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Articles Posted in HOA Governance

*Asked & Answered

recall-WEBAsked – We recently completed our annual meeting/election where approximately ninety-four percent (94%) of the membership participated. Almost immediately thereafter, we received a petition to recall the Board of Directors (“Board”). Must our association go forward with the recall election? What alternate options are available to the Board?

Answered – Most common interest developments (“CIDs”) are formed as nonprofit mutual benefit corporations. Under California’s nonprofit corporation law, “any or all directors may be removed without cause” (Cal. Corp. Code § 7222 (emphasis added)); meaning that directors can be removed by the membership for any reason, or no reason at all. In order to initiate the recall process, five percent (5%) of the membership may submit a petition to the CID (usually addressed to its president) requesting that a special meeting of the membership be noticed for the purpose of recalling the Board (or any director). The notice requirements are addressed in California Corporations Code section 7511(c).

Recall elections can disrupt the effective operation of the CID and are often a costly endeavor. And, in most cases, such efforts fail to achieve the petitioning members’ desired objective—the removal of the Board. This is especially true in situations where the CID’s Bylaws allow for cumulative voting and members try to recall individual directors. (See Removal & Recall of Directors – Individual Director or Directors.) Nevertheless, under most circumstances, the CID must take action in response to a petition to recall the Board. However, based on the facts contained in the question presented, there may be other options available. The three options available in response to a valid recall petition are:

  1. Perform only those acts required to conduct a recall election;
  2. Do nothing in response to the petition other than to inform the petitioners that the Board has elected not to take action; or
  3. Perform all acts necessary to hold a recall election and concurrent director election.

Each option will be discussed in turn.

Option #1 – Perform only those acts required to conduct a recall election.

According to the facts provided in this question, the petitioning members have submitted a petition to recall the Board. The petitioning members have not also requested that a director election be held in the event the recall is successful. Thus, the Board could simply notice a special meeting of the membership to recall the Board without soliciting membership votes on replacement directors. This approach is problematic for the CID.

Under California Corporations Code section 7220(b), a director continues to serve until their successor is elected, “unless the director has been removed from office.” Thus, if the recall is successful, all directors immediately cease being on the Board; in other words, the CID will be without a Board. Failure to have a Board violates California Corporations Code section 7210, which states that “[e]ach corporation shall have a board of directors.” (Emphasis added.) Moreover, without a Board, the CID will be significantly prejudiced; it will not be able to carry out its obligations under California law and its governing documents (e.g., maintenance may cease, rule enforcement ends, the CID will be unable to respond to lawsuits, etc.).

Since the CID will be without a Board, members will be forced to file a petition with the Superior Court for the appointment of a receiver pursuant to California Code of Civil Procedure section 564(a)(9). The receiver will then manage the affairs of the CID and will initiate the procedure to conduct a director election. This, of course, is problematic in several respects.  First, receivers are paid for their services. Most CIDs do not have adequate financial resources to cover unanticipated expenses. The receiver therefore may be forced (and will have the authority) to levy an emergency special assessment. Second, the receiver’s objectives are not usually in line with the interests of the CID’s members.

In light of the foregoing concerns, it would not be in the CID’s best interest to proceed in this fashion (i.e., conduct the recall election without a concurrent director election).

Option #2 – Do nothing in response to the petition other than to inform the petitioners that the Board has elected not to take action

Based on the information given, this option may be reasonable under the circumstances, especially given the overwhelming voter turnout (approximately ninety-four percent (94%) of the membership participated in the election). If such option is selected, the petitioning members will have the option of giving notice of the special meeting pursuant to California Corporations Code section 7511(c), or may petition the Court to require that such notice be given by the CID. Either way, the petitioners will be required to obtain a Court order directing the CID to prepare and distribute ballots as the petitioners do not have such authority. (See Cal. Civ. Code § 5115 (“Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member….”).)

This option, while seemingly reasonable, raises similar concerns referenced above. To the extent members petition the court for an order compelling the CID to take action in response to the petition (including providing notice and preparing/distributing balloting materials), the CID will incur significant legal fees in defense of its position in this matter (unless insurance-appointed defense counsel steps in to provide a defense). And, in the event the petitioners are successful, the CID will incur costs relative to holding the recall election/director election. Again, most CIDs are not in a financial position to incur these additional costs.

Option #3 – Perform all acts necessary to hold a recall election and concurrent director election.

The third, and final, option—to conduct the recall election and concurrent director election—is the only option available to the CID that minimizes the CID’s financial harm and liability exposure. It is therefore the preferred course of action in response to a petition to recall the Board.

It is important to note that recent changes to the California Civil Code governing CID elections has made it practically impossible for a CID to comply with the timing requirements contained in California Corporations Code section 7511(c) and those contained in California Civil Code section 5115. Nevertheless, California Civil Code section 5100(a)(1) makes it clear that the procedural requirements contained within the Davis-Stirling Common Interest Development Act (“Act”) control—“Notwithstanding any other law….” The CID must therefore comply with the procedural requirements contained in California Civil Code section 5115 notwithstanding the degree to which same deviates from those contained in California Corporations Code section 7511.

Other Option Available to the CID to Prevent Recall Petitions Immediately After a Director Election

The foregoing has addressed the ways in which a CID may respond to a recall petition immediately after the conclusion of a director election. It does not, however, address how a CID may prevent such petitions from being brought in the future. One way in which a CID may prevent such petitions from being brought in the future is to adopt rules governing recall elections. Although the Act does not directly address the extent to which a CID may restrict recall petitions, other bodies of law have. For example, in the California Elections Code, a person is precluded from bringing a recall petition against “an officer of a city, county, special district, school district, community college district, or county board of education” if one ore more of the specifically identified limitations apply (e.g., the officer “has not held office during [their] current term for more than 90 days”). A CID may adopt a similar limitation for director recalls.

California HOA lawyers Each recall petition is unique. Thus, while the foregoing provides general guidance based on the particular facts identified above, each CID must confer with its attorney to determine the appropriate response to a recall petition.

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

*Asked & Answered

imageAsked Many owners in the community have requested that the board of directors consider removing an old, largely unused tennis court. We have three other tennis courts in the community and the space could be repurposed for a variety of other uses. Does the board have the authority to remove the tennis court?

Answered – Generally, not without membership approval. The membership pays dues for the maintenance, repair, and use of common area amenities. Many owners make their purchasing decisions in reliance on the available facilities a community has to offer. If the board unilaterally begins removing amenities without membership approval, there could be a risk of exposure to potential legal action. In addition, some associations have specific provisions in their governing documents that prohibit the elimination of common area amenities without membership approval.

That said, there can be limited situations where a board may have the authority to remove a common area amenity without a vote of the membership. Such situations may turn in part on the size of the amenity, whether it poses a hazard to the residents, and if the governing documents authorize such an action. However, disrepair alone generally cannot be the sole basis of a removal decision as the association usually has a duty to maintain common area amenities in good repair.

California HOA lawyers We recommend that associations and their boards proceed with caution when evaluating whether to remove a common area amenity. Counsel should be consulted to review the association’s governing documents to advise whether any specific provisions limit or restrict the board’s authority or require a vote of the membership for such actions.

-Blog post authored by TLG Attorney, Tim D. Klubnikin, Esq.

MEGAN4Megan’s Law is a federal law that permits authorities to release information about registered sex offenders (“Registered Offender”). California has a database of Registered Offenders available for public viewing on the internet (see www.meganslaw.ca.gov). Searches can be done by a Registered Offender’s name, or by city, zip or within a predetermined radius of a selected park, address or school. Once a Registered Offender has been located, his or her picture is displayed, as is the person’s present address, offenses, known aliases and any distinguishing scars, marks and tattoos.

An HOA Board (“Board”) is not prohibited from sharing information obtained from this database with its membership provided it is for the purpose of protecting persons at risk. Additionally, California Penal Code Section 290.03 allows Boards to pass that information along to the Association’s membership as long as it merely restates factual details. However, Boards should nonetheless thread very carefully when considering making disclosures regarding Registered Offenders within the Association because any error in its disclosure could lead to potential civil as well as criminal exposure.

While Directors on a Board are fiduciaries, there does not appear to be a duty by Directors under CA law to disclose the presence of or other information regarding a Registered Offender in the Association. Moreover, due to the different tiers or classifications for Registered Offenders, not all are deemed dangerous notwithstanding their underlying wrongful conduct.  Additionally, the law has created protections for Registered Offenders who have “paid their debt” to society and have been released from custody. The only time disclosure is allowed is to protect persons at risk.

Moreover, the disclosure must not be for the purpose of discriminating against or harassing the Registered Offender. Impermissible disclosures or conduct that prejudices such residents (i.e. limiting access to common areas/amenities or otherwise embarrasses the resident) are arguably discriminatory and could lead to criminal prosecution and civil liability.

However and with the above considerations and potential risks in mind, the following options are available to a Board:

  • Make No Disclosure. The Board could elect not to mention the presence of the Registered Offender. This avoids any potential risk of liability that may arise from improper use of the information, improper notification, or mistaken identification. However, if a child in the Association is molested by the Registered Offender, the parties involved might sue for failure to notify the membership of the potential danger.
  • Direct Members to the Website. The Board could include a notice in the Association’s newsletter about the Megan’s Law website without any comments about the Registered Offender living in the Association; it would simply encourage members to examine the website and contain certain disclaimer language.
  • Contact the local Police Department and ask it to give notice to the membership. The advantage is that the Board would avoid potential liability for giving improper notice. The disadvantage is that the agency may refuse to give notice (the more likely scenario).
  • Lastly, the Board could elect to disclose the identity and address of the Registered Offender. However, this option carries much risk. Although the Registered Offender status is publicly-available information, the direct disclosure of the identity and address may put the Board in violation of the protective statute and create potential for defamation since the information on the State’s website may not be accurate. Moreover, if the Association makes disclosures regarding the Registered Offender, the members may then assume unrealistically, and unreasonably, that the Association is responsible to protect them.

Of the foregoing options, perhaps the most conservative and arguably most prudent is to consider putting a standard notice in the Association’s newsletters that would appear in all future newsletters or website (if applicable). The notice should be generic and state something similar to the following: “For information on registered sex offenders, visit www.meganslaw.ca.gov.” This way, no person in the Association is singled out, but the membership is at least put on notice and provided some guidance to look up the publicly-available information for themselves.

Additionally, it may be best to also indicate that it is not the Association’s responsibility to track or monitor the Registered Offender list, nor to take any action if there is a Registered Offender within the community. Use of such wording would place the responsibility on the residents to check the publicly available website and take whatever precautions they believe is necessary to protect themselves and their families.

If the Board wishes to take more proactive measures while mitigating exposure then the Association’s patrol vendor can be informed of the Registered Offender with clear instructions that they are not to single out or harass the Registered Offender, they must not disclose identifying information about him or her to other residents, and that they shall immediately notify law enforcement if they encounter obvious misconduct that presents an imminent risk to others and particularly when vulnerable groups such as minors are involved.

Otherwise, it may be best not to fully disclose the identity of the Registered Offender to the Association’s personnel, but rather generally put them on notice of the issue for enhanced patrolling purposes. This way, the patrol service can be tasked to generally remain vigilant to promote a sense of safety, but not be given express or implied license to target anyone in particular.

California HOA lawyers If the Board believes that a Registered Offender has moved into the Association in violation of California or federal law or if the Association would like to generally develop a plan to protect it and its membership, then the Board should immediately consult with the Association’s legal counsel. For example, legal counsel can review all guidelines and restrictions for the Registered Offender housing. It is possible that someone in the Association is operating a licensed day-care center that was not considered when granting the Registered Offender housing, or that your community includes a public park that was not officially recognized at the time of the housing determination. These and many other considerations can be explored with the help of your legal counsel to help protect your Association without creating any unnecessary exposure for the Board.

-Blog post authored by TLG Attorney, Sam I. Khil, Esq.

Picture1[As written by Rip Van Winkle on June 15, 2021]

In early March 2020, I fell asleep upon drinking my favorite beverage on a California beach.  When I awoke today on June 15, 2021, I am surprised to see people celebrating in the streets and face masks in the trash.  Home prices are sky high and the cost of a gallon of gas is near $5.  What happened during my slumber?!  Everything looks normal to me – but is it?  Help! 

On June 15, 2021, the state of California fully reopened under the New Normal.  According to the state’s web site, Governor Newsom terminated “the executive orders that put into place the Stay Home Order and the Blueprint for a Safer Economy.”  Previously, it noted that beginning June 15, 2021, all sectors listed in the current Blueprint Activities and Business Tiers Chart may return to usual operations…”  How will the state’s reopening plan affect HOAs throughout the state?  The purpose of this article is to briefly summarize what some have described as the New Normal – and to address whether HOAs can reopen without restrictions.

The New Normal 

COVID-19 continues to be present in smaller numbers throughout the state.  The Centers for Disease Control (“CDC”) states that some vaccinated people will still get sick because “no vaccines are 100% effective” and provides that it is “still learning how long COVID-19 vaccines protect people.”  Data suggests that some California citizens remain unvaccinated.  As of June 17, 2021, the California Department of Public Health (“CDPH”) maintains that the “risk for COVID-19 exposure and infection will remain until we reach community immunity from vaccinations, especially in communities heavily impacted by COVID-19.”

Now that the state will no longer be subject to the state’s COVID-19 health guidelines, does that mean that HOAs can return to pre-COVID operations under the New Normal without regard to prior and existing health recommendations?  Not necessarily.

Since the Governor’s March 2020 Executive Order, the state has largely deferred to health mandates imposed by local counties.  While the state may have lifted its Blueprint for a Safer Economy, it is possible that some counties may continue to impose COVID-19 limitations for their local populations based upon their respective COVID-19 metrics.  “Nothing in this Order shall be construed to limit the existing authority of local health officers to establish and implement public health measures within their respective jurisdictions that are more restrictive than…the public health measures imposed on a statewide basis pursuant to the statewide directives of the State Public Officer.” (Executive Order N-07-21 dated June 11, 2021).  Accordingly, it is advisable for HOAs to review local requirements before deciding to resume pre-COVID business (i.e., reopening facilities and holding in-person Board meetings, among other things).

The state’s decision to fully reopen potentially creates confusion regarding the application of health guidelines and safe practices.  Fortunately, the Centers for Disease Control (“CDC”) provides a default framework for community associations to evaluate as they reopen throughout the state.

Liability Considerations

During the New Normal, boards of directors and management professionals should not overlook the CDC’s COVID-19 guidance, particularly because reviewing that material could help to prevent liability exposure for the Association.  The CDC provides guidance for shared or congregate housing, and multifamily housing (e.g., condominiums and townhouses).  The principles from those resources could apply to resident gatherings within community associations, such as in-person board meetings and community events.  The CDC web site includes COVID-19 instruction for many daily activities that are fixtures within HOA communities, such as gyms or fitness centers, playgrounds, and pools.  HOAs would be well served by considering the adoption of safeguards which appreciate the CDC’s guiding principles in those contexts (i.e., encouraging social distancing and mask wearing; sign posting; and resident education, etc.) because the landscape in 2021 is much different than it was in 2019.

Community associations possess the obligation to discharge their legal responsibilities in accordance with certain standards of care.  They can be responsible for harms to third parties if their conduct is considered to be negligent by acting or by failing to act (CACI 400).  Negligence is defined as “conduct which falls below the standard established by law for the protection of others against unreasonable risk of harm.”(Restatement Second of Torts, section 282).  In general, one is required to exercise the care that a person of ordinary prudence would exercise under the circumstances.  The California Supreme Court held the following: “Because application of [due care] is inherently situational, the amount of care deemed reasonable in any particular case will vary, while at the same time the standard of conduct itself remains constant, i.e., due care commensurate with the risk posed by the conduct taking into consideration all relevant circumstances (Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992, 997).

Notwithstanding the state’s reopening, the amount of care now exercised by HOAs might require a greater appreciation or awareness of safe procedures, in view of the present COVID-19 risk and current health standards.  CDC and state/local guidelines, to the extent available, provide detailed guidance that can be considered in that regard.  Below are suggested practices for some common HOA functions:

HOA Function

Recommended Practice
Indoor Board Meetings Face Mask Coverings – see CDPH’s “Guidance for the Use of Face Coverings – Effective June 15, 2021”, or applicable County guidelines, whichever is stricter.  Click here for our recent blog post regarding face mask coverings.

Holding Gatherings – see CDC guidance.

Maintenance of Common Area Amenities Continuance of enhanced cleaning and disinfection practices – beyond those practices in place before the March 2021 Stay at Home Order.

Maintaining Healthy Environments – see CDC Guidance.

California HOA lawyers Rejoice!  It looks like we may be close to the light at the end of the tunnel.  Much has changed since I fell asleep.  What appears to be normal may not be.  I know that I can ask my trusted HOA lawyer for assistance as I take measures to protect my community – but maybe not at the beach… RVW

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

201167609_10158535966747582_6734223399279805886_nAs of June 15, 2021, Governor Newsom terminated the executive orders that created the Stay-at-Home Order and the Blueprint for a Safer Economy. These orders have been replaced with and superseded by a new State Public Health Officer Order of June 11, 2021 (“Current Order”). This New Order requires all individuals, regardless of vaccination status, to wear face coverings: 1) on public transit; 2) indoors in schools and in childcare; 3) in healthcare settings; 4) in correctional facilities and detention centers; and 5) in homeless and emergency shelters. Vaccinated people may now forego face coverings in public places, including indoors, but unvaccinated persons must still wear face coverings in these locations.

The vast majority of HOAs are not open to public as their common area amenities and facilities are for the use of residents and their guests only. The Current Order, by its plain language, does not apply to these private businesses, which means that HOAs not open to the public are free to adopt their own reasonable rules related to face coverings and social distancing in common areas while the COVID-19 pandemic continues. Although progress has been made in vaccinations and in reducing community transmission, the pandemic is still ongoing, and the risks are still very real. However, the lifting of the state mandates and improved conditions means that HOAs are opening their community facilities and loosening restrictions on their use.

HOAs are tasked with various responsibilities and obligations to ensure the continued operation and well-being of the Association. Those obligations include keeping common areas safely maintained. The Association must continue to fulfill these obligations despite the lifting of governmental mandates through the adoption of reasonable rules.

It is arguably reasonable for HOAs to mirror the provisions of the Current Order when opening community facilities, although HOAs can choose to be more restrictive if the Board determines this course of action to be in the Association’s best interest. However, only lifting masking requirements for vaccinated persons creates significant enforcement difficulties. Specifically, it forces the HOA to ask people if they are vaccinated. While asking persons if they are vaccinated is lawful (HIPAA is only applicable to healthcare providers), many will consider answering questions concerning their private health information an invasion of their privacy and by that same token, may refuse to answer. The law does not require anyone to answer such a question.

Moreover, an unvaccinated person could simply lie. Asking for vaccination cards poses the same dilemma and is arguably an even more egregious invasion of privacy. The administrative costs of implementing a registry of vaccinated versus non-vaccinated persons is also a concern as is monitoring who must and who may not wear masks at the facilities at any given time. Furthermore, vaccination is not fully achieved until two (2) weeks after the second dose in a 2-dose series, such as the Pfizer or Moderna vaccines, or until two (2) weeks after a single-dose vaccine, such as Johnson & Johnson’s Janssen vaccine.  Determining when individuals received their shots adds an additional and undesirable layer to the screening and questioning process.

An additional concern is that some persons may not be vaccinated because of a medical condition or because of their religious beliefs which raises potential discrimination issues related to vaccine verification and questioning. Therefore, some HOAs are implementing an “honor system” in the form of a rule or policy that requires residents and guests who are not vaccinated to wear masks and allows those who are vaccinated to use the facilities without masks and without the HOA questioning or requiring proof. This model obviously carries the risk that an unvaccinated person will use the facility without a mask.

Another arrangement is to simply require all residents and guests to wear masks in the common area regardless of vaccination status, unless they are sunbathing, exercising, etc. This policy can be combined with social distancing requirements and sanitization efforts to provide increased safety and protection to facility users. Many businesses open to the public are still requiring the wearing of masks and may continue to do so for the protection of their customers even if the state or county does not mandate such measures. This model also eliminates the administrative costs and hassle of the screening and policing of mask-wearing for the unvaccinated only and reduces liability for those who feel discriminated against or otherwise wronged by an intrusive vaccine verification or questioning policy.

Regardless of the rules adopted by an HOA to protect residents from COVID-19 transmission, it is advisable for an HOA to post notices in community facilities advising users of the risks and that by using the facility, they agree to assume such risks. Depending on the policy adopted by the HOA regarding mask wearing, said notice should also reiterate face covering requirements for the facility’s use. The requirement for users to sign waivers prior to using the facilities is still a potential option to add an extra layer of protection, but HOA’s should discuss the use of waivers with their legal counsel which takes that HOA’s location and unique characteristics into account.   While not a guarantee that the HOA will not be sued if someone catches COVID-19 in a common area, such measures may help mitigate the Association’s legal exposure resulting from reopening.

California HOA lawyers HOAs should contact their legal counsel to prepare appropriate rules and policies for reopening in light of the Current Order.

-Blog post authored by TLG Attorney, Carrie N. Heieck, Esq.

NkYIgAhLP*New Case Law

The Court of Appeals recently ruled in Issakhani v. Shadow Glen Homeowners Association, Inc. (2021) 63 Cal.App.5th 917, that homeowners associations do not have a duty of care to provide onsite parking to invitees. In that case, a pedestrian was struck by a car when jaywalking across a five-lane highway at night. The pedestrian was visiting her friend, who lived in a condominium project. The pedestrian decided to park across the street because the complex did not have any guest parking spots available.

The pedestrian sued the condominium owners association (“association”) for negligence and premises liability on the basis that the association did not have enough onsite guest parking spaces. The pedestrian argued that the association was liable because the association’s failure to maintain the “required” number of guest spots created a foreseeable risk of harm to the association’s guests.

The association moved for summary judgment, and the trial court granted the association’s motion. The Court of Appeals agreed and ruled that the association, as the landowner, did not owe a duty of care to invitees to provide adequate onsite parking.

Common Law Duty of Care

A “duty of care” exists when a person has a legal obligation to prevent harm to another person. If that person breaches his or her duty, then that person is subject to liability. A duty of care can arise under either the common law or through legislative enactments (i.e., statutes).

The common law requires landowners to maintain their properties in “reasonably safe conditions.” This duty also requires landowners to ensure that the maintenance of their land does not expose others to unreasonable risk of offsite injuries. In other words, landowners may be required to protect invitees against offsite injuries, if those offsite injuries are caused by alleged onsite deficiencies.

To determine whether the association owed a duty of care to the pedestrian in this case, the Court of Appeals looked to existing California caselaw.

California courts have historically refused to impose a duty of care on landowners to provide onsite parking in order to protect invitees from the dangers of crossing nearby streets. In the most recent case of Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077, the California Supreme Court held that landowners are not required to provide onsite parking for invitees.

As such, the Court of Appeals ruled that the common law duty of care does not require a landowner to provide onsite parking to invitees in order to protect those invitees from traffic accidents occurring offsite. Therefore, the association did not owe a duty of care toward the pedestrian in this case.

Statute-Based Duty of Care

A duty of care can also stem from a statute or ordinance enacted by the legislature. The pedestrian argued that the association owed her a duty of care by virtue of the guest parking requirements set forth in City of Los Angeles Ordinance No. 151,411 (“Ordinance”). The Ordinance required that the association maintain 34 guest parking spaces. The pedestrian argued that the association violated its statute-based duty of care since the association only had 6 guest parking spots.

Statutes and ordinances can create duties of care giving rise to negligence claims when they set forth generally applicable, “fundamental policy decisions.”  However, a duty of care arises in those cases only when the person invoking the statute-based duty of care is a member of the class of persons that the statute was designed to protect, and when the harm suffered by the person invoking the statute-based duty of care is the type of harm that the statute was designed to prevent.

In this case, the Court of Appeals found that the Ordinance did not embody a generally applicable fundamental policy decision, because the Ordinance only applied to a single parcel of property. The Ordinance was simply a result of an internal, parcel-specific administrative review initiated by the developer to rezone the parcel of land.

Even if the Ordinance were found to embody a fundamental policy decision, the Court of Appeals explained that it was not designed to protect invitees from offsite traffic accidents. Instead, the Ordinance was part of a rezoning request that was designed to protect the community-at large by preserving the residential character and aesthetics of the surrounding neighborhood. Therefore, the Ordinance did not create a statute-based duty of care that could be used by the pedestrian to assign liability to the association in the underlying lawsuit.

California HOA lawyers This case rejects the notion that HOAs have a duty to provide guests with onsite parking in order to protect those guests from the dangers of crossing streets to access the community.  However, HOAs should be aware that they still have a duty to maintain their properties in conditions that do not exacerbate the dangers of guests entering or exiting the communities. For example, HOAs should take steps to ensure that the Common Area landscaping is not maintained in a manner that makes exiting or entering the community more dangerous.

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

*Asked & Answered

workplace-bullying-1024x683-1Asked – How should our HOA handle a hostile homeowner who is being abusive to other residents and overwhelms management staff with endless emails and other harassing communication?

Answered – We previously blogged about workplace harassment and hostile work environments for management professionals.  Unfortunately, harassment in Associations is becoming increasingly common these days. The COVID-19 pandemic-related difficulties has only heightened tensions and exacerbated this problem by further triggering those with a propensity for such hostile behavior and visceral outbursts.

While most Community Managers have had some experience dealing with abusive homeowners, hostile homeowners tend to exhibit unrelenting behavior that is challenging and highly disruptive notwithstanding management’s best efforts and great work on behalf of the community. They tend to inundate management staff with incessant and baseless complaints regarding perceived or self-inflicted issues, frivolously question Board actions, and are frequently the primary source of widespread tensions that lead to controversies with other residents.

One helpful guiding principle when encountering such hostile homeowners, is to step back and remember that the management company was hired to serve as the managing agent for the Association. Thus, Management’s 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 the monthly Board meetings. Recognizing this dynamic can assist management staff and the Board when encountering confrontational homeowners. Thus, when responding to emails or other correspondence from such homeowners, Management can simply  acknowledge receipt of the communication, thank the homeowner, and advise them that the Board values resident communication relating to Association business and that you understand their concerns and will forward their communication to the Board for review at the next Board meeting. Then, timely engage the Association’s legal counsel to deal with the problem and to protect the Association’s interests.

If the compulsive emailing or hostile communications persists, then the homeowner can be informed that his/her emails will be blocked by Management and if they wish to send written communication, they send a letter to Management, and it will be placed in the Board packet to be reviewed by the Directors at the next scheduled Board meeting.

While the hope is that Management can get the hostile homeowner under control while memorializing the Association’s good faith efforts to avoid any escalation, the reality is that an overwhelming majority of homeowners who exhibit hostile tendencies will remain unyielding and continue on their ill-advised path until confronted with more serious financial and/or legal ramifications.

Therefore, it is very important that the Board of Directors and Management get the Association’s legal counsel involved as soon as possible in the process. Particularly, the Board should have the Association’s legal counsel send the offending homeowner a formal Cease and Desist letter that fully articulates the misconduct, outlines the basis for the violation, and puts the homeowner on notice that they will be subject to fines and possible legal action if the troubling conduct and violation are not immediately ceased. The letter should preferably also suggest an alternative means of dealing with the purported underlying problem. While this approach generally reaches a good number of offending homeowners, some will inevitably remain undeterred by the formal letter.

If the hostile behavior persists, the Board should consider holding a hearing and start levying fines. Thereafter, and depending on the severity of the ongoing homeowner misconduct, the Board may consider initiating an Internal Dispute Resolution process, or sending a further demand for compliance coupled with a pre-litigation offer of alternative dispute resolution (ADR). These steps will generally resolve the majority of violations and behavioral issues.

California HOA lawyers However, if the homeowner lacks any appreciation for the preservation of his/her financial and legal interests and the bad behavior persists, the Board should seek judicial relief by way of a restraining order, suing the hostile homeowner, and seeking recovery of its legal fees and costs pursuant to the Association’s Declaration. Our expert attorneys stand ready to answer your questions, help resolve your matter involving hostile homeowners or other difficulties, and ensure that the Association’s interests are always protected. 

-Blog post authored by TLG Attorney, Sam I. Khil, Esq.

ResearchingThePost-COVIDGymExperienceWe have previously blogged about successfully re-opening the common area amenities during the COVID-19 pandemic. Homeowner Associations (HOAs) are tasked with various responsibilities, including the health and safety of their memberships.  California has made it clear that all businesses and facilities must follow the industry guidance to reduce the risk of COVID-19 before reopening.  Willfully disregarding the state government directives and subjecting the membership to COVID-19 exposure is antithetical to this purpose.  As such, it is possible for HOAs to expose themselves to substantial liability if they re-opened the common area facilities using only a member honor system to enforce the industry guidance to reduce risk of COVID-19.

California has a new blueprint (“Blueprint“) for reducing COVID-19 transmission in the state with revised criteria for loosening and tightening restrictions on activities. Every county in California is assigned to a tier based on its test positivity and adjusted case rate for tier assignment including metrics from the last three (3) weeks.  HOAs’ management should routinely check the restriction criteria that is respective to each HOA’s county.  For example, as of December 30, 2020, Orange County and San Diego are under a Regional Stay Home Order  meaning many non-essential indoor business operations are closed.  Pursuant to government directives, gyms and fitness centers can open outdoors only with modifications.  Indoor pools, hot tubs, saunas, and steam rooms must close. Also note that each county may impose further requirements that are stricter than the state government directive.

Understandably, HOAs have probably not accounted for a pandemic in their prior operating budget, so retaining extra personnel to enforce health guidelines would no doubt put a strain on already allocated financial resources.  However, in the interest of being safe, HOAs should follow the Blueprint and industry guidance policies, particularly when it comes to re-opening common area facilities.  It is quite difficult to rely solely on HOA members and their guests to conform with both California State and County guidelines regarding the re-opening of HOA common area facilities.  There are always a few outlying members unwilling to cooperate and keep clean the common areas/equipment after usage, thus leaving HOAs in a situation where HOAs may become liable.

California HOA lawyers As a reminder, HOAs and the Board of Directors have an obligation to keep common areas safely maintained to ensure the health and safety of their memberships.  As such, re-opening HOA common area facilities without a proper plan, protocols, and monitoring system puts the safety of an HOA’s membership in question and is antithetical to an HOA’s overall purpose, which may subject an HOA to liability.  HOA Boards should discuss the matter amongst themselves and reach out to their general counsel should the need arise. 

-Blog post authored by TLG Attorney, Vivian X. Tran, Esq.

conflict-of-interest-25e7ab7068414ab080d7563821681049*New Case Law

Under the Business Judgment Rule, volunteer directors are shielded from liability for decisions made when those decisions are (1) consistent with the director’s duties, (2) made in good faith, and (3) in a manner it believes to be in the best interests of the HOA and its members. (See Lamden v. La Jolla Shores Clubdominium HOA (1999) 21 Cal.4th 249, 265; see also Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal. App. 4th 965, 979.) However, as clarified in the recent case of Coley v. Eskaton, the Business Judgment Rule does not uphold decisions made by directors “acting under a material conflict of interest.” ((2020) 51 Cal.App.5th 943 (“Coley”).)

In Coley, a homeowner Board member (“Owner Member”) brought legal action against the homeowners association (“Association”), two directors (collectively, “Directors”), and the Directors’ employer (Eskaton, Eskaton Village-Grass Valley, and Eskaton Properties, Inc.) (“Employer”) alleging, among other things, that the Directors “ran the [A]ssociation for the benefit of the Eskaton entities rather than the [A]ssociation and its members” in breach of their fiduciary duties. (Id. at p. *1.) In particular, the Directors were paid by Employer and “receive bonuses and incentive compensation in part based on the Eskaton Properties’ performance. Eskaton Properties’ performance, in turn, is based in part on Eskaton Village’s performance.” (Id. at p. *5.) Thus, the Directors were incentivized to ensure that the Eskaton Village performs well despite the impact said performance would have on other communities located within the Association development (i.e., the “Patio” homes).

In support of his allegations, Owner Member provided evidence that Directors improperly “voted to require the Patio homeowners to cover 83 percent of the cost associated with security services,” as well as imposed an assessment on the Patio homeowners to cover litigation expenses. (Id. at p. *7.) The result was a financial benefit to the Eskaton Village (and subsequently, the Directors). Additionally, one of the Directors improperly shared the Association’s attorney-client privileged information with Employer and Employer’s legal counsel. (Id.)

Employer and Directors objected to Owner Member’s argument that the foregoing actions constituted a breach of Director’s fiduciary duties to the Association and its members. In support of their objection, they argued that Owner Member failed to adequately demonstrate that Directors’ conduct “was motivated by specific self-interest,” that Directors “benefited from their breach of fiduciary duty,” and that Directors’ actions “amounted to mismanagement of the [Association].” (Id. at p. *51.) However, the Court of Appeals rejected Employer/Directors arguments concluding that “[o]nce [Owner Member] established the existence of a fiduciary relationship, breach of fiduciary duty, and damages, he was entitled to damages absent some applicable affirmative defense.” (Id. at p. *55.)

The Court noted that Owner Member satisfied this burden: (1) Directors, as members of the Board of Directors for the Association, owed fiduciary duties to the Association and its members; (2) Directors breached those duties by: (a) requiring Patio owners to pay a greater share of the security-services fees and legal fees” in violation of the CC&Rs, and (b) disclosing Association’s attorney-client privileged communications with Employer and Employer’s legal counsel; and (3) Owner Member (and other Patio owners) were injured as a result of the breach. (Id. at pp. **52-55.) And, as noted earlier, the Business Judgment Rule defense did not apply because Directors were acting under a material conflict of interest. As a result, liability was imposed against both Employer and against each Director personally.

California HOA lawyers This case is important because it highlights the fact that, while the Business Judgment Rule will ordinarily protect individual directors from liability for decisions made, it does not extend to decisions made while acting under a material conflict of interest. Directors therefore should refrain from participating in the decision-making process when a conflict of interest exists in order to avoid personal liability exposure.

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

*New Legislation

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On January 1, 2012, Section 1360.2 (now Section 4740) was added to the California Civil Code to limit a HOA’s authority to adopt and enforce certain rental “prohibitions.”  The legislative intent behind the law was the recognition that “the rights of Owners in [a HOA] to rent or lease their properties, as the rights existed at the time the Owners acquired them, should be protected by the State of California…”  Nevertheless, by its own terms, Section 4740 applies to rental prohibitions, not necessarily less serious restrictions that are reasonably related to the Association’s interests in maintaining and preserving the community.  Thus, many HOAs adopted restrictions regulating the rental of separate interests within the development (e.g., one-year minimum term limit, owner-occupancy requirements, individual room rental restrictions, etc.).

On September 28, 2020, Governor Gavin Newsom signed Assembly Bill 3182 (“AB 3182”), which was introduced as another measure “to address the housing and homelessness crisis” in California. According to Assembly Member Phil Ting (the author of AB 3182), “[t]here are millions of homes across the state that have the potential to be rented to Californians in need of housing but that are prohibited from being leased under outdated [HOA] rules.” While the stated objective of providing more affordable housing units is a laudable goal, AB 3182 significantly limits the extent to which HOAs may impose rental restrictions and prohibitions.

Under AB 3182, California Civil Code section 4741 is added to the Davis-Stirling Common Interest Development Act and renders void and unenforceable any provision in a governing document or amendment thereto “that prohibits, has the effect of prohibiting, or unreasonably restricts the rental or leasing of” a separate interest “to a renter, lessee, or tenant.” Despite this prohibition, Section 4741 does authorize a HOA to adopt and enforce:

  • A rental cap of twenty-five percent (25%) of the separate interests (or greater); and
  • A provision “that prohibits transient or short-term rental of a separate…interest for a period of 30 days or less.”

Moreover, Section 4741 adds that a separate interest (including Accessory Dwelling Units and Junior Accessory Dwelling Units) is not considered “occupied by a renter” if the separate interest is also owner-occupied. Thus, for example, a cap on the number of rentals within a HOA would not apply to an owner renting out individual rooms within his or her separate interest.

Other than the rental restrictions specifically identified in Section 4741, there is much uncertainty as to the extent to which other common rental restrictions would be rendered unenforceable as a result of AB 3182. Indeed, the Legislature provides no guidance as to what would constitute an “unreasonable restriction” on the rental of a separate interest. Therefore, each rental restriction contained in a HOA’s governing documents must be evaluated in light of AB 3182’s intent: to increase the number of housing units made available.

California HOA lawyers There is much uncertainty that remains concerning the extent to which other typical rental restrictions remain valid and enforceable. To the extent certain rental restrictions are rendered unenforceable by AB 3182, same must be removed from the governing documents no later than December 31, 2021. Failure to comply with Section 4741 may result in a HOA being liable for actual damages (e.g., lost rental income) and a civil penalty of up to one thousand dollars ($1,000). It is therefore important for each HOA to consult with their attorney to determine whether the HOA’s rental restrictions are enforceable in light of AB 3182, and to take action to amend their governing documents to remove such unenforceable provisions.

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

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