2021 was the most positive legislative year for California HOAs in a very long time. Today’s column summarizes four helpful changes to California law, one of which is already in effect.
Senate Bill 391 took effect immediately once Gov. Gavin Newsom approved it Sept. 23. It allows HOAs during times of declared emergency to hold purely virtual meetings (without the normal requirement of a physical location where members can choose to observe). Notice of the first virtual meeting must be announced to all members by mail, including the contact information of someone who can help with log-in difficulties, and all votes in purely virtual meetings must be by roll call.
Assembly Bill 1101, sponsored by the Community Associations Institute, makes several changes regarding the safekeeping of HOA funds. The current Civil Code Section 5380(b)(6) requirement of board approval for fund transfers (including payments) now varies based on the HOA’s size.
HOAs of 50 or fewer members must have board approval for transfers of either $5,000 or 5% of the HOA estimated annual income (whichever is less), and HOAs with more than 50 members must have board approval increases starting at the lesser of $10,000 or 5% of the HOA estimated annual income.
Several prior exceptions to the rule against commingling HOA funds have been deleted, and the requirement of dishonesty insurance has been clarified to be more consistent with insurance terminology.
SB 392, sponsored by the California Association of Realtors, continues to move toward electronic communication.
Starting in 2023, owners can choose whether they wish to receive individual notifications from the HOA by postal and/or electronic mail. If they do not choose, the default method of communication is still postal mail. The remainder of the bill is effective in 2022.
A new 4045(a)(5) is created, permitting HOAs to make general notices on the HOA’s website. New subparts (c) and (d) are added to Civil Code Section 5230, barring the HOA or its management from selling member information to a third party without member consent. (Some management companies have been doing this under their contracts, without full disclosure to the membership).
Associations and their management firms should encourage members to accept communications electronically. The cost, material, and time expended in sending postal mail can be substantial for larger HOAs. These days, where everyone not only has email but accesses it on their smartphones, email should become the primary mode of HOA communication.
AB 1584 helps correct a problem regarding the correction of illegal rental restrictions. Last year’s SB 3182 added Civil Code Section 4741, barring “unreasonable” restrictions against HOA rentals and requiring HOAs to amend their governing documents before 2022 to correct any unreasonable restrictions.
Many lawyers incorrectly told their clients the law required HOAs to amend their CC&Rs although rules are also “governing documents.” This is expensive and often impossible due to member disinterest. AB 1584 opens a six-month window starting Jan. 1, 2023, and concluding July 1, 2023, in which HOA boards can amend CC&Rs without a membership vote solely to remove provisions violating Section 4741. This should not be attempted without competent legal advice.
Dear Legislators: Thanks for the help this year. Now, how about letting HOAs vote electronically???
Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober DeNichilo LLP, a law firm known for community association advice. Submit questions to Kelly@rodllp.com.
