HOA Law Blog

December 5, 2011

Judge Rules That Transfer Fees to Original Developer Not Enforceable pursuant to California Civil Code Sections 1098 and 1098.5

Blog post/article by David Swedelson, Senior Partner SwedelsonGottlieb, Condo Lawyer and HOA Attorney

The Daily Journal reports that Los Angeles County Superior Court Judge Madden recently ruled on the monthly fee that owners at Marina Pacifica Homeowners Association (located in Long Beach, California) paid to a developer. The Judge found that the fee constituted a “transfer fee” that was a violation of California Civil Code sections 1098 and 1098.5.

California Civil Code sections 1098 and 1098.5 took effect on January 1, 2009, eliminating real property “transfer fees,” particularly targeting fees written into the recorded CC&Rs at some California community associations. These fees are not the fees charged by an association or its managing agent for providing documents and other information as part of Civil Code Section 1368; these transfer fees were typically being paid to the original developer. Since the legislation’s enactment in 2009, we have not seen any court cases, at least until now.
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December 1, 2011

Another Flag Story—This Should Not Happen Under California Law

by David C. Swedelson

Some community association boards of directors just do not use common sense. This story was reported by Newsy, a video news source.

A retired New York City police officer who rescued people on September 11th is apparently being told by his Florida homeowners’ association he cannot fly two flags, just one, the American flag. His association is telling him that he cannot fly The Flag of Honor, a flag that commemorates 9/11.  

Richard Wentz claims to have lost 43 friends in the attacks on the World Trade Center, and he is suffering from cancer that he says is a result of Ground Zero contamination. He flies two flags outside his Florida home – the American flag and The Flag of Honor (also called a ghost flag, its colors are faded and the name of each person who died in 9/11 is embroidered on it).
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November 29, 2011

California Enacts New Employment Laws Impacting Community Associations And Management Companies

by David C. Swedelson

By David Swedelson and Sandra Gottlieb, Condo Lawyers and HOA Attorneys, Senior Partners at SwedelsonGottlieb

On October 9, 2011, Governor Brown signed into law several new bills impacting California community associations as well as their managing agents who are employers. These new laws include the imposition of penalties for “willfully misclassifying” workers as independent contractors and the creation of a new definition of “gender” when interpreting California’s anti-discrimination statutes to include gender identity and transvestitism. Follow this link for a summary of some of the new laws that will have the biggest impact on California community associations and their management and vendors.

November 9, 2011

Confidentiality Agreements; Are They Enforceable?

by David C. Swedelson

By David C. Swedelson, Senior Partner SwedelsonGottlieb, Condo Lawyer and HOA Attorney

We are often asked to include confidentiality clauses in settlement agreements with owners, as the board often wants to avoid other owners hearing that the association settled. The concern is that these other owners will think it is OK to violate the CC&Rs or Rules, as they will ask for the same “sweetheart” deal. We do not want them to think this way. We do not want them to know about the settlement with their neighbor.

Sometimes, we have these clauses in agreements with developers or contractors or even former association employees who want to keep the terms of the settlement confidential.

The question whether and to what extent settlements can be kept quiet through the use of a confidentiality agreement is difficult to answer. Just ask Republican presidential candidate Herman Cain, who currently faces allegations that women formerly employed with the National Restaurant Association received financial settlements in disputes over alleged sexual harassment by Cain, the former head of the National Restaurant Association.
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November 7, 2011

Are California Homeowner Associations Required to Create Reserve Accounts?

by David C. Swedelson

By David Swedelson, senior partner, SwedelsonGottlieb, California condo lawyer and HOA attorney

“Homeowner Associations Are Not Required to Create Reserve Accounts?” This was the title of a recent Los Angeles Times column on community association law written by two individuals who I do not believe are really community association legal experts (one is an attorney, and the other went to law school, so why the Times has them writing this column is not understood). Their lack of HOA legal expertise is evidenced by their inane and often incorrect responses to the questions they are responding to.

I often question if the questions are real, as in over 25 years of representing California community associations, I have never encountered or even heard about some of the fact situations that they claim they are responding to. Other times, I just chuckle and shake my head (literally), as I cannot believe their responses to the questions. Usually, they are very cynical, and typically they suggest that owners sue their condo or HOA association and its board. More often than not, I am concerned that owners at community associations are reading the incorrect information that they publish and are relying on the poor advice.
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November 4, 2011

It’s November. What Are You Doing About Year-End Disclosures?

by David C. Swedelson

By David C. Swedelson and Sandra L. Gottlieb, California Condo Lawyers and HOA Attorneys

It’s fall, and that means that most community association board members and management are busy finalizing their budgets (this applies to most community associations that have a calendar fiscal year). Unlike the old days, the budget is not all that California community associations need to be concerned about. What about all those disclosures that are required annually? Are you sure that your association is in compliance? Never fear, SwedelsonGottlieb is here with our updated annual disclosure checklist. Follow this link for a PDF copy of our checklist which we provide annually, setting out all of the statutory disclosures that California community associations are required to provide to the owners/members.
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October 31, 2011

How Bankruptcy Affects Assessment Collection

by David C. Swedelson

By SwedelsonGottlieb, Community Association Attorneys

So, your Association has a homeowner who is delinquent on his assessments. Before you are able to make any progress on collection and before a lien is recorded, you receive notice that he has filed for bankruptcy. What happens next?

The moment a debtor files for bankruptcy, an “automatic stay” is imposed. The automatic stay prevents creditors from taking any action to collect from a debtor. This is intended to give the debtor some breathing room and allow him to clearly evaluate his financial position without having to fend off creditors. Therefore, all collection efforts must cease until the automatic stay is either lifted or terminated.
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October 31, 2011

Lien Priority Explained – Who Gets Paid After A Foreclosure

by David C. Swedelson

By SwedelsonGottlieb, Community Association Attorneys

We have all heard the terms “Senior Lien”, “Junior Lien”, “First Mortgage”, “Second Trust Deed” and whatever other variations of those terms are out there. Here we are going to explain exactly what those terms mean and how they relate to a foreclosure action.

A lien is simply a way to secure a debt to a piece of property so that the association has some priority especially over the delinquent owner’s unsecured debts. When someone owes money to another, that debt can be secured by recording a lien. That debt is then attached to the property, and the lien must be paid before the property can be sold. The property becomes collateral for the debt. If the borrower fails to pay the debt when due, the lien holder can force the sale of the property in a foreclosure action in order to get paid.
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October 24, 2011

New Law—Independent Contractors: Willful Misclassification SB 459 Corbett

by David C. Swedelson

By Sandra Gottlieb, Senior Partner SwedelsonGottlieb; Condo Lawyer and HOA Attorney

We know that there is a tendency to classify some condo and HOA staff as independent contractors rather then employees. Some community association boards want to do this because they think that such a classification will mean that their association will not have to pay for all of fees, charges, taxes, etc. that are normally associated with an employee. They also think that they can avoid vacation pay, payroll taxes, medical insurance, etc.

The staff member may want the independent contractor classification as then they believe that they will not have taxes deducted from their checks, that they can then write off their car and other expenses and benefit in other ways.

Well, the government knows what you are doing and they are not happy about it. There has been an increasing effort by the State and Federal governments to address this “problem”. The fact is that in many situations, that staff member is not really an independent contractor, as they work full time at the association, use the equipment, etc. provided by the association and get their direction from the association.
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October 23, 2011

New FHA Certification Rules Make Compliance Difficult

by David C. Swedelson

By David C. Swedelson, Senior Partner SwedelsonGottlieb, California Condo Lawyer and HOA attorney

Interesting article in the October 23, 2011 edition of the Los Angeles Times regarding recent rule revisions by the Federal Housing Administration (FHA). Follow this link to read the article. We have been reporting on this issue, follow this link to read our blog post from August 21, 2011, “CAI Slams latest FHA Guidance”. As pointed out by the article, a little-publicized switch in federal mortgage policy is causing problems for condominium sellers, buyers and homeowner association boards across the country.

The recent series of rule revisions by the Federal Housing Administration has apparently caused thousands of common-interest developments to become ineligible for FHA mortgages. The article suggests that this has abruptly shut off loan money for would-be buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments – sometimes 20% or higher versus the FHA’s 3.5% minimum – that they often cannot afford.

The FHA defends the rule changes it has adopted, which focus on community association budgets, insurance and financial reserves, as having been prudent and designed to avert losses from delinquencies and foreclosures. The FHA nonetheless acknowledges that thousands of community associations have failed to obtain or apply for required recertifications under the new rules. “Out of approximately 25,000 common-interest developments nationwide with expiration dates for FHA eligibility between last December and Sept. 30 of this year, only 2,100 – just 8.4% – have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesman.”
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