BILL ANALYSIS
SB 1128
Page 1
Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
SB 1128 (DeSaulnier) - As Amended: April 7, 2010
SENATE VOTE : 33-0
SUBJECT : Common interest developments: governance
SUMMARY : Allows a non - profit entity providing services to a
common interest development (CID) under a declaration of trust
to collect an assessment fee from purchasers during a transfer
of title, and also provides requires that a such non - profit
entit y is ies are subject to the open records provisions of the
Davis-Stirling Act. Specifically, this bill : >
1) Allows a ny non-profit entity that provides services to a
CID common interest development under a declaration of trust,
if it received transfer fees prior to January 1, 2004, to
continue to collect transfer fees from new members of the
common interest development CID upon the purchase of property.
EXISTING LAW >
2)2) Clarifies that any such a non-profit entity providing
services to a common interest development CID under a
declaration of trust is required to provide members with
all access to homeowner association (HOA) records upon the
member's request , . and comply with the accompanying standards
within the open records provisions of the Davis-Stirling Act.
FISCAL EFFECT : >
EXISTING LAW:
1)Defines a community service organization (CSO) as a nonprofit
entity, other than an association HOA, that is organized to
provide services to residents of a the common interest
development CID or to the public in addition to the residents,
to the extent that the facility common areas are open to the
public ( ( Civil Code Section 1368 (c) (2) (A 1 ) ).
2)Precludes an association HOA or CSO from imposing any
assessment, penalty, or fee in connection with a transfer of
SB 1128
Page 2
title for an individual interest except to cover the
association's actual costs related to the transfer (Civil Code
Section 1368 ( 3) ( c) (1 3) ) ).
3)Provides an exemption to the prohibition of transfer fees for
; a CSO established prior to February 20, 2003, that exists to
fund or perform environmental mitigation or to restore or
maintain wetlands or native habitat, or a CSO that was
established and received a transfer fee prior to January 1,
2004, and after January 1, 2006 (Civil Code Section 1368 (c)
(2) (B) ).
4)Requires a CSO or association HOA to make its the association
HOA records available to members of the CID ( Civil Code
Section 1368 (a )).
FISCAL EFFECT: None
COMMENTS:
Background :
A
common interest development (CID) is a form of real property
where each owner holds exclusive rights to a portion of the
property typically called a unit or lot, and shared rights to
portions of the property typically called the common area. Each
CID is governed by a homeowner association according to the
recorded declarations, bylaws, and operating rules of the
association. The Davis-Stirling Common Interest Development Act
(the Act) provides that legal framework under which homeowner
associations HOAs operate.
Some CIDs have created affiliated entities, called "community
service organizations (CSO) or similar entities" to provide
services to residents in the CID. The Davis-StirlingStirling Act
generally precludes both homeowners associations HOAs and CSOs
from imposing any assessment, fee, or penalty in connection with
a transfer of title for an individual unit except to cover the
association HOAs or CSO's actual costs associated with the
transfer.
The act does, however, contain an exemption for CSOs that meet
the following criteria:
SB 1128
Page 3
1)the CSO was established prior to February 20, 2003 and exists
to fund or perform environmental mitigation or to restore or
maintain wetlands or native habitat, as required by the state
or local government as an express written condition of
development, or
2)the CSO was established and received a transfer fee prior to
January 1, 2004, and after January 1, 2006 it allows a
purchaser to pay the transfer fee under an installment plan of
at least seven years.
The Davis Stirling Act also requires that an association HOA and
CSO be required to make financial documents available to
individual residents.
This bill is sponsored by the Golden Rain Foundation, a
nonprofit corporation designated to serve as trustee of the
Rossmoor community in Walnut Creek. The Rossmoor community is
home to over 9,600 seniors, and is made up of seventeen
affiliated CIDs. The purpose of the Golden Rain Foundation is to
provide administrative service and to own and maintain major
infrastructure and facilities within the developments.
Currently, residents of Rossmoor pay a one-time transfer fee
upon purchasing a new unit. The foundation uses this fund of
transfer fees to pay for infrastructure and facilities costs,
rather than increasing monthly dues for residents. The
foundation follows the provisions of the Davis-Stirling act Act,
including those regarding transfer fees, by operating under the
assumption that the foundation is considered a CSO.
In 2008, the 4th District Court of Appeals in Southern
California ruled in the case of Golden Rain Foundation v. Franz,
that a similar foundation affiliated with Leisure World of Seal
Beach was not a CSO, but an association HOA, and was therefore
subject to the open records provisions of the Davis-Stirling
Act. Given the similarities between the Seal Beach and Walnut
Creek Golden Rain Foundations, the Golden Rain Foundation of
Walnut Creek is now concerned that it too, might be considered
an association HOA rather than a CSO, and if so, its ability to
charge a transfer fee could be challenged.
Purpose of this bill:
SB 1128
Page 4
Current law provides an exception to the prohibition of transfer
fees for CSOs. This bill will expand that exception to include
any "non-profit entity providing services to a common interest
development under a declaration of trust" that received transfer
fees prior to January 1, 2004. Rather than determine whether or
not the Golden Rain Foundation is a CSO or an association HOA,
this bill simply broadens the terms used in the Davis-Stirling
Act, so that any non-profit entity providing services under a
declaration of trust must adhere to the open records provisions,
and will be allowed to continue charging transfer fees if it had
done so before January 1, 2004.
By expanding this exception, this bill will allow the Golden
Rain Foundation of Walnut Creek to continue charging transfer
fees to new residents as it has done for years. Without this
bill, a court could potentially deem the Golden Rain Foundation
an association HOA, rather than a CSO, rendering the foundation
unable to charge a transfer fee. Without the ability to charge a
transfer fee, the Golden Rain Foundation would be forced to
increase monthly dues for residents on fixed incomes, seriously
threatening the stability of the community.
REGISTERED SUPPORT / OPPOSITION:
Support
Golden Rain Foundation of Walnut Creek (sponsor)
Laguna Woods Village
Rossmoor Walnut Creek
Three individual residents at Rossmoor Walnut Creek
Opposition
None on file
>
Analysis Prepared by : Celeste Parisi / H. & C.D. / (916)
319-2085