BILL NUMBER: AB 596 CHAPTERED
BILL TEXT
CHAPTER 184
FILED WITH SECRETARY OF STATE AUGUST 12, 2015
APPROVED BY GOVERNOR AUGUST 12, 2015
PASSED THE SENATE JULY 6, 2015
PASSED THE ASSEMBLY JULY 9, 2015
AMENDED IN SENATE JUNE 9, 2015
AMENDED IN ASSEMBLY MAY 5, 2015
AMENDED IN ASSEMBLY APRIL 6, 2015
INTRODUCED BY Assembly Member Daly
FEBRUARY 24, 2015
An act to amend, repeal, and add Section 5300 of the Civil Code,
relating to common interest developments.
LEGISLATIVE COUNSEL'S DIGEST
AB 596, 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, which includes a
condominium project, 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, beginning July 1, 2016, require the annual budget
report of a condominium project to also include a separate statement
describing the status of the common interest development as a
Federal Housing Administration (FHA)-approved condominium project and
as a federal Department of Veterans Affairs (VA)-approved
condominium project.
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."
(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.
(f) This section shall become inoperative on July 1, 2016, and, as
of January 1, 2017, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2017, deletes or
extends the dates on which it becomes inoperative and is repealed.
SEC. 2. Section 5300 is added to the Civil Code, 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) 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."
(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.
(f) This section shall become operative on July 1, 2016.