Retroactive Rent Restrictions
Adams Stirling PLC
  California's Leader in Community Association LawNovember 15, 2020

QUESTION: Regarding AB 3182, are owners who purchased into an HOA prior to the new law coming into effect subject to the same regulations or does the law only apply to new owners after January 1, 2021? We currently have no rules and limited CC&R requirements for rentals. The board plans to establish regulations allowed by law but are unclear to whom they will apply. -Paul B.

RESPONSE: There are three scenarios to consider. The first is where the association does not have a rental cap and wants to add one. In that case, section 4740 of the Civil Code applies and the newly adopted restriction will only apply to owners who purchase after the restriction is recorded.

The second scenario is where the association has had existing rental restrictions that were adopted prior to January 1, 2012. If the cap is more restrictive than 25%, such as 10%, 15% or 20%, the board can adjust it to 25% to conform to new rental requirements and it applies to everyone.

The third scenario is if the existing rental cap is more restrictive than 25% but was adopted after January 1, 2012. Since the existing cap only applies to owners who purchased after the cap was adopted, any adjustments to the cap would only apply to those owners. Those homeowners who bought prior to the rental cap would not be subject to the revised cap.

RECOMMENDATION: Boards should work with legal counsel as they amend their documents to conform to the statute — or adopt new rental restrictions.


QUESTION: Under SB 326, what percentage of decks must be inspected? -Carl B.

There is no fixed percentage. As required by statute, the number of elevated structures (balconies, decks, stairwells and walkways) inspected must be sufficient to reach a 95% confidence level for the inspector. (Civ. Code §5551(a)(4).) The number will vary depending on the condition of the project and the person performing the inspection (an architect or structural engineer). (Civ. Code §5551(b)(1).)

RECOMMENDATION: I will be speaking on this topic with Robert Grosse of the Bergeman Group (construction management) and Sean Kargari, RS, of Association Reserves, at an annual event put on by HOA Organizers. It's a free event for board members and will be held on December 5. I will post sign-up information once I receive it.

Expense Reimbursements. Can a board member submit for mileage reimbursement? We have a director who goes to Home Depot often for materials for repairs around the park. –Lohree B.

RESPONSE: Yes, he can be reimbursed. Payment of mileage or other reimbursement expenses to a director is allowed by law and does not affect the person's status as a volunteer. (Corp. Code §7231.5(b); Civ. Code §5800(b).)

Balanced Budget. Is there a requirement under California law for an HOA to approve an annual budget that is balanced (where revenues equal expenses)? Can the board approve a budget with a surplus or deficit? -Jim M.

RESPONSE: Associations are required to prepare budgets annually and do so on an accrual basis. (Civ. Code §5300.) Nowhere in the Davis-Stirling Act does it require that a budget be balanced. However, this is where taxes come into play, as discussed in earlier newsletters. Associations are nonprofit organizations and should not end the year with a profit (excess income). If they do and plan to file Tax Form 1120, an excess income resolution needs to be approved so the monies can be rolled into next year's budget.

Election Laws. Am I, as a board member, violating anything by revealing to the homeowners the details of the new election laws, including those regarding inspectors? –Lily C.

RESPONSE: If you discuss your understanding of the laws' requirements, you won't go to jail. If, however, you start giving legal advice, you would be practicing law without a license. If members rely on your advice and things go awry, lawsuits might be filed. Whenever statutory requirements are unclear, it's always safer to say, "Let's check with legal counsel." It satisfies the Business Judgment Rule and protects you from potential liability.

Non-Member Appointments. If SB 323 disqualifies a non-member from being nominated, can the board appoint a non-member to fill a vacancy by a resigning board member? -Terri M.

RESPONSE: Yes. One of the many inconsistencies in SB 323 deals with director qualifications. The poorly-drafted bill states: "An association shall disqualify a person from a nomination as a candidate for not being a member of the association at the time of the nomination. (Civ. Code 5105(b).) You will notice, the requirement only applies to candidates at the time they are nominated. The statute does not restrict associations from appointing non-members to vacant seats.

Nevada Office? With Rob Ward joining your staff, will we start to see some commentary regarding Nevada and our NRS 1116 issues? I use as much as I can from the California information, but we are a bit different over here. –Terril R.

RESPONSE: We've had many requests over the years to open an office in Nevada, but the workload in California has always kept us anchored here. A large number of new clients have been added to the firm and Rob Ward will be working with many of them. However, if the right attorney came along, we might consider expanding into Nevada.

Sewer Lateral Inspections. In regard to sewer laterals, Marin County has a similar ordinance. –Ann V.

RESPONSE: Even if not required by ordinance, all associations should inspect their lateral lines. Lines are sometimes improperly installed by the developer (a construction defect). Even if properly installed, tree roots can be invasive, soils can shift and damage lines, etc. As the court of appeals noted in the Affan case, boards can't just snake lines, they have a duty to inspect them when problems become apparent. A plumber can run a camera down the lines for a modest price and record the condition of the lines. 

Roof Leak. Our HOA learned that negligence can include deferred maintenance, so that if the roof was due to be replaced, the leak could be considered "negligence" for purposes of assigning responsibility. Another reason why maintenance is so important in an HOA. -Paul Y.

RESPONSE: Yes, failure to properly maintain roofs can be deemed negligence on the part of the association, which can make it liable for damage in a unit.

Kickback Rumors. Thank you for warning about being careful when there are rumors of kickbacks. We had a retired general contractor on our board whose advice and guidance were invaluable. He never received a penny for his pro-bono help. A couple of people started a false rumor that he was receiving kickbacks. The damage to his reputation was needlessly hurtful. –Elaine J.

NEWSLETTERS. Readers can find current year and prior year newsletters posted here. Older newsletters are not posted since the information they contain can change over time with new statutes and case law. The website itself is kept updated with current information which can be found via the "Index" or through our website's "Google Search."

Federal Update. The CDC issued Thanksgiving guidelines and also issued holiday celebration and small gathering guidelines.

Statewide Update. The state issued a November 13, 2020 Travel Advisory for those traveling from out of state/country for non-essential purposes should self-quarantine for 14 days. California residents traveling for non-essential purposes should stay local.

The following Counties updated their tiers: Amador (Orange Tier to Red); Contra Costa (Orange Tier to Red); El Dorado (Orange Tier to Red); Modoc (Yellow Tier to Orange); Placer (Orange Tier to Red); Sacramento (Red Tier to Purple); Santa Cruz (Orange Tier to Red); Siskiyou (Yellow Tier to Orange); Stanislaus (Red Tier to Purple); Trinity (Yellow Tier to Orange).

NorCal Counties. Alameda County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. Alameda issued a November 12, 2020 Press Release pausing further openings due to an increase in cases.

Butte County issued a November 10, 2020 Press Release indicating that the County was trending towards the Red Tier and urging people to exercise caution to prevent this.

Contra Costa County changed to the Red Tier. The County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. The County issued a November 10, 2020 Press Release related to the switch to the Red Tier which reinforces the changes in openings the County made last week. It issued a November 13, 2020 order as a result of the increased cases which imposes additional restrictions on high-risk business sectors. The order, effective November 17, bans indoor dining, prohibits concessions at theaters and requires face masks, and bans indoor fitness centers and gyms.

El Dorado County moved to the Red Tier. The County issued a November 10, 2020 Press Release indicating that they have started the state’s adjudication process to remain in the Orange Tier. The Health Officer indicated that until the state rules on the adjudication, the County remains in the Orange.

Madera County published the CDC’s guidance for celebrating Thanksgiving.

Marin County issued November 12, 2020 recommendations to reduce indoor dining capacity to 25%; reduce theater capacity to 25% and close concessions; and reduce capacity of indoor faith-based and cultural ceremonies to 25%.

Mendocino County has revised their Quarantine Order and Isolation Order. Mendocino also issued November 12, 2020 Reopening K-12 School Opening Guidance.

Mono County issued a November 9, 2020 Press Release indicating that they have started the adjudication process to remain in the Orange tier as the outbreak at the Marine Corps base is being contained and would not be addressed by changing the County’s tier and impacting the County’s economy.

Monterey County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. The County issued a November 10, 2020 Press Release indicating that the County’s adjudication request to the state to change tiers was denied.

Nevada County issued a November 10, 2020 Press Release indicating that the County is at risk for moving to the Red Tier and indicating the changes that would bring.

Placer County has moved to the Red Tier, and therefore businesses and activities must change accordingly pursuant to the State's Blueprint.

Sacramento County has moved to the Purple Tier and issued a November 10, 2020 Press Release related to the change. The County issued a new order on November 13, 2020 to align with the Purple Tier restrictions.

San Francisco County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. The County issued a November 10, 2020 Press Release indicating that due to an increase in cases, the County is halting indoor dining, halting the opening of high schools that are not already open with approved plans, reducing capacity at fitness centers and movie theaters to 25% capacity or 50 people (whichever is smaller).

San Mateo County issued Recommendations for Safer Holidays and Recommendations for Safe Travel.

Santa Clara County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. The County issued a November 9, 2020 Press Release urging strict adherence to safety protocols due to an increase in cases.

Santa Cruz County has moved to the Red Tier. The County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling. The County also issued a November 10, 2020 Press Release regarding the change to the red tier and the impact this has on businesses and activities.

Shasta County issued Guidance for Safer Holidays.

Solano County urged residents to take caution, as they are at risk for moving to the Red Tier. The County also issued Holiday Safety Guidance.

Sonoma County issued a November 9, 2020 Press Release along with the other Bay Area Counties with recommendations for safe holidays and traveling.

Stanislaus County has moved to the Purple Tier.

Tehama County issued updated Business FAQs.

Yolo County issued November 9, 2020 Holiday Guidance. The County issued a November 10, 2020 Press Release urging residents to follow health directives to avoid a move to the Purple Tier.

SoCal Counties. Kern County is at risk of falling back to Purple Tier.

Los Angeles County updated its golf course protocols, to allow two different households in a golf cart, as long as there is a protective partition between the individuals; otherwise, the golf cart must be a single rider or used by members of same household. It also updated protocols for Gyms and Fitness centers, to allow for individual use of indoor restrooms when using outdoor gym facilities. Use of indoor showers, changing rooms and lockers is still prohibited. Updated protocols for office worksites. A maximum of 15 people is permitted for in-person meetings for essential office-based businesses. The County remains in Purple Tier at least four weeks as cases increase.

Orange County is expected to fall back to Purple Tier next week if cases continue to rise.

Riverside County is expected to remain Purple as cases increase.

San Bernardino County is expected to stay in the Purple Tier as cases increase.

San Diego County fell back to Purple; restrictions start 11/14. List of what is open and closed.

Santa Barbara County issued an amended Health Order effective 11/14/20 and which expires December 13, 2020. The amended Order prohibits gatherings from different households indoors and outdoors unless an exemption applies. The Health Order is more restrictive than the State’s guidance on gatherings.

Ventura County is at risk of falling back to Purple Tier.

READING THE CHART. Because the chart is large and the text small, you can easily make it larger for viewing by holding down the "Ctrl" key on the left side of your keyboard and then using your finger to scroll forward or backwards with the wheel on your mouse. You will see the text grow larger or smaller as you move the wheel. For a list of County restrictions and links to health department orders, see County Chart 11-13-20. The chart is also posted on our website.

Boards can contact us for friendly,
professional advice.

Adrian J. Adams, Esq.
Founder & Managing Partner

DISCLAIMER. Our newsletter provides commentary based on sketchy information we receive from readers. From time to time, we add a little humor. Some find it amusing. Others are appalled. Some readers are excited when they score free legal advice. Not so. Our newsletter provides commentary only, not legal advice. You need to pay real money for an attorney to review all the facts and give you a legal opinion. We do that too, but you have to hire us. It's okay, we're friendly. Keep in mind we are corporate counsel to California associations only. Ask us for a proposal to represent your association.

Contact us to amend your governing documents to comply with rent restrictions required by AB 3182.

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