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Annual Disclosure Summary for Common Interest Developments

We are well into the second half of 2022.  With 2023 just around the corner, we write this as a friendly reminder of the annual disclosure requirements under the Davis-Stirling Common Interest Development Act (the “Act”).

As you may know, the Act requires common interest developments (“CIDs”) to prepare and distribute certain disclosures annually.  If you live within a planned unit development, condominium complexes, stock cooperatives, and community apartment projects, then you live in a CID and these disclosures apply to you.

A CID must distribute to its members or tenant-shareholders 1) Annual Budget Report and 2) Annual Policy Statement within 30 to 90 days before the end of that CID’s fiscal year. Please note that while these to items are what is required under the Act, your CID’s governing documents may require disclosures of additional information.

Below is a summary of the annual disclosures under the Act.

The Annual Budget Report must include:

  1. Pro forma operating budget;
  2. Reserve summary, showing:
    1. Total cash reserves currently set aside;
    2. The following, as of the end of the fiscal year for which the study is prepared:
      • the current estimate of the amount of cash reserves necessary to repair, replace, restore, or maintain the major components;
      • The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain major components; and
      • If applicable, a summary of the funds related to compensatory damage award or settlement to the CID.
    3. The percentage of the current reserves amount on hand compared to the estimate of reserves necessary to repair, replace, restore, or maintain the major components;
    4. The current deficiency in reserve funding (expressed on a per unit basis).
  3. A summary of the Board of Director’s (“Board”) plan to fund reserves;
  4. A statement regarding the Board’s deferred repairs and/or replacement;
  5. A statement regarding anticipated special assessments;
  6. A statement as to how the Board will fund reserves or repair major components;
  7. A statement about the procedures used to fund reserves;
  8. Outstanding loan statement;
  9. Insurance policy summary;
  10. If the CID is a condominium project, a statement describing the status as a Federal Housing Administration-approved condominium project;
  11. If the CID is a condominium project, a statement as to whether the CID is a federal Veterans Affairs-approved condominium project; and
  12. A list of the charges for providing CID documents.

The Annual Policy Statement must include:

  1. The name and address of person designated to receive official communications to the CID;
  2. A statement to members notifying them of their right to have notices sent to up to two addresses;
  3. General notice of the location, if any, designated for the posting of general notices;(If no location is designated in the Annual Policy Statement, then the CID may not post general notices in any common area location);
  4. Notice of members’ option to receive general notice by individual delivery;
  5. Notice of members’ right to receive board minutes;
  6. A statement on assessment collections policies;
  7. A statement describing the CID’s policies and practices in enforcing lien rights or other legal remedies for default in the payment of assessments;
  8. A statement describing the discipline policy, if any, including any schedule of penalties for violations of the governing documents;
  9. Summary of dispute resolution procedures;
  10. Summary of any requirements for CID approval of a physical change to property;
  11. The mailing address for overnight payment of assessments; and
  12. Any other information that is required by law or the governing documents or that the Board determines to be appropriate for inclusion.

We should also mention here the requirement to review of the financial statement, which should be distributed within one hundred twenty (120) days after the end of the fiscal year. The review of the financial statement must be prepared in accordance with generally accepted accounting principles (also known as “GAAP”) for any fiscal year in which the gross income exceeds $75,000.

If your CID has not begun preparing these annual disclosures, we are available to assist you.

Please let us know if you have any questions or if your Board would like to discuss preparing these disclosures.

We here at Scherer Smith & Kenny LLP remain available to address any questions you may have related to these or other employment- or business-related issues.  For additional information, please contact Bill Scherer at [email protected] or [email protected].

– Written by Louis Sarmiento