Legal Obligations and Liabilities of Condominium Homeowners’ Associations Under the Davis-Stirling Act in California Law

Under the terms of the Davis-Stirling Common Interest Development Act in California, Condominium Homeowners Associations (“HOAs”) have certain minimal obligations under California Law to members of the Association, the individual home or unit owners, including for the maintenance and repair of the Common Areas of the development:

§ 1364. Responsibility for maintaining common areas and separate interests; Access to telephone wiring

“(a) Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.

(b) . . . .” (Emphasis added) Civil Code § 1364.

Condominium Declaration of Covenants, Conditions, and Restrictions (“CC&Rs”) recorded for the development often establish even stricter or more heightened requirements for the maintenance upkeep, and repair duties and obligations of the Association for all “Common Areas” (usually areas other than the interiors of the individual condominium units, which areas are shared or used by more than one unit or member of the of the Association), for the benefit, protection, and safety of the individual owner-members of the association, such as the following example:

“The Association shall have the responsibility to manage and maintain all of the common areas including but not limited to the common stairways, the common walkways, the elevator, parking area, the private driveways, and the exterior of the building, and such maintenance, shall be of a high quality so as to keep the entire project in a first-class condition and in a good state of repair.” (emphasis added)

The Association also has statutory obligations under the Davis-Stirling Act to inspect, make plans for, to study and to fund the cost of the anticipated future repairs to the Common Areas:

“(a) Unless the governing documents impose more stringent standards, the board of directors of the association shall do all of the following: . . .

(2) Review a current reconciliation of the association's reserve accounts on at least a quarterly basis.

(3) Review, on at least a quarterly basis, the current year's actual reserve revenues and expenses compared to the current year's budget.

(4) Review the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.

(5) Review an income and expense statement for the association's operating and reserve accounts on at least a quarterly basis. . . . .

“(e) At least once every three years, the board of directors shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirements of the common interest development, if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association, excluding the association's reserve account for that period. The board shall review this study, or cause it to be reviewed, annually and shall consider and implement necessary adjustments to the board's analysis of the reserve account requirements as a result of that review.”

“The study required by this subdivision shall at a minimum include:

(1) Identification of the major components that the association is obligated to repair, replace, restore, or maintain that, as of the date of the study, have a remaining useful life of less than 30 years.

(2) Identification of the probable remaining useful life of the components identified in paragraph (1) as of the date of the study.

(3) An estimate of the cost of repair, replacement, restoration, or maintenance of the components identified in paragraph (1).

(4) An estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain the components identified in paragraph (1) during and at the end of their useful life, after subtracting total reserve funds as of the date of the study.

(5) A reserve funding plan that indicates how the association plans to fund the contribution identified in paragraph (4) to meet the association's obligation for the repair and replacement of all major components with an expected remaining life of 30 years or less, not including those components that the board has determined will not be replaced or repaired. The plan shall include a schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserve funding plan. The plan shall be adopted by the board of directors at an open meeting before the membership of the association as described in Section 1363.05. If the board of directors determines that an assessment increase is necessary to fund the reserve funding plan, any increase shall be approved in a separate action of the board that is consistent with the procedure described in Section 1366.” (Emphasis added)Civil Code § 1365.5

The phrase "reserve account requirements" means the estimated funds that the association's Board of Directors has determined are required to be available at a specified point in time to repair, replace, or restore those major components that the association is obligated to maintain.

In one court case regarding the Associations’s obligations to maintain and repair the common areas, the California Court of Appeal found liability for the HOA in a suit filed against it by individual homeowners, where:

“the Affans sued the Association for its 10-year failure to undertake any maintenance of the condominium complex's main plumbing lines, despite knowledge of a recurring plumbing problem in first-floor units.

“Though the Association considered hydro-jetting a main line in 2001, and then four years later, in early 2005, discussed whether annual maintenance of the main lines might be a more cost-effective way to deal with the recurring first-floor sewage backups, the Association took no action to maintain the lines until April 2005. . . .”

Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal. App. 4th 930, 942.

“the Association's decision to hire Rescue Rooter to clean the main lines was inconsequential because Rescue Rooter's ineffectual hydro-jetting on May 3, 2005, had no discernable effect on the main lines: The hydro-jetting left the main lines choked with the same debris that had been accumulating for a decade. n8 Plaintiffs' lawsuit looked past that futile, last-minute cleaning effort and sought to hold the Association liable for its 10-year failure to address the maintenance needs of the common area plumbing lines. Put simply, the clogged drain lines and resulting sewage eruption do not implicate any decision by the Association, but rather reflect the Association's abiding indecision and inattention to plumbing maintenance issues.”

Affan v. Portofino Cove Homeowners Assn., supra, 189 Cal. App. 4th at 942-943.

“there was no evidence the board engaged in “reasonable investigation” (Lamden, supra, 21 Cal.4th at p. 253) before choosing to continue its “piecemeal” approach to sewage backups (i.e., sending plumbers to snake both drains in individual units), rather than servicing the main drain lines for the building. Instead, there was evidence the Association never sought to investigate the cause of the repeated backups until it hired Hoffman to do so in 2008.

“Nor was there evidence the Association acted “in good faith and with regard for the best interests of the community association and its members” (Lamden, supra, 21 Cal.4th at p. 253), because no one testified about the board's decisionmaking process. The Association failed to present evidence the board weighed the costs and benefits of a particular course of action, or considered any other factors in choosing to snake drains in individual units rather than clear main drain lines..."

Affan v. Portofino Cove Homeowners Assn., supra, 189 Cal. App. 4th at 943.

Occasionally there is a dispute over whether a portion of the development is a “Common Area” which the HOA must “maintain, repair and replace” as required by Section 1364(a), or whether it is part of an individual condo unit, or is part of an “Exclusive Use Common Area” appurtenant to (or deeded to) a particular homeowner’s unit.

For example, in one case a homeowner had a leaky sewer pipe two feet beneath the concrete slab underlying his Newport Beach condo. The homeowners association said he was responsible for the repair bill on the theory that the sewer pipe was “exclusive use common area” for which he was responsible to just “maintain” under Civil Code section 1364(a).

The definitions section of the Davis-Stirling Act is set out in Civil Code section 1351(I), and it defines “Exclusive Use Common Area.” The definition is:

“Exclusive use common area’ means a portion of the common areas designated by the declaration for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests. (1) Unless the declaration otherwise provides, any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, exterior doors, doorframes, and hardware incident thereto, screens and windows or other fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest, are exclusive use common areas allocated exclusively to that separate interest.” (Emphasis added.)

The CC&Rs of an Association may modify or expand on the definition of “Exclusive Use Common Area”.

In the Newport Beach case discussed in the above example, the Court of Appeal held that a piece of a system of interconnected sewer piping is, literally, physically connected to every other piece of the system.

Every unit's sewer pipes are a “fixture” of every other unit's sewer pipes, and thus the sewer pipe was not the duty of the Homeowner to repair or replace or maintain, since it was part of the HOA’s Common Area. Dover Village Assn. v. Jennison (2010) 191 Cal. App. 4th 123, 129.

In that case the Court also required the HOA to pay the Homeowner’s attorneys fees and litigation costs in the suit the HOA filed against the Homeowner per Civil Code section 1354, which allows the “prevailing party” in any suit filed by the HOA or a Homeowner to enforce the CC&Rs to recover his or her attorney fees and costs of suit

Thus, if Homeowners filed a suit against the HOA to enforce the maintenance, repair or other obligations of the HOA under the CC&Rs or the Davis-Stirling Act, the Homeowners could potentially recover their costs of suit if they “prevailed” in the case.

HOAs may also be liable to Homeowners for their damages for its failure to maintain or repair the Common Areas, or to comply with the HOA’s obligations under the CC&Rs or the Davis-Stirling Act.

However, often in such cases the court will defer to the HOA Board’s decision or discretion on maintenance matters - unless their decision was clearly unreasonable - under the authority of Lamden v. La Jolla Shores Condominium Homeowners Assn. (1999) 21 Cal.4th 249.

In that case, a unit owner disputed the homeowners association's preferred method of treating termite infestation. The owner, supported by inspection reports, wanted fumigation. The board decided on “spot-treatment.”

The board's decision was ultimately upheld by the California Supreme Court because it was a matter “entrusted” to the board's “discretion.” This is sometimes referred to as the “Business Judgment Rule”.

Thus careful legal analysis and consultation with experts and a strategy of dealing with the HOA to address and notify the HOA of the problems and errors in their course of action should be done before filing any such suit, to increase the likelihood of success.