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2012 Legislative Update for Community Associations

It’s that time of year again. With the end of year approaching, it is a good time to review some of the new laws enacted in California during 2011 that impact our local community associations. This is not a complete list of all new legislation, but rather brief summaries of the statutes and cases that will likely have the biggest impact on California HOAs. Any community association or manager that has questions on the impact of a new law should consult with their corporate counsel for clarification and details.

1.    SB 563    Board Meetings

As many directors and managers already know, the time it takes to successfully run an association can be significant. One of the tools that boards have often used to efficiently handle issues that are not the subject of debate has been the Action Without Meeting, or “AWOM.” Well, no more. This amendment to the Open Meeting Act eliminates a board’s ability take action without a meeting.

SB 563 prohibits boards from acting via email with the very limited exception of emergency meetings. Emergency meetings may be called “if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice” as would otherwise be required. However, before a board can hold an emergency meeting via “electronic transmission” all members of the board, individually or collectively, must consent in writing to that action (the consent can be transmitted electronically, such as in an email), and the written consent must be filed with the minutes of the meeting of the board.

In addition to eliminating the AWOM, AB 563 also requires that members of the association be given at least two days notice for a meeting that will be held solely in executive session, and changes the rules for holding a meeting via teleconference. Under the new law, if a board meets via teleconference, the association must specify a physical location where members can attend in person and listen to the meeting. In addition, at least one board member must be physically present at the identified meeting location.

Lastly, the statute broadens the current definition of a meeting of the board from “any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board” to “any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business that is within the authority of the board,” and includes in the definition of meeting, meetings by teleconference in which a majority of the board members, in different locations, are connected by electronic means, such as audio, video, or both.   “Item of business” is defined as any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a majority of the directors.

2.     AB 771    Escrow Documents Provided to Prospective Purchasers

Associations are currently required to provide certain documents and information when the documents are requested by an escrow agent upon the sale of a unit. Under the new law, if requested, sellers are also required to provide twelve months of board meeting minutes. In addition, in responding to a record request, associations must now use a specific form set forth in new Civil Code section 1368.2 in responding to the request.

New Civil Code section 1368.2 provides a form that associations must use in fulfilling a record request pursuant to Civil Code Section 1368.

Lastly, associations may charge a reasonable fee based on the actual costs incurred to provide the requested documents and information; however, no such fee is permitted if the documents and information are to be delivered electronically.

3.    SB 150    Rental Restrictions

SB 150 limits the ability to restrict rentals within community associations. Previously, community associations had the ability to amend their Governing Documents to restrict rentals so long as the amendment was reasonable and have the restriction apply equally to all owners. Under the new law, any amendment designed to prohibit renting of property in an association will only apply to owners who purchase the property after the amendment to the Governing Documents takes effect.

In dealing with the new law and rental restrictions one must first ask “does it apply?” The new law is “prospective.” This means the law only applies to rental restrictions adopted on or after January 1, 2012. Rental restrictions were established prior to 2012 are not affected.

What About Rental Restrictions Adopted After January 1, 2012?

All owners who already owned their property prior to the post January 1, 2012, rental restriction would be “grandfathered” in and would be able to rent anytime they want, until they transfer title to their property.

The new law will define types of transfers. Some will allow the new owner to keep the “grandfathered” status (for example, when an owner transfers title into his or her own living trust, or gives title to a child, or the property is inherited). For other transfers (routine sales of property), the new owner will not be “grandfathered” in and may or may not be able to rent, depending on how many other properties are rented in the community at the time.

What About Disclosures?

Disclosures in escrows will need to include clear information about limitations on rentals in each specific community beginning January 1, 2012. This will include then need to provide information about both whether the association has a restriction on rentals and information what rental limitations are in place.

Other Things to be Aware of

• The new law does not apply to commercial common interest developments. They may continue to enact rental restrictions without regard for the provisions of the new law.

• While it is not absolutely clear (and it won’t be until a court decides the issue), it appears that only “prohibitions” are outlawed; lesser restrictions, such as 30-day minimums or requirements that only the entire dwelling may be rented, might be permitted under the new law.

• The new law adds a requirement that, prior to renting or leasing a dwelling, an owner “shall provide the association verification of the date the owner acquired title and the name and contact information of the prospective tenant or the tenant’s representative.” How this will be enforced is yet to be seen.

4.    SB 209    Electric Vehicle Charging Stations

SB 209 restricts an association’s ability to prohibit the installation of electric vehicle charging stations (“EVCs”), and renders void and unenforceable any provision that prohibits or restricts the installation or use of an EVC. However, associations retain the right to impose “reasonable restrictions” on the installation of EVCs. Such “reasonable restrictions” are those that “do not significantly increase the cost of the [EVC] or significantly decrease its efficiency or specified performance.” In addition, the stations are required to meet applicable health and safety standards and to comply with the Building Code requirements.

Associations are required to process applications for approval for the installation of charging stations, if applications for architectural modification are required by the association’s governing documents, in the same manner as other applications for architectural modifications.  Approval or denial is required to be in writing, and the association’s approval cannot be willfully avoided or delayed.

Other requirements to installation of EVC’s include that owners wanting to install them hire a licensed contractor for the installation, provide a certificate of insurance in the amount of at least $1,000,000, which names the association as an additional insured. Additionally, the owner must pay the costs of electricity associated with the station, and  shall be responsible for all damage to the station, common areas, exclusive use common areas or units caused by the station. The owner must also be responsible for all maintenance, removal, repair and replacement of the station and must disclose the existence of the station to prospective purchasers.

5. SB 183 Carbon Monoxide Detectors

SB 183 requires the presence of carbon monoxide (“CO”) detectors in all “single family dwelling units intended for human habitation” and “…having a fossil fuel burning heater or appliance, fireplace, or an attached garage” beginning July 1, 2011 and for all other dwelling units by January 1, 2013. This law impacts any association which has taken title to property and is renting it out.

Click Here to Download a PDF version of our 2012 Legislative Update.

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By Robert M. DeNichilo – December 9, 2011

Governor Signs Bill Putting End to Actions Without Meeting

As many directors and managers already know, the time it takes to successfully run an Association can be significant. One of the tools that Boards have often used to efficiently handle issues that were not the subject of debate has been the Action Without Meeting, or “AWOM”. Well, no more. California Governor Jerry Brown has now signed, bill SB 563 which becomes effective January 1, 2012, and amends the Open Meeting Act to eliminate a Board’s ability take action without a meeting.

In addition to eliminating the AWOM, SB 563 also requires that members of the association be given at least two days notice for a meeting that will be held solely in executive session, and changes the rules for holding a meeting via teleconference. Under the new law, if a Board meets via teleconference, the Association must specify a physical location where members can attend in person and listen to the meeting. In addition, at least one Board member must be physically present at the identified meeting location.

Lastly, Boards will be prohibited from acting via email with the very limited exception of emergency meetings. Emergency meetings may be called “if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice” as would otherwise be required. However, before a Board can hold an emergency meeting via “electronic transmission” all members of the board, individually or collectively, must consent in writing to that action (the consent can be transmitted electronically, such as in an email), and the written consent or consents must be filed with the minutes of the meeting of the board.

Read the full text of the new law here.


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By Robert M. DeNichilo – September 21, 2011

Governor Brown Vetoes Turf Bill

CAI-CLAC reported yesterday that for the second time, an artificial turf bill has been vetoed by California’s Governor. In vetoing the bill, Governor Brown reasoned, as Governor Schwarzenegger did when he vetoed AB 1793 last year, that CIDs should not be micromanaged by the State Legislature.

The Legislature’s passage of the bill was due largely to the fact that it was marketed as a water conservation measure and as such explains the impressive vote in favor of it. The veto of this bill is a victory for local control rather than state mandated regulations.

The bill was sponsored by the San Diego County Water Authority and supported by the Association of California Water Agencies, and the City of San Diego, and opposed by CAI-CLAC.

Here is the Governor’s veto message, followed by an article in the press:

To the Members of the California State Senate:

I am returning Senate Bill 759 without my signature. Under this bill, homeowners associations that govern Common Interest Developments would be forced to approve the installation of AstroTurf. The decision about choosing synthetic turf instead of natural vegetation should be left to individual homeowners associations, not mandated by state law. For this reason, I am returning this bill.

 

Sincerely,

Edmund G. Brown Jr.

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July 15, 2011

Jerry Brown vetoes artificial turf bill backed by conservationists

Gov. Jerry Brown has vetoed legislation that would have required homeowners associations to let people replace their lawns with artificial turf, the governor’s office announced today.

Senate Bill 759, by Sen. Ted Lieu, D-Torrance, was supported by water conservationists and passed by the Legislature with some bipartisan support. It would have prohibited associations, which often govern the aesthetics of a neighborhood, from banning artificial turf.

“A decision to choose synthetic turf over natural vegetation is best left to individual homeowners associations, not mandated by state law,” the Democratic governor said in his veto message.

Lieu fired a testy Twitter message or two at Brown last month after the governor vetoed the first budget passed by Democratic lawmakers. But Lieu said this afternoon that he didn’t think the veto was in retribution.

“It does appear to me that Jerry Brown is looking at each bill on its merits and then making his decision,” he said.

** Sacramento Bee Newspaper

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Posted in Governance, News, Pending legislation.

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By Robert M. DeNichilo – July 21, 2011

Dealing with Complaints & Difficult Owners

While most board members truly act with the best interest of the Association in mind, even with the best of intentions a board may at some point have to deal with opposition from fellow homeowners. Sometimes the opposition is legitimate. Other times, it is not. Knowing how to respond to members in the Association and handle conflict is important to building and maintaining a strong community.

Problems often can arise when an owner or owners are not happy with particular board decision or policy. For example if the board has instituted a necessary but unpopular parking program, or someone wants to paint their home a color that is not approved by architectural review committee. The owner disapproves of the decision, but the board supports the committee’s decision. In such cases there is a conflict between the owner and the board. But when does a person cross the line from simply expressing their disapproval of the decision to actually becoming a problem?

Typically a problem arises when, in response to a board decision, the owner declares “war” and begins interactions with an aggressive attitude, and makes demands that are designed to harass the board and manager. A situation like that is detrimental to the entire Association because it distracts the board or manager from their important tasks, and uses Association resources in order to respond to the upset owner.

Other times the problem may be less obvious. Because board members are often neighbors and friends of other residents, owners don’t always respect board members’ personal time. It’s easy for fellow owners to stop board members outside their homes, poolside, or by the mailbox to discuss issues within the community. While the owner’s concerns may be warranted, it may border on being overzealous or even harassing since it can occur at any given moment. Typically, when this occurs there is a lack of knowledge about how a homeowners association is structured, and how the board should function. Owners (and board members) need to recognize that the boards’ authority comes from the board acting as a whole, not from any one individual board member.

Transparency is good

One of the key steps in dealing with all members in an Association is to maintain regular, open communication with owners so the board’s actions are always clear. A good board is responsive to residents and takes the position that every owner has a legitimate interest in what’s going on and that their questions deserve to be answered. Open lines of communication will help lessen confusion and reduce any “us vs. them” attitude that some members may feel toward the board. When considering an item that may be controversial in the community, consider soliciting the input of the other owners via a survey, or even a town hall meeting.

Handling Complaints

Even while taking steps to involve the community in the difficult decisions, there will be times when an owner has a complaint. In evaluating any complaints, there are several tried and true approaches the board (and management) should consider:

  • Gather as much information as possible about the facts surrounding the complaint;
  • In gathering facts, initiate contact with the affected owners in a neutral fact gathering rather than confrontational fashion;
  • Unless there is an emergency, only act on written complaints;
  • Use IDR — internal dispute resolution, whenever possible;
  • Keep the emotions in check and make sure they are not a factor in deciding any outcome;
  • Listen to the complaints from the owner’s perspective and evaluate if the complaint has any merit;
  • Keep your end of the agreement even if the other side doesn’t;
  • Standardize procedures in dealing with violations and follow the procedures as consistently as possible.
  • If none of these concepts work, seek out the right kind of professional for help.

Don’t get sucked into a pattern of ineffective behavior in dealing with difficult people. Follow the policies the board has adopted in compliance with the association’s governing documents. When these issues arise, give the complaining party an opportunity to state their case, and do your best to let them know that they have been heard. Lastly, in resolving the issue, be fair and reasonable. Most of the time following these steps will resolve the situation. In cases where things continue to escalate, or the owner continues to make unreasonable demands or complaints, the association may need additional help. In those rare cases, discuss your options with your Association’s counsel who can advise the board on specific options the board may implement to deal with such a situation.

 

Posted in Governance, Operations.

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By Robert M. DeNichilo – March 29, 2011

Protect Board Members from Personal Liability

We all know that Board members volunteer their time, often putting in many hours per week for the betterment of their communities. While most homeowners are grateful for the work done by the members of their Board of Directors (and community managers!), there are times when the actions taken by the Board, or by individual Board members, are challenged. While this risk would deter many from volunteering their time, the laws in California provide some legal protections for Board members from personal liability. While this protection is not absolute, so long as a volunteer board member complies with the following checklist they should avoid personal liability for actions they take as a director

  • Act in good faith;
  • Act in a manner which the board member believes is in the best interests of the Association;
  • Act with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances (this includes, but is not limited to, consulting with the Association’s attorney, CPA, insurance and other experts, as needed);
  • Avoid acting in a manner that is willful, wanton, or grossly negligent;
  • Act within the scope of their duties as an officer or director of the Association;
  • The Association carries insurance which meets the minimum requirements set forth in California Civil Code 1365.7(a). These requirements include both liability insurance and directors and officers liability coverage.

When these requirements are met, the law provides a qualified immunity for volunteer officers and directors which shields them from personal liability, even if the amount of the damage is more than the amount of insurance coverage. In other words, a person attempting to file a civil action against a volunteer officer or director of an Association should have their claim dismissed by the courts. It is, of course, impossible to predict what a court will do in any one particular case, and many courts apply the law incorrectly, which is why we have Courts of Appeal.

Boards should also be aware that many insurance policies require that the insurance carrier be notified of potential claims as soon as the insured (the Association, or particular officers and directors, depending on the policy) has “notice” of the potential claim. This “notice” often occurs well before a lawsuit is filed. Therefore, it is important for the Board to consult with the Association’s attorney as soon as they suspect there may be any claim which might be made against the Association or any directors. The Association’s attorney should be able to guide the Board with respect to providing notice to insurance carriers in order to comply with an insurer’s “notice” requirements. Associations should also be encouraged to obtain fidelity coverage. A common mistake made by associations is to assume that their liability insurance also provides fidelity coverage. Frequently, this assumption is in error, and the coverage must be purchased separately.

Lastly, Board’s should also be made aware of the additional liability protection available for all Owners in an Association. California Civil Code Section 1365.9 protects the individual owners of the association from being sued for damages such as personal injury that occur in common areas of the association such as a neighborhood park. To receive this protection, the association must maintain liability coverage of at least $2,000,000 if there are 100 or fewer separate interests in the association, and $3,000,000 if the Association contains more than 100 separate interests.

Posted in Governance.

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By Robert M. DeNichilo – March 19, 2011