A fidelity bond is a form of insurance protection which covers losses that the policyholder incurs as a result of fraudulent acts by individuals. It is used by an association to insure losses caused by the dishonest acts of the association’s employees, board members or officers.
Associations Must Purchase Fidelity Bond Coverage
Civil Code Section 5806 requires associations to purchase fidelity bond coverage. Unless the governing documents require greater amounts, an association must maintain fidelity bond coverage for the following (Civ Code. § 5806.):
- Directors, Officers and Employees. Fidelity bond coverage for its directors, officers and employees in an amount that equal to at least the combined amount of the associations reserves and total assessments for three (3) months;
- Computer Fraud and Funds Transfer Fraud. The fidelity bond must also include computer fraud and funds transfer fraud.
- Coverage for Managing Agent or Management Company. If the association uses a managing agent or management company, the fidelity bond coverage must also include dishonest acts by the managing agent or the management company and its employees.
Board Candidate Qualification
An association’s election rules or bylaws may disqualify a person from nomination to the board if that person discloses, or if the association is aware or becomes aware of, a past criminal conviction that would, if the person was elected, either prevent the association from purchasing fidelity bond coverage or terminate the association’s existing fidelity bond coverage. (Civ. Code § 5105(c)(4); See also “Candidate Qualifications.”)
Related Links
AB 2912 Signed! Significant Changes to HOA Financial Review and Insurance Requirements
Published on HOA Lawyer Blog (September 20, 2018)
AB 1101 Signed! Welcome Clarity to HOA Financial Protection Requirements – Published on HOA Lawyer Blog (October 2021)
Civil Code Section 5806. Fidelity Bond Coverage Requirement.
Unless the governing documents require greater coverage amounts, the association shall maintain crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent, for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for three months. The coverage maintained by the association shall also include protection in an equal amount against computer fraud and funds transfer fraud. If the association uses a managing agent or management company, the association’s crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent, shall additionally include coverage for, or otherwise be endorsed to provide coverage for, dishonest acts by that person or entity and its employees. Self-insurance does not meet the requirements of this section.
Related Links
AB 2912 Signed! Significant Changes to HOA Financial Review and Insurance Requirements
Published on HOA Lawyer Blog (September 20, 2018)
Civil Code Section 5502. Board Authorization of Financial Transfers.
(a) Notwithstanding any other law, transfers shall not be authorized from the association’s reserve or operating accounts without prior written approval from the board of the association unless the amount of the transfer is less than the following:
(1) The lesser of five thousand dollars ($5,000) or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests.
(2) The lesser of ten thousand dollars ($10,000) or 5 percent of the estimated income in the annual operating budget, for associations with 51 or more separate interests.
(b) This section applies in addition to any other applicable requirements of this part.
Related Links
AB 2912 Signed! Significant Changes to HOA Financial Review and Insurance Requirements
Published on HOA Lawyer Blog (September 20, 2018)
AB 1101 Signed! Welcome Clarity to HOA Financial Protection Requirements – Published on HOA Lawyer Blog (October 2021)
Civil Code Section 5501. Financial Review Between Board Meetings.
The review requirements of Section 5500 may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one other board member, reviews the documents and statements described in Section 5500 independent of a board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.
Related Links
AB 2912 Signed! Significant Changes to HOA Financial Review and Insurance Requirements
Published on HOA Lawyer Blog (September 20, 2018)
Civil Code Section 4745.1. Electric Vehicle Dedicated TOU Meters.
(a) Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a common interest development, and any provision of a governing document, as defined in Section 4150, that either effectively prohibits or unreasonably restricts the installation or use of an EV-dedicated TOU meter or is in conflict with this section is void and unenforceable.
(b)
(1) This section does not apply to provisions that impose reasonable restrictions on the installation of an EV-dedicated TOU meter. However, it is the policy of the state to promote, encourage, and remove obstacles to the effective installation of EV-dedicated TOU meters.
(2) For purposes of this section, “reasonable restrictions” are restrictions based upon space, aesthetics, structural integrity, and equal access to these services for all homeowners, but an association shall attempt to find a reasonable way to accommodate the installation request, unless the association would need to incur an expense.
(c) An EV-dedicated TOU meter shall meet applicable health and safety standards and requirements imposed by state and local authorities, and all other applicable zoning, land use, or other ordinances, or land use permits.
(d) For purposes of this section, an “EV-dedicated TOU meter” means an electric meter supplied and installed by an electric utility, that is separate from, and in addition to, any other electric meter and is devoted exclusively to the charging of electric vehicles, and that tracks the time of use (TOU) when charging occurs. An “EV-dedicated TOU meter” includes any wiring or conduit necessary to connect the electric meter to an electric vehicle charging station, as defined in Section 4745, regardless of whether it is supplied or installed by an electric utility.
(e) If approval is required for the installation or use of an EV-dedicated TOU meter, the application for approval shall be processed and approved by the association in the same manner as an application for approval of an architectural modification to the property, and shall not be willfully avoided or delayed. The approval or denial of an application shall be in writing. If an application is not denied in writing within 60 days from the date of receipt of the application, the application shall be deemed approved, unless that delay is the result of a reasonable request for additional information.
(f) If the EV-dedicated TOU meter is to be placed in a common area or an exclusive use common area, as designated in the common interest development’s declaration, the following provisions apply:
(1) The owner first shall obtain approval from the association to install the EV-dedicated TOU meter and the association shall approve the installation if the owner agrees in writing to do both of the following:
(A) Comply with the association’s architectural standards for the installation of the EV-dedicated TOU meter.
(B) Engage the relevant electric utility to install the EV-dedicated TOU meter and, if necessary, a licensed contractor to install wiring or conduit necessary to connect the electric meter to an EV charging station.
(2) The owner and each successive owner of an EV-dedicated TOU meter shall be responsible for all of the following:
(A) Costs for damage to the EV-dedicated TOU meter, common area, exclusive use common area, or separate interests resulting from the installation, maintenance, repair, removal, or replacement of the EV-dedicated TOU meter.
(B) Costs for the maintenance, repair, and replacement of the EV-dedicated TOU meter until it has been removed and for the restoration of the common area after removal.
(C) Disclosing to prospective buyers the existence of any EV-dedicated TOU meter of the owner and the related responsibilities of the owner under this section.
(g) The association or owners may install an EV-dedicated TOU meter in the common area for the use of all members of the association and, in that case, the association shall develop appropriate terms of use for the EV-dedicated TOU meter.
(h) An association that willfully violates this section shall be liable to the applicant or other party for actual damages, and shall pay a civil penalty to the applicant or other party in an amount not to exceed one thousand dollars ($1,000).
(i) In any action by a homeowner requesting to have an EV-dedicated TOU meter installed and seeking to enforce compliance with this section, the prevailing plaintiff shall be awarded reasonable attorney’s fees.
Related Links
New Law Expands Rights to Use EV Charging Stations in HOAs
Published on HOA Lawyer Blog (September 14, 2018)
Civil Code Section 1098.6. Transfer Fees Prohibited.
*Note – This Section shall not become operative until January 1, 2019. For more information, see AB 3041.
(a)
(1) On or after January 1, 2019, a transfer fee shall not be created.
(2) This subdivision does not apply to excepted transfer fee covenants as defined by Section 1228.1 of Title 12 of the Code of Federal Regulations. Excepted transfer fee covenants are not required to comply with subparagraph (H) of paragraph (2) of subdivision (b) of Section 1098.5.
(b) Any transfer fee created in violation of subdivision (a) is void as against public policy.
(c) For purposes of this section, “transfer fee” has the same meaning as that term is defined in Section 1098.
Related Links
AB 1139 Imposes New Notice Requirements on Deed-Based Transfer Fees – Published on HOA Lawyer Blog (August 2, 2017)
Code of Civil Procedure Section 325. Adverse Possession.
(a) For the purpose of constituting an adverse possession by a person claiming title, not founded upon a written instrument, judgment, or decree, land is deemed to have been possessed and occupied in the following cases only:
(1) Where it has been protected by a substantial enclosure.
(2) Where it has been usually cultivated or improved.
(b) In no case shall adverse possession be considered established under the provision of any section of this code, unless it shall be shown that the land has been occupied and claimed for the period of five years continuously, and the party or persons, their predecessors and grantors, have timely paid all state, county, or municipal taxes that have been levied and assessed upon the land for the period of five years during which the land has been occupied and claimed. Payment of those taxes by the party or persons, their predecessors and grantors shall be established by certified records of the county tax collector.
AB 3247 (Committee on Judiciary) Arbitration: agreements: enforcement.
Would make non-substantive changes to Code of Civil Procedure 1281.2 regarding arbitration agreements.
Current Status: Chaptered
FindHOALaw Quick Summary:
from the California Legislature's website
AB 2353 (Frazier) Construction defects: actions: statute of limitations.
Would shorten the statute of limitations to file a claim for construction defects from 10 years to 5 years.
Current Status: Dead
FindHOALaw Quick Summary:
To read the current text of AB 2353, click here to the view the bill’s page on the California Legislature’s website. FindHOALaw will continue to track AB 2353 as it progresses through the Legislature.
View more info on AB 2353from the California Legislature's website
Related Links
SB 1128 (Roth). Common interest developments.
This bill would allow for voting by acclamation in uncontested elections.
Current Status: Dead
FindHOALaw Quick Summary:
The Davis-Stirling Common Interest Development Act governs the management and operation of common interest developments.
Most likely a spot bill, this bill would make nonsubstantive changes Civil Code Section 4000.
**UPDATE: On March 22, 2018, the proposed text of SB 1128 was amended to allow an owner to consent to individual delivery by electronic means in writing or by email, to reduce notice of a rule change to 28 days, and to allow for voting by acclamation:
(e) Notwithstanding subdivision (d), if a common interest development, as defined in Section 4100 of the Civil Code, is subject to this part and after the close of nominations for the directors on the board of the association of the common interest development the number of qualified director nominees is less than the number of vacancies to be elected, as determined by the inspector or inspectors of elections selected pursuant to Section 5110 of the Civil Code, the qualified director nominees shall be considered elected by acclamation.
**UPDATE: The Governor vetoed SB 1128 on September 30, 2018. His veto message can be found here.
View more info on SB 1128from the California Legislature's website