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CASE UPDATE: Court Awards $100,000.00 in Attorneys’ Fees Against HOA Member in Dispute About Short-Term Vacation Rentals

In Almanor Lakeside Villas Owners Association v. Carson, (6th Dist. 2016) 246 Cal.App.4th 761, the court of appeal affirmed a trial court judgment awarding the homeowners’ association (HOA) approximately $100,000.00 in attorneys’ fees.  The HOA filed a complaint against a member of the HOA in order to enforce $20,000.00 in fines and related fees for rule violations related to the member’s leasing of its two properties as short-term vacation rentals, which was prohibited by the CC&Rs.

The owner took the position that the short-term rental prohibition was not enforceable against him because it conflicted with another term in the CC&Rs that allowed certain lots to be used for commercial purposes. The owner also argued that strict enforcement of the short-term rental prohibition was unreasonable as applied to him because his properties were historically and currently used as “lodges”, that is, vacation rentals.  He also argued, in the alternative, that his properties were entirely exempt from any use restrictions set forth in the CC&Rs, and he filed a counter-claim against the HOA for damages based on alleged lost rents.

The trial court made a split decision:  It held that the HOA member’s “lodges” were generally subject to the CC&Rs, but that CC&R’s short-term vacation rental prohibition, along with the related fines and penalties based on that prohibition, were not enforceable against the lodges because of the obvious conflict with the section in the CC&Rs that allowed commercial uses.

Even though the court found that most of the imposed fines were not enforceable, it nonetheless determined the HOA to be the “prevailing party” that was entitled to an award of attorneys’ fees against the owners.  The Court of Appeal for the Sixth District affirmed the trial court’s judgment on all issues.

One lesson to be gleaned from this case is that even relatively small HOA cases that involve the interpretation of just a few sections of CC&Rs can be expensive to litigate, and that the attorneys’ fees provisions contained in most CC&Rs significantly raise the stakes.  In this case, the court’s determination of who was the “prevailing party” entitled to attorneys’ fees could easily have gone the other way and been awarded against the HOA.  One way to address this outcome is for the CC&Rs to include mandatory mediation and/or arbitration provisions, and for all parties involved to be open to compromise. 

PLEASE CONTACT ME IF YOU ARE AN HOA IN SANTA CRUZ, SANTA CLARA, SAN BENITO OR MONTEREY COUNTY AND NEED A LAWYER TO REVIEW AND/OR UPDATE YOUR CC&Rs.  http://dolingerlaw.com/real-estate/  

©2016 Miles J. Dolinger.  This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.

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Miles J. Dolinger
Attorney at Law

314 Capitola Avenue Capitola, CA 95010
Phone: (831) 477-9193
FAX: (831) 477-9196
miles@dolingerlaw.com

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