2020 Legislation Update

By Nathan R. McGuire, Esq.
ADAMS|STIRLING PLC

October of last year marked the end of the legislative session in California and Halloween was a fitting backdrop for some of the year’s nightmarish results. While there was good mixed in with the bad, some of the legislation passed this year could turn out to be the most challenging ever to community associations, including SB 323 and AB 670. CAI’s California Legislative Action Committee (CAI-CLAC) fought hard and had great success in light of overwhelming political obstacles. Believe it or not, the horrific aspects of SB 323 would have been doubly dreadful if not for staunch opposition from CAI-CLAC.

Senate Bill 323 – Elections and E-mail Address Disclosure
Last year I talked about the defeat of SB 1265, which sought to interfere unnecessarily with community association elections. Governor Brown vetoed the bill, stating:

“California has over 50,000 common interest developments varying in purpose and size. Each one has governing documents that are tailored specifically for that individual community. This bill takes a once-size-fits-all approach, but not all homeowner associations are alike. If changes to an election process are needed, they should be resolved by the members of that specific community.”

Unfortunately, the message was not received in Sacramento. Like a zombie rising from the crypt, with no brains or purpose but to wreak havoc, SB 1265 clawed its way back in the form of SB 323. As a result of unprecedented bad drafting and illogical requirements, attorneys and other professionals have been working hard trying to decipher all of maniacal traps and survive the house of mirrors.

First and foremost, everyone should know that every association in California is required to adopt new election rules to comply with SB 323, which, among other things:

• Specify candidate qualifications, subject to the following:
  • must disqualify anyone not a member at the time of nomination (except developer nominations if otherwise permitted in the documents);
  • entity owners may appoint a natural person for nomination or service as a director;
  • if stated in the bylaws or election rules, may disqualify:
    • persons delinquent in the payment of regular or special assessments, except if assessments are paid under protest or pursuant to a payment plan;
    • joint owners from serving on the board at the same time; or
    • someone who has been a member for less than a year.
  • may not disqualify anyone for nonpayment of fines, fines characterized as assessments, collection charges, late charges or costs levied by a third party (management companies e.g.).
• Require retention of, as election materials, a candidate registration list and voter list. The voter list must the name, voting power, and physical address or parcel number or both, and the mailing address in some cases.
• Must make candidate registration list and voter list available to members to verify accuracy the member's information at least 30 days before ballots are distributed.
• Provide general notice (or individual notice if requested) at least 30 days before nomination deadline of the procedure and deadline for submitting a nomination.
• Provide general notice (or individual notice if requested) at least 30 days before ballot distribution of the following:
  • date, time and physical address to return ballots; 
  • date time and location of ballot counting meeting;
  • a list of candidates’ names that will appear on the ballot.
• Mandate the inspector of elections deliver to each member by individual delivery (or website posting when specified wording regarding website posting is state on the ballot) the ballots and a copy of the election operating rules at least 30 days before an election.
• Prohibit the denial of a ballot to a member for any reason and to a person with general power of attorney for a member.
• Require the sealed ballots, signed voter envelopes, voter list, proxies, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would, with certain exceptions, require these association election materials to be considered association records, as defined, subject to inspection and copying.
• Allow someone with a general power of attorney to vote for a member.
• May not be amended less than 90 days before an election.

The failure to adopt compliant election rules could make an association’s future elections subject to successful challenge. With the additional requirements, the time it takes to complete an election and the cost will double. Here are some more elements:

• Elections will now take more than 100 days.
• Elections must be held at minimum every four years. It isn’t clear what this means for associations which struggle to ever meet quorum.
• The inspector of elections must be an entity or individual with no previous contractual relationship with the association, which disqualifies managers, attorneys and accountants, among others. This will be a new cost for many associations.
• When a court finds that election procedures were not adopted or adhered to, it shall void the election results unless the association establishes that its noncompliance did not affect the election results. It allows a member to be awarded attorneys’ fees for consulting an attorney for small claims court.
• Owners may review the signatures of all other owners on the outside mailing envelopes voter list, including parcel numbers. As a condition of casting a ballot, homeowners must give up their right to keep their signatures private.

The bill also makes members’ email addresses part of the membership list available to all other members, upon request. Members can opt out of having their e-mail addresses included with the membership list, but the bill makes NO allowance for e-mail addresses which have already been provided to associations. Associations should consider providing notice and the opportunity to opt-out to members who previously provided their e-mail addresses and didn’t realize at the time that they would later be handed over to any member.

The bill leaves many questions unanswered, including:

• How do associations with elections scheduled in Q1 of 2020 possibly comply?
• How will associations possibly conduct recall elections in 90 days?
• Are term limits still valid?
• Are director qualifications different from candidate qualifications?
• Are the stated qualifications exclusive?
• Are homeowner volunteer election inspectors protected in any way in the event of litigation?

Assembly Bill 670 – Accessory Dwelling Units
This bill, which was opposed by CAI-CLAC, makes any provision in a community association’s governing documents void and unenforceable if it prohibits the construction of accessory dwelling units or junior accessory dwelling units. An “accessory dwelling unit” or “ADU” is a second unit on a lot, either detached or contained within the walls of the house on the lot, up to 1,200 square feet, and including cooking, sleeping, and bathroom facilities. Accessory dwelling units may also have relaxed setback and parking requirements. A “junior accessory dwelling unit” may be up to 500 square feet and must have an outside entrance and cooking facilities, but may share bathroom facilities with the main house on the lot.

ADU companion bills signed by the Governor include:

• AB 68 makes major changes to facilitate the development of more ADUs and address barriers to building. The bill reduces barriers to ADU approval and construction, which will increase production of these low-cost, energy-efficient units and add to California’s affordable housing supply.
• AB 587 provides a narrow exemption for affordable housing organizations to sell deed-restricted land to eligible low-income homeowners.
• AB 671 requires local governments’ housing plans to encourage affordable ADU rentals and requires the state to develop a list of state grants and financial incentives for affordable ADUs.
• AB 881 removes impediments to ADU construction by restricting local jurisdictions’ permitting criteria, clarifying that ADUs must receive streamlined approval if constructed in existing garages, and eliminating local agencies’ ability to require owner-occupancy for five years.
• SB 13 creates a tiered fee structure which charges ADUs more fairly based on their size and location. The bill also addresses other barriers by lowering the application approval timeframe, creating an avenue to get unpermitted ADUs up to code, and enhancing an enforcement mechanism allowing the state to ensure that localities are following ADU statute.

 Townhomes with garages and single-family planned developments will face significant challenges complying with the new laws. Garage conversions and backyard ADUs will exacerbate parking problems, increase the burden on existing amenities, impact rules enforcement, and complicate security.

Many associations already have parking problems. ADUs will exacerbate the problem. Associations that require cars be parked in garages may not be able to use the requirement to stop garage conversions. The bill allows one accessory dwelling unit and one junior accessory dwelling unit per lot. That means owners can potentially convert their garage into a JADU and build an ADU in their backyard. In addition, if owners want to create parking additional on their lots, the bill allows for parking in setback areas. That means more vehicles can be parked on a lot and parked closer to neighboring houses.

The bill does allow reasonable restrictions as long as the restrictions don’t unreasonably increase the cost or effectively prohibit the construction of an ADU or JADU. This means associations should be able to make requests go through a standard architectural request process and the association will have a say in things like the aesthetic harmony with existing structures and location.

Assembly Bill 326 – Balcony Inspections
This bill has two parts. First, starting in 2025, condominium associations must have visual inspections of load-bearing components (six feet above ground, supported entirely or substantially by wood) and associated waterproofing systems every nine years. An inspector must submit a report to the board providing the current physical condition and remaining useful life of the load-bearing components and associated waterproofing systems.

Inspection obligations apply only to buildings with three or more multifamily dwelling units.

The declarant or developer of a condominium project must submit a complete set of architectural and structural plans and specifications to an association for any buildings containing exterior elevated elements, as specified.

The second part of this bill voids developer imposed CC&R provisions requiring a vote of the membership to initiate an action against the developer for construction defects as well as any provision that restricts the board's authority to retain legal counsel or incur expenses to pursue a claim. 

Assembly Bill 5 – Employee Classification
This bill codifies the strict “ABC” test for employee versus independent contractor classification adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court. All workers are presumptively considered employees and may only be classified as independent contractors if the hiring business demonstrates the worker satisfies each of three conditions: (i) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (ii) the worker performs work that is outside the usual course of the hiring entity's business, and (iii) the worker is customarily engaged in an independently established trade, occupation, or business. The hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an employee, rather than independent contractor. This bill could impact associations which rely independent contractors for services.

Senate Bill 652 – Display of Religious Items
Senate Bill 652 prohibits restrictions on the display of religious items on entry doors and door frames of dwellings, provided the item is displayed because of sincerely held religious beliefs. The item displayed can have dimensions up to 3 feet by 1 foot in size. CAI-CLAC was successful in obtaining an amendment to the bill which ensures associations can require the religious items to be removed for maintenance or replacement of the door.

Conclusion
This year, more than any in recent memory, will require associations to take action to comply with the legal changes, especially the scary ones. Associations should consult with professionals, including legal counsel, to ensure compliance. Finally, CAI-CLAC will consider seeking amendments to SB 323. Problems, issues, and other ideas should be submitted to CAI-CLAC’s Legislative Strategy & Research Committee at [email protected]. Data will be critical to the success of any effort to fix SB 323.

Nathan R. McGuire is a partner with Adams | Stirling, PLC, in charge of the firm’s Northern California offices, and currently serving as Chair of CAI-CLAC. You can reach Nate at [email protected] or (800) 464-2817.