GOOD HOA v. BAD HOA
A good HOA plays an important role in maintaining your property values and ensuring your quiet enjoyment of your property.
A bad HOA can decrease the value of your home, force you to needlessly waste thousands of dollars, and turn your life upside down.
Good HOAs are priceless. Bad HOAs are a nightmare.
Good HOAs help make your home a place of comfort and relaxation.
Bad HOAs make your life a living hell.
CALIFORNIA COMMON INTEREST DEVELOPMENTS & THE DAVIS-STIRLING ACT
If you live in a condominium or planned housing development, then you live in a common interest development. There are four types of common interest developments:
- community apartment projects;
- planned developments;
- condominium projects; and
- stock cooperatives.
Within those four categories, you’ll find a lot of different types of housing arrangements, from single family homes (i.e., detached homes) and condominiums, to high-rise apartments and townhomes. What all common interest developments have in common, however, is that they are governed by an association of owners who enjoy the use of shared common areas and amenities.
No matter what kind of common interest development you live in, if it’s in California, it’s governed by the Davis-Stirling Act.
WHAT IS AN HOA?
Homeowners Associations (“HOAs”) are associations formed, usually as non-profit corporations, to own and manage common interest developments in California. HOAs are sometimes referred to by other names, such as “community associations” or just “associations,” but they all describe the same thing.
Some larger communities are actually made up of more than one HOA—consisting of a master association and one or more sub-associations, but that is not the norm.
The owners of the homes located within an HOA are referred to as “members.” The members of an HOA own not only their individual homes, but a piece of the common areas through their membership in their HOAs.
Like all corporations, HOAs are governed by a board of directors. The board of directors, made up of homeowners, is responsible for governing the HOA. To accomplish that task, an HOA’s board of directors has the power and authority to:
- adopt rules;
- call meetings;
- enforce governing documents;
- invest HOA funds;
- maintain common areas;
- obtain insurance;
- create committees;
- set elections;
- hire managers;
- set and enforce architectural standards;
- disburse revenues;
- hire attorneys;
- approve contracts
- call meetings;
- select officers;
- hire vendors;
- adopt budgets;
- pay HOA expenses;
- collect assessments; and
- file/defend lawsuits.
In addition, like all corporations, HOAs have a set of governing documents that describe not only the rules regarding how HOAs should function procedurally (e.g., the Bylaws), but also the rules governing what members can and cannot do (e.g., Rules and Regulations or Architectural Guidelines). The most important of these governing documents is the CC&Rs—the document that sets out the rights and obligations of the members, and the only governing document that is always recorded with the county recorder.
YOUR HOA IS GOVERNED BY REGULAR PEOPLE
Even though your HOA’s board of directors enjoys many of the same powers and responsibilities as any corporation’s board of directors, your HOA’s board consists of volunteers, most of whom have little or no experience running a corporation.
The problem is that most HOA board members have no experience whatsoever running a business—especially one worth millions of dollars. Think about it. If your HOA is large (i.e., has lots of homes and common amenities), then it’s quite possible that your HOA has extremely valuable assets. This is especially true if, for example, your HOA has amenities like swimming pools, tennis courts, club houses, etc.
Obviously, many boards hire management companies, accountants, and lawyers to help them properly manage the HOA, but when it comes down to it, the decisions are made by lay people, most of whom have little experience in such matters.
For that reason, HOA board members are given a lot of leeway and protection in making decisions. Such leeway is granted to them not only through liability protection offered by the CC&Rs and by errors and omissions insurance paid for by the HOA, but also courts in California tend to give directors the benefit of the doubt when it comes to their decisions—even when those decisions aren’t necessarily the best decisions. This judicial deference is known as the “Business Judgment Rule.”
The Business Judgment Rule is a legal doctrine that protects board members from liability for making bad decisions if they acted in good faith, did not act in a grossly negligent manner, and maintained liability insurance.
The problem with the Business Judgment Rule is that it is premised on the assumption that the directors’ decisions are based on sound business judgment.
That assumption, however, is quite frequently unfounded. Not only are the vast majority of directors serving on HOAs unexperienced in operating a corporation, but many HOAs find themselves governed by individuals whose motivations for serving are less than stellar.
YOU HAVE OPTIONS WHEN YOUR HOA ACTS IN BAD FAITH
Problems arise when board members either fail to do their jobs (e.g., they refuse to enforce the governing documents or maintain the common areas), or they act arbitrarily, dishonestly, or capriciously. When that happens, homeowners have options.
For example, homeowners have a right to demand a recall. Homeowners can recall the entire board, or just a specific member of the board. Regarding the latter, however, homeowners should remember that recalling the entire board is often much easier than recalling just one board member because in the case of a single board member recall, the cumulative voting laws permit a small minority of members from blocking a recall even if a vast majority of the members are in favor of the recall. Initiating a recall election is quite easy – it just takes a written petition signed by 5% or more of the HOA’s members (for stock co-ops, the petition threshold is 10%). The board must then act according to the HOA’s Bylaws in setting up a special meeting/election. HOAs are required to adopt recall policies as part of their election procedures, so be sure to look at those carefully.
Homeowners can also file a lawsuit against the HOA. Now, while it’s true that filing a lawsuit is (and should be) a last resort, it is also true that homeowners typically only contemplate such drastic action after they’ve tried to resolve the dispute in other ways.
For example, assume that the dispute at issue involves the HOA’s demand that a homeowner take down a shed erected in the owner’s backyard. A homeowner might try to point out that many of his/her neighbors have similar sheds and the HOA is not requiring them to take their sheds down. Such a homeowner might appeal to the HOA’s management company, and/or write emails to the board, and/or even speak up at board meetings. Only after getting nowhere might the homeowner consider litigation to force the HOA to treat everyone similarly.
Or, take for example the homeowner who is having a dispute with his/her neighbor about water intrusion being caused by the neighbor’s changing of the grading in the neighbor’s yard in violation of the HOA’s governing documents. After trying to resolve the dispute informally with the neighbor, the homeowner might decide to get the HOA involved by demanding that it enforce the association’s governing documents. Again, such a homeowner might write the management company, appear at board meetings, and even try talking to individual board members. But if that homeowner gets nowhere, he or she might not have any other choice but to file suit against the neighbor and the HOA.
In many cases, the homeowner is required to demand that the HOA/neighbor engage in alternative dispute resolution (ADR) before filing a lawsuit against the HOA or another homeowner. This is accomplished through an ADR Demand Letter.
Although the Davis-Stirling Act only requires ADR prior to filing a lawsuit that is “solely for declaratory, injunctive relief, or writ relief,” more often than not homeowner/HOA disputes can be resolved through the ADR process. ADR, therefore, in addition to sometimes being required by law, often plays a vital role in helping homeowners resolve disputes with their HOAs.
At the very least, ADR accomplishes three things:
- it tells the HOA that a homeowner is serious about whatever dispute is at issue;
- it provides an opportunity for the homeowner and the board to have one-on-one time to hash out the dispute; and
- both sides get to hear the opinions of an experienced, knowledgeable, and impartial mediator regarding the dispute.
Because ADR can so often resolve a dispute between a homeowner and the HOA (even a serious dispute), taking advantage of the ADR process, even when not technically required, often proves much more beneficial to the homeowner than to the HOA.
FREQUENTLY ASKED QUESTIONS & ANSWERS ABOUT CALIFORNIA HOAs
As you might imagine, homeowners have a lot of basic questions about their rights (and obligations) relating to their HOAs and neighbors. In no particular order, here are just a few of those questions (with brief answers):
Q: A group of us got together and signed a petition to recall the board of our HOA, and during the election process, the board announced that it had voted on some “rule changes” to the election process, which started the 28 day “comment period.” These changes were clearly designed to make it harder for us to accomplish our goal. Can they do that?
A: It depends on how far in advance of the election this occurred. The Davis-Stirling Act prohibits any amendment to the election rules less than 90 days before an election (Civ. Code, § 5105(h)). If the board vote or comment period falls within that 90-day period, then the rule change will not apply to the election at issue. So, if you’re correct, and the board made that change specifically to thwart your recall, then no, the board cannot do that.
Q: Can we reverse a rule change voted on by our board?
A: Yes, if you act quickly and in strict compliance with Civil Code section 4365. To start the process of reversing a rule change, you’ll need the support of at least 5% of the members of the HOA—the minimum number required to call a special election of the shareholders (i.e., members). So, if your HOA has 100 members (e.g., there are 100 homes or condos in your association), you and 4 other owners can force a special election. You will also need to act within 30 calendar days from the time that you’re notified of the rule change. If a quorum is reached in that election, and if a majority of the votes cast are in favor of reversing the rule change, you will be successful.
Q: If I’m forced to sue my HOA, can I recover my attorneys’ fees and costs if I win?
A: Yes. The Davis-Stirling Act requires an award of reasonable attorneys’ fees and costs to the winning party. The judge will decide what’s reasonable. Keep in mind that a refusal by a party to engage in ADR when it is required
and demanded can result in the court severely slashing, or even eliminating, their fees even if they win. Also, under a law that went into effect on January 1, 2020, a homeowner is now entitled to their attorneys’ fees if they consulted with an attorney regarding a small claims matter and they win.
Q: Is my HOA obligated to enforce the CC&Rs against other homeowners?
A: Yes. HOAs can be held liable for not enforcing their own governing documents.
Q: If I think my HOA’s board of directors is corrupt, what can I do?
A: Subject to certain statutory exceptions, if 5% of the members of your HOA (you included) agree, you may institute a recall against the entire board or against indi vidual director(s) by delivering a signed recall petition. This will force an official recall election. Because of cumulative voting requirements included in most CC&Rs, however, recalling individual directors is often more difficult than recalling the entire board.
Q: What’s the difference between the CC&Rs and the rules?
A: Your HOA’s CC&Rs represent the official “rule book” for your HOA. It is recorded with the county and may only be amended by the members of your HOA. The rules, on the other hand, can be established by your HOA’s board as long as they’re consistent with the CC&Rs. Rules must be reasonable, cannot be arbitrary, and any burden imposed must be outweighed by their benefit. In short, the CC&Rs are like the Constitution, and the Rules are like ordinary laws.
Q: Can the board just unilaterally change our HOA’s rules?
A: Before instituting a rule change or a new rule (other than in an emergency situation), the HOA’s board must vote to make the change or adopt the new rule at an open meeting. After that, the board must provide home owners with at least 28 days’ written notice to comment or object to the proposed change/new rule. The notice must include the exact text of the new rule, as well as a description of the purpose and effect of the rule change. If not vetoed by the homeowners during that time in the manner required by the Davis-Stirling Act, the HOA must then, within 15 days of the rule change, deliver notice to all homeowners that the new rule/change is in effect.
Q: Can my HOA ban sober living/drug treatment homes?
A: No. HOAs cannot ban owners from operating or renting their homes out as alcohol or drug abuse treatment/recovery facilities as long as there are no more than 6 people living in a given home. However, there are things an HOA can do to minimize the impact of such facilities, or even to discourage them from setting up shop in a neighborhood.
Q: Can my HOA ban me from operating a day care center?
A: No. Your HOA cannot prevent you from operating a day care center. Your HOA can, however, adopt reasonable rules and regulations regarding the manner in which you operate the day care. For example, the HOA can require that you be licensed by the State, or that you either carry insurance, or notify parents that you don’t have such insurance.
Q: Can my HOA ban me from owning a dog?
A: No. Your HOA cannot prevent you from owning a dog. HOAs can, however, set rules regarding the number of pets you can have, the size of the pet, and even whether certain breeds will be permitted. There was some debate about whether or not the law applied to all HOAs,
or just those formed in the last few years, but because of a loophole in the law, it probably applies to all HOAs in California.
Q: I live in a medium-sized association in Orange County and a proposal came up at our last Zoom meeting to require members who wish to use the community pool and tennis courts to prove that they’ve received one of the COVID-19 vaccines. I don’t think the board can do that, can they?
A: Obviously, we are in new territory when it comes to COVID-19 regulations, so it’s very difficult to predict how courts will act when faced with these types of novel questions. That being said, while there are no laws that I can think of that would specifically prevent an HOA from passing such a rule, I don’t think such a rule would be enforceable if it was challenged in court. I can think of several constitutional issues that would arise if your HOA tried to pass such a rule (e.g., religious beliefs and the right to medical privacy). There are also public policy grounds to prohibit such overreach on an HOA’s part, such as equal protection (e.g., Why is this virus different than other serious viruses?) or valid exceptions (e.g., allergy conditions that make most vaccinations impossible). In short, I think your HOA would be inviting massive litigation if it tried to pass such a rule.
Q: Can my HOA stop me from installing video cameras?
A: No. As long as you install the cameras on your property (i.e., not common areas), and you aren’t pointing them at a neighbor’s windows, your HOA cannot prevent you from installing cameras on your property.
Q: Do I have the right to record HOA board meetings to ensure that a proper record is kept of what was discussed?
A: No. You do not have a right to record board meetings, so your HOA may adopt rules prohibiting you from doing so. But even if your board has not adopted such a rule, before recording a meeting, make sure you do so in compliance with California’s other laws regarding privacy and recording conversations.
Q: What are my rights after receiving a violation notice?
A: Before any penalty (e.g., a fine or suspension of privileges) is assessed against you, the HOA must provide you with notice (typically 10 days for fines, 15 days for suspension of privileges) of a hearing. The Notice must specify the date, time, and place of the hearing, and what you’re being accused of. You are also entitled to know who your accuser is, look at the evidence against you, and submit your own evidence to refute the accusations.
Q: Can my HOA prevent me from renting out my home?
A: Wholesale bans on any rentals at all are illegal. But the question is much more complicated than you may think. Here are the basics:
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- if you owned your home before a ban or limitation on rentals went into effect, the ban or limitation does not apply to you;
- beginning on January 1, 2021, HOAs in California cannot impose outright bans of rentals lasting 30 days or longer;
- HOAs can ban rentals of 30 days or less; and
- HOAs can set reasonable restrictions on the percentage of homes in the community that may be rented out as long as the percentage isn’t higher than 25%.
Q: I am trying to build a separate apartment for my mother-in-law by converting one of our garages into an apartment for her to move into. My HOA is putting up all kinds of road blocks, and one of my neighbors is refusing to sign off. What are my rights?
A: What you’re describing is sometimes known as a “granny flat,” but the official name is an Accessory Dwelling Unit (“ADU”). An ADU can be attached to the main house or detached from it. For purposes of this question, I’m going to assume that you own a single family home (i.e., not a townhome or condominium). Since you’re interested in converting one of your garages, I also assume that your garage is attached to the main house. If that’s case, provided that you don’t plan on making your ADU larger than 50% of the square footage of your main house, your HOA won’t be able to stop you from building the flat for your mother-in-law. In fact, the ADU law passed recently in California overrides any set back or parking requirements contained in your HOA’s governing documents.
Q: Can the HOA stop me from installing a satellite dish?
A: No. As long as you’re installing your satellite dish on your property, your HOA can’t do much to stand in your way. However, HOAs can impose a few restrictions, such as: (i) requiring you to provide notice before installation; (ii) requiring you to camouflage the antenna (as long as
it’s not too expensive); and (iii) limiting you to 1 antenna. Also, your HOA cannot require you to get pre approval before installing your satellite dish.
Q: I recently put up a sign and flag on my property to honor our veterans, and my HOA has demanded that I remove both the flag and sign. Can they do that?
A: Both federal and state law protect your right to display an American flag on your property. HOAs can, however, set some restrictions. For example, HOAs can require that your flag be displayed from a window, pole, or in your yard. And HOAs can prohibit flags made from certain materials, such as lights, paint, balloons, etc. With respect to signs, it depends. HOAs can ban commercial signs (except for real estate signs, which the Davis-Stirling Act specifically permits), but subject to certain limitations (composition, time limits, size, etc.), HOAs can’t prevent you from displaying most other types of signs, including political signs. Assuming that your flag and sign aren’t unreasonably large, no, your HOA can’t force you to remove either.
Q: I didn’t realize when I built my deck about 7 years ago that I had violated the CC&Rs. Now, the HOA is ordering me to remove it. Do I have to remove the deck?
A: Most likely not. There is a 5 year statute of limitations for punishing any violation of the CC&Rs or rules of an HOA (measured from the time that the board knew or should’ve known of the violation).
Q: I want to see a list of my HOA’s members so I can write to them about a rule change that I think my HOA needs. Does the HOA have to give me that list?
A: Yes. You have a right to receive your HOA’s membership list (i.e., names, addresses, mailing addresses, and beginning January 1, 2020, email addresses) within 5 days of your request as long as you cover any actual costs incurred by the HOA in copying the list, state the reason you want the list, and that reason is reasonably related to your interest as a member of the HOA.
Q: Can my HOA stop me from smoking in my home or on my balcony?
A: Yes. The legislature and courts in CA have decided that smoking is not a civil right and that the HOA’s right to minimize fire hazards and nuisances to other residents (especially in connected housing that share centralized air systems) trumps your right to smoke-even inside your own unit.
Q: Can my HOA ban my use of medical marijuana?
A: For purposes of this question, I assume you’re referring to smoking marijuana rather than using edibles. The fact that you have a prescription for marijuana or that you need it for the treatment of an illness or disease is currently irrelevant. As far as HOAs are concerned under the current law in CA, there’s no difference between marijuana and cigars or cigarettes. It might be different, however, if your doctor could demonstrate that no reasonable alternatives existed (i.e., edible marijuana wouldn’t provide the necessary relief, and use of opioids was contraindicated). In such a case, you could assert that your HOA must permit your use of marijuana cigarettes as a reasonable accommodation. Illnesses—especially those of a long-term nature—very often qualify as disabilities under federal and state law.
Q: I had my car wrapped to advertise my business and my HOA is now telling me that I can’t park my car on my driveway because of the ban on commercial vehicles in our CC&Rs. Can they do that?
A: Yes. While HOAs can’t ban regular passenger vehicles, if you’ve added commercial designations (e.g., magnetic signage or a wrap), such bans are enforceable.
Q: Do I have a right to receive the minutes of my HOA’s board meetings?
A: As a member of the HOA, you have an absolute right to receive a copy of the minutes of each open meeting. You do not, however, have a right to inspect the minutes of executive session meetings.
Q: Can my HOA enforce rules against me that it isn’t enforcing against others?
A: No. HOAs are obligated to treat all HOA members the same, and selective enforcement violates that obligation.
Q: Can I get fined if one or two neighbors constantly lodge anonymous complaints about me?
A: That shouldn’t occur unless the HOA can prove a violation through some other means (e.g., a video camera, or another witness’s testimony). You also have the right to know who your accusers are and to confront them.
Q: Can our HOA do something about people who drive too fast?
A: Yes. If your HOA can prove that a resident is speeding through the community (through testimony, for example), the HOA can either impose a fine or even suspend the driver’s right to drive in the neighborhood (meaning, that the speeder might have to park outside of the HOA’s property and walk to his or her home).
Q: We have an election coming up. Do existing board members have rights that I don’t have if I want to run?
A: No. Homeowners running for the board are entitled to equal access to the HOA’s media and common area meeting spaces. So, if an HOA has a monthly newsletter (as many of them do), if any board member running for reelection uses that newsletter to campaign (i.e., if he or she does anything other than just sticking to general matters), the HOA is required to provide equal access to all candidates. Also, no HOA funds can be used for campaign purposes, so current board members shouldn’t be using HOA funds in any way related to their reelection.
Q: What can I do if an election wasn’t conducted properly?
A: HOA members have several options if they feel an election wasn’t conducted properly. For example, home owners can demand to inspect the ballots after they’ve been tabulated. HOA members can also demand a formal recount as long as they make the demand in writing within 5 days after the election results are announced and pay the reasonable costs associated with the recount. If the HOA fails to strictly abide by its election related obligations, homeowners have 1 year to challenge the election results in court.
Q: My HOA is refusing to hold elections. What can I do?
A: Elections are among the fundamental tasks that HOAs are responsible. If your HOA has refused to hold elections when required to, you can file a Writ with the Court to compel the HOA to move forward with the elections. If you win, the court will also award you with your attorneys’ fees and costs.
Q: If a homeowner is delinquent in paying her monthly assessments, can we prevent her from serving on the board?
A: Yes and no. Generally speaking, homeowners who are not current on paying their regular or special assessments can be prevented from running for a board seat. That disqualification, however, does not apply to home owners who are making payments under an established payment plan, nor does it apply to fines, collection fees, or late fees, even when those are couched as “assessments.”
Q: Can I force my HOA to give me the email addresses for all the members?
A: Yes. all HOA members are entitled to other members’ email addresses unless the members at issue have opted out. Individual members have the right to opt out of providing email addresses to their HOAs.
Q: A leaking roof in my condo caused a lot of damage to my home. Is the HOA responsible for my repair costs and damage to my things?
A: It depends. First, in the case of a condominium, it’s very likely that the HOA is responsible for repairing the leaky roof. However, that doesn’t necessarily mean that the HOA is responsible for your interior repairs or damage to your things. That would depend on whether you could prove the HOA was negligent or not. For example, if you could show that the HOA knew about the problem that led to the leak, or that the HOA failed to repair something that resulted in the leak, then you could likely prove negligence, and the HOA would be liable for your damages.
Q: Can non-HOA members serve on the board?
A: No, not since 2020. Non-members are no longer permitted to serve on an HOA’s board of directors. This prohibition, however, doesn’t apply to board positions being held by a developer prior to turning control over to the homeowners.
Q: Can my HOA suspend my voting rights if I’m not current on my paying my regular assessments?
A: No. While an HOA can prevent homeowners who are delinquent in payment of their assessments from serving on the board, such delinquency cannot serve as a basis to ban a member from voting.
Q: My HOA is trying to ban me from hanging a cross on my front door during lent/Easter. Can they do that?
A: No. HOAs cannot restrict a homeowner/renter from displaying “religious items” on their entry doors or door frames. This would also include things like a reasonably sized Christmas wreath or a mezuzah.
Q: I live on the top floor of my condominium building. Can my HOA ban hardwood flooring?
A: Yes, if that prohibition is in the CC&Rs. There are exceptions, however, to enforcing such bans. For example, a homeowner who suffers from severe allergies could compel the HOA to grant an accommodation-provided, of course, that the hardwood flooring doesn’t cause a noise nuisance to another resident (e.g., someone living below).
Q: Can my HOA require people to wear face masks while in the common areas (which, in our neighborhood, are all outside)?
A: That’s a difficult question. The COVID-19 virus has raised a lot of novel issues related to HOAs. Your question is one of them. And while this is all very new and untested (meaning that the courts have yet to decide on such things), I think your HOA would argue that it has the right to require masks in the common areas. Your HOA would likely argue that since COVID-19 constitutes a public health emergency, and since HOAs have authority to enact to emergency rules (i.e., ignore the 28 day waiting period required by Civ. Code, § 4360(d)), it has the right to enforce a mask requirement. Certainly if your association’s common areas are inside (e.g., clubhouse), such a rule would have an easier time passing muster with the courts. It would be harder, however, if your common areas consisted solely of outdoor “amenities,” such as gardens and the like.
Q: Our HOA’s board has tried two times to hold our annual elections, only to fail because too few homeowners show up to vote (or mail in their ballots). What are we supposed to do?
A: To begin with, let’s address the future. The easiest way to avoid this from happening in the future is to eliminate the quorum requirement for board elections. Those requirements are probably contained in the HOA’s bylaws, so those would have to be amended. But if you could accomplish that, it would solve the problem in the future. As for the issue before you now, you really only have two choices: (i) keep trying until you achieve a quorum, and then lobby to amend the bylaws to avoid the problem from arising again; or (ii) the board can take the issue to court so that the court can lower the quorum requirement for that election.
Q: I own a condo in an HOA that I use as a long-term rental. During the heavy rains last year, a few of the units in my building, including mine, suffered damage as a result of a leaky roof and sloppy landscaping. The HOA immediately agreed to make repairs, so there’s no issue there. The problem is that during the repair period, my unit will become uninhabitable, and I’m left with the choice of releasing my tenants from their lease, or paying for them to temporarily relocate. Is the HOA responsible for my lost rent/relocation costs?
A: Most likely, no. HOAs are not responsible for damage to personal property or things like lost rent unless such damage/losses arose as a result of their negligence. (Civil Code § 4775.) Sometimes, roofs leak—especially in heavy and sustained rains (like we experienced last year). And sometimes, heavy rains can cause changes in grading, resulting in water intrusion. Unless the HOA knew of a problem, and chose to do nothing, the HOA will not be responsible for damages you suffered. It will have to make the repairs, of course, but you said that the HOA was doing that. So, unless the leak/water intrusion resulted from the HOA’s negligence, you are not entitled to lost rent or relocation costs.