Special assessments seem to be all the rage right now. Many associations have found themselves in a situation where a special assessment is required. Therefore, I thought it would be useful to touch on some of the statutory requirements under the Davis-Stirling Act for special assessments.
First, special assessments can be a controversial and risky proposition for a community if the assessments are not planned in advance and are simply sprung onto homeowners. The community may find, if passed, that the assessments are financially burdensome to some their community residents, which may require additional action by the board in terms of filing liens and possibly even foreclosing on property. Based on the turbulent real estate market a special assessment may mean default to a owner that is carrying a variable rate loan that has adjusted or will be adjusting some time in the future.
Civil Code § 1366(a) states that the "association shall levy...special assessments sufficient to perform its obligations under the governing documents... ." The statute goes on to state that unless there are more restrictive limits placed on the HOA Board by the governing documents the board of directors may not impose a special assessment, which in the aggregate exceeds 5 percent (5%) of the budgeted gross expense of the association for that fiscal year without approval of a quorum of owners that cast a majority of votes .
A quorum under the statute is defined as more than fifty percent (50%) of the owners of the association.
Civil Code § 1366(d) states that the community association must notify owners by first class mail of any increase or special assessment not less than 30 days nor more than 60 days prior to the increased assessment becoming due.
Finally, Civil Code § 1366(e) goes on to state generally that levied special assessments become delinquent 15 days after they are due (unless longer period prescribed in governing documents), at which time the association may collect: 1) reasonable costs in collecting delinquent assessments, which includes reasonable attorney fees 2) late charges not to exceed 10% of the delinquent assessment or $10, whichever is greater, and 3) interest on all fees, which cannot exceed 12%.
Note: The information contained is not legal advice and does not establish an attorney-client relationship. Contact us via email Ryan.McClure.Esq@gmail.com or call us at 951.818.0687.
