BILL ANALYSIS �
AB 2430
Page 1
Date of Hearing: April 30, 2014
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
AB 2430 (Maienschein) - As Amended: April 7, 2014
SUBJECT : Transfer disclosures.
SUMMARY : Clarifies that it is the responsibility of the seller
of a separate interest in a common interest development (CID) to
pay for the production and delivery of any disclosure documents
that are required to be provided to a prospective purchaser.
Specifically, this bill :
1)Requires the billing disclosure form that a homeowners
association (HOA) in a CID is required to provide to an owner
or any other representative authorized by the owner, to
individually itemize the fee for each document.
2)Clarifies that an HOA must collect the fee for procuring,
preparing, reproducing, and delivering documents from the
seller.
3)Clarifies that any documents that a seller is not required to
provide to a prospective purchaser of a separate interest
shall not be included with the required CID disclosure
documents.
4)Prohibits the "bundling" of required disclosure documents with
other documents that are not required as part of the
disclosure requirements.
5)Requires a seller to provide a prospective purchaser current
copies of any disclosure documents that are in the seller's
possession at no cost.
6)States that it is the seller of a separate interest's
responsibility to compensate the HOA, person, or entity that
provides the required disclosure documents.
EXISTING LAW
1)Requires an owner of a separate interest to provide the
following documents as soon as practicable before the transfer
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of title or the execution of a real property sales contract to
a prospective buyer:
a) a copy of all the governing documents of the CID;
b) restrictions on occupancy based on age;
c) copies of documents required as part of the pro forma
budget;
d) a statement of the current and special assessments;
e) a summary of any alleged violations that are unresolved
against the owner of the separate interest;
f) a list of any construction defects;
g) any pending special assessments that have been approved
by the board of directors but have not been made due;
h) any prohibition in the governing documents on renting or
leasing a separate unit; and
i) if requested by a prospective purchaser, a copy of the
last 12 months of board minutes.
(Civil Code
4525)
1)Requires an HOA in a CID to provide each owner of a separate
interest in a CID with a statement of the fees that may be
charged for providing documents to a prospective buyer (Civil
Code 4528).
FISCAL EFFECT : None.
COMMENTS :
There are over 50,000 Community Interest Developments (CIDs) in
the state that range in size from three to 27,000 units. CIDs
make up over 4.9 million housing units which represents
approximately one quarter of the state's housing stock. CIDs
include condominiums, community apartment projects, housing
cooperatives, and planned unit developments. CIDs are governed
by the Davis Stirling Act as well as the governing documents of
the association including bylaws, declaration, and operating
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rules.
An owner in a CID is required to provide a prospective purchaser
with specified documents listed in Civil Code Section 4525 as
soon as practicable before the transfer of title or the
execution of a real property sales contract with a prospective
buyer. These documents include the operating rules, financial
statements, governing documents and other disclosures governing
the operations of the CID. Sellers, who do not have current
documents to provide to a prospective buyer can request the
documents from the HOA, which has 10 days to provide copies to
the seller or someone designated by the seller. In some CIDs,
the HOA contracts with a management company or other agent to
collect the documents, reproduce them and provide them to the
seller. Existing law provides the HOA may only charge a
reasonable fee based on the actual cost to procure, prepare and
reproduce the items for the owner.
In Berryman v. Merit Property Management (152 Cal Capp 4th 1544,
2007), the court determined that an agent of the HOA is not
subject to the provision requiring that the HOA charge only the
actual cost to procure, prepare, and reproduce the documents for
the owner. The court determined that although an HOA is
prohibited from charging above the actual costs and making a
profit, a managing agent is not.
In 2011, California Association of Realtors (CAR) sponsored AB
771 (Butler) Chapter 206 in an effort to curb abuses they
identified in which an HOA or the entity that it contracts with
to provide disclosure documents to a seller bundled the fee for
those documents with other escrow-related services and
documents. AB 771 (Butler) created a billing disclosure form
that an HOA must provide to an owner listing all of the
documents that must be disclosed and the cumulative cost of
those documents. The bill also specified that the disclosure
documents required in Civil Code Section 4525 could not be
combined with other documents, items, or services. This
language was an effort to eliminate the practice of bundling the
required CID disclosure documents with other documents and
charging more.
According to CAR, "two years of experience with the guidelines
created by AB 771 suggest that it has not been entirely
effective at reducing unnecessary costs in CID unit sales
transactions. Clarifying amendments are necessary to achieve the
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goals of AB 771 and protect sellers and prospective purchasers
from being 'hit' with excessive fees during the purchase of a
unit in a CID. AB 2430 is intended to totally eliminate any
and all bundling of other transactions and escrow fees with the
Davis Stirling Act fees."
Staff comments:
Itemizing the fee for each individual document in the disclosure
form will help the seller to identify discrepancies between the
costs of like documents. However, it is somewhat unclear if
this bill will accomplish greater transparency and curb bundling
of documents where the previous bill was unsuccessful. The
committee may wish to consider that ultimately what may be
necessary to curb the practice of bundling the fees for required
disclosure documents with other real estate documents is to cap
the amount that can be charged per document by entities that
HOAs contract with, or to limit the amount an entity that the
HOA contracts with to charging reasonable fees like an HOA.
Additionally, it is unclear in existing law that the seller
receives the billing disclosure form prior to receiving all the
disclosure documents. The committee may wish to clarify that the
seller must receive the billing disclosure form before receiving
the disclosure documents. This will allow the seller to make an
informed decision as to whether to pay for the disclosure
documents.
Committee amendment:
On page 5, line 13 through 16, amend as follows:
(2) Upon receipt of a written request, the association
shall provide, on the form described in Section 4528, a
written or electronic estimate of the fees that will be
assessed for providing the requested documents prior to
processing the request in ( a ) (1).
Double referred: The Assembly Committee on Rules referred AB
2430 to the Committee on Housing and Community Development and
Judiciary. If AB 2430 passes this committee, the bill must be
referred to the Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
AB 2430
Page 5
Support
California Association of Realtors
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085