HOA Law Blog

August 14, 2012

What the Heck is Directors and Officers (D and O) Liability Insurance and Why is it so Important? A Primer on Board Member and Officer Liability Exposure

By David Swedelson, Esq., Senior Partner at SwedelsonGottlieb, Community Association Attorneys

Directors and officers of an association are volunteers with enormous responsibilities, who put in countless hours to better their communities. Though directors and officers are appreciated by most of the community, they are sometimes blamed for their decisions and challenged in court. However, in the event that there is a challenge (a threatened or actual lawsuit), the law affords some protections to directors and officers.

What does the law say? California Civil Code Section 1365.7 and California Corporations Code Section 7231.5 set forth specific factors that can shield a director from liability. Specifically, these laws state that if a personal injury or property damage claim is brought against a director or officer, as a result of a tortious act or omission, and if the damage exceeds the amount of the association’s insurance coverage, the director or officer will not be personally liable in excess of the association’s insurance policy if:

1. The director or officer was acting within the scope of his/her duties;
2. The director or officer was acting in good faith;
3. The director or officer was acting in a manner which he/she believed to be in the best interest of the association;
4. The director or officer was acting with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use in similar circumstances;
5. The act or omission was not willful, wanton, or grossly negligent; and
6. The association maintained and had in effect an insurance policy at the time the act or omission occurred and at the time the claim was made, which meets the minimum requirements set forth in Civil Code Section 1365.7(a)(4).
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August 12, 2012

Smoke Free Housing Toolkit

by David C. Swedelson

Blog Post by David Swedelson

I recently spoke at a program on secondhand smoke issues at California community associations. And I posted an article that dealt with second hand smoke and how condo and HOA associations can deal with the issue, The Smoker Next Door: Secondhand Smoke + Condominiums = Trouble

A new “Smoke-Free Housing” tool kit for owners and residents of multifamily housing, including condo associations, is available from the U.S. Department of Housing and Urban Development. The toolkit includes a guide for implementing no-smoking policies, sample resident survey and educational and research materials.

August 12, 2012

Common Scents Often Become A Condo Issue

by David C. Swedelson

Blog post by David Swedelson

We hear these types of complaints all the time. While secondhand cigarette, pipe or marijuana smoke are the biggest sources of complaints, we are often asked to help associations deal with smells from other sources including cleaning products, paint and lack of ventilation, food and even perfume. I was reminded about this issue from an article that appeared in the Chicago Tribune newspaper.

As the article points out, “[w]ith many kids being asthmatic or allergic, and increasing numbers of people claiming chemical sensitivities, whether real or imagined, products that could become the trigger for an attack can become quite a hot button issue in certain associations.”

August 9, 2012

Is a Provision In a California Community Association’s CC&Rs Requiring That Construction Defect Claims Against The Developer Be Adjudicated Via Binding Arbitration Unconscionable And Therefore Unenforceable? Yes Says the Court Of Appeal

by David C. Swedelson

By David Swedelson, Partner, SwedelsonGottlieb

So here is the question. Is a provision in the CC&Rs requiring that an association submit claims against the developer for construction defects to binding arbitration unconscionable and therefore unenforceable? This is what the Court of Appeal found in the Pinnacle case, holding that such provisions are procedurally unconscionable because neither the individual purchasers, nor the association, have any alternative but to accept the terms of the CC&Rs, and substantively unconscionable because they are unfair and one-sided.

This case is now before the California Supreme Court, and we are awaiting its decision.
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August 7, 2012

Smoking Bans: An Increasingly Viable Alternative for California Condo and HOAs Seeking Ways To Address Complaints of Secondhand Smoke

by David C. Swedelson

By David C. Swedelson, Esq. and Ryan D. Barrett, Esq., Community Association Attorneys

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We recently published an article on secondhand smoke regarding its impact at condominium associations and how it can constitute a nuisance. Since almost every community association’s CC&Rs prohibit noxious activity, this is a fairly common and accessible means of addressing the issue. However, enforcing a nuisance claim has its challenges and drawbacks, namely, the subjective nature of defining a nuisance makes enforcement difficult, and the fact that each instance of a nuisance must be addressed individually does not make prosecution of these claims all that easy. But this is not to say that these claims are not enforceable or that California community associations should not take action, when appropriate, to eliminate nuisances.

A budding trend among community associations, or at least a topic of significant consideration, is to amend the CC&Rs to include the adoption of a community-wide smoking ban, restricting all homeowners from smoking anywhere within the Association, including their own units. While the adoption of such a ban has been historically difficult, in many areas, particularly in major cities of California, the climate is ripe for change.
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August 3, 2012

Time to Update your CC&R Cover Sheets!

by David C. Swedelson

You may be asking what the heck a CC&R Cover Sheet is, as we expect that over time, this requirement has been forgotten. As provided for in amended Government Code Section 12956.1, which has been the law for at least 10 years, California community associations that provide a copy of the declaration (CC&Rs) must place a cover page or stamp on the first page of their CC&Rs stating, in at least 14-point boldface type, the following:

If this document contains any restriction based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, familial status, marital status, disability, genetic information, national origin, source of income as defined in subdivision (p) of Section 12955, or ancestry, that restriction violates state and federal fair housing laws and is void, and may be removed pursuant to Section 12956.2 of the Government Code. Lawful restrictions under state and federal law on the age of occupants in senior housing or housing for older persons shall not be construed as restrictions based on familial status.

In October of 2011, Governor Brown signed AB 887 into law, which adds the characteristics of “gender”, “gender identity” and “gender expression.” AB 887 also amended California Government Code Section 12956.1 to require associations to place additional language on the cover sheet, and that language has been incorporated into the language in bold above.

June 26, 2012

Go Ahead, Foreclose Already!

by David C. Swedelson

A firm client has three open delinquent assessment collection matters with our affiliate Association Lien Services. A new board of directors was elected, and despite the significant success that Association Lien Services has had collecting this condo association’s delinquent assessments in the past, the new board of directors was reluctant to proceed with foreclosure on these three files. They thought the association, by foreclosure, could become the owner of these properties if no one bids on them and then would not only become the landlord, but would also have an obligation to pay the bank on its loan, among other expenses of the property. They asked to meet with me.

I met with them, and we discussed their options. I have had many similar phone conferences and meetings over the last three years. This board agreed that with respect to each of the three homeowners, they did not think there was ever going to be a way to collect money from them as, among other things, they knew these owners were not working people.
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June 17, 2012

Judge Says Bank Can’t Use Facebook To Reach Defendant — Try Local Paper Instead

by David C. Swedelson

Blog post by David Swedelson, Condo Lawyer and HOA Attorney; Partner, SwedelsonGottlieb, Community Association Attorneys

In the latest example of courts’ unease with social media, a federal judge has refused a request by a bank to serve legal papers on an a defendant via Facebook. Why is this important? Because it is getting increasingly difficult to find some defendants, and in lawsuits, the law requires that the defendant be served with the lawsuit (service of process) or in the case of a delinquent owner, that they be served with notice of a board’s intent to foreclose. Sometimes we just can’t find the defendant (or delinquent owner) and this makes it difficult for associations to collect damages that the owner owes the association, delinquent assessments, seek a restraining order if the owner or their tenants violations of the governing documents etc.
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June 12, 2012

Termites, Business Judgment Rule and Second Guessing Community Association Boards of Directors—Lamden v. La Jolla Shores Clubdominium Homeowners Association

by David C. Swedelson

Blog Article by David Swedelson, SwedelsonGottlieb Senior Partner, Condo Lawyer and Community Association Attorney
Resulting in one of the most important common interest development cases decided by the California Supreme Court, Mrs. Gertrude Lamden disagreed with her homeowners association’s board’s decision to address a termite problem by spot treating the affected areas rather than tenting and fumigating the entire building.

Upon learning of a termite problem in the association’s common area, the board carefully investigated and considered its options, taking into account the expense, inconvenience to members, likelihood of effectiveness, and a number of other factors, and decided to spot treat the affected areas. After that failed to eradicate the termites, Mrs. Lamden sued the association, requesting a court order requiring that the association fumigate her building.
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May 25, 2012

The Smoker Next Door: Secondhand Smoke + Condominiums = Trouble

by David C. Swedelson

By David C. Swedelson, Esq., Condo and HOA Attorney

Recent reports indicate that only 12% of California adults smoke cigarettes. The problem is that they all live in condominiums, or so you would think from all the reports of problems we are receiving relating to complaints from the non-smokers who do not want to smell cigarettes.

And the issue is not limited to cigarettes; we are hearing a lot of complaints regarding pipes, cigars and marijuana. And marijuana is becoming one of the more difficult issues to deal with, as the smokers are not that considerate, and those with medical marijuana cards think that they are impervious to criticism or the complaints of others. But the fact is that smoke can be a nuisance, and nuisance is prohibited by just about every California community associations’ CC&Rs.

Someone saying that their legal right to smoke trumps the rights of the other owners is like saying that an owner can maintain their seeing/emotional support animal in violation of the CC&Rs even though the dog barks all night. I trust you get the point that no one can create a nuisance.

Because secondhand smoke is injurious to health according to most experts, many states and local governments, even low levels of exposure can be considered a nuisance. Many condominium associations are adopting or considering the adoption of restrictions or prohibitions on smoking in the common areas, exclusive use common areas such as balconies and patios, and even units.
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