Our annual legal update is here! Below is the latest on virtual meetings, ADUs, director elections, and more.
All new laws summarized below are effective January 1, 2024, unless otherwise noted. Contact your favorite HGCT attorney if you have questions on how these changes impact your association.
New Legislation
AB 572: Limitation on Regular Assessment Increase for Affordable Housing Units
Prohibits regular assessment increases of more than 5% plus cost of living (capped at 10%) over the previous year for any deed-restricted affordable housing unit. Applies to associations with more than 20 units with original declarations recorded on or after January 1, 2025. Amends Civil Code section 5605.
Takeaway:
Be aware of budgeting and funding challenges in post-2025 associations with affordable housing units.
AB 648: Virtual Meetings
Associations can conduct meetings entirely by teleconference (including video conference) without a physical location. The notice must contain technical instructions and contact information to assist members to connect remotely. Board votes must be conducted by roll call. Meetings at which secret ballots are opened and tabulated must include a physical location. Amends Civil Code section 4090 and adds Civil Code section 4926.
For a more in-depth discussion of this bill, please see our October newsletter.
Takeaway:
All meetings may now be conducted via video conference, which many boards believe encourages greater participation, is more convenient, and is safer. Consult with counsel regarding meetings at which secret ballots are to be opened and tabulated.
The Latest Law on ADUs
AB 976: ADU Occupancy
Authorizes local agencies to impose minimum rental terms of more than 30 days for ADUs. Prohibits local agencies from imposing owner-occupancy requirements on ADUs, regardless of date of ADU construction. Amends Government Code sections.
AB 1033: Sale of ADUs
Allows local agencies to adopt ordinances to permit owners to sell an ADU separately from the primary dwelling, with lender and association approval. Member approval also required if stated in the governing documents. Amends Government Code section 65852.2.
Takeaway:
Consult with legal counsel regarding ADU rules and whether amendments to CC&Rs to impose specific member approval requirements are recommended.
AB 1458: Reduced Quorum for Director Elections
Allows associations with quorum requirements higher than 20% of the members for director elections to reduce the quorum requirement to 20% if the quorum requirement in the governing documents is not achieved. This reduced quorum is solely for the election of directors. Amends Civil Code section 5115 and Corporations Code section 7512.
For a more in-depth discussion on this bill, please see our November newsletter.
Takeaway:
This bill will hopefully help associations that are unable to elect directors simply because people don’t vote. Work with legal counsel to ensure that the association complies with the notice requirements in the law to take advantage of reduced quorum.
AB 1572: Restrictions on Watering Nonfunctional Turf
Beginning January 1, 2029, associations will be prohibited from using potable water (water fit for human consumption) to irrigate nonfunctional turf. “Nonfunctional turf” is defined as turf that is located within street rights-of-way and parking lots (grass-covered parkways, open spaces, and lawns) and is not for recreational purposes such as sports fields. Amends Water Code sections 10608.12 and 10608.14.
Takeaway:
Work with your association’s landscaper to create a plan for changing out turf that is “nonfunctional” for other materials, or to use non-potable water to irrigate nonfunctional turf.
AB 1764: Director Qualifications and Term Limits
Cleanup legislation which clarifies that sitting directors and candidates for the board are subject to the same qualifications, adds term limits as grounds for disqualification if included in the association’s bylaws, and states that a director who ceases to be a member of the association is disqualified from serving on the board. Amends Civil Code section 5103 and 5105.
Takeaway:
If your association has term limits, or wants to establish them, consult with legal counsel. We typically don’t recommend term limits because it reduces the pool of qualified candidates when many associations have difficulty finding people to run for the board.
SB 71: Small Claims Limits
Changes the limit for small claims filed by natural persons from $10,000 to $12,500 and changes the limits for associations from $5,000 to $6,250. However, does not change the $2,500 limit for multiple claims in a calendar year.
Takeaway:
If your association is sued in small claims court, consult with the association’s legal counsel for assistance. Although attorneys are not permitted in small claims court, we can help prepare the association’s representative.
Corporate Transparency Act (Federal Legislation)
Beginning in 2025, all corporations, including associations, are required to file reports regarding “beneficial owners” (directors, officers and anyone who owns 25% or more separate interests). Penalties for non-reporting range from $500-$10,000 per day.
Takeaway:
Efforts are being made to exclude community associations so stay tuned.
Case Law
Fairly-Haze v. Whitesails Community Association
US v. Aqua 388 Community Association
Both of these cases concern requests for accommodations regarding disabled parking. They confirm the obvious – associations must make a reasonable effort to accommodate disabled parking requests. While associations must provide an accommodation if it is possible and “reasonable on its face,” they are not required to provide everything the member requests.
Takeaway:
Reasonable accommodations must be provided for disabled residents when requested, however associations are not necessarily required to provide everything requested. Consult legal counsel whenever an accommodation request is received.
Lake Lindero Homeowners Association v. Barone
The Corporations Code controls over an association’s bylaws with respect to the member approval requirement for director recall votes. Bylaws cannot impose an approval threshold higher than the Corporation Code requires for the removal of a director.
Takeaway:
Recalls are complicated and require some analysis of the Davis-Stirling Act and the Corporations Code. Contact legal counsel as soon as a recall petition is received.
Lauckhart v. El Macero Homeowners Association
An association member sought to cancel 1995 CC&Rs and bar the association from acquiring a common area lot. The court held that cause of action to cancel the CC&Rs was barred by the statute of limitations, the CC&Rs were found to be valid and enforceable against all owners, and that the Business Judgment Rule protected the association’s acquisition of the lot. The recording of the 1995 amendments put all owners on notice of the changes in the CC&Rs, and the authority to annex property. Therefore, the owners had missed their 4-year window to challenge the validity of the amendments.
Takeaway:
The Business Judgment Rule continues to protect associations, their boards and individual directors when informed decisions are made.
LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Association
Bizarre case in which the court held that email discussions among board members are not “board meetings” and do not violate the Open Meeting Act. Both a request for depublication and a petition for review have been filed and are currently under consideration by the Supreme Court. This decision may be overturned, modified, or ordered to have no controlling impact.
For a detailed discussion of this case, please see our September email update.
Takeaway:
Boards should tread lightly. There are numerous issues with the reasoning in the case, and many reasons why email discussions among board members should be avoided.
Manrodt v. Albelo (Unpublished)
This case addresses when gathering evidence become harassment. Ongoing surveillance to confirm an owner is complying with rules or to attempt to catch potential violations is harassment.
See our September newsletter for a more in-depth summary and discussion.
Takeaway:
Board members, community members, and managers cannot preemptively surveil members in anticipation of a potential rules violation. While evidence is necessary to impose fines or penalties for governing document violations, there is a fine line between capturing violations and harassment. Contact counsel immediately if there is any question about violations or appropriate methods of evidence collection.
North Coast Village Condominium Association v. Phillips
Association sought workplace violence restraining order on behalf of board members and employees. Discussion at trial court and appellate court levels involved whether a home office is a “workplace” for the association’s president. The appellate court held that the trial court should have evaluated the restraining order under the workplace violence requirements and not under a different standard of harassment. The appellate court also ruled that directors can qualify as association employees, even if they are unpaid.
Takeaway:
Typically, it is difficult for associations to obtain restraining orders on behalf of volunteer board members. However, facts matter. Contact the association’s legal counsel regarding any harassment issues in your association.
River’s Side at Washington Square Homeowners Association v Superior Court
The case involved the association’s standing in a construction defect lawsuit. The development was a planned development; the only common area was a street and the association did not have maintenance responsibilities with respect to the lot. Court found that the association may be permitted to litigate construction defects involving separate interests via a class action lawsuit.
Takeaway:
Consult with experienced legal counsel regarding threshold issues such as standing.
Takiguchi v. Venetian Condominiums Maintenance Corporation
Boards must hold annual membership meetings to elect directors as required by the Corporations Code. Ballots and non-voting members present in person count towards quorum.
Takeaway:
Director elections are required by law. Consult with legal counsel regarding quorum requirements.