AB 1098 - New Statute May Limit Architectural Review Approvals

By: Martin Lee, Esq.
Feldsott & Lee
A Law Corporation

Thirty years ago, it started becoming popular in California to install skylights in the roofs over living space. While this was never much of a problem for most people, it presented some difficulties in condominium projects because the roof was common area maintained by the condominium association and the CC&Rs in almost all condominium projects prohibited exterior modifications without the prior written approval of the condominium association. If the condominium association approved of the skylight for a member, it would, in effect, be giving the exclusive use of some of the common area over to that owner. Also, if the skylight later leaked, who would repair it? What if the leak occurred years later and the owner who originally installed the skylight had sold to a new owner who did not know the skylight was anything other than common area maintained by the condominium association? Yet condominium associations wanted to approve the member installation of such skylights. A dilemma was presented.

In order to accommodate our clients back then, Feldsott & Lee developed the concept of the architectural committee of the condominium association approving of the request by a member to install a skylight conditioned upon the member entering into a recordable license agreement. The license agreement would, in pertinent part, provide that the owner and any and all later owners of the condominium unit would maintain the skylight and hold the condominium association harmless and, in exchange, the condominium association would give the owner (and the subsequent owners) a revocable license to install the skylight. The giving of a revocable license arguably prevented the association from being charged with wrongfully giving away common area (a revocable license is technically not an interest in realty) and the recordation of the agreement would protect the condominium association from confronting a subsequent owner of the condominium unit contending he did not know the skylight was his or her responsibility to maintain.

Over the decades, the Davis-Stirling Common Interest Development Act (Civil Code §1350) was passed and various forms of the recorded revocable license agreement were used by many homeowners association law firms to accommodate ever increasing uses in all sorts of common interest developments where there was some form of common area. For instance, some condominium associations wanted to permit members to install screen doors, yet this was also common area – the license agreement was used. Or in a planned development, the association wanted to permit owners to personalize their common area mailboxes – again the license agreement was used.

The use of the revocable and recordable license agreement became increasingly more complicated over the past 20 years as the Davis-Stirling Common Interest Development Act was amended and changed. The Legislature has now approved a completely new statute, Civil Code §1363.07, for the Davis-Stirling Common Interest Development Act which may well spell the end for many, if not most, uses of the recordable revocable license agreement in certain associations, and completely eliminate the necessity for their use in other situations. New Civil Code §1363.07 (which should become effective January 1, 2006) will, in general, prohibit any association from granting the exclusive use of any portion of the common area to any member unless the grant is approved by the affirmative vote of the members owning 67% of the separate interests in the development (the association’s governing documents can specify a different percentage). Of course, lawyers previously argued that a revocable license was not a “grant” (the word used in the new statute), but the Courts might well look askance at this legalistic argument, especially given what appears to be the legislative intent behind this new statute. Nonetheless, as with most statutes, there are lots of exceptions to the prohibition in the new statute. For example, the following “grants” of exclusive use are exempted:

“(A) To eliminate or correct engineering errors in documents recorded with the county recorder or on file with a public agency or utility company.
“(B) To eliminate or correct encroachments due to errors in construction of any improvements.
“(C) To permit changes in the plan of development submitted to the Commissioner of the Department of Real Estate in circumstances where the changes are the result of topography, obstruction, hardship, aesthetic considerations, or environmental conditions.
“(D) To fulfill the requirement of a public agency.
“(E) To transfer the burden of management and maintenance of any common area that is generally inaccessible and is not of general use to the membership at large of the association.
“(F) Any grant in connection with an expressly zoned industrial or commercial development, or any grant within a subdivision of the type defined in Section 1373.” (Emphasis supplied).

Since many common areas where the revocable license agreement were previously used in condominium projects were genuinely inaccessible and not of general use to the members (e.g., in the skylight example), exemption E will probably be the one most used by architectural review committees. But the issue gets thornier in planned developments. For instance, in planned developments where the homeowners association has a maintenance easement for the landscaping on slopes on members’ lots inaccessible and not of use to the general membership, a good argument can be made that exemption E applies and the association now has not only the power to grant exclusive use to a member, but it need not even use the device of a revocable and recordable license agreement – the new statute appears to give the homeowners association all the authority it needs. But this new statute would seem to prohibit the use of a revocable, recordable license agreement where a homeowners association in a planned development wants to, let’s say, give a member architectural approval to turn a common area cement sidewalk in front of his or her home into a decorative cobblestone walkway. It would be impossible to argue that the common area sidewalk is inaccessible or not of general use to the other association members. So this new statute can cut both ways and only complicates the issue of architectural review approval for most homeowners associations. When confronted with a situation where this new Civil Code §1363.07 might apply, homeowners associations and their architectural review committees should immediately consult their legal counsel for advice. #