California Civil Code 5550 requires a Reserve Study based on a “diligent visual site inspection” at least every third year, but requires the Board review that Reserve Study annually and “consider and implement necessary adjustments”. That’s called an annual Reserve Study update.
HOA LIABILITY FOR FAILURE TO UPHOLD MAINTENANCE OBLIGATIONS
Sands v. Walnut Gardens Condominium Ass'n (2019)
Takeaway: CC&R provisions may dictate standard of maintenance to be performed and failure to investigate and conduct maintenance issues may constitute a breach of contract by the HOA.
In Sands v. Walnut Gardens Condominium Association, the California Appellate Court held the HOA could be responsible for damages sustained by a homeowner as a result of a plumbing leak originating from a pipe on the roof of the condominium building (i.e., HOA common area). In Sands, the HOA repaired the pipe and the roof, but did not compensate the homeowners for the damages they sustained to the interior of the unit and their personal property. The homeowners sued the HOA for breach of contract and negligence.
In addressing the the breach of contract claim, the Court of Appeal noted that the HOA had a contractual obligation under the CC&Rs to maintain the common area in "a first-class condition." A jury could find that the HOA breached that contract by failing to perform preventative maintenance, and by failing to periodically inspect the pipes and roof. The Court dismissed the HOA's argument that "no evidence showed [that] the [HOA] was 'on notice that it needed to make repairs or do something to the roof or the pipes.'" Rather, it was sufficient that the HOA knew that no maintenance was being performed, which a jury could find as a breach of the CC&Rs' requirement that the common area be maintained in a first-class condition.
However, as to the second cause of action for negligence, the Court sustained the trial court's judgment of nonsuit (i.e., the homeowners failed to present sufficient evidence to conclude that the HOA was negligent). The Court noted that "the [HOA] had no independent duty as to the pipes and roof arising from tort law." In other words, absent a showing of a duty independent of the CC&Rs, an HOA cannot be held liable for the tort of negligence for its maintenance failures.
SB 323 makes substantive modifications to the Civil Code's provisions governing HOA elections, effective January 1, 2020. Some of the more significant modifications require associations to amend their election rules to conform to new statutory requirements, limit the types of candidate qualifications an association may adopt, address the only circumstance for elections by acclamation, place limitations on who may serve as an inspector of elections, and bolster the ability of members to overturn an election that is not conducted in accordance with proper procedures.
Homeowners associations (“HOAs”) are governed by a group of volunteer members known as a “Board of Directors” (“Board”). Their primary responsibilities include: (1) managing the common areas, (2) managing the HOA’s finances, (3) setting policies to assist in the operation of the HOA, and (4) enforcing those policies along with the HOA’s governing documents. The Board is therefore vital to the effective operation and management of the HOA, as well as preserving the property values of the HOA’s members....
Each Board member should employ the following procedure when observing a violation of the HOA’s governing documents: