Beaumont Tashjian Law Blog

Tuesday, November 3, 2020

2020/2021 LEGAL UPDATE

This year’s legislative session was unlike any other, as the novel coronavirus (COVID-19) pandemic forced the State of California and its 2020 legislative session to suspend its routine schedule. As a consequence, the focus of the Legislature shifted to pandemic relief, and for our State’s 40,000+ common interest developments, this means changes to combat issues caused or exacerbated by the pandemic (see Assembly Bill 3182, for example).

What follows is a summary of noteworthy legislation, court decisions, news, and current events from this past year, which impact common interest developments. 

 

ENACTED LEGISLATION
The bills below have been signed and approved by Governor Gavin Newsom and will take effect January 1, 2021, as “New Law.”

SB 326: Exterior Elevated Elements

This Bill revises the Civil Code to require a condominium association with three (3) or more units to have a licensed structural engineer conduct an inspection of the building’s exterior elevated elements, at least once every nine (9) years. Exterior elevated elements include decks, balconies, stairways and walkways and their railings, for which the association is responsible for maintaining or repairing, and which: (a) extend beyond the exterior walls of the building; (b) have a walking surface six (6) or more feet above ground, (c) are designed for human occupancy or use; and (d) are supported in whole or in substantial part by wood or wood-based components.

The law requires the association to perform its first inspection and obtain a “statistically significant” sample by January 1, 2025. It’s critical that boards and managers start this process early, which means working with the association’s reserve specialist to add this as a new line item and begin allocating money accordingly, obtaining and reviewing bids from engineers, and discussing the next steps with legal counsel if there are balconies which pose an immediate danger or risk.

  

AB 3182: Rental or Leasing of Separate Interests

Starting January 1, 2021, the Civil Code is amended to make void and unenforceable any provision in your governing documents which prohibits or “unreasonably restricts” renting, with two (2) exceptions: (1) Associations can prohibits short-term rentals of thirty (30) days or less; and (2) Associations can limit the total number of rental homes in the community to twenty-five percent (25%), but no less.

What is more, the law requires associations to amend their governing documents to conform to the law by December 31, 2021. Enforcing a prohibited rental restriction or failing to amend the governing documents exposes associations to risk of incurring a $1,000.00 civil penalty. Boards must act now and consult with their association’s legal counsel to determine a course of action for amending the governing documents and coming into compliance, while also addressing any mitigating measures to combat the effects of a potential increase in rental properties within the community.

 

AB 1885: Debtor Homestead Exemption  

A homestead exemption is provided by state law, and protects an owner’s equity in their home, by preventing creditors from collecting up to a certain dollar amount in a foreclosure sale. For homeowners associations in California, nonjudicial foreclosures are subject to a homestead exemption of either $75,000, $100,000 or $175,000, depending on certain characteristics of the owner(s).

AB 1885 revises the homestead exemption to provide even greater protections for delinquent owners whose homes may be nonjudicially foreclosed upon by the association. Owners may now claim an exemption up to the greater of: a) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed $600,000; or b) $300,000.

Association boards should consult with legal counsel and/or their nonjudicial foreclosure service provider to determine what impact this may have on their community’s ability to foreclose and/or collect assessments.

 

SB 908: Debt Collectors, Licensing and Regulation

This Bill applies greater oversight to debt collectors by requiring them to apply for and be approved for a license under the Debt Collection Licensing Act. With this revised licensing requirement, the association’s law firm, management company, or other person or entity who assists with the collection of delinquent assessments, is subject to greater regulation and control by the state.

This may not directly impact the association, but it impacts its debt collection vendors, and may potentially result in higher fees/costs due to the new licensing requirements. Associations should nonetheless ensure their collection vendors are properly licensed.

 

PENDING/INACTIVE LEGISLATION

The bills below are either “pending” or still in committee process. Many of the following bills were halted from reaching the Governor’s desk or otherwise ordered “inactive”, in response to the novel coronavirus (COVID-19) pandemic and the Legislature’s refocusing on the state of emergency.

 

AB 828: Temporary Moratorium on foreclosures and unlawful detainer actions – coronavirus (COVID-19)

This Bill seeks to impose a moratorium or temporary ban on foreclosure and unlawful detainer (eviction) actions until ninety-one (91) days after the COVID-19 state of emergency has ended. This of course can significantly impede an association’s ability to foreclose upon the home of a delinquent owner.

Boards and managers should continue to consult with legal counsel throughout the collections process, to establish: a) the status of this Bill; and b) how the Bill may affect the board’s decision to pursue judicial foreclosure. For example, although this Bill temporarily bans foreclosures, several steps must occur prior to the execution of a writ of sale; thus, the Bill may not affect the association’s ability to at least begin the collections process (i.e., issue a “pre-lien” letter, record a lien, file the lawsuit for judicial foreclosure and/or money judgment, etc.).

 

Assembly Bill 2324: Prohibition of rent or lease of accessory dwelling units

This Bill seeks to limit the number of accessory dwelling units that any individual can rent at a given time in the state, to fifteen (15). Board and managers of planned developments should review their accessory dwelling unit policies and procedures and determine how to ensure owners are complying with this law, if it passes.

 

AB 2503: Senior Citizen Housing Developments

Under existing law, the governing documents of a senior citizen housing development must allow for temporary residency of a guest of the senior citizen who is under the age of 55, for at least 60 days in any calendar year. This Bill seeks to also require the governing documents to permit a qualifying resident (62 years or older, or 55 years or older) to share their residence with a qualified roommate, pursuant to a lease or other written agreement with the roommate. This Bill would also allow the qualified roommate to continue living in the residence, upon the death of the owner, if the roommate is 55 years of age or older.

If your community is age restricted, consult with legal counsel to determine what, if any, changes need to be made to your governing documents, in anticipation of this Bill being revisited by the Legislature and potentially enacted.

 

CALIFORNIA CASE LAW

“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.


Coley v. Eskaton (2020) 51 Cal.App 5th 943

Published

In this case, a homeowner brought action against the Association, two directors of the board, and the directors’ employers (Eskaton Properties Inc.), alleging a breach of fiduciary duties. The defendant directors are employees of a company which owns a majority of units and, thus, always holds a board majority. Their employee compensation is partly based on employer performance, so they were incentivized to shift responsibility for certain costs to the other unit owners, resulting in a material conflict of interest. The directors were found personally liable for various breaches of fiduciary duties.

This case reaffirms that a director acting with a material conflict of interest is not protected from personal liability by the business judgment rule (BJR). Board members should always take the most prudent course of action and recuse themselves from board votes or discussions where there is a conflict of interest or the potential of their vote being influenced by the conflict.

 

Jeppson v. Ley (2020) 44 Cal App.5th 845

Published

In this case, two feuding neighbors entered into a settlement agreement with a non-disparagement clause, after one’s dog killed the other’s cat. One neighbor (Ley) then posted a hostile message on Nextdoor.com about Jeppson. Jeppson sued Ley for breach of contract, among other things. Ley filed an Anti-SLAPP motion that was denied by the trial court. The Appellate Court affirmed, holding the posting on Nextdoor.com was not considered a protected activity (defined generally as a written statement made in a public forum in connection with an issue of public interest).

The court determined that there was no public interest in the post on Nextdoor.com stating: “Despite the medium of the internet, the topic was not of widespread public interest. There is no issue of public interest when the speaker’s words are merely an effort to gather ammunition for another round in the speaker’s neighborhood wrangle.”

The main takeaway from this case is that the court found that postings on Nextdoor.com reach a smaller audience than postings “on the internet”, as  the posts are generally only available to the author’s neighborhood or related areas and, therefore, are not a matter of “public interest”. All in all, associations, and especially board members, should take care to limit social media communications, as they can cause controversy and create the appearance of having been sanctioned or endorsed by the board, leading to confusion, miscommunication and the like.

 

Third Laguna Hills Mutual v. Joslin (2020) 49 Cal.App.5th 366

Published

The association (a senior community) brought an enforcement lawsuit against owners Joslin and Michael Cohan for allowing unqualified (non-seniors) to reside in their home and for nuisance conduct. Joslin filed a cross-complaint against the association claiming, among other things, the association unlawfully prevented him from renting his home. The association then filed an anti-SLAPP motion, claiming the cross-complaint was brought because the association initiated legal action and, therefore, was protected activity. The trial court denied the anti-SLAPP motion and the appellate court affirmed.

In this case, the appellate court determined the tort claims alleged in Joslin's cross-complaint arose from the association’s actions, not from the association filing a complaint or its oral or written communications to the owners. Ultimately, the court determined that the dispute is a monetary dispute between the owners and the association, not an issue of public interest, under the anti-SLAPP statute. In other words, Joslin’s cross-complaint had merit, because it was not filed merely to punish the association for filing its lawsuit (the “protected activity”); rather, the Joslin’s cross-complaint was based on legitimate allegations. Associations should always consult with legal counsel prior to initiating legal action to determine the risks and rewards of doing so.

 

Gallian v. Gragnano (2020)

Unpublished – May Not be Cited (Not Law)

The association sued an owner, Gallian, to enforce the governing documents for architectural violations and nuisance conduct. The owner cross-complained against the individual directors seeking indemnity on the association’s complaint. The directors demurred to the cross-complaint and were dismissed from the action.

Thereafter, the association and owner entered into a settlement agreement, which involved releases by all parties (the association, the owner and the individual directors). The release included a waiver of attorneys’ fees (or so they thought). Nonetheless, the director litigants moved for their attorneys’ fees and were granted $46,138, to which Gallian objected.

The court found that there was no meeting of the minds as to the settlement, because the board members were not present during the settlement conference where the settlement was orally agreed upon. Additionally, since the lawsuit was for enforcement of the governing documents, an award for attorneys’ fees were proper. This case confirms, among other things, that the prevailing party in an action to enforce the governing documents is entitled to attorneys’ fees.

 

Maravich v. Dover Shores Community Association (2020)

Unpublished – May Not be Cited (Not Law)

Homeowners brought suit against the association contending the association failed in its duty to prevent other owners from obstructing the view from their home. The court reviewed relevant provisions of the CC&Rs and Rules and determined the association had discretion to allow tall trees, even if they impeded an owner’s view.

The question at issue was whether a rule adopted regarding trees and views was inconsistent with the CC&Rs provision on the same subject. The CC&Rs provided that trees planted could not exceed fourteen (14) feet, without approval from the Landscape Committee, if they blocked a neighbor’s view. The Rules, on the other hand, stated that trees could not be fourteen (14) feet in height, and the Landscape Committee may require the owner to take action if they do; however, the Rules did not make mention of the trees impeding or blocking a neighbor’s view.

The court noted that while the rule was different than the CC&Rs provision, “merely being different does not render them inconsistent.” The CC&Rs provision confers general discretion on the Landscape Committee to require trimming and removal of tall trees, not the obligation. This case is a reminder that boards, with the advice of legal counsel, should ensure the language of the governing documents is clear and concise, and should carefully adopt rules consistent with the plain language of the CC&Rs to avoid unnecessary, unbudgeted costs associated with homeowner challenges.

 

Parnell v. Shih (2020)

Unpublished – May Not be Cited (Not Law)

Tenants residing in a homeowners association obtained a restraining order against a homeowner (Shih) due in part to an excessive number of emails (approximately 300 in a 7 month period of time). The court found that the emails “reach[ed] a level of unhealthy obsession in monitoring almost every movement and action take by [the Parnells] and was clearly invading [their] privacy through stalking”.  The emails were sent not only to the Parnells, but also to their landlord, Mr. Parnell’s employer, and the association.

Shih was ordered not to harass or contact the Parnells and to stay five yards away from them and their son, and 100 yards away from their dog. Shih was also ordered not to contact Mr. Parnell’s employer, the U.S. Marine Corps. The court affirmed the order nearly in its entirety, sending back only one item with directions that the trial court re-word a portion of the order to limit the prohibition on contacting the Marine Corps (a large and public entity engaging in many activities beyond employing Mr. Parnell) to matters concerning the Parnells.

Before deeming matters a neighbor-to-neighbor dispute, boards, in conjunction with the association’s legal counsel, should evaluate the conduct and ensure that harassment is not taking place, even if the conduct is merely an excessive number of emails. 


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