Tag Archives: HOA

Landlord & Tenant Law, Real Estate

HOA Can Regulate Short Term Rentals

The California Court of Appeal recently found that a HOA can adopt reasonable rules and impose fees related to short term rentals of condominium units. Watts v. Oak Shores Community Association provides some guidance on an expanding area for landlords and property owners as to the proliferation of short term rentals, particularly in high demand vacation spots.

Oak Shores is a single family common interest development governed by a board of directors and regulated by its Covenants, Conditions, and Restrictions (CC&Rs). Oak Shores regulated short term rentals by prohibiting any rental period less than seven days, charging a $325 fee on homeowners who rent their units, prohibiting the number of automobiles, boats, and other watercraft that renters could bring into Oak Shores, and charging a mandatory garbage collection fee, boat and watercraft fees, building permit fees, and property transfer fees.

Oak Shores prohibited any homeowner from renting their property for less than seven days because various Board members and staff testified that short term renters brought a number of issues, including parking, noise and use violations, a lack of knowledge of the rules of the HOA and abuse of the facilities. The HOA also found that short term rents caused more issues and were more disruptive than other long term residents.

The $325 fee was charged to homeowners who rented their homes on a short term or long term basis; however, fees for watercraft use were only charged to short term rentals. The HOA testified that short term renters were only 8% of people entering the HOA but brought in 37% of the boats.

The trial court agreed with the HOA that it could reasonably restrict short term rentals. The Court of Appeals agreed because the HOA had reasonably restricted short term rentals by studying the use of facilities by short term renters. The Court of Appeals also found that the $325 fee charged to homeowners who rented their homes was reasonable in light of Civil Code Section 1366.1, which requires a reasonably close relationship between the contested fee and and the cost it is intended to offset.

This case has important implications for HOAs looking to regulate short term rentals and homeowners looking to rent their units on a short term basis. Please contact Attorney Anthony Marinaccio at 818-839-5220 for more information.

Real Estate

Commercial and Industrial Common Interest Developments Treated Differently From Residential Developments

Recently, the California Legislature enacted SB 752, entitled “Commercial and Industrial Common Interest Developments.” Effective January 1, 2014, commercial and industrial common interest developments are treated differently from residential CIDs. Prior to 2014, commercial and industrial CIDs were treated the same as residential CIDs under the Davis-Stirling Act. Although many of the provisions in the Commercial and Industrial Common Interest Development Act (Civil Code Section 6580, et seq.) are similar to those found in the Davis-Stirling Act, there are some significant changes that are tailored to commercial and industrial developments.

Who Does it Apply to? 

The Commercial and Industrial Common Interest Development Act (the “Act”) applies to a common interest development that is limited to commercial and/or industrial uses by law or recorded CC&Rs. If a common interest development includes both commercial and residential uses, the Davis-Stirling Act would still apply. It would apply to commercial or industrial common interest developments going forward even if they were formed prior to 2014.

What are Some of the Changes? 

Under the Act, many of the disclosures required under the Davis-Stirling Act have been removed. For example, there is no requirement for a commercial common interest development to provide disclosures of a budget or financial documents to members or prospective purchasers of a unit.

Further, owners within a commercial common interest development do not have the statutory right to request alternative dispute resolution if a dispute arises under the common interest development’s governing documents.

The law addressing amendments to the CC&Rs has also changed. A commercial or industrial common interest development cannot seek a court order allowing a majority of voters to approve an issue when a super majority is required, although it would be allowed to do so if it were a residential common interest development. However, most of the provisions regarding amending the governing documents are similar to those found in the Davis-Stirling Act.

Commercial or industrial common interest developments are also not required to follow the Open Meeting Act (Civil Code Section 1363.05) although an open meeting is still required to make amendments to the governing documents.  Further, certain provisions of the Corporations Code still apply to meetings held by a commercial or industrial common interest development.

Liability insurance requirements have also grown. A development with 100 or fewer units must maintain at least 2 million dollars in liability insurance, while a development with over 100 units must maintain at least 3 million dollars in liability insurance.

What About Old Governing Documents or Prior Acts? 

Commercial or industrial common interest developments would still be regulated by their governing documents; however, many governing documents will contain language that would be required under the new Act. The Act does not invalidate any developments’ actions taken prior to 2014. In order to update governing documents to applicable law by referencing new statutes, a common interest development is allowed to revise its CC&Rs to make correct references to the Act and public law without approval by members.

For commercial or industrial common interest developments, it may be wise to review governing documents to determine if any revisions are necessary under the Act. Because the Act is less demanding than the Davis-Stirling Act, a commercial or industrial common interest development may also want to remove certain provisions in their CC&Rs that would not be required under the Act.

 

 

 

Real Estate

HOA Board Has Authority to Limit Rules for the Election of Directors

areas-of-practice

Recently, a California court found that a HOA (also known as a homeowner’s association) has the authority to adopt election rules for the election of directors when the rule is reasonable and does not conflict with the HOA’s governing documents. This is an important decision that establishes how HOAs can govern elections. A copy of Friars Village Homeowners Association v. Hansing can be found here.

Charles Hansing (“Plaintiff”) sued his HOA, the Friars Village Homeowners Association (“Friars Village”) after he attempted to run for the board of directors of Friars Village. Friars Village is a HOA governed by the Davis-Stirling Common Interest Development Act and operates under amended articles of incorporation and bylaws. The Friars Village Board of Directors (“HOA Board”) also adopted a rule that prohibited someone from running for a member on the HOA Board if they were related to a current director by blood or marriage, also known as the Relationship Rule by the Court. The Relationship Rule was not in the by laws or articles of incorporation.

Plaintiff challenged the rule because his wife was currently a member on the HOA Board. Plaintiff sued after the HOA Board denied him from running to be on the HOA Board. The trial court upheld Friar Village’s Relationship Rule, and Plaintiff appealed. 

The Court found that the Relationship Rule was reasonable because it was based upon the HOA Board’s desire to prevent a voting bloc by having two members of the HOA Board from the same family. The Court also found that the Relationship Rule was consistent with Friar’s Village governing documents. The Court further rejected the proposition that the Relationship Rule prohibited the Plaintiff from nominating himself, which was allowed under Friar Village’s articles of incorporation and by laws. 

Friars Village Homeowners Association establishes that a HOA can adopt its own election rules setting forth additional requirements or qualifications that are not stated in the HOA’s by laws or articles of incorporation as long as the rules are consistent with the HOA’s governing documents and are reasonable. Although the  Court’s decision was based upon a review of the HOA’s governing documents and the specific election rule, other HOAs would be able to follow the Court’s reasoning in creating their own election rules.

 

 

Real Estate

Homeowners’s Association is Required to Take Partial Payments to Reduce Delinquent Assessments

Recently, a California court determined that a homeowners’ association governed by the Davis-Stirling Act to accept and apply partial payments to reduce delinquent assessments owed but not other amounts due, such as late fees, attorneys’ fees, interest, and costs. This case is important since it is one of the first cases to decide whether or not a homeowner’s association can accept partial payments. A copy of Huntington Continental Town House Association, Inc. v. The JM Trust can be found here.

Homeowners owned real property within the Huntington Continental Town House Association (the “Homeowner’s Association”) in Huntington Beach, California. From 2003 to 2009, Defendants paid the monthly assessments issued by the Homeowner’s Association on time. Defendants failed to pay the monthly assessment on April 1, 2009 and started to stop paying the monthly assessment. On October 23, 2010, the Homeowner’s Association sent Defendants a notifying them that they were delinquent $3,864.96. The Homeowner’s Association received no response, and recorded a lien on the property.

The Homeowner’s Association then passed a resolution authorizing the Homeowner’s Association to foreclose on the delinquent assessment lien. After providing notice to the Homeowners, a Complaint was filed on April 13, 2011 to foreclose on the lien and for additional damages.

In May 2011, after receiving an itemized statement of damages, Defendant sent a check for $2,000 along with a request to stop the foreclosure. Homeowners agreed to a monthly payment to pay all damages and delinquent assessment. Homeowners made two additional payments of $1,500 each.

On October 17, 2011, Homeowners were notified that they failed to make two monthly payments and that the agreement to stop the foreclosure would be cancelled. In November and December 2011, Homeowners paid the regular monthly assessment of $188. The Homeowners’ Association returned the checks because it stated it was unable to receive partial payments for the amount due. In January 2012, Homeowners attempted to pay $3,500 to the Homeowner’s Association, but again the Homeowner’s Association refused saying it was not allowed to receive partial payments.

The trial court granted the foreclosure and damages of $5,715.93 against Homeowners. Homeowners appealed the decision.

On appeal, the Court found that there is nothing to bar a homeowner’s association from receiving partial payments. Civil Code Section 1367.1 provides a list of accounts to be paid first if a homeowner’s association receives a partial payment thus contemplating partial payments.

The Court broadened the language of Section 1367.1 to include the time after litigation has commenced. As a result, if a homeowner attempts to tender a partial payment to pay a delinquent assessment, a HOA must accept it.

This case provides guidance for homeowners that are delinquent on homeowners’ association dues and for HOAs looking to to foreclose on delinquent assessment liens.

On a personal note, I lived in the Huntington Continental Town Houses during law school. Great place to live.

If you have a dispute involving a HOA, please contact Attorney Anthony Marinaccio at (818) 839-5220 for a free initial consultation.