HOA Lawyer Blog

SB 2 Signed: California Legislature Passes the Building Homes and Jobs Act to Address the Affordable Housing Crisis

Published on: September 29, 2017 | by Steven J. Tinnelly, Esq.

housing-crisis California is currently facing a serious shortage of affordable housing. The housing crunch is impacting individuals and businesses in all parts of the state. Businesses are having trouble attracting and retaining employees and individuals face longer commute times and overcrowding, among a host of other issues.

To combat the affordable housing crisis, the California Legislature recently passed the Building Homes and Jobs Act (“Act”). Effective immediately, the Act adds a new section to the Government Code (Section 27388.1) and a new chapter to the Health and Safety Code (Division 31, Part 2, Chapter 2.5).

Effective January 1, 2018, the Act imposes a $75.00 fee for the recording of certain real estate documents like HOA governing documents and collection documents (i.e. CC&Rs, liens, notices of default, etc.) and cannot exceed $225.00 per transaction. The fees generated from the Act will be made available to local governments and the Governor’s Office of Planning and Research through the creation of the Building Homes and Jobs Trust Fund (“Fund”). The Fund will be managed by the California State Treasury.

How the Building Homes and Jobs Act Will Adversely Impact HOAs in California

Central to all HOAs is the collection of assessments on a monthly, quarterly, or annual basis. When a homeowner is delinquent in the payment of assessments, an HOA typically records various lien documents to secure its interest thereby ensuring that it is paid what is owed.

Imposing a $75.00 fee each time these documents are recorded will increase the cost to a delinquent homeowner to resolve an assessment debt with his or her HOA. For homeowners who are already in financial straits and having difficulty making their assessment payments, the added fees to be imposed when lien documents are recorded will make it increasingly difficult for these individuals to bring their assessment accounts current and ultimately remain in their homes.

How the Recording Fees are Distributed through the Building Homes and Jobs Trust Fund

County Recorder Offices will be responsible for remitting the fees they collect on a quarterly basis directly to the Fund. To gain access to the fees collected, local governments must submit proposals to the Governor’s Office of Planning and Research detailing how they plan to use the fees to update planning and zoning ordinances that will streamline housing production.

In addition, the Governor’s Office of Planning and Research will be permitted to use a portion of the fees collected in the Fund to combat homelessness and to create, rehabilitate, and preserve transitional rental housing.

Despite the adverse impact the Act will likely have on HOAs across the state of California, its ultimate goal is to leverage billions of dollars in private investment, lessen the demands on law enforcement and dwindling health resources as fewer people are forced to live on the streets or in substandard housing, and increase businesses’ ability to attract and retain skilled workers.

-Blog post authored by TLG Attorney, Kyle B. Roybal, Esq.

AB 1412 Signed: Clarification of Two (2) Existing Code Sections (Member Notification and Director/Officer Liability)

Published on: September 26, 2017 | by Steven J. Tinnelly, Esq.

Director-Liability On September 25, 2017, Governor Brown signed AB 1412 (effective January 1, 2018) which seeks to clarify Civil Code Section 4041 (Annual Notice of Owner Contact Information) and Civil Code Section 5800 (Limitation of Director and Officer Liability).

Under current law, Civil Code Section 4041 requires the Association to solicit, on an annual basis, mailing addresses from the Members for purposes of providing notice. Members are required to state the primary and secondary addresses to which notices from the Association are to be delivered, among other things. If no such notice is provided, that Section 4041 provides that the default mailing address for purposes of delivery shall be the Member’s property address within the Association.

The existing version of Civil Code Section 4041 potentially inconveniences non-resident Members because they must annually notify the Association of their current mailing address. If they fail to do so, Management is then legally obligated to change the Members’ mailing address back to the Members’ Association address.

AB 1412 removes those administrative burdens by stating that the default mailing address shall be the last address provided in writing by the Member to the Association, if any. Under that circumstance, the Association no longer needs to annually update its Member address records if the Members forget to supply their existing mailing address to the Association.

Civil Code Section 5800 provides liability protections to volunteer Directors and Officers if certain conditions are satisfied (i.e. the act/omission was performed in good faith and within the Director/Officer’s Association duties, etc.). Current law provides that such protections are only available to Directors/Officers in common interest developments that are exclusively residential. The protections previously offered by Section 5800 were unavailable to volunteer Directors/Officers in mixed use settings, such as common interest developments with residential and commercial units.

In view of the growing number of common interests developments throughout the state, the California legislature recognized that Section 5800 did not provide liability protection to Directors/Officers in mixed use common interest developments.

As such, AB 1412 seeks to expand the breadth of Civil Code Section 5800 because it now generally applies to volunteer Directors/Officers in mixed use settings. Such protection is limited to those Directors/Officers who are tenants of a residential separate interest or who own no more than two (2) residential separate interests.

AB 1412 will save time and money because the Association is no longer burdened with the duty to update Member address information if a Member fails to provide Management with his or her mailing address.

Mixed use common interest developments may experience increased Board participation by volunteer Directors/Officers because liability protections are now available under Civil Code Section 5800.

AB 1412 does not address whether volunteer commercial unit owners or Members who own three (3) or more residential units are immune from liability under the same liability protections. A review of the legislative history for AB 1412, coupled with general principles of statutory construction, suggests that those individuals may be excluded in that regard.

-Blog post authored by TLG Attorney, Kumar S. Raja, Esq.

New Client: Rossmoor Park Owners Association

Published on: September 26, 2017 | by Steven J. Tinnelly, Esq.

Rossmoor-Park We are proud to announce that Rossmoor Park Owners Association has selected Tinnelly Law Group as their associations’ legal counsel.

Rossmoor Park is a condominium community located in Seal Beach. Residents enjoy two pools, a spa, fitness center, barbecue area, and several greenbelts.

Our HOA attorneys and staff look forward to working with Rossmoor Park’s Board and management.

New Client: Pentridge Cove II Community Association

Published on: September 19, 2017 | by Steven J. Tinnelly, Esq.

pentridge-cove-II We are proud to announce that Pentridge Cove II Community Association has selected Tinnelly Law Group as their associations’ legal counsel.

Pentridge Cove II is a condominium community located in the South Coast Metro area of Costa Mesa. Residents enjoy a pool, spa, lakes and streams.

Our HOA attorneys and staff look forward to working with Pentridge Cove II’s Board and management.

SB 407 Signed! Legislation Broadens Assembly and Speech Rights within HOAs

Published on: September 13, 2017 | by Steven J. Tinnelly, Esq.

hoa-campaign-meeting

New Civil Code 4515 will be added to the Davis-Stirling Act to ensure that homeowners association residents may exercise their rights of peaceful assembly and political speech.

HOAs are playing an increasing role in the lives of California’s residents as compared to the roles traditionally played by cities and counties. HOAs are growing in number, size and sophistication. As a result, a HOA’s actions and governance structure often have more immediate effects on the issues homeowners feel “closest to home,” such as property values and community services. This is why California law will at times hold HOAs—which are private corporations—to the standards of “quasi-governmental entities.”

An example of this was seen several years ago when legislation was enacted to grant every HOA member the right to use common area meeting spaces for purposes related to a HOA’s election. The intent was to promote constitutional principles of freedom of speech and assembly; to allow HOA members to meet for purposes related to an ongoing HOA campaign (i.e., a HOA board election), and to do so without any unreasonable impediment imposed on them by their HOA.

SB 407 (Wieckowski) is a newly signed bill that takes this idea much further. It was introduced in response to what California’s legislators felt to be a continuing abuse of power by HOAs in using non-solicitation rules to prohibit non-commercial free and political speech:

“Blanket prohibitions on commercial solicitation are often so broadly written that they could be interpreted to prohibit non-commercial free and political speech.”

“Significant anecdotal evidence demonstrates that HOAs have extended the restrictions of door-to-door solicitation to political speech.”

“Overly broad rules and policies discourage the civic participation of HOA members and criminalize free political expression.”

New Client: Madiera at Coronado Ranch Homeowners Association

Published on: August 15, 2017 | by Steven J. Tinnelly, Esq.

Madiera We are proud to announce that Madiera at Coronado Ranch Homeowners Association has selected Tinnelly Law Group as their associations’ legal counsel.

Madiera is a condominium community located in San Marcos. Residents enjoy a clubhouse, fitness center, pool, and playground.

Our HOA attorneys and staff look forward to working with Madiera’s Board and management.

New Client: Isle Cove Homeowners Association

Published on: August 8, 2017 | by Steven J. Tinnelly, Esq.

Isle-Cove We are proud to announce that Isle Cove Homeowners Association has selected Tinnelly Law Group as their associations’ legal counsel.

Isle Cove is a condominium community located in Foster City. Residents enjoy a large lagoon, pool, tennis courts and clubhouse.

Our HOA attorneys and staff look forward to working with Isle Cove’s Board and management.

AB 1139 Imposes New Notice Requirements on Deed-Based Transfer Fees

Published on: August 2, 2017 | by Steven J. Tinnelly, Esq.

disclosure On July 31, 2017, Governor Brown signed Assembly Bill 1139 (“AB 1139”) into law. AB 1139 amends California Civil Code Section 1098.5 with regard to deed-based transfer fees (“Private Transfer Fees” or “Fees”). Prior to AB 1139 becoming law, any individual or entity who imposed a Fee on real property on or after January 1, 2008, had to record a document that provided limited notice of the Fee on or before January 1, 2009.

AB 1139 now requires any individual or entity who imposes a Fee on real property on or after February 8, 2011, to record a document that contains very specific language with regard to notice. The notice must now state that federal housing agencies are prohibited from dealing in mortgages on properties encumbered by private transfer fee covenants that do not provide a “direct benefit” to real property encumbered, and that if a person purchases such a property, that person may have difficulty obtaining financing.

Brief Background

Private Transfer Fees are fees paid by a purchaser when real property is resold. The Fees are typically one percent (1%) of the sale price of the real property and specified in the original purchase documents. The Fees are typically paid from the purchaser to one of four groups: 1. the HOA, 2. tax-exempt groups that provide a direct benefit to the HOA, 3. tax-exempt groups that don’t provide a direct benefit to the HOA, and 4. third-party developers or investors.

New Client: Central Park West Community Association

Published on: August 1, 2017 | by Steven J. Tinnelly, Esq.

Central-Park-West We are proud to announce that Central Park West Community Association has selected Tinnelly Law Group as their associations’ legal counsel.

Central Park West is Irvine’s first urban master planned community developed by Lennar. This beautiful 43-acre community encompasses urban-styled residences, verdant parks and landscaped paseos, resort-style clubhouse, barbecue areas, state-of-the-art health and fitness center, exercise/yoga studio, and Junior-Olympic-size saline pool and spas.

Our HOA attorneys and staff look forward to working with Central Park West’s Board and management.

AB 690 Signed! New Management Disclosures and Changes to the Escrow Document Disclosure Form

Published on: July 25, 2017 | by Steven J. Tinnelly, Esq.

conflict-of-interest

The Governor has signed AB 690 into law, which modifies several Code sections and adds two new Civil Code sections to the Davis Stirling Common Interest Development Act. Here is what you need to know about the new requirements:

New Civil Code Section 5376 provides that the manager, management firm, or third-party contractor must facilitate the delivery of escrow documents pursuant to Civil Code Section 4530, as required by the management contract.

New Requirements: Escrow Document Disclosure Form

The “Charges for Documents Provided” form described in Civil Code Section 4528 must be modified to include the following:

All information in at least 10-point type;
The statement: “The seller may, in accordance with Section 4530 of the Civil Code, provide to the prospective purchaser, at no cost, current copies of any documents specified by Section 4525 that are in the possession of the seller.”;
The statement: “A seller may request to purchase some or all of these documents, but shall not be required to purchase ALL of the documents listed on this form.”;
The fee for each document in the “Fee for Document” column of the form;
Fees must be separately stated and billed to distinguish them from other transfer fees; and,
A copy of the escrow document disclosure form must be included in the Annual Budget Report sent to members.

New Manager and Management Company Disclosures

Business & Professions Code Section 11504 and Civil Code Section 5375 have been amended to provide that, in addition to a CID manager’s disclosure within 90-days of providing management services of their name, address, certification, real estate license, and fidelity insurance coverage, managers and management firms must annually disclose, in writing, to HOA boards the following:

Any referral fee or other monetary benefit the manager or management firm receives from companies that provide escrow documents and annual budget reports;
Acknowledgement that the records listed in the escrow document disclosure form are the property of the HOA, not the manager or management firm; and,
Any business or company in which the manager or management firm has an ownership interest, receives profits or other monetary incentives.

New Civil Code Section 5375.5 provides that, when presenting a bid for vendor services to a board, the manager or management firm must disclose, in writing:

Any referral fee or other monetary benefit that could be derived from a business or company serving the HOA (i.e., vendor the HOA board may contract with); and
Any ownership interests or profit-sharing arrangements with service providers recommended to, or used by the HOA.

Although managers have long been advised to disclose any potential conflicts of interest to an association’s board of directors, AB 690 now codifies how and when a manager or management company must make that disclosure.

-Blog post authored by TLG Attorney, Terri A. Morris, Esq.

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