BILL ANALYSIS
AB 1836
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Date of Hearing: March 24, 2004
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Alan Lowenthal, Chair
AB 1836 (Harman) - As Introduced: January 22, 2004
SUBJECT : Common Interest Developments: dispute resolution
SUMMARY : Enacts recommendations by the California Law Revision
Commission revising the requirements and process for alternative
dispute resolution used by homeowner associations and
homeowners. Specifically, this bill :
1)Requires a fair and reasonable process be provided internally
by an association for members and the board to resolve
disputes through a meet and confer mechanism not requiring a
neutral third party.
2)Requires that in order for a meet and confer process to be
deemed fair and reasonable it include the following:
a) The right for either an association or a homeowner to
invoke the process. However, a homeowner may refuse a
request to meet and confer but an association may not
refuse;
b) The right of appeal by the homeowner to the board of the
association; and,
c) No fee shall be charged to the member.
3)Requires that a party attempt to submit their dispute to
alternative dispute resolution prior to filing suit if they
are seeking declaratory, injunctive or writ relief or for that
relief in conjunction with a claim of damages less than
$5,000.
4)Defines alternative dispute resolution as mediation,
arbitration, conciliation or other nonjudicial procedure
involving a neutral third party. The form may be binding or
nonbinding at the choice of the parties involved.
5)Requires alternative dispute resolution prior to filing suit
for any action to enforce the Davis Stirling Act, Nonprofit
Mutual Benefit Corporation Law, or the governing documents of
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the association.
6)Requires that in order to initiate the process of alternative
dispute resolution any party may serve all other parties with
a Request for Resolution that includes:
a) A brief description of the dispute and a request for
alternative dispute resolution;
b) A notice that the receiving party is required to respond
within 30 days or the request will be deemed denied; and,
c) A copy of the articles enacted by this bill establishing
the process for alternative dispute resolution.
7)Requires a Request for Resolution to be by personal delivery,
first class mail, express mail, fax, or other means that would
reasonably be assumed to notify the receiving party.
8)Provides that a court may take into account a party's prior
refusal for requested alternative dispute resolution when
determining the amount of an award in a subsequent suit.
EXISTING LAW
1)Requires meetings of the association to be conducted in a
recognized parliamentary procedure and to provide notice to
members of an action that will be presented for action by the
membership. (Civil Code Section 1363)
2)Requires all meetings to be open to the membership unless the
board meets in executive session to consider litigation,
member discipline, personnel matters, or matters relating to
the formation of contracts with third parties. (Civil Code
Section 1363.05)
3)Requires the minutes, draft minutes, or summary of the minutes
of a board meeting to be distributed within 30 days of the
meeting. (Civil Code Section 1363.05)
4)Provides that a homeowner may dispute assessments provided
they pay the amount owed and any fees under protest while the
dispute is either resolved through alternative dispute
resolution or the courts. (Civil Code Section 1366.3)
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FISCAL EFFECT : Unknown.
COMMENTS :
Two tiers prior to court action
This bill establishes a two tier process to address disputes
prior to a party pursuing enforcement through the courts. The
first step is an informal meet and confer process that seeks to
encourage personal communication between a homeowner and their
board. In most cases disputes have gone beyond this step but
the California Law Revision Commission argues that some
associations need these basic ground rules. The meet and confer
process encourages communication and does not bind any party to
a decision merely by the fact that they agree to meet and
confer. This procedure is designed to be a no cost process that
does not call for a third party.
The second step reforms and strengthens the existing process for
alternative dispute resolution. Specifically, alternative
dispute resolution is expanded to those actions seeking to
enforce the Davis-Stirling Act or the Nonprofit Mutual Benefit
Corporation Law. This means that any of the provisions of law
in dispute ranging from requirements that financial documents be
made public, as required by AB 104 (Lowenthal), Chapter 375,
Statutes of 2003, or restrictions on pets (Civil Code Section
1360.5), shall endeavor to submit the issue to alternative
dispute resolution prior to pursuing court action.
Opposition
The Congress of California Seniors objects to provisions of the
bill including a presumption that the informal meet and confer
process established by an association is fair and reasonable.
Essentially, this presumption means a homeowner has the burden
of proving that the process adopted by the association is not
fair and reasonable. However, the practical effect of removing
this presumption in the bill would not change the burden from
being on the homeowner. According to the California Law
Revision Commission this presumption is a restatement of
existing law that requires any person bringing a suit to prove
that the defendant is in violation of the law.
In addition, the Congress claims that the association will
devise the alternative dispute resolution process. The bill
though clearly states that alternative dispute resolution means
mediation, arbitration, conciliation, or other nonjudicial
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procedure involving a neutral third party. If the specific
terms of the alternative dispute resolution cannot be agreed to
the homeowner still has the right to go to court, including the
low cost option of small claims court.
Lastly, the Congress points out that this alternative dispute
resolution process would not apply to what are often the most
pressing disputes, the payment of assessments. However, the
California Law Revision Commission has pointed out in their
response that:
Effective in 2003, Civil Code Section 1367.1 (c) provides
an informal procedure for disputing an assessment or
requesting a payment plan for an overdue assessment. That
provision serves much the same purpose as the proposed meet
and confer requirement. The Law Revision Commission did
not want its general procedure to override a procedure
adopted by the Legislature to address a specific type of
dispute.
In fact, the bill that added the meet and confer process for
disputed assessments, AB 2289 (Kehoe), Chapter 1111, Statutes of
2002, was strongly supported by the Congress of California
Seniors.
This proposed bill does not in fact preclude the use of
alternative dispute resolution for assessments. Instead, it
maintains the requirements of existing law, which are that a
homeowner has the right to request and obtain a meeting with the
board or pay the assessment under protest.
Lastly, in regards to assessments the disputes that gain the
greatest attention are not based on whether or not a homeowner
paid them or not but instead on what happens when they do not
pay. Specifically, the use of non-judicial foreclosure by
associations has gained recent attention due to the fact that
some persons have lost their homes for what are admittedly small
amounts of money. It may be appropriate to argue that the
current system for enforcing assessments are unfair but those
provisions of law are separate from the process of alternative
dispute resolution. Would it be any more fair if a third party
found that a homeowner indeed did not pay their assessment thus
allowing the association to foreclose on their home?
Double referred : The Assembly Committee on Rules referred AB
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1836 to Housing and Community Development Committee and
Judiciary Committee. If AB 1836 passes this committee, the bill
must be referred to the Assembly Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Alliance for Retired Americans
Congress of California Seniors
Older Women's League of California
Analysis Prepared by : Jay Barkman / H. & C.D. / (916)
319-2085