Association GovernanceManaging Agent

Section § 5375

Explanation

If you're about to hire a managing agent for a common-interest community, they must give the board a written report within 90 days before finalizing any agreement. This report should include the names and addresses of the owners or directors, any state-issued licenses, any relevant professional certifications, and info on any businesses they own or have financial interests in. They also need to disclose if they receive referral fees from third-party service providers.

A prospective managing agent of a common interest development shall provide a written statement to the board as soon as practicable, but in no event more than 90 days, before entering into a management agreement which shall contain all of the following information concerning the managing agent:
(a)CA Civil Law Code § 5375(a) The names and business addresses of the owners or general partners of the managing agent. If the managing agent is a corporation, the written statement shall include the names and business addresses of the directors and officers and shareholders holding greater than 10 percent of the shares of the corporation.
(b)CA Civil Law Code § 5375(b) Whether or not any relevant licenses such as architectural design, construction, engineering, real estate, or accounting have been issued by this state and are currently held by the persons specified in subdivision (a). If a license is currently held by any of those persons, the statement shall contain the following information:
(1)CA Civil Law Code § 5375(b)(1) What license is held.
(2)CA Civil Law Code § 5375(b)(2) The dates the license is valid.
(3)CA Civil Law Code § 5375(b)(3) The name of the licensee appearing on that license.
(c)CA Civil Law Code § 5375(c) Whether or not any relevant professional certifications or designations such as architectural design, construction, engineering, real property management, or accounting are currently held by any of the persons specified in subdivision (a), including, but not limited to, a professional common interest development manager. If any certification or designation is held, the statement shall include the following information:
(1)CA Civil Law Code § 5375(c)(1) What the certification or designation is and what entity issued it.
(2)CA Civil Law Code § 5375(c)(2) The dates the certification or designation is valid.
(3)CA Civil Law Code § 5375(c)(3) The names in which the certification or designation is held.
(d)CA Civil Law Code § 5375(d) Disclose any business or company in which the common interest development manager or common interest development management firm has any ownership interests, profit-sharing arrangements, or other monetary incentives provided to the management firm or managing agent.
(e)CA Civil Law Code § 5375(e) Whether or not the common interest development manager or common interest development management firm receives a referral fee or other monetary benefit from a third-party provider distributing documents pursuant to Sections 4528 and 4530.
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Section § 5375.5

Explanation

If someone manages a common interest development, like a condo complex, they must let the board know in writing if there's any possible conflict of interest when they propose a service. A conflict of interest includes getting fees or money from businesses providing services or owning part of a company used by the association.

A common interest development manager or common interest development management firm shall disclose, in writing, any potential conflict of interest when presenting a bid for service to an association’s board of directors. “Conflict of interest,” for purposes of this section, means:
(a)CA Civil Law Code § 5375.5(a) Any referral fee or other monetary benefit that could be derived from a business or company providing products or services to the association.
(b)CA Civil Law Code § 5375.5(b) Any ownership interests or profit-sharing arrangements with service providers recommended to, or used by, the association.
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Section § 5376

Explanation

If a management company or a third-party agent is hired to handle a neighborhood or condo association, they must deliver certain important documents when required by the contract. This includes information about the rules and status of the community.

The common interest development manager, common interest development management firm, or its contracted third-party agent shall facilitate the delivery of disclosures required pursuant to paragraph (1) of subdivision (a), paragraph (2) of subdivision (b), and subdivision (d), of Section 4530 if the common interest development manager, or common interest development management firm, is contractually responsible for delivering those documents.
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Section § 5380

Explanation

This law requires a managing agent who handles an association's money to keep those funds in specific types of accounts in California. The money should be placed in a trust fund account, insured by the federal government, and separate from the agent's own funds or any other funds the agent manages. The board of the association can request funds be deposited in accounts that insure the money and do not involve risky investments. The managing agent must document all transactions and can't mix the association's funds with their own. If someone wins a lawsuit to enforce this rule, they can get their legal fees paid. Finally, any interest earned on these funds should not benefit the managing agent.

(a)CA Civil Law Code § 5380(a) A managing agent of a common interest development who accepts or receives funds belonging to the association shall deposit those funds that are not placed into an escrow account with a bank, savings association, or credit union or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank, savings association, or credit union in this state. All funds deposited by the managing agent in the trust fund account shall be kept in this state in a financial institution, as defined in Section 31041 of the Financial Code, which is insured by the federal government, or is a guaranty corporation subject to Section 14858 of the Financial Code, and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.
(b)CA Civil Law Code § 5380(b) At the written request of the board, the funds the managing agent accepts or receives on behalf of the association shall be deposited into an account in a bank, savings association, or credit union in this state that is insured by the Federal Deposit Insurance Corporation, National Credit Union Administration Insurance Fund, or a guaranty corporation subject to Section 14858 of the Financial Code, provided all of the following requirements are met:
(1)CA Civil Law Code § 5380(b)(1) The account is in the name of the managing agent as trustee for the association or in the name of the association.
(2)CA Civil Law Code § 5380(b)(2) All of the funds in the account are covered by insurance provided by an agency of the federal government or a guaranty corporation subject to Section 14858 of the Financial Code. Those funds may only be deposited in accounts that protect the principal. In no event may those funds be invested in stocks or high-risk investment options.
(3)CA Civil Law Code § 5380(b)(3) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person for whom the managing agent holds funds in trust.
(4)CA Civil Law Code § 5380(b)(4) The managing agent discloses to the board the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.
(5)CA Civil Law Code § 5380(b)(5) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or the managing agent’s employees.
(6)CA Civil Law Code § 5380(b)(6) Transfers of funds out of the association’s reserve or operating accounts shall not be authorized without prior written approval from the board of the association unless the amount of the transfer is less than the following:
(A)CA Civil Law Code § 5380(b)(6)(A) The lesser of five thousand dollars ($5,000) or 5 percent of the estimated income in the annual operating budget, for associations with 50 or less separate interests.
(B)CA Civil Law Code § 5380(b)(6)(B) The lesser of ten thousand dollars ($10,000) or 5 percent of estimated income in the annual operating budget, for associations with 51 or more separate interests.
(c)CA Civil Law Code § 5380(c) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.
(d)CA Civil Law Code § 5380(d) The managing agent shall not commingle the funds of the association with the managing agent’s own money or with the money of others that the managing agent receives or accepts.
(e)CA Civil Law Code § 5380(e) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.
(f)CA Civil Law Code § 5380(f) As used in this section, “completed payment” means funds received that clearly identify the account to which the funds are to be credited.
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Section § 5385

Explanation

This law clarifies that a "managing agent" is not considered to be a full-time employee of an association.

For the purposes of this article, “managing agent” does not include a full-time employee of the association.
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