Budget surplus spending

Where did you read this?

What, if anything, do your bylaws say?

Are you and the board aware of the tax implications here? See https://www.davis-stirling.com/HOME/E/Excess-Income-Resolution

At this point, do you turn to the governing documents, state law and the davis-stirling.com site //as a start// to getting questions answered?

The davis-stirling.com's search engine is outstanding and almost beyond compare.

I read Davis-Stirling.com some months ago under budget - excess funds and how IRS rules apply. My understanding was any excess had to be applied to next year's assessments or returned to members and the decision had to be made by the members - otherwise the excess funds would be taxable. I asked our treasurer about it and she said that's not true. So they spend it how they wish and don't pay taxes on it.

Our by-laws don't address this.

Davis-Stirling is good but it's always slanted to the board's favor in its explanations.

Thank you for explaining from where you are coming. Your source seems to be largely the site I linked above. This is fine, AFAIC.

For someone new to HOA tax law in particular, the site I linked is not an easy read. If a person is also a bit new to HOA law in general, I think this new-ness will also be an impedance to understanding what is going on. I am not trying to be snotty. I am trying to say these topics are pretty complex. Anyone thinking he/she will have command of many of these topics after just one sitting perhaps does not understand the learning process? Just my opinion.

Also I believe an online forum is not the greatest place to teach people about HOA law, budgeting and so forth. Hopefully you get this. From prior exchanges, I think you do.

I appreciate your digging in and trying to get still more command of owners' rights and board rights. Below, I hope you will ask questions as needed to get clarification.

You say the bylaws are silent. In my opinion, and assuming the board is satisfied with the funding of reserves, I suppose the board could vote to refund excess income. But the board does not have to. The reason the owners do not have this right is because the owners have only the rights expressly reserved to them in the bylaws, covenants and state law. What the owners can control has to be written down in the aforementioned documents. Many people think this is crazy, and it deprives owners of controlling their fate. This is flatly false. Owners control their fate by electing (and if desired, recalling) directors they want. The courts are keenly aware of this. Owners do have much control over their own fate. I am not saying it is perfect. "Perfect" here does not exist, AFAIC.

At your HOA the reason the board has the right to apply the excess income to the following year's budget is because the board sets the budget. You should read your bylaws carefully to learn the details of this. Then search the D-S site for "budget."

I am aware in California that assessment increases over a certain amount require the owners' (en masse) approval. See https://www.davis-stirling.com/HOME/H/HOA-Assessment-Increase-Limitations. This is an example of when the statutes reserve a specific right to the owners.

At your HOA, do the bylaws say the owners have to approve the annual budget? Or do the bylaws maybe say the owners have the right to reject a budget? If so, then once again, this is a specific, express power reserved to the owners. Owners absolutely can and should use this right to rein in a board.

I hope they spend it within the constraints of the governing documents. Plus, with owners the board should be completing the annual "excess income resolution." If this is not happening, then as needed, ask me what risks the HOA is taking.

The excess income resolution is for legal protection against the IRS. It is not a trivial excercise, IMO. The owners should vote on the resolution. Just be aware that this is not a vote on whether to say, refund money to owners. The vote is a formality that aids the HOA accountant and protects the HOA, in case the IRS comes a-knocking.

I disagree. It is slanted towards what the statutes, governing documents and case law say.

Why do you assume they had objections or concerns and did not raise them?

The treasurer does not know what is in people's minds.

To me, what you posted is a big "So what? If one does not like board actions, that are perfectly legal and do not violate the governing docs or state law, then either run for the board, or find others who will.

In my opinion for a board critic to be taken seriously, one must home in on genuine violations of the bylaws, Declaration and state law. With the above, so far I see no violations.

Do understand: A failure of a board to prepare and have owners vote on an excess income resolution does not, in itself, violate any law.

IMO that's you injecting enormous bias into what the D-S site says. The site's position is much more nuanced and far from black-and-white. The site says to me what you say: Legal invoices are not categorically privileged. See https://www.davis-stirling.com/HOME/L/Legal-invoices

I can understand a person wanting to hold the board to the highest standards. But shouldn't that person darn well better hold him- or herself to the highest standards?

I hope this forum is about testing your theories of where you can hold the board accountable. Which also means I hope you are amenable to throwing out some of these theories.

Maybe this forum is also about education. Hopefully this forum is at least planting seeds, for people with concerns like yours, to process in the coming weeks and months.

For your HOA, and as explained above, the Board.

The board opened our very first reserve account two years ago. The association does not pay for any electricity.

Does your HOA have a clubhouse, pool, street lighting, or other power source like lighted signage?

You may not think they pay for electricity but would not rule it out completely. That is because many HOA the electric bill is not under the name of the HOA. It is most likely under an individual member name. Which may or may not longer be part of the HOA. Utilities do not always accept accounts under HOA name. One person has to be used for their address. It may then appear the HOA does not have a utility account when they do.

Our HOA was like that. The utilities was not under our name. We paid the bill. It just if you called the utilities company it would not go under our name but our clubhouse address with former member name.

No clubhouse, no pool, no street lighting, no signage, no water or sewer! Nothing but roads and greenbelt.

Davis-Stirling.com is the website for the law firm Adams/Stirling. That us a company.
The Davis-Stirling Act is the legislation.

Davis stirling.com is then that company name that is using it. Davis Stirling is a set of procedures. Not the same.

No, I wasn't saying that - the Adams/Stirling law firm said that and I believe it is misleading because they represent associations and they don't homeowners to have invoices. The case they cite is L.A. Cnty. bd. Of Supervisors v. superior Court of L.A. Cnty., 2017 which says the following (my numbering): 1) the purpose of legal invoices is to ensure proper payment for services rendered, not to seek or deliver the attorney's advice or representation., 2) Chief Justice George in Costco wrote "unlike an opinion letter, a billing invoice is not made for the purpose of the legal representation., 3) This imperative (protecting privileged communications) does not require us to conclude that everything in a public agency's invoices for legal services is categorically privileged. Instead, the contents of an invoice are privileged only if they either communicate information for the purpose of legal consultation or risk exposing information that was communicated for such a purpose. This latter category includes any invoice that reflects work in active and ongoing litigation.

So it's not a bias on my part. The law firm made it seem all legal invoices are not subject to inspection by members when the Supreme Court case they cited showed it's only invoices in open litigation that contain information communicate for the purpose of legal consultation (which is not usually contained in a legal invoice). Legal invoices for inactive/ended litigation are not privileged or confidential. Not to mention invoices are not privileged if no privilege is claimed, if the invoice is shared with a third party, or if the contents of the invoice is shared with a third party.

Terri, this is literally the bottom line at https://www.davis-stirling.com/HOME/L/Legal-invoices:

Recommendation: Boards should consult legal counsel in the event a member were to request legal invoices and contracts for legal services.

From what you know so far, do you disagree with this advice?

I am going to take this as a yes, you agree with the advice at the bottom of https://www.davis-stirling.com/HOME/L/Legal-invoices.

In court it seems to me the HOA attorney's bad advice is your gain.

Then again, what you see as bad advice may be wise advice. Why? Here's why:

In California and as you are aware, in small claims court when an owner prevails she can win her attorney's fees (and yup, collecting is another issue). However if the HOA prevails, it is not allowed an award of its attorney fees, unless the action the owner brought was frivolous yada. See https://www.davis-stirling.com/HOME/Statutes/Civil-Code-5145.

In California this heavily favors owners bringing disputes (the ones allowed by statute) to small claims court. An ill-informed owner who loses claims in California small claims court can place a mighty cost burden on the HOA.

You have posted you accumulated a number of wins in small claims court. You have not indicated you lost any of your claims. From reading your knowledge of HOA law and covenants, I am wondering if there were losses. If so, then the unlucky HOA, and not you, got stuck with paying the bills for consulting its attorney on the claims you lost.

What's a HOA to do with someone like you, knowing the structure of small claims court encourages half-baked claims by owners, where the HOA will not get its attorney fees back?

Dig in.

In the eyes of this board and its attorney, you are this HOA's enemy. To the extent the law allows, the board and its attorney have a legal right to make things hard for you. And they are. E.g. you indicated you are having a hard time collecting your attorney's fees. Attorney's fees are a huge topic in law. Whether you have command of what fees you are allowed, under California law for prevailing on certain claims, is in question.

This is where suing your HOA is suing yourself and your neighbors. The HOA has a fiduciary duty everyone states to protect the HOA. That is done by hiring their own attorney to respond to your attorney or threats of lawsuits. The money spent comes from the HOA dues. A HOA is ONLY funded by it's owners for it's operating expenses.

So the HOA can request their legal expenses back as part of the lawsuit. Ti for tat as most will say. That is because that is viewed as damages if the lawsuit is frivolous per the court.

It is up to the court to decide which part pays the legal expenses. It may be each pays their own and done. The court may decide the other party pays for them. This is to be requested as part of the judgement.

Whether or not the HOA has bad legal advice is not up to you to decide. The HOA is paying for it. You do not get out of paying for bad advice. It is the choice to take and use it.

CA Civil Code section 5215.(a)(5)(D) "Privileged contracts shall not include contracts for maintenance, management, or legal services." The Davis-Stirling Act was written to protect homeowners and is meant for lay persons to understand. A board should not have to consult an attorney for every little thing. That's just due diligance.

Basically what Terri is saying the BOD should have had a "better/closer" read of their own docs and gotten legal advise rather then fight Terri's claims. In one HOA I was a member of, the straw that broke the camel's back was a President and BOD that refused to accept advice from the associations attorney (concerning out buildings). They hired another attorney to fight a group of owners over the issue. Long story short, it took two election cycles and a lot of hard work for a group of we owners to purge the existing BOD.

Ideally, a board would communicate with a member so lawyers would not be necessary. And a member would not be forced to take legal action as a last resort.

So do you just want the HOA to follow the rules for rules sake or is some actually directly effected by their actions?

It should be known that if someone can not refinance their house in their HOA that is two factors. Usually it is not a denial but do not get the best rate. Denial is for bad credit reasons not HOA.

There is a HUD form a HOA fills out with 25 questions about the health of the HOA. This is done in the background by the HOA. It is between the bank and HOA representative. The most important parts are how many rentals and if the HOA is involved in any lawsuits. The higher the rental percentage the less likely certain government based loans offered. Also the higher refinance rates are.

So all your lawsuits are doing your neighbors harm by preventing good refinance rates. Plus less pool of potential buyers. This form is where the actual rubber meets the road NOT rule following.