ARTICLE 5. Record Inspection
5200. For the purposes of this ARTICLE, the following definitions shall apply: (a) "Association records" means all of the following:
(1) Any financial document required to be provided to a member in ARTICLE 7 (commencing with Section 5300) or in Sections 5565 and 5810.
(2) Any financial document or statement required to be provided in ARTICLE 2 (commencing with Section 4525) of
(3) Interim financial statements, periodic or as compiled, containing any of the following: (A) Balance sheet.
(B) Income and expense statement. (C) Budget comparison.
(D) 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 paragraph shall be prepared in accordance with an accrual or modified accrual basis of accounting.
(4) Executed contracts not otherwise privileged under law.
(5) Written board approval of vendor or contractor proposals or invoices. (6) State and federal tax returns.
(7) Reserve account balances and records of payments made from reserve accounts.
(8) Agendas and minutes of meetings of the members, the board, and any committees appointed by the board pursuant to Section 7212 of the Corporations Code; excluding, however, minutes and other information from executive sessions of the board as described in ARTICLE 2 (commencing with Section 4900).
(9) Membership lists, including name, property address, and mailing address, but not including information for members who have opted out pursuant to Section 5220.
(10) Check registers.
(11) The governing documents.
(12) An accounting prepared pursuant to subdivision (b) of Section 5520. (13) An "enhanced association record" as defined in subdivision (b).
(b) "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.
(a) The association shall make available association records for the time periods and within the timeframes
provided in Section 5210 for inspection and copying by a member of the association, or the member's designated representative.
(b) 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) The association shall make the specified association records available for inspection and copying in the association's business office within the common interest development.
(d) 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 agreed to by the requesting member and the association.
(e) If the association and the requesting member cannot agree upon a place for inspection and copying pursuant to subdivision (d) 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 delivering copies of the specifically identified records to the member by individual delivery pursuant to Section 4040 within the timeframes set forth in subdivision (b) of Section 5210.
(f) 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.
(g) 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 an enhanced association record. If the enhanced association record includes a reimbursement request, the person submitting the reimbursement request shall be solely responsible for removing all personal identification information from the request. The association shall inform the member of the estimated costs, and the member shall agree to pay those costs, before retrieving the requested documents.
(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.
(a) Association records are subject to member inspection for the following time periods: (1) For the current fiscal year and for each of the previous two fiscal years.
(2) Notwithstanding paragraph (1), minutes of member and board meetings are subject to inspection permanently.
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 subject to inspection.
(b) When a member properly requests access to association records, access to the requested records shall be granted within the following time periods:
(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 ARTICLE 2 (commencing with Section 4525) of CHAPTER 4, ARTICLE 7 (commencing with Section 5300), Section 5565, or Section 5810, within the timeframe specified therein.
(4) Minutes of member and board meetings, within the timeframe specified in subdivision (a) of Section 4950.
(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.
(c) There shall be no liability pursuant to this ARTICLE for an association that fails to retain records for the periods specified in subdivision (a) that were created prior to January 1, 2006.
(a) Except as provided in subdivision (b), the association may withhold or redact information from the association
records if any of the following are true:
(1) 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.
(2) The release of the information is reasonably likely to lead to fraud in connection with the association.
(3) 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.
(4) The release of the information is reasonably likely to compromise the privacy of an individual member of the association.
(5) The information contains any of the following:
(A) Records of goods or services provided a la carte to individual members of the association for which the association received monetary consideration other than assessments.
(B) Records of disciplinary actions, collection activities, or payment plans of members other than the member requesting the records.
(C) 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.
(D) Minutes and other information from executive sessions of the board as described in ARTICLE 2 (commencing with Section 4900), except for executed contracts not otherwise privileged. Privileged contracts shall not include contracts for maintenance, management, or legal services.
(E) Personnel records other than the payroll records required to be provided under subdivision (b). (F) Interior architectural plans, including security features, for individual homes.
(b) 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.
(c) 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 section unless the failure to withhold or redact the information was intentional, willful, or negligent.
(d) 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.
5220. A member of the association may opt out of the sharing of that member's name, property address, and mailing
address by notifying the association in writing that the member 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.
5225. A member requesting the membership 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 Section 5235, the association shall have the burden to prove that the member would have allowed use of the information for purposes unrelated to the member's interest as a member.
(a) 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 ARTICLE for injunctive relief and for actual damages to the association caused by the violation.
(b) This ARTICLE 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 ARTICLE or to limit the right of an association to injunctive relief to stop the misuse of this information.
(c) 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 ARTICLE.
(a) A member may bring an action to enforce that 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.
(b) 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.
(c) A prevailing association may recover any costs if the court finds the action to be frivolous, unreasonable, or
(a) As applied to an association and its members, the provisions of this ARTICLE are intended to supersede the
provisions of Sections 8330 and 8333 of the Corporations Code to the extent those sections are inconsistent.
(b) Except as provided in subdivision (a), members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with ARTICLE 3 (commencing with Section
8330) of CHAPTER 13 of Part 3 of Division 2 of Title 1 of the Corporations Code.
(c) The provisions of this ARTICLE apply to any community service organization or similar entity that is related to the association, and to any nonprofit entity that provides services to a common interest development under a declaration of trust. This ARTICLE shall operate to give a member of the organization or entity a right to inspect and copy the records of that organization or entity equivalent to that granted to association members by this ARTICLE.
(d) The provisions of this ARTICLE 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 directors. Notwithstanding the foregoing, this ARTICLE 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.
ARTICLE 6. Recordkeeping
5260. To be effective, any of the following requests shall be delivered in writing to the association, pursuant to Section
(a) A request to change the member's information in the association membership list.
(b) A request to add or remove a second address for delivery of individual notices to the member, pursuant to subdivision (b) of 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
(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.
ARTICLE 7. Annual Reports
(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.
5305. 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) 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 subdivision (b) of Section 4040.
(3) The location, if any, designated for posting of a general notice, pursuant to paragraph (3) of subdivision (a) of
(4) Notice of a member's option to receive general notices by individual delivery, pursuant to subdivision (b) of
(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
(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.
(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. The summary shall include a general description of the content of the report. Instructions on how to request a complete copy of the report at no cost to the member shall be printed in at least 10-point boldface type on the first page of the summary.
(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.
ARTICLE 8. Conflict of Interest
(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.
ARTICLE 9. Managing Agent
5375. 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.
(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, 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 interest-bearing account in a bank, savings association, or credit union in this state, 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.
(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 except that the funds of various associations may be commingled as permitted pursuant to subdivision (d).
(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.
(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, unless all of the following requirements are met:
(1) The managing agent commingled the funds of various associations on or before February 26, 1990, and has obtained a written agreement with the board of each association that the managing agent will maintain a fidelity and surety bond in an amount that provides adequate protection to the associations as agreed upon by the managing agent and the board of each association.
(2) The managing agent discloses in the written agreement whether the managing agent is deriving benefits from the commingled account or the bank, credit union, or savings institution where the moneys will be on deposit.
(3) The written agreement provided pursuant to this subdivision includes, but is not limited to, the name and address of the bonding companies, the amount of the bonds, and the expiration dates of the bonds.
(4) If there are any changes in the bond coverage or the companies providing the coverage, the managing agent discloses that fact to the board of each affected association as soon as practical, but in no event more than 10 days after the change.
(5) The bonds assure the protection of the association and provide the association at least 10 days' notice prior to cancellation.
(6) Completed payments on the behalf of the association are deposited within 24 hours or the next business day and do not remain commingled for more than 10 calendar days.
(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.
5385. For the purposes of this ARTICLE, "managing agent" does not include a full-time employee of the association.
ARTICLE 10. Government Assistance
5400. 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) To assist with the identification of common interest developments, each association, whether incorporated or
unincorporated, shall submit to the Secretary of State, on a form and for a fee not to exceed thirty dollars ($30) that the Secretary of State shall prescribe, the following information concerning the association and the development that it manages:
(1) A statement that the association is formed to manage a common interest development under the Davis-Stirling
Common Interest Development Act.
(2) The name of the association.
(3) The street address of the business or corporate office of the association, if any.
(4) The street address of the association's onsite office, if different from the street address of the business or corporate office, or if there is no onsite office, the street address of the responsible officer or managing agent of the
(5) The name, address, and either the daytime telephone number or e-mail address of the president of the association, other than the address, telephone number, or e-mail address of the association's onsite office or managing agent.
(6) The name, street address, and daytime telephone number of the association's managing agent, if any.
(7) The county, and, if in an incorporated area, the city in which the development is physically located. If the boundaries of the development are physically located in more than one county, each of the counties in which it is located.
(8) If the development is in an unincorporated area, the city closest in proximity to the development. (9) The front street and nearest cross street of the physical location of the development.
(10) The type of common interest development managed by the association. (11) The number of separate interests in the development.
(b) The association shall submit the information required by this section as follows:
(1) By incorporated associations, within 90 days after the filing of its original articles of incorporation, and thereafter at the time the association files its statement of principal business activity with the Secretary of State pursuant to Section 8210 of the Corporations Code.
(2) By unincorporated associations, in July 2003, and in that same month biennially thereafter. Upon changing its status to that of a corporation, the association shall comply with the filing deadlines in paragraph (1).
(c) The association shall notify the Secretary of State of any change in the street address of the association's onsite office or of the responsible officer or managing agent of the association in the form and for a fee prescribed by the Secretary of State, within 60 days of the change.
(d) The penalty for an incorporated association's noncompliance with the initial or biennial filing requirements of this section shall be suspension of the association's rights, privileges, and powers as a corporation and monetary penalties, to the same extent and in the same manner as suspension and monetary penalties imposed pursuant to Section 8810 of the Corporations Code.
(e) The statement required by this section may be filed, notwithstanding suspension of the corporate powers, rights, and privileges under this section or under provisions of the Revenue and Taxation Code. Upon the filing of a statement under this section by a corporation that has suffered suspension under this section, the Secretary of State shall certify that fact to the Franchise Tax Board and the corporation may thereupon be relieved from suspension, unless the corporation is held in suspension by the Franchise Tax Board by reason of Section 23301, 23301.5, or 23775 of the Revenue and Taxation Code.
(f) The Secretary of State shall make the information submitted pursuant to paragraph (5) of subdivision (a)
available only for governmental purposes and only to Members of the Legislature and the Business, Transportation and Housing Agency, upon written request. All other information submitted pursuant to this section shall be subject to public inspection pursuant to the California Public Records Act (
CHAPTER 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). The information submitted pursuant to this section shall be made available for governmental or public inspection.
(g) Whenever any form is filed pursuant to this section, it supersedes any previously filed form.
(h) The Secretary of State may destroy or otherwise dispose of any form filed pursuant to this section after it has been superseded by the filing of a new form.
CHAPTER 7. FINANCES ARTICLE 1. Accounting
5500. Unless the governing documents impose more stringent standards, the board shall do all of the following:
(a) Review a current reconciliation of the association's operating accounts on at least a quarterly basis. (b) Review a current reconciliation of the association's reserve accounts on at least a quarterly basis.
(c) Review, on at least a quarterly basis, the current year's actual reserve revenues and expenses compared to the current year's budget.
(d) Review the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.
(e) Review an income and expense statement for the association's operating and reserve accounts on at least a quarterly basis.
ARTICLE 2. Use of Reserve Funds
(a) The signatures of at least two persons, who shall be directors, or one officer who is not a director and one who
is a director, shall be required for the withdrawal of moneys from the association's reserve accounts.
(b) The board 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.
(a) Notwithstanding Section 5510, 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 board meeting notice provided pursuant to Section 4920.
(b) The notice shall include the reasons the transfer is needed, some of the options for repayment, and whether a special assessment may be considered.
(c) 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.
(d) 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.
(e) 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 5605. 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.
(a) When the decision is made to use reserve funds or to temporarily transfer moneys from the reserve fund to pay
for litigation pursuant to subdivision (b) of Section 5510, the association shall provide general notice pursuant to Section
4045 of that decision, and of the availability of an accounting of those expenses.
(b) 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.
ARTICLE 3. Reserve Planning
(a) At least once every three years, the board 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.
(b) The study required by this section 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.
(a) The reserve funding plan required by Section 5550 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.
(b) The plan shall be adopted by the board at an open meeting before the membership of the association as described in ARTICLE 2 (commencing with Section 4900) of CHAPTER 6.
(c) If the board 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
5565. The summary of the association's reserves required by paragraph (2) of subdivision (b) of Section 5300 shall be based on the most recent review or study conducted pursuant to Section 5550, shall be based only on assets held in cash or cash equivalents, shall be printed in boldface type, and shall 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:
(1) The current estimate of the amount of cash reserves necessary to repair, replace, restore, or maintain the major components.
(2) The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain major components.
(3) If applicable, the amount of funds received from either a compensatory damage award or settlement to an association from any person 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 paragraph (2). Instead of complying with the requirements set forth in this paragraph, an association that is obligated to issue a review of its financial statement pursuant
to Section 5305 may include in the review a statement containing all of the information required by this paragraph.
(c) The percentage that the amount determined for purposes of paragraph (2) of subdivision (b) equals the amount determined for purposes of paragraph (1) of subdivision (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 paragraph (2) of subdivision (b) from the amount determined for purposes of paragraph (1) of subdivision (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.
(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 For the Fiscal Year Ending
(1) The 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: +---------------+----------------+---------
--------+ | | Amount per | | | | ownership | | | | interest per | | | | month or year | | | | (If assessments| | | | are variable, | | | | see | | | Date | note | | | assessment | immediately | Purpose of the | | will be due: | below): | 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?
(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? +------------------+-------------+ | | Amount per | | | ownership | | Approximate date | interest | | assessment | per month or| | will be due: | 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 5570, 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 5570 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. At the time this summary was prepared, the assumed long-term before-tax interest rate earned on reserve funds was percent per year, and the assumed long-term inflation rate to be applied to major component repair and replacement costs was percent per year.
(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 55530. 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 annual budget report or summary thereof that is delivered pursuant to Section 5300. 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.
(a) Unless the governing documents impose more stringent standards, any community service organization 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 ARTICLE 5 (commencing with Section 5200) of CHAPTER 6.
(b) 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 and Section 5300. An association may rely upon information received from a community service organization, and shall provide access to the information pursuant to the provisions of ARTICLE 5 (commencing with Section 5200) of CHAPTER 6.
CHAPTER 8. ASSESSMENTS AND ASSESSMENT COLLECTION
ARTICLE 1. Establishment and Imposition of Assessments
(a) Except as provided in Section 5605, the association shall levy regular and special assessments sufficient to
perform its obligations under the governing documents and this act.
(b) An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.
(a) Annual increases in regular assessments for any fiscal year shall not be imposed unless the board has
complied with paragraphs (1), (2), (4), (5), (6), (7), and (8) of subdivision (b) of Section 5300 with respect to that fiscal year, or has obtained the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.
(b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election.
(c) For the purposes of this section, "quorum" means more than 50 percent of the members.
5610. Section 5605 does not limit assessment increases necessary for emergency situations. For purposes of this section, an emergency situation is any one of the following:
(a) An extraordinary expense required by an order of a court.
(b) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.
(c) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the annual budget report under Section 5300. However, prior to the imposition or collection of an assessment under this subdivision, the board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment.
5615. The association shall provide individual notice pursuant to Section 4040 to the members of any increase in the regular or special assessments of the association, not less than 30 nor more than 60 days prior to the increased assessment becoming due.
(a) Regular assessments imposed or collected to perform the obligations of an association under the governing
documents or this act shall be exempt from execution by a judgment creditor of the association only to the extent necessary for the association to perform essential services, such as paying for utilities and insurance. In determining the appropriateness of an exemption, a court shall ensure that only essential services are protected under this subdivision.
(b) This exemption shall not apply to any consensual pledges, liens, or encumbrances that have been approved by a majority of a quorum of members, pursuant to Section 4070, at a member meeting or election, or to any state tax lien, or to any lien for labor or materials supplied to the common area.
(a) Except as provided in subdivision (b), notwithstanding any provision of this act or the governing documents to
the contrary, an association shall not levy assessments on separate interests within the common interest development based on the taxable value of the separate interests unless the association, on or before December 31, 2009, in accordance with its governing documents, levied assessments on those separate interests based on their taxable value, as determined by the tax assessor of the county in which the separate interests are located.
(b) An association that is responsible for paying taxes on the separate interests within the common interest development may levy that portion of assessments on separate interests that is related to the payment of taxes based on the taxable value of the separate interest, as determined by the tax assessor.
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