Monday, September 12, 2005

HOA's New and Pending Legislation

Governor Schwarzenegger has signed into law SB 853, which requires decisions by a homeowners association's Board on a request for an architectural change to be in compliance with applicable law, such as building codes and fair housing statutes. Several other bills are on the Governor's desk that would have much more serious ramifications for homeowners associations if signed into law.

Following is a short summary of these pending bills:

SB 137 deals with foreclosures and imposes a huge array of red tape on associations before they can lien or foreclose on an owner's property. Some highlights: an association cannot foreclose for less than $1,800 in delinquent assessments (the current limit is $1,500) unless the owner is more than 12 months delinquent; before recording a lien or starting to foreclose on the lien, the association must offer alternative dispute resolution ("ADR") to the owner, and if the owner agrees, the ADR must be completed before a lien or a Notice of Default can be recorded; more required language has been added for the pre-lien letter; an owner will have 90 days after the foreclosure sale to pay the debt and take back title to his/her home; and before conducting a foreclosure sale the Association must hand deliver notice of the sale to the owner.
SB 137 also revises the "Notice - Assessments and Foreclosure" form that associations must distribute annually to their owners. This bill would allow property managers and bookkeepers to appear for the association in small claims court. Currently, Board members must be present.

SB 61 deals with members' voting procedures. The Association must adopt rules to (1) give all candidates equal access for their campaign; (2) specify voting powers, proxy issues, and the voting period, including polling hours; (3) adopt director qualifications; and (4) provide procedures for nominations, voting, and selecting inspectors of election. This bill specifies the inspector of election's duties. Any vote on assessments, elections, amendments, and granting an owner exclusive access to a portion of the common area must be done by secret written ballot. Thirty days before any vote on these issues, the Association must distribute to all owners a ballot plus two envelopes, an outer envelope containing the owner's name and an inner envelope without the owner's name containing the ballot. Ballots and proxies cannot be counted as they are received by the Association; this must be done in public at an open meeting, and anyone can observe the counting. The ballots and proxies are available for inspection by the members for a year after the election. The Association cannot use its funds to endorse candidates.

AB 394. This bill would change the wording on the paragraph that must be attached to CC&Rs before copies are given out by associations, management companies, escrow, etc.

AB 1098 defines the records owners can inspect. It would make available for inspection, among other things, the Association's general ledger, check register, cancelled checks, invoices, purchase orders, billing statements, and credit card statements for the current year and two prior years. Minutes for all years must also be made available. With some exceptions, the Association must make the current year's records available within 10 days of request and prior years' records must be made available within 30 days of request. Owners would be entitled to enforce these rights in small claims court and the court could fine violating associations $500 for each denial of an inspection request. This bill also requires the approval of 67% of the owners before the Association can give an owner the exclusive right to use a portion of the common area, with certain exceptions.

As you can see, these bills are intended to protect owners' rights, but they include features that would create delays and could add a huge volume of red tape and expense to associations' functioning.
We will keep you updated on progress of this pending legislation.

Very truly yours,Jeanne H. McDonald, Esq.Adams AuCoin & Kessler, LLP

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