Amended in Senate July 8, 2013

Amended in Senate June 24, 2013

Amended in Assembly April 10, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 1024

Introduced by Assembly Member Torres

February 22, 2013

An act to amend Sections 11003.4 and 11013.1of, 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.


AB 1024, as amended, Torres. 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 every 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:

P2    1


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



(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

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
19(PERS), the State Teachers’ Retirement System (STRS), the
20Department of Housing and Community Development, the Federal
21Home Loan Bank System or any of its member institutions, a state
P3    1or federally chartered credit union, a state or federally certified
2community development financial institution, or the city, county,
3school district, or redevelopment agency in which the cooperative
4is located, alone or in any combination with each other, directly
5finances or subsidizes at least 50 percent of the total construction
6or development cost or one hundred thousand dollars ($100,000),
7whichever is less; or the real property to be occupied by the
8cooperative was sold or leased by the Department of
9Transportation, other state agency, a city, a county, or a school
10district for the development of the cooperative and has a regulatory
11agreement approved by the Department of Housing and Community
12Development for the term of the permanent financing,
13notwithstanding the source of the permanent subsidy or financing.

14(2) No more than 20 percent of the total development cost of a
15limited-equity mobilehome park, and no more than 10 percent of
16the total development cost of other limited-equity housing
17cooperatives, is provided by purchasers of membership shares.

18(3) A regulatory agreement that covers the cooperative for a
19term of at least as long as the duration of the permanent financing
20or subsidy, notwithstanding the source of the permanent subsidy
21or financing, has been duly executed between the recipient of the
22financing and either (A) one of the federal or state agencies
23specified in paragraph (1) or (B) a local public agency that is
24 providing financing for the project under a regulatory agreement
25meeting standards of the Department of Housing and Community
26Development. The regulatory agreement shall make provision for
27at least all of the following:

28(A) Assurances for completion of the common areas and
29facilities to be owned or leased by the limited-equity housing
30cooperative, unless a construction agreement between the same
31parties contains written assurances for completion.

32(B) Governing instruments for the organization and operation
33of the housing cooperative by the members.

34(C) The ongoing fiscal management of the project by the
35cooperative, including an adequate budget, reserves, and provisions
36for maintenance and management.

37(D) Distribution of a membership information report to any
38prospective purchaser of a membership share, prior to purchase
39of that share. The membership information report shall contain
40full disclosure of the financial obligations and responsibilities of
P4    1cooperative membership, the resale of shares, the financing of the
2cooperative including any arrangements made with any partners,
3membership share accounts, occupancy restrictions, management
4arrangements, and any other information pertinent to the benefits,
5risks, and obligations of cooperative ownership.

6(4) Every party that executes the regulatory agreement shall
7satisfy itself that the bylaws, articles of incorporation, occupancy
8agreement, subscription agreement, any lease of the regulated
9premises, any arrangement with partners, and arrangement for
10membership share accounts provide adequate protection of the
11rights of cooperative members.

12(5) Every provider of financing or subsidies shall receive from
13the attorney for the recipient of the financing or subsidy a legal
14opinion that the cooperative meets the requirements of Section
15817 of the Civil Code and the exemption provided by this section.

16(c) Any limited-equity cooperative, or workforce housing
17cooperative trust that meets the requirements for exemption
18pursuant to subdivision (b) may elect to be subject to all provisions
19of this chapter.

20(d) The developer of the cooperative shall notify the Bureau of
21Real Estate, on a form provided by the bureau, that an exemption
22is claimed under this section. The Bureau of Real Estate shall retain
23this form for at least four years for statistical purposes.


SEC. 2.  

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



It shall be unlawful, except as provided in Section
2711013.2 or 11013.6, for the owner, subdivider, or agent to sell or
28lease lots or parcels within a subdivision that is subject to a blanket
29encumbrance unless there exists in the blanket encumbrance or
30other supplementary agreement a provision, hereinafter referred
31to as a release clause, which by its terms shall unconditionally
32provide that the purchaser or lessee of a lot or parcel can obtain
33legal title or other interest contracted for, free and clear of the
34blanket encumbrance, upon compliance with the terms and
35conditions of the purchase or lease.


SEC. 3.  

Section 11013.6 is added to the Business and
37Professions Code
, to read:



Notwithstanding Sections 11013.1 and 11013.2, an
39individual interest in a stock cooperative, as defined in Section
404190 of the Civil Code, or a limited equity housing cooperative,
P5    1as defined in Section 817 of the Civil Code, may be sold or leased
2subject to a blanket encumbrance if all of the following conditions
3are met:

4(a) The notice required pursuant to Section 1133 of the Civil
5Code is provided to every prospective purchaserbegin insert and lesseeend insert of the
6interest and is included in every purchasebegin insert and lease end insert contract.

7(b) The property subject to the salebegin insert or leaseend insert has obtained a public
8report from the Bureau of Real Estate that accounts for the blanket
9begin delete encumberanceend deletebegin insert encumbranceend insert.

10(c) The governing documents for the association require the
11association to create within one year of the sale of at least 50
12percent of the individual interests in the stock cooperative or
13limited-equity housing cooperative and maintain during the term
14of the blanket encumbrance a financing reserve amount equal to
15at least three months of the amount of the debt service payments
16due on the blanket encumbrance or a lesser amount acceptable to
17the commissioner.


SEC. 4.  

Section 5100 of the Civil Code is amended to read:



(a) Notwithstanding any other law or provision of the
20governing documents, elections regarding assessments legally
21requiring a vote, election and removal of directors, amendments
22to the governing documents, or the grant of exclusive use of
23common area pursuant to Section 4600 shall be held by secret
24ballot in accordance with the procedures set forth in this article.

25(b) This article also governs an election on any topic that is
26expressly identified in the operating rules as being governed by
27this article.

28(c) The provisions of this article apply to both incorporated and
29unincorporated associations, notwithstanding any contrary
30 provision of the governing documents.

31(d) The procedures set forth in this article shall apply to votes
32cast directly by the membership, but do not apply to votes cast by
33delegates or other elected representatives.

34(e) In the event of a conflict between this article and the
35provisions of the Nonprofit Mutual Benefit Corporation Law (Part
363 (commencing with Section 7110) of Division 2 of Title 1 of the
37Corporations Code) relating to elections, the provisions of this
38article shall prevail.

begin delete

P6    1(f) A director shall not be required to be elected pursuant to this
2article if the governing documents provide that all members are

end delete
begin insert

4(f) Directors shall not be required to be elected pursuant to this
5article if the governing documents provide that one member from
6each separate interest is a director.

end insert

SEC. 5.  

No reimbursement is required by this act pursuant to
8Section 6 of Article XIII B of the California Constitution because
9the only costs that may be incurred by a local agency or school
10district will be incurred because this act creates a new crime or
11infraction, eliminates a crime or infraction, or changes the penalty
12for a crime or infraction, within the meaning of Section 17556 of
13the Government Code, or changes the definition of a crime within
14the meaning of Section 6 of Article XIII B of the California