BILL ANALYSIS
SB 1128
Page 1
SENATE THIRD READING
SB 1128 (DeSaulnier)
As Amended April 7, 2010
Majority vote
SENATE VOTE :33-0
HOUSING 8-0
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|Ayes:|Torres, Arambula, | | |
| |Bradford, Eng, Gilmore, | | |
| |Knight, Torlakson, Tran | | |
| | | | |
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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 that a non-profit entity is subject
to the open records provisions of the Davis-Stirling Act (the
Act). Specifically, this bill :
1) Allows a non-profit entity that provides services to a CID
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 CID upon the purchase of property.
2) Clarifies that a non-profit entity providing services to a
CID under a declaration of trust is required to provide
members access to homeowner association (HOA) records upon the
member's request.
FISCAL EFFECT : None
COMMENTS : 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
(Act) provides that legal framework under which homeowner
associations HOAs operate.
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Some CIDs have created affiliated entities, called "community
service organizations (CSO) or similar entities" to provide
services to residents in the CID. The Act generally precludes
both 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 HOAs or CSO's actual costs associated with
the transfer.
The Act does, however, contain an exemption for CSOs that meet
the following criteria:
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 Act also requires that an HOA and CSO 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 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
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Beach was not a CSO, but an HOA, and was therefore subject to
the open records provisions of the 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 HOA rather than a CSO, and if so,
its ability to charge a transfer fee could be challenged.
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 HOA, this bill
simply broadens the terms used in the 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 HOA, rather than a CSO, rendering the foundation unable to
charge a transfer fee.
Analysis Prepared by : Celeste Parisi & Lisa Engel/ H. & C.D.
/ (916) 319-2085
FN: 0005341