Commercial and Industrial Common Interest Developments ("Commercial CIDs") in California have historically been governed by the same provisions that apply to planned residential developments and condominiums: the Davis-Stirling Common Interest Development Act ("Davis-Stirling"). However, some of those provisions have resulted in unnecessary burdens and requirements for Commercial CIDs that were really tailored to provide consumer protections for homeowners in residential settings (i.e., open meeting, election and disclosure requirements).

In light of this issue, on September 6, 2013, the California Legislature passed SB 752: the Commercial and Industrial Common Interest Development Act.  SB 752 mirrors many of the provisions contained in Davis-Stirling, but omits some of the requirements that were geared toward residential homeowners...

Click here to continue reading our blog post entitled: 

"SB: 752: Commercial & Industrial CID Act Signed into Law"

HOAs have been traditionally required to formally amend their Bylaws in order to establish, clarify or expand qualifications for members seeking to serve on the HOA's Board of Directors. This generally requires the approval of the membership and a formal vote which, as many Boards and industry professionals understand, often acts as a significant hurdle to achieving the HOA's goals.

However, as a result of Friars Village Homeowners Association v. Hansing (2013) ("Friars Village"), it appears that a less onerous mechanism for enacting new director qualifications may now be available. Friars Village dealt with a lawsuit brought by a HOA member challenging the validity of an HOA election rule that prevented any member from seeking a position on the Board if that member was related by blood or marriage to any current Board member or other candidate for the Board.  The Court ultimately ruled for the HOA, finding that the election rule was both reasonable and rationally related to the proper conduct and business affairs of the HOA.  This decision may establish a basis for adopting director qualifications through the implementation of reasonable election rules rather than through formal amendments to the Bylaws. 

 For more information on Friars Village, click here to read our blog post entitled: 

"Court Upholds Use of HOA Election Rules for Director Qualifications"

One issue that surfaces from time to time deals with the extent to which a HOA is required to allow a member to attend a Board meeting with her attorney, or to allow a member's attorney or agent to attend the Board meeting on the member's behalf. This issue may be complicated further if the owner of a property (the "member" under the HOA's governing documents) is an entity (i.e., a business organization or a family trust). 

The recent case of SB Liberty, LLC v. Isla Verde Association (2013) ("SB Liberty") will help resolve this issue and will provide valuable guidance for HOAs moving forward.  Using a combined analysis of pertinent Civil Code provisiosn and the definition of "member" set forth in the HOA's governing documents, the Court in SB Liberty held that the right to attend and participate in Board meetings doe not extend to attorneys, designated representatives, or any other party other than the "owner" of the property.  The Court went on to clarify who may attend Board meetings where an entity, such as an LLC, is the "owner" of a property within a HOA. 

For more information on SB Liberty, click here to read our blog post entitled: 

"Who is Entitled to Attend Board Meetings on an Owner's Behalf?"

HOA Boards are always looking for ways in which they can educate the members on the Board's position and the reasons why the Board believes that the membership should vote a particular way in an upcoming election.  HOA Boards may therefore seek to utilize media outlets such as the HOA's website and newsletters, as well as posting notices in HOA common areas, in an effort to garnish member support for the Board's position. However, when such "advocacy" efforts are made as part of an election campaign, the Civil Code requires the HOA to provide equal access to its media outlets and common areas to all members who may be advocating opposing points of view. 

This was the issue in the case of Wittenberg v. Beachwalk Homeowners Association (2013) ("Wittenberg"), where the Court held that a HOA's election results could be invalidated based upon the fact that the HOA Board had failed its duty to provide homeowners with the type of equal access contemplated by the Civil Code.  Wittenberg involved issues concerning the Board's use of the HOA website and newsletter for "advocacy" purposes, as well as the HOA's refusal allow a homeowner to utilize common areas, free of charge, for holding a membership rally relating to the upcoming election. 

For more information on Wittenberg, click here to read our blog post entitled: 

"Equal Access to HOA Media Outlets During Election Campaigns"

Because the assessment collection methods sanctioned under a HOA's governing documents and California law can result in the foreclosure of a delinquent homeowner's property, it is paramount that HOAs strictly comply with the statutory procedures and requirements applicable to assessment collection (i.e., transmittal of notices, dispute resolution procedures, votes to initiate foreclosure, etc.).

The case of Diamond v. Casa Del Valle Homeowners Association (2013) ("Diamond") illustrates how failing to comply with those procedures and requirements can result not only in the invalidation of a HOA's assessment lien, but also an award of attorney's fees and costs to the delinquent homeowner.  The issues in Diamond involved errors with the notice of assessment lien, the notice of the right to request ADR, the Board vote to foreclose on the lien, and the notice of the Board's decision to foreclose. 

 For more information on Diamond, click here to read our blog post entitled: 

"HOA Collection Procedures: Strict Compliance Required" 

The Diamond case (above), underscores the necessity for a HOA to strictly comply with the statutory procedures and requirements pertaining to assessment collection.  The case of Multani v. Witkin & Neal (2013) ("Multani") similarly involved allegations of procedural defects by a HOA's collection agent.  However, the Court's ruling in Multani is significant in that it addresses the statutory, ninety (90) day "right of redemption" afforded to a homeowner that may have lost ownership of his unit through nonjudicial foreclosure of a delinquent assessment lien. 

The "right of redemption" allows for the delinquent (foreclosed) homeowner to "redeem" (to reinstate his ownership of) the unit within ninety (90) days following the nonjudicial foreclosure sale by paying the "redemption price" in accordance with Ca. Code of Civ. Proc. Sec. 729.060.  One significant issue in Multani was the HOA's failure to demonstrate that it had provided the foreclosed homeowner with requisite notice of his redemption rights once the nonjudicial foreclosure sale had completed.  

 For more information on Multani, click here to read our blog post entitled: 

"Redemption Rights after HOA Nonjudicial Foreclosure"

The holding in San Miguel Community Association v. State Farm General Ins. Co. (2013) ("San Miguel") illustrates the importance of understanding the scope and limitations of the coverages afforded to a HOA under its insurance policies. In San Miguel, two homeowners sought to force the HOA to take action to curb ongoing parking violations within the community. After the HOA refused to take action, the homeowners demanded the HOA's participation in mediation, thereby prompting the HOA to tender the matter to its insurance carrier, State Farm. In responding to the HOA, State Farm noted that the claims brought by the homeowners did not seek the recovery of monetary damages, and were therefore insufficient to trigger State Farm's obligation to defend the HOA or to reimburse the HOA for its defense costs.  

After mediation failed and the homeowners filed a lawsuit against the HOA, the HOA renewed its attempt to tender the dispute to State Farm. However, State Farm once again denied defense coverage on the basis that the suit did not involve a claim for monetary damages, and therefore failed to "seek damages that would be covered under the policy" purchased by the HOA.  The HOA then brought suit against State Farm, arguing unsuccessfully that State Farm's defense obligations were triggered by the fact that the homeowner's claims implied that monetary damages would be sought. The court ultimately ruled in favor of State Farm, holding that, pursuant to the terms of the HOA's insurance policy, State Farm was under no obligation to provide defense coverage until the claim for damages was formally brought by the homeowners. 

For more information on San Miguel, click here to read our blog post entitled:  

"No Duty of HOA Insurance Carrier to Defend Non-Monetary Claims"

Attorneys' fees incurred by a HOA in participating in Alternative Dispute Resolution ("ADR") with a homeowner have been traditionally viewed as fees which can not be recovered from the homeowner if the HOA prevails. This is because ADR has not been formally classified as an "action" to enforce the governing documents within the meaning of Civil Code Sec. 5975. 

However, as a result of the ruling in Grossman v. Park Fort Washington Association (2012) ("Grossman"), a HOA may now recover its pre-litigation attorneys' fees (i.e., attorney's fees spent in ADR) if the dispute escalates to a lawsuit in which the HOA prevails.  

For more information on Grossman, click here to read our blog post entitled:  

"Recovering Pre-Litigation Attorneys' Fees in HOA Disputes"