New California HOA Laws Passed In 2021

The California legislative season for 2021 has officially closed, and new bills have been signed into law. Some of these bills — five, to be exact — have certain effects on homeowners associations. What are these new California HOA laws?

Understanding the New California HOA Laws

California Governor Newsom recently signed five bills into law that impact the way homeowners associations are run. The new laws include two assembly bills, AB 1101 and AB 502, and three senate bills, SB 391, SB 392, and SB 432. Two of these, namely AB 502 and SB 432, make significant changes to the election process of HOAs in the state. Others affect communication methods associations use and further protect associations from fraud, embezzlement, and other forms of dishonesty.

Assembly Bill 1101

Penned by Assemblymember Jacqui Irwin, AB 1101 clarifies some critical terminology issues concerning the insurance and banking requirements imposed on homeowners associations as found under Civil Code Sections 5502, 5806, and 5380. The bill follows up on AB 2912, which passed a few years ago. Both bills were sponsored by the Community Associations Institute.

AB 2912 brought some confusion to associations because it basically mandated that certain fund transfers go through the approval of the HOA board. These are transfers that go over $10,000 or 5 percent of the association’s total deposits. The percentage requirement, though, meant that HOAs would need to recalculate time and again to ensure they remain within the threshold. This proved particularly difficult for smaller associations.

AB 1101 addresses this problem and adjusts the threshold as follows:

• $5,000 or 5 percent of the estimated income in the annual operating budget for small associations (those with 50 units or less)
• $10,000 or 5 percent of the estimated income in the annual operating budget for large associations (those with 51 units or more)

The bill also completely prohibits the commingling of funds, which, prior to this bill, allowed for a few exceptions. It also changes “fidelity bond coverage” to “crime insurance and employee dishonesty coverage,” perhaps due to confusion associated with the term “bond.” With these changes, AB 1101 is fundamentally designed to safeguard the finances of homeowners associations and prevent financial dishonesty.

Assembly Bill 502

Assemblymember Laurie Davies authored AB 502, which adds Civil Code Section 5103 to allow associations to elect board candidates by acclamation and forego balloting. This can only be done if the number of nominees does not exceed the number of open seats. To qualify, an HOA must adhere to certain requirements during the call of nominations:

• Impart the possibility of an election by acclamation;
• Remind members of the nominations 7 to 30 days prior to the close of nominations;
• Send an acknowledgment to every person that submits a nomination within 7 days of the nomination;
• Send the nominees a statement letting them know of their eligibility or ineligibility within 7 days of the nomination;
• Elections by acclamation must only take place 2 of every 3 years; and,
• The list of permitted board eligibility requirements should include term limits.

Prior to the introduction of this bill, only associations with more than 6,000 members could skip balloting if the number of nominees matched the number of open seats.

Senate Bill 391

The past year and a half proved tumultuous for many homeowners associations. The COVID-19 pandemic made it nearly impossible for some HOAs to conduct business due to the physical limitations that social distancing brought. For a good while, members could not meet in person to vote on association matters.

Considering the effects of the pandemic, the introduction of SB 391 does not come as a surprise. With Sen. Dave Min as the author, SB 391 adds a new Civil Code Section 5450(a), which allows HOAs to hold meetings electronically during a declared federal, state, or local emergency. Having the option to hold entire meetings remotely certainly makes it easier for associations to adjust to times of crisis.

Senate Bill 392

With Sens. Bob Archuleta and Ben Hueso as its authors, SB 392 amends several sections of the Civil Code. According to this bill, homeowners associations in California can use email as a default mode of sending notices and documents to members. But, associations can only do this beginning in 2023.

Associations would still need to follow members’ preferred method of delivery. And members would need to provide their HOA with a written notice informing them of their preferred method and any other necessary details. If a member does not provide their preferred method, the HOA should use traditional mail. The option of electronic notices, though, certainly changes things for many associations. Most members would definitely want to receive theirs via email since it is both convenient and less costly.

Senate Bill 432

As with AB 502, SB 432 also affects the election procedures of homeowners associations. Authored by Sen. Bob Wieckowski, the bill increases the period of time for HOAs to hold a petitioned member meeting. Previously, associations only had 90 days to hold such a meeting. Beginning 2022, SB 432 extends the time to 150 days of the petition. This will give associations more time to call for nominations, declare candidates, and send out the ballots.

Additionally, the bill corrects SB 323, which omitted term limits. Now, associations are again permitted to disqualify candidates who have already served the maximum allowed terms.

Constructive New California HOA Laws Introduced

It was a productive legislative season for the state of California — one that brought forth five helpful new laws for homeowners associations. The new California HOA laws simplified certain election procedures, heightened financial security protocols, and approved alternative means of communication. While a few of these don’t take effect until much later, familiarizing yourself with these laws remains paramount, whether you are a board member, an HOA resident, or a manager.

Self-managed boards already have a lot on their plate. If you are having trouble juggling your many duties as a board member, perhaps it is time to seek professional help. Start your search for the best HOA management company today with the help of our online directory. Narrow down your list and filter through the options according to your city or state.

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