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2016 CHANGES IN THE LAW

2016 BILLS

AB 54. Disability Access. The Construction-Related Accessibility Standards Compliance Act establishes standards for making new construction and existing facilities accessible to persons with disabilities and provides for construction related accessibility claims for violations of those standards. Current law requires that a copy of the demand letter and the complaint be sent to the California Commission on Disability Access. This bill would, in addition, require that information about the demand letter and the complaint be submitted to the commission in a standard format specified by the commission on the commission's website.

AB 557. Corporate Suspension. (Passed in 2015, took effect January 1, 2016.) This bill make nonprofit public benefit and mutual benefit corporations subject to administrative dissolution if their corporate powers have been suspended by the Franchise Tax Board or the Secretary of State for at least 48 months.

AB 596. Annual Budget Disclosure of FHA Status. (Passed in 2015, took effect July 1, 2016.) Amends existing Civil Code §5300 beginning July 1, 2016, to require condominium developments to include in their annual budget report their status as a Federal Housing Administration (FHA)-approved condominium project and as a federal Department of Veterans Affairs (VA)-approved condominium project.

AB 968. Maintenance & Repairs. (Passed in 2014, takes effect January 1, 2017). This clarifies maintenance obligations for exclusive use common areas. Unless otherwise provided in the CC&Rs, associations are responsible for maintaining, repairing, and replacing common areas. Homeowners are responsible for maintaining, repairing, and replacing their separate interests and for maintaining the exclusive use common areas appurtenant to their separate interests. Associations are responsible for repairing and replacing exclusive use common area. (Changes Civil Code §4775.)

AB 1720. Lawyers in Board Meetings. Would have allowed homeowners to send their lawyers to association board meetings. (DEFEATED)

AB 1963. Construction Defects. Existing law requires, until July 1, 2017, specified conditions to be met before an association may file a complaint for damages against a builder, developer, or general contractor of a common interest development based upon a claim for defects in the design or construction of the common interest development. This bill extends the current laws to 2024 and 2025.

AB 2362. Pesticide Applicators. Requires associations give notice to owners and tenants if pesticide is to be applied to units or the common area by an unlicensed pest control operator. (Adds new Civil Code §4777.)

AB 2819. Unlawful Detainer Proceedings. This bill provides that access to limited civil case records filed in an unlawful detainer action is restricted, for purposes of (1) to any person by order of the court if judgment is entered for the plaintiff after trial more than 60 days since the filing of the complaint, and (2) to any other person 60 days after the complaint has been filed if the plaintiff prevails in the action within 60 days of the filing of the complaint.

SB 7. Water Meters. Would express the intent of the Legislature to encourage the conservation of water in multifamily residential rental buildings through means either within the landlord's or the tenant's control, and to establish that the practices involving the submetering of dwelling units for water service are just and reasonable, and include appropriate safeguards for both tenants and landlords. This bill contains other related provisions and other existing laws.

SB 269. Disability Access. Current law specifies that a violation of construction-related accessibility standards personally encountered by a plaintiff may be sufficient to cause a denial of full and equal access if the plaintiff experienced difficulty, discomfort, or embarrassment because of the violation. This bill would, for claims filed on and after its effective date, establish a rebuttable presumption, for the purpose of an award of minimum statutory damages, that certain technical violations do not cause a plaintiff to experience difficulty, discomfort, or embarrassment, if specified conditions are met.

SB 814. Excessive Water Use. Would declare that during prescribed periods excessive water use by a residential customer in a single family residence or by a customer in a multi-unit housing complex, as specified, is prohibited. This bill, during prescribed periods, would require each urban retail water supplier to establish a method to identify and discourage excessive water use. This bill would authorize as a method to identify and discourage excessive water use the establishment of a rate structure that includes block tiers, water budgets, or rate surcharges over and above base rates for excessive water use by residential customers.

SB 918. Contact Information. Requires associations to annually give notice to members of their obligation to update their contact information with the association for the purpose of receiving notices from the association. If members fail to provide contact information, associations can use the property address for giving notices. (Adds new Civil Code §4041.)

SB 944. Various Corrections. This bill clarifies alternative procedures for approving, certifying, or recording amendments to a declaration (Civ. Code §4270). It also makes nonsubstantive changes to provisions regarding clotheslines and drying racks in an owner’s backyard (also renumbers 4750.10 to 4753). In addition, it corrects an erroneous reference to the statutory definition of “major component” for reserve studies (Civ. Code §5570).

SB 983. Mortgages and Deeds of Trust. Current law requires a mortgagee, beneficiary, or authorized agent to record a rescission of a notice of default or cancel a pending trustee sale, if applicable, upon the borrower executing a permanent foreclosure prevention alternative. Current law, in the case of a short sale, requires the rescission or cancellation of the pending trustee's sale to occur when the short sale has been approved and proof of funds or financing has been provided, as specified. This bill would make a clarifying change by eliminating the reference to rescission in the case of a pending trustee's sale.

SB 1092. Internet Advertising of Rental Listings. Current law requires a hosting platform, as defined, to provide a specific notice to an occupant listing a residence for short-term rental on a hosting platform that states, among other things, that, if the occupant is a tenant, listing the room, home, condominium, or apartment may violate the lease or contract and could result in legal action by the landlord, including possible eviction. This bill would require that notice to also be provided to mobilehome offerors and include a statement advising the offeror to review any restrictions on coverage under the offeror’s homeowners’ or renters’ insurance policy related to short-term rental activities, as specified, and would make technical and conforming changes.

SB1431. Access to Gated Communities. Associations with staffed entry gates must allow process servers access to the development to serve process or subpoenas on residents. Process servers include Sheriff deputies, marshals, investigators employed by the California Attorney General's office, county counsel, city attorneys, district attorneys, and public defenders.

HR 3700. FHA Certification. HUD must revise its FHA certification and recertification requirements for condominium developments so as to make them less burdensome. The legislation requires HUD to loosen its restrictions on condominium developments with transfer fees, i.e., fees imposed by an association when a unit is sold or transferred. Until now, HUD refused to extend financing to projects with transfer fees. With this change, more associations can certify for FHA financing. Lenders have long recognized that a high rental population in a development damages property values. HUD established a 50% cutoff for FHA insured loans. HR 3700 requires HUD to issue justification for its percentage ownership requirements by the end of October. If it does not issue new guidelines by then, a default number goes into effect which reduces the percentage of owner occupied units from 50% to 35%.

Harassment & Discrimination. Effective October 14, 2016, the U.S. Department of Housing and Urban Development (HUD) requires all housing providers take steps to end harassment. The regulation includes homeowner associations as a housing provider. (Code of Fed. Reg. §100.7(a)(1)(iii).) No longer can boards tell feuding neighbors that the association will not get involved in neighbor-to-neighbor disputes. If one of them files a complaint with the association of harassment, the board must investigate and take appropriate action.

2016 CASE LAW

Almanor Lakeside Villas Owners Association v. Carson (Apr. 19, 2016). The Carsons leased their property for short-term vacation rentals even though it violated CC&R restrictions that prohibited owners from using their lots for transient hotel purposes and prohibited rentals for less than 30 days. They also disputed rules related to parking, trash storage, use of common areas, and decals for boats. The association fined the Carsons and sued them. The court ruled the association could enforce its rules and awarded attorneys fees in the amount of $101,803.15 in addition to $6,620 in fines (approximately 10% of the amount originally imposed by the association). The Carsons appealed and lost. The association was deemed the prevailing party even though 90% of its fines had been disallowed. The court concluded the key issue was the association's right to enforce rules and impose fines for violations, thereby making it the prevailing party.

Nellie Gail Ranch OA v. McMullin (October 3 2016). Without approval, a homeowner built a retaining wall on 6,000 square feet of common area. Because of the rural nature of the development, the trespass went undiscovered for several years. When it was discovered and demands went unheeded, the association sued. The homeowner argued he had acquired ownership of the common area through adverse position. Under California law (Code Civ. Proc. §§318, 325, 328), a person can acquire legal ownership of another's land without paying for it if he can prove (1) possession of the land was under claim of right or color of title; (2) possession was actual, open, and notorious; (3) possession was adverse and hostile to the true owner; (4) Possession was continuous for at least five years; and (5) the person paid all taxes assessed against the property during the five-year period. In a common interest development, payment of all taxes on disputed common area is impossible for a claimant to establish. Although common areas have value, they  are not separately assessed for taxes. Their taxable value is reflected in the increased market value of members' properties created by common area pools, clubhouses, riding trails, parks, etc. Property taxes on common areas are, therefore, billed to and paid by all homeowners individually, not by the association. As a result, the fifth element of adverse possession cannot be met by a claimant.

Palm Springs Villas II HOA v. Parth (June 21, 2016). The Business Judgment Rule protects directors who conduct a reasonable investigation (due diligence) before taking corporate action. Failure of a director to conduct their due diligence is a breach of their fiduciary duty. Because the Business Judgment Rule is an affirmative defense, a director has the burden to establish that he/she made a reasonable inquiry under the circumstances alleged in the complaint. In this case, the President hired a roofing company without soliciting bids, checking references or licensing, verifying insurance, or consulting management or legal counsel. In addition, she had little familiarity with the association's governing documents.

Rogo v. Gottlieb (2016). Anti-SLAPP motion denied when court determined that a letter to the membership by the association's attorney was sent with malice toward an owner.

Vien-Phuong Thi Ho v. Recontrust Co. (9th Cir. Oct. 2016). The Ninth Circuit Court of Appeals held that a non-judicial foreclosure is not debt collection under the Fair Debt Collection Practices Act (FDCPA). The Court made a distinction between foreclosing on a deed of trust (enforcing a security interest) and collecting funds from a debtor (debt collection). The distinction is important because of the strict restrictions and notice requirements of the FDCPA. The Court stated that the object of a nonjudicial foreclosure “is to retake and resell security, not to collect money from the borrower.” The decision is significant because it breaks with decisions from the Fourth and Sixth Circuits, which previously found that foreclosures were subject to the FDCPA.

Rancho Mirage Country Club HOA v. Hazelbaker (2016). An association's lawsuit to enforce a settlement agreement entered into during ADR is deemed an action to enforce the governing documents under the Davis-Stirling Act, which entitles the association to recover reasonable attorneys' fees.

Ziani HOA v. Brookfield Ziani LLC (December 22, 2015). Condominium owners can intervene in a lawsuit brought by their association over construction defects once they learn that their interests in the litigation are not being adequately represented.

Lee v. Silviera (December 5, 2016). A board member’s vote at a board meeting constitutes as protected activity under section (e)(3) of the anti-SLAPP statute. (Cal. Rules of Court, rule 8.1105(c)(1).)

Castillo Condominium Association v. HUD (2016) 821 F.3d 92. Homeowner Giménez suffered from chronic depression and anxiety, which were alleviated by his emotional support dog. The association had a prohibition against pets and demanded Gimenez get rid of his dog. Giménez informed the board of his need for an emotional support animal and requested reasonable accommodation. When the association refused, Gimenez sold is home and moved. He also filed a Fair Housing claim. The judge ruled that (i) Giménez had a disability, (ii) the association failed to engage in an interactive process with Gimenez to discuss possible reasonable accommodations, and (iii) improperly denied Giménez’s request for reasonable accommodation. Gimenez was awarded emotional distress damages of $20,000, and the association fined $16,000.

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.

Boswell v. The Retreat Community Assn (July 11, 2016). The association's president engaged in behavior against a resident (Boswell) that included publicly disparaging the resident, improperly towing his guest's car and then falsifying evidence when the association was sued by the car's owner, sitting outside his house with a camera or video camera, refusing to allow repairs, and a number of other improper actions. Boswell sued the association and its president for intentional infliction of emotional stress for 19 separate incidents. The trial court dismissed the action when the association filed an anti-SLAPP motion. The court of appeal reversed stating while the president and the association could engage in free speech, they could still be sued for intentionally inflicting emotion distress.

Murphy v. Anaheim Hills Planned Community Association, (January 14, 2016). A master association election was voided by the court because voting delegates were not properly elected by their subassociations. All persons claiming to be delegates must be properly selected and have proper credentials.

SUPERIOR COURT CASES

Superior court cases are not binding precedent. However, they are sometimes valuable to see how courts might view particular issues.

Vera v. Verano at Talega HOA (Orange County). Alexander Vera, 17, was a guest of a renter at the HOA. He and several high school friends consumed alcohol for several hours and around 10 p.m. decided to go swimming at the HOA pool. After spending 20 minutes in the spa, Vera got up from the spa, ran over to, and jumped into the shallow end of the pool. There were no lights on in the pool or the pool deck. Vera suffered cervical fractures and a compressed spinal cord causing him to become a tetraplegic. The board and property manager were aware of frequent access to the pool after the lights around the pool were out. The association's patrol company made recommendations regarding changes that would prevent access to the pool when unlit. The recommendations were never implemented by the association. The association settled the case by paying Vera $3 million.

Acqua Vista HOA v. Rena Marrocco (San Diego). Defendants rented out their condominium for short-term rentals in violation of the CC&Rs. The HOA sued to stop the rentals and the defendant cross-claimed for discrimination and breach of fiduciary duties. After a three-day trial, the jury deliberated for 1.5 hours and found the defendant had violated the CC&Rs and found the association had not discriminated in its enforcement.

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