2025 Brings New HOA Election and Voting Rules

| Michael Corbett
voting

The Davis-Stirling Common Interest Development Act (California Civil Code Section 4000 et seq.) (“Act”) is the primary body of law governing residential common interest developments (“CIDs”) and homeowners associations (“HOAs”) in California.  Several bills – such as those relating to HOA elections, the permissibility of electronic voting, maintenance responsibilities for public utilities serving CIDs, and dispute resolution procedures for construction defect claims – were recently enacted by the state legislature and signed into law by Governor Newsom.  These modifications to the Act have since been codified in the California Civil Code and became effective January 1, 2025.

The following is a brief summary of the 2025 changes to the Act, which HOAs and boards of directors should take into consideration, and where appropriate, update the governing documents applicable to the CID which they oversee.

New Electronic Voting Rights and Procedures

Assembly Bill No. 2159 authorized and established several new procedures and protocols enabling electronic voting for HOAs and its members.  These changes now permit HOAs to adopt electronic secret ballot voting under specific conditions while maintaining transparency and security.  To effectuate these modifications, amendments have been made to California Civil Code §§ 5105, 5110, 5120, 5125, 5200, and 5260.

  • Civil Code Section 5105 – Election Rules.  Rules relating to electronic voting have been added, including requirements for both inspectors of elections and member options to switch between the use of electronic and written ballots.  Additionally, floor nominations are prohibited when using electronic ballots, though they remain allowed with paper ballots.
  • Civil Code Section 5110 – Inspectors of Election.  Updates have been made to address and clarify the role and responsibilities of inspectors of elections in electronic voting.  Specifically, Civil Code § 5110 was amended to allow HOAs to conduct all votes by electronic voting – including those by secret ballot – except those relating to the approvals of proposed increases to regular and/or special assessments.  For elections by electronic secret ballot, § 5110 further provides technical requirements aimed at bolstering the security of the voting system, including those relating to the authentication of the identity of HOA members, and the separation of voter identity from the vote cast.
  • Civil Code Section 5120 – Association Records and Enhanced Records.  Provisions have been added to help ensure the integrity and security of electronic ballots.  Specifically, § 5120(c) was modified to mandate that a person, including a member of the HOA or an employee of its management company, be prohibited from opening or otherwise reviewing any tally sheet of votes cast by electronic secret ballots before the time and place at which the ballots are counted and tabulated.
  • Civil Code Section 5125 – Custody of Election Materials.  To account for the new 2025 electronic voting rights described herein, § 5125 was updated to incorporate any “tally sheet of votes cast by electronic secret ballot” into the procedures governing the existing custodial requirements of election inspectors in maintaining election materials.
  • Civil Code Section 5200 – Association Records and Enhanced Records.  The definition of “Association election materials” under § 5200(c) was expanded to include electronic voting records; specifically, the tally sheet of votes cast by electronic secret ballot.
  • Civil Code Section 5260 – Requests That Must be in Writing.  To account for the aforementioned changes to electronic voting procedures, subsection (g) was added to § 5260 to require any “request to opt out of or opt into electronically voting by electronic secret ballot” be delivered in writing to the HOA.  Guidelines were also added addressing notification requirements for HOA members related to electronic voting.

Quorum Adjustments for Elections

Assembly Bill No. 2460 made several clarifications and updates to Civil Code § 5115 relating to HOA elections and quorum requirements, while also accounting for and being in harmony with the new electronic voting rules and procedures, including those for secret ballots, as described above.

  • Civil Code Section 5115 – Voting Procedures.  § 5115 of the Act (and Corporations Code § 7512) have been amended to provide that, the absence of a quorum for purposes of member elections, an HOA would be authorized to adjourn the meeting to a date at least twenty (20) days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting would be twenty percent (20%) of the members, whether voting in person, by proxy, or by secret ballot.  These amendments further require HOAs to provide general notice of such reconvened meetings no later than fifteen (15) days prior to the date of the reconvened meeting.  Further, an HOA whose governing documents require a quorum for election of directors, are to provide general notice of a statement that the association may call a reconvened meeting to be held at least twenty (20) days after a scheduled election if the quorum is not reached, as specified.  Finally, in the absence of a quorum, an HOA is now authorized to adjourn a meeting to a date at least twenty (20) days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting would be twenty percent (20%) of the members, whether voting in person, by proxy, or by secret ballot.

 

Authored by Reuben, Junius & Rose, LLP Attorney, Michael Corbett.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Local Governments Given Broad Power to Authorize ADU Sales

| Michael Corbett
sale

As recently as last month, existing state law prohibited the sale of accessory dwelling units (“ADU”) from being sold or conveyed separately from the primary residence, except under specific circumstances where the ADU was built or developed by a qualified nonprofit corporation and held pursuant to a recorded tenancy-in-common agreement meeting certain requirements. Thanks to new state legislation – and depending on the city – the right of property owners to sell ADUs separate from primary residences has been considerably broadened. Drafted by Assemblyman Phil Ting (D-San Francisco) and signed into law on October 11, Assembly Bill 1033 provides a path forward for participating cities to adopt legislation authorizing the purchase and sale of ADUs as condominiums, regardless of whether the contractor was a qualified nonprofit or the manner in which the property is owned. The following summarizes the requirements of AB 1033 and provides guidance for homeowners in utilizing this change in law.

With respect to the construction of ADUs, Government Code § 65852.2 allows local agencies, by ordinance, to provide for the creation of ADUs in areas zoned for single-family or multifamily dwelling residential use. Among other requirements, any such ordinance must (i) designate areas within the jurisdiction of the local agency where accessory dwelling units may be permitted, (ii) impose certain objective standards on ADUs (such as parking, height, setback, landscape, architectural review, and maximum size), (iii) provide that ADUs do not exceed the allowable density for the lot upon which the ADU is located, and (iv) require ADUs be for residential use consistent with the existing general plan and zoning designation for its lot.

AB 1033 now allows cities to adopt ordinances that authorize the sale of ADUs – constructed in compliance with Gov. Code § 65852.2 – as condominiums, provided such ordinances meet the following requirements:

(1) The condominiums are created pursuant to the Davis-Stirling Common Interest Development Act, the state’s statutory scheme governing residential condominiums.

(2) The condominiums are created in conformance with all applicable objective requirements of the Subdivision Map Act, which governs subdivision mapping, and all objective requirements of applicable local subdivision ordinances.

(3) Before recordation of the condominium plan, a safety inspection of the ADU must be conducted, evidenced either through (i) a certificate of occupancy from the local agency or (ii) a housing quality standards report from a building inspector certified by the United States Department of Housing and Urban Development.

(4) Each lienholder of the applicable property must consent to the recording of a subdivision map and condominium plan before either of those documents may be recorded. With respect to lienholder consent, a lienholder may (i) refuse to give consent, or (ii) give consent provided that any terms and conditions required by the lienholder are satisfied.

(5) Prior to recordation of the condominium plan (or any amendments thereto), written evidence of the lienholder’s consent must be provided to the county recorder along with the following signed statement from each lienholder:

“(Name of lienholder) hereby consents to the recording of this condominium plan in their sole and absolute discretion and the borrower has or will satisfy any additional terms and conditions the lienholder may have.”

(6) The lienholder’s consent must be included on the condominium plan or a separate form attached to the condominium plan (and include certain information required by statute), and must be recorded in the office of the applicable county recorder.

(7) The local agency must also include a statutory notice to consumers on any ADU submittal checklist or public information issued describing requirements and permitting for accessory dwelling units.[1]

(8) If an accessory dwelling unit is established as a condominium, the local government must require the homeowner to notify utility providers of the condominium creation and separate conveyance.

(9) For owners of a property or a separate interest within an existing planned development with an existing association, as defined in Section 4080 of the Civil Code, such owners may not record a condominium plan without the written authorization by the association.

Under AB 1033, an ADU may be sold or otherwise conveyed separate from the primary residence where the above conditions are satisfied. While this is certainly an encouraging development in the fight to overcome the state housing crisis, many questions remain.

AB 1033 will only be as effective as the cities that choose to adopt the necessary legislation providing for the separate conveyance of ADUs as condominiums. As of this writing, the City of Santa Monica has passed a resolution directing staff to draft a conforming ordinance for consideration. No city has yet enacted an AB 1033-compliant ordinance.

Beyond the issue of city participation, the appetite of lienholders to consent to the mapping and sale of ADUs as condominiums is unclear. If the condominiumization of ADUs were to reduce the value of the principal residences acting as a secured asset, lenders may decline consent or grant consent while imposing onerous conditions on property owners.

Further, the market for the sale of ADUs as condominiums is an unknown quantity. It may prove difficult for property owners to sell ADUs as a condominium separate from a primary residence, and vice versa. Purchasing either interest would also subject owners to the rules and regulations applicable to homeowners’ associations, which can prove tricky for small, two-member associations, particularly when disputes arise.

Homeowners looking to sell ADUs should contact their local city officials and request information regarding the prospects for local adoption of an ordinance now authorized pursuant to California Government Code § 65852.2.

If you have any questions or would like to discuss the mechanics and implications of AB 1033, please contact Michael Corbett from Reuben, Junius & Rose, LLP, at 415.567.9000 or mcorbett@reubenlaw.com.

[1] See Gov. Code § 65852.2(a)(1)(10)(E) for the required notice.

 

Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

New State Laws Affecting Condo Homeowners Associations

| Jay Drake
HOAs

There are relatively fewer new state laws affecting condominium homeowners associations (“HOAs”) in 2023 than in recent years. However, one particular bill was passed by the California State legislature that includes important changes condominium owners and HOAs should be aware of.  Assembly Bill 1410 made a few significant changes to the Davis-Stirling Common Interest Development Act, which is the primary state law affecting condos and HOAs.  These new laws became effective January 1, 2023.

As we have previously reported over the past few years, the state legislature has been making an effort to increase affordable housing in the state.  To that end, the ability of HOAs to restrict rentals of condo units has been curtailed.  Assembly Bill 3182, passed in 2020, amended Civil Code Section 4740 to limit the power of HOAs to enforce restrictions on a homeowner’s ability to rent his or her unit.  AB 3182 also added new Civil Code Section 4741, which provides that HOAs cannot require a minimum rental term of greater than thirty (30) days.  Section 4741 also states that HOAs cannot enforce a cap on the number of units that may be rented at greater than 25%.  Units that are owner-occupied where only a portion of the unit is rented, or an accessory dwelling unit (ADU) that is part of the unit is rented, do not count towards any such rental cap.  The effect of this is to limit restrictions on rental of ADUs and a unit owner’s ability to rent rooms in his or her unit.

AB 1410 furthers the state legislature’s objective of increasing affordable housing by adding a new section 4739 to the Civil Code.  Section 4739 provides that an HOA’s governing documents cannot prohibit an owner from renting out a portion of his or her unit so long as the owner occupies the unit and the rental term is for more than 30 days.  This has the effect of allowing more short term rentals so long as the rental period is for more than 30 days.

AB 1410 also amends Civil Code Section 4515 to provide that an HOA’s governing documents cannot prohibit a member or resident from exercising free speech by using social media or other online resources to discuss certain matters, even if the content is critical of the HOA or its governance. Such matters include development living, HOA elections, proposed legislation, government elections, and other issues of concern to members and residents of the community.  This does not mean an HOA has to provide any social media or other online resources to its members, and an HOA does not have to allow members to post content on the HOA’s website.  This new law seems to be fixing a problem that is not widespread, but has become an issue in some HOA communities.

Finally, AB 1410 prohibits an HOA from pursuing any enforcement actions for a violation of its governing documents during a declared state or local emergency if the nature of the emergency makes it unsafe or impossible for the owner to either prevent or fix the violation.  The only exception is an enforcement action relating to an owner’s nonpayment of assessments to the HOA.  This rule is clearly intended to give homeowners some leeway to comply with an HOA’s governing documents during government imposed emergency declarations.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Condo Owners Exempt from HOA Rental Prohibitions Adopted After Purchase, Court Rules

| Michael Corbett
rental

The 4th District Court of Appeals has resolved an ambiguity in the intent and enforceability of Civil Code Section 4740, a statute within the Davis-Stirling Act (“Act”) placing limitations on rental prohibitions within common interest developments (“CID”) in California. The court’s ruling is a victory for owners of residential condominiums currently renting units in a manner that their homeowners association (“HOA”) seeks to prohibit through proposed changes to the CC&Rs, bylaws, rules, or related documents (collectively, the “Governing Documents”) of the HOA.

In Brown v. Montage at Mission Hills, Inc. (21 C.D.O.S. 8590), certified for publication on August 20, 2021, the court held that, pursuant to Section 4740(a), an HOA’s amendment to its Governing Documents prohibiting short-term rentals of less than 30 days (“STRs”) was unenforceable against an owner that had been using her unit for STRs the previous 16 years.

Civil Code section 4740(a) states that an owner of a property in a CID shall not be subject to a provision in its regulations “that prohibits the rental or leasing of any of the separate interests in that common interest development” un­less that provision “was effective prior to the date the owner acquired title to their separate interest.”

The trial court agreed with the HOA that Section 4740 precluded CIDs from imposing complete bans on renting, and that its prohibition on STRs was merely a restriction on rent­ing. The Court of Appeal reversed that ruling, finding the meaning of section 4740 to be unclear, ambiguous, and in need of closer scrutiny.

The ambiguity lied in two reasonable, but conflicting, interpretations of the statute’s meaning: on the one hand, if a regulation forbids a specific category of rentals, such as STRs, that regulation “prohibits” that type of rental, even if it does not prohibit all forms of rentals; on the other hand, Section 4740(a) could be read to forbid only outright “prohibitions” on leasing, but not “restrictions” on leasing that fall short of a complete ban on all leasing.

To resolve these conflicting interpretations, the court considered both the legislative history of Section 4740, as well as other provisions within the Act’s statutory scheme that imposed restrictions and/or prohibitions of certain actions or conduct.

While the court acknowledged that some statutes within the Act expressly created distinctions between “restrictions” and “prohibitions”, it also found that the legislative history of section 4740 indicated that the Legislature intended broad protection for owners against restrictions on renting, includ­ing restrictions against STRs. Further, the legislative history indicated that the Legisla­ture’s intention was to ensure that unit owners within CIDs maintained all of the rental rights they had at the time they purchased their unit.

In seeking guidance from both the entire statutory scheme of the Act and the legislative intent behind Section 4740, the court was required to “choose the construction that comports most closely with the Legislature’s apparent intent.” (Smith v. Superior Court (2006) 39 Cal.4th 77, 88) With this directive, the court determined the goal of Section 4740 is to exempt CID unit owners from any kind of rental prohibition or restric­tion that did not exist when the owner acquired title to the unit.

Notably, the court cited the opinion of the Legislative Counsel regarding section 4740’s effect on rental prohibitions in CIDs, including prohibitions against STRs, at the time of the statute’s enactment in 2012. The Legislative Counsel opined that a unit owner within a CID is subject to a provision of, or amendment to, Governing Documents that prohibits an owner from renting out their unit only if either (1) the prohibition took effect before the owner acquired title to his or her separate interest in that CID, or (2) the owner consented to the Governing Documents or amendment con­taining that provision.

In Brown, HOA respondent Montage nonetheless argued its STR prohibition was permissible due to “public policy considerations.” Montage observed that individual property owner’s rights must some­times give way to the public interest and the right of CIDs to decide their rules and restrictions. However, relying on the public policy considerations given priority by the Legislature when it adopted Section 4740, the court found the statute to have been enacted to protect “the rights of CID own­ers to rent or lease their properties, as the rights existed at the time they acquired them,” and that its goal was to ensure that “the right of an owner to rent or lease his or her separate interest [in a CID] shall be the same as when the owner purchased his or her separate interest throughout the life of ownership.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended Apr. 25, 2011.) (Italics added.)

In other words, a residential condominium owner will not be subject to amendments to Governing Documents prohibiting a specific form of leasing – including without limitation STRs – otherwise allowed at the time such owner first purchased their unit. An owner who acquired title prior to the HOA’s adoption of such a rental prohibition would be exempt from the same unless the owner waived this right by formally voting in favor of the proposed prohibition.

The Brown appeal was pending while the Legislature enacted Civil Code Section 4741, a statute that was the subject of an e-update by this firm earlier in the year.  Section 4741 allows an HOA to adopt and enforce a provision in its Governing Documents that prohibits transient or STRs of units within its CID for a period of 30 days or less. (Civ. Code, § 4741, subd. (c)). However, as pointed out by the Brown ruling, Section 4741 expressly provides that, in ac­cordance with Section 4740, Section 4741 does not change the right of an owner of a separate interest who acquired title to their separate interest before the effective date of this section to rent or lease their property. (Civ. Code, § 4741, subd. (h)).

 

Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

New Law Limits Rental Restrictions in Condo Projects

| Jay Drake
new law

A new law became effective on January1, 2021, that impacts common interest developments (“CIDs”) (including condo projects and planned developments) and homeowners associations (“HOAs”) in California.  Assembly Bill 3182 adds Civil Code Section 4741 to the Davis-Stirling Common Interest Development Act (“Davis-Stirling Act”), which is the primary body of law governing CIDs and HOAs in California.

The new law is controversial because it limits the right of HOAs to impose what many believe are reasonable and necessary restrictions on rentals in CIDs and requires HOAs to amend their governing documents to conform to the new law.

New Civil Code Section 4741 includes the following key provisions:

  • The governing documents of a CID shall not prohibit or unreasonably restrict the rental of a unit. The governing documents include the project declaration (“CC&Rs”), HOA bylaws, HOA rules and related documents.
  • The maximum number of rentals permitted in a CID cannot be capped at less than 25% of the units in the project. Rentals of accessory dwelling units (ADUs) are exempt from the cap.
  • Perhaps most significant is that minimum lease terms cannot be greater than 30 days. Typical minimum lease terms of 6 months or 1 year are no longer valid.  An HOA can only require a minimum lease term of 30 days or less.
  • HOAs are required to amend their CC&Rs and other governing documents to conform to the requirements of Section 4741 by December 31, 2021.
  • An HOA that willfully violates these rules shall be liable to the applicant or other party for actual damages and for civil penalties of up to $1,000.

Note that the new Civil Code Section 4741 modifies Civil Code Section 4740 enacted in 2012.  Pursuant to Section 4740, rental restrictions that were already in place when an owner took title to a condo unit remained enforceable.  Under the new Section 4741, even existing rental restrictions are invalid if they do not comply with the new law.

While this new law appears to be a well-intentioned change designed to increase affordable housing, there are potentially negative consequences for HOAs and condo owners.  Minimum lease terms of 6 months or 1 year are very common, increase stability in a project and are not considered to be an unreasonable restriction on renting.

Requiring HOAs to amend their governing documents to comply with the new law is unusual and imposes a heavy burden on HOAs.  The new law could have just declared non-compliant provisions in governing documents unenforceable.  Instead, an affirmative obligation has been imposed on HOAs to amend their governing documents to conform to the new law.  This typically involves amending a project’s CC&Rs, which is time consuming, costly, and can be difficult due to owner apathy.

HOAs should review their governing documents, in particular the CC&Rs, to confirm whether they comply with the new Section 4741.  If there are any rental restrictions that do not comply, then those documents must be amended by December 31, 2021.  Of particular concern are typical minimum lease terms of 6 months or 1 year.  As these provisions are rendered unenforceable, this could leave an HOA without any minimum term for rentals.  The CC&Rs may be amended to include a 30-day minimum lease term as permitted by the new law.

While the HOA board of directors can typically amend the HOA rules and regulations, amendment of the CC&Rs requires compliance with the Davis-Stirling Act, including voting by secret ballot and related procedures, which can take several months to accomplish.  The amendment process should be started soon so it may be completed by December 31, 2021.

Please contact Jay Drake for assistance with amending governing documents to comply with the new law.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.