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By Sandra M. Bonato, Esq.
Beginning January 1, 2010, California's community associations may now distribute their budget packages and most annual financial disclosures to owners over the Internet. Owners' written consent to receive their budgets by email will be required. Once that consent is obtained, however, budget distribution can become virtually paperless. The 21st century has at last arrived!
In the second of our series on e-delivery of budgets and annual disclosures (look for it!), we'll tell you how to get ready. This first article outlines the new law, identifies which disclosures can be made electronically and which still cannot, and what degree of owner consent is required and why.
AB 899 (Torres)
AB 899 (Torres) was signed into law on October 11, 2009 and becomes effective on January 1, 2010. Sponsored by the Executive Council of Homeowners (ECHO), AB 899 began as an effort to list in one location in the Davis-Stirling Common Interest Development Act all the annual financial disclosures that associations must make. By listing them in this new Index, omitting an important disclosure would be far less likely.
Once the Index was developed, ECHO's effort turned to proposing changes in existing law to allow associations to make each of the listed disclosures available to consenting association members through their email addresses rather than by hard copy through the mail. Thousands of pages of paper, printing costs, and postage could be saved.
The changes in Davis-Stirling are both historic and simple. Existing law (Civil Code § 1350.7) was amended in AB 899 to permit all notices listed in the new Index to be distributed electronically, by following the member consent requirements in Section 20 of the Corporations Code, which in turn requires compliance with similar provisions in the Electronic Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001(c)(1). Section 20 and federal law describe how the members of corporations can receive documents electronically. In this simple fashion, the authority to make many disclosures by email was achieved.
What's in the New Index?
To know what documents can be sent electronically starting in 2010, you need to know what's in the new Davis-Stirling index. There you will find listed the following disclosure documents that associations must send to their members and that most associations compile and distribute once a year at budget time:
With a member's written consent, each of these documents can be provided electronically to that member's email address, beginning in 2010. E-delivery will satisfy the association's obligation to make the listed disclosures to that member.
What Other Notices Can Already Be Sent Electronically?
The law has for some time authorized the following documents and notices to be e-delivered, with member consent:
What Disclosures Still Cannot Be E-Delivered?
The Index does not include all notices and disclosures that associations must make to members. Even if a member consents to e-delivery, the following must still be prepared in written form and mailed or delivered as otherwise stated in the law:
In short, if a particular disclosure or notice is not on the Index or not otherwise expressly permitted by law to be electronically delivered, then it can't be.
Can We Obtain Member Consent by Simply Adopting a Rule?
No. Even if an association's rules or other governing documents seemingly authorize e-delivery of documents, neither Davis-Stirling nor the Corporations Code allows for e-delivery on any authority other than each member's individual written consent to receive disclosures by email. And because email boxes are generally personal to individuals, arguably each owner of a lot or unit (not simply one) will need to sign the consent form.
In our next article, we'll tell you how to get ready to maximize your association's e-delivery of disclosures pursuant to this exciting new law. We'll also provide some important guidelines for record-keeping and document security in the electronic era.
WHAT HAPPENS WHEN A COMMUNITY ASSOCIATION FAILS?
Does the Experience in Florida Presage the Future for California?
By Tyler Berding
"What are Assessments used for?"
Assessments are used for operating expenses and for the reserve accounts. Operating expenses are the costs of running the common interest development and include such things as utilities, insurance, management, maintenance and repair.
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