Community Associations Subject to Davis Stirling Act

This blog post will touch on the benefits of being included under the Davis-Stirling Act, and conclude with what it takes to be excluded from the Act.

Most of my blogs come from real, every day experiences. Over the past week I met with an attorney that specializes in the formation of community associations, and followed that meeting up with a real estate investment company. Turns out the relationships created were symbiotic in nature. I looked to the lawyer to refer business to me, the lawyer looked to me to refer business to him, and the real estate investor needed both of us to help him with a recent acquisition. The symbiotic nature of real estate is honestly the favorite part of my job. I cold call and shake people down for business, but at the end of the day I truly enjoy being able to network, help people and solve problems.

Why do I bring this symbiotic relationship up? Well, it all stems from the question that was asked of me by the real estate investor looking to set-up an association. He asked me, "what are the strategic advantages of having an association, and what is an alternative remedy?" Great question! First, let's rephrase the question to: Do I want my commercial buildings subject to the Davis-Stirling Act (the Act)? The Davis-Stirling Act is Civil Code (CC) sections 1350-1378, and this body of law was created to protect/govern community associations. Inherent to creating associations is being subject to this body of law.

Advantages of Being Within the Act:

I'll try to keep my position neutral by outlining a few beneficial sections of the Act:

• CC 1357: Extending the term of the CC&R's
• CC 1358: Transferring interest occurs automatically
• CC 1363: Election procedures, meetings and due process
• CC 1363.03, .04, .05, .07, .09: Elections and conduct of meetings
• CC 1363.1 &1363.2: Managing agent controls
• CC 1363.810 - 1363.850: Internal dispute resolution processes
• CC 1365: Financial reporting
• CC 1365.7 & 1365.9: Association insurance requirements

The Act obviously affords many protections, but many developers/investors don't want all the regulations this Act puts on their property. The real protection for including a property within this Act is courts see creating associations as "sound business judgement."

Exclusion from the Act:

F. Scott Jackson, Esq. wrote a book called Commercial Mixed-Use Common Interest Developments, and I've paraphrased below some items I think are useful to consider:

• The development shouldn't be a condo, stock operative and should have no common area.
• A planned development with an association that has no enforceable lien rights.
• A tenancy in common agreement should be in place.
• A responsible party should be in place that has the right to unilaterally assign its rights to a responsible successor, outside management party, or owner in the project.

Conclusion:

It's imperative to consult an attorney when considering forming an association. The purpose of this blog post is to outline the ways to be excluded from the Act, and the protections the Act affords.