How often & how much can dues be increased?

We live in California. Our dues were increased from $400 to $460 starting 1/1/24 and the board decided today that dues would be increased to $500 starting 5/1/24. Is this legal? I thought dues could not be increased more than 20% a year without all members voting to do so.

-Laura

To add to what Melissa said, assessments *should* be based on need. Often they aren't. Boards may pick some arbitrary dollar figure as the annual budget, and then they try to adjust spending accordingly. This can happen for a few reasons: either the board isn't good at finances, or they don't want to deal with the blowback from the community, or they're forced into it by legislation that essentially allows homeowners to set a cap (whether or not that cap has anything to do with reality).

Here's a hint: inflation and unexpected events don't give a hoot what the budget is.

This sort of thing can be especially bad in communities where the owners aren't planning to live in their homes for very long. They'll happily keep assessments down, and too bad about future owners who have to pay the price for the neglected maintenance and inadequate reserves that result from years of this nonsense. Do it long enough and you end up with things like the Surfside condo collapse. This is why I refer to laws that can impose arbitrary limits on HOA spending as "licenses to commit financial suicide", and it irks me no end that these laws are often touted as "consumer protection". Protection of their right to make dumb choices, maybe...

I'll note that the proposed increases add up to 25% for the year. Given what's been going on in the California insurance market and with the damage being done by all of the storms that have been rolling through, that doesn't sound unreasonable to me. I vaguely remember some of our California posters mentioning a cap beyond which homeowner approval is required. Before I'd fight this, I'd want to know how the budget breaks out and where the increases are coming from. There are probably a few items driving it.

Contrary to what Mellissa wrote, Board of Directors in California don't have an unlimited 'pot of gold. They work for and are responsible to the....homeowners. Far too often, rogue Boards go off on their own personal objectives. If there is a need to increase dues more than 20% - then they need to sell it to the membership

And here is another legal blog about it:

https://www.lehrlawgroup.com/how-much-can-california-hoa-fees-increase/#:~:text=California%20Civil%20Code%20Section%205605,of%20the%20previous%20year's%20dues.

California Civil Code Section 5605 dictates that a homeowner’s regular dues may only be increased annually, and this increase must apply to all members of the community to prevent targeting of specific families.

The amount of the increase cannot exceed 20% of the value of the previous year’s dues. This safeguards residents against sudden and untenably large jumps in the cost of living in a homeowners association. Residents must be notified at least 30 days in advance of an increase in dues.

Define 'need' as in "HOA has a need for money"

The HOA is the homeowners and the Directors need to act in the best interest of the homeowners. There are no pots of gold. Some people are retired on fixed incomes (social security) and to them every dollar counts.

Ask yourself - why did the California Legislatures spend the time an energy to enact this law? Where they all just sitting around one day with nothing to do, drinking coffee and one of them jumped up and exclaimed "let's write a law limiting HOA's to a 20% increase on their monthly dues"

I think not, I think they were trying to address a real problem. But I do think that when I see someone on a forum with over 13,000 and 5,000 posts, and I read some of the way these posters respond and treat other forum members, that maybe they should step back away from the computer, take a break and get a life.

You do not need to reply to every post, especially when you have no idea what your talking about

Your board's increase is tied to the Notice of Increase, Annual Policy Statement, and Annual Policy Statement. Those 3 documents must be provided to members at least 30 days prior to the annual assessment due date. Otherwise, as you said, the board must get member approval. To answer your question, no it would not be legal.

If they persist, you can make the payment "under protest" then file in small claims court for a refund of the illegal portion. If they increase assessments in the future based on the illegal amount, those increases too would be illegal.

You’re correct that no one has a pot of gold anywhere, but many homeowners (some of whom are board members) don’t understand or refuse to accept that homeownership isn’t cheap. Eventually, things do wear out and have to be replaced, and by then, there have been changes in materials, labor costs, building code requirements, insurance (I’m sure you’ve seen LOTS of discussions on that lately) and inflation (remember that?) It can be a pain in the ass, but you have to make adjustments.

In your own home, you don’t want to have to choose between groceries, your high blood pressure medication or getting a new water heater, so you may have to move some things around in your budget. Some things you have to have, so you grit your teeth, do as much comparison shopping as you can and perhaps reset y your priorities.

Likewise, if people want to continue to get services from the HOA as provided in the documents, they have to be willing to pay for it, or learn to live with limited services or perhaps do certain tasks themselves. That may be easier in a detached home HOA than a townhouse community like mine or a high rise condo.

(Remember Surfside – lots of people are forgetting how that ended, although their costs were increasing and the homeowners didn't want to face it. Lax state law, shoddy builders and ignoring Mother Nature didn't help)

In Laura’s case, it may be the board didn’t do enough thinking on the 2024 budget. I’d like to know what prompted that increase to $500 – unexpected repairs that have to be done RIGHT NOW? Did someone misread the documents and thought this increase was allowable? Was $500 a month originally proposed, but the homeowners squawked? How much dialog went between the board and the homeowners before Jan. 1 – if assessments aren’t keeping up with inflation because previous boards didn’t have the will to increase them gradually, this is what you get. What about reserves - has there been a reserve study in the last five years? Are deposits being done according to the recommendations? Do people understand this isn't a slush fund to cover shortfalls in the operating budget - if that's what's happened, your board has really screwed up and depending on what else is going on, you and your neighbors may need to decide if it's time for new blood on the board.

If the board originally set the increase at $460, that's what they need to learn to live with and if there need to be some cutbacks, they may as well tell the homeowners now and let the chips fall where they may. On the other hand, Laura, I hope you've also taken a look at the last 3-5 years of HOA expenses to see what's gone up the fastest and ask why. There could be things people can do to help save money and they have to be willing to do it.

Yes. Thank you!

However, California HOA’s are governed by the Davis-Stirling Act = California HOA law.

For all the money board members are paid, they darn well better not be complacent.

Here we go again, insulting the people asking for help. Accusing the poster of giving the board the stink eye and threatening recall? The poster was 100% correct from the start regarding assessment increases. And she found out on her own.

Some suggested research for you is below, Laura. And it’s great to see your willingness to explore Davis-stirling.com. Meanwhile, the Board did act illegally by raising regular dues by more than 20% at their 4/3 open meeting.* But this illegal increase must be sent to owners in writing and — someone can look this up— I do not think they can give less than 30-days written notice to raise dues! An announcement at a board meeting is NOT proper notice. So this will not be due on 5/1!

At the meeting on 4/3, didn't the Board explain why they are going to raise the assessments again? Did the Board perhaps use the language of "special assessment?" Or "emergency assessment” for this additional $40/mo increase? Did any owners at the open forum --required in Calif.-- ask why there needed to be an additional increase? Did you attend this meeting? In Calif the draft minutes of this meting MUST be amiable for your review 30 days after the 4/3 meeting.

Suggest following up on what Terri wrote: Laura's HOA owners are required by statute to receive at least 30 days before your fiscal year began, which sounds like 1/1/24, an Annual Budget & Reserves Report.* In it should be a table showing your budget for 2024. It shows every line item in your operation budget, including the the monthly contribution to reserves. Just compare it to any monthly financial report for 2023** and you'll easily see which line item expenses increased for 2024. The first two I'd review are insurance and reserves. The next (as in my HOA's case for one big increase) is utilities. But the whole thing is pretty easy to skim & compare.

As also suggested by Shelia— former seasoned Board vet and longtime board treasurer—review the minutes of the open board meeting when they discussed and voted on the 2024 budget. There might be an explanation for certain increases. Our fiscal year also begins on 1/1 and the Board's budget meeting usually is in October.

At this same 2023 open Board meeting, the Board also should discuss the new reserves study—updates are required every year and a full onsite visit by a reserves specialist every 3 years in Calif. Changes should be noted in that meeting’s minutes. Any change in contribution to reserves will appear in the abovementioned Annual Budget & Reserves Report. See https://www.davis-stirling.com/HOME/H/HOA-Reserve-Study-Required).

* This also included an annual Policy Statement. If misplaced get a copy from your community manager, if you have one.
**Available on your HOA’s website?

“You say you assume the reserve study and 2024 operating budget prompted the increase- that could be it, but read the documents yourself - don't guess. Take a look at board meeting minutes for last year to see what prompted lots of discussion. And go to some meetings- starting with the next one and listen to the proceedings. If there's an owners forum, you can ask a question there.”

I attend all meetings and read all the docs. 2024 end-of-year budget docs stated dues increase to $460, but **nothing even suggested another $40 dues increase 4 months later AND a special assessment of $2,000 per unit. I realize special assessments are different, as needed. But why raise dues on top of that at the same time?

Very little HOA spending is discretionary, except maybe in the high-end communities where owners are rolling in dough. I define "needs" as non-discretionary items plus a bit of a cushion for the unexpected. Unfortunately, most HOAs operate on the same business model as individuals who live paycheck to paycheck. An unplanned expense is a financial disaster rather than the inconvenience it is for those who can live below their means. It's one reason the working poor remain the working poor - they don't have the cushion that would allow them to get ahead.

The part in bold above is the problem with many HOAs. Spending needs don't automatically adjust themselves downward because people can't afford their homes. Major components have useful lives, after which they need to be replaced. And neglecting maintenance actually shortens their useful lives and *increases* costs over time - it's the last thing you should do if money is tight. And things like insurance premiums rise according to claims being made, not according to what's affordable. Insurance is about the dumbest expense you can skimp on.

As I said, rising costs don't give a rat's patootie about what individuals can afford. In aggregate on a macroeconomic scale, sure. But on an individual scale, you no got the money, you no get the thing. And this has consequences.

Almost three years ago we had a graphic demonstration of what "we can't afford this" will do to a property over time.

As to why legislators pass laws like this? Lots of magical thinking about money, lots of pandering to voters, lots of "the chickens won't come home to roost why I'm in office and current beneficiaries of the law are still around, and too bad about the suckers down the line." Straight talk about money matters, especially the social implications around them, tends to get people booted by the voters. Many would much rather have a comforting fairy tale than unpalatable hard talk that actually allows people to make sound financial choices with the resources they do have.

What we're on the road to seeing is blighted communities that are targeted by the professional investors who convert them into rental properties (after upscaling them and kicking out the remaining owners who *really* can no longer afford their homes then). If I were a professional investor, I'd be cheering on communities that cut costs below where they should be - that says "attractive pricing for a buyer" and "desperate owners needing to sell". Is that predatory? You're dang spanky it is. Don't make yourselves victims by running your properties into the ground.

Also, as an aside, this is the internet. This site provides free advice. The quality thereof will vary. It's no good complaining that you're not getting good advice because there is no implicit contract between buyer and seller here. Take all of it with a grain of salt, or take none of it. Nobody's feelings will be hurt one way or the other, and nothing will change unless someone regularly violates the terms of service and gets booted. Ad hominem attacks are frowned on, for example.

The board is prohibited from increasing the assessment by another $40. because 1) as you stated, the total annual increase would be over 20%, and 2) the total annual increase was not noticed 30-90 days prior to the assessment being due on January 1st.

ElleN, not only are you a great educator for this site, but one with a sense of humor! Ahhh, where to spend those great volunteers' salaries?

Do you have to wait for a reaction before you accept that your words were insulting? I don't knock heads with my board. If they are doing something illegal that hurts my neighbors and me, I draw their attention to it. Just like Laura's board who apparently wants to illegally raise assessments. If her board doesn't respond when she advises them they are mistaken, she still has various remedies. Some of us believe in due process.

12. Send out proxies instead of secret ballots and instruct members to send their proxies to the president

To try to return to your HOA & Board, Laura. Good to see that you attend board meetings and that you read the annually required Budget & Reserves Report. So...didn't the Board explain at a meeting, in the minutes or in the Budget Report the reasons for the $2000 special assessment?

At the 4/3 meeting, didn't the board explain the reason for the additional (illegal) increase to $500?

Still, bottom line: The board must not raise regular assessments more than 20%/ann. in Calif. The 4/3 announced increase, even if legal*, must go to owners in writing with xx. days notice before implemented. So May 1 will not be the due date.

* An Emergency Assessment per CA Civil Code I cited waaaay above.

Posted By LauraG8

I attend all meetings and read all the docs. 2024 end-of-year budget docs stated dues increase to $460, but **nothing even suggested another $40 dues increase 4 months later AND a special assessment of $2,000 per unit. I realize special assessments are different, as needed. But why raise dues on top of that at the same time?