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Ward v. Superior Court

(1997) 55 Cal.App.4th 60

[Enforcement; Recorded Notice of Noncompliance] An association is not legally authorized to record a notice of noncompliance in response to a member’s violation of the CC&Rs.

Ronald M. Katzman for Petitioners. No appearance for Respondent. Wolf, Rifkin & Shapiro and Andrew S. Gelb for Real Party in Interest.

OPINION
ZEBROWSKI, J.

This case concerns whether a homeowners association may record, in a county’s land title records, a document asserting that a homeowner is in violation of the association’s covenants, conditions and restrictions (hereafter CC&R’s). We conclude that there is no authority for recordation of such a document, and that the document recorded in this case should have been expunged.

I. The Facts

Petitioners own a house in the Beverlywood area of Los Angeles. The property is subject to a declaration of restrictions which was recorded in 1940 and which affects 1,324 homes. These restrictions were updated in 1994 by the recordation of an amended and restated declaration of CC&R’s. The CC&R’s are administered by the Beverlywood Homes Association (hereafter BHA). For purposes of this petition, it is assumed that petitioners are bound by these CC&R’s. [FN. 1]

The CC&R’s provide for “Architectural and Design Control” by BHA. These controls require approval of construction or alterations by BHA. The [63] CC&R’s indirectly provide that BHA may record a notice of noncompliance by providing that property improvements will eventually be deemed in compliance “unless actual notice executed by the Association of such … noncompliance shall appear of record in the office of the County Recorder of Los Angeles County ….” Petitioners obtained approval from BHA for a remodeling project on their property. The project approval included approval for the painting of the new construction in “blue/blue-grey tones.” The evidence is in conflict, however, as to whether the shades later applied precisely matched the colors approved.

Either when painting was underway or shortly after it was completed in June 1995, petitioners received a letter from the BHA president complaining about the “atrocious bright-blue color” being applied, which the president found “hideous” and “offensive.” [FN. 2] The letter contended that “as to the color, you never obtained approval of this color and, as such, you have now violated the CC&Rs.” The letter purported to levy a fine of $50 and advised that the fine would be rescinded only if petitioners painted their property in a “color consistent with that in the surrounding neighborhood.” The letter continued that if petitioners did not comply, not only would additional fines accrue, but in addition “a notice of non-compliance will be filed against the property. A notice of non-compliance is notice to the world that there is a violation of CC&Rs. Such notice simply has the effect of preventing a sale, transfer or mortgage of the affected property.” The letter from the BHA president concluded “[l]et me assure you, I have received numerous phone calls from your neighbors, as well as those passing by your house while walking their dog or children. Because I live on the street behind you, most of the people in our local neighborhood know where I live and, unfortunately, also know my phone number.”

Petitioners refused to repaint their house in accordance with the demands of BHA. Several months later, in October 1995, while trying to refinance, petitioners learned from their title insurance company that BHA had unilaterally and without further notice recorded a “Notice of Non-Compliance with Declaration of Restrictions (Non-Conforming Improvement)” (hereafter the notice of noncompliance) against their property. As a consequence, the pending refinance could not close. Petitioners attempted to negotiate a release of the notice of noncompliance, but BHA refused to release the notice until petitioners repainted their home. Petitioners would not agree to repaint. In order to complete the refinance with the notice of noncompliance still of record, petitioners had to post a cash bond of $10,000 in favor of their title insurer. [64]

Negotiations apparently continued without progress until BHA filed suit in March 1996. BHA sought abatement of the offending color as a nuisance, punitive damages, attorney fees and costs. Petitioners moved for expungement of the notice of noncompliance. The motion was denied. This petition for writ of mandate followed.

II. The Statutory Law

A. There is no specific authorization for recordation of a notice of noncompliance.

Miller and Starr contains a nonexclusive list of 99 types of instruments that may be recorded. The recordation of most of these instruments is specifically authorized by statute. (3 Miller & Starr, Cal. Real Estate (2d ed. 1989) Recording and Priorities, §§ 8:4-8:5, pp. 275-292.) A notice of noncompliance with CC&R’s is not on the list, nor has any other specific authorization been cited. If a notice of noncompliance is recordable, recordation must be authorized by inclusion within a generic category of recordable documents.

B. BHA relies on generic authority that does not authorize recordation of a notice of noncompliance.

[1] BHA relies on the generic authorization for recordation of documents contained in Government Code section 27280, subdivision (a), which provides that “[a]ny instrument or judgment affecting the title to or possession of real property may be recorded ….” The notice of noncompliance in this case was not a “judgment,” hence if recordable, it must be recordable as an “instrument.”

The term “instrument” as used in Government Code section 27280 is defined in Government Code section 27279, subdivision (a), as “a written paper signed by a person or persons transferring the title to, or giving a lien on real property, or giving a right to a debt or duty.” Three categories are thus presented. A recordable “instrument” is one which either a) transfers title, b) “gives” a lien, or c) “gives” a right or duty.

Clearly the notice of noncompliance has no effect on the state of the title. Title remains vested in petitioners as before, possibly subject to typical deeds of trust or similar financing liens, etc. The first category of the “instrument” definition does not apply.

Nor does the notice of noncompliance “give,” or create, a lien on real property. While it does cloud the title by giving public notice of a claim and [65] creating uncertainty about the ability of BHA to force an eventual repainting of the house, the notice of noncompliance does not create a “lien.” Nor has BHA argued that its notice of noncompliance creates a “lien.” Hence the second category of the “instrument” definition does not apply.

BHA relies on the third category of the “instrument” definition. BHA argues that the notice of noncompliance is a recordable instrument “because it is in writing and gives ‘a right to a debt or duty’ in that it provides petitioners and any successors notice of their duty to bring their property into compliance.” Clearly there is a major difference between providing notice of a duty, and “giving” or creating that duty. To the extent that BHA has the “right” to dictate the color of a wall or garage door, that “right” was given to BHA by the CC&R’s. If the right exists, it exists whether or not a notice of noncompliance is recorded to give public notice of BHA’s claim. In this case, for example, BHA filed suit to enforce this claimed right, something BHA could have done without recording a notice of noncompliance. Thus BHA’s notice of noncompliance does not come within the third category of the “instrument” definition.

Even assuming that the notice of noncompliance were an “instrument” as defined by Government Code section 27279, it would be recordable only if-pursuant to Government Code section 27280-it affected “title to” or “possession of” the real property. As discussed above, the notice of noncompliance does not affect title to the property. Nor does it affect possession. Petitioners retain possession as well as title. Legally speaking, petitioners can freely transfer title and possession. The constraints petitioners are experiencing on transfer of title and possession are practical ones, not legal limitations. For example, property subject to a lis pendens remains freely transferable as a legal matter. (See, e.g., Stagen v. Stewart-West Coast Title Co. (1983) 149 Cal.App.3d 114, 122 [196 Cal.Rptr. 732].) The notice of noncompliance involved here has no legal effect on title or possession, or on transfers of title or possession. Instead, the notice simply creates uncertainty about whether BHA will be able to force petitioners (or their successors) to repaint their home. It is because few purchasers or lenders would likely be willing to assume this risk that transfer or encumbrance of the property might be impeded.

No authority for recordation of the notice of noncompliance has been cited except for the statutes discussed above. Since the cited statutes do not authorize the recording and no other statutory authority can be found, it must be concluded that there is no statutory authorization for recording such a document. [66]

C. The notice of noncompliance is not recordable in the absence of statutory authority.

[2] The system for public recording of land title records was established by statute. (See Gov. Code, § 27201 et seq.) The proper operation of that system is hence one of legislative intent.

A county recorder is obligated to accept for recordation only those documents which are “authorized or required by law to be recorded.” (Gov. Code, § 27201.) There is no authority for the proposition that a county recorder either must or may record documents which are not “authorized or required by law to be recorded,” i.e., there is no authority for the proposition that the recorder must or may accept unauthorized documents for recordation. Nor is there any authority for the proposition that parties may by private contract create a right to record, for their own private purposes, documents which are not “authorized or required by law to be recorded.”

In order to rule in favor of BHA that BHA’s notice of noncompliance is a recordable document, we would have to accept the proposition that any type of document is recordable unless recordation of that type of document is specifically prohibited. If that were the legislative intent, it is expectable that there would then be code sections prohibiting the recordation of specific types of documents.[FN. 3] However, BHA has cited no such code sections. Moreover, if it were the Legislature’s intent, in enacting the land title recording system, that any type of document could be recorded in that system, there would be no need for the Legislature to identify specific types of documents that are recordable. (Cf. 3 Miller & Starr, Cal. Real Estate, supra, Recording and Priorities, §§ 8:4-8:5, pp. 275-292 [listing specific types of recordable documents].) Yet the Legislature has taken great effort to identify various types of recordable documents. When the Legislature does specify a recordable type of document, the Legislature generally also specifies the standards according to which the propriety of such a recordation would be judged, and has often provided specific procedures governing disputes over propriety of a recording. (See, e.g., Code Civ. Proc., § 405 et seq.; Civ. Code, § 3109 et seq.) Thus there is no principled basis on which we can accept the proposition that the Legislature intended all documents of every kind to be recordable unless specifically prohibited. We therefore [67] conclude that BHA’s notice of noncompliance was not a recordable document.[FN. 4]

D. The notice of noncompliance should have been expunged.

[3] Petitioners’ motion to expunge the notice of noncompliance was brought pursuant to Civil Code section 3412, which provides that a written instrument may be adjudged void or voidable if it may cause serious injury if left outstanding. Here the notice of noncompliance was not a legally recordable document. The undisputed evidence demonstrated that the improper recordation of this document had created a cloud on title, preventing refinancing of petitioners’ property until they posted a $10,000 bond. The bond remains outstanding. We consider this a sufficiently serious injury to require expungement of the improperly recorded notice.[FN. 5]

III. Disposition

Accordingly, the superior court is directed to set aside its order denying petitioners’ motion to expunge the notice of noncompliance and to issue a [68] new and different order granting the motion. The temporary stay is vacated. Real party to pay the costs of this petition.

Boren, P. J., and Nott, J., concurred.

The petition of real party in interest for review by the Supreme Court was denied August 20, 1997. Mosk, J., and Kennard, J., were of the opinion that the petition should be granted.

FN 1. The issue here is not whether CC&R’s can be enforced. It is whether a notice of violation of CC&R’s is a type of document which can be recorded in the public land title records. We therefore need not consider the effect or application of Civil Code section 1354 (CC&R’s enforceable as equitable servitudes) or the case of Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361 [33 Cal.Rptr.2d 63, 878 P.2d 1275] (equitable servitudes to be enforced unless in violation of public policy). Rather than whether CC&R’s can be enforced, the question is whether compliance with CC&R’s can be coerced by recording a notice of noncompliance without statutory authority.

FN 2. Shade of color is not the issue here. The issue is the recordability of the notice of noncompliance.

FN 3. For example, Code of Civil Procedure section 405.36 prohibits the re-recording of a lis pendens after the lis pendens has once been expunged, unless leave of court is first obtained. This code section is only necessary because another section specifically authorizes the recording of a lis pendens in the first instance. (Code Civ. Proc., § 405.20.)

FN 4. The argument has been suggested that homeowners associations such as BHA need the ability to record notices of noncompliance in order to effectively enforce CC&R’s. We need not debate the issue here, for that is a matter for legislative attention. The Legislature can consider whether recording should be allowed, and what type of procedures for review of recordings should be provided. Recordation could be authorized with a ready made system for due process review, for example, by simply amending the definition of “real property claim” in Code of Civil Procedure section 405.4 (the lis pendens law) to include a claim of violation of CC&R’s. However, only the Legislature can make such public policy decisions.

FN 5. Attached to BHA’s complaint against petitioners was a copy of the CC&R’s. Article 3 of those CC&R’s deals with “Common Area,” and references a “Schedule B” on which parcels of land “owned by the Association for the benefit of the Members” were supposed to be listed. However, no Schedule B was attached to the copy of the CC&R’s appended to the complaint. It is therefore unclear whether BHA is, or is not, a common interest development subject to the regulation of the Real Estate Commissioner set forth in title 10, California Code of Regulations, section 2792.26. A homeowners association subject to this regulation “cannot be empowered to cause a[n] … abridgment of an owner’s right to the full use and enjoyment of his individually-owned subdivision interest on account of the failure by the owner to comply with provisions of the governing instruments … except by judgment of a court or a decision arising out of an arbitration ….” Placing a cloud on title with the specific intent of preventing transfer or refinancing can reasonably be construed as an “abridgment of an owner’s right to the full use and enjoyment of his individually-owned subdivision interest.” It thus appears that, to the extent BHA may be subject to this regulation because of status as a common interest development, it may be prohibited from recording notices such as the one involved in this case. To the extent the regulation is not applicable because BHA may not be a common interest development, the decision we make here is consistent with the approach taken by the Real Estate Commissioner.

Recorded Notice of Noncompliance

Older sets of CC&Rs often contain provisions allowing the association to record a “notice of noncompliance” with the county recorder’s office in response to a member’s violation of the CC&Rs. Such recordings are no longer permitted as a result of the holding in Ward v. Superior Court (1997) 55 Cal.App.4th 60:

“Since the cited statutes do not authorize the recording [of the notice of noncompliance] and no other statutory authority can be found, it must be concluded that there is no statutory authorization for recording such a document.” (Ward, at 65.)

“Nor is there authority for the proposition that the parties may be private contract create a right to record, for their own private purposes, documents which are not ‘authorized or required by law to be recorded.’” (Ward, at 66.)

Distinct from Assessment Lien
The above does not prohibit an association from recording a “Notice of Delinquent Assessment” (an “assessment lien”) in response to a member’s assessment delinquency. Assessment liens may be recorded pursuant to Civil Code Section 5675.

Watts v. Oak Shores Community Association

(2015) 235 Cal.App.4th 466

[Operating Rules; Rental Activities; Board Deference] Homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.

Burlison Law Group and Robert C. Burlison, Jr., for Plaintiffs, Cross-defendants and Appellants and for Cross-defendant and Appellant.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Michael B. Wilk, Caroline E. Chan, Ryan D. Harvey; Adams Kessler, Adrian J. Adams, Gary S. Kessler, Paul S. Ablon, Aide C. Ontiveros and Tina Chu for Defendant, Cross-complainant and Respondent.

[CERTIFIED FOR PARTIAL PUBLICATION[FN. *]]

OPINION

GILBERT, P. J. —

Here we hold, among other things, that homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.

Two owners of one lot in a common interest development and one of two owners of another lot brought an action challenging regulations and fees adopted by the homeowners association. The association cross-complained against all owners of both lots for fees and declaratory relief. The association [469] prevailed on the complaint and cross-complaint. The trial court also awarded the association statutory attorney fees and costs on the complaint and cross-complaint. As we explain in the unpublished portion of this opinion, the judgment must be clarified so that the attorney fees awarded on the complaint are against plaintiffs only, and not against the cross-defendant who was not a plaintiff. In all other respects, we affirm.

FACTS

Oak Shores is a single-family residential common interest development. It is governed by the Oak Shores Community Association (Association). The Association is governed by a board of directors (Board). All property owners in the development are members of the Association.

The Association’s governing documents include its covenants, conditions and restrictions (CC&R’s) and its bylaws. The Board “may adopt, amend, or repeal Rules for the use, occupancy and maintenance of the Project; for the general health, welfare, comfort, and safety of Members; and to interpret and implement these CC&R’s, and establish penalties for violation of such Rules.” (CC&R’s, art. 6.2.) “In the event the Association undertakes to provide materials or services that benefit a particular Member, such Member in accepting the materials or services agrees to reimburse the Association for the costs incurred by the Association, which shall become a Special Assessment against the Member.” (Id., art. 3.8.)

Oak Shores consists of 851 parcels of land. Six hundred sixty parcels are developed with single-family homes. Only about 20 percent, 125 to 150, of the homes are occupied by full-time residents. Approximately 66 absentee homeowners rent their homes to short-term vacation renters.

Ken and Joyce Watts and Lynda Burlison (collectively Watts) are absentee owners who rent their homes to short-term vacation renters. Watts filed a complaint against Oak Shores challenging fees charged and rules and regulations enacted by the Association. The challenge included a rule stating the minimum rental period is seven days; an annual fee of $325 imposed on owners who rent their homes; a rule limiting the number of automobiles, boats and other watercraft that renters are allowed to bring into Oak Shores; a mandatory garbage collection fee; boat and watercraft fees; building permit fees; and property transfer fees.

[[/]][FN. *]

[470] Short-term Renters

The Association has a rule stating that the minimum rental period is seven days. The Association’s general manager testified that, based on his discussion with Board members, staff and code enforcement officers, as well as his review of gate and patrol logs, short-term renters cause more problems than owners or their guests. The problems include parking, lack of awareness of the rules, noise and use, and abuse of the facilities. Expert James Smith testified that, unlike guests who are typically present with the owners, short-term renters are never present with the owner. Guests tend to be less destructive and less burdensome. Short-term renters require greater supervision and increase administrative expenses.

A $325 fee is charged to all owners who rent their homes. A 2007 study calculated each rental cost the Association $898.59 per year.

Watercraft

All short-term renters and guests who bring watercraft into Oak Shores pay a fee of $25 per day or $125 per week. Short-term renters and guests are limited to one boat or two personal watercraft. Owners and long-term renters do not pay such special fees and are not limited in the number of watercraft they can bring into Oak Shores.

Boats have a negative impact on the Association’s roads. There are also costs of maintaining the docks and parking lot used by the renters and increased costs for code enforcement.

Expert Smith testified that renters comprise only 8 percent of the people entering the gate, but renters bring in 37 percent of the boats.

Parking Restrictions

Association rules restrict parking in the lower marina lot to owners on weekends and holidays during the summer months. A lot not much further away is available to all.

Construction Permits

The Association charges a plan-check fee of $100 and a road impact fee of $1,600 for new construction. Expert Smith testified that heavy equipment used to construct homes places more wear on the roads and results in greater usage. It is appropriate to consider the need for reserves in determining the [471] amount of the fee. The Board president testified that road resurfacing and repair are the basis for the fee.

Trash Collection Fees

The Association contracts with a trash collector. It passes the fees pro rata onto all owners of developed lots. The Association does not distinguish between full-time and part-time residences because it is too difficult to make that determination. It does not charge the owners of undeveloped lots because they do not produce trash.

Civil Code Former Section 1366.1[FN. 1]

Former section 1366.1 (repealed by Stats. 2012, ch. 180, § 1 and reinstated with nonsubstantive changes as § 5600, subd. (b)) provided, “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

David Levy and Travis Hickey are certified public accountants. Levy testified that the expenses generated by owners who rent short term far exceed the income generated from those owners. He analyzed fees and costs contained in the Association’s financial statements and reserve studies. He concluded the fees charged were reasonable and complied with the law. Levy also consulted with the Association’s former auditors. Levy and Hickey concluded that the fees were reasonable and did not violate former section 1366.1. Levy also testified the fees charged by comparable associations for similar activities were higher or equivalent to fees charged by Oak Shores.

Hickey testified that he is the Association’s former auditor. He studied the fees and consulted with another former auditor. He concluded the fees were fair, reasonable, and in compliance with the law. They do not exceed the costs for which they are levied. No association conducts a formal study to set fees. Nor does any association conduct time and motion studies. In fact, time and motion accounting is not possible.

Homeowners association expert Karen Conlon testified the Association met the standard of care for giving members notice of rule and fee changes. Fee increases can be enacted by adopting a budget for the year.

Swimming Pool

The Association paid a pool contractor $35,000 to repair a swimming pool. The contractor absconded with the money without repairing the pool. A [472] former director testified that a former Board president wrote a check to the contractor without Board approval. Expert Smith testified it is not typical, nor within the standard of care, for an association to purchase a performance bond.

Release and Unclean Hands

[[/]][FN. *]

Ken Watts has never obtained a business license to rent his home, nor has he paid transient occupancy taxes since at least 2000. He owes at least $5,000 in back taxes. Watts has repeatedly mischaracterized his renters as guests in order to avoid applicable rental rules and regulations. Portions of his testimony at trial were “demonstrably false.” Throughout his tenure at Oak Shores, he has adopted a “rancorous, accusatory and obstructionist” style of interaction with Board members and staff. He has occasionally intimidated staff with bizarre and threatening behavior.

Judgment

The trial court found for the Association on the complaint. [[/]][FN. *] The court found that the Association’s rules and regulations are reasonable and comply with the Association’s governing documents and the law, and that the fees charged comply with former section 1366.1.

The trial court also found for the Association on the cross-complaint. It granted the Association an injunction ordering cross-defendants to abide by the rules and regulations. [[/]][FN. *]

DISCUSSION

[[/]][FN. *]

[473] II.

Watts contends that the judgment is based on incorrect legal grounds.

(1) Watts claims that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions. But in Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940], our Supreme Court stated, “`Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy.'” (Id., at p. 264, quoting Nahrstedt v. Lakeside Village Condominium Assn.(1994) 8 Cal.4th 361, 374 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) It is true the facts inLamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions. Common interest developments are best operated by the board of directors, not the courts.

Watts’s reliance on Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930 [117 Cal.Rptr.3d 481] is misplaced. There, an owner sued the association for failing to properly maintain the sewer lines. In applying judicial deference, the court stated that the Lamden rule gives “deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance.” (Affan, at p. 940.) But there is no reason to read Lamden so narrowly. In fact, courts have given deference to board decisions that do not concern ordinary maintenance. Thus, for example, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280], the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.

(2) Article 3.8 of the CC&R’s gives the Board broad powers to adopt rules for Oak Shores. Nothing in the article or elsewhere prohibits the Board from adopting rules governing short-term rentals, including fees to help defray the costs such rentals impose on all owners. The Board may reasonably decide that all owners should not be required to subsidize Watts’s vacation rental business.

That short-term renters cost the Association more than long-term renters or permanent residents is not only supported by the evidence but experience and common sense places the matter beyond debate. Short-term renters use the common facilities more intensely; they take more staff time in giving directions and information and enforcing the rules; and they are less careful in using the common facilities because they are not concerned with the long-term consequences of abuse.

[474] (3) In arguing the cost of short-term rentals must be borne by all members, Watts cites California Code of Regulations, title 10, section 2792.16, subdivision (a). That regulation provides, “Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision interests owned by the owner assessed to the total number of interests subject to assessments.” Watts’s reliance on the regulation is misplaced for a number of reasons. First, the regulation applies to subdivision developers. Watts cites no authority that it also applies to continuing operations of a common interest development. Second, the regulation is qualified by the word “ordinarily.” (Ibid.) It clearly does not state an immutable rule. Third, the regulation applies to “[r]egular assessments.” (Ibid.) Watts cites no authority that it applies to the type of use fees at issue here.

Watts’s reliance on the Association’s articles of incorporation, article II, paragraph (d), is also misplaced. The paragraph under the heading “General Purposes” states in part: “To fix and establish the fees, dues and assessments that each member of this corporation shall pay to this corporation for the purpose of providing funds to carry out the community purposes and objects of this corporation, and to receive and collect such fees, dues and assessments.” Nothing in the paragraph provides that each member shall pay the same amount regardless of his or her activities on the premises. It does confirm, however, the power of the Association to impose fees as well as assessments. Thus, it confirms the power of the Association to impose the type of fees at issue here.

Watts’s reliance on Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670, 685 [174 Cal.Rptr. 136] (“Laguna Royale“) is misplaced. There, a common interest development was built on a 99-year ground lease. The defendants purchased a unit in the development. Later, the defendants transferred undivided interests to three other families. No more than one family would use the unit at a time and each of the four families agreed to 13-week periods of exclusive use. The ground lease contained a provision prohibiting transfer of the unit without the development association’s approval. The association refused to approve the transfer on the ground, among others, that use by the four families would place an undue burden on the other owners in their use and enjoyment of their units so as to be inconsistent with their quiet enjoyment and maintenance of security. The trial court invalidated the assignments. The Court of Appeal reversed.

In reversing, the Court of Appeal affirmed that the association had the authority to enact reasonable regulations on the use and alienation of the condominiums. (Laguna Royale, supra, 119 Cal.App.3d at p. 682.) The court [475] also determined that the reason given for refusing consent to the transfer is rationally related to the proper operation of the property and purposes of the association. (Id., at p. 686.) The court concluded, however, there was no evidence that consecutive use of the unit by the four families one at a time would be so disruptive as to interfere substantially with the other owners’ use and enjoyment or the maintenance of security. (Id., at p. 687.) The court pointed out that the association’s bylaws allowed leasing of a unit for 90 days or more, a use more intense than the 13 weeks exclusive use agreed to by each of the four families. (Ibid.)

If anything, Laguna Royale is favorable to the Association. It confirms the authority of the Association to enact reasonable regulations governing transfers so as to preserve the owner’s quiet enjoyment of the premises and the maintenance of security. There was simply no evidence in Laguna Royale that four 13-week periods of occupation by a single family would have a significant impact on the enjoyment of the premises by other owners or on security. Here there is more than ample evidence that short-term rentals have such significant impacts.

[[/]][FN. *]

IV.

Watts contends the trial court erred in adopting the proportionality test in determining the reasonableness of the fees.

(4) Former section 1366.1 prohibits an association from imposing or collecting “an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

At trial, Watts argued the Association was required to conduct time and motion studies to determine the correct amount of the fees. The trial court rejected Watts’s argument. In its statement of decision, the court stated the issue is whether “rough proportionality” between the fees and costs is sufficient to comply with the statute. The court found that the evidence established a “reasonably close” relationship between each contested fee and the cost it is intended to offset. The court concluded that relationship satisfied former section 1366.1.

(5) Nothing in the language of former section 1366.1 requires the exact correlation between the fee assessed and the costs for which it is levied that [476] Watts appears to demand. In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive, requiring the Association to add the costs to the fees. The “golden rule” for statutory interpretation is that where several alternative interpretations exist, the one that appears the most reasonable prevails. (Stewart v. Board of Medical Quality Assurance (1978) 80 Cal.App.3d 172, 179 [143 Cal.Rptr. 641].)

(6) The most reasonable interpretation of former section 1366.1 is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. Whether the court uses the term “roughly proportional” or “reasonably close,” the test has been met here.

In Foothills Townhome Assn. v. Christiansen (1998) 65 Cal.App.4th 688 [76 Cal.Rptr.2d 516], a homeowners association imposed a special assessment of $1,300 against each owner. The assessment was to replenish the association’s reserve fund, which had been depleted paying for storm damage. The reserve fund could be used for purposes other than storm damage. An owner challenged the assessment as violating former section 1366.1. The court upheld the amount of the assessment on the ground that there was no showing that the usual reserve balance was excessive or that the amount of the assessment pushed the fund above its usual balance. (Foothills, at p. 694.) The court did not require a precise correlation between the amount of the assessment and the cost for which it was levied.

Watts argues that the Association should be bound by its admissions made during discovery that no studies to determine costs associated with the fees were conducted. The discovery to which Watts refers was interrogatories answered in February 2007. Trial began in April 2011. At trial, the Association produced evidence of studies that supported the fees. Watts points to no place in the record where the Association’s witnesses were asked to explain the apparent discrepancy between the interrogatory responses and their testimony. Nor does Watts cite any authority in support of the argument requiring the trial court to reject the Association’s evidence at trial. Watts has failed to carry the burden of showing error on appeal. (See In re Marriage of Ananeh-Firempong (1990) 219 Cal.App.3d 272, 278 [268 Cal.Rptr. 83] [judgment presumed correct, error must be affirmatively shown].)

(7) Watts claims that the garbage fees were initiated January 1, 2001, without ever being adopted by the Association as required by former section 1357.100, subdivision (a), repealed by Stats. 2012, ch. 180, § 1, now § 4340. But that statute simply defines “`[o]perating rule.'” (Former § 1357.100, subd. (a).) It does not set forth any particular procedure for adopting any rule. Moreover, it defines operating rule as a “regulation.” (Ibid.) The garbage fee is not a regulation. It is simply a cost the Association passes through to the owners of the developed lots.

[477] Watts claims the Board adopted or increased fees and fines by simply including them in the budget. But Watts cites no authority prohibiting the Board from adopting or increasing fees and fines in that manner.

In any event, Watts’s entire contention is based on a view of the evidence most favorable to themselves. Watts fails to cite the evidence most favorable to the judgment. That evidence includes the testimony of Karen Conlon, an expert on homeowners associations. She testified the Association met the standard of care on notice of rules and fee charges. Board members also testified that Board meetings agenda and minutes were posted on the Association’s Web site. Watts has waived the contention on appeal. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [92 Cal.Rptr. 162, 479 P.2d 362].)

[[/]][FN. *]

The attorney fee portion of the judgment is ordered modified as discussed in the unpublished portion of the opinion. In all other respects, the judgment is affirmed. Costs on appeal are awarded to respondent and against all appellants.

Yegan, J., and Perren, J., concurred.

 

[FN. *] Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].

[FN. *] See footnote, ante, page 466.

[FN. 1] All statutory references are to the Civil Code unless noted otherwise.

[FN. *] See footnote, ante, page 466.

[FN. *] See footnote, ante, page 466.

[FN. *] See footnote, ante, page 466.

Related Links

Expanded Scope of ‘Judicial Deference’ – Authority to Impose Short-term Renter Fees – Published on HOA Lawyer Blog (4/13/15)

Courts Will Defer to the Decisions of Boards Based on Good Faith and Regard for the Best Interests of the Community
– Published on HOA Lawyer Blog (March 2019)

SB 3 (Leno). Minimum Wage: Adjustment.

Would require minimum wage increases for all industries beginning January 1, 2017. Would directly impact the budget and assessment rates of associations with employees. Could indirectly impact associations without employees through vendor wage increases.

Current Status: Chaptered

FindHOALaw Quick Summary:

SB 3 (Leno) would amend Labor Code § 1182.12 to increase the minimum wage for all industries to $15.00 per hour by 2023, except when the increases are suspended by the Governor. The bill would require the Director of Finance to adjust the minimum wage under a specified formula by August 1st of each year, with the new minimum wage taking effect the following January 1st, provided the General Fund can support the scheduled increase. The minimum wage for all industries shall be increased in accordance with the following schedule.

For any employer who employs 26 or more employees, the minimum wage shall be as follows:

  • From January 1, 2017, to December 31, 2017, inclusive,—ten dollars and fifty cents ($10.50) per hour.
  • From January 1, 2018, to December 31, 2018, inclusive,—eleven dollars ($11) per hour.
  • From January 1, 2019, to December 31, 2019, inclusive,—twelve dollars ($12) per hour.
  • From January 1, 2020, to December 31, 2020, inclusive,—thirteen dollars ($13) per hour.
  • From January 1, 2021, to December 31, 2021, inclusive,—fourteen dollars ($14) per hour.
  • From January 1, 2022, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

 

For any employer who employs 25 or fewer employees, the minimum wage shall be as follows:

  • From January 1, 2018, to December 31, 2018, inclusive,—ten dollars and fifty cents ($10.50) per hour.
  • From January 1, 2019, to December 31, 2019, inclusive,—eleven dollars ($11) per hour.
  • From January 1, 2020, to December 31, 2020, inclusive,—twelve dollars ($12) per hour.
  • From January 1, 2021, to December 31, 2021, inclusive,—thirteen dollars ($13) per hour.
  • From January 1, 2022, to December 31, 2022, inclusive,—fourteen dollars ($14) per hour.
  • From January 1, 2023, and until adjusted by subdivision (c)—fifteen dollars ($15) per hour.

**UPDATE: SB 3 was signed by the Governor on April 4, 2016. It’s changes to the law will become operative on January 1, 2017.  

View more info on SB 3
from the California Legislature's website