Cal. Civ. Code § 1354 authorizes a homeowner subject to particular CC&Rs, to bring an enforcement action against another HOA member or the HOA to enforce a covenant, condition or restriction.  Often times, such an enforcement action warrants injunctive relief as well.  When our HOA Dispute Attorneys endeavor to seek a preliminary injunction, the question then becomes, what action is necessary to seek enjoinment of, or is it necessary to seek to compel the association to enforce CC&R provisions.

These questions are critical since an action seeking enforcement of CC&Rs as against an HOA will usually be met with the argument that the HOA alone has the discretion to determine how to enforce its CC&Rs.  However, California courts have held that when an association refuses to enforce its CC&Rs, a homeowner may seek injunctive relief compelling it to do so.  See Lamden v. La Jolla Shores Clubdominium Homeowners Assn., (1999) 21 Cal. 4th 249, 268.

Thus, an injunction directing an HOA utilize all enforcement mechanisms available to it necessary to enforce the CC&Rs can issue, and has been upheld in California courts.  See Ekstrom v. Marquesa at Monarch Beach Homeowners Ass’n, (2008) 168 Cal. App. 4th 1111, 1125.

It is well settled California law that constructive notice of a document affecting real property is conclusively presumed where said document is recorded as prescribed by law or indexed in the public records.  See Cal. Civ. Code § 1213; see also First Bank v. East West Bank, (2011) 199 Cal. App. 4th 1309, 1314.  Generally, CC&Rs are recorded instruments indexed in the public record.  Thus, violation of a covenant or restriction affecting real property subject to the CC&Rs, is not excused or otherwise permissible if the violating property owner claims ignorance or lack of awareness or knowledge of the CC&R rules.  As a matter of California law, a property owner is charged with actual knowledge of recorded documents affecting real property which he/she holds title to.

Illegal offers along with Fraud and Misrepresentation in franchise offerings are governed by the California Franchise Investment Law (“CFIL”) as codified by Cal. Corp. Code § 31300 et. seq.  If a franchisee is considering bringing a claim against a franchisor, the franchisee must be aware of the specific rules regarding the time limitation for bringing an action and the CFIL’s bar to common law fraud claims.

Illegal Offers under Cal. Corp. Code § 31300 - In order to demonstrate a violation of Cal. Corp. Code Section 31300, a Franchisee must demonstrate that the Franchisor offered to sell a franchise prior to said franchise being registered under applicable state laws.  Cal. Corp. Code Section 31303 provides the time limitation of any action brought pursuant to 31300.

Section 31303 provides:  No action shall be maintained to enforce any liability created under Section 31300 unless brought before the expiration of four years after the act or transaction constituting the violation, the expiration of one year after the discovery by the plaintiff of the fact constituting the violation, or 90 days after delivery to the franchisee of a written notice disclosing any violation of Section 31110 or 31200, which notice shall be approved as to form by the commissioner, whichever shall first expire.

Thus, the absolute outer limit to bring an action is four years.  However, the time limit is one year upon the franchisee discovering facts regarding the illegal offer.  See Powell v. Coffee Beanery, Ltd, 932 F.Supp. 985, 987 (E.D. Mich. 1996) (“[T]he California legislature expressly and unambiguously chose to start the one year limitations period [in the CFIL] from the date that the claimant became aware of the facts constituting the violation, regardless of whether the claimant knew that the facts constituted a violation.”); see also Perez v. McDonald's Corp., F. Supp.2d 1030,1036 (E.D.Cal. 1998) (one-year CFIL statute runs from “the date that the claimant became aware of the facts constituting the violation, regardless of whether the claimant knew that the facts constituted a violation.”); see also People ex rel. Dept. of Corporations v. Speedee Oil Change Systems, Inc. (2002) 116 Cal. App. 4th 709, 725 (“Legislature has not referred directly or inferentially to delayed accrual based on when damage is sustained or because of fraud nor is there any reference in sections 31303 and 31304 to tolling based upon a conspiracy.”) Thus, California law is well settled in that claims brought pursuant to Section 31300 are subject to the statute of limitations as expressly stated in Section 31303.

Fraud and Misrepresentation under Cal. Corp. Code § 31301 – Cal. Corp. Code Section 31304 provides the time limitation of any action brought pursuant to 31301.  Section 31304 provides:  No action shall be maintained to enforce any liability created under Section 31301 unless brought before the expiration of two years after the violation upon which it is based, expiration of one year after the discovery by the plaintiff of the facts constituting such violation, or 90 days after delivery to the franchisee of a written notice disclosing any violation of Section 31201 or 31202 which notice shall be approved as to form by the commissioner, whichever shall first expire.

Again, the same time limitations are applicable to franchisee claims pursuant to Section 31301.

The CFIL provides the exclusive remedy for Fraud and Misrepresentation – Section 31306 of the CFIL provides that “[e]xcept as explicitly provided in this chapter, no civil liability in favor of any private party shall arise against any person by implication from or as a result of the violation of any provision of this law or any rule or order hereunder.” See People ex rel. supra, 95 Cal. App. 4th at 724-25 (“Section 31306 provides that civil liability under the Franchise Investment Law only arises under its explicit terms.”) Moreover, the second sentence of Section 31306 says: “Nothing in this chapter shall limit any liability which may exist by virtue of any other statute or under common law if this law were not in effect.”

A real estate agent who breaches the duty of good faith is precluded from recovering a commission for services rendered upon a showing that the breach was founded in fraud or intentional deceit.  See Ziswasser v. Cole & Cowan, Inc., (1985) 164 Cal. App. 3d 417, 432 (Holding that a breach of fiduciary duty involving intentional disloyalty or bad faith required before a broker will be deprived of his/her right to a commission.)

Thus, a real estate broker’s commission could be disgorged in the event a principal shows intent and/or bad faith on the part of the agent.