Berding | Weil Community Association ALERT Newsletter
Legal News and Comments for Community Association Boards and Managers Issue #45 • May 2010
Why "As Is" Really Isn't How It Is:...
The Legal Effect Of "As-Is" Clauses in the Context of Homeowners Association Defect Claims - Part 1
by Matt J. Malone, Esq.
“It depends on what the meaning of the word 'is' is.” — Bill Clinton
Let's be honest: The only people young enough not to recall that quote from our 42nd President are also far too young to be reading this article. Support him or not, we all remember that gem from his videotaped grand jury testimony. And we also remember the backlash that followed: Could such a seemingly simple word like “is” be stretched into something debatable, questionable or somehow indefinable?
Now, residential purchase and sale agreements are not quite as, shall we say, sexy as a presidential scandal. But in this case, they do implicate a similar problem. Almost all such agreements contain disclaimers and warranty waivers whereby a buyer acknowledges that he or she takes the property without representations by the seller as to the fitness of any particular component. Similarly, these agreements almost universally contain “as is” provisions, which act as a confirmation that the buyer takes the property in its presently-existing condition. But, as this article will show, “as-is” clauses and related waivers do not stop claims by all purchasers, and do not necessarily apply to all claims a particular plaintiff might have — especially if that plaintiff is a homeowners association. In short, it is not as simple as you might think to determine what the meaning of “as is” is.
So, when might “as is” not be the way it is? The first part of this article describes California law on “as is” clauses, illustrating the reluctance by both the legislature and the courts to allow such provisions to operate as catch-alls universally protecting sellers from any problems a buyer might later discover with the property. In the next part, we will look at the particular problem of homeowners' association defect claims. We will see how as-is clauses do not block such actions because the association never executed the contract containing the “as-is” provision. Indeed, even if the clause appeared in every purchase and sale contract signed by the members of an association, it is not enough to show that the association – which is its own separate, distinct legal entity – waived any of its claims. The second part will also include a discussion about the unique issue of condominium conversions – older properties that are nonetheless governed by new associations – to see whether a homeowners association is on weaker ground with the “as-is” clause because a conversion is, unquestionably, not new construction.
Berding|Weil Q&A of the Day
By Matt J. Malone, Esq.
Our association maintains an on-site security office. Calls to that office are automatically recorded. Do we need to disclose to the members that their calls to the security office are being recorded?
Yes. And this doesn't just apply to members. Anyone who might be recorded should be told beforehand.
When it comes to recording phone calls, California is a "two-party consent" state. Any person (and that includes an HOA) who records a confidential communication without the consent of the other party violates Penal Code section 632. The punishment is a fine of up to $2,500 and/or imprisonment for up to one year. Worse, under Penal Code section 637.2., the person who is surreptitiously recorded may recover, as damages, either three times their actual damages or $5,000, whichever is greater. That's as much as $7,500 total and a year in prison for a single violation!
If an HOA wants to record calls, it should provide notification at the beginning of the call that the call may be recorded. A taped message to that effect is fine. Then, the HOA won't run afoul of the Penal Code.  See Kearney v. Salomon Smith-Barney (2006) 39 Cal.4th 95, 100, 118.  You've probably noticed just such an announcement when you place a call to a bank or virtually any other customer service number. That's how those companies protect themselves from violating California's "two-party consent" rule, and how HOAs should do so, too.

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