Reader Questions - Assessments: Must They Pay THAT?

Dear Mr. Richardson,

I’ve lived in my condo 3 years. Since I’ve been here the association dues have skyrocketed. The management claims assessments are owed. Is there some law that can perhaps put a cap on the amount or the time frame when dues can go up? Any information you can give would greatly be appreciated.

C.T., Compton

Dear C.T.,

Assessments can be increased by the board by up to 20% each year without a vote of the members. Some governing documents have requirements with a lower amount of increase, but Civil Code Section 5605(b) overrides any more strict requirements. Associations should make sure assessments track the association’s actual expenses. Boards that artificially “hold the line” on assessments usually are deferring maintenance, not depositing money into the reserves, and hiring the cheapest not the best for their neighbors. Some associations that had unrealistic previous budgets find they need major increases of up to 20% to try to catch up to their actual expenses.

Best,
Kelly

Dear Mr. Richardson,

We just received a set of amended bylaws and CC&Rs which we have to vote on. A section that concerns us is that if the association does not have a manager, the board can have a partial or complete waiver of assessments. The board states that the documents were approved by an attorney they hired.

Your column is awesome!

Sincerely,

D.W., Goleta

Dear D.W.,

First, only the very smallest associations can realistically avoid professional management. The work load is too much, current events on vendor resources change, and the laws change so frequently, that associations without a good manager may be in trouble without even knowing it (yet).

Giving directors a break on their assessments, even a partial break, is compensation. If a director receives compensation, they are no longer a volunteer under the Business Judgement Rule or under the directors and officers insurance and the immunity under Civil Code 5800 that accompanies it.

Paying a director, even if only a small amount, is a bad idea for both director and association.

Thanks,
Kelly

Hi Kelly,

A friend of mine lost their home to foreclosure. There were unpaid dues and fines on the account. The HOA had liens on the home, but they were wiped out by the foreclosure. The HOA is now pursuing them after the fact for payment of everything, dues, fines, late charges, interest (at close to 12% per year), legal fees, lien fees, you name it.

Can they collect after the fact? Are fines treated the same as dues? Can they charge 12% interest? Is there any limit to the legal fees?

T.D., Temescal Valley

Dear T.D.,

So long as the association did not take ownership of the home by a non-judicial foreclosure, the association can still pursue the debt. A lender foreclosure erases the association’s lien, but the association can still pursue the now-former homeowner for “damages” in court, meaning the arrearage. This is one of the advantages of judicial foreclosure, which preserves more HOA options. Fines are not enforced the same as assessments, because the HOA cannot use non-judicial foreclosure to enforce fines, per Civil Code 5725(b). Interest at 12% can be charged on the balance as well as “reasonable” attorney fees, per Civil Code 5650(a)(3).

Thanks for your question,
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®.