New Laws taking effect January 1, 2019 and Impacting Community Associations

 New Laws taking effect January 1, 2019 and impacting Community Associations

 By: Robert D. Hillshafer, Esq.

David A. Loewenthal, Esq.

Barbara A. Higgins, Esq.

Loewenthal, Hillshafer & Carter, LLP




AB 1766.   Required Pool Safety Equipment.  This law will require that entities with defined public swimming pools which have lifeguard services and charge a direct fee, must also provide an Automated External Defibrillator (AED) during pool operations.  Note: This law should only apply to Associations which use lifeguards and charge a fee for pool use by non-members (who are considered members of the public).  [Added as Health & Safety Code Section 118046.]

AB 2353.  Construction Defect Inspections.  This law provides that inspections to determine the existence of and method of repairs of defects must be conducted by a person licensed pursuant to the Contractor’s State License Law with a license that applies to the field and scope in which the person is conducting the inspection and issuing inspection findings or a report. [Added as Civil Code Section 916.5.]

AB 2912.   Association Finances.  This law is intended to protect the owners in a common interest development (“CID”) from fraudulent activity by those entrusted with the management of the Association’s finances. It prohibits transfers of greater than $10,000 or 5% of the total combined reserve and operating accounts, whichever is lower, without prior written, board approval. It also requires the Association to maintain fidelity bond coverage, that is equal to or more than the combined amount of the reserves of the association and total assessments for three months. The Association’s fidelity bond shall also include computer fraud and funds transfer fraud. If the Association uses a managing agent or management company, the association’s fidelity bond coverage shall additionally include dishonest acts by that person or entity and its employees. It requires that a managing agent who accepts or receives funds belonging to the association, upon written request by the board, to deposit those funds into an interest-bearing account in a bank, savings association, or credit union in California, provided certain requirements are met.  The Board must now review various financial documents and statements on at least a monthly basis, including the check register, monthly general ledger, and delinquent assessment receivable reports. These requirements may be met when every member of the Board, or a subcommittee of the Board including the Treasurer and at least one other board member, reviews these documents and statements independent of a board meeting, if the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.  [An act to amend Sections 5380 and 5500 of, and to add Sections5501, 5502, and 5806 to the Civil Code.]  SignificanceThis new law significantly increases the financial review requirements of HOA boards of directors, limits automatic transfer of funds without board approval, and requires the HOA to purchase and maintain a fidelity bond. Note that many CCRs already require procurement of Fidelity Bonds for three months of assessments.

AB 3041.  Real Property Transfer Fees.  (Civil Code Section 1098.6).  Except as provided specifically in the bill, this new law prohibits the CC&Rs from imposing transfer fees in connection with the sale of residential real estate.

SB 261.  Governance/Notice Requirements.  If an Association is required to deliver a document by “individual delivery” or “individual notice,” this bill now authorizes the Association to use email if the member provides consent to receive such delivery by email until that consent is revoked.  In addition, the notice period (comment period) requirement for proposed operating rule changes is reduced from 30 to 28 days. [Amends Sections 4040 and 4360 of the Civil Code.]  Significance: This common-sense law could save Association’s significant postage expense and will allow needed rules to be adopted in a timely fashion without undue delay.

SB 721.  Balcony Inspection & Repair.  (Health and Safety Code 17973). This bill requires an inspection of exterior elevated elements and associated waterproofing elements, as defined, including decks and balconies, for buildings with 3 or more multifamily dwelling units by a licensed architect, licensed civil or structural engineer, a building contractor holding specified licenses, or an individual certified as a building inspector or building official, as specified. The bill requires, among other things, the inspections, including any necessary testing, must be completed by January 1, 2025, with certain exceptions, and would require subsequent inspections every 6 years, except as specified.  Immediate hazard conditions require a 15-day notice mandate to local enforcement agency to send out a 30-day corrective notice to building owners, subject to civil penalties and liens, for lack of timely compliance. Most nonemergency repairs need to be completed within 120 days or four months.  The Good News:  The bill excludes common interest developments from these provisions.  However, any proposed condo conversion buildings to be sold to the public after January 1, 2019, must have the required inspection conducted prior to the first close of escrow of a separate interest in the project, and requires the inspection report and written confirmation by the inspector that any recommended repairs or replacements have been completed to be submitted to, among others, the Department of Real Estate and included in certain required statements and reports, as specified.  Significance: HOAs scored a major victory with this bill when common interest developments were removed from its onerous, expensive inspection and repair requirements.


SB 954.  Mediation Confidentiality Disclosure.  (Evidence Code Section 1122) Under existing law, anything said in the course of a mediation consultation or in the course of the mediation is not admissible as evidence nor subject to discovery, and all communications, negotiations, and settlement discussions by and between participants or mediators are confidential. This new law requires an attorney proposing participation in mediation, to provide his or her client, as soon as reasonably possible before the client agrees to participate in the mediation or mediation consultation, with a printed disclosure containing the confidentiality restrictions related to mediation, and to obtain a printed acknowledgment signed by that client stating that he or she has read and understands the confidentiality restrictions.  Significance:  It should make participants in mediation better informed as to the mediation process and should allow for greater candor in settlement discussions.

SB 1016.  Electric Vehicles.  This law makes minor changes to Civil Code Sections 4745 and 4745.1 by specifying that homeowners must bear the costs associated with the installation and electrical usage of electric vehicle charging stations placed in a common area or an exclusive use common area.  The law would require the owner of the charging station, wherever located within the common interest development, to maintain a liability coverage policy, and provide the association with a corresponding certificate of insurance. A prevailing homeowner who sues over a request to have installed an electric vehicle charging station is entitled to attorneys’ fees, as is the Association if it prevails in an enforcement action. Any covenant, restriction, or condition contained in any document affecting the transfer or sale of any interest in a common interest development, or any provision of the CID’s governing documents, that effectively prohibits or restricts the installation or use of an electric vehicle charging station within an owner’s unit or of an EV-dedicated TOU meter, as defined, is void and unenforceable.  [Enacted to amend Section 4745 of the Civil Code and add Section 4745.1.]


SB 1128.  Governance – Elections/Board Member Qualifications/Notices

This bill proposed that automatic election to the Board if the number of qualified nominees was equal to or less than the number of available seats on the Board in theory, to order avoid costly expenses to Associations that didn’t have contested elections.  It also would have included overreaching candidate qualification and voting requirements and would have allowed members to consent to receiving HOA notices by email, (and to rescind that consent via email).

SB 1265.  Homeowner Voting & Privacy Issues/Candidate Qualifications

This bill would have taken away Association’s rights to decide on preferred qualifications for Board candidates, and would have allowed convicted felons to run for the Board with certain exceptions, and also allowed owners who had not paid their assessments to run. The bill threatened homeowner privacy rights by allowing any owner to review and copy proxies and ballot envelopes with owners’ addresses and signatures, post the names and parcel numbers of all those eligible to vote, and would have significantly increased costs, including the hiring of an election inspector and additional mailings, and allowance of attorneys’ fees for an owner consulting with an attorney prior to small claims court, in the event of a dispute.  The bill shifted the burden of proof in a civil action to the HOA to prove that an election violation did not occur, which is unreasonable when it is the homeowner filing the lawsuit.