Legal Question in Real Estate Law in California

It is a violation of the law and illegal. CC&R's can not violate the established law, as is true with an contractual agreement.

I'd be interested in what authority Mr. Shers has for his opinion that it is illegal. Your question does not provide enough information to answer, in my opinion. First off how would the HOA even have the ability to cut off water service? In most of California water is provided by a utility company, not the HOA. In the zip code you list, the City of Cloverdale appears to provide the water service. How could the HOA get water service cut off? They can't force the city to cut off water. Or are you in a community in the outskirts, where the HOA has its own private water service? If so, I don't see why the HOA can't cut off water for non-payment just like the City of Cloverdale could if you were on the city system, or EBMUD could cut off mine if I don't pay. The only way I see that it would be both possible and illegal would be if the HOA somehow interfered with the city's delivery system to block the water service from the city's lines to the homeowner. Of course breaking or blocking public utility lines is illegal.