EMERGENCY ASSESSMENTS DON’T REQUIRE APPROVAL OF OWNERS

In California, HOA and Condo boards are limited in raising assessments without member approval. They can raise the regular assessments 20% a year and/or impose a special assessment of up to 5% of the budgeted gross expenses for a fiscal year without a vote. If a vote is needed, the requirement is majority of a quorum approval. If more than half the owners vote and more than half of those vote in favor of the assessment, it will pass.

 

A Board can impose an emergency assessment without approval of members if certain findings are made, regardless of how big an increase it is or what percentage of the budget it is. These are the requirements (and my comments) as set forth in my book THE DAVIS STIRLING ACT IN PLAIN ENGLIST (which is available in the webstore at www.californiacondoguru.com):

(b) ... For purposes of this section, an emergency situation is any
one of the following:

(1)     An extraordinary court-ordered expense;

(2)     An extraordinary expense necessary to repair or maintain any part of the CID for
which the association is responsible where a threat to personal safety is
discovered;

(3)    An extraordinary expense necessary to repair or maintain any part of the CID for
which the association is responsible which could not have been foreseen by the
board in preparing and distributing the pro forma budget under Section 1365
above. Prior to imposition of this emergency assessment, the board must pass a
resolution reflecting written findings about the need for the assessment and
why the expense could not reasonably be foreseen. The board must distribute the
resolution to the owners with the notice of assessment.

(4)     An extraordinary expense in making the first payment of the earthquake insurance
surcharge pursuant to Section 5003 of the Insurance Code. [You may see this provision but it s no longer applicable in practice because the insurance fund was repealed and the surcharge dropped.]

Comment: The intent of these sections of the assessment
statutes is to assure that associations have adequate authority to impose
assessments “sufficient to perform the obligations” imposed on the
association. The rights and limitations to increases and imposition of
assessments without a vote of the membership are the legislature’s view of
what’s reasonable, no matter what appears in the governing documents. As for understanding subsection (b), most HOA attorneys interpret this section (in its poorly worded condition) to mean that an association’s can raise the regular assessment up to 20% a fiscal year without a vote, can impose a special assessment that is 5% of the budgeted gross expenses for the fiscal year without a vote, and/or can impose an emergency assessment (making the appropriate findings and only in situations described) of any amount without a vote.]

     Here is a sad story from a frustrated reader – it serves as an example of where a small claims court judge found in favor of an association that imposed a emergency special assessment to pay for litigation against an owner who constructed an unapproved modification to her property. One of the owners was upset and tried to challenge the board since it did not get a vote of the members. His letter follows. If you are in the same boat and are facing an emergency assessment that was not approved by owners, just know that you are not alone.

Letter from reader:

“I have Lost all Belief and Respect for the
California Court systems.

I live in a CID in 2008 the … down a Few Homes, a Homeowner started Rebuilding but Did not Submit her plans, ( Court case Pending) the HOA had a Meeting Behind Closed Doors, non-emergency Meeting and Voted to Special assess the membership $650.00 each home for attorney fee’s. $52,000.00 without any Regard to California Civil Code 1363.05
(f) (“Common Interest Development Open Meeting Act.”)

Interesting Facts Case was Filed in Dec 2010.
Assessment was done in 01/01/2011 then a letter was sent out again on 02/2011
then after the Members Really got Upset they sent a letter for a Meeting of the
Members a Q&A on the Lawsuit on 03/2011 at this Q&A nobody got to Vote
in this assessment ( 200% over the Common area Expenses) also They now had
their Legal Counsel at this Meeting it Got Ugly. Bottom line is our Governing
Documents address this issue.

1. Special assessment is against a Particular owner and their Lot
to bring them in compliance.

2. In case of Total Destruction of Lot Member is Responsible and if
does not Comply with the acc will be Fined a special assessment Including
attorney fees and additional Cost’s

So on top of our Governing Documents stating Clearly the Procedures for the assessment, and Letters from the HOA and The Member dated back to 2009 were the Member said if you want me to Comply Sue me!.

The Board was able to win in small claims because a Judge Said. He Believes that the Emergency Requirement for a Special assessment was Met.

WHAT! I showed him two the Letter dated 2009 indicating that they Knew a lawsuit was going to happen. So this was not an unanticipated Expense I showed him our CC&R’s that showed the Procedures for a total Destruction of a lot was not enforced by the Board,
that a Special assessment is to a Particular Home Owner of a lot. I gave him
1366(b) 136.3.05(f)…. I asked him Your Honor how can you explain the Governing
Documents wording, Does this mean the Board does not have to Comply with the
Documents that Govern us, His response was I made my decision, Then he left to
his Chambers, as if I can’t look at you in the Eye…

For me the Lesson Learned is It does not
matter what the Governing Documents Read, nor the Legal Statues, if a Small
Claim Judge Does not care you Lose….

p.s. I also included an Opinion Letter from an
attorney that the assessment was done Improperly based on the Statutes and
Governing Documents. So my Question is now what? Can I appeal or hire you to
take this into another Level? My fear is That this Board just Got and Unlimited
amount of Power to Further assess this Membership anyway they feel they can.
All they have to do is Call it an Emergency assessment and they Get away with
it.

p.s. One last thing. I also sued for Records
that the Board Refused to Surrender. And he did not Rule on this at all.

I feel so Violated and Betrayed.

Thanks again, I always look Forward to all
your Posts, I am a Contributing member … I also Purchased the Davis Stirling
act from your site. Great Information if only the system Worked….”

 

 

 

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2 Responses to EMERGENCY ASSESSMENTS DON’T REQUIRE APPROVAL OF OWNERS
  1. Fernando Cordero
    February 8, 2012 | 10:57 pm

    I wanted to Clear up Something. The Statutes say that to be an Emergency assessment you must show that:
    (1) An extraordinary court-ordered expense;
    ( this was not the case )
    (2) An extraordinary expense necessary to repair or maintain any part of the CID for which the association is responsible where a threat to personal safety is discovered; ( this was not the Case.)

    (3) An extraordinary expense necessary to repair or maintain any part of the CID for which the association is responsible which could not have been foreseen by the board in preparing and distributing the pro forma budget under Section 1365 above. Prior to imposition of this emergency assessment, the board must pass a resolution reflecting written findings about the need for the assessment and why the expense could not reasonably be foreseen. The board must distribute the resolution to the owners with the notice of assessment.
    ( this was also not Done)
    So bottom line is The Law in Small Claims court Fails to Properly Enforce this Statute. All the Judge has to say is I believe (Regardless of what you Legally Prove) this is an Emergency assessment. and Poof! you lost. I supplied 14 exhibits showing this assessment did not Qualify as an Emergency. HOA did not Supply 1 Exhibit. The Small Claims Judicial System in California does not care…Bottom Line Unless you Hire an attorney do not take this to Small claims. I don’t Know if I can Mention the Judges name but, if I could I would. and if you happen to have him as your Judge, Drop your case and file with an attorney.

    • Beth Grimm
      February 24, 2012 | 6:01 am

      I have often said – small claims court is a crapshoot. That does not mean its not worth a try.