SB-1238 (Wahab) Common interest developments: management.

Would redefine a managing agent and limit the association’s ability to use reserve funds for litigation.

Current Status: Pending

FindHOALaw Quick Summary:

The Davis-Stirling Common Interest Development Act (“Act”), provides for the creation and regulation of common interest developments. Existing civil law defines an agent as one who represents another, called the principal, in dealings with third persons.

This bill would amend Civil Code Section 2295 to revise the above-described definition of agent to include a person or company that facilitates activities pursuant to specified provisions of the act and that is required to provide a fiduciary duty to the board of a homeowner’s association and its members.

Existing law defines “management services” for purposes of a common interest development to mean specified acts performed or offered to be performed in an advisory capacity for an association, including implementing provisions of governing documents for the operation of the common interest development.

This bill would amend Business & Professions Code 11500 to revise the above definition to specify that it means acts performed or offered to be performed by an agent, as defined above, in an advisory capacity for an association.

Existing law defines “professional association for common interest development managers” to mean an organization that meets all of specified criteria, including having at least 200 members or certificants who are common interest development managers in California.

This bill would amend Business & Professions Code 11500 to revise that definition to specify that it means an organization that employees an agent or agents, as defined, and that meets the above mentioned criteria.

Existing law requires the owner of a separate interest in a common interest development to provide specified documents to a prospective purchaser as soon as practicable before the transfer of title or execution of a real property sales contract, including a copy of all the governing documents for the association.

This bill would amend Civil Code Section 4525 to require the owner to provide additional information to a prospective purchaser, including, among other things, a separate disclosure regarding exterior elements and units requiring imminent repairs, if the association employs an association manager or management company.

Existing law prohibits the board of a common interest development from expending reserve funds for other than specified purposes, including repair, replacement, or maintenance of, or litigation involving major components, that the association is obligated to repair, replace, or maintain, and for which the reserve fund was established, subject to certain exceptions.

This bill would amend Civil Code Section 5510 to prohibit the board from expending reserve funds for other litigation, legal services, or to threaten litigation involving any real property owner of record or relative of the real property owner of record that is a member of the homeowner’s association.

The bill would make various other related and conforming changes to Civil Code Sections 5550, 5551, 5560, 5565, and 5570 regarding reserve studies and exterior elevated elements.