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SB 326 – A Balcony Bill that Protects Community Associations AND their Residents!

SB 326 –A Balcony Bill that Protects Community Associations AND Their Residents!

by Robert Ward, Esq.

In 2015, a tragedy in Berkeley resulting from a balcony collapse that killed six young people and injured seven more sparked much debate about the safety of elevated decks, walkways, and balconies in California multi-unit residential construction.  A few years later, in 2018, Senator Jerry Hill drafted S.B. 721 as a direct response to the collapse, seeing a need for those responsible for maintaining these structures to take preventative action.  That bill imposed rigorous destructive testing obligations on those charged with maintaining these elevated structures in multi-unit projects, including apartment buildings and condominium or townhome developments.  Had it passed as drafted, community association boards would have been required to perform costly invasive (or “destructive”) testing on balconies and other elevated structures every six years in at least 15% of the units with these components.

S.B. 721 was passed by the legislature and signed by Governor Brown in September of 2018; however, it was amended and community associations were ultimately excluded from that legislation.  While the idea of promoting safety and preventative care in community association was noble, the obligations to HOAs, both financial and logistical, proved far too onerous for most associations.  The legislature agreed that any such requirements would need to also make sense in the common interest development world.  So, HOA advocates like CAI’s Legislative Action Committee worked tirelessly with Senator Hill towards drafting a new bill that would make sense not only for owners and visitors of these projects, but also the associations that are charged with budgeting for their maintenance.

In early 2019, Senator Hill introduced a newer, better version of the balcony bill.  Senate Bill 326 was introduced with new language that serves a dual purpose:  first, promote the safety and welfare of community association residents and their guests; secondly, to protect consumer’s rights – namely, those of the associations who must budget to retain experts above and beyond they expected based on existing reserve studies.

The proposed bill in its current form amends Sections 5551 and 5586 of the Civil Code, and require the following:  condominium associations would be required to conduct a visual inspection either by a licensed, qualified architect or structural engineer with similar credentials, every nine years.  These consultants would need to be familiar with the project’s elevated components by reviewing plans, after they would generate a random list for each construction type of each component.  The inspection will need to be of a “statistically significant” sample of elevated structures, such as balconies, decks, stairways and railings, and a report would be produced of the results of the inspection.   If evidence of water intrusion is found, the inspector would use his or her best professional judgment in deciding on any further needed investigation, and would produce a report to the association.  The first inspection would need to be completed by January 1, 2025.

The report would need to include the following information: (1) the identification of the building components comprising the load-bearing components and associated waterproofing system; (2) the current physical condition of the elevated structures (3) the expected future performance and remaining useful life of the components; and (4) recommendations of any necessary repairs. The inspector would also notify the local code enforcement agency of any imminent threat to personal safety.  Thus, a plan for preventative maintenance on elevated walkways, balconies, decks and stairways is now possible, but in a more fiscally responsible manner than S.B. 721 required.

The second part of SB 326, the “consumer protection” portion of the bill, is new this year and involves the ability for associations in projects less than 10 years old to engage the builder in claims for defective construction.  Over the course of several years since S.B. 800 (the “right to repair” law) was passed, developers of new condominium and townhome projects have increasingly been drafting their governing documents to include stringent requirements that obligate boards to get a vote of the membership before that board can claims against the builder for defective construction. In certain circumstances, a “super-majority” vote of 66% or even more of the membership must be satisfied before a board may pursue a legitimate claim. In a recent 2018 case (Branches Neighborhood v. CalAtlantic Group[1]), the court dismissed an association’s claim for $5 million in damage because the association filed their suit before obtaining the vote, despite the fact that a later vote resulted in 92 of 93 association members voting in favor of the claim.

The legislature is now considering the extreme effects of having such requirements in governing documents.  Typical clauses require a membership vote (usually a supermajority of at least 66%) before the Board can retain counsel to advise them as to whether or how to proceed; require a membership vote before a Board can spend any association funds to investigate whether construction deficiencies may exist; require notice to be given to the Developer of any Board meetings where construction defects may be discussed (in open or executive session), long after Developer representatives have left the Board; permit Developer representatives to sit on Boards long after all units are sold; and include a provision in the governing documents which prohibits Boards from amending its CC&R’s to remove these “poison pen” provisions without the Developer’s consent.

By removing these obstacles, S.B. 326 would protect association board’s rights to pursue valid claims, which is a fiduciary obligation anyway.   California Civil Code Section 5800(f) describes the fiduciary duty of board members, providing that the scope of board members’ duties includes “whether to conduct an investigation of the common interest development for latent deficiencies prior to the expiration of the applicable statute of limitations,” and “whether to commence a civil action against the builder for defects in design or construction.”[2]  Language that hinders the ability for board members to perform these investigations and protect assets like balconies, decks and elevated walkways is counterproductive to existing law, and only serves to limit the power of associations to seek legal remedies for breaches of the construction standards set forth in Civil Code Sections 896 and 897 exist.

SB 326 contains language that prohibits these types of clauses in governing documents and protect HOAs.  The bill is supported in its current form by CAI, and is currently in the Assembly’s Housing and Community Development Committee.  Efforts are underway in Sacramento to thwart whatever opposition there may be to this bill, and CAI’s Legislative Action Committee continues to monitor its progress going forward.

Rob Ward is an partner with Riley Pasek Canty LLP.  Mr. Ward has represented homeowners and HOAs for over 20 years, both in the area of Construction Defect and as a general counsel attorney.   He also serves as a delegate with the San Diego chapter of CAI’s California Legislative Action Committee.

 

[1] Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) Cal.App.5th 743

[2] Cal. Civil Code Sec. 5800(f)(1)(A-B)

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