LHC Newsletter Vol. 16, No. 1
2024 Year-End Review of California Legislation and Cases which affect
Homeowners’ Associations and Common Interest Developments
By: David A. Loewenthal, Esq.
James D. Theodosopoulos, Esq.
NEW LAWS EFFECTIVE JANUARY 1, 2025
PUBLISHED CASES:
Colyear v. Rolling Hills Community Association of Rancho Palos Verdes (3/1/2024) 100 Cal.App.5th 110
Significance: Associations should ensure that when a property is annexed in a new phase of a development, the newly annexed property should contain language expressly incorporating clauses that reference and bind the new phase to the original Declaration. Further, the Court emphasized that deeds are analyzed as contracts, including CC&Rs and thus are subject to Contract Law.
Facts: Rolling Hills Community Association of Rancho Palos Verdes is a development that was built in multiple phases. The original phase began in 1936, when the first CC&Rs (“Dec. 150”) were recorded for the first phase. One of the Covenants in Dec. 150 allowed the Association to enter lots to maintain and trim trees to preserve views and protect adjoining properties, if owners did not comply. Colyear’s property was not part of the original development and was in a separate phase that was not governed by Dec. 150. The set of CC&R’s that bound Colyears property was recorded on May 29, 1944 (“Dec. 150M”) and did not contain the Tree trimming covenant as Dec. 150 did. Colyear owned two parcels outside the original tract with a large garden containing many mature trees, thus he preemptively initiated the action to obtain a declaration and injunction that the trees on his property could not be cut by the Association. The trial court granted Colyear’s request for declaratory relief and an injunction, declaring that Dec. 150 was not binding on Colyear’s property except to the extent any restrictions were restated in Dec. 150M. Colyear was further seeking damages of attorney’s fees for his breach of fiduciary duty claim which the trial court ruled was moot because Colyear preemptively was protecting his property.
Disposition: The Court found that Dec. 150M does not sufficiently incorporate the tree trimming covenant or the original CC&Rs, Dec. 150. Due to Dec. 150M not including the tree trimming provision or expressly incorporating Dec. 150, the tree trimming provisions cannot be enforced on Colyear’s property, absent consent. Further, the Court found that attorneys fees do not constitute damages for purposes of Colyear’s breach of fiduciary duty claim, as Colyear needed to be damaged to recover for breach of fiduciary duty.
Morris v. West Hayden Estates First Addition Homeowners Association, Inc. (6/17/2024) 104 F..4th 1128
Significance: This case underscores the complexities at the intersection of homeowners associations’ enforcement of community rules and residents’ rights to religious expression. It highlights the legal challenges in determining when enforcement actions may constitute discrimination under the Fair Housing Act.
Facts: In 2014, Jeremy and Kristy Morris hosted a Christmas event at their home in Grouse Meadows, Idaho, attracting large crowds with Christmas lights, a live nativity, and other festivities. They later moved to West Hayden Estates and planned a similar event, but the Homeowners Association (HOA) raised concerns that it violated community rules. The HOA cited potential issues such as traffic, excessive lighting, and non-residential use of the property. The Morrises accused the HOA of religious discrimination, alleging violations of the Fair Housing Act (FHA). The case went to trial, and a jury found the HOA had discriminated against the Morrises, awarding them damages.
Despite the jury’s verdict, the district court ruled in favor of the HOA, granting a judgment as a matter of law (JMOL) and ordering an injunction against the Morrises’ event. The court stated that the HOA had legitimate concerns about violating community rules. The Morrises appealed the decision, and the appellate court affirmed some aspects, reversed others, and remanded the case for further proceedings, including a new trial.
This case involves the Morrises’ allegations that the Homeowners’ Association (HOA) violated several provisions of the Fair Housing Act (FHA), specifically Section 3604(b), 3604(c), and 3617. The Morrises claim that the HOA discriminated against them because of their Christian faith, including opposing their Christmas program, discouraging their home purchase, and selectively enforcing rules.
Disposition: The Morrises argue the HOA’s actions amounted to religious discrimination. However, the court found no adverse effect on the Morrises’ rights, as they were neither prevented from purchasing their home nor from holding the Christmas program. Despite some contentious letters and meetings, there was no legal action taken against them. The court held that the Morrises failed to demonstrate a concrete adverse impact, and thus their claim under Section 3604(b) did not succeed.
The Morrises also alleged interference with their right to enjoy their home without religious discrimination. The court found that evidence, such as the HOA’s letters threatening legal action and statements implying that the Morrises’ religious practices were unwelcome, supported a claim under Section 3617. Specifically, statements made by HOA officials that indicated religious animus towards Christmas and the Morrises’ beliefs contributed to the jury’s finding that the HOA’s actions interfered with the Morrises’ enjoyment of their rights under the FHA.
Overall, the court affirmed the jury’s finding of interference but rejected the claim of discriminatory treatment. The evidence suggested the HOA’s actions were driven by religious animus, which warranted the jury’s conclusion under Section 3617, even though no concrete legal action was taken against the Morrises.
The Morrises claim that the HOA allowed harassment and threats from other residents of West Hayden Estates, violating the Fair Housing Act (FHA). While the FHA prohibits harassment based on protected characteristics like religion, the court found that the HOA could not be held responsible for the harassment in this case.
The Morrises challenged the HOA Board’s January 2015 letter under § 3604(c) of the Fair Housing Act (FHA), which prohibits discriminatory statements regarding the sale or rental of a dwelling based on protected characteristics, such as religion.
The court concluded that the HOA’s letter did not indicate a preference for non-religious homebuyers. While the letter expressed concern about potential disruptions from the event, including its religious context, it did not suggest that prospective homebuyers’ religion or lack thereof was a factor in the sale of the Morrises’ home. Therefore, the court granted Judgment as a Matter of Law (JMOL) for the HOA on the § 3604(c) claim.
The district court issued an injunction preventing the Morrises from hosting a Christmas program that violated HOA rules. However, the court vacated this injunction because it determined that the Morrises’ discrimination claim still warranted a new trial. If the jury finds that the HOA’s actions were motivated by religious animus, the injunction could unfairly endorse discriminatory enforcement of the HOA rules.
UNPUBLISHED CASES
United States of America v. Aqua 388 Community Association (10/6/2023) 2023 WL 6890753
Significance: A homeowners association must make reasonable accommodations for disabled individuals if the homeowners association is aware of their needs, otherwise the association runs the risk of violating the Fair Housing Act.
Facts: The court granted partial summary judgment in favor of Emma Adams, finding that the defendants violated the Fair Housing Act (FHA) by failing to accommodate her disability-related parking needs. Adams, a paraplegic, requested a designated handicap accessible parking space for her modified minivan, which requires 8 feet of clearance for her to enter and exit. Despite numerous requests, the defendants did not provide an assigned space until years later, resulting in Adams receiving citations due to the Association’s rules about unassigned spaces.
The court ruled that the failure to grant Adams’ request for an accommodation was discriminatory under FHA Section 3604(f)(3)(B), which mandates reasonable accommodations for disabled individuals. The court emphasized that the requested accommodation was reasonable, as the FHA design manual requires reserved parking spaces for disabled residents, and the defendants should have known of Adams’ needs. Additionally, the defendants’ offer to provide access to additional spaces on a first-come, first-served basis was inadequate.
Disposition: The court also cited legal precedents, such as the Astralis case, which confirmed that housing providers must make accommodations even if they conflict with local laws, and that FHA protections for disabled individuals take precedence. The government’s motion for partial summary judgment was granted, holding the defendants liable for failing to accommodate Adams from the time of her first request in January 2017 until her assigned space in 2021.
Miller v. San Luis Bay Estate Homeowners Association, Inc., (7/31/2024) 2024 WL 3589633
Significance: A Court can look at the historical information and interpret the CC&Rs to help determine an easements existence. The court interpreted the CC&Rs in a way that favors easement rights for unannexed parcels, aligning with California’s Civil Code, which favors such easements in planned developments. The court also found that easements for ingress and egress automatically transfer with the property, even if not explicitly mentioned in the deed.
Facts: Miller sued the Association for access to a private road that provides access to her undeveloped parcel within the San Luis Bay Estate Homeowners Association (Association), arguing various theories for an easement. The parcel is undeveloped, and Miller’s property was not annexed to the Development’s CC&Rs, but the CC&Rs suggest that property owners within the Development can use the private roads, and Miller’s property falls within this category.
Miller’s application for a permanent pass to the private road was denied by the Association, despite past practices where other property owners, including those with unannexed parcels, had been granted access. The Association’s past actions, such as granting access to other property owners (including the Rossi Trust, the previous owners of Miller’s property), supported Miller’s claim.
Disposition: The court granted Miller a preliminary injunction, recognizing that without access to the private road, Miller has no legal way to access her property. The court found that Miller is likely to succeed in establishing an easement over the road, citing Civil Code Section 4505(b), which supports easements for ingress and egress in planned developments. The court also noted that Miller’s right to access the road likely existed prior to her purchase, meaning she automatically has the right to use the road, and the CC&Rs should be interpreted in favor of that policy.
The court determined that Miller had a high likelihood of success in establishing the easement and granted her temporary use of the private road pending further resolution of the case.
Woolard v. Regent Real Estate Services, Inc. (12/3/2024) 2024 WL 4965439
Significance: This case involves an appeal following a summary judgment in favor of the cross-defendants, Regent Real Estate Services, Inc. (Regent), a property management company, and Greenhouse Community Association (Greenhouse), a homeowners association. The dispute arose from a physical altercation between two sets of residents at Greenhouse Condominiums, Eric Woolard and Breonna Hall (the defendants and cross-plaintiffs), and Eric Smith and Stacy Thorne (the plaintiffs and cross-defendants). The appellate court affirmed the trial court’s judgment, agreeing that Woolard and Hall had not established a breach of duty by Regent and Greenhouse. The court emphasized that homeowners associations and property management companies are not responsible for mediating or intervening in disputes between homeowners or their residents, and imposing such a duty would place an undue burden on these entities.
Facts: In December 2019, Eric Smith and Stacy Thorne were at their residence in the Greenhouse Condominiums when they got into a physical altercation with their neighbors, Woolard and Hall. Woolard and Hall alleged that the altercation was the result of long-standing harassment from neighbors, including complaints about their dogs and other minor disturbances, which were allegedly exacerbated by Regent and Greenhouse. Woolard and Hall claimed that Regent and Greenhouse failed to address their complaints and allowed the harassment to escalate, ultimately leading to the violent incident. Even though Regent and Greenhouse adequately responded to all complaints filed by Woolard and Hall.
In their cross-complaint, Woolard and Hall sought indemnification, apportionment of fault, and damages for negligence against Regent and Greenhouse, claiming that their failure to intervene or adequately address the harassment caused the altercation. They also accused Greenhouse’s management of unethical conduct, asserting that Regent ignored their complaints, failed to investigate incidents, and ultimately contributed to the emotional and financial distress Woolard and Hall suffered.
In response, Regent and Greenhouse argued that they had no legal duty to intervene in the dispute between neighbors, and that their actions in responding to complaints were reasonable and met the standard of care expected of property management companies and homeowners associations. They also argued that Woolard and Hall had not provided sufficient evidence of negligence or a breach of duty.
Disposition: The court granted summary judgment in favor of Regent and Greenhouse, concluding that they did not owe Woolard and Hall a duty to intervene in the dispute between neighbors. The court determined that Woolard and Hall had failed to provide any legal basis for imposing such a duty and that their claims of housing discrimination were unfounded. Furthermore, there was no evidence of negligence or a failure to investigate complaints in the manner required by law.
Woolard and Hall’s appeal was based on their belief that the trial court had erred in granting summary judgment, specifically arguing that the foreseeability of harm made it clear that Regent and Greenhouse should have intervened. However, the court found that foreseeability alone is not enough to establish negligence, and no duty existed for the homeowners association or property manager to resolve neighbor disputes.
Thus, the judgment in favor of Regent and Greenhouse was affirmed, and the appeal was denied.
Mays v. Oakview Homeowners Association (6/17/2024)
Significance: Courts are increasingly willing to require Boards to hold elections even if a quorum is not met, especially if elections have not been held according to the governing documents.
Facts: Oakview Homeowners Association (Association) elects its five (5) directors to two-year staggered terms at the Association’s annual meeting each year. However, the number of members attending the annual meeting from 2018 through 2023 was insufficient to constitute a quorum. Mays ran for a seat on the board from 2020 through 2022, but an election never took place because the Association failed to meet quorum each time an election meeting was held. In 2022, Mays filed a petition for Peremptory Writ of Mandate and a Motion for Judgment, where she stated that the Association violated the CC&Rs and Bylaws by failing to maintain the full number of directors and not holding annual meetings to replace directors. The trial court granted Mays’ Motion for Judgment, and separately issued a Writ of Mandate in favor of Mays. A peremptory writ of mandate is a judicial order requiring that a party perform an act or cease to act where the Court finds that an official law, duty, or judgment requires them to do so.
Disposition: It was affirmed that the Association needed to hold a new election for the Board of Directors, even if a quorum was not met again. The Association’s governing documents provided that “in the absence of a quorum, the meeting must be adjourned no less than five (5) days and no more than thirty (30) days from the date of the original meeting.” The trial court felt this was convincing because the Association’s governing documents require the Association to notice the time and place for another meeting, even if the vote by members present at a current meeting to forgo setting another meeting if a quorum is not achieved. The Appellate Court stated, “The Association failed to enforce the governing documents, which resulted in an abuse of power that occurs when an incumbent board tries to perpetuate their own power by failing to hold regular homeowner meetings or elections.”
Taggart v. North Coast Village Home Owners Association (11/28/2023) 2023 WL 8228855
Significance: The court’s interpretation of “regular” and “special” assessments highlights that the purpose of the assessment is paramount, not just its label or structure. This case clarifies how assessments in homeowner associations are classified under the Davis-Stirling Act, reinforcing that the purpose of an assessment is the key factor in determining whether it is a “regular” or “special” assessment. This legal principle discourages HOAs from using superficial labeling tactics to bypass legal requirements, thereby ensuring that the substance of the assessment (its actual use) prevails over the form (the label attached to it). This is significant because it limits the ability of HOAs to circumvent statutory restrictions by labeling assessments in ways that do not reflect their actual purpose. If HOAs could simply re-label regular expenses as “special” assessments, they could evade the legal limits on increases.
Facts: This case involves an appeal by Tim Taggart against the North Coast Village Homeowners Association (HOA) concerning two $1,000 assessments levied in 2020 and 2021. The HOA imposed additional $1,000 assessments per unit to cover operating costs, which included increased insurance premiums, wages, and COVID related expenses. The HOA labeled these assessments as “special assessments,” but they were used for recurring operating expenses. Taggart sued the HOA, claiming the assessments were incorrectly labeled and exceeded the statutory limits for a special assessments under California’s Davis-Stirling Common Interest Development Act (the Act).
The trial court concluded that the assessments should have been classified as regular assessments; notwithstanding that the Association labelled them as special assessments. The court’s rationale that the assessments were being used to pay for recurring operating expenses and therefore the 5% maximum increase provision for special assessments did not apply. The trial court ruled in favor of the Association and Taggart appealed.
Taggart argued that the assessments were improperly classified as “regular assessments” rather than “special assessments” by the court, which would be subject to different limitations under the Act. Specifically, he argued that special assessments are capped at 5% of the HOA’s budgeted gross expenses unless homeowner approval is obtained, whereas regular assessments do not require such approval unless they increase by more than 20% from the previous year.
Disposition: The trial court ruled that the assessments were “regular assessments” despite being labeled “special” by the HOA. The court reasoned that the nature and use of the assessments (covering essential operating expenses like insurance and wages) made them regular, not special, assessments. The court also ruled that because these assessments were used for ongoing operating expenses, they were not subject to the 5% cap for special assessments under section 5605(b).
The court emphasized that the distinction between “regular” and “special” assessments is based on the purpose of the assessment, not its label or frequency. Since the assessments were for essential operating costs, they were regular assessments. The court referenced the legislative intent of the Davis-Stirling Act, which distinguishes regular assessments for ongoing operations from special assessments for extraordinary expenses or capital improvements. The court also rejected Taggart’s argument that assessments could be classified based on their payment structure, noting that such a position would allow HOAs to circumvent the statutory limits by using different payment schedules.
On appeal, the judgment was affirmed in favor of the HOA, with the court holding that the assessments were regular assessments, not subject to the 5% limit for special assessments. The Court of Appeals determined that the $1,000 assessment was generally used for operating expenses and not for extraordinary or unforeseen costs. As such they were in actuality regular assessments and not subject to the 5% cap on special assessments as set forth in in Civil Code 5605. As such, the court determined that how an association labels an assessment is not as relevant as what the purpose of the assessment is.
Haidet v. Del Mar Woods Homeowners Association (10/21/2024) 2024 WL 4677484 (only the westlaw citation is currently available)
Significance: If a defendant is included in the complaint but is then subsequently left off a subsequent amended complaint, the prior defendant is no longer a party to the case and the plaintiff ultimately forfeits their right to voluntarily dismiss said defendant. If a plaintiff wants to preserve their right of voluntary dismissal of a defendant in a subsequent amended complaint, the plaintiff needs to file the amended complaint including that defendant and then make a motion to dismiss without prejudice.
Facts: Gregory and Kathleen Haidet, condominium owners, sued the Del Mar Woods Homeowners Association (HOA) and others, alleging nuisance from improperly installed flooring by their upstairs neighbors. The HOA demurred, and the court dismissed their claims, allowing them to amend some but not all of their claims. The Haidets chose not to amend claims against the HOA, instead filing an amended complaint with other defendants and left the HOA out of the amended complaint. The HOA sought dismissal with prejudice and attorney fees which was filed on April 6, 2024. The Haidets filed a request to dismiss the HOA without prejudice on April 18, 2024, which was rejected by the clerk because the HOA was no longer an active case participant, based on not being included in the first amended complaint.
The Haidets argued they should have been allowed to dismiss the HOA without prejudice, citing their timely amended complaint and request. The court ruled the Haidets forfeited their right to voluntary dismissal by omitting the HOA from their amended complaint and dismissed the HOA with prejudice under Civil Procedure Section 581(f)(2). The court also awarded the HOA $48,229.08 in attorney fees, finding the HOA the prevailing party, as it succeeded in its demurrer and led to the Haidets dropping their claims.
Disposition: On appeal, the Haidets contested both the dismissal with prejudice and the attorney fees award, but the court affirmed the trial court’s decisions, concluding the HOA was the prevailing party and the dismissal was within the court’s discretion.