Generally, board members of common interest developments are volunteers dedicating their time, skills and energy to serve the communities within which they live. Indeed, without these director volunteers, community associations would be unable to properly function. Similarly, committee members are volunteers who work on specific projects within a community. Often, committee work is a valuable first experience which can entice a member to become more involved and to eventually run for the board. However, there is a steep learning curve upon entering the world of association governance.
In order to help board and committee members understand the association’s expectations for service, codes of conduct can be particularly helpful. Not only do codes of conduct codify association expectations, they can also serve to educate board and committee members and help minimize association liability. Boards might therefore consider adopting codes of conduct that cover the following topics, among others:
Prohibiting the acceptance of any gift, gratuity, favor, entertainment, loan, or any other item of monetary value by a board or committee member from a person who is seeking to obtain a contractual or other business or financial relationship with the association.
Clarifying that board and committee members may not engage in any writing, publishing, or speech that defames any other member of the board, committee, employee, or resident of the community.
Establishing that board and committee members may not knowingly misrepresent facts to the residents for the sole purpose of advancing a personal cause or influencing the residents.
Prohibiting board members from discussing sensitive and confidential matters discussed in executive session, outside of executive session, or with anyone who is not on the board (with the exception of management and association counsel).
Prohibiting board or committee members from seeking to have a contract implemented that has not been duly approved by the board.
Prohibiting board or committee member interference with an association contractor performing work.
Clarifying that board and committee members may not harass, threaten, or attempt through any means to control, instill fear or discriminate against any member of the Association, management company, service provider, or community resident.
Preventing interference by board and committee members with the system of management established by the board as a whole and the management company.
Reminding board members that they must operate as a board and do not have any individual authority unless it is specifically granted to them in writing by the board or the Association’s governing documents.
Often, codes of conduct may be adopted as rules of procedure by way of approval by the board at an open session meeting, rather than by following the rulemaking procedures spelled out in Civil Code section 4360. However, we encourage you to first speak with your association’s legal counsel to review your association’s governing documents and discuss your community’s particular needs prior to adopting such rules.
Enforceability of these codes of conduct is another important issue to consider when preparing draft rules. It is recommended that any code of conduct specifically list the consequences for a violation of the code of conduct. Reasonable penalties for violation might include: public or private censure by the board, removal of an officer title, and/or removal from committee service by the board. It is unlikely that violation of a code of conduct may result in unilateral removal of a board member by the board, but speak with your association counsel on this issue.
It is not uncommon for an owner receiving a disciplinary hearing notice to respond with something akin to, “I’m bringing my attorney to the hearing!” or “I demand the accuser be at the hearing to allow me to ask them questions!” Associations are responsible for maintaining community standards. Imposing discipline, such as fines or suspensions of privileges, at duly noticed hearings is a tool used to deter violations of those standards. However, many misunderstand members’ due process rights under California law at those disciplinary hearings. The disciplinary process must follow specific legal requirements, particularly those outlined in California Civil Code section 5855.
What Civil Code Section 5855 Requires
Civil Code section 5855 establishes the minimum due process requirements that associations must follow before imposing penalties on an owner, including what the specific hearing notice and results lettersmust include. However, as for due process at the hearing itself, Civil Code section 5855 only requires the association give the owner the opportunity to attend the hearing and present their side of the story, either in person or in writing. While this process ensures basic fairness, it does not create the same formal due process rights that a homeowner would receive in a court of law. The association retains significant discretion in enforcing its rules, and disciplinary hearings are not subject to strict legal procedures like those found in judicial proceedings.
Why the Law Grants Limited Due Process
Associations are private organizations, not government entities, which means they are not required to follow the same extensive legal due process standards as courts. Civil Code section 5855 strikes a balance by ensuring homeowners receive notice and an opportunity to be heard, while still allowing associations to efficiently enforce community rules.
For example:
The board serves as the decision-maker – Unlike in a courtroom, where a neutral judge or jury decides the outcome, the association’s board itself determines whether a violation occurred and what penalty, if any, is appropriate.
No formal rules of evidence apply – The board can consider various types of information, including written complaints, photos, or testimony from neighbors, without strict legal evidentiary requirements.
Legal representation is limited – While homeowners may bring an attorney, the board is not obligated to allow lawyers to actively participate in the hearing. In fact, as the hearings take place at board meetings, California case law explicitly allows associations to forbid owner’s attorneys to attend (SB. Liberty v. Isla Verde Association).
PRACTICE TIP:
While Civil Code section 5855 sets the minimum due process requirements, some associations may have additional protections outlined in their governing documents. Associations should regularly review their bylaws and CC&Rs to determine if they provide:
Additional notice requirements beyond the 10-day minimum.
Specific hearing procedures that must be followed, including cross-examination and inspection of evidence.
If the governing documents impose these or other due process requirements, consult with legal counsel to discuss the enforceability of such provisions.
Conclusion
Civil Code section 5855 provides a balanced approach to association disciplinary hearings, granting homeowners basic due process rights while allowing associations to enforce their rules effectively. By carefully following the law and reviewing their governing documents, associations can maintain community standards while ensuring that all enforcement actions are fair, transparent, and legally sound.
While community association boards might view social media as a free, convenient means of disseminating information to the membership, social media use by associations can be fraught with potential stumbling blocks. Boards may in fact prefer to avoid using social media altogether given the concerns listed below. At the same time, Civil Code section 4515 limits associations’ ability to restrict individual homeowners’ use of social media to discuss association life. In that respect, associations may need to view individual homeowners’ use of social media from a live-and-let-live perspective.
Potential Concerns – Association Use of Social Media
The Loose Canon: board members may lose their temper, reveal attorney-client privileged information, or otherwise inflame an already volatile dispute when posting or responding to homeowner comments on social media. Online content lives forever, even if subsequently deleted. Ill-considered board member comments can in turn attract defamation claims, sow division, and otherwise negatively affect the association.
Constant Vigilance: association-run social media pages must be constantly monitored because negative, defamatory, or otherwise ill-advised content may be posted by homeowners, which the association may in turn need to regulate or delete. Homeowners may also post negative content about one another, leading to demands that the association delete such content by the targeted party, putting the association in a tough position. Homeowners may additionally choose to notify the association of important issues via social media rather than contacting management. The resulting need for constant monitoring can be time-consuming and expensive.
Is This Covered?: association and board members’ online activities on social media may not be covered by association insurance policies. If an association is sued in connection with online activity, and the claim is not covered, any resulting liability could be financially devastating.
Civil Code Section 4515 and Homeowner Use of Social Media
If an association steers clear of social media, shouldn’t homeowners be required to do the same? Under the law, no. Civil Code section 4515(b) states governing documents shall not prohibit a member or resident of a common interest development from “using social media or other online resources to discuss any of the following, even if the content is critical of the association or its governance:”
Development living;
Association elections;
Legislation;
Election to public office;
The initiative, referendum, or recall processes; or
Any other issues of concern to members and residents.
Note that homeowners’ social media posts may be critical of the association; negativity, whether unfair or not, does not constitute grounds to regulate homeowner online activity. Further, “development living” and “any other issues of concern to members and residents” are so broad as to effectively serve as catch-all categories, allowing homeowners to freely post about most association-related topics.
So where does this leave community associations? Associations may do well to remember that one of the main purposes of common interest developments is to maintain the common areas. That is, associations serve physical needs (maintenance) in the real world, rather than playing a role online. Given that associations are also limited in regulating homeowner online activity, associations may want to steer clear of the Wild Wild West of social media entirely. Does an association really need to be on TikTok? As fun as it sounds, perhaps not.
While the primary focus of the residential community association management industry is AB 2159, which permits electronic voting, several other bills were signed into law in 2024 that managers should be aware of.
SB 900
SB 900, which went into effect January 1, 2025, significantly amends Civil Code (“CC”) § 4775 to address the maintenance and repair of utility services in common interest developments. SB 900 also makes minor revisions to CC § 5550 and 5610. Specifically, SB 900 makes an association responsible for the repairs and replacement needed to restore interrupted utility services (i.e., gas, heat, water or electrical services) that begin in the common area even when the issue extends into a separate interest or exclusive use common area, unless the association’s CC&Rs expressly provide for a different allocation, or the utility provider or local government is required to perform the work.
SB 900 requires an association to commence the repair process necessary to restore utility service within 14 days of service interruption.
If an association has insufficient reserve funds to cover the needed utility work, SB 900 permits an association’s board to obtain a loan to cover these costs without a member vote. The board may also levy an emergency assessment to repay the loan. Like a board’s existing right to impose an emergency assessment under CC § 5610, before obtaining a loan, a board must pass a resolution containing written findings regarding the nature of the expenses and the insufficiency of reserve funding. This resolution must be distributed to the members via individual delivery with the notice of the emergency assessment. The association must also provide any other notices required by law or the association’s governing documents.
If a quorum of the board cannot meet within 14 days to address the repair process, then at the next duly noticed board meeting, the total number of directors in attendance shall constitute a quorum. If applicable, the meeting notice shall state that the board may meet with a reduced quorum.
The board may also vote to approve the work needed to restore the utility service by electronic means, including email. All records of the electronic vote constitute association records and are subject to member inspection for three years.
In the event an association fails to meet these SB 900 requirements, the association may be held liable for that failure, but individual board members may not be found liable.
An association is exempt from complying with SB 900 requirements if the association is located in an area affected by a federal, state or local state of disaster or emergency, provided the disaster or emergency materially affects the association’s ability to perform its utility repair responsibilities.
The legislature amended CC § 5550 to designate utility services as “major components” to the extent an association is obligated to repair or replace those lines by CC § 4775.
The legislature amended CC § 5610(b) to add operating costs as an extraordinary expense if health or safety hazards are discovered on site.
AB 2114
SB 326 (“The Balcony Bill”) established CC § 5551 as of January 1, 2020. Under CC § 5551, an association is, among other things, required to have a reasonably competent and diligent visual inspection of a random and statistically significant sample of the exterior elevated elements for which the association is responsible for maintaining or repairing at least once every nine years. Previously, only licensed architects and structural engineers were permitted to perform these inspections.
Effective immediately, AB 2114 amended CC § 5551 to permit licensed civil engineers to perform these inspections rather than limiting the inspections to architects and structural engineers.
AB 2460
AB 2460 amends 2023’s AB 1458, which provided that if an association requires a quorum for director and/or recall elections, the association must provide the membership with general notice of the date, time and location of the meeting at which the quorum will be determined, and a statement that the board may adjourn the meeting for at least 20 days if the association fails to achieve quorum. If an association does not reach quorum for a director election, the association may adjourn the meeting to tabulate the votes for a minimum of 20 days. Unless the association’s governing documents authorize a lower quorum, the quorum for the adjourned meeting drops to twenty percent (20%). General notice of the adjourned meeting must contain the following: (1) the date, time and location of the adjourned meeting, (2) the list of candidates, (3) a statement that the quorum requirement is reduced to 20% and (4) that the ballots will be opened if the 20% quorum requirement is reached. The association must provide this notice to members not less than 15 days prior to the adjourned meeting.
AB 2460, which went into effect January 1, 2025, does not substantively change the law. Rather, it clarifies the changes to CC § 5115 and Corporations Code § 7512 made last year by AB 1458. Specifically, AB 2460 further clarifies that the 20% quorum for board elections and the related notice requirements only apply to incorporated and unincorporated associations with governing documents that impose a quorum requirement of more than 20% for reconvened meetings to elect directors, that members can call for a reconvened meeting, and that the notice that must be provided to the members at least 15 days in advance of the meeting date refers to the reconvened meeting date. Finally, AB 2460 clarifies that 20% of an association’s members, voting in person, by proxy, or secret ballot will satisfy quorum for the election of directors at a reconvened meeting and that the ballots will be counted if quorum is reached.
ENFORCEMENT OF THE CORPORATE TRANSPARENCY ACT SUSPENDED
In a significant development for U.S. common interest developments, the U.S. Treasury Department (Treasury Department) issued a press release on March 2, 2025, clarifying its enforcement stance on the Corporate Transparency Act (Act).
The press release stated the Treasury Department will not enforce penalties or fines associated with the beneficial ownership information (BOI) reporting rule under the existing regulatory guidelines. The press release also said the Treasury Department will refrain from enforcing any penalties or fines against U.S. citizens, domestic reporting companies, or their beneficial owners after the upcoming rule changes take effect.
To clarify this last point, the Treasury Department explained it will be “issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”
While the official rule is still forthcoming, this press release shows that the Treasury Department is moving toward tailoring the Act so that it does not apply to U.S. citizens or domestic reporting companies. Once the official rule is implemented, it is anticipated the Act will no longer apply to domestic reporting companies, including common interest developments.
Secretary of the Treasury Scott Bessent stated, “This is a victory for common sense.”
This continues to be a developing issue and common interest development boards should anticipate updates as the official rule has not yet been implemented.
EFFORTS BY COMMUNITY ASSOCIATIONS INSTITUTE
The Community Associations Institute (CAI) has spent much of the past two years advocating for common interest developments. CAI filed a lawsuit challenging the application of the Act on common interest developments and utilized lobbying and advocacy efforts in Washington D.C. to encourage Congress to repeal the Act, exempt common interest developments, or delay the first reporting date. Epsten, APC thanks CAI for its diligent efforts to protect common interest developments.
On February 17, 2025, the United States District Court for the Eastern District of Texas stayed a nationwide injunction halting enforcement of the Corporate Transparency Act (Act) in Smith v. United States Department of Treasury. The Eastern District of Texas’ decision cited the recent Supreme Court of the United States’ Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland decision as precedent.
UPDATED DEADLINE TO FILE – 12:00 PM EASTERN, MARCH 21, 2025
On February 19, 2025, FinCEN issued an alert regarding the Act. FinCEN stated that the decision by the Eastern District of Texas reinstated reporting requirements under the Act. However, the Department of the Treasury recognized some reporting companies may need additional time to comply with reporting obligations, so FinCEN generally extended the deadline 30 calendar days to 12:00 pm Eastern, March 21, 2025.
If your association was previously given a later deadline by the Department of the Treasury, the later deadline should still be met. These extensions were granted for various reasons, including certain disaster relief extensions. However, for most reporting companies, the deadline to file beneficial owner information reports is March 21, 2025.
IS THERE STILL HOPE THE REQUIREMENTS WILL CHANGE BEFORE THE DEADLINE?
Status of CAI’s CTA Lawsuit, Lobbying, and Advocacy Efforts
As you may recall, the Community Associations Institute (CAI) filed a lawsuit challenging the application of the Act on common interest developments. CAI requested a preliminary injunction, but that request was denied by a federal judge. CAI appealed the denial and the government responded to the appeal on February 7, 2025. CAI’s response is due at the end of February.
In addition, CAI is continuing to utilize lobbying and advocacy efforts in Washington D.C. to encourage Congress to repeal the Act, exempt common interest developments from the Act’s reporting requirements, or delay the first reporting date. H.R. 736 and S. 505 are two bills that were recently introduced to seek a one-year delay of the CTA reporting requirements.
If you are interested in assisting with CAI’s efforts, visit CAI’s Action Center for information about how to contact your Congress person and Senators to ask them to support H.R. 736 and S. 505.
This continues to be a developing issue. Common interest development boards should continue to remain informed and should be prepared to file any required reports prior to FinCEN’s March 21, 2025 deadline.
*This article is an update to the previous versions:
Community associations are governed by boards of directors made up of volunteers. The role of these volunteers is crucial to keeping community associations functioning, but potential volunteers are often dissuaded by their fear of potential liability. This is a misconception. California law has evolved considerably to provide a robust framework of shields for volunteer directors. This article explores the statutory protections, insurance options, and governing document provisions that together safeguard volunteer directors, ensuring they can perform their essential roles without undue personal risk.
What is a volunteer? Corporations Code section 5239(b) defines “volunteer” as “the rendering of services without compensation.” “Compensation” is further defined as “remuneration whether by way of salary, fee, or other consideration for services rendered.” However, the Corporations Code specifically allows for the payment of per diem, mileage, or other reimbursement expenses. While it may be tempting to offer perks to get owners in the community to participate on the Board, community association Boards should be careful to avoid offering any perks that could be considered compensation. For example, assigned parking spaces could arguably be consideration for services rendered as parking spaces have a monetary value.
Statutory Protections Public Policy Corporations Code section 5047.5(a) addresses the services of directors and officers of nonprofit corporations as “critical to the efficient conduct and management of the public service and charitable affairs of the people of California.” This Corporations Code section also codifies as California public policy the state’s decision “to provide incentive and protection to the individuals who perform these important functions.”
Business Judgment Rule Corporations Code section 7231 establishes the Business Judgment Rule which protects directors from personal liability when the directors perform their duties in good faith, in a manner such directors believe to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a similar position would in similar circumstances.
Civil Code Section 5800 Civil Code section 5800 provides additional protections for volunteer directors who own no more than two (2) homes within the community. Volunteer directors and officers are not personally liable in excess of the community association’s insurance coverage so long as the community association has maintained the minimum levels of general liability and D&O insurance as required by law and the volunteer directors and officers’ actions were performed in good faith, within the scope of their duties, and were not willful, wanton, or grossly negligent.
Directors and Officers Insurance Directors and Officers Insurance, commonly referred to as D&O insurance, protects both the community association from liability and volunteer directors and officers from personal liability for errors and omissions made by directors and officers while they were serving on the Board. All community associations are required by law to maintain minimum levels of D&O insurance.
Governing Documents In addition to statutory protections and D&O insurance, volunteer directors may also find additional protections in their community association’s CC&Rs and/or Bylaws. Some, but not all, CC&Rs and Bylaws contain indemnity provisions that offer protections for directors and officers against their negligence and omissions. Since every community association has unique CC&Rs and Bylaws, each community association should consult with their legal representation to see whether there are protections for the volunteer directors.
Conclusion Potential Board members should not let fear of personal liability keep them from running for the Board. So long as their Association retains the adequate amount of D&O insurance and they perform their duties in good faith, in a manner they believe to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a similar position would in similar circumstances, California law, D&O insurance, and potentially even the governing documents will provide protections against personal liability.
Photography and editing by Leah Eklof, Marketing Assistant
(From left to right) Pejman D. Kharrazian, Esq., Rhonda R. Goldblatt, Esq., Kieran J. Purcell, Esq., William S. Budd, Esq., Emily A. Long, Esq., and Susan M. Hawks McClintic, Esq., at the Coachella Valley Symposium.
It’s a wrap! We had another successful Symposia season and are thankful to everyone who attended. Here is a quick recap of what happened at our 2024 Symposia in case you couldn’t make it. Overall, 900+ board members, community managers, and industry partners attended our Coachella Valley and San Diego Symposia. We delivered timely, relevant, and up-to-date legal education impacting community associations.
Our Symposia fosters collaboration and new networking opportunities for our attendees. They can ask general legal-related questions to one of our attorneys, network with exhibitors, and build meaningful connections with fellow professionals. Epsten, APC, continues to be at the forefront of legal education for community associations, and its Symposia are some of the most attended community association events in Southern California. It is also important to highlight that our event offers 2 CEUs from the California Association of Community Managers (CACM) and 5 CEUs that complete the requirement for the CMCA certification offered by the Community Association Managers International Certification Board (CAMICB).
Interview with Marisha Lou from Keystone Pacific: “I’ve been in management for 33 years, and I attend every year because it’s well worth it for any association manager or assistant manager or even a realtor that does leasing at community properties. It’s great information!“
(From left to right) Shareholder Pejman D. Kharrazian, Esq. and Senior Attorney Emily A. Long, Esq. presenting Case Law Update at the Coachella Valley event.
By popular demand, our content does a deep dive into the legislative updates based on the annual Bills signed by the Governor, as well as the key case law from the year relevant to community associations. Here are some quick links to the Statutes – New or Newly Amended. You may find these on our website under the Laws & Statutes tab / Civil Codes:
California Civil Code (Civ. Code)
California Civil Code (Civ. Code): Davis-Stirling Act
(Left) Shareholder and new CAI-San Diego President Susan M. Hawks McClintic, Esq. and (right) Mike Cruz, Administrative Assistant, holding the famous and acclaimed Epsten, APC 2025 Community Association Law Resource Book
In addition, Kieran J. Purcell, Esq. spoke about updates on The Corporate Transparency Act (CTA). With all the back-and-forth on the CTA, board members and managers have really had to stay up to date with the most recent updates. Our firm has been closely tracking the CTA, and you can click here to sign up for our CTA Legal Alerts.
Kieran J. Purcell, Esq., Managing Shareholder of Epsten, APC, speaking to over 600 attendees at our San Diego Symposium.
Kieran J. Purcell, Esq., and Susan M. Hawks McClintic, Esq., also spoke on the 2024 Legislative Update. They discussed Bill AB 2114, which allows civil engineers to be added to the qualified list of inspectors who conduct mandatory inspections of balconies. Both attorneys also spoke on matters regarding elections, SB 900 on repairs and maintenance, and other relevant updates in the community association law.
Interview with Dominique Albrecht, Chief Administrative Officer for Rancho Santa Fe Association: “Today we loved the sessions, such great information on new case law, the latest and greatest on what’s happening on the legislative front and then just really awesome breakout sessions where we could hear from others in the industry about what their facing and get great advice as well.”
BREAK IT DOWN > Legal Discussions
Content tailored to Community Managers and Board Members
You may find your next brilliant idea for your community association at one of our Legal Discussions. Attendees get to share thoughts and concerns directly with our attorneys on matters such as insurance, senior communities and fair housing, amending governing documents, litigation, and elections & recalls (Election Process Timelineand Election by Acclamation Process Timeline), and meetings.
Industry partners harness the power of new products, services and expertise for community associations
Symposia exhibitors have the unique opportunity to showcase their company’s products, services, and expertise to a targeted audience of community leaders and industry professionals. This event allows for valuable networking, strengthening connections, and fostering new partnerships and business opportunities. Our diversified exhibitors are ahead of the game providing attendees great giveaways and special offers to Symposia attendees. This year, vendor categories included:
Accounting, Architect, Backflow Services, Bank, Construction Managements, Door/Gate, FHA, Foundation Repair, Furniture, General Contractor, Inspector of Elections, Insurance, Landscape, Leak Detection, Maintenance, Meter, Painting, Pest Control, Pool, Refuse, Reserve Study, Restoration, Roofing, Security, Solar, Towing, Tree Care. We are always in search of new types of vendors to join our repertoire.
If you are looking to become a sponsor for next year, click here to connect with us.
*Disclaimer: due to event capacity and fairness to our clients, Epsten, APC is unable to accept management companies or other community association law firms to exhibit at our event.
A Big THANK YOU!
A huge shout out to our beverage partner CM2 & Associates for providing beverages for our San Diego Symposium.
San Diego Beverage sponsor, Annie Wyland from CM2, Inc. networking with prospects.
This event is also possible thanks to our Premier and Standard sponsors at both San Diego and Coachella Valley, we thank you! Our 2024 Symposia season could not have happened without you. To find out more about our exhibitors and the services they offer, check out the links below.
Berg Insurance Agency in Partnership with LaBarre/Oksnee
California Sub-Meters
Click2Bind Insurance Services, Inc.
Enhanced Landscape Management
First Citizens Bank
Four Seasons Tree Care
Gemini Insurance Agency
Global Disposal
Harvest Landscape Enterprises, Inc.
Kirk Miller Insurance Agency, Inc.
LaBahn’s Landscaping
McCormick-JWC Construction & Consulting
MeterNet, LLC
NPG Asphalt
O’Connell Landscape Maintenance
Precision Construction & Painting
Premier Roofing CA, Inc.
Proform Interiors
Rayco Exteriors
SCT Reserve Services
Sherwin Williams Paint
Southern Cross Property Consultants
To Our Staff and Attorneys…
This wouldn’t be a proper recap without thanking our staff and attorneys who helped put on the symposia events. Here are just some faces behind the scenes working hard.
Participants left with new knowledge, lasting friendships and connections, and a renewed sense of energy to tackle problems in 2025. Nevertheless, a new Symposium season will be arriving soon. If you are looking for more information for next year’s symposia, click here to be updated when we release dates.
Speakers at San Diego Symposium from left to right; Jillian M. Wright, Esq., Kieran J. Purcell, Esq., Susan M. Hawks McClintic, Esq., Pejman D. Kharrazian, Esq., Jon H. Epsten, Esq., Rhonda R. Goldblatt, Esq., Jacquelyn E. Quinn, Esq., and Joseph A. Sammartino, Esq.
On January 23, 2025, the U.S. Supreme Court stayed a nationwide injunction halting enforcement of the Corporate Transparency Act (Act) in Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland. This decision appears at first glance to require that common interest developments comply with the Act. However, Texas Top Cop Shop is not the only case currently making its way through the judicial system. A different federal judge in Texas imposed a similar nationwide injunction in Smith v. U.S. Department of the Treasury. The Smith nationwide injunction still remains in place.
On January 24, 2025, FinCEN issued an alert confirming that despite the U.S. Supreme Court’s action in Texas Top Cop Shop, while the Smith order remains in place, reporting companies are not currently required to file beneficial ownership information (BOI) reports with FinCEN and are not subject to liability for failure to do so. That said, FinCEN reiterated that reporting companies may continue to voluntarily submit beneficial ownership information reports.
At present, the Smith nationwide injunction means the reporting requirements for applicable common interest developments are currently “on hold” and thus applicable common interest developments are not currently subject to liability for failure to meet filing deadlines.
Common interest development boards should continue to remain informed and prepared to act quickly to meet filing deadlines as needed. Our office will continue to provide updates as they arise.
Status of CAI’s CTA Lawsuit, Lobbying and Advocacy Efforts
As you may be aware, the Community Associations Institute (CAI) filed a lawsuit challenging the application of the Act on common interest developments. CAI requested a preliminary injunction but that request was denied by a federal judge. CAI appealed and the government’s response to CAI’s appeal is due on January 31, 2025.
In addition, CAI is utilizing lobbying and advocacy efforts in Washington D.C. to encourage legislators to either repeal the Act or exempt common interest developments from the Act’s reporting requirements. H.R. 425 and S. 100 are two bills that were introduced to repeal the Act.
If you are interested in assisting with CAI’s efforts, visit CAI’s Action Center for information about how to contact your Members of Congress and Senators to ask them to support H.R. 425 and S. 100.
For additional information and updates regarding the Act and CAI’s efforts to repeal the Act or exempt applicable common interest developments visit www.caionline.org/CTA.
Community associations benefit from an informed, educated membership. With that in mind, please find five strategies for improving community association communication below:
1. Check Your Calendar. Community associations are required to distribute various documents from time to time, including annual budgets, policy disclosures, ballots and more. Association governing documents also typically require holding various events, such as annual membership meetings, regular board meetings, and the like. Trying to keep track of it all can be dizzying. Therefore, it is helpful to calendar relevant deadlines and events in an automated, digital system, to help ensure that member communications go out on time.
2. Preferences Matter. Civil Code section 4041 requires associations to solicit members’ preferred delivery method for receiving certain notices on an annual basis. Members have the option of receiving notices via a mailing address and/or a valid email address. Members can also provide the contact information of their legal representative. Associations must in turn deliver certain notices in accordance with members’ preferred delivery method. Members’ entitlement to select their preferred delivery method, in conjunction with different distribution requirements for different types of notices (i.e., general versus individual delivery) can make life complicated for managers. Again, automation can help, from software programs that either track member preferences or allow those preferences to be logged and changed easily, to spreadsheets that keep member information organized. Associations can also regularly remind owners of their entitlement to receive association notices via email, which many members may prefer for ease of access and may in turn reduce the association’s administrative burden.
3. Be Wary of Social Media. Associations might view social media as an easy, low effort means of distributing information to members. However, if a social media platform allows members to comment and post content, associations may in turn be forced to constantly monitor that platform for divisive or defamatory content. Therefore, one-sided association communication mechanisms like email blasts and newsletters that do not allow members to reply all, post, or comment may be preferable.
4. Prioritize Appropriately. Members frequently communicate with their associations about various concerns, from maintenance issues to complaints about neighbors. It is not uncommon for a minority of members in a community to communicate a lot, sending the association emails, making telephone calls, and speaking at board meetings. However, boards have a fiduciary obligation to act in the best interests of the entire community, not just a single member. As such, while boards should listen carefully to member concerns, boards must also triage and address member concerns according to the needs of the entire community. That may mean other pressing needs take priority.
5. Delivery is Everything. Members sometimes send angry, volatile communications to association representatives, and it can be extremely tempting to respond in kind. However, written communication can last forever, and non-privileged correspondence can easily become an exhibit in a subsequent lawsuit. Therefore, it may be wise to pause before replying and imagine a judge or jury as the audience of any given communication rather than the actual recipient. Associations must be the adult in the room, and a professional, measured tone is always best.
