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*New Case Lawhoa-records-inspection

As part of the ongoing management of a homeowners association (“HOA”), the HOA is obligated to prepare and maintain certain “association records,” most of which must be made available for inspection by the HOA’s members. However, the right to inspect and copy certain association records is not absolute, as some records may be withheld from a member for confidentiality concerns, as well as in situations where the member requesting the records is doing so for an “improper purpose”:

“association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member’s interest as a member.” (Civ. Code § 5230; see also Corp. Code §§ 8330, 8333.)

This “proper purpose” requirement was recently the focus of a challenge brought by a member of a HOA who sought to inspect and copy the HOA’s membership list. In Tract No. 7260 Association, Inc. v. Parker (2017) 2017 Cal. App. LEXIS 265 (“Parker“), the Court of Appeal concluded that the HOA was justified in withholding the membership list despite the member’s offering of a facially valid reason for his request to inspect the membership list. The member was involved in a corporation that the HOA was suing, called “Fix the City.” The member claimed that he sought the membership list “for possible communication with the [HOA’s] members to ascertain whether there had been corporate misdeeds.”

The HOA denied the request, arguing that the member was seeking inspection of the membership list in order to give Fix the City an unfair advantage in the lawsuit between it and the HOA. The trial court considered the facts at issue, and concluded that the member’s request was indeed improper, stating that “a reasonable conclusion is that [the member] is using his membership status to aid Fix the City in defending the [HOA/Fix the City] lawsuit.”

This aspect of the trial court’s ruling was affirmed on appeal. The Court in Parker noted that, while the HOA has the burden of demonstrating that the member will use the record for an improper purpose, and that mere speculation of an improper purpose is insufficient to justify withholding records, the HOA provided sufficient evidence that the requesting member did indeed seek the information for an improper purpose—namely, to aid Fix the City’s defense in the lawsuit brought against it by the HOA.

California HOA lawyers The Parker case underscores the importance of evaluating a member’s request for association records to determine whether the requested record(s) will be used for an improper purpose (i.e., to advance the member’s interests at the expense of the HOA’s). If the purpose is improper, and that conclusion is supported by more than simple conjecture, the HOA may lawfully deny the request. HOA Boards and managing agents that are concerned about the underlying motivations of a member’s request for association records should consult with the HOA’s legal counsel as to what records may (and indeed should) be withheld in order to protect the HOA.

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

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new-client-PSD-file-to-editWe are proud to announce that San Lorenzo Village Homes Association has selected Tinnelly Law Group as their associations’ legal counsel.

Situated just east of San Francisco, San Lorenzo is an appealing, family focused community consisting of 5714 single-family homes covering 2.8 square miles.  Built in 1944, San Lorenzo is one of the first planned developments in the United States.  Residents enjoy close proximity to wine country and the Bay Area.

hoa laws Our HOA attorneys and staff look forward to working with San Lorenzo’s Board and management.

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*New Case Lawhoa-assessment-debt

Recovering delinquent assessment debt is one of the more complicated issues that homeowners associations (“HOAs”) face. Fortunately, the Civil Code grants HOAs with significant remedies to recover delinquent assessment debt, including the ability to record assessment liens and to ultimately enforce those liens through foreclosure. However, HOA Boards, managing agents and collection professionals understand that the laws governing such remedies are complex, and a string of California court decisions in recent years have affirmed the necessity for HOAs to strictly comply with these legal requirements. The recent case of Mashiri v. Epsten Grinnell & Howell (2017) 845 F.3d 984 is an example.

Civil Code Section 5660 requires associations to provide delinquent homeowners with notice of the HOA’s intent to record an assessment lien (i.e., to send a “pre-lien letter”) at least thirty (30) days prior to recording the assessment lien.  As such, most pre-lien letters demand that payment be made within this thirty (30) day period (e.g., “Demand is hereby made that you remit payment within thirty days of the date of this notice or else a lien will be recorded”).  However, according to the Court’s decision in Mashiri, such a demand for payment within this timeframe may violate the Fair Debt Collection Practices Act (“FDCPA”).

In Mashiri an owner became delinquent in the payment of assessments to the HOA. As a result, the HOA, through its legal counsel sent the homeowner a pre-lien letter.  The letter stated in part:

This letter is to advise you that $598.00 is currently owing on your Association assessment account.  Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property….

Unless you notify this office within 30 days of receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume the debt is valid.  If you notify this office in writing within thirty (30) days of receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification of the debt….

The Court concluded that this language violated the FDCPA in two (2) respects. First, the FDCPA requires the written notice (here, the pre-lien letter) to provide the debtor with thirty (30) days to dispute the debt. While the pre-lien letter demanded payment within thirty-five days of the date of the letter, such language is inconsistent with the requirement that it be upon receipt of the letter. The Court pointed out that, “[b]y the time a debtor receives such a letter, there may be fewer than thirty days before payment is due.”  (Id. at p. 991.) As such, the “least sophisticated debtor, when confronted with such a notice, would reasonably forego her right to thirty days in which to dispute the debt and seek verification.” (Id. at p. 991-92.)

Second, the FDCPA requires a debt collector to cease all collection efforts “until the debt collector obtains verification of the debt . . . and a copy of such verification . . . is mailed to the consumer by the debt collector.”  (Id. at p. 992; quoting 15 U.S.C. § 1692g(b).) The pre-lien letter at issue in Mashiri simply stated that a lien would be recorded if the debtor failed to pay.  Thus, the “least sophisticated debtor would likely (and incorrectly) believe that even if she disputed the debt,” and the debt collector had not mailed the verification of debt to the debtor, the debt collector would nevertheless record a lien against the property. (Id.)  “In this manner, the letter effectively overshadows the disclosed right to dispute by conveying an inaccurate message that exercise of the right does not have an effect that the statute itself says it has.” (Id.; quoting Pollard v. Law Office of Mandy L. Spaulding (1st Cir. 2014) 766 F.3d 98, 105.)

California HOA lawyers HOAs should be cognizant of the requirements under both the Civil Code and the FDCPA, and should ensure that the pre-lien letters being prepared by the HOA’s managing agent and/or legal counsel is compliant with the Court’s holding in Mashiri. The language should include a statement concerning the owner’s right to dispute the debt, as well as provide a sufficient amount of time from receipt of the letter to dispute the debt in order to prevent a lien from being recorded. The holding in Mashiri emphasizes the necessity for HOAs to retain the services of qualified collection firms that are aware of these statutory requirements and understand how the collection process must be managed so as to avoid potential problems. HOAs in need of collection services may contact our firm’s affiliate, Alterra Assessment Recovery.

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

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new-client-PSD-file-to-editWe are proud to announce that Regency Villas Association of San Diego has selected Tinnelly Law Group as their associations’ legal counsel.

Regency Villas is an active adult community for seniors 62 and older in the University City area of San Diego. The community is ideally located within walking distance of shopping and restaurants, and just a short 10-minute drive to La Jolla beaches.  Residents enjoy a clubhouse with recreation room, gym, and barbecue area.

hoa laws Our HOA attorneys and staff look forward to working with Regency Villas’ Board and management.

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South-Peak-1We are proud to announce that South Peak Community Association has selected Tinnelly Law Group as their associations’ legal counsel.

South Peak is a guard gated community that features some of the largest custom homes in Laguna Niguel.  Located adjacent to the Salt Creek corridor nature trail, residents enjoy city lights, ocean, canyon, and golf-course views.

hoa laws Our HOA attorneys and staff look forward to working with South Peak’s Board and management.

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Adult possession and use of marijuana for recreational purposes is now legal in California as a result of the passage of Proposition 64 (“Prop 64”) in 2016. Prop 64 is comprised of sixty-two (62) pages of detailed, complicated, and at times confusing regulations and statutory revisions to various California codes. We have been asked by various homeowners association (“HOA”) clients about the significance of Prop 64 and what impact, if any, it has on their ability to regulate marijuana within their private communities.

Restrictions on Marijuana Smoking
Virtually every set of HOA governing documents contains a provision that prohibits activities which serve as a nuisance to residents within the HOA’s development (i.e., the transmission of “noxious odors”). These provisions have been relied upon by HOAs to restrict smoking (i.e., cigarettes, pipes, cigars, vaporizers, etc.) in common areas and, in some instances, within the separate interests (i.e., the lots or units) that are owned by each of the HOA’s members.  Fortunately, Prop 64 has not altered a HOA’s regulatory authority with respect to the smoking of marijuana. Section 4.6 of Prop 64 (adding Section 11362.3 to the California Health & Safety Code) provides in relevant part that nothing in the statute permitting personal use, possession, cultivation, etc. of marijuana shall be construed to permit any person to “[s]moke marijuana or marijuana products in a location where smoking tobacco is prohibited.” Thus, valid and enforceable HOA restrictions against tobacco smoking may still be used to restrict marijuana smoking as well. Notably, the term “smoke” as used in Prop 64 also includes the use of electronic smoking devices and vaporizers.

Restrictions on Marijuana Cultivation
One of the more interesting issues that HOAs may encounter in the wake of Prop 64 relates to the growing or “cultivation” of marijuana plants. In 2015, new Civil Code § 4750 was enacted to grant homeowners within HOAs the right to use their backyards for “personal agriculture.” Civil Code § 1940.10 was enacted at the same time to clarify that “personal agriculture” as used in Section 4750 means the use of land where an individual cultivates “edible plant crops for personal use or donation,” and that the term “plant crop” does not include “marijuana or any unlawful crops or substances.” Thus, prior to Prop 64’s passage, a HOA’s authority to prohibit backyard marijuana gardens was relatively clear.

Prop 64 appears to have muddied this issue. It added Section 11362.1 to the Health & Safety Code which provides in relevant part that, “notwithstanding any other provision of law,” it is lawful for persons 21 years of age or older to “[p]ossess, plant, cultivate, harvest, dry or process not more than six living marijuana plants.” Some may interpret this language as overriding the Civil Code’s restrictions on the type of “personal agriculture” which may be cultivated in a homeowner’s backyard—especially in light of the fact that marijuana is technically no longer an “unlawful crop or substance.”

Prop 64 also added Section 11362.2 to the Health & Safety Code to allow for restrictions to be imposed on the outdoor cultivation of marijuana. It provides in relevant part that a “city or county” may “enact and enforce reasonable regulations” on the cultivation of marijuana, provided, however, that such regulations may not be used to completely prohibit the cultivation of marijuana “inside a private residence, or inside an accessory structure to a private residence located upon the grounds of a private residence that is fully enclosed and secure.” However, this language appears to empower only cities or counties to prohibit outdoor marijuana cultivation, and does not adequately address whether such prohibitions may also be enacted and enforced by HOAs.

Prop 64 does provide that the rights to cultivate marijuana do not preempt the “ability of an individual or private entity to prohibit or restrict…[the cultivation of marijuana]…on the individuals’ or entity’s privately owned property.” Thus, a HOA’s ability to prohibit the cultivation of marijuana on its “privately owned property”—meaning the HOA’s common area—is relatively clear.  What is less clear is whether a HOA that exists within a city or county that does not restrict outdoor marijuana cultivation may nevertheless impose such restrictions on a homeowner’s separately owned residential lot. In other words, may a HOA restrict the outdoor cultivation of marijuana on property within its development that the HOA technically does not own? For HOAs that exist in cities or counties that do not already restrict the outdoor cultivation of marijuana, there is no clear statutory answer to this question. However, we have encountered instances in HOAs where the smell from marijuana plants and blooms are so strong that they rise to the level of a nuisance which is prohibited under the CC&Rs, and may therefore be restricted on those grounds. HOAs dealing with this issue should seek guidance from their legal counsel.

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McKinley-VillageWe are proud to announce that McKinley Village Community Association has selected Tinnelly Law Group as their associations’ legal counsel.

McKinley Village by The New Home Company is a progressive urban village set in East Sacramento that connect residents to where they want to be, and how they want to live – modern design and amenities foster connectivity and healthy living with village parks, paths, pools, spa and clubhouse.

hoa laws Our HOA attorneys and staff look forward to working with McKinley Village’s Board and management.

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hoa-assessment-collection-houseThe collection practices of HOA collection vendors have come under increased scrutiny over recent years. For example, we have written about how California courts have struck down a vendor’s ability to reject partial payments. Those actions resonated throughout the HOA industry and resulted in significant changes to the approaches taken by collection vendors when pursuing the debt owed to their HOA clients. The most significant changes however have come in response to attacks made against collection vendors that operate under a “no cost” collection model. We have also written about this issue and how the “no cost” collection model results in liability exposure for violations of the California Civil Code as well as applicable state and federal fair debt collection laws. To our surprise, despite the actions that collection vendors have wisely taken to shift away from the “no cost” model, we are still seeing instances where a HOA has opted to utilize the services of a “no cost” collection vendor without understanding the substantial risks of doing so.

As nonprofit corporations with fixed budgets, the idea of a “no cost” collection model is certainly attractive to HOAs. Under a “no cost” model, the collection vendor does not charge the HOA any upfront fees or costs for the collection services it performs, but rather collects those amounts directly from the delinquent homeowner. However, in doing so, the United States Bankruptcy Court in California first noted how this approach violates applicable provisions of the Civil Code, and further “opens the door to all sorts of mischief, as an HOA has no incentive whatsoever to question costs for which it is not liable and no incentive to search for services charging more reasonable costs.” (In re Cisneros, (Bankr. N.D. Cal. 2012), (“Cisneros”).) That rationale was underscored in the most recent attack on “no cost” collection models put forth in the case of Hanson v. JQD, LLC d/b/a Pro Solutions, (N.D. Cal., 2014) (“Hanson v. Pro Solutions”).

In Hanson v. Pro Solutions, a HOA hired a collection vendor (“Pro Solutions”) operating under a “no cost” model.  California Civil Code § 5650 allows for a HOA to recover reasonable costs and attorney’s fees “incurred” by the HOA in collecting delinquent assessments. However, Pro Solutions’ “no cost” model did not result in the HOA incurring any fees or costs for Pro Solutions’ services. Rather, the fees and costs charged for Pro Solutions’ services were never billed to the HOA but were instead billed directly to the delinquent homeowner. The plaintiff homeowner alleged that this practice violated the Civil Code and federal and state fair debt collection laws, relying in part on the rationale underlying the Court’s decision in Cisneros.

The Court in Hanson v. Pro Solutions agreed with the homeowner and waived an even bigger red flag to collection vendors operating under a “no cost” model:

“Although no California appellate court has directly addressed whether, as here, a third-party vendor acting on behalf of a HOA can lawfully charge a delinquent homeowner fees not incurred by the HOA, the aforementioned authorities prompt a conclusion that Pro Solutions’ right to impose debt collection fees against Hanson extends no further than the [HOA’s] right to do the same…Pro Solutions’ fees apparently are neither incurred nor paid by the HOAs that contract for the company’s “no cost” services. If California law nonetheless entitled Pro Solutions to impose the fees of its choosing against homeowners like Hanson, the company would wield unchecked power to extract a cascade of fees and costs from a HOA’s delinquent members.”

Hanson v. Pro Solutions was settled and therefore did not result in any precedential court decision on the issue of “no cost” collection models. However, the Court’s language was strikingly clear, as was the warning it sent to HOAs and collection vendors. Even though the HOA was not named as a defendant in Hanson v. Pro Solutions, there is nothing to prevent a HOA utilizing a “no cost” collection vendor from being named as a defendant in a similar suit and thus exposed to significant liability.

California HOA lawyers HOA Boards and management professionals must recognize that, regardless of what type of entity a HOA uses to collect delinquent assessments (an attorney, third party collection agency, etc.), there will be fees and costs associated with their collection services, and that the HOA must pay for those services in order for them to be incorporated into the debt that is recovered from the homeowner. This incentivizes collection vendors to provide services that are not only effective, but cost-efficient, and in doing so helps protect the financial interests of HOAs as well as homeowners who may fall behind on their assessment payments.

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Tustin-Field-IIWe are proud to announce that Tustin Field II Community Association has selected Tinnelly Law Group as their associations’ legal counsel.

Tustin Field is a planned development located in the city of Tustin on the former Marine Corps Air Station El Toro. Residents enjoy community pools, spa, clubhouse, barbecue, picnic area, green park and playgrounds.

hoa laws Our HOA attorneys and staff look forward to working with Tustin Field II’s Board and management.

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pest-controlOnce again the first of the year brings new legislation impacting common interest developments. The passage of Assembly Bill 2362 adds Civil Code section 4777 to the Davis Stirling Common Interest Development Act effective January 1, 2017.  The intent of this bill was to require the same written notification of pesticide application to separate interests and common areas of common interest developments by a non-licensed pest control operator (i.e., the association’s general landscaper) as residents would receive under the existing law for pesticide application by a licensed pest control operator.

You may recall in 2014 California Code of Regulations (CCR) Sections 6000 through 6619 were adopted to govern pesticides and pest control operations. Under Section 6618(b)(1) association vendors that perform pest control services are required to provide associations with certain information concerning the application of pesticides, and associations are required to distribute that information to their residents on a regular basis.

The new Civil Code section 4777 requires associations applying pesticides to a separate interest or the common area by an unlicensed pest control operator to notify the owner and tenant of the affected separate interest, and if the operator will be using a broadcast application (spreading pesticide over an area greater than two square feet) or using total release foggers or aerosol sprays, to notify the owner and tenants of adjacent separate interests that could reasonably be impacted by the pesticide use.  The notice must contain the pest(s) to be controlled, the name and brand of the pesticide product to be used, the date, time and frequency of application (stating that the date, time and frequency are subject to change), and a healthy and safety statement to be copied into the notice.  A copy of the written notice must also be attached to the minutes of the next association board meeting.

Where pesticides are to be applied to a separate interest, at least forty-eight (48) hours prior written notice must be given to the owner and tenant of the separate interest, along with any adjacent impacted owners and tenants.  For applications to the common area, notice must be posted in a conspicuous place near the area to be treated, if practicable, otherwise, individual notice must be given to the owner(s) and tenant(s) of the separate interests adjacent the common area to be treated.  Notice to tenants may be accomplished using first-class mail, personal delivery to a tenant at least 18 years old, or electronic delivery if the tenant has provided an electronic mailing address.

California HOA laws Section 4777 also provides helpful definitions for terms including pest, pesticide, licensed pest control operator, and broadcast application, and the statute authorizes owners and tenants to agree to immediate pesticide application when necessary.

Blog post authored by TLG attorney, Terri A. Morris.