BILL NUMBER: AB 596 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 6, 2015
INTRODUCED BY Assembly Member Daly
FEBRUARY 24, 2015
An act to amend amend, repeal, and add
Sections 5300 and 5810 of the Civil Code, relating to common
interest developments.
LEGISLATIVE COUNSEL'S DIGEST
AB 596, as amended, 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 would, beginning January
1, 2017, 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 and as a federal Department of Veterans Affairs (VA)-approved
condominium project.
This bill would would, beginning January
1, 2017, 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 or as a
VA-approved condominium project pursuant to VA 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."
(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 remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
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) 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 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) 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 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 January 1, 2017.
SEC. 3. 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 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.
This section shall remain in effect only until January 1, 2017,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2017, deletes or extends that date.
SEC. 4. Section 5810 is added to the
Civil Code , to read:
5810. The association shall, as soon as reasonably practicable,
provide individual notice pursuant to Section 4040 to all members if
any 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.
(c) Any change in the status of the common interest development as
a federal Department of Veterans Affairs (VA)-approved condominium
project pursuant to VA guidelines, including a description of the
type of change, such as approval, cancellation, or other nonrenewal
of the approval.
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
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.