BILL ANALYSIS
SENATE HOUSING & COMMUNITY DEVELOPMENT COMMITTEE
Senator Denise Moreno Ducheny, Chair
Bill No: AB 512Hearing: July
7, 2003
Author: BatesFiscal: No
Version: June 23,
2003Consultant: Mark Stivers
COMMON INTEREST DEVELOPMENT RULES
AND ARCHITECTURAL REVIEW
Background and Existing Law :
A common-interest development (CID) is a form of real
estate in which each homeowner has an exclusive interest in
a unit or lot and a shared or undivided interest in common
area property. Condominiums, planned unit developments,
stock cooperatives, and community apartments all fall under
the umbrella of common interest developments. There were
an estimated 6 million residents living in approximately
30,000 CID's in California.
The Davis-Stirling Common Interest Development Act provides
the legal framework under which homeowner associations
operate in common interest developments. In addition to
the requirements of the act, each CID is governed by a
homeowner association according to the recorded
declarations, bylaws, and operating rules of the
association.
In general, homeowner associations have wide discretion to
regulate the appearance of individual interests and the
conduct of its members. Under current law, the
declarations of an association are enforceable as equitable
servitudes "unless unreasonable." In Nahrstedt v.
Lakeside Village Condominium Assoc., Inc ., 8 Cal. 4th 361
(1994), the
California Supreme Court opined that the "unless
unreasonable" standard means that "restrictions should be
enforced unless they are wholly arbitrary, violate a public
policy, or impose a burden on the use of affected land that
far outweighs any benefit."
AB 512
Page 2
Proposed Law :
Assembly Bill 512 establishes basic standards with respect
to operating rule changes and architectural review of
alterations to separate interests and common areas in
common interest developments. In addition, the bill
outlines optional procedures for homeowner associations to
meet those standards. Specifically, the bill:
Adds chapter and article headings to the Davis-Stirling
Act and declares that the headings to not affect the
scope, meaning or intent of the provisions.
Requires that when documents must be delivered under the
optional procedures of the bill, they shall be personally
delivered, mailed to the last known address, published in
a periodical primarily for members, broadcast on
association television, or delivered in any method
provided in recorded governing documents. In addition,
such documents may be delivered by email, fax or any
other method the recipient has specifically agreed to.
Provides that an operating rule adopted, amended, or
repealed after January 1, 2004 that relates to the use of
common areas or separate interests, member discipline, or
assessment collection procedures is only valid and
enforceable if:
? The rule is in writing.
? The rule is within the authority of the board as
conferred by law, the declarations, articles of
incorporation or bylaws.
? The rule is adopted, amended or repealed in good
faith and in substantial compliance with state
standards.
? The rule is reasonable
Requires that members receive notice and have an
opportunity to comment before rule changes are made.
Establishes an optional procedure for changing standard
rules that meets the notice and comment requirement:
? The association shall deliver the written text and
a description of the changes to members.
? There shall be a 30 day written comment period.
? The rule change shall be acted on at a board
meeting after consideration of all comments.
? Upon adoption, the association shall deliver to all
members the text and a description of the rule change,
which shall become effective on a date made public by
the board that is at least 15 days from the date of
AB 512
Page 3
delivery.
Establishes an optional procedure for changing emergency
rules that meets the notice and comment requirement:
? Provides for immediate rule changes to address
imminent threats to public health or safety or
imminent risks of substantial economic loss to the
association.
? The association shall deliver to members within 15
days the text of the rule change and an explanation of
the emergency.
? Provides that such a rule is valid for 120 days and
may not be extended under emergency authority.
Provides that members owning 5 percent of the separate
interests may call a special meeting to reverse a
non-emergency rule change by delivering a written request
to the board within 30 days of notification of the rule
change. Reversal requires a majority vote of those
represented and voting at the special meeting or by
written ballot. If overturned, the rejected rule may not
be readopted for one year.
Provides access to operating rules to members and a copy
to prospective purchasers.
Provides that when approval is required for an alteration
of a separate interest, exclusive use common area, or
common area, the decision must be made in good faith and
in a fair and reasonable manner.
Establishes on optional procedure for meeting the fair
and reasonable requirement.
? The association shall provide notice to all members
for alterations to common areas and to owners within
300 feet or same building if separate interest or
exclusive use common area.
? The reviewing body shall issue a written decision
between 15 and 30 days from notice which includes a
explanation of the decision and a description of the
appeal process.
? An applicant or person who commented on the initial
decision can appeal within 15 days to the board of
directors.
? The board shall hear appeals de novo within 45
days, and any member may testify upon appeal.
? The board shall issue a written decision within 15
days of the hearing with explanation of the basis for
the decision.
? Only the decision of the board on appeal is subject
to court review.
AB 512
Page 4
Requires that any writ of mandate to challenge an
association's decision on the alteration of a separate
interest, exclusive use common area or common area is
subject to alternative dispute resolution prior to
filing.
Comments :
1. Purpose of the bill . At the request of the
Legislature, the California Law Revision Commission is
examining ways in which to minimize reliance on the courts
to resolve disputes between a CID association and its
members. While the commission is working on a number of
different approaches, its initial focus is on preventing
disputes from arising by seeking to make decision making
procedures used by a community association as fair and
reasonable as possible. The commission believes that a
decision made under a fair and reasonable procedure is more
likely to be a just decision and is more likely to be
accepted by a homeowner who would dispute a decision
reached under a procedure that is perceived to be unfair.
2. Where we are after the last hearing . On June 30, the
Housing Committee took extensive testimony on AB 512. The
Congress of California Seniors opposed the bill based on
the belief that the bill lacked sufficient protections for
homeowners. The Community Associations Institute and ECHO
had concerns about the optional procedures creating
confusion for associations and an implied legal standard of
care. At the request of the committee, the bill was put
over.
While the parties continued to negotiate as this analysis
went to print, the author and sponsor were inclined to
amend the bill in committee in three substantive ways:
Remove all provisions relating to architectural review,
including the fair and reasonable standard as well as the
optional procedures.
Remove the optional rulemaking procedures.
Strengthen the mandatory procedures for rule changes to
require 10 day advance notice of proposed rule changes,
to require delivery by one of the methods described in
the bill, and to require delivery of all rule changes to
members once the changes are adopted.
AB 512
Page 5
In essence, the remaining bill would now be limited to
issues affecting rule changes. Rules would have to meet
specified criteria to be enforceable, and in order to
adopt, repeal or amend rules, an association would be
required to provide advance notice, allow public comment,
and give homeowners the right to subject rule changes to
referendum.
Previous Actions:
Assembly Floor 77-0
Assembly Judiciary 11-0
Assembly Housing 9-0
Support and Opposition : (7/2/03)
Support : California Law Revision Commission (sponsor)
American Homeowners Resource Center
Opposition : Congress of California Seniors, unless amended