Legal Update with Michael Rabkin

Recently, Michael Rabkin of The Law Offices of Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP visited our office to discuss new legislation and some relevant court cases. It is important for our staff to stay up to date on legal issues that could affect our clients and so we are very thankful to Michael for providing this valuable education. Please find some of the highlights below:(Remember, state law supersedes the governing documents of an association. If your association’s governing documents conflict, the law wins!)

Recent CA Legislation

AB 634 – Solar Energy Systems

SB 407 – Noncommercial Solicitation

Both of these bills limit the ability of associations to regular their common areas. In the case of the Solar Energy Systems bill, associations can no longer have a general policy prohibiting roof top installation of solar energy systems, even when the roof covers multiple units, and such installation no longer requires prior approval of the other owners. The Noncommercial Solicitation bill allows owners and residents to use common areas to exercise their right to peacefully assemble for social, political or educational purposes, as well as to distribute information to the membership without prior permission. The association may not require the owner/resident to pay a deposit or fee up front but it appears the association can still hold a member liable for any damage caused by the event. Your manager can assist the Board in developing policy to address this legislation and will advise if/when it is necessary to seek legal counsel in regards to these issues.

AB 690 – Managers: Conflicts of Interest

This bill requires management companies to disclose any potential conflicts of interest prior to entering into a management agreement with an association and imposes an ongoing duty by the management company to disclose any potential conflict of interest when presenting a bid for service to the board. Our managers subscribe to CAI’s Professional Manager Code of Ethics and have always made it a priority to make such disclosures when necessary.

AB 1412 – Volunteer Officers: Liability

As volunteers of the association, board members are protected from personal liability so long as they act in good faith and follow the business judgment rule.  This bill expands that protection to volunteers of mixed use developments (residential and commercial) for those who are tenants of the residential portion of the development or who own no more than two residential units (developers are excluded).

AB 534 – Mechanics Liens

Should a mechanics lien be recorded against the association, existing law provide protections to condominium owners by allowing them to remove their unit from the lien by paying their proportionate share of the lien. This bill expands this protection to owners of all types of common interest developments, not just condominiums, and adds the choice to the owner to record a release bond to remove the lien from their unit. In addition, the bill requires the association to provide individual notice to its members of the mechanics lien within 60 days of being served.

Significant Court Cases

Mashiri v. Epsten Grinnell & Howell (2017) 845 F.3d 984

This case involves the collection of delinquent assessments and a violation of the Debt Collection Practices Act. The law firm’s initial collection letter gave the owner 35 days from the date of the letter to request validation of their debt when the law clearly states that the owner has 30 days from receipt of the letter to do so. The small assumption on the part of the law firm that these two statements are equivalent cost the association years of litigation. The take away from this is to follow proper procedure precisely when it comes to debt collection and in any instance where there is ambiguity, take the safe route and start the process over to avoid costly litigation down the road. Our collection department will provide guidance to the board every step of the way to ensure the collection practices of your association are lawful and effective.

Tract No. 7260 Association, Inc. v. Parker (2017) 10 Cal.App.5th 24

In this case, an association denied an owner’s request for a copy of the membership list and the owner sued the association. Under the law, a member/owner has the right to inspect the membership list and corporate financial records of the association for purposes related to the member’s interests in the corporation. This association was able to provide sufficient evidence that the owner intended to use the information for an improper purpose. In instances such as this, the burden of proof is on the board to show that an owner intends to misuse the membership list. Before the board denies such a request, it is important to show a written record of evidence to support the assertion that the owner will misuse the information. It is important to note that owners have the ability to “opt-out” of sharing their contact information if privacy is of concern to them (Civil Code 5220). Our office maintains the membership list for your association as well as keeps track of the “opt-out” list.

Retzloff v. Moulton Parkway Residents’ Association, No. One (2017) 14 Cal.App.5th 742

This case also involves the inspection of association records but in this instance the court addressed the responsibility of various legal fees and expenses. In a case where the owner prevails, the court will award the member “reasonable costs and expenses, including reasonable attorney’s fees” and may assess a civil penalty of $500 against the association for each records request. If the association prevails they will only recovers their “costs”, which this case clarified does not include attorney’s fees. As such, an association should act cautiously when responding to an owner’s request to inspect records because it could be very costly for the association, regardless of outcome, should the owner litigate.

Domenica Lewis et al. vs. Silvertree Mohave Homeowners’ Association et al. (2017) WL 5495816

A class action lawsuit was brought against this association for having a rule in place which prohibited children under the age of 14 from being in the association’s common areas without adult supervision and from engaging in any sports activities in the common areas. The Federal Fair Housing Act prohibits discrimination based on familial status and protects the rights of children. The association was heavily penalized, including but not limited to paying over $850,000 to the plaintiffs. As association’s rules should not single out children or set minimum age requirement, instead make rules that focus on enforcing safety and prohibiting undesirable activities for all members. Your manager will advise the board when they should consult with an attorney regarding changes to current rules or adopting new ones.

Espinoza v. Gentry Courts Home Owners Association et al. (2017) WL 2311310

In this case, a disabled owner made a request for a reasonable accommodation to keep a second emotional support animal despite the association’s one pet policy. The association did not effectively communicate their decision to the owner and she sued the association over alleged violation of the Federal Fair Housing Act, the California Fair Employment and Housing Act and other state antidiscrimination statutes. This case highlights the importance of responding to requests for reasonable accommodations in a timely and appropriate manner. The board should contact their attorney early in the process to protect the association from claims of discrimination. In most cases, the board will have to grant the request for accommodation as long as the owner has provided all necessary documentation and should maintain a written record of all communication regarding such requests in case the issue is ever brought to court.

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