California’s AB648 and AB1033 Transform HOA Meetings and Property Rights

California is buzzing with the announcement of new assembly bills AB648 – Virtual Meetings and AB1033 – Accessory Dwelling Units (ADUs) into condos, both effective January 1, 2024.  

This is partly because HOAs and their members in all 50 states are greatly influenced by state laws. In fact, in terms of adherence, federal and state laws supersede all other HOA guiding documents.

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So, when there is a new or amended state law HOAs must pay careful attention to fully understand what the details are and how it will impact them as an HOA and their communities.

In this case, California passed two new assembly bills on January 1, 2024, among others, that are getting a lot of attention from HOAs and homeowners alike.

Let’s find out why, starting with the impact of these state laws on HOAs.

  

Why the impact of state laws on HOAs is so important

All states have jurisdiction over HOAs and the communities that exist within their state as HOAs must operate in accordance with the laws of the land.

State statutes directly influence an HOA’s:

• Creation
• Operation
• Termination 

The diagram below indicates the hierarchy of HOA guiding documents.

As you can see from the chart, the laws passed by the state can and do directly impact all HOA guiding documents on some level, and they empower HOAs to exercise authority over planned communities and members through HOA guiding documents. 

Now that you understand the depth of influence state laws have on HOAs, we can take a deeper look at one of the important new assembly bills signed by Governor Gavin Newsome, California.

  

AB648 – Virtual/Online HOA Meetings

California has recently permitted all HOA board and member meetings to take place completely online. That’s right, before the adoption of AB648, a physical location still had to be designated for an HOA meeting, with at least one board member in attendance, even if the meeting was also taking place virtually. Now all meetings can be held virtually without that physical location designation.    

  

Conducting and attending virtual meetings

Virtual meetings have been taking place for some years now. A virtual or online meeting is when attendees from different locations join a meeting by audio and/or video to communicate, even though they are in different physical locations—they attend and conduct the meeting virtually or online.

Various types of software, also known as conferencing platforms, may be used to conduct a virtual meeting such as:

• Zoom
• Microsoft Teams
• Slack Video Calls
• Google Meet
• Go To Meeting
• Webex Meetings

HOAs have to do some research to decide which software will be most suitable for them.  

  

Types of virtual meetings

In the case of HOAs and condo boards in California, a virtual meeting may be used for the:

• Annual General Meeting (AGM)
• Board Meeting
• Proxy Only Meeting

Really, these are the most prevalent types of meetings, but a virtual meeting can be used for any purpose including discussing any number of topics.

  

Benefits of AB648

Did you know that 11 million meetings are held every day in the United States? Which breaks down to 55 million meetings every week!   

So, with this incredibly high number of meetings taking place, a percentage of which are HOA meetings, you may wonder how does AB648 benefit HOAs, members and staff.  

Here are some of the ways virtual meetings benefit HOA communities in California.

  

The Board

Challenges	How Virtual Meetings Help
When members don’t attend meetings at a physical location, quorum can’t be met, and the meeting cannot proceed.	Boards are more likely to make quorum as more members will attend virtually due to convenience.
Keeping members informed who missed the meeting at the time and location designated.	Virtual meetings can be recorded and the recording made available to all members via a link by email.
Expensive paper and print jobs for each member. Information packages cost a lot of money and take a lot of time to produce to be delivered or presented at an in-person meeting.	Documents can be shared on screen and via links with members, reducing or eliminating printed packages, which saves money. Members can download the documents to their computer /mobile device if they choose.

  

Property Managers

Challenges	How Virtual Meetings Help
Having multiple locations means they don’t have enough time to visit all locations in a single day to attend meetings.	Holding virtual meetings with the board and members and security will help property managers address issues quickly without having to go to a site to address a problem.
Vendors and suppliers can’t attend physical HOA meetings due to location and/or time	Contractors and vendors can attend virtual meetings easily leave/drop off the meeting when their portion is over.
As fuel prices go up, travel becomes more expensive for property managers.	Online meetings cut commuting expenses

  

Members

Challenges	How Virtual Meetings Help
Bad weather can deter members from leaving their homes to attend a meeting in person.	Rain or shine, virtual meetings take place.
Too busy to physically attend meetings	A virtual meeting can be joined from a car, a sporting event, even from outdoors as long as a person has smart device (cell phone, tablet, laptop) and internet access.
Feel seen and connected	In a virtual meeting members can see each other online, and submit questions anonymously in advance of the meeting instead of having to raise or stand in a meeting to ask the question.

California’s bill to allow for virtual meetings without the need to designate a physical meeting space, with a board member in attendance, addresses many challenges faced by the board, property managers and members.  

Keep in mind, there are some stipulations that AB648 also outlines.

  

AB648 Must Haves

The AB648 allows for virtual meetings without the need for a physical location, and board representation, but it also requires that HOAs must provide:

Clear instructions

• Provide clear instructions to each member about how they can participate in a virtual meeting, including the technical details. Not everyone will be familiar or comfortable using conference platforms, so HOAs must provide all instructions necessary. And it’s a good suggestion to provide links to video tutorials for the conference software being used.

Technical support

• While a virtual HOA meeting is taking place, the HOA must have a designated technical support person who members can reach out to if they experience technical difficulties.

Requested hard copies

• Make members aware that they still have to option to receive hard copies of all materials referred to in the virtual meeting if they request it, and how they can make that request.

  

No online voting… yet

At this point you may have noticed that despite the ability to have virtual meetings, online voting or e-voting is still NOT permitted in California. Voting must take place in person at a physical location. To date, according to CA Civil Code Sec 5100, electronic voting is not allowed for HOAs.

The inability to vote online in California detracts from the convenience of using virtual meetings. Currently, property management software makes voting online possible, and many other states already allow HOA online voting. So, being able to take advantage of both meeting online and voting online would be the most effective scenario for HOAs in California.  

Now let’s explore AB1033.

  

 AB1033 -Accessory Dwelling Units (ADUs)

The amendment to this bill is quite exciting.

AB1033 provides that homeowners in California, in a planned community, have the option to add an Accessory Dwelling Unit (ADU) to their property and turn it into a condo, which can then be sold  separately from the homeowner’s principal residence, by the homeowner.  

The homeowner can even split their lot so that the separate ADU can be sold on its own.

An ADU is a fully functioning second living space, where one or more people can live.  An ADU can be attached to or separate from the existing, original home on the lot.

From the very onset of this development, you can anticipate some pluses and minuses in a shared community living environment.

First, let’s take a look at the positives.  

  

Benefits of AB1033

Some members and not-yet members of HOAs in California are pleased with the AB1033 bill for the following reasons:

  

Break into the housing market

Young and first-time prospective homeowners who typically can’t afford to purchase a home in California now have an opportunity to get into the housing market. The average home in California is valued at $783, 666, which has risen over 6.4% in just one year! And over 40% of homes sell over the asking price.

The chart below demonstrates how housing prices in the early 2020s are steadily rising in California.

Source: U.S. Federal Housing Finance Agency

Comparatively, ADUs in California can range in cost from $200k to $500k depending on where they are located in California and the size and materials of the ADU. This is considerably less expensive than what the current market is offering.

  

Additional income

Homeowners who own a home in their HOA can either rent their ADU or if it’s a separate dwelling, they can actually sell it separately from their primary dwelling. This poses a great opportunity for homeowners to bring in additional income to offset their current mortgage, especially senior citizens who are no longer working.

  

Increase in value

Typically adding an ADU increases the value of the original property. When an ADU is sold it can raise the overall property value.  

  

Eliminates confusion

The bill brings clarity to those who would like to add an ADU to their property by confirming an ADU can be built on an HOA homeowner’s property, without the HOA blocking its construction by using its Covenants, Conditions and Restrictions (CC&R) or creating unreasonable burdens.

While it seems, all is a go for ADUs, it still may not be very easy to proceed. Let’s explore some of the issues.

  

Accessory Dwelling Unit Challenges

  

HOA Concerns

An HOA has the responsibility of overseeing many operations, activities and aesthetics in the community; and it also has existing governing rules and regulations that it must enforce. So, while an HOA cannot stop the building of an ADU, the homeowner building the ADU must comply with HOA rules and restrictions as well as its architectural committee in regard to the ADU. Going through this process can be overwhelming and prove problematic if the HOA and homeowner are at odds with what they want.

The HOA can still enforce requirements of the ADU pertaining to:

• Size
• Design
• Architectural application process
• Shared amenities

  

Non-compliant new owners/renters

The primary owner who invested in buying in the HOA community will have considered and accepted the obligations that come with living in a planned community. However, new owners and renters may be less compliant—causing challenges to the HOA.

For example, it will take a while for new owners to understand all they need to comply with and may overlook some requirements, such as parking where they shouldn’t. And renters don’t have the same financial investment in the property as the primary owner and may become careless with lifestyle choices like making noise—both leading to violations. It’s more work for the board and staff if ADU residents don’t comply.

  

Complaining neighbors

Depending on where the ADU is situated, such as in a homeowner’s back yard, the neighbor facing the ADU may perceive it as a problem for them. They bought a property based on a certain design of the community and now that layout has changed due to the ADU, and they may have continually evolving renters or a new ADU owner as a neighbor.

 These are just some issues that could pop up with building, renting and selling ADUs.

  

 AB1033 Must Haves

The legislation insists that the ADU can only be sold if:

• The local municipality allows for the ADU to be sold separately from the principal home
• Financial institution holding a mortgage on the ADU approves the sale
• The HOA association also approves of sale and purchase.

  

California Amendments Offer New Options to HOA Members  

These days hot topics for Californians living in HOAs is firstly the ability to participate in virtual meetings without a designated meeting place, and board attendee; and secondly, the ability to build and sell an accessory dwelling unit (ADU) as a condo, separate from the homeowner’s principal dwelling—AB648 and AB1033 respectively.

These two new state laws, effective January 1, 2024, have caused HOAs to operate differently as they must adopt them.

In short, participating in only online meetings frees up people to attend without the obligation of physically being in a room, which is ultimately more convenient, any way you look at it.

And the ability to build and sell an ADU as a condo creates great opportunities for more affordable housing in California and additional income for homeowners.