BILL ANALYSIS
AB 2100
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2100 (Laird)
As Amended June 19, 2006
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |78-0 |(May 11, 2006) |SENATE: |39-0 |(June 29, |
| | | | | |2006) |
-----------------------------------------------------------------
Original Committee Reference: H. & C. D.
SUMMARY : Requires the board of directors of a homeowners
association (HOA) to adopt a reserve funding plan based on their
reserve study and establishes new requirements for the review of
contracts.
The Senate amendments make the following changes:
1)Require a HOA to include in its current disclosures to the
membership the reserve funding needed on a per unit basis and
a notice informing the members they may request a copy of the
full reserve study plan.
2)Require the following be included in the Assessment and
Reserve Funding Disclosure Summary:
a) Estimated amount of reserve funds required for the next
five budget years;
b) Projected reserve fund cash balance, the percentage of
reserves that will be funded based only on the assessments
already approved, and other revenues; and,
c) Projected reserve fund cash balance and percentage of
reserves funded if the approved reserve funding plan is
implemented.
3)Make technical changes.
AS PASSED BY THE ASSEMLBY , this bill required the board of
directors of a HOA to adopt a reserve funding plan based on
their reserve study and established new requirements for the
review of contracts. Specifically, this bill :
1)Required the HOA board of directors of to adopt a reserve
AB 2100
Page 2
funding plan every three years to fund the reserves necessary
to replace and repair all major components of the HOA with an
expected remaining life of 30 years or less.
2)Excluded those major components from the reserve funding plan
that the board of directors has determined will not be
replaced or repaired.
3)Required, beginning January 1, 2009, the HOA to send the
owners a summary of the reserve funding plan adopted by the
board of directors each year.
4)Required the reserve funding plan to include the amount of any
changes in all scheduled regular and special assessments
necessary to fund the reserves.
5)Provided that any action taken by the board of directors
regarding the reserve funding plan must be taken in an open
meeting of the membership. Required the meeting to comply
with the Common Interest Development Open Meeting Act.
6)Provided, if as a result of the reserve funding plan the board
of directors determines an increase in the assessments is
necessary, they must comply with the requirements of existing
law, including distribution of financial updates and voting
requirements for assessment increases over a certain
threshold.
7)Required, if the board of directors determines an assessment
that is more than 20% greater than the regular assessment from
the HOA's preceding fiscal year or a special assessment that
exceeds 5% of the HOA budgeted gross expenses for that fiscal
year is needed to fund the reserves, the approval of a
majority of the owners is required.
8)Required a HOA to include in the financial information mailed
to the membership of a common interest development (CID) each
year the following:
a) A decision and justification as to whether or not the
board of directors has determined to defer or not undertake
repair or replacement of any of the major components of the
CID with a remaining life of 30 years or less;
b) A list of all outstanding loans with an original term of
AB 2100
Page 3
more than one year which must include the name of the
payee, interest rate, amount outstanding, annual payment,
and when the loan is due;
c) The projected amount of reserve funds at the end of the
fiscal year and the percentage of reserves being funded for
the year; and,
d) The name of the person who prepared the reserve study
and the date it was completed.
1)Provided in unincorporated HOAs, if a board member has a
material financial interest in a contract, or other
transaction, the agreement may be validated by the following
test:
a) The board member informed the other members of his/her
financial interest prior to a vote and the board member
with the financial interest did not vote;
b) The agreement was just and reasonable; and,
c) The person, who asserts that the transaction is valid,
sustains the burden of proof that the transaction was just
and reasonable.
FISCAL EFFECT : None
COMMENTS : HOAs are required to complete a reserve study at
least once every three years to identify the major components of
the development that have a remaining useful life of less than
30 years and that the HOA is obligated to repair, replace,
restore, or maintain. The reserve study includes the estimated
cost of repairing or replacing those components and the total
annual contribution minus the amount that is in the current
reserve accounts needed to repair or replace the major
components. In addition to completing the reserve study which
is required by existing law, this bill would require the board
of directors of a HOA to adopt a reserve funding plan.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN:
0015314