California law, under Civil Code Section 4525, requires specific disclosures be provided to HOA members upon request, so they can relay them to prospective homebuyers. Well-run HOAs should have these readily available.

Here is a checklist for buyers, sellers, and managers:

Governing documents

CC&R’s, bylaws, rules/regulations, Articles of Incorporation (or statement of non-incorporation), and Condominium Plan or Subdivision Map (not mandatory) and any amendments must be provided upon request. All prospective homebuyers should read through these thoroughly BEFORE closing escrow.

Annual reports: The Annual Budget Report, required by Civil Code 5300, is a compilation of important financial disclosures, not just the HOA’s current budget.

For example, it reveals if the association follows its reserve study recommendations, or whether there is insufficient money saved in the reserve fund account, exposing the HOA to future major borrowing or major special assessments. HOAs must have a written plan to become more adequately funded, and that plan must be disclosed annually to members.

The Annual Budget Report also includes a summary of insurance. Does the HOA have earthquake insurance or required dishonesty coverage?

The Annual Policy Statement, required by Civil Code 5310, is a collection of the HOA’s written policies.

Assessments: Buyers are entitled to know the amount of any regular, special,  and any scheduled future special assessments.

Unresolved problems: Delinquent assessments, unpaid fines, and unresolved violations on the home in question must be disclosed.

Unique issues: Age-restricted communities must be so disclosed to prospective buyers. If the HOA has pursued a defect lawsuit, the list of defects disclosed to the builder and (if settled) the HOA’s plans to repair them must be disclosed.

Problems/violations: Has the seller not been a good HOA member? The seller must disclose any assessment arrearages, unpaid fines, and any unresolved violations involving the property.

Unique issues: Sellers in age-restricted HOAs and HOAs with a partial rental ban must disclose that fact to buyers.

If the HOA has sued for construction defects, the defect list given to the builder must be disclosed. and if the case has ended, the disclosure must include a copy the association’s plan to deal with the defects.

Difficulties: The association can only charge its actual reasonable cost to make the copies, which must be provided within ten days of written request. Management companies are not subject to the same cost limitation so their fees for documents should be scrutinized to confirm they are reasonable.

Poorly operating or poorly managed HOAs may be unable to comply with the disclosure requirements. Realtors should send this request very early in the selling process to avoid “rush” fees and to allow time in case the HOA is late. Consider that the person handling the request may be an overloaded manager or a homeowner volunteer struggling to handle association paperwork after their daytime job workday.

Other helpful documents

In addition to the specifically required documents, prospective buyers may seek the:

Latest monthly financial reports,

Last three board meeting minutes; and

Latest reserve study.

These are not mandatory disclosures, but they provide insight into the association’s health and operations.

HOAs and their managers should be prepared to provide these disclosures. The required documents provide valuable information, and buyers should use the information to become more informed and ultimately better members of their prospective new HOA community.

Kelly G. Richardson is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP, a California law firm known for community association advice. Send column questions to [email protected].

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