AB 968 would shift costs to individuals in homeowner associations

Question: We have a townhouse that is part of a homeowner association. We’re on a very limited fixed income and can barely afford paying our monthly dues. We’ve just heard that the law is changing to make owners pay for their own maintenance for exclusive use areas. What is that legislation and how will it affect us? Is there something homeowners can do?

Answer: Town home, condominium, detached or attached homes — it matters not. Making its way through California’s Legislature is Assembly Bill 968, which could open the flood gates for expanding the responsibilities and monetary obligations of owners for their own units as well as any “exclusive use common area.”

The bill seeks to rewrite Civil Code section 4775, which directs who pays to maintain, repair and replace in various areas at residential developments governed by homeowner associations.

First, some definitions. Under the current law, unless a development’s governing documents specify otherwise:

•”Common area” is the part of the property that the homeowner association administers — a roof, pool or other area that serves the entire development. The association maintains, repairs and replaces in the common area.

•”Separate interest” is the area, such as the inside of an individual town home or condo, that the owner is responsible for maintaining.

•”Exclusive use common area” is something that goes with or is attached to a unit — the law uses the term “appurtenant” — such as a patio, which serves one or more owners but fewer than all the owners. The owner is responsible for maintaining that area.

Backers of AB 968, which include a group that represents homeowner associations, contend that the existing law is poorly worded when spelling out who should pay for repairs and replacements in exclusive use common areas. This could lead to safety problems or lawsuits, the supporters say.

In its current form, AB 968 spells out that an individual owner must maintain his or her unit (the “separate interest”) and adds responsibility for repairing and replacing in the unit.

AB 968 goes on to say that each individual owner is responsible for maintaining the exclusive use common area, as before, and that the association is responsible for repairing and replacing in the exclusive use common area.

But here’s the problem: The bill would let the association governing documents define which items or actions constitute maintenance and which constitute repair and replacement. And nothing precludes the association from ordering the owner to perform the repairs and replacements.

In addition, AB 968 fails to address the status of money already deposited in reserve funds meant to maintain exclusive use common areas.

The bill creates the potential for vesting each owner with extra obligations, burdening them with new costs on top of obligatory monthly association dues each presently pays.

Make no mistake, AB 968 allows boards to expand, redefine and concoct their own rendition of what “exclusive use common area” is and then assess the owner to maintain, insure and assume liability for it. If the association has a reserve account, this new obligation does not exempt owners from continuing to fund it.

Exclusive use components that associations may add are infinite. Some examples: indoor/outdoor pipes, sprinkler systems, wiring, parking stalls, doors, screens, windows, steps to entryways, outdoor light fixtures, walkways, hallways, fences, mailboxes, balconies, porches, roofs, air conditioners, heating systems, outdoor stairs, patches of dirt touching your property’s stucco and more.

Well in advance of AB 968, associations have been advocating amending and rewriting their governing documents — the “covenants, conditions and restrictions” or CC&Rs — to shift burdens of paying for maintaining, repairing and replacing exclusive use common areas to owners from associations. Some associations have devised ways to circumvent legal formalities by inserting owner obligations in documents with creative titles such as “Operating Rules,” “Guidelines for Community Living” or “Matrix Responsibility List.” These official-looking documents are not supposed to override or supersede governing documents, yet without timely challenge by homeowners, the content usually stands.

Vigilant owners voting together may be the only thing preventing boards from redefining “exclusive use common area” and/or “maintenance” and expanding titleholder monetary obligations. Once owners are statutorily encumbered with these new payment obligations, it’s likely they won’t have a viable opportunity to vote against such document changes in a meaningful way.

Assembly Bill 968 appears to create a new level of assessments to be levied against owners, the failure to pay resulting in foreclosure. With no per se definition of “maintenance,” a board is free to apply a broad interpretation of what it wants “maintenance” to mean. It can unilaterally assess owners to maintain their properties no matter how often and no matter the cost.

Those who do not have the funds to comply, or who do not comply fast enough, could be faced with yet more fines, penalties and interest on top of the new assessments. The board’s authority will include imposing special assessments for exclusive use common area maintenance, subjecting titleholder properties to liens, attorney and collection costs and ultimately foreclosure should owners fail to fully comply.

The paradigm of this type of “affordable” living is the sharing of costs, as was the original concept behind the common interest development schema of self management. After passage of AB 968, the owner goes it alone. The side effect is a costly burden now placed on each individual owner.

Caveat emptor: Buyers should pay extraordinary attention to property surveys and boundaries detailing exclusive use common areas, including governing document definitions. Scrutinize any document referring to owner maintenance obligations, requirements and responsibilities.

Owners on a fixed or limited income should meet with their financial advisors to determine how to deal with any unexpected costs.

To follow AB 968’s status, go to leginfo.legislature.ca.gov and type the bill number in the search field.

Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.