What Amount of Reserves Does the Law Require?

What Amount of Reserves Does the Law Require?

Dear Kelly, Is there any legal requirement for the reserves to be at any levels or is it a recommendation by the state? Can an HOA be taken over by the state if it is underfunded and if so, at what percentage? Thank you, S.P., Newport Beach Mr. Richardson, Please tell me if there is a Civil Code requiring a certain percentage of funds to be kept in the HOA reserve fund? Also, would you know if there is an average or median level that is known for California HOA’s.? Ours is over 100 percent. J.D., El Cajon Dear S.P. and J.D., The Davis-Stirling Act contains several requirements regarding reserves. Civil Code Section 5550 requires a full study be performed every three years, with annual reviews in-between. Civil 5550(b)(5) requires a long-term funding plan, and Civil 5560 requires that plan include scheduled assessment increases and be adopted in an open board meeting. Civil 5565 requires a detailed written disclosure of the status of each common area component in the reserve study, which disclosure must be in the form prescribed by Civil 5570. This disclosure, per Civil 5300(b)(2) is part of the Annual Budget Report, and so is distributed annually to members and to prospective buyers. Civil 5510(b) requires that reserve funds be spent only on the items they are reserved for, and per Civil 5515 any other withdrawal of reserve funds is considered borrowing which must be disclosed to the members per Civil 5520. The Davis-Stirling Act does not specify any minimum funding of reserve accounts and does not specify a percentage the fund must be in comparison to...
Can I/They Keep My/Their Exclusive Use Area Change?

Can I/They Keep My/Their Exclusive Use Area Change?

Dear Mr. Richardson, Many years ago, I was allowed by the board to raise the height of my deck. I paid for the architectural change. No board member or manager since has ever inquired about it. Most people don’t even see the change. Do I have legal standing to keep my patio the way it is or at some time could I be forced to put it back the way it was originally built? J.H., Huntington Beach Dear J.H., When you modify an exclusive use common area, it is still not owned by you. Common areas are normally defined by a recorded plan or map. I am assuming from your question that you have no documentation proving the modification was approved. If you cannot prove the alteration was with HOA permission, the HOA might deny that the alteration was approved. If the association decided for some reason to renege on the permission, it might have to pay for the revision and possibly reimburse you for the original modification expense. Your situation illustrates why it is a good idea for both HOA and homeowner to document approved changes to an exclusive use common area, in a written agreement signed by the homeowner and the HOA. With a written agreement in hand, you would be able to prove you had permission. Such agreements are also helpful to the HOA because they can document the homeowner’s agreement to be responsible for the changed item’s maintenance and repair. To make sure that future owners of the lot or unit are notified of this agreement, the agreement can be filed with the County Registrar/Recorder....
Freedom of Speech and Assembly

Freedom of Speech and Assembly

Dear Mr. Richardson, Our board is considering banning informal meetings in common areas. To me, this sounds like a violation of the constitutional right of assembly, but are there laws in California that cover this? S.M. Escondido Dear Kelly, I have a question regarding the new state law supporting use of common facilities for political activities, and one on first amendment rights. The new law allows residents to use common facilities for political meetings without charge. May the HOA limit attendance to only residents, residents and guests according to its adopted policies, or may/must these programs be open to all? Can an HOA prohibit the display of political signage on front lawns? For example, must the HOA allow residents to have campaign signs? Are there limitations to this allowance like size, length of display time, etc., as established in the HOA rules and policies? B.S., Murrieta Dear S.M. and B.S., Two Davis-Stirling sections create First Amendment-type rights in HOAs – Civil Code Sections 4710 and 4515. Section 4710 protects the right of members to display noncommercial signs or banners in or on their separate interest. In a typical airspace condominium that would mean inside a window or sliding door, and in a planned development would allow such a sign or banner to be displayed anywhere within the lot. There is a size limit but no time limitation on display. Can the HOA stop a resident displaying an offensive racist or prurient sign or banner? No. However, under the current federal Fair Housing regulations (and the soon to be official California Fair Housing regulations), the HOA or any resident could...
Is This Exclusive Use?

Is This Exclusive Use?

Dear Mr. Richardson, If a club in the HOA wants a locked storage space, is it considered exclusive use? W.S., Escondido Dear W.S., Exclusive use common area is defined by Civil Code Section 4145 as a portion of common area dedicated by the CC&R’s to the use of a single owner or group of owners. So, the club storage space, unless it was mentioned in the CC&R’s, would ordinarily not be considered exclusive use, but is common area allocated by board permission. Thanks, Kelly Kelly, I have a problem with my HOA on who pays for plumbing backing up due to a rusty pipe outside my unit in the front. The pipe rusted out and backed up into my unit. The HOA says it’s my responsibility because the pipe is “exclusively” into my unit therefore I have to replace the pipe and fix my flooring at my expense. Any advice would be appreciated. D.W., Fair Oaks Dear D.W., Do the CC&R’s of your HOA designate pipes which only serve your unit to be “exclusive use common area?” Per the Dover Village v. Jennison appellate decision of 2010, unless the CC&R’s say otherwise, the pipes outside a unit are not considered exclusive use common area. Even if they are considered exclusive use, do the CC&R’s specifically say that repair of the pipes is your responsibility? Civil Code 4775(a)(3) states that, unless the CC&R’s say otherwise, exclusive use common areas are to be repaired by the HOA and maintained by the homeowner. In townhouse-style condominiums, in which much of the plumbing separately serves individual units, associations sometimes amend the CC&R’s to...
Can We Limit Dogs?

Can We Limit Dogs?

Hi Kelly,  Our HOA recently voted to update our CC&R’s. One section prohibits ownership of numerous breeds of dogs that the board considers dangerous. Since California law (Food and Agri. Code 31683) outlaws dog breed discrimination by counties and cities we are the only HOA in the region that bans ownership of certain dogs. Isn’t it illegal under Davis-Stirling to violate state law?  R.L., Rancho Santa Fe  Dear R.L., The Food and Agricultural Code section you mention applies to ordinances adopted by cities and counties, but not restrictions passed by common interest developments. So, when the association members voted to approve an amendment to the CC&R’s prohibiting certain dog breeds, the amendment would not violate that specific law. However, the Davis-Stirling Act does protect the right to have a “pet,” which per Civil Code 4715 includes dogs. Under that statute, an association must allow an owner to keep one pet on the property. The statute defines “pet” as including ”any…dog,” so if one takes the statute as written, it is the homeowner who chooses what breed of dog to have, not the HOA. Thanks for your question,Kelly Dear Mr. Richardson, How can HOAs handle large, aggressive service dogs that otherwise would be barred by CC&R’s? How can HOAs accommodate residents’ allergies or legitimate fears re: service animals? A.Y., West Los Angeles Dear A.Y., The Fair Housing Act requires associations to provide reasonable accommodations to residents with disabilities, and one of the most common accommodations allowing a service dog or support animal. However, if the dog creates a nuisance by damaging property or menacing other residents, that accommodation may become...
Two Homeowners Want Out, One Wants In

Two Homeowners Want Out, One Wants In

Dear Kelly, Is there a way to get out of our three member HOA? Our home stands alone. The other two are connected. Thank you for your comment on this! K.N., Santa Barbara Dear K.N., I assume your association was established as a condominium project. Most likely the developer wanted to put more homes on the land than the zoning and Subdivision Map Act would allow. Condominiums are often a way to place more homes in a smaller space. Small associations are often pinched between the increasingly complex and burdensome Davis-Stirling Act and the cost of hiring professional management and legal counsel to navigate the Act. Most very small associations operate largely in disregard of the Act, typically more like a partnership than an association. If the three properties cannot meet the requirements of separate independent lots, it may be impossible to disband the association. It would certainly take agreement of all three owners and each of their mortgage lenders to make that change. Check with a real estate attorney in your area to find out if this is possible. Best, Kelly Dear Mr. Richardson, How can I resign from the HOA as an owner? J.K., Anaheim Dear J.K., A common interest development (aka “homeowners association”) automatically is joined when one becomes an owner in that development. That happens by virtue of the recorded covenants on the property which “run with the land” and are a contract binding the owner even though the owner never signed it. To exit the contract one must cease to own the land on which the CC&R’s are recorded, meaning the only way to...
Evaluating Management: Management Companies Respond

Evaluating Management: Management Companies Respond

Kelly, I am a HOA Board member, and our management company contract is coming up for renewal. We realized we have no formal way of evaluating how they are doing. I was wondering if in your dealings with HOAs you have come across a checklist or evaluation instrument. Thanks, B.T., Encinitas Dear B.T., I don’t have a standard checklist, because each association has different priorities and needs and evaluation of management should be customized to the uniqueness of each community. I relayed your question to a number of management company owners and officers, and I hope you find their responses helpful. Brian Davidoff, CEO of Ross Morgan & Company, said it is all about responsiveness: “Respond, respond, respond…service is all we offer!” David Brock PCAM, co-owner of Beven and Brock, said evaluating a management company might involve three major questions: “Are the managers credentialed, does the company provide transparency in financial reporting and potential conflicts, and is the company responsive and accessible?” Managers also evaluate prospective clients. “If I ask the board members who their landscaper is and no one knows (when they see them at a minimum weekly and sign their checks monthly), that tells me they are not as involved in their community’s governance as they should be” said Kelly Bunnell, PCAM, President of Bentley Community Management. Last year’s Community Associations Institute President John Hammersmith PCAM, CEO of Hammersmith Management in Colorado, said “I have always viewed the relationship between board and management as a partnership, and the evaluation process should be viewed the same way. It is important that both the Board and Management understand how each can...
Drought’s Over, Must Our Cactus Go Too?

Drought’s Over, Must Our Cactus Go Too?

Mr. Richardson, After my HOA approved my drought-tolerant design, they asked me to add ‘more & bigger plants’ which violates Civil section 4735(e). Are the regulations still in place after May 2017? And if they are in effect, who do I get in touch with to help me enforce them? Thank you, I.D., Vista Dear I.D., Associations cannot ban drought-tolerant landscaping, as Civil Code 4735 still is in force. The part of that statute which no longer applies is part (c), which bars associations from penalizing members who let their yards “go brown” during a Drought Emergency. Furthermore, under section 4735(e) associations may not force removal of artificial turf or other drought-resistant landscaping once it is in place. The bottom line is that homeowners choosing xeriscapes are still protected by Civil 4735. The yard must of course be presentable and maintained, but it does not have to be a traditional lush lawn. Thanks,Kelly Hello Mr. Richardson, During the drought our front lawn went brown, like all others in our community. After the drought we had a difficult time resurrecting the green lawn in several spots. We were assessed several large monthly penalties, one after another, a couple of years back, the HOA stating the CC&Rs required a green lawn. The penalty is now [thousands of dollars]. I’m not sure what options we have to push the HOA to eliminate the penalty. Any assistance is appreciated. Thank you, M.T., Rocklin Dear M.T., Until April 7, 2017, the day Governor Brown declared an end to the Drought Emergency, associations could not fine members for under watering yards, as such penalties violated Civil...
Recalls, Voting

Recalls, Voting

Hello Kelly, I enjoy your column and have learned so much from reading it religiously. I have 2 questions: 1. A petition to recall a board member received sufficient signatures and the recall election was scheduled. The board appointed three homeowner inspectors, each of which either circulated or signed the recall petition. Is it legal and/or ethical for them to participate in the counting of the recall ballots? 2. The recall petition called for both the recall election and the election of candidates to replace the board member if the recall is successful to occur at the same meeting. The board and management company have refused to ask for candidates and the agenda for the recall meeting says nothing about the election of candidates. Ballots containing the recall vote only have already been sent to homeowners. Isn’t the board required to follow the petition? S.P., Banning Dear S.P., Inspectors of election may be volunteers, so long as they are “third parties.” A “third party” under Civil Code Section 5110(b) may not be director, candidate or someone related to a director or candidate. It is hard to ask a volunteer not to have a point of view, but in a hotly contested election the board should be careful to try to have a mix of views on the inspector panel, to give greater comfort to the members that the election is being conducted fairly. As to the recall election, the petitioners were wise to ask for voting to fill the vacancy if the recall vote succeeds. The board is violating the petition and is harming the association by not asking...