Navigating Compliance Challenges: Deed Recording and DRE Requirements

We are working with a client who recently transitioned to using all our services at California Builder Services when they previously only used our Budget services.

The Problem

Their former DRE Consultant advised against recording deeds for the common areas until the completion of certain improvements, despite these improvements being bonded in accordance with DRE requirements. Unfortunately, after the improvements were completed, recording the deeds was often overlooked by the DRE Consultant, the legal team, the developer, and the escrow company.

Regrettably, the instructions provided by their previous consultant inadvertently placed them in a state of non-compliance with both their HOA documents and DRE regulations. After our firm conducted a comprehensive review of the various issues involved, we collaborated with the developer and their escrow company to rectify the situation to ensure compliance with DRE and their legal documents.

The Key Points

This case highlights the critical importance of being aware of the requirements outlined in legal documents. In this specific case, the Annexation documents and all Public Reports clearly stipulated that the common areas would be deeded to the HOA within a particular phase. In the DRE filings, “Irrevocable” escrow instructions were submitted and approved, specifying that the common areas will be deeded “prior to or concurrently with” the first escrow closing in that phase and required insurance coverage against potential mechanics lien claims. This insurance coverage is a DRE requirement and provides assurance to the HOA, effectively rendering the conveyance “lien-free.”

How We Helped

Assisting the client in rectifying this situation and steering the development back on the path of compliance is part of what we do here at California Builder Services. This situation serves as an excellent reminder of the significance of diligently adhering to legal requirements which is critical in complex projects such as these.  It is important that all members of the development team are in constant communication to avoid issues in the future.

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