Tuesday, December 2, 2014

Trespass and Nuisance Meet Inconvenience Damages

Do you have unwanted intrusions such as water draining from your neighbor’s unit or your unit? Is this invasion annoying or does it inconvenience you in some manner? Recently, a California Court of Appeal discussed the available remedies for someone facing such an imposition. One such available remedy is awarding damages for annoyance, discomfort, and inconvenience.1

Gail and Lewis Wyatt were awarded damages after a lower court found their neighbor’s patio improvements caused water to continuously flow into the Wyatts’ property, which eventually caused mold and damage.2 The appellate court, however, did not agree with the lower court’s decision, and the reason for this disagreement is essential.3

The Wyatts did not live in the unit. To be eligible for annoyance, discomfort, and inconvenience damages, you have to occupy the unit. Your use and enjoyment of the property cannot be inconvenienced if you are not actually using the property. The Wyatts’ award for discomfort and annoyance damages were, therefore, taken away by the appellate court.4

As we all know, our actions have consequences. If you are causing a nuisance or trespass to your neighbor’s property, be prepared to have to do more than just cease your actions or pay for property damage. You may have to compensate your neighbor for his or her inconvenience and annoyance, which can be a hefty bill to pay. Before the appellate court found that the Wyatts did not qualify for such damages and took them away, the Wyatts were looking at receiving $300,000.00 in discomfort and annoyance damages.5 A fee most, if not all of us, would find astronomical!

While the association in this case was quickly removed from any liability, as the area causing the nuisance was one which the homeowner had the responsibility to maintain,6 the association must still keep in mind that it too could cause such problems to its homeowners if it fails to maintain the common areas. The same damages for annoyance, discomfort, and inconvenience could be awarded to the homeowners bothered by a nuisance caused by the association’s own failures to properly fulfill its responsibilities and duties under the governing documents. This could result in a hefty sum of money being paid to homeowners that could easily be avoided by keeping up with repairs and maintenance.

Thanks to Rachelle Harrington of Silldorf & Levine for this excellent information. If you want more information from Ms. Harrington you can reach her firm at http://www.silldorf-levine.com/index.php

Thursday, August 14, 2014

Update of California Drought Legislation

As you are likely aware, California is in the midst of a drought. Below is an update from Jakob Harle, of Harle, Janics & Kannen regarding recent legislation and how it affects community associations.
We had mentioned during our previous e-mail blast regarding Governor Brown's Drought Proclamation that there were multiple drought-related bills wending their way through the State Legislature. One such bill, AB 2100 (Campos), was signed by the Governor on July 21, 2014. Because the bill was declared to be an urgency statute, it became effective immediately, and therefore now applies to all residential common interest developments.

The bill amends Civil Code Section 4735, which deals with low water-using plants in residential CIDs, by adding new subpart (c). New subpart (c) prohibits residential associations from imposing a fine or assessment against a member for reducing or eliminating the watering of vegetation or lawns during any period for which either (i) the governor has declared a state of emergency due to drought pursuant to Government Code Section 8558(b), or (ii) a local government (i.e., a city or county) has declared a local emergency due to drought pursuant to Government Code Section 8558(c). The bill does not address other forms of HOA discipline, such as the suspension of HOA voting privileges or suspension of recreational facility use privileges; however, our best guess is that a court would likely hold that the intent and spirit of the statute is to prohibit HOAs from disciplining their members in any manner for under watering during declared states of emergency due to drought, so our view is that voting and recreational facility use privilege suspensions are probably off the table as well.

Although HOAs are prohibited from disciplining for under watering during declared drought emergencies, it is our view that HOAs can still require members to properly maintain their lots in ways that are not water-related, such as requiring lawns to be kept free of weeds, and requiring owners to remove plant material that has died as a result of under watering.

 Stay tuned for future updates on other drought-related bills affecting CIDs!
We would like to thank Mr. Harle for providing this information. For more information on his firm, visit their website at www.hjklawfirm.com or call them at 714-429-0700.



Monday, February 10, 2014

FHA Loans - Are They A Civil Right?

Ken Harney writes an award-winning, nationally syndicated column for the Washington Post on “The Nation’s Housing.” On January 27, he interviewed me for an article he was writing about the vulnerability of associations to discrimination claims related to FHA certification.

His interest was triggered in part by an article I wrote last November about an Ohio Civil Rights Commission investigation of alleged familial discrimination when a condo board declined a single mother's request to certify the development for FHA financing (so she could buy a unit).

After a six-month investigation, Ohio's CRC found insufficient evidence the association had violated the law. However, they left open the door that the buyer could file an action in federal court for disparate impact discrimination. If that were to happen, the Department of Justice could pursue the matter against the association.

Ken Harney noted that the current administration has already aggressively pursued disparate impact discrimination against mortgage companies. In other words, condominium associations could be open to civil rights claims for not seeking FHA certification because their decision has the practical effect of discriminating against minorities. To read the article, see "Condo Boards Could Face Discrimination Claims."

RECOMMENDATION: As I noted in last year's article, any decision not to seek FHA certification must be based on non-discriminatory reasons, which should then be recorded in the board's meeting minutes. Boards should seek legal assistance drafting the board resolution before it is recorded in the minutes.
Thanks to Adrian J. Adams of Adams Kessler PLC for this excellent information. If you want more information from Mr. Adams you can reach his firm at www.adamskessler.com.

Wednesday, October 23, 2013

California Appeals Court Upholds Reasonable Election Rules

Friars Village Homeowners Association v. Hansing: Relationship Rule

According to the Court of Appeal in San Diego County, a homeowners association may adopt, by rule, a Board candidate qualification where the qualification is reasonable and does not conflict with the Association's other governing documents.  So ruled the court in Friars Village Homeowners Association v. Hansing, an opinion published October 9, 2013. 

The rule in question prevented a person from seeking election to the Board if the person was related by blood or marriage to a current Board member or a current candidate for election to the Board.  (The court referred to the rule as the Relationship Rule.)  

Association member Charles Hansing challenged the Relationship Rule.  Mr. Hansing's wife was a member of the Board.  When the Association denied Mr. Hansing's request that his name be placed on the ballot, he sued.  Both the trial court and the court of appeal upheld the Relationship Rule.  The Court of Appeal held the rule was reasonable and cited with favor the rationale given by the Association for adopting the rule (to protect the Board from the possible wrongdoing by directors from the same household and to prevent a situation where two directors would constitute a substantial voting bloc).  The court rejected Mr. Hansing's claims that the rule, by establishing a new qualification, was inconsistent with the Bylaws or that the rule violated his right to self-nomination.   

This case stands for the proposition that a Board may adopt, via an election rule, a qualification for election to the Board that goes beyond what is set forth in the Bylaws or Articles, provided the qualification is "not inconsistent" with the Association's governing documents and the qualification is, in the opinion of the court, reasonable.  Also, by implication, a homeowners association is not required to include a non-qualified candidate's name on the ballot for election of directors.  

The Friar Village case was decided on specific grounds, involving the language of the Association's governing documents, the Board's purposes for adopting the rule and the court's opinion on the reasonableness of the rule.  But the case's holding represents a potentially broad grant of authority to Boards regarding adoption of qualifications by rule and the authority of associations to exclude nonqualified candidates from the ballot.
Thanks to the Law Firm of Fiore, Racobs & Powers for this information. A leading firm in the practice of community association law. For more information on their firm, check their website at www.fiorelaw.com

Wednesday, September 18, 2013

Make Sure Your Follow Correct Procedures In Collection Foreclosures

In July 2013, the Sixth Appellate District Court on an appeal taken from a case in Santa Clara County modified its opinion and ordered its previously unpublished opinion as published.  As you may or may not be aware, opinions certified not for publication cannot be cited to a court nor do they provide any precedent value.  By changing its mind and ordering its opinion published, the case,  Diamond v. Superior Court (Casa        Del        Valley        Homeowners Association), 217 Cal. App. 4th 1172; 159 Cal.  Rptr.  3d  110  (Cal.  App.  6th  Dist. 2013), may now be cited as authority for the proposition that an association must strictly  comply  with  pre-lien  and  pre-foreclosure  notice  requirements  as  set forth  under  the  Davis-Stirling  Common Interest  Development  Act. The  court rejected the Association’s argument that it had substantially complied.  Initially, it should  be  noted  that  the  focus  of  the case was on the various notices required to be given to an owner prior to the recordation of a lien and prior to the commencement of foreclosure proceedings.   This does not mean that every error” or misstep” in the process will result in the association’s lien being invalidated or the foreclosure process being voided. Here is a checklist of the summary of steps required in a judicial foreclosure.


·         Notice of Intent to Lien (by certified mail; must contain itemized breakdown of charges, statutory language, copy of collection policy, and statement re owner’s right to IDR and to ADR)

·         Board Vote to Record Lien (in open session; using account number or APN; recorded in minutes)

·         Record Lien (at least 30 days after Notice of Intent to Lien; must attach and record copy of account ledger)

·         Notice of Recordation of Lien (by certified mail; no later than 10 days after date lien recorded; enclose copy of recorded lien)

·         Board Vote to Foreclose (in executive session; recorded in minutes of next open meeting using account number or APN)

·         Notice of Board Vote to Foreclose  (served in the manner of a summons to onsite owner or by first-class mail to offsite owner; prior to filing a foreclosure lawsuit)
Thanks to the Stanley Feldsott of the Law Offices ofFeldsott & Lee for this important information (taken from their September 2013 Firm Newsletter). For further information on the firm and their ability to assist your association or if you have questions on this information please contact Jennifer Kneer 23161 Mill Creek Drive, Suite 300 Laguna Hills, CA 92653 (949) 729-8002 Phone (949) 729-8012 Facsimile WWW.CAHOALAW.COM 

Thursday, August 1, 2013

Are Emails Violating The Open Meeting Act?

               E-mail communications play an important role in the business each of us conducts each day.   The following are tips to consider when utilizing this form of communication to conduct association business.  

          California Civil Code Section 1363.05, which is known as the Common Interest Development Open Meeting Act (Open Meeting Act), states that a "board of directors shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail..."  The purpose of this code section is to hold associations to the same due process standards as those to which municipal governments are held.  All members have a right to hear about and deliberate on issues concerning their community.  Under the Act, some email communications are allowed while others are not allowed.   

Emails Disallowed. 

          Any email exchanges involving a majority of the members of the board that discuss an association's business items are not allowed.  The California Civil Code defines an item of business as "any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a majority of the directors." 

Emails Allowed.

            Board members may use email for the purpose of conducting emergency meetings, for communications that do not involve items of association business, and for exchanges that involve less than a majority of the directors.  This may include the distribution of information for a meeting, suggesting that certain items be placed on the agenda, and choosing the date and time for a meeting.
              Creating a Separate Email Account. 

        Board members should set up a separate email account for the sole purpose of conducting association business. This prevents any personal correspondence unrelated to the association from being intermingled with association correspondence.
Thanks to the Law Offices of Silldorf & Levine, LLP for this important information. For further information on the firm and their ability to assist your association or if you have questions on this information please contact Christina Ciceron, Esq. at (800) 811-5874 or cciceron@silldorf-levine.com 

Thursday, February 14, 2013

The Business Judgement Rule: A Three Legged Stool (Of Security)

The Business Judgment rule is one of the most important things a good director should know well, because it protects directors from liability.  However, well-meaning directors can accidentally stray outside of its protections.

The Rule
The "Business Judgment Rule" (hereafter, "BJR") is found at Corporations Code Section 7231, which states that a director is personally protected from liability, so long as it operates within the BJR, which is found at subsection (a): 

"A director shall perform the duties of a director ... in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances."

So, if a volunteer director acts:
  • With good faith;
  • Believing the action is in the best interests of the entire association; and
  • With reasonable inquiry.
Then the director is not responsible personally, even if it turns out the board made a bad decision that financially harmed the association.

It's not that simple
Every day, good people step outside of the BJR, leaving themselves needlessly exposed to risk of personal liability.  The potential tragedy is that most of these people leave the BJR's protection unknowingly but based on a belief they are helping their association. Most times, luckily, it works out.

"Good Faith"
Good faith is not simply good intentions or a pure heart.  Good faith is making a decision which is not bad faith.  The people who decide whether something is in good or bad faith will be judges or jury members.  So what is important is not what YOU think, but what somebody else thinks of the action and the evidence about it.

Could one argue that a decision is based upon a desire to retaliate against "that member"? You know, the one who always criticizes, perhaps even abuses the board?  The law requires that members are treated consistently, so the horrible abusive member is entitled to the same roof repair as the saintly, thankful member.

You may be making a decision that sets aside your differences with a neighbor, but sometimes past statements or even e-mails can be taken out of context, with dangerous results.  Make sure that every statement you make in front of people, and every e-mail, is carefully worded -- and avoid intemperate or sarcastic remarks.   
"In Interest of Association as a Whole"
Of course, every action by a board should be in the best interests, and I am sure every director thinks they are doing the best for their HOA.  But who decides if your motivation was correct, and how do they do it?  A judge or jury would look at your actions, your statements and the surrounding facts, and from that determine if you reasonably believed you were working for the HOA's best interests (and not your own).

How fastidious are you in avoiding conflicts of interest, or apparent conflicts?  Do you make sure that, in an overall remodel of the property, the directors' homes are remodeled last (not first!)?  Do you make sure the minutes show that before the board discusses your home or building, you left the meeting during that discussion (or at least sat in the audience and not at the board table)?

"With Reasonable Inquiry"
The board must make sure it has the appropriate qualified input before it makes a decision.  A manager's input may be all that is required, depending upon the size and complexity of the issue.  However, if the matter is serious, large or complex, more expertise may be needed.

Well-meaning directors often innocently violate this requirement by either providing their own expertise ("I think that wall is structurally sound") or by refusing to endorse the hiring of the appropriate consultant ("engineers are too expensive, can't we figure this out?")

A director's job is to make decisions based upon the information brought to the board.  Make sure the board has sufficient and qualified input, appropriate to the decision.  Sometimes the board must spend money to know it is right.  That is why you have lawyers, engineers and other experts.
Three Legged Stool
The Business Judgment Rule is a three-legged stool. Skip any one of the legs and you know what happens ... headache!

Thanks to Kelly G. Richardson Managing Partner of Richardson Harman Ober PC, a law firm known for community association advice for this important information.  Direct questions to krichardson@RHOPC.com and check out their website at www.rhopc.com