Source: http://www.ccfj.net/HOACALRCagency.html
Timestamp: 2019-04-25 08:36:52+00:00

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The Commission has directed the staff to prepare a draft proposal for creation of a common interest development oversight agency. The agency would be charged with providing information to the public regarding common interest development law and assisting in the resolution of CID disputes. A staff draft tentative recommendation is attached. The Commission should consider whether to make any changes to that draft and whether to circulate it for public comment. Various features of the attached draft are discussed below.
suited to practical realities. A grant of broad operational discretion would allow the agency to learn and adjust its procedures over time.
The proposed law would create the Common Interest Development Bureau (“Bureau”) within the Department of Consumer Affairs (“DCA”). That decision reflects two choices: (1) where to locate the agency, and (2) whether to create an entity headed by a single executive officer or by a multi-member board. Those choices are discussed below.
it is a simple matter to add another appendage to the existing DCA structure. DCA’s considerable experience in regulating various businesses and professions should prove valuable in starting up a new regulatory body.
decision that can be changed later if it is desirable to do so.
direct input in the agency’s policy formation.
Boards and commissions first became popular in the late 19th Century. As a response to the corrupt “big city bosses” that ruled American cities during the late 1800s and the early 1900s, reformers sought to remove power and influence over services from what they believed were the clutches of highly partisan and self-centered politicians. Instead, key government decisions would be made by boards and commissions comprised of “experts” who would supposedly apply their expertise in a neutral fashion, influenced only by what worked and what was right, or so the theory went.
lack of general accountability. When something goes wrong with a board or commission, the electorate feels powerless because it is powerless; there is literally no one to hold directly accountable. And transparency without accountability is a façade.
that reason, the staff draft provides for a bureau rather than a board. That approach can be changed fairly easily if the Commission feels that a multimember board should be used instead.
It seems likely that a proposal to create a new regulatory agency (the “Common Interest Development Bureau”) would meet with more skepticism from the Legislature, the Governor, and the public than is typical for a Law Revision Commission proposal. For that reason it is important to provide a clear explanation of the purpose and functions of the proposed agency. We would ordinarily provide such an explanation in the preliminary part of the recommendation. However, individual Legislators and members of the public may not have the Commission’s recommendation available when first reviewing the proposed law. For that reason, the proposed law includes an explanatory provision, framed as a statement of legislative findings and declarations.
approximately one quarter of the state’s housing stock.
and divisive problems. The Common Interest Development Bureau seeks to educate community association officers and homeowners as to their legal rights and obligations. Effective education can prevent or reduce the severity of problems within a common interest development.
disputes, where the disputants are neighbors who must maintain ongoing relationships. The adversarial nature of litigation can disrupt these relationships, creating animosity that degrades the quality of life within the community and makes future disputes more likely to arise. Litigation imposes costs on a common interest development community as a whole; costs that must be paid by all members through increased assessments. Many homeowners cannot afford to bring a lawsuit and are effectively denied the benefit of laws designed for their protection. The Common Interest Development Bureau provides a neutral, nonjudicial forum for resolution of common interest development disputes. Many disputes can be resolved inexpensively, informally, and amicably through bureau facilitated mediation. As a last resort, the bureau has authority to issue a citation for violation of the law.
and incidence of problems within common interest developments, the Common Interest Development Bureau provides a sound basis for prioritizing reform efforts, thereby increasing the stability of common interest development law.
revenue shall be used to fund the services provided by the bureau.
The proposed law requires the Bureau to maintain an informational website, similar to that previously recommended by the Commission. Information provided on the website would also be available in printed form. The Bureau would also be required to provide a toll-free telephone number that could be used to request information and advice. The Bureau would also provide training courses to association officers and homeowners. The Bureau would be authorized to charge a fee to cover the actual cost of providing printed material or training.
documents. On receipt of a request for assistance the bureau shall, within the limits of its resources, investigate the dispute, confer with the interested parties, and assist in efforts to resolve the dispute by mutual agreement of the parties.
This gives the Bureau broad authority to informally investigate and mediate disputes, without dictating any specific procedure.
Under existing Civil Code Section 1354 a person is required to offer ADR before filing certain types of CID lawsuits. That requirement is not inconsistent with proposed Section 1380.300, but the two provisions could be better coordinated.
One alternative would be to simply make clear that Bureau-assisted mediation may be used to satisfy the pre-litigation ADR requirements. That would leave the choice of ADR form up to the parties, but would make clear that use of the Bureau’s mediation process is a valid choice.
Another alternative would be to provide that Bureau mediation is the only form of ADR that satisfies Section 1354. That would eliminate an existing problem: a person who wishes to avoid ADR can offer a form that the other party is likely to reject.
the right to refuse ADR.
The Commission has been hesitant about making participation in mediation completely mandatory. The success of mediation depends in large part on the willingness of the parties to negotiate in good faith. A recent report on mediation programs in the superior court casts additional light on the issue.
A recent report of the Administrative Office of the Courts reviews experience under five pilot programs conducted in 2000 and 2001, in which early mediation of lawsuits was encouraged or required by the superior courts. See Evaluation of the Early Mediation Pilot Programs (Admin. Office of the Courts, Feb. 27, 2004). The programs were generally successful. They increased settlement rates and litigant satisfaction and reduced trial rates and court workloads. Id. at 29-31.
minimum mediator qualifications). Id. at 35.
of cases referred to mediation was capped. Under a full implementation of the Fresno approach, all cases would be referred to mediation. The Los Angeles and San Diego programs are described in the table as “semimandatory” because willingness of the parties to participate was a major factor in deciding whether to refer a case to mediation. “[The] wishes of the litigants played an important role in the mediation referral process, just as they would in a voluntary program.” Id. at 87, 150.
In general, voluntary mediation is more likely to succeed than involuntary mediation. However, a system of voluntary mediation results in fewer cases being referred to mediation (28-47% of total cases). Thus, while voluntary mediation improves the rate of successful mediation, the total number of cases resolved through mediation remains fairly low (14-19% of eligible cases). In mandatory mediation the total number of eligible cases resolved through mediation is much higher (55%). This suggest that there are a significant number of cases in which the parties would not voluntarily participate in mediation, but nonetheless will settle if forced into mediation. However, mandatory mediation also results in a higher number of unsuccessful mediations. In Fresno’s mandatory program, 45% of the eligible cases were forced into unsuccessful mediation, adding to the cost and delay of resolving those cases. Under the voluntary and semi-mandatory programs, a much smaller percentage of the cases involve unsuccessful mediation (11% to 19% ). Does the heightened number of cases settled through mandatory mediation justify imposing mediation on everyone, even though half of the mediations will fail to produce a settlement? From the point of view of conserving judicial resources, a mandatory system probably makes sense. From the perspective of conserving litigant resources, the advantage is less clear — many more cases will avoid the cost of litigation, but half of all cases will be forced into unsuccessful mediation, adding to the cost and delay of resolving their cases.
to mediation of CID disputes, we could then reconsider whether to require participation in the Bureau’s process as a pre-requisite to litigation. The staff recommends that the existing ADR provisions be amended to make clear that participation in the Bureau’s process would satisfy the ADR requirement. A revision to that effect is included in the staff draft as an amendment to proposed Civil Code Section 1369.510 (which would be added by AB 1836 (Harman) as part of a recodification of the existing ADR requirements). That change would allow and encourage use of the Bureau’s process, but would not require it.
Some disputes cannot be resolved through appeals to reason and good will. If the Bureau finds a violation of CID law, and efforts to remedy the violation through mediation are unsuccessful, the Bureau would have authority to issue a corrective citation. A citation would order abatement of the violation and could include appropriate equitable relief (e.g., restitution of unlawfully collected fines). Where warranted, a citation could include an administrative fine to be paid to the Bureau. The following standards would govern imposition of a fine: 1380.310. … (c) A citation may include an administrative fine of not more than $1,000 per violation, to be paid to the bureau. In determining whether to impose a fine and the amount of any fine imposed, the bureau shall consider the gravity of the violation, the presence or absence of just cause or excuse, and any history of prior violations. A fine shall not be imposed against an individual unless the bureau finds, by clear and convincing evidence, that the violation committed by the individual involved malice, oppression, or fraud, as those terms are defined in Section 3294 of the Civil Code. If the bureau imposes a fine against an individual, the individual shall not be indemnified by the community association.
review. If a hearing is not contested or is upheld after administrative and judicial review it would be enforceable in the superior court.
The Bureau would be required to publish all final corrective citations on its website. This is consistent with existing law that requires DCA to publish the disciplinary history of licensees on its website. Such information helps consumers to avoid a business (or community association) that has a history of violation of the law. That provides a strong incentive to follow the law or accept a mediated remedy of a violation.
collected into the Common Interest Development Bureau Fund established exclusively for use by the Bureau. Fees, fines, and reimbursement collected by the Bureau would also be deposited into the fund. The Bureau would be funded exclusively from the special fund; it would not receive any general fund revenues.
The per unit base amount would initially be $10. Because the fee is only collected every two years, that would average to $5 per unit per year. The Bureau would be required to adjust the per unit base amount every two years, to provide only the revenue that it estimates will be necessary for its operations in the next two years. The per unit base amount would be capped at $20 (i.e., $10 per unit per year).
A community association could increase assessments to recover the fee amount. This would spread the cost of the Bureau equally to all CID homeowners.
avoid that result by exempting master associations and sub-associations from payment of the Common Interest Development Bureau Fee. A note following Section 1380.120 asks for input on whether that solution is workable and appropriate.
The proposed law would be subject to a five year sunset provision. This is a common feature of consumer protection agencies established within the Department of Consumer Affairs.
The Joint Legislative Sunset Review Committee exists to review the operation of a consumer protection agency that is subject to a sunset provision and to make a recommendation on whether there is a continued public need for the agency’s existence. Bus. & Prof. Code § 473.4. An agency under review must provide the Joint Committee with a detailed report analyzing its activities, funding, and expenditures. Bus. & Prof. Code § 473.2. The Joint Committee then holds a public hearing to receive testimony regarding the continued need for the agency. Under the proposed law the Common Interest Development Bureau would be subject to review by the Joint Committee. This provides an important measure of agency accountability. It should also help to allay some concerns about whether a CID agency is needed; if it turns out that the benefits of the agency don’t justify the cost to homeowners the sunset date can be allowed to operate.
sense of the will of the Legislature and executive branch.
7 apartment projects, housing cooperatives, and planned unit developments.
14 CIDs are governed by volunteer directors, elected from among the unit owners.
19 management and an individual homeowner, or between homeowners.
26 CID dwelling units, that would yield about 300,000 complaints each year.
 See Civ. Code § 1351.
 Gordon, Planned Developments in California: Private Communities and Public Life 21-22 (Cal.
 For another effort to estimate the frequency of CID disputes, see Johnston & Johnston-Dodds, Common Interest Developments: Housing at Risk? 35 (Cal. Res. Bur., Aug. 2002).
2 matter of policy, the Attorney General does not pursue legal action in such cases.
11 effectively denied the benefit of laws designed for their protection.
26 in costly and rancorous disputes.
 See Commission Staff Memorandum 2001-44 (May 3, 2001).
 Many CID disputes involve laws regulating community association governance (e.g., procedures for elections, meetings, or access to records). In such a case the relief sought will typically be an injunction or declaratory relief.
 Cf. Bus. & Prof. Code § 125.9 (Department of Consumer Affairs citation authority).
3 community association has a history of violating the law.
8 reform of CID law.
14 cases that are filed in the courts.
18 would not be feasible to fund such an agency from the state’s general fund.
23 exclusively from fee revenue.
26 through a modest increase in annual assessments.
30 managed. However, the Bureau’s educational services will benefit all associations.
 See, e.g., Bus. & Prof. Code § 27.
and the Fair Employment and Housing Commission combined is around $20 million.
 See Civ. Code § 1363.6.
 See Gov’t Code § 11425.60 (precedent decisions).
7 Department of Consumer Affairs.
16 provides an important measure of agency accountability.
21 significant public demand for such services.
22 A partial survey of CID programs in other jurisdictions is provided below.
 See “Experience in Other Jurisdictions,” infra.
 Bus. & Prof. Code § 473.4.
 Bus. & Prof. Code § 473.2.
6 information and advice, but does not intervene in disputes.
7 Liaison operations are funded by an annual fee of $25 per association.
11 board consisting of representatives of all stakeholders in the housing market.
16 realistic in coming to a resolution of their differences.
17 Advice is provided by telephone, written correspondence, email, or in person.
21 The agency’s seven consultants processed nearly 27,000 inquiries in 2003.
33 parties to a subsidized mediation pay only a modest fee.
 See Va. Code Ann. § 55-530.
 See Civ. Code § 1354.
2 26,000 requests for information or advice.
4 are funded by a $4 per unit annual fee on registered condominium associations.
11 ADR, but the state has discretion to pay the mediator or arbitrator.
22 all community association disputes.
28 pursuant to Nevada’s mandatory ADR statute (see discussion above).
30 publishing materials relating to rights and responsibilities of homeowners.
31 (3) To assist board members to carry out their duties.
33 governing documents of an association and assist in resolving such disputes.
34 (5) To compile a registry of CID associations.
 See Nev. Rev. Stat. §§ 38.300-38.360.
 See Fla. Stat. Ann. § 718.1255.
Report of the Homeowners’ Association Task Force (2004).
 See Nev. Rev. Stat. Ann. § 116.625.
2 Ombudsman’s office is funded by a fee of $3 per unit per year.
11 have access to association records.
20 disputes, or (if necessary) conduct formal hearings.
25 housing, and community affairs).
36 in appropriate situations. Its decision is binding on the parties.
 See Haw. Rev. Stat. §§ 514A-46 - 514A-49.
 See Haw. Rev. Stat. § 514A-83.5.
 See Chapter 10B of the Montgomery County Code.
10 appealed to the courts.
11 The Montgomery County program is funded by a $2.25 annual per-unit fee.
12 There is also a $50 fee to file a dispute.
19 developing a program to certify and discipline community managers.
 See Nev. Rev. Stat. §§ 116.745-116.750.
2 the law can be ordered removed from office.
3 In general, a boardmember or other officer is not personally liable for a fine.
5 willfully violated the law, that officer may be held personally liable.
9 manager), one certified public accountant, one attorney.
15 receives tenant complaints and resolves them free of charge.
20 these disputes out of court.
22 determinative, but are subject to judicial review.
41 Wales (out of approximately 750,000 “strata scheme” housing units).
3 and appeal to a specialist tribunal.
9 this article govern the construction of this chapter.
10 Comment. Section 1380.010 is new.
12 1380.020. “Bureau” means the Common Interest Development Bureau.
13 Comment. Section 1380.020 is new.
15 1380.030. “Homeowner” means the owner of a separate interest.
16 Comment. Section 1380.030 is new. See also Section 1351(l) (“separate interest” defined).
19 partnership, business trust, corporation, limited liability company, or public entity.
20 Comment. Section 1380.040 defines “person” broadly to include various forms of legal entity.
21 Cf. Evid. Code § 175, Fam. Code § 105.
27 developments comprise approximately one quarter of the state’s housing stock.
7 severity of problems within a common interest development.
21 authority to issue a citation for violation of the law.
29 thereby increasing the stability of common interest development law.
33 provided by the bureau.
40 the Department of Consumer Affairs.
3 bureau. The chief shall have the powers delegated by the director.
6 11340) of Part 1 of Division 3 of Title 2 of the Government Code.
9 Division 3 of Title 2 of the Government Code.
23 §§ Sections 10 (delegation of powers or duties), 310 (powers and duties of the director).
31 (1) A master association comprised of two or more community associations.
37 amount is ten dollars ($10).
41 exceed twenty dollars ($20).
2 placed in the Common Interest Development Bureau Fund.
6 available to the bureau.
14 (“community association” defined), 1380.020 (“bureau” defined).
27 records of each county in which the common interest development is located.
30 chapter is enacted and takes effect on or before January 1, 2012.
33 of the Business and Professions Code.
36 (“common interest development” defined).
42 community association or homeowner.
3 defined), 1380.030 (“homeowner” defined).
6 request information or assistance.
7 Comment. Section 1380.210 is new. See also Section 1380.020 (“bureau” defined).
14 community association or homeowner.
18 Section 465) of Division 1 of the Business and Professions Code.
20 to contact the bureau for assistance.
22 community association or homeowner.
25 material, not to exceed the actual cost of printing and delivery.
28 defined), 1380.030 (“homeowner” defined).
36 agreement of the parties.
4 s provided in Section 1380.300.
8 statute or regulation that has been violated and the facts constituting the violation.
13 within a community association.
17 the presence or absence of just cause or excuse, and any history of prior violations.
22 indemnified by the community association.
39 development” defined), 1380.020 (“bureau” defined), 1380.040 (“person” defined).
8 defined); Gov’t Code § 11523 (judicial review of final agency decision).
13 Interest Development Bureau established pursuant to Chapter 11.
15 members with contact information for the Common Interest Development Bureau.
22 nonbinding, with the voluntary consent of the parties.
25 (1) Enforcement of this title.
29 (3) Enforcement of the governing documents of a common interest development.
36 would be proposed for Section 1354.

References: § 473
 § 473
 § 1351
 § 125
 § 27
 § 1363
 § 11425
 § 473
 § 473
 § 55
 § 1354
 § 718
 § 116
 § 514
 § 175
 § 105
 § 11523