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Answers to FAQs about Condos, CC&Rs, HOAs and California Law

 
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Answers to FAQs about Condos, CC&Rs, HOAs and California Law

Prepared By: Melissa C. Marsh, Los Angeles Business And Corporate Attorney
Written: March 2009
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Purchase and Sale of a Condo

Q. Can individually owned elements of a unit or lot (e.g. a room) be sold to, or exchanged with, another homeowner?
A.
Generally No.
The boundaries of units and lots within a condominium project, or planned development, appear on map or plan filed with the County Recorder's Office. These boundaries cannot be changed, sold, or exchanged without amending the recorded map or plan. The amendment must be prepared by a licensed surveyor, and if the original map or plan was recorded separately from the CC&Rs, the amendment must be reviewed by a governmental agency, signed by all of the homeowners and all of the lenders who have an interest in the project, and then recorded. The signature requirement is especially difficult to fulfill because it requires the cooperation of every lender that has a mortgage on any of the units, or lots, in the complex (including those not directly affected by the amendment). Needless to say, lenders are generally not anxious to cooperate in this process.

If the map or plan to be amended is recorded only as an exhibit to the CC&Rs, the amendment will only need to be approved by the percentage of homeowners required by the CC&Rs, and the lenders with mortgages on the directly affected units or lots. The approval of other lenders, and of a governmental agency, is required only if the CC&Rs so state.

Q. Can two homeowners sell or exchange a parking space or storage unit?
A.
Generally No.
Parking spaces and storage units are typically common areas to which individual units have been granted exclusive use.

If the parking space, or storage unit, is assigned to a particular unit or lot on a map or plan recorded separately from the CC&Rs, the sale or exchange requires a licensed surveyor to prepare an amendment to the recorded map or plan and the written agreement of each and every homeowner and lender with an interest in the condominium complex and/or planned development.

However, if the parking space or storage unit is assigned to a particular unit or lot only in the CC&Rs and/or the initial deed conveying the unit or lot, and is not designated and assigned on the recorded map or plan, the sale or exchange only requires an amendment to the CC&Rs and/or a new deed. In these cases, the homeowners directly involved with the proposed sale or exchange still need the approval and cooperation of their mortgage lenders, and if required by the CC&Rs, the approval and cooperation of some, if not all, of the homeowners and their mortgage lenders.

Q. Can the HOA or Board sell or grant exclusive use rights to a common area?
A.
Yes,
if two-thirds of all the homeowners in the homeowners association approve the sale or transfer of exclusive use rights to a common area.

Q. If there are known construction defects am I required to disclose them to a prospective purchaser?
A.
Yes.
The seller of a unit, or lot, is required by law to disclose all material defects in the property, including defects in the common areas, and defects in other units or lots if they affect the unit or lot being sold. The disclosure requirements extend to all defects of which the seller is aware, or should be aware. Additional disclosure requirements apply when construction defect litigation has been commenced, or being considered. Any real estate agent involved in the sale is also required to disclose any defects of which he/she is aware or should be aware, and is further required to conduct a reasonably competent and diligent visual inspection. HOAs, on the other hand, are not required to provide or disclose construction defect information to prospective purchasers of units or lots.

If you have additional questions, or would like the assistance of a California real estate attorney, we are available to assist both homeowners and HOAs. Please schedule a telephone consultation for as little as $69 by completing our Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select. If you prefer, you can introduce yourself by calling 818-849-5206, or by sending us an Email. We are based in Sherman Oaks and Los Angeles.

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Condominium Dues, Fines and Penalties

Q. How do I remove a lis pendens?
A.
A lis pendens is written notice that a lawsuit has been filed concerning the property, involving either the title to the property, or a claimed ownership interest in the property.

In California, there are essentially two ways to remove a lis pendens (notice of pendency of action). The first way to remove a lis pendens is withdrawal. Withdrawal is a voluntary act by the party that initially recorded and filed the lis pendens, and usually occurs as a result of the settlement of the litigation or some other agreement between the litigants. The second method to remove a lis pendens is expungement. Any party to the litigation, or a non-party who has an interest in the real property (with prior court permission), may ask the court to expunge the notice.

There are several grounds for expungement. The most common one, perhaps, is that the claim does not sufficiently affect an interest in the property described in the lis pendens. Another common ground for expunging a lis pendens is that the plaintiff appears to have little chance of prevailing, i.e. his claim is not very good. Since expungement is fairly technical, anyone seeking expungement should seek the advice of competent local counsel.

Q. What kinds of fees and assessments can the HOA impose?
A.
The California Civil Code defines "assessment" as either being regular or special. Regular assessments, also known as monthly dues, are needed for the day-to-day operations and long term maintenance reserve of the homeowners association (HOA). Special assessments are fees levied by the homeowners association for a major common area repair, replacement, or new construction, or for a one-time, unanticipated expense (e.g., to repair fire damage from a boiler explosion) which cannot be covered by the regular monthly dues.

In addition to regular dues and special assessments, the homeowners association can also levy a monetary fine against an individual homeowner as a disciplinary measure for failure to obey a Rule, or as a "reimbursement assessment" for damage caused by that homeowner (or his guests) to the common area.

Although less common, some condominium rules and Declaration of Covenants, Conditions and Restrictions ("CC&R's") permit the HOA to charge user fees for services and activities that are not customary (e.g., use of the pool and tennis courts to entertain guests). The fees are usually on a pay-as-you-go basis and generally cannot become a lien on the homeowner’s unit or property.

The different types of assessments that may apply to your particular homeowners association will most probably be listed in the CC&Rs.

Q. When can the HOA fine a homeowner?
A.
In California, the homeowners association (HOA) through its board of directors ("Board") can impose a fine on any homeowner so long as they comply with California Civil Code § 1363(h). First the Board must notify the homeowner in writing, by either personal delivery or first-class mail, at least 10 days before a Board meeting. The written notice must contain the date, time, and place of the Board meeting, a description of the alleged violation for which the homeowner may be fined, and a statement that the homeowner has the right to attend the meeting and address the Board at the meeting. The HOA Board must then meet in executive session if requested by the homeowner to discuss the matter and determine if there has in fact been a violation of the governing documents (Bylaws or CC&Rs), and if Board actually decides to impose a fine on the homeowner, the Board must then provide the homeowner with written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action.

Noise is a common complaint in both condos and townhouses because there are adjoining walls and/or ceilings. Most CC&Rs will contain a nuisance clause that prohibits activities that "disturb the quiet enjoyment" of the neighbors. While each of the homeowners should try to make "reasonable accommodations" if some condition in their unit is causing a nuisance, when the individual homeowners cannot amicably resolve their dispute, the HOA Board can, and has the authority to, resolve it for them.

Q. Is there any limit on how much the monthly dues can be increased?
A.
The board of directors (Board) can increase the amount of the monthly dues paid by the association's homeowners by following certain procedures mandated by California Civil Code § 1366.

Pursuant to California law, the Board may not increase the regular assessment by more than 20% per year, without the approval of a majority of the homeowners. The Board must circulate a budget to the homeowners not less than 45 days, but no more than 60 days, before the beginning of the fiscal year. If the budget indicates that a dues increase of more than 20% is necessary, a majority of the homeowners must approve the dues increase, absent an emergency (an extraordinary expense required by court order, or emergency repairs to the common area).

It is important to note that the governing documents of your particular HOA may contain more stringent restrictions than the default provided by California law.

Q. What happens if I fail to pay my monthly association dues or a special assessment?
A.
Pursuant to California law, if an assessment (regular monthly dues and special assessments) are not paid within 15 days of the due date, a delinquency occurs. Once delinquent, the homeowners' association (HOA) may impose a "late fee" of $10.00 or 10%, whichever is greater, unless the CC&Rs specify a lesser amount. If an assessment becomes delinquent for over 30 days, in addition to the late fee the HOA may assess interest up to 12% per year on the unpaid balance owed by the delinquent homeowner. If the homeowner still fails to pay the delinquent assessments, the HOA can seek a personal judgment and/or lien the delnquent homeowner's property for the amounts owed plus attorneys fees and costs. And most important, if the assessed debt reaches $1,800 or more or becomes more than one year old (even if only $100), the homeowners association (HOA) can initiate foreclosure proceedings.

Q. How are homeowners' dues established, changed, or increased?
A.
Homeowners' dues must be based upon the funding needs projected in the HOA budget. Typically, the Board will determine what amount of money the HOA will need, but it can delegate this responsibility to an officer, committee, or professional manager provided the Board retains final authority. Based on the determination, the Board will set the amount of the regular dues.

Some governing documents require homeowner approval for changes in regular dues and for special assessments exceeding a certain amount.

Even where the governing documents do not expressly require homeowner approval, California law requires 50% of the homeowners approve a dues increase of 20% or more.

All homeowners must be notified of a dues increase by first-class mail at least 30 and no more than 60 days before the increase is to take effect.

Q. Who determines each homeowner’s percentage share of assessments?
A.
The governing documents of a homeowners association always specify how assessments are allocated among the homeowners, and typically require a super-majority of the homeowners and the mortgage lenders to approve any change in the allocation. The allocation is generally established by the developer at the time the governing documents are prepared, and is reviewed by a governmental agency for projects consisting of five or more units or lots.

There are no legal grounds upon which a homeowner can challenge the assessment allocation based upon fairness or equity.

Q. What is a special assessment? Who determines the amount and how it's paid?
A.
A special assessment is an assessment for an association expense that was either under-budgeted or not budgeted. The homeowners association can require a special assessment to be made payable in a single installment, or in multiple installments over a period of time.

Typically, the Board has the power to impose small special assessments and to determine the payment schedule, if any. Some governing documents, however, require homeowner approval for all special assessments. Where the governing documents do not require homeowner approval, California law requires homeowner approval for special assessments that total more than 5% of the budgeted expenses for any given year, except in the case of an emergency.

How special assessments are allocated among the homeowners is determined by the governing documents (Bylaws and/or CC&Rs). All homeowners must be notified of a new or increased special assessment by first-class mail 30 to 60 days before it is due.

Q. What is a personal reimbursement assessment?
A.
A personal reimbursement assessment is an assessment imposed by the homeowners association against a single homeowner.

The most common type of personal reimbursement assessment is one imposed to reimburse the HOA for a cost incurred that should ahve been sole responsibility of a specific homeowner according to the governing documents (Bylaws and CC&Rs). For example, if a homeowner, or the homeowner’s guest or tenant, damages the entrace doorway while carrying a christmas tree, the HOA can levy a personal reimbursement assessment against the responsible homeowner for the cost to repair the doorway.

Another type of personal reimbursement assessment is one imposed as a fine or penalty. Fines and penalties can only be imposed if a schedule of fines has been distributed to all the homeowners in advance.

Check the governing documents, especially the CC&Rs, as they typically require the homeowner be given the opportunity to be heard at a Board hearing before any kind of personal reimbursement assessment is imposed.

Q. What can a homeowner do if s/he disagrees with the amount of an assessment?
A.
Under most circumstances, if a homeowner disagrees with the amount of an assessment, s/he can pay it under protest and then challenge the assessment through a court action or arbitration.

The requirements for challenging an assessment are described in California Civil Code § 1366.3.

However if a homeowner fails to pay the assessment, or fails to follow the procedures outlined in the Civil Code, s/he may lose the right to challenge the assessment and thereafter be subject to collection and/or foreclosure proceedings.

Q. Can an owner offset money the HOA owes him or her from an assessment?
A.
No.
A homeowner may not refuse to pay an assessment, or offset money to him or her by the homeowners association (HOA).

Q. What recourse does the HOA have if a homeowner does not pay an assessment?
A.
The homeowners association (HOA) is required to have a written policy regarding the collection of delinquent assessments that is in conformity with the association's governing documents (Bylaws and CC&Rs) and state law. That policy must be distributed to all homeowners every year.

If a homeowner fails to pay a regular or special assessment, s/he can be subject to a variety of fees and penalties including non-judicial foreclosure (a four-month procedure culminating in an auction-like sale of the delinquent homeowner’s unit or lot). In a non-judicial foreclosure, there is no trial or hearing. The procedure can be handled by an attorney, or a specialized assessment collection service.

However, if a homeowner fails to pay a personal reimbursement assessment levied to reimburse the HOA for damage to the common area, non-judicial foreclosure is only possible if the governing documents so authorize. If the governing documents are silent on the issue, the HOA must collect its funds through the normal judicial process.

Q. What recourse does the HOA have if a homeowner makes an alteration or improvement without HOA approval?
A.
If a homeowner owner alters the premises without required homeowner association (HOA) approval, the HOA can order the homeowner to immediately cease all work and restore any altered areas to their original state. If the homeowner fails to comply, the HOA can perform the restoration itself and thereafter assess the costs to the homeowner.

If the HOA fails to enforce its rules, it may find it more difficult to enforce a similar restriction in the future.

Every HOA should have written policy for discovering and responding to violations of alteration restrictions.

If you have additional questions, or would like the assistance of a California real estate attorney, we are available to assist both homeowners and HOAs. Please schedule a telephone consultation for as little as $69 by completing our Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select. If you prefer, you can introduce yourself by calling 818-849-5206, or by sending us an Email. We are based in Sherman Oaks and Los Angeles.

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Ownership & Use of a California Condo

Q. Can the HOA impose restrictions on a homeowner’s right to rent his/her unit or home?
A.
Yes so long as they are reasonable and not discriminatory.

Rental restrictions in governing documents (Bylaws and the CC&Rs) are legal so long as they are uniformly applied to all homeowners, do not discriminate against a particular group of potential renters, and can be shown to serve some legitimate purpose. Some condos: (1) restrict the number of units that may be rented; (2) require the rental agreement acknowledge that the tenancy is subject to all of the rules and regulations of the HOA; and (3) require the homeowner to the HOA with a copy of the rental agreement. Note that rental restrictions may affect the homeowners’ ability to obtain mortgage loans from some lenders.

Q. My neighbor is constantly playing loud music what can I do?
A.
Noise is a common complaint in both condos and townhouses because there are adjoining walls and/or ceilings. Most CC&Rs will contain a nuisance clause that prohibits activities that "disturb the quiet enjoyment" of the neighbors. While each of the homeowners should try to make "reasonable accommodations" if some condition in their unit is causing a nuisance, when the individual homeowners cannot amicably resolve their dispute, the HOA Board can, and has the authority to, resolve it for them.

Q. Can a homeowner be forced to give up a pet?
A.
Governing documents which were created, or amended, after January 1, 2001 must allow each homeowner to keep at least one pet, and cannot prohibit an owner from keeping a pet s/he already has. Beyond this basic requirement, however, pet restrictions in governing documents are valid and enforceable, and a homeowner in violation of the restrictions can be forced to give up his/her pet.

Q. Can the HOA legally restrict a homeowner from displaying a sign?
A.
Both condominiums and planned developments are private property, and as such the occupants have no constitutional right to freedom of expression. Sign restrictions and prohibitions in governing documents are generally valid and enforceable, unless the restrictions purport to prohibit signs advertising a unit or lot for sale or rental, including related signs providing directions to the property, and the homeowner or agent's name, address and telephone number. The HOA, however, may impose reasonable restrictions on the location, size, dimensions, and design of these signs. No restrictions can be imposed on the display of the U.S. flag.

Q. Can the HOA limit the type or number of people who can live in a unit or home?
A.
California law specifically prohibits housing discrimination based upon sex, race, color, religion, ancestry, national origin, and disability, and the California Supreme Court, has held that discrimination against children, and against families because they have children, is also prohibited. California anti-discrimination laws are so broad that any occupancy restriction could be interpreted as discriminatory, including limits on the maximum number of occupants in a home. The only limitations that are clearly valid and enforceable are those that restate local and state health codes, and those that establish a project as senior citizen housing.

Q. Who is responsible for a tenant’s compliance with the HOA Rules?
A.
A homeowner is responsible for his/her tenant’s compliance with the governing documents, Declaration of Covenants, Conditions and Restrictions (CC&R's) and Rules. The homeowners association can fine or penalize a homeowner for the tenant’s violations.

Any homeowner who rents his or her unit should have a written rental agreement incorporating all of the restrictions contained in the governing documents, CC&R's and Rules. In addition, the homeowner should make the tenancy subject to any additional restrictions that are enacted or later imposed by the HOA during the rental term.

If you have additional questions, or would like the assistance of a California real estate attorney, we are available to assist both homeowners and HOAs. Please schedule a telephone consultation for as little as $69 by completing our Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select. If you prefer, you can introduce yourself by calling 818-849-5206, or by sending us an Email. We are based in Sherman Oaks and Los Angeles.

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California Homeowner Association's (HOAs) Powers and Duties

Q. Can the HOA charge for parking, use of recreational facilities, and other services? Are there any limits on how much?
A.
The Board of Directors of a homeowners association may impose usage and service fees so long as they do not conflict with the governing documents and are reasonable.

Q. Is the HOA required to perform regular inspections of the common areas?
A.
Yes.
YES. The homeowners association (HOA) is required to regularly inspect the portions of the property it maintains (common areas) as part of the reserve study process.

Q. Is HOA approval necessary for an improvement or alteration?
A.
The homeowners associations'(HOA) governing documents (Bylaws and/or CC&RS) will typically require the HOA to give its approval for improvements and alterations which: (1) change the appearance of any exterior area; (2) change any interior common area (except exclusive use common areas such as storage closets); (3) impair structural integrity; (4) interfere with plumbing, electrical, heating, or air conditioning service to other units, or other common area; or (5) may cause a nuisance to other homeowners.

In planned developments, the governing documents will generally require HOA approval for improvements and alterations which: (1) alter any common area; (2) change the appearance of the exterior (exterior paint, siding, shutters, antennas, satellite dishes, window air conditioners, awnings, balconies, patios, and roofing); (3) modify the appearance of landscaping; (4) may obstruct a view; or (5) interfere with water supply, drainage, or sewage systems.

Q. Can the HOA arbitrarily approve, or disprove, of an alteration or improvement?
A.
Homeowner associations (HOAs) are generally given wide latitude and can base their decision on many subjective criteria so long as the HOA: (1) acts within the scope of its authority under the association's governing documents, (2) conducts a reasonable investigation; and makes its decision (3) in good faith (4) in a fair non-discriminatory manner; and (5) with the best interests of the HOA and the homeowners as a group in mind.

It should be noted that just because the HOA may have approved a certain alteration by a particular homeowner does not mean the HOA cannot later prohibit the same, or similar, alteration by another homeowner.

Q. When can the HOA directors and officers be held personally liable for damages?br> A. Pursuant to California law, a volunteer director or officer cannot be held personally liable for damages resulting from his/her service to the homeowners association (HOA) so long as the volunteer director or officer performs his or her duties (i) in good faith, (ii) in a manner which s/he/ believes to be in the best interests of the HOA, and (iii) with such care, including reasonable inquiry, as a reasonably prudent person in a like position would exercise in similar circumstances. Directors are entitled to rely on information and opinions provided by the homeowner association’s officers, committees, and hired experts.

Most HOA governing documents also provide that the HOA will indemnify and hold the directors and officers harmless unless absent gross negligence, intentional misconduct, or fraud. Additionally, most governing documents require the HOA to carry director and officer liability insurance. Pursuant to California if the HOA maintains directors and officer's liability insurance, the directors and/or officers cannot be held personally liable even if the damages exceed the insurance coverage.

If you have additional questions, or would like the assistance of a California real estate attorney, we are available to assist both homeowners and HOAs. Please schedule a telephone consultation for as little as $69 by completing our Telephone Consultation Request Form and Melissa Marsh will call you back at the time you select. If you prefer, you can introduce yourself by calling 818-849-5206, or by sending us an Email. We are based in Sherman Oaks and Los Angeles.

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Disclaimer: The information presented on this web site was prepared by Melissa C. Marsh for general informational purposes only and does not constitute legal advice. The information provided in my articles and alerts should not be relied upon, or used as a substitute for professional legal advice from an attorney you retain to advise or represent you. Your use of this Internet site does not create an attorney- client relationship. Transmission of this article is not intended to create, and receipt of it does not constitute, an attorney-client relationship. All uses of the contents of this site, other than personal uses, are prohibited. You may print or email a copy of any information posted on this web site for your own personal, non-commercial, use, but you may not publish any of the articles or posts on this web site without the Express Written Permission of Melissa C. Marsh.


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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.