BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 899| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 899 Author: Torres (D), et al Amended: 6/26/09 in Senate Vote: 21 SENATE TRANSPORTATION & HOUSING COMM. : 11-0, 6/23/09 AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman, Hollingsworth, Kehoe, Oropeza, Pavley, Simitian, Wolk ASSEMBLY FLOOR : 78-0, 5/28/09 - See last page for vote SUBJECT : Common interest development disclosures SOURCE : Executive Council of Homeowners DIGEST : This bill creates an index of disclosures required of common interest developments, allows e-mail distribution of these disclosures, as specified, and requires a common interest development to include in the existing reserve funding summary the assumed interest rate earned on reserves and the assumed rate of inflation for the repair and replacement of major components. ANALYSIS : A common interest development (CID) is a form of real estate where each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks are all CIDs. Each CID is governed by a homeowner association CONTINUED AB 899 Page 2 (HOA) according to the recorded declarations, bylaws, and operating rules of the association. The Davis-Stirling Common Interest Development Act provides the legal framework under which homeowner associations operate in CIDs. Current law requires an HOA to provide its members with a variety of disclosures relating to the budget, financial condition, and policies of the association. In general, an HOA may deliver documents to a member via fax or e-mail if the member has agreed to that method of delivery. One of the required disclosures is the assessment and reserve funding disclosure summary. Among other things, this disclosure informs members whether or not the HOA's reserves to repair or replace major components at the end of their useful life are fully funded. If not, the summary must estimate the percentage of necessary reserves that will be available at the end of the current fiscal year and after five years and identify the amount and timing of assessment increase of special assessment that would be necessary to fully fund the reserves. This bill: 1. Creates an index of 14 separate disclosures that an HOA must provide to its members and requires an HOA to distribute the index to those members who request it. 2. Allows an HOA to distribute any of these 14 disclosures via e-mail if the recipient has agreed to that method of delivery. 3. With respect to any document that an HOA distributes via e-mail, fax, or other electronic means, provides that the agreement of the member shall be obtained by the HOA consistent with the condition for obtaining consumer consent described in specified provisions of the Corporations Code. 4. Requires an HOA to include in the assessment and reserve funding disclosure summary the assumed interest rate earned on reserves and the assumed rate of inflation for the repair and replacement of major components. AB 899 Page 3 FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 6/26/09) Executive Council of Homeowners (source) California Rural Legal Assistance Foundation Western Center on Law and Poverty OPPOSITION : (Verified 6/26/09) (prior version of the bill) Community Association Institute ARGUMENTS IN SUPPORT : According to the author's office, the intent of this bill is to provide clarity and transparency to both CID board members and owners relative to the many disclosures required within the Davis-Stirling Act and to facilitate the electronic distribution of documents. By citing all the required disclosures in one place, HOAs will be less likely to omit a disclosure, and owners will know what to expect. This bill also seeks to provide better information to owners relating to reserve funding by requiring that the assessment and reserve funding disclosure summary specify the assumed interest rate earned on the reserve funds and the long-term inflation rate assumed for the costs of major component repair and replacement. ARGUMENTS IN OPPOSITION : The Community Associations Institute (CAI) states that this bill requires all self-managed and professionally managed associations to distribute more than one dozen documents to any and all owner-members upon individual requests. CAI argues the bill is unnecessary as current law already provides for such disclosures, and that requiring dissemination to every owner-member on an individual demand basis is costly. In addition, CAI is concerned that errors in the specific reserve disclosures proposed by the bill will expose an association to liability and litigation. ASSEMBLY FLOOR : AB 899 Page 4 AYES: Adams, Ammiano, Anderson, Arambula, Beall, Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas, Saldana, Skinner, Smyth, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass NO VOTE RECORDED: Bill Berryhill, Silva JJA:mw 6/26/09 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****