California Assembly Bill AB771 Amended / Bill

 BILL NUMBER: AB 771AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 15, 2011 INTRODUCED BY Assembly Member Butler FEBRUARY 17, 2011 An act to amend  Section 1368 of   Sections 1365 and 1368 of, and to add Section 1368.2 to,  the Civil Code, relating to common interest developments. LEGISLATIVE COUNSEL'S DIGEST AB 771, as amended, Butler. Common interest developments: requests for documents: fees. The Davis-Stirling Common Interest Development Act requires an owner of a separate interest in a common interest development to provide specified documents to a prospective purchaser of that interest. Existing law requires a homeowners' association to provide these documents to the owner of the separate interest within 10 days of the mailing or delivery of the request and limits the amount of fees charged for the provision of the documents to the association's actual costs to procure, prepare, and reproduce the requested documents. This bill would  require the association to provide a statement describing the fees that may be charged to a seller to procure, prepare, and reproduce the documents. The bill would  provide that the timeframe for the provision of, and the limitation of the amount of fees charged for, the specified documents also apply to an agent, as defined, of the association that provides the documents to an owner of a separate interest in a common interest development. This bill would also require an association or an agent of the association to provide a written  or electronic  estimate of the fees that will be assessed for the provision of the specified documents.  The bill would require the owner of a separate interest to also provide a form for billing disclosures, as specified, to a prospective purchaser.  This bill contains legislative findings and declarations in support of the proposed changes. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares: (1) That subdivision (b) of Section 1368 of the Civil Code, which limits the amount of fees charged by an association of a common interest development for the provision of specified  documents   items  to a seller of a separate interest in a common interest development to a reasonable amount based upon the association's cost to procure, prepare, and reproduce the requested  documents   items  , was intended to apply to any person that provided  the specified documents   those items  . (2) That the decision of Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, in which the court held that subdivision (b) of Section 1368 of the Civil Code is limited to fees charged by the association of the common interest development and does not apply to an agent of the association, does not reflect the Legislature's intent  to limit the amount of   as to  fees that may be charged for the provision of the  specified documents   items  . (b) It is the intent of the Legislature that the amendments  proposed by this act clarify the Legislature's original intent to unilaterally limit the amount of fees charged for the provision of specified documents to a seller of a separate interest in a common interest development to the association's cost to procure, prepare, and reproduce the requested documents.   proposed by this act clarify the process for assessing fees charged for the provision of specified items to a seller of a separate interest in a common interest development.   SEC. 2.   Sec   tion 1365 of the   Civil Code   is amended to read:  1365. Unless the governing documents impose more stringent standards, the association shall prepare and distribute to all of its members the following documents: (a) A pro forma operating budget, which shall include all of the following: (1) The estimated revenue and expenses on an accrual basis. (2) A summary of the association's reserves based upon the most recent review or study conducted pursuant to Section 1365.5, based only on assets held in cash or cash equivalents, which shall be printed in boldface type and include all of the following: (A) The current estimated replacement cost, estimated remaining life, and estimated useful life of each major component. (B) As of the end of the fiscal year for which the study is prepared: (i) The current estimate of the amount of cash reserves necessary to repair, replace, restore, or maintain the major components. (ii) The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain major components. (iii) If applicable, the amount of funds received from either a compensatory damage award or settlement to an association from any person or entity for injuries to property, real or personal, arising out of any construction or design defects, and the expenditure or disposition of funds, including the amounts expended for the direct and indirect costs of repair of construction or design defects. These amounts shall be reported at the end of the fiscal year for which the study is prepared as separate line items under cash reserves pursuant to clause (ii). Instead of complying with the requirements set forth in this clause, an association that is obligated to issue a review of their financial statement pursuant to subdivision (b) may include in the review a statement containing all of the information required by this clause. (C) The percentage that the amount determined for purposes of clause (ii) of subparagraph (B) equals the amount determined for purposes of clause (i) of subparagraph (B). (D) The current deficiency in reserve funding expressed on a per unit basis. The figure shall be calculated by subtracting the amount determined for purposes of clause (ii) of subparagraph (B) from the amount determined for purposes of clause (i) of subparagraph (B) and then dividing the result by the number of separate interests within the association, except that if assessments vary by the size or type of ownership interest, then the association shall calculate the current deficiency in a manner that reflects the variation. (3) A statement as to all of the following: (A) Whether the board of directors of the association has determined to defer or not undertake repairs or replacement of any major component with a remaining life of 30 years or less, including a justification for the deferral or decision not to undertake the repairs or replacement. (B) Whether the board of directors of the association, consistent with the reserve funding plan adopted pursuant to subdivision (e) of Section 1365.5, has determined or anticipates that the levy of one or more special assessments will be required to repair, replace, or restore any major component or to provide adequate reserves therefor. If so, the statement shall also set out the estimated amount, commencement date, and duration of the assessment. (C) The mechanism or mechanisms by which the board of directors will fund reserves to repair or replace major components, including assessments, borrowing, use of other assets, deferral of selected replacements or repairs, or alternative mechanisms. (D) Whether the association has any outstanding loans with an original term of more than one year, including the payee, interest rate, amount outstanding, annual payment, and when the loan is scheduled to be retired. (4) A general statement addressing the procedures used for the calculation and establishment of those reserves to defray the future repair, replacement, or additions to those major components that the association is obligated to maintain. The report shall include, but need not be limited to, reserve calculations made using the formula described in paragraph (4) of subdivision (b) of Section 1365.2.5, and may not assume a rate of return on cash reserves in excess of 2 percent above the discount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made. The summary of the association's reserves disclosed pursuant to paragraph (2) shall not be admissible in evidence to show improper financial management of an association, provided that other relevant and competent evidence of the financial condition of the association is not made inadmissible by this provision. Notwithstanding a contrary provision in the governing documents, a copy of the operating budget shall be annually distributed not less than 30 days nor more than 90 days prior to the beginning of the association's fiscal year. (b) Commencing January 1, 2009, a summary of the reserve funding plan adopted by the board of directors of the association, as specified in paragraph (4) of subdivision (e) of Section 1365.5. The summary shall include notice to members that the full reserve study plan is available upon request, and the association shall provide the full reserve plan to any member upon request. (c) A review of the financial statement of the association shall be prepared in accordance with generally accepted accounting principles by a licensee of the California Board of Accountancy for any fiscal year in which the gross income to the association exceeds seventy-five thousand dollars ($75,000). A copy of the review of the financial statement shall be distributed within 120 days after the close of each fiscal year. (d) Instead of the distribution of the pro forma operating budget required by subdivision (a), the board of directors may elect to distribute a summary of the pro forma operating budget to all of its members with a written notice that the pro forma operating budget is available at the business office of the association or at another suitable location within the boundaries of the development, and that copies will be provided upon request and at the expense of the association. If any member requests that a copy of the pro forma operating budget required by subdivision (a) be mailed to the member, the association shall provide the copy to the member by first-class United States mail at the expense of the association and delivered within five days. The written notice that is distributed to each of the association members shall be in at least 10-point boldface type on the front page of the summary of the budget. (e) A statement describing the association's policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments against its members shall be annually delivered to the members not less than 30 days nor more than 90 days immediately preceding the beginning of the association's fiscal year. (f) (1) A summary of the association's property, general liability, earthquake, flood, and fidelity insurance policies, which shall be distributed not less than 30 days nor more than 90 days preceding the beginning of the association's fiscal year, that includes all of the following information about each policy: (A) The name of the insurer. (B) The type of insurance. (C) The policy limits of the insurance. (D) The amount of deductibles, if any. (2) The association shall, as soon as reasonably practicable, notify its members by first-class mail if any of the policies described in paragraph (1) have lapsed, been canceled, and are not immediately renewed, restored, or replaced, or if there is a significant change, such as a reduction in coverage or limits or an increase in the deductible, as to any of those policies. If the association receives any notice of nonrenewal of a policy described in paragraph (1), the association shall immediately notify its members if replacement coverage will not be in effect by the date the existing coverage will lapse. (3) To the extent that any of the information required to be disclosed pursuant to paragraph (1) is specified in the insurance policy declaration page, the association may meet its obligation to disclose that information by making copies of that page and distributing it to all of its members. (4) The summary distributed pursuant to paragraph (1) shall contain, in at least 10-point boldface type, the following statement: "This summary of the association's policies of insurance provides only certain information, as required by subdivision (f) of Section 1365 of the Civil Code, and should not be considered a substitute for the complete policy terms and conditions contained in the actual policies of insurance. Any association member may, upon request and provision of reasonable notice, review the association's insurance policies and, upon request and payment of reasonable duplication charges, obtain copies of those policies. Although the association maintains the policies of insurance specified in this summary, the association's policies of insurance may not cover your property, including personal property or, real property improvements to or around your dwelling, or personal injuries or other losses that occur within or around your dwelling. Even if a loss is covered, you may nevertheless be responsible for paying all or a portion of any deductible that applies. Association members should consult with their individual insurance broker or agent for appropriate additional coverage."  (g) A statement describing the fees that may be charged to a seller to procure, prepare, and reproduce documents pursuant to the requirements of Section 1368. The statement shall provide the date that the estimate was prepared and the period of time that the fees are valid. The statement shall be updated when the association revises the fees.   SEC. 2.   SEC. 3.  Section 1368 of the Civil Code is amended to read: 1368. (a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, provide the following to the prospective purchaser  with a copy of the completed form specified in Section 1368.2:  (1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated. (2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3. (3) A copy of the most recent documents distributed pursuant to Section 1365. (4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association' s current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1. (5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest. (6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made. (7) A copy of the latest information provided for in Section 1375.1. (8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision.  (9) A copy of the most recent 12 months of minutes approved by the association's board of directors.   (b) Upon written request, an association or an agent of the association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest with a copy of the requested items specified in paragraphs (1) to (8), inclusive, of subdivision (a). Upon receipt of the written request, the association or the agent of the association shall provide a written estimate of the fees that will be assessed for the provision of the documents. The items required to be made available pursuant to this section may be maintained in electronic form and requesting parties shall have the option of receiving them by electronic transmission or machine readable storage media if the association maintains these items in electronic form. The association may charge, or the agent of the association may collect, a reasonable fee for this service based upon the association's actual cost to procure, prepare, and reproduce the requested items.  (b) (1) Upon receipt of an electronic or written request, the association, or the agent of the association, shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest, or any other recipient authorized by the owner, with a copy of the requested items specified in paragraphs (1) to (9), inclusive, of subdivision (a). Upon receipt of a written or electronic request, the association or the agent of the association shall provide a written or electronic estimate of the fees that will be assessed for providing the requested items. The items required to be made available pursuant to this section may be maintained in electronic form, and shall be posted on the Internet Web site, if any, of the association or agent of the association, and shall be accessible to the owner or any other recipient authorized by the owner. Requesting parties shall have the option of receiving the items by electronic transmission if the association, or the association's agent, maintains the items in electronic form. The association or the association's agent may collect a reasonable fee for the procurement, preparation, reproduction, and delivery of the items requested pursuant to the provisions of this section.   (2) No additional fees may be charged by the association for the electronic delivery of the items requested.   (3) Fees for any documents or items not required by this section shall not be charged or assessed at the time fees are charged for the items provided pursuant to this section. Fees for items provided pursuant to this section shall be separate from any other fee, fine, or assessment.   (4) Any payment for the provision of items pursuant to this section shall not be processed until the required items are delivered to the owner or any other recipient authorized by the owner.  (5) Fees for any items not required to be provided under this section shall be paid at the close of escrow, or if there is no escrow, at the transfer of title, unless otherwise agreed to by the owner and any other recipient authorized by the owner.  (c) (1) Except as provided in paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following: (A) An amount not to exceed the association's actual costs to change its records. (B) An amount authorized by subdivision (b). (2) The prohibition in paragraph (1) does not apply to a community service organization or similar entity, or to a nonprofit entity that provides services to a common interest development under a declaration of trust, that is described in subparagraph (A) or (B): (A) The community service organization or similar entity satisfies both of the following requirements: (i) The community service organization or similar entity was established prior to February 20, 2003. (ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development. (B) The community service organization or similar entity, or a nonprofit entity that provides services to a common interest development under a declaration of trust, satisfies all of the following requirements: (i) The organization or entity is not an organization or entity described in subparagraph (A). (ii) The organization or entity was established and received a transfer fee prior to January 1, 2004. (iii) On and after January 1, 2006, the organization or entity offers a purchaser the following payment options for the fee or charge it collects at time of transfer: (I) Paying the fee or charge at the time of transfer. (II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the organization or entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to transfer. (3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance. (d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonable attorneys' fees. (e) Nothing in this section affects the validity of title to real property transferred in violation of this section. (f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134. (g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association. (h) For purposes of this section "agent of the association" means any person or entity  performing services   providing the items  for, or acting on behalf of, the association  pursuant to the requirements of this section  .  SEC. 4.   Section 1368.2 is added to the   Civil Code   , to read:   1368.2. The form for billing disclosures required by Section 1368 shall be in substantially the following form:   Form for Billing of Disclosures Required by   Section 1368   Property Address __________________________________   Owner of Property _________________________________   Owner's Mailing Address ______________________   (If known or different   _______________________   from property address.)   Provider of the Section 1368 Items:   _________________________________________________   Print Name Position or Title Association or Agent   ___________________   Date Form Completed   Check or Complete Applicable Column Below   Not   Civil Available   Item Code Included (N/A) or Not   Section Applicable   (N/App)   Articles of   Incorporation Section   or statement 1368(a)(1) _________ _____________   that not   incorporated  CC&Rs Section _________ _____________   1368(a)(1)   Bylaws Section _________ _____________   1368(a)(1)   Operating Rules Section _________ _____________   1368(a)(1)   Age Section   restrictions, 1368(a)(2) _________ _____________   if any   Pro forma   operating Sections   budget or 1365 and _________ _____________   summary, 1368(a)(3)   including   reserve study   Assessment and Sections   reserve funding 1365 and _________ _____________   disclosure 1368(a)(4)   summary   Financial Sections   statement review 1365 and _________ _____________   1368(a)(3)   Assessment Sections   enforcement 1365 and _________ _____________   policy 1368(a)(4)   Insurance Sections   summary 1365 and _________ _____________   1368(a)(3)   Regular Section _________ _____________   assessment 1368(a)(4)   Special Section _________ _____________   assessment 1368(a)(4)   Emergency Section _________ _____________   assessment 1368(a)(4)   Other unpaid Sections   obligations of 1367.1 _________ _____________   seller and   1368(a)(4)   Approved Section   changes to 1365 and _________ _____________   assessments 1368(a)(4)   , (8)   Settlement Sections   notice 1368(a)(6)   regarding , (7) and _________ _____________   common area 1375.1   defects   Sections   Preliminary 1368(a)(6) _________ _____________   list of defects , 1375,   and 1375.1   Notice(s) of Sections   violation 1363 and _________ _____________   1368(a)(5)   Required Sections   statement of 1365(g) _________ _____________   fees and 1368   Most recent 12 Section _________ _____________   mo./minutes 1368(a)(9)