28 Jul 2015

California Bill AB 596 is about to pass – How to meet the criteria in your Budget Disclosure

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California Bill AB 596 has passed through both the Assembly and Senate and is currently awaiting signature.  This bill will amend Civil Code 5300 relating to Common Interest Developments and Budget Disclosures:

What does this mean for California Community Managers, Condominium Associations, and Boards of Directors?

As of July 1, 2016 all California budgets disclosures must include the following:

  • All CID’s will need to be identified as a Condominium, or not a Condominium
  • All Condominium Associations will need to disclose if they are FHA Certified in their annual budget disclosure.
  • All Condominium Associations will need to disclose if they are VA Certified in their annual budget disclosure.

Check if your Condominium Association is FHA or VA Approved

 Check FHA & VA Status for California Bill AB-596

How to meet the AB-596 Budget requirements:

Step1: Identify the type of Unit: Is the project a Condominium, Site Condo, or PUD?
  1. Determining if your Association is a Condominium, PUD, or Site Condominium is the first step.  This can be done by looking at the CCR’s or Declarations.
    1. Condominiums: If your community is under a Condominium form of ownership, the CC&R’s or Declarations will state this. In addition, condominiums have “Condo Plans” which are referred to in the Governing Documents.  If you see any reference to Condo Plans in the declarations, you can be sure its a condominium.  Keep in mind, Townhomes, Townhouses, Villas, Bungalows, Garden Homes etc. are a “style” of unit, not a legal description.  These types of units will either be a Condo, PUD, Site Condo or Single Family Home (SFR).  Condominiums will qualify for both FHA and VA approval.
    2. Site Condominium:  If your project is a under Condominium form of Ownership, but meet ALL of the following criteria, it is considered a “Site Condo”  Site condominums qualify for VA approval, but do not need FHA approval.
      1. Single family totally detached dwellings (no shared garages or any other attached buildings or e.g. archways, breezeways); and 
      2. Are encumbered by a declaration of condominium covenants or condominium form of ownership; and 
      3. The condominium unit consists of the entire structure as well as the site and air space and are not considered to be common areas or limited common areas; and 
      4. Insurance and maintenance costs are totally the responsibility of the unit owner; and 
      5. Any common assessments collected will be for amenities outside of the footprint of the individual site.
    3. PUD: If you do not see the word Condominium, or any reference to Condo Plans, the Project is most likely a PUD.  In a Planned Unit Development, the unit owner may own the land, walls, or other structural elements making up the unit.  PUD’s do not need FHA or VA approval.
    4. Single Family Homes:  Single Family homes are stand alone residences.  They are not connected to other homes or units, and they occupy their own lot.  Single Family Residences do not need FHA or VA approval.
Step 2: Does My Project Need FHA or VA Certification?
  1. Once you’ve determined the legal description of your Association, you can discern if FHA or VA Condo Certification is applicable.  See the chart below.

AB 596 california chart

Check VA and FHA Status

Step 3: The Disclosure
  1. FHA
    1. Once the the Legal unit type and Approval Status are determined, you are ready to disclose.  On a Separate page within your Budget Disclosure, using at least 10-Point font, you must insert the following statement:
      1. “Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
      2. This common interest development [is/is not (circle one)] a condominium project.
      3. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”
  2. VA
    1.  On a second separate page within your Budget Disclosure , using at least 10-Point font, you must insert the following statement:
      1. “Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
      2. This common interest development [is/is not (circle one)] a condominium project.
      3. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.”

Get Your Community FHA or VA approved

Below you will find the official language of the bill.
(10) When the common interest development is a condominium project, a statement describing the status of the common interest development as a Federal Housing Administration (FHA)-approved condominium project pursuant to FHA guidelines, including whether the common interest development is an FHA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
“Certification by the Federal Housing Administration may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the Federal Housing Administration.”
(11) When the common interest development is a condominium project, a statement describing the status of the common interest development as a federal Department of Veterans Affairs (VA)-approved condominium project pursuant to VA guidelines, including whether the common interest development is a VA-approved condominium project. The statement shall be in at least 10-point font on a separate piece of paper and in the following form:
“Certification by the federal Department of Veterans Affairs may provide benefits to members of an association, including an improvement in an owner’s ability to refinance a mortgage or obtain secondary financing and an increase in the pool of potential buyers of the separate interest.
This common interest development [is/is not (circle one)] a condominium project. The association of this common interest development [is/is not (circle one)] certified by the federal Department of Veterans Affairs.”
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