4 Important Points for CID Managers and Leaders to Keep in Mind About SB721

Now we know the fate of California Senate Bill 721 (SB721), many homeowners’ associations are celebrating the fact that they dodged a bullet and can go on with business as usual. The argument that seemed to win the day with the legislature was that the requirements of the proposed law would have been redundant and costly for homeowners’ associations because they already are required to have reserve studies completed on their property. I hope that homeowners’ association boards do not make the mistake of thinking that their responsibility for the condition of the waterproofing and the wood structural elements of their decks, balconies, exterior walkways, and stairs has magically gone away. There are a few important points that HOA managers and leaders need to keep in mind.

• This is probably not the end

Although SB721 failed to have the support needed to pass in a form that would apply to homeowners’ associations (it likely still will pass and apply to apartments), I would argue that we are one Berkeley Balcony Collapse type incident at a homeowners’ association away from this being back with a vengeance. Homeowners’ association leaders should understand that and plan accordingly. If an incident like the Berkeley tragedy occurs in an association community, the odds of legislation like SB721 being imposed are significant.

• Homeowners’ associations boards still have an obligation to make sure their waterproofing and exterior wood structural elements are in good condition

A homeowners’ association board has the duty of “repairing, replacing, and maintaining the common area of the association” (Davis Sterling Common Interest Development Act, Chapter 5, Article 3, §4775(a)(1)). This is a primary responsibility of the Board of Directors. Even without SB721, the Board has this obligation and must make sure that replacement and maintenance are taking place.

If you do not know what the condition of these elements are, then it is the obligation of community managers and directors to find a way to obtain this condition assessment. This has always been the case. I would argue that a Board of Directors should use the proposed standard from SB721 to ensure that their reserve study and maintenance plans accurately reflect the true condition of the waterproofing and wood structural elements at their property. This will likely require more than just cursory observations or trusting that everything is in good working order. By all accounts, the balconies at the Library Apartments in Berkeley could have easily been identified as having structural and waterproofing problems, had they been subjected to a reasonable level of inspection. The cost of being more diligent is offset by the potential for costs of a much higher magnitude if something fails.

• Homeowners’ association boards are now on notice

I am not a litigation attorney, but I would argue that due to the amount of attention SB721 received in the homeowners’ association world and the reality of litigation in California, any homeowners’ association that is not taking inspection and required maintenance of their waterproofing and exposed wood structural elements seriously is going to be in significant legal jeopardy if they find themselves being sued because of personal injury or property damage that could have been identified and corrected. A plaintiff’s attorney is not going to have to work too hard to argue that a homeowners’ association had the maintenance and repair obligation anyway. The fact that the argument against adoption of SB721 was that it imposed a redundant obligation on homeowners’ associations highlights the point that the homeowners’ association should have prevented the situation being litigated.

• Too many homeowners’ associations are not doing the level of maintenance and repairs that they need to be doing

While I respect by the Community Association Institute (CAI)  and understand why they were opposed to SB721, I know from experience that many homeowners’ associations are not meeting their obligations to perform maintenance and repairs on their waterproofing systems and their wood structural elements. I will not belabor this point (you can read more about this topic here and here), but I see enough associations with deferred maintenance and underfunded reserve accounts that I feel confident that a lot of homeowners’ association boards are failing to meet their fiduciary duty of “repairing, replacing, and maintaining the common area of the association”. The only way to eat an elephant is slowly and one bite at a time, but if you never start you can never finish.

If your complex is more than 10 years old, you need to be making sure that all exterior waterproofing and wood structural systems are being inspected to ensure that they are not concealing any issues. The bottom line is that you cannot fix a problem that you do not know about or are ignoring, and you do not avoid liability for “not knowing” about a bad condition.

Matthew C. Boomhower is the founder and president of Southern Cross Property Consultants; a construction management, technical architecture, and facilities management consulting firm with offices in San Diego and Orange County. He is licensed in California as both an Architect and an Attorney. He can be contacted at office@southerncrosspc.com or 858-444-5498.