Reader Questions - Assessment Increases

Dear Mr. Richardson,

I read your column in the [paper] every week. I really appreciate your help to clarify the difference between our bylaws and state laws regarding our increased assessment.

Our HOA bylaws: “the maximum annual assessment may be increased six percent (6%) …without a vote of the membership.” and ” the maximum annual assessment may be increased above the six percent …by a vote of the members …such change shall have the assent of fifty-one percent (51%) of the vote of each class of members…”

Despite of our petition collected more than 60% of our members’ signatures, our board decided to increase our monthly dues 15%.

Did our board violate our bylaws or did they do the right thing because state laws take over our bylaws.

Thank you very much for your time,

K.V., Westminster

Dear K.V.,

The Davis-Stirling Common Interest Development Act protects the flexibility of associations by protecting the power of boards to impose a certain level of assessment increase, regardless of more strict provisions in the HOA governing documents. Civil Code Section 5605(b) states that, regardless of any stricter language in the documents, a board can increase the regular assessments up to 20% per fiscal year without a vote of the members. Your membership petition is an important way to communicate with your board, but the board nevertheless can increase assessments up to 20%. So, no, your board did not violate the law, which on this subject overrides your HOA bylaws.

However, before you get too angry with your board, carefully look at your HOA budget, and ask the board to help the community understand why the increase was necessary.

Best,
Kelly

Hi Mr. Richardson,

Here’s an interesting one for you that has our HOA a bit confused. Our CC&Rs require a 75% vote to change the document and for other votes. Our articles of incorporation have a 2/3 vote for changes. But are special assessments possible with only 50% of the members’ votes? [Civil Code 5605] is a little confusing because it seems to say that more restrictive limitations by our governing docs prevail, yet the last sentence of 5605(b) indicates just a majority can approve special assessments that exceed 5% (which the one we’re considering does).

Thanks,

J.K., Bonsall

Dear J.K.,

Votes to impose a special assessment or a general assessment increase beyond the board’s power under Civil Code Section 5605(b) must be votes by the membership with 30 day notice and secret ballots per the process described in Civil 5100(a). Civil Code 5065(b) also says that such approval requires a majority of a quorum of members. Civil Code 5605(c) defines “quorum” as more than 50% of the members. [Note – it states “of the members”, not “of the members entitled to vote” so this is different than the voting power.] Also note that it defines quorum as MORE than 50%. So, for example, if your association has 50 members, quorum is 26 or more participating, and a majority of those participating could approve such an assessment or increase.

If governing documents place a HIGHER requirement on member votes on assessments, such as, for example, 2/3, it would conflict with Civil Code 5605, and a majority of a quorum would be sufficient.

Thanks,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.