New Case Law

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POWERPOINT SLIDES

NEW CASE LAW

THURSDAY GENERAL SESSION

3:40 – 4:40 PM

SPEAKERS

David F. Feingold, Esq.

Michael J. Hughes., Esq.

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SPEAKERS

David F. Feingold, Esq.

Michael J. Hughes, Esq.

New Cases and

Case Law

Case Law – What’s the Point?

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Published Appellate Cases

Unpublished Appellate Cases

Trial Court Cases

Published

Appellate Cases

Suing the Architect

Beacon Residential Community Association v.

Skidmore

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WHAT HAPPENED?

• High Rise condominium defect action

• Architect sued for design defects - solar heat

gain in high rise caused by selected windows

and design

• Architect claims no duty to association (buyers)

YOU BE THE JUDGE!

• Can an architect be sued by future owners of a

residential project for negligence?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Architects can be sued by future owners

• Three part test:

1. Close connection between negligent

conduct and injury?

2. Clear and definable class intended to be

affected by the work?

3. Did the owners have “ordering options”

that could have protected them?

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TRENDING ISSUES

• Architects and engineers will be scrutinized

• HOA renovation projects – pay attention to

indemnities, limitation of liability clauses, and

insurance issues

STANDING TO SUE

Market Lofts Community Association v. 9th

Street Market Lofts LLC

WHAT HAPPENED?

• 267 unit condominium project

• Agreement between developer and adjacent parking structure owner for “perpetual” no-cost parking rights for condominium purchasers

• Developer-controlled board eliminates no-cost parking deal in a new agreement

• Owner controlled board later sues developer for breach of fiduciary duty and to rescind new agreement

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Developers claimed the association lacked

“standing” (the right) to sue, arguing that

association members were damaged, not the

association itself

YOU BE THE JUDGE!

Did the association have “standing” to sue the

developer and seek as damages the money that

the owners had to pay for the parking?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Yes -- the association can sue

• An association has standing to sue the

developer for negligence and self-dealing as a

representative of the owners when:

– An ascertainable class of owners exists

– A well-defined community of interest exists

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TRENDING ISSUES

• Reaffirms associations’ right to sue in a

representative capacity for harm done to the

owners

• Developers can be held liable when they are

controlling members of a board

• Watch for “self dealing” or conflicts of interest!

ASSESSMENT COLLECTION - REJECTION OF PARTIAL PAYMENTS

Huntington Continental Town House Assn.,

Inc. v. Miner

WHAT HAPPENED?

• Association sued homeowners to foreclose

assessment lien

• Homeowners made partial payments -- principal

only – no late fees or collection costs

• Association rejected partial payments

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YOU BE THE JUDGE!

Was the association entitled to reject partial

payment so that foreclosure could proceed?

– Yes?

– No?

WHAT DID THE COURT DECIDE?

• Associations must accept partial payments that

reduce delinquent assessments owed even after

foreclosure proceedings commence

• Associations must accept partial payments even if

such payments do not include late fees, costs of

collection, attorneys’ fees, etc.

• Partial payments that cover the principal preclude

associations from proceeding with foreclosure

TRENDING ISSUES

• What to do?

• Civil Code § 5720 foreclosure thresholds:

$1800

12 months delinquent

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FREE SPEECH PROTECTION FOR

BOARD MEMBER ACTS OR STATEMENTS

Talega Maintenance Corporation v.

Standard Pacific Construction

WHAT HAPPENED?

• Association sued developer for defective trails

• Developer directors named as defendants

• Association alleged fraud, negligence, and

breach of fiduciary duty for directors:

– Statements about responsibility for trail

repairs

– Votes at meetings to use association funds to

repair trails

Anti SLAPP Motion

• CCP 425.16 – Protection for Strategic Lawsuits

Against Public Participation

• Defendants move to strike, claiming lawsuit is

barred because the claims based on protected

activity

• Prior cases protected HOA directors from certain

claims found to be protected free speech

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YOU BE THE JUDGE!

Can the director defendants dismiss the lawsuit

because their actions on the board constituted

protected activity?

- Yes

- No

WHAT DID THE COURT DECIDE?

• Directors’ acts of withholding information and

improperly expending HOA funds were not

protected free speech

• The statements were made in a public forum,

but were not a “public issue” because no

ongoing controversy

TRENDING ISSUES

• Directors may be held liable for actions as

association directors

• But free speech rights exist in HOA’s for

directors and members

• Don’t SLAPP anyone and know when you are

being SLAPPED

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ATTORNEY-CLIENT PRIVILEGE Seahaus La Jolla Owners Association v.

Superior Court

WHAT HAPPENED?

• Construction defect action against developer

• Association’s attorney wrote letters and

communicated with the members

• Developer sought access to those member

communications, claiming not attorney client

privileged

YOU BE THE JUDGE!

Were communications between the attorney and

members who were not directors protected by the

attorney client privilege?

– Yes

– No

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WHAT DID THE COURT DECIDE?

• Attorney’s communications with members were

protected by the attorney-client privilege

• Communications were necessary for attorney to

pursue construction defect litigation on behalf of

the association

TRENDING ISSUES

• Protecting privilege as to third parties is not

guaranteed – don’t assume it will be.

• Can members demand access to

communications with HOA general counsel?

ALTERNATIVE TO SB 800

DISPUTE RESOLUTION PROCESS

ESTABLISHED BY DEVELOPER

McCaffrey Group, Inc. v. Superior Court

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WHAT HAPPENED?

• Developer set forth alternative dispute resolution

procedures in the sales contracts and warranties

– opted out of SB 800 Right to Repair Act

requirements

• Owners alleged the dispute resolution process

was unconscionable because:

– Owners had no bargaining or negotiation

power

– Process one sided and did not contain any deadlines for completion

YOU BE THE JUDGE!

Could the developer enforce the dispute resolution

procedure it created that contained no deadlines?

- Yes

- No

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WHAT DID THE COURT DECIDE?

• Developer’s alternative dispute resolution

procedures were not unconscionable

• Not so one-sided as to “shock the conscience”

and good faith implied in all contracts

• Court orders process to be followed

TRENDING ISSUES

• Consistent with findings of the California

Supreme Court that developers can insert

construction defect dispute resolution

requirements in CC&Rs

• What about CC&R amendments to control

member suits?

“NO COST” ASSESSMENT

COLLECTIONS

Hanson v. JQD, L.L.C.

TRIAL COURT – PRELIMINARY DECISION

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WHAT HAPPENED?

• Association retained firm to collect delinquent assessments under its “no cost” program

• Owner attempt to pay principal only was rejected by collection firm and assessment lien recorded

• Owner sues alleging collection firm had no right to costs if not charging costs to association

• Defendant filed motion to dismiss

YOU BE THE JUDGE!

Should the case be dismissed because an owner

is liable for assessment collection costs even if

those costs are not incurred by the association?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Case not dismissed, Trial Court found that

owners are liable for collection fees charged by

vendors only to the extent that those fees have

actually been incurred by the association

• Decision was preliminary!

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TRENDING ISSUES

• Impact on future non-judicial collection actions?

• “No cost” collection services are being highly

scrutinized by courts and local district attorneys

• Stay tuned for further developments

RENTAL RESTRICTION CHALLENGED

Guttman v. Glen Towers Owners Association, Inc.

(Unpublished)

WHAT HAPPENED?

• 61 unit condominium building

• “Single Units” were “maid units” with no kitchen

on first floor, only owners of “Master Units”

upstairs could own

• Only family and other household members of the

Master Unit (including domestic servants or

guests) could occupy a Single Unit

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• Owner since the 1970’s began violating

restriction in the 1990’s by renting – consistently

lied about use

• HOA sued in 2010

• Owner claimed restriction unenforceable

YOU BE THE JUDGE!

Is a CC&R provision restricting the rental of

a condominium unit enforceable?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Court found that the occupancy restrictions of

the Single Units were reasonable and

enforceable

• No waiver by HOA – burden is on party claiming

waiver of a right to enforce

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Trending Issues

• Vacation Rentals -- Airbnb, HomeAway, VRBO, Flipkey

• House Swap – Homeexchange, lovehomeswap

• Enforcement of Rental Restrictions difficult to police and enforce

• Airbnb laws, e.g., San Francisco – As of February 2015, allows turning homes into ad-hoc hotels

FANNIE MAE AND DELINQUENT

ASSESSMENTS

Federal National Mortgage Association v.

Rothman, et al. (Unpublished)

WHAT HAPPENED?

• Fannie Mae refused to pay assessments on

foreclosed properties

• Associations recorded liens by attorney

Rothman (which included his collection costs,

interest and late charges) against the Fannie

Mae properties

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• Fannie Mae sued Rothman and the associations

arguing charges excessive and that Rothman

acted with fraud, malice and in bad faith

• Claimed charges included pre foreclosure

assessments, fees and costs

YOU BE THE JUDGE!

Was Fannie Mae obligated to pay delinquent

amounts that accrued before a foreclosure?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Fannie Mae was not liable for pre-foreclosure

assessments and costs and fees but was

responsible to pay post foreclosure

assessments and fees and costs

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TRENDING ISSUES

• Watch for demands on foreclosing lenders – are

you asking for pre-foreclosure delinquencies?

Judicial Deference in Architectural

Decisions

Harper v. Canyon Hills Community Association (Unpublished)

WHAT HAPPENED?

• Owner sues neighbor for building home and

HOA for approving project

• HOA files for summary judgment, trial court

grants motion finding that rule of judicial

deference applies and burden of proof was on

the owner to show lack of good faith on HOA’s

part

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YOU BE THE JUDGE!

Is it the owner’s burden to prove that HOA did not

act in good faith when enforcing architectural

standards?

– Yes

– No

WHAT DID THE COURT DECIDE?

• Appellate Court reversed the Trial Court, finding

burden of proof was on HOA, not owner

TRENDING ISSUES

Highlights importance of documenting authority,

reasonable inquiry, good faith and best interests

of the community, in all association decisions

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