BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1838 (Calderon)
As Amended May 7, 2012
Hearing Date: July 3, 2012
Fiscal: No
Urgency: No
BCP
SUBJECT
Common Interest Developments: Association Records
DESCRIPTION
This bill would prohibit a homeowners association in a common
interest development from charging a cancelation fee for
providing certain documents if: (1) the request was canceled in
writing by the same party that placed the order and the work has
not been performed; or (2) the request was canceled in writing
and the work that had been performed on the order was
compensated.
This bill would require the existing required disclosure form
that identifies the fees that will be charged for the production
of certain documents relating to a homeowners association must
be in at least 10-point font.
BACKGROUND
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 a common area property.
The Davis-Stirling Common Interest Development Act (Act)
provides the legal framework under which common interest
developments are established and operate. In addition to the
requirements of the Act, each CID is governed according to the
recorded declarations, bylaws, and operating rules of the
homeowners association. These documents are referred to
collectively as the governing documents of the association.
In addition to the standard residential property disclosures,
(more)
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purchasers of separate interests within a CID must receive
copies of the governing documents, certain financial reports,
amount of the association's current regular and special
assessments and fees, unresolved notices of violation, and
related information. Since those documents are generally in the
association's possession, existing law allows the seller of the
property to request copies of those documents and requires the
association to provide them within 10 days. Current law
requires those disclosures to be delivered to the purchaser as
soon as practicable before transfer of title, or the execution
of a real property sales contract.
In response to concerns about the fees being charged by third
parties for production of those documents, AB 771 (Butler,
Chapter 206, Statutes of 2011) required a CID 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
those fees from any other fees, fines, or assessments associated
with the sale. This bill would revise those criteria by
additionally prohibiting a cancellation fee from being charged
if either: a request was cancelled in writing and work has not
yet been performed, or, the request was cancelled in writing and
any work that had been performed on the order was compensated.
This bill would also require the billing disclosure to be in at
least 10-point type.
This bill was approved by the Senate Transportation and Housing
Committee on June 26, 2012 by a vote of 9-0.
CHANGES TO EXISTING LAW
Existing law requires certain transferors of real property,
manufactured homes, mobilehomes, and residential stock
cooperatives, consisting of one to four units, to provide
detailed disclosures to the transferee of the property. (Civ.
Code Sec. 1102 et seq.)
Existing law , the Davis-Stirling Common Interest Development
Act, defines and regulates common interest developments (CIDs)
and requires the following to be provided to a prospective
purchaser as soon as practicable before transfer of title to the
separate interest: (1) a copy of the governing documents; (2) a
statement regarding the enforceability of a restriction on
occupancy on the basis of age, as specified; (3) a copy of the
association's most recent financial documents, as specified; (4)
a true written statement regarding the amount of fees and
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assessments, any unpaid assessments, and any monetary fines or
penalties; (5) a copy or summary of any prior disciplinary
notice sent to the owner for an alleged violation that remains
unresolved; (6) a copy of the preliminary list of defects; (7) a
copy of the latest information regarding defects; (8) any change
in assessments that have been approved but not become due and
payable as of the date of disclosure; (9) if there is a
provision prohibiting rental or leasing of the separate
interest; and (10) a copy of the minutes of the meeting of the
association's board of directors, as specified. (Civ. Code Sec.
1368 (a).)
Existing law requires an association, upon written request, to
provide the above documents to the owner of a separate interest
in the CID, or any other recipient authorized by the owner,
within 10 days of the mailing or delivery of the request. The
association must, also upon receiving that request, provide the
owner or recipient with a prescribed form that contains a
written or electronic estimate of the fees that will be assessed
for providing the requested documents. (Civ. Code Sec. 1368
(b)(1).)
Existing law allows the association to collect a reasonable fee
based upon the association's actual costs for procuring,
preparing, reproducing, and delivering the requested documents,
and specifies that no additional fees may be charged by the
association for the electronic delivery of the documents
requested. (Civ. Code Sec. 1368 (b)(1)-(2).)
Existing law requires any fees charged for the above documents
to be distinguished from other fees, fines, or assessments
billed as part of the transfer or sales transaction. Existing
law provides that delivery of the required documents shall not
be withheld for any reason or subject to any condition except
payment of the fee. (Civ. Code Sec. 1368 (b)(3).)
Existing law allows an association to contract with any person
or entity to facilitate compliance with the above requirements
on behalf of the association. (Civ. Code Sec. 1368 (b)(4).)
Existing law provides a statutory billing disclosure form that
lists the charges for each of the required documents, and
requires that this form be provided, upon receipt of a written
request, to the requester or designated recipient in order to
provide an estimate of the fees that will be assessed for
providing the requested documents. The association must also
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provide a recipient of the documents with a completed form at
the time the required documents are delivered. (Civ. Code Secs.
1368.2, 1368(b)(1),(5).)
This bill would prohibit the charging of a cancellation fee if
either of the following applies: (1) the request was cancelled
in writing by the same party that placed the order and work had
not yet been performed on the order, and (2) the request was
cancelled in writing and any work that had been performed on the
order was compensated.
This bill would also require the statutory billing disclosure to
be in at least 10-point font.
COMMENT
1. Stated need for the bill
According to the author, this bill seeks to address issues with
document preparation companies charging cancellation fees and
using a font size for billing documents that is too small.
2. Cancellation fees
As noted above, the seller of a property within a common
interest development (CID) is required to provide copies of
specified documents to the prospective purchaser. Since those
documents are generally in the possession of the homeowner's
association, existing law allows the seller to submit a request
for those documents and gives the association 10 days to
respond. The association is statutorily allowed to charge a
"reasonable fee based upon the association's actual cost for the
procurement, preparation, reproduction, and delivery of the
documents requested." (Civ. Code Sec. 1368 (b)(1).) In
response to concerns that third-party companies hired by
associations to perform that these document production services
were charging significant amounts, AB 771 (Butler, Chapter 206,
Statutes of 2011), among other things, required an estimate to
be provided of the fees that will be assessed for providing the
documents.
This bill seeks to further respond to reported issues with the
production of those documents by prohibiting a cancellation fee
if: (1) a request was cancelled in writing by the same party
that placed the order an work had not yet been performed on the
order; or (2) the request was canceled in writing and any work
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that had been performed under the order was compensated.
Associa, in support, contends: "Cancellation fees should be
prohibited where no work has been performed. Last year, this
was not an issue and this year, it became an issue. Thus, it is
appropriate to address this issue."
From a policy standpoint, it appears reasonable to prohibit the
charging of a cancellation fee if no work has been done on an
order for documents, or, the work already performed had been
compensated. Considering that real estate transactions can
easily fall through in the present real estate market, it
appears appropriate to enact some further protections against
the charging of unnecessary fees in those circumstances.
Staff also notes that the author's amendment discussed in
Comment 4 would further protect sellers who cancel document
orders by requiring a refund of fees paid for the order (for the
portion of the work not yet performed), thus, ensuring that the
third party cannot keep a fee paid to them unless actual work
has been done.
3. Font size
To facilitate disclosure to sellers regarding charges for
providing the documents, AB 771 codified a statutory form that
lists each of the documents and allows the association, or third
party, to check whether the document is included or not
available/not applicable. Although the form is codified, AB 771
provided that the billing disclosures shall be in substantially
the following form, thus allowing for customization, as needed.
This bill would additionally require that form to be in at least
10-point type. Associa, in support, asserts that this change
will "make�] it much easier to read the new statutory disclosure
form that is required to be provided to the buyer prior to
transfer of title."
4. Author's amendment agreed to in Senate Transportation &
Housing
The author accepted the following amendment in the Senate
Transportation & Housing Committee to additionally require: (1)
a refund of the fee collected if a request for documents was
cancelled in writing and work had not yet been performed; and
(2) when work has been performed, a refund of the share of the
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fee that represents the portion of the work not performed.
Author's amendment:
1) On page 4, line 25 after "(3)" and insert: (A)
2) On page 4, line 27, strike out "(A)" and insert: (i)
3) On page 4, line 30, strike out "(B)" and insert: (ii)
4) On page 4, line 32, insert:
(B) The association shall refund all fees collected pursuant to
paragraph (1) if the request was canceled in writing and work
had not yet been performed on the order.
(C) If the request was canceled in writing, the association
shall refund the share of fees collected pursuant to paragraph
(1) that represents the portion of the work not performed on the
order.
Support : Associa; Community Associations Institute; California
Association of Realtors; Executive Council of Homeowners
Opposition : None Known
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation : AB 771 (Butler, Chapter 206, Statutes of
2011) See Background and Comments 2 and 3.
Prior Vote :
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 74, Noes 1)
Senate Transportation & Housing Committee (Ayes 9, Noes 0)
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