Are Our Assessments FAIR?

By Kelly G. Richardson, Esq., HOA Homefront Column 

Dear Kelly: My large HOA has monthly assessments that are the same for all units. The units vary in size from free-standing units with yards to attached housing of varying square footage. I have the smallest sized unit. I have owned this condo for decades. Do I and my fellow like-sized unit owners have any recourse? We are subsidizing a significant portion of the costs of all the other units. What can we do? N.V., Laguna Niguel.

Dear N.V.: Developers typically establish HOA assessment allocations in one of four ways: All pay an equal share of HOA expenses; assessments are based upon number of bedrooms; or based upon the stated square footage; or a hybrid (also called a “variable assessment”), in which part of the budget is split equally and the rest of the budget is allocated based upon square footage figures (which are not always accurate). There are valid arguments supporting each assessment allocation method, making it difficult to decide which system is ultimately the fairest way of assessing homeowners. In 2006, the appellate court ruled on a challenge to assessment allocations in Cebular v. Cooper Arms Apartments. In that case, a homeowner challenged the assessment allocations as unreasonable, but the appellate court said the allocations in the CC&Rs are presumed to be reasonable and there was nothing illegal about it, denying the homeowner’s challenge.

There are some HOA expenses which seem fairer to split equally, but others would seem to be fairer if they varied based upon unit size. However, short of somehow convincing a majority of the homeowners to amend the CC&Rs and revise the assessment allocation, your HOA’s current assessment allocation is unlikely to change. It’s hard to convince neighbors to vote for a change which might increase their assessments and decrease others. That is why when I’m involved with CC&R overhauls, I urge my clients not to even propose a change in assessment allocations- consensus is too unlikely.
Sincerely, Kelly

Kelly, Good morning, I really enjoy reading your weekly column. I have a question about equal monthly HOA fees. At a recent board meeting a quorum of the board voted to grant a lower monthly fee to a widow. Our CC&R's specifically state that "...assessments shall be divided equally among all units". I believe that this lower rate for one unit violates that, and perhaps the law as well. I value your opinion on this. Thanks, K.W., Santee.

Dear K.W.: One stewardship responsibility regarding the HOA members’ funds is to ensure that all homeowners contribute their fair share of the HOA’s expenses, and this responsibility is a basic part of the fiduciary duties of each board member. Even though sometimes neighbors have hard times and well deserve sympathy, the board’s responsibility is to collect the HOA’s assessments and pay the HOA’s expenses. Intentionally violating the CC&Rs assessment allocation, even for a commendable reason, could place the board outside the Business Judgment Rule as well as outside the coverage of the HOA’s directors and officers liability insurance. Discriminating in favor of a single homeowner, no matter how justified it may seem, is not allowed. Perhaps the board’s efforts could be redirected toward seeking help from other neighbors to assist those who are going through very difficult times. Best regards, Kelly