Homeowners associations in California must understand and comply with state laws to avoid potential liability. With so many California HOA laws, though, it can be difficult to weed through each one in detail. But, there are a select few that stand out above the rest since they are more commonly discussed.
The Davis-Stirling Common Interest Development Act was enacted in the 1980s. Since its creation, the Act has gone through numerous amendments to adapt to the changing times and society. This Act governs all common interest developments in California, including but not limited to:
The Davis-Stirling Act consists of 11 chapters, each one divided further into sections. These sections govern and regulate various goings-on within planned developments, such as budget preparation, dues increases, and election requirements. The Act also defines the authority of HOA boards as well as the limitations on their powers. Beyond that, it also protects homeowner rights.
You can read this Act in further detail by referring to the California Civil Code Sections 4000 to 6150. The following are the chapters found in the Davis-Stirling Common Interest Development Act:
Establishing a homeowners association requires the creation of governing documents. This includes the Articles of Incorporation, the Community Bylaws, and the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
According to Civil Code Section 4080, Associations that run a common interest development can be formed as an unincorporated association or a non-profit corporation. If you choose to incorporate, under Civil Code Section 4280, you must file your Articles of Incorporation with the California Secretary of State.
Incorporated or not, though, the California Corporations Code provides associations with the powers of non-profit mutual benefit associations. Under this code, associations can adopt and amend bylaws, levy dues & fees, and enter into contracts, among other things.
Although the Davis-Stirling Act offers comprehensive coverage of California HOA laws, associations can refer to the California Corporations Code when the former fails to address certain topics in an explicit manner.
Members of an HOA board may find themselves the recipient of a lawsuit filed by an aggrieved homeowner. The HOA laws of California, though, offer board members protection from personal liability. As volunteer leaders, board members are shielded from personal liability provided they acted in good faith, with reasonable care, and within the community’s best interest.
Homeowners associations must not solely rely on California law to protect board members from personal liability, though. Every HOA must have adequate Directors & Officers Insurance to cover the cost of damages in the event of litigation or other legal trouble.
Homeowners pay monthly HOA dues, which the association then uses to cover the cost of maintenance and other operating expenses. Although the HOA board does possess the power to raise dues, Civil Code Section 5605 limits this increase. According to California law, associations may not increase dues by more than 20 percent of the dues from the previous fiscal year. The exception to this is when a majority of homeowners vote for the increase.
Homeowners associations also have the power to levy special assessments. But, under the same section, associations may not charge special assessments that aggregately go over 5 percent of the association’s budgeted gross expenses for the fiscal year. The same exception applies.
Should an HOA raise its regular dues, the board must send written notification to all members at least 30 days prior to the adoption of the increase. However, the notification period must not exceed 60 days.
In California, homeowners associations can fine members for violating the rules of the community. But, HOA boards must adhere to the proper procedure. First, the board must send a written notification to the homeowner. This notification should include the homeowner’s alleged offense and the corresponding fine amount. The board must send this notification at least 10 days before a board meeting.
Next, the board should give the homeowner an opportunity to defend themselves during a disciplinary hearing as it is their right. The board will then make its final decision and send a written notification of the fine to the homeowner within 15 days following the ruling.
When homeowners default on their dues or fail to pay special assessments, the HOA will have the ability to attach a lien to the owner’s property. The total lien amount includes the amount of the dues or assessments, plus any incurred fees such as processing fees or attorney’s fees.
According to Civil Code Section 5660, the HOA must notify the homeowner in writing via certified mail at least 30 days before recording the lien. The notification must include a general description of the lien, enforcement procedures, and how the lien amount was determined. Homeowners associations also have a legal authority to initiate foreclosure proceedings.
When it comes to property use restrictions in HOAs, these are some of the subjects that frequently come up.
In most homeowners associations, members have a right to request and inspect HOA records. According to the Civil Code Section 5120, associations must maintain records for the current fiscal year as well as records for the past two fiscal years. Minutes of the board and HOA meetings must be kept indefinitely. Additionally, should a member request a copy of association records, the HOA must provide them within 10 days (for records for the current fiscal year) or within 30 days (for records for previous fiscal years).
Of course, the HOA also reserves the right to make redactions to the documents to prevent identity theft or fraud. If the HOA does redact information, according to Civil Code Section 5215, the association must provide a legal explanation in writing. There are also some records that should never be shared with members, such as minutes of board meetings held in executive session, documents protected by attorney-client privilege, and personnel records.
According to the Davis-Stirling Act, the following fall under association records and enhanced association records that members can inspect:
The Davis-Stirling Act also allows HOAs to impose a fee for the production of these documents. But, Civil Code Section 5205 states that associations must charge for these documents at cost.
Every homeowners association is bound by the federal Fair Housing Act, but many states also have their own Fair Housing laws. California is one of those states. Whereas the federal FHA protects persons from discrimination based on race, color, sex, religion, disability, familial status, and national origin, California’s Fair Housing laws go further.
Under California law, housing providers also can’t discriminate against people based on their gender identity, sexual orientation, marital status, source of income, and more. Courts have also considered age-related discrimination as a form of familial status discrimination.
Fair Housing laws don’t only pertain to denying housing for protected classes. For homeowners associations, a breach of these laws can also happen when they adopt discriminatory covenants or rules, discriminatory tenant screening procedures, restricting access to amenities and facilities for members of a certain class, etc.
In compliance with Fair Housing laws and the Americans with Disabilities Act (ADA), homeowners associations must provide reasonable accommodations or modifications so that disabled persons can fully use and access their homes and the common areas of a community. This means associations must change or adjust a rule, service, or policy, or permit or make structural modifications to provide equal opportunity to persons with disabilities.
The federal Fair Housing Act and Americans with Disabilities Act have differing requirements and definitions of a service animal. The ADA defines them as dogs and, in some cases, miniature horses that have undergone special training. On the other hand, the FHA has a more broad definition of assistance animals. Because of this, many HOAs find themselves in legal trouble.
Generally, it is a good idea for homeowners associations to allow service animals into the community, even if it has a strict no-pets policy. But, HOAs adopt reasonable regulations, such as requiring owners to pick up after their assistance animal and to keep them on a leash in common areas. Associations can also deny an owner’s request if it endangers public health and safety.
The Servicemembers Civil Relief Act protects members of the U.S. armed services against foreclosure and civil litigation while they are on active duty. The Act also offers protection to members of the national guard as well as reservists, provided they have been activated for at least 30 consecutive days.
In the context of HOAs, the SCRA prevents associations from foreclosing on a lien or obtaining a judgment for delinquent dues against service members covered by the Act. Associations also can’t impose an interest rate of more than 6 percent on debts service members owed prior to their service and a year following.