BILL ANALYSIS Ó
SB 752
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Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
SB 752 (Roth) - As Amended: June 24, 2013
PROPOSED CONSENT
SENATE VOTE : 37-0
SUBJECT : COMMERCIAL AND INDUSTRIAL Common Interest
DevelopmentS
KEY ISSUE : Should A SEPARATE STATUTE BE CREATED TO govern
commercial common interest developments, DISTINCT FROM the
statute governing residential common interest developments, so
as to more logically address the different ISSUES that arise in
each CONTEXT?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
Existing law, the Davis-Stirling Act, applies to all CIDs,
including both residential and commercial CIDs, with a number of
provisions having exemptions for commercial CIDs. The CLRC has
studied the legislative history of the Davis-Stirling Act and
made several recommendations on the reorganization of CID law,
as follows: (1) The law governing commercial and industrial
CIDs should be separated from the law governing residential
CIDs; (2) The existing foundational provisions of the
Davis-Stirling Act should continue to apply to commercial and
industrial CIDs; and (3) Most of the existing operational
provisions of the Davis-Stirling Act should be made inapplicable
to commercial and industrial CIDs. CLRC, the sponsor of this
bill, contends that this non-controversial bill will help
facilitate separate regulation of distinctly different types of
CIDs, and will prevent any new laws enacted to benefit
residential owners from being inadvertently applied to
commercial and industrial developments. Accordingly, this bill
implements those CLRC recommendations and seeks to establish the
Commercial and Industrial Common Interest Development Act, a new
stand-alone statute to govern commercial and industrial CIDs.
This bill is supported by the California Business Properties
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Association, among others, and has no known opposition. This
bill received no "No" votes in the Senate, and was approved by
the Assembly Housing and Community Development Committee by a
7-0 vote.
SUMMARY : Establishes a separate new law, the Commercial and
Industrial Common Interest Development Act (CICIDA), to govern
the creation and operation of industrial or commercial common
interest developments (CIDs). Specifically, this bill :
1)Defines a "commercial or industrial common interest
development" as a CID that is limited to industrial or
commercial uses by zoning law or by a declaration of
covenants, conditions, and restrictions that has been recorded
in the official records of each county in which the CID is
located. Clarifies that "commercial use" for this purpose
includes, but is not limited to, the operation of a business
that provides facilities for the overnight stay of its
customers, employees, or agents.
2)Establishes the new Commercial and Industrial Common Interest
Development Act (CICIDA) within the Civil Code.
3)Continues in the CICIDA selected provisions of the
Davis-Stirling Act necessary to authorize and define the
functional elements of CID law, but discontinues many
provisions intended primarily to apply to residential CIDs,
particularly with respect to the operation of a CID's
governing association. (For a comprehensive summary of
provisions from which commercial and industrial CIDs are
exempted, refer to the Assembly Housing and Community
Development Committee analysis.)
4)Updates numerous cross-references to the Davis-Stirling Act in
other codes and allows an association to amend its governing
documents without the approval of owners solely to correct any
cross-references to the Davis-Stirling Act.
5)States that CICIDA 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.
EXISTING LAW , the Davis-Stirling Common Interest Development
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Act:
1)Establishes the rules and regulations governing the operation
of a common interest development and the respective rights and
duties of a homeowners association and its members. (Civil
Code Section 1350 et seq.)
2)Specifies certain 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. (Civil Code Section 1373(a).)
3)Makes 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 those types of CIDs. (Civil
Code Section 1373(b).)
COMMENTS : This non-controversial bill, sponsored by the
California Law Revision Commission (CLRC), seeks to create a new
stand-alone statute to govern commercial and industrial CIDs in
order to facilitate separate regulation of these distinctly
different types of CIDs in the future. Existing law, the
Davis-Stirling Act applies to all CIDs, including both
residential and commercial CIDs, with a number of provisions
having exemptions for commercial CIDs. The CLRC has studied the
legislative history of the Davis-Stirling Act and made several
recommendations on the reorganization and reform of CID law in
California. Accordingly, this bill implements those CLRC
recommendations and establishes the Commercial and Industrial
Common Interest Development Act.
Background on community interest developments . A common
interest development ("CID") is a real property development that
includes all of the following: (1) separate ownership of a lot
or unit, coupled with an undivided interest in common property,
(2) covenants, conditions, and restrictions that limit use of
both the common area and separate ownership interests, and (3)
management of common property and enforcement of restrictions by
a community association. Most CIDs are residential in nature;
CLRC estimates there are over 49,000 CIDs in California that
together comprise over 4.9 million total housing units, with
CIDs ranging in size from as few as three units to as many as
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27,000 units. It is less commonly known, however, that CIDs may
also be commercial or industrial in nature-for example, a
business park or strip mall so organized by its developer and
governed by an owner's association.
According to CLRC, the special character of industrial and
commercial CIDs causes them to differ from residential CIDs in
several ways. First, commercial and industrial CIDs are
business endeavors in which the parties engage the services of
attorneys, accountants, management companies, and developers.
Second, unlike owners in residential CIDs, owners in commercial
and industrial CIDs are well-informed and governed by other
provisions of commercial law. Third, the operational needs of
commercial and industrial CIDs are different than the needs of
residential CIDs, possibly needing greater flexibility to
address business-related changes in the development's use and
facilities. Finally, regulatory requirements designed to
protect residential owners interfere with commerce, and increase
the costs of doing business. (CLRC, "Recommendation:
Commercial and Industrial Common Interest Developments," 42 Cal.
Law Revision Commission Report (August 2012), pages 4-5;
hereafter "CLRC Recommendation Report.")
Stated need for the bill. According to the CLRC, this bill will
help further the Legislature's original intent in enacting
Section 1373 of the Civil Code, to appropriately exempt
commercial and industrial CIDs from provisions that were largely
developed to apply to owners in residential CIDs. The CLRC
states:
The legislative history of the Davis-Stirling Act suggests
that it 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
specified provisions of the Act.
Since 1988, however, most of the new provisions of the
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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.
Summary of CLRC recommendations. Based on its review of the
legislative history of commercial and industrial CIDs, the CLRC
makes the following three general recommendations which this
bill seeks to implement:
1)The law governing commercial and industrial CIDs should be
separated from the law governing residential CIDs. This will
prevent any new laws enacted to benefit residential owners
from being inadvertently applied to commercial and industrial
developments.
2)The existing foundational provisions of the Davis Stirling Act
should continue to apply to commercial and industrial CIDs.
These provisions are necessary for any CID, regardless of
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type.
3)Most of the existing operational provisions of the Davis
Stirling Act should be made inapplicable to commercial and
industrial CIDs. These provisions are not strictly necessary
for all CIDs. They appear to have been added to the Davis
Stirling Act to benefit residential property owners, without
separate consideration of their effect on commercial or
industrial property owners. (CLRC Recommendation Report, p.1)
This Committee's review of the CLRC Recommendation Report
indicates the level of care and attention to detail used by CLRC
in documenting the codification of selected provisions of the
Davis-Stirling Act in order to create the CICIDA. Interested
parties may wish to refer to the table titled "Disposition of
Existing Law" on pages 139-140 of the CLRC Recommendation Report
for a comprehensive guide mapping the disposition of each
provision of the existing Davis-Stirling Act in the new law
proposed by this bill.
This bill would not affect the law governing residential or
mixed use CIDs. Under this bill, a commercial or industrial CID
is defined as one " that is limited to industrial or commercial
uses by zoning law or by a declaration of covenants, conditions,
and restrictions that has been recorded in the official records
of each county in which the CID is located." According to the
author and sponsor, this language is intended to ensure that
this bill has no effect on residential or mixed use CIDs because
a CID that contains even a single residence is not "limited to
industrial or commercial uses" and therefore that CID would
continue to be governed by the Davis-Stirling Act applying
strictly to residential CIDs. In addition, the list of sections
affected by this bill confirms that no sections of the existing
Davis-Stirling Act (or the latent sections of that Act set to
become operative in 2014, pursuant to AB 805 of 2012) are
amended by this bill.
Recent amendments to the bill clarify that the term "commercial
use" for the purpose of this definition includes, but is not
limited to, the operation of a business that provides facilities
for the overnight stay of its customers, employees, or agents
(e.g., a hotel, inpatient medical facility, or apartment
building.) The author also notes that because the definition of
"commercial and industrial" used in the Davis-Stirling Act
parallels a definition of that same term in the Subdivided Lands
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Act (Bus. & Prof. Code Sections 11000 to 11200), the bill
follows a technical CLRC recommendation to makes a conforming
change in the latter act to maintain the existing parallelism.
ARGUMENTS IN SUPPORT : The California Business Properties
Association writes in support of this bill:
Since its enactment, the Davis-Stirling Act has more
than tripled in size. However, most of its new
provisions were added to address problems faced by
homeowners, without separate analysis of whether the new
provisions should also apply to businesses. This has
resulted in the unnecessary regulation applying to
non-residential CIDs. The California Law Revision
Commission, after conducting public hearings, has
recommended that the issue be addressed by enacting a
separate statute that would govern only non-residential
CIDs, and would not contain the regulatory provisions of
the Davis-Stirling Act that are not applicable to those
CIDs. . . SB 752 would implement that recommendation. We
believe this is an important change to reduce
unnecessary regulations on businesses without
compromising residential protections.
Related Prior Legislation. AB 805 (Torres) Ch. 180, Stats.
2012, reorganized and recodified the Davis-Stirling Act and made
minor substantive changes in order to achieve internal
consistency. AB 806 (Torres) Ch. 181, Stats. 2012, is a
technical companion bill to AB 805 that made conforming changes
in other codes so that cross-references to the Davis-Stirling
Act correspond to the new section numbers.
REGISTERED SUPPORT / OPPOSITION :
Support
California Law Revision Commission (sponsor)
California Association of Community Managers
California Business Properties Association
Mar West Real Estate
Opposition
None on file
SB 752
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Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334