Roseman Law has received many requests to provide additional guidance in complying with SB326 – also known as the Balcony Bill. This document can serve as a checklist for a pragmatic approach in complying with the Balcony Bill. This checklist highlights several aspects of the Balcony Bill and some potential consequences it may have for your Association.
What is the Balcony Bill?
On August 30, 2019, Governor Newsom signed Senate Bill 326 into law. The Bill added new Civil Code §5551 to the Davis-Stirling Act and it became effective on January 1, 2020. The Balcony Bill refers to Civil Code §5551 which applies to condominium buildings containing three or more units and requires associations in applicable condominium projects to perform a periodic visual inspection of condo balconies and other load bearing elements that extend beyond the exterior walls of the building—such as decks, stairways, walkways, and their railings—if those load bearing elements are supported primarily by wood or wood-based products and are elevated more than six-feet above the ground.
The purpose of the visual inspection is to determine whether these exterior elements are safe and performing in accordance with applicable standards. The inspector uses his or her best professional judgment in determining whether any further investigation is needed pursuant to the visual inspection, and then must issue a written report. Associations must maintain a copy of the written reports in their records for at least two inspection cycles, or in other words, for 18 years.
If the inspector determines that any exterior elevated element inspected poses an immediate threat to safety, the inspector must provide a copy of his or her report to local code enforcement agency within 15 days of the finalization of the report.
For most associations, the first inspection required by Civil Code §5551 must be performed before January 1, 2025. Please note, if your association is one which submitted a building permit application on or after January 1, 2020, the first inspection must occur no later than six years following the issuance of the certificate of occupancy. However, it is important that associations plan to conduct the inspection well in advance of the January 1, 2025, deadline, as it is likely that licensed architects and structural engineers will be less available as the deadline approaches.
Also, while the statute imposes a January 1, 2025, deadline for most associations, newer associations should consider a sooner deadline. Specifically, for any association that was built within the last ten years, the inspection should be done sooner to ensure that any potential construction defect claims against the developer are protected. Generally speaking, there is a ten-year statute of limitations on bringing such claims.
Association’s Obligation to Maintain Common Areas.
As a preliminary issue, it is important to have your association’s legal counsel review the governing documents, and specifically the CC&Rs, to determine what your association’s maintenance and repair responsibilities are. Pursuant to Civil Code §4775(a) associations must maintain, repair, and replace the common area components, unless otherwise provided for in the governing documents. Civil Code §4775(a) further provides:
(1) Except as provided in paragraph (3), unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, and maintaining the common area.
(2) Unless otherwise provided in the declaration of a common interest development, the owner of each separate interest is responsible for repairing, replacing, and maintaining that separate interest.
(3) Unless otherwise provided in the declaration of a common interest development, the owner of each separate interest is responsible for maintaining the exclusive use common area appurtenant to that separate interest and the association is responsible for repairing and replacing the exclusive use common area.
Your association’s legal counsel should review the governing documents in conjunction with Civil Code §4775 to determine what maintenance and repair responsibilities your association has in preparation for compliance with Civil Code §5551.
Civil Code §5551 Applies to Your Association – Now What?
Your association must hire an architect or engineer to conduct an inspection of a statistically significant sample of all exterior elevated surfaces, as described above. Having the expert inspect before a contractor conducts any repairs will ensure that the association is not expending funds unnecessarily and should lead to more cost savings in the long run.
What is a Statistically Significant Sample?
When the expert conducts the inspection pursuant to Civil Code §5551, they will inspect a “statistically significant sample” of the exterior elevated structures in complying with Civil Code §5551. Different experts will have different interpretations of what a “statistically significant sample” is, and some experts may even interpret that to mean that 100% of the exterior elevated structures must be inspected. However, §5551 does not provide a specific percentage of exterior elevated structures to be inspected, rather §5551 provides definitions and it defines “statistically significant sample” to mean a sufficient number of units inspected to provide 95 percent confidence that the results from the sample are reflective of the whole, with a margin of error of no greater than plus or minus 5 percent.
It is important to note here that the way §5551 is written, the code gives the inspector the authority to determine what that number will be – and the 95 percent confidence will be at the discretion of the inspector. However, §5551(j)(1) also provides that the Association has the responsibility to comply with the requirements of §5551; therefore, and in order to comply with the business judgment rule, the association should rely on their experts to make the determination of what that sample size looks like.
What is the Inspector’s Obligation to Report Life Safety Issues?
Following the inspection, §5551 provides that the inspector must then compile a report (which is signed and stamped by the inspector), and the inspector must present that report to the board. The board of directors must then incorporate that report into the reserve study prepared by the association at least every three years.
The inspector also has an obligation to report any life safety hazards to local code enforcement under §5551(g)(1), which specifically requires that if, after the inspection, the inspector determines that any of the exterior elevated elements inspected pose an immediate threat to the safety of the occupant, the inspector must provide a copy of the inspection report to the association immediately once the report is completed, and then to the local code enforcement agency within 15 days of completion of the report.
The association is then required to take protective measures immediately, such as preventing residents from accessing those exterior elevated elements until repairs have been completed, inspected, and approved by local code enforcement.
How Long Must Inspection Reports Be Maintained?
For most associations, the first inspection must be completed by January 1, 2025, and then re-inspected nine years after that. The inspection reports are required to be maintained for two full inspection cycles as records of the association. Therefore, the association is required to maintain these reports as association records for 18 years.
Should Legal Counsel Be Involved?
It is important that your association have legal counsel review the agreements with the inspector and contractor. As a preliminary note, the association should contract separately with the inspector and the contractor, assuming repair work is necessary after the inspection is complete. Your association’s legal counsel will review these agreements to ensure the proper indemnity provisions are in place. Further, legal counsel will want to review insurance provisions and advise the association with regard to the same.
What Can My Association Do in the Meantime?
Boards should enact reasonable rules to protect the structural integrity of balconies and other exterior elevated surfaces. Such rules should regulate the placement of potted plants, artificial turf, tile, rugs, and other objects or materials that trap moisture on these surfaces. Further, the Board should review the association’s CC&Rs to determine what rights the association has with regard to homeowners who negligently maintain their exclusive use common areas, causing the process of wearing out of such components to occur more rapidly than expected.
- Does my association have reasonable rules in place regulating the items that can be placed on elevated exterior surfaces? Do the CC&Rs confirm that homeowners that negligently maintain exclusive use common areas are responsible to reimburse the association for repairing the same?
- Does Civil Code §5551 apply to my association? The board should contact legal counsel for an opinion on whether or not §5551 applies.
- Assuming §5551 does apply, what should the board do next? Legal counsel can assist to determine what your compliance requirement is with regard to timing. The Board can then obtain bids from inspectors.
- Once the board has selected an inspector, legal counsel should review and revise the agreement between the inspector and the association.
- Assuming that the inspector’s report requires repair work to be done, the association should then obtain bids from contractors. Once the board is aware of how much the cost of the repair work will be, the board can determine whether the work can be funded from the reserves, a special assessment, a loan, or an SB800 settlement fund.
- Once the board has selected a vendor, legal counsel should review and revise the agreement between the contractor and the association.
- Assuming that the inspector’s report indicated that there were life safety issues, the association is required to take protective measures immediately, such as preventing residents from accessing those exterior elevated elements until repairs have been made, inspected, and approved by local code enforcement.