HOA Governance

Imposing Fines for Member Discipline: How Many Notices are Required?

Published on: October 12, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – How many notices do you need to give a unit owner about a rule violation before they are called to a hearing and fined?

Answered – Associations generally must provide their members with “due process” before they are able to impose disciplinary measures, such as fines, for rule violations. This due process requirement is meant to ensure that the Association’s enforcement procedures are both fair and reasonable. Two central elements of due process are (1) providing the accused notice of her alleged violation and (2) providing the accused a reasonable opportunity to be heard and to defend herself. Applebaum v. Board of Directors (1980). Notices and hearings for Association rule violations are in furtherance of the due process requirement.

Before conducting a hearing to determine whether a fine should be imposed, the Board must “notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the [hearing].” Cal. Civ. Code Sec. 1363(h). Assuming that your Association’s governing documents do not contain a more stringent notice requirement or that your Association does not have an enforcement policy which states otherwise, this is the only violation notice required before a member may be called to a hearing and fined. This notice, however, must contain all of the information required by Civil Code Section 1363(h) (the date, time, and place of the hearing, the nature of the alleged violation, etc.). Please note that Associations are also required to annually provide their members with notice of the Association’s enforcement procedures, including its schedule of fines. Cal. Civ. Code Sec. 1363(g).

Though the Civil Code only requires that one notice of violation be given to a member before they may be called to a hearing and fined, it is a better practice for an Association to provide its members with more advanced notice and a reasonable time period (i.e., 30 days) to voluntarily correct the violation before being called to a hearing. Such a practice helps to (1) secure the cooperation of members and (2) demonstrate that the Association is acting both fairly and reasonably in enforcing its rules and restrictions.

To submit questions to Tinnelly Law Group, click here.

New Legislation Impacts Homeowners Association Board Meetings

Published on: September 20, 2011 | by Steven J. Tinnelly, Esq.

*New Resource

When Senate Bill 563 (“SB 563”) was signed into law this month, the fears of many people within the Community Association industry came true. The new legislation purports to provide better homeowner awareness of the affairs of their respective Associations and the ways in which those affairs are being managed by their elected Boards of Directors. However, many industry professionals and Board members are concerned that the new legislation will restrict a Board’s ability to take the actions required to efficiently address the day-to-day issues that arise within their communities.

SB 563 amends several sections of the California Civil Code–most notably Section 1363.05, known as the “Common Interest Development Open Meeting Act.” The amendments include new restrictions on actions without a meeting and what matters may be considered at a meeting. The amendments also provide new requirements with respect to meetings held in executive session as well as requirements for meetings held electronically or by teleconference.

In response to requests made by our clients and industry partners, we have published a new resource on SB 563 which outlines these new restrictions and requirements. The resource, entitled “Senate Bill 563: Boards and their Business”, is available for download from our library.

Requiring Directors to Sign Ethics Rules

Published on: September 16, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Upon being elected to serve on our Association’s Board of Directors, our Management company gave me “Ethics Rules” to sign. These rules are not a part of our CC&Rs or our Bylaws. Am I required to sign the rules in order to serve on the Board?

Answered – Generally no. Homeowners Association (“HOA”) governing documents typically include a set of Bylaws that govern the corporate structure of the HOA and the functions and duties of its Board of Directors. It is not uncommon for Bylaws to set certain eligibility requirements for HOA members to serve as Directors. Such eligibility requirements can include, for example, ownership of property within the HOA, being current on one’s monthly assessments and not being in violation of any of the HOA’s rules or restrictions. We encourage our clients to adopt these types of eligibility requirements to help ensure those members elected to serve on the Board set a good example for the rest of the membership.

Requesting that Directors subscribe to certain “Ethics Rules” or “Codes of Conduct” is always an option available to a HOA’s Board of Directors. Such rules may help to provide guidance to new Directors who wish to better understand the scope of their responsibilities. However, in order to make subscribing to such rules a requirement to serving on the Board, it must be contained in the HOA’s Bylaws or elsewhere in the HOA’s governing documents. Every situation is different, however, and a definitive answer would require examining your HOA’s governing documents and the procedures used in adopting the Ethics Rules at issue.

To submit questions to Tinnelly Law Group, click here.

Could Aging “Baby Boomers” Create New Concerns for HOAs?

Published on: August 23, 2011 | by Steven J. Tinnelly, Esq.

I read an interesting article today that discusses the potential legal problems that could arise for Community Associations that contain members of the aging “baby boom” generation. The article references a program, presented in Virginia at a CAI sponsored event, called “Aging-in-Place: The Boomer Community.”

One of the program’s co-presenters believes that “[t]hanks to a confluence of demographic, economic and social factors, more and more elderly residents are staying put rather than moving into institutional settings such as retirement or assisted-living communities. This trend toward ‘aging in place’ makes it inevitable that a higher proportion of residents in a given community will face challenges such as loss of strength, coordination and mental acuity over time, or will be diagnosed with a catastrophic illness. Unfortunately, this can create significant legal and safety questions for community associations.”

Some of the scenarios discussed in the article, including the active steps that some Community Associations are taking to better accommodate their aging membership, may be of value to you and your Association. Of particular interest are the scenarios regarding community-based shuttles and amending architectural provisions to accommodate “Med Cottages” (a.k.a “Granny Pods”).

Click here to read the entire article.

Statements about HOA Board Candidates at HOA Meetings are Privileged

Published on: August 22, 2011 | by Steven J. Tinnelly, Esq.

*New Case Law

A Homeowners Association (“HOA”) Board of Directors exercises substantial authority and control over the direction and financial well-being of the HOA. Proactive and concerned HOA members often seek election to the Board of Directors in order to deal with perceived problems in the community. Unfortunately, these elections sometimes result in disagreements and disputes between competing candidates. These disputes may become so heated and contentious that individuals result to levying harmful statements and allegations against one another.

The question addressed in the recent decision of Cabrera v. Alam,(2011) 197 Cal.App.4th 1077, is whether such statements and allegations can give rise to a claim of defamation, or whether the statements are “privileged” communications and therefore a complete defense to a claim of defamation.

Borrowing from Homeowners Association Reserve Accounts

Published on: August 2, 2011 | by Steven J. Tinnelly, Esq.

Several clients have recently dealt with situations requiring them to consider the feasibility of borrowing from their reserve accounts in order to satisfy various financial obligations.

California law authorizes Association Boards of Directors to borrow from reserves to supplement monthly operating expenses under certain conditions. Such borrowing is usually done to fulfill an Association’s maintenance, repair, litigation or short-term cash flow needs.

When borrowing from reserves, Association members must be primarily notified of (1) of the intent to borrow from reserves, (2) the reasons for borrowing, and (3) the manner in which the funds will be repaid. Boards of Directors must be diligent in complying with these notice and disclosure requirements and in ensuring that they have a feasible plan for restoring the reserve account within one year.

Prior to electing to borrow from their Association’s reserves, Boards of Directors should consider all available sources of money in addition to other factors. Consideration of (1) realistic repayment sources (e.g., loans from financial institutions, special assessments, etc.), (2) the amount of money actually needed, and (3) the estimated length of time required to restore the reserve account may have a substantial bearing on a Board’s decision whether or not to borrow from reserves. Proper consideration of these factors and diligence in complying with the attending legal requirements will help to ensure that any decision to borrow from reserves is made in the best interest of the Association.

Content by: Jeffrey M. Hylton, Esq.

Governor Signs Bill Prohibiting HOAs from Unreasonably Restricting EV Charging Stations

Published on: July 26, 2011 | by Steven J. Tinnelly, Esq.

In furtherance of California’s energy conservation goals, Governor Brown has signed Senate Bill 209 (“SB209”) which prohibits Homeowners Associations (“HOAs”) from unreasonably restricting the installation of electric vehicle (“EV”) charging staitons in their communities. SB209 will take effect January 1, 2012.

CAI’s California Legislative Action Committee (“CAI-CLAC”) worked with the author of SB209 to ensure that potential issues regarding an HOA’s responsibility and control over these stations would be adequately addressed.
The work of CAI-CLAC was reflected in Governor Brown’s signing message to the California Senate: “The author has assured me that she will pursue legislation that clearly protects the right of [HOAs] to establish reasonable rules for any use of common areas for charging stations.”

The aesthetic concerns over EV charging stations are easy to understand. However, there may be an incentive for a HOA to voluntarily install the stations for use by its members/tenants:
a new revenue stream. Practically every major Southern California utility company offers discounted rates on electricity used to charge EVs. However, according to a recent decision by the California Public Utilities Commission (“CPUC”), “condominium associations that provide electric vehicle charging on the premises as a service to condominium owners…that have not dedicated their equipment for public use” are not regulated as public utilities and therefore not subject to various rate controls when deciding what price to charge for the use of the stations.Thus, a HOA could install the stations for use by its members/tenants and ultimately profit from them.

Governor Vetoes HOA Artificial Turf Bill

Published on: July 19, 2011 | by Steven J. Tinnelly, Esq.

Congratulations to CAI’s California Legislative Action Committee (“CAI-CLAC”) for successfully working to get Senate Bill 759 vetoed. SB 759 would have required Homeowners Associations to permit the installation of artificial turf in their communities. This marks the second time that such a bill was ultimately vetoed by a California Governor.

SB 759 purported to serve a water conservation goal and was passed by the California Legislature with bipartisan support. The Community Association Industry’s opposition to the bill was based largely on the realization that such a bill would intrude on the self-governance rights reserved for Homeowners Associations.

In his veto message, Governor Jerry Brown stated that “[t]he decision about choosing synthetic turf instead of natural vegetation should be left to individual homeowners associations, not mandated by state law.”

The Governor’s action with respect to this bill serves as an important recognition of the fact that Homeowners Associations are meant to be autonomous, self-regulating entities. Congratulations again to CAI-CLAC for their hard work.

To read CAI-CLAC’s Veto Request Letter, click

Web-based Board Meetings

Published on: July 13, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Many of our unit owners and some Board Members live out of state. The Board has opted to hold “virtual” board meetings via web-conferencing. Is this permissible?

Answered – Yes. Provided that your HOA’s CC&Rs do not explicitly require physical Board Meetings, a Board can hold a “virtual Board Meeting” so long as the meeting complies with the California Corporations Code and the “Open Meeting Act.”

California Corporation’s Code Section 7211(a)(6) permits Directors to hold meetings through the use of “conference telephone or electronic video screen communication” so long as they are able to hear one another and participate in the meeting. The “Open Meeting Act” (California Civil Code Section 1363.05), however, allows members to attend all meetings of the Board of Directors. The web-conferencing platform must therefore allow all members to attend the meeting electronically and participate in open forum during the meeting. Most modern video-conferencing platforms contain this type of functionality. However, if there are any owners wishing to attend the virtual meeting who lack the technology or know-how required to do so, the HOA may need to take additional measures to accomodate such owners. These measures may include setting up a computer/web-conferencing terminal in a common area building or working with the HOA’s management to find a similar solution.

Web-conferencing is slowly becoming a more valuable tool for HOA Boards of Directors. In addition to providing an added convenience to owners wishing to participate more in HOA affairs, it can also serve as an efficient and cost-saving communications tool between the Board and the HOA’s legal counsel.

To submit questions to Tinnelly Law Group, click here.

Defining HOA “Membership” & “Ownership” Status for Registered Domestic Partners

Published on: June 14, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Our Association’s By-laws state that you must be an owner of the Association to be eligible for election to the Board. Would the registered domestic partner of the person on title be considered an owner in the State of California under California Community Property Law?

Answered – Not in this instance. Most Association Governing Documents require that anyone wishing to serve on the Association’s Board of Directors be a “member” of the Association. Pursuant to California Civil Code Section 1358, “membership” within an Association is granted by virtue of a person’s ownership interest in the Association. Thus, so long as a person is an owner of a unit within the Association, they are granted membership rights.

Proof of one’s ownership interest in the Association is established through a deed which has been recorded in the Association’s County Recorder’s Office. The persons whose names are listed on the recorded deed are considered to be the “Owners of Record.”

Virtually every Association requires that a member be an “Owner of Record” in order to be eligible to serve on the Board of Directors. Therefore, a registered domestic partner who is not an “Owner of Record” would not satisfy this requirement. To resolve this issue, the domestic partner must be named on the recorded deed to the property. California Community Property law does not render spouses or domestic partners “Owners of Record” for such purposes if their names do not appear on the recorded deed.

To submit questions to Tinnelly Law Group, click here.