Introduction
We're dissecting CNBC's "How Homeowners Associations Took Over American Neighborhoods," a video highlighting contentious issues surrounding HOAs. While we appreciate the spotlight on HOAs, we found the narrative one-sided, portraying HOAs as overly powerful entities. With this response, we aim to add additional context and a more balanced perspective, aided by Jenny Carlson's non-lawyer viewpoint.

HOAs in Modern Housing
CNBC reports that 84% of newly built homes in 2022 were part of HOAs, underscoring their significant role. We agree that well-functioning HOAs can help support property values. However, the downside is that poorly managed HOAs can negatively impact properties due to neglect, such as dilapidated common areas.

Addressing the Misconception of Civil Rights
A major point of contention in the video is the claim that joining an HOA equates to signing away civil rights. This is an overstatement. Many important rights remain in place, and CC&Rs generally cannot be enforced in ways that violate state or federal law or established public policy.

Understanding HOA Management and Legalities
Many homeowners express frustration towards management companies. It's important to understand that management companies often act as agents of the HOA, and the board typically retains decision-making authority. Depending on the facts and legal theories involved, disputes may involve the HOA, the management company, or both.

Financial Obligations and Disputes in HOAs
Discussing the financial aspects, homeowners typically contribute to an operating budget for their HOA, with fees varying across communities. We explored a case where unpaid amounts and related charges led to significant complications, underscoring the importance of thorough disclosures and careful review of association documents during sales. In California, delinquent regular assessments can, in certain circumstances, lead to a lien and foreclosure if statutory requirements are met. Monetary penalties (fines) are generally treated differently than assessments and are not typically collected through an assessment lien unless reduced to a judgment.

Communication Breakdowns and Legal Recourse
A recurring theme in HOA disputes is the lack of communication, which can contribute to escalated collection activity such as liens and, in some situations, post-judgment remedies. Communication breakdowns can raise compliance questions under the HOA's governing documents and California law.

The Role of Homeowners in HOA Governance
An essential aspect of HOA governance is the board of directors, typically composed of volunteer homeowners. The board's decisions, however, should align with the community's best interests and the governing documents. Conflicts can arise for many reasons, including limited time, training, or experience, which can lead to management and operational inefficiencies. Homeowner participation in elections and governance can be an important part of how communities function.

HOAs and Property Values
We delved into the debate over whether HOAs positively impact property values. While HOAs can enhance curbside appeal and community amenities, poor management can lead to the opposite effect. This impact varies significantly based on location and the effectiveness of the HOA's management.

Legal Framework and Homeowner Rights
A key takeaway from our discussion is that California HOAs operate within a detailed legal framework. Depending on the circumstances, homeowners may have rights and potential avenues for recourse when an HOA fails to comply with its duties. These can include informal dispute resolution (IDR), alternative dispute resolution (ADR), and, if appropriate, litigation. Understanding the CC&Rs, the Davis-Stirling Act in California, and relevant case law can help homeowners better understand how disputes are evaluated.

Conclusion
Our review of CNBC's video and the broader HOA landscape illustrates that homeowners may have more options and rights than are sometimes perceived, particularly under California's statutory framework. This discussion is intended for general educational information.

You can watch the original CNBC video on YouTube:
https://www.youtube.com/watch?v=fnLMeotB0c0

Full Video Transcript

00:00:00 Host: HOA Attorney, Luke Carlson, Esq.
Hello, I'm Luke Carlson from L .S. Carlson Law. We are a California law firm, and one of our practice areas includes HOA-related matters. And today, we wanted to take some time to review the CNBC video that really focused on HOA. I want to start by applauding them for really highlighting this area that has really been a point of great contention for a lot of homeowners. However, our take is that it was very one -sided, basically painting out the HOA as having all the power, which we disagree with. So we're here today. Again, I'm a lawyer, but I also brought my wife, Jenny Carlson on as well.

00:00:36 Guest Host: Homeowner, Jenny Carlson
Hi there.

00:00:36 Host: HOA Attorney, Luke Carlson, Esq.
She's a non-lawyer so I thought it'd be helpful to have both sets of minds looking at this and really dissecting it. Absolutely. Thank you for having me. Anytime. You're always welcome on the show. All right, here we go.

00:00:49 CNBC Video Transcript
84% of newly built single family homes sold in 2022 belong to what's called a homeowners association, which are organizations that oversee properties in a community. Certain local governments require almost all new construction to have an HOA. They're rooted in the desire for municipalities to offload their responsibilities for taking care of things that you would normally associate with paying your taxes. Homeowner's associations provide value to owners...

00:01:18 Host: HOA Attorney, Luke Carlson, Esq.
All right, so far so good. I think that was straightforward. We're aligned. The only caveat I would say is, yes, well -functioning HOAs can help support property values. However, the flip side is that a poorly run HOA can negatively impact property values, including where common areas are not properly maintained.

00:01:44 CNBC Video Transcript
...there's been a backlash to HOAs because of some homeowners negative experiences when I first bought this house I was very excited seemed like it was a very nice cozy close -knit community then it started turning into a horror story. I'm a huge believer that, you know, you do sign away your civil rights when you're signing into an HOA or a condo association. Pause it there. Do you really sign away your civil rights? All right. So, you know, what are civil rights? You're looking at right of privacy, right to freedom of religion, you know, freedom of speech. I mean, there's so many civil rights that remain intact, notwithstanding CC &Rs. So that is a significant overstatement. In general, CC&Rs cannot be enforced in ways that violate state or federal law. It's a matter of personal preference. Some people like anchovies on their pizza and some don't. Some people really like living in homeowners associations. Others don't like it. So why are HOAs so powerful? And do they make homes more valuable? Homeowners associations are run by a board of directors that’s made up of volunteers that own property in the community. The HOA typically handles communal responsibilities which can vary from managing amenities such as swimming pools to making sure property owners follow home maintenance rules. The board may hire a management company which tend to be for-profit to help run the day-to-day operations...

00:03:15 Host: HOA Attorney, Luke Carlson, Esq.
Just a quick clarification on that. A lot of times we have homeowners who come in and they're frustrated about the management company, right? And they often want to sue the management company. But legally, at least in California, that is often not the full picture. A management company commonly acts as an agent for the HOA, and the board typically directs the manager. Depending on the facts, claims may be asserted against the HOA, the management company, or both.

00:03:35 Guest Host: Homeowner, Jenny Carlson
Okay, I think that's a common misconception, so I'm glad you're clarifying that.

00:03:38 Host: HOA Attorney, Luke Carlson, Esq.
If you have a management company that is failing to maintain common area elements, homeowners commonly focus on the HOA because the contractual relationship is typically between homeowner and HOA, not homeowner and management company, if that makes sense.

00:03:54 CNBC Video Transcript
...homeowners in the community pay into a fund for the HOA to have an operating budget. In the U .S., the typical home in an HOA pays between $200 and $300 per month in fees. HOAs have the authority to hand out fines to residents in the community that the association feels is not following the rules. Those fines may also accrue interest in some cases. The Anastrosis annual dues for their HOA in [another jurisdiction] is $200 per year, which is lower than the national average. So on paper, their HOA membership doesn't seem like that much of a financial burden, but that's not been their reality. When we moved in in 2008, we found out that there was a balance that was attached to the home because it had been sitting in the community. And they were fining us for that balance and late fees and any other type of fines that they would put on to the home for lawn care or anything...

00:04:48 Guest Host: Homeowner, Jenny Carlson
Yeah. Clarify this because when you buy a home, doesn't it have to be disclosed?

00:04:53 Host: HOA Attorney, Luke Carlson, Esq.
So California has specific disclosure requirements in real estate transactions, and escrow typically includes association-related documents. Depending on the facts, unpaid assessments and known violations may be addressed through those disclosures. The other issue, and she kind of, she says it quickly, she says lawn care. So it is possible there was some sort of open violation that wasn't addressed. So maybe the lawn was in a state of disrepair. The HOA may have been levying fines against that homeowner for failure to maintain the landscape.

00:05:26 Guest Host: Homeowner, Jenny Carlson
Okay. And if those fines accrued, the new buyer is responsible.

00:05:29 Host: HOA Attorney, Luke Carlson, Esq.
In California, whether amounts carry over to a new owner depends on the type of charge and how it was handled in escrow. Delinquent assessments can, in certain circumstances, be secured by the property through an assessment lien process. Monetary penalties (fines) are generally treated as a personal obligation and are not typically collected through an assessment lien unless reduced to a judgment. For whatever reason, it sounds like the issue wasn't resolved at the time of acquisition. In some circumstances, there may also be potential claims related to nondisclosure, but it depends on the facts.

00:05:42 Guest Host: Homeowner, Jenny Carlson
Okay.

00:05:48 CNBC Video Transcript
...all of that was attached to this home when we moved in. From 2008 to 2014, we tried getting in contact with HOA, and we never had a reply from them. And we just kept trying and no answer...

00:06:00 Host: HOA Attorney, Luke Carlson, Esq.
All right, a failure to respond to a homeowner can raise compliance and due process concerns, depending on what was requested and the circumstances.

00:06:08 Guest Host: Homeowner, Jenny Carlson
And the hope is that that is an atypical scenario.

00:06:12 Host: HOA Attorney, Luke Carlson, Esq.
Communication problems are a common theme in many HOA disputes.

00:06:14 Guest Host: Homeowner, Jenny Carlson
Hence why we do HOA law.

00:06:17 Host: HOA Attorney, Luke Carlson, Esq.
HOAs and management companies can sometimes be poor at communicating, and that can contribute to misunderstandings and escalated enforcement activity.

00:06:28 Guest Host: Homeowner, Jenny Carlson
That's fascinating.

00:06:29 Host: HOA Attorney, Luke Carlson, Esq.
So we actually do see that.

00:06:31 CNBC Video Transcript
...By August 2015, the HOA put a lien on the Anastrosa's home. In the court documents, the HOA said the Anastrosas owed more than $1 ,600. A lien is when a party has a legal claim to an asset, such as a home, which can serve as collateral to satisfy unpaid debt. This can open the door to the HOA escalating to the next level of debt collection, such as foreclosing on the home or, in the Innistros' case, garnishing wages. In mid -2015, they started garnishing my wages. The first time I learned of that was when I got my first paycheck that they garnished...

00:07:05 Guest Host: Homeowner, Jenny Carlson
Please explain that.

00:07:06 Host: HOA Attorney, Luke Carlson, Esq.
In California, wage garnishment generally occurs after a court judgment, and there are specific statutory notice and procedural requirements that apply to assessment collection, liens, and foreclosure under the Davis-Stirling Act, as well as to post-judgment collection remedies. If required notices or procedures were not followed, that could raise legal compliance issues—assuming the reporting is accurate and comparable to California procedures.

00:07:31 Guest Host: Homeowner, Jenny Carlson
Okay.

00:07:32 CNBC Video Transcript
...I didn't get any prior notice. I got a notice two weeks after, even though the HOA was collecting...

00:07:40 Guest Host: Homeowner, Jenny Carlson
So if she didn't get any prior notice, We have lots of room for error here.

00:07:45 Host: HOA Attorney, Luke Carlson, Esq.
Yes, there may be room for error, depending on what notices were required and what actually occurred. If required notice and due process steps were not followed, that can create potential defenses or claims.

00:08:12 Guest Host: Homeowner, Jenny Carlson
They do have power and justification to go after their HOA at this point.

00:08:15 Host: HOA Attorney, Luke Carlson, Esq.
In this scenario, it looks like they may have grounds to challenge what occurred, depending on the documentation and applicable law.

00:08:17 CNBC Video Transcript
...From Jules' paycheck, invoices filed with the court showed they were adding fines rather than deducting from the overall balance by December 26th...

00:08:25 Host: HOA Attorney, Luke Carlson, Esq.
I didn't catch this before, but it's landscape maintenance that keeps getting flagged on this ledger. So I would imagine that there's some sort of outstanding violation potentially. Again, that doesn't determine whether collection activity was lawful, but it may be part of the underlying dispute.

00:08:45 CNBC Video Transcript
...in 2016, the HOA said the Inostrosas owed more than $4 ,300. In 2016, I decided to go into debtor's court. My attorney and the HOA's attorney came to an agreement that I would pay paid $3 ,200. We paid in installments and we finally paid that off in January of this year. But it seemed like never got to the management or the homeowner associate. Just adding fines and adding interest. That's all they were doing...

00:09:14 Guest Host: Homeowner, Jenny Carlson
Is there a lack of communication between parties?

00:09:16 Host: HOA Attorney, Luke Carlson, Esq.
No, no. This is unusual. Typically, when there's some sort of negotiation amongst attorneys, right? There's an outstanding debt. Their attorney's going to say, well, it's lower. They're going to say it's higher. They meet in the middle, and they find a number. Well, here it sounds like they reached some sort of settlement or resolution and there was a fee schedule.

00:09:37 Guest Host: Homeowner, Jenny Carlson
And they satisfied the fee schedule, it sounds like.

00:09:39 Host: HOA Attorney, Luke Carlson, Esq.
Well, according to them, typically those are in writing. So assuming there was a written agreement, and the HOA continued to collect after that agreement was entered into, they may have a contract or enforcement issue. So again, there's more to this story. I don't know what's going on here.

00:10:03 Guest Host: Homeowner, Jenny Carlson
There has to be.

00:10:04 CNBC Video Transcript
...So they were still saying that I owed almost $8 ,000 while my attorney and their attorney agreed on $3 ,000 something...

00:10:12 Host: HOA Attorney, Luke Carlson, Esq.
Again, in a situation like that, the written agreement and payment history would typically be key documents to review, and counsel-to-counsel communications often address disputes about whether an agreement has been satisfied.

00:10:24 CNBC Video Transcript
...The Innistroses estimate that they've paid about $12 ,000 in fines and garnished wages wages to the HOA, along with thousands of dollars in legal fees to their own attorneys. The latest invoice they received on August 18th, 2023, says they still hold a balance. Even after paying $12 ,000, they're still saying that we owe them $8 ,000. After the past, what, 23, after the past 10 years, 10, yeah, about 10 years, yeah. CNBC reached out to Homeowners Management LLC for comment and received automated responses directing us to contact the current management company as of August 2023. 23. A representative from the current management company Sentry Management told CNBC because it just became the management company for this community in the last couple of months, Sentry has little ability to comment on historical facts regarding the Innistrosa's case. The former director of the HOA board, who oversaw the association from 2020 until her resignation in October 2023, declined CNBC's request for comment...

00:11:20 Host: HOA Attorney, Luke Carlson, Esq.
CNBC appears to have reached out to multiple parties, including former and current management and a former volunteer board member, who may have limited ability to comment on historical events.

00:11:43 CNBC Video Transcript
…The attorneys representing the hoa board did not respond to cnbc's repeated requests for comment…

00:11:49 Host: HOA Attorney, Luke Carlson, Esq.
All right that also doesn't surprise me. Generally, attorneys may be limited in what they can say publicly about disputes or alleged misconduct.

00:12:13 CNBC Video Transcript
...Jessica Navas and Matt Bazone, who are also homeowners in the subdivision, began investigating their HOA. I started to have this feeling that there was something odd about the HOA during the pandemic. They discovered a history of at least 25 foreclosures in the community over the past 15 years just one house can have a record between two to three foreclosures within that time frame...

00:12:35 Host: HOA Attorney, Luke Carlson, Esq.
So I appreciate people like that in a community—someone who is willing to gather information and ask questions.

00:12:39 Guest Host: Homeowner, Jenny Carlson
and they're taking action

00:12:40 Host: HOA Attorney, Luke Carlson, Esq.
Yeah they roll up their sleeves and they look under the hood. I think if more homeowners were proactive and engaged, it can help communities address problems earlier.

00:12:55 CNBC Video Transcript
...If Jessica haddn't just took the initiative to go to everyone in the community that she knew were homeowners. We never would have known any of this because all we did was basically go to work, come home, raise our children, that's it. And we never knew that anybody else was going through this because for the longest I felt like, is it just me? I feel like H .O. could be a positive thing when the community work together, keeping our houses looking good and good for property value. A big part of an HOA sales pitch is that the presence of the organization can help increase property values. The board is responsible for protecting property values. For most people in the United States, the single biggest investment they're ever going to make. There's mixed evidence about whether this is true. A 2019 study found that on average, HOA homes cost at least 4 % more than non -HOA homes. That comes out to an extra $13 ,500. But those property values can vary significantly by location. A different 2019 analysis of three U .S. cities found that the home values in HOA areas were less than those in neighborhoods without them. The Innistrosa's property value has increased between the time they bought it in 2008 following the housing crash to 2023...

00:14:11 Host: HOA Attorney, Luke Carlson, Esq.
I mean, I'd hope so.

00:14:12 Guest Host: Homeowner, Jenny Carlson
Yeah, gosh.

00:14:13 CNBC Video Transcript
...I don't think that HOA has anything to do with that property value going up. I feel with the HOA, the management company don't increase the property value. They use that as a ploy to the community to increase the value of the property. HOAs can also be necessary in order to manage shared amenities or land, which can be a value add for homeowners. There are associations out there that handle all the landscaping. Even though you may own your lot, the association cuts the grass and they do all the landscaping. So is that a cost savings? Sure. Management companies can help a community function...

00:14:46 Host: HOA Attorney, Luke Carlson, Esq.
All right. I find this shot very funny because to me it kind of sums up. I mean, if you're a well -run HOA, you're helping maintain curbside appeal.

00:14:55 Guest Host: Homeowner, Jenny Carlson
Think of our neighborhood specifically. We have the lawn areas, the park areas, the pool.

00:15:00 Host: HOA Attorney, Luke Carlson, Esq.
And they're very well-maintained. I think they do a good job. If you look at this photo, though, it's interesting because if you look at the street where you drive in, the grass is very green. Everything looks very nice, well -maintained.

00:15:10 Guest Host: Homeowner, Jenny Carlson
You see the lush trees.

00:15:11 Host: HOA Attorney, Luke Carlson, Esq.
And then look at the backyards.

00:15:12 Guest Host: Homeowner, Jenny Carlson
They look like deserts.

00:15:14 Host: HOA Attorney, Luke Carlson, Esq.
So I think that could be a good example. I mean, if people are left to their own devices, yes, sometimes homes fall into a state of disrepair. If you're living next to a home in significant disrepair, it may affect neighboring values. So again, well -maintained HOAs—or those that are complying with their duties and governing documents—can have a meaningful impact.

00:15:34 Guest Host: Homeowner, Jenny Carlson
I'm sure there's a huge differentiation between good HOAs and bad HOAs. And if you have a good HOA, I feel like the curbside appeal and the preserving home values is going to be a positive thing for you.

00:15:44 Host: HOA Attorney, Luke Carlson, Esq.
I agree.

00:15:45 CNBC Video Transcript
...smoothly, especially when a board of volunteers needs assistance. One large company will manage 20 or 30 or 40 HOAs in a region and they tend to have it down to a science. They know how to deal with trash pickup, they know how to deal with yard maintenance, they know how to deal with complaints, they have their fines and their enforcement down to a science. Relying too much on a property management company is going to cause problems and relying too much on the homeowners to run their own association is also going to cause problems. The management company and the manager are simply a contractor to carry out the board's direction. They may handle all of that routine activity on behalf of the board, but those folks who live in the community and volunteer remain the decision-making authority...

00:16:31 Host: HOA Attorney, Luke Carlson, Esq.
Yeah, that was going back to what I was saying earlier. Management company is a contracted third party, right? So the HOA, through its board, is typically the final decision-maker. So if a management company is not performing, the HOA generally has responsibility to evaluate whether to terminate and replace the vendor.

00:16:52 Guest Host: Homeowner, Jenny Carlson
And that is the responsibility of the homeowners or the board?

00:16:54 Host: HOA Attorney, Luke Carlson, Esq.
The board generally has that authority. And if the board is failing to act, homeowners may have internal governance options (like elections) and, depending on the situation, legal remedies.

00:17:04 Guest Host: Homeowner, Jenny Carlson
and that's something maybe we can get into a little bit later when we dive into this but that's an interesting point so remind me to come back to that

00:17:10 CNBC Video Transcript
...the board in that situation is still responsible they are still the fiduciary they are legally and financially responsible for the decision making in that community...

00:17:22 Host: HOA Attorney, Luke Carlson, Esq.
All right fiduciary is a huge deal. When the board is elected in, directors generally owe fiduciary duties to the association and its members to act in good faith, in the best interests of the association, and to comply with applicable law and the governing documents.

00:17:45 Guest Host: Homeowner, Jenny Carlson
Okay, just in layman's terms, define CC&Rs real quick, just in case people are watching this and need a refresher.

00:17:50 Host: HOA Attorney, Luke Carlson, Esq.
CC&Rs are the Covenants, Conditions, and Restrictions recorded against the property that set out many of the community's use restrictions, obligations, and enforcement framework.

00:17:55 Guest Host: Homeowner, Jenny Carlson
Okay, and that's kind of like what we sign into when we buy the home?

00:17:58 Host: HOA Attorney, Luke Carlson, Esq.
Correct. And it's a contract within the community and it contractually binds not only the homeowner to the HOA, but also neighbors to neighbors.

00:18:06 Guest Host: Homeowner, Jenny Carlson
Okay. So if there is an issue, is that what the first thing I'm going to look at?

00:18:10 Host: HOA Attorney, Luke Carlson, Esq.
The CC&Rs often guide much of the analysis.

00:18:13 Guest Host: Homeowner, Jenny Carlson
So it's everything.

00:18:14 Host: HOA Attorney, Luke Carlson, Esq.
Now, it gets a little complicated because you have the CC&Rs, then you have state regulation. So in California, you have the Davis-Stirling Act, and then you have case law. So it's really three areas you have to look at together.

00:18:48 CNBC Video Transcript
...I think that there are times and places for HOAs, and I think that they could be positive, but the abuse negates that benefit. A lot of people have trouble thinking of community associations as a business even though statutorily in many cases they they are you have to think about it like running a business at the same time you have to think about it from the perspective of a group of investors who all have this shared goal of making sure their investment's safe and nobody's quite sure how to do that and when you bring in an outside advisor to help run your organization those people's goals are not the the same as the goals of the people who made the initial investment...

00:19:32 Host: HOA Attorney, Luke Carlson, Esq.
I don't fully agree with that. Many communities hire outside advisors and vendors, and a good management company is typically incentivized to perform well because they want to keep the contract. That said, incentives can vary by contract structure and circumstances.

00:20:17 Guest Host: Homeowner, Jenny Carlson
It would benefit no one to have different.

00:20:19 Host: HOA Attorney, Luke Carlson, Esq.
Correct.

00:20:21 CNBC Video Transcript
...Professional involvement in HOAs is increasing with the for-profit homeowner association industry growing to $38 billion. Jessica and Matt have been fighting for more transparency about where their HOA fines are going. We had four months of pulling teeth. We wanted a general ledger, but they gave us a balance sheet and a budget. We contracted a forensic auditor, CPA. It is very concerning to see that the amount of income that they are receiving is coming from this particular aspect, fine, citations, collection, legal fees. And her recommendation was remove the board, freeze the account, get access into the bank account...

00:20:59 Host: HOA Attorney, Luke Carlson, Esq.
Situations involving records access, accounting questions, and enforcement often raise legal as well as financial issues, and the appropriate next steps depend on the facts.

00:21:04 CNBC Video Transcript
...The numbers don't align with each other. In most cases, association management companies charge a flat fee for their management services for the association each month. They're not getting a share of the proceeds. That's not how they're compensated. If we didn't have a management company, we wouldn't have to be dealing with these different problems...

00:21:27 Host: HOA Attorney, Luke Carlson, Esq.
I tend to disagree with the idea that the mere presence of a management company is the cause. Ultimately, the board is responsible for oversight and decision-making.

00:21:45 Guest Host: Homeowner, Jenny Carlson
Right. It's a very general statement.

00:21:46 Host: HOA Attorney, Luke Carlson, Esq.
Yes.

00:22:00 CNBC Video Transcript
...we're having. Basically, they're just milking the community. The Innistrosa's experience with their HOA highlights some patterns seen across the country when it comes to how much power HOAs have. 57 % of homeowners polled disliked living in an HOA, with more than 3 in 10 homeowners saying they feel like the HOA has too much power. People need to understand how much power a board of directors has. Governments are giving the power of the municipality to these communities. They act as hyper-local governments and in many ways supersede all the other laws that exist when you sign into a covenant that runs with the land...

00:22:37 Host: HOA Attorney, Luke Carlson, Esq.
There's a lot to unpack. In California, HOAs have powers defined by their governing documents and state law, but they do not generally supersede state or federal law.

00:22:43 Guest Host: Homeowner, Jenny Carlson
From a layman's perspective, it sounds like the HOA has more power, almost in the state there.

00:22:50 Host: HOA Attorney, Luke Carlson, Esq.
I think they're trying to pitch this as, you know, once you sign into CC&Rs, you're powerless. But in reality, the governing documents can also define obligations and enforcement mechanisms, including potential rights homeowners may assert when an association is not complying with its duties.

00:23:20 Guest Host: Homeowner, Jenny Carlson
And that's not even brought up in this case.

00:23:21 Host: HOA Attorney, Luke Carlson, Esq.
You're right. Let me back up. By purchasing into an HOA, you are generally agreeing to certain restrictions—like architectural standards or rules about exterior appearance—that you can typically review before closing.

00:23:42 Guest Host: Homeowner, Jenny Carlson
Keep your Christmas lights up year-round.

00:23:44 Host: HOA Attorney, Luke Carlson, Esq.
Correct. But that's different from the claim that you are giving up core legal rights or that you have no recourse when an HOA is acting improperly.

00:23:59 Guest Host: Homeowner, Jenny Carlson
That's what we call a bad HOA.

00:24:01 Host: HOA Attorney, Luke Carlson, Esq.
Bad HOA.

00:24:01 CNBC Video Transcript
...Covenants is shorthand for Covenants, Conditions, and Restrictions, or CCNRs. These are documents that outline the HOA board and homeowners' rights and obligations. A homeowners association usually enacts the CC&Rs, as well as the bylaws that outline procedural matters, when it's incorporated by the subdivision developer. The board, in the beginning, is controlled by the developer. So, it starts out as a board of people that are paid on behalf of the developer to operate that community. And it transitions [typically] over time, sometimes quickly and sometimes over years, to a homeowner-controlled board. Homeowners who have to...

00:24:38 Guest Host: Homeowner, Jenny Carlson
Wait, that is so interesting because I had no idea.

00:24:41 Host: HOA Attorney, Luke Carlson, Esq.
Well, think about it. I mean, when you first develop land, there's no one living there, right? So it's the developer who comes in, buys the plot of land, subdivides it, builds the homes. And then in order to create an HOA or an association you have to form an entity, register it with the state, and record governing documents like the CC&Rs. Once people start buying and acquiring and a board comes in, the developer then typically turns that all over to the board.

00:25:15 Guest Host: Homeowner, Jenny Carlson
So they transition to a board of people (homeowners)

00:25:17 Host: HOA Attorney, Luke Carlson, Esq.
Right. It can take time sometimes to do that.

00:25:25 Guest Host: Homeowner, Jenny Carlson
It's just interesting because I had no idea. I'm sure most people don't.

00:25:28 Host: HOA Attorney, Luke Carlson, Esq.
It's part of how many HOAs begin. But again, go to the CC &Rs. You'll see the developer typically is the one who signs them.

00:25:36 CNBC Video Transcript
...feats with their HOA say they have trouble getting help from official government channels. I have personally contacted the city officials. None of them want to get involved in the HOA. Some jurisdictions have established HOA-focused complaint or ombudsman programs, but they may have limited jurisdiction and funding. As far as the regulation goes, I think a lot of that regulation is predetermined. So in other words, there's already laws that are set up in place, and so inherently they're already being regulated that way. And of course you've got the court systems for checks and balances in case you have a disagreement within your homeowners association. I think that education is really key to these communities. I mean, they need to know that there's nobody that's going to help them, that in a lot of cases, civil court is the only answer. So you can't even...

00:26:47 Guest Host: Homeowner, Jenny Carlson
Isn't civil court supposed to be the answer?

00:26:50 Host: HOA Attorney, Luke Carlson, Esq.
Well, OK, so I'll unpack this one as well, because they say a lot of things. And sort of the messaging in my mind is, hey, there's no one who can help us.

00:27:00 Guest Host: Homeowner, Jenny Carlson
Explain this, because aren't these private parties?

00:27:01 Host 1: HOA Attorney, Luke Carlson, Esq.
Exactly. In general, these are private disputes. The primary forum for resolving many contract and statutory disputes is the court system, and that can be a powerful tool. That said, California law also includes pre-litigation processes like IDR and ADR for certain HOA disputes.

00:27:31 Guest Host: Homeowner, Jenny Carlson
It is our tool, right?

00:27:32 Host: HOA Attorney, Luke Carlson, Esq.
They seem to be saying, other than that, we don't have any tools. But there are legal processes available.

00:27:41 CNBC Video Transcript
...and take some of these communities to small claims court. There's really a very limited number of scenarios where a court can say that something that's binding in your covenants is not valid.

00:27:54 Host: HOA Attorney, Luke Carlson, Esq.
If something in the CC&Rs violates state or federal law, or is otherwise unenforceable as a matter of public policy, a court can declare it invalid or decline to enforce it.

00:28:03 Guest Host: Homeowner, Jenny Carlson
Okay, thank you for clarifying that.

00:28:05 Host 1: HOA Attorney, Luke Carlson, Esq.
Okay.

00:28:07 CNBC Video Transcript
...makers have introduced policies to address some of the issues homeowners have been raising. But it's been met with backlash from the professional management industry. There's always going to be a wide variety of perspectives and concerns. So no solution, no bill, no piece of advocacy is ever going to garner 100 % support from everyone. We try to find the best middle ground that makes sure the association runs effectively and people's investments are protected...

00:28:38 Host: HOA Attorney, Luke Carlson, Esq.
In California, proposals to change HOA laws periodically come up, and they often involve balancing effective governance with homeowner protections. Different stakeholders may disagree on where the balance should be.

00:29:06 Guest Host: Homeowner, Jenny Carlson
it's so true

00:29:07 Host: HOA Attorney, Luke Carlson, Esq.
Right.

00:29:38 CNBC Video Transcript
...As of right now, change has to happen at the grassroots level with homeowners fighting through the court system, as well as through voting for a board they feel represents them...

00:29:46 Guest Host: Homeowner, Jenny Carlson
That's the key point, right? Voting for a board that represents you.

00:29:49 Host: HOA Attorney, Luke Carlson, Esq.
Well, I think voting for the right people is important. It does involve community involvement. And sometimes disputes arise where board members have differing perspectives or agendas, which can create friction.

00:30:14 Guest Host: Homeowner, Jenny Carlson
These are not business people on the board.

00:30:16 Host: HOA Attorney, Luke Carlson, Esq.
Often, no. And that can cause problems because they're volunteers. They may not realize what they're stepping into, again, is a fiduciary role that has obligations governed by governing documents, state law, and case law.

00:30:39 CNBC Video Transcript
...of the board in October 2023 so these are your new officers thank you very much i did the oath when i became a naturalized citizen it was my duty and regardless of my economical condition i have to fight for them I would feel bad, you know, selling this home to someone else, especially if they don't know what's been going on in the neighborhood...

00:31:01 Host: HOA Attorney, Luke Carlson, Esq.
Well, you would typically want to make appropriate disclosures during a sale.

00:31:03 CNBC Video Transcript
...And I feel like I would probably just be like, hey, look, I don't think you want to move in this neighborhood. You may want to think about it...

00:31:15 Host: HOA Attorney, Luke Carlson, Esq.
All right. So I think the key takeaway or what we were trying to convey to everyone is that homeowners may have more options than this video makes it seem. In California, that can include rights and procedures found in the CC&Rs, the board's fiduciary duties, state statutes like the Davis-Stirling Act, and case law.

00:31:44 Guest Host: Homeowner, Jenny Carlson
OK, so as a homeowner, if you have an issue in your neighborhood, what is the first step that you should take other than looking at your CC&Rs? if you feel like there is negligence or there is some level of misconduct? What should my next step be?

00:31:58 Host: HOA Attorney, Luke Carlson, Esq.
Okay, that's a fair question. I'll frame it in California as general information. The Davis-Stirling Act includes an informal dispute resolution (IDR) process (Civil Code §§ 5900–5920), which is essentially a structured opportunity to meet and try to resolve issues informally. The Act also includes an alternative dispute resolution (ADR) requirement for many types of HOA lawsuits (Civil Code § 5930), commonly satisfied through mediation. Whether either process is appropriate depends on the issue and the circumstances.

00:32:57 Guest Host: Homeowner, Jenny Carlson
Oh interesting

00:32:57 Host: HOA Attorney, Luke Carlson, Esq.
Yeah and mediation can be an effective way to resolve disputes in many situations.

00:33:01 Guest Host: Homeowner, Jenny Carlson
Do you need a lawyer?

00:33:03 Host: HOA Attorney, Luke Carlson, Esq.
Parties may choose to have counsel, but representation is not required in every setting. Whether legal counsel is appropriate depends on the complexity of the dispute, the amounts at issue, and the forum.