and shooting (photographs of course) in the mountains of Tennessee and Vermont this month! Wonders never cease. This month starts a series of issues on new legislation. We just ended another turbulent year in Sacramento with people and groups fighting over proposed legislation and already griping about new laws. This edition is about the changes in the IDR law. Next month I will tackle the changes in the maintenance of exclusive use common area law, and after that, in January, the dichotomy between the new law that says HOAs cannot fine owners for refusing to water their lawns (called by some the "browning of California") OR prevent owners from planting gardens in their lawn areas (called by some the "support local farming"). Certainly the drought has become epic and will be an ongoing topic of discussion her in California. There is a lot to talk about so stay tuned ... and get your friends on the list!
SO WHY DOES THE NEW HOA-IDR LAW IN CALIFORNIA MAKE PEOPLE SO CRAZY?
IDR stands for internal dispute resolution. It's supposed to help HOAs resolve disputes that arise between boards and owners by providing a default process that calls for a face-to-face meeting to discuss differences. It could be called "informal" dispute resolution, at least up until now. With the approval of AB 1738 by the California legislature, some say the "informal" process is out the window.
If true, that is unfortunate. If face to face meetings turn into attorneys "going at it" with legal arguments, the value of the "good old sit down and figure out what might work" opportunity is lost.
My experience in over 30 years of doing HOA legal work, performing services as a mediator, and providing solutions is that if the parties are willing to listen to each other, face to face, 90% of the time the "problem" can be resolved! This is the very reason why I took on extensive mediation training about 8 years into my career - I found that more and better solutions happened outside of rather than than inside the courtroom, and for a lot less money. So let's examine the change in the California IDR law and how the face of IDR might take on a new look.
The position of the owners' group that sponsored the new law is that owners get the short shrift in an IDR proceeding. And I can understand why it feels that way sometimes. Often the entire board is present along with the manager, and sometimes the board brings in an attorney, while the owner is only one person, feeling very small. Odds like that create an imbalance. Some owners don't feel that they have a chance to be heard, unless they can bring a lawyer to speak for them. And some boards wouldn't allow that. In any case, IDR never has a chance if there isn't some transparency and honesty about what to expect, and some congeniality and mutual respect for the process itself.
Owners' fears and complaints are sometimes justified (see owner comments below). But sometimes their thinking is clouded - a form of "paranoia" has developed. Sometimes they wear an unimpressive bias on their sleeve and that gets in the way of trust. For example, some owners criticize CAI or ECHO, and throw stones all members simply because of our affiliations (see more on this below). There can be bad apples in any group, including an owners' advocacy group. It does not mean the rest are automatically tainted.
Not to pick on owners. I acknowledge that CAI seems heavily weighted by lawyers and managers when it comes to advocacy in Sacramento. And while ECHO sports a large board member base, its message is sometimes driven by the professional members. And CACM is pretty exclusive (not for board members or owners). And I agree strongly that professionals, especially those whose emphasis is on advocacy rather than offering sage "counsel", tend to let their egos get in the way of discussing solutions that require a little give and take. But I keep my affiliations with these groups because they offer a very valuable asset in this state - that of education. If nothing else, go to seminars, talk to attendees and exhibitors, and seek out the people who offer suggestions, solutions, and support. They are out there, I promise you. And if you are a good judge of character, and willing to ask the tough questions, it does not take rocket science to assess people by their reactions, good or bad, professional or petty, and to recognize biases. I stay in these groups to educate. I submit articles to the publications to educate and promote balance and fair advocacy! And there are others of a like mind in these groups.
But my point is- along with some obnoxious people -there are people in all of these groups who are reasonable people willing to listen, and IDR can work whether there are lawyers present or not. The IDR process is much like mediation, absent only a trained facilitator/neutral. If the parties come to the table willing to discuss differences and with a desire to settle matters before they escalate, IDR has a great chance of success! The next process up, ADR (alternative dispute resolution), calls for a facilitator who can help the parties listen if they are incapable themselves because of past history, baggage, or ego. If any board member has good listening and people skills, and speaks from a rational and knowledgeable perspective, let them take the lead at the IDR proceeding, and you are very likely on your way to success.
What follows is what owners who wrote to me had to say about the bill as it progressed.
ONE: "I've seen strong opposition to this bill that allows an owner to bring an attorney to an IDR meeting. Thank you in advance for addressing it in a blog! You're absolutely the only person in any way associated with the HOA industry that I trust to even remotely care about we lowly homeowners. We will never, ever live in an HOA again." [Hint, clearly distressed but willing to listen.]
TWO: "With regard to AB 1738, I'm completely astounded that this full-employment-for-lawyers-favored bill was even considered, let alone passed into law. Who needs to support attorneys as a cause? Are we now to expect attorneys arguing at every IDR procedure?" [Clearly biased against attorneys. Probably did get that it was an owners' group that sponsored the bill.]
THREE: "In our association (I am a minority on the board), an owner requested IDR and this is the advice the association attorney gave us as a board: "All the board has to do to comply with the law is to have one board member meet with her, listen, say nothing, then adjourn." He said, "That board member doesn't have to say one word, doesn't have to give her any answers and doesn't have to make any decisions regarding her problem." In the attorney's words, "just give them a body and you've complied." [Board clearly exposed to uninspired and petty lawyering.]
FOUR: "I was shocked that you and the other CAI attorneys opposed AB1738. Do you not know the horrors in living in some of these HOA'S? Some HOA's don't even respond to a request from a homeowner for IDR. In our HOA they will meet and confer but it is sickening. The property manager presides over this meeting and usually gives advice to the board members, who never get legal advice. They make fun of the homeowner and 'railroad' them out. To make matters worse, the homeowner has no witness, no support whatsoever. To me, the passage of this bill is a Godsend. I don't see too many laws/civil codes which even benefit the homeowners. [Owner with bias against an organization.]
FIVE: "A friend of mine lives in an HOA in Irvine, had an issues and requested IDR, then ADR. The Board refused both; which isn't uncommon. In this particular case, she filed a lawsuit against her HOA and board and won. She cleaned their clock in court."
As you can see, even owners have differing views about the IDR bill and changes in the law. #One trusts me to address this. #Two disfavors the bill and sees it as a full employment for attorneys act. And #Three sits on a board and is appalled by the lawyer's advice (as I am!!). An owner could just as well receive bad advice from an attorney who says - "keep your mouth shut and let me do the talking, I know more about the law than you and the board put together and can roll over on this board like a steam roller." (Yes, I can imagine that too.) #FOUR has a clear bias against CAI. Likely exposed to bad lawyering by a CAI attorney like in #3- still, one bad apple doesn't taint the whole group. #FIVE had to go to court to get the HOA board to listen. Unfortunate of course, for everyone involved. Court is a very stressful process, costly not only in terms of dollars, but also in relationships.
Remember, there are bad apples out there. The only really new thing in AB 1738 is that an owner is allowed to bring an attorney to IDR. Before AB 1738 each side would have to bear their own attorney costs and that does not change. Previously the parties could enter into a binding agreement and that does not change. And any contract or agreement is enforceable in court without having to say it.
It is fair to bring my own experience into this also. No board never turned down a request of an individual client of mine to bring an attorney to an IDR proceeding - but it was a trigger for the board to have its attorney present, which is understandable. I attended one IDR where the board forgot to tell the owner I (an attorney) would be present and the owner came and was outraged. And even though she had brought her own advocate (a paralegal), without notifying the board, she then refused to get involved in any discussions, even though in reality she was better off with me there than not. The board had put up barriers to listening after she had tromped on them at meetings. I can understand that. However in that case, I knew there was room for improvement in this relationship and the opportunity never arose. Instead, the differences escalated.
The signing of AB 1738 into law is not the end of the world. I think we can all learn to live with it. In any case, I do have some recommendations for a successful IDR proceeding:
- 1. Have at least two board members present to avoid a "he said, she said" argument after the IDR proceeding. If you send fewer than all directors, give them some reasonable authority to negotiate a resolution. Don't advise them to sit there like sticks or start out with a litany of "charges" (this would be a hearing). If the full board meets with the party rather than designating one member a later appeal to the Board can be avoided as a moot point. To avoid the feeling of a "lopsided" procedure, let the owner know the full board will attend. Say something positive about it such as "... so that we can all hear what you have to say." Set up the chairs in a circle rather than 6 people on one side of a table and the Owner standing or sitting on the other feeling like they are attending an "inquisition." These may feel a bit "touchy feely" but there is no benefit to be had by creating a confrontational setting.
- 2. If the parties want to forego the expense of attorneys, they certainly can, and that might be achieved at the outset by asking a simple question: "Shall we meet and discuss the situation and try to resolve it without either of us incurring the expense of attorney? Are you amenable to that?"
- 3. Don't shut out key parties. If the problems involve a tenant, allow the owner to bring the tenant if the owner asks. The tenant may need to hear the severity of the consequences first hand. If the owner wants to bring an interpreter because English is their second language, let them. Difficulty in communicating will encourage misunderstandings and deter resolution. If a husband wants to bring a wife or vice versa, let them.
- 4. If there is a propensity on either side for a participant to act outrageously, just be prepared, remain calm, and try to minimize the effects of the behavior. If the actions of any particular board member are the cause of constant friction with the owner, I would suggest considering leaving that board member out of the proceeding. If the owner wants to bring an offensive companion to the proceedings, I would suggest that limiting the proceeding to the owner is appropriate (sometimes the wife or husband or adult child of the owner is the problem and could get in the way of reaching an accord!).
- 5. Try to create a setting that has an "informal" element to it - meaning that there is give and take, an opportunity for all to speak, and some time allotted for memorializing agreements on paper. Many boards schedule these sessions for the same evening as a meeting, to forego having to congregate at other times. The Directors are, after all, volunteers with lives outside the HOA. For the purpose of a true IDR, do what you can to help the owner feel like you "have heard" them even if you do not reach an agreement. Thank them for coming.
(Even if you don't "feel it" common courtesy is warranted.)
FYI - Here is the new law in full (see notes where language is changed):
Section 5910 of the Civil Code is amended to read:A fair, reasonable, and expeditious dispute resolution procedure shall at a minimum satisfy all of the following requirements:
- (a) The procedure may be invoked by either party to the dispute. A request invoking the procedure shall be in writing.
- (b) The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for the association to act on a request invoking the procedure.
- (c) If the procedure is invoked by a member, the association shall participate in the procedure.
- (d) If the procedure is invoked by the association, the member may elect not to participate in the procedure. If the member participates but the dispute is resolved other than by agreement of the member, the member shall have a right of appeal to the board.
- (e) A written resolution, signed by both parties, of a dispute pursuant to the procedure that is not in conflict with the law or the governing documents binds the association and is judicially enforceable. A written agreement, signed by both parties, reached pursuant to the procedure that is not in conflict with the law or the governing documents binds the parties and is judicially enforceable.
- [Provisions calling for slightly more formal agreements, signed by both parties, were added.]
(f) The procedure shall provide a means by which the member and the association may explain their positions. The member and association may be assisted by an attorney or another person in explaining their positions at their own cost. [This last sentence allowing either party to have an attorney or representative, at the parties' own cost, was added.]
(g) A member of the association shall not be charged a fee to participate in the process.
Section 5915 of the Civil Code is amended to read:
- (a) This section applies to an association that does not otherwise provide a fair, reasonable, and expeditious dispute resolution procedure. The procedure provided in this section is fair, reasonable, and expeditious, within the meaning of this article.
- (b) Either party to a dispute within the scope of this article may invoke the following procedure:
- (1) The party may request the other party to meet and confer in an effort to resolve the dispute. The request shall be in writing.
- (2) A member of an association may refuse a request to meet and confer. The association may not refuse a request to meet and confer.
- (3) The board shall designate a director to meet and confer.
- (4) The parties shall meet promptly at a mutually convenient time and place, explain their positions to each other, and confer in good faith in an effort to resolve the dispute. The parties may be assisted by an attorney or another person at their own cost when conferring. [Same as above comment in (f).]
- (5) A resolution of the dispute agreed to by the parties shall be memorialized in writing and signed by the parties, including the board designee on behalf of the association. [Same as above comment in (e).]
- (c) A written agreement reached under this section binds the parties and is judicially enforceable if it is signed by both parties and both of the following conditions are satisfied:
- (1) The agreement is not in conflict with law or the governing documents of the common interest development or association.
- (2) The agreement is either consistent with the authority granted by the board to its designee or the agreement is ratified by the board.
- (d) A member shall not be charged a fee to participate in the process. [May is changed to shall - no real legal significance.]
All this hubbub for one small change in the law - owners can now, under the law, bring attorneys or someone to represent them to an IDR session -- not, in my view, triggering a huge change in industry practices. I mean really, how many owners, or boards for that matter, want to pay an attorney to come to a meeting. It's not cheap! I believe only the most difficult or egregious situations call for the presence of legal representation at an IDR meeting (whether the egregious behavior is on the part of the board or the owner), and I believe that attorney representation would be sought and agreed to in 99% of these cases anyway. Is this necessary law? Is this bad law? I don't think so applies to both questions.
What is really needed to make IDR work successfully in a case of difficult differences are better practices, more transparency, more education, more compassion, a better moral compass, and mutual respect. Obviously, with more of these things, no law would become a full-employment-opportunity-act for attorneys.
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I am an attorney who serves homeowner associations and homeowners alike (not inthe same association of course). I am a frequent contributor to the Echo Journal
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