By statute, HOA boards of directors are allowed to special assess the membership up to 5% of the current fiscal year's budgeted gross expenses without membership approval regardless of any limitations that might be found in the governing documents. (Civ. Code §5605(b).) For special assessments over 5% (other than emergency special assessments), boards must seek membership approval.
How to Calculate 5%. If an association's annual budget is $100,000, the maximum special assessment the board can impose without membership approval is $5,000. That does not mean $5,000 per unit. The $5,000 assessment is divided among all units according to the allocation schedule contained in the CC&Rs. Once an assessment has been approved by the board, proper notice must be given to the membership before it can be levied.
Super-Majority Requirements Invalid. Governing documents that require a super-majority for assessment approval are invalid, such as: approval by a majority of the membership or approval by a majority of a quorum where the quorum is 2/3 of the membership. Such provisions are superseded by the Davis-Stirling Act.
Approval Defined. For purposes of a special assessment, the approval requirement is set by statute rather than the governing documents. Regardless of anything to the contrary in an association's governing documents, special assessments are approved by a majority of a quorum of the membership. The Davis-Stirling Act defines a quorum to mean more than 50% of the owners of an association. (Civ. Code §5605(c).) It then defines a majority of a quorum to mean the affirmative vote of a majority of the votes cast, which votes also constitute a majority of the required quorum. (Civ. Code §4070.)
For Example: In an association of 100 members, 51 ballots must be returned to constitute a quorum. Of those, at least 26 must vote for the special assessment. If 60 ballots are cast, at least 31 must vote in the affirmative. And so on.
Secret Ballot. A membership voting on a special assessment must be done by secret ballot using election rules duly adopted by the association. Membership approval is at a special meeting called for that purpose or entirely through a mail-in ballot.
Notice Requirement. If the assessment is approved, proper notice must be given before the assessment can be levied.
Funding Alternative. Boards are required to fund common area maintenance. If the membership votes down a major unfunded maintenance project, boards might consider petitioning the court to approve the special assessment. Corporations Code §7515(a) provides:
If for any reason it is impractical or unduly difficult for any corporation to call or conduct a meeting of its members, delegates or directors, or otherwise obtain their consent, in the manner prescribed by its articles or bylaws, or this part, then the superior court of the proper county, upon petition of a director, officer, delegate or member, may order that such a meeting be called or that a written ballot or other form of obtaining the vote of members, delegates or directors be authorized, in such a manner as the court finds fair and equitable under the circumstances.
If a property is in dire need, this would be a minimal risk approach following a failed assessment vote to get a court order to compel the imposition of a necessary assessment. The assessment could then be used as collateral for a bank loan. This provides immediate funds for critical maintenance.
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