More on Electric Car Charging Stations – for Community Associations

A reader of  my post here sent me an e-mail message raising concerns about whether installing charging stations could make a community association an unlicensed electric power re-seller.  The reader raised an important issue.  As renewable/green energy infrastructure develops, so will statutes and regulations pertaining to it.  Any association interested in such things as electric vehicle charging stations or solar energy will want to be particularly sure to consult with legal counsel to ensure that contracts for such improvements address these evolving legal issues.   

 Specifically regarding electric vehicle charging stations in California, as part of its efforts to implement recently enacted Senate Bill 626 (requiring the PUC to develop policies to develop infrastructure for plug-in hybrid and electric vehicles) the California Public Utilities Commission (CPUC) very recently issued a decision that companies which sell electric vehicle charging services will not be regulated as public utilities pursuant to the Public Utilities Code and that, unless the charging station provider procures electricity on the wholesale market, utility sales of electricity to electric vehicle service providers do not constitute a “sale for resale” under the Federal Power Act.  In fact, the CPUC decision states, as a Conclusion of Law, that “condominium associations that provide electric vehicle charging on the premises as a service to the condominium owners . . . that have not dedicated their equipment to public use” are also not public utilities.  Notwithstanding this, the CPUC does, of course, have authority to dictate the terms under which the utility providing the electricity to power the charging stations provides service, so regulations requiring, for example, that customers notify a utility of anticipated increased connected load would need to be followed.  Again, it will be important for community associations installing charging stations to consult with legal counsel to address these issues during the contracting stage.

 With respect to rates, since the CPUC has decided that electric vehicle charging service providers will not be regulated as public utilities it will not be directly regulating the rates charged to use charging stations.  Insofar as the cost to purchase the electricity to power the charging station is regulated by the CPUC, however, and will be the largest business expense for the charging station’s owner (whether the association or a third party), the CPUC’s decisions regarding tariff rates will, of course, have an indirect impact.     

Failure to understand and address these sorts of regulatory issues can really throw a monkey wrench into the works of what should be a successful effort to “green” a community.  For example, earlier this year it was reported in local (Los Angeles area) media that a $25 million “solar farm” installed in the vast campus parking lots of a community college were sitting “unplugged”.  The solar equipment, owned by a third party, was intended to supply electricity to the Los Angeles Community College District via a Power Purchase Agreement (PPA), but the Los Angeles Department of Water and Power (DWP) would not agree to the arrangement, since the Los Angeles city charter bars the sale of power by any entity other than the DWP.  (This differs from state law pertaining to investor-owned utilities, which generally do approve PPAs).  Last I heard the LACCD was working on another financing arrangement, but these issues would, of course, have been more easily (and, I am sure, more cost effectively) addressed before the solar system was installed, not after.


Risk Management for Special Events

One of the more important risk management concerns for my community association clients is the management of potential legal liability risks arising from special events.  Whether an association hosts a special event itself or permits its members to use its facilities to host their own special events, there are a number of risk exposures to be considered and addressed in order to protect the event participants and the association.  Stephanie Dufour’s blog post, Safety Considerations for Your “SPECIAL” Day,  is an excellent overview of the risk management issues to be considered.

In addition to Stephanie’s excellent post, I offer the following, addressed to the risk management needs of the venue owner (typically, in my case, a community association):

  • In her 2nd point, Stephanie points out important considerations for the event sponsor regarding location selection.  For the property owner offering its facilities for use (a community association which permits use of its clubhouse for private parties, for example), a similar analysis is important.  The type of use and number of participants for which your facility is safely suited should be carefully considered, and described in your lease, permit or use agreement.  It should go without saying (but I’ll say it anyway ’cause that’s what we lawyer types so often do), that you should in fact have a written agreement for a member’s (or other third party’s) use of your facilities, and that agreement should cover the scope of permitted use, indemnity obligations, insurance requirements and liability waivers.  
  • In her 3rd point, regarding food service, Stephanie notes the importance of proper food preparation and handling.  From the property owner’s perspective, if food will be sold by vendors at an event held at your facilities (an Octoberfest, for example), your written agreement for that event should include appropriate requirements pertaining to any government-required licensing or food handling procedures.
  • Stephanie’s 4th point addresses risk management issues for events where alcohol will be served.  Whether the facility owner is hosting such an event itself or is permitting another party to host the event, Stephanie’s suggestions regarding procedures to institute to ensure the responsible service of alcohol are important.  In addition, liquor liability insurance coverage should be obtained (for a community association, this would typically be done via appropriate endorsement to the association’s commercial general liability – CGL – insurance policy) and, if alcohol is to be served by a third party host, by requiring appropriate liquor liability insurance coverage to be provided by the host via the property use agreement.  The potential need for a temporary liquor license should also be considered.  For example, a wine tasting event may require a one day liquor license.  Information regarding liquor licenses for special events in California can be found here (scroll to the 3rd page). 
  • I cannot endorse strongly enough Stephanie’s comments concerning vendors/collaborative events (Stephanie’s 8th point).  I would add only one thing to Stephanie’s comments – if there will be vendors (booths, entertainment, food, etc.) at your special event, which party will assume liability risks and provide insurance coverage should not only be discussed, but must be carefully memorialized in writing in a binding legal document. 
  • Regarding waivers (Stephanie’s 9th point), keep in mind that the law regarding enforceable terms, scope and format differs from jurisdiction to jurisdiction.  In addition, there are specific legal issues pertaining to waiver and release agreements pertaining to minors.  Do not rely on a form document found on the internet.  Seek the assistance of an attorney licensed in your jurisdiction with experience addressing these issues.
  • Similarly, laws vary from state to state regarding the meaning, scope and enforceability of indemnity agreements.  You need an indemnification clause in any use agreement granting a third party permission to use your property; again, seek the assistance of an attorney licensed in your jurisdiction with experience addressing these issues to prepare your agreement, to ensure that indemnity obligations are addressed in a manner consistent with the law in your jurisdiction.
  • Further to Stephanie’s 10th point, regarding photo/media releases, another issue to consider is how to protect your organization against potential breach/violation of copyright, license and/or publicity rights and similar issues.  One scenario in which a community association may be vulnerable to such claims is when the association hosts outdoor concerts.  Your contracts with live entertainment vendors must be written in such a way as to protect the association against such claims, particularly since such claims may not be covered by the association’s own insurance policies.  It is also important to determine whether there is a sound ordinance controlling the allowable decibel levels of the music, and be sure to address such rules in the vendor’s contract as well.  In my experience, such issues are rarely addressed in the entertainment vendor’s own contract (and when they are the issues are not addressed in a way which protects the association), so I would further add the recommendation that you have the association’s legal counsel review and negotiate the terms of that vendor’s contract as necessary.


New Statutes California Community Association Managers and Board Members Should Know About

One would have hoped that during 2009 California’s legislators would have had their hands full addressing our state’s budget crisis, but they did manage to squeeze in some time to amend and adopt legislation affecting community associations.  Listed below are the statutes which I believe will have the greatest impact on community associations, their managers, board members and residents.  Unless otherwise noted, all of the statutes listed below were adopted in 2009 and are effective as of January 1, 2010.

1.  If your association has a swimming pool or spa, you should already be familiar with the federal Virginia Graeme Baker Pool and Spa Safety Act (15 USC 8001), requiring pools and spas to be retrofitted with anti-entrapment devices (drain covers meeting specified standards).  This Act became effective in December 2008, and pool retrofits should have been completed by January 1st of this year.  The federal Act includes a section establishing a grant program to assist States with enforcement, education and administration costs, but only States meeting the federal Act’s minimum State law requirements are eligible.  To meet those requirements, California Assembly Bill No. 1020, which amended Section 18942 of, and added Sections 116064.1 and 116064.2 to, the California Health and Safety Code, was passed.  The bill imposes standards both for newly constructed public swimming pools and for the retrofit of existing public swimming pools (and community association swimming pools and spas do fall within the definition of “public” swimming pools).  All pools and spas must be retrofitted by no later than July 1, 2010, unless they have already been retrofitted to comply with the federal Act.  Since both the federal Act and the new State legislation pertain to health and safety issues for children, it would be very poor risk management for an association to ignore this legislation. 

 2.  California Assembly Bill 1353.8 declares any governing document provision which prohibits, or has the effect of prohibiting, water-efficient landscaping to be void and unenforceable.  The governing documents of many California community associations would contravene this new legislation.  As noted in my prior posts regarding solar energy for community associations, it is reasonable to assume that California community associations will see much more legislation pertaining to such “green” issues in the near future.  (I predict that the next big thing will be clotheslines.)

 3.  Several new statutes pertaining to community associations’ disclosure obligations were passed during the last legislative session.  Board members and managers should review and familiarize themselves with the provisions of these new statutes, including:

     a.  Amended Civil Code Section 1350.7 and amended Corporations Code Section 20 (pertaining to electronic distribution of documents);

      b.  New Civil Code Section 1363.005 (which requires distribution of a statutorily proscribed “Disclosure Documents Index” at the request of any member);

      c.  New Civil Code Section 1365.2.5 (regarding new assessment and reserve funding disclosure requirements).

Feel free to contact me for a copy of the full text of these new statutes, or you can find them at  In addition, I am always happy to meet, free of charge, with board members and managers, to discuss complying with the new statutes (or any other issue of concern to your community).


Furthermore, a rose by any other name . . .

. . . may also bring a visit from the tax man (or woman).  Or the labor board.  Or a process server.

My previous “Rose By Any Other Name” posts have been about (a) misnamed/unnamed insureds and (b) contracts (verbal vs. written).  This post is about independent contractors who are really employees (at least, as far as the federal and state tax authorities are concerned), and other “thorny” employee classification issues.

At this time of rising State and Federal deficits, there seems to be an increased scrutiny of how small and medium sized businesses are classifying their workers.  In addition, attorneys who represent workers before the Labor Board seem to be experiencing an uptick in business, commensurate with rising unemployment.  This is strictly based upon anecdotal evidence (I’m receiving more calls from business owners on the receiving end of employee pay and benefit claims), but my suspicion is that such claims, as well as tax enforcement proceedings, are on the rise and will continue along that trend for some time to come. 

Proper classification of workers as independent contractors or employees (and if employees, as temporary, part-time or full-time and as exempt or non-exempt) can mean the difference between financial survival or failure, particularly for a small business, and small business owners, who do not have their own HR staff, are often the least equipped to make these determinations.  Failure to properly classify employees can leave a small business vulnerable to claims for legally mandated employee benefits such as workers’ compensation and unemployment benefits, for discretionary benefits such as health insurance and paid time off, and for back overtime pay.  Properly classifying employees is particularly difficult for small businesses with fluctuating staffing needs, since it is easy for a busy small business owner to forget to reclassify a temporary employee who becomes permanent, or a part-time employee who becomes full-time.   

The solution?  Well, my instinct as a lawyer is this – put it in writing, and keep it in writing.  Even temporary workers could be given something in writing that makes it clear that their status is temporary, with an approximate time limit.  Then calendar the end of that time limit, as a reminder to revisit the issue of how that worker should continue to be classified.  And even small businesses should have a written personnel policy to point to when your employee classifications (or other employment practices) are questioned.       

More dangerous than a misclassification of an employee is the improper classification of a worker as an independent contractor.  Such a misclassification leaves the employer vulnerable to back payroll taxes and penalties as well, which can be substantial enough to put you out of business.  And, whether a worker should be classified as an independent contractor or as an employee can be a particularly tricky determination for a small business owner to make, since the criteria for independent contractor status used by the IRS, the federal Department of Labor and state labor departments don’t all impose exactly the same standards. and are not “exact” but, rather, are open to some interpretation.  Even large companies, such as Microsoft and Federal Express, have been the subject of expensive enforcement actions alleging misclassification of workers.  The new targets for such actions appear to be small businesses, and I’m sure that has alot to do with the fact that they are the most likely to be mistakenly misclassifying their staff.    

The solution?  Again, my instinct is to put it in writing.  As far as I am concerned, a written contract is absolutely essential.  Even with a written contract, however, treating the independent contractor as an employee may indeed make the contractor an employee, whether that’s what you intended or not.  For an explanation of how the IRS analyzes these issues, see IRS Publication 15A.   

Finally, years ago one of my community association clients learned the hard way that even with no employees it still needed workers compensation insurance.  That is because California’s Labor Code provides that one who hires a worker to perform work requiring a license is that worker’s employer if it turns out that the worker doesn’t have the required license.  (It may shock you to hear that sometimes unlicensed contractors lie about their unlicensed status and either provide a fraudulent contractor’s license number or “borrow” another contractor’s license number.)  The association hired an unlicensed contractor, one of the contractor’s employees was injured, and the association was on the hook, with no workers compensation insurance and with a workers compensation exclusion in its commercial general liability insurance policy.  To get a better feel for how California’s Workers’ Compensation Appeals Board analyzes the issue of employment status, take a look here

The solution to this problem?  Legal liability risk management, plain and simple.  A good insurance broker and an attorney to prepare the association’s own contracts, requiring contractors to maintain appropriate licenses and insurance coverage, would have been a big help.


Risk Management Guidelines for Directors and Officers

Most recently, I have been blogging about California community associations (aka homeowners associations), so I thought this would be a good time to offer some general risk management guidance for members of the boards of directors of such organizations.

The structure and constraints of board membership can be difficult for community association directors to get comfortable with.  Particularly in small community associations (10 units or less, for example), the formalities of board meetings, minutes, financial reporting, and generally complying with the myriad statutory requirements imposed on community associations seem needlessly complex and frustrating.  The board of directors of an association which is large enough to use professional management can rely on the association’s management professional to handle the nuts and bolts, leaving the actual work of corporate governance up to the board members.  The directors of small associations without professional management, on the other hand, often abandon any effort to follow California’s non-profit corporation laws and the Davis-Stirling Act (the part of California’s Civil Code which pertains specifically to community associations) in the interest of easier “self-management”, not realizing that abandoning the “formalities” of corporate governance leaves the association, the individual board members, and in some instances even the association’s members (the homeowners) vulnerable to legal liability against which they would otherwise be shielded.  Similarly, the small business owner who forms a business entity (a corporation or LLC) in an effort to shield him or her self from personal liability, but then ignores corporate guidelines and formalities, is vulnerable to personal liability. 

From my standpoint as an attorney representing these entities, establishing procedures and internal controls to maintain the corporate entity as a shield against personal liability is well worth the effort and, if necessary, expense.  A good first step for the new board member (or small corporate business owner) is, of course, to get educated.  In this digital age, what better place to begin that education than for free, on the internet?  With that in mind, I would recommend two publications from Chubb & Son, a division of Federal Insurance Company, which can be downloaded free of charge.  The first, Directors & Officers Liability Loss Prevention Guidelines for Not-for-Profit Organizations, is good for board members of community associations.  The second, Loss Prevention Guidelines for Independent Directors, while not directly relevant to community association or small business board members, is Chubb’s most recent publication on the topic, and includes a section, Corporate Governance Best Practices (pages 17-28), which contains valuable information for any director.

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