HOA assessments

Started by MarcoS • 2 replies • 1757 views

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MarcoS (California)
Posts: 1

Posted:

My wife and I bought a Victorian condo (in a 14-unit association) in San francisco about 3 years ago. Unfortunately we got sucked in emotionally by the experience and bought in spite of a pending special assessment (mainly to address necessary dry rot repairs/painting, etc.). The assessment was passed by a majority vote late last summer and the work was completed (or so we thought) by early 2010. We have now paid roughly half of the $54K levied against us, personally, and we are financing the balance due, over the next 6 years, through a lender provided by the HOA. Of the 14 homeowners, a staggering 6 (who have been here many years and are rich with equity) have paid their entire assessment amounts in full. 6 homeowners have paid the required "down payment" portion of their special assessment (about half the total due) and are financing the remaining balance of their assessment over the next 6 years. 1 homeowner is in default and has paid no monies that are due to date under the assessment.

After attending an HOA meeting last night I was surprised to learn that the Board (under the direction of the management company) is now considering proposing an additional special assessment due to lack of funds to cover 1) the completion of construction repairs on one of the units that wasn't completed due to early depletion of funds collected in the first special assessment. (Unexpected structural defects were discovered on other units and this rapidly depleted the construction funds) and 2) the HOA owes the management company roughly $40K in management fees but lacks funds to pay them at this time. The management company is factoring the delinquent homeowner into the equation and is planning to add his portion of the delinquent assessment (roughly $34K to date) to the amount that each homeowner would be required to pay under the additional special assessment.

In the meantime, the Board filed a lien (on 5/24/2010) against the delinquent homeowner and the management company states that after a waiting period of 60 days the Board will vote to initiate judicial foreclosure if the amount is still unpaid. This process comes with another waiting period of 90 days, as I understand it.

Questions:

1. Can the HOA levy another assessment within such a short timeframe, placing additional homeowners in financial hardship and at risk of foreclosure?

2. Would it not be more prudent for the Board to attempt to resolve the lien against the delinquent unit before slapping other homeowner's with an additional special assessment that also factors in that we should expect to not get paid on any additional assessments levied against the delinquent homeowner?

3. One homeowner has just placed her unit for sale as she cannot afford the special assessment payments (on top of HOA monthly dues that are already high by local standards). We are also considering placing our unit on the market even though, given current market conditions, we would likely lose money (possibly all of our 10% down payment + monies paid to date towards the special assessment). Does the lien against the delinquent unit affect the sale of another property in the complex?

4. Is there any legal recourse to stop an additional second assessment from going to vote?

Thank you for your time and any feedback/assistance you can provide.

M.S. in SF

GlenL (Ohio)
Posts: 5,491

Posted:

Marco these are the State imposed limitations on raising assessments and special assessments. (bold by me)
Civil Code §1366. Duty to Assess, Limitations on Assessments.

(a) Except as provided in this section, the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title. However, annual increases in regular assessments for any fiscal year, as authorized by subdivision (b), shall not be imposed unless the board has complied with subdivision (a) of Section 1365 with respect to that fiscal year, or has obtained the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, "quorum" means more than 50 percent of the owners of an association.

(b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, quorum means more than 50 percent of the owners of an association. This section does not limit assessment increases necessary for emergency situations. For purposes of this section, an emergency situation is any one of the following:

(1) An extraordinary expense required by an order of a court.

(2) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible where a threat to personal safety on the property is discovered.

(3) An extraordinary expense necessary to repair or maintain the common interest development or any part of it for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the pro forma operating budget under Section 1365. However, prior to the imposition or collection of an assessment under this subdivision, the board shall pass a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment.

(c) Regular assessments imposed or collected to perform the obligations of an association under the governing documents or this title shall be exempt from execution by a judgment creditor of the association only to the extent necessary for the association to perform essential services, such as paying for utilities and insurance. In determining the appropriateness of an exemption, a court shall ensure that only essential services are protected under this subdivision. This exemption shall not apply to any consensual pledges, liens, or encumbrances that have been approved by the owners of an association, constituting a quorum, casting a majority of the votes at a meeting or election of the association, or to any state tax lien, or to any lien for labor or materials supplied to the common area.

(d) The association shall provide notice by first-class mail to the owners of the separate interests of any increase in the regular or special assessments of the association, not less than 30 nor more than 60 days prior to the increased assessment becoming due.

(e) Regular and special assessments levied pursuant to the governing documents are delinquent 15 days after they become due, unless the declaration provides a longer time period, in which case the longer time period shall apply. If an assessment is delinquent the association may recover all of the following:

(1) Reasonable costs incurred in collecting the delinquent assessment, including reasonable attorney's fees.

(2) A late charge not exceeding 10 percent of the delinquent assessment or ten dollars ($10), whichever is greater, unless the declaration specifies a late charge in a smaller amount, in which case any late charge imposed shall not exceed the amount specified in the declaration.

(3) Interest on all sums imposed in accordance with this section, including the delinquent assessments, reasonable fees and costs of collection, and reasonable attorney's fees, at an annual interest rate not to exceed 12 percent, commencing 30 days after the assessment becomes due, unless the declaration specifies the recovery of interest at a rate of a lesser amount, in which case the lesser rate of interest shall apply.

(f) Associations are hereby exempted from interest-rate limitations imposed by Article XV of the California Constitution, subject to the limitations of this section.

Studies show that 5 out of 4 people have problems with fractions

DanielH1 (California)
Posts: 482

Posted:

You are in a difficult situation.

1. Yes, the HOA can vote to levy another special assessment.

2. Probably not. Since many HOAs have delinquencies and considering the economy, it may not be sensible to delay work until there are no delinquencies and all previous deliquencies have been totally resolved.

3. Any buyer would have to be informed that a huge $54K special assessment was just levied and a new (probably huge) special assessment is on its way. I hate to say it but no sensible buyer will want to step into that situation. The lien won't affect your sale at all. If they are blind to the special assessment situation, the lien shouldn't bother them. If you can sell it, do it.

4. No, but you should vote against it and spend a ton of time convincing others to vote against it.

Your situation is so dire; I really feel sorry for you. You should consider bankruptcy and foreclosure; do it, if professional advisors recommend it.

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