Important California HOA, condo, coop legislation updates (Sept. 2018)

By Deborah Goonan, Independent American Communities

Updated September 6, 2018 7:22 PM

The 2018 legislation session ended with some good, and some not so good new laws for Californians residing in common interest developments.

The following 4 bills are currently enrolled, awaiting approval of Governor Jerry Brown.

AB 2912 passed with near unanimous support from both houses of the Legislature. The bill creates greater accountability for both association board (trustee) members and managing agents for association-governed communities, including the following:

  • Fidelity bond coverage requirements for the association, to guard against losses due to dishonesty of board members or community association management companies
  • Requires a management agent to deposit all association funds in an interest-bearing account, and requires written approval from the board for any transfer of funds in excess of $10,000 or 5% of the association’s combined accounts, whichever is lower
  • Requires association board members to review financial documents and bank statements on a monthly basis
Read and track AB 2912:

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB2912

underside of wood balcony

SB 721 began as comprehensive legislation that would have required owners and landlords of multifamily buildings, including condominium associations, to conduct regular inspections of “exterior elevated elements” such as balconies and catwalks. The bill was written in response to a tragic balcony collapse that occurred in Berkeley in 2015.  That incident resulted in the death of 6 exchange students from Ireland. The cause of the balcony failure was determined to be wood rot that occurred due to moisture infiltration behind the siding of the building, resulting in hidden damage to the balcony’s support beams.

SB 721 was opposed by trade groups and condominium homeowners alike, due to the cost of inspections, which would have required a costly, invasive procedure to examine the interior structure of 15% of elevated elements every 6 years.

A few weeks ago, in response to widespread opposition, the Legislature amended the bill to remove all references to condominium associations from the bill. The bill is currently enrolled, but now applies only to apartment buildings and future apartment-to-condominium conversions.

For now, the issue of how to best ensure safety of balconies and other exterior elevated elements in condominium buildings remains unresolved.

Read and track SB 721:

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB721

Ballot box

SB 1265 and SB 1128

SB 1265, legislation, sponsored by homeowner advocacy group, California Center for Homeowner Association Law (CCHAL, http://www.calhomelaw.org) was approved in the Assembly 46-27 and in the Senate 27-11.

Several other supporters of SB 1265 include the American Civil Liberties Union, California Alliance for Retired Americans, Nonprofit Housing Association of Northern California, Citizens for Constitutional Local Government, El Dorado Institute, Inc., Greater Sacramento Urban League, and Insurance Commissioner Dave Jones.

From its initial introduction, the bill was strongly opposed by trade group, Community Associations Institute, California Legislative Action Committee. (CAI-CLAC)

As explained in the following article by the bill’s sponsor, Senator Bob Wieckowski, SB 1265 is intended to make the election process more transparent and fair, and to prevent incumbent boards from using various tactics to remain in power or hand-pick their successors.

Assembly approves Wieckowski bill to rein in HOA election abuses

August 28, 2018
SACRAMENTO – The state Assembly today approved a bill by Senator Bob Wieckowski (D-Fremont) to rein in election abuses in California’s more than 55,000 homeowner associations (HOA). Senate Bill 1265 now heads back to the Senate for a concurrence vote before being sent to Governor Brown.

“Today’s Assembly approval sends a clear signal that the Legislature recognizes not only the critical role HOA boards play, but the impact they have on millions of Californians’ homes and pocketbooks,” said Sen. Wieckowski, a member of the Senate’s Housing and Transportation Committee. “By adding safeguards to the system, SB 1265 will restore fairness and integrity to the board election process and end abuses in communities where board members are more interested in maintaining power than faithfully following the association’s covenants, conditions, and restrictions.”
Read more:

http://sd10.senate.ca.gov/news/2018-08-28-assembly-approves-wieckowski-bill-rein-hoa-election-abuses

Some highlights of the bill:

  • Requires that no member of the association may be denied a ballot, for any reason
  • Requires that a board candidate must be a member of the association, but
    • A member is disqualified to run for election to the board, if s/he has been convicted of a felony involving financial crime within the past 20 years,
  • An association’s governing documents may allow the following disqualifications for board candidacy:
    • Being a member of the association for less than one year
    • Being a co-owner of a unit (in other words, the bylaws can state that only one unit owner can serve on the board at a time)
    • Not being current on regular assessments, however, the association must first allow for Internal Dispute Resolution (IDR) to determine the validity of the debt. And, as long as the member agrees to a payment plan, and pays accordingly, s/he cannot be disqualified as a board candidate.
  • Prohibits a the use of an election monitor with a conflict of interest due to a business relationship with the association
  • Allows members to dispute election procedures in court, and to seek reimbursement of attorney fees it they prevail. The court must void an election if the process was improper, unless the association can show that errors in process were unintentional, or did not affect the outcome of the election.
Vote  button green
(Morguefile.com free image)

SB 1128, sponsored by Senator Richard Roth, and supported by CAI-CLAC was originally drafted to allow association boards to declare election by acclamation, when the number of candidates is equal to or less than the number of open seats on the board.

The original bill did not contain any of the amendment proposed in SB 1265.

The election by acclamation provision of SB 1128 was opposed by CCHAL, and described by the organization as a way for incumbent boards to “cancel elections.”

The bill was ultimately amended to permit election by acclamation only if election procedures, as proposed in SB 1265 (and incorporated into SB 1128), are properly followed. In addition, members must be notified of the possibility of election by acclamation, at least 30 days prior to the close of the nomination period.

If the number of candidates at the end of the nomination period does not exceed the number of open seats, the association board is required to pass a resolution for election by acclamation in 28 days, unless members nominate additional candidates within 21 days. If additional qualified candidates come forward within 21 days, the association must then conduct an election according to California statute.

Oddly enough, after provisions of SB 1265 were added to SB 1128, CAI-CLAC decided to oppose the very bill they originally sponsored.

SB 1128 ultimately passed both chambers with unanimous consent.

Both bills await action by Governor Brown.

CCHAL is asking homeowners to contact the Governor to support SB 1265. CAI-CLAC and several law firms are circulating emails to their members, asking the Governor to veto both bills.

CAI emails make several misleading claims about both bills, claims which are completely unsupported by the plain language of both SB 1265 and SB 1128.

For example, with regard to CAI’s claims that new election procedures “allow members to photocopy voters’ signatures and to review and copy proxies,

here’s what SB 1265 and SB 1128 actually say:

5125.

The sealed ballots, signed voter envelopes, voter list, proxies, and candidate registration list shall at all times be in the custody of the inspector or inspectors of elections or at a location designated by the inspector or inspectors until after the tabulation of the vote, and until the time allowed by Section 5145 for challenging the election has expired, at which time custody shall be transferred to the association. If there is a recount or other challenge to the election process, the inspector or inspectors of elections shall, upon written request, make the election materials available for inspection and review by an association member or the member’s authorized representative. Any recount shall be conducted in a manner that preserves the confidentiality of the vote.

“Association election materials” means returned ballots, signed voter envelopes, a list of parcel numbers and voters to whom ballots were to be sent, proxies, and the candidate registration list. Except for the purposes of this article, signed voter envelopes may be inspected but shall not be copied.

Another CAI e-mail spreads more misleading statements about SB 1128, stating that “Senate Bill 1128 (Roth), was amended to include Senate Bill 1265’s oppressive restrictions on an association’s ability to prevent felons and others from serving on the Board. It will also allow associations to elect members to the board by acclamation, but at the cost of requiring associations to allow felons and members who don’t pay special assessments to run for the Board.

Here’s what both bills actually say about felons and assessments: (emphasis added in bold)

b) An association shall disqualify a person from a nomination as a candidate pursuant to either of the following:
(1) An association shall disqualify a nominee for not being a member of the association at the time of the nomination.
(2) An association shall disqualify a nominee if, within the past 20 years, the person has been convicted of a felony involving accepting, giving, or offering to give, a bribe, the embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of those crimes. For purposes of this paragraph, “conviction of a felony” includes a conviction of a felony in this state and a conviction under the laws of any other state, the United States, or any foreign government or country of a crime that, if committed in this state, would be a felony, and for which the person has not received a pardon from a person or entity authorized to grant the pardon.
(c) An association may disqualify a person from nomination as a candidate pursuant to any of the following:
(1) Through its bylaws only, and subject to paragraph (2) of subdivision (d), an association may require a nominee for a board seat, and an incumbent board director during his or her board tenure, to be current in the payment of regular assessments, which are consumer debts subject to validation. If an association requires a nominee to be current in the payment of regular assessments, it shall also require an incumbent board director to be current in the payment of regular assessments.
(2) Through its bylaws only, an association may prohibit more than one person with joint ownership interests in the same separate interest parcel from serving as board directors at the same time, subject to the following:
(A) The board may disqualify a person from nomination as a candidate pursuant to this paragraph only in cases where that person, if elected, could not serve on the board without violating the above prohibition.
(B) Notwithstanding subparagraph (A), the board may disqualify from nomination as a candidate a person who is a joint owner of a parcel if one of the other joint owners is already properly nominated for the current election, and none of the joint owners is an incumbent board director.
(3) Through its bylaws only, an association may disqualify a nominee if that person has been a member of the association for less than one year.
(d) Before disqualifying a nominee for alleged nonpayment of regular assessments, the association shall provide the nominee the opportunity to engage in the internal dispute resolution process set forth in Article 2 (commencing with Section 5900) of Chapter 10.
(1) A disqualifying debt includes regular assessments and interest owed the association. Fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
(2) The nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
(A) The nominee has paid the regular assessment under protest pursuant to Section 5658.
(B) The nominee has entered into a payment plan pursuant to Section 5665.
(C) Upon request by the nominee to engage in the internal dispute resolution process, the association fails to convene a timely session of the process, or the nominee and the association are engaged in the process at the time of the deadline for nominations.
(D) It is determined, at the conclusion of the internal dispute resolution process, that the nominee does not owe a disqualifying debt.

 

 

In case there’s any doubt, here are the links to the full text of both bills. 

Read and track SB 1265:

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB1265

Read and track SB 1128:

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB1128

The vigorous debate of these two bills, and substantial amendments in the Legislature, resulted in some additional protections for homeowner rights to vote and run for election to their association’s board, but, with the passage of SB 1128, the Legislature did not entirely eliminate the possibility that incumbent boards can avoid an election altogether.

Now that both bills are presented before the Governor, homeowner advocacy and trade groups await the final outcome as to which bill — if any — will become law in California.

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