HOA Law Blog

Legislative Update: CAI Monitors New Consumer Financial Protection Bureau (CFPB)

Thu, 02 Feb 2012 14:46:13 -0800

The following was reported by Community Associations Institute (CAI) by Andrew S. Fortin, Esq., CAI’s vice president of government and public affairs.

The Consumer Financial Protection Bureau (CFPB), which officially opened for business in July, was created by Congress to enforce most federal financial consumer protection laws and to protect consumers from harmful financial products.

The CFPB has the authority to set standards that govern almost every aspect of the mortgage lending and closing process. Because CAI members have a keen interest in the development of CFPB’s rules and regulations that could affect community associations, CAI recently added a special section about the CFPB to our Mortgage Matters program. CAI is particularly interested in the CFPB’s actions on transfer fees, association assessments, foreclosure prevention, mortgage servicing standards and the definitions of qualified mortgage and real estate settlement fees.

SwedelsonGottlieb Attorneys Are On Their Way To The CAI Law Seminar

Thu, 26 Jan 2012 11:18:06 -0800

All of the attorneys at SwedelsonGottlieb will be attending the 2012 Community Associations Institute Law Seminar in Palm Springs. The Law Seminar provides a unique learning opportunity to discuss emerging trends and legislative issues important to the practice of community association law—as well as excellent opportunities for professional networking.

And when they get back, they will be blogging about what they have learned. So be sure to visit hoalawblog.com for blog postings on new law, emerging trends and what is going on nationally and in California in community association law.

SwedelsonGottlieb Attorneys Nominated for CAI-OCRC Awards

Thu, 26 Jan 2012 09:39:24 -0800

Once again, the Orange County Regional Chapter of the Community Associations Institute (CAI) has recognized the contributions of several SwedelsonGottlieb attorneys to the community association industry in Orange County with nominations for awards in three categories:

Author of the Year (David Swedelson, Esq., nominee)
Speaker of the Year (Sandra Gottlieb, Esq., nominee)
Committee of the Year (Alex Noland, Esq., as Co-Chair of the Programs Committee)

We are honored that our attorneys are recognized with these nominations, and we look forward to the big celebration recognizing the outstanding authors, speakers, committees and other volunteers in the Chapter. The Orange County Excellence in Community (OCEC) awards and wine dinner is Friday, February 3rd at Disney's Grand Californian Hotel & Spa. The registration fee will increase on this Friday, so register soon.

Did you know that you can find the CAI-OCRC chapter on Facebook?

Therapy Playhouse Creates Controversy at HOA

Wed, 25 Jan 2012 10:58:38 -0800

Blog posting by SwedelsonGottlieb Senior Partner David Swedelson, Condo Lawyer and HOA Attorney

We have had to deal with our share of unauthorized playhouses in the past. And we have dealt with therapy pets in the past. But a therapy playhouse? Really!? As reported in Community Association Institute’s FastTracks email newsletter, a Lexington, Kentucky family’s legal battle with their homeowner’s association over the right to keep their disabled son’s “therapy playhouse” which was not approved by the association has “caused quite the stir, and is heating up as Kentucky’s legislature and a non-profit advocacy group get involved with the dispute.”

Alex Noland To Speak on HOA Loans For CAI Bay Area & Central CA Chapter on February 10, 2012

Tue, 24 Jan 2012 09:43:01 -0800

The following is reposted from the Community Association Institute (CAI) - Bay Area & Central CA Chapter's website. Follow this link to view the event on their site, and scroll down to the bottom of their page to find the "Register" link.

Please join with Community Associations Institute Bay Area and Central California Chapter at their Educational Forum on Friday, February 10, 2012 at Dolce Hayes Mansion. Our program will be "Get the Loan you Want and Need - Preparing Your Association for a Loan" presented by Geri Kennedy, CCAM of First Bank, Mary Peterson of Association Lien Services and Alex Noland, Esq. of SwedelsonGottlieb.

Planning early is critical if the association is considering the possibility of a loan. This presentation will explore the legal issues related to association loans, what the bank will be looking for and how your delinquency collections can help get you the loan you want and need approved. Help avoid pitfalls that can cause your loan application to be declined.

David Swedelson Will Be A Speaker At HOA Board Member Orientation on January 21, 2012

Thu, 19 Jan 2012 15:01:36 -0800

Senior Partner David Swedelson will be a speaker on legal issues at the Los Angeles Chapter of Community Associations Institute’s upcoming HOA Board Member Orientation, Essentials of Community Association Leadership to be held this Saturday, January 21st. If you're new to community association governance, this 8 hour Saturday orientation for association leaders is a must. This course will be given on Saturday, January 21st in Redondo Beach. For more information, follow this link.

Pasadena’s No Smoking Ordinance Went Into Effect January 1st; Impacts Condos and Homeowners Associations in the City

Thu, 19 Jan 2012 11:14:41 -0800

By Sandra L. Gottlieb, Esq., Senior Partner, Swedelson & Gottlieb

On July 11, 2011, the City of Pasadena passed a “no-smoking” ordinance for multi-family homes, defined as two or more units, applicable to both those now existing and to be built, effective January 1, 2012. The ordinance provides that it will be unlawful to smoke in any common area (broadly defined in the statute to include all areas other than a unit), patio, balcony or inside a unit within any multi-family building, and yes, this applies to condominiums.

As of January 1, 2012, owners and/or their community managers must post “No Smoking” signs, in capital letters, not less than one inch in height, on a contrasting background or, as an alternative, the association may post the international “no smoking” symbol instead of the written words, in the common areas of the association’s building(s) at first floor entrances and exits, lobbies, restrooms and elevators. The international “no smoking” symbol consists of a picture of a burning cigarette enclosed in a red circle with a red bar across it:

Further, effective January 1, 2012, all leases, rental agreements and purchase agreements (new or renewed, and this will apply to condominium associations and planned developments) must refer to the prohibition language in the ordinance and must provide a copy of the ordinance to the person or entity with whom they are contracting.

The actual enforcement of this ordinance will commence on July 1, 2013 and prohibit smokers from not only smoking on association common areas, but also within their condominium, which includes townhomes and, as it applies to non-association properties as well, rental and owned apartments. The ordinance will be enforced by the City, not by the associations.

If you are selling a home (unit condominium, townhome, etc.), you must include a reference to the “no smoking” ordinance in your purchase agreement, as well as include a copy of the ordinance. (Ordinance Section 8.78.080 Posting of Signs, and Section 8.78.085 Reduction of Drifting Tobacco Smoke in Multi-Unit Housing). Follow this link to view these ordinances.

As a final comment, the last sentence of the ordinance provides that “an owner, operator, manager, landlord, homeowners’ association or other person having control of a multi-unit housing unit shall post signs as required by Section 8.78.080; however, said persons may, but are not hereby required, to assist with enforcing the provisions of this section and shall not be deemed in violation of this section by failure to assist in its enforcement.” Fortunately, this clarifies that the City is not expecting homeowners associations to enforce the ordinance. It is imperative that Boards of Directors understand the extent and limits of their associations' obligations and not take on the enforcement obligations of the City.

Sandra Gottlieb can be contacted at slg@sghoalaw.com.

Summary Of Important New Legislation Affecting California Homeowner, Condominium And Stock Co-Op Associations/Common Interest Developments In 2012

Fri, 13 Jan 2012 10:01:52 -0800

Prepared by the Community Association Attorneys at Swedelson & Gottlieb

As they do almost every year, the California Legislature has yet again changed the Davis-Stirling Act (there have been approximately 50 amendments to the Act since its inception in 1985). We have summarized the most significant changes which impact how boards will hold meetings including executive session meetings, how boards communicate with one another, fees at escrow, electric charging stations, and rental restrictions. We will be preparing additional articles on these changes and posting them to www.hoalawblog.com. Follow this link for our summary of new legislation.

No, Boards Can't Increase the Rate of Assessments Mid-Fiscal Year

Thu, 12 Jan 2012 19:54:47 -0800

By David C. Swedelson, Esq., Senior Partner, Swedelson & Gottlieb

Here is the issue: A board adopts the annual budget and notifies the owners that assessments will increase from last year by 10%. After the beginning of the association’s fiscal year, and months later, the board realizes that expenses are greater than anticipated and wants to again increase the assessments, this time by another 10% (for a total of a 20% annual increase). Some attorneys, managers and board members believe that the board has this power; others (including this writer) disagree based on the language of the Civil Code, the intent of the legislature, and common sense. Owners are entitled to know at the beginning of the fiscal year what their association’s assessments will be. The board has a fiduciary obligation to determine what the assessments will be for that fiscal year and has a right to use the remedy provided in the Civil Code if expenses are greater than anticipated. Otherwise, the legislature would not have imposed a sanction for a board’s failure to timely distribute the new fiscal year’s budget, and a board could simply send out whatever they have and finalize the budget later.

Great Recession Impacts Court System; Expect Delays

Tue, 03 Jan 2012 11:16:19 -0800

By David Swedelson, Senior Partner at SwedelsonGottlieb; Head of Firm Litigation Team; Condo Lawyer and HOA Attorney

As you have likely seen in the news, the “Great Recession” is still impacting us in ways we could not have imagined a year or two ago. Recently we have seen a number of news stories chronicling the plight of the state's trial courts that are faced with unprecedented budget cuts, resulting in staff reductions and layoffs, and as a consequence long lines at the court house, stacks of unprocessed paperwork piling up in court clerks' offices, and delays in getting hearing and trial dates. Justice will be delayed because there are just not enough staff persons at the courthouses to get the work done as quickly as we would like.

As reported in the Daily Journal, “Saying it had no other alternative for absorbing $350 million in budget cuts to the branch, the Judicial Council voted in July to slash trial court funding 6.8 percent. It remains to be seen how the next fiscal's budget will shake out, but even courts that fared OK this year are bracing for the worst.”

Revamping of Davis-Stirling Act Slated for 2013 or 2014

Tue, 03 Jan 2012 08:46:24 -0800

By Sandra L. Gottlieb, Esq., SwedelsonGottlieb Managing Partner; Community Association Legal Counsel

In 2002, the California Law Revision Commission (CLRC) was charged by then-Governor Gray Davis with clarifying ambiguities within the Davis-Stirling Act. (Civil Code Sections 1350-1378) to make it more "user-friendly" for homeowners and board members alike. After working fro many years with stakeholders, including a working group of attorneys, community managers and other industry professionals, the CLRC is behind the introduction of AB 805 (Torres), a two-year bill which must first be passed by both the Senate and Assembly and ultimately signed by the governor into law.

At this point, it is highly likely that AB 805 will make its way through both houses in 2012, with an effective date of either January 2013 or (the more likely date of) January 2014. Attorneys and managers alike will need continuing education to learn the new code provisions, sections and numbering.

Civil Code § 1373 - Developments Expressly Zoned As Industrial Or Commercial And Limited To Such Purposes.

Sun, 01 Jan 2012 16:28:35 -0800

(a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each
county in which the common interest development is located:

(1) Section 1356.
(2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2.
(3) Section 1360.2.
(4) Subdivision (b) of Section 1363.
(5) Section 1365.
(6) Section 1365.5.
(7) Subdivision (b) of Section 1366.
(8) Section 1366.1.
(9) Section 1368.
(10) Section 1378.

(b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments.

Civil Code § 1368 - Documents Provided To Prospective Purchaser.

Sun, 01 Jan 2012 15:50:23 -0800

(a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, provide the following to the prospective purchaser:
(1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated.
(2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3.
(3) A copy of the most recent documents distributed pursuant to Section 1365.
(4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association's current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1.
(5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest.
(6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made.
(7) A copy of the latest information provided for in Section 1375.1.
(8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision.
(9) If there is a provision in the governing documents that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee or tenant, a statement describing the prohibition and its applicability.
(10) If requested by the prospective purchaser, a copy of the minutes of the meetings, excluding meetings held in executive session, of the association's board of directors, conducted over the previous 12 months, that were approved by the association's board of directors.

(b) Upon written request, the association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest, or any other recipient authorized by the owner, with a copy of the requested items specified in paragraphs (1) to (10), inclusive, of subdivision (a). Upon receipt of a written request, the association shall provide, on the form described in Section 1368.2, a written or electronic estimate of the fees that will be assessed for providing the requested documents. The documents required to be made available pursuant to this section may be maintained in electronic form, and may be posted on the association's Internet Web site. Requesting parties shall have the option of receiving the documents by electronic transmission if the association maintains the documents in electronic form. The association may collect a reasonable fee based upon the association's actual cost for the procurement, preparation, reproduction, and delivery of the documents requested pursuant to the provisions of this section.
(2) No additional fees may be charged by the association for the electronic delivery of the documents requested.
(3) Fees for any documents required by this section shall be distinguished from other fees, fines, or assessments billed as part of the transfer or sales transaction. Delivery of the documents required by this section shall not be withheld for any reason nor subject to any condition except the payment of the fee allowed pursuant to paragraph (1).
(4) An association may contract with any person or entity to facilitate compliance with the requirements of this subdivision on behalf of the association.
(5) The association shall also provide a recipient authorized by the owner of a separate interest with a copy of the completed form specified in Section 1368.2 at the time the required documents are delivered.

(c) (1) Except as provided in paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following:
(A) An amount not to exceed the association's actual costs to change its records.
(B) An amount authorized by subdivision (b).
(2) The amendments made to this subdivision by the act adding this paragraph do not apply to a community service organization or similar entity that is described in subparagraph (A) or (B):
(A) The community service organization or similar entity satisfies both of the following requirements:
(i) The community service organization or similar entity was established prior to February 20, 2003.
(ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development.
(B) The community service organization or similar entity satisfies all of the following requirements:
(i) The community service organization or similar entity is not an organization or entity described in subparagraph (A).
(ii) The community service organization or similar entity was established and received a transfer fee prior to January 1, 2004.
(iii) On and after January 1, 2006, the community service organization or similar entity offers a purchaser the following payment options for the fee or charge it collects at time of transfer:
(I) Paying the fee or charge at the time of transfer.
(II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the community service organization or similar entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to transfer.
(3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance.

(d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonable attorneys' fees.

(e) Nothing in this section affects the validity of title to real property transferred in violation of this section.

(f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134.

(g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association.

Civil Code § 1368.2 - Billing Disclosure Form.

Sun, 01 Jan 2012 15:50:05 -0800

1368.2. The form for billing disclosures required by Section 1368 shall be in substantially the following form:

Follow this link to download the required form.

Civil Code § 1360.2 - Rental Restrictions

Sun, 01 Jan 2012 15:11:09 -0800

1360.2. (a) An owner of a separate interest in a common interest development shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits the rental or leasing of any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest.
(b) Notwithstanding the provisions of this section, an owner of a separate interest in a common interest development may expressly consent to be subject to a governing document or an amendment to a governing document that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee, or tenant.
(c) For purposes of this section, the right to rent or lease the separate interest of an owner shall not be deemed to have terminated if the transfer by the owner of all or part of the separate interest meets at least one of the following conditions:
(1) Pursuant to Section 62 or 480.3 of the Revenue and Taxation Code, the transfer is exempt, for purposes of reassessment by the county tax assessor.
(2) Pursuant to subdivision (b) of, solely with respect to probate transfers, or subdivision (e), (f), or (g) of, Section 1102.2, the transfer is exempt from the requirements to prepare and deliver a Real Estate Transfer Disclosure Statement, as set forth in Section 1102.6.
(d) Prior to renting or leasing his or her separate interest as provided by this section, an owner shall provide the association verification of the date the owner acquired title to the separate interest and the name and contact information of the prospective
tenant or the prospective tenant's representative.
(e) Nothing in this section shall be deemed to revise, alter, or otherwise affect the voting process by which a common interest development adopts or amends its governing documents.
(f) This section shall apply only to a provision in a governing document or a provision in an amendment to a governing document that becomes effective on or after January 1, 2012.