BILL NUMBER: AB 1836	CHAPTERED  09/24/04

	CHAPTER  754
	FILED WITH SECRETARY OF STATE  SEPTEMBER 24, 2004
	APPROVED BY GOVERNOR  SEPTEMBER 24, 2004
	PASSED THE ASSEMBLY  AUGUST 17, 2004
	PASSED THE SENATE  AUGUST 12, 2004
	AMENDED IN SENATE  JULY 6, 2004
	AMENDED IN SENATE  JUNE 28, 2004
	AMENDED IN SENATE  JUNE 15, 2004
	AMENDED IN SENATE  JUNE 1, 2004
	AMENDED IN ASSEMBLY  MAY 12, 2004

INTRODUCED BY   Assembly Member Harman

                        JANUARY 22, 2004

   An act to amend Sections 1354 and 1357.120 of, to amend and
renumber Section 1368.4 of, and to add Article 5 (commencing with
Section 1363.810) to Chapter 4 of, and Article 1 (commencing with
Section 1368.3) and Article 2 (commencing with Section 1369.510) to
Chapter 7 of, Title 6 of Part 4 of Division 2 of, the Civil Code, and
to repeal Section 383 of the Code of Civil Procedure, relating to
common interest developments.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1836, Harman.  Common interest developments:  dispute
resolution.
   Existing law provides that a common interest development
association has standing to institute, defend, settle, or intervene
in litigation, arbitration, mediation, or administrative proceedings,
in various circumstances, including enforcement of the governing
documents.  The Davis-Stirling Common Interest Development Act
requires, before a common interest development association or an
owner of a separate interest therein brings certain actions related
to the enforcement of the development's governing documents, that the
parties endeavor to submit their dispute to alternative dispute
resolution, as specified.  Existing law defines and regulates
operating rules in connection with common interest development
associations and applies them to association procedures for
resolution of assessment disputes.
   This bill would revise and recast the provisions described above
relating to dispute resolution.  The bill would specify that a common
interest development association and an owner of a separate interest
may enforce governing documents other than the declaration.  The
bill would create a new dispute resolution procedure for conflicts
between an association and a member, to be applied when the dispute
concerns specified subjects.  The bill would require an association
to provide a fair, reasonable, and expeditious procedure for
resolving these disputes, as defined by certain minimum standards,
and would provide a procedure for associations that do not have a
procedure of their own that meets the minimum standards, among them
that the member not be charged a fee to participate in the process.
The bill would also require that the association provide notice of
its dispute resolution process, as specified.
   This bill would revise the existing dispute resolution provisions,
described above, to clarify their application to other nonjudicial
processes and to broaden their applicability to include actions
enforcing the Davis-Stirling Common Interest Development Act and the
Nonprofit Mutual Benefit Corporation Law.  Among other things, the
bill would also provide for the tolling of a statute of limitations
in certain circumstances, expand the permissible methods of service
of a request to submit a dispute to the resolution process, and
change the confidentiality protections applied to these procedures.
The bill would require that a common interest development association'
s procedures for the resolution of all disputes, not only those
related to assessments, satisfy requirements regarding association
operating rules.  The bill would make additional technical and
conforming changes.
   The bill would incorporate additional changes in Section 1357.120
of the Civil Code proposed by AB 2376 that would become operative
only if AB 2376 and this bill are both chaptered and become effective
on or before January 1, 2005, and this bill is chaptered last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1354 of the Civil Code is amended to read:
   1354.  (a) The covenants and restrictions in the declaration shall
be enforceable equitable servitudes, unless unreasonable, and shall
inure to the benefit of and bind all owners of separate interests in
the development.  Unless the declaration states otherwise, these
servitudes may be enforced by any owner of a separate interest or by
the association, or by both.
   (b) A governing document other than the declaration may be
enforced by the association against an owner of a separate interest
or by an owner of a separate interest against the association.
   (c) In an action to enforce the governing documents, the
prevailing party shall be awarded reasonable attorney's fees and
costs.
  SEC. 2.  Section 1357.120 of the Civil Code is amended to read:
   1357.120.  (a) Sections 1357.130 and 1357.140 only apply to an
operating rule that relates to one or more of the following subjects:

   (1) Use of the common area or of an exclusive use common area.
   (2) Use of a separate interest, including any aesthetic or
architectural standards that govern alteration of a separate
interest.
   (3) Member discipline, including any schedule of monetary
penalties for violation of the governing documents and any procedure
for the imposition of penalties.
   (4) Any standards for delinquent assessment payment plans.
   (5) Any procedures adopted by the association for resolution of
disputes.
   (b) Sections 1357.130 and 1357.140 do not apply to the following
actions by the board of directors of an association:
   (1) A decision regarding maintenance of the common area.
   (2) A decision on a specific matter that is not intended to apply
generally.
   (3) A decision setting the amount of a regular or special
assessment.
   (4) A rule change that is required by law, if the board of
directors has no discretion as to the substantive effect of the rule
change.
   (5) Issuance of a document that merely repeats existing law or the
governing documents.
  SEC. 2.5.  Section 1357.120 of the Civil Code is amended to read:
   1357.120.  (a) Sections 1357.130 and 1357.140 only apply to an
operating rule that relates to one or more of the following subjects:

   (1) Use of the common area or of an exclusive use common area.
   (2) Use of a separate interest, including any aesthetic or
architectural standards that govern alteration of a separate
interest.
   (3) Member discipline, including any schedule of monetary
penalties for violation of the governing documents and any procedure
for the imposition of penalties.
   (4) Any standards for delinquent assessment payment plans.
   (5) Any procedures adopted by the association for resolution of
disputes.
   (6) Any procedures for reviewing and approving or disapproving a
proposed physical change to a member's separate interest or to the
common area.
   (b) Sections 1357.130 and 1357.140 do not apply to the following
actions by the board of directors of an association:
   (1) A decision regarding maintenance of the common area.
   (2) A decision on a specific matter that is not intended to apply
generally.
   (3) A decision setting the amount of a regular or special
assessment.
   (4) A rule change that is required by law, if the board of
directors has no discretion as to the substantive effect of the rule
change.
   (5) Issuance of a document that merely repeats existing law or the
governing documents.
  SEC. 3.  Article 5 (commencing with Section 1363.810) is added to
Chapter 4 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:

      Article 5.  Dispute Resolution Procedure

   1363.810.  (a) This article applies to a dispute between an
association and a member involving their rights, duties, or
liabilities under this title, under the Nonprofit Mutual Benefit
Corporation Law (Part 3 (commencing with Section 7110) of Division 2
of Title 1 of the Corporations Code), or under the governing
documents of the common interest development or association.
   (b) This article supplements, and does not replace, Article 2
(commencing with Section 1369.510) of Chapter 7, relating to
alternative dispute resolution as a prerequisite to an enforcement
action.
   1363.820.  (a) An association shall provide a fair, reasonable,
and expeditious procedure for resolving a dispute within the scope of
this article.
   (b) In developing a procedure pursuant to this article, an
association shall make maximum, reasonable use of available local
dispute resolution programs involving a neutral third party,
including low-cost mediation programs such as those listed on the
Internet Web sites of the Department of Consumer Affairs and the
United States Department of Housing and Urban Development.
   (c) If an association does not provide a fair, reasonable, and
expeditious procedure for resolving a dispute within the scope of
this article, the procedure provided in Section 1363.840 applies and
satisfies the requirement of subdivision (a).
   1363.830.  A fair, reasonable, and expeditious dispute resolution
procedure shall at a minimum satisfy all of the following
requirements:
   (a) The procedure may be invoked by either party to the dispute.
A request invoking the procedure shall be in writing.
   (b) The procedure shall provide for prompt deadlines.  The
procedure shall state the maximum time for the association to act on
a request invoking the procedure.
   (c) If the procedure is invoked by a member, the association shall
participate in the procedure.
   (d) If the procedure is invoked by the association, the member may
elect not to participate in the procedure.  If the member
participates but the dispute is resolved other than by agreement of
the member, the member shall have a right of appeal to the
association's board of directors.
   (e) A resolution of a dispute pursuant to the procedure, that is
not in conflict with the law or the governing documents, binds the
association and is judicially enforceable.  An agreement reached
pursuant to the procedure, that is not in conflict with the law or
the governing documents, binds the parties and is judicially
enforceable.
   (f) The procedure shall provide a means by which the member and
the association may explain their positions.
   (g) A member of the association shall not be charged a fee to
participate in the process.
   1363.840.  (a) This section applies in an association that does
not otherwise provide a fair, reasonable, and expeditious dispute
resolution procedure.  The procedure provided in this section is
fair, reasonable, and expeditious, within the meaning of this
article.
   (b) Either party to a dispute within the scope of this article may
invoke the following procedure:
   (1) The party may request the other party to meet and confer in an
effort to resolve the dispute.  The request shall be in writing.
   (2) A member of an association may refuse a request to meet and
confer.  The association may not refuse a request to meet and confer.

   (3) The association's board of directors shall designate a member
of the board to meet and confer.
   (4) The parties shall meet promptly at a mutually convenient time
and place, explain their positions to each other, and confer in good
faith in an effort to resolve the dispute.
   (5) A resolution of the dispute agreed to by the parties shall be
memorialized in writing and signed by the parties, including the
board designee on behalf of the association.
   (c) An agreement reached under this section binds the parties and
is judicially enforceable if both of the following conditions are
satisfied:
   (1) The agreement is not in conflict with law or the governing
documents of the common interest development or association.
   (2) The agreement is either consistent with the authority granted
by the board of directors to its designee or the agreement is
ratified by the board of directors.
   (d) A member of the association may not be charged a fee to
participate in the process.
   1363.850.  The notice provided pursuant to Section 1369.590 shall
include a description of the internal dispute resolution process
provided pursuant to this article.
  SEC. 4.  Article 1 (commencing with Section 1368.3) is added to
Chapter 7 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:

      Article 1.  Miscellaneous Provisions

   1368.3.  An association established to manage a common interest
development has standing to institute, defend, settle, or intervene
in litigation, arbitration, mediation, or administrative proceedings
in its own name as the real party in interest and without joining
with it the individual owners of the common interest development, in
matters pertaining to the following:
   (a) Enforcement of the governing documents.
   (b) Damage to the common area.
   (c) Damage to a separate interest that the association is
obligated to maintain or repair.
   (d) Damage to a separate interest that arises out of, or is
integrally related to, damage to the common area or a separate
interest that the association is obligated to maintain or repair.
   1368.4.  (a) In an action maintained by an association pursuant to
subdivision (b), (c), or (d) of Section 1368.3, the amount of
damages recovered by the association shall be reduced by the amount
of damages allocated to the association or its managing agents in
direct proportion to their percentage of fault based upon principles
of comparative fault.  The comparative fault of the association or
its managing agents may be raised by way of defense, but shall not be
the basis for a cross-action or separate action against the
association or its managing agents for contribution or implied
indemnity, where the only damage was sustained by the association or
its members.  It is the intent of the Legislature in enacting this
subdivision to require that comparative fault be pleaded as an
affirmative defense, rather than a separate cause of action, where
the only damage was sustained by the association or its members.
   (b) In an action involving damages described in subdivision (b),
(c), or (d) of Section 1368.3, the defendant or cross-defendant may
allege and prove the comparative fault of the association or its
managing agents as a setoff to the liability of the defendant or
cross-defendant even if the association is not a party to the
litigation or is no longer a party whether by reason of settlement,
dismissal, or otherwise.
   (c) Subdivisions (a) and (b) apply to actions commenced on or
after January 1, 1993.
   (d) Nothing in this section affects a person's liability under
Section 1431, or the liability of the association or its managing
agent for an act or omission which causes damages to another.
  SEC. 5.  Section 1368.4 of the Civil Code is amended and renumbered
to read:
   1368.5.  (a) Not later than 30 days prior to the filing of any
civil action by the association against the declarant or other
developer of a common interest development for alleged damage to the
common areas, alleged damage to the separate interests that the
association is obligated to maintain or repair, or alleged damage to
the separate interests that arises out of, or is integrally related
to, damage to the common areas or separate interests that the
association is obligated to maintain or repair, the board of
directors of the association shall provide a written notice to each
member of the association who appears on the records of the
association when the notice is provided.  This notice shall specify
all of the following:
   (1) That a meeting will take place to discuss problems that may
lead to the filing of a civil action.
   (2) The options, including civil actions, that are available to
address the problems.
   (3) The time and place of this meeting.
   (b) Notwithstanding subdivision (a), if the association has reason
to believe that the applicable statute of limitations will expire
before the association files the civil action, the association may
give the notice, as described above, within 30 days after the filing
of the action.
  SEC. 6.  Article 2 (commencing with Section 1369.510) is added to
Chapter 7 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:

      Article 2.  Alternative Dispute Resolution

   1369.510.  As used in this article:
   (a) "Alternative dispute resolution" means mediation, arbitration,
conciliation, or other nonjudicial procedure that involves a neutral
party in the decisionmaking process.  The form of alternative
dispute resolution chosen pursuant to this article may be binding or
nonbinding, with the voluntary consent of the parties.
   (b) "Enforcement action" means a civil action or proceeding, other
than a cross-complaint, for any of the following purposes:
   (1) Enforcement of this title.
   (2) Enforcement of the Nonprofit Mutual Benefit Corporation Law
(Part 3 (commencing with Section 7110) of Division 2 of Title 1 of
the Corporations Code).
   (3) Enforcement of the governing documents of a common interest
development.
   1369.520.  (a) An association or an owner or a member of a common
interest development may not file an enforcement action in the
superior court unless the parties have endeavored to submit their
dispute to alternative dispute resolution pursuant to this article.
   (b) This section applies only to an enforcement action that is
solely for declaratory, injunctive, or writ relief, or for that
relief in conjunction with a claim for monetary damages not in excess
of five thousand dollars ($5,000).
   (c) This section does not apply to a small claims action.
   (d) Except as otherwise provided by law, this section does not
apply to an assessment dispute.
   1369.530.  (a) Any party to a dispute may initiate the process
required by Section 1369.520 by serving on all other parties to the
dispute a Request for Resolution.  The Request for Resolution shall
include all of the following:
   (1) A brief description of the dispute between the parties.
   (2) A request for alternative dispute resolution.
   (3) A notice that the party receiving the Request for Resolution
is required to respond within 30 days of receipt or the request will
be deemed rejected.
   (4) If the party on whom the request is served is the owner of a
separate interest, a copy of this article.
   (b) Service of the Request for Resolution shall be by personal
delivery, first-class mail, express mail, facsimile transmission, or
other means reasonably calculated to provide the party on whom the
request is served actual notice of the request.
   (c) A party on whom a Request for Resolution is served has 30 days
following service to accept or reject the request.  If a party does
not accept the request within that period, the request is deemed
rejected by the party.
   1369.540.  (a) If the party on whom a Request for Resolution is
served accepts the request, the parties shall complete the
alternative dispute resolution within 90 days after the party
initiating the request receives the acceptance, unless this period is
extended by written stipulation signed by both parties.
   (b) Chapter 2 (commencing with Section 1115) of Division 9 of the
Evidence Code applies to any form of alternative dispute resolution
initiated by a Request for Resolution under this article, other than
arbitration.
   (c) The costs of the alternative dispute resolution shall be borne
by the parties.
   1369.550.  If a Request for Resolution is served before the end of
the applicable time limitation for commencing an enforcement action,
the time limitation is tolled during the following periods:
   (a) The period provided in Section 1369.530 for response to a
Request for Resolution.
   (b) If the Request for Resolution is accepted, the period provided
by Section 1369.540 for completion of alternative dispute
resolution, including any extension of time stipulated to by the
parties pursuant to Section 1369.540.
   1369.560.  (a) At the time of commencement of an enforcement
action, the party commencing the action shall file with the initial
pleading a certificate stating that one or more of the following
conditions is satisfied:
   (1) Alternative dispute resolution has been completed in
compliance with this article.
   (2) One of the other parties to the dispute did not accept the
terms offered for alternative dispute resolution.
   (3) Preliminary or temporary injunctive relief is necessary.
   (b) Failure to file a certificate pursuant to subdivision (a) is
grounds for a demurrer or a motion to strike unless the court finds
that dismissal of the action for failure to comply with this article
would result in substantial prejudice to one of the parties.
   1369.570.  (a) After an enforcement action is commenced, on
written stipulation of the parties, the matter may be referred to
alternative dispute resolution.  The referred action is stayed.
During the stay, the action is not subject to the rules implementing
subdivision (c) of Section 68603 of the Government Code.
   (b) The costs of the alternative dispute resolution shall be borne
by the parties.
   1369.580.  In an enforcement action in which fees and costs may be
awarded pursuant to subdivision (c) of Section 1354, the court, in
determining the amount of the award, may consider whether a party's
refusal to participate in alternative dispute resolution before
commencement of the action was reasonable.
   1369.590.  (a) An association shall annually provide its members a
summary of the provisions of this article that specifically
references this article.  The summary shall include the following
language:

   "Failure of a member of the association to comply with the
alternative dispute resolution requirements of Section 1369.520 of
the Civil Code may result in the loss of your right to sue the
association or another member of the association regarding
enforcement of the governing documents or the applicable law."

   (b) The summary shall be provided either at the time the pro forma
budget required by Section 1365 is distributed or in the manner
prescribed in Section 5016 of the Corporations Code.  The summary
shall include a description of the association's internal dispute
resolution process, as required by Section 1363.850.
  SEC. 7.  Section 383 of the Code of Civil Procedure is repealed.
  SEC. 8.  Section 2.5 of this bill incorporates amendments to
Section 1357.120 of the Civil Code proposed by both this bill and AB
2376.  It shall only become operative if (1) both bills are enacted
and become effective on or before January 1, 2005, (2) each bill
amends Section 1357.120 of the Civil Code, and (3) this bill is
enacted after AB 2376, in which case Section 2 of this bill shall not
become operative.