Posts for Tag : Homeowners Association

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GOVERNING DOCUMENTS SUPERSEDE THE NEW AIRBNB LAW 0

By Hanh Pham, Esq., Law Offices of Ann Rankin

Clients ask whether San Francisco’s new Airbnb law (effective February 1, 2015) supersedes their declaration of covenants, conditions and restrictions’ (“CC&Rs”) short-term rental provisions or whether they need to amend the CC&Rs to address Airbnb.  The brief answers to both questions are “No.”

Airbnb is a website for people to rent out lodgings, usually on a daily basis.  The new Airbnb law, San Francisco Administrative Code Chapter 41A legalizes short-term rentals but imposes a number of restrictions, discussed below.  San Francisco’s Planning Department will enforce the new law.

The new law does not change CC&Rs’ current restrictions; it imposes additional restrictions.  Your association should send notices to its homeowners to familiarize them with the new law’s important requirements, including the following:

 

  • The 90 Day Rule. The law limits rentals where the host is not present in the unit to a maximum of 90 days per year. Violators who continue to rent out their apartments beyond 90 days would be subject to a $416-a-day fine for the first offense and $1,000 a day thereafter.
  • Only Primary Residence May be Rented. Permanent residents (those residing in their units for at least 275 days per year) are allowed to rent out their primary residences, but not locations in which they don’t live or second or vacation homes. If you are a new resident, you must have occupied this specific unit for at least 60 consecutive days prior to your application. If you own a multi-unit building, you may only register the specific residential unit in which you reside.
  • Registry and Permits. Hosts must register and obtain a permit from the planning department to engage in short-term renting and pay a $50 fee every two years. Hosts will also need to obtain a city business license. Short-term rentals will be listed and tracked by the city in a registry. This information will not be available to the public unless a public records request is filed.
  • Insurance Requirement. Hosts must be covered by liability insurance with at least $500,000 in coverage. Alternatively, they may offer their units for rent through a hosting service that offers at least this much coverage.
  • Hotel Taxes Must Be Paid. The 14% San Francisco hotel tax must be collected and paid to the city. Airbnb has already started collecting and remitting such taxes for its San Francisco hosts. Your association should also send reminders to homeowners regarding the CC&Rs’ rental restrictions. Typically, CC&Rs prohibit rentals of less than 30 days and require the Owner/landlord to provide certain tenant information to the association. The reminder should also advise homeowners that they will be subject to a fine, suspension of membership privileges, and/or a lawsuit for injunctive relief and attorney’s fees incurred to enforce the rental restrictions in the CC&Rs if they violate these provisions. If you need assistance in preparing reminders to the homeowners or summarizing the Airbnb law to them, please contact our firm.

The information contained in this article is for informational purposes only and does not constitute legal advice. Anyone obtaining information on this site should consult with an attorney. The information herein is generalized and not related to any specific set of facts. Neither this article’s content nor any transmissions between you and our firm through this article are intended to provide legal or other advice or to create an attorney-client relationship. In communicating with us through this article, you should not provide any confidential information to us concerning any potential or actual legal matter you may have. Before providing any such information to us, you must obtain approval to do so from one of our lawyers.

By choosing to communicate with us without such prior approval, you understand and agree that our firm will have no duty to keep confidential any information you provide.

 

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HOW TO MONITOR OCCUPANCY AND ENFORCE RENTAL RESTRICTIONS

By Hanh Pham, Esq., Law Offices of Ann Rankin

 

Our firm has received many inquiries regarding how to enforce rental restrictions.  It seems that renters everywhere host loud parties, or that owners are trying to satisfy lending requirements for lower rental rates.

 

So, what can the association’s board of directors (“Board”) do to enforce the rental restrictions in their declaration of covenants, conditions and restrictions (“CC&Rs”)?  Unfortunately, it’s not easy to monitor occupancy or to enforce rental restrictions.

 

MONITORING OCCUPANCY

 

Most associations determine whether an owner lives in his or her unit by determining whether the owner has asked that communications such as invoices for assessments should be sent to the property address or to another address that’s not in the property.

 

Another method, which may cost more money and take more time, is to check the Tax Assessor’s records to see where the property tax invoice is sent.  Of course, the fact that the property tax bill is not being sent to an address within the development does not prove that the unit isn’t owner-occupied; some people may have a relative or a CPA who helps with financial matters.  However, the fact that invoices for assessments and bills for property taxes are being sent to an address outside of the complex should cause you to make a further inquiry.

 

A difficult issue arises when an owner allows family members to occupy the unit.  For example, in some situations, parents will purchase a unit and allow their adult children to live there.  In other cases, adult children may buy a unit and allow their older parents to live there.  In these cases, the occupant is often not a “renter” in the sense that the occupant pays rent for the right to possess the premises.  In my opinion, such a situation shouldn’t be treated as a “rental,” but the association should consider this situation and perhaps develop a policy to exempt it from the rental restriction.

 

Of course, sometimes an owner’s neighbor will know when the owner moves out and a renter moves in.  If the association has a move in/move out policy, that may be another source of information.  The association should also consider asking owners for their emergency contact information and their tenant’s information.  Some owners will consider this request an invasion of privacy, but others may provide the information.

 

To address a possible violation, the Board may wish to invite the owner to an internal dispute resolution (IDR) meeting to discuss the Board’s concerns.  The Board can perform an investigation based upon public records, testimony from neighbors, etc. and ask the owner questions.  The Board could also ask for a copy of the owner’s driver’s license or other information with the owner’s principal address to ascertain the owner’s address.  Some owners will decline to provide this information; this will force the association to dig deeper.  The Board will have to make a business decision about how much money to spend on such an investigation after the IDR meeting.

 

ENFORCING RENTAL RESTRICTIONS

 

If a violation is found after the IDR meeting and the owner continues to rent out the unit, the Board can enforce the rental restrictions by providing notice of a hearing to impose disciplinary action in accordance with the governing documents (with no less than 10 days’ notice) and giving the offender an opportunity to present his or her side of the story.

 

Before the hearing, the Board should adopt a fine schedule in the same manner it would adopt any operating rule (e.g., mail the proposed schedule to the members for a 30-day comment period before a Board vote at a duly-noticed meeting).  The fine for each violation must be “reasonable,” which means that it must fit the offense and should include a per diem fine for continued violation of the rental cap (i.e., $200 for each day that the unit is rented in violation of the CC&Rs).

 

Once the hearing notice is issued and the hearing date arrives, the Board merely conducts a fair hearing in which the accused can explain his or her side of the story.  Owners often attempt to circumvent the rules by claiming that long-term guests, friends, or family members are occupying the residence.  If, after investigation, the Board finds that this claim is an attempt to avoid compliance with rental restrictions, the Board may proceed with disciplinary action, including levying a fine, suspending voting rights, suspending the owner and tenant’s privileges to use recreational facilities such as a pool, clubhouse, or fitness room, and/or ordering the owner to commence an unlawful detainer action within a specified period.  If the fine remains unpaid for 30 days, the association can collect it by filing a small claims court action and referring it to a collection agency.

 

If the owner continues to rent out the unit, the association can serve a Request for Resolution asking that the owner agree to participate in mediation of the dispute within 30 days.  If the owner does not respond within 30 days or rejects the Request, the association may file an action for injunctive relief requesting that a court enforce the rental cap and award the association reasonable attorney’s fees pursuant to California Civil Code Section 5975(c).  However, if the association proceeds down this road, it faces a heavy burden of proof and the cold realities of a crowded docket and a judge that may not be sympathetic to its action.

 

In addition to enforcement of the rental restrictions, the association should distribute a formal disclosure to all homeowners and prospective purchasers about the rental cap and about the procedure for submitting a request to rent.

 

The information contained in this article is for informational purposes only and does not constitute legal advice.  Anyone obtaining information on this site should consult with an attorney.  The information herein is generalized and not related to any specific set of facts.  Neither this article’s content nor any transmissions between you and our firm through this article are intended to provide legal or other advice or to create an attorney-client relationship.  In communicating with us through this article, you should not provide any confidential information to us concerning any potential or actual legal matter you may have.  Before providing any such information to us, you must obtain approval to do so from one of our lawyers.

 

By choosing to communicate with us without such prior approval, you understand and agree that our firm will have no duty to keep confidential any information you provide.

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2014 STATUTES RELATED TO COMMON INTEREST DEVELOPMENTS

By Hanh Pham, Esq., Law Offices of Ann Rankin

This blog summarizes new homeowner association statutes which take effect on January 1, 2014, unless otherwise specified below.

 

1.                  Davis-Stirling Restatement (AB 805).  Last year, AB 805 repealed California Civil Code Sections 1350-1378 of the Davis-Stirling Common Interest Development Act (“Davis-Stirling”) and restated them in new California Civil Code Sections 4000-6150.  In order to give associations, managers and attorneys a year to familiarize themselves with the changes, AB 805 was not going to be effective and operative until January 1, 2014.  Key changes are as follows:

 

(a)                Section 4035 provides that documents to an association may be delivered by e-mail, facsimile, or other electronic means, with association consent.  If an association assents, personal delivery is permitted with written acknowledgement of receipt.  If an association fails to designate to whom document delivery is to be made in its annual policy statement (see Section 5310 below), delivery shall be made to the president or secretary.

 

(b)               Section 4045(a) allows an association to deliver documents to members by “general delivery” or “general notice.”  These include first-class mail, postage prepaid, registered or certified mail, or overnight delivery by an express service carrier; e-mail, facsimile, or other electronic means, if consented to; inclusion in billing statements or newsletters; and posting in a prominent location accessible to all members, if the association has designated the location for the posting of general notices in an annual policy statement.  Under Section 5120(b), election results can be posted in a prominent location within 15 days of an election rather than by mail if the annual policy statement specified said location.

 

(c)                Section 4235 authorizes a board to amend governing documents to correct a changed cross-reference resulting from this re-codification, without member approval.  A corrected governing document may be restated and recorded with a copy of the authorizing board resolution.  This statute only authorizes the board to replace the Civil Code provisions, not to change the governing documents’ text.

 

(d)               Section 4600 authorizes the board to grant exclusive use of common areas to an owner without membership approval for circumstances such as granting a disability accommodation, allowing installation of electric vehicle charging stations, assigning parking spaces which the governing documents were to assign, and to comply with the law.

 

(e)                Section 5260 requires certain member requests to be made in writing, including requests to add second addresses for delivery of notices, to receive a full copy of the budget or annual policy statements, and to opt out of a membership list.

 

(f)                Section 5300 requires the board to prepare and distribute, within 30 to 90 days of its fiscal year’s end, an annual budget report.  It collects Davis-Stirling’s financial statements and insurance requirements and adds new requirements.  The annual budget report must include: (1) a pro forma operating budget; (2) a reserve summary; (3) a reserve funding plan summary; (4) a statement as to whether the board has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years or less, and a justification for that decision; (5) a statement as to whether the board, consistent with the reserve funding plan, has determined or anticipates that (a) special assessment(s) will be required to repair, replace, or restore a major component or to provide adequate reserves therefor; (6) a statement as to the mechanism(s) by which the board will fund reserves to repair or replace major components; (7) a general statement addressing the procedures used for calculating and establishing those reserves to defray the future repair, replacement, or additions to those major components that the association is obligated to maintain; (8) a statement as to whether the association has any outstanding loans with an original term of more than one year; and (9) a summary of the association’s insurance policies and the insurance disclosure set forth therein.

 

(g)               Section 5310 requires the board to prepare and distribute, within 30 to 90 days of its fiscal year’s end, an “annual policy statement.”  This collects in one section Davis-Stirling’s various annual disclosure and notification requirements and adds new requirements. The annual policy statement must include:  the name and address of the person designated to receive communications to the association; the location of the common area where the association is to post general notices; collection policies; enforcement policies; dispute resolution information; and an address for overnight payment of assessments, among other information.  The statement must be delivered to the members by a means of individual delivery described in Section 4040.  Individual delivery does not permit delivery by electronic means UNLESS the owner has previously consented, in writing, to such delivery.

 

(h)               Section 5350 lists conflicts of interest as to which a director (or member of a committee of the board) may not vote.  Examples include decisions regarding discipline of the director/committee member, collection of assessments owed by the director/committee member, architectural changes sought by the director/committee member, and grants of exclusive use of common areas to the director/committee member.  This list is not exclusive and provisions of law relating to so-called “interested transactions” apply to director decisions.

 

2.                  Davis-Stirling Restatement (SB 745).  This omnibus bill would implement minor clean-up amendments to AB 805.  SB 745 would: (a) allow mail delivery of documents to an association; (b) allow a quorum by secret ballot for an election; (c) clarify that the declaration prevails if it conflicts with bylaws or operating rules; (d) allow a board designee to be present at the physical location where members can dial in during a teleconference; (e) clarify that no notice of an emergency or executive session meeting is required if the governing documents do not provide a notice period; (f) disclose a notice of rental restrictions to buyers; and (g) prohibit cancellation fees for a document request if work had not yet been performed, or if work that had been performed had been compensated.  In addition, SB 745 requires the retrofitting of existing toilets, urinals, shower fixtures, and faucets with water-conserving plumbing fixtures for multifamily residential buildings on or before January 1, 2019, unless an addition, alteration, or improvements requiring a building permit triggers earlier retrofitting; (2) replaces National Electrical Code standards with the California Electrical Code for inside telephone wiring; and (3) incorporates the State Fire Marshall’s smoke alarm requirements.

 

3.                  Commercial and Industrial CIDs (SB 752).  SB 752 would establish the Commercial and Industrial Common Interest Development Act, which would provide for the creation and regulation of commercial and industrial common interest developments.  Previously, commercial and industrial common interest developments (“CIDs”) were governed by Davis-Stirling, like residential condominiums and planned developments. Starting January 1, 2014, however, non-residential CIDs will look to new statutes starting with California Civil Code Section 6500.  The new statutes omit provisions designed to protect residential owners such as election provisions and disclosure requirements imposed on residential developments.  A commercial association may designate an agent, like a manager, to receive information.

 

4.                  Carbon Monoxide and Smoke Detectors (SB 1394).  This bill changes smoke detector and alarm requirements when a building permit is issued on or after January 1, 2014, for alterations, repairs, or additions exceeding $1,000.  It deletes the requirement that a smoke detector be installed in apartment complexes and other multiple-dwelling complexes’ common stairwells.  It also requires that on or after January 1, 2014, when a building permit for alterations, repairs, or additions exceeding $1,000 is issued, all required smoke alarms shall display the manufacture date, provide a place for the installation date, incorporate a hush feature, and incorporate an end-of-life feature that provides notice that the device needs to be replaced, and, if battery operated, contain a non-replaceable, non-removable battery that is capable of powering the smoke alarm for 10 years. Remember that existing law requires the installation of carbon monoxide devices in each existing single-family dwelling unit by July 1, 2011, and all other dwelling units by January 1, 2013.

 

I hope that this information is helpful.  Please be advised that this letter is intended as an update on pertinent California law and is not intended as legal advice.  Should you have any questions or concerns regarding specific matters, please call me.

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HOAs, if You Give Only ONE Side of an Election Issue the Opportunity to Advocate on Its Behalf, the Court May Overturn Your Election!

By Jeff Cluett, Esq., Law Offices of Ann Rankin

 

         On June 26, 2013, the California Court of Appeal, in Wittenberg v. Beachwalk Homeowners Association, held that homeowners’ association boards are subject to Civil Code Section 1363.03 – and that failure to comply could cause a court to overturn an election!
What is Section 1363.03?Section 1363.03 states, in part:

(a) An association shall adopt rules, in accordance with the procedures prescribed by Article 4 (commencing with Section 1357.100) of Chapter 2, that do all of the following:

(1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content.

(2) Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.

            In Beachwalk, the board held three elections to amend the CC&Rs.  The board sent two letters to association members stating that the amendment was “more flexible and reasonable, while still ‘a workable method of fiscal restraint.’”  They also warned that if it did not pass, the association would become embroiled in expensive litigation.  They urged the members to vote for the amendment.  The Association’s website also encouraged its members to vote for the amendment.  A one-page attachment to the letters stated a “Case for amending the CC & Rs” but failed to include opposing material.  An association newsletter also stated that the proposed amendment was more modern and adaptable and failure to pass it would encourage litigation, concluding:  “Vote YES on the proposed 8th amendment to our CCRS so we can put our money to use on physically improving Beachwalk.”The board refused a request to respond to the newsletter and a request to rent the association’s clubhouse for a meeting for candidates who did not support the amendment.  It also refused the request of another homeowner opposed to the amendments to use a common area for a political rally.  Finally, while the newsletter was posted on a glass-enclosed community bulletin board, nonboard members were not permitted to post materials.  Further, nonboard members were not allowed to post material on the Association’s website.The members passed a modified amendment at a third election.  Members opposed to the amendment sued.  The court of appeal held that the board violated Section 1363.03(a)(2).  Why?First, the court held that the board is subject to Section 1363.03(a)’s equal access provision.  Therefore “[t]he equal-access provision of subdivision (a)(1) is triggered any time a ‘member’ advocates a point of view using association media.”  The California Legislature wanted to ensure that opposing voices were heard.  Therefore a board must either give equal access to opposing viewpoints or forego the use of association media.

Second, by advocating its viewpoint and failing to allow opposing viewpoints, the board violated Section 1363.03(a)(2).  The board advocated for the amendment by letters, attachments to letters, website, newsletter, and bulletin board.  Yet it refused to allow opponents to use media such as the clubhouse and the common area to voice their opposition.  The board therefore violated Section 1363.03.

Oddly, despite these findings, the court did not overturn the third election.  Rather, it returned the case to the trial court to determine whether the violations of 1363.03(a)(2) should be considered in deciding whether to void the third election.

Why should you care?  Because elections are time-consuming, expensive, and contentious!  You do not want your election results overturned.  So what do you do?

First, if the board wants to advocate for the passage or defeat of an amendment, it must allow its opponents access to the same media – common areas, websites, newsletters, etc.

Second, if anyone wants to use association resources to advocate their position, the board must decide whether to let them.  If the board decides not to, then it does not need to allow the other side to do so.  However, if it does allow such access, then the board must allow the other side access as well.  If it does not, then it risks having its election results overturned.

 

This article is general in nature. It is not a substitute for qualified legal advice. Contact an attorney with expertise in common interest development law if you require specific legal advice.
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Rescuing Your Board Members from E-Mail Hell!

By Ann Rankin, Esq. at the Law Offices of Ann Rankin

 

“I’m in trouble at work! The Board business is taking up all my time! The homeowners send me emails 24/7 and they all want an immediate reply!”

“Answering homeowner emails is a constant task, and none of the owners are ever satisfied with my responses!”

If you’re a board member of a common interest development association, the above complaints may sound all too familiar.

What is wrong with this picture and what can you do about it?

Problems with Board E-Mail Communications with Members: 

Here’s a list of legal and practical problems with Board Member replies to E-Mail communications with homeowners:

  1. If the Board Members make a practice of replying to e-mail communications from Members, they will soon be inundated and will have difficulty prioritizing tasks or getting anything else done. Board Members are volunteers; most of them didn’t sign up to be on duty 24 hours a day, 7 days a week when they ran for office. As soon as the other homeowners find out how time-consuming the Board’s job has become, on account of the proliferation of e-mails and demands to reply to them immediately, no one else will want to run for the Board, except perhaps for a few masochists.

2. Replying to e-mails may create a situation in which a particular Board Member is making a unilateral decision without Board deliberation, voting, or appropriate minutes. This circumvents the Board process. Such decisions may not have the support of other Board Members, and may sometimes be ill-considered, but they may bind the Association if the board member had apparent authority to make the decision.

3. When Board Members make decisions by e-mails, rather than in open board meetings, it circumvents the intent of the Open Meeting Act, Civil Code 1363.05, which requires the Board to circulate an agenda prior to each open Board Meeting; to allow association members to attend the open board meetings, and to allow members to address the Board on matters of association business. If everything is done behind the scenes via email, the Members are deprived of their rights under the Open Meeting Act.

4. The practice of the Board immediately replying to e-mails from members creates unrealistic and never-ending expectations from members. Can you imagine Board Members of publicly-traded corporations spending hours a day replying to e-mails from shareholders? Neither can I.

What Can Board Members Do to Get Out of E-Mail Hell?

I have advised some Associations whose Board Members were roasting in E-Mail Hell to adopt an Operating Rule to solve the problem. Such a Rule does not fall within the parameters of those that must be circulated among the Members under Civil Code 1357.100 et. seq. An example of the proposed Rule follows. If you’re in E-Mail Hell, I recommend you try it. This proposed Rule assumes that you have a property manager. If you’re self-managed, you can still adopt the Rule but you’ll have to require that the Members send their emails to one or more Board Members who will periodically collect, organize and prioritize them and put them on the agenda for the next Board Meeting if appropriate.

SNAKE PIT HOA RULE REGARDING COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The Board of Directors of Snake Pit Homeowners’ Association hereby adopts the following Rules pursuant to the Association’s Declaration of Covenants, Conditions and Restrictions, as follows:

1. Findings.

a. The Board of Directors consists of unpaid volunteers who donate their time to the Association.

b. The Board of Directors is required by law to create an agenda for each Board Meeting, to follow the agenda, and to make decisions only at Board Meetings and only after giving all Board Members the chance to deliberate, undertake necessary study and other due diligence, and make a reasoned decision.

c. The Board of Directors members, as fiduciaries, need to prioritize their time at Board Meetings in order to be sure to attend to the most important issues at hand.

d. The Open Meeting Act, Civil Code 1363.05, requires that Board decisions be made at open meetings, except for issues that are allowed by statute to be discussed in executive sessions. All Association Members are required to be provided with an agenda of each open Board Meeting and are required to be able to listen to Board deliberations, and to provide input to the Board during the Open Forum time.

e. A number of Association Members are in the habit of sending e-mails directly to Board Members’ personal e-mail accounts, in between Board Meetings, and requesting the Board Members provide an immediate response. If the Board Members were to do so, it would preclude their being able to deliberate upon the issues at hand in an open Board Meeting. Also, if the Board Members replied to e-mails between meetings, this would deprive the other Members of the opportunity to listen to Board deliberations on the issue at hand and to provide input during the Open Forum time. Further, this practice could preclude Board Members from prioritizing their time as they are required to do as fiduciaries.

f. The Association employs a managing agent whose job it is to work with the Board to prepare agendas, to carry out Board directives, and to provide the Board with correspondence and with other materials requiring matters that may require attention of the Board and Board decisions.

g. Counsel for the Association has pointed out that the Association is a corporation, and that it is not usual for corporate board members to be expected to reply to e-mails from their constituents outside of Board Meetings; also that making decisions outside of regular or special Board Meetings may violate the Open Meeting Act.

h. The Board wishes to adopt a procedure that will enable the Board Members to prepare appropriate agendas for Board Meetings with the assistance of the manager; that will allow the Board Members to discuss all Board business except for those subjects that may be decided upon in executive session at open board meetings, and that will allow Board Members to appropriately prioritize their time.

NOW THEREFORE, the Board enacts the following Operating Rule:

a. All Member communications requesting Board action or response are to be directed, in writing, to the property manager. The property manager will periodically notify the Board Members of the issues, and will assist them by organizing the communications and preparing an appropriate agenda for each Board Meeting.

b. Board Members will no longer reply to e-mails between Board Meetings, and may block e-mails sent by Members who attempt to communicate with them directly;

c. All Board decisions will be made at Regular or Special Board Meetings. The meetings will be conducted as required by the Open Meeting Act. All Board Resolutions will be voted on by the Board Members, constituting at least a Quorum, sitting at Regular or Special Board Meetings. The following matters may be discussed by the Board in Executive Session: Litigation, formation of contracts with third parties, personnel issues, member discipline, and member requests for payment plans for delinquent assessments.

 

This article is general in nature. It is not a substitute for qualified legal advice. Contact an attorney with expertise in common interest development law if you require specific legal advice.