HOA Lawyer Blog

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.

New Client: Belamaria Community Association

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

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

Located in Ontario, Belamaria is a brand new planned development by Frontier Communities. Residents will enjoy a clubhouse, splash pad, dog park, and tot lot.

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

New Client: Broadmoor Hills Community Association

Published on: July 18, 2017 | by Steven J. Tinnelly, Esq.

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

Broadmoor Hills is a planned development located in Corona Del Mar. Residents enjoy a community pool, picnic area, and ocean views.

Our HOA attorneys and staff look forward to working with Broadmoor Hills’ Board and management.

AB 534 Signed: Associations to Provide Notice to Members of Lien Claims

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

Vendor professionals frequently provide a variety of services on behalf of community associations and individual homeowners. Under California’s Constitution, unpaid vendors possess a legal right to lien the property upon which they work for the value of their rendered services or furnished material.

AB 534 (Gallagher), effective January 1, 2018, seeks to clarify how mechanic’s liens are to be used in common interest developments by amending Civil Code Section 4615 and by adding new Civil Code sections.

Under existing law, if a vendor intends to preserve the ability to impose a mechanic’s lien at a later time for work performed at a property, then such entity must first secure advance authorization from the property owner. Similarly, under existing law, a vendor seeking to enforce its claim to payment by way of a mechanic’s lien must notify the owner of the property which will be subject to a lien.

In the context of community associations, ownership of common area property can take a variety of forms: that property can be owned by the association, or it can be owned by all of the homeowners jointly, as tenants in common. As such, the vendor is often burdened by the obligation to identify the legal owner of the common area property when attempting to obtain that advance authorization and when seeking to provide legal notice of an impending lien.

AB 534 circumvents the challenges associated with identifying property ownership by imputing association authorization for a common area improvement to all members, and by making the association the agent for the members for purposes of receiving notices and claims during the lien enforcement process.

Court Concludes Rental Restrictions are Reasonable

Published on: July 5, 2017 | by Steven J. Tinnelly, Esq.

*Unpublished Case

Recently, many residential common interest developments have experienced an influx in the number of short-term rentals within their community. This problem is exacerbated by the increased popularity of websites such as Airbnb and HomeAway. Although profitable, short-term rentals have a significant negative impact on community associations, such as increased damage to common area and violations of the Association’s governing documents. To address these concerns, many associations are amending their CC&Rs to include restrictions imposing a minimum lease period (e.g., thirty days). In a recent unpublished opinion, the California Court of Appeal upheld such a restriction as reasonable.

In Ocean Windows Owners Association v. Spataro, the Court affirmed the decision of the trial court granting the Association’s petition to reduce the requisite approval necessary to amend their CC&Rs pursuant to Civil Code section 4275. The proposed amended CC&Rs included, among other things, a provision imposing a minimum lease term of “thirty (30) consecutive days in any one (1) calendar year….” A homeowner filed an objection to the petition stating that the record was void of any facts sufficient to support a conclusion that the amendments “were necessary for the good of the community.” The Court of Appeal rejected this argument for two reasons.

At the outset, the Court noted that the homeowner had misstated the standard under Civil Code section 4275. Specifically, Civil Code section 4275(c)(5) requires that the “amendment is reasonable.” Reasonableness has been defined as:

Not arbitrary or capricious, rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments, and is fair and non-discriminatory.

(Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal. App. 4^th 563, 577; see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4^th 361, 382 (citations omitted).)

Using the appropriate standard, the Court concluded that the rental restriction was reasonable. The Court’s decision was predicated, in large part, on the declarations of the Association’s community manager and its general counsel. Both averred that short-term rentals had resulted in damage to the common area, increased costs and violations of the governing documents, and the inability or difficulty with obtaining financing due to the association’s appearance as a “condotel.” As such, the Court concluded that there was substantial evidence to support the conclusion that the rental restriction contained in the amended CC&Rs was reasonable (i.e., rationally related to the protection, preservation and operation of the community as a whole).

Although unpublished, this case underscores the courts’ awareness of problems affecting communities with short-term rentals, and their willingness to assist associations in addressing the issue. HOA Boards that are dealing with these types of issues should consult with their HOA’s legal counsel for guidance and recommendations.

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

New Client: Weatherly Bay Homeowner’s Association

Published on: June 27, 2017 | by Steven J. Tinnelly, Esq.

Weatherly-Bay We are proud to announce that Weatherly Bay Homeowner’s Association has selected Tinnelly Law Group as their associations’ legal counsel.

Weatherly Bay is a luxury condominium community located next to Huntington Harbour in northwest Huntington Beach. Residents enjoy harbor views, private boat slips, a large community pool and tennis courts.

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

New Client: Alder Community Association

Published on: June 20, 2017 | by Steven J. Tinnelly, Esq.

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

Alder at 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.

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

Business Judgment Rule Doesn’t Apply When the Board Acts Outside its Authority

Published on: June 14, 2017 | by Steven J. Tinnelly, Esq.

*Unpublished Case

ISSUE:

Is an HOA Board of Directors (“Board”) entitled to protection under the Business Judgment Rule (“BJR”) when it applies an unambiguous view restriction contained in the governing documents in a manner other than written?

RULE:

No. In Lingenbrink v. Del Rayo Estates Homeowners Association, 2017 WL 1075062 (“Lingenbrink”), the Court of Appeal concluded the BJR only applies to matters that are within an HOA Board’s discretion. A Board does not have the discretion to interpret or re-write a restriction where the meaning of the restriction is perfectly clear.

ANALYSIS:

The HOA consists of eighteen (18) “high end” homes in Rancho Santa Fe built on 21 lots, each with sweeping views of the Pacific Ocean. The CC&Rs contain very specific language that protects each Lot’s view as follows:

“No tree, hedges or other plant shall be so located or allowed to reach a size or height which will interfere with the view from any Lot and, in the event such trees, hedges or other plant materials do reach a height which interferes with the view from another Lot, then the Owner thereof shall cause such tree(s), hedge(s) or other plant material[(]s) to be trimmed or removed as necessary.”

New Client: Presidential Heights Community Association No. 2

Published on: May 23, 2017 | by Steven J. Tinnelly, Esq.

Presidential-Heights-II We are proud to announce that Presidential Heights Community Association No. 2 has selected Tinnelly Law Group as their associations’ legal counsel.

Presidential Heights is a condominium community located above the San Clemente Municipal Golf Course, in close proximity to Vista Bahia Park, and a variety of hiking and biking trails. Residents enjoy multiple pools, spas, and panoramic coastal and city lights views.

Our HOA attorneys and staff look forward to working with Presidential Heights’ Board and management.

New Client: Tidelands Owners Association

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

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

Tidelands is a brand new condominium community by The New Home Company. Located in San Mateo, Tidelands offers the very best of waterfront living. Its modern residences provide homeowners a rare opportunity to live in the heart of the San Francisco Peninsula with easy access north to the city or south to Silicon Valley. In addition to a great climate, San Mateo boasts numerous parks making it easy to enjoy a healthy outdoor lifestyle. Residents will enjoy a Club Room, Fitness Center, and views of the San Mateo wetlands, bay and city skyline.

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

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