BILL ANALYSIS
AB 899
Page 1
ASSEMBLY THIRD READING
AB 899 (Torres)
As Amended April 1, 2009
Majority vote
HOUSING 4-2
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|Ayes:|Torres, Eng, Ma, Saldana | | |
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|Nays:|Harkey, Fletcher | | |
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SUMMARY : Makes several changes to the Davis-Stirling Common
Interest Development Act (Act) governing common interest
developments (CID). Specifically, this bill :
1)Creates the Disclosure Documents Index.
2)Requires the Disclosure Documents Index to be distributed to
the members of a homeowners association (association) in a CID
annually.
3)Requires the Assessment and Reserve Funding Disclosure Summary
to specify the assumed long-term before-tax interest rate
earned on reserve funds per year.
4)Requires the Assessment and Reserve Funding Disclosure Summary
to specify the assumed long-term inflation rate applied to
major component repair and replacement costs per year.
FISCAL EFFECT : None
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 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
AB 899
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the separate ownership interests and the management of common
property and enforcement of restrictions by an association.
CIDs are governed by the Act as well as the governing documents
of the association including the bylaws, declaration, and
operating rules. Except when CIDs are first developed, no state
agency provides ongoing oversight to these communities.
Associations are required to distribute to the members various
disclosure documents including, but not limited to, a pro forma
operating budget, assessment and reserve funding summary,
assessment collection policy; and, disclosure of an owner's
rights to alternative dispute resolution. The disclosure
documents that are required to be distributed to the owners are
scattered in multiple code sections throughout the Act.
Associations are also required to complete a reserve study of
the major components of the CID at least every three years. The
major components are defined as components in the development
that the association is required to maintain or replace with a
service life of 30 years or less. The board is required to
review the reserve study annually and determine whether
deterioration of the major components over the past year warrant
adjustment of the reserve funding. If the board determines that
an adjustment is required the regular special assessments can be
adjusted to reflect the increase necessary to meet funding
goals. Existing law requires the association to distribute an
Assessment and Reserve Funding Disclosure Summary that includes
current regular assessment per ownership interest, the
additional special or regular assessments that have been
approved by the board and or members, and an assessment by the
board of directors as to whether or not the current projected
reserve account balances will be sufficient to meet the
association's obligations. The purpose of the Assessment and
Reserve Funding Disclosure Summary is to give the association a
sense of what is needed to fund the reserves necessary to
maintain the community.
The purpose of this bill is to provide clarity and transparency
for association boards of directors and owners of separate
interests relative to the many disclosures required within the
Act. AB 899 would create an index of the disclosure documents
in the Act and would further require the index to be distributed
to the owners of each separate interest. Additionally, this
bill would require that the Assessment and Reserve Funding
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Summary specify the annual interest rate earned on the reserve
funds per year and the assumed long-term inflation rate to be
applied to major component repair and replacement costs each
year.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0000740