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Homeowner Association Law Update – Recent Court Decision and Changes to Davis-Stirling Common Interest Development Act

unique-3-1098685-m.jpgIn the state of California, homeowners associations (“HOAs”) are governed by both bylaws, which establish how the association will be run, and by a declaration of covenants, conditions, and restrictions (“CC&Rs”). In addition, California HOAs must also adhere to several laws, including the Davis-Stirling Common Interest Development Act. A recent court decision and amendments to the Davis Stirling Common Interest Development Act represent expanded authority for Board Members in some instances.

Friars Village Homeowners Association v. Hansing

Following an October 9, 2013 decision by the Court of Appeal in San Diego County, the hurdles for enacting new director qualifications for a HOA may become less onerous. Prior to this decision, HOAs were traditionally required to formally amend their bylaws to establish, clarify, or expand director qualifications, which required a formal vote and approval of the membership. In Friars Village, association member Hansing challenged a rule that prevented two members from the same household serving on the board.

Rejecting Hansing’s argument that the rule established a new qualification that was inconsistent with the bylaws, the Court of Appeal found the rule was reasonable and supported the HOA’s rationale for adopting the rule. Based on the court’s decision here, a Board may adopt a qualification for election to the Board beyond what is set forth in the bylaws as long as the qualification is reasonable and consistent with the HOA’s governing documents and is reasonable. Importantly, this decision may open the door to a potentially broad grant of authority to HOA Boards relating to the adoption of qualifications by rule as opposed to formal votes.

Davis-Stirling Common Interest Development Act

Effective January 1, 2014, there will be new changes to the Davis-Stirling Common Interest Development Act. Although the changes will not have a large impact on the current law as most of the changes involve logically reordering the provisions, dividing longer sections into simpler and shorter sections, using more consistent terminology, and standardizing the governance procedures, it is still important for HOAs to take note of the revisions.

Some of the significant changes to the Act that will go into effect on January 1, 2014 include, but are not limited to, the following:

1. Giving General Notice: The revision expands the number of ways an association provides “notice” to its members. Specifically, general notice for board meetings (and other general notice requirements) can be given by (1) first-class mail; (2) email, facsimile, or other electronic means (upon written consent); (3) inclusion in a billing statement, newsletter, or other document delivered in the same manner; (4) posting in prominent location accessible to all members; and (5) through television broadcasts.

2. Hierarchy of Governing Documents: The Act also clarifies the hierarchy of governing documents. When conflicts exist between documents and the law, the following hierarchy should be used: law, CC&Rs, articles of incorporation, bylaws, rules and regulations.

3. Granting Exclusive Use Common Area: While the grant of exclusive use of any portion of the common area to a member generally requires an affirmative vote of 67% of the voting members, the revisions add several additional exceptions to the 67% requirement, including: (1) where the purpose is to accommodate a member with a disability, (2) where it is necessary to comply with governing law, or (3) or where the association is assigning parking spaces and storage units designated in the CC&Rs but not specifically assigned to a unit.

4. Written Requests: Certain member requests must be in writing. Some of these requests include the following: (1) changing information in membership list, (2) adding or removing a second address for delivery of notices to the member, and (3) opting out of the membership list or to cancel a prior request.

5. Director Conflict of Interests: The update identifies certain situations where a director or committee member must abstain from voting on a member, guidance that was missing in the previous version.

Notably, a board is not legally required to amend the HOA’s governing documents pursuant to the new law. However, if a board chooses to do so, the board may amend the CC&Rs via a board vote, without having to hold a member vote.

The Law Offices of James G. Schwartz provides comprehensive legal advice to home owners who may be in violation of HOA guidelines and represents HOAs in working with their board of directions. If you have any questions about the potential impact of the court decision or changes to the Davis-Stirling Act, contact the Pleasanton, California officers of our California Homeowners’ Association dispute attorneys today.

Sources:

Friars Village Homeowners Association v. Hansing

California Assembly Bill No. 805