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(a) The owner of a separate interest, other than an owner subject to the requirements of Section 11018.6 of the Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as defined in Section 2985, provide the following to the prospective purchaser:
(1) A copy of the governing documents of the common interest development, including any operating rules, and including a copy of the association's articles of incorporation, or, if not incorporated, a statement in writing from an authorized representative of the association that the association is not incorporated.
(2) If there is a restriction in the governing documents limiting the occupancy, residency, or use of a separate interest on the basis of age in a manner different from that provided in Section 51.3, a statement that the restriction is only enforceable to the extent permitted by Section 51.3 and a statement specifying the applicable provisions of Section 51.3.
(3) A copy of the most recent documents distributed pursuant to Section 1365.
(4) A true statement in writing obtained from an authorized representative of the association as to the amount of the association's current regular and special assessments and fees, any assessments levied upon the owner's interest in the common interest development that are unpaid on the date of the statement, and any monetary fines or penalties levied upon the owner's interest and unpaid on the date of the statement. The statement obtained from an authorized representative shall also include true information on late charges, interest, and costs of collection which, as of the date of the statement, are or may be made a lien upon the owner's interest in a common interest development pursuant to Section 1367 or 1367.1.
(5) A copy or a summary of any notice previously sent to the owner pursuant to subdivision (h) of Section 1363 that sets forth any alleged violation of the governing documents that remains unresolved at the time of the request. The notice shall not be deemed a waiver of the association's right to enforce the governing documents against the owner or the prospective purchaser of the separate interest with respect to any violation. This paragraph shall not be construed to require an association to inspect an owner's separate interest.
(6) A copy of the preliminary list of defects provided to each member of the association pursuant to Section 1375, unless the association and the builder subsequently enter into a settlement agreement or otherwise resolve the matter and the association complies with Section 1375.1. Disclosure of the preliminary list of defects pursuant to this paragraph does not waive any privilege attached to the document. The preliminary list of defects shall also include a statement that a final determination as to whether the list of defects is accurate and complete has not been made.
(7) A copy of the latest information provided for in Section 1375.1.
(8) Any change in the association's current regular and special assessments and fees which have been approved by the association's board of directors, but have not become due and payable as of the date disclosure is provided pursuant to this subdivision.
(9) If there is a provision in the governing documents that prohibits the rental or leasing of any of the separate interests in the common interest development to a renter, lessee or tenant, a statement describing the prohibition and its applicability.
(10) If requested by the prospective purchaser, a copy of the minutes of the meetings, excluding meetings held in executive session, of the association's board of directors, conducted over the previous 12 months, that were approved by the association's board of directors.

(b) Upon written request, the association shall, within 10 days of the mailing or delivery of the request, provide the owner of a separate interest, or any other recipient authorized by the owner, with a copy of the requested items specified in paragraphs (1) to (10), inclusive, of subdivision (a). Upon receipt of a written request, the association shall provide, on the form described in Section 1368.2, a written or electronic estimate of the fees that will be assessed for providing the requested documents. The documents required to be made available pursuant to this section may be maintained in electronic form, and may be posted on the association's Internet Web site. Requesting parties shall have the option of receiving the documents by electronic transmission if the association maintains the documents in electronic form. The association may collect a reasonable fee based upon the association's actual cost for the procurement, preparation, reproduction, and delivery of the documents requested pursuant to the provisions of this section.
(2) No additional fees may be charged by the association for the electronic delivery of the documents requested.
(3) Fees for any documents required by this section shall be distinguished from other fees, fines, or assessments billed as part of the transfer or sales transaction. Delivery of the documents required by this section shall not be withheld for any reason nor subject to any condition except the payment of the fee allowed pursuant to paragraph (1).
(4) An association may contract with any person or entity to facilitate compliance with the requirements of this subdivision on behalf of the association.
(5) The association shall also provide a recipient authorized by the owner of a separate interest with a copy of the completed form specified in Section 1368.2 at the time the required documents are delivered.

(c) (1) Except as provided in paragraph (2), neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following:
(A) An amount not to exceed the association's actual costs to change its records.
(B) An amount authorized by subdivision (b).
(2) The amendments made to this subdivision by the act adding this paragraph do not apply to a community service organization or similar entity that is described in subparagraph (A) or (B):
(A) The community service organization or similar entity satisfies both of the following requirements:
(i) The community service organization or similar entity was established prior to February 20, 2003.
(ii) The community service organization or similar entity exists and operates, in whole or in part, to fund or perform environmental mitigation or to restore or maintain wetlands or native habitat, as required by the state or local government as an express written condition of development.
(B) The community service organization or similar entity satisfies all of the following requirements:
(i) The community service organization or similar entity is not an organization or entity described in subparagraph (A).
(ii) The community service organization or similar entity was established and received a transfer fee prior to January 1, 2004.
(iii) On and after January 1, 2006, the community service organization or similar entity offers a purchaser the following payment options for the fee or charge it collects at time of transfer:
(I) Paying the fee or charge at the time of transfer.
(II) Paying the fee or charge pursuant to an installment payment plan for a period of not less than seven years. If the purchaser elects to pay the fee or charge in installment payments, the community service organization or similar entity may also collect additional amounts that do not exceed the actual costs for billing and financing on the amount owed. If the purchaser sells the separate interest before the end of the installment payment plan period, he or she shall pay the remaining balance prior to transfer.
(3) For the purposes of this subdivision, a "community service organization or similar entity" means a nonprofit entity, other than an association, that is organized to provide services to residents of the common interest development or to the public in addition to the residents, to the extent community common areas or facilities are available to the public. A "community service organization or similar entity" does not include an entity that has been organized solely to raise moneys and contribute to other nonprofit organizations that are qualified as tax exempt under Section 501(c)(3) of the Internal Revenue Code and that provide housing or housing assistance.

(d) Any person or entity who willfully violates this section is liable to the purchaser of a separate interest that is subject to this section for actual damages occasioned thereby and, in addition, shall pay a civil penalty in an amount not to exceed five hundred dollars ($500). In an action to enforce this liability, the prevailing party shall be awarded reasonable attorneys' fees.

(e) Nothing in this section affects the validity of title to real property transferred in violation of this section.

(f) In addition to the requirements of this section, an owner transferring title to a separate interest shall comply with applicable requirements of Sections 1133 and 1134.

(g) For the purposes of this section, a person who acts as a community association manager is an agent, as defined in Section 2297, of the association.

2005 - 2006 ANNUAL DISCLOSURE CHECKLIST FOR COMMUNITY ASSOCIATIONS

NOT LESS THAN 30 DAYS NOR MORE THAN 90 DAYS PRIOR TO THE BEGINING OF THE FISCAL YEAR:

 Pro Forma Operating Budget Civil Code § 1365(a)
The association must distribute its operating “pro forma” budget within the “60-day window” to retain its ability to unilaterally increase assessments. If this requirement is not met, the members must approve any increase to the regular assessments.

The budget must contain the following:
• an estimate of revenue and expenses on an accrual basis;
• a summary of the reserves printed in bold type;
• with respect to construction or design defect cases, the summary must also include a separate line
item for:
(1) funds received from compensatory damage awards or settlements; and
(2) expenditure or disposition of funds, including amounts for direct/indirect costs of repair of
defects (If the association is required to have a CPA conduct a review of its financial
statements, the above information may instead be contained in such review);
• a statement as to whether the board anticipates the levy of one or more special assessments; and
• a basic description of the procedures used to calculate the reserves.

 Summary of Pro Forma Operating Budget Civil Code § 1365(c)
(Alternative to Above) The association may distribute a summary of the operating budget in lieu of the pro forma budget.

The summary budget must give members notice that:
• the complete budget is available for review at the association’s business office or other
suitable location within the development; and
• copies of the complete budget will be provided upon request at no charge to a member within
five (5) days of the request.

These notices must be printed in at least 10-point bold type on the front page of the summary.

 Assessment and Reserve Funding Disclosure Summary
The association must distribute an Assessment and Reserve Funding Disclosure Summary in the form prescribed by Civil Code Section 1365.2.5. This disclosure requires more than just a description of the amount of reserves and/or the association’s budget contributions. Disclosure of, among other things, the components being reserved for, their anticipated remaining life and how much money is currently in reserves allocated to that component must be disclosed.

 Assessment Increases Civil Code § 1366(d)
Notice of an assessment increase or special assessment must be provided by first-class mail to members not less than thirty (30) nor more than sixty (60) days before the increase or assessment is due. Note: Even if the budget shows the increased assessments, prepare and distribute a general notice.

 Assessment Collection Policy Civil Code § 1365(d)
Members must receive a description of the policies and practices which the association will apply to enforce payment of assessments. The failure to adopt and distribute this assessment collection policy may affect an association’s ability to collect delinquent assessments.

This notice usually describes:
• how, when and under what conditions the association will record and foreclose upon assessment liens;
• the nature and amount of late charges, interest and collection costs; and
• owners’ rights to demand Internal Dispute Resolution (“IDR”) and Alternative Dispute Resolution (“ADR”) at different times during the collection process.

 Secondary Addresses Provided by Owners
The association shall notify owners of their right to submit secondary addresses to the association for purposes of collection notices. Upon receipt of a written request by an owner identifying a secondary address for purposes of collection notices, the association shall send additional copies of any notices required by Section 1367.1 of the California Civil Code to the secondary address provided. The owner’s request shall be in writing and shall be mailed to the association in a manner that shall indicate that the association has received it. The owner may identify or change a secondary address at any time, provided that, if a secondary address is identified or changed during the collection process, the association shall only be required to send notices to the requested secondary address from the point that the association receives the request.

WITH THE BUDGET SUMMARY, OR IN ANY GENERALY MAILING DURING THE YEAR:

 Notice of Right to Minutes of Board Meeting Civil Code § 1363.05(d)
On an annual basis, the association must notify members of their right to receive copies of the minutes from board of directors’ meetings (which does not include executive session meeting minutes).
The notice should state:
1. that members have the right to receive approved minutes, an unapproved draft, or a summary of the minutes within thirty (30) days of a board meeting upon member’s request and upon reimbursement of association’s costs to distribute minutes; and
2. how and from whom those minutes may be obtained.

 Arbitration/Mediation of CC&Rs Disputes Civil Code § 1369.510 et seq.
Annually, the association must distribute a summary of Civil Code Section 1369.510 et seq. to its members.

Section 1369.510 et seq. provides, in part:
• An owner or the association must first offer arbitration, mediation or conciliation prior to litigating an action to enforce the governing documents, in seeking injunctive or declaratory relief, or injunctive or declaratory relief plus damages of up to $5,000 (other than assessments);
• thirty (30) days in which the responding party may accept or reject ADR

Civil Code §1369.590 requires that associations annually provide members with a summary of the ADR that specifically states:
“Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 1369.520 of the Civil Code may result in the loss of your right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.”

The summary must be provided “either at the time the pro forma budget required by Civil Code Section 1365 is distributed or in the manner prescribed in Section 5016 of the Corporations Code.”

 Insurance Coverages Civil Code § 1365(e)
The association must distribute to the members a summary of its property, general liability, earthquake, flood and fidelity insurance policies. The summary should also state:
• the name of the insurer and the type of insurance; and
• the policy limits and deductibles, if any.

To the extent the above information is contained on the policy’s declaration page, that page can be distributed in lieu of the summary.

The summary or declaration page must include the statement provided in Civil Code Section 1365(e)(4). This statement must be in at least 10-point boldface type.

Notice of a lapse, cancellation or non-renewal of any policy or of any change in policy shall be provided to the members by first-class mail as soon as reasonably practicable.

Within Sixty (60) days prior to beginning of fiscal year:

 Notice of Assessments, Foreclosures and Payment Plans Civil Code §1365.1
The association must distribute the notice specified in Civil Code Section 1365.1 pertaining to assessments, the association’s rights of foreclosure, payments of assessments and meetings and payment plans concerning a delinquent assessment.

WITHIN 120 DAYS AFTER THE CLOSE OF EACH FISCAL YEAR

 Review of Financial Statement Civil Code § 1365(b)
For any fiscal year in which the association’s gross income exceeds $75,000, a review of its financial statement must be prepared by a licensed California accountant and distributed to members within 120 days after the close of each fiscal year.

 Notice of Right to Receive Annual Report Corporations Code § 8321
For any fiscal year in which the association’s gross revenues are at least $10,000, it must prepare an annual report within 120 days after the end of the association’s fiscal year and notify members on an annual basis of their right to receive this report. The association must provide the report at its own expense to any member submitting a written request for a copy of the report.

The annual report must contain:
• a year-end financial statement;
• a notice stating where records of the association members’ names and addresses are stored; and
• disclosure of transactions with interested parties and of indemnification agreements.

The association must attach either the accountant’s report, if an independent accountant has reviewed or audited the financial statement, or a certificate by an officer indicating that the statement was prepared without review or audit.

MISCELLANEOUS DISCLOSURES

 Schedule of Monetary Penalties Civil Code § 1363(g)
Associations which impose fines on members for violating governing documents or association rules must distribute a schedule of the monetary penalties via first class mail or hand-delivery when the schedule is adopted or revised (recommended annually).

 Escrow/Sale of Unit Civil Code § 1368(a) and (b)
Within ten (10) days of written request from an owner, an association must provide the owner (or owner’s agent/escrow) with a copy of various documents and information so that the owner may satisfy certain disclosure obligations to a prospective buyer. Among the documents and information to be provided by the selling owner is a statement of unpaid fines and other monetary penalties, as well as a copy or summary of any notices of alleged violations of the governing documents that remain unresolved at the time of making the disclosure to the prospective buyer.

 Disclosure of Construction Defect Issues Before Suit Civil Code § 1368.5, § 1375(k)(1)(E)
Thirty (30) days before an association files a lawsuit for construction defects, it must provide notice to all owners of the defect issues, schedule a members meeting to discuss the claims and the available options, including any settlement offer from the builder, as referenced in California Civil Code Section 1375(k)(1)(E).

 Disclosure of Construction Defect Settlement Civil Code § 1375.1
Upon settling a construction defect claim with the builder, the association must so inform the members as soon as reasonably practicable, of the following:
(1) disclose what will be repaired;
(2) estimate when the defects will be repaired; and
(3) disclose any defects that may not be repaired.

 Reserve Fund Transfer Civil Code § 1365.5(d)
When an association uses or transfers any funds from its reserve account to fund litigation, it must notify the members of the transfer and of the availability of an accounting in the next available mailing to the membership.

 Litigation Expenses Civil Code § 1365.5(d)
Unless the association’s governing documents impose more stringent standards, the association shall prepare an accounting of the litigation expenses on at least a quarterly basis. The accounting shall be made available for inspection by members at the association’s office.