BILL ANALYSIS Ó
AB 805
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Date of Hearing: April 6, 2011
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 805 (Torres) - As Introduced: February 17, 2011
SUBJECT : Common interest developments
SUMMARY : Revises and recasts the Davis Stirling Common Interest
Development (CID) Act (Act) which governs common interest
developments (CID). Specifically, this bill :
1)Groups related provisions together in a logical order.
2)Clarifies sections that are unclear or confusing.
3)Divides sections that are long into more readable, shorter
sections.
4)Adds a requirement that a homeowners association (HOA) provide
members with the text of a proposed amendment to the governing
documents before holding an election to approve the proposed
amendment.
5)Permits a successor-in-interest, to the original signator of a
recorded declaration, to add material to the declaration as
that person deems appropriate.
6)Harmonizes the procedure for amending a declaration to allow
for a person other than a member of the HOA to approve an
amendment (i.e. a community manager) and clarifies that a
declaration can only be amended through the procedure provided
by the declaration.
7)Requires in a case in which a court determines the validity of
an election to approve the amendment of a declaration the
court must find that the election complied with the provisions
of the Act and any other applicable law, in addition to the
governing documents.
8)Clarifies that an amendment to a condominium plan may be
executed by the current specified interests in the property at
the time of the amendment.
9)Replaces outdated references to the Corporations Code with
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equivalent provisions in the Act.
10)Clarifies that a non-owner occupant has the same protections
as an owner to have physical access to their separate
interest.
11)Combines all of the provisions that limit an HOA's ability to
restrict certain specified uses of a separate interest into
one section and adds cross references to other similar
protections that are outside of the Act.
12)Generalizes the protections provided to owners of
condominiums with disabilities to all types of CIDs.
13)Adds some minor exceptions to the law that requires the
approval of at least 67% of the HOA to grant an individual
member a right of exclusive use of the part of the common
area.
14)Requires all HOAs to provide an advance notice of a board
meeting, including an agenda regardless of whether the
governing documents provide for a fixed meeting place and
time.
15)Applies the rules governing board meetings to any meeting in
which there are enough board members to establish a quorum.
16)Delete the requirement to post a notice of a board meeting in
a prominent area and instead require "general delivery" as
defined, of the notice which would include mailed notice if
requested by a member.
17)Clarifies the requirements for board members to disqualify
themselves from decisions in which they may have
self-interest.
18)Allows an HOA to extend the standardized procedures for
elections to those for which it is not applied to now.
19)Clarifies that election ballots must be retained for
12-months by the HOA in case of a challenge.
20)Adds governing documents to the list of HOA records that a
member can request to inspect.
21)Organizes all annual reporting requirements of a CID in one
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section and requires the HOA to distribute the documents in
the form of three annual reports.
22)Standardizes delivery requirements for notices.
23)Provides that, where there are inconsistencies in certain
cases, the Act has supremacy over the Corporations Code.
24)Requires that an HOA include a schedule of monetary penalties
for the violation of governing documents in the policy
statement that is delivered to members annually.
25)Requires an HOA to notify and give a member an opportunity to
respond if it plans to impose a monetary charge to reimburse
the HOA for costs incurred in repairing damage to a common
area or facility cause by the member of the member's guest or
tenant.
26)Allows the court to determine whether a refusal to
participate in alternative dispute resolution (ADR) was
reasonable in any action in which fees and costs may be
awarded, not just an action to enforce the HOAs governing
documents.
27)Exempts entirely commercial and industrial CIDs from certain
provisions of the Act including elections procedures and
certain assessment setting provisions.
28)Deletes erroneous cross-references
29)Becomes operative January 1, 2014.
EXISTING LAW : The Act provides the rules and regulations within
which a HOA may operate in a CID (Civil Code Sections 1350 -
1376).
FISCAL EFFECT : None.
COMMENTS :
Background :
There are over 49,000 CIDs in the state that range in size from
three to 27,000 units. CIDs make up over 4.9 million housing
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units which represents approximately one quarter of the state's
housing stock. CIDs include condominiums, community apartment
projects, and 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 Act as well as the governing
documents of the association including bylaws, declaration, and
operating rules. CIDs are run by volunteer board of directors
(boards) who may have little or no experience managing real
property or governing a nonprofit association and must interpret
the complex laws regulating CIDs. Boards must not only
interpret the law but enforce the restrictions and rules imposed
by the governing documents and state law.
In addition to interpreting a HOAs individual governing
documents, boards and homeowners must also follow the state law
governing CIDs found in the Act. The governing law has two main
sources, the Corporations Code and the Act. If an HOA is
incorporated it is typically governed by the Nonprofit Mutual
Benefit Corporation Law. An unincorporated homeowner association
is subject to both the general law and on unincorporated
associations, and specific provisions of the Nonprofit Mutual
Benefit Corporations Code.
Although some medium and large CIDS employ community managers
who are responsible for handling the day-to-day operations of
the HOA many smaller CIDs are self-managed. According to the
2005 California Community Associations Statistics Report
prepared by Levy & Company, CPAs more than two-thirds of CIDs
are 50 units are less.
Purpose of the bill
After a four years of study and public input, the California Law
Revision Commission (Commission) has recommended that the Act be
repealed and replaced with a new statute which continues the
substance of existing law in a more user-friendly form. AB 805
would repeal the Act and replace it with a new statute that is
intended to be more logical, organized and easier for homeowners
and volunteer board members to navigate.
According to the Commission, the new statute would provide
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guidance on two fundamental aspects of CID governance that are
not clearly addressed in the existing statute: the general
supremacy of the law over a CID's governing documents and the
relative authority of different types of governing documents.
This guidance will help to avoid disputes that might arise if a
HOA's governing documents are inconsistent with the law or with
each other.
The revised version of the Act would be grouped in a logical
order and would make relevant law easier to find and provide a
logical approach to making future changes to law. Additional
benefits include: creating consistent terminology throughout,
restating excessively long and complex sections into simpler and
shorter sections, standardization some governing procedures and
finally, some substantive improvements would be made.
Minor Substantive Changes :
Although for the most part, AB 806 is technical and
nonsubstantive, it does make some minor substantive changes to
CID law. The minor substantive changes represent areas of
existing law where the Commission identified flaws that with
minor changes could make the Act more consistent and clear.
Companion bill : AB 805 is double-joined with AB 806 (Torres).
AB 806 deletes the cross-reference in existing law to the
existing code section in the Act and replaces them with the new
code sections in AB 805.
Double referred : The Assembly Committee on Rules referred AB
805 to the Committee on Housing and Community Development and
Judiciary. If AB 805 passes this committee, the bill must be
referred to the Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
Community Association Institute (CAI)
Opposition
None on file.
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Analysis Prepared by : Lisa Engel /H.&C.D. /(916) 319-2085