BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 752 (Roth)
As Amended April 18, 2013
Hearing Date: May 7, 2013
Fiscal: No
Urgency: No
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SUBJECT
Commercial and Industrial Common Interest Developments
DESCRIPTION
Existing law, the Davis-Stirling Common Interest Development
Act, governs the creation and regulation of common interest
developments but exempts common interest developments that are
limited to industrial or commercial uses.
This bill would establish the Commercial and Industrial Common
Interest Development Act and provide for the creation and
regulation of industrial or commercial common interest
developments.
BACKGROUND
In California, common interest developments (CIDs) are governed
by the Davis-Stirling Common Interest Development Act
(Davis-Stirling Act). Owners of separate property in CIDs have
an undivided interest in the common property of the development
and are subject to the CIDs covenants, conditions and
restrictions. CIDs are also governed by a homeowners
association, which is run by volunteer directors that may or may
not have prior experience managing an association.
In 1988, the Legislature recognized that the operational needs
of commercial and industrial CIDs are different than the
operational needs of residential CIDs, and, therefore, exempted
industrial and commercial CIDs from the operational provisions
of the Davis-Stirling Act. (See AB 2484 (Hauser, Ch. 123,
Stats. 1988).)
(more)
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Subsequently, the California Law Revision Commission (CLRC)
analyzed whether recent operational statutes added to the
Davis-Stirling Act, many of which appear to have been
specifically designed for residential CIDs, are necessary or
beneficial to commercial or industrial CIDs. The CLRC
recommended that commercial and industrial CIDs should be
excluded from the Davis-Stirling Act and a new set of statutes
should be created for the regulation of commercial and
industrial CIDs. (See Recommendation: Commercial and
Industrial Common Interest Developments (Aug. 2012) 42 Cal. Law
Revision Com. Rep. (2012)
[as
of Apr. 29, 2013] [pre-print copy].)
This bill would enact the CLRC's recommendation by establishing
the Commercial and Industrial Common Interest Development Act
and make technical and conforming changes.
This bill passed out of the Senate Transportation and Housing
Committee on April 16, 2013, on a vote of 10-0.
CHANGES TO EXISTING LAW
Existing law , the Davis-Stirling Common Interest Development Act
(Davis-Stirling Act), establishes the rules and regulations
governing the operation of a common interest development (CID)
and the respective rights and duties of a homeowners association
and its members. (Civ. Code Sec. 1350 et seq.)
Existing law provides a list of operational provisions under the
Davis-Stirling Act that do not apply to a CID that is limited to
industrial or commercial uses by zoning or by a declaration of
covenants, conditions, and restrictions. (Civ. Code Sec. 1373.)
Existing law further provides legislative findings that, while
certain provisions under the Davis-Stirling Act are appropriate
to protect purchasers in residential CIDs, the provisions may
not be necessary to protect purchasers in commercial or
industrial CIDs since the application of those provisions could
result in unnecessary burdens and costs for these types of
developments. (Id.)
This bill would make the Davis-Stirling Act inapplicable to
industrial and commercial CIDs.
This bill would establish the Commercial and Industrial Common
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Interest Development Act, provide rules and regulations
governing the creation and operation of an industrial or
commercial CID, and carry over the foundational provisions of
the Davis-Stirling Act, but would no longer require industrial
and commercial CIDs to be subject to the operational
requirements of residential CIDs.
This bill would allow an industrial or commercial CID
association to amend its governing documents, without the
approval of owners, solely to correct any cross-references to
the Davis-Stirling Act.
This bill would provide that the new act shall not invalidate a
document, other than a governing document, or action taken
before January 1, 2014, if the document or action was proper
under the law governing CIDs at the time the document was
prepared or the action taken.
This bill would update numerous cross-references to the
Davis-Stirling Act in other codes and provide cross-references
to the new act.
COMMENT
1. Stated need for the bill
The author writes:
The [Davis-Stirling Common Interest Development Act
(Davis-Stirling Act)] was enacted to consolidate and
standardize statutory provisions governing CIDs [common
interest developments]. However, legislative history suggests
that the Act was originally intended only to govern
residential property, with no expectation that it would apply
to commercial or industrial property. When it was recognized
that the law also applied to commercial and industrial
property, a bill was introduced to entirely exempt such
property from the Davis-Stirling Act.
Business property owners objected to complete exemption from
the Act, noting that some provisions of the Act are necessary
for all CIDs, including business CIDs. Based on that input, in
1988 the Legislature instead enacted Civil Code Section 1373,
which exempted commercial and industrial CIDs from selected
provisions of the Act.
. . .
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Since 1988, however, most of the new provisions of the
Davis-Stirling Act were added to address problems faced by
homeowners, without separate analysis of whether the new
provisions should also apply to commercial and industrial
developments. Since its enactment, only three additions have
been made to the list of exemptions [for commercial and
industrial CIDs] in [Civil Code] Section 1373. As a
consequence, nearly all of the numerous regulatory provisions
of the Davis-Stirling Act currently apply to commercial and
industrial CIDs, despite having been designed to protect
residential property owners. This seems contrary to the
Legislature's intent in enacting Section 1373.
Consistent with the policy underlying enactment of Section
1373, SB 752 would exempt commercial and industrial CIDs from
the provisions of the Davis-Stirling Act that were added to
protect homeowners, but are not necessary for (and may be
burdensome to) commercial property owners. Provisions of the
Davis-Stirling Act that are needed by all CIDs would remain
applicable.
Establishing a separate statute for commercial and industrial
CIDs, rather than simply adding to the list of exemptions in
Section 1373, will help to avoid any future inadvertent
regulation of commercial and industrial CIDs. Any CID law
reform that is intended to apply to commercial or industrial
CIDs would need to be made in the new statute.
The creation of two separate CID acts will also allow for
independent development of the law governing residential and
business CIDs.
2. Need for new act solely applicable to industrial and
commercial CIDs
Existing law, the Davis-Stirling Act, provides for the
governance of CIDs. According to the August 2012
recommendation by the California Law Revision Commission
(CLRC), a review of legislative history revealed that the
Davis-Stirling Act, enacted in 1985, was originally intended
to govern only residential property. (Recommendation:
Commercial and Industrial Common Interest Developments (Aug.
2012) 42 Cal. Law Revision Com. Rep. (2012)
[as of Apr. 29, 2013], p. 1 [pre-print copy].)
Two years after enactment of the Davis-Stirling Act, Civil Code
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Section 1373 was enacted to exempt industrial and commercial
CIDs from certain operational provisions under the
Davis-Stirling Act. Notably, Civil Code Section 1373 was
enacted with legislative findings that the exemptions were
appropriate to protect purchasers in residential common interest
developments, however, the provisions may not be necessary to
protect purchasers in commercial or industrial developments
since the application of those provisions could result in
unnecessary burdens and costs for these types of developments.
As noted in the CLRC Recommendation, industrial and commercial
CIDs differ from residential CIDs in the following ways:
commercial and industrial CIDs are business endeavors in which
the parties engage the services of attorneys, accountants,
management companies, and developers;
unlike owners in residential CIDs, owners in commercial and
industrial CIDs are well-informed and governed by other
provisions of commercial law;
the operational needs of commercial and industrial CIDs are
different than the needs of residential CIDs; and
regulatory requirements designed to protect residential owners
interfere with commerce, and increase the costs of doing
business. (Recommendation: Commercial and Industrial Common
Interest Developments, 42 Cal. Law Revision Com. Rep., supra,
pp. 4-5.)
According to the CLRC:
Since the enactment of Section 1373, the Davis-Stirling Act
has more than tripled in size. However, over that 23 year
period, only three additions have been made to the list of
exemptions in Section 1373 for commercial and industrial
developments.
The Commission believes that most of the new provisions of the
Davis-Stirling Act have been enacted to solve problems faced
by residential property owners, without separate consideration
of their effects on nonresidential CIDs. As a consequence,
nearly all of the numerous regulatory provisions of the
Davis-Stirling Act currently apply to commercial and
industrial CIDs, despite having been designed to protect
residential property owners. This seems contrary to the
Legislature's intent in enacting Section 1373.
(Recommendation: Commercial and Industrial Common Interest
Developments, 42 Cal. Law Revision Com. Rep., supra, p. 2.)
Accordingly, the CLRC recommended that "the law governing
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commercial and industrial CIDs be separated from the law
governing residential CIDs. That would avoid any future
inadvertent regulation of commercial and industrial CIDS,
through the enactment of new provisions designed to benefit
residential property owners. This would not prevent the
Legislature from adopting reforms that apply to all types of
CIDs, but it would require an affirmative step in order to
give a new provision such universal application."
(Recommendation: Commercial and Industrial Common Interest
Developments, 42 Cal. Law Revision Com. Rep., supra, p. 3.)
In support of this bill, Mar West Real Estate states that this
bill is the product of "meeting with owners in these business
parks, who did not want to be subject to the overly
bureaucratic, administratively heavy and costly requirements
of the existing act. Simply put . . . the act did not fit
these types of projects. The building owners favor
simplification of the law, greater flexibility to decide what
rules should apply to their business parks and lower costs
associated with their building ownership." In order to
address the frustration of owners of industrial and commercial
CIDs and properly provide appropriate regulations for these
types of business structures, this bill would adopt the CLRC's
recommendations to create a new act for the regulation of
industrial and commercial CIDs, separate from the residential
CID provisions under the Davis-Stirling Act.
Support : California Association of Community Managers;
California Business Properties Association; Mar West Real Estate
Opposition : None Known
HISTORY
Source : California Law Revision Commission
Related Pending Legislation : None Known
Prior Legislation :
SB 150 (Correa, Ch. 62, Stats. 2011) added an exemption from the
Davis-Stirling Common Interest Development Act for industrial
and commercial common interest developments (CIDs) regarding
rental or leasing of separate interests in a CID.
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AB 2376 (Bates, Ch. 346, Stats. 2004) added an exemption for
industrial and commercial CIDs regarding architectural review of
a CID.
AB 512 (Bates, Ch. 557, Stats. 2003) added an exemption for
industrial and commercial CIDs regarding operating rules of a
CID.
AB 2484 (Hauser, Ch. 123, Stats. 1988) See Background.
Prior Vote : Senate Committee on Transportation and Housing
(Ayes 10, Noes 0)
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