HOA Lawyer Blog

Defining HOA “Membership” & “Ownership” Status for Registered Domestic Partners

Published on: June 14, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked – Our Association’s By-laws state that you must be an owner of the Association to be eligible for election to the Board. Would the registered domestic partner of the person on title be considered an owner in the State of California under California Community Property Law?

Answered – Not in this instance. Most Association Governing Documents require that anyone wishing to serve on the Association’s Board of Directors be a “member” of the Association. Pursuant to California Civil Code Section 1358, “membership” within an Association is granted by virtue of a person’s ownership interest in the Association. Thus, so long as a person is an owner of a unit within the Association, they are granted membership rights.

Proof of one’s ownership interest in the Association is established through a deed which has been recorded in the Association’s County Recorder’s Office. The persons whose names are listed on the recorded deed are considered to be the “Owners of Record.”

Virtually every Association requires that a member be an “Owner of Record” in order to be eligible to serve on the Board of Directors. Therefore, a registered domestic partner who is not an “Owner of Record” would not satisfy this requirement. To resolve this issue, the domestic partner must be named on the recorded deed to the property. California Community Property law does not render spouses or domestic partners “Owners of Record” for such purposes if their names do not appear on the recorded deed.

To submit questions to Tinnelly Law Group, click here.

Can HOA Enforcement Actions Equate to Discrimination?

Published on: June 8, 2011 | by Steven J. Tinnelly, Esq.

The recent, unpublished opinion in Radell v. Park Wilshire Homeowners Association (2011) illustrates the importance of fully complying with prescribed HOA enforcement procedures. In Radell, the Plaintiffs alleged that the Willshire Bark Homeowners Association (“Association”) Board of Directors (“Board”) “committed a series of discriminatory acts intended to diminish the presence of Puerto Rican women in their upscale condominium building.”

The issue arose out of the Defendant’s use of their maid’s unit for residential purposes– a use which the Board felt constituted a violation of the Association’s CC&Rs. Rather than following the Association’s prescribed enforcement procedures, the Board declined to extend a confidential disciplinary hearing regarding the issue to the Defendants. The Board opted instead to publish the alleged violation to the entirety of the Association’s membership.

To make matters worse, the Board held an unnoticed, confidential Board meeting where they initiated a recall election against the Defendant Board Member. The Defendants then brought a housing discrimination action against the Association under the California Fair Employment and Housing Act (FEHA) and the Fair Housing Amendments Act of 1988 (FHA) by alleging that the Board “engaged in a pattern or practice of discrimination through disparate treatment on the basis of race, ancestry and national origin.”

Though the the holding in Radell primarily touches on Anti-Slapp motions in the context of housing discrimination, it also demonstrates how a Board’s conduct in enforcing CC&Rs can subject an Association to defending costly lawsuits. Boards must be diligent in fully complying with prescribed enforcement policies and procedures when dealing with each and every potential violation.

New Data & Analytics Firm Seeks to “Bridge the Gap” Between the Mortgage Industry and HOAs

Published on: June 1, 2011 | by Steven J. Tinnelly, Esq.

A new subsidiary of a national asset management firm has been founded to help resolve some of the problems experienced by Homeowners Associations (“HOAs”) and the mortgage industry in the resale of foreclosed and defaulting residential properties. A press release by the newly formed company, Sperlonga Data and Analytics, states that HOA claims for unpaid dues “frequently create problems and delays” in the sale process. Sperlonga believes that these delays cause “hundreds of millions of dollars in losses for the mortgage industry annually, largely because parties have no means to contact one another.”

Sperlonga seeks to help facilitate contact with HOAs, lenders and other lien holders. Their goal is to resolve outstanding HOA obligations before they can negatively impact the resale process. “After hearing again and again of homeowners’ associations creating issues at closing for parties wanting to buy and sell assets, it became evident that this problem was costing the industry tremendous amounts of time and money…With no single source of reliable association data or standardization in place to manage this process, we saw an immediate opportunity to deliver a solution with real value for all parties.” (Sperlonga’s chairman and CEO).

Sperlonga will provide a “centralized repository” for HOAs to submit their demands for unpaid assessments. These demands will then be directed by Sperlonga to the appropriate party for payment–usually a bank or other financial institution.

It is great to see the attention being given to the difficulties experienced by HOAs attempting to collect on unpaid assessment obligations and how HOAs are suffering from significant foreclosures and vacancies. Any efforts made by service providers and those in the mortgage industry to provide a more efficient resale process for distressed properties will certainly help HOAs and their communities.

Turning up the Heat on HOA Collection Practices

Published on: May 26, 2011 | by Steven J. Tinnelly, Esq.

The increase in assessment collection efforts by Homeowners Associations (“HOAs”) is being seen nation-wide. States like California, Nevada and Texas are currently debating new legislation aimed at making some drastic, and potentially harmful, reforms to the ways in which HOAs can pursue and collect delinquent assessments.

In California, there is a proposed bill that would significantly affect a HOA’s ability to collect delinquent assessments. SB 561 will, in a nutshell, make it much more difficult for a HOA to recover the collection costs and fees incurred in connection with collecting delinquent assessments. There is signficant industry opposition to the bill.**

Additionally, some property owners are beginning to take a more agressive stance against HOA collection efforts. In Nevada, investors in foreclosed homes recently filed a new class-action complaint against more than 500 Nevada HOAs. They allege that HOAs have unlawfully allowed collection companies to collect costs that were never incurred by the HOAs.

New legislation and legal challenges concerning HOA collection practices could radically impact the financial and operational structure of HOAs and collection companies. Hopefully, the increase in attention will help to (1) spotlight the tremendous toll that delinquencies are taking on HOAs and (2) provide a clear, settled framework for HOAs to use in their collection efforts.

**To read more about industry sentiments toward SB561, visit CAI’s California Legislative Action Committee’s website.

Credit Card Processing of HOA Assessments: Good Idea?

Published on: May 17, 2011 | by Steven J. Tinnelly, Esq.

Associations are required to levy regular and special assessments sufficient to perform their obligations under their governing documents and Ca. Civ. Code §1366(a). Associations may encounter difficulties in getting their members to pay assessments on a regular and timely basis. In response to these difficulties, some Associations are providing credit card processing of assessment payments as a courtesy to their members and/or an incentive for delinquent members to fulfill their assessment obligations while deferring the actual payment. The fees involved in processing assessments by credit card are then sometimes absorbed by the Association.

Several Managers and Board members have contacted us regarding the propriety of absorbing these fees.

We have prepared an article on this issue which is available for download from our Library. The article is entitled “Absorbing Credit Card Transaction Fees”.

In sum, absorbing these fees is problematic because (1) it results in an inequity for the Association’s members that pay their assessments by cash or check and (2) likely violates the assessment requirements of the Association’s CC&Rs. Associations that provide credit card processing of assessments should ensure that the members paying by credit card are responsible for any transaction fees and costs involved.

For a more detailed discussion of this issue, click here to read the article.

To submit questions to Tinnelly Law Group, click here.

HOA To Install CA’s Largest Residential Solar Water Heating Project

Published on: May 11, 2011 | by Steven J. Tinnelly, Esq.

More and more Associations throughout California are considering the implementation of alternative energy sources as a mechanism to reduce their operating expenses. An Association in San Jose will begin construction on the largest solar water heating project in the state later this month in an effort to reduce its water heating bills.

The Association is comprised of 320 residential units and uses an average of 10,000 gallons of hot water per day for showers, dishwashers, laundry and other residential purposes. By switching from natural gas to solar energy for their water heating needs, the Association expects to reduce its water heating bills by as much as 60%.

The project will benefit significantly from the new California Solar Initiative (CSI) Thermal Program which provides the Association with rebates valued at over $185,000. These rebates will help offset the costs of installing a total of 183 commercial grade solar hot water collectors to be mounted on five roofs of the Association’s buildings.

Homeowners Associations in California may want to explore the feasibility of implementing alternative energy within their communities. Some CC&Rs may restrict or prohibit these installations; however, any such restrictions flatly prohibiting solar panels and supporting equipment are null and void in California. If you would like some guidance on this issue, contact our offices to discuss with one of our attorneys the options available to your Association.

To read the original article, click here.
To visit the solar system manufacturer’s website, click here.

Board Member Qualifications: Defining “Ownership” for a Trust Beneficiary

Published on: May 9, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Question – One of our incumbent Board Members was recently discovered to be the beneficiary of a trust that holds title to her home. The title was transferred by Grant Deed to the named Trustee many years ago. The Board Member asserts that she is an owner and thus eligible to serve as a Board Member. Is she correct?

Maybe. Associations are permitted to set reasonable requirements/qualifications in their Bylaws or CC&Rs for members to serve on the Board. Laguna Royale v. Darger (1981). These requirements typically include that any member wishing to serve on the Board have an ownership interest in a property located within the Association. We typically treat the trustees as the owners of the property due to their ability to control title. However, general principles of trust law in California view trust beneficiaries as holding “the equitable estate or beneficial interest in” property held in a trust and are “regarded as the real owner[s] of [that] property.” Steinhart v. County of Los Angeles (2010).

The answer will ultimately depend on a number of factors including the nature of the restrictions/qualifications contained in your Association’s Governing Documents and the type of trust involved. We recommend discussing the issue with your Association’s legal counsel.

To submit questions to Tinnelly Law Group, click here.

Short Sales and Delinquent Assessments

Published on: May 5, 2011 | by Steven J. Tinnelly, Esq.

*Asked & Answered

This economic downturn has dealt a serious blow to the assessment revenue of Associations throughout California. Almost every Association is dealing with several delinquent homeowners. One Board Member recently submitted a question on our site asking what happens to an owner’s delinquent assessments if the owner sells his property in a short sale.

In an effort to avoid foreclosure, an owner may elect to sell his property in a “short sale” by selling the property for less than is owed on the mortgage. Because the lender will take a loss on the property, the lender ‘s approval is required before the sale can take place.

Any outstanding liens on the property must be satisfied for the sale to proceed. Provided that the Association has liened property for the delinquent assessments, then it stands in a strong position to recoup at least some money.

Though the Association is under no obligation to release its lien, it should realize the benefit of having a new, dues-paying owner in the property. The Association should negotiate with the parties involved by seeking contribution from the lender, buyer, and realtors in exchange for the Association waiving some of the late fees and interest that may have accrued on the outstanding assessment amount. This type of reasonable approach will (1) help the Association recover at least some money, (2) provide the Association with a dues-paying owner, and (3) help prevent the new owner from harboring resentment for the Association.

Property Owners Entitled to Compensation from State

Published on: May 2, 2011 | by Steven J. Tinnelly, Esq.

Property owners in a partially-built Northern California subdivision may be compensated by the State for flooding damage to their properties.

A Sacramento County Superior Court ruling in April held that the state violated the constitutionally property rights of the property owners by allowing the local lake to flood the surrounding landscape. The California Coastal Commission and the state Department of Fish and Game were managing the lake’s water levels in such a way as to cause flooding to a significant portion of the property owners’ land.

The court ruled that, as a result of the management plan, the state had effectively seized the homeowners land without compensation. The second phase of the trial will require a determination as to the type and amount of damage each property owner will receive from the state.

To read the full story, click here.

It is important for property owners to understand how their private property rights interact with the rights and privileges of state and local municipal bodies.

Purchaser of Home Foreclosed by HOA Entitled to Recover Repair Costs from Redeeming Homeowner

Published on: April 27, 2011 | by Steven J. Tinnelly, Esq.

In an effort to collect unpaid assessments, Associations have the power pursuant to California Civil Code Sections 1367(a) and 1367.1 to record a lien on the offending property and subsequently enforce that lien through foreclosure. After the foreclosure sale, California Code of Civil Procedure § 729.035 states that “the sale of a separate interest in a common interest development is subject to the right of redemption…if the sale arises from a foreclosure by the association of a common interest development…” This right of redemption allows the delinquent homeowner to redeem the foreclosed property from its purchaser by paying the requisite “redemption price” within 90 days. California Civ. Code § 1367.4.

The recently decided case of Barry v. OC Residential Properties, LLC (2011), holds that if such a homeowner wishes to exercise her right of redemption, the redemption price should include any repair costs paid by the purchaser that were “reasonably necessary for the preservation of the property.”

In Barry, the Plaintiff redeeming homeowner challenged the redemption price because it included over $17,900 in expenses that the Defendant purchaser paid for maintenance and repair work on the unit after the foreclosure sale, an electric bill, and interest on the foreclosure sale price. In ultimately affirming the validity of the redemption price, the court in Barry relied on a declaration given by one of Defendant’s project managers that concluded that the unit was “in need of repair and rehabilitation” and that the “repairs made were necessary to prevent further damage to the property.”

To read the Barry case, click here.

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