Community Association Update: Issue # 53
Annual Legislative & Case Law Update (2021-2022)
Dear ,

Happy New Year!
Below you will find an overview of the 2021 legislation and case law impacting California HOAs as we head into 2022. The material below is not meant to be an exhaustive list of all new legislation and case law; we have summarized what we believe is the most important to the majority of our HOA clients and the industry professionals who service them.
 
If you have any questions regarding the items below, please feel free to contact our offices, email us, or submit a question online!

Sincerely,
Steven Tinnelly, Esq.
Tinnelly Law Group
NEW LEGISLATION
AB 502 | ELECTIONS BY ACCLAMATION
(Effective January 1, 2022)
HOAs may now conduct uncontested director elections by acclamation through new procedural requirements.

Prior Law. If the number of director nominees is not more than the number of vacancies to be filled (if the election is “uncontested”), the law still required the HOA to go through the election/secret balloting process and incur the time and expense associated therewith. The only exception to this requirement was limited to HOAs consisting of 6,000 or more units; those HOAs were able to forego the balloting requirement in an uncontested election and declare the director nominees elected by “acclamation.”

New Law. AB 502 adds new Civil Code § 5103 to expand the ability to conduct uncontested elections by acclamation to all HOAs regardless of their size. Section 5103 does, however, impose new procedural pre-balloting requirements that must be satisfied in order for the acclamation process to be utilized.

HOAs should ensure that their election rules are updated to satisfy these new requirements in order to preserve the ability to conduct an uncontested election by acclamation.

AB 611 | SAFE AT HOME PROGRAM
(Effective January 1, 2022)
New requirements for HOAs to protect the confidentiality of any member participating in the Safe at Home Program.

The Safe at Home Program allows for victims of domestic violence, sexual assault, stalking, human trafficking, or elder or dependent adult abuse to designate the Secretary of State as their agent for service of process and receipt of mail. The person’s actual address is kept confidential.

New Law. AB 611 adds new Civil Code § 5216 to clarify that HOAs must, upon request by a person who is an active participant in the program: use the Secretary of State’s address for HOA communications to that person; withhold or redact the person’s information from membership lists, HOA websites, etc. that would reveal the person’s name, community property address, or email address; and keep the person’s participation in the program confidential.
AB 1101 | FINANCIAL PROTECTIONS; INSURANCE
(Effective January 1, 2022)
Federally insured accounts for HOA funds; transfer restrictions; mandatory crime, dishonesty and fidelity coverage.

Prior Law. The Civil Code was amended a couple of years ago to require written board approval each time an HOA makes a monetary transfer of $10,0000 or five percent (5%)—whichever is lower—of its total combined and reserve operating account deposits.

New Law. AB 1101 amends several provisions of the Civil Code to clarify how the threshold calculations apply in response to confusion that often surfaced under the law’s prior language. Now, for HOAs with 50 or fewer units, board approval is required for transfers greater than $5,000 or five percent (5%) of the HOA's estimated annual income (whichever is lower); for HOAs with more than 50 units, board approval is required for transfers greater than $10,000 or five percent (5%) of the HOA's estimated annual income, whichever is lower.

AB 1101 also clarifies the types of federally insured accounts that HOA funds must be kept in, as well as clarifies the types of mandated dishonesty insurance and crime coverage that may be kept by an HOA to comply with previously enacted law.

AB 1584 | RENTAL RESTRICTION AMENDMENTS
(Effective January 1, 2022)
Easier avenue to amend CC&Rs to remove unlawful rental restrictions; Extended compliance deadline.

Existing Law. Recent changes to the law significantly limited the types of rental restrictions HOAs were able to enforce (e.g., prohibiting rental caps stricter than 25% of the separate interests), as well as required HOAs to amend their governing documents (such as their CC&Rs) to remove any unlawful rental restrictions before January 1, 2022.

New Law. AB 1584 extends the deadline for amending documents to remove unlawful rental restrictions to July 1, 2022. It also provides an easier avenue to amend CC&Rs in this regard by allowing the board to amend the CC&Rs, without membership approval, by following a notification process similar to that which is utilized for making changes to the HOA's operating rules.

HOAs should consult with legal counsel to ensure compliance with the law’s mandate that (a) unlawful rental restrictions are not being enforced and (b) unlawful restrictions are removed from the HOA's governing documents before July 1, 2022.

**For a thorough breakdown of types of rent restrictions that an HOA may now adopt and enforce, click here to read our FindHOALaw page entitled "Limitations on Rental Prohibitions."
SB 9 | URBAN LOT SPLITS; TWO-UNIT PROJECTS
(Effective January 1, 2022)
Circumventing single-family zoning standards to permit owners to split their lots and develop two-unit projects.

Existing Law. Under existing law, property owners are not permitted to split their lots and/or build multi-unit projects on residential lots that are already zoned for single-family use.

New Law. SB 9 is a controversial bill that was enacted to help combat California’s housing crisis. Effective January 1, 2022, property owners will be permitted to either add a second home on their existing single-family lot or construct a duplex, as well as to split their lot into two (2) separate lots and then construct up to two homes on each lot.

While SB 9 does not explicitly override CC&R restrictions that would prohibit SB 9 developments (e.g., those that prohibit subdividing or partitioning lots, constructing additional residences, etc.), HOAs may not already have these types of CC&R restrictions in place. We strongly recommend that HOAs consult with their legal counsel to determine what, if any, amendments need to be made to their CC&Rs to preserve the single-family character of their communities

SB 391 | MEETINGS DURING GOVERNMENT EMERGENCY
(Effective January 1, 2022)
New exemption from physical location requirements when gathering at a meeting is unsafe due to a government-declared state of emergency.

Existing Law. When conducting a board meeting by teleconference, an HOA is required to designate a physical location where at least one director or person designated by the board is present and where members can attend in person. When conducting an election entirely by mail, ballots must be counted and tabulated in public at a properly noticed board or membership meeting, requiring a physical location where members may attend and observe the inspector of elections.

New Law.  SB 391 removes the physical location requirements for such meetings where there is a federal, state or local government-declared emergency that renders physical meetings unsafe, so long as the HOA satisfies certain notice and procedural requirements set forth in new Civil Code § 5450.

SB 392 | DOCUMENT DELIVERY; MEMBER CONTACT INFO
(Effective January 1, 2022)
Electronic delivery of individual notices; expanded opt-out options for the sharing of members’ private information. 

SB 392 makes numerous changes to existing Civil Code sections pertaining to methods of document delivery, solicitation of member contact information, how notices and other documents may be delivered, and components of an HOA's membership list.

Notable changes include the following:
  • If an HOA maintains a website, then general notices (e.g., board meeting notices) may be posted on the website if designated by the HOA for such purposes;
  • More specific language regarding a member’s ability to opt-out of sharing their email address on the association’s membership list;
  • New restrictions on the improper use or transmission of a member’s personal information;
  • New requirements for notifying members of their ability to receive communications via email as well as delivery of certain HOA records to both an owner’s primary and secondary addresses. 
SB 432 | ELECTIONS
(Effective January 1, 2022)
Expansion of timeline to hold a special membership meeting called by petition of the members; Candidate disqualifications; Inspectors of elections.

Existing Law. Existing law allows HOAs to disqualify persons from nomination under specified circumstances. Existing law also permits an inspector of elections to oversee additional persons to verify signatures and tabulate votes, but it does not specify the qualifications for such persons. Finally, existing law frustrates an HOA's ability to comply with timelines set forth in the Corporations Code for holding special meetings of the members called by petition while, at the same time, complying the balloting-requirements and procedures in the Civil Code.

New Law. SB 432 allows HOAs to set term limits for directors and use term limits as a basis for disqualification of a candidate when an election is being conducted by acclamation. SB 432 also imposes the same qualifications for “additional persons” being overseen by the inspector of elections as those which apply to inspectors of elections. Finally, SB 432 extends the timeline for conducting special meetings of the members to align with the Civil Code’s requirements governing HOA elections.
NEW CASE LAW
Short-term Rental Restriction is a 'Prohibition' Under Civil Code Section 4740
Brown v. Montage at Mission Hills
A 30 day rental period minimum constitutes a rental "prohibition" that is binding only on owners who buy into the HOA after the prohibition is adopted; Short-term rental activity not considered a "commercial use" of property that is different from longer-term rental activity.

Factual Background. The owner purchased a unit for the express purpose of renting it out as a short-term rental. The HOA later adopted a 30-day minimum rental period. The owner sued on the basis that she was exempt from that requirement because Civil Code § 4740 provides that homeowners are not subject to governing document provisions that “prohibit[ ] the rental or leasing of any of the separate interests … unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to their separate interest.” The HOA argued that the minimum rental period constituted only a “restriction” (not a “prohibition”) and was therefore binding on the owner. The HOA also argued alternatively that the owner’s conduct violated the HOA's existing restriction on commercial use.

Court’s Ruling. Section 4740 applies to any kind of rental restriction or prohibition that did not exist when the owner bought her unit.

“In our view, the statute’s legislative history demonstrates that the statute’s goal is to exempt CID property owners from any kind of rental prohibition or restriction that did not exist when the owner acquired title to the property.”

The court saw no distinction between short-term rentals and longer-term rentals that would support the HOA's argument that short-term rentals are commercial use but longer-term rentals are not.

HOA Has No Duty of Care for Offsite Injuries
Issakhani v. Shadow Glen HOA
HOA had no duty of care to protect visitors from offsite injuries stemming from the lack of available onsite guest parking spaces.

Factual Background. Condominium association in Sun Valley was developed under a 1979 ordinance requiring 34 guest parking spaces. By 2014, only 6 of the 170 spaces were marked as guest parking spaces.

Plaintiff drove to visit a friend in the HOA and was unable to find guest parking. She parked on the far side of a five-lane public street next to the HOA. She jaywalked and was struck by a car, suffering a traumatic brain injury. Plaintiff sued the HOA for negligence and premises liability based on the HOA's failure to maintain the number of guest parking spaces required by the development ordinance. Plaintiff’s claims required her to establish that (a) the HOA owed her a legal duty of care, (b) that it breached that duty, and (c) that it was the main cause of her injury.

Court’s Ruling. A property owner's common law duty of care does not encompass a duty to provide on-site parking for invitees to protect them from traffic accidents occurring offsite as they travel to and from the premises. It is unreasonable to impose a duty on every property owner to provide sufficient on-site parking for every possible guest to avoid injury to those guests trying to access the property from outside the premises.
Attorney's Fees Award in Dismissed Case
Champir v. Fairbanks Ranch
A party to a lawsuit that achieves its main litigation objective may seek recovery of its attorneys’ fees even if the case is dismissed before final judgment. 

Factual Background. Plaintiff sued the HOA to stop it from installing a traffic signal adjacent to Plaintiff’s home. Plaintiff obtained a temporary restraining order (“TRO”) enjoining the HOA from constructing the traffic signal next to Plaintiff’s home. The HOA, however, was successful in modifying the TRO to allow it to go forward with constructing the traffic signal provided that it was not constructed on any part of owner’s land. Nevertheless, court issued a preliminary injunction enjoining the HOA from further construction because the owner had demonstrated a likelihood of success on the merits with respect to their breach claim.

The Court subsequently dissolved the injunction allowing the HOA to proceed with the project due to a material change in the facts—the HOA had secured the requisite membership approval thereby correcting the breach. Both parties filed a motion for attorneys' fees claiming to be the “prevailing party.” Trial court concluded that the Plaintiff was the successful party.

Court’s Ruling. Plaintiff was the prevailing party because it achieved its main litigation objective: to get the HOA to comply with the governing documents (i.e., to obtain membership approval to construct the traffic lights). The Court rejected the HOA's argument that Plaintiff was not entitled to its attorneys' fees because Plaintiff voluntarily dismissed the action: “such conduct does not deprive them of prevailing party status.”

This case is helpful in situations where an HOA is forced to file suit against an owner to resolve the owner's violation. If the owner corrects the violation during the pendency of the lawsuit, the HOA will preserve its right to recover its attorney's fees even though the case gets dismissed before final judgment is entered.
FIRM NEWS
First Annual TLG Legal Symposium a Hit!

What an incredible day at the beautiful Laguna Cliffs Resort spent educating board members and community managers on a variety of legal topics affecting California HOAs. Thank you to all our incredible sponsors who made the event possible, our talented team at TLG for executing an entertaining and engaging program, and our keynote speaker Louie Brown for flying down to Southern California to provide our attendees with valuable insight on the legislative happenings in Sacramento and the impact we can make at the local level.

We look forward to seeing you all again at next year's TLG Legal Symposium!
MAKING IT RAIN FOR OUR CLIENTS!
Alterra smashes its annual recovery record in 2021: nearly $3 MILLION recovered!
 
TLG is proud to provide HOAs throughout the state with access to highly-advanced, comprehensive collection services through our affiliate company, Alterra Assessment Recovery. Alterra was founded with the goal of providing efficient and effective collection services, utilizing the best technology available and a skilled team of professionals.

The dedicated and phenomenal team at Alterra recovered $2,899,600.40 in debt for its clients in 2021. This shattered Alterra's previous annual record by nearly one million dollars.

If your community is looking for help recovering assessment debt, request a proposal from Alterra and experience a level of service and efficiency that is second to none.
Another Banner Year of Growth for TLG!

TLG was privileged to welcome over 120 new communities to TLG's client family in 2021! We appreciate the trust these communities have placed in our team, as well as the relationships we've been fortunate to build with the over 1,200 communities our firm represents throughout California.
Your Community. Your Counsel. TM