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Articles Posted in HOA Governance

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hostile-work-environmentAs HOA industry professionals, there are many positive aspects to our occupation.  We work with a diverse group of people, take fulfillment from helping volunteer boards, and are happy when we solve problems through creativity.  Unfortunately, there are situations that can become difficult.

Most association managers (“Manager”) have had some experience dealing with abusive homeowners and demanding board members (“Hostile Actor”).  Typically, the Hostile Actor exhibits unrelenting behavior that becomes obnoxious despite Management’s best efforts.

The purpose of this article is to provide Managers with a brief primer as you experience hostility in the moment – via email correspondence, telephone calls, or direct confrontations.

When you encounter hostile situations, it is important to remember that your Management Company was hired to serve as the managing agent for the Association.  Your primary responsibility is to implement the board’s directives and to serve as a communications liaison between the board and the residents.  For the most part, substantive decisions are made by the board at monthly board meetings.  Recognizing that legal relationship can assist the Manager when confronted with a threatening email or any other form of communication.  Below is a sample response to consider when responding to a Hostile Actor:

Thank you for your email.  The board values resident communication relating to Association business.  I understand your concerns and will forward your communication to the board for review at the next board meeting. 

A phone call is usually the next step if the Hostile Actor is not satisfied with Management’s return correspondence.  You should be able to tell where the call is headed based upon his or her initial tone and word choice.  Hostile situations may be diffused or avoided altogether by giving the caller a chance to be heard; the Manager can use the call for good as an opportunity to further explain why it would be inappropriate and unfair if Management were to respond at that time.

You do not deserve to be the subject of personal attacks.  Phone calls that lapse into volatile language should be ended as soon as possible by stating that all future communication must be sent in writing for board review.  After the call concludes, it is advisable to send an email to the Hostile Actor which politely confirms your prior statement about future communication.  If possible, the Manager should prepare an internal memo which documents what was said with as much detail as possible.  The memo can be used to notify other Management employees regarding the Hostile Actor’s prior phone call and for evidence preservation purposes.  Preserving inflammatory communication can help general counsel with later drafting cease and desist correspondence and, if necessary, filing a temporary restraining order if abusive behaviors later escalate.

With limited exception, there is no need for in-person meetings between Managers and Hostile Actors who have demonstrated a prior pattern of disruptive conduct.  In general, Hostile Actors do not show up at Management’s business office unless they are angry.  For that reason, direct confrontations, which are rarely productive, are not recommended because of the potential for further abuse.  Management’s receptionist, if available, should screen the reason for the visit and then direct the Hostile Actor to forward his or her concerns to the board in writing.  If a Manager interacts with a Hostile Actor, then all meetings should be held in the open presence of at least one (1) other Management professional so that conversations can be witnessed.  One-on-one meetings in a private office are discouraged.

What happens when the Hostile Actor is a board member?  Management’s executive team, if available, should be contacted for assistance to navigate the delicate client relationship.  The board member should be reminded that your ability to support the Association depends upon establishing a professional working relationship.

The appearance of the Hostile Actor at board meetings is not uncommon.  The Manager can reduce the possibility of hostile meeting environments by being proactive.  Distributing policy statements for board meeting conduct and requiring the completion of homeowner speaker cards are effective ways to create a healthy work space.  Those documents can state that homeowner forum will be time limited and interruptions will not be tolerated, among other things.  Unruly board members may be tempered by emphasizing the importance of only discussing agenda items and underscoring the negative consequences to the Association by engaging in harmful dialogue.

hoa laws The Hostile Actor is a frequent character in the business of managing community associations.  Disruptive situations should be identified and handled swiftly by the board and Management on a case by case basis through a collaborative process.  The Manager should consider contacting ‘legal’ if abusive communication intensifies.  General counsel can then offer potential solutions for board review such as sending cease and desist correspondence, initiating the Internal Dispute Resolution process, or seeking judicial relief. 

-Blog post authored by TLG Attorney, Kumar S. Raja, Esq.

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hoa-coastal*New Case Law

The issue of short-term rentals (or “vacation rentals”) is becoming increasingly significant for homeowners associations (“HOAs”).  The concerns and problems that arise from having revolving groups of vacation renters in HOAs are well-documented, such as the fact that vacation renters are often “less careful in using the common facilities because they are not concerned with the long-term consequences of abuse.” Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 473.

To avoid these problems, many HOAs have lease restrictions within their governing documents such as a restriction which prohibits the rental or leasing of a property for a period of less than thirty (30) days. Such a restriction was adopted in 2016 by the coastal community of Mandalay Shores Community Association (“Mandalay Shores”), together with a schedule of significant fines that may be imposed on the owners of the roughly 1,400 homes in Mandalay Shores who violate the short-term rental rule. Two owners filed suit against Mandalay Shores seeking an injunction to stay the enforcement of the short-term rental rule, contending that the rule violates the California Coastal Act (Pub. Resources Code Sec. 3000 et. seq) (the “Act”).

The injunction was ultimately granted on appeal.  The Court of Appeal noted that the Act was enacted to, among other things, “[m]aximize public access to and along the coast and maximize public recreational opportunities to the coastal zone consistent with sound resources conservation principles and constitutionally protected right of private property owners.” While Mandalay Shores did not erect a physical barrier to the beach, the Court believed that it erected a monetary barrier, which had the same effect.

The Court was not persuaded by Mandalay Shores’ argument that the short-term rental rule was to curtail parking, noise and trash problems. In his opinion, Acting Presiding Justice Yegan stated that such problems are to be addressed by the city and Coastal Commission: “The decision to ban or regulate [short-term rentals] must be made by the City and Coastal Commission, not a homeowner’s association.” Thus, in his opinion, a HOA may not adopt rules affecting “the intensity of use or access to single family residences in a coastal zone.” To read the Court’s holding in Greenfield v. Mandalay Shores Community Association, click here.

California HOA lawyers This case will have a profound effect on a HOA’s ability to adopt rules preventing short-term rentals in coastal communities. HOA attorneys and management professionals should be mindful of this case when receiving requests from coastal community clients to adopt/amend rules to include short-term rental restrictions.

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

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hoa-membership-id-cards*Asked & Answered

Asked – Our HOA makes us take a photograph which they put on an ID card to use at the various amenities on site. Upon move out, they make us turn in the IDs. I found out that they don’t destroy the cards that have our name and photograph and what unit we are in. The HOA keeps it in the “unit file” in perpetuity. I don’t feel comfortable with this, but I turned mine and my husband’s in to avoid paying $25 each for not handing them in. My step-daughter has lost hers and I’m being charged $25. In finding out the fee does not go to defray any costs incurred by the board. This does not sound legal/in-line with privacy laws. Suggestions?

AnsweredThe HOA’s practice of retaining photo ID cards does not violate the law; however, the ID cards do not contain information that HOA’s are required to retain as HOA “records” such as copies of the HOA’s governing documents, minutes, financial records, and litigation files. There is no arguable reason for the HOA to retain photo ID’s of past members, so it would be our recommendation that rather than retain the photo ID cards the HOA shred them once they are surrendered, thereby preventing any opportunity for misuse of the information and photographs contained in the cards.

hoa laws The charge of $25 for members who fail to turn in their ID cards upon moving out of the community is probably a penalty charge listed in the HOA’s Fine Schedule.  As a fine, the charge is not required to be used to defray costs incurred by the HOA, but is a penalty designed to motivate members to surrender their cards, so they are not used for entrance to the HOA’s amenities by unauthorized individuals. The amount of the fine is not “unreasonable,” so it does not violate the Civil Code that governs homeowners associations.

Content provided by TLG attorney Terri A. Morris, Esq.

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

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notboss63Previously, we wrote on a decision published by the National Labor Relations Board (“NLRB”) wherein the NLRB concluded that, where a contracting party has reserved the authority to exercise control over the employees of another, said contracting party will be found to be the “joint employer” of the other entity’s employees.  In the case of Browning-Ferris Industries of California, Inc. (2015) NLRB No. 672 (“BFI”), BFI retained the services of Leadpoint Business Services (“LBS”) to provide staff to one of BFI’s recycling facilities.  Although the contract between BFI and LBS recognized that the personnel staffed by LBS were the employees of LBS, BFI retained some control over the employees. As such, the NLRB concluded that as long as a company retains (e.g., through the execution of a contract) the authority to control the employees of another, said company will be given joint-employer status. (Id. at p. *2.)

The BFI decision caused quite a stir in the realm of common interest developments. As discussed in our prior post, many associations retain a community management firm to facilitate the duties of the association (e.g., solicit bids for common area maintenance and repair). And while the community managers were historically viewed as the employees of the management firm, the BFI case raised some questions with respect to the nature of the relationship between the employees of a management firm and the association.

Nevertheless, on December 14, 2017, the NLRB did an about-face reversing its decision in the BFI case.  In Hy-Brand Industrial Contractors, Ltd. (“Hy-Brand”) the NLRB held that the BFI standard was “a distortion of common law as interpreted by the Board and the courts…[wa]s contrary to the [National Labor Relations] Act…is ill-advised as a matter of policy, and its application would prevent the [NLRB] from…foster[ing] stability in labor-management relations.” ((2017) 365 NLRB No. 156, *2.) Accordingly, the NLRB concluded that a joint-employment relationship will be found where there is evidence demonstrating that an entity has “exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control).” (Id. at p. *5 (emphasis original).) Said control must be “direct and immediate,” as opposed to “indirect,” and must be more than control which is “limited and routine.” (Id.)

Although the BFI case has been abrogated restoring the prior position of the NLRB, associations and management companies must continue to exercise caution when hiring vendors to perform services for the association to prevent a finding of a joint-employment relationship. In Heiman v. Workers’ Compensation Appeals Board, the Court of Appeal concluded that the community manager (and by extension, the association) was the joint-employer of an employee of an unlicensed and uninsured contractor. ((2007) 149 Cal. App. 4th 724.)  Under California law, one of the legal consequences for hiring an unlicensed contractor is that the person who hired the unlicensed contractor may be considered an “employer” for tort-liability purposes. (Id. at p. 735.) Since the community manager hired an unlicensed contractor, it was found to be the joint-employer of the injured worker. And, because of the agency relationship between the management company and the association, the association was found liable. (Id. at p. 744.)

California HOA lawyers In sum, despite the shift in position, associations must continue to insulate itself from a finding of joint-employer status by ensuring that it retains only licensed and insured vendors, and adequately sets forth the scope of work and the level of care and skill required to achieve the desired result within its contract with the vendor.  Moreover, the contract must include a provision requiring the contractor to indemnify and hold the association harmless in the event a labor dispute arises between the contractor and its employees.

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

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SolarThe Governor has signed AB 634 into law changing HOA control over solar energy system (“Solar”) installations. HOAs may no longer adopt policies and guidelines that prohibit Solar installations on common area roofs protecting HOA property and homes from damage and members are stripped of the right to protect common area property by membership vote. HOA’s must conform to a statewide, one-size-fits-all Solar policy summarized here.

Civil Code § 714.1 now provides that Associations are prevented from . . .

  • Establishing a solar energy system policy that prohibits condominium owners from installing solar panels on the common area roofs of condominium buildings or the owner’s adjacent garage/carport (exclusive use common area);
  • Requiring membership approval for an owner’s encroachment for Solar equipment on the common area.

New Civil Code § 4746 declares HOAs reviewing requests for Solar installations on common area roofs of multifamily dwellings . . .

MUST require:

  • Applicants to notify each owner in the building of the proposed solar installation, AND
  • Owners/successive owners to maintain homeowner liability coverage, providing the HOA with proof of insurance within 14 days of approval and annually thereafter;

MAY impose reasonable provisions that:

  • Require owners to provide a survey of “usable solar roof area” prepared by a licensed contractor/knowledgeable salesperson;
  • Require survey to include equitable allocation of usable solar roof area for all owners sharing the roof/garage/carport;
  • Require owners/successive owners to be responsible for:
    • Costs for damage to any common area resulting from installation/maintenance/repair/removal/replacement of Solar installation;
    • Costs for maintenance/repair/replacement of Solar installation until its removal;
    • Restoration of all common area and separate interests after removal;
    • Disclosing the Solar installation to prospective buyers and all related responsibilities

Civil Code § 4600 now includes Solar installations as an exception to the rule requiring approval of 67% of members before the HOA can grant exclusive use of any portion of the common area to a member.

California HOA lawyers In light of AB 634, HOAs should have their legal counsel review their current architectural guidelines with respect to the installation of solar energy systems.

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

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governing-docs*Asked & Answered

Asked – Our documents were created in 1981 and have not been updated since that time.  I imagine that we are out of legal compliance with some of the items listed within both documents.  The HOA membership does not want to pay to have them rewritten and brought up to the codes and I am not sure what the implications are if we do nothing.

Answered – This a common question asked by many of our clients, especially those with governing documents that look like they were typed on a typewriter and digitally stored on microfiche.  However, it is important to note at the outset that just because your documents are old, does not mean that it is necessary to amend/restate them.  Nevertheless, there are several reasons why an association may want to update its documents.

The first, and most obvious, reason why an association may want to update its documents is to address particular issues affecting the community. While an association’s operating rules can easily be amended to tackle many of these issues, not all can be addressed through adopting an operating rule.  Thus, certain situations may require a CC&R or Bylaw amendment.

The second common reason why an association may want to update its CC&Rs is to remove developer-specific provisions. When an association is formed, the developer’s attorney prepares the governing documents, including the CC&Rs. And while the California Bureau of Real Estate exercises some oversight, many of the provisions are drafted to benefit the Developer and not necessarily the individual homeowners. Accordingly, it may be worthwhile to remove these provisions and reallocate the rights and responsibilities to the Association and its members.

Other reasons why an association may want to update its documents is to reduce quorum and membership approval requirements, and to address changes in the law. For example, a recent change to the Civil Code further defined the maintenance and repair responsibilities of the association and owners concerning Exclusive Use Common Area (“EUCA”) components. For condominium associations that have traditionally held owners responsible for EUCA repairs, changes in the law may require them to change that position if the provisions in their CC&Rs fail to address the issue.

California HOA lawyers Board members should be aware that amending an association’s governing documents can be an expensive endeavor. The expense is often exacerbated by the difficulty experienced in obtaining membership approval, either because of the unpopularity of the proposed amendments, or membership apathy. The foregoing is meant to underscore the importance of discussing potential updates with the association’s legal counsel to determine if they are necessary and/or advisable.

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

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Director-LiabilityOn September 25, 2017, Governor Brown signed AB 1412 (effective January 1, 2018) which seeks to clarify Civil Code Section 4041 (Annual Notice of Owner Contact Information) and Civil Code Section 5800 (Limitation of Director and Officer Liability).

Under current law, Civil Code Section 4041 requires the Association to solicit, on an annual basis, mailing addresses from the Members for purposes of providing notice.  Members are required to state the primary and secondary addresses to which notices from the Association are to be delivered, among other things.  If no such notice is provided, that Section 4041 provides that the default mailing address for purposes of delivery shall be the Member’s property address within the Association.

The existing version of Civil Code Section 4041 potentially inconveniences non-resident Members because they must annually notify the Association of their current mailing address.  If they fail to do so, Management is then legally obligated to change the Members’ mailing address back to the Members’ Association address.

AB 1412 removes those administrative burdens by stating that the default mailing address shall be the last address provided in writing by the Member to the Association, if any.  Under that circumstance, the Association no longer needs to annually update its Member address records if the Members forget to supply their existing mailing address to the Association.

Civil Code Section 5800 provides liability protections to volunteer Directors and Officers if certain conditions are satisfied (i.e. the act/omission was performed in good faith and within the Director/Officer’s Association duties, etc.).  Current law provides that such protections are only available to Directors/Officers in common interest developments that are exclusively residential.  The protections previously offered by Section 5800 were unavailable to volunteer Directors/Officers in mixed use settings, such as common interest developments with residential and commercial units.

In view of the growing number of common interests developments throughout the state, the California legislature recognized that Section 5800 did not provide liability protection to Directors/Officers in mixed use common interest developments.

As such, AB 1412 seeks to expand the breadth of Civil Code Section 5800 because it now generally applies to volunteer Directors/Officers in mixed use settings.  Such protection is limited to those Directors/Officers who are tenants of a residential separate interest or who own no more than two (2) residential separate interests.

California HOA lawyers AB 1412 will save time and money because the Association is no longer burdened with the duty to update Member address information if a Member fails to provide Management with his or her mailing address. 

Mixed use common interest developments may experience increased Board participation by volunteer Directors/Officers because liability protections are now available under Civil Code Section 5800.

AB 1412 does not address whether volunteer commercial unit owners or Members who own three (3) or more residential units are immune from liability under the same liability protections.  A review of the legislative history for AB 1412, coupled with general principles of statutory construction, suggests that those individuals may be excluded in that regard.

-Blog post authored by TLG Attorney, Kumar S. Raja, Esq.

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hoa-campaign-meeting

New Civil Code 4515 will be added to the Davis-Stirling Act to ensure that homeowners association residents may exercise their rights of peaceful assembly and political speech.

HOAs are playing an increasing role in the lives of California’s residents as compared to the roles traditionally played by cities and counties. HOAs are growing in number, size and sophistication. As a result, a HOA’s actions and governance structure often have more immediate effects on the issues homeowners feel “closest to home,” such as property values and community services. This is why California law will at times hold HOAs—which are private corporations—to the standards of “quasi-governmental entities.”

An example of this was seen several years ago when legislation was enacted to grant every HOA member the right to use common area meeting spaces for purposes related to a HOA’s election. The intent was to promote constitutional principles of freedom of speech and assembly; to allow HOA members to meet for purposes related to an ongoing HOA campaign (i.e., a HOA board election), and to do so without any unreasonable impediment imposed on them by their HOA.

SB 407 (Wieckowski) is a newly signed bill that takes this idea much further. It was introduced in response to what California’s legislators felt to be a continuing abuse of power by HOAs in using non-solicitation rules to prohibit non-commercial free and political speech:

“Blanket prohibitions on commercial solicitation are often so broadly written that they could be interpreted to prohibit non-commercial free and political speech.”

“Significant anecdotal evidence demonstrates that HOAs have extended the restrictions of door-to-door solicitation to political speech.”

“Overly broad rules and policies discourage the civic participation of HOA members and criminalize free political expression.”

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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.

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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.

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