b2ap3_thumbnail_budget-blog.jpg

 

How is the amount of the monthly assessment determined?

When the budget is prepared, the amounts necessary for the daily operation and long-term reserves for maintenance and replacement are determined based on the level of service for which the association is both required and willing to pay. For example, sometimes there are specific items defined in the CC&Rs that require a certain level of maintenance by the association.

Once the annual amount is determined, then it must be collected from the members in order for the association to operate. Each member’s assessment is usually collected monthly, in 12 equal installments. Some associations collect assessments on a quarterly or annual basis. The CC&Rs will normally indicate the frequency of assessment collections.

 

Are there different types of assessments or fees?

There are several types of assessments that may apply to your association. The California Civil Code defines assessments as either being regular or special. Regular assessments are needed for the operating (day-to-day) and reserve (long-term maintenance) activities of the association.

Special assessments are those levied by the association for major repairs, replacement, or new construction of the common area or for a one-time, unanticipated expense which cannot be covered by the regular assessment (e.g., insurance premiums that unexpectedly rise sharply).

Note, a special assessment should not be confused with a monetary penalty levied by the association against an individual owner to reimburse the association for an expense such as damage to the common area, or imposed as a disciplinary measure for a violation of the rules and regulations. Homeowners can be fined for damaging common areas and/or violating any rules and regulations of the association. Some CIDs establish user fees or special charges for services and activities that are not customary. Typically, these are imposed on an owner specifically benefiting from the service, such as an owner who wants to use the common area pool, clubhouse, or tennis courts to entertain private guests. The fees are usually on a pay-as-you-go basis and generally cannot become a lien on the owner’s unit or interest. There are other types of assessments that may be designated by the CID homeowners association. For example, an association may have an assessment for cable television service. A “reimbursement assessment” may be levied against an individual owner as a charge for damage to the common area resulting from an act by the owner or an owner’s guest. The best place to look for the different types of assessments that may apply to a CID is in the CC&Rs of the association.

 

Who can increase the amount of the assessment?

The board of directors can increase the amount of the assessment by following certain procedures mandated by California Civil Code sections 5605 and 5610. Even if the governing documents (Civil Code section 4150) are more restrictive, the board of directors may not increase the regular assessment more than 20 percent per year, without the approval of the owners. The board must circulate a budget to the membership 30 to 90 days before the end of its fiscal year (Civil Code section 5300). If the budget indicates that an assessment increase greater than 20 percent is necessary, a majority of the members of the association must approve the assessment. There are also provisions for a board to increase an assessment more than 20 percent without member approval in cases of emergency such as an extraordinary expense required by order of a court, or for repairs to the common area.

 

What happens if you do not pay your assessments?

Usually, the association will send you a reminder letter as a first step. The law is specific in California regarding the due date of assessments and the overall process that an association must follow regarding delinquent assessments. The law states that if an assessment is not paid within 15 days of the due date, a delinquency occurs, unless the governing documents provide for a longer time. At this point, the association can add a charge to your assessment in the form of a late fee in the amount of $10 or 10 percent of the monthly assessment amount, whichever is greater, unless the CC&Rs specify a lesser amount. Again, the law covering this area is quite clear and the board must follow these procedures.

 

Once a year, the association will send each owner a copy of the assessment collection policy, which will tell you the amount of the late fee. If your assessment becomes over 30 days delinquent the association has the right to assess interest up to 12 percent per year on the balance that is owed and unpaid. If you still fail to pay your assessments, the matter may be referred to an attorney or foreclosure service. The association has the right to lien your property for the amounts owed as well as other costs such as attorney’s fees. Ultimately, the association can foreclose and take your property for your failure to pay assessments. A personal judgment may also be entered against you. As you can see, it is imperative that all owners pay their assessments in a timely manner. Failure by several owners to pay their assessment obligation could place the association in financial jeopardy.