Reader Questions - Who Prepares Delinquency Policy, and Who Votes On Special Assessment?

c c & rs h o a homefront legislation reader questions Oct 31, 2016

Attorney Richardson,

We were recently informed by our management company that under the Davis-Stirling Act, we now need to have a collection policy in place. We also need to send a copy to each homeowner. We are a small HOA consisting of [less than 20] homes. Every cost cuts into our small reserve. My question is whether or not this policy requires an attorney to draft it. If so what questions does the policy need to address, to insure that we are within our rights to collect should one default on their monthly fees?

Thank you for your assistance,

B.L., Oceanside

Dear B.L.,

The Davis-Stirling Act contains two different annual disclosures which must be made to all HOA members. Civil Code 5310(a)(6), which is part of the list of items in the Annual Policy Statement, requires that members annually receive a specific statutory disclosure statement. The exact text of this is found at Civil Code 5730, which can be copied from www.leginfo.legislature.ca.gov. Click on “California Law”, then “Civil Code”, and then scroll down to Section 5730. You don’t need a lawyer to do that for you.

The second disclosure is under Civil Code 5310(a)(7), which requires the association’s policies in pursuing delinquent assessments to be disclosed to all members annually as part of the Annual Policy Statement. This policy could be written by someone who is not a common interest development attorney, but the likelihood of including illegal or otherwise problematic policies is greater without an experienced HOA attorney helping. This represents an undesired and unexpected expense for your small HOA, but this policy probably won’t change much from year, so it most likely is a modest one-time expense.

Association boards – Check the list of Annual Budget Report (Civil Code 5300) and Annual Policy Statement (Civil Code 5310) items – is your HOA providing all of these annually? If your year ends December 31, you have until end of November to get all of these items to your members.

Best Regards,
Kelly

Dear Mr. Richardson,

I am confused on special assessments (see below). Soon a project is coming up for our condo association that will have a cost of [15% of our annual budget]. This will require a special assessment to be split among our owners. My question is would we need to do the secret ballot process? I think no because the assessment per member is less than 5%. I am not sure what way the secret ballot is based on. Can you please shed some light on this?

Thank you,

M.W., San Diego

Dear M.W.,

Under Civil Section 5605(b), your association board can pass a special assessment of up to 5% of the association’s annual budgeted gross expenses. You have indicated that the assessment actually will be equal to about 15% of the HOA’s annual budget. Your HOA governing documents may speak to this, and most likely will require a membership vote. The individual assessment amount can be misleading – your individual special assessment may well be less than 5%, while the total of the assessment to all owners exceeds 5% of budget. Civil Code 5100(a) requires that the membership vote must be a 30 day notice, double envelope vote – the same process as director elections.

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®.