AB 596, as amended, Daly. Common interest developments: annual budget report.
Existing law governing common interest developments, the Davis-Stirling Common Interest Development Act, requires the association of a common interest development to prepare and distribute to all of its members certain documents, including an annual budget report that includes, among other items of information, a pro forma operating budget. The act requires a notice to be provided if an insurance policy described in the annual budget report lapses, is canceled, or is not immediately renewed, restored, or replaced, or if there is a significant change as to the policy.
This billbegin delete wouldend deletebegin insert would, beginning January 1, 2017,end insert require the annual budget report to
also include a statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approvedbegin insert condominium project and as a federal Department of Veterans Affairs (VA)-approvedend insert condominium project.
This billbegin delete wouldend deletebegin insert would, beginning January 1, 2017,end insert also require the association of a common interest development to provide a notice to its members if there is any change in the status of the common interest development as an FHA-approved condominium project pursuant to FHAbegin insert guidelines or as a VA-approved condominium project pursuant to VAend insert
guidelines.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
begin insertSection 5300 of the end insertbegin insertCivil Codeend insertbegin insert is amended to
2read:end insert
(a) Notwithstanding a contrary provision in the
4governing documents, an association shall distribute an annual
5budget report 30 to 90 days before the end of its fiscal year.
6(b) Unless the governing documents impose more stringent
7standards, the annual budget report shall include all of the
8following information:
9(1) A pro forma operating budget, showing the estimated
10revenue and expenses on an accrual basis.
11(2) A summary of the association’s reserves, prepared pursuant
12to Section 5565.
13(3) A summary of the reserve funding plan adopted by the board,
14as specified in
paragraph (5) of subdivision (b) of Section 5550.
15The summary shall include notice to members that the full reserve
16study plan is available upon request, and the association shall
17provide the full reserve plan to any member upon request.
18(4) A statement as to whether the board has determined to defer
19or not undertake repairs or replacement of any major component
20with a remaining life of 30 years or less, including a justification
21for the deferral or decision not to undertake the repairs or
22replacement.
23(5) A statement as to whether the board, consistent with the
24reserve funding plan adopted pursuant to Section 5560, has
25determined or anticipates that the levy of one or more special
26assessments will be required to repair, replace, or restore any major
27component or to provide adequate reserves therefor. If so, the
28statement shall also set out the estimated amount, commencement
29date,
and duration of the assessment.
30(6) A statement as to the mechanism or mechanisms by which
31the board will fund reserves to repair or replace major components,
32including assessments, borrowing, use of other assets, deferral of
33selected replacements or repairs, or alternative mechanisms.
P3 1(7) A general statement addressing the procedures used for the
2calculation and establishment of those reserves to defray the future
3repair, replacement, or additions to those major components that
4the association is obligated to maintain. The statement shall
5include, but need not be limited to, reserve calculations made using
6the formula described in paragraph (4) of subdivision (b) of Section
75570, and may not assume a rate of return on cash reserves in
8excess of 2 percent above the discount rate published by the Federal
9Reserve Bank of San Francisco at the time the calculation was
10made.
11(8) A statement as to whether the association has any outstanding
12loans with an original term of more than one year, including the
13payee, interest rate, amount outstanding, annual payment, and
14when the loan is scheduled to be retired.
15(9) A summary of the association’s property, general liability,
16earthquake, flood, and fidelity insurance policies. For each policy,
17the summary shall include the name of the insurer, the type of
18insurance, the policy limit, and the amount of the deductible, if
19any. To the extent that any of the required information is specified
20in the insurance policy declaration page, the association may meet
21its obligation to disclose that information by making copies of that
22page and distributing it with the annual budget report. The
23summary distributed pursuant to this paragraph shall contain, in
24at least 10-point boldface type, the following statement:
26“This summary of the association’s policies of insurance provides
27only certain information, as required by Section 5300 of the Civil
28Code, and should not be considered a substitute for the complete
29policy terms and conditions contained in the actual policies of
30insurance. Any association member may, upon request and
31provision of reasonable notice, review the association’s insurance
32policies and, upon request and payment of reasonable duplication
33charges, obtain copies of those policies. Although the association
34maintains the policies of insurance specified in this summary, the
35association’s policies of insurance may not cover your property,
36including personal property or real property improvements to or
37around your dwelling, or personal injuries or other losses that occur
38within or around your dwelling. Even if a loss is covered, you may
39nevertheless be responsible for paying all or a portion of any
40deductible that applies. Association members should consult with
P4 1their
individual insurance broker or agent for appropriate additional
2coverage.”
4(c) The annual budget report shall be made available to the
5members pursuant to Section 5320.
6(d) The summary of the association’s reserves disclosed pursuant
7to paragraph (2) of subdivision (b) shall not be admissible in
8evidence to show improper financial management of an association,
9provided that other relevant and competent evidence of the financial
10condition of the association is not made inadmissible by this
11provision.
12(e) The Assessment and Reserve Funding Disclosure Summary
13form, prepared pursuant to Section 5570, shall accompany each
14annual budget report or summary of the annual budget report that
15is delivered pursuant to
this article.
16(f) This section shall remain in effect only until January 1, 2017,
17and as of that date is repealed, unless a later enacted statute, that
18is enacted before January 1, 2017, deletes or extends that date.
begin insertSection 5300 is added to the end insertbegin insertCivil Codeend insertbegin insert, to read:end insert
begin insert(a) Notwithstanding a contrary provision in the
21governing documents, an association shall distribute an annual
22budget report 30 to 90 days before the end of its fiscal year.
23(b) Unless the governing documents impose more stringent
24standards, the annual budget report shall include all of the
25following information:
26(1) A pro forma operating budget, showing the estimated
27revenue and expenses on an accrual basis.
28(2) A summary of the association’s reserves, prepared pursuant
29to Section 5565.
30(3) A summary of the reserve funding plan adopted by the board,
31
as specified in paragraph (5) of subdivision (b) of Section 5550.
32The summary shall include notice to members that the full reserve
33study plan is available upon request, and the association shall
34provide the full reserve plan to any member upon request.
35(4) A statement as to whether the board has determined to defer
36or not undertake repairs or replacement of any major component
37with a remaining life of 30 years or less, including a justification
38for the deferral or decision not to undertake the repairs or
39replacement.
P5 1(5) A statement as to whether the board, consistent with the
2reserve funding plan adopted pursuant to Section 5560, has
3determined or anticipates that the levy of one or more special
4assessments will be required to repair, replace, or restore any
5major component or to provide adequate reserves therefor. If so,
6the statement shall also set out the estimated amount,
7
commencement date, and duration of the assessment.
8(6) A statement as to the mechanism or mechanisms by which
9the board will fund reserves to repair or replace major
10components, including assessments, borrowing, use of other assets,
11deferral of selected replacements or repairs, or alternative
12mechanisms.
13(7) A general statement addressing the procedures used for the
14calculation and establishment of those reserves to defray the future
15repair, replacement, or additions to those major components that
16the association is obligated to maintain. The statement shall
17include, but need not be limited to, reserve calculations made using
18the formula described in paragraph (4) of subdivision (b) of Section
195570, and may not assume a rate of return on cash reserves in
20excess of 2 percent above the discount rate published by the
21Federal Reserve Bank of San Francisco at the time the calculation
22
was made.
23(8) A statement as to whether the association has any
24outstanding loans with an original term of more than one year,
25including the payee, interest rate, amount outstanding, annual
26payment, and when the loan is scheduled to be retired.
27(9) A summary of the association’s property, general liability,
28earthquake, flood, and fidelity insurance policies. For each policy,
29the summary shall include the name of the insurer, the type of
30insurance, the policy limit, and the amount of the deductible, if
31any. To the extent that any of the required information is specified
32in the insurance policy declaration page, the association may meet
33its obligation to disclose that information by making copies of that
34page and distributing it with the annual budget report. The
35summary distributed pursuant to this paragraph shall contain, in
36at least 10-point boldface type, the following
statement:
38“This summary of the association’s policies of insurance
39provides only certain information, as required by Section 5300 of
40the Civil Code, and should not be considered a substitute for the
P6 1complete policy terms and conditions contained in the actual
2policies of insurance. Any association member may, upon request
3and provision of reasonable notice, review the association’s
4insurance policies and, upon request and payment of reasonable
5duplication charges, obtain copies of those policies. Although the
6association maintains the policies of insurance specified in this
7summary, the association’s policies of insurance may not cover
8your property, including personal property or real property
9improvements to or around your dwelling, or personal injuries or
10other losses that occur within or around your dwelling. Even if a
11loss is covered, you may nevertheless be responsible for paying
12all or a portion of any deductible that applies. Association members
13should
consult with their individual insurance broker or agent for
14appropriate additional coverage.”
16(10) A statement describing the status of the common interest
17development as a Federal Housing Administration (FHA)-approved
18condominium project pursuant to FHA guidelines, including
19whether the common interest development is an FHA-approved
20condominium project. The statement shall be in at least 10-point
21font and in the following form:
23“Certification by the Federal Housing Administration may
24provide benefits to members of an association, including an
25improvement in an owner’s ability to refinance a mortgage or
26obtain secondary financing and an increase in the pool of potential
27buyers of the separate interest.
28 This common interest development [is/is not (circle one)] a
29condominium project. The association of this common interest
30development [is/is not
(circle one)] certified by the Federal
31Housing Administration.”
33(11) A statement describing the status of the common interest
34development as a federal Department of Veterans Affairs
35(VA)-approved condominium project pursuant to VA guidelines,
36including whether the common interest development is a
37VA-approved condominium project. The statement shall be in at
38least 10-point font and in the following form:
P7 1“Certification by the federal Department of Veterans Affairs
2may provide benefits to members of an association, including an
3improvement in an owner’s ability to refinance a mortgage or
4obtain secondary financing and an increase in the pool of potential
5buyers of the separate interest.
6This common interest development [is/is not (circle one)] a
7condominium project. The association of this common interest
8development [is/is not (circle one)] certified
by the federal
9Department of Veterans Affairs.”
11(c) The annual budget report shall be made available to the
12members pursuant to Section 5320.
13(d) The summary of the association’s reserves disclosed
14pursuant to paragraph (2) of subdivision (b) shall not be admissible
15in evidence to show improper financial management of an
16association, provided that other relevant and competent evidence
17of the financial condition of the association is not made
18inadmissible by this provision.
19(e) The Assessment and Reserve Funding Disclosure Summary
20form, prepared pursuant to Section 5570, shall accompany each
21annual budget report or summary of the annual budget report that
22is delivered pursuant to this article.
23(f) This section shall become operative on January 1, 2017.
begin insertSection 5810 of the end insertbegin insertCivil Codeend insertbegin insert is amended to read:end insert
The association shall, as soon as reasonably practicable,
26provide individual notice pursuant to Section 4040 to all members
27if any of the policies described in the annual budget report pursuant
28to Section 5300 have lapsed, been canceled, and are not
29immediately renewed, restored, or replaced, or if there is a
30significant change, such as a reduction in coverage or limits or an
31increase in the deductible, as to any of those policies. If the
32association receives any notice of nonrenewal of a policy described
33in the annual budget report pursuant to Section 5300, the
34association shall immediately notify its members if replacement
35coverage will not be in effect by the date the existing coverage
36will lapse.
37This section shall remain in effect only until January 1, 2017,
38and as of that date
is repealed, unless a later enacted statute, that
39is enacted before January 1, 2017, deletes or extends that date.
begin insertSection 5810 is added to the end insertbegin insertCivil Codeend insertbegin insert, to read:end insert
begin insertThe association shall, as soon as reasonably practicable,
2provide individual notice pursuant to Section 4040 to all members
3if any of the following occur:
4(a) Any of the policies described in the annual budget report
5pursuant to Section 5300 have lapsed, been canceled, and are not
6immediately renewed, restored, or replaced, or if there is a
7significant change, such as a reduction in coverage or limits or
8an increase in the deductible, as to any of those policies. If the
9association receives any notice of nonrenewal of a policy described
10in the annual budget report pursuant to Section 5300, the
11association shall immediately notify its members if replacement
12coverage will not be in effect by the date the existing coverage will
13lapse.
14(b) Any change in the status of the common interest development
15as a Federal
Housing Administration (FHA)-approved
16condominium project pursuant to FHA guidelines, including a
17description of the type of change, such as the approval,
18cancellation, or other nonrenewal of the approval.
19(c) Any change in the status of the common interest development
20as a federal Department of Veterans Affairs (VA)-approved
21condominium project pursuant to VA guidelines, including a
22description of the type of change, such as approval, cancellation,
23or other nonrenewal of the approval.
Section 5300 of the Civil Code is amended to
25read:
(a) Notwithstanding a contrary provision in the
27governing documents, an association shall distribute an annual
28budget report 30 to 90 days before the end of its fiscal year.
29(b) Unless the governing documents impose more stringent
30standards, the annual budget report shall include all of the
31following information:
32(1) A pro forma operating budget, showing the estimated
33revenue and expenses on an accrual basis.
34(2) A summary of the association’s reserves, prepared pursuant
35to Section 5565.
36(3) A summary of the reserve funding plan adopted by the board,
37as specified in paragraph
(5) of subdivision (b) of Section 5550.
38The summary shall include notice to members that the full reserve
39study plan is available upon request, and the association shall
40provide the full reserve plan to any member upon request.
P9 1(4) A statement as to whether the board has determined to defer
2or not undertake repairs or replacement of any major component
3with a remaining life of 30 years or less, including a justification
4for the deferral or decision not to undertake the repairs or
5replacement.
6(5) A statement as to whether the board, consistent with the
7reserve funding plan adopted pursuant to Section 5560, has
8determined or anticipates that the levy of one or more special
9assessments will be required to repair, replace, or restore any major
10component or to provide adequate reserves therefor. If so, the
11statement shall also set out the estimated amount, commencement
12date, and
duration of the assessment.
13(6) A statement as to the mechanism or mechanisms by which
14the board will fund reserves to repair or replace major components,
15including assessments, borrowing, use of other assets, deferral of
16selected replacements or repairs, or alternative mechanisms.
17(7) A general statement addressing the procedures used for the
18calculation and establishment of those reserves to defray the future
19repair, replacement, or additions to those major components that
20the association is obligated to maintain. The statement shall
21include, but need not be limited to, reserve calculations made using
22the formula described in paragraph (4) of subdivision (b) of Section
235570, and may not assume a rate of return on cash reserves in
24excess of 2 percent above the discount rate published by the Federal
25Reserve Bank of San Francisco at the time the calculation was
26made.
27(8) A statement as to whether the association has any outstanding
28loans with an original term of more than one year, including the
29payee, interest rate, amount outstanding, annual payment, and
30when the loan is scheduled to be retired.
31(9) A summary of the association’s property, general liability,
32earthquake, flood, and fidelity insurance policies. For each policy,
33the summary shall include the name of the insurer, the type of
34insurance, the policy limit, and the amount of the deductible, if
35any. To the extent that any of the required information is specified
36in the insurance policy declaration page, the association may meet
37its obligation to disclose that information by making copies of that
38page and distributing it with the annual budget report. The
39summary distributed pursuant to this paragraph shall contain, in
40at least 10-point boldface type, the following statement:
P10 1“This summary of the association’s policies of insurance provides
2only certain information, as required by Section 5300 of the Civil
3Code, and should not be considered a substitute for the complete
4policy terms and conditions contained in the actual policies of
5insurance. Any association member may, upon request and
6provision of reasonable notice, review the association’s insurance
7policies and, upon request and payment of reasonable duplication
8charges, obtain copies of those policies. Although the association
9maintains the policies of insurance specified in this summary, the
10association’s policies of insurance may not cover your property,
11including personal property or real property improvements to or
12around your dwelling, or personal injuries or other losses that occur
13within or around your dwelling. Even if a loss is covered, you may
14nevertheless be responsible for paying all or a portion of any
15deductible that applies. Association members should consult with
16their
individual insurance broker or agent for appropriate additional
17coverage.”
18(10) A statement describing the status of the common interest
19development as a Federal Housing Administration (FHA)-approved
20condominium project pursuant to FHA guidelines, including
21whether the common interest development is an FHA-approved
22condominium project.
23(c) The annual budget report shall be made available to the
24members pursuant to Section 5320.
25(d) The summary of the association’s reserves disclosed pursuant
26to paragraph (2) of subdivision (b) shall not be admissible in
27evidence to show improper financial management of an association,
28provided that other relevant and competent evidence of the financial
29condition of the
association is not made inadmissible by this
30provision.
31(e) The Assessment and Reserve Funding Disclosure Summary
32form, prepared pursuant to Section 5570, shall accompany each
33annual budget report or summary of the annual budget report that
34is delivered pursuant to this article.
Section 5810 of the Civil Code is amended to read:
The association shall, as soon as reasonably practicable,
37provide individual notice pursuant to Section 4040 to all members
38if either of the following occur:
39(a) Any of the policies described in the annual budget report
40pursuant to Section 5300 have lapsed, been canceled, and are not
P11 1immediately renewed,
restored, or replaced, or if there is a
2significant change, such as a reduction in coverage or limits or an
3increase in the deductible, as to any of those policies. If the
4association receives any notice of nonrenewal of a policy described
5in the annual budget report pursuant to Section 5300, the
6association shall immediately notify its members if replacement
7coverage will not be in effect by the date the existing coverage
8will lapse.
9(b) Any change in the status of the common interest development
10as a Federal Housing Administration (FHA)-approved
11condominium project pursuant to FHA guidelines, including a
12description of the type of change, such as the approval,
13cancellation, or other nonrenewal of the approval.
O
98