A homeowner association, or HOA, is a private association for a common interest development, a subdivision, a planned community or a condominium. The HOA creates and enforces rules for the property and its residents. An individual who buys a unit within an HOA’s jurisdiction automatically becomes a member and is required to pay dues called HOA fees.
How HOAs Began
Common interest developments began to be regulated in 1963 through the California Condominium Act. In 1985, the California legislature enacted the Davis-Stirling Common Interest Development Act. This was a large section of the California Civil Code that allowed a developer to create an HOA. In 2012, Assembly Bill 805 completely reorganized and recodified the laws regarding HOAs.
Recent Legislation Affecting HOAs
January 1, 2020, brought a number of changes to California state laws regarding HOAs. California’s new labor law regarding independent contractors, Labor Code Section 2750.3, reclassifies certain HOA workers as employees. HOAs must now provide sick leave and withhold payroll taxes for these workers. Civil Code Section 4706 prohibits HOAs from banning religious items on entry doors and door frames. Civil Code 4751 makes it illegal for planned development associations to unreasonably restrict the construction of accessory dwelling units, or ADUs.
How HOAs Are Governed
In California, HOAs regulate themselves through bylaws. Bylaws state how the association will be run. For example, a bylaw would state what percentage of HOA members constitutes a quorum to vote on an HOA action. HOAs are also organized by a declaration of covenants, conditions and restrictions, commonly known as CC&Rs. CC&Rs establish the rules for homeowners. For example, a section of an HOA’s CC&Rs would dictate how HOA members would need to engage in landscaping. A rule in the CC&Rs might read: “All portions of a member’s lot must be kept free of weeds, rubbish and litter.”
State agencies do not regulate HOAs. An HOA is considered a corporation and regulates itself. An HOA must have a board of directors. The officers on the board of directors are usually a president, vice-president, secretary, treasurer and member at large. A member at large has no fixed responsibilities and usually does tasks requested by other officers of the board.
The board of directors collects assessments, pays association bills, like insurance on the entire property, deals with association finances and creates and distributes a budget. California’s laws regarding HOAs shield board members and HOA officers from personal liability if the member acts in good faith, in the best interest of the HOA and with the care a reasonable person would use in a similar situation. An HOA usually purchases insurance to protect its board of directors and officers from liability.
Rules on Assessments
An HOA can increase monthly dues, but not by over 20 percent a year. The exception is if a majority of homeowners approve the measure. The HOA must notify all homeowners of the increase in writing at least 30 days before the increase begins. The board of directors must also make the HOA’s rules public to homeowners in the community at least 45 days before the first day of the fiscal year. A fiscal year, the 12-month period for which an HOA budgets its funds, can have any start date, including in the middle of a month.
Regular and Special Assessments
The California Civil Code explains the differences between regular and special assessments. A regular assessment is also called monthly dues. The HOA uses regular assessments to pay for day-to-day operations and to establish a long-term maintenance reserve in case of an emergency. A special assessment is a fine levied by the HOA for a major repair to a common area, new construction or a one-time expense, like addressing the removal of graffiti from a clubhouse wall. A special assessment cannot be covered by a regular assessment.
A common area is an area of the complex’s property that is accessible to all members and maintained by the HOA. A swimming pool and a basketball court are good examples of common areas. Common areas also include sidewalks, internal plazas, stairs and lawns.
An HOA can require members to pay additional fees for services and activities that are outside the scope of regular use. Rules regarding these fees can be found in the CC&Rs. Such fees can include the rental of a clubhouse for a party. Such fees cannot develop into a lien on the homeowner’s unit.
Failure to Pay Assessments
A homeowner who does not pay regular or special assessments within 15 days of the due date will be considered to be delinquent. The HOA can fine the owner a late fee that is either $10 or 10 percent of the monthly dues amount, whichever is greater. When a homeowner does not cure the delinquency, the HOA can place a lien on the property. The lien can include the amount of the assessment and fees incurred during the process, such as attorney’s fees. An HOA can also foreclose on the property and file a judgment against the homeowner to assume ownership of her unit.
Understanding Townhouses and Condominiums
A townhouse is one or more conjoined units owned by individual tenants. The owners share one or more walls. A condominium is a community of individual buildings, with each unit owned by an owner. HOA fees for condos are often higher than for townhouses. A townhouse owner pays for much of his own upkeep. The HOA usually uses regular assessments to pay for exterior upkeep for condo owners.
A townhouse owner makes up the difference by paying higher home insurance rates. She needs insurance that covers the exterior and interior of her unit. A condo owner must only insure the interior of her unit.
Limits on Homeowner Fines
An HOA can fine a homeowner for breaking its rules or damaging common areas in the community. The HOA’s board of directors is required to notify the homeowner of the alleged offense in writing at least 10 days before a board meeting. The homeowner has a right to address the board at the board meeting. The board decides if the homeowner broke a rule. If the board fines the homeowner for the violation, it must notify him of the fine within 15 days of its decision. The board would also require the homeowner to pay for the damage.
Read More: How to Disband a Homeowner's Association
When Things Go Wrong
A homeowner has a number of options when an HOA is acting in a problematic manner. These include requesting a variance, or exception, to the HOA rule the board is trying to enforce; requesting a hearing with the board; and contacting the board of directors and the property management company the board has hired. If the concern relates to a fine, the homeowner can pay the fine and then file a lawsuit in small claims court or superior court. An HOA's CC&Rs may require a homeowner to engage in alternative dispute resolution proceedings, such as mediation, before filing a civil lawsuit.
The Office of the Attorney General for the state of California has limited and discretionary authority to intervene when an HOA denies homeowners certain rights provided in the California Corporations Code. In order for a homeowner to make a complaint to the attorney general, the HOA must be set up as a nonprofit mutual benefit corporation, which is the norm. In addition, the complaint must relate to a matter on the attorney general's prescribed list. The list of violations includes failure to provide notice of a meeting to members and failure to allow inspection of books and records.
- California Department of Justice: Homeowner Association, Nonprofit Mutual Benefit Corporations
- The California Association of Homeowners Associations, Inc: About Us
- California Corporations Code Section 7150
- California Civil Code Section 4000
- California Legislative Information: AB-5 Worker Status: Employees and Independent Contractors
- The San Diego Union-Tribune: Many New Laws Will Affect HOAs in 2020
- California Civil Code Section 5625
- Nationwide Insurance: Condo vs. Townhouse, What's the Difference?