Four new HOA and ADU laws for California homeowners

As of 2023, there are 4 new HOA and ADU laws affecting California homeowners.

These laws pertain to HOA meetings, quorums, and the addition of a new law to promote construction of ADUs in HOA-governed communities.

By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com

CA law: All HOA board meetings can be virtual 

Ever since the COVID epidemic, virtual HOA meetings have become popular, especially for board members and HOA managers. Even after the emergency restrictions have expired, HOA industry trade groups have been pushing to make all board meetings entirely virtual, whether online or by teleconference. 

While there can be certain advantages to holding board meetings via telecommunications venues, such as encouraging increased participation by members who cannot attend in person, there are also some disadvantages. 

When the HOA does not hold a meeting in person, members cannot fully witness communication of important community issues. For example, it’s more difficult to read body language, to survey the room and see who else is attending and to gauge their reactions.

Also, IAC has heard from many homeowners that HOA boards tend to mute the microphones of members when they don’t want to hear any more of their comments or concerns. This practice can be a good thing or a bad thing, depending on the nature of the dialogue and the validity of homeowner concerns. Generally, it’s a power that is misused by HOA boards who wish to silence dissenters.

Another problem is that some HOA members lack knowledge of how to participate in a virtual meeting. Others may not have a reliable internet service provider, which makes it hard to attend online meetings.  

Despite these drawbacks, the HOA industry management trade group has been lobbying for 4 years for a way to completely avoid in-person board meetings.  

Virtual meetings must meet certain requirements

In September 2023, the California Chapter of Community Associations Institute (CAI-CLAC) finally got its wish. Lawmakers added Section 4926 to the Davis-Sterling Act. It allows HOA board meetings to be completely virtual, under certain conditions. 

First, each member of the board and the HOA must have access to the phone number and email address of someone from the HOA who will provide technical support, to ensure any member can join the meeting and participate as if they were present in person. 

Second, all votes conducted by the HOA board must be done by roll call, so that members will know how each board director votes on an agenda item. (Yes, No, or Abstain) 

It’s important to note that annual membership meetings, where HOA board elections and ballot measures are considered, are NOT permitted to be 100% virtual. Such meetings must still be held at a location where any member can be present to witness the counting and tabulation of ballots.

The original draft of AB 648 proposed that annual membership meetings also be held remotely. However, thanks to the advocacy work of Center for California Homeowner Association Law (calhomelaw.org), the final version of the bill still requires HOAs to hold their elections and count ballots at a physical location so that members can attend in person.  

See Bill Text – AB-648 Common interest developments: procedures: meetings by teleconference. (ca.gov) (See Chapter 203, Section 4926) 

Changes to quorum requirements for HOA member elections 

Some bylaws of HOAs (including condominium and cooperative associations) require a quorum for the annual election meeting to be considered legally valid. And some governing documents have no quorum requirement at all.  

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NOTE: For the benefit of readers who are unfamiliar with the term Quorum, here is the Oxford Dictionary definition: 

quorum (noun) · quorums (plural noun) 

• the minimum number of members of an assembly or society that must be present at any of its meetings to make the proceedings of that meeting valid. 

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Some HOAs run into problems with quorum requirements, or lack thereof.  

If the quorum requirement is too high — meaning there are never enough members present at the meeting (in person, by proxy, or by absentee ballot) — then a valid election (or recall) cannot happen.  Many HOAs require at least one-third (33%) to two-thirds (67%) quorum for annual elections or recall attempts.  

Conversely, what if there is no quorum requirement in a community where few members are able or willing to participate in the election meeting? Typically, the few people who show up at the annual meeting can handpick HOA board members.  

Partial solution to HOA quorums?

AB1458 addresses the problem of HOAs being unable to meet relatively high quorum requirements. If the HOA is unable to establish quorum at its annual election meeting, the board can adjourn the meeting for at least 20 days. At the next meeting, the HOA reduces the quorum requirement to 20% of total membership. The HOA is required to provide written notice of the new meeting, including the reduced quorum requirement.  

The legislation makes no changes regarding HOAs that have no quorum requirements.  

Whether the change in quorum requirements is a good thing or a bad thing will depend on your perspective. It’s definitely not a one-size-fits-all solution to the problem of homeowner apathy.

See Bill Text – AB-1458 Common interest developments: association governance: member election. (ca.gov) 

California law now clears the way for Accessory Dwelling Units (aka ADUs) to be sold as condos.  

As of October 2023, the following amendments apply to Accessory Dwelling Units: 

• Subject to a local ordinance, a property owner can sell their ADU separately from the original main home or convey separate unit(s) as condominium(s). 
• Any new condominium association created must comply with the Davis-Sterling Common Interest Development Act. Lienholders must provide written consent for the creation of condominiums.  
• The owner of a property governed by a planned community association must obtain written permission to convey their property as condominium units. This may entail not only a vote by the HOA board of directors, but also a membership vote to allow the creation of separate condo associations within the existing HOA.  
• A local permitting agency cannot require owner occupancy as a prerequisite for issuing a permit for an ADU, until January 1, 2025. 
• However, a local agency can create and enforce an ordinance prohibiting short term rentals of less than 30 days. 

Leave it to California lawmakers to further complicate homeownership by creating numerous small condominium associations where none now exist. Even worse, this law now opens the door for multiple new condo associations nested within existing HOAs.  

Proponents of AB1033 claim that it provides a solution to a housing affordability crisis. For example, retired owners of a larger home can create either an attached or detached ADU and sell each separate housing unit as condominiums.

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ADUs include creating housing units such as:

• above the garage apartments,
• dividing a home into a duplex, or
• adding a separate smaller home (guest house or ‘granny flat’) in the back yard.

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Theoretically, for instance, a retired homeowner can move into the backyard ADU, then sell the main home. Instead of renting the main home, they can sell it and pocket the money. Sounds simple, but it’s complicated. 

Challenges for homeowners

First, state law allows for non-owner occupants of newly created ADUs, which may be converted to condominiums. That opens the door for investors to buy single family homes and turn them into 2-family rental properties. Or if it’s more profitable, investors may sell one or both units as condos. This may be a good business model for big corporate real estate investors. But is unlikely to have any meaningful effect on housing affordability. 

Note the stark contrast to a situation where the owner occupant merely rents out the ADU (without creating a condo association). Also, what if the primary owner chooses to live among extended family, sharing living expenses? In the first case, the primary owner increases the supply of competitively priced rental units. in the second situation, a multigenerational dwelling reduced the overall demand for affordable rental properties. 

Second, a potential problem exists in the allocation of voting interests in small condo associations. Think about a case where there are two units are of unequal size. Consider that there may be one unit is that is the original owner of the single-family home. The condo documents are likely to skew voting power in favor of the owner/Declarant or the owner of the largest (primary) unit.

Third, for ADUs created in existing HOA-governed communities, there will be increased tension among neighbors. Consider the common issue of limited parking space, especially on-street parking for overflow vehicles where private drives are not possible. Each community’s privately maintained and funded infrastructure and common recreational amenities will have to accommodate additional users. Within a decade, the added population of residents could exceed capacity for utility services. Additional residents will create additional wear and tear on amenities. More dense housing may lead to new localized flooding problems due to inadequate stormwater drainage.  

More questions

Existing HOAs do not necessarily have to permit condo conveyances of ADUs by existing owners. But they do still have to allow the construction of ADUs. How will existing HOAs deal with unintended growth within their boundaries? For instance, how will the HOA recoup the additional costs associated with population growth? What will HOAs do to address wear and tear on common infrastructure and amenities? That remains to be seen. Will existing HOAs seek to require new ADU condo associations to pay additional fees? Won’t this create a logistical nightmare? Many unanswered questions.  

References:

Bill Text – AB-1033 Accessory dwelling units: local ordinances: separate sale or conveyance. 

A new law allows homeowner to sell ADUs like condos – Los Angeles Times (latimes.com) 

Starting in 2025, your HOA can pass higher assessment increases for market rate vs. affordable homes 

Here is a controversial California housing policy that will allow HOA boards to offer reduced HOA fees to owners of affordable (government subsidized) housing, in comparison to HOA fees charged to owners of market rate housing in the same community.  

According to this newly amended statute, HOAs established beginning in 2025 will have to limit their regular (monthly or annual) HOA fee increases to no more than 5% plus cost of living (CPI) for owners of deed restricted affordable housing units. Furthermore, the total annual increase cannot exceed 10% of the prior year’s HOA fees. 

However, all other owners of market-rate homes or units in HOAs can still potentially face HOA fee increases of up to 20% per year! 

Critics say this policy could lead to conflict in mixed-income residential communities where many owners will be paying higher HOA fees, in part, to subsidize owners of affordable housing.  

References:

Bill Text – AB-572 Common interest developments: imposition of assessments. (ca.gov) 

HOA Homefront: New Year, new laws for communities – Orange County Register (ocregister.com)