La Mirada HOA Sales Transaction & AB 2912
Posted on June 9, 2021 at 11:30 pm | Uncategorized
A client of ours was a party to an transaction and new to HOA’s so we wanted to be sure they had as much information as possible to get them off on the right foot.
We made the usual inquiries during the due diligence – contingency period (solvency review of financials including budget, reserve study, governing doc provisions and so on). I wanted to ensure my client was aware of their right to inspect association documents such as: copies of contracts, governing documents, tax returns, minutes of meeting (including agendas) and membership list (California Civil Code Section 5200-5240). The statue requires associations to provide requested records 10 days after receipt of the request; however, a membership list must be provided within 5 days.
While speaking with the management representative, the conversation shifted to statutory protections against board fraud in HOA’s. I have heard of broad members taking vacations with the association’s money while past due notices were plastered on the front entry gate. Business Judgment Rules (found in CA Corporations Code 7231) protects HOA directors liability only if they acting in good faith for the association’s best interest. The type of outrageous fraud like that mentioned above may have prompted provisions in the AB-2912 where a fidelity bond is now required under AB 2912, which includes expansion of the prior statue now making it mandatory for a board to review the financial one per calendar month as opposed to once a quarter. The transfer of funds over $10,000.00 or 5% of the combined operating account deposits/reserves is prohibited without prior written approval of the board.
I have lived in associations dating back to the late 1990’s and my wife and I currently reside in a La Mirada Common Interest Development. During my personal and professional dealings with association boards, I have seen the good, bad, and ugly when it comes to how some handle the financials of an association.
The most important aspect of the story was of course the closed transaction and another satisfied client. When looking to sell or lease your unit in a La Mirada HOA, feel free to consider the Williams’ Team Real Estate and our firm Global Realty Group.
My next blog will discuss the ‘shake, rattle and roll’ facts of HOA’s and earthquake insurance.