BILL ANALYSIS                                                                                                                                                                                                    



                                                                  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          9)Replaces outdated references to the Corporations Code with 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