HOA Law Blog

Effective January 1, 2005, Assembly Bill 1836 changes the current requirements and process for Alternative Dispute Resolution,  by amending the existing provisions of the Davis-Stirling Common Interest Development Act (“Act) and adding additional provisions to the Act.  This Bill was introduced to enact recommendations made by the California Law Review Commission (CLRC). This new legislation requires that associations adopt some form of Internal Dispute Resolution process, as discussed below, and it also expands the scope of the disputes to which the Alternative Dispute Resolution processes must or can be applied within community associations.

Existing law requires that certain disputes be submitted to Alternative Dispute Resolution prior to a lawsuit being filed, either by a homeowner or by the association.  This Bill establishes a two-tier process to address disputes prior to enforcement through the court system.  As of 2005, associations are required to implement an informal process by which homeowners and boards "meet and confer" to discuss their disputes.  The CLRC came to the conclusion that some association boards were not talking with homeowners regarding their disputes, and felt that by encouraging personal communication that many disputes would be resolved without court intervention.

If the dispute is not resolved through the informal “meet and confer” process, either the owner/member or the association must still submit the dispute to some form of formal Alternative Dispute Resolution (ADR) prior to filing a lawsuit in the Superior Court.

Assembly Bill 1836 amends Section 1354 of the Davis-Stirling Act to clarify that all governing documents, which include rules and regulations, Articles, Bylaws, as well as CC&Rs, may be enforced by any owner of a separate interest or by the association, or both.  This change reinforces the concept  recognized by the California Court of appeals in Beehan v Lido Isle Community Association that not all association disputes have to be enforced or resolved by the association.

As was the case prior to enactment of Assembly Bill 1836, neither associations nor homeowners are obligated to use the mandatory “meet and confer” and the ADR process for disputes involving a claim for monetary damages in excess of $5,000.00, Small Claims actions, or, except as provided in the Davis-Stirling Act, to assessment disputes.

This Bill also defines ADR as including mediation, arbitration, conciliation, or any other non-judicial procedure involving a neutral party in the decision-making process.

This new legislation also changes the requirements on how a Request for Resolution may be served.  Previously, there was some ambiguity in the law regarding whether a Request for Resolution had to be personally served.  The Court of Appeals addressed this ambiguity in the Cabrini Villas HOA case.  Realizing that it was becoming difficult for associations to comply with the ADR service requirements, the new law states that the Request for Resolution may be made by personal delivery, first class mail, express mail, fax, or any other means that would reasonably be assumed to notify the receiving party.

AB 1836 also repeals the provisions of Court of Civil Procedure 383, and adds Section 1368.3 to the Civil Code in its place.  Section 1368.3 provides that an association is entitled to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings in its own name as the real party interest without joining the individual owners in certain disputes.

AB 1836 also amends Civil Code Section 1357.120 to reflect that associations are required to adopt an internal procedure for dispute resolution and that any procedures to be adopted by the Board are subject to the notice and rule change requirements of Civil Code Sections 1357.130 and 1357.140.  This Bill also adds two new requirements to Sections 1357.130 and 1357.140 (which are the sections adopted last year which require notice to members before the Board makes a rule change and allow members of an Association to reverse a rule change, respectively.  Essentially, the amendments to Sections 1357.130 and 1357.140 require that the Internal Dispute Resolution process adopted by an association must comply with the requirements of Section 1357.100 et seq, which means that before it becomes the law of an association, it must first be distributed to the members, to allow them an opportunity to oppose the new procedure.

Associations Must Adopt a Procedure for Internal Dispute Resolution

AB 1836 requires that associations either establish their own procedures for Internal Dispute Resolution or use the procedure set forth in new Civil Code Section 1363.840.  The procedures set forth in Section 1363.840 are as follows:

1. Either the association or a homeowner may request that the other meet and confer in an effort to resolve a dispute involving their rights, duties or liabilities under the Davis-Stirling Common Interest Development Act, the Nonprofit Mutual Benefit Corporation law, or the governing documents of the common interest development.  The request must be in writing.
2. Either the homeowner receiving such a request from the association may refuse to meet and confer.  However, if the association receives such a request from a homeowner, the association must accept the homeowner’s request to meet and confer.
3. The association’s board of directors must designate a member of the board to meet and confer with the homeowner.
4. The designated member of the board of directors and the homeowner shall meet promptly at a mutually convenient time and place; explain their positions to each other and confer in good faith in an effort to resolve this dispute.
5. Any resolution of the dispute agreed to by the designated member of the board of directors and the homeowner must be memorialized in writing and signed by the designated member of the board of directors and the homeowner.

The association has the option of using the above procedure or may adopt its own process.  If the board of directors chooses to adopt its own process, the process is subject to the following:

1. The meet and confer process must be “fair and reasonable.”
2. The process must provide the right for either the association or a homeowner to invoke the process in writing.
3. The procedure must provide prompt deadlines.
4. The procedure must allow for the homeowner and the association to explain their positions and provide the right of appeal by the homeowner to the board of the association.

This new requirement of “a meet and confer” process is intended to foster communication, and that communication will not be binding on either the association or the disgruntled or rule-violating homeowner.  Assuming the agreement made through the meet and confer process is in writing, that resolution may be judicially enforceable, as long as the resolution is not in conflict with the law or the governing documents of the community association, and the agreement is either consistent with the authority granted by the Board of Directors to its designated representative or is ratified by the Board of Directors.

In developing an Internal Dispute Resolution process, Civil Code Section 1363.820(b) requires associations to “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.”

Conceivably, the meet and confer process implemented by a Board of Directors could include use of a mediation service.  However, this new law specifically states that no fee can be charged to the member for participating in the Board’s informal meet and confer process.  Should the dispute not be resolved and be subject to the formal ADR process, the cost of the ADR will be shared equally by the association and the homeowner.

AB 1836 requires that associations annually provide the members with a summary that specifically states:

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.

The summary must be provided “either at the time the pro forma budget required by Civil Code 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.”

Any new procedures adopted by the Board of Directors related to the Resolution of Disputes must comply with Civil Code Section 1357.130 and 1357.140, the procedure for enacting new rules (which, among other things, requires that the new rule or procedure be distributed to the members prior to becoming enforceable and allows members to vote to reverse a rule change).

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Posted In: 1354 - Covenants And Restrictions In Declaration Enforcement. , Davis-Stirling Act Text

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The new laws affecting collection of delinquent assessments now require the Board of Directors of an Association to vote during an open meeting of the Board to make the decision to record a lien. S&G and Association Lien Services has developed a simple Resolution Document that details all of the steps that need to be taken during that Board meeting to ensure compliance with the California Civil Code. Just click on the link below to download the Resolution Document (REVISED January 2006)

Download bod_lien_resolution_final.pdf

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Posted In: Assessment Collection , Davis-Stirling Act Text

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2005 - 2006 ANNUAL DISCLOSURE CHECKLIST FOR COMMUNITY ASSOCIATIONS

NOT LESS THAN 30 DAYS NOR MORE THAN 90 DAYS PRIOR TO THE BEGINING OF THE FISCAL YEAR:

 Pro Forma Operating Budget Civil Code § 1365(a)
The association must distribute its operating “pro forma” budget within the “60-day window” to retain its ability to unilaterally increase assessments. If this requirement is not met, the members must approve any increase to the regular assessments.

The budget must contain the following:
• an estimate of revenue and expenses on an accrual basis;
• a summary of the reserves printed in bold type;
• with respect to construction or design defect cases, the summary must also include a separate line
item for:
(1) funds received from compensatory damage awards or settlements; and
(2) expenditure or disposition of funds, including amounts for direct/indirect costs of repair of
defects (If the association is required to have a CPA conduct a review of its financial
statements, the above information may instead be contained in such review);
• a statement as to whether the board anticipates the levy of one or more special assessments; and
• a basic description of the procedures used to calculate the reserves.

 Summary of Pro Forma Operating Budget Civil Code § 1365(c)
(Alternative to Above) The association may distribute a summary of the operating budget in lieu of the pro forma budget.

The summary budget must give members notice that:
• the complete budget is available for review at the association’s business office or other
suitable location within the development; and
• copies of the complete budget will be provided upon request at no charge to a member within
five (5) days of the request.

These notices must be printed in at least 10-point bold type on the front page of the summary.

 Assessment and Reserve Funding Disclosure Summary
The association must distribute an Assessment and Reserve Funding Disclosure Summary in the form prescribed by Civil Code Section 1365.2.5. This disclosure requires more than just a description of the amount of reserves and/or the association’s budget contributions. Disclosure of, among other things, the components being reserved for, their anticipated remaining life and how much money is currently in reserves allocated to that component must be disclosed.

 Assessment Increases Civil Code § 1366(d)
Notice of an assessment increase or special assessment must be provided by first-class mail to members not less than thirty (30) nor more than sixty (60) days before the increase or assessment is due. Note: Even if the budget shows the increased assessments, prepare and distribute a general notice.

 Assessment Collection Policy Civil Code § 1365(d)
Members must receive a description of the policies and practices which the association will apply to enforce payment of assessments. The failure to adopt and distribute this assessment collection policy may affect an association’s ability to collect delinquent assessments.

This notice usually describes:
• how, when and under what conditions the association will record and foreclose upon assessment liens;
• the nature and amount of late charges, interest and collection costs; and
• owners’ rights to demand Internal Dispute Resolution (“IDR”) and Alternative Dispute Resolution (“ADR”) at different times during the collection process.

 Secondary Addresses Provided by Owners
The association shall notify owners of their right to submit secondary addresses to the association for purposes of collection notices. 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 Section 1367.1 of the California Civil Code to the secondary address provided. The owner’s request shall be in writing and shall be mailed to the association in a manner that shall indicate that 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 requested secondary address from the point that the association receives the request.

WITH THE BUDGET SUMMARY, OR IN ANY GENERALY MAILING DURING THE YEAR:

 Notice of Right to Minutes of Board Meeting Civil Code § 1363.05(d)
On an annual basis, the association must notify members of their right to receive copies of the minutes from board of directors’ meetings (which does not include executive session meeting minutes).
The notice should state:
1. that members have the right to receive approved minutes, an unapproved draft, or a summary of the minutes within thirty (30) days of a board meeting upon member’s request and upon reimbursement of association’s costs to distribute minutes; and
2. how and from whom those minutes may be obtained.

 Arbitration/Mediation of CC&Rs Disputes Civil Code § 1369.510 et seq.
Annually, the association must distribute a summary of Civil Code Section 1369.510 et seq. to its members.

Section 1369.510 et seq. provides, in part:
• An owner or the association must first offer arbitration, mediation or conciliation prior to litigating an action to enforce the governing documents, in seeking injunctive or declaratory relief, or injunctive or declaratory relief plus damages of up to $5,000 (other than assessments);
• thirty (30) days in which the responding party may accept or reject ADR

Civil Code §1369.590 requires that associations annually provide members with a summary of the ADR that specifically states:
“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.”

The summary must be provided “either at the time the pro forma budget required by Civil Code Section 1365 is distributed or in the manner prescribed in Section 5016 of the Corporations Code.”

 Insurance Coverages Civil Code § 1365(e)
The association must distribute to the members a summary of its property, general liability, earthquake, flood and fidelity insurance policies. The summary should also state:
• the name of the insurer and the type of insurance; and
• the policy limits and deductibles, if any.

To the extent the above information is contained on the policy’s declaration page, that page can be distributed in lieu of the summary.

The summary or declaration page must include the statement provided in Civil Code Section 1365(e)(4). This statement must be in at least 10-point boldface type.

Notice of a lapse, cancellation or non-renewal of any policy or of any change in policy shall be provided to the members by first-class mail as soon as reasonably practicable.

Within Sixty (60) days prior to beginning of fiscal year:

 Notice of Assessments, Foreclosures and Payment Plans Civil Code §1365.1
The association must distribute the notice specified in Civil Code Section 1365.1 pertaining to assessments, the association’s rights of foreclosure, payments of assessments and meetings and payment plans concerning a delinquent assessment.

WITHIN 120 DAYS AFTER THE CLOSE OF EACH FISCAL YEAR

 Review of Financial Statement Civil Code § 1365(b)
For any fiscal year in which the association’s gross income exceeds $75,000, a review of its financial statement must be prepared by a licensed California accountant and distributed to members within 120 days after the close of each fiscal year.

 Notice of Right to Receive Annual Report Corporations Code § 8321
For any fiscal year in which the association’s gross revenues are at least $10,000, it must prepare an annual report within 120 days after the end of the association’s fiscal year and notify members on an annual basis of their right to receive this report. The association must provide the report at its own expense to any member submitting a written request for a copy of the report.

The annual report must contain:
• a year-end financial statement;
• a notice stating where records of the association members’ names and addresses are stored; and
• disclosure of transactions with interested parties and of indemnification agreements.

The association must attach either the accountant’s report, if an independent accountant has reviewed or audited the financial statement, or a certificate by an officer indicating that the statement was prepared without review or audit.

MISCELLANEOUS DISCLOSURES

 Schedule of Monetary Penalties Civil Code § 1363(g)
Associations which impose fines on members for violating governing documents or association rules must distribute a schedule of the monetary penalties via first class mail or hand-delivery when the schedule is adopted or revised (recommended annually).

 Escrow/Sale of Unit Civil Code § 1368(a) and (b)
Within ten (10) days of written request from an owner, an association must provide the owner (or owner’s agent/escrow) with a copy of various documents and information so that the owner may satisfy certain disclosure obligations to a prospective buyer. Among the documents and information to be provided by the selling owner is a statement of unpaid fines and other monetary penalties, as well as a copy or summary of any notices of alleged violations of the governing documents that remain unresolved at the time of making the disclosure to the prospective buyer.

 Disclosure of Construction Defect Issues Before Suit Civil Code § 1368.5, § 1375(k)(1)(E)
Thirty (30) days before an association files a lawsuit for construction defects, it must provide notice to all owners of the defect issues, schedule a members meeting to discuss the claims and the available options, including any settlement offer from the builder, as referenced in California Civil Code Section 1375(k)(1)(E).

 Disclosure of Construction Defect Settlement Civil Code § 1375.1
Upon settling a construction defect claim with the builder, the association must so inform the members as soon as reasonably practicable, of the following:
(1) disclose what will be repaired;
(2) estimate when the defects will be repaired; and
(3) disclose any defects that may not be repaired.

 Reserve Fund Transfer Civil Code § 1365.5(d)
When an association uses or transfers any funds from its reserve account to fund litigation, it must notify the members of the transfer and of the availability of an accounting in the next available mailing to the membership.

 Litigation Expenses Civil Code § 1365.5(d)
Unless the association’s governing documents impose more stringent standards, the association shall prepare an accounting of the litigation expenses on at least a quarterly basis. The accounting shall be made available for inspection by members at the association’s office.

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Posted In: 1363 - General Powers And Duties Of Association; Meetings; Access To Records; Disciplinary Action. , 1363.05 -Common Interest Development Open Meeting Act , 1365 -Financial Documents , 1365.1 - Distribution of Written Notice by Association Prior to Beginning of Fiscal Year. , 1365.5 - Board Of Directors; Duties; Reserve Accounts. , 1366 -Regular and Special Assessments. , 1367.1 -Lien For Delinquent Assessment Recorded After January 1, 2003. , 1368 -Documents to Be Provided to Prospective Purchaser. , 1368.5 -Civil Action by Association-Notice Prior to Filing. , 1369.510 -Definitions. , 1369.590 - Annual Summary to Be Provided. , 1375 - Construction Defect Litigation; Prefiling; Dispute Rsolution Prcess. , 1375.1 -Disclosure To Association Members Of Settlement Agreement Regarding Defects. , Davis-Stirling Act Text

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As of January 1, 2006, Senate Bill 137 takes effect and the civil code sections regarding assessment collection drastically alter the collection process. In addition, the new law will prohibit associations from foreclosing on an assessment lien unless the amount of assessments owed (not including costs or interest) is $1,800 or one year of delinquency has passed on any unpaid assessments.

Our attorneys have been diligently researching and deciphering every aspect of this new law. As a courtesy, Swedelson & Gottlieb/Association Lien Services will be hosting a teleconference on Thursday, November 17, 2005, at 10:00 a.m., to explain new civil code changes. There will be time at the end of the conference for questions to be answered. Just prior to the audio conference call seminar we will send you, via email, an outline and timetable or you can download a copy at hoalawblog.com. If you cannot call in at the scheduled time, you will have the option of calling in later (within 24 hours from the scheduled call time) and listen to a recording of the conference call, questions asked and answers to questions.

To participate in our teleconference, please contact Jennie Swanson, (310) 207-2207 ext. 210 or jennie@sghoalaw.com, to receive the call-in number and password. An article on the new law is currently accessible on our blog site, hoalawblog.com, we recommend reviewing it prior to the teleconference to help formulate any questions you may want to ask.

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LAWFORHOAS.COM

SWEDELSON & GOTTLIEB LEGAL UPDATE
2005-2006 ANNUAL DISCLOSURE ISSUES
__________________________________________________________
BUDGET AND DISCLOSURE DEADLINE: DECEMBER 1, 2005

It’s November and community managers and board members are hard at work preparing their association’s budgets and other required disclosure documents.

There are important legislative changes effective in 2006, some of which will affect what disclosures are required.

As Swedelson & Gottlieb does each year, we are providing you with our updated Annual Budget and Disclosure Checklist (the “Budget”).

The provisions of the California Civil Code governing community developments require that community associations provide members with an ever-growing list of disclosure information. Much of the information required by the Civil Code must be distributed to homeowners within a 60-day window “not less than 30 days nor more than 90 days” prior to the beginning of the association’s fiscal year. (Yes, that’s the law as of 2005.)

For those community associations operating under a fiscal year that coincides with the calendar year, the Budget and other disclosures must be distributed not later than December 1, 2005.

For those community associations whose fiscal year commences on a date other than January 1, 2006, the information in this newsletter should be utilized at the applicable time by calculating the appropriate calendar deadlines prior to the commencement of the new fiscal year.

The California Civil Code also mandates the distribution of a “pro forma operating budget” which must include, among other things, information regarding the association’s expenses, income, and reserves. The Civil Code also requires that associations annually provide members with other information about the association and their membership rights. We address these requirements in our checklist which follows.

For more information, including updates on applicable statutes, you can print a copy of our newsletter explaining the changes in the law by accessing our internet blog at www.hoalawblog.com or e-mail us at Info@sghoalaw.com to request a copy be sent to you via e-mail.

The remainder of this newsletter addresses suggestions for dealing with specific issues relating to the association’s budget and disclosure obligations.

BUDGETING FOR BAD DEBT

Although we have enjoyed several years of phenomenal growth and appreciation in real estate, experts indicate that we are likely to see a softening of the real estate market beginning in 2006. While the experts also believe that at least 50% of homeowners have significant equity in their properties, a large percentage of new homeowners who have bought or refinanced within the last year, or so, have taken advantage of the creative
loans that are in the market. Many of these homeowners have either obtained 100% financing or interest-only financing and have very little equity in their properties. When their variable interest rates start to climb, it is likely that some of these homeowners will not be able to afford the payments for the financing of their condominium or house.

A recent Los Angeles Times news article pointed out the potential for many homeowners to lose their homes through foreclosure. The article quoted a woman who had recently purchased her condominium with 100% financing with a variable interest rate. The woman stated that she could barely make the payments and did not know what she would do if her interest rate increased.

Many of us who have been in real estate-related industries for many years remember when interest rates were higher, property values fell, and many homeowners found themselves in a situation where their mortgages were more than the market value of their homes. There are likely to be some homeowners who will not pay their assessments or who lose their properties to their senior lenders in foreclosure. In that instance, the associations may not be able to collect the delinquency from them. It would be prudent for associations to work a bad debt allowance into their budgets beginning with fiscal year 2006.

BUDGETING FOR COST OF DOCUMENT INSPECTION BY OWNERS

Effective July 1, 2006, new Civil Code Section 1365.2 greatly expands the types of documents homeowners are entitled to inspect. Homeowners will not be limited merely to inspecting financial reports, but will be able to see bank statements, cancelled checks, contracts and other financial documents. An association has an obligation to redact, which means to edit a document to omit confidential and/or privileged information, such as information relating to the names of employees, social security numbers, account numbers, etc. Unfortunately, the Legislature only allows an association to charge a homeowner $10.00 per hour, for a maximum of $200.00, for preparing and providing the requested documents. It is expected that some associations will require an attorney’s assistance in the proper preparation of confidential and/or privileged documents that may be requested by a homeowner.

Although associations are only allowed to charge homeowners $10.00 per hour, up to $200.00, for its to prepare requested documents, which costs include attorney services, management companies may charge the associations their extra hourly fees for their services, if required. Additional fees charged by management for these services are probably justified, and associations are encouraged to add additional monies into their budgets for these additional management services. The amount that should be budgeted depends upon the size of the association and the history of the association’s homeowners’ requests for documents.

ANTICIPATING SPECIAL ASSESSMENTS

The California Civil Code also details what is required to be stated or presented in an association’s budget and financial reports. In addition to the budget and other required financial disclosures, the Code requires that associations, through their boards of directors, prepare a statement as to whether “the association 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.” The Civil Code now imposes greater disclosure obligations regarding reserves and the precise amount of increased assessments for the association’s fiscal year.

Associations need to take a good, hard look at their proposed budgets and anticipated expenses for the new fiscal year and determine whether any special assessments will be required.

This has been an issue with several associations where the board knew, or should have known, of the need for a special assessment to fund the cost of a common area repair, or replacement project, for which there were no monies in reserve, but failed to advise the members.

Many associations are purposely choosing to under-fund reserves and rely on special assessments for common area repair or replacement projects under the theory that the homeowners who will benefit immediately from the repair should pay for it. While such a practice may be in technical compliance with Civil Code requirements because an association is not required to establish reserves, the 2005 changes to the Civil Code require that the board of directors carefully review what projects it believes will need to be undertaken and determine whether the association has sufficient funds or will require a special assessment and make the appropriate disclosure.

Some associations are disguising assessment increases by calling them “special assessments.” Rather than increase the regular assessment, some associations are levying special assessments of a set amount, per month, to fund repair programs or reserves when, in reality, this money should be part of the regular assessments. Such a practice could be challenged by homeowners. In order to be in compliance with Civil Code mandates, it is appropriate to present this information in the budget.

LEAKS, MOLD, AND DEFECTS

When the budget is being finalized, some associations are also uncovering issues, such as water leaks, mold and construction defects, of which the board has knowledge. Even if the board is not anticipating making any major repairs to deal with the problems (although these days, they probably should), disclosure of these issues should be made. Technically, it could be said that the issues fall between the cracks in the California Civil Code and a line item for the repairs should either be included as a reserve item or the board should disclose, at some point, that they anticipate a special assessment to repair or fix the problems. To avoid conflict, the board should make full disclosure of what major repair issues it is dealing with, especially if the board anticipates that the cost of repair will affect the association’s budget. Full financial disclosure should be made so that the board is representing the association’s true financial condition.

The failure to disclose the cost of repair for defects, water damage or mold repair projects continues to be a problem for associations that anticipate such work. Although not every expenditure can be calculated or anticipated in advance, if a board is going to borrow from reserves (that is, use reserve money for work not designated as a reserve item), then it must disclose that it is borrowing from the reserves, along with the board’s plan for repayment of the borrowed reserve money.

MOLD AND INSURANCE DEDUCTIBLES

Community associations should develop and distribute a “deductible policy” setting forth the association’s policy for dealing with insurance claim deductibles. The policy should state, for example, that, if the claim originates as a result of an element that is the homeowner’s responsibility, such as a broken flex line or leaking sink fixtures, then the homeowner is responsible for the deductible. If the cause of the damage is related to an element over which the association has maintenance and repair responsibilities, the association would be responsible for the deductible. Such a policy can be included with the insurance disclosures and reflect the amount of the deductible(s).

If the association adopts a deductible policy that includes a significant deductible, it should be disclosed to the members along with a reminder to homeowners to obtain their own insurance policies to cover any gaps in the association’s coverage.

Associations should adopt a mold policy in addition to their maintenance and repair policies. Often associations wind up in disputes with homeowners over who is responsible for what maintenance and repairs.

One component of the policy is that homeowners should be apprised that, if they do not report water damage claims within twenty-four (24) hours, the association cannot be held responsible for any resulting mold because the association was not given a timely

opportunity to remediate the water damage before mold developed.

DISCLOSURE OF ALLEGED VIOLATIONS
OF GOVERNING DOCUMENTS

There is another important disclosure that some association boards are failing to make: escrow notification of alleged violations of association governing documents. Although not part of the annual disclosure obligations, not only can this disclosure assist the association in CC&R and Rules and Regulation enforcement, but the association’s failure to make such a disclosure may adversely effect an association’s enforcement rights.

Along with all other documents delivered to escrow on behalf of an owner, the California Civil Code requires associations to provide a copy or summary of any notice previously sent to an owner that sets forth any alleged violations of the governing documents which remain unresolved at the time of the request. This means that associations are obligated to disclose to prospective owners any CC&Rs or Rules and Regulation violations alleged to have occurred on a homeowner’s property. Disclosure may compel the seller to correct the violation, as the prospective buyer will not want to inherit the problem.

NEW DISCLOSURES FOR 2006

ASSESSMENTS AND FORECLOSURES NOTICE OF SECONDARY ADDRESS AND PAYMENTS

Effective in January 2006, the Civil Code will be revised and the process of collecting assessments will substantially change. In addition to restricting when and how an association can lien and foreclose, the new law requires new disclosures. See the checklist that follows.

For a copy of an article detailing the changes, please contact us at Info@sghoalaw.com.

NOTICE

As of January 1, 2006, each association is required to provide annually an updated notice to the homeowners that outlines some of the rights and responsibilities of common interest development property owners and the associations. It is suggested the notice be provided with the association’s other mandatory disclosures.

SECONDARY ADDRESS

New for 2006, the Civil Code requires that associations notify homeowners of their right to submit a secondary address to the association for the purpose of collection. Such notification must be sent to the homeowners and associations should likely not wait until 2006, but rather, provide this notice at the same time that the other 2005-2006 disclosures, budget, etc., are distributed.

Although the Civil Code only requires that associations notify homeowners of their right to provide secondary addresses for the purpose of collection notices, Civil Code Section 1365.1(c) also gives homeowners the right to give a secondary address for general notices and obligates the associations to send all correspondence and legal notices to the secondary address. Civil Code Section 1367.1 requires that secondary address notices for collection purposes be mailed in a manner that confirms receipt whereas, Civil Code Section 1365.1 provides that secondary address notices may be sent by facsimile or mail, with no requirement of confirmation of receipt. It is not clear whether this discrepancy is the result of poor drafting on the part of the California Legislature or whether the Legislature intended to make a distinction between notifications for purposes of collection and other notices, although we believe it is the former.

For a copy of this newsletter in PDF format to copy and distribute to clients and associates, please contact us at Info@sghoalaw.com.

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Posted In: 1365.1 - Distribution of Written Notice by Association Prior to Beginning of Fiscal Year. , 1365.2 - Inspection of Records and Restrictions of Use. , 1367.1 -Lien For Delinquent Assessment Recorded After January 1, 2003. , Davis-Stirling Act Text

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That’s right, it’s budget time again.

Community managers and Board members are hard at work preparing their associations’ budgets and other required disclosure documents. As we do each year, Swedelson & Gottlieb is providing you with our 2004 Annual Disclosure Checklist.

The Checklist is in Adobe Acrobat PDF document format and can be downloaded by clicking on the following link. Download 2004ADC.pdf

Please contact our office at 800.372.2207 if you have any difficulties with the download.

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Posted In: Davis-Stirling Act , Davis-Stirling Act Text

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As you hopefully know by now, as of July 1, 2006, the way all California community associations conduct elections and membership votes was changed. Among the major changes is the requirement that all elections and certain other membership votes be held by secret ballot pursuant to operating rules. This includes votes for the selection and removal of members of the board, amendments to the governing documents, votes regarding assessments, and the grant of exclusive use common area. In addition, the role of the inspectors of election has grown significantly, and the use of proxies, while still permitted, may not be as prevalent as in the past. This new law affects all community associations, irrespective of their size. Failure to comply with the new law could subject an association to a challenge in small claims court. Because this new law is so complex, we are receiving a lot of questions. In response, we present the following frequently asked questions:

1. Our Association has always had secret ballots; can't we just keep on holding our annual elections as we have been doing for years?

The simple answer is no. The new election law was adopted because Senator Battin from the Coachella Valley somehow came to believe that fraud was rampant within association elections. This was news to us. If an association does not comply with the new law, which includes, among other things, the adoption of election rules and procedures, which specify procedures for voting by secret ballot, designating and detailing the responsibilities of the inspector(s) of election, the voting results can be challenged and a fine imposed on the association. We do not believe that the new election law is required as we certainly do not see rampant fraud at associations, but it is the law and if you do not fully comply, there are potential serious consequences.

2. What is required for the election rules and procedures - do they need to be approved by the members?

New Civil Code Section 1363.03 provides that the new election rules and procedures must provide, among other things, that the association allow for equal access for all candidates or members to advocate their point of view in all association media (via newsletter, websites, etc.); that the association provide access to common area meeting space at no cost to all candidates and members who advocate a point of view during a campaign; set forth the qualifications of candidates for the board; set procedures for the nomination of candidates; set qualifications for voting; establish a method for selecting the inpector(s) of election and who can serve as an inspector of election. This new law specifically provides that these rules must be treated like other "operating" rules and sent out to the members for their comment thirty (30) days before being adopted by the board of directors. However, regardless of member comment, it is the board's decision whether to adopt the rules; the members do not vote on them.

3. What happens if we don't have election rules and procedures?

The failure to adopt election rules and procedures means that actual results of the voting can be contested in small claims court.

4. Do these voting rules and procedures only apply to the election of board members or to voting on other matters as well?

The new law provides a list of different votes that are taken by the members in accordance with the election rules - the election or removal of the board members, voting regarding assessments, amendment of the governing documents, and the grant of exclusive use common area.

5. We are a small association of only 10 units. My board does not want to have to make rules or follow the new law regarding secret ballots. Can a majority of the homeowners decide that we don't want to follow this new law?

Unfortunately, Senator Battin (and the California legislature) did not believe that there was any need to differentiate between larger and smaller associations; all community associations subject to the Davis-Stirling Act must follow the new election law. Any homeowner that wants to challenge the results of an election may do so by going to small claims court, and a small claims judge not only has the power to invalidate the election results, but also has the power to impose a fine of up to $500 per violation. Although there may not be any homeowners today that even know about these new election laws, it only takes one disgruntled homeowner to file a small claims action involving the results of your election. This does not even take into consideration the question that if the results of the election are invalidated, is there a board of directors in place to make decisions, sign checks, etc.?

6. What exactly has to be provided in the upper left hand corner of the outer secret ballot envelope?

The following must appear in the upper-left hand corner of the outer secret ballot envelope:

• Written or pre-printed voter’s name
• Written or pre-printed voter’s address or separate interest identifier that entitles him or her to vote (such as parcel, unit or lot number - can simply be the voter's full address)
• Voter’s signature

7. What if a homeowner doesn't know their parcel or lot number?

By recent amendments to Civil Code Section 1363.03 (effective 7/1/06), it is no longer necessary that an owner place their parcel or lot number as long as the voter can be identified from the information provided (address and unit number may be sufficient).

8. Does everyone need to fill out a candidacy notice, including existing Board members who are running for reelection?

Some election rules provide for candidacy notices to be sent out to the membership, and the answer would depend on how your election rules are drafted since the code does not address candidacy notices. Candidacy notices are just one way to provide equal access for those persons running for election. It is a good idea to provide in your election rules that all candidates, regardless of whether they are running for reelection, must fill out a candidacy notice.

9. Should the inner envelope say only "SECRET BALLOT" or does it also need to include an address?

The inner envelope should say no more than: "Secret Ballot, to be opened by the Inspector of Election only." It should not be marked with any identifying information by anyone.

10. Do we need to send homeowners a proxy? How do we let homeowners know that they can give a proxy to someone and what needs to be on it?

If the governing documents don’t require the Association to send a proxy, you are not obligated to do so. The requirements for proxies are set forth in the Corporations Code and should be addressed in the election rules. The Inspector(s) of Election validates proxies. All proxies must be exchanged for Secret Ballots because the proxy itself can’t be voted.

11. Is it 1 Inspector under 100 units and 3 for 100 + units?

No, it's one or three at the Board’s discretion. If the Board fails to designate the Inspector(s), the members may vote on the appointment.

12. What if five members are up for election, all five want to run again and no candidacy notices are received by the deadline? What is the use of having nominations from the floor if a member can't change their vote once it has been mailed?

Recently amended Civil Code Section 1363.03 makes clear that nominations may be allowed from the floor if provided for in the rules and not prohibited by the governing documents. This helps in cases where nominations are not received in advance of the meeting. A member may wish to refrain from voting until the meeting itself in order to ensure the member knows all of the choices available. The member shouldn't mail their ballot unless they are sure of their vote. Another option is to write in a candidate that is not yet nominated, mail the ballot, and then nominate that candidate from the floor at the meeting. It is obviously an advantage for a candidate to return the candidacy notice within the time provided so that candidate is on the ballot. Also, elections by acclamation are no longer allowed (a vote must still be taken where the number of candidates is equal to the number of open board positions).

13. Do only members not planning on attending the meeting need to mail in their secret ballots? The members attending can bring them in but they must be in the 2 sealed envelopes...correct?

Yes. But mailing in your ballot does not mean you cannot attend the meeting. Members can complete their secret ballots and seal them at the meeting. We recommend the board, manager or Inspector(s) bring extra blank secret ballots and envelopes to the meeting in case someone lost their voting materials, etc. and needs a replacement.

14. What if quorum is not achieved?

Remember that even secret ballots received by mail count as members present at the meeting for quorum purposes, so be sure to count them towards quorum. Also, the Inspector(s) should not open any envelopes until quorum is satisfied (if quorum is not satisfied, move to adjourn the meeting and check to see if your governing documents have a provision for reduced quorum at an adjourned meeting).



We encourage all associations to comply with the new law. If you would like more information, there are additional articles on this blog and our website, or you may e-mail our office and we will be glad to forward you additional documents.

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Posted In: 1363.03 -Adoption of Rules; Election; Inspectors of Election; Procedures , Davis-Stirling Act Text , Disclosure/Civil Code Compliance

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The California State Legislature has passed many code sections or statutory laws that govern the formation and operation of condominium and homeowner associations. The Davis-Stirling Common Interest Development Act (Civil Code §§ 1350-1378) was first made law in 1986 and was intended to bring together in one area of the Civil Code the most important statutory laws regulating California community associations. The Act has been amended more than 45 times since enacted. These important code sections are set out below with explanations and articles.

Posted by David C. Swedelson | Permalink | Email This Post | Print this Post

Posted In: Davis-Stirling Act Text

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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

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Posted In: Assessment Collection , Davis-Stirling Act Text

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(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.

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Posted In: 1378 - Required Architectural Review Procedures; Exemptions. , Davis-Stirling Act Text

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(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.

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Posted In: 1376 - Installation Of Video And Television Antenna. , Davis-Stirling Act Text

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(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.

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Posted In: 1375.1 -Disclosure To Association Members Of Settlement Agreement Regarding Defects. , Davis-Stirling Act Text

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(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.

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Posted In: 1375.05 - Contruction Defect Litigation; Complaint; Inspection; Expert Witnesses. , Davis-Stirling Act Text

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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.

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Posted In: 1374 - Inapplicability of Title to Development Without Common Areas. , Davis-Stirling Act Text

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(a) The following provisions do not apply to a common interest development that is limited to industrial or commercial uses by zoning or by a declaration of covenants, conditions, and restrictions that has been recorded in the official records of each
county in which the common interest development is located:

(1) Section 1356.
(2) Article 4 (commencing with Section 1357.100) of Chapter 2 of Title 6 of Part 4 of Division 2.
(3) Subdivision (b) of Section 1363.
(4) Section 1365.
(5) Section 1365.5.
(6) Subdivision (b) of Section 1366.
(7) Section 1366.1.
(8) Section 1368.
(9) Section 1378.

(b) The Legislature finds that the provisions listed in subdivision (a) are appropriate to protect purchasers in residential common interest developments, however, the provisions may not be necessary to protect purchasers in commercial or industrial developments since the application of those provisions could result in unnecessary burdens and costs for these types of developments.

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Posted In: 1373 - Provisions Inapplicable to Industrial Developments; Legislative Findings. , Davis-Stirling Act Text

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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.

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Posted In: 1372 - Construction of Local Zoning Ordinances. , Davis-Stirling Act Text

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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.

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Posted In: 1371 - Presumption Reguarding Boundaries of Condominium Units. , Davis-Stirling Act Text

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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.

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Posted In: 1370 - Construction of Deed, Declaration or Condominium Plan; Severability. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.590 - Annual Summary to Be Provided. , Davis-Stirling Act Text

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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.

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Posted In: 1369.580 - Determination of Fees and Costs. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.570 - Stipulations For ADR After Lawsuit. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.560 -Filing Certification Of Compliance. , Davis-Stirling Act Text

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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.

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Posted In: 1369.550 -Tolling of Time Limitation. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.540 -Completion of Resolution Process Within 90 Days. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.530 -Service of Request for Resolution; Contents of Request. , Davis-Stirling Act Text

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(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.

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Posted In: 1369.520 -ADR Required Prior To Filing An Enforcement Action. , Davis-Stirling Act Text

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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.

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Posted In: 1369.510 -Definitions. , Davis-Stirling Act Text

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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.

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Posted In: 1369 -Lien For Labor And Materials. , Davis-Stirling Act Text

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(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.

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Posted In: 1368.5 -Civil Action by Association-Notice Prior to Filing. , Davis-Stirling Act Text

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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.

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Posted In: 1368.3 -Standing of Association in Specific Matters. , Davis-Stirling Act Text

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(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.

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Posted In: 1368.1 -Unreasonable Restrictions on Marketability or Property Void. , Davis-Stirling Act Text

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(a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, provide the following to the prospective purchaser:
(1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated.
(2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3.
(3) A copy of the most recent documents distributed pursuant to Section 1365.
(4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association's current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1.
(5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest.
(6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made.
(7) A copy of the latest information provided for in Section 1375.1.
(8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision.

(b) Upon written request, an association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest with a copy of the requested items specified in paragraphs (1) to (8), inclusive, of subdivision (a). The items required to be made available pursuant to this section may be maintained in electronic form and requesting parties shall have the option of receiving them by electronic transmission or machine readable storage media if the association maintains these items in electronic form. The association may charge a reasonable fee for this service based upon the association's actual cost to procure, prepare, and reproduce the requested items.

(c) (1) Subject to the provisions of paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following:
(A) An amount not to exceed the association's actual costs to change its records.
(B) An amount authorized by subdivision (b).
(2) The amendments made to this subdivision by the act adding this paragraph do not apply to a community service organization or similar entity that is described in subparagraph (A) or (B):
(A) The community service organization or similar entity satisfies both of the following requirements:
(i) The community service organization or similar entity was established prior to February 20, 2003.
(ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development.
(B) The community service organization or similar entity satisfies all of the following requirements:
(i) The community service organization or similar entity is not an organization or entity described in subparagraph (A).
(ii) The community service organization or similar entity was established and received a transfer fee prior to January 1, 2004.
(iii) On and after January 1, 2006, the community service organization or similar entity offers a purchaser the following payment options for the fee or charge it collects at time of transfer:
(I) Paying the fee or charge at the time of transfer.
(II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the community service organization or similar entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to transfer.
(3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance.

(d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonable attorneys' fees.

(e) Nothing in this section affects the validity of title to real property transferred in violation of this section.

(f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134.

(g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association.

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Posted In: 1368 -Documents to Be Provided to Prospective Purchaser. , Davis-Stirling Act Text

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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.

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Posted In: 1367.5 -Reversal and Release of Lien Recorded in Error; Costs. , Davis-Stirling Act Text

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(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.

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Posted In: 1367.4 - Limitations on Collection of Delinquent Assessments. , Davis-Stirling Act Text

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(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.

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Posted In: 1367.1 -Lien For Delinquent Assessment Recorded After January 1, 2003. , Davis-Stirling Act Text

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(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.

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Posted In: 1367 -Lien for Assessments; Enforcement. , Davis-Stirling Act Text

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(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.

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Posted In: 1366.2 -Collection of Assessments; Recording Of Identifying Statement. , Davis-Stirling Act Text

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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.

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Posted In: 1366.1 -Prohibition Against Excessive Assessments or Fees. , Davis-Stirling Act Text

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(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.

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Posted In: 1366 -Regular and Special Assessments. , Davis-Stirling Act Text

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(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.

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Posted In: 1365.9 - Liability For Common Areas; Action Against Association; Insurance Requirements. , Davis-Stirling Act Text

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(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.

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Posted In: 1365.7 - Liability Of Volunteer Officer Or Director; Criteria; Limitations. , Davis-Stirling Act Text

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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.

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Posted In: 1365.6 - Application Of Corp. Code § 310. , Davis-Stirling Act Text

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(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.

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Posted In: 1365.5 - Board Of Directors; Duties; Reserve Accounts. , Davis-Stirling Act Text

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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.

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Posted In: 1365.3 - Association Report Required To Meet Standards Of Corp. Code § 5012 , Davis-Stirling Act Text

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(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.

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Posted In: 1364 - Responsibility Of Maintenance of Common Interest Development; Access to Telephone Wiring. , Davis-Stirling Act Text

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

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Posted In: 1363.850 -Notice to Include Description of Process , Davis-Stirling Act Text

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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.

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Posted In: 1363.830 -Requirement for Procedure , Davis-Stirling Act Text

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(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).

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Posted In: 1363.820 -Development of Fair, Reasonable and Expeditious Procedures , Davis-Stirling Act Text

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(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.

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Posted In: 1363.810 -Application of Article , Davis-Stirling Act Text

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(a) To assist with the identification of common interest developments, each association, whether incorporated or unincorporated, shall submit to the Secretary of State, on a form and for a fee not to exceed thirty dollars ($30) that the Secretary of State shall prescribe, the following information concerning the association and the development that it manages:
(1) A statement that the association is formed to manage a common interest development under the Davis-Stirling Common Interest Development Act.
(2) The name of the association.
(3) The street address of the association's onsite office, or, if none, of the responsible officer or managing agent of the association.
(4) The name, address, and either the daytime telephone number or e-mail address of the president of the association, other than the address, telephone number, or e-mail address of the association's onsite office or managing agent of the association.
(5) The name, street address, and daytime telephone number of the association's managing agent, if any.
(6) The county, and if in an incorporated area, the city in which the development is physically located. If the boundaries of the development are physically located in more than one county, each of the counties in which it is located.
(7) If the development is in an unincorporated area, the city closest in proximity to the development.
(8) The nine-digit ZIP Code, front street, and nearest cross street of the physical location of the development.
(9) The type of common interest development, as defined in subdivision (c) of Section 1351, managed by the association.
(10) The number of separate interests, as defined in subdivision (l) of Section 1351, in the development.

(b) The association shall submit the information required by this section as follows:
(1) By incorporated associations, within 90 days after the filing of its original articles of incorporation, and thereafter at the time the association files its biennial statement of principal business activity with the Secretary of State pursuant to Section 8210 of the Corporations Code.
(2) By unincorporated associations, in July of 2003, and in that same month biennially thereafter. Upon changing its status to that of a corporation, the association shall comply with the filing deadlines in paragraph (1).

(c) The association shall notify the Secretary of State of any change in the street address of the association's onsite office or of the responsible officer or managing agent of the association in the form and for a fee prescribed by the Secretary of State, within 60 days of the change.

(d) On and after January 1, 2006, the penalty for an incorporated association's noncompliance with the initial or biennial filing requirements of this section shall be suspension of the association's rights, privileges, and powers as a corporation and monetary penalties, to the same extent and in the same manner as suspension and monetary penalties imposed pursuant to Section 8810 of the Corporations Code.

(e) The Secretary of State shall make the information submitted pursuant to paragraph (4) of subdivision (a) available only for governmental purposes and only to Members of the Legislature and the Business, Transportation and Housing Agency, upon written request. All other information submitted pursuant to this section shall be subject to public inspection pursuant to the California Public Records Act, Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code. The information submitted pursuant to this section shall be made available for governmental or public inspection, as the case may be, on or before July 1, 2004, and thereafter.

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Posted In: 1363.6 -Information to Be Submitted By Association to Secretary of State , Davis-Stirling Act Text

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(a) The articles of incorporation of a common interest development association filed with the Secretary of State on or after January 1, 1995, shall include a statement, which shall be in addition to the statement of purposes of the corporation, that does all of the following:
(1) Identifies the corporation as an association formed to manage a common interest development under the Davis-Stirling Common Interest Development Act.
(2) States the business or corporate office of the association, if any, and, if the office is not on the site of the common interest development, states the nine-digit ZIP Code, front street, and nearest cross street for the physical location of the common interest development.
(3) States the name and address of the association's managing agent, as defined in Section 1363.1, if any.

(b) The statement of principal business activity contained in the annual statement filed by an incorporated association with the Secretary of State pursuant to Section 1502 of the Corporations Code shall also contain the statement specified in subdivision (a).

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Posted In: 1363.5 -Article of Incorporation-Disclosure Information , Davis-Stirling Act Text

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(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.