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Alert: New Law on HOA Reserves

| Jun 23, 2016 | HOA

HOA Reserves under the Davis-Stirling Act may be impacted by the enactment of Assembly Bill 968, which amends California Civil Code Section 4775. AB 968 changes the responsibility for exclusive use common areas. The current law under the Davis-Stirling Act effective until December 31, 2017 excludes exclusive use areas from the association’s maintenance, repair and replacement responsibilities and places that responsibility on the owner of the separate interest for maintaining any exclusive use area attached to the separate interest. The new law, in effect on January 1, 2017, reverses the responsibility requiring, generally, that if the HOA’s governing documents and/or CC&Rs are not clear on who is responsible for exclusive use common areas, then it is the HOA’ s responsibility.

The impact on the operating costs and reserves can negatively impact the financial health of your HOA. How? Depending upon the governing documents, the HOA may be liable for extensive maintenance, repairs, and replacements previously borne by the individual owners and not part of the HOA budget. What can you do? The first step is to review your governing documents.  The second step would be to amend and/or restate your governing documents to avoid this potential, financial pitfall.

L. Sue Loftin is the Founder and Shareholder of The Loftin Firm. For questions relating to this blog or any other California real estate, corporate governance, land use, or estate planning matter, contact Ms. Loftin at 760-814-9649