The California Association of Realtors (CAR) Seeks Legislation to Limit Fees Charged By Management

CAR has let it be known that it plans to introduce a bill in 2011 that will effectively restrict or limit the fees that community association management companies now charge for such things as ownership transfers and compliance with Civil Code Section 1368. This is likely going to be a very contentious issue, as these are fees that the owners of the specific property that is making the request should be required to pay directly to management. If CAR’s legislation were to become effective, it is likely that owners in escrows would only be required to pay the actual costs of duplication, etc. As a consequence, the associations would themselves end up paying the fees for the manager’s services, which would in turn be paid by all owners. How can community associations budget for these fees when they have no idea how many requests they will get in a fiscal year? Why should all owners pay for a service that benefits only one owner? This proposed legislation will negatively impact management and associations.

For example, consider the result that occurred when the legislature amended Civil Code Section 1365.2 a few years ago. That code section deals with an association’s obligation to provide owners with records. Civil Code Section 1365.2 limits the fees and charges that can be charged to the requesting owner. As a result, the additional fees charged by the manager for finding, compiling and preparing the requested association records for production ends up getting paid by all owners and not the owner that made the request. Management companies are entitled to be paid for these extra services, and the payment for these services should come from the owner requesting the service.

This proposed legislation seeks to overturn the 2007 Court of Appeal decision in Berryman v. Merit Property Management that held that the documentation and transfer fees charged by management are products of market forces and are not subject to statutory control.

For more information, see an informational statement prepared by the California Association of Community Managers (CACM) and a more detailed summary of the Berryman decision.

Posted by SwedelsonGottlieb Partner David C. Swedelson, who is also a member of CACM’s Legislative Affairs Committee

Contact Information