BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 771
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: butler
VERSION: 6/20/11
Analysis by: Mark Stivers FISCAL: no
Hearing date: June 28, 2011
SUBJECT:
Common interest developments: provision of sale-related
documents
DESCRIPTION:
This bill requires a common interest development to provide an
estimate of the fees that it will assess for providing the
documents required for the sale of a unit and to distinguish
these fees from any other fees, fines, or assessments associated
with the sale.
ANALYSIS:
A common-interest development (CID) is a form of real estate in
which 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
all fall under the umbrella of common interest developments. A
homeowners' association with an elected board of directors
governs each CID. The Davis-Stirling Common Interest
Development Act provides the legal framework under which common
interest developments are established and operate.
Current law requires the seller of a unit in a CID to provide a
prospective purchaser with various documents related to the CID,
including:
The CID's governing documents.
A statement regarding any age restrictions in the CID.
The CID's most recent budget, financial audit, reserve funding
plan, and insurance policy summary.
The amount of the CID's current regular and special
assessments and fees, as well as any unpaid assessments, fees,
or fines related to the unit.
Notice of any change in the CID's current regular and special
AB 771 (BUTLER) Page 2
assessments and fees that the board has approved but which
have not yet become due.
A summary of any pending rule violations related to the unit.
The preliminary list of any construction defects that is the
subject of potential or actual litigation against the
developer and, if applicable, a summary of any settlement.
Because the CID, rather than the unit owner, maintains these
documents, current law requires the CID to provide the selling
owner with a copy of these documents within ten days of a
request. The CID may charge a reasonable fee based upon its
actual cost to procure, prepare, and reproduce the documents.
This bill :
Adds to the list of documents the seller must provide a
prospective purchaser the minutes of the most recent 12
months' worth of regular meetings of the CID's board of
directors, if requested by the purchaser.
Requires the CID to provide the documents to any recipient the
selling owner authorizes.
Requires the CID to provide a written or electronic estimate
of the fees that it will assess for providing the documents,
upon receipt of a written request. The CID must provide this
estimate on a statutory form that this bill creates, which
lists each document and the aggregate fee associated with the
provision of all the documents.
Prohibits a CID from charging additional fees for electronic
transmission of the documents.
Requires a CID to distinguish the fees associated with the
provisions of these documents from any other fees, fines, or
assessments the CID bills as part of the sale.
Prohibits a CID from withholding or conditioning the provision
of the documents for any reason other than non-payment of the
associated fees.
COMMENTS:
1.Purpose of the bill . According to the sponsor, many CIDs
"bundle" the fees for the provision of the documents listed
above with other unrelated fees due to the CID upon sale.
This bill explicitly prohibits such bundling and also requires
disclosure of the fee associated only with these documents.
The sponsor asserts that the lack of such disclosure has
created difficulties when closing real estate transactions.
AB 771 (BUTLER) Page 3
2.Capping agent fees . Current law allows an association to
charge a reasonable fee based on its actual costs to provide
these documents to sellers. Many CIDs contract with an agent,
however, to provide these documents, and the 4th District
Court of Appeal in Berryman v. Merit Property Management
(2007) ruled that the statutory limit on fees does not apply
to agents of CIDs. According to information the sponsors
provided, agents sometimes charge upwards of $1000 to provide
these documents, four to five times what the CIDs themselves
charge. While previous versions of the bill explicitly
applied the "actual cost" language to these agents, the bill
no longer does so. As a result, courts are likely to continue
ruling that there is no cap on what an agent may charge to
provide these documents, just disclosure. Moreover, because
the agent is the only one authorized to provide the documents
for a given association, he or she essentially has a monopoly
and has no competitive incentive to moderate exorbitant fees.
The homeseller is therefore at the agent's mercy and must pay
whatever fee the agent sets. To protect homesellers from
exorbitant fees, the committee may wish to consider capping
agent fees at $250.
3.Technical amendments : The author may wish to accept the
following technical amendments. If so, she should take the
amendments in the Judiciary Committee due to the double
referral.
On page 4, lines 4-5 strike "regular meetings" and
insert, "meetings, excluding meetings held in executive
session,"
On page 4 line 13 after "provide" insert ", on the form
described in Section 1368.2,"
On page 8 line 13 strike "regular meetings" and insert,
"meetings, excluding meetings held in executive session,"
On page 8 line 21 after "provide" insert ", on the form
described in Section 1368.2,"
1.Double referral . The Senate Rules Committee has referred this
bill to both this committee and the Senate Judiciary
Committee.
Assembly Votes:
Floor: 76-0
Jud: 9-0
H&CD: 7-0
AB 771 (BUTLER) Page 4
POSITIONS: (Communicated to the Committee before noon on
Wednesday, June 22,
2011)
SUPPORT: California Association of Realtors (sponsor)
OPPOSED: None received.