Beaumont Tashjian Law Blog

Friday, January 1, 2016

2015/2016 Legal Update

The following is a summary of legislation enacted and court decisions from this past year, and news and current events, which impact common interest developments. 

ENACTED STATE LEGISLATION

AB 349 (Gonzalez) Property Use and Maintenance – Artificial Turf

Effective immediately as an urgency statute, AB 349 amends Civil Code Section 4735 to make any provision of a governing document or policy, including architectural or landscaping guidelines, void and unenforceable if it prohibits, or includes conditions that have the effect of prohibiting, the use of artificial turf or other synthetic surface resembling grass. AB 349 was enacted to reduce outdoor water use to help meet the Governor’s mandated 25-percent statewide water use reduction in a time of drought.

This bill also amends Civil Code Section 4735 to prohibit associations from requiring a member to remove or reverse water-efficient landscaping measures, installed in response to a declaration of a state of emergency, once the state of emergency due to drought is lifted.

AB 596 (Daly) Annual Budget Report – FHA/VA Certification

Beginning July 1, 2016, the annual budget report of a condominium project must include a separate statement describing the status of certification by the Federal Housing Administration (FHA) and the federal Department of Veterans Affairs (VA). The Annual Budget Report for condominium projects must now include statements on a separate piece of paper in at least 10-point font as follows:

  • “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.”

AB 786 (Levine) Property Use and Maintenance – Recycled Water

Existing law prohibits an association, except those that use recycled water for landscape irrigation, from imposing a fine or assessment on members for reducing or eliminating watering of vegetation or lawns during any period for which the Governor has declared a state of emergency or the local government has declared a local emergency due to a drought.

AB 786, which takes immediate effect as an urgency statute, allows the imposition of a fine or assessment against an owner that receives recycled water from a retail water supplier and fails to use that recycled water for landscaping irrigation.

AB 807 (Stone, Mark) Recordation of Notice of Transfer Fees

Current law, with regard to a transfer fee imposed upon real property on or after January 1, 2008, requires the person or entity imposing the transfer fee to record a specified document describing the transfer fee concurrently with the instrument creating the transfer fee requirement. Existing law governing transfer fees requires certain disclosures to provide prospective transferee notice of specified information, including the amount or method of calculation of the fee.

AB 807 makes unenforceable a transfer fee recorded against the property on or before December 31, 2007, that incorporates by reference from another document, such as CC&Rs, unless it is recorded against the property on or before December 31, 2016, in a single document that complies with Civil Code Section 1098.

AB 1236 (Chiu, Low) Electric Vehicle Charging Stations – Local Government Approval

AB 1236 requires a city and/or county to approve an application for the installation of electric vehicle charging stations (“EVCS”) through the issuance of specified permits unless the city or county makes specified written findings based on substantial evidence that the proposed installation would have a specific, adverse impact upon the public health or safety, and there is no feasible method to satisfactorily mitigate or avoid the specific, adverse impact. The intent of the legislature is to ensure the timely and cost-effective installation of EVCS. Civil Code Section 4745 requires EVCS to meet applicable health and safety standards and requirements imposed by state and local authorities, and all other applicable zoning, land use, or other ordinances, or land use permits.

This bill does not change Civil Code Section 4745 regarding reasonable restrictions on EVCS set forth in an association’s governing documents. However, associations should not wait for local governments to issue a permit and should not delay in making a decision on whether to approve or deny a request to install an EVCS based upon same.

AB 1448 (Lopez) Personal Energy Conversation – Clotheslines and Drying Racks

New Civil Code Section 4750.10 provides that any governing document provision is void and unenforceable if it prohibits or unreasonably restricts the use of a clotheslines or a drying rack in the owner’s exclusive use backyard. Associations may adopt reasonable restrictions on clotheslines or drying racks that do not significantly increase the cost of using same. A balcony, railing, awning, or other part of a structure or building, such as a fence, are expressly excluded from the definition of a “clothesline” and “drying rack.” As such, associations may be able to prohibit the use of same to hang or otherwise dry laundered items. 

AB 1516 (Committee on Housing and Community Development) – Annual Budget Report

AB 1516 makes technical changes to the form entitled “Assessment and Reserve Funding Disclosure Summary For the Fiscal Year Ending [Insert Year Here]” set forth in Civil Code Section 5570. Be sure to use the updated version of the form in your next Annual Budget Report.

SB 287 (Hueso) Automated External Defibrillators

Under existing law, any person or entity that supplies an automated external defibrillator (AED) on the premise must notify an agent of the EMS agency of the existence, location and type of AED acquired. Any association that supplies an AED must comply with specified existing law regarding AED’s. SB 287 further exempts the supplier from liability from civil damages resulting from any acts or omission in the rendering of emergency care if certain requirements have been met.

SB 351 (Committee on Banking and Financial Institutions) Corporations – Officer Titles

Incorporated associations are governed by the California Corporations Code, which requires corporations to have specific corporate officers, including, among others, a chair of the board. SB 351 amends Corporations Code Section 7213 to expand the permissible titles relating to a chair of the board (e.g., chair, chairperson, chairman, chairwoman, president). Officer titles should be set forth in your association’s bylaws.

SB 655 (Mitchell) Housing Standards: Mold

Existing law requires landlords of buildings to repair dilapidations that render residences untenantable. SB 655 specifies that visible mold growth, with exceptions, is a substandard condition for which the landlord may is required to enter a building to repair dilapidation relating to mold, under specified conditions. Most notably, SB 655 authorizes criminal prosecution of persons who do not swiftly remediate mold.  Despite the attempts of the common interest development industry to urge the legislature to amend SB 655 for clarity, the law does not clearly apply to homeowners associations. This bill demonstrates the importance of boards taking swift action in the event of water intrusion caused by or effecting the common areas or components for which the association is responsible.

PROPOSED FEDERAL LEGISLATION

HR 1471 (Barletta) Disaster Assistance Reform

Steps to obtain eligibility and access to the Federal Emergency Management Agency (FEMA) are ambiguous for housing cooperatives, condominium associations, and community associations. This act will amend the Robert T. Stafford Disaster Relief and Emergency Assistance Act and direct FEMA to provide technical assistance to associations on how to access federal debris removal assistance and directs FEMA to developer policy solutions so homeowners are able to use assistance to repair storm damage to common areas, thereby providing federal disaster relief for associations.

CALIFORNIA CASE LAW - PUBLISHED & UNPUBLISHED

“Published” court decisions are law, and binding, while “unpublished” court decisions are not law.  Although not law, unpublished decisions are extremely valuable as they illustrate how courts address various issues commonly faced by common interest developments.

Bel Air Ridge Homeowners Ass’n v. Rosenberg
(2015) Not Officially Published – May Not be Cited (Not Law) – (2015) LEXIS 4311

In this case, the association petitioned the court to reduce the percentage of affirmative votes necessary to amend CC&Rs (which required supermajority to amend) after seeking a vote of the membership. As a result of voter apathy, the board repeatedly extended the voting period and deadline. The association also sought lender approval, which was required by the original CC&Rs.  Opponents of the restated CC&Rs challenged these procedures and also contended that the proposed amendments included unreasonable restrictions.

The court found that extending the deadline to vote is not prohibited by law, that lender approval efforts were reasonably diligent and that the burden is on members to show CC&R provisions are unreasonable. This case demonstrates the importance of not only making reasonable attempts to allow members to return their secret ballots after the thirty day period required by law for CC&R amendments, but also the importance of properly documenting attempts to amend. Boards should also regularly review their governing documents to ensure same are consistent with law and meet the needs of your community. Please contact our offices should you wish to obtain a quote for BGT to review and amend your governing documents.

Castaic Lake Water Agency v. Newhall County Water District
238 Cal. App. 4th 1196 (2015)

Notice and agenda provided by a local government to the public cited the incorrect statutory provision for authority to hold closed session. The court found that notice substantially complied with the Brown Act (Government Code §54950 et seq.).  The Brown Act applies to government, not CIDs; rather Associations are governed by the Open Meeting Act (Civil Code §4900-4955). However, the Brown Act can provide guidance for conducting board meetings. This case indicates that minor mistakes in agenda references will not prevent holding closed sessions if the agenda item is clear and will not mislead or confuse members.

Glassner v. Smith
(2015) Not Officially Published – May Not be Cited (Not Law) – (2015) Lexis 3201

A board member accused the current and former board members of fraud and mishandling of funds. Accused board members struck back with a recall campaign through a website alleging the member as a convicted criminal and published his settled sexual harassment lawsuit. The member filed a lawsuit naming certain board members as defendants for defamation-related claims. The court ultimately held that the member’s defamation claims arose from protected activity; specifically, board members are limited public figures and a showing of malice is required to support a claim of defamation. The lesson to learn from this case is to avoid the appearance of endorsing or otherwise supporting statements for or against a recall and/or candidates for director. Comments and discussions should be kept neutral at a board level and, where feasible, work internally to resolve disputes. Of course, it is prudent to seek legal counsel in the event of a recall of one or more board members.

Hanson v. JQD LLC, dba Pro Solutions
U.S. Dist. - (2014) Lexis 94742

In this federal case, an association contracted with a debt/assessment collection company to collect assessment arrearages from delinquent owners. The collection company then obtained control of the delinquent owner’s accounts and charged the owner directly for “costs” associated with its services while the association assumed no liability for the company’s fees. The court found that this “no-cost” business model may be unlawful because the amounts recovered against a delinquent owner exceeded the costs incurred by the association. The court reasoned that the company may not collect fees and costs from a delinquent owner when the collection assessment fees are never actually incurred by the association. The court conclusively held that the collection agency violated the Fair Debt Collection Practices Act and the California’s unfair competition law.

In re Cathy Davenport, Debtor (Otter Creek Homeowners Association)
534 B.R. 1 (2015)- Arkansas

In this bankruptcy case, a homeowner debtor purchased real property, then later filed a Chapter 13 petition and failed to make further payments to the association. The CC&Rs expressly stated that easements, covenants, restrictions, conditions and charges shall run with the land, thereby passing with the transfer of property to the debtor. The court found that post-petition assessments and fees are non-dischargeable because they run with the land and are post-petition debts for which no proof of claim was filed by the creditor. A trend towards owners filing bankruptcy has continued to emerge in the industry, creating a roadblock to the collection of delinquent assessments. Consult with legal counsel to monitor bankruptcies and make reasonable attempts to collection delinquent amounts to the extent allowed by law.

Kraus v. Grill
(2015) Not Officially Published – May Not be Cited (Not Law) – (2015) Lexis 846

In this case, a homeowner planted “fast-growing” shrubs along the boundary between his backyard and the neighbor’s backyard. The shrubs grew to an extensive height and blocked the adjacent property owner’s sunlight and ocean views. The adjacent property owner contended that the shrubs height violated the City’s Municipal Code. The court held that the plants were a hedge in violation of local ordinances and ordered either the removal or maintenance of the hedge at the height specified by local ordinance. The “takeaway” from this case is that boards can, and many times should, play a role in facilitating true neighbor-to-neighbor disputes. The trend in the law is moving towards holding boards responsible for getting involved, unless the matter does not involve a violation of the governing documents, affect the common area or otherwise affect components for which the association is responsible.

Ryland Mews Homeowners Association v. Munoz
234 Cal. App. 4th 705 (2015)

An owner installed hardwood floors in a condominium unit without prior association approval and authorization. The floor modification caused a significant increase in sound transfer and noise to the unit below. The association sued the owner to enforce the nuisance provision of CC&Rs and bring the owner into compliance. The court granted an injunction with the directive to find a compromise in modifying the flooring to reduce the level of noise that could be heard from outside the unit, as well as the interim remedy of using throw rugs. The court balanced the consideration of the circumstances of all parties involved, including the residents below who were adversely affected by the upstairs owner’s violation of the noise and nuisance restriction. Depending on the given facts, associations should consider alternative or interim solutions as a way to resolve disputes between neighbors.

The Villas in Whispering Palms v. Tempkin
(2015) Not Officially Published – May Not be Cited (Not Law) – (2015) LEXIS 3425

In 2005, the board of The Villas in Whispering Palms began enforcing a pet restriction set forth in the CC&Rs, effective as of 1979. The court found that the board’s decision to strictly enforce the pet restriction after many years of granting variances was reasonable and entitled to judicial deference. Specifically, there was no indication or evidence of selective or arbitrary enforcement of the restriction when the board took no action to enforce the pet restriction for many years and then reassessed the need for enforcement after investigating the community’s opinion and notifying owners that the rule would be strictly enforced from that point forward. In addition, when the board learned of the violations, it levied fines, sent violation letters, and gave owners an opportunity to address the board. Boards must ensure consistent and uniform enforcement of the governing documents.

Trilogy at Glen Ivy Maintenance Association v. Shea Homes, Inc.
235 Cal. App. 4th 361 (2015)

In this case, the association and homeowners filed suit against the developer for breach of fiduciary duties, unfair business practices including improperly diverting funds, and breach of implied covenant of good faith and fair dealing. The court held that the developer’s anti-SLAPP motion lacked merit for failure to establish an anti-SLAPP analysis. Specifically, the association used the word “repudiation” to describe a species of fiduciary breach, leading the developer to claim that the complaint was about speech. However, the court was not persuaded since the developer failed to show that the association’s suit came from the developer’s conduct taken in furtherance of the developer’s constitutional right of free speech. The court observed that if the association’s injury was caused by the defendant’s conduct that does not rest on protected speech, then it will not trigger an anti-SLAPP defense. In sum, developer controlled boards owe fiduciary duties to the association. During developer transition, evaluate transition procedures and obligations set forth in the governing documents, BRE file and other relevant resources, such as bank statements.

Watts v. Oak Shores Community Association
235 Cal. App. 4th 466 (2015)

In this case, an association enacted rules and regulations and charged fees to non-resident homeowners who rented their homes to short-term vacation renters. The homeowners brought an action challenging the various regulations and fees adopted, including an annual fee imposed on owners who rented their homes. The court upheld the rules adopted by the association that restricted minimum rental periods to seven days and imposed fees on owners who rent their homes. The court found that associations could adopt reasonable operating rules and impose fees on its members relating to short term rentals of condominium units where the CC&Rs gives the board of director’s broad power to adopt rules for the development, and nothing prohibited the board from adopting rules governing short-term rentals. Although the most prudent approach is to amend the CC&Rs regarding use restrictions, this case appears to be an extension of Friars Village Ass’n v. Hansing (2013) 220 Cal. App. 4th 405, which stands for the proposition that rules and regulations are generally considered reasonable if they are 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 are fair and nondiscriminatory.


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