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 developmentbegin insert, which includes a condominium project,end insert 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, beginning July 1, 2016, require the annual budget reportbegin insert of a condominium projectend insert to also include a separate 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.
Vote: 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,
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 become inoperative on July 1, 2016, and,
17as of January 1, 2017, is repealed, unless a later enacted statute,
18that becomes operative on or before January 1, 2017, deletes or
19extends 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
22governing documents, an association shall distribute an annual
23budget report 30 to 90 days before the end of its fiscal year.
24(b) Unless the governing documents impose more stringent
25standards, the annual budget report shall include all of the
26following information:
27(1) A pro forma operating budget, showing the estimated
28revenue and expenses on an accrual basis.
29(2) A summary of the association’s reserves, prepared pursuant
30to Section 5565.
31(3) A summary of the reserve funding plan adopted by the board,
32as
specified in paragraph (5) of subdivision (b) of Section 5550.
33The summary shall include notice to members that the full reserve
34study plan is available upon request, and the association shall
35provide the full reserve plan to any member upon request.
36(4) A statement as to whether the board has determined to defer
37or not undertake repairs or replacement of any major component
38with a remaining life of 30 years or less, including a justification
39for the deferral or decision not to undertake the repairs or
40replacement.
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 major
5component or to provide adequate reserves therefor. If so, the
6statement shall also set out the estimated amount,
commencement
7date, 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 components,
10including assessments, borrowing, use of other assets, deferral of
11selected replacements or repairs, or alternative mechanisms.
12(7) A general statement addressing the procedures used for the
13calculation and establishment of those reserves to defray the future
14repair, replacement, or additions to those major components that
15the association is obligated to maintain. The statement shall
16include, but need not be limited to, reserve calculations made using
17the formula described in paragraph (4) of subdivision (b) of Section
185570, and may not assume a rate of return on cash reserves in
19excess of 2 percent above the discount rate published by the Federal
20Reserve Bank of San Francisco at the time the calculation
was
21made.
22(8) A statement as to whether the association has any outstanding
23loans with an original term of more than one year, including the
24payee, interest rate, amount outstanding, annual payment, and
25when the loan is scheduled to be retired.
26(9) A summary of the association’s property, general liability,
27earthquake, flood, and fidelity insurance policies. For each policy,
28the summary shall include the name of the insurer, the type of
29insurance, the policy limit, and the amount of the deductible, if
30any. To the extent that any of the required information is specified
31in the insurance policy declaration page, the association may meet
32its obligation to disclose that information by making copies of that
33page and distributing it with the annual budget report. The
34summary distributed pursuant to this paragraph shall contain, in
35at least 10-point boldface type, the following
statement:
37“This summary of the association’s policies of insurance provides
38only certain information, as required by Section 5300 of the Civil
39Code, and should not be considered a substitute for the complete
40policy terms and conditions contained in the actual policies of
P6 1insurance. Any association member may, upon request and
2provision of reasonable notice, review the association’s insurance
3policies and, upon request and payment of reasonable duplication
4charges, obtain copies of those policies. Although the association
5maintains the policies of insurance specified in this summary, the
6association’s policies of insurance may not cover your property,
7including personal property or real property improvements to or
8around your dwelling, or personal injuries or other losses that occur
9within or around your dwelling. Even if a loss is covered, you may
10nevertheless be responsible for paying all or a portion of any
11deductible
that applies. Association members should consult with
12their individual insurance broker or agent for appropriate additional
13coverage.”
15(10) begin deleteA end deletebegin insertWhen the common interest development is a
16condominium project, a end insertstatement describing the status of the
17common interest development as a Federal Housing Administration
18(FHA)-approved condominium project pursuant to FHA guidelines,
19including whether the common interest development is an
20FHA-approved condominium project. The statement shall be in at
21least 10-point font on a separate piece of paper and in the following
22form:
24“Certification by the
Federal Housing Administration may
25provide benefits to members of an association, including an
26improvement in an owner’s ability to refinance a mortgage or
27obtain secondary financing and an increase in the pool of potential
28buyers of the separate interest.
29 This common interest development [is/is not (circle one)] a
30condominium project. The association of this common interest
31development [is/is not (circle one)] certified by the Federal Housing
32Administration.”
34(11) begin deleteA end deletebegin insertWhen the common interest development is a
35condominium project, a end insertstatement describing the status of the
36common interest development as a federal Department of Veterans
37Affairs (VA)-approved condominium
project pursuant to VA
38guidelines, including whether the common interest development
39is a VA-approved condominium project. The statement shall be
P7 1in at least 10-point font on a separate piece of paper and in the
2following form:
4“Certification by the federal Department of Veterans Affairs
5may provide benefits to members of an association, including an
6improvement in an owner’s ability to refinance a mortgage or
7obtain secondary financing and an increase in the pool of potential
8buyers of the separate interest.
9This common interest development [is/is not (circle one)] a
10condominium project. The association of this common interest
11development [is/is not (circle one)] certified by the federal
12Department of Veterans Affairs.”
14(c) The annual budget report shall be made available to
the
15members pursuant to Section 5320.
16(d) The summary of the association’s reserves disclosed pursuant
17to paragraph (2) of subdivision (b) shall not be admissible in
18evidence to show improper financial management of an association,
19provided that other relevant and competent evidence of the financial
20condition of the association is not made inadmissible by this
21provision.
22(e) The Assessment and Reserve Funding Disclosure Summary
23form, prepared pursuant to Section 5570, shall accompany each
24annual budget report or summary of the annual budget report that
25is delivered pursuant to this article.
26(f) This section shall become operative on July 1, 2016.
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