7 Tips for Handling HOA Architectural Approvals Fairly

One process that often gets owners piping mad is architectural approval. Here our experts offer seven tips for making your HOA’s architectural approval process transparent, fair, and as speedy as possible.

1. Educate home owners on the committee’s role. “Educate home owners on the reason for the architectural review committee,” says Steven Parker, president of RMI Management in Las Vegas, which manages 286 community associations. “You might say, ‘You bought in this community because you liked the way it looked, and it’s the ARC’s job to maintain those standards that appealed to you.’ I’ve seen associations where owners were mad at ARC decisions and considered them unfair, and that was because the board hadn’t adequately explained the reason for the ARC process to home owners in the first place. Where that’s done and owners’ requests are declined, they’re less likely to be angry.”

2. Create written standards. “The first thing you need is written criteria,” explains Robert Galvin, a partner at Davis, Malm & D’Agostine PC in Boston who specializes in representing condos and co–ops. “For example, if somebody wants to put in a dormer, what are the criteria for that so it’s not left completely up to the architectural review committee?

“You could promulgate specific criteria for specific renovations,” adds Galvin. “For example in the condo where I live, the windows are owned by the owners and aren’t common. The association has issued a list of windows you can use. You can buy them anyplace, but the windows you buy must meet these specifications. Then there are balcony criteria: This is what you can do to your balcony.

“Then there can be general criteria,” says Galvin. “You could state that alterations have to fit in with the existing architecture, so they must be art deco or American colonial style, whatever your style. Otherwise, there are no guidelines, and it would be very difficult for the committee to know what the criteria would be. That’ll make the process fair, and not only that, people will believe it’s fair.”

3. Take tons of decisions out of the committee’s hands. “Have as many decisions taken out of the subjective realm as possible,” advises Parker. “Rather than saying, ‘No, you can’t choose that paint color,’ create a list of paint colors that are acceptable and let owners choose from the list.”

4. Create a transparent system. “It should be an open process,” says Galvin. “There should be a hearing before the ARC members, and there’s no reason it can’t be public. There should be a written decision, and it should include the committee’s reasons for the decision. And the process should be speedy. It doesn’t have to be done in a few days, but an ARC review shouldn’t take months.”

5. Document your process. “Have a process that ensures that all requests should be on an application, and create a form application that owners must use so that people just don’t send a letter,” advises Brad van Rooyen, a partner at Home Encounter, a Tampa, Fla., company that manages 15 community associations totaling about 3,000 owners. “Also tell owners that if their application isn’t done correctly, it won’t be processed until it’s correct. Then you keep the process fair for everybody. Likewise, ensure that every step of the ARC review process is documented in writing by someone on the committee.”

6. Remind the committee of the stakes involved. “Whether the management company or the HOA’s attorney brings this up, we always remind our ARCs that disputes can end up in court or arbitration, and the committee might be asked to explain everything they’ve done,” explains van Rooyen. “Keeping that in the back of their minds hopefully keeps things moving along in a fair and consistent manner.”

7. Be open to change. “When ARCs are developing architectural guidelines, they need to be responsive to the needs of the community,” says van Rooyen. “A lot of things have changed, especially in older communities. Sometimes, 25 years have gone by since the creation of the guidelines. What was written when the community was founded isn’t likely to be applicable today.

“For example, some condos are extremely specific on the roofing material type, ” adds van Rooyen. “But there have been so many advancements in roofing types that there are probably better solutions that are longer lasting and more affordable than what’s specified in the governing documents. Also, my association has very specific guidelines governing the coach lights in front of our garages. But we can’t find the replacement lights, and we also can’t get a majority of our community to show up or send in proxies to change the governing documents on that issue.”

Why go through all this hassle to strengthen your ARC process? So you’re ready and your actions are defensible when owners challenge you—which is something you can count on.

“If you treat differently and upset one owner who’s retired and has a little time on his hands,” says van Rooyen, “with owners’ access to the Internet today and how quickly people can find out how to challenge things, it’s not if they’ll challenge you but when.”

 

Originally published October 2012 by HOALeader.com

New 2014 Civil Code for Commercial CIDs

New and Improved Law to Govern Commercial

Common Interest Developments in California

HIGHLIGHTS:

  • As of January 1, 2014, commercial common interest developments (CIDs) in California are governed by the new Commercial and Industrial Common Interest Development Act.
  • The New Act establishes provisions specific to commercial CIDs, clarifying those legal requirements applicable to commercial CIDs. It also makes CID requirements less burdensome to commercial interests, separating them from consumer protection provisions aimed at homeowners.

Effective January 1, 2014, the establishment, governance and operations of commercial and industrial common interest developments (commercial CIDs) in California are governed by the new Commercial and Industrial Common Interest Development Act, added by SB 752 and signed into law on October 5, 2013 (the “New Act”). The New Act adds Sections 6500-6876 to the California Civil Code and makes conforming changes to other related statutes. Most important, it clarifies the law applicable to commercial CIDs and removes unnecessary burdens for commercial interests that were in place to protect residential homeowners.

Defining Commercial CIDs Under the New Act

Common interest developments include condominium projects, planned developments and stock cooperatives. They are typically characterized by the inclusion of both “separate interests” in property as well as “common area” owned by an owners’ association or by the owners in common that are made subject to covenants, conditions and restrictions set forth in a recorded declaration, commonly referred to as CC&Rs.

Under the New Act, commercial CIDs are defined to mean a common interest development that is limited to industrial or commercial uses by law or by recorded CC&Rs. Unless a contrary intent is clearly expressed, a local zoning ordinance is construed to treat like structures, lots, parcels, areas or spaces in like manner regardless of the form of the commercial CID. The New Act further provides that commercial uses include, but are not limited to, the operation of a business that provides facilities for the overnight stay of its customers, employees or agents. Commercial CIDs can range from small retail strips or office parks to large mixed-use projects containing retail, industrial and office developments.

An Improvement Over the Davis-Stirling Act

Prior to the New Act, both commercial CIDs and residential common interest developments were governed by the provisions of the Davis-Stirling Common Interest Development Act (amended and recodified, effective January 1, 2014, at California Civil Code sections 4000 et seq.). The inclusion of both types of common interest developments under the former version of the Davis-Stirling Act often proved confusing for property owners, associations and managers, and their counsel.

Several years after the Davis-Stirling Act was implemented, an additional provision was put in place to exempt commercial CIDs from certain aspects of the Davis-Stirling Act intended to protect homeowners. Over time, however, numerous new provisions were added without separate analysis of whether they should apply to commercial CIDs, inadvertently subjecting commercial CIDs to consumer protection provisions aimed at homeowners.

The New Act has been established separate from the Davis-Stirling Act to clarify the law applicable to commercial CIDs and prevent further confusion when new consumer protection provisions are added to the common interest development laws.

Provisions of the New Law

The New Act mirrors much of the reorganized Davis-Stirling Act with respect to statutory definitions, the types and contents of governing documents, powers of the association, establishment and collection of regular and special assessments, and resolution of construction defect claims. However, the extent of member protections in the commercial CID context have been substantially reduced through the exclusion of multiple provisions of the Davis-Stirling Act, such as, but not limited to: (1) those requiring disclosures to members, (2) those requiring “open” Board meetings and broad member voting rights, (3) those limiting annual increases in assessments, and (4) those requiring the association to adopt procedures for resolving disputes or for affording members certain alternative dispute resolution rights in the event of disputes with their association.

The New Act leaves most governance matters to the provisions of the CC&R and other governing documents of the association, as well as any applicable provisions of the California Corporations Code in the case of incorporated associations. Under the New Act, there are no requirements for the distribution to members of an association budget or other financial disclosures, and there is no requirement for an owner or the association to provide disclosures to prospective purchasers of separate interests. Owners within a commercial CID do not have a statutory right to request alternative dispute resolution in the event of a dispute under the governing documents, even with respect to actions taken by the board regarding delinquent assessments.

The New Act also serves to expand certain laws applicable to commercial CIDs. Under prior law, commercial CIDs were exempt from the provisions of the Davis-Stirling Act regarding amendment of CC&Rs. As a result, it was not clear what actions would be considered valid for the amendment of commercial CC&Rs. The New Act establishes amendment procedures applicable to commercial CC&Rs, similar to the procedures set forth in the Davis-Stirling Act without certain owner rights. In addition, the New Act increases the required minimum coverage amount for liability insurance for commercial CIDs. Under the New Act, a commercial CID with 100 or fewer separate interests is required to maintain at least $2 million in liability insurance (versus $500,000 under the Davis-Stirling Act) and $3 million in liability insurance if the commercial CID has over 100 separate interests (versus $1 million under the Davis-Stirling Act).

The New Act also contains a “savings clause” for certain documents and actions taken prior to its effective date. The law provides that nothing in it shall be construed to invalidate a document prepared or action taken before January 1, 2014, if the document or action was proper under the law governing common interest developments at the time that the document was prepared or the action was taken. It continues to require each commercial CID association to file an information-reporting statement with the California Secretary of State on a prescribed form.

To update governing documents in effect for existing commercial CIDs, the New Act authorizes an association board without member approval to revise existing CC&Rs to correct references to applicable law pursuant to a resolution of the board. The New Act also authorizes existing CC&Rs to be restated in corrected form and recorded in the public records provided that the board resolution authorizing such restatement is recorded as well.

In connection with a restatement and re-recording of CC&Rs, the board of a commercial CID may want to consider conducting a comprehensive review of the CC&Rs to determine if there are provisions not applicable to commercial CIDs included in their CC&Rs that could be eliminated or amended to make the operation and governance of a commercial CID less onerous. Any amendment to CC&Rs beyond correcting statutory references will require compliance with amendment procedures, such as owner approval.

Applicability of the New Act

The legislative intent with respect to the New Act is that it is to apply only to those common interest developments that are limited to commercial and industrial use. For any common interest development that includes residential and commercial use, the Davis-Stirling Act will continue to apply. Developers should carefully consider the implications of applicable law when constructing new mixed-use developments.

SOLAR ENERGY SYSTEMS and Davis Sterling

SOLAR ENERGY SYSTEMS
California promotes the use of solar energy systems. Accordingly, associations cannot (i) prohibit solar energy systems, (ii) impose restrictions that significantly increase their cost, or (iii) impose restrictions that significantly decrease their efficiency. (Civ. Code §714.)

20/20 Rule. For solar water heating systems, associations cannot impose requirements that will decrease efficiency or increase installation costs by more than 20%.

20/2000 Rule. For solar energy systems, associations cannot impose requirements that will decrease efficiency by more than 20% or increase installation costs by more than $2,000. As provided for in Civil Code §714.1, associations may impose reasonable provisions that restrict the installation of solar energy systems installed in common areas. “Reasonable” restrictions are those where solar units were comparable in performance and cost to unapproved type of unit homeowner sought to install on the roof of his home. Palos Verdes Homeowners Association v. Rodman (1986) 182 Cal.App.3d 324

Common Area Installations. At this point, it is unclear whether owners have the right to install solar systems in the common areas. It appears that the stronger argument is that they do not. Members do not control the common areas; all such control is through an elected board of directors. Moreover, any installation in the common areas would result in an exclusive use easement which, per Civil Code §1363.07, requires approval by 2/3rds of the membership.

Exclusive Use Roofs. Townhouse owners with exclusive use common area roofs have a better argument that they have a right to install solar panels on their roofs. However, if the association is obligated to maintain those roofs, it raises significant issues related to the increased cost of maintenance and whether those costs can be billed to the owners who install solar panels.

Architectural Review. 
If an application is not denied in writing within 60 days from the date of receipt of the application, the application shall be deemed approved, unless that delay is the result of a reasonable request for additional information. If approvals are willfully avoided or delayed, an association can be penalized up to $1,000. (Civ. Code §714(f).) Aesthetics are a proper part of the architectural review process, provided it does not significantly increase the cost of the installation. (Tesoro del Valle v. Griffen.)

RECOMMENDATION: Associations should adopt written architectural standards in consultation with legal counsel regarding the installation of solar energy systems.