1365.
Unless the governing documents impose more stringent standards, the association
shall prepare and distribute to all of its
members the following documents:
(a) A pro forma operating budget, which shall include all of the
following:
(1) The estimated revenue and expenses on an accrual basis.
(2) A summary of the association's reserves based upon the most
recent review or study conducted pursuant to Section
1365.5, based only on assets held in
cash or cash equivalents, which shall be printed in boldface type and include
all of the following:
(A) The current estimated replacement cost, estimated remaining
life, and estimated useful life of each major component.
(B) As of the end of the fiscal year for which the study is
prepared:
(i) The current estimate of the amount of cash reserves necessary
to repair, replace, restore, or maintain the major components.
(ii) The current amount of accumulated cash reserves actually set
aside to repair, replace, restore, or maintain major components.
(iii) If applicable, the amount of funds received from either a
compensatory damage award or settlement to an association from any
person or entity for injuries to property, real or personal, arising out of any
construction or design defects, and the expenditure or
disposition of funds, including the amounts expended for the direct and indirect
costs of repair of construction or design defects. These amounts shall be
reported at the end of the fiscal year for which the study is prepared as
separate line items under cash reserves pursuant to clause (ii). Instead of
complying with the requirements set forth in this clause, an association that is
obligated to issue a review of their financial statement pursuant to subdivision
(b) may include in the review a statement containing all of the information
required by this clause.
(C) The percentage that the amount determined for purposes of
clause (ii) of subparagraph (B) equals the amount determined for
purposes of clause (i) of subparagraph (B).
(D) The current deficiency in reserve funding expressed on a per
unit basis. The figure shall be calculated by subtracting the amount
determined for purposes of clause (ii) of subparagraph (B) from the amount
determined for purposes of clause (i) of subparagraph (B) and then dividing the
result by the number of separate interests within the association, except that
if assessments vary by the size or type of ownership interest, then the
association shall calculate the current deficiency in a manner that reflects the
variation.
(3) A statement as to all of the following:
(A) Whether the board of directors of the association 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.
(B) Whether the board of directors of the association, consistent
with the reserve funding plan adopted pursuant to subdivision (e) of Section
1365.5, 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.
(C) The mechanism or mechanisms by which the board of directors
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.
(D) 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.
(4) 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 report shall include, but need not be limited to,
reserve calculations made using the formula described in paragraph (4) of
subdivision (b) of Section 1365.2.5,
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.
The summary of the association's reserves disclosed pursuant to
paragraph (2) 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.
Notwithstanding a contrary provision in the governing documents, a
copy of the operating budget shall be annually distributed not less than 30 days
nor more than 90 days prior to the beginning of the association's fiscal year.
(b) Commencing January 1, 2009, a summary of the reserve funding
plan adopted by the board of directors of the association, as
specified in paragraph (4) of subdivision (e) of Section
1365.5. 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.
(c) 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 within 120 days after the
close of each fiscal year.
(d) Instead of the distribution of the pro forma operating budget
required by subdivision (a), the board of directors may elect to
distribute a summary of the pro forma operating budget to all of its members
with a written notice that the pro forma operating budget is available at the
business office of the association or at another suitable location within the
boundaries of the development, and that copies will be provided upon request and
at the expense of the association. If any member requests that a copy of the pro
forma operating budget required by subdivision (a) be mailed to the member, the
association shall provide the copy to the member by first-class United States
mail at the expense of the association and delivered within five days. The
written notice that is distributed to each of the association members shall be
in at least 10-point boldface type on the front page of the summary of the
budget.
(e) A statement describing the association's policies and practices
in enforcing lien rights or other legal remedies for
default in payment of its assessments against its members shall be annually
delivered to the members not less than 30 days nor more than 90 days immediately
preceding the beginning of the association's fiscal year.
(f) (1) A summary of the association's property, general liability,
earthquake, flood, and fidelity insurance policies, which shall be distributed
not less than 30 days nor more than 90 days preceding the beginning of the
association's fiscal year, that includes all of the following information about
each policy:
(A) The name of the insurer.
(B) The type of insurance.
(C) The policy limits of the insurance.
(D) The amount of deductibles, if any.
(2) The association shall, as soon as reasonably practicable,
notify its members by first-class mail if any of the policies described in
paragraph (1) have lapsed, been canceled, and are not immediately renewed,
restored, or replaced, or if there is a significant change, such as a reduction
in coverage or limits or an increase in the deductible, as to any of those
policies. If the association receives any notice of nonrenewal of a policy
described in paragraph (1), the association shall immediately notify its members
if replacement coverage will not be in effect by the date the existing coverage
will lapse.
(3) To the extent that any of the information required to be
disclosed pursuant to paragraph (1) 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 to all of its
members.
(4) The summary distributed pursuant to paragraph (1) 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 subdivision (f) of Section
1365 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."
1365.1. (a) The association shall distribute the
written notice described in subdivision (b) to each member of the association
during
the 60-day period immediately preceding the beginning of the association's
fiscal year. The notice shall be printed in at least 12-point type. An
association distributing the notice to an owner of an interest that is described
in Section 11212 of the Business and Professions
Code that is not otherwise exempt from
this section pursuant to subdivision (a) of Section 11211.7 may delete from the
notice described in subdivision (b) the portion regarding meetings and payment
plans.
(b) The notice required by this section shall read as follows:
"NOTICE ASSESSMENTS AND FORECLOSURE
This notice outlines some of the rights and responsibilities of
owners of property in common interest developments and the associations that
manage them. Please refer to the sections of the
Civil
Code indicated for further information. A portion of the
information in this notice applies only to liens recorded on or after January 1,
2003. You may wish to consult a lawyer if you dispute an assessment.
ASSESSMENTS AND FORECLOSURE
Assessments become delinquent 15 days after they are due, unless
the governing documents provide for a longer time. The failure to pay
association assessments may result in the loss of an owner's property through
foreclosure. Foreclosure may occur either as a
result of a court action, known as judicial foreclosure or without court action,
often referred to as nonjudicial foreclosure. For liens
recorded on and after January 1, 2006, an association may not use judicial or
nonjudicial foreclosure to enforce that lien if the
amount of the delinquent assessments or dues, exclusive of any accelerated
assessments, late charges, fees, attorney's fees,
interest, and costs of collection, is less than one thousand eight hundred
dollars ($1,800). For delinquent assessments or dues in
excess of one thousand eight hundred dollars ($1,800) or more than 12 months
delinquent, an association may use judicial or nonjudicial foreclosure subject
to the conditions set forth in Section 1367.4 of the
Civil
Code. When using judicial or nonjudicial foreclosure, the association
records a lien on the owner's property. The owner's property may be sold to
satisfy the lien if the amounts secured by the lien are not paid. (Sections
1366, 1367.1, and 1367.4 of the Civil
Code)
In a judicial or nonjudicial foreclosure, the association may
recover assessments, reasonable costs of collection, reasonable
attorney's fees, late charges, and interest. The association may not use
nonjudicial foreclosure to collect fines or penalties, except for costs to
repair common areas damaged by a member or a member's guests, if the governing
documents provide for this. (Sections 1366 and 1367.1 of the
Civil
Code)
The association must comply with the requirements of Section 1367.1
of the Civil
Code when collecting delinquent
assessments. If
the association fails to follow these requirements, it may not record a lien on
the owner's property until it has satisfied those
requirements. Any additional costs that result from satisfying the requirements
are the responsibility of the association. (Section
1367.1 of the Civil
Code)
At least 30 days prior to recording a lien on an owner's separate
interest, the association must provide the owner of record with
certain documents by certified mail, including a description of its collection
and lien enforcement procedures and the method of
calculating the amount. It must also provide an itemized statement of the
charges owed by the owner. An owner has a right to review the
association's records to verify the debt. (Section 1367.1 of the
Civil
Code)
If a lien is recorded against an owner's property in error, the
person who recorded the lien is required to record a lien release within 21
days, and to provide an owner certain documents in this regard. (Section 1367.1
of the Civil
Code)
The collection practices of the association may be governed by
state and federal laws regarding fair debt collection. Penalties can be imposed
for debt collection practices that violate these laws.
PAYMENTS
When an owner makes a payment, he or she may request a receipt, and
the association is required to provide it. On the receipt, the association must
indicate the date of payment and the person who received it. The association
must inform owners of a mailing address for overnight payments. (Section 1367.1
of the Civil
Code)
An owner may, but is not obligated to, pay under protest any
disputed charge or sum levied by the association, including, but not
limited to, an assessment, fine, penalty, late fee, collection cost, or monetary
penalty imposed as a disciplinary measure, and by so
doing, specifically reserve the right to contest the disputed charge or sum in
court or otherwise.
An owner may dispute an assessment debt by submitting a written
request for dispute resolution to the association as set forth in
Article 5 (commencing with Section 1368.810) of Chapter 4 of Title 6 of Division
2 of the Civil
Code. In addition, an association may
not initiate a foreclosure without participating in alternative dispute
resolution with a neutral third party as set forth in Article 2
(commencing with Section 1369.510) of Chapter 7 of Title 6 of Division 2 of the
Civil
Code, if so requested by the owner. Binding
arbitration shall not be available if the association intends to initiate a
judicial foreclosure.
An owner is not liable for charges, interest, and costs of
collection, if it is established that the assessment was paid properly on time.
(Section 1367.1 of the Civil
Code)
MEETINGS AND PAYMENT PLANS
An owner of a separate interest that is not a timeshare may request
the association to consider a payment plan to satisfy a delinquent assessment.
The association must inform owners of the standards for payment plans, if any
exist. (Section 1367.1 of the
Civil
Code)
The board of directors must meet with an owner who makes a proper
written request for a meeting to discuss a payment plan when the owner has
received a notice of a delinquent assessment. These payment plans must conform
with the payment plan standards of the association, if they exist.
(Section 1367.1 of the Civil
Code)"
(c) A member of an association may provide written notice by
facsimile transmission or United States mail to the association of a
secondary address. If a secondary address is provided, the association shall
send any and all correspondence and legal notices
required pursuant to this article to both the primary and the secondary address.
1365.2. (a) For the purposes of this section, the
following definitions shall apply:
(1) "Association records" means all of the following:
(A) Any financial document required to be provided to a member in
Section 1365.
(B) Any financial document or statement required to be provided in
Section 1368.
(C) Interim financial statements, periodic or as compiled,
containing any of the following:
(i) Balance sheet.
(ii) Income and expense statement.
(iii) Budget comparison.
(iv) General ledger. A "general ledger" is a report that shows all
transactions that occurred in an association account over a
specified period of time. The records described in this subparagraph shall be prepared in
accordance with an accrual or modified accrual basis of accounting.
(D) Executed contracts not otherwise privileged under law.
(E) Written board approval of vendor or contractor proposals or
invoices.
(F) State and federal tax returns.
(G) Reserve account balances and records of payments made from
reserve accounts.
(H) Agendas and minutes of meetings of the members, the board of
directors and any committees appointed by the board of directors pursuant to
Section 7212 of the Corporations Code;
excluding, however, agendas, minutes, and other information from executive
sessions of the board of directors as described in Section 1363.05.
(I) (i) Membership lists, including name, property address, and
mailing address, if the conditions set forth in clause (ii) are met
and except as otherwise provided in clause (iii).
(ii) The member requesting the list shall state the purpose for
which the list is requested which purpose shall be reasonably related
to the requester's interest as a member. If the association reasonably believes
that the information in the list will be used for
another purpose, it may deny the member access to the list. If the request is
denied, in any subsequent action brought by the member under subdivision (f),
the association shall have the burden to prove that the member would have
allowed use of the information for purposes unrelated to his or her interest as
a member.
(iii) A member of the association may opt out of the sharing of his
or her name, property address, and mailing address by notifying
the association in writing that he or she prefers to be contacted via the
alternative process described in subdivision (c) of Section 8330 of the
Corporations Code. This opt-out shall
remain in effect until changed by the member.
(J) Check registers.
(2) "Enhanced association records" means invoices, receipts and
canceled checks for payments made by the association, purchase orders approved
by the association, credit card statements for credit cards issued in the name
of the association, statements for services rendered, and reimbursement requests
submitted to the association, provided that the person submitting the
reimbursement request shall be solely responsible for removing all personal
identification information from the request.
(b) (1) The association shall make available association records
and enhanced association records for the time periods and within the timeframes
provided in subdivisions (i) and (j) for inspection and copying by a member of
the association, or the member's designated representative. The association may
bill the requesting member for the direct and actual cost of copying requested
documents. The association shall inform the member of the amount of the copying
costs before copying the requested documents.
(2) A member of the association may designate another person to
inspect and copy the specified association records on the member's behalf. The
member shall make this designation in writing.
(c) (1) The association shall make the specified association
records available for inspection and copying in the association's
business office within the common interest development.
(2) If the association does not have a business office within the
development, the association shall make the specified association
records available for inspection and copying at a place that the requesting
member and the association agree upon.
(3) If the association and the requesting member cannot agree upon
a place for inspection and copying pursuant to paragraph (2), or if the
requesting member submits a written request directly to the association for
copies of specifically identified records, the
association may satisfy the requirement to make the association records
available for inspection and copying by mailing copies of the
specifically identified records to the member by first-class mail within the
timeframes set forth in subdivision (j).
(4) The association may bill the requesting member for the direct
and actual cost of copying and mailing requested documents. The
association shall inform the member of the amount of the copying and mailing
costs, and the member shall agree to pay those costs, before copying and sending
the requested documents.
(5) In addition to the direct and actual costs of copying and
mailing, the association may bill the requesting member an amount not
in excess of ten dollars ($10) per hour, and not to exceed two hundred dollars
($200) total per written request, for the time actually and reasonably involved
in redacting the enhanced association records as provided in paragraph (2) of
subdivision (a). The association shall inform the member of the estimated
costs, and the member shall agree to pay those costs, before retrieving the
requested documents.
(d) (1) Except as provided in paragraph (2), the association may
withhold or redact information from the association records for any
of the following reasons:
(A) The release of the information is reasonably likely to lead to
identity theft. For the purposes of this section, "identity theft" means the
unauthorized use of another person's personal identifying information to obtain
credit, goods, services, money, or property. Examples of information that
may be withheld or redacted pursuant to this paragraph include bank account
numbers of members or vendors, social security or tax identification numbers,
and check, stock, and credit card numbers.
(B) The release of the information is reasonably likely to lead to
fraud in connection with the association.
(C) The information is privileged under law. Examples include
documents subject to attorney-client privilege or relating to
litigation in which the association is or may become involved, and confidential
settlement agreements.
(D) The release of the information is reasonably likely to
compromise the privacy of an individual member of the association.
(E) The information contains any of the following:
(i) Records of a-la-carte goods or services provided to individual
members of the association for which the association received
monetary consideration other than assessments.
(ii) Records of disciplinary actions, collection activities, or
payment plans of members other than the member requesting the
records.
(iii) Any person's personal identification information, including,
without limitation, social security number, tax identification
number, driver's license number, credit card account numbers, bank account
number, and bank routing number.
(iv) Agendas, minutes, and other information from executive
sessions of the board of directors as described in Section 1363.05,
except for executed contracts not otherwise privileged. Privileged contracts
shall not include contracts for maintenance, management, or legal services.
(v) Personnel records other than the payroll records required to be
provided under paragraph (2).
(vi) Interior architectural plans, including security features, for
individual homes.
(2) Except as provided by the attorney-client privilege, the
association may not withhold or redact information concerning the
compensation paid to employees, vendors, or contractors. Compensation
information for individual employees shall be set forth by job classification or
title, not by the employee's name, social security number, or other personal
information.
(3) No association, officer, director, employee, agent or volunteer
of an association shall be liable for damages to a member of the association or
any third party as the result of identity theft or other breach of privacy
because of the failure to withhold or redact that member's information under
this subdivision unless the failure to withhold or redact the information was
intentional, willful, or negligent.
(4) If requested by the requesting member, an association that
denies or redacts records shall provide a written explanation specifying the
legal basis for withholding or redacting the requested records.
(e) (1) The association records, and any information from them, may
not be sold, used for a commercial purpose, or used for any other purpose not
reasonably related to a member's interest as a member. An association may
bring an action against any person who violates this section for injunctive
relief and for actual damages to the association caused by the violation.
(2) This section may not be construed to limit the right of an
association to damages for misuse of information obtained from the
association records pursuant to this section or to limit the right of an
association to injunctive relief to stop the misuse of this information.
(3) An association shall be entitled to recover reasonable costs
and expenses, including reasonable attorney's fees, in a successful
action to enforce its rights under this section.
(f) A member of an association may bring an action to enforce the
member's right to inspect and copy the association records. If a
court finds that the association unreasonably withheld access to the association
records, the court shall award the member reasonable
costs and expenses, including reasonable attorney's fees, and may assess a
civil penalty of up to five hundred
dollars ($500) for the
denial of each separate written request. A cause of action under this section
may be brought in small claims court if the amount of the demand does not exceed
the jurisdiction of that court. A prevailing association may recover any costs
if the court finds the action to be frivolous, unreasonable, or without
foundation.
(g) The provisions of this section apply to any community service
organization or similar entity, as defined in paragraph (3) of
subdivision (c) of Section 1368, that is related to the association, and this
section shall operate to give a member of the community
service organization or similar entity a right to inspect and copy the records
of that organization or entity equivalent to that granted
to association members by this section.
(h) Requesting parties shall have the option of receiving
specifically identified records by electronic transmission or machine-readable
storage media as long as those records can be transmitted in a redacted format
that does not allow the records to be altered. The cost of duplication shall be
limited to the direct cost of producing the copy of a record in that electronic
format. The
association may deliver specifically identified records by electronic
transmission or machine-readable storage media as long as
those records can be transmitted in a redacted format that prevents the records
from being altered.
(i) The time periods for which specified records shall be provided
is as follows:
(1) Association records shall be made available for the current
fiscal year and for each of the previous two fiscal years.
(2) Minutes of member and board meetings shall be permanently made
available. If a committee has decisionmaking authority, minutes of the meetings
of that committee shall be made available commencing January 1, 2007, and shall
thereafter be permanently made available.
(j) The timeframes in which access to specified records shall be
provided to a requesting member are as follows:
(1) Association records prepared during the current fiscal year,
within 10 business days following the association's receipt of the
request.
(2) Association records prepared during the previous two fiscal
years, within 30 calendar days following the association's receipt of
the request.
(3) Any record or statement available pursuant to Section
1365 or 1368, within the timeframe
specified therein.
(4) Minutes of member and board meetings, within the timeframe
specified in subdivision (d) of Section 1363.05.
(5) Minutes of meetings of committees with decisionmaking authority
for meetings commencing on or after January 1, 2007, within
15 calendar days following approval.
(6) Membership list, within the timeframe specified in Section 8330
of the Corporations Code.
(k) There shall be no liability pursuant to this section for an
association that fails to retain records for the periods specified in
subdivision (i) that were created prior to January 1, 2006.
(l) As applied to an association and its members, the provisions of
this section are intended to supersede the provisions of Sections
8330 and 8333 of the Corporations Code
to the extent those sections are inconsistent.
(m) The provisions of this section shall not apply to any common
interest development in which separate interests are being offered
for sale by a subdivider under the authority of a public report issued by the
Department of Real Estate so long as the subdivider or all subdividers offering
those separate interests for sale, or any employees of those subdividers or any
other person who receives direct or indirect compensation from any of those
subdividers, comprise a majority of the members of the board of directors of the
association. Notwithstanding the foregoing, this section shall apply to that
common interest development no later than 10 years after the close of escrow for
the first sale of a separate interest to a member of the general public pursuant
to the public report issued for the first phase of the development.
(n) This section shall become operative on July 1, 2006.
1365.2.5. (a) The disclosures required by this
article with regard to an association or a property shall be summarized on the
following form:
Assessment and Reserve Funding Disclosure
Summary
(1) The current regular assessment per ownership interest is $_____
per ____. Note: If assessments vary by the size or type of
ownership interest, the assessment applicable to this ownership interest may be
found on page _____ of the attached summary.
(2) Additional regular or special assessments that have already
been scheduled to be imposed or charged, regardless of the purpose,
if they have been approved by the board and/or members:
| Date assessment will be
due: |
Amount per ownership
interest per month or year (if assessments are variable, see note
immediately below): |
Purpose of the assessment: |
| |
|
|
| |
Total: |
|
Note: If assessments vary by the
size or type of ownership interest, the assessment applicable to this ownership
interest may be
found on page ____ of the attached report.
(3) Based upon the most recent reserve study and other information
available to the board of directors, will currently projected
reserve account balances be sufficient at the end of each year to meet the
association's obligation for repair and/or replacement of
major components during the next 30 years
Yes _____ No _____
(4) If the answer to (3) is no, what additional assessments or
other contributions to reserves would be necessary to ensure that
sufficient reserve funds will be available each year during the next 30 years
that have not yet been approved by the board or the members
| Approximate date
assessment will be due: |
Amount per ownership
interest per month or year: |
| |
|
| |
Total: |
(5) All major components are
included in the reserve study and are included in its calculations.
(6) Based on the method of calculation in paragraph (4) of
subdivision (b) of Section 1365.2.5,
the estimated amount required in the reserve fund at the end of the current
fiscal year is $____, based in whole or in part on the last reserve study or
update prepared by ____ as of ____ (month), ____ (year). The projected
reserve fund cash balance at the end of the current fiscal year is $____,
resulting in reserves being ____ percent funded at this date. If an
alternate, but generally accepted, method of calculation is also used, the
required reserve amount is $____. (See attached explanation)
(7) Based on the method of calculation in paragraph (4) of
subdivision (b) of Section 1365.2.5 of
the Civil
Code, the estimated amount required in the reserve fund at the end of each of the next five budget
years is $______, and the projected reserve fund cash balance in each of those
years, taking into account only assessments already approved and other known
revenues, is $______, leaving the reserve at ______ percent funding. If the
reserve funding plan approved by the association is implemented, the projected
reserve fund cash balance in each of those years will be $______, leaving the
reserve at ______ percent funding. Note: The financial
representations set forth in this summary are based on the best estimates of the
preparer at that time. The estimates are subject to change.
(b) For the purposes of preparing a summary pursuant to this
section:
(1) "Estimated remaining useful life" means the time reasonably
calculated to remain before a major component will require replacement.
(2) "Major component" has the meaning used in Section
1365.5. Components with an estimated
remaining useful life of more than 30 years may be included in a study as a
capital asset or disregarded from the reserve calculation, so long as the
decision is revealed in the reserve study report and reported in the Assessment
and Reserve Funding Disclosure Summary.
(3) The form set out in subdivision (a) shall accompany each pro
forma operating budget or summary thereof that is delivered pursuant to this
article. The form may be supplemented or modified to clarify the information
delivered, so long as the minimum information set out in subdivision (a) is
provided.
(4) For the purpose of the report and summary, the amount of
reserves needed to be accumulated for a component at a given time
shall be computed as the current cost of replacement or repair multiplied by the
number of years the component has been in service divided by the useful life of
the component. This shall not be construed to require the board to fund reserves
in accordance with this calculation.
1365.3. Unless the governing documents impose more
stringent standards, any community service organization as defined in paragraph
(3) of subdivision (c) of Section 1368 whose funding from the association or its
members exceeds 10 percent of the organization's annual budget shall prepare and
distribute to the association a report that meets the requirements of Section
5012 of the Corporations Code, and
that describes in detail administrative costs and identifies the payees of those
costs in a manner consistent with the provisions of Section
1365.2. If the community service
organization does not comply with the standards, the report shall disclose the
noncompliance in detail. If a community service organization is
responsible for the maintenance of major components for which an association
would otherwise be responsible, the community service organization shall supply
to the association the information regarding those components that the
association would use to complete disclosures and reserve reports required under
this article. An association may rely upon information received from a
community service organization, and shall provide access to the information
pursuant to the provisions of Section 1365.2.
1365.5. (a) Unless the governing documents impose
more stringent standards, the board of directors of the association shall do all
of the following:
(1) Review a current reconciliation of the association's operating
accounts on at least a quarterly basis.
(2) Review a current reconciliation of the association's reserve
accounts on at least a quarterly basis.
(3) Review, on at least a quarterly basis, the current year's
actual reserve revenues and expenses compared to the current year's
budget.
(4) Review the latest account statements prepared by the financial
institutions where the association has its operating and reserve
accounts.
(5) Review an income and expense statement for the association's
operating and reserve accounts on at least a quarterly basis.
(b) The signatures of at least two persons, who shall be members of
the association's board of directors, or one officer who is not a member of the
board of directors and a member of the board of directors, shall be required for
the withdrawal of moneys from the association's reserve accounts.
(c) (1) The board of directors shall not expend funds designated as
reserve funds for any purpose other than the repair, restoration,
replacement, or maintenance of, or litigation involving the repair, restoration,
replacement, or maintenance of, major components that the association is
obligated to repair, restore, replace, or maintain and for which the reserve
fund was established.
(2) However, the board may authorize the temporary transfer of
moneys from a reserve fund to the association's general operating
fund to meet short-term cashflow requirements or other expenses, if the board
has provided notice of the intent to consider the transfer in a notice of
meeting, which shall be provided as specified in Section 1363.05. The
notice shall include the reasons the transfer is needed, some of the options for
repayment, and whether a special assessment may be considered. If the board
authorizes the transfer, the board shall issue a written finding, recorded in
the board's minutes, explaining the reasons that the transfer is needed, and
describing when and how the moneys will be repaid to the reserve fund. The
transferred funds shall be restored to the reserve fund within one year of the
date of the initial transfer, except that the board may, after giving the same
notice required for considering a transfer, and, upon making a finding supported
by documentation that a temporary delay would be in the best interests of the
common interest development, temporarily delay the restoration. The board shall
exercise prudent fiscal management in maintaining the integrity of the reserve
account, and shall, if necessary, levy a special assessment to recover the full
amount of the expended funds within the time limits required by this section.
This special assessment is subject to the limitation imposed by Section 1366.
The board may, at its discretion, extend the date the payment on the special
assessment is due. Any extension shall not prevent the board from pursuing any
legal remedy to enforce the collection of an unpaid special assessment.
(d) When the decision is made to use reserve funds or to
temporarily transfer moneys from the reserve fund to pay for litigation, the
association shall notify the members of the association of that decision in the
next available mailing to all members pursuant to Section 5016 of the
Corporations Code, and of the
availability of an accounting of those expenses. Unless the governing documents
impose more stringent standards, the association shall make an accounting of
expenses related to the litigation on at least a quarterly basis. The accounting
shall be made available for inspection by members of the association at the
association's office.
(e) At least once every three years, the board of directors shall
cause to be conducted a reasonably competent and diligent visual inspection of
the accessible areas of the major components that the association is obligated
to repair, replace, restore, or maintain as part of a study of the reserve
account requirements of the common interest development, if the current
replacement value of the major components is equal to or greater than one-half
of the gross budget of the association, excluding the association's reserve
account for that period. The board shall review this study, or cause it to be
reviewed, annually and shall consider and implement necessary adjustments to the
board's analysis of the reserve account requirements as a result of that review.
The study required by this subdivision shall at a minimum include:
(1) Identification of the major components that the association is
obligated to repair, replace, restore, or maintain that, as of the
date of the study, have a remaining useful life of less than 30 years.
(2) Identification of the probable remaining useful life of the
components identified in paragraph (1) as of the date of the study.
(3) An estimate of the cost of repair, replacement, restoration, or
maintenance of the components identified in paragraph (1).
(4) An estimate of the total annual contribution necessary to
defray the cost to repair, replace, restore, or maintain the components
identified in paragraph (1) during and at the end of their useful life, after
subtracting total reserve funds as of the date of the study.
(5) A reserve funding plan that indicates how the association plans
to fund the contribution identified in paragraph (4) to meet the association's
obligation for the repair and replacement of all major components with an
expected remaining life of 30 years or less,
not including those components that the board has determined will not be
replaced or repaired. The plan shall include a schedule of the date and amount
of any change in regular or special assessments that would be needed to
sufficiently fund the reserve funding plan. The plan shall be adopted by the
board of directors at an open meeting before the membership of the association
as described in Section 1363.05. If the board of directors determines that an
assessment increase is necessary to fund the reserve funding plan, any increase
shall be approved in a separate action of the board that is consistent with the
procedure described in Section 1366.
(f) As used in this section, "reserve accounts" means both of
the following:
(1) Moneys that the association's board of directors has identified
for use to defray the future repair or replacement of, or additions to, those
major components that the association is obligated to maintain.
(2) The funds received, and not yet expended or disposed of, from
either a compensatory damage award or settlement to an association from any
person or entity for injuries to property, real or personal, arising from any
construction or design defects. These funds shall be separately itemized from
funds described in paragraph (1).
(g) As used in this section, "reserve account requirements"
means the estimated funds that the association's board of directors has
determined are required to be available at a specified point in time to repair,
replace, or restore those major components that the
association is obligated to maintain.
(h) This section does not apply to an association that does
not have a "common area" as defined in Section 1351.
1365.6. Notwithstanding any other law, and
regardless of whether an association is a corporation, as defined in Section 162
of the
Corporations Code, the provisions of
Section 310 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.
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