SECTION 1357.100-1357.150

SECTION 1358-1362 

SECTION 1363

SECTION 1357.100-1357.150

 1357.100.  As used in this article:

   (a) "Operating rule" means a regulation adopted by the board of directors of the association that applies generally to the management and operation of the common interest development or the conduct of the business and affairs of the association.

   (b) "Rule change" means the adoption, amendment, or repeal of an operating rule by the board of directors of the association.

 1357.110.  An operating rule is valid and enforceable only if all of the following requirements are satisfied:

   (a) The rule is in writing.

   (b) The rule is within the authority of the board of directors of the association conferred by law or by the declaration, articles of incorporation or association, or bylaws of the association.

   (c) The rule is not inconsistent with governing law and the declaration, articles of incorporation or association, and bylaws of the association.

   (d) The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.

   (e) The rule is reasonable.

 1357.120.  (a) Sections 1357.130 and 1357.140 only apply to an operating rule that relates to one or more of the following subjects:

    (1) Use of the common area or of an exclusive use common area.

   (2) Use of a separate interest, including any aesthetic or architectural standards that govern alteration of a separate interest.

   (3) Member discipline, including any schedule of monetary penalties for violation of the governing documents and any procedure for the imposition of penalties.

   (4) Any standards for delinquent assessment payment plans.

   (5) Any procedures adopted by the association for resolution of disputes.

   (6) Any procedures for reviewing and approving or disapproving a proposed physical change to a member's separate interest or to the common area.

   (b) Sections 1357.130 and 1357.140 do not apply to the following actions by the board of directors of an association:

   (1) A decision regarding maintenance of the common area.

   (2) A decision on a specific matter that is not intended to apply generally.

   (3) A decision setting the amount of a regular or special assessment.

   (4) A rule change that is required by law, if the board of directors has no discretion as to the substantive effect of the rule change.

   (5) Issuance of a document that merely repeats existing law or the governing documents.

 
1357.130.  (a) The board of directors shall provide written notice of a proposed rule change to the members 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 of directors 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 meeting of the board of directors, 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 of directors shall deliver notice of the rule change to every association member. 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 of directors 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.

   (e) A notice required by this section is subject to Section 1350.7.

 
1357.140.  (a) Members of an association owning 5 percent or more of the separate interests may call a special meeting of the members to reverse a rule change.

   (b) A special meeting of the members may be called by delivering a written request to the president or secretary of the board of directors, after which the board shall deliver notice of the meeting to the association's members and hold the meeting in conformity with Section 7511 of the Corporations Code.  The written request may not be delivered more than 30 days after the members of the association are notified of the rule change.  Members are deemed to have been notified of a rule change on delivery of notice of the rule change, or on enforcement of the resulting rule, whichever is sooner.  For the purposes of Section 8330 of the Corporations Code, collection of signatures to call a special meeting under this section is a purpose reasonably related to the interests of the members of the association.  A member request to copy or inspect the membership list solely for that purpose may not be denied on the grounds that the purpose is not reasonably related to the member's interests as a member.

   (c) The rule change may be reversed by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present (which affirmative votes also constitute a majority of the required quorum), or if the declaration or bylaws require a greater proportion, by the affirmative vote or written ballot of the proportion required.  In lieu of calling the meeting described in this section, the board may distribute a written ballot to every member of the association in conformity with the requirements of Section 7513 of the Corporations Code.

   (d) Unless otherwise provided in the declaration or bylaws, for the purposes of this section, a member may cast one vote per separate interest owned.

   (e) A meeting called under this section is governed by Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of, and Sections 7612 and 7613 of, the Corporations Code.

   (f) A rule change reversed under this section may not be readopted for one year after the date of the meeting reversing the rule change.  Nothing in this section precludes the board of directors from adopting a different rule on the same subject as the rule change that has been reversed.

   (g) As soon as possible after the close of voting, but not more than 15 days after the close of voting, the board of directors shall provide notice of the results of a member vote held pursuant to this section to every association member.  Delivery of notice under this subdivision is subject to Section 1350.7.

   (h) This section does not apply to an emergency rule change made under subdivision (d) of  Section 1357.130.

 
1357.150.  (a) This article applies to a rule change commenced on or after January 1, 2004.

   (b) Nothing in this article affects the validity of a rule change commenced before January 1, 2004.

   (c) For the purposes of this section, a rule change is commenced when the board of directors of the association takes its first official action leading to adoption of the rule change.

 SECTION 1358-1362

 1358.  (a) In a community apartment project, any conveyance, judicial sale, or other voluntary or involuntary transfer of the separate interest includes the undivided interest in the community apartment project.  Any conveyance, judicial sale, or other voluntary or involuntary transfer of the owner's entire estate also includes the owner's membership interest in the association.

   (b) In a condominium project the common areas are not subject to partition, except as provided in Section 1359.  Any conveyance, judicial sale, or other voluntary or involuntary transfer of the separate interest includes the undivided interest in the common areas.  Any  conveyance, judicial sale, or other voluntary or involuntary transfer of the owner's entire estate also includes the owner's membership interest in the association.

   (c) In a planned development, any conveyance, judicial sale, or other voluntary or involuntary transfer of the separate interest includes the undivided interest in the common areas, if any exist. Any  conveyance, judicial sale, or other voluntary or involuntary transfer of the owner's entire estate also includes the owner's membership interest in the association.

   (d) In a stock cooperative, any conveyance, judicial sale, or other voluntary or involuntary transfer of the separate interest includes the ownership interest in the corporation, however evidenced.  Any  conveyance, judicial sale, or other voluntary or involuntary transfer of the owner's entire estate also includes the owner's membership interest in the association.   Nothing in this section prohibits the transfer of exclusive useareas, independent of any other interest in a common interest subdivision, if authorization to separately transfer exclusive use areas is expressly stated in the declaration and the transfer occurs in accordance with the terms of the declaration. Any restrictions upon the severability of the component interests in real property which are contained in the declaration shall not be deemed conditions repugnant to the interest created within the meaning of Section 711 of the Civil Code.  However, these restrictions shall not extend beyond the period in which the right to partition a project is suspended under Section 1359.

 
1359.  (a) Except as provided in this section, the common areas in a condominium project shall remain undivided, and there shall be no judicial partition thereof.  Nothing in this section shall be deemed to prohibit partition of a cotenancy in a condominium.

   (b) The owner of a separate interest in a condominium project may maintain a partition action as to the entire project as if the owners of all of the separate interests in the project were tenants in common in the entire project in the same proportion as their interests in the common areas.  The court shall order partition under this subdivision only by sale of the entire condominium project and only upon a showing of one of the following:

   (1) More than three years before the filing of the action, the condominium project was damaged or destroyed, so that a material part was rendered unfit for its prior use, and the condominium project has not been rebuilt or repaired substantially to its state prior to the damage or destruction.

   (2) Three-fourths or more of the project is destroyed or substantially damaged and owners of separate interests holding in the aggregate more than a 50-percent interest in the common areas oppose repair or restoration of the project.

   (3) The project has been in existence more than 50 years, is obsolete and uneconomic, and owners of separate interests holding in the aggregate more than a 50-percent interest in the common area oppose repair or restoration of the project.

   (4) The conditions for such a sale, set forth in the declaration, have been met.

 
1360.  (a) Subject to the provisions of the governing documents and other applicable provisions of law, if the boundaries of the separate interest are contained within a building, the owner of the separate interest may do the following:

   (1) Make any improvements or alterations within the boundaries of his or her separate interest that do not impair the structural integrity or mechanical systems or lessen the support of any portions of the common interest development.

   (2) Modify a unit in a condominium project, at the owner'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 unit for the purposes of this paragraph if the unit 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 owner when the unit is no longer occupied by persons requiring those modifications who are blind, visually handicapped, deaf, or physically disabled.

   (D) Any owner who intends to modify a unit pursuant to this paragraph shall submit his or her plans and specifications to the association of the condominium project 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.

 
1360.5.  (a) No governing documents shall prohibit the owner of a separate interest within a common interest development from keeping at least one pet within the common interest development, subject to reasonable rules and regulations of the association.  This section may not be construed to affect any other rights provided by law to an owner of a separate interest to keep a pet within the development.

   (b) For purposes of this section, "pet" means any domesticated bird, cat, dog, aquatic animal kept within an aquarium, or other animal as agreed to between the association and the homeowner.

   (c) If the association implements a rule or regulation restricting the number of pets an owner may keep, the new rule or regulation shall not apply to prohibit an owner from continuing to keep any pet that the owner currently keeps in his or her separate interest if the pet otherwise conforms with the previous rules or regulations relating to pets.

   (d) For the purposes of this section, "governing documents" shall include, but are not limited to, the conditions, covenants, and restrictions of the common interest development, and the bylaws, rules, and regulations of the association.

   (e) This section shall become operative on January 1, 2001, and shall only apply to governing documents entered into, amended, or otherwise modified on or after that date.

 
1361.  Unless the declaration otherwise provides:

   (a) In a community apartment project and condominium project, and in those planned developments with common areas owned in common by the owners of the separate interests, there are appurtenant to each separate interest nonexclusive rights of ingress, egress, and support, if necessary, through the common areas.  The common areas are subject to these rights.

   (b) In a stock cooperative, and in a planned development with common areas owned by the association, there is an easement for ingress, egress, and support, if necessary, appurtenant to each separate interest.  The common areas are subject to these easements.

 
1361.5.  Except as otherwise provided in law, an order of the court, or an order pursuant to a final and binding arbitration decision, an association may not deny an owner or occupant physical access to his or her separate interest, either by restricting access through the common areas to the owner's separate interest, or by restricting access solely to the owner's separate interest.

 
1362.  Unless the declaration otherwise provides, in a condominium project, or in a planned development in which the common areas are owned by the owners of the separate interests, the common areas are owned as tenants in common, in equal shares, one for each unit or lot.

 
SECTION 1363

1363.  (a) A common interest development shall be managed by an association which may be incorporated or unincorporated.  The association may be referred to as a community association.

   (b) An association, whether incorporated or unincorporated, shall prepare a budget pursuant to Section 1365 and disclose information, if requested, in accordance with Section 1368.

   (c) Unless the governing documents provide otherwise, and regardless of whether the association is incorporated or unincorporated, the association may exercise the powers granted to a nonprofit mutual benefit corporation, as enumerated in Section 7140 of the Corporations Code, except that an unincorporated association may not adopt or use a corporate seal or issue membership certificates in accordance with Section 7313 of the Corporations Code. The association, whether incorporated or unincorporated, may exercise the powers granted to an association by Section 383 of the Code of Civil Procedure and the powers granted to the association in this title.

   (d) Meetings of the membership of the association shall be conducted in accordance with a recognized system of parliamentary procedure or any parliamentary procedures the association may adopt.

   (e) Notwithstanding any other provision of law, notice of meetings of the members shall specify those matters the board intends to present for action by the members, but, except as otherwise provided by law, any proper matter may be presented at the meeting for action.

   (f) Members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with Article 3 (commencing with Section 8330) of Chapter 13 of Part 3 of Division 2 of Title 1 of the Corporations Code.  The members of the association shall have the same access to the operating rules of the association as they have to the accounting books and records of the association.

   (g) If an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for a violation of the governing documents or rules of the association, including any monetary penalty relating to the activities of a guest or invitee of a member, the board of directors shall adopt and distribute to each member, by personal delivery or first-class mail, a schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with authorization for member discipline contained in the governing documents.  The board of directors shall not be required to distribute any additional schedules of monetary penalties unless there are changes from the schedule that was adopted and distributed to the members pursuant to this subdivision.

   (h) When the board of directors is to meet to consider or imposediscipline upon a member, the board shall notify the member in writing, by either personal delivery or first-class mail, at least 10 days prior to the meeting.  The notification shall contain, at a minimum, the date, time, and place of the meeting, the nature of the alleged violation for which a member may be disciplined, and a statement that the member has a right to attend and may address the board at the meeting.  The board of directors of the association shall meet in executive session if requested by the member being disciplined. If the board imposes discipline on a member, the board shall provide the member a written notification of the disciplinary action, by either personal delivery or first-class mail, within 15 days following the action.  A disciplinary action shall not be effective against a member unless the board fulfills the requirements of this subdivision.

   (i) Whenever two or more associations have consolidated any of their functions under a joint neighborhood association or similar organization, members of each participating association shall be entitled to attend all meetings of the joint association other than executive sessions, (1) shall be given reasonable opportunity for participation in those meetings and (2) shall be entitled to the same access to the joint association's records as they are to the participating association's records.

   (j) Nothing in this section shall be construed to create, expand, or reduce the authority of the board of directors of an association to impose monetary penalties on an association member for a violation of the governing documents or rules of the association.

SECTION 1363.1-1363.2

1363.1.  (a) A prospective managing agent of a common interest development shall provide a written statement to the board of directors of the association of a common interest development as soon as practicable, but in no event more than 90 days, before entering into a management agreement which shall contain all of the following information concerning the managing agent:

   (1) The names and business addresses of the owners or general partners of the managing agent.  If the managing agent is a corporation, the written statement shall include the names and business addresses of the directors and officers and shareholders holding greater than 10 percent of the shares of the corporation.

   (2) Whether or not any relevant licenses such as architectural design, construction, engineering, real estate, or accounting have been issued by this state and are currently held by the persons specified in paragraph (1).  If a license is currently held by any of those persons, the statement shall contain the following information:

   (A) What license is held.

   (B) The dates the license is valid.

   (C) The name of the licensee appearing on that license.

   (3) Whether or not any relevant professional certifications or designations such as architectural design, construction, engineering, real property management, or accounting are currently held by any of the persons specified in paragraph (1), including, but not limited to, a professional common interest development manager.  If any certification or designation is held, the statement shall include the following information:

   (A) What the certification or designation is and what entity issued it.

   (B) The dates the certification or designation is valid.

   (C) The names in which the certification or designation is held.

   (b) As used in this section, a "managing agent" is a person or entity who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development. A "managing agent" does not include either of the following:

   (1) A full-time employee of the association.

   (2) Any regulated financial institution operating within the normal course of its regulated business practice.

1363.2.  (a) A managing agent of a common interest development who accepts or receives funds belonging to the association shall deposit all such funds that are not placed into an escrow account with a bank, savings association, or credit union or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in this state.  All funds deposited by the managing agent in the trust fund account shall be kept in this state in a financial institution, as defined in Section 31041 of the Financial Code, which is insured by the federal government, and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.

   (b) At the written request of the board of directors of the association, the funds the managing agent accepts or receives on behalf of the association shall be deposited into an interest-bearing account in a bank, savings association, or credit union in this state, provided all of the following requirements are met:

   (1) The account is in the name of the managing agent as trustee for the association or in the name of the association.

   (2) All of the funds in the account are covered by insurance provided by an agency of the federal government.

   (3) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person or entity for whom the managing agent holds funds in trust except that the funds of various associations may be commingled as permitted pursuant to subdivision (d).

   (4) The managing agent discloses to the board of directors of the association the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.

   (5) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or his or her employees.

   (c) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.

   (d) The managing agent shall not commingle the funds of the association with his or her own money or with the money of others that he or she receives or accepts, unless all of the following requirements are met:

   (1) The managing agent commingled the funds of various associations on or before February 26, 1990, and has obtained a written agreement with the board of directors of each association that he or she will maintain a fidelity and surety bond in an amount that provides adequate protection to the associations as agreed uponby the managing agent and the board of directors of each association.

   (2) The managing agent discloses in the written agreement whether he or she is deriving benefits from the commingled account or the bank, credit union, or savings institution where the moneys will beon deposit.

   (3) The written agreement provided pursuant to this subdivision includes, but is not limited to, the name and address of the bonding companies, the amount of the bonds, and the expiration dates of the bonds.

   (4) If there are any changes in the bond coverage or the companies providing the coverage, the managing agent discloses that fact to the board of directors of each affected association as soon as practical, but in no event more than 10 days after the change.

   (5) The bonds assure the protection of the association and provide the association at least 10 days' notice prior to cancellation.

   (6) Completed payments on the behalf of the association are deposited within 24 hours or the next business day and do not remain commingled for more than 10 calendar days.

   (e) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.

   (f) As used in this section, a "managing agent" is a person or entity, who for compensation or, in expectation of compensation, exercises control over the assets of the association.  However, a "managing agent" does not include a full-time employee of the association or a regulated financial institution operating within the normal course of business, or an attorney at law acting within the scope of his or her license.

   (g) As used in this section, "completed payment" means funds received which clearly identify the account to which the funds are to be credited.

SECTION 1363.05

1363.05.  (a) This section shall be known and may be cited as the Common Interest Development Open Meeting Act.

   (b) Any member of the association may attend meetings of the board of directors of the association, except when the board adjourns to executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member's request, regarding the member's payment of assessments, as specified in Section 1367 or 1367.1.  The board of directors of the association shall meet in executive session, if requested by a member who may be subject to a fine, penalty, or other form of discipline, and the member shall be entitled to attend the executive session.

   (c) Any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership.

   (d) The minutes, minutes proposed for adoption that are marked toindicate draft status, or a summary of the minutes, of any meeting of the board of directors of an association, 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 of the association upon request and upon reimbursement of the association's costs for making that distribution.

   (e) Members of the association shall be notified in writing at the time that the pro forma budget required in Section 1365 is distributed, or at the time of any general mailing to the entire membership of the association, of their right to have copies of the minutes of meetings of the board of directors, and how and where those minutes may be obtained.

   (f) As used in this section, "meeting" includes any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board, except those matters that may be discussed in executive session.

   (g) Unless the time and place of meeting is fixed by the bylaws, or unless the bylaws provide for a longer period of notice, members shall be given notice of the time and place of a meeting as defined in subdivision (f), except for an emergency meeting, at least four days prior to the meeting.  Notice shall be given by posting the notice in a prominent place or places within the common area and by mail to any owner who had requested notification of board meetings by mail, at the address requested by the owner.  Notice may also be given, by mail or delivery of the notice to each unit in the development or by newsletter or similar means of communication.

   (h) An emergency meeting of the board may be called by the president of the association, or by any two members of the governing body 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 this section.

   (i) The board of directors of the association shall permit any member of the association to speak at any meeting of the association or the board of directors, except for meetings of the board held in executive session.  A reasonable time limit for all members of the association to speak to the board of directors or before a meeting of the association shall be established by the board of directors.

SECTION 1363.810-1363.850

1363.810.  (a) This article applies to a dispute between an association and a member involving their rights, duties, or liabilities under this title, under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code), or under the governing documents of the common interest development or association.

   (b) This article supplements, and does not replace, Article 2 (commencing with Section 1369.510) of Chapter 7, relating to alternative dispute resolution as a prerequisite to an enforcement action.

1363.820.  (a) An association shall provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article.

   (b) In developing a procedure pursuant to this article, an association shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs such as those listed on the Internet Web sites of the Department of Consumer Affairs and the United States Department of Housing and Urban Development.

   (c) If an association does not provide a fair, reasonable, and expeditious procedure for resolving a dispute within the scope of this article, the procedure provided in Section 1363.840 applies and satisfies the requirement of subdivision (a).

1363.830.  A fair, reasonable, and expeditious dispute resolution procedure shall at a minimum satisfy all of the following requirements:

   (a) The procedure may be invoked by either party to the dispute. A request invoking the procedure shall be in writing.

   (b) The procedure shall provide for prompt deadlines.  The procedure shall state the maximum time for the association to act on a request invoking the procedure.

   (c) If the procedure is invoked by a member, the association shall participate in the procedure.

   (d) If the procedure is invoked by the association, the member may elect not to participate in the procedure.  If the member participates but the dispute is resolved other than by agreement of the member, the member shall have a right of appeal to the association's board of directors.

   (e) A resolution of a dispute pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the association and is judicially enforceable.  An agreement reached pursuant to the procedure, that is not in conflict with the law or the governing documents, binds the parties and is judicially enforceable.

   (f) The procedure shall provide a means by which the member and the association may explain their positions.

   (g) A member of the association shall not be charged a fee to participate in the process.

1363.840.  (a) This section applies in an association that does not otherwise provide a fair, reasonable, and expeditious dispute resolution procedure.  The procedure provided in this section is fair, reasonable, and expeditious, within the meaning of this article.

   (b) Either party to a dispute within the scope of this article may invoke the following procedure:

   (1) The party may request the other party to meet and confer in an effort to resolve the dispute.  The request shall be in writing.

   (2) A member of an association may refuse a request to meet and confer.  The association may not refuse a request to meet and confer.

   (3) The association's board of directors shall designate a member of the board to meet and confer.

   (4) The parties shall meet promptly at a mutually convenient time and place, explain their positions to each other, and confer in good faith in an effort to resolve the dispute.

   (5) A resolution of the dispute agreed to by the parties shall bememorialized in writing and signed by the parties, including the board designee on behalf of the association.

   (c) An agreement reached under this section binds the parties and is judicially enforceable if both of the following conditions are satisfied:

   (1) The agreement is not in conflict with law or the governing documents of the common interest development or association.

   (2) The agreement is either consistent with the authority granted by the board of directors to its designee or the agreement is ratified by the board of directors.

   (d) A member of the association may not be charged a fee to participate in the process.

1363.850.  The notice provided pursuant to Section 1369.590 shall include a description of the internal dispute resolution process provided pursuant to this article.

SECTION 1364

1364.  (a) Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.

   (b) (1) In a community apartment project, condominium project, or stock cooperative, as defined in Section 1351, unless otherwise provided in the declaration, the association is responsible for the repair and maintenance of the common area occasioned by the presence of wood-destroying pests or organisms.

   (2) In a planned development as defined in Section 1351, unless a different maintenance scheme is provided in the declaration, each owner of a separate interest is responsible for the repair and maintenance of that separate interest as may be occasioned by the presence of wood-destroying pests or organisms.  Upon approval of the majority of all members of the association, the responsibility for such repair and maintenance may be delegated to the association, which shall be entitled to recover the cost thereof as a special assessment.

   (c) The costs of temporary relocation during the repair and maintenance of the areas within the responsibility of the association shall be borne by the owner of the separate interest affected.

   (d) (1) The association may cause the temporary, summary removal of any occupant of a common interest development for such periods and at such times as may be necessary for prompt, effective treatment of wood-destroying pests or organisms.

   (2) The association shall give notice of the need to temporarily vacate a separate interest to the occupants and to the owners, not less than 15 days nor more than 30 days prior to the date of the temporary relocation.  The notice shall state the reason for the temporary relocation, the date and time of the beginning of treatment, the anticipated date and time of termination of treatment, and that the occupants will be responsible for their own accommodations during the temporary relocation.

   (3) Notice by the association shall be deemed complete upon either:

   (A) Personal delivery of a copy of the notice to the occupants, and sending a  copy of the notice to the owners, if different than the occupants, by first-class mail, postage prepaid at the most current address shown on the books of the association.

   (B) By sending a copy of the notice to the occupants at the separate interest address and a copy of the notice to the owners, if different than the occupants, by first-class mail, postage prepaid, at the most current address shown on the books of the association.

   (e) For purposes of this section, "occupant" means an owner, resident, guest, invitee, tenant, lessee, sublessee, or other person in possession on the separate interest.

   (f) Notwithstanding the provisions of the declaration, the owner of a separate interest is entitled to reasonable access to the common areas for the purpose of maintaining the internal and external telephone wiring made part of the exclusive use common areas of a separate interest pursuant to paragraph (2) of subdivision (i) of

Section 1351.  The access shall be subject to the consent of the association, whose approval shall not be unreasonably withheld, and which may include the association's approval of telephone wiring upon the exterior of the common areas, and other conditions as the association determines reasonable.

SECTION 1365-1365.5

1365.  Unless the governing documents impose more stringent standards, the association shall prepare and distribute to all of its members the following documents:

   (a) A pro forma operating budget, which shall include all of the following:

   (1) The estimated revenue and expenses on an accrual basis.

   (2) A summary of the association's reserves based upon the most recent review or study conducted pursuant to Section 1365.5, based only on assets held in cash or cash equivalents, which shall be printed in boldface type and 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:

   (i) The current estimate of the amount of cash reserves necessary to repair, replace, restore, or maintain the major components.

   (ii) The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain major components.

   (iii) If applicable, the amount of funds received from either a compensatory damage award or settlement to an association from any person or entity 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 clause (ii).  In lieu of complying with the requirements set forth in this clause, an association that is obligated to issue a review of their financial statement pursuant to

subdivision (b) may include in the review a statement containing all of the information required by this clause.

   (C) The percentage that the amount determined for purposes of clause (ii) of subparagraph (B) equals the amount determined for purposes of clause (i) of subparagraph (B).

   (3) A statement as to both of the following:

   (A) Whether the board of directors of the association 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.

   (B) The mechanism or mechanisms by which the board of directors will fund reserves to repair or replace major components, including assessments, borrowing, use of other assets, deferral of selected replacement or repairs, or alternative mechanisms.

   (4) 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 report shall include, but need not be limited to, reserve calculations made using the formula described in paragraph (4) of subdivision (b) of Section 1365.2.5, and may not assume a rate of return on cash reserves in excess of 2 percent above the rediscount rate published by the Federal Reserve Bank of San Francisco at the time the calculation was made. The summary of the association's reserves disclosed pursuant to paragraph (2) 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. Notwithstanding a contrary provision in the governing documents, a copy of the operating budget shall be annually distributed not less than 30 days nor more than 90 days prior to the beginning of the association's fiscal year.

   (b) 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 within 120 days after the close of each fiscal year.

   (c) In lieu of the distribution of the pro forma operating budget required by subdivision (a), the board of directors may elect to distribute a summary of the pro forma operating budget to all of its members with a written notice that the pro forma operating budget is available at the business office of the association or at another suitable location within the boundaries of the development, and that copies will be provided upon request and at the expense of the association.  If any member requests that a copy of the pro forma operating budget required by subdivision (a) be mailed to the member, the association shall provide the copy to the member by first-class United States mail at the expense of the association and delivered within five days.  The written notice that is distributed to each of the association members shall be in at least 10-point boldface type on the front page of the summary of the budget.

   (d) A statement describing the association's policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments against its members shall be annually delivered to the members not less than 30 days nor more than 90 days immediately preceding the beginning of the association's fiscal year.

   (e) (1) A summary of the association's property, general liability, earthquake, flood, and fidelity insurance policies, which shall be distributed not less than 30 days nor more than 90 days preceding the beginning of the association's fiscal year, that includes all of the following information about each policy:

   (A) The name of the insurer.

   (B) The type of insurance.

   (C) The policy limits of the insurance.

   (D) The amount of deductibles, if any.

   (2) The association shall, as soon as reasonably practicable, notify its members by first-class mail if any of the policies described in paragraph (1) have lapsed, been canceled, and are not immediately renewed, restored, or replaced, or if there is a significant change, such as a reduction in coverage or limits or an increase in the deductible, as to any of those policies.  If the association receives any notice of nonrenewal of a policy described in paragraph (1), the association shall immediately notify its members if replacement coverage will not be in effect by the date the existing coverage will lapse.

   (3) To the extent that any of the information required to be disclosed pursuant to paragraph (1) 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 to all of its members.

   (4) The summary distributed pursuant to paragraph (1) 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 subdivision (e) of Section 1365 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."

1365.1.  (a) The association shall distribute the written notice described in subdivision (b) to each member of the association during the 60-day period immediately preceding the beginning of the association's fiscal year.  The notice shall be printed in at least 12-point type.  An association distributing the notice to an owner of an interest that is described in Section 11212 of the Business and Professions Code that is not otherwise exempt from this section pursuant to subdivision (a) of Section 11211.7, may delete from the notice described in subdivision (b) the portion regarding meetings and payment plans.

   (b) The notice required by this section shall read as follows:

      "NOTICE ASSESSMENTS AND FORECLOSURE

   This notice outlines some of the rights and responsibilities of owners of property in common interest developments and the associations that manage them.  Please refer to the sections of the Civil Code indicated for further information.  A portion of the information in this notice applies only to liens recorded on or after January 1, 2003.  You may wish to consult a lawyer if you dispute an assessment.

      ASSESSMENTS AND NONJUDICIAL FORECLOSURE

   The failure to pay association assessments may result in the loss of an owner's property without court action, often referred to as nonjudicial foreclosure.  When using nonjudicial foreclosure, the association records a lien on the owner's property.  The owner's property may be sold to satisfy the lien if the lien is not paid. Assessments become delinquent 15 days after they are due, unless the governing documents of the association provide for a longer time (Sections 1366 and 1367.1 of the Civil Code)

   In a nonjudicial foreclosure, the association may recover assessments, reasonable costs of collection, reasonable attorney's fees, late charges, and interest.  The association may not use nonjudicial foreclosure to collect fines or penalties, except for costs to repair common areas damaged by a member or a member's guests, if the governing documents provide for this.  (Sections 1366 and 1367.1 of the Civil Code)

   The association must comply with the requirements of Section 1367.1 of the Civil Code when collecting delinquent assessments.  If the association fails to follow these requirements, it may not record a lien on the owner's property until it has satisfied those requirements.  Any additional costs that result from satisfying the requirements are the responsibility of the association.  (Section 1367.1 of the Civil Code)

   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.  Among these documents, the association must send 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 1367.1 of the Civil Code)

   If a lien is recorded against an owner's property in error, the person who recorded the lien is required to record a lien release within 21 days, and to provide an owner certain documents in this regard.  (Section 1367.1 of the Civil Code)

   The collection practices of the association may be governed by state and federal laws regarding fair debt collection.  Penalties can be imposed for debt collection practices that violate these laws.

      PAYMENTS

   When an owner makes a payment, he or she may request a receipt, and the association is required to provide it.  On the receipt, the association must indicate the date of payment and the person who received it.  The association must inform owners of a mailing address for overnight payments.  ( Section 1367.1 of the Civil Code)

   An owner may dispute an assessment debt by giving the board of the association a written explanation, and the board must respond within 15 days if certain conditions are met.  An owner may pay assessments that are in dispute in full under protest, and then request alternative dispute resolution.  (Sections 1366.3 and 1367.1 of the Civil Code)

   An owner is not liable for charges, interest, and costs of collection, if it is established that the assessment was paid properly on time.  (Section 1367.1 of the Civil Code)

 
      MEETINGS AND PAYMENT PLANS

   An owner of a separate interest that is not a time-share may request the association to consider a payment plan to satisfy a delinquent assessment.  The association must inform owners of the standards for payment plans, if any exist.  (Section 1367.1 of the Civil Code)

   The board of directors must meet with an owner who makes a proper written request for a meeting to discuss a payment plan when the owner has received a notice of a delinquent assessment.  These payment plans must conform with the payment plan standards of the association, if they exist.  (Section 1367.1 of the Civil Code)"

1365.2.  (a) (1) The association shall make the accounting books and records and the minutes of proceedings of the association available for inspection and copying by a member of the association, or the member's designated representative, as provided by this section.

   (2) A member of the association may designate another person to inspect and copy the accounting books and records and the minutes of proceedings on the member's behalf.  The member shall make this designation in writing.

   (b) (1) The association shall make the accounting books and records and the minutes of proceedings available for inspection and copying in the association's business office within the common interest development.

   (2) If the association does not have a business office within the development, the association shall make the accounting books and records and minutes of proceedings available for inspection and copying at a place that the requesting member and the association agree upon.

   (3) If the association and the requesting member cannot agree upon a place for inspection and copying pursuant to paragraph (2), or if the requesting member submits a written request directly to the association for copies, the association may satisfy the requirement to make the accounting books and records and the minutes of proceedings available for inspection and copying by mailing copies of the requested records to the member by first-class mail within 10 days of receiving the member's request.  The association may bill the requesting member for its actual, reasonable costs for copying and mailing requested documents.  The association shall inform the member of the amount of the copying and mailing costs before sending the requested documents.

   (c) (1) Except as provided in paragraph (2), the association may withhold or redact information from the accounting books and records and the minutes of proceedings for any of the following reasons:

   (A) The release of the information is reasonably likely to lead to identity theft.  For the purposes of this section, "identity theft" means the unauthorized use of another person's personal identifying information to obtain credit, goods, services, money, or property.

   (B) The release of the information is reasonably likely to lead to fraud in connection with the association.

   (C) The information is privileged under law.

   (2) Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors, or contractors. Compensation information for individual employees shall be set forth by job classification or title, not by the employee's name, social security number, or other personal information.

   (d) (1) The accounting books and records and the minutes of proceedings of an association, and any information from them, may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member's interest as a member. An association may bring an action against any person who violates this section for injunctive relief and for actual damages to the association caused by the violation.

   (2) This section may not be construed to limit the right of an association to damages for misuse of information obtained from the accounting books and records and the minutes of proceedings pursuant to this section or to limit the right of an association to injunctive relief to stop the misuse of this information.

   (3) An association shall be entitled to recover reasonable costs and expenses, including reasonable attorney's fees, in a successful action to enforce its rights under this section.

   (e) A member of an association may bring an action to enforce the member's right to inspect and copy the accounting books and records and the minutes of proceedings of the association.  If a court finds that the association unreasonably withheld access to the accounting books and records and the minutes of proceedings, the court shall award the member reasonable costs and expenses, including reasonable attorney's fees, and may assess a civil penalty of up to five hundred dollars ($500) for each violation.

1365.2.5.  (a) The disclosures required by this article in regard to an association or a property shall be summarized on the following form:

     Assessment and Reserve Funding Disclosure Summary

  (1)  The current assessment per unit is $_______ per ____.

     Note:  If assessments vary by the size or type of unit, the assessment applicable to this unit may be found on page ____ of the attached report.

  (2)  Additional assessments that have already been scheduled to be imposed or charged, regardless of the purpose, if they have been approved by the board and/or members:

   Date assessment is due: ___________
   Amount per unit per month: _____________               Total: _____________
   Purpose of the assessment  (If assessments are variable, see note immediately below):

   __________________________________________________
   __________________________________________________
   __________________________________________________

   Note:  If assessments vary by the size or type of unit, the assessment applicable to this unit may be found on page ____ of the attached report.

 (3)  Based upon the most recent reserve study and other information available to the board of directors, will currently projected reserve account balances be sufficient at the end of each year to meet the association's obligation for repair and/or replacement of major components during the next 30 years?

      Yes _____      No _____

 (4) If the answer to #3 is no, what additional assessments or other contributions to reserves would be necessary to ensure that sufficient reserve funds will be available each year during the next 30 years?

    ____________________________________________________

 Approximate date assessment will be due: _________    Amount per unit per month: ___________   Total: _________

 (5)  The following major components, which are included in the reserve study, are NOT included in the existing reserve funding:

       ____________________________________________________________________

Major component:  Useful remaining life in years: _____
Reason this major component was not included:_____________________________________
      _________________________________________________________________________

 (6) As of the last reserve study or update, the current balance in the reserve fund is $____.  Based on the method of calculation in paragraph (4) of subdivision (b) of Section 1365.2.5, the required amount in the reserve fund is $____, and if an alternate, but generally accepted, method of calculation is also used, the required amount is $____.  (See attached explanation)

      NOTE: The financial representations set forth in this summary are based on the best estimates of the preparer at that time.  The estimates are subject to change.

   (b) For the purposes of preparing a summary pursuant to this section:

   (1) "Estimated remaining useful life" means the time reasonably calculated to remain before a major component will require replacement.

   (2) "Major component" has the meaning used in Section 1365.5. Components with an estimated remaining useful life of more than 30 years may be included in a study as a capital asset or disregarded from the reserve calculation, so long as the decision is revealed in the reserve study report and reported in the Assessment and Reserve Funding Disclosure Summary.

   (3) The form set out in subdivision (a) shall accompany each pro forma operating budget or summary thereof that is delivered pursuant to this article.  The form may be supplemented or modified to clarify the information delivered, so long as the minimum information set out in subdivision (a) is provided.

   (4) For the purpose of the report and summary, the amount of reserves needed to be accumulated for a component at a given time shall be computed as the current cost of replacement or repair multiplied by the number of years the component has been in service divided by the useful life of the component.  This shall not be construed to require the board to fund reserves in accordance with this calculation.

1365.3.  Unless the governing documents impose more stringent standards, any community service organization as defined in paragraph (3) of subdivision (c) of Section 1368 whose funding from the association or its members exceeds 10 percent of the organization's annual budget shall prepare and distribute to the association a report that meets the requirements of Section 5012 of the Corporations Code, and that describes in detail administrative costs and identifies the payees of those costs in a manner consistent with the provisions of Section 1365.2.  If the community service organization does not comply with the standards, the report shall disclose the noncompliance in detail.  If a community service organization is responsible for the maintenance of major components for which an association would otherwise be responsible, the community service organization shall supply to the association the information regarding those components that the association would use to complete disclosures and reserve reports required under this article.  An association may rely upon information received from a community service organization, and shall provide access to the information pursuant to the provisions of Section 1365.2.

1365.5.  (a) Unless the governing documents impose more stringent standards, the board of directors of the association shall do all of the following:

   (1) Review a current reconciliation of the association's operating accounts on at least a quarterly basis.

   (2) Review a current reconciliation of the association's reserve accounts on at least a quarterly basis.

   (3) Review, on at least a quarterly basis, the current year's actual reserve revenues and expenses compared to the current year's budget.

   (4) Review the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.

   (5) Review an income and expense statement for the association's operating and reserve accounts on at least a quarterly basis.

   (b) The signatures of at least two persons, who shall be members of the association's board of directors, or one officer who is not a member of the board of directors and a member of the board of directors, shall be required for the withdrawal of moneys from the association's reserve accounts.

   (c) (1) The board of directors shall not expend funds designated as reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components which the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established.

   (2) However, the board may authorize the temporary transfer of moneys from a reserve fund to the association's general operating fund to meet short-term cashflow requirements or other expenses, if the board has provided notice of the intent to consider the transfer in a notice of meeting, which shall be provided as specified in

Section 1363.05.  The notice shall include the reasons the transfer is needed, some of the options for repayment,and whether a special assessment may be considered.  If the board authorizes the transfer, the board shall issue a written finding, recorded in the board's minutes, explaining the reasons that the transfer is needed, and describing when and how the moneys will be repaid to the reserve fund.  The transferred funds shall be restored to the reserve fund within one year of the date of the initial transfer, except that the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration.  The board shall exercise prudent fiscal management in maintaining the integrity of the reserve account, and shall, if necessary, levy a special assessment to recover the full amount of the expended funds within the time limits required by this section.  This special assessment is subject to the limitation imposed by Section 1366.  The board may, at its discretion, extend the date the payment on the special assessment is due.  Any extension shall not prevent the board from pursuing any legal remedy to enforce the collection of an unpaid special assessment.

   (d) When the decision is made to use reserve funds or to temporarily transfer moneys from the reserve fund to pay for litigation, the association shall notify the members of the association of that decision in the next available mailing to all members pursuant to Section 5016 of the Corporations Code, and of the availability of an accounting of those expenses.  Unless the governing documents impose more stringent standards, the association shall make an accounting of expenses related to the litigation on at least a quarterly basis.  The accounting shall be made available for inspection by members of the association at the association's office.

   (e) At least once every three years, the board of directors shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components which the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirements of the common interest development, if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association which excludes the association's reserve account for that period. The board shall review this study, or cause it to be reviewed, annually and shall consider and implement necessary adjustments to the board's analysis of the reserve account requirements as a result of that review.

   The study required by this subdivision shall at a minimum include:

   (1) Identification of the major components which the association is obligated to repair, replace, restore, or maintain which, as of the date of the study, have a remaining useful life of less than 30 years.

   (2) Identification of the probable remaining useful life of the components identified in paragraph (1) as of the date of the study.

   (3) An estimate of the cost of repair, replacement, restoration, or maintenance of the components identified in paragraph (1).

   (4) An estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain the components identified in paragraph (1) during and at the end of their useful life, after subtracting total reserve funds as of the date of the study.

   (f)  As used in this section, "reserve accounts" means both of the following:

   (1) Moneys that the association's board of directors has identified for use to defray the future repair or replacement of, or additions to, those major components which the association is obligated to maintain.

   (2) The funds received and not yet expended or disposed from either a compensatory damage award or settlement to an association from any person or entity for injuries to property, real or personal, arising from any construction or design defects.  These funds shall be separately itemized from funds described in paragraph (1).

   (g)  As used in this section, "reserve account requirements" means the estimated funds which the association's board of directors has determined are required to be available at a specified point in time to repair, replace, or restore those major components which the association is obligated to maintain.

   (h)  This section does not apply to an association that does not have a "common area" as defined in Section 1351.

SECTION 1365.7-1365.9

1365.7.  (a) A volunteer officer or volunteer director of an association, as defined in subdivision (a) of Section 1351, which manages a common interest development that is exclusively residential, shall not be personally liable in excess of the coverage of insurance specified in paragraph (4) to any person who suffers injury, including, but not limited to, bodily injury, emotional distress, wrongful death, or property damage or loss as a result of the tortious act or omission of the volunteer officer or volunteer director if all of the following criteria are met:

   (1) The act or omission was performed within the scope of the officer's or director's association duties.

   (2) The act or omission was performed in good faith.

   (3) The act or omission was not willful, wanton, or grossly negligent.

   (4) The association maintained and had in effect at the time the act or omission occurred and at the time a claim is made one or more policies of insurance which shall include coverage for (A) general liability of the association and (B) individual liability of officers and directors of the association for negligent acts or omissions in that capacity; provided, that both types of coverage are in the following minimum amount:

   (A) At least five hundred thousand dollars ($500,000) if the common interest development consists of 100 or fewer separate interests.

   (B) At least one million dollars ($1,000,000) if the common interest development consists of more than 100 separate interests.

   (b) The payment of actual expenses incurred by a director or officer in the execution of the duties of that position does not affect the director's or officer's status as a volunteer within the meaning of this section.

   (c) An officer or director who at the time of the act or omission was a declarant, as defined in subdivision (g) of Section 1351, or who received either direct or indirect compensation as an employee from the declarant, or from a financial institution that purchased a separate interest, as defined in subdivision (l) of Section 1351, at a judicial or nonjudicial foreclosure of a mortgage or deed of trust on real property, is not a volunteer for the purposes of this section.

   (d) Nothing in this section shall be construed to limit the liability of the association for its negligent act or omission or for any negligent act or omission of an officer or director of the association.

   (e) This section shall only apply to a volunteer officer or director who is a tenant of a separate interest in the common interest development or is an owner of no more than two separate interests in the common interest development.

   (f) (1) For purposes of paragraph (1) of subdivision (a), the scope of the officer's or director's association duties shall include, but shall not be limited to, both of the following decisions:

   (A) Whether to conduct an investigation of the common interest development for latent deficiencies prior to the expiration of the applicable statute of limitations.

   (B) Whether to commence a civil action against the builder for defects in design or construction.

   (2) It is the intent of the Legislature that this section clarify the scope of association duties to which the protections against personal liability in this section apply.  It is not the intent of the Legislature that these clarifications be construed to expand, or limit, the fiduciary duties owed by the directors or officers.

1365.9.  (a) It is the intent of the Legislature to offer civil liability protection to owners of the separate interests in a common interest development that have common areas owned in tenancy-in-common if the association carries a certain level of prescribed insurance that covers a cause of action in tort.

   (b) Any cause of action in tort against any owner of a separate interest arising solely by reason of an ownership interest as a tenant in common in the common area of a common interest development shall be brought only against the association and not against the individual owners of the separate interests, as defined in subdivision (l) of Section 1351,  if both of the insurance requirements in paragraphs (1) and (2) are met:

   (1) The association maintained and has in effect  for this cause of action, one or more policies of insurance which include coverage for general liability of the association.

   (2) The coverage described in paragraph (1) is in the following minimum amounts:

   (A) At least two million dollars ($2,000,000) if the common interest development consists of 100 or fewer separate interests.

   (B) At least three million dollars ($3,000,000) if the common interest development consists of more than 100 separate interests.

SECTION 1366-1367.1

1366.  (a) Except as provided in this section, the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title.  However, annual increases in regular assessments for any fiscal year, as authorized by subdivision (b), shall not be imposed unless the board has complied with subdivision (a) of Section 1365 with respect to that fiscal year, or has obtained the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, "quorum" means more than 50 percent of the owners of an association.

   (b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code.  For the purposes of this section, quorum means more than 50 percent of the owners of an association.  This section does not limit assessment increases necessary for emergency situations.  For purposes of this section, an emergency situation is any one of the following:

   (1) An extraordinary expense required by an order of a court.

   (2) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.

   (3) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the pro forma operating budget under Section 1365.  However, prior to the imposition or collection of an assessment under this subdivision, the board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment.

   (c) Regular assessments imposed or collected to perform the obligations of an association under the governing documents or this title shall be exempt from execution by a judgment creditor of the association only to the extent necessary for the association to perform essential services, such as paying for utilities and insurance.  In determining the appropriateness of an exemption, a court shall ensure that only essential services are protected under this subdivision.

   This exemption shall not apply to any consensual pledges, liens, or encumbrances that have been approved by the owners of an association, constituting a quorum, casting a majority of the votes at a meeting or election of the association, or to any state tax lien, or to any lien for labor or materials supplied to the common area.

   (d) The association shall provide notice by first-class mail to the owners of the separate interests of any increase in the regular or special assessments of the association, not less than 30 nor more than 60 days prior to the increased assessment becoming due.

   (e) Regular and special assessments levied pursuant to the governing documents are delinquent 15 days after they become due, unless the declaration provides a longer time period, in which case the longer time period shall apply.  If an assessment is delinquent the association may recover all of the following:

   (1) Reasonable costs incurred in collecting the delinquent assessment, including reasonable attorney's fees.

   (2) A late charge not exceeding 10 percent of the delinquent assessment or ten dollars ($10), whichever is greater, unless the declaration specifies a late charge in a smaller amount, in which case any late charge imposed shall not exceed the amount specified in the declaration.

   (3) Interest on all sums imposed in accordance with this section, including the delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12 percent, commencing 30 days after the assessment becomes due, unless the declaration specifies the recovery of interest at a rate of a lesser amount, in which case the lesser rate of interest shall apply.

   (f) Associations are hereby exempted from interest-rate limitations imposed by Article XV of the California Constitution, subject to the limitations of this section.

1366.1.  An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.

1366.2.  (a) In order to facilitate the collection of regular assessments, special assessments, transfer fees, and similar charges, the board of directors of any association is authorized to record a statement or amended statement identifying relevant information for the association.  This statement may include any or all of the following information:

   (1) The name of the association as shown in the conditions, covenants, and restrictions or the current name of the association, if different.

   (2) The name and address of a managing agent or treasurer of the association or other individual or entity authorized to receive assessments and fees imposed by the association.

   (3) A daytime telephone number of the authorized party identified in paragraph (2) if a telephone number is available.

   (4) A list of separate interests subject to assessment by the association, showing the assessor's parcel number or legal description, or both, of the separate interests.

   (5) The recording information identifying the declaration or declarations of covenants, conditions, and restrictions governing the association.

   (6) If an amended statement is being recorded, the recording information identifying the prior statement or statements which the amendment is superseding.

   (b) The county recorder is authorized to charge a fee for recording the document described in subdivision (a), which fee shall be based upon the number of pages in the document and the recorder's per-page recording fee.

1366.3.  (a) The exception for disputes related to association assessments in subdivision (b) of Section 1354 shall not apply if, in a dispute between the owner of a separate interest and the association regarding the assessments imposed by the association, the owner of the separate interest chooses to pay in full to the association all of the charges listed in paragraphs (1) to (4), inclusive, and states by written notice that the amount is paid under protest, and the written notice is mailed by certified mail not more than 30 days from the recording of a notice of delinquent assessment in accordance with Section 1367 or 1367.1; and in those instances, the association shall inform the owner that the owner may resolve the dispute through alternative dispute resolution as set forth in Section 1354, civil action, and any other procedures to resolve the dispute that may be available through the association.

   (1) The amount of the assessment in dispute.

   (2) Late charges.

   (3) Interest.

   (4) All reasonable fees and costs associated with the preparation and filing of a notice of delinquent assessment, including all mailing costs, and including reasonable attorney's fees not to exceed four hundred twenty-five dollars ($425).

   (b) The right of any owner of a separate interest to utilize alternative dispute resolution under this section may not be exercised more than two times in any single calendar year, and not more than three times within any five calendar years.  Nothing within this section shall preclude any owner of a separate interest and the association, upon mutual agreement, from entering into alternative dispute resolution for a number of times in excess of the limits set forth in this section.  The owner of a separate interest may request and be awarded through alternative dispute resolution reasonable interest to be paid by the association on the total amount paid under paragraphs (1) to (4), inclusive, of subdivision (a), if it is determined through alternative dispute resolution that the assessment levied by the association was not correctly levied.

1367.  (a) A regular or special assessment and any late charges, reasonable costs of collection, and interest, as assessed in accordance with Section 1366, shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.  Before an association may place a lien upon the separate interest of an owner to collect a debt which is past due under this subdivision, the association shall notify the owner in writing by certified mail of the fee and penalty procedures of the association, provide an itemized statement of the charges owed by the owner, including items on the statement which indicate the assessments owed, any late charges and the method of calculation, any attorney's fees, and the collection practices used by the association, including the right of the association to the reasonable costs of collection.  In addition, any payments toward that debt shall first be applied to the assessments owed, and only after the principal owed is paid in full shall the payments be appli