Davis-Stirling §5570 in practice — the Reserve Funding Disclosure Summary, line by line.

Every California HOA has to send unit owners a one-page disclosure every year. The format is statutory. The numbers are awkward to compute. The downstream consequences of getting it wrong are real. Here's the §5570 disclosure explained, field by field, for boards going into the 2026 budget cycle.

1. What §5570 actually requires

California's Davis-Stirling Common Interest Development Act splits the reserve disclosure burden across two sections of the Civil Code. §5550 is the reserve study mandate — every association must conduct a full reserve study, with visual inspection of accessible major components, at least once every three years. §5570 is the annual disclosure mandate — every year, including the two years between full studies, the board must distribute a "Reserve Funding Disclosure Summary" to every unit owner.

New since 2025: SB 900 amended §5550 to require gas, water, and electrical service lines that the association is responsible to maintain to be carried as major components in the reserve study — effective January 1, 2025. If your association maintains any utility service lines, they now belong in the component inventory that feeds this disclosure, which can raise both the replacement-cost total and the fully funded balance on the §5570 summary.

The summary is a one-page document, attached to the annual budget report, that translates the three-year reserve study into the numbers an owner can act on this year. It is the single most-read document in California HOA governance.

Timing: the disclosure must be distributed no fewer than 30 days and no more than 90 days before the start of the association's fiscal year. Most California associations whose fiscal year matches the calendar year ship the disclosure in October or November.

2. The seven required line items

Civil Code §5570(a) enumerates exactly what must appear on the disclosure. Free-form summaries that omit any of the seven items are non-compliant — boards have lost litigation over this. The required fields are:

3. The percent-funded calculation, explained

Line 4 — the percent-funded ratio — is the single most-watched number in the entire document. Owners read it. Lenders demand it. Insurance underwriters cite it. Board members lose elections over it. Yet it's the most-commonly-miscomputed line in California reserve disclosures.

The formula

Percent funded = (current reserve balance ÷ fully funded balance) × 100

The fully funded balance — the denominator — is what trips boards up. It is not the total replacement cost of all components. It is the accumulated depreciation of every component as of the disclosure date.

Worked example

Say the association has one major component: a roof. Replacement cost today: $400,000. Useful life: 20 years. Age: 10 years. The accumulated depreciation as of today is (10 ÷ 20) × $400,000 = $200,000. That's the fully funded balance for this single-component association.

If the association currently has $140,000 in reserves, the percent funded is 140,000 / 200,000 = 70%. The association is at the Strong/Fair boundary — adequately funded but with little cushion.

Real associations have 50-150 components, and the calculation rolls up across all of them. But the principle is the same: compare what's in the account against the depreciation that has accumulated.

The common mistake

Boards (and some reserve study providers) sometimes report percent funded as reserves ÷ total replacement cost. That math always understates the funded percentage because the denominator includes future depreciation that hasn't accumulated yet. A 10-year-old roof's fully funded balance is half its replacement cost, not the full replacement cost. Boards using the wrong denominator have understated their funded percentage by 30-50 percentage points and undercollected as a result.

4. The three funding plan options

Line 5 — recommended monthly contribution — depends on which funding strategy the board has adopted. Davis-Stirling permits any of the three NRSS-standard plans, and the disclosure should state which one was used:

• Recommended (Fully Funded) — contributions sized to hit 100% funded by the end of the projection horizon. Highest monthly cost; most defensive.
• Threshold — contributions sized to hit 70% funded by the end of the horizon. The NRSS-standard target and the most common California choice.
• Baseline — contributions sized to keep the reserve balance above zero at every year of the horizon. Lowest monthly cost; operationally fragile.

The funding strategies comparison post walks through worked numerical examples of all three for a sample 80-unit CA association.

5. What goes wrong in practice

Mistake 1: Skipping the disclosure because reserves "look fine"

The disclosure is mandatory regardless of funding status. A 95%-funded association still has to send it. Boards that skip the disclosure because reserves seem healthy expose themselves to the same fiduciary breach claims as boards that skip it because reserves are catastrophically low.

Mistake 2: Disclosing an outdated funding plan

The disclosure must reflect the current adopted funding plan. If the board adopted a new contribution schedule at the most recent budget meeting, the disclosure must use that schedule, not last year's. Disclosures with stale funding plans have been used as evidence of director negligence in CA derivative actions.

Mistake 3: Computing percent funded against total replacement cost

See above. This is the single most common §5570 error. If your most recent disclosure shows a percent-funded number under 25% and your reserves are healthy on paper, double-check that the denominator is the fully funded balance, not the total replacement cost.

Mistake 4: Free-form summaries

The statute specifies the format. Some associations attempt to substitute a prose paragraph or a custom infographic. California courts have consistently held that the prescribed format is not optional. Use the format.

Mistake 5: Missing the 30-90 day window

Distributed too early (more than 90 days before fiscal year start), the disclosure is considered untimely. Distributed too late (fewer than 30 days), same outcome. Calendar the distribution date as a recurring board action item.

6. The annual rhythm

For an HOA on a calendar fiscal year, the §5570 rhythm typically looks like:

• Q1 (January-March) — review the prior year's reserve expenses, true up the reserve balance, identify any component replacements that ran over or under budget.
• Q2 (April-June) — commission a reserve study refresh if a Level I is due (the 3-year cycle under §5550). Otherwise schedule a Level III desktop update.
• Q3 (July-September) — adopt the next year's budget, including the reserve contribution schedule. The reserve contribution must align with the reserve study's recommendation.
• Q4 (October-November) — distribute the §5570 Reserve Funding Disclosure Summary to every owner alongside the annual budget report. Hit the 30-90 day window before fiscal year start.
• December — record the §5570 distribution date in the board minutes. File the disclosure in the association's official records.

7. What lenders and buyers do with the disclosure

Three audiences read the §5570 disclosure most carefully, and their reactions cascade quickly:

• Condo lenders — Fannie Mae and Freddie Mac project standards require condo loan underwriters to review a current §5570 disclosure. A funded percentage below 10% is grounds for the project to lose Fannie/Freddie eligibility, which in turn locks individual unit owners out of conforming loans.
• Title insurers and buyers — California's resale process generates an HOA disclosure packet (Civil Code §4525) that includes the most recent §5570. Effective January 1, 2026, SB 410 (Stats. 2025, ch. 516) expanded that packet to also include the association's most recent Civil Code §5551 exterior elevated element inspection report. Buyers and their agents scan the percent-funded ratio as part of their decision; some buyers walk away on weak funded percentages.
• Insurance underwriters — In the post-2023 hardened California condo market, property insurance carriers are using §5570 disclosures as a signal of governance quality. Strong funded percentages can soften premium increases; weak ones can trigger non-renewal.

The disclosure is also the document that grounds owner-driven derivative litigation. Owners who file a breach-of-fiduciary-duty action against a board almost always cite the most recent §5570 disclosure as Exhibit A. Boards that have been honest in the disclosure — accurate numbers, statutory format, timely distribution — are well-defended in these actions. Boards that have been creative are not.