BILL NUMBER: AB 770 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 25, 2005
AMENDED IN ASSEMBLY MARCH 31, 2005
INTRODUCED BY Assembly Member Mullin
FEBRUARY 18, 2005
An act to amend Section 11504 of the Business and Professions
Code, and to amend Sections 1369.510 and 1373 of, to add
Section 1363.7 to, and to add Chapter 11 (commencing with Section
1380.010) to Title 6 of Part 4 of Division 2 of, the Civil Code,
relating to common interest developments, and making an appropriation
therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 770, as amended, Mullin. Common interest developments:
ombudsperson.
(1) Existing law requires a person who either provides or
contemplates providing the services of a common interest development
manager to a community association to annually disclose to the board
of directors of the community association specified information,
including whether or not he or she has met certain requirements to be
called a certified common interest development manager and the
location of his or her primary office.
This bill would require this information to be disclosed in
writing, and would additionally require the person to disclose
whether or not he or she has read the governing documents of the
community association.
(2) The Davis-Stirling Common Interest
Development Act defines and regulates common interest developments,
which include condominiums and planned developments. The act requires
that a common interest development be managed by an association, and
establishes requirements for association operating rules and
meetings and for the resolution of specified disputes. Among other
things, the act requires the association that manages a development
to provide a fair, reasonable, and expeditious procedure for
resolving disputes between the association and members of the
association involving their rights, duties, or liabilities under the
act. The act also requires an association or an owner of a separate
interest or a member of an association to endeavor to submit their
dispute to alternative dispute resolution before they file certain
enforcement actions in the superior court.
This bill would, until January 1, 2011, establish in the
Department of Consumer Affairs, the Office of the Common Interest
Development Ombudsperson. The bill would require the Ombudsperson,
among other things, to offer training materials and courses to common
interest development directors, officers, and owners, in subjects
relevant to the operation of a common interest development and the
rights and duties of an association or owner. The bill would require
the Ombudsperson to maintain a toll-free telephone number and
Internet Web site for purposes of further providing that information
and assistance, and would require an association director or agent to
meet certain requirements in that regard. The bill would authorize
the Ombudsperson to provide assistance in resolving common interest
development disputes, and would require a specified fee for that
resolution. The bill would impose a biennial association fee on
common interest development associations to fund the administration
of the provisions of the bill, for deposit in a newly created fund,
the Fee Account of the Common Interest Development Ombudsperson Fund.
Because the funds in that account would be continuously
appropriated, the bill would make an appropriation.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 11504 of the
Business and Professions Code is amended to read:
11504.
(a) On or before September 1, 2003, and on
an annual basis thereafter, a person who either provides or
contemplates providing the services of a common interest development
manager to a community association shall disclose to the board of
directors of the community association the following information
in writing :
(a)
(1) Whether or not the common interest development
manager has met the requirements of Section 11502 so he or she may be
called a certified common interest development manager.
(b)
(2) The name, address, and telephone number of the
professional association that certified the common interest
development manager, the date the manager was certified, and the
status of the certification.
(c)
(3) The location of his or her primary office.
(d)
(4) Prior to entering into or renewing a contract with
a community association, the common interest development manager
shall disclose to the governing board of the community association
whether the fidelity insurance of the community manager or his or her
employer covers the operating and reserve funds of the community
association. This requirement may not be construed to compel or
require a community association or common interest development
manager to require fidelity insurance.
(e)
(5) Possession of an active real estate license, if
applicable.
(6) Whether or not the common interest development manager has
read the governing documents of the community association.
(b) This section may not preclude a common
interest development manager from disclosing information as required
in Section 1363.1 of the Civil Code.
SECTION 1.
SEC. 2. Section 1363.7 is added to the Civil Code, to read:
1363.7.
An association shall provide its members with annual written
notice of the Internet Web site address and toll-free telephone
number of the Common Interest Development Ombudsperson established
pursuant to Chapter 11 (commencing with Section 1380.010).
SEC. 2.
SEC. 3. Section 1369.510 of the Civil Code is amended to
read:
1369.510.
As used in this article:
(a) "Alternative dispute resolution" means mediation, arbitration,
conciliation, or other nonjudicial procedure, including mediation
pursuant to Section 1380.300, 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, with
the voluntary consent 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.
SEC. 3.
SEC. 4. Section 1373 of the Civil Code is amended to read:
1373.
(a) The following provisions do not apply to a common interest
development that is limited to industrial or commercial uses by
zoning or by a declaration of covenants, conditions, and restrictions
that has been recorded in the official records of each county in
which the common interest development is located:
(1) Section 1356.
(2) Article 4 (commencing with Section 1357.100) of Chapter 2.
(3) Subdivision (b) of Section 1363.
(4) Section 1365.
(5) Section 1365.5.
(6) Subdivision (b) of Section 1366.
(7) Section 1366.1.
(8) Section 1368.
(9) Section 1378.
(10) Chapter 11 (commencing with Section 1380.010).
(b) The Legislature finds that the provisions listed in
subdivision (a) are appropriate to protect purchasers in residential
common interest developments , ;
however, the provisions may not be necessary to protect purchasers in
commercial or industrial developments since the application of those
provisions could result in unnecessary burdens and costs for these
types of developments.
SEC. 4.
SEC. 5. Chapter 11 (commencing with Section 1380.010) is
added to Title 6 of Part 4 of Division 2 of the Civil Code, to read:
CHAPTER 11. Common Interest Development Ombudsperson Pilot
Project
Article 1. Definitions
1380.010.
Unless the provision or context otherwise requires, the
definitions in this article govern the construction of this chapter.
1380.020.
"Owner" means the owner of a separate interest.
1380.030.
"Person" includes a natural person, firm, association,
organization, partnership, business trust, corporation, limited
liability company, or public entity.
Article 2. Administration
1380.100.
The Legislature finds and declares all of the following:
(a) There are more than 36,000 residential common interest
developments in California, comprising more than 3,000,000 dwellings.
Common interest developments comprise approximately one-quarter of
the state's housing stock.
(b) Managing a common interest development is a complex
responsibility. Community associations are run by volunteer directors
who may have little or no prior experience in managing real
property, operating a nonprofit association or corporation, complying
with the law governing common interest developments, and
interpreting and enforcing restrictions and rules imposed by the
governing documents of the common interest development. Homeowners
may not fully understand their rights and obligations under the law
and the governing documents. Mistakes and misunderstandings are
inevitable and may lead to serious, costly, and divisive problems.
The Common Interest Development Ombudsperson seeks to educate
community association officers and homeowners as to their legal
rights and obligations. Effective education can prevent or reduce the
severity of problems within a common interest development.
(c) The principal remedy for a violation of common interest
development law is private litigation. Litigation is not an ideal
remedy for many common interest development disputes, where the
disputants are neighbors who must maintain ongoing relationships. The
adversarial nature of litigation can disrupt these relationships,
creating animosity that degrades the quality of life within the
community and makes future disputes more likely to arise. Litigation
imposes costs on a common interest development community as a whole,
costs that must be paid by all members through increased assessments.
Many homeowners cannot afford to bring a lawsuit and are effectively
denied the benefit of laws designed for their protection. The Common
Interest Development Ombudsperson provides a neutral, nonjudicial
forum for resolution of common interest development disputes. Many
disputes can be resolved inexpensively, informally, and amicably
through ombudsperson-facilitated mediation.
(d) Anecdotal accounts of abuses within common interest
developments create continuing public demand for reform of common
interest development law. This results in frequent changes to the
law, making it more difficult to understand and apply and imposing
significant transitional costs on common interest developments
statewide. By collecting empirical data on the nature and incidence
of problems within common interest developments, the Common Interest
Development Ombudsperson provides a sound basis for prioritizing
reform efforts, thereby increasing the stability of common interest
development law.
(e) The costs of the Common Interest Development Ombudsperson
Pilot Project shall be borne entirely by common interest development
homeowners, through imposition of a biennial fee.
1380.110.
(a) There is in the Department of Consumer Affairs the Office of
the Common Interest Development Ombudsperson, under the supervision
and control of the director of the Department
Director of Consumer Affairs.
(b) The director of the Department Director
of Consumer Affairs shall employ a Common Interest Development
Ombudsperson and other officers and employees as necessary to
discharge the requirements of this chapter. The Common Interest
Development Ombudsperson shall have the powers delegated by the
director.
(c) The Ombudsperson shall adopt rules governing practices and
procedures under this chapter. Any rule adopted under this
subdivision is subject to the rulemaking provisions of the
Administrative Procedure Act (Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(d) Information and advice provided by the Ombudsperson has no
binding legal effect and is not subject to the rulemaking provisions
of the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code).
(e) There shall be no liability on the part of, and no cause of
action of any nature shall arise against, the State of California or
any of its employees, agents, or representatives for providing or
failing to provide information or advice pursuant to this chapter.
(f)
(e) The Ombudsperson may convene an advisory committee
to make recommendations on matters within the Ombudsperson's
jurisdiction. A member of an advisory committee shall receive per
diem and expenses pursuant to Section 103 of the Business and
Professions Code. In selecting the members of an advisory committee,
the Ombudsperson shall ensure a fair representation of the interests
involved.
1380.120.
The Common Interest Development Ombudsperson shall report annually
to the Legislature, no later than October 1 of each year. The report
shall include all of the following information:
(a) Annual workload and performance data, including the number of
requests for assistance received, the manner in which a request was
or was not resolved, and the staff time required to resolve the
inquiry. For each category of data, the Ombudsperson shall provide
subtotals based on the type of question or dispute involved in the
request.
(b) Analysis of the most common and serious types of disputes
within common interest developments, along with any recommendations
for statutory reform to reduce the frequency or severity of those
disputes.
(c) On or before January 1, 2009, the Ombudsperson shall submit
recommendations to the Legislature on the following topics:
(1) Whether the Ombudsperson should be authorized to enforce
common interest development law.
(2) Whether the Ombudsperson should be authorized to oversee
association elections.
(3) Whether the scope of application of Section 1380.230 should be
narrowed or broadened.
1380.130.
(a) On filing information with the Secretary of State every two
years, pursuant to subdivision (a) of Section 1363.6, an association
shall submit a Common Interest Development Ombudsperson Fee. This fee
is in addition to the fee submitted pursuant to Section 1363.6.
Failure to submit the Common Interest Development Ombudsperson Fee is
deemed noncompliance with Section 1363.6.
(b) The Common Interest Development Ombudsperson Fee shall equal
the number of separate interests within the association multiplied by
the biennial fee amount. The initial biennial fee amount is ten
dollars ($10).
(c) An association is excused from paying the fee for a separate
interest if another association has paid the fee for that separate
interest. An association that is excused from paying the fee for a
separate interest shall certify, on a form developed by the Secretary
of State for that purpose, that another association has paid the fee
for that separate interest. The Ombudsperson may adopt, by
regulation, a rule governing which association is required to pay the
fee for a separate interest that is part of more than one
association.
(d) The Common Interest Development Ombudsperson shall increase or
decrease the biennial fee amount every two years to provide only the
revenue that it estimates will be necessary for its operation during
the next two-year period. The biennial fee amount shall not exceed
twenty dollars ($20).
(e) Subdivision (b) of Section 1366 does not limit an
assessment increase necessary to recover the fee imposed by this
section.
1380.140.
Common Interest Development Ombudsperson fee revenue received by
the Secretary of State and fee revenue received by the Common
Interest Development Ombudsperson shall be transferred to the State
Treasurer and placed in the Fee Account of the Common Interest
Development Ombudsperson Fund, which is hereby created. All funds in
the Fee Account of the Common Interest Development Ombudsperson Fund
are continuously appropriated to the Ombudsperson, to be used
exclusively for expenditures necessary for the proper administration
of this chapter.
1380.150.
(a) This chapter shall remain in effect only until January 1,
2011, and as of that date is repealed, unless a later enacted statute
that is enacted before January 1, 2011, deletes or extends that
date.
(b) The Common Interest Development Ombudsperson Pilot Project is
subject to the sunset review process conducted by the Joint Committee
on Boards, Commissions, and Consumer Protection pursuant to Division
1.2 (commencing with Section 473) of the Business and Professions
Code.
Article 3. Education
1380.200.
(a) The Common Interest Development Ombudsperson shall offer
training materials and courses to common interest development
directors, officers, and owners, in subjects relevant to the
operation of a common interest development and the rights and duties
of an association or owner.
(b) The Ombudsperson may charge a fee for training materials or
courses, not to exceed their actual cost.
1380.210.
The Common Interest Development Ombudsperson shall maintain a
toll-free telephone number to provide information or assistance on
matters relating to common interest developments.
1380.220.
(a) The Common Interest Development Ombudsperson shall maintain an
Internet Web site, which shall provide all of the following
information:
(1) The text of this title, the Nonprofit Mutual Benefit
Corporation Law (Part 3 (commencing with Section 7110) of Division 2
of Title 1 of the Corporations Code), and any other statute or
regulation that the Ombudsperson determines would be relevant to the
operation of a common interest development or the rights and duties
of an association or owner.
(2) Information concerning nonjudicial resolution of disputes that
may arise within a common interest development, including contacts
for locally available dispute resolution programs organized pursuant
to Chapter 8 (commencing with Section 465) of Division 1 of the
Business and Professions Code.
(3) A description of the services provided by the Ombudsperson and
information on how to contact the Ombudsperson for assistance.
(4) An analysis, prepared each year, of legislative changes to
common interest development law.
(5) Any other information that the Ombudsperson determines would
be useful to an association or owner.
(b) Information provided on the Ombudsperson's Internet Web site
shall also be made available in printed form. The Ombudsperson may
charge a fee for the purchase of printed material, not to exceed the
actual cost of printing and delivery.
1380.230.
(a) Within 60 days of assuming office as an association director
or providing services as a managing agent, an association
director or managing agent shall certify that the director or
managing agent , the director shall certify that he or
she has read each of the following:
(1) The declaration, articles of incorporation or association, and
bylaws of the association that the director or managing
agent serves .
(2) This title or, if the Common Interest Development Ombudsperson
prepares a detailed summary of the requirements of this title, that
summary.
(b) A director shall file the certification required by this
section with the Ombudsperson. A managing agent shall file
the certification required by this section with the association
served by that managing agent.
(c) For the purposes of this section, "managing agent" means a
person or entity who, for compensation or in expectation of
compensation, exercises control over the assets of a common interest
development. "Managing agent" does not include a regulated financial
institution operating within the normal course of its regulated
business practice.
Article 4. Informal Dispute Resolution
1380.300.
(a) Any interested person may request that the office of the
Common Interest Development Ombudsperson provide assistance in
resolving a dispute involving the law governing common interest
developments or the governing documents of a common interest
development.
(b) On receipt of a request for assistance , the
Ombudsperson shall, within the limits of the available resources,
confer with the interested parties and assist in efforts to resolve
the dispute by mutual agreement of the parties. If a dispute cannot
be resolved through informal conference, the Ombudsperson may offer
to mediate the dispute.
(c) The Ombudsperson may, by regulation, adopt a fee for mediation
services of not more than twenty-five dollars ($25) per mediation.
(d) The Ombudsperson may contract with private parties to provide
mediation services pursuant to this section.
(e) Chapter 2 (commencing with Section 1115) of Division 9 of the
Evidence Code applies to mediation initiated under this section.