January 1, 2014, has come and gone.
The Reorganized Davis Stirling Act is here to stay.
By Beth A. Grimm, HOA Attorney
There have been a lot of questions about what effect the reorganized Act has on existing governing documents. What's the answer?
Nothing drastic will happen. No governing document will expire unless by its own terms it says so. The new Civil Code Section 4010 says "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."
This means that your documents are legal and enforceable now, and will continue to be even though it is after January 1, 2014. If they conflicted with the law prior to January 1, 2014, they will remain in conflict until the conflict is resolved. The law itself will not change drastically enough to make your heart speed up in anticipation of the end of the year. Neither existing documents nor your association died or became irrelevant. While there are considerable benefits to amending your governing documents to be consistent with the new laws and code sections, there is no legal requirement to do so.
So what do we do about CC&Rs and Bylaws that point to the existing (but on January 1 to become) "old" law?
Transitioning can be made easier by using conversion charts! Respect the KIS principle Keep it Simple. Conversion charts are gold for updating documents for a smooth transition from 2013 to 2014. Look around, there are lots available. The California Law Revision Commission (CLRC) responsible for rewriting and relocating the Act published one. It's goal was to make the Act more user-friendly, and to break down the long statutes into [what they saw as] understandable "paragraph bites". The CLRC has a conversion chart on its website (www.clrc.ca.gov). Lots of attorneys also have posted conversion charts for downloading their websites. If you purchase my book THE DAVIS STIRLING ACT IN PLAIN ENGLISH, you will find that the Table of Contents contains a full conversion chart for the old and new statutes listed by subject matter. The CLRC specifically left subject references and titles out of the new law and did not include one particularly important law which incorporates other California laws. This is discussed in more detail below.
In adjusting documents and policies for transition, you need only those cross-references for pertinent statutes listed in the document so that you can look up the laws by the new code numbers. You can find all of California law on the web for free through the California website but you need the statute numbers as you cannot do a word search
In adjusting documents and policies for transition, you need only those cross-references for pertinent statutes listed in the document. Appropriate attachment and incorporation of a relevant conversion chart to almost any document can make the transition from 2013-2014 very smooth.
What are the annual disclosure package and rules changes going to be and what can we do now?
Revamp Policies and/or Rules: Just like working with flexing the governing documents, a board can be proactive with policies and rules. For example, the Collections Policy can be revamped by including a conversion chart at the end showing these columns:
|The subject matter headings||The 2013 code numbers||The corresponding 2014 code numbers|
This can be accomplished by preparing the summary chart and attaching it to the policy or rule, and formally re-adopting it by board action, preferably by a resolution. In many cases code numbers that appear in the text of the policy or rule can be eliminated, but unless the subject matter is identified on the conversion chart, it will be difficult to impossible to locate the proper code cross-reference without the original code reference. The law did not change as to the wording relating to collections, just the code numbers, so the Board can make this change officially by motion or resolution signifying approval at a board meeting. No documents need to be sent out for owner voting or comment to integrate the cross-referencing means of transition. The same applies to the fining policy if you have one, which must be sent out with the annual policy statement disclosure packet since it is an enforcement-related policy. The same applies to any other enforcement, IDR or ADR policy, i.e., changes can be made to reflect cross-references to code numbers without pre-board-adoption owner comment.
Rearrange the Annual Package: The new Davis Stirling Act reorganization of the annual disclosure package for owners makes a lot of sense. It breaks the package down to two sections: financial and policy.
Financial Portion (New Civil Code Section 5300): The "Annual Budget Report" portion of the annual disclosure package contains the financial information such as the budget, reserves information including the study with the component list and funding plan, and the detailed worksheet containing the statements about how shortfalls in funding will be met in the coming years. The budget report also includes the information about insurance coverage and association loans. The checklist is provided under Disclosures right here on my website. None of these items is new; they just going to be found under new statute numbers. A summary conversion chart can be made up for the Annual Budget Report, showing the corresponding cross-reference to statutes and subject. Again, a board does not need to include the entire conversion chart covering all of the statutes of the Davis Stirling Act. It's just too cumbersome. It is more work to prepare a summary chart, but much more useful if it is unencumbered by extraneous references.
Policy Portion (New Civil Code Section 5310): The second part of the annual disclosure package is called the "Annual Policy Statement". This portion includes the association policies that must be circulated. The checklist is provided under Disclosures right here on my website. Any of these items can be refined with the summary conversion chart added at the end, showing the 2013 law / 2014 corresponding laws / and subject matter. There are a few other additions to the annual policy aspect of the association. The law says Boards must provide owners the contact information for the Association. Most boards have been doing this anyway by providing the name and address for the management company or the board secretary. And boards that did not provide this kind of information in the past left owners to their own devices, like handing items to the board president at the swimming pool or coming to a director's home during dinner time and knocking on the door. Other new information to be included in this annual policy statement includes a statement that a member may request to have notices sent to up to 2 addresses, the general location for posting general meeting notices, and the option for the member to receive these general notices by individual delivery (which is intended to be helpful to owners who live off-site).
Currently disclosure package items, which remain the same in 2014, are collection policies, dispute resolution summaries, how to obtain minutes, where overnight payments of assessments can be made, and architectural process policies and in the coming months, you can look for links to samples of these on my website.
May we send out notices by email to owners in 2014 without their consent?
Boards may send out email notices to owners when owners provide their addresses. However, there is a distinction between just sending an email notice and expecting that notice to satisfy legal notice requirements specifically calling for other methods of delivery such as mailed notices. An owner's written consent to receive notice by email is still required if a board is trying to satisfy a legal requirement to "distribute" notice which is the case for distribution of the annual disclosure packet. The consent form for giving permission should make it clear to the member what they are agreeing to receive by email. And the new law says that any record or document provided by email must be capable of printing and retention by the recipient. (Civil Code Section 4055). In the new law there are 3 specific types of notices laid out. Adopting a full-fledged Notice Policy and including it in your annual disclosure package this year makes a lot of sense, to get the jump on next year, and to provide items will eventually have to be included in the annual package anyway. If you stick to the law, no owner comment period is required. Here are the new categories:
NOTICES TO THE ASSOCIATION [New Civil Code Section 4035]: The board will have to provide association contact information as described above. If there is a "Notice Policy" adopted and included in the annual disclosure package, it could cover a lot of ground, including the various new required "notices" like stating that if an owner wants to request 2 mailing addresses, opt out of the membership list, or ask for individual notice of general association notices, the owner has to submit a written request to the Association's contact person listed. Thus, an official Notice Policy could cover 5 of the new requirements and provide a useful educational tool for new and future board members and managers.
NOTICES TO MEMBERS: There are two types of notices to members those items requiring individual delivery [New Civil Code Section 4040] which means delivery to the individual member directly, like hearing notices and disclosure packages; and those satisfied by general delivery [New Civil Code Section 4045] which means items sent out to all members or posted for general information purposes, like meeting notices and announcements.
A forward thinking board could add a tear off or separate form to be circulated with a "Notice Policy" asking members to complete and return it, allowing members to indicate whether they want to opt out of the membership list, have items mailed to dual addresses, give consent to email delivery, and if you add blanks to include emergency information, it might enhance the ability to collect critical and important information the board needs to have on file. Asking for completion of such a form fulfills many purposes. Look for sample consent forms later on this year and in 2014 on my website.
New Civil Code Section 4050 is added which says that if delivery involves mailing of a document, it is "deemed" to be complete on deposit in the US mail, clarifying an ongoing question as to whether there is any 5 day rule about when the time starts to accrue for timing a mailing.
Additional Notable Aspects of the Reorganized Act:
In order to avoid a 10 page article, I am summarizing a few of the remaining noteworthy highlights of the new Act. For the most part, the material provisions of the old Act were carried to the New Act and much of the wording remains the same. The intent of the CLRC was not to change the law, but to restate it in terms the average person could understand, to bring laws applying to property use from other sections of the law into the Davis Stirling Act, and to break up run-on sections that had become cumbersome. These are some of those changes:
Civil Code Section 4205 (hierarchy) provides a legal statement of hierarchy in the association documents. At a minimum, it is good for boards and managers to know the law controls if it says "notwithstanding" referring to other documents. The documents control if the law says: "Unless the document says" referring to the document as the authority. And with regard to subjects of most interest to owners, such as regulations on property use, the recorded CC&Rs control over the other governing documents.
Civil Code Section 5350 (director conflicts) specifically prohibits directors from voting [with regard to board actions] on specific decisions that directly affect the director such as disciplinary action, an assessment for damage to the common area, an architectural application, or a transfer of common area for exclusive use.
Civil Code Section 4700 (several property use related codes) directly references statutes from other areas of the law that regulate the use of a member's separate interest. It is the complete impact of this one new law that is commonly inadequately explained on conversion charts. It is essential that it be properly addressed in such summary charts as those made for CC&Rs and policies that address the various topics, as follows: (listed in order as set forth in New Civil Code Section 4700: (a) Civil Code 712 and 713 relating to the display of signs, (b) Civil Code 714 and 714.1, relating to solar energy systems; (c) Civil Code 714.5, relating to modular homes, (d) Civil Code 782, 782.5, and 6150, and Section 12956.1 of the Government Code, relating to racial restrictions; (e) Section 12927 of the Government Code, relating to the modification of property to accommodate a disability; and (f) Section 1597.40 of the Health and Safety Code, relating to the operation of a family day care home.
These are the highlights of the new Davis Stirling Act and this information should help homeowner associations in California prepare for the big transition.
By Beth A. Grimm, Attorney. ECHO East Bay Resource Panel Chairperson, a 20+ year member of ECHO and CAI, past Public Relations Chair of the California Legislative Action Committee (CAI-CLAC), and author of FINDING THE KEY TO YOUR CASTLE, THE CONDO OWNERS HANDBOOK by Sourcebooks, THE DAVIS STIRLING ACT IN PLAIN ENGLISH, and other helpful community association publications.