CALIFORNIA CIVIL CODE - DAVIS STERLING ACT

• Compliance Procedures

A. Initiating Party: The party pursing the dispute, prior to filing any lawsuit, must serve on the other party a Request for Resolution including the following information and language:

1. A brief description of the dispute;
2. A request that the matter be submitted to ADR;
3. A statement that the party receiving the request for Resolution (Responding Party is required to respond thereto within thirty (30) days of receipt or it will be Deemed Rejected.
4. If the responding party is the owner of a separate interest, a copy of Section 5930 of the Civil Code. With respect to the method of service, the statute provides that the Request for Resolution may be served either by personal delivery or by leaving a copy of the request at the responding party's home or business and thereafter mailing a copy of the request through first class postage pre-paid mail.

B. Responding Party: Upon receipt of a Request for Resolution the responding party, whether the Association or Owner has thirty (30) days in which to either accept or reject the request. In the event no such response is received, the request is deemed rejected.

C. General Procedural: Where the request is accepted, the parties must complete the ADR within ninety (90) days of receipt of the acceptance. However, the parties can stipulate in writing to extend this period.

In the event that a lawsuit is eventually commenced, the party filing must also file a certificate concerning the completion of the ADR. Where a lawsuit is commenced and ADR has not occurred, the filing party should file a certificate as to why ADR did not take place.

• Consequences For Failure To Comply With The Law

In the event the initiating party proceeds to Court without complying with the provisions of this Section, the responding party can move the Court for an order of dismissal. As a result, it is important to seek independent counsel in the event that you, as an owner have further questions.

Where a trial does go forward by virtue of the responding party's refusal to participate in dispute resolution, the Court may take such failure into consideration when ruling on payment of attorney's fees and costs.

"Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 5930 of the Civil Code may result in the loss of the member's right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law."

The preceding summary shall be included in the annual policy statement prepared pursuant to Section 5310

---

ARCHITECTURAL CHANGES

REGULATIONS

(Civil Code Sections 4760-4765)

4760. (a) Subject to the governing documents and applicable law, a member may do the following:

(1) Make any improvement or alteration within the boundaries of the member's separate interest that does not impair the structural integrity or mechanical systems or lessen the support of any portions of the common interest development.

(2) Modify the member's separate interest, at the member's expense, to facilitate access for persons who are blind, visually handicapped, deaf, or physically disabled, or to alter conditions which could be hazardous to these persons. These modifications may also include modifications of the route from the public way to the door of the separate interest for the purposes of this paragraph if the separate interest is on the ground floor or already accessible by an existing ramp or elevator. The right granted by this paragraph is subject to the following conditions:

(A) The modifications shall be consistent with applicable building code requirements.

(B) The modifications shall be consistent with the intent of otherwise applicable provisions of the governing documents pertaining to safety or aesthetics.

(C) Modifications external to the dwelling shall not prevent reasonable passage by other residents, and shall be removed by the member when the separate interest is no longer occupied by persons requiring those modifications who are blind, visually handicapped, deaf, or physically disabled.

(D) Any member who intends to modify a separate interest pursuant to this paragraph shall submit plans and specifications to the association for review to determine whether the modifications will comply with the provisions of this paragraph. The association shall not deny approval of the proposed modifications under this paragraph without good cause.

(b) Any change in the exterior appearance of a separate interest shall be in accordance with the governing documents and applicable provisions of law.

4765. (a) This section applies if the governing documents require association approval before a member may make a physical change to the member's separate interest or to the common area. In reviewing and approving or disapproving a proposed change, the association shall satisfy the following requirements:

(1) The association shall provide a fair, reasonable, and expeditious procedure for making its decision. The procedure shall be included in the association's governing documents. The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for response to an application or a request for reconsideration by the board.

(2) A decision on a proposed change shall be made in good faith and may not be unreasonable, arbitrary, or capricious.

(3) Notwithstanding a contrary provision of the governing documents, a decision on a proposed change may not violate any governing provision of law, including, but not limited to, the Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code), or a building code or other applicable law governing land use or public safety.

(4) A decision on a proposed change shall be in writing. If a proposed change is disapproved, the written decision shall include both an explanation of why the proposed change is disapproved and a description of the procedure for reconsideration of the decision by

the board.

(5) If a proposed change is disapproved, the applicant is entitled to reconsideration by the board, at an open meeting of the board. This paragraph does not require reconsideration of a decision that is made by the board or a body that has the same membership as the board, at a meeting that satisfies the requirements of Article 2 (commencing with Section 4900) of Chapter 6. Reconsideration by the board does not constitute dispute resolution within the meaning of Section 5905.

(b) Nothing in this section authorizes a physical change to the common area in a manner that is inconsistent with an association's governing documents, unless the change is required by law.

(c) An association shall annually provide its members with notice of any requirements for association approval of physical changes to property. The notice shall describe the types of changes that require association approval and shall include a copy of the procedure used to review and approve or disapprove a proposed change.

---

BUDGET PRO FORMA

OPERATING REPORT

(Civil Code §5300(b) (1))

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.

---

COLLECTION POLICY

California Civil Code

(CC §5310(a) (6), 5650, 5730)

The effective and prompt collection of assessments is essential to the running of Associations. Only through the collection of these assessments can the property be maintained and the value of our property assured. The policies and practices of the Homeowners Association with regard to the collection of delinquent assessments are as follows:

1. Assessments are due on the first (1^st) day of each month and are delinquent if not received by the fifteenth (15^th) day of each month unless the governing documents provide for a longer time. The failure to pay association assessments may result in the loss of an owner's property through foreclosure. If a special assessment is necessary, homeowners will be notified of the due date of said assessment.

• In the event an assessment is not received within fifteen (15) days after it is due, homeowners will be required to pay to the Association a late charge in an amount equal to ten percent (10%) of the delinquent balance or $10.00, whichever is greater. In addition, interest at the rate of twelve percent (12%) per annum may be added to your account.

1. If the payment due is not received within thirty (30) days after its original due date, a reminder will be sent to the owner.

• If payment is not received within sixty (60) days after the original due date, another reminder will be sent to the owner. This letter will be sent by certified mail and will state that a Notice of Assessment ("lien") will be recorded if the payment is not received.

1. At least 30 days prior to recording a lien on an owner's separate interest, the association must provide the owner of record with certain documents by certified mail, including a description of its collection and lien enforcement procedures and the method of calculating the amount. It must also provide an itemized statement of the charges owed by the owner. An owner has a right to review the association's records to verify the debt. (Section 5660 of the Civil Code)
2.  
3. If the payment is not received within sixty (60) days after its original due date, a lien may be recorded with the county recorder's office. Within ten (10) days after the lien is recorded, the lien will be sent to the owner by certified mail along with a letter stating that if full payment is not made to the Association within thirty (30) days from the date the letter was sent, a Notice of default will be recorded against the property to commence the foreclosure proceeding.

• 6. Once the foreclosure procedure begins, it will continue until the foreclosure sale actually takes place, unless the total amount due to the Association, including all delinquent maintenance assessments, special assessments, late charges, lien fees, trustee's fees, attorney's fees, and any other charges against the property are paid in full.
•  
• In the event a senior lien holder forecloses on the property, the association will proceed to obtain a personal money judgment against the owner for all amounts which are due and owing to the Association in connection with the unit.

1. The Board of Directors reserves its rights, on behalf of the Association, to collect delinquent assessments through Small Claims Court, or any other remedy available at law, or in equity.

---

Emergency Meeting Via Electronic Transmission (Civil Code §4923)

Written consents under certain circumstances may be transmitted electronically. 4910.  (a) The board shall not take action on any item of business outside of a board meeting. (b) (1) Notwithstanding Section 7211 of the Corporations Code, the board shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail, except as specified in paragraph (2). (2) Electronic transmissions may be used as a method of conducting an emergency board meeting if all directors, individually or collectively, consent in writing to that action, and if the written consent or consents are filed with the minutes of the board meeting.These written consents may be transmitted electronically.

---

FINANCIAL REPORTDISCLOSURE(Civil Code §5305) 

California Corporation Code Section 8321 requires the Board of Directors to notify all Members of the Association of their right to receive the most recent Annual Financial Report of the Association and to know the place where the names and address of current members is located.

California Civil Code Section 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.

The Corporation Code requires the Annual Financial Report shall contain the Balance Sheet, Income Statement, and Statement of Changes in Financial Position of the Association. The Association's CC&Rs requires the Annual Financial Report, audited by an independent public accountant, to be distributed within 90 days after the close of the fiscal year.

A copy of the most recent Annual Financial Report may be received by contacting California Association of Homeowners Associations, Inc. at (909) 931-7552 or by sending a written request to:

1452 W 9TH ST "E"

Upland, CA 91786

Or by fax at 909-931-0591

---

LIABILITY INSURANCE

DISCLOSURE

California Civil Code Section 5300 (9)

California Civil Code Section 5300 (9) requires that the Association send an insurance disclosure statement to each of its members not less than thirty days (30) days nor more than preceding the beginning of the association's fiscal year. Accordingly, we are providing you the following information in compliance with the Civil Code.

Section 5300(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 thepolicies 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."

---

Internal Dispute ResolutionDisclosure(Civil Code §5310(a) (9), 5920, 5965)5965.  (a) An association shall annually provide its members a summary of the provisions of this article that specifically references this article. The summary shall include the followinglanguage: "Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 5930 of the Civil Code may result in the loss of the member's right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law."(b) The summary shall be included in the annual policy statement prepared pursuant to Section 5310.

---

Minutes DisclosureOpen Session Board Meetings Executive Session Board Meetings Open Meeting Act

(Civil Code §4900-4950)

California Civil Code Section 4950 requires that the Association notify all owners of their rights to have copies of the minutes of meetings of the Associations Board of Directors.

4920.  (a) Except as provided in subdivision (b), the association shall give notice of the time and place of a board meeting at least four days before the meeting. (b) (1) If a board meeting is an emergency meeting held pursuant to Section 4923, the association is not required to give notice of the time and place of the meeting. (2) If a nonemergency board meeting is held solely in executive session, the association shall give notice of the time and place of the meeting at least two days prior to the meeting. (3) If the association's governing documents require a longer period of notice than is required by this section, the association shall comply with the period stated in its governing documents. For the purposes of this paragraph, a governing document provision does not apply to a notice of an emergency meeting or a meeting held solely in executive session unless it specifically states that it applies to those types of meetings. (c) Notice of a board meeting shall be given by general delivery pursuant to Section 4045. (d) Notice of a board meeting shall contain the agenda for the meeting.4923.  An emergency board meeting may be called by the president of the association, or by any two directors other than the president, if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice as required by Section 4920.

4950. (a) The minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary of the minutes, of any board meeting, other than an executive session, shall be available to members within 30 days of the meeting. The minutes, proposed minutes, or summary minutes shall be distributed to any member upon request and upon reimbursement of the association's costs for making that distribution.

(b) The annual policy statement, prepared pursuant to Section 5310, shall inform the members of their right to obtain copies of board meeting minutes and of how and where to do so.

---

Reserve Summary Disclosure

(Civil Code §5300(b) (2), 5565)

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.

---

Rule Change

Disclosure

(Civil Code §4360 (a, c)

4360.  (a) The board shall provide general notice pursuant to Section 4045 of a proposed rule change at least 30 days before making the rule change. The notice shall include the text of the proposed rule change and a description of the purpose and effect of the proposed rule change. Notice is not required under this subdivision if the board determines that an immediate rule change is necessary to address an imminent threat to public health or safety or imminent risk of substantial economic loss to the association. (b) A decision on a proposed rule change shall be made at a board meeting, after consideration of any comments made by association members.(c) As soon as possible after making a rule change, but not more than 15 days after making the rule change, the board shall deliver general notice pursuant to Section 4045 of the rule change. If the rule change was an emergency rule change made under subdivision (d) the notice shall include the text of the rule change, a description of the purpose and effect of the rule change, and the date that the rule change expires. (d) If the board determines that an immediate rule change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association, it may make an emergency rule change, and no notice is required, as specified in subdivision (a). An emergency rule change is effective for 120 days, unless the rule change provides for a shorter effective period. A rule change made under this subdivision may not be readopted under this subdivision.

---

Transmission of Documents by E-mail

Disclosure

(Civil Code §440, 4045)

4040.  (a) If a provision of this act requires that an association deliver a document by "individual delivery" or "individual notice," the document shall be delivered by one of the following methods: (1) First-class mail, postage prepaid, registered or certified mail, express mail, or overnight delivery by an express service carrier. The document shall be addressed to the recipient at theaddress last shown on the books of the association. (2) E-mail, facsimile, or other electronic means, if the recipient has consented, in writing, to that method of delivery. The consent may be revoked, in writing, by the recipient.(b) Upon receipt of a request by a member, pursuant to Section 5260, identifying a secondary address for delivery of notices of the following types, the association shall deliver an additional copy of those notices to the secondary address identified in the request: (1) The documents to be delivered to the member pursuant to Article 7 (commencing with Section 5300) of Chapter 6. (2) The documents to be delivered to the member pursuant to Article 2 (commencing with Section 5650) of Chapter 8, and Section 5710.(c) For the purposes of this section, an unrecorded provision of the governing documents providing for a particular method of delivery does not constitute agreement by a member to that method of delivery.4045.  (a) If a provision of this act requires "general delivery" or "general notice," the document shall be provided by one or more of the following methods: (1) Any method provided for delivery of an individual notice pursuant to Section 4040. (2) Inclusion in a billing statement, newsletter, or other document that is delivered by one of the methods provided in this section. (3) Posting the printed document in a prominent location that is accessible to all members, if the location has been designated for the posting of general notices by the association in the annual policy statement, prepared pursuant to Section 5310. (4) If the association broadcasts television programming for the purpose of distributing information on association business to its members, by inclusion in the programming.(b) Notwithstanding subdivision (a), if a member requests to receive general notices by individual delivery, all general notices to that member, given under this section, shall be delivered pursuant to Section 4040. The option provided in this subdivision shall be described in the annual policy statement, prepared pursuant to Section 5310.