Today's Law As Amended


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AB-1101 Common interest developments: funds: insurance.(2021-2022)



As Amends the Law Today


SECTION 1.

 Section 5380 of the Civil Code is amended to read:

5380.
 (a) A managing agent of a common interest development who accepts or receives funds belonging to the association shall deposit those funds that are not placed into an escrow account with a bank, savings association, or credit union or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in this state. All funds deposited by the managing agent in the trust fund account shall be kept in this state in a financial institution, as defined in Section 31041 of the Financial Code, which is insured by the federal government, or is a guaranty corporation subject to Section 14858 of the Financial Code,  and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.
(b) At the written request of the board, the funds the managing agent accepts or receives on behalf of the association shall be deposited into an interest-bearing  account in a bank, savings association, or credit union in this state,  state that is insured by the Federal Deposit Insurance Corporation, National Credit Union Administration Insurance Fund, or a guaranty corporation subject to Section 14858 of the Financial Code,  provided all of the following requirements are met:
(1) The account is in the name of the managing agent as trustee for the association or in the name of the association.
(2) All of the funds in the account are covered by insurance provided by an agency of the federal government. government or a guaranty corporation subject to Section 14858 of the Financial Code. Those funds may only be deposited in accounts that protect the principal. In no event may those funds be invested in stocks or high-risk investment options. 
(3) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person for whom the managing agent holds funds in trust except that the funds of various associations may be commingled as permitted pursuant to subdivision (d). trust. 
(4) The managing agent discloses to the board the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.
(5) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or the managing agent’s employees.
(6) Transfers of greater than ten thousand dollars ($10,000) or 5 percent of an association’s total combined reserve and operating account deposits, whichever is lower,  funds out of the association’s reserve or operating accounts  shall not be authorized from the account  without prior written approval from the board of the association. association unless the amount of the transfer is less than the following: 
(A) The lesser of five thousand dollars ($5,000) or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests.
(B) The lesser of ten thousand dollars ($10,000) or 5 percent of estimated income in the annual operating budget, for associations with 51 or more separate interests.
(c) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.
(d) The managing agent shall not commingle the funds of the association with the managing agent’s own money or with the money of others that the managing agent receives or accepts, unless all of the following requirements are met: accepts. 
(1) The managing agent commingled the funds of various associations on or before February 26, 1990, and has obtained a written agreement with the board of each association that the managing agent will maintain a fidelity and surety bond in an amount that provides adequate protection to the associations as agreed upon by the managing agent and the board of each association.
(2) The managing agent discloses in the written agreement whether the managing agent is deriving benefits from the commingled account or the bank, credit union, or savings institution where the moneys will be on deposit.
(3) The written agreement provided pursuant to this subdivision includes, but is not limited to, the name and address of the bonding companies, the amount of the bonds, and the expiration dates of the bonds.
(4) If there are any changes in the bond coverage or the companies providing the coverage, the managing agent discloses that fact to the board of each affected association as soon as practical, but in no event more than 10 days after the change.
(5) The bonds assure the protection of the association and provide the association at least 10 days’ notice prior to cancellation.
(6) Completed payments on the behalf of the association are deposited within 24 hours or the next business day and do not remain commingled for more than 10 calendar days.
(e) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.
(f) As used in this section, “completed payment” means funds received that clearly identify the account to which the funds are to be credited.

SEC. 2.

 Section 5502 of the Civil Code is amended to read:

5502.
 (a)  Notwithstanding any other law, transfers of greater than ten thousand dollars ($10,000) or 5 percent of an association’s total combined reserve and operating account deposits, whichever is lower,  shall not be authorized from the association’s reserve or operating accounts without prior written board approval. This section applies in addition to any other applicable requirements of this part. approval from the board of the association unless the amount of the transfer is less than the following: 
(1) The lesser of five thousand dollars ($5,000) or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests.
(2) The lesser of ten thousand dollars ($10,000) or 5 percent of the estimated income in the annual operating budget, for associations with 51 or more separate interests.
(b) This section applies in addition to any other applicable requirements of this part.

SEC. 3.

 Section 5806 of the Civil Code is amended to read:

5806.
 Unless the governing documents require greater coverage amounts, the association shall maintain fidelity bond coverage  crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent,  for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for three months. The association’s fidelity bond  coverage maintained by the association  shall also include protection in an equal amount against  computer fraud and funds transfer fraud. If the association uses a managing agent or management company, the association’s fidelity bond coverage  crime insurance, employee dishonesty coverage, fidelity bond coverage, or their equivalent,  shall additionally include coverage for, or otherwise be endorsed to provide coverage for,  dishonest acts by that person or entity and its employees. Self-insurance does not meet the requirements of this section.