2011 Laws
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2011 CHANGES IN THE LAW

2011 STATUTES

AB 138. CPA Peer Review. The bill was signed into law in 2009 but took effect July 1, 2011. California CPAs are now subject to mandatory review of their auditing and accounting practices. It affects HOAs because CIDs with a gross income over $75,000 are required to annually prepare a financial statement on an accrual basis and distribute it to the membership. That statement must be independently reviewed by a California licensed certified public accountant (unless the governing documents call for an audit instead of a review). The peer review allows boards to better evaluate any CPAs hired by the board to prepare the association’s annual statement. It is analogous to a restaurant getting a letter grade (A, B, C . . .) posted in their window for their food preparation practices. The peer review report is then available to clients who request it.

AB 771. Escrow Documents. Existing law requires that associations provide specified documents upon request by escrow officers when a unit is sold. AB 771 amends Civil Code §1368 to require sellers to also provide twelve months of minutes if so requested. The bill also creates a new §1368.2, which provides a form that associations must fill out when records are requested under §1368. It allows associations to collect a reasonable fee based on their actual costs but prohibits charging additional fees for electronic delivery of documents. Delivery of the documents may not be withheld for any reason nor subject to any condition except the payment of the fee.

AB 341. Recycling. This bill makes numerous changes to the Public Resources Code. It requires multifamily dwellings, with 5 or more units, to arrange for recycling services starting July 1, 2012.

AB 657. Corporate Statement of Information. This bill revised existing provisions regarding corporate filings with the Secretary of State and allows corporations to receive annual renewal notices by email.

AB 887 Gender Identity. This legislation added new protected categories called "gender identity" and "gender expression." Accordingly, associations must update their CC&R "non-discrimination" cover sheet to incorporate the new language. See: Government Code §12956.1.

SB 150. Rent Restrictions. SB 150 exempts members from rental prohibitions adopted after January 1, 2012 unless (i) they expressly agree to be bound by the prohibitions or (ii) the prohibition was in effect prior to the date the owner bought into the development. In addition, the bill requires owners to provide buyers with a statement describing any provision in the governing documents that prohibits the rental or leasing of units in the development.

SB 183. Carbon Monoxide Detectors. Carbon monoxide detectors are required in every dwelling unit where the home has a gas burning furnace, cook stove, water heater, wood burning stove, fireplace or attached garage. Anything in the home that burns a fossil fuel can create carbon monoxide--a colorless, odorless gas that can be lethal. Single-family homes must install them by no later than July 1, 2011. Condominiums and townhomes must install them by no later than January 1, 2013. The requirements are found in Health & Safety Code §§17296, 17926.1, and 17926.2.

SB 209. Electric Charging Stations. SB 209 prohibits HOAs from unreasonably restricting the installation of electric vehicle charging stations. Members who place charging stations in the common areas are responsible for costs associated with maintaining and repairing the station as well as costs for damage to common areas and adjacent units resulting from installation and maintenance of the station. The bill imposes other responsibilities on the homeowner, including maintaining an umbrella liability coverage policy of $1,000,000 that names the common interest development as an additional insured. Unfortunately, the new statute allows individual owners to use or occupy common areas contrary to existing statutes and case law.

SB 221. Small Claims Jurisdiction Increased. SB 221 increases small claims jurisdiction for personal claims from $7,500 to $10,000. It means members can sue their associations for up to $10,000 but associations are still limited to $5,000.

SB 337. Political Signs. This bill prohibits a landlord from prohibiting a tenant from posting or displaying political signs relating to an election or legislative vote, the initiative, referendum, or recall process, or issues before a public body for a vote, except under certain circumstances. Political signs may be posted or displayed in the window or on the door of the premises leased by the tenant in a multifamily dwelling, or from the yard, window, door, balcony, or outside wall of the premises leased by a tenant of a single-family dwelling. The bill would require a tenant to comply with the time period established by the local ordinance for the posting and removal of political signs or, in the absence of those provisions, by reasonable time limits, as specified, established by the landlord. Posting must comply with lawful provisions of a CID (Civ. Code §1353.6).

SB 563. Open Meeting Act. S.B. 563 amends Civil Code §§1363, 1363.05 and 1365.2. (1) The bill requires that boards now give notice of executive session meetings at least two days prior to meetings that are solely in executive session, i.e., not in conjunction with an open meeting. The notice must contain an agenda for the meeting. (2) Except for emergencies, boards are no longer allowed to make decisions by email. Emergency meetings may be held by email if all members of the board, individually or collectively, consent in writing to the action, and if the written consent or consents are filed with the minutes of the meeting of the board. (3) Board meetings can be held electronically if it includes at least one physical location where members can attend and at least one member of the board of directors is present at that location. All board members and homeowners must be able to hear one another.

SB 332. Rental Dwellings: Smoking. This bill authorizes a landlord of a residential dwelling unit to prohibit the smoking of tobacco products on the property, in a dwelling unit, in another interior or exterior area, or on the premises on which the dwelling unit is located.

2011 CASE LAW

Salehi v Surfside III (2011). Salehi sued her association alleging 10 causes of action. Three days before trial, she dismissed eight of her ten claims against the association. The association spent approximately $250,000 defending against her claims. Three days before trial, Salehi dismissed eight of her ten claims. The association subsequently sought recovery of the legal fees it incurred defending against Salehi's dismissed causes of action. The trial court denied the association’s request but the court of appeal reversed. The appellate court found that the association was entitled to recover attorneys fees from Salehi, reasoning that a party suing to enforce the CC&Rs must get their “ducks in a row” both procedurally and substantively before filing suit. Salehi had done neither.

Schuman v. Ignatin (2011) 191 Cal.App.4th 255. Homeowner Ignatin wanted to build a house that would violate the CC&Rs and neighbors filed a lawsuit to block his proposed construction. Ignatin tried to get around the restriction by challenging the validity of a CC&R amendment approved by the membership ten years earlier that extended the expiration date of the original CC&Rs. The trial court found in favor of Ignatin, holding that the amendment was invalid because it was not signed by every lot owner in the tract, thus his construction would not violate any restrictions. The Court of Appeals reversed, holding that Ignatin's challenge was untimely because the statute of limitations bars any challenge to the validity of an amendment made more than four years after the amendment was recorded.

Diamond Heights Village v. Financial Freedom (2011) 196 Cal.App.4th 290. Once an association obtains a money judgment against a delinquent owner, any existing assessment lien on the property is automatically extinguished and must be replaced with a judgment lien if the association wants to preserve its rights.

Cabrera v. Alam (2011) 197 Cal.App.4th 1077. This case involved alleged defamation during an election campaign. Prior board president Veronica Cabrera accused board member Mohammed Alam (who was running for reelection) of mismanagement of the association’s finances. In response, Alam accused Cabrera (who was campaigning for Alam’s opponent) of defrauding the association and stealing money. Cabrera sued for defamation. Alam filed an anti-SLAPP motion which was denied. The Court of Appeal reversed. The Court held that HOA meetings constitute a “public forum” and the statements against her were an issue of interest to the membership. Moreover, Cabrera was a “public figure” in her association because she had voluntarily injected herself into the election. Because she was a public figures, a higher standard of proof was applied to the alleged defamation, i.e., Cabrera had to show that Alam made the statements knowing they were false and that he made them with malice. The court found that Cabrera failed to produce any evidence to meet that standard. Accordingly, her claim for defamation was dismissed.

Villa Los Alamos HOA v. State Farm (2011) 198 Cal.App.4th 522. Disturbing asbestos by scraping the acoustical popcorn ceilings constitutes an “environmental pollution” which properly comes with an insurance policy’s defined pollution exclusion.

Country Side Villa HOA v. Ivie (2011) 193 Cal.App.4th 1110. Members have the right to speak out against the actions of their board of directors and management. In this case, the association’s newly elected board hired a new manager and new legal counsel. Their new attorney advised the board that the association was responsible for the maintenance and repair of balconies and shingle siding, rather than unit homeowners. This was inconsistent with the HOA’s prior practices. Ms. Ivie objected to the new interpretation because not all units had balconies, the HOA had no reserves to pay these new expenses, and board members had a conflict of interest because they benefited from the change. Ivie circulated a petition to recall the new board and was sued by the board. The court granted Ivie’s anti-SLAPP motion. The board appealed. The Court of Appeals found that Ms. Ivie's criticism and petition to recall the board is a protected free speech and granting her anti-SLAPP motion was proper under Code Civ. Proc. §425.16.

Barry v. OC Residential Properties (2011) 194 Cal.App.4th 861. The association acquired Barry’s unit through foreclosure and then paid $17,900 in expenses for maintenance and repair work on the unit and an electric bill. When Barry exercised her 90-day right of redemption pursuant to Civ. Code §§1367.1 and 1367.4, she was billed for those expenses. Barry objected to the additional expenses and petitioned the court to reverse them. The court ruled against Barry finding that Code Civ. Proc. §729.090(c) authorizes the purchaser at a foreclosure sale to enter the property "to repair and maintain the premises." The court found that the repairs were reasonably necessary for the preservation of the property. Accordingly, associations have the right to make needed repairs to a foreclosed property and include the expenses in the redemption price.

Bear Creek Planning Committee v. Ferwerda (2011) 193 Cal.App.4th 1178. If empowering language is provided for in the CC&Rs, architectural committees may adopt standards beyond those set forth in the CC&Rs, i.e., it can adopt new design standards related to the improvement or development of lots. However, a committee may not unilaterally establish an attorneys’ fees provision for itself. Attorneys’ fees must be reciprocal and contractual--the committee's fee provisions did not seek to clarify existing language in the CC&R's. Rather, it was an inappropriate attempt by the committee to insert a new provision that bound homeowners without their approval. Nothing in the CC&Rs gave the committee the power to insert into their architectural standards an attorney fee provision that was never in the CC&Rs.

Sui v. Price (2011) 196 Cal.App.4th 933. This case involves a 1987 Mitsubishi van which was inoperable and parked in homeowner Yan Sui’s exclusive parking space from 2003 to 2007. In December 2006, the association amended its rules to prohibit all disabled, inoperable vehicles. In January 2007, the board president Stephen Price, placed a warning sticker on the windshield of the van that the vehicle was in violation of the parking rule would be towed. In February, the van was towed. Sui sued. The defendants’ demurrer to the complaint was sustained without leave to amend, thereby ending the lawsuit. Sui appealed. The Court upheld the lower court decision. It found “nothing unreasonable about prohibiting the open, long-term parking of disabled vehicles. The association was perfectly reasonable in prohibiting this unsightly intrusion upon the aesthetics of their common interest development.

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