There is no substitute for expertise. HOA law is what we do.

Articles Posted in Voting & Elections

Court Steps in to Force Recalled HOA Board to Step Down

Published on: July 27, 2023 | by Steven J. Tinnelly, Esq. and Amanda Beall, Esq.

*New Case Law

The Court of Appeals recently ruled in Lake Lindero Homeowners Association, Inc. v. Barone that Corporations Code section 7616 may be used to validate a recall election removing the former board of a homeowners association (“HOA”), in addition to validating the election of a new HOA board.

In this case, the board was properly served with a recall petition for the entire sitting board. The HOA held an election meeting on December 19, 2019; however, quorum was not present. In compliance with the HOA’s bylaws, a majority of the members at the December 19, 2019 election meeting voted to adjourn the meeting to December 23, 2019, wherein only 25% of the votes of the membership would be required to constitute a quorum, as opposed to the usual 50%.

Thereafter, at the election meeting on December 23, 2019, the necessary quorum of 25% of the membership was present. The recall of the entire board passed, and a new board was elected and certified.

In January of 2020, Plaintiffs filed a complaint seeking a declaration under Corporations Code section 7616 validating the December 2019 recall election and the election of the new board. Plaintiff’s action was necessitated by Defendant Barone, and other prior board members, refusal to recognize the validity of the December 2019 recall. The trial court granted Plaintiff’s request for declaratory relief and validated the December 2019 recall. Defendant Barone appealed.

Defendant argued on appeal that Corporations Code section 7616 pertained to validating elections only and did not authorize Plaintiff’s action or the trial court to validate a recall election. The Court of Appeals disagreed with Defendant Barone’s narrow reading of the statute.

First, the Court found the statutory text of Corporations Code section 7616 to evidence a clear legislative intent providing trial courts with broad authority to determine the validity of board elections. While the Court acknowledged recall elections are not expressly referenced in the code section, the Court looked to subdivision (d) of Corporations Code section 7616 to support its holding, which authorizes the Court to “…direct any such other relief as may be just and proper.”

The Court concluded Corporations Code section 7616(d) was broad enough to serve as a “procedural vehicle” to clarify Plaintiffs recall rights under the HOA’s bylaws, even though the statute does not expressly mention recall elections. The Court reasoned that it was “just and proper” to enter an order confirming the recall, as it could not determine the validity of the election of the new board without first addressing the recall. The Court further concluded that having validly confirmed the recall and subsequent election of the HOA’s new board, the same code section authorized the trial court to enter an order confirming Defendant Barone had no authority to act on the HOA’s behalf.

This case is an unfortunate example of an HOA board of directors refusing to recognize the will of its membership in exercising their rights to control the leadership of their community. HOA boards which are unclear about the procedural aspects of their board elections should consult with a qualified HOA lawyer for guidance.

What is the Proper Procedure to Adjourn the Annual Meeting?

Published on: January 12, 2022 | by Matthew Plaxton, Esq.

*Asked and Answered

Asked – We recently concluded our Annual Meeting of the Membership. As always, we failed to achieve quorum. Rather than successively adjourn and reconvene the meeting, the Board concluded the meeting. Now we have several owners complaining, saying that the proper procedure was not followed when the Board concluded the meeting. What is the proper procedure?

Answered – It is not uncommon for an association to suffer from “member apathy.” Such apathy is most commonly apparent when it comes time to hold the association’s annual membership meeting (“Annual Meeting”). In order to hold an Annual Meeting (or a special meeting of the members (“Special Meeting”)), a quorum of the membership must be present in person, by written ballot, or, if allowed by the association’s Bylaws, by proxy. Quorum requirements vary.

If a quorum is present, the members may convene the Annual or Special Meeting and conduct the business at hand. If a quorum is not present, the members present at the Annual or Special Meeting have two options: (1) adjourn the meeting, or (2) adjourn the meeting to a later date. The word “members” is emphasized in the preceding sentence to highlight the fact that an Annual or Special Meeting is a meeting of the members. Thus, while the Board president may preside over the meeting, and other Board members may be present, the decisions made thereat are made by the members, not the Board.

The appropriate procedure for adjourning an Annual or Special Meeting is usually set forth in the association’s Bylaws. Nevertheless, California Corporations Code section 7512(d) states that, “[i]n the absence of a quorum, any meeting of members may be adjourned…by the vote of a majority of the votes represented either in person or by proxy….” (Emphasis added.) Thus, the following procedure should be employed:

The “chair” of the Annual or Special Meeting (again, typically the Board president) calls the meeting to order.
An announcement is made that quorum was not reached and therefore the association is unable to hold the meeting.
The chair of the Annual or Special Meeting then entertains motions made by members present at the meeting.

If no motion is made and everyone simply leaves, the matter is concluded; no further action may be taken on the item or items of business for which the meeting was called (unless a Special Meeting is called for that purpose). If a member makes a motion to adjourn, and the motion carries (i.e., a majority of the members present approve the motion), the matter is concluded. The meeting will not be adjourned to a later date. This is because the motion did not specially call for the meeting to be reconvened at a later date. Thus, in order to reconvene the meeting at a later date, a majority of the members present must move to adjourn the meeting to a later date.

It is important to point out that neither the Board nor the managing agent has the authority to unilaterally adjourn the meeting to a later date. For example, when quorum is not achieved, the Board cannot simply establish a date for a reconvened meeting; the decision must be made by the members through a proper motion. Moreover, it is not uncommon for the association’s managing agent and Inspector of Election to be the only persons present at the meeting. Again, neither the managing agent nor the Inspector of Election has the authority to adjourn the meeting to a later date (that is unless the managing agent or Inspector of Election is also a member of the association). It is for this reason that we always recommend that at least one Board member be present at the meeting so that the proper motion can be made. Reconvening the meeting without a proper motion will make any decisions made at said meeting subject to legal challenge.

It is also important to point out that the association cannot correct this deficiency by distributing notice to the membership of the new meeting date. That is because the motion to adjourn to a later date is a procedural prerequisite; meaning, the motion must occur in order to the hold the meeting in the future. Thus, if the association desires to move forward with the Annual or Special Meeting, and the motion was not properly made (or made at all) it will need to restart the process.

Conducting Annual and Special Meetings is important to the effective operation of the association. However, it is equally important that the proper procedure is followed, especially when adjourning meetings. Failure to do so increases the potential for costly disputes.

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

AB 502 Signed! Board Elections by Acclamation Available to All California HOAs

Published on: October 6, 2021 | by Matthew Plaxton, Esq.

*New Legislation

There has been disagreement within the homeowners association (HOA) legal community as to whether California law permits uncontested director elections to be carried out by acclamation, especially in situations where the HOA’s bylaws contain language permitting such a procedure. Our firm has always held that such a procedure is not permitted regardless of any language within an HOA’s Bylaws to the contrary. Our position is based on Civil Code section 5100(a) which provides that the Civil Code’s election procedures must be followed “[n]otwithstanding any other law or provision of the governing documents…” Accordingly, any Bylaw provisions purporting to permit elections by acclamation were superseded by Section 5100(a) of the California Civil Code.

Our position was recently supported by the adoption of Senate Bill 323 (“SB 323”) in 2019. SB 323 finally addressed the issue of elections by acclamation, and in doing so, specified that such a procedure was only available to HOAs with 6,000 or more units. This provided clear indication of the Legislature’s intent to require smaller HOAs (those with less than 6,000 units) to comply with the secret ballot procedure and conduct a full election even in situations where the election was uncontested (where, at the close of nominations, the number of candidates was not greater than the number of board positions to be filled).

This statutory scheme has understandably been the source of frustration for HOAs who have been compelled to incur the expense of conducting a full election (preparing, printing, and mailing ballots, etc.) in situations where the election is uncontested and the outcome of the election is already known prior to the distribution of ballots. We were therefore pleased at the introduction of Assembly Bill 502 (“AB 502”) earlier this year. AB 502 is aimed at resolving this problem by expanding the election by acclamation procedure to all HOAs irrespective of their size.

We are thrilled to report that AB 502 was just signed into law. Effective January 1, 2022, HOAs will be available to utilize an acclamation procedure specified under a new section of the Civil Code, subject to certain requirements that must be satisfied during the pre-balloting process. Those requirements include (among others):

Holding a regular director election at least once every three (3) years;
*Providing specified notices to the membership of the potential for the acclamation procedure to be utilized if the number of candidates does not exceed the number of board positions to be filled. This notice must be provided least ninety (90) days before the nomination deadline, and another reminder notice must be provided between seven (7) and thirty (30) days before the nomination deadline;
Confirming receipt of the nomination within seven (7) business days of receipt of same; and
Notifying a nominee as to whether they are qualified to be a candidate and, if not, the reason for the disqualification and the procedure to appeal the decision.

*It is important to note that, under the new law, the notices described in Item 2 above must be provided via “individual notice”—meaning they must be mailed directly to every member within the HOA who has not previously consented to the receipt of individual notices electronically, as authorized under Civil Code section 4040(a)(2). Previously, notices regarding the election procedure were only required to be delivered via “general notice” (e.g., posting the notice in a prominent location within the HOA). This may undercut the cost-saving benefit HOAs hope to receive from being able to utilize the acclamation procedure; while the HOA may save on expenses by not having to prepare, mail and tabulate ballots for an uncontested election, it will have to incur greater expenses during the pre-election procedures to prepare additional notices and mail them to each member. This should motivate every HOA to take additional measures to secure their members’ consent to the receipt of individual notices via email, at least in the context of election-related notices.

Although the pre-election procedures are more cumbersome, AB 502 provides much needed relief from meaningless elections. This does not mean, however, that an HOA is able to dispense with its annual meeting altogether, as the language of its CC&Rs or Bylaws may still require an annual meeting for other purposes. HOA Boards and management professionals should consult with their HOA attorney to understand the impact of the new law and the corresponding impact on their HOA’s annual meeting and director election procedure.

-Blog post authored by TLG Partner, Matthew Plaxton.

Asked and Answered: Recall Petitions

Published on: September 8, 2021 | by Matthew Plaxton, Esq.

*Asked & Answered

Asked – 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:

Perform only those acts required to conduct a recall election;
Do nothing in response to the petition other than to inform the petitioners that the Board has elected not to take action; or
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.

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.

Resolving Conflicts of Law Related to Recall Election Timelines in the Wake of SB 323

Published on: April 14, 2021 | by Carrie Heieck, Esq.

download Recall elections of individual Board members or of the entire Board are a source of great contention, divide and added expense for HOA’s. Prior to the passage of SB 323, which took effect January 1, 2020, recall petitions and elections were already complicated. To add to this complexity, since SB 323 became law, some of the Civil Code sections associated with HOA elections now conflict with those of the Corporations Code in the context of recall elections.

According to Corporations Code Sections 7510(e) and 7511(a), assuming at least five percent (5%) of the membership has signed a petition for same, an HOA has twenty (20) days to notice the membership of a special meeting of the membership to vote to recall the Directors and to elect new Directors to replace the recalled Directors if the recall is successful. Corporations Code Section 7511(c) requires that the special membership meeting to recall the Directors be set not less than thirty-five (35) or more than ninety (90) days after receipt of the recall petition.

Civil Code Section 5100(a)(1) states, “Notwithstanding any other law or provision of the governing documents, elections . . . legally requiring a vote, election and removal of directors . . . shall be held by secret ballot in accordance with the procedures set forth in this article.” This means that elections to remove/recall directors and to elect replacement Directors must comply with Civil Code Section 5100 et seq, which was amended via the passage of SB 323.

Notably, the required timeline for a recall election set forth in the Corporations Code does not match that of the Civil Code. Specifically, Civil Code Section 5115 proscribes a timeline of at least ninety (90) days to hold an election, assuming an Association’s Election Rules have already been amended to comply with SB 323, and which does not include any extra days for weekends or holidays. Therefore, noticing the membership for a recall election within ninety (90) days of the receipt of a recall petition as mandated by Corporations Code Section 7511 is now practicably impossible to satisfy in light of the new elongated Civil Code 5115 required timeline for elections (including recall elections). This is because notice cannot be sent to the membership until the Board and its counsel have reviewed and verified the petition to ensure it meets the requirements of the law and governing documents, which cannot reasonably occur on the same day a petition is received.

Thankfully, the Civil Code provides direction to Boards facing such a morass. Pursuant to Civil Code Section 5100(e), “(i)n the event of a conflict between this article and the provisions of the Nonprofit Mutual Benefit Corporation Law (Part 3(commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) relating to election [which includes Corp. Code Section 7511], the provisions of this article shall prevail.” This means that when there is a conflict between the Corporations Code and the Civil Code regarding mandated timelines and related notice deadlines for a recall election, Boards must follow the timelines proscribed in the Civil Code.

Although the Civil Code makes it clear that its provisions supersede those of the Corporations Code with regard to recall election timelines, other attorneys have taken a different and what we believe to be an erroneous approach to this conflict by advising HOA’s that the election to recall Directors take place before the election to replace recalled Directors to attempt to satisfy both the Corporations Code and the Civil Code. However, this approach is not advisable for several reasons.

First, Corporations Code Section 7220(b) makes it clear that the recall of a Director means said Director is no longer on the Board. Unless the Bylaws provide otherwise, there is no legal authority for a recalled Director to remain on a Board with any power or authority – even in a limited capacity – once the members have voted to recall or remove said Director. Accordingly, a recalled Director may not serve on the Board in the interim between their removal and the election of their successor because they have already been removed and no longer have any power or authority.

Second, Members may only petition the Board to schedule a special membership meeting, including one to recall Directors, for a lawful purpose pursuant to Corporations Code Section 7510(e). This means that if a petition seeks to partition a recall election from the election of replacement Directors if the recall is successful at a later date, the petition is not for a lawful purpose as Corporations Code Section 7210 and most likely the Association’s governing documents require HOA’s to have a Board of Directors. Recalling a Director without immediately electing their replacement would leave the HOA without a functioning Board of Directors as required by law.

Finally, petitioning members or Boards who allow the vote to recall Directors to proceed within the Corporations Code timeline of 35-90 days of receipt of the recall petition but allowing said recalled Directors to still serve on the Board with limited powers (without legal authority for same as discussed above) until their successors can later be elected under the longer Civil Code Section 5115 timeline expose their Association to legal liability. This is because if the recalled Directors who have no lawful authority are still meeting and making decisions on behalf of the HOA, such as entering into contractual relationships, imposing disciplinary action, etc. these decisions and acts made without proper authority are arguably void under the law. Furthermore, a recall election not conducted in strict accordance with Civil Code Section 5100 et seq. runs the risk of being challenged in court. Pursuant to SB 323, judges no longer have discretion in ruling upon such challenges as Civil Code Section 5145 now requires a judge to void any election not conducted in strict accordance with Civil Code Section 5100 et seq, which creates further legal exposure for an HOA attempting to bend the rules.

In summary, because of the complexities of HOA elections and especially those for the removal of Directors, HOA’s should contact their legal counsel as soon as a recall petition is received.

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

Political Signs and the Limits Imposed on a HOA’s Ability to Regulate Same

Published on: September 23, 2020 | by Steven J. Tinnelly, Esq.

bigstock_Yard_Signs_At_Residential_Stre_229727968 As we draw near to the 2020 election, many residents living in HOAs have decided to install yard signs and other displays for their chosen candidate or cause. Many of these “noncommercial” signs have sparked fury in those who oppose such views, calling upon the Board of Directors to have such signs removed. Thus, in recent months, we have received numerous requests from our clients to provide an opinion as to the extent to which a HOA may regulate the display of such non-commercial signs.

It is without doubt that we currently live in a society with varying opinions on political and social issues. Such division has only become more polarized with recent events. While some might find the opinions espoused by certain groups repugnant, upholding a resident’s right to express those beliefs and opinions through the display of signs on their property is more important than the minor discomfort some may experience in observing such signs. The only other option would be to prohibit residents from displaying any signs concerning issues of politics and social justice, something which the California Legislature has expressly forbidden: “[H]omeowners throughout the state shall be able to engage in constitutionally protected free speech traditionally associated with private residential property” and “shall be specifically protected from unreasonable restrictions on this right in the governing documents.” (Historical and Statutory Notes, 8 West’s Ann. Civ. Code (2007 ed.) foll. 1353.6, p. 184.)

Indeed, under California Civil Code section 4710(a), “[t]he governing documents may not prohibit posting or displaying of noncommercial signs, posters, flags or banners on or in a member’s separate interest, except as required for the protection of public health or safety or if the posting or display would violate a local, state, or federal law.” Some may nevertheless argue that certain noncommercial signs incite terror and/or rioting and therefore must be removed “for the protection of public health [and] safety.” Although such argument is speculative at best, Section 4710’s concern with public health and safety relates to concerns relative to the placement of such signs (e.g., view obstructions), not the fact that some might have an adverse emotional or physical reaction to such signs.

Inquiries have also been made concerning a HOA’s ability to restrict the number of noncommercial signs placed on a resident’s separate interest, as well as the duration of their display. Section 4710 does not address the number of noncommercial signs that may be displayed by a particular resident. However, in Fourth La Costa Condominium Owners Association v. Seith, the Court saw “no problem with allowing only one sign per unit,” and requiring that they be removed after a particular duration. ((2008) 159 Cal.App.4th 563, 581.) While Fourth La Costa pertained to real estate signs (i.e., commercial signs), the Court’s reasoning could similarly apply to restrictions on the number of noncommercial signs as well as the duration of display. (See id. at p. 581 (upholding the HOA’s decision “for aesthetic purposes”).) A HOA’s ability to regulate the number and duration would be further supported if the city/county in which the HOA is located has also promulgated codes/ordinances regulating the installation of political signs on a resident’s separate interest.

Again, it is important to recognize that many residents might find some of the political and social views promoted by their neighbors as offensive. Because they live in a HOA, they must necessarily tolerate differing viewpoints and loyalties. As the California Supreme Court has said, “[t]he very existence of organized society depends upon the principle of ‘give and take, live and let live’….” (San Diego Gas & Electric Co. v. Superior Court. (1996) 13 Cal.4th 893, 937-38.) Therefore, in response to resident complaints, such residents should be informed of the limitation imposed by Section 4710 and directed to “avoid further bombardment of their sensibilities simply by averting their eyes.” (Cohen v. California (1971) 403 U.S. 15, 21.)

Residents who object to the content displayed on noncommercial signs should be reminded that HOAs are limited in the ways in which they may restrict residents from displaying such signs on their separate interests. Nevertheless, HOAs should consult with their general counsel to ensure that the HOA’s operating rules are in compliance with California Civil Code section 4710.

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

There is no Such Thing as a Free Lunch – Or a Free Clubhouse: Implementing Reasonable Limitations on Political Speech and Assembly Rights in California HOAs

Published on: February 25, 2020 | by Steven J. Tinnelly, Esq.

bigstock-Election-Campaign-Election-Vo-131448176-1-1140x660-1 We have just passed the two-year anniversary of California Civil Code 4515. This is the law that protects certain rights of members and residents to political speech and peaceful assembly within California community associations. With election season in full swing, it is important for Boards and management to be reminded that the rights afforded to members and to residents by Civil Code 4515 to utilize Association common area facilities and to campaign are not unlimited.

For many associations, Civil Code 4515 comes into play when members or residents (the code applies to both) seek to use common area facilities to hold campaign or political rallies. Rules that previously required the payment of a deposit and/or fee plus proof of liability insurance to reserve a facility for an event needed to be revised in light of the new law, which prohibits such fees, deposits, and insurance for those using the common area facilities for assembly purposes. Managers and Boards were left with the burden of determining how to differentiate between those wishing to use the common area facilities for private events such as birthday parties where a fee can still be charged and those who desired to use those same facilities for assembly purposes where fees cannot be charged.

Reasonable Restrictions on the Use of Common Area Facilities for Assembly Purposes. Association rules & regulations and facility use agreements are useful tools in balancing the requirements of the law with reasonable restrictions that protect the Association. Possible restrictions on the use of facilities for assembly purposes are as follows:

Not open to the public: Both the rules and facility use agreements may require that any 4515-related meetings or events be restricted to members, residents and their guests only so as not to open the Association’s facilities to the public. If the Association is open to the public, it must comply with the Americans with Disabilities Act, a costly endeavor that exposes the Association to potential significant liability if the strict ADA requirements are not met.
Occupancy restrictions: The fire department of each city typically sets maximum occupancy limits for association facilities such as clubhouses. Those reserving the facilities should be required to limit their events to no more than what is permitted by the fire code or to any other reasonable number determined by the Board as the maximum capacity for each facility. Attendance beyond capacity burdens Associations with traffic, potential for unruliness and nuisance, and excess strain on common area components such as restrooms.
Responsibility for damages: Although no fee or deposit may be charged upfront, this does not mean members cannot be held responsible for damage caused to the common area by their residents and guests during 4515-related gatherings. A facility use agreement may be required for anyone reserving the facilities. Reservations should be required in advance and a stated purpose should be required when making the reservation that the meeting is for proper assembly purposes pursuant to Civil Code 4515. If a non-member resident wishes to use a facility for a proper assembly purpose, the member who owns the Lot/Unit where the resident resides may be required to sign such an agreement assuming responsibility for any damage caused at their event. Additionally, most CC&Rs contain a provision that makes members responsible for damage caused to the common area by them, their tenants or guests and many of these damages can be levied as a reimbursement assessment, depending on the language of the Association’s CC&Rs.
Cleaning fees. A facility usage agreement can also require that a member and/or resident reserving a common area facility return the facility in the same condition in which they received it, which includes cleaning and the disposal of trash. If the individual fails to return the facility in the same condition, the Association can charge the responsible member for cleaning fees as required by a facility usage agreement.
Parking: Parking is a concern for many associations and the scheduling of a large rally poses a potential strain on Associations where parking is limited. Civil Code 4515 does not afford members or residents with additional parking rights. That means that the existing parking rules and regulations apply to attendees of an event for assembly purposes. Once the guest spaces are all occupied, attendees must make arrangements to park elsewhere to avoid being cited and/or towed as provided in the Rules. This should be made clear in any facility use agreement so advance arrangements for parking for their guests if necessary. Compliance by all attendees with the governing document provisions, not just its parking provisions, should be required by the rules and/or a facility use agreement for assembly-related events.
Alcohol use: The Association may ban the use of alcohol at events for assembly purposes – even if alcohol is allowed at private events. Because procuring insurance cannot be required for those reserving facilities for assembly purposes, it is reasonable to ban alcohol or other activities which may increase legal exposure to the Association at these gatherings. Likewise, items such as sound equipment that may be used for private events can be withheld from assembly events with no deposit so long as this limitation is made clear in the facility use agreement and/or rules.
Compliance with the governing documents. Members and residents and their guests using common areas must still comply with the provisions of the Association’s governing documents including as to noise levels, parking, cleaning up after service animals, etc. This can be made clear in a well-drafted facility use agreement.
Reasonable hours: Holding a political rally does not give members and residents 24-hour access to the Association’s facilities or rights above members who request to use the facilities for their private events. Rules should be adopted that ensure all members have equal access to these facilities, including for private events, and that the events end at a reasonable time to ensure noise levels are not interrupting residents’ quiet enjoyment of their property.
Designated Areas. Often, an Association’s clubhouse is near a pool or to other facilities and guests of the assembly event spill out into other areas not reserved for the event. A facility use agreement can require that the event must be contained within the reserved facility and that guests may not migrate beyond said designated area.

What is a Proper “Assembly” Purpose Under Civil Code 4515? Most Associations are concerned about the potential abuse of this statute in the form of members reserving facilities without paying a fee stating it is for assembly purposes when it is really just a private event. Examples of qualified purposes of assembly are to discuss common interest living, association elections, legislation, election to public office, or any initiative, referendum, or recall process involving the Association or other political body. If the stated purpose for reserving a facility does not fall into one of these categories, then it is a private event.

Limitations on Canvassing and Petitioning. While Associations cannot restrict canvassing, petitioning, or the circulation of materials for political purposes, they can place reasonable restrictions on these activities such as requiring that it take place only during certain hours. This type of political speech often gives rise to complaints by members disturbed by such unsolicited campaigning and door-knocking, but the Association may not bar such free speech activities when done in a reasonable manner.

To implement reasonable and common-sense restrictions on political speech and assembly without violating Civil Code 4515, HOAs should have their legal counsel review their current rules and policies with respect to campaigning, solicitation and common area use and to prepare agreements concerning the use of common area facilities. Rules or policies which violate Civil Code 4515 subject the HOA to court action and fines.

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

SB 323 Signed! The New State of HOA Election Laws

Published on: October 23, 2019 | by Steven J. Tinnelly, Esq.

*New Legislation

Governor Newsom recently signed into law Senate Bill 323 (“SB 323“). SB 323 makes substantive modifications to the Civil Code’s provisions governing HOA elections, effective January 1, 2020. Some of the more significant modifications require associations to amend their election rules to conform to new statutory requirements, limit the types of candidate qualifications an association may adopt, address the only circumstance for elections by acclamation, place limitations on who may serve as an inspector of elections, and bolster the ability of members to overturn an election that is not conducted in accordance with proper procedures.

*We have published a detailed article on SB 323, entitled “The New State of HOA Election Laws.” The article is available for download, here.

*Also included with the article is a “Director Election Timeline” that illustrates the new pre-election notice requirements imposed by SB 323. The timeline is also available for download, here.

SB 323 requires HOAs to make immediate changes to their election rules, especially those HOAs that have their annual meeting set to take place in the first quarter of 2020. Time is of the essence. Our team of HOA lawyers is ready to assist our clients with the steps needed to conform to the changes imposed by SB 323.

The What and Why of Lender Rights, and How to Deal with Same

Published on: September 10, 2019 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – We are trying to obtain a loan to conduct much needed, overdue (albeit non-life threatening) repairs and remediation work within the Association. However, the CC&Rs requires us to obtain a 75% vote by the First Mortgagees (i.e., institutional lenders) to obtain the loan because it exceeds 5% of our budgeted expenses. Firstly, why are there provisions in the CC&Rs that protect First Mortgagees (such provisions seem to create unnecessary and nuanced obstacles for the Association)? Secondly, given the urgency of the repairs, how can we expedite the process of obtaining the First Mortgagees’ approval? In other words, what can we do if they do not respond?

Answered – Most, if not all, CC&Rs (“Declaration”) dedicate a section to first mortgagees (“Lenders”) often titled “Lender Rights.” These rights are provided by the Declaration to protect the interests of the Lenders by giving same voting rights in areas that potentially impact the Lenders’ security interests in a property (e.g., single family home, condominium unit) within the homeowners’ association (“HOA”). For instance, many Declarations require Lender approval to amend “material provisions” or make “material amendments” of the Declaration and/or HOA bylaws.

Material amendments that require Lender approval generally consist of provisions affecting the following (among other things):

HOA insurance obligations;
partition/abandonment of HOA property (i.e., common area);
dissolution of the HOA; and
maintenance obligations.

All of the above have one thing in common: they impact the Lenders’ security interests (i.e., first mortgages) on the properties within the HOA. For example, if the Declaration was amended to severely limit or eliminate HOA insurance obligations, the Lenders’ security interests are at risk since the properties and/or common area elements are uninsured. Consequently, if a natural disaster occurs and destroys the community, Lenders lose their security interests and are unable to recoup the debt.

For the same reason, most Declarations, if not all, require HOA’s to obtain Lender approval (in addition to membership approval) for an HOA to pull out a loan in excess of a certain threshold (generally loans in excess of 5% of the prior fiscal year’s budgeted expense). This is because if an HOA is able to pull out a loan from a financial institution (“Institution”) without Lender approval and subsequently defaults on the loan, it puts the Lenders at risk of not being able to recoup their respective debts owed by the homeowners. For instance, should the HOA default on the loan, assessment rights are generally assigned/transferred to the Institution (via loan terms). This cripples the HOA’s ability to upkeep and maintain the community, resulting in decreased property values and ultimately hurting the Lenders’ security interests.

Understandably, many HOA’s are frustrated with the additional obstacle of obtaining Lender approval as it increases cost and time to approve certain actions. However, most Declarations will contain a provision (“Provision”) such as the following:

A Lender who receives written request to approve an amendment or action herein and does not deliver or post to the requesting party a negative response within thirty (30) days shall be deemed to have approved such request.

In most cases, this gives HOA’s an “out” because Lenders generally do not take the time to review and submit a vote. However, while most Declarations contain such a Provision, it is not uncommon to come across some that are lacking. Not to worry, this does not mean that HOA’s without the aforementioned Provision are stranded and helpless, thanks to California case law.

In Fourth La Costa Condominium Owners Association v. Barbara Seith (2008) 159 Cal.App.4th 563, the Appellate Court (affirming the Trial Court’s decision) ruled that the HOA’s ballot measure to Lenders (sent via Certified Mail, Return-Receipt Requested) that indicated their failure to return an executed ballot within thirty (30) days shall be deemed “consented” to, was an acceptable method of obtaining “written consent” from the Lenders. (Seith, at 573.) In particular, the Court found that the Lenders’ “written consent” was effectively obtained by the Lenders’ signatures on the return-receipt coupled with the “30-day verbiage,” indicating Lenders’ silence as consent.

While most HOA Declarations will have the relevant Provision, HOA’s that do not and are seeking to make a certain amendment or perform a certain action requiring Lender approval may simply send out ballots to Lenders (1) via Certified Mail, Return-Receipt Requested, and (2) provide the 30-day verbiage to obtain “written consent.” Furthermore, HOA’s may seek to amend the Declaration to eliminate the Lender approval requirement altogether; this allows HOA’s to make certain actions/amendments in the future without expending resources in obtaining Lender approval.

-Blog post authored by TLG Attorney, Andrew M. Jun, Esq.

Voter Apathy Not a Required Showing in a Petition to Reduce Percentage of Affirmative Votes Required to Amend CC&Rs

Published on: April 16, 2019 | by Steven J. Tinnelly, Esq.

Amending a HOA’s Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) can be a challenging endeavor. This is true, in large part, to the onerous approval requirements imposed by the CC&Rs themselves. Indeed, many CC&Rs require a super-majority (i.e., 67% or more) of the HOA’s members to approve an amendment. Such requirements make it difficult for an association to pass a proposed amendment, often as a result of member apathy or lack of participation in the voting process.

When this occurs, California Civil Code Section 4275 provides a mechanism for a HOA to “petition the superior court of the county in which the common interest development is located for an order reducing the percentage of affirmative votes necessary for such an amendment.” Section 4275 thus serves to provide a HOA “with a safety valve for those situations where the need for a supermajority vote would hamstring the association.” (Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472).

Accordingly, in order to successfully bring a petition to reduce the percentage of affirmative votes necessary to approve an amendment to the CC&Rs, a HOA must demonstrate the following:

Adequate notice of the proposed CC&R amendment was given;
Balloting was conducted properly pursuant to the CC&Rs and the Act;
Reasonable efforts were made to solicit approval from the members;
More than fifty percent (50%) of the eligible members voted in favor of the amendment;
“The amendment is reasonable[;]” and
“Granting the petition is not improper….”

(Cal. Civ. Code § 4275(c).)

In the recent case of Orchard Estate Homes, Inc. v. The Orchard Homeowner Alliance, the California Court of Appeal rejected an argument brought by a group of homeowners (The Orchard Homeowner Alliance) objecting to the HOA’s petition to reduce the percentage of affirmative votes necessary to amend their CC&Rs. ((2019) ___ Cal.App.4th ___, 2019 Cal.App.Lexis 144.) (“Orchard Estate”) In particular, and relying on the Mission Shores Assn v. Pheil case, the homeowners argued that, in order to prevail on their petition, the HOA must demonstrate that the CC&R amendment failed due to “voter apathy.” ((2008) 166 Cal.App.4th 789, 794-95 (stating that section 4275 of the California Civil Code was to “provide homeowners associations with the ‘ability to amend [their] governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures”).)

The Court in Orchard Estate rejected this argument, noting that the statutory language contained in California Civil Code section 4275(c) clearly and unambiguously identified the “elements required to be established to authorize a reduction in the required voting percentage to amend a provision of the governing CC&Rs.” (Id. at p. **6-7.) As such, the Court was unwilling “to imply an element that was not expressed by the Legislature” based on off-hand statements made in appellate decisions. (Id. at p. *7.)

Although the Orchard Estate case appears to make CC&R amendments easier to accomplish, Board members should nevertheless be aware that amending CC&Rs can be an expensive endeavor. Therefore, it is important for Board members to discuss potential CC&R amendments with the HOA’s legal counsel to determine if they are necessary and/or advisable, or if other avenues are available to achieve the Board’s desired result.

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