BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1738|
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THIRD READING
Bill No: AB 1738
Author: Chau (D)
Amended: 6/16/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 7-0, 6/10/14
AYES: Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak
ASSEMBLY FLOOR : 77-0, 5/15/14 - See last page for vote
SUBJECT : Common interest developments: dispute resolution
SOURCE : California Alliance for Retired Americans
Center for California Homeowner Association Law
Conference of California Bar Associations
DIGEST : This bill requires a resolution or agreement under a
common interest developments (CIDs) procedure for resolving
internal disputes between an association and a member be in
writing, and authorizes a member and an association to be
assisted by an attorney or another person at their own costs
during the dispute process.
ANALYSIS :
Existing law:
1.Establishes under the Davis-Stirling Act, the rules and
regulations governing the operation of a CID and the
respective rights and duties of a homeowners association and
CONTINUED
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its members.
2.Requires associations subject to the Davis-Stirling Act to
provide an internal dispute resolution (IDR) process for use
in resolving disputes between an association and a member
involving their rights, duties, or liabilities under the
Davis-Stirling Act, under the Nonprofit Mutual Benefit
Corporation Law, or under the governing documents of the CID
or association.
3.Provides that an association or a member may not file an
enforcement action in a superior court unless the parties have
endeavored to submit their dispute to alternative dispute
resolution (ADR), as specified.
4.Specifies that the required IDR process supplements, and does
not replace, the requirement to submit a dispute to ADR as a
prerequisite to filing an enforcement action in superior
court.
5.Provides that an association shall provide a fair, reasonable,
and expeditious procedure for resolving a dispute under the
required IDR process.
6.Provides that a fair, reasonable, and expeditious IDR
procedure shall at a minimum satisfy all of the following
requirements:
A. The procedure may be invoked by either party to the
dispute. A request invoking the procedure shall be in
writing;
B. The procedure shall provide for prompt deadlines. The
procedure shall state the maximum time for the association
to act on a request invoking the procedure;
C. If the procedure is invoked by a member, the association
shall participate in the procedure;
D. If the procedure is invoked by the association, the
member may elect not to participate in the procedure. If
the member participates but the dispute is resolved other
than by agreement of the member, the member shall have a
right of appeal to the board;
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E. A resolution of a dispute pursuant to the procedure,
which is not in conflict with the law or the governing
documents, binds the association and is judicially
enforceable. An agreement reached pursuant to the
procedure, which is not in conflict with the law or the
governing documents, binds the parties and is judicially
enforceable;
F. The procedure shall provide a means by which the member
and the association may explain their positions; and
G. A member of the association shall not be charged a fee
to participate in the process.
1.Provides that an association that does not otherwise provide a
fair, reasonable, and expeditious dispute resolution procedure
shall follow the default meet and confer procedure, which
consists of the following requirements:
A. Either party to a dispute may invoke the following
procedure:
(1) The party may request the other party to meet and
confer in an effort to resolve the dispute. The request
shall be in writing;
(2) A member of an association may refuse a request to
meet and confer. The association may not refuse a
request to meet and confer;
(3) The board shall designate a director to meet and
confer;
(4) The parties shall meet promptly at a mutually
convenient time and place, explain their positions to
each other, and confer in good faith in an effort to
resolve the dispute; and
(5) A resolution of the dispute agreed to by the parties
shall be memorialized in writing and signed by the
parties, including the board designee on behalf of the
association.
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A. An agreement reached under this process binds the
parties and is judicially enforceable if both of the
following conditions are satisfied:
(1) The agreement is not in conflict with law or the
governing documents of the CID or association; and
(2) The agreement is either consistent with the
authority granted by the board to its designee or the
agreement is ratified by the board.
A. A member may not be charged a fee to participate in the
process.
This bill requires a resolution or agreement under a CIDs
procedure for resolving internal disputes between an association
and a member to be in writing, and authorizes a member and an
association to be assisted by an attorney or another person at
their own costs during the dispute process.
Background
In California, CIDs are governed by the Davis-Stirling Act.
Owners of separate property in CIDs have an undivided interest
in the common property of the development and are subject to the
CID's covenants, conditions, and restrictions. CIDs are also
governed by a homeowners association, which is run by volunteer
directors that may or may not have prior experience managing an
association. The Court of Appeal, Fourth Appellate District,
previously observed that:
The homeowners associations function almost "as a second
municipal government, regulating many aspects of the homeowners'
daily lives." "Upon analysis of the association's functions,
one clearly sees the association as a quasi-government entity
paralleling in almost every case the powers, duties, and
responsibilities of a municipal government. As a
'mini-government,' the association provides to its members, in
almost every case, utility services, road maintenance, street
and common area lighting, and refuse removal. In many cases, it
also provides security services and various forms of
communication within the community. There is, moreover, a clear
analogy to the municipal police and public safety functions. . .
." In short, homeowners associations, via their enforcement of
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the CC&R's, provide many beneficial and desirable services that
permit a CID to flourish. (Villa Milano Homeowners Ass'n v. Il
Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)
Just as with municipal governments, homeowners associations
occasionally find themselves in disputes with their members.
The Davis-Stirling Act provides three distinct dispute
resolution processes that allow these disagreements to be
resolved at varying levels of formality. At the most informal
level, the Davis-Stirling Act provides for an IDR process that
essentially allows members to simply and expeditiously meet and
confer with a director from their association. If the member is
unsatisfied with the outcome of the meet and confer session, the
member may lodge an appeal and seek resolution from the entire
board of directors of the association. The Davis-Stirling Act
also envisions the use of ADR for resolving disagreements
between members and their association. Endeavoring to submit a
dispute to ADR is a jurisdictional prerequisite to bringing an
enforcement action in superior court. As with many ADR
processes, the requirements for proceeding through ADR under the
Davis-Stirling Act are more formal, requiring parties to serve
written requests for ADR that contain a brief description of the
dispute. Unless otherwise agreed to by the parties, ADR is to
be completed within 90 days and costs are borne by the
respective parties. Finally, the Davis-Stirling Act provides
that any member or the association may seek to enforce covenants
and restrictions in the property declarations, or terms of the
governing documents, in superior court.
Prior Legislation
SB 752 (Roth, Chapter 605, Statutes of 2013) established the
Commercial and Industrial Common Interest Development Act and
provided for the creation and regulation of industrial or
commercial CIDs.
AB 1836 (Harman, Chapter 754, Statutes of 2004) reorganized and
expanded the ADR processes and procedures contained in the
Davis-Stirling Act, and expanded the scope of the disputes to
which ADR processes and procedures may be applied within CIDs.
The bill also required associations to develop fair, reasonable,
and expeditious IDR processes.
AB 2376 (Bates, Chapter 346, Statutes of 2004) required a
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homeowner association to provide a fair and reasonable process
for reviewing a request by a homeowner for a physical alteration
to their unit or the common area.
AB 2598 (Steinberg, 2004) would have prohibited the use of the
non-judicial foreclosure process by homeowner associations
(HOAs) in collecting overdue assessments when the underlying
debt is for the failure to pay association assessments or dues.
The bill was vetoed by Governor Schwarzenegger.
SB 1682 (Ducheny, 2004) would have required HOAs to offer
binding arbitration before placing a lien on the property or
before initiating foreclosure proceedings. The bill died on the
Assembly Floor.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/17/14)
California Alliance for Retired Americans (co-source)
Center for California Homeowner Association Law (co-source)
Conference of California Bar Associations (co-source)
Educational Community for Homeowners
OPPOSITION : (Verified 6/17/14)
California Association of Community Managers
Community Associations Institute
Executive Council of Homeowners
ASSEMBLY FLOOR : 77-0, 5/15/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
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NO VOTE RECORDED: Donnelly, Mansoor, Vacancy
AL/JA:e 6/17/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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