2022 Legislation: Insight and Legal Update
By Nathan R. McGuire, Esq.
This article first appeared in the Winter 2022 Issue of The Communicator here.
On balance, the industry fared well in this last legislative session. The prior two years in a row, we faced some of the most historically significant bills since the Davis-Stirling Act came into effect in 1986. And we’re still dealing with those bills (think SB 323, AB 670, AB 3182). That’s saying a lot considering the Davis-Stirling Act has been perpetually amended year after year. Overall, the legislature continued to focus on COVID-19, economic recovery, and housing affordability issues. But the legislature was also able to fit in bills on other topics, including many which will have a lasting impact on community associations.
CAI’s California Legislative Action Committee monitored more than 50 bills and engaged on at least 10 of them. We had an outstanding year as we continued to pivot and take advantage of virtual legislative opportunities and we had a higher level of grassroots participation than ever before. We were successful on multiple fronts – successfully sponsoring bills, making improvements to bills, cleaning up prior legislation, and helping to defeat bills (or clarifying that they don’t apply to community associations). Some of the highlights include election by acclamation, virtual meetings in emergency situations, SB 323 (elections) clean-up, AB 3182 (rental restrictions) clean-up, and emotional support animals. Read on to learn what you need to know. Unless otherwise specified, each bill is effective January 1, 2022.
LEGISLATION
AB 468. Emotional Support Animals: Among other things, the bill prohibits a health care practitioner from providing documentation relating to an individual’s need for an emotional support dog unless the health care practitioner complies with specified requirements, including holding a valid license, establishing a client-provider relationship with the individual for at least 30 days prior to providing the documentation, and completing a clinical evaluation of the individual regarding the need for an emotional support dog. This bill does not restrict or change existing federal and state law related to a person’s rights for reasonable accommodation and equal access to housing. As a result, community associations should be able to ask for additional information as part of the interactive process in determining whether to grant a reasonable accommodation due to disability.
AB 502. Election by Acclamation: Existing law permits election by acclamation for large associations (6,000 or more units). This bill, which was supported by CLAC, gets rid of the size limit, so all associations can now utilize election by acclamation. This means that if the number of candidates for a director election is less than or equal to the number of open seats, the association can forgo having an election, provided the association follows the specified process and provides certain notices. An association can only do election by acclamation if it has successfully held (had a quorum for) a regular election for the directors in the last three years. The three-year time period is to be calculated from the date ballots were due in the last full election to the start of voting for the proposed election. The first notice must be sent at least 90 days prior to the deadline for submitting nominations. A reminder notice must be sent 7-30 days before the deadline for submitting nominations.
AB 611. Safe at Home Program: The Safe at Home Program, established in 1998, offers victims of domestic violence, stalking, sexual assault, human trafficking, elder and dependent abuse, as well as reproductive health care workers a substitute mailing address to receive first class, certified, and registered mail. This address is also accepted by California state, county, and city government agencies in lieu of a residential or other mailing address where a victim can be tracked down, keeping the residence address confidential and out of the hands of someone who might want to harm the victim. This bill requires, upon request of a participant in the Safe at Home program, that a community association accept and use the address designated by the Secretary of State as the Safe at Home participant’s substitute address for association communications and to withhold or redact information that would reveal the name, community property address, or email address of the Safe at Home participant in specified communications of the association. Community associations should be prepared to comply prior to receiving a request.
AB 1101. Funds; Insurance: This bill, sponsored by CLAC, cleans up AB 2912, which was designed to safeguard a community association’s finances from fraud and embezzlement. The bill requires funds accepted or received by a managing agent on behalf of the association, as specified, to be deposited in a bank, savings association, or credit union insured by the Federal Deposit Insurance Corporation, National Credit Union Administration Insurance Fund, or the Securities Investor Protection Corporation. AB 2912 prohibited transfers of greater than $10,000 or 5 percent of an association’s total combined reserve and operating account deposits, whichever is lower, without written approval from the board. Because it was sometimes challenging to determine whether the threshold applied, and because it was constantly changing, this bill establishes a threshold which is determined annually based on the size of the association. It prohibits transfers of funds out of the association’s reserve or operating accounts unless the amount of the transfer is the lesser of five thousand dollars $5,000 or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests; or the lesser of $10,000 or 5 percent of the estimated income in the annual operating budget, for associations with 51 or more separate interests, without prior written approval from the board. This bill also requires crime insurance, employee dishonesty coverage, and fidelity bond coverage, or their equivalent, for the association and its managing agent or management company and requires the protection against computer and funds transfer fraud to be in an equal amount.
AB 1124. Solar Energy Systems: This bill amends Civil Code section 801.5 and Government Code section 66015 related to solar energy systems. Among other things, it revises the definition of "solar energy system." The definition now incorporates certain structural design features, including solar racking, solar mounting, and elevated solar support structures, as specified, regardless of whether the feature is on the ground or on a building. This will make it harder for community associations to restrict the location of solar energy systems.
AB 1466. Discriminatory Restrictions: This bill makes it easier to delete discriminatory provisions in recorded documents by authorizing a title company, escrow company, county recorder, real estate broker, real estate agent, or other person to record a "Restrictive Covenant Modification" to delete such provisions. The necessary forms are required to be provided in certain situations, starting July 1, 2022, including when a homeowners association delivers a copy of recorded CC&Rs believed to contain such provisions. This bill also requires the county recorder of each county to establish a restrictive covenant program to assist in the redaction of unlawfully restrictive covenants.
AB 1584. Housing Omnibus Bill – Rental Restrictions: This bill includes changes to numerous areas of the law. With respect to community associations, it cleans up AB 3182 related to rental restrictions, which created significant limits on rental restrictions and required associations to amend conflicting provisions of their governing documents by December 31, 2021, to conform with the law. This bill clarifies that the board, without approval of the members, may amend any declaration or other governing document to conform any rental restrictions with the requirements of AB 3182. The bill also extends the compliance date to no later than July 1, 2022 and sets out a process which resembles the process for adopting operating rules. In order to amend without member approval, the board must provide a general notice of the amendment at least 28 days before approving it and any decision on the amendment must be made at a board meeting, after consideration of any comments made by association members. Associations should consult with legal counsel to determine if any conflicting governing document provisions need to be confirmed.
SB 9. Lot Splits in Residential Communities: This bill requires a city or county to ministerially approve duplex units and/or the subdivision of one lot into two lots, in spite of contrary residential zoning (i.e., R1) requirements. This could lead to up to four homes (plus ADUs) where one would otherwise sit. Fortunately, the bill does not apply to community associations. In a letter dated August 30, 2021, to the Senate Journal, Senator Atkins, the author of the bill, clarifies, "SB 9 would not override CID or HOA restrictions. Specifically, SB 9 is silent on the issue, meaning the bill contains no provisions that supersede HOA or CID governing documents. As we have seen with other housing legislation, SB 9 would have to contain an explicit and proactive provision to override those rules. This bill does not." Boards should confer with legal counsel to determine whether the association has appropriate language in place to appropriately restrict or prohibit lot splits.
SB 10. Housing Developments in Residential Communities: This bill authorizes a city or county to pass an ordinance to upzone any parcel for up to 10 units of residential density, if the parcel is located in a transit-rich area, jobs-rich area or an urban infill area, as defined in the bill, in spite of contrary residential zoning (i.e., R1) requirements. At one point, the bill included language overriding a common interest development’s governing documents, but that language was deleted. As a result, an association’s existing restrictions should still apply. Similarly to SB 9, associations should confer with legal counsel to determine whether they have appropriate language in place to restrict or prohibit lot splits.
SB 391. Emergency Powers and Procedures: This bill, which was supported by CLAC, establishes virtual meeting/teleconferencing procedures for board and membership meetings if the association is in an area affected by a federal, state, or local emergency and it is "unsafe or impossible" to meet in person. Because it was an urgency measure (though long overdue), it took effect immediately upon the signature of the governor on September 23, 2021. If a board would like to transition to virtual meetings, it must provide an initial notice of the decision by individual delivery. The initial notice (provided by individual delivery) and subsequent meeting notices (may be provided by general delivery) must include the following:
- Clear technical instructions on how to participate by teleconference.
- The telephone number and electronic mail address of a person who can provide technical assistance with the teleconference process, both before and during the meeting.
- A reminder that a member may request individual delivery of meeting notices, with instructions on how to do so.
Votes must be conducted by roll call. The meetings may be conducted by video or telephonically. However, if the meeting is conducted by video, there must be a telephone dial-in option. Elections may be conducted virtually, but they must be by video and the camera must be placed in a location such that members can witness the inspector of elections counting and tabulating the votes.
SB 392. Document Delivery: Existing law requires an association to deliver documents required to be delivered by individual delivery or notice, by either first-class mail, postage prepaid, registered or certified mail, express mail, or overnight delivery by an express service carrier or by email, facsimile, or other electronic means, if the recipient has consented, in writing or by email, to receive documents by that electronic means. In other words, the association has the option, but is not required to send documents electronically even if the member has opted in to receive communications electronically. This bill requires, on and after January 1, 2023, an association to deliver those documents by email unless the member has not provided a valid email address to the association or has revoked consent to receiving documents by email, in which case the association would be required to deliver the documents by traditional mail. Continuing the trend toward communicating electronically, the bill also allows an association to deliver a document by general delivery (which traditionally has been done by posting on a bulletin board) by posting in a prominent location on the website that is accessible to all members, if designated as a location for posting general notices in the annual policy statement.
SB 432. HOA Director Elections: This bill, related to AB 502, amends Civil Code §5100 to allow associations to adopt term limits for directors and eliminates the need for a pre-ballot notice in non-director elections. It also clarifies that election rules must require directors to meet the same qualifications as nominees, which was previously unclear after SB 323.
SB 607. Balcony Inspections: The bill makes a number of changes to requirements of various professions and vocations. One of them is to eliminate the prohibition against a contractor who inspects balconies from bidding on the repair work.
Congratulations to CAI-CLAC on a very successful year. We needed a breath and some good news after two tough legislative sessions in a row. Associations should consult with professionals, including legal counsel, to ensure compliance with the new laws. Problems, issues, and ideas should be submitted to CAI-CLAC’s Legislative Strategy & Research Committee at [email protected].
Nathan R. McGuire, CCAL, is a partner with Adams|Stirling, PLC, in charge of the firm’s Northern California offices. He is a Fellow of CAI’s College of Community Association Lawyers and an Emeritus Delegate and past chair of CAI-CLAC. McGuire has served in various capacities on CAI-CLAC for more than 10 years. You can reach him at [email protected] or (800) 464-2817.