If Assembly Bill 2100 (Laird) successfully works its way through the California legislative process, both current and prospective owners of common interest development units will have cause to be grateful.
Sponsored by the California Association of Realtors® (CAR), the bill would strengthen existing law with respect to the obligations of HOAs (Homeowner Associations) to plan for the eventual replacement and/or repair of major components such as roofs, streets, and common water heaters.
This is no small matter, according to the Legislative Bill Analysis. There are more than 41,000 common interest developments in California, making up over three million housing units -- approximately one quarter of the state's housing stock. Approximately 50 percent of these developments are more than twenty years old.
The bill analysis points out, "As these developments mature the major components of the HOA including roofs and siding will require repair and replacement; however, many HOAs have not funded their reserves adequately … A 1995 survey of HOAs found that on average reserves were [only] 59 percent funded." This, the bill analyst writes, "leaves homeowners and new buyers of condominiums vulnerable to 'budget busting' special assessments in order to make the repairs for which funds could have been accumulated over a period of years."
Current law requires HOA directors to conduct an investigation at least every three years "of the major components which the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirement of the common interest development." Moreover, the board is required to provide the membership with an analysis of what it would take -- assuming adequate reserves are not on hand or foreseeable -- to collect and set aside sufficient funds to provide for the needs identified. But existing law does not require that the HOA actually adopt a plan to accomplish what is needed.
AB 2100 carries existing law a step forward. It would require that the HOA directors actually adopt a plan for funding the reserves in a manner that will be adequate for the needs that have been identified. A summary of the plan would be provided to the membership each year along with the already-required pro forma operating budget.
The bill calls for any such plan to be adopted at an open meeting of the membership. If the plan requires an increase in assessment(s) -- a very likely event -- adoption of the assessment(s) increase would have to take place at a separate meeting, subject to the legal notices already required by law.
The plan would have to be updated every three years, along with the required inspection of major HOA components.
Nobody likes special assessments or increases in regular assessments. But nobody likes deterioration of their buildings or common area components either. At least, under the provisions of AB 2100, both current and prospective owners could have a look at the plan(s) and know what to expect. They could then make their own informed decisions accordingly.
In addition to CAR, AB 2100 currently has the registered support of the California Association of Community Managers and the Congress of California Seniors. At this point there is no registered opposition. Readers who think it sounds like a good idea just might let their legislators know.
