This week we learned the Corporate Transparency Act will not be enforced against small businesses, including HOAs.
On Sunday, March 2, the Treasury Department announced it would suspend any enforcement of new rules enacted under President Joe Biden requiring business owners file beneficial ownership information with the Financial Crimes Enforcement Network.
Many HOA attorneys, managers and boards have been following the saga of the CTA, which required HOAs to file BOI reports with the FinCEN. Court challenges and appeals suspended and then reinstated the CTA deadlines which moved from Jan. 1, 2025 to March. The on, off and back on again court rulings created plenty of confusion.
The Treasury Department said it would not enforce the CTA against U.S. citizens and domestic corporations, meaning HOAs can ignore the CTA and its BOI requirements. HOAs that already filed such reports can now be relieved of having to update those reports going forward.
Q: We live in a massive HOA. Our board members and management do a great job of overall maintenance and landscaping of the complex, but rental units have become a consistent problem. At a recent HOA meeting our board and manager refused to reveal how many units are rentals. They said the residents do not have the right to know who our legal counsel is, nor do they have access to them. Some of these problem renters brought into the HOA by negligent landlords linger around for years before they are evicted. The HOA is saying there is no transparency from our counsel as to why it takes so long for the evictions. — E.G., Santa Clarita.
A: Rentals are often a problem in HOAs, but Civil Code 4741 bans “unreasonable” restrictions on rentals. We don’t know what is “unreasonable” because the statute doesn’t define that term, but we do know that rentals can be capped at no less than 25% and that short-term (30 days or less) rentals can be banned. HOAs often forget that the landlord can still be held responsible for the problems caused by their tenants, and we often remind landlords that if the HOA must pursue court relief against their tenant the HOA will seek attorney fee reimbursement from the landlord. We normally do not seek eviction of a homeowner’s tenant, but we do frequently pursue restraining orders against tenants who are a threat or nuisance to their neighbors.
Most HOAs do not allow homeowners to contact the HOA’s legal counsel, because boards do not want bills run up from homeowner calls unless the board has approved the expense in advance. Also, lawyers normally report confidentially to the board on the progress of legal matters but those reports are not shared with the entire HOA. That can be frustrating, but the protection of confidential legal strategies and other reasons dictate that such updates are not shared publicly with the HOA members.
Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association advice. Submit questions to Kelly@roattorneys.com.