HOA Governance

AB 2912 Signed! Significant Changes to HOA Financial Review and Insurance Requirements

Published on: September 20, 2018 | by Steven J. Tinnelly, Esq.

*New Legislation

Earlier this year, the California Legislature proposed AB 2912 (Irwin) in an effort “to protect owners in a [HOA] from fraudulent activity by those entrusted with the management of the [HOA’s] finances.” To that end, AB 2912 significantly increases the financial review requirements of HOA boards of directors, limits the ability for automatic transfer of funds without board approval, and also imposes a requirement for the HOA to purchase and maintain a fidelity bond. AB 2912 was signed on September 17, 2018 and its changes to the law take effect January 1, 2019. The following information summarizes the new state of the law in the wake of AB 2912’s passage:

Requirement for Written Board Approval of Account Transfers Above $10k:

Existing Civil Code § 5380 has been amended to prohibit the automatic/electronic transfer of funds greater than $10,000 or 5% of a HOA’s total combined reserve and operating account deposits (whichever is lower), without prior, written approval from the HOA’s board of directors. This requirement is also reiterated in new Civil Code § 5502. HOA boards that previously gave blanket consent to their managing agent for such electronic/automatic transfers should expect the need to now give written approval for such transfers (i.e., large payments to vendors of the HOA) each time a transfer is required.

Financial Review by Board Must Now be Performed on a Monthly Basis:

The law previously required the Board to review the financial information of the HOA on at least a quarterly basis. Civil Code § 5500 has been amended to now require that review to be performed on a monthly basis. Moreover, it now requires the review to include the HOA’s check register, monthly general ledger, and delinquent assessment receivable reports.

But what about HOA Boards that only meet quarterly? Fortunately, new Section 5501 was added to the Civil Code to address this issue. It provides that the financial review requirements may be met “when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member” reviews the financial information “independent of a board meeting” and that review is (a) subsequently ratified by the board at its next meeting and (b) the ratification is memorialized in the board’s meeting minutes. For HOAs that meet on a quarterly basis, there will likely be a need to form an executive finance committee of the board as contemplated by Section 5501. Such HOAs should work with their legal counsel to draft an appropriate charter for such a committee.

HOAs Now Legally Required to Purchase a Fidelity Bond:

A fidelity bond is a form of insurance protection which covers losses that the policyholder incurs as a result of fraudulent acts by individuals. It is used by a HOA to insure losses caused by the dishonest acts of the association’s employees, managers, board members or officers. Previously there was no legal requirement for HOAs to purchase fidelity bonds; however, many HOAs do so either because their CC&Rs require it and/or because it makes good business sense.

New Section 5806 is added to the Civil Code to formally require HOAs to purchase a fidelity bond. Unless a HOA’s governing documents require greater coverage amounts, the fidelity bond must be purchased and maintained in a coverage amount that is equal to or more than the combined amount of reserves of the HOA and total assessments for three (3) months. The bond must also include computer fraud and funds transfer fraud. Additionally, for HOAs that contract with a third-party managing agent or management company (which is the vast majority of HOAs in California), the HOA’s fidelity bond coverage must also include coverage for dishonest acts by the managing agent or the management company and its employees.

HOA boards should work with their managing agents to develop a protocol for adhering to the new legal requirements regarding automatic transfers of funds and monthly financial reviews. Additionally, HOAs should contact their insurance professionals to ensure that they are carrying fidelity bond coverage which satisfies the new legal requirements.

Should an Association Respond to Unofficial Publications?

Published on: August 28, 2018 | by Steven J. Tinnelly, Esq.

*Unpublished Opinion

With increasing frequency, homeowners associations are confronted with members publishing content related to their association and its operations, whether on Facebook, blog posts, or other various online forums. Sometimes these publications are critical of the association board of directors, misrepresent important information and facts, or fraudulently purport to be official association publications. The various potential issues associated with member publications are seemingly endless, but California courts periodically provide clarity regarding issues that can arise in the context of member/association publications. The recent unpublished opinion of Kulick v. Leisure Village Association (2018) arose out of the publication of such member content and provides insight into how courts view and address some of these issues.

The Kulick case involved two separate lawsuits between a homeowner (“Kulick”) and his homeowner’s association (“Association”), the Association’s board of directors (“Board”), and the Association’s attorneys. Kulick, a long-time resident with a history of conflict and grievances against the Association, anonymously published and circulated newsletters (“Newsletters”) within the community in violation of the Association’s rules and regulations prohibiting anonymous publications. Kulick’s anonymous Newsletters were frequently critical of the Association Board.

The Association successfully filed suit against Kulick for intentional interference with Association insurance coverage. In response to the Association’s lawsuit, Kulick levied accusations against the Board in one of his anonymous Newsletters. In defense of Kulick’s claims, the Association (through counsel) prepared and circulated a letter (“Letter”) to each community member addressing Kulick’s specific allegations by denying Board misconduct and inviting the membership to view court filings in the pending matter. The Letter described Kulick’s most recent missive as a “reckless communication” containing “unfounded, inaccurate, and spiteful allegations” against the Association, Board, and the Association’s attorneys. It also contained details regarding the then-pending matter and the Association’s success in their preliminary injunction against Kulick. After the Letter was circulated, Kulick brought a lawsuit against the Association for defamation arising out of the Letter to the membership, among other causes of action.

The trial court dismissed Kulick’s case after the Association brought an Anti-SLAPP motion against the defamation claim (“SLAPP” stands for Strategic Lawsuits Against Public Participation; such motions are designed to protect defendants who have been sued for acts in furtherance of a constitutionally protected right of free speech or petition). On appeal, the court found that the Letter constituted “protected activity” as a public writing (i.e. circulated to all members throughout the community) in connection with an issue of public interest – the ongoing controversy of the then-pending lawsuit between the Association and Kulick. Additionally, the court found that Kulick could not demonstrate a likelihood of success on the merits because “expressions of opinion that do not include or imply false factual assertions do not constitute actionable defamation,” among other reasons. For these reasons, the appellate court upheld the trial court’s ruling against Kulick.

While the Kulick case did not ultimately address the anonymous nature of Kulick’s publications or the validity of the Association rule prohibiting them, Kulick raises important issues for associations to consider when confronted with homeowner publications, or association responses to them. While it is unclear to what extent associations can restrict member publications, such as the regulation of anonymous publications, the court in Kulick signaled an association’s ability to address specific member allegations in the public forum of the community. However, when addressing such claims, associations should be mindful of the content of these responses as certain communications are not permissible (e.g. false assertions of fact, etc.). Conversely, an association has rights against defamation published by its members and should address any member publications that defame the association, its board of directors, managing agent, or employees.

Additionally, associations should be vigilant regarding member publications that purport to be official association publications, or publications that are circulated that contain patently false information. Such publications can cause significant disruption in an association’s affairs if allowed to exist and perpetuate. Ultimately, while the line between permissible and actionable content is by no means clear and varies case by case, associations should be alert for member publications that contain clearly false assertions of fact or publications that purport to be official association communications. If you have concerns regarding member publications or appropriate association responses to them, association counsel should be contacted to review the material and discuss potential remedies to the extent they are available.

Although Kulick is an unpublished opinion, it provides an indication of how a future court may rule in a similar situation. When confronted with member publications, homeowners associations should consider whether the published content violates any association rules and regulations, whether it contains false assertions of fact, or whether the content purports to be or could be reasonably construed as an official association publication intended to mislead the recipients and/or members.

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

Debunking the Myths of Volunteer Board Service

Published on: August 7, 2018 | by Steven J. Tinnelly, Esq.

bustingthemyths1-1-300x197 Congratulations! You’ve just been elected to your Board of Directors – now what? Or maybe you’ve been serving as a volunteer director for some time and you just aren’t sure which way is up. If you have been dazed and confused but still have a passionate heart to do the right thing in the best interest of your community, then there may be some myths that need to be debunked. Navigating through conflict, financial tough spots, working with your service providers, noncompliance issues, homeowner requests, day-to-day operations, and strategic planning can be overwhelming. Changing the way you do business can take you from volunteer Board member to community leader.

First and foremost, association directors must recognize that they have the same fiduciary duties as boards of large corporations. Each director has a duty of loyalty to the association and its members. He or she must act in the best of the association, accepting that a decision of a majority of a quorum of the board is a decision of the whole board. Volunteer directors are shielded from personal liability, provided they have acted in accordance with their fiduciary duties.

Board members must also act in accordance with the “business judgment rule.” They must act in good faith and in the best interest of the association; not according to self-interest or the interests of a particular group within the community. They must act only after reasonable inquiry, consulting with experts when it is prudent to do. And, they must act as an ordinarily prudent person in a like position would do, minimizing risks where they can be reasonably avoided. Keeping these two criteria in mind, let’s debunk a few myths of volunteer board service.

Is a Homeowners Association Required to Install and Maintain AEDs?

Published on: July 17, 2018 | by Steven J. Tinnelly, Esq.

The issue of whether or not a homeowners association is required to install and maintain an automated external defibrillator (“AED”) on-site is a question that has not been directly addressed by California courts. As a result, many community members and Board of Directors (“Board”) seek legal guidance and clarity as to the same. In particular, associations that maintain common area facilities and accommodations such as a gym, basketball court, tennis court, or swimming pool, feel the need to maintain an AED due to the rising number of lawsuits that are being filed against businesses and corporate entities for failing to maintain same.

The main cause of action named in these lawsuits is one of negligence, wherein plaintiffs claim the landowner has breached its duty of care by failing to maintain an AED on-site; chief among these cases is Verdugo v. Target Corp. (2014) 59 Cal.4th 312. In this case, Verdugo, age 49, suffered a sudden cardiac arrest while shopping at Target and died despite the paramedics’ attempts to revive her. There was no AED in the store. Verdugo’s family members filed the suit against Target claiming that it breached its duty of care to its invitees (i.e., business guests) by failing to maintain an AED in the store. However, the Court ruled in favor of Target holding that it did not owe a statutory or common law duty to maintain an AED.

The Court found that Target did not owe a statutory duty of care under California Health and Safety Code (“CHSC”) §1797.196 because it only imposes obligations on an entity or person that maintains an AED; the statute does not require them to maintain same. More importantly, the Court reasoned that while Target owed a reasonable duty of care to provide assistance to a patron in medical need, maintaining an AED exceeded the scope of duty. The Court looked at two factors: (1) the degree of foreseeability that the danger will arise on the business’s premises and (2) the relative burden that providing a particular precautionary measure will place upon the business.

In its evaluation of the two factors, the Court found that there was no reason for Target to foresee that shopping within its premises would increase the risk or cause an invitee to go into cardiac arrest. Secondly, the burden of regularly maintaining an AED (in accordance with all federal and state regulations) and trained personnel on-site was not minor or minimal, outweighing the need for same.

Although Verdugo dealt with a for-profit corporation, it appears to support the position that homeowners associations are not required to maintain an AED. Like Target, a homeowners association does not have any reason to foresee an increased risk of cardiac arrest within its premises from the mere fact an individual—whether it is a homeowner, guest, or tenant—is occupying a unit within the community or visiting.

Sticks and Stones

Published on: June 6, 2018 | by Steven J. Tinnelly, Esq.

hostile-work-environment As 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.

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.

HOA Short-term Rental Rule Violated California Coastal Act

Published on: April 17, 2018 | by Steven J. Tinnelly, Esq.

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.

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.

Should an Association Retain Photo ID Cards?

Published on: February 13, 2018 | by Steven J. Tinnelly, Esq.

*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?

Answered – The 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.

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.

The National Labor Relations Board Had a Change of Heart on Joint-Employer Liability

Published on: January 23, 2018 | by Steven J. Tinnelly, Esq.

notboss63 Previously, 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.)

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.

AB 634 Signed! Reduced HOA Control of Solar Energy System Installations

Published on: October 16, 2017 | by Steven J. Tinnelly, Esq.

Solar The 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.

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.

Updating Your Association’s CC&Rs

Published on: October 10, 2017 | by Steven J. Tinnelly, Esq.

*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.

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.