2009 California HOA Legislative Update

With the end of year upon us, I thought it would be a good time to post a summary some of the laws enacted in California during 2009 that impact our local homeowners associations. This is not a complete list of all new legislation, but rather brief summaries of the statutes I believe will have the biggest impact on California HOAs. The full impact of 2009 California legislation on an HOA will require a more detailed analysis. Any HOA that has questions on the impact of a new law should consult with their corporate counsel.

Just a BillWith the end of year upon us, I thought it would be a good time to post a summary some of the laws enacted in California during 2009 that impact our local homeowners associations. This is not a complete list of all new legislation, but rather brief summaries of the statutes I believe will have the biggest impact on California HOAs. The full impact of 2009 California legislation on an HOA will require a more detailed analysis. Any HOA that has questions on the impact of a new law should consult with their corporate counsel.

1. AB 313 (Fletcher) Assessments

This statute will allow those HOAs whose declarations allow assessments to be based on the assessed value of the individual separate interests to continue to assess in this fashion, but will prohibit other existing and newly formed HOAs to do so.

2. AB 899 (Torres) Disclosures

This statute imposes three new requirements on HOAs. The first requirement is that the title of the Assessment and Reserve Funding form disclosure must now include the ending date of the fiscal year for which it was prepared, and the form must disclose the rate of return and inflation rate assumptions used by HOA in its reserve planning.

The second requirement this statute places on HOAs relates to agreements by members to receive delivery of documents via email, facsimile or other electronic means.  Such agreements must now comply with consumer consent and disclosure requirements of California Corporations Code section 20, and the Federal E-Sign Statute, 15 U.S.C. section 7001(c)(1).

Lastly, this statute adds a new section to the Davis-Stirling Act, Civil Code, section 1363.005, which requires every Association to distribute, upon request by a member, a document disclosure index identifying the disclosures provided by the HOA, along with a reference to the Civil Code section requiring that disclosure.

3. AB 1061 (Lieu) Water-Efficient Landscapes

This statute is one I have written about before here on HOA Brief. This statute amends section 1353.8 of the Davis-Stirling Act, and restricts an HOA’s architectural standards and other governing documents from prohibiting or providing conditions that hinder or prohibit use of low-water usage plants. In addition, this statute requires compliance with local water ordinances.

4. AB 1233 (Silva)

AB 1233 amends the Non-Profit section of the California Corporations code relating to nonprofit mutual benefit corporations (most HOAs in California are non-profit mutual benefit corporations). Subject to certain limitations, AB 1233 authorizes the articles or bylaws to require the presence of one or more specified directors in order to constitute a quorum to transact business. In addition, this statute prohibits a committee exercising the authority of the board from including as members persons who are not directors of the corporation. However, the statute does not prevent a committee which is not exercising the authority of the board from including a non-board member on the committee.

In my opinion, this statute is also the most troubling for HOAs. This statute also alters the protections afforded directors where the HOA had appropriate insurance in place. Prior to the passage of this statute, existing law prohibited a cause of action for monetary damages from arising against any director or officer of a nonprofit corporation, who served without compensation, on account of any specified negligent act or omission if the HOA had a general liability insurance policy in a specified amount in force both at the time of the injury and at the time the claim was made. With the enactment of this bill those causes of action now are only prohibited if the HOA maintains a liability insurance policy that is applicable to the claim. That means that if a claim is not covered, the directors may face liability, despite the fact that there is a general liability policy in place. I fear this will have a negative impact on the ability of HOAs to get people to volunteer and serve as directors. This is already difficult enough. There are many communities where people refuse to serve, and there are perpetual openings on the board. Now people who already hesitate to serve will have another reason to refuse to do so.

Author: Robert M. DeNichilo

I am a partner in the law firm Nordberg|DeNichilo, LLP., specializing in the representation of community associations throughout southern California, For more information, please visit our web site at NDHOALaw.com.

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