OVERVIEW
The Davis-Stirling Act, a set of laws that governs California’s HOAs, requires HOAs to provide its members with a whole host of annual disclosures. These mandatory annual disclosures, which must generally be provided to all homeowners anywhere from 30 to 90 days prior to the end of the HOA’s fiscal year, basically fall into two primary categories:
→ Budget-Related Disclosures; and
→ Policy-Related Disclosures.
This article provides you with a quick and easy reference to all the disclosures that their HOAs are required to provide members of the association every year.
ANNUAL BUDGET-RELATED DISCLOSURES
| Specific Disclosure | Code Section |
|---|---|
| A pro forma operating budget, showing the estimated revenue and expenses on an accrual basis | Civ. Code, § 5300(b)(1) |
| Summary of HOA reserves | Civ. Code, §§ 5300(b)(2) and 5565 |
| Summary of reserve funding plan | Civ. Code, §§ 5300(b)(3) and 5550(b)(5) |
| A statement as to whether the board has determined to defer or not undertake repairs or replacement of any major component and justification for the decision | Civ. Code, § 5300(b)(4) |
| A statement about any anticipated special assessments | Civ. Code, § 5300(b)(5) |
| A statement about how the board will fund reserves to repair or replace major components (e.g., assessments, loans, deferrals of selected repairs, etc.) | Civ. Code, § 5300(b)(6) |
| A statement outlining the procedures used to calculate reserves | Civ. Code, §§ 5300(b)(7) and 5570(b)(4) |
| A statement as to whether the association has any outstanding loans and the payment terms (e.g., interest rate being charged, amount outstanding, etc.) | Civ. Code, § 5300(b)(8) |
| A summary of the HOA’s applicable insurance policies (e.g., liability, earthquake, flood, etc.), along with the name of the insurer, policy limits, deductibles, etc. | Civ. Code, § 5300(b)(9) |
| For condominium owners, a statement describing whether the development is an FHA-approved condominium project* | Civ. Code, § 5300(b)(10) |
| For condominium owners, a statement describing whether the development is a VA-approved condominium project** | Civ. Code, § 5300(b)(11) |
| A disclosure of the document fees charged to potential purchasers | Civ. Code, §§ 5300(b)(12) and 4528 |
| An Assessment and Reserve Funding Disclosure Summary form | Civ. Code, §§ 5300(e) and 5570 |
* This is important because buyers who purchase condominiums in non-FHA-approved developments will not be able to obtain FHA-backed loans (which accounts for most home loans).
**This is important because unless an HOA is approved by the VA, eligible veterans and active duty members of the military will not be able to purchase condominiums using VA loans (or take advantage of the benefits of VA loans, such as no down payment, no private mortgage insurance, etc.).
ANNUAL POLICY-RELATED DISCLOSURES
| Specific Disclosure | Code Section |
|---|---|
| Name and address of the person designated by the HOA to receive official communications on the HOA’s behalf | Civ. Code, §§ 5310(a)(1) and 4035 |
| A statement explaining that a member may submit a request to have notices sent to up to two different specified addresses | Civ. Code, §§ 5310(a)(2) and 4040(b) |
| Notice of the location designated for the posting of general notices (e.g., agendas for meetings, etc.) | Civ. Code, §§ 5310(a)(3) and 4045(a) |
| Notice of your right to receive general notices by individual delivery | Civ. Code, §§ 5310(a)(4) and 4045(b) |
| Notice of your right to receive minutes of the open board meetings (not executive session) | Civ. Code, §§ 5310(a)(5) and 4950(b) |
| A statement regarding the HOA’s assessment collection policies | Civ. Code, §§ 5310(a)(6) and 5730 |
| A statement regarding the HOA’s default and enforcement policies (including enforcement via liens) | Civ. Code, § 5310(a)(7) |
| A statement regarding the HOA’s discipline policies, and where applicable, its fine schedule | Civ. Code, §§ 5310(a)(8) and 5850 |
| A summary of the HOA’s dispute resolution procedures (e.g., ADR) | Civ. Code, §§ 5310(a)(9), 5920, and 5965 |
| A summary of any applicable architectural guidelines | Civ. Code, §§ 5310(a)(10) and 4765(c) |
| Mailing address for overnight payment of assessments | Civ. Code, §§ 5310(a)(11) and 5655 |
| Property manager certification disclosures | Bus. & Prof. Code, § 5310(a)(1) |
CONCLUDING THOUGHT
Armed with the disclosures that your HOA is required to make to you every year, you are now in a better position to hold your HOA accountable and ensure that your HOA’s board is managing your HOA properly. Keep in mind, however, that the items listed above are just some of the mandatory disclosures that your HOA is required to provide you. There are numerous other disclosures that become mandatory upon the occurrence of certain triggers. Some of these will be covered in a future article, so keep checking this website for updates.