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CIVIL CODE
SECTION 5550-5580

Reserve Planning


5550.  (a) At least once every three years, the board shall cause to
be conducted a reasonably competent and diligent visual inspection
of the accessible areas of the major components that the association
is obligated to repair, replace, restore, or maintain as part of a
study of the reserve account requirements of the common interest
development, if the current replacement value of the major components
is equal to or greater than one-half of the gross budget of the
association, excluding the association's reserve account for that
period. The board shall review this study, or cause it to be
reviewed, annually and shall consider and implement necessary
adjustments to the board's analysis of the reserve account
requirements as a result of that review.
   (b) The study required by this section shall at a minimum include:
   (1) Identification of the major components that the association is
obligated to repair, replace, restore, or maintain that, as of the
date of the study, have a remaining useful life of less than 30
years.
   (2) Identification of the probable remaining useful life of the
components identified in paragraph (1) as of the date of the study.
   (3) An estimate of the cost of repair, replacement, restoration,
or maintenance of the components identified in paragraph (1).
   (4) An estimate of the total annual contribution necessary to
defray the cost to repair, replace, restore, or maintain the
components identified in paragraph (1) during and at the end of their
useful life, after subtracting total reserve funds as of the date of
the study.
   (5) A reserve funding plan that indicates how the association
plans to fund the contribution identified in paragraph (4) to meet
the association's obligation for the repair and replacement of all
major components with an expected remaining life of 30 years or less,
not including those components that the board has determined will
not be replaced or repaired.



5560.  (a) The reserve funding plan required by Section 5550 shall
include a schedule of the date and amount of any change in regular or
special assessments that would be needed to sufficiently fund the
reserve funding plan.
   (b) The plan shall be adopted by the board at an open meeting
before the membership of the association as described in Article 2
(commencing with Section 4900) of Chapter 6.
   (c) If the board determines that an assessment increase is
necessary to fund the reserve funding plan, any increase shall be
approved in a separate action of the board that is consistent with
the procedure described in Section 5605.


5565.  The summary of the association's reserves required by
paragraph (2) of subdivision (b) of Section 5300 shall be based on
the most recent review or study conducted pursuant to Section 5550,
shall be based only on assets held in cash or cash equivalents, shall
be printed in boldface type, and shall include all of the following:
   (a) The current estimated replacement cost, estimated remaining
life, and estimated useful life of each major component.
   (b) As of the end of the fiscal year for which the study is
prepared:
   (1) The current estimate of the amount of cash reserves necessary
to repair, replace, restore, or maintain the major components.
   (2) The current amount of accumulated cash reserves actually set
aside to repair, replace, restore, or maintain major components.
   (3) If applicable, the amount of funds received from either a
compensatory damage award or settlement to an association from any
person for injuries to property, real or personal, arising out of any
construction or design defects, and the expenditure or disposition
of funds, including the amounts expended for the direct and indirect
costs of repair of construction or design defects. These amounts
shall be reported at the end of the fiscal year for which the study
is prepared as separate line items under cash reserves pursuant to
paragraph (2). Instead of complying with the requirements set forth
in this paragraph, an association that is obligated to issue a review
of its financial statement pursuant to Section 5305 may include in
the review a statement containing all of the information required by
this paragraph.
   (c) The percentage that the amount determined for purposes of
paragraph (2) of subdivision (b) equals the amount determined for
purposes of paragraph (1) of subdivision (b).
   (d) The current deficiency in reserve funding expressed on a per
unit basis. The figure shall be calculated by subtracting the amount
determined for purposes of paragraph (2) of subdivision (b) from the
amount determined for purposes of paragraph (1) of subdivision (b)
and then dividing the result by the number of separate interests
within the association, except that if assessments vary by the size
or type of ownership interest, then the association shall calculate
the current deficiency in a manner that reflects the variation.




5570.  (a) The disclosures required by this article with regard to
an association or a property shall be summarized on the following
form:

Assessment and Reserve Funding Disclosure Summary For the Fiscal Year
Ending   _____
   (1) The regular assessment per ownership interest is $_____ per
____. Note: If assessments vary by the size or type of ownership
interest, the assessment applicable to this ownership interest may be
found on page _____ of the attached summary.
   (2) Additional regular or special assessments that have already
been scheduled to be imposed or charged, regardless of the purpose,
if they have been approved by the board and/or members:

+---------------+----------------+-----------------+
|               |   Amount per   |                 |
|               |    ownership   |                 |
|               |  interest per  |                 |
|               |  month or year |                 |
|               | (If assessments|                 |
|               |  are variable, |                 |
|      Date     |       see      |                 |
|   assessment  |      note      |                 |
|    will be    |   immediately  | Purpose of the  |
|      due:     |     below):    |   assessment:   |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |                |                 |
+---------------+----------------+-----------------+
|               |Total:          |                 |
+---------------+----------------+-----------------+

   Note: If assessments vary by the size or type of ownership
interest, the assessment applicable to this ownership interest may be
found on page ____ of the attached report.
   (3) Based upon the most recent reserve study and other information
available to the board of directors, will currently projected
reserve account balances be sufficient at the end of each year to
meet the association's obligation for repair and/or replacement of
major components during the next 30 years?
   Yes _____    No _____
   (4) If the answer to (3) is no, what additional assessments or
other contributions to reserves would be necessary to ensure that
sufficient reserve funds will be available each year during the next
30 years that have not yet been approved by the board or the members?

+------------------+-------------+
|                  |  Amount per |
|                  |  ownership  |
| Approximate date |   interest  |
|    assessment    | per month or|
|   will be due:   |    year:    |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |             |
+------------------+-------------+
|                  |Total:       |
+------------------+-------------+

   (5)  All major components are included in the reserve study and
are included in its calculations.
   (6) Based on the method of calculation in paragraph (4) of
subdivision (b) of Section 5570, the estimated amount required in the
reserve fund at the end of the current fiscal year is $____, based
in whole or in part on the last reserve study or update prepared by
____ as of ____ (month), ____ (year). The projected reserve fund cash
balance at the end of the current fiscal year is $____, resulting in
reserves being ____ percent funded at this date.
   If an alternate, but generally accepted, method of calculation is
also used, the required reserve amount is $____. (See attached
explanation)
   (7) Based on the method of calculation in paragraph (4) of
subdivision (b) of Section 5570 of the Civil Code, the estimated
amount required in the reserve fund at the end of each of the next
five budget years is $______, and the projected reserve fund cash
balance in each of those years, taking into account only assessments
already approved and other known revenues, is $______, leaving the
reserve at ______ percent funding. If the reserve funding plan
approved by the association is implemented, the projected reserve
fund cash balance in each of those years will be $______, leaving the
reserve at ______ percent funding.
   Note: The financial representations set forth in this summary are
based on the best estimates of the preparer at that time. The
estimates are subject to change. At the time this summary was
prepared, the assumed long-term before-tax interest rate earned on
reserve funds was ____ percent per year, and the assumed long-term
inflation rate to be applied to major component repair and
replacement costs was ____ percent per year.

   (b) For the purposes of preparing a summary pursuant to this
section:
   (1) "Estimated remaining useful life" means the time reasonably
calculated to remain before a major component will require
replacement.
   (2) "Major component" has the meaning used in Section 55530.
Components with an estimated remaining useful life of more than 30
years may be included in a study as a capital asset or disregarded
from the reserve calculation, so long as the decision is revealed in
the reserve study report and reported in the Assessment and Reserve
Funding Disclosure Summary.
   (3) The form set out in subdivision (a) shall accompany each
annual budget report or summary thereof that is delivered pursuant to
Section 5300. The form may be supplemented or modified to clarify
the information delivered, so long as the minimum information set out
in subdivision (a) is provided.
   (4) For the purpose of the report and summary, the amount of
reserves needed to be accumulated for a component at a given time
shall be computed as the current cost of replacement or repair
multiplied by the number of years the component has been in service
divided by the useful life of the component. This shall not be
construed to require the board to fund reserves in accordance with
this calculation.



5580.  (a) Unless the governing documents impose more stringent
standards, any community service organization whose funding from the
association or its members exceeds 10 percent of the organization's
annual budget shall prepare and distribute to the association a
report that meets the requirements of Section 5012 of the
Corporations Code, and that describes in detail administrative costs
and identifies the payees of those costs in a manner consistent with
the provisions of Article 5 (commencing with Section 5200) of Chapter
6.
   (b) If the community service organization does not comply with the
standards, the report shall disclose the noncompliance in detail. If
a community service organization is responsible for the maintenance
of major components for which an association would otherwise be
responsible, the community service organization shall supply to the
association the information regarding those components that the
association would use to complete disclosures and reserve reports
required under this article and Section 5300. An association may rely
upon information received from a community service organization, and
shall provide access to the information pursuant to the provisions
of Article 5 (commencing with Section 5200) of Chapter 6.


1452 W. 9th Street # 3  Upland, CA 91786

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