Reader Questions - Financial Reports, Are We a CID?

Hi Mr. Richardson,

I am new to the HOA board and enjoy reading your weekly column in the [paper]. I don’t think you have discussed what to do if the property manager does not give the financials we need to see. I and another other board member sent e-mails requesting [a recent] financial statement. We email and call the property manager office and get no response. What do we need to do to get this corrected.

HELP!

P.R., Rancho Cucamonga

Dear P.R.,

Boards are required to review certain financial information on at least a quarterly basis, under Civil Code 5500. Most mid-size and larger associations review financial information on a monthly basis, but even the smallest associations must have a board meeting at least quarterly to review certain financial updates.

Under this statute, boards should, at least every three months, review a current reconciliation of the association operating accounts and reserve accounts, a comparison of the operating and reserve income and expenses compared to the budget, and an income and expense statement. Association boards should regularly review further financial information, as may be recommended by the manager, lawyer or accountant, in addition to this the basic information which is required by the statute.

If the association manager is not providing the financial information to the board on a timely basis so the board can fulfill its responsibilities under Civil Code 5500, perhaps the association has the wrong manager. Discuss this in a board meeting, and the board can then decide who will contact the manager’s supervisor to obtain better performance. If that does not produce improvement, perhaps the association will need to look at other managers.

Thanks,
Kelly

Dear Kelly,

I am a member of a non-profit mutual benefit corporation- [a number of] stock holders, formed [long ago]. Our documents are minimal. We only have a constitution and bylaws. We lack CC&R’s or a registered map on file with the state.

Our attorney states we do not fall under the Davis Stirling Act. We have been considered by the state as a mobile home park. This I know is not correct but the Board insists we are not a HOA. Where can I get some clarity? Thank you for your comments.

D.N., Coulterville

Dear D.N.,

In order to be defined as a “common interest development” falling under the Davis-Stirling Common Interest Development Act, Civil Code 4200 says each owner must have a separate ownership interest of some type, mandatory membership or common area, and a recorded declaration. In your situation, if there is no recorded declaration binding all the properties together in some way, the association would not qualify as a common interest development (“CID”). That declaration may be called “covenants, conditions and restrictions” or simply “maintenance agreement” or something else, but must be an agreement of some sort, automatically binding all the properties by being filed with the County Recorder (aka “recording”).

There are many neighborhood associations called “homeowner association” which also are not under the Act because of the lack of a recorded declaration. Also, some older association covenants have built-in expiration dates. If those terminate without extension or renewal, the community ceases to be a “common interest development” and is no longer covered as such by the Act.

Best regards,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.