HOA Law Blog
You have most likely received emails regarding proposed new legislation that would allow California community associations’ Boards the power to enter into long term contracts for water or energy efficiency programs. After considering the pros and cons as expressed in these emails, we have let the Governor know that we support this bill. We urge you to let him know that you do as well, and you need to do that now, as he will soon be finalizing his decision on this bill.
Here are the facts: The California legislature recently passed Assembly Bill 1328, which is now on the Governor’s desk, awaiting his approval or veto. AB 1328, if enacted, would allow an association to enter into a contract for a water or energy efficiency program for a term of up to five (5) years, if the board reasonably anticipates that the contract will result in savings to the association. The members would not have the right to vote on the contract, but would be given notice of the proposed duration of the contract on the agenda for any meeting at which the contract will be discussed or voted on.
The full text of AB 1328 and the legislative summary can be found by clicking here.
This new legislation would add Section 1353.9 to the Civil Code.
The Legislative Counsel’s Digest on this bill is very clear as to what this legislation is all about:
The Davis-Stirling Common Interest Development Act provides for the creation and regulation of common interest developments. Under existing law, a common interest development is managed by an association pursuant to the provisions of the governing documents of the development.
This bill would provide that, notwithstanding any provision of the governing documents to the contrary, an association may enter into a contract for a water or energy efficiency program, not to exceed 5 years in duration, if the board of directors reasonably anticipates that the contract will result in verifiable savings to the association and the supplier is not an entity that the subdivider has a direct or indirect interest in, as provided. This bill would also provide that, prior to approving a multiyear contract, the board shall provide notice of the proposed duration of the contract on the agenda for any meeting at which the contract will be discussed or voted on.
There has been some controversy regarding whether this bill will benefit homeowners by allowing the boards to enter into beneficial contracts, or whether it will provide boards too much unchecked freedom to bind the association to long-term obligations. You may have received emails asking that you tell the Governor that this is bad legislation and that he should veto. We really do not understand why anyone who works with, lives at, manages or represents a condominium or homeowners association would not support this proposed new law. We support AB 1328, and believe that its enactment will benefit California community associations.
We have attached a copy of a letter that was sent to the Governor by CAI’s California Legislative Action Committee (CLAC) with rebuttal and comments from the California Association Community Managers (CACM) which proposed this new legislation. Click here to read this letter with CACM’s comments.
In the interest of full disclosure, David Swedelson was a long time delegate to and officer of CLAC. David is currently a member of CACM’s Legislation Committee and has evaluated this proposed new legislation from all perspectives.
Typically, most associations are only permitted to enter into contracts with a term of one year or less without member approval. However, current Department of Real Estate Guidelines now allow for CC&Rs to permit Boards to enter into some contracts for longer periods of time (this applies to newer associations). There is a reason for this; there are times when it makes economic sense to allow for longer contracts when it is not economically feasible for a contractor to install a system for a period of only a year.
Many contracts that are considered to be water or energy efficient (i.e. solar panels, water monitoring systems, and other “green” technologies) require at least a five-year term. Upon approval of this legislation, association boards will be able to enter into such contracts when they determine that the contracts will result in savings for the association, which could be in the form of lower assessments, reduced utility bills, or other savings. Although a member vote will not be required, and therefore the association will not incur the expense of distributing ballots or encounter the difficulty of fighting member apathy, discussion of such contracts will be included on board meeting agendas, and members will have the opportunity to voice their opinions. AB 1328, if enacted, would give the Board some additional authority, however the scope of the legislation is extremely limited and the board’s fiduciary duties to act in the best interests of the Association still apply. We believe that associations would benefit from the easier access to green technology that this bill would provide.
We have reviewed and considered the requests made by one legislative action committee in an email that you may have received asking that you urge the Governor to veto this bill. We very much disagree with that recommendation and instead urge you to let the Governor know that he should support this important legislation. Do this today. You can let the Governor know how you feel by leaving him an email comment supporting AB 1328, and you can do this through his web site. Click here.