SB1238 - Common interest developments: management.

Amended IN Assembly August 21, 2026 Amended IN Assembly August 19, 2026 Amended IN Assembly July 02, 2026 Amended IN Senate April 23, 2026 Amended IN Senate April 16, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 1238 Introduced by Senator Wahab February 19, 2026 An act to amend Sections 11500 and 11501 of the Business and Professions Code, and to amend Sections 4525, 5200, 5510, 5550, 5551, 5560, and 5565 of, and to add Section 5390 to, the Civil Code, relating to common interest developments. LEGISLATIVE COUNSEL'S DIGEST SB 1238, as amended, Wahab. Common interest developments: management. (1) Existing law, the Davis-Stirling Common Interest Development Act (act), provides for the creation and regulation of common interest developments. Existing law defines “management services” for purposes of a common interest development to mean specified acts performed or offered to be performed in an advisory capacity for an association, including implementing provisions of governing documents for the operation of the common interest development. This bill would revise the above definition to specify that it means acts performed or offered to be performed by an agent, including a managing agent and its employees, in an advisory capacity for an association, as prescribed. Existing law imposes certain fiduciary duties on managers and agents of common interest developments. This bill would provide that a managing agent, including its employees, that facilitates specified activities, including reviewing association operating accounts, owes a duty of care that is prudent and provides the highest good faith effort to the association and its members. (2) Existing law requires a common interest development to be managed by an association and requires the association to distribute to its members an annual budget that includes, among other things, a summary of the association’s property, general liability, earthquake, flood, and fidelity insurance policies, a review of the financial statement of the association, and an annual policy statement, as provided. Existing law requires the owner of a separate interest in a common interest development to provide specified documents to a prospective purchaser as soon as practicable before the transfer of title or execution of a real property sales contract, including a copy of the most recent distributed annual budget, review of the financial statement, and annual policy statement and a report issued pursuant to the most recent inspection conducted. This bill would require the association, upon request, to provide the owner of a separate interest, or their agent, with those documents as soon as practicable. The bill would require the owner to provide additional information, including, among other things, if separately requested by the purchaser, the location on the first page of the report where certain facts about the exterior elevated elements and the number of units impacted may be found. The bill would make various other related and conforming changes to those provisions. This bill would incorporate additional changes to Section 5200 of the Civil Code proposed by AB 739 to be operative only if this bill and AB 739 are enacted and this bill is enacted last. This bill would incorporate additional changes to Section 5550 of the Civil Code proposed by AB 2050 to be operative only if this bill and AB 2050 are enacted and this bill is enacted last. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 11500 of the Business and Professions Code is amended to read: 11500. For purposes of this chapter, the following definitions apply: (a) “Common interest development” means a residential development identified in Section 4100 of the Civil Code. (b) “Association” has the same meaning as defined in Section 4080 of the Civil Code. (c) “Financial services” means acts performed or offered to be performed, for compensation, for an association, including, but not limited to, the preparation of internal unaudited financial statements, internal accounting and bookkeeping functions, billing of assessments, and related services. (d) “Management services” means acts performed or offered to be performed by an agent, including a managing agent and its employees, in an advisory capacity for an association including, but not limited to, the following: (1) Administering or supervising the collection, reporting, and archiving of the financial or common area assets of an association or common interest development, at the direction of the association’s board of directors. (2) Implementing resolutions and directives of the board of directors of the association elected to oversee the operation of a common interest development. (3) Implementing provisions of governing documents, as defined in Section 4150 of the Civil Code, that govern the operation of the common interest development. (4) Administering association contracts, including insurance contracts, within the scope of the association’s duties or with other common interest development managers, vendors, contractors, and other third-party providers of goods and services to an association or common interest development. (5) Implementing or administering activities pursuant to Sections 5300, 5310, and 5500 of the Civil Code. (e) “Professional association for common interest development managers” means an organization that meets all of the following: (1) Has at least 200 members or certificants who are common interest development managers in California. (2) Has been in existence for at least five years. (3) Operates pursuant to Section 501(c) of the Internal Revenue Code. (4) Certifies that a common interest development manager has met the criteria set forth in Section 11502 without requiring membership in the association. (5) Requires adherence to a code of professional ethics and standards of practice for certified common interest development managers. SEC. 2. Section 11501 of the Business and Professions Code is amended to read: 11501. (a) “Common interest development manager” means an individual who for compensation, or in expectation of compensation, provides or contracts to provide management or financial services, as defined in Section 11500, or represents themself to act in the capacity of providing management or financial services to an association. Notwithstanding any other provision of law, an individual may not be required to obtain a real estate or broker’s license in order to perform the services of a common interest development manager to an association. (b) “Common interest development manager” also means any of the following: (1) An individual who is a partner in a partnership, a shareholder or officer in a corporation, or who, in any other business entity acts in a capacity to advise, supervise, and direct the activity of a registrant or provisional registrant, or who acts as a principal on behalf of a company that provides the services of a common interest development manager. (2) An individual operating under a fictitious business name who provides the services of a common interest development manager. This section may not be construed to require an association to hire for compensation a common interest development manager, unless required to do so by its governing documents. Nothing in this part shall be construed to supersede any law that requires a license, permit, or any other form of registration, to provide management or financial services. Nothing in this section shall preclude a licensee of the California Board of Accountancy from providing financial services to an association within the scope of their license in addition to the preparation of reviewed and audited financial statements and the preparation of the association’s tax returns. SEC. 3. Section 4525 of the Civil Code is amended to read: 4525. (a) Upon request, the association shall provide, and as soon as practicable, to the owner of a separate interest, or their agent, the documents specified paragraphs (1) to (11), inclusive. The owner of a separate interest shall provide the following documents to a prospective purchaser of the separate interest, as soon as practicable before the transfer of title or the execution of a real property sales contract, as defined in Section 2985: (1) A copy of all governing documents. If the association is not incorporated, this shall include a statement in writing from an authorized representative of the association that the association is not incorporated. (2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3. (3) A copy of the most recent documents distributed pursuant to Article 7 (commencing with Section 5300) of Chapter 6 and shall include a copy of the master insurance policy for the association that covers the association’s property, general liability, earthquake, flood, and fidelity coverage upon request of the property owner or prospective purchaser. (4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association’s current regular and special assessments and fees, any assessments levied upon the owner’s interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner’s interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner’s interest in a common interest development pursuant to Article 2 (commencing with Section 5650) of Chapter 8. (5) A copy or a summary of any notice previously sent to the owner pursuant to Section 5855 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association’s right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner’s separate interest. (6) A copy of the initial list of defects provided to each member pursuant to Section 6000, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 6100. Disclosure of the initial list of defects pursuant to this paragraph does not waive any privilege attached to the document. The initial list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made. (7) A copy of the latest information provided for in Section 6100. (8) Any change in the association’s current regular and special assessments and fees which have been approved by the board, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision. (9) If there is a provision in the governing documents that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee, or tenant, a statement describing the prohibition. (10) If requested by the prospective purchaser, a copy of the minutes of board meetings, excluding meetings held in executive session, conducted over the previous 12 months, that were approved by the board. (11) (A) A copy of the report issued pursuant to the most recent inspection conducted pursuant to Section 5551. (B) The following information, if separately requested by the purchaser: (i) The location on the first page of the report where the following information may be found: (I) The number of exterior elevated elements, and the number of units identified pursuant to clause (i) of subparagraph (F) of paragraph (5) of subdivision (e) of Section 5551. (II) The number of exterior elevated elements identified pursuant to clause (ii) of subparagraph (F) of paragraph (5) of subdivision (e) of Section 5551. (III) The number of exterior elevated elements identified pursuant to clause (iii) of subparagraph (F) of paragraph (5) of subdivision (e) of Section 5551. (ii) Any exterior elevated elements identified in the report, written pursuant to subdivision (e) of Section 5551, as needing repairs that exceed ten thousand dollars ($10,000). (C) (i) The following information indicating whether: (I) The covenants, restrictions, or conditions require an owner of a separate interest, with an exclusive right to use an exterior elevated element, to individually maintain that exterior elevated element. (II) The association’s reserve study includes a minimum annual budgeted replacement reserve allocation of 10 percent for repairs of the exterior elevated elements. (III) The association’s reserve study has been updated to include identified repairs contained within the exterior elevated elements inspection report conducted pursuant to subdivision (e) of Section 5551. (ii) The requirements of clause (i) of this subparagraph may be satisfied by identifying where this information is addressed in the documents disclosed pursuant to paragraphs (1) and (3) of subdivision (a). (b) This section does not apply to an owner that is subject to Section 11018.6 of the Business and Professions Code. SEC. 4. Section 5200 of the Civil Code is amended to read: 5200. For the purposes of this article, the following definitions shall apply: (a) “Association records” means all of the following: (1) Any financial document required to be provided to a member in Article 7 (commencing with Section 5300) or in Sections 5565 and 5810. (2) Any financial document or statement required to be provided in Article 2 (commencing with Section 4525) of Chapter 4. (3) Interim financial statements, periodic or as compiled, containing any of the following: (A) Balance sheet. (B) Income and expense statement. (C) Budget comparison. (D) General ledger. A “general ledger” is a report that shows all transactions that occurred in an association account over a specified period of time. The records described in this paragraph shall be prepared in accordance with an accrual or modified accrual basis of accounting. (4) Executed contracts not otherwise privileged under law. (5) Written board approval of vendor or contractor proposals or invoices. (6) State and federal tax returns. (7) Reserve study pursuant to Section 5550, reserve account balances, and records of payments made from reserve accounts. (8) Agenda [Text truncated for display. Full text available on Congress.gov.]