Question: A few years ago my family bought what we thought was our dream home, but now the pool is closed for “safety reasons,” I smell gas when I walk by the gas boiler outside of the laundry room, and the lights no longer work at the tennis courts. On top of this, the dues we pay are excessive, not properly credited, and it is almost impossible to get a straight answer from the management company. Should we sue the board?
Answer:
Maintaining the common areas is one of the primary responsibilities of an HOA. The other big responsibility is managing the association’s money. It sounds like your HOA is failing on both these counts. These responsibilities are described in your CC&Rs and By-Laws. When an owner sues to force the board of directors to follow the governing documents it is called an enforcement action. There may also be a cause of action against individual board members for a breach of their fiduciary duties to look after the well-being of the association.
There are several steps that must be taken in California before a homeowner, or a group of homeowners, can sue their HOA. Usually, a homeowner will want to request a meet and confer, an internal dispute resolution process described in Civ. Code § 1363.810 – 1363.850. While optional for the homeowner, the association must participate if requested by a homeowner. The purpose is to provide “a fair, reasonable, and expeditious” way of solving disagreements. An HOA must provide every member annually with a description of the association’s internal dispute resolution process (See Annual Disclosures).
If the problem is not solved internally, either party can request Alternative Dispute Resolution (“ADR”) which is a more formal process conducted by a mediator or arbitrator, who is often a former judge or experienced attorney. California Civil Code § 1369.520(a) states that an association or owner may not file an enforcement action until the parties have submitted their dispute to ADR.
The ADR process is begun by one party serving all other parties a Request for Resolution. This request must include 1) a brief description of the problem, 2) a request for alternative dispute resolution, 3) a notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or that the request will be deemed rejected, and 4) if the party to receive the request is a homeowner, a copy of Civ. Code § 1369.590 (describing ADR).
If the party who receives the Request for Resolution accepts, then the dispute resolution must be completed within 90 days, unless the process is extended by written agreement of the parties. The costs of ADR are shared by both parties. At the time a lawsuit is filed to enforce the governing documents a certificate must be filed stating that one or more of the following conditions have been met: 1) ADR has been completed, 2) one of the parties did not accept the terms offered for ADR, or 3) preliminary or temporary court involvement is needed to stop some imminent action.
It is better to try and work things out with your board and management company before filing a lawsuit. California law requires that you try to do so. If your board is unwilling to listen, you may want to run for a position on the board or recruit another concerned homeowner. If your management company is the problem, get rid of them. An attorney can help protect your rights.
Saturday, February 21, 2009
Saturday, November 15, 2008
Annual Disclosures
Besides keeping members informed, there are two chief reasons why an association should diligently comply with annual disclosure requirements. First, if the board has not complied with the disclosure and notice requirements of Section 1365 of the Davis Stirling Act, it is not authorized to impose an annual increase in the regular assessments unless 50% of owners have given their approval in an election conducted by secret ballot according to Section 7510 of the Corporations Code. Second, if the Association Collection Policy, Notice of Collection Rights, and Alternative Dispute Rights Summary are not delivered, the association may have difficulty collecting from owners who are past due on their accounts.
Here is a Summary of Annual Disclosures (taken from Chapter 16 of the 2008 Condo Bluebook):
1. Pro Forma Operating Budget or Summary
2. Assessment and Reserve Funding Disclosure Summary
3. Anticipated Special Assessment for Reserves
4. Assessment Collection Policy
5. Statutory Notice of Collection Rights
6. Association Insurance Disclosure
7. Alternative Disputes Rights Summary
8. Internal Dispute Resolution Procedures
9. Receipt and Disposition of Funds Received for Construction Defects (if any)
10. Notice of Member Rights to Minutes
11. Notice of Right to Submit Secondary Address
12. Architectural Review Procedures
13. Notice of Assessment Increases
Most of the required disclosures and notices must be delivered to homeowners within a period that runs from 30 to 90 days before the beginning of the fiscal year. A rule of thumb is to have them in the mail by November 15, 2008. However, if you are running late there is still time to get them out over the next two weeks.
Here is a Summary of Annual Disclosures (taken from Chapter 16 of the 2008 Condo Bluebook):
1. Pro Forma Operating Budget or Summary
2. Assessment and Reserve Funding Disclosure Summary
3. Anticipated Special Assessment for Reserves
4. Assessment Collection Policy
5. Statutory Notice of Collection Rights
6. Association Insurance Disclosure
7. Alternative Disputes Rights Summary
8. Internal Dispute Resolution Procedures
9. Receipt and Disposition of Funds Received for Construction Defects (if any)
10. Notice of Member Rights to Minutes
11. Notice of Right to Submit Secondary Address
12. Architectural Review Procedures
13. Notice of Assessment Increases
Most of the required disclosures and notices must be delivered to homeowners within a period that runs from 30 to 90 days before the beginning of the fiscal year. A rule of thumb is to have them in the mail by November 15, 2008. However, if you are running late there is still time to get them out over the next two weeks.
Thursday, October 30, 2008
Strengthening the Rights of Homeowners in Community Associations
A Homeowners Association (“HOA”) has the power through the board of directors to enforce the governing documents, to make and enforce rules, and to levy fines and penalties against homeowners who do not comply. HOAs have been compared to municipal governments in both the duties owed to homeowners and the power to police homeowner conduct through the courts or through non-judicial methods.
While a 2007 National Survey by Zogby International reported that 72% of those interviewed had a positive experience living in a community association, this is little consolation for the homeowner who is faced with the threat of foreclosure for unknown charges on their dues statements, illegal assessments, unreasonable rules, or discriminatory conduct by the HOA. Owners may also encounter an HOA that fails to maintain the common areas, to prepare and distribute annual disclosures, to hold open meetings where homeowners can have their concerns addressed, or to respond to nuisance complaints or problems between homeowners.
The weight of the legal community is on the side of the HOA. Both the California Association of Community Managers (http://www.cacm.org/) and the Community Associations Institute (http://www.caionline.org/) make available to their members an extensive list of top shelf lawyers available to represent HOAs which are likely to have greater financial resources for attorneys' fees than do individual owners. Fortunately, if the homeowner prevails in an action against the HOA the homeowner’s attorneys' fees may be borne by the HOA.
There is an effort on many fronts to increase the regulation of HOAs. In July 2006, the AARP published “A Bill of Rights for Homeowners in Associations,” which advocated for fairness in litigation, and for the oversight of associations and directors. CAI responded that the AARP proposal would “increase costs to those who abide by the rules, yet benefit those who act against the common interest.” The California State Assembly has twice tried to enact a law which would create a Community Association Ombudsman who would assist community association homeowners. The legislation was vetoed both times by Governor Schwarzenegger, most recently at the end of last month.
Mandatory education for board members and an improved mechanism for settling complaints of homeowners against their HOA would benefit all homeowners. In a recent Colorado case, an HOA was ordered to pay $550,000 in attorneys' fees and related costs to a homeowner who asked the Booth Creek Townhouse Association to investigate moisture intrusion into his unit. The original repair would have cost about $5,000. If the HOA’s appeal of the attorneys' fees award fails, the homeowner members of the association will be responsible for paying the debt.
In a significant act, CAI filed a friend-of-the-court brief in support of the homeowner who was “forced to take several legal actions year after year for the sole purpose of forcing the association to honor its obligations and perform its duties….”
While a 2007 National Survey by Zogby International reported that 72% of those interviewed had a positive experience living in a community association, this is little consolation for the homeowner who is faced with the threat of foreclosure for unknown charges on their dues statements, illegal assessments, unreasonable rules, or discriminatory conduct by the HOA. Owners may also encounter an HOA that fails to maintain the common areas, to prepare and distribute annual disclosures, to hold open meetings where homeowners can have their concerns addressed, or to respond to nuisance complaints or problems between homeowners.
The weight of the legal community is on the side of the HOA. Both the California Association of Community Managers (http://www.cacm.org/) and the Community Associations Institute (http://www.caionline.org/) make available to their members an extensive list of top shelf lawyers available to represent HOAs which are likely to have greater financial resources for attorneys' fees than do individual owners. Fortunately, if the homeowner prevails in an action against the HOA the homeowner’s attorneys' fees may be borne by the HOA.
There is an effort on many fronts to increase the regulation of HOAs. In July 2006, the AARP published “A Bill of Rights for Homeowners in Associations,” which advocated for fairness in litigation, and for the oversight of associations and directors. CAI responded that the AARP proposal would “increase costs to those who abide by the rules, yet benefit those who act against the common interest.” The California State Assembly has twice tried to enact a law which would create a Community Association Ombudsman who would assist community association homeowners. The legislation was vetoed both times by Governor Schwarzenegger, most recently at the end of last month.
Mandatory education for board members and an improved mechanism for settling complaints of homeowners against their HOA would benefit all homeowners. In a recent Colorado case, an HOA was ordered to pay $550,000 in attorneys' fees and related costs to a homeowner who asked the Booth Creek Townhouse Association to investigate moisture intrusion into his unit. The original repair would have cost about $5,000. If the HOA’s appeal of the attorneys' fees award fails, the homeowner members of the association will be responsible for paying the debt.
In a significant act, CAI filed a friend-of-the-court brief in support of the homeowner who was “forced to take several legal actions year after year for the sole purpose of forcing the association to honor its obligations and perform its duties….”
Tuesday, October 14, 2008
The Importance of Recording a Lien Correctly
If a homeowner who is behind in their dues files bankruptcy and the property goes into foreclosure, will the HOA (Homeowners Association) be able to collect the assessments owed? It depends. If the HOA has properly recorded a lien against the owner's interest the HOA will be considered a secured creditor and will have a much better chance of collecting.
The HOA must have a written statement of the policy for collecting delinquent assessments which is distributed annually to owners (See Annual Disclosures). The lien can only apply to delinquent assessments and to late fees, costs of collection (including attorneys' fees), interest on delinquent assessments, and reimbursement assessments for damage done to the common area. The lien and foreclosure process cannot be used to collect fines for rules violations or other monetary penalties.
The decision to record a lien must be made by the board of directors in an open meeting and the vote to record a lien must be mentioned in the minutes of the meeting. The decision to record a lien cannot be delegated to the managing agent or property manager. At least 30 days before a lien is recorded the owner of the separate interest must be sent notification by certified mail. The notice must contain all of the items listed in California Civil Code Section 1367.1. Among other requirements, these items include an itemized statement of charges and the right to request a meeting with the board.
Having a collection policy in place and enforcing it systematically is important to protect the HOA. If it is determined that the HOA has recorded a lien in error, the HOA must promptly reverse all late charges and fees and release the lien. The HOA would also have to pay all costs relating to dispute resolution which might include attorneys' fees for the owner of interest.
If you are part of an HOA considering filing a lien, or a homeowner who believes a lien has been improperly recorded against their interest, it is important to understand your rights and responsibilities. Legal counsel can help. Call Link Schrader, Attorney (323) 822-9422 or by email link@link-schrader.com
The HOA must have a written statement of the policy for collecting delinquent assessments which is distributed annually to owners (See Annual Disclosures). The lien can only apply to delinquent assessments and to late fees, costs of collection (including attorneys' fees), interest on delinquent assessments, and reimbursement assessments for damage done to the common area. The lien and foreclosure process cannot be used to collect fines for rules violations or other monetary penalties.
The decision to record a lien must be made by the board of directors in an open meeting and the vote to record a lien must be mentioned in the minutes of the meeting. The decision to record a lien cannot be delegated to the managing agent or property manager. At least 30 days before a lien is recorded the owner of the separate interest must be sent notification by certified mail. The notice must contain all of the items listed in California Civil Code Section 1367.1. Among other requirements, these items include an itemized statement of charges and the right to request a meeting with the board.
Having a collection policy in place and enforcing it systematically is important to protect the HOA. If it is determined that the HOA has recorded a lien in error, the HOA must promptly reverse all late charges and fees and release the lien. The HOA would also have to pay all costs relating to dispute resolution which might include attorneys' fees for the owner of interest.
If you are part of an HOA considering filing a lien, or a homeowner who believes a lien has been improperly recorded against their interest, it is important to understand your rights and responsibilities. Legal counsel can help. Call Link Schrader, Attorney (323) 822-9422 or by email link@link-schrader.com
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