Articles Posted in HOA Housing

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first-time-homebuyerWe previously blogged about H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016”, which was signed by the President on July 29, 2016.  H.R. 3700 required the Department of Housing and Urban Development (“HUD”) to streamline the Federal Housing Administration (“FHA”) recertification process, provide regulations for commercial space exemptions, allow for deed-based transfer fees, and lower the owner-occupancy requirement within ninety (90) days of the bill’s approval.  In response to these provisions and changes in the condominium market, HUD proposed a new rule governing the certification requirements for condominium associations.  The proposed rule includes the following reforms:

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familyThe U.S. Department of Housing and Urban Development (“HUD”) recently adopted regulations for evaluating claims of harassment in housing and housing related transactions because of race, color, religion, sex, national origin, disability, or familial status under Title VIII of the Civil Rights Act of 1968 (“Fair Housing Act”).  The new regulations, which will directly impact Homeowners Associations (“HOAs”), are set to take effect October 14, 2016.

Brief Background

Both Courts and HUD have long recognized that the Fair Housing Act prohibits harassment in housing and housing related transactions on account of race, color, religion, sex, national origin, disability, or familial status in the same way that Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits harassment on these same basis in an employment setting.  Prior to HUD’s adoption of these new regulations, Courts often applied Title VII standards when evaluating claims of harassment in the housing setting.  However, because employment and home settings are different environments, the application of one to another is not always appropriate.  To address these deficiencies, HUD recently adopted formal standards for evaluating claims of harassment under the Fair Housing Act.

The new regulations directly impact HOAs because their directors and officers are the ones who are responsible for investigating an owner’s or tenant’s claim of housing related harassment.  Furthermore, liability for harassment under the Fair Housing Act can be imposed not just on the HOA but on its officers and directors for their own actions as well as the actions of third-party agents like a management company.

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Taxes-PictureA bi-partisan group of the House of Representatives would like to think so.  According to the Community Associations Institute (CAI), more than 66 million Americans live in homeowners associations across the country, with an estimated 13 million of them living in California.  These homeowners pay assessments to cover the costs of road maintenance, street lighting, street cleaning, snow removal and other municipal services.  However, they also pay for these services through their local, county, or state property taxes.  U.S. Representatives Anna G. Eschoo (D-CA) and Mike Thompson (D-CA) have introduced H. R. 4696, the “Helping Our Middle-Income Earners (HOME) Act” to correct this double-taxation.  The bill is co-sponsored by US Representative Barbara Comstock (R-VA).

Under the Home Act, association members with annual incomes of $115,000 or less (or $150,000 in the case of joint returns) would be eligible for a tax deduction of up to $5,000 for qualifying assessments.  To qualify, assessments must be mandatory and regularly occurring, apply to the taxpayer’s principle residence, and benefit the taxpayer’s principle residence.  The obligation to pay assessments must also arise out of the taxpayer’s automatic membership in the association.  Under these provisions, special assessments and rental properties would not qualify for the deduction.

Homeowners associations would be required to provide a statement to each member showing the name, address, and tax ID number of the homeowner, the amount of qualified assessments received from the homeowner during the calendar year, and the name, address, and phone number of the contact person for the association.  The statement must be provided annually by January 31st.

“The Home Act recognizes that millions of middle class homeowners are struggling to keep up with rising household expenses like child care, college tuition, health care, mortgage and community assessments,” says Rep. Eschoo.  “The Home Act can go along way by providing relief from this tax burden on millions of middle class families.”

“Congress needs to do all that it can to reduce barriers to homeownership for hard-working middle class families,” said Thompson.  “By helping to alleviate the cost of community association fees this legislation is an important step.”

hoa laws The Home Act has been referred to the House Committee on Ways and Means, but may have trouble moving forward during an election year.  CAI has taken a “support” position on the bill, and has issued a Call to Action to seek additional sponsors.  Even if the bill does not pass in 2016, it sends a message to the legislative committees working on tax code changes, that it’s an initiative whose time has come.

Blog post authored by Tinnelly Law Group’s Director of Business Development, Ramona Acosta.

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fhaWe have previously blogged about the Federal Housing Administration’s (FHA) revisions to its condominium approval guidelines.  Recently, the Community Associations Institute (CAI) announced that progress was made towards reasonable reforms to the FHA approval process.  On February 2, 2016, the US House of Representatives passed H.R. 3700 the “Housing Opportunity through Modernization Act of 2015” (Act).

The bill is now referred to the Senate for review and approval.  If passed, the Act would:

  • streamline the recertification process,
  • allow the Department of Housing and Urban Development (HUD) to grant commercial or nonresidential space requirement exemptions, and
  • reduce the minimum owner occupancy requirement from 50% to 35%.

If this bill becomes law, the recertification process for condominium projects would become substantially less burdensome, allowing associations to maintain their FHA approval status, thereby making homeownership more affordable.

For further analysis of the bill, click here to read CAI’s blog post and letter to US Representative Leuketmeyer, Chairman of the Housing and Insurance Subcommittee.

hoa laws Association boards and managers can verify the status of a condominium project’s FHA approval at the Official HUD Directory.

Blog post authored by Tinnelly Law Group’s Director of Business Development, Ramona Acosta.

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hoa-fha-loansNew Legislation*

Civil Code Section 5300 requires a HOA to prepare and distribute to its members an annual budget report. The annual budget report serves as a consolidated disclosure statement which must include numerous items of information, such as information pertaining to the HOA’s reserve funds, operating budget, and insurance policies.

In June of this year, we blogged about AB 596 (Daly), a bill proposed by the California Legislature that would require additional statements of information to be distributed with the annual budget report for condominium HOAs. Those statements would disclose the status of the condominium development as being a Federal Housing Administration (FHA) approved condominium project or a Department of Veterans Affairs (VA) approved condominium project.

AB 596 was signed by Governor Brown on August 12, 2015. As a result, beginning July 1, 2016, Civil Code Section 5300 will additionally require condominium HOAs to provide the following statements in at least 10-point font on separate pieces of paper that accompany the annual budget report:

“Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest. This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”

“Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest. This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.”

The intent behind AB 596 is to ensure that condominium owners and prospective condominium owners understand the benefits of a condominium development being FHA or VA approved and how the availability of FHA or VA financing benefits the marketability of the condominium units within the development.

Industry experts have expressed concern that a HOA which was certified at the time of the disclosure may not retain that certification throughout the course of the fiscal year. However, AB 596 does not add a requirement for the disclosure statements to be revised mid-year should the HOA’s FHA or VA certification status change. FHA approval expires every two years and requires a recertification process. If a community no longer meets the FHA approval guidelines, recertification may be rejected. If approval is granted, but the FHA learns of additional factors, approval may be withdrawn. HUD does not currently have a notification system in place to inform the association that FHA approval has expired or been withdrawn.

hoa laws Condominium HOA boards and managers are encouraged to regularly check for FHA Approval at the Official HUD Directory and VA Approval at the Official VA Directory to verify the current status of their communities. 

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familyOn January 20, 2015, a tragic fire ripped through a condominium complex in the city of San Juan Capistrano, killing three, injuring six, and displacing eighty residents living in eight units.  The decedents were three of seventeen individuals living in a four-bedroom condominium.  In light of the deaths and their relation to the number of occupants living in the unit, efforts are now underway to examine state and local occupancy restrictions with an eye towards preventing an incident like this from occurring in the future.  To that end, questions have surfaced with respect to an association’s ability to adopt and enforce state and local occupancy standards, as well as to promulgate operating rules regulating the number of occupants living within a unit.

An association’s “operating rules” are regulations adopted by the board that apply “generally to the management  and  operation  of the  common  interest  development  or the conduct  of the business and affairs of the association.” (Civ. Code § 4340(a)) They relate to things such as the use of common area and separate interests, member discipline, and procedures for elections. (Civ. Code § 4355(a)(1)-(7))  In order to be valid and enforceable, the operating rule must meet several requirements: the rule must be (1) in writing, (2) within the authority of the Board of Directors conferred by law or the governing documents, (3) not in conflict with governing law and the governing documents, (4) adopted in good faith and in compliance with the procedural requirements set forth in Civil Code section 4360, and (5) reasonable. (Civ. Code § 4350) Accordingly, presuming that an occupancy rule is adopted by an association’s board of directors pursuant to the powers granted to it under the governing documents, the primary focus is whether the occupancy rule conflicts with governing law (i.e., California law).

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hoa-fha-loansWe have previously blogged about Federal Housing Administration (FHA) certification for condominium associations.  Recently, the California legislature proposed AB 596 (Daly), which would add a separate document to the Annual Budget Package disclosing whether the condominium association is FHA approved.  This bill would also require a second document disclosing whether the condominium association is approved by the federal Department of Veterans Affairs (VA).

When a community is a condominium project, AB 596 requires that the Annual Budget Package include a statement “in at least 10-point font on a separate piece of paper and in the following form:  ‘Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.  This common interest development [is/is not (circle one)] a condominium project.  The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”  A similar statement on a second piece of paper must be made regarding VA certification.

Industry experts have expressed concern that an association that was certified at the time of the disclosure may not retain that certification throughout the course of the fiscal year.  FHA approval expires every two years and requires a recertification process.  If a community no longer meets the FHA approval guidelines, recertification may be rejected.  If approval is granted, but the FHA learns of additional factors, approval may be withdrawn.  HUD does not currently have a notification system in place to inform the association that FHA approval has expired or been withdrawn.

CAI’s California Legislative Action Committee is requesting amendments to the bill that would direct homeowners to the official FHA and VA Approval websites to verify if the community is FHA or VA certified.  AB 596 has passed the Assembly, and is currently in the Senate.

hoa laws Association boards and managers are encouraged to regularly check for FHA Approval at the Official HUD Directory and VA Approval at the Official VA Directory to verify the current status of their communities. We will update our blog if and when AB 596 is ultimately signed into law.

Blog post authored by Tinnelly Law Group’s Director of Business Development, Ramona Acosta

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disabillity-residents-hoa.jpg*New Library Article

Civil Code Section 1360 generally requires homeowners associations (“HOA”) to allow a disabled owner to, at the owner’s expense, make modifications to the owner’s units and potentially to the HOA’s common areas in order to accommodate the owner’s disability. When a HOA receives a request for an accommodation, what steps can and should the HOA take to verify the owner’s disability and to determine whether or not the owner is indeed entitled to the accommodation? This article addresses three questions that may be useful to an Association in this regard.

Our HOA lawyers have also published this information in our new article entitled “Responding to Requests for Accommodation,” available for download from our library.

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fha.jpgThe Community Associations Institute (CAI) has just reported that the Federal Housing Administration (FHA) has released revisions to its condominium approval guidelines. In response to recent market and industry pressure, the FHA has determined to modify the existing rules and standards regulating the eligibility of condominiums to acquire FHA financing. CAI’s initial review of the revisions indicate that the substantive changes are as follows:

  1. Delinquencies: No more than 15 percent of units may be more than 60 days delinquent. Previously the threshold involved a 30 day limitation.
  2. Employee Dishonesty Insurance: All new and established condominium projects with more than 20 units will be required to obtain and maintain employee dishonesty insurance covering all directors, officers, employees and agents of the Association.
  3. Project Certification: Individuals submitting a condominium project for approval under the new rules will be required to certify that (a) all information is true and correct, (b) they have reviewed the project application and it meets all applicable state and local laws and (c) they have no knowledge of circumstances that would adversely affect the project (litigation, operational issues, etc.)
  4. Commercial Space Limits: FHA will consider approving projects with commercial space between 25% and 35% through the HRAP process. Mixed use projects up to 50% will also be considered subject to substantial documentation.

For a further analysis and review of the updated FHA condominium guidelines, click here to access CAI’s recent member article.

california hoa

The Tinnelly Law Group serves as legal counsel to community associations, homeowners associations, and condominium developments throughout California.

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discrimination.jpgThe recent, unpublished opinion in Radell v. Park Wilshire Homeowners Association (2011) illustrates the importance of fully complying with prescribed HOA enforcement procedures. In Radell, the Plaintiffs alleged that the Willshire Bark Homeowners Association (“Association”) Board of Directors (“Board”) “committed a series of discriminatory acts intended to diminish the presence of Puerto Rican women in their upscale condominium building.”

The issue arose out of the Defendant’s use of their maid’s unit for residential purposes– a use which the Board felt constituted a violation of the Association’s CC&Rs. Rather than following the Association’s prescribed enforcement procedures, the Board declined to extend a confidential disciplinary hearing regarding the issue to the Defendants. The Board opted instead to publish the alleged violation to the entirety of the Association’s membership.

To make matters worse, the Board held an unnoticed, confidential Board meeting where they initiated a recall election against the Defendant Board Member. The Defendants then brought a housing discrimination action against the Association under the California Fair Employment and Housing Act (FEHA) and the Fair Housing Amendments Act of 1988 (FHA) by alleging that the Board “engaged in a pattern or practice of discrimination through disparate treatment on the basis of race, ancestry and national origin.”

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Though the the holding in Radell primarily touches on Anti-Slapp motions in the context of housing discrimination, it also demonstrates how a Board’s conduct in enforcing CC&Rs can subject an Association to defending costly lawsuits. Boards must be diligent in fully complying with prescribed enforcement policies and procedures when dealing with each and every potential violation.