LHC Newsletter Vol 9, No. 7

 2017 Year-End Review of California Legislation and New 2018 Laws As They Affect Community and Homeowners’ Associations

By Robert D. Hillshafer, Esq.

David A. Loewenthal, Esq.

Barbara A. Higgins, Esq.

Loewenthal, Hillshafer & Carter, LLP

NEW 2018 LAWS:

AB 407:  Assembly and Free Speech Rights on HOA Common Areas (New Law).  New Civil Code Section 4515 will be added to the Davis-Stirling Act effective January 1, 2018, and will give HOA members, residents, their invitees, and guests expanded speech and assembly rights, and allow them to use common areas during reasonable hours without charge for purposes relating to “common interest development living”, association elections, legislation, election to public office, and other election process topics. This bill also allows members and residents to canvas and petition others during reasonable hours, invite public speakers to common areas, and distribute or circulate information without prior permission concerning information about the HOA community, elections, or other “issues of concern” to its members.  The new law will invalidate any governing document, rule, or restriction which prohibits any of the above activities, and authorizes the court to assess a civil penalty for violations.

Recommendation:  HOAs should have their legal counsel review their current rules, policies, and governing documents with respect to campaigning, solicitation and common area usage and may wish to consider creating specific reasonable rules and regulations in anticipation of such requests.

AB 534:  Mechanics Liens (New Law). This law allows owners in planned developments to obtain releases of mechanics liens, by paying a portion of the amount of the lien attributable to that owner’s fractional interest in the development, or by obtaining a lien release bond in such amount.  The law prohibits a mechanics lien from being recorded against a separate interest in a condo or common interest development, unless consent was expressly provided or that owner requested the performance of labor or furnishing of materials or services, except in the case of emergency repairs.  This does not change the existing provision implying consent as to work on the common area approved by the Association.  Effective January 1, 2018, it will act to amend Sections 4615 and 6658, and also add Sections 4620, 6660, and 8119, to the Civil Code.

AB 634:  Solar Energy Systems (New Law).  This new law allows homeowners to install solar panels on HOA common area roofs without a 2/3 vote of the Association’s membership.  When reviewing a request to install a solar energy system on a roof area shared by more than one family or homeowner, the Association must require an applicant to notify each homeowner in the building on which the solar installation will be placed, and requires the applicant owner to maintain a homeowner liability coverage policy.  Owners must provide Association Certificate of Insurance within fourteen days of approval and annually thereafter.  The Association may impose reasonable restrictions that do not significantly increase the costs of the system or decrease its performance.  The application must be processed in the same manner as an architectural modification.  Associations may wish to create reasonable rules and regulations in anticipation of solar panel requests.

Note:  This is a very significant change in the law because it will severely impact the Association’s ability to properly and fully maintain the common area roofing systems both because additional equipment will be located on the roof and because its control over access on to the roof will be limited.  It is likely that this will create conflicts between owners who want to have such panels installed but there is not enough room left on the roof for such installations.

This bill will result in the following Civil Code Sections being affected, as highlighted below:

714.1 – Amended to specify that an Association shall not establish a general policy prohibiting the installation or use of a rooftop solar energy system on a common area roof, and shall not require approval by a vote of members owning separate interests affected by the common area roof where the solar panels are to be installed.

4600 – Amended to provide that an Association may not require approval of the membership to grant exclusive use of the common area to a member for the installation of a solar energy system.

4746 – Added to require the Association and applicant to take certain actions regarding insurance and notification to other affected homeowners.  It also requires the applicant to submit a solar site survey showing the solar placement by a licensed contractor or the contractor’s knowledgeable, registered salesperson, and requires the owner and each successive owner to bear the costs for homeowner liability coverage insurance, any specified damage caused by the installation, maintenance, repair, removal or replacement of the solar energy system, as well as the costs for maintenance, repair, and replacement of the solar energy system until the common area is restored.  The Association shall also require the applicant to disclose to prospective buyers the existence of the solar energy system and the responsibilities that go with it.  Though not specifically referenced in the legislation, a recorded covenant may be the appropriate instrument to deal with many of these requirements.

AB 690: Managers’ Conflict of Interest (New Law). Managers and management companies must disclose conflicts of interest to the Association’s Board of Directors, and this new law(s) codifies how and when they must make that disclosure, including but not necessarily limited to, the following:

  • receiving any referral fee or other financial benefit that could be derived from a business providing products or services to the association;
  • ownership interests or profit-sharing arrangements with service providers recommended to, or used by, the Association;
  • receiving a referral fee or other financial benefit from a third-party provider distributing documents pursuant to Civil Code §4528;
  • disclosing any business or company in which the property manager or common interest development management firm has any ownership interests, profit-sharing arrangements, or other financial incentives provided to the management firm or managing agent.

Effective January 1, 2018, AB 690 will be codified through amendment to various existing statutes (Business & Professions Code §11504, Civil Code §§ 4528, 4530, 5300, and 5375), and through the addition of Civil Code §§ 5375.5 and 5376.

AB 1412: Volunteer Director and Officer Liability (New Law). Current (2017) law only grants specified immunity from personal liability to board members of HOAs that are exclusively residential. This bill extends the liability protections to those in mixed use associations.  It also authorizes Associations to use the last address(es) on file for off-site owners if they do not provide mailing addresses annually.  (Effective January 1, 2018, this bill can be found in amended versions of Civil Code §§ 4041 and 5800.)

SB 2:  Recordation Fees (New Law).  This bill now requires a fee of $75 on every real estate instrument, paper, or notice required or permitted by law to be recorded, per single transaction per single parcel of property, not to exceed $225.


SB 451:  No Liability Based on Governing Documents Omitting Harassment Reference

No association shall be liable to any person because the governing documents of the association do not contain a provision authorizing the Association to stop harassment of a member by another member.

AB 721:  Inspection and Repair of Balconies, Decks, and Walkways.  This bill would obligate Associations to inspect balconies and all structural components every 5 years through a licensed, structural engineer, who would be permitted to order destructive testing and any repairs he or she deemed appropriate without consideration of financial means to pay or the timing of the repair work.  This bill would have substantial financial impact on Associations.

AB 731:  Personal Income Tax Deduction on HOA Assessments. This amended bill allows qualified taxpayers (HOA members whose income does not exceed $150,000) to deduct from their income taxes an amount not to exceed $1,500 for HOA assessments.   (This bill is for taxable years beginning on or after January 1, 2017 and before January 1, 2022, and is intended to amend Section 17072 of, and add/repeal Section 17208 of the Revenue and Taxation Code.) Recommendation:  If adopted, consult with your tax adviser.

AB 786:  Statements of Information.  This bill allows associations to file their required statements of information online with the Secretary of State.

AB 1426:  Uncontested Elections.  This bill exempts Associations from balloting requirements if the election is uncontested.  This could conceivably save association’s the expense of conducting elections when the election is uncontested.  This would allow for efficiency and cost savings.

AB 1569:  Disability Accommodations of Animals. This bill would allow a landlord and Associations to request verification of a disability from a reliable third-party source such as a doctor to determine the need for a support animal when the disability is not readily apparent.