BILL NUMBER: AB 76 CHAPTERED
BILL TEXT
CHAPTER 632
FILED WITH SECRETARY OF STATE OCTOBER 6, 1997
APPROVED BY GOVERNOR OCTOBER 3, 1997
PASSED THE ASSEMBLY SEPTEMBER 12, 1997
PASSED THE SENATE SEPTEMBER 9, 1997
AMENDED IN SENATE SEPTEMBER 4, 1997
AMENDED IN SENATE AUGUST 25, 1997
AMENDED IN SENATE JULY 29, 1997
AMENDED IN SENATE JULY 16, 1997
AMENDED IN ASSEMBLY MAY 23, 1997
AMENDED IN ASSEMBLY MAY 12, 1997
AMENDED IN ASSEMBLY APRIL 8, 1997
AMENDED IN ASSEMBLY MARCH 31, 1997
AMENDED IN ASSEMBLY MARCH 12, 1997
INTRODUCED BY Assembly Member Miller
DECEMBER 18, 1996
An act to amend Sections 1368 and 1375 of, and to add Sections
1363.1 and 1375.1 to, the Civil Code, relating to common interest
developments.
LEGISLATIVE COUNSEL'S DIGEST
AB 76, Miller. Common interest developments.
(1) Provisions of the Davis-Stirling Common Interest Development
Act, repealed as of January 1, 1997, required a prospective managing
agent of a common interest development to provide a written statement
to the board of directors of the association of the development
containing prescribed information regarding the owners or general
partners of the managing agent. Among other things, that information
was required to include the status of any professional licenses,
certifications, or designations held by those persons.
This bill would reenact these provisions. The bill would also
require that the managing agents provide information specifying the
dates that any professional licenses, certifications, or designations
held are valid, rather than the status of those licenses,
certifications, or designations. It also would specify that a
professional common interest development manager, rather than a
certified property manager or professional association manager, is
included in the certifications or designations required to be
included in the statement.
(2) Existing law requires the owner of a separate interest in a
common interest development to provide prescribed documents relating
to operation of the common interest development to the prospective
purchaser of the separate interest, except as specified.
This bill would require the owner to provide the prospective
purchaser with a copy of the preliminary list of defects provided to
each member of the association pursuant to existing law, except as
specified, and specified information regarding settlement agreements
regarding defects in common areas or separate interests. The bill
would require the list of defects to include a specified statement.
(3) Existing law requires the board of directors of the
association of a common interest development to provide each member
of the association who appears on the association records with a
prescribed written notice not later than 30 days prior to the filing
of any civil action by the association against a declarant or other
developer of the common interest development for, among other things,
alleged damage to the separate interests that the association is
obligated to maintain or repair, or alleged damage to the separate
interests that arises out of, or is integrally related to, damage to
the common areas or separate interests that the association is
obligated to maintain or repair.
This bill would require the association to, in writing, inform
only the members whose names appear on the association records of
prescribed information as soon as is reasonably practicable after the
resolution of a dispute, as specified, regarding alleged defects in
prescribed common areas, alleged defects in separate interests that
the association is obligated to maintain or repair, or for alleged
defects in the separate interests that arise out of, or are
integrally related to, defects in the common areas or separate
interests that the association is obligated to maintain or repair.
The bill would define "defects" to include any damage resulting from
defects.
(4) Existing law provides specific requirements for the
association to meet before it commences an action for damages against
a builder of a common interest development based upon a claim for
defects in the design or construction of the development. Existing
law requires, in a certain situation, the association's board of
directors to hold a meeting of the association members and provide a
written notice to each member that specifies, among other things, the
options that are available to address the problems, including the
filing of a civil action.
This bill would also require the notice to include a statement of
the various, reasonably foreseeable alternatives to pay for those
options.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1363.1 is added to the Civil Code, to read:
1363.1. (a) A prospective managing agent of a common interest
development shall provide a written statement to the board of
directors of the association of a common interest development as soon
as practicable, but in no event more than 90 days, before entering
into a management agreement which shall contain all of the following
information concerning the managing agent:
(1) The names and business addresses of the owners or general
partners of the managing agent. If the managing agent is a
corporation, the written statement shall include the names and
business addresses of the directors and officers and shareholders
holding greater than 10 percent of the shares of the corporation.
(2) Whether or not any relevant licenses such as architectural
design, construction, engineering, real estate, or accounting have
been issued by this state and are currently held by the persons
specified in paragraph (1). If a license is currently held by any of
those persons, the statement shall contain the following
information:
(A) What license is held.
(B) The dates the license is valid.
(C) The name of the licensee appearing on that license.
(3) Whether or not any relevant professional certifications or
designations such as architectural design, construction, engineering,
real property management, or accounting are currently held by any of
the persons specified in paragraph (1), including, but not limited
to, a professional common interest development manager. If any
certification or designation is held, the statement shall include the
following information:
(A) What the certification or designation is and what entity
issued it.
(B) The dates the certification or designation is valid.
(C) The names in which the certification or designation is held.
(b) As used in this section, a "managing agent" is a person or
entity who, for compensation or in expectation of compensation,
exercises control over the assets of a common interest development.
A "managing agent" does not include either of the following:
(1) A full-time employee of the association.
(2) Any regulated financial institution operating within the
normal course of its regulated business practice.
SEC. 2. Section 1368 of the Civil Code is amended to read:
1368. (a) The owner of a separate interest, other than an owner
subject to the requirements of Section 11018.6 of the Business and
Professions Code, shall, as soon as practicable before transfer of
title to the separate interest or execution of a real property sales
contract therefor, as defined in Section 2985, provide the following
to the prospective purchaser:
(1) A copy of the governing documents of the common interest
development.
(2) If there is a restriction in the governing documents limiting
the occupancy, residency, or use of a separate interest on the basis
of age in a manner different from that provided in Section 51.3, a
statement that the restriction is only enforceable to the extent
permitted by Section 51.3 and a statement specifying the applicable
provisions of Section 51.3.
(3) A copy of the most recent documents distributed pursuant to
Section 1365.
(4) A true statement in writing from an authorized representative
of the association as to the amount of the association's current
regular and special assessments and fees, as well as any assessments
levied upon the owner's interest in the common interest development
which are unpaid on the date of the statement. The statement shall
also include true information on late charges, interest, and costs of
collection which, as of the date of the statement, are or may be
made a lien upon the owner's interest in a common interest
development pursuant to Section 1367.
(5) A copy of the preliminary list of defects provided to each
member of the association pursuant to Section 1375, unless the
association and the builder subsequently enter into a settlement
agreement or otherwise resolve the matter and the association
complies with Section 1375.1. Disclosure of the preliminary list of
defects pursuant to this paragraph shall not waive any privilege
attached to the document. The preliminary list of defects shall also
include a statement that a final determination as to whether the
list of defects is accurate and complete has not been made.
(6) A copy of the latest information provided for in Section
1375.1.
(7) Any change in the association's current regular and special
assessments and fees which have been approved by the association's
board of directors, but have not become due and payable as of the
date disclosure is provided pursuant to this subdivision.
(b) Upon written request, an association shall, within 10 days of
the mailing or delivery of the request, provide the owner of a
separate interest with a copy of the requested items specified in
paragraphs (1) to (7), inclusive, of subdivision (a). The
association may charge a fee for this service, which shall not exceed
the association's reasonable cost to prepare and reproduce the
requested items.
(c) An association shall not impose or collect any assessment,
penalty, or fee in connection with a transfer of title or any other
interest except the association's actual costs to change its records
and that authorized by subdivision (b).
(d) Any person or entity who willfully violates this section shall
be liable to the purchaser of a separate interest which is subject
to this section for actual damages occasioned thereby and, in
addition, shall pay a civil penalty in an amount not to exceed five
hundred dollars ($500). In an action to enforce this liability, the
prevailing party shall be awarded reasonable attorneys' fees.
(e) Nothing in this section affects the validity of title to real
property transferred in violation of this section.
(f) In addition to the requirements of this section, an owner
transferring title to a separate interest shall comply with
applicable requirements of Sections 1133 and 1134.
SEC. 3. Section 1375.1 is added to the Civil Code, to read:
1375.1. (a) As soon as is reasonably practicable after the
association and the builder have entered into a settlement agreement
or the matter has otherwise been resolved regarding alleged defects
in the common areas, alleged defects in the separate interests that
the association is obligated to maintain or repair, or alleged
defects in the separate interests that arise out of, or are
integrally related to, defects in the common areas or separate
interests that the association is obligated to maintain or repair,
where the defects giving rise to the dispute have not been corrected,
the association shall, in writing, inform only the members of the
association whose names appear on the records of the association that
the matter has been resolved, by settlement agreement or other
means, and disclose all of the following:
(1) A general description of the defects that the association
reasonably believes, as of the date of the disclosure, will be
corrected or replaced.
(2) A good faith estimate, as of the date of the disclosure, of
when the association believes that the defects identified in
paragraph (1) will be corrected or replaced. The association may
state that the estimate may be modified.
(3) The status of the claims for defects in the design or
construction of the common interest development that were not
identified in paragraph (1) whether expressed in a preliminary list
of defects sent to each member of the association or otherwise
claimed and disclosed to the members of the association.
(b) Nothing in this section shall preclude an association from
amending the disclosures required pursuant to subdivision (a), and
any amendments shall supersede any prior conflicting information
disclosed to the members of the association and shall retain any
privilege attached to the original disclosures.
(c) Disclosure of the information required pursuant to subdivision
(a) or authorized by subdivision (b) shall not waive any privilege
attached to the information.
(d) For the purposes of the disclosures required pursuant to this
section, the term "defects" shall be defined to include any damage
resulting from defects.
SEC. 4. Section 1375 of the Civil Code is amended to read:
1375. (a) Before an association commences an action for damages
against a builder of a common interest development based upon a claim
for defects in the design or construction of the common interest
development, all of the requirements of subdivisions (b) to (g),
inclusive, shall be met, except as otherwise provided in this
section.
(b) (1) The association shall give written notice to the builder
against whom the claim is made. This notice shall include all of the
following:
(A) A preliminary list of defects.
(B) A summary of the results of a survey or questionnaire
distributed to homeowners to determine the nature and extent of
defects, if this survey has been conducted or a questionnaire has
been distributed.
(C) Either a summary of the results of testing conducted to
determine the nature and extent of defects or the actual test
results, if this testing has been conducted.
(2) The association's notice shall, upon delivery of the notice to
the builder, commence a period of time not to exceed 90 days, unless
the association and builder agree to a longer period, during which
the association and builder shall either, in accordance with the
requirements of this section, attempt to settle the dispute or
attempt to agree to submit it to alternative dispute resolution.
(3) (A) Except as provided in this section and notwithstanding any
other provision of law, the notice by the association shall, upon
mailing, toll all statutory and contractual limitations on actions
against all parties who may be responsible for the defects claimed,
whether named in the notice or not, including claims for indemnity
applicable to the claim, for a period of 150 days or a longer period
agreed to in writing by the association and the builder.
(B) At any time, the builder may give written notice to cancel the
tolling of the statute of limitations provided in this section.
Upon delivery of this written cancellation notice, the association
shall be relieved of any further obligation to satisfy the
requirements of this subdivision and subdivisions (c) to (e),
inclusive. The tolling of all applicable statutes of limitations
shall cease 60 days after the written notice of cancellation by the
builder is delivered to the association.
(c) (1) Within 25 days of the date the association delivers the
notice required by subdivision (b), the builder may request in
writing to meet and confer with the board of directors of the
association, and to inspect the project and conduct testing,
including testing that may cause physical damage to any property in
the development, in order to evaluate the claim. If the builder does
not make a timely request to meet and confer with the board of
directors of the association, or to conduct inspection and testing,
the association shall be relieved of any further obligation to
satisfy the requirements of this subdivision and subdivisions (d) and
(e). Unless the builder and association otherwise agree, the
meeting shall take place no later than 10 days from the date of the
builder's written request, at a mutually agreeable time and place.
The meeting shall be subject to subdivision (g) of Section 1363. The
discussions at the meeting are privileged communications and are not
admissible in evidence in any civil action, unless the association
and builder consent to their admission. The meeting shall be for the
purpose of discussing all of the following:
(A) The nature and extent of the claimed defects.
(B) Proposed methods of correction, to the extent there is
sufficient information.
(C) Proposals for submitting the dispute to alternative dispute
resolution.
(D) Requests from the builder to inspect the project and conduct
testing.
(2) If the builder requests in writing to meet and confer with the
board of directors of the association pursuant to paragraph (1) of
this subdivision, the builder shall deliver the notice provided by
the association to the builder pursuant to subdivision (b) to any
insurer that has issued a policy to the builder which imposes upon
the insurer a duty to defend the insured or indemnify the insured for
losses resulting from the defects identified in the notice required
by subdivision (b). The notice by the builder shall, upon receipt,
impose upon that insurer any obligation which would be imposed under
the terms of the policy if the insured had been served with a summons
and complaint for damages. The builder shall inform the association
when the builder delivers the notice to each insurer pursuant to
this paragraph.
(d) (1) If the association conducted inspection and testing prior
to the date it sent the written notice pursuant to subdivision (b),
the association shall, at the earliest practicable date after the
meeting held pursuant to subdivision (c), make available for
inspection and testing at least those areas inspected or tested by
the association. The inspection and testing shall be completed
within 15 days from the date the association makes these areas
available for inspection and testing, unless the association and
builder agree to a longer period. If the builder does not timely
complete the inspection and testing, the association shall be
relieved of any further obligation to satisfy the requirements of
this subdivision and subdivision (e). The manner in which the
inspection and testing shall be conducted, and the extent of any
inspection and testing to be conducted beyond that which was
conducted by the association prior to sending the notice, shall be
set by agreement of the association and builder.
(2) The builder shall pay all costs of inspection and testing that
is requested by the builder, shall restore the property to the
condition which existed immediately prior to the testing, and shall
indemnify the association and owner of the separate interest for any
damages resulting from the testing.
(3) Interior inspections of occupied separate interests and
destructive testing of any interior of a separate interest shall be
conducted in accordance with the governing documents of the
association, unless otherwise agreed to by the owner of the separate
interest. If the governing documents of the association do not
provide for inspection or testing of separate interests, this
inspection or testing shall be conducted in a manner and at a time
agreed to by the owner of the separate interest.
(4) The results of the inspection and testing shall not be
inadmissible in evidence in any civil action solely because the
inspection and testing was conducted pursuant to this section.
(e) (1) Within 30 days of the completion of inspection and testing
or within 30 days of a meeting held pursuant to subdivision (c) if
no inspection and testing is conducted pursuant to subdivision (d),
the builder shall submit to the association all of the following:
(A) A request to meet with the board to discuss a written
settlement offer.
(B) A written settlement offer, and a concise explanation of the
specific reasons for the terms of the offer. This offer may include
an offer to submit the dispute to alternative dispute resolution.
(C) A statement that the builder has access to sufficient funds to
satisfy the conditions of the settlement offer.
(D) A summary of the results of testing conducted for the purpose
of determining the nature and extent of defects, if this testing has
been conducted, unless the association provided the builder with
actual test results pursuant to subdivision (b), in which case the
builder shall provide the association with actual test results.
(2) If the builder does not timely submit the items required by
this subdivision, the association shall be relieved of any further
obligation to satisfy the requirements of this subdivision only.
(3) No less than 10 days after the builder submits the items
required by this paragraph, the builder and the board of directors of
the association shall meet and confer about the builder's settlement
offer, including any offer to submit the dispute to alternative
dispute resolution.
(f) (1) At any time after the notice required by subdivision (b)
is delivered to the builder, the association and builder may agree in
writing to modify or excuse any of the time periods or other
obligations imposed by this section.
(2) Except for the notice required pursuant to subdivision (g),
all notices, requests, statements, or other communications required
pursuant to this section shall be delivered by one of the following:
(A) By first-class registered or certified mail, return receipt
requested.
(B) In any manner in which it is permissible to serve a summons
pursuant to Section 415.10 or 415.20 of the Code of Civil Procedure.
(g) If the board of directors of the association rejects a
settlement offer presented at the meeting held pursuant to
subdivision (e), the board shall comply with the requirements of
paragraph (1) of this subdivision. If the association is relieved of
its obligation to satisfy the requirements of subdivisions (a) to
(e), inclusive, before all those requirements are satisfied, the
association shall comply with the requirements of paragraph (2) of
this subdivision. Under no circumstances shall the association be
required to comply with both paragraph (1) and paragraph (2) of this
subdivision.
(1) (A) If the association's board of directors rejects a
settlement offer presented at the meeting held pursuant to
subdivision (e), the board shall hold a meeting open to each member
of the association. The meeting shall be held no less than 15 days
before the association commences an action for damages against the
builder.
(B) No less than 15 days before this meeting is held, a written
notice shall be sent to each member of the association specifying all
of the following:
(i) That a meeting will take place to discuss problems that may
lead to the filing of a civil action, and the time and place of this
meeting.
(ii) The options that are available to address the problems,
including the filing of a civil action and a statement of the various
alternatives that are reasonably foreseeable by the association to
pay for those options and whether these payments are expected to be
made from the use of reserve account funds or the imposition of
regular or special assessments, or emergency assessment increases.
(iii) The complete text of any written settlement offer, and a
concise explanation of the specific reasons for the terms of the
offer submitted to the board pursuant to paragraph (1) of subdivision
(e), received from the builder and of any offer by the builder to
submit the dispute to alternative dispute resolution.
(iv) The preliminary list of defects provided by the association
to the builder pursuant to subdivision (b) and a list of any other
documents provided by the association to the builder pursuant to
subdivision (b), and information about where and when members of the
association may inspect those documents.
(C) The builder shall pay all expenses attributable to sending the
settlement offer and any offer for alternative dispute resolution to
all members of the association. The builder shall also pay the
expense of holding the meeting, not to exceed three dollars ($3) per
association member.
(D) The discussions at the meeting and the contents of the notice
and the items required to be specified in the notice pursuant to
subparagraph (B), are privileged communications and are not
admissible in evidence in any civil action, unless the association
consents to their admission.
(E) Compliance with this paragraph shall excuse the association
from satisfying the requirements of Section 1368.4.
(2) If the association is relieved of its obligation to satisfy
the requirements of subdivisions (a) to (e), inclusive, before all
those requirements have been satisfied, the association may commence
an action for damages against the builder 30 days after sending a
written notice to each member specifying all of the following:
(A) The preliminary list of defects provided by the association to
the builder pursuant to subdivision (b), and a list of any other
documents provided by the association to the builder pursuant to
subdivision (b), and information about where and when members of the
association may inspect those documents.
(B) The options, including civil actions, that are available to
address the problems.
(C) A statement that if 5 percent of the members of the
association request a special meeting of the members to discuss the
matter within 15 days of the date the notice is mailed or delivered
to the members of the association, a meeting of the members shall be
held, unless governing documents of the association provide for a
different procedure for calling a special meeting of the members, in
which case, the statement shall inform the members of that procedure.
(D) Compliance with this paragraph shall excuse the association
from satisfying the requirements of Section 1368.4.
(h) (1) The only method of seeking judicial relief for the failure
of the association to comply with this section shall be the
assertion, as provided for in this subdivision, of a procedural
deficiency to an action for damages by the association against the
builder after such an action has been filed. A verified application
asserting such a procedural deficiency shall be filed with the court
no later than 90 days after the answer to the plaintiff's complaint
has been served, unless the court finds that extraordinary conditions
exist.
(2) Upon the verified application of the association or the
builder alleging substantial noncompliance with this section, the
court shall schedule a hearing within 21 days of the application to
determine whether the association or builder has substantially
complied with this section. The issue may be determined upon
affidavits or upon oral testimony, in the discretion of the court.
(3) (A) If the court finds that the association did not
substantially comply with this section, the court shall stay the
action for up to 90 days to allow the association to establish
substantial compliance. The court shall set a hearing within 90 days
to determine substantial compliance by the association. At any
time, the court may, for good cause shown, extend the period of the
stay upon application of the association.
(B) If, within the time set by the court pursuant to this section,
the association has not established that it has substantially
complied with this section, the court shall determine if, in the
interest of justice, the action should be dismissed without
prejudice, or if another remedy should be fashioned. Under no
circumstances shall the court dismiss the action with prejudice as a
result of the association's failure to substantially comply with this
section. In determining the appropriate remedy, the court shall
consider the extent to which the builder has complied with this
section.
(C) If the alleged noncompliance of either the builder or the
association resulted from the unreasonable withholding of consent for
inspection or testing by an owner of a separate interest, it shall
not be considered substantial noncompliance, provided that the party
alleged to be out of compliance did not encourage the withholding of
consent.
(4) If the court finds that the builder did not pay all of the
costs of inspection and testing pursuant to paragraph (3) of
subdivision (a), or that the builder did not pay its required share
of the costs of holding the meeting and of all expenses attributable
to sending the settlement offer pursuant to subparagraph (C) of
paragraph (1) of subdivision (g) of this section, the court shall
order the builder to pay any deficiencies within 30 days, with
interest, and any additional remedy which the court determines, in
the interest of justice, should be fashioned.
(i) As used in this section:
(1) "Association" shall have the same meaning as defined in
subdivision (a) of Section 1351.
(2) "Builder" means the declarant, as defined in subdivision (g)
of Section 1351.
(D) "Common interest development" shall have the same meaning as
in subdivision (c) of Section 1351, except that it shall not include
developments or projects with less than 20 units.