Previously, commercial and industrial common interest developments fell
under the Davis-Stirling Act, except for a list of excluded statutes
found in former Civil Code §1373
January 1, 2014, commercial and industrial CIDs ceased to be part of
the Davis-Stirling Act and were moved under a new Act, the Commercial
and Industrial Common Interest Development Act ("Commercial CID Act").
But now, commercial CIDs have their own body of law which, in many
instances, parallels Davis-Stirling, but in other cases, varies
Application of the Act
. The rewritten Davis-Stirling Act (also
effective January 1, 2014) no longer applies to CIDs which are entirely
commercial or industrial. (Civ. Code §4202
They are now covered by the Commercial CID Act. (Civ. Code §6531
.) Mixed use CIDs, those with residential and commercial components, continue to be governed by the Davis-Stirling Act
Delivering Documents to the Association
. The new Davis-Stirling scrapped former Civil Code §1350.7
regarding delivery of documents to the association and its members, and
the provision was likewise discontinued in the Commercial CID Act. In
its place, both acts adopted near identical provisions for delivering
documents to the association. (Civ. Code §4035
Commercial and industrial associations need not prepare the new annual policy statement required of residential associations in Civil Code §5310.
Instead they may, but are not required to, give notice to their members
of a person designated to receive notices. If not specified, documents
may be delivered to the president or secretary of the association. If an
association wants a manager or management company to receive
documents, they need to notify their members.
Documents may be delivered to the association only by the following methods: (i) First-class mail, postage prepaid; (ii) Registered or certified mail; (iii) Express mail; (iv) Overnight delivery by an express service carrier; (v) Electronically (email, facsimile, or otherwise), if assented to by the association; and (vi) Personal delivery, if assented to by the association, with a written receipt. All
associations (commercial, industrial and/or residential) may decline to
accept personal delivery of documents. But, in most cases, that would
require a change to the governing documents, most of which expressly
Individual Delivery and Notice to Members.
Both the new Davis-Stirling Act and Commercial CID Act adopted similar
provisions for “individual delivery” and “individual notice” to members
in Civil Code §4040 and §6514, respectively. Both acts provide for individual delivery of documents or individual notices by the following methods: (i) First-class mail, postage prepaid; (ii) Registered or certified mail; (iii) Express mail; (iv) Overnight delivery by an express service carrier; and (v) Electronically (email, facsimile, or otherwise), if consented to by the member in writing.
Both acts provide as follows (i) No
provisions for “individual delivery” of documents or “individual
notices” by personal delivery, regardless of what your governing
documents might state (However, personal delivery of certain documents
and notices is expressly allowed for certain notices elsewhere in the
Commercial CID Act.); (ii) Non-electronic
delivery shall be addressed to the last known address of the recipient
as shown in the association’s record; (iii) The recipient may revoke, in writing, consent to receive electronic notice; and (iv) An
unrecorded provision of the governing documents (i.e. bylaws or
operating rules) providing for a method of delivery does not constitute
agreement by a member to accept that method of delivery.
For the purposes of the Commercial CID Act, “individual delivery” and
“individual notice” reference only a few specific types of documents or
notice: (i) Delivery of (1) a
copy of all amendments to the governing documents to remove only certain
developer language and (2) the related notice of the meeting to
consider same (Civ. Code §6608(c)); (ii) Delivery of a proposed amendment to the CC&Rs to the membership (Civ. Code §6620(a)(1)); (iii) Delivery of notices to the owner regarding the temporary, summary removal of occupants for termite treatment (Civ. Code §6720(c)); and (iv) Distribution of a schedule of monetary penalties (Civ. Code §6850(a)).
Secondary Address. The Commercial CID Act discontinued the requirements of former Civil Code §1365.1(c) and §1367.1(k) regarding secondary addresses for members.
General Delivery and Notice. While the new Davis-Stirling
continued provisions for “general delivery” and “general notice” which
allow giving notice by such means as a newsletter, posting and
television broadcasting, the Commercial CID Act does not.
Time of Delivery. Both the new Davis-Stirling and the Commercial
CID Act adopted identical new provisions defining when a document is
deemed delivered (Civ. Code §4050 and §6518): (i) delivery
by mail is deemed to be completed on deposit into the United States
mail; and (ii) electronic delivery is complete at the time of
transmission. Regrettably, neither act addresses when delivery by
overnight delivery by an express service carrier is completed. The best
answer for that is upon actual delivery to the address of the recipient.
Electronic Delivery. Both the new Davis-Stirling and the Commercial CID Act also adopted new provisions comparable to certain portions of Corporations Code §20 and §21 regarding conditions of electronic delivery. Civil Code §4055 and §6520 identically
provide that information received by electronic delivery which must be
in writing, must be capable of retention (by printing or storing) by the
recipient at the time of receipt.
Notice of Airport in the Vicinity. Former Civil Code §1353(a) regarding notification of nearby airports in the CC&Rs was not continued in the Commercial CID Act.
Fire Retardant Roofing. The requirements of former Civil Code §1353.7 that
the provisions of the CC&Rs provide for use of certain fire
retardant roofing materials under certain circumstances was not
continued in the Commercial CID Act. But all legal requirements
regarding fire retardant roofing materials in very high fire severity
zones continue to take precedent over any governing documents.
Right to Attorney’s Fees. The Commercial CID Act discontinued the
general statutory right of the prevailing party to recover attorney’s
fees and costs in actions for the enforcement of governing documents
provided in former Civil Code §1354(c).
Part of the idea behind the Commercial CID Act is to cater to the
generally more sophisticated membership of an association consisting of
business people. The legislature decided to afford prevailing commercial
and industrial CIDs or their members the statutory right to recover
reasonable attorney’s fees (and sometimes costs) only in a select few
instances: (i) Enforcement of
an action against the association for injunctive relief to require the
removal of a restrictive covenant in violation of Government Code §12955
(prohibiting discriminatory language on the basis of race, religion,
gender, etc.) (Civ. Code, §6606(d)); (ii) Enforcement of an action to allow a member to display the American flag (Civ. Code §6702(c)); (iii) Enforcement
of an action regarding installation or use of video or television
antennas or satellite dishes, etc. of 36 inches or less (Civ. Code §6708(d)); (iv) Enforcement of an action regarding the installation or use of an electric charging station (Civ. Code §6713(k)); and (v) Costs of collection and reasonable attorneys fees arising from collection of assessments (Civ. Code §6808 and §6812).
Petition to Amend CC&Rs.
The Commercial CID Act still does not allow the association the right
to petition the court to allow a majority vote to be sufficient when a
supermajority is required by the CC&Rs. The petition right, found in
former Civil Code §1356 and continued in Civil Code §4275, remains available only to residential CIDs.
Rule Adoption and Changes.
Commercial and industrial CIDs were previously excluded from the entire
process for the adoption and changing operating rules previously
provided for in Civil Code §1357.100 through §1357.150, inclusive, and now continued for residential CIDs in Civil Code §4340 through §4370, inclusive.
However, the Commercial CID Act includes two provisions previously
applicable only to residential CIDs including (1) the definition of
“operating rule” and (2) the requirements for an operating rule to be
valid and enforceable. (Civ. Code §6630 and §6632.)
Rental Prohibitions. Controversial former Civil Code §1360.2 provided
that any rental prohibitions (such as prohibiting all rentals or
limiting the number of separate interest that may be rented) would apply
only prospectively to those who purchased after the prohibition went
into effect. That section was previously inapplicable to commercial and
industrial CIDs. While the section was continued in the new
Davis-Stirling Act at Civil Code §4740,
it was not adopted by the Commercial CID Act. Rental prohibitions in
commercial and industrial CIDs may be applied to all owners at the time
Limitations on Pet Restrictions. One of the great unexplained anomalies of the old Davis-Stirling was that Civil Code §1373 (which
set out all the statutes that did not apply to the commercial and
industrial CIDs) did not include the pet restriction limitations set
forth in former Civil Code 1360.5.
While some people do take their pets to work, the primary reason behind
the limitation was to overturn the California Supreme Court decision in Nahrstedt which
allowed complete pet bans and instead allowed people to keep at least
one pet at home. This peculiar situation was changed by Civil Code §6706 of the Commercial CID Act which provides that the new Davis-Stirling pet provision, Civil Code §4715, applies to owners of separate interests who kept a pet in the development prior to January 1, 2014.
Budgets and Financial Disclosures. Commercial and industrial CIDs
previously had no obligation to prepare a budget or make financial or
real estate disclosures required by former Civil Code §1365. That is still true. But now all of the related financial disclosure requirements of Civil Code §1365.1 (Notice of Assessments and Foreclosures) and Civil Code §1365.2.5 (Assessment
and Reserve Funding Disclosure Summary) are also excluded from the
Commercial CID Act. Of course, general accounting principles and
fiduciary obligations would suggest that commercial and industrial CIDs
should prepare budgets like any other business.
Reserves. Commercial and industrial CIDs were previously excluded
from the reserve study requirements and reserve account and transfer
limitations of former Civil Code §1365.5.
While those requirements continue in the new Davis-Stirling for
residential CIDs, commercial and industrial CIDs are still excluded
under the Commercial CID Act. However, as with budgets, the lack of a
statutory mandate does not extinguish an Association’s fiduciary
obligations to maintain the property and be fiscally sound. Many prudent
commercial CIDs continue to maintain separate reserve accounts, require
two signatures to withdraw reserve funds, and conduct reserve studies
to monitor the health of their property and their financial ability to
discharge their maintenance obligations.
Parliamentary Procedures. The Commercial CID Act discontinued the
requirement of conducting meetings under a parliamentary procedure as
previously required by former Civil Code §1363(d).
Access to Records. The statutes allowing membership access to records and providing recordkeeping requirements (Civ. Code §1363(e) and §1365.2) no longer apply to commercial and industrial CIDs. Record access is once again limited to Corporations Code §8330, et seq. and the association’s governing documents. Likewise, the ill-conceived “Disclosure Documents Index” required by former Civil Code §1363.005 was abandoned by both the new Davis-Stirling Act and the Commercial CID Act.
Fines and Discipline. The statutory fine and discipline procedure of former Civil Code §1363(g) has
been jettisoned. This does not suggest that commercial CIDs may
disregard due process entirely. It only means that any reasonable
procedure giving notice and an opportunity to be heard may be adopted in
your governing documents and implemented. Do not forget that there are
still guidelines in the Corporations Code for such things as suspension
of membership rights. Prudent associations would do well to continue
with the Corporation Code standards and the continuing standards of the
new Davis-Stirling Act.
Election Rules. The election procedures statute (Civ. Code §1363.03) and its companion on campaign funding (Civ. Code §1363.04)
were not continued in the Commercial CID Act. Note that the
Corporations Code has some similar provisions that still may be
applicable to certain commercial and industrial CIDs and, of course, the
association’s governing documents will still apply. But, election rules
and the double-envelope secret ballot procedure are no longer mandated
by statute for commercial CIDs.
Open Meeting Act. Another casualty of the Commercial CID Act is the Open Meeting Act. The provision of Civil Code §1363.05 are
not part of the Commercial CID Act. However, an open meeting is still
required for the consideration and deliberation by the board to adopt
and amendment to remove certain developer language from the governing
documents. Members are entitled to make comments at such meeting.
Otherwise, commercial and industrial CIDs, among other things:
Transfer of Common Area to a Member
- Are subject to Corporations Code §7211 and their governing documents for board meetings.
- Need not give notice of regular or special board meetings to its membership.
- Need not distribute board meeting agendas to its membership.
- Need not allow its members to attend board meetings.
- May consider any matters in executive session (assuming it allowed an open meeting to start).
- May again take actions by written consent as allowed by Corporations Code §7211(b).
. The requirement of former Civil Code §1363.07
member consent to transfer common area to a member for his or her
exclusive use no longer applies to commercial or industrial CIDs.
Managing Agent Disclosures and Duties
. The disclosure requirements and duties of managing agents provided for in former Civil Code §1363.1
were discontinued in the Commercial CID Act.
. The requirements and protections of former Civil Code §1365.7
to directors and officers insurance no longer apply to commercial and
industrial CIDs. Regardless, directors and officers insurance coverage
is highly recommended for any CID board.
. Prior to the Commercial CID Act, the only difference
between residential and commercial CIDs regarding assessments was that
commercial CIDs were not bound by former Civil Code §1366(b)
(1) limited the amount of annual increases to regular assessments, (2)
limited the amount an association could impose for a special assessment
and (3) restricted the circumstances under which an emergency assessment
could be imposed. The Commercial CID Act continues as before in that
regard, but eliminates the requirements of Civil Code §1366(d),(e)&(f)
as well. Subject to a commercial or industrial association’s governing documents:
no longer must give notice of an assessment increase between 30 and 60
days before it becomes due. Now, a shorter or longer period would be
- The 15 day minimum before assessments are in default no longer applies. Assessments may be in default after a shorter period.
- The 10% or $10 limit on late fees no longer applies. Larger late fees may be imposed.
delay of 30 days before interest accrues on delinquent assessments no
longer applies. Interest may now commence immediately upon delinquency.
Constitutional exemption allowing them to charge 12% interest on
delinquent accounts no longer applies. Commercial and industrial CIDs
are now limited to collecting no more than 10% interest on unpaid
. Former Civil Code §1366.1
which prohibits residential associations imposing or collecting an
assessment or fee that exceeds the amount necessary to defray the costs
for which it is levied, continues to be inapplicable to commercial and
industrial associations under the Commercial CID Act.
Recording Management Information
. The recording rights of former Civil Code §1366.2
were discontinued under the Commercial CID Act.
Basing Assessments on Taxable Value
. The prohibitions of former Civil Code §1366.4
to basing assessments on taxable values are not part of the Commercial CID Act.
. Prior to the Commercial CID Act, lien procedures
between the residential and commercial CIDs were identical. But now,
the Commercial CID Act changes it to the following:
Real Estate Disclosures
Commercial CID Act lien provisions apply only to liens created on or
after January 1, 2014. Liens created before then follow the law that
existed at the time of their creation. (Civ. Code §6828.)
The consequence is that commercial and industrial CIDs now have four
different bodies of law for liens depending on when they were created:
- Before January 1, 1986 (such statutory and case law that might have existed then).
- January 1, 1986 through December 31, 2002 (former Civ. Code §1367).
- January 1, 2003 through December 31, 2013 (former Civ. Code 1367.1).
- January 1, 2014 until the next change) (Commercial CID Act).
- Pre-lien letters no long need to include the former requirements of Civil Code §1367.1(a)(4)-(6) stating that a member has the right to:
- request a meeting with the board to discuss payments plans,
- request IDR,
- request ADR,
- Commercial and industrial CIDs are no longer required to apply payments to assessments first as previously required by former Civil Code §1367.1(b).
- Commercial and industrial CIDs need no longer participate in IDR, ADR or discuss payment plans as previously required by former Civil Code §1367.1(c).
- The foreclosure restrictions of former Civil Code §1367.4
(requiring an assessment to be delinquent for 12 months or in an amount
of $1,800 or more) no longer apply to commercial or industrial CIDs.
it is determined that a commercial or industrial CID has recorded a
lien for a delinquent assessment in error, it is no longer required to
reverse all late charges, fees, interest, attorney’s fees, costs of
collection, costs imposed as previously provided for in former Civil Code §1367.5.
It need only record a lien release or notice of rescission and provide
the owner of the separate interest with a declaration that the lien
filing or recording was in error and a copy of the lien release or
notice of rescission. (Civ. Code §6818.)
But, an association that fails to comply with proper lien procedures
shall, prior to recording a lien, recommence the required notice
process. Any costs associated with recommencing the notice process shall
be borne by the association and not by the owner of a separate
interest. (Civ. Code §6819.) So, the association need not reverse prior charges, but cannot charge the member again for the same pre-lien costs.
- Members may no long pay assessments to commercial or industrial CIDs under protest as previously allowed under Civil Code §1367.6.
. Previously, the provisions of former Civil Code §1368
owners to make certain disclosures to prospective purchasers and
requiring associations to provide owners with such information did not
apply to commercial or industrial CIDs. That is still the case under the
Commercial CID Act. In addition, the related form disclosing charges
for such disclosures, as required by former Civil Code §1368.2
, was discontinued in the Commercial CID Act.
IDR and ADR
. The IDR and ADR requirements of former Civil Code §1363.810
and Civil Code §1369.510
, respectively, have been discontinued in their entirety in the Commercial CID Act.
. The architectural approval requirements of former Civil Code §1378
were previously excluded from commercial and industrial CIDs and they are still excluded from the Commercial CID Act.
. When the Legislature moved commercial and
industrial CIDs out from under the Davis-Stirling Act, they essentially
deregulated them. Even though the Commercial CID Act is silent on many
matters, commercial and industrial CIDs are still bound by their
governing documents even where those documents conform to the old
Davis-Stirling Act. For example, if a commercial CID’s governing
documents require open board meetings and secret ballots for director
elections, the association must follow those provisions. Indeed, an
association may want to continue those provisions. But, the only way to
take full advantage of a less regulated commercial or industrial CID is
to remove extraneous requirements from their governing documents to the
extent allowed by the new Commercial CID Act.
: Associations needing legal assistance can contact us
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