BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1128|
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UNFINISHED BUSINESS
Bill No: SB 1128
Author: DeSaulnier (D)
Amended: 8/9/10
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 8-0, 4/13/10
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Kehoe,
Oropeza, Pavley, Simitian
NO VOTE RECORDED: Harman
SENATE FLOOR : 33-0, 4/22/10
AYES: Alquist, Ashburn, Calderon, Cedillo, Corbett,
Correa, Denham, DeSaulnier, Ducheny, Dutton, Florez,
Hancock, Hollingsworth, Huff, Kehoe, Leno, Liu,
Lowenthal, Maldonado, Negrete McLeod, Oropeza, Padilla,
Pavley, Price, Romero, Simitian, Steinberg, Strickland,
Walters, Wolk, Wright, Wyland, Yee
NO VOTE RECORDED: Aanestad, Cogdill, Cox, Harman, Runner,
Wiggins, Vacancy
ASSEMBLY FLOOR : 75-0, 8/16/10 - See last page for vote
SUBJECT : Common interest developments transfer fees
SOURCE : Golden Rain Foundation of Walnut Creek
DIGEST : This bill allows a non-profit entity that
provides services to a common interest development under a
declaration of trust, if it received transfer fees prior to
January 1, 2004, to continue to charge transfer fees to the
CONTINUED
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purchasers of units within the common interested
development to which it provides services. The bill also
clarifies that such entities are subject to the open
records provisions of the Davis-Stirling Act.
Assembly Amendments double-jointing language with AB 1927
(Knight).
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
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.
Homeowner associations generally fund their activities
through monthly assessments on individual homeowners. The
assessments cover not only the operating costs of the
association, but also maintenance reserves and services
that the association provides to its members. Some CIDs
have created affiliated entities, called "community service
organizations or similar entities" (CSOs), to provide
services to residents of the common interest development.
The Davis-Stirling Act generally precludes an association
or a CSO from imposing any assessment, penalty, or fee in
connection with a transfer of title for an individual
interest except to cover the association's actual costs
related to the transfer. The act, however, contains an
exemption that grandfathers in CSOs that meet either of 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.
2. The CSO was established and received a transfer fee
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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 statute defines a CSO as a nonprofit entity, other than
an association, that is organized to provide services to
residents of the common interest development or to the
public in addition to the residents, to the extent
community common areas or facilities are available to the
public. Located in Walnut Creek, Rossmoor is a senior
community that is home to over 9,600 seniors. The Golden
Rain Foundation of Walnut Creek is a nonprofit corporation
designated to serve as trustee under a trust agreement
benefiting the seventeen affiliated common interest
developments in the Rossmoor community. The purpose of the
foundation is to provide administrative services and to own
and maintain major infrastructure and facilities within the
developments. Currently, the residents of Rossmoor pay a
one-time transfer fee upon moving into the community, which
the foundation uses to pay for infrastructure and
facilities costs in lieu of increased assessments or
monthly dues on the residents.
Since 2004 when the CSO provisions described above took
effect, the Golden Rain Foundation of Walnut Creek has
considered itself to be a CSO and therefore eligible to
continue charging a transfer fee. In 2008, however, the
4th District Court of Appeal 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 required to make financial documents available to
residents because the Seal Beach Golden Rain Foundation was
an association rather than a CSO for purposes 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 its
ability to charge a transfer fee could be challenged.
This bill:
1. Allows a non-profit entity that provides services to a
common interest development under a declaration of
trust, if it received transfer fees prior to January 1,
2004, to continue to charge transfer fees to the
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purchasers of units within the common interested
development to which it provides services.
2. Clarifies that such entities are subject to the section
of the Davis-Stirling Act requiring associations and
CSOs to make association records available to members
for inspection and copying.
3. Contains double-jointing language with AB 1927 (Knight).
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/17/10)
Golden Rain Foundation of Walnut Creek (source)
Laguana Woods Village
Rossmoor Walnut Creek
Presidents of Rossmoor Walnut Creek Mutuals
ARGUMENTS IN SUPPORT : According to the author's office,
by allowing the Golden Rain Foundation of Walnut Creek to
continue to charge a one-time transfer fee to residents,
this bill ensures the continuity of services to residents
of Rossmoor. The recent appellate court decision from
Southern California raised concerns for the Golden Rain
Foundation of Walnut Creek that a court might not find it
to be a community service organization under current law.
If the court deemed the foundation to be an association and
not a community service organization, the foundation will
no longer be able to charge a transfer fee, which will
threaten the stability of Rossmoor's infrastructure and
facilities funding. The only way to maintain funding and
services will be to shift a significant burden onto
individual seniors at Rossmoor in the form of increased
dues and assessments.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Carter, Chesbro, Conway,
Cook, Coto, De La Torre, De Leon, DeVore, Eng, Evans,
Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,
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Galgiani, Garrick, Gatto, Gilmore, Hagman, Hall, Harkey,
Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,
Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma,
Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, Norby, V. Manuel Perez, Portantino, Ruskin,
Salas, Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, John A. Perez
NO VOTE RECORDED: Bass, Blakeslee, Charles Calderon, Davis,
Vacancy
JJA:do 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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