Disclosures for Owners & Purchasers

California Civil Code section 4525 provides that the owner of a separate interest, other than an owner subject to the requirements of section 11018.6 of the California Business and Professions Code, shall, as soon as practicable before transfer of title to the separate interest or execution of a real property sales contract therefor, as described in Business and Professions Code section 2985, provide the following to a prospective purchaser. See Section 4525 for the list of documents.

D&O Insurance

This stands for Directors and Officers Liability Insurance. D&O insurance is intended to defend and indemnify the directors and officers of an association and often the association itself, usually against claims made by other persons arising out of alleged losses or damage other than bodily injury or property damage and possibly other personal (non-bodily) injury losses, such as libel or slander, that are covered under the typical commercial general liability (“CGL”) insurance policy. For directors and officers to obtain the limitations against liability offered by Civil Code section 5800, associations must have D&O insurance in the amounts specified in the statute. See the Article, Insurance for Community Associations, for more information.

Discrimination

The unlawful denial of rights or privileges of membership or occupancy, usually based on “suspect classification” (i.e., on the basis of race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, or genetic information).

Davis-Stirling Act

The Davis-Stirling Act was originally passed into law in 1985 with the purpose of creating, governing and guiding homeowners associations. After 28 years of amendments and revisions, the entire Act was re-codified on January 1, 2014. The Act serves as one of the set of laws governing the day-to-day activities of associations. In addition to the Act, the Corporations Code, Civil Code and other miscellaneous statutes provide the framework within which these associations operate.

Distributing Assets to Members

A member receiving cash or other distribution of assets from the association generally receives an adjustment in the member’s basis in the separate interest rather than taxable income. As association is not permitted to distribute its assets to its members when the association is dissolved – in this instance, an association must distribute its assets to another non-profit organization formed for religious, charitable or other public purpose.

Daycare Homes

Public policy strongly favors allowing home operated child daycare centers. Daycare facilities operated in compliance with the California Health and Safety Code cannot be prohibited on the basis that they violate residential use restrictions or commercial use prohibitions contained in the governing documents.

Document Delivery Methods

Civil Code sections 4040, 4045 and 4050 control the methods of document delivery. Members may be sent notice of delivery via first class mail, postage prepaid, registered mail, express mail, or overnight delivery. In addition, members may receive their notices and deliveries via electronic means, such as email and facsimile, if they have consented in writing.

Declarant

A Declarant is, typically, an individual or entity who establishes a residential or commercial project and creates an association to manage it. A Declarant will draft and record a set of CC&Rs against the property comprising the project and will usually reserve certain rights to itself as a Declarant including the right to appoint a majority of directors and make unilateral (i) amendments to the governing documents and (ii) annexations of additional property into an association. A Declarant may also exempt itself from certain provisions in the governing documents including architectural control. A Declarant may also be a homeowner-controlled association that restates its CC&Rs and/or bylaws (i.e., completely replaces its existing CC&Rs and/or bylaws with a new set). A Declarant may also be a developer.

Dogs

Domesticated dogs are included within the definition of “pet” in Civil Code section 4715. Associations can adopt reasonable rules or CC&R amendments on the number, breed, behavior, and size of permissible dogs. Insurance companies typically have a list of aggressive dog breeds. Dog owners are liable for the behavior of their dogs and are subject to civil suit for bites and creating a nuisance (e.g., barking).