DAVIS-STIRLING COMMON INTEREST DEVELOPMENT ACT

Summary and Framework

The Davis-Stirling Act (the “Act”) was enacted in 1985 to provide a comprehensive and cohesive legal framework for the creation and governance of residential common interest developments in California. Common interest developments include condo projects, and planned developments.

In 2014, the Act underwent a significant reorganization and renumbering. Since that time the Act has been set forth in Civil Code sections 4000 through 6150 and is broken down into eleven categories:

  1. General Provisions (§4000-4190)

  2. Applications (§4200-4202)

  3. The Governing Documents (§4205-4370)

  4. Ownership and Transfer of Interests (§4500-4650)

  5. Property Use and Maintenance (§4700-4790)

  6. Association Governance (§4800-5450)

  7. Finances (§5500-5580)

  8. Assessments and Assessment Collection (§5600-5740)

  9. Insurance and Liability (§5800-5810)

  10. Dispute Resolution and Enforcement (§5850-5986)

  11. Construction Defect Litigation (§6000-6150).

Governance

The Act allows developers of common interest developments to create homeowners associations (“HOAs”)to govern the developments. HOAs can be either a non-profit corporation or an unincorporated association.

The HOA acts as a quasi-government entity governing various aspects of the homeowners’ daily lives. In that regard, the Declaration of Covenants, Conditions, and Restrictions (CC&Rs)recorded against the properties operate as the HOA’s Constitution. The Board of Directors are elected or appointed members that govern the HOA.

In addition to the Act and the CC&Rs, HOAs are often governed by Board adopted Bylaws and Rules and Regulations. The Act sets forth a variety of boundaries and requirements for these governing documents, and to the extent of any conflict the Act prevails.

One of the primary functions of the Act is to safeguard the individual owners of the common interest development, and several of the provisions are set forth to provide homeowners’ rights and access to the HOA operations and documents.

Homeowners’ Rights

Access:

The Act provides homeowners extensive, although not unfettered, access to association business. Homeowners are entitled to review a wide variety of “association records”, including budgets, tax returns, reserve summaries, vendor contracts, income and expense sheets, and agenda and meeting minutes.(Civil Code §§ 5200; 5205.) With the exception of executive sessions, board meetings must be open to the homeowners, and the board must only conduct business during official meetings. (See e.g., Civil Code §§ 4910; 4925.)

Enforcement:

Members can bring legal action against other members for violating the CC&Rs, and against the HOA for failing to carry out its obligations. A homeowner that prevails against an association for failure to enforce the governing documents is entitled to recover reasonable attorney’s fees. (Civil Code § 5975(a).)

Association Responsibilities:

The Act bestows a significant amount of power to HOAs, and with that comes several responsibilities, a select few are detailed below. Consequently, HOAs owe fiduciary obligations to its members. Likewise, board members owe fiduciary duties to the members and the association and must carry out their duties in good faith and with due care.

Elections Rules:

The Act requires that HOA adopt election rules with specific criteria aimed at providing equal access to media, common area space, and transparency of the specifications for candidacy, voting power, and appointment of third party inspectors.(Civil Code § 5105(a).)

Maintenance:

HOAs are responsible for keeping common areas in good repair and can be liable for injuries sustained and should engage in regular inspections of the development.(Civil Code § 4775.) Every three years HOAs must prepare a reserve study analyzing the remaining useful life of various components in the common areas(Civil Code §5550.)

Assessments& Liens:

HOAs have a duty to collect regular assessments sufficient to cover their obligations to the development. (Civil Code § 5600(a).) HOAs can record a lien against a property whose owner has failed to pay assessments. The Act imposes several requirements on HOAs before they can proceed with a lien, and before they can foreclosure on the lien. (See e.g., Civil Code §§ 5660; 5705; 5720.)

Architectural Standards:

The Board or architectural committee can impose rules regarding the improvement of the exterior of the homeowners’ property consistent with the governing documents to maintain the character of the neighborhood. Both approval of homeowner requests and enforcement of architectural restrictions must be in good faith and not arbitrary or capricious(Civil Code § 4765.)

Recent Developments:

In recent years, several amendments went into effect concerning elections rules and processes, management of association funds, restrictions on rental terms, and notice to members. HOAs are obligated to ensure their operations and governing documents comply with the Act as it evolves, and should routinely review their documents to ensure they are up to date.

If you have any questions concerning a common interest development or need assistance revising your governing documents, please do not hesitate to contact the attorneys at the Blake Law Firm.

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