Amended in Senate June 2, 2014

Amended in Assembly September 12, 2013

Amended in Assembly March 18, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 569

Introduced by Assembly Member Chau

February 20, 2013

An act to amend Sections 11003.4 and 11013.1 of, and to add Section 11013.6 to, the Business and Professions Code, and to amend Section 5100 of the Civil Code, relating to land use.

LEGISLATIVE COUNSEL’S DIGEST

AB 569, as amended, Chau. Real property: divided lands.

(1) Existing law exempts a limited-equity housing cooperative or a workforce housing cooperative trust from provisions of existing law governing subdivided land transactions that are applicable to stock cooperatives if the limited-equity housing cooperative or workforce housing cooperative trust complies with specified conditions.

This bill would revise the conditions for the exemption to, among other things, require that each party that executes a regulatory agreement with the cooperative satisfy itself that the rights of the cooperative members are provided adequate protection, as specified. By expanding the applicability of a crime, this bill would impose a state-mandated local program.

(2) Existing law prohibits the sale or lease of lots or parcels within a subdivision that is subject to a blanket encumbrance unless the encumbrance includes a specified release clause or certain conditions are met.

This bill would authorize the sale or lease of an individual interest in a defined stock cooperative or limited housing cooperative that is subject to a blanket encumbrance if specified conditions are met.

(3) The Davis-Stirling Common Interest Development Act establishes procedures for elections.

This bill would exempt a stock cooperative with bylaws that provide that all members and shareholders automatically become directors of the homeowners’ association from the procedures applicable to the election of directors of the homeowners’ association.

(4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

begin delete

SECTION 1.  

Section 11003.4 of the Business and Professions
Code is amended to read:

11003.4.  

(a) A “limited-equity housing cooperative” or a
“workforce housing cooperative trust” is a corporation that meets
the criteria of Section 11003.2 and that also meets the criteria of
Sections 817 and 817.1 of the Civil Code, as applicable. Except
as provided in subdivision (b), a limited-equity housing or
workforce housing cooperative trust shall be subject to all the
requirements of this chapter pertaining to stock cooperatives.

(b) A limited-equity housing cooperative or a workforce housing
cooperative trust shall be exempt from the requirements of this
chapter if the limited-equity housing cooperative or workforce
housing cooperative trust complies with all the following
conditions:

(1) The United States Department of Housing and Urban
Development, the United States Department of Agriculture, the
National Consumers Cooperative Bank, the California Housing
Finance Agency, the Public Employees’ Retirement System
(PERS), the State Teachers’ Retirement System (STRS), the
Department of Housing and Community Development, the Federal
Home Loan Bank System or any of its member institutions, a state
or federally chartered credit union, a state or federally certified
community development financial institution, or the city, county,
school district, or redevelopment agency in which the cooperative
is located, alone or in any combination with each other, directly
finances or subsidizes at least 50 percent of the total construction
or development cost or one hundred thousand dollars ($100,000),
whichever is less; or the real property to be occupied by the
cooperative was sold or leased by the Transportation Agency, other
state agency, a city, a county, or a school district for the
development of the cooperative and has a regulatory agreement
approved by the Department of Housing and Community
Development for the term of the permanent financing,
notwithstanding the source of the permanent subsidy or financing.

(2) No more than 20 percent of the total development cost of a
limited-equity mobilehome park, and no more than 10 percent of
the total development cost of other limited-equity housing
cooperatives, is provided by purchasers of membership shares.

(3) A regulatory agreement that covers the cooperative for a
term of at least as long as the duration of the permanent financing
or subsidy, notwithstanding the source of the permanent subsidy
or financing, has been duly executed between the recipient of the
financing and either (A) one of the federal or state agencies
specified in paragraph (1) or (B) a local public agency that is
providing financing for the project under a regulatory agreement
meeting standards of the Department of Housing and Community
Development. The regulatory agreement shall make provision for
at least all of the following:

(A) Assurances for completion of the common areas and
facilities to be owned or leased by the limited-equity housing
cooperative, unless a construction agreement between the same
parties contains written assurances for completion.

(B) Governing instruments for the organization and operation
of the housing cooperative by the members.

(C) The ongoing fiscal management of the project by the
cooperative, including an adequate budget, reserves, and provisions
for maintenance and management.

(D) Distribution of a membership information report to any
prospective purchaser of a membership share, prior to purchase
of that share. The membership information report shall contain
full disclosure of the financial obligations and responsibilities of
cooperative membership, the resale of shares, the financing of the
cooperative including any arrangements made with any partners,
membership share accounts, occupancy restrictions, management
arrangements, and any other information pertinent to the benefits,
risks, and obligations of cooperative ownership.

(4)  Each party that executes the regulatory agreement shall
satisfy itself that the bylaws, articles of incorporation, occupancy
agreement, subscription agreement, any lease of the regulated
premises, any arrangement with partners, and arrangement for
membership share accounts provide adequate protection of the
rights of cooperative members.

(5)  Each provider of financing or subsidies shall receive from
the attorney for the recipient of the financing or subsidy a legal
opinion that the cooperative meets the requirements of Section
817 of the Civil Code and the exemption provided by this section.

(c) Any limited-equity cooperative, or workforce housing
cooperative trust that meets the requirements for exemption
pursuant to subdivision (b) may elect to be subject to all provisions
of this chapter.

(d) The developer of the cooperative shall notify the Bureau of
Real Estate, on a form provided by the bureau, that an exemption
is claimed under this section. The Bureau of Real Estate shall retain
this form for at least four years for statistical purposes.

end delete

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 11003.4 of the end insert begin insert Business and Professions
Code end insert begin insert is amended to read: end insert

11003.4.  

(a) A “limited-equity housing cooperative” or a
“workforce housing cooperative trust” is a corporation that meets
the criteria of Section 11003.2 and that also meets the criteria of
Sections 817 and 817.1 of the Civil Code, as applicable. Except
as provided in subdivision (b), a limited-equity housing or
workforce housing cooperative trust shall be subject to all the
requirements of this chapter pertaining to stock cooperatives.

(b) A limited-equity housing cooperative or a workforce housing
cooperative trust shall be exempt from the requirements of this
chapter if the limited-equity housing cooperative or workforce
housing cooperative trust complies with all the following
conditions:

(1) The United States Department of Housing and Urban
Development, the United States Department of Agriculture, the
National Consumers Cooperative Bank, the California Housing
Finance Agency, the Public Employees’ Retirement System
(PERS), the State Teachers’ Retirement System (STRS), the
Department of Housing and Community Development, begin delete or end delete the
Federal Home Loan Bank System or any of its member institutions,
begin delete alone end delete begin insert a state end insert or begin delete in any combination with each other, end delete begin insert federally
chartered credit union, a state end insert or begin delete with end delete begin insert federally certified community
development financial institution, or end insert the city, county, school
district, or redevelopment agency in which the cooperative is
located, begin insert alone or in any combination with each other, end insert directly
finances or subsidizes at least 50 percent of the total construction
or development cost or one hundred thousand dollars ($100,000),
whichever is less; or the real property to be occupied by the
cooperative was sold or leased by the begin delete Department of
Transportation, end delete begin insert Transportation Agency, end insert other state agency, a city,
a county, or a school district for the development of the cooperative
and has a regulatory agreement approved by the Department of
Housing and Community Development for the term of the
permanent financing, notwithstanding the source of the permanent
subsidy or financing.

(2) No more than 20 percent of the total development cost of a
limited-equity mobilehome park, and no more than 10 percent of
the total development cost of other limited-equity housing
cooperatives, is provided by purchasers of membership shares.

(3) A regulatory agreement that covers the cooperative for a
term of at least as long as the duration of the permanent financing
or subsidy, notwithstanding the source of the permanent subsidy
or begin delete financing end delete begin insert financing, end insert has been duly executed between the
recipient of the financing and either (A) one of the federal or state
agencies specified in paragraph (1) or (B) a local public agency
that is providing financing for the project under a regulatory
agreement meeting standards of the Department of Housing and
Community Development. The regulatory agreement shall make
provision for at least all of the following:

(A) Assurances for completion of the common areas and
facilities to be owned or leased by the limited-equity housing
cooperative, unless a construction agreement between the same
parties contains written assurances for completion.

(B) Governing instruments for the organization and operation
of the housing cooperative by the members.

(C) The ongoing fiscal management of the project by the
cooperative, including an adequate budget, reserves, and provisions
for maintenance and management.

(D) Distribution of a membership information report to any
prospective purchaser of a membership share, prior to purchase
of that share. The membership information report shall contain
full disclosure of the financial obligations and responsibilities of
cooperative membership, the resale of shares, the financing of the
cooperative including any arrangements made with any partners,
membership share accounts, occupancy restrictions, management
arrangements, and any other information pertinent to the benefits,
risks, and obligations of cooperative ownership.

(4)  begin delete The federal, state, or local public agency end delete begin insert Each party end insert that
executes the regulatory agreement shall satisfy itself that the
bylaws, articles of incorporation, occupancy agreement,
subscription agreement, any lease of the regulated premises, any
arrangement with partners, and arrangement for membership share
accounts provide adequate protection of the rights of cooperative
members.

(5)  begin delete The federal end delete begin insert Each provider of financing end insert or begin delete state agency end delete
begin insert subsidies end insert shall receive from the attorney for the recipient of the
financing or subsidy a legal opinion that the cooperative meets the
requirements of Section 817 of the Civil Code and the exemption
provided by this section.

(c) Any limited-equity cooperative, or workforce housing
cooperative trust that meets the requirements for exemption
pursuant to subdivision (b) may elect to be subject to all provisions
of this chapter.

(d) The developer of the cooperative shall notify the Bureau of
Real Estate, on a form provided by the bureau, that an exemption
is claimed under this section. The Bureau of Real Estate shall retain
this form for at least four years for statistical purposes.

SEC. 2.  

Section 11013.1 of the Business and Professions Code
is amended to read:

11013.1.  

It shall be unlawful, except as provided in Section
11013.2 or 11013.6, for the owner, subdivider, or agent to sell or
lease lots or parcels within a subdivision that is subject to a blanket
encumbrance unless there exists in the blanket encumbrance or
other supplementary agreement a provision, hereinafter referred
to as a release clause, which by its terms shall unconditionally
provide that the purchaser or lessee of a lot or parcel can obtain
legal title or other interest contracted for, free and clear of the
blanket encumbrance, upon compliance with the terms and
conditions of the purchase or lease.

SEC. 3.  

Section 11013.6 is added to the Business and
Professions Code, to read:

11013.6.  

Notwithstanding Sections 11013.1 and 11013.2, an
individual interest in a stock cooperative, as defined in Section
4190 of the Civil Code, or a limited equity housing cooperative,
as defined in Section 817 of the Civil Code, may be sold or leased
subject to a blanket encumbrance if all of the following conditions
are met:

(a) The notice required pursuant to Section 1133 of the Civil
Code is provided to each prospective purchaser and lessee of the
interest and is included in every purchase and lease contract.

(b) The property subject to the sale or lease has obtained a public
report from the Bureau of Real Estate that accounts for the blanket
encumbrance.

(c) The governing documents for the association require the
association to create within one year of the sale of at least 50
percent of the individual interests in the stock cooperative or
limited-equity housing cooperative and maintain during the term
of the blanket encumbrance a financing reserve amount equal to
at least three months of the amount of the debt service payments
due on the blanket encumbrance or a lesser amount acceptable to
the commissioner.

SEC. 4.  

Section 5100 of the Civil Code is amended to read:

5100.  

(a) Notwithstanding any other law or provision of the
governing documents, elections regarding assessments legally
requiring a vote, election and removal of directors, amendments
to the governing documents, or the grant of exclusive use of
common area pursuant to Section 4600 shall be held by secret
ballot in accordance with the procedures set forth in this article.

(b) This article also governs an election on any topic that is
expressly identified in the operating rules as being governed by
this article.

(c) The provisions of this article apply to both incorporated and
unincorporated associations, notwithstanding any contrary
provision of the governing documents.

(d) The procedures set forth in this article shall apply to votes
cast directly by the membership, but do not apply to votes cast by
delegates or other elected representatives.

(e) In the event of a conflict between this article and the
provisions of the Nonprofit Mutual Benefit Corporation Law (Part
3 (commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code) relating to elections, the provisions of this
article shall prevail.

(f) Directors shall not be required to be elected pursuant to this
article if the governing documents provide that one member from
each separate interest is a director.

SEC. 5.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.