Board Must Provide Annual Budget Report
QUESTION: I own a condominium in Fullerton that is rented to a tenant. I do not feel that the board is spending money wisely. When sending my monthly assessment payment to the management company, I requested a financial statement. There was no response.
The board does not give a financial report at meetings and they are hostile when questioned. In two years I have received no explanation of expenditures. What are my legal rights.?
ANSWER: You are entitled to receive an annual budget 45 to 60 days prior to the beginning of each fiscal year. Section 1365 of the California Civil Code says that, unless your association documents impose more stringent standards, the association should provide each owner with an estimate of the income and expenses on an accrual basis.
This annual budget should also show the total cash reserves that are set aside for future use and the estimate of the current replacement cost, remaining useful life and the methods for funding the repair or replacement of the major components of the property that the association is required to maintain.
If your association’s annual gross income exceeds $75,000, the association must provide a financial review that is prepared by a licensed accountant (CPA). A copy of the review of the financial statement must be distributed within 120 days after the close of the fiscal year.
The information should be provided to all owners, whether you live in the unit or not. Perhaps it was distributed door-to-door and your tenant did not pass the information on to you
In the future, do not enclose your request for information with your monthly assessment payment. Write to your board president or the association’s manager.
Common Areas Can’t Be Sold to Others
Q: The developer of our association has taken portions of the “common area” and sold them to individual owners as “exclusive easements.” These exclusive easements include surplus garage spaces, closets and storage spaces that have electrical service provided by the association. Shouldn’t the funds derived from these sales be deposited in the association’s account? Does the developer have the right to sell these areas?
A: In my opinion, the developer does not have the right to grant “exclusive easements” to individual owners when the electricity is paid by the association and the spaces are designated in the documents as common area.
However, there may be wording in your association’s documents (CC&R;’s), which gives the developer the authority to grant these easements. Some association documents give the developer the power to do almost anything. You need to consult with an attorney that specializes in common-interest real estate law.
50% Down Probably Illegal and Too High
Q: Our association’s CC&R;’s require buyers to have a 50% down payment. It is my understanding that this was put into the documents to “keep the ‘riffraff’ out.” Some owners think that this 50% down payment requirement is illegal. What do you think?
A: I don’t believe that this is a reasonable requirement. If challenged in court, this would probably be found illegal. There are some associations that have unbelievable provisions in the documents and as long as no one challenges it, the association continues to enforce unfair procedures.
In my opinion, this is a lawsuit waiting to happen if a seller is unable to find a buyer because of this restriction. Since I am not an attorney, I urge you to consult one if you want to keep your association out of legal hassles and expenses.
Check With Officials Before You Proceed
Q: I am building 14 houses that share a private road and some common area that is landscaped. Some of the houses share common walls. How do I go about setting up an owners’ association that will be responsible for repair and maintenance of the common areas and the private road.
A: Hold everything! If your development is being built in California, the Department of Real Estate is the governmental agency that controls developments of this type.
Before you proceed any further, check with the Department of Real Estate to find out what the requirements are and how to draft the necessary documents for filing with the state.
You are involved in a project that requires a great deal of legal groundwork and document preparation both with the state and the local municipality, if the property lies within a city’s boundaries.
