Summer 2023 Legislative Update: What's New in HOA Law

By Jennifer Wada, Esq.

CID legislation abounds this year. Not only are there a significant number of bills that impact the management industry, but they are also high-stakes pieces of legislation that required extensive negotiations and advocacy. Some are good, and some are bad, but all will change how the management industry operates should they be enacted. Before we begin, an enormous thank you to the managers that traveled to Sacramento to testify before the legislature! Your stories informed legislators of what it is like “in the trenches.”

The key bills that we are focusing on include:

AB 572

Haney CIDs: Imposition of Assessments

This bill would prohibit the increase of a regular assessment on the owner of a deedrestricted affordable housing unit that is more than 5% greater than the regular assessment for the association’s preceding fiscal year, except those where 100% of the units are occupied or available at affordable costs to lower income and moderateincome households.

CACM opposes this bill because it would:

1) impose disproportionate financial burdens on homeowners who cannot afford to subsidize others,

2) create inequities and division within the community, and

3) undermine the ability of associations to raise the necessary funds to maintain the community.

Both in meetings and the Assembly hearing, CACM emphasizes that at a time of rising costs, with insurance increases of 1000% and mandatory balcony inspections resulting in an overwhelming number of repairs, asking some owners to subsidize others is not sustainable or realistic. Concerns include that subsidizing owners won’t be able to pay the increased assessments, or the association won’t get the necessary approval for significant increases required to meet the financial obligations it has to its members. In addition, if associations can’t increase assessments enough to keep up with reallife inflation and service costs, the entire community, including below-market-rate owners, will suffer.

Several Assembly members acknowledged our concerns and encouraged the author and sponsors to work with us to address these issues. Whether there is a viable compromise is yet to be determined, but we continue to oppose this bill in its current form. AB 572 is now awaiting a vote on the Assembly floor. If approved, it will then head to the Senate.

AB 1033

Ting – ADUs: separate sale or conveyance

This bill would allow a local agency to adopt an ordinance to allow the separate conveyance of an ADU or ADUs as condominiums. This means that ADUs could be separately conveyed from the primary dwelling, resulting in mini condominium complexes forming upon a former single-unit lot. The bill aims to increase density and expand homeownership opportunities for lowincome owners.

CACM opposes this bill because there need to be provisions that govern how this bill would work in a CID and how these new condo complexes would be managed and regulated in the context of the original, existing association. We have concerns that the bill would result in chaos and confusion in these communities. For example, what does this mean for voting rights? What about common area rights when amenities were designed for a lower health and safety target use? How are these units assessed? What entity is responsible for maintenance and enforcement? And there are many, many more questions.

We are in ongoing discussions with the author and sponsors, but we remain opposed. We are part of a broader opposition coalition that includes realtors, builders, bankers, title and escrow companies, and others. AB 1033 is at the Assembly Appropriations Committee.

AB 648

Valencia: CIDs: Meetings by Teleconference

This bill is co-sponsored by CAI and CACM. It would authorize a board meeting or a meeting of the members to be conducted entirely by teleconference, even when there is no declared state of emergency. We successfully got this bill to the Assembly floor, awaiting a vote. If the Assembly approves it, it will then move to the Senate.

The Center for Homeowner Association Law is opposed to this bill. One of their main allegations is that there is abuse when it comes to counting and tabulating ballots in a virtual context and that the “digital divide” prevents homeowners from accessing virtual meetings. The Assembly Housing Committee appropriately pointed out that call-in features would still be allowed but also noted that a call-in option would not allow owners to witness ballot counting. They addressed this issue by creating an exception for meetings where ballot tabulation occurs. While we do not like that a physical location is required for ballot counting, having the ability to meet virtually for all other meetings is still better than the current law.

AB 1458

Ta: CIDs: association governance: member election

This bill is sponsored by CAI and supported by CACM. It states that for the election or recall of directors if an association fails to attain a quorum as required in the governing documents, the association can hold a subsequent meeting. At that meeting, the quorum necessary for a membership meeting is reduced to 20% of owners present in person, by proxy, or by secret written ballot.

The Assembly Judiciary Committee believes associations should notify owners that the quorum will lower if not achieved the first time around. Accordingly, they asked for an amendment to include a disclosure in the general notice of the election that if the association fails to receive a quorum, it can call a subsequent meeting at least 20 days after a scheduled election where the quorum will be 20% of members present in person, by proxy or secret written ballot. The committee also imposed an amendment that requires another general notice, no less than 15 days before the subsequent meeting, that includes the date, time, and location of the meeting, the list of candidates, and a statement that 20% of those present in person, by proxy or secret written ballot will satisfy the quorum.

CACM expressed that additional notice is an unnecessary use of resources since it is unlikely to have any effect. The committee and the Center for Homeowner Association Law continue to urge that this notice be individual notice, as opposed to general notice. We will continue to fight against any additional individual notice requirement.

The Center for Homeowner Association Law is opposed to this bill. They contend quorum requirements exist to ensure broad participation by owners, and because associations are “quasi-local governments,” allowing the election of board members by a small percentage of owners violates homeowner rights.

Oppositely, we argue that the inability to achieve quorum paralyzes the association from electing new board members and conducting business. The Center for HOA Law also argues that associations can petition a court or change their governing documents if they cannot achieve quorum. We have argued that both options are unrealistic, as the petition process is expensive and unnecessarily clogs an already overburdened court system. Also, to change your governing documents, you need a quorum that is often higher than the quorum for elections!

AB 1458 passed both the Assembly Housing and Judiciary Committees unanimously. It is now headed to the Assembly floor and will then move over to the Senate.

We are now just finishing the first house policy committees. Bills will soon transition to the opposite house, and the policy vetting process will start over again. Advocacy and negotiations will continue as we work to protect the management industry. If you would like to get involved in advocating for reasonable CID law, click here to learn more about how you can support CACM’s advocacy efforts.

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