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Annual Request for Owners’ Addresses and Owners’ Preferred Methods of Delivery

Added to the Davis-Stirling Common Interest Development Act (“DSA”) by the California legislature in 2016 and further amended in 2021 and 2022, Civil Code section 4041  requires a common interest development association (“association”) to annually solicit the following information from owners: (1) the owner’s preferred method of delivery for receiving notices from the association, which includes the option of receiving notices at a mailing address and/or an email address; (2) an alternative or secondary method of delivery for receiving notices from the association, which includes the option of receiving notices at a mailing address and/or an email address; (3) the name, mailing address, and (if available) email address of the owner’s legal representative, if any, including any person with power of attorney or other person who can be contacted in the event of the owner’s extended absence from his/her separate interest; and (4) whether the owner’s separate interest is occupied by the owner, rented, developed but vacant, or undeveloped.  (Civil Code § 4041(b).) Civil Code section 4041 also requires owners to provide written notice of this information to their association annually. (Civil Code § 4041(a)(1)-(4).)

The annual solicitation notice sent by an association must include a statement that owners are not required to provide the association with an email address and a simple method for how an owner can notify the association in writing if they would like to change their preferred delivery method for receiving notices from the Association. Associations are required to enter the information received from owners in the association’s books and records at least thirty (30) days prior to the association making its annual budget report and policy statement disclosure as required by Civil Code section 5300.  (Civil Code § 4041(b).) If an owner fails to provide their association with their preferred delivery method, the last mailing address provided in writing to the association by the owner, or, if none, the owner’s property address within the association is the owner’s default preferred method of delivery. (Civil Code § 4041(c).)

Beginning January 1, 2023, associations are required to deliver documents using an owner’s preferred delivery method if such documents are required by law to be delivered via “individual” notice or “individual” delivery.  (Civil Code § 4040(a)(1).)  As noted above, if an association has no record of an owner’s preferred delivery method and the document must be sent by “individual” delivery, an association must mail the document to the owner’s address last shown in the association’s records.  (Civil Code § 4040(a)(2).)

Also beginning January 1, 2023, associations must deliver copies of its annual budget report and policy statement disclosure as required by Civil Code section 5300 et seq., and copies of any and all assessment collection notices as required by Civil Code section 5650 et seq., including copies of any notice of default or other nonjudicial foreclosure related notice contemplated in Civil Code section 5710 to not only the owner’s preferred mailing and/or email address, but also to the owner’s secondary mailing and/or email address too, if one is identified by an owner. (Civil Code § 4040(b).)

It’s important to note that Civil Code § 4040(c) provides that an unrecorded governing document provision (e.g., a bylaw or rule provision), which details a specific method of delivery, does not constitute an agreement by the owners to that delivery method.  In other words, if a rule or bylaw provision provides for a specific method of individual delivery that is contrary to an owner’s preferred delivery method, the association must use the owner’s preferred delivery method.

Consequently, boards and managers can no longer assume that an owner’s mailing address in the association is an owner’s preferred method of delivery.  Rather the associations must confirm whether an owner has specified a preferred method of delivery before sending that owner documents from the association if those documents must be sent via individual delivery.

Formation and Use of Executive Committees

 

By Karyn A. Larko, Esq.

 

** This article was published on CACM’s The Law Journal – Winter 2022 Issue.

A committee is a group of persons appointed by an association’s board of directors to perform a specific task or tasks.

The scope of authority of a committee is largely dependent on its composition. A committee composed solely or partially of persons other than board members is generally tasked with advising the board on specific matters or exercising powers granted to that committee by the governing documents (e.g., some architectural review committees (“ARCs”).

Conversely, executive committees (“ECs”) are composed of two or more current directors and only current directors in accordance with California Corporations Code § 7212. ECs are given decision-making power that would otherwise be exercised by the board. An example of an EC is a litigation committee comprised solely of directors, established to communicate with the association’s legal counsel and make decisions pertaining to a lawsuit. Another example is an ARC comprised solely of directors tasked with exercising the board’s authority under the governing documents to approve or reject architectural applications.

Forming an EC

An EC should be formed when a board needs to delegate tasks for which it is responsible. This need may arise when a board is dealing with a complex, time-consuming matter that is ongoing and necessitates attention between board meetings. This need also exists when a dispute exists between a director and the association. In the latter example, the interested director (i.e., the director whose interests are contrary to the association’s interests) should not serve on the EC due to their conflicting interests.

California Civil Code § 5350 requires directors to recuse themselves from voting on certain matters. In some instances, it may also be prudent to form an EC to address these matters.

ECs should not be formed to exclude a director from generally participating in board discussions and votes. However, if a director is jeopardizing the interests of the association by, for example, revealing confidential or privileged information to others, it may be appropriate to form an EC to exclude that director from meetings whereat the Board discusses matters that, if made public, might expose the association to liability or disadvantage the association in a dispute. Your boards should consult with their association’s legal counsel before forming an EC for this purpose as taking this action can also create legal issues for the association.

Why Form an EC?

There are benefits to having ECs. An EC comprised of directors willing and able to volunteer more time to the association can address complex, time-consuming matters more quickly than the entire Board. Additionally, since an EC has fewer members, scheduling meetings and coming to a collective decision on matters is often easier. Finally, if less than a quorum of directors serves on an EC, the EC meetings are not subject to the Open Meetings Act (i.e., the meetings are not subject to the same notice and agenda requirements as board meetings).

In the event of a dispute involving a director, especially a dispute that could lead to litigation, there are important additional benefits to establishing an EC of disinterested directors (i.e., directors not adverse to the association in the matter) to handle the dispute. By establishing the EC, the board can prevent the interested director from obtaining privileged or confidential communications and documents related to the matter (e.g. correspondence between the EC and the association’s legal counsel, expert findings), thereby better protecting the association’s attorney-client privilege and its interests. The board can also avoid the appearance of impropriety and better protect the association and directors individually against potential liability.

In order to preserve the association’s attorney-client privilege, however, all EC meetings pertaining to the director dispute must be held in executive session and all legal guidance, EC discussions, meeting minutes and other documents and information related to the dispute cannot be disclosed to persons outside of the EC, including other directors.

Forming an EC

Have your boards review their governing documents prior to establishing an EC. The governing documents may already establish the EC, grant the board committee-making authority or, conversely, limit the board’s committee-making authority, as well as impose requirements on how ECs are formed or who may serve on them.

Unless otherwise provided for in the governing documents, ECs may be formed by a resolution or charter adopted by a quorum of the board pursuant to Corporations Code § 7212. A resolution is an official expression of the opinion or will of the board that includes the reasons for that opinion or will. A charter is a founding document that is typically more detailed than a resolution and outlines the EC’s responsibilities and authority.

When forming an EC, your boards should consider: 1) whether any directors have conflicts of interest that disqualify them from appointment or perceived conflicts that make appointment unwise; 2) whether certain directors have knowledge and experience that would benefit the EC; 3) the time commitment needed to serve on the EC; 4) whether the governing documents dictate which directors serve on the EC (e.g. based on the offices they hold); 5) whether California law dictates the composition of the EC (e.g. Civil Code § 5501 requires the treasurer to serve on an EC that reviews the association’s financials); and 6) the willingness of directors to serve on the EC.

The board should also keep in mind that if the EC is composed of a majority of the board, the same notice and agenda requirements for board meetings will apply to EC meetings. Having said this, the authority of an EC composed of a quorum of the Board is less likely to be challenged. Thus, ECs established to handle controversial matters should generally include a quorum of the board.

 

Multiple Choice Questions (correct answers in bold)

An executive committee may be composed of two or more:

a) current and former directors.

b) current directors and general members.

c) current directors and non-member experts on the matter.

d) current directors only.

 

Which of the following is not an appropriate reason for a board to form an executive committee?

a) a complex, time-consuming matter has arisen for the association

b) a majority of directors do not like the personality of another director

c) a dispute exists between a director and the association

d) the governing documents have granted the Board the authority to do so

 

Which of the following statements pertaining to executive committees is accurate?

a) An executive committee must be formed by a quorum of the board, and all executive committee meetings must be properly noticed pursuant to the Open Meetings Act.

b) An executive committee may be formed by a quorum of the board, in which case the executive committee meetings must be properly noticed pursuant to the Open Meetings Act.

c) An executive committee may be formed by a quorum of the board, but, in either case, notice of executive committee meetings should not be provided to the membership.

d) An executive committee may not be formed by a quorum of the board, and notice of executive committee meetings should not be provided to the membership.

 

 

*This article was originally published in The Law Journal Winter, 2022 and was adapted from the original article, Formation and Use of Executive Committees, as authored by Karyn A. Larko, Esq.

The New Normal

 

By Rhonda R. Goldblatt, Esq.

We are now entering the third year of the COVID-19 pandemic. Summertime Is approaching, and with the new season comes questions regarding how associations should manage their common area recreational facilities during the current phase of the pandemic.

Governor Newsom declared a State of Emergency on March 4, 2020, quickly followed by a Stay at Home Order on March 19, 2020. The State of California and local municipalities began Issuing COVID-19 regulations soon after, including regulations, restricting gatherings, mandating mask-wearing, limiting the use of pools, gyms, and playgrounds, setting forth cleaning protocols, and more. These regulations often arrived and changed at rapid-fire pace. Association managers, like many Californians across a wide swath of Industries, struggled to keep up with the changes.

The COVID-19 regulations in place during the last two summers provided some sense of structure (albeit and often onerous and confusing one) as associations were required to follow the law. What other option was there?

Now, many COVID-19 regulations have been rolled back, but California’s State of Emergency remains in place. The pandemic, unfortunately continues, mutating into different strains that dominate the news and bring more uncertainty. We have not entirely returned to a pre-COVlD world, as much as we wish to do so. So how, to approach the upcoming summer?

Associations may consider doing the following:

Defer to the law. New governmental restrictions, such as mask mandates, may come into place in the event of new surges. Associations can consider adopting rules that mirror existing governmental restrictions verbatim in order to bolster the reasonableness of those rules. Or, associations can simply refer residents to the governmental regulations for a more hands-off approach.

Address clashes. At least anecdotally, it seems that confrontations are on the rise as Americans enter the third year of a difficult, stressful pandemic. Associations should Investigate and appropriately address any governing document violations, including nuisances, harassment violations, or hostile environment harassment based on a protected status.

Clean smarter. Hopefully, the longer the pandemic goes on, the more we learn about how COVID-19 and its mutations spread. Associations should rely on their cleaning and janitorial professionals regarding best practices for maintaining common area facilities in as reasonably safe a condition as possible.

Continue to rely on experts. Associations can and should continue to rely on qualified experts like cleaning professionals, legal counsel, and Insurance representatives to minimize the associations’ liability, Including with regard to managing the common area and holding meetings and events.

With these steps, associations can ready themselves for the upcoming summer, as we settle into the “new normal” of the post-shutdown world.

 

 

 

* This article was originally published in CAI San Diego  Community Insider  Magazine in the Summer  2022 edition and was adapted from the original article, The New Normal as authored by Rhonda R. Goldblatt, Esq.

Refresher on the Architectural Approval Process

By  Karyn A. Larko, Esq.

** This article was published on CACM’s The Law Journal – Fall 2022 Issue.

Most CC&Rs require owners of the separate interests to obtain association approval prior to making structural alterations or alterations to the exterior of their separate interests or common area.

In some instances, the language is vague, imposing the obligation on owners, but providing few details. In other instances, the CC&Rs set forth in detail the process owners (and the association) must follow.

Directors should be encouraged to review their association’s CC&Rs so they are well-versed on the architectural approval process (“Process”) they must follow. Likewise, if the CC&Rs provide for an architectural review committee (“ARC”), ARC members should be encouraged to review the Process.

Having said this, “knowing” the Process is not enough. The board and ARC, if any, must also comply with the Process. Failure to do so can lead to the inadvertent approval of alterations that are not acceptable to the board or ARC.

Many CC&Rs state that if an application is not approved or denied within a specified time period, the application is automatically approved or association approval is no longer required.

The inadvertent approval of alterations can result in alterations that are detrimental to the appearance of the community and property values, or that undermine the structural integrity of a building. Inadvertent approval of alterations can also lead to potential liability for the association and, in some instances, individual board or ARC members.

On a related note, be sure your boards and ARCs know the time periods imposed by California law for reviewing solar energy systems and electric vehicle charging station applications. California Civil Code (“CC”) §714(e) (2)(B) provides that unless a solar energy system application is denied in writing within 45 days of submission, it is deemed approved.

CC §4745(e) provides that if an electric vehicle charging station is not denied in writing within 60 days of submission, it is deemed approved. The Civil Code controls in the event the governing documents grant a longer review period.

Federal law also imposes a deadline for reviewing applications for qualifying satellite dishes and antennas. If your clients require approval for the installation of these devices, encourage your boards to consult with their association’s legal counsel on this matter

REVIEWING APPLICATIONS

The CC&Rs generally identify the factors the board or ARC is to consider when evaluating applications, such as conformity of the alterations with the governing documents, the quality of the proposed workmanship, the design and harmony of the alterations with existing structures, the location of the alterations in relation to surrounding structures, topography, and finish grade elevation.

It is important that boards and ARCs understand the scope of their authority and duty when evaluating applications, and perform their evaluation in keeping with this scope.

If an application contains a disability related request for a reasonable accommodation, the board or ARC should consult with the association’s legal counsel on how best to evaluate the application.

APPROVING/DENYING APPLICATIONS

Boards and ARCs must act reasonably and not in a capricious or arbitrary manner when deciding applications. This does not mean that if they have previously approved an alteration, they must approve all future applications for the same or similar alterations.

Nor does it mean that if they have previously denied an alteration, they must do so in the future. However, they should have objective reasons for treating the applications differently and these reasons should be noted in the meeting minutes.

For example, the location of a proposed alteration in relation to other structures might be a basis for denying a request that was previously approved elsewhere in the community.

CC §4765(a)(4) mandates that applications be approved or denied in writing, and that if an application is denied, the notice of denial must include the reason(s) for the denial and a description of any procedure the owner must follow to appeal the denial.

Your boards and ARCs may impose reasonable conditions when approving applications, subject to any limitations imposed by the governing documents. If any conditions are imposed, these conditions should be clearly set forth in the notice of approval.

APPEALS

If applications are denied by an ARC, other committee, or subcommittee of less than the whole board, CC §4765(a)(5) grants owners the right to appeal the denial of their application to the board. Section 4765(a)(5) does not extend this same right of appeal to other owners who may object to the approval of a neighbor’s application.

Some governing documents provide an appeal process regardless of the composition of the body reviewing applications. In such instances, this process must be followed even if the right to appeal is not imposed by the CC.

If owners are entitled to appeal, the board must promptly consider their appeal at a duly noticed open session board meeting, subject to any additional requirements imposed by the governing documents.

ARCHITECTURAL GUIDELINES

CC §4765(a)(1) requires associations to have a fair, reasonable, and expeditious procedure for deciding applications, including the maximum time for responding to applications and appeal requests. This procedure must be set forth in the governing documents, which include CC&Rs and rules or guidelines.

Therefore, if any of your clients have CC&Rs that do not include a detailed description of the architectural review process or have concerns about the current process, they should consult with legal counsel.

If authorized by the governing documents, your boards should adopt architectural guidelines that set forth any standard restrictions on commonly requested alterations. By doing so, they reduce the potential for inconsistent application decisions and claims of wrongdoing.

ANNUAL DISCLOSURE

CC §4765(c) requires associations to notify their members annually of any requirements for association approval of physical changes to property. This notice must describe the types of changes that require association approval and include a copy of the association’s process.

 

 

*This article was originally published in The CACM Law Journal, Fall 2022 edition and was adapted from the original article, Refresher on the Architectural Approval Process) as authored by Karyn A. Larko, Esq.

 

Parking and Requests for Accommodation for a Disability

 

By Jillian M. Wright, Esq.

Parking requests to accommodate a disability bring about a particular set of issues and questions.  What requests are reasonable? If the board deems a request reasonable, who pays for the accommodation, if a cost is involved? What if parking spots are so limited in the community that accommodating the request seems impossible? What to do?

When in receipt of an accommodation request, a board is strongly encouraged to engage in an interactive process and make a good faith effort to consider the following when deciding how to handle the request:

Does the requesting party have a qualifying disability?

If someone has a physical or mental impairment which substantially limits a major life activity like walking, talking, hearing, seeing, breathing, learning, performing manual tasks or caring for themselves, then federal law considers them disabled. State law offers broader protection; disability is defined as an impairment that makes performance of a major life activity “difficult.” If a requesting party’s disability is obvious, e.g., they use a wheelchair, then it could be considered discriminatory to ask for verification of the disability.

Does the requesting party have a disabled person placard or license plate?

Oftentimes, when requesting a parking accommodation the requesting party will have a disabled person placard from the DMV. Presuming the plate or placard is current and valid, then this should constitute sufficient verification of a disability related to use of a vehicle

Is the request reasonable?

Every community’s parking situation differs and so too will the reasonableness of a request for accommodation. One main factor to consider is whether the request is even possible. For example, if the requesting party asks for a parking space closer to their unit but there are no common area spaces closer to the unit, the board likely does not have the power under the governing documents to displace another owner from their deeded or assigned parking spot.

A board should also consider whether there is a causal link between the disability and the request for a parking accommodation. Not every disability impacts the use of a vehicle and parking. If a person with a mental disability requests a parking accommodation, it would be reasonable to request verification to identify the link between the request and the disability.

Another consideration is cost. Typically, granting parking variances have minimal costs to the community while physical modifications can become costly. If the cost to the association is minimal and the benefit to the disabled person is significant it will be difficult to argue that the request is not reasonable.

Is the request necessary to allow equal enjoyment of the community or just convenient?

A requesting party is not entitled to an accommodation if the accommodation is merely convenient, but they are entitled to a reasonable accommodation if the accommodation is necessary to allow them the equal use and enjoyment of their home or the common area facilities.

One federal case illustrates this point well: In Sporn v. Ocean Colony Condominium Ass’n. (D NJ 2001) 173 F.Supp.2d 244, a disabled owner sought and received permission to use a parking space closer to his unit, but Sporn refused to relinquish his assigned space despite the association’s parking rules requiring such transfer. Sporn argued that he needed the space for his guests.  The Sporn court held, “an accommodation should not ‘extend a preference to handicapped residents [relative to other residents], as opposed to affording them equal opportunity'” and “accommodations that go beyond affording a handicapped tenant ‘an equal opportunity to use and enjoy a dwelling’ are not required …”(Citations omitted.) The association’s parking policy requiring the relinquishment of one’s deeded parking space granted the same rights to disabled tenants as it did to non-disabled residents. When plaintiff Sporn was asked to relinquish his parking space pursuant to the association’s parking policy, Sporn refused and when asked why he needed two spaces, Sporn did not offer any explanation related to the disability, but instead responded, “because during the summertime we couldn’t get any parking for any of our family that came down.” (Id.). This comment lead the Sporn court to determine that Sporn’s request for “reasonable accommodation” was really a request for accommodation coupled with a demand for special treatment.

Even if the board determines the requesting party is disabled and accommodation is necessary, unique concerns arise that are specific to parking accommodation requests:

Are common area disabled parking spots required by law/building code?

Not necessarily.  While disabled parking spots are common in public accommodations (hotels, restaurants, grocery stores, etc.), if the community is not a public accommodation subject to the Americans with Disabilities Act and was built prior to building code regulations requiring disabled parking spaces, then the association likely does not need to convert any open parking spaces to disabled parking spaces. When asked, each community should review its conditional use permit and consult with a licensed contractor or architect familiar with the applicable building code. Moreover, construction of additional disabled parking spots is often impossible because there is limited space or a limited number of common area parking spaces.

What if there are no open common area spaces to provide?

An association is only required to accommodate a reasonable request to the extent possible. If, for example, there are no spaces closer to the requesting party’s residence or there is no way to convert an existing common area space to make it more accessible, then the association should engage in the interactive process with the requesting party to determine if there is any reasonable alternative which alleviates some of the requesting party’s concerns. Every community and disability is different, so it is best to consult with legal counsel if approval of a reasonable accommodation seems impossible.

Does the association have to help pay for the accommodation?

Maybe! Some accommodation requests include physical alterations to the parking lot – painting new lines, making and installing a “reserved” sign, etc. Such alterations might sound more like a reasonable modifications rather than accommodations. Owners are often responsible for the cost to install reasonable modifications if it benefits them individually. However, the courts have treated requests for parking spaces as requests for reasonable accommodations, making associations responsible for some costs.  Providing a parking accommodation could include creating signage, repainting markings, redistributing spaces, or creating curb cuts.  This list is not exhaustive and there is no clear law on how much expense is unreasonable.

Can a disabled resident allow their non-disabled guests to park in a spot afforded to them as an accommodation?

Yes. As mentioned above, disabled persons must be afforded equal enjoyment of the community. If an association would allow any other resident to have guests park in their assigned parking spot, then the association must also extend this right to disabled persons, even if their guests are not disabled.

The resident has a disabled parking placard and claim that they can park anywhere with the placard regardless of the rules. Is this true?

No, not necessarily. While a resident with a disabled parking placard or license plate may park in all disabled parking spaces, when parking on private property they are still subject to the reasonable rules of the community. For example, they may not park in a fire lane or in a manner that blocks the ingress and egress of other residents. Another example: if there is a limit to parking in a guest spot for more than 72 hours, this rule applies to all guest spots, including disabled parking spots. The disabled parking placard or plate does not give them the right to store their vehicle in a guest parking spot. However, we strongly encourage consulting with legal counsel before towing a vehicle with a disabled parking placard or plate.

Can the association explain to other inquiring residents why someone is receiving a special parking accommodation or variance?

No. The association must keep all information relating to someone’s disability confidential.

This area of law is complicated. A board should carefully consider each reasonable accommodation request and engage in the interactive process to avoid discrimination claims, even if there is limited parking in your community. When in doubt, contact your legal counsel.

Using Drones for Inspections

 

Four Considerations Before Using Drones for Community Association Inspections

Drones, also known as unmanned aircraft systems, are nearly everywhere. Advances in technology have made drones smaller, cheaper, and easier to use, and therefore more accessible to average users.  As drones become more accessible, community associations may wonder whether drones may be used to help conduct inspections of common area components. Drones can provide a host of benefits for associations including, but not limited to, lowered costs because inspections can be completed more quickly, fewer accidents in inspections, and better-quality documentation in the form of video footage.  However, before moving forward with using drones for inspections, boards should contemplate the following considerations and consult with the association’s legal counsel.

First, laws are still developing in the drone realm.  As of now, drones are primarily regulated by the Federal Aviation Administration (“FAA”).  The FAA requires pilot certification, registration of drones, and a minimum age of pilots if the drone is used for commercial purposes.  There are also strict requirements regarding speed and altitude. The state and municipalities may impose additional requirements.  Associations should be sure to abide by all federal, state, and local requirements for drones.

Second, associations should craft appropriate policies regarding the use of drones.   Since drones are a relatively new phenomenon, an association’s governing documents may not address the use of drones.  Consultation with the association’s legal counsel is recommended to craft appropriate policies regarding the use of drones, including with respect to notice requirements for inspections.

Third, using drones for inspections of common area components may give rise to privacy concerns.  In California, laws prohibit entering the airspace of another in order to capture an image or recording of that individual engaging in a private, personal or familial activity without permission.  While an association may intend to use a drone for an inspection of a common area component only, the drone may inadvertently capture a private or family activity which could open the association up to liability.  Rules and policies should be carefully tailored in order to protect the association from liability and owners from unintentional privacy intrusions.  Consultation with legal counsel is also imperative with respect to addressing privacy concerns.

Fourth, since drone use is still a relatively new endeavor for associations, associations should be sure to consult with their insurance providers to make sure that the association’s policies cover claims arising out of the association’s use of drones.

While drones may be the wave of the future, associations should proceed with caution before using them for common area inspections.  A careful and thorough examination of the considerations outlined above, coupled with consultation with association counsel and the association’s insurance professional, may help to protect associations from potential liability.

 

 

*This article was originally published in San Diego Community Insider in the Fall 2022 edition and was adapted from the original article, Using Drones For Inspections).

 

 

Key Tips for Levying Special Assessments

 

By Karyn A. Larko, Esq.

** This article was published on CACM’s The Law Journal – Summer 2022 Issue.

There are times when levying a special assessment is necessary or prudent to obtain needed funds. However, if not well planned and properly implemented, a special assessment can turn into a nightmare for the Board, and for you.

Here are some key tips to help avoid such a nightmare.

Ascertain Whether a Member Vote is Required

California Civil Code (“Code”) § 5605 controls when a member vote is needed to levy a special assessment. No matter what an association’s governing documents state, a member vote is not required to levy a special assessment if that special assessment individually, or when combined with any other special assessments levied the same fiscal year will not exceed 5% of the association’s budgeted gross expenses for that fiscal year. Conversely, a member vote is always required if the special assessment individually, or when combined with any other special assessments levied the same fiscal year will exceed 5% of the association’s budgeted gross expenses.

The Civil Code Sets the Member Approval Requirement

If member approval is required, Code § 5605 also dictates the votes needed to approve the special assessment, as well as quorum. The affirmative vote of a majority of a quorum is required to pass a special assessment.  A quorum is more than 50% of the members.

Comply with the Civil Code When Conducting the Vote

A member vote to approve a special assessment must be conducted using the double-envelope secret ballot voting process set forth in Code § 5100 et seq. In short, this means providing all members with a ballot, two balloting envelopes and the association’s election rules at least 30 days before the voting deadline. (The election rules can be omitted if they are posted on the association’s website and the ballot contains the language mandated by Code § 5105.) It also means having one or three qualified inspectors of elections open and count the ballots at a duly noticed meeting whereat the members can observe this process, and providing members with notice of the vote results within 15 days.

Notify the Members

Regardless of whether a member vote is needed, members must be given written notice of a special assessment no less than 30 days and no more than 60 days before that special assessment becomes due in accordance with Code § 5615. If a member vote is required, this notice can be combined with the notice of the outcome of the vote that must be provided to members so long as:  1) this notice is provided via “individual delivery” and 2) the special assessment will become due between 30 and 60 days after this notice is given.

Payment is Important

It goes without saying that when planning a special assessment, it is critical to consider when the funds will be needed. However, there are other factors that should also be considered.

If members will be voting on whether to approve the special assessment, giving members more than one payment option (e.g. the option of paying in one lump sum or in installments over time) may increase the likelihood of members voting in favor of the special assessment.

On the flip side, if members will be given the option of paying over time, it is possible that more members will decide to pay over time than expected. If some or all of the special assessment monies are needed quickly, this situation could result in a serious cashflow problem for the association.

If a special assessment is to be paid over time (e.g. monthly installments), it is important to secure the debt in case any members file bankruptcy or sell. The longer the payment period, the greater the likelihood of collection issues. However, securing the debt means going through the pre-lien and lien process, which can be costly for the members who are subject to this process. Thus, levying a special assessment that will or can be paid over time may only be a perceived benefit to members if the assessment amount will be significantly greater than the pre-lien and lien costs.

It is a good idea to have members who cannot pay a special assessment when due enter into a payment plan whereby they agree to pay the assessment within a longer period of time that is acceptable to the Board. Doing so will help the Board predict the association’s cashflow and prevent any misunderstandings as to what payment allowances the Board is granting.  It may also create good will with members who are struggling financially. However, a payment plan should generally be used in addition to, and not in lieu of a lien, because a payment plan will not secure the debt. A lien will.

In the event a member fails to pay the special assessment and that debt is not secured, the association’s only recourse for collecting the debt is to file a lawsuit against the member. The association cannot collect the debt via foreclosure unless the debtor still owns the separate interest and a lien is filed.

When in Doubt, Encourage the Board to Consult with Legal Counsel

While it may be tempting to save a little money by not consulting with the association’s legal counsel for guidance when levying a special assessment, making a special assessment misstep could cost the association a lot more in time and money. For example, a mistake could result in a missed opportunity for the association, create a serious cashflow problem, necessitate a second member vote and/or place the association in the position of having to return to members any special assessment payments received. It could also leave the association vulnerable to liability for violating the Code and unable to collect from delinquent members.

Solar Energy Systems: Regulating Owners’ Installation on Shared Multi-family Common Area Roofs

Jillian M. Wright, Esq.
Senior Attorney

Emily A. Long, Esq.
Senior Attorney

Since January 1, 2018, California common interest developments have been required to allow members to install solar energy systems[1] on shared multifamily common area roofs of buildings within which their units are located and on roofs of adjacent carports or garages. (See Civ. Code §§ 714.1, 4600 and 4746).  While we do not have an abundance of mid or high-rise common interest developments in the desert, we do see many buildings with shared multifamily common area roofs.

Luckily, the requirement to allow solar energy systems does not mean that associations are prohibited from implementing reasonable requirements to guide solar energy system installation and protect associations from liability. Below, we summarize some of relevant law’s important provisions on this topic, and provide further guidance on how to remain compliant.  Associations should work with counsel to develop guidelines that take into consideration the recommendations provided below.

  1. An association shall not establish a general policy prohibiting the installation or use of a rooftop solar energy system for household purposes on the roof of the building in which the owner resides, or a garage or carport adjacent to the building that has been assigned to the owner for exclusive use. (Cal. Civ. Code §714.1(b)(1).)

Owners cannot place solar panels or equipment on whatever common area they choose, but rather are limited to the buildings or structures in which they own. Also note, if a carport is adjacent to the building but is not assigned, the association is not required to allow an owner to place solar energy equipment on that carport.

  1. When reviewing a request to install a solar energy system on a multifamily common area roof, the association must require an applicant to notify each owner of a unit in the building on which the installation will be located of the application. (Cal. Civ. Code §4746(a)(1).)

For practical purposes, we suggest any association with common area roofs include this requirement in its guidelines to notify all owners in the same building. Associations may require the applicant to provide signatures from the notified owners or certified mail receipts showing the notification was sent as part of its application process. That way, if a neighboring owner challenges the owner’s solar installation, the association has proof that the owner complied with the guidelines.

  1. The association must require the applicant and each successive owner of that unit to maintain a homeowner liability coverage policy and provide the certificate of insurance within 14 days of approval and annually thereafter. (Cal. Civ. Code § 4746(a)(2).)

Unfortunately, the California Legislature did not clarify what an association can or should do if an owner does not comply with this requirement. We believe the Legislature would not force an association to permit a solar energy system to be installed if there is no proof that it is insured, so we think revocation of approval is appropriate in that instance. However, there are unanswered questions with respect to insurance and we recommend you discuss such concerns with association counsel.

  1. When reviewing a request to install a solar energy system on common area, the association may impose a requirement to submit a solar site survey showing the placement of the system. If the association requires this solar survey, it must “include a determination of an equitable allocation of the usable solar roof area among all owners sharing the same roof, garage, or carport.” (Cal. Civ. Code §4746(b)(1(B).)

This provision means the association can impose guidelines regarding aesthetic standards, so long as the guidelines do not “significantly increase the cost of the system or significantly decrease its efficiency or specific performance…” as described in Civil Code §714.  For example, an association can provide that the preferred location of all solar energy systems is one that results in the least visual impact.  However, if the only feasible location for solar panels to be placed is on a roof which directly faces the street and any other location would significantly decrease the system’s efficiency, the association cannot prohibit an owner from placing the solar panels on the roof that faces the street.

Additionally, this provision provides that an association “may” require that an owner provide a solar site survey showing the usable area of the rooftop and the proposed placement of the solar energy system.[2] We recommend every association with common area roofs require the submission of a solar survey in its solar guidelines. Alternatively, an association may perform its own solar site survey.

As for the “equitable allocation,” we interpret this provision to mean an association may require the owner to abide by the equitable allocation as called for in the site survey by using only the owner’s share of the rooftop and leaving the remainder available for other owners of units in the building. The phrasing of Civil Code §4746(b)(1) seems to indicate that the requesting owner may choose where the solar energy system is placed, so long as the owner owns a portion of the building on which it will be placed, and complies with other requirements.

  1. The association may require the owner and each successive owner to be responsible for costs of any damage to the common area, exclusive use common area or unit; costs for the solar energy system; and disclosures to prospective buyers. (Cal. Civ. Code §4746(b)(2).)

We highly recommend each association require an applicant to sign a license, maintenance, and indemnity agreement taking on the above responsibilities, which may then be recorded on title so all prospective buyers are put on constructive notice of the agreement. This agreement should include language which clarifies that the owner may be required to remove the solar energy system, at their cost, to allow for common area maintenance or repair.

  1. The association must still abide by Civil Code §714.

California Civil Code § 714(a) prohibits any declaration and other governing document provision(s) from prohibiting or restricting the installation of solar energy systems outright. As such, any restrictions on the installation of these systems are declared invalid if the restrictions “significantly” increase the cost of the system or “significantly” decrease the efficiency of the system.[3]  Civil Code § 714 also provides penalties for willful noncompliance and attorneys’ fees are recoverable by a prevailing party.[4]

Emily Long, Esq., Epsten, APC.  Epsten, APC is a community association law firm that has been providing solutions to Southern California common interest development legal issues since 1986.  You can reach Emily at [email protected].

“Associations should work with counsel to develop guidelines that take into consideration these recommendations for solar energy system installation on shared multifamily common area roofs.

 

[1] For purposes of these Guidelines, the term “solar energy system” refers to both solar domestic water heating systems and/or photovoltaic systems, as applicable to an Owner’s request.

[2] The cost to perform this survey shall not be deemed as part of the cost of the system as used in Civil Code §714.

[3]See Civil code § 714(d)(1)(A) and (B) for a further definition of what a “significant increase” or “significant decrease” means under the law.

[4] See Civil Code § 714(f) and (g).

 

*This article was originally published in CAI Coachella Valley’s HOA Living Magazine in the June 2022 edition and was adapted from the original article, Solar Panels and Solar Energy Systems: The Association’s Ability to Regulate Owners’ Installation on Common Area) as authored by Jillian M. Wright, Esq.

Emily Long, Esq., Epsten, APC.  Epsten, APC is a community association law firm that has been providing solutions to Southern California common interest development legal issues since 1986.  You can reach Emily at [email protected].

Associations should work with counsel to develop guidelines that take into consideration these recommendations for solar energy system installation on shared multifamily common area roofs.

Use of Association Technology by Members

By Rhonda R. Goldblatt, Esq.

 

  • Does your community have a media room?
  • Does your community offer computers for use by residents?

If so, this article is for you! Stay safe and ensure your community has a record of who is using association technology and how.

Logging into Association-Owned Devices

Some community associations allow residents to access the internet on association-owned devices, such as tablets or computers located in a community clubhouse or business center. However, it is important for such associations to consider implementing safeguards to keep residents accountable for their online activity and restricting accessing to certain websites and content, or in some unusual cases completely restricting access to the internet.

One method of monitoring and restricting access is requiring each resident to log in to association-owned devices using a unique, association-assigned username and password. This will make it easier for the association to track the activity of each resident, if needed. The association may also want to consider blocking specific residents from using its devices at all. For example, certain residents may be barred from accessing the internet as a result of prior criminal activities.

Our firm is not an expert in cybersecurity or information technology (“IT”). Therefore, we recommend consulting with a qualified expert regarding securing an association’s devices, implementing resident log-in requirements, restricting access to undesirable websites, etc. We also recommend consulting with association counsel regarding the type of digital safeguards each community is authorized to implement.

Finally, associations may want to consult with their insurance broker and legal counsel to ensure they’re adequately protected from potential liability in connection with a homeowner’s misuse of an association-owned device.

Here’s to (safely) surfing the Web!

Term Limits are Back in Vogue

By Rhonda R. Goldblatt, Esq.

Everyone has a change of heart sometimes, including, it seems, the California Legislature. By now, most people in the community association field are familiar with Senate Bill 323 (“SB 323”). SB 323 was chaptered into law in October 2019. It significantly amended Civil Code sections 5100, et seq., which govern community association elections. Among other things, SB 323 revised the law to only permit community associations to impose a few, specific qualifications on candidates running for an association’s board of directors. Term limits were not included among them, meaning that associations were effectively prohibited from disqualifying board candidates who had termed out.

That has now changed. The Governor signed Assembly Bill 502 (“AB 502”) into law in October 2021, which took effect on January 1, 2022. This new law added Section 5103 to the Civil Code, which permits elections by acclamation, provided certain requirements have been met. These requirements include:

(d) (1) The association permits all candidates to run if nominated, except for nominees disqualified for running as allowed or required pursuant to subdivisions (b) to (e), inclusive, of Section 5105.
(2) Notwithstanding paragraph (1), an association may disqualify a nominee if the person has served the maximum number of terms or sequential terms allowed by the association.
(3) If an association disqualifies a nominee pursuant to this subdivision, an association in its election rules shall also require a director to comply with the same requirements.

(Emphasis added.)

Section 5103(d)(2) effectively reintroduced the concept of permitting director term limits. Arguably, associations may now impose term limits on director candidates, so long as such term limit is clearly set forth in the association’s Election Rules.

This raises a question as to whether term limits only apply in elections by acclamation. It is curious that the Legislature reintroduced the concept of imposing term limits in the context of elections by acclamation, rather than simply stating that associations may impose this candidate qualification in all elections. Hopefully, the Legislature will clarify this issue with some clean up legislation in the coming years.

Another question is whether term limits in Bylaws are now enforceable again. We believe they likely are, but the association’s Election Rules will need to be amended accordingly.

Please reach out to your community association counsel if you have any questions regarding imposing term limits in your association’s board elections, the enforceability of term limits in Bylaws, or the procedure to amend Election Rules.