BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 752| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 SB 752 Page 2 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. SB 752 Page 3 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. SB 752 Page 4 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. SB 752 Page 5 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. SB 752 Page 6 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. SB 752 Page 7 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 **** SB 752 Page 8