Month: December 2018
Like any other business or organization, community associations must file taxes with the government. And tax liability is a huge issue that associations need to be aware of. Improper reporting can land the association in hot water and cost thousands in fines, penalties, and late fees. With the New Year just here, April—the month in which federal and state taxes must be filed—might seem far off. But properly doing necessary paperwork and consulting with the association’s accountant can take time. So planning ahead is key.
Managing an association involves day-to-day tasks that, while they should be done meticulously, are also not typically the impetus for lawsuits. Although you might be used to dealing with small issues that aren’t the subject of litigation, don’t be cavalier about bigger decisions, like how to let go of an employee who just isn’t working out.
Facts: Two homeowners cultivated a vineyard on their land in a planned community for the purpose of making wine to be sold to the public. The association’s CC&Rs didn’t prohibit the cultivation of a vineyard for this purpose, but they did prohibit “any business or commercial activity.” Several other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity.
Important new legislation is changing how California HOAs will operate starting in 2019. Assembly Bill 2912 began with its purpose “to take important steps to protect HOA members from fraudulent activity by those entrusted with the management of the association’s finances.” The bill, which passed both houses of the Legislature on unanimous votes, is sponsored by the Community Associations Institute and the California Association of Community Managers.
Every person who works in your community—from maintenance employees to office staff—will interact with members and potentially have access to sensitive information, including financial documents. When employees are trustworthy, this exposure isn’t an issue. But it’s incredibly difficult to ensure that a new hire won’t turn out to be an opportunist who uses her position for an ulterior motive.
The financial health of an association depends in large part on monthly payments from members. Those payments are integral because they pay for the services and amenities the members expect and are entitled to. Unfortunately, whether it’s because of financial difficulties or a dispute, sometimes you’ll encounter a member who doesn’t make his monthly payment of assessments.
Typically, if decisions made by the board turn out well, members are happy. But if the decisions lead to unforeseen costly expenses to the community, some members might sue, regardless of the board members’ good intentions. That’s why it’s more important than ever that your board’s judgments be the result of a sound, deliberative decision-making process. If they are, there’s a much better chance that courts will defer to them in case of a lawsuit.