Duty to Levy Assessments. The duty to manage the association's budget falls to the board of directors. They are the ones most knowledgeable about the association's financial condition since they pay the bills and review financial reports. By statute, boards are required to levy assessments sufficient to perform their duties. (Civ. Code § 5600.) The legal duty falls on board members, not the membership. That explains why boards sometimes raise dues when they would rather not and why they don't seek membership approval unless the increase exceeds 20%.
20% Limitation. Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may increase regular assessments (dues) by up to 20% of the association's preceding fiscal year without membership approval. Membership approval is defined as a majority of a quorum of members constituting a quorum, casting a majority of the votes--"quorum" means more than 50 percent of the owners of an association. (Civ. Code § 5605.) The 20% increase is based on the association's regular assessments for the prior year. This includes operations and reserves contributions as defined in the budget.
Overall vs. Individual. The statute is a little unclear on whether the 20% increase must be calculated to see if it increases any one member's dues by more than 20%. The general consensus in the legal community is that the limitation applies to the totality of the assessment increase. The statute specifies 20% of the association’s regular assessments, not 20% of any individual owner’s assessments. With variable and hybrid assessments, it is possible that a 20% increase in the prior year's budget could result in an individual's increase to be 21% or 22%, while other members might experience an 18% or 19% increase.
Special Assessments. The budget requirement described above does not apply to special assessments.
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