BILL ANALYSIS
AB 313
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 313 (Fletcher)
As Amended May 19, 2009
Majority vote
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|ASSEMBLY: |75-0 |(April 30, |SENATE: |40-0 |(August 24, |
| | |2009) | | |2009) |
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Original Committee Reference: H. & C.D.
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.
The Senate amendments , allow an HOA that is responsible for
paying the property taxes on the separate interests in a CID, on
behalf of the owners, to levy assessments based on the taxable
value of the separate interest if it is related to payment of
taxes.
FISCAL EFFECT : None
AS PASSED BY THE ASSEMBLY , 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.
COMMENTS : 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 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
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well as the governing documents of the HOA including bylaws,
declaration, and operating rules.
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
$0.14 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
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generally pay much less in taxes than neighbors who own similar
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 $2,900 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 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.
Identical legislation: This bill is identical to AB 1955
(Plescia) which the Assembly Housing and Community Development
Committee heard and passed out with a vote of 6-0. Governor
Schwarzenegger vetoed AB 1955 with the following veto message:
"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."
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
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