Bill Text: CA AB596 | 2015-2016 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Common interest developments: annual budget report.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2015-08-12 - Chaptered by Secretary of State - Chapter 184, Statutes of 2015. [AB596 Detail]

Download: California-2015-AB596-Introduced.html

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BILL NUMBER: AB 596	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Daly

                        FEBRUARY 24, 2015

   An act to amend Sections 5300 and 5810 of the Civil Code, relating
to common interest developments.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 596, as introduced, 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 development 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 require the annual budget report to also include a
statement describing the status of the common interest development
as a Federal Housing Administration (FHA)-approved condominium
project.
   This bill would also require the association of a common interest
development to provide a notice to its members if there is any change
in the status of the common interest development as an FHA-approved
condominium project pursuant to FHA guidelines.
   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 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) 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.

   (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.
  SEC. 2.  Section 5810 of the Civil Code is amended to read:
   5810.  The association shall, as soon as reasonably practicable,
provide individual notice pursuant to Section 4040 to all members if
 any   either of the following occur: 
    (a)     Any  of the policies described
in the annual budget report pursuant to Section 5300 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 the annual budget report pursuant to Section
5300, the association shall immediately notify its members if
replacement coverage will not be in effect by the date the existing
coverage will lapse. 
   (b) Any change in the status of the common interest development as
a Federal Housing Administration (FHA)-approved condominium project
pursuant to FHA guidelines, including a description of the type of
change, such as the approval, cancellation, or other nonrenewal of
the approval.