AB2050 - Common interest developments: reserve accounts.

Enrolled August 30, 2026 Passed IN Senate August 26, 2026 Passed IN Assembly August 26, 2026 Amended IN Senate August 21, 2026 Amended IN Senate June 18, 2026 Amended IN Assembly April 16, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2050 Introduced by Assembly Member Caloza (Coauthors: Assembly Members Dixon and Zbur) February 18, 2026 An act to amend, repeal, and add Section 5550 of, and to add Section 5552 to, the Civil Code, relating to common interest developments. LEGISLATIVE COUNSEL'S DIGEST AB 2050, Caloza. Common interest developments: reserve accounts. Existing law, the Davis-Stirling Common Interest Development Act, governs the management and operation of common interest developments, and requires an association to manage a common interest development, including requiring the association to levy regular and special assessments sufficient to perform its obligations, subject to specified limitations on increases in those assessments. The act requires an association to distribute an annual budget report 30 to 90 days before the end of its fiscal year. Under existing law, that budget report includes, among other things, a summary of the association’s reserve accounts. The act requires an association to perform a study of the reserve account requirements, as defined, and, as part of that study, cause to be conducted a visual inspection of the accessible areas of major components that the association is obligated to repair, replace, restore, or maintain. This bill would, beginning January 1, 2032, revise the requirement to perform a study of the reserve account requirements to, among other things, include the minimum reserve contribution level to prevent the projected association reserve account balance from falling below zero over the following 30 years. The bill would require an association to fund the reserve account on an annual basis in at least the minimum reserve contribution level. If an association’s reserve balance account is projected to fall below zero at any time over the following 30 years, the bill would require the association to transfer 15% of its gross annual budget to its reserve account each year, as prescribed. If the association is unable to fund the reserve account in at least the minimum reserve contribution level through its gross annual budget, the bill would require the association to levy a reserve funding special assessment, as provided. This bill would incorporate additional changes to Section 5550 of the Civil Code proposed by SB 1238 to be operative only if this bill and SB 1238 are enacted and this bill is enacted last. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares all of the following: (a) Common interest developments are responsible for the ongoing repair, maintenance, and replacement of major common area components, including, but not limited to, roofs, paving, mechanical systems, and critical infrastructure. (b) To protect the health, safety, and property values of homeowners, it is imperative that homeowners’ associations proactively and adequately save for these significant long-term structural and operational obligations. (c) Underfunded reserve accounts pose a severe risk to the physical integrity of common interest developments and place an undue, unexpected financial burden on homeowners by increasing the likelihood of sudden and steep special assessments. (d) Therefore, it is the intent of the Legislature in enacting this act to establish a minimum reserve contribution level, ensuring that associations maintain long-term financial solvency and that projected reserve account balances do not fall below zero over a 30-year period. (e) It is further the intent of the Legislature to reaffirm that all moneys collected and transferred into these reserve accounts must be strictly safeguarded. Consistent with existing law, including Section 5510 of the Civil Code, these funds should be used for the repair, restoration, replacement, or maintenance of the major components that the association is obligated to repair, restore, or maintain, and for which the reserve fund was established, or for related litigation, and not for routine operations or any other unauthorized purpose. SEC. 2. Section 5550 of the Civil Code is amended to read: 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. (c) For purposes of this section, “major components” includes gas, water, and electrical service to the extent that the association is responsible for repair or replacement of those lines pursuant to Section 4775. (d) This section shall remain in effect only until January 1, 2032, and as of that date is repealed. SEC. 3. Section 5550 is added to the Civil Code, to read: 5550. (a) At least once every three years, the association 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. The association shall review and update this study annually and shall consider and implement necessary adjustments to the association’s funding of the reserve account 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 reserve account transfer 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 reserve account transfer 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. (6) The minimum reserve contribution level to prevent the projected association reserve account balance from falling below zero over the following 30 years. (7) A statement informing the association that, beginning January 1, 2032, state law will require an association to take certain actions if the association projects the reserve account balance to fall below zero over a 30-year period, including transferring a minimum of 15 percent of its gross annual budget to the reserve account and, under specified conditions, levying a reserve funding special assessment, as prescribed. (c) For purposes of this section, “major components” includes gas, water, and electrical service to the extent that the association is responsible for repair or replacement of those lines pursuant to Section 4775. (d) This section shall become operative on January 1, 2032. SEC. 3.1. Section 5550 of the Civil Code is amended to read: 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) Cost of repair, replacement, restoration or maintenance of the components identified in the report required in Section 5551. (5) 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. (6) A reserve funding plan that indicates how the association plans to fund the contribution identified in paragraph (5) 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. (c) For purposes of this section, “major components” includes, but is not limited to, exterior elevated elements defined and inspected pursuant to Section 5551, and gas, water, and electrical service to the extent that the association is responsible for repair or replacement of those lines pursuant to Section 4775. (d) This section shall remain in effect only until January 1, 2032, and as of that date is repealed. SEC. 3.2. Section 5550 is added to the Civil Code, to read: 5550. (a) At least once every three years, the association 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. The association shall review and update this study annually and shall consider and implement necessary adjustments to the association’s funding of the reserve account 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) Cost of repair, replacement, restoration or maintenance of the components identified in the report required in Section 5551. (5) An estimate of the total annual reserve account transfer 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. (6) A reserve funding plan that indicates how the association plans to fund the reserve account transfer identified in paragraph (5) 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. (7) The minimum reserve contribution level to prevent the projected association reserve account balance from falling below zero over the following 30 years. (8) A statement informing the association that, beginning January 1, 2032, state law will require an association to take certain actions if the association projects the reserve account balance to fall below zero over a 30-year period, including transferring a minimum of 15 percent of its gross annual budget to the reserve account and, under specified conditions, levying a reserve funding special assessment, as prescribed. (c) For purposes of this section, “major components” includes, but is not limited to, exterior elevated elements defined and inspected pursuant to Section 5551, and gas, water, and electrical service to the extent that the association is responsible for repair or replacement of those lines pursuant to Section 4775. (d) This section shall become operative on Janua [Text truncated for display. Full text available on Congress.gov.]