2014 Legislation: AB 2430 - Sale Package Disclosures and Fees

Bill Author: 
Maienschein
Subject: 
HOA Transfer Fees and Disclosures
Status: 
Signed by Govenor

UPDATE 7/23: The bill was signed by the Govenor. 

What AB 2430 Says

AB 2430 will require an association to itemize each charge for any disclosures it provides to a selling owner to give to a buyer, and not simply state a bulk sum as the law previously allowed.

The bill also requires a seller to give all current documents in the seller’s possession to the buyer free of charge. Any documents on the list that an HOA maintains in electronic format must be provided for the seller to give to the buyer in electronic format (“in lieu of a hard copy delivery”) also free of charge. 

From the Legislative Counsel's Digest:

The Davis-Stirling Common Interest Development Act requires an association, upon written request, to provide the owner of a separate interest, or a recipient authorized by the owner, with a copy of specific documents relating to transfer disclosures that the owner is required to make to a prospective purchaser of the owner’s separate interest. That act authorizes the association to collect a reasonable cost for delivery of those documents but prohibits any additional fees for electronic delivery.

This bill would require the cost for providing the required documents to be separately stated and billed from other charges that are part of the transfer or sales transaction. This bill would authorize an association to collect a reasonable fee from a seller for its actual costs in providing documents under these provisions and would require a seller to be responsible for compensating an association, person, or entity for providing documents under these provisions. This bill would also require a seller to provide a prospective purchaser with certain current documents that the seller possesses free of charge. This bill would prohibit a seller from giving a prospective purchaser the required documents bundled with other documents. This bill would make conforming changes to a codified form.

AB 2430 Effects on HOAs

Benefits 

The bill clarifies three important principles. First it is the association’s fundamental role to provide the documents to a requesting seller, not the management company’s role (HOAs merely contract with management companies for these services).

Second the bill confirms that sellers can select from among the itemized list of documents and charges, and cannot be required to pay a single “bundled” rate for all documents, whether requested or not, as some management companies have insisted the law permits. Third, the bill makes it unequivocally the obligation of the seller to compensate the providing party for the required disclosures, not the buyer. 

Drawbacks 

First, the law will not only require sellers to give buyers all of the “current” documents that sellers have in their possession, but will also require sellers to “confirm in writing [that whatever sellers provide directly to buyers is] a current document.” This puts extra strain on the sellers, which may then lead to more work for the HOA. We think that sellers will continue to look to their associations to supply current documents (even if unneccessary), regardless of what the sellers have in their possession or what the law requires.

Secondly, the bill will require associations to separate the charges for documents from “all other fees, fines, or assessments billed as part of the transfer or sales transaction.” This will require extra work, increases the chances for mistakes, and opens up the prospect, for example, of sellers not curing unpaid fines or paying special assessments, shown on separate invoices.

Last, the bill overlooks the whole other area of disclosures that associations participate in at escrow time, namely the homeowner certifications that buyers’ lenders require. Associations generally include the cost of preparing and providing these (voluntary) certifications in their escrow fees and require upfront payment. AB 2430 casts into question how these charges will be stated and who will pay for them in advance. 

Educational Topic: