What it means for boards, managers and owners

The manager is the association's agent, not the members'. That is the durable point, and it rests on Berryman — which is published and citable — rather than on this decision. Owners with a grievance about how their community has been managed have a claim against the association and its board, not against the management company.

This surprises owners routinely, because the manager is the person they deal with. The manager is also the party with insurance and an incentive to settle, which is why these claims get filed.

For boards, it is a caution rather than a comfort. If the manager is not liable to members, the association is. A board that assumes management will absorb the consequences of a deferred-maintenance failure is assuming something the law does not provide.

The contract terms did real work here. “Shall not be responsible for taking any action unless specifically directed by the Board… in writing” is the kind of clause that reads as boilerplate until it is quoted back in an opinion. Associations negotiating management agreements should understand that such terms allocate responsibility to the board, which is where the liability then sits.

The prior-acts disclaimer is worth noting at every transition. Avalon disclaimed responsibility for anything before it took over. An incoming manager inherits a community's problems without inheriting responsibility for how they arose — and the board is the only entity with continuity across the change.

Why this may be changing

The Legislature has a bill on the Governor's desk that speaks directly to manager duties, and it points the other way.

SB 1238 would add a new Civil Code section 5390: a managing agent, including its employees, facilitating activities under Civil Code sections 5300, 5310 and 5500 “owes a duty of care that is prudent and provides the highest good faith effort to the association and its members.”

“And its members” is the phrase to watch. Berryman and Alarcon both turn on the absence of a statutory basis for a duty running to individual owners. Section 5390 would supply one, at least for the enumerated activities — the annual budget report, the annual policy statement, and the management services provisions.

SB 1238 would also amend Business and Professions Code section 11500 to define “management services” expressly to include administering financial collection and reporting, implementing board directives, enforcing governing documents, and administering contracts — while section 11501 reaffirms that no real estate or broker licence is required.

It is not law. It was presented to the Governor on August 31, 2026, and he must act by September 30. If signed, its ordinary operative date is January 1, 2027, and management agreements drafted around contractual limitation-of-liability provisions would need review by both sides — because a statutory duty owed to members is not one the contract between manager and association can bargain away.

The underlying facts are their own story

Set the liability question aside and look at the numbers: a 150-unit condominium community with $2,225 in reserves, buildings an engineer called a high safety risk after decades of deferred maintenance, and a city order to vacate.

That is what an underfunded reserve looks like at the end, and it is the scenario the reserve legislation now on the Governor's desk is aimed at. AB 2050 would require associations to fund reserves at the minimum level keeping the projected balance above zero over 30 years, with a floor of 15 percent of gross annual budget where projections cross zero — operative January 1, 2032.

It is also the scenario Fannie Mae's Lender Letter LL-2026-03 addresses sooner, raising the minimum reserve allocation from 10 to 15 percent of budgeted assessment income for loan applications on or after January 4, 2027.

Neither would have helped these owners. Both exist because of communities like this one.

What to watch next

The Governor's decision on SB 1238. If section 5390 becomes law, the question Berryman answered in 2007 and Alarcon reaffirmed this year gets a new statutory overlay — and the first case testing its scope will be worth reading closely.