BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 150|
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                              UNFINISHED BUSINESS


          Bill No:  SB 150
          Author:   Correa (D), et al.
          Amended:  6/9/11
          Vote:     21

           
           SENATE TRANSPORTATION & HOUSING COMMITTEE :  8-0, 5/3/11
          AYES:  DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal, 
            Rubio, Simitian
          NO VOTE RECORDED:  Pavley

           SENATE JUDICIARY COMMITTEE  :  5-0, 5/10/11
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno

           SENATE FLOOR  :  39-0, 5/31/11
          AYES:  Alquist, Anderson, Blakeslee, Calderon, Cannella, 
            Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson, 
            Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff, 
            Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete 
            McLeod, Padilla, Pavley, Price, Rubio, Runner, Simitian, 
            Steinberg, Strickland, Vargas, Walters, Wolk, Wright, 
            Wyland, Yee
          NO VOTE RECORDED:  Berryhill

           ASSEMBLY FLOOR  :  72-0, 6/23/11 - See last page for vote


           SUBJECT  :    Common interest developments:  rental units

           SOURCE  :     California Association of Realtors


           DIGEST  :    This bill exempts an owner of a unit in a common 
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          interest development from any prohibition on renting or 
          leasing the unit, except when the prohibition was effective 
          on or after January 1, 2012. 

           Assembly Amendments  add double-jointing language with AB 
          771 (Butler).

           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 umbrella of common interest developments.  
          CIDs are governed by a homeowners' association with an 
          elected board of directors.  The Davis-Stirling Common 
          Interest Development Act provides the legal framework under 
          which common interest developments are established and 
          operate.  In addition to the requirements of the act, each 
          CID is governed according to the recorded declarations, 
          bylaws, and operating rules of the association.  These 
          documents are referred to collectively as the governing 
          documents of the association.

          Some CIDs have restrictions on renting out units.  These 
          restrictions can take various forms, including limiting the 
          total number of rentals in the development to a set 
          percentage, requiring a minimum amount of time for leases, 
          prohibiting rental until a unit has been owner-occupied for 
          at least a year, and prohibiting renting outright.  

          This bill exempts an owner of a unit in a CID from any 
          prohibition on renting or leasing the unit unless the 
          prohibition was effective on or after January 1, 2012.  
          Specifically, this bill:

          1. Provides that an owner of a separate interest in a CID, 
             except a CID that is limited to industrial or commercial 
             uses, is not subject to a provision in a governing 
             document that prohibits the rental or leasing of any of 
             the separate interests unless the prohibition was 
             effective prior to the date the owner acquired title.

          2. Allows an owner to consent to be subject to a 

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             prohibition on renting or leasing that took effect after 
             the purchase of his/her separate interest.

          3. Requires the owner, prior to exercising the exemption 
             allowed by this bill, to provide the association with 
             verification of the date of acquisition and the name and 
             contact information of the prospective tenant.

          4. Requires the seller of a unit in a CID that prohibits 
             the rental or leasing of the unit to provide a 
             prospective purchaser with a statement describing the 
             restriction and its applicability.

          5. Contains double-jointing language with AB 771 (Butler).
          
           Prior legislation  .  The Senate has considered similar bills 
          in recent years.  In 2008, the Senate approved AB 2259 
          (Mullin), which was nearly identical to this bill.  
          Governor Schwarzenegger vetoed AB 2259 stating, "Property 
          owners and residents that purchase and live in a CID 
          governed by an HOA have agreed to live under a common set 
          of rules and guidelines governed by a democratic process.  
          It is best, as current law allows, for the owner-members of 
          the HOA to determine what is best for their communities."

          In 2010, the Senate approved a much narrower bill, AB 1927 
          (Knight), which would have required the membership of a CID 
          to vote on any new restrictions on the rental or lease of a 
          separate unit, as opposed to current law which, depending 
          on a CID's own by-laws, allows a CID board to impose such a 
          restriction without a vote of the general membership.  
          Governor Schwarzenegger vetoed AB 1927 stating, "There is 
          insufficient evidence to indicate that rental restrictions 
          are currently a growing or widespread problem to justify 
          such a wide-ranging rule change.  Furthermore, current 
          provisions in law provide for an amendment process for 
          ÝCIDs] to make rule changes."  
          
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

           SUPPORT  :   (Verified  6/24/11)

          California Association of Realtors (source)

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          Center for California Homeowner Association Law

           OPPOSITION  :    (Verified  6/24/11)

          Community Associations Institute

           ARGUMENTS IN SUPPORT  :    According to the bill's sponsor, 
          the California Association of Realtors, current law does 
          not protect the right of a CID unit owner to rent or lease 
          his/her unit when such a right existed at the time 
          ownership commenced.  Over the last few years, an 
          increasing number of CIDs have imposed rental restrictions. 
           Many people need to rent out their units because of job 
          relocation or a personal situation.  Others made a 
          significant investment based on the assumption of rental 
          income, only to have the rules change after the fact.  The 
          ability to rent a unit has become even more important 
          because of the deteriorated housing market, which makes it 
          difficult to sell.  The right to rent or lease real 
          property is a valuable property right that should be 
          protected during one's term of ownership.  This bill is 
          intended to ensure that if an owner of a CID unit has the 
          right to rent that unit at the time he/she purchases it, 
          that expectation is preserved as long as he or she owns the 
          unit, irrespective of any subsequent revision of governance 
          documents effecting the right to rent.

           ARGUMENTS IN OPPOSITION  :    The Community Associations 
          Institute (CAI) argues that CID rules and regulations, 
          including renter restrictions, need to be fluid and change 
          with conditions imposed by the mortgage market or personal 
          needs.  In addition, CAI believes that rental rules should 
          be uniform for all owners, not differ based on when a unit 
          was purchased.  CAI states, "Renter restrictions are a 
          property right that periodically should be uniformly 
          changed based on market and hardship conditions."  
           

           ASSEMBLY FLOOR  :  72-0, 6/23/11
          AYES:  Achadjian, Allen, Ammiano, Atkins, Bill Berryhill, 
            Block, Blumenfield, Bonilla, Bradford, Brownley, 
            Buchanan, Butler, Charles Calderon, Campos, Carter, 
            Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, 

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            Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, 
            Hagman, Halderman, Harkey, Hayashi, Hill, Huber, Hueso, 
            Huffman, Jeffries, Jones, Knight, Logue, Ma, Mendoza, 
            Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, 
            Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, 
            Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, 
            Wagner, Wieckowski, Williams, Yamada, John A. Pérez
          NO VOTE RECORDED:  Alejo, Beall, Gorell, Hall, Roger 
            Hernández, Lara, Bonnie Lowenthal, Mansoor


          JJA:mw  6/24/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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