BILL ANALYSIS                                                                                                                                                                                                    



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 805 (Torres)
          As Amended  June 11, 2012
          Majority vote
           
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          |ASSEMBLY:  |73-0 |(May 2, 2011)   |SENATE: |38-0 |(July 2, 2012) |
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           Original Committee Reference:    H. & C.D.  

           SUMMARY  :  Revises and recasts the Davis-Stirling Common Interest 
          Development (CID) Act (Act) which governs common interest 
          developments. 

           The Senate amendments  :

          1)Make technical changes.

          2)Incorporate changes to the Act made by bills passed in 2011.  
           
          AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Grouped related provisions together in a logical order.

          2)Clarified sections that are unclear or confusing.

          3)Divided sections that are long into more readable, shorter 
            sections.

          4)Added 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)Permitted a successor-in-interest, to the original signator of 
            a recorded declaration, to add material to the declaration as 
            that person deems appropriate. 

          6)Harmonized 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 clarified that a 
            declaration can only be amended through the procedure provided 
            by the declaration.









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          7)Required 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)Clarified 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)Replaced outdated references to the Corporations Code with 
            equivalent provisions in the Act. 

          10)Clarified that a non-owner occupant has the same protections 
            as an owner to have physical access to their separate 
            interest. 

          11)Combined all of the provisions that limit a HOA's ability to 
            restrict certain specified uses of a separate interest into 
            one section and added cross references to other similar 
            protections that are outside of the Act. 

          12)Generalized the protections provided to owners of 
            condominiums with disabilities to all types of CIDs.

          13)Added 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)Required 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)Applied the rules governing board meetings to any meeting in 
            which there are enough board members to establish a quorum. 

          16)Deleted the requirement to post a notice of a board meeting 
            in a prominent area and instead required "general delivery" as 
            defined, of the notice which would include mailed notice if 
            requested by a member. 

          17)Clarified the requirements for board members to disqualify 
            themselves from decisions in which they may have 








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            self-interest. 

          18)Allowed an HOA to extend the standardized procedures for 
            elections to those for which it is not applied to now. 

          19)Clarified that election ballots must be retained for 12 
            months by the HOA in case of a challenge.

          20)Added governing documents to the list of HOA records that a 
            member can request to inspect. 

          21)Organized all annual reporting requirements of a CID in one 
            section and required the HOA to distribute the documents in 
            the form of three annual reports.

          22)Standardized delivery requirements for notices. 

          23)Provided that, where there are inconsistencies in certain 
            cases, the Act has supremacy over the Corporations Code.  

          24)Required 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)Required 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 caused by the member or the member's guest or 
            tenant.   

          26)Allowed 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 HOA's governing 
            documents. 

          27)Exempted entirely commercial and industrial CIDs from certain 
            provisions of the Act including elections procedures and 
            certain assessment setting provisions. 

          28)Deleted erroneous cross-references. 

          29)Stated that the bill becomes operative January 1, 2014. 

           FISCAL EFFECT  :  None 








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           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 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 HOA's 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 a 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 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 or less.    

          Purpose of the bill:  After 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.  This bill 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 








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          to navigate. 

          According to the Commission, the new statute would provide 
          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, standardizing some governing procedures and 
          finally, making some substantive improvements. 

          Minor substantive changes:  Although for the most part, this 
          bill 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:  This bill is double-jointed with AB 806 
          (Torres).  AB 806 deletes the cross-references in existing law 
          to the existing code sections in the Act and replaces them with 
          the new code sections in AB 805.  


           Analysis Prepared by  :    Lisa Engel /H.&C.D. /(916) 319-2085 


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