Community Association Update: Issue # 57
Annual Legislative & Case Law Update (2022-2023)
Dear ,

Below you will find an overview of the 2022 legislation and case law impacting California HOAs as we head further into 2023. The material below is not meant to be an exhaustive list; we have summarized what we believe is the most important to the majority of our HOA clients and the industry professionals who service them.

If you have any questions regarding the information below, feel free to contact our offices, email us, or submit a question online!

Steve Tinnelly, Esq.
Tinnelly Law Group
(Effective January 1, 2023)
Multi-component bill impacting (a) speech on social media, (b) the ability of owners to rent out portions of their homes, and (c) enforcement actions by an HOA during declared states of emergency. 

AB 1410 was known as the "anti-HOA" bill when it was first proposed. This was due to the exhaustive list of onerous regulations it sought to impose on California community associations. Fortunately only the following three (3) components of the bill ultimately survived and were signed into law. These components are unlikely to result in significant changes to the day-to-day operations of most HOAs:

(Amends Civil Code section 4515, effective January 1, 2023)

Civil Code section 4515 was enacted several years ago to ensure that HOA members and residents had the ability to exercise their rights to "peacefully assemble and freely communicate with one another with respect to [HOA] living or for social, political or educational purposes." It did so by prohibiting an HOA from restricting its residents from distributing information or meeting in common areas on matters involving the HOA, HOA elections, public elections, and legislation.

New Law. AB 1410 has amended Civil Code section 4515 to expand these protections to what the HOA's residents may say about the HOA on "social media or other online resources", even if the "content is critical" of the HOA. Fortunately, the new law does not require HOAs to provide social media or other online resources to its members, nor are HOAs required to allow members to post information on the HOA's website.

Click here for more information about the rights of assembly and speech within HOAs.

(Adds new Civil Code section 4739, effective January 1, 2023)

Several changes to the law in recent years have placed significant limitations on the types of rental restrictions HOAs may enforce. Prior to AB 1410, the law was unclear as to whether an HOA could prohibit the renting of individual rooms of a home. While a broad prohibition on rentals is unlawful, many communities continued their prior practice of requiring any proposed rental be for the entire home; rental arrangements whereby the owner sought to rent out individual portions/rooms of the home to separate tenants were typically prohibited.

New Law. AB 1410 added new Civil Code section 4739 to address this issue. Owners are now permitted to rent out individual rooms or any "portion" of their home provided that the owner continues to reside in the home (the home remains "owner-occupied" during the lease). Fortunately, the HOA may still require such leases to be for periods of greater than 30 days. Additionally, Section 4739 is clear that it does not serve to relieve an owner's tenant(s) from having to comply with the HOA's governing documents.

Click here for detailed information on the types of HOA rental restrictions that are allowed under current law.

(Adds new Civil Code section 5875, effective January 1, 2023)

The California Legislature has previously demonstrated its concern over enforcement actions by HOAs to address violations that were due to, or which could not be remedied because of, some declared state or local emergency. It first did so via Civil Code section 4735 enacted years ago to, among other things, prohibit HOAs from fining owners for failing to water their lawns during declared drought emergencies.

New Law. AB 1410 followed this rationale by enacting new Civil Code section 5875 affecting any enforcement action during declared states of emergency. Section 5875 prohibits an HOA from pursing enforcement of violations of its governing documents during a declared state or local emergency if "the nature of the emergency giving rise to the declaration makes it unsafe or impossible" for the violating owner to "either prevent or fix the violation."

Fortunately, this prohibition on enforcement actions does not apply to enforcement actions relating to the collection of delinquent assessments.

Click here for more information on prohibited enforcement actions during emergencies.
(Effective January 1, 2023)
Condominium HOAs may be required to install EV charging stations and infrastructure within common areas in order to obtain permits for other retrofit projects.

New Law. AB 1738 amends Health and Safety Code Section 18941.11 to require that the California Building and Standards Code be changed in the next few years to mandate the installation of electric vehicle charging stations in the common parking areas of condominium and commercial developments. Installation of EV stations would be required whenever the HOA seeks to perform retrofits or upgrades requiring a permit.

While we do not yet have specifics on what types of requirements will be imposed, condominium boards and management professionals should evaluate what types of infrastructure and utility upgrades would be needed to support EV charging stations in the common areas and to start reserving funds for those purposes if necessary.
(Effective January 1, 2023)
Less authority of cities and counties to regulate ADUs by allowing only "objective standards".

New Law. SB 897 is the latest effort by the California Legislature to promote the creation of accessory dwelling units ("ADUs") as part of the state's effort to combat the housing and homelessness crisis. SB 897 amends Government Code sections 65852.2 and 65852.22 to, among other things, increase maximum height limitations, to confirm that enclosed garages are considered part of a residence, and to allow for only objective standards to be utilized by cities and counties in regulating ADUs.

While these Government Code sections are not directly applicable to HOAs, Civil Code section 4751 states that HOAs may only impose "reasonable restrictions" on ADUs "consistent with" the provisions of the Government Code. While HOAs still have aesthetic control over ADUs, any ancillary restrictions an HOA imposes on their use may be subject to challenge should they violate the framework established under the applicable Government Code sections.

Click here for more information on regulating ADUs within HOAs.
Prevailing party status to allow for an award of attorney's fees.
Neither party achieved their litigation objective to warrant status as the “prevailing party” and be awarded its attorney’s fees.

*Cang Le, Esq., Tinnelly Law Group's litigation partner, successfully represented Gramercy Towers in this case as part of a complex, multi-year lawsuit.

Factual Background. Artus, the owner of three condominium units in Gramercy Towers, filed suit against Gramercy Towers for various causes of action and pursued an injunction prohibiting the enforcement of the HOA's election rules. Gramercy Towers succeeded in challenging a portion of the suit. While the suit was still pending, Gramercy Towers adopted new election rules which rendered the remaining claims in the lawsuit moot. Artus then sought her attorney's fees as the "prevailing party"; Gramercy Towers' argument in defense was that Artus did not achieve her main litigation objectives to warrant prevailing party status (she had only obtained a limited procedural victory regarding the process for noticing rule changes in the community), and that, in light of Gramercy Towers' success in defeating several of her claims, attorney's fees should instead be awarded to Gramercy Towers.

Court’s Ruling. The court ruled that neither party was the prevailing party. Artus only achieved one (1) of her four (4) litigation objectives. Gramercy Towers was able to stop Artus from achieving her other three (3) litigation objectives and took action outside of the lawsuit by adopting new election and leasing rules to render Artus’ claims moot. Because the court viewed this outcome as neither party having achieved its main litigation objective, each side was to bear its own fees.

Click here to read the court's holding in this case.
Record inspection rights of corporate director's
A corporate director's access to the corporation's records cannot be denied simply because the director is adverse to the corporation in a lawsuit.

Factual Background. The Plaintiff was a director of Bancorp and also the COO of a law firm being sued by Bancorp for malpractice. The Plaintiff was also named as a defendant in Bancorp’s lawsuit. Claims against the Plaintiff included breach of fiduciary duty and fraud.

The Plaintiff requested access to sensitive financial and other records of Bancorp (e.g., expenses and personal legal fees of Bancorp CEO). Bancorp denied this request, citing conflicts of interest and intent for the Plaintiff to use the records for an improper purpose (to undermine Bancorp’s position in Bancorp’s suit against him and his law firm).

The Plaintiff argued that directors have an “absolute right” to inspect records under the Corporations Code, and that he needed those records to fulfill his fiduciary duties to stay informed about Bancorp’s financial condition and operations (e.g., how financials were being calculated and how expenses were being classified).

Court’s Ruling. A director’s access to corporate records may only be limited in "extreme" cases where granting access would otherwise produce an "absurd result". The court felt that granting the Plaintiff’s request posed no conflict with constitutional or other statutory protections, nor did it seek access to privileged documents generated in defense of a suit for damages against the corporation. The court stated that the mere possibility that the information could be used to harm the corporation is not sufficient to defeat a director's otherwise "absolute" inspection rights.

This case is relevant in light of the status of most California HOAs as nonprofit corporations governed by the California Corporations Code. At times a hostile HOA board member may seek access to sensitive HOA records that are not otherwise accessible to the HOA's general membership. In such cases, the HOA may not deny the board member access to those records solely because of a concern that the board member may use them to harm the HOA.

Click here for more information on director record inspection rights.
An amazing day of dynamic education for our clients and management professionals.
We were thrilled to produce our second annual TLG Legal Symposium last month at the beautiful Laguna Cliffs Resort in Dana Point.

Our programs addressed a range of topics including Wildfire Risk & Insurance, Disability Accommodations, Legislative Updates, and an HOA Mock Trial that was as informative as it was fun!
Our 150+ attendees included management professionals who were able to receive continuing educating toward their management designations, thanks to the support from both the Community Associations Institute (CAI) and the California Association of Community Managers (CACM),

We also had the pleasure of welcoming various board member clients from communities throughout the state who made the trip to spend the day learning with us.
Thank you to our dedicated teams at TLG and Alterra--and specifically to our Director of Business Development, Ramona Acosta, PCAM--for executing such a successful, polished, and engaging event.

Last but definitely not least: A BIG THANK YOU to all our incredible event sponsors who made the event possible and contributed to its success.

We look forward to seeing you all again at next year's TLG Legal Symposium!

TLG is proud to provide HOAs throughout the state with access to advanced, comprehensive, and attorney-supervised collection services through our affiliate company, Alterra Assessment Recovery.

Since its founding, Alterra's mission has been to provide the most efficient and effective assessment collection services by leveraging advanced technology, a team of talented professionals, and the backing of expert HOA lawyers to deliver results for its clients day after day.

Alterra's annual recovery statistics speak to its success: $3,713,829.78 in debt was recovered for its clients just in 2022. This shattered Alterra's previous annual record (set in 2021) by nearly one million dollars.

If your community is looking for help recovering assessment debt, request a proposal from Alterra and experience a level of service and efficiency that is second to none.

We were privileged to welcome over 100 communities to our client family in 2022. We appreciate the trust these communities have placed in our team, as well as the relationships we've been fortunate to build with the over 1,300 California communities we work with.

To support our continued growth, we are looking to hire 3-4 more exceptional attorneys this year as well as open newer and/or larger offices in several regions. Stay tuned!
Your Community. Your Counsel. TM