Posts for Tag : Annual Policy Statement



By Hanh Pham, Esq., Law Offices of Ann Rankin

As their fiscal year’s end approaches, some associations are asking whether they need to update their budgets and annual disclosures to comply with AB 805.


Yes!  Associations and managers should learn the new formats of the “Annual Budget Report” under new California Civil Code Section 5300 and the “Annual Policy Statement” under new California Civil Code Section 5310’s and use them to insure full compliance with the new law.


AB 805 restated and re-codified the Davis-Stirling Common Interest Development Act (“Act”).  The Act took effect on January 1, 2013 but becomes enforceable on January 1, 2014, which gives managers, boards, and attorneys one year to familiarize themselves with the reorganized Act.


Many clients are also concerned that they need to overhaul their governing documents to comply with AB 805.  The law does not require associations to update their governing documents.  However, if they do not, existing and future boards of directors will lack guidance as to what the law requires and may rely on superseded provisions.  Since the new law mostly affects corporate matters such as notice, delivery of documents, the budget, and disclosure requirements, the association can amend those provisions in their bylaws and declaration of covenants, conditions and restrictions to incorporate the new requirements.  Alternatively, the new law permits associations to update their governing documents by a board vote to correct the old Civil Code references and insert the new ones.  Amendments are more critical for self-managed associations who have board members that are unknowledgeable about changes in the law and need more guidance.


Regardless of whether you amend your governing documents, your association should comply with AB 805 by distributing an annual budget report and annual policy statement 30 to 90 days before the end of its fiscal year, as summarized below:


A. Annual Budget Report:  AB 805 requires associations to provide an annual budget report, which includes the following:


  1. A pro forma operating budget;
  2. An Assessment and Reserve Funding Disclosure Summary form;
  3. A statement as to whether the association has any outstanding loans;
  4. Certificates of insurance for property and liability coverage and an insurance summary containing, 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.”


Any member who wishes to obtain a complete copy of the reserve study, reserve study plan, or insurance policies must provide a written request to the association or its management company. 


When preparing the documents in the annual budget report, your association should request that its budget preparer and insurance adjuster replace all references to former Civil Code Section 1365 with Civil Code Section 5300, to conform to AB 805.


B. Annual Policy Statement:  AB 805 also requires associations to provide members with important information about the association’s policies, including the following:


  1. The name and address of the person designated to receive official communications to the association;
  2. Each member’s right to submit a written request to have the association’s documents sent to two different specified addresses;
  3. Its location for posting notices of member and board meetings;
  4. Each member’s right to submit a written request that the association’s general notice be sent by individual delivery;
  5. Each member’s right to receive copies of the board’s meeting minutes (other than executive sessions) within 30 days of the meeting by sending a written request to the person identified in paragraph (1) above;
  6. Its statement of assessment collection policies (this item may be satisfied by attaching a copy of an updated Delinquent Assessment Collection Policy, which refers to the new Civil Code sections under AB 805);
  7. Its statement describing its policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments (this item may be satisfied by attaching a copy of an updated Delinquent Assessment Collection Policy);
  8. Fine schedule (if the board has not adopted a fine schedule, it should prepare one and mail it to the members for a 30-day comment period before adopting it at a duly-noticed board meeting and attaching it to the annual policy statement);
  9. A summary of its dispute resolution procedures, which should refer to the new Civil Code Sections under AB 805;
  10. A summary of the Association’s requirements for approving physical changes to a separate interest or portion of the common interest development (this item may be satisfied by citing relevant provisions of the declaration of covenants, conditions and restrictions and rules regarding alterations requiring architectural approval and the architectural review procedures); and
  11. The mailing address for overnight payment of assessments.


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