The Definition of an Assessment

The dictionary defines an assessment as a charge for an expense and the amount of the charge, not as a payment or a collection of a payment, and it defines improvement as the act of making something better (change), and it defines maintenance as the act of keeping something the same (non-change), neither making it better nor allowing it to become worse.

The language of the Articles and the Bylaws and the Declaration which govern the Board appear to me to be consistent with these dictionary definitions of an assessment (a charge for an expense and the amount of the charge) and improvement (change) and maintenance (non-change).

Section 3.2a of the Articles states that the Board has the power “to make and collect Assessments against Members.”

The Board cannot “make” and “collect” a payment or a collection of a payment “against” the membership. However, the Board can “make” a charge for an expense “against” the membership, and the Board can then “collect” the amount of the charge.

So an assessment is a charge for an expense and the amount of the charge in the regulations which govern the Board, just as it is in the dictionary.

Section 8.04 of the Bylaws states that “Regular annual Assessments [charges] against a Lot Owner for his share of the items of the budget shall be made [shall be imposed] in advance [before the calendar year] on or before December 20,” and that “Special Assessments [charges] may be made [may be imposed against the membership] from time to time [at any time] by the Board ... with membership approval where required.”

So the annual charge for the expense of the annual budget is the “Regular Assessment,” and every other charge for every other expense, such as the expense of an improvement (a change) of the membership’s Common Property, is a “Special Assessment,” and some (not all) “Special Assessments” (charges for expenses other than the expense of the annual budget) require “membership approval.”

Section 6.04c of the Declaration states that the Board “may levy [may impose against the membership] a Special Assessment [a charge for an expense other than the expense of the annual budget] for the purpose of defraying ... the cost of any construction ... of a described improvement [a described change] to the Common Property,” and that “Special Assessments [charges] for improvements [changes] must be approved by at least sixty (60%) percent of the votes cast by Members,” and that “Special Assessments [the amounts of any charges for any expenses other than the expense of the annual budget] shall be payable [shall be owed by the membership for payment] at such times [a single payment] and in such installments [multiple payments] as may be determined by the Board.”

It is logically impossible for the membership to approve “Special Assessments [charges] for improvements [changes]” unless it approves the “improvements” (the changes) themselves, hence the phrase “approved improvements” in section 8.02 of the Bylaws, which states that “a budget for each calendar year ... may provide funds for specifically proposed and approved improvements.”

So “at least sixty (60%) percent of the votes cast by Members” must approve every “improvement” (every change) of the membership’s Common Property and every “Special Assessment” (every charge) for the expense of every “improvement” (every change) before the Board can “levy” (can impose) against the membership the approved Special Assessment (the approved charge) for the expense of the approved improvement (the approved change), the payment of which can be collected from the membership at whatever “time” (a single payment) or in whatever “installments” (multiple payments) are “determined by the Board,” as stated in section 6.04c of the Declaration.

The logical manner in which to collect from the membership an approved and levied Special Assessment (an approved and imposed charge) for the expense of an approved improvement (an approved change) of the membership’s Common Property is to collect it in the payment for the annual budget for the next calendar year (a single payment) or in the payments for the annual budgets for subsequently calendar years (multiple payments in installments), hence the statement in section 8.02 of the Bylaws that “a budget for each calendar year ... may provide funds for specifically proposed and approved improvements.”

Section 8.02 of the Bylaws states that “the Board shall adopt a budget for each calendar year which shall include the estimated funds required to defray [1] the Common Expenses and funds for [2] reserves, if any, and may provide funds for [3] specifically proposed and approved improvements.”

The reason that the phrase “approved improvements” in section 8.02 of the Bylaws has to be a reference to membership approval and cannot be a reference to Board approval is that whereas the Board must approve all three things (the “Common Expenses” and the “reserves” and the “approved improvements”) stated in this section, the only one of these three stated things which is characterized as having been “approved” is the only one of these three stated things which “must be approved by at least sixty (60%) percent of the votes cast by Members,” as stated in section 6.04c of the Declaration, namely, the “improvements.”

So the regulations which govern the Board give the membership the authority to decide what can or cannot be done with its own Common Property (the 60% membership vote-of-approval requirement for every improvement [every change] of its Common Property) and with its own money (the 60% membership vote-of-approval requirement for every Special Assessment [every charge] for the expense of every improvement [every change] of its Common Property).

That’s how it appears to me. Am I wrong?

Prior to the Board meeting held on 03/26/08, the Board agreed with its improvement project coordinator that a vote of approval from the membership had to occur before the Board’s improvement project could proceed.

But in the minutes of the Board meeting held on 03/26/08, the Board reverses itself and begins to claim that, according to its attorney, it can evade the 60% membership vote-of-approval requirement by simply “handling” or “treating” whatever required membership approval as if it were something else which did not require membership approval.

So the Board decides to “handle” or “treat” the Special Assessment (the charge) for improvement (change) as if it were a fee (a charge) for maintenance (non-change), and it decides to “handle” or “treat” the membership’s deciding vote as if it were a nonbinding opinion, and it is stated in these minutes that “a motion [was made] that the renovation cost would be in the form of a maintenance fee,” and that “there would be no special assessment and no upfront payment option.” Apparently, the “special assessment” is being defined as a type of payment instead of what it is (a charge for an expense).

According to this logic, the repayment of a bank loan could be evaded by simply handling or treating the borrowed money as if it were a gift. But I don’t think that any bank would go along with this kind of reasoning, and neither do I think that the membership should go along with this kind of reasoning regarding the 60% membership vote-of-approval requirement.

In the subsequently written letter dated 06/05/08 from the Board’s attorney in support of the Board’s new position, the attorney admits that the Board’s project consists of “changes” which are “considered improvements,” and that the Board has the right “to borrow money” for “improvement,” and that “the levy of a Special Assessment to fund improvements ... may be levied only upon the affirmative vote of not less than sixty (60%) percent of ... members,” all of which supports the Board’s original position (prior to the 03/26/08 Board meeting) that a vote of approval from the membership must occur before the improvement project can proceed.

But then she attempts to evade the 60% membership vote-of-approval requirement by changing the definition of a Special Assessment (any charge for any expense other than the expense of the annual budget) to a payment which is collected apart from the payment for the annual budget, and by then concluding that if the payment for the improvement (the change) is collected in the payment for the annual budget, then there is no Special Assessment and consequently no 60% membership vote-of-approval requirement.

But in doing this, she ignores the statement in section 8.02 of the Bylaws that “a budget for each calendar year ... may provide funds for specifically proposed and approved improvements,” which refutes both her conclusion and her altered definition of a Special Assessment.

In a second letter dated 08/25/08, she reverses herself and claims that the Board’s project consists of “work” which is “considered maintenance,” and that the Board has the right “to borrow money” for “maintenance,” and she cites section 4.06c of the Declaration, which states that the Board has “the right ... to borrow money for the purpose of improving, replacing, restoring or expanding the Common Property, or adding New Common property.”

However, not only is the word “maintaining” not included among the stated purposes for which the Board has the right to borrow money, but also the nature (non-change) of maintenance is incompatible with the nature (change) of the stated purposes: improvement, replacement, restoration, expansion, addition. So the Board has the right to borrow money for improvement (change), but it does not have the right to borrow money for maintenance (non-change).

I think that the definition of an assessment (a charge for an expense and the amount of the charge) is clear enough in any dictionary and in the language of the regulations which govern the Board.

However, is there a universally accepted statement of standards for home owners associations (HOA), which clarifies the meaning of assessments for HOA Boards, and to which I could direct the Board (and its attorney) so that it would stop playing these word games in its attempt to evade the membership approval requirement?

Jim,

I have to admit I didn't read all of your lengthy post but our hoa docs state that the memberhsip must vote for or against it. This makes sense to me. Why should 3 or 5 board members decide if a special assessment is necessary?

Anna,

I may be wrong but am sure our docs say the membership must vote for a special assement. I'll check them out once more. We had an issue a couple of years ago about cutting down old live oak trees. Turns out a few folks on the board wanted some old live oak trees cut down so their yard would get more sun at a cost of $15,000 but it isn't just the cost. Purchasers are attracted because of the tees. Why should 101 owners have their properties devalued because 3 or 5 board members decide that is what is going to happen?

Jim, I think I understand your post, so I'll take a stab at it. The BOD is trying to raise assessments or have a special assessment to repair/replace an existing item. To add to this confusion they want to create (add) something that wasn't there before and this is what's causing the monkey wrench in the works.

Normally the BOD decides how much money it will need for the following year and divides that amount between all the homeowners in a manor prescribed in your documents either (usually) equally in stand alone homes or a percentage in condos. If they have a shortfall or a special need then they can impose a special assessment in the same manor as long as they conform to the documents and any applicable law. However most documents limit the amount of capital improvement the Board can create (the new item) to a certain dollar amount without a majority homeowner vote.

The issue is not the right of the Board to make and collect assessments. As mentioned in the first message, section 3.2a of the Articles states that the Board has the power "to make and collect Assessments against Members." That is not the issue.

Neither is maintenance the issue. The Board has the obligation to maintain the Common Property. The example of fixing a broken pump or painting what needs painted falls into this category. Maintenance (non-change, neither making the Common Property better nor allowing it to become worse) does not require membership approval. All of that is understood.

Also, not all Special Assessments (charges for expenses other than the expense of the annual budget) require membership approval. For instance, a Special Assessment (a charge) for a shortfall in the funds to pay for the expense of the items of the annual budget does not require membership approval anymore than the Regular Assessment (the annual charge for the expense of the annual budget) itself requires membership approval.

The issue is an "improvement" (a change) of the membership's Common Property. It's the membership's Common Property, and the membership has the right to decide whether or not its own Common Property is to be changed. That is why "improvement" (change) requires membership approval, whereas "maintenance" (non-change) does not require membership approval.

What if the Board decided that the construction of a statue of a pink elephant in front of the clubhouse would be an improvement to the Common Property? Shouldn't the membership have the right and the authority to say no to the pink elephant?

Section 6.04c of the Declarations states that the membership has that authority. It states that "Special Assessments (charges) for improvements (changes) must be approved by at least sixty (60%) percent of the votes cast by the Members."

This correlates with the tree-cutting example in one of the messages. Cutting down the trees changes the Common Property. It would fall into the category of "improvement" (change), not "maintenance" (non-change), and therefore would require membership approval. What if most of the membership loved those trees? Wouldn't the membership have the right to say no to cutting them down?

The Board doesn't need membership approval for maintenance (non-change), because there is nothing to approve, because nothing is being changed. But the Board does NOT have the right to improve (to change) the membership's Common Property WITHOUT the permission of the membership itself, because the membership may not want its own Common Property changed.

The primary issue in the first message, however, is the redefinition of the word "assessment" from what it is (a charge for an expense and the amount of the charge) to what it is not (a payment or a collection of a payment) in an effort to evade the 60% membership vote-of-approval requirement for every improvement (every change) and for every Special Assessment (every charge) for the expense of every improvement (every change).

The "approved improvements" whose "funds" are collected from the membership in the payment for the annual "budget" in section 8.02 of the Bylaws are the result of Special Assessments (charges for expenses other than the expense of the annual budget, such as the expense of improvements).

There is no such thing as a payment without an assessment (a charge for an expense), no matter how the payment is collected, and there is no such thing as a payment for an improvement (a change) without a Special Assessment (a charge for any expense other than the expense of the annual budget) for the expense of the improvement (the change), no matter how the payment is collected.

But the Board's attorney changes the definition of a Special Assessment from what it is (a charge for any expense other than the expense of the annual budget) to what it is not (a payment which is collected apart from the payment for the annual budget) in order to falsely claim that collecting the payment for an improvement (a change) in the payment for the annual budget eliminates a Special Assessment (which she falsely defines as a payment which is collected apart from the payment for the annual budget) and consequently eliminates the 60% membership vote-of-approval requirement for every improvement (every change).

The fact that this is a false claim is corroborated in section 8.02 of the Bylaws, which specifically states that the "improvements" whose "funds" are collected in the payment for the annual "budget" are "specifically proposed and approved improvements."

My question is whether there is a universally accepted statement of standards for home owners associations to which I can direct the Board and its attorney for the correct definition of an assessment. If they won't listen to me, then maybe they will listen to such a statement of standards, if it exists.

Jim, I guess we both posted at the same time...I should have said "levy assessments."

Anna,

Our docs state "Special assessments may be levied by the Association......provided that any such assessment shall have the assent of two thirds (2/3) of the votes of each class of membership who are voting in person or by proxy at a meeting duly called for this purpose. In addition, the Board of Directors may assess a special assessment AGAINST AN OWNER for the cost of repair or restoration on account of damage or injury to the Common Area or any Lot caused by the Owner's negligence or failure to comply with the provisions hereof."

In our case, if the board had cut down the hundred year old live oak trees as they wanted, it would have done little good to recall the board after the fact.

Good morning Ellen. Interesting what your docs say. Yes, there certainly are instances where you don't want your Board to have free range, ESPECIALLY in the instance you told--about cutting down those magnificent trees. It would have been too late. Yet here is another example of people wanting to be on the board for their personal agenda.

Ellen,

Over the past couple of years we had a number of examples similar to your. First, our docs and the law is clear. The community (members) must get a copy of the proposed annual assessment 30 days prior to a vote, and the budget must be approved by the majority of the members voting. It also states that any special assessment must be approved seperately by the same percentage. The only time the board has a unilaterial decision is when the situation was an emergency and needed to be addressed immediately.

Over the past 2 yrs or so we've had similar situations as mentioned in the various posts. Late 2007, just before the annual election the then VP spent $14K on tree removal/trimming around a pond which we have. A lot of these trees were a live, and no one even knew he (or the board) was getting this work done until it was in progress. Keep in mind our community was only turned over from the builder in mid-2006. The community been pushing the builder to address some issues in the common area which they did. The builder was going to give back $40K for some issues, but wanted a contract signed relinquishing them of any future issues. This past fall (late Oct) the then board decided to take $20K of that money and use it to buy fountains for the pond. Two things, first we had not yet received any money from the builder (contract not even signed), and secondly no fountains ever existed in the pond previously. The then board, 3 of which is on the current board, claimed that the fountains were for maintenance purposes. Remember they did not previously exist, and the pond has 5 aerators which the builder had just replaced. No votes by the community were taken, no formal discussion, and no study on the impact on on-going costs. Since I am now on the board, I was able to get all of this information, which was never communicated to the community, and the projected impact on the annual budget is an increase of $5K.

This has caused a problem since some community members are now refusing to pay assessments because they feel the prior boards did not act appropriately. Honestly, to some degree I agree.

Jim, I'm a meat and potatoes kind of guy so what specifically (in 100 words or less) is the BOD trying to create that wasn't there before and are there any limits for capital improvements in your documents. With the exception of the elephant statue all the things you mentioned could either be improvements or maintenance issues.

Sorry, Glen. I didn't see your message until I posted my last message. I'll keep it to 100 words or less from now on. Again, sorry.

Ellen,

You are so correct. Since the board meetings are now open I'm trying to encourage more people to attend so that they at least see/hear what's going on.

Gerry

Jim,

Whoever said that women talked more than men? Only kidding but lenghty posts are often not read..people just want the gist of the problem and not all the details.

SusannaM:

Has your HOA transitioned from developer control yet ??

Jim:

Yes.

In the meeting in which the Board denied the recall, it spent a large part of the meeting reading aloud all of the addresses of the members who voted to recall it (over 437), stating that it would subsequently recite all of the names of these members. The Board has made it clear that it will go out of its way to publicly identify every member who voted to recall it. What is implicit in this course of action is the Board's hope that someone will do something bad to these members and/or to their properties. So the Board has added intimidation to to denial as its strategy. What the Board is doing is certainly inappropriate, if not illegal.