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November 11, 2006
Special Assessments - Is Documentation of Need Required?
Here is a question by a reader about special assessments in California. I have left blanks in the amounts so as not to identify the specific association or sender,
"I live in a ___ unit condo complex and the BOD decided to charge the homeowner's $______ as a special assessment without supplying documentation or getting a vote by the homeowner's. This amount is more than 5% of our operating budget for the year and no explanation was given. I have filed a small claims court complaint. Is this common?"
I do not know how common the small claims complaint thing is but it seems odd to me that a board would not tell the owners what the special assessment is for. I know it happens, but it is not the way to go. If a Board needs to consider a special assessment, it does have the authority to assess one that is less than 5% of the budgeted gross expenses for the Association for the fiscal year without a vote of the members. Before I would expend the energy to file a small claims court action, though, I would make a list of questions for the Board to answer and submit them in writing, ask the Board to address the need at a special membership town-hall type meeting or through a communication to owners or on the websiite or some other way. If the Board did not comply, I would ask for records relating to the special assessment under Civil Code Section 1365.2. Owners have rights and there are punishments for withholding financial records.
On the flip side, many boards will discuss needs for a special assessment ad naseum at board meetings and get frustrated that owners who demand information do not come to board meetings to see what is going on. It is not in the Board or association's bests interests though to minimize information about the need for a special assessment. It is in the best interest to MAXIMIZE communications. People can usually understand need, what they cannot understand is "secrets".
And if the assessment was for more than 5% of the budgeted gross expenses for the fiscal year, it may be illegal and unenforceable. If it is an "emergency assessment" then it may be higher, but there are requirements of notice to members and criteria for what qualifiess as an "emergency assessment."
So ask the questions beforehand, make the effort to get the information, and document your efforts, so you do not end up in small claims court with "egg on your face". If you are going to go to court, you may as well go with two causes of action instead of one: i.e., a claim of illegal assessment and a claim of failure to provide records under the statute. There is a "$500 per" possibility of penalty for each violation of failure to provide records as specified by Civil Code Section 1365.2.
And Boards, do not let this happen!
Posted by Beth Grimm at November 11, 2006 1:20 PM