BILL ANALYSIS                                                                                                                                                                                                    ”






                             SENATE JUDICIARY COMMITTEE
                             Senator Noreen Evans, Chair
                              2011-2012 Regular Session


          AB 805 (Torres)
          As Amended June 11, 2012
          Hearing Date: June 19, 2012
          Fiscal: No
          Urgency: No
          BCP:rm
                    

                                        SUBJECT
                                           
                            Common Interest Developments

                                      DESCRIPTION  

          This bill would revise and recast the Davis-Stirling Common 
          Interest Development Act, and make minor substantive changes 
          relating to: (1) governing documents; (2) property use, 
          ownership, and transfer; (3) board of directors; (4) member 
          elections; (5) records and notices; (6) assessments; and (7) 
          enforcement and dispute resolution.  

                                      BACKGROUND  

          In California, common interest developments (CIDs) are governed 
          by the Davis-Stirling Common Interest Development Act 
          (Davis-Stirling Act).  Owners of separate property in CIDs have 
          an undivided interest in the common property of the development 
          and are subject to the CIDs covenants, conditions, and 
          restrictions.  CIDs are also governed by a homeowners 
          association, which is run by volunteer directors that may or may 
          not have prior experience managing an association.  The Court of 
          Appeal, Fourth Appellate District, previously observed that:

            ›t]he homeowners associations function almost "as a second 
            municipal government, regulating many aspects of ›the 
            homeowners'] daily lives." "›U]pon analysis of the 
            association's functions, one clearly sees the association as 
            a quasi-government entity paralleling in almost every case 
            the powers, duties, and responsibilities of a municipal 
            government.  As a 'mini-government,' the association 
            provides to its members, in almost every case, utility 
                                                                (more)



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            services, road maintenance, street and common area lighting, 
            and refuse removal. In many cases, it also provides security 
            services and various forms of communication within the 
            community. There is, moreover, a clear analogy to the 
            municipal police and public safety functions. . . ."  In 
            short, homeowners associations, via their enforcement of the 
            CC&R's, provide many beneficial and desirable services that 
            permit a common interest development to flourish. Villa 
            Milano Homeowners Ass'n v. Il Davorge (2000) 84 Cal.App.4th 
            819, 836 (citations omitted).

          In response to concerns that the Davis-Stirling Act is not well 
          organized or easy to use, the California Law Revision Commission 
          (CLRC) recommended that the existing Davis-Stirling Act be 
          repealed and replaced with a revised version that would continue 
          the substance of existing law in a more logical and 
          user-friendly form.  CLRC's original recommendation for 
          recodification was introduced in 2008, but was held in the 
          Senate Transportation and Housing Committee.  The CLRC revisited 
          the issue and formulated a subsequent recommendation, which was 
          introduced in this bill and AB 806 (Torres, 2012).  
          Specifically, this bill would revise and recast the 
          Davis-Stirling Act and make noncontroversial substantive 
          improvements to its text.

                                CHANGES TO EXISTING LAW
           
           Existing law  , the Davis-Stirling Common Interest Development 
          Act, establishes the rules and regulations governing the 
          operation of a common interest development (CID) and the 
          respective rights and duties of a homeowners association and its 
          members.  (Civ. Code Sec. 1350 et seq.)

           This bill  , on and after January 1, 2014, would comprehensively 
          reorganize and recodify the Davis-Stirling Common Interest 
          Development Act. That reorganization would group related 
          provisions together, clarify certain sections without changing 
          substantive effect, divide longer sections into shorter 
          sections, and standardize terminology.

           This bill  would also make substantive changes relating to: (1) 
          governing documents; (2) property use, ownership, and transfer; 
          (3) board of directors; (4) member elections; (5) records and 
          notices; (6) assessments; and (7) enforcement and dispute 
          resolution.  (See Comment 3 for brief summary.)

                                                                      



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                                        COMMENT
           
          1.   Stated need for the bill  

          According to the author:

            There are a number of problems with the organization and 
            drafting of the existing Davis-Stirling Common Interest 
            Development Act ›(Davis-Stirling Act)]: (1) Some provisions 
            on similar topics are not in close proximity to each other, 
            making it difficult to find all of the law that governs a 
            particular topic. (2) Some sections are overly long and 
            complex. (3) Some sections are difficult to understand, 
            because of their phrasing. (4)  Inconsistencies in the 
            terminology used in the existing statute may lead to 
            misunderstandings.
           
          The author further notes that this bill would group related 
          provisions together, revise sections for clarity, divide longer 
          sections into short sections, standardize terminology, and make 
          various noncontroversial substantive improvements.

          2.   History of proposed revision  

          This bill seeks to revise and recast the Davis-Stirling Act 
          while making noncontroversial substantive improvements where 
          appropriate.  Staff notes that this bill has been the subject of 
          extensive public vetting since the California Law Revision 
          Commission's (CLRC) pre-print recommendation was issued in 
          December of 2007, and has no known opposition.  The original 
          pre-print recommendation was introduced in the form of AB 1921 
          (Saldana, 2008) on February 8, 2008, but was held in the Senate 
          Transportation & Housing Committee.  The author notes:

            ›AB 1921 was held] because policy changes were deemed ›too] 
            substantial by some opponents.  The CLRC took this message 
            back to the Commission and revised the approach to reduce 
            the number of policy changes made in the recodification.  AB 
            805 and AB 806 are the result of that retooling.

          The CLRC issued their final recommendation for the "Statutory 
          Clarification and Simplification of CID Law" in February of 
          2011, and, this bill was introduced on February 17, 2011.  
          Thus, this bill reflects the culmination of over six years of 
          review by the CLRC, public hearings, and extensive discussions 
          with stakeholders.  
                                                                      



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          3.   Brief summary of proposed changes  

          Considering the length of the proposed revision, the following 
          brief summaries provide an overview of how the CLRC addressed 
          the issues found during the review of the Davis-Stirling Act. 
          With respect to general issues found throughout the 
          Davis-Stirling Act, the CLRC's recommendation notes that the 
          following organizational and drafting improvements were made:
           provisions are grouped by subject matter, in a "coherent and 
            logical order;"
           longer sections were divided into shorter, simpler sections;
           provisions were revised to clarify meaning without changing 
            substantive effect; and
           terminology was standardized, to the extent practical.

          The CLRC notes that the proposed revision would make a number 
          of minor substantive improvements, but that "›b]ecause of the 
          magnitude and mostly technical character of the proposed law, 
          the ›CLRC] adopted a conservative approach in deciding which 
          substantive reforms would be included.  If a possible 
          substantive change was found to be significantly 
          controversial, it was not included. Substantive changes that 
          were not included in the proposed law were noted by the ›CLRC] 
          for possible future study." Accordingly, the substantive 
          changes made by this bill include the following:
                 providing guidance on the supremacy of the law over a 
               CID's governing documents, and the relative authority of 
               different types of governing documents;
                 requiring an association to provide members with the 
               text of a proposed amendment to a governing document when 
               holding an election to approve that amendment;
                 permitting a successor-in-interest to the "original 
               signator" of the CID's recorded declaration to add 
               material to the declaration;
                 creating a general procedure for amending the 
               declaration;
                 in order for a court to approve an amendment of a 
               declaration under specified circumstances, require the 
               court to additionally find that the election was 
               conducted in accordance with the election provisions of 
               the Davis-Stirling Act;
                 clarifying 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 
                                                                      



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               plan;
                 clarifying that an association may not prohibit 
               physical access to an occupant of a separate interest 
               occupied by that person;
                 applying the existing provision that guarantees the 
               right of an owner in a condominium project to make 
               changes to his or her unit to any type of CID;
                 removing exception that allows an association to not 
               give advance notice of a board meeting if the time and 
               place is fixed in the government documents;
                 modifying the definition of "board meeting" to require 
               the presence of a number of directors sufficient to 
               establish a quorum;
                 providing greater flexibility in posting board meeting 
               notices;
                 prohibiting a self-interested director from voting on 
               specified types of matters;
                 requiring the election inspector to retain custody of 
               ballots for 12 months;
                 clarifying that governing documents are association 
               records, thereby, allowing members to inspect those 
               documents;
                 reorganizing the budget and other financial 
               information that a CID must distribute to members into 
               three annual reports, based on subject matter;
                 clarifying that the rule concerning application of 
               payments for assessments applies regardless of whether or 
               when the member received a notice of delinquency;
                 requiring an association to release a lien, and 
               reverse all costs, fees, and interest associated with the 
               error, whenever the association has recorded an easement 
               lien in error;
                 requiring a schedule of monetary penalties to be 
               included in the policy statement that is delivered to 
               members annually;
                 requiring 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; and
                 broadening a court's ability to weigh a party's 
               refusal to participate in alternative dispute resolution 
               when determining awards of fees and costs.

          4.   Logistics  

                                                                      



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          Staff notes that the revision of an Davis-Stirling Act that 
          applies to over 49,000 CIDs in California poses some logistical 
          hurdles to ensure a smooth transition to the new, simplified, 
          and arguably improved text.  Regarding those challenges, the 
          CLRC's recommendation observes:  

            Because the proposed law would comprehensively reorganize 
            the Davis-Stirling Common Interest Development Act, all of 
            the existing code section numbers would be changed. Each 
            provision continued in the proposed law would have a new 
            number. This will impose some transitional costs on those 
            who are already familiar with the existing numbering scheme. 
            It will also require that court decisions and other 
            documents referencing the former section numbers be 
            correlated to the new numbers. These transitional costs will 
            fall most heavily on CID professionals, such as property 
            managers and attorneys, who have expertise with the current 
            statute›s]. Most homeowners are not experts in the 
            Davis-Stirling Common Interest Development Act and so will 
            not be directly affected by these transitional costs.

          In order to facilitate the transition to the new Davis-Stirling 
          Act, the CLRC's recommendation includes several features to 
          "ease the transition to the reorganized statute."  Those 
          features include a one-year deferred operation date to provide 
          affected parties with time for adjustment to the new law, and 
          include a provision to ensure that substantive changes apply 
          prospectively only so as not to invalidate prior acts.  
          Furthermore, to provide clarity as to the intent of each 
          section, CLRC's final recommendation includes a "Comment" for 
          every section of this bill, and includes a "disposition table" 
          that shows every provision of the Davis-Stirling Act and the new 
          provision that would continue it.

          Staff also notes that since this bill would sunset the existing 
          Davis-Stirling Act on January, 1, 2014, the author and sponsor 
          should continue to work with all pending bills that propose 
          modifications to the current Davis-Stirling Act to avoid 
          chaptering issues. 


           Support  :  Executive Council of Homeowners 

           Opposition  :  None Known

                                        HISTORY
                                                                      



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           Source  :  California Law Revision Commission

           Related Pending Legislation  : AB 806 (Torres) See Background.

           Prior Legislation  : AB 1921 (Saldana) See Comment 2.

           Prior Vote  :

          Assembly Housing & Community Development Committee (Ayes 7, Noes 
          0)
          Assembly Judiciary Committee (Ayes 9, Noes 0)
          Assembly Floor (Ayes 73, Noes 0)
          Senate Transportation & Housing Committee (Ayes 9, Noes 0)

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