MISCELLANEOUS ISSUES

OUR ASSOCIATION IS VERY SMALL. MUST WE USE A LICENSED CONTRACTOR FOR COMMON AREA REPAIR WORK, WHEN WE HAVE A NICE RETIRED HOMEOWNER WHO SERVES AS OUR HANDYMAN AND IS AVAILABLE 24 HOURS A DAY?

Yes, it is strongly recommended. A contractor employed by an association to perform repair and maintenance services for the benefit of the common area improvements must be licensed as such by the State of California.

Although most governing documents do not address the issue of whether a contractor performing work for the association must be licensed by the State of California, state law does so explicitly.

California Business and Professions Code §7026 defines a contractor, in pertinent part, as:

... any person who undertakes to or offers to undertake to, ... alter, repair, add to, ... improve, ... any... structure, project, development, or improvement, or to do any part thereof, including... the cleaning of grounds or structures in connection therewith... "Contractor" includes subcontractor and specialty contractor.

The exceptions to the foregoing license requirement are in §§7048 and 7053 of the California Business and Professions Code as follows:

7048(a) This chapter does not apply to any work or operation on one undertaking or project by one or more contracts, the aggregate contract price which for labor, materials, and all other items, is less than five hundred dollars ($500), that work or operations being considered of casual, minor, or inconsequential nature.

7053 ...this chapter does not apply to any person who engages in the activities herein regulated as an employee who receives wages as his or her sole compensation, does not customarily engage in an independently established business, and does not have the right to control or discretion as to the manner of performance so as to determine the final results of the work performed.

[emphasis added].

Most work performed for an association, whether repair and/or maintenance, is usually greater than $500, and if the individual is not an employee, the individual performing said repair and maintenance must be licensed. Failure to have such a license would subject the individual performing the work to both civil and criminal penalties should a homeowner choose to bring suit and/or file a complaint with the State Contractor's Licensing Board.

More importantly, we believe associations are at greater risk of liability exposure by engaging an unlicensed contractor if an occurrence or incident should occur causing property damage or personal injury. The only method to assure that the association's risk of liability is handled appropriately is to require the person intending to perform the work to provide insurance which would list the association as an additional insured with an endorsement indicating the contractor's insurance is primary and the association's insurance is non-contributory. Additionally, the contract with the individual would further have a Type I indemnity, which shifts the risk of all responsibility related to the proposed scope of work from the association to the individual. Absent such an arrangement, we believe the association is unduly exposing itself to liability.

Finally, the nice, retired homeowner-contractor could easily be injured, yet the association may not have worker's compensation insurance for the work performed by the individual homeowner. This further leaves the association exposed to liability for any personal injury that results to the handyman. With the insurance market at a crisis level, any increase in loss history, including potential personal injury claims by a handyman, could result in a loss of insurance or a substantial increase in premiums.

Finally, the handyman could perform work which somehow results in injury to another homeowner, visitor or even another vendor's employee, such as landscape personnel. If a person is injured as a result of work performed by a handyman who should have been licensed but, in fact, was not, the association would more than likely be found negligent based on the fact that it retained an unlicensed person to perform work which requires a license.

WHEN IS A LIQUOR LICENSE REQUIRED?

The determining factor in the requirement for a liquor license at association social functions is whether the board intends to (a) supply and serve, or (b) sell and serve the alcohol. If it is the intention of the association to simply serve and not sell alcohol at social functions for association members (and their guests, but not open to the public), then a liquor license is not required pursuant to § 23399.1 of the Business and Professions Code, which provides that:

§ 23399.1No license or permit shall be required for the serving and otherwise disposing of alcoholic beverages where all of the following conditions prevail:

1. That there is no sale of an alcoholic beverage.
2.That the premises are not open to the general public during the time alcoholic beverages are served, consumed or otherwise disposed of.
3.That the premises are not maintained for the purpose of keeping, serving, consuming or otherwise disposing of alcoholic beverages.

Provided, however, that nothing in this section shall be construed to permit any person to violate any provision of the Alcoholic Beverage Control Act. [emphasis added]

It should be emphasized that the alcohol must be provided by the association. A social function wherein members are encouraged and/or permitted to supply their own alcohol would be considered a Bottle Club by the Department of Alcohol and Beverage Control ("Department"). This is an illegal activity.

A further consideration with the supply and service of alcohol by an association is one of liability. Associations are advised to contact their insurance carriers to determine if they have adequate liability coverage for the service of alcohol on the associations' premises. Ordinarily, insurers require an additional premium and or a "special events permit."

If, however, it is the intention of the board to sell and serve alcohol at the association's social functions, a liquor license is required by § 23300, et seq. of the Business and Professions Code. There are many types of liquor licenses, however most associations would only need an "on-sale general license" or a "club license." The Business and Professions Code defines these licenses, in pertinent part, as follows:

23399(a).An on-sale general license authorizes the sale of beer, wine, and distilled spirits for consumption on the premises where sold ...

23431. The holder of a club license may exercise all of the rights and privileges permitted by an on-sale general license but may sell and serve alcoholic beverages for consumption within the licensed establishment only to bona fide members of the club and their bona fide guests ...

23437... no club license ... shall entitle the holder to any off-sale privileges.

23426. ... "club"... means ... any swimming and tennis club which maintains a standard AAU swimming pool [an AAU swimming pool is at least 22.85M in length, 13.706M in width, and 1.219M in depth] and not less than two regulation tennis courts, together with the necessary facilities and clubhouse, which has members paying regular monthly dues; or any swimming club which maintains a standard AAU swimming pool and not less than two regulation tennis courts, together with the necessary facilities and clubhouse, or any tennis club which maintains not less than five regulation tennis courts, together with the necessary facilities and clubhouse, and which swimming club or tennis club has members paying regular monthly dues.

If an association qualifies as a "club" pursuant to the foregoing definition, it should first submit an application for a liquor club license. The primary reason for pursuing a club license first, before an on-sale general license, is the difference in the application fees; the on-sale general license application fee is twelve thousand dollars ($12,000) versus a one hundred dollar ($100) application fee for a club license. It should also be noted that the application process is lengthy for both, requiring two thirty-day waiting periods and a forty-five day investigation period.

Consequently, the Department may issue temporary licenses for picnics and social events for twenty five dollars ($25) per day to qualified non-profit organizations authorizing the sale of beer, wine and distilled spirits. This may also be an option if an association is seeking to serve and sell alcohol at a very limited number of social functions.

An added feature of possessing a club license is that an association would then be permitted to obtain a caterer's license (a $100 application fee). This would allow the association to provide and sell alcohol for member's special personal events such as birthday celebrations and wedding receptions that are held on the premises, but include members of the general public.

Lastly, an association must comply with local ordinances and zoning regulations pertaining to the consumption and sale of alcohol, which may require a Conditional Use Permit.

In conclusion, if the association simply provides and serves alcohol at social functions that are not open to the general public, a liquor license is not required. However, if it plans to sell and serve alcohol at said functions, a liquor license is required. In either instance, an association should confer with its insurance carrier to assure coverage.

ARE ASSOCIATIONS SUBJECT TO THE AMERICAN WITH DISABILITIES ACT ("ADA")?

IT DEPENDS. Only certain portions of the Americans with Disabilities Act of 1990 ("ADA") are applicable to associations. The ADA was designed to protect persons with disabilities when those persons are in a commercial setting. The ADA guarantees equal opportunity and requires reasonable accommodations for individuals with disabilities in employment, public accommodations, transportation, state and local government services and telecommunications. Therefore, the ADA would not be applicable associations with less than 15 employees and to associations whose facilities are not open to the public. For example, the restaurant/bar of a country club with a club liquor license (not open to the public at large) would not be subject to the ADA; however, a country club with a public liquor license (members of the public are welcomed in the bar or restaurant, regardless of whether or not they are members of the club or association) would be subject to the ADA.

Additionally, ADA may apply to a development's other common areas, such as swimming pools, tennis courts, or other similar facilities, if they are made available to persons other than association members, their families and guests. The ADA would require that physical and communication barriers, if applicable, be removed, if readily achievable and not an undue hardship, such as the installation of grab bars, widening doors and creating handicapped parking spaces.

Notwithstanding the fact that the ADA may not apply to your association, the association may still need to comply with other laws intended to protect disabled or handicapped persons, such as the Federal Fair Housing Act, California's Unruh Civil Rights Act, as well as Civil Code §1360 (which provides that associations must permit architectural changes to the residential unit (at the owner's expense) to facilitate access to persons who are blind, visually handicapped, deaf, or physically disabled or to alter conditions which could be hazardous to such persons. This statute indicates that the association cannot deny approval of such proposed modifications without good cause. If an association is faced with any issues involving handicapped or disabled persons' access to the unit or common areas, the association should consult with its general counsel for analysis and recommendations.

WE LIVE IN A GATED COMMUNITY. DOES OUR ASSOCIATION HAVE TO GRANT ACCESS TO PROCESS SERVERS ANY TIME THE PROCESS SERVERS SHOW UP AT THE GATE?

NO. In 1994, §415.21 was added to the Code of Civil Procedure. The statute relates to service of process in gate-guarded communities and generally embodies the holding of the California Appellate Court in Bein v. Brechtel-Jochim Group, Inc., (1992) 6 Cal.App.4th 1387.

In the Bein case, the Court of Appeal held that where a subdivision precludes public access through a gate-guarded area, service of process of a resident may be established by delivering a copy of the summons and complaint to the guard, and thereafter mailing a copy of the summons and complaint to the resident's address ("Substituted Service").

The statute specifically provides that any person shall be granted access to a guard-gated community for a reasonable period of time for the purpose of lawful service of process upon identifying to the guard the person or persons to be served, displaying a current driver's license or other form of identification and one of the following: (a) a badge or other confirmation that the individual is acting in his/her capacity as a representative of the County sheriff or marshal; or (b) evidence of current registration as a process server, pursuant to the California Business and Professions Code.

It is important to note that the statute only requires reasonable access to process servers. Thus, the association can adopt post orders to permit access into the subdivision by process servers but still provide enhanced security to its members while complying with the statutory requirements of Code of Civil Procedure §415.21, such as:

• Adopting post orders in advance to provide reasonable access during normal business hours (i.e., 9:00 a.m. and 5:00 p.m., seven days a week) and limiting access through one gate only. If the process server is unable to serve the resident within normal business hours after a first attempt, the process server shall be permitted access into the subdivision after normal business hours, as long as the individual coordinates this access and activity with the Head of Security.
  
  
• Requiring that the process server provides one of the following:
  • Identification of the person(s) to be served;
  • A driver's license or other identification of the process server;
  • A badge or other confirmation, showing that he/she is a representative of a County sheriff or marshal; or evidence of his/her registration of a professional process server (Note: ask for process server's identification number.)
    
    
• Having security personnel escort the process server to the address of the person proposed to be served. Security personnel should wait in their vehicle while service is attempted by the process server/marshal. After the service is either effected or attempted, the security personnel should escort the process server/marshal back to the gate. Security personnel should neither assist in any service of process nor hinder same, but should only escort the process service/marshal to make sure that said process server/marshall only goes to the address at issue and immediately exits the subdivision after the service is either effected or attempted.
  
  
• Requiring that process servers, marshals and/or sheriffs attempt to give the association a minimum of one hour advanced notice by telephone of their need to effect service of process, so that security personnel are available to escort said individual to the specified address. Failure to give such advanced notice could result in a delay in gaining access into the subdivision while the association arranges the proper security personnel to escort said individual to the specified address.

OUR ASSOCIATION RECENTLY RECEIVED A REAL PROPERTY TAX BILL FOR ONE OF THE COMMON AREA LOTS IN THE NAME OF THE ASSOCIATION. DO ASSOCIATIONS HAVE TO PAY REAL PROPERTY TAXES ON COMMON AREA LOTS OWNED BY THEM?

NO. Real property taxes are sacred and the counties will get their real property taxes, but generally associations do not have to pay real property taxes, consistent with Revenue and Taxation Code §2188.5. This code provision requires the county tax assessor to value each separately owned lot or condominium unit, as well as reflect within that value each and every owner's share in the common area, whether the common area is owned in fee by the association or as tenants in common by the respective owners. Thus, if a community association is receiving a tax bill for a common area lot it owns, it should request that the county tax assessor place the value of the common area lot on the tax rolls for each separate individual unit owner, not as a separate tax bill for the association.

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