River's Side at Washington Sq. Homeowners Assn. v. Superior Court (2023) 88 Cal.App.5 th. 1209.

This case concerns the ability of an Association to sue a developer on behalf of its homeowners. Plaintiff River’s Side at Washington Square Homeowners Association (“Association”) was established to manage a development consisting of 25 residential units and common areas. It sued Defendants River’s Side LLC et al. for construction defects in the residential units. Defendants attacked six of the seven causes of action asserted against them, arguing that the Association lacked standing to sue on behalf of its members for defects in residential units that it did not own and had no obligation to repair. The Association alleged it had standing to bring this action on behalf of its members pursuant to the California  Civil Code, however the trail court disagreed and granted the demurrer without leave to amend, holding that the Association lacked standing under Civil Code sections 945 and 5980, and that Code of Civil Procedure section 382 was inapplicable. Because the order sustaining the demurrer left one cause of action remaining, it was not immediately appealable, so the Association challenged the order by petition for writ of mandate. The Court of Appeal concluded that the Association did have standing to bring claims for damages to the common areas, and that the Association at least nominally alleged such damages. The Court further concluded that the Association might have standing to bring claims for damages to the residential units that sound in contract or fraud if it could meet the requirements for bringing a representative action pursuant to Code of Civil Procedure section 382. The Court also determined that the Association should have been granted leave to amend to cure any standing defect. The Court thus granted the petition for mandamus relief and directed the trial court to reverse its order granting the demurrer. This case provides HOAs a pathway to file on behalf of their homeowners without those homeowners actually being a party to a lawsuit.

MANAGER TAKEAWAY: This is a complex treatment of a question that is usually answered by reference to existing law. Under existing law (Civil Code section 5980), an association has standing to sue for damage to individual units if those damages “relate to” the common area or there is damage to an individual unit that the association is obligation to repair or maintain. This rule would normally apply to many construction defect cases. However, in any construction defect case, the manager should advise his or her Board to hire a qualified and expert construction defect lawyer, who will consider the issue presented by this case as well as existing law, and decide what is the legally correct thing to do.