Amended in Senate July 1, 2014

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 BillNo. 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 orbegin delete limitedend deletebegin insert end insertbegin insert limitedend insertbegin insert-equityend insert 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:

P2    1

SECTION 1.  

Section 11003.4 of the Business and Professions
2Code
is amended to read:

3

11003.4.  

(a) A “limited-equity housing cooperative” or a
4“workforce housing cooperative trust” is a corporation that meets
5the criteria of Section 11003.2 and that also meets the criteria of
6Sections 817 and 817.1 of the Civil Code, as applicable. Except
7as provided in subdivision (b), a limited-equity housing or
8workforce housing cooperative trust shall be subject to all the
9requirements of this chapter pertaining to stock cooperatives.

10(b) A limited-equity housing cooperative or a workforce housing
11cooperative trust shall be exempt from the requirements of this
12chapter if the limited-equity housing cooperative or workforce
13housing cooperative trust complies with all the following
14conditions:

15(1) The United States Department of Housing and Urban
16Development, the United States Department of Agriculture, the
17National Consumers Cooperative Bank, the California Housing
18Finance Agency, the Public Employees’ Retirement System
P3    1(PERS), the State Teachers’ Retirement System (STRS), the
2Department of Housing and Community Development, the Federal
3Home Loan Bank System or any of its member institutions, a state
4or federally chartered credit union, a state or federally certified
5community development financial institution, or the city, county,
6school district, or redevelopment agency in which the cooperative
7is located, alone or in any combination with each other, directly
8finances or subsidizes at least 50 percent of the total construction
9or development cost or one hundred thousand dollars ($100,000),
10whichever is less; or the real property to be occupied by the
11cooperative was sold or leased by the Transportation Agency, other
12state agency, a city, a county, or a school district for the
13development of the cooperative and has a regulatory agreement
14approved by the Department of Housing and Community
15Development for the term of the permanent financing,
16notwithstanding the source of the permanent subsidy or financing.

17(2) No more than 20 percent of the total development cost of a
18limited-equity mobilehome park, and no more than 10 percent of
19the total development cost of other limited-equity housing
20cooperatives, is provided by purchasers of membership shares.

21(3) A regulatory agreement that covers the cooperative for a
22term of at least as long as the duration of the permanent financing
23or subsidy, notwithstanding the source of the permanent subsidy
24or financing, has been duly executed between the recipient of the
25financing and either (A) one of the federal or state agencies
26specified in paragraph (1) or (B) a local public agency that is
27providing financing for the project under a regulatory agreement
28meeting standards of the Department of Housing and Community
29Development. The regulatory agreement shall make provision for
30at least all of the following:

31(A) Assurances for completion of the common areas and
32facilities to be owned or leased by the limited-equity housing
33cooperative, unless a construction agreement between the same
34parties contains written assurances for completion.

35(B) Governing instruments for the organization and operation
36of the housing cooperative by the members.

37(C) The ongoing fiscal management of the project by the
38cooperative, including an adequate budget, reserves, and provisions
39for maintenance and management.

P4    1(D) Distribution of a membership information report to any
2prospective purchaser of a membership share, prior to purchase
3of that share. The membership information report shall contain
4full disclosure of the financial obligations and responsibilities of
5cooperative membership, the resale of shares, the financing of the
6cooperative including any arrangements made with any partners,
7membership share accounts, occupancy restrictions, management
8arrangements, and any other information pertinent to the benefits,
9risks, and obligations of cooperative ownership.

10(4) Each party that executes the regulatory agreement shall
11satisfy itself that the bylaws, articles of incorporation, occupancy
12agreement, subscription agreement, any lease of the regulated
13premises, any arrangement with partners, and arrangement for
14membership share accounts provide adequate protection of the
15rights of cooperative members.

16(5) Each provider of financing or subsidies shall receive from
17the attorney for the recipient of the financing or subsidy a legal
18opinion that the cooperative meets the requirements of Section
19817 of the Civil Code and the exemption provided by this section.

20(c) Any limited-equity cooperative, or workforce housing
21cooperative trust that meets the requirements for exemption
22pursuant to subdivision (b) may elect to be subject to all provisions
23of this chapter.

24(d) The developer of the cooperative shall notify the Bureau of
25Real Estate, on a form provided by the bureau, that an exemption
26is claimed under this section. The Bureau of Real Estate shall retain
27this form for at least four years for statistical purposes.

28

SEC. 2.  

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

30

11013.1.  

It shall be unlawful, except as provided in Section
3111013.2 or 11013.6, for the owner, subdivider, or agent to sell or
32lease lots or parcels within a subdivision that is subject to a blanket
33encumbrance unless there exists in the blanket encumbrance or
34other supplementary agreement a provision, hereinafter referred
35to as a release clause, which by its terms shall unconditionally
36provide that the purchaser or lessee of a lot or parcel can obtain
37legal title or other interest contracted for, free and clear of the
38blanket encumbrance, upon compliance with the terms and
39conditions of the purchase or lease.

P5    1

SEC. 3.  

Section 11013.6 is added to the Business and
2Professions Code
, to read:

3

11013.6.  

Notwithstanding Sections 11013.1 and 11013.2, an
4individual interest in a stock cooperative, as defined in Section
54190 of the Civil Code, or a limited equity housing cooperative,
6as defined in Section 817 of the Civil Code, may be sold or leased
7subject to a blanket encumbrance if all of the following conditions
8are met:

9(a) The notice required pursuant to Section 1133 of the Civil
10Code is provided to each prospective purchaser and lessee of the
11interest and is included in every purchase and lease contract.

12(b) The property subject to the sale or lease has obtained a public
13report from the Bureau of Real Estate that accounts for the blanket
14encumbrance.

begin delete

15(c) The governing documents for the association require the
16association to create within one year of the sale of at least 50
17percent of the individual interests in the stock cooperative or
18limited-equity housing cooperative and maintain during the term
19of the blanket encumbrance a financing reserve amount equal to
20at least three months of the amount of the debt service payments
21due on the blanket encumbrance or a lesser amount acceptable to
22the commissioner.

end delete
begin insert

23(c) The governing documents for the association require the
24association to create and maintain during the term of the blanket
25encumbrance all of the following:

end insert
begin insert

26(1) Prior to the sale of any individual interests in the stock
27cooperative or limited-equity housing cooperative, a financing
28reserve amount equal to at least two months of the amount of the
29debt service payments due on the blanket encumbrance.

end insert
begin insert

30(2) Within one year of the sale of at least 25 percent of the
31individual interests in the stock cooperative or limited-equity
32housing cooperative, a financing reserve amount equal to at least
33three months of the amount of the debt service payments due on
34the blanket encumbrance.

end insert
begin insert

35(3) Within one year of the sale of at least 50 percent of the
36individual interests in the stock cooperative or limited-equity
37housing cooperative, a financing reserve amount equal to at least
38five months of the amount of the debt service payments due on the
39blanket encumbrance.

end insert
begin insert

P6    1(4) Within one year of the sale of at least 75 percent of the
2individual interests in the stock cooperative or limited-equity
3housing cooperative, a financing reserve amount equal to at least
4eight months of the amount of the debt service payments due on
5the blanket encumbrance.

end insert
6

SEC. 4.  

Section 5100 of the Civil Code is amended to read:

7

5100.  

(a) Notwithstanding any other law or provision of the
8governing documents, elections regarding assessments legally
9requiring a vote, election and removal of directors, amendments
10to the governing documents, or the grant of exclusive use of
11common area pursuant to Section 4600 shall be held by secret
12ballot in accordance with the procedures set forth in this article.

13(b) This article also governs an election on any topic that is
14expressly identified in the operating rules as being governed by
15this article.

16(c) The provisions of this article apply to both incorporated and
17unincorporated associations, notwithstanding any contrary
18 provision of the governing documents.

19(d) The procedures set forth in this article shall apply to votes
20cast directly by the membership, but do not apply to votes cast by
21delegates or other elected representatives.

22(e) In the event of a conflict between this article and the
23provisions of the Nonprofit Mutual Benefit Corporation Law (Part
243 (commencing with Section 7110) of Division 2 of Title 1 of the
25Corporations Code) relating to elections, the provisions of this
26article shall prevail.

27(f) Directors shall not be required to be elected pursuant to this
28article if the governing documents provide that one member from
29each separate interest is a director.

30

SEC. 5.  

No reimbursement is required by this act pursuant to
31Section 6 of Article XIII B of the California Constitution because
32the only costs that may be incurred by a local agency or school
33district will be incurred because this act creates a new crime or
34infraction, eliminates a crime or infraction, or changes the penalty
35for a crime or infraction, within the meaning of Section 17556 of
36the Government Code, or changes the definition of a crime within
37the meaning of Section 6 of Article XIII B of the California
38Constitution.



O

    95