2005 Laws
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2005 CHANGES IN THE LAW

2005 STATUTES

Secret Ballot Elections (Senate Bill 61, new Civil Code §1363.03). Associations must conduct elections by secret ballot, including election of directors, assessment increases, amendments to the governing instruments and grants of exclusive use rights in the common area. One or three inspectors must be appointed to supervise election procedures. Form of proxy was changed.

Dispute Resolution (Assembly Bill 1836). Associations must provide Internal Dispute Resolution (IDR) procedures for resolving disputes with owners (Civil Code §§1357.130 to 1357.140). Members may not be charged a fee to participate in IDR.

Inspection of Books and Records. Inspection rights were expanded to include interim financial statements such as balance sheets, income and expense statements, budget comparisons, check registers, and the general ledger. Also included are executed contracts, contractor proposals, tax returns, reserve account balances and payment records, agenda and minutes of the board and committees, etc.(Civil Code §1365.2)

Common Area Easements (Assembly Bill 1098). Any grant of exclusive use of the common area to any owner requires approval by two-thirds (2/3rds) of the membership

Architectural Review (Assembly Bill 2376 adds Civil Code §1378). Associations must provide a fair, reasonable, and expeditious procedure for making decisions on architectural requests by owners. Decisions must be in writing and, if the members request is denied, the decision must explain the reason for denial and set forth the procedure for reconsideration of the decision by the Board.

Assessment Collection (Senate Bill 137). Liens recorded after January 1, 2006 cannot be foreclosed until the debt is $1,800 or 12 months old. Late charges, interest, and attorneys' fees are excluded in determining the $1,800 threshold. The board, not an agent of the board, must make the decision to record a lien. The decision must be made in an open meeting by a majority of the board, not a majority of a quorum. Owners may request dispute resolution with the association. Pre-lien notices must be served at least 30 days prior to lien recordation. The former requirement of Civil Code Section 1366.3 that the owner pay in full as a condition of the right to alternative dispute resolution was deleted. The decision to foreclose must also be made by the board, in executive session, by a majority of the board. The decision must be confidential. The board may refer to the property by parcel number, rather than address. The owner has a 90 day right of redemption. Civil Code §§1365.1, 1367.1, 1367.4, 1367.5

Reserve Disclosures (Assembly Bill 2718, effective July 1, 2005). Requires that associations annually distribute a new form regarding assessment and reserve funding. The new form is found in Civil Code §1365.2.5. The form must accompany the pro forma operating budget or summary distributed to the members.

Fire Retardant Roof Materials (Assembly Bill 224 adds Civil Code §1353.7). Associations may not require owners to install or repair a roof in a manner that violates Health & Safety Code Section 13132.7. Owners in high fire hazard severity zones who replace more that 50 percent of their roof must use fire retardant roof materials.

Electronic Transmission of Records (Senate Bill 1306). Allows associations to transmit information electronically with the approval of recipients.

2005 CASE LAW

Woodbridge Escondido Property Owners Assn. v. Nielsen, (2005) 130 Cal.App.4th 559. The Association's architectural committee approved a wood deck that encroached upon a side yard easement of a neighbor. The CC&Rs prohibited permanent structures other than irrigation systems in the easement. The board learned of the approval and ordered the removal of the deck. The board offered to pay the cost. The owner refused. The court ruled in favor of the association. It concluded that because the CC&Rs expressly prohibited permanent structures in the easement, the board's decision was not arbitrary.

Tilley v. CZ Master Assn. (2005) 131 Cal.App.4th 464. A contract security guard sued the Association for injuries he received when he attempted to arrest two youths at an owner's party. The court ruled that the association had no liability for the injuries suffered by the employee of an independent contractor; and the guard had assumed the risk of injuries he suffered. The court found no evidence that the association's exercise of authority over the premises contributed to the guard's injuries.

Arias vs. Katella Townhouse Homeowners Assn.(2005) 127 Cal.App.4th 847.Arias sued the association for failure to repair the common area, thereby causing toxic mold in her unit. At trial, the association admitted to breaching the CC&Rs and admitted to breaching its duty of maintenance under Civil Code §1364. The jury awarded the Plaintiff $3,900 dollars for past economic damages and $2,500 for future economic damages. Both parties filed motions for attorney's fees and costs. The court held that Ms. Arias was the prevailing party, and was entitled to attorney's fees. In addition, she was entitled to attorney's fees under Civil Code Section 1354(c), since her complaint sought enforcement of the CC&Rs.

Bear Creek Master Assn. v. Edwards (2005) 130 Cal.App.4th 1470. The association brought an action for breach of contract and foreclosure on eight unbuilt condominium units. The owner had acquired the property through foreclosure but never reviewed the CC&Rs and did not receive a title report before foreclosing on the property. The owner alleged it had no duty to pay assessments because the units had not yet been built. The court disagreed. The court found that assessments became due upon all units after the first unit in a phase was sold.

Brown v. Prof. Community Management (2005), 127 Cal.App.4th 532. An owner sued her association and management company alleging she had been charged fees exceeding the amount necessary to defray the costs for which the fees had been levied in violation of Section 1366.1 of the Civil Code. The court found that Civil Code §1366.1 constrains associations not management companies from charging fees in excess of costs. The court noted that vendors are allowed to make a profit.

O'Toole Company vs. Kingsbury Court Owners Association, (2005) 126 Cal.App.4th 549. The association failed to pay a vendor, who obtained a judgment for the amount owed. The association failed to pay the judgment. The court ordered the members to meet to discuss an emergency assessment to satisfy the judgment. The members met but refused to impose an assessment. The court appointed a receiver to levy and administer a special assessment.

Ruiz v. Harbor View Community Assn. (2005) 134 Cal.App.4th 1456. The association's attorney sent letters to an owner accusing the homeowner of stalking and harassing board members. The owner sued claiming defamation and lost. When the letters were written, the parties were involved in ongoing disputes over approval of Plaintiffs' architectural plans and Plaintiffs' demands for information and documents. Those disputes were of interest to members of the association because they would be affected by the outcome of those disputes. The letters were written in the context of the disputes between Plaintiffs and the association, were part of the ongoing discussion over those disputes, and "contributed to the public debate" and were, therefore, protected speech.

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