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California HOA Fidelity Bond Requirements

Request your HOA Fidelity Bond Now!

What is the California HOA Fidelity Bond?

The California HOA Bond is a new type of fidelity bond requirement, which protects the home owners in a community from various different acts of fidelity, fraud, or theft. California legislation is now requiring that every HOA in California be required to obtain an HOA fidelity bond. The HOA, Home Owners Association, is considered a private government within a community of homes that can regulate, tax, and create specific rules for the community and homeowners based on decisions of an elected board. Many communities have an HOA, which means homeowners are paying monthly fees to these board members to help with community projects.

The California homeowners association fidelity bond requirements are listed below and require cooperation and honest of the board members to ensure that the bond can be obtained. This bond will protect homeowners from any dishonest activity that may occur with the assets they provide each month due to decisions made by board members and directors of the HOA. The HOA bond is a type of fidelity bond that will protect homeowners from members of the HOA taking funds and not appropriating them accordingly or justly.

California Civil Code Section 6, 5806, states the following:

“Unless the governing documents require greater coverage amounts, the association shall maintain fidelity bond coverage for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for three months. The association’s fidelity bond shall also include computer fraud and funds transfer fraud. If the association uses a managing agent or management company, the association’s fidelity bond coverage shall additionally include dishonest acts by that person or entity and its employees.”

The California HOA Fidelity Bond requirements rely largely on 3 things including: managerial companies/persons, separation of financial duties, and routine CPA/independent accountant input.

California HOA Fidelity Bond Requirements

Requirement #1: Separation of all Financial Responsibilities

Whoever applies for the HOA Bond must be aware of the requirement where specific financial responsibilities must be performed by different people. This is yet another way to protect the homeowners from fraudulent activities. There must be at least 2 different people on the HOA board to perform financial duties. The person who makes the bank deposits, writes checks, or completes bank withdraws cannot be the person who who keeps the books and checks the bank statements at the end of each month to ensure that all money going in and out is accommodated for.

Requirement #2: Books submitted annually to CPA or Accountant

When requesting the HOA Bond, the Surety will look to ensure that the HOA applying has an independent outsider checking the books at least once a year. This is important because it ensures that the internal team is not in cahoots to defraud the homeowners in anyway. The new regulation requiring an HOA fidelity bond by all California HOA's is due to the fact that homeowners were being taken advantage of by different HOA boards, paying fees each month but not knowing where their money was really being utilized to better the community grounds.

Requirement #3: Is there an independent management group running the community?

The purpose of the HOA Bond is to ensure limited access to community funds, ie: a property manager should not be allowed full access to HOA funds. Underwriters will need to know exactly who all has access to the HOA funds and will require that rules be established for certain parties in order to protect the members of that specific community. Honesty is crucial when requesting a California HOA Bond.

Is it hard to obtain a California HOA Fidelity Bond, even if this is the first time?

The Surety Place is here to help! The great thing about working with a surety when requesting an HOA Bond is that we provide all of the information you will need to know and submit in order to obtain the bond. You can be penalized by the state for not obtaining this fidelity bond so it is important to contact us today to get the process started and completed as quickly as possible!

 

Contact us today for your HOA fidelity bond!

Why Choose The Surety Place

The Surety Place, previously known as Surety Placement Services, was founded in 2002 with a goal to bring innovation and a high level of service the industry had not yet seen. We can write any bond in any of the 50 states; we may have big capabilities, but we make sure that we always treat you like a local in our community. We know that with this new law comes stress and urgency, which is why we are here to help you! We make the process easy for you. As an industry leader from the start, we are a people first surety bond partner that you can trust, offering access to agents and businesses to achieve the right solution at the right time.

Your Bond Needs Are Always Heard

We establish a relationship with you in order to truly understand your focus whether large or small, complicated or difficult.  As one of the only true specialists within the industry we supply access, partnerships and specialty programs with numerous “A” rated sureties across the nation. We are here to help you service all your bonding needs with no appointments or contracts necessary. The requirement of the California HOA Bond is causing a frenzy with many community leaders, but you don’t have to be that person! Call us today to get the process started!

Because of our industry knowledge and expertise coupled with our ever increasing specialty programs, we have the unique ability to write your bonds when no one else can, and because of our relationship with you we will stand behind you in support to achieve your agency or business objectives.

Over 40 Years of Combined Surety Experience

Our dedicated account managers are highly trained underwriters who provide our agents and clients a tailored bonding solution for their individual or corporate needs. In today’s marketplace, surety access can be limited; but with Surety Place as your partner, you’ll find the white-glove service you have been looking for.

No matter how complicated your bond may be, your personal credit, or the size bond you need, Surety Place is built to find an answer. Poor credit, financial hardship, fast growth, or just getting your company off the ground, we the have options you need.

Need help growing your bond department?

At The Surety Place, we pride ourselves in our customer service! If you have any questions regarding your California HOA fidelity bond requirements, give us a call.