Beaumont Tashjian Law Blog

Monday, November 6, 2023

2023/2024 LEGAL UPDATE

This year’s legislature has enacted several laws which expand on the State’s climate-related and housing availability goals, as well as facilitate board meetings and the transaction of association business. The following is a summary of enacted and pending legislation, court decisions, news, and current events from this past year, which will impact your communities through 2024 and beyond.

ENACTED LEGISLATION
The bills below have been signed and approved by the Governor and will take effect January 1, 2024, as “New Law.”

SB 355: Multi-Family Affordable Housing Solar Roofs

  • What Does Current Law Say? Currently, the Public Utilities Commission oversees subsidy programs for solar energy system (“SES”) installations on multifamily residential buildings that meet certain income and other requirements.
  • What Changed? SB 355 expands the pool of buildings which qualify for these SES incentives, to include low-income residential buildings in which sixty-six percent (66%) of the households have incomes at or below eighty percent (80%) of the area median income, among others.
  • What Should Associations do? Associations should continue to monitor the development of SES policies and laws at the state level and be prepared for costs that will accompany these mandates and implement solar policies in their governing documents.

AB 403: Discrimination on the Basis of Ancestry

  • What Does Current Law Say? Currently, the Fair Employment and Housing Act (“FEHA”) provides that ancestry is a protected characteristic that cannot be used as the basis for discrimination in housing, employment, or education.
  • What Changed? This Bill amends Civil Code Section 51 to clarify that “ancestry” includes lineal descent, heritage, parentage, caste, or any inherited social status. “Caste” is defined to include an individual’s perceived position in a system of social stratification on the basis of inherited status.
  • What Should Associations Do? Boards will need to be mindful that any acts or communications which may be perceived as discriminatory, based on an owner’s or resident’s ancestry or perceived “caste”, create exposure to discrimination/Fair Housing claims. Careful communication with owners in the housing context is especially key. Boards should also be proactive in ensuring their governing documents include updated cover pages which include all of the protected classes, as required by Government Code Section 12956.1, and adopt anti-discrimination policies to protect against discrimination claims.

SB 428: Temporary Restraining Orders – Employee Harassment

  • What Does Current Law Say? Existing law allows employers to seek a temporary restraining order (“TRO”) on behalf of their employees who have suffered unlawful violence or a credible threat of violence at the workplace.
  • What Changed? Effective January 1, 2025, this Bill will allow employers to also seek a temporary restraining order on behalf of their employees who have experienced workplace harassment. The standard of proof for obtaining a TRO for harassment will be clear and convincing evidence, and the employer will be required to show that the employee(s) suffered harassment through conduct that served no legitimate purpose that will result in great or irreparable harm to the employee(s). Employers will be required to provide the employee(s) with the opportunity not to be named in the TRO order.
  • What Should Associations Do? Whether or not the association has employees, boards should ensure that their directors and the association’s vendors, such as management, are free from a hostile or threatening work environment, taking any such claims extremely seriously. In any case, boards should consult with legal counsel to evaluate whether the circumstances warrant seeking a restraining order and determine the association’s overall liability exposure.

AB 572: Imposition of Assessments

  • What Does Current Law Say? Current law allows associations to impose regular assessments against the membership in accordance with their governing documents and increase those regular assessments by up to twenty percent (20%), without membership approval.
  • What Changed?This Bill amends Civil Code Section 5605 and prohibits boards from imposing a regular assessment against an owner of a deed-restricted affordable housing unit that is more than five percent (5%), plus the percentage change in the cost of living, and not to exceed ten percent (10%), if the association’s original CC&Rs were recorded on or after January 1, 2025. In other words, assessment increases may not exceed ten percent (10%) for owners whose units are subject to an affordable housing covenant in communities created after January 1, 2025.
  • What Should Associations Do? Any new associations formed after January 1, 2025, may be limited in terms of how much they may increase regular assessments. Boards will need to keep this in mind when budgeting for the common expenses each year and work with legal counsel to confirm if the community consists of any affordable housing units.

AB 648: Board Meetings by Teleconference

  • What Does Current Law Say? Current law allows for virtual board meetings but requires a physical location to exist where members can attend the meeting and participate, along with a board representative at the physical location to assist with meeting participation and access.
  • What Changed? Now, AB 648 will allow board meetings to occur entirely virtually, and no physical location will be required, so long as the board provides owners with: 1) clear technical instructions on how to participate by teleconference; 2) the phone number and email address of a person who can assist with access and participation in the virtual meeting before and during the meeting; 3) a reminder before the virtual meeting that they can request individual delivery of notices of the virtual meetings. Note, any meetings involving ballot-counting still require a physical location and present board member.
  • What Should Associations do? Boards and managers should consult with legal counsel when determining whether it is viable and beneficial to conduct meetings entirely online, based on the requirements of AB 648. Additionally, boards should work with legal counsel to update their governing documents and adopt guidelines for virtual meetings, including notice requirements, conduct and decorum.

AB 911: Unlawfully Restrictive Covenants – Affordable Housing

  • What Does Current Law Say? Currently, owners of affordable housing developments are authorized to record a restrictive covenant modification that eliminates any unlawfully restrictive covenants. Current law requires the county recorder to charge the standard recording fee to the owner.
  • What Changed? This Bill requires the county recorder to notify the owner submitting the restrictive covenant modification, immediately, whether the modification will be allowed. Additionally, the county recorder is authorized, but not required to charge the standard recording fee. Finally, AB 911 requires any suit challenging the restrictive covenant modification to be brought within thirty-five (35) days of receiving notice of same.
  • What Should Associations do? These changes only impact associations that are deemed affordable housing developments. For those impacted, boards should be mindful of any restrictive covenant modifications being requested and fully investigate before acting. All boards should always be proactive, and work with legal counsel to review the governing documents and modify any potentially unlawful covenants or discriminatory provisions.

AB 1033: Accessory Dwelling Unit (“ADU”) Sales

  • What Does Current Law Say? Currently, owners are not permitted to sell an accessory dwelling unit (“ADU”) constructed on their lot, separately from their primary residence. In other words, both the primary residence and the ADU must be sold together.
  • What Changed? AB 1033 allows municipalities to adopt an ordinance which would authorize the sale of ADUs, separately from the primary residence. Additionally, a local ordinance may allow for an ADU to be developed as a separate condominium building with its own condominium plan and restrictions (an association within the association!) if the association authorizes it. With AB 1033, owners may circumvent an association’s prohibition on lot splitting by separately conveying their ADUs without splitting the lot, but CC&Rs may be amended to prohibit the sale of ADUs separate from its lot/property.
  • What Should Associations Do? If a local ordinance authorizes the sale of ADUs separate and apart from the primary residence, or the construction of a condominium development within the association and on an owner’s lot, this may significantly impact the association’s density, parking, and overall character of the community. Boards should work with legal counsel to confirm the local ordinances and adopt strong ADU policies and CC&Rs amendments that either prohibit the sale of ADUs or regulate same.

AB 1101: Balcony Inspections

  • What Does Current Law Say? In 2019 the Governor signed a bill to require all associations with wood-based exterior elevated elements (i.e., decks, balconies, patios, stairways, etc.) to have a licensed structural engineer inspect them at least once every nine (9) years, with the first inspection to be performed no later than January 1, 2025.
  • What Changed? AB 1101 permits “Branch 3” registered companies registered with the Structural Pest Control Board with a minimum of 5 years of experience to conduct these inspections as well.
  • What Should Associations Do? Associations should continue conducting balcony inspections as required by current laws. This includes budgeting, notifying the owners, and working diligently to find a qualified engineer ahead of time. AB 1101 may make it easier to find a qualified expert to perform the inspection, but boards should continue to do their due diligence, which of course includes ensuring all contractors are appropriately licensed and insured.

AB 1132: Solar Energy System (“SES”) Permit Fees

  • What Does Current Law Say? Existing law establishes limits on the permit fees that counties or cities may charge owners for SES installations. Those limits were set to expire on January 1, 2025.
  • What Changed? The limit on permit fees has been extended another nine (9) years, until January 1, 2035.
  • What Should Associations Do? Associations do not need to take action; however, this bill demonstrates the legislatures continued push towards solar and alternative energy sources. Associations should review their governing documents and ensure that adequate provisions governing solar energy installations are in place. Be proactive!

AB 1308: Single Family Residences, Parking Requirements

  • What Does Current Law Say? Currently, municipalities may adopt ordinances that regulate the use of buildings, structures, etc., including establishing minimum parking requirements.
  • What Changed? AB 1308 prohibits public agencies from increasing the minimum parking requirement for remodels, renovations, or additions to single-family residences. This law is intended to decrease the cost of housing by removing the barriers and costs associated with minimum parking requirements. This Bill does not impact any local parking requirements related to ADU construction.
  • What Should Associations Do? Boards should be aware that owners may be installing ADUs or JADUs without providing additional parking. Boards should review their parking requirements and ADU policies and ensure that adequate protections are in place, consistent with local parking, development, and ADU laws.

AB 1332: Accessory Dwelling Units (“ADUs”), Pre-Approved Plans

  • What Does Current Law Say? Under existing law, local authorities may impose parking, height, setback, landscape, architectural review, and maximum size standards on ADUs.
  • What Changed? AB 1332 makes ADU permitting easier and requires local agencies to develop a program to streamline ADU applications by January 1, 2025. This program will provide for preapproval of ADU applications that meet certain requirements. The local agency would also have just thirty (30) days to approve or deny an owner’s complete ADU application.
  • What Should Associations Do? With the continued push for ADUs by the state, associations should ensure that proper restrictions on ADU construction and use are in place. If ADUs are not currently addressed in the governing documents, the board should consult with legal counsel and adopt reasonable ADU restrictions, as well as architectural and parking requirements.

AB 1458: Election Quorum and Adjournment

  • What Does Current Law Say? Currently, short of potentially expending thousands of dollars petitioning the court, there is no method for reducing quorum for director elections, if it is not provided for in the governing documents.
  • What Changed? This Bill amends Civil Code Section 4115 and establishes a reduced quorum of twenty percent (20%) for the adjourned meeting. The law also states that the adjourned meeting must be at least twenty (20) days after the original meeting. However, associations must also include in their general election notice a statement that the board may call a subsequent meeting with these reduced quorum requirements if quorum is not reached at the original meeting.
  • What Should Associations Do? This Bill provides much needed relief for associations that require a quorum for director elections and have extreme homeowner apathy. Now associations may rely on the Civil Code to reduce quorum to twenty percent (20%) if quorum is not reached at the first meeting. In general, removing or reducing quorum requirements by amending the governing documents is recommended, to overcome apathy issues.

AB 1572: Potable Water – Nonfunctional Turf

  • What Does Current Law Say? Current law establishes various policies regarding the use of water for irrigation, with a goal of reducing overall water usage. Various agencies, including the State Water Resources Control Board oversee such compliance and regulation.
  • What Changed? This Bill prohibits associations from using potable water to irrigate any common area “nonfunctional turf”, beginning January 1, 2029. Associations with more than 5,000 square feet of irrigated common area also must certify to the State Water Resources Board every three years beginning January 30, 2031, through June 30, 2031, that the property is in compliance.
  • What Should Associations Do? For now, boards are not expected to take immediate action, but this Bill shows that water usage will be subject to greater regulation in the years to come. Boards may want to be proactive, by limiting water usage now and/or utilizing drought tolerant landscaping.

AB 1746: Housing Omnibus (Elections)

  • What Does Current Law Say? Current law states that, in order to be qualified to run for the board of directors, a candidate must be an owner/member of the association. The association can also adopt additional qualifications such as being current in the payment of assessments and having not been convicted of a crime that would impact the association’s insurance coverage. Current law also states that associations can consider candidates elected by acclamation, if the election is uncontested (i.e., the number of qualified candidates is less than or equal to the number of vacancies on the board).
  • What Changed? Now, the law will clarify that directors currently serving on the board must also meet the candidate qualifications and that they are automatically disqualified from continuing their term if they are no longer a member of the association. Additionally, the law will now require associations to disqualify a nominee who has served the maximum number of terms allowed by the governing documents.
  • What Should Associations Do? Associations should continue to ensure that their election rules are up to date and include any candidate qualifications and/or term limits, which fit the goals and needs of the community.

PENDING/INACTIVE LEGISLATION

The following are “pending” bills which could impact associations in the near future but are still in committee process. Keep in mind that although these bills may ultimately fail, they may provide insight into the direction of the laws:

AB 468: State Building Standards

  • What Does Current Law Say? Current law requires all buildings, residential or otherwise, to meet certain health and safety conditions so as not to be “substandard,” i.e., endangers the life, limb, health, property, safety, or welfare of the occupants or the public.” (Health and Safety Code § 17920.3.)If they do not, local or state enforcement agencies may file legal action against the owner to compel them to bring the building to an acceptable condition.
  • What May Change? If passed, this Bill would expand the definition of “substandard,” to include a building condition that endangers the life, limb, health, property, safety, or welfare of nearby residents as well.
  • What Should Associations Do? As always, boards need to be keenly aware of their association’s maintenance and repair responsibilities under the governing documents. Owners also share in those responsibilities. This Bill is a reminder that state and local health authorities may also be involved in repair and maintenance disputes, as they too have the power to inspect and file legal action, when they discover substandard living conditions, etc.

AB 1043: Residential Real Property: Foreclosure

  • What Does Current Law Say? Current law establishes detailed guidelines and procedures for executing a foreclosure sale, including notice requirements, the bidding process, recording the notice of default, etc.
  • What May Change? Among other things, this Bill would prohibit a person from contacting, soliciting, or initiating communication with an owner to claim any surplus funds from a foreclosure sale, until ninety (90) days have passed since the trustee’s deed was recorded.
  • What Should Associations Do? Assessments are often referred to as the “lifeblood” of the association. Whether the association utilizes judicial or non-judicial foreclosures for collecting delinquent assessments, boards have a fiduciary duty to collect. Collections are governed by strict procedures under state and federal laws and any missteps can expose the association to liability or impact their ability to successfully collect. Working with experienced collections experts and legal counsel will help avoid those missteps!

CALIFORNIA/FEDERAL 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. Additionally, Superior Court cases, while good sources for reference, are not binding authority.

Dollar Point Association, Inc. v. United States Liability Insurance Company [Published]

Facts: Two homeowners filed suit against the Association to establish ownership over a strip of Association property which they had claimed to be maintaining and landscaping for several years. The Association submitted the claim to its insurance carrier (USLI) for defense, who denied coverage, claiming they had no duty to defend under the policy as this was not a covered loss. So, the Association sued USLI for breach of contract.

Court Decision:  The Court ruled in favor of USLI. While the Court noted that ambiguities in policy terms should be construed in favor of the insured, ultimately, we must follow a reasonable interpretation of the policy’s plain language and terms. Accordingly, the Court reasoned that the USLI policy did not cover the homeowners’ suit.

Takeaways: Boards should work with legal counsel and the association’s insurance experts to understand the scope of their insurance policies. Insurance carriers have a duty to defend against lawsuits of course, but only to the extent that the claim is covered under the policy. Decisions by insurance companies should be scrutinized by legal counsel as well, to ensure that a claim is not being improperly denied.

Lake Lindero Homeowners Association, Inc. v. Barone [Published]

Facts: Here, the owners submitted a petition to recall the entire board of directors. Quorum was not reached at the first recall election meeting, so the owners present adjourned. Per the Association’s bylaws, quorum for the adjourned meeting was reduced from fifty percent (50%) to twenty-five percent (25%). At the adjourned meeting, quorum was reached, and the board was successfully recalled, but the board refused to honor the results. The new board sued on behalf of the Association to affirm the results of the recall, using Corporations Code Section 7616 as the vehicle of that suit.

Court Decision: The Court ruled in favor of the Association (and the new board), by affirming that Corporations Code Section 7616 allows courts to validate a recall election, even though the word “recall” is not included in the statute. The Court confirmed the validity of the recall and election of the new board.

Takeaways: This case shows how recalls can create significant dysfunction in the community and open the door to costly litigation. This case highlights why, when given a recall petition, boards should respond timely and follow recall and election procedures under the law. Ultimately, boards should respect the will of the owners through the democratic process, to avoid protracted legal disputes, which undermine the reputation and value of the community.

Lauckhart v. El Macero Homeowners Association [Published]

Facts: In 1995, homeowners in the El Macero Homeowners Association collaborated to create a new set of CC&Rs, without holding a formal vote on the CC&Rs. Fast forward to 2020, when the Association also acquired title to abandoned property within the community from the County and took over maintenance and insurance responsibilities for it. An owner then sued the Association to (a) cancel the 1995 CC&Rs based on fraud and (b) invalidate the Association’s property acquisition.

Court Decision:  The Court ruled in favor of the Association and would not invalidate the 1995 CC&Rs, nor the Association’s acquisition of the abandoned property. First, the Court decided that the homeowner did not provide enough evidence to suggest that the 1995 CC&Rs were adopted fraudulently. Second, the Court ruled that the CC&Rs gave the board authority to exercise its reasonable business judgment to acquire the abandoned property and make it part of the Association’s common area.

Takeaways: Even decades after the fact, failing to follow procedure when it comes to amending the governing documents can come back to haunt an association. Boards should be sure to always adhere to requirements in the law and governing documents. Additionally, this case shows that decisions by boards to acquire property will be scrutinized based on the authority and language contained in the governing documents. Moreover, this case affirms that courts are deferential to boards when they exercise sound business judgment.

LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Association [Published]

Facts: Two members of the Association brought suit against the Association for violations of the Open Meetings Act (“OMA”). The members alleged that, between meetings, the board violated the OMA by exchanging email communications regarding Association business and agenda items and agreeing to set a board meeting and hold a disciplinary hearing, among other administrative issues.

Court Decision: The Court held that email exchanges among directors on those items that occur before a board meeting, and in which no action is being taken on the items, do not constitute “board meetings” or violate the OMA.

Takeaways: This case helps clarify, to what extent, board members may discuss association business outside of board meetings. As long as these email communications occur before a board meeting and no “decisions” are made in those email exchanges, the board is not in violation of the OMA. However, boards should continue to use caution when discussing association matters via email, because the Court did not define how long “before” a board meeting these email exchanges can occur, nor did it define when “discussions” become “decisions.”

Takiguchi v. Venetian Condominiums Maintenance Corp. [Published]

Facts: In Takiguchi, the board adjourned the annual meeting and election of directors, assuming that quorum was not reached based on the number of ballots submitted. However, the count did not include members who were actually present at the meeting, which would have surpassed quorum. To make things worse, the board then determined not to hold the second/adjourned meeting, and the election did not move forward. One of the directors then filed a petition with the superior court to compel the election.

Court Decision:  The Court ruled in favor of the petitioner, ordering the election to be held, and for the ballots to be counted. The Court agreed that quorum was reached at the first meeting, based on the number of ballots submitted and the owners who attended the meeting.

Takeaways: Associations should be mindful that attempts to skip required annual meetings and director elections and skirt the election and notice requirements of the Civil Code and governing documents, open the door to significant risk of legal liability. Boards should be proactive when it comes to scheduling annual meetings and complying with the state’s strict election requirements. Boards should also ensure that their governing documents, especially their election rules, are up to date and consistent with these laws.

Manrodt v. Albelo [Unpublished]

Facts: An owner sought a restraining order against a neighboring owner for harassment, for allegedly photographing and filming them regularly in the community, causing them to fear for their safety and the safety of their infant child. The Manrodts claimed that Albelo had sat outside his garage waiting for them to leave, and even filmed them inside of their house through their front door.

Court Decision: The Court issued an order that included a 10-yard stay away order that required Albelo to stay at least 10 yards from the Manrodt property. The Court also ordered Albelo not to photograph or videotape the Manrodts unless he is videotaping a violation of law or violations of the association’s governing documents. The order specifically stated that Albelo could not lurk about filming in anticipation of a possible violation.

Takeaways: Owners may obtain a restraining order against neighboring owners who routinely harass them. While this case is unpublished and the association was not involved in this dispute, this case serves as an example for how “filming” can also be viewed as a harassing act, resulting in costly litigation and significant risk of liability. Thus, all owners, including board members, can learn to be mindful when it comes to documenting violations in the community and maintaining peace and harmony.


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