BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1128
                                                                  Page  1


          SENATE THIRD READING
          SB 1128 (DeSaulnier)
          As Amended  August 9, 2010
          Majority vote

           SENATE VOTE  :33-0  
           
           HOUSING             8-0                                         
           
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          |Ayes:|Torres, Arambula,         |     |                          |
          |     |Bradford, Eng, Gilmore,   |     |                          |
          |     |Knight, Torlakson, Tran   |     |                          |
          |     |                          |     |                          |
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           SUMMARY  :   Allows a non-profit entity providing services to a  
          common interest development (CID) under a declaration of trust  
          to collect an assessment fee from purchasers during a transfer  
          of title, and also provides that a non-profit entity is subject  
          to the open records provisions of the Davis-Stirling Act (the  
          Act). Specifically,  this bill  :  

          1)   Allows a non-profit entity that provides services to a CID  
            under a declaration of trust, if it received transfer fees  
            prior to January 1, 2004, to continue to collect transfer fees  
            from new members of the CID upon the purchase of property. 

          2)   Clarifies that a non-profit entity providing services to a  
            CID under a declaration of trust is required to provide  
            members access to homeowner association (HOA) records upon the  
            member's request.

          3 Includes language to avoid chaptering conflicts with AB 1927  
            (Knight)

           FISCAL EFFECT  :   None

           COMMENTS  :  A common interest development (CID) is a form of real  
          property where each owner holds exclusive rights to a portion of  
          the property typically called a unit or lot, and shared rights  
          to portions of the property typically called the common area.  
          Each CID is governed by a homeowner association according to the  
          recorded declarations, bylaws, and operating rules of the  
          association.  The Davis-Stirling Common Interest Development Act  








                                                                  SB 1128
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          (Act) provides that legal framework under which homeowner  
          associations HOAs operate. 

          Some CIDs have created affiliated entities, called "community  
          service organizations (CSO) or similar entities" to provide  
          services to residents in the CID. The Act generally precludes  
          both HOAs and CSOs from imposing any assessment, fee, or penalty  
          in connection with a transfer of title for an individual unit  
          except to cover the HOAs or CSO's actual costs associated with  
          the transfer. 

          The Act does, however, contain an exemption for CSOs that meet  
          the following criteria:

          1)The CSO was established prior to February 20, 2003 and exists  
            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; or,

          2)The CSO was established and received a transfer fee prior to  
            January 1, 2004, and after January 1, 2006 it allows a  
            purchaser to pay the transfer fee under an installment plan of  
            at least seven years. 

          The Act also requires that an HOA and CSO make financial  
          documents available to individual residents.  

          This bill is sponsored by the Golden Rain Foundation, a  
          nonprofit corporation designated to serve as trustee of the  
          Rossmoor community in Walnut Creek. The Rossmoor community is  
          home to over 9,600 seniors, and is made up of seventeen  
          affiliated CIDs. The purpose of the Golden Rain Foundation is to  
          provide administrative service and to own and maintain major  
          infrastructure and facilities within the developments. 

          Currently, residents of Rossmoor pay a one-time transfer fee  
          upon purchasing a new unit. The foundation uses this fund of  
          transfer fees to pay for infrastructure and facilities costs,  
          rather than increasing monthly dues for residents. The  
          foundation follows the provisions of the Act, including those  
          regarding transfer fees, by operating under the assumption that  
          the foundation is considered a CSO. 

          In 2008, the 4th District Court of Appeals in Southern  








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          California ruled in the case of Golden Rain Foundation v. Franz,  
          that a similar foundation affiliated with Leisure World of Seal  
          Beach was not a CSO, but an HOA, and was therefore subject to  
          the open records provisions of the Act. Given the similarities  
          between the Seal Beach and Walnut Creek Golden Rain Foundations,  
          the Golden Rain Foundation of Walnut Creek is now concerned that  
          it too, might be considered an HOA rather than a CSO, and if so,  
          its ability to charge a transfer fee could be challenged.

          Current law provides an exception to the prohibition of transfer  
          fees for CSOs. This bill will expand that exception to include  
          any "non-profit entity providing services to a common interest  
          development under a declaration of trust" that received transfer  
          fees prior to January 1, 2004.  Rather than determine whether or  
          not the Golden Rain Foundation is a CSO or an HOA, this bill  
          simply broadens the terms used in the Act, so that any  
          non-profit entity providing services under a declaration of  
          trust must adhere to the open records provisions, and will be  
          allowed to continue charging transfer fees if it had done so  
          before January 1, 2004.

          By expanding this exception, this bill will allow the Golden  
          Rain Foundation of Walnut Creek to continue charging transfer  
          fees to new residents as it has done for years. Without this  
          bill, a court could potentially deem the Golden Rain Foundation  
          an HOA, rather than a CSO, rendering the foundation unable to  
          charge a transfer fee. 


           Analysis Prepared by  :    Celeste Parisi & Lisa Engel/ H. & C.D.  
          / (916) 319-2085 


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