Acc-Fall 2012

7/31/2019 Acc-Fall 2012

http://slidepdf.com/reader/full/acc-fall-2012 1/4

Accell Advisor

Save the Date!

Board Member Appreciation

NightNovember 1, 2012

Accell Property Management

appreciates the time and energy

our volunteer Board members

put toward bettering their

communities. To say “Thank

You,” we would like to invite

you to our second annual Board

Member Appreciation Night.

Join us on November 1st for hors

d’oeuvres, refreshments, expert

advice and prizes.

HOA Concerns in Contracting

with Vendors

Every Homeowners Association (HOA) will at some point hire a

vendor to perform certain tasks on behalf of the HOA, or to furnish

services to the HOA and its members. In doing so, a HOA may be

exposed to liability brought about by vendor actions and/or the

terms of the vendor contracts. Because such liability may

substantially impact the financial interests of the HOA and its

members, HOA Boards of Directors and community managers mustunderstand how to properly protect the HOA when hiring a vendor.

This article addresses three issues that are key to doing so: (1) the

necessity for hiring properly licensed, bonded and insured vendors,

(2) the employment status of a vendor as an “independent

contractor” or an “employee” of the HOA, and (3) the importance of

having proposed vendor contracts reviewed by legal counsel prior

to execution.

(Continued on page 2)

F A L L 2 0 1 2

The

By The Tinnelly Law Group

7/31/2019 Acc-Fall 2012


THE ACCELL ADVISOR FALL 2012

2

Understanding how to Protect the Interests of the HOA and its Members

Licensed, Bonded and Insured VendorsIn California, anyone who contracts to perform work

that is valued at $500 or more for materials and labor

must hold a current, valid license from the Contractors

State License Board (CSLB) in the specialty for which he

or she is contracting. Because unlicensed vendors rarely

have bonding or worker’s compensation insurance, they

can pose a severe financial risk to the HOA in the event

of property damage or injury. A HOA that hires an

unlicensed or uninsured vendor also subjects itself to

potential liability for unpaid wage or worker’scompensation claims brought by the vendor’s

employees. Accordingly, as fiduciaries, the HOA’s

Board of Directors must be diligent in ensuring that a

potential vendor is properly licensed, bonded and

insured. HOAs and community managers should

therefore always check the online CSLB verification

page at www.cslb.ca.gov to verify the vendor is licensed

for the type of work to be performed, that no action has

been taken against the vendor’s license, and that the

vendor is properly bonded.

Employment Status: “Independent Contractor” or

“Employee”

The “independent contractor” versus the “employee”

status of a vendor significantly impacts the HOA’s

obligations and liabilities in hiring the vendor. In

addition to avoiding such issues as paying payroll taxes,

workers’ compensation insurance and IRS reporting

requirements, when a vendor is deemed to be the

HOA’s “independent contractor,” the HOA better

shields itself from potential liability for damage caused

by the vendor’s negligence during the course of the

vendor’s work. This is because the HOA is deemed to

have control over only the result of the vendor’s work,

not “the means by which such result is accomplished”

(Ca. Labor Code §3353). HOAs should thus include

provisions in their vendor contracts explicitly

designating the vendor as an independent contractor of

the HOA. So long as the HOA retains only “a broad

general power of supervision and control as to the

results of the work to insure satisfactory performance of

the independent contract… Including the right to

inspect, the right to stop work, the right to make

suggestions or recommendations about the details of

the work, and the right to prescribe alterations or

deviations in the work,” the employment status of the

vendor as an independent contractor of the HOA will

not be jeopardized (McDonald v. Shell Oil Co. [1965]).

If, however, the HOA does such things as train the

vendor, establish the vendor’s working hours, or provide

the vendor with tools and equipment, the HOA risks ashift in the employment status of the vendor to an

employee of the HOA. Additional factors used to

evaluate a vendor’s employment status can be found in

IRS Publication 1179.

Written Vendor Contracts Reviewed by Legal

Counsel

A written vendor contract, reviewed by legal counsel, is

(Continued on page 4)

Continued from page 1

http://www.cslb.ca.gov/

http://www.cslb.ca.gov/

7/31/2019 Acc-Fall 2012



3

Davis-Stirling CID Act Reorganization BillSigned, To Become Law 1/1/14

By Kelly G. Richardson, Esq., Richardson Harman Ober PC

On Friday, August 17, Governor Brown concluded

the long journey of the California Law Revision

Commission's project to reorganize the Davis-

Stirling Common Interest Development Act, when

he signed into law Assembly Bills 805 and 806. AB

805 relocates the Act to a different part of the

California Civil Code, while AB 806 updates the

many references to the Act in other parts of

California statutes to reflect the new correctstatute numbers.

The law does not take effect until January 1, 2014,

to give managers, boards and attorneys one year to

familiarize themselves with the reorganized

Act. Currently found at Civil Code Sections 1350-

1378, the Act starting at that date will be found at

Civil Code Sections 4000-6150.

The primary purpose was to reorganize and clarify

the law without making substantive changes. Thenew law does in fact enact approximately 16

substantive changes, none of which are believed to

be controversial. In HOA Homefront, the

newspaper column, HOAHomefront.com, and in

RHOPC.com articles, I will be providing updates in

2013 about these changes.

One of the comments already circulating this year

is that many associations are reluctant to improve

their governing documents, due to the coming newlaw in 2014. However, associations do not need to

avoid amending their governing documents until

2014, because the new law specifically provides for

associations to update their existing governing

documents (CC&Rs and Bylaws) by a board vote in

order to correct the old Civil Code references and

insert the new ones. The California Law Revision Commission has done

a commendable job on this law. CAI and this law

firm supported it, and welcome the improvement

and clarity it will bring.

The CLRC is not done with common interest

developments. The stated intention of the

Commission was to avoid as much as possible any

substantive changes during the reorganization of

the law. However, CLRC has stated that

substantive changes will be explored once this law

is in place.

Furthermore, the Commission is already exploring

modifications to the Act regarding commercial

common interest developments. There may also at

some point be an attempt to explore modification

of the Act to accommodate the small CIDs. Small

CIDs, which generally do not have counsel and

often do not have professional management, have

great difficulty tracking, let along complying with,

the myriad of legal requirements in the Act.

Kelly G. Richardson is Managing Partner of

Richardson Harman Ober PC, a former Chair of

CAI California Legislative Action Committee and a

current Trustee of CAI. He can be reached

at [email protected]

mailto:[email protected]



7/31/2019 Acc-Fall 2012


a necessity in every circumstance regardless of the size and

scope of the service/job for which the HOA is contracting.

This may seem like a “no brainer” to some HOAs and

community managers – especially to those that have been

badly burned by vendors in the past. However, we areconstantly surprised on how the smallest jobs can turn into

the largest problems where HOAs short-cut the process by

not having a written vendor contract without first having it

reviewed by the HOA’s legal counsel. In general, a written

vendor contract is paramount to establishing:

1) the scope of the work to be performed by the vendor,

2) the timeline with which the work must be performed,

3) the price to be paid for the work,

4) how the contract may be terminated and by whom,

5) the methods of payment,

6) how breaches of the contract will be addressed,

7) any warrantees concerning the work to be performed,

8) the employment status of the vendor,

9) indemnification of the HOA for any damages brought

about by the vendor during the course of the work.

Situations where HOAs suffer financial loss by not having

vendor contracts reviewed by legal counsel are often the

result of exculpatory clauses contained in the vendor


Continued from page 2

contracts (e.g. indemnification and/or “hold harmless”

provisions) as well as the enforcement of exclusivity

term renewal, and arbitration provisions. Legal review o

vendor contracts also ensure that the HOA’s governing

documents grant the Board of Directors the authority to

enter into the desired contract and to bind the HOA to

its terms.

Summary

Despite how simple the process may seem to select and

hire a vendor, HOA Boards and community managers

should recognize the HOA’s potential exposure to

liability should a problem arise. Appropriate steps must

be taken to ensure that the interests of the HOA and its

members are protected. At a

minimum, these stepsinclude (1) verification that

vendors are properly

licensed/bonded/insured, (2)

obtaining written vendor

contracts, and (3) ensuring

that such contracts are

reviewed by the HOA’s legal

counsel prior to execution.

Acc-Fall 2012

Documents

Transcript of Acc-Fall 2012