This letter summarizes new homeowner association statutes which take effect on January 1, 2012 or earlier, as specified below.

1.                  Board of Director Meetings (SB 563).  This law amends California Civil Code Sections 1363, 1363.05, and 1365.2 of the Davis-Stirling Act to change the requirements of Board of Directors meetings. 

Section 1363 is amended to delete the provision that allows any proper matter to be presented at the meeting, even if it is not on the agenda.  Therefore any item to be discussed at a meeting must be on the agenda. 

Section 1363.05 is amended to require:  notice of a teleconference meeting that is open to the public, or of the portion that is open to the public; that the notice identify a physical location where members can attend; and that one board member be present at that location.  It also requires two days’ notice (rather than four) to association members for executive sessions, except for emergency meetings.  It also allows, if a member consents, notice to be given to that member electronically.  The bill also prevents the board from taking action on any business item outside a meeting.  Therefore, no meeting, no action.  It also prevents a board from conducting a meeting electronically, except for emergency meetings if all board members consent in writing to an electronic meeting, and that written consent is filed with the meeting minutes.  Such written consent may be transmitted electronically. 

 Section 1365.2 is amended to include executive session agendas as documents to which association members are entitled.  We therefore recommend that executive session agenda items be written generically, i.e., “Discuss potential disciplinary action against a member” or “discuss potential litigation with counsel” without specifying the owner to be disciplined or the potential litigation matter to be discussed.  However, if a suit has already been filed, you may specify that in the agenda, i.e., “Discuss Obama v. Cain with counsel Ann Rankin.” 

2.                  Documents at Escrow (AB 771).  This states that associations may collect a reasonable fee for providing requested documents in escrow to sellers pursuant to California Civil Code Section 1368.  Associations must provide an estimate of these charges in advance.  The seller may also opt to receive escrow documents and information electronically if it is stored that way.  The association may not charge extra fees for electronic delivery.  The law also states that if a buyer requests them, a seller must give approved board meeting (not executive session) minutes for the past 12 months to a buyer. 

3.                  Renters’ Right to Recycle Act (AB 818).  Pursuant to this law, an owner of a multifamily dwelling (five or more residential units) shall arrange for appropriate and available recycling services.  The requirement is waived if a solid waste enterprise certifies that there is insufficient waste for recycling containers; a solid waste enterprise providing recycling does not serve the property; or the cost of recycling provides a financial hardship (30% or greater increase to cost of providing solid waste services alone). 

4.                  Rental Restrictions (SB 150).  This bill will allow owners to rent under the restrictions in force when they became owners.  Rental restrictions that come into force after purchase would not apply unless the owner agrees to that restriction in writing.  It will also require sellers to disclose to prospective purchasers whether the governing documents prohibit rentals and require associations to provide this information to sellers as part of Civil Code Section 1368’s escrow disclosures.  This measure applies prospectively and does not affect CC&R amendments and rules adopted before January 1, 2012.  Nor does it apply to commercial or industrial common interest developments. 

This law also specifies when a transfer of title does not bind the new title holder to the new restrictions (e.g., transfers to living trusts, inter-familial transfers, and transfers in probate).  In other words, these transfers do not activate the new restrictions passed since the previous purchase. 

This bill does not override existing rental restrictions in place before 2012 and give all owners a right to rent.  Nor does it preclude associations from approving rental restrictions in 2012 and beyond.  However, those rental restrictions will apply only to owners who purchase after the new rental restrictions come into effect, unless the owner agrees to that restriction in writing. 

5.         Electric Vehicles/Charging Stations (SB 209).  This makes void and unenforceable governing documents that effectively prohibit an owner from installing an electric vehicle charging station in the common area, whether exclusive use or general, of a common interest development.  The station must meet applicable health and safety laws and the owner must maintain a $1,000,000 umbrella liability policy.  The bill requires applicants and successor owners to bear all costs associated with installation, use, insurance, utilities, and removal.  An association which violates this provision could be liable for damages and a civil penalty. 

6.         Political Signs (SB 337).  This law prohibits a landlord from prohibiting a tenant from displaying political signs relating to an election or legislative vote, the initiative, referendum, or recall process, or issues before a public body for a vote, except under specific circumstances.  A tenant must comply with local ordinances governing such signs, or, in the absence of such ordinances, reasonable time limits established by a landlord. 

7.         Smoking in Rental Dwellings (SB 332).  This law authorizes a landlord of a residential dwelling unit to prohibit the smoking of tobacco products on the property, in the dwelling unit, in another interior or exterior area, or on the premises on which the dwelling unit is located.  Every lease entered into on or after January 1, 2012, must list the areas where smoking is prohibited.  For leases signed prior to January 1, 2012, the prohibition shall constitute a change in terms requiring advance notice in writing pursuant to Civil Code Section 827. 

Pending Legislation.

8.         Water meters (AB 19).  This would require every water purveyor to require, as a condition of new water service on and after January 1, 1992, the installation of a water meter to measure water supplied to each individual dwelling. 

9.         Davis-Stirling Restatement (AB 805, 806).  These would codify the California Law Revision’s proposed restatement of the Davis-Stirling Common Interest Development Act.  Both bills have passed the Assembly and are in the Senate.  If signed by the governor by the end of 2012, they will go into effect on January 1, 2014.

10.       Delinquent Payments (SB 561).  This bill would require a delinquent owner’s payments to be applied to outstanding assessments and only then to late charges, interest, costs of collection, and attorneys’ fees.  Because payments would go directly to past due fees, third parties could not be paid for their efforts until outstanding assessments are paid off. 

This bill would therefore negatively affect payment plans (which provide for costs to a third party), association bank loans, and trustee services used by associations exercising their right to foreclose for unpaid assessments.  It would also void contracts between associations and their collection agents that waived the owner’s rights or the association’s responsibilities under this statute. 

This bill has passed the Senate and was held for deliberation in next year’s Assembly. It has not been enacted.

I hope that this information is helpful.  Please be advised that this letter is intended as an update on pertinent California law and is not intended as legal advice.  Should you have any questions or concerns regarding specific matters, please call me.

Very truly yours,

LAW OFFICES OF ANN RANKIN

Ann Rankin