Pending Legislation 2011

An Update on the Current Status of Legislation Affecting Common Interest Developments and Community Associations

by Sandra M. Bonato, Esq.

As summer nears, we wanted to tell you about this year's bills that affect CIDs and the associations that manage them. Pending bills cover subjects ranging from the future enforceability of rental restrictions, to new curbs on assessment collection, from email communications and executive sessions, to conference call procedures for board meetings. One bill covers electric vehicle charging stations in CIDs. Another would create a new CC&R override to protect fake grass. This is only part of this year's slate of bills.

The most significant bill pending is, of course, the California Law Revision Commission's restated Davis-Stirling Common Interest Development Act, which would simplify, reorganize and re-number the existing Act. This seminal legislation and each other bill of importance to those who read our newsletter are discussed in more detail below.

Over the last several years, a substantial amount of CID legislation was passed by the legislature and then vetoed by the governor. With the change in governorship, we will see at the end of the summer whether vetoes or signatures result. Actual texts of the following bills can be found at www.leginfo.ca.gov.

Assembly Bills

AB 19 (Fong)
Water Meters/Sub-meters in Condominium Projects

If enacted, AB 19 would require developers and builders of new condominium projects to install separate water meters for each unit in a common interest development. Sub-meters for units and/or master meters dedicated to domestic water use would not be permitted.

The concept would be to better inspire water conservation in individual units without creating significant administrative burdens for associations in the future.

STATUS: The bill did not move out of the Assembly in time to meet required deadlines and will go no further.

AB 20 (Halderman)
Construction Defects

If enacted, AB 20 would require counsel for associations of developments with defective construction to make certain statements and disclosures to the association and its members before filing an action against a developer or builder. The bill would require State Bar discipline of counsel who fail to make such statements.

The concept is apparently an effort to stigmatize members into urging their associations to not pursue responsible parties for defective construction, on the premise that counsel manufactures problems for self-gain. The bill makes no case for abusive practices and would be an extraordinary effort to distance associations from the legal representation to which they are entitled.

STATUS: The bill failed passage in the Assembly Judiciary Committee.

AB 771 (Butler)
Fees at Escrow

AB 771 is sponsored by the California Association of Realtors. If enacted, the bill would clarify that associations may collect reasonable charges for providing selling owners with documents and statements in escrow pursuant to Civil Code section 1368. Associations would be required to disclose such charges in advance to requesting sellers on a statutory form that would itemize each document and statement that a seller is obligated to give to prospective purchasers and price each separately. Certain items could be maintained on an association Web site, in the association's discretion, and the association would not be permitted to charge for information stored in such an electronic medium. The bill would also add 12 months of regular board meeting minutes to the list of information that a seller must give a buyer and would include the charge for this separately as well.

STATUS: AB 771 has been amended in response to industry concerns. Concerns about adding yet another new disclosure (regular board meeting minutes) and the inclusion of a specific statutory form persist. AB 771 passed out of the Assembly and will be heard in the Senate this summer.

AB 805/806 (Torres)
NEW Davis-Stirling

AB 805 and AB 806 are the companion bills that, if enacted, would codify the California Law Revision's proposed restatement of the Davis-Stirling Common Interest Development Act. The CLRC was charged with simplifying, clarifying and reorganizing the Act. If enacted, these bills would go into effect on January 1, 2014.

STATUS: AB 805 and 806 passed cleanly through the Assembly, parrying efforts by some groups to amend them. Both bills are now in the Senate, and the CLRC is keeping to its commitment to not move them in the Senate this year but to allow full debate and discussion in the Senate in 2012.

AB 818 (Blumenfield)
“Renters' Right to Recycle Act”

If enacted, AB 818 would give tenants in multi-unit residential properties a right to be afforded the opportunity to recycle paper, plastic, glass, etc. The bill was initially an effort by the author to require owners of apartment projects to install recycling areas within their projects where feasible. The Executive Council of Homeowners (ECHO) and others won the author's agreement to exempt CIDs, which were not the author's target and which are already subject to local governmental requirements for recycling found in existing law. ECHO's proposed exemption amendment, while accepted by the author, is currently being discussed by staff in the Senate Environmental Quality Committee where the bill will be heard in the Senate. The Committee is considering whether the right to recycle should also be extended to the tenants of owners of units in condominium and cooperatives, the same as those of tenants in apartment projects under the bill.

STATUS: The bill awaits a hearing date in the Senate Environmental Quality Committee.

Senate Bills

SB 150 (Correa)
Rental Restrictions

If enacted, this CAR-sponsored bill would require all future rental restrictions to “grandfather in” then-current owners and allow them to begin or continue to rent under the terms of the restrictions that were in place at the time they became owners. It would require sellers to disclose to prospective purchasers whether rentals are restricted in the governing documents and require associations to give sellers this information as part of the Civil Code section 1368 escrow disclosures. Currently, the bill would apply only prospectively and would not affect CC&R amendments and rules adopted before January 1, 2012. The bill would not apply to solely commercial or industrial common interest developments. The bill would also specify when a transfer of title is not a transfer that binds the new title holder to the new restrictions (e.g., transfers to living trusts, inter-familial transfers, transfers in probate).

STATUS: The bill passed the Senate and will be debated further in the Assembly this summer.

SB 209 (Corbett)
Electric Vehicles / Charging Stations

If enacted, SB 209 would make void and unenforceable governing documents that have the effect of prohibiting or preventing an owner from installing an electric vehicle charging station in the common area of a common interest development. The bill would endorse the authority of an association to impose reasonable regulations on the appearance, installation, safety and use of EV charging stations, would require applicants to maintain minimum levels of liability insurance and name their association as an additional insured party on such policies, require the applicant and successor owners to bear all costs associated with installation, use, insurance, utilities and removal.

The bill as currently written lacks certain reasonable protections for associations and owners who would be involuntarily compelled to accept common area encroachments. At a minimum, provisions for indemnification of the association and all owners holding title as tenants-in-common would be essential, as well as recording agreements with respect to the applicant and future owners. Discussions are under way to limit the installation locations to separate interest garages and designated parking spaces that are exclusive use common area, to avoid legal concerns about encroachment and “taking” co-owners' common area property for exclusive use.

STATUS: The bill passed the Senate and will be heard this summer in the Assembly. Senator Corbett's office requested and is reviewing proposed amendments.

SB 561 (Corbett)
Assessment Collection

If enacted as written, SB 561 would largely kill payment plans, association bank loans, and legitimate trustee services to associations exercising their statutory rights to foreclose on separate interests for unpaid assessments. The bill would make it significantly more difficult for owners to arrange payment plans by giving associations a clear disincentive to accept such plans, would place associations in the position of having to pay collection fees and costs out-of-pocket in accepting the risk of a payment plan, not effectively help owners who need this assistance to pay their debt to their association, add new strict compliance procedures that could make liens and their enforcement even more risky, void certain contracts between associations and their collection agents, and legally prevent associations from retaining experienced foreclosure trustees. In addition, SB 561 would interfere with association lenders' collateral in a borrowing association's assessment stream (agreed to and statutorily-protected in prior legislation), threatening the willingness or ability of association lenders to make loans to California associations at a time when they need them most. SB 561 is wholly mis-labeled as a measure to prevent “predatory collection practices” in associations.

STATUS: SB 561 passed the Senate and will be debated further in the Assembly this summer.

SB 563 (Senate Transportation and Housing Committee)
CID Open Meeting Act

If enacted, SB 563 would clarify that executive sessions of the board are meetings, they are simply not open meetings. The bill could clarify that boards are not required to notice and hold an open meeting before going into executive session but can meet solely for executive session purposes. SB 563 would provide that discussing or deciding association business may only be done in meetings, i.e., not by email. A sole exception would be for emergency meetings on executive session topics, in which decisions could be made by email with unanimous written board consent pursuant to Corporations Code section 7211(b). Except for executive sessions held as emergency meetings, executive sessions would require two days' prior posted notice. SB 563 would specify the process for how association boards could lawfully meet using conference telephone equipment.

STATUS: SB 563 passed the Senate and is now in the Assembly for consideration.

SB 759 (Lieu)
Artificial Turf

If enacted, SB 759 would protect an owner's right to install artificial turf on the owner's lot in lieu of natural grass. This right would be subject to an association's architectural review and its authority to establish standards for quality of product and requirements for professional installation. However, approval could not be denied.

STATUS: SB 759 passed the Senate and will next be heard in the Assembly Housing and Community Development Committee.