Nov 20

Earlier this week, the Court of Appeal in Salehi v Surfside III Condominium Owners Association decided in favor of an association where an owner filed a lawsuit containing ten claims against an association and on the eve of trial dismissed eight of those claims.

$250,000 in Legal Fees. Ms. Salehi sued her association alleging it had failed to maintain the common areas, failed to maintain an adequate reserve fund, and failed to disclose maintenance and financial problems. The association spent approximately $250,000 defending against her claims. Three days before trial, Salehi dismissed eight of her ten claims. The association subsequently sought recovery of the legal fees it incurred defending against Salehi’s dismissed causes of action.


Gary Kessler, Esq.
Adams Kessler PLC

Before Litigating. The trial court denied the association’s request but the court of appeal reversed. The appellate court found that the association was entitled to recover attorneys fees from Salehi, reasoning that a party suing to enforce the CC&Rs must get their “ducks in a row” both procedurally and substantively before filing suit. Since Salehi had done neither, she did not prevail on a “practical level” and the matter was sent back to the trial court for a determination and award of reasonable attorney fees to the association. To read the case in its entirety, see Salehi v Surfside III.

ANNUAL MEETING
DEFAMATION

Stealing Money? Another case decided earlier this year involved alleged defamation during an election campaign. Prior board president Veronica Cabrera accused board member Mohammed Alam (who was running for reelection) of mismanagement of the association’s finances. In response, Alam accused Cabrera (who was campaigning for Alam’s opponent) of defrauding the association and stealing money. Cabrera sued for defamation. Alam filed an anti-SLAPP motion which was denied. The Court of Appeal reversed.

Public Forum. The court held that HOA meetings constitute a “public forum” and the statements against her were an issue of interest to the membership. Moreover, Cabrera was a “public figure” in her association because she had voluntarily injected herself into the election. Because she was a public figure, a higher standard of proof was applied to the alleged defamation, i.e., Cabrera had to show that Alam made the statements knowing they were false and that he made them with malice. The court found that Cabrera failed to produce any evidence to meet that standard. Accordingly, her claim for defamation was dismissed. Cabrera v. Alam.

RECALL PETITION
DEFAMATION


This case also involved alleged defamation, conflicts of interest and a petition to recall the board.

Balcony Maintenance. The association’s newly elected board hired a new manager and new legal counsel. The board asked for a legal opinion about maintenance and repair of balconies and shingle siding. The attorney determined that the association was responsible, not individual owners. This was inconsistent with the HOA’s prior practice and benefited board members with balconies.

Conflict of Interest. Homeowner Susan Ivie objected to the new interpretation because not all units had balconies, the HOA had no reserves to pay these new expenses, and board members had a conflict of interest because they benefited from the legal opinion. Ivie circulated a petition to recall the new board and was sued. The court granted Ivie’s anti-SLAPP motion dismissing the case. The board appealed. The Court of Appeal found that Ms. Ivie’s conduct in criticizing the board’s actions was protected. Country Side Villa HOA v. Ivie.

DISABLED VEHICLE

This case involved a 1987 Mitsubishi van which was inoperable and did not move from Yan Sui’s parking space from 2003 to 2007. In December 2006, the HOA amended its rules to prohibit all disabled, inoperable vehicles. In January 2007, the board president placed a warning sticker on the windshield notifying Sui that his vehicle was in violation and would be towed. In February the van was towed.

Throw in Kitchen Sink. Sui sued for trespass, intentional infliction of emotional distress, violation of due process, conversion, discrimination, libel, fraud, and breach of contract. The only thing he left out was an ADA claim for reasonable accommodation because the vehicle was disabled. The association demurred and the court sustained it without leave to amend, thereby ending the lawsuit. Sui appealed.

Just Like a Pet. Among the arguments made by Sui was that his children had a “strong bond” with the van–it was part of their family, “just like a pet.” The court was not persuaded. It found nothing unreasonable about prohibiting disabled vehicles and the “association was perfectly reasonable in prohibiting this unsightly intrusion upon the aesthetics of their common interest development.” See Sui v. Price.

FEEDBACK


Washer/Dryer #1. Thanks for the picture of the washer, we had one when I was a kid. -Margaret H.

Washer/Dryer #2
. Great coverage of the issues. Even further, new complexes often have floor drains for mechanical failures or backups so water does not flood into adjacent units. To convert a complex raises the insurance premiums of the master policy. We looked into this, to meet Code was costly. -Joseph L.

Washer/Dryer #3. I think you meant “if the developer did not design the building to include washers and dryers” in your answer. -Amy T.

RESPONSE: Yes I did. The “not” fell out during the rinse cycle.

Washer/Dryer #4. Our HOA was built without washers and dryers 40 years ago. My wife was adamant about installing them so I paid for larger drain lines from the unit above. Dryer venting was direct to the outside. I pushed the idea that anyone could install washers and dryers provided they replaced and up-sized the drain lines and the venting was properly handled including fire protection of the exhaust. I think it is well worth the effort. -Mike G.

Washer/Dryer #5. Thanks for the thoughtful, thorough and interesting piece on “Washers & Dryers” in HOAs. This issue is much more prevalent than most people think. I know of at least two large HOAs where the installation of washers and dryers in select units created two classes of owners because of master water-metering. The vast majority, who must pay via coin-operated machines to do their laundry in a communal laundry room, and the “privileged” few with laundry facilities in their own units, who get to do their laundry “for free.” And don’t even get me started on the water damage caused by overflowing drains. -Phillip M.

Washer/Dryer #6. Love your responses from questions. On the issue of washers and dryers, we’re in a 100-year-old (next year) historic building with 8-inch concrete walls and working around them becomes quite a problem in and of itself. -Don M.

Washer/Dryer #7. Buildings that are not designed for clothes washers often have communal laundry rooms with coin-operated machines for residents to use. Associations rely on the income from those machines to offset utility costs. Owners who install their own washers and dryers deprive the association of income from the communal machines (which raises the cost for everyone else). In addition, I believe residents are apt to use their own machines more frequently and thus increase their use of “free” water. Why should other owners have to bear the increased costs? I would love to have my own washer but my building does not permit such installations. I knew that when I purchased and therefore live by the rules!!!! -Diana S.

Broken Glass. We had a similar situation with bees (Africanized?) in the attic of a home which was clearly the responsibility of the homeowner – who ignored our letter. I advised the board to kill the bees and fight with the homeowners later before a swarm attacked someone. My argument was the HOA had the money to do it now whereas the homeowner may be in financial straits and regardless of potential liability may simply not do anything. -David A.

Small HOAs #1. Your most recent newsletter is the first time I have heard anybody – besides our board – comment on the fact that the legislature totally ignores or refuses to consider the effect some of their laws have on small associations. Even the org of managers doesn’t speak up. THANK YOU. Perhaps the message will reverberate. -Arnold R.

Small HOAs #2. Some clarifications on small HOAs; there are 3 exemptions from the reserve study requirements:

  • Commercial or industrial CIDs. Civ. Code §1373.
  • Those without common area. Civ. Code §1365.5(h).
  • If the total replacement costs are less than 50% of the annual gross budget. Civ. Code §1365.5(e).

Example: if the annual gross budget was $75,000, if the HOA could replace all of its major common area components for less than $37,500 they would not be required to have a reserve study, as outlined in §1365, et al. A number of small HOA’s may fall under that exemption. This, of course, was its purpose. -Scott Clements, Reserve Studies Inc.

Speed Bumps. Cars were speeding down our private street, which had young children who played on it. I suggested that speed bumps be installed to slow cars down. We have over 400 units in our complex with a huge monthly budget and the cost for the speed bumps was only $300. The board denied my request. One of the board members stated that the board is insured for one million dollars so if anyone is injured or killed by a speeder and the board is sued for lack of action, they were covered. So why spend the money? -Marc S.

RESPONSE: I would hate to defend that statement to a jury. The attitude of “what do we care if someone gets killed, we have insurance” would likely result in punitive damages against the directors. Juries like to punish defendants who have a reckless disregard for public safety. Since punitive damages are not covered by insurance, your penny-pinching director could be paying out of his own pocket.

-Adrian J. Adams, Esq

Bookmark and Share
Nov 13

QUESTION: Can an HOA prevent an owner from installing a clothes washer and dryer without first obtaining a study advising that such installation would damage the plumbing or other common interests?

ANSWER: I understand the desire by owners to add modern conveniences to their units. A washer and dryer not only makes life easier, it increases property values. Unfortunately, if the developer did not design the building to include washers and dryers, installing them at a later date can be problematic. This is especially true for condo conversions.

Water & Electrical. Running electrical and water lines through the walls to a new washer/dryer is usually not a problem, provided the vendors are licensed and insured and everything is done to Code. The problem is water usage. Most condominium developments are master metered for water. That means everyone else in the association pays via their regular assessments for the increased water usage by the owner with the clothes washer. In my experience, owners are not very charitable on this issue–they don’t like paying out of their pockets for someone else’s higher water consumption.

Drain Lines. The biggest obstacle is the building’s drain line. The sudden force and volume of water into a drain pipe during the wash cycles can overload the line and lead to backups in other units. When developers build multi-unit developments, they calculate normal water flow and only install lines needed to handle those flows per applicable building codes. Clothes washers need larger lines due to the larger flow and turbulence of the water plus the sudsing effect of the detergent. Even if existing lines can handle the load of one washer, can it handle additional washers in the stack? If not, can the board approve one washer but deny all others in the stack? To handle the increased load, a larger drain line may need to be installed from the washer through the building to the sewer. That means opening the walls in the units below the new washer. This can be costly and disruptive.

Dryer Vent. Venting the clothes dryer can also be problematic. Dryer exhaust lines cannot, under any circumstances, vent into the common area walls, ceiling or floors spaces. Doing so puts moisture into those spaces that can lead to dry rot that destroys the wood structure and mold that can create health issues. It also puts lint into the space which can lead to a fire. If the dryer vents to the outside (as it should) there is a limit on the hose length (no more than 25′) because of lint accumulation in the line and back pressure buildup. Where venting to the outside is not possible, a special indoor dryer vent can be used but they have their own problems. Every time a load is dried, a gallon of water or more is released into the unit, creating excessive humidity with possible condensation and mold.

Noise and Vibration. Once the washer and dryer are installed, noise and vibrations can radiate through walls and floors into surrounding units. The problem may be minor or it may be significant depending on how the building was constructed. Sometimes the problem can be cured with a thick rubber mat under each machine.

Owner’s Duty. The duty is not the board’s to commission and pay for a feasibility study. The obligation falls to the owner who wants to alter common area electrical and water lines, drains, and install venting. Even if the project is feasible, there is no obligation by the board to approve it. Every one of the problems I described can, in most circumstances, be overcome–it’s only a matter of money. In older condominium developments and especially condo conversions, the cost will generally outweigh the benefit.

ANNUAL MEETING
QUORUM

QUESTION: Our managing agent says the number of ballots returned establishes the quorum for an annual meeting and cites Civil Code §1363.03(b) as her authority. I say §1363.03(b) ONLY applies to the following situations: elections regarding assessments, election and removal of members of the board, amendments to the governing documents, or the grant of exclusive use of common area. I say §1363.03(b) does not apply to any other situation. If we need a quorum to approve minutes, only physical bodies and proxies count toward a quorum. Who is correct?

ANSWER: Your managing agent.

BROKEN WINDOW

QUESTION: A homeowner on the 3rd floor whose bedroom window overlooks our back yard has a broken window that is all taped together. If pieces of glass fall and injure someone in the yard, who is financially responsible for medical bills–the homeowner or the HOA?

ANSWER: Regardless of who is responsible for repairing the window, the association could get dragged into litigation if the board fails to act.

Owner Duty. If your CC&Rs make owners responsible for repairing windows, boards have the power (and duty) to enforce the CC&Rs. That means boards have the authority to compel owners to make repairs. If directors sit on their hands and do nothing despite having knowledge of potential injury or death to persons from falling glass, they can expect to be named in any litigation that might result from those injuries.

HOA Duty. If the CC&Rs make the HOA responsible for repairing windows, the board needs to have the glass replaced regardless of who broke it. Once the window has been repaired the board can seek reimbursement from the person responsible for the damage.

RECOMMENDATION: Your board should seek an opinion from legal counsel on who is responsible for replacing the glass and then take appropriate action to ensure repairs are made.

SMALL HOAs

QUESTION: For our small 9-unit association, must annual notices and disclosures be sent out? Our annual income is very small.

ANSWER: Unfortunately, California’s Legislature has not taken into account the burdens their laws impose on small associations. If your association’s gross income is below $75,000, you don’t need a CPA review of your annual financial statement. All other requirements of the Davis-Stirling Act–disclosures, reserve studies, election procedures, etc., apply.

-Adrian J. Adams, Esq

Bookmark and Share
Nov 06

QUESTION: Because litigation matters are reserved for private executive session meetings, does the board have any liability if it informs the membership of litigation involving the association?

ANSWER: If done properly, there is no liability. The Court of Appeals dealt with this issue in Healy v. Tuscany Hills.

Summary of Case. In this 2006 case, homeowner Gloria Healy sued Tuscany Hills claiming the Association had defamed her when it informed the membership that her refusal to allow access through her property for weed abatement resulted in increased costs to the Association. Healy alleged she suffered loss of reputation, shame, mortification and hurt feelings in the amount of $250,000. She also sought punitive damages. The offending letter stated in part:

Dear Affected Tuscany Hills Member: . . . Please be advised that the [the Association is in litigation because it is performing] weed abatement at an additional cost to the Association, primarily because . . . ingress and egress . . . is being prohibited by the owner of 6 Villa Scencero.

Decision. Healy won her lawsuit at the trial level and the association appealed. The Court of Appeals reversed the lower court decision. The Court determined that the allegedly defamatory statements came within what is known as the “litigation privilege” when the letter expressly referred to litigation arising from Healy’s refusal to allow ingress and egress for weed abatement.

Litigation Privilege. The litigation privilege is a type of immunity given to statements in connection to litigation. The protections are found in Civil Code §47(b) and Code Civ. Proc. §425.16 which are construed broadly to protect the right of litigants to the utmost freedom of access to the courts without the fear of being harassed subsequently by derivative tort actions. Thus, a communication is absolutely immune from any tort liability if it has some relation to judicial proceedings. Healy v. Tuscany Hills.

RECOMMENDATION: Members have an interest in knowing about litigation involving their association and boards should keep them informed. However before anything is released, legal counsel should review and approve the wording of the disclosure. In addition, disclosure is a board function, not the right of individual directors.

UNFAIR HARDWOOD
RESTRICTIONS

QUESTION: Our condo development has 36 units–1/3 of the units are on the 1st floor with wood flooring. Our CC&Rs require a vote to amend so that 2nd & 3rd floor units can install wood floors. It seems unfair and possibly illegal to allow 1st floor units to have wood floors and not the 2nd & 3rd floors.

ANSWER: There is nothing illegal with the arrangement. Hardwood floors can create a great deal of nuisance noise, hence the restriction on wood floors on upper floors. The first floor has no restriction because it is on the ground floor with no one underneath to disturb.

Amending CC&Rs. This kind of arrangement is typical in older sets of CC&Rs. Since most owners today want the beauty of hardwood and tile floors (and the increased property values that go with them), many associations have amended their CC&Rs to allow for the installation of hard-surfaced floors, provided they meet certain noise insulation criteria.

RECOMMENDATION: Before allowing hard-surfaced floors, associations must take into account how their condos are constructed, the weight of the tile, the noise insulation levels desired, and which areas in a unit can have hard surfaces–typically, areas over bedrooms must remain carpeted. Boards should work with an architect or acoustical engineer to develop proper standards. Once standards have been prepared, legal counsel should prepare language for the CC&R amendment.

BARKING DOGS
Earlier this week the City of Los Angeles adopted an ordinance to fine owners of dogs that bark excessively. The City defined excessive barking as that which continues for 10 minutes or more, or intermittently for 30 minutes or more within a three-hour period. Violators face fines of $250 for a first offense, $500 for a second and $1,000 for a third offense.

HOA Rules. HOAs need not rely on local ordinances to address excessive barking. Associations can adopt their own definitions for nuisance barking and establish fines appropriate to their own associations. For sample definitions see nuisance barking.

FEEDBACK

FHA Certification #1. Why would a high-end complex need FHA certification?

RESPONSE: If the market values of condominiums in your complex are over $729,750 (the loan limits for FHA), there is no need for FHA certification.

FHA Certification #2. “You Know Who” or “He Who Must Not Be Named”. . . I literally laughed out loud! -A.S.

FHA Certification #3. Our bylaws are 30 years old. No one has a signed copy and I understand there is no legal requirement for signed bylaws. We’ve been told that signed bylaws are now one of the requirements for FHA approval. Should the current board sign our bylaws and give them to the FHA?

ANSWER: According to Scott Iden of US Approvals LLC, the Department of Housing and Urban Development (HUD), which oversees the FHA, has always required a signed set of bylaws. It has been his experience that if the board authorizes the president to sign the bylaws, it should satisfy the FHA. The authorization to sign the bylaws should be in recorded in the board’s minutes.

Assignment of Rents. Does the Davis-Stirling Act address the issue of assignment of rents you discussed in your newsletter?

RESPONSE: The DSA does not mention assignment of rents. If an association wants authority to collect rental income from a delinquent owner’s tenant, the association’s CC&Rs need to be amended. It would be nice if California’s legislature enacted a statute similar to Utah’s Title 57, Chapter 8, Section 53. Thank you to Scott Iden for information about Utah’s statute.

Board Email #1. I’m so glad I signed up for your newsletter. It has made me aware of many new aspects of condo living, which is becoming increasingly more complicated. One wonders if the legislators who have put unfair restrictions on HOAs could survive with the same rules in their day-to-day business. As an HOA President who works the night shift, I depend on email to get small business done with other board members. The internet is a valuable tool for our HOA. -Lew S.

RESPONSE: The HOA industry’s best defense against onerous regulation is to educate our legislators. To that end, all associations should be annually contributing money to CAI-CLAC via a line item in their HOA budget–even if it’s only a few hundred dollars.

Board Email #2. The new restrictions on board email communication has the biggest impact on 3-member boards as any discussion between 2 directors is a majority. Our solution will be to post daily, each week day (5 separate posts in the common area) of a executive session meeting. This will give us the freedom to continue our discussions. -Joseph L.

Medieval Times. Are you going to Medieval Times or do you work there part time? -Sandi S.


RESPONSE: I work there full time now. It looked like a good career move.

-Adrian J. Adams, Esq

Bookmark and Share