Improving or Constructing on Property in an HOA

Your homeowner association's governing documents or Declaration of Covenants, Conditions & Restrictions ("CC&Rs") should provide some control over the improvements and design of the exterior of members' individually owned units. The duty to enforce those improvements must generally be delegated to a 3-5 person committee. (California Code of Regulations, Title 10, Section 2792.28(a)) This committee is frequently referred to as the Architectural Control Committee.

Depending upon the type and age of the community, the committee will be staffed by owner-members chosen by either the HOA, or if the development is newer- the developer/subdivider.

The conditions on how a member can improve his or her property must be reasonable. The member will normally have to submit proposed plans to the committee. The committee will review the plans in light of its duty to the homeowners to act in good faith in exercising its powers. If the committee acts in an arbitrary or unreasonable manner the homeowner can seek judicial relief (frequently after exhausting his or her non-judicial/Alternative Dispute Resolution remedies required in the CC&Rs). If a judicial action is brought, the court will not uphold the committee's decision if it was unreasonable or not in good faith as to the other owners.

Generally, the committee's discretion can be very broad. The committee can apply subjective standards in making its decision that tends to increase their discretion.

However, there are certain issues where the committee has little, if any, discretion. An individual homeowner can modify his or her property to provide disability access for example. Other examples of matters excluded from the committee's control is: the use of non-commercial signs, installing low-water using plants, and displaying the flag of the United States. These exclusions are themselves subject to the limitation that the HOA or committee can act to limit uses like these in the interests of the public health or safety, or in the case of posting non-commercial signs (like protest signs), if the posting would violate another law.

The benefit of architectural control committees should not go unstated. Proper exercise of the CC&Rs frequently will advance the interests of the community in general. The general master plan and aesthetic look of the community can be maintained. Limiting one homeowner's ability to modify his or her property can help preserve the views of others.

Many communities in southern California are subject to HOA restrictions. While the CC&Rs should provide for proper protection for both individual homeowners and the community at large, disputes can arise regarding the proper application of the governing documents. Community politics can interfere with an otherwise reasonable proposed architectural improvement, or conversely cause an otherwise unreasonable or improper construction to be authorized.

If you believe your ability to modify your home or land is being impaired unfairly, you may have recourse through the dispute resolution procedures of your HOA or in the court. If you believe that a neighbor's project is improper and against the CC&Rs you too may have legal recourse to either take action directly yourself or to compel your HOA to take action on behalf of the committee as a whole.

Contact Darwin Bustarde, Esq. to discuss your options regarding completing your own project or issues that you may have with a neighbor's proposed project.

The Warranty of Habitability: Waivable in a Lease?

Frequently, lessors/landlords will present to lessees/renters/tenants a lease full of boilerplate language. A renter will likely not be able to negotiate many of the terms in such standard leases. Consequently, a lease may contain many terms that a renter might not otherwise accept or in fact may not even be legal!

The question arises, what terms can the landlord get away with? That is of course, a very broad question. The best way to have it answered effectively is to contact an attorney like Darwin Bustarde, Esq. or other competent real property professional to review your lease and consult with you regarding its terms.

In California (and other states), the warranty of habitability is one implied warranty that many lessors want waived in the lease. The warranty of habitability requires that a dwelling be in a condition fit for the occupation of humans. California Civil Code Section 1941 et seq. For example, an untenable dwelling may lack: effective waterproofing/roof, plumbing that is in good working order, a water supply that provides cold and hot water, appropriate heating, electrical systems in good working order, adequate garbage receptacles, floors and stairs in good repair, and/or a locking mail box. California Civil Code Section 1941.1.

Sections 1942.1 and 1953 of the Civil Code make any agreement that waives or modifies a tenants rights establishing the warranty of habitability/tenability void as a violation of public policy. There are of course potential exceptions to this general statement that would need to be considered before taking any action in reliance on the warranty of habitablity. For example, a lessor and tenant can agree to have a tenant make improvements or repairs to the property in consideration for rent. Civil Code Section 1942.1.

If you are a landlord looking to control his or her legal duties to the extent legally permissible you should consult with an attorney to review your lease. Bustarde Law can provide that type of consultation for a reasonable flat fee, reflective of your interest as a landlord to make renting/leasing properties as profitable as possible. Conversely, if you are a renter or tenant and you have been presented with a lease, consult with an attorney to review it. A small investment to pay an experienced legal professional to review and consult with you regarding your lease could help you avoid legal issues in the future.

Unlawful Detainer/Evictions: The Three (3) Day Notice, The Landlord's Concerns

A Three (3) Day Notice is required to initiate a Unlawful Detainer (Eviction) action as described in California Civil Code Section 1161, including:

• tenant's failure to pay rent;
• tenant's failure to abide by the lease terms;
• nuisance by the tenant;
• waste by the tenant;
• unlawful use of the property by the tenant; and
• the property has been sold pursuant to a sale under execution, mortgage or trust deed.

Depending on what acts or omissions the tenant has committed, a 3-Day Notice to Pay or Quit, and a 3-Day Notice to Cure or Quit (also may be termed something like-3-Day Notice to Perform Covenants or Quit) may be served on the tenant together. For example, if the tenant has failed to pay rent and is committing a nuisance on the property, both notices may be proper.

The landlord must take care when filling out the required information on the notice(s). If the notice is incomplete, incorrect or contains extra information or allegations that are not allowed by law, then the notice may be defective. A defective notice may cause the landlord to lose his unlawful detainer case.

Examples of defects/issues that the landlord should be aware of include:

• not stating the name of the actual tenants;
• not identifying the address/property;
• failure to state the exact amount of rent owed (or a reasonable calculation/approximation as may be allowed by law);
• overstating the amount (including claims for unpaid utilities, late fees, interest, etc.)
• including a claim of rent beyond a years time;
• failure to state that the tenant has 3 days to pay the amount at a particular day and time or the tenant must move out;
• say what the tenant did or failed to do to break the lease and alternatively state that the tenant has 3 days to fix the problem or move out;
• and simply sign and date the notice.

Landlords should carefully review the terms of the lease. For example, some leases might specify that a late fee is deemed to be "rent" under the lease, thereby creating the potential to claim the late fee as part of the rent owed in a 3-Day Notice to Pay or Quit.

Bustarde Law can help analyze your situation with your tenant to determine the correct notices to serve, the correct information to provide, and the correct procedure to serve the notices and thereafter file an eviction action. Oftentimes, an attempt to evict someone is delayed or fails unnecessarily because the notice contained a seemingly minor discrepancy.

An eviction action is a complicated process based on specific statutory requirements. The foundation of the action is the notice. If the notice is defective then the action will likely be too.

The California Court system provides a helpful website containing general information (including that summarized above) concerning unlawful detainer actions on its website, click here. Also, Mr. Bustarde offers extremely reasonable hourly and flat rate fees to help landlords, especially non-professional landlords, evict tenants to make their properties money generating resources again.

The Deferrence Given to HOA Maintenance Decisions is Not a Blanket Immunity

A homeowners association ("HOA") of a common interest community enjoys "judicial deference" concerning ordinary maintenance decisions. Individual owners who might believe their HOA caused or failed to prevent a problem, like a burst pipe in a common area, flooding, termite infestation, etc., should educate themselves and consult an attorney regarding the viability of the potential claim and anticipated defenses.

A court will defer to the ordinary maintenance decisions of an HOA, where the HOA selects from various means a method to maintain or repair a development's common areas. This deference is an affirmative defense that the HOA can assert to protect itself from liability. To do so, the HOA must show that it performed a reasonable investigation, in good faith and with regard for the best interests of the community and members, pursuant to its authority under the law and CCRs. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253.

Last month, the Court of Appeal, Fourth Appellate District, held that the judicial deference does not shield an association from liability for ignoring problems and explained it protects an HOA's good faith decisions to maintain and repair common areas. Affan v. Portofino Cove Homeowners Association, et al. (2010) 2010 DJDAR 16702. In Affan, owners in a condo complex complained of sewage backups over the years. The HOA discussed possibly hiring someone to clean the sewage lines but never actually took action. Eventually, it hired a pluber to clean the linem, however by that time the lines were so clogged that a special method of cleaning was required but was not used. As a result, after the cleaning, a serious "sewage eruption" occurred.

The Court of Appeal found that the HOA in responding to the sewer line issue did not make a "maintenance decision." Therefore, it could not avoid liability for the sewage problems under the judicial deference doctrine. As an aside, the Appellate Court also described that the HOA's managing agent could not rely on the judicial deference doctrine because it was not an HOA.

Affan v. Portofino provides an instructive example for HOA Board Members and owners, of the type of conduct an HOA will be expected to perform. If you are involved in an HOA or common interest development feel free to contact me and I would be happy to discuss the law and concerns that regard defects like that addressed above and other issues.

New Anti-Deficiency Protection for Short Sales in California

More homeowners are considering "short selling" their home in these hard economic times as an alternative to foreclosure. A "short sale" is where a home is sold for less than the homeowner owes to his or her lender or mortgage holder.

However, the mortgage holder/lender who received less than the full amount of the debt owed to it could still pursue the homeowner for the difference remaining on the indebtedness after the short sale. To address this, Governor Schwarzenegger signed Senate Bill no. 931 to provide anti-deficiency protection for borrowers. This protection applies to pre-existing, previously negotiated mortgage loan contracts subject to actions filed on or after June 1, 2011.

SB931 adds section 580e to California's Code of Civil Procedure. Pursuant to this new section: if the mortgage holder gives its written consent for the "short sale" then the mortgage holder must accept the proceeds of that sale as full payment and discharge any remaining claims it may have against its borrower for the remaining amount of indebtedness.

Homeowners should take care to note that section 580e is written with specific reference to a: "note secured by a first deed of trust or first mortgage." SB931 [setting forth the language of C.C.P. section 580e.]. Therefore, homeowners that have a second mortgage or HELOC, may not be able to completely rely on this new law to protect themselves from liability for amounts owed under other notes that are secured by their homes. Also, as indicated above, an anti-deficiency action filed before June 1, 2011, may not be precluded by this new law.

Before taking any action in reliance on this new law, homeowners should take care to consult with an attorney or perform their own legal research. California's leginfo.ca.gov is one helpful website to start with.

Beware: An Unlawful Detainer Following Foreclosure May Affect Your Claim for Ownership

A homeowner facing foreclosure and potential sale of his or her property by the mortgage holder may believe that the foreclosure or subsequent sale was conducted improperly. A homeowner may have a cause of action to dispute the validity of the foreclosure or sale. It is advisable for a homeowner to consult with an attorney to determine if a lawsuit may be appropriate to challenge the foreclosure.

This post regards the situation where a lender has sold a property under a foreclosure sale and has initiated an unlawful detainer proceeding to evict the borrower/homeowner. The borrower/homeowner may have a viable claim to attack the validity of the foreclosure sale. For example, if the statutory procedures for a foreclosure were not followed properly. The borrower/homeowner will therefore likely file its own lawsuit separate from the UD action.

An unlawful detainer proceeding is an expedited avenue to determine issues of possession. However, a judgment granting possession to the lender or purchaser in the UD proceeding could negatively affect the borrower's action to determine the underlying ownership and title issues. It could do this under a legal doctrine called collateral estoppel, or stated very simply- a litigant cannot relitigate any issue that was necessarily included in a prior final judgment.

An unlawful detainer proceeding is an expedited process intended to determine the issue of possession. Therefore, a judgment arising from a UD action is generally given limited res judicata or collateral estoppel affect. This means that generally the findings in a UD action cannot necessarily be used in a later action involving the same property/parties.

However, homeowners/borrowers should be aware of recent case law regarding the collateral estoppel effect that may be given to an unlawful detainer judgment in another proceedings, for example the borrower/homeowner's hypothetical action to oppose the underlying foreclosure.

In Malkoskie v. Option One Mortgage Corporation (2010) the Malkoskies' property was sold to a third party purchaser in a foreclosure sale. The Malkoskies remained on the property and the purchaser-Wells Fargo filed an unlawful detainer action to remove the borrowers from the property. The Malkoskies filed a separate quiet title action to set aside the foreclosure sale and eviction. The Malkoskies contended the sale was not properly conducted and therefore Wells Fargo did not properly obtain valid title to the property.

At the time of trial for the UD action, the Malkoskies and Wells Fargo agreed to a stipulated judgment to resolve the UD action. The case is silent as to the reasons why the Malkoskies agreed to a stipulated judgment, one reason might have been that in doing so Wells Fargo may have agreed not to pursue ancillary damages, costs or fees recoverable in a UD action.

Then, Wells Fargo challenged the Malkoskies' action to set aside the sale and eviction with a legal pleading called a demurrer. The court sustained the demurrer and judgment for Wells Fargo was entered. The court found that the stipulated judgment amounted to the Malkoskies conceding that the sale was "duly conducted and operated to transfer 'duly perfected' legal title to the property.'" The court referred to Code of Civil Procedure section 1161a, which regards UD actions and describes that a purchaser who brings a UD action following a trustee's sale must show that the property was sold in accordance with section 2924 of the Civil Code (regarding power of sale in a deed of trust). The UD action was based on whether the power of sale was proper. Since the borrowers stipulated to judgment that it was, the borrowers could not thereafter claim otherwise in their separate action to quiet title.

Malkoskie v. Option One Mortgage Corporation presents borrowers with difficult choices.

A UD action is generally not the ideal forum to litigate issues concerning title or whether a trustee sale was proper or not. Going forward with the UD action risks creation of the collateral estoppel issue that the Malkoskies faced. Surrending possession under terms that allow the issue of ownership to be determined later may be possible but by no means guaranteed and assuming the purchaser or lender agrees, that option will probably require the owner to leave the property.

One of the better alternatives is for the borrower to seek a stay of the UD action and request that the UD action be consolidated with the borrower's litigation to determine title. This last option means that the issues of possession and ownership are determined together in the borrower's hypothetical concurrent action to determine title. Of course, lenders or purchasers will likely oppose consolidation if it means that eviction is stayed. Additionally, a borrower must be very vigilant in protecting their rights by seeking consolidation as soon as possible, because if consolidation is denied and a stay is not granted on the UD action, the borrower will need to address the possibility that he or she will need to litigate the issue of ownership in the expedited UD proceeding.

Borrowers who believe the foreclosure process has proceeded improperly or that the sale somehow violated statute should take care to consult with an attorney regarding the issues addressed briefly in this post and other legal issues. Feel free to contact Bustarde Law regarding your real property, business or contract matter.

Oral Contracts for Home Improvement Work Can Be Enforced

Home owners that engage the services of a contractor for home improvement work are generally protected by the requirement that a home improvement contract be in writing and contain certain specific requirements. California Business & Professions Code section 7159.

Last month, the California Court of Appeal, Second District upheld enforcement of an oral contract for home improvement services. Hinerfeld-Ward Inc. v. Lipian (2010) 188 Cal.App.4th 86.

In Hinerfeld-Ward the Lipians retained an architect to design a major remodel to a single family home. They retained a contractor that left the job because of repeated design changes and replaced that contractor with Hinerfeld. No written contract was entered.

The Lipians terminated Hinerfeld, leaving an unpaid balance to him of $200,000.00. Hinerfeld sued the Lipians who counterclaimed, stating in part that Hinerfeld violated section 7159 making the oral contract void. The Court of Appeal upheld the jury's finding of a contract that Hinerfeld substantially complied with and affirmed the trial court's award of damages in favor of Hinerfeld in addition to attorneys fees.

The Appellate Court noted that enforcement of the contract was justified: to avoid unjust enrichment to the Lipians, and because the Lipians had the benefit of their architect to look out for their interests.

The Appellate Court also upheld an award of attorneys fees based on Civil Code section 3260 et al. That, and related sections, provide for a penalty to be assessed where one wrongfully withholds amounts owed to the contractor pursuant. The Appellate Court found that the penalty contemplated under the statutory scheme also includes an award of attorneys fees under 3260.1. Consequently, $200,000.00 in attorney's fees was awarded to Hinerfeld.

The opinion is silent whether the Lipians relied on advice of counsel to withheld payment or to support a belief they ultimately could avoid payment to Hinderfeld on an assertion that the oral contract was void. However, it is a helpful example of the importance of retaining legal advice before relying upon or taking definitive action where there is a potential dispute.