§ 1365 Civ.

  Unless the governing documents impose more stringent standards, the
association shall prepare and distribute to all of its members the
following documents:

  (a) A pro forma operating budget, which shall include all of the
following:

  (1) The estimated revenue and expenses on an accrual basis.

  (2) A summary of the association's reserves based upon the most
recent review or study conducted pursuant to Section 1365.5 Civ., which
shall be printed in bold type and include all of the following:

  (A) The current estimated replacement cost, estimated remaining
life, and estimated useful life of each major component.

  (B) As of the end of the fiscal year for which the study is prepared:

  (i) The current estimate of the amount of cash reserves necessary
to repair, replace, restore, or maintain the major components.

  (ii) The current amount of accumulated cash reserves actually set
aside to repair, replace, restore, or maintain major components.

  (iii) If applicable, the amount of funds received from either a
compensatory damage award or settlement to an association from any person
or entity for injuries to property, real or personal, arising out of any
construction or design defects, and the expenditure or disposition of
funds, including the amounts expended for the direct and indirect costs
of repair of construction or design defects. These amounts shall be
reported at the end of the fiscal year for which the study is prepared as
separate line items under cash reserves pursuant to clause (ii). In lieu
of complying with the requirements set forth in this clause, an
association that is obligated to issue a review of their financial
statement pursuant to subdivision (b) may include in the review a
statement containing all of the information required by this clause.

  (C) The percentage that the amount determined for purposes of clause
(ii) subparagraph (B) equals the amount determined for purposes of clause
(i) of subparagraph (B).

  (3) A statement as to whether the board of directors of the association
has determined or anticipates that the levy of one or more special
assessments will be required to repair, replace, or restore any major
component or to provide adequate reserves therefor.

   (4) A general statement addressing the procedures used for the
calculation and establishment of those reserves to defray the future
repair, replacement, or additions to those major components that the
association is obligated to maintain.

  The summary of the association's reserves disclosed pursuant to
paragraph (2) shall not be admissible in evidence to show improper
financial management of an association, provided that other relevant
and competent evidence of the financial condition of the association
is not made inadmissible by this provision.

  A copy of the operating budget shall be annually distributed not
less than 45 days nor more than 60 days prior to the beginning of the
association's fiscal year.

  (b) A review of the financial statement of the association shall be
prepared in accordance with generally accepted accounting principles by a
licensee of the California Board of Accountancy for any fiscal year in
which the gross income to the association exceeds seventy-five thousand
dollars ($75,000). A copy of the review of the financial statement shall
be distributed within 120 days after the close of each fiscal year.

  (c) In lieu of the distribution of the pro forma operating budget
required by subdivision (a), the board of directors may elect to
distribute a summary of the pro forma operating budget to all of its
members with a written notice that the pro forma operating budget is
available at the business office of the association or at another
suitable location within the boundaries of the development, and that
copies will be provided upon request and at the expense of the
association. If any member requests that a copy of the pro forma
operating budget required by subdivision (a) be mailed to the member, the
association shall provide the copy to the member by first-class United
States mail at the expense of the association and delivered within five
days. The written notice that is distributed to each of the association
members shall be in at least 10-point boldface type on the front page of
the summary of the budget.

  (d) A statement describing the association's policies and practices in
enforcing lien rights or other legal remedies for default in payment of
its assessments against its members shall be annually delivered to the
members during the 60-day period immediately preceding the beginning of
the association's fiscal year.

   (e) (1) A summary of the association's property, general liability,
and earthquake and flood insurance policies, which shall be distributed
within 60 days preceding the beginning of the association's fiscal year,
that includes all of the following information about each policy:

  (A) The name of the insurer.

  (B) The type of insurance.

  (C) The policy limits of the insurance.

  (D) The amount of deductibles, if any.

  (2) The association shall, as soon as reasonably practicable, notify
its members by first-class mail if any of the policies described in
paragraph (1) have lapsed, been canceled, and are not immediately
renewed, restored, or replaced, or if there is a significant change, such
as a reduction in coverage or limits or an increase in the deductible, as
to any of those policies. If the association receives any notice of
nonrenewal of a policy described in paragraph (1), the association shall
immediately notify its members if replacement coverage will not be in
effect by the date the existing coverage will lapse.

  (3) To the extent that any of the information required to be disclosed
pursuant to paragraph (1) is specified in the insurance policy declaration
page, the association may meet its obligation to disclose that information
by making copies of that page and distributing it to all of its members.

  (4) The summary distributed pursuant to paragraph (1) shall contain, in
at least 10-point boldface type, the following statement:

  "This summary of the association's policies of insurance provides only
certain information, as required by subdivision (e) of Section 1365 Civ.
of the Civil Code, and should not be considered a substitute for the
complete policy terms and conditions contained in the actual policies of
insurance. Any association member may, upon request and provision of
reasonable notice, review the association's insurance policies and, upon
request and payment of reasonable duplication charges, obtain copies of
those policies. Although the association maintains the policies of
insurance specified in this summary, the association's policies of
insurance may not cover your property, including personal property or,
real property improvements to or around your dwelling, or personal
injuries or other losses that occur within or around your dwelling. Even
if a loss is covered, you may nevertheless be responsible for paying all
or a portion of any deductible that applies. Association members should
consult with their individual insurance broker or agent for appropriate
additional coverage."

(Amended by Stats. 1999, Ch. 898, § 1. Effective January 1,
2000; Amended by Stats. 2000, ch. 1055, § 8.)