Lake Lindero HOA v. Barone (2023) 89 Cal.App.5th 834

This case concerned approval requirements for recall elections. Lake Lindero is a 459-lot planned development. The association's bylaws required a majority vote of the entire membership to remove the board, i.e., at least 230 affirmative votes. When quorum was not met in the first meeting, it was adjourned to a second meeting where quorum dropped to 25% (115 members). The Corporations Code only requires a majority vote once a quorum was established, to recall the board. Of the 190 ballots cast, 156 voted to remove the board. The Inspector of Elections declared the Board recalled and new directors were seated. In the litigation that followed, the court ruled that the Corporations Code controlled and the board was properly recalled. Thus, the Courts will look to the clear bylaws, rules and regulations already established in an HOA’s governing documents before the Court makes its own interpretation.

MANAGER TAKEAWAY: This case, too, settles a question that has led to diverse opinions by association attorneys regarding the number of votes necessary to recall an entire Board when a reduce quorum is present by confirming that when a reduced quorum is present, it is the majority vote of the reduced quorum that is all that is needed to recall an entire Board. Managers should keep in mind that if less than the entire Board is being proposed to be recalled, and the bylaws provide for cumulative voting, then the majority vote rule does not apply, and the method that must be used is the often-misunderstood method of reverse cumulative voting must be used. Because this method of voting is often misunderstood, The Judge Law Firm will be publishing a separate article on this subject after the first of the year, simplifying the process and providing an easy to use calculation to determine whether the recall of less than the entire Board is successful.

LNSU #1 v. Alta Del Mar Coastal Collection Community Assn(2023) 94 Cal.App.5th 1050.

In this case, appellants LNSU #1 and LNSU #2, two homeowners in a common interest development managed by the Alta Del Mar Coastal Collection Community Association (the Association), appealed a judgment entered against them in their action against the Association for violations of the Common Interest Development Open Meeting Act. The court rejected the homeowners’ claims that: (1) the Association violated the Open Meeting Act when its board of directors took action in an executive session that it should have taken in a meeting open to all members; (2) the board failed to prepare minutes concerning a second executive session; and (3) certain directors discussed items of Association business via e-mails without giving all Association members notice and opportunity to participate in the discussions and without preparing related minutes. The court ruled that email communications by directors between board meetings is not a violation of the Open Meeting Act. The court decided that a "board meeting" is defined to mean “an in-person gathering of a quorum of directors at the same time and physical location for the purpose of taking action on items of association business.” The Court of Appeal found no reversible error with respect to appellants' Open Meeting Act violation claims and affirmed the trial court’s judgment. Therefore, email exchanges among directors where no action is taken do not constitute board meetings.

The Appellants also appealed post judgment orders denying their motion to strike or tax costs and granting the Association’s motion for attorney fees. The Court determined the trial court incorrectly awarded costs under a provision of the Open Meeting Act authorizing such an award to a prevailing homeowners association in an action the court finds “to be frivolous, unreasonable, or without foundation” but that the Association was not entitled to attorney fees or costs: "appellants’ action does not meet that description that the action was frivolous, unreasonable or without foundation], the Association is not entitled to costs." The Court thus reversed the order denying appellants’ motion to strike or tax costs and reversed the order granting the Association’s motion for attorney fees.

MANAGER TAKEAWAY: This case seems to raise more questions than it answers. It ruled against the plaintiffs because the definition of a Board meeting is limited to where the Board members are physically present at a physical location. This opens up the question of whether a Board meeting is not even a meeting if it occurs in any other way than in person, particularly in view of AB 648, discussed above. We will have to wait for a court or the legislature to straighten this issue out. In the meantime, the safest approach is to assume that any electronic Board meeting at which a majority of the Directors are present is a Board meeting, where the Open Meetings Act applies.

Beyond this, the statute is a Godsend in that it clarifies, for the first time, that Board members may discuss association business by email. Until now, this was an open question, and Board members discussed association business at their own risk. This is no longer the case, and managers may advise their Board members that the frequent practice of discussing association business by email is now perfectly legal.

ATAIN SPECIALTY INS. CO. V. LAKE LINDERO HOA, No. 21-55319 (9th Cir. Feb. 7, 2022) [DISCLOSURE TO INSURANCE COMPANIES]

A representative applying for insurance on behalf of a homeowners association must disclose all requested information to the insurer under the “duty of disclosure.” Before entering into an insurance contract, the duty of disclosure requires the applicant to provide requested information to enable the insurance company to decide whether, and on what terms, the policy will be issued, including the amount of the insurance premium. In this case, the federal appellate court ruled that an insurance policy may be rescinded if an association fails to disclose a situation that could give rise to a claim or litigation at the time the application is completed. Atain’s insurance application required the applicant to disclose “any fact, circumstance or situation which may result in a claim.”  The Association did not respond to these questions even though it had an ongoing conflict with its property management company and received a written warning from a homeowner threatening to take legal action against the Association’s board of directors if it terminated its management contract. The Court ruled that the Association should have disclosed this information to Atain, during the application process, reasoning that if the Association terminated its management contract, this would present a risk that a claim would be filed against the LLHOA. The court further stated that “[i]t is irrelevant that these risks had not yet materialized; the question’s purpose was to enable Atain to assess the risks it was underwriting.”

BROWN V. MONTAGE AT MISSION HILLS, INC. (2021) 68 Cal.App.5th 124 [SHORT-TERM RENTALS]

In this case, an individual purchased a condominium, which she consistently rented for short terms. Sixteen years after her purchase, the owner’s association amended its governing documents to prohibit renting properties for less than 30 days. The Court found that the owner was exempt from this prohibition under Civil Code section 4740(a). That provision provides that an owner of a property in a common interest development “shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits the rental or leasing of” the owner’s property unless that document or amendment “was effective prior to the date the owner acquired title” to the property. The Court found that a restriction on short-term rentals is a “prohibition” within the meaning of Civil Code section 4740 and is enforceable only against owners who purchased properties after the restriction was in effect.

ISSAKHANI v. SHADOW GLEN HOMEOWNERS ASSOCIATION, INC. (2021) 63 Cal.App.5th 917 [PREMISES LIABILITY]

Plaintiff visited a condominium complex. All the guest spaces were taken so she parked her car on the far side of a five-lane street. Rather than use the crosswalk, she jaywalked (at night), was struck by a car, and sustained a traumatic brain injury. As part of the condominium's development, the City required 34 guest parking spaces. At the time of the accident, only 6 parking spaces were marked as visitor spaces. Plaintiff sued the association for negligence and premises liability claiming that the failure to maintain the number of parking spaces required by the ordinance created a foreseeable risk of harm for the association’s guests. This appeal therefore presented the following questions:  Does a landowner owe a duty of care to invitees to provide adequate onsite parking, either (1) under common law principles, or (2) by virtue of a 1978 city ordinance that rezoned the complex’s specific parcel for multifamily dwellings and conditioned that rezoning on providing a specific number of guest parking spaces? The court concluded that the answer to both questions is “no.” The appellate court stated “We conclude that a landowner’s common law duty of care does not encompass a duty to provide onsite parking for invitees in order to protect them from traffic accidents occurring off site as they travel to the premises. The court stated: “Imposing a duty to provide sufficient onsite parking for all invitees would also impose an unacceptably heavy burden, as every business and every multifamily residential dwelling complex would be required to provide parking for every guest, or else face liability for damages incurred when those guests cannot find onsite parking and are injured when trying to access the property from off site.”