2024 New Case Law

LHC Newsletter Vol. 16, No. 2

 By: David A. Loewenthal, Esq.

        James D. Theodosopoulos, Esq.

 

NEW LAWS EFFECTIVE JANUARY 1, 2025

STATUTES SIGNED BY GOVERNOR NEWSOM

AB 2159 Common Interest Developments: Association Governance: Elections.

Amends Civil Code Sections 5105, 5110, 5115, 5120, 5125, 5200 and 5260

The bill introduces several key changes to the Davis-Stirling Common Interest Development Act, particularly focusing on the use of electronic secret ballots in elections for associations. The bill authorizes associations to adopt rules that allow elections to be conducted via electronic secret ballots. This is allowed even if the association’s governing documents specify otherwise, though members must be given the ability to change their preferred voting method no later than 90 days before an election. It specifies that electronic voting systems must authenticate the member’s identity and confirm that the member’s device can successfully communicate with the system 30 days before the voting deadline, and send a receipt once a vote is cast, ensuring greater security and verification in electronic voting.

Associations that conduct electronic voting must provide specific notices, including the date and time by which electronic ballots must be transmitted, and preliminary instructions on how to vote electronically. For members voting by written secret ballot, the association must still mail physical ballots and envelopes. However, this requirement only applies to those members voting by written secret ballot, not to those voting electronically. The bill allows associations to conduct elections entirely by mail, entirely by electronic secret ballot, or a combination of both, overriding any conflicting provisions in the governing documents. When voting on amendments to governing documents, associations conducting electronic voting can provide the proposed text of amendments electronically but must provide a written copy upon request.

The bill extends the prohibition on reviewing ballots before the election count to include electronic voting tally sheets. No one can access these tally sheets prior to the designated counting time. The bill expands the requirements for the custody and inspection of ballots and tally sheets to include electronic voting materials, ensuring transparency in the process. Requests to opt into or out of electronic voting must be submitted in writing to the association, at least 90 days before an election, to be valid.

 

AB 2460 Common Interest Developments: Association Governance: Member Election.

Amends Civil Code Section 5115 and Corporations Code Section 7512

The new bill clarifies issues arising from AB 1428 enacted last year and introduces changes to the existing law governing common interest developments under the Davis-Stirling Common Interest Development Act, specifically concerning quorum requirements and notice of meetings regarding election of directors and recall elections.

Civil Code Section 5115 requires that if the association’s governing documents require a quorum for an election of directors, a statement that the association may call a reconvened meeting to be held at least 20 days after a scheduled election if the required quorum is not reached, at which time the quorum of the membership to elect directors will be 20 percent of the association’s members, voting in person, by proxy, or by secret ballot.

This paragraph shall not apply if the governing documents of the association provide for a quorum lower than 20 percent.

For an election of directors of an association, and in the absence of meeting quorum as required by the association’s governing documents or Section 7512 of the Corporations Code, unless a lower quorum for a reconvened meeting is authorized by the association’s governing documents, the association may adjourn the meeting to a date at least 20 days after the adjourned meeting, at which time the quorum required for purposes of a reconvened meeting to elect directors shall be 20 percent of the association’s members, voting in person, by proxy, or by secret ballot.

No less than 15 days prior to the date of the reconvened meeting, the association shall provide general notice of the reconvened meeting, which shall include: (1) The date, time, and location of the meeting; (2) The list of all candidates; (3) Unless the association’s governing documents provide for a lower quorum, a statement that 20 percent of the association’s members, voting in person, by proxy, or secret ballot will satisfy the quorum requirements for the election of directors at that reconvened meeting and that the ballots will be counted if a quorum is reached, if the association’s governing documents require a quorum.

 

AB 2114 Building Standards: Exterior Elevated Elements: Inspection.

Amends Civil Code Section 5551

The bill amends the Davis-Stirling Common Interest Development Act by allowing a licensed civil engineer to conduct the required visual inspection of exterior elevated elements in condominium projects. Previously, only a licensed structural engineer or architect was authorized to perform the inspection. The inspection must still be conducted at least every 9 years.

AB 3057 California Environmental Quality Act: Exemption: Junior Accessory Dwelling Units Ordinances.

Amends the Public Resources Code Section 21080.17

This bill introduces a new expansion to the existing California Environmental Quality Act (CEQA) exemption related to accessory dwelling units (ADUs). This is part of a broader effort to streamline the process for creating ADUs and junior accessory dwelling units (JADUs), facilitating the construction of additional housing units without triggering the complex environmental review processes typically required under CEQA.

The bill expands the existing CEQA exemption to include the adoption of ordinances by cities or counties that provide for the creation of JADUs in single-family residential zones. This change removes the requirement for an environmental impact report (EIR) or negative declaration under CEQA for these types of ordinances.

The bill means that local governments can adopt ordinances allowing the creation of JADUs without the need to conduct an environmental review under CEQA, provided the project falls within the defined criteria for exemption (such as being in a single-family residential zone).

SB 900 Common Interest Developments: Repair and Maintenance.

Amends Civil Code Section 4775, 5550 and 5610

The new provisions introduced in this bill modify and expand certain responsibilities of associations in managing common interest developments under the Davis-Stirling Common Interest Development Act. These changes aim to provide associations with more flexibility and resources to maintain the safety and livability of common interest developments, especially in the case of utility failures and emergencies affecting the property.

An association will now be responsible for repairing and replacing utilities (gas, heat, water, or electricity) when interruptions occur in the common area, even if the issue extends into another area, unless a public or private utility provider is responsible for the service. The association’s board must begin the repair process within 14 days of identifying the issue. If the association lacks sufficient reserve funds, this bill allows the association to obtain competitive financing to fund repairs or replacements without a vote from the members. It can also levy an emergency assessment to repay the loan, provided specific conditions are met. If the board cannot reach a quorum during the 14-day window, the bill allows for a reduced quorum at the next meeting specifically to vote on beginning the repairs. Directors can vote electronically to initiate repairs or replacements under these provisions. If the association is in an area affected by a state or local emergency or disaster, and it materially impacts the association’s ability to repair or maintain common areas, it is exempt from these requirements.

The bill expands the definition of “major components” for the purposes of the association’s reserve study to include gas, water, and electrical services if the association is responsible for repairing or replacing these services. The bill broadens the circumstances that qualify as emergency situations allowing associations to increase assessments without restriction. In addition to threats to personal safety, the bill includes situations where there is a threat to personal health or other hazardous conditions discovered on the property. This allows for extraordinary expenses related to health and safety hazards to be addressed more quickly.

SB 477 Accessory Dwelling Units.

Amends Civil Code Sections 714.3 and 4751 of the Civil Code; Amends Sections 65582.1, 65583, 65583.2, 65585, 65589.4, 65589.9, 65852.1, 65852.21, 65852.27, 65863.3, 65913.5, 66411.7, 66412.2, and 66499.41 of, to add Chapter 13 (commencing with Section 66310) to Division 1 of Title 7 of, and to repeal Sections 65852.150, 65852.2, 65852.22, 65852.23, and 65852.26 of, the Government Code; to amend Sections 18214, 50504.5, 50515.03, 50650.3, 50843.5, and 50952 of the Health and Safety Code; to amend Sections 10238 and 21080.17 of the Public Resources Code; and to amend Section 10755.4 of the Water Code

This bill primarily focuses on non-substantive changes and reorganization of existing provisions related to the creation and regulation of accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs) in residential zones.

The bill reorganizes various existing provisions that govern the creation and regulation of ADUs and JADUs. This could involve restructuring the legal language and clarifying the relationship between local ordinances and ministerial approvals, but without introducing significant new rules or standards.

The bill makes non-substantive changes to the existing law. These changes may include updates to language or formatting for clarity, but they don’t alter the intent or requirements of the law.

The bill includes a declaration that it will take effect immediately as an urgency statute, meaning it will become law right away upon passage, rather than waiting for the usual legislative timeline.

SB 1211 Land Use: Accessory Dwelling Units: Ministerial Approval.

Amends Government Code Sections 66313, 66314 and 66323

The bill introduces new provisions regarding Accessory Dwelling Units (ADUs). These changes are aimed at streamlining the ADU approval process and expanding the opportunities for ADUs in both single-family and multifamily residential areas, with a focus on reducing local regulatory barriers.

In addition to the existing law, which prohibits local agencies from requiring the replacement of offstreet parking spaces when a garage, carport, or covered parking structure is demolished in conjunction with an ADU, this bill extends that prohibition to also include uncovered parking spaces. This means local agencies cannot require the replacement of uncovered parking spaces when demolished for the construction or conversion of an ADU.

The bill prohibits local agencies from imposing any objective development or design standards that are not specifically authorized by the law on any ADU that meets the requirements for ministerial approval. This means local agencies can no longer create additional rules or restrictions beyond those explicitly stated in the law for ADUs that are eligible for streamlined approval.

The bill defines “livable space” for ADUs, specifying that it refers to space intended for human habitation, which includes areas for living, sleeping, eating, cooking, or sanitation. This clarification ensures consistency and clarity in how ADUs are assessed and approved, especially in relation to whether space in a dwelling qualifies for ADU conversion.

Under the existing law, a local agency could approve up to 2 detached ADUs on a lot with an existing multifamily dwelling. This bill increases the allowable number to up to 8 detached ADUs, provided that the total number of ADUs does not exceed the number of existing dwelling units on the lot. For lots with a proposed multifamily dwelling, the bill allows up to 2 detached ADUs, as opposed to previously limiting the allowance.

By imposing new duties on local governments regarding the approval of ADUs, such as prohibiting additional local development standards and expanding the number of allowable detached ADUs, the bill creates a state-mandated local program. The bill specifies that no reimbursement is required for local agencies and school districts for the costs incurred due to the changes introduced by this bill. This is because of a specific provision in the law.

 

CORPORATE TRANSPARENCY ACT

On December 3, the U.S. District Court for the Eastern District of Texas issued a preliminary nationwide injunction in the case Texas Top Cop Shop, Inc. v. Garland, blocking enforcement of the Corporate Transparency Act (CTA). The court granted the plaintiffs’ request, halting the U.S. Department of Treasury from enforcing the act’s beneficial ownership information reporting requirements. Judge Amos L. Mazzant III ruled that reporting companies, including community associations, need not comply with the January 1, 2025, deadline for reporting beneficial ownership information until further court orders.

Prior to the recent Court decision, community associations and management companies were required to file Beneficial Ownership Information on an annual basis. The Beneficial Ownership Information included providing the business name, the legal name, birthdate, home address, driver’s license or passport numbers of Association board members and those individuals in substantial control.

The injunction applies nationwide, impacting all entities required to comply with the CTA, including community associations. Organizations involved in advocating for Common Interest Developments (CID) were generally opposed to the CTA and support the injunction, as the act’s requirements are seen as burdensome for community associations, which differ from traditional businesses. CID advocacy groups continue to seek for a full repeal or exemption of the act to protect privacy and avoid undue burden on volunteer association board members.

The plaintiffs in this case raised constitutional concerns, arguing that the CTA oversteps Congressional authority, infringes on the right to free association, and violates the Fourth Amendment by forcing the disclosure of private information. The court’s ruling referenced similar arguments in an ongoing lawsuit in Virginia.

On December 23, 2024, the Fifth Circuit Court of Appeals granted the government’s emergency stay over the injunction issued by the U.S District Court for the Eastern District of Texas. The Court stated that the Government demonstrated that a stay is warranted. After the stay, the Treasury Department/Financial Crimes Enforcement Network extended the Corporate Transparency Act compliance deadline to January 13, 2025

This development is not a final ruling on the CTA’s constitutionality which continues to be ongoing. Organizations involved in advocating for CID’s remain opposed to the CTA and will proceed forward with their claims, continuing to seek a full repeal or an exemption for associations.

On December 26, 2024, the Fifth Circuit Court of Appeals reinstated the nationwide injunction, meaning Owners Associations do not need to report beneficial ownership information, currently. The Court mentioned they reinstated the injunction “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” Again, this decision is not final as the Court is waiting to determine the substantive arguments before proceeding with requirements for reporting beneficial ownership information.

It would be prudent for associations to gather all necessary identification documents that are needed for reporting beneficial ownership information. This ensures that if the injunction is lifted after the substantive arguments are heard, associations will not miss the deadline for filing beneficial ownership information.

 

STATUTES NOT SIGNED BY GOVERNOR NEWSOM

AB 2149 Gates: standards: inspection.

Amends Civil Codes Section 3496 and adds Part 5.6 (commencing with Civil Code Section 7110) to Division 4 of the Civil Code.

This bill introduces several new requirements and regulations regarding the installation, inspection, and maintenance of “regulated gates” on real property, with a focus on public safety.

A “regulated gate” is defined as any gate that weighs more than 50 pounds and is more than 48 inches wide or 84 inches high, and is intended to be used by the public, a community, or a large group of people. This applies unless otherwise specified. The bill requires that all newly installed regulated gates meet certain standards. If it had been signed into law by the Governor, these standards would have been implemented by local building departments by July 1, 2026, and updated in the building code requirements for their jurisdiction. The bill also requires owners to maintain a written compliance report for at least 10 years for regulated gates.

Owners of regulated gates would have been required to have their gates inspected by July 1, 2026, or upon installation, and then reinspected at least once every 10 years. The owners must also maintain a written report detailing the gate’s compliance with these standards for at least 10 years and provide it to building departments upon request. If an inspection determines that a regulated gate poses an immediate safety threat, the owner must immediately cease its use until necessary repairs are made. A contractor or qualified employee must be engaged to address the emergency condition.

 

SB 1470 Construction Defect Cases.

Amends Civil Code Sections 895, 896, 897, 916, 921, 926, 927, 933, 934 and 945.5

The new provisions introduced in this bill would have made several changes to the process of handling construction defect claims and liability for deficiencies in residential construction. These changes aim to improve the process of addressing construction defects by ensuring repairs are properly inspected and compliant with building codes, while providing builders with clearer defenses and streamlined procedures for resolving disputes.

If it had been signed into law by the Governor, for a builder to be liable for deficiencies in construction, the deficiency must materially affect the habitability or usefulness of the residential dwelling unit. The deficiency must also result from a failure to meet the standard of care, which is defined as the level of care typically expected in the industry for similar work performed in the state.

The bill required the participation of a special inspector in the inspection and approval of any repair work performed under prelitigation procedures. This ensures that repairs are appropriately inspected and meet the required standards. The builder must obtain and pay for a building permit to perform the repair work. This ensures that repairs comply with local building codes and regulations. A local permitting authority must issue the building permit within 30 days of receiving the application, creating a new state-mandated local program for timely processing of permits.

The bill allows the builder to obtain a release or waiver from the claimant after completing the repair work, which was previously prohibited under existing law. The bill removes the previous provisions about the claimant needing to show that repair work caused further damage. Instead, it now allows the building permit and special inspector’s reports to be introduced as evidence in an enforcement action, potentially improving the transparency of repair work.

The bill adds new affirmative defenses for builders in construction defect enforcement actions. If the builder complies with the required building permit for repairs, it may be used as a defense. If the builder receives approval from the special inspector for the repairs, this can also serve as a defense.

If the Commission on State Mandates determines that the bill imposes costs on local agencies (such as issuing building permits), the state will be required to reimburse these costs under established procedures.