Senate Bill No. 1329

Introduced by Senator Wright

February 21, 2014

An act to amend Section 5300 of the Civil Code, relating to common interest developments.

LEGISLATIVE COUNSEL’S DIGEST

SB 1329, as introduced, Wright. Common interest developments.

The Davis-Stirling Common Interest Development Act defines and regulates common interest developments. The act requires a common interest development to be managed by an association and requires the association to distribute an annual budget report 30 to 90 days before the end of its fiscal year. Existing law requires the annual budget report to include specified information

This bill would make nonsubstantive changes to the annual budget report requirement.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 5300 of the Civil Code is amended to
read:

5300.  

(a) Notwithstanding a contrary provision in the
governing documents, an association shall distribute an annual
budget report 30 to 90 days before the end of its fiscal year.

(b) Unless the governing documents impose more stringent
standards, the annual budget report shall include all of the
following information:

(1) A pro forma operating budget, showing the estimated
revenue and expenses on an accrual basis.

(2) A summary of the association’s reserves, prepared pursuant
to Section 5565.

(3) A summary of the reserve funding plan adopted by the board,
as specified in paragraph (5) of subdivision (b) of Section 5550.
The summary shall include notice to members that the full reserve
study plan is available upon request, and the association shall
provide the full reserve plan to any member upon request.

(4) A statement as to whether the board has determined to defer
or not undertake repairs or replacement of any major component
with a remaining life of 30 years or less, including a justification
for the deferral or decision not to undertake the repairs or
replacement.

(5) A statement as to whether the board, consistent with the
reserve funding plan adopted pursuant to Section 5560, has
determined or anticipates that the levy of one or more special
assessments will be required to repair, replace, or restore any major
component or to provide adequate reserves therefor. If so, the
statement shall also set out the estimated amount, commencement
date, and duration of the assessment.

(6) A statement as to the mechanism or mechanisms by which
the board will fund reserves to repair or replace major components,
including assessments, borrowing, use of other assets, deferral of
selected replacements or repairs, or alternative mechanisms.

(7) A general statement addressing the procedures used for the
calculation and establishment of those reserves to defray the future
repair, replacement, or additions to those major components that
the association is obligated to maintain. The statement shall
include, but begin delete need end delete begin insert is end insert not begin delete be end delete limited to, reserve calculations made
using the formula described in paragraph (4) of subdivision (b) of
Section 5570, and may not assume a rate of return on cash reserves
in excess of 2 percent above the discount rate published by the
Federal Reserve Bank of San Francisco at the time the calculation
was made.

(8) A statement as to whether the association has any outstanding
loans with an original term of more than one year, including the
payee, interest rate, amount outstanding, annual payment, and
when the loan is scheduled to be retired.

(9) A summary of the association’s property, general liability,
earthquake, flood, and fidelity insurance policies. For each policy,
the summary shall include the name of the insurer, the type of
insurance, the policy limit, and the amount of the deductible, if
any. To the extent that any of the required information is specified
in the insurance policy declaration page, the association may meet
its obligation to disclose that information by making copies of that
page and distributing it with the annual budget report. The
summary distributed pursuant to this paragraph shall contain, in
at least 10-point boldface type, the following statement:

“This summary of the association’s policies of insurance provides
only certain information, as required by Section 5300 of the Civil
Code, and should not be considered a substitute for the complete
policy terms and conditions contained in the actual policies of
insurance. Any association member may, upon request and
provision of reasonable notice, review the association’s insurance
policies and, upon request and payment of reasonable duplication
charges, obtain copies of those policies. Although the association
maintains the policies of insurance specified in this summary, the
association’s policies of insurance may not cover your property,
including personal property or real property improvements to or
around your dwelling, or personal injuries or other losses that occur
within or around your dwelling. Even if a loss is covered, you may
nevertheless be responsible for paying all or a portion of any
deductible that applies. Association members should consult with
their individual insurance broker or agent for appropriate additional
coverage.”

(c) The annual budget report shall be made available to the
members pursuant to Section 5320.

(d) The summary of the association’s reserves disclosed pursuant
to paragraph (2) of subdivision (b) shall not be admissible in
evidence to show improper financial management of an association,
provided that other relevant and competent evidence of the financial
condition of the association is not made inadmissible by this
provision.

(e) The Assessment and Reserve Funding Disclosure Summary
form, prepared pursuant to Section 5570, shall accompany each
annual budget report or summary of the annual budget report that
is delivered pursuant to this article.