April 2015 Legislative Update!

Many associations face the problem of delinquency, as members that fail to pay their assessments can cause great financial burden for the associations. Many times the delinquency can only be cured by seeking legal action including foreclosure of the property. The Civil Code explicitly provides for the procedures in which an association must undertake to foreclose on the member’s property.

It currently requires the board to personally serve the homeowner with notice of its intent to foreclose on the member’s separate interest. This requires the notice to be directly and personally delivered to the homeowner. Currently, Senate Bill 290 proposes to change this. SB 290 seeks to permit associations to serve the notice on the homeowner by personal service or substitute service. Substitute service would allow associations to provide notice indirectly to the homeowner. For example, the notice could be delivered to the homeowner’s place of work and left with an adult who appears to be in charge.

If this bill passes, associations should be pleased. Personal service is more difficult to achieve, and homeowners who are aware of the impending foreclosure may attempt to evade such service. This can cause the process to take more time and add to the legal fees as counsel continues attempt service. Allowing substitute service can prevent these issues and, therefore, expedite the process and prevent increased legal fees.

With the legislature having been on a streak of bills that are more beneficial to homeowner rights, it is refreshing to see a bill that provides the association with more tools to maintain its vitality and continued financial security.

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Director Compensation? Just Say No!

Participating in your association as a director of the board is an important role that comes with many responsibilities. Directors owe a fiduciary duty to the association and must act in the best interest of the association. It is a voluntary position that comes with no compensation.

Generally, the director is not entitled to compensation for his or her services.1 There are, however, some exceptions to this general rule. A director can be paid either when: (1) the board agrees to pay the director for a specific service before he or she performs the service, or (2) the director performs an extraordinary service, one that is not within the scope of his or her usual duties, and where it is intended he or she be paid for the rendered work.2

For those of you who have served on a board or are serving on a board, this might sound wonderful as your responsibilities are great indeed. Adding compensation to service can, however, complicate matters potentially creating not only conflicts of interest, but also a legal mess. Briskin v. Oceanside Marina Towers Association is a prime example of how just the discussion of director compensation can lead to unwanted legal battles.

Jules Briskin was the board director of the Oceanside Marina Towers Association.3 The Association leased the land on which the development was built.4 The city owned the land and the Association only owned the improvements. While he was director, Briskin began negotiating for the purchase of the land from the city.5 The negotiations began in 2003 and continued through 2008 when the city agreed to sell the land to the Association.6

During this time, Briskin asked for compensation for his work in the land sale negotiations.7 He claimed other board members individually told him he should be compensated for his work, and a committee was formed to address the matter.8 The committee recommended the board compensate Briskin, but the board never took action on the issue.9 After the city agreed to sell the land, Briskin resigned from the board, and the board formally decided not to compensate Briskin for his work.10

Briskin responded by filing a law suit against the Association for compensation.11 Briskin claimed there was an implied contract and that the Association intended to pay him.12 The Association argued there was no intent that he be compensated.13

The Association cited its governing documents, which provided, “Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the board.”14 The court said this provision, which requires the board to agree to pay a director for his work by board resolution was not dispositive of the issue.15 The question of what the parties intended had to be resolved in trial, and the result in trial is still unknown.

This is a scary outcome. The board did not follow the governing documents and is now not protected by the governing documents. If it is shown that (1) the negotiation of the land sale was an extraordinary service performed by Briskin and (2) that the parties intended Briskin be paid regardless of what the governing documents require, the Association will have to compensate Briskin.

This could have been avoided if the Board followed proper procedures and if board members had abstained from individually discussing the matter, outside of board meetings, with Briskin.

This case should serve as a reminder to all associations: The procedures within the governing documents should always be followed. If you serve on the board of directors, remember it is something you do for your community and neighborhood, without the expectation of compensation.

  1. Briskin v. Oceanside Marina Towers Association (Cal. Ct. App. 2015) 2015 WL 1307204, *3. 

  2. Id. 

  3. Id. at *1. 

  4. Id. 

  5. Id. 

  6. Id. *1-*2. 

  7. Id. at *1. 

  8. Id. 

  9. Id. at *2. 

  10. Id. 

  11. Id. 

  12. Id. at *3-*4. 

  13. Id. at *4. 

  14. Id. 

  15. Id. 

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Legislative Update: What changes can you expect to see in your community?

Going green: Solar energy is a hot topic with the legislation having already amended Civil Code § 714 to make it easier and more cost effective for homeowners to have and install solar energy systems.1 Brace yourself; more changes are on their way! The legislature has introduced a bill that would effectively make clotheslines solar energy systems.2 This bill will amend Civil Code § 714(a) to provide:

Any covenant, restriction, or condition contained in any rental agreement, lease, deed, contract, security instrument, or other instrument affecting the transfer or sale of, or any interest in, real property, and any provision of a governing document, as defined in Section 4150 or 6552, that effectively prohibits or restricts the installation or use of a solar energy system, including a clothesline, is void and unenforceable.

Should this bill pass, associations will have to allow homeowners line-dry their clothes with little regard to the impact the clotheslines have on the aesthetic appeal of the community.

Adding to the Annual Budget Report: We are all familiar with the annual budget report and the extent to which associations are required to provide homeowners with an abundance of information as enumerated in the Civil Code § 5300 and possibly the CC&Rs. The list of information to be provided is growing, as the legislature has introduced an assembly bill that would require Associations to also inform the homeowners of the Association’s FHA status.3

This bill will amend the Civil Code § 5300 to include subsection (10), which will require associations to include the following in their annual budget report, “[a] statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approved condominium project pursuant to FHA guidelines, including whether the common interest development is an FHA-approved condominium project.”

Additionally, Civil Code § 5810 will be amended to require Associations to provide the homeowners notice of any changes to the FHA status as soon as is practical.

These bills are currently pending, and have not become law yet. Our office will monitor and continue to update you once the bills are voted on.

  1. See AB 2188. 

  2. See AB 1448. 

  3. See AB 596. 

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Introducing Rachael!

We’re excited for you to get to know Rachael a little better! Rachael began working as a law clerk at Silldorf & Levine while attending the California Western School of Law, and now holds the title of the firm’s newest attorney. One of the aspects of community association law that appealed to Rachael is that since HOAs can face so many problems, no day of work is ever the same!

“I knew [while in law school] that I liked general counsel and transactional work and focused most of my education in related areas. HOA law provides me with a wonderful opportunity to do both! I get to help associations resolve disputes and answer legal questions. I get to review contracts and CC&Rs, something I am particularly interested in. I also love that no day is the same. HOAs face all sorts of problems. There is more to HOA law than CC&Rs and the Davis-Stirling Act. HOAs face matters including, just to name a few: issues pertaining to landlord tenant relations, real property, safety and liability, employment, construction, and liens other than assessment liens. It is a wonderful area of law to practice.”

Rachael grew up sailing, learning the day she could hold a tiller. Sailing classes started at the age of seven and by eight years old, she was racing sailboats out of Southwestern Yacht Club. Racing quickly became a passion, providing Rachael with the opportunity to travel the country; she also lived on a sailboat for five years to learn more about the community and boating lifestyle. Although she is no longer racing, Rachael remains an active member of the Southwestern Yacht Club. Serendipitously, sailing class at the Yacht Club was also where she met her husband Ross.

You’ll be seeing more and more of Rachael as she continues to attend events on behalf of Silldorf & Levine for the Community Associations Institute, California Association of Community Managers, and other industry organizations.

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The Great Hardwood vs. Carpet Debate!

Living within a condominium complex has its benefits and disadvantages. One of the benefits includes an association that generally cares for and maintains the landscape, roofing, and other common areas. One particular disadvantage, however, is the noise that can result from high density living spaces with shared walls, floors, and ceilings. People are, of course, inherently different and enjoy different things that may or may not create more noise than desired by others.

For example, some residents have an innate love for plush carpeting, while others couldn’t live without hardwood floors. Does it really make a difference as long as you have the flooring you desire in your own living space? Add to the mix a pair of stiletto heels or a clumsy individual who has a horrible habit of dropping everything he or she comes into contact with and yes, it will make a difference.

Whatever the reason is for your love of hardwood floors, the neighbor that lives below you will thank you if you include area rugs in your interior design plan, as well as invest in slippers! Hardwood floors can cause much more noise than carpeting. In fact, associations may have specific CC&R provisions addressing the type of flooring that can be installed, and the good news is that these provisions, within reason, are enforceable.

Ryland Mews Homeowners Association found itself in this exact dispute. Ruben Munoz, the homeowner residing on the second story, installed hardwood floors.1 His wife had severe allergies and could not live with carpet2. Mr. Munoz, however, did not seek approval from the association for his flooring decision.3 The neighbors that shared their ceiling with Mr. Munoz’s floors were inundated with noise that they considered “‘greatly amplified’ and ‘intolerable.’”4

The CC&Rs for this association specifically restricted homeowners from altering units in “any manner that would increase sound transmission to any adjoining or other Unit, including, but not limited to, the replacement or modification of any flooring or floor covering that increases sound transmission to any lower Unit.’”5 Written approval from the association was also required before modifying or replacing flooring if the new flooring could result in increased noise.6 The CC&Rs also spelled out – as CC&Rs tend to do! – that homeowners could not cause a nuisance.7

A California Court of Appeal determined the flooring caused a “‘great nuisance’” to the neighbors.8 Rather than force the immediate removal and replacement of the flooring, the court was fair and required area rugs to be utilized until the association design review committee could agree on plans to modify the flooring so that it conformed with the CC&Rs.

Living in a condominium complex requires a balancing of interests and compromise as exemplified in the Ryland Mews Homeowners Assn. v. Munoz case. This case does not ban hardwood flooring; however, it does allow associations to have restrictions on flooring that could cause a nuisance, which is beneficial for associations and homeowners. Associations, within reason, have more authority to control the interior of a unit in order to provide for every homeowner’s quiet enjoyment of his or her home.

  1. Ryland Mews Homeowners Assn. v. Munoz (2015) 2015 WL 394513, 1. 

  2. Id. 

  3. Id. 

  4. Id. 

  5. Id. at 4. 

  6. Id. 

  7. Id. 

  8. Id. at 5. 

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Enforcing the Right Documents!

The CC&Rs are the central ingredient of what makes a Common Interest Development tick. Homeowners and associations alike use the CC&Rs as both a sword and a shield. If you have ever asked, “can Jon Doe or Mary Anne do this,” the CC&Rs were likely the first place you went in search of the answer!

The CC&Rs have an additional function that makes them that much more powerful: the prevailing party of a legal action taken to enforce the CC&Rs may be awarded attorneys’ fees. This particular prowess comes not from the CC&Rs, but from the Civil Code.1 Essentially, it means all those invoices from your attorney will be paid for by the party that lost.

There are three requirements that must be met to be awarded attorneys’ fees:

(1) the action taken must be to enforce governing documents;
(2) the governing documents must be for a Common Interest Development; and
(3) the party seeking attorneys’ fees must be the prevailing party.2

Sounds easy, right?

In the 2015 case of Patterson v. Sherwood Valley Homeowners Association, we learn, however, that it is not always so cut and dry. In this case, the development happened to be located next to a park, and both the development and the park had their own sets of CC&Rs.3 The association was given authority to manage both the park and the development, and in doing so, the association planted trees that eventually obstructed Patterson’s view of the lake.4 Patterson sought to have the CC&Rs enforced, and alleged, among other things, that the association created a nuisance by “‘extensively over-planting’” the park “‘with a variety of rapidly growing trees.’”5 The trial court eventually determined that Patterson “did not have a right to an unobstructed view of the lake,” and that she could not actually seek to enforce the park CC&Rs.6 The association, therefore, prevailed in the action and sought attorneys’ fees.7

The association was not, however, awarded the attorneys’ fees, which may seem to go against what has been stated above. So, why did this happen?

The answer: the park, while it had CC&Rs, was not a Common Interest Development as defined by the Civil Code, and the plaintiff sought enforcement of the park’s CC&Rs, not the development’s CC&Rs. Therefore, there was:

(1) an action to enforce governing documents; and
(3) a prevailing party;
but there were no (2) governing documents from a Common Interest Development being enforced, since the CC&Rs being referenced were that of the park.
Thus, while requirements 1 and 3 were met, requirement 2 was not and the prevailing party could not, therefore, be awarded attorneys’ fees.8

Associations should take caution to ensure that the documents being enforced are those of the Common Interest Development and not a different neighboring entity. While the association may still have to enforce the neighboring entity’s governing documents as in Patterson, it should be aware that there may not be a right to recover attorneys’ fees.

  1. See Civil Code § 5975. 

  2. Civil Code § 5975(c); Patterson v. Sherwood Valley Homeowners Association (2015) 2015 WL 81914 (unpublished). 

  3. Patterson, 2015 WL at 1. 

  4. Id. 

  5. Id. at 1-2 (quoting the original complaint). 

  6. Id. at 2. 

  7. Id. 

  8. Id. at 2-5. 

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When Governing Documents Conflict…

We encourage you to post questions in the comments that we can answer for you in a future blog post!

Q: When governing documents conflict, creating an ambiguity in meaning, where can a clear meaning be found?

A: Thankfully, the Civil Code is very clear on the matter of conflicting governing documents. Where there is a conflict between the governing documents, the Declaration – (the CC&Rs) – will take precedence over the Article of Incorporation, Bylaws, and Rules and Regulations. The Articles of Incorporation take precedence over the Bylaws and Rules and Regulations, and lastly, the Bylaws take precedence over the Rules and Regulations.1

What happens, however, when the conflict is between the Declaration and the Condominium Plan?

Unfortunately, the Civil Code provides no direction in this circumstance. A court, therefore, in determining the meaning of terms found in both the Declaration and Condo Plan may look beyond the words themselves to find the intended meaning.2

For example, in the recent case of Schmidbauer v. Deelo, two property owners had a dispute over a set of stairs.3 The stairway causing the issue connected the common area underground garage with a separate interest patio.4 The homeowner who lived in the unit connecting to the stairway did not want other homeowners using the stairway, and cited privacy reasons.5 The other homeowners, however, enjoyed using this stairway for the convenience factor.6

The question was whether or not the stairway was part of the common area meant for use by all homeowners or whether it was the separate interest property of the unit it connected to.

The answer to this question should have been an easy one, but it was not. The Declaration said “stairways” were part of the common area while the Condo Plan said only “common stairways” were part of the common area.7 Hence the confusion!

Because the two governing documents conflicted and were susceptible to two different interpretations, the court had to look beyond the words in the documents to determine what was meant to be common area: all stairways or only stairways in common areas.8 The judge ended up having to go to the property itself to look at all areas of ingress and egress, while consulting experts on the condominium plans.9

The result, we find, is very peculiar. The court determined the stairway was a separate interest property that could only be used by other homeowners during an emergency.10 Generally, stairs are common areas, but in this instance, because of the evidence provided to the court and the testimony of an expert who drafts condo plans, the court found otherwise.11 The stairs were separate interest property.

In light of this conclusion by the court, Associations should review their governing documents for inconsistencies and, if possible, resolve the ambiguity before it reaches the court. Once the issue of interpretation of governing document reaches the courts, the result may not be what one would expect.

  1. Civil Code § 4205. 

  2. Schmidbauer v. Deelo (2014) 2014 WL 7272948, 8. 

  3. Id. at 1. 

  4. Id. at 1-2. 

  5. Id. at 2. 

  6. Id. 

  7. Id. at 4. 

  8. Id. at 8-9. 

  9. Id. at 10-12. 

  10. Id. at 7, 13. 

  11. Id. at 7-13. 

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Alternative Dispute Resolution & Its Binding Effects

Every Homeowners Association has a set of CC&Rs; the covenants, conditions, and restrictions that govern the property within the Association. Generally the CC&Rs are lengthy and cumbersome to read, but that does not mean you can ignore them. It is important that the Board of Directors, managers, and homeowners read and understand the CC&Rs.

A common provision found in CC&Rs is a provision for alternative dispute resolution. Generally, under such provisions, arbitration will be the means in which a dispute is resolved, and it is binding. The parties may not be able to take the dispute to court.

Jennifer Loeffler learned this lesson the hard way. Ms. Loeffler purchased property that was subject to a set of CC&Rs that included a provision for alternative dispute resolution. (Shea Homes LP v. Loeffler (2014) 2014 WL 551193, 2.)) (Her purchase agreement similarly had an alternative dispute resolution provision.1 Unfortunately for Ms. Loeffler, a dispute over the property arose shortly after purchase.2 The alternative dispute resolution provisions were enforced, and the parties forced into binding arbitration to resolve their differences.3

The arbitrator resolved the dispute by having the cost of the property returned to Ms. Loeffler and title to the property being returned to the seller.4 It was as if the parties never entered the purchase agreement in the first place. The dispute appeared to be solved.

Ms. Loeffler, however, disputed the arbitration decision and said she would not leave the property unless she was paid more money.5The seller did not give in to her demands and sought to have the arbitration award confirmed.6 The trial court agreed with the seller and confirmed the arbitration decision. (Id.)) (Ms. Loeffler appealed.7 The result was the same; the higher court also confirmed and upheld the arbitration decision.8 The fact that Ms. Loeffler had misread and, therefore, misunderstood her agreement and CC&Rs, did not change court’s opinion.9 The arbitrator’s decision was final.10

California law provides courts with limited ability to void arbitration decisions.11 Arbitration has many benefits including lower costs, faster resolution, and keeping disputes out of the courts. If courts could void arbitration decisions easily, the goals and benefits associated with Arbitration would be lost. California, therefore, prevents courts from interfering with an arbitrator’s final decision.

Associations and homeowners need to understand the CC&Rs and the significance of these provisions. Each provision serves a purpose. If that purpose is understood, the Association and the homeowners will not be blindsided by its effects and will know how to use the CC&Rs to their advantage.

  1. [1] Id. 

  2. Id. at 1-3. 

  3. Id. at 3. 

  4. Id. at 3. 

  5. Id. 

  6. Id. at 4. 

  7. Id. 

  8. Id. at 10. 

  9. Id. at 6. 

  10. Id. at 4. 

  11. Id. at 4. 

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HOA Q&A – Can a homeowner refuse to make repairs requested by the Board?

It will depend on your CC&Rs. If the CC&Rs require the HOA to repair common and exclusive use common areas and the owners to allow the HOA to make these repairs, the homeowner should let the HOA repair the balcony.

Most CC&Rs have these provisions. You should check to see if the CC&Rs require the Association to make the repairs and if they require the homeowner to give the Association access. If they do, notice should be given to the homeowner of her obligation to allow access and the Association’s obligation to make the repairs. If the homeowner persists in her refusal to give you access to make the repairs, you can (after providing proper notice) seek legal action to obtain an injunction. This can be costly, but if the Board is successful, the Association may be awarded attorney fees for the legal action.1

If you and the other Directors of the Board, after reviewing your CC&Rs, remain in doubt about whether the CC&Rs provide such rights and responsibilities, you should contact an attorney to help provide you guidance.

Case Example: Tegze Haraszti had the same problem. The Association wanted to make repairs to his balcony. He was not opposed to the repairs, but had demands he wanted met prior to allowing the HOA access. Rather than giving in to his demands, the Association sought an injunction against Mr. Haraszti. A temporary restraining order and eventually a permanent injunction were granted by the court because the CC&Rs required the Association to make the repairs to the balcony and required Mr. Haraszti, a homeowner, to provide the Association access to the balcony to make the repairs.2

In addition to granting the injunction requiring Mr. Haraszti to provide the Association with access to the balcony in order to make repairs, Mr. Haraszti was required to pay the Association’s attorney fees because the Association was the prevailing party in the lawsuit.3

  1. See Civil Code § 5975; Versailles Homeowners Association v. Haraszti (2014) 2014 WL 6693838. 

  2. [1] Versailles Homeowners Association, 2014 WL at 1-3. 

  3. Id. at 4-8. 

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Be Careful What You Wish For…

Those of us who live within the confines of a homeowners association know and understand the burdens and hurdles of changing and improving our property. We have to get plans for the improvement, submit them to the architectural committee, and then begin construction, installation, and transformation. But, at the end of all the hoops, loops, bumps, and work, we finally get what we wish for! Life is great with new and improved property, right?

Lewis and Patricia Mork probably thought so after they got approval to install a planter and irrigation system, and later a pool.1 However, this installation resulted in water diversion to the neighbor’s property, which ultimately caused mold and damage to the neighboring unit.2 The neighbors, of course, sued the Morks for the continued water intrusion and damage.3 The neighbors also sued the association because the area in which the improvements had been installed was limited common area, which according to the CC&Rs was to be maintained by the association.4

Things started looking up for the Morks! It wasn’t their responsibility, it was the association’s. The association had to maintain the area and repair the drainage problem, right? Wrong. The CC&Rs had an exception to the limited common area maintenance responsibility5 that stated if a homeowner made an improvement to this area, the association was no longer responsible for its maintenance.6 This effectively placed the responsibility for the water drainage back on the Morks, who had done nothing to stop or alter the water flow and were found liable for the damage and nuisance they had caused.

This provision is an important one, and associations should consider having similar provisions. The association would normally have maintained the Morks’ limited common areas, but the CC&Rs’ provision was able to remove such responsibility when the Morks decided to voluntarily improve the property.7 This provision keeps the association’s costs of maintenance relatively the same and imposes liability and the increased cost of maintenance that comes with improvements on the homeowner. This is a great cost saving and protective measure associations can take when homeowners want to improve areas that the association would generally maintain.

  1. PGA West Residential Association v. Mork (2014) 2014 WL 5342574, 2-7. 

  2. Id. at 2-3. 

  3. Id. at 1. 

  4. Id. at 2-7. 

  5. Id. at 5. 

  6. Id. at 5-6. 

  7. Id. at 5. 

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