HOA Law Blog

Prepared by the Community Association Attorneys at Swedelson & Gottlieb

As they do almost every year, the California Legislature has yet again changed the Davis-Stirling Act (there have been approximately 50 amendments to the Act since its inception in 1985). We have summarized the most significant changes which impact how boards will hold meetings including executive session meetings, how boards communicate with one another, fees at escrow, electric charging stations, and rental restrictions. We will be preparing additional articles on these changes and posting them to www.hoalawblog.com. Follow this link for our summary of new legislation.

By Sandra L. Gottlieb, Esq., SwedelsonGottlieb Managing Partner; Community Association Legal Counsel

In 2002, the California Law Revision Commission (CLRC) was charged by then-Governor Gray Davis with clarifying ambiguities within the Davis-Stirling Act. (Civil Code Sections 1350-1378) to make it more "user-friendly" for homeowners and board members alike. After working fro many years with stakeholders, including a working group of attorneys, community managers and other industry professionals, the CLRC is behind the introduction of AB 805 (Torres), a two-year bill which must first be passed by both the Senate and Assembly and ultimately signed by the governor into law.

At this point, it is highly likely that AB 805 will make its way through both houses in 2012, with an effective date of either January 2013 or (the more likely date of) January 2014. Attorneys and managers alike will need continuing education to learn the new code provisions, sections and numbering.

Continue reading "Revamping of Davis-Stirling Act Slated for 2013 or 2014" »

By David Swedelson and Sandra Gottlieb, Condo Lawyers and HOA Attorneys, Senior Partners at SwedelsonGottlieb

On October 9, 2011, Governor Brown signed into law several new bills impacting California community associations as well as their managing agents who are employers. These new laws include the imposition of penalties for “willfully misclassifying” workers as independent contractors and the creation of a new definition of “gender” when interpreting California’s anti-discrimination statutes to include gender identity and transvestitism. Follow this link for a summary of some of the new laws that will have the biggest impact on California community associations and their management and vendors.

By Sandra Gottlieb, Senior Partner SwedelsonGottlieb; Condo Lawyer and HOA Attorney

We know that there is a tendency to classify some condo and HOA staff as independent contractors rather then employees. Some community association boards want to do this because they think that such a classification will mean that their association will not have to pay for all of fees, charges, taxes, etc. that are normally associated with an employee. They also think that they can avoid vacation pay, payroll taxes, medical insurance, etc.

The staff member may want the independent contractor classification as then they believe that they will not have taxes deducted from their checks, that they can then write off their car and other expenses and benefit in other ways.

Well, the government knows what you are doing and they are not happy about it. There has been an increasing effort by the State and Federal governments to address this “problem". The fact is that in many situations, that staff member is not really an independent contractor, as they work full time at the association, use the equipment, etc. provided by the association and get their direction from the association.

Continue reading "New Law—Independent Contractors: Willful Misclassification SB 459 Corbett" »

Assembly Bill 771 (Betsy Butler), which amends Civil Code Section 1368 regarding documents to be provided the buyer in an escrow, was sponsored by the California Association of Realtors and initially sought to place a cap on fees that may be charged by management companies and others who provide documents upon sale or transfer of a separate interest. This bill was opposed by all industry trade groups and was ultimately revised to remove the cap. As signed by the Governor, the bill sets out the items which are to be provided to a buyer as well as an estimated fee for each.

Continue reading "Governor Signs AB 771 (Butler) Into Law Requiring Associations to Itemize and Disclose Fees Charged For Documents To Be Provided to Buyer in Escrow" »

By David Swedelson, Condo lawyer and HOA attorney; Senior Partner SwedelsonGottlieb

Despite significant industry opposition, the Governor has signed into law amendments to the Davis Stirling Act and specifically Civil Code Section 1363.05, also known as the Common Interest Development Open Meeting Act. Here is the story of how this new law came to be:

As most of you know, the Act was amended with the addition of this code section requiring that board meetings at California community associations be open to members except for certain specified executive session meetings when those meetings should be kept confidential or emergency meetings when the required notice to owners is not possible.

Continue reading "Governor Brown Signs SB 563; Say Good-bye to Actions Without a Meeting " »

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.

Posted by David C. Swedelson,
Partner, SwedelsonGottlieb; Community Association Legal Expert

With the proliferation of electric vehicles comes a new law that limits and restricts California community associations' ability to prohibit an owner from installing their own electric charging station. On July 25, Governor Brown signed Senate Bill 209, which adds new Civil Code Section 1353.9. The new law takes effect January 1, 2012.

New Civil Code Section 1353.9 will prohibit California condominium and other community associations from unreasonably restricting the installation of electric vehicle charging stations. Homeowners who place charging stations in the common areas will be responsible for costs associated with maintaining and repairing the station, as well as costs for damage to common areas and adjacent units resulting from installation and maintenance of the station. The new law will impose other responsibilities on the homeowner, including maintaining a liability insurance coverage of $1,000,000 that names the association as an additional insured.

Unfortunately, the new law allows individual owners to use or occupy common areas, contrary to existing statutes and case law. In his signing message, Governor Brown stated that the author of the bill plans to introduce legislation that protects the right of common interest developments to establish reasonable rules for any use of common areas for charging stations. Governor Brown recognized this issue in his signing message:

Continue reading "Governor Signs Senate Bill 209 Dealing WIth Electric Charging Stations" »

Senate Majority Leader Ellen M. Corbett (D-San Leandro) has introduced SB 561 which will, if signed into law, make some fairly significant changes to the law impacting how California community associations collect delinquent assessments. Senator Corbett has been quoted as saying that "[u]nscrupulous debt collectors are increasing the amount owed based on penalties and fees, and foreclosing on people's homes... It's a terrible practice. The penalties are just way too harsh." Unfortunately, Senator Corbett has failed to provide any examples or proof that delinquent owners are incurring anything more then the reasonable costs and fees of collection. We really have no idea what penalties or fees she is referencing, and based on our more than 20 years of experience, what Senator Corbett is quoted as saying is not accurate.

David Swedelson and Sandra Gottlieb have analyzed SB 561, and based on their many years of experience dealing with assessment collection issues, they believe that this is bad legislation based on incorrect facts and circumstances. They have written an article summarizing their analysis. This bill has been approved by the California State Senate and will soon be taken up by the Assembly. We are hoping that a massive showing of opposition will motivate the assembly to reject SB 561. We will be forwarding additional information soon.

We were advised that the California Senate Transportation & Housing Committee is prepared to vote on SB 563 (DeSaulnier) that deals with Community Association Board Meetings. We encourage you to contact the members of this Committee and tell them to vote "NO" on SB 563 which will, if made law, prohibit any actions and communications among community association board directors outside of noticed board meetings (excluding emergencies). Both the California Legislative Action Committee of Community Associations Institute (CLAC) and the Cailfornia Association of Community Managers are opposed to this bill in its current form.

Community associations are, for the most part, corporations and are required to comply with the sections of the California Corporations Code and Civil Code that already deal with the requirements for making decisions, taking actions in furtherance of their fiduciary duties, and reporting to the members.

Board members are volunteers, and things are always coming up that require their action. Day-to-day matters need to be acted upon as they arise, and holding off until the next board meeting (which may not be for months) may be impossible or impractical for a variety of reasons.

Nobody has presented any information regarding abuses that would warrant this proposed legislation, which will make it more difficult for boards to carry out their responsibilities.

Please follow this link for a notice from CLAC that provides information as to where to voice your objections to SB 563.

CLAC sets forth the following reasons to OPPOSE SB 563:
1. Prohibits directors from talking about ANY item outside of a noticed meeting.
2. Cripples a board's ability to act on non-emergency but essential items between meetings.
3. Wipes out the ability for directors to agree by written consent between meetings, a long standing right for all other corporations.
4. Requires additional notices, costing HOAs more money.
5. Informs members about Executive Committee meetings that they are not allowed to
attend, causing severe member frustration.
6. Impossible to enforce; even casual conversation at social events could be intentionally unlawful.
7. Will lead to litigation; minor perceived violations will be seized upon.
8. How can directors even talk or email about convening the next meeting?
9. Informal outreach and "walk around" gatherings among members and board directors would be unlawful.

By David C. Swedelson, Swedelson & Gottlieb Partner

There was an interesting article on new legislation in the March 6, 2011 edition of the Los Angeles Times about the 2,323 new bills that have been introduced in the California legislature, and this includes several that impact California community associations (more on that below). As reported in the Times:

In addition to addressing the state's $25-billion deficit this year, the Legislature is making time for some other less-pressing matters: Caffeinated beer. Spaceships. How to properly describe a dog pound.

Proposals on those subjects are among the 2,323 bills lawmakers have introduced this year. Others would revise the definition of olive oil and regulate the reflectivity of pavement to help curb global warming. There's a measure to create a "Parks Make Life Better" month.

Continue reading "State lawmakers are being urged to scale back the number of laws they propose; they should start with those that impact California condominium and homeowner associations" »

CAR has let it be known that it plans to introduce a bill in 2011 that will effectively restrict or limit the fees that community association management companies now charge for such things as ownership transfers and compliance with Civil Code Section 1368. This is likely going to be a very contentious issue, as these are fees that the owners of the specific property that is making the request should be required to pay directly to management. If CAR's legislation were to become effective, it is likely that owners in escrows would only be required to pay the actual costs of duplication, etc. As a consequence, the associations would themselves end up paying the fees for the manager’s services, which would in turn be paid by all owners. How can community associations budget for these fees when they have no idea how many requests they will get in a fiscal year? Why should all owners pay for a service that benefits only one owner? This proposed legislation will negatively impact management and associations.

For example, consider the result that occurred when the legislature amended Civil Code Section 1365.2 a few years ago. That code section deals with an association's obligation to provide owners with records. Civil Code Section 1365.2 limits the fees and charges that can be charged to the requesting owner. As a result, the additional fees charged by the manager for finding, compiling and preparing the requested association records for production ends up getting paid by all owners and not the owner that made the request. Management companies are entitled to be paid for these extra services, and the payment for these services should come from the owner requesting the service.

This proposed legislation seeks to overturn the 2007 Court of Appeal decision in Berryman v. Merit Property Management that held that the documentation and transfer fees charged by management are products of market forces and are not subject to statutory control.

For more information, see an informational statement prepared by the California Association of Community Managers (CACM) and a more detailed summary of the Berryman decision.

Posted by Swedelson & Gottlieb Partner David C. Swedelson, who is also a member of CACM’s Legislative Affairs Committee

Karen Conlon from the California Association of Community Managers (CACM) reports that in this most recent legislative session, Senate Bill 294 was introduced for the purpose of consolidating and downsizing the numerous boards, commissions, etc. that exist in California. To protect the CACM manager certification standards in the Business & Professions Codes, CACM asked that the sunset provision in B&P Section 11506 be extended and NOT eliminated as a result of this bill. By doing so, manager certification standards would be preserved. The Senate B&P Committee agreed to this request. Follow this link to see the portion of the bill that reflects the extension of the sunset provision to January 1, 2015 (the sunset provision was originally due to expire January 2012). SB 294 was signed by the Governor and chaptered into law. Congratulations to CACM.

Earlier this year, California Assemblymember Swanson introduced AB 1726, a bill that would benefit California common interest developments. As amended, the bill has been watered down in some respects but improved in other respects, and it remains a valuable piece of legislation. We have recently been alerted by the California Legislative Action Committee, which supports the bill, that the bill is encountering unexpected opposition in the state senate. Please fax a message to the state senate committee members by Monday, June 28 in support of AB 1726.

Continue reading "Legislation Alert - AB 1726 (Swanson) In Jeopardy" »

An Editorial by David C. Swedelson, Esq., Senior Partner, Swedelson & Gottlieb

Many of you received an urgent request by the California Legislative Action Committee (CLAC) for grassroots letters to be sent to the legislature opposing Assembly Bill 1793 (Saldana). I am not sure that I agree with what CLAC stated, and I really wonder if this is legislation that the CID industry should oppose.

I do not now personally have any artificial turf at my home, but I have considered it. I do have neighbors that have installed it, and my daughter’s school installed it on the athletic field. I do not have an interest in any company that manufactures, sells or installs artificial turf.

Today’s artificial turf looks a lot different than the “Astroturf” we may be familiar with. Esthetically, the newer products I have seen look like real grass. Even if I get on my hands and knees to check, it is hard to tell if it is artificial grass.

Continue reading "Are We Really That Opposed to Artificial Turf? Really!" »

As we reported in April, Assemblymember Julia Brownley had proposed AB 2502, which would have made assessment collection in California even more difficult than it already is. We have great news. Because of all of the opposition she received (your letters and emails were acknowledged) and because some of those that backed the bill withdrew their support when Brownley amended parts of the bill, Brownley likely realized that compromise was impossible, the bill never made it out of committee and it did not advance to the floor for a vote. This legislation would have imposed new and unwarranted restrictions on the assessment collection process for California community associations.

Brownley had agreed and did amend the bill to eliminate the requirement that associations wait until the delinquent owner owed $3,600 or was 18 months delinquent before foreclosing. But she had left in the proposed prohibition on a waiver of the provisions of Civil Code Section 1367.1 relating to the allocation of payments, as well as the proposed prohibition on not accepting partial payments, and we learned that these issues were not only misunderstood by the legislator, but by others in the community association industry as well.

And why did the Community Association Institute's California Legislative Action Committee (CLAC), which had originally opposed the bill, then decide to support this flawed legislation?

To learn more about why the waiver and partial payment prohibition are important to California community associations, download our full article.