By Tyler Berding, Esq. and Steven Weil, Esq.
Many of the statutes in the Davis-Stirling Common Interest Development Act ("Act") address common area maintenance and the calculation and levying of assessments needed to maintain and reserve for that maintenance. Directors and managers face the challenge of implementing these statutory directives, a task especially difficult during an economic downturn. Decisions have to be made: what must be repaired, what can be deferred; should we replace a component with a "short term" fix or with one that is more costly but will last longer? When the CC&Rs say common areas must be maintained in "First Class condition" is that different than requiring simply that common areas "be maintained"? Answering these and similar questions can affect habitability, enjoyment of the project and property values.
For new developments, the issues are even more complex. Title 7 of Division 2 of the California Civil Code ("Title 7" which, before its enactment, was called "SB 800") creates new standards and special statutory maintenance requirements for residential common interest developments constructed after 2003.1 These requirements, which can require compliance with a project "Maintenance Manual", pose special risks for managers and directors because the failure to comply could reduce the recovery available to associations in construction defect claims or create liability to members or others if the new maintenance standards are breached.
The association's governing documents can add yet another dimension. Typical CC&Rs for new projects often contain specific requirements that the board must follow, including complying with the provisions of the maintenance manual and conducting all necessary inspections specified in such manuals.
Most maintenance manuals are detailed, but the "maintenance" that is required usually consists not of repairs, per se, but rather periodic inspections of various components. The ones that we have reviewed have few actual specifications for work to be performed for which contractor's bids could be obtained. Nevertheless, must the manuals be followed completely and if they are not, what is the consequence? This article is intended to help boards and managers navigate the liability risks created by the new maintenance standards contained in the manuals.
Managers and directors are given little statutory guidance for determining the extent of maintenance required by a common interest development. Section 1364 of the Act says:
(a) Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.
The lack of statutory maintenance standards was partially addressed in Title 7 for developments with residential homes sold after January 2003. Title 7 is actually a series of statutes intended to address mediation and related procedures for resolving construction defects. To set a "benchmark" for the performance of building components, we compare that performance in light of how the project was maintained after original construction. Civil Code §907 provides these maintenance guidelines:
A homeowner is obligated to follow all reasonable maintenance obligations and schedules communicated in writing to the homeowner by the builder and product manufacturers, as well as commonly accepted maintenance practices. A failure by a homeowner to follow these obligations, schedules, and practices may subject the homeowner to the affirmative defenses contained in § 944.
Importantly, the term "Homeowner", as defined by Title 7, includes a community association in a common interest development.
The operative phrase is "reasonable maintenance obligations and schedules" provided by the developer of the project as well as "commonly accepted maintenance practices." Civil Code §907 requires that "reasonable" written maintenance obligations and standards, if provided by the developer, be followed along with "commonly accepted" maintenance standards. But what if these two sets of standards conflict? Or what if the maintenance manuals prepared and delivered by the developer provide little in the way of actual specifications for necessary "maintenance"?
The Maintenance Manual has two main purposes: to provide guidance to the Association and to penalize it for failing to comply with the manual should it later bring construction defect claims against the developer. In light of this second purpose - to provide a defense to claims - the standards in the manual can overstate the maintenance activities that a particular component of the building may require. But are those maintenance requirements nevertheless "reasonable?"
1 §938 of the California Civil Code states that Title 7 is applicable to: "...new residential units where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003."
MAKING ENDS MEET:
Fiduciary Duty on a Limited Budget
By Steven S. Weil, Esq.
Hang Together or Hang Separately?
Selling a Distressed Common Interest Development as a Single Parcel: Is Partition an Alternative to Losing it to Individual Foreclosures?
To view the future of many common interest developments take a look at the present-day reality of those recent condominium conversions that were born with serious maintenance issues and a major cash deficit.
The financial condition of these projects shows us what other associations will encounter as their need for maintenance and repair overwhelms their budgets »
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