Several CID bills headed to governor for signing

By Jennifer Wada, Esq.

The 2021 legislative session adjourned on September 10 and hundreds of bills were sent to the governor’s desk. These bills included proposals that establish a police decertification process for officers that commit wrongdoing, prevent police from blocking journalists from covering protests, allow dependent parents to be covered on an individual’s health plan, overhaul the state’s broken unemployment system, and provide billions of dollars for wildfire and drought prevention.

However, the tension between moderate and liberal democrats resulted in a number of bills being tabled for the year. These included aggressive climate change bills, single-payer healthcare and even a bill that would have allowed people to choose to turn their bodies into garden compost after death. Governor Newsom has until October 10 to sign or veto all bills. And although the end of session comes just days before the closely watched recall election on September 14, Governor Newsom will still be at the helm during the bill signing period even if he is recalled, which recent polls indicate is unlikely.

So how did CACM’s most closely tracked bills fare?

AB 502 (Davies) was approved by the legislature and is now headed to the governor’s desk. It would apply elections by acclamation to all associations. This was a hard-fought battle with homeowner groups opposing throughout the process. CACM has been at the forefront of support, with Tom Freeley being a key witness at hearings. Amendments taken in both the Senate Housing and Judiciary committees added provisions that are intended to ensure homeowners are informed about whether an election by acclamation will occur. While some of the amendments aren’t ideal, they are a small price to pay in exchange for all associations having the ability to use acclamation. Some key provisions do the following:

1. Both the first notice (90 days prior to election) and the reminder notice (7-30 days prior to election) must include: a) the number of board positions available; b) the deadline for submitting nominations; and c) how to submit nominations.

2. For the first notice, there must be a “heads up” statement that if there are fewer candidates than there are vacancies, the board may vote to fill the vacancies by acclamation.

3. For the second notice, if there are less candidates than vacancies, there must be a statement declaring that the board can vote to elect by acclamation. This second notice must also include a list of qualified candidates running.

4. Within 7 days of a person submitting a nomination, the association must confirm receipt, as well as confirm with that person whether they are qualified or disqualified. If they are disqualified, a reason must be given along with the procedure for appeal. CACM voiced concern about the short timeline to determine if a candidate is disqualified. Because the author did not want to compromise the bill’s success with any more changes, we have agreed to revisit this topic in possible cleanup legislation next year.

5. The board must vote to use acclamation at a meeting in compliance with existing law and the names of qualified candidates to be seated must be listed as part of the agenda item.

AB 1101 (Irwin) is headed to the governor’s desk. This is CAI-CLAC’s clean up measure to AB 2912 (Irwin, 2018). It would clarify the types of financial institutions an association may use to hold its funds and modify when board approval is needed for electronic transfers. Such transfers would be prohibited unless the amount of the transfer is $10,000 or less or 5% of the estimated income in the annual operating budget for associations with 50+ separate interests and $5,000 or less or 5% of the estimated income in the annual operating budget for associations with less than 50 separate interests. AB 1101 would also clarify the types of insurance an association must maintain. One notable amendment by the Senate Judiciary committee was the elimination of an old grandfather provision that allowed managing agents to commingle funds if doing so on or before February 26, 1990. This amendment was in response to accusations by the opposition that management companies regularly commingle funds. CACM debunked this accusation.

AB 1584 (Committee on Housing) is the housing omnibus bill, which is intended to contain noncontroversial proposals and is on its way to the governor. This bill contains language that would allow the governing document amendment requirement in AB 3182 (Ting) to be done through a board vote only and would push the compliance date to July 1, 2022. The bill also continues to contain 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.

SB 391 (Min) is the vehicle for the California Law Revision Commission’s study on emergency measures in CIDs. This bill is on its way to the governor and because it is an urgency measure, it will become law immediately upon signature, as opposed to January 1, 2022. SB 391 would allow, during a state of emergency, meetings to be conducted entirely by teleconference (this is defined to include videoconference) without any physical location needed if certain requirements are met. A concern was raised that not all emergencies are equal and physical meetings should still be required if the emergency doesn’t prevent physical meetings. For example, a drought emergency doesn’t necessarily prevent an association from holding an in-person meeting. The bill was narrowed to only allow strictly teleconference meetings if gathering in person is “unsafe or impossible.”

SB 392 (Archuleta) is headed to the governor’s desk. The bill is sponsored by the California Association of Realtors and in its original form, would have changed notices sent by email to be opt-out, instead of opt-in, and would have required associations with 50 units or more to have websites. This bill was opposed by homeowner groups due to concerns regarding privacy and broadband access. It was amended to eliminate the opt-in/ opt-out approach and alternatively, require members to provide their preferred methods of delivery, which can be both email and mail. Members must provide their email, mailing address, secondary email, and secondary mailing address. The website requirement was eliminated entirely.

SB 432 (Wieckowski) is the cleanup measure to SB 323 and is also headed to the governor’s desk. It contains numerous noncontroversial provisions including clarifying that the felony candidate disqualification applies if the felony compromises the association’s ability to get any kind of insurance, not just fidelity as stated in current law. It also clarifies that board members are subject to the same qualification requirements as candidates, as well as clarifies that associations must maintain election materials for one year. The most significant change made by the bill appears to be the definition of “enhanced associations records” being amended to include bank statements.

Because this year is the first year of the legislative session, many bills that stalled this year may resume next year. We will soon start preparing for next year’s legislative session and in addition to offensive measures, we anticipate that we will be playing plenty of defense with regards to prohibitions on various restrictions and issues related to urban lot splitting. CACM has already received calls from legislators who are interested in legislation in response to the Surfside collapse that would put protections in place to prevent a similar tragedy in California. We have discussed minimum reserve funding, soil analysis and structural inspection of coastal and other communities and insurance coverage. As always, engagement of the management industry will be critical.

Jennifer Wada, Esq.

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