All California homeowners are subject to the laws of the United States and the State of California, and the laws of their county and city or municipality. Homeowners in a common interest development are also subject to the “covenants, conditions and restrictions” (CC&R’s), rules and regulations, and the enforcement powers of their homeowners association.
A California homeowners association is typically run by an elected board of directors and a hired property management company. Board members are typically elected from a slate provided by or at the suggestion of a previous board, and are typically unknown to a majority of the voting members of the association. The management company is selected and hired by the board of directors, with no input from the members at large.
Among the duties of a homeowners association, to be carried out by and through its board of directors, as set forth in its CC&R’s and as required by law, are the duties to maintain the common areas and to enforce the association’s CC&R’s and rules and regulations, for the benefit and peaceful enjoyment of the property rights of all of the members. Board members are given enforcement mechanisms which include the issuance of fines and the imposition of liens against the members’ separate interest properties, and can foreclose against a member’s separate interest property if the fines are not paid or the liens are not satisfied.
Most homeowners associations operate properly and without incident most of the time. Serious problems arise, however, in a variety of circumstances, including: when a board member or management company employee has or develops a personal dislike, grudge or bias against an individual member or a group of members; when the board fails to maintain common areas; when the board enforces association rules in a less than even-handed manner; and especially when the board seeks to implement the desires of a majority, to the severe detriment of a minority of the members of the association. This last problem is encountered in a number of contexts: parking and other rules and regulations that negatively impact the disabled, persons with over-sized vehicles, and persons with special needs; pet rules; rules prohibiting play by children in common areas where a majority have no children, or encouraging play by children in common areas where a majority have children; changing the rules and uses of common areas in a manner which deprives some homeowners of their peace and quiet, their privacy, the aesthetics for which they may have paid a premium, and/or even significant market value in their homes.
A California homeowners association is in fact an additional layer of government, governing the lives, rights and duties of its separate interest property owners; a layer of government which is typically operated by persons who are not necessarily experienced, trained or specially qualified for the job. Disputes between individual homeowners and homeowners association boards of directors abound.
In the event of a dispute, a homeowner has a right to a hearing before the board of directors; and, if requested, a cost-free mediation type of dispute resolution proceeding, as required by law. (California Civil Code sections 1363.810--1364.850.) But if the parties do not informally and voluntarily agree, the homeowner has no recourse other than to file a lawsuit in court; and if the dispute is about association rules or proposed actions and does not involve monetary damages of $5,000 or more, then the homeowner must also, and first, participate in a paid mediation or arbitration, or other dispute resolution proceeding, before he or she is permitted to file the lawsuit in court. (California Civil Code sections 1369.510--1369.590.) If a lawsuit is filed, the association’s costs and fees will most likely be paid by insurance; the homeowner will have no such assistance. Many, if not most, common interest development homeowners cannot afford this process.
The California legislature is fully aware of this problem. In 1985, the Davis-Stirling Act (California Civil Code sections 1350--1378) was enacted, among other reasons, to consolidate statutes governing common interest developments and to address problems faced by homeowners and associations in the operation of common interest developments. (See Rosenberry, “The Davis-Stirling Common Interest Development Act,” 8 CEB Real Property Law, Rep. 172 (Nov. 1985.) It is supplemented and implemented by Department of Real Estate regulations. (California Code of Regulations, Title 10, sections 2790 et seq.) Virtually every year the Davis-Stirling Act is amended in some manner, and is frequently amended to deal with the imbalance of power as between homeowners and their homeowners associations, to curb overreaching and abuses by homeowners association boards of directors, and to provide and improve no- and low-cost mechanisms by which homeowners can present and attempt to resolve their grievances.
In 1995 the Common Interest Development Open Meeting Act (California Civil Code Section 1363.05) was enacted. The purpose was to prevent secret, non-public meetings and actions by homeowners association boards of directors, and to assure that actions taken by boards of directors are open and disclosed to the entire membership of their associations. The Open Meeting Act was amended in 1996, 2002, 2007 and 2011.
In 2004, provisions of the Davis-Stirling Act requiring that the parties participate in an alternative dispute resolution proceeding before being permitted to file a lawsuit in court in certain types of cases, were replaced and supplemented by a series of new provisions. Also in 2004, provisions requiring that homeowners associations provide a simple and efficient intra-association dispute resolution procedure at no cost to the parties was enacted. (California Civil Code sections 1363.810--1363.850.) These provisions have all been amended numerous times since enactment.
While all of this is helpful, to date it is just not enough.
In Nahrstedt v. Lakeside Village Condominiums Owners Association, Inc. (1994) 8 Cal.4th 361, the California Supreme Court presented a “broad overview of the general principles governing common interest forms of real property ownership.” The Nahrstedt court cited various treatises finding the roots of the shared ownership of real property back in ancient Rome, and tracing the condominium (in Latin = joint dominium or ownership) concept back to medieval Germany. The court stated that it was not until the enactment of the National Housing Act of 1961, making federal mortgage insurance available to condominium units, that the shared ownership of real property gained general acceptance in the United States.
The Nahrstedt court found and stated that: “Use restrictions are an inherent part of any common interest development and are crucial to the stable, planned environment of any shared arrangement.” “Because of its considerable power in managing and regulating a common interest development, the governing board of an owners association must guard against the potential for the abuse of that power.” “Owners associations ‘can be a powerful force for good or ill’ in their members’ lives.” “Therefore, anyone who buys a unit in a common interest development with knowledge of its owners association’s discretionary power accepts ‘the risk that the power may be used in a way that benefits the commonality but harms the individual.’”
For individual homeowners, however, while they may be deemed by law to have accepted or assumed these risks, they have not typically done so knowingly, voluntarily or in full appreciation of the nature of the risks involved. For many Californians, condominium living is not a choice, but a necessity. For many first-time home buyers, it is and has been their only means of entering the California housing market and of participating in what has been up to the very most recent years an ever-escalating cost of home ownership in our State.