BILL ANALYSIS Ó
AB 771
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 771 (Butler)
As Amended July 12, 2011
Majority vote
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|ASSEMBLY: |76-0 |(May 26, 2011) |SENATE: |37-0 |(July 14, |
| | | | | |2011) |
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Original Committee Reference: H. & C.D.
SUMMARY : Creates a disclosure form that a seller must provide
to a buyer including the cost and allows a homeowners'
association (HOA) to contract with an agent to procure, prepare,
reproduce and deliver disclosure documents to a seller of a
common interest development (CID).
The Senate amendments make the following changes to the Assembly
version of the bill:
1)Require an HOA within 10 days of a request, to provide a copy
of the last 12 months of approved HOA board minutes, excluding
the executive session meeting, to a seller.
2)Delete the column in the disclosure form that delineates the
cost of each disclosure document that is required to be
provide to a seller and rather provides for the cumulative
cost of all of the documents.
3)Provide that delivery of the disclosure documents may only be
withheld for lack of payment of the reasonable fee for an
HOA's actual costs to procure, prepare, reproduce and deliver
the documents.
4)Include chaptering amendments to avoid conflicts with SB 150
(Correa), Chapter 62, Statutes of 2011.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required a seller to provide a copy of the last 12 months of
approved HOA board minutes to a prospective buyer.
2)Added a form listing documents a seller of a separate interest
must provide to a prospective buyer as soon as practicable
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before transfer of title of the separate interest or execution
of the sales contract.
3)Provided 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)Prohibited 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)Provided that documents required to be provided under this
section, must be distinguished from other fees, fines or
assessments billed as part of the sales transaction.
6)Provided 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)Provided 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.
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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.App.4th 1544, the court determined that an agent
of the HOA was not subject to the provision requiring that 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 deliver 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 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
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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
FN: 0001709