BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: ab 805
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  tORRES
                                                         VERSION: 1/4/12
          Analysis by:  Mark Stivers                     FISCAL:  no
          Hearing date:  January 10, 2012



          SUBJECT:       

          Reorganization of the Davis-Stirling Common Interest Development 
          Act

          DESCRIPTION:

          This bill moves, reorganizes, and harmonizes the provisions of 
          the Davis-Stirling Common Interest Development Act.

          ANALYSIS:

          A common interest development (CID) is a form of real estate in 
          which each homeowner has an exclusive interest in a unit or lot 
          and a shared or undivided interest in common area property.  
          Condominiums, planned unit developments, stock cooperatives, 
          community apartments, and many resident-owned mobilehome parks 
          all fall under the CID umbrella.  A homeowner association board 
          elected by the members governs each CID.  The covenants, 
          conditions, and restrictions (CC&Rs) that are recorded against 
          each individual unit bind the members of the CID.  In addition, 
          associations adopt articles of incorporation, articles of 
          association, and bylaws for the governance of the CID as well as 
          operating rules that govern the behavior of members and their 
          guests.  Collectively, these documents are referred to as the 
          governing documents of the association.  

          First enacted in 1985 and amended numerous times since, the 
          Davis-Stirling Common Interest Development Act governs CIDs.  
          The act contains provisions that, among other things, regulate 
          the creation and amendment of CIDs and their governing documents 
          as well as elections, meetings, assessments, collections, fiscal 
          matters, and dispute resolution.  

           This bill  , operative January 1, 2014, moves, reorganizes, and 
          harmonizes the provisions of the Davis-Stirling Common Interest 
          Development Act.  The bill largely keeps the substance and 
          language of the Davis-Stirling Act intact with only technical 




          AB 805 (TORRES)                                        Page 2

                                                                       


          changes.  The bill, however, makes the following substantives 
          changes to the statute:

           Provides guidance on two fundamental aspects of CID governance 
            that are not clearly addressed in current law: (1) The general 
            supremacy of the law over a CID's governing documents, and (2) 
            the relative authority of different types of governing 
            documents.
           Requires that an association provide members with the text of 
            a proposed amendment of the governing documents when holding 
            an election to approve the proposed amendment.
           Allows a declarant, as opposed to just the original signator 
            of the declaration, to amend the declaration.
           Creates a single procedure for amending the declaration.
           In order for a court to amend a declaration that has not 
            received the required member approval, requires the court to 
            find that the election was conducted in accordance with the 
            election provisions of the Davis-Stirling Act.
           Clarifies that the persons who currently hold specified 
            interests in the property, as opposed to those who held such 
            positions at the creation of the CID, may execute an amendment 
            or revocation of the condominium plan.
           Clarifies that an association may not prohibit access to an 
            occupant, in addition to the owner, of a separate interest to 
            his or her interest.
           Applies existing law governing the grant of common area to an 
            individual member as exclusive use common area to situations 
            in which the common area is owned by the tenants in common, 
            not the association.  
           Additionally exempts from the requirement that 67% of members 
            approve a grant of common area to an individual member as 
            exclusive use common area the following:

                 A grant that is necessary to accommodate a disability.
                 A grant that is required by law.
                 The assignment of a parking space, storage unit, or 
               other amenity, if the declaration expressly provides for 
               its assignment.

           Applies the CID open meeting law to any meeting of a quorum of 
            the board, as opposed to a meeting of a majority of members of 
            the board.
           Allows greater flexibility in how a CID posts meeting notices.
           Prohibits a CID board member or committee member from voting 
            on specified matters directly involving himself or herself. 
           Requires an inspector of elections to maintain election 




          AB 805 (TORRES)                                        Page 3

                                                                       


            ballots for 12 months, as opposed to nine months and then 
            turning them over to the association for an additional three 
            months.
           Reorganizes the budget and other financial information that a 
            CID must distribute to members into three annual reports, 
            based on subject matter.
           Standardizes notice delivery procedures.
           Requires a CID that has recorded an assessment lien in error, 
            under any circumstances as opposed to only when discovered 
            through alternative dispute resolution, to release the lien 
            and reverse all costs, fees, and interest associated with the 
            error.
           Requires a CID, when attempting to impose a monetary charge 
            for damage to common area and facilities caused by a member or 
            the member's guest or tenant, to provide the member with 
            notice of the alleged violation and an opportunity to be heard 
            by the board.
           Broadens a court's ability to weigh a party's refusal to 
            participate in alternative dispute resolution when determining 
            awards of attorney's fees and costs to all actions in which 
            fees and costs may be awarded, as opposed just to actions to 
            enforce the governing documents.
           Exempts non-residential CIDs from the board election 
            procedures of the Davis-Stirling Act and applies the 
            Corporations Code procedures.
           Subjects non-residential CIDs to emergency assessment setting 
            provisions.
           Establishes standards for a member to deliver a document to 
            the CID and for the CID to deliver documents and notices to 
            members.

          COMMENTS:

           1.Purpose of the bill  .  The author notes that volunteers who 
            govern CID associations may have little experience managing 
            real property or running a nonprofit entity.  Most 
            associations are small and do not have the resources for 
            professional management or counsel.  It is therefore important 
            that the law governing CIDs be as understandable and easy to 
            use as possible. Unfortunately, the existing Davis-Stirling 
            Act is not well organized or easy to understand.  These 
            shortcomings can make it difficult for boardmembers and owners 
            to understand their rights and obligations under the law.  The 
            author believes that this bill will make the law more 
            user-friendly and, therefore, more effective.





          AB 805 (TORRES)                                        Page 4

                                                                       


           2.Reflects a Law Revision Commission recommendation  .  The 
            California Law Revision Commission, a state entity charged 
            with examining California law and recommending needed reforms, 
            is the sponsor of this bill.  This particular recommendation 
            is the culmination of at least six years of review, public 
            hearings, and exhaustive stakeholder consultation.  The 
            commission recommends that the Legislature repeal the existing 
            Davis-Stirling Act and replace it with a new statute that 
            continues the substance of existing law in a more logical and 
            user-friendly form.  The commission believes that the new 
            statute will provide the following advantages for CID members 
            who must read, understand, and apply the law:

                 Related provisions are grouped together in a logical 
               order.  This makes relevant law easier to find and use.  It 
               also provides a clear organization to guide the future 
               development of the law.
                 Sections that are unclear or confusing are revised for 
               clarity, without any change to their substantive effect.
                 Sections that are excessively long are divided into 
               shorter sections.
                 To the extent practical, terminology is standardized.
                 Various noncontroversial substantive improvements are 
               made.

           1.Legislative intent  .  The bill expressly states that courts 
            should consider the bill a restatement of the Davis-Stirling 
            Act and not a new enactment.  This provision will help ensure 
            continuity in legal decisions interpreting and applying the 
            act and, as a result, enforcement of the law.  In addition, 
            courts consider the extensive Law Revision Commission 
            materials leading up to this bill as evidence of legislative 
            intent and are obligated to give great weight to these 
            materials in construing statutes, which should further help 
            practitioners and the courts in implementing the revised law.  
           
           2.One year deferral  .  The bill defers its own operative date by 
            one year to January 1, 2014 in order to give affected persons 
            and organizations time to adjust to the new organization of 
            the law.

           3.Double referral  .  The Rules Committee has referred this bill 
            to both this committee and the Judiciary Committee.  
          
          Assembly Votes:
               Floor:    73-0




          AB 805 (TORRES)                                        Page 5

                                                                       


               Judic:      9-0
               H&CD:   7-0




          RELATED LEGISLATION:

          AB 806 (Torres) is a companion bill that makes cross reference 
          changes to other statutes to reflect the movement and 
          reorganization of the Davis-Stirling Act proposed in AB 805.  
          The committee will also hear AB 806 at the January 10 hearing.
          
          POSITIONS:  (Communicated to the committee before noon on 
          Wednesday,                                             January 
          4, 2012)

               SUPPORT:  California Law Revision Commission (sponsor)
                         Community Association Institute

          
               OPPOSED:  None received.