BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 899|
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THIRD READING
Bill No: AB 899
Author: Torres (D), et al
Amended: 6/26/09 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM. : 11-0, 6/23/09
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Oropeza, Pavley, Simitian, Wolk
ASSEMBLY FLOOR : 78-0, 5/28/09 - See last page for vote
SUBJECT : Common interest development disclosures
SOURCE : Executive Council of Homeowners
DIGEST : This bill creates an index of disclosures
required of common interest developments, allows e-mail
distribution of these disclosures, as specified, and
requires a common interest development to include in the
existing reserve funding summary the assumed interest rate
earned on reserves and the assumed rate of inflation for
the repair and replacement of major components.
ANALYSIS : A common interest development (CID) is a form
of real estate where each homeowner has an exclusive
interest in a unit or lot and a shared or undivided
interest in common area property. Condominiums, planned
unit developments, stock cooperatives, community
apartments, and many resident-owned mobilehome parks are
all CIDs. Each CID is governed by a homeowner association
CONTINUED
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(HOA) according to the recorded declarations, bylaws, and
operating rules of the association. The Davis-Stirling
Common Interest Development Act provides the legal
framework under which homeowner associations operate in
CIDs.
Current law requires an HOA to provide its members with a
variety of disclosures relating to the budget, financial
condition, and policies of the association. In general, an
HOA may deliver documents to a member via fax or e-mail if
the member has agreed to that method of delivery.
One of the required disclosures is the assessment and
reserve funding disclosure summary. Among other things,
this disclosure informs members whether or not the HOA's
reserves to repair or replace major components at the end
of their useful life are fully funded. If not, the summary
must estimate the percentage of necessary reserves that
will be available at the end of the current fiscal year and
after five years and identify the amount and timing of
assessment increase of special assessment that would be
necessary to fully fund the reserves.
This bill:
1. Creates an index of 14 separate disclosures that an HOA
must provide to its members and requires an HOA to
distribute the index to those members who request it.
2. Allows an HOA to distribute any of these 14 disclosures
via e-mail if the recipient has agreed to that method of
delivery.
3. With respect to any document that an HOA distributes via
e-mail, fax, or other electronic means, provides that
the agreement of the member shall be obtained by the HOA
consistent with the condition for obtaining consumer
consent described in specified provisions of the
Corporations Code.
4. Requires an HOA to include in the assessment and reserve
funding disclosure summary the assumed interest rate
earned on reserves and the assumed rate of inflation for
the repair and replacement of major components.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/26/09)
Executive Council of Homeowners (source)
California Rural Legal Assistance Foundation
Western Center on Law and Poverty
OPPOSITION : (Verified 6/26/09) (prior version of the
bill)
Community Association Institute
ARGUMENTS IN SUPPORT : According to the author's office,
the intent of this bill is to provide clarity and
transparency to both CID board members and owners relative
to the many disclosures required within the Davis-Stirling
Act and to facilitate the electronic distribution of
documents. By citing all the required disclosures in one
place, HOAs will be less likely to omit a disclosure, and
owners will know what to expect. This bill also seeks to
provide better information to owners relating to reserve
funding by requiring that the assessment and reserve
funding disclosure summary specify the assumed interest
rate earned on the reserve funds and the long-term
inflation rate assumed for the costs of major component
repair and replacement.
ARGUMENTS IN OPPOSITION : The Community Associations
Institute (CAI) states that this bill requires all
self-managed and professionally managed associations to
distribute more than one dozen documents to any and all
owner-members upon individual requests. CAI argues the
bill is unnecessary as current law already provides for
such disclosures, and that requiring dissemination to every
owner-member on an individual demand basis is costly. In
addition, CAI is concerned that errors in the specific
reserve disclosures proposed by the bill will expose an
association to liability and litigation.
ASSEMBLY FLOOR :
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AYES: Adams, Ammiano, Anderson, Arambula, Beall, Tom
Berryhill, Blakeslee, Block, Blumenfield, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Price, Ruskin, Salas, Saldana,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Bill Berryhill, Silva
JJA:mw 6/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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