Substantive Changes to the Davis-Stirling Act as of January 1, 2014

OVERVIEW OF CHANGES:

  • Substantively  related  code sections are now grouped together for ease of use
  • Revisions have been made to clarify poorly worded  sections for clarity
  • Code sections which were previously  lengthy are now divided into shorter  sections
  • Some altogether new laws have been added

NOTABLE MODIFICATIONS:

  1. NEW DEFINITIONS REGARDING:

a.   Delivered to an Association - New definition for any document to be delivered to the Association must be delivered  to the person and address designated in the Annual Policy Statement [Civil Code Section 4035]

b.   Individual Notice - relating  to notice that an Association must give to a specific member. Notice can be provided by first class mail, registered or certified mail, express mail, or overnight mail. Individual notice must also be sent to any secondary address on file. [Civil Code Section 4040]

c.   General Notice - Any manner  of individual  notice, posting in a common area location, or printed on a billing statement of other document  that is delivered by one of the above methods.  [Civil Code Section 4045]

d.   Annual Budget Report - what was formerly  referred to as the pro forma operating budget.  [Civil Code Section 4076]

e.   Annual Policy Statement - a comprehensive statement/packet of all notices and disclosures that are provided at the beginning of each fiscal year, along with  the Annual Budget Report.  [Civil Code Section 4078]

2.   EFFECTS ON GOVERNING DOCUMENTS:

a.   CA law controls  over governing documents   [Civil Code Section 4205]

b.   Priority  by which the governing documents  govern.  [Civil Code Section 4205]

i.   Law

1.   CC&Rs

a.   Articles

i.   By-Laws

1.   Operating Rules

a.        Note: Operating rules may not be inconsistent with the CC&Rs, Articles, or By-Laws

c.   Board authorized to amend a cross reference of old statute in governing documents through adoption of a resolution showing the correction.  [Civil Code Section 4235]

d.   Text of Proposed Amendment to Governing Documents: Requires an Association to provide the member with the actual text of the proposed amendment for any upcoming election to be held for purposes of approving the proposed amendment.  [Civil Code Section 4230]

e.   Reversal of Operating Rule: Requires that if a vote is to take place to reverse a recently enacted operating rule, the provision is now modernized to incorporate the new election rules and two envelope secret ballot process. [Civil Code Section 4365]

3.   PROPERTY USE MODIFICATIONS

a.   Right of Access to Separate Interest: Incorporates both owner and tenant’s right to access their separate interest, and generally have the rights as to common area/facilities.  [Civil Code Section 4510]

b.   Protected Use of Separate Interest Property: Owners have a protected right to sacred activity, including posting flags and signs, even if precluded from the CC&Rs. [Civil Code Section 4705]

c.   Modification to Separate Interest: Broadens the term “unit”  when referencing owner’s right to make reasonable accommodations of a separate interest in any type of CID. [Civil Code Section 4645]

d.   Grant of Exclusive Use Common Area: Civil Code Section 4600 clarifies requirement to obtain 67% membership approval when granting exclusive use common area. This requirement  applies not only to common area owned by the Association as an entity, but also to common area owned by members as tenants in common. The requirement imposes exceptions for the following grants of exclusive use:

i.   To accommodate a disability

ii.   Required by law

iii.   Assignment of a parking space, storage unit, or other amenity if expressly provided for in the declaration.

4.   BOARD OF DIRECTORS’ MODIFICATIONS

a.   Notice of BOD Meetings: Corporation code provision does not require notice of upcoming meeting if date and time are specified in the corporation’s By-laws. Section 4920 requires notice of all Board meetings at least four days prior to meeting, with the exception of emergency meetings.

i.  New law now requires all notices of board meetings via General Notice requirements as specified in §4045

b.   Definition of “Meeting”: Defined as the “number of directors [sufficient] to establish a quorum [Civil Code Section 4925]

c.   Conflicts of Interest: Code now identifies six (6) matters upon which a director/committee member may not vote.  [Civil Code Section 5350)

i.   Discipline against director/committee member;

ii.   Assessment against director/committee member for damage to common area

iii.   Payment plan consideration for overdue assessments for director/committee member

iv.   Decision to foreclose on a lien on a separate interest of the director/ committee member

v.   Proposed ARC modifications to a separate interest

vi.   Grant of exclusive use common area to the director/committee member

5.   MEMBER  ELECTIONS MODIFICATIONS

a.   Scope of Member Election Procedure - Expands the Association’s ability to incorporate the two envelope secret ballot procedure to other types of elections provided such a provision is incorporated into the Association’s election procedure [Civil Code Section 5115]

b.   Notification of Election Results – Election results are to be provided under the General Notice requirements in Section 5120(b).

c.   Ballot Custody – Ballots must be retained for a period of twelve (12) months by the lnspector(s) of election. [Civil Code Section 5125]

d.   Campaign Communications - Drafting of meeting minutes and disbursing same to the membership does not violate the Davis-Stirling Act, even though the minutes may include a candidate’s name for an upcoming election. [Civil Code Section 5135]

6.   RECORDS & NOTICES

a.   Accounting for Reserve Funding Expenditures for CD Litigation - Accounting records for CD litigation expenses are deemed association records and requires the membership be notified of the Board’s decision to spend reserve funds for CD litigation by means of the General Notice requirement.  [Civil Code Section 5520]

b.   Addition to “Association Records” - Modifies the list of documents entitled to an owner on demand to include “Governing Documents.” [Civil Code Section 5200]

c.   Annual Policy Statement and Annual Budget Report - Current law allows a Board  to send a summary of the budget (now Annual Policy Statement) to the members. New Act will extend this option to the Annual Policy Statement as well. [Civil Code Section 5300-5320]

d.   Requirements for Written Requests for Documents – Written  requests under Civil Code Section 5260 must be delivered to the Association at the address listed on the Annual Policy Statement. Such written requests include: address change on membership list; request to add or remove a second address for delivery in individual notices; request for individual delivery or to cancel a prior request for individual delivery; opt out request; or a request for a full copy of a specified Annual Policy Statement, Annual Budget Report or all reports in full.

7.   ASSESSMENTS & COLLECTIONS

a.   Assessment Increases – Any annual assessment increase for any fiscal year may not be imposed  until the board has distributed the Annual Budget Report. [Civil Code Section 5605]

b.   Election Process on Assessment Increases and Special Assessments - Any vote by the membership for an increase in assessments by more than 20% or special assessment great than 5% or the gross expenses requires the two envelope, secret ballot process. [Civil Code Section 5115, 5605(b)]

c.   Lien Releases - An Association that records a lien in error, whenever it’s discovered, must release the lien and reverse all costs, fees, and interest  associated with the error. [Civil Code Section 5685(c)]

d.   Overnight Payments - The address designated for owners to mail overnight  payments must be included  in the Annual Policy Statement.  [Civil Code Section 5310(a)(11)]

8.   ENFORCEMENT OF RULES AND DISPUTE RESOLUTION

a.   Schedule of Monetary Penalties - The Association must provide  the fine schedule on an annual basis in the Annual Policy Statement.  [Civil Code Section 5310(a)(8)]

b.   Right to be Heard - A notice and hearing must be provided to a member  by individual notice if the Board is attempting to impose a monetary charge against an owner for reimbursement to the HOA for damage caused to the common  area by the member or their tenant(s)/guest(s). [Civil Code Section 5855]

c.   ADR -In an action in which fees and costs may be awarded, courts retains discretion as to whether  a non-filing party’s refusal to accept ADR was reasonable, when determining the amount  of the award. This provision  now applies not only to actions to enforce governing documents, but to any action in which fees and awards may be awarded. [Civil Code Section 5960]

9.   COMMERCIAL/INDUSTRIAL DEVELOPMENTS

a.   Imposition of Emergency Special Assessments -Industrial/Commercial properties now permitted to impose special assessments for certain emergency assessments (Section 5610)