Short answer: Before a client buys a condo, I read the HOA's annual budget report and reserve summary for seven things: the percent funded figure, the insurance summary and its deductibles, delinquencies, deferred maintenance in the board minutes, litigation, the three-year trend in dues, and the rules on rentals, pets, laundry and flooring. The seller must deliver most of this under California Civil Code 4525.
I am the treasurer of my own homeowners association, which means I help build a budget every year and then live with it. I know where the soft spots show up: the insurance line that jumped, the roof that keeps getting pushed to next year, the owners who are behind. When a client buys a South Bay condo, I read the association's documents the way I read my own.
Where do the HOA documents come from in a resale?
In a California resale, the seller orders the disclosure package from the association or its management company, and it is delivered during escrow. Civil Code 4525 lists what the owner must provide "as soon as practicable before the transfer of title or the execution of a real property sales contract": the governing documents, the most recent annual budget report and related disclosures, a written statement of current assessments and unpaid amounts, a statement of any rental prohibition, the most recent balcony inspection report, and, if the buyer asks, the approved board minutes from the prior 12 months (leginfo.legislature.ca.gov, version effective January 1, 2026).
Civil Code 5300 requires the association to distribute the annual budget report 30 to 90 days before the end of its fiscal year, so the report in your packet may be close to a year old. I always ask the manager for the current budget.
| Line I check | Where it lives | What I write down |
|---|---|---|
| Reserves | Reserve Funding Disclosure Summary | Percent funded, five-year outlook |
| Insurance | Budget report insurance summary | Each policy's limit and deductible |
| Delinquencies | Financials, aging report | Owners behind, and how much |
| Deferred maintenance | Budget report, board minutes | What was postponed and why |
| Litigation | Disclosure package | Who is suing whom, and the status |
| Dues trend | Three years of budgets | Each year's regular assessment |
| Rules | CC&Rs and rules | Rentals, pets, laundry, flooring, parking |
How funded are the reserves, and how old is the study?
The most useful page in the packet is the Assessment and Reserve Funding Disclosure Summary required by Civil Code 5570. It states the estimated reserves required at the end of the fiscal year, the projected cash balance, the percent funded, and the same figures projected over the next five years.
Behind that summary sits the reserve study. Civil Code 5550 requires the board to have a visual inspection of the major components done at least once every three years, to cover components with less than 30 years of remaining life, and to review the study every year. I check the date of the last site visit. A study with a stale inspection is a guess with a cover page.
What does the insurance summary say about earthquake coverage and renewals?
Civil Code 5300 requires the annual budget report to summarize the association's property, general liability, earthquake, flood and fidelity insurance, naming the carrier, the type, the policy limit and any deductible. That summary is where I learn whether the building carries earthquake coverage at all and what the deductible is.
I also ask two questions the summary does not answer: did the carrier renew this year, and by how much did the premium change? If the insurance line jumped, the dues will follow.
Who is behind on dues, what got postponed, and is anyone suing?
Delinquencies first. The budget assumes every owner pays. If a meaningful share of owners is behind, the paying owners carry the shortfall or the repairs wait. I ask the manager for the current aging report.
Deferred maintenance next. Civil Code 5300 requires the budget report to state whether the board has deferred or decided against repairs to major components with 30 years or less of remaining life, with the reasons. The minutes tell the fuller story. I read 12 months of them for the words leak, bid, roof, plumbing, sewer, special assessment and attorney.
Litigation last. Civil Code 4525 requires the seller to deliver any initial list of construction defects given to members and the latest status information on it. Beyond that, I ask the manager directly whether the association is a party to any lawsuit.
What have the dues done over three years, and what can the board raise without a vote?
I ask for the regular assessment for each of the last three years and write them in a row. A flat line in an old building can mean the board is holding dues down by postponing the roof.
Under Civil Code 5605, a board may raise the regular assessment by up to 20 percent over the prior fiscal year, and may levy special assessments totaling up to 5 percent of the year's budgeted gross expenses, without a member vote. Anything above those limits requires approval by a majority of a quorum of the members.
Which rules change daily life: rentals, pets, laundry, flooring
I read the CC&Rs and the rules for the things that shape a week in the building.
- Rentals: Civil Code 4525 requires the seller to state any provision that prohibits renting, and I also look for minimum lease terms.
- Pets: number, size and type.
- Laundry: whether in-unit machines are allowed.
- Flooring: upper units in older buildings often restrict hard-surface floors or require sound underlayment.
- Parking: assigned spaces, guest rules and waiting lists, confirmed with the manager in writing.
Questions I get asked
What percent funded is good enough?
There is no single number I trust on its own. A newer building with few big components coming due can be fine at a lower figure, and an older building with roofs and plumbing on the schedule needs more. I read the percent funded next to the five-year outlook and the age of the components, then I ask what the board plans to do about any gap.
Can the board raise my dues whenever it wants?
Within limits. Civil Code 5605 lets a board raise the regular assessment up to 20 percent over the prior year and levy special assessments up to 5 percent of budgeted gross expenses in a fiscal year without a member vote. Beyond that, the members have to approve it by a majority of a quorum. Governing documents can add process requirements, so read yours.
The HOA package arrived three days before my contingency deadline. What now?
Ask for more time, in writing, before the deadline passes. I do not let clients remove contingencies on documents nobody has read. If the seller or the manager delayed the package, that is a reasonable basis to request an extension, and I would rather have an awkward conversation now than a special assessment later.
If you are looking at a condo anywhere in the South Bay and want a second set of eyes on the packet, start at beckyhomes.com/buyers and send me the documents.
This post is general information, not legal, tax or lending advice. Talk with a California real estate attorney, CPA or lender about your situation.
Becky Davidson is a REALTOR® with Estate Properties in Riviera Village, Redondo Beach (DRE# 01894087). She has lived in the South Bay since 1993, taught elementary school before earning her license in 2011, and has sold 240+ homes and $205M+ across the South Bay and Los Angeles. She lives in Seaside with her husband and daughter and often co-lists homes with her mother, Jenna Christensen of Compass (DRE# 01341901). Call or text 310.920.9287.
