HOA Law Blog

As we reported on July 31st (follow this link), FHA’s Revised Condominium Guidance Solves Some Problems But Creates Many More. Community Association's institute (CAI) has been actively addressing the issues. In a July 22 letter to the Office of Information and Regulatory Affairs (OIRA), CAI asserts that the Federal Housing Administration (FHA) “failed to undertake even the most basic due diligence” in its latest mortgage-approval guidance. CAI wants OIRA to require FHA to re-examine its June 30 guidance, which CAI says will prevent many condominium associations from meeting FHA-certification guidelines. “We hope OIRA will take whatever steps are necessary to ensure that FHA conducts a more thoughtful, thorough and transparent analysis,” said CAI Chief Executive Officer Thomas Skiba, CAE. Read more. Visit Mortgage Matters to learn more about what CAI is doing on behalf of HOAs, condominium communities, homeowners, prospective homebuyers and the housing market.

By David C. Swedelson, Esq. and W. Alexander Noland, Esq., SwedelsonGottlieb

SwedelsonGottlieb has been responding to a flood of inquiries regarding the recently chaptered California SB 150, a bill which amends Sections 1368 and 1373 of the Davis-Stirling Act and adds a new Civil Code Section to the Act affecting certain rental restriction provisions in CC&Rs that are recorded on or after January 1, 2012. As there seems to be a good deal of confusion about this bill (even among some attorneys in our industry), we thought it would be beneficial for the readers of HOALawBlog to clearly explain the applicability and effect of this new legislation.

The Legislative Counsel's Digest contains a good summary of the purpose of the bill: "This bill would prohibit the owner of a separate interest in a common interest development from being subject to a provision in a governing document, or a provision in an amendment to a governing document, that prohibits the rental or leasing of all or any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest." As noted above, this bill applies to some, but not all, rental restrictions recorded on or after January 1, 2012.

Following are two pertinent points about the application of SB 150 to California common interest developments:

1. This new legislation does not apply to all rental restrictions. For example, it does not apply to a rental restriction that prohibits an owner from leasing his/her unit/lot for a term less than one year, that the lease be in writing, or a restriction requiring that the lease contain language that the tenant agrees to abide by the association's governing documents. The bill does apply to restrictions recorded on or after January 1, 2012 that prohibit leasing of a unit or lot, such as a restriction that sets a cap on the number or percentage of units that may be leased at any one time, or a restriction requiring a waiting period after purchase before an owner may rent his/her unit or lot.

2. The bill does not nullify all limits on leasing that are recorded on or after January 1, 2012. For example, if an association records an amendment to its CC&Rs establishing a 25% limit on leased units/lots on or after January 1, 2012, only new owners that purchase their properties after the effective date of that amendment would be subject to the 25% limit; existing owners would not be subject to the restriction. [This example would likely create a tracking burden for an association, as theoretically all existing owners could lease their units, but only new owners would be subject to the rental cap.]

If an association's board of directors is considering proposing a rental restriction that affects the ability of owners to lease their units, the board should present that proposal for vote and record the corresponding CC&R amendment (assuming it is approved by the owners, and, if applicable, mortgagees) no later than December 31, 2011 to have a rental cap restriction that will be enforceable against all owners.

By David Swedelson, Senior Partner at SwedelsonGottlieb, Condo Attorney and HOA Lawyer

I came across an interesting article with this title written by fellow community association attorney, Donna DiMaggio Berger, who practices in Florida. As Donna states in her article, “fraud is certainly nothing new but in today's troubling economic climate, the chance that your community may be harmed by a fraudster, especially if you don't have a series of checks and balances in place, rises dangerously.” This is so true. I track news articles that relate to condominiums and homeowners associations around the country, and I have not been surprised by the many news articles I have seen reporting on fraud and embezzlement committed by board members and association managers. And they go to jail!

Continue reading " How Does Fraud Take Hold In A Private Residential Community? " »

By David C. Swedelson and Sandra L. Gottlieb, Condo and HOA Legal Experts, Community Association Attorneys

As we maneuver our way through the end of this recession, the words “short sale” are being bandied about more than at any other time that we can remember. Lenders are apparently more receptive to considering a discount on a mortgage rather then taking the property back in foreclosure. We wrote about short sales back in May 2011 (follow this link). Wikipedia defines a short sale as "a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.”

Continue reading " Short Sale: Words That Should Strike Fear, or The Good Alternative to Foreclosure? You Decide " »

(and why condominium associations should be responsible for waterproofing on balcony decks)

By David C. Swedelson, Condo Lawyer and HOA legal expert; Senior Partner at SwedelsonGottlieb

I know that many boards contemplate the idea of making owners responsible for the waterproofing on the balconies or decks in condominiums (and yes, generally the association is responsible for repairing or replacing what is considered common area waterproofing). Bad idea. The reality is that owners will not do what is required, and the leaks will damage the common area and other units. One association client learned this the hard way. And while the end result was good for the association and we consider this an excellent result, the road was rocky and stressful. And the association had to finance our fees and the costs.

It all started with that association amending and restating its Governing Documents (through another firm). As a part of that process, their former attorney suggested that they make the homeowners responsible for the maintenance, repair and replacement of the waterproofing on each homeowner’s exclusive use balcony decks. Many associations tell me they would like to see the homeowners responsible for the waterproofing, as they claim that the association does not want to have to save or expend the money for that work. However, in practice this is not a good idea.

Continue reading " How One Association's $30,000 Mold Water Damage Claim Turned into a $169,000 Arbitration Award " »