BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        SB 752|
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                                 UNFINISHED BUSINESS


          Bill No:  SB 752
          Author:   Roth (D)
          Amended:  9/3/13
          Vote:     21

           
           SENATE TRANSPORTATION & HOUSING COMMITTEE  :  10-0, 4/16/13
          AYES:  DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,  
            Lara, Liu, Roth, Wyland
          NO VOTE RECORDED:  Pavley

           SENATE JUDICIARY COMMITTEE  :  6-0, 5/7/13
          AYES:  Evans, Anderson, Corbett, Jackson, Leno, Monning
          NO VOTE RECORDED:  Walters

           SENATE FLOOR  :  37-0, 5/16/13 (Consent)
          AYES:  Anderson, Beall, Berryhill, Block, Calderon, Cannella,  
            Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Fuller,  
            Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff,  
            Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen,  
            Padilla, Pavley, Roth, Steinberg, Walters, Wolk, Wright,  
            Wyland, Yee
          NO VOTE RECORDED:  Price, Vacancy, Vacancy

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Commercial and industrial common interest  
          developments

           SOURCE  :     California Law Revision Commission


                                                                CONTINUED





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           DIGEST  :    This bill separates the laws governing commercial and  
          industrial common interest developments (CIDs) from the laws  
          governing residential CIDs and generally makes the operational  
          provisions of current law inapplicable to commercial and  
          industrial CIDs.

           Assembly amendments  add double-jointing language with SB 251  
          (Calderon), revise and recast the section of the bill related to  
          solar energy systems, add a provision which require the articles  
          of incorporation of an association filed with the Secretary of  
          State include a statement as specified, and make numerous  
          technical and clarifying changes.

           ANALYSIS  :    A 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.  Condominiums, planned unit  
          developments, stock cooperatives, community apartments, and many  
          resident-owned mobilehome parks all fall under the CID umbrella.  
           While most CIDs are residential, CIDs can also comprise  
          industrial or commercial properties.  

          The Davis-Stirling Common Interest Development Act is the main  
          body of statutory law that governs CIDs in California.  The law  
          includes both foundational provisions that relate to the  
          establishment and definition of the CID property form and  
          operational provisions that regulate the ongoing operation of  
          the managing association.  Existing law exempts commercial and  
          industrial CIDs from a few specific provisions of the Act but  
          generally treats commercial and industrial CIDs the same as  
          residential CIDs.  

          This bill separates the laws governing commercial and industrial  
          CIDs from the laws governing residential CIDs and generally  
          makes the operational provisions of current CID law inapplicable  
          to commercial and industrial CIDs.  Specifically, the bill:

          1. Makes the Davis Stirling Common Interest Development Act  
             inapplicable to commercial and industrial CIDs and creates a  
             new Commercial and Industrial Common Interest Development  
             Act.







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          2. Carries over the provisions of the Davis Stirling Act to the  
             Commercial and Industrial Common Interest Development Act  
             except for the following provisions from which the bill  
             exempts commercial and industrial CIDs:

             a.    Declaration requirements related to location of the  
                property in an airport influence area or in the  
                jurisdiction of the San Francisco Bay Conservation and  
                Development Commission.

             b.    The requirement that the association allow for at  
                least one type of fire retardant roof covering  
                material that meets legal requirements in a very high  
                fire severity zone.

             c.    Award of reasonable attorney's fees and costs to  
                the prevailing party in an action to enforce the  
                governing documents.

             d.    The authority for the association to petition the  
                court for an order reducing the percentage of the  
                affirmative votes necessary for an amendment of the  
                declaration.

             e.    Provisions regulating changes to the association's  
                operating rules.

             f.    Owner protections against association policies  
                prohibiting rental of units.

             g.    The requirement for the association to prepare and  
                disclose a budget.

             h.    The requirement to conduct association meetings  
                with a recognized parliamentary procedure.

             i.    Member rights of access to association records.

             j.    Rules regarding member discipline.

             k.    The right of owners in a joint association to  
                attend meetings and access records of the joint  
                association.







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             l.    The requirement for the association to provide a  
                document disclosure index.

             m.    Rules related to campaigns, elections, and open  
                meetings.

             n.    The requirement that members owning at least 67% of  
                the separate interests approve granting exclusive use  
                of any portion of the common area to an individual  
                owner.  

             o.    Disclosure requirements relating to the  
                qualifications of association managers and  
                requirements relating to how managers handle  
                association funds.

             p.    The requirement for the association to adopt a  
                fair, reasonable, and expeditious procedure for  
                resolving disputes.

             q.    The requirements that the association provide  
                budgets and insurance coverage information, disclose  
                reserves and reserve deficits, and conduct reserve  
                studies that account for future repair needs.

             r.    The requirement for the association annually to  
                disclose its policies and practices in enforcing lien  
                rights or other legal remedies for assessment  
                defaults.

             s.    Requirements relating to how the board reviews  
                financial statements and makes transfers and payments  
                out of reserves.

             t.    Limits on assessment increases without a vote of  
                the membership.

             u.    Limits on late charges and interest charges on  
                delinquent assessments.

             v.    The prohibition against an association imposing  
                assessments that exceeds the amount necessary to  
                defray costs. 







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             w.    The prohibition on levying assessments based on the  
                taxable value of the separate interests.

             x.    The right of owners to request dispute resolution  
                and to request a payment plan for delinquent  
                assessments.

             y.    An owner's right to pay delinquent assessments  
                under protest.  

             z.    The requirement for the association to credit any  
                payments first towards delinquent assessments and only  
                thereafter to the fees and costs of collection,  
                attorney's fees, late charges, or interest.

             aa.   The requirement for the association to send notices  
                regarding delinquent assessments to a second address  
                provided by an owner.

             bb.   Prohibitions on the use of foreclosure for  
                delinquent assessments that are less than 12 months  
                delinquent and less than $1,800, as well as the  
                conditions on the use of foreclosure for greater or  
                older delinquent assessments, including an owner's  
                right of redemption.

             cc.   The requirement for a selling owner to provide a  
                buyer with various association documents and for the  
                association to provide those documents upon request.  

             dd.   The prohibition on the association charging fees in  
                connection with a transfer of title.

             ee.   The requirement that a party engage in alternative  
                dispute resolution before filing an enforcement action  
                in court.

             ff.   Rules relating to association approval of  
                architectural changes.  

             gg.   The requirement to register with the Secretary of  
                State and pay a $30 fee. 








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          3. Prohibits new owners in commercial and industrial CIDs from  
             keeping at least one pet subject to reasonable rules and  
             regulations but grandfather's those owners who had pet's  
             prior to January 1, 2014. 

          4. 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 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.  

          6. Updates numerous cross-references to the Davis Stirling Act  
             in other codes.

          7. Includes language to avoid chaptering out with SB 251 (Ron  
             Calderon) of the current legislative session.

           Comments  

          According to the sponsor, the California Law Revision Commission  
          (CLRC), the available legislative history indicates that the  
          Davis-Stirling Act originally was intended to govern only  
          residential property, with no expectation that it would apply to  
          commercial or industrial property.  When it later became  
          apparent that the act also applied to nonresidential  
          developments, AB 2484 (Hauser), Chapter 123, Statutes of 1988,  
          limited that application by generally preserving the  
          foundational provisions of the act (i.e., those that relate to  
          the establishment and definition of the CID property form) while  
          making inapplicable to commercial and industrial CIDs the  
          operational provisions (i.e., those that regulated the ongoing  
          operation of the managing association).  Since then, the  
          Davis-Stirling Act has more than tripled in size, mostly through  
          the addition of numerous new operational provisions.  Many of  
          those provisions appear to have been designed specifically for  
          homeowners.  For the most part, the Legislature does not appear  
          to have considered whether those new provisions were necessary  
          or beneficial to commercial or industrial property owners.









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          Based on the same policy of preserving foundational provisions  
          and exempting commercial and industrial CIDs from operational  
          provisions that guided AB 2484, the CLRC completed an analysis  
          of the Davis-Stirling Act and made three general  
          recommendations:


           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.


           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  
            type.

           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.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  9/6/13)

          California Law Revision Commission (source)
          California Association of Community Managers 
          California Business Properties Association
          Mar West Real Estate



          JJA:d  9/6/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

                                   ****  END  ****







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