In California, it takes a veto by the Governor to reject bills approved by our legislature. On September 30, 2010, the last day possible, Governor Schwarzenegger vetoed four bills that would have had potentially significant impacts on the operations of common interest developments and their associations.
As reflected in his veto messages discussed below, the Governor clearly respects the integrity of governing documents and the right of owners to vote to change the governing documents to reflect the unique circumstances of each community, without undue legislative interference.
AB 1726 would have permitted quorum to be reduced in director elections, even where bylaws do not provide for reduced quorums. The bill would also have specifically required the posting of a notice and agenda for executive sessions of the board of directors.
In his message to the Assembly explaining his reasons for refusing to sign the bill, the Governor said the first of these changes was unnecessary since members can amend the bylaws to provide for reduced quorums, if they don't already contain them. He concluded that the bill would interfere with the basic democratic principle of CIDs. The Governor's message did not address the part of AB 1726 (belatedly inserted by its author without notice) that would have required executive sessions to be noticed and agendized. Some suggest this requirement already exists, while others believe that state law instead calls for general disclosure of executive sessions at the next open meeting of the board but not before.
AB 1793 would have required an association to allow the installation of artificial turf on privately-owned lots, notwithstanding traditional principles of architectural control. A classic CC&R override, the bill at most have only allowed associations to regulate characteristics like quality of product, color and workmanship.
As many of you know, the Davis-Stirling Common Interest Development Act and federal law do not permit an association to use aesthetic criteria to wholly ban certain items in CIDs. Examples are solar energy systems, satellite dishes, real estate and political signs, and drought-tolerant plants as a class. The addition of fake grass as yet another category of protected improvement seemed an unwarranted incursion into community self-determination, however, and some objected on the bases of hygiene, heat and undirected run-off. In a refreshing and well-stated message to the Assembly, the Governor wrote:
CIDs provide a system of self-governance through a community association responsible for managing, maintaining, and repairing common areas, and have the authority to enforce special rules. Decisions such as these regarding the use of artificial turf can be made by the homeowners and amended into their documents.
AB 1927 started as an ambitious effort to limit the ability of association members to amend governing documents to limit the number of units or lots in a community that can be leased or rented at any one time. Many associations are considering such amendments to better comply with tightened lending guidelines and to generally enhance enforcement of the governing documents.
In rejecting the bill, the Governor again chose to speak up for the principle of community self-determination. In refusing to sign the bill, his message to the Assembly said:
The right to rent . . . is an important right of a homeowner. . . . [T]here is insufficient evidence to indicate that rental restrictions are a widespread problem to justify such a wide ranging rule change. Furthermore, current provisions in law provide for an amendment process for HOAs to make rule changes. . . . [T]herefore, I believe this bill is unnecessary at this time.
California law contains both a developer fix it law (in Title VII of the Civil Code) and a mandatory mediation process (referred to as the Calderon process) contained in the Davis-Stirling Act. Both are intended to facilitate the resolution of construction defect disputes in common interest developments.
If an association and developer cannot resolve a dispute during the Calderon process and suit is filed, Civil Code section 1375.05 provides for specified court procedures to assist the resolution. That procedural portion of the law will be repealed at the end of this year unless its terms are extended. AB 2485 would have done so.
Unfortunately, the bill also contained unrelated provisions concerning court fees to be paid when out-of-state attorneys appear in local courts. The Governor felt that the increased fee should be addressed in a different and more comprehensive bill and so returned it all to the Assembly. The legislature's failure to extend section 1375.05 will mostly impact the legal strategies that attorneys employ in bringing cases to trial that do not resolve during the Calderon mediation process.
The California Law Revision Commission continues its extensive effort to restate the Davis-Stirling Act. The Commission's progress can be tracked online at www.clrc.ca.gov. The Commission's goal is to clarify, simply and better organize Davis-Stirling, largely avoiding intentional substantive changes to the law at this time. The Commission's current goal is to finalize its draft restatement and bring it to the legislature to become a bill in early 2011.
Assuming ultimate passage through the legislature, the Davis-Stirling restatement project will likely not go into effect until 2013 or later. We expect there would be a transition period of a year to help communities subject to Davis-Stirling get up to speed before the operative date of the restated law.
Independent of its restatement project, the Commission has undertaken an effort to separate the portions of the Act that relate to strictly residential and mixed-use projects, from those that are exclusively commercial or industrial (non-residential). Progress on this effort continues.