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Articles Posted in Litigation

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hoa update 2014Our “Annual Legislative & Case Law Update” newsletter for the year 2014 is now available in our library!

The Legislative & Case Law Update provides an overview of the new legislation and case law impacting California Homeowners Associations (“HOAs”) as we head into 2014. The new legislation includes, among other items, the re-organization of the Davis-Stirling Act (now in effect), and a bill that clarifies contractor licensing requirements for HOA managers. The new case law includes rulings that may impact HOA election rules, membership rights to attend Board meetings, use of HOA media outlets during election campaigns, insurance defense coverage, attorney’s fees recovery in HOA disputes, and assessment collection procedures.

Click here to read our Annual Legislative & Case Law Update (2014)

Have questions on any of the new legislation or case law? Click here to send us a question online.

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In a recent blog post we addressed the importance of involving the HOA’s legal counsel in the decision as to whether a lawsuit brought against the HOA should be tendered to one or more of the HOA’s insurance carriers. The recent case of San Miguel Community Association v. State Farm General Ins. Co. (October 1, 2013) (Cal.App.4th, No. G047738) (“San Miguel”) touched on this issue. Although the ruling in San Miguel focused primarily upon the scope of an insurer’s obligation to defend a HOA under the HOA’s insurance policy, the ruling underscores the importance of reviewing, understanding, and if necessary, seeking professional guidance regarding the scope of insurance coverage afforded to a HOA under its insurance policies.

In San Miguel, two homeowners sought to force the HOA to take action to curb ongoing parking violations within the community. After the HOA refused to take action, the homeowners demanded the HOA’s participation in mediation, thereby prompting the HOA to tender the matter to its insurance carrier, State Farm. In responding to the HOA, State Farm noted that the claims brought by the homeowners did not seek the recovery of monetary damages, and were therefore insufficient to trigger State Farm’s obligation to defend the HOA or to reimburse the HOA for its defense costs…

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hoa insurance*New Library Article

There are instances where a disgruntled homeowner may file a lawsuit against his or her homeowners association (“HOA”). The lawsuit may be based on a variety of claims (i.e., claims involving property damage or alleged malfeasance on the part of the HOA’s Board of Directors). This is one of the reasons why HOAs are legally required to purchase and maintain certain insurance policies designed to protect the HOA and its membership from a variety of risks.

However, problems may arise in response to the actions taken by the HOA and its management once the lawsuit has been served. Those problems generally result from the way in which the lawsuit may have been “tendered” (sent to) to one or more of the HOA’s insurance carriers, including whether it was even appropriate to tender the lawsuit in the first place. This blog post addresses some of those problems and provides guidance to HOA Boards and their management with regard to this issue…

Our attorneys have also published this information in an article that is available for download from our Web site’s library.

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*New Case Lawhoa meeting

Membership rights with regard to the attendance and participation in Board meetings is an important component of the laws governing homeowners associations (“HOAs”). Civil Code Section 1363.05, known as the “Common Interest Development Open Meeting Act,” states that “any member of the [HOA] may attend meetings of the board of directions…” This right is central to keeping HOA members apprised of the issues affecting their community and the ways in which the Board is discharging its duties under the HOA’s governing documents.

However, one issue that surfaces from time to time deals with the extent to which a HOA is required to allow a member to attend a Board meeting with her attorney, or to allow the member’s attorney or agent to attend the Board meeting on the member’s behalf. This issue may be complicated further if the owner of a property (the “member” under the HOA’s governing documents) is an entity (i.e., a business organization or family trust).

Fortunately, the recent case of SB Liberty, LLC v. Isla Verde Association, Inc. (“SB Liberty”), will help resolve this issue and will provide valuable guidance for HOAs moving forward…

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*New Case Lawhoa foreclosure

The California Civil Code requires community associations (“HOAs”) to levy regular and special assessments as necessary to perform the HOA’s obligations under its governing documents. However, when a homeowner fails to pay those assessments, HOAs are often left with no alternative other than to pursue the owner in accordance with the collection methods sanctioned under the HOA’s governing documents and the Civil Code. Because those methods could result in the foreclosure of the delinquent homeowner’s property, it is paramount that HOAs strictly comply with the statutory procedures and requirements applicable to assessment collection (i.e., transmittal of notices, dispute resolution procedures, votes to initiate foreclosure, etc.).

The recent case of Diamond v. Casa Del Valle Homeowners Association 2013 DJDAR 9176, which has been certified for publication, illustrates how failing to comply with those procedures and requirements can result not only in the invalidation of a HOA’s assessment lien, but also an award of attorney’s fees and costs to the delinquent homeowner…

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accolade ribbon-blog.pngThe Tinnelly Law Group has secured a favorable settlement in a breach of contract case for one of our HOA clients located in Newport Beach, California.

The Defendant homeowner was refusing to grant the HOA access to the Owner’s condominium unit for the limited purpose of placing a protective safety barrier between the sliding glass balcony door and the balcony while the HOA performed structural repairs to the underside of the balcony. After Internal Dispute Resolution failed and all efforts were exhausted to secure a non-judicial resolution, the HOA was forced to file a lawsuit seeking injunctive relief. After securing injunctive relief for our client, our attorneys then obtained a 100% attorneys’ fees and costs award. Such 100% attorneys’ fees awards are incredibly rare.

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The Tinnelly Law Group strives to resolve our clients’ disputes through non-judicial means wherever possible. However, when issues do result in litigation, our clients take comfort in knowing that our attorneys provide the highest quality representation available, and that our entire team remains committed to securing the best possible outcome.

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smoking-hoa

The problems posed by second-hand smoke have become a burning issue for California homeowners associations (“HOAs”), expecially condominium developments. A HOA typically does have the authority to adopt operating rules that prohibit smoking in common areas and exclusive use common areas; however, those rules may be insufficient to address problems posed by second-hand smoke emanating from inside an owner’s unit. Prohibiting that type of activity generally requires language to that effect contained in the HOA’s recorded CC&Rs. Where there is no such language, HOAs often refuse to get involved and opt to treat those situations as a “neighbor-to-neighbor” disputes.

However, we have written before about how a HOA may have an obligation to enforce the nuisance provisions contained in its CC&Rs to address problems posed by smoking within units. An Orange County jury recently affirmed this fact in the first ruling of its kind in California. The jury in Chauncey v. Bella Palermo Homeowners’ Association, et al., OCSC Case No. 30-2011-00461681, found the defendants HOA and its management company negligent and also found the HOA in breach of its CC&Rs for failing to enforce its nuisance provision protecting the plaintiffs’ rights to their “quiet enjoyment” of their unit. The jury held the HOA liable for doing nothing to abate the alleged nuisance resulting from the second-hand smoke, despite the fact that the CC&Rs contained no provision specifically prohibiting smoking within the units.

hoa attorney More and more municipalities are adopting “no-smoking” ordinances within multi-dwelling residential units. However, where there are no such ordinances, or any similar restrictions contained in a HOA’s recorded CC&Rs, a HOA may be still be obligated to enforce its nuisance provisions to address problems posed by second-hand smoke emanating from the interior of a unit. Where the problems persist, a HOA should consult with its legal counsel and also consider a formal amendment to its CC&Rs to prohibit smoking throughout the entire development.

Content by TLG attorney Terri Morris

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In our recent blog post entitled “Are Attorney’s Fees for ADR Recoverable?” we touched briefly on the recently decided case of Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128 (“Grossman”). In response to requests for more information on this issue from our clients and industry partners, we felt it necessary to further address the reasoning behind the court’s ruling in Grossman.

In Grossman, a dispute between a homeowners association (“HOA”) and a homeowner relating to a claimed architectural violation was resolved by the trial court in favor of the homeowners. In awarding the homeowners attorney’s fees and costs arising from both pre and post-litigation activities, the trial court cited Civil Code Section 1354(c), which states that “[i]n an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Emphasis added.)

The HOA objected to the award based on its argument that the statute did not authorize awarding pre-litigation attorney’s fees (fees incurred in participating in ADR) because such fees were not incurred as part of the action (the lawsuit) to enforce the governing documents. However, the appellate court disagreed with the HOA and ultimately affirmed the ruling, noting several key points…

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*Asked & AnsweredADR california hoa law litigation.jpg

Asked – Are our HOA’s attorney’s fees recoverable when we participate in ADR with a homeowner?

Answered – Maybe. Civil Code §1354(c) states that “in an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” Alternative Dispute Resolution (“ADR”) does not technically constitute an “action” as contemplated by Civil Code §1354(c). When a homeowners association (“HOA”) and a homeowner agree to participate in ADR, Civil Code §1369.540(c) states that “the costs of [ADR] shall be borne by the parties.” Accordingly, each side pays its own attorney’s fees, and the mediation fees/costs are split between the parties unless the parties negotiate a different arrangement.

However, if the ADR results in a settlement of the dispute, then the attorney’s fees are allocated according to the settlement terms. If the ADR does not result in a settlement and a lawsuit ensues, then the “prevailing party” in the resulting lawsuit may recover its pre-litigation attorney’s fees incurred for ADR. In the recent case of Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128, the prevailing party (the homeowners) were awarded their attorneys’ fees incurred in pre-litigation ADR:

“…[B]ecause the Legislature has required ADR, a party acts reasonably when it spends money on attorney fees and costs during pre-litigation ADR. The alternate view–that such expenditures are categorically unreasonable–is contrary to the strong public policy of promoting the resolution of disputes through mediation and arbitration…Thus, when attorney fees and costs expended in pre-litigation ADR satisfy the other criteria of reasonableness, those fees and costs may be recovered in an action to enforce the governing documents of a common interest development.” Grossman.

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Attorney’s fees incurred in ADR are typically not recoverable absent language to that effect in the terms of the ADR settlement. However, if no settlement is reached and a lawsuit ensues, the public policy factors recognized by the court in Grossman suggest that these attorney’s fees should be recovered by the prevailing party (e.g., the HOA) in the lawsuit.

Content provided by Tinnelly Law Group attorney Bruce Kermott

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

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*New Case Lawhoa law firm residential design professionals architects.jpg

California’s 1st District Court of Appeal recently ruled that “design professionals” may be liable under both common law and Senate Bill No. 800 (“SB 800”) to third party purchasers for construction defects.

In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP et al., the defendants (the “Architects”) had performed architectural and engineering services, as well as construction administration and construction contract management, for a 595 unit condominium project located in San Francisco. The plaintiff homeowners association (the “HOA”) alleged that multiple construction defects in the project were caused in part by negligent architectural and engineering design. Included in those defects was the presence of “solar heat gain” allegedly caused by the Architects’ approval of cheap and non-functional windows paired with a defective design that failed to provide for adequate ventilation within the units. During periods of high temperatures, the solar heat gain had rendered many of the units “uninhabitable, unhealthy and unsafe.”

The Architects successfully argued at the trial court level that they could not be held liable for the alleged defects because, under common law, the Architects owed no duty of care to third parties (to the HOA or its members). The trial court agreed, holding that the Architect could not be held liable for negligent design and that the HOA was required to show that the Architects had “control” in the construction process; the Architects had to have “assum[ed] a role beyond that of providing design recommendations to the [developer].” Accordingly, the trial court sustained the Architects’ demurrers and the HOA then appealed…

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