BILL NUMBER: AB 2259 AMENDED BILL TEXT AMENDED IN SENATE AUGUST 5, 2008 AMENDED IN SENATE JULY 2, 2008 AMENDED IN SENATE MAY 27, 2008 AMENDED IN ASSEMBLY APRIL 29, 2008 AMENDED IN ASSEMBLY MARCH 28, 2008 INTRODUCED BY Assembly Member Mullin(Coauthor:Assembly MemberAdams)FEBRUARY 21, 2008 An act to amend Sections 1368 and 1373 of, and to add Section 1360.2 to, the Civil Code, relating to common interest developments. LEGISLATIVE COUNSEL'S DIGEST AB 2259, as amended, Mullin. Common interest developments.Existing(1) Existing law, the Davis-Stirling Common Interest Development Act, requires the declaration of a common interest development recorded on or after January 1, 1986, to contain a legal description of the development and the restrictions on the use or enjoyment of any portion of the development that are intended to be enforceable equitable servitudes. Existing law authorizes the declaration to contain any other matters the original signator of the declaration or the owners consider appropriate. Existing law also provides that the covenants and restrictions in the declaration of a common interest development shall be enforceable equitable servitudes, unless unreasonable. This bill would prohibit the owner of a separate interest in a common interest development from being subject to a provision in a governing document, or a provision in an amendment to a governing document, that prohibits the rental or leasing of all or any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest. The bill would also authorize that owner to expressly consent to be subject to a governing document or amendment thereto with that specified prohibition. The bill would also require the owner, prior to renting or leasing his or her separate interest as provided by those provisions, to provide the homeowner's association verification of the date the owner acquired title to the separate interest and the name and contact information of the prospective tenant or the prospective tenant's representative.Existing(2) Existing law requires the owner of a separate interest, except as specified, to provide specified documents and information to a prospective purchaser as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor. This bill would, in addition, require the owner of a separate interest, except as specified, to provide a statement describing any provision in the governing documents that prohibits the rental or leasing of all of any of the separate interests in the common interest development to a renter, lessee, or tenant, and its applicability, if there is such a provision. (3) This bill would incorporate additional changes in Section 1368 of the Civil Code proposed in SB 127, that would become operative only if SB 127 and this bill are both chaptered and become effective on or before January 1, 2009, and this bill is chaptered last. (4) (A) This bill would incorporate additional changes to Section 1373 of the Civil Code, proposed by AB 567, to be operative only if AB 567 and this bill are both enacted, each bill amends the respective sections, AB 2806 is not enacted, or if enacted, does not amend those sections, and this bill is enacted after AB 567. (B) This bill would incorporate additional changes to Section 1373 of the Civil Code, proposed by AB 2806, to be operative only if AB 2806 and this bill are both enacted, each bill amends the respective sections, AB 567 is not enacted, or if enacted, does not amend those sections, and this bill is enacted after AB 2806. (C) This bill would incorporate additional changes to Section 1373 of the Civil Code, proposed by AB 567 and AB 2806, to be operative only if AB 567, AB 2806, and this bill are all enacted, all 3 bills amend that section, and this bill is enacted after AB 567 and AB 2806. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares that the rights of common interest development owners to rent or lease their properties, as the rights existed at the time they acquired them, should be protected by the State of California, and the rights of subsequent owners should be governed by the status of those rights at the time they acquire them. SEC. 2. Section 1360.2 is added to the Civil Code, to read: 1360.2.(a)An owner of a separate interest in a common interest development shall not be subject to a provision in a governing document, or a provision in an amendment to a governing document, that prohibits the rental or leasing of all or any of the separate interests in that common interest development to a renter, lessee, or tenant unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to his or her separate interest.(b)(a) Notwithstanding the provisions of this section, an owner of a separate interest in a common interest development may expressly consent to be subject to a governing document or an amendment to a governing document that prohibits the rental or leasing of all or any of the separate interests in the common interest development to a renter, lessee, or tenant.(c)(b) For purposes of this section, the separate interest of an owner shall not be deemed to have terminated if the transfer by the owner of all or part of the separate interest meets at least one of the following conditions: (1) Pursuant to Section 62 or 480.3 of the Revenue and Taxation Code, the transfer is exempt, for purposes of reassessment by the county tax assessor. (2) Pursuant to subdivision (b) of, solely with respect to probate transfers, or subdivision (e), (f), or (g) of, Section 1102.2, the transfer is exempt from the requirements to prepare and deliver a Real Estate Transfer Disclosure Statement, as set forth in Section 1102.6. (c) Prior to renting or leasing his or her separate interest as provided by this section, an owner shall provide the association verification of the date the owner acquired title to the separate interest and the name and contact information of the prospective tenant or the prospective tenant's representative. (d) Nothing in this section shall be deemed to revise, alter, or otherwise affect the voting process by which a common interest development adopts or amends its governing documents. (e) This section shall apply only to provisions in a governing document, or provisions in an amendment to a governing document, that become effective on or after January 1, 2009. SEC. 3. Section 1368 of the Civil Code is amended to read: 1368. (a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, provide the following to the prospective purchaser: (1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated. (2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3. (3) A copy of the most recent documents distributed pursuant to Section 1365. (4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association' s current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1. (5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest. (6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made. (7) A copy of the latest information provided for in Section 1375.1. (8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision. (9) If there is a provision in the governing documents that prohibits the rental or leasing of all or any of the separate interests in the common interest development to a renter, lessee, or tenant, a statement describing the prohibition and its applicability. (b) Upon written request, an association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest with a copy of the requested items specified in paragraphs (1) to (9), inclusive, of subdivision (a). The items required to be made available pursuant to this section may be maintained in electronic form and requesting parties shall have the option of receiving them by electronic transmission or machine readable storage media if the association maintains these items in electronic form. The association may charge a reasonable fee for this service based upon the association's actual cost to procure, prepare, and reproduce the requested items. (c) (1) Subject to the provisions of paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following: (A) An amount not to exceed the association's actual costs to change its records. (B) An amount authorized by subdivision (b). (2) The amendments made to this subdivision by the act adding this paragraph do not apply to a community service organization or similar entity that is described in subparagraph (A) or (B): (A) The community service organization or similar entity satisfies both of the following requirements: (i) The community service organization or similar entity was established prior to February 20, 2003. (ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development. (B) The community service organization or similar entity satisfies all of the following requirements: (i) The community service organization or similar entity is not an organization or entity described in subparagraph (A). (ii) The community service organization or similar entity was established and received a transfer fee prior to January 1, 2004. (iii) On and after January 1, 2006, the community service organization or similar entity offers a purchaser the following payment options for the fee or charge it collects at the time of transfer: (I) Paying the fee or charge at the time of transfer. (II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the community service organization or similar entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to the transfer. (3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance. (d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonable attorneys' fees. (e) Nothing in this section affects the validity of title to real property transferred in violation of this section. (f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134. (g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association. SEC. 3.5. Section 1368 of the Civil Code is amended to read: 1368. (a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title but no later than 20 calendar days after either the execution of the purchase agreement to purchase title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, or the opening of esc row, whichever is later, provide the following to the prospective purchaser: (1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated. (2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3. (3) A copy of the most recent documents distributed pursuant to Section 1365. (4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association' s current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1. (5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest. (6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made. (7) A copy of the latest information provided for in Section 1375.1. (8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision. (9) If there is a provision in the governing documents that prohibits the rental or leasing of all or any of the separate interests in the common interest development to a renter, lessee, or tenant, a statement describing the prohibition and its applicability. (b) Upon written request, an association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest with a copy of the requested items specified in paragraphs (1) to(8)(9) , inclusive, of subdivision (a). The items required to be made available pursuant to this section may be maintained in electronic form and requesting parties shall have the option of receiving them by electronic transmission or machine readable storage media if the association maintains these items in electronic form. The association may charge a reasonable fee for this service based upon the association's actual cost to procure, prepare, and reproduce the requested items. (c) (1) Subject to the provisions of paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following: (A) An amount not to exceed the association's actual costs to change its records. (B) An amount authorized by subdivision (b). (2) The amendments made to this subdivision by the act adding this paragraph do not apply to a community service organization or similar entity that is described in subparagraph (A) or (B): (A) The community service organization or similar entity satisfies both of the following requirements: (i) The community service organization or similar entity was established prior to February 20, 2003. (ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development. (B) The community service organization or similar entity satisfies all of the following requirements: (i) The community service organization or similar entity is not an organization or entity described in subparagraph (A). (ii) The community service organization or similar entity was established and received a transfer fee prior to January 1, 2004. (iii) On and after January 1, 2006, the community service organization or similar entity offers a purchaser the following payment options for the fee or charge it collects at the time of transfer: (I) Paying the fee or charge at the time of transfer. (II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the community service organization or similar entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to the transfer. (3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance. (d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonableattorneys'attorney's fees. (e) Nothing in this section affects the validity of title to real property transferred in violation of this section. (f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134. (g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association. SEC. 4. Section 1373 of the Civil Code is amended to read: 1373. (a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each county in which the common interest development is located: (1) Section 1356. (2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2. (3) Section 1360.2. (4) Subdivision (b) of Section 1363. (5) Section 1365. (6) Section 1365.5. (7) Subdivision (b) of Section 1366. (8) Section 1366.1. (9) Section 1368. (10) Section 1378. (b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments. SEC. 4.5. Section 1373 of the Civil Code is amended to read: 1373. (a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each county in which the common interest development is located: (1) Section 1356. (2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2. (3) Section 1360.2.(3)(4) Subdivision (b) of Section 1363.(4)(5) Section 1365.(5)(6) Section 1365.5.(6)(7) Subdivision (b) of Section 1366.(7)(8) Section 1366.1.(8)(9) Section 1368.(9)(10) Section 1378. (11) Chapter 11 (commencing with Section 1380.010). (b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments. SEC. 4.7. Section 1373 of the Civil Code is amended to read: 1373. (a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each county in which the common interest development is located: (1) Section 1356. (2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2. (3) Section 1360.2.(3)(4) Subdivision (b) of Section 1363. (5) Section 1363.002.(4)(6) Section 1365.(5)(7) Section 1365.5.(6)(8) Subdivision (b) of Section 1366.(7)(9) Section 1366.1.(8)(10) Section 1368.(9)(11) Section 1378. (b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments. SEC. 4.9. Section 1373 of the Civil Code is amended to read: 1373. (a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each county in which the common interest development is located: (1) Section 1356. (2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2. (3) Section 1360.2.(3)(4) Subdivision (b) of Section 1363. (5) Section 1363.002.(4)(6) Section 1365.(5)(7) Section 1365.5.(6)(8) Subdivision (b) of Section 1366.(7)(9) Section 1366.1.(8)(10) Section 1368.(9)(11) Section 1378. (12) Chapter 11 (commencing with Section 1380.010). (b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments. SEC. 5. Section 3.5 of this bill incorporates amendments to Section 1368 of the Civil Code proposed by both this bill and SB 127. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2009, (2) each bill amends Section 1368 of the Civil Code, and (3) this bill is enacted after SB 127, in which case Section 3 of this bill shall not become operative. SEC. 6. (a) Section 4.5 of this bill incorporates amendments to Section 1373 of the Civil Code proposed by both this bill and AB 567. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2009, (2) each bill amends Section 1373 of the Civil Code, and (3) AB 2806 is not enacted or as enacted does not amend that section, and (4) this bill is enacted after AB 567, in which case Sections 4, 4.7 and 4.9 of this bill shall not become operative. (b) Section 4.7 of this bill incorporates amendments to Section 1373 of the Civil Code proposed by both this bill and AB 2806. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2009, (2) each bill amends Section 1373 of the Civil Code, (3) AB 567 is not enacted or as enacted does not amend that section, and (4) this bill is enacted after AB 2806 in which case Sections 4, 4.5 and 4.9 of this bill shall not become operative. (c) Section 4.9 of this bill incorporates amendments to Section 1373 of the Civil Code proposed by this bill, AB 567, and AB 2806. It shall only become operative if (1) all three bills are enacted and become effective on or before January 1, 2009, (2) all three bills amend Section 1373 of the Civil Code, and (3) this bill is enacted after AB 567 and AB 2806, in which case Sections 4, 4.5 and 4.7 of this bill shall not become operative.