The California Legislature started off the 2007 Legislative Session geared up to make numerous amendments to California law applicable to common interest developments. Among the top contenders were Assembly Bill 567 (establishing the Common Interest Development Bureau in the Department of Consumer Affairs), Assembly Bill 952 (prohibition on imposing certain assessments on low to moderate income purchasers without approval of those owners, constituting a quorum, casting a majority of the votes), Assembly Bill 980 (disclosure of residential real estate transfer fees), Senate Bill 127 (requiring sellers of real property to provide purchasers all documents set forth in Civil Code 1368 within 3 calendar days), Senate Bill 528 (amending the Open Meeting Act), and Senate Bill 948 (requiring board of director members to complete a 3-hour Department of Real Estate approved course on homeowners association law).
Most of the bills either never made it to the Governor’s desk or did not obtain final signature by the Governor. The following significant bills affecting common interest developments were chaptered into California law and took effect on January 1, 2008, unless otherwise noted.
A. Senate Bill 528 – NOTICES AND BOARD MEETING AGENDAS
(Civil Code section 1363.05) (Effective January 1, 2008)
Effective January 1, 2008, Civil Code section 1363.05 has been amended to prohibit the board from discussing or taking action on any item at a non-emergency meeting unless the item is listed on the agenda for that meeting. The agenda must also be included in the notice of meeting. Under existing law, the notice is required to be posted in a prominent place in the common area, or mailed or delivered to each member. Notice must also be mailed to members who request such notice by mail. See, amended Civil Code section 1363.05 (i)(1).
Residents who are not members of the board are not bound to adhere to the agenda when they are speaking (i.e. in open forum portion of meeting). See, amended Civil Code section 1363.05 (i)(1).
Notwithstanding the new agenda requirements, the new law provides that when faced with items not on the agenda, the board members may: (A) briefly respond to statements made or questions posed by a person speaking at a meeting; and (B) ask a question for clarification, make a brief announcement or make a brief report on their own activities, whether in response to questions posed by the member or based upon their own initiative. See, amended Civil Code section 1363.05 (i)(2).
The law further allows the board, or a member of the board, subject to the rules and procedures of the board, to do the following:
(A) Provide a reference to, or provide other resources for factual information to, its managing agent or other agents or staff;
(B) Request that its manager or other agents or staff report back to the board at a subsequent meeting concerning any matter, or take action to direct its managing agent or other agents or staff to place a matter of business on a future agenda;
(C) Direct its managing agent or other agents or staff to perform administrative tasks that are necessary to comply with this section. See, amended Civil Code section 1363.05 (i)(3)(C).
“Rules or procedures of the board” appear to refer to requests for action or direction being subject to any rule of action under the bylaws, such as a provision requiring the vote of a majority of a quorum of the board to take action versus unilateral action by an individual director.
Exceptions exist for “emergency situations” under Civil Code section 1363.05(i)(4)(i), which are defined as “circumstances that could not have been reasonably foreseen by the board, that require immediate attention and possible action by the board, and that, of necessity, make it impracticable to provide notice” (i.e. via a published agenda). A need for immediate action can also be voted upon by two-thirds of the board or, if less than two-thirds of the board is present, by unanimous vote of the (board) members present, if the need came to the attention of the board after the agenda was posted and distributed. Action can be taken on an item that was listed on a prior agenda for a meeting which occurred not more than thirty (30) calendar days before the subsequent meeting at which the action is to be taken, and at the prior meeting, the action was continued or tabled. The law further provides that before discussing any items pursuant to paragraph (i)(4), the board of directors is required to openly identify the item to the members in attendance at the meeting.
Old subsection (f) containing the definition of “meeting” was moved to new subsection (j), and old subsections (g), (h) and (i) are now (f), (g) and (h).
Given the new requirements, it will be important to continue to limit time on homeowner open forum and to keep careful records of all posted agendas/meeting notices. Management or a board member should also bring a copy of the posted agenda to the board meeting to ensure adherence.
If the board finds that action is necessary on items that were not posted on the agenda, the board should table the item to a meeting not more than 30 calendar days from the original meeting, or call a special board meeting and comply with the posting requirements, unless the action falls within the above definitions of an emergency.
Agenda items should also be stated in a broad and general manner, to reduce the chance of having to re-notice with an additional agenda (i.e., instead of stating “discuss flowers at front entrance to property next to monument,” state “landscaping of common area”).
Managers should be aware of possible additional duties that may be requested by a board. These may include reporting back at subsequent meetings, placing a matter of business on future agendas, posting the agenda as part of the meeting notice, and ensuring that any items discussed were properly posted. If items were not properly posted, managers should recommend to the board that such items be tabled and/or placed on the next meeting’s agenda, or schedule a special meeting with an additional published agenda. These additional duties may or may not be covered under your existing management contract cost.
Please note there is no requirement being imposed on agendas for member meetings. The rules referring to executive sessions were also not changed by this law and remain in effect.
B. Assembly Bill 691 – MANAGER REQUIREMENTS
(Business & Professions Code sections 11500, 11501, 11502, 11504, 11505, 11506) (Effective January 1, 2008)
The California Legislature implemented numerous revisions to Business & Professions Code sections 11500, 11501, 11502, 11504, 11505, and 11506 regarding certification and other requirements for Common Interest Development Managers. These code sections require certain education and testing requirements, including, but not limited to, 30 hours of instruction in course work on specific topics, such as the Davis-Stirling Common Interest Development Act, financial management, governance, dispute resolution, risk management, personnel management, and other topics, prior to the manager being certified as a “common interest development manager.”
Most of the revisions clarify or clean-up existing language. The following are notable amendments:
Section 11500 containing applicable definitions, adds “collection, reporting and archiving” of financial or common area assets of an association to the acts considered “management services” performed by the common interest development manager.
Section 11502 clarifies the educational curriculum requirements to be completed by common interest development managers. Subsection (b)(1) is amended to delete the specific reference to “California” law and replaces it with the broad term “the law that relates to” the management of common interest developments. Subsection (b)(1)(A) clarifies “member access” to association records as a specific topic included in the Davis-Stirling Common Interest Development Act course of study. Subsection (b)(1)(B) clarifies the course of study on fair employment laws to the California Fair Employment and Housing Act. Subsection (b)(1)(C) expands the risk management course of study to include, but not be limited to, insurance coverage, maintenance, operations and emergency preparedness. New subsection (b)(2)(M) requires instruction in conflict avoidance and resolution mechanisms.
Section 11504 requires common interest development managers to make certain disclosures to the association’s board of directors. Subsection (d) now requires the manager to disclose whether the fidelity insurance of the manager or his/her employer covers the “current year’s” operating and reserve funds of the association. This is not to be construed as a requirement that the manager obtain or maintain fidelity insurance. Section 11506 extends the effective date of Business & Professions Code sections 11500 – 11506 from January 1, 2008, to January 1, 2012.
C. Senate Bill 430 – EARTHQUAKE INSURANCE
(Insurance Code sections 10089.5, 10089.9, 10089.13, 10089.16, 10089.23, 10089.30, 10089.31, and 10089.33) (Operative July 1, 2008)
Existing law authorizes the California Earthquake Authority (“CEA”) to transact basic residential earthquake insurance. Senate Bill 430 amends Insurance Code sections 10089.5, 10089.9, 10089.13, 10089.16, 10089.23, 10089.30, and 10089.33 of, and adds new section 10089.31, to improve the financial condition of CEA for earthquakes occurring after the original sunset date of December 1, 2008. Senate Bill 430 creates a new assessment authority for the CEA, clarifies the power of the CEA to impose conditions on insurance companies applying to become participating insurers, and requires insurers that sell homeowners’ insurance in California, to offer to each policyholder who purchases a homeowners’ policy the option to purchase earthquake insurance. Condominium owners continue to have the right to purchase loss assessment coverage from the CEA. Underwriting requirements for participating insurers is reduced, resulting in increased insurance premiums for purchasers through the CEA.