Proposed law could stop gouging of condo, townhouse owners
Realtors support measure that would block excessive fees
The California Association of Realtors is sponsoring AB 771, a state bill that would prevent home buyers in a common interest development (CID), such as a condominium or townhome, from being charged excess document fees.
Existing law requires homeowners' associations (HOAs) to provide specific documents to prospective purchasers of homes in a CID -- a form of real estate ownership in which each homeowner has an exclusive interest in a unit and a shared interest in the common area property.
In addition to the standard residential property disclosures that must be provided to purchasers of residential property, purchasers of a unit within a CID must receive basic information about the structure, operation and management of the homeowners association that operates the CID.
Current state law requires that this information come from the HOA and prohibits it from charging fees in excess of what is "reasonable," not to exceed the actual cost of processing and producing these document. HOAs generally provide the documents for approximately $75 to $250.
But increasingly, the HOAs are delegating document preparations to third party vendors or contractors who, under a 2007 court decision, are exempt from this fee limitation. This delegation of responsibility by HOAs sometimes results in home purchasers being forced to pay additional fees for other documents, which are "bundled" with the required documents.
Assembly Bill 771, introduced by Assemblywoman Betsy Butler (D-Torrance), addresses this situation by specifying that only fees for the required documents may be charged when such documents are provided, effectively prohibiting any "bundling" of fees for other documents with these fees.
The bill also creates a new form detailing which documents are required. The seller of a CID must complete this form and transmit it to the prospective purchaser along with the required documents.
The real estate group said this would eliminate any uncertainty for the prospective purchaser as to exactly which documents are being provided.
AB 771 passed off the Assembly floor Monday by a vote of 69-0. The measure now awaits the governor's signature into law.