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DoradoWe are proud to announce that Dorado Homeowners Association has selected Tinnelly Law Group as their association’s legal counsel.

Dorado is a brand new single-family home community by Pulte Homes. Dorado is close to many attractions including the Queen Mary, The Pike, Aquarium of the Pacific, Cal State Long Beach and the delicious culinary scene downtown. Ideally situated between Los Angeles and Orange Counties, Dorado is conveniently located in Long Beach.

hoa laws Our HOA attorneys and staff look forward to working with Dorado’s Board and management.

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arbitration-judgeIt is well settled that an association’s CC&Rs (“Declaration”) establishes and controls, among other things, a board’s authority to govern an association provided that the CC&Rs do not conflict with California law and regulations (i.e., Davis-Stirling Act). In such cases, the plain language of the CC&Rs control. (Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 829.)  This was the case in Branches Neighborhood Corporation v. CalAtlantic Group., Inc. G055201 (August 24, 2018), where Branches Neighborhood Corporation’s (“Association”) Declaration required the same to obtain a membership vote of fifty-one percent (51%) or more prior to the initiation of its construction defect claim (“Claim”) against CalAtlantic Group., Inc. (“Developer”).

In Branches, the Association properly followed all procedural requirements under California law in the initiation of the Claim, however, failed to obtain the prerequisite vote in accordance with its Declaration. Approximately two years after the initiation of the Claim, the Association obtained a membership vote in excess of fifty-one percent (51%), approving and ratifying the Claim. Taking into consideration these undisputed facts, the arbitrator assigned to the Claim granted Developer’s motion for summary judgment, holding that the “after the fact expression of consent cannot be transmuted into the prior consent required by the CC&Rs…when such a result would adversely impact the rights of a party to the agreement by which the CC&Rs were created…[t]he Developer is such a party.”

In its opposition to Developer’s motion to confirm the award, the Association based its argument on the theory that the arbitrator exceeded its powers under Code of Civil Procedure (“CCP”) § 1286.2(a)(4), which requires a court to vacate an arbitrator’s award if it determines that the arbitrator has exceeded its powers. Specifically, the Association argued that the arbitrator exceeded its powers by (1) depriving the Association of its unwaivable statutory right to affirmatively ratify the Claim, and (2) overriding public policy in favor of ratification. Both trial and appellate courts (collectively, “Court”) confirmed the arbitrator’s award.

The Court predicated its decision on the established foundation of the “Rule of Finality,” which in short, provides extreme deference to an arbitrator’s decision, subject to limited exceptions such as CCP § 1286.2(a)(4).

In support of its first argument, the Association provided the Court with several sections of the Davis-Stirling Act (“Act”) that provided the Association with the ability to retroactively ratify its actions, claiming that it is its “statutory right.” As such, the Association asserted that the provision in the Declaration that requires membership approval prior to the initiation of the Claim (“Provision”) is unenforceable as it waives said right. The Court quickly disposed of this argument because all the statutes mentioned by the Association provided the right to ratify only if a provision of the Act required an action to be approved by a majority vote. (See Civil Code §§ 4065, 4070.)  Here, the Court found no provision of the Act that required the Association to obtain a majority vote prior to the initiation of the Claim, holding that “absent a specific requirement in the Act to hold an election, the association’s governing documents control.” Branches, at 6.

The Association then went on to argue that public policy supports its position due to the Legislature’s “clear pronouncement of public policy favoring ratification.” Branches, at 8.  The Court disagreed with this proposition, stating that the Act was created to regulate the governance of homeowners associations, placing a system of checks and balances (“System”) against the Association and its board of directors (“Board”). The Court noted Civil Code § 6150 (requiring an association to provide notice to its members 30 days prior to the filing of a claim, unless such requirement would cause the statute of limitations to run) as an example of the System the Act is intended to establish. The Court found the Provision to go a “step further” by requiring the Association to obtain membership approval prior to the initiation of the Claim, as opposed to the mere requirement of providing notice of same. Id.

Retroactively approving the Claim went against public policy as it stripped Association members of their ability to “check” the authority of the Board (i.e., provide authorization to file the Claim); even if the members had the ability to disapprove the Claim, the Association would suffer damages in the form of legal costs and expenses already expended in the Claim, going further against the System, Act, and Declaration. Accordingly, the Court found no violation of public policy and thus, no violation committed by the arbitrator.

Branches emphasizes the importance of the plain language of an association’s Declaration. So long as the Declaration does not conflict with existing law (i.e., Act) and/or goes against public policy, the plain language of the Declaration controls, to which a homeowners association must strictly abide by.

hoa laws It is of crucial importance for a homeowners association to thoroughly interpret, analyze and understand its authority under its governing documents, in particular, its CC&Rs, prior to the taking of any action in order to avoid unnecessary consequences.  For the same reason, it is of equal importance for homeowners associations to obtain general legal counsel that specializes solely in HOA law and related matters to provide unfettered and sound legal advice from an objective perspective.  Law firms that specialize in multiple areas of law (e.g., HOA and construction defect) may overlook certain provisions of an association’s governing documents and inadvertently guide associations in a direction that may prove to be detrimental, such as the outcome in Branches.  For more information and guidance related to the interpretation and/or amending of CC&Rs and other governing documents, please contact us.

-Blog post authored by TLG Attorney, Andrew M. Jun, Esq.

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BreezaWe are proud to announce that Breeza Owners Association has selected Tinnelly Law Group as their association’s legal counsel.

Breeza is a high-rise condominium community located in the Little Italy area of downtown San Diego. Situated along what has been dubbed “Millionaire’s Row” on Pacific Highway, residents enjoy a community pool, spa, workout facility, concierge service, security attendant and underground parking.

hoa laws Our HOA attorneys and staff look forward to working with Breeza’s Board and management.

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Pacific-Island-VillasWe are proud to announce that Pacific Island Villas Homeowners’ Association has selected Tinnelly Law Group as their association’s legal counsel.

Pacific Island Villas is a condominium community located in Dana Point. Residents enjoy a pool, spa, clubhouse, and close proximity to the beach.

hoa laws Our HOA attorneys and staff look forward to working with Pacific Island Villas’ Board and management.

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BikeExhaust-e1534522784547*Asked & Answered

Asked – We have several vehicles that are “extremely loud” due to their exhaust systems. Even with all windows and doors closed and these vehicles 1/2 way across the complex, there is NO PROBLEM hearing them when they start them. They even set off car alarms near them. Can we ask them to address the noise they cause?

Answered – Noisy neighbors are a frequent occurrence in common interest developments, especially in dense housing communities (e.g., condominiums). And while the California Supreme Court has indicated that individuals “in a community must put up with a certain amount of annoyance, inconvenience and interference,” (San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 937), that does not extend to situations which have a substantial impact on residents’ use and enjoyment of their separate interests.

Indeed, residents of a common interest development are generally entitled to the peaceful use and enjoyment of their respective separate interests as well as the common areas. Ensuring such peaceful use and enjoyment is what underlies many of the provisions set forth in an association’s recorded Declaration of Covenants, Conditions and Restrictions (“CC&Rs”). Residents purchase or rent their separate interests within an association in reliance on those restrictions being consistently and faithfully enforced.

The peaceful use and enjoyment to which residents are entitled is typically reflected in the association’s CC&Rs under the heading “use restrictions.” The following is a common example of a use restriction preserving the right of residents to the peaceful use and enjoyment of their separate interest:

No Condominium shall be used in such a manner as to obstruct or interfere with the enjoyment of occupants of other Condominiums or annoy them by unreasonable noises or otherwise, nor shall any nuisance be committed or permitted to occur in any Condominium.

This provision, alone, can serve as a basis to prevent residents from operating vehicles in the community that are “extremely loud.” However, some associations go a step further and adopt operating rules identifying what constitutes an “unreasonable” noise. For example, an association may adopt an operating rule prohibiting residents from operating vehicles that exceed a certain decibel level; or, more commonly, adopt an operating rule prohibiting residents from operating vehicles that produce “excessive” noise thereby providing the Board of Directors with the broad discretion to determine what constitutes “excessive.”

hoa laws In sum, the ability to regulate conduct or activities that constitute a nuisance is well within the scope of authority granted to an association. This power extends to prohibiting residents from operating extremely loud vehicles within the community. Associations facing such issues can and should commence enforcement efforts to remedy the violation, and, if the association has not done so already, adopt operating rules addressing such conduct. 

Content provided by TLG attorney Matthew T. Plaxton, Esq.

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.

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DavenportWe are proud to announce that Davenport Neighborhood Corporation has selected Tinnelly Law Group as their association’s legal counsel.

Davenport is a condominium community located in Ladera Ranch. Residents enjoy the use of multiple pools, spa, clubhouse, tennis, sports court, biking and hiking trails.

hoa laws Our HOA attorneys and staff look forward to working with Davenport’s Board and management.

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RenaissanceWe are proud to announce that Renaissance at Redhawk Homeowners Association has selected Tinnelly Law Group as their association’s legal counsel.

Renaissance at Redhawk is a brand new master-planned community by Beazer Homes featuring new detached homes located in Temecula. Residents live conveniently near Redhawk Golf Course, Old Town, San Diego and Orange counties.

hoa laws Our HOA attorneys and staff look forward to working with Renaissance at Redhawk’s Board and management.

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**New LegislationEmail-1

Homeowners associations are often required to disclose information to their membership.  There are two forms of disclosure: general notice or individual delivery.  When homeowners associations are required to deliver documents by  “individual delivery” or “individual notice,” Civil Code Section 4040 permits delivery by email, facsimile, or other electronic means (“electronic delivery”) only if the recipient has consented in writing to the same.  Civil Code Section 4040 also requires recipients to revoke their consent to electronic delivery in writing.   SB 261 allows recipients to consent to electronic delivery and to revoke consent to electronic delivery by email. This Bill will bring the current law up-to-date with existing technology so that homeowners can easily opt in or out of electronic delivery.

Civil Code 4360 requires the Board Directors to provide general notice of a proposed rule change at least thirty (30) days before making the change to the rule.  SB 261 changes that timeframe from thirty (30) days to twenty-eight (28) days. Under the new statute, the Board of Directors would be required to provide general notice of a proposed rule change at least twenty-eight (28) days before making a rule change.

HOA law attorneys SB 261 is an example of the law evolving with technological advances.  Although “snail mail” is not quite obsolete, more and more people rely on their inboxes for important news and updates.  By permitting Homeowners to opt into electronic delivery with emails, HOAs should be able to more quickly and efficiently provide individual notice to their Members.

-Blog post authored by TLG Attorney, Sarah A. Kyriakedes, Esq.

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PGA-WestWe are proud to announce that PGA WEST II Residential Association, Inc. has selected Tinnelly Law Group as their association’s legal counsel.

PGA WEST II is a master-planned community located in the La Quinta.  Residents enjoy several community pools, and views of the golf courses, lakes, and mountains.

hoa laws Our HOA attorneys and staff look forward to working with PGA West II’s Board and management.

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*New Legislation hoa-financial-review-

Earlier this year, the California Legislature proposed AB 2912 (Irwin) in an effort “to protect owners in a [HOA] from fraudulent activity by those entrusted with the management of the [HOA’s] finances.” To that end, AB 2912 significantly increases the financial review requirements of HOA boards of directors, limits the ability for automatic transfer of funds without board approval, and also imposes a requirement for the HOA to purchase and maintain a fidelity bondAB 2912 was signed on September 17, 2018 and its changes to the law take effect January 1, 2019. The following information summarizes the new state of the law in the wake of AB 2912’s passage:

Requirement for Written Board Approval of Account Transfers Above $10k:

Existing Civil Code § 5380 has been amended to prohibit the automatic/electronic transfer of funds greater than $10,000 or 5% of a HOA’s total combined reserve and operating account deposits (whichever is lower), without prior, written approval from the HOA’s board of directors. This requirement is also reiterated in new Civil Code § 5502.  HOA boards that previously gave blanket consent to their managing agent for such electronic/automatic transfers should expect the need to now give written approval for such transfers (i.e., large payments to vendors of the HOA) each time a transfer is required.

Financial Review by Board Must Now be Performed on a Monthly Basis:

The law previously required the Board to review the financial information of the HOA on at least a quarterly basis. Civil Code § 5500 has been amended to now require that review to be performed on a monthly basis.  Moreover, it now requires the review to include the HOA’s check register, monthly general ledger, and delinquent assessment receivable reports.

But what about HOA Boards that only meet quarterly? Fortunately, new Section 5501 was added to the Civil Code to address this issue.  It provides that the financial review requirements may be met “when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member” reviews the financial information “independent of a board meeting” and that review is (a) subsequently ratified by the board at its next meeting and (b) the ratification is memorialized in the board’s meeting minutes. For HOAs that meet on a quarterly basis, there will likely be a need to form an executive finance committee of the board as contemplated by Section 5501. Such HOAs should work with their legal counsel to draft an appropriate charter for such a committee.

HOAs Now Legally Required to Purchase a Fidelity Bond:

A fidelity bond is a form of insurance protection which covers losses that the policyholder incurs as a result of fraudulent acts by individuals. It is used by a HOA to insure losses caused by the dishonest acts of the association’s employees, managers, board members or officers. Previously there was no legal requirement for HOAs to purchase fidelity bonds; however, many HOAs do so either because their CC&Rs require it and/or because it makes good business sense.

New Section 5806 is added to the Civil Code to formally require HOAs to purchase a fidelity bond. Unless a HOA’s governing documents require greater coverage amounts, the fidelity bond must be purchased and maintained in a coverage amount that is equal to or more than the combined amount of reserves of the HOA and total assessments for three (3) months. The bond must also include computer fraud and funds transfer fraud. Additionally, for HOAs that contract with a third-party managing agent or management company (which is the vast majority of HOAs in California), the HOA’s fidelity bond coverage must also include coverage for dishonest acts by the managing agent or the management company and its employees.

HOA law attorneys HOA boards should work with their managing agents to develop a protocol for adhering to the new legal requirements regarding automatic transfers of funds and monthly financial reviews.  Additionally, HOAs should contact their insurance professionals to ensure that they are carrying fidelity bond coverage which satisfies the new legal requirements.