PART 3
– RELEVANT REFERENCE MATERIALS
ITEM A
Text of a Memo From Breetz to
Lisman and Diamond on
MEMORANDUM
TO: Carl Lisman, Bob Diamond
FROM: Bill Breetz
Date:
RE: INITIAL
OUTLINE OF ISSUES FOR THE
This list is based on my
very helpful conversations with Bob of
1.
Create Workable Warranties
a.
Bob
suggests consideration of either the Virginia or Pennsylvania Acts on this
subject. [WRB to get]
b.
Under
those Acts, the Declarant may exclude warranties in a conversion project for
work he did not do. Whichever way we go,
we should be clear on whether this is possible – UCIOA is not clear.
c.
Bob
feels that under Magnuson-Moss, the declarant cannot disclaim warranties. [WRB to secure statute] Comment should be clear on the
interrelationship of State and Federal law.
d.
Nat’l
Association of Home Builders- has a draft statute providing that:
1.
Before
association sues on warranties, it must give Declarant notice and an
opportunity to cure
2.
In
addition, under NAHB Act, [and as proposed in
e.
Bob
suggests including d1 in Act, and trading it for d2.
2.
Appointment or Election of Directors
a.
There
are two circumstances where Bob feels appointment of directors is appropriate:
1.
Mixed
Used Projects, where we seek to insure a seat for each kind of unit; and
2.
“CCRC”
[continuing care /retirement communities] – where it would be useful to have at
least a minority of appointed outside directors.
3.
b.
I
suggested a third – the master association situation, where I do not think the
lower tier boards may simply appoint directors to the master board [WRB to
check]
c.
We
also discussed ‘subsidized’ project where the committee rejected my suggestion
in
d.
Bob’s
view of how to handle this would be to allow the Declaration to provide that
parties specified in the Declaration would be entitled to appoint directors of
the Board, so long as those appointed directors did not comprise a majority of
the Board.
e.
We
also discussed whether the Declarant ought to be empowered to do so, beyond the
rights already granted in the Act. The
answer, I think, is probably not.
3.
Limited Liability Companies as Associations
a.
Bob
believes that Associations ought to be able to be organized as LLCs - Bob does this in
b.
I
believe this is a subject that the drafting committee discussed at the last
meeting, and agreed to.
4.
Reserved Common Elements
a.
Bob
uses this concept in his Virginia projects and – as I understand it – thinks it
works more or less like a ‘license’ for common elements rather than an assigned
limited common element [Bob – correct me if I am wrong]. He referred to using it as a means of controlling
access, for example, to an electrical switch box [I admit I didn’t get
it.] I think his thought was that this
might best be addressed through a comment.
5.
Comment on Convertible Space
a.
The
6.
Comment on “Zero” and “One Unit” Condominiums
a.
Bob
and I agree that it is not possible under UCIOA to have condominiums with no
units or one unit. At the same time,
Don Buck has aggressively disagreed, and has created such condominiums – and
apparently financed them.
b.
Bob
also describes circumstances where Condos and PUDs are created with no common
elements. He and I are baffled.
c.
He
suggests a comment to deal with this. I
am offering to call Don, try and better understand his intentions, and then
perhaps suggest an amendment to UCIOA providing a mechanism to address his
issues.
7.
Alternative Dispute Resolution
a.
Bob
feels we should have a comment noting that the form of ‘binding’ arbitration
that the current text of UCIOA offers violates Magnuson-Moss. [WRB to get the
text]
8.
Problems Around Interstate Offers of Land Sales [“Oilzer”]
a.
Bob
feels that there increasing problems with the requirements of federal law as
they relate to contracts to deliver a unit more than 24 months from the date of
contract. [WRB to get the text]. A
comment might be appropriate.
9.
Turnover of Declarant Control
a.
Bob
feels that there are problems with Declarants who refuse to turn over control
of the Association as mandated by the Act and the penalties for failing to do
so are insufficient to force a lawful outcome.
He recommends a statutory penalty sufficient to secure compliance.
10.
Multi-Year Budgets
a.
Bob
feels that FNMA is/has abandoned its requirement for multi-year projected
budgets and that such a budgeting process represents important disclosure to
unit owners in a large project being built out over many years. He recommends
that we require such budgets in the Act.
11.
Mandated Reserves
a.
Bob
felt that a comment should be included in the Act urging State Legislatures not
to pass legislation requiring establishment of ‘adequate’ reserves or to
otherwise deal with mandated reserves.
b.
He
contrasts this situation with statutory language in some states [
c.
The
issue here, of course, is why an association should tax existing owners by
mandating funded reserves for future repairs, when the owners who pay for those
reserves will likely not have the benefit of those reserves because they move. Existing single family homeowners do not make
deposits to segregated reserves; they simply pay cash when the roof needs to be
repaired, or they borrow funds to do so.
12.
Investment of Reserves
a.
Bob
feels that it may be appropriate in some cases for Associations to have some of
their reserves invested in equity securities – or for the Boards to at least
have the authority to make such investments – in order to keep up with
inflation. He feels that too often,
Boards are advised that as fiduciaries, board members have no authority to make
such investments.
b.
I
told Bob I thought the Uniform Prudent Investor Act and Uniform Management of
Institutional Funds Act might bear on this subject.
c.
In
any case, we [I?] ought to review those Acts and try and understand what the
law currently is on this subject, before making any decision.
13.
Homeowners’ Bill of Rights
a.
We
discussed this subject at length. Bob
and I agree that there is only a limited amount that can be said about this
subject that is not already a part of UCIOA.
b. Bob felt that the Virginia Act on this
subject was not terribly useful, but suggested I read it. I noted that Ellen Dyke had already sent that
Act to me.
c.
Bob
did observe that CAI has already drafted such a document, and he agreed to send
it to me. He recalls that the document
as drafted deals only with these subjects:
i.
Owner
access to Association financial and other records
ii.
Owner
right to attend meetings
iii.
Rights
of Notice and rights to cure defaults under documents and, generally, due
process.
d.
He
and I discussed adding the notion of the right to display “flags” and
“religious symbols” on the exterior of units.
Bob suggested making that right subject to reasonable rules promulgated
by the association regarding size and location.
e.
Carl
and I discussed adding Political signs to the items discussed in 13. c. This was also discussed at
f.
Bob
and I also discussed the notion of making the Bill of Rights an optional part
of UCIOA and introducing it by language generally as follows:
“To the extent these
subjects are not addressed by existing statutes of this State, unit owners in
common interest communities in this State have the following rights….”-
g.
This
would contemplate adoption of this part as a free-standing law, even in those
states that choose not to adopt all of UCIOA.
ITEM B. Background
materials for Proposed New Part 6
“Community Associations Institute Text - Rights &
Responsibilities for Better Communities - Principles for Homeowners and
Community Leaders
More than a destination at the end of the day, a
community is a place you want to call home and where you feel at home. There is
a difference between living in a community and being part of that community.
Being part of a community means sharing with your neighbors a common desire to
promote harmony and contentment. It is this universal goal that prompted
Community Associations Institute (CAI) to develop Rights & Responsibilities
for Better Communities.
CAI is dedicated to fostering vibrant,
competent, responsive community associations that promote harmony, stability
and a strong sense of community. This mission is best achieved when homeowners,
non-owner residents and association leaders all recognize and accept their
rights and responsibilities. In all cases, this entails striking a reasonable,
logical balance between the best interests of individual homeowners and those
of the community as a whole. CAI believes Rights & Responsibilities for
Better Communities is an excellent foundation for balancing these dual
objectives.
Homeowners Have the Right To:
Community Leaders Have the Right To:
1. Expect owners and
non-owner residents to meet their financial obligations to the community.
2. Expect residents to know
and comply with the rules and regulations of the community and to stay informed
by reading materials provided by the association.
3. Respectful and honest
treatment from residents.
4. Conduct meetings in a
positive and constructive atmosphere.
5. Receive support and
constructive input from owners and non-owner residents.
6. Personal privacy at home
and during leisure time in the community.
7. Educational
opportunities (e.g., publications, training workshops) that are directly
related to their responsibilities, and as approved by the association.
Homeowners Have the Responsibility To:
Community Leaders Have the Responsibility To:
1.
Fulfill
their fiduciary duties to the community and exercise discretion in a manner
they reasonably believe to be in the best interests of the community.
2.
Exercise
sound business judgment and follow established management practices.
3.
Balance
the needs and obligations of the community as a whole with those of individual
homeowners and residents.
Community Associations Institute (CAI) is a
national organization dedicated to fostering vibrant, responsive, competent
community associations. Founded in 1973, CAI represents association-governed
communities, such as condominium and homeowner associations, cooperatives and
planned communities. To learn more about CAI and its local, regional and state
chapters, visit www.caionline.org or call CAI Direct at 703-548-8600.
ITEM C. RELAVANT MATERIALS FOR SECTION 3-103(A) EXERPTS FROM THE (1994) UNIFORM PRUDENT INVESTOR ACT
PREFATORY NOTE
Over the quarter century from the late 1960's the investment practices of
fiduciaries experienced significant change. The Uniform Prudent Investor Act
(UPIA) undertakes to update trust investment law in recognition of the
alterations that have occurred in investment practice. These changes have
occurred under the influence of a large and broadly accepted body of empirical
and theoretical knowledge about the behavior of capital markets, often
described as "modern portfolio theory."
This Act draws upon the revised standards for prudent trust investment
promulgated by the American Law Institute in its Restatement (Third) of Trusts:
Prudent Investor Rule (1992) [hereinafter Restatement of Trusts 3d: Prudent
Investor Rule; also referred to as 1992 Restatement].
Objectives of the Act. UPIA makes five fundamental alterations
in the former criteria for prudent investing. All are to be found in the
Restatement of Trusts 3d: Prudent Investor Rule.
(1) The standard of prudence is applied to any investment as part of the total
portfolio, rather than to individual investments. In the trust setting the term
"portfolio" embraces all the trust's assets. UPIA § 2(b).
(2) The tradeoff in all investing between risk and return is identified as the
fiduciary's central consideration. UPIA § 2(b).
(3) All categoric restrictions on types of investments have been abrogated; the
trustee can invest in anything that plays an appropriate role in achieving the
risk/return objectives of the trust and that meets the other requirements of
prudent investing. UPIA § 2(e).
(4) The long familiar requirement that fiduciaries diversify their investments
has been integrated into the definition of prudent investing. UPIA § 3.
(5) The much criticized former rule of trust law forbidding the trustee to
delegate investment and management functions has been reversed. Delegation is
now permitted, subject to safeguards. UPIA § 9.
Literature. These changes in trust investment law have been
presaged in an extensive body of practical and scholarly writing. See
especially the discussion and reporter's notes by Edward C. Halbach, Jr., in
Restatement of Trusts 3d: Prudent Investor Rule (1992); see also Edward C.
Halbach, Jr., Trust Investment Law in the Third Restatement, 27 Real Property,
Probate & Trust J. 407 (1992); Bevis Longstreth, Modern Investment
Management and the Prudent Man Rule (1986); Jeffrey N. Gordon, The Puzzling
Persistence of the Constrained Prudent Man Rule, 62 N.Y.U.L. Rev. 52 (1987);
John H. Langbein & Richard A. Posner, The Revolution in Trust Investment
Law, 62 A.B.A.J. 887 (1976); Note, The Regulation of Risky Investments, 83
Harvard L. Rev. 603 (1970). A succinct account of the main findings of modern
portfolio theory, written for lawyers, is Jonathan R. Macey, An Introduction to
Modern Financial Theory (1991) (American College of Trust & Estate Counsel
Foundation). A leading introductory text on modern portfolio theory is R.A.
Brealey, An Introduction to Risk and Return from Common Stocks (2d ed. 1983).
Legislation. Most states have legislation governing
trust-investment law. This Act promotes uniformity of state law on the basis of
the new consensus reflected in the Restatement of Trusts 3d: Prudent Investor
Rule. Some states have already acted.
Drafters in
Remedies. This Act does not undertake to address
issues of remedy law or the computation of damages in trust matters. Remedies
are the subject of a reasonably distinct body of doctrine. See generally
Restatement (Second) of Trusts §§ 197-226A (1959) [hereinafter cited as
Restatement of Trusts 2d; also referred to as 1959 Restatement].
Implications
for charitable and pension trusts.
This Act is centrally concerned with the investment responsibilities arising
under the private gratuitous trust, which is the common vehicle for conditioned
wealth transfer within the family. Nevertheless, the prudent investor rule also
bears on charitable and pension trusts, among others. "In making
investments of trust funds the trustee of a charitable trust is under a duty
similar to that of the trustee of a private trust." Restatement of Trusts
2d § 389 (1959). The Employee Retirement Income Security Act (ERISA), the
federal regulatory scheme for pension trusts enacted in 1974, absorbs
trust-investment law through the prudence standard of ERISA
§ 404(a)(1)(B), 29 U.S.C. § 1104(a). The Supreme Court has said:
"ERISA's legislative history confirms that the Act's fiduciary
responsibility provisions 'codif[y] and mak[e] applicable to [ERISA]
fiduciaries certain principles developed in the evolution of the law of
trusts.'" Firestone Tire & Rubber Co. v. Bruch, 489
Other
fiduciary relationships.
The Uniform Prudent Investor Act regulates the investment responsibilities of
trustees. Other fiduciaries - such as executors, conservators, and
guardians of the property - sometimes have responsibilities over assets
that are governed by the standards of prudent investment. It will often be
appropriate for states to adapt the law governing investment by trustees under
this Act to these other fiduciary regimes, taking account of such changed
circumstances as the relatively short duration of most executorships and the
intensity of court supervision of conservators and guardians in some
jurisdictions. The present Act does not undertake to adjust trust-investment
law to the special circumstances of the state schemes for administering
decedents' estates or conducting the affairs of protected persons.
Although the Uniform Prudent Investor Act
by its terms applies to trusts and not to charitable corporations, the
standards of the Act can be expected to inform the investment responsibilities
of directors and officers of charitable corporations. As the 1992 Restatement
observes, "the duties of the members of the governing board of a
charitable corporation are generally similar to the duties of the trustee of a
charitable trust." Restatement of Trusts 3d: Prudent Investor Rule
§ 379, Comment b, at 190 (1992). See also id. § 389, Comment
b, at 190-91 (absent contrary statute or other provision, prudent
investor rule applies to investment of funds held for charitable corporations).
SECTION 1. PRUDENT INVESTOR RULE.
(a) Except as otherwise provided in subsection (b), a trustee who invests and
manages trust assets owes a duty to the beneficiaries of the trust to comply
with the prudent investor rule set forth in this [Act].
(b) The prudent investor rule, a default rule, may be expanded, restricted,
eliminated, or otherwise altered by the provisions of a trust. A trustee is not
liable to a beneficiary to the extent that the trustee acted in reasonable reliance
on the provisions of the trust.
This section imposes the obligation of
prudence in the conduct of investment functions and identifies further sections
of the Act that specify the attributes of prudent conduct.
Origins. The prudence standard for trust investing traces back
to Harvard College v. Amory, 26
Prior legislation. The Model Prudent Man Rule Statute (1942),
sponsored by the American Bankers Association, undertook to codify the language
of the Amory case. See Mayo A. Shattuck, The Development of the
Prudent Man Rule for Fiduciary Investment in the United States in the Twentieth
Century, 12 Ohio State L.J. 491, at 501 (1951); for the text of the model act,
which inspired many state statutes, see id. at 508-09. Another prominent
codification of the Amory standard is Uniform Probate Code
§ 7-302 (1969), which provides that "the trustee shall observe the
standards in dealing with the trust assets that would be observed by a prudent
man dealing with the property of another . . . ."
Congress has imposed a comparable prudence standard for the administration of
pension and employee benefit trusts in the Employee Retirement Income Security
Act (ERISA), enacted in 1974. ERISA § 404(a)(1)(B), 29 U.S.C.
§ 1104(a), provides that "a fiduciary shall discharge his duties with
respect to a plan solely in the interest of the participants and beneficiaries
and . . . with the care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of like character and
with like aims . . . ."
Prior Restatement. The Restatement of Trusts 2d (1959) also
tracked the language of the Amory case: "In making investments of
trust funds the trustee is under a duty to the beneficiary . . . to make such
investments and only such investments as a prudent man would make of his own
property having in view the preservation of the estate and the amount and
regularity of the income to be derived . . . ." Restatement of Trusts 2d
§ 227 (1959).
Objective standard. The concept of prudence in the judicial
opinions and legislation is essentially relational or comparative. It resembles
in this respect the "reasonable person" rule of tort law. A prudent
trustee behaves as other trustees similarly situated would behave. The standard
is, therefore, objective rather than subjective. Sections 2 through 9 of this
Act identify the main factors that bear on prudent investment behavior.
Variation. Almost all of the rules of trust law are default
rules, that is, rules that the settlor may alter or abrogate. Subsection (b)
carries forward this traditional attribute of trust law. Traditional trust law
also allows the beneficiaries of the trust to excuse its performance, when they
are all capable and not misinformed. Restatement of Trusts 2d § 216
(1959).
SECTION 2. STANDARD OF CARE; PORTFOLIO STRATEGY; RISK AND RETURN
OBJECTIVES.
(a) A trustee shall invest and manage trust assets as a prudent investor would,
by considering the purposes, terms, distribution requirements, and other
circumstances of the trust. In satisfying this standard, the trustee shall
exercise reasonable care, skill, and caution.
(b) A trustee's investment and management decisions respecting individual
assets must be evaluated not in isolation but in the context of the trust
portfolio as a whole and as a part of an overall investment strategy having
risk and return objectives reasonably suited to the trust.
(c) Among circumstances that a trustee
shall consider in investing and managing trust assets are such of the following
as are relevant to the trust or its beneficiaries:
(1) general economic conditions;
(2) the possible effect of inflation or deflation;
(3) the expected tax consequences of investment decisions or strategies;
(4) the role that each investment or course of action plays within the overall
trust portfolio, which may include financial assets, interests in closely held
enterprises, tangible and intangible personal property, and real property;
(5) the expected total return from income and the appreciation of capital;
(6) other resources of the beneficiaries;
(7) needs for liquidity, regularity of income, and preservation or appreciation
of capital; and
(8) an asset's special relationship or special value, if any, to the purposes
of the trust or to one or more of the beneficiaries.
(d) A trustee shall make a reasonable effort to verify facts relevant to the
investment and management of trust assets.
(e) A trustee may invest in any kind of property or type of investment
consistent with the standards of this [Act].
(f) A trustee who has special skills or expertise, or is named trustee in
reliance upon the trustee's representation that the trustee has special skills
or expertise, has a duty to use those special skills or expertise.
Comment
Section 2 is the heart of the Act. Subsections (a), (b), and (c) are patterned
loosely on the language of the Restatement of Trusts 3d: Prudent Investor Rule
§ 227 (1992), and on the 1991
Objective standard. Subsection (a) of this Act carries forward
the relational and objective standard made familiar in the Amory case,
in earlier prudent investor legislation, and in the Restatements. Early
formulations of the prudent person rule were sometimes troubled by the effort
to distinguish between the standard of a prudent person investing for another
and investing on his or her own account. The language of subsection (a), by
relating the trustee's duty to "the purposes, terms, distribution
requirements, and other circumstances of the trust," should put such
questions to rest. The standard is the standard of the prudent investor
similarly situated.
Portfolio standard. Subsection (b) emphasizes the consolidated
portfolio standard for evaluating investment decisions. An investment that
might be imprudent standing alone can become prudent if undertaken in sensible
relation to other trust assets, or to other nontrust assets. In the trust
setting the term "portfolio" embraces the entire trust estate.
Risk and
return. Subsection (b)
also sounds the main theme of modern investment practice, sensitivity to the
risk/return curve. See generally the works cited in the Prefatory Note to this
Act, under "Literature." Returns correlate strongly with risk, but
tolerance for risk varies greatly with the financial and other circumstances of
the investor, or in the case of a trust, with the purposes of the trust and the
relevant circumstances of the beneficiaries. A trust whose main purpose is to
support an elderly widow of modest means will have a lower risk tolerance than
a trust to accumulate for a young scion of great wealth.
The Drafting Committee declined the
suggestion that the Act should create an exception to the prudent investor rule
(or to the diversification requirement of Section 3) in the case of smaller
trusts. The
Committee believes that subsections (b) and (c) of the Act emphasize factors
that are sensitive to the traits of small trusts; and that subsection (f)
adjusts helpfully for the distinction between professional and amateur
trusteeship. Furthermore, it is always open to the settlor of a trust under
Section 1(b) of the Act to reduce the trustee's standard of care if the settlor
deems such a step appropriate. The official comments to the 1992 Restatement
observe that pooled investments, such as mutual funds and bank common trust funds,
are especially suitable for small trusts. Restatement of Trusts 3d: Prudent
Investor Rule § 227, Comments h, m, at 28, 51;
reporter's note to Comment g, id. at 83.
SECTION
3. DIVERSIFICATION. A
trustee shall diversify the investments of the trust unless the trustee
reasonably determines that, because of special circumstances, the purposes of
the trust are better served without diversifying.
The language of this section derives from Restatement of Trusts 2d § 228
(1959). ERISA insists upon a comparable rule for pension trusts. ERISA
§ 404(a)(1)(C), 29 U.S.C. § 1104(a)(1)(C). Case law overwhelmingly
supports the duty to diversify. See Annot., Duty of Trustee to Diversify
Investments, and Liability for Failure to Do So, 24 A.L.R. 3d 730 (1969) & 1992
Supp. at 78-79.
The 1992 Restatement of Trusts takes the
significant step of integrating the diversification requirement into the
concept of prudent investing. Section 227(b) of the 1992 Restatement treats
diversification as one of the fundamental elements of prudent investing,
replacing the separate section 228 of the Restatement of Trusts 2d. The message
of the 1992 Restatement, carried forward in Section 3 of this Act, is that
prudent investing ordinarily requires diversification.
Circumstances can, however, overcome the
duty to diversify. For example, if a tax-sensitive trust owns an
underdiversified block of low-basis securities, the tax costs of recognizing
the gain may outweigh the advantages of diversifying the holding. The wish to
retain a family business is another situation in which the purposes of the
trust sometimes override the conventional duty to diversify.
Most states have legislation authorizing common trust funds; see 3 Austin W.
Scott & William F. Fratcher, The Law of Trusts § 227.9, at 463-65 n.26
(4th ed. 1988) (collecting citations to state statutes). As of 1992, 35 states
and the District of Columbia had enacted the Uniform Common Trust Fund Act
(UCTFA) (1938), overcoming the rule against commingling trust assets and
expressly enabling banks and trust companies to establish common trust funds. 7
Uniform Laws Ann. 1992 Supp. at 130 (schedule of adopting states). The
Prefatory Note to the UCTFA explains: "The purposes of such a common or
joint investment fund are to diversify the investment of the several trusts and
thus spread the risk of loss, and to make it easy to invest any amount of trust
funds quickly and with a small amount of trouble." 7 Uniform Laws Ann. 402
(1985).
Fiduciary investing in mutual funds. Trusts can also achieve
diversification by investing in mutual funds. See Restatement of Trusts 3d:
Prudent Investor Rule, § 227, Comment m, at 99-100 (1992)
(endorsing trust investment in mutual funds). ERISA § 401(b)(1), 29 U.S.C.
§ 1101(b)(1), expressly authorizes pension trusts to invest in mutual
funds, identified as securities "issued by an investment company
registered under the Investment Company Act of 1940 . . . ."
SECTION 4. DUTIES AT INCEPTION OF TRUSTEESHIP. Within a
reasonable time after accepting a trusteeship or receiving trust assets, a
trustee shall review the trust assets and make and implement decisions
concerning the retention and disposition of assets, in order to bring the trust
portfolio into compliance with the purposes, terms, distribution requirements,
and other circumstances of the trust, and with the requirements of this [Act].
SECTION
5. LOYALTY. A trustee
shall invest and manage the trust assets solely in the interest of the
beneficiaries.
SECTION
6. IMPARTIALITY. If a
trust has two or more beneficiaries, the trustee shall act impartially in
investing and managing the trust assets, taking into account any differing
interests of the beneficiaries.
SECTION 7. INVESTMENT COSTS. In investing and managing trust
assets, a trustee may only incur costs that are appropriate and reasonable in
relation to the assets, the purposes of the trust, and the skills of the
trustee.
SECTION 8. REVIEWING COMPLIANCE. Compliance with the prudent
investor rule is determined in light of the facts and circumstances existing at
the time of a trustee's decision or action and not by hindsight.
SECTION 9. DELEGATION OF INVESTMENT AND MANAGEMENT FUNCTIONS.
(a) A trustee may delegate investment and management functions that a prudent
trustee of comparable skills could properly delegate under the circumstances.
The trustee shall exercise reasonable care, skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation, consistent with the
purposes and terms of the trust; and
(3) periodically reviewing the agent's actions in order to monitor the agent's
performance and compliance with the terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the trust to
exercise reasonable care to comply with the terms of the delegation.
(c) A trustee who complies with the requirements of subsection (a) is not
liable to the beneficiaries or to the trust for the decisions or actions of the
agent to whom the function was delegated.
(d) By accepting the delegation of a trust function from the trustee of a trust
that is subject to the law of this State, an agent submits to the jurisdiction
of the courts of this State.
ITEM D. MORE MATERIALS ON HOME OWNER BILL OF
RIGHTS
A significant part of our discussion
in
1. "Joanne uses the HOBof R to limit
association ability to adopt rules. [pets, parking, leasing]."
2. "Mandatory grand-fathering of
personal property rights [can? cant? force me to sell my RV after new rules
adopted] "
3. "Can't make rule about who
occupies the unit other than as it affects the CEs."
4. "Can't prohibit political
signs."
5. "Religious displays during
holidays"
6. "procedure for recall of rules by
members "
7. "3-102(c) Too broad for lots where
focus should be what happens on the lot, not inside the house"
8. He also scratched some thoughts about
Architectural review issues - no
standard for review in UCIOA; Who can it be?
Can the Declarant retain it?
Should it be a Special Declarant Right?
9. "3-102(a)(1) - distinguish between
rules and regulations versus administrative policies [ which Joanne sees as the
difference between property rights v management of common elements] "
10. "Board v. Membership Rules "
Breetz
Note - A student and I are looking for the relevant provisions of the Virginia
and other statutory provisions on this subject - particularly as to the need to
address owner access rights to records.
UCIOA 3-118 already deals with this subject, but perhaps inadequately.
11. Finally, Carl notes or implies that
"In section 3-108 , [we ought to] expand purpose of special meetings to
allow a vote to overturn a decision of the Board or take up any other matter
that the association might properly consider - owners can do whatever the board
can do."
12. Later, Carl notes suggest that the
association [should be required to ?] establish and administer standards
relating to building design, construction and appearance." I think this is a complicated issue, if it is
not dealt with up front.
13. Carl
then goes on to add these random thoughts:
a. "give
reasonable notice of every board meeting"
b. "any subject ripe for association
meeting" [even if not noticed, asks Breetz?]
c. "Can agenda be changed at meeting?
No, otherwise deprive owners of the opportunity to participate on issues not
disclosed in the agenda [Breetz agrees]
d. "Who
can set agenda items? % of owners can
require it {SEC rule on shareholder proposals] "
e. "add
email as an alternative form of service for those who ask for it."
f. "Must post on bulletin Board and
personal notice"
14. Add new section 3-108 provisions
- Board meetings should
be open to all except in executive session
- public comment
15. Then Carl's notes ask:
a. "What records- At least so that
the association can properly answer the resale certification requirements
b. Access
to names and addresses of unit owners
c. minutes
"
16. Exclusions from mandatory access-
personnel records, HIPPA information, litigation, contract negotiations
17. 3-103(a) - repeat verbatim the duty of
care etc. from nonprofit corporate law,
18. litigation - give notice to owners of
association litigation and annual updates.
19. He continues : Re the homeowner bill of
rights: let's just require that the
by-laws must contain provisions on various topics -- the notice of meetings,
etc and let each declaring flesh things out.
Lets' do this as an alternative.
20. Make architectural control a special
declaring right
21. Architectural control - how long can
declaring hold the power?
22. Shall we authorize the board to require
arbitration in Section 3-102(a)(18)?
23. We ought to add a default rules that
protects declaring who settles with the association but wants protection
against claims from individual unit owners
24. What about an association claim on
commonality inside the unit?”
ITEM E CALIFORNIA ALTERNATIVE DISPUTE RESOLUTION PROCESS And PART OF NOTICE PROVISIONS INVOLVING DEVELOPER SUITS BILL NUMBER: AB 1836 FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2004 LEGISLATIVE COUNSEL'S DIGEST Existing law provides that a common interest development association has standing to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings, in various circumstances, including enforcement of the governing documents. The Davis-Stirling Common Interest Development Act requires, before a common interest development association or an owner of a separate interest therein brings certain actions related to the enforcement of the development's governing documents, that the parties endeavor to submit their dispute to alternative dispute resolution, as specified. Existing law defines and regulates operating rules in connection with common interest development associations and applies them to association procedures for resolution of assessment disputes. This bill would revise and recast the provisions described above relating to dispute resolution. The bill would specify that a common interest development association and an owner of a separate interest may enforce governing documents other than the declaration. The bill would create a new dispute resolution procedure for conflicts between an association and a member, to be applied when the dispute concerns specified subjects. The bill would require an association to provide a fair, reasonable, and expeditious procedure for resolving these disputes, as defined by certain minimum standards, and would provide a procedure for associations that do not have a procedure of their own that meets the minimum standards, among them that the member not be charged a fee to participate in the process. The bill would also require that the association provide notice of its dispute resolution process, as specified.This bill would revise the existing dispute resolution provisions, described above, to clarify their application to other non-judicial processes and to broaden their applicability to include actions enforcing the Davis-Stirling Common Interest Development Act and the Nonprofit Mutual Benefit Corporation Law. Among other things, thebill would also provide for the tolling of a statute of limitations in certain circumstances, expand the permissible methods of service of a request to submit a dispute to the resolution process, and change the confidentiality protections applied to these procedures. The bill would require that a common interest development association's procedures for the resolution of all disputes, not only those related to assessments, satisfy requirements regarding association operating rules. The bill would make additional technical and conforming changes. SECTION 1. **** Article 5. Dispute Resolution Procedure (a) This article applies to a dispute between an association and a member involving their rights, duties, or liabilities under this title, under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code), or under the governing documents of the common interest development or association. (b) This article supplements, and does not replace, Article 2 (commencing with Section 1369.510) of Chapter 7, relating to alternative dispute resolution as a prerequisite to an enforcement action. (a) An association shall provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article.
(b) In developing a procedure pursuant to this article, an association shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs such as those listed on the Internet Web sites of the Department of Consumer Affairs and theUnited States Department of Housing and Urban Development. (c) If an association does not provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article, the procedure provided in Section 1363.840 applies and satisfies the requirement of subdivision (a). 1363.830. A fair, reasonable, and expeditious dispute resolution procedure shall at a minimum satisfy all of the following requirements: (a) The procedure may be invoked by either party to the dispute. A request invoking the procedure shall be in writing. (b) The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for the association to act on a request invoking the procedure. (c) If the procedure is invoked by a member, the association shall participate in the procedure. (d) If the procedure is invoked by the association, the member may elect not to participate in the procedure. If the member participates but the dispute is resolved other than by agreement of the member, the member shall have a right of appeal to the association's board of directors. (e) A resolution of a dispute pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the association and is judicially enforceable. An agreement reached pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the parties and is judicially enforceable. (f) The procedure shall provide a means by which the member and the association may explain their positions. (g) A member of the association shall not be charged a fee to participate in the process. 1363.840. (a) This section applies in an association that does not otherwise provide a fair, reasonable, and expeditious dispute resolution procedure. The procedure provided in this section is fair, reasonable, and expeditious, within the meaning of this article. (b) Either party to a dispute within the scope of this article may invoke the following procedure: (1) The party may request the other party to meet and confer in an effort to resolve the dispute. The request shall be in writing. (2) A member of an association may refuse a request to meet and confer. The association may not refuse a request to meet and confer. (3) The association's board of directors shall designate a member of the board to meet and confer. (4) The parties shall meet promptly at a mutually convenient time and place, explain their positions to each other, and confer in good faith in an effort to resolve the dispute. (5) A resolution of the dispute agreed to by the parties shall be memorialized in writing and signed by the parties, including the board designee on behalf of the association. (c) An agreement reached under this section binds the parties and is judicially enforceable if both of the following conditions are satisfied: (1) The agreement is not in conflict with law or the governing documents of the common interest development or association. (2) The agreement is either consistent with the authority granted by the board of directors to its designee or the agreement is ratified by the board of directors. (d) A member of the association may not be charged a fee to participate in the process.