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*New Legislation

hoa-duplex

Senate Bill 9 (SB 9) was recently signed into law making revisions to the California Government Code effective January 1, 2022.  This bill is touted as a major step in California’s efforts to address the housing crisis by re-zoning single family lots to allow for duplexes and more. Below is an overview of some of the primary components of this rather complicated legislation.

Construction of two (2) units on a single parcel zoned as single-family residential

California law will now permit the division, partial or full tear down of an existing single-family home to create two (2) separate residential units, which need not be attached and which are eligible to be sold separately. A municipality will be required to ministerially approve such a project without any significant review or public comment.  Because this law will operate in conjunction with existing law permitting the construction of Accessory Dwelling Units (ADUs), it will allow even more units to be built on the parcel without public review. Local ordinances that would physically preclude construction of the two units cannot be enforced. Any parking requirements to be imposed by local ordinances must be limited to requiring only one “parking space” (not necessarily a garage) per residential unit, and must be eliminated entirely if the project is located within one-half mile of public transit or if there is a car share vehicle located within one block of the project.

Splitting of an existing parcel into two (2) separate parcels

SB 9 also permits urban lot splits in residential zones to create two (2) equal parcels of a minimum of 1,200 square feet. It further prohibits the application of local requirements that would physically preclude the construction of two (2) units to be built on each split lot, subject to other requirements of questionable merit and enforceability (e.g., the ability for a local requirement to be imposed mandating that the owner of the parcel ‘certify’ that they will live in one of the units for at least the first three (3) years after the project’s completion). The parcel split may operate in conjunction with SB 9’s allowance of two (2) separate residential units on a single parcel–allowing for four (4) units to ultimately be constructed on a parcel where only one single-family home may have existed (and even more units if ADUs and JADUs are also constructed on the newly subdivided parcels).

*Impact on HOA CC&R Restrictions is unclear – The common question/concern we are receiving in connection with SB 9 is whether it will override homeowners association (HOA) governing documents that prohibit the type of development projects within HOAs that SB 9 is intended to provide.  For example, it is common for an HOA’s CC&Rs to contain provisions prohibiting homeowners from subdividing their lots.  Unfortunately, SB 9 is silent with respect to this issue and those in the HOA legal community are concerned that SB 9 could be construed as demonstrating public policy in favor of these types of projects.  California courts have held that CC&R restrictions which violate public policy may be challenged and held as enforceable. (See Narstedt v. Lakeside Village Condo. Assn. (1994) 8 Cal. 4th 361).

Senator Toni Atkins, the author of SB 9, submitted a letter to the California Secretary of State ostensibly addressing this concern.  It provides in pertinent part that:

“…on the issue of common interest developments (CID) and homeowners’ associations (HOA). My office has consulted with Legislative Counsel, and SB 9 would not override CID or HOA restrictions. Specifically, SB 9 is silent on the issue, meaning the bill contains no provisions that supersede HOA or CID governing documents. As we have seen with other housing legislation, SB 9 would have to contain an explicit and proactive provision to override those rules. This bill does not.” (Emphasis added.)

While superficially this may seem helpful, it notably fails to state anything regarding the intent of SB 9 and the California Legislature with regard to this issue.  The letter does not have the force of law and whether it will be given weight by California courts in assessing the public policy of SB 9 as it applies to HOAs is anyone’s guess. Moreover, efforts by CAI’s California Legislative Action Committee to request changes to SB 9’s language to explicitly state that it does not override HOA governing documents were ignored.

California HOA lawyers Questions remain as to what, if any, impact SB 9 will have on HOAs and the degree to which homeowners, investors and residential developers will actually find it financially advantageous to pursue multi-unit residential projects within single-family common interest developments. 

090518115715*New Case Law

In the case of Aldea Dos Vientos v. CalAtlantic Group, Inc., the Second District Court of Appeals overruled the Fourth District’s previous holding in Branches Neighborhood Corp. v. CalAtlantic Group, Inc.  The Branches case found that homeowners associations forfeit their rights to pursue construction defect claims unless their members first vote to approve such legal action in accordance with their CC&Rs.  The Branches decision was overturned upon the finding that developers cannot use the CC&Rs to veto claims made against them.  The Court of Appeals held that such use of the CC&Rs not only violated public policy, but also Senate Bill No. 326, as codified by California Civil Code, section 5986(b).

 

Factual Summary

A condominium project in Thousand Oaks, Aldea Dos Vientos (“Association”), brought suit against CalAtlantic Group, Inc., the successor to the developer of the Project (“Developer”). The trial court stayed the lawsuit on the parties’ agreement to participate in mediation and then arbitration.  When mediation was unsuccessful, the Association subsequently filed a demand for arbitration.  After the demand was filed, the Developer cited to the Association’s CC&Rs at Section 7.01B to raise a defense.  Section 7.01B required the Association to first obtain a membership vote in excess of fifty-one percent (51%) prior to commencing arbitration. The Association admitted it had not obtained the required vote.

In response, the arbitrator stayed the arbitration to allow the Association to petition the trial court to review this issue of arbitrability.  In the meantime, the Association obtained membership approval to continue with arbitration from over ninety-nine percent (99%) of its members.  The trial court denied the Association’s motion on the grounds that arbitrability was a matter for the arbitrator to decide.  The Developer then filed a motion to dismiss with the arbitrator for the Association’s failure to comply with the CC&Rs at Section 7.01B.  The arbitrator summarily dismissed the original demand for arbitration, and the trial court concluded that the arbitration constituted a final determination of the rights of the parties, so judgment was entered in favor of the Developer and against the Association.

 

Public Policy

In the Aldea Dos Vientos case, the Second District Court of Appeals vacated the lower court’s decision on the basis that the arbitrators exceeded their powers by issuing an award that contravenes an explicit legislative expression of public policy. More specifically, the Court of Appeals found that Section 7.01B of the CC&Rs violates public policy because it gives the Developer the unilateral power to bar an action against itself even though the Legislature clearly intended for housing to be free of substantial construction defects.

Furthermore, the Court of Appeals held that Section 7.01B of the CC&Rs, and any similar provision, is not just unreasonable but unconscionable.  The Court stated, “[i]t gives the Developer veto power over the Association’s claims in spite of the members’ vote to proceed with the arbitration.”  In sum, such a provision amounts to a trap for the unwary set by the Developer to bar claims against it.  For these very reasons, the Second District Court of Appeals declined to follow its sister court’s ruling in Branches.

 

Senate Bill 326

The Court of Appeals also acknowledged that the Legislature has already found provisions, like Section 7.01B, to be unconscionable.  Senate Bill 326 was enacted on August 30, 2019 and took effect on January 1, 2020.  The bill added Civil Code, section 5986, subdivision (b) to the Davis-Stirling Act, which prohibits an association’s CC&Rs from limiting a Board’s authority to initiate legal proceedings against its Developer.   The Civil Code applies retroactively to any CC&Rs with such limiting language.

The Second District Court of Appeals reversed the judgment in Aldea Dos Vientos on the additional grounds that the arbitrator’s decision to dismiss the original demand for arbitration was not on the merits, nor was the trial court’s judgment final.  Furthermore, the arbitrator’s decision expressly stated that it did not directly impact the Association’s second demand for arbitration.  Therefore, the Court of Appeals held that the arbitrator’s decision could not have resulted in a final judgment against the Association in the Aldea Dos Vientos case.

California HOA lawyers The Aldea Dos Vientos ruling is beneficial for homeowners associations across the state because it preserves their rights to bring construction defect lawsuits against developers regardless of language in the CC&Rs requiring prior membership approval.  In any event, homeowners associations should always seek legal advice from attorneys that specialize in HOA law before commencing construction defect lawsuits to ensure their compliance with both state law and their governing documents.

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

**New Legislationhoa-electric-vehicles

For the third time in past seven (7) years, the California Legislature has modified the laws governing the installation and use of Electric Vehicle (EV) charging stations within homeowners associations (“HOAs”). The first time was in 2011 when the Legislature enacted a new statute (now contained at Civil Code Section 4745) designed to nullify any provision in a HOA’s governing documents that prohibited homeowners from installing and using EV charging stations. In the following year, the Legislature then amended the law to give HOAs some regulatory authority in this area. That amendment served two (2) essential purposes: (1) it gave HOAs the ability to impose “reasonable restrictions” on the installation and use of EV charging stations, and (2) it clarified how the statute is primarily intended to apply to EV charging stations to be installed in a homeowner’s exclusive use/dedicated parking space.

This year (2018), SB 1016 was proposed by the Legislature. It makes some significant changes to Section 4745, and also adds new Section 4745.1 to the Civil Code to address EV Charging Station dedicated “TOU” (time of use) meters. Today, September 14, 2018, the Governor signed SB 1016 and its changes to the law will take effect January 1, 2019. The following information summarizes what HOAs should be aware of in the wake of SB 1016’s passage.

Changes to Existing Section 4745, effective January 1, 2019:

  • Section 4745(a) was amended to expand the scope of rights homeowners have to install EV charging stations. Homeowners will now have the right to install EV charging stations in their “units,” not simply their designated, exclusive use common area parking spaces. Some condominium developments are structured such that each “unit” is comprised of a residential element and a garage element.  Other developments actually include spaces within the deeds to the individual units. Thus, regardless of whether a homeowner’s designated parking space is within their unit’s garage, or within a portion of common area, the provisions of Section 4745 apply.
  • Section 4745(f)(1)(D) was amended to clarify that the homeowner has to pay for not only the electricity usage associated with the charging station, but also for the costs of installation of the station.
  • Section 4745(f)(3) was amended to relax the insurance requirements of homeowners who install EV charging stations. The $1,000,000 homeowner liability coverage policy requirement has now been replaced with a requirement for the homeowner to simply have “a liability coverage policy” without any specific amount listed. The requirement for the HOA to be named as an additional insured under the policy has also been deleted. **However, somehow the requirement under 4745(f)(1)(C) for the homeowner to, as a condition of approval, agree to provide a certificate of insurance which names the HOA as an additional insured has not been changed. In other words, the law now contradicts itself. Another “head-scratcher” from the California Legislature that should prompt a clean-up bill next year (we hope).
  • Section 4745(k) has been amended in a way that materially modifies the remedies available in enforcing Section 4745’s requirements. Prior to SB 1016, Section 4745(k) allowed for a prevailing plaintiff in an action to enforce Section 4745 to recover its attorney’s fees. The new law will change this language to allow recovery of attorney’s fees only when “a homeowner requesting to have an [EV] charging station installed and seeking to enforce compliance with [Section 4745]” is the prevailing plaintiff. In other words, regardless of whether the HOA is the plaintiff or the defendant, it will never be able to recover attorney’s fees in a lawsuit to enforce Section 4745 even where the HOA wins! This is the latest example of the Legislature’s willingness to modify the fee-shifting provisions of the Davis-Stirling Act to afford homeowners an advantage over their HOAs.

New Section 4745.1, effective January 1, 2019:

As referenced above, new Section 4745.1 will be added to the Civil Code effective January 1, 2019. It basically mirrors the provisions of Section 4745 (pertaining to EV Charging Station installations) in order to extend them to EV-dedicated “TOU” (time of use) meters. An EV-dedicated TOU meter is an electric meter supplied and installed by an electric utility, that is (a) separate from, and in addition to, any other electric meter, (b) is devoted exclusively to the charging of EVs, and (c) that tracks the time of use (TOU) when charging occurs. It is designed to aid utility companies in determining what price per kilowatt-hour should be charged for the use of an EV charging station at specific times of day.

Applications for the installation and use of EV-dedicated TOU meters must be processed in virtually the same way as applications for the installation and use of charging stations, except that the insurance requirements which apply to charging stations do not apply to EV-dedicated TOU meters. Section 4745.1 also requires HOAs to “attempt to find a reasonable way to accommodate” a request to install an EV-dedicated TOU meter, “unless the [HOA] would need to incur an expense.”

HOA law attorneys SB 1016 is the latest example of the Legislature’s continuing trend of promoting renewable energy technologies and limiting the regulatory authority of HOAs. In our prior blog posts and newsletters on EV charging stations, we have touched on the need of every HOA (especially condominium HOAs) to work with its HOA lawyer to implement rules designed to process homeowner requests for EV charging stations in ways that comport with statutory requirements. That need is even greater now. HOAs that violate Section 4745 and/or new Section 4745.1 are subject to civil penalties and damages.

hoa-parking-space*Unpublished Opinion

Homeowners Association (“HOA”) Boards of Directors and management professionals often encounter disputes with homeowners as to who has the right to use common areas parking spaces within a condominium development. Homeowners often believe that such spaces are part of their separately owned units (their separate property or “separate interest”); that the spaces were “deeded” to them and the HOA is therefore is limited in its ability to regulate, restrict, or reassign the use of those spaces.  For most condominium projects, parking spaces are portions of common area which the HOA may—or in some instances must—reserve for a particular homeowner’s exclusive use, based upon the language of the HOA’s governing documents (i.e., the language of its CC&Rs and/or condominium plan).

We have seen instances where the deed to a unit that was conveyed to the homeowner by the initial developer of the HOA does include a reference to a particular common area parking space as assigned to the homeowner for her exclusive use.  However, such deeds often parallel language in the HOA’s CC&Rs and/or condominium plan which support that exclusive use assignment.  In other words, the language of the deed merely reiterates the applicable language of the CC&Rs and/or condominium plan establishing a particular parking space as a portion of common area for which the homeowner listed in the deed has exclusive use easement rights.

The situation becomes more complicated when the exclusive use language in the deed is ambiguous or is not supported by any provisions of the HOA’s governing documents. This was the central issue in Michaelson v. V.P. Condominium Corporation, No. D071215 (Cal. Ct. App. Feb. 21, 2018).  The HOA in Michaelson consisted of an eleven (11) unit condominium development, in which each unit was granted an exclusive right to use an assigned garage parking space as defined in the HOA’s condominium plan. However, the condominium plan also denoted a 12th unassigned garage parking space (“Unassigned Space”).  For some reason, the right to use this Unassigned Space was actually listed in the deed (“Deed”) to a unit (“Unit”) that the HOA’s developer conveyed to the first homeowner of the Unit, which was later conveyed to the Plaintiff homeowner (“Homeowner”).

The HOA accused the Homeowner of fraudulently acquiring the Unassigned Space and demanded that he convey his interest in the Unassigned Space to the HOA. The Homeowner sued the HOA to quiet title on the Unassigned Space based on the following: (1) the Deed included the exclusive right to use the Unassigned Space; or in the alternative, (2) the Unassigned Space was acquired by adverse possession.

The Court quickly disposed of the Homeowner’s adverse possession claim because the tax for the Unassigned Space was paid for by all the HOA’s members and not by the Homeowner (one of the elements for an adverse possession claim in California requires claimant to have paid taxes on the property; See Code Civ. Pro § 325; See also Nellie Gail Ranch Owners Assn. v. McMullin (2016) 4 Cal. App. 5th 982).

With regard to the Deed, the Court found that it was ineffective as to the right of exclusive use of the Unassigned Space despite the fact that the HOA’s CC&Rs specified garage spaces as part of the “exclusive use common area.” This is because the CC&Rs tied the definition of exclusive use common area to the condominium plan, and the condominium plan did not define the Unassigned Space as exclusive use common area. The Court therefore held that the Unassigned Space belonged to the HOA as general common area, and as such the CC&Rs prohibit the transfer of the Unassigned Space without consent of 75% of the eligible mortgagees on the units.

The Court of Appeal affirmed the trial court’s order to grant the HOA’s motion for summary judgment plus attorney’s fees, holding that the Deed was a “wild deed” with ineffective conveyances that conflicted with the reservations contained in the CC&Rs and the condominium plan.

California HOA lawyers This case highlights the often forgotten importance of condominium plans. While CC&Rs will answer most questions regarding ownership and use rights, the CC&Rs for condominium projects will often relate to and reference the development’s condominium plan in significant ways.

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

commercial-CID.jpg*New Legislation

Commercial and Industrial Common Interest Developments (“Commercial CIDs”) in California have historically been governed by the same provisions that apply to planned residential developments and condominiums: the Davis-Stirling Common Interest Development Act (“Davis-Stirling”). However, some of those provisions have resulted in unnecessary burdens and requirements for Commercial CIDs that were really tailored to provide consumer protections for homeowners in residential settings (i.e., open meeting, election and disclosure requirements).

In light of this issue, on September 6, 2013, the California Legislature passed SB752: the Commercial and Industrial Common Interest Development Act. SB752 mirrors many of the provisions contained in Davis-Stirling, but omits some of requirements that were geared toward residential homeowners. For example, SB752 contains provisions governing Commercial CID formation, governing documents, assessments and construction defect litigation, but omits certain Davis-Stirling provisions governing association elections and disclosure requirements.

SB752 was officially signed into law by Governor Brown on October 5, 2013 and will take effect January 1, 2014.

hoa attorney

This is fortunate news for the Commercial CIDs that are becoming more prevalent within the community association industry. SB752 will help to simplify the management and operation of Commercial CIDs and will provide them with a workable framework that is better suited to address their unique needs.

smoking-hoa

The problems posed by second-hand smoke have become a burning issue for California homeowners associations (“HOAs”), expecially condominium developments. A HOA typically does have the authority to adopt operating rules that prohibit smoking in common areas and exclusive use common areas; however, those rules may be insufficient to address problems posed by second-hand smoke emanating from inside an owner’s unit. Prohibiting that type of activity generally requires language to that effect contained in the HOA’s recorded CC&Rs. Where there is no such language, HOAs often refuse to get involved and opt to treat those situations as a “neighbor-to-neighbor” disputes.

However, we have written before about how a HOA may have an obligation to enforce the nuisance provisions contained in its CC&Rs to address problems posed by smoking within units. An Orange County jury recently affirmed this fact in the first ruling of its kind in California. The jury in Chauncey v. Bella Palermo Homeowners’ Association, et al., OCSC Case No. 30-2011-00461681, found the defendants HOA and its management company negligent and also found the HOA in breach of its CC&Rs for failing to enforce its nuisance provision protecting the plaintiffs’ rights to their “quiet enjoyment” of their unit. The jury held the HOA liable for doing nothing to abate the alleged nuisance resulting from the second-hand smoke, despite the fact that the CC&Rs contained no provision specifically prohibiting smoking within the units.

hoa attorney More and more municipalities are adopting “no-smoking” ordinances within multi-dwelling residential units. However, where there are no such ordinances, or any similar restrictions contained in a HOA’s recorded CC&Rs, a HOA may be still be obligated to enforce its nuisance provisions to address problems posed by second-hand smoke emanating from the interior of a unit. Where the problems persist, a HOA should consult with its legal counsel and also consider a formal amendment to its CC&Rs to prohibit smoking throughout the entire development.

Content by TLG attorney Terri Morris

*New Case Lawhoa law firm residential design professionals architects.jpg

California’s 1st District Court of Appeal recently ruled that “design professionals” may be liable under both common law and Senate Bill No. 800 (“SB 800”) to third party purchasers for construction defects.

In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP et al., the defendants (the “Architects”) had performed architectural and engineering services, as well as construction administration and construction contract management, for a 595 unit condominium project located in San Francisco. The plaintiff homeowners association (the “HOA”) alleged that multiple construction defects in the project were caused in part by negligent architectural and engineering design. Included in those defects was the presence of “solar heat gain” allegedly caused by the Architects’ approval of cheap and non-functional windows paired with a defective design that failed to provide for adequate ventilation within the units. During periods of high temperatures, the solar heat gain had rendered many of the units “uninhabitable, unhealthy and unsafe.”

The Architects successfully argued at the trial court level that they could not be held liable for the alleged defects because, under common law, the Architects owed no duty of care to third parties (to the HOA or its members). The trial court agreed, holding that the Architect could not be held liable for negligent design and that the HOA was required to show that the Architects had “control” in the construction process; the Architects had to have “assum[ed] a role beyond that of providing design recommendations to the [developer].” Accordingly, the trial court sustained the Architects’ demurrers and the HOA then appealed…

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hoa lawsOur annual “Legislative & Case Law Update” newsletter for the year 2013 is now available in our library!

The Legislative & Case Law Update provides an overview of the new legislation and case law impacting California Homeowners Associations (“HOAs”) as we head into 2013. The new legislation includes, among other items, bills that impact Bank foreclosures, the re-organization of the Davis-Stirling Act, EV Charging Stations and fees charged by HOAs in producing certain records. The new case law includes rulings that may impact the architectural restrictions placed on the installation of solar panels, arbitration provisions for construction defect disputes, “no-cost” HOA collections contracts, election disputes and defamation claims. The Legislative & Case Law Update also addresses some new Fannie Mae and FHA regulations impacting condominium insurance and certification requirements.

Click here to read our Legislative & Case Law Update (2013)

Have questions on any of the new legislation or case law? Click here to send us a question online.

Fire prevention bill.png

Homeowners in California should be expecting a new bill in their mailbox for the calendar year 2011 and onward. The California legislature has passed a controversial new Fire Prevention Fee which will aim to defray the State’s costs for fire prevention services. The new fee–argued by some to be a tax–will affect homes that are considered to be “habitable structures within the State Responsibility Area (SRA)” and within “the area of the state where the State of California is financially responsible for the prevention and suppression of wildfires.” Homeowners can check the Fire Prevention Fee website to determine if their home is located within the SRA area.

The new assessment fee for affected structures will be $150.00 per “habitable structure,” defined as “a building that can be occupied for residential use.” For affected multi-unit condominium buildings, the new regulations assess a fee of $150.00 for the first “dwelling unit” and $25.00 for each additional dwelling unit located within the building.

california hoa

Condominium Associations located within the SRA that consist of multiple units may feel the biggest effect due to the new fees levied on each “dwelling unit.” Such Associations will need to determine how best to structure payment (e.g., paid by the Association as part of its annual budget or paid by each owner individually).

The content of this post was adapted from information provided by CAI’s Legislative Action Committee Blog. To read the original article, click here.

*Asked & Answeredhoa law firm

Asked My HOA requires a parking decal to park in the community. Is my HOA allowed to enforce its parking rules on vehicles with handicap parking placards that are parked within designated parking areas, but are without the HOA required parking decal?

Answered – Yes. Typically, homeowners association (“HOA”) governing documents (e.g., “CC&Rs,” “Rules & Regulations”) contain provisions governing how vehicles may be parked in the common area streets or parking spaces. In the event that a parking violation occurs, the HOA has the authority to enforce disciplinary measures against the violating individuals in accordance with the applicable enforcement procedures set forth in the HOA’s governing documents. Although California Vehicle Code §22511.5 permits individuals with appropriate handicap placards to park in handicap spaces, those individuals must still comply with all other HOA parking rules. Individuals generally may not, therefore, circumvent the requirements of an HOA’s parking rules through the use of handicap placards or plates.

hoa attorney

Upon receiving a proper request, a HOA may be required to make “reasonable accommodations” for disabled individuals by designating additional parking spaces as handicap parking spaces. If your HOA has received such a request, the issue should be directed to your HOA’s legal counsel for guidance.

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

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