HOA Law Blog

October 13, 2010

It is Budget Time of the Year

It is mid-October, and many California community associations and managers are busy working on their 2011 budgets that will need to be sent out by the end of November. In addition to the budget, however, there are several other documents and disclosures that are required by California statutes to be made on an annual basis. Most associations provide those documents and disclosures with the distribution of the association’s next year’s budget. As we have done every year for as far back as we can remember, SwedelsonGottlieb has published its Annual Disclosure Checklist for 2010–2011. If you are unable to download the PDF file utilizing the foregoing link, please contact Mark Petrie of our office.

You may also wish to download my recent article on Budgeting For Bad Debt.

October 12, 2010

Ethics for Board Members

by David C. Swedelson

SwedelsonGottlieb Senior Partner Sandra Gottlieb and Karen Conlon, President and CEO of the California Association of Community Managers (CACM) have written an article providing community association boards of directors with practical tools designed to identify and implement ethical value systems for their association board members. These tools will enable board members to navigate through the complex ethical issues that can occur in the everyday administration, management and governance of a condominium project, planned development, stock cooperative or other community association. To download a copy of this important article, please follow this link.

October 5, 2010

Strategic Planning For Community Association Board Members

by David C. Swedelson

“Most successful businesses have embraced the concept of strategic planning, and the results attained drive the direction, resources, and decisions made in the daily course of doing business. It guides the leadership and unites the employees and partners through common goals and objectives.”

This is the introduction to an article on strategic planning by hoalawblog friend Debra Warren, PCAM, CCAM, CMCA, of Cinnabar Consulting. As a Community Association Manager, Management Firm CEO and Consultant, Debra should know a thing or two about this subject. She has had the opportunity to work with hundreds of communities and literally thousands of Board Members. She has had a seat at the table with some of the most successful communities and, conversely, at some of the most challenged communities.

Debra raises a good question: Since the benefits of developing a strategic plan are generally positive, why don’t community associations enthusiastically proceed along the same path? Debra’s article suggests that there are several answers to this question. One answer is simply the perception that creating a plan is complicated and requires a lot of time and money. Another answer is that many community association volunteers believe that the 30-Year Reserve Study is their plan. While this financial tool is an important part of a comprehensive plan, it does not include many factors that contribute to the overall health of the community. Some of these factors are changing demographics, local economic conditions, and aging landscaping and design elements. A complete plan will also consider the needs and wants of the individual community members.

October 5, 2010

Woman Sues Nordstrom and Loses; No Negligence or Breach of Duty Means No Liability

by David C. Swedelson

So, you are probably asking yourself what a lawsuit against Nordstrom (a department store) has to do with community associations. Plenty. Let me explain.

In a recent decision, the Court of Appeal determined that the trial court had NOT made a mistake when it granted summary judgment in favor of Nordstrom against a woman who sued the department store after the escalator she was riding stopped abruptly due to a power outage apparently caused by a nearby traffic collision (Bozzi v. Nordstrom, Inc.).

The court’s ruling was based on the fact that the woman who sued had failed to show that Nordstrom had breached any duty of care (meaning that she didn’t show that Nordstrom had been negligent) or that the escalator was defective. While her expert opined that the escalator must have been defectively designed or maintained, he was unable to state any facts to support his opinion.

What this case points out is that in order to show that the association or an owner is liable for damages from a roof or pipe leak or some other damage producing event, unless the association’s CC&Rs say that either can be held strictly liable without a showing of fault or negligence, a party (the association or an owner/resident/tenant) who claims that they have suffered damages must show that the other party somehow breached a duty and/or was negligent.
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October 5, 2010

Part Deux: To Foreclose or Not to Foreclose, That is the Question… So What is the Answer?

by David C. Swedelson

By David Swedelson, Esq.; Senior Partner at SwedelsonGottlieb

This article follows an earlier post entitled To Foreclose Or Not To Foreclose; That Seems To Be The Question. We had hoped that the economy would have improved so we would not have to revisit the issue. However, board members and managers are still asking the question: Do we foreclose or not? This question is coming up more and more as banks continue to delay foreclosing themselves as they do not want to take title to the property, adding it to unsold inventory and picking up responsibility for its maintenance and the association’s assessments and fees.

The answer to the question is that boards need to seriously consider foreclosing on the assessment liens recorded against the properties of non-paying owners in order to protect the community association – and to protect the other owners who are paying their assessments. Associations need and rely upon the timely payment of assessments to pay the bills, and to maintain the common areas and other amenities. If one owner doesn’t pay, the other owners have to pay and in some instances pay more. Desperate times often require desperate measures, and it may be necessary to force the hand of a non-paying owner (and subsequently the bank) by foreclosing. The ultimate goal by foreclosing is to get a property owner who will pay the assessments; in our experience, the quickest and most efficient way to accomplish this goal is through non-judicial foreclosure.
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September 28, 2010

Community Associations Cannot Foreclose on Units that are Owned by Soldiers on Active Duty

by David C. Swedelson

A recent column in the Los Angeles Times addressed an interesting issue regarding assessment collection on units or lots owned by soldiers who are serving in Iraq, Afghanistan or elsewhere.

The article referenced a community association in Texas that proceeded to foreclose on its lien recorded against a home owned by a soldier that was on active duty in Iraq. As the article indicates, while the soldier was in Iraq, his wife was in the home but “suffered from anxiety and depression over her husband’s tour of duty, didn’t open the certified letters informing her that the $315,000 home in Frisco, Texas was about to be sold to collect $977.55 in back dues [assessments] (although by the time the home went to auction, legal costs had ballooned the amount to about $2,600).”

The house was sold in a foreclosure sale, the buyer sold it to an investor, a lawsuit ensued and eventually the parties settled.

September 28, 2010

Community Associations May be Obligated to Accommodate a Disabled Resident, But that Does Not Mean that the Accommodation Can Negatively Impact Other Residents

by David C. Swedelson

The Los Angeles Times publishes a column entitled Rent Watch. Recently, the column addressed a situation where a tenant maintained in that tenants apartment a seeing eye dog that barked at night bothering the neighbor(s). The answer applies to community associations as well as rental units. Follow this link to read the selected Q&A.

As that column correctly indicates, while community associations (which are considered housing providers for the purpose of fair housing/accommodation matters) are required to reasonably accommodate disabled residents, the accommodation provided to a disabled individual must be “reasonable”. Quoting from the article, “If the dog’s behavior is an unreasonable nuisance to other [residents], the [association] is not obligated to ignore that.”

It may be necessary to contact the resident directly to advise them that while they are able to have their dog in their unit (which may violate the association’s governing documents) their dog is creating a nuisance and they have to deal with that and the dog will have to leave. Otherwise, their request to maintain their dog in their unit is not reasonable so long as it continues to bark and create a nuisance.

September 24, 2010

The Owner Put a Sukkah Where?

by David C. Swedelson

September 22, 2010 marked the beginning of the Jewish holiday of Sukkot. This holiday starts on a different date between late September to late October each year and has agricultural orgins, celebrating the harvest. If it is Sukkot, we can be assured of getting calls asking us what to do about the Sukkahs that some homeowners have erected on their balconies or patios (or in some cases right in the common area). For those of you who don’t know what Sukkot entails, some Jews construct temporary outdoor dwellings, called Sukkahs, where they traditionally eat, sleep, and otherwise spend their time during this seven day holiday. Click here for examples of Sukkahs. The Sukkahs are typically small temporary wooden structures, but can be quite elaborate, incorporating various decorations such as hanging fruit and vegetables.

What do you do if a homeowner puts up a Sukkah on their exclusive use common area, or worse, on the common area that is not theirs to use exclusively, in violation of governing documents that contain prohibitions on exterior modifications without architectural committee approval? Despite our constant admonishments to uniformly and consistently enforce the governing documents, the association’s right to enforce its restrictions has to be weighed against the homeowners’ right to practice their religion.
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September 24, 2010

Owners in Zero Lot Line View Protected Communities May Have No Reasonable Expectation of Privacy

by David C. Swedelson

An interesting trial court decision was reported in the Daily Journal, a newspaper for attorneys. The article dealt with a the trial judge’s decision in a lawsuit between two owners in a Newport Beach gated zero lot line community regarding a purported landscaping encroachment. A zero lot line refers to a type of home where one boundary wall of the structure is built right on the property line (rather then there being a wall between the two homes with a setback).

Follow this link to read the article/summary.

One neighbor claimed that the other neighbor’s shrubbery that grew along a 2.5 foot wall on their shared property line was interfering with their view. They also sought a declaration from the court that their neighbor would be responsible for future damage to the drainage system that may be caused by their landscaping. The plaintiff owner requested $100,000 in damages and injunctive relief (and a court order requiring that the conditions be eliminated).
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September 23, 2010

FHFA Proposes Ban on Transfer Fees

by David C. Swedelson

On August 13, 2010, the Federal Housing Finance Agency (FHFA) issued a proposed regulation to ban the use of deed-based or covenant-based transfer fees. The proposal would prohibit Fannie Mae, Freddie Mac and all federal home loan banks from purchasing mortgages for properties in communities with deed-based transfer fees. While the target of the regulation appears to be private transfer fees that require a payment to a third party each time a property is sold, the proposed rule, as currently written, would include deed-based transfer fees used by many community associations. Click here for a recent Los Angeles Times article that addresses this issue.

A Private Transfer Fee is defined any fee or payment required at time of sale of a property by a deed or covenant restriction.

This new rule, if adopted, could have a significant impact on those communities that have private transfer fees in their governing documents.
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