HOA Lawyer Blog

AB 596 Signed! New FHA and VA Disclosures Required Beginning July 1, 2016

Published on: August 24, 2015 | by Steven J. Tinnelly, Esq.

hoa-fha-loans New Legislation*

Civil Code Section 5300 requires a HOA to prepare and distribute to its members an annual budget report. The annual budget report serves as a consolidated disclosure statement which must include numerous items of information, such as information pertaining to the HOA’s reserve funds, operating budget, and insurance policies.

In June of this year, we blogged about AB 596 (Daly), a bill proposed by the California Legislature that would require additional statements of information to be distributed with the annual budget report for condominium HOAs. Those statements would disclose the status of the condominium development as being a Federal Housing Administration (FHA) approved condominium project or a Department of Veterans Affairs (VA) approved condominium project.

AB 596 was signed by Governor Brown on August 12, 2015. As a result, beginning July 1, 2016, Civil Code Section 5300 will additionally require condominium HOAs to provide the following statements in at least 10-point font on separate pieces of paper that accompany the annual budget report:

“Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest. This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”

“Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest. This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.”

The intent behind AB 596 is to ensure that condominium owners and prospective condominium owners understand the benefits of a condominium development being FHA or VA approved and how the availability of FHA or VA financing benefits the marketability of the condominium units within the development.

Industry experts have expressed concern that a HOA which was certified at the time of the disclosure may not retain that certification throughout the course of the fiscal year. However, AB 596 does not add a requirement for the disclosure statements to be revised mid-year should the HOA’s FHA or VA certification status change. FHA approval expires every two years and requires a recertification process. If a community no longer meets the FHA approval guidelines, recertification may be rejected. If approval is granted, but the FHA learns of additional factors, approval may be withdrawn. HUD does not currently have a notification system in place to inform the association that FHA approval has expired or been withdrawn.

Condominium HOA boards and managers are encouraged to regularly check for FHA Approval at the Official HUD Directory and VA Approval at the Official VA Directory to verify the current status of their communities.

New Client: Portola Hills Community Association

Published on: July 29, 2015 | by Steven J. Tinnelly, Esq.

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

Portola Hills is a planned development located in Trabuco Canyon, surrounded by the Saddleback Mountains and Whiting Ranch Wilderness Park. Residents enjoy a private recreation center, including a pool, jacuzzi, and tennis courts, as well as walking trails throughout the neighborhood.

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

Occupancy Limitations and Homeowners Associations

Published on: July 24, 2015 | by Steven J. Tinnelly, Esq.

On January 20, 2015, a tragic fire ripped through a condominium complex in the city of San Juan Capistrano, killing three, injuring six, and displacing eighty residents living in eight units. The decedents were three of seventeen individuals living in a four-bedroom condominium. In light of the deaths and their relation to the number of occupants living in the unit, efforts are now underway to examine state and local occupancy restrictions with an eye towards preventing an incident like this from occurring in the future. To that end, questions have surfaced with respect to an association’s ability to adopt and enforce state and local occupancy standards, as well as to promulgate operating rules regulating the number of occupants living within a unit.

An association’s “operating rules” are regulations adopted by the board that apply “generally to the management and operation of the common interest development or the conduct of the business and affairs of the association.” (Civ. Code § 4340(a)) They relate to things such as the use of common area and separate interests, member discipline, and procedures for elections. (Civ. Code § 4355(a)(1)-(7)) In order to be valid and enforceable, the operating rule must meet several requirements: the rule must be (1) in writing, (2) within the authority of the Board of Directors conferred by law or the governing documents, (3) not in conflict with governing law and the governing documents, (4) adopted in good faith and in compliance with the procedural requirements set forth in Civil Code section 4360, and (5) reasonable. (Civ. Code § 4350) Accordingly, presuming that an occupancy rule is adopted by an association’s board of directors pursuant to the powers granted to it under the governing documents, the primary focus is whether the occupancy rule conflicts with governing law (i.e., California law).

New Client: The Crossings Rowhouse Association

Published on: July 17, 2015 | by Steven J. Tinnelly, Esq.

We are proud to announce that The Crossings Rowhouse Association has selected Tinnelly Law Group as their associations’ legal counsel.

The Crossings Rowhouse is a transit-oriented condominium community located in the city of Mountain View, 30 miles south of San Francisco. Residents enjoy a walkable and bikeable neighborhood, close to retail shops, parks, a daycare center, and the Caltrain commuter rail station.

Our HOA attorneys and staff look forward to working with The Crossings Rowhouse’s Board and management.

Modifying Enforcement Policies; Avoiding Claims of ‘Selective Enforcement’

Published on: July 6, 2015 | by Steven J. Tinnelly, Esq.

hoa-pet-restriction One problem that arises in the context of enforcing homeowners association (“HOA”) governing documents pertains to how consistently certain use restrictions in the governing documents are enforced over time. For example, if a HOA has historically failed to enforce a particular restriction, a decision to enforce that restriction against a particular owner may subject the HOA to claims of “selective enforcement” and/or that the HOA’s enforcements efforts are being exercised in an arbitrary and capricious fashion. These claims not only hinder the cost-efficient resolution of disputes, but could significantly undermine the HOA’s enforcement authority.

It is therefore difficult for a HOA’s Board of Directors to modify the HOA’s enforcement policies over time, especially when it desires to enforce a use restriction that was either never enforced or enforced inconsistently by the HOA in the past. However, the recent unpublished opinion in The Villas in Whispering Palms v. Tempkin (Cal. App. 2015) 2015 WL 2395151 (“Villas”) demonstrates that this difficulty may be overcome through providing proper notice to the HOA’s members and through enforcing the restriction consistently thereafter…

New Client: Savannah at Mountain House Owners’ Association

Published on: July 1, 2015 | by Steven J. Tinnelly, Esq.

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

Savannah is a brand new single family home community in the growing town of Mountain House being developed by Signature Homes. Residents will enjoy a true neighborhood vibe, where they can share a cup of coffee on the porch or entertain family and friends in spacious great rooms.

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

AB 596: Is Your Community FHA or VA Certified?

Published on: June 22, 2015 | by Steven J. Tinnelly, Esq.

hoa-fha-loans We have previously blogged about Federal Housing Administration (FHA) certification for condominium associations. Recently, the California legislature proposed AB 596 (Daly), which would add a separate document to the Annual Budget Package disclosing whether the condominium association is FHA approved. This bill would also require a second document disclosing whether the condominium association is approved by the federal Department of Veterans Affairs (VA).

When a community is a condominium project, AB 596 requires that the Annual Budget Package include a statement “in at least 10-point font on a separate piece of paper and in the following form: ‘Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest. This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.” A similar statement on a second piece of paper must be made regarding VA certification.

Industry experts have expressed concern that an association that was certified at the time of the disclosure may not retain that certification throughout the course of the fiscal year. FHA approval expires every two years and requires a recertification process. If a community no longer meets the FHA approval guidelines, recertification may be rejected. If approval is granted, but the FHA learns of additional factors, approval may be withdrawn. HUD does not currently have a notification system in place to inform the association that FHA approval has expired or been withdrawn.

CAI’s California Legislative Action Committee is requesting amendments to the bill that would direct homeowners to the official FHA and VA Approval websites to verify if the community is FHA or VA certified. AB 596 has passed the Assembly, and is currently in the Senate.

Association boards and managers are encouraged to regularly check for FHA Approval at the Official HUD Directory and VA Approval at the Official VA Directory to verify the current status of their communities. We will update our blog if and when AB 596 is ultimately signed into law.

Blog post authored by Tinnelly Law Group’s Director of Business Development, Ramona Acosta

New Client: Avelina Homeowners Association

Published on: April 23, 2015 | by Steven J. Tinnelly, Esq.

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

Avelina is a brand new single family detached home community in the city of Perris being developed by Pulte Homes. The community features five versatile floor plans ranging from 1,959 to 3,286+ square feet with 3-7 bedrooms and up to 5 baths. Residents will enjoy this family-friendly master planned community with a neighborhood-exclusive pool, kiddie pool, Jacuzzi, BBQs and more.

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

Expanded Scope of ‘Judicial Deference’ – Authority to Impose Short-term Renter Fees

Published on: April 13, 2015 | by Steven J. Tinnelly, Esq.

*New Case Law

In the landmark case of Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 (“Lamden“), the California Supreme Court established what is known as the “Rule of Judicial Deference” or “Lamden Rule” that, in sum, requires courts to defer to decisions made by a HOA’s Board of Directors regarding “ordinary maintenance:”

“…We adopt today for California courts a rule of judicial deference to community association board decisionmaking that applies, regardless of an association’s corporate status, when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors.” (Lamden, at 253.)

However, in a recently published opinion, the Court of Appeals expanded the scope of the Lamden Rule to include additional decisions made by a HOA’s Board, such as those to adopt rules and impose fees on members relating to short-term renters…

New Client: Coronado at Aliso Viejo Homeowners Association

Published on: April 7, 2015 | by Steven J. Tinnelly, Esq.

We are proud to announce that Coronado at Aliso Viejo Homeowners Association has selected Tinnelly Law Group as their association’s legal counsel.

Coronado was built in 1994 by Lohn Laing Homes in the City of Aliso Viejo, which is known for its rolling hills, low crime, clean air, and close proximity to the beach. Residents enjoy using the community pool, spa, and a central greenbelt.

Our HOA attorneys and staff look forward to working with Coronado at Aliso Viejo’s Board and management.

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