TERMINOLOGY
Statutory Law. Bills (proposed changes to the law) are introduced into the legislature in Sacramento. Once a bill has been approved by both houses of the legislature (the Assembly and Senate) and signed by the Governor, a bill becomes a statute or "statutory law." The Davis-Stirling Act (Civ. Code §§4000-6150) is an example of statutory law. Regulatory laws are adopted by executive agencies based on statutes. Ordinances are passed by counties and cities.
Enrolled. A bill that passes both houses is sent for proofreading for consistency before being sent to the Governor for approval.
Transmitted to Governor. The governor must sign or veto legislation within 10 days after transmittal, or it becomes law without his/her signature. For bills transmitted after session adjournment, the governor must act within 30 days after the end of the session, or the legislation becomes law without being signed.
Chaptered. A bill is "chaptered" once it is signed by the Governor. It becomes law January 1 of the following year unless it contains an urgency clause (takes effect immediately) or specifies an effective date.
2018 BILLS
AB 1760. Emergency Vehicle Parking. (Died) This bill would make a prohibition or restriction relating to parking, including, but not limited to, street parking, void and unenforceable with respect to an emergency vehicle owned or under the control of a member.
AB 1766. Pool Safety Equipment. (Chaptered) This bill addresses public swimming pools but could affect associations. It requires an Automated External Defibrillator (AED) on the premises of any pool that provides lifeguard services and charges a fee. Associations with lifeguards that allow non-members access to their pools, for a fee, would likely fall under this bill.
AB 1943. Manufactured Housing Foundation Systems. (Chaptered) A registered owner of a manufactured home or mobilehome in a mobilehome park that is converted or proposed to be converted to a resident-owned subdivision, stock cooperative, or condominium project, may submit written evidence of that owner’s resident ownership in the mobilehome park in order to comply with this requirement.
AB 2079. Janitorial Workers. (Chaptered) This bill parallels SB 1343 regarding sexual harassment training but is aimed specifically at janitorial employers and includes other requirements. As of July 1, 2018, the Act requires all janitorial employers to register annually with the Labor Commissioner’s Office and provide employees (they can have as little as 1 employee and be considered an “employer”) with sexual harassment prevention training once every two years beginning January 1, 2019 (Labor Code Section 1429.5). “Covered Workers” under the statute include employees and independent contractors employed as janitors for janitorial service. Any janitorial employer that does not register is subject to a fine of $100 for each calendar day that they are not registered. The fine will not exceed $10,000 (Labor Code Section 1432(a)). Any person or entity that contracts with an employer who lacks a current and valid registration, as displayed on the online registration database at the time the contract is executed, extended, renewed, or modified, under this part on the date the person or entity enters into or renews a contract or subcontract for janitorial services with the employer is subject to a civil fine of not less than two thousand dollars ($2,000) nor more than ten thousand dollars ($10,000) in the case of a first violation, and a civil fine of not less than ten thousand dollars ($10,000) nor more than twenty-five thousand dollars ($25,000) for a subsequent violation.
AB 2353. Construction Defects. (Inactive) This bill would require that an inspection for construction defects be conducted by a person who is licensed as a contractor with a license that applies to the field and scope in which the person is conducting the inspection and issuing his or her inspection findings or report.
AB 2912. Association Financial Security. (Chaptered) This bill is designed to prevent fraud and embezzlement in common interest developments. It prohibits transfers of greater than $10,000 or 5 percent of the total combined reserve and operating account deposits, whichever is lower, without prior written board approval. The bill would also require monthly reviews of operating accounts, reserve accounts, actual operating revenues and expenses compared to budget, account statements prepared by financial institutions, income and expense statements, check register, monthly general ledger, and delinquent assessment receivable reports. The bill allows these requirements to be met when every individual member of the board or a subcommittee of the board consisting of the treasurer and at least one other board member reviews these documents and statements independent of a board meeting, if the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting. The bill also requires associations to purchase fidelity insurance as well as computer and transfer fraud insurance in an amount equal to or exceeding current reserves, plus three months of assessments.
AB 3041. Transfer Fees. (Chaptered) This bill prohibits transfer fees imposed by CC&Rs in the transfer of residential real estate, except as provided in the bill.
SB 261. Governance. (Chaptered) This bill authorizes members to use email to provide and revoke consent to receive delivery of “individual delivery” or “individual notice” by email. It also changes the notice requirement for proposed operating rule changes from 30 to 28 days.
SB 721. Balcony Inspection & Repair. (Chaptered) In June 2018, SB 721 was amended to exclude its application to common interest developments. Owners of buildings with three or more multifamily dwelling units must perform periodic inspections of balconies/decks, stairwells, walkways and entry structures that extend beyond the exterior building walls more than six feet above ground level, consisting of wood or wood-based products for support. The bill also includes requirements for making repairs. For condo conversions sold to the public after January 1, 2019, inspections shall be conducted prior to the first close of escrow of a separate interest in the project and shall include the inspector’s recommendations for repair or replacement of any exterior elevated element found to be defective, decayed, or deteriorated to the extent that it does not meet its load requirements, and would, in the opinion of the inspector, constitute a threat to the health or safety of the occupants.
SB 954. Mediation Confidentiality Disclosure. (Chaptered) Requires attorneys representing clients in connection with a mediation to provide written disclosures to their clients about mediation confidentiality.
SB 1016. Electric Vehicles. (Chaptered) The makes small changes to existing Civil Code 4745 and 4745.1 making it clear that homeowners must pay the costs associated with the installation and electrical usage of electric vehicle charging stations.
SB 1128. E-mail Notices and Uncontested Elections. (Vetoed) This bill allows members to consent to receiving HOA notices by email and also to rescind that consent via email. It also allows for automatic election to the board when the number of qualified nominees is equal to or less than the number of available seats on the board. In addition, it reduces from 30 to 28 the number of days' notice required before making a rule change. The bill was subsequently amended by CCHAL to incorporate the worst elements of SB 1265.
SB 1265. Candidate Qualifications. (Vetoed) This bill voids all candidate qualifications other than being a member of the association, financial felon or delinquent in regular assessments. It also requires that the location where ballots are counted be accessible to seniors and persons with disabilities. Ballots must be given to anyone with a power of attorney for an owner. A member who challenges the election in small claims court (where no attorneys are allowed) and prevails, can be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney.
SB 1173. Timeshare Annual Notices. (Chaptered). Exempts homeowners of vacation ownerships and timeshares from annually providing the association with a mailing address.
SB 1289. Liens. (Chaptered) Makes small corrections to language in Civil Code 4615.
SB 1300. Discrimination & Harassment. (Chaptered) Under FEHA, an employer may also be responsible for the acts of nonemployees, with respect to sexual harassment of employees and other specified persons, if the employer, or its agents or supervisors, knows or should have known of the conduct and fails to take immediate and appropriate corrective action. This bill makes an employer potentially liable for the acts of nonemployees with respect to other harassment activity.
SB 1343. Sexual Harassment Training. (Chaptered) Applies to employers with 5 or more employees. Supervisory employees require 2-hour training and non-supervisory employees require 1 hour of training, both every 2 years. This will affect many associations and most management companies and vendors. It goes into effect January 1, 2019 and requires compliance by 2020.
SB 1480. Manager Certification, Disclosures. (Chaptered) This bill eliminates the sunset provision applicable to Sections 11500–11509 of the Business & Professions Code regarding common interest development manager certification and disclosures. If the sunset provision were not removed, these sections would be repealed as of January 1, 2019.
2018 CASE LAW
Case Law. Case law is created by judicial decisions in California's appellate courts and supreme court. Statutory law demands or prohibits certain acts. Case law interprets statutory law. The cases also explain how the justices arrived at their particular conclusions. If published, their rulings serve as precedence for cases that follow.
Artus v. Gramercy Towers. A San Francisco condominium highrise voted to eliminate cumulative voting. Artus sued and obtained preliminary injunctive relief, preventing a board election under the new, direct vote rule. The HOA held another election and again eliminated cumulative voting by a substantial margin. When the Artus lawsuit went to trial, the court found the association had corrected earlier election problems and denied her request for relief. Artus appealed. The court of appeal affirmed the lower court's decision, rejecting Artus’ claim for attorneys' fees and costs. Artus' earlier success at obtaining a preliminary injunction did not make her the prevailing party.
Branches v. Calatlantic Group. The Branches Association filed an arbitration claim against the developer for construction defects. The association did so without first getting membership approval as required by the CC&Rs. The developer sought and the arbitrator granted summary judgment in the developer's favor because of the association's failure to get membership approval. The board of directors belatedly sought and received membership approval and filed a motion to vacate the award. The trial court denied the association's motion, concluding the court had no power to review the arbitrator's decision. The association appealed. The court of appeal determined the plain language of the CC&Rs controlled and ruled against the association.
Cheveldave v. Tri Palms. Confirms reciprocal mutual easements for the purpose of determining whether an association with no physical common area can be deemed a Davis-Stirling common interest development. If a development is not a CID, the board does not have standing to enter into contracts on behalf of owners otherwise permitted by statute.
Dynamex Operations West vs. Superior Court. All workers are presumptively considered employees and may only be classified as independent contractors if the hiring business demonstrates the worker satisfies each of three conditions: (i) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (ii) the worker performs work that is outside the usual course of the hiring entity's business, and (iii) the worker is customarily engaged in an independently established trade, occupation, or business. The hiring entity's failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an employee, rather than independent contractor.
Eith v. Ketelhut. The appellate court upheld the trial court application of the Lamden judicial deference rule to the Board decision that the Ketelhut operation of the vineyard was not a prohibited business or commercial use and concluded, as a matter of law, it was not a prohibited business or commercial use.
Geraci v. Union Square. Geraci alleged she suffered from PTSD. She sought an accommodation request from the association, which was denied. Geraci filed suit under the Fair Housing Act. She also alleged the association retaliated against her by revealing her alleged PTSD in the litigation update to the members. During the litigation, the association presented a psychiatrist’s testimony, which contradicted the PTSD diagnosis. Geraci argued the association did not have the right to question her PTSD diagnosis. The court disagreed. In addition, the court stated the litigation update did not amount to retaliation because members deserve to know the details of why their association is bearing legal costs, and because the facts of her alleged PTSD became public knowledge when she filed her lawsuit. This case puts members on notice that their alleged medical condition is subject to investigation in litigation, and the Association can disclose the details of a litigation even when a member is the opposing party.
Golden Eagle Land Investment v. Rancho Santa Fe Assn. Conduct regarding an issue of public interest when participating in the government entitlement process affecting property is an act in furtherance of the right to free speech under the anti-SLAPP statute. Association meetings to discuss the development project and a letter contacting the county regarding same were protected speech.
Goudelock v. Sixty-01 Association. Debtors who successfully complete their Chapter 13 bankruptcy plans and earn a discharge are freed permanently from the personal obligation to pay homeowner association dues, including post-petition dues. The owner's property may still be liened and foreclosed on by the association for non-payment of post-petition assessments.
Greenfield v. Mandalay Shores. The beachfront association adopted a rule requiring rentals be for a minimum of 30 days. The Coastal Commission demanded the association cease enforcement of the restriction alleging the requirement constituted a “development” affecting the density and intensity of the use of the coastal area, which required a coastal permit. The trial court disagreed and found that a 30-day minimum was not a “development.” The court of appeal reversed stating, "The decision to ban or regulate STRs must be made by the City and Coastal Commission, not a homeowner’s association."
Heron Bay v. City of San Leandro. It is not an abuse of discretion to award attorneys' fees under a public interest litigation statute where the plaintiffs brought suit for private financial interest.
Kohler Co v. Superior Court. Except under very limited circumstances, association members cannot bring a class action action for defective plumbing under the Right to Repair Act.
Marina Pacifica HOA v. Southern California Financial Corp. When it comes to attorneys' fees, a party's failure to obtain its litigation objective does not automatically make the other party the prevailing party.
McMillan Albany, LLC v. Superior Court. In a homeowner's common law action to seek recovery of damages from deficiencies in residential construction, homeowners had to comply with prelitigation procedures under the Right to Repair Act. This disapproved Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, 163 Cal.Rptr.3d 600, Burch v. Superior Court, 168 Cal.Rptr.3d 81.
McNair v. Maxwell & Morgan PC. Even though an effort to collect homeowner association fees through nonjudicial foreclosure does not constitute "debt collection" under the Fair Debt Collection Practices Act, an effort to collect them through judicial foreclosure does. And, any post-judgment attorneys’ fees must be approved by the court before being sought.
MTC Financial v. Nationstar Mortgage. When an association as a junior lienholder forecloses, the senior lienholder recovers nothing from the sale proceeds. However, the senior lien remains intact and the association takes title to the property subject to the senior lien.
O'Malley v. Hospitality Staffing Solutions. Reversing the grant of summary judgment in a case where a couple sued a hotel whose staff might not have had a duty of care owed the wife, who suffered a brain aneurysm while staying there, except that the husband had called the hotel and a maintenance worker had checked the room, which meant that there was a triable issue of material fact as to whether he or the hotel were liable for a negligent undertaking.
Sierra Palms v. Metro Gold Line. Association has standing to sue a municipality for inverse condemnation.
Staats v. Vintner's Golf Club, LLC. A golfer was stung 50 times by a swarm of yellow jackets and almost died. Clubs have a duty to exercise reasonable care to protect patrons against the foreseeable risk posed by yellow jackets. The golf club argued it had no duty to protect golfers from insects without prior knowledge of their existence. The court found the club liable because it did not regularly inspect the grounds for pests or use any preventative measures to control yellow jackets.
UNPUBLISHED OPINIONS
The following cases are unpublished opinions and are not binding precedent. However, they give insight on how future courts might deal with similar issues.
Abounassar v. Stay Green. An association is not strictly liable for injury caused by broken sprinkler. Plaintiff must prove elements of negligence. Plaintiff failed to produce any evidence the association or its landscape contractor knew the sprinkler was likely to break, how it broke, the standard of care applicable to maintenance of a sprinkler system by a homeowners' association or landscaping contractor, or any evidence they breached the standard of care.
Asher v. Morningside Community Assn. Owners challenged an amendment to their homeowners association's covenants, conditions and restrictions (CC&Rs) that added a $250 monthly assessment to cover the costs associated with the members-only golf and tennis club. The court denied the association's anti-SLAPP motions on the grounds plaintiffs' causes of action did not arise out of protected activity.
Eicherly v. Palm Beach Park Association. The trial and appellate courts upheld an election to impose a substantial special assessment, despite numerous procedural violations of the Davis-Stirling Act. The election was found to be reasonably fair.
Grande S. at Santa Fe Place Owners Assn. v. Williams. Association filed a petition for court approval of CC&R amendments to address problems created by short-term rentals. A member objected to the 12-month minimum lease requirement; limits on occupancy, and requirement to give notice of guests. The court ruled in favor of the association, concluding the changes were rationally related to the protection, preservation and proper operation of the association.
Ibarra v. Papierniak. An individual owner has standing to bring a claim against the developer for damage to the foundation.
Johnston v. City of Hermosa Beach. The City of Hermosa Beach enacted an ordinance banning short-term rentals. Johnston sued the city alleging the ordinance violated the Coastal Act. The court disagreed and concluded that restrictions on short-term rentals do not constitute a "development" subject to regulation by the California Coastal Commission.
Kulick v. Leisure Village. The association's attorney prepared distributed a letter to the membership responding to Kulick's newsletter. The attorney's letter described Kulick's newsletter as a "reckless communication" that contained "unfounded, inaccurate and spiteful allegations." The letter denied that any board member was a cheat or a liar or that the association attorneys had engaged in unlawful conduct during the litigation. The letter also explained the association's position in the litigation and its success in obtaining a preliminary injunction against Kulick. Kulick sued for defamation. Court ruled the attorney's letter was protected.
LNSU #1, LLC v. McLaughlin. Where the same three persons serve as co-managers on two different LLCs, each of which owns a different Lot, and where two of the three co-managers already served on the Board, each as an agent for one of the two LLCs, the third co-manager could not contemporaneously serve on the Association Board with the others because his eligibility is based on his agency with one of the two LLC owners, each of which already had a representative on the Board.
Michaelson v. V.P. Condominium Corporation. A developer cannot convey exclusive use rights involving unassigned common areas. If unassigned, areas such as parking become part the general common area with no exclusivity.
Schwindt v. Omar. An architectural decision is binding on owners if it is not arbitrary or capricious.
Wright v. Morningside Community Assn. Anti-SLAPP motion denied where the activities alleged in the first amended complaint - misrepresentations and tortious actions taken by the defendants to insure the implementation of an assessment - were not protected speech.
Wright v. Peters & Freedman. Anti-SLAPP motion denied where the association's attorney served as an election inspector and was accused of conspiring to rig the election, fraud/deceit, and intentional infliction of emotional distress.
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