BILL ANALYSIS Ó
AB 806
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Date of Hearing: April 6, 2011
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 806 (Torres) - As Introduced: February 17, 2011
SUBJECT : Common interest developments.
SUMMARY : Makes conforming changes to AB 805 (Torres) to deletes
the cross-reference in existing law to the existing code section
in the Davis Stirling Common Interest Development Act (the Act)
and replaces them with the new code sections in AB 805.
Specifically, this bill :
1)Makes conforming changes to AB 805 (Torres) to 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.
2)Contingent upon enactment of AB 805 (Torres).
3)Becomes operative January 1, 2014.
EXISTING LAW : The Act provides the rules and regulations within
which a homeowners association (HOA) may operate in a CID (Civil
Code Sections 1350 - 1376).
FISCAL EFFECT : None.
COMMENTS : AB 805 is the companion bill to AB 806 (Torres). AB
805 revises and recasts the Act which governs common interest
developments to make it more organized and user-friendly for CID
homeowners. AB 806 deletes all of the existing cross-references
to the Act in other code sections and replaces them with the new
code sections created by AB 805.
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
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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. Under the current scheme, a CID
homeowner must read both sources of law together and resolve any
inconsistencies to determine what law applies in a particular
situation.
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 Davis Stirling 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.
AB 806 is the clean-up bill for AB 805 and is contingent upon
the enactment of AB 805 (Torres).
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.
Double referred : The Assembly Committee on Rules referred AB
806 to the Committee on Housing and Community Development and
Judiciary. If AB 806 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.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085