BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 771
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          ASSEMBLY THIRD READING
          AB 771 (Butler)
          As Amended  May 10, 2011
          Majority vote 

           HOUSING             7-0         JUDICIARY           9-0         
           
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          |Ayes:|Torres, Atkins, Bradford, |Ayes:|Feuer, Wagner, Atkins,    |
          |     |Cedillo, Hueso, Jeffries, |     |Dickinson, Huber,         |
          |     |Miller                    |     |Huffman, Jones, Monning,  |
          |     |                          |     |Wieckowski                |
           ----------------------------------------------------------------- 
           
          SUMMARY  :  Allows a homeowners association (HOA) to charge a 
          reasonable fee for the procurement, preparation, reproduction, 
          or delivery of the documents required to be provided to a 
          prospective buyer before the transfer of title or execution of a 
          sales contract and creates a disclosure form that a seller must 
          provide to a buyer including the cost of each disclosure 
          document.  Specifically,  this bill  :  

          1)Requires a seller to provide a copy of the last 12 months of 
            approved HOA board minutes to a prospective buyer. 

          2)Adds a form listing documents a seller of a separate interest 
            must provide to a prospective buyer as soon as practicable 
            before transfer of title of the separate interest or execution 
            of the sales contract. 

          3)Provides that the disclosure documents that are required to be 
            provided to the prospective buyer before the transfer of title 
            or execution of the sales contract may be made available 
            electronically or posted on the HOA Web site and must be 
            accessible to a seller or any other recipient authorized by 
            the owner.  

          4)Prohibits an HOA from charging additional fees for the 
            electronic delivery of the documents required to be provided 
            to a prospective buyer before the transfer of title or 
            execution of a sales contract. 

          5)Provides that documents required to be provided under this 
            section, must be distinguished from other fees, fines or 








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            assessments billed as part of the sales transaction. 

          6)Provides that delivery of the documents required by this 
            section shall not be conditioned upon or required to be 
            combined with any other documents, items or services. 

          7)Provides that an HOA may contract with any person or entity to 
            procure, prepare reproduce, and deliver the documents required 
            to be provided to a prospective buyer before the transfer of 
            title or execution of a sales contract. 

           FISCAL EFFECT  :  None
           
          COMMENTS  :  There are over 50,000 Community Interest Developments 
          (CIDs) in the state that range in size from three to 27,000 
          units. CIDs make up over 4.9 million housing units which 
          represents approximately one quarter of the state's housing 
          stock.  CIDs include condominiums, community apartment projects, 
          housing cooperatives, and planned unit developments.  They are 
          characterized by a separate ownership of dwelling space coupled 
          with an undivided interest in a common property, restricted by 
          covenants and conditions that limit the use of common area, and 
          the separate ownership interests and the management of common 
          property and enforcement of restrictions by a HOA. CIDs are 
          governed by the Davis-Stirling Act as well as the governing 
          documents of the association including bylaws, declaration, and 
          operating rules. 

          An owner in a CID is required to provide a prospective purchaser 
          with specified documents listed in Civil Code Section 1368 as 
          soon as practicable before the transfer of title or the 
          execution of a real property sales contract to a prospective 
          buyer.  Sellers, who do not have current documents to provide to 
          a prospective buyer, can request the documents from the HOA 
          which has 10 days to provide copies to the seller.  In some 
          CIDs, the HOA contracts with a management company or other agent 
          to collect the documents, reproduce them and provide them to the 
          seller.  Existing law provides the HOA may only charge a 
          reasonable fee based on the actual cost of to procure, prepare 
          and reproduce the items for the owner. 

          In the recent case of Berryman v. Merit Property Management 
          (2007) 152 Cal Capp 4th 1544,  the court determined that an 
          agent of the HOA was not subject to the provision requiring that 








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          the HOA charge only the actual cost to procure, prepare and 
          reproduce the documents for the owner.     
          The court determined that although an HOA is prohibited by 
          charging above the actual costs and making a profit, a managing 
          agent is not.  

          The sponsor of this bill, California Association of Realtors, is 
          concerned that a prospective buyer may be charged for documents, 
          fees or assessments that are not required by Civil Code Section 
          1368.  The purpose of this bill is to provide greater 
          transparency for the seller who is providing the documents and 
          the prospective buyer about what fees they will be charged for 
          the disclosure documents required by Civil Code Section 1368 by 
          adding a disclosure form that both the seller and the 
          prospective buyer will receive. 

          This bill allows an HOA to continue to contract with a managing 
          agent to procure, prepare, reproduce and delivery the documents 
          required by the seller while attempting to provide greater 
          transparency to the seller and prospective buyer.  By adding a 
          disclosure form, which details the documents and the associated 
          fees, and providing it to the prospective buyer at the time of 
          sale, the sponsor believes there will be less opportunity for a 
          third party management agent to pass on costs not directly 
          related to the procurement, preparation, production and delivery 
          of disclosure documents. 

          Another issue that the sponsor is attempting to address in this 
          bill, is to separate out the fees charged for delivering the 
          documents required by Civil Code Section 1368 from other fees or 
          assessments that a purchaser may pay during the sales 
          transaction.  This bill attempts to resolve this issue by 
          specifying that the form listing the disclosure documents must 
          be provided to a buyer separate from any other fees or 
          assessments.


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



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