Capital Projects - No Owner Approval

Is this "capital project" either the maintenance, repair or replacement of a capital asset listed in the Declaration? If so, does it appear the capital asset requires maintenance, repair or replacement?

It could be possible if there is no special assessment being used to fund the project. If they are shifting funds, then it's possible.

JeffR11, is the item (the "capital project") on which the Board wants to spend money listed in the most recent reserve study?

- and no it is not in the reserve study - again, it is a new project

A new capital project typically requires owner approval regardless of the funding source.

This is the key question.

I happen to do business in California and know the laws fairly well.

Should a capital project of that size be approved by the members, IMO, yes. Is it required, no, unless required by your specific governing documents. What must be approved is the funding source, but only if it over the 5% threshold. Can the monies come from reserves, yes, as long as it is repaid with the year.

It is very possible they have a legal opinion on this. I have seen three or four in associations I have managed where this came up. The Board had opinions from their legal counsel to move forward.

Thank you for your time but that does not answer my question.

These are not capital projects.

Thank you for taking the time to comment.

This is not a substitute for legal advice but we go through many of the same problems and I was hoping that someone had been through a similar situation.

I also understand that this is specific to California.

This question is about a twenty year-old HOA and a new capital project.

A capital project is a legal term.

it is not a matter of opinion and this is not in question.

The developer is long gone.

In my experience, an attorney would reject the answers the OP is giving here as insufficient to give meaningful advice. The attorney would tell the OP that, unless the OP provides more information, the attorney cannot help the OP.

CathyA3 is a veteran poster here. She is one of the few here who in my opinion, has an excellent grasp on the law including understanding that the law may vary state by state. When I have a legal question about a hoa/condo situation, she is my first go-to person by far.

If the OP reads the site CathyA3 linked and googles to pull up the court decisions linked at the bottom of the site, he will see that the courts would never make a decision based solely on the facts he provides. Asking for black and white answers here when the OP does not provide reasonably black-and-white facts is not fair.

If the OP takes the facts of his situation and compares them to the several cases listed (at the bottom of the link CathyA provided), he may find an answer that helps him with your decision-making.

Several of the veterans hoatalk here could read the facts of the cases (at the bottom of the site CathyA3 linked) and instantly come to the same conclusion the appeals courts did. Why? Because in general, the courts have said nationwide that, if the Declaration does not provide for the HOA's payment for the capital improvement, then the law prohibits the capital improvement without a membership vote. The Declaration is a contract, and many of the veterans here know that the Board's actions must comply with the contract and not exceeding the terms of the contract. The OP seems to be at least a little aware of this. California does have some caveats on this. From the site CathyA3 linked: "For example, replacing chain link fences costing $25,000 with slump stone costing $100,000 requires membership approval. Replacing lobby carpet that costs $62,000 with tile at $120,000 requires membership approval. Upgrading carpet from $62,000 to a higher quality at $70,000 does not require membership approval if difference in cost falls within 5% of the annual budget."

The 5% rule comes from California statutes limiting spending from the operating funds and the reserve funds; special assessments; and so on.

In my opinion, and since the OP refuses to elaborate, the OP's next steps should be to read the site CathyA3 linked; read the case law cited at the bottom of the aforementioned link; figure out how the facts of his HOA's situation fit or do not fit these cases; consider the aforementioned California caveats; then either go see an attorney to help him in his decision-making or, if he feels confident the Board is violating the covenants, immediately proceed to Internal Dispute Resolution, as described at https://www.davis-stirling.com/HOME/Internal-Dispute-Resolution .

I was at this site long before I posted on this site.

We could go round and round for days with questions that have nothing to do with my original post.

I thank everyone for their time.

My wish is that the OP will have to pay an extra three grand to an attorney for the teeth pulling the attorney will have to do. It's often the best education.

Whom you either gave facts that you were not willing to share with this forum, or whom you did not pay and received some sort of general opinion worth as much as the advice here.

Only one case listed on the bottom of the page Cathy mentioned about capital improvement has any bearing on your situation, and that is Litvak v. 155 Harbor Drive. There are only two instances where a membership vote is needed, 1) if the governing documents, specifically the CCRs outline such, or 2) If the funded needed to fund the project exceed 5% of the annual expenses of the association AND required a special assessment.

There is no state statue prohibiting a capital project or improvement without membership, only if a special assessment is needed. In the case of Litvak v 155 Harbor Drive, the CCRS stated that anything over $100 times the number of units (742) required membership approval.

The two excerpts below are from my previous HOA, located in California. In Section 5.4, it states the association may levy a special assessment if the project is over 5% of the budgeted annual expenses. If the funds are already there, which it appears from your posts that they are, then no notice is required. If they take from reserves, they have to indicate in the minutes a plan to repay within 12 month.

Section 5.4 Special Assessments. In addition to the annual assessments authorized above, the Association may levy, in any assessment year, a applicable to that year only for the purpose of defraying, in whole or in part, the cost of any construction, reconstruction, repair or replacement of a capital improvement upon the Association Property, including fixtures and personal property related thereto, or otherwise, provided that any such assessment(s) for capital improvements to the Association Property which total, in the aggregate, more than five percent (5%) of the budgeted gross expenses of the Association for that fiscal year shall require the vote or written assent of a majority of the Owners, constituting a quorum.

Somewhat up the same avenue, in Section 4.1.13, the builder put in a clause whereas you couldn't sue them, or anyone for that matter if the costs could reasonably be expected to be over $2500.00. My association tried it and sued a owner with the lawyers approval and violated our CCRs. The lawyer later admitted they never read the clause.

4.1.13 The Association has the right and power to prosecute or defend, under the name of the Association, any action affecting or relating to the Project or the personal property thereon, or any action in which all of the Owners have an interest in the subject matter of the action. Notwithstanding the foregoing, without the prior vote or written assent of a majority of the voting power of the Association, the Board may not institute any legal proceeding (including any arbitration or judicial reference proceeding) against any person or entity the cost of which could reasonably be expected to exceed Two Thousand Five Hundred Dollars ($2,500.00). In estimating the costs, the Board shall include all normal and customary court costs and attorneys' fees without regard to the possibility of recovering costs and fees if the Association were to prevail.

If your attorney says its illegal, then I hope that there is something in your CCRs that make it illegal, as no state statue prohibit it, under your circumstances.

WOW...Did you read any of them, because I did.

That is the biggest load of horse$hit I have ever read. Your later responses to the OP border on badgering.

Uh huh. You and I disagree.

And this is why I dislike “is this legal” questions. It usually doesn’t take long to see the poster has already made up his/her mind and wants other people to agree (aka amen corner). However, we live in different states with different statutes (and sometimes no statutes at all) and what the documents say or don’t say can be all over the place – especially if they haven’t been updated since the dawn of the Industrial Revolution.

In my experience, the “is this legal” questions are usually a bit more (sometimes a lot) complicated than what the OP thinks they are. Or he/she has received an answer he/she doesn’t like and is fishing for what fits the narrative. I suspect Jeff was looking for a specific answer that fit whatever he’d already made up his mind about – and the vagueness of his question didn’t help AT ALL. A capital project can be anything ranging from new roofs for everyone to a clubhouse that perhaps no one really wants – we don’t live in Jeff’s community, so the secrecy is a waste of time.

Maybe I’m just dense, but for me, this may have made a little more sense if the question read something like:

Our board wants to proceed with a project to (description), without homeowner approval. It will cost between $120K - $160K and to pay for it, the board has decided to shift monthly dues for 2021 (what does that even mean?) and a larger percentage of funds are going into the operating budget this year so the funds for the project don’t have to come from the reserve fund.

And that bit about the board being “a clever bunch and they decided to shift monthly dues for 2021” is written with a bit of emotion, which can get in the way of having an adult conversation about serious issues (you become less concerned about unpacking the issue and more about being right and don’t listen to anything or anyone else).

As some of you have indicated, the answer may depend on what the project is (a major repair or replacement of a capital item), how many units are in the community, how much are assessments (so we have some idea of the money), is there a reserve fund and is it being funded regularly, have there been any discussions in the community about the project (special homeowner meetings are great for this) and my usual go-to question – have you gone to the board with any of your concerns and if so, what was the response? If not, why not?

Shelia

I call what you described as shopping for an answer one wants. It happens quite a bit on this chat. Usually you can smell them as their post will be little more then a one liner like:
Can my BOD fine me? Can my BOD tell me where to park?

What a bunch of opinionated, hyper-sensitive babies - truly amazing.

Please have at it - tell me about myself and my motivation and intelligence,

What a bunch of opinionated, hyper-sensitive babies - truly amazing.

Please have at it - tell me about myself and my motivation and intelligence,

Jeff,
I love when people challenge others on Intelligence and then hit Submit 3 times to send 1 Reply. That's smart.

I am glad you live in Ca. and not in any of our HOAs. Please stay put and don't move to Texas we do not need any ankle biters here.

Jeff,
Is that the best you got? Actually I was smart enough to leave Ca. 4 years ago before many figured it out just what a dump it is turning into.

Are all of the homeless camps starting new HOAs in Ca.?

You know Mark, I am believer in the 2nd Amendment, though not like the wack jobs out there, but IF I had a choice between walking by a group of homeless or a group of idiots with their AR-15 strapped to their chest, I will take the homeless every day of the week, and twice on Sunday.

Yes, California has issues, but so do all the other states in some form or another.

Kerry,
I apologize to the good people of California. I guess I was just doing a little tit for tat. I got stuck in a Rabbit hole with an A hole.