Articles Posted in Contracts & Easements

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*New Case Lawhoa-boundary-dispute

Rural, equestrian, and large-scale planned developments may include properties with spacious lot sizes bordered by common area lots and open spaces. When property lines are not clearly delineated or easily identified in these communities, there may be instances where a homeowner seeks to expand his property by constructing yard improvements that extend beyond his property line and encroach onto adjacent, HOA-owned common area. If this is not discovered and addressed by the HOA in a timely fashion, there are avenues under California law through which the homeowner may assert that he has obtained an easement over (and in extreme circumstances, actual ownership of) the encroached area. The thought of a homeowner annexing common area for his/her own use is a scary thought, as is the prospect of the HOA failing to prevail in costly litigation that may be needed to reclaim its common area.

Fortunately, the recent holding in Nellie Gail Ranch Owners Association v. McMullin (2016) 4 Cal.App.5th 982 (“McMullin”) helps strengthen a HOA’s ability to defeat a homeowner’s attempt to encroach onto common area and claim it as his own…
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Labor-Unions-Preventive-Practices-1024x683On August 27, 2015, the National Labor Relations Board (“NLRB”) published its decision in the Browning-Ferris Industries of California, Inc. case (“BFI Case”). In that case, Browning-Ferris Industries of California, Inc. (“BFI”) retained the services of Leadpoint Business Services (“LBS”) to provide staff to one of BFI’s recycling facilities. The contract between BFI and LBS recognized, and the parties understood, that the personnel staffed by LBS were the employees of LBS. Nevertheless, given the fact that the contract granted BFI with some control over the employees of LBS, the NLRB concluded that BFI was a joint-employer of LBS thereby obligating BFI to comply with federal labor laws.

In adopting a new legal standard for determining joint-employer status, the NLRB emphasized that such a determination should not be based solely on actual control over the employees of another, but the “existence, extent, and object of the putative joint employer’s control.” (Browning-Ferris Industries of California, Inc. (2015) 2015 NLRB No. 672, *12 (Emphasis added).) Otherwise, employers would be able to insulate themselves from their responsibility to comply with federal labor laws. (Id. at p. *21) Accordingly, as long as a company retains (e.g., through the execution of a contract) the authority to control the employees of another, said company shall be given joint employer status. (Id. at p. *2.) This is true even if control is exercised indirectly (e.g., through an intermediary). (Id.)

Many associations retain a community management firm for the purpose of executing the duties of the association. These community management firms in turn employ community managers and support staff to manage these associations. While historically recognized as the employee of the community management firm (and an independent contractor of the association), the BFI Case raises some questions with respect to the nature of the relationship between the employees of a community management firm and the association. Accordingly, associations must be cognizant that a Court may find that it is a joint employer of the community manager (and support staff), notwithstanding the fact that it exercises no direct and immediate control over said manager.

Similarly, associations and management companies must take care when hiring maintenance and service providers for the community.  When managers, committee members, or board members are conducting job walks with a contractor’s employee, reviewing specifications, or receiving invoices, the management company and the association may become joint employers. In Heiman v. Worker’s Compensation Appeals Board, Cal: Court of Appeal, 2nd Appellate Dist., 3rd Div. 2007 (“Heiman”), a community association manager hired an unlicensed and uninsured contractor on behalf of the association to install rain gutters on the condominium buildings.  An employee of the contractor was seriously injured on the first day of the project and sued the contractor, management company, and association for workers’ compensation.  The Court held that the contractor, the association, and the management company were all joint employers because the contractor hired the injured employee, and the management company, as agent of the association, hired the contractor.  The BFI Case seems to affirm this decision.

California HOA laws In order to insulate the association from a possible finding of joint-employer status, the association should ensure that its contract with independent contractors, requires all proper licenses and insurance, adequately sets forth the desired results, and sets forth the level of care and skill to be used in accomplishing the desired results. (See Id. at p. 12 (“mere ‘service under an agreement to accomplish results or to use care and skill in accomplishing results’ is not evidence of an employment, or joint-employment relationship”).) The agreement should also include a provision that requires the contractor to indemnify and hold the association harmless in the event a labor dispute arises.

Blog post authored by TLG attorney, Matthew T. Plaxton.

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hoa vendorsOne of the primary purposes of any homeowners association (HOA) is to manage, maintain and repair the common areas throughout the HOA’s development. This naturally requires the HOA to contract with third-party vendors to furnish goods or services to the HOA (e.g., landscaping, construction, remediation, painting, plumbing, etc.). We are consistently surprised at how some Board members and management professionals fail to recognize how the HOA’s use of improperly vetted vendors can result in potentially significant legal and financial implications for the HOA, among other problems. Therefore, the need to properly vet vendors—and their contracts—is critical before the Board executes any vendor’s contract on behalf of the HOA.

We previously drafted a library article entitled “HOA Concerns in Contracting with Vendors” that provides some guidance as to how a HOA’s Board and Managing Agent can protect the interests of the HOA and its members. This blog post touches on some of the information contained in that article, and sets forth some recommended procedures which should be utilized before any vendor begins work at the HOA’s development.

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HOA-water-intrusion-patio.jpgMost every set of Homeowners Association (“HOA”) CC&Rs contain a provision prohibiting conduct which constitutes a “nuisance.” That conduct often includes “noxious, illegal or offensive activities,” anything which “unreasonably interferes with a resident’s right to quiet enjoyment” and/or “endangers their health or annoys or disturbs” them. We have blogged about how such nuisance provisions may be employed to resolve issues such as the conduct of tenants, activities in the common area, and second-hand smoke transmission. However, a recent unpublished ruling of a California appeals court indicates how nuisance provisions may also extend to situations involving improvements constructed or maintained by a homeowner.

In PGA West Residential Association, Inc. et al., v. Mork (2014) Cal. Ct. App. No. E054276 (“PGA West“), the Defendant homeowners (the Morks) and the Plaintiff homeowners (the Wyatts) owned adjacent, freestanding condominium units within the PGA West Residential Association (“Association”). In 2008, the Wyatts discovered the presence of mold and moisture damage within the interior of their unit. The Wyatts concluded that the water had entered into their unit through an exterior common area wall (“Common Wall”) separating their unit and the Morks’ patio (“Patio”). The Wyatts then sued both the Morks and the Association for violating the restrictive covenants set forth in the Association’s CC&Rs. The Association also sued the Morks for breach of the CC&Rs, breach of contract, and negligence–alleging that the Morks had altered the drainage in the Patio and, as a result, caused water to flow under the Common Wall and into the Wyatts’ unit.

At trial, both the Wyatts and the Association presented evidence that the Morks had altered the original grade of the Patio in the Morks’ course of constructing a swimming pool, sprinkler system and other improvements in the Patio area. The Morks’ conduct resulted in surface water which drained away from the Morks’ unit ultimately collecting into a 2′ wide planter (“Planter”) that extended the length of the Common Wall. In their defense, the Morks argued, among other things, that they were not responsible under the CC&Rs for maintaining the Patio or the Planter–that those areas were designated as “Limited Common Areas” under the CC&Rs to be maintained by the Association…

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hoa-gateAn easement provides an individual with the legal right to a specific and definable use of another’s property. A homeowners association’s (“HOA’s”) governing documents (i.e., “CC&Rs”) often provide numerous easement rights to its members for access and use of the HOA’s common areas and recreational facilities. While those easement rights are reserved for the benefit of the HOA’s members, their guests and tenants residing in the HOA’s development, it is not uncommon for non-residents and general members of the public to utilize HOA common area facilities such as walkways, trails and parks. HOAs may run into issues when trying to exclude non-residents from those areas, and may be reluctant to take more formal measures needed to do so (i.e., the installation of controlled access gates, the use of security personnel, etc.).

However, if a HOA fails to take such measures and fails to actively prohibit non-residents from accessing the HOA’s common area facilities, the open and consistent use of those facilities by non-residents may ultimately result in the creation of “prescriptive” easement rights for those non-residents. In the recent unpublished decision in Applegate Properties, Inc. v. Coronado Cays Homeowners Association (“Applegate“), the California Court of Appeals held that such prescriptive easement rights had been created over the common area of the Coronado Cays Homeowners Association (“Association”).

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hoa-records.jpg*New Library Article

There are numerous records and items of information maintained and generated by a homeowners association (“HOA”) in the course of its operations. It is common for a HOA member to request copies of such records and information, especially in connection with an ongoing dispute the member may have with the HOA. Upon receipt of such a request, HOA boards and management professionals often have questions concerning the scope of the HOA’s responsibilities in responding to the request and in ultimately providing the member with the requested records and information.

The California Civil Code contains several provisions governing (1) the degree to which a HOA member is entitled to inspect and to copy certain “association records,” (2) the degree to which certain association records are not subject to inspection or copying by a member, and (3) the process through which the HOA must produce or provide access to its records in response to a member’s request. This blog post provides an overview of these provisions, as well as some general guidance for HOA boards and management professionals on this issue.

*Note: Our attorneys have also published this information in a new article entitled “Inspection and Copying of Association Records” that is available for download from our Web site’s library.

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*New Case LawHOA-parking-structure.jpg

It is not uncommon for a homeowners association (“HOA”) to enter into contractual arrangements with a third party where the rights and responsibilities under that arrangement are between the third party and each of the HOA’s members. Under such circumstances, the HOA’s involvement may be limited solely to collecting fees from the members and passing them on to the third party. Because the HOA (as an entity) is not the beneficiary of the contract, there is uncertainty as to whether the HOA has standing to assert claims against the third party on behalf of the HOA’s members. California Civil Code Section 5980 provides a HOA with standing to initiate legal action “in its own name as the real party in interest and without joining with it the [HOA’s] members” in matters relating to enforcement of the HOA’s governing documents, as well as matters involving or arising out of damage to the common area and/or to a separate interest which the HOA is obligated to maintain or repair. However, there is no statutory provision clearly addressing whether a HOA has such standing in matters pertaining to the rights of the HOA’s members in contracts with third parties.

Fortunately, the recent case of Market Lofts Community Association v. 9th Street Market Lofts, LLC (2014) 222 Cal. App. 4th 924 (“Market Lofts”) provides some guidance on this issue.

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hoa-pesticide-warning.jpg*New Library Article

California Code of Regulations (CCR) Sections 6000 through 6619 regulate the use of pesticides and pest control operations. Much of these Sections do not apply to residential homeowners associations (“HOAs”). However, there is one Section that contains various notification requirements that a HOA must satisfy when pesticides are applied in its community: CCR Section 6618 – “Notice of Applications.”

In sum, CCR Section 6618 requires certain notifications to be provided to the “operator” of the property where pesticides are being applied, as well as to persons whom the operator has reason to believe may enter the property during and after the application period. Unfortunately, CCR Section 6618 is vague and somewhat confusing to interpret, especially due to its references to “fieldworkers,” “agricultural plant commodities,” and “commercial and research production.” As a result, a number of our HOA clients have requested guidance on the extent to which they must comply with CCR Section 6618, as well as the steps needed to do so.

This blog post addresses this issue and provides some generalized recommendations for HOAs and their management. It also includes information we obtained from state and local entities that enforce these regulations: the California Department of Pesticide Regulation (“DPR”) and the Orange County Agricultural Commissioner’s Office (“OCAC”). As discussed below, HOA vendors that perform pest control services have a major role in providing HOAs with the pesticide label and application information that must be disclosed to the HOA’s members pursuant to CCR Section 6618…

Our attorneys have also published this information in an article that is available for download from our Web site’s library.

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*New Case LawHOA-insurance-defense.jpg

In a recent blog post we addressed the importance of involving the HOA’s legal counsel in the decision as to whether a lawsuit brought against the HOA should be tendered to one or more of the HOA’s insurance carriers. The recent case of San Miguel Community Association v. State Farm General Ins. Co. (October 1, 2013) (Cal.App.4th, No. G047738) (“San Miguel”) touched on this issue. Although the ruling in San Miguel focused primarily upon the scope of an insurer’s obligation to defend a HOA under the HOA’s insurance policy, the ruling underscores the importance of reviewing, understanding, and if necessary, seeking professional guidance regarding the scope of insurance coverage afforded to a HOA under its insurance policies.

In San Miguel, two homeowners sought to force the HOA to take action to curb ongoing parking violations within the community. After the HOA refused to take action, the homeowners demanded the HOA’s participation in mediation, thereby prompting the HOA to tender the matter to its insurance carrier, State Farm. In responding to the HOA, State Farm noted that the claims brought by the homeowners did not seek the recovery of monetary damages, and were therefore insufficient to trigger State Farm’s obligation to defend the HOA or to reimburse the HOA for its defense costs…

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hoa-manager-construction.jpg*New Legislation

We have previously blogged about the introduction of SB 822 by the California Legislature earlier this year. SB 822, in part, clarifies recent amendments to the California Business and Professions Code relating to “contractors” whom are required to be licensed by the state. The clarifying language was introduced in the wake of the confusion and concern that had surfaced regarding whether community association (“HOA”) managers were required to hold a contractor’s license in order to perform common tasks such as obtaining bids and overseeing the progress of ongoing construction work.

Thanks to the efforts of CAI’s California Legislative Action Committee (“CLAC”), SB 822 was recently signed into law by Governor Brown and will take effect January 1, 2014. SB 822 adds the following provision to Section 7026.1(b) of the Cal. Bus. & Prof. Code:

“The term “contractor” or “consultant” does not include a common interest development manager, as defined in Section 11501, and a common interest development manager is not required to have a contractor’s license when performing management services, as defined in subdivision (d) of Section 11500.”

However, this does not mean that HOA managers should interpret this language as a “green light” to act as de facto construction managers. Doing so could expose the HOA, the manager and the management company to liability in the event a construction project goes south. How then can a HOA manager and Board avoid this problem without having to hire an independent construction manager for every project?…

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