CAI-CLAC ADVOCACY WEEK REPORT

CAI GRIE Chapter Session

BETTY ROTH, CMCA, AMS, LSM, PACM HERITAGE LAKE MASTER ASSOCIATION

I was honored to be the CAI-CLAC Executive Committee Host as well as the facilitator for the virtual CAI GRIE Advocacy Session on Monday April 24, 2024. This is the biggest advocacy meeting that CLAC sponsors all year. All chapters meet with their legislators to discuss CLAC’s positions on upcoming bills and ask for their support whether it be for or against a particular bill.

I have been fortunate to participate in all of the last four years of virtual sessions. I believe that this year was more satisfying than ever because of the strides that were made in the previous years, as well as the very put together legislative meetings and support from the tech team, advocate team, PR Committee, CLAC Administrator, and well-prepared speakers for each bill: Daniel Heaton (AB 572), Robert Riddick (AB 1458), and Fred Bartz (AB 648). Kimberly Lilley was also very well-versed in speaking on the State’s ongoing insurance concerns.

We met directly with Assembly Member Bill Essayli, as well as staff representatives from the offices of Senators Ochoa Bogh and Roth and Assembly Member Kate Sanchez. Each of the individuals that joined us were already very well versed on CLAC and CAI in general, so each of the meetings were full of information on CLAC’s positions on the bills at hand. Our legislative guests were all very receptive and supportive as they listened to each of our speakers, and many wanted to get more involved in our ongoing insurance efforts.

The bills continue to go in and out of different Assembly and Senate committees, so our job of advocating is not finished. Should you receive a grass roots request to contact your legislator to support CLAC’s position on a bill, please take the time to answer the call. It only takes a moment, and it has a significant impact!

AB 572 (Selective Assessment Caps)

DANIEL C. HEATON, ESQ. NORDBERG|DENICHILO, LLP CAI-GRIE LSC COMMITTEE

The Davis-Stirling Act requires community associations to impose and collect assessments to fund its various obligations, including community maintenance and repairs. Existing law prevents a board from increasing the amount of regular assessments by more than 20% and caps the aggregate amount of special assessments that may be imposed at 5% of the annual budget, unless either is first approved by a majority of a quorum of the members.

AB 572 proposes to amend Civil Code § 5605 to further prohibit any increase of a regular assessment that is more than 5% for any owner of deed-restricted affordable housing, unless all the units in the community are subject to such deed-restrictions.

While the bill certainly has good intentions in trying to make housing more affordable, in practice, it is likely to create a host of unintended problems.

At the outset, most associations will have incredible difficulty determining which units are subject to the provision. Many members are not aware if their community contains deed-restricted affordable housing units, and when they do, the CC&Rs generally will not identify the specific properties. Instead, a board will likely be required to seek the assistance of legal counsel at significant cost to review each of the underlying deeds to identify which properties are impacted.

More significantly, the bill actively sets up affordable housing as a separate class of homeowners within the community, who would pay less than their fair share of association expenses than their neighbors. Such unfair distribution of financial burdens can result in division within a community, when the primary premise of choosing to live in an association is just that: the shared cost of a community.

In circumstances where an already burdened association needs to increase assessments by even the full amount permitted without a membership vote, or 20%, approval of the bill would mean that the board would have to determine which below-market units to cap at 5%, while everybody else would be required to absorb that 15% at significant increased cost. Now imagine the disparity that could potentially result in the community after years of repeating this same process.

As of May 1, 2023, AB 572 has been ordered to a third reading in the Assembly Housing Committee. Given the above repercussions, CLAC urges all members to contact their legislators to urge that they vote against this bill.

AB 1458 (Quorum Requirement)

ROBERT RIDDICK, CMCA
HOMEOWNER LEADER; CAI-CLAC DELEGATE

This bill, once enacted into law, would drop the quorum requirement to 20% of the total membership, even if the governing documents impose a higher quorum. A majority of current CID governing documents set quorum at a minimum of 50% +1 of the total membership. That requirement is not only often difficult to achieve, but it prevents CIDs from being able to function as intended by the Davis-Stirling Act, including conducting fair and open annual elections for board members.

Too often, governing documents “set the bar” unreasonably high for satisfying quorum. As a result, those associations that fail to satisfy quorum are prevented from conducting annual member meetings and board elections. This unfortunate dilemma has significant unintended consequences, including making it difficult for an association to conduct member meetings and hold elections, depriving interested members from being able to run for board positions, and preventing currently serving board members from stepping down, because elections are not able to be held for their replacements.

AB 1458 makes all the sense in the world and will set a much more realistic quorum requirement that significantly aids associations in being able to conduct business as the legislation intended when the Davis-Stirling Act was originally adopted.

AB 648 (Virtual Meetings)

FRED BARTZ
HOMEOWNER LEADER; CAI-CLAC DELEGATE

CAI-CLAC is sponsoring AB 648 which would allow community associations to have the option of conducting most board meetings virtually instead of in person, except for those that involve elections. This would be similar to what was previously allowed under Civil Code § 5450 during a state of emergency. As many associations have experienced, virtual meetings allow for greater availability and participation by members in board meetings. The bill already has wide support and has passed the Assembly Housing Committee. We hope you will contact your Assembly and Senate members and let them know you support the need for permitting this alternative form of board meetings.

California Insurance Crisis

KIMBERLY LILLEY, CIRMS, CMCA, EBP DIRECTOR OF BUSINESS DEVELOPMENT, BERG INSURANCE AGENCY CHAIR OF CAI-CLAC’S INSURANCE TASK FORCE

We are in an insurance crisis in California. This is mainly impacting condominiums which are often our state’s supply of affordable housing and the access point for firsttime home buyers, as well as retirement communities. This crisis has begun to expand and shows no indication of stopping.

Since all homeowners share the costs of the community association, insurance increases impose a financial burden on every owner within the community. Some associations are increasing monthly assessments, some are levying special assessments, and some are even taking out loans in order to afford the insurance that they are required to have by their governing documents. And since these costs will most likely be the same or even MORE next year, this course is simply not sustainable.

The crisis is no longer simply due to wildfire losses. Many communities are experiencing a jump in premiums due to having the wrong kind of electrical panels, or roof, or a variety of other reasons. Some communities cannot even FIND insurance, and some cannot find insurance up to the full value of their buildings. This means that, aside from being in violation of their own governing documents, federally backed loans are no longer available. Since Fannie Mae and Freddie Mac underwrite approximately 70% of all loans, most banks will not write a loan for these associations. Those who NEED to sell due to the increased cost are now stuck.

CLAC is working with the Department of Insurance, the CA FAIR Plan, and legislators, to identify and implement both short and longterm solutions. You may have heard that the CA FAIR Plan increased property limits to $20 million. That is due to our working hand in hand with the interested parties, but IT IS NOT ENOUGH. We are not done, and we continue to seek solutions and are thankful to the legislative representatives who expressed their strong desire to partner with us in these efforts.