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EMERGENCY SITUATION ASSESSMENTS

Normally, boards of directors cannot increase regular assessments more than 20% above the prior year's regular assessments or impose special assessments (within a fiscal year) that in the aggregate exceed 5% of an association's budgeted gross expenses for that fiscal year, without membership approval. (Civ. Code §5605(b).)

However, the Legislature provided an exception that allows boards, without membership approval, to impose a special assessment in excess of 5% if there is an "emergency situations." An emergency situation is defined by the Davis-Stirling Act to mean any of the following circumstances (Civ. Code §5610):

  1. An extraordinary expense required by a court order.
  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 annual budget report under Section 5300.

    However, before it can impose or collect an "emergency situation" assessment under #3 above, the board is required to pass a resolution containing written findings as to (a) the necessity of the extraordinary expense involved and (b) why the expense was not or could not have been reasonably foreseen in the budgeting process. The resolution must be distributed to the members with the notice of the "emergency situation" assessment that is required to be provided by Civil Code §5615.

Recommendation: Whenever a board imposes an "emergency situation" assessment (including under #1 and #2 above), the board should adopt a resolution containing written findings as to (a) the necessity of the extraordinary expense involved and (b) why the situation qualifies as an "emergency situation." The board should also include a copy of that resolution with the notice of the "emergency situation" assessment it provides to the members.

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Adams Stirling PLC