CACM THE Law Journal FEATURED ARTICLES: COMPLYING WITH SB 323 With no bright lines to guide associations on the road to SB 323 compliance, stay in the middle and avoid the unfinished edges of the pavement. PG. 10 THE NITTY GRITTY ASSESSMENT COLLECTIONS AND BANKRUPTCIES How does the In Re Basave De Guillen Decision really affect California Associations? PG. 17 TOOLS TO ADDRESS SUBSTANCE ABUSE AND HOMELESSNESS IN YOUR HOA PG. 06 SPRING 2020 SOBER LIVING IN HOAS Are recovery treatment centers legal in community associations?
PG. 02 CACM THE Law Journal A PRACTICAL REVIEW OF COMMUNITY MANAGEMENT LAW 2020 CACM SPRING LAW JOURNAL EDITORIAL COMMITTEE CHIEF EDITOR Fred Whitney, Esq.
Whitney | Petchul ATTORNEY GUEST EDITOR Mike Kennedy, Esq.
Berding Weil LLP COMMITTEE MEMBERS John Hansen, Esq.
Baydaline & Jacobsen LLP Zer Iyer, Esq.
Angius & Terry LLP Alex Sohal, Esq.
Adams|Stirling Eric Kazakoff, CCAM Canyon Lake Property OA Jill Morgan, CCAM Allure Total Management Hamlet Vazquez, MCAM-HR Action Property Management An archive of past issues can be found under Member Resources at CACM.org.
The CACM Law Journal is distributed digitally four times annually to members, affiliates and supporters of the California Association of Community Managers.
DISCLAIMER: CACM does not assume responsibility for the accuracy of articles, events or announcements listed. Please be advised that the opinions of the authors who contribute to the Law Journal are those of the author only, and do not necessarily reflect the opinions of CACM and other industry attorneys. Please note that in a constantly evolving industry there are frequently multiple interpretations of the controlling statutes and case law.
The information contained in these articles is of a general nature
e note that in a constantly evolving industry there are frequently multiple interpretations of the controlling statutes and case law.
The information contained in these articles is of a general nature and not intended as legal advice. If you have any questions, please discuss them with your association's legal counsel.
SOBER LIVING IN HOAS Are recovery treatment centers legal in community associations?
By Cyrus Koochek, Esq.
S ober living homes are becoming a more frequent reality for community association boards, managers and residents.
Sober living homes generally refer to alcohol and drug recovery or treatment centers, and the increase in sober living homes within associations is not an accident. In fact, it is the express public policy of California, pursuant to California.
Health and Safety Code §11834.20, to permit and encourage the development of facilities for alcoholism or drug abuse recovery or treatment. Perhaps equally as important, the California Health and Safety Code also makes clear that for the purposes of any covenant for the transfer of real property (e.g., CC&Rs), a sober living home serving six or fewer persons is considered a residential, single-family use of the property.
2 THE LAW JOURNAL | WWW.CACM.ORG Commercial vs.
Residential Use We are all familiar with CC&R provisions that prohibit commercial uses of a property and the California Legislature has made it public policy (and the law) to specifically exempt sober living homes from commercial use restrictions found in most CC&Rs for residential associations. What this means for associations is that sober living homes are here to stay and associations cannot rely on "no commercial use" or "residential use only" language within their CC&Rs to prohibit sober living homes (nor can
sociations is that sober living homes are here to stay and associations cannot rely on "no commercial use" or "residential use only" language within their CC&Rs to prohibit sober living homes (nor can they attempt to specifically restrict such use). This does not mean, however, that associations are left helpless when it comes to regulating sober living homes. In order to do so, boards and managers need to understand the key characteristics and considerations that exist when dealing with sober living homes.
Homeowner vs. Tenant Operators First, it is important to understand that sober living homes may be operated by a homeowner or tenant. Although an association's legal relationship and lines of communication are (and should be) with the actual homeowner, a tenant is fully entitled to operate a sober living home in accordance with California law.
If the presence of a sober living home results in governing document violations, as discussed further below, the association's enforcement of the violations should be addressed with the homeowner, not the tenant. This is no different than how most tenant-caused violations should be handled, but it is worth noting given it may be less common for a tenant to be the operator of a sober living home.
Number of Persons in a Sober Living Home The California Health and Safety Code prohibits more than six people from residing in a sober living home. It is important to note that this number does not include the operator of the sober living home or any employees/staff. There is not much guidance on this issue, and it is clearly Continued on page 4 3 THE LAW JOURNAL | WWW.CACM.ORG Continued from page 3 the case that in some associations (like condominium buildings), the presence of a large number of persons can cause a real
y Continued on page 4 3 THE LAW JOURNAL | WWW.CACM.ORG Continued from page 3 the case that in some associations (like condominium buildings), the presence of a large number of persons can cause a real impact on the common areas and facilities.
It is also worth consulting with your association's legal counsel to determine if any local zoning or occupancy restrictions may still be applicable and actually limit the number of persons in a home, even a sober living home. Although these various regulations exist, associations may still regulate nuisances that exist; this is described in greater detail below.
Licensed and Unlicensed Homes; Discrimination Some sober living homes/facilities require licensing because they provide an array of non-medical services like detoxification, group or personal therapy, and other forms of non-medical treatment.
Many sober living homes are not required to be licensed, and are not governed formally by a particular state agency. This is the case as long as the sober living home offers a group living environment without the non-medical services described above. The primary reason for this is that the persons treated in sober living homes are considered disabled under State and Federal law. As a result, persons in sober living homes are considered a protected class of persons due to their disability (more on this below).
If the association knows or has reason to believe that a sober living home is present, managers should ask what type of sober living home is being operated. If the sober living facility will provide detoxi ication and related nonmedical services, a copy of the license should be provided to the association; otherwise, the operator may be operating the sober living home without a license.
There is some debate about whether
nonmedical services, a copy of the license should be provided to the association; otherwise, the operator may be operating the sober living home without a license.
There is some debate about whether unlicensed 4 THE LAW JOURNAL | WWW.CACM.ORG sober living homes are actually governed by the California Health and Safety Code regulations described above and whether the public policy of the state actually applies to unlicensed sober living homes in addition to the licensed ones. This debate should not impact how associations treat unlicensed sober living homes, mostly due to the fact that under State and Federal laws, discriminating against persons who are recovering from alcoholism or drug abuse means you are discriminating against a person with a disability. This is a clear violation of State and Federal law and should be avoided. This makes the focus on actual conduct and governing document violations most important, as opposed to who is committing the conduct.
Governing Document and Conduct Violations What should be regulated is the conduct of persons within sober living homes. As described above, the increased presence of residents can result in a major impact to an association's common areas and recreational facilities, such as parking areas, pools and other amenities, guest numbers, and noise issues generally. If, for example, the residents of the sober living home are creating significant and unreasonable noise, are parking in improper areas, or are harassing other residents, the homeowner should be contacted, and the association can and should enforce the governing document violations consistent with normal practice.
Remember, boards have a legal, fiduciary duty to enforce the governing documents and this exists regardless of who is allowed to reside
e governing document violations consistent with normal practice.
Remember, boards have a legal, fiduciary duty to enforce the governing documents and this exists regardless of who is allowed to reside within an association's community. Focusing on the conduct, not the violator, will protect an association, board, and management from claims of discrimination by sober living home residents or operators on the basis of disability, while at the same time ensure that the association is taking all steps to balance and recognize the public policy with respect to sober living homes.
ABOUT THE AUTHOR Cyrus Koochek, Esq., specializes in community association law with SwedelsonGottlieb. Koochek has been in the industry for 7 years.
5 THE LAW JOURNAL | WWW.CACM.ORG TOOLS TO ADDRESS SUBSTANCE ABUSE AND HOMELESSNESS IN YOUR HOA By Sean Kane, Esq.
S ubstance abuse is an unfortunate reality that comes in varying degrees.
Homelessness is as well, and is almost always accompanied by some degree of substance abuse. These challenging problems affect all of society, and homeowners' associations are no exception.
When either of these issues affects an association, it is important to remember both the tools the association has 6 THE LAW JOURNAL | WWW.CACM.ORG to address these problems, as well as the limitations on an association's ability to address them. First, we'll address substance abuse, then homelessness.
Substance Abuse The tools associations have to address substance abuse are two-fold: (1) enforcing governing documents to regulate problematic conduct; and (2) calling law enforcement if necessary.
When a person's substance abuse problem has reached the point where it affects their neighbors, chances are the association has, or can adopt, rules to address the behavior.
enforcement if necessary.
When a person's substance abuse problem has reached the point where it affects their neighbors, chances are the association has, or can adopt, rules to address the behavior.
CC&Rs almost always prohibit nuisance. Depending on how the CC&Rs are worded, a person's problematic conduct may be severe and habitual enough to constitute a violation of the CC&Rs' nuisance provision. For example, if my neighbor Bob is up drinking and consistently playing loud music at all hours of the night and I can hear it from my unit, Bob's conduct would likely violate the CC&Rs. If so, the association should enforce the CC&Rs against Bob, or any other member doing the same thing, through the disciplinary hearing process, fines, and legal action if necessary.
Additionally, associations may have operating rules prohibiting certain behavior. Common rules include prohibiting alcohol consumption in the common area amenities, limiting excessive noise, etc. If associations do not have such operating rules in place, the association's board can adopt reasonable operating rules, with respect to unacceptable behavior in the common areas.
This process is easy - notice to the membership of the proposed rules, a minimum of 28 days for Continued on page 8 Guest Editor's Note Well, it's springtime already. We usually associate spring with rebirth, renewal, and new growth. This issue is full of good and hopefully useful information about new growth in the law affecting California Common Interest Developments. For better or worse, there are a lot of new legal developments, both in the form of legislation and court decisions affecting the communities that we all serve.
By now we have all heard about the extent to which elections will be different, with new
developments, both in the form of legislation and court decisions affecting the communities that we all serve.
By now we have all heard about the extent to which elections will be different, with new rules and new requirements for the conduct of those elections. Most of us have heard about new inspection requirements for elevated decks and walkways. There are other new legal requirements as well, and legal issues that arise from changes in society.
This edition takes a deeper dive into those issues, with insightful contributions from some of the leaders in our industry.
Your own association counsel will have their own take on these new laws, and many of you will have had the opportunity to consider them in the recent Law Seminars, or other educational offerings.
The articles in this issue will hopefully add to that conversation, and help fill in the picture for you, and the associations that we all serve together.
Michael T. Kennedy, Jr., Esq.
specializes in residential and commercial construction litigation at Berding | Weil. He's worked in the industry for 20 years.
7 THE LAW JOURNAL | WWW.CACM.ORG ՀՈՈՐ: Continued from page 7 the membership to provide comments on the proposed rules, followed by adoption of the rules in open session and notice to the membership of the adopted rules within 15 days. From there, the association should uniformly enforce these rules the same as in our example with Bob.
The second tool available is calling the police, if the conduct warrants it. The association's board, members, and management have rights in their individual capacity to call the police if someone's conduct is dangerous. I ров recommend using this option only when truly necessary.
vPolice departments quickly become desensitized to calls for help if frequent or unnecessary
the police if someone's conduct is dangerous. I ров recommend using this option only when truly necessary.
vPolice departments quickly become desensitized to calls for help if frequent or unnecessary calls are made from a particular community, and may end up not responding at all if it continues. For example, if Bob is simply playing loud music at night, and is not otherwise a danger to anyone, do not call the police. Instead, enforce your governing documents. If, however, Bob staggers out of his unit and starts a fist fight in the common area, call the police.
This type of behavior would most likely also constitute a violation of your governing documents, which should also ANYTHING Hungry Bless HELPS SA be pursued against Bob. So remember, both tools can be used for a single incident if the circumstances warrant it.
Homelessness The tools associations have to address homelessness are also two-fold: (1) access control devices; and (2) calling the police.
The most effective means an association can use to address homelessness is installing access control devices throughout the community. The type of access control device(s) that work best depends on the unique configuration of your community, and the severity of the homelessness in the vicinity. Often, associations have perimeter fences or walls already. If your community doesn't, or the existing barrier does not completely surround the community, installing one that does is the first step to addressing this problem. Also consider how easy it is to get over or through the perimeter barrier and modify it as 8 THE LAW JOURNAL | WWW.CACM.ORG necessary to make access more difficult.
You should also consider installing keypads, fobs, or other locking mechanisms on your gates. Some homeowners may resist these measures, but
NAL | WWW.CACM.ORG necessary to make access more difficult.
You should also consider installing keypads, fobs, or other locking mechanisms on your gates. Some homeowners may resist these measures, but if the problem is significant enough to warrant it, pushback from the membership usually is manageable. Finally, the association may consider hiring private security, if the problem is severe enough.
This can be a significant expense, however, and may require membership approval depending on the terms of the security company's contract, and/or modification of your operating rules.
A less effective means of addressing homelessness is calling the police.
Unfortunately, homelessness has become so pervasive, police are unlikely to respond to any calls regarding simple trespass or verbal assault or harassment. However, if there is a violent, or otherwise dangerous situation, you should call the police. The best option is to prevent access 9 THE LAW JOURNAL | WWW.CACM.ORG to your community from the outset.
For problems with homelessness near or adjacent to, but not within the community, unfortunately associations have little means of addressing these issues aside from calling the police. Associations only have jurisdiction over the common area and separate interests.
Limitations Regarding both homelessness and substance abuse, keep the association's limitations in mind also. While associations can often regulate the problematic conduct associated with substance abuse, or install improvements to prevent homeless from accessing the property, associations do not have the power to cure the underlying problem. Frankly, no one but the affected person does.
Associations should not stage any type of intervention, or let their sense of morality or "justice" guide their decision-
to cure the underlying problem. Frankly, no one but the affected person does.
Associations should not stage any type of intervention, or let their sense of morality or "justice" guide their decisionmaking when addressing these issues. Such misguided decision-making could create a dangerous situation and ultimately lead to liability for the association.
4 ABOUT THE AUTHOR Sean Kane, Esq., is an HOA litigation and general counsel to community associations. He's worked in the industry for 8 years and is an attorney with Berding | Weil, LLP.
COMPLYING WITH SB 323 With no bright lines to guide associations on the road to SB 323 compliance, stay in the middle and avoid the unfinished edges of the pavement.
By Allison L. Andersen T he California Legislature's basic intention in passing SB 323 cannot be faulted.
Moves toward inclusiveness, transparency and fairness in community association elections are part of an overall trend in our society today. Like most legislative mandates, cleanup legislation is now necessary to address the ambiguities created by SB 323. Associations and their professional managers should recognize and consider the following significant potential pitfalls for their elections in 2020 and beyond.
10 THE LAW JOURNAL | WWW.CACM.ORG The Big Picture: Risks of Non-Compliance While many associations are now focused upon the individual mandates of SB 323, such as updated election rules, candidate eligibility, and independent election inspectors, the hidden trap built into the new law is the increased risk posed by non-compliance. Previously, a member challenge to an election faced the nearly insurmountable legal hurdle of both (1) showing noncompliance, and (2) showing that the non-compliance affected the election result.
Beginning in 2020, however,
lenge to an election faced the nearly insurmountable legal hurdle of both (1) showing noncompliance, and (2) showing that the non-compliance affected the election result.
Beginning in 2020, however, a challenger need only allege and prove some instance of technical non-compliance.
Under Civil Code § 5145(a), the association now carries the legal burden of proving that the claimed non-compliance had no impact on the outcome of the election. Arguably, proving such a negative is a far heavier burden. The resulting exposures for minor non-compliance includes the association's own legal expenses, a lengthier legal process, real property disclosures, civil fines, the attorney fees and costs of the challenger, and the expense of a new election.
Although worst-case scenarios for an upcoming election might seem remote, non-compliance in 2020 allows a single disgruntled member to wreak havoc with an association's governance and budget. Without doubt, the ambiguities in the law coupled with the shift in the burden of proof will only enlarge the target placed on associations. In the uncharted landscape of SB 323, risk avoidance should be the watchword in every association's effort to comply with the new law's mandates.
Candidate Eligibility/ Disqualification SB 323 was enacted, in large measure, to remedy a handful of isolated and extreme circumstances where highly entrenched association boards used candidacy restrictions and disciplinary measures to maintain their status quo authority. In the remaining 99 percent of communities, apathy is the true bugaboo. Most associations are in need of volunteers willing to invest their time for the greater good of the membership.
The SB 323 amendments to Civil Code § 5105(c) and (d) detail certain specific 11 THE LAW JOURNAL | WWW.CACM.ORG
need of volunteers willing to invest their time for the greater good of the membership.
The SB 323 amendments to Civil Code § 5105(c) and (d) detail certain specific 11 THE LAW JOURNAL | WWW.CACM.ORG grounds upon which board candidates may be disqualified from an election, including minimum residency, joint ownership, and non-payment of assessments. The new law specifically prohibits disqualification for nonpayment of fines and collections expenses. Further, non-payment of regular and special assessments can only be grounds for candidate disqualification if the association also requires directors to be current on such assessments.
Even then, non-payment of general and special assessments cannot be the basis for disqualification if the assessments have been paid under protest or are the subject of a written payment plan.
In terms of personal conduct, Section 5105(c)(4) specifically permits a candidate to be disqualified for a past criminal conviction which would prevent the association from maintaining or purchasing its required fidelity bond coverage. In all other respects, however, the Davis-Stirling law remains silent on whether an association may (or may not) impose additional conduct-based restrictions on a member's candidacy.
While there is certainly a vast universe of reasons why an association might Continued on page 12 Maltman Av STOP Continued from page 12 reasonably believe conduct-based justifications should disqualify a particular candidate (including those currently listed in an association's governing documents), extreme caution is nonetheless recommended. The Legislature did not intend that candidates be prohibited from running for non-specified disciplinary matters.
Inspectors of Election The Legislature created additional
is nonetheless recommended. The Legislature did not intend that candidates be prohibited from running for non-specified disciplinary matters.
Inspectors of Election The Legislature created additional confusion by eliminating the option of using the association's community managers or corporate counsel as the inspectors of election, without entirely defining the duties of the fully independent inspector. In particular, Civil Code § 5105(g) specifies that every association must amend its election operating rules to "require the inspector of elections to deliver, or cause to be delivered" ballots to each member. However, Civil Code § 5115(c), which states that ballots "shall be mailed [ ] or delivered by the association to every member" was not changed. While there is no ambiguity concerning the requirement that the election inspector receive the completed secret ballot envelopes, the responsibility for mailing out the ballots is not entirely clear.
The mandate for an entirely independent election inspector is somewhat inconsistent with allowing association management to perform the essential role of ballot delivery to the membership. More importantly, not having management deliver the ballots will deprive an association of critical legal protections.
SB 323 has substantially “lowered the bar” for election challenges. Because the inspector's written report of the election constitutes prima facia evidence of the facts stated therein, the report can demonstrate both compliance with the process and the lack of impact on the result. If the inspector does not conduct the ballot package mailing 12 THE LAW JOURNAL | WWW.CACM.ORG or the ballot collection, the inspector's written report will not be based on personal knowledge and will be of minimal use in satisfying the
e ballot package mailing 12 THE LAW JOURNAL | WWW.CACM.ORG or the ballot collection, the inspector's written report will not be based on personal knowledge and will be of minimal use in satisfying the association's heavy burden.
More specifically, the report will not be able to establish (1) that the ballot packages were timely delivered, (2) that a ballot package was delivered to each member, (3) that each ballot package contained the required ballot materials, and (4) that votes of all received and validly completed ballots are reflected in the final tally. In such a scenario, an association's election could be voided based merely upon an allegation that a single member failed to receive a ballot package.
Without the written inspector of election report, an association would be fully exposed to claims by an unsuccessful candidate that the election result was the product of a selective and incomplete delivery of ballot packages.
Unfortunately, the Legislature did not provide associations with bright lines to follow for elections in 2020. Until SB 323 cleanup legislation is enacted, best practices should focus on risk-avoidance. Relying on statutory ambiguities for short-term expedience and cost savings will only place an association in peril of negative consequences that could dwarf the benefits of such expedience.
ABOUT THE AUTHOR Allison L. Andersen, Esq., is an attorney specializing in community association law at Angius & Terry LLP. She's been in the industry for 17 years.
THE NITTY GRITTY ON SB 326 T By Ritchie Lipson, Esq.
he Governor signed SB326 August 30, 2019, which became law January 1, 2020. This new law will have a substantial impact on Common Interest Developments (CID's) throughout the State of California.
The bill was introduced as a response
0, 2019, which became law January 1, 2020. This new law will have a substantial impact on Common Interest Developments (CID's) throughout the State of California.
The bill was introduced as a response to the Berkeley balcony collapse at Library Gardens Apartments on June 16, 2015, when 13 students fell 40 feet from a failed fifth-floor balcony, killing six and injuring seven.
The cause of collapse was determined by the California Contractors State License Board to be "Dry rot along the top of the joists which suggests longterm moisture saturation...of Oriented Strand Board (OSB) in direct contact with the joists. Additional locations of water damage and dry rot were found on the wall OSB sheathing and the face of the doubled deck joists along the deck edge to wall interface by severely rotted structural support joists."
Continued on page 14 13 THE LAW JOURNAL | WWW.CACM.ORG Continued from page 13 The load of the 13 students were found to be "well within the design limits of the balcony structure."
What Communities Are Affected and What Inspections Are Required?
The bill adds Section 5551 and 5986 to the California Civil Code and amends Section 6150 and applies to buildings with three or more multifamily units which contain "exterior elevated elements."
The Inspections are “of the load-bearing components and associated waterproofing elements of exterior elevated elements."
The bill defines load-bearing components as "components that extend beyond the exterior walls of the building to deliver structural loads from the exterior elevated element to the building."
Exterior elevated elements are defined as "decks, balconies, stairways, walkways, and their railings that have a walking surface that is elevated more than 6 feet above ground
lement to the building."
Exterior elevated elements are defined as "decks, balconies, stairways, walkways, and their railings that have a walking surface that is elevated more than 6 feet above ground level, and are designed for human occupancy or use, and that are supported in whole or in substantial part by wood or wood-based products."
Who Is Qualified to Complete the Inspections?
Inspections can be completed by any of the following: (1) Licensed Architect; (2) Licensed Structural Engineer.
What Is the Scope and Purpose of the Inspections?
The purpose of the inspection is to "determine whether the exterior elevated elements are in a generally safe condition and 14 THE LAW JOURNAL | WWW.CACM.ORG performing in accordance with applicable standards."
The inspector shall perform a visual inspection in a “statistically significant” random sample of locations to provide 95 percent confidence that the sample results are reflective of the whole projects condition.
A visual inspection is defined as "the least.
intrusive method necessary to inspect load-bearing components, including visual observation only or visual observation in conjunction with, for example, the use of moisture meters, borescopes, or infrared technology."
However, if the inspector observes conditions that indicate water intrusion, further inspection is required, and the inspector "shall exercise their best professional judgment in determining the necessity, scope, and breadth of any further inspection."
What Type of Reporting is Required?
A written report stamped by the inspector shall be incorporated into the reserve study of the association and must be maintained for 2 inspection cycles in the association's records and is required to contain the following info: (1) Identification of the load-bearing
o the reserve study of the association and must be maintained for 2 inspection cycles in the association's records and is required to contain the following info: (1) Identification of the load-bearing components and associated waterproofing system.
(2) The current physical condition of the load-bearing components and associated waterproofing system, including whether the condition presents an immediate threat to the health and safety of the residents.
(3) The expected future performance and remaining useful life of the load-bearing components and associated waterproofing system.
(4) Recommendations for any necessary repair or replacement of the load-bearing components and associated waterproofing system.
If, after inspection of any exterior elevated element, the inspector advises that the exterior elevated element poses an immediate threat to the safety of the occupants, the inspector shall provide a copy of the inspection report to the association immediately upon completion of the report, and to the local code enforcement agency within 15 days of completion of the report.
What Type of Repairs Must be Completed?
After receipt of the report the association shall take "preventive measures immediately" including preventing occupant access to the exterior elevated element until Continued on page 16 15 THE LAW JOURNAL | WWW.CACM.ORG Continued from page 15 repairs have been inspected and approved by the local enforcement agency.
The new law further provides that the continued and ongoing maintenance and repair of the load-bearing components and associated waterproofing systems in a safe, functional, and sanitary condition shall be the responsibility of the association as required by the association's governing documents.
When Are the Inspections Required?
erproofing systems in a safe, functional, and sanitary condition shall be the responsibility of the association as required by the association's governing documents.
When Are the Inspections Required?
The initial inspections must be completed by 1/1/2025 and every 9 years thereafter. For buildings permitted after 1/1/2000 the first inspection must be completed within six years of the certificate of occupancy. Here are some important considerations and recommendations for managers: (1) There is a significant risk to waiting as the statute permits local governments or enforcement agencies to enact an ordinance or other rule imposing requirements greater than the statute.
(3) The reports will become part of the permanent records of the Association, reports indicating potential issues with construction may negatively impact the value of the community.
(4) Inspect early a. to reduce and mitigate damage.
b. avoid the last-minute rush that will occur near the deadline.
c. allows time to bring SB800 claims for defects discovered.
ABOUT THE AUTHOR Ritchie Lipson, Esq., is Director of Client Relations at Kasdan LippSmith Weber Turner LLP. He's been in the industry for 20 years.
(2) The statute is vague and shifts much of the responsibility for compliance with the inspector.
These professionals, required to stamp the report, will more than likely require intrusive/destructive testing to comply with the intent of the statute.
16 THE LAW JOURNAL | WWW.CACM.ORG ASSESSMENT COLLECTIONS AND BANKRUPTCIES By Erin A. Maloney, Esq.
How does the In Re Basave De Guillen Decision really affect California Associations?
O n August 26, 2019, the United States Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") dealt a bit of a blow to associations. The facts of In Re Maria A. Basave de
ect California Associations?
O n August 26, 2019, the United States Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") dealt a bit of a blow to associations. The facts of In Re Maria A. Basave de Guillen (BAP No. CC-181248-LSTa) are fairly typical of bankruptcy cases, so the result reached by the BAP has caused some concern among industry professionals.
The debtor became delinquent in payment of assessments to her association, Highland Greens Homeowners Association 17 THE LAW JOURNAL | WWW.CACM.ORG of Buena Park ("Highland Greens"). Highland Greens recorded an assessment lien early, with an amount then due of $1,395.00, and later filed a judicial foreclosure action to enforce the lien.
Highland Greens was awarded a judgment of $21,398.02, and recorded an abstract of judgment. Several years later the debtor filed a chapter 13 bankruptcy. Highland Greens filed a proof of claim in the bankruptcy, asserting that the full amount of its claim ($64,137.20) was secured by its assessment lien. The debtor objected to the claim. The bankruptcy court held that only the $1,395.00 set forth in the lien was secured by the assessment lien; the judgment amount of $21,398.02 plus interest thereon was secured by the judgment lien; and Continued on page 18 THE UNITED STAT THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE WASHING 12 L L 89823401 J 12 for bemutates fir ACO ONE DOLLA Continued from page 17 post-judgment amounts were unsecured.
The BAP confirmed the bankruptcy court's ruling, holding that there were two independent bases to find that the lien did not secure more than the amount stated therein. The first was that Highland Greens' CC&Rs did not provide for a continuing lien. In the case relied upon by Highland Greens for the rule that assessment liens are
more than the amount stated therein. The first was that Highland Greens' CC&Rs did not provide for a continuing lien. In the case relied upon by Highland Greens for the rule that assessment liens are continuing liens (Bear Creek Master Association v. Edwards (2005) 130 Cal.App.4th 1470, 1489), the CC&Rs provided that "any demand or claim of 18 THE LAW JOURNAL | WWW.CACM.ORG SERIES 2013 lien or lien on account of l Secretary of the Treasury.
FW E 102 12 §5675(a) states that "the amount of the assessment, plus any costs of collection, late charges, and interest" assessed in accordance with §5650(b) shall be a lien from and after the time the association records a notice of delinquent assessment. The BAP confirmed that §5675 does provide that collection costs, including attorneys' fees, are secured by a lien, but held that assessments which accrue after the lien is recorded are not secured.
prior delinquencies shall be deemed to include subsequent delinquencies and amounts due on account thereof." In contrast, Highland Greens' CC&Rs provided that each delinquency shall constitute a separate basis for a claim of lien, with no mention of a continuing lien. Associations with CC&Rs like Bear Creek's that clearly provide that liens secure assessments which accrue after the lien is recorded should still be able to rely upon those provisions to allow a continuing lien.
The BAP's second basis for confirming the order potentially applies to all associations; it concluded that the Davis-Stirling Common Interest Development Act does not provide for a continuing lien. Civil Code The BAP relied upon two prior bankruptcy court opinions: In re Warren, 2016 WL 1560844 (N.D.Cal. Apr. 13, 2016), and In re Guajardo, 2016 WL 943613 (Bankr. N.D.Cal. Mar 11, 2016) which both held
Code The BAP relied upon two prior bankruptcy court opinions: In re Warren, 2016 WL 1560844 (N.D.Cal. Apr. 13, 2016), and In re Guajardo, 2016 WL 943613 (Bankr. N.D.Cal. Mar 11, 2016) which both held that assessment liens are not continuing liens, and only secure amounts identified in the recorded lien. Those decisions have been around for years but have not been heavily relied upon by courts as they are not binding authority on any state court, or on any bankruptcy court. Decisions by the BAP are also not binding upon any other court; they are only binding in the case in which the decision was rendered. However, BAP opinions are frequently relied upon as persuasive authority by other courts.
Bear Creek Master Association v. Edwards continues to be binding authority upon all California courts. It established public policy favorable to associations that there is no need to record successive liens to secure unpaid assessments. However, there may be a trend shifting that public policy. In Diamond v. Superior Court (2013) 217 Cal.
App.4th 1172, the court noted that the most important purpose of the statute is to protect homeowners. The BAP chose to follow the more recent statement of policy favoring homeowners over associations.
Some associations have begun to record successive liens so that assessments are secured in the event that an owner files a bankruptcy. In weighing whether that approach is beneficial, associations should consider the high costs associated with recording multiple liens and the possibility that those costs may not be recoverable if a court views them to be unnecessary. If an association does not have a history of many owners filing for bankruptcy relief, it may find that the downside of recording successive liens outweighs the possible
views them to be unnecessary. If an association does not have a history of many owners filing for bankruptcy relief, it may find that the downside of recording successive liens outweighs the possible benefit of doing so.
An important step for managers to take is to support any legislative efforts to amend the law to clarify that assessment liens secure subsequently accruing assessments in addition to collection costs, late charges, and interest, and encourage association leaders to do the same.
Associations might consider taking steps to avoid the negative impact of the Basave opinion. If an association's CC&Rs do not clearly provide that subsequent assessments are secured by a continuing lien, then association may wish to consider seeking to amend them. Many associations' CC&Rs provide that liens are continuing, but do not explain what that term means. It may be beneficial to attempt to clarify such an ambiguity in a collection policy.
ABOUT THE AUTHOR Erin A. Maloney, Esq., is a Managing Shareholder of the Assessment Collection Department at Fiore, Racobs & Powers. She's worked in the industry for 28 years.
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