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Review and Refresh Your Governing Documents for 2023

¢¢¢ By: Sean D. Allen, Esq.

These last few years have brought with them a complete change in how we view the day-to-day operations of community associations. The ongoing pandemic has changed the way that we approach board and membership meetings, and several new laws have shaken what we previously thought we could and could not do on behalf of our communities. Since the 2020’s began, we have dealt with more broadly sweeping changes to the laws governing common interest developments than we have since the Davis-Stirling Act was rewritten and renumbered back in 2014. This means that now is an ideal time to take a close look at your association’s governing documents to ensure that they are not in conflict with the law, and that they are appropriate for the current operations of your community. This article will highlight some provisions which directors and community managers may want to consider when discussing updates with legal counsel.

Rental Restrictions

As you are no doubt already aware, a new law went into effect recently regarding rental restrictions. In general terms, the new law only allows associations to prohibit short term rentals of thirty days or less, and to enforce a cap on rentals of twenty-five percent or more of the units in the association, and that is about it. To the extent your governing documents contain conflicting provisions, the new law requires that those provisions be amended to bring them into compliance. It is important to also note that California law does not allow associations to enforce new rental restrictions against existing homeowners, meaning any new rental restrictions put in place will only be enforceable against owners who purchase their property after those restrictions are in effect. If tenantoccupied units are a problem or a concern, or if your governing documents contain provisions which conflict with the new laws, then the documents should be amended.

Elections

There is a new law on the books that will allow all communities to take advantage of a process known as “Election by Acclamation,” which means that if you have an uncontested election where you have the same number of candidates running for election as there are open seats, then you already know the outcome of the election and do not need to go through the process of mailing and counting ballots. However, to take advantage of the acclamation process, the association will need to meet a few additional requirements. If your governing documents contain any language which would preclude the use of the acclamation procedure, then it may be a good idea to amend the documents to remove these roadblocks and expressly allow for it. Similarly, there were recent changes to the law which limit the qualifications we can enforce for director elections. The law expressly prevents non-owners from running for the board and allows associations to disqualify candidates only if they have been an owner for less than one year, if a joint owner is on the board or a candidate, if they have been convicted of a crime which jeopardizes the association’s insurance coverage, or if they are delinquent in the payment of assessments. All other director qualifications contained in an association’s governing documents are null and void, and any such provisions should be amended out.

Virtual Meetings

Section 5450 was added to the California Civil Code with immediate effect, establishing that associations are permitted to conduct board meetings and meetings of the membership solely via video or teleconference if gathering in person is unsafe or impossible because the community is in an area affected by a declared federal, state, or local emergency. If your association is conducting board and/or membership meetings solely via telephone or video conference platforms such as Zoom because of the ongoing COVID-19 pandemic, your association must immediately comply with the requirements of Civil Code Section 5450(b), and specifically the notice requirements contained therein. Since this is a new development under the law in response to the pandemic, most current governing documents will not contain provisions which account for this scenario. It may make sense to build such provisions in as you are bringing your documents up to date.

Lot Splitting

A new law purports to address the housing crisis in California by allowing for the automatic approval of certain lot-splits and housing development projects containing up to two dwelling units. In plain language, the new law creates the possibility that a single-family residential lot can now be divided and developed with up to four residential units where only one single-family home previously existed. For the time being, however, and until the courts or state legislature tells us otherwise, this does not prohibit community associations from enforcing provisions in their CC&Rs which prohibit lot-splitting. Therefore, planned developments should review their CC&Rs and governing documents to ensure they are properly drafted to prohibit lot-splitting.

Sean D. Allen, Esq. is a partner with the law firm Roseman Law APC, a full-service law firm serving communities throughout California. He can be reached at allen@ roseman.law.

¢¢¢ By Thomas M. Ware II, Esq. CCAL

Whew!

Going into the 2022 cycle, the California common interest community was concerned that the legislature may overreact to the Florida Surfside condominium collapse by imposing numerous Draconian measures to make it seem like such a catastrophe could not happen in California. CAI’s California Action Committee (“CAI-CLAC”) proactively worked to develop prospective legislation to address potential mandatory reserve funding requirements and the ability to fund investigation to prevent such tragedies in California. Perhaps due to an election year where legislators were concerned about increased housing expenses, our concerns were unfounded. Thankfully, we got through the 2022 legislative cycle with no real legislative scuds. The legislature did not adopt any material legislation that conflicted with CAI’s general position that associations generally should be left to manage themselves without government interference. Such luck does not mean that our diligence last year was in vain. As you may know, there are eight CAI chapters in California. Each chapter, picks two delegates to represent the interest of the respective chapter on the CAI-CLAC Delegate Board. These sixteen delegates, along with a limited number of at-large delegates from across the state, meet every October, at CAI-CLAC’s Annual Planning Meeting (“APM”). At the APM, CAI-CLAC develops its legislative priorities for the upcoming legislative session that it believes are in the best interests of its constituents.

What are these topics and legislative priorities? I am glad you asked. Virtual Meetings

Civil Code Section 4090(b) mandates that, even when meetings are held virtually, there must be a physical location at which there is at least one Board member present. Other homeowners must be permitted to appear at this location to observe the meeting. Last year, Civil Code Section 5450 was adopted to permit boards to dispense with this physical location requirement to meet completely virtual during a state of emergency. COVID-19 has been used by many boards as grounds to dispense with this physical location requirement. Fortunately, the COVID-19 state of emergency is set to expire February 28, 2023. However, as a result, on March 1, 2023, completely virtual meetings no longer will be permitted. CAI-CLAC will be pursuing legislation that permits Boards and members to conduct meetings completely virtually irrespective of the existence of a state of emergency. Huzzah!

Wildfire Insurance Crisis

The State of California is experiencing a fire insurance crisis. Thousands of California communities are burdened by this crisis. Last year, CAI-CLAC formed a task force consisting of insurance and community association leaders to try to address this calamity. To that end, CAI-CLAC met, and will continue to meet, with the Insurance Commissioner and state legislators to try come up with ways to prospectively mitigate the dearth of coverage and precipitous premium increases. To that end, CAI-CLAC agreed to pursue the expansion of Civil Code Section 5605 so as to permit Boards to increase assessments to cover premium increases without a vote of the members. CAI-CLAC also will seek to expand the emergency assessment definition in Civil Code Section 5610 to address wildfire issues and structural investigations. CAI-CLAC also will seek legislative authority to allow Board members to approve a special assessment without member consent if necessary to cover insurance premiums for coverage mandated by the CC&Rs in those instances where the assessment does not qualify as an emergency or where the Association cannot impose an additional twenty percent regular assessment increase to cover the insurance increase.

Structural Repairs and Investigation

While the legislature did not mandate that associations fund a specific amount to address structural issues, CAI-CLAC will seek to clarify the scope of reserve requirements to facilitate, among other things, the funding of structural repairs and structural investigations as to the safety of the infrastructure.

Electronic Voting

Homeowners associations spend an inordinate amount of money mailing out ballot materials. A number of states already permit associations to conduct homeowners associations to obviate these expenses by conducting elections electronically. CAI-CLAC will endeavor to convince the legislature that now is the time for California to go green, join these other states, and authorize electronic voting in California.

Reduced Quorum

Civil Code Section 5100(a)(2) requires an association to conduct a Board election at least once every four years. However, many associations have trouble achieving quorum to conduct an election. If an association cannot achieve quorum, how can it meet the state mandated requirement to hold an election every four years? State elections are not dependent on a quorum. Why should a homeowners association’s board election be dependent on more than 50% of the members voting? Is it not more democratic to allow the majority of those voting choose their representatives rather than permitting board members to hold over indefinitely? CAI-CLAC will explore dispensing with, or alternatively reducing, quorum requirements for Board elections to facilitate more board elections.

CAI-CLAC represents you! If you have an idea for common interest development legislation, or comments on the above ideas, send CAI-CLAC your comments at legcochair@caiclac.com.

Thomas M. Ware II is a partner in the law firm of Kulik Gottesman Siegel & Ware LLP, and a Fellow of the College of Community Associations Lawyers (CCAL). He currently serves as one of CAI-GLAC’s California Legislative Action Committee Delegates and is CLAC’s Legislative Co-chair. He can be reached at tware@kgswlaw.com.

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GOAL: $26,272

What is CLAC?

THE CALIFORNIA LEGISLATIVE ACTION COMMITTEE (CLAC) IS A VOLUNTEER COMMITTEE OF THE COMMUNITY ASSOCIATIONS INSTITUTE (CAI) CONSISTING OF HOMEOWNERS AND PROFESSIONALS SERVING COMMUNITY ASSOCIATIONS. CAI IS THE LARGEST ADVOCACY ORGANIZATION IN AMERICA DEDICATED TO MONITORING LEGISLATION, EDUCATING ELECTED STATE LAWMAKERS, AND PROTECTING THE INTERESTS OF THOSE LIVING IN COMMUNITY ASSOCIATIONS IN CALIFORNIA.

OUR THANKS TO CAI-CLAC 2022 CONTRIBUTORS

January 1 – December 31

100 Marina Shores HOA 11767 Sunset Boulevard Association 12616 Pacific OA 2017 Ketch to Jib Townhouses HOA, Inc. 2138 Stewart Street HOA 2620 Highlands HOA Accurate Termite & Pest Control Action Property Management AAMC ADAMS | STIRLING PLC Advanced Election Services ALLBRIGHT 1-800-PAINTING Ani Keshishian, CMCA® Armour Lane Condomiums Artesia HOA ATS Audiovisual Avis HOA Avocado Glen HOA Beaumont Tashjian Beven & Brock Blossom Vanderbilt COA Border and Lincoln Villas HOA Bouganvillea Inc. Bouganvillea Townhomes HOA Casa de Suenos HOA Casa Loma Association, Inc. Casita De La HOA Catalina Plaza HOA Centinela Townhomes II HOA Command Guard Services Common Interest Services, Inc. Culver Centrale HOA Diane Schoolsky Erik M. Rivera FHA Review FirstService Residential AAMC Gateway Village HOA Greenfield HOA, Inc. Hacienda HOA Harbor Ridge HOA Hermosa Surf Condominium Hermosa Townhomes HOA Highlands HOA Hillcrest Meadows HOA, Inc. HOA Management of Santa Clarita Infinity Property Services AAMC Irena Vista OA JUST RIGHT Painting, Inc. Kelton Arms COA Kulik Gottesman Siegel & Ware, LLP La Pointe Master Assn. Lawford HOA Longfellow Village OA Los Cerros HOA Main at the Beach HOA Management Professionals, Inc. AAMC Matt Meadors, CMCA®, AMS®, PCAM® Mimi Cortes Monica Villas III HOA Oakbridge HOA Oak Hill Condominiums HOA Oak Street HOA Ocean West COA ONIT Property Management Pacific Bougainvillea, Inc. Pacific Colony HOA Pacific Owners Association Pacific View Condominiums HOA Park Crest HOA Partners Community Management Platinum Security, Inc. Prima Terra HOA Redondo Vista HOA Richardson | Ober, LLP Robin Choppe Roseman Law APC Roxbury Park COA SAX Insurance Agency Scott Litman Insurance Agency Seabreeze Management Company AAMC Seascape Redondo HOA, Inc. Seasons West HOA Silicon Beach Insurance Services Silver Spur Court HOA SiSi Villas HOA South Bay Estates HOA South Hermosa Townhomes HOA Spencer Estates HOA Steve Little Insurance Agecy SwedelsonGottlieb Textile Building OA The Miller Law Firm The Naumann Law Firm, PC The Vista Pacifica HOA Tiffany McCall, MBA, CCAM® Valencia Management Group AAMC Villa Capri Townhomes HOA Villa Del Sol Villas HOA Villa Redano HOA Villa Serene CA, Inc. Westchester Playa Del Sol HOA Westside Townhomes I HOA VIP Goshen Association Yukon I Townhomes COA

A SPECIAL THANKS TO OUR 2022 CLAC CHALLENGE CONTRIBUTORS

Accurate Termite & Pest Control Action Property Management AAMC ADAMS | STIRLING PLC Advanced Election Services ALLBRIGHT 1-800-PAINTING Ani Keshishian, CMCA® ATS Audiovisual Beaumont Tashjian Beven & Brock Command Guard Services Common Interest Services, Inc. Diane Schoolsky FHA Review FirstService Residential AAMC HOA Management of Santa Clarita Infinity Property Services AAMC JUST RIGHT Painting, Inc. Kulik Gottesman Siegel & Ware, LLP Management Professionals, Inc. AAMC Matt Meadors, CMCA®, AMS®, PCAM® Mimi Cortes ONIT Property Management Partners Community Management Platinum Security, Inc. Richardson | Ober, LLP Roseman Law APC SAX Insurance Agency Scott Litman Insurance Agency Seabreeze Management Company AAMC Silicon Beach Insurance Services Steve Little Insurance Agecy SwedelsonGottlieb The Miller Law Firm The Naumann Law Firm, PC Tiffany McCall, MBA, CCAM® Valencia Management Group AAMC

ABOUT THE ORGANIZATION

 Is a non-profit, non-partisan committee composed of two Delegates and one Liaison from each of the eight CAI California chapters.  Represents over 13 million homeowners and property owners in more than 52,000 associations throughout California.  Comprises association homeowners, board members and the professional business partners that service them.  Is NOT a PAC (Political Action Committee) and makes no financial campaign contributions.  Depends solely on the donations of the community associations, their boards of directors and those who serve HOA members.

CLAC’S MISSION

To safeguard and improve the community association lifestyle and property values by advocating a reasonable balance between state statutory requirements and the ability and authority of individual homeowners to govern themselves through their community associations.