Real Property Law
How We Can Create Good HOA Legislation From Florida's Surfside Tragedy
By Mark Guithues
Last year’s sudden and unexpected collapse of the 40-year-old Champlain Tower condominium structure in Surfside, Fla., provides insight into the weak points of California’s community association model. As a 25-year veteran of the management and legal communities serving this industry, I invite you (and our legislature) to focus on mitigating some obvious systemic problems which result in such predictable failures.
II. LEAVE THE BOARD (AND BOARD LEADERSHIP) ALONE
To be sure, the tower tragedy highlights the “us vs. them” mentality of owners versus the volunteer directors — those who are trying to raise assessments to make repairs. That is, while nobody foresaw the sudden and unexpected collapse of a 40-year-old concrete building, every owner was aware of significant and expensive structural challenges ahead. And with no omnipotent dictator to demand immediate repair, members (logically) took advantage of the opportunity to disagree with methods, costs, and repair processes. Within that space and time, the board was nothing more or less than a microcosm of the membership which elected it — a conflicted group of amateurs doing their best to quantify overwhelming operating and maintenance costs in the face of limited finances.
So, we need to pause and accept that the most palpably amazingly awesome aspect of community associations – their self-governance – is a likely culprit here. The very design of allowing owners to elect their representatives, regardless of professional experience and often based on nothing more than a promise “not to raise assessments,” has real and continuing implications.
That doesn’t mean that the legislature should step in and change this model. It means that the legislature needs to acknowledge that this model has the propensity to underappreciate and underfund the maintenance requirements of the properties, leading to predictable failure.
Here are some structural elephants (within our HOA industry) that our legislature can help with.
a. Legislate Management Certification
Require all association managers to be “certified.” This isn’t a guarantee of competence, but it at least signifies the person taking direction from the board has some minimum amount of training and skin in the game. When we legislate its requirement, we validate the need for even more advanced management training, raising respect, professionalism, and esteem for our managers. The legislature got close once with B&P 11504 defining certification but failed to require it.
To be sure, such a certification will not invite the ear of die-hard directors who threaten to fire any manager daring to suggest a special assessment for building maintenance. But then a community’s serial replacement of trained and certified managers will serve as a significant red flag both to sitting board members and to folks looking to purchase within the community.
b. Legislate Significant Reserve Funding Requirements and Provide For Their Implementation
Civil Code §5600 already requires “…the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this act.” This needs to be expanded to include reserves. The legislature should require 50-75% minimum funding of reserves, to be accomplished over the next five years. So too, current limitations on Special Assessment and Emergency Assessment laws need to be revised to assist boards in funding necessary repairs.
Reserve Studies occur when an unbiased third-party professional is retained to evaluate the condition of the common area, analyze repair protocols, and develop an assessment schedule that addresses upcoming required maintenance for the community’s next 30 years. This is required now, and while acknowledging that such reports may be flawed (either high or low) in their predictions, directors routinely disregard these studies, underfunding reserves because raising assessments gets them voted out of office. We need the legislature to do the unpopular heavy lifting here and establish a non-negotiable minimum percentage of financial funding, so directors can focus on arranging maintenance rather than raising money.
c. Legislate Building Certification
Recently (and in response to the deaths of those who rode a balcony down to their deaths), California’s legislature implemented a “balcony bill” requiring certain “elevated exterior elements” to be regularly inspected and certified by an architect or structural engineer. This law must be expanded to include inspections of multi-family condominiums to meet minimal fire and safety standards. To be sure, we are legislating the price of housing out of the reach of many California earners. But watch the video of the tower’s collapse, and you’ll realize we cannot sit by while owners routinely vote to imperil themselves and their neighbors by routinely voting to underfund maintenance of their housing.
d. Legislate Training
There have been quite a few bills, most recently AB 1410, designed to impose ethics training, fair housing training, and more on those who volunteer their time to serve as directors. Let’s instead require community-wide attendance at a one- or two-hour training on the maintenance obligations and corporate requirements of the association. These classes are widely available (and often free) through professional organizations and local law firms, including ours. When owners and directors understand the scope of their duties, they generally reset from us-vs-them to working together to overcome problems.
In the end, we need to recognize that, like Florida’s towers, the design of our self-governance has predictable failure points which can and should be addressed with simple legislative requirements for manager licensing, adequate reserve funding, minimal safety inspection standards, and training.
Mark Guithues is the founding partner of Community Legal Advisors Inc., a six-attorney law firm limiting its practice to assessment collection and general counsel services for its 300 community association clients, subdivision services to its developer-declarant clients, and mediation and arbitration services to its homeowner clients.