How Exclusive is Exclusive Use Area? Part 2

How Exclusive is Exclusive Use Area? Part 2

Hi Kelly, I live in a condo complex in which the restricted common area is the front and back yards of each unit. The board says it has the authority to grant permission to an owner to make room additions in the backyard. I do not believe they have such authority as it would be “giving” ownership of the restricted common area which would then be enclosed in his unit. Do you believe the owner can build an addition to his unit? Thank you, P.W., San Diego Dear P.W., First, the unit is not defined by what the board says, but by the condominium plan. That recorded document is part of the legal description of the condominium. If one adds living space to the unit, that new living space, outside the boundaries of the original unit, is still common area. This could create a significant disclosure problem for members, who surely will want to disclose the larger square footage even though they do not own that space. If such a modification to a home were to be allowed, a written agreement between the HOA and the homeowner is essential. Such agreement should, at a minimum, reflect that the homeowner is responsible for the new structure, the HOA has no responsibility to insure, repair or maintain it, and it still is common area. Another issue is whether the board violated Civil Code 4600, which requires a 2/3 vote of the membership before the HOA allows a homeowner to convert “pure” common area to exclusive use. Some may argue that the area already was exclusive use. There are also some exceptions to...
What and Where Is “Exclusive Use Common Area”? Part 1

What and Where Is “Exclusive Use Common Area”? Part 1

The typical condominium project consists of three categories of property – the “separate interest” (normally called the “unit”), the common area, and a subset of common area called “exclusive use common area.” Misunderstandings regarding exclusive use area lead to many disputes. Simply put, exclusive use areas are not “your” property, but a part of the commonly owned property set aside for one member’s use. A better understanding of exclusive use area, what it is, who controls it, and who takes care of it can help prevent disputes in condominium associations. The unit is normally described in the “notes” portion of the condominium plan, a recorded (but often overlooked) document. There are many portions of a normal condominium project which are outside of the unit boundaries but intended for the use and enjoyment of a single unit owner. These parts are called “exclusive use common area”. The description of some exclusive use common areas might be found in the Condominium Plan or CC&Rs. Civil Code Section 4145 provides the default definition if the governing documents do not fully cover the topic, including: “shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, exterior doors, doorframes, and hardware incident thereto, screens and windows or other fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest…”. Fixtures serving a single unit but existing outside of the unit boundaries may include water heaters or air conditioning equipment, for example. Many condominiums are bought with the mistaken belief that the exclusive use area, such as, for example, a balcony, is “theirs” and the HOA cannot dictate how it...
Changes in Condominium Lending Rules

Changes in Condominium Lending Rules

The Department of Housing and Urban Development (HUD) has issued revisions to its condominium lending rules, effective October 15, 2019. In 2009 HUD began predicating FHA condominium loans on the entire project being approved by meeting certain minimum guidelines. HUD slightly liberalized its rules in 2012, which were modified again by Congress in 2018 through the enacted H.R. 3700. Here are some highlights of the new changes. The most significant change is that individual unit buyers will be able to obtain FHA loans even if the HOA is not HUD-approved. In non-HUD-approved HOAs, up to 20% of its members could qualify individually for FHA loans if the HOA meets certain criteria. The new rules also will liberalize the renewal process, as approved associations will now renew every three years instead of the current two-year cycle. Henceforth, renewals will be simpler, by updating the information on file rather than the current full reapplication process. One aspect of this update is negative, at least for “site condominiums,” condominiums consisting of individual detached dwellings. Although the previous rules excluded “site condominiums” the new rules include them, meaning that FHA loans in this unusual type of condominium now will also require project approval. Regarding project owner occupancy, HUD rules will permit granting special exceptions from the normal minimum of at least 50% owner-occupied condominiums to as low as 30%. Homes occupied part-time by their owners will be counted as “owner-occupied.” While the general HUD rule is that a maximum of 25% of the floor space in a project can be non-residential units, with exceptions granted up to 35%, under the new rule HUD...
Recall Questions: Part 2

Recall Questions: Part 2

Kelly, Our HOA recently had a total board recall and election. The new (self- appointed) president handed out terms based on votes received, with three two-year and two one-year terms. Our bylaws specify a procedure for the first election, namely drawing of lots to determine terms, to be two (two-year) and three (one-year). Subsequent elections should be for two-year terms, for a staggered election pattern. Should the president have followed the bylaws’ first election procedure, as the situation is identical, or should the president have given more two-year terms than is specified? I can’t find the answer anywhere on the Internet. J.T., San Jacinto Dear J.T., First, president does not appoint offices or board terms and is one vote out of the five who should be making that decision. Having not seen your association governing documents, I cannot say exactly what was required to happen. Normally, when an association begins to use staggered terms, the first election will have directors with the higher vote totals receiving the longer terms. We normally draft such bylaw provisions or amendments that way. If everyone received two-year terms the staggering would be destroyed so your suggested approach makes sense, if it does not violate the governing documents. Best regards,Kelly Dear Mr. Richardson, We had a five-member board. Two of the members did not like the others, organized a total board recall election, recalled the entire board, and then ran again and won. Is this legal besides being unethical? E.F., Temecula Dear E.F., Directors are also members and at election time can personally support or oppose who they choose as directors. What directors cannot...
Recall Questions: Part 1

Recall Questions: Part 1

Dear Kelly, In our recent HOA election, one new member was elected but resigned six weeks later. There is an all-out war between the four remaining directors. All business has stopped due to the inability of the four to agree on anything that needs a vote. Homeowners want the board to appoint the next in line from the last election, two board members will not agree to this. We have cumulative voting and I understand recalling anyone less than the entire board is very difficult, no? We are being told that our bylaws require 25% of the owners to demand a special election. Is this so? K.C., Mission Viejo Dear K.C., Very sorry to hear of the discord within your board. Recalling the entire board is one possibility, which normally requires approval of a majority of a quorum of the members. Pursuant to Corporations Code 7222(b)(1), associations with cumulative voting find it much harder to recall a single or a few directors, because under that statute “no” votes are multiplied by the number of authorized seats, so it takes many more “yes” votes to remove a director. However, a less hostile alternative would be simply to ask the board to set a special election to fill the open seat. Another option, undesirable due to its cost, would be to ask the Superior Court to appoint a provisional director to break the tie and get a special election set. As to the minimum members necessary to petition for a special membership meeting, Corporations Code 7510(e) says that 5% or more of the members can petition for such a meeting. If the...
Senate Bill 323: More “One Size Fits All” For HOAs

Senate Bill 323: More “One Size Fits All” For HOAs

Senate Bill (SB) 323 (Wieckowski) is now pending in the Assembly after passing through the Senate. The bill originally proposed to significantly expand election procedural requirements and now strays into additional areas, potentially creating even further problems for California HOAs. Since July 2006, when 2005’s SB 61 became law, HOAs have the most complex election requirements of all California nonprofit corporations. For example, HOAs are the only nonprofit corporations barred from using electronic voting (Civil Code 5115 requires paper ballots in double sealed envelopes). While many (including this author) felt SB 61 was overkill, SB 323 would take things even further. Under current Civil 5200(a)(9), members can request the HOA membership roster, including names and addresses, but under Civil 5220 members can opt out of that roster and keep their information private. SB 323 would require adding email addresses to the available roster information, something which many homeowners prefer to keep confidential. A proposed amendment to Civil 5125 would add additional items for post-election member inspection, requiring signed exterior ballot envelopes, voter lists and proxies also to be available for member inspection. Many residents do not wish their signatures or voting record to be available for public inspection. Some associations have bylaws automatically disqualifying delinquent members from voting, while others hold hearings under Corporations Code 7341 to suspend delinquent member voting rights. However, SB 323 would force associations to give ballots to all members – even to those deemed ineligible to vote. This would, in effect, cancel Corporations Code 7341, leaving HOAs as the only corporations unable to suspend member voting rights. SB 323 also would in a proposed...
Conduct Policy With a Forced Waiver?

Conduct Policy With a Forced Waiver?

Kelly, Our board instituted an ethics policy for all directors and committee members. The first requirement is that all nominees for directors sign a confidentiality promise and promise they will never sue the board. If a board member does something wrong, illegal or unethical, how can we get relief if we sign away our rights to sue? The board’s current attorney wrote this policy because we have had board members suing the board for problems they could not resolve among themselves. Why should any candidate for the board sign their rights away? Is this even legal? S.K., Encino Dear S.K., Board ethics and conduct policies are a great idea for associations, and can apply to directors, committee chairs, and committee members. Such policies can make a strong statement about the association’s values and build members’ confidence in their volunteer leadership. Eligibility standards for board candidacy or for board service should not be in the conduct policy but should be stated in the bylaws or election rules. However, if Senate Bill 323, currently pending in Sacramento, becomes law it will require that all board eligibility requirements be stated in bylaws and will not allow such standards to be in board-adopted election rules. That bill is in process in the Assembly, with some increasing opposition after passing the Senate on a divided vote. The Community Associations Institute has a Model Code of Ethics for Community Association Board Members, which can be found by CAI members at www.caionline.org/homeownerleaders. That is a good place to start. A code of ethics/conduct can be adopted by the board as an operating rule, to make it...
Scaring Off Volunteers

Scaring Off Volunteers

Filling open HOA board seats is a vexing and discouraging problem for some associations. However, there may be some reasons why neighbors are not interesting in serving. Could any of the below describe your association? Volunteer Managers Do directors spend many hours each week on HOA business, inspecting the property, observing vendors, and otherwise dealing with the HOA’s daily matters? The well-intentioned sacrifice of so much time and energy may deter others from board service. Some neighbors may be retired or have the energy to spend 20-30 hours each week on association matters, but many don’t – and they are frightened of that level of commitment. Let the manager manage, or hire a better one. If the association does not have a manager, hire one. People need to know they are not signing up to be free association co-managers. Fire and Brimstone in the Clubhouse Some associations seem fraught with conflict and low standards of behavior. Few are interested in joining a board in which members display open hostility toward each other, or serving an association which seems to be always in litigation. Chaotic Meetings Disruptive and uncomfortable meetings filled with hostility between directors and the audience will repel most volunteers. Many prospective volunteers will decide that life is too short to deal with unpleasant people and will avoid meetings and not volunteer. Elevate professionalism and civility in board meetings, and consider adopting board meeting rules promoting civility and order. Fear of Liability Volunteer directors should not fear liability, even while making important association decisions. The Business Judgment Rule, corporate process, and directors and officers errors and omissions insurance...
Is It My Parking?

Is It My Parking?

Good morning Mr. Richardson, I discovered a problem with my deeded garage. Long story short my deed does not reflect the garage I was given. I have been fighting to retrieve what I paid for at the beginning. After a unit above my current located garage sold, I lost all power to the garage. HOA was contacted and they discovered the problem. Shouldn’t somebody have caught this issue before the sale? There is a whole mess here and all we want is what we paid for at the beginning. I look forward to your reply. Thank you, T.M., Brea Dear T.M., The first question is, do you own the garage or is it common area owned by all? Normally this is established when the condominium project is created. Sometimes, parking spaces or garages are designated by the Condominium Plan, an underappreciated but important document. Sometimes garages are designated by the Condominium Plan as part of the unit or described as exclusive use common area. CC&R’s unfortunately rarely include a parking list specifying which spaces are assigned to which units. If the Condominium Plan did not create a legal interest in the garage, the seller may have “sold” something which the seller never owned in the first place. Another problem arising from the lack of specificity regarding parking is that owners over the years will trade spaces or cede parking rights to another owner – without any documentation as to how this was done. The problem often surfaces when an association member claims they “acquired” a parking space from another owner, despite the fact that parking spaces are common area...
They Won’t Pay, Now What?

They Won’t Pay, Now What?

When a homeowner fails to pay their share of the association expenses, the board is duty-bound to pursue the unpleasant but necessary task of compelling the member to pay. The association has three options – small claims court, non-judicial foreclosure and judicial foreclosure. In each approach, collection costs are added to the debt. Small Claims Court In small claims court associations can sue for a limited amount – up to $5,000 twice each year and each additional claim is limited to $2,500 per claim, under Code of Civil Procedure Section 116.231(a). Small claims court is fast, filing fees are low, and attorneys are not allowed to represent parties in small claims court trials. Plaintiffs cannot appeal the outcome, while defendants can appeal, sending the case to a retrial before a Superior Court Judge, under Code of Civil Procedure 116.710. Nonjudicial Foreclosure Nonjudicial foreclosure involves a series of notices and waiting periods, after which the property is taken away from the owner without court supervision. The goal of non-judicial foreclosure is simply for the HOA to take ownership of the property if the member does not pay the arrearage. If the property does not have enough net value to cover the debt, HOAs may not after a nonjudicial foreclosure pursue the member for more money. If the member is already in foreclosure from a lender, foreclosure is not a helpful option for the association. Prior to completing a foreclosure sale to take the property, consult legal counsel to confirm foreclosure is in the HOA’s best interests, because sometimes it isn’t. The foreclosure threat does not always compel owners to pay....