Governing Document Enforcement
In an action to enforce an association’s governing documents, the prevailing party must be awarded “reasonable attorney’s fees and costs.” (Civ. Code § 5975(c).)
“Prevailing Party”
The Davis-Stirling Act does not define the term “prevailing party,” nor does it provide a metric or formula for making that determination. As a result, California Courts have “concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives.” (Heather Farms HOA v. Robinson (1994) 21 Cal.App.4th 1568, 1574; See also “Prevailing Party & Attorney’s Fees.”)
Attorney’s Fees & Alternative Dispute Resolution (“ADR”)
Neither an association nor any of its members may file an “enforcement action” (i.e., a lawsuit) in superior court unless the parties to the dispute have “endeavored” to submit their dispute to “alternative dispute resolution” (ADR) in accordance with Civil Code Section 5930. (Civ. Code § 5930(a); See also “Alternative Dispute Resolution (ADR).”) ADR is essentially mediation where the parties to a dispute (i.e., the homeowner and the HOA) utilize the services of a third-party mediator to try and come to a mutual resolution. While each party to ADR is generally required to bear its own attorney’s fees, those attorney’s fees may become recoverable in any subsequent litigation regarding the dispute or to enforce a settlement agreement that was reached by the parties in ADR. (Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128; Rancho Mirage Country Club HOA v. Hazelbaker (2016) 2 Cal.App.5th 252.)
Other Causes of Action
The following provisions of the California Civil Code and Code of Civil Procedure provide for recovery of attorney’s fees in actions that may involve associations but not necessarily relate to enforcement of an association’s governing documents:
| Anti-SLAPP Motion | Code Civ. Pro. § 425.16 |
| Assessment Collection | Civ. Code § 5650 |
| Contract Enforcement (*where the disputed contract provides for attorney’s fees) |
Civ. Code § 1717 |
| Discriminatory Restrictions | Civ. Code § 4225 |
| Election Challenges (*attorney’s fees are only available to a prevailing member, not a prevailing association.) |
Civ. Code § 5145(b) |
| Escrow Disclosure Violations | Civ. Code § 4540 |
| Flags (*display U.S. flag) |
Civ. Code § 4705(c) |
| Grants of Exclusive Use of Common Area (*attorney’s fees are only available to a prevailing member, not a prevailing association.) |
Civ. Code § 4605(b) |
| Managing Agent: Deposit of Association Funds | Civ. Code § 5380(e) |
| Open Meeting Act Violations (*attorney’s fees are only available to a prevailing member, not a prevailing association.) |
Civ. Code § 4955 |
| Records Inspection (*attorney’s fees are only available to a prevailing member, not a prevailing association.) |
Civ. Code § 5235 |
| Records Misuse (*attorney’s fees are available to a prevailing association.) |
Civ. Code § 5230 |
| Satellite Dishes | Civ. Code § 4725(d) |
| Small Claims Appeals | Code Civ. Pro. § 116.780(c) |
| Solar Energy Systems | Civ. Code § 714(g) |
Notable HOA Attorney’s Fees Case Law
- Almanor Lakeside Villas Owners Association v. Carson
(2016) 246 Cal.App.4th 761
Where both sides achieved some positive net effect as a result of the court’s ruling, a prevailing party determination is made by comparing the practical effect of the relief attained by each; After resolving the issue of prevailing party in an action to enforce the governing documents, a trial court has no discretion to deny attorney’s fees. - Grossman v. Park Fort Washington Association
(2012) 212 Cal. App. 4th 1128
Pre-litigation attorney’s fees that are incurred in alternative dispute resolution (ADR) are recoverable by the prevailing party in subsequent ligation. - Rancho Mirage Country Club Homeowners Association v. Hazelbaker
(2016) 2 Cal.App.5th 252
An action to enforce a settlement agreement reached between a HOA and an owner through Alternative Dispute Resolution (ADR) was held to be an action to enforce the governing documents entitling the prevailing party to an award of attorney’s fees and costs pursuant to Civ. Code § 5975. - Heather Farms Homeowners Association v. Robinson
(1994) 21 Cal.App.4th 1568
The determination as to who is the “prevailing party” entitled to its attorney’s fees under the Davis-Stirling Act is based on the court’s analysis of which party prevailed on a practical level. When that determination is made, the court’s ruling should be affirmed on appeal absent an abuse of discretion. - Salehi v. Surfside III Condominium Owners Association
(2011) 200 Cal.App.4th 1146
A HOA is deemed a prevailing party entitled to recover its attorney’s fees where the outcome of the lawsuit results in the HOA realizing its litigation objectives on a practical level. - Tract 19051 Homeowners Association v. Kemp
(2015) 60 Cal. 4th 1135
Attorney’s fees may be recovered by the prevailing party under Civ. Code § 5975 in an action to enforce the governing documents regardless of whether the association is in fact a common interest development that is subject to the Davis-Stirling Act. - Martin v. Bridgeport Community Association
(2009) 173 Cal.App.4th 1024
Plaintiff’s lack of standing does not preclude Defendant HOA’s ability to recover its attorney’s fees as the prevailing party.
Related Links
Recovering Pre-Litigation Attorney’s Fees in HOA Disputes – Published on HOA Lawyer Blog (March, 2013)
Attorney’s Fees are Recoverable to Enforce Settlement Agreement Reached in ADR – Published on HOA Lawyer Blog (November, 2016)
Clarifying When a HOA may be Deemed the ‘Prevailing Party’ in an Enforcement Suit – Published on HOA Lawyer Blog (January, 2017)
Initiating ADR: Request for Resolution
In order for a party to initiate alternative dispute resolution (“ADR”), the party is required to serve on the other parties to the dispute a “Request for Resolution” pursuant to Civil Code Section 5935. The Request for Resolution must include all of the following items of information:
- A brief description of the dispute between the parties; (Civ. Code § 5935(a)(1).)
- A request for ADR; (Civ. Code § 5935(a)(2).)
- A notice that the party receiving the Request for Resolution is required to respond within thirty (30) days of receipt or the request will be deemed rejected; and (Civ. Code § 5935(a)(3).)
- If the party on whom the request is served is the member, a copy of Article 3, of Chapter 10 of the Davis-Stirling Act (a copy of Civil Code Sections 5925-5965). (Civ. Code § 5935(a)(4).) However, even if an association does not entirely satisfy this requirement and a lawsuit is ultimately filed by the association, it may not provide grounds to dismiss the lawsuit unless the association’s failure to provide the member with copies of the ADR Code Sections results in prejudice to the member. (Ryland Mews HOA v. Munoz (2015) Cal. App. 4th 705, 710-711.)
Method of Service
The Request for Resolution must be served by personal delivery, first-class mail, facsimile transmission, or “other means reasonably calculated to provide the party on whom the request is served actual notice of the request.” (Civ. Code § 5935(b).) Once the Request for Resolution is validly served, the party on whom the Request for Resolution is served has thirty (30) days to accept or reject the request; if the party does not respond within that timeframe, the Request for Resolution is deemed rejected. (Civ. Code § 5935(c).)
ADR Timelines
- 30 Days to Accept Request for Resolution – A party on whom a Request for Resolution is served has thirty (30) days following service to accept or reject the request. (Civ. Code § 5935(c).) If the party does not accept the request within that period (or simply fails to respond), the request is deemed rejected by that party. (Civ. Code § 5935(c).)
- 90 Days to Complete ADR – If the party on whom a Request for Resolution is served accepts the request, the parties are required to complete ADR within ninety (90) days after the date the acceptance was received, unless the period is extended by written stipulation signed by both parties. (Civ. Code § 5940(a).)
Effect on Statute of Limitations
If a Request for Resolution is served before the applicable statute of limitations has run for commencing an enforcement action, the statute of limitations is tolled:
- During the the thirty (30) day period for a response a Request for Resolution, (Civ. Code § 5945(a).) and
- If the Request for Resolution is accepted, during the the ninety (90) day period to complete ADR, including any extension of time for completing the ADR that is stipulated to by the parties. (Civ. Code § 5945(b).)
Loss Assessment Insurance
An association may sustain a loss that is not entirely covered by the association’s insurance policies. For example, if a person sustains bodily injury while using the common areas and $3 million dollars in damages are awarded, the association’s insurance carrier will not cover the amount of damages which exceed the association’s $2 million dollar policy limit. In that situation, the association would likely be required to levy a special assessment (specifically, an “emergency assessment” pursuant to Civil Code Section 5610(a)) against the membership to cover the difference ($1 million dollars).
“Loss assessment insurance” is insurance that would generally cover the cost of the member’s portion of that special assessment. Loss assessment insurance is not purchased by the association, but by the association’s individual members. Loss assessment insurance can be purchased as an independent policy, but is more commonly purchased as a rider that is added to an owner’s underlying insurance policy.
Related Links
What if Our HOA’s Insurance is Cancelled Due to Risk of Wildfires?
-Published on HOA Lawyer Blog (August, 2023)
Owner & Tenant Insurance Requirements
The requirements for owners and tenants residing within a condominium association to purchase and maintain insurance for their respective units depends primarily on the scope of insurance which the association is required to carry. If there are gaps in coverage (i.e., if the association has a “bare-walls” policy), the association’s CC&Rs typically contain provisions requiring owners to purchase and maintain insurance necessary to fill the gap.
“Walls-In” Policies
Both the Civil Code and the association’s CC&Rs require the association to purchase and maintain insurance on the common areas/elements existing throughout the project. Some sets of CC&Rs require the association to purchase and maintain what is commonly known as “Walls-In” insurance coverage that not only covers the common areas/elements that bound the separate interests (the units), but also covers any damage or loss to the improvements existing within the units. This type of broad coverage is more expensive for the association as compared to “bare-walls” coverage, and thus results in a higher level of regular assessments.
“Bare-Walls” Policies
“Bare-Walls” coverage is a less expensive form of insurance coverage because it does not cover any damage or loss sustained to the improvements and property located within the interior of an owner’s unit. In situations where an association is only required to purchase a Bare-Walls policy, the association’s CC&Rs almost always contain a provision requiring each owner to purchase and maintain insurance covering the improvements and property located within the interior of the owner’s unit. This separate coverage that an owner would purchase would extend to everything existing within the airspace of the unit (i.e., cabinets, flooring finishes, appliances, etc. existing within the block of space bounded by the unit’s perimeter walls, floors and ceilings).
Owner Insurance: HO-6 Policy
The insurance policy that an owner purchases is known as a HO-6 policy (aka “Condominium Unit Owner Policy” or “Homeowners 6 Policy”). It covers all of the personal property and improvements located within the interior of the owner’s unit, personal injury or property damage sustained inside of an owner’s unit, any expenses (i.e., hotel expenses) relating to an owner’s loss of use of his/her unit while repairs are being performed, and loss assessment coverage.
Tenant Insurance: HO-4 Policy
Some CC&Rs require tenants residing within the association’s development to purchase and maintain a HO-4 policy that protects the tenant’s personal property against loss and limits the tenant’s exposure to personal liability.
Internal Dispute Resolution (IDR)
An association is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the association and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the association’s governing documents. (Civ. Code §§ 5900, 5905.) This procedure is referred to as “Meet and Confer” and more commonly as “Internal Dispute Resolution” (IDR). The purpose of IDR is to provide a non-judicial forum to resolve disputes between a member and the association that will not result in a fee or a charge to the member.
Notice of IDR Procedure in Annual Policy Statement
An association’s annual policy statement must include a description of the association’s IDR procedure. (Civ. Code §§ 5310(a)(9), 5920.)
Minimum Requirements of IDR Procedure
The IDR procedure established by an association must, at a minimum, satisfy all of the following requirements: (Civ. Code § 5910.)
- Invoking IDR – The procedure may be invoked by either party to the dispute, and a request to invoke the IDR procedure must be in writing. (Civ. Code § 5910(a).)
- Deadlines & Timeline for Action by Association – The IDR procedure must provide for prompt deadlines, and must state the maximum time for the association to act on a request to invoke IDR. (Civ. Code § 5910(b).)
- Participation in IDR – If IDR is invoked by a member, the association must participate in IDR. If IDR is invoked by the association, the member may elect not to participate in IDR. If the member participates but the dispute is resolved other than by agreement of the member, the member must have the right of appeal to the board. (Civ. Code § 5910(c)-(d).)
- Written Resolution is Binding & Enforceable – If a written resolution is signed by both parties to IDR, that resolution is binding and judicially enforceable provided that it is not in conflict with the law or the association’s governing documents. (Civ. Code § 5910(e).)
- Explaining Positions & Attorney Assistance – The IDR procedure must provide a means by which the member and the association may explain their respective positions. The member and the association may be assisted by an attorney or another person in explaining their positions, at their own cost. (Civ. Code § 5910(f).)
- No Fee Charged to Member – A member of the association may not be charged a fee to participate in IDR. (Civ. Code § 5910(g).)
Default IDR Procedure
If an association does not establish its own IDR procedure that satisfies the requirements discussed above, Civil Code Section 5915 establishes the following default IDR procedure:
- The party may request the other party to meet and confer in an effort to resolve the dispute. The request must be in writing. (Civ. Code § 5915(b)(1).)
- A member of an association may refuse a request to meet and confer. The association may not refuse a request to meet and confer. (Civ. Code § 5915(b)(2).)
- The board must designate a director to meet and confer. (Civ. Code § 5915(b)(3).)
- The parties must meet promptly at a mutually convenient time and place, explain their positions to each other, and confer in good faith in an effort to resolve the dispute. The parties may be assisted by an attorney or another person at their own cost when conferring. (Civ. Code § 5915(b)(4).)
- A resolution of the dispute agreed to by the parties must be memorialized in writing and signed by the parties, including the board designee on behalf of the association. That written resolution is binding and judicially enforceable so long as the agreement (1) is not in conflict with the law or the association’s governing documents, and (2) is either consistent with the authority granted by the board to its designee or is ratified by the board. (Civ. Code § 5915(b)(5),(c).)
- A member may not be charged a fee to participate in IDR. (Civ. Code § 5915(d).)
Written Resolution Obtained in IDR
As referenced above, a written resolution signed by the parties to IDR is binding and judicially enforceable provided that it is (1) not in conflict with the law or the association’s governing documents, and (2) is within the board’s authority (or the authority given to the board’s designee) and/or is ratified by the board. (Civ Code §§ 5910(e), 5915(c).)
Attorney Assistance at IDR
As a result of Assembly Bill 1738, the Civil Code’s provisions pertaining to IDR were amended by the California Legislature and the changes which took effect on January 1, 2015 now allow for a member to bring an attorney or other person with him/her to the IDR proceeding in order to assist the member at the member’s expense. (Civ. Code §§ 5910(b), 5915(b)(4).) The Civil Code does not contain any requirement for a member to provide the association with advance notice of the member’s intent to bring an attorney to the IDR proceeding. Many HOA attorneys take the position that having a member’s attorney at an IDR proceeding without also having the association’s attorney present could violate Rule 2-100 of the California Rules of Professional Conduct. That rule prohibits an attorney from communicating with parties whom the attorney knows to be represented by legal counsel. (See Rule 2-100.) Many associations therefore opt to include a requirement in their IDR procedure for the member to provide the association advance notice of the member’s intent to have an attorney present at the IDR proceeding.
IDR Prior to Litigation
If a member requests IDR in connection with a dispute, the association may not file a lawsuit against the member regarding that dispute without first having participated in IDR with the member. (Civ. Code § 5910.1.)
Related Links
AB 1738 Signed: HOAs Set to Incur Greater Attorney’s Fees to Resolve Member Disputes via IDR | From HOA Lawyer Blog, published by Tinnelly Law Group, October 14, 2014
Notice of Change in Insurance Coverage
An association is required to disclose and summarize information regarding the association’s insurance policies as part of the association’s annual budget report that is distributed to the association’s members. (See “Insurance Disclosures.”) When any of the policies lapse, are changed, are cancelled and are not immediately renewed, Civil Code Section 5810 requires the association to provide notice of the same to its members:
“The association shall, as soon as reasonably practicable, provide individual notice pursuant to Section 4040 to all members if any of the policies described in the annual budget report pursuant to Section 5300 have lapsed, been canceled, and are not immediately renewed, restored, or replaced, or if there is a significant change, such as a reduction in coverage or limits or an increase in the deductible, as to any of those policies. If the association receives any notice of nonrenewal of a policy described in the annual budget report pursuant to Section 5300, the association shall immediately notify its members if replacement coverage will not be in effect by the date the existing coverage will lapse.” (Civ. Code § 5810.)
Insurance Disclosures
An association is required to prepare and distribute to its members an annual budget report pursuant to Civil Code Section 5300 not less then thirty (30) nor more than ninety (90) days prior to the beginning of the association’s fiscal year. (See “Annual Budget Report.”) One of the items of information that must be included in the annual budget report is a disclosure summarizing the association’s property, general liability, earthquake, flood, and fidelity insurance policies. (Civ. Code § 5300(b)(9).)
Required Contents of Insurance Summary
The insurance summary must include information pertaining to each policy of insurance carried by the association, as well as the statement required by Civil Code Section 5300(b)(9).
- Information Pertaining to Insurance Policies – For each policy of insurance carried by the association, the summary must include all of the following: the name of the insurer, the type of insurance, the policy limit, and the amount of the deductible (if any). (Civ. Code § 5300(b)(9).)
- Required Insurance Statement – The insurance summary must also include the following statement in at least 10-point boldface type:
“This summary of the association’s policies of insurance provides only certain information, as required by Section 5300 of the Civil Code, and should not be considered a substitute for the complete policy terms and conditions contained in the actual policies of insurance. Any association member may, upon request and provision of reasonable notice, review the association’s insurance policies and, upon request and payment of reasonable duplication charges, obtain copies of those policies. Although the association maintains the policies of insurance specified in this summary, the association’s policies of insurance may not cover your property, including personal property or real property improvements to or around your dwelling, or personal injuries or other losses that occur within or around your dwelling. Even if a loss is covered, you may nevertheless be responsible for paying all or a portion of any deductible that applies. Association members should consult with their individual insurance broker or agent for appropriate additional coverage.” (Civ. Code § 5300(b)(9).)
Notice of Change in Insurance Coverage
Civil Code Section 5810 requires an association to provide its members with individual notice if any of the insurance policies described in the annual budget report have been changed, lapsed, been canceled, are not renewed. (See “Notice of Change in Insurance Coverage.”)
Directors & Officers (D&O) Insurance
Volunteer directors and officers of an association are required to make decisions which may have significant legal and financial implications for the association and its membership. Because directors and officers do not receive any compensation, they are afforded certain protections against personal liability that may result from actions they undertake on behalf of the association. This is necessary in order to ensure that an association will be able to recruit people to serve on its board. (See “Director & Officer Liability Protection.”)
One of the ways in which directors and officers are insulated from liability is through Directors & Officers (D&O) insurance. D&O insurance protects against errors and omissions made by directors and officers while they were serving on the board. The governing documents (i.e., CC&Rs) of an association typically require the association to purchase and maintain D&O insurance. Additionally, Civil Code Section 5800 protects volunteer directors and offers from liability in excess of the association’s insurance coverage subject to the requirements discussed below.
Civil Code § 5800 Requirements
A “volunteer officer or volunteer director of an association…shall not be personally liable” in excess of the required insurance coverage amounts “to any person who suffers injury, including, but not limited to, bodily injury, emotional distress, wrongful death, or property damage or loss as a result of the tortious act or omission of the volunteer officer or volunteer director if all of the following criteria are met:” (Civ. Code § 5800(a).)
Nature of Act or Omission – The act or omission was performed within the scope of the officer’s or director’s association duties, in good faith, and was not willful, wanton or grossly negligent. (Civ. Code § 5800(a)(1)-(4).) and
Minimum Coverage – The association maintained and had in effect at the time the act or omission occurred and at the time a claim is made one or more policies of the insurance for both general liability and D&O coverage in the following minimum amounts:
- 100 or Fewer Separate Interests: $500,000 – If the association’s development is comprised of one hundred (100) or fewer separate interests (lots or units owned by individual members), the minimum amount of coverage is five hundred thousand dollars ($500,000). (Civ. Code § 5800(a)(4)(A).)
- More than 100 Separate Interests: $1m – If the association’s development is comprised of more than one hundred (100) separate interests, the minimum amount of coverage is one million dollars ($1,000,000). (Civ. Code § 5800(a)(4)(B).)
Exception for Owners of More than 2 Units
The protections under Section 5800 do not extend to a person who owns more than two (2) separate interests in the association’s development. (Civ. Code § 5800(e).)
Scope of D&O Coverage
The scope of coverage under a D&O policy may vary. For example, D&O policies may include coverage for both current and former directors and officers, committee members and other association volunteers, association employees, and managing agents. D&O policies also contain various exclusions (claims that the insurance carrier will not cover), such as breach of contract claims, discrimination and employment practices liability, and claims brought against one director by the board (aka “insured vs. insured” claims).
Commercial General Liability (CGL) Insurance
Commercial General Liability (CGL) insurance protects an association’s members from liability that may result from a person’s use of the association’s common areas. By statute, an association must carry minimum levels of such insurance for the benefit of the association’s members. (Civ. Code § 5805.) Civil Code Section 5805(b) states that a cause of action brought against a member solely by virtue of the member’s ownership interest as a tenant-in-common in the common area of an association must be brought only against the association (and not against individual members) if both the following insurance requirements are met:
- The association has one or more policies of insurance that include coverage for general liability; and
- The general liability insurance coverage is maintained in the minimum amounts discussed below.
Minimum Amounts of Coverage
The minimum levels of CGL insurance which must be carried by an association pursuant to Civil Code Section 5805 depend upon the number of separate interests (units or lots owned by individual members) within the association:
- 100 or Fewer Separate Interests: At least $2m – If the association is comprised of one hundred (100) or fewer separate interests, the coverage must be maintained in the minimum amount of two million dollars ($2,000,000). (Civ. Code § 5805(b)(2)(A).)
- More than 100 Separate Interests: At least $3m – If the association is comprised of more than one hundred (100) separate interests, the coverage must be maintained in the minimum amount of three million dollars ($3,000,000). (Civ. Code § 5805(b)(2)(B).)
Small Claims Collection Actions
An association that has recorded an assessment lien against an owner’s property is permitted to enforce the lien through suing the owner personally and obtaining a money judgment (aka a “personal money judgment” or “PMJ”). (Civ. Code §§ 5700(a), 5720(b); See also “Money Judgments (Assessment Collection).”) Once the association obtains the money judgment, the assessment lien is extinguished and the underlying debt of the owner merges into the judgment obtained by the association. (Diamond Heights Village Assn., Inc. v. Financial Freedom (2011) 196 Cal.App.4th 290, 301.)
The money judgment may be sought in Small Claims Court, subject to the limitations discussed below.
$5,000 Claim Limitation
Although an owner (a “natural person”) may sue an association in small claims for an amount up to $10,000, an association may not sue an owner in small claims for an amount exceeding $5,000. (Code Civ. Pro. §§ 116.220, 116.221.) The limitations on foreclosure of an assessment lien set forth in Civil Code Section 5720(b) (i.e., foreclosure may not be instituted until the amount of assessment debt totals at least $1,800) do not apply to small claims actions:
“An association that seeks to collect delinquent regular or special assessments of an amount less than [$1,800]…may not collect that debt through judicial or nonjudicial foreclosure, but may attempt to collect or secure that debt…[b]y a civil action in small claims court…The amount that may be recovered in small claims court to collect upon a debt for delinquent assessments may not exceed the jurisdictional limits of the small claims court…” (Civ. Code § 5720(b).)
$2,500 Claims Twice Per Year
An association may not file more than two (2) small claims actions per calendar year in which the amount demanded exceeds $2,500. (Code Civ. Pro. § 116.231(a).)
Appeal of Judgment
If a judgment is obtained by the association against the delinquent owner, the delinquent owner may appeal the judgment; however, the association (as the plaintiff) may not appeal an adverse judgment. (Code Civ. Pro. § 116.710.)
Attorney’s Fees on Appeal
The appeal on a small claims judgment is heard in Superior Court, where both parties may be represented by an attorney. However, even if the association prevails on appeal, it cannot recover all of its attorney’s fees, as the available fees which may be recovered are capped at $150. (Code Civ. Pro. § 116.780(c).)
Money Judgment
Once the association prevails and obtains a money judgment, it may enforce the money judgment through recording an abstract of judgment (a “judgment lien”) and through levying the delinquent owner’s wages or bank account. (See “Money Judgments (Assessment Collection).”)