Distribute Budget Packages and Most Annual Financial Disclosures Electronically

By David Swedelson, Senior Partner, SwedelsonGottlieb; Condo Lawyer and HOA Attorney

Apparently there are many of you out there that are not aware that as of January 2010, California community associations are permitted by law to distribute budget packages and most annual disclosure documents to owners electronically so long as owners give their written consent to receive them by email. Once that consent is obtained, budget distribution can become virtually paperless. To read the statute, follow this link for Civil Code § 1350.7. This statute was amended effective in 2010 to permit all notices listed in a new Index (read the statute) to be distributed electronically, by following the member consent requirements in the Corporations Code.

To know what documents can be sent to owners electronically, you need to know what’s in the Davis-Stirling index that lists the following disclosure documents that associations must send to their members and that most associations compile and distribute once a year at budget time:

• Pro Forma Operating Budget (which includes the reserve disclosures)
• Reserve Funding Plan • Annual Update of Reserve Funding Plan • Assessment and Reserve Funding Disclosure Summary (form)
• Assessment Collection Policy • Statutory Notice / Assessments and Foreclosure (form)
• Secondary Address Notification Request • Insurance Coverage Summary • Board Minutes Access • Alternative Dispute Resolution Summary • Meet-and-Confer Program Summary • Architectural Changes Notice • Monetary Penalties (Fine) Schedule • Year-End Review of Financial Statement
Each of these disclosure documents can be provided electronically to a consenting owner via email and will satisfy the association’s obligation to make the listed disclosures to that member (and save the association a lot of money that would have been spent on paper, photocopying and postage).

The Civil Code has for some time also authorized other documents and notices to be delivered, with owner consent, via email:

• Notices of Proposed and Adopted Rule Changes • Rule Changes Themselves • Notices of Member Petitions to Reverse Rule Changes • Notices of Year-End Financial Reports ($10,000 to $75,000 in annual revenue)

There are still some documents that the Code does not allow to be sent via email. The Index (referenced above) does not include all notices and disclosures that associations are required to make to members. The following documents and notices must still be distributed in written form, mailed or delivered as otherwise stated in the law:

• 30 to 60 Day Notices of Assessment Increases and Special Assessments • Collection and Foreclosure Notices • Notices of Use of Reserve Funds • Disclosures to Sellers • Notices of Disciplinary Proceedings and of Sanctions Imposed • Notices of Construction Defect Litigation, Resolution and Repair Plans
It is important to get this right or otherwise an owner can complain that they did not properly receive an important disclosure document. Note: if a particular disclosure or notice is not on the “Index” or not otherwise expressly permitted by the Code to be electronically delivered, then it can’t be.

And member consent means getting an owner’s written consent. Even if an association’s rules or other governing documents are amended to authorize email delivery of all documents, neither Davis-Stirling nor the Corporations Code allows for this.

David Swedelson can be contacted via email: dcs@sghoalaw.com