Common interest developments: management.

Typo correction in Section 5200 (alternate version SEC. 4.5): 'Reserve account balances study pursuant to Section 5550' was corrected to 'Reserve study pursuant to Section 5550.'

Procedural changes: amendment history dates removed, Senate and Assembly passage dates added (August 27 and August 26, 2026 respectively), and the bill was reformatted from line-numbered amendment style to clean enrolled bill layout.

The amendment to Civil Code Section 2295, which would have expanded the definition of 'agent' to include any person or company facilitating activities under Sections 5300, 5310, and 5500, is entirely removed. This means the bill no longer broadens who qualifies as an agent under the Davis-Stirling Act.

New Section 5390 (duty of care) is narrowed from 'any person or entity managing agent, including its employees' to only 'any managing agent, including its employees.' This limits the prudent duty of care obligation to formally designated managing agents rather than any person or entity performing related activities.

A new Section 4.5 incorporates changes from AB 739 to Civil Code Section 5200, adding paragraph (16) to the definition of 'association records' requiring inclusion of statements of fees charged by the managing agent pursuant to subdivision (g) of Section 5500. This is operative only if both bills are enacted and SB 1238 is enacted last.

A new provision incorporates changes from AB 2050 to Civil Code Section 5550 (reserve studies), operative only if both bills are enacted and SB 1238 is enacted last. The specific text of these changes is not fully visible in the truncated diff.

Section 4525 is clarified: the previous version stated the owner 'shall be able to obtain' certain documents, while the new version states the owner 'shall provide' those documents to a prospective purchaser. This makes the disclosure obligation more explicit and active rather than passive.

In Section 5551, references to 'balcony exterior elevated elements' are changed to simply 'exterior elevated elements,' broadening the scope of the inspection and disclosure requirements beyond just balconies to all exterior elevated elements. Garbled text in paragraphs (C)(i)(I) through (III) is also cleaned up.

The definition of 'management services' in Section 11500(d) now explicitly includes 'a managing agent and its employees,' making clear that employees of a managing agent are covered by the regulatory framework, not just the entity itself.

The duty-of-care provision in new Section 5390 now explicitly names 'managing agent, including its employees' as entities that owe a prudent duty of care and highest good faith effort to the association and its members, rather than using the broader phrase 'any person or entity.'

A new item (5) was added to the definition of 'management services': implementing or administering activities pursuant to Sections 5300, 5310, and 5500 of the Civil Code. This brings financial reporting and budget-related activities squarely within the definition of management services.

Section 4525 now requires the association itself to provide documents (paragraphs 1 through 11) to the owner of a separate interest or their agent upon request, as soon as practicable. Previously, the language only stated that the owner 'shall be able to obtain' the documents, which was less explicit about who bears the obligation to provide them.

Multiple disclosure provisions in Section 4525(11) were updated to replace references to 'balcony' and 'exterior structures' with the broader term 'exterior elevated elements,' aligning the disclosure language with the terminology used in Section 5551. This broadens what must be disclosed beyond just balconies to include decks, stairways, walkways, and railings.

Section 4525(11)(C)(i)(I) now refers to 'a unit owner, an owner of a separate interest' rather than just 'a unit owner,' broadening the class of persons whose maintenance obligations must be disclosed. It also changes 'covenants, codes, and restrictions' to 'covenants, restrictions, or conditions.'

Section 5550(a) removed the introductory phrase 'In addition to the inspection mandated pursuant to Section 5551 every nine years' and removed the trailing language 'to ensure the maintenance of components under the association's control,' simplifying the reserve study requirement without changing the underlying obligation.

The definition of 'agent' in Civil Code Section 2295 was narrowed. The Senate version required that a facilitating person or company also be 'required to provide a fiduciary duty to the board of a homeowner's association and its members.' The Assembly version removed this fiduciary duty requirement, so any person or company facilitating activities under Sections 5300, 5310, and 5500 now qualifies as an agent without that additional obligation.

The definition of 'professional association for common interest development managers' in Business and Professions Code Section 11500(e) was changed. The Senate version required the organization to employ an agent or agents as defined in Civil Code Section 2295. The Assembly version removed this employment requirement, so organizations now only need to meet the existing criteria (200 members, 5 years existence, 501(c) status, certification without membership, and code of ethics).

The definition of 'major components' in Civil Code Section 5550(c) was changed from an exhaustive list ('includes associated waterproofing systems...') to a non-exhaustive one ('includes, but is not limited to, associated waterproofing systems...'). This broadens what can be considered a major component subject to reserve study requirements.

A new requirement was added in Civil Code Section 4525(a)(3): the owner must include a copy of the association's master insurance policy covering property, general liability, earthquake, flood, and fidelity coverage upon request of the property owner or prospective purchaser. This is a significant new disclosure obligation for buyers.

Civil Code Section 4525(a) was changed from requiring the owner to 'provide' documents to prospective purchasers to requiring the owner to 'be able to obtain' the documents AND provide them to prospective purchasers. This adds an affirmative obligation on the owner to have access to these records, not just a duty to hand them over at sale.

A new paragraph was added to Civil Code Section 5550(b) requiring that the reserve study include the cost of repair, replacement, restoration, or maintenance of components identified in the report required under Section 5551 (the balcony/exterior elevated elements inspection). This ties balcony inspection findings directly into reserve funding planning.

In Civil Code Section 4525(a)(11)(C)(i)(I), the language was changed from 'The covenants, codes, and restrictions require a unit owner...' to 'The covenants, codes, and restrictions, or conditions require a unit owner...' (though it contains an apparent typo with 'restrictions' repeated). The addition of 'or conditions' broadens what governing document provisions trigger the disclosure about individual maintenance responsibility for exterior elevated elements.

Removed the prohibition on HOA boards expending reserve funds to threaten litigation involving any real property owner of record or relative of that owner who is a member of the association. The new language in Section 5510(c) simply prohibits spending reserve funds on 'other litigation or legal services that are not identified in subdivision (b),' removing the specific anti-litigation-threat protection for individual owners.

Removed Section 5520, which had required general notice to members when reserve funds were used for litigation and mandated quarterly accounting of litigation expenses made available for member inspection.

Restructured Section 4525 disclosure requirements for prospective purchasers. The old version required associations employing a manager to separately disclose exterior element repair information and provided a 'uniform overview' related to federal lending rules defining 'critical repair.' The new version requires purchasers to separately request specific data points (location of findings on first page of report, balconies needing repairs over $10,000) and removes the federal lending rule alignment language.

Modified Section 5550 three-year visual inspection requirement. Removed the phrase 'to ensure occupant safety' from the purpose of the inspection. Added a requirement that the board review the study annually and implement necessary adjustments to its analysis of reserve account requirements. Clarified the budget threshold by specifying it excludes the association's reserve account.

Removed Section 5515, which had governed temporary transfers of money from reserve funds to the general operating fund. That section required board notice, written findings in minutes, restoration of funds within one year, and prohibited using transferred funds for litigation against owners. The entire mechanism is now gone.

The bill's scope narrowed: it no longer amends Civil Code Sections 5515, 5520, or 5570. It now adds Section 5390 instead. The overall focus shifted from restricting how boards use reserve funds against individual owners toward establishing duty-of-care standards for service providers and refining inspection protocols.

Added new Section 5390 to the Civil Code establishing that any person or entity facilitating activities under Sections 5300, 5310, and 5500 (or other board-authorized activities) owes a duty of care that is 'prudent and provides the highest good faith effort' to the association and its members. This creates a new legal standard for third parties involved in association financial management.

Expanded Section 5551 with new definitions for 'associated waterproofing systems,' 'exterior elevated elements,' 'load-bearing components,' 'statistically significant sample' (95 percent confidence, plus or minus 5 percent margin of error), and 'visual inspection.' Added procedural requirements for generating a random list before inspection and conducting further inspection when water intrusion is observed.

Section 11500(e) redefines 'professional association for common interest development managers' from an organization with at least 200 members or certificants to one that employs an agent or agents (as defined in Civil Code Section 2295) and meets the other listed criteria. This shifts the qualifying standard from membership size to whether the organization actually employs licensed agents.

Section 4525(a)(12) adds a new disclosure right: if separately requested by the purchaser, the association must provide the location on the first page of the inspection report where specific facts about exterior elevated elements and the number of impacted units may be found. This makes it easier for buyers to locate critical safety information without reading the entire report.

Section 5510(c) adds the phrase 'services that are not identified in subdivision (b)' at the end of the prohibition on using reserve funds for litigation or legal services. This clarifies that the ban applies to legal services unrelated to repair, restoration, replacement, or maintenance of major components.

Section 5520 removes a duplicate paragraph label (two paragraphs were both labeled '(b)') and renumbers the third as '(c)'. Section 5550 removes redundant opening language ('At least once every three years') that duplicated the frequency stated later in the same sentence.

Gender-neutral language updates throughout: 'himself or herself themself' changed to 'themself' in Section 11501, and 'his or her their license' changed to 'their license' in the same section. Also removed a duplicate word 'balances balances' in Section 5200.

The bill's title section removes Sections 5510 and 5515 from the list of Civil Code sections being amended and adds a duplicate reference to Section 5565, suggesting a correction to the statutory cross-references.