Community Association Update: Issue # 33
  - What Does Legalized Marijuana Mean for Your HOA?
  - 'No Cost' Collections Can Prove Very Costly
  - Pre-Lien Demands and FDCPA Concerns
  - Access to HOA Membership List Must be for a Proper Purpose
This Community Association Update is part of our commitment to providing the highest quality legal services to our clients and industry partners. If your company or Association would like to see a topic or issue covered in future editions, feel free to call our offices, email us, or submit a question online!

Sincerely,
Steve_Profile
Signature
Steven Tinnelly, Esq.
Tinnelly Law Group
What Does Legalized Marijuana Mean for Your HOA?
Adult possession and use of marijuana for recreational purposes is now legal in California as a result of the passage of  Proposition 64 ("Prop 64") in 2016. Prop 64 is comprised of sixty-two (62) pages of detailed, complicated, and at times confusing regulations and statutory revisions to various California codes. We have been asked by various homeowners association ("HOA") clients about the significance of Prop 64 and what impact, if any, it has on their ability to regulate marijuana within their private communities.

Restrictions on Marijuana Smoking
Virtually every set of HOA governing documents contains a provision that prohibits activities which serve as a nuisance to residents within the HOA's development (i.e., the transmission of "noxious odors"). These provisions have been relied upon by HOAs to restrict smoking (i.e., cigarettes, pipes, cigars, vaporizers, etc.) in common areas and, in some instances, within the separate interests (i.e., the lots or units) that are owned by each of the HOA's members.  Fortunately, Prop 64 has not altered a HOA's regulatory authority with respect to the smoking of marijuana. Section 4.6 of Prop 64 (adding Section 11362.3 to the California Health & Safety Code) provides in relevant part that nothing in the statute permitting personal use, possession, cultivation, etc. of marijuana shall be construed to permit any person to "[s]moke marijuana or marijuana products in a location where smoking tobacco is prohibited." Thus, valid and enforceable HOA restrictions against tobacco smoking may still be used to restrict marijuana smoking as well. Notably, the term "smoke" as used in Prop 64 also includes the use of electronic smoking devices and vaporizers.

Restrictions on Marijuana Cultivation
One of the more interesting issues that HOAs may encounter in the wake of Prop 64 relates to the growing or "cultivation" of marijuana plants. In 2015, new  Civil Code § 4750 was enacted to grant homeowners within HOAs the right to use their backyards for " personal agriculture." Civil Code § 1940.10 was enacted at the same time to clarify that "personal agriculture" as used in Section 4750 means the use of land where an individual cultivates "edible plant crops for personal use or donation," and that the term "plant crop" does not include "marijuana or any unlawful crops or substances." Thus, prior to Prop 64's passage, a HOA's authority to prohibit backyard marijuana gardens was relatively clear.
'No Cost' Collections Can Prove Very Costly
The collection practices of HOA collection vendors have come under increased scrutiny over recent years. For example, we have written about how California courts have struck down a vendor's ability to reject partial payments. Those actions resonated throughout the HOA industry and resulted in significant changes to the approaches taken by collection vendors when pursuing the debt owed to their HOA clients. The most significant changes however have come in response to attacks made against collection vendors that operate under a "no cost" collection model. We have also written about this issue and how the "no cost" collection model results in liability exposure for violations of the California Civil Code as well as applicable state and federal fair debt collection laws. To our surprise, despite the actions that collection vendors have wisely taken to shift away from the "no cost" model, we are still seeing instances where a HOA has opted to utilize the services of a "no cost" collection vendor without understanding the substantial risks of doing so.

As nonprofit corporations with fixed budgets, the idea of a "no cost" collection model is certainly attractive to HOAs. Under a "no cost" model, the collection vendor does not charge the HOA any upfront fees or costs for the collection services it performs, but rather collects those amounts directly from the delinquent homeowner. However, in doing so, the United States Bankruptcy Court in California first noted how this approach violates applicable provisions of the Civil Code, and further "opens the door to all sorts of mischief, as an HOA has no incentive whatsoever to question costs for which it is not liable and no incentive to search for services charging more reasonable costs." (In re Cisneros, (Bankr. N.D. Cal. 2012), ("Cisneros").) That rationale was underscored in the most recent attack on "no cost" collection models put forth in the case of Hanson v. JQD, LLC d/b/a Pro Solutions, (N.D. Cal., 2014) ("Hanson v. Pro Solutions").
Pre-Lien Demands and FDCPA Concerns
*New Case Law
Recovering delinquent assessment debt is one of the more complicated issues that homeowners associations ("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.

Civil Code Section 5660 requires associations to provide delinquent homeowners with notice of the HOA's intent to record an assessment lien (i.e., to send a "pre-lien letter") at least thirty (30) days prior to recording the assessment lien.  As such, most pre-lien letters demand that payment be made within this thirty (30) day period (e.g., "Demand is hereby made that you remit payment within thirty days of the date of this notice or else a lien will be recorded").  However, according to the Court's decision in Mashiri, such a demand for payment within this timeframe may violate the Fair Debt Collection Practices Act (" FDCPA").

Access to HOA Membership List Must be for a Proper Purpose
*New Case Law
As part of the ongoing management of a homeowners association ("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."
FIRM NEWS
Alterra Names Amanda Ybarra Vice President

Alterra Assessment Recovery is pleased to announce that Amanda Ybarra has been named Vice President. She will assist in the development and administration of the company's daily operations, in addition to maintaining the company's collection files.

Amanda has been providing assessment debt recovery for community associations since 2009, when she began working for a prominent Orange County law firm. She joined Alterra Assessment Recovery in 2015 as a collection account manager, where she has been instrumental in streamlining Alterra's processes, which included development of software and related operational processes.

"We constantly receive positive feedback from our clients about Amanda," says Tisha Lopez, Director of Administration and Assessment Collections. "She has contributed towards Alterra's success to such an extent that our clients are pleased with the helpfulness and work ethic that she demonstrates. We anticipate that as Vice President, Amanda's input, structure, and tenacity will continue to result in major growth for years to come."

If you would like information about Alterra or to request a proposal, please visit Alterra's website .

Ramona Acosta Receives CAI's May Russell Lifetime Achievement Award

Ramona Acosta, Director of Business Development for Tinnelly Law Group, PC, won the May Russell Lifetime Achievement Award given by the Orange County Regional Chapter of the Community Associations Institute (CAI) during its 40th Anniversary Gala and Orange County Excellence in Community Awards held at Disney's Grand Californian Hotel & Spa on February 8, 2017.

Each year, the Orange County Chapter of CAI recognizes an outstanding individual who has been instrumental in the success of the Chapter. The Chapter's most prestigious award is named after May Russell, a former Irvine Company Executive who helped form CAI and was its first president. Recipients of this Award were first announced in 1988 at the Chapter's very first awards dinner. The Award is presented to an individual who has proved exemplary leadership and demonstrated the ideals and objectives of CAI through active participation at the local, regional and/or national level.

Ramona has been a longtime supporter of CAI and an outstanding leader within the organization. She served on the Board of Directors from 2006-2011. She was the Treasurer in 2008 and the President in 2010. She provided leadership on several committees, including the Education Committee and Public Relations Committee. She represents the Chapter as a Delegate to CAI's California Legislative Action Committee, where she serves as the PR Chair, and she is recognized as a frequent speaker at industry events and luncheons.

During her tenure on the Board, she helped resurrect the PCAM Assistance Fund, a program dedicated to assisting community association managers in earning the Professional Community Association Manager designation, the highest international designation for community association management. She helped the Chapter accomplish a 17% increase in manager certifications and she was instrumental in developing a relationship with the City of Santa Ana to educate its homeowners living in community associations, for which the Chapter received recognition from the Santa Ana City Council. She is highly regarded by her colleagues and business partners as a driving force in the industry and a true friend to many involved.

Welcome New TLG Clients!

 Vue on 5th Owners Association
 San Diego
 Sage Canyon Maintenance Corporation
 Corona
Irvine
Wallis Ranch Owners Association
San Diego
Robertson Ranch West Village Owners Association
Lafayette
Tustin Field II Community Association
Tustin
McKinley Village Community Association
Sacramento
South Peak Community Association
Laguna Niguel
Smoketree La Habra Homeowners Association
La Habra

Augusta at Vista Del Verde Association
Yorba Linda

Sunset Pointe Homeowners Association
Long Beach

Villa Mar Homeowners Association
San Diego

Mariposa Maintenance Association
Lake Forest
Your Community. Your Counsel. TM