Overview

Every year, California HOAs have to send homeowners a set of documents that show how the HOA spends their money, how well it’s saving for future repairs, and the rules it follows to collect assessments, impose fines, and resolve disputes. The Davis-Stirling Act doesn’t leave the questions of whether and when to provide homeowners with these documents up to the HOA. It requires HOAs to provide them, and it sets deadlines on when those disclosures have to be sent out.

The mandatory annual disclosure of these documents serves a critical function. These financial and policy-related documents give homeowners the clearest picture they’ll get of their HOA’s finances and governance limitations. They show, for example, whether HOAs are underfunding their reserves, whether a special assessment is coming, what insurance the HOAs carry, and what the HOAs charge sellers for documents the buyers are required to receive. If an HOA fails to deliver any of the mandatory disclosures, there are legal consequences that homeowners can press to their advantage.

This Fact Sheet lists every document California HOAs have to send homeowners each year, explains what each one has to include, and tells homeowners what to do when their HOA fails to deliver.

Key Points

Civil Code 5300 and Civil Code 5310 require HOAs of any size to send homeowners two sets of disclosures every year. The annual budget report and the annual policy statement each bundle together a long list of required documents, statements, and notices, and Civil Code 5305 adds a CPA-reviewed financial statement for HOAs with gross income over $75,000. Each statute spells out what HOAs must include, and HOAs don’t get to pick and choose which items to provide. The points below group those required items by what they tell homeowners about their HOAs’ finances and policies. They also explain what homeowners can do when their HOAs miss a deadline or leave something out.

• HOAs must send homeowners an annual budget report 30 to 90 days before the end of each fiscal year. Civil Code 5300 sets that deadline regardless of what HOAs’ governing documents say. The governing documents can require HOAs to include more information than the statute demands, but never less. The budget report gives homeowners a look at their HOAs’ finances heading into the next year. Among other things, the documents included cover everything from the HOA’s day-to-day spending and the health of the reserves, to its outstanding debts, insurance coverage, and for condominium communities, the FHA and VA approval status. [For a quick-reference guide to all of the documents that your HOA is required to supply you every year, check out my article, “Mandatory Annual Disclosures that CA HOAs Must Make to Members,” where I included two helpful tables containing all of the required disclosures.]
  • The reserve disclosures in the budget report show whether HOAs are saving enough to pay for future repairs. Civil Code 5300 requires HOAs to include a summary of their reserves, and Civil Code 5565 dictates what that summary must show. It must, for example, list the replacement cost and remaining life of each major component, compare the cash HOAs should have set aside against the cash they’ve set aside, state that comparison as a percentage, and translate any shortfall into a per-unit dollar figure. HOAs must also include a summary of the reserve funding plan that they adopted, along with notice that homeowners can get the full plan on request. Then there’s a series of required statements. For example, HOAs must disclose whether they’ve decided to defer or skip repairing or replacing any major component with a remaining life of 30 years or less, and why. They must disclose whether they expect to levy one or more special assessments, and if so, the estimated amount, start date, and duration. They must also explain how they plan to fund their reserves (i.e., through assessments, borrowing, deferring repairs, or other means) and describe the procedures they used to calculate their reserve needs. And finally, Civil Code 5570 requires HOAs to attach the Assessment and Reserve Funding Disclosure Summary, a standardized form that reports the regular assessment, any scheduled assessments, how well funded the reserves are, and whether projected reserves will cover major repairs over the next 30 years.
  • The budget report also shows how HOAs plan to spend money in the coming year, what they owe, and what they charge for documents. Civil Code 5300 requires a pro forma operating budget, which estimates HOAs’ revenue and expenses for the coming year and counts them when HOAs earn or owe the money, not just when cash changes hands. HOAs must also disclose any outstanding loans with an original term of more than one year, including who the lender is, the interest rate, the amount still owed, the annual payment, and when the loan will be paid off. Finally, HOAs must include a completed copy of the “Charges for Documents Provided” form under Civil Code 4528, which lists, item by item, what HOAs charge homeowners for the documents they need when they sell their homes.
  • The budget report must summarize HOAs’ insurance, and in condominium projects, disclose whether buyers can use FHA and VA loans. Civil Code 5300 requires HOAs to summarize their property, general liability, earthquake, flood, and fidelity insurance policies, listing the insurer, the type of coverage, the policy limit, and the deductible for each. HOAs can meet part of that requirement by providing homeowners with copies of the policies’ declarations pages. The summary must also include a warning, in at least 10-point boldface type, that the summary doesn’t replace the policies themselves, that homeowners can review and copy the full policies, that HOAs’ insurance might not cover homeowners’ own property or injuries inside their homes, and that homeowners might still have to pay part or all of a deductible. In condominium projects, HOAs must also state, on separate pages, whether the Federal Housing Administration (FHA) and the federal Department of Veterans Affairs (VA) have approved the project. Those approvals affect resale values because without them, buyers face serious obstacles to using FHA-backed or VA loans to buy condos in the development.
• Without the required budget disclosures, HOAs can’t raise regular assessments unless homeowners approve the increase. Civil Code 5605 bars HOAs from imposing an annual increase in regular assessments for any fiscal year unless they’ve provided most of the budget report’s required contents for that year. Those contents include the pro forma operating budget, the reserve summary, the statement on deferred repairs, the special assessment statement, the reserve funding mechanisms, the reserve calculation procedures, and the loan disclosure. If an HOA leaves any of those required disclosures out (i.e., if it fails to include any of those items in the budget report, or fails to send the budget report at all), then the HOA cannot raise its regular assessment without the approval of a majority of a quorum of members in a vote by secret ballot (even if the increase is less than the 20% permitted under Civil Code 5605). [Keep in mind that Civil Code 5605 ties the bar to what the budget report contains, not to the deadlines for sending it.]
• HOAs with gross income over $75,000 must also send homeowners a CPA-reviewed financial statement every year. Civil Code 5305 requires those HOAs to have an accountant licensed by the California Board of Accountancy review their financial statement under generally accepted accounting principles. HOAs must deliver a copy of that review to every homeowner within 120 days after the fiscal year closes. Governing documents can impose stricter standards than Civil Code 5305 does, but never weaker ones. The review gives homeowners an outside accountant’s check on the numbers HOAs report about themselves, which the budget report alone doesn’t provide. [To learn more about the financial records your HOA has to share and how to use them, read my Fact Sheet, “California HOA Financial Transparency.”]
• HOAs must also send homeowners an annual policy statement on the same 30-to-90-day schedule as the financial disclosures described above. Civil Code 5310 requires HOA boards to distribute the annual policy statement within 30 to 90 days before the end of each fiscal year, the same window that applies to the budget report. The policy statement covers rules and procedures. It tells homeowners how to communicate with their HOAs, how their HOAs collect assessments and enforce the governing documents, and how disputes and architectural requests work. HOAs must also include any other information that their governing documents require (or that a subsequent law might require). And, of course, HOAs may include anything else they consider appropriate as well.
  • The policy statement tells homeowners how to communicate with their HOAs and how to receive notices and minutes. Civil Code 5310 requires the policy statement to give the name and address of the person HOAs have designated to receive official communications on an HOA’s behalf. That designation has teeth because when the Davis-Stirling Act requires homeowners to deliver a document to their HOAs, Civil Code 4035 directs them to send it to that person. The policy statement must also explain that homeowners can ask their HOAs to send notices to up to two different addresses, and it must identify the location, if any, where HOAs post general notices, and tell homeowners that Civil Code 4045 lets them choose to receive those notices by individual delivery instead. And finally, it must tell homeowners about their right under Civil Code 4950 to get copies of board meeting minutes, along with how and where to get them.
  • The policy statement also spells out how HOAs collect assessments and discipline homeowners. It must include the assessment and foreclosure notice that Civil Code 5730 prescribes, which explains when assessments become delinquent and when HOAs can foreclose to collect them. It must also describe HOAs’ policies for enforcing liens and pursuing other remedies when homeowners fall behind, and give a mailing address for overnight payment of assessments. And it must describe the HOA’s discipline policies, if it has any, including the schedule of fines that Civil Code 5850 requires HOAs to adopt before they can fine anyone.
  • The policy statement must also explain how HOAs resolve disputes and approve changes to homeowners’ properties. It must summarize HOAs’ internal dispute resolution procedures and the pre-lawsuit alternative dispute resolution requirements. Civil Code 5965 requires that summary to warn homeowners that failing to follow those alternative dispute resolution requirements can cost them the right to sue their HOAs or their neighbors over enforcement of the governing documents. When governing documents require HOA approval before homeowners make physical changes to their properties, the policy statement must also describe which changes need approval and include a copy of the procedure the HOA uses to approve or deny them.
• If your HOA’s annual disclosures don’t arrive on time, or arrive incomplete, put your HOA on notice in writing. Find out when your HOA’s fiscal year ends because both the budget report and the policy statement are due 30 to 90 days before that date. If either one hasn’t arrived by then, send your HOA a written demand for it. If and when the documents do arrive, check them against the items listed above (or in the tables that I included in my article, which I linked to above) and send a written demand for anything missing. If your HOA raises regular assessments without sending a complete budget report, pay the increased amount anyway, then challenge the legality of the increase in writing and demand a refund. Withholding payment exposes you to late charges, interest, collection costs, and attorneys’ fees, and it can even lead to a lien on your home, or eventually, foreclosure.
  • One required disclosure goes to HOA boards rather than homeowners, but homeowners should know it exists. Business and Professions Code 11504 requires management companies to disclose to HOA boards every year whether their managers are certified, which professional organization certified them, where their primary office is, and whether they hold an active real estate license. Before entering into or renewing a management contract, a management company must also tell the HOA whether its fidelity insurance covers the current year’s operating and reserve funds that it’s contracting to manage. Civil Code 5375 requires a separate disclosure before a management company signs a management agreement. That disclosure identifies who owns the company and what licenses and certifications its owners hold. It also reveals any businesses in which the company holds an ownership interest or profit-sharing arrangement, and whether it receives referral fees from the companies that prepare the documents homeowners buy when they sell. [Unfortunately, homeowners don’t have a right under Civil Code 5200 to force HOAs to turn these disclosures over. Homeowners can and should ask for them, but they can’t enforce that request until they’re in a lawsuit, where the Civil Discovery Act’s much broader rules let them demand the disclosures.]
• If your HOA isn’t sending the annual disclosures the Davis-Stirling Act requires, call the HOA attorneys at MBK Chapman. The HOA attorneys at MBK Chapman know exactly what the Davis-Stirling Act requires your HOA to disclose every year, and they know how to use missing or incomplete disclosures to challenge improper assessment increases and force HOAs to comply. Whether your HOA skipped its budget report, left out required reserve or insurance information, or never sent a policy statement at all, call MBK Chapman today.

California HOAs spend homeowners’ money all year long, and the annual disclosures are when the Davis-Stirling Act forces them to put the numbers, and the rules, in writing. Every one of those disclosures is mandatory, and skipping any of them hands homeowners leverage. Scan every page when it arrives, and pay just as much attention to what’s missing because a missing budget disclosure can stop an assessment increase cold.

FAQs

About Michael Kushner

Michael Kushner is a California attorney with over 30 years of experience representing homeowners in disputes with their HOAs. He is widely regarded as California’s leading homeowner-side HOA attorney, and has built one of the state’s most prominent law practices dedicated to holding HOAs accountable under the Davis-Stirling Act and California law.

In addition to his law firm’s work, Michael is a recognized lecturer, author, and the host of the hit HOA HELL podcast, where he provides homeowners living in HOA-governed communities with clear, practical strategies for dealing with bad HOAs. He’s also the author of the best-selling book, HOA HELL | California Homeowners’ Definitive Guide to Beating Bad HOAs, which has become a go-to resource for both homeowners seeking real-world solutions to their HOA disputes, as well as those good HOA board members who are interested in doing a good job.

About MBK Chapman Fact Sheets

Homeowners searching for answers online will often come across articles that appear authoritative, but are actually written as search-engine marketing content rather than by an experienced HOA lawyer. These pieces tend to prioritize keyword density over clarity, accuracy, or legal context, which often leaves homeowners more confused than informed.

At MBK Chapman, our Fact Sheets are part of our HOA Law Library and are written by Michael Kushner, an HOA lawyer with decades of hands-on experience representing California homeowners. In fact, Michael Kushner is the HOA lawyer who pioneered the systems and strategies used by some of California’s most successful homeowner-side HOA law firms.

Each Fact Sheet is deliberately concise, statute-based, and designed as a quick-reference guide to help homeowners understand key HOA laws and enforcement rules at a glance.

AND DON’T FORGET TO TUNE INTO MY PODCAST, HOA HELL

YOU CAN ALSO ORDER MY GROUNDBREAKING BOOK

HOA HELL | California Homeowners’ Definitive Guide to Beating Bad HOAs

Amazon  |  Barnes & Noble