Snuck into the text of a larger bill designed to make housing more affordable in California is a disastrous new limit to the ability of homeowners associations to enforce their governing documents. AB 130, signed into law last week, includes new language in Civil Code Sections 5850 and 5855. Perhaps most critically, the new language limits fines for violations of governing documents to $100 per violation, with the only exception being for violations that adversely impact health and safety.

The good news for many homeowners associations is that it does not apply retroactively, meaning that associations do not need to reduce existing fines they levied before the passage of AB 130. However, associations should strongly consider changing their fine policies to account for the new cap on fines to avoid potential headaches. Associations that allow for the accrual of daily fines should reconsider whether those are acceptable. The statute's plain language states that the maximum is $100 “per violation,” so the distinction between an ongoing violation that could incur daily fines and a recurring violation that could incur successive fines should be well-defined in an enforcement policy. A strict interpretation suggests that daily fines for ongoing violations are no longer acceptable.

Other statutory alterations are also potentially worrisome. When an association attempts to levy a fine of more than $100 for a health and safety violation, the new law requires that the board present written findings specifying the adverse health or safety impact in an open meeting. It is not clear how the legislature intends to square this requirement with the implied privacy concerns surrounding member discipline according to Civil Code Section 5215(a)(4). Notably, Civil Code Section 5855(b) still requires the board to meet in executive session if requested by owner who is the subject of the hearing, so it seems odd that the finding that the violation would result in an adverse health and safety impact would need to be made in an open meeting.

Additionally, if a member cures a violation before the hearing at which the association would consider levying a fine, the association cannot levy a fine. Civil Code Section 5855(c) now also states that the board cannot levy a fine if curing the violation would take longer than the time between the notice of the hearing and the date of the hearing, or if the member “provides financial commitment to cure the violation.” It is uncertain what is meant by a “financial commitment” – perhaps the legislature wants homeowners to post a bond to the association to avoid fines.

Notices of fines or monetary charges to reimburse the association for damage to the common area must be sent 14 days after the hearing, reduced from 15. Lastly, the legislature included extremely odd language concerning “agreements” made during a hearing. Specifically, the statute allows for members to request IDR if they do not agree with the association's findings, which is merely a restatement of existing law. More concerningly, if the board and the member are in agreement after the meeting, new subdivision (d) of Civil Code Section 5855 states that “…the board shall draft a written resolution. The written resolution, signed by the board and the member of the dispute pursuant to procedures not in conflict with the law or governing documents, binds the association and is judicially enforceable.” The statutory language appears to turn a typical violation hearing into a de facto IDR while also requiring the association to engage in another IDR if the member does not agree with the association's findings. What a waste of time and resources!

Our take is that the legislature got this severely wrong. It will negatively affect every association's ability to adequately enforce community standards without resorting to expensive litigation. In more affluent communities, a $100 fine will serve as a convenience fee for a homeowner to violate the governing documents repeatedly. Associations will likely inadvertently fail to meet all of the statutory requirements in Civil Code Section 5855 before imposing fines or monetary charges, and may be stuck with a bill for common area damage that is rightly the responsibility of a member. The only hope is that someone in Sacramento will pay attention to the damage this new bill will cause, and it will get drastically rewritten in the next legislative session.

We are happy to help you and your association sort through the fallout of AB 130. Give us a call.