DAVIS-STIRLING COMMON INTEREST DEVELOPMENT ACT

Transcription

1 DAVIS-STIRLING COMMON INTEREST DEVELOPMENT ACT AND RELATED CALIFORNIA LAWS 2015 EDITION Compliments of Angius & Terry LLP 1990 North California Boulevard, Suite 950 Walnut Creek, CA Phone: Fax: MacArthur Court, 11 th Floor Newport Beach, CA Phone: Fax: Lava Ridge Court, Suite 130 Roseville, CA Phone: Fax: South Main Street, Suite 328 Manteca, CA Phone: For all locations

2 WHAT IS IN THIS BOOK? The Davis-Stirling Common Interest Development Act ( the Davis-Stirling Act ), the body of California law which has governed California homeowner associations for more than twenty-five years, was repealed as of January 1, 2014 and replaced with a group of statutes which is now known as the Davis-Stirling Common Interest Development Act. The new Davis-Stirling Act was initially drafted by the California Law Review Commission with the aim of making the Davis-Stirling Act more user friendly. This was accomplished by grouping provisions within the Act together in logical order, attempting to clarify unclear or confusing provisions, dividing long sections into shorter sections and utilizing standardized terminology. Some "noncontroversial" substantive changes were also made to the original Act. Associations have been operating under the new Davis-Stirling Act for the last year. Thankfully, as a result of the significant changes which occurred last year, the California Legislature did not need to make as many substantial changes this year. Part I of this booklet contains the text of the Davis-Stirling Act in its entirety. Parts II through IV include certain other California statutes that are either incorporated by reference in the Davis-Stirling Act or which we, at Angius & Terry LLP, have found to be relevant to the management and operation of Community Associations. Please visit our website at for articles, forms, disclosures, and worksheets which may prove useful to boards and association managers. We hope this booklet will assist managers and boards understand and apply this complex body of law. As always we would be pleased to provide guidance on specific legal issues or assist managers and boards in preparing or amending CC&Rs, Bylaws and other governing documents to accurately reflect the requirements of the law. Please recall that last year, the new Davis-Stirling Act created a separate body of law, known as the Commercial and Industrial Common Interest Development Act, which applied to the governance of all such developments within the state. As we did last year, Angius & Terry LLP has created a separate booklet addressing the provisions of this law.

3 WHO IS Angius & Terry LLP? Angius & Terry LLP has over thirty years of experience helping Community Associations and property owners protect their rights. Angius & Terry LLP prides itself on the service and commitment that it offers to its clients. Angius & Terry LLP possesses extensive experience handling the corporate and business affairs of its Community Association clients. This experience includes: Drafting and amending CC&Rs, Bylaws, Articles of Incorporation and other governing documents; Interpretation and enforcement of governing documents; Interpretation of statutes and ordinances as they relate to the management and operation of the Association; Assessment collection and lien procedures; Architectural control committees and compliance; Contract drafting and review; Claims by and against Association vendors, contractors and suppliers. Angius & Terry LLP has recovered hundreds of millions of dollars in Community Association construction defect lawsuits. These lawsuits include two of the largest condominium association construction defect settlements in the history of Northern California and the only Community Association construction defect lawsuit that resulted in the demolition and rebuilding of an entire Community Association development. Angius & Terry LLP s objective is to use the knowledge gained during the litigation process to work with our Community Association clients and their management companies after the lawsuit has concluded. This will ensure that the reconstruction process satisfactorily addresses the Community Association s construction problems. Conclusion of a Community Association s lawsuit does not end our commitment to that Community Association. Angius & Terry LLP offers free initial consultations to Community Association Boards of Directors faced with potential construction defects. In many instances, there are alternatives which, when properly used, can resolve construction defect problems short of litigation. Angius & Terry LLP has been awarded an A-V rating by Martindale-Hubbell, the highest rating given to any law firm in the United States. We are active participants and sponsors of California Association of Community Managers (CACM), Community Associations Institute (CAI), Executive Council of Homeowners (ECHO) and other trade organizations. In addition, we are regularly called upon to advise legislative committees and testify before the California Legislature in connection with bills that impact Community Associations throughout the State. We have also been called upon to provide consulting services to the State Bar of California.

4 PAUL P. TERRY, JR. Mr. Terry specializes in construction, community association and insurance law. In addition to his extensive handling of construction defect cases, he works closely with association management companies and boards of directors in providing both legal and practical advice regarding the day-to-day affairs of their associations, enforcement and revision of governing documents, and delinquent assessment collection. His unique combination of knowledge and experience enabled him to secure the largest condominium construction defect settlement in Northern California history for a firm client. He graduated from the University of California at Irvine in 1980 with degrees in Literature and Economics and received his law degree in 1984 from the University of California, Hastings College of the Law, where he served on the editorial board of the Hastings Constitutional Law Quarterly. Mr. Terry frequently lectures on topics relevant to common interest developments, including new and pending legislation, mediation, effective assessment collection and construction defect litigation. BRADLEY J. EPSTEIN Brad Epstein has been specializing as an attorney in community association law, including construction defect and all general corporate matters for the last nineteen years, since Mr. Epstein has spent his entire career in this specialization with the law firm of Angius & Terry LLP. He became a partner with Angius & Terry in Mr. Epstein provides services to hundreds of associations ranging in size from four residents to over fourteen thousand residents. Brad has recovered more than $80 million dollars in construction defect claims for his association clients. He represents associations in court trials, jury trials, bankruptcy hearings, fair housing mediations, administrative agency hearings, and even board hearings for violating owners. Mr. Epstein regularly participates in continuing education seminars and lectures on the subject of construction defect litigation and community association law. He has published articles in various community association trade organizations, including California Association of Community Managers and chapter newsletters for the Community Association Institute. He has been a president, director, and member of the Community Associations Institute - California North Chapter, and a legislative co-chair of California Legislative Action Committee. JULIE M. MOUSER Ms. Mouser joined Angius & Terry in 1999 and was elevated to partner in She represents community associations and homeowners in complex construction defect litigation and whether through trial, arbitration or settlement, she has successfully recovered in excess of $60 million dollars in construction defect damages on behalf of deserving clients. Ms. Mouser also counsels community associations on general corporate and governance matters, including governing document analysis and interpretation, member discipline, delinquent assessment collection, vendor contract negotiation and administration, insurance coverage issues, and contractual disputes. Ms. Mouser frequently participates in Board Member education seminars and new homeowner orientation seminars. She is affiliated with the Executive Counsel of Homeowners (ECHO), Community Associations Institute (CAI), and California Association of Community Managers (CACM). Ms. Mouser graduated from Central Michigan University with a B.S. in Political Science and attended law school at Santa Clara University School of Law. She was admitted to the State Bar of California in 1998.

5 TABLE OF CONTENTS I. DAVIS-STIRLING COMMON INTEREST DEVELOPMENT ACT... 1 CHAPTER 1. GENERAL PROVISIONS... 1 Article 1. Preliminary Provisions Short Title Effect of Headings Application of Act Construction of Zoning Ordinance Delivered to an Association Individual Notice General Notice Time and Proof of Delivery Electronic Delivery; Requirements Approved by Majority of All Members Approved by Majority of Quorum of Members Article 2. Definitions Application of Definitions Annual Budget Report Annual Policy Statement Association Board Board Meeting Common Area Common Interest Development Community Apartment Project Community Service Organization or Similar Entity Condominium Plan Condominium Project Declarant Declaration Director Exclusive Use Common Area General Notice Governing Documents Individual Notice Item of Business Managing Agent Member Person Planned Development Reserve Accounts Reserve Account Requirements Separate Interest Stock Cooperative CHAPTER 2. APPLICATION OF ACT Application of Act Exemption of Development without Common Area Commercial and Industrial Developments CHAPTER 3. GOVERNING DOCUMENTS... 7 Article 1. General Provisions Document Authority Record Notice of Agent to Receive Payments Liberal Construction of Instruments Compliments of Angius & Terry, LLP i

6 4220. Boundaries of Units Deletion of Unlawful Restrictive Covenants Deletion of Declarant Provisions in Governing Documents Correction of Statutory Cross-Reference Article 2. Declaration Content of Declaration Special Disclosures Amendment Authorized Amendment to Extend Term of Declaration Authorized Amendment Procedure Judicial Authorization of Amendment Article 3. Articles of Incorporation Content of Articles Article 4. Condominium Plan Condominium Plan Recordation of Condominium Plan Amendment or Revocation of Condominium Plan Article 5. Operating Rules Operating rule or Rule change Requirements for Validity and Enforceability Application of Rulemaking Procedures Approval of Rule Change by Board Reversal of Rule Change by Members Applicability of Article to Changes Commenced Before and After January 1, CHAPTER 4. OWNERSHIP AND TRANSFER OF INTERESTS Article 1. Ownership Rights and Interests Ownership of Common Area Appurtenant Rights and Easements Access to Separate Interest Property Article 2. Transfer Disclosure Disclosure to Prospective Purchaser Document Disclosure Summary Form Documents to be Provided by Association; Fee for Providing Requested Documents Related Requirements Enforcement of Article Validity of Title Unaffected Article 3. Transfer Fee Transfer Fee Exemption from Transfer Fee Limitations Article 4. Restrictions on Transfer Grant of Exclusive Use Civil Action to Enforce Section Partition of Condominium Project Lien for Work Performed in Condominium Project Article 5. Transfer of separate Interest Community Apartment Project Condominium Project Planned Development Stock Cooperative Transfer of Exclusive Use Common Area Severability of Interests CHAPTER 5. PROPERTY USE AND MAINTENANCE Article 1. Protected Uses Application of Article Display of United States Flag Noncommercial Sign Pets ii Compliments of Angius & Terry, LLP

7 4720. Roofing Materials Television Antenna or Satellite Dish Marketing Restriction Low Water-Using Plants; Landscaping Rules; Fine or Assessment Proscribed Pressure Washing of Separate Interest and Appurtenant Common Area During Declared Drought Emergency Rental Restriction Electric Vehicle Charging Station Personal Agriculture Article 2. Modification of Separate Interest Improvements to Separate Interest Architectural Review and Decision Making Article 3. Maintenance Maintenance Responsibility Generally Wood-Destroying Pests or Organisms Temporary Removal of Occupant to Perform Treatment of Wood-Destroying Pests Exclusive Use Communication Wiring CHAPTER 6. ASSOCIATION GOVERNANCE Article 1. Association Existence and Powers Association Association Powers Joint Neighborhood Association Article 2. Board Meeting Common Interest Development Open Meeting Act Board Action Outside of Meeting Prohibited Notice of Board Meeting Emergency Board Meeting Board Meeting Open Limitation on Meeting Content Executive Session Minutes Civil Action to Enforce Article Article 3. Member Meeting Member Meeting Article 4. Member Election Application of Article Election Rules Inspector of Elections Voting Procedure Counting Ballots Ballot Retention Proxies Campaign-Related Information Judicial Enforcement Article 5. Record Inspection Definitions Document Time Periods Withholding and Redaction Membership List Opt Out Membership List Request Restriction on Use of Records Enforcement Application of Article Article 6. Recordkeeping Mailing-Related Requests Article 7. Annual Reports Compliments of Angius & Terry, LLP iii

8 5300. Annual Budget Report Review of Financial Statement Annual Policy Statement Notice of Availability Article 8. Conflict of Interest Interested Director Article 9. Managing Agent Prospective Managing Agent Disclosure Trust Fund Account Managing Agent Article 10. Government Assistance Director Training Course State Registry CHAPTER 7. FINANCES Article 1. Accounting Board Review Article 2. Use of Reserve Funds Use of Reserve Funds Temporary Transfer of Reserve Funds Use of Reserve Funds for Litigation Article 3. Reserve Planning Visual Inspection of Major Components and Reserve Study Reserve Funding Plan Summary of Association Reserves Assessment and Reserve Funding Disclosure Summary Community Service Organization Report CHAPTER 8. ASSESSMENTS AND ASSESSMENT COLLECTION Article 1. Establishment and Imposition of Assessments Levy of Assessment Assessment Approval Requirements Emergency Exception to Assessment Approval Requirements Notice of Assessment Increase Exemption from Execution Property Tax Value as Basis for Assessments Article 2. Assessment Payment and Delinquency Assessment Debt and Delinquency Payments Payment Under Protest Notice Prior to Recording a Lien Payment Plan Dispute Resolution Decision to Record a Lien Notice of Delinquent Assessment Lien Priority Lien Release Procedural Noncompliance Article 3. Assessment Collection Collection Generally Decision to Foreclose Foreclosure Right of Redemption after Trustee Sale Limitation on Foreclosure Limitations on Authority to Foreclose Liens for Monetary Penalties and Damage to the Common Area Statement of Collection Procedure Assignment or Pledge Application of Article iv Compliments of Angius & Terry, LLP

9 CHAPTER 9. INSURANCE AND LIABILITY Limitation of Director and Officer Liability Limitation of Member Liability Notice of Change in Coverage CHAPTER 10. DISPUTE RESOLUTION AND ENFORCEMENT Article 1. Discipline and Cost Reimbursement Schedule of Monetary Penalties Hearing No Effect on Authority of Board Article 2. Internal Dispute Resolution Application of Article Fair, Reasonable, and Expeditious Dispute Resolution Procedure Required Minimum Requirements of Association Procedure Default Meet and Confer Procedure Notice in Policy Statement Article 3. Alternative Dispute Resolution Prerequisite to Civil Action Definitions ADR Prerequisite to Enforcement Action Request for Resolution ADR Process Tolling of Statute of Limitations Certification of Efforts to Resolve Dispute Stay of Litigation for Dispute Resolution Attorney s Fees Notice in Annual Policy Statement Article 4. Civil Action Enforcement of Government Documents Standing Comparative Fault CHAPTER 11. CONSTRUCTION DEFECT LITIGATION Actions for Damages Notice of Resolution Notice of Civil Action II. RELATED CIVIL CODE PROVISIONS SOLAR ENERGY SYSTEMS Unenforceability of Restrictions on Use of Solar Energy System; Standards for Solar Energy Systems; Approval Process; Penalty for Willful Violation; Attorneys' Fees; Compliance by Public Entity Seeking Grant or Loan Funds Permitted Restrictions by Common Interest Development Associations REQUIREMENTS FOR CONSTRUCTION DEFECT ACTIONS Definitions Standards for Residential Construction Intent of Standards Warranty Covering Fit and Finish Items Enhanced Protection Agreement Effect of Enhanced Protection Agreement Written Copy of Enhanced Protection Agreement Enforcement of Construction Standards In Lieu of Particular Enhanced Protection Agreement Provision Responsive Pleading in Action to Enforce Construction Standards of this Chapter In Lieu of Enhanced Protection Agreement Effect of Election of Enhanced Protection Agreement on Provisions of Prelitigation Procedures Obligation of Homeowner to Follow Reasonable Maintenance Obligations Procedures Required Prior to Filing Action for Violation of Construction Standards Builder Defined Compliments of Angius & Terry, LLP v

10 912. Builder s Duties Acknowledgement of Receipt of Notice Nonadversarial procedure established Actions Resulting in Nonapplication of Chapter Inspection of Claimed Unmet Standards by Builder Offer to Repair Authorization to Proceed with Repair Offer to Mediate Dispute Actions Resulting in Filing of an Action by Homeowner; Applicable Standards Procedure when Resolution Involves Repair by Builder Observation and Electronic Recording, Video Recording, or Photographing of Repair Allowed Availability to Homeowner of Correspondence, Photographs and Other Material Pertaining to Repairs Offer to Repair Some, but not all, of Claimed Unmet Standards Failure to Timely Complete Repairs Release or Waiver in Exchange for Repair Work Prohibited Statute of Limitations Mediation Procedure Cash Offer in Lieu of Repair Strict Construction of Requirements; Failure of Claimant to Conform Claim Combined with Other Causes of Action Subsequently Discovered Claims of Unmet Standards Evidence of Repair Work Evidence of Parties Conduct Similar Requirements of Civil Code Section Applicability of Title to Other Entities Involved in Construction Process Claims and Damages not Covered by this Title Date of Sale for Applicability of Title Time Limit for Bringing Action Showing Required for Claim Other Causes of Action; Claims Involving Detached Single-Family Home Damages Original Purchasers and Successors-in-Interest Affirmative Defenses III. RELATED CORPORATIONS CODE PROVISIONS Self-Dealing Transactions by Interested Director; Remedies Powers of Corporation Assertion of Limitations on Corporate Activities or Powers as between Corporation and Third Person; Binding Effect of Contracts Contents; Directors; Meetings; Committees; Members; Emergency Operating Procedures Availability; Place and Time Corporate Activities shall be under Direction of Board; Delegation of Management Activities Meetings of the Board; Notice; Adjournment; Participation via Electronic Means; Quorum; Acts or Decisions of the Board; Action Taken by Board without a Meeting; Applicability of Section Creation of Committees; Appointment of Members; Authority Corporate Officers; Chair of the Board; President; Secretary; Treasurer or Chief Financial Officer; Applicability of Government Code Section 12586; Selection of Officers Bylaws, Minutes, and Resolutions as Prima Facie Evidence; Original or Copy; Forms Allowed Election and Selection of Directors; Term of Office; Designator ; Entitlement to Designate Directors vi Compliments of Angius & Terry, LLP

11 7221. Grounds for Vacating Office of Director Removal of Directors Without Cause Removal of Director by Court Order; Grounds Means of Filling Vacancies on Board of Directors; Resignation of Director; Notice Requirements Appointment of Provisional Director when Directors cannot Agree as to Management; Deadlock; Equitable Relief; Rights and Powers of Provisional Director Director to Perform Duties in Good Faith; Good Faith Reliance on Official Corporate Information, Opinions, and Records; Liability of Directors Conflicts of Interest; Contracts not Void or Voidable if Approved at Meeting in Presence of Interested Director; Conditions; Applicability Counting of Interested or Common Directors in Determining Quorum Agent; Proceeding; Expenses; Power of Corporation to Indemnify Person Threatened to be Made Party to Proceeding; Indemnification of Agent for Expenses Incurred; Authorization to Purchase Liability Insurance on Behalf of Corporate Agent; Applicability of Section Meetings of Members; Orders of Superior Court after Failure to Hold Regular Meeting or Written Ballot; Who may Call Special Meetings; Conducting Meetings by Electronic Transmission Allowed; Requirements Notice of Meeting Where Shareholders are Required or Permitted to Take Action; Requirements for Validity of Notice by Electronic Transmission; Special Meetings; Notice of Adjourned Meeting; Validity Determination of Quorum Actions which May be Taken without Meeting; Approval by Written Ballot; Solicitation and Revocation of Ballots; Election of Directors by Written Ballot Form of Proxy or Written Ballot; Opportunity to Specify Choice between Approval and Disapproval Required; Ballots Marked Withhold ; Effect of Failure to Comply with Section Direction by Court Order that Meeting be Called; Powers of Court; Validity of Meeting Action without Meeting by Written Consent Name Signed Nomination and Election Procedures Nomination Procedures; Corporations with 500 or More Members Equal Access to Corporate Publications; Vote Solicitations in Corporate Publications Election Material; Mailings; Requests by Nominees; Payment of Costs Refusal by Corporation to Publish or Mail Material; Prohibitions; Liability of Corporation or Officers for Material Supplied by Nominee; Actions to Relieve Corporation from Publication and Mailing Obligations Use of Corporate Funds to Support Nominees; Prohibitions Statute of Limitations; Action to Challenge Validity of Election One Vote Entitlement Determination of Record Date Voting; Where Membership Stands on Record in Names of Two or More Persons Proxies Authorized Cumulative Voting; Notice of Intention to Cumulate Votes; Ballots not Required Actions to Determine Validity of Election or Appointment; Notice to Attorney General; Intervention; Hearing; Findings IV. RELATED VEHICLE CODE PROVISIONS Private Roads Private Roads Open for Public Use Private Roads Not Open to Public Use Removal of Vehicle from Private Property by Property Owner; Requirements; Notice; Recovery for Damages; Liability; Towing Charge; Excessive Charges; Liability; Payment by Cash or Credit Allowed; Written Authorization from Property Owner or Compliments of Angius & Terry, LLP vii

12 Lessee as Prerequisite to Removal; Storage Facility Requirements; Legislative Intent Procedure when Owner Cannot be Ascertained INDEX viii Compliments of Angius & Terry, LLP

13 I. DAVIS-STIRLING COMMON INTEREST DEVELOPMENT ACT CHAPTER 1. GENERAL PROVISIONS Short Title. ARTICLE 1. PRELIMINARY PROVISIONS This part shall be known and may be cited as the Davis-Stirling Common Interest Development Act. In a provision of this part, the part may be referred to as the act Effect of Headings. Division, part, title, chapter, article and section headings do not in any manner affect the scope, meaning, or intent of this act Application of Act. Nothing in the act that added this part shall be construed to invalidate a document prepared or action taken before January 1, 2014, if the document or action was proper under the law governing common interest developments at the time that the document was prepared or the action was taken. For the purposes of this section, document does not include a governing document Construction of Zoning Ordinance. Unless a contrary intent is clearly expressed, a local zoning ordinance is construed to treat like structures, lots, parcels, areas, or spaces in like manner regardless of the form of the common interest development Delivered to an Association. (a) If a provision of this act requires that a document be delivered to an association, the document shall be delivered to the person designated in the annual policy statement, prepared pursuant to Section 5310, to receive documents on behalf of the association. If no person has been designated to receive documents, the document shall be delivered to the president or secretary of the association. (b) A document delivered pursuant to this section may be delivered by any of the following methods: (1) By , facsimile, or other electronic means, if the association has assented to that method of delivery. (2) By personal delivery, if the association has assented to that method of delivery. If the association accepts a document by personal delivery it shall provide a written receipt acknowledging delivery of the document. (3) By first-class mail, postage prepaid, registered or certified mail, express mail, or overnight delivery by an express service center Individual Notice. (a) If a provision of this act requires that an association deliver a document by individual delivery or individual notice, the document shall be delivered by one of the following methods: (1) First-class mail, postage prepaid, registered or certified mail, express mail, or overnight delivery by an express service carrier. The document shall be addressed to the recipient at the address last shown on the books of the association. (2) , facsimile, or other electronic means, if the recipient has consented, in writing, to that method of delivery. The consent may be revoked, in writing, by the recipient. Compliments of Angius & Terry, LLP 1

14 (b) Upon receipt of a request by a member, pursuant to Section 5260, identifying a secondary address for delivery of notices of the following types, the association shall deliver an additional copy of those notices to the secondary address identified in the request: (1) The documents to be delivered to the member pursuant to Article 7 (commencing with Section 5300) of Chapter 6. (2) The documents to be delivered to the member pursuant to Article 2 (commencing with Section 5650) of Chapter 8, and Section (c) For the purposes of this section, an unrecorded provision of the governing documents providing for a particular method of delivery does not constitute agreement by a member to that method of delivery General Notice. (a) If a provision of this act requires general delivery or general notice, the document shall be provided by one or more of the following methods: (1) Any method provided for delivery of an individual notice pursuant to Section (2) Inclusion in a billing statement, newsletter, or other document that is delivered by one of the methods provided in this section. (3) Posting the printed document in a prominent location that is accessible to all members, if the location has been designated for the posting of general notices by the association in the annual policy statement, prepared pursuant to Section (4) If the association broadcasts television programming for the purpose of distributing information on association business to its members, by inclusion in the programming. (b) Notwithstanding subdivision (a), if a member requests to receive general notices by individual delivery, all general notices to that member, given under this section, shall be delivered pursuant to Section The option provided in this subdivision shall be described in the annual policy statement, prepared pursuant to Section Time and Proof of Delivery. (a) (b) States mail. This section governs the delivery of a document pursuant to this act. If a document is delivered by mail, delivery is deemed to be complete on deposit into the United (c) If a document is delivered by electronic means, delivery is complete at the time of transmission Electronic Delivery; Requirements. If the association or a member has consented to receive information by electronic delivery, and a provision of this act requires that the information be in writing, that requirement is satisfied if the information is provided in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record Approved by Majority of All Members. If a provision of this act requires that an action be approved by a majority of all members, the action shall be approved or ratified by an affirmative vote of a majority of the votes entitled to be cast. 2 Compliments of Angius & Terry, LLP

15 4070. Approved by Majority of Quorum of Members. If a provision of this act requires that an action be approved by a majority of a quorum of the members, the action shall be approved or ratified by an affirmative vote of a majority of the votes represented and voting in a duly held election in which a quorum is represented, which affirmative votes also constitute a majority of the required quorum Application of Definitions. ARTICLE 2. DEFINITIONS The definitions in this article govern the construction of this act Annual Budget Report. Annual budget report means the report described in Section Annual Policy Statement. Annual policy statement means the statement described in Section Association. Association means a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development Board. Board means the board of directors of the association Board Meeting. Board meeting means either of the following: (a) A congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board. (b) A teleconference, where a sufficient number of directors to establish a quorum of the board, in different locations, are connected by electronic means, through audio or video, or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the association and otherwise complies with the requirements of this act. Except for a meeting that will be held solely in executive session, the notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend, and at least one director or a person designated by the board shall be present at that location. Participation by directors in a teleconference meeting constitutes presence at that meeting as long as all directors participating are able to hear one another, as well as members of the association speaking on matters before the board Common Area. (a) Common area means the entire common interest development except the separate interests therein. The estate in the common area may be a fee, a life estate, an estate for years, or any combination of the foregoing. (b) Notwithstanding subdivision (a), in a planned development described in subdivision (b) of Section 4175, the common area may consist of mutual or reciprocal easement rights appurtenant to the separate interests Common Interest Development. Common interest development means any of the following: Compliments of Angius & Terry, LLP 3

16 (a) (b) (c) A community apartment project. A condominium project. A planned development. (d) A stock cooperative Community Apartment Project. Community apartment project means a development in which an undivided interest in land is coupled with the right of exclusive occupancy of any apartment located thereon Community Service Organization or Similar Entity. (a) Community service organization or similar entity means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common area or facilities are available to the public. (b) Community service organization or similar entity does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance Condominium Plan. Condominium plan means a plan described in Section Condominium Project. (a) A condominium project means a real property development consisting of condominiums. (b) A condominium consists of an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map, or condominium plan in sufficient detail to locate all boundaries thereof. The area within these boundaries may be filled with air, earth, water, or fixtures, or any combination thereof, and need not be physically attached to land except by easements for access and, if necessary, support. The description of the unit may refer to (1) boundaries described in the recorded final map, parcel map, or condominium plan, (2) physical boundaries, either in existence, or to be constructed, such as walls, floors, and ceilings of a structure or any portion thereof, (3) an entire structure containing one or more units, or (4) any combination thereof. (c) The portion or portions of the real property held in undivided interest may be all of the real property, except for the separate interests, or may include a particular three-dimensional portion thereof, the boundaries of which are described on a recorded final map, parcel map, or condominium plan. The area within these boundaries may be filled with air, earth, water, or fixtures, or any combination thereof, and need not be physically attached to land except by easements for access and, if necessary, support. (d) An individual condominium within a condominium project may include, in addition, a separate interest in other portions of the real property Declarant. Declarant means the person or group of persons designated in the declaration as declarant, or if no declarant is designated, the person or group of persons who sign the original declaration or who succeed to special rights, preferences, or privileges designated in the declaration as belonging to the signator of the original declaration. 4 Compliments of Angius & Terry, LLP

17 4135. Declaration. Declaration means the document, however denominated, that contains the information required by Sections 4250 and Director. Director means a natural person who serves on the board Exclusive Use Common Area. (a) Exclusive use common area means a portion of the common area designated by the declaration for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests. (b) Unless the declaration otherwise provides, any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patios, exterior doors, doorframes, and hardware incident thereto, screens and windows or other fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest, are exclusive use common area allocated exclusively to that separate interest. (c) Notwithstanding the provisions of the declaration, internal and external telephone wiring designed to serve a single separate interest, but located outside the boundaries of the separate interest, is exclusive use common area allocated exclusively to that separate interest General Notice. General notice means the delivery of a document pursuant to Section Governing Documents. Governing documents means the declaration and any other documents, such as bylaws, operating rules, articles of incorporation, or articles of association, which govern the operation of the common interest development or association Individual Notice. Individual notice means the delivery of a document pursuant to Section Item of Business. Item of business means any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a quorum of the board Managing Agent. (a) A managing agent is a person who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development. (b) A managing agent does not include any of the following: (1) A regulated financial institution operating within the normal course of its regulated business practice Member. (2) An attorney at law acting within the scope of the attorney's license. Member means an owner of a separate interest. Compliments of Angius & Terry, LLP 5

18 4170. Person. Person means a natural person, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity Planned Development. Planned development means a real property development other than a community apartment project, a condominium project, or a stock cooperative, having either or both of the following features: (a) Common area that is owned either by an association or in common by the owners of the separate interests who possess appurtenant rights to the beneficial use and enjoyment of the common area. (b) Common area and an association that maintains the common area with the power to levy assessments that may become a lien upon the separate interests in accordance with Article 2 (commencing with Section 5650) of Chapter Reserve Accounts. Reserve accounts means both of the following: (a) Moneys that the board has identified for use to defray the future repair or replacement of, or additions to, those major components that the association is obligated to maintain. (b) The funds received, and not yet expended or disposed of, from either a compensatory damage award or settlement to an association from any person for injuries to property, real or personal, arising from any construction or design defects. These funds shall be separately itemized from funds described in subdivision (a) Reserve Account Requirements. Reserve account requirements means the estimated funds that the board has determined are required to be available at a specified point in time to repair, replace, or restore those major components that the association is obligated to maintain Separate Interest. (a) Separate interest has the following meanings: (1) In a community apartment project, separate interest means the exclusive right to occupy an apartment, as specified in Section in Section or space. (2) In a condominium project, separate interest means a separately owned unit, as specified (3) In a planned development, separate interest means a separately owned lot, parcel, area, (4) In a stock cooperative, separate interest means the exclusive right to occupy a portion of the real property, as specified in Section (b) Unless the declaration or condominium plan, if any exists, otherwise provides, if walls, floors, or ceilings are designated as boundaries of a separate interest, the interior surfaces of the perimeter walls, floors, ceilings, windows, doors, and outlets located within the separate interest are part of the separate interest and any other portions of the walls, floors, or ceilings are part of the common area. (c) The estate in a separate interest may be a fee, a life estate, an estate for years, or any combination of the foregoing. 6 Compliments of Angius & Terry, LLP

19 4190. Stock Cooperative. (a) Stock cooperative means a development in which a corporation is formed or availed of, primarily for the purpose of holding title to, either in fee simple or for a term of years, improved real property, and all or substantially all of the shareholders of the corporation receive a right of exclusive occupancy in a portion of the real property, title to which is held by the corporation. The owners' interest in the corporation, whether evidenced by a share of stock, a certificate of membership, or otherwise, shall be deemed to be an interest in a common interest development and a real estate development for purposes of subdivision (f) of Section of the Corporations Code. (b) A stock cooperative includes a limited equity housing cooperative which is a stock cooperative that meets the criteria of Section Application of Act. CHAPTER 2. APPLICATION OF ACT This act applies and a common interest development is created whenever a separate interest coupled with an interest in the common area or membership in the association is, or has been, conveyed, provided all of the following are recorded: (a) (b) A declaration. A condominium plan, if any exists. (c) A final map or parcel map, if Division 2 (commencing with Section 66410) of Title 7 of the Government Code requires the recording of either a final map or parcel map for the common interest development Exemption of Development without Common Area. Nothing in this act may be construed to apply to a real property development that does not contain common area. This section is declaratory of existing law Commercial and Industrial Developments This part does not apply to a commercial or industrial common interest development, as defined in Section CHAPTER 3. GOVERNING DOCUMENTS Document Authority. ARTICLE 1. GENERAL PROVISIONS (a) To the extent of any conflict between the governing documents and the law, the law shall prevail. (b) To the extent of any conflict between the articles of incorporation and the declaration, the declaration shall prevail. (c) To the extent of any conflict between the bylaws and the articles of incorporation or declaration, the articles of incorporation or declaration shall prevail. (d) To the extent of any conflict between the operating rules and the bylaws, articles of incorporation, or declaration, the bylaws, articles of incorporation, or declaration shall prevail Record Notice of Agent to Receive Payments. In order to facilitate the collection of regular assessments, special assessments, transfer fees as authorized by Sections 4530, 4575, and 4580, and similar charges, the board is authorized to record a statement or amended Compliments of Angius & Terry, LLP 7

20 statement identifying relevant information for the association. This statement may include any or all of the following information: (a) different. The name of the association as shown in the declaration or the current name of the association, if (b) The name and address of a managing agent or treasurer of the association or other individual or entity authorized to receive assessments and fees imposed by the association. (c) A daytime telephone number of the authorized party identified in subdivision (b) if a telephone number is available. (d) A list of separate interests subject to assessment by the association, showing the assessor's parcel number or legal description, or both, of the separate interests. (e) The recording information identifying the declaration governing the association. (f) If an amended statement is being recorded, the recording information identifying the prior statement or statements which the amendment is superseding Liberal Construction of Instruments. Any deed, declaration, or condominium plan for a common interest development shall be liberally construed to facilitate the operation of the common interest development, and its provisions shall be presumed to be independent and severable. Nothing in Article 3 (commencing with Section 715) of Chapter 2 of Title 2 of Part 1 of Division 2 shall operate to invalidate any provisions of the governing documents Boundaries of Units. In interpreting deeds and condominium plans, the existing physical boundaries of a unit in a condominium project, when the boundaries of the unit are contained within a building, or of a unit reconstructed in substantial accordance with the original plans thereof, shall be conclusively presumed to be its boundaries rather than the metes and bounds expressed in the deed or condominium plan, if any exists, regardless of settling or lateral movement of the building and regardless of minor variance between boundaries shown on the plan or in the deed and those of the building Deletion of Unlawful Restrictive Covenants. (a) No declaration or other governing document shall include a restrictive covenant in violation of Section of the Government Code. (b) Notwithstanding any other provision of law or provision of the governing documents, the board, without approval of the members, shall amend any declaration or other governing document that includes a restrictive covenant prohibited by this section to delete the restrictive covenant, and shall restate the declaration or other governing document without the restrictive covenant but with no other change to the declaration or governing document. (c) If the declaration is amended under this section, the board shall record the restated declaration in each county in which the common interest development is located. If the articles of incorporation are amended under this section, the board shall file a certificate of amendment with the Secretary of State pursuant to Section 7814 of the Corporations Code. (d) If after providing written notice to an association, pursuant to Section 4035, requesting that the association delete a restrictive covenant that violates subdivision (a), and the association fails to delete the restrictive covenant within 30 days of receiving the notice, the Department of Fair Employment and Housing, a city or county in which a common interest development is located, or any person may bring an action against the association for injunctive relief to enforce subdivision (a). The court may award attorney's fees to the prevailing party. 8 Compliments of Angius & Terry, LLP