Senate passes bill requiring clearer

views of association money


Article Courtesy of the Mercury News

Published August 24, 2004

Prospective home buyers in California's 37,000 homeowners associations would get clearer information about what they're getting into financially under a bill that passed the state Senate on Monday.

Senators voted 38-0 to make associations compile user-friendly summaries of monthly dues, a timetable of expected hikes and the precise amounts the association must increase dues in years ahead to maintain the property.

The bill also makes association boards give written notice to homeowners before diverting funds from maintenance and repair reserve accounts to other uses.

The legislation, which returns to the Assembly for a vote this week, comes as thousands of associations face dues increases to upgrade aging roofs, streets, swimming pools and landscaping. Experts say more than one-third of the state's associations have put off necessary dues hikes for fear of homeowner backlash. The bill is one of several awaiting votes this week as lawmakers wrestle with association foreclosure practices, access to financial records and a closed decision-making process for requests to modify home exteriors.

California's real estate agents say they face rising complaints from home buyers about unexpected hikes in monthly dues shortly after they move into privately governed communities. Monthly dues in such communities can run to hundreds of dollars alongside a monthly mortgage payment.

The bill's author, Assemblyman John Laird, D-Santa Cruz, says the financial information associations typically provide potential buyers about dues is too difficult to understand. His bill requires a standard form disclosing the current amount of reserves on hand versus what's needed in years ahead to maintain the community.

"That's a positive thing," said Alex Creel, lobbyist with the California Association of Realtors. "The buyer coming in should have some kind of idea what the reserve status is, what the dollar amount is, and how and when the appropriate reserve status would be achieved."

Creel said the CAR has received no commitment from Gov. Arnold Schwarzenegger about the bill, which must be signed by Sept. 30 to become law.

The bill also requires for the first time that secondary sources of monthly dues - community service organizations within the association that maintain golf courses or swimming pools alone - be included in the financial analysis. Associations' community service organizations currently don't have to provide financial information to their dues-paying members.

The legislation says associations can charge only actual and reasonable costs of providing the information to prospective buyers. Opponents of the bill, including the American Homeowners Resource Center, argued unsuccessfully for stricter limits on copying costs, saying excessive charges, if unpaid, could cause an association to foreclose on the home.