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California - AB 1927 - Real property: common interest developments
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Introduced
SENATE PASSED
HOUSE PASSED
SIGNED BY GOVERNOR

1/22/2009
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Policy Becomes Law


  • Policy Overview
  • An act to amend Section 1368 of, and to add Section 1360.2 to, the Civil Code, relating to common interest developments.

    BILL NUMBER: AB 1927	INTRODUCED
    BILL TEXT
    INTRODUCED BY Assembly Member Knight

    FEBRUARY 17, 2010

    An act to add Section 1360.2 to the Civil Code, relating to common
    interest developments.
    LEGISLATIVE COUNSEL`S DIGEST
    AB 1927, as introduced, Knight. Real property: common interest
    developments.
    The Davis-Stirling Common Interest Development Act provides for
    the creation and regulation of common interest developments. Under
    existing law, a common interest development is managed by an
    association pursuant to the provisions of the governing documents of
    the development.
    This bill would provide that a governing document that is amended,
    adopted, or recorded on or after January 1, 2011, shall not prohibit
    the rental or lease of a separate interest in a common interest
    development, unless the provision imposing the prohibition is
    approved by 2/3 of all of the owners of separate interests, as
    provided.
    Vote: majority. Appropriation: no. Fiscal committee: no.
    State-mandated local program: no.
    THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

    SECTION 1. The Legislature finds and declares that the rights of
    common interest development owners to rent or lease their properties,
    as the rights existed at the time they acquired them, should be
    protected by the State of California. The Legislature further finds
    and declares that a common interest development creates a unique home
    ownership model that is unlike the status of a single family home in
    a traditional neighborhood. Property owners and residents who
    purchase units within, and live in, a common interest development
    governed by a homeowner`s association have agreed to live under rules
    and guidelines created by a democratic process. It is best,
    therefore, as provided herein, that the owners of units within a
    common interest development determine, through the exercise of a
    democratic decisionmaking process, what is best for their
    communities.
    SEC. 2. Section 1360.2 is added to the Civil Code, to read:
    1360.2. (a) A governing document that is amended, adopted, or
    recorded on or after January 1, 2011, shall not prohibit the rental
    or lease of a separate interest in a common interest development,
    except as provided in this section.
    (b) Notwithstanding any provision of the governing documents to
    the contrary, if a common interest development adopts a governing
    document or an amendment to a governing document that prohibits the
    rental or lease of a separate interest in a common interest
    development, that provision shall be approved by a vote of all the
    owners of separate interests in the common interest development.
    (c) The vote required by subdivision (b) shall be by means of a
    written ballot approved by not less than two-thirds of all of the
    owners of separate interests in the common interest development.
  • Summary/Fact Sheet Title
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  • BILL NUMBER: AB 1927 INTRODUCED
    BILL TEXT
    INTRODUCED BY Assembly Member Knight

    FEBRUARY 17, 2010

    An act to add Section 1360.2 to the Civil Code, relating to common
    interest developments.
    LEGISLATIVE COUNSEL`S DIGEST
    AB 1927, as introduced, Knight. Real property: common interest
    developments.
    The Davis-Stirling Common Interest Development Act provides for
    the creation and regulation of common interest developments. Under
    existing law, a common interest development is managed by an
    association pursuant to the provisions of the governing documents of
    the development.
    This bill would provide that a governing document that is amended,
    adopted, or recorded on or after January 1, 2011, shall not prohibit
    the rental or lease of a separate interest in a common interest
    development, unless the provision imposing the prohibition is
    approved by 2/3 of all of the owners of separate interests, as
    provided.
    Vote: majority. Appropriation: no. Fiscal committee: no.
    State-mandated local program: no.
    THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

    SECTION 1. The Legislature finds and declares that the rights of
    common interest development owners to rent or lease their properties,
    as the rights existed at the time they acquired them, should be
    protected by the State of California. The Legislature further finds
    and declares that a common interest development creates a unique home
    ownership model that is unlike the status of a single family home in
    a traditional neighborhood. Property owners and residents who
    purchase units within, and live in, a common interest development
    governed by a homeowner`s association have agreed to live under rules
    and guidelines created by a democratic process. It is best,
    therefore, as provided herein, that the owners of units within a
    common interest development determine, through the exercise of a
    democratic decisionmaking process, what is best for their
    communities.
    SEC. 2. Section 1360.2 is added to the Civil Code, to read:
    1360.2. (a) A governing document that is amended, adopted, or
    recorded on or after January 1, 2011, shall not prohibit the rental
    or lease of a separate interest in a common interest development,
    except as provided in this section.
    (b) Notwithstanding any provision of the governing documents to
    the contrary, if a common interest development adopts a governing
    document or an amendment to a governing document that prohibits the
    rental or lease of a separate interest in a common interest
    development, that provision shall be approved by a vote of all the
    owners of separate interests in the common interest development.
    (c) The vote required by subdivision (b) shall be by means of a
    written ballot approved by not less than two-thirds of all of the
    owners of separate interests in the common interest development.


  • View History
  •           

               COMPLETE BILL HISTORY

              

              BILL NUMBER : A.B. No. 1927

              Latest Vote

              AUTHOR : Knight

              TOPIC : Real property: common interest developments.

              

              TYPE OF BILL :

               Active

  • View Analysis
  • 2010-04-12 00:00:00

    BILL ANALYSIS                                                                                                                                                                                                    

    AB 1927
    Page 1

    Date of Hearing: April 14, 2010

    ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
    Norma Torres, Chair
    AB 1927 (Knight) - As Amended: March 9, 2010

    SUBJECT : Real property: common interest developments

    SUMMARY : Prohibits a homeowner association (HOA) in a common
    interest development (CID) from amending, adopting or recording
    a governing document to prohibit the lease or rental of a
    separate interest without two-thirds of the member`s approval.
    Specifically, this bill :

    1)Requires the vote to be conducted by written ballot and
    approved by not less than two-thirds of the owners of separate
    interest in the CID.

    2)Overrides any provision to the contrary in the governing
    documents of a CID.

    3)Applies to governing documents that are amended, adopted or
    recorded on or after January 1, 2011.

    EXISTING LAW

    1)Provides that any rule or regulation of an HOA that
    arbitrarily or unreasonably restricts an owner`s ability to
    market his or her interest in a CID is void (Civil Code
    Section 1368.1).

    2)Defines the governing documents of a CID as the Covenants,
    Conditions and Restrictions (CC&Rs), bylaws, operating rule of
    the HOA, articles of incorporation, or articles of the HOA
    which governs the operation of the CID ( Civil Code Section
    1351).

    3)Provides the governing documents of a CID may be amended
    pursuant to the process provided for in the governing
    documents. The amendment is effective if the following
    conditions are met:

    a) The approval of the percentage of owners required by the
    governing documents is met;


    AB 1927
    Page 2

    b) The vote of the owners is certified in writing by an
    officer of the HOA, and

    c) The amendment is recorded in the county or counties in
    which the CID is located.

    4) Provides that if the governing documents do not provide
    a procedure for amendment the
    following conditions must be met for an amendment to be
    effective:

    a) The proposed amendment must be distributed to all owners
    by first class mail not less than 15 days and not 60 days
    prior to a vote;

    b) Fifty percent or any higher percentage required by the
    CC&Rs of owners approve the amendment; and

    c) The amendment is recorded in the county in which the CID
    is located (Civil Code Section 1355).

    FISCAL EFFECT : None.

    COMMENTS :

    Background : There are over 41,000 CIDs in the state that range
    in size from three to 27,000 units. CIDs make up over four
    million total housing units which represents approximately one
    quarter of the state`s housing stock. CIDs include
    condominiums, community apartment projects, and housing
    cooperatives and planned unit developments. They are
    characterized by a separate ownership of dwelling space coupled
    with an undivided interest in a common property, restricted by
    covenants and conditions that limit the use of common area, and
    the separate ownership interests and the management of common
    property and enforcement of restrictions by a HOA. CIDs are
    governed by the Davis Stirling Act as well as the governing
    documents of the association including bylaws, declaration, and
    operating rules. CIDs are governed by volunteer boards of
    directors who are elected by the members of the HOA and are
    responsible for interpreting the governing documents and state
    law. Except when CIDs are first developed, no state agency
    provides ongoing oversight of these communities.

    In order to amend the governing documents a HOA must follow the

    AB 1927
    Page 3

    procedure outlined in the governing documents or if the
    governing documents are silent, the process provided in state
    law. State law and most governing documents require that a
    majority of members vote to approve an amendment to the
    governing documents.

    Some CIDs have restrictions on rentals which take a variety of
    forms including: limiting the total number of rentals in a CID
    to a set percentage, requiring a minimum amount of time for
    leases, prohibiting rental of a unit until the unit has been
    owner occupied for at least a year or prohibiting renting or
    leasing outright. Additionally, in some cases HOAs adopt rules
    which do not flatly deny rentals but require owners renting
    their separate interest to follow specific policies. For
    example, a HOA may require owners who rent their separate
    interest to include a clause in their lease agreement requiring
    renters to abide by the rules of the HOA as a condition of
    residence.

    This bill would prohibit a HOA from amending or adopting a
    governing document that would prohibit the rental or lease of
    units in the CID without the approval of two-thirds of the
    owners. The election would have to meet the requirements of
    existing law, including that the ballot be mailed and secret.
    If a HOA`s governing documents specify a percentage of owner
    approval that is needed to approve a change to the governing
    documents, in the case of a change to the rental policy or the
    adoption of the rental policy, state law would trump the
    governing documents.

    Purpose of the bill :

    According to the author, this bill is intended to protect the
    property right of a CID owner to rent their unit if such a right
    existed for them at the time they purchased the unit. An owner
    of a property whose rights to rent that property were not
    restricted when the unit was purchased should not have the
    rights abridged during their term of ownership, without the
    express permission. According to the sponsor of the bill,
    preservation of the right to rent one`s home is particularly
    important to individual homeowners in the current stressful real
    estate market. A prohibition on rentals in an association could
    create a hardship for a homeowner who must move because of a
    change in employment, and the owner cannot sell so he/she must
    rent the unit.

    AB 1927
    Page 4


    Arguments in opposition : The Executive Council of Homeowners
    (ECHO) believes given the current foreclosure crisis and
    restrictions by mortgage insurers and lenders on the number of
    separate interests that can be rentals with in a condominium
    development, the bill could have negative consequences for
    homeowners. Owners who occupy their units and who may want to
    sell their interest, refinance it or improve it , and those who
    may want to purchase a separate interest in a condominium
    development may not be able to secure a loan if the number of
    rentals with the development exceeds the lender`s or insurer`s
    threshold.

    Staff comments : CIDs are required to provide prospective buyers
    with disclosure documents before purchase. This includes a
    statement of any restriction that limits residency on the basis
    of age. The committee may wish to consider, adding to this list
    of disclosures by requiring a CID to give a prospective buyer a
    statement describing any restrictions in the governing documents
    on rentals. This requirement would allow prospective buyers to
    make an informed decision before finalizing purchase of a home.


    Committee amendment :

    1)The governing documents of CIDs typically require the approval
    of a majority of the members to approve an amendment or change
    to the governing documents. This bill would apply a separate
    voting standard for changes that affect an owner`s ability to
    rent their separate interest. The committee may wish to
    consider allowing CIDs whose governing documents include a
    voting standard to apply and if the governing documents are
    silent to require a two-thirds vote. This bill would still
    require that a change to the governing documents that affects
    an owner`s ability to rent their separate interest be made by
    the membership through a written ballot.

    On page 2, line 17, delete "Notwithstanding any provision of
    the governing documents to the contrary,"

    On page 2, line 24 insert "Notwithstanding any provision of
    the governing documents to the contrary"

    On page 2, line 26, after "and" insert, "unless the
    associations governing documents require a different

    AB 1927
    Page 5

    percentage,"

    2)The bill currently requires that a change to the governing
    documents regarding rentals be approved by two-thirds of the
    owners of separate interests in a CID. In some CIDs not every
    owner has the right to vote; in some cases where there is a
    joint ownership the separate interest only has one vote. To be
    clear that only owners with voting power can vote the
    committee may wish to consider the following amendments:

    On page 2, line 22 after "interests" insert "with voting
    power"

    On page 2, line 27 after "two-thirds of" insert "the voting
    power of"

    3)Amend Civil Code Section 1368 to include the following
    disclosure in the list of disclosures a prospective buyer must
    receive prior to the transfer of title:

    "If there is a provision in the governing documents that
    prohibits the rental or leasing of all or any of the separate
    interests in the common interest development to a renter,
    lessee, or tenant, a statement describing the prohibition and
    its applicability."

    Related Legislation : In 2008, AB 2259 (Mullin) would have
    prohibited a CID from restricting the right of an owner to rent
    or lease his/her separate interest if the owner had that right
    at the time of purchase, unless the owner waives the right to
    lease or rent. AB 2259 was vetoed by the Governor. The veto
    message is below.

    This bill would allow a homeowner in a common interest
    development (CID) to retain the right to rent or lease his or
    her unit, if the right existed at the time of ownership
    unless the owner relinquishes those rights in writing.

    The supporters of this bill stress that the bill will
    protect the property rights of the owners of property within
    a CID governed by a home owner association (HOA) by
    preserving the conditions under which the property was
    purchased. This view stresses that these conditions are
    essentially a contract between the buyer and the HOA.
    However, the converse of this argument is that owners have

    AB 1927
    Page 6

    their property rights limited when they are prevented from
    renting or leasing their property when they are restricted by
    this law and the subsequent actions taken by HOAs.

    This bill alters the basic tenets under which CIDs and HOAs
    are formed and operated. While my support of property rights
    is unwavering, the CID creates a unique community model that
    is unlike the standard single family home in a traditional
    neighborhood. Property owners and residents that purchase
    and live in a CID governed by an HOA have agreed to live
    under a common set of rules and guidelines governed by a
    democratic process. It is best, as current law allows, for
    the owner-members of the HOA to determine what is best for
    their communities.

    Double referred : The Assembly Committee on Rules referred AB
    1927 to the Committee on Housing and Community Development and
    Judiciary. If AB 1927 passes this committee, the bill must be
    referred to the Committee on Judiciary.

    REGISTERED SUPPORT / OPPOSITION :
    Support

    California Association of Realtors (sponsor)
    California Rural Legal Assistance Foundation
    Western Center on Law and Poverty

    Opposition
    Community Associations Institute
    Executive Council of Homeowners

    Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085


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