BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   AB 899|
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                                 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





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          (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.  







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           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  :







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          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

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