December 2017 Update
The most significant recent legal developments affecting common interest development practice include the following:
Effective January 1, 2017, CC §4775 has been amended to state that unless the covenants, conditions, and restrictions (CC&Rs) provide otherwise, associations are responsible for repairing and replacing the exclusive use common area appurtenant to a separate interest (with the owner of the appurtenant separate interest remaining responsible for maintenance of the exclusive use common area appurtenant to that separate interest). See §§1.16, 5.71.
Beginning January 1, 2018, the annual budget report that is distributed to members must include a copy of the completed “Charges For Documents Provided” disclosure identified in CC §4528 (see §2.130). See AB 690 (Stats 2017, ch 127), adding CC §5300(b)(12), discussed in §§1.26, 5.65.
Regarding conflicts of interest in the attorney-client relationship, the court in Radcliffe v Hernandez (9th Cir 2016) 818 F3d 537 held that counsel for a class action client is not automatically disqualified when a concurrent or simultaneous conflict of interest arises. See §2.7.
In Retzloff v Moulton Parkway Residents’ Ass’n, No. One (2017) 14 CA5th 742, the court ruled that associations cannot recover attorney fees under CC §5235(c) (frivolous or unreasonable actions by members to enforce inspection rights) because that statute authorizes recovery of only costs, not attorney fees. See §§2.33, 2.124, 2.128, 12.39.
In Tract No. 7620 Ass’n v Parker (2017) 10 CA5th 24, the court upheld an association’s denial of a member’s request to inspect the association’s membership list and other records, finding the requesting member had an improper purpose for the inspection. See §2.116.
Beginning January 1, 2017, associations or their agents must give specified notice to affected owners and tenants before applying any pesticide to the common area or to a separate interest. See new CC §4777 (added by Stats 2016, ch 330). The statute prescribes the content of the notice, the owners and tenants to whom it must be given, the manner of providing it, and an alternate notice procedure if the owner or tenant agrees to a different time for the pesticide application. For details, see §2.145A.
Beginning January 1, 2017, each owner of a separate interest must annually provide the association with written notice of specified contact information, for purposes of receiving association notices. See CC §4041, discussed in §2.154.
New sections have been added to chapter 3 on important tax matters that associations commonly encounter other than direct income tax, including other potential taxes (e.g., transient occupancy tax, handling rental income, and sales and use taxes), administrative tax issues, and tax credits. See §§3.36–3.39.
Effective January 1, 2018, new CC §4515 prohibits inclusion in governing documents of provisions that prohibit owners or residents from assembling or meeting with other members or residents, and their invitees, for purposes related both to the community and association issues, as well as public elections. See SB 407 (Stats 2017, ch 236), discussed in §4.37.
In Doskocz v Association Lien Servs. (ND Cal, Dec. 23, 2016, No. 15–cv–01525–JD) 2016 US Dist Lexis 178221, the court held that, as a matter of public policy, a homeowner cannot waive CC §5655(a)’s requirement that payments made by the owner will be applied first to delinquent principal before being applied to fees and other collection costs. That case also held that a “no upfront cost” model of a delinquent assessment collection agreement, which authorized a third party collection agency to collect its fees and costs directly from the homeowner, did not violate the federal Fair Debt Collection Practices Act or California’s Unfair Competition Law. See §§5.29, 5.35.
In Colyear v Rolling Hills Community Ass’n (2017) 9 CA5th 119, the court held that a view dispute between two neighbors was a matter of public interest, entitling the defendant owner to anti-SLAPP relief. See §§6.11, 12.66.
For new discussion of the regulation of short-term rentals in common interest developments, see §6.49.
For new discussion of federal rules under the ADA regarding “service animals” and “emotional support animals,” see §8.54.
Effective October 14, 2016, HUD promulgated new rules regarding “Quid Pro Quo and Hostile Environment Harassment,” which are intended to formalize standards for evaluating claims arising from harassment on the basis of a protected classification, including many types of neighbor-to-neighbor interactions. See 24 CFR §§100.7–100.600, discussed in §§8.61A–8.62, and the Note in §6.40. For sample language for an association enforcement policy addressing the new anti-harassment rules, see §7.21.
There is no bright-line definition of the due process to be accorded to a homeowner in an association disciplinary hearing, but it is clear that the homeowner is not entitled to the same degree of protection as is afforded the accused in a criminal proceeding. Cases arising from disciplinary proceedings outside the HOA context are instructive. See, e.g., Doe v Regents of Univ. of Cal. (2016) 5 CA5th 1055, upholding restrictions on counsel’s right to participate in a disciplinary hearing for alleged sexual misconduct. See §§7.8–7.10.
In Rancho Mirage Country Club Homeowners Ass’n v Hazelbaker (2016) 2 CA5th 252, the court awarded attorney fees for the enforcement of a mediation agreement between the HOA and a homeowner. See §§7.30, 7.32, 12.40, 12.42.
In Bank of America v City of Miami (2017) 581 US ___, 137 S Ct 1296, the U.S. Supreme Court held that a city had standing as an “aggrieved person” to file a civil damages action for violation of 24 USC §3613, in a charge that the bank intentionally targeted predatory lending practices at minority neighborhoods, resulting in disproportionate foreclosures and vacancies in such neighborhoods. See §8.65.
The intermediate appellate courts are now split on the question of whether the Builder’s Right to Repair Law (CC §§895–945.5) is the exclusive remedy for residential construction defects in for homes sold after 2002. See Burch v Superior Court (2014) 223 CA4th 1411, 1418, and Liberty Mut. Ins. Co. v Brookfield Crystal Cove LLC (2013) 219 CA4th 98, 109 (Right to Repair Law is not exclusive remedy); but see Elliott Homes, Inc. v Superior Court (review granted Mar. 15, 2017, S239804; superseded opinion at 6 CA5th 333) and McMillin Albany LLC v Superior Court (review granted Nov. 24, 2015, S229762; superseded opinion at 239 CA4th 1132) (Right to Repair Law is exclusive remedy for residential construction defect claims for homes sold after 2002 even when claims arise from actual damages; homeowners cannot avoid law’s requirements/prelitigation procedures by alleging only common law claims). As of December 2017, the question of whether the Right to Repair Law altogether precludes common law causes of action for defective conditions that resulted in physical damage to the home is under review by the California Supreme Court in the McMillin Albany case. See discussion in §§11.4, 11.21, 11.72.
In Ramos v Brenntag Specialties, Inc. (2016) 63 C4th 500, the California Supreme Court ruled that the manufacturer of defective construction materials can be held strictly liable for damage caused when the material is used in the manner intended by the supplier. See §§11.11–11.12.
In Acqua Vista Homeowners Ass’n v MWI, Inc. (2017) 7 CA5th 1129, the court held that as to defendants other than builders (such as material suppliers), a claimant under the Right to Repair Law must prove not only the violation of the statutory standard of construction but also that the deficiency was caused by the “negligent act or omission” or breach of contract by the nonbuilder-defendant. See Practice Tip in §11.72.
In Blanchette v Superior Court (2016) 8 CA5th 521, the court held that a builder’s failure to respond to a homeowner’s notice of claim within 14 days released the homeowner from the requirements of the Right to Repair Law, even though the notice of claim was insufficient on its face. See §§11.69, 11.81.
In Nellie Gail Ranch Owners Ass’n v McMullin (2016) 4 CA5th 982, the court upheld a mandatory injunction requiring an owner to remove encroaching improvements located on the common area when the owner knew the true location of the property line when he constructed the improvements. See §12.20.
For a new case on the proper calculation of attorney fees in common fund cases (particularly in the context of class actions), see Laffitte v Robert Half Int’l, Inc. (2016) 1 C5th 480, discussed in §12.44.
In Lee v Silveira (2016) 6 CA5th 527, a minority faction of the board sued the majority of the board ostensibly for declaratory relief, requesting a declaration that various past actions and votes of the majority of the board were improper. The court upheld the grant of an anti-SLAPP motion, confirming that board votes on association business occurred in a public forum and concerned matters of public interest. See §12.66.
In another anti-SLAPP case, Barkhordar v Century Park Place Condominium Ass’n (CD Cal, Oct 18, 2016, No. 2:16–cv–03071–CAS(Ex)) 2016 US Dist Lexis 145076, the court held that the association’s counterclaim that certain homeowners had violated CC&Rs’ noise restrictions was not subject to an anti-SLAPP motion because there was no evidence the counterclaim was filed in response to the homeowners’ action. See §12.66.