An Ounce of Prevention for Homeowner Associations and Members

An Ounce of Prevention for Homeowner Associations and Members

We have all been through it. We have endured misery at the hands of our neighbors. Whether it is coming home to relentless noise through the walls, pet owners not cleaning up after their dog’s mess on the common areas, cigarette smoke wafting through the window from the Marlborough man next door, the tacky fuscia paint job adorning the front door of the sweet old lady across the street, the prickly pear bushes planted down the street that the Santa Anas blow on your yard alongside your rose garden, or the strange fascination your upstairs neighbor has with playing Whitney Houston as loud as possible on summer nights when your patio door is open. 

Let’s face it, whether you live in a condominium, townhome or on an estate, we all face our neighbors at some point or another. Facing our neighbors can be good, bad and just down right ugly. Thankfully, Southern California is swarming with community associations to control these miserable encounters. But do they?
 
Today, more than ever, Homeowner Associations are straining to keep costs to a minimum in an effort to maintain assessments and increase the overall property value. Of course, present economic conditions create substantial hardships on both Board of Directors and homeowners. Boards are forced to make critical decisions which may severely impact the financial livelihood of homeowners within the community, or alternatively, face negative impacts on property values or potential liability.
 
A growing trend is for Homeowner Associations to terminate community association management companies and take on self-management as the ultimate means to cut costs. At first, this endeavor appears as a selfless, noble and efficient method to minimize the costs incurred by the Homeowners. Directors serving on the Board volunteer their time as the ultimate “thankless task” for their fellow homeowners. Unfortunately, a Board of Directors’ intent to save costs and defer maintenance as an efficient solution to increasing assessments is often illusory. 
 
It all starts with termination of the community association management company. Most Homeowner Associations rely on the community association management company’s knowledge and understanding of community association law. California has detailed and vigorous requirements for all community associations. The Davis Stirling Act, also known as Title 6 of the California Civil Code sections 1350–1378, regulates community associations. 
 
Homeowner Association Board of Directors that are aware of the Davis Stirling Act seldom comply with the requisite policies and actions mandated by the Act. Without a competent management company, or legal counsel, Boards are at a disadvantage when interpreting and complying with the Act. Often, Boards fail to incorporate the Davis Stirling Act with the CC&Rs, Bylaws, Rules and Regulations when determining the proper procedures to govern their associations. 
 
A Board’s failure to comply with and enforce the laws may come with a significant cost. For example, the Board may suddenly need to resolve a legitimate complaint from a homeowner regarding a neighbor’s loud music. Both the injured homeowner (hearing the loud music) and non-compliant homeowner (playing the loud music) often externalize their emotions to the Board and begin to scrutinize the Board’s actions. This is one of the many occasions where the Board’s non-compliance with the Davis Stirling Act, CC&Rs, Bylaws, Rules and Regulations create liability for the HOA. Homeowners often use the Board’s non-compliance as leverage to enforce, or dispute enforcement, of a valid CC&R, Bylaw, Rule or Regulation.  
 
The Board will likely take action to remedy the issue with homeowners per the Internal Dispute Resolution procedures adopted by the Association (also mandated by the California Civil Code). Either homeowner may become angry about the final decision of the Board regarding the complaint and instead of cooperating, hire an attorney. This is the point where the Board’s lack of compliance with the Code can quite literally hold the HOA “hostage” in exchange for fees and completion of outstanding duties. 
 
The subject of the dispute has now accelerated from a simple noise complaint to recovery of attorney fees in enforcement of the California Civil Code and/or CC&Rs. The Civil Code allows any member of a community association who incurs attorney fees in order to enforce the Act and its requirements against the Board to recover legal fees and costs, along with other legal damages. In addition, nearly all CC&Rs have a similar term in enforcement of its provisions. On the other hand, the Board may be entitled to collect attorney fees in enforcing a homeowner’s complaint against another if the CC&Rs contain such a provision (they often do). 
 
Suddenly, the Board of Directors’ legitimate reason for not preparing and incurring the cost of the Annual Reserve Fund Summary pursuant to California Civil Code § 1365.25 in an effort to keep assessments low and make repairs to common areas is the subject of dispute and potential attorney fees against the Board. These costs fall directly back on the Homeowners – all of them. There are various exceptions and defenses a Board of Directors may assert for non-compliance with mandated action required either by the Civil Code or other adopted Rules and Restrictions. It is best for both the Boards and the homeowners to prevent having to rely on these exceptions altogether and properly manage maintenance and compliance with the applicable law. 
 
The best way the Board can minimize their own liability exposure is to maintain professional community management services; familiarize themselves with the Davis Stirling Act and all other California laws governing community associations, CC&Rs, Bylaws, Rules and Regulations; routinely review and audit management services provided to the association; and consult with legal counsel periodically to assure compliance with all legally mandated requirements.
 

A Homeowner’s best chance at minimizing exposure to liability for failure to comply with CC&Rs, Bylaws, Rules and Regulations is to thoroughly read them. If the contents are unclear or require clarification, inquire to the Board or consult with or retain legal counsel. The potential for legal fees and costs should provide incentive for Homeowners and the Board of Directors to attempt in good faith to resolve all conflicts at the onset informally, if feasible.

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