For 40 years, California HOAs operated in relative legislative quiet. The Davis-Stirling Common Interest Development Act got tweaked occasionally. CACM and CAI, the two industry groups that represent management companies and association volunteers, did most of the lobbying. Most boards didn’t think about Sacramento at all.
That era is ending.
The California Association of Realtors, which has historically stayed out of HOA-specific lawmaking, is now actively pushing legislation that would change how associations are managed, how they fund themselves, and who oversees them. If your board is making 5-year plans without watching this shift, you’re planning against an outdated picture.
Here’s what’s moving on California HOA legislation, why it’s moving now, and what your board should be doing about it.
Why CAR is suddenly involved
The triggering event was consolidation. Four management companies (Associa, FirstService, Management Trust, and Keystone Pacific) now control over 65 percent of HOA management contracts in California. Consolidation usually means rising fees, and that’s exactly what’s happened.
Realtors representing sellers started noticing that selling a home in an HOA had quietly become much more expensive than selling a home outside one. Transfer and demand fees, which a seller pays to the management company at closing, have climbed past $1,000 in many associations. The cost to actually produce those documents (CC&Rs, reserve study, budget, rules, minutes, insurance declarations, all of which the law already requires the association to maintain) has gone down, not up. The fee climbed anyway.
Realtors lose deals when buyers see the closing costs and walk. Now CAR is paying attention.
The four legislative threads to watch
There are four areas where new legislation is either pending or likely. Each one would change something boards do today.
Transfer and demand fee caps
Seventeen other states already cap what a management company can charge a seller for transfer documents. The cap hasn’t bankrupted management companies in those states. CAR is making the case that California should follow.
The pushback from CACM and CAI is straightforward: cap the fee, and management companies will raise the monthly fee to make up the difference. The board’s bill goes up either way.
What boards should do now: when your management contract comes up for renewal, ask explicitly how transfer and demand fees are calculated, what they cost the management company to produce, and what happens to your monthly fee if the legislature caps the seller charge. Get the answer in writing. Boards that wait to ask until a cap passes will get less attractive answers.
Mandated reserve funding
Underfunded reserves are how communities end up with surprise special assessments. We consider 35 to 65 percent of the fully-funded reserve goal to be a defensible range. Plenty of California HOAs sit below 20 percent.
The political pressure is real. Owners hit with a $15,000 special assessment they didn’t see coming complain to their state senator, not their board. Legislators have noticed.
Expect a proposal that requires associations to dedicate a minimum percentage of dues to reserves each year, ramping up over time. The starting number could be modest (5 percent of the fully-funded amount in year one) with a step-up each year until reserves hit 50 percent or so.
What boards should do now: pull your most recent reserve study and find your percent-funded number. If you’re under 30 percent, start the conversation about a structured catch-up plan with your community manager and your reserve specialist this year. The plan you design voluntarily is going to be more flexible than the one Sacramento eventually mandates.
Insurance coverage minimums
Insurance is the third front. Premiums are up sharply, and we’ve watched some boards respond by cutting replacement-cost coverage from 100 percent to 75 or 50 percent.
That move quietly shifts risk to the lenders, the buyers, and ultimately the resale value of every unit in the community. Conventional lenders generally require 100 percent replacement coverage. Communities that drop below it can become non-warrantable, which limits who can finance a purchase there.
Realtors don’t love non-warrantable communities. CAR is exploring legislation that would prohibit boards from reducing replacement coverage below 100 percent. There is also separate movement to make CC&R amendments easier to pass, partly so that other coverage decisions are less stuck.
What boards should do now: if your association has dropped or is considering dropping below 100 percent replacement coverage, document the decision in writing, including the lender-impact analysis. Communicate it clearly to owners. Be ready for that decision to be revisited if a coverage minimum becomes law.
Licensing for community managers
Residential property managers in California operate under the Department of Real Estate. They take a licensing exam. Tenants have rights enforceable through state agencies. Owners who don’t follow the rules face penalties.
Community association managers, who oversee billions of dollars in reserve and operating accounts across 53,000 California associations, are not licensed. There is no state body auditing them. There is no enforcement mechanism beyond the management company’s own internal controls.
CAR is making the case for a specialty license for community managers, run through DRE, that would cover the Davis-Stirling statutes, the four director duties (care, loyalty, obedience, oversight), basic legal requirements, and compliance fundamentals. The proposal also floats a few hours of required board education, similar to what Florida already mandates.
What boards should do now: ask whether your community manager has voluntarily completed continuing education through CACM or CAI. Both organizations offer credentials that go beyond the legal minimum. If a license becomes mandatory, your already-credentialed manager keeps practicing without disruption.
The scale that finally got Sacramento’s attention
The reason any of this is moving now comes down to size.
There are over 53,000 HOAs in California. They contain about 5 million housing units and house roughly 15 million Californians. Better than 95 percent of all new housing being built in this state is going up inside an association. Roughly 36 percent of California households live in an HOA today.
A regulatory regime that was light-touch when HOAs were a niche product in a few suburbs is harder to justify when more than a third of the state lives under one.
What this means for your board’s planning
You don’t need to track every bill in Sacramento. Your management company should be doing that. What you do need is a board posture that anticipates rather than reacts.
Three habits are worth building into your routine.
Stay current on your reserve funding. If you’re underfunded, build a credible plan to get to 50 percent over a defined number of years. The board that does this voluntarily controls the pace.
Stay current on your coverage. Don’t drop replacement coverage to chase a lower premium without modeling the impact on resale, lender access, and likely future legislation. If you have already done so, document the rationale and stay close to renewal cycles.
Stay current on your manager’s credentials. Ask. If your manager has put in the time to be CCAM, PCAM, or AMS-credentialed, that’s a sign they’re already operating closer to where the regulatory floor is heading.
The legislative environment is going to keep moving in one direction: more transparency, more required education, more structural protection for owners and buyers. Boards that get ahead of that curve will spend less time in fire drills than boards that wait.
If you want a clearer picture of how your community’s finances stack up against peer associations and where your board may be exposed as the rules tighten, thinking through your assessment and funding posture with experienced HOA managers is a useful starting point.
When you’re evaluating whether your current management is positioning your community well for what’s coming, request 3 quotes from HOA management companies that have a clear point of view on legislative trends, not just on this month’s invoices.
