HOA Law Blog

September 20, 2022

Mastering the Understanding of the A to Z of Petitions MEMBER PETITION Process

Your board of directors is conducting a regular board meeting when a disgruntled owner hands over a petition to the board. Now what? Is it valid? Do you have to hold an election or meeting? If so, by when? Where do you go from here? These are just some of the questions you might have when receiving a petition, and there are many others to consider. Membership petitions are becoming increasingly common for associations, and the relevant statutory authorities do not provide the clearest picture of how associations should handle them. Many owners believe they can demand anything they want through a petition, which is simply not the case.

Petitions are primarily governed by the California Corporations Code. Section 7510(e) of the Corporations Code states that 5% or more of the owners of a corporation can submit a petition for a special meeting of the members for any lawful purpose. Section 7511(e) of the Corporations Code states that the petition must be in writing and submitted to the board chair, president, vicepresident, or secretary. When receiving a petition, there are a few threshold issues to confirm. First, is the petition signed by 5% or more of the owners?

Related to this, do the signatures on the petition belong to actual owners? If 5% or more of the owners have not signed a petition, you can stop there because the petition is invalid. Of course, sometimes this is difficult to tell. When reviewing a petition, confirm that the signatories are record owners on title (i.e., the owners listed on the unit grant deed). Sometimes you will see multiple persons signing from one unit, which is only permissible if all such persons are actual owners. If not, only the owner(s) listed on the grant deed should be counted. Tenants and non-owner family members also do not count toward the 5% requirement.

August 16, 2022

THIEVES BEWARE! A Surveillance Camera Policy Checklist for Boards of Directors

by Adrian Chiang and Sandra L. Gottlieb

Theft! Whether it occurs in the common area lobby, hallway, parking area, or on an owner’s porch, it is on the rise. Many associations are installing or updating surveillance cameras in response to this criminal behavior. Cameras may not stop all thievery, but they can still help to prove criminal damages or that a theft has occurred. Surveillance cameras can be valuable tools for insurance purposes, to deter would-be criminals, and to provide law enforcement with proof so they can hold criminals accountable for their behavior. Below is a checklist of key points for boards of directors to consider when making surveillance camera policies. Every association with cameras should adopt these guidelines.

Affirm that Association Cameras Do Not Provide Security – Unless an association’s governing documents state otherwise – and they never should – associations do not generally provide security to their residents and should take care in their communications, policies, and actions to avoid creating a duty (and liability) to provide security to residents. This is important so that residents do not rely on such representations for security. Associations should state that the surveillance cameras have a limited purpose and are for the benefit of the association. That is, the cameras are placed to provide evidence of association property damage or theft, for the board to review after an incident has occurred. Associations should also provide a disclaimer to advise residents of limited video storage, the overwriting of older footage, and the fact that cameras may not be actively monitored with a live viewer. The association should make it explicit in policy that residents are responsible for protecting themselves and their own personal property. This is important so that residents do not rely on the association’s cameras for such footage, which may not exist.

Address Privacy Issues – One of the major liability concerns regarding the installation of cameras is, of course, the issue of privacy. State law does not permit the recording of others without their consent when there is a reasonable expectation of privacy. Typically, there is no reasonable expectation of privacy in the common areas, such as a garage, lobby, or shared hallway, since anyone can come and go through these areas. However, there is a likely expectation of privacy in the interior of someone’s home, a backyard, or a restroom.

May 9, 2022

Preparing for the Inevitable: Raising Assessments and How to Do It

by Adrian Chiang and Sandra L. Gottlieb

Preparing for the Inevitable: Raising Assessments and How to Do It

Whether it’s to pay for repairs to the common area, replenish reserve funds, pay for increased utilities, stay even with inflation, raise funds for a new project addition such as a playground or pool (also known as capital improvement), or even help pay for litigation, there will come a time when a homeowners association will need to raise its assessments. This article explains why, how, and when to raise assessments, and how to best communicate it to the membership. When you go through this process keep in mind everyone knows that the cost for a gallon of milk has gone up along with a gallon of gas, so increases in assessments should not be a surprise. Our association boards shouldn’t have to approach the news of assessments increases with shame or threats of retribution, the truth is it is just a “sign of the times.”

First, it’s important to know how assessments work. An association’s annual or “regular” assessments should total the amount of expected expenses for the year which are collected from the membership. These regular assessments are deposited in the operating account and some of the funds may be saved in a reserve account for designated line items as identified in the association’s annual budget. As the association incurs expenses, the operating funds are used to pay for such expenses. If the association has reserve funds set aside for, as an example, major repair items, such as a pool or a roof, then the association can use those reserve funds as that is what the reserve funds are intended for. But when there are additional ongoing operating expenses that arise in which the operating account is insufficient and in which reserve funds can’t be used for that purpose*, the association will have to raise its regular assessments or may need to levy a special assessment based on urgency and need. (Note*: Associations do have the ability to borrow from reserve funds for ongoing operating expenses but are required to pay back the borrowed reserve funds which typically result in raising assessments.). Below is a summary of the methods of raising assessments.

April 19, 2022

New Election Laws

by Sandra L. Gottlieb

In October 2021, Governor Gavin Newsom approved the following three bills affecting homeowner association elections: SB 392, SB 432, and AB 502. These bills made some improvements to the HOA election laws that were passed in 2019, but then they complicated others. First, SB 392 made one simple improvement regarding election material retention. The prior law required retention until the election cannot be contested, which left many people wondering, when is that? And the new law that became effective January 1, 2022, made it simple by requiring retention of election materials for one year after the election date.

As a reminder, California Civil Code § 5200 (c) defines “association election materials” as returned ballots, signed voter envelopes, the voter list of names, parcel numbers, and voters to whom ballots were to be sent, proxies, and the candidate registration list. Signed voter envelopes may be inspected but may not be copied.

Next, SB 432 cleaned up a discrepancy that the 2019 law had left between the Davis-Stirling Act andnthe Corporations Code, both of which apply to most community associations. Corporations Code Section 7511(c) was amended by extending the maximum time for associations to hold the recall/removal and new board member election vote from 90 to 150 days from the date of receipt of the petition. This will allow associations to comply with both Civil Code Section 5115, which requires associations to send a general notice 90 days before an election, and the Corporations Code, which requires the recall/removal to occur within 90 days of the receipt of the petition. According to the old law, in order to comply with both statutes, associations would have been required to send the notice on the day they received the petition.

March 23, 2022

Creating Committees

by Stephen T. Brindle

committee-300x300 Does your board table decisions because you can’t get through all of the discussion? Is there a big project that your association needs to complete, but the minutia of it is overwhelming the board? Don’t let the added work hold you back. Recruit volunteers from the membership to assist the board through the creation of a committee.

Under Corporations Code § 7212, the board of directors of a community association may, subject to the association’s governing documents, vote to form one or more committees that serve at the pleasure of the board. There are two basic types of committees: committees with decision-making authority—such as an executive “committee of the board” made up entirely of directors to which the board has delegated certain powers, or an architectural review committee—and advisory committees, which merely provide the board with non-binding information and advice regarding specific issues, such as a social committee.

A special type of committee, applicable only to community associations, is a “subcommittee” of the board consisting of the treasurer and at least one other board member that performs the required monthly review of the association’s finances, which is required under Civil Code § 5500, independent of a board meeting. When this subcommittee performs this financial review, the board must ratify that review at the next open board meeting and note that ratification in the meeting minutes.

February 22, 2022

Your Association Received a Preliminary Lien Notice. Now What?

by Stephen T. Brindle

preliminary-notice-300x300 Under California law, most licensed contractors or suppliers that provide labor, services, equipment, or materials on projects involving the common area of a community association are entitled to record a mechanic’s lien or issue a stop payment notice if they are not paid for their work or materials. Associations involved in such projects often receive 20-day “preliminary notices” from vendors and wonder what they are and what, if anything, they are supposed to do with them. Contractors are required to send these preliminary notices to associations to preserve their rights to record mechanic’s liens or issue stop payment notices. The preliminary notice must contain certain information, including a description of the nature and estimated cost of the work, the identities of the parties, and the location of the property in question, as well as a boldfaced “Notice to Property Owner” statement. Contractors that are under direct contract with an association (such as a “general” contractor that hires subcontractors aka “subs” for a project) are not required to serve a preliminary notice on the association, because the association is presumably already aware of all of the information that a preliminary notice would otherwise contain. Direct contractors are instead required to serve preliminary notices on the actual or reputed construction lender for the project.

On the other hand, contractors that are not under direct contract with an association, such as subcontractors, must serve a preliminary notice on the association, the actual or reputed direct contractor for the project, and any actual or reputed construction lender. Therefore, most preliminary notices that associations receive will be from subcontractors. Generally, preliminary notices are sent via first-class registered or certified mail, express mail, or overnight delivery. As long as an association recognizes the information in the preliminary notice, generally speaking there is nothing special that it needs to do, as serving a preliminary notice on an association does not change a contractor’s rights, it merely preserves them. Sometimes, contractors request that an association acknowledge in writing that they received a preliminary notice. While signing such a preliminary notice is generally unnecessary, an association may choose to do so anyway, as a courtesy and to keep the project moving.

January 27, 2022

NEW AND HELPFUL FEDERAL RESOURCES REGARDING ASSOCIATION WORKPLACE SEXUAL ORIENTATION AND GENDER IDENTITY FROM THE EEOC

by Adrian Chiang

Inclusive_Progressive_Pride_flag-300x186 The United States Equal Employment Opportunity Commission (“EEOC”) recently created a new webpage with helpful practical information to guide employers and employees about employment discrimination based on sexual orientation and gender identity. This new webpage provides additional clarity about sexual orientation and gender identity protections based on the 2020 Supreme Court decision in Bostock v. Clayton County (decided on Jun. 15, 2020). In Bostock, the Supreme Court held that those firing individuals because of their sexual orientation or transgender status violated Title VII’s prohibition on discrimination because of sex. Title VII is part of the Civil Rights Act of 1964, a national law that prohibits employment discrimination based on protected classes of people such as race, color, religion, sex, and national origin.

The new webpage is intended to function as one comprehensive resource to educate employees, applicants, and employers about the rights of all employees, including lesbian, gay, bisexual, and transgender workers, to be free from sexual orientation and gender identity discrimination in employment. In addition, the new webpage includes information on related topics of harassment and retaliation. Although Title VII and Bostock only apply to employers with 15 or more total employees and does not generally apply to independent contractors, associations with any employees can still learn best practices from these new EEOC resources to prevent discrimination (and liability) in the workplace.

We share below some important reminders and takeaways from the recently published resources:

January 21, 2022

Did You Know? SB 432 Corrects Problems with Recall Elections Created by SB 323

by Stephen T. Brindle

Did-You-Know-300x300 When SB 323 took effect on January 1, 2020, it greatly modified the Davis-Stirling Common Interest Development Act’s election procedures, including timelines for conducting an election. In the process, it inadvertently created a conflict in the law regarding recall elections that community associations have been struggling with ever since.

Corporations Code §§ 7510 and 7511 state that when 5% of the members of a nonprofit mutual benefit corporation submit a written petition to the board of directors to request a special meeting of the members (which is basically the process for initiating a recall election), the board is required, within 20 days after it receives the petition, to schedule the special meeting on a date that is not fewer than 35 and not more than 90 days after the date it received the petition.

However, Civil Code § 5100 states that notwithstanding any other law (including the Corporations Code), community association elections legally requiring a member vote, including election and removal of directors, must be held by secret ballot in accordance with the Davis-Stirling Act’s election procedures, and Civil Code § 5115 provides a timeline for such elections that is at least 90 days.

January 10, 2022

California HOAs/Community Associations Have Been Hit With Massive Increases in Premiums and Outright Cancellation// Call to Action

by David C. Swedelson

insurance_crisis_-_Google_Search-300x107 Many California community associations are dealing with massive and significant increases in their insurance premiums. These increases were not anticipated and as a result they are unbudgeted requiring that boards levy emergency special assessments, borrow from reserves or otherwise find the money to pay the increased cost of insurance.

It is estimated that about 14+ million Californians live or own a home or unit in a community association. All of their associations are required to obtain insurance coverage. Insurance professionals are reporting that the trend to decrease coverage and increase assessments and fees are not sustainable and will soon become prohibitive.

Some communities have had their policies canceled or not renewed and have been unable to find coverage.

January 1, 2022

AB 1584: No Time to Comply California Extends Compliance Deadlines For Leasing Requirements and Confirms Reasonable Restrictions Are Allowed for Accessory Dwelling Units

by Adrian Chiang and Sandra L. Gottlieb

On September 28, 2021, the state passed AB 1584 which amends laws regarding mobile home parks, mortgage protections, and access to limited civil case records among other things. Most importantly, as it applies to homeowners’ associations, AB 1584 contains provisions that affect restrictions on accessory dwelling units (“ADUs”), junior ADUs, and leasing requirements. These new laws will take effect on January 1, 2022.

ACCESSORY DWELLING UNIT RESTRICTIONS

Under existing law, any provision of a governing document or any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a planned development that effectively prohibits or unreasonably restricts the construction or use of an ADU or junior ADU is void and unenforceable.