Some may or may not be aware of how HOAs are governed in places such as California and how decisions are made. Where are these rules coming from? Who puts them into action?
The Davis Stirling Act is the driving factor behind all of this, and you’ll want to know a bit about it:
What is it?
It’s a section of law that specifically regulates California’s community associations
Who does it apply to?
All forms of common interest developments in California
Why is it so important?
It protects the homes of millions of Californians served by associations
This article will explain in detail what the Davis Stirling Act is and how it manages your association. We’ll get into the history and why it even exists in the first place. Education is important here at Dials and we’re constantly trying to make your life easier whether you’re an HOA board member or a homeowner trying to understand how all of this works. It’s good to be informed on how your association works and this article outlines why the board makes the decisions it does.
Let’s look at the history of how the Davis Stirling Act came into effect. In the 1950s and 1960s, the explosion of single-family homes led to a shortage of quality land (and land in general), resulting in a different approach when constructing living units. The approach taken was to create higher-density living spaces on land that was previously classified as unsuitable for housing due to quality or distance away from cities. The result of this was the creation of common area structures in the form of apartments and condominiums which needed to be maintained with more specific measures. As the ’80s crept in and construction continued, the major limitations in California laws became evident and left HOAs poorly maintained, planned, and weakly regulated. The existing laws were soon identified as not suitable for such high growth. A committee got together and designed a more specific rulebook for such developments resulting in the creation of the Davis Stirling Act of 1985. Now that we understand the reason behind the formation of the Davis Stirling Act, let’s look at some of the terms often used in HOA management and what they mean.
Here are some terms you’ll want to familiarize yourself with as a person who owns a condo or a unit in a Planned Unit Development.
A portion of the California Civil Code that governs condominiums, cooperatives, and planned unit development communities in California.
Standing for Covenants, Conditions, and Restrictions, CC&Rs are used by many common interest developments to regulate the use, appearance, and maintenance of a property.
Common interest development
A form of real estate where each homeowner holds exclusive rights to portions of the property (i.e. a unit) and shared ownership to other portions of the property (Eg. a community pool, elevators, stairs, fire safety systems, etc.).
Board members are responsible for making decisions regarding various aspects of their HOA and then communicating these decisions to homeowners. Board member roles include president, treasurer, and secretary. In most cases, a board member is also a homeowner in the association.
Assessment fees are payments made by homeowners intended to cover expenses the HOA is responsible for. Examples of these expenses would include lawn care, pool maintenance, elevator servicing, roof repair, etc., depending on what constitutes common areas for that HOA.
Now that you’re aware of some of the terms used, let’s talk about maintenance and repairs that will inevitably come up. In general, the association is responsible for repairing and maintaining the common areas. At the end of each fiscal year, the board decides the budget for the upcoming year. Fees are then collected from the homeowners in the form of assessments. For non-common areas such as units, homeowners are responsible for the repairs and general maintenance. This was a general overview of who takes responsibility for which repairs in an association. Let’s take a closer look at how they are paid for.
Repairs can come in all shapes and sizes and of course, prices. The Davis Stirling Act requires HOAs to follow all defined measures outlined in the bill regarding assessments. Assessments are commonly set at the start of each year and are reviewed annually. Upon HOA’s board approval, assessments can be increased with some limitations outlined in the act. Another type of assessment is created to cover unexpected urgent repairs. This type of assessment is called a special assessment. Determining the amount owed by each unit via excel sheets which no one fully understands is both cumbersome and prone to errors. This is where you can count on Dials– it’s our mission to help streamline this process and ensure that your fees are calculated more easily and accurately. We accept this challenge with grace the same way you’ve taken on the responsibility of being a board member of an HOA. Assessments help maintain the value of your property and the integrity of your common areas, so be sure to think of Dials the next time you’re doing your bookkeeping.
Assessments among other things need to be documented every year in the form of annual budget reports. Distributed 30-90 days before the end of the fiscal year, these reports need to include various documentation. A thorough outline of all documentation required can be found in article 7 section 5300 of the Davis Stirling Act, but to save you some time we’ve put together a comprehensive checklist for you below:
Go ahead and print it out!
Also, here’s a link to the Document disclosure summary form in case you were wondering where to find it. We hope this was helpful to get you going on annual reports.
We realize board members are volunteers and take on this responsibility for the good of their community. We want our user experience to reflect the same type of care and kindness. Our goal is to enable you to easily implement these complicated legislations and confusing rulebooks. Dials HOA software is designed to handle repetitive tasks for you so you can focus on the more important topics. Stay tuned for more while we continue to ship features for people just like you. Visit us at www.dials.com and sign up for our mailing list so we can get you onboard asap. See you there!
– The Dials team