2007 Laws
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2007 CHANGES IN THE lAW

2007 STATUTES

Posting Agendas (Senate Bill 528). Notice of board meetings must now contain an agenda for the meeting. Boards may only discuss and take action on items on the agenda.

Construction Contracts-Indemnity Provisions (Senate Bill 138). Indemnity provisions in construction contracts that shield contractors from liability for construction defects or injury to property arising from or relating to the contractor's negligence are unenforceable.

Aiding Unlicensed Contractors (Senate Bill 354). Licensed contractors who aid an unlicensed person in evading the contractors' license requirements or allow someone to use their license can be ordered to pay an injured party for injury resulting from the acts of the unlicensed person.

Security Services (Senate Bill 666, goes into effect 2009). A private security officer who is uniformed, unarmed and employed exclusively by one employer must complete training in security officer skills.

Dog Bites (Assembly Bill 670). A person who has an animal that bites another person must, within 48 hours, provide the bitten person with their name, address, telephone number and the name and license tag number of the animal, and the status of the animal's vaccinations.

Manager Certification (Assembly Bill 691, revises Bus. & Prof. Code §§11500 to 11506). The program by which managers may be certified and represent themselves as a certified manager was extended another 5 years, until January 1, 2012. Topics covered by certification courses were expanded.

Transfer Fees Imposed by Associations & Property Management Companies(Assembly Bill 980, revises Civil Code Sections 1098, 1098.5, and 1102.6) Sellers who transfer or sell their homes are required to disclose applicable transfer fees to potential buyers, including transfers fees imposed by associations and property management companies.

Earthquake Insurance (Senate Bill 430) Authorizes the California Earthquake Authority to raise residential earthquake insurance premiums by 8.5%.

Parking Signs for Persons with Disabilities (Assembly Bill 1531). After July 1, 2008, all new or replacement signs for handicap parking spaces must refer to "persons with disabilities" rather than "disabled persons."

Hiring Illegal Workers (Homeland Security). Employers must fire workers who cannot verify their work eligibility. Workers who provide false social security numbers on their W-2 forms to qualify for a job will result in a mismatch in Social Security Administration records. Under the new crackdown, the Agency is expected to send out "no-match" letters affecting more than eight million workers. Employers who receive a no-match letter will have 90 days to resolve discrepancies. If the discrepancies cannot be resolved, the employee must be fired. Employers who continue to employ workers with mismatching numbers could face criminal prosecution and fines up to $11,000 per worker.

Bulk Cable Contracts (Federal Communications Commission). Prohibits exclusivity arrangements and allows members to receive video services from other sources. A possible side-effect may be increased cable prices since community associations will lose the benefit of price concessions given by cable companies for exclusive access. This legislation applies only to bulk cable contracts and not to contracts for satellite cable or bulk billing arrangements.

Reserve Funding. Starting January 1, associations are required to make the following reserve disclosures:

  • Deficiencies. Disclose any deficiencies in the reserves on a per unit basis.
  • Deferrals. Disclose whether the board plans to defer repairs or replacement of any major component, including a justification for the deferral.
  • Loans. Disclose whether the association has any outstanding loans with an original term of more than one year, including the payee, interest rate, amount outstanding, annual payment, and when the loan is scheduled to be retired.
  • Funding Plan. Prepare and distribute a funding plan that indicates how the board plans to fund the annual contribution to meet the association's obligation for the repair and replacement of all major components. The reserve funding plan must be adopted in an open meeting. Beginning January 1, 2009, boards must distribute their reserve funding plan to all members along with the association's annual operating budget, not less than 30 nor more than 90 days before the start of the association's fiscal year.
  • Assessments. If the board determines an assessment increase is required to fund the reserves, the assessment must be adopted in an open meeting and separately from the adoption of the funding plan.
  • Form of Disclosures. Prepare and distribute specific reserve funding disclosures using the new disclosure format in Civil Code §1365.2.5

Transgender Discrimination (Assembly Bill 14 - Civil Rights Act of 2007). Under the legislation that took effect in January 2006, you cannot discriminate against persons who perceive their gender to be different from that traditionally associated with a person's sex at birth. Under AB 14, the most recent amendment to the California Unruh Civil Rights Law, if a board denies a member his/her lawful right to receive benefits or services, the board would lose the immunity given to volunteer directors and officers. Under the new legislation, requiring a transgendered man to use the men's room may very well be considered discriminatory.

2007 CASE LAW

Unlicensed Contractors Workers' Comp Insurance.Association's management company hired an unlicensed and uninsured company to clean and repair rain gutters. A worker was seriously injured when a rain gutter touched a power line. Association and its management company held liable for workers' compensation benefits. Heiman v. Workers' Compensation Appeals Board (2007) 149 Cal.App.4th 724.

Transfer Fees. Davis-Stirling Act does not limit the amount that may be charged by a managing agent for document and transfer fees. Berryman v. Merit Property Management (2007) 152 Cal.App.4th 1544.

Insurance Denial of Coverage. Exclusion in D&O policy for claims arising from construction did not apply to suit arising from Association's attempt to resolve a neighbor to neighbor architectural dispute. Marquez Knolls POA v. Executive Risk (2007) 153 Cal.App.4th 228.

Common Area Encroachments. Owners extended their exclusive use patios into unused portion of the common area adjacent to a downward slope. Boards may use their best judgment to decide whether to sue to enforce a particular violation. A CC&R amendment which ratified the encroachments was also deemed proper. Haley v. Casa del Rey Homeowners Association (2007) 153 Cal.App.4th 863.

Negligent Management Company. The board hired one of its directors to manage the association's construction defect lawsuit. The director overpaid herself from the association's checking account. The management company processed the checks without notifying other directors, failed to obtain the signatures of two directors and failed to furnish monthly financial reports to the board. The association sued the management company. The company defended by claiming that the indemnity clause in its contract with the association protected it from liability. The court ruled that such clauses protect against third party claims, not against first-party actions brought by the association against the company. Accordingly, the management company could be liable for the claims. Queen Villas HOA v. TCB Property Management (2007) 149 Cal.App.4th 1.

NOTE: Some landlord-tenant case law is included because courts frequently apply such law to associations.

Brandishing Guns. Tenant brandishing a gun while uttering threats constitutes a foreseeable risk of harm to others, and the owner of the property has a duty to protect other residents. Barber v. Chang (2007) 151 Cal.App.4th 1456. This means associations may have a duty to protect members from known or foreseeable criminal acts in the development.

Gang Members. Landlords do not have a duty to evict gang members. However, landlords (and, therefore, associations) do have a duty to protect residents from reasonably foreseeable harm. Castaneda v. Olsher (2007) 41 Cal.4th 1205.

Parking Spaces. There was a restriction in the CC&Rs regarding the developer's duty to convey parking spaces to the association. The court held that the statute of limitations for breach of the CC&Rs begins to run from the time the developer conveys parking spaces to other persons. Crestmar Owners Association v. Stapakis (2007) 157 Cal.App.4th 1223.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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