HOA Law Blog

We are very pleased to advise you that all of our efforts were successful and the Governor vetoed AB 2598, the assessment collection bill. We agree with the Governor’s reasons for the veto. His letter to the legislators is presented below. His reasons for his veto show he listened to what we had to say. We are willing to work on compromise legislation that may help eliminate some of the problems the proponents of this legislation expressed as their motivations for this legislation while at the same time preserving the non-judicial foreclosure process. We thank all of those who worked to defeat this bill and took the time to express their opposition to the legislature and the Governor.

Letter Sent By Schwarzenegger To California State Assembly

To the Members of the California State Assembly:

I am returning Assembly Bill 2598 without my signature.

This bill makes sweeping changes to the laws that govern Common Interest Developments (CID)
and the foreclosure process for failure to pay delinquent homeowners’ assessments.

While the intent of this legislation is laudable and intended to protect homeowners from being
foreclosed upon for small sums of delinquent assessments, this bill is overly broad and could
negatively impact all homeowners living in CIDs.

This bill could unfairly result in increased assessments for other homeowners who pay their
assessments in a timely manner and may delay the transfer of real property in CIDs due to the
lien procedures set forth in the bill.

Foreclosure should be the last course of action taken against a homeowner. If there were more
open discussion between homeowners and their associations, many conflicts could be resolved.
That is why I recently signed into law AB 1836 (Chapter 754, 2004) and AB 2718 (Chapter 766,
2004). These bills establish methods to encourage more disclosure and better communication
between homeowners and their associations.

I recognize that additional clarification in the foreclosure statutes is necessary. However, this
change should be made incrementally working together with all impacted parties. Therefore, I
am directing the State and Consumer Services and the Business, Transportation and Housing
Agencies to work with all of the interested stakeholders to develop and ensure that the process
for collecting CID homeowners’ assessments is refined so that all homeowners are treated
equitably and foreclosure only occurs after every reasonable alternative is exhausted.

Sincerely,

Arnold Schwarzenegger

(a) This section applies if an association's governing documents require association approval before an owner of a separate interest may make a physical change to the owner's separate interest or to the common area. In reviewing and approving or disapproving a proposed change, the association shall satisfy the following requirements:

(1) The association shall provide a fair, reasonable, and expeditious procedure for making its decision. The procedure shall be included in the association's governing documents. The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for response to an application or a request for reconsideration by the board of directors.
(2) A decision on a proposed change shall be made in good faith and may not be unreasonable, arbitrary, or capricious.
(3) Notwithstanding a contrary provision of the governing documents, a decision on a proposed change may not violate any governing provision of law, including, but not limited to, the Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code), or a building code or other applicable law governing land use or public safety.
(4) A decision on a proposed change shall be in writing. If a proposed change is disapproved, the written decision shall include both an explanation of why the proposed change is disapproved and a description of the procedure for reconsideration of the decision by the board of directors.
(5) If a proposed change is disapproved, the applicant is entitled to reconsideration by the board of directors of the association that made the decision, at an open meeting of the board. This paragraph does not require reconsideration of a decision that is made by the board of directors or a body that has the same membership as the board of directors, at a meeting that satisfies the requirements of Section 1363.05. Reconsideration by the board does not constitute dispute resolution within the meaning of Section 1363.820.

(b) Nothing in this section authorizes a physical change to the common area in a manner that is inconsistent with an association's governing documents, unless the change is required by law.

(c) An association shall annually provide its members with notice of any requirements for association approval of physical changes to property. The notice shall describe the types of changes that require association approval and shall include a copy of the procedure used to review and approve or disapprove a proposed change.

(a) Any covenant, condition, or restriction contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of, or any interest in, a common interest development that effectively prohibits or restricts the installation or use of a video or television antenna, including a satellite dish, or that effectively prohibits or restricts the attachment of that antenna to a structure within that development where the antenna is not visible from any street or common area, except as otherwise prohibited or restricted by law, is void and unenforceable as to its application to the installation or use of a video or television antenna that has a diameter or diagonal measurement of 36 inches or less.

(b) This section shall not apply to any covenant, condition, or restriction, as described in subdivision (a), that imposes reasonable restrictions on the installation or use of a video or television antenna, including a satellite dish, that has a diameter or diagonal measurement of 36 inches or less. For purposes of this section, "reasonable restrictions" means those restrictions that do not significantly increase the cost of the video or television antenna system, including all related equipment, or significantly decrease its efficiency or performance and include all of the following:

(1) Requirements for application and notice to the association prior to the installation.
(2) Requirement of the owner of a separate interest, as defined in Section 1351, to obtain the approval of the association for the installation of a video or television antenna that has a diameter or diagonal measurement of 36 inches or less on a separate interest owned by another.
(3) Provision for the maintenance, repair, or replacement of roofs or other building components.
(4) Requirements for installers of a video or television antenna to indemnify or reimburse the association or its members for loss or damage caused by the installation, maintenance, or use of a video or television antenna that has a diameter or diagonal measurement of 36 inches or less.

(c) Whenever approval is required for the installation or use of a video or television antenna, including a satellite dish, the application for approval shall be processed by the appropriate approving entity for the common interest development in the same manner as an application for approval of an architectural modification to the property, and the issuance of a decision on the application shall not be willfully delayed.

(d) In any action to enforce compliance with this section, the prevailing party shall be awarded reasonable attorney's fees.

(a) As soon as is reasonably practicable after the association and the builder have entered into a settlement agreement or the matter has otherwise been resolved regarding alleged defects in the common areas, alleged defects in the separate interests that the association is obligated to maintain or repair, or alleged defects in the separate interests that arise out of, or are integrally related to, defects in the common areas or separate interests that the association is obligated to maintain or repair, where the defects giving rise to the dispute have not been corrected, the association shall, in writing, inform only the members of the association whose names appear on the records of the association that the matter has been resolved, by settlement agreement or other means, and disclose all of the following:

(1) A general description of the defects that the association reasonably believes, as of the date of the disclosure, will be corrected or replaced.
(2) A good faith estimate, as of the date of the disclosure, of when the association believes that the defects identified in paragraph (1) will be corrected or replaced. The association may state that the estimate may be modified.
(3) The status of the claims for defects in the design or construction of the common interest development that were not identified in paragraph (1) whether expressed in a preliminary list of defects sent to each member of the association or otherwise claimed and disclosed to the members of the association.

(b) Nothing in this section shall preclude an association from amending the disclosures required pursuant to subdivision (a), and any amendments shall supersede any prior conflicting information disclosed to the members of the association and shall retain any privilege attached to the original disclosures.

(c) Disclosure of the information required pursuant to subdivision (a) or authorized by subdivision (b) shall not waive any privilege attached to the information.

(d) For the purposes of the disclosures required pursuant to this section, the term "defects" shall be defined to include any damage resulting from defects.

(a) Upon the completion of the mandatory prefiling dispute resolution process described in Section 1375, if the parties have not settled the matter, the association or its assignee may file a complaint in the superior court in the county in which the project is located. Those matters shall be given trial priority.

(b) In assigning trial priority, the court shall assign the earliest possible trial date, taking into consideration the pretrial preparation completed pursuant to Section 1375, and shall deem the complaint to have been filed on the date of service of the Notice of Commencement of Legal Proceedings described under Section 1375.

(c) Any respondent, subcontractor, or design professional who received timely prior notice of the inspections and testing conducted under Section 1375 shall be prohibited from engaging in additional inspection or testing, except if all of the following specific conditions are met, upon motion to the court:
(1) There is an insurer for a subcontractor or design professional, that did not have timely notice that legal proceedings were commenced under Section 1375 at least 30 days prior to the commencement of inspections or testing pursuant to paragraph (6) of subdivision (h) of Section 1375.
(2) The insurer's insured did not participate in any inspections or testing conducted under the provisions of paragraph (6) of subdivision (h) of Section 1375.
(3) The insurer has, after receiving notice of a complaint filed in superior court under subdivision (a), retained separate counsel, who did not participate in the Section 1375 dispute resolution process, to defend its insured as to the allegations in the complaint.
(4) It is reasonably likely that the insured would suffer prejudice if additional inspections or testing are not permitted.
(5) The information obtainable through the proposed additional inspections or testing is not available through any reasonable alternative sources.

If the court permits additional inspections or testing upon finding that these requirements are met, any additional inspections or testing shall be limited to the extent reasonably necessary to avoid the likelihood of prejudice and shall be coordinated among all similarly situated parties to ensure that they occur without unnecessary duplication. For purposes of providing notice to an insurer prior to inspections or testing under paragraph (6) of subdivision (h) of Section 1375, if notice of the proceedings was not provided by the insurer's insured, notice may be made via certified mail either by the subcontractor, design professional, association, or respondent to the address specified in the Statement of Insurance provided under paragraph (2) of subdivision (e) of Section 1375. Nothing herein shall affect the rights of an intervenor who files a complaint in intervention. If the association alleges defects that were not specified in the prefiling dispute resolution process under Section 1375, the respondent, subcontractor, and design professionals shall be permitted to engage in testing or inspection necessary to respond to the additional claims. A party who seeks additional inspections or testing based upon the amendment of claims shall apply to the court for leave to conduct those inspections or that testing.

If the court determines that it must review the defect claims alleged by the association in the prefiling dispute resolution process in order to determine whether the association alleges new or additional defects, this review shall be conducted in camera. Upon objection of any party, the court shall refer the matter to a judge other than the assigned trial judge to determine if the claim has been amended in a way that requires additional testing or inspection.

(d) Any subcontractor or design professional who had notice of the facilitated dispute resolution conducted under Section 1375 but failed to attend, or attended without settlement authority, shall be bound by the amount of any settlement reached in the facilitated dispute resolution in any subsequent trial, although the affected party may introduce evidence as to the allocation of the settlement. Any party who failed to participate in the facilitated dispute resolution because the party did not receive timely notice of the mediation shall be relieved of any obligation to participate in the settlement. Notwithstanding any privilege applicable to the prefiling dispute resolution process provided by Section 1375, evidence may be introduced by any party to show whether a subcontractor or design professional failed to attend or attended without settlement authority. The binding effect of this subdivision shall in no way diminish or reduce a nonsettling subcontractor or design professional's right to defend itself or assert all available defenses relevant to its liability in any subsequent trial. For purposes of this subdivision, a subcontractor or design professional shall not be deemed to have attended without settlement authority because it asserted defenses to its potential liability.

(e) Notice of the facilitated dispute resolution conducted under Section 1375 must be mailed by the respondent no later than 20 days prior to the date of the first facilitated dispute resolution session to all parties. Notice shall also be mailed to each of these parties' known insurance carriers. Mailing of this notice shall be by certified mail. Any subsequent facilitated dispute resolution notices shall be served by any means reasonably calculated to provide those parties actual notice.

(f) As to the complaint, the order of discovery shall, at the request of any defendant, except upon a showing of good cause, permit the association's expert witnesses to be deposed prior to any percipient party depositions. The depositions shall, at the request of the association, be followed immediately by the defendant's experts and then by the subcontractors' and design professionals' experts, except on a showing of good cause. For purposes of this section, in determining what constitutes "good cause," the court shall consider, among other things, the goal of early disclosure of defects and whether the expert is prepared to render a final opinion, except that the court may modify the scope of any expert's deposition to address those concerns.

(g) (1) The only method of seeking judicial relief for the failure of the association or the respondent to complete the dispute resolution process under Section 1375 shall be the assertion, as provided for in this subdivision, of a procedural deficiency to an action for damages by the association against the respondent after that action has been filed. A verified application asserting a procedural deficiency shall be filed with the court no later than 90 days after the answer to the plaintiff's complaint has been served, unless the court finds that extraordinary conditions exist.
(2) Upon the verified application of the association or the respondent alleging substantial noncompliance with Section 1375, the court shall schedule a hearing within 21 days of the application to determine whether the association or respondent has substantially complied with this section. The issue may be determined upon affidavits or upon oral testimony, in the discretion of the court.
(3) (A) If the court finds that the association or the respondent did not substantially comply with this paragraph, the court shall stay the action for up to 90 days to allow the noncomplying party to establish substantial compliance. The court shall set a hearing within 90 days to determine substantial compliance. At any time, the court may, for good cause shown, extend the period of the stay upon application of the noncomplying party.
(B) If, within the time set by the court pursuant to this paragraph, the association or the respondent has not established that it has substantially complied with this section, the court shall determine if, in the interest of justice, the action should be dismissed without prejudice, or if another remedy should be fashioned. Under no circumstances shall the court dismiss the action with prejudice as a result of the association's failure to substantially comply with this section. In determining the appropriate remedy, the court shall consider the extent to which the respondent has complied with this section.

(h) This section is operative on July 1, 2002, but does not apply to any action or proceeding pending on that date.

(i) This section shall become inoperative on July 1, 2010, and, as of January 1, 2011, is repealed, unless a later enacted statute that is enacted before January 1, 2011, deletes or extends the dates on which it becomes inoperative and is repealed.

(a) Before an association files a complaint for damages against a builder, developer, or general contractor ("respondent") of a common interest development based upon a claim for defects in the design or construction of the common interest development, all of the requirements of this section shall be satisfied with respect to the builder, developer, or general contractor.

(b) The association shall serve upon the respondent a "Notice of Commencement of Legal Proceedings." The notice shall be served by certified mail to the registered agent of the respondent, or if there is no registered agent, then to any officer of the respondent. If there are no current officers of the respondent, service shall be upon the person or entity otherwise authorized by law to receive service of process. Service upon the general contractor shall be sufficient to initiate the process set forth in this section with regard to any builder or developer, if the builder or developer is not amenable to service of process by the foregoing methods. This notice shall toll all applicable statutes of limitation and repose, whether contractual or statutory, by and against all potentially responsible parties, regardless of whether they were named in the notice, including claims for indemnity applicable to the claim for the period set forth in subdivision (c). The notice shall include all of the following:
(1) The name and location of the project.
(2) An initial list of defects sufficient to apprise the respondent of the general nature of the defects at issue.
(3) A description of the results of the defects, if known.
(4) A summary of the results of a survey or questionnaire distributed to homeowners to determine the nature and extent of defects, if a survey has been conducted or a questionnaire has been distributed.
(5) Either a summary of the results of testing conducted to determine the nature and extent of defects or the actual test results, if that testing has been conducted.

(c) Service of the notice shall commence a period, not to exceed 180 days, during which the association, the respondent, and all other participating parties shall try to resolve the dispute through the processes set forth in this section. This 180-day period may be extended for one additional period, not to exceed 180 days, only upon the mutual agreement of the association, the respondent, and any parties not deemed peripheral pursuant to paragraph (3) of subdivision (e). Any extensions beyond the first extension shall require the agreement of all participating parties. Unless extended, the dispute resolution process prescribed by this section shall be deemed completed. All extensions shall continue the tolling period described in subdivision (b).

(d) Within 25 days of the date the association serves the Notice of Commencement of Legal Proceedings, the respondent may request in writing to meet and confer with the board of directors of the association. Unless the respondent and the association otherwise agree, there shall be not more than one meeting, which shall take place no later than 10 days from the date of the respondent's written request, at a mutually agreeable time and place. The meeting shall be subject to subdivision (b) of Section 1363.05. The discussions at the meeting are privileged communications and are not admissible in evidence in any civil action, unless the association and the respondent consent in writing to their admission.

(e) Upon receipt of the notice, the respondent shall, within 60 days, comply with the following:
(1) The respondent shall provide the association with access to, for inspection and copying of, all plans and specifications, subcontracts, and other construction files for the project that are reasonably calculated to lead to the discovery of admissible evidence regarding the defects claimed. The association shall provide the respondent with access to, for inspection and copying of, all files reasonably calculated to lead to the discovery of admissible evidence regarding the defects claimed, including all reserve studies, maintenance records and any survey questionnaires, or results of testing to determine the nature and extent of defects. To the extent any of the above documents are withheld based on privilege, a privilege log shall be prepared and submitted to all other parties. All other potentially responsible parties shall have the same rights as the respondent regarding the production of documents upon receipt of written notice of the claim, and shall produce all relevant documents within 60 days of receipt of the notice of the claim.
(2) The respondent shall provide written notice by certified mail to all subcontractors, design professionals, their insurers, and the insurers of any additional insured whose identities are known to the respondent or readily ascertainable by review of the project files or other similar sources and whose potential responsibility appears on the face of the notice. This notice to subcontractors, design professionals, and insurers shall include a copy of the Notice of Commencement of Legal Proceedings, and shall specify the date and manner by which the parties shall meet and confer to select a dispute resolution facilitator pursuant to paragraph (1) of subdivision (f), advise the recipient of its obligation to participate in the meet and confer or serve a written acknowledgment of receipt regarding this notice, advise the recipient that it will waive any challenge to selection of the dispute resolution facilitator if it elects not to participate in the meet and confer, advise the recipient that it may be bound by any settlement reached pursuant to subdivision (d) of Section 1375.05, advise the recipient that it may be deemed to have waived rights to conduct inspection and testing pursuant to subdivision (c) of Section 1375.05, advise the recipient that it may seek the assistance of an attorney, and advise the recipient that it should contact its insurer, if any. Any subcontractor or design professional, or insurer for that subcontractor, design professional, or additional insured, who receives written notice from the respondent regarding the meet and confer shall, prior to the meet and confer, serve on the respondent a written acknowledgment of receipt. That subcontractor or design professional shall, within 10 days of service of the written acknowledgment of receipt, provide to the association and the respondent a Statement of Insurance that includes both of the following:
(A) The names, addresses, and contact persons, if known, of all insurance carriers, whether primary or excess and regardless of whether a deductible or self-insured retention applies, whose policies were in effect from the commencement of construction of the subject project to the present and which potentially cover the subject claims.
(B) The applicable policy numbers for each policy of insurance provided.
(3) Any subcontractor or design professional, or insurer for that subcontractor, design professional, or additional insured, who so chooses, may, at any time, make a written request to the dispute resolution facilitator for designation as a peripheral party. That request shall be served contemporaneously on the association and the respondent. If no objection to that designation is received within 15 days, or upon rejection of that objection, the dispute resolution facilitator shall designate that subcontractor or design professional as a peripheral party, and shall thereafter seek to limit the attendance of that subcontractor or design professional only to those dispute resolution sessions deemed peripheral party sessions or to those sessions during which the dispute resolution facilitator believes settlement as to peripheral parties may be finalized. Nothing in this subdivision shall preclude a party who has been designated a peripheral party from being reclassified as a nonperipheral party, nor shall this subdivision preclude a party designated as a nonperipheral party from being reclassified as a peripheral party after notice to all parties and an opportunity to object. For purposes of this subdivision, a peripheral party is a party having total claimed exposure of less than twenty-five thousand dollars ($25,000).

(f) (1) Within 20 days of sending the notice set forth in paragraph (2) of subdivision (e), the association, respondent, subcontractors, design professionals, and their insurers who have been sent a notice as described in paragraph (2) of subdivision (e) shall meet and confer in an effort to select a dispute resolution facilitator to preside over the mandatory dispute resolution process prescribed by this section. Any subcontractor or design professional who has been given timely notice of this meeting but who does not participate, waives any challenge he or she may have as to the selection of the dispute resolution facilitator. The role of the dispute resolution facilitator is to attempt to resolve the conflict in a fair manner. The dispute resolution facilitator shall be sufficiently knowledgeable in the subject matter and be able to devote sufficient time to the case. The dispute resolution facilitator shall not be required to reside in or have an office in the county in which the project is located. The dispute resolution facilitator and the participating parties shall agree to a date, time, and location to hold a case management meeting of all parties and the dispute resolution facilitator, to discuss the claims being asserted and the scheduling of events under this section. The case management meeting with the dispute resolution facilitator shall be held within 100 days of service of the Notice of Commencement of Legal Proceedings at a location in the county where the project is located. Written notice of the case management meeting with the dispute resolution facilitator shall be sent by the respondent to the association, subcontractors and design professionals, and their insurers who are known to the respondent to be on notice of the claim, no later than 10 days prior to the case management meeting, and shall specify its date, time, and location. The dispute resolution facilitator in consultation with the respondent shall maintain a contact list of the participating parties.
(2) No later than 10 days prior to the case management meeting, the dispute resolution facilitator shall disclose to the parties all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed dispute resolution facilitator would be able to resolve the conflict in a fair manner. The facilitator's disclosure shall include the existence of any ground specified in Section 170.1 of the Code of Civil Procedure for disqualification of a judge, any attorney-client relationship the facilitator has or had with any party or lawyer for a party to the dispute resolution process, and any professional or significant personal relationship the facilitator or his or her spouse or minor child living in the household has or had with any party to the dispute resolution process. The disclosure shall also be provided to any subsequently noticed subcontractor or design professional within 10 days of the notice.
(3) A dispute resolution facilitator shall be disqualified by the court if he or she fails to comply with this paragraph and any party to the dispute resolution process serves a notice of disqualification prior to the case management meeting. If the dispute resolution facilitator complies with this paragraph, he or she shall be disqualified by the court on the basis of the disclosure if any party to the dispute resolution process serves a notice of disqualification prior to the case management meeting.
(4) If the parties cannot mutually agree to a dispute resolution facilitator, then each party shall submit a list of three dispute resolution facilitators. Each party may then strike one nominee from the other parties' list, and petition the court, pursuant to the procedure described in subdivisions (n) and (o), for final selection of the dispute resolution facilitator. The court may issue an order for final selection of the dispute resolution facilitator pursuant to this paragraph.
(5) Any subcontractor or design professional who receives notice of the association's claim without having previously received timely notice of the meet and confer to select the dispute resolution facilitator shall be notified by the respondent regarding the name, address, and telephone number of the dispute resolution facilitator. Any such subcontractor or design professional may serve upon the parties and the dispute resolution facilitator a written objection to the dispute resolution facilitator within 15 days of receiving notice of the claim. Within seven days after service of this objection, the subcontractor or design professional may petition the superior court to replace the dispute resolution facilitator. The court may replace the dispute resolution facilitator only upon a showing of good cause, liberally construed. Failure to satisfy the deadlines set forth in this subdivision shall constitute a waiver of the right to challenge the dispute resolution facilitator.
(6) The costs of the dispute resolution facilitator shall be apportioned in the following manner: one-third to be paid by the association; one-third to be paid by the respondent; and one-third to be paid by the subcontractors and design professionals, as allocated among them by the dispute resolution facilitator. The costs of the dispute resolution facilitator shall be recoverable by the prevailing party in any subsequent litigation pursuant to Section 1032 of the Code of Civil Procedure, provided however that any nonsettling party may, prior to the filing of the complaint, petition the facilitator to reallocate the costs of the dispute resolution facilitator as they apply to any nonsettling party. The determination of the dispute resolution facilitator with respect to the allocation of these costs shall be binding in any subsequent litigation. The dispute resolution facilitator shall take into account all relevant factors and equities between all parties in the dispute resolution process when reallocating costs.
(7) In the event the dispute resolution facilitator is replaced at any time, the case management statement created pursuant to subdivision (h) shall remain in full force and effect.
(8) The dispute resolution facilitator shall be empowered to enforce all provisions of this section.
(g) (1) No later than the case management meeting, the parties shall begin to generate a data compilation showing the following
information regarding the alleged defects at issue:
(A) The scope of the work performed by each potentially responsible subcontractor.
(B) The tract or phase number in which each subcontractor provided goods or services, or both.
(C) The units, either by address, unit number, or lot number, at which each subcontractor provided goods or services, or both.
(2) This data compilation shall be updated as needed to reflect additional information. Each party attending the case management meeting, and any subsequent meeting pursuant to this section, shall provide all information available to that party relevant to this data compilation.

(h) At the case management meeting, the parties shall, with the assistance of the dispute resolution facilitator, reach agreement on a case management statement, which shall set forth all of the elements set forth in paragraphs (1) to (8), inclusive, except that the parties may dispense with one or more of these elements if they agree that it is appropriate to do so. The case management statement shall provide that the following elements shall take place in the following order:
(1) Establishment of a document depository, located in the county where the project is located, for deposit of documents, defect lists, demands, and other information provided for under this section. All documents exchanged by the parties and all documents created pursuant to this subdivision shall be deposited in the document depository, which shall be available to all parties throughout the prefiling dispute resolution process and in any subsequent litigation. When any document is deposited in the document depository, the party depositing the document shall provide written notice identifying the document to all other parties. The costs of maintaining the document depository shall be apportioned among the parties in the same manner as the costs of the dispute resolution facilitator.
(2) Provision of a more detailed list of defects by the association to the respondent after the association completes a visual inspection of the project. This list of defects shall provide sufficient detail for the respondent to ensure that all potentially responsible subcontractors and design professionals are provided with notice of the dispute resolution process. If not already completed prior to the case management meeting, the Notice of Commencement of Legal Proceedings shall be served by the respondent on all additional subcontractors and design professionals whose potential responsibility appears on the face of the more detailed list of defects within seven days of receipt of the more detailed list. The respondent shall serve a copy of the case management statement, including the name, address, and telephone number of the dispute resolution facilitator, to all the potentially responsible subcontractors and design professionals at the same time.
(3) Nonintrusive visual inspection of the project by the respondent, subcontractors, and design professionals.
(4) Invasive testing conducted by the association, if the association deems appropriate. All parties may observe and photograph any testing conducted by the association pursuant to this paragraph, but may not take samples or direct testing unless, by mutual agreement, costs of testing are shared by the parties.
(5) Provision by the association of a comprehensive demand which provides sufficient detail for the parties to engage in meaningful dispute resolution as contemplated under this section.
(6) Invasive testing conducted by the respondent, subcontractors, and design professionals, if they deem appropriate.
(7) Allowance for modification of the demand by the association if new issues arise during the testing conducted by the respondent, subcontractor, or design professionals.
(8) Facilitated dispute resolution of the claim, with all parties, including peripheral parties, as appropriate, and insurers, if any, present and having settlement authority. The dispute resolution facilitators shall endeavor to set specific times for the attendance of specific parties at dispute resolution sessions. If the dispute resolution facilitator does not set specific times for the attendance of parties at dispute resolution sessions, the dispute resolution facilitator shall permit those parties to participate in dispute resolution sessions by telephone.

(i) In addition to the foregoing elements of the case management statement described in subdivision (h), upon mutual agreement of the parties, the dispute resolution facilitator may include any or all of the following elements in a case management statement: the exchange of consultant or expert photographs; expert presentations; expert meetings; or any other mechanism deemed appropriate by the parties in the interest of resolving the dispute.

(j) The dispute resolution facilitator, with the guidance of the parties, shall at the time the case management statement is established, set deadlines for the occurrence of each event set forth in the case management statement, taking into account such factors as the size and complexity of the case, and the requirement of this section that this dispute resolution process not exceed 180 days absent agreement of the parties to an extension of time.

(k) (1) (A) At a time to be determined by the dispute resolution facilitator, the respondent may submit to the association all of the following:
(i) A request to meet with the board to discuss a written settlement offer.
(ii) A written settlement offer, and a concise explanation of the reasons for the terms of the offer.
(iii) A statement that the respondent has access to sufficient funds to satisfy the conditions of the settlement offer.
(iv) A summary of the results of testing conducted for the purposes of determining the nature and extent of defects, if this testing has been conducted, unless the association provided the respondent with actual test results.
(B) If the respondent does not timely submit the items required by this subdivision, the association shall be relieved of any further obligation to satisfy the requirements of this subdivision only.
(C) No less than 10 days after the respondent submits the items required by this paragraph, the respondent and the board of directors of the association shall meet and confer about the respondent's settlement offer.
(D) If the association's board of directors rejects a settlement offer presented at the meeting held pursuant to this subdivision, the board shall hold a meeting open to each member of the association. The meeting shall be held no less than 15 days before the association commences an action for damages against the respondent.
(E) No less than 15 days before this meeting is held, a written notice shall be sent to each member of the association specifying all
of the following:
(i) That a meeting will take place to discuss problems that may lead to the filing of a civil action, and the time and place of this meeting.
(ii) The options that are available to address the problems, including the filing of a civil action and a statement of the various alternatives that are reasonably foreseeable by the association to pay for those options and whether these payments are expected to be made from the use of reserve account funds or the imposition of regular or special assessments, or emergency assessment increases.
(iii) The complete text of any written settlement offer, and a concise explanation of the specific reasons for the terms of the offer submitted to the board at the meeting held pursuant to subdivision (d) that was received from the respondent.

(F)The respondent shall pay all expenses attributable to sending the settlement offer to all members of the association. The respondent shall also pay the expense of holding the meeting, not to exceed three dollars ($3) per association member.

(G) The discussions at the meeting and the contents of the notice and the items required to be specified in the notice pursuant to paragraph (E) are privileged communications and are not admissible in evidence in any civil action, unless the association consents to their admission.

(H) No more than one request to meet and discuss a written settlement offer may be made by the respondent pursuant to this subdivision.

(l) Except for the purpose of in camera review as provided in subdivision (c) of Section 1375.05, all defect lists and demands, communications, negotiations, and settlement offers made in the course of the prelitigation dispute resolution process provided by this section shall be inadmissible pursuant to Sections 1119 to 1124, inclusive, of the Evidence Code and all applicable decisional law. This inadmissibility shall not be extended to any other documents or communications which would not otherwise be deemed inadmissible.

(m) Any subcontractor or design professional may, at any time, petition the dispute resolution facilitator to release that party from the dispute resolution process upon a showing that the subcontractor or design professional is not potentially responsible for the defect claims at issue. The petition shall be served contemporaneously on all other parties, who shall have 15 days from the date of service to object. If a subcontractor or design professional is released, and it later appears to the dispute resolution facilitator that it may be a responsible party in light of the current defect list or demand, the respondent shall renotice the party as provided by paragraph (2) of subdivision (e), provide a copy of the current defect list or demand, and direct the party to attend a dispute resolution session at a stated time and location. A party who subsequently appears after having been released by the dispute resolution facilitator shall not be prejudiced by its absence from the dispute resolution process as the result of having been previously released by the dispute resolution facilitator.

(n) Any party may, at any time, petition the superior court in the county where the project is located, upon a showing of good cause, and the court may issue an order, for any of the following, or for appointment of a referee to resolve a dispute regarding any of the following:
(1) To take a deposition of any party to the process, or subpoena a third party for deposition or production of documents, which is
necessary to further prelitigation resolution of the dispute.
(2) To resolve any disputes concerning inspection, testing, production of documents, or exchange of information provided for under this section.
(3) To resolve any disagreements relative to the timing or contents of the case management statement.
(4) To authorize internal extensions of timeframes set forth in the case management statement.
(5) To seek a determination that a settlement is a good faith settlement pursuant to Section 877.6 of the Code of Civil Procedure and all related authorities. The page limitations and meet and confer requirements specified in this section shall not apply to these motions, which may be made on shortened notice. Instead, these motions shall be subject to other applicable state law, rules of court, and local rules. A determination made by the court pursuant to this motion shall have the same force and effect as the determination of a postfiling application or motion for good faith settlement.
(6) To ensure compliance, on shortened notice, with the obligation to provide a Statement of Insurance pursuant to paragraph (2) of subdivision (e).
(7) For any other relief appropriate to the enforcement of the provisions of this section, including the ordering of parties, and insurers, if any, to the dispute resolution process with settlement authority.

(o) (1) A petition filed pursuant to subdivision (n) shall be filed in the superior court in the county in which the project is located. The court shall hear and decide the petition within 10 days after filing. The petitioning party shall serve the petition on all parties, including the date, time, and location of the hearing no later than five business days prior to the hearing. Any responsive papers shall be filed and served no later than three business days prior to the hearing. Any petition or response filed under this section shall be no more than three pages in length.
(2) All parties shall meet with the dispute resolution facilitator, if one has been appointed and confer in person or by the telephone prior to the filing of that petition to attempt to resolve the matter without requiring court intervention.

(p) As used in this section:
(1) "Association" shall have the same meaning as defined in subdivision (a) of Section 1351.
(2) "Builder" means the declarant, as defined in subdivision (g) of Section 1351.
(3) "Common interest development" shall have the same meaning as in subdivision (c) of Section 1351, except that it shall not include developments or projects with less than 20 units.

(q) The alternative dispute resolution process and procedures described in this section shall have no application or legal effect other than as described in this section.

(r) This section shall become operative on July 1, 2002, however it shall not apply to any pending suit or claim for which notice has previously been given.

(s) This section shall become inoperative on July 1, 2010, and as of January 1, 2011, is repealed, unless a later enacted statute, that is enacted before January 1, 2011, deletes or extends the dates on which it becomes inoperative and is repealed.

Nothing in this title may be construed to apply to a development wherein there does not exist a common area as defined in subdivision (b) of Section 1351. This section is declaratory of existing law.

Unless a contrary intent is clearly expressed, local zoning ordinances shall be construed to treat like structures, lots, parcels, areas, or spaces in like manner regardless of whether the common interest development is a community apartment project, condominium project, planned development, or stock cooperative.

In interpreting deeds and condominium plans, the existing physical boundaries of a unit in a condominium project, when the boundaries of the unit are contained within a building, or of a unit reconstructed in substantial accordance with the original plans thereof, shall be conclusively presumed to be its boundaries rather than the metes and bounds expressed in the deed or condominium plan, if any exists, regardless of settling or lateral movement of the building and regardless of minor variance between boundaries shown on the plan or in the deed and those of the building.

Any deed, declaration, or condominium plan for a common interest development shall be liberally construed to facilitate the operation of the common interest development, and its provisions shall be presumed to be independent and severable. Nothing in Article 3 (commencing with Section 715) of Chapter 2 of Title 2 of Part 1 of this division shall operate to invalidate any provisions of the governing documents of a common interest development.

(a) An association shall annually provide its members a summary of the provisions of this article that specifically references this article. The summary shall include the following language:

"Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 1369.520 of the Civil Code may result in the loss of your right to sue the association or another member of the association regarding
enforcement of the governing documents or the applicable law."

(b) The summary shall be provided either at the time the pro forma budget required by Section 1365 is distributed or in the manner prescribed in Section 5016 of the Corporations Code. The summary shall include a description of the association's internal dispute resolution process, as required by Section 1363.850.

In an enforcement action in which fees and costs may be awarded pursuant to subdivision (c) of Section 1354, the court, in determining the amount of the award, may consider whether a party's refusal to participate in alternative dispute resolution before commencement of the action was reasonable.

(a) After an enforcement action is commenced, on written stipulation of the parties, the matter may be referred to alternative dispute resolution. The referred action is stayed. During the stay, the action is not subject to the rules implementing subdivision (c) of Section 68603 of the Government Code.

(b) The costs of the alternative dispute resolution shall be borne by the parties.

(a) At the time of commencement of an enforcement action, the party commencing the action shall file with the initial pleading a certificate stating that one or more of the following conditions is satisfied:
(1) Alternative dispute resolution has been completed in compliance with this article.
(2) One of the other parties to the dispute did not accept the terms offered for alternative dispute resolution.
(3) Preliminary or temporary injunctive relief is necessary.

(b) Failure to file a certificate pursuant to subdivision (a) is grounds for a demurrer or a motion to strike unless the court finds that dismissal of the action for failure to comply with this article would result in substantial prejudice to one of the parties.

If a Request for Resolution is served before the end of the applicable time limitation for commencing an enforcement action, the time limitation is tolled during the following periods:

(a) The period provided in Section 1369.530 for response to a Request for Resolution.

(b) If the Request for Resolution is accepted, the period provided by Section 1369.540 for completion of alternative dispute resolution, including any extension of time stipulated to by the parties pursuant to Section 1369.540.

(a) If the party on whom a Request for Resolution is served accepts the request, the parties shall complete the alternative dispute resolution within 90 days after the party initiating the request receives the acceptance, unless this period is extended by written stipulation signed by both parties.

(b) Chapter 2 (commencing with Section 1115) of Division 9 of the Evidence Code applies to any form of alternative dispute resolution initiated by a Request for Resolution under this article, other than arbitration.

(c) The costs of the alternative dispute resolution shall be borne by the parties.

(a) Any party to a dispute may initiate the process required by Section 1369.520 by serving on all other parties to the dispute a Request for Resolution. The Request for Resolution shall include all of the following:
(1) A brief description of the dispute between the parties.
(2) A request for alternative dispute resolution.
(3) A notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or the request will be deemed rejected.
(4) If the party on whom the request is served is the owner of a separate interest, a copy of this article.

(b) Service of the Request for Resolution shall be by personal delivery, first-class mail, express mail, facsimile transmission, or other means reasonably calculated to provide the party on whom the request is served actual notice of the request.

(c) A party on whom a Request for Resolution is served has 30 days following service to accept or reject the request. If a party does not accept the request within that period, the request is deemed rejected by the party.

(a) An association or an owner or a member of a common interest development may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article.

(b) This section applies only to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits stated in Sections 116.220 and 116.221 of the Code of Civil Procedure.

(c) This section does not apply to a small claims action.

(d) Except as otherwise provided by law, this section does not apply to an assessment dispute.

As used in this article:

(a) "Alternative dispute resolution" means mediation, arbitration, conciliation, or other nonjudicial procedure that involves a neutral party in the decision making process. The form of alternative dispute resolution chosen pursuant to this article may be binding or nonbinding, with the voluntary consent of the parties.

(b) "Enforcement action" means a civil action or proceeding, other than a cross-complaint, for any of the following purposes:
(1) Enforcement of this title.
(2) Enforcement of the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code).
(3) Enforcement of the governing documents of a common interest development.

In a condominium project, no labor performed or services or materials furnished with the consent of, or at the request of, an owner in the condominium project or his or her agent or his or her contractor shall be the basis for the filing of a lien against any other property of any other owner in the condominium project unless that other owner has expressly consented to or requested the performance of the labor or furnishing of the materials or services. However, express consent shall be deemed to have been given by the owner of any condominium in the case of emergency repairs thereto. Labor performed or services or materials furnished for the common areas, if duly authorized by the association, shall be deemed to be performed or furnished with the express consent of each condominium owner. The owner of any condominium may remove his or her condominium from a lien against two or more condominiums or any part thereof by payment to the holder of the lien of the fraction of the total sum secured by the lien which is attributable to his or her condominium.

(a) Not later than 30 days prior to the filing of any civil action by the association against the declarant or other developer of a common interest development for alleged damage to the common areas, alleged damage to the separate interests that the association is obligated to maintain or repair, or alleged damage to the separate interests that arises out of, or is integrally related to, damage to the common areas or separate interests that the association is obligated to maintain or repair, the board of directors of the association shall provide a written notice to each member of the association who appears on the records of the association when the notice is provided. This notice shall specify all of the following:

(1) That a meeting will take place to discuss problems that may lead to the filing of a civil action.
(2) The options, including civil actions, that are available to address the problems.
(3) The time and place of this meeting.

(b) Notwithstanding subdivision (a), if the association has reason to believe that the applicable statute of limitations will expire before the association files the civil action, the association may give the notice, as described above, within 30 days after the filing of the action.

(a) In an action maintained by an association pursuant to subdivision (b), (c), or (d) of Section 1368.3, the amount of damages recovered by the association shall be reduced by the amount of damages allocated to the association or its managing agents in direct proportion to their percentage of fault based upon principles of comparative fault. The comparative fault of the association or its managing agents may be raised by way of defense, but shall not be the basis for a cross-action or separate action against the association or its managing agents for contribution or implied indemnity, where the only damage was sustained by the association or its members. It is the intent of the Legislature in enacting this subdivision to require that comparative fault be pleaded as an affirmative defense, rather than a separate cause of action, where the only damage was sustained by the association or its members.

(b) In an action involving damages described in subdivision (b), (c), or (d) of Section 1368.3, the defendant or cross-defendant may allege and prove the comparative fault of the association or its managing agents as a setoff to the liability of the defendant or cross-defendant even if the association is not a party to the litigation or is no longer a party whether by reason of settlement, dismissal, or otherwise.

(c) Subdivisions (a) and (b) apply to actions commenced on or after January 1, 1993.

(d) Nothing in this section affects a person's liability under Section 1431, or the liability of the association or its managing agent for an act or omission which causes damages to another.

An association established to manage a common interest development has standing to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings in its own name as the real party in interest and without joining with it the individual owners of the common interest development, in matters pertaining to the following:
(a) Enforcement of the governing documents.
(b) Damage to the common area.
(c) Damage to a separate interest that the association is obligated to maintain or repair.
(d) Damage to a separate interest that arises out of, or is integrally related to, damage to the common area or a separate interest that the association is obligated to maintain or repair.

(a) Any rule or regulation of an association that arbitrarily or unreasonably restricts an owner's ability to market his or her interest in a common interest development is void.

(b) No association may adopt, enforce, or otherwise impose any rule or regulation that does either of the following:
(1) Imposes an assessment or fee in connection with the marketing of an owner's interest in an amount that exceeds the association's actual or direct costs. That assessment or fee shall be deemed to violate the limitation set forth in Section 1366.1.
(2) Establishes an exclusive relationship with a real estate broker through which the sale or marketing of interests in the development is required to occur. The limitation set forth in this paragraph does not apply to the sale or marketing of separate interests owned by the association or to the sale or marketing of common areas by the association.

(c) For purposes of this section, "market" and "marketing" mean listing, advertising, or obtaining or providing access to show the owner's interest in the development.

(d) This section does not apply to rules or regulations made pursuant to Section 712 or 713 regarding real estate signs.

If it is determined through dispute resolution pursuant to the association's "meet and confer" program required in Article 5 (commencing with Section 1363.810) of Chapter 4 or alternative dispute resolution with a neutral third party pursuant to Article 2 (commencing with Section 1369.510) of Chapter 7 that an association has recorded a lien for a delinquent assessment in error, the association shall promptly reverse all late charges, fees, interest, attorney's fees, costs of collection, costs imposed for the notice prescribed in subdivision (a) of Section 1367.1, and costs of recordation and release of the lien authorized under subdivision (b) of Section 1367.4, and pay all costs related to the dispute resolution or alternative dispute resolution.

(a) Notwithstanding any law or any provisions of the governing documents to the contrary, this section shall apply to debts for assessments that arise on and after January 1, 2006.

(b) An association that seeks to collect delinquent regular or special assessments of an amount less than one thousand eight hundred dollars ($1,800), not including any accelerated assessments, late charges, fees and costs of collection, attorney's fees, or interest, may not collect that debt through judicial or nonjudicial foreclosure, but may attempt to collect or secure that debt in any of the following ways:
(1) By a civil action in small claims court, pursuant to Chapter 5.5 (commencing with Section 116.110) of Title 1 of the Code of Civil Procedure. An association that chooses to proceed by an action in small claims court, and prevails, may enforce the judgment as permitted under Article 8 (commencing with Section 116.810) of Title 1 of the Code of Civil Procedure. The amount that may be recovered in small claims court to collect upon a debt for delinquent assessments may not exceed the jurisdictional limits of the small claims court and shall be the sum of the following:
(A) The amount owed as of the date of filing the complaint in the small claims court proceeding.
(B) In the discretion of the court, an additional amount to that described in subparagraph (A) equal to the amount owed for the period from the date the complaint is filed until satisfaction of the judgment, which total amount may include accruing unpaid assessments and any reasonable late charges, fees and costs of collection, attorney's fees, and interest, up to the jurisdictional limits of the small claims court.
(2) By recording a lien on the owner's separate interest upon which the association may not foreclose until the amount of the delinquent assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney's fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent. An association that chooses to record a lien under these provisions, prior to recording the lien, shall offer the owner and, if so requested by the owner, participate in dispute resolution as set forth in Article 5 (commencing with Section 1363.810) of Chapter 4.
(3) Any other manner provided by law, except for judicial or nonjudicial foreclosure.

(c) An association that seeks to collect delinquent regular or special assessments of an amount of one thousand eight hundred dollars ($1,800) or more, not including any accelerated assessments, late charges, fees and costs of collection, attorney's fees, or interest, or any assessments secured by the lien that are more than 12 months delinquent, may use judicial or nonjudicial foreclosure subject to the following conditions:
(1) Prior to initiating a foreclosure on an owner's separate interest, the association shall offer the owner and, if so requested by the owner, participate in dispute resolution pursuant to the association's "meet and confer" program required in Article 5 (commencing with Section 1363.810) of Chapter 4 or alternative dispute resolution as set forth in Article 2 (commencing with Section 1369.510) of Chapter 7. The decision to pursue dispute resolution or a particular type of alternative dispute resolution shall be the choice of the owner, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.
(2) The decision to initiate foreclosure of a lien for delinquent assessments that has been validly recorded shall be made only by the board of directors of the association and may not be delegated to an agent of the association. The board shall approve the decision by a majority vote of the board members in an executive session. The board shall record the vote in the minutes of the next meeting of the board open to all members. The board shall maintain the confidentiality of the owner or owners of the separate interest by identifying the matter in the minutes by the parcel number of the property, rather than the name of the owner or owners. A board vote to approve foreclosure of a lien shall take place at least 30 days prior to any public sale.
(3) The board shall provide notice by personal service in accordance with the manner of service of summons in Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2 of the Code of Civil Procedure to an owner of a separate interest who occupies the separate interest or to the owner's legal representative, if the board votes to foreclose upon the separate interest. The board shall provide written notice to an owner of a separate interest who does not occupy the separate interest by first-class mail, postage prepaid, at the most current address shown on the books of the association. In the absence of written notification by the owner to the association, the address of the owner's separate interest may be treated as the owner's mailing address.
(4) A nonjudicial foreclosure by an association to collect upon a debt for delinquent assessments shall be subject to a right of redemption. The redemption period within which the separate interest may be redeemed from a foreclosure sale under this paragraph ends 90 days after the sale. In addition to the requirements of Section 2924f, a notice of sale in connection with an association's foreclosure of a separate interest in a common interest development shall include a statement that the property is being sold subject to the right of redemption created in this paragraph.

(d) The limitation on foreclosure of assessment liens for amounts under the stated minimum in this section does not apply to assessments owed by owners of separate interests in timeshare estates, as defined in subdivision (x) of Section 11112 of the Business and Professions Code, or to assessments owed by developers.

(a) A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney's fees, if any, and interest, if any, as determined in accordance with Section 1366, shall be a debt of the owner of the separate interest
at the time the assessment or other sums are levied. At least 30 days prior to recording a lien upon the separate interest of the owner of record to collect a debt that is past due under this subdivision, the association shall notify the owner of record in writing by certified mail of the following:
(1) A general description of the collection and lien enforcement procedures of the association and the method of calculation of the amount, a statement that the owner of the separate interest has the right to inspect the association records, pursuant to Section 8333 of the Corporations Code, and the following statement in 14-point boldface type, if printed, or in capital letters, if typed: "IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION."
(2) An itemized statement of the charges owed by the owner, including items on the statement which indicate the amount of any delinquent assessments, the fees and reasonable costs of collection, reasonable attorney's fees, any late charges, and interest, if any.
(3) A statement that the owner shall not be liable to pay the charges, interest, and costs of collection, if it is determined the assessment was paid on time to the association.
(4) The right to request a meeting with the board as provided by paragraph (3) of subdivision (c).
(5) The right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association's "meet and confer" program required in Article 5 (commencing with Section 1363.810) of Chapter 4.
(6) The right to request alternative dispute resolution with a neutral third party pursuant to Article 2 (commencing with Section 1369.510) of Chapter 7 before the association may initiate foreclosure against the owner's separate interest, except that
binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.

(b) Any payments made by the owner of a separate interest toward the debt set forth, as required in subdivision (a), shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney's fees, late charges, or interest. When an owner makes a payment, the owner may request a receipt and the association shall provide it. The receipt shall indicate the date of payment and the person who received it. The association shall provide a mailing address for overnight payment of assessments.

(c) (1) (A) Prior to recording a lien for delinquent assessments, an association shall offer the owner and, if so requested by the owner, participate in dispute resolution pursuant to the association's "meet and confer" program required in Article 5 (commencing with Section 1363.810) of Chapter 4.
(B) Prior to initiating a foreclosure for delinquent assessments, an association shall offer the owner and, if so requested by the owner, shall participate in dispute resolution pursuant to the association's "meet and confer" program required in Article 5 (commencing with Section 1363.810) of Chapter 4 or alternative dispute resolution with a neutral third party pursuant to Article 2 (commencing with Section 1369.510) of Chapter 7. The decision to pursue dispute resolution or a particular type of alternative dispute resolution shall be the choice of the owner, except that binding
arbitration shall not be available if the association intends to initiate a judicial foreclosure.
(2) For liens recorded on or after January 1, 2006, the decision to record a lien for delinquent assessments shall be made only by the board of directors of the association and may not be delegated to an agent of the association. The board shall approve the decision by a majority vote of the board members in an open meeting. The board shall record the vote in the minutes of that meeting.
(3) An owner, other than an owner of any interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7, may submit a written request to meet with the board to discuss a payment plan for the debt noticed pursuant to subdivision (a). The association shall provide the owners the standards for payment plans, if any exist. The board shall meet with the owner in executive session within 45 days of the postmark of the request, if the request is mailed within 15 days of the date of the postmark of the notice, unless there is no regularly scheduled board meeting within that period, in which case the board may designate a committee of one or more members to meet with the owner. Payment plans may incorporate any assessments that accrue during the payment plan period. Payment plans shall not impede an association's ability to record a lien on the owner's separate interest to secure payment of delinquent assessments. Additional late fees shall not accrue during the payment plan period if the owner is in compliance with the terms of the payment plan. In the event of a default on any payment plan, the association may resume its efforts to collect the delinquent assessments from the time prior to entering into the
payment plan.

(d) The amount of the assessment, plus any costs of collection, late charges, and interest assessed in accordance with Section 1366, shall be a lien on the owner's separate interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with Section 1366, a legal description of the owner's separate interest in the common interest development against which the assessment and other sums are levied, and the name of the record owner of the separate interest in the common interest development against which the lien is imposed. The itemized statement of the charges owed by the owner described in paragraph (2) of subdivision (a) shall be recorded together with the notice of delinquent assessment. In order for the lien to be enforced by nonjudicial foreclosure as provided in subdivision (g), the notice of delinquent assessment shall state the name and address of the trustee authorized by the association to enforce the lien by sale. The notice of delinquent assessment shall be signed by the person designated in the declaration or by the association for that purpose, or if no one is designated, by the president of the association. A copy of the recorded notice of delinquent assessment shall be mailed by certified mail to every person whose name is shown as an owner of the separate interest in the association's records, and the notice shall be mailed no later than 10 calendar days after recordation. Within 21 days of the payment of the sums specified in the notice of delinquent assessment, the association shall record or cause to be recorded in the office of the county recorder in which the notice of delinquent assessment is recorded a lien release or notice of rescission and provide the owner of the separate interest a copy of the lien release or notice that the delinquent assessment has been satisfied. A monetary charge imposed by the association as a means of reimbursing the association for costs incurred by the association in the repair of damage to common areas and facilities for which the member or the member's guests or tenants were responsible may become a lien against the member's separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c, provided the authority to impose a lien is set forth in the governing documents. It is the intent of the Legislature not to contravene Section 2792.26 of Title 10 of the California Code of Regulations, as that section appeared on January 1, 1996, for associations of subdivisions that are being sold under authority of a subdivision public report, pursuant to Part 2 (commencing with Section 11000) of Division 4 of the Business and Professions Code.

(e) Except as indicated in subdivision (d), a monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing instruments, except for the late payments, may not be characterized nor treated in the governing instruments as an assessment that may become a lien against the member's subdivision separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.

(f) A lien created pursuant to subdivision (d) shall be prior to all other liens recorded subsequent to the notice of assessment, except that the declaration may provide for the subordination thereof to any other liens and encumbrances.

(g) An association may not voluntarily assign or pledge the association's right to collect payments or assessments, or to enforce or foreclose a lien to a third party, except when the assignment or pledge is made to a financial institution or lender chartered or licensed under federal or state law, when acting within the scope of that charter or license, as security for a loan obtained by the association; however, the foregoing provision may not restrict the right or ability of an association to assign any unpaid obligations of a former member to a third party for purposes of collection. Subject to the limitations of this subdivision, after the expiration of 30 days following the recording of a lien created pursuant to subdivision (d), the lien may be enforced in any manner permitted by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a trustee substituted pursuant to Section 2934a. Any sale by the trustee shall be conducted in accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust. The fees of a trustee may not exceed the amounts prescribed in Sections 2924c and 2924d, plus the cost of service for either of the following:
(1) The notice of default pursuant to subdivision (j) of Section 1367.1.
(2) The decision of the board to foreclose upon the separate interest of an owner as described in paragraph (3) of subdivision (c) of Section 1367.4.

(h) Nothing in this section or in subdivision (a) of Section 726 of the Code of Civil Procedure prohibits actions against the owner of a separate interest to recover sums for which a lien is created pursuant to this section or prohibits an association from taking a deed in lieu of foreclosure.

(i) If it is determined that a lien previously recorded against the separate interest was recorded in error, the party who recorded the lien shall, within 21 calendar days, record or cause to be recorded in the office of the county recorder in which the notice of delinquent assessment is recorded a lien release or notice of rescission and provide the owner of the separate interest with a declaration that the lien filing or recording was in error and a copy of the lien release or notice of rescission.

(j) In addition to the requirements of Section 2924, a notice of default shall be served by the association on the owner's legal representative in accordance with the manner of service of summons in Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2 of the Code of Civil Procedure. The owner's legal representative shall be the person whose name is shown as the owner of a separate interest in the association's records, unless another person has been previously designated by the owner as his or her legal representative in writing and mailed to the association in a manner that indicates that the association has received it.

(k) Upon receipt of a written request by an owner identifying a secondary address for purposes of collection notices, the association shall send additional copies of any notices required by this section to the secondary address provided. The association shall notify owners of their right to submit secondary addresses to the association, at the time the association issues the pro forma operating budget pursuant to Section 1365. The owner's request shall be in writing and shall be mailed to the association in a manner that shall indicate the association has received it. The owner may identify or change a secondary address at any time, provided that, if a secondary address is identified or changed during the collection
process, the association shall only be required to send notices to the indicated secondary address from the point the association receives the request.

(l) (1) An association that fails to comply with the procedures set forth in this section shall, prior to recording a lien, recommence the required notice process.
(2) Any costs associated with recommencing the notice process shall be borne by the association and not by the owner of a separate interest.

(m) This section only applies to liens recorded on or after January 1, 2003.

(n) This section is subordinate to, and shall be interpreted in
conformity with, Section 1367.4.

(a) A regular or special assessment and any late charges, reasonable costs of collection, and interest, as assessed in accordance with Section 1366, shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied. Before an association may place a lien upon the separate interest of an owner to collect a debt which is past due under this subdivision, the association shall notify the owner in writing by certified mail of the fee and penalty procedures of the association, provide an itemized statement of the charges owed by the owner, including items on the statement which indicate the assessments owed, any late charges and the method of calculation, any attorney's fees, and the collection practices used by the association, including the right of the association to the reasonable costs of collection. In addition, any payments toward that debt shall first be applied to the assessments owed, and only after the principal owed is paid in full shall the payments be applied to interest or collection expenses.

(b) The amount of the assessment, plus any costs of collection, late charges, and interest assessed in accordance with Section 1366, shall be a lien on the owner's interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with Section 1366, a legal description of the owner's interest in the common interest development against which the assessment and other sums are levied, the name of the record owner of the owner's interest in the common interest development against which the lien is imposed, and, in order for the lien to be enforced by nonjudicial foreclosure as provided in subdivision (e) the name and address of the trustee authorized by the association to enforce the lien by sale. The notice of delinquent assessment shall be signed by the person designated in the declaration or by the association for that purpose, or if no one is designated, by the president of the association, and mailed in the manner set forth in Section 2924b, to all record owners of the owner's interest in the common interest development no later than 10 calendar days after recordation. Upon payment of the sums specified in the notice of delinquent assessment, the association shall cause to be recorded a further notice stating the satisfaction and release of the lien thereof. A monetary penalty imposed by the association as a means of reimbursing the association for costs incurred by the association in the repair of damage to common areas and facilities for which the member or the member's guests or tenants were responsible may become a lien against the member's separate interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c, provided the authority to impose a lien is set forth in the governing documents. It is the intent of the Legislature not to contravene Section 2792.26 of Title 10 of the California Code of Regulations, as that section appeared on January 1, 1996, for associations of subdivisions that are being sold under authority of a subdivision public report, pursuant to Part 2 (commencing with Section 11000) of Division 4 of the Business and Professions Code.

(c) Except as indicated in subdivision (b), a monetary penalty imposed by the association as a disciplinary measure for failure of a member to comply with the governing instruments, except for the late payments, may not be characterized nor treated in the governing instruments as an assessment which may become a lien against the member's subdivision interest enforceable by the sale of the interest under Sections 2924, 2924b, and 2924c.

(d) A lien created pursuant to subdivision (b) shall be prior to all other liens recorded subsequent to the notice of assessment, except that the declaration may provide for the subordination thereof to any other liens and encumbrances.

(e) After the expiration of 30 days following the recording of a lien created pursuant to subdivision (b), the lien may be enforced in any manner permitted by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a trustee substituted pursuant to Section 2934a. Any sale by
the trustee shall be conducted in accordance with the provisions of Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trusts.

(f) Nothing in this section or in subdivision (a) of Section 726 of the Code of Civil Procedure prohibits actions against the owner of a separate interest to recover sums for which a lien is created pursuant to this section or prohibits an association from taking a deed in lieu of foreclosure.

(g) This section only applies to liens recorded on or after January 1, 1986 and prior to January 1, 2003.

(a) In order to facilitate the collection of regular assessments, special assessments, transfer fees, and similar charges, the board of directors of any association is authorized to record a statement or amended statement identifying relevant information for the association. This statement may include any or all of the following information:
(1) The name of the association as shown in the conditions, covenants, and restrictions or the current name of the association, if different.
(2) The name and address of a managing agent or treasurer of the association or other individual or entity authorized to receive assessments and fees imposed by the association.
(3) A daytime telephone number of the authorized party identified in paragraph (2) if a telephone number is available.
(4) A list of separate interests subject to assessment by the association, showing the assessor's parcel number or legal description, or both, of the separate interests.
(5) The recording information identifying the declaration or declarations of covenants, conditions, and restrictions governing the association.
(6) If an amended statement is being recorded, the recording information identifying the prior statement or statements which the amendment is superseding.

(b) The county recorder is authorized to charge a fee for recording the document described in subdivision (a), which fee shall be based upon the number of pages in the document and the recorder's per-page recording fee.

An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.

(a) Except as provided in this section, the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title. However, annual increases in regular assessments for any fiscal year, as authorized by subdivision (b), shall not be imposed unless the board has complied with subdivision (a) of Section 1365 with respect to that fiscal year, or has obtained the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, "quorum" means more than 50 percent
of the owners of an association.

(b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a
majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, quorum means more than 50 percent of the owners of an
association. This section does not limit assessment increases necessary for emergency situations. For purposes of this section, an emergency situation is any one of the following:
(1) An extraordinary expense required by an order of a court.
(2) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.
(3) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the pro forma operating budget under Section 1365. However, prior to the imposition or collection of an assessment under this subdivision, the board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment.

(c) Regular assessments imposed or collected to perform the obligations of an association under the governing documents or this title shall be exempt from execution by a judgment creditor of the association only to the extent necessary for the association to perform essential services, such as paying for utilities and insurance. In determining the appropriateness of an exemption, a court shall ensure that only essential services are protected under this subdivision.

This exemption shall not apply to any consensual pledges, liens, or encumbrances that have been approved by the owners of an association, constituting a quorum, casting a majority of the votes at a meeting or election of the association, or to any state tax lien, or to any lien for labor or materials supplied to the common area.

(d) The association shall provide notice by first-class mail to the owners of the separate interests of any increase in the regular or special assessments of the association, not less than 30 nor more than 60 days prior to the increased assessment becoming due.

(e) Regular and special assessments levied pursuant to the governing documents are delinquent 15 days after they become due, unless the declaration provides a longer time period, in which case the longer time period shall apply. If an assessment is delinquent the association may recover all of the following:
(1) Reasonable costs incurred in collecting the delinquent assessment, including reasonable attorney's fees.
(2) A late charge not exceeding 10 percent of the delinquent assessment or ten dollars ($10), whichever is greater, unless the declaration specifies a late charge in a smaller amount, in which case any late charge imposed shall not exceed the amount specified in the declaration.
(3) Interest on all sums imposed in accordance with this section, including the delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12 percent, commencing 30 days after the assessment becomes due, unless the declaration specifies the recovery
of interest at a rate of a lesser amount, in which case the lesser rate of interest shall apply.

(f) Associations are hereby exempted from interest-rate limitations imposed by Article XV of the California Constitution, subject to the limitations of this section.

(a) It is the intent of the Legislature to offer civil liability protection to owners of the separate interests in a common interest development that have common areas owned in tenancy-in-common if the association carries a certain level of prescribed insurance that covers a cause of action in tort.

(b) Any cause of action in tort against any owner of a separate interest arising solely by reason of an ownership interest as a tenant in common in the common area of a common interest development shall be brought only against the association and not against the individual owners of the separate interests, as defined in subdivision (l) of Section 1351, if both of the insurance requirements in paragraphs (1) and (2) are met:
(1) The association maintained and has in effect for this cause of action, one or more policies of insurance which include coverage for general liability of the association.
(2) The coverage described in paragraph (1) is in the following minimum amounts:
(A) At least two million dollars ($2,000,000) if the common interest development consists of 100 or fewer separate interests.
(B) At least three million dollars ($3,000,000) if the common interest development consists of more than 100 separate interests.

(a) A volunteer officer or volunteer director of an association, as defined in subdivision (a) of Section 1351, which manages a common interest development that is exclusively residential, shall not be personally liable in excess of the coverage of insurance specified in paragraph (4) to any person who suffers injury, including, but not limited to, bodily injury, emotional distress, wrongful death, or property damage or loss as a result of the tortious act or omission of the volunteer officer or volunteer director if all of the following criteria are met:
(1) The act or omission was performed within the scope of the officer's or director's association duties.
(2) The act or omission was performed in good faith.
(3) The act or omission was not willful, wanton, or grossly negligent.
(4) The association maintained and had in effect at the time the act or omission occurred and at the time a claim is made one or more policies of insurance which shall include coverage for (A) general liability of the association and (B) individual liability of officers and directors of the association for negligent acts or omissions in
that capacity; provided, that both types of coverage are in the following minimum amount:
(A) At least five hundred thousand dollars ($500,000) if the common interest development consists of 100 or fewer separate interests.
(B) At least one million dollars ($1,000,000) if the common interest development consists of more than 100 separate interests.

(b) The payment of actual expenses incurred by a director or officer in the execution of the duties of that position does not affect the director's or officer's status as a volunteer within the meaning of this section.

(c) An officer or director who at the time of the act or omission was a declarant, as defined in subdivision (g) of Section 1351, or who received either direct or indirect compensation as an employee from the declarant, or from a financial institution that purchased a separate interest, as defined in subdivision (l) of Section 1351, at a judicial or nonjudicial foreclosure of a mortgage or deed of trust on real property, is not a volunteer for the purposes of this section.

(d) Nothing in this section shall be construed to limit the liability of the association for its negligent act or omission or for any negligent act or omission of an officer or director of the association.

(e) This section shall only apply to a volunteer officer or director who is a tenant of a separate interest in the common interest development or is an owner of no more than two separate interests in the common interest development.

(f) (1) For purposes of paragraph (1) of subdivision (a), the scope of the officer's or director's association duties shall include, but shall not be limited to, both of the following decisions:
(A) Whether to conduct an investigation of the common interest development for latent deficiencies prior to the expiration of the applicable statute of limitations.
(B) Whether to commence a civil action against the builder for defects in design or construction.
(2) It is the intent of the Legislature that this section clarify the scope of association duties to which the protections against personal liability in this section apply. It is not the intent of the Legislature that these clarifications be construed to expand, or
limit, the fiduciary duties owed by the directors or officers.

Notwithstanding any other law, and regardless of whether an association is a corporation, as defined in Section 162 of the Corporations Code, the provisions of Section 310 of the Corporations Code shall apply to any contract or other transaction authorized, approved, or ratified by the board or a committee of the board.

(a) The disclosures required by this article with regard
to an association or a property shall be summarized on the following
form:

Assessment and Reserve Funding Disclosure Summary

(1) The current regular assessment per ownership interest is $_____ per ____. Note: If assessments vary by the size or type of ownership interest, the assessment applicable to this ownership interest may be found on page _____ of the attached summary.
(2) Additional regular or special assessments that have already been scheduled to be imposed or charged, regardless of the purpose, if they have been approved by the board and/or members:

+---------------+----------------+-----------------+
|               |   Amount per   |                 |
|               |    ownership   |                 |
|               |  interest per  |                 |
|               |  month or year |                 |
|               | (If assessments|                 |
|               |  are variable, |                 |
|               |    see note    |                 |
|      Date     |                |                 |
|   assessment  |   immediately  |  Purpose of the |
|  will be due: |     below):    |   assessment:   |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |Total:          |                 |
+---------------+----------------+-----------------+

Note: If assessments vary by the size or type of ownership interest, the assessment applicable to this ownership interest may be found on page ____ of the attached report. (3) Based upon the most recent reserve study and other information available to the board of directors, will currently projected reserve account balances be sufficient at the end of each year to meet the association's obligation for repair and/or replacement of major components during the next 30 years Yes _____ No _____ (4) If the answer to (3) is no, what additional assessments or other contributions to reserves would be necessary to ensure that sufficient reserve funds will be available each year during the next 30 years that have not yet been approved by the board or the members

+------------------+-------------+
|                  |  Amount per |
| Approximate date |  ownership  |
|    assessment    |   interest  |
|                  | per month or|
|   will be due:   |    year:    |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |Total:       |
+------------------+-------------+

(5) All major components are included in the reserve study and are included in its calculations. (6) Based on the method of calculation in paragraph (4) of subdivision (b) of Section 1365.2.5, the estimated amount required in the reserve fund at the end of the current fiscal year is $____, based in whole or in part on the last reserve study or update prepared by ____ as of ____ (month), ____ (year). The projected reserve fund cash balance at the end of the current fiscal year is $____, resulting in reserves being ____ percent funded at this date. If an alternate, but generally accepted, method of calculation is also used, the required reserve amount is $____. (See attached explanation)

(7) Based on the method of calculation in paragraph (4) of subdivision (b) of Section 1365.2.5 of the Civil Code, the estimated amount required in the reserve fund at the end of each of the next five budget years is $______, and the projected reserve fund cash balance in each of those years, taking into account only assessments already approved and other known revenues, is $______, leaving the reserve at ______ percent funding. If the reserve funding plan approved by the association is implemented, the projected reserve fund cash balance in each of those years will be $______, leaving the reserve at ______ percent funding.

Note: The financial representations set forth in this summary are based on the best estimates of the preparer at that time. The estimates are subject to change. At the time this summary was prepared, the assumed long-term before –tax interest rate earned on reserve funds was ___ percent per year, and the assumed long-term inflation rate to be applied to major component repair and replacement costs was ____ percent per year.

(b) For the purposes of preparing a summary pursuant to this section:
(1) "Estimated remaining useful life" means the time reasonably calculated to remain before a major component will require replacement.
(2) "Major component" has the meaning used in Section 1365.5. Components with an estimated remaining useful life of more than 30 years may be included in a study as a capital asset or disregarded from the reserve calculation, so long as the decision is revealed in the reserve study report and reported in the Assessment and Reserve
Funding Disclosure Summary.
(3) The form set out in subdivision (a) shall accompany each pro forma operating budget or summary thereof that is delivered pursuant to this article. The form may be supplemented or modified to clarify the information delivered, so long as the minimum information set out in subdivision (a) is provided.
(4) For the purpose of the report and summary, the amount of reserves needed to be accumulated for a component at a given time shall be computed as the current cost of replacement or repair multiplied by the number of years the component has been in service divided by the useful life of the component. This shall not be construed to require the board to fund reserves in accordance with
this calculation.

(a) Unless the governing documents impose more stringent standards, the board of directors of the association shall do all of the following:
(1) Review a current reconciliation of the association's operating accounts on at least a quarterly basis.
(2) Review a current reconciliation of the association's reserve accounts on at least a quarterly basis.
(3) Review, on at least a quarterly basis, the current year's actual reserve revenues and expenses compared to the current year's budget.
(4) Review the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.
(5) Review an income and expense statement for the association's operating and reserve accounts on at least a quarterly basis.

(b) The signatures of at least two persons, who shall be members of the association's board of directors, or one officer who is not a member of the board of directors and a member of the board of directors, shall be required for the withdrawal of moneys from the association's reserve accounts.

(c) (1) The board of directors shall not expend funds designated as reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established.
(2) However, the board may authorize the temporary transfer of moneys from a reserve fund to the association's general operating fund to meet short-term cashflow requirements or other expenses, if the board has provided notice of the intent to consider the transfer in a notice of meeting, which shall be provided as specified in Section 1363.05. The notice shall include the reasons the transfer is needed, some of the options for repayment, and whether a special assessment may be considered. If the board authorizes the transfer, the board shall issue a written finding, recorded in the board's minutes, explaining the reasons that the transfer is needed, and describing when and how the moneys will be repaid to the reserve fund. The transferred funds shall be restored to the reserve fund within one year of the date of the initial transfer, except that the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration. The board shall exercise prudent fiscal management in maintaining the integrity of the reserve account, and shall, if necessary, levy a special assessment to recover the full amount of the expended funds within the time limits required by this section. This special assessment is subject to the limitation imposed by Section 1366. The board may, at its discretion, extend the date the payment on the special assessment is due. Any extension shall not prevent the board from pursuing any legal remedy to enforce the collection of an unpaid special assessment.

(d) When the decision is made to use reserve funds or to temporarily transfer moneys from the reserve fund to pay for litigation, the association shall notify the members of the association of that decision in the next available mailing to all members pursuant to Section 5016 of the Corporations Code, and of the availability of an accounting of those expenses. Unless the governing documents impose more stringent standards, the association shall make an accounting of expenses related to the litigation on at least a quarterly basis. The accounting shall be made available for inspection by members of the association at the association's office.

(e) At least once every three years, the board of directors shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirements of the common interest development, if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association, excluding the association's reserve account for that period. The board shall review this study, or cause it to be reviewed, annually and shall consider and implement necessary adjustments to the board's analysis of the reserve account requirements as a result of that review.

The study required by this subdivision shall at a minimum include:

(1) Identification of the major components that the association is obligated to repair, replace, restore, or maintain that, as of the date of the study, have a remaining useful life of less than 30 years.
(2) Identification of the probable remaining useful life of the components identified in paragraph (1) as of the date of the study.
(3) An estimate of the cost of repair, replacement, restoration, or maintenance of the components identified in paragraph (1).
(4) An estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain the components identified in paragraph (1) during and at the end of their useful life, after subtracting total reserve funds as of the date of the study.
(5) A reserve funding plan that indicates how the association plans to fund the contribution identified in paragraph (4) to meet the association's obligation for the repair and replacement of all major components with an expected remaining life of 30 years or less, not including those components that the board has determined will not be replaced or repaired. The plan shall include a schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserve funding plan. The plan shall be adopted by the board of directors at an open meeting before the membership of the association as described in Section 1363.05. If the board of directors determines that an assessment increase is necessary to fund the reserve funding plan, any increase shall be approved in a separate action of the board that is consistent with the procedure described in Section 1366.

(f) As used in this section, "reserve accounts" means both of the following:
(1) Moneys that the association's board of directors has identified for use to defray the future repair or replacement of, or additions to, those major components that the association is obligated to maintain.
(2) The funds received, and not yet expended or disposed of, from either a compensatory damage award or settlement to an association from any person or entity for injuries to property, real or personal, arising from any construction or design defects. These funds shall be separately itemized from funds described in paragraph (1).

(g) As used in this section, "reserve account requirements" means the estimated funds that the association's board of directors has determined are required to be available at a specified point in time to repair, replace, or restore those major components that the association is obligated to maintain.

(h) This section does not apply to an association that does not have a "common area" as defined in Section 1351.

Unless the governing documents impose more stringent standards, any community service organization as defined in paragraph (3) of subdivision (c) of Section 1368 whose funding from the association or its members exceeds 10 percent of the organization's
annual budget shall prepare and distribute to the association a report that meets the requirements of Section 5012 of the Corporations Code, and that describes in detail administrative costs and identifies the payees of those costs in a manner consistent with
the provisions of Section 1365.2. If the community service organization does not comply with the standards, the report shall disclose the noncompliance in detail. If a community service organization is responsible for the maintenance of major components for which an association would otherwise be responsible, the community service organization shall supply to the association the information regarding those components that the association would use to complete disclosures and reserve reports required under this article. An association may rely upon information received from a community service organization, and shall provide access to the information pursuant to the provisions of Section 1365.2.

(a) For the purposes of this section, the following definitions shall apply:
(1) "Association records" means all of the following:
(A) Any financial document required to be provided to a member in Section 1365.
(B) Any financial document or statement required to be provided in Section 1368.
(C) Interim financial statements, periodic or as compiled, containing any of the following:
(i) Balance sheet.
(ii) Income and expense statement.
(iii) Budget comparison.
(iv) General ledger. A "general ledger" is a report that shows all transactions that occurred in an association account over a specified period of time.

The records described in this subparagraph shall be prepared in accordance with an accrual or modified accrual basis of accounting.
(D) Executed contracts not otherwise privileged under law.
(E) Written board approval of vendor or contractor proposals or invoices.
(F) State and federal tax returns.
(G) Reserve account balances and records of payments made from reserve accounts.
(H) Agendas and minutes of meetings of the members, the board of directors and any committees appointed by the board of directors pursuant to Section 7212 of the Corporations Code; excluding, however, agendas, minutes, and other information from executive sessions of the board of directors as described in Section 1363.05.
(I) (i) Membership lists, including name, property address, and mailing address, if the conditions set forth in clause (ii) are met and except as otherwise provided in clause (iii).
(ii) The member requesting the list shall state the purpose for which the list is requested which purpose shall be reasonably related to the requester's interest as a member. If the association reasonably believes that the information in the list will be used for another purpose, it may deny the member access to the list. If the request is denied, in any subsequent action brought by the member under subdivision (f), the association shall have the burden to prove that the member would have allowed use of the information for purposes unrelated to his or her interest as a member.
(iii) A member of the association may opt out of the sharing of his or her name, property address, and mailing address by notifying the association in writing that he or she prefers to be contacted via the alternative process described in subdivision (c) of Section 8330 of the Corporations Code. This opt-out shall remain in effect until changed by the member.
(J) Check registers.
(2) "Enhanced association records" means invoices, receipts and canceled checks for payments made by the association, purchase orders approved by the association, credit card statements for credit cards issued in the name of the association, statements for services rendered, and reimbursement requests submitted to the association, provided that the person submitting the reimbursement request shall be solely responsible for removing all personal identification information from the request.

(b) (1) The association shall make available association records and enhanced association records for the time periods and within the timeframes provided in subdivisions (i) and (j) for inspection and copying by a member of the association, or the member's designated representative. The association may bill the requesting member for the direct and actual cost of copying requested documents. The association shall inform the member of the amount of the copying costs before copying the requested documents.
(2) A member of the association may designate another person to inspect and copy the specified association records on the member's behalf. The member shall make this designation in writing.

(c) (1) The association shall make the specified association records available for inspection and copying in the association's business office within the common interest development.
(2) If the association does not have a business office within the development, the association shall make the specified association records available for inspection and copying at a place that the requesting member and the association agree upon.
(3) If the association and the requesting member cannot agree upon a place for inspection and copying pursuant to paragraph (2), or if the requesting member submits a written request directly to the association for copies of specifically identified records, the association may satisfy the requirement to make the association records available for inspection and copying by mailing copies of the specifically identified records to the member by first-class mail within the timeframes set forth in subdivision (j).
(4) The association may bill the requesting member for the direct and actual cost of copying and mailing requested documents. The association shall inform the member of the amount of the copying and mailing costs, and the member shall agree to pay those costs, before copying and sending the requested documents.
(5) In addition to the direct and actual costs of copying and mailing, the association may bill the requesting member an amount not in excess of ten dollars ($10) per hour, and not to exceed two hundred dollars ($200) total per written request, for the time actually and reasonably involved in redacting the enhanced association records as provided in paragraph (2) of subdivision (a). The association shall inform the member of the estimated costs, and the member shall agree to pay those costs, before retrieving the requested documents.

(d) (1) Except as provided in paragraph (2), the association may
withhold or redact information from the association records for any of the following reasons:
(A) The release of the information is reasonably likely to lead to identity theft. For the purposes of this section, "identity theft" means the unauthorized use of another person's personal identifying information to obtain credit, goods, services, money, or property. Examples of information that may be withheld or redacted pursuant to this paragraph include bank account numbers of members or vendors, social security or tax identification numbers, and check, stock, and credit card numbers.
(B) The release of the information is reasonably likely to lead to fraud in connection with the association.
(C) The information is privileged under law. Examples include documents subject to attorney-client privilege or relating to litigation in which the association is or may become involved, and confidential settlement agreements.
(D) The release of the information is reasonably likely to compromise the privacy of an individual member of the association.
(E) The information contains any of the following:
(i) Records of a-la-carte goods or services provided to individual members of the association for which the association received monetary consideration other than assessments.
(ii) Records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records.
(iii) Any person's personal identification information, including,
without limitation, social security number, tax identification
number, driver's license number, credit card account numbers, bank
account number, and bank routing number.
(iv) Agendas, minutes, and other information from executive sessions of the board of directors as described in Section 1363.05, except for executed contracts not otherwise privileged. Privileged contracts shall not include contracts for maintenance, management, or legal services.
(v) Personnel records other than the payroll records required to be provided under paragraph (2).
(vi) Interior architectural plans, including security features, for individual homes.
(2) Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors, or contractors. Compensation information for individual employees shall be set forth by job classification or title, not by the employee's name, social security number, or other personal information.
(3) No association, officer, director, employee, agent or volunteer of an association shall be liable for damages to a member of the association or any third party as the result of identity theft or other breach of privacy because of the failure to withhold or redact that member's information under this subdivision unless the failure to withhold or redact the information was intentional, willful, or negligent.
(4) If requested by the requesting member, an association that denies or redacts records shall provide a written explanation specifying the legal basis for withholding or redacting the requested records.

(e) (1) The association records, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member's interest as a member. An association may bring an action against any person who violates this section for injunctive relief and for actual damages to the
association caused by the violation.
(2) This section may not be construed to limit the right of an association to damages for misuse of information obtained from the association records pursuant to this section or to limit the right of an association to injunctive relief to stop the misuse of this information.
(3) An association shall be entitled to recover reasonable costs and expenses, including reasonable attorney's fees, in a successful action to enforce its rights under this section.

(f) A member of an association may bring an action to enforce the member's right to inspect and copy the association records. If a court finds that the association unreasonably withheld access to the association records, the court shall award the member reasonable costs and expenses, including reasonable attorney's fees, and may assess a civil penalty of up to five hundred dollars ($500) for the denial of each separate written request. A cause of action under this section may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court. A prevailing association may recover any costs if the court finds the action to be frivolous, unreasonable, or without foundation.

(g) The provisions of this section apply to any community service organization or similar entity, as defined in paragraph (3) of subdivision (c) of Section 1368, that is related to the association, and this section shall operate to give a member of the community service organization or similar entity a right to inspect and copy the records of that organization or entity equivalent to that granted to association members by this section.

(h) Requesting parties shall have the option of receiving specifically identified records by electronic transmission or machine-readable storage media as long as those records can be transmitted in a redacted format that does not allow the records to be altered. The cost of duplication shall be limited to the direct cost of producing the copy of a record in that electronic format. The association may deliver specifically identified records by electronic transmission or machine-readable storage media as long as those records can be transmitted in a redacted format that prevents the records from being altered.

(i) The time periods for which specified records shall be provided is as follows:
(1) Association records shall be made available for the current fiscal year and for each of the previous two fiscal years.
(2) Minutes of member and board meetings shall be permanently made available. If a committee has decisionmaking authority, minutes of the meetings of that committee shall be made available commencing January 1, 2007, and shall thereafter be permanently made available.

(j) The timeframes in which access to specified records shall be provided to a requesting member are as follows:
(1) Association records prepared during the current fiscal year, within 10 business days following the association's receipt of the request.
(2) Association records prepared during the previous two fiscal years, within 30 calendar days following the association's receipt of the request.
(3) Any record or statement available pursuant to Section 1365 or 1368, within the timeframe specified therein.
(4) Minutes of member and board meetings, within the timeframe specified in subdivision (d) of Section 1363.05.
(5) Minutes of meetings of committees with decision making authority for meetings commencing on or after January 1, 2007, within 15 calendar days following approval.
(6) Membership list, within the timeframe specified in Section 8330 of the Corporations Code.

(k) There shall be no liability pursuant to this section for an association that fails to retain records for the periods specified in subdivision (i) that were created prior to January 1, 2006.

(l) As applied to an association and its members, the provisions of this section are intended to supersede the provisions of Sections 8330 and 8333 of the Corporations Code to the extent those sections are inconsistent.

(m) The provisions of this section shall not apply to any common interest development in which separate interests are being offered for sale by a subdivider under the authority of a public report issued by the Department of Real Estate so long as the subdivider or all subdividers offering those separate interests for sale, or any employees of those subdividers or any other person who receives direct or indirect compensation from any of those subdividers, comprise a majority of the members of the board of directors of the association. Notwithstanding the foregoing, this section shall apply to that common interest development no later than 10 years after the close of escrow for the first sale of a separate interest to a member of the general public pursuant to the public report issued for the first phase of the development.

(n) This section shall become operative on July 1, 2006.

(a) The association shall distribute the written notice described in subdivision (b) to each member of the association during the 60-day period immediately preceding the beginning of the association's fiscal year. The notice shall be printed in at least 12-point type. An association distributing the notice to an owner of an interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7, may delete from the notice described in subdivision (b) the portion regarding meetings and payment plans.

(b) The notice required by this section shall read as follows:

"NOTICE ASSESSMENTS AND FORECLOSURE

This notice outlines some of the rights and responsibilities of owners of property in common interest developments and the associations that manage them. Please refer to the sections of the Civil Code indicated for further information. A portion of the information in this notice applies only to liens recorded on or after January 1, 2003. You may wish to consult a lawyer if you dispute an assessment.

ASSESSMENTS AND FORECLOSURE

Assessments become delinquent 15 days after they are due, unless the governing documents provide for a longer time. The failure to pay association assessments may result in the loss of an owner's property through foreclosure. Foreclosure may occur either as a result of a court action, known as judicial foreclosure or without court action, often referred to as nonjudicial foreclosure. For liens recorded on and after January 1, 2006, an association may not use judicial or nonjudicial foreclosure to enforce that lien if the amount of the delinquent assessments or dues, exclusive of any accelerated assessments, late charges, fees, attorney's fees, interest, and costs of collection, is less than one thousand eight hundred dollars ($1,800). For delinquent assessments or dues in excess of one thousand eight hundred dollars ($1,800) or more than 12 months delinquent, an association may use judicial or nonjudicial foreclosure subject to the conditions set forth in Section 1367.4 of the Civil Code. When using judicial or nonjudicial foreclosure, the association records a lien on the owner's property. The owner's property may be sold to satisfy the lien if the amounts secured by the lien are not paid. (Sections 1366, 1367.1, and 1367.4 of the
Civil Code)

In a judicial or nonjudicial foreclosure, the association may recover assessments, reasonable costs of collection, reasonable attorney's fees, late charges, and interest. The association may not use nonjudicial foreclosure to collect fines or penalties, except for costs to repair common areas damaged by a member or a member's
guests, if the governing documents provide for this. (Sections 1366 and 1367.1 of the Civil Code)

The association must comply with the requirements of Section 1367.1 of the Civil Code when collecting delinquent assessments. If the association fails to follow these requirements, it may not record a lien on the owner's property until it has satisfied those requirements. Any additional costs that result from satisfying the requirements are the responsibility of the association. (Section 1367.1 of the Civil Code)

At least 30 days prior to recording a lien on an owner's separate interest, the association must provide the owner of record with certain documents by certified mail, including a description of its collection and lien enforcement procedures and the method of calculating the amount. It must also provide an itemized statement of the charges owed by the owner. An owner has a right to review the association's records to verify the debt. (Section 1367.1 of the Civil Code)

If a lien is recorded against an owner's property in error, the person who recorded the lien is required to record a lien release within 21 days, and to provide an owner certain documents in this regard. (Section 1367.1 of the Civil Code)

The collection practices of the association may be governed by state and federal laws regarding fair debt collection. Penalties can be imposed for debt collection practices that violate these laws.

PAYMENTS

When an owner makes a payment, he or she may request a receipt, and the association is required to provide it. On the receipt, the association must indicate the date of payment and the person who received it. The association must inform owners of a mailing addressfor overnight payments. (Section 1367.1 of the Civil Code)

An owner may, but is not obligated to, pay under protest any disputed charge or sum levied by the association, including, but not limited to, an assessment, fine, penalty, late fee, collection cost, or monetary penalty imposed as a disciplinary measure, and by so doing, specifically reserve the right to contest the disputed charge or sum in court or otherwise.

An owner may dispute an assessment debt by submitting a written request for dispute resolution to the association as set forth in Article 5 (commencing with Section 1368.810) of Chapter 4 of Title 6 of Division 2 of the Civil Code. In addition, an association may not initiate a foreclosure without participating in alternative dispute resolution with a neutral third party as set forth in Article 2 (commencing with Section 1369.510) of Chapter 7 of Title 6 of Division 2 of the Civil Code, if so requested by the owner. Binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.

An owner is not liable for charges, interest, and costs of collection, if it is established that the assessment was paid properly on time. (Section 1367.1 of the Civil Code)

MEETINGS AND PAYMENT PLANS

An owner of a separate interest that is not a timeshare may request the association to consider a payment plan to satisfy a delinquent assessment. The association must inform owners of the standards for payment plans, if any exist. (Section 1367.1 of the Civil Code)

The board of directors must meet with an owner who makes a proper written request for a meeting to discuss a payment plan when the owner has received a notice of a delinquent assessment. These payment plans must conform with the payment plan standards of the association, if they exist. (Section 1367.1 of the Civil Code)"

(c) A member of an association may provide written notice by facsimile transmission or United States mail to the association of a secondary address. If a secondary address is provided, the association shall send any and all correspondence and legal notices required pursuant to this article to both the primary and the secondary address.

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 therefore. 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."

(a) Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.

(b) (1) In a community apartment project, condominium project, or stock cooperative, as defined in Section 1351, unless otherwise provided in the declaration, the association is responsible for the repair and maintenance of the common area occasioned by the presence of wood-destroying pests or organisms.
(2) In a planned development as defined in Section 1351, unless a different maintenance scheme is provided in the declaration, each owner of a separate interest is responsible for the repair and maintenance of that separate interest as may be occasioned by the presence of wood-destroying pests or organisms. Upon approval of the majority of all members of the association, the responsibility for such repair and maintenance may be delegated to the association, which shall be entitled to recover the cost thereof as a special assessment.

(c) The costs of temporary relocation during the repair and maintenance of the areas within the responsibility of the association shall be borne by the owner of the separate interest affected.

(d) (1) The association may cause the temporary, summary removal of any occupant of a common interest development for such periods and at such times as may be necessary for prompt, effective treatment of wood-destroying pests or organisms.
(2) The association shall give notice of the need to temporarily vacate a separate interest to the occupants and to the owners, not less than 15 days nor more than 30 days prior to the date of the temporary relocation. The notice shall state the reason for the temporary relocation, the date and time of the beginning of treatment, the anticipated date and time of termination of treatment, and that the occupants will be responsible for their own accommodations during the temporary relocation.
(3) Notice by the association shall be deemed complete upon either:
(A) Personal delivery of a copy of the notice to the occupants, and sending a copy of the notice to the owners, if different than the occupants, by first-class mail, postage prepaid at the most current address shown on the books of the association.
(B) By sending a copy of the notice to the occupants at the separate interest address and a copy of the notice to the owners, if different than the occupants, by first-class mail, postage prepaid, at the most current address shown on the books of the association.

(e) For purposes of this section, "occupant" means an owner, resident, guest, invitee, tenant, lessee, sublessee, or other person in possession on the separate interest.

(f) Notwithstanding the provisions of the declaration, the owner of a separate interest is entitled to reasonable access to the common areas for the purpose of maintaining the internal and external telephone wiring made part of the exclusive use common areas of a separate interest pursuant to paragraph (2) of subdivision (i) of Section 1351. The access shall be subject to the consent of the association, whose approval shall not be unreasonably withheld, and which may include the association's approval of telephone wiring upon the exterior of the common areas, and other conditions as the association determines reasonable.

The notice provided pursuant to Section 1369.590 shall include a description of the internal dispute resolution process provided pursuant to this article.

A fair, reasonable, and expeditious dispute resolution procedure shall at a minimum satisfy all of the following requirements:

(a) The procedure may be invoked by either party to the dispute. A request invoking the procedure shall be in writing.

(b) The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for the association to act on a request invoking the procedure.

(c) If the procedure is invoked by a member, the association shall participate in the procedure.

(d) If the procedure is invoked by the association, the member may elect not to participate in the procedure. If the member participates but the dispute is resolved other than by agreement of the member, the member shall have a right of appeal to the association's board of directors.

(e) A resolution of a dispute pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the association and is judicially enforceable. An agreement reached pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the parties and is judicially
enforceable.

(f) The procedure shall provide a means by which the member and the association may explain their positions.

(g) A member of the association shall not be charged a fee to participate in the process.

(a) An association shall provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article.

(b) In developing a procedure pursuant to this article, an association shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs such as those listed on the Internet Web sites of the Department of Consumer Affairs and the United States Department of Housing and Urban Development.

(c) If an association does not provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article, the procedure provided in Section 1363.840 applies and satisfies the requirement of subdivision (a).

(a) This article applies to a dispute between an association and a member involving their rights, duties, or liabilities under this title, under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code), or under the governing documents of the common interest development or association.

(b) This article supplements, and does not replace, Article 2 (commencing with Section 1369.510) of Chapter 7, relating to alternative dispute resolution as a prerequisite to an enforcement action.

(a) A managing agent of a common interest development who accepts or receives funds belonging to the association shall deposit all such funds that are not placed into an escrow account with a bank, savings association, or credit union or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in this state. All funds deposited by the managing agent in the trust fund account shall be kept in this state in a financial institution, as defined in Section 31041 of the Financial Code, which is insured by the federal government, and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.

(b) At the written request of the board of directors of the association, the funds the managing agent accepts or receives on behalf of the association shall be deposited into an interest-bearing account in a bank, savings association, or credit union in this
state, provided all of the following requirements are met:
(1) The account is in the name of the managing agent as trustee for the association or in the name of the association.
(2) All of the funds in the account are covered by insurance provided by an agency of the federal government.
(3) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person or entity for whom the managing agent holds funds in trust except that the funds of various associations may be commingled as permitted pursuant to subdivision (d).
(4) The managing agent discloses to the board of directors of the association the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.
(5) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or his or her employees.

(c) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.

(d) The managing agent shall not commingle the funds of the association with his or her own money or with the money of others that he or she receives or accepts, unless all of the following requirements are met:
(1) The managing agent commingled the funds of various associations on or before February 26, 1990, and has obtained a written agreement with the board of directors of each association that he or she will maintain a fidelity and surety bond in an amount that provides adequate protection to the associations as agreed upon by the managing agent and the board of directors of each association.
(2) The managing agent discloses in the written agreement whether he or she is deriving benefits from the commingled account or the bank, credit union, or savings institution where the moneys will be on deposit.
(3) The written agreement provided pursuant to this subdivision includes, but is not limited to, the name and address of the bonding companies, the amount of the bonds, and the expiration dates of the bonds.
(4) If there are any changes in the bond coverage or the companies providing the coverage, the managing agent discloses that fact to the board of directors of each affected association as soon as practical, but in no event more than 10 days after the change.
(5) The bonds assure the protection of the association and provide the association at least 10 days' notice prior to cancellation.
(6) Completed payments on the behalf of the association are deposited within 24 hours or the next business day and do not remain commingled for more than 10 calendar days.

(e) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.

(f) As used in this section, a "managing agent" is a person or entity, who for compensation or, in expectation of compensation, exercises control over the assets of the association. However, a "managing agent" does not include a full-time employee of the association or a regulated financial institution operating within the normal course of business, or an attorney at law acting within the scope of his or her license.

(g) As used in this section, "completed payment" means funds received which clearly identify the account to which the funds are to be credited.

(a) A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by an association of which he or she is a member, including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues. Upon a finding that the election procedures of this article, or the adoption of and adherence to rules provided by Article 4 (commencing with Section 1357.100) of Chapter 2, were not followed, a court may void any results of the election.

(b) A member who prevails in a civil action to enforce his or her rights pursuant to this article shall be entitled to reasonable attorney's fees and court costs, and the court may impose a civil penalty of up to five hundred dollars ($500) for each violation, except that each identical violation shall be subject to only one penalty if the violation affects each member of the association equally. A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

(c) A cause of action under Section 1363.03 with respect to access to association resources by a candidate or member advocating a point of view, the receipt of a ballot by a member, or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after tabulation may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court.

(a) After an association acquires fee title to, or any easement right over, a common area, unless the association's governing documents specify a different percentage, the affirmative vote of members owning at least 67 percent of the separate interests
in the common interest development shall be required before the board of directors may grant exclusive use of any portion of that common area to any member, except for any of the following:
(1) A reconveyance of all or any portion of that common area to the subdivider to enable the continuation of development that is in substantial conformance with a detailed plan of phased development submitted to the Real Estate Commissioner with the application for a public report.
(2) Any grant of exclusive use that is in substantial conformance with a detailed plan of phased development submitted to the Real Estate Commissioner with the application for a public report or in accordance with the governing documents approved by the Real Estate Commissioner.
(3) Any grant of exclusive use that is for any of the following reasons:
(A) To eliminate or correct engineering errors in documents recorded with the county recorder or on file with a public agency or utility company.
(B) To eliminate or correct encroachments due to errors in construction of any improvements.
(C) To permit changes in the plan of development submitted to the Real Estate Commissioner in circumstances where the changes are the result of topography, obstruction, hardship, aesthetic considerations, or environmental conditions.
(D) To fulfill the requirement of a public agency.
(E) To transfer the burden of management and maintenance of any common area that is generally inaccessible and not of general use to the membership at large of the association.
(F) Any grant in connection with an expressly zoned industrial or commercial development, or any grant within a subdivision of the type defined in Section 1373.

(b) Any measure placed before the members requesting that the board of directors grant exclusive use of any portion of the common area shall specify whether the association will receive any monetary consideration for the grant and whether the association or the transferee will be responsible for providing any insurance coverage for exclusive use of the common area.

(a) Association funds shall not be used for campaign purposes in connection with any association board election. Funds of the association shall not be used for campaign purposes in connection with any other association election except to the extent necessary to comply with duties of the association imposed by law.

(b) For the purposes of this section, "campaign purposes" includes, but is not limited to, the following:
(1) Expressly advocating the election or defeat of any candidate that is on the association election ballot.
(2) Including the photograph or prominently featuring the name of any candidate on a communication from the association or its board, excepting the ballot and ballot materials, within 30 days of an election. This is not a campaign purpose if the communication is one for which subdivision (a) of Section 1363.03 requires that equal
access be provided to another candidate or advocate.

(a) An association shall adopt rules, in accordance with the procedures prescribed by Article 4 (commencing with Section 1357.100) of Chapter 2, that do all of the following:

(1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content.
(2) Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
(3) Specify the qualifications for candidates for the board of directors and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure shall not be deemed reasonable if it disallows any member of the association from nominating himself or herself for election to the board of directors.
(4) Specify the qualifications for voting, the voting power of each membership, the authenticity, validity, and effect of proxies, and the voting period for elections, including the times at which polls will open and close, consistent with the governing documents.
(5) Specify a method of selecting one or three independent third parties as inspector, or inspectors, of election utilizing one of the following methods:
(A) Appointment of the inspector or inspectors by the board.
(B) Election of the inspector or inspectors by the members of the association.
(C) Any other method for selecting the inspector or inspectors.
(6) Allow the inspector, or inspectors, to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.

(b) Notwithstanding any other law or provision of the governing documents, elections regarding assessments legally requiring a vote, election and removal of members of the association board of directors, amendments to the governing documents, or the grant of exclusive use of common area property pursuant to Section 1363.07 shall be held by secret ballot in accordance with the procedures set forth in this section. A quorum shall be required only if so stated in the governing documents of the association or other provisions of law. If a quorum is required by the governing documents, each ballot received by the inspector of elections shall be treated as a member present at a meeting for purposes of establishing a quorum. An association shall allow for cumulative voting using the secret ballot procedures provided in this section, if cumulative voting is provided for in the governing documents.

(c) (1) The association shall select an independent third party or parties as an inspector of election. The number of inspectors of election shall be one or three.
(2) For the purposes of this section, an independent third party includes, but is not limited to, a volunteer poll worker with the county registrar of voters, a licensee of the California Board of Accountancy, or a notary public. An independent third party may be a member of the association, but may not be a member of the board of directors or a candidate for the board of directors or related to a member of the board of directors or a candidate for the board of directors. An independent third party may not be a person, business entity, or subdivision of a business entity who is currently employed or under contract to the association for any compensable services
unless expressly authorized by rules of the association adopted pursuant to paragraph (5) of subdivision (a).
(3) The inspector or inspectors of election shall do all of the following:
(A) Determine the number of memberships entitled to vote and the voting power of each.
(B) Determine the authenticity, validity, and effect of proxies, if any.
(C) Receive ballots.
(D) Hear and determine all challenges and questions in any way arising out of or in connection with the right to vote.
(E) Count and tabulate all votes.
(F) Determine when the polls shall close, consistent with the governing documents.
(G) Determine the tabulated results of the election.
(H) Perform any acts as may be proper to conduct the election with fairness to all members in accordance with this section, the Corporations Code, and all applicable rules of the association regarding the conduct of the election that are not in conflict with this section.
(4) An inspector of election shall perform his or her duties impartially, in good faith, to the best of his or her ability, and as expeditiously as is practical. If there are three inspectors of election, the decision or act of a majority shall be effective in all respects as the decision or act of all. Any report made by the inspector or inspectors of election is prima facie evidence of the facts stated in the report.

(d) (1) For purposes of this section, the following definitions shall apply:
(A) "Proxy" means a written authorization signed by a member or the authorized representative of the member that gives another member or members the power to vote on behalf of that member.
(B) "Signed" means the placing of the member's name on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the member or authorized representative of the member.
(2) Proxies shall not be construed or used in lieu of a ballot. An association may use proxies if permitted or required by the bylaws of the association and if those proxies meet the requirements of this article, other laws, and the association's governing documents, but the association shall not be required to prepare or distribute proxies pursuant to this section.
(3) Any instruction given in a proxy issued for an election that directs the manner in which the proxyholder is to cast the vote shall be set forth on a separate page of the proxy that can be detached and given to the proxyholder to retain. The proxyholder shall cast the member's vote by secret ballot. The proxy may be revoked by the member prior to the receipt of the ballot by the inspector of elections as described in Section 7613 of the Corporations Code.

(e) Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member not less than 30 days prior to the deadline for voting. In order to preserve confidentiality, a voter may not be identified by name, address, or lot, parcel, or unit number on the ballot. The association shall use as a model those procedures used by California counties for ensuring confidentiality of voter absentee ballots, including all of the following:

(1) The ballot itself is not signed by the voter, but is inserted into an envelope that is sealed. This envelope is inserted into a second envelope that is sealed. In the upper left hand corner of the second envelope, the voter shall sign his or her name, indicate his or her name, and indicate the address or separate interest identifier that entitles him or her to vote.
(2) The second envelope is addressed to the inspector or inspectors of election, who will be tallying the votes. The envelope may be mailed or delivered by hand to a location specified by the inspector or inspectors of election. The member may request a receipt for delivery.

(f) All votes shall be counted and tabulated by the inspector or inspectors of election or his or her designee in public at a properly noticed open meeting of the board of directors or members. Any candidate or other member of the association may witness the counting and tabulation of the votes. No person, including a member of the association or an employee of the management company, shall open or otherwise review any ballot prior to the time and place at which the ballots are counted and tabulated. The inspector of election, or his or her designee, may verify the member's information and signature on the outer envelope prior to the meeting at which ballots are tabulated. Once a secret ballot is received by the inspector of elections, it shall be irrevocable.

(g) The tabulated results of the election shall be promptly reported to the board of directors of the association and shall be recorded in the minutes of the next meeting of the board of directors and shall be available for review by members of the association. Within 15 days of the election, the board shall publicize the tabulated results of the election in a communication directed to all members.

(h) The sealed ballots at all times shall be in the custody of the inspector or inspectors of election or at a location designated by the inspector or inspectors until after the tabulation of the vote, and until the time allowed by Section 7527 of the Corporations Code for challenging the election has expired, at which time custody shall be transferred to the association. If there is a recount or other challenge to the election process, the inspector or inspectors of election shall, upon written request, make the ballots available for inspection and review by an association member or his or her authorized representative. Any recount shall be conducted in a manner that preserves the confidentiality of the vote.

(i) After the transfer of the ballots to the association, the ballots shall be stored by the association in a secure place for no less than one year after the date of the election.

(j) Notwithstanding any other provision of law, the rules adopted pursuant to this section may provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner. Those rules may permit write-in candidates for ballots.

(k) Except for the meeting to count the votes required in subdivision (f), an election may be conducted entirely by mail unless otherwise specified in the governing documents.

(l) The provisions of this section apply to both incorporated and unincorporated associations, notwithstanding any contrary provision of the governing documents.

(m) The procedures set forth in this section shall apply to votes cast directly by the membership, but do not apply to votes cast by delegates or other elected representatives.

(n) In the event of a conflict between this section and the provisions of the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) relating to elections, the provisions of this section shall prevail.

(o) The amendments made to this section by the act adding this subdivision shall become operative on July 1, 2006.

(a) A common interest development shall be managed by an association that may be incorporated or unincorporated. The association may be referred to as a community association.

(b) An association, whether incorporated or unincorporated, shall prepare a budget pursuant to Section 1365 and disclose information, if requested, in accordance with Section 1368.

(c) Unless the governing documents provide otherwise, and regardless of whether the association is incorporated or unincorporated, the association may exercise the powers granted to a nonprofit mutual benefit corporation, as enumerated in Section 7140 of the Corporations Code, except that an unincorporated association may not adopt or use a corporate seal or issue membership certificates in accordance with Section 7313 of the Corporations Code.

The association, whether incorporated or unincorporated, may exercise the powers granted to an association in this title.

(d) Meetings of the membership of the association shall be conducted in accordance with a recognized system of parliamentary procedure or any parliamentary procedures the association may adopt.

(e) Notwithstanding any other provision of law, notice of meetings of the members shall specify those matters the board intends to present for action by the members, but, except as otherwise provided by law, any proper matter may be presented at the meeting for action.

(f) Members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with Article 3 (commencing with Section 8330) of Chapter 13 of Part 3 of Division 2 of Title 1 of the Corporations Code. The members of the association shall have the same access to the operating rules of the association as they have to the accounting books and records of the association.

(g) If an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for a violation of the governing documents or rules of the association, including any monetary penalty relating to the activities of a guest or invitee of a member, the board of directors shall adopt and distribute to each member, by personal delivery or first-class mail, a schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with authorization for member discipline contained in the governing documents. The board of directors shall not be required to distribute any additional schedules of monetary penalties unless there are changes from the schedule that was adopted and distributed to the members pursuant to this subdivision.

(h) When the board of directors is to meet to consider or impose discipline upon a member, the board shall notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the meeting. The notification shall contain, at a minimum, the date, time, and place of the meeting, the nature of the alleged violation for which a member may be disciplined, and a statement that the member has a right to attend and may address the board at the meeting. The board of directors of the association shall meet in executive session if requested by the member being disciplined.

If the board imposes discipline on a member, the board shall provide the member a written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action. A disciplinary action shall not be effective against a member unless the board fulfills the requirements of this subdivision.

(i) Whenever two or more associations have consolidated any of their functions under a joint neighborhood association or similar organization, members of each participating association shall be (1) entitled to attend all meetings of the joint association other than executive sessions, (2) given reasonable opportunity for participation in those meetings, and (3) entitled to the same access to the joint association's records as they are to the participating association's records.

(j) Nothing in this section shall be construed to create, expand, or reduce the authority of the board of directors of an association to impose monetary penalties on an association member for a violation of the governing documents or rules of the association.

To the extent existing funds are available, the Department of Consumer Affairs and the Department of Real Estate shall develop an on-line education course for the board of directors of an association regarding the role, duties, laws, and responsibilities of board members and prospective board members, and the nonjudicial foreclosure process.

Unless the declaration otherwise provides, in a condominium project, or in a planned development in which the common areas are owned by the owners of the separate interests, the common areas are owned as tenants in common, in equal shares, one for each unit or lot.

Except as otherwise provided in law, an order of the court, or an order pursuant to a final and binding arbitration decision, an association may not deny an owner or occupant physical access to his or her separate interest, either by restricting access through the common areas to the owner's separate interest, or by restricting access solely to the owner's separate interest.

Unless the declaration otherwise provides:

(a) In a community apartment project and condominium project, and in those planned developments with common areas owned in common by the owners of the separate interests, there are appurtenant to each separate interest nonexclusive rights of ingress, egress, and support, if necessary, through the common areas. The common areas are subject to these rights.

(b) In a stock cooperative, and in a planned development with common areas owned by the association, there is an easement for ingress, egress, and support, if necessary, appurtenant to each separate interest. The common areas are subject to these easements.

(a) No governing documents shall prohibit the owner of a separate interest within a common interest development from keeping at least one pet within the common interest development, subject to reasonable rules and regulations of the association. This section may not be construed to affect any other rights provided by law to an owner of a separate interest to keep a pet within the development.

(b) For purposes of this section, "pet" means any domesticated bird, cat, dog, aquatic animal kept within an aquarium, or other animal as agreed to between the association and the homeowner.

(c) If the association implements a rule or regulation restricting the number of pets an owner may keep, the new rule or regulation shall not apply to prohibit an owner from continuing to keep any pet that the owner currently keeps in his or her separate interest if the pet otherwise conforms with the previous rules or regulations relating to pets.

(d) For the purposes of this section, "governing documents" shall include, but are not limited to, the conditions, covenants, and restrictions of the common interest development, and the bylaws, rules, and regulations of the association.

(e) This section shall become operative on January 1, 2001, and shall only apply to governing documents entered into, amended, or otherwise modified on or after that date.

(a) Subject to the provisions of the governing documents and
other applicable provisions of law, if the boundaries of the separate
interest are contained within a building, the owner of the separate
interest may do the following:
(1) Make any improvements or alterations within the boundaries of
his or her separate interest that do not impair the structural
integrity or mechanical systems or lessen the support of any portions
of the common interest development.
(2) Modify a unit in a condominium project, at the owner's
expense, to facilitate access for persons who are blind, visually
handicapped, deaf, or physically disabled, or to alter conditions
which could be hazardous to these persons. These modifications may
also include modifications of the route from the public way to the
door of the unit for the purposes of this paragraph if the unit is on
the ground floor or already accessible by an existing ramp or
elevator. The right granted by this paragraph is subject to the
following conditions:
(A) The modifications shall be consistent with applicable building
code requirements.
(B) The modifications shall be consistent with the intent of
otherwise applicable provisions of the governing documents pertaining
to safety or aesthetics.
(C) Modifications external to the dwelling shall not prevent
reasonable passage by other residents, and shall be removed by the
owner when the unit is no longer occupied by persons requiring those
modifications who are blind, visually handicapped, deaf, or
physically disabled.
(D) Any owner who intends to modify a unit pursuant to this
paragraph shall submit his or her plans and specifications to the
association of the condominium project for review to determine
whether the modifications will comply with the provisions of this
paragraph. The association shall not deny approval of the proposed
modifications under this paragraph without good cause.

(b) Any change in the exterior appearance of a separate interest
shall be in accordance with the governing documents and applicable
provisions of law.

(a) Except as provided in this section, the common areas in a
condominium project shall remain undivided, and there shall be no
judicial partition thereof. Nothing in this section shall be deemed
to prohibit partition of a cotenancy in a condominium.

(b) The owner of a separate interest in a condominium project may
maintain a partition action as to the entire project as if the owners
of all of the separate interests in the project were tenants in
common in the entire project in the same proportion as their
interests in the common areas. The court shall order partition under
this subdivision only by sale of the entire condominium project and
only upon a showing of one of the following:
(1) More than three years before the filing of the action, the
condominium project was damaged or destroyed, so that a material part
was rendered unfit for its prior use, and the condominium project
has not been rebuilt or repaired substantially to its state prior to
the damage or destruction.
(2) Three-fourths or more of the project is destroyed or
substantially damaged and owners of separate interests holding in the
aggregate more than a 50-percent interest in the common areas oppose
repair or restoration of the project.
(3) The project has been in existence more than 50 years, is
obsolete and uneconomic, and owners of separate interests holding in
the aggregate more than a 50-percent interest in the common area
oppose repair or restoration of the project.
(4) The conditions for such a sale, set forth in the declaration,
have been met.

(a) In a community apartment project, any conveyance,
judicial sale, or other voluntary or involuntary transfer of the
separate interest includes the undivided interest in the community
apartment project. Any conveyance, judicial sale, or other voluntary
or involuntary transfer of the owner's entire estate also includes
the owner's membership interest in the association.

(b) In a condominium project the common areas are not subject to
partition, except as provided in Section 1359. Any conveyance,
judicial sale, or other voluntary or involuntary transfer of the
separate interest includes the undivided interest in the common
areas. Any conveyance, judicial sale, or other voluntary or
involuntary transfer of the owner's entire estate also includes the
owner's membership interest in the association.

(c) In a planned development, any conveyance, judicial sale, or
other voluntary or involuntary transfer of the separate interest
includes the undivided interest in the common areas, if any exist.
Any conveyance, judicial sale, or other voluntary or involuntary
transfer of the owner's entire estate also includes the owner's
membership interest in the association.

(d) In a stock cooperative, any conveyance, judicial sale, or
other voluntary or involuntary transfer of the separate interest
includes the ownership interest in the corporation, however
evidenced. Any conveyance, judicial sale, or other voluntary or
involuntary transfer of the owner's entire estate also includes the
owner's membership interest in the association.

Nothing in this section prohibits the transfer of exclusive use
areas, independent of any other interest in a common interest
subdivision, if authorization to separately transfer exclusive use
areas is expressly stated in the declaration and the transfer occurs
in accordance with the terms of the declaration.

Any restrictions upon the severability of the component interests
in real property which are contained in the declaration shall not be
deemed conditions repugnant to the interest created within the
meaning of Section 711 of the Civil Code. However, these
restrictions shall not extend beyond the period in which the right to
partition a project is suspended under Section 1359.

(a) This article applies to a rule change commenced on or
after January 1, 2004.

(b) Nothing in this article affects the validity of a rule change
commenced before January 1, 2004.

(c) For the purposes of this section, a rule change is commenced
when the board of directors of the association takes its first
official action leading to adoption of the rule change.

(a) Members of an association owning 5 percent or more of
the separate interests may call a special meeting of the members to
reverse a rule change.

(b) A special meeting of the members may be called by delivering a
written request to the president or secretary of the board of
directors, after which the board shall deliver notice of the meeting
to the association's members and hold the meeting in conformity with
Section 7511 of the Corporations Code. The written request may not
be delivered more than 30 days after the members of the association
are notified of the rule change. Members are deemed to have been
notified of a rule change on delivery of notice of the rule change,
or on enforcement of the resulting rule, whichever is sooner. For
the purposes of Section 8330 of the Corporations Code, collection of
signatures to call a special meeting under this section is a purpose
reasonably related to the interests of the members of the
association. A member request to copy or inspect the membership list
solely for that purpose may not be denied on the grounds that the
purpose is not reasonably related to the member's interests as a
member.

(c) The rule change may be reversed by the affirmative vote of a
majority of the votes represented and voting at a duly held meeting
at which a quorum is present (which affirmative votes also constitute
a majority of the required quorum), or if the declaration or bylaws
require a greater proportion, by the affirmative vote or written
ballot of the proportion required. In lieu of calling the meeting
described in this section, the board may distribute a written ballot
to every member of the association in conformity with the
requirements of Section 7513 of the Corporations Code.

(d) Unless otherwise provided in the declaration or bylaws, for
the purposes of this section, a member may cast one vote per separate
interest owned.

(e) A meeting called under this section is governed by Chapter 5
(commencing with Section 7510) of Part 3 of Division 2 of Title 1 of,
and Sections 7612 and 7613 of, the Corporations Code.

(f) A rule change reversed under this section may not be readopted
for one year after the date of the meeting reversing the rule
change. Nothing in this section precludes the board of directors
from adopting a different rule on the same subject as the rule change
that has been reversed.

(g) As soon as possible after the close of voting, but not more
than 15 days after the close of voting, the board of directors shall
provide notice of the results of a member vote held pursuant to this
section to every association member. Delivery of notice under this
subdivision is subject to Section 1350.7.

(h) This section does not apply to an emergency rule change made
under subdivision (d) of Section 1357.130.

(a) The board of directors shall provide written notice
of a proposed rule change to the members at least 30 days before
making the rule change. The notice shall include the text of the
proposed rule change and a description of the purpose and effect of
the proposed rule change. Notice is not required under this
subdivision if the board of directors determines that an immediate
rule change is necessary to address an imminent threat to public
health or safety or imminent risk of substantial economic loss to the
association.

(b) A decision on a proposed rule change shall be made at a
meeting of the board of directors, after consideration of any
comments made by association members.

(c) As soon as possible after making a rule change, but not more
than 15 days after making the rule change, the board of directors
shall deliver notice of the rule change to every association member.
If the rule change was an emergency rule change made under
subdivision (d), the notice shall include the text of the rule
change, a description of the purpose and effect of the rule change,
and the date that the rule change expires.

(d) If the board of directors determines that an immediate rule
change is required to address an imminent threat to public health or
safety, or an imminent risk of substantial economic loss to the
association, it may make an emergency rule change; and no notice is
required, as specified in subdivision (a). An emergency rule change
is effective for 120 days, unless the rule change provides for a
shorter effective period. A rule change made under this subdivision
may not be readopted under this subdivision.

(e) A notice required by this section is subject to Section 1350.7.

(a) Sections 1357.130 and 1357.140 only apply to an operating rule
that relates to one or more of the following subjects:

(1) Use of the common area or of an exclusive use common area.
(2) Use of a separate interest, including any aesthetic or
architectural standards that govern alteration of a separate
interest.
(3) Member discipline, including any schedule of monetary
penalties for violation of the governing documents and any procedure
for the imposition of penalties.
(4) Any standards for delinquent assessment payment plans.
(5) Any procedures adopted by the association for resolution of disputes.
(6) Any procedures for reviewing and approving or disapproving a
proposed physical change to a member's separate interest or to the
common area.
(7) Procedures for elections.

(b) Sections 1357.130 and 1357.140 do not apply to the
following actions by the board of directors of an association:
(1) A decision regarding maintenance of the common area.
(2) A decision on a specific matter that is not intended to apply
generally.
(3) A decision setting the amount of a regular or special
assessment.
(4) A rule change that is required by law, if the board of directors has
no discretion as to the substantive effect of the rule change.
(5) Issuance of a document that merely repeats existing law or the
governing documents.

An operating rule is valid and enforceable only if all of
the following requirements are satisfied:

(a) The rule is in writing.
(b) The rule is within the authority of the board of directors of
the association conferred by law or by the declaration, articles of
incorporation or association, or bylaws of the association.
(c) The rule is not inconsistent with governing law and the
declaration, articles of incorporation or association, and bylaws of
the association.
(d) The rule is adopted, amended, or repealed in good faith and in
substantial compliance with the requirements of this article.
(e) The rule is reasonable.

As used in this article:

(a) "Operating rule" means a regulation adopted by the board of
directors of the association that applies generally to the management
and operation of the common interest development or the conduct of
the business and affairs of the association.

(b) "Rule change" means the adoption, amendment, or repeal of an
operating rule by the board of directors of the association.

(a) The Legislature finds that there are common interest
developments that have been created with deed restrictions which do
not provide a means for the property owners to extend the term of the
declaration. The Legislature further finds that covenants and
restrictions, contained in the declaration, are an appropriate method
for protecting the common plan of developments and to provide for a
mechanism for financial support for the upkeep of common areas
including, but not limited to, roofs, roads, heating systems, and
recreational facilities. If declarations terminate prematurely,
common interest developments may deteriorate and the housing supply
of affordable units could be impacted adversely.

The Legislature further finds and declares that it is in the
public interest to provide a vehicle for extending the term of the
declaration if owners having more than 50 percent of the votes in
the association choose to do so.

(b) A declaration which specifies a termination date, but which
contains no provision for extension of the termination date, may be
extended by the approval of owners having more than 50 percent of the
votes in the association or any greater percentage specified in the
declaration for an amendment thereto. If the approval of owners
having more than 50 percent of the votes in the association is
required to amend the declaration, the term of the declaration may be
extended in accordance with Section 1356.

(c) Any amendment to a declaration made in accordance with
subdivision (b) shall become effective upon recordation in
accordance with Section 1355.

(d) No single extension of the terms of the declaration made
pursuant to this section shall exceed the initial term of the
declaration or 20 years, whichever is less. However, more than one
extension may occur pursuant to this section.

(a) If in order to amend a declaration, the declaration requires owners having more than 50 percent of the votes in the association, in a single class voting structure, or owners having more than 50 percent of the votes in more than one class in a voting structure with more than one class, to vote in favor of the amendment, the association, or any owner of a separate interest, may petition the superior court of the county in which the common interest development is located for an order reducing the percentage of the affirmative votes necessary for such an amendment. The petition shall describe the effort that has been made to solicit approval of the association members in the manner provided in the declaration, the number of affirmative and negative votes actually received, the number or percentage of affirmative votes required to effect the amendment in accordance with the existing declaration, and other matters the petitioner considers relevant to the court's
determination. The petition shall also contain, as exhibits thereto, copies of all of the following:
(1) The governing documents.
(2) A complete text of the amendment.
(3) Copies of any notice and solicitation materials utilized in the solicitation of owner approvals.
(4) A short explanation of the reason for the amendment.
(5) Any other documentation relevant to the court's determination.

(b) Upon filing the petition, the court shall set the matter for hearing and issue an ex parte order setting forth the manner in which notice shall be given.

(c) The court may, but shall not be required to, grant the petition if it finds all of the following:
(1) The petitioner has given not less than 15 days written notice of the court hearing to all members of the association, to any mortgagee of a mortgage or beneficiary of a deed of trust who is entitled to notice under the terms of the declaration, and to the city, county, or city and county in which the common interest development is located that is entitled to notice under the terms of the declaration.
(2) Balloting on the proposed amendment was conducted in accordance with all applicable provisions of the governing documents.
(3) A reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment.
(4) Owners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment. In a voting structure with more than one class, where the declaration requires a majority of more than one class to vote in favor of the amendment, owners having more than 50 percent of the votes of each class required by the declaration to vote in favor of the amendment voted in favor of the amendment.
(5) The amendment is reasonable.
(6) Granting the petition is not improper for any reason stated in subdivision (e).

(d) If the court makes the findings required by subdivision (c), any order issued pursuant to this section may confirm the amendment as being validly approved on the basis of the affirmative votes actually received during the balloting period or the order may dispense with any requirement relating to quorums or to the number or percentage of votes needed for approval of the amendment that would otherwise exist under the governing documents.

(e) Subdivisions (a) to (d), inclusive, notwithstanding, the court shall not be empowered by this section to approve any amendment to the declaration that:
(1) Would change provisions in the declaration requiring the approval of owners having more than 50 percent of the votes in more than one class to vote in favor of an amendment, unless owners having more than 50 percent of the votes in each affected class approved the amendment.
(2) Would eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.
(3) Would impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries.

(f) An amendment is not effective pursuant to this section until the court order and amendment have been recorded in every county in which a portion of the common interest development is located. The amendment may be acknowledged by, and the court order and amendment may be recorded by, any person designated in the declaration or by the association for that purpose, or if no one is designated for that purpose, by the president of the association. Upon recordation of the amendment and court order, the declaration, as amended in accordance with this section, shall have the same force and effect as if the amendment were adopted in compliance with every requirement imposed by the governing documents.

(g) Within a reasonable time after the amendment is recorded the association shall mail a copy of the amendment to each member of the association, together with a statement that the amendment has been recorded.

(a) Notwithstanding any provision of the governing
documents of a common interest development to the contrary, the board
of directors of the association may, after the developer of the
common interest development has completed construction of the
development, has terminated construction activities, and has
terminated his or her marketing activities for the sale, lease, or
other disposition of separate interests within the development, adopt
an amendment deleting from any of the governing documents any
provision which is unequivocally designed and intended, or which by
its nature can only have been designed or intended, to facilitate the
developer in completing the construction or marketing of the
development. However, provisions of the governing documents relative
to a particular construction or marketing phase of the development
may not be deleted under the authorization of this subdivision until
that construction or marketing phase has been completed.

(b) The provisions which may be deleted by action of the board
shall be limited to those which provide for access by the developer
over or across the common area for the purposes of (a) completion of
construction of the development, and (b) the erection, construction,
or maintenance of structures or other facilities designed to
facilitate the completion of construction or marketing of separate
interests.

(c) At least 30 days prior to taking action pursuant to
subdivision (a), the board of directors of the association shall mail
to all owners of the separate interests, by first-class mail, (1) a
copy of all amendments to the governing documents proposed to be
adopted under subdivision (a) and (2) a notice of the time, date, and
place the board of directors will consider adoption of the
amendments. The board of directors of an association may consider
adoption of amendments to the governing documents pursuant to
subdivision (a) only at a meeting which is open to all owners of the
separate interests in the common interest development, who shall be
given opportunity to make comments thereon. All deliberations of the
board of directors on any action proposed under subdivision (a)
shall only be conducted in such an open meeting.

(d) The board of directors of the association may not amend the
governing documents pursuant to this section without the approval of
the owners, casting a majority of the votes at a meeting or election
of the association constituting a quorum and conducted in accordance
with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2
of Title 1 of, and Section 7613 of, the Corporations Code. For the
purposes of this section, "quorum" means more than 50 percent of the
owners who own no more than two separate interests in the
development.

(a) The declaration may be amended pursuant to the governing
documents or this title. Except as provided in Section 1356, an
amendment is effective after (1) the approval of the percentage of
owners required by the governing documents has been given, (2) that
fact has been certified in a writing executed and acknowledged by the
officer designated in the declaration or by the association for that
purpose, or if no one is designated, by the president of the
association, and (3) that writing has been recorded in each county in
which a portion of the common interest development is located.

(b) Except to the extent that a declaration provides by its
express terms that it is not amendable, in whole or in part, a
declaration which fails to include provisions permitting its
amendment at all times during its existence may be amended at any
time. For purposes of this subdivision, an amendment is only
effective after (1) the proposed amendment has been distributed to
all of the owners of separate interests in the common interest
development by first-class mail postage prepaid or personal delivery
not less than 15 days and not more than 60 days prior to any approval
being solicited; (2) the approval of owners representing more than
50 percent, or any higher percentage required by the declaration for
the approval of an amendment to the declaration, of the separate
interests in the common interest development has been given, and that
fact has been certified in a writing, executed and acknowledged by
an officer of the association; and (3) the amendment has been
recorded in each county in which a portion of the common interest
development is located. A copy of any amendment adopted pursuant to
this subdivision shall be distributed by first-class mail postage
prepaid or personal delivery to all of the owners of separate
interest immediately upon its recordation.

(a) The covenants and restrictions in the declaration shall
be enforceable equitable servitudes, unless unreasonable, and shall
inure to the benefit of and bind all owners of separate interests in
the development. Unless the declaration states otherwise, these
servitudes may be enforced by any owner of a separate interest or by
the association, or by both.
(b) A governing document other than the declaration may be
enforced by the association against an owner of a separate interest
or by an owner of a separate interest against the association.
(c) In an action to enforce the governing documents, the
prevailing party shall be awarded reasonable attorney's fees and
costs.

(a) Notwithstanding any other law, a provision of any of the governing documents of a common interest development shall be void and unenforceable if it does any of the following:
(1) Prohibits, or includes conditions that have the effect of prohibiting, the use of low water-using plants as a group.
(2) Has the effect of prohibiting or restricting compliance with either of the following:
(A) A water-efficient landscape ordinance adopted or in effect pursuant to subdivision (c) of Section 65595 of the Government Code.
(B) Any regulation or restriction on the use of water adopted pursuant to Section 353 or 375 of the Water Code.
(b) This section shall not prohibit an association from applying landscaping rules and regulations established in the governing documents, to the extent the rules and regulations fully conform with the requirements of subdivision (a).

(a) No common interest development may require a homeowner
to install or repair a roof in a manner that is in violation of
Section 13132.7 of the Health and Safety Code.
(b) Governing documents of a common interest development located
within a very high fire severity zone, as designated by the Director
of Forestry and Fire Protection pursuant to Article 9 (commencing
with Section 4201) of Chapter 1 of Part 2 of Division 4 of the Public
Resources Code or by a local agency pursuant to Chapter 6.8
(commencing with Section 51175) of Part 1 of Division 1 of Title 5 of
the Government Code, shall allow for at least one type of fire
retardant roof covering material that meets the requirements of
Section 13132.7 of the Health and Safety Code.

(a) The governing documents, including the operating rules,
may not prohibit posting or displaying of noncommercial signs,
posters, flags, or banners on or in an owner's separate interest,
except as required for the protection of public health or safety or
if the posting or display would violate a local, state, or federal
law.
(b) For purposes of this section, a noncommercial sign, poster,
flag, or banner may be made of paper, cardboard, cloth, plastic, or
fabric, and may be posted or displayed from the yard, window, door,
balcony, or outside wall of the separate interest, but may not be
made of lights, roofing, siding, paving materials, flora, or
balloons, or any other similar building, landscaping, or decorative
component, or include the painting of architectural surfaces.
(c) An association may prohibit noncommercial signs and posters
that are more than 9 square feet in size and noncommercial flags or
banners that are more than 15 square feet in size.

(a) Except as required for the protection of the public
health or safety, no declaration or other governing document shall
limit or prohibit, or be construed to limit or prohibit, the display
of the flag of the United States by an owner on or in the owner's
separate interest or within the owner's exclusive use common area, as
defined in Section 1351.
(b) For purposes of this section, "display of the flag of the
United States" means a flag of the United States made of fabric,
cloth, or paper displayed from a staff or pole or in a window, and
does not mean a depiction or emblem of the flag of the United States
made of lights, paint, roofing, siding, paving materials, flora, or
balloons, or any other similar building, landscaping, or decorative
component.
(c) In any action to enforce this section, the prevailing party
shall be awarded reasonable attorneys' fees and costs.

(a) (1) A declaration, recorded on or after January 1, 1986,
shall contain a legal description of the common interest development,
and a statement that the common interest development is a community
apartment project, condominium project, planned development, stock
cooperative, or combination thereof. The declaration shall
additionally set forth the name of the association and the
restrictions on the use or enjoyment of any portion of the common
interest development that are intended to be enforceable equitable
servitudes. If the property is located within an airport influence
area, a declaration, recorded after January 1, 2004, shall contain
the following statement:

NOTICE OF AIRPORT IN VICINITY

This property is presently located in the vicinity of an
airport, within what is known as an airport influence area.
For that reason, the property may be subject to some of the
annoyances or inconveniences associated with proximity to
airport operations (for example: noise, vibration, or odors).
Individual sensitivities to those annoyances can vary from
person to person. You may wish to consider what airport
annoyances, if any, are associated with the property before
you complete your purchase and determine whether they are
acceptable to you.

(2) For purposes of this section, an "airport influence area,"
also known as an "airport referral area," is the area in which
current or future airport-related noise, overflight, safety, or
airspace protection factors may significantly affect land uses or
necessitate restrictions on those uses as determined by an airport
land use commission.
(3) If the property is within the San Francisco Bay Conservation
and Development Commission jurisdiction, as described in Section
66610 of the Government Code, a declaration recorded on or after
January 1, 2006, shall contain the following notice:

NOTICE OF SAN FRANCISCO BAY CONSERVATION AND DEVELOPMENT
COMMISSION JURISDICTION

This property is located within the jurisdiction of the San
Francisco Bay Conservation and Development Commission. Use and
development of property within the commission's jurisdiction may be
subject to special regulations, restrictions, and permit
requirements. You may wish to investigate and determine whether they
are acceptable to you and your intended use of the property before
you complete your transaction.

(4) The statement in a declaration acknowledging that a property
is located in an airport influence area or within the jurisdiction of
the San Francisco Bay Conservation and Development Commission does
not constitute a title defect, lien, or encumbrance.
(b) The declaration may contain any other matters the original
signator of the declaration or the owners consider appropriate.

(a) No declaration or other governing document shall
include a restrictive covenant in violation of Section 12955 of the
Government Code.
(b) Notwithstanding any other provision of law or provision of the
governing documents, the board of directors of an association,
without approval of the owners, shall amend any declaration or other
governing document that includes a restrictive covenant prohibited by
this section to delete the restrictive covenant, and shall restate
the declaration or other governing document without the restrictive
covenant but with no other change to the declaration or governing
document.
(c) If after providing written notice to an association requesting
that the association delete a restrictive covenant that violates
subdivision (a), and the association fails to delete the restrictive
covenant within 30 days of receiving the notice, the Department of
Fair Employment and Housing, a city or county in which a common
interest development is located, or any person may bring an action
against the association for injunctive relief to enforce subdivision
(a). The court may award attorney's fees to the prevailing party.

This title applies and a common interest development is
created whenever a separate interest coupled with an interest in the
common area or membership in the association is, or has been,
conveyed, provided, all of the following are recorded:
(a) A declaration.
(b) A condominium plan, if any exists.
(c) A final map or parcel map, if Division 2 (commencing with
Section 66410) of Title 7 of the Government Code requires the
recording of either a final map or parcel map for the common interest
development.

As used in this title, the following terms have the following
meanings:
(a) "Association" means a nonprofit corporation or unincorporated
association created for the purpose of managing a common interest
development.
(b) "Common area" means the entire common interest development
except the separate interests therein. The estate in the common area
may be a fee, a life estate, an estate for years, or any combination
of the foregoing. However, the common area for a planned
development specified in paragraph (2) of subdivision (k) may consist
of mutual or reciprocal easement rights appurtenant to the separate
interests.
(c) "Common interest development" means any of the following:
(1) A community apartment project.
(2) A condominium project.
(3) A planned development.
(4) A stock cooperative.
(d) "Community apartment project" means a development in which an
undivided interest in land is coupled with the right of exclusive
occupancy of any apartment located thereon.
(e) "Condominium plan" means a plan consisting of (1) a
description or survey map of a condominium project, which shall refer
to or show monumentation on the ground, (2) a three-dimensional
description of a condominium project, one or more dimensions of which
may extend for an indefinite distance upwards or downwards, in
sufficient detail to identify the common areas and each separate
interest, and (3) a certificate consenting to the recordation of the
condominium plan pursuant to this title signed and acknowledged by
the following:
(A) The record owner of fee title to that property included in the
condominium project.
(B) In the case of a condominium project which will terminate upon
the termination of an estate for years, the certificate shall be
signed and acknowledged by all lessors and lessees of the estate for
years.
(C) In the case of a condominium project subject to a life estate,
the certificate shall be signed and acknowledged by all life tenants
and remainder interests.
(D) The certificate shall also be signed and acknowledged by
either the trustee or the beneficiary of each recorded deed of trust,
and the mortgagee of each recorded mortgage encumbering the
property.
Owners of mineral rights, easements, rights-of-way, and other
nonpossessory interests do not need to sign the condominium plan.
Further, in the event a conversion to condominiums of a community
apartment project or stock cooperative has been approved by the
required number of owners, trustees, beneficiaries, and mortgagees
pursuant to Section 66452.10 of the Government Code, the certificate
need only be signed by those owners, trustees, beneficiaries, and
mortgagees approving the conversion.
A condominium plan may be amended or revoked by a subsequently
acknowledged recorded instrument executed by all the persons whose
signatures would be required pursuant to this subdivision.
(f) A "condominium project" means a development consisting of
condominiums. A condominium consists of an undivided interest in
common in a portion of real property coupled with a separate interest
in space called a unit, the boundaries of which are described on a
recorded final map, parcel map, or condominium plan in sufficient
detail to locate all boundaries thereof. The area within these
boundaries may be filled with air, earth, or water, or any
combination thereof, and need not be physically attached to land
except by easements for access and, if necessary, support. The
description of the unit may refer to (1) boundaries described in the
recorded final map, parcel map, or condominium plan, (2) physical
boundaries, either in existence, or to be constructed, such as walls,
floors, and ceilings of a structure or any portion thereof, (3) an
entire structure containing one or more units, or (4) any combination
thereof. The portion or portions of the real property held in
undivided interest may be all of the real property, except for the
separate interests, or may include a particular three-dimensional
portion thereof, the boundaries of which are described on a recorded
final map, parcel map, or condominium plan. The area within these
boundaries may be filled with air, earth, or water, or any
combination thereof, and need not be physically attached to land
except by easements for access and, if necessary, support. An
individual condominium within a condominium project may include, in
addition, a separate interest in other portions of the real property.
(g) "Declarant" means the person or group of persons designated in
the declaration as declarant, or if no declarant is designated, the
person or group of persons who sign the original declaration or who
succeed to special rights, preferences, or privileges designated in
the declaration as belonging to the signator of the original
declaration.
(h) "Declaration" means the document, however denominated, which
contains the information required by Section 1353.
(i) "Exclusive use common area" means a portion of the common
areas designated by the declaration for the exclusive use of one or
more, but fewer than all, of the owners of the separate interests and
which is or will be appurtenant to the separate interest or
interests.
(1) Unless the declaration otherwise provides, any shutters,
awnings, window boxes, doorsteps, stoops, porches, balconies, patios,
exterior doors, doorframes, and hardware incident thereto, screens
and windows or other fixtures designed to serve a single separate
interest, but located outside the boundaries of the separate
interest, are exclusive use common areas allocated exclusively to
that separate interest.
(2) Notwithstanding the provisions of the declaration, internal
and external telephone wiring designed to serve a single separate
interest, but located outside the boundaries of the separate
interest, are exclusive use common areas allocated exclusively to
that separate interest.
(j) "Governing documents" means the declaration and any other
documents, such as bylaws, operating rules of the association,
articles of incorporation, or articles of association, which govern
the operation of the common interest development or association.
(k) "Planned development" means a development (other than a
community apartment project, a condominium project, or a stock
cooperative) having either or both of the following features:
(1) The common area is owned either by an association or in common
by the owners of the separate interests who possess appurtenant
rights to the beneficial use and enjoyment of the common area.
(2) A power exists in the association to enforce an obligation of
an owner of a separate interest with respect to the beneficial use
and enjoyment of the common area by means of an assessment which may
become a lien upon the separate interests in accordance with Section
1367 or 1367.1.
(l) "Separate interest" has the following meanings:
(1) In a community apartment project, "separate interest" means
the exclusive right to occupy an apartment, as specified in
subdivision (d).
(2) In a condominium project, "separate interest" means an
individual unit, as specified in subdivision (f).
(3) In a planned development, "separate interest" means a
separately owned lot, parcel, area, or space.
(4) In a stock cooperative, "separate interest" means the
exclusive right to occupy a portion of the real property, as
specified in subdivision (m).
Unless the declaration or condominium plan, if any exists,
otherwise provides, if walls, floors, or ceilings are designated as
boundaries of a separate interest, the interior surfaces of the
perimeter walls, floors, ceilings, windows, doors, and outlets
located within the separate interest are part of the separate
interest and any other portions of the walls, floors, or ceilings are
part of the common areas.
The estate in a separate interest may be a fee, a life estate, an
estate for years, or any combination of the foregoing.
(m) "Stock cooperative" means a development in which a corporation
is formed or availed of, primarily for the purpose of holding title
to, either in fee simple or for a term of years, improved real
property, and all or substantially all of the shareholders of the
corporation receive a right of exclusive occupancy in a portion of
the real property, title to which is held by the corporation. The
owners' interest in the corporation, whether evidenced by a share of
stock, a certificate of membership, or otherwise, shall be deemed to
be an interest in a common interest development and a real estate
development for purposes of subdivision (f) of Section 25100 of the
Corporations Code.
A "stock cooperative" includes a limited equity housing
cooperative which is a stock cooperative that meets the criteria of
Section 33007.5 of the Health and Safety Code.

(a) This section applies to delivery of a document listed in Section 1363.005 to the extent the section is made applicable by another provision of this title.
(b) A document shall be delivered by one or more of the following methods:
(1) Personal delivery.
(2) First-class mail, postage prepaid, addressed to a member at the address last shown on the books of the association or otherwise provided by the member. Delivery is deemed to be complete on deposit into the United States mail.
(3) E-mail, facsimile, or other electronic means, if the recipient has agreed to that method of delivery. The agreement obtained by the association shall be consistent with the conditions for obtaining consumer consent described in Section 20 of the Corporations Code. If a document is delivered by electronic means, delivery is complete at the time of transmission.
(4) By publication in a periodical that is circulated primarily to members of the association.
(5) If the association broadcasts television programming for the purpose of distributing information on association business to its members, by inclusion in the programming.
(6) A method of delivery provided in a recorded provision of the governing documents.
(7) Any other method of delivery, provided that the recipient has agreed to that method of delivery.
(c) A document may be included in or delivered with a billing statement, newsletter, or other document that is delivered by one of the methods provided in subdivision (b).
(d) For the purposes of this section, an unrecorded provision of the governing documents providing for a particular method of delivery does not constitute agreement by a member of the association to that method of delivery.

Division, part, title, chapter, and section headings do not
in any manner affect the scope, meaning, or intent of this title.

This title shall be known and may be cited as the
Davis-Stirling Common Interest Development Act.

Swedelson & Gottlieb was asked to prepare a letter to Governor Arnold Schwarzenegger and his staff setting out our issues and concerns regarding AB 2598. The following is our letter that went out to the Governor on September 21, 2004:

Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, California 95814

Re: Veto AB 2598

Dear Governor Schwarzenegger:

We have been asked to provide you with some additional information regarding community associations, assessment collection procedures, and why AB 2598 is not good law.

By way of background, this law firm specializes in representing community associations. While the bulk of our practice is located in Southern California, the assessment collection division of our law firm, Association Lien Services, collects delinquent assessments throughout the State of California. We annually process more than 2,000 delinquent assessment matters. While a significant number of those assessment collection matters require the recordation of an assessment lien on the delinquent owners’ property, less than one percent (1%) of those matters actually goes to foreclosure sale. This makes sense; homeowners don’t want to lose their property to their homeowner’s association.

The non-judicial foreclosure procedure has been successfully used without problems for many years. AB 2598 is an over reaction to one unfortunate occurrence earlier this year in Calaveras County (where an association foreclosed on some delinquent owners who owed a $120 annual assessment). Despite what proponents of this bill have stated, there are no rampant problems with the assessment collection process (set out in the Civil Code) that justifies the major changes that are part of AB 2598. In fact, despite inquiry, we cannot find any other similar types of situations as occurred in Calaveras County.

AB 2598 provides that a community association may not proceed with foreclosure on a recorded assessment lien unless and until the amount owed on assessments is $2500. For many associations, that amount may not be accrued for 12 months and in many cases 2 years! Alternatively, the association may proceed to Small Claims Court, but may not record the lien, which secures the obligation.

Securing the obligation with a lien is critically important to community associations. Without the lien, a homeowner may transfer interest in the property to avoid the obligation to the association. You would be surprised how often this occurs. Further, by recording a lien an association is a secured creditor in a bankruptcy proceeding. We are sure this is not a surprise to your office that many seriously delinquent homeowners have financial problems and file bankruptcy. Unless the lien is recorded, the association is not a secured creditor and cannot recover the delinquent assessments.

As you have already been advised in other letters your office has received, if a delinquent homeowner does not pay their assessments, each of the other homeowners at the association must cover the shortfall to the association. If several homeowners do not pay their assessments, this only compounds the problem. AB 2598 protects the delinquent homeowner at the expense of all the other homeowners of the association who timely pay their assessments. This is not fair to all of the owners who do pay their assessments timely and who believed that the association would have expedited means of collection (per the recorded CC&Rs).

In March of this year, David Swedelson traveled to Sacramento to talk with the legislators and their staff regarding this proposed legislation. Shocking as it may seem, they were unwilling to discuss issues we had with their proposed legislation. The staff people that drafted this bill seemed to have no experience with the assessment collection process or community associations. They were certainly not experts in this area of the law. They refused to consider the matters we are addressing in this letter. Instead, they told us that if the assessments owed are below $2500, it is a matter for the Small Claims Court. They refused to consider the fact that because the assessments are an association’s sole source of income, the associations must have an expedited collection procedure to be able to pay their association’s expenses. They also refused to consider the fact that there are problems with collecting assessments in Small Claims Court.

Many Small Claims Courts favor the owner at the expense of the association and they will not consider the law. Small Claims Court has been called the “peoples’ court” on television, and for good reason. In the Small Claims Court, the judges are commissioners that sit as the trier of fact. They often fail to consider California law, either statutes or case precedent. Instead, they seem more concerned with what they deem is fair, even if what they deem is fair does not comply with California law.

For example, when an association proceeds to Small Claims Court, the delinquent homeowner will often state that they have not paid their assessments because the association has not fixed damage in their unit caused by a roof leak. This issue is dealt with in Park Place Estates v. Naber (1994) 29 Cal.4th 427, where the court held that an owner may not withhold assessments owed to an association on the grounds that the owner is entitled to recover money or damages from the association for some other obligation. The court held that the Davis-Stirling Common Interest Development Act establishes a strong public policy against allowing a homeowner to offset assessments against any other obligation allegedly owed by the association to the owner. Many Small Claims Court Judges ignore this case law. The Association then loses the case and cannot appeal. In many cases the association did not owe the owner any money nor did it have an obligation to repair the damage.

When an association sues the homeowner for the delinquent assessments in Small Claims Court, someone from the association has to appear in court. Many courts will not allow the manager to appear and will require that a volunteer board member take time off of work to appear in court. Although AB 2598 will now allow a manager to appear, to do so will result in an hourly charge for their time to be paid, not by the delinquent homeowner, but by the association.

Our guess is that if a homeowner’s association is required to proceed to Small Claims Court, it will have a fifty-fifty chance of prevailing. These are not great odds. If the association does prevail, it is the delinquent homeowner who has the right to appeal (an association has no right of appeal as the plaintiff in Small Claims Court).

The appeal means that the association is further delayed in collection, and is required to participate in a second court hearing. Many divisions of the Los Angeles Superior Court are taking several months to schedule Superior Court appeals. Even on appeal, the association still has a fifty-fifty chance of prevailing.

Even if the association does prevail, and obtains a judgment, it then has to collect the money. This is not an easy process and if the owner did not pay the $125 assessment, they likely do not have the money available for collection of the judgement. Foreclosure of the property on a judgment lien is almost virtually impossible (different procedures are provided for a judgement lien). The association must find some asset, whether it be a bank account, car, or the person’s wages to execute on. The collection process is time consuming. Even if the association is eventually successful, the association is delayed in collecting the assessments it needs to pay its bills. Keep in mind that a community association’s sole source of income is typically the assessments that it is diligently trying to collect.

Please also keep in mind that without assessments, the association cannot pay for the vital services it provides to its homeowners. This may include utilities, water, insurance, maintenance, management, etc. Who is supposed to make up this deficit if homeowners don’t pay? The remaining homeowners, of course!

The only real option for associations (if you do not veto AB 2598) is to proceed with non-judicial foreclosure once the delinquent amount is $2500. Is delaying the process until the amount owed is $2500 really going to change the end result? Not really. The proponents of AB 2598 will likely still have issues if an association initiates foreclosure to collect $2500.

At many associations, the assessments owed are $100 to $150 per month. Should community associations have to wait two years to begin the foreclosure process? We do not think this is fair or appropriate.

The Court of Appeal in the Park Place case (cited above) made some interesting comments regarding assessments in their reported opinion. The court, in its decision, referred to various statutes regarding assessment collection, including Civil Code Section 1366, and 1367, and stated that:

“These statutory provisions reflect the legislators’ recognition of the importance of assessments to the proper functioning of condominiums in this state. Because homeowners associations cease to exist without regular payment of the assessment fees, the legislature has created procedures to quickly and efficiently seek relief against a non-paying owner.”

The legislators referenced are obviously those of the past. AB 2598 is a product of legislators that were perhaps not in office when Civil Code Sections 1366 and 1367 were adopted based on the legislature’s acknowledgment that community associations need a quick and efficient process to collect delinquent assessments. AB 2598 would end the current quick and efficient process. Legislation enacted in 2003 already requires additional notices and a longer notice period. There is no rash of problems with the foreclosure process that requires AB 2598. The legislature is being shortsighted and overreacting; it’s up to the Governor’s office to recognize what is in the best interests of the majority of citizens in the state.

AB 2598 also requires that an association enter into some form of alternative dispute resolution (ADR) with a delinquent homeowner if requested. The Civil Code now allows for ADR if a homeowner requests it, and deposits the amount of the assessments plus an additional amount to cover attorney’s fees and costs. This procedure was implemented to eliminate the potential that homeowners would abuse and delay the process. AB 2598 will now allow homeowners to abuse the process by demanding ADR, even if the only issue is the amount of assessments they owe. This will provide homeowners with an ability to arbitrate or mediate their “disputes” with their association, complaints that perhaps their association is not budgeting for (i.e. expenses, etc.) or properly maintaining the common area. This proposed ADR process will be time consuming, expensive, and will eliminate the quick and efficient ability of an association to collect assessments that are needed to pay the associations’ ongoing expenses.

AB 2598 also requires a “drive by” appraisal before an association can actually foreclose on homeowners’ property for non-payment of assessments. The language in this code section is not workable. At a foreclosure on an assessment lien, potential buyers are bidding on the amount of the lien, not the amount of the property. If the amount of the delinquent assessments, interest, late fees, costs and attorney’s fees are $3,000, the opening bid will be $3,000, without any recognition as to the value of the property. Potential bidders are not going to bid up to sixty five percent (65%) of the value of the property at a foreclosure on an assessment lien; they are going to bid based on the value of the lien and equity in the property. They recognize that they will take the property subject to all senior encumbrances. AB2598 fails to recognize the mechanics of the foreclosure process.

In the case of Wilton v. Mountainwood HOA (1993) 18 Cal.App.4 565, the Court of Appeal ruled in favor of an association with respect to a litigation privilege, ruling that the litigation privilege would attach to the recording of an assessment lien. The Court’s ruling is relevant to AB 2598. The Court concluded as follows:

“The litigation privilege attaches to the publication of the assessment lien even if the homeowners association has not decided, at the point the lien is filed, that it will pursue a judicial foreclosure, even if the lien is ultimately enforced by private sale. To conclude otherwise would make the privilege hinge upon factual inquiries and which remedy the association intended to use, and might lead associations to resort to judicial foreclosure in every case simply to avoid the risk of tort liability. There is no reason to flood the courts with such cases. The legislature has given homeowners associations a remedy of private sale, and we must avoid deterring the use of that remedy while at the same time protecting associations access to the courts for the purpose of judicial foreclosures.”

It is interesting that the Court of Appeal in Wilton also stated:

“We do not share appellants’ concern that our decision will prompt, associations to file a flood of fraudulent assessment liens against our neighbors, but should that occur the legislature is free to limit the litigation privilege for such liens as it has recently done with respect to lis pendens.”

That case was decided in 1993. There was no flood of fraudulent assessment liens then, and there has not been a flood of fraudulent or inappropriate assessment liens recorded on delinquent homeowners now. Nothing has occurred that justifies the legislature’s reaction, or in this case, overreaction, to a situation which isn’t even a problem. AB 2598 is motivated by individuals who have a problem with the community association concept. They seem to distrust how the associations are governed and the powers asserted by the association’s board.

AB 2598 will hurt more than help senior citizens and all of the citizens of California. It will undoubtedly require that associations increase their budgets to make up for the shortfall in the income that will likely occur as a result of homeowners who are not being compelled to timely pay their assessments. Absent a flood of problems, we are urging you to veto AB 2598.

Our firm, along with other experts in the industry are ready, willing, and able to meet with legislators to come up with legislation which is more sensitive to all citizens, while addressing the issues that concern the legislators and proponents of AB 2598. AB 2598 was an overreaction, was not well drafted and does not deal with the realities of California law or community associations in California. Again, we urge you to veto AB 2598.

Sincerely,

SWEDELSON & GOTTLIEB
DAVID C. SWEDELSON, ESQ.
SANDRA L. GOTTLIEB, ESQ.

BY: SANDRA L. GOTTLIEB

Please do not shoot the messenger as we are only reporting the news. On September 18, 2006, the Governor signed S.B. 1560 (the “Amendment”), which modifies recently enacted Civil Code Section 1363.03. This “cleanup bill” clarifies some troublesome issues, which will hopefully allow associations to get through the election process more efficiently.

• §1363.03(e)(1)

One of the provisions in 1363.03 required homeowners, when voting by secret ballot, to write his or her name in their own hand on the exterior envelope sent to the inspector(s) of election and state their unit, lot or tract number. The Amendment allows an owner to sign the exterior envelope and indicate the owner’s name or address or separate interest identifier that entitles that owner to vote. Therefore, the homeowner will no longer have to print their name, unit, lot and tract number in their own hand but may instead utilize a label. However, the member is still required to sign his or her name.

• §1363.03(f)

The changes to Civil Code Section 1363.03 now confirm what we already knew to be the case, that once the inspector receives the ballot, it is not revocable. This change can be found at 1363.03(f). An additional change to 1363.03(f) allows the inspector or the inspector’s third party designee to verify members’ information and signature on the outer envelope of the secret ballot prior to the meeting at which the ballots are tabulated. We had been very concerned that only the inspector(s) of election could perform this job and only perform it at the meeting. Now, the inspector(s) can designate third parties to help perform some of the work and allows for the signature on the outer envelope to be verified (this will help with reaching quorum) prior to the meeting.

• §1363.03(m)

1363.03(m) has been added to confirm that the secret ballot procedure is not required for votes cast by delegates or other elected representatives, but only for votes cast directly by members of the association.

• §1363.03(d)(1)(A)

Another important change defines a proxy (this is a new definition for the code) as “a written authorization signed by a member or the authorized representative of the member that gives another member or members the power to vote on behalf of that member.” (Emphasis added.) In the past, a proxy could be given to any third party whether they were the member, the member’s attorney or a family member unrelated to the association. Now, a proxy can only be given to a member.

• §1363.03(d)(1)(B)

The word “signed” is now defined as “the placing of the member’s name on the proxy, whether by manual signature, typewriting, telegraphic transmission or otherwise by the member or authorized representative of the member.” This is important because it clarifies whether faxed signatures count; they do.

• §1363.03(d)(2)

The cleanup legislation clarifies that proxies may not be construed or used in lieu of a ballot. The modifications to the Civil Code provide that if proxies are permitted or required by an association’s bylaws, and if the proxy meets the statutory requirements, they shall be used. However, associations are not required to prepare or distribute proxies pursuant to Section 1363.03. A member may revoke his or her proxy prior to the receipt of the secret ballot by the inspector(s) of election pursuant to Section 1363.03(d)(3).

• §1363.03(b)

An important concern has been the quorum requirement. The Amendment provides that if quorum is required for elections in the governing documents or other provisions of law, each secret ballot received by the inspector(s) shall be treated as a member present at a meeting for purposes of establishing a quorum (1363.03(b)). We believe that since the ballot is contained within the first and second envelope referenced above, when the envelope is received, it can be used for establishing quorum. Since quorum is determined by ballots, if an envelope is received without a ballot enclosed, then the empty envelope would not count toward quorum.

Additionally, this same subparagraph adds to the already designated four issues for which secret ballots must be utilized to include the removal (recall) of directors.

Unfortunately, these changes did not go as far as we would have liked. However, the changes are significant and clarify many unanswered questions that followed the enactment of Civil Code Section 1363.03.

A Soon To Be State Law May Do More Harm Than Good
Steven Shuey, PCAM, CCAM

Homeowner Associations exist in common interest developments to manage the community.  This management includes providing for the maintenance of the common areas as well as administration.  In many communities, this can mean thousands of dollars per month in regular monthly costs.

Associations pay their monthly bills with funds collected from owners through maintenance assessments, also known as a maintenance fee or dues.  Without this regular recurring income, funds would not be available to meet the association’s obligations.

Occasionally, there are owners who, for whatever reason, cannot or will not pay their maintenance fee on time.  This, of course, can present a problem for the association if it happens very much.  Associations must take measures to prevent this.  If a few owners are allowed to withhold their maintenance fee for any length of time, the remaining owners will need to carry the load.  This can mean increasing the fees for everyone in the association so that enough money will be on hand to pay the association’s bills when they come due.

Associations have policies regarding payment of the maintenance assessment.  In most cases the fee is monthly and in other cases it can be quarterly or annually.  The collection policy, adopted by most associations calls for the payment to be due on the first of the month and late if not paid within 15 days.

In order that pressure can be applied to a late paying owner, a late penalty is applied if the payment is not received on time.  This is usually 10% or $10, which ever is greater.  This means that for an association with a maintenance fee of $300, the late penalty could be $30; if the regular fee is $600, the late penalty could be $60.  This is a pretty good incentive to pay on time, but actually, it is not enough.

Typically, if a maintenance fee goes unpaid for three months, a recorded lien is placed on the property.  If the fee still remains unpaid, the property could be foreclosed upon.  There are in place comprehensive protections for the consumer relative to maintenance assessment collections including extensive notification, payment plans and wait periods.  Rarely does a property go all the way to foreclosure, but having the ability to do so puts enough pressure on the owner to keep the maintenance fees paid current. 

In recently proposed legislation, specifically, AB2598, some of these protections will be altered or taken away to such a degree that some associations will have financial hardship if the legislation goes into law.  These maintenance assessments are the lifeline of homeowners associations.  If the strength to enforce on time payment is taken away, it stands to reason that the maintenance fees will go up for everyone.  Let’s hope the governor does not sign the bill into law.  Action on this bill is expected shortly.

Homeowners in communities are encouraged to be involved in the governance of the community.  It is important to take an active role if we want our communities to continue to thrive and survive.  For more information check out www.ResponsibleNeighbors.com.

Steven Shuey is a Certified Community Association Manager (PCAM, CCAM), General Manager of the Desert Island Condominium Community and past president of the Coachella Valley Chapter of the CAI.

Veto AB 2598 (Steinberg)

This is a sample letter that you can use as a template for your own letter to the Governor Schwarzenegger letting him know that this legislation protects delinquent owners at the expense of those owners who timely pay their assessments.

WRITE TODAY—DO THIS AS SOON AS POSSIBLE

Re: Veto AB 2598 (Steinberg)

To: Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814
Phone: 916-445-2841
Fax: 916-445-4633

To send an Electronic Mail please visit:
http://www.govmail.ca.gov

RE: Veto AB 2598 (Steinberg)

Dear Governor Schwarzenegger,

Paragraph 1

In the first paragraph, introduce yourself to the Governor.
Please include:

1. Your name and whether you are a senior, a homeowner residing in a community association, a manager, or a professional or service provider who works with community associations, or are on a fixed income.

2. State where you live and how many homeowners reside in the community association you live in or manage.

Sample Paragraph 1

My name is Jane Doe and I am a resident of Camelot Homeowners Association (HOA) that is located in Sacramento. 625 residents live in the HOA, which is made of up 300 units.

Paragraph 2

In the second paragraph, tell the Governor why you are writing.

Please include:

1. Ask the governor to veto AB2598.

2. Tell the governor why you want him to veto the legislation. Please use the following message points and put them in your own words:

(Insert Message Points from this list):

• I can't afford to nor is it fair that I carry the financial obligations of other owners who do not timely pay their association assessments.

• Responsible owners will be punished with higher assessments (dues).

• We already have the nation's best owner protection laws when someone can't pay their assessments.

• The bills will increase litigation and attorneys' fees, clog the courts and cost the associations and their members more money.

• California needs less regulation of, and intrusion into, private contracts (CC&Rs)

Sample Paragraph 2

I am writing to ask that you veto this bill. Since some homeowners in my HOA will not pay the assessments (dues) they contractually agreed to pay when they bought their home, if this bill becomes law, the board of the HOA will have to increase my assessments and the dues of the other homeowners who take our obligations seriously. [(If applicable): As a senior citizen living on a fixed-income, I cannot afford to have my dues increase.]

Paragraph 3

In the last paragraph, thank the Governor for considering your request.

Sample Paragraph 3

Thank you very much for considering my request. Your veto will help to ensure that every homeowner in my association continues to follow through on their obligation to pay assessments and that the assessments of every homeowner will not increase.

Very Truly Yours,

(Insert Your Signature)

Insert Your Name

Interesting article recently appeared in the Wall Street Journal (and was also reported in the Los Angeles Daily Journal). Apparently there are "tens of thousands of empty or unfinished condominiums" in Florida. While we have not heard of this type of inventory in California, there are many condominium buildings under construction or recently completed, and many if not most of those units have not been sold. Many owners or individuals who've contracted to buy some of these uncompleted units may be seeking some sort of exit strategy and that may include lawsuits.

The Wall Street Journal article states that recent legal decisions in Florida courts indicate that won't be that easy for buyers to get out of those deals. "the bottom line: unless it's a bona fide contract dispute, and investors chance of winning appear to be slim."

Homeowner Legislation Poised to Hurt More Than Help—CAI/CLAC‘s Press Release on AB 2598 The seven million Californians who live in homeowners associations will have to pay higher monthly dues, thanks to legislation passed in the last hours of the legislative session. Assembly Bill 2598 (Steinberg) again takes up the use of foreclosure to compel payment of delinquent assessments – a practice used in less than 0.007 of collections processes. Just last year California implemented a law (Kehoe, AB 2289) that provides comprehensive protections specific to dues collections, including extensive notification, payment plans and wait periods. These protections rank as the strongest nationwide. That’s why members of homeowners associations oppose AB 2598. Senior Sam Dolnick of La Mesa, CA, said the legislation will do more harm than good. “Many seniors in our association live on fixed incomes and they cannot afford to pay more. When placed in a squeeze, they will have to pay higher assessments to make up for those who may purposely not pay their assessments until they reach the $2,500 threshold.” Homeowner association resident and president of the Wildwood Association in Sacramento Lisa Lindsey said, “Assessments are the lifeline of homeowners associations. For smaller communities like mine, we would be crippled if 20 of our 137 residents were late on assessment dues. Our insurance alone costs more than $85,000.” Homeowners aren’t the only ones hurt by AB 2598. The legislation brings business disincentives for builders and lenders, who are central to responding to the state’s population growth. • Developers will not sell units if new buyers can willingly avoid paying the dues needed to maintain the property. • Banks and lenders will stop loaning money to developers and homeowner associations because their loan security is impaired. “We have thousands of community associations in California as clients. This law will have a negative impact on the ability of associations to secure financing for needed renovations and repairs,” said John Smith, Senior Vice President, U.S. Bank Homeowner Division. For More Information: www.responsibleneighbors.com

We have been asked for more information on why Steinberg’s AB2598 is bad law. AB 2598 is one of two pieces of legislation proposed following the foreclosure earlier this year on a senior citizen couple in Calaveras County. Proponents of this legislation, which would make it more difficult for associations to collect assessments, suggest that what happened in Calaveras County is only an example of a rampant problem. They have not referenced any other similar problems; assessment foreclosure abuses are not rampant; there is no problem with the current system other than the fact that it compels homeowners who are delinquent to pay their assessments.

This legislation is a poor response and overreaction to a situation which is not a rampant problem. We say overreaction because of the following:

1. Currently, if a homeowner is delinquent in the payment of assessments, the association has the ability to record a lien securing that obligation. Of course, the association must follow the proper procedures, send out the appropriate notices, and wait the appropriate time. However, if that lien is not recorded, the homeowner can transfer title to the unit without paying their assessment obligation. It is the lien with the possibility of foreclosure that compels homeowners to timely pay their assessments.

2. AB 2598 restricts associations assessment collection options to either recording a lien but not taking action on the lien until the amount owed is $2,500 or going to small claims court. What good is a lien if you cannot proceed to collect the assessments? The legislature refuses to consider the fact that the payment of assessments is a community association’s sole income. If owners do not pay their assessments, where is the money to pay for the associations utility, insurance and other expenses to come from.

3. Proponents of AB2598 argue that a community association should not be given any special powers and they should collect their delinquent assessments much like a credit card company collects from a borrower who does not pay. This argument misses an important point. Many associations have less than 100 members, and some have as few as five (or less). Credit card companies can spread the loss of revenue among the millions of their borrowers, and charge fees and other costs which may up the deficit. Associations are not given that luxury. If homeowners do not timely pay their assessments, the associations will have problems paying important bills such as those for insurance, utilities, maintenance and repair, etc. In addition, if this legislation passes, there is no doubt that associations will not be as successful in collection assessments as they have been. Associations will have no choice but to increase assessments to supplement for when homeowners do not pay their assessments.

You ask why assessments will be more difficult to collect. If an association waits until there is $2,500 owed, they can utilize non-judicial foreclosure, which has proven to be the most successful method of collection assessments. However, for many associations (including the one in Calaveras County that apparently had a $120 per year assessment) waiting until $2,500 is owed is not practical. Those associations have no choice but to proceed to small claims court. Unfortunately, history has shown that small claims court is a hit or miss proposition. Most managers indicate that an association has a 50/50 chance of prevailing in small claims court. If it prevails at the original trial, the delinquent homeowner can appeal to the superior court, requiring a second hearing. Even after the second hearing and providing that the association is successful, it still has to collect the judgment. A judgment lien recorded against an owner’s property, at that point, cannot easily be foreclosed on and there may not be any other assets available to the association for collection.

Even if the amount of assessments owed is $2,500 and the association opts for non-judicial foreclosure, this legislation has made that process even more difficult. AB2598 now requires that before the foreclosure, the association must have a "driveby" appraisal conducted and if the opening bid at the foreclosure sale cannot be less than 65% of the appraised value of the property. Not only does this increase the time and cost of the foreclosure process, the 65% of value requirement is an impossible roadblock. There is no way to get a bidder at a foreclosure sale to bid 65% of the value of the property when they are foreclosing on a lien which may have a value of less than $5,000.

Unfortunately, the legislators did not work with community association industry experts to develop a legislation which is workable. AB 2598 only demonstrates that they do not understand community associations. Again, this poorly drafted piece of legislation is an overreaction to a problem that does not exist. It is important that you, your colleagues, all Board members and homeowners that you know write letters to Governor Schwartznegger letting him know that AB2598 is a poorly drafted piece of legislation that is not necessary and should be vetoed.

They did it. The legislature passed one of the two foreclosure bills we warned you about previously. Senator Denise Ducheney’s (Democrat - San Diego) SB1682 did not move forward but Assemblyman Darrell Steinberg’s (Democrat - Sacramento) AB2598 passed the Senate although we are told that there was some confusion during the voting on this bill.

We are advised that an hour later Steinberg’s AB 2598 was passed on a split vote in the Assembly after a "robust debate" which addressed the negative impact this litigation would have on responsible homeowners who do timely pay their assessments. We are advised that 27 out of 80 assembly members voted "no" or abstained from voting on the first round, further indicating that there was (and remains) serious concerns with the bill.

AB2598 has gone to Governor Schwartznegger for his action. Governor Schwartznegger until the end of September decide whether to sign the bill into law or veto it. AB 2598 is bad law and we want it vetoed. The Governor needs to hear from all of us as soon as possible.

Now is the time for all of us to share this information with our colleagues, Board members, and responsible homeowners. Everyone of them needs to write letters to the governor letting him know that this is just bad law. Please forward this newletter on to everyone you know that is a board member, manager or is otherwise involved in the community association industry and get them to write letters as well. The more letters, the more we will be able to convince the Governor to veto AB 2598