Community Association Update: Issue # 35

  - Annual Legislative & Case Law Update (2018)

Happy New Year!
Below you will find an overview of the 2017 legislation and case law impacting California HOAs as we head into 2018. The material below is not meant to be an exhaustive list of all new legislation and case law; we have summarized what we believe is the most important to the majority of our HOA clients and the industry professionals who service them.

If you have any questions regarding the items below, please feel free to contact our offices anytime!

Sincerely,
Steve_Profile
Signature
Steven Tinnelly, Esq.
Tinnelly Law Group

NEW LEGISLATION
AB 634: REDUCED HOA CONTROL OF SOLAR ENERGY SYSTEM INSTALLATIONS
(Effective January 1, 2018)
The Governor has signed  AB 634 into law changing HOA control over solar energy system ("Solar") installations, such as solar panels. HOAs may no longer adopt policies and guidelines that prohibit Solar installations on common area roofs, garages or carports. Such policies and guidelines were previously utilized to protect common area components from damage. However, HOAs   must conform to a statewide, one-size-fits-all Solar policy summarized here.

SB 2: CALIFORNIA LEGISLATURE PASSES THE BUILDING HOMES AND JOBS ACT TO ADDRESS THE AFFORDABLE HOUSING CRISIS
(Effective Immediately - Fee Effective January 1, 2018)
California is currently facing a serious shortage of affordable housing.  The housing crunch is impacting individuals and businesses in all parts of the state.  Businesses are having trouble attracting and retaining employees and individuals face longer commute times and overcrowding, among a host of other issues.

To combat the affordable housing crisis, the California Legislature recently passed the  Building Homes and Jobs Act ("Act").  Effective immediately, the Act adds a new section to the Government Code (Section 27388.1) and a new chapter to the Health and Safety Code (Division 31, Part 2, Chapter 2.5). It results in the imposition of a new fee for many recorded instruments that HOAs utilize (i.e., assessment liens). 

AB 1412: CLARIFICATION OF TWO (2) EXISTING CODE SECTIONS (MEMBER NOTIFICATION AND DIRECTOR/OFFICER LIABILITY)
(Effective January 1, 2018)
On September 25, 2017, Governor Brown signed  AB 1412 (effective January 1, 2018) which seeks to clarify  Civil Code Section 4041 (Annual Notice of Owner Contact Information) and  Civil Code Section 5800 (Limitation of Director and Officer Liability).

Under the current law, Civil Code Section 4041 requires the HOA to solicit, on an annual basis, mailing addresses from the Members for purposes of providing notice.  Members are required to state the primary and secondary addresses to which notices from the HOA are to be delivered, among other things.  If no such notice is provided, Section 4041 provided that the default mailing address for purposes of delivery shall be the Member's property address within the Association. That has now been changed to allow the HOA to utilize the last address given to the HOA by the Member. 

SB 407: LEGISLATION BROADENS ASSEMBLY AND SPEECH RIGHTS WITHIN HOAS
(Effective January 1, 2018)
New Civil Code 4515 will be added to the Davis-Stirling Act to ensure that homeowners association residents may exercise their rights of peaceful assembly and political speech.

HOAs are playing an increasing role in the lives of California's residents as compared to the roles traditionally played by cities and counties. HOAs are growing in number, size and sophistication. As a result, a HOA's actions and governance structure often have more immediate effects on the issues homeowners feel "closest to home," such as property values and community services. This is why California law will at times hold HOAs-which are private corporations-to the standards of "quasi-governmental entities."

Continuing with that trend, SB 407 enacts new Civil Code Section 4515 to broaden the speech and assembly rights of persons within HOAs; HOAs may no longer impede homeowners' ability to assemble, canvas, petition, etc. on matters related to HOA living, HOA elections or elections to public office. 

AB 1139: IMPOSES NEW NOTICE REQUIREMENTS ON DEED-BASED TRANSFER FEES
(Effective January 1, 2018)
On July 31, 2017, Governor Brown signed Assembly Bill 1139 ("AB 1139") into law.   AB 1139 amends California Civil Code Section 1098.5 with regard to deed-based transfer fees ("Private Transfer Fees" or "Fees").  Prior to AB 1139 becoming law, any individual or entity who imposed a Fee on real property on or after January 1, 2008, had to record a document that provided limited notice of the Fee on or before January 1, 2009.

AB 1139 now requires any individual or entity who imposes a Fee on real property on or after February 8, 2011, to record a document that contains very specific language with regard to notice.  The notice must now state that federal housing agencies are prohibited from dealing in mortgages on properties encumbered by private transfer fee covenants that do not provide a "direct benefit" to real property encumbered, and that if a person purchases such a property, that person may have difficulty obtaining financing.

AB 690: NEW MANAGEMENT DISCLOSURE AND CHANGES TO THE ESCROW DOCUMENT DISCLOSURE FORM
(Effective January 1, 2018)
The Governor has signed  AB 690 into law, which modifies several Code sections and adds two new Civil Code sections to the Davis Stirling Common Interest Development Act. The new requirements relate to billing disclosures associated with escrow documents, as well as other disclosures relating to manager and management company conflicts of interest. 


AB 534: ASSOCIATIONS TO PROVIDE NOTICE TO MEMBERS OF LIEN CLAIMS
(Effective January 1, 2018)
Vendor professionals frequently provide a variety of services on behalf of HOAs and individual homeowners.  Under California's law, unpaid vendors possess a legal right to lien the property upon which they work for the value of their rendered services or furnished material.

AB 534 (Gallagher), effective January 1, 2018, seeks to clarify how mechanic's liens are to be used in common interest developments by amending  Civil Code Section 4615 and by adding new Civil Code sections.

NEW CASE LAW
REQUESTING HOA ENFORCEMENT HELD TO BE CONSTITUTIONALLY PROTECTED ACTIVITY
Colyear v. Rolling Hills Community Association of Rancho Palos Verdes (2017)
A Strategic Lawsuit Against Public Participation (or "SLAPP") is a lawsuit brought to prevent or punish someone for exercising their First Amendment right to speak about public issues or to petition the government. In response to this abuse of the court system, California enacted  Code of Civil Procedure Section 425.16, known as the "anti-SLAPP" statute. It allows a defendant against whom a SLAPP is brought to file a special motion to strike and, if granted, have the case dismissed and also recover his attorney's fees.

In recent years we have seen situations where the anti-SLAPP statute has been triggered in homeowners association ("HOA") disputes.  The 2017 case of  Colyear v. Rolling Hills Community Association of Rancho Palos Verdes (9 Cal.App.5th 119) (Rolling Hills) is another example.

ACCESS TO HOA MEMBERSHIP LIST MUST BE FOR A PROPER PURPOSE
Tract No. 7260 Association, Inc. v. Parker (2017)
As part of the ongoing management of a HOA, the HOA is obligated to prepare and maintain certain " association records," most of which must be made available for  inspection by the HOA's members. However, the right to inspect and copy certain association records is not absolute, as some records  may be withheld from a member for confidentiality concerns, as well as in situations where the member requesting the records is doing so for an "improper purpose":

"association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member's interest as a member." ( Civ. Code § 5230; see also Corp. Code §§ 83308333.)

This "proper purpose" requirement was recently the focus of a challenge brought by a member of a HOA who sought to inspect and copy the HOA's  membership list. In  Tract No. 7260 Association, Inc. v. Parker (2017) 2017 Cal. App. LEXIS 265 ("Parker"), the Court of Appeal concluded that the HOA was justified in withholding the membership list despite the member's offering of a facially valid reason for his request to inspect the membership list. The member was involved in a corporation that the HOA was suing, called "Fix the City." The member claimed that he sought the membership list "for possible communication with the [HOA's] members to ascertain whether there had been corporate misdeeds."

PRE-LIEN DEMANDS AND FDCPA CONCERNS
Mashiri v. Epsten Grinnell & Howell (2017)
Recovering delinquent assessment debt is one of the more complicated issues that HOAs face. Fortunately, the Civil Code grants HOAs with significant remedies to recover delinquent assessment debt, including the ability to record  assessment liens and to ultimately enforce those liens through  foreclosure. However, HOA Boards, managing agents and collection professionals understand that the laws governing such remedies are complex, and a string of California court decisions in recent years have affirmed the necessity for HOAs to strictly comply with these legal requirements. The recent case of  Mashiri v. Epsten Grinnell & Howell (2017) 845 F.3d 984 is an example.

BUSINESS JUDGMENT RULE DOESN'T APPLY WHEN THE BOARD ACTS OUTSIDE ITS AUTHORITY
Lingenbrink v. Del Rayo Estates Homeowners Association (2017)
*Unpublished

Is an HOA Board of Directors ("Board") entitled to protection under the  Business Judgment Rule  ("BJR") when it applies an unambiguous view restriction contained in the governing documents in a manner other than written?  According to the Court of Appeal in   Lingenbrink v. Del Rayo Estates Homeowners Association , 2017 WL 1075062 ("Lingenbrink"), that answer is "no." The BJR only applies to matters that are within an HOA Board's discretion.  A Board does not have the discretion to interpret or re-write a restriction where the meaning of the restriction is perfectly clear.

COURT CONCLUDES RENTAL RESTRICTIONS ARE REASONABLE
Ocean Windows Owners Association v. Spataro (2017)
*Unpublished
Recently, many residential common interest developments have experienced an influx in the number of short-term rentals within their community. This problem is exacerbated by the increased popularity of websites such as Airbnb and HomeAway. Although profitable, short-term rentals have a significant negative impact on community associations, such as increased damage to common area and violations of the Association's governing documents. To address these concerns, many associations are amending their CC&Rs to include restrictions imposing a minimum lease period (e.g., thirty days). In a recent unpublished opinion, the California Court of Appeal upheld such a restriction as reasonable.

FIRM NEWS
Welcome New TLG Clients!

2017 was quite a year for our growth, as we were privileged to welcome over 70 new communities to TLG's client family! Some of the more recent clients to sign on board include:

Orange
Sierra Vista Estates Townhomes Association
Mountain View
Brea-Olinda Master Community Association
Brea
Rossmoor Park Owners Association
Seal Beach
Pentridge Cove II Community Association
Costa Mesa
Madiera at Coronado Ranch Homeowners Association
San Marcos
Isle Cove Homeowners Association
Foster City
Central Park West Community Association
Irvine
The Plaza Homeowners' Community Association
Newport Beach
Vogue Condominiums Association, Inc.
Los Angeles
Portico at Rancho Carillo Homeowners Association
Carlsbad
Classics at Ruschin Homeowners Association
Palo Alto

Our Commitment to Continued Improvement

We are privileged to have many new communities join the TLG client family in 2017, and to continue to serve communities that have been part of our client family for decades. We value the trust that they place in our team of dedicated professionals each year.  With that in mind, we are always striving to improve upon our operations and to maximize the value we offer. 

To that end, in the opening months of 2018 we will be commencing another expansion of our corporate headquarters, as well as implementing a robust matter-management platform to further enhance our ability to deliver quality, responsive and cost-efficient legal services. 

Alterra Surpasses $4 Million in Debt Recovery 

Tinnelly Law Group is proud to provide its clients and HOAs throughout the state with access to comprehensive collection services through the use of our affiliate, Alterra Assessment Recovery. Alterra was founded with the goal of providing efficient and effective collection services, utilizing the best technology available and a skilled, dedicated team of professionals. In just its first 4 years of operation, Alterra has already recovered over $ 4 million dollars in assessment debt for its clients, with approximately $1.7 million in debt recovered in 2017 alone

Alterra appreciates all the support it has received and remains committed to providing consistent results with the best service possible.
Your Community. Your Counsel. TM