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Governor Signs SB 822: Community Association Managers Not “Contractors” or “Consultants” Under B&P Code Section 7026.1

September 23, 2013

In 2012, California enacted AB 2237, amending Section 7026.1 of the Business and Professions (B&P) Code relating to contractors (Section 7026.1), effective Jan. 1, 2013. AB 2237 required “consultants” overseeing home improvement construction projects to be licensed “contractors.” The result was much confusion and concern regarding whether community association managers were considered “consultants” and thus were now required to be licensed contractors when performing common management services such as bid solicitation or oversight of common area maintenance projects.

This year, CLAC sought to clarify what it believed to be an unintended consequence of AB 2237 (i.e., the possible casting of community association managers in the role of “consultants” under Section 7026.1). CLAC contacted the Contractors State License Board (CSLB) to alert them of the issue and to propose legislation to clarify that community association managers are not consultants or contractors for the purposes of AB 2237.

Fortunately, the CSLB agreed with CLAC that including community association managers in the definition of contractor or consultant was not the intent of AB 2237. The CSLB accepted CLAC’s proposed amendment to Section 7026.1, and helped CLAC facilitate its incorporation into this year’s SB 822, an omnibus bill introduced by the Committee on Business, Professions and Economic Development.

Governor Brown recently signed SB 822 into law, adding the following provision to Section 7026.01:
“The term “contractor” or “consultant” does not include a common interest development manager, as defined in Section 11501, and a common interest development manager is not required to have a contractor’s license when performing management services, as defined in subdivision (d) of Section 11500.” (B&P Code section 7026.1(b))

Community associations and their managers should still be aware that licensed contractors must be engaged to perform certain jobs. B&P Code section 7048 requires use of a licensed contractor for projects having an aggregate contract price for labor, materials and all other items of $500 or more. Also be aware that, although the CLSB clarified on the legislative record its intent with respect to community association managers, SB 822 will not be effective until Jan. 1, 2014. Until that time, community association managers should remain cautious when undertaking construction project oversight which might be seen to constitute the work of a “contractor” or “consultant.”

Nancy I. Sidoruk is an Attorney with Epsten Grinnell & Howell, APC, and is also the firm’s Director of Practice Development. She is a CLAC delegate representing the Greater Inland Empire Chapter, chairs the CAI-GRIE legislative support committee and serves as co-chair of the CLAC Grassroots Key Contacts task force.

CLAC wishes to thank attorneys Kieran J. Purcell and Nancy I. Sidoruk of Epsten Grinnell & Howell, APC, for their efforts in preparing the clarifying language which, on January 1, 2014, will become B&P Code section 7026.1(b).  Nancy Sidoruk

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3 Comments leave one →
  1. Judy Campion permalink
    September 23, 2013 4:32 pm

    This is good news! Thank you Nancy and Kieran for your good work on behalf of community association managers!

    Judy

    Sent from my iPad

  2. September 23, 2013 6:44 pm

    I disagree that Property Management Companies shouldn’t be required to have a licensed contractor’s license. Property Management companies are supposed to get 3 bids and if they are not licensed contractor’s how do they know who is including everything that should be included?
    Also, if a Porperty Management Company walks around a condo building for an inspection, how do they know what needs to be done?
    Property Management companies DO ACT AS CONSULTANTS when they recommend contractors and when they advise the HOA Boards when to paty the contractor and when not to.
    the Property Management company should be required to be licensed and there should be
    more oversight for Property Management companies and also there should be a State Regulator for the Homeowner and HOA”s protection. Right now, as far as I know, there is
    none.” What qualifies a person to be a Property Manager?
    I own 4 condos in Marina del Rey, and on a 14 unit condo we were taken by the contractor
    for $1 million ($over $80,000 per unit), and the job isn’t finished, and the Property Management advised the HOA to pay him, when NOT ALL PERMITS WERE FINALIZED
    AND SIGNED OFF BY THE L.A. DEPARTMENT OF BUILDING AND SAFETY).
    tHIS IS JUST 1 EXAMPLE and I know of many more in other buildings.
    To see the receipts is very difficult even after a lawyer has requested that the owners be able to see them. It is very costly to get a CAI CPA who is very knowledgable to go with a homeowner to see them.
    Meanwhile, the CONTRACTOR has BEEN PAID IN FULL AND IS OFF THE JOB (incomplete job), and we have to redo the work at our own expense.
    I am a decorator and have been involved in several remodels but I ALWAYS GET PERMITS
    AND USE LICENSED CONTRACTORS.
    Some of the Property Managers send out non licensed subs or handymen when it requires
    a licensed plumber, or in some cases where it involves a plumber who is fire certified regarding water and plumbing, and they send out a handy man.
    A property manager does act as a “Consultant” and should know the code and be a licensed contractor, so they can advise us when a Contractor should be paid or if the job wasn’t done
    right, NOT TO PAY THE CONTRACTOR.
    As least 1 person at a Property Management Company should be licensed.
    What are Property Management companies for? Just to send out bills and collect our
    dues?
    As a long time member of CAI, and a member of several HOA Boards for many years, I hope you would reconsider your position, and make the Property Management companies
    requirements more stringent and find a place where the owners can do to vent and also
    have some State protection.
    Most of the HOA Boards are volunteer LAY PERSONS AND KNOW NOTHING OR VERY LITTLE ABOUT CONSTRUCTION, or codes, and don’t know where to find out, and yet
    they are MAKING MAJOR DECISIONS WITH THE HELP OF PROPERTY MANAGEMENT
    COMPANIES.
    Please reconsider your position.
    Sincerely,
    Barbara Lee Walker

    • December 10, 2013 8:02 pm

      Thank you for your comment. We agree that associations should use qualified contractors and the required permits. To us, this law clarified the role of managers – emphasizing that an actual manager is not a consultant or contractor.

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