There has been a renewed interest by homeowners in the installation of solar panels on their roofs. Members of the association are still required to apply and receive approval from the architectural committee before installing solar panels on their roofs. Unlike most other improvements to the property, California law limits the ability of associations to control the installation of solar panels. Civil Code §714 provides that any CC&Rs that effectively prohibit or restrict installation of solar energy systems are void and unenforceable. However, homeowners associations can impose reasonable restrictions on solar energy systems. Civil Code §714.1 elaborates on the installation of solar panels in community associations and clarifies the extent of control associations are permitted to exercise. Should you need more information regarding this issue, copies of the law, or if you would like our office to draft solar energy system regulations for solar panel installation, please feel free to contact us.
If you are a member of CAI or receive CAI bulletins, no doubt you received word earlier this year that in a case arising in King County, Washington, the court put the lien interests of a community association ahead of the secured lender’s lien. The case is known as Summerhill Village Homeowners Association v. Roughley. Ms. Roughley became delinquent in her assessment payments, and the Summerhill Village HOA brought an action to foreclose its assessment lien. Roughley did not object and the property was sold.
In the meantime, Roughley also became delinquent in her mortgage payments. The lender intervened in the HOA’s foreclosure action to establish priority of its lien (which took the form of a deed of trust). The court held that the lender was out of luck, and that the HOA’s foreclosure extinguished the lender’s deed of trust.
Don’t we all wish this were the law in California? How many HOAs here have pursued collections only to have the assessment lien wiped out and no practical way to recover thousands of dollars in unpaid assessments and costs of collection?
Washington’s Condominium Act expressly allows for HOA liens to take priority over bank liens. In California, this “super-priority” for HOAs is non-existent, and not likely to materialize any time soon. In Washington, the law is that assessments which cover “common expenses” take super-priority over all prior liens, including a bank’s deed of trust. The Washington law provides for other super-priority features too legalistic to explain here. The upshot is that the legislature in the state of Washington “gets it” when it comes to community associations: HOA’s are dependent upon assessments to maintain basic quality of life and property value levels; as investors taking a security interest in the homes which constitute a community association, banks derive benefit from the maintenance of those basic levels of quality of life and property values; so therefore, HOAs should not always be the odd man out when it comes to collecting delinquent assessments, facing a squeeze from foreclosing banks at one end and the bankruptcy courts which relieve delinquent owners of their obligations at the other. In Washington, unlike in California, an HOA can recover unpaid assessments by foreclosing ahead of a bank and wiping out the bank’s lien, and in doing so avoid rent-skimming problems and the threat of losing the property when the bank eventually deigns to foreclose. This also means an HOA can negotiate more forcefully with a delinquent homeowner to pay up.
But then … to take advantage of the super-priority law for community associations, you would have to live in Washington, where it rains more than three times as much as in California (at least if you compare annual rainfall averages in San Diego and Seattle). I think I would rather lobby legislators in Sacramento to enact protections for HOAs than re-locate to the beautiful, but cold and damp, pacific northwest.
This time of year we often receive calls from managers regarding owner violations of the minimum lease term provisions set forth in the CC&Rs. Minimum lease term provisions vary depending on the CC&RS, but thirty (30) day or six (6) month minimum lease terms are the most common. The purpose of these provisions is to cut down on the use of residences for hotel or transient use. Owners do not want their community to be used as a vacation rental.
We find that violations of minimum lease term provisions is most common in communities that are attractive vacation rentals due to proximity to the beach, the convention center or in the downtown area. For example, owners advertise the availability of their units by posting them on popular websites such as vrbo.com, which includes vacation rentals by owners or airbnb.com, which advertises single rooms or an entire condominium, to solicit short term rentals by the night or by the week. Many of these advertisements are for high-end properties with ocean views where owners have paid a premium for an upscale, luxury property with desirable amenities such as pool, spa, exercise studio and/or sauna. Owners rightly object to sharing these recreational facilities with tourists and travelers.
Violations of the minimum lease term requirement can be addressed as any other CC&Rs violation by notice and hearing. The Board can have management send the offending owner a violation notice and call the owner to a hearing, which is usually held in executive session. If after the hearing, the owner is found to be in violation, then the Board can impose a fine according to the fine schedule.
If fines do not curtail the owner’s short term vacation rental activity, the Board may want to consider a court action for injunctive relief. Before a complaint can be filed, associations are required to serve the offending owner with a request for resolution and offer to mediate the dispute. If the owner accepts the offer to mediate, then a mediation is scheduled and held. Often, mediation will resolve the dispute. If it does not, then the association is then free to file a lawsuit requesting injunctive relief. If the association prevails, the court can order the owner to pay the association’s legal fees.
Kathy Mills & Jamie Schwartz
AB 2273 has moved from the State Assembly to the Senate Judiciary Committee, where it is scheduled for a hearing on June 26, 2012. The bill, sponsored by Assemblymen Wieckowski, requires recordation of foreclosure sale deeds within thirty (30) days from the date of the sale.
This bill would be a significant improvement for homeowner associations. It would result in additional cashflow in financially strapped associations where a number of homes in the community are in foreclosure.
Presently, lenders are slow in recording the foreclosure sale deed after the foreclosure sale occurs, thereby delaying the payment of assessments. Associations already have the right to record a notice requiring foreclosing lenders to mail the association a copy of the trustee’s deed within fifteen (15) days of the trustee sale date, but there is no law requiring the foreclosing lender to record the foreclosure sale deed within a specified time period. As a result, lenders are slow to record the deeds, so they do not have to start paying assessments. This bill will speed-up notification to associations if the association previously recorded a request for the information, so that the associations can then invoice the lender for assessments.
We will continue to support and keep a close watch on this bill which is CAI’s big bill for this legislative session.