To the extent existing funds are available, the Department of Consumer Affairs and the Department of Real Estate shall develop an online education course for the board regarding the role, duties, laws, and responsibilities of directors and prospective directors, and the nonjudicial foreclosure process.
(a) A managing agent of a common interest development who accepts or receives funds belonging to the association shall deposit those funds that are not placed into an escrow account with a bank, savings association, or credit union or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in this state. All funds deposited by the managing agent in the trust fund account shall be kept in this state in a financial institution, as defined in Section 31041 of the Financial Code, which is insured by the federal government, or is a guaranty corporation subject to Section 14858 of the Financial Code, and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.
(b) At the written request of the board, the funds the managing agent accepts or receives on behalf of the association shall be deposited into an account in a bank, savings association, or credit union in this state that is insured by the Federal Deposit Insurance Corporation, National Credit Union Administration Insurance Fund, or a guaranty corporation subject to Section 14858 of the Financial Code, provided all of the following requirements are met:
(1) The account is in the name of the managing agent as trustee for the association or in the name of the association.
(2) All of the funds in the account are covered by insurance provided by an agency of the federal government or a guaranty corporation subject to Section 14858 of the Financial Code. Those funds may only be deposited in accounts that protect the principal. In no event may those funds be invested in stocks or high-risk investment options.
(3) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person for whom the managing agent holds funds in trust.
(4) The managing agent discloses to the board the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.
(5) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or the managing agent’s employees.
(6) Transfers of funds out of the association’s reserve or operating accounts shall not be authorized without prior written approval from the board of the association unless the amount of the transfer is less than the following:
(A) 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.
(B) The lesser of ten thousand dollars ($10,000) or 5 percent of estimated income in the annual operating budget, for associations with 51 or more separate interests.
(c) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.
(d) The managing agent shall not commingle the funds of the association with the managing agent’s own money or with the money of others that the managing agent receives or accepts.
(e) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.
(f) As used in this section, “completed payment” means funds received that clearly identify the account to which the funds are to be credited.
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)
A prospective managing agent of a common interest development shall provide a written statement to the board as soon as practicable, but in no event more than 90 days, before entering into a management agreement which shall contain all of the following information concerning the managing agent:
(a) The names and business addresses of the owners or general partners of the managing agent. If the managing agent is a corporation, the written statement shall include the names and business addresses of the directors and officers and shareholders holding greater than 10 percent of the shares of the corporation.
(b) Whether or not any relevant licenses such as architectural design, construction, engineering, real estate, or accounting have been issued by this state and are currently held by the persons specified in subdivision (a). If a license is currently held by any of those persons, the statement shall contain the following information:
(1) What license is held.
(2) The dates the license is valid.
(3) The name of the licensee appearing on that license.
(c) Whether or not any relevant professional certifications or designations such as architectural design, construction, engineering, real property management, or accounting are currently held by any of the persons specified in subdivision (a), including, but not limited to, a professional common interest development manager. If any certification or designation is held, the statement shall include the following information:
(1) What the certification or designation is and what entity issued it.
(2) The dates the certification or designation is valid.
(3) The names in which the certification or designation is held.
AB 690 Signed! New Management Disclosures and changes to the Escrow Document Disclosure Form – Published on HOA Lawyer Blog (July, 2017)
(a) Notwithstanding any other law, and regardless of whether an association is incorporated or unincorporated, the provisions of Sections 7233 and 7234 of the Corporations Code shall apply to any contract or other transaction authorized, approved, or ratified by the board or a committee of the board.
(b) A director or member of a committee shall not vote on any of the following matters:
(1) Discipline of the director or committee member.
(2) An assessment against the director or committee member for damage to the common area or facilities.
(3) A request, by the director or committee member, for a payment plan for overdue assessments.
(4) A decision whether to foreclose on a lien on the separate interest of the director or committee member.
(5) Review of a proposed physical change to the separate interest of the director or committee member.
(6) A grant of exclusive use common area to the director or committee member.
(c) Nothing in this section limits any other provision of law or the governing documents that govern a decision in which a director may have an interest.
(a) When a report is prepared pursuant to Section 5300 or 5310, the association shall deliver one of the following documents to all members by individual delivery pursuant to Section 4040:
(1) The full report.
(2) A summary of the report that includes, on the first page, a general description of the content of the report and instructions, printed in at least 10-point boldface type, regarding how to request a complete copy of the report at no cost to the member.
(b) Notwithstanding subdivision (a), if a member has requested to receive all reports in full, the association shall deliver the full report to that member, rather than a summary of the report.
(a) Within 30 to 90 days before the end of its fiscal year, the board shall distribute an annual policy statement that provides the members with information about association policies. The annual policy statement shall include all of the following information:
(1) The name and address of the person designated to receive official communications to the association, pursuant to Section 4035.
(2) A statement explaining that a member may submit a request to have notices sent to up to two different specified addresses, pursuant to Section 4040.
(3) The location, if any, designated for posting of a general notice, pursuant to Section 4045.
(4) Notice of a member’s option to receive general notices by individual delivery, pursuant to subdivision (b) of Section 4045.
(5) Notice of a member’s right to receive copies of meeting minutes, pursuant to subdivision (b) of Section 4950.
(6) The statement of assessment collection policies required by Section 5730.
(7) A statement describing the association’s policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments.
(8) A statement describing the association’s discipline policy, if any, including any schedule of penalties for violations of the governing documents pursuant to Section 5850.
(9) A summary of dispute resolution procedures, pursuant to Sections 5920 and 5965.
(10) A summary of any requirements for association approval of a physical change to property, pursuant to Section 4765.
(11) The mailing address for overnight payment of assessments, pursuant to Section 5655.
(12) Any other information that is required by law or the governing documents or that the board determines to be appropriate for inclusion.
(b) The annual policy statement shall be made available to the members pursuant to Section 5320.
Unless the governing documents impose more stringent standards, a review of the financial statement of the association shall be prepared in accordance with generally accepted accounting principles by a licensee of the California Board of Accountancy for any fiscal year in which the gross income to the association exceeds seventy-five thousand dollars ($75,000). A copy of the review of the financial statement shall be distributed to the members within 120 days after the close of each fiscal year, by individual delivery pursuant to Section 4040.
(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 need not be 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.”
(10) When the common interest development is a condominium project, a statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approved condominium project pursuant to FHA guidelines, including whether the common interest development is an FHA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
“Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”
(11) When the common interest development is a condominium project, a statement describing the status of the common interest development as a federal Department of Veterans Affairs (VA)-approved condominium project pursuant to VA guidelines, including whether the common interest development is a VA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.
(12) A copy of the completed “Charges For Documents Provided” disclosure identified in Section 4528. For purposes of this section, “completed” means that the “Fee for Document” section of the form individually identifies the costs associated with providing each document listed on the form.
(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.
AB 596 Signed! New FHA and VA Disclosures Required Beginning July 1, 2016 – Published on HOA Lawyer Blog, August 24, 2015.
To be effective, any of the following requests shall be delivered in writing to the association, pursuant to Section 4035:
(a) A request to change the member’s information in the association membership list.
(b) A request to add or remove a second email or mailing address for delivery of individual notices to the member, pursuant to Section 4040.
(c) A request for individual delivery of general notices to the member, pursuant to subdivision (b) of Section 4045, or a request to cancel a prior request for individual delivery of general notices.
(d) A request to opt out of the membership list pursuant to Section 5220, or a request to cancel a prior request to opt out of the membership list.
(e) A request to receive a full copy of a specified annual budget report or annual policy statement pursuant to Section 5320.
(f) A request to receive all reports in full, pursuant to subdivision (b) of Section 5320, or a request to cancel a prior request to receive all reports in full.
(g) A request to opt out of or opt into electronically voting by electronic secret ballot, pursuant to Section 5105.
