Community Association Update: Issue # 52
  • AB 1101 Signed! Welcome Clarity to HOA Financial Protection Requirements
  • AB 502 Signed! Board Elections by Acclamation
  • What to Do if There is HOA Slope Movement/Failure
  • Due Process Regarding an Association's Disciplinary Procedures
  • Does Our Association Have View Rights?
Dear ,

This Community Association Update is part of our commitment to providing the highest quality legal services to our clients and industry partners. If your company or Association would like to see a topic or issue covered in future editions, feel free to call our offices, email us, or submit a question online!

Steven Tinnelly, Esq.
Tinnelly Law Group
AB 1101 Signed! Welcome Clarity to HOA Financial Protection Requirements
*New Legislation
AB 2912, passed in 2018, provided welcome protections to homeowners in HOAs from fraudulent activities by those entrusted with managing an HOA’s finances. AB 2912’s protections included: 1) requiring Associations to secure fidelity bond insurance in an amount equal to or exceeding current reserves, plus three months of assessments; 2) requiring a monthly review of financial statements rather than quarterly; and 3) prohibiting electronic transfers of funds without board approval. However, certain provisions of AB 2912 were unclear.

To settle any confusion, AB 1101 was passed by the California Legislature in September of 2021. Effective January 1, 2022, Civil Code Sections 53805502, and 5806, will be amended in order to clarify existing law by:

  1. Specifying that HOA funds shall be deposited into accounts insured by Federal Deposit Insurance Corporation or the National Credit Union Administration Insurance Fund.
  2. Establishing clear limits before board approval is required for the transfer of HOA funds.
  3. Specifying that the HOA must not just maintain fidelity bond coverage, but that it must now also maintain crime insurance and employee dishonesty coverage, or their equivalent, for dishonest acts of the person or entity and their employees.

Common sense legislation that protects the financial interests of HOAs, which are unfortunately often targets for embezzlement, is a breath of fresh air. As always, HOAs with questions regarding new legislation or legal requirements related to insurance or finances, should contact their HOA lawyer.

AB 502 Signed! Board Elections by Acclamation Available to All California HOAs
*New Legislation
There has been disagreement within the homeowners association (HOA) legal community as to whether California law permits uncontested director elections to be carried out by acclamation, especially in situations where the HOA’s bylaws contain language permitting such a procedure. Our firm has always held that such a procedure is not permitted regardless of any language within an HOA’s Bylaws to the contrary. Our position is based on Civil Code section 5100(a) which provides that the Civil Code’s election procedures must be followed “[n]otwithstanding any other law or provision of the governing documents…” Accordingly, any Bylaw provisions purporting to permit elections by acclamation were superseded by Section 5100(a) of the California Civil Code.

Our position was recently supported by the adoption of Senate Bill 323 (“SB 323”) in 2019. SB 323 finally addressed the issue of elections by acclamation, and in doing so, specified that such a procedure was only available to HOAs with 6,000 or more units. This provided clear indication of the Legislature’s intent to require smaller HOAs (those with less than 6,000 units) to comply with the secret ballot procedure and conduct a full election even in situations where the election was uncontested.

We were therefore pleased at the introduction of Assembly Bill 502 (“AB 502”) earlier this year. AB 502 is aimed at resolving this problem by expanding the election by acclamation procedure to all HOAs irrespective of their size. Effective January 1, 2022, HOAs will be available to utilize an acclamation procedure specified under a new section of the Civil Code, subject to certain requirements that must be satisfied during the pre-balloting process. 

This does not mean, however, that an HOA is able to dispense with its annual meeting altogether, as the language of its CC&Rs or Bylaws may still require an annual meeting for other purposes. HOA Boards and management professionals should consult with their HOA attorney to understand the impact of the new law and the corresponding impact on their HOA’s annual meeting and director election procedure.

What to Do if There is HOA Slope Movement/Failure
Southern California is known for the warm weather, relaxing atmosphere, and in certain cases, picturesque Homeowners Associations (HOA) situated high enough to see the ocean. However, what happens when those picture-perfect HOAs have a slope movement/failure? What should the Board of Directors (Board) do?

An HOA’s Board will be called upon to act in the event of slope movement/failure. It is important for the Board to take immediate action as slope movement/failure can be detrimental to the physical wellbeing of everyone in the community and the homeowners’ properties involved. Additionally, immediate action will ensure that more data may be collected for the analyzation of the slope movement/failure. 

The Board must keep in mind that should the slope movement/failure be extreme, the costs associated with determining the cause and rectifying any damages will be vast. This is not taking into account any legal disputes between the parties as liability and responsibility for the slope movement/failure will not be clear until after investigations. Therefore, if HOAs have a slope movement/failure, it is best to contact general counsel immediately!

Due Process Regarding an Association's Disciplinary Procedures
Rules are meant to be followed. However, some homeowners unknowingly or knowingly violate these rules. What should an association do under these circumstances?

First and foremost, every association should have clear disciplinary and enforcement procedures (i.e., due process) regarding the handling of a homeowner’s violation of the association’s governing documents (Civil Code section 5850(c)). Think of associations as miniature governments in which each homeowner would have certain constitutional rights associated with their life, liberty, and property. Due process refers to the fact that in such matters, the association must provide homeowners with notice of the violation, the opportunity to be heard, and a decision upon neutral analyzation by the association (Civil Code section 5855).

For due process to be effective any disciplinary procedures and enforcement of such must be clearly delineated in a policy. The purpose of such a policy is to ensure the association will not arbitrarily or capriciously adjudicate enforcement matters. If the homeowner’s violation(s) remained unresolved, the association might proceed with litigation, in which case the court will scrutinize whether the association observed procedural due process. Associations should look to their general counsel to draft or update their enforcement policy and ensure their management is familiar with the policy and its execution.

Does Our Association Have View Rights?
*Asked and Answered
Asked – Our HOA has been receiving architectural applications from Owners who are requesting to install tall trees or increase the height of their property walls for additional privacy. However, several neighbors have expressed their stark opposition to any modifications that would impact the views from their property. Is our Architectural Committee obligated to approve the applications provided it complies with all other requirements, or should the application be denied to preserve the neighbor’s views?

Answered – It depends on the language contained within the HOA’s governing documents.

Included in most Governing Documents is the requirement that any Owners that wish to modify the exterior of their property must first submit an architectural application (“Application”) to the HOA’s Architectural Committee (“Committee”) for approval. Furthermore, most HOAs adopt some type of Architectural Standards that clearly define the aesthetic requirements that must be met to obtain approval from the Committee.

However, while almost all HOAs establish some type of Committee, Architectural Standards, and Application review process, not all HOAs have provisions regarding the preservation of views or clearly define what constitutes a “view”.

To provide guidance in view dispute scenarios, in Posey v. Leavitt, the California Court of Appeals for the Fourth Appellate District held that absent CC&R provisions, members have no right to air, light, or an unobstructed view. (Posey v. Leavitt, (1991) 229 Cal.App.3d 1236.) As a result, without an expressed provision protecting a homeowner’s right to a view, the Association is under no obligation to deny the Application on that basis.

Save the Date for Tinnelly Law Group's First Annual Legal Symposium!
January 7, 2021
8:00 am - 4:30 pm

Laguna Cliffs Marriot Resort and Spa
25135 Park Lantern
Dana Point

Listen to our attorneys discuss such hot topics as:
  • California's State Policy on Housing
  • Homeowner Harassment
  • Legislative & Case Law Update
  • "Let's Talk HOA Law" Game Show & Wrap Up

Cocktail Reception to follow. More details to come!
Welcome New TLG Clients!
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