HOA Governance

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.

Can HOA Enforcement Actions Equate to Discrimination?

Published on: June 8, 2011 | by Steven J. Tinnelly, Esq.

The recent, unpublished opinion in Radell v. Park Wilshire Homeowners Association (2011) illustrates the importance of fully complying with prescribed HOA enforcement procedures. In Radell, the Plaintiffs alleged that the Willshire Bark Homeowners Association (“Association”) Board of Directors (“Board”) “committed a series of discriminatory acts intended to diminish the presence of Puerto Rican women in their upscale condominium building.”

The issue arose out of the Defendant’s use of their maid’s unit for residential purposes– a use which the Board felt constituted a violation of the Association’s CC&Rs. Rather than following the Association’s prescribed enforcement procedures, the Board declined to extend a confidential disciplinary hearing regarding the issue to the Defendants. The Board opted instead to publish the alleged violation to the entirety of the Association’s membership.

To make matters worse, the Board held an unnoticed, confidential Board meeting where they initiated a recall election against the Defendant Board Member. The Defendants then brought a housing discrimination action against the Association under the California Fair Employment and Housing Act (FEHA) and the Fair Housing Amendments Act of 1988 (FHA) by alleging that the Board “engaged in a pattern or practice of discrimination through disparate treatment on the basis of race, ancestry and national origin.”

Though the the holding in Radell primarily touches on Anti-Slapp motions in the context of housing discrimination, it also demonstrates how a Board’s conduct in enforcing CC&Rs can subject an Association to defending costly lawsuits. Boards must be diligent in fully complying with prescribed enforcement policies and procedures when dealing with each and every potential violation.

Credit Card Processing of HOA Assessments: Good Idea?

Published on: May 17, 2011 | by Steven J. Tinnelly, Esq.

Associations are required to levy regular and special assessments sufficient to perform their obligations under their governing documents and Ca. Civ. Code §1366(a). Associations may encounter difficulties in getting their members to pay assessments on a regular and timely basis. In response to these difficulties, some Associations are providing credit card processing of assessment payments as a courtesy to their members and/or an incentive for delinquent members to fulfill their assessment obligations while deferring the actual payment. The fees involved in processing assessments by credit card are then sometimes absorbed by the Association.

Several Managers and Board members have contacted us regarding the propriety of absorbing these fees.

We have prepared an article on this issue which is available for download from our Library. The article is entitled “Absorbing Credit Card Transaction Fees”.

In sum, absorbing these fees is problematic because (1) it results in an inequity for the Association’s members that pay their assessments by cash or check and (2) likely violates the assessment requirements of the Association’s CC&Rs. Associations that provide credit card processing of assessments should ensure that the members paying by credit card are responsible for any transaction fees and costs involved.

For a more detailed discussion of this issue, click here to read the article.

To submit questions to Tinnelly Law Group, click here.