BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 150| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 CONTINUED SB 150 Page 2 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 CONTINUED SB 150 Page 3 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) CONTINUED SB 150 Page 4 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, CONTINUED SB 150 Page 5 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 **** END **** CONTINUED