BILL NUMBER: AB 771 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 15, 2011
INTRODUCED BY Assembly Member Butler
FEBRUARY 17, 2011
An act to amend Section 1368 of Sections
1365 and 1368 of, and to add Section 1368.2 to, the Civil Code,
relating to common interest developments.
LEGISLATIVE COUNSEL'S DIGEST
AB 771, as amended, Butler. Common interest developments: requests
for documents: fees.
The Davis-Stirling Common Interest Development Act requires an
owner of a separate interest in a common interest development to
provide specified documents to a prospective purchaser of that
interest. Existing law requires a homeowners' association to provide
these documents to the owner of the separate interest within 10 days
of the mailing or delivery of the request and limits the amount of
fees charged for the provision of the documents to the association's
actual costs to procure, prepare, and reproduce the requested
documents.
This bill would require the association to provide a
statement describing the fees that may be charged to a seller to
procure, prepare, and reproduce the documents. The bill would
provide that the timeframe for the provision of, and the limitation
of the amount of fees charged for, the specified documents also apply
to an agent, as defined, of the association that provides the
documents to an owner of a separate interest in a common interest
development. This bill would also require an association or an agent
of the association to provide a written or electronic
estimate of the fees that will be assessed for the provision of the
specified documents. The bill would require the owner of a
separate interest to also provide a form for billing disclosures, as
specified, to a prospective purchaser.
This bill contains legislative findings and declarations in
support of the proposed changes.
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. (a) The Legislature finds and declares:
(1) That subdivision (b) of Section 1368 of the Civil Code, which
limits the amount of fees charged by an association of a common
interest development for the provision of specified
documents items to a seller of a separate
interest in a common interest development to a reasonable amount
based upon the association's cost to procure, prepare, and reproduce
the requested documents items , was
intended to apply to any person that provided the specified
documents those items .
(2) That the decision of Berryman v. Merit Property Management,
Inc. (2007) 152 Cal.App.4th 1544, in which the court held that
subdivision (b) of Section 1368 of the Civil Code is limited to fees
charged by the association of the common interest development and
does not apply to an agent of the association, does not reflect the
Legislature's intent to limit the amount of
as to fees that may be charged for the provision of the
specified documents items .
(b) It is the intent of the Legislature that the amendments
proposed by this act clarify the Legislature's original
intent to unilaterally limit the amount of fees charged for the
provision of specified documents to a seller of a separate interest
in a common interest development to the association's cost to
procure, prepare, and reproduce the requested documents.
proposed by this act clarify the process for assessing fees
charged for the provision of specified items to a seller of a
separate interest in a common interest development.
SEC. 2. Sec tion 1365 of the
Civil Code is amended to read:
1365. Unless the governing documents impose more stringent
standards, the association shall prepare and distribute to all of its
members the following documents:
(a) A pro forma operating budget, which shall include all of the
following:
(1) The estimated revenue and expenses on an accrual basis.
(2) A summary of the association's reserves based upon the most
recent review or study conducted pursuant to Section 1365.5, based
only on assets held in cash or cash equivalents, which shall be
printed in boldface type and include all of the following:
(A) The current estimated replacement cost, estimated remaining
life, and estimated useful life of each major component.
(B) As of the end of the fiscal year for which the study is
prepared:
(i) The current estimate of the amount of cash reserves necessary
to repair, replace, restore, or maintain the major components.
(ii) The current amount of accumulated cash reserves actually set
aside to repair, replace, restore, or maintain major components.
(iii) If applicable, the amount of funds received from either a
compensatory damage award or settlement to an association from any
person or entity for injuries to property, real or personal, arising
out of any construction or design defects, and the expenditure or
disposition of funds, including the amounts expended for the direct
and indirect costs of repair of construction or design defects. These
amounts shall be reported at the end of the fiscal year for which
the study is prepared as separate line items under cash reserves
pursuant to clause (ii). Instead of complying with the requirements
set forth in this clause, an association that is obligated to issue a
review of their financial statement pursuant to subdivision (b) may
include in the review a statement containing all of the information
required by this clause.
(C) The percentage that the amount determined for purposes of
clause (ii) of subparagraph (B) equals the amount determined for
purposes of clause (i) of subparagraph (B).
(D) The current deficiency in reserve funding expressed on a per
unit basis. The figure shall be calculated by subtracting the amount
determined for purposes of clause (ii) of subparagraph (B) from the
amount determined for purposes of clause (i) of subparagraph (B) and
then dividing the result by the number of separate interests within
the association, except that if assessments vary by the size or type
of ownership interest, then the association shall calculate the
current deficiency in a manner that reflects the variation.
(3) A statement as to all of the following:
(A) Whether the board of directors of the association has
determined to defer or not undertake repairs or replacement of any
major component with a remaining life of 30 years or less, including
a justification for the deferral or decision not to undertake the
repairs or replacement.
(B) Whether the board of directors of the association, consistent
with the reserve funding plan adopted pursuant to subdivision (e) of
Section 1365.5, has determined or anticipates that the levy of one or
more special assessments will be required to repair, replace, or
restore any major component or to provide adequate reserves therefor.
If so, the statement shall also set out the estimated amount,
commencement date, and duration of the assessment.
(C) The mechanism or mechanisms by which the board of directors
will fund reserves to repair or replace major components, including
assessments, borrowing, use of other assets, deferral of selected
replacements or repairs, or alternative mechanisms.
(D) Whether the association has any outstanding loans with an
original term of more than one year, including the payee, interest
rate, amount outstanding, annual payment, and when the loan is
scheduled to be retired.
(4) A general statement addressing the procedures used for the
calculation and establishment of those reserves to defray the future
repair, replacement, or additions to those major components that the
association is obligated to maintain. The report shall include, but
need not be limited to, reserve calculations made using the formula
described in paragraph (4) of subdivision (b) of Section 1365.2.5,
and may not assume a rate of return on cash reserves in excess of 2
percent above the discount rate published by the Federal Reserve Bank
of San Francisco at the time the calculation was made.
The summary of the association's reserves disclosed pursuant to
paragraph (2) shall not be admissible in evidence to show improper
financial management of an association, provided that other relevant
and competent evidence of the financial condition of the association
is not made inadmissible by this provision.
Notwithstanding a contrary provision in the governing documents, a
copy of the operating budget shall be annually distributed not less
than 30 days nor more than 90 days prior to the beginning of the
association's fiscal year.
(b) Commencing January 1, 2009, a summary of the reserve funding
plan adopted by the board of directors of the association, as
specified in paragraph (4) of subdivision (e) of Section 1365.5. The
summary shall include notice to members that the full reserve study
plan is available upon request, and the association shall provide the
full reserve plan to any member upon request.
(c) A review of the financial statement of the association shall
be prepared in accordance with generally accepted accounting
principles by a licensee of the California Board of Accountancy for
any fiscal year in which the gross income to the association exceeds
seventy-five thousand dollars ($75,000). A copy of the review of the
financial statement shall be distributed within 120 days after the
close of each fiscal year.
(d) Instead of the distribution of the pro forma operating budget
required by subdivision (a), the board of directors may elect to
distribute a summary of the pro forma operating budget to all of its
members with a written notice that the pro forma operating budget is
available at the business office of the association or at another
suitable location within the boundaries of the development, and that
copies will be provided upon request and at the expense of the
association. If any member requests that a copy of the pro forma
operating budget required by subdivision (a) be mailed to the member,
the association shall provide the copy to the member by first-class
United States mail at the expense of the association and delivered
within five days. The written notice that is distributed to each of
the association members shall be in at least 10-point boldface type
on the front page of the summary of the budget.
(e) A statement describing the association's policies and
practices in enforcing lien rights or other legal remedies for
default in payment of its assessments against its members shall be
annually delivered to the members not less than 30 days nor more than
90 days immediately preceding the beginning of the association's
fiscal year.
(f) (1) A summary of the association's property, general
liability, earthquake, flood, and fidelity insurance policies, which
shall be distributed not less than 30 days nor more than 90 days
preceding the beginning of the association's fiscal year, that
includes all of the following information about each policy:
(A) The name of the insurer.
(B) The type of insurance.
(C) The policy limits of the insurance.
(D) The amount of deductibles, if any.
(2) The association shall, as soon as reasonably practicable,
notify its members by first-class mail if any of the policies
described in paragraph (1) have lapsed, been canceled, and are not
immediately renewed, restored, or replaced, or if there is a
significant change, such as a reduction in coverage or limits or an
increase in the deductible, as to any of those policies. If the
association receives any notice of nonrenewal of a policy described
in paragraph (1), the association shall immediately notify its
members if replacement coverage will not be in effect by the date the
existing coverage will lapse.
(3) To the extent that any of the information required to be
disclosed pursuant to paragraph (1) is specified in the insurance
policy declaration page, the association may meet its obligation to
disclose that information by making copies of that page and
distributing it to all of its members.
(4) The summary distributed pursuant to paragraph (1) shall
contain, in at least 10-point boldface type, the following statement:
"This summary of the association's policies of insurance provides
only certain information, as required by subdivision (f) of Section
1365 of the Civil Code, and should not be considered a substitute for
the complete policy terms and conditions contained in the actual
policies of insurance. Any association member may, upon request and
provision of reasonable notice, review the association's insurance
policies and, upon request and payment of reasonable duplication
charges, obtain copies of those policies. Although the association
maintains the policies of insurance specified in this summary, the
association's policies of insurance may not cover your property,
including personal property or, real property improvements to or
around your dwelling, or personal injuries or other losses that occur
within or around your dwelling. Even if a loss is covered, you may
nevertheless be responsible for paying all or a portion of any
deductible that applies. Association members should consult with
their individual insurance broker or agent for appropriate additional
coverage."
(g) A statement describing the fees that may be charged to a
seller to procure, prepare, and reproduce documents pursuant to the
requirements of Section 1368. The statement shall provide the date
that the estimate was prepared and the period of time that the fees
are valid. The statement shall be updated when the association
revises the fees.
SEC. 2. 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 with a copy of the completed form
specified in Section 1368.2:
(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) A copy of the most recent 12 months of minutes approved by the
association's board of directors.
(b) Upon written request, an association or an agent of the
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), inclusive, of
subdivision (a). Upon receipt of the written request, the association
or the agent of the association shall provide a written estimate of
the fees that will be assessed for the provision of the documents.
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, or the agent of the
association may collect, a reasonable fee for this service based upon
the association's actual cost to procure, prepare, and reproduce the
requested items.
(b) (1) Upon receipt of an electronic or written request, the
association, or the agent of the association, shall, within 10 days
of the mailing or delivery of the request, provide the owner of a
separate interest, or any other recipient authorized by the owner,
with a copy of the requested items specified in paragraphs (1) to
(9), inclusive, of subdivision (a). Upon receipt of a written or
electronic request, the association or the agent of the association
shall provide a written or electronic estimate of the fees that will
be assessed for providing the requested items. The items required to
be made available pursuant to this section may be maintained in
electronic form, and shall be posted on the Internet Web site, if
any, of the association or agent of the association, and shall be
accessible to the owner or any other recipient authorized by the
owner. Requesting parties shall have the option of receiving the
items by electronic transmission if the association, or the
association's agent, maintains the items in electronic form. The
association or the association's agent may collect a reasonable fee
for the procurement, preparation, reproduction, and delivery of the
items requested pursuant to the provisions of this section.
(2) No additional fees may be charged by the association for the
electronic delivery of the items requested.
(3) Fees for any documents or items not required by this section
shall not be charged or assessed at the time fees are charged for the
items provided pursuant to this section. Fees for items provided
pursuant to this section shall be separate from any other fee, fine,
or assessment.
(4) Any payment for the provision of items pursuant to this
section shall not be processed until the required items are delivered
to the owner or any other recipient authorized by the owner.
(5) Fees for any items not required to be provided under this
section shall be paid at the close of escrow, or if there is no
escrow, at the transfer of title, unless otherwise agreed to by the
owner and any other recipient authorized by the owner.
(c) (1) Except as provided in 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 prohibition in paragraph (1) does not apply to a community
service organization or similar entity, or to a nonprofit entity
that provides services to a common interest development under a
declaration of trust, 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, or a
nonprofit entity that provides services to a common interest
development under a declaration of trust, satisfies all of the
following requirements:
(i) The organization or entity is not an organization or entity
described in subparagraph (A).
(ii) The organization or entity was established and received a
transfer fee prior to January 1, 2004.
(iii) On and after January 1, 2006, the organization or entity
offers a purchaser the following payment options for the fee or
charge it collects at 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
organization or 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 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.
(h) For purposes of this section "agent of the association" means
any person or entity performing services
providing the items for, or acting on behalf of, the
association pursuant to the requirements of this section .
SEC. 4. Section 1368.2 is added to the
Civil Code , to read:
1368.2. The form for billing disclosures required by Section 1368
shall be in substantially the following form:
Form for Billing of Disclosures Required by
Section 1368
Property Address __________________________________
Owner of Property _________________________________
Owner's Mailing Address ______________________
(If known or different
_______________________
from property address.)
Provider of the Section 1368 Items:
_________________________________________________
Print Name Position or Title Association or Agent
___________________
Date Form Completed
Check or Complete Applicable Column Below
Not
Civil Available
Item Code Included (N/A) or Not
Section Applicable
(N/App)
Articles of
Incorporation Section
or statement 1368(a)(1) _________ _____________
that not
incorporated
CC&Rs Section _________ _____________
1368(a)(1)
Bylaws Section _________ _____________
1368(a)(1)
Operating Rules Section _________ _____________
1368(a)(1)
Age Section
restrictions, 1368(a)(2) _________ _____________
if any
Pro forma
operating Sections
budget or 1365 and _________ _____________
summary, 1368(a)(3)
including
reserve study
Assessment and Sections
reserve funding 1365 and _________ _____________
disclosure 1368(a)(4)
summary
Financial Sections
statement review 1365 and _________ _____________
1368(a)(3)
Assessment Sections
enforcement 1365 and _________ _____________
policy 1368(a)(4)
Insurance Sections
summary 1365 and _________ _____________
1368(a)(3)
Regular Section _________ _____________
assessment 1368(a)(4)
Special Section _________ _____________
assessment 1368(a)(4)
Emergency Section _________ _____________
assessment 1368(a)(4)
Other unpaid Sections
obligations of 1367.1 _________ _____________
seller and
1368(a)(4)
Approved Section
changes to 1365 and _________ _____________
assessments 1368(a)(4)
, (8)
Settlement Sections
notice 1368(a)(6)
regarding , (7) and _________ _____________
common area 1375.1
defects
Sections
Preliminary 1368(a)(6) _________ _____________
list of defects , 1375,
and 1375.1
Notice(s) of Sections
violation 1363 and _________ _____________
1368(a)(5)
Required Sections
statement of 1365(g) _________ _____________
fees and 1368
Most recent 12 Section _________ _____________
mo./minutes 1368(a)(9)