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 bill would, beginningbegin delete January 1, 2017,end deletebegin insert July 1, 2016,end insert require the annual budget
report to also include abegin insert separateend insert statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approved condominium project and as a federal Department of Veterans Affairs (VA)-approved condominium project.
This bill would, beginning January 1, 2017, 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 FHA guidelines or as a VA-approved condominium project pursuant to VA guidelines.
end deleteVote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 5300 of the Civil Code is amended to
2read:
(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,
P3 1including assessments, borrowing, use of other assets, deferral of
2selected replacements or repairs, or alternative mechanisms.
3(7) A general statement addressing the procedures used for the
4calculation and establishment of those reserves to defray the future
5repair, replacement, or additions to those major components that
6the association is obligated to maintain. The statement shall
7include, but need not be limited to, reserve calculations made using
8the
formula described in paragraph (4) of subdivision (b) of Section
95570, and may not assume a rate of return on cash reserves in
10excess of 2 percent above the discount rate published by the Federal
11Reserve Bank of San Francisco at the time the calculation was
12made.
13(8) A statement as to whether the association has any outstanding
14loans with an original term of more than one year, including the
15payee, interest rate, amount outstanding, annual payment, and
16when the loan is scheduled to be retired.
17(9) A summary of the association’s property, general liability,
18earthquake, flood, and fidelity insurance policies. For each policy,
19the summary shall include the name of the insurer, the type of
20insurance, the policy limit, and the amount of the deductible, if
21any. To the extent that any of
the required information is specified
22in the insurance policy declaration page, the association may meet
23its obligation to disclose that information by making copies of that
24page and distributing it with the annual budget report. The
25summary distributed pursuant to this paragraph shall contain, in
26at least 10-point boldface type, the following statement:
28“This summary of the association’s policies of insurance provides
29only certain information, as required by Section 5300 of the Civil
30Code, and should not be considered a substitute for the complete
31policy terms and conditions contained in the actual policies of
32insurance. Any association member may, upon request and
33provision of reasonable notice, review the association’s insurance
34policies and, upon request and payment of reasonable duplication
35charges, obtain copies of
those policies. Although the association
36maintains the policies of insurance specified in this summary, the
37association’s policies of insurance may not cover your property,
38including personal property or real property improvements to or
39around your dwelling, or personal injuries or other losses that occur
40within or around your dwelling. Even if a loss is covered, you may
P4 1nevertheless be responsible for paying all or a portion of any
2deductible that applies. Association members should consult with
3their individual insurance broker or agent for appropriate additional
4coverage.”
6(c) The annual budget report shall be made available to the
7members pursuant to Section 5320.
8(d) The summary of the association’s reserves disclosed pursuant
9to
paragraph (2) of subdivision (b) shall not be admissible in
10evidence to show improper financial management of an association,
11provided that other relevant and competent evidence of the financial
12condition of the association is not made inadmissible by this
13provision.
14(e) The Assessment and Reserve Funding Disclosure Summary
15form, prepared pursuant to Section 5570, shall accompany each
16annual budget report or summary of the annual budget report that
17is delivered pursuant to this article.
18(f) This section shall remain in effect only until January 1, 2017,
19and as of that date is repealed, unless a later enacted statute, that
20is enacted before January 1, 2017, deletes or extends that date.
21(f) This section shall become inoperative on July 1, 2016, and,
22as of January 1, 2017, is repealed, unless a later enacted statute,
23that becomes operative on or before January 1, 2017, deletes or
24extends the dates on which it becomes inoperative and is repealed.
Section 5300 is added to the Civil Code, to read:
(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,
37
as 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.
P5 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
10
component 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:
P6 2“This summary of the association’s policies of insurance provides
3only certain information, as required by Section 5300 of the Civil
4Code, and should not be considered a substitute for the complete
5policy terms and conditions contained in the actual policies of
6insurance. Any association member may, upon request and
7provision of reasonable notice, review the association’s insurance
8policies and, upon request and payment of reasonable duplication
9charges, obtain copies of those policies. Although the association
10maintains the policies of insurance specified in this summary, the
11association’s policies of insurance may not cover your property,
12including personal property or real property improvements to or
13around
your dwelling, or personal injuries or other losses that occur
14within or around your dwelling. Even if a loss is covered, you may
15nevertheless be responsible for paying all or a portion of any
16deductible that applies. Association members should consult with
17their individual insurance broker or agent for appropriate additional
18coverage.”
20(10) A statement describing the status of the common interest
21development as a Federal Housing Administration (FHA)-approved
22condominium project pursuant to FHA guidelines, including
23whether the common interest development is an FHA-approved
24condominium project. The statement shall be in at least 10-point
25fontbegin insert on a separate piece of paperend insert and in the following form:
27“Certification by the Federal Housing Administration may
28provide benefits to members of an association, including an
29improvement in an owner’s ability to refinance a mortgage or
30obtain secondary financing and an increase in the pool of potential
31buyers of the separate interest.
32 This common interest development [is/is not (circle one)] a
33condominium project. The association of this common interest
34development [is/is not (circle one)] certified by the Federal Housing
35Administration.”
37(11) A statement describing the status of the common interest
38development as a federal Department of Veterans Affairs
39(VA)-approved condominium project pursuant to VA guidelines,
40including whether the
common interest development is a
P7 1VA-approved condominium project. The statement shall be in at
2least 10-point fontbegin insert on a separate piece of paperend insert and in the
3following form:
5“Certification by the federal Department of Veterans Affairs
6may provide benefits to members of an association, including an
7improvement in an owner’s ability to refinance a mortgage or
8obtain secondary financing and an increase in the pool of potential
9buyers of the separate interest.
10This common interest development [is/is not (circle one)] a
11condominium project. The association of this common interest
12development [is/is not (circle one)] certified by the federal
13Department of Veterans Affairs.”
15(c) The annual budget report shall be made available to the
16members pursuant to Section 5320.
17(d) The summary of the association’s reserves disclosed pursuant
18to paragraph (2) of subdivision (b) shall not be admissible in
19evidence to show improper financial management of an association,
20provided that other relevant and competent evidence of the financial
21condition of the association is not made inadmissible by this
22provision.
23(e) The Assessment and Reserve Funding Disclosure Summary
24form, prepared pursuant to Section 5570, shall accompany each
25annual budget report or summary of the annual budget report that
26is delivered pursuant to this article.
27(f) This section shall become operative onbegin delete January 1,
2017.end delete
281, 2016.end insert
Section 5810 of the Civil Code is amended to read:
The association shall, as soon as reasonably practicable,
31provide individual notice pursuant to Section 4040 to all members
32if any of the policies described in the annual budget report pursuant
33to Section 5300 have lapsed, been canceled, and are not
34immediately renewed, restored, or replaced, or if there is a
35significant change, such as a reduction in coverage or limits or an
36increase in the deductible, as to any of those policies. If the
37association receives any notice of nonrenewal of a policy described
38in the annual budget report pursuant to Section 5300, the
39association shall immediately notify its members if replacement
P8 1coverage will not be in effect by the date the existing coverage
2will lapse.
3This section shall remain in effect only until January 1, 2017,
4and as of that date
is repealed, unless a later enacted statute, that
5is enacted before January 1, 2017, deletes or extends that date.
Section 5810 is added to the Civil Code, to read:
The association shall, as soon as reasonably practicable,
8provide individual notice pursuant to Section 4040 to all members
9if any of the following occur:
10(a) Any of the policies described in the annual budget report
11pursuant to Section 5300 have lapsed, been canceled, and are not
12immediately renewed, restored, or replaced, or if there is a
13significant change, such as a reduction in coverage or limits or an
14increase in the deductible, as to any of those policies. If the
15association receives any notice of nonrenewal of a policy described
16in the annual budget report pursuant to Section 5300, the
17association shall immediately notify its members if replacement
18coverage will not be in effect by the date the existing coverage
19will lapse.
20(b) Any change in the status of the common interest development
21as a Federal
Housing Administration (FHA)-approved
22condominium project pursuant to FHA guidelines, including a
23description of the type of change, such as the approval,
24cancellation, or other nonrenewal of the approval.
25(c) Any change in the status of the common interest development
26as a federal Department of Veterans Affairs (VA)-approved
27condominium project pursuant to VA guidelines, including a
28description of the type of change, such as approval, cancellation,
29or other nonrenewal of the approval.
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