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.

Governator Terminates HOA Bill Allowing Boards to Enter into Long Term Conservation Contracts

Gov. Schwarzenegger recently vetoed California’s AB 1328. AB 1328 would have provided that a homeowners association could enter into a contract for a water or energy efficiency program, for a term of up to five years, if the board of directors reasonably anticipated that the contract would result in verifiable savings to the association.

vetoGov. Schwarzenegger recently vetoed California’s AB 1328. AB 1328 would have provided that a homeowners association could enter into a contract for a water or energy efficiency program, for a term of up to five years without owner approval, if the board of directors reasonably anticipated that the contract would result in verifiable savings to the association. This would have allowed HOAs to take advantage of long term savings and actively engage in energy conversation which is essentially mandated by California’s AB 32.  However, the Governator vetoed the bill claiming that it was unnecessary and would override the requirement that most contracts which are longer than one year obtain homeowner approval.

AB 1328 would have allowed HOAs, and by extension homeowners, the ability to obtain long term savings if they were able to locate vendors to provide extended water and energy conservation programs for their community. Boards are required to use sound business judgment and protect the assets of an Association.  Further, under the bill homeowners were to be notified of the terms of the contracts and provided an opportunity to be heard at an open meeting prior to the Board’s execution of any such contracts. It seems that there were sufficient protections in place to allow Boards to explore and enter into these types of long term contracts. Remember, Boards would not be required to enter into such contracts. The bill just would have given Boards the flexibility to enter into longer term contracts if sufficient savings could be found.

It is disappointing that while California’s State government continues to impose regulations on local entities such as HOAs, it also deprives them of tools which would allow them to meet the requirements at a reduced cost.

The California Association of Community Managers (CACM) and the California Association of Realtors (CAR) both supported the bill. The Executive Council of Homeowners (ECHO) was neutral.

Proposed California Bill Lets Water Agency Trump Homeowners Association Rules

California’s AB 1061, introduced on February 27 by Assemblyman Ted Lieu would repeal a portion of the Davis-Stirling Act as it relates to water efficient plants.

landscaping-with-drought-tolerant-plants-2California’s AB 1061, introduced on February 27 by Assemblyman Ted Lieu would repeal a portion of the Davis-Stirling Act as it relates to water efficient plants.  Currently, the Davis-Stirling Act provides that the architectural guidelines of a common interest development shall not prohibit or include conditions that have the effect of prohibiting the use of low water-using plants as a group.  AB 1061 would enforce a model conservation ordinance that state officials plan to complete next year. Local water districts would be able to use the model ordinance as a blueprint for their own conservation rules.  As long as the water districts obey the model ordinance guidelines, anything in the rules of a community association development that conflicts with local water district’s regulations or restrictions would be “void and unenforceable.”

Water wholesaler Metropolitan Water District is sponsoring the legislation claiming the bill clarifies how homeowners can install water-efficient landscaping without running afoul of association rules. With California in a drought and rationing under way or looming in many districts, the agency claims it is looking for any way to stretch out its supplies. However, one has to wonder whether the bill is even necessary since there have only been isolated instances of conflicts between homeowner members eager to save water and associations that outlawed particular types of water-efficient landscaping.

Nevada Bill Limits Restrictions on Solar Energy Systems

The Nevada Senate voted Monday for an alternative energy bill that would limit a homeowner association’s ability to restrict the installation and use of solar energy systems.

Solar Energy System

The Nevada Senate voted Monday for an alternative energy bill that would limit a homeowner association’s ability to restrict the installation and use of solar energy systems.

Sen. Mike Schneider, author of SB 114, says the bill strengthens existing laws that already prohibit homeowner associations from interfering with installation of solar energy systems. Currently, a homeowners’ association in Nevada can impose restrictions that, while not prohibiting solar energy systems, could make them so much more costly and so much less efficient that the restrictions effectively act as a prohibition.

Under the bill, the director of the Nevada Office of Energy would have final say as to whether a restriction imposed by a homeowner association violates the rights of a homeowner to use or install a solar energy system.

The proposed bill also deems any restrictions that reduce efficiency of solar energy systems by more than 10% to be unreasonable.

Coupled with California’s Climate Change Solutions Act, a clear trend is emerging requiring HOAs to focus more attention on all aspects of energy efficiency.