Focus Magazine

With the tremendous and long-reaching impact of legislation upon the operation and management of common interest developments, laws passed by the California legislature may have altering effects upon associations. To keep you apprised of applicable laws, the following is a summary of new legislation considered and/or passed in 2007.

Senate Bill 528, modifying Civil Code Section 1363.05 as of January 1, 2008, prohibits Boards from considering or discussing any matter at a non-emergency board meeting that is not set forth on the notice agenda, unless (1) it is an emergency situation, as determined by a majority of the board members present at the meeting; (2) it requires immediate action but arose after notice was distributed to the members; (3) a member raised the matter (to which the board may only briefly respond); or (4) the action was continued from a prior meeting and was contained on the prior meeting’s notice agenda. All matters qualifying for discussion under one of these exceptions must be specifically identified to the members attending the meeting. This law will likely only impact the manner oards prepare agendas, crafting them generally to allow as much business to be transacted as possible. (See the article on page ___ for more detail.)

Assembly Bill 691, revising Business and Professions Code Sections 11500 to 11506, extends manager regulations in the Davis-Stirling Common Interest Development Act (including requirements and qualifications for "certified common interest development managers") until January 1, 2012. This law does not have a direct impact on associations beyond who qualifies as "certified common interest development managers," which is voluntary.

Assembly Bill 980, revising Civil Code Sections 1098, 1098.5, and 1102.6, requires those who transfer or sell their homes to disclose certain information about applicable transfer fees to potential buyers, including the duration of the fee, its recipient, and the potential effect of the fee on the future resale value of the property. While transfer fees imposed by associations and property management companies have been upheld by California courts, requiring such fees to be disclosed to potential buyers may cause a drop or delay in association home sales, which, given our litigious society, will likely correspond to an increase in lawsuits regarding such fees.

Senate Bill 430, affecting Insurance Code Sections 10089.5 to 10089.33, creates new assessment authority for the California Earthquake Authority ("CEA"), which has the power to issue residential earthquake insurance. Participating insurers may be required pay capital assessments under specified conditions to qualify and remain as participating insurers. The law further requires that if claims and expenses paid by the CEA due to earthquake-related events commencing on or after December 1, 2008, exhaust existing capital, the CEA Board of Directors may further assess participating insurers to certain limits.

While the four laws just described will have some effect upon homeowners associations, two other pending bills may, if eventually passed, have even longer lasting effects.

Assembly Bill 952, which was tabled this year, is the most significant.. If this bill is eventually passed, it would prohibit boards of associations with dedicated low- to moderate-income residences ("affordable units") from imposing assessment increases without the approval of these affordable units, and would require associations to offer payment plans to owner-occupants of affordable units for regular and special assessments. This pending legislation would significantly limit the ability of boards to assess association members who own affordable units.

Senate Bill 948, which was tabled by its author until the 2008 legislative session, would require every member of an association's board of directors to complete at least one training course during their terms of office and at least one course every three to four years after their initial term. This proposed law, introduced by CAI, would be beneficial in ensuring that board members obtain much-needed training.