ENACTED LEGISLATION IN CALIFORNIA
AB 634: Solar Energy Installation
Beginning January 1, 2018, Civil Code §714.1 now restricts associations from establishing a general policy that prohibits or requires membership approval of the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which the owner resides, or a garage or carport adjacent to the building that has been assigned to the owner for exclusive use.
Furthermore, Civil Code §4600 will now exclude the installation and use of a solar energy system on common area roof of a residence from the requirement of an affirmative vote of members owning at least 67 percent of the separate interests in the common interest development before the board may grant exclusive use of any portion of the common area to a member.
Lastly, under new Civil Code §4746, when reviewing an architectural approval request to install a solar energy system on a multifamily common area roof shared by more than one homeowner, the association shall require the applicant to notify each other unit holder within the building in which the installation will be located, and the association shall require that the applying owner and each successive owner maintain homeowner liability insurance, and provide the association with the certificate of insurance within fourteen (14) days of approval of the application, and annually thereafter.
Additionally, when reviewing the architectural approval request, the association may impose reasonable provisions that require the applicant to submit a solar site survey showing the placement of the system, prepared by a licensed contractor or registered salesperson knowledgeable in the installation of solar energy systems to determine usable solar roof area. This survey or the costs to determine useable space shall not be deemed as part of the cost of the system and the solar site survey shall also include a determination of an equitable allocation of the usable solar roof among all owners sharing the same roof, garage, or carport.
Also, the association may impose reasonable provisions that require the owner and each successive owner to be responsible for: (1) Damage to the common area resulting from the installation, maintenance, repair, removal or replacement of the system; (2) Costs for the maintenance, repair, and replacement of the system until it has been removed; (3) Costs for the restoration of the common area, exclusive use common area, or separate interests after removal; and (4) Disclosing to prospective buyers the existence of the system and the related obligations of the owner with respect to the same.
AB690: Manager Conflicts and Disclosure Requirements
Effective on January 1, 2018, AB 690 amended Business and Professions Code §11504, added two (2) new Civil Code sections and amended several more.
Existing law requires that a common interest development manager (“Manager”), or common interest development management firm (“Management Company”) provide specified disclosures to the board of directors of an association, including whether the prospective Manager is certified, holds an active real estate license, and the Manager’s name and address. Business and Professions Code §11504 has been amended to now require that Managers disclose whether they receive a referral fee or other monetary benefit from a third-party provider distributing the association’s annual budget report, and must provide a written acknowledgment that the billing disclosures and annual budget report documents provided to a member, or potential member, are the property of the association, and not of the manager or management company. Additionally, §11504 now further requires that a Manager or Management Company, make the disclosures required of Civil Code §5375.
Another change is that the billing disclosures form outlined in Civil Code §4528 now includes language stating that any documents specified by Civil Code §4525 that are in the possession of the seller may be provided to the prospective purchaser at no cost, and that a seller may request to purchase some or all of the documents listed on the form, but is not required to. Additionally, Civil Code §5300 now requires that the billing disclosure form must now be included with the annual budget report, in addition to being disclosed at the time of purchase or sale.
Furthermore, Civil Code §5375 now requires that Managers disclose any business or company in which the Manager or Management Company has any monetary interest or in which a monetary benefit can be derived, and must disclose whether the Manager or Management company receives a monetary benefit from a third-party distributor of documents.
Lastly, §§5375.5 and 5376 have been added to the Civil Code. Civil Code §5375.5 provides that a manager shall disclose in writing, any potential conflict of interest when presenting a bid for a provider of service to an association. Conflict of interest is defined as any referral fee or monetary benefit that could be derived from a company providing services to the association, and any ownership interests or profit-sharing arrangements with services providers recommended to, or used by the association. And, Civil Code §5376 requires Manager and Management Companies, or their third-party agent to facilitate the delivery of disclosure documents in accordance with Civil Code §4530, if the Manager, Management Company or the third-party agent is contractually responsible for delivering those documents.
AB 534: Mechanics Liens
Civil Code §4615 has been amended to now prohibit, in a common interest development, a mechanics lien from being filed against another owner in the common interest development unless the owner provides consent, or requests the work, except in the case of emergency repairs.
Furthermore, Civil Code §§4615 and 6658 allows a homeowner to remove the lien by paying a fraction of the total sum under the lien that is attributable to the homeowners separate interest, or by recording a release bond in an amount equal to 125 percent of the sum secured by the lien that is attributable to the owners separate interest.
Additionally, Civil Code §§4620 and 6660 have been added which require that the association give notice of the lien to the members of the association within sixty (60) days of service of the claimed lien.
Lastly, the addition of Civil Code §8119 imputes to all owners authorization to perform work in common areas of the association if the association requests the work.
AB 1412: Civil Code §§4041 and 5800 – Director Liability and Address for Member Notice
Existing law, found in Civil Code §5800 shields volunteer officers or directors of an association that manages exclusively residential common interest developments from liability in excess of the coverage of insurance maintained by the association, for tortious acts or omissions, provided that the act or omission was performed in good faith, within the scope of the officer or director’s association duties and was not will willful, wanton, or grossly negligent. Beginning January 1, 2018, this protection extends to directors or officers of an association that manages residential or mixed use common interest developments, but only to those officers or directors who are residents of the association.
In addition, Civil Code §4041 which discusses delivery of member notices, has been amended to add that the association may use the last address provided in writing by the owner, if an owner fails to provide an address or alternate address to which notices from the association are to be delivered.
SB 2: Addition of Government Code §27388.1 – Recorded Document Fee
SB 2, among other things, added new Government Code §27388.1 which provides in relevant part that a $75.00 recording fee will be imposed, in addition to any other recording fees, for the recording of every real estate instrument, paper or notice required or permitted by law to be recorded, except those expressly exempted from payment of recording fees, per each single transaction per parcel of real property. “Real estate instrument, paper, or notice” is defined as a document relating to real property, including, but not limited to the following: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release of discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restrictions. The fee imposed by this section shall not exceed $225.00.
The fee described above will not be imposed on any real estate instrument, paper, or notice recorded in connection with a transfer subject to the imposition of a documentary transfer tax as defined in §11911 of the Revenue and Taxation Code, or on any real estate instrument, paper, or notice, recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.
SB 407: Addition of Civil Code §4515 – Non-Commercial Solicitation
SB407 added new Civil Code §4515, which takes effect January 1, 2018. The new rule prohibits the governing documents of an association from prohibiting members or residents of a common interest development from engaging in certain activities. Those activities include:
(1) Peacefully meeting with members, guests and their invitees during reasonable hours and in a reasonable manner for purposes related to common interest development living, association elections, legislation, election to public office, or the initiative, referendum or recall processes; (2) Inviting public officials, candidates for public office, or representatives of homeowner organizations to meet with members, residents, or their invitees or guests and speak on matters of public interest; (3) Using the common area, or the area of a separate interest (with the consent of the member) for these meetings; (4) Canvassing and petitioning the members, association board of directors, and residents for these meetings at reasonable hours and in a reasonable manner; and (5) Distributing or circulating, without prior permission, information about common interest development living, association elections, legislation, election to public office, or the initiative, referendum, or recall processes, or other issues of concern to members and residents at reasonable hours and in a reasonable manner.
In addition, a member shall not be required to, pay a fee, make a deposit, obtain liability insurance, or pay the premium or deductible on the association’s insurance policy, in order to use the common area for the described activities.
ENACTED FEDERAL LEGISLATION
81 FR 63054: Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Ac
As of 2016, “Quid pro quo harassment” and “hostile environment harassment” are prohibited. Quid pro quo harassment occurs when a person is subjected to an unwelcome request or demand related to the person’s housing. Hostile environment harassment involves subjecting a person to unwelcome conduct that is sufficiently severe or pervasive to the point where it deprives the person of the right to use and enjoy the housing.
Associations, including board members, may be liable under this law: (1) for their own actions; or (2) if they do not act when residents’ conduct constitutes hostile environment harassment towards others. This year, the U.S. Department of Housing and Urban Development (“HUD”) provided clarification in response to questions regarding the application of the rule to community associations.
Particularly, an issue was raised concerning the fact that community associations generally lack the legal authority to mandate that residents take actions described in the preamble of the rule because the associations cannot evict homeowners or otherwise impose conditions not specifically authorized by the associations covenants, conditions and restrictions (“CC&R’s”).
The HUD responded by highlighting the fact that a community association generally has the power to respond to third-party harassment by imposing conditions authorized by the associations CC&R’s or by other legal authority. Community Associations regularly require residents to comply with CC&R’s and community rules through such mechanisms as notices of violations, threats of fines. While community associations may not always have the ability to deny a unit owner access to his or her dwelling, the rule requires the community association to take whatever actions it legally can take to end the harassing conduct.
CALIFORNIA CASE LAW
Tract 7260 Ass’n v. Parker: (2017) 10 Cal.App. 5th 24
Facts: Homeowner, requested a copy of the association’s membership list and other association records. The association denied the request because they were being sought for an improper purpose–to be used against the association in a legal dispute. Homeowner filed a petition for writ of mandate to compel the association to allow him to inspect and copy the membership list and other books and records, as was his right as a member.
Applicable Law: California Corporations Code §8333
Result: Trial Courts finding that that the member sought information for an improper purpose affirmed. Trial Court reversed the finding that the membership list be disclosed as the corporation’s challenge to the request was not barred by statute.
Rule: When there is a finding of improper purpose supported by substantial evidence, the assertion of a proper purpose does not undermine the conclusion.
Mashiri v. Epsten Grinnel & Howell: (9th Cir. 2017) 845 F. 3d 984
Facts: Homeowner and member of the association became delinquent in her assessments. The association sent the homeowner a pre-lien letter that stated the Association would record a lien against the homeowner’s property if she failed to pay the delinquent assessments within thirty-five days of the date of the pre-lien letter. The homeowner later sued, arguing: (1) requiring payment within thirty-five days of the date of the pre-lien letter impermissibly violated her rights under the Fair Debt Collection Practices Act (“FDCPA”), which provides her a thirty-day period to dispute the debt upon receipt of the letter; and (2) by threatening to record a lien within thirty-five days irrespective of whether she disputed the debt, the Association violated her right to effectively dispute the debt. The District Court dismissed the claim, and Mashiri appealed.
Applicable Law: 15 U.S.C. 1692g(b) and Civil Code §5660
Result: The Appellate Court reversed holding that the pre-lien letter demanding payment within thirty-five days of the date of the letter was inconsistent with the right to dispute a debt within thirty days of receipt of the letter. By the time a delinquent homeowner receives such a letter, there may be fewer than thirty days left before payment is actually due, and a delinquent homeowner could likely be led to believe that, even if she disputed the debt, the association would nonetheless record a lien on the thirty-fifth day after the date of the pre-lien letter, which would be improper.
Rule: Demanding payment from a point in time that would require the homeowner to send payment prior to the thirtieth day of the dispute period, and language that would lead the homeowner to believe that even if they were to dispute the debt, a lien would be recorded upon the expiration of the time-period called for in the letter, overshadows and conflicts with the homeowners FDCPA debt validation rights.
Retzloff v. Moulton Parkway Assn.: G053164
Facts: Plaintiffs and former board members Retzloff, Franklin and Stewart sued the association twice for violations of the Davis Stirling Act. The first suit alleged that the association violated sections of the Davis Stirling Act by conducting association business outside of board meetings and failing to maintain and make available certain corporate records. Before the suit, pursuant to Civil Code §5930, plaintiffs notified the association of their grievances in an email demanding ADR. However, this never occurred because Plaintiffs contended they did not have access to association documents necessary to engage in mediation. Plaintiffs then filed the suit and the association demurred on the grounds that plaintiffs did not complete ADR prior to filing the lawsuit. Plaintiffs dismissed the first suit before the demurrer could be ruled on and then filed a second suit identical to the first, attaching a certificate purporting to comply with the ADR requirement. The association demurred to which the trial court sustained without leave to amend. The association then moved for attorney fees. The trial court found the second action to be frivolous, and pursuant to Civil Code §5235(c), awarded the association attorneys fees and costs. Plaintiffs then appealed the award.
Applicable Law: Civil Code §5235(c)
Result: Judgment in favor of the association affirmed with respect to award for costs, and reversed with respect to the award for attorney fees.
Rule: A plain reading of “any costs” as used in §5235(c) does not support the inclusion of attorney fees as costs. §5235(c) entitles a prevailing association to costs, not attorney fees and costs.
Colyear v. Rolling Hills Community Association of Rancho Palos Verdes: B270396
Facts: Homeowner Yu Liu (“Liu”) submitted an application to the association, Rolling Hills Community Association of Rancho Palos Verdes, seeking to invoke the association’s dispute resolution process against a neighbor who refused to trim trees blocking Liu’s view. Neighbor and association member Richard Colyear sued Liu and the association, alleging that two of the offending trees were actually on his property, that the relevant tree-trimming covenant did not encumber his property, and therefore that Liu and the association were wrongfully clouding his title by seeking to apply such an encumbrance. Liu filed a special motion to strike the claims alleged against him under the anti-SLAPP statute. The trial court granted the motion. Colyear appealed, arguing that Liu’s application involved a private tree-trimming dispute between two neighbors and thus did not qualify as a matter of “public interest” for purposes of the anti-SLAPP statute.
Applicable Law: Code of Civil Procedure §425.16 (Anti-SLAPP motion)
Result: The Court of Appeal affirmed holding that Colyear’s complaint arose from Liu’s statements made in connection with an issue of public interest. The issue regarding the applicability of tree-trimming covenants was an ongoing topic of debate between the board and the homeowners.
Rule: Issues of general concern to homeowners in the community are considered issues of public interest and therefore statements made in connection with the same are protected.
Revock v. Cowpet Bay West Condominium Assn.: (2017) 853 F.3d 96
Facts: Appellants Walters and Kromenhoek were prescribed emotional support animals. Each obtained a dog which violated the “no dogs” rule of the condominium. Appellants each attempted to request an accommodation by filing paperwork with the office manager with certifications stating that the dog was “prescribed and deemed necessary to assist . . . the confirmed disabled handler” and that “property managers and landlords are required to make reasonable accommodation” under the Fair Housing Act. Meanwhile, another resident Talkington, used his internet blog about the community to denigrate Walters and Kromenhoek for their possession of the dogs. The Board did not grant an accommodation to Walters or Kromenhoek in the fall of 2011 and instead fined Walters and Kromenhoek for violating the “no dogs” rule. The Board eventually granted the accommodations in 2012 under a new president. Walters and Kromenhoek, filed civil rights cases under the Fair Housing Act raising two federal claims: (1) that Cowpet denied their reasonable requests for accommodation in violation of 42 U.S.C. §3604(f)(3)(B); and (2) that Cowpet and three individual Appellees interfered with the exercise of their fair housing rights in violation of 42 U.S.C. §3617. Walters and Kromenhoek also asserted supplemental territorial law claims against all Appellees. Walters committed suicide while her case was pending in the District Court. Appellees moved for summary judgment. The District Court dismissed Walters’ Fair Housing Act claims entirely due to her death. As to Kromenhoek, the District Court denied her Fair Housing Act claims on the merits. Walters and Kromenhoek appealed.
Applicable Law: Fair Housing Act (“FHA”)
Result: Summary judgment reversed. The Fair Housing Act claim survives the death of a party. There was a material issue of fact as to whether Cowpet’s actions constituted a refusal of accommodation, and there were genuine issues of material fact as to whether the Defendants actions interfered with Walters and Kromenhoeks exercise of their fair housing rights.
Rule: 1) Fair Housing Act claims survive the death of a party. 2) An undue delay in granting a reasonable accommodation under the FHA may amount to refusal. 3) Interference under the FHA may consist of harassment if it is sufficiently severe or pervasive so as to create a hostile environment.
Acqua Vista HOA v. MWI, Inc.: D068406
Facts: The association filed a construction defect action in December 2009. In September 2013, the association filed an amended complaint in which it named MWI, Inc. (“MWI”) and others as defendants. The complaint alleged a cause of action styled as “Violation of SB800 Construction Standards, Civil Code § 896” against all defendants, including MWI. At trial MWI moved for a directed verdict on the ground that the association failed to present evidence that MWI caused a violation of Act’s standards as a result of MWI’s negligence or breach of contract. The trial court denied the motion and entered judgment against MWI. Thereafter, MWI moved for a judgment notwithstanding verdict “JNOV” on several grounds, including that the association had failed to present evidence that MWI had caused a violation of the Acts standards as a result of MWI’s negligence or breach of contract. The Trial Court denied MWI’s motion for JNOV and MWI appealed.
Applicable Law: Civil Code §936
Result: The amended judgment and trial court’s order denying motion for JNOV was reversed. Since the HOA’s claim was brought under SB800, it was required to prove the defendant “caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract.
Rule: Civil Code §936 contains an “explicit adoption of a negligence standard for claims” under the Building Standards Act against material suppliers. A party suing a material supplier under SB800 for violation of one or more construction standards must prove that the material supplier “caused, in whole or in part, a violation of a particular standard as a result of a negligent act or omission or breach of contract.”
Marina Pacifica HOA v. SC Financial Corp.: B270580
Facts: In 2007, the Legislature enacted §§1098 and 1098.5 to regulate transfer fees, defined broadly as fees imposed in any document affecting transfer of an interest in real property. When unit owners purchased their units in the Marina Pacifica complex, they purchased an ownership interest in their individual units, and a share of an undivided leasehold interest in the land on which the complex was built. The leasehold interest included the obligation to pay monthly rent to the landowner and an assignment fee to the developers. Plaintiff Marina Pacifica and a Mr. Lansfield retained the interest in assignment fees. In 2008, Mr. Lansfield transferred his right to the assignment fees to the defendant. Plaintiff instructed owners not to pay the assignment fees and sued asserting that the assignment fee was a transfer fee as defined by §1098 and could not be collected after December 31, 2008, because Defendant did not comply with the recording requirements of §1098.5. The trial court agreed and entered judgment. During 2015, legislation was enacted to amend §1098, effective January 1, 2016. Among the changes were the addition of a new subdivision (b) which provides, with respect to the substantial compliance exception to the definition of a transfer fee, that the specified information “shall be set forth in a single document and shall not be incorporated by reference from any other document.” After the passing of the new legislation, the trial court permitted briefing, and on December 28, 2015 entered final judgment. Plaintiff appealed asking the Appeals court to reverse and direct entry of a new judgment declaring that Defendant cannot collect assignment fees as of January 1, 2009
Applicable Law: Civil Code §§1098 and 1098.5
Result: Trial court judgment is affirmed. The result the legislature intended was that the Marina Pacifica assignment fees should remain in place so long as defendant recorded a document reflecting the assignment fee, that complies with §§1098(b) and 1098.5 on or before December 31, 2016
Rule: A fee for assignment of ground lease interests to condominium owners, payable by individual condominium unit owners to the developers of the condominium project, is properly collectible if the recording requirements under Civil Code §§1098 and 1098.5 have been met.