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June 30, 2008
LIMITING RENTALS IN CIDS - MORE ON THIS SUBJECT
There are some lease limitation cases going on here in California and also in other states that I am watching. I am in the process of rewriting my article on my website called "Lease Limitatiton Amendments - Are They Legal." Here are some of my thoughts on the subject:
I have always felt that a good clause that can be supported by objective reasonableness should uphold, and they have - but I have always believed (from reading the cases from all states that I could get my hands on)- that there are at least 2 mandatory criteria:
1. the necessity of grandfathering current lessors until they transfer their property (from a vesting rights viewpoint)
2. the necessity of providing a hardship clause (from a reasonable-ness standpoint)
The legislative moves across the country (which closely align to what California legislators are looking at) have proved this out focussing on the issue of "consent" by owners.
The last formal survey on rentals and the effects and subseqent study I know of was the 1985 DRE commissioned study that showed (through a rather small sampling but maybe adequate at that time), that there tended to be more problems in high percentage rental developments). Experience for boards proves that to be true again and again.
One rendition I heard about with regard to the California legislation that is proposed (SB2259) was that it was triggered by a complaint that a man that was called into military service was denied the right to lease his home during his tour of duty, because of a lease limitation provision.
I have discussed this with other attorneys in California. Some attorneys complain that if the limitation says 30% the HOA can not not approve a hardship request because it would make the units unmarketable via purchase by FNMA or Freddie Mac. Others like me believe that that is a perfect example of a hardship that should be approved.
Attorneys are polarized on these things. Boards are put to quite a task these days in considering financial hardships. Something occurring frequently today that did not seem to be as prevalent an issue last year (before the subprime and other mortgage crisis and economically difficult times) is that more and more owners could not be pushed over the brink when they could otherwise pay their assessments if they could just rent their units. In an HOA where the delinquencies have gone from 10% to 40%, giving owners a boost that would enable them to pay the assessments makes sense. The approval might be tied to keeping the assessments current if an owner claims if they can rent, they can pay. Just an observation, not legal advice.
This is a very topical issue and I am very appreciative that it is being discussed, and it is encouraging to see that the trial courts are upholding these clauses. However, it will take only one bad apple to spoil the batch in California. We could be on the brink. One board could screw it up. And since the new election laws are closely tied and controlling in any election to amend documents to add a lease limitation clause, I could see an association messing up the voting process, so be careful!
I wish the HOA attorneys best of luck with these cases because there is a need for a remedy to keep rentals in any HOA from getting out of hand.
However, ... a word of caution. Those of us who truly understand the need, the cases, and the right way to do things believe leasing limitations are and should be legal and they are (if well written) and should be found reasonable under the circumstances. But most of the rest of the world (including my former real property law professor) either believe they are an unreasonable restraint on alienation, or think they are "discriminatory" or "unconstitutional" (a favorite claim of anyone challenging the HOA restrictions, whatever they may be).
Just my thoughts. I would like to hear yours.
Posted by Beth Grimm at 10:27 PM
June 24, 2008
Requests of the Disabled
Many HOA Boards are confronted with special requests of the disabled. Sometimes they are justified, sometimes not.
Here are some requests that I found to be justified over the years:
An owner who was deaf asked the board if it would provide a sign language interpreter at the board meetings so the person could understand what was going on. The Board said "no", it was too costly. The owner asked if they could bring their own interpreter to the meetings. The Board said "No", that was too disruptive. That Board exposed the HOA to serious damages. The Owner contacted the Fair Housing Dept who took the case, sued, and the HOA paid damages, somewhere in the neighborhood of $30,000 is what I heard.
The Condo HOA CC&Rs prohibited dogs. Owners could have cats. An owner said they wanted to have a dog and would have it. The Board said "No". The owner said they were depressed and the dog brought them happiness. The Board eventually actually did say yes, if the owners kept the dog in their enclosed patio, and carried it to and from the car in a carrier. The people moved away. The Dept. of Fair Housing took the case, and pushed it through the appeals court (even though they lost at the Superior Court) and won. The owners were granted about $8,000 in damages and attorney fees.
Questions often come up about parking spaces. A disabled owner wants a parking space closer to the unit entry and the Board is dealing with a situation where spaces are assigned on the deeds. Does that always absolve the HOA? No. It does not always absolve. Sometime the owners really want special favors for the household residents that are not disabled. For example, in one case that came across my desk, there were two residents, one with a heart condition and one perfectly healthy young (40's) male roomate. While the unit was assigned one parking space very close, the disabled resident demanded assignment of one of the close open parking spaces as a handicapped designated space. This would have given the two residents the assigned spot plus an extra parking space (since the disabled resident was apparently the only person in the complex qualified to park in a disabled space). The Board said "No" to that. So far, no repercussions.
Here is a recent note sent to me by a reader:
"I am a paraplegic. I have resided at my current condo for several years and I have never been able to come to a meeting. I have requested accommodations by perhaps asking that the Board at least have meetings outdoors in the summer. I was told by the Board there was no place outdoors that was quiet enough for meetings (too many noisy kids aroung the pool area). I believe this is just an excuse to keep me away from board meetings. Out HOA has another common area place that would work just fine, but the Board will not even consider it. Do you think that I could request a copy of the minutes (free of charge) as an accomodation?"
My answer would be that an owner can request any accomodation that he or she wanted to - the real question is - will thte Board approve it. In this case, if the Board cannot reasonably accommodate a request to change the meeting place, it seems that it would not be a huge burden to email the meeting minutes to the owner each time there is a new set, so the person could at least have the information. I wonder if the Board has considered having the meetings (if they meet in a board member's unit) with a speaker phone at the board table so that the owner could listen in. I do not know in this case if the owner really would attend meetings if they could, or if they have tried to find a way to get into where the meetings are (as I do not know how many steps there are, whether it is possible for other members to help this one into the meeting room, etc.). I can hear the Board now, though ... No, it's too much trouble because .........
And it may be ... or maybe not. The question the court would want answered is: "Is there a great burden to the other members or high cost in granting the accommodation?" If there is a great cost or burden, then there may be justification for saying "no".
In this latest case, I would guess that there is something the Board could do to accommodate this member's desire to be informed - but I am not going to give any advice as it would be too general to be useful.
I lean toward "giving" whhen it makes sense to do so. And an owner that wants to be informed often wants to be involved. And that is generally a good thing.
There is a statute in California that requires Boards to be as accommodating as possible (if there is not too great a burden) to grant requests that allow the disabled to get to and from their units. It allows the Board to defer the costs to the owner or resident and allows the Board to require reinstatement of the area that was changed with the accommodation when the handicapped person leaves (Civil Code Section 1360). And there are federal anti-discrimination statutes and cases that suggest a Board should make an accommodation for any resident that claims a disability if it is possible to do so (very loose paraphrasing but also indicative of how I feel the statutes and cases go), even if at the resident's expense. Some of the federal statutes are misconstrued to apply when they really do not directly apply (the ADA in particular), so legal advice should be sought (don't quote my opinions or thoughts as legal authority because before giving any specific advice, I would ask a lot of questions about the circumstances).
Still and again, I think Boards are better off to look at the requests with an open, rather than a closed, mind, and look for solutions rather than excuses.
Posted by Beth Grimm at 8:48 PM
June 22, 2008
Renters - How Do You Manage Them?
Here is a suggestion from a reader.
"We're a small 10-unit complex and 3 of them are rentals. The renters are often annoying, loud, and are smokers. While the owner occupied units are quite, mellow, non-smokers.
I lived in Germany and there HOAs can actually be on an approval-type board for all rentals. Meaning, if you rent your condo out, the HOA has a say in who you rent to. Usually this is by submitting the rental applications to the HOA board...and agreeing with the owner on who the best for for the condo-community would be. We actually have the additional problem that the owner's of the rental units never bother to show up to our HOA meetings....
I'm the president of our HOA, and I'd LOVE to enact something like this. But is is legal? Are there any precedents in CA of anything like this?
Would be great to read a blog post about this."
My answer is this. Obviously, the better renters are screened, the more likely one is to end up with a good tenant. But should the HOA assume responsibility for the screening? That is really the question here. I often am asked by an HOA Board, when updating the documents, "Can't we add a screening or eviction option to our governing documents?" My response is along these lines:
Yes, an HOA could set up some screening requirements and an eviction clause, but why would it want to do that .... other than hoping for better tenants of course? My concern is that the flip side of the HOA doing the screening or eviction is that it would most likely alleviate the owner of the unit from all responsibility, and possibly most if not all legal liability for tenant issues and problems. I can hear it now ... All the owner would have to say to the board is: "You have the option of screening and eviction, you can choose the tenant, and more power to you. If you screw up I can sue you, instead of you suing me. and, if you turn anyone away, and the place does not get rented because of it, I will seek the losses from you."
Have you noticed? California is the "Land of Entitlement"! (As opposed to the "Land of Enchantment" - which was the NM license plate ad for many, many years.) There are many people who shirk responsibility, pass it on, blame others, etc., and there are many people who can and will sue at the drop of a hat ... don't even ask me how many lawyers there are in this state hungry to take the cases. And Board members are volunteers. Aren't your jobs hard enough already?
So I ask you, what Board wants to step into the shoes of the landlord/ owner and do his or her job? What Board wants to assume the responsibility and liabity for choosing tenants? What volunteer Board knows all the ins and outs of renting property and what questions can and can't be asked, how to avoid discrimination claims? How many know that turning away potential tenants because of gender, sexual preferences (such as gay couples), children (meaning families with), and/or source of income (such as Section 8 tenants) can lead to expensive lawsuits? Who is the deeper pocket, the HOA or the individual owner?
Yikes, Boards .. once you know these things and think about them, I assume that you will get my gist. I never recommend that the HOA take over any owner/tenant situation in a manner that arguably lets the owner off the hook. I always recommend that the Board address the problems the tenants are causing, and at the same time keep pressure on the owners to do something about it too, through demands, fines, seeking reimbursement of costs, etc.
I also often suggest that the HOA could do some things that would help owners be better screeners, such as suggesting, by way of newsletter or otherwise, and some of the simple things:
1. Have the tenant complete an application with their personal credit and bank information. If they are unwilling to do so, they are not familiar with common leasing requirements of apartment complexes.
2. Get a property manager if you live out of the area that will check credit references, or do it yourself.
3. Encourage owners who rent their units to put clauses in their leases that say any violation of the association governing documents or rules is, at the option of owner, grounds to immediately terminate the lease.
4. Encourage owners who rent their units to put clauses in their leases that make the tenant responsible to owner for any fines or penalties or costs that are incurred by owner because of tenant's violation of the assocition governing documents or rules.
5. Let owners know that if they have a Section 8 tenant coming in, that the lease contract provided by the Fair Housing Department does not include the extra clauses mentioned above, so they should have a separate agreement on this with the tenant.
I have had rental property over the years and this is my tactic. I do not like to go to the trouble of checking credit, etc., and rely alot on instinct and how the tenant responds to my questions. So one thing I always say is I have an application I require that provides me with your bank and personal credit information, and references. I tell tenants I will be checking references and credit, and that I would prefer they tell me now if there is anything or any problem that might come to light through that process. I tell them that I would think of them more positively if they were honest with me up front instead of waiting to see if something shows up on the credit report or through checking with references. My experience with this is that the person either clams up (not a positive sign to me), says nothing will show up derogatory and they are sure of it, or they tell me everything that could show up and explain why.
Although I always require a credit app (for my own protection should the tenants trash a unit), I have never had to send any credit app in. I always got my tenants through sensing who was the most honest of the applicants by how they respond to that. I have never had a bad tenant.
Anyway, owners can do a good job of screening, ... if they want to, and even when a good effort goes south, owners can protect themselves with a good lease and "out" clause for any tenant that gets into trouble with the HOA rules. And in my book, the owner is getting the benefit of the rent (the HOA is not), and the pressure should be put on the owner to take care of any problems. The minute the HOA steps into the middle of that relationship (tenant/landlord), a new can of worms is opened.
Now I know someone is going to say ... what if the owner does not do anything ... or what if the owner cannot be located ... or lives a million miles away ... or is an abused elder relative .... or ... oh well, you get the picture. This is for a later blog!
Posted by Beth Grimm at 1:47 PM
June 18, 2008
Renters - Minutes - Do the Two Go Together?
Here is a question that has come up more than once:
"Should the Board distribute minutes to renters?"
One reader says: "Our current Board of Directors sees nothing wrong with sending out our minutes to renters. I objected so the current BOD position is that they will send "sanitized" minutes removing financial information to the renters. ... Our CCRs do not address the subject, but I think all owners should be concerned about inviting the involvement of non-owners into whatever actions or issues are addressed in our HOA minutes. I believe that the HOA should restrict its contact with renters, and that contact should first flow through their owners or property management companies. What is your opinion on this?"
Another reader says: "Our board does not send any communications, including minutes, which are distributed regularly to owners (we are a small association) to renters. My tenants are very interested in what is going on in the association and are planning on buying the place as soon as they can. Should I not be able to give the board my permission so that they can include my tenants in the list of communications about the association, including the minutes?"
So ... what are ya going to do? Two views. Two positions. This is what I think.
The minutes contain information private to the association, and care should be given to handing them out publicly. There is generally no legal requirement to provide the HOA minutes to anyone, but owners in California do have the right to ask and when they ask, can get copies, at cost.
That said, HOAs do want tenants to have copies of the rules and governing documents and so do want them to know something about what is allowed and what is not allowed. And buyers tend to ask for a year's worth of minutes among the documents related to purchase of a property in an HOA these days (if they are savvy). Condocerts.com which is a website that serves as a source of HOA information and documents for lenders, title companies and others who need to obtain documents related to sales of condos and townhouses asks HOAs that list with them to provide minutes for availability of these entities.
Still, I do not see a good reason to go to the extra expense to provide minutes to tenants. It requires the Board, if they send them out, to keep a separate list of recipients as generally, the owner and tenant lists would be kept separate. Associations that post the minutes in the common area (many do) are in essence providing this private information to all who pass by. Good or bad? I would like to say open communication and transparency is good, generally, but when minutes contain sensitive information about HOA financial issues and the need to consider a special assessment, or other matters such as discovery of an association-wide problem, the duty to the owners is to be prudent and prudence I think suggests not to disseminate the information further than the owners.
And I would not be in favor of having two sets of minutes, one sanitized and one not. That could be confusing.
However, renters tend to feel more involved if they get news of association matters and events. Distribution of the HOA newsletter to owners and tenants could be a good thing for the community and could help bring the tenants under the umbrella of good citizenship by understanding the rules or procedures of the association. My recommendation would be to include them in distribution of the newsletter, if it does not contain overly sensitive information, but not if it involves considerable expense as the owner can always provide what they want to their tenants.
My two cents. No cases or laws that I know of on the subject.
Posted by Beth Grimm at 10:24 PM
June 15, 2008
DO BOARD MEMBERS HAVE TO PAY FOR COPIES OF RECORDS?
A reader asks: "Is there a provision in the civil code that a 'Board Member' may have access to HOA records, invoices etc. as a 'board member'? The management company tells us that a homeowner as well as a board member will be charged $____/hour plus ___ cents a copy with a 10 day notice."
I left the amounts out so no one would complain about being targetted. Believe it or not, this is a common question.
Board members are entitled to see all records of the association, with the cavaet that although the Corporations Code provides for an abolute, the basis for review of some association records came into question and a board member was denied review of some proxies in a California case. (Chantiles v Lake Forest II Master HOA) So, board members to not have unfettered access.
That said, board members are members of the association and the records inspection statute (Civil Code Section 1365.2) speaks in terms of members rights of access and charges that can be made to members for review of the records (see below).
"Civil Code Section 1365.2 - (b)(1) The association shall make available association records and enhanced association records for the time periods and within the timeframes provided in subdivisions (i) and (j) for inspection and copying by a member of the association, or the member's designated representative. The association may bill the requesting member for the direct and actual cost of copying requested documents. The association shall inform the member of the amount of the copying costs before copying the requested documents."
This leaves open the argument that the board member could be charged. However, if a board member is being charged for records that Board members should be seeing and reviewing because of their role in serving the association, such as financials that have to be reviewed under Civil Code Section 1365 on a quarterly basis by board members, and the reserve studies, budgets, financial statements, etc., then that would seem to me to be wrong. That said, board members can be as pesky as owners in making excessive demands on management to produce records for their review that have already been provided in past years or that normally are not copied for board members. If these demands cost the association money because they are out of the ordinary duties, then it could be right.
The only way to tell is to pay the charges and then bring a small claims action to recover the money. If the board member can show that they needed to records to fulfill their volunteer role successfully and properly, then the person would probably recover the costs.
So why go there? Be reasonable .... people.
Posted by Beth Grimm at 6:00 AM
June 12, 2008
DO DAY SLEEPERS HAVE RIGHTS?
A reader recently asked me a simple question: "Do Condo-Owner's who work Night Shifts & sleep in the daytime have any right to peace & quiet?"
The answer is yes, reasonable rights, which is what everyone has. In order to find someone legally liable, you have to prove certain things. Every person has an innate duty to act as a "reasonable", or for the legal world "prudent", person would act. What you have to prove to whomever is listening (judge, board, small claims court hearing officer, etc.) is that the person who is giving you grief breached that duty (failed to honor it basically) and that that breach caused you damage in some way (property, health, etc.). In the HOA enforcement world, you have to prove that they created a nuisance in most cases.
So, if you are a day sleeper and your neighbor is not, who wins? No one if there is a fight over wanting silence during the day. The neighbor probably says "you're crazy, I have 3 kids and you expect me to keep them quiet?" And you say, "If I can't sleep I will lose my job."
There certainly is a lot of ground for compromise here, but absent a willingness to do so, day sleepers and daytime noisy people can come to blows. And of course, I have a story on it, so watch for the next blog which I will call: "There is no such thing as a slam dunk!"
Posted by Beth Grimm at 10:56 AM
June 7, 2008
LEASE LIMITATION PROVISIONS - ARE THEY GOOD?
I have done 3 other posts that touch on the subject of Lease Limitation provisions. Based on my research, and experience, I think it time to provide some simple explanations about what they mean. A lease limitation provision might be based on any of the following ideas (or maybe someone out there has something more creative to offer:
Limit on number of units/lots that can be leased at one time.
Limit on leasing for the first year, two, or three after purchase.
Limit on term of lease, for example – one year minimum.
The thinking behind these restrictions is that the properties will not invite investor purchasers but rather would be enticing to persons intending to reside in the property who are interested in a community with limits on leasing. Resident owners that plan to continue to reside in the property like this idea very much. Resident owners that tend to “move up” in the coming years and want to keep and rent their properties out would not be so fond of the idea that they could be prevented from doing so. Investors and leasing owners would not like the idea at all.
The simple truth that many people believe and experience is that high percentage rental communities tend to have many more problems than lower percentage rental communities. Way back in 1985, the last time I know of that any study was done, the California Department of Real Estate commissioned a study and that is what the study showed. So I am not the only one that believes this, no sir.
Another simple truth is that it is harder to get conventional financing for properties in common interest developments because the largest purchasers of residential loans in the country – namely FNMA and FHLMC (more commonly known as Fannie Mae and Freddie Mac – sounds like something right out of the Flintstones) have limits on purchasing loans in high percentage rental communities. So, if your HOA is over 30-40% rentals, and it becomes especially apparent if it gets over 50% rentals, the financing gets tougher to find, through conventional methods at least. However, see below for more on this in today’s market place.
Another simple truth is that renters are generally more transient than residents. Of course I know there will be those that will come out of the woodwork to let me know they have been darn good renters for more than 30 years! But, get real people, the transient part of society tends to have less interest in taking care of the real estate they occupy for temporary purposes than the buyer who has crossed the line into property ownership and has pride in that “piece of dirt”.
Another simple truth is that investors often have different interests than residents. While some investors take great pride in every piece of property they own, others are only interested in the bottom line – how much rent can they pull in – how little can they spend.
Another simple truth is that the provision when it is posed to the members (it does require a CC&R amendment) could “grandfather all owners” in the development at the time the measure is passed, which would put everyone in the development at that time on the “same plane” and alleviate the second two arguments above that owners who want to rent their properties and investors which would mean they would never be prevented from leasing their property. [There are pros and cons to that which have been and will be further explained in communications on this subject written by me.]
And the last, but perhaps hardest bit of truth, is that while the leasing limitation provisions do help keep or lower the percentage of renters in any community, they still can “bite” the innocent. What about the person that thought the restriction was great, until their life circumstances changed, they needed to move away temporarily or permanently, the market went south (what a concept, huh?), and they could not afford to “give away” their property in a bad market.
And, there is a wide range of enforcement tactics out there; some communities are very lax in enforcement since they do not want to enforce such harsh provisions on their neighbors, others are militaristic in their enforcement. The laxity can lead to legal issues, and the militaristic view can do the same.
In order to make a lease limitation restriction fair, reasonable, and able to pass court scrutiny, I believe (and again, this is based on my reading of the cases all around the country and in California), there has to be some kind of hardship provision. This means that if someone is called off to war, and they are going to be doing a duty tour, they should be able to temporarily lease their property during that time! If someone has a medical disaster – either them or a family member – and they need to be somewhere else for a period of time, they should be able to temporarily lease their property during that time! There are those who would disagree even with that. And, of course, there are those that might “embellish” or make up such a story when the Board members know it to be less than true.
And why would an investor vote for such an amendment? So long as they, at least are grandfathered (which wise at the least if an HOA does not want to get into the argument that has occurred in some state cases where the court recognized that such owners may have a “vested interest”), then it is possible that under such an amendment, rentals by others would be on the decrease and the property values could appreciate considerably. I believe this is especially true in a higher percentage rental development where sales are affected by the lack of available financing. It may take longer to get the percentage down, but to many, at least the development would be headed in the right direction.
So, although we know that these provisions can help dramatically in lowering rentals in a common interest development, we know there are pros and cons to them. We do not know for sure where the law is going on these. There have been some Superior Court decisions in the past couple years in Santa Barbara and further south that have upheld lease limitations. More will be reported on these as the time for appeals and any appeals have run. There is also a statute that has been introduced in California that would place some restrictions on enforcing the restrictions.
Please – if you want more information on this – continue to follow this blog (aka California Condo & HOA blog and Beth’s Blog) at http://www.californiacondoguru.com and also sign up for the free E-newsletters from that site. Watch for future Primers on the topic (helpful learning tools available on the website). I will be circulating the next E-News soon, so sign up soon! The Primers, when completed, are inexpensive and helpful.
There is so much to be done to get the word out. People do not seem to fully understand the benefits and the drawbacks and the only way to do that is to follow the articles and posts. Boards often, believing that these restrictions are for the benefit of the community and will sail through, put a ballot out only to be blasted by those who are either uneducated about the provisions, or have the “King of the Castle” mentality. In other words, they have not prepared the membership and it comes back to stifle the process.
Posted by Beth Grimm at 12:57 PM
June 2, 2008
What Elections Are Covered by the New California HOA Elections Law?
Here is a question about elections that is pretty straightforward.
"I have read and re-read the section on Election and Voting Procedures and can't find anything in the section that covers anything other than the election process. The reason I ask is that we recently put out a ballot to the membership to give the Board authority to grant fence extensions from back of unit wall - recognizing that 1363.07 removes that authority unless owner approval is achieved. ... Anyhow, I don't see in anything Section 1363.03 that requires a secret ballot for anything other than an election of officers. Can you offer any comments on this issue?"
Civil Code Section 1363.03 provides, in part pertinent to this question:
(b) Notwithstanding any other law or provision of the governing documents, an election within a CID regarding assessments legally requiring a vote, election and removal of members of the association board of directors, amendments to the governing documents, or the grant of exclusive use of common area property pursuant to Section 1363.07 shall be held by secret ballot in accordance with the procedures set forth in this section.
Civil Code Section 1363.07 is the statute that requires the Board, with a few exceptions noted, to obtain 2/3 approval of the members to grant an owner exclusive use of common area so the procedures of Civil Code Section 1363.03 apply.
Posted by Beth Grimm at 9:21 PM
Take It To The Judge - What Can He or She Do With An Assessment Request
People often ask what the court can do if an HOA or Owner takes a dispute to court. Basically, a judge can make orders to do something or stop doing something, and can make an order interpreting what documents say. However, in order to make an order, even the Judge has to have some legal authority to do it. Here is a question from a reader asking what a Judge can do with a request to approve an increased assessment plan:
"Our HOA just took a vote for assessments for unit painting. The ballot asked for a graduated increase in assessments for reserve funds over the next 7 years. Some houses are two story and some are one story. The CC&Rs required 75% of all units voting positive to change to graduated assessments. Every unit had to vote. A non vote counted as a no on the issue. It did not pass. The Association board is now going to a Judge to ask for a rulling to change to vote to a positive because they want a 50% plus one to make it pass. This is without going through the process of changing the CC&Rs to get what they want. Will this work for them? Can a Judge over rule CC&R requirements and change an election? Can those of us who appose this get our say with the Judge? Do we have to hire a lawyer? The Board is currently using the Association lawyer at all of our expense."
There are a lot of questions here and giving specific answers would require a lot of presumptions about the representations made. I did not review this HOA's documents and am not providing legal advice, but will pull out what I can answer in a generic form:
May a Judge order an increase in assessments in an attempt to sufficiently fund reserves over a period of time for a specific HOA project, when the measure presented to the Owners does not pass?
A Judge could approve an assessment imposed without homeowner approval if the use for the money qualified as an emergency assessment per Civil Code Section 1366. Emergency assessments are those that do not require HO approval and that are imposed to deal with safety and hazard issues, and maintenance items that need to be addressed but which could not be foreseen, but this situation does not seem to fall into that category as the plan is for 7 years of graduated assessments. Other than that, it seems to me that the law leaves it up to owners to approve assessments and not the court. Civil Code Section 1366 says that boards can increase assessments up to 20% a year and/or impose a special assessment that does not exceed 5% of the budgeted gross operating expenses of the association without membership approval. And if the assessments exceed these limits, homeowner approval is required. The statute says that approval of a majority of a quorum is sufficient for the assessment that requires a vote. If the vote is not legally approved by members, then I would be surprised if a judge attempted to overrule the majority will on that. And IF there was a requirement of a higher percentage for approval to fund reserves or adopt a different reserve plan, I believe a judge would be even more disinclined to overrule the documents.
If by "graduated" assessments the implication is increasing assessments that would exceed the Board's authority - then the above discussion would apply. If by "graduated" assessments the reader means changing from equal to pro rata assessments based on size of unit, or the reverse, (am wondering if that is why the one-story two-story reference is raised), then it would take a document amendment to do that, for sure. Many documents do require 75% approval to amend CC&Rs. It's a high percentage and so the legislature has offered a solution when an HOA cannot achieve that high of a supermajority to amend the CC&Rs. Civil Code Section 1356 allows an HOA to go into court and ask a Judge to approve the amendment if the HOA can show that it made diligent attempts to get members to vote, could not get the higher majority, and that at least, more than half of the association members did approve the amendment.
If such a petition is filed with the court, the members who wish to can oppose, but this is a court proceeding and going in without an attorney is a daunting task. There are many procedural rules.
I hope that this information helps this reader and others concerned about what the court can do with requests to raise money through assessments and to amend the governing documents.
Posted by Beth Grimm at 8:40 PM