Myths Regarding the New Acts
Nov 04, 2013Myth #1
HOAs must immediately prepare completely new documents, the “Annual Budget Report (ABR)” and “Annual Policy Statement (APS)”.
The new Act refers to the ABR and APS as new disclosures, which starting next year, HOAs must distribute annually to members. However, the ABR and APS are primarily collections of documents HOAs already distribute. One collection, the ABR, consists of items which likely change each year, while the APS collection consists of items which typically will not change much from one year to the next. If your HOA has not yet distributed its budget package from 2014, would it be a good idea to get a jump on things and prepare the ABR and APS this fall? Sure, but that is very different from saying it is required. Also, you don’t need a lawyer to prepare this! The competent manager should know how to prepare these two items for your association- and, since it is basically what your manager already is doing, it should not cost extra.
Myth #2
HOAs must amend their governing documents to update all statutory references.
I very recently learned of a lawyer who is saying that the relocation of the Davis Stirling Act “forces” HOAs to update statutory references in their CC&Rs and Bylaws, or they will become unenforceable. This is a misstatement of the law, designed to scare clients into doing something which is optional.
The new Civil Code 4235 says a Board “may” amend its governing documents to update the statute numbers. It is not mandatory. The statutes apply whether or not they are correctly mentioned in the governing documents, so there should be no legal consequence of leaving the old statute numbers in place. If your lawyer is telling you that this is mandatory, get a second opinion.
It is a good idea to update the numbers to make the documents more useful.
Many law firms have prepared conversion charts which are available at no cost, giving the old law number alongside the new (www.HOAhomefront.com has one also), and also offer affordable amendments to update the numbers. But it is a choice, not a requirement.
Myth #3
Mixed use HOAs now fall outside the Davis Stirling CID Act.
Some lawyers have said that if an association has any non-residential units along with the residences (aka the “mixed use” HOA), the Davis Stirling CID Act no longer applies. This is incorrect. The Commercial and Industrial CID Act applies (per new Civil Code 6531 and 6582) to non-residential associations. If a project has any homes in it, the Davis Stirling CID Act still applies. Note, however, that hotel units are considered “non-residential” under this law.
Myth #4
The new Act will really change how we govern our HOA.
This is not at all true. The new law makes some changes which are not earthshaking (see columns “Getting Ready for 2014” and “Get Ready for the ‘New’ Davis-Stirling Act“). Most of the changes are sensible and all are very manageable. Don’t let anyone panic your HOA.
Written by Kelly G. Richardson
Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.
