BILL NUMBER: AB 1836 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Harman
JANUARY 22, 2004
An act to amend Sections 1354 and 1366.3 of, to amend and renumber
Section 1368.4 of, and to add Article 5 (commencing with Section
1363.810) to Chapter 4 of, and Article 1 (commencing with Section
1368.3) and Article 2 (commencing with Section 1369.510) to Chapter 7
of, Title 6 of Part 4 of Division 2 of, the Civil Code, and to
repeal Section 383 of the Code of Civil Procedure, relating to common
interest developments.
LEGISLATIVE COUNSEL'S DIGEST
AB 1836, as introduced, Harman. Common interest developments:
dispute resolution.
Existing law provides that a common interest development
association has standing to institute, defend, settle, or intervene
in litigation, arbitration, mediation, or administrative proceedings,
in various circumstances, including enforcement of the governing
documents. The existing Davis-Stirling Common Interest Development
Act requires, before a common interest development association or an
owner of a separate interest therein brings certain actions related
to the enforcement of the development's governing documents, that the
parties endeavor to submit their dispute to alternative dispute
resolution, as specified.
This bill would revise and recast these provisions. The bill
would specify that a common interest development association and an
owner of a separate interest may enforce governing documents other
than the declaration. The bill would create a new dispute resolution
procedure for conflicts between an association and a member, to be
applied when the dispute concerns specified subjects. The bill would
require an association to provide a fair, reasonable, and
expeditious procedure for resolving these disputes, as defined by
certain minimum standards, and would provide a procedure for
associations that do not have a procedure of their own that meets the
minimum standards, subject to good faith implementation.
The bill would revise the existing dispute resolution provisions,
described above, to clarify their application to other nonjudicial
processes and to broaden their applicability to include actions
enforcing the Davis-Stirling Common Interest Development Act and the
Nonprofit Mutual Benefit Corporation Law. Among other things, the
bill would also provide for the tolling of a statute of limitations
in certain circumstances, expand the permissible methods of service
of a request to submit a dispute to the resolution process, and
change the confidentiality protections applied to these procedures.
The bill would make additional technical and conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1354 of the Civil Code is amended to read:
1354. (a) The covenants and restrictions in the declaration shall
be enforceable equitable servitudes, unless unreasonable, and shall
inure to the benefit of and bind all owners of separate interests in
the development. Unless the declaration states otherwise, these
servitudes may be enforced by any owner of a separate interest or by
the association, or by both.
(b) Unless the applicable time limitation for commencing
the action would run within 120 days, prior to the filing of a civil
action by either an association or an owner or a member of a common
interest development solely for declaratory relief or injunctive
relief, or for declaratory relief or injunctive relief in conjunction
with a claim for monetary damages, other than association
assessments, not in excess of five thousand dollars ($5,000), related
to the enforcement of the governing documents, the parties shall
endeavor, as provided in this subdivision, to submit their dispute to
a form of alternative dispute resolution such as mediation or
arbitration. The form of alternative dispute resolution chosen may
be binding or nonbinding at the option of the parties. Any party to
such a dispute may initiate this process by serving on another party
to the dispute a Request for Resolution. The Request for Resolution
shall include (1) a brief description of the dispute between the
parties, (2) a request for alternative dispute resolution, and (3) a
notice that the party receiving the Request for Resolution is
required to respond thereto within 30 days of receipt or it will be
deemed rejected. Service of the Request for Resolution shall be in
the same manner as prescribed for service in a small claims action as
provided in Section 116.340 of the Code of Civil Procedure. Parties
receiving a Request for Resolution shall have 30 days following
service of the Request for Resolution to accept or reject alternative
dispute resolution and, if not accepted within the 30-day period by
a party, shall be deemed rejected by that party. If alternative
dispute resolution is accepted by the party upon whom the Request for
Resolution is served, the alternative dispute resolution shall be
completed within 90 days of receipt of the acceptance by the party
initiating the Request for Resolution, unless extended by written
stipulation signed by both parties. The costs of the alternative
dispute resolution shall be borne by the parties.
(c) At the time of filing a civil action by either an association
or an owner or a member of a common interest development solely for
declaratory relief or injunctive relief, or for declaratory relief or
injunctive relief in conjunction with a claim for monetary damages
not in excess of five thousand dollars ($5,000), related to the
enforcement of the governing documents, the party filing the action
shall file with the complaint a certificate stating that alternative
dispute resolution has been completed in compliance with subdivision
(b). The failure to file a certificate as required by subdivision
(b) shall be grounds for a demurrer pursuant to Section 430.10 of the
Code of Civil Procedure or a motion to strike pursuant to Section
435 of the Code of Civil Procedure unless the filing party certifies
in writing that one of the other parties to the dispute refused
alternative dispute resolution prior to the filing of the complaint,
that preliminary or temporary injunctive relief is necessary, or that
alternative dispute resolution is not required by subdivision (b),
because the limitation period for bringing the action would have run
within the 120-day period next following the filing of the action, or
the court finds that dismissal of the action for failure to comply
with subdivision (b) would result in substantial prejudice to one of
the parties.
(d) Once a civil action specified in subdivision (a) to enforce
the governing documents has been filed by either an association or an
owner or member of a common interest development, upon written
stipulation of the parties the matter may be referred to alternative
dispute resolution and stayed. The costs of the alternative dispute
resolution shall be borne by the parties. During this referral, the
action shall not be subject to the rules implementing subdivision (c)
of Section 68603 of the Government Code.
(e) The requirements of subdivisions (b) and (c) shall not apply
to the filing of a cross-complaint.
(f) In any action specified in subdivision (a) to enforce the
governing documents, the prevailing party shall be awarded reasonable
attorney's fees and costs. Upon motion by any party for attorney's
fees and costs to be awarded to the prevailing party in these
actions, the court, in determining the amount of the award, may
consider a party's refusal to participate in alternative dispute
resolution prior to the filing of the action.
(g) Unless consented to by both parties to alternative dispute
resolution that is initiated by a Request for Resolution under
subdivision (b), evidence of anything said or of admissions made in
the course of the alternative dispute resolution process shall not be
admissible in evidence, and testimony or disclosure of such a
statement or admission may not be compelled, in any civil action in
which, pursuant to law, testimony can be compelled to be given.
(h) Unless consented to by both parties to alternative dispute
resolution that is initiated by a Request for Resolution under
subdivision (b), documents prepared for the purpose or in the course
of, or pursuant to, the alternative dispute resolution shall not be
admissible in evidence, and disclosure of these documents may not be
compelled, in any civil action in which, pursuant to law, testimony
can be compelled to be given.
(i) Members of the association shall annually be provided a
summary of the provisions of this section, which specifically
references this section. The summary shall include the following
language:
"Failure by any member of the association to comply with the
prefiling requirements of Section 1354 of the Civil Code may result
in the loss of your rights to sue the association or another member
of the association regarding enforcement of the governing documents."
The summary shall be provided either at the time the pro forma
budget required by Section 1365 is distributed or in the manner
specified in Section 5016 of the Corporations Code.
(j) Any Request for Resolution sent to the owner of a separate
interest pursuant to subdivision (b) shall include a copy of this
section A governing document other than the
declaration may be enforced by the association against an owner of a
separate interest or by an owner of a separate interest against the
association.
(c) In an action to enforce the governing documents, the
prevailing party shall be awarded reasonable attorney's fees and
costs .
SEC. 2. Article 5 (commencing with Section 1363.810) is added to
Chapter 4 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:
Article 5. Dispute Resolution Procedure
1363.810. (a) This article applies to a dispute between an
association and a member involving their rights, duties, or
liabilities under this title, under the Nonprofit Mutual Benefit
Corporation Law (Part 3 (commencing with Section 7110) of Division 2
of Title 1 of the Corporations Code), or under the governing
documents of the common interest development or association.
(b) This article supplements, and does not replace, Article 2
(commencing with Section 1369.510) of Chapter 7, relating to
alternative dispute resolution as a prerequisite to an enforcement
action.
(c) This article does not apply to a dispute that is subject to
subdivision (c) of Section 1367.1.
1363.820. (a) An association shall provide a fair, reasonable,
and expeditious procedure for resolving a dispute within the scope of
this article.
(b) A dispute resolution procedure provided by an association is
presumed to be fair, reasonable, and expeditious. The presumption
created by this subdivision is a presumption affecting the burden of
proof.
(c) If an association does not provide a fair, reasonable, and
expeditious procedure for resolving a dispute within the scope of
this article, the procedure provided in Section 1363.840 applies and
satisfies the requirement of subdivision (a).
1363.830. A fair, reasonable, and expeditious dispute resolution
procedure shall at a minimum satisfy all of the following
requirements:
(a) The procedure may be invoked by either party to the dispute.
(b) If the procedure is invoked by a member, the association shall
participate in, and is bound by any resolution of the dispute
pursuant to, the procedure.
(c) If the procedure is invoked by the association, the member may
elect not to participate in the procedure. If the member
participates but the dispute is resolved other than by agreement of
the member, the member shall have a right of appeal to the
association's board of directors.
(d) An agreement reached pursuant to the procedure, that is not in
conflict with the law or the governing documents, binds the parties
and is judicially enforceable.
(e) A member of the association shall not be charged a fee to
participate in the process.
1363.840. (a) This section applies in an association that does
not otherwise provide a fair, reasonable, and expeditious dispute
resolution procedure. The procedure provided in this section is
fair, reasonable, and expeditious, within the meaning of this
article, subject to good faith implementation by an association.
(b) Either party to a dispute within the scope of this article may
invoke the following procedure:
(1) The party may request the other party to meet and confer in an
effort to resolve the dispute. The request shall be in writing.
(2) A member of an association may refuse a request to meet and
confer. The association may not refuse a request to meet and confer.
(3) The association's board of directors shall designate a member
of the board to meet and confer.
(4) The parties shall meet promptly at a mutually convenient time
and place, explain their positions to each other, and confer in an
effort to resolve the dispute.
(5) A resolution of the dispute agreed to by the parties shall be
memorialized in writing and signed by the parties, including the
board designee on behalf of the association.
(c) An agreement reached under this section binds the parties and
is judicially enforceable if both of the following conditions are
satisfied:
(1) The agreement is not in conflict with law or the governing
documents of the common interest development or association.
(2) The agreement is either consistent with the authority granted
by the board of directors to its designee or the agreement is
ratified by the board of directors.
SEC. 3. Section 1366.3 of the Civil Code is amended to read:
1366.3. (a) The exception for disputes related to association
assessments in subdivision (b) of Section 1354 shall
Article 2 (commencing with Section 1369.510) of
Chapter 7 does not apply if, in a dispute between the owner of
a separate interest and the association regarding the assessments
imposed by the association, the owner of the separate interest
chooses to pay in full to the association all of the charges listed
in paragraphs (1) to (4), inclusive, and states by written notice
that the amount is paid under protest, and the written notice is
mailed by certified mail not more than 30 days from the recording of
a notice of delinquent assessment in accordance with Section 1367 or
1367.1; and in those instances, the association shall inform the
owner that the owner may resolve the dispute through alternative
dispute resolution as set forth in Section 1354
Article 2 (commencing with Section 1369.510) of Chapter 7
, civil action, and any other procedures to resolve the dispute that
may be available through the association.
(1) The amount of the assessment in dispute.
(2) Late charges.
(3) Interest.
(4) All reasonable fees and costs associated with the preparation
and filing of a notice of delinquent assessment, including all
mailing costs, and including reasonable attorney's fees not to exceed
four hundred twenty-five dollars ($425).
(b) The right of any owner of a separate interest to utilize
alternative dispute resolution under this section may not be
exercised more than two times in any single calendar year, and not
more than three times within any five calendar years. Nothing within
this section shall preclude any owner of a separate interest and the
association, upon mutual agreement, from entering into alternative
dispute resolution for a number of times in excess of the limits set
forth in this section. The owner of a separate interest may request
and be awarded through alternative dispute resolution reasonable
interest to be paid by the association on the total amount paid under
paragraphs (1) to (4), inclusive, of subdivision (a), if it is
determined through alternative dispute resolution that the assessment
levied by the association was not correctly levied.
SEC. 4. Article 1 (commencing with Section 1368.3) is added to
Chapter 7 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:
Article 1. Miscellaneous Provisions
1368.3. An association established to manage a common interest
development has standing to institute, defend, settle, or intervene
in litigation, arbitration, mediation, or administrative proceedings
in its own name as the real party in interest and without joining
with it the individual owners of the common interest development, in
matters pertaining to the following:
(a) Enforcement of the governing documents.
(b) Damage to the common area.
(c) Damage to a separate interest that the association is
obligated to maintain or repair.
(d) Damage to a separate interest that arises out of, or is
integrally related to, damage to the common area or a separate
interest that the association is obligated to maintain or repair.
1368.4. (a) In an action maintained by an association pursuant to
subdivision (b), (c), or (d) of Section 1368.3, the amount of
damages recovered by the association shall be reduced by the amount
of damages allocated to the association or its managing agents in
direct proportion to their percentage of fault based upon principles
of comparative fault. The comparative fault of the association or
its managing agents may be raised by way of defense, but shall not be
the basis for a cross-action or separate action against the
association or its managing agents for contribution or implied
indemnity, where the only damage was sustained by the association or
its members. It is the intent of the Legislature in enacting this
subdivision to require that comparative fault be pleaded as an
affirmative defense, rather than a separate cause of action, where
the only damage was sustained by the association or its members.
(b) In an action involving damages described in subdivision (b),
(c), or (d) of Section 1368.3, the defendant or cross-defendant may
allege and prove the comparative fault of the association or its
managing agents as a setoff to the liability of the defendant or
cross-defendant even if the association is not a party to the
litigation or is no longer a party whether by reason of settlement,
dismissal, or otherwise.
(c) Subdivisions (a) and (b) apply to actions commenced on or
after January 1, 1993.
(d) Nothing in this section affects a person's liability under
Section 1431, or the liability of the association or its managing
agent for an act or omission which causes damages to another.
SEC. 5. Section 1368.4 of the Civil Code is amended and renumbered
to read:
1368.4.
1368.5. (a) Not later than 30 days prior to the filing of
any civil action by the association against the declarant or other
developer of a common interest development for alleged damage to the
common areas, 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, the board of
directors of the association shall a provide written notice to each
member of the association who appears on the records of the
association when the notice is provided. This notice shall specify
all of the following:
(1) That a meeting will take place to discuss problems that may
lead to the filing of a civil action.
(2) The options, including civil actions, that are available to
address the problems.
(3) The time and place of this meeting.
(b) Notwithstanding subdivision (a), if the association has reason
to believe that the applicable statute of limitations will expire
before the association files the civil action, the association may
give the notice, as described above, within 30 days after the filing
of the action.
SEC. 6. Article 2 (commencing with Section 1369.510) is added to
Chapter 7 of Title 6 of Part 4 of Division 2 of the Civil Code, to
read:
Article 2. Alternative Dispute Resolution
1369.510. As used in this article:
(a) "Alternative dispute resolution" means mediation, arbitration,
conciliation, or other nonjudicial procedure that involves a neutral
party in the decisionmaking process. The form of alternative
dispute resolution chosen pursuant to this article may be binding or
nonbinding at the option of the parties.
(b) "Enforcement action" means a civil action or proceeding, other
than a cross-complaint, for any of the following purposes:
(1) Enforcement of this title.
(2) Enforcement of the Nonprofit Mutual Benefit Corporation Law
(Part 3 (commencing with Section 7110) of Division 2 of Title 1 of
the Corporations Code).
(3) Enforcement of the governing documents of a common interest
development.
1369.520. (a) An association or an owner or a member of a common
interest development may not file an enforcement action unless the
parties have endeavored to submit their dispute to alternative
dispute resolution.
(b) This section applies only to an enforcement action that is
solely for declaratory, injunctive, or writ relief, or for that
relief in conjunction with a claim for monetary damages not in excess
of five thousand dollars ($5,000). Except as provided in Section
1366.3, this section does not apply to an action for association
assessments. This section does not apply to a small claims action.
1369.530. (a) Any party to a dispute may initiate the process
required by Section 1369.520 by serving on all other parties to the
dispute a Request for Resolution. The Request for Resolution shall
include all of the following:
(1) A brief description of the dispute between the parties.
(2) A request for alternative dispute resolution.
(3) A notice that the party receiving the Request for Resolution
is required to respond within 30 days of receipt or the request will
be deemed rejected.
(4) If the party on whom the request is served is the owner of a
separate interest, a copy of this article.
(b) Service of the Request for Resolution shall be by personal
delivery, first class mail, express mail, facsimile transmission, or
other means reasonably calculated to provide the party on whom the
request is served actual notice of the request.
(c) A party on whom a Request for Resolution is served has 30 days
following service to accept or reject the request. If a party does
not accept the request within that period, the request is deemed
rejected by the party.
1369.540. (a) If the party on whom a Request for Resolution is
served accepts the request, the parties shall complete the
alternative dispute resolution within 90 days after the party
initiating the request receives the acceptance, unless this period is
extended by written stipulation signed by both parties.
(b) Chapter 2 (commencing with Section 1115) of Division 9 of the
Evidence Code applies to any form of alternative dispute resolution
initiated by a Request for Resolution under this article, other than
arbitration.
(c) The costs of the alternative dispute resolution shall be borne
by the parties.
1369.550. If the applicable time limitation for commencing an
enforcement action would run within 120 days after service of a
Request for Resolution, the time limitation is extended to the 120th
day after service. If the parties have stipulated to an extension of
the alternative dispute resolution period beyond the 120th day after
service of a Request for Resolution pursuant to Section 1369.540, a
time limitation that would expire during the alternative dispute
resolution period is extended to the end of the stipulated period.
1369.560. (a) At the time of commencement of an enforcement
action, the party commencing the action shall file with the initial
pleading a certificate stating that alternative dispute resolution
has been completed in compliance with this article.
(b) Failure to file a certificate pursuant to subdivision (a) is
grounds for a demurrer or a motion to strike unless one of the
following conditions is satisfied:
(1) The party commencing the action certifies in writing that one
of the other parties to the dispute refused alternative dispute
resolution before commencement of the action, or that preliminary or
temporary injunctive relief is necessary.
(2) The court finds that dismissal of the action for failure to
comply with this article would result in substantial prejudice to one
of the parties.
1369.570. (a) After an enforcement action is commenced, on
written stipulation of the parties the matter may be referred to
alternative dispute resolution and stayed.
(b) The costs of the alternative dispute resolution shall be borne
by the parties.
(c) During a referral, the action is not subject to the rules
implementing subdivision (c) of Section 68603 of the Government Code.
1369.580. In an enforcement action in which fees and costs may be
awarded, the court, in determining the amount of the award, may
consider a party's refusal to participate in alternative dispute
resolution before commencement of the action.
1369.590. (a) An association shall annually provide its members a
summary of the provisions of this article that specifically
references this article. The summary shall include the following
language:
"Failure of a member of the association to comply with the prefiling
requirements of Section 1369.520 of the Civil Code may result in the
loss of your right to sue the association or another member of the
association regarding enforcement of the governing documents or the
applicable law."
(b) The summary shall be provided either at the time the pro forma
budget required by Section 1365 is distributed or in the manner
prescribed in Section 5016 of the Corporations Code.
SEC. 7. Section 383 of the Code of Civil Procedure is repealed.
383. (a) An association established to manage a common interest
development shall have standing to institute, defend, settle, or
intervene in litigation, arbitration, mediation, or administrative
proceedings in its own name as the real party in interest and without
joining with it the individual owners of the common interest
development, in matters pertaining to the following:
(1) Enforcement of the governing documents.
(2) Damage to the common areas.
(3) Damage to the separate interests which the association is
obligated to maintain or repair.
(4) Damage to the separate interests which 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.
(b) In any action maintained by an association pursuant to
paragraph (2), (3), or (4) of subdivision (a), the amount of damages
recovered by the association shall be reduced by the amount of
damages allocated to the association or its managing agents in direct
proportion to their percentage of fault based upon principles of
comparative fault. In such an action, the comparative fault of the
association or its managing agents may be raised by way of defense,
but shall not be the basis for any cross-action or separate action
against the association or its managing agents for contribution or
implied indemnity, where the only damage was sustained by the
association or its members. It is the intent of the Legislature in
enacting this subdivision to require that comparative fault be plead
as an affirmative defense, rather than a separate cause of action,
where the only damage was sustained by the association or its
members.
(c) In any action involving damages described in paragraph (2),
(3), or (4) of subdivision (a), the defendant or cross-defendant may
allege and prove the comparative fault of the association or its
managing agents as a setoff to his or her liability even if the
association is not a party to the litigation or is no longer a party
whether by reason of settlement, dismissal, or otherwise.
(d) Subdivisions (b) and (c) apply to actions commenced on or
after January 1, 1993.
(e) Nothing in this section shall affect (1) any
person's liability under Section 1431 of the Civil Code, or (2) the
liability of the association or its managing agent for any act or
omission which causes damages to another.