2010 Legislative Update Summary

By Robert D. Hillshafer and David A. Loewenthal

Compared to recent years, 2009 was not a year with dramatic amounts of new or significant legislation or court decisions impacting community associations. The following discusses new laws going into effect in 2010 and court decisions made during 2009.


Disclosures to Members-AB 899

This bill adds Civil Code Section 1363.005 to the Davis Stirling Common Interest Development Act. This section requires associations to distribute to any member making a request, the Disclosure Documents Index which is attached hereto as Exhibit A. This Index may be distributed to the requesting member by personal delivery or first class mail, or by email, fax or other means if the member agrees to such alternative forms of delivery. The provision indicates that the “agreement” of the member to distribution via electronic means must conform to the requirements of federal law for such consent. This modification is simply another attempt by the legislature to ensure “transparency” by Board’s concerning the operation of community association’s. Unfortunately, each new attempt to ensure such transparency has a cost component without a significant increase in the actual transparency.

This bill also modifies the Assessment and Reserve Funding Disclosure Summary in Civil Code Section 1365.2.5. That summary is mandated to contain certain specific information, including, but not limited to, the estimated amount required in the reserve fund at the end of the next five budget years and the projected reserve cash fund in each of those five years. The new law requires the preparer of the Summary to identify the assumed long-term before-tax interest rate earned on reserve funds and the assumed long-term inflation rated to be applied to major component repair/replacement costs at the time the summary was prepared. The revised Summary is attached hereto as Exhibit B.

Pool Safety – AB 1020

As of December 20, 2008, the Virginia Graeme Baker Pool and Spa Safety Act (federal law) required that public pools and spas had to be equipped with certain anti-entrapment devices. The term “public” was broadly defined to include community associations and enforcement of this law was assigned to the Consumer Product Safety Commission. This law also established a grant program for states that incorporated the federal law into a state law. AB 1020 is California’s codification of the federal law into the state law, which will facilitate local health department agencies adoption of regulations at the local level.

This law provides that a pool or spa constructed prior to January 1, 2010 must comply with the standards of the federal act or be retrofitted in accordance with the standards prior to July 1, 2010, except that pools constructed between December 19, 2007 and January 1, 2010 which complied with the Act do not to be further retrofitted. A form must be filed with the local health department attesting that the retrofit work has been performed prior to September 30, 2010. If an Association’s pool/spa is being retrofitted to comply with this law, the form must be filed with the local agency within 30 days of completion.

Because of the obvious life-safety implications of the retrofit mandate, we have generally advised associations to close pools and spas which do not comply with the Act until the retrofit has been completed. The life-safety aspect raises the duty of the Board from a mere maintenance obligation to a fiduciary obligation which could result in personal liability of directors if someone is injured due to the lack of the anti-entrapment device in an Association pool. In addition to personal liability implications, failure to complete this mandated retrofit could seriously impact insurance coverage for the Association.

Water Efficient Landscaping- AB 1061

Current California law prohibits an Association’s architectural guidelines from banning or effectively prohibiting the use of low water-using, drought-tolerant plants as a group. This new law expands that prohibition to all of an Association’s governing documents.

New Civil Code Section 1353.8 provides that any provision of any governing document, whenever adopted, is VOID and unenforceable if it prohibits or effectively prohibits the use of such low water-using, drought-tolerant plants as a group. Similarly, this new law provides that governing document provisions are void and unenforceable if they prohibit or restrict compliance with local water efficiency landscape ordinances, emergency water ordinance or any public entity mandated water conservation program.

Please note that this new law does not prevent Association’s from banning certain types or species of plants. Rather, the governing documents cannot ban the entire group as a whole. This bill should stimulate Board’s to review existing governing document provisions for potential violations and to modify enforcement actions to comply with this new law.

Assessments Based on Property Value- AB 313

This bill adds Civil Code Section 1366.4 to the Act and prohibits associations from levying assessments based on the assessed taxable value of the property, except for associations that had made such levies prior to December 31, 2009 or were responsible for payment of property taxes. This law is designed to prevent de facto discrimination in assessments based on length of ownership such that newer members would be assessed at a higher rate based on a higher purchase price. Since such an assessment method is quite rare, this law should not have any significant impact.

Legislation to Watch in 2010- SB 259

This proposed legislation would prevent minor technical violations of the HOA election laws (Civil Code Section 1363.03) from invalidating election results and actions of Boards. The goal is to prevent the chaos and expenses which would result in minor violations were allowed to be a basis for invalidating elections and decisions by Boards so elected.


Published Appellate Decisions

To be binding as precedent in subsequent litigation, appellate court decisions must be certified for publication, generally because the case is determined to address some broad public issue which may recur in the future. In the context of community association law, although there are many appellate decisions, many of the decisions are not certified for publication, often because the case involves a vary narrow issue of interpretation of a CCR provision or unique fact pattern. In 2009, there was at least one unpublished opinion which a number of community association attorneys sought to have certified for publication because it would have clarified Association obligations to maintain/repair common areas which were originally defectively constructed and may not be susceptible to complete repair within a practical budget. Also in 2009, there were some trial court decisions which are not necessarily binding precedent, but do provide insight into “hot button” issues that may confront associations in the near future.

Carolyn v. Orange Park Community Association (2009) 177 Cal. App. 4th 1090

This case addresses the application of the Americans With Disabilities Act (“ADA”) and the California Disabled Persons Act (“CDPA”) to community associations. These group of laws prohibit discrimination on the basis of disability in places of “public accommodation.”

The court was asked by the plaintiff to determine that recreational trails within the Association were a public accommodation, even though these trails were common area privately owned by the Association. The Association had a general policy of allowing public access to these trails, subject to limitations at access points to vehicles. The plaintiff, a disabled person who was not a member of the Association, desired to access and use the Association’s trails in a horse drawn carriage. The court ruled that the Association’s recreational trails were NOT public accommodations under either law and further found that the Association’s practice of allowing public access did not “transform” the trails into a public accommodation.

However, the court did note that there are certain circumstances where recreational common areas within CID’s can be classified as public accommodations (such as swimming pools or golf courses generally open for public use). The court also noted that even though common areas are not public accommodations, Association’s are subject to federal and state fair housing laws which require Association’s make reasonable accommodations to disabled resident’s, whether members or tenants.

Association’s must be diligent not to ignore complaints about access to common areas by residents based on disability, as there are public interest groups which have attorneys on staff that will immediately pursue discrimination claims. If such complaints or requests are made based on disability grounds, even if the disability seems incredible or is based on psychological reasons, Boards should immediately involve legal counsel to avoid risking a misstep relative to these laws.

Nelson v. Avondale Homeowners Association (2009) 172 Cal. App. 4th 857

This case involves the interpretation and enforcement of CCR provisions concerning limitations on conducting business within a common interest development. Mr. Nelson admittedly was operating a medical and religious counseling business from his home in direct violation of the governing documents. During a 12 month period the association had logged in excess of 1000 visitors going to the Nelson residence. In response to a violation and hearing notice demanding he cease the operation, the owner requested that he be allowed to continue for 6-12 months because he was recovering from an illness. Following the hearing, the board voted to revoke all guest passes for persons who were business customers of the owner. At the Superior Court level, Mr. Nelson filed suit seeking to enjoin the Association from denying guest access but his motion for an injunction was denied. The Association also sought an injunction against the owner to cease his business operations and the court granted this request.

Mr. Nelson appealed and alleged that the Association was violating the California Fair Employment and Housing Act and Unruh Civil Rights Act by refusing to reasonably accommodate his disability. The Court of Appeals rejected Nelson’s claims, partially because they were without merit and partially because Nelson failed to follow established appellate procedures and did not raise certain of his discrimination arguments in the trial court.

This outcome underscores the need of Association to be diligent in dealing with violations and addressing issues involving disability and alleged discrimination.

Calemine v. Samuelson (2009) 171 Cal. App. 4th 153

Although this case does not actually address a matter involving common interest development law, it does illustrate a very common scenario regarding disclosure obligations following a settled construction defect lawsuit by an association. It also provides some insight into how sellers who are or were directors of the Association during the defect litigation or during post-settlement repairs, can be viewed relative to their disclosure obligations.

Calemine bought a condominium from Samuelson, who was a long-time member of the Board, who was aware of two separate construction defect cases and two post-settlement attempts to repair below grade waterproofing and water intrusion issues into the garages of a number of units. Samuelson completed a transfer disclosure statement as required under California law and disclosed that there had been past water intrusion into the garage area but that repairs had been undertaken and the intrusion had not recurred. Samuelson’s disclosure statement did not disclose the two prior lawsuits for construction defects or the settlements. In fact, he checked “no” as to litigation section on the form, ostensibly because there was no current litigation.

Samuelson brought a motion for summary judgment on the basis that his disclosure was adequate pursuant to California law. The court granted the motion and Calemine appealed. The appellate court reversed the trial court’s ruling on the summary judgment, finding that there was an issue of fact as to whether Samuelson’s non-disclosure of the litigation was material to the value or desirability of the property because there was a common law duty to disclose material facts about the property. We believe that a significant element in the appellate court’s reversal of the summary judgment had to do with Samuelson’s significant and intimate knowledge of the lawsuits and the attempted repairs by the Association due to his role as a long-time director.

The significance of this case seems to be that directors may well be determined to have a greater duty to disclose than the average member based on a superior level of knowledge and information concerning the association.

In a companion case, Calemine v. Jared Court HOA, which is an unpublished decision by the same court, Mr. Calemine brought an action against the Association for breach of the CCRs and negligence relative to the common area below grade waterproofing. His theory was that the Association was obligated to perform any and all repairs to stop the water intrusion, regardless of the expense.

After settling its second construction defect lawsuit, the Board engaged consultants to assist in performing a scope of repair which would be effective and affordable. Because of unique site conditions, installation of waterproofing on the entire height of the below grade masonry wall was exorbitantly expensive, very disruptive and could not be guaranteed to stop all water intrusion into the garages. Some of the intrusion was through the garage floor and some was through the back masonry wall. The Board made a decision, based on professional advice, including that of its legal counsel and construction consultants, to undertake a repair which it could afford and was likely to resolve the water intrusion issues. The membership was advised at the time that to undertake repairs would result in a significant special assessment, much inconvenience, and still not be guaranteed to work completely.

After a full blown trial, the trial court found that under the California Supreme Court’s decision in Lamden v. La Jolla Shores Clubdominium, because the board had relied upon professional advice concerning the manner and scope of repair, the decision of the board was entitled to deference and would not be disturbed. Calemine appealed this decision as well but the appellate court affirmed the decision of the trial court, reciting in detail all the various steps which the Board had gone through in making the decision concerning the repair scope and the various professional advice which it had received to assist in making that decision. Also relevant was the fact that the water intrusion was not into habitable living space. Because of the decision’s thorough application of the Lamden analysis to the decision regarding repairs of construction defects, many CID lawyers asked the court to certify the decision for publication because this is a fact pattern which is oft-repeated in this industry. Unfortunately, the case was not certified for publication.

Although unpublished, the decision does reflect that courts recognize that upon a showing of diligence in investigating and obtaining competent professional advice, they should not “second guess” good faith decisions by volunteer boards. The decision also references an attempt by the Association to notify its members and prospective purchasers as to the facts and reasoning of the board in making its decision regarding repairs, so as to manage expectations and theoretically reduce potential claims. Any Association which goes through a construction defect litigation should probably consider publishing a similar disclosure document unless perhaps, the Association has performed the suggested scope of repairs to defects which were the basis of its construction defect case.

Trial Court Decisions of Note

In a recent Ventura County trial, a homeowners association that attempted to force a homeowner to place solar panels in a location on his roof which was 40% less efficient but less aesthetically intrusive than where he sought to place them in an architectural application, was ordered to allow the placement of the panels where requested and ordered to pay tens of thousands of dollars of the homeowner’s attorneys fees and costs. Civil Code Section 714 provides that any restriction in a governing document which “effectively prohibits or restricts the installation or use of a solar energy system is void and unenforceable.”

While this section allows restrictions which impose reasonable limits on solar energy systems, those based solely on aesthetic considerations or which hinder effectiveness or increase cost will be problematic, as evidenced in the Ventura County case. The growing trend in California is that aesthetics, which are often a very important consideration to purchasers of homes within planned communities, are being subjugated to “green” interests such as solar energy and water conservation. Consequently, architectural review committees and Boards of Directors must recognize that simply because CCRs or guidelines mandate certain aesthetics, that interest may be trumped by the “green” movement and should make sure that applicable governing documents are not invalid on their face in violation of these green laws and are not applied in ways to run afoul of these laws.

To view and print out the Exhibits please click here: