Category: General

Clients often report a common intimidation tactic used against them, where they are warned, “You’ll be responsible for covering the HOA’s attorney fees,” as a means to discourage them from pursuing accountability for their HOA’s wrongdoing.

A significant legal development was addressed in an appellate ruling from last month in the case of LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Assn. In this post, I will focus on the issue of fee-shifting.

In LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Assn., the Court of Appeal had to grapple with the interpretation of the term “frivolous, unreasonable, and without foundation” within the context of a fee-shifting provision outlined in the Common Interest Development Open Meeting Act (OMA), specifically Civil Code §4955(b). This provision allows for fee shifting to a prevailing Homeowners’ Association (HOA) if certain prerequisites are met.

In this case, two homeowners had initiated legal action against their HOA for OMA violations. The lower court ruled against the homeowners on the merits of their claims, and this decision was upheld by the appellate court. However, the lower court awarded the HOA $8,874.61 in standard costs and rejected the homeowners’ motion to challenge or reduce these costs. Additionally, the lower court granted the HOA $348,306 in attorney’s fees (out of a requested $405,282.50) under the Davis-Stirling Act (Civil Code §5975(c)), rather than the cost-shifting provision of the OMA.

The appellate court ultimately reversed both the cost and fee awards against the homeowners. The issue with the fee award stemmed from the fact that the homeowners had not brought a claim under the Davis-Stirling Act, which is based on the HOA’s governing documents. Instead, they had invoked the OMA, which only allows for the recovery of regular costs (not attorney’s fees) in favor of a prevailing HOA.

The focus then shifted to the regular costs award. The appellate court interpreted the “frivolous, unreasonable, and without foundation” criteria for awarding costs to a prevailing HOA to incorporate the “any reasonable attorney” standard, as established in cases such as Smith v. Selma Community Hospital, 188 Cal.App.4th 1, 33 (2010). Given this standard, the homeowners’ positions were subject to debate and had not been definitively resolved previously. Consequently, there existed legal uncertainty, which did not warrant the imposition of standard costs under the circumstances. Even though the homeowners had rejected the HOA’s §998 offer, the specific OMA cost-shifting provision took precedence over the §998 cost-shifting mechanism.

It’s important to note that while it’s true that homeowners pursuing legal action against their HOAs to enforce governing documents may potentially face liability for the HOA’s attorney fees if they do not prevail, there is a strategic alternative. With the constantly evolving laws concerning common interest developments, often mirroring the Civil Code and Corporations Code, initiating action under these code sections, as opposed to pursuing a governing document enforcement action, can offer a clear pathway to avoid fee shifting in bona fide legal actions.

Another takeaway is that Alta Del Mar Coastal Collection Community Association spent over $400,000 to defend itself and now there’s some great law everyone can benefit from!

 

If you’ve not seen the segment above, do yourself a favor and stop reading this until you have.

On April 9th, John Oliver discussed some controversies surrounding homeowner associations on HBO. He highlighted concerns such as their extensive power over homeowners, lack of transparency and accountability, conflicts of interest, and arbitrary regulations. While there are benefits to living in an HOA, there is also the potential for abuse of power and a lack of regulation across the nation. Homeowners need to be aware of their rights and responsibilities and hold their board accountable while also being held accountable themselves, given that almost one-third of the US population lives in an HOA, and the majority of single-family homes sold in 2021 were in one. HOA living is a choice and choices have natural consequences.

As a California homeowner advocate, I often encounter homeowners who want the benefits of living in an HOA without taking on the responsibilities of owning property in a community association. I advise and educate homeowners and, when necessary, deliver unpleasant news such as when their HOA is in the right. One of the most common violation notices I’m contacted about relates to personal property left in common areas, such as chairs, toys, and other items left at a community pool or benches, stumps, chairs, and BBQs left near basketball courts. I remind my clients that they cannot do what they want with common area property if they are not paying property taxes for that land. Asking for permission first can prevent problems, and California Civil Code section 4765 requires HOAs to adopt written procedures for reviewing architectural applications promptly.

Most HOA directors are reasonable people who want to protect everyone’s assets as a whole, but it is a thankless and often-unreasonable job. Their primary job is to uphold the governing documents as they are, not as they wish them to be. An ombudsman program managed by the state could help keep HOAs in line and prevent drastic actions such as using satellites to peer into backyards or prohibiting owners from renting to Section 8 recipients. The state’s Department of Justice has limited oversight over select violations of the Corporations Code related to CIDs, and funding an ombudsman program could be achieved through collecting $100.00 from the 50,000+ HOAs in the state that are required to register and annually re-register with the Secretary of State. Such a program and a related public complaint database could increase transparency and hold bad actors accountable

Ultimately it is up to individual homeowners to decide whether they want to live in a community with an HOA or not and to weigh the benefits and drawbacks carefully before making their decision. A contract is a contract and your name on a title binds you to it, for better or worse.

As a homeowner in California, you may have heard of homeowners associations, or HOAs. These private organizations are responsible for managing and maintaining common areas and enforcing community rules within planned communities and condominium complexes. While HOAs can offer many benefits, they can also come with their fair share of challenges. In this blog post, we will explore some of the pros and cons of living in an HOA in California.

Pros:

  1. Increased property value: One of the primary benefits of living in an HOA community is that it can help to maintain property values. HOAs often invest in community amenities such as swimming pools, playgrounds, and fitness centers, which can increase the value of individual properties.
  2. Community involvement: HOAs often host community events and encourage resident participation in committees and boards. This can create a strong sense of community and foster relationships between neighbors.
  3. Maintenance and upkeep: HOAs are responsible for the maintenance and upkeep of common areas such as landscaping, building exteriors, and parking lots. This can be a huge relief for homeowners who do not have the time or resources to maintain their own property.

Cons:

  1. HOA fees: Living in an HOA community often comes with monthly or annual fees to cover the cost of maintenance and community amenities. These fees can vary widely and can add a significant amount to homeowners’ monthly expenses.
  2. Restrictions on personal property: HOAs often have rules and regulations regarding personal property, such as the type and color of fencing or the placement of outdoor decorations. Homeowners may feel restricted in their ability to make changes or personalize their property but it’s important to note that the restrictions are agreed to by acquiring title.
  3. Disputes with the HOA: Disputes can arise between homeowners and the HOA over issues such as maintenance, enforcement of rules, or decisions made by the board. Resolving these disputes can be time-consuming and costly.

Overall, living in an HOA community in California can have both benefits and drawbacks. Homeowners should carefully consider their priorities and lifestyle before purchasing a property within an HOA. It is important to read and understand the community’s rules and regulations, as well as the costs associated with living in the community. With proper research and consideration, living in an HOA community can be a positive and enjoyable experience for homeowners in California.

If you’ve ever used our services you might have spoken with Douglas Kruschen in Los Angeles. Douglas has proven to be an invaluable resource. He’s a technology solutions provider who works primarily in the property management space, is an SSU trained paralegal who earned a coveted internship with a past Oklahoma state insurance commissioner’s general counsel, and all around good guy who understands the hardships HOA members face…after all, he implements the back end compliance systems managers use to make owners’ lives miserable. You’re likely reading this because you’re one of the disgruntled members of one of California’s over 50,000 common interest developments.

 

What sets Douglas apart is that he’s not all talk. He’s willing to take action and litigate issues when necessary, always with the goal of setting a precedent that can benefit everyone. Earlier this year, in my introductory blog post in fact, we discussed how to use California Corporations Code section 7515 to address quorum-related issues in an HOA.

 

Recently, in October, Douglas initiated his own 7515 petition after his HOA abruptly ended a successful election and claimed “no quorum.” One of the lifer board members had convinced the inspector to reverse their tabulation. The case, Kruschen v. Annandale Townhouse Association, Inc., is ongoing in the Los Angeles Superior Court (Case No. 19VECP00459). We will keep you updated on the outcome. Good luck, Douglas!