California Legislative Update

2021: SLEW OF LEGISLATION INTRODUCED

By Jennifer Wada, Esq.

We have hit the ground running, as the legislative session started off at full speed. Pent-up energy and bill ideas have been unleashed. The industry faces a slew of legislation that directly impacts it. Here are some of the key bills we are working on this year:

AB 502 (Davies) would apply elections by acclamation to all associations. The author’s office reached out to CACM early in its process and was contemplating lowering the current 6,000 unit threshold. We urged the author’s office to eliminate it entirely, since 68% of associations are 50 units or less. Thankfully the author’s office agreed, and the bill proposes to relieve all associations of the unnecessary burden of the secret ballot process when elections are uncontested. One hiccup is that due to the continuing COVID protocols, the Legislature has less time to hear bills and committee chairs are attempting to limit the number of bills that are allowed to proceed. The Assembly Housing chair is not inclined to hear AB 502, citing the recent enactment of SB 754 (Moorlach, 2019), which established acclamation for large associations. The chair would like to wait to see how acclamation works in practice. We are continuing to advocate in support of this bill, arguing it is critical since SB 754 only impacted a small number of associations.

AB 1101 (Irwin) is CAI-CLAC’s clean up measure to AB 2912 (Irwin, 2018) which, among other things, required electronic transfers of a certain kind to be approved by the board. AB 1101 will soon be amended to modify existing law so that board approval will be needed for transfers of $10,000 or more for associations of 51 units or more, and $5,000 for associations of 50 units or less. It will also clarify that funds may not be invested in stocks or high-risk investment options. The bill also clarifies the types of insurance an association must maintain.

AB 1410 (Rodriguez) is a compilation of various problematic proposals, most of which tie the hands of associations. First, the bill eliminates all rental restrictions without regards to when a homeowner acquired title. The author’s office indicates that this is not their intent and they will be amending the bill to clarify that associations cannot prohibit owners from renting out rooms. Second, the bill expands the provision allowing use of an owner’s backyard for personal agriculture to include all of the owner’s separate interest. Third, the bill prohibits any restriction on discussions “critical of the association” without any parameters. Fourth, AB 1410 requires every director or association employee to complete a course on ethics and harassment prevention upon election or hire. Fifth, the bill prohibits an association from imposing a monetary penalty or other enforcement action in relation to landscaping on a separate interest during a state of emergency or on days when air quality is unhealthy. Sixth, (yes, I’m still going) it prohibits any enforcement actions, including any courtesy notices, for violations of governing documents during, and for 30 days after, a state of emergency, stay at home order, or quarantine. Seventh, to impose a monetary penalty against a member for a violation, the association must make any physical evidence used to determine a violation, including but not limited to, photographs or video or audio recordings, available to the member. Eighth, any photograph used in determining a violation shall have a valid time and date stamp or shall be accompanied by digital metadata clearly stating the time/date the photo was taken. Clearly, this bill will require a lot of attention and advocacy. We have already submitted a letter of opposition, and we are in discussions with the author’s office and the housing committee.

AB 1466 (McCarty) requires a county recorder, title insurance or escrow company, real estate broker, real estate agent, or association that delivers a copy of a declaration, governing document or deed to a person who holds an ownership interest of record in the property to also provide a Restrictive Covenant Modification form along with information for appropriate processing. Existing law authorizes a person who holds an ownership interest of record in property that they believe is the subject of an unlawfully restrictive covenant to record a Restrictive Covenant Modification.

AB 1584 (Committee on Housing) is the housing omnibus bill, which is intended to contain noncontroversial proposals. This year, the bill contains cleanup to the CID ADU law (AB 670, Friedman, 2019) by clarifying it applies to all CIDs since some associations were construing it as not applying if they did not have undivided interests in common area. Additionally, CACM has been working with CAI, the Housing committee and Assemblymember Ting to insert language into this bill that would modify last year’s AB 3182 regarding rental restrictions by allowing governing documents to be amended through a board vote only. The language would also push the compliance date to July 1, 2022. Negotiations are currently in process and we will hopefully be able to insert this fix at some point in the session.

SB 391 (Min) is the vehicle for the California Law Revision Commission’s study on emergency measures in CIDs. This bill would allow, during a state of emergency, meetings to be conducted entirely by teleconference without any physical location needed as long as certain requirements are met. These requirements include: 1) the notice must provide clear technical instructions on how to participate; 2) the notice must provide a phone number and email address for a person who can provide technical assistance before and during the teleconference; 3) every director and member must have the same ability to participate as they would if it were in person; 4) any vote of directors is by roll call vote; and 5) any person who is entitled to participate is also given a phone option. The bill was recently amended to require the first initial meeting notice under a state of emergency to be delivered through individual delivery and that the notice include a reminder of the owner’s ability to request documents through individual delivery. The amendments also included a blanket provision that, if the association has reason to believe the disaster or emergency will prevent any member from receiving a notice at the address in the association’s records, the association shall take reasonable steps to provide each of those members with notice through alternative means. CACM supported the original version of the bill and is working with the author’s office on concerns with the latest amendments.

SB 392 (Archuleta) is sponsored by the California Association of Realtors and requires, starting January 2023, an association to deliver documents via email unless the member has not provided a valid email address or has revoked consent to electronic delivery. A two-thirds membership approval allows delivery by any allowable method. The bill also requires websites for associations with 50+ separate interests to provide general information but is purposefully silent on specific content. The website may be maintained by a person designated by the association and can include a volunteer member, real estate licensee, manager or management company. A two-thirds membership vote can exempt the association from this requirement as well.

SB 432 (Wieckowski) is intended to be the vehicle for “clean-up” to SB 323, the elections bill from 2019. Currently, it contains only placeholder language that adds term limits to the list of candidate disqualifications. The substantive content will likely be amended in on the Assembly side later in the session. There has been discussion about expanding the kinds of insurance that would trigger an association’s ability to utilize the criminal conviction disqualification for candidates, clarifying that candidate requirements also apply to directors and that election materials must be kept for one year following the election.

As you see, we have A LOT of work to do this year. It is still early in the legislative session and we are in the first round of policy committee hearings. I anticipate that more will be thrown at us as we move through the session and we will remain vigilant and focused as we fight to protect the industry. As always, we welcome your input and engagement as we advocate in the Legislature.

PLEASE NOTE: Status of bills is as of March 22, the date this article was written. Things move quickly in the legislature so the status of the bills may have changed by the time of publication.

Jennifer Wada, Esq., is an attorney, CACM’s legislative advocate and principal of Wada Government Relations in Sacramento.