BILL ANALYSIS
AB 313
Page 1
Date of Hearing: April 15, 2009
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 313 (Fletcher) - As Introduced: February 17, 2009
SUBJECT : Common interest developments: assessments
SUMMARY : Prohibits a homeowners association (HOA) in a common
interest development (CID) from levying assessments on separate
interests based on the taxable value of the separate interest
unless the declaration allowed for this practice on or before
December 31, 2009.
EXISTING LAW :
1)Provides that the declaration of a CID is a governing document
that includes the name of the HOA and the restrictions on the
use or enjoyment of any portion of the CID that are intended
to be enforceable equitable servitudes (Civil Code Section
1353).
2)Provides that the declaration may contain any matters that the
original signator of the declaration or the owners consider
appropriate (Civil Code Section 1353).
FISCAL EFFECT : None.
COMMENTS :
Background : There are over 41,000 CIDs in the state that range
in size from three to 27,000 units. CIDs make up over four
million total housing units which represents approximately one
quarter of the state's housing stock. In the 1990s, over 60% of
all residential construction starts in the state were CIDs.
CIDs include condominiums, community apartment projects, and
housing cooperatives and planned unit developments. They are
characterized by a separate ownership of dwelling space coupled
with an undivided interest in a common property, restricted by
covenants and conditions that limit the use of common area, and
the separate ownership interests and the management of common
property and enforcement of restrictions by a HOA. CIDs are
governed by the Davis Stirling Act (Civil Code Section 1350) as
well as the governing documents of the association including
bylaws, declaration, and operating rules.
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The Department of Real Estate (DRE) reviews the legal framework
of all new CIDs to ensure compliance with the Subdivided Lands
Law as part of the public report application process before
homes are offered for sale. In the early stages of development,
developers are required to submit the proposed governing
documents of a CID to DRE for review and approval. DRE's
regulations generally require assessments in CIDs to be paid
equally by all the owners. In condominiums assessments may
vary based on the square footage of a unit.
Purpose of the bill : The sponsor of this bill, the Rancho Santa
Fe Homeowners Association was formed in 1928. The community
covers 10 square miles and includes a variety of types of
property including: commercial, office building, retail, hotel,
townhomes, apartments, condominiums and ranches, one of which is
over 100 acres. All members receive access to the same
amenities which include access to the golf club, tennis club, 45
miles of riding trails, security police sports fields and open
space parcels and parks.
Under the provisions of the HOA's original governing documents
the assessments for each separate interest in the CID are based
on a rate tied to the county tax rolls. According to the
sponsor, in October of each year the board of directors
establishes the assessment rate based on the projected budget
and the current county assessed value of each property. The
proposed rate for the 2008/2009 fiscal year was 14 cents per
$100 of assessed value. This equates to $140 per $100,000 of
value. The annual assessments range from a low of $261 for a
single family residence that was purchased in 1952 to a high of
$65,000 for a single family residence that is valued by the
county at $46 million. The sponsor is seeking to preserve their
ability to continue to base assessments on the assessed value of
the property because it has been the practice for the last 80
years and those that purchased homes in the community knew the
system when they purchased and to change the system would have
significant impact on the long term residents of the community
many of which are on fixed incomes.
Long-time owners in the Rancho Santa Fe HOA who have lower
taxable property values benefit most from the HOAs formula for
determining assessments. Proposition 13 ensured that county
assessors reassess the taxable value of a property upon sale.
As a result, owners who bought into a development years ago
generally pay much less in taxes than neighbors who own similar
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homes. When taxable value is used as the basis for CID
assessments, longer-term owners pay less for common area
maintenance and amenities even though they enjoy the same
benefits. According to the sponsor, the board of directors of
Rancho Santa Fe HOA has discussed the current policy and has
determined a change could unfairly penalize those residents who
have lived in the HOA for a long time and are on fixed incomes
and may not be able afford an increase in their assessments.
The sponsor indicates if the assessments needed for the annual
budget were divided equally among all homeowners the amount
would be approximately $2900 per year per owner.
Impact of this bill : This bill will allow those HOAs whose
governing documents currently allow them to base assessments on
the assessed value of individual separate interests to continue
to do so but would prohibit any other HOA that does not already
use taxable values as the basis of assessments from doing so
going forward.
It is unclear to staff how many HOAs in the state determine
assessments based on the assessed taxable value of a home. The
sponsor is only aware of one other HOA that does so, in Palos
Verdes. This bill will prohibit any HOA that does not already
use the assessed taxable value of a home to determine the
owner's assessments from doing so after December 31, 2009. Any
newly formed HOA would be subject to DRE's regulation which
generally requires that assessments be levied against each owner
equally. It is important to note that the Rancho Santa Fe HOA
was formed 80 years ago before DRE regulated the creation of
CIDs.
Staff comments : The committee may wish to consider that at the
same time this bill grandfathers in HOAs that currently use
taxable values, it prohibits any other HOA from adopting the use
of taxable values in the future. The committee may wish to
consider that DRE's regulations generally require that
assessments be paid equally by homeowners in a CID. Should the
committee sanction a practice that does not conform to the
existing policy?
Identical legislation :
This bill is identical to AB 1955 (Plescia) which this committee
heard and passed out with a vote of 6-0. The Governor vetoed AB
1955 providing the following veto message:
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I am returning Assembly Bill 1955 without my signature.
The historic delay in passing the 2008-2009 State Budget
has forced me to prioritize the bills sent to my desk at
the end of the year's legislative session. Given the
delay, I am only signing bills that are the highest
priority for California. This bill does not meet that
standard and I cannot sign it at this time.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Community Managers
Two individuals (Rancho Santa Fe)
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085