Special assessments

5 Replies

This is the first time we own a home with an HOA and so far we hate it. They just sent us a letter asking for a special assessment of $600 to pay legal fees to review the rules and regs and to pay a debt collection agency to collect the money from one of the units that is past due. Can they do this?

We had a special assessment last year for termites of $1600 and they keep talking about collecting more money every year for repairs. I get the repairs part, but to collect money from an owner that doesn't want to pay?? It seems like this is not a community issue or at least it is something that it should have been foreseen and saved for, to not have the other owners pay for. Any information or clarification will help. Thank you. 

Originally posted by @Carolina Bettencourt:

This is the first time we own a home with an HOA and so far we hate it. They just sent us a letter asking for a special assessment of $600 to pay legal fees to review the rules and regs and to pay a debt collection agency to collect the money from one of the units that is past due. Can they do this?

We had a special assessment last year for termites of $1600 and they keep talking about collecting more money every year for repairs. I get the repairs part, but to collect money from an owner that doesn't want to pay?? It seems like this is not a community issue or at least it is something that it should have been foreseen and saved for, to not have the other owners pay for. Any information or clarification will help. Thank you. 

 If it helps, our unit is located in California. The unit in question is currently pending sale so, I'm not sure what late payments they will have the lawyer collect. It's my understanding that the new buyer takes on the debt, unless is different when it's a foreclosure/ short sale. Would we get the special assessment back after the money is collected? (Long shot but that makes sense in my head) 

Hi @Carolina Bettencourt,

Wellcome to BP! I have to wonder if your HOA has a management company that is helping the board, if the board is going it alone, if the board is blowing off the advice of the management company, or the membership is just not willing to fund the HOA properly. At the next board meeting I would be asking these questions, and some questions may be answered in the information that was supposed to be requested and delivered to you prior to your purchase.

1) Special Assessment For review - This should be done about every 10ish years. The laws change and it is important that the CC&Rs are reflective of the laws currently in place. If they don't you may be faced with more of those legal bills because the CC&Rs & therefore the board will be in conflict with the law and someone may very well decide to force the issue if it important to them. With regard to the special assessment see #2.

2) Does your HOA have a review of all the components that will need to be replaced in the next 30 years within the past 3 years. This is required by law (http://www.dre.ca.gov/files/pdf/ca/2012/ConsumerAl...) the review should be included in that 3 year study. What each HOA is responsible for will very greatly, but for example if yours is responsible for roads then every 4-5 years they will need to maintain the road and re-stripe, if they maintain the mail boxes than every 25 ish years they will need to replace those. The HOA is supposed to set aside reserves by dividing up the $3000 mailbox expense by 25 years/ 12 months/ number of units and put that away from the monthly dues for when the mailboxes need replacing. The reserve study is an independent third party (not the management company) that tells the association members to what degree that is happening. If you aren't at a bare minimum of 60% then you need to be asking some serious questions of the board. The report will have information at the beginning that explains the calculations.

3) Collections - The HOA may have to front the collections cost, but they will get it back when the unit sells-it gets more complex if it is underwater, but at the very least they would be able to continue to collect against the soon to be former owner. It is important that what is due is calculated correctly and collections helps with that. It is also a community problem because the board has a responsibility to pursue unpaid dues because that is what the community needs to continue to operate.

4) Returned Special Assessments - My guess is that your HOA is woefully underfunded and when they get the money back it should go to reserves.

I don't like to be the barer of bad news, but it sounds like your HOA needs a reality check and a willingness (by the membership) to raise the dues to a level that will cover the expenses and reserves without having to go to a special assessment for what are basic operating needs. Consider running for the board.

Thank you for all the info Mark. I did run for the HOA, i was the secretary for almost 8 months and i could't do it anymore because i was constantly fighting with the other two members (that are good friends) about how things should run and what money needed to be spent on. I was able to get a management company onboard and they have helped a lot but the other members still focus a lot on "their wants", instead of focusing on reserves and other major issues. I am not very knowledgeable when it comes to HOA's and it seem like i was putting way to much effort in a battle i wasn't going to win.

As far as i know the home that owes the HOA fees is a short sale owned by the bank and the collections company that was taking care of this said that the HOA can battle with the bank to get the property. Which in this case the no doubt the bank will win. I also read that the late dues always stay with the owner not the house, in that case a small claims will do, but with my experience small claims don't always work. I took someone to small claims for $10, 000 in late rent payments, attorney fees, etc. and i am still waiting to see any money.

At this point i am just trying to look after myself and my property and it seems like this special assessment is not justified, also very curious that the amount they are asking for is $600 which is the exact amount they can request per year without requiring a community vote. My question is, since they explain on the letter what the money is going to be used for can we (the community) ask the verify that in fact is being used for just that? and can we appeal?

I've had some experience with a similar situation. I purchased a home in late 2011 as a foreclosure. The previous owners has neglected to pay HOA dues for over a year, but failed to place a lien on the property. After I closed on the property, the HOA attempted to collect the bad debt of the previous owner from me. After reviewing the bylaws I learned that the HOA has every right to place a lien on the a property for nonpayment of HOA dues. Obviously if this has been done the unpaid dues would have been remitted to the HOA at closing to satisfy the lien. My advice to you would be to review the HOA bylaws and determine if placing a lien on the property is within their authority. If so, a process should be set in place to place liens on property for nonpayment and there should also be a clause in the bylaws which allows the HOA to collect any fees associated with collection of the bad debt. I would argue that the board neglected to take action and that they are now attempting to make up their losses at the homeowners expense.

As a member of the HOA, you should have the legal right to an accounting, per the bylaws. Meaning that you can request any financial records and meeting minutes (board and general meetings). You should be able to verify where this money is being allocated and/or spent.

It sounds to me that your HOA may be much more well organized that mine, as I was able to fight them on several issues because their bylaws contradicted themselves (and even some state laws), and they were unable to produce financial records and meeting minutes when I requested them. There was an assessment placed to replace the fencing surrounding the subdivision, but they were unable to prove quorum at the meeting and they later increased the assessment amount without another vote (rendering the previous vote null and void, even if they did have quorum). Hopefully this gives you some ideas to fight them, or at least hold them accountable.

@Carolina Bettencourt

Congrats on getting the management company on board - this should help with the oversight, but they are bound by what the board wants to do.

Generally if the HOA takes the property that will wipe out the debt owed by the previous homeowner to the HOA. Then the HOA can rent or sell the property. The HOA is still responsible for paying on other liens. The collections company can keep monitoring the previous homeowner for assets that pop up later and then can attach a lien on them if the HOA decides not to take the property.

If they are having a hard time with getting a quorum then the $600/yr would be an easy way to raise the dues without having to get a vote. To look at what the money is spent on you have the right to see the documentation. Contact the management company and set up time to see the documents. What you can do if they are not doing what they said they would with the money is something you would want to discuss with an attorney.

The laws in CA pertaining to CID (Common Interest Developments) are known as Davis Sterling. You can view them here with commentary:

http://www.davis-stirling.com

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