2021 New Case Law and Legislation
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Please enjoy the following overview and consider how each of the below changes may affect your community association. If you believe that one of the new provisions affects your association adversely, just give us a free telephone call and we will do our very best to help you.
PART I
NEW LEGISLATION
A. AB 3182 – Overrides Traditional Rights to Impose Rental Restrictions
Background and Summary: Since 2012, associations could enact and enforce certain restrictions limiting rentals or leasing of separate interests within the development if such provisions were in effect prior to January 1, 2012. Under new Civil Code § 4741, associations may not adopt or enforce restrictions that prohibit or unreasonably restrict rentals or leasing of separate interests, accessory dwelling units (“ADUs”) or junior accessory dwelling units (“JADUs”). Associations may still prohibit rentals under thirty (30) days and limit rentals to 25% (or greater percentage) of separate interests in the development. When calculating this limitation on rentals: (i) ADUs and JADUs located at a separate interest are not counted towards a rental cap; and (ii) a separate interest is not counted as a rental if the owner lives either in their primary residence or in their ADU or JADU. Importantly, the new law also requires associations to amend their governing documents to conform to these new requirements no later than December 31, 2021. Community associations that ignore this amendment requirement are subject to a $1,000 fine, in addition to actual damages.
Board and Manager Takeaway: If your association’s CC&Rs or rules require leases be for a period greater than thirty (30) days, or require fewer than 25% of the residences be available for rental purposes, then you must immediately stop enforcing such provisions and amend your governing documents to be consistent with the new law. Associations will face civil penalties if they fail to amend non-conforming provisions by December 31, 2021. Obviously, the primary obstacle here is obtaining a homeowner vote if the restriction is in the CC&Rs. Legal practitioners are debating whether Boards may unilaterally amend without a membership vote. Options should be discussed with legal counsel as to the propriety and risk associated with amendment solely by Board action. Boards should also determine whether to affirmatively amend the governing documents to provide for a new lease minimum and/or rental cap where none currently exist – which will require a membership vote. At that time, discuss the “grandfathering” provisions in Civil Code § 4740(a) which prohibits project-wide rental bans, and § 4741(a) which prohibits only unreasonable restrictions which have “the effect of prohibiting, or unreasonably restricting the rental or leasing of any of the separate interests” and whether an existing or proposed rental restriction may be “unreasonable.”
Recommended Actions: Do not enforce rental restrictions that require leases be for a period greater than thirty (30) days, or require fewer than 25% of the residences be allowed for rental purposes. Next, have us review your governing documents for such restrictions. We will provide a written opinion as to the necessity of an amendment, and if so, we will prepare the amendment, and advise you if a membership vote need occur. The cost of this work will be far less than the penalty for having failed to comply.
B. SB 908 – New Licensing Requirements and Oversight for Debt Collectors
Background and Summary: Unsurprisingly, debt collection practices consistently remain a top consumer complaint. Using the Rosenthal Act and FDBPA as its foundation, SB 908 is intended to ensure greater consumer protection by adding a new layer of regulatory oversight over debt collectors and debt buyers who, though already subject to state law, are not currently subject to licensure. SB 908 enacts the Debt Collection Licensing Act (“DCLA”) establishing new licensing requirements applicable to debt collectors and debt buyers to be administered by the Department of Business Oversight (“DBO”) headed by the Commissioner of Business Oversight (Commissioner), effective January 1, 2022.
The DBO will have one year to establish minimum requirements and prohibitions for licensure, regulation and oversight of debt collectors by the Commissioner, define terms for purposes of the DCLA, prohibit practicing the business of debt collection in California without a license, require examination, reporting, application procedures and fees, licensing and other administrative fees, criminal background checks, and maintenance of surety bonds. The Commissioner will be authorized to enforce the DCLA through administrative remedies, including but not limited to, adopting regulations, performing investigations, suspending licenses, and issuing orders and claims for relief. Finally, SB 908 amends Civil Code Section 1788.11 to require debt collectors to provide their California debt collector license number during telephone calls upon the consumer’s request and display the license number in written or digital communications in at least 12-point font.
Board and Manager Takeaway: Community associations in California often engage management companies, law firms, and other third-party entities to provide debt collection services for delinquent assessments. We believe that law firms and management companies providing debt collection services as defined in the DCLA will not be exempt from the new licensing requirements.
Recommended Actions: Community Legal Advisors and Community Lien Services are undertaking these licensing procedures. Boards will need to review their debt collection service providers, if different from CLA, to ensure they meet the new licensing requirements and do not otherwise violate the DCLA. Community associations may be subject to the various penalties provided for in the DCLA (refunds, restitution, disgorgement, and payment of damages) on behalf of a person injured by the debt collector’s improper conduct or lack of license.
C. SB 1079 – Residential Property: Foreclosure Sales
Background and Summary: Existing law prescribes various requirements to be satisfied before the exercise of a power of sale under a mortgage or deed of trust and prescribes a procedure for the exercise of that power. Effective January 1, 2021, SB 1079 changes foreclosure procedures by requiring the notice of sale to contain specified notices to not only potential bidders, but to other third parties and entities as well, including tenants of the foreclosed property, persons who want to purchase as their primary residence, or certain non-profit organizations.
Sellers are required to receive offers from tenants and potential owner-occupiers, giving them a right of first refusal to purchase at the successful bidder’s price for forty-five (45) days after the foreclosure sale. If the property consists of several lots or parcels, each lot or parcel is to be sold separately unless the deed of trust provides otherwise. Thankfully, the bill also imposes fines and penalties for owners of properties who fail to maintain a vacant property after a foreclosure sale. Fines for violations range from $2,000-$5,000 per day.
Board and Manager Takeaway: SB 1079 applies to all loans secured by property containing 1 to 4 residential units, regardless of whether they are used for business or consumer purposes. The law went into effect on September 28, 2020 and extends through January 1, 2026. All notices of sales recorded must now contain special statutory language.
D. COVID Restrictions Now and In the Future
Background and Summary: Each week, the State of California audits the numbers of COVID-19 infections and hospitalizations within its counties as part of its Blueprint for a Safer Economy. Depending on the audit, a county’s numbers may result in a step back into higher restrictions, meaning that some community association amenities such as pools, spas, clubhouses, sports courts and gymnasiums which were previously opened must now be further restricted or closed altogether, while other amenities might be opened. Individual municipalities often have more restrictive requirements which need to be followed as well.
Board and Manager Takeaway: When and how amenities may be re-opened or must be closed can change on a weekly basis.
Recommended Actions: Boards should monitor whether the State has changed its restrictions and, if so, then review these health orders with legal counsel to ensure compliance both with the revised State-based restrictions and any municipal or local restrictions. Watch for our e-mail alerts frequently advising of these changes.
E. AB 685 – COVID-19: Imminent Hazard to Employees: Exposure: Notification: Serious Violations
Background and Summary: AB 685 requires employers to provide written notice to all employees if an employer receives notice of potential exposure to COVID-19 in the workplace. Notice must also be provided to employers of subcontracted employees who were on the premises at the same time as the employee who was diagnosed with COVID-19, ordered to isolate, or died of the virus. Employers must provide exposed employees with information about benefits to which the employee may be entitled including, but not limited to, workers’ compensation and COVID-19-related leave, including company sick leave, state-mandated leave, federal sick leave, as well as anti-retaliation and anti-discrimination protections available.
Board and Manager Takeaway: There are new COVID related employer disclosures which must be disseminated to employees. Also, previously protected employee rights to privacy have been revised to require immediate employer disclosure of an employee’s COVID infection to others who were near enough to be exposed.
Recommended Actions: If your association has onsite employees, contact our office to receive disclosures about benefits to which the employees are entitled including, but not limited to, workers’ compensation and COVID-19-related leave, company sick leave, state-mandated leave, federal sick leave, as well as anti-retaliation and anti-discrimination protections. If an employee advises your manager or the Board that they or another employee were or might have been exposed at the workplace, the association must provide written notice to all employees. Notice must also be provided to employers of subcontracted employees who were on the premises at the same time as the employee who was diagnosed with COVID-19, ordered to isolate, or died of the virus.
F. SB 1159 – Workers’ Compensation: COVID-19: Critical Workers.
Background and Summary: SB 1159 expands the definition of employee “injury” to include illness or death resulting from COVID-19 under specified circumstances until January 1, 2023. Employees must exhaust their paid sick leave benefits and meet specified certification requirements before receiving any temporary disability benefits, or, for specified employers, police officers and firefighters, a leave of absence. “Place of employment” does not include an employee’s residence; however, coverage will apply for employees who leave their homes to perform work on behalf of an employer. Employers with five (5) or more employees are required to report all known employee positive tests to their workers’ compensation claims administrator.
Board and Manager Takeaway: Workers’ compensation coverage for COVID-19 illness is expanded for employees who leave their homes to perform work. This applies even if the employee is not claiming workplace exposure. If an employee claims they contracted the virus while performing their job, the new law creates a rebuttable presumption the employee contracted it at work. The burden is on the employer to prove otherwise.
Recommended Actions: If your association has onsite employees, Boards and managers will need to be aware of these new workers’ compensation requirements, the scope of application, and the claims process should a claim be made by an employee who contracts the virus.
PART II
NEW CASELAW
A. Bennett v. Cielo Homeowners Assn., Case No.: 19-CV-2131-WQH-BLM (USDC, So. Dist., CA).
Background and Summary: Plaintiffs Pamela and James Bennett sued the Cielo Homeowners Association (“Association”) and the Association’s legal counsel in Federal Court alleging fraud and violations of the Fair Debt Collections Practices Act (“FDCPA”). The Federal lawsuit was the culmination of allegations arising from a state court lawsuit brought by the Association against Pamela Bennett for judicial foreclosure and breach of covenant from delinquent assessments. Default was entered against the Defendants Association and law firm for failure to respond to Plaintiffs’ First Amended Complaint (“FAC”). Defendants filed motions to dismiss the FAC and to set aside the default. The Court dismissed Plaintiffs’ FDCPA claims for failure to state facts sufficient to support a reasonable inference that Defendant Cielo is a debt collector under the FDCPA and that Defendants’ conduct constitutes a violation of the FDCPA. The Court also held that the Association could not be vicariously liable for alleged FDCPA violations of its attorneys since both parties would need to be debt collectors. The Court dismissed the FAC without prejudice and with leave to file a motion for leave to amend.
Board and Manager Takeaway: This case is still working its way through the court system as Plaintiffs were given leave to amend their FAC, and did so. We will keep our eye on the outcome in 2021. With the new debt collection licensing procedures going into effect on January 1, 2022, community associations and their law firms and third-party collection services will need to ensure that they are properly licensed as required. Further, the Association in this case may not have received a favorable ruling of non-liability for alleged FDCPA violations and for not being deemed a debt collector under the new debt collection licensing laws.
B. Coley v. Eskaton, 51 Cal. App. 5th 943 (2020)
Background and Summary: Eskaton, Eskaton Village Grass Valley (Eskaton Village), and Eskaton Properties Inc. (“Eskaton”) are related corporations that develop and support common interest developments for older adults in Northern California. Ronald F. Coley (“Coley”) owns a home in the Eskaton Village development. Coley sued Eskaton Village’s homeowners association, two of the directors on the association’s board, and the directors’ employers, Eskaton, alleging a breach of fiduciary duty cause of action due to these directors running the association for the benefit of the Eskaton entities rather than the association and its members. The association’s attorneys advised the association during the course of the litigation. One of the directors shared this information with his counsel and Eskaton’s counsel.
Under California corporate law, corporate directors acting under a conflict of interest cannot obtain the benefit of the business judgment rule. A director who votes on a measure when he has a conflict of interest bears the burden of showing that the measure or the transaction was just and reasonable to the corporation, considering only the corporation’s interests. Some of the directors of the Eskaton Village association worked for the Eskaton developer entities that owned units in the association. One of the issues raised by Coley was the allocation of expenses between the developer owned units and privately owned units. On that issue, the Eskaton directors had a conflict of interest and failed to show that the allocation of expenses was fair and just. The Court affirmed the lower court’s finding that the Eskaton directors breached their fiduciary duties, and that the Eskaton directors are individually liable for that breach of fiduciary duty, as well as their employer, Eskaton. In revealing to the Eskaton developer attorney-client privileged communications, the Eskaton directors also breached their fiduciary duty to the association. The Court did, however, find that the trial court erred in awarding Coley all his legal fees in the entire case based on that breach of duty since the attorney-client privilege issue was a minor issue in the case.
Board and Manager Takeaway: Directors acting with a material conflict of interest are not protected from personal liability by the business judgment rule. Where a director is incentivized to act on his or her personal interest to the detriment of the corporate entity, resulting in a material conflict of interest, the director can be found personally liable for various breaches of fiduciary duties.
C. Davis v. Echo Valley Condominium Association, 945 F.3d 483 (6th Cir. Dec. 19, 2019)
Background and Summary: Plaintiff Phyllis Davis suffered from asthma and claimed that her asthma was aggravated by the frequent smell of smoke from her neighbor’s condominium. In her lawsuit against the Echo Valley Condominium Association (“Association”), Davis alleged that the Aassociation’s refusal to ban smoking in the building discriminated against her under the Fair Housing Act (“FHA”) because of her health issues. The Association submitted a smoking ban amendment to the membership for approval, which was not approved. The district court ruled in favor of the Association’s motion for summary judgment stating that the ban would fundamentally change the Association’s smoking policy by prohibiting residents from engaging in lawful activity on their own property. The Appellate Court upheld, stating that Davis did not show that her request qualifies as a “reasonable accommodation” under the FHA, as that phrase “means a moderate adjustment to a challenged policy, not a fundamental change in the policy,” and that Davis’s desired smoking ban would be a fundamental change. The Appellate Court further stated that courts reject requested changes to policy that interfere with the rights of third parties, i.e., intrudes on the rights of other residents to smoke within their units.
Board and Manager Takeaway: A an association’s failure to obtain approval from its membership to implement a smoking ban will not be found to be a failure to offer a reasonable accommodation under the FHA.
D. Jeppson v. Ley (2020) 44 Cal App.5th 845.
Background and Summary: This case does not directly involve a community association. However, it does arise out of use of the “Nextdoor.com” social networking service for neighborhoods. In this case, Ley’s dog killed Jeppson’s cat, which led to a settlement agreement with a small payment and a non-disparagement agreement between the neighbors. Jeppson wanted a third neighbor, Cates, to trim Cates’ tree to improve Jeppson’s ocean view. Cates eventually obtained a restraining order on Jeppson that included a requirement to dispose of some guns. Ley then posted a message on Nextdoor.com about Jeppson. Jeppson sued Ley for breach of contract, defamation and intentional infliction of emotional distress. Ley filed an Anti-SLAPP motion that was denied by the trial court. The Appellate Court affirmed, holding the posting on Nextdoor.com was not considered a protected activity (defined generally as a written statement made in a public forum in connection with an issue of public interest). The Court determined that there was no public interest in the post on Nextdoor.com stating: “Despite the medium of the internet, the topic was not of widespread public interest. There is no issue of public interest when the speaker’s words are merely an effort to gather ammunition for another round in the speaker’s neighborhood wrangle.”
Board and Manager Takeaway: The Court found that postings on Nextdoor.com reach a smaller audience than postings “on the internet” as the posts are generally limited to a particular neighborhood, taking them out of the “public interest.” Associations with member communication forums, such as an association website or portal, should review how communications are posted and monitored on the forum with their legal counsel. While in this case the Nextdoor.com posts were not considered a “public interest” despite reaching almost a thousand neighbors in the community, this may not be the case when an association or its directors and owners are communicating about matters of association interest, or where the association’s board appears to sanction or endorse the posted communications.
E. Third Laguna Hills Mutual v. Joslin, 49 Cal. App 5th (2020).
Background and Summary: The Association brought an enforcement lawsuit against owners Joslin and Michael Cohan for allowing unqualified (underage, non-senior) residents to live in their home located within a senior community and for nuisance violations. Joslin filed a cross-complaint against the Association claiming, among other things, that the Association unlawfully prevented him from renting his home. The Association filed an anti-SLAPP motion, claiming the cross-complaint was brought just because the Association initiated legal action and, therefore, was protected activity. The trial court denied the anti-SLAPP motion and the Appellate Court affirmed. The Appellate Court determined that the tort claims alleged in Joslin’s cross-complaint arose from the Association’s decisions and actions, not from the Association’s filing of the complaint or its oral or written communications to the owners. The Appellate Court also held that the dispute is a monetary dispute between the owners and the Association and not an issue of public interest under the anti-SLAPP statute, meaning that Joslin’s cross-complaint was based on legitimate allegations and not to “punish” the Association for filing its lawsuit.
Board and Manager Takeaway: In this case, the cross-complaint was not intended to “chill” the Association’s enforcement action against Joslin. Associations with their legal counsel will need to perform a cost-benefit analysis of any legal action proposed to be initiated for similar types of applications of the anti-SLAPP laws.
F. Paul v. Enhanced Recovery Company, LLC, Case No. 19-CV-4664(JMA)(AYS), USDC, Eastern District
Background and Summary: Plaintiff Alberto Paul received two letters from Enhanced Recovery Company, LLC, a debt collector concerning the same debt, about 40 days apart. The letters were identical, except for the dates and the amount of the settlement offers – the first contained an offer of $1,375.42, while the second offer was $1,277.17.
In addition to a validation notice required by the Fair Debt Collection Practices Act (“FDCPA”) and other state law disclosures, each letter contained four different addresses: (1) the signature line contained a correspondence address; (2) the enclosed payment slip contained an address for mailing payment, (3) as well as a different return address for the debt collector (with instructions not to send correspondence to that address); and (4) on the back of the letter was the corporate information for the debt collector, which included a physical address.
Plaintiff sued the debt collector alleging violations of the FDCPA, specifically Section 1692e (prohibiting false, deceptive, or misleading representations) and Section 1692g (requiring validation notices). Plaintiff claimed that because there were four addresses on each letter, it was unclear which address should be used to send payment and which should be used to send written disputes. Plaintiff further alleged that the validation period was unclear because both letters provided a thirty-day validation period. Plaintiff also claimed that the formatting of the letter, which placed the validation notice near the bottom of the page with a note to “see the reverse side of this letter for important notices concerning your rights,” would make a least sophisticated consumer think the preceding paragraph was “neither important not contained any rights.”
The debt collector filed a motion to dismiss all claims, which the court granted. As to the multiple validation periods, the Court explained that there is nothing in the FDCPA that prohibits a debt collector from extending the validation period beyond the statutorily required 30 days, and in that situation, a least sophisticated consumer would not find it “deceitful or false” if he were offered “additional time to exercise his right to obtain validation of the debt.” The Court also did not find the placement of the validation notice problematic, noting that a “least sophisticated consumer is expected to read the front page of the letter that clearly contains the validation notice.”
Finally, the Court did not find the inclusion of multiple addresses misleading because of the additional instructions or information that accompanied each address. For example, underneath one address, the letter read, “Send Correspondence to.” Under another, it stated, “Please do not send correspondence to this address.” Under another, it provided, “Our Corporate Information is.” Thus, “when reading the letters in their entirety,” the least sophisticated consumer “would understand that each address has a different purpose.”
Board and Manager Takeaway: The Court was careful to distinguish the facts before it from those in another case in the same district, Pinyuk v. CBE Group, Inc., No. 17-CV-5753, 2019 WL 1900985 at *7 (E.D.N.Y. Apr. 29, 2019), in which a plaintiff was granted leave to amend based on a finding that a proposed amended complaint stated a plausible claim that a least sophisticated consumer would be “without clear direction as to where to mail a written request” when confronted with three addresses in a debt collection letter. In the instant case, however, the Court found that the letters did provide “clear direction as to which of the four addresses should be used for payment and for correspondence,” making it “implausible that the plaintiff would be confused by the inclusion of multiple addresses.”
Boards and managers should review their correspondence templates used to collect delinquent assessments from homeowners to ensure that there are clear directions as to the use and purpose of multiple addresses that may be contained in such correspondence.
G. In re Basave De Guillen, 604 BR 826 (9th Cir) 2019
Background and Summary:The 2005 Bear Creek Master Association vs. Edwards (130 Cal. App. 4th 1470) is a State of California case which stands for the proposition that when an association places a lien against an owner’s property for unpaid assessments, it creates a “continuing lien” which includes all (old and newly accruing) unpaid assessments, late fees and costs of collections. Bear Creek created an orderly process whereby potential purchasers were provided notice (by the lien) that the property was subject to an assessment debt, and escrow simply requested a “payoff” ledger for the original amount plus all the subsequently accruing amounts to close escrow free of the lien.
De Guillen is a bankruptcy (Chapter 13) case where the Federal Court looked to the specific lien language in the CC&Rs and determined that where the Bear Creek CC&Rs contained language expressly providing for continuing liens, the De Guillen CC&Rs did not. Therefore, the Federal Court concluded that until the legislature amends Civil Code § 2924c to automatically make all association liens continuing liens, determination of that question will be made on a CC&R-by-CC&R basis.
Board and Manager Takeaway: Your collection company may, from time to time, advise the Board to update a lien against a particular debtor. Although it is impossible to predict whether a debtor will file bankruptcy, prudence suggests that communities with higher assessments, without the proper lien language or with older liens are subject to larger losses. Some Boards will want to immediately amend to make certain their CC&Rs contain the continuing lien language.
Recommended Actions: If the Board desires, our office will analyze your CC&Rs and provide you an opinion letter that the proper language is there for $300. If the proper language is not there, we can provide a simple amendment (including Board analysis of the process, letters to the members requesting approval, letters to the City or County or developer if necessary for approval, amendment and ballot) for $1800.
PART III
LEGISLATIVE FAILURES
Each year, members of our Legislature propose numerous bills which die for lack of support. If you were not following them this year, skip this Part III now. Our historical policy is to avoid discussing failed bills to avoid confusion. However, this year, several bills were widely discussed and negotiated for the first three months of the legislative session before abandonment due to COVID. We offer these four Association related bills which we all expected could become law, exactly so that you know THESE DID NOT PASS. Fair warning: It is likely we will see at least some of these bills proposed again in the future.
A. The “No More Physical Location Requirement” Emergency Reform
Current Law: Current Civil Code § 4090 requires at least one director or other association designated representative to be present at a physical location identified on the notice/agenda for a meeting in order to allow members without a computer to attend board meetings held by teleconference, videoconference or other electronic means. As a result of the COVID-19 “stay at home” orders, it is impractical for associations to force staff or members to sit within such proximity of one another. While State orders waived the requirement of an open physical location at state or local government meetings, they offered no similar cover for community association meetings conducted pursuant to Civil Code § 4090.
Law Revision Commission Review: The California Law Revision Commission recommended emergency statutory reform to implement the State’s policy for state and local government meetings for common interest developments. While the Commission has issued a tentative recommendation for statutory reform, this effort just completed the public comment period on November 1, 2020, and legislative reform is yet to be proposed. We anticipate the legislature will author proposed legislation in the upcoming session.
B. SB 969 – The “Clean Up Last Year’s Election Debacle” Bill
Current Law: AB 323 passed last year amended numerous Civil Code sections relating to community association election procedures and required a variety of unnecessary and often conflicting requirements for holding community association annual elections, including duplicative candidate introduction notices, required amendments to election rules and a timeline extending more than a third of a year.
Failed Revision: SB 969 promised amendments and clarifications to several election law requirements and questions created by SB 323, including term limits as a candidacy requirement and requiring typical homeowners appointed by an inspector of elections to satisfy the same criteria for serving as an independent inspector of elections.
C. SB 981 – The “Notice by E-Mail” Bill
Current Law: Current Civil Code § 4040 provides a menu of delivery standards which community associations must fulfill when communicating notices to owners depending on the nature of the document and the underlying circumstances. For example, community associations notify members of board meetings by posting notice in a public place. Ballots for specified elections must be mailed to the owner’s personal address at least thirty (30) days prior to the ballot tabulation meeting.
Failed Revision: SB 981 was introduced to Civil Code § 4040 to require community associations to make a good faith effort to obtain email addresses for the entire membership and mandate the delivery of documents required to be delivered by “individual delivery” or “individual notice” to be delivered by email. Documents would be delivered by first-class mail, registered or certified mail, express mail, or overnight delivery by an express service carrier if a member has not provided a valid email address or revoked consent to receiving documents by email.
D. AB 3040 – The “No More Single-Family Residence” Bill
Current Law: Except for the recent introduction of ADUs and JADUs, community zoning laws, association CC&Rs and California case law work together to generally disallow (albeit subject to multiple definitions) more than one family within a single-family residence.
Failed Revision: The stated purpose of AB 3040 was to increase housing supply in California by allowing for higher density communities by encouraging local municipalities to rezone single-family residential lots that are 15 year or older, and permit construction of up to four primary dwellings on such lots. More specific to community associations, AB 3040 would also prevent community associations from “prohibiting or unreasonably restricting” the construction of up to four primary dwelling units on a single-family lot that is rezoned.
PART IV
REMAINING GHOSTS OF PAST LEGISLATION
Here are three bills which have passed in the last two legislative sessions which require some forward motion, if not immediate action, in terms of planning and budgeting.
A. SB 323 – Election Laws
As referenced above in Part III, Section B, since January 2020 all associations are required to adopt new election rules to comply with SB 323. This bill significantly impacted notice requirements, election timeline and deadlines, the existing process for holding homeowner association elections, nominations and director candidate qualifications, and selection of independent inspectors of elections. More importantly for this newsletter, the new laws invalidated existing provisions in your association’s Bylaws, CC&Rs and Election Rules. If your community has not yet had legal counsel prepare updated Election Rules compliant with SB 323, you are risking a challenged election and civil penalties, which will be a heck of a lot more expensive than a new set of Election Rules. Our office can walk you through these election laws, timeline, review your governing documents and prepare Election Rules at a flat fee of $600.
B. Accessory Dwelling Units/Junior Accessory Dwelling Units/Garage Conversions
Since January 2020 planned unit development (lot) associations were required to increase affordable housing units in California by allowing homeowners of single-family residential lots to unilaterally convert garages into dwelling spaces and construct accessory dwelling units (granny flats) on the side and back yards of the lot. Absolute restrictions prohibiting the construction of granny flats or converting garages into living spaces are now void. If your community is a planned development, you should immediately: (i) review current governing document provisions, operating rules, architectural guidelines and other applicable policies for any conflicts with these laws, including, but not limited to, provisions relating to garage conversions, parking, architectural guidelines such as setbacks and approval process; and (ii) adopt an ADU/JADU architectural policy in compliance with state laws and local ordinances to get some protections in place. Our office will work with you to customize a policy for your community needs.
C. SB 326 – Inspections of Decks, Balconies, Walkways and Railings.
No later than January 1, 2025, and at least once every nine (9) years thereafter, condominium associations must complete visual inspections of “exterior elevated elements.” The first key to this bill is knowing if it applies to you. If your balconies, elevated walkways or other elevated structures are not structurally wood, if they are supported by pillars or posts, or if portions of them are surrounded by parts of the building structure, they may fall outside of the “exterior elevated element” definitions. The inspections must be performed by a licensed engineer or architect, who will prepare a report with, among other information, recommendations for necessary repair or replacement. The report must be factored into the community association’s reserve study.
Since the first inspection does not need to be completed until January 1, 2025, associations do have some time to wait and observe how this law is implemented and enforced. In the meantime, immediately start reserving for the initial inspection, and then fund reserves in an amount sufficient to cover the inspector’s secondary forensic “deep-dive” inspection and resultant repairs. Be aware of the inspector’s 15-day reporting requirement to the local enforcement agency by listening closely for opportunities to repair any immediate threat to safety during inspections and before any final report is generated. If such an immediate threat report is generated, get the association’s legal counsel into the municipality so that the local agency understands repairs are being undertaken and does not expend enforcement dollars at the (additional) cost of the association.
WHEW, THAT’S IT. You did it! THANK YOU! We hope you enjoyed this 10 page overview and considered how each of the changes may affect your community. If you believe that one of the new provisions could affect your community association adversely, just give us a free telephone call and we will do our very best to help you. To stay current with issues affecting community associations, please go to our website and subscribe to our Newsletter.