Why Governing Documents Matter

Why Governing Documents Matter

Governing documents are critical for HOA communities and are literally the legal glue which holds the association together. Civil Code Section 4150 defines “governing documents” as articles of incorporation, CC&Rs, bylaws, and operating rules, but I think subdivision maps and condominium plans also should be regarded as governing documents. Each has a distinct purpose and function, and every HOA member should have copies. Subdivision map and condominium plan This document breaks up land into separate pieces of land or airspace sold to homeowners in planned development (“lots”) or condominium (“units”) projects. This document is recorded (i.e. filed) with the County Recorder, is easily retrieved, and defines the “common area” as well as the “separate interest” (i.e., the lot or unit). Sometimes it also delineates exclusive use common areas or maintenance easement areas. It establishes the real estate interests owned, so any amendment requires agreement of 100% of association members and their mortgage holders, and consequently amendment is highly unlikely. Articles of incorporation Articles of Incorporation establish the legal “person” of the association. Filed with the Secretary of State, this document can be retrieved from that office. Older Articles sometimes contain important information about limits on the association or board’s powers. The Articles list the association’s legal name and can be amended by membership vote, although amending is rarely necessary. Check the association’s corporate status at https://businesssearch.sos.ca.gov. CC&Rs The CC&Rs document is recorded (amendments also must be recorded), and therefore is also a public document. Associations often use unrecorded, unofficial copies, but official copies can be retrieved from the County Recorder. CC&Rs are a long contract automatically binding all owners,...

What Sacramento Did For (Or is it to?) HOAs in 2017

The California Legislature was quite active this year in creating laws affecting HOAs, as six bills take effect in 2018. SB 2 Senate Bill (SB) 2, known as the “Building Homes and Jobs Act”, was signed by the Governor on September 29 as an urgency statute, which means it took effect on the day it was signed. Its stated goal is to increase housing supply and reduce homelessness, and it creates a fund called the “Building Homes and Jobs Trust Fund. The new statutes are Government Code Section 27388.1 and Health and Safety Code Sections 50470 and 50470.5. The Fund will receive the proceeds from a new tax of $75 per document on documents recorded with County Recorders, except for documents recorded as part of a transfer of property ownership. Despite being called an urgency statute, it practically does not begin until January 1, 2018, when the County Recorders start collecting the $75 fee on recorded documents. In the future, various documents commonly recorded by HOAs will be subject to the $75 fee, such as amendments to CC&Rs, common area alteration agreements, and liens and lien releases. Delinquent members will now face an additional $150 cost, as the cost to the HOA of recording an assessment lien and later removing the lien will be passed along to the member as part of the delinquency. AB 534 A bill which brings some help to HOAs is Assembly Bill (“AB”) 534. Civil Code 4615 previously barred contractors from recording a mechanics lien (yes these in the future will also be subject to SB 2’s $75 fee) against an entire condominium project...
Before Painting Garage Doors Purple

Before Painting Garage Doors Purple

Associations are normally created with an initial architectural and landscaping theme which boards are responsible to protect and preserve. Condominium association boards are also expected to protect and preserve common area. Therefore, owners are usually prohibited from changing the exterior appearance of homes, or altering common area, without association permission. Before making a change to one’s home, a homeowner in a California common interest development may wish to consider the following tips to enhance chances of a successful proposal. Begin by checking the CC&Rs and association rules Is the change the kind which requires association permission? Planned development associations are usually mainly concerned with changes to home exteriors or landscaping. However, condominium associations present the additional important issue: Is it common area? Common area in condominiums is typically more than most homeowners understand – it is usually defined by the recorded Condominium Plan as everything behind the paint on the walls and ceilings, and the floor under the carpeting. So, in condominiums, changing interior doorways or interior walls may be a change to common area, requiring association permission. Check the association’s architectural and landscaping rules Do not waste time proposing something outside the approved landscaping or color schemes. Homeowners who decide to follow the bad advice that “it is better to ask forgiveness than permission” can create a disaster. One example is the 2010 ruling of Clear Lake Riviera v. Cramer. In that case a homeowner built a two-story home, despite CC&Rs limiting homes to single story. The HOA sued, and the homeowner was ultimately required by the court to dismantle the second story and return the house to...

Twenty Thoughts at the 200 Mark

Dear Readers, This marks the 200th column since it was revived in early 2012; may I share 20 thoughts with you on this milestone? Common interest communities involve shared ownership, which is not possible without an organization to facilitate that sharing. Some people are unwilling to play well with others, and often are the ones who want to ban the HOA. Unless someone invents more land, HOAs are vitally necessary. Could Realtors® treat CC&Rs with the same importance as the Residential Purchase Agreement? Both documents are binding contracts, but only one is usually reviewed by buyers during escrow. Successful HOA governance requires setting aside the vertical chain of command we all learn during our education and employment lives. Common interest developments use a horizontal power structure, in which the power rests in the board, not in any individual. Most boards do too much business in closed session which should be conducted in open session. If homeowners allow the board to deliberate the agenda without interruption, and directors avoid interrupting homeowners during their open forum remarks, meetings would be dramatically more productive and professional. Too many managers without credentials are managing associations, because too few associations insist on hiring only managers holding credentials from a recognized organization. If someone is a Certified Common Interest Development Manager, qualified to use that label by the Business and Professions Code, they hold at least one such credential. Board meetings are too long in most associations. Exclusive use common area is still common area – the association can indeed control how it is used. Most associations spend too little time telling their members what...
Patios, Planned Developments

Patios, Planned Developments

Kelly, I live in a condo in Laguna Niguel, CA. I have a small patio (ground level). It would be really nice to be able to have a slightly larger patio. There is a common area that runs along the back of my condo which is next to my existing patio. I would love to be able to enlarge my patio to extend to the end of my unit and make it a permanent part of my patio by walling it in. Are there any laws that would prevent me from even considering taking this suggestion before the Board of my association? Thank you for your help. C.H., Ladera Ranch Dear C.H., Your board may have the discretion to approve enlargement of your patio, but it also may not. Your patio is probably an “exclusive use common area”. If you expand your patio, you would be expanding your exclusive use area into the non-exclusive common area. The non-exclusive common areas exist to benefit all members. Civil Code 1363.07 limits the board’s ability to grant exclusive use rights to a member except within specified narrow exceptions. If an exception does not apply, the additional exclusive use area would require a 67% vote of all members. If one of the exceptions in 1363.07 applies, it may be worthwhile to request permission to expand your patio, although the board does not have to grant the request. However, if no exception applies, it probably is not worth the effort to seek approval of 67% of all the members – many HOAs do not achieve that level of participation even for their board elections, so...