Articles Posted in HOA Governance

Published on:

conflict-of-interest

The Governor has signed AB 690 into law, which modifies several Code sections and adds two new Civil Code sections to the Davis Stirling Common Interest Development Act. Here is what you need to know about the new requirements:

New Civil Code Section 5376 provides that the manager, management firm, or third-party contractor must facilitate the delivery of escrow documents pursuant to Civil Code Section 4530, as required by the management contract.

New Requirements: Escrow Document Disclosure Form

The “Charges for Documents Provided” form described in Civil Code Section 4528 must be modified to include the following:

  • All information in at least 10-point type;
  • The statement: “The seller may, in accordance with Section 4530 of the Civil Code, provide to the prospective purchaser, at no cost, current copies of any documents specified by Section 4525 that are in the possession of the seller.”;
  • The statement: “A seller may request to purchase some or all of these documents, but shall not be required to purchase ALL of the documents listed on this form.”;
  • The fee for each document in the “Fee for Document” column of the form;
  • Fees must be separately stated and billed to distinguish them from other transfer fees; and,
  • A copy of the escrow document disclosure form must be included in the Annual Budget Report sent to members.

New Manager and Management Company Disclosures

Business & Professions Code Section 11504 and Civil Code Section 5375 have been amended to provide that, in addition to a CID manager’s disclosure within 90-days of providing management services of their name, address, certification, real estate license, and fidelity insurance coverage, managers and management firms must annually disclose, in writing, to HOA boards the following:

  • Any referral fee or other monetary benefit the manager or management firm receives from companies that provide escrow documents and annual budget reports;
  • Acknowledgement that the records listed in the escrow document disclosure form are the property of the HOA, not the manager or management firm; and,
  • Any business or company in which the manager or management firm has an ownership interest, receives profits or other monetary incentives.

New Civil Code Section 5375.5 provides that, when presenting a bid for vendor services to a board, the manager or management firm must disclose, in writing:

  • Any referral fee or other monetary benefit that could be derived from a business or company serving the HOA (i.e., vendor the HOA board may contract with); and
  • Any ownership interests or profit-sharing arrangements with service providers recommended to, or used by the HOA.
California HOA lawyers Although managers have long been advised to disclose any potential conflicts of interest to an association’s board of directors, AB 690 now codifies how and when a manager or management company must make that disclosure.

-Blog post authored by TLG Attorney, Terri A. Morris, Esq.

Published on:

mechanics-lien

Vendor professionals frequently provide a variety of services on behalf of community associations and individual homeowners.  Under California’s Constitution, unpaid vendors possess a legal right to lien the property upon which they work for the value of their rendered services or furnished material.

AB 534 (Gallagher), effective January 1, 2018, seeks to clarify how mechanic’s liens are to be used in common interest developments by amending Civil Code Section 4615 and by adding new Civil Code sections.

Under existing law, if a vendor intends to preserve the ability to impose a mechanic’s lien at a later time for work performed at a property, then such entity must first secure advance authorization from the property owner. Similarly, under existing law, a vendor seeking to enforce its claim to payment by way of a mechanic’s lien must notify the owner of the property which will be subject to a lien.

In the context of community associations, ownership of common area property can take a variety of forms: that property can be owned by the association, or it can be owned by all of the homeowners jointly, as tenants in common.  As such, the vendor is often burdened by the obligation to identify the legal owner of the common area property when attempting to obtain that advance authorization and when seeking to provide legal notice of an impending lien.

AB 534 circumvents the challenges associated with identifying property ownership by imputing association authorization for a common area improvement to all members, and by making the association the agent for the members for purposes of receiving notices and claims during the lien enforcement process.

Continue reading

Published on:

short-term-rental*Unpublished Case

Recently, many residential common interest developments have experienced an influx in the number of short-term rentals within their community. This problem is exacerbated by the increased popularity of websites such as Airbnb and HomeAway. Although profitable, short-term rentals have a significant negative impact on community associations, such as increased damage to common area and violations of the Association’s governing documents. To address these concerns, many associations are amending their CC&Rs to include restrictions imposing a minimum lease period (e.g., thirty days). In a recent unpublished opinion, the California Court of Appeal upheld such a restriction as reasonable.

In Ocean Windows Owners Association v. Spataro, the Court affirmed the decision of the trial court granting the Association’s petition to reduce the requisite approval necessary to amend their CC&Rs pursuant to Civil Code section 4275.  The proposed amended CC&Rs included, among other things, a provision imposing a minimum lease term of “thirty (30) consecutive days in any one (1) calendar year….” A homeowner filed an objection to the petition stating that the record was void of any facts sufficient to support a conclusion that the amendments “were necessary for the good of the community.” The Court of Appeal rejected this argument for two reasons.

At the outset, the Court noted that the homeowner had misstated the standard under Civil Code section 4275. Specifically, Civil Code section 4275(c)(5) requires that the “amendment is reasonable.” Reasonableness has been defined as:

Not arbitrary or capricious, rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments, and is fair and non-discriminatory.

(Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal. App. 4th 563, 577; see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 382 (citations omitted).)

Using the appropriate standard, the Court concluded that the rental restriction was reasonable. The Court’s decision was predicated, in large part, on the declarations of the Association’s community manager and its general counsel. Both averred that short-term rentals had resulted in damage to the common area, increased costs and violations of the governing documents, and the inability or difficulty with obtaining financing due to the association’s appearance as a “condotel.” As such, the Court concluded that there was substantial evidence to support the conclusion that the rental restriction contained in the amended CC&Rs was reasonable (i.e., rationally related to the protection, preservation and operation of the community as a whole).

California HOA lawyers Although unpublished, this case underscores the courts’ awareness of problems affecting communities with short-term rentals, and their willingness to assist associations in addressing the issue.  HOA Boards that are dealing with these types of issues should consult with their HOA’s legal counsel for guidance and recommendations.

-Blog post authored by TLG Attorney, Matthew T. Plaxton, Esq.

Published on:

Swallows-Nest*Asked & Answered

Asked – I’m receiving calls regarding swallows nests. Folks want them removed. Pest control is reminding everyone they are protected and removing is punishable by law. We are in high time for swallow activity! Is there anything our HOA can do to address this issue?

Answered – All swallows and their nests are fully protected under the “Migratory Bird Treaty Act of 1918” by state and federal regulations. It is illegal for any person to intentionally kill, injure, take, possess, transport, sell, or purchase them or their parts. It is illegal to intentionally destroy the nest, eggs or young of a swallow without a permit. If an adult swallow is occupying a half-built nest, or a fully built nest without eggs, then the law protects it. A permit is not required to remove swallow nests under construction that do not contain an adult, any new eggs or young, or nests abandoned after the breeding season. Permits to kill swallows or destroy swallow nests are only issued by the U.S. Fish and Wildlife Service, and only in very extreme cases. An example would be concerns for aircraft safety from a nesting colony at an airport. In most cases a permit for lethal control of swallows will not be issued for swallows nesting on a residence or other buildings and causing aesthetic damage.

The best strategy appears to be preventing nest building by “exclusion”, meaning methods that deny physical access to the nest site area. Exclusion represents a relatively permanent, long-term solution to the problem, and California does not require a permit for this method if it is done before the birds arrive, during nest building when there are no eggs or young in the nest or after the birds have left for the winter.

California HOA lawyers For methods of exclusion, please see the article “Living with Wildlife” published by the Washington Department of Fish & Wildlife.

-Blog post authored by TLG Attorney, Terri A Morris, Esq.

Published on:

water-rain-raindrops-drops

On April 7, 2017, Governor Brown signed Executive Order B-40-17, ending the drought state of emergency in most of California.  Drought restrictions will remain in effect in Fresno, Kings, Tulare, and Tuolomne counties, which continue to face drinking water shortages and diminished groundwater supplies.  The new Executive Order rescinds the emergency proclamations from January and April 2014, along with four drought-related executive orders.

Over the last few years, the California legislature has passed several bills aimed at water conservation within community associations. AB 2100 amended Civil Code Section 4735 to prohibit associations from fining or threatening to fine an owner for failing to water vegetation or lawns during a state or local government-declared drought.  SB 814 also authorized penalties for excessive residential water use during periods of government-declared droughts. Now that the state of emergency has been lifted, these laws are no longer in effect, provided the local jurisdiction has not declared a local drought.

AB 2104 further amended Section 4735 to restrict an association from prohibiting low-water using plants as a group, and AB 349 amended Section 4735 to restrict an association’s authority to prohibit artificial turf.  Although the drought restrictions have been lifted, this legislation protects homeowners from having to reverse or remove any landscaping measures that were installed in response to the government-declared drought.

The State Water Resources Control Board (SWRCB) also adopted emergency regulations that subject associations to fines of up to $500 per day for violating the provisions of Section 4735.  These regulations will remain in effect until November 25, 2017, or until they are modified or repealed by SWRCB.

The decision to lift drought restrictions was partly based on unprecedented water conservation.  Californians saved more than 20% of urban water since the Governor mandated water use reductions in 2015.  Despite the record levels of water conservation, the State cautions, “This drought emergency is over, but the next drought could be around the corner,” said Governor Brown. “Conservation must remain a way of life.”

Executive Order B-40-17 continues the provisions in the previous Executive Order, “Making Water Conservation a California Way of Life.”  Permanent restrictions prohibit the use of potable water for:

  • hosing off sidewalks, driveway and other hardscapes;
  • washing automobiles with hoses not equipped with a shot-off nozzle;
  • using non-recirculated water in a fountain or other decorative water feature;
  • watering lawns in a manner that causes runoff, or within 48 hours after measurable precipitation; and
  • irrigating ornamental turf on public street medians.
California HOA lawyers The SWRCB will continue to plan for future droughts and promote water conservation as a way of life, which may result in more legislation.  

Blog post authored by TLG Director of Business Development, Ramona Acosta.

Published on:

*New Case Lawhoa-records-inspection

As part of the ongoing management of a homeowners association (“HOA”), the HOA is obligated to prepare and maintain certain “association records,” most of which must be made available for inspection by the HOA’s members. However, the right to inspect and copy certain association records is not absolute, as some records may be withheld from a member for confidentiality concerns, as well as in situations where the member requesting the records is doing so for an “improper purpose”:

“association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member’s interest as a member.” (Civ. Code § 5230; see also Corp. Code §§ 8330, 8333.)

This “proper purpose” requirement was recently the focus of a challenge brought by a member of a HOA who sought to inspect and copy the HOA’s membership list. In Tract No. 7260 Association, Inc. v. Parker (2017) 2017 Cal. App. LEXIS 265 (“Parker“), the Court of Appeal concluded that the HOA was justified in withholding the membership list despite the member’s offering of a facially valid reason for his request to inspect the membership list. The member was involved in a corporation that the HOA was suing, called “Fix the City.” The member claimed that he sought the membership list “for possible communication with the [HOA’s] members to ascertain whether there had been corporate misdeeds.”

The HOA denied the request, arguing that the member was seeking inspection of the membership list in order to give Fix the City an unfair advantage in the lawsuit between it and the HOA. The trial court considered the facts at issue, and concluded that the member’s request was indeed improper, stating that “a reasonable conclusion is that [the member] is using his membership status to aid Fix the City in defending the [HOA/Fix the City] lawsuit.”

This aspect of the trial court’s ruling was affirmed on appeal. The Court in Parker noted that, while the HOA has the burden of demonstrating that the member will use the record for an improper purpose, and that mere speculation of an improper purpose is insufficient to justify withholding records, the HOA provided sufficient evidence that the requesting member did indeed seek the information for an improper purpose—namely, to aid Fix the City’s defense in the lawsuit brought against it by the HOA.

California HOA lawyers The Parker case underscores the importance of evaluating a member’s request for association records to determine whether the requested record(s) will be used for an improper purpose (i.e., to advance the member’s interests at the expense of the HOA’s). If the purpose is improper, and that conclusion is supported by more than simple conjecture, the HOA may lawfully deny the request. HOA Boards and managing agents that are concerned about the underlying motivations of a member’s request for association records should consult with the HOA’s legal counsel as to what records may (and indeed should) be withheld in order to protect the HOA.

-Blog post authored by TLG Attorney, Matthew Plaxton, Esq.

Published on:

pest-controlOnce again the first of the year brings new legislation impacting common interest developments. The passage of Assembly Bill 2362 adds Civil Code section 4777 to the Davis Stirling Common Interest Development Act effective January 1, 2017.  The intent of this bill was to require the same written notification of pesticide application to separate interests and common areas of common interest developments by a non-licensed pest control operator (i.e., the association’s general landscaper) as residents would receive under the existing law for pesticide application by a licensed pest control operator.

You may recall in 2014 California Code of Regulations (CCR) Sections 6000 through 6619 were adopted to govern pesticides and pest control operations. Under Section 6618(b)(1) association vendors that perform pest control services are required to provide associations with certain information concerning the application of pesticides, and associations are required to distribute that information to their residents on a regular basis.

The new Civil Code section 4777 requires associations applying pesticides to a separate interest or the common area by an unlicensed pest control operator to notify the owner and tenant of the affected separate interest, and if the operator will be using a broadcast application (spreading pesticide over an area greater than two square feet) or using total release foggers or aerosol sprays, to notify the owner and tenants of adjacent separate interests that could reasonably be impacted by the pesticide use.  The notice must contain the pest(s) to be controlled, the name and brand of the pesticide product to be used, the date, time and frequency of application (stating that the date, time and frequency are subject to change), and a healthy and safety statement to be copied into the notice.  A copy of the written notice must also be attached to the minutes of the next association board meeting.

Where pesticides are to be applied to a separate interest, at least forty-eight (48) hours prior written notice must be given to the owner and tenant of the separate interest, along with any adjacent impacted owners and tenants.  For applications to the common area, notice must be posted in a conspicuous place near the area to be treated, if practicable, otherwise, individual notice must be given to the owner(s) and tenant(s) of the separate interests adjacent the common area to be treated.  Notice to tenants may be accomplished using first-class mail, personal delivery to a tenant at least 18 years old, or electronic delivery if the tenant has provided an electronic mailing address.

California HOA laws Section 4777 also provides helpful definitions for terms including pest, pesticide, licensed pest control operator, and broadcast application, and the statute authorizes owners and tenants to agree to immediate pesticide application when necessary.

Blog post authored by TLG attorney, Terri A. Morris.

Published on:

sb-814-california-water-usage-hoa-e1484179755582California is experiencing the worst drought in over a century.  As a result, the California Legislature has enacted a number of laws aimed at water conservation.  Existing law requires the Department of Water Resources and the State Water Resources Control Board to take appropriate actions to prevent unreasonable water use.  To further the goal of preventing unreasonable water use, Governor Jerry Brown signed into law new legislation prohibiting excessive water use by residential customers during a drought (SB 814).

Specifically, SB 814, which adds Chapter 3.3 to Division 1 of the California Water Code, requires “urban water suppliers” to “establish a method to identify and discourage excessive water use.”  (Water Code § 366(b).)  Accordingly, a water supplier may adopt one of the following methods: (1) a rate structure using block tiers, water budgets, penalties for prohibited uses, and rate surcharges, or (2) an ordinance, rule or tariff (collectively, “Ordinance”) that defines the procedure by which water suppliers are to recognize and deal with excessive water use.  A violation of an Ordinance is punishable by a fine of at least $500 per one hundred (100) cubic feet of water, or seven hundred forty-eight (748) gallons, above the established threshold.

California HOA laws In light of the foregoing, Associations should be mindful of the new prohibition against excessive water use, especially in condominium projects where the units are not separately metered.

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

Published on:

janitorial-e1483995561223AB 1978 creates the Property Services Workers Protection Act.  Adding Part 4.2 (commencing with Section 1420) to Division 2 of the Labor Code, it requires every janitorial business within the State of California to register yearly with the Commissioner of the Division of Labor Standards Enforcement (“DLSE”) and pay a yearly fee of $500.00.  “No employer may conduct any janitorial business without a valid registration.”

It requires employees and employers of janitorial businesses to participate in a biennial in-person sexual violence and harassment prevention training course.  The course is to be developed by the DLSE by January 1, 2019.

Any janitorial business which does not have a current and valid registration is subject to a fine of $2,500.00.  Additional fines may be imposed including a fine of $100.00 for each calendar day that the business is unregistered with a maximum fine of $10,000.00.

Businesses (including Homeowner Associations) which contract with unregistered and unlicensed janitorial businesses are subject to fines of $2,000.00 to $25,000.00.

How will you know if the janitorial business is registered?          

The DLSE is required to maintain an online Janitorial Contractor Registry which is to be a public database of property service employers on the website of the Department of Industrial Relations (“DIR”) including the name, address, registration number, and effective dates of registration of all janitorial businesses.

AB 1978 was signed into law on September 15, 2016, and becomes effective on July 1, 2018.

California HOA lawyers Be proactive: Verify online through the Janitorial Contractor Registry that your janitorial workers are employed by a licensed janitorial business.  If you don’t, your Association may be subject to fines of $2,000.00 to $25,000.00.

Blog post authored by TLG attorney, Bruce R. Kermot.

Published on:

street-sweeperThe California Air Resources Board (“ARB”) passed a regulation (“Regulation”) that requires diesel trucks and buses that operate in California to be upgraded to reduce emissions.  The Regulation has a direct impact on HOAs and requires them to take steps to verify that certain vehicles they hire are properly certified with the State.   The Regulation requires lighter and older heavier trucks to be replaced starting January 1, 2015.  By January 1, 2023, nearly all trucks and buses will need to have 2010 model year engines or equivalent.

The Regulation requires that any party (including HOAs, board members, and managing agents) that hires or directs the operation of any vehicle subject to the Regulation, must verify that each hired company is either in compliance with the regulation or has reported compliance to the ARB.  The Regulation does not apply where the party does not hire or direct the operation of any vehicle subject to the Regulation.  The types of vehicles that an HOA or its managing agent may encounter include but are not limited to the following: street sweepers, dump trucks, pumper trucks, crane trucks, charter buses, lift trucks, concrete pump trucks, and tow trucks.

Continue reading