HOA Law Blog
By Sandra L. Gottlieb, Esq., Senior Partner and Mark Petrie, Marketing Coordinator at SwedelsonGottlieb
On August 12, 2015, Governor Brown signed AB 596, which adds the following two new required disclosures to the Annual Budget Report for California condominium associations (this does not include planned developments or other common interest developments).
(10) When the common interest development is a condominium project, a statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approved condominium project pursuant to FHA guidelines, including whether the common interest development is an FHA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
“Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”
(11) When the common interest development is a condominium project, a statement describing the status of the common interest development as a federal Department of Veterans Affairs (VA)-approved condominium project pursuant to VA guidelines, including whether the common interest development is a VA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
“Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.”
Even though this legislation is not effective until July 1, 2016, at which point the above language will be added to Section 5300(b) of the Civil Code, it may be wise to go ahead and include these disclosures in your condominium association’s next Annual Budget Report even if your fiscal year begins before July 1. That way, you won’t forget about this the next time around. Note specifically the requirements that the two statements must be in at least 10-point font, each on separate pieces of paper from the rest of the Annual Budget Report.
It’s interesting to note that the statements above include an opportunity to identify whether or not the common interest development is a condominium project, given these statements are only required for condominium projects. This may have been a mistake during the drafting of the legislation.
So, why is this so important? The legislature believes that many individuals have been excluded from the potential pool of buyers of real estate in California due to the new requirements for FHA/VA approval. By adding these disclosures, including the statement that obtaining approval may be beneficial to the members, the hope is that more boards of directors and condominium association members will be convinced that pursuing FHA/VA approval is worth the time and expense. Our understanding from our association clients who have obtained these approvals is that there is a mixed cost/benefit result, some saying the owners/sellers like the larger purchasing pool and that the process was worth pursuing; others have expressed anger that the Association, at its expense, went through a process that they believe benefits just one or two people.
If your fiscal year is the same as the calendar year, it’s time to start thinking about your annual disclosures. Does your association require assistance with complying with the Annual Budget Report and Annual Policy Statement requirements under Civil Code Sections 5300-5310? Contact Mark Petrie at mark@sghoalaw.com or 310-207-2207 x214. If you require assistance with FHA/VA approval, we can provide that service for you or you may wish to contact your local chapter of Community Associations Institute for a referral to a vendor that specializes in those services.