San Diego Condos

Condo Q and A

This memorandum covers a variety of topics, including the different types of common interest developments, homeowners’ associations,

 directors and their responsibilities and liabilities, permissible and impermissible restrictions in CC&Rs, the ability of a homeowners’

 associations to sue or be sued, special rules that apply when a unit in a common interest development is transferred, and selected

other topics.  

I. Definitions

Q 1. What is the law that governs common interest developments?

A The law governing common interest developments is called the "Davis-Stirling Common Interest Development Act" (The "Act").

 It is codified in California Civil Code (Civ. Code) Sections 1350 through 1376. In addition, common interest developments organized as

 nonprofit mutual benefit corporations are also governed by California Corporations Code Sections (Corp. Code) 7110 through 8910.

The following is a chart summarizing some of the statutory definitions found in the Act.

TYPE OF UNIT	NATURE OF OWNERSHIP
Common Interest Development	General term which includes all projects characterized by exclusive, individual rights of use or ownership in a portion of real property coupled with undivided real property rights held in common with others. Includes any of the following: community apartment project, condominium project, planned development, and stock cooperative. (Civ. Code § 1351(c).)
Community Apartment Project	Exclusive right to occupy apartment must be specified in instrument of conveyance, usually contained in grant deed; and Each owner owns an undivided interest in the entire project. Sometimes a "community apartment" is also known as an "own-your-own." (Civ. Code § 1351(d).)
Condominium Project	Title to an individual unit; and Undivided interest in the common area. (Civ. Code § 1351(f).)
Planned Development	Title to individual lot, parcel, area or space; and Either or both of the following features: (1) Common area owned either by association or in common by owners of individual units, or (2) Association has power to enforce assessment by a lien on owner’s separate interest. (Civ. Code § 1351(k)-(l).)
Stock Cooperative	Corporation holds title to real property; and Shareholders of corporation receive right of exclusive occupancy in a portion of the property. One variety is a "limited equity housing cooperative" which is designed to provide housing to low and moderate income residents. (Civ. Code § 1351(m).)

Q 2. What are the "governing documents"?

A The "governing documents" are the declaration of covenants, conditions and restrictions (commonly known as the CC&Rs),

bylaws, operating rules of the homeowners’ association, articles of incorporation, articles of association and any other documents

 which govern the operation of the common interest development or its homeowners’ association. (Civ. Code § 1351(j).)

Q 3. What are the CC&Rs?

A This is a document which contains, among other things, a legal description of the common interest development, the

nature of the development (i.e., condominium project, stock cooperative or other type), the name of the homeowners’ association,

and the restrictions on the use or enjoyment of any portion of the development. The CC&Rs usually also contain the basic rights

and obligations of the owners and the homeowners’ association with respect to dues, assessments, maintenance, and other

basic items. (Civ. Code  §§ 1351, 1353.)

Q 4. What is a community association"?

A A community association is a nonprofit corporation or unincorporated association created for the purpose of managing a

common interest development. Other names for this type of association are "owners’ association" or "homeowners’ association"

 and this Q&A will use the term "homeowners’ association" or "association" interchangeably.

The Civil Code requires that all common interest developments must be managed by a homeowners’ association. See Part

 III for the duties and responsibilities of the association and its directors. (Civ. Code § 1363.)

Q 5. What is a condominium plan?

A A "condominium plan" is a plan consisting of:

• A description or survey map of a condominium project which refers to "monumentation on the ground";
• A three dimensional description of a condominium project; and
• A certificate consenting to the recordation of the condominium plan, signed and acknowledged by the record owner of fee title to that property. (Civ. Code § 1351(e).)

Q 6. What is the common area?

A The "common area" is the entire common interest development except the separate units of the individual owners.

 Typical examples of common areas include pools, spas, and gardens. (Civ. Code § 1351(b).)

Q 7. What is an exclusive use common area?

A An "exclusive use common area" is a portion of the common area designated by the CC&Rs for the exclusive use of one

 or more, but fewer than all, of the owners of the separate interests. It is "appurtenant" to a separate interest, which means a

transfer of the owner’s separate interest will also transfer the exclusive use common area. Examples include the right to use

parking spaces, a patio, or balcony, and external and internal telephone wiring. (Civ. Code § 1351(i).)

Q 8. What does the owner of a separate interest or unit possess?

A The term "separate interest" has the following meanings:

1) In a community apartment project, separate interest means the exclusive right to occupy an apartment.

2) In a condominium project, separate interest means an individual unit.

3) In a planned development, separate interest means a separately owned lot, parcel, area, or space.

4) In a stock cooperative, separate interest means the exclusive right to occupy a portion of the real property. (Civ. Code § 1351(l).)

II. Creation of Common Interest Developments

Q 9. How is a common interest development created?

A California law requires the following for the creation of a common interest development:

1) The recording of a declaration of covenants, conditions and restrictions (CC&Rs);

2) The recording of a final subdivision map or parcel map, if mandated by the Subdivision Map Act; and

3) The recording of a condominium plan for a condominium project, if applicable.

4) In addition, compliance with the requirements of the Subdivided Lands Act and local ordinances may be necessary.

 (Civ. Code § 1352.)

Q 10. Must a homeowners’ association be incorporated?

A No, although most of them are. In fact, many of them are incorporated as nonprofit mutual benefit corporations. Even if an

 association is not incorporated in any way, however, the association automatically retains the powers of a corporation, unless

 the CC&Rs provide otherwise. (Civ. Code § 1363.)

Q 11. How can CC&Rs be amended?

A An amendment to the CC&Rs requires:

1) The approval of the percentage of owners required by the governing documents;

2) A writing executed either by the officer designated in the governing documents or by the association, or by the president of the

association if no one is so designated, acknowledging the owners’ approval of the amendment; and

3) Recording the document in each county in which a portion of the common interest development is located. (Some county

recorders take the position that the names of the owners of property in the amendment must be the same names as those in

the original recording.) (Civ. Code § 1355, Gov't Code § 27288.1.)

However, if the CC&Rs require more than a 50 percent vote in favor of an amendment, the association, or any owner of a separate

 interest, may petition the superior court of a county in which the common interest subdivision is located for an order reducing the

 percentage of the affirmative votes necessary for an amendment.  (Civ. Code § 1356.)

III. Homeowners’ Associations

Q 12. What are the powers and duties of a homeowners’ association?

A A homeowners’ association manages the common interest development. The association, whether incorporated or

unincorporated, may exercise many of the powers granted to a nonprofit mutual benefit corporation. The powers and duties

 are typically enumerated in the governing documents (e.g., bylaws, articles of incorporation or association, CC&Rs).  

(Civ. Code § 1363.)

The duties of the association are normally handled by the members of the board of directors. Some of these duties include:

 duty to maintain the common areas, financial planning duties, architectural control, duty to protect and insure the

association assets, duty to enforce the CC&Rs, duty to collect assessments, and duty to conduct meetings.  (Civ. Code § 1365.5.)

Q 13. What is the principal source of income for a homeowners’ association?

A The principal source of income for a homeowners’ association is assessments levied on its members who own interests

 in the development. Ordinarily, the CC&Rs provide procedures for calculating and collecting regular assessments. (Civ. Code § 1366.)

Q 14. How are these regular assessments allocated among the association members?

A The governing documents of a homeowner’s association must establish a system for allocating the assessments.

For example, in a condominium project, a large unit may be more expensive for the association to maintain than a small unit.

 Therefore, if provided in the governing documents, the owner of a larger unit may find him/herself paying a higher assessment

than the owner of a smaller unit.  (10 Cal. Code Regs § 2792.16(a).)

Q 15. May regular assessments be increased each year?

A Yes. Even if the governing documents indicate otherwise, however, the homeowners’ association may not increase the

 annual regular assessment by more than 20 percent over the regular assessment for the preceding fiscal year without the

approval of owners constituting a quorum (more than 50 percent of the owners of the association). (Civ. Code § 1366(b).)

However, the limits stated above do not apply to defined "emergency situations." (See Question 16.)

Q 16. What "emergency situations" would allow an association to increase assessments without complying

 with the restrictions specified in Question 15?

A "Emergency situations" are defined to be any one of the following:

• An extraordinary expense required by court order;
• An extraordinary expense necessary to repair or maintain the development or areas which the association is responsible for where a threat of personal safety on the property is discovered;
• An extraordinary expense necessary to repair or maintain the areas under responsibility of the association which could not have been "reasonably foreseen" by the board when preparing and distributing the pro forma operating budget. (Civ. Code § 1366(b).)

Q 17. May a homeowners’ association levy assessments for special expenses?

A Yes. An association may periodically levy special assessments to make improvements to the structure of a building

 (e.g., a clubhouse roof), to pay for extraordinary expenses, or to make up for a shortage in the association’s reserves.

The homeowners’ association may not impose special assessments amounting to more than 5 percent of the association’s

 budgeted gross expenses for that year without the approval of a majority of the owners. (Civ. Code § 1366.)

Q 18. Must a homeowners’ association hold membership meetings?

A Yes. According to regulations of the Department of Real Estate (DRE), the CC&Rs or the bylaws must provide for such

meetings, at least annually. These membership meetings must be held within the development itself or as close to it as possible.

 However, once the developer has sold his/her last unit and the DRE no longer is regulating the development, regular meetings

must be held with the frequency and at the times and dates that are in accordance with the bylaws. In any event, a meeting must

be held in any year in which directors are to be elected at a regular membership meeting. The meeting location may be at

a place "within or without the state" as stated in the bylaws. If none is stated, then the meeting must be held at the corporation’s

 principal office. (10 Cal Code Regs § 2792.17(a), Corp. Code § 7510.)

Any member of an association may petition the local superior court for an order to hold a meeting if the association fails to

 call one within 60 days of the meeting date provided for in the governing documents. The petitioner must give the corporation

 adequate notice and a reasonable opportunity to be heard, however. (Corp. Code § 7510(c).)

Q 19. Must owners be given access to all association meetings?

A No.  Nearly all board of directors' meetings must be open to all unit owners.  In the open meetings, all owners have the

right to speak but are subject to any reasonable time limit imposed by the association.

The board of directors may restrict attendance only when it meets in an "executive session"--that is a session called to

consider litigation, matters that relate to the formation of contracts with third parties, member discipline, personnel matters,

 or to meet with a member, at the member's request, regarding the member's payment of assessments.  However, all

matters discussed in the closed meeting must be recorded in the minutes of the subsequent open meeting and made

available to the unit owners.  (Civ. Code § 1363.05.) 

Q 20. Must owners have voting rights in the homeowners’ association?

A Yes. The governing documents (such as articles of incorporation or bylaws) must provide for member voting rights.

 (Corp. Code § 7610.)

Q 21. What rights does a homeowners’ association member or governing body member

(i.e., officer or director of the association) have to inspect the books, records, and physical properties of the association?

A A governing body member has a right to inspect, at any reasonable time, all the books, records, and physical

properties of the association. Such a member (director/officer) is not required to present a written demand for

inspection. (Corp. Code § 8334, 10 Cal Code Regs § 2792.23(c)).  In a 1995 case, the court held that a director

did not have an absolute right of inspection and the rights of inspection must be balanced against members’

"legitimate expectations of privacy." (Chantiles v. Lake Forest II Master Homeowners Ass’n (1995) 37 Cal. App.

4th 914 (the director wanted to determine who voted against him))

On the other hand, an association member who is not on the governing body (i.e., not on the board of directors) has

the right to review the association documents only if the inspection is "related" to his/her interest as a member.

In addition, written notice must be given to the association before this type of inspection may occur.

(Civ. Code § 1363(f), Corp. Code § 8333.)

Q 22. May a homeowners’ association discipline a member who violates a provision of a governing document?

A Yes. In order to do so, however, the governing documents must include specific provisions authorizing the governing

 body to impose a fine, suspend common area use rights, or otherwise discipline a member for failing to abide by

its provisions. Further, before actually imposing a particular penalty, such as a fine, the board of directors must

adopt a schedule of fines or penalties and must distribute it personally or by first class mail to each member.

 (Civ. Code § 1363(g).)

Q 23. May a homeowners’ association impose or collect an unreasonable fee or assessment?

A No. An association cannot impose or collect a fee or assessment that exceeds "the amount necessary

to defray the costs" of levying. (Civ. Code § 1366.1.)

Q 24. May a homeowners’ association impose late charges?

A Yes. A homeowners’ association may impose late charges not exceeding 10 percent of the delinquent regular

or special assessment, or $10, whichever is greater, if the assessment remains unpaid 15 days after it is due. 

If the CC&Rs specify a longer period of time or a lower fine for delinquent payments, the CC&Rs will apply.  

Associations may also recover "reasonable" collection costs, including attorney’s fees.

In addition, if an assessment remains unpaid 30 days or more after the due date, the association can collect

interest on "all sums," including the delinquent assessment, reasonable costs of collection and late charges,

limitations. (Civ. Code § 1366(e).)

Q 25. Under what circumstances may a homeowners’ association impose a lien on a member’s interest?

A An association has the authority to impose a lien on the property of a member who fails to pay regular or

special assessments. However, the assessment, costs of collection, late charges, and interest do not become

 a lien on the owner’s separate interest until the association records a notice of delinquent assessment. Penalty

assessments for violation of association rules cannot become a lien. (Civ. Code § 1367.1.)

Before recording a lien, the association must provide a 30-day notice to the member by certfied mail.  This notice

must contain various statements.  The list of items can be found in Civil Code Section 1367.1.

Q 26. What are the collection choices available to a homeowners’ association if a unit owner refuses to

 pay assessment dues in response to a notice of delinquent assessment?

A An association may elect any of the following alternatives:

• A civil action (such as a small claims or municipal court action) to collect the delinquent assessment;
• A nonjudicial trustee sale; or
• A judicial foreclosure proceeding.
• Alternative Dispute Resolution (if homeowner has paid amount in dispute under protest and has requested ADR this method must be used prior to any civil action--limited to 2 times in a single year and 3 times in a five year period) (Civ. Code  §§ 1367.1, 1366.3.)

Q 27. Must a homeowners’ association board of directors oversee the financial affairs of the association?

A Yes. And unless the governing documents impose more stringent standards, such overseeing by the board of

directors must include a review, on at least a quarterly basis, of the following:

• A current reconciliation of the association’s operating accounts;
• A current reconciliation of reserve accounts;
• The current year’s actual reserve revenues and expenses compared with the current year’s budget;
• The latest account statements prepared by the financial institutions in which the association has its
•  operating and reserve accounts; and An income and expense statement for the association’s operating and reserve accounts.

The requirement of quarterly reviews of financial material does not apply in some circumstances where an association does

 not have a "common area." (Civ. Code § 1365.5.)

Q 28. Is the homeowners’ association responsible for repairing, replacing, or maintaining the

common areas?

A Yes. Unless provided otherwise in the CC&Rs, the homeowners’ association is responsible for repairing, replacing or

 maintaining the common areas, other than the exclusive use common areas. (Civ. Code § 1364.) The California Supreme

Court has held in Lamden v. La Jolla Shores Clubdominium Homeowners Ass’n, (1999), 21 Cal. 4th 249, that when a

 homeowner disagrees with the association’s decisions on how to handle maintenance decisions, the courts will defer to

the authority and presumed expertise of a homeowner’s association in making those decisions.

Q 29. Must the homeowners’ association prepare and distribute financial statements?

A Yes. Unless the CC&Rs impose more stringent standards, the association must prepare and distribute to its members

 a "formal operating budget" not less than 45 days nor more than 60 days before the beginning of the fiscal year. The budget

 must contain all of the following information:

A. The estimated revenue and expenses on an accrual basis;

B. A summary of the association’s reserves based on a recent review or study done under including in bold type all of

the following:

1) The current estimated replacement cost, estimated remaining life, and estimated useful life of each major component;

2) At the end of the fiscal year:

a) The current estimate of the amount of cash reserves necessary to repair, replace, restore or maintain the major

 components; and

b) The current amount of accumulated cash reserves necessary to repair, replace, restore or maintain the major components;

3) The percentage that the current amount of accumulated cash reserves to repair the major components is of the current

estimate of what such cash reserves should be.

C. A statement as to whether the board of directors has determined or anticipates that the levy of special assessments

 will be required to repair or restore any major component or to provide adequate reserves therefor;

D. A general statement addressing procedures used for the calculation and establishment of those reserves to defray future

 repair, replacement, or additions to those major components that the association must maintain;

E. A review of the financial statement done in accordance with "generally accepted accounting principles" by a licensee of

the California State Board of Accountancy and distributed within 120 days after the close of any fiscal year in which the

 gross income to the association exceeds $75,000.   (Civ. Code §§ 1365(a)(b).)

Summary of the pro forma operating budget

Instead of the "formal operating budget," an association may instead distribute a summary of the pro forma operating budget

 accompanied by a written notice in at least 10-point bold type that the complete statement is available at the business office

e of the association or other location and copies can be made, if requested, at the association’s expense. If a member requests

a copy of the budget by mail the association must send it by first-class mail within 5 days after receipt.  (Civ. Code § 1365(c).)

Policies and practices enforcing liens

Furthermore, the association must annually provide during the 60-day period before the beginning of the fiscal year a

statement describing its policies and practices in enforcing lien rights or other remedies for default in the payment of its assessments against its members.  (Civ. Code § 1365(d).)

Summary of association insurance policies

Finally, the association must provide a summary of the association’s property, general liability, and earthquake and

flood insurance policies, which must be distributed within 60 days prior to the beginning of the association’s fiscal year.

 (Civ. Code § 1365(e).)

Q 30. What powers do architectural review boards possess?

A The governing documents of most common interest subdivisions require an architectural committee or review board

to be formed. Its goal is to maintain the appearance and value of the project by establishing architectural standards

and reviewing all proposed changes in relation to those standards.

Q 31. Are there any limits on an architectural review board’s authority?

A Architectural review boards in general have a great deal of freedom to make decisions concerning the architectural

 design or aesthetics of homeowners’ units. However, the board may not exceed the authority provided in the

governing documents. (Clark v. Rancho Santa Fe Ass’n, (1989) 216 Cal. App. 3d 606.)

Q 32. Should a homeowners’ association carry an insurance policy for its directors and officers?

A Yes. Association directors and officers who fail to obtain adequate insurance may be exposed to personal liability.

Q 33. What other types of insurance coverage should an association have?

A An association should carry a master policy covering all the common areas. Specific risks to be insured against

should be discussed with the association’s attorney and/or insurance broker. Coverage to consider includes: fire,

and vehicle.

Association directors and officers have a fiduciary duty to insure and protect association assets. Failure of their

duty to procure insurance is not typically covered by Errors and Omissions ("E&O") or Directors and

Officers ("D&O") insurance.

In order for a director or officer to have the statutory protection against tort liability, the association must carry

general liability insurance (covering the association and the individual directors and officers) in the following

amounts (at a minimum): $500,000 coverage if there are 100 or fewer separate units in the development or

 $1,000,000 coverage if there are more than 100 separate units in the development. (Civ. Code § 1365.7.)

In addition, in order for the homeowners to have statutory protection against tort liabilities (accidents in

the common areas), the association must carry general liability insurance in the following amounts

 (at a minimum): $2,000,000 if development has 100 or fewer units and $3,000,000 if development has

more than 100 units. (Civ. Code § 1365.9.)

Q 34. Should individual unit/lot owners obtain their own insurance?

A Yes. Each unit/lot owner should obtain insurance covering risks that are not covered by the association’s

policies. Each unit/lot owner should consider an emergency shelter rider to cover additional living expenses

in the event of damage to his/her unit. In addition, the individual unit/lot owner should have coverage for his/her

own "tortious" injuries to other persons or property, including the unit owner’s negligence and that of members

 of his/her family, household, and pets. Owners should also consider fire and extended coverage for the interior

 and contents of their units.

Q 35. Should a homeowners’ association and its members obtain the services of an insurance expert?

A Yes. Because of the specialized nature of condominium insurance, the association should utilize the services

 of an experienced insurance broker.

IV.   Directors’ Duties, Liabilities and Insurance

Q 36. What are all the duties of a director of a homeowners’ association?

A Directors have the following duties:

• Duty to Maintain the Common Areas

• Financial Planning Duties

• Duty of Architectural Control (if in CC&Rs)

• Duty to Protect Association Assets By Procuring Insurance

• Duty to Enforce CC&Rs

• Duty to Assess Dues and Collection

• Duty to Disclose Certain Information to Members--no duty to non-members (such as buyers or lenders)

Q 37. What is the standard of care to determine a director’s liability?

A A director must perform his/her duties:

• In good faith;

• In a manner believed to be in the best interests of the association; and

• "With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use
• under similar circumstances."

• In other words, a director must exercise reasonable diligence in the discharge of his/her duties. Sometimes
•  the standard is referred to as the "business judgment rule." (Corp. Code § 7231(a).)

On occasion, the courts have imposed a greater duty of care on the association and its’ governing board equivalent to

 the duty of a landlord. In Francis T. v. Village Green Owners Ass’n, (1986) 42 Cal. 3d 490, the association was held

iable for the rape of a homeowner in her unit when it had knowledge of a dangerous lighting problem (lack of sufficient lighting)

and refused to do something about it in a timely manner.

In Lamden v. La Jolla Clubdominium Homeowners Ass’n, (1999) 21 Cal. 4th 249, the California Supreme Court has

 held that the courts should give judicial deference to maintenance decisions made by the board of directors on

 behalf of the homeowners’ association. This standard is equivalent to the prudent business judgment rule.

Q 38. May a director rely on the reports or opinions of staff or outside experts when discharging

his/her duties?

A Yes. A director can rely on the reports or opinions of staff or outside experts when discharging his/her duties

unless there are circumstances or conditions necessitating further inquiry. (Corp. Code § 7231(b).)

Q 39. Are there any limitations on the personal liability of a volunteer officer or director for injury to

a third party?

A Yes. Subject to the following limitations, a state statute provides immunity for injuries caused by a

volunteer officer or director:

• "Injury" includes, but is not limited to, bodily injury, emotional distress, wrongful death, and property
• damage or loss resulting from a tortious act or omission. (It does not cover a breach of contract or
• action based on other tort theories.);
• The common interest development must be exclusively residential;
• The act or omission was performed within the scope of the officer’s or director’s duties;
• The act was performed in "good faith" and was not "willful, wanton, or grossly negligent;"
• The association must maintain and have in effect at the time of the injury general liability insurance coverage for the association with specific minimum coverages (i.e., at least $500,000 if the common interest development consists of 100 or fewer separate interests and $1,000,000 if the development consists of more than 100 separate interests);
• Any director who is an employee of the developer, an employee of a financial institution that acquired a lot or parcelthrough the foreclosure process, or is an owner who has more than two separate interests in the development is not covered. However, all other directors or officers who are either tenants or owners of up to two interests are protected; and
• This section does not limit the liability of the association for any negligent acts or omissions. (Civ. Code § 1365.7.)

In addition, another statute gives volunteer directors and officers of specified nonprofit organizations protection against

claims of negligence within the scope of the person’s duties. The organizations covered under this statute must be organized

 to provide charitable, educational, scientific, social or other types of public service and be exempt from federal income taxation.

 Some attorneys argue that because some homeowners’ associations are entitled to file for a federal tax exemption,

therefore directors of all such associations are protected. However, other attorneys argue that the protection coverage is

not that broad. (Code Civ. Proc. § 425.15.)

Another statutory provision provides that no claims can be made against volunteer directors and officers who perform their

duties in accordance with the "business judgment rule." This section is limited, however, to trade, professional and labor

organizations incorporated as mutual benefit corporations and operated for fraternal, educational and other nonprofit purposes;

so homeowners’ associations probably aren’t covered under it. In any event, it is not clear what this section adds to the general

protection for director’s or officer’s liability already given by still another statutory provision which immunizes all directors and

officers (not just volunteers) from liability based upon an alleged failure to discharge their duties. (Corp. Code §§ 7231(c), 7231.5.)

Q 40. Are individual homeowners who are neither officers nor directors liable for injuries suffered by someone

in the common area of a common interest development?

A No, provided that the association carries the required statutory insurance. In 1992, the California court of appeal,

in Ruoff v. Harbor Creek Community Ass’n, (1992) 10 Cal. App. 4th 1624, held that Civil Code Section 1365.7 shielded

 association officers and directors from tort liability but did not protect individual homeowners who were sued on the

basis that they were owners as tenants-in-common of the common areas. Subsequently, the legislature passed Civil

Code Section 1365.9 which shielded the individual homeowners from tort liability when being sued simply because of

 their ownership interest in the common areas.

The statute provides that the injured person must sue the association and not the individual owners. In addition, the

association must maintain general liability insurance in the following amounts: $2,000,000 for developments of 100

or fewer separate units and $3,000,000 for developments with over 100 separate units. (Civ. Code §1365.9.)

V.   CC&R Restrictions

Q 41. May the CC&Rs or homeowners’ association restrict the rental of units in a common interest development?

A Maybe. There is no clear answer as to whether the CC&Rs or homeowners’ association may restrict the rental of units.

The prevailing California law since 1872, Civil Code Section 711, states, "Conditions restraining alienation, when repugnant

to the interests created, are void." Essentially, courts have interpreted this to mean that unreasonable restrictions on the

transferability of real property, whether found in CC&Rs or elsewhere, are void. Leasing of real property is a form of transfer.

One test which courts have used to determine whether a restriction is unreasonable is to weigh the justification for the

restriction against the "quantum of restraint" it causes. This means that courts balance the needs and interests of both

sides to determine which is more compelling.

There is a 1989 case where a California Court of Appeal upheld the CC&Rs of a publicly subsidized condominium

project which did not permit the leasing of the condominium units for a period of ten years. The facts of this case are

unique, however, because the project was part of a downtown redevelopment effort to provide replacement dwellings for

 persons of low and moderate income and the condominiums were sold far below fair market value. Since the intent of

the redevelopment effort was to create a stabilized community of owner-occupied dwelling units and to avoid artificial

 inflation of prices caused by resales by speculators, the court’s ruling in this particular case was in support of a

specific public policy. (City of Oceanside v. McKenna,(1989) 215 Cal. App. 3d 1420.)

It’s not clear that the holding would be the same if the facts were different, and as yet no court has ruled on the

 validity of restrictions against the rental of units in the CC&Rs of a common interest development which was not a publicly subsidized project.

Q 42. May the CC&Rs contain racial and other unenforceable restrictions?

A No.  Associations must amend any old declarations or governing documents to remove restrictions based on

ace, color, religion, gender, sexual orientation, marital status, natinal origin, ancestry, familial status, source of

ncome or disability.  Such amendments are effective even without the owners' approval and do not otherwise

change the CC&Rs.  If the unenforceable restrictions are not removed, a unit owner may sue the association.

(Civ. Code § 1352.5; Gov. Code § 12955.)

Q 43. May the CC&Rs or homeowners’ association restrict the rights of renters or nonresident owners

 to use the facilities in a common interest development?

A Yes, under certain circumstances. In a 1992 case, a California court of appeal held that the nonresident owners

(a husband, wife and two sons) of a condominium had a right to use the recreational facilities in the common area

 since the occupant/tenant (82 year old senile mother of the wife) was not able to use the facilities.

(MaJor v. Miraverde Homeowners Ass’n, (1992) 7 Cal. App. 4th 618.)

Part of the court’s rationale was that the homeowners’ association could not exclude the nonresident owners from

using the recreational facilities while simultaneously requiring them to pay all the fees for the common area’s use

and improvements. Following this same rationale, it could be argued that the court was essentially holding that

omeone is entitled to use the recreational facilities (i.e., either the nonresident owner or the resident/tenant) since

the owner is paying for the use of the facilities. It would follow, then, that if the owner relinquishes the right to use

the facilities, arguably the tenant should retain this right.

In 1995, the case of Liebler v. Point Loma Tennis Club, (1995) 40 Cal. App. 4th 1600, made it clear that the

CC&Rs can restrict non-resident owners from using the facilities (tennis courts) if the tenants retain the right

to use the facilities.

Q 44. May the CC&Rs or homeowners’ association restrict ownership of pets in a common

 interest development?

A Yes.  Associations, who have not created or amended any governing documents on or after January 1, 2001

 may completely restrict the keeping of pets within the development.

However, Associations, who have created or amended any governing documents on or after January 1, 2001,

may restrict, but not prohibit, the keeping of pets within the development.  Owners of a separate interest may

have one domesticated pet, subject to the associations's reasonable rules.  New rules that limit the number of

pets may not prohibit any pets that the owner already had under the previous rules.  (Civ. Code § 1360.5.)

Q 45. May the CC&Rs contain age restrictions (i. e., no one under the age of 18 or no one under the

age of 62 may live in a unit)?

A Generally no, but there are exceptions. That is, under state and federal anti-discrimination statutes, it is unlawful to refuse

 housing to any family with children under the age of 18, including women who are pregnant, unless the housing qualifies as

senior citizen housing.  (42 U.S.C. § 3604.)

Thus, housing providers are required to admit families with children unless the housing fits into the definition of housing for

older persons. The federal Fair Housing Act defines three types of housing that meet this definition. The first type includes

all housing that is provided under state and federal programs specifically for the purposes of accommodating elderly persons. 

 (42 U.S.C. § 3607; 24 C.F.R. § 100.302.)

The second type of housing excluded from the restrictions against banning children is housing "intended for, and solely

occupied by persons 62 years of age or older." No conditions are attached as long as every resident is of this age. In

other words, residency by a couple, one aged 62 and the other younger, would nullify that project’s designation as

senior citizen housing. (42 U.S.C. § 3607; 24 C.F.R. § 100.303.)

The third type is what is commonly known as a retirement community. The threshold age is 55, and the owner or

 manager must meet additional requirements in order to exclude families with children from residing in the housing.

 To qualify, the following criteria must be met:

• At least 80 percent of the units must be occupied by at least one person who has attained the age of 55.
• The remaining units are under no restrictions. If less than 80 percent are occupied by persons 55 or over
• the community can no longer bar families with children;
• The owner or manager must, by publication of and adherence to policies and procedures, demonstrate an intent to provide housing for persons 55 or over;
• The owner or manager must verify the age of the occupants (by reliable surveys and affidavits). (42 U.S.C. § 3607; 24 C.F.R. §§ 100.304-100.307.)

Q 46. May the CC&Rs or homeowners’ association of a common interest development prohibit or restrict

children from using the swimming pools?

A No, the CC&Rs or homeowners’ association cannot totally prohibit children from using the swimming pools; however,

the CC&Rs or homeowners’ associations may impose reasonable restrictions. As noted above, both the state Civil Rights

 Act and the federal Fair Housing Act prohibit "unreasonable, arbitrary or invidious discrimination" against families with

hildren, which includes limiting the use of privileges, services or facilities to families with children. However, differential

treatment of adults and children in the use of the recreational facilities based on differences in their needs may be acceptable.

Case law and an Attorney General Opinion indicated that a development that had two swimming pools could restrict children

one of the two pools. (75 Ops. Cal. Atty Gen 219 (1992).)

However, a federal regulation arguably prohibits projects in which some areas are designated for families and some

for adults only. (24 C.F.R. § 100.70(a).)

Therefore, any restrictions which distinguish simply on the basis of age, other than for verifiable safety reasons,

may violate federal law.

Q 47. May the CC&Rs or homeowners’ association of a common interest development restrict owners

 from installing solar energy systems on their roofs??

A The CC&Rs may not prohibit the installation or use of solar energy systems whether they are to be installed on

 the private roof of a house in a planned development or on the common area roof of a condominium or other common i

nterest development. However, homeowners’ associations may impose reasonable restrictions on these systems.

Reasonable restrictions are those which do not significantly increase the cost of the system or significantly decrease

 its efficiency or performance.

Whenever the CC&Rs require approval for the installation or use of solar energy systems, the application for approval

must be processed and approved in the same manner as an application for approval of an architectural modification.

When the solar energy system is to be installed in a common area, the homeowners’ association may require (1)

 a system approved by the association, (2) provisions for the maintenance, repair, or replacement of roofs or other

building components, and (3) installers of solar energy systems to indemnify or reimburse the association for loss

 or damage caused by the installation, maintenance, or use of the system. (Civ. Code §§ 714, 714.1.)

Q 48. Is the homeowners’ association subject to any sanctions if it refuses to comply with the law regardin

 solar energy systems?

A Yes. Violations of California law regarding solar energy systems by homeowners’ associations may subject the

 associations to actual damages not to exceed $1,000, plus reasonable attorney’s fees (which may exceed $1,000).

 (Civ. Code § 714.)

Q 49. May the CC&Rs or the homeowners’ association ban the use of a satellite dish anywhere within a

planned development community?

A No. The federal Telecommunications Act of 1996 has preempted this field. Satellite dish and antenna restrictions are

 limited by federal law. A satellite dish of one meter or less in diameter located on property under the "exclusive use or

 control" of the homeowner cannot be prohibited. Therefore, the association can prohibit satellite dishes on the common

 areas. Satellite dishes cannot be prohibited from exclusive-use common areas, but associations can reasonably regulate

them (e.g., prohibit drilling in walls, enforce safety standards).  Any restrictions regarding the location of the dish are

invalid if the required placement would interfere with the reception. (47 C.F.R. § 1.4000.).

Q 50. May the CC&Rs or homeowners’ association legally prevent or restrict individual owners from

posting "for sale" signs?

A No. Neither the CC&Rs nor the homeowners’ association may totally prohibit the posting of "for sale" signs;

however, they may put reasonable restrictions on their placement. Under California law, any unreasonable restraint

upon the ability to transfer property is void. California also has a specific sign ordinance. Civil Code Section 713 states

 that an owner of real property or his/her agent may display a "for sale" sign on his/her real property or on real property

owned by another (with that person’s consent) in plain view of the public and of reasonable dimensions and design if the

advertising involves a sale, lease, or exchange.

The sign may contain:

• directions to the property;

• the owner’s or agent’s name;

• the owner’s or agent’s address; and

• the owner’s or agent’s phone number. (Civ. Code §§ 712, 713.)

Furthermore, there are city ordinances which regulate the placement of signs on private property. Failure to comply

 may result in fines and confiscation of the signs.

Finally, a total prohibition on "for sale" signs, or "sold" signs located on private property is an unconstitutional violation

the First Amendment to the United States Constitution. (Linmark Assoc., Inc. v. Willingboro, 431 U.S. 85 (1977))

For additional information, see the C.A.R. legal memorandum, "Signs: Can They Be Regulated and to What Extent?"

Q 51. May the CC&Rs or homeowners’ association put restrictions on the type of vehicles that may park in

 the common areas?

A Maybe. Any restrictions must be reasonable and the reasonableness of a particular restriction depends upon the

individual circumstances. In one case, the CC&Rs banned all trucks, campers, boats, and recreational vehicles from

the common area of a condominium project. The restriction was applied to a new pickup truck used for personal

transportation. The court held that this application of the restriction was unreasonable, since the parking of the truck in

 the carport was not aesthetically "unpleasant" to reasonable persons and did not interfere with the other owners’ use

 and enjoyment of their property. The court stated, "One person’s Bronco II is another’s Rolls-Royce."

(Bernardo Villas Mgmt. Corp. v. Black, (1987) 190 Cal. App. 3d 153.)

However, subsequent courts rejected the Bernardo analysis. In 1994, the Supreme Court in Nahrstedt v. Lakeside

Village Condominium Ass’n, (1994) 8 Cal. 4th 361, placed the burden on the homeowner to prove that the restriction

was unreasonable. The court in Bernardo had placed the burden on the association to prove that its restriction was

reasonable. It is unclear if the Bernardo outcome would be the same or different. However, courts will permit

associations to use aesthetic criteria in their decision making.

(Clark v. Rancho Santa Fe Ass’n, (1989) 216 Cal. App. 3d 606.)

Q 52. Must the CC&Rs contain a special notice when the common interest development

 is located in an "airport influence area"?

A Yes, but only for CC&Rs recorded after January 1, 2004.  An "airport influence area" is an area in which current

or future airport-related noise, overflight, safety, or airspace protection factors may significantly affect land uses or

necessitate restrictions on those uses as determined by an airport land use commission.  If the development is

 located in such an area, the CC&Rs must contain the following notice:

NOTICE OF AIRPORT IN VICINITY
This property is presently located in the vicinity of an airport, within what is known as an airport influence area. For that

reason, the property may be subject to some of the annoyances or inconveniences associated with proximity to airport

 operations (for example: noise, vibration, or odors). Individual sensitivities to those annoyances can vary from person to

person. You may wish to consider what airport annoyances, if any, are associated with the property before you complete

 your purchase and determine whether they are acceptable to you.  (Civ. Code §1353.)

VI.   Liens, Lawsuits, ADR and Liability

Q 53. What is ADR?

A ADR stands for Alternative Dispute Resolution.  California law requires ADR prior to the filing of a civil action by a

 homeowner or the association regarding any dispute that would require declaratory relief, injunctive relief, and/or

monetary damages not in excess of $5,000 and related to the enforcement of the governing documents.

The aggrieved person(s) must make a mandatory offer of ADR called a "Request for Resolution" stating whatever terms

 they want for ADR (binding or non-binding, type of arbitration or mediation, number of arbitrators, etc.). The responding

party has 30 days to respond. If there is no response, then the aggrieved party may file a civil action accompanied by a

Certificate of ADR Compliance indicating that the other party failed to respond (or that ADR was conducted but there

was no resolution--i.e. with non-binding ADR).

Failure to use the ADR procedure may be grounds for a demurrer or motion to strike. In addition, failure to respond t

o the Request for Resolution can impact attorneys’ fees even if the party prevails in the civil action.

The exemptions from mandatory ADR are: the statute of limitations would run in 120 days, the claim for monetary

damages exceeds $5,000, the dispute is over assessments (with one exception--See Question 26), or the issue is

not related to enforcement of the governing documents. (Civ. Code §1354.)

Q 54.  May any injured person sue the homeowners’ association directly?

A Yes. A homeowners’ association for a common interest development can be sued in its own name as the

 real party in interest. The injured person need not sue the individual homeowners. (Code Civ. Proc. § 383.)

Q 55.  Does a homeowners’ association have the right to sue a homeowner or anyone else in its own name

 without adding the individual homeowners as plaintiffs?

A Yes.  A homeowners’ association has the legal right to sue in its own name as long the issue involves

one of the following:

• Enforcement of the governing documents.

• Damage to the common area.

• Damage to a separate interest which the association is obligated to maintain or repair.

• Damage to a separate interest which arises out of, or is integrally related to, damage to the common area or separate interests that the association is obligated to maintain or repair. (Code Civ. Proc. § 383.)

Q 56. May an owner of a separate interest sue another owner who violates a covenant or restriction

 in the CC&Rs?

A Yes. Unless the CC&Rs state otherwise, the CC&Rs may be enforced by any owner of a separate interest or

 by the homeowners’ association. In addition, the prevailing party is entitled to reasonable attorney’s fees and costs

. (Civ. Code § 1354.).

Q 57. May an owner sue the homeowners’ association of a common interest development for violation

of a covenant or restriction in the CC&Rs?

A Yes. Unless the CC&Rs state otherwise, the CC&Rs may be enforced by any owner of a separate interest

or by the homeowners’ association. In addition, the prevailing party is entitled to reasonable attorney’s fees and costs.

(Civ. Code § 1354.)   In addition, the association may be liable to a homeowner for failure to enforce the CC&Rs.

(Cohen v. Kite Hill Community Ass’n, (1983) 142 Cal. App. 3d 642.)

Q 58. May the homeowners’ association of a common interest development sue the owner of a separate

interest who violates a covenant or restriction in the CC&Rs?

A Yes. Unless the CC&Rs state otherwise, the CC&Rs may be enforced by any owner of a separate interest or by

the homeowners’ association. In addition, the prevailing party is entitled to reasonable attorney’s fees and costs.

 (Civ. Code § 1354.)

Q 59. May a contractor or subcontractor file a mechanic’s lien against the owner of a unit in a common

 interest development for work done on someone else’s unit?

A No. Unless an owner has given his/her consent to the work, a contractor or subcontractor cannot place a lien

 against one owner’s unit for work done on someone else’s unit. However, if emergency repairs are needed on the

 owner’s own unit, then an owner will be deemed to have given his/her consent. (Civ. Code § 1369.)

Q 60. May a contractor or subcontractor file a mechanic’s lien against the owner of a unit in a

nterest development for work done on the common area?

A Yes. Labor performed or services or materials furnished for the common area, if authorized by the homeowners’

association, will be deemed to be performed with the express consent of each separate owner. Therefore, each owner

is subject to a mechanic’s lien.

However, the owner of a separate unit may remove his/her unit from a lien by payment to the lienholder

(contractor/subcontractor) of the fraction of the total sum secured by the lien which is attributable to his/her

separate unit. (Civ. Code § 1369.)

Q 61. Are there any special requirements which a homeowners’ association must satisfy before it

 may sue the developer?

A Yes. California law requires that not later than 30 days prior to the filing of any civil action by the association

against the developer for alleged damage to the common areas, or separate units that the association is obligated

to maintain or repair, the association must send a written notice to each homeowner indicating the following:

• that a meeting will take place to discuss problems that may lead to the filing of a civil action

• the options available to address the problems

• the time and place of this meeting.

If the applicable statute of limitations will run, the association may give the notice within 30 days after the filing

f the action. (Civ. Code § 1368.4.)

VII. Transfer of a Unit in a Common Interest Development

Q 62. What documents should be given to a buyer of a unit in a new (or conversion) common

interest development?

A The following documents should be given to a buyer of a unit in a new common interest development

(or a conversion):

A. Subdivision Public Report - This must be given to a prospective buyer prior to the execution of a binding

contract if the subdivision is subject to the Subdivided Lands Law (project consists of five or more separate units)

 (Bus. & Prof. Code § 11018.1);

B. Declaration of Restrictions (CC&Rs);

C. Articles of Incorporation (if incorporated) or Articles of Association and a statement signed by the authorized

agent that the association is not incorporated (if not incorporated);

D. Bylaws (Bus. & Prof. Code § 11018.6);

E. Any other document which establishes or defines the common, mutual, and reciprocal rights and responsibilities

 of the owners or lessees;

F. All Current Financial Information and related statements (if available or applicable), such as

(1) An Operating Budget to include:

(a) Estimated Revenue and Expenses,

(b) Association Reserves,

(c) Estimated Remaining Life of Major Components,

(d) Estimated Useful Life of Major Components,

(e) Estimated Replacement Cost of Each Major Component,

(f) Estimated Reserves Necessary to Repair, Replace, Restore, or Maintain Major Components,

(g) Actual Reserves Set Aside to Repair, Replace, Restore, or Maintain Major Components,

(h) Percentage ratio of item (g) to item (f),

(i) Statement of Anticipated Assessments to Repair, Replace, Restore, or Maintain Major Components, and

(j) Statement of Procedures Used to Calculate Reserves for Future Purposes

(Bus. & Prof Code § 11018.6; Civil Code § 1365(a)) ,

(2) Regular and Special Assessments,

(3) Outstanding Delinquent Assessments (Bus. & Prof Code § 11018.6),

(4) Mello-Roos Tax Disclosures (Gov't Code § 53341.5) ;

G. A statement describing the association’s policies and practices in enforcing lien rights or other legal

 remedies for default in payment of its assessments (Civ. Code § 1365(d)) ;

H. A summary of the association’s property, general liability, and earthquake and flood insurance policies

 (Civ. Code § 1365(e)) ;

I. If the common interest development is subject to a blanket encumbrance, but the project is not subject to

 the Subdivided Lands Law (i. e., fewer than five separate units in the project), then the owner (subdivider) may

 not sell, or lease for a term exceeding five years, without providing the buyer with a notice containing the

language described in Civil Code Section 1133.

Q 63. What is a "blanket encumbrance"?

A Basically, a "blanket encumbrance" is a lien against an entire subdivision, or a lien against a collection

 (more than one) of lots or parcels. (Bus. & Prof. Code § 11013.)

Q 64. Are there any special requirements for the transfer of a unit in a common interest

development conversion?

A Yes. In addition to all the documents required for the transfer of a unit in a new common interest development

 (see Question 62), before transfer of title for the first sale of a unit in a residential condominium, community apartment

project, or stock cooperative which was converted from an existing dwelling, the owner (i.e., subdivider) must

deliver to the prospective buyer a written statement listing all substantial defects or malfunctions in the major

systems in the unit, as well as the common area.

This written statement must disclose any problems with major systems including, but not limited to, the roof,

walls, floors, heating, air conditioning, plumbing, electrical systems or components, and recreational facilities.

If the owner has inspected the unit and the common areas and has not discovered a substantial defect or

 malfunction which a reasonable inspection would have uncovered, then the owner must provide a written

disclaimer. The written disclosure provides the buyer with a rescission right, comparable to the rescission right

associated with a transfer disclosure statement, if delivered after execution of the purchase agreement (three days

 if delivered in person and five days after deposit in the mail).

If delivered after execution of the purchase agreement, the written disclosure must describe the buyer’s right

, method, and time to rescind. (Civ. Code § 1134.)

Q 65. What documents should be given to a buyer of a unit in an existing common

interest development?

A All the documents described above in Question 60, except the Public Report, should be given to a buye

r by the seller of a unit in an existing common interest development. In addition, the following documents

 if applicable, should also be delivered to the buyer:

• A statement describing any restrictions in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age, including a statement that the restriction is only enforceable to the extent permitted by Civil Code Section 51.3 (senior citizen housing);
• A statement from a representative of the association regarding current regular and special assessments and fees levied upon the seller’s interest including any unpaid assessments;
• A summary of any notice previously sent to the owner pursuant to Civil Code Section 1363(h), alleging violations of the governing documents that remain unresolved at the time of request; and
• Any change in the association’s current regular and special assessments and fees which have been approved by the board of directors, but have not yet become due and payable.

If a seller refuses to disclose this information to a buyer (i.e., "willful" violation), the Civil Code provides a civil

 penalty not to exceed $500, plus actual damages incurred by the buyer, plus reasonable attorney’s fees. (Civ. Code § 1368.)

Q 66. Does a homeowners’ association have an obligation to provide an owner of a separate interest

with the necessary documentation to give to the buyer?

A Yes. Upon written request, an association must, within 10 days of the mailing or delivery of the request,

provide the owner of a separate interest with a copy of the items listed in Question 65.

The association may charge a fee for this service, but the fee may not exceed the association’s reasonable

costs to prepare and reproduce the requested information If the homeowners’ association refuses to comply

 (i.e., "willful" violation), the Civil Code provides a civil penalty not to exceed $500, plus actual damages incurred

by the buyer, plus reasonable attorney’s fees. (Civ. Code § 1368.)

However, the association does not have a duty either to the buyer or to the lender to provide any documentation

or disclosure documents. (Kovich v. Paseo Del Mar Homeowners’ Ass’n, (1996) 41 Cal. App. 4th 863.)

Q 67. May associations allow only certain real estate agents to show units?

A No.  Associations may not establish exclusive sales or marketing relationships with a real estate broker.

  (Civ. Code §1368.1.)

Q 68.  May associations charge marketing fees?

A Yes.  However, marketing fees or assessments can be no more than the association's actual or direct cost

in marketing the unit.  (Civ. Code §1368.1.)

Q 69.  What fees may a managing agent for a homeowners’ association legally charge a new buyer?

A A managing agent hired by the homeowners’ association is bound by the same restrictions as the homeowners’

association. In other words, since an association may not impose or collect any assessment, penalty, or fee in

 connection with a transfer of title other than the association’s actual costs to change its records or to prepare

and reproduce requested documents, the managing agent is subject to these same constraints.

Q 70.  How can a buyer of a unit in a new common interest development be protected against a

mechanics’ lien or any other lien?

A If the mechanics’ lien is part of the blanket encumbrance (see Question 60), one option is for the buyer to

 obtain a partial release or unconditional release from the encumbrance by the holder of the lien. 

Bus. & Prof. Code § 11013.1.)

Another option is for the buyer to obtain a title insurance endorsement protecting against any liens.

The law also requires that in a subdivision subject to a blanket encumbrance where there is no release clause,

the subdivider must select one of the following options to protect a buyer.

• The entire sum of money paid or advanced by the buyer must be placed into a special escrow a
• ccount until the release is obtained; or

• Title to the subdivision must be held in trust under an agreement of trust until the release is obtained; or

• A bond to the State of California must be furnished to the DRE for the benefit of the buyer; or

• Any other alternative which the DRE deems adequate to protect the buyer. (Bus. & Prof. Code §11013.2.)

Q 71.  Is a buyer responsible for delinquent homeowners’ association assessments on the

property at the date of acquisition?

A No. A buyer of the separate unit will not be subject to personal liability for delinquent homeowners’ association

assessments due before the acquisition date. However, assessments after that date will be the responsibility

of the new buyer. (Civ. Code §§ 1466, 1367.1; Mountain Home Prop. v. Pine Mountain Lake Ass’n, (1982) 135 Cal. App. 3d 959.)

VIII. Miscellaneous

Q 72. What is a "managing agent" of a common interest development?

A A "managing agent" is a person or entity, who for compensation, or, in expectation of compensation, exercises

control over the assets of a common interest development. (Civ. Code § 1363.1(b).) A "managing agent" does

 not include any of the following:

• a full-time employee of the association, or

• any regulated financial institution operating within the normal course of its regulated business practice.

Q 73. Must a real estate broker or agent comply with any special requirements in order to be a

 managing agent for a common interest development?

A Yes. A prospective managing agent of a common interest development must provide a written statement to th

board of directors of the homeowners’ association as soon as practicable, but not more than 90 days, before

entering into a management agreement.

The statement must contain the following information:

• The names and business addresses of the owners or general partners of the managing agent.
• If the managing agent is a corporation, the names and business addresses of the directors, officers, and shareholders holding greater than 10 percent of the shares of the corporation.
• Any relevant California licenses held by the owners or general partners of the managing agent, such as architectural design, construction, engineering, real estate, or accounting--including the status of the license, and name of the licensee on the license.
• Any relevant professional certifications or designations held by the owners or general partners of the managing agent, such as architectural design, construction, engineering, real property management, or accounting (e.g., certified property manager or professional association manager)--including what entity issued the certificate or designation, the status of the certificate or designation, and the name on the certificate or designation.
• For any licenses currently held: what license, the valid dates, the name on license. (Civ. Code § 1363.1(a).)

Q 74.  What are the duties of a managing agent?

A A managing agent of a common interest development who accepts or receives funds which belong to the homeowner

rs’

association must deposit all funds either into an escrow account (if applicable), into an account under the control of the

 association, or into a trust fund account maintained by the managing agent in a bank, savings association, or credit union

in this state that is insured by the federal government.

If the board of directors of the association makes a request in writing, the managing agent may deposit the association’s

funds into an interest-bearing account providing all of the following conditions are satisfied:

• The account is in the name of the managing agent as trustee for the association or in the name of the association.
• All of the funds in the account are insured by the federal government.
• The managing agent must disclose to the board of directors the nature of the account, how interest is calculated and paid, whether service charges will be paid and by whom, and any notice requirements or penalties for thewithdrawal of funds from the account.
• The interest earned on funds in the account do not go to the managing agent or his/her employees.
• The funds in the account must be kept separate and apart from the funds belonging to the managing agent or to any other person or entity for whom the managing agent holds funds in trust, unless all of the following are met:

1) The managing agent commingled the funds of various associations on or before February 26, 1990, and has obtained a

 written agreement with the board of directors of each association that he/she will maintain a fidelity and surety bond in an

amount that provides adequate protection to the associations.

2) The managing agent discloses in the written agreement mentioned in subparagraph (1) whether he/she is deriving

benefits from the commingled account or from the financial institution where the monies are deposited.

3) The written agreement mentioned in subparagraph (1) must also include the name and address of the bonding companies,

 the amount of the bonds, and the expiration dates of the bonds.

4) The managing agent must disclose to the board of directors of each affected association any changes in bond coverage

or bond companies within 10 days after the change.

5) The bonds must assure the protection of the association and provide the association at least 10 days’ notice prior to

 cancellation.

6) Completed payments on behalf of the association are deposited within 24 hours or the next business day and do not

remain commingled for more than 10 calendar days.

In addition to keeping these accounts, the managing agent must maintain a separate record of the receipt and disposition

 of all funds including any interest earned on the funds. (Civ. Code § 1363.2.)

Q 75.  May the board of directors of a homeowners’ association grant an easement on the common area property

 without the consent of all the homeowners?

A No. (Posey v. Leavitt, (1991) 229 Cal. App. 3d 1236.)

Q 76.  Does a common interest development need to comply with the Americans With Disabilities Act ("ADA")?

A Yes, under certain circumstances. The ADA, a federal law that prohibits discrimination against individuals with

disabilities, addresses discrimination in four areas: employment (Title I), public services (Title II), public accommodations

 and commercial facilities (Title III), and telecommunications (Title IV). Two of these areas may apply to common interest

developments.  (42 U.S.C. §§ 12101-12213.)

ADA, Title I (Employment)

Some common interest developments hire employees (such as managers, secretaries, gardeners, security guards, etc.).

Any private employer with 15 or more employees must comply with the ADA, Title I requirements.  (42 U.S.C. §§ 12111(5).)

ADA, Title III (Public Accommodations or Commercial Facilities)

The ADA, Title III, generally does not apply to residential facilities. However, if any of the facilities are open for use by the public

 then compliance with the ADA is required. For example, sometimes an owner of a unit in a common interest development

 (i.e., a condominium in Mammoth Lakes) will rent out his/her unit as a vacation rental. They are subject to compliance

with the ADA, Title III.  (42 U.S.C. §§ 12181(7)(A).)

The rental office in a private residential apartment complex is considered a place of public accommodation, and, hence,

 subject to the ADA, Title III.

For additional information, including agency phone numbers, regarding ADA requirements, please see the C.A.R. legal

memorandum, Complying With Title III of the Americans With Disabilities Act of 1990 .

Q 77. May an owner in a common interest development change, renovate, or modify his/her separate

 interest (home or unit or apartment)?

A Yes, but all improvements, changes, renovations, or modifications made to a separate interest are subject to the CC&Rs.

If the boundaries of the separate interest are contained within a building, the owner of the separate interest may do the following:

1) Make any improvements or alterations to the separate interest that do not impair the structural integrity or mechanical

systems or lessen the support of any portions of the common interest development.

2) Modify the separate interest (at the owner’s expense) in a condominium project to facilitate access or eliminate hazards for

 persons who are blind, visually handicapped, deaf, or physically disabled. Modifications may also be made to the route from

the public way to the door of a ground floor unit. All modifications must not conflict with applicable building codes, must be

consistent with provisions in the CC&Rs pertaining to safety and aesthetics, must not prevent reasonable passage by other

residents, and must be removed by the owner when the unit is no longer occupied by persons requiring those modifications.

The owner needs to submit his/her plans and specifications to the homeowners’ association for review. (Civ. Code § 1360.)

Q 78. Who is responsible for pest control in a common interest development?

A In general, unless the CC&Rs provide otherwise, the homeowners’ association is responsible for repairing, replacing, or

maintaining the common areas, but not the "exclusive use common areas." The owner of each separate interest is responsible

 for maintaining his/her separate interest as well as any adjoining exclusive use common area.

In a community apartment project, condominium, or stock cooperative, unless the CC&Rs provide otherwise, the homeowners’

association is responsible for pest control involving wood-destroying pests in the common areas.

In a planned development, unless the CC&Rs provide otherwise, each owner of a separate interest is responsible for pest

 control involving the separate interest. If the majority of the owners approve, the homeowners’ association may handle

 pest control for the planned development and recover the cost with a special assessment. (Civ. Code § 1364.)

Q 79. What type of notice must the homeowners’ association give the owners of a common interest development

 regarding impending pest control work?

A The homeowners’ association must give notice of the need temporarily to vacate a separate interest to the occupants

 and to the owners, not less than 15 days nor more than 30 days prior to the date of the required temporary relocation.

The notice must state (1) the reason for the temporary relocation, (2) the date and time of the beginning of the treatmen

t and termination of treatment, and (3) that the occupants will be responsible for their own accommodations during the

temporary relocation.

This notice must be given to both the occupants and the owners (if different) by personal delivery or by first-class mail,

postage prepaid. (Civ. Code § 1364.)

Q 80. Who pays for the cost of any required relocation during pest control repair and maintenance being done

by the homeowners’ association?

A The owner of the affected separate interest. (Civ. Code § 1364.)

Q 81. What are the homeowners’ association’s responsibilities for installation and maintenance of

 telephone lines?

A Internal and external telephone wiring designed to serve a single separate interest, but located outside the separate

 interest, are considered "exclusive use common areas," which means their maintenance and repair are the responsibility

of the owner of the separate interest.

The owner of a separate interest who needs access to the common area in order to maintain or repair equipment located

 in the exclusive use common area must be given this access by the homeowners’ association, but the homeowners’

 association does have the right of approval of any telephone wiring affecting the exterior of the common area.

Any telephone equipment inside a separate interest is the responsibility of the owner of the separate interest. Any

 telephone equipment in the common area is the responsibility of the homeowners’ association. (Civ. Code § 1364.)

Q 82. Who can I call if I have questions about common interest developments or homeowners’ associations?

A The Community Associations Institute, a national trade association for homeowners’ associations, is a source of

valuable practical information.


Readers who require specific advice should consult an attorney.
California Association of REALTORS®

The information contained herein is believed accurate as of December 12, 2003. It is intended to provide general

answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific

 situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal

 questions should seek the advice of an attorney.