Law Permits Board to Levy Additional Fees

QUESTION: I would like more information regarding your answer, “Associations Entitled Legally to Raise Fees” (Feb. 11), about a community association board’s authority to raise assessments up to 20% per year.

I live in a condominium that passed an amendment to the declaration allowing increases only with the approval of 60% of the members except for emergency situations. Does the new law that you cited displace all previous provisions in the association’s documents? How can a board of directors stay informed about changes in the law?

ANSWER: Yes, Section 1366 of the California Civil Code specifically states that regardless of more restrictive limitations in an association’s documents, the board may increase regular assessments up to 20% of the previous year’s assessment.

The board may also impose a special assessment that does not exceed 5% of the budgeted expenses. Higher increases are legal if more than 50% of the owners attend a meeting at which a majority of those present approve the increase.

Proper notice must be given and the meeting must be conducted according to Section 7510 and Section 7613 of the Corporations Code. Your board can research the law by going to the county law library. Some local public libraries also have excellent legal reference books available.

Since the law is changing frequently, make sure that you have current information.

The board has the authority to approve an assessment increase greater than 20% if the increase is directly related to an emergency situation, such as an extraordinary expense required by a court order, an extraordinary repair or maintenance expense where a threat to personal safety is discovered, an extraordinary expense necessary to repair or maintain association property that was unforeseen at the time of preparation of the annual budget.

The board must pass a resolution containing written evidence of the need for the repair and reasons why the expense was unforeseen. The resolution must be distributed to all the members with the notice of the assessment increase.

California Civil Code, Section 1366.1 prohibits the association from collecting an assessment, penalty or fee that exceeds the amount necessary for the purpose for which it is collected.

Community Associations Institute provides seminars and newsletters to keep boards of directors, managers and other professionals informed about changes in the laws governing community associations. There are chapters across the nation. You will find chapters in the following California cities: Los Angeles, San Diego, San Francisco, El Toro, Sacramento, Camarillo, Stockton and Palm Desert.

New Owner Charged Steep Transfer Fee

Q: Our association would like advice regarding the extra fees that we can charge to new owners. Can our homeowners association assess a new buyer a transfer fee of twice the monthly assessment fee for the unit being sold?

A: That sounds like an unreasonable fee based on the laws governing ownership transfer fees. The seller is obligated to provide to the prospective buyer certain documents listed in California Civil Code, Section 1368.

The association may be asked to provide these documents through the escrow company. The law allows the association to charge only the amount of the association’s reasonable cost to prepare and reproduce the requested documents.

Many management companies, operating as the agent for the association, charge $150 or more for this service. In my opinion, such fees are unreasonable and possibly illegal, based on the specific wording of the law. The cost is customarily passed on to the buyer at the closing of escrow.

When challenged, managers say they are charging the fee because of the time spent on the phone with escrow and loan officers, real estate agents and others involved with the resale. One manager recently told me that he felt that the limit imposed by the law did not apply to management companies.

Some managers and association boards are not aware that the association must provide the requested documents within 10 days of the written request. Any person or entity that willfully violates this section of the law is liable to the purchaser for actual damages as well as a civil penalty not to exceed $500.

When selling my condominium, I provided the documents to the buyer myself and told the management company that I expected a reduction in the transfer fee since the only thing they were providing was a letter showing that there were no past-due assessments owed on the unit.

The manager said that I shouldn’t be concerned about the amount of the transfer fee since the buyer is the one who ends up paying. Sure enough, at the closing of escrow the buyer was charged a $150 transfer fee.