May an HOA Board Waive HOA Assessments?

Here are a couple of questions about waiving HOA Assessments – people wondering if it is legal for various reasons.

Is it legal for our HOA to waive assessments for board members?

Most Bylaws and/or CC&Rs in California provide that board members serve as volunteers. That is the California HOA model. Waiving assessments is no different than accepting compensation except in one aspect. The CC&Rs generally set the scheme for payment of assessments, whether it is to be on an equal basis, by size of the unit, by square footage, by number of bedrooms, or by some other scheme proscribed. The CC&Rs are recorded property restrictions and cannot be changed without approval of owners, per the amendment requirements in the document. When a board compensates itself with assessment waivers, it violates those CC&Rs. Some would call that “illegal”.

There are various definitions of the word “illegal”.

1. contrary to or forbidden by law, ….

2. A body of rules of conduct of binding legal force and effect, prescribed, recognized, and enforced by controlling authority.

3. Prohibited by law, prohibited by official rules: such as an illegal pass in football.

I would say that someone could find the assessment waivers to be “illegal” unless there was some provision in the governing documents (CC&Rs or Bylaws) authorizing them.

But that is not the end of the inquiry. When board members are paid for services, it raises all sorts of additional questions like: (1) Should payroll taxes be deducted? Well, it is the same as paying compensation, (2) Is it worth it? A waiver of assessments would change the status of the board member from volunteer to paid worker and thus the board member would lose important legal protections for volunteer board members that shield them from liability.

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Can a board of directors in a California HOA waive special  assessments for a homeowner as part of a settlement agreement over a dispute ?

A board might be tempted to offer an assessment waiver if forced into some settlement with an owner. In the case where the question arose, I believe the waiver was for a special assessment related to roof repairs. I do not know the specifics but a settlement was reached that resulted in a waiver of a special assessment for the roof repair.

For the same reason noted above, i.e., that the waiver may be in violation of the way the  CC&Rs allocate assessments, and that it may be a violation of the law depending on which definition of “illegal” is used, I believe it is best to agree on a different form of payment for settlement.

Assessments are the life blood of an HOA. They are based on a budget and “robbing Peter to pay Paul” -in this way- as my mother would call it — should not be something that a Board does without legal advice.

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One Response to May an HOA Board Waive HOA Assessments?
  1. Beth Grimm
    February 8, 2017 | 11:31 pm

    There are two problems with homeowners trying to rescind a contract the board has signed (well at least 2 big ones). The Board has the authority to contract if the HOA is a corporation or the Bylaws allow it AND once a contract is signed, if the other side believes the party had the authority to sign it then it becomes a question of how to “undo” a viable contract. That would depend on the termination provisions in the contract, or proving breach of contract, fraud or some other claim that would give rise to voiding the contract. A vote of the homeowners being against the contract is not a viable claim to get it rescinded. There is more to the question of what to do now. I do telephone consultations if a person wants to pay for one. My website explains consultations. http://www.californiacondoguru.com