California has suffered significant wildfire damage in recent years. Coupled with several years of severe drought and increased wildfire risk, fewer and fewer insurance companies are willing to write policies for communities that may experience wildfire damage. In addition, admitted carriers are highly regulated by the Department of Insurance, which limits the amounts they may charge for insurance premiums. This has caused many associations to be cancelled or non-renewed by admitted carriers or those in the “primary” market.

As a result, HOAs are left to purchase insurance from the non-admitted or “surplus” market. Carriers in the surplus market are less regulated and, when demand is high and supply is low, prices skyrocket. The HOA’s CC&Rs generally include language specifying that the association “shall” purchase insurance, and may require coverage to provide for “full replacement cost.” If the association does not purchase the insurance as required by the governing documents, the association and its board of directors could be exposed to liability for failure to obtain adequate coverage.

So, what is an HOA to do if it doesn’t have the money to pay for the skyrocketed insurance premiums? Yes, an HOA may temporarily borrow funds from reserves in this situation without membership approval because this act would be needed to “meet short-term cash flow requirements or other expenses.” (Civ. Code § 5515(a).) This action should only be taken with the guidance from the association’s legal counsel due to the significant procedural requirements that must be satisfied under the law.

There are many additional factors to consider before utilizing this option, such as the mechanism that will be used to restore the borrowed reserve funds (i.e., a special assessment) and its legal requirements and limitations, as well as options which may be available to reduce the HOA’s insurance premiums carrying forward… Read More

The rising cost of electricity, environmental considerations, clean energy and tax savings, utility company programs designed to help alleviate the demand on the grid, and the proliferation of affordable residential solar energy systems have made solar power more popular than ever. Consequently, HOAs are seeing a sharp rise in homeowner requests to install solar energy systems. This presents a particularly unique set of challenges for condominium developments because of their shared roofs and other similar common area components.

Under Civil Code § 714.1, if a homeowner wants to install a solar energy system (e.g., solar panels) on a shared common area rooftop or adjacent garage or carport, associations can no longer prohibit them. California law broadly requires associations to allow homeowners to install solar panels on common area roofs of the buildings in which their unit is located or on the roofs of adjacent carports or garages. See Civ. Code §§ 714.1, 4600, and 4746.

However, this does not mean that a homeowner can install as many solar panels on the common area roof as he or she desires without consideration of neighbors in the building. Civil Code § 4746(b) provides that when reviewing a request to install a solar energy system on a multifamily common area roof shared by more than one homeowner pursuant to §§ 714 and 714.1, an association may impose additional reasonable provisions.

Associations should get ahead of potential future issues involving solar panel systems by adopting guidelines addressing the policies and procedures regarding the application and installation of solar panels, which should include the homeowner's execution of a maintenance and indemnity agreement providing important protections for the Association... Read More

When a delinquent homeowner dies, there is a strict one-year statute of limitations to sue them or to continue a lawsuit against their estate. (Cal. Code Civ. Proc. § 366.2). This is true even if the statute of limitations would have been longer had the person survived. This harsh rule applies even if you did not know that the person died so Boards and management should take notice if a homeowner does not respond to communications or suddenly falls in arrears and then investigate further by contacting family members or emergency contacts during circumstances of non-responsiveness and/or extended non-payment.

The second important rule when a debtor dies is that when a probate estate has opened, any creditor has only four months from the date the executor or administrator is appointed to file a claim in probate. (Cal. Code Civ. Proc. § 377.40; Prob. Code §§ 9100 et seq.). Sometimes the decedent has no family or heirs, or the heirs fail to open a probate. In this case, the HOA may reach out to the public administrator in the county where the real property is located to request that they open a probate. If this is not done, then it is incumbent on the HOA to open the probate as a creditor to ensure that the above-referenced statute of limitations does not run. (See Prob. Code §§800; 48).

Since a dead person cannot be sued, the HOA must sue the estate of the decedent. If a lawsuit was filed while the homeowner was alive, but they are now deceased, a motion should be timely filed to substitute the deceased person with their estate. (Cal Code Civ. Proc. § 377.31). Counsel should be mindful that the motion must be filed within three (3) months of the rejection of the HOA’s creditor’s claim, which is deemed rejected if not responded to within thirty (30) days of submission. (Prob. Code §§ 9256, 9352, 9353, 9371). It is important to note that once the creditor’s claim is filed, the one-year time bar pursuant to Code of Civil Procedure §366.2 is tolled. Nevertheless, the creditor’s claim must be filed within one year of the decedent’s death or the claim is barred entirely.

Thankfully, the above harsh requirements do not apply when the debt is one that can be secured via a lien on real property that may be foreclosed, such as with assessment liens. This is because such debt attaches to the property and not to the deceased person.

The death of a delinquent homeowner can pose complex and time-sensitive challenges. This is another reason why it's important for an association to have a qualified collection services provider with specialized knowledge and experience delinquent assessment collection, such as our firm's affiliate, Alterra Assessment Recovery.

There will come a time when a homeowner violates an association’s governing documents (i.e., CC&Rs, Rules & Regulations, Architectural Guidelines…etc). If there is a possibility those violations will be litigated, the association must have a proper trail of evidence to bolster their claims.

A: Unapproved architectural improvements (i.e., walls, patio covers), failing to maintain property exterior in planned developments (i.e., shutters, paint, landscaping), inappropriate parking…etc.

A: For these violations, the association’s community manager should clearly document in their written records: what the violation was, which governing documents provision was violated, who committed the violation, if known (e.g., an owner, guest, tenant), when the violation occurred (i.e., date and time), where the violation occurred, and anything else that might be relevant. Additionally, a photo of the violation should be taken on the date it occurred and reoccurred..

If the matter goes to litigation, the association will need to prove that a homeowner has committed the violation(s) alleged by the association. A judge will want to see actual physical photo evidence and clear documentation of the homeowner’s violation history. Without proper evidence, the association might have a hard time winning its case. If there is a clear violation history and evidence, the judge will be able to order the homeowner to correct the violations.

Even if the matter does not go to litigation, a proper trail of evidence will assist the association’s general counsel in dealing with the matter... Read More

Competition within the real estate market remains strong, with many potential buyers looking to buy their next home within an HOA. The competition to buy homes creates an increase in the number of questions from real estate agents and mortgage/escrow companies that are directed toward the association and its agents regarding any litigation involving the association. 

What should the Board and manager be aware of? What should they do in certain situations?

The association has no legal obligation to make disclosures to prospective buyers of properties within the association or other third parties. These third parties may be real estate agents, loan processors, escrow companies, or anyone else looking for information regarding the association. Even though the association has no legal obligation to make disclosures, its management company and even its board will be asked numerous times by third parties to provide further information regarding any pre-litigation matter or lawsuit the association is engaged in. Associations may encounter problems if the manner and methods for responding to these requests are not handled appropriately with guidance from the association's legal counsel... Read More

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