: I have an association that has variable assessments. Increasing the budget by 20% would cause one group of owners' individual assessments to be 30% over last year's. Is this allowable? Is the 20% limitation based on individual assessments or on the aggregate?
: Not all associations use the same assessment methods. Variable assessments refer to "blended rates" which are assigned using a uniform rate for some budget items and a percentage rate for other budget items. These kinds of assessment formulas make it impossible to simply increase everyone's assessment by a fixed percentage since each unit must be individually calculated. Because of the formula, a 20% increase in the budget could result in some owners receiving a 15% to 20% increase in their dues while others receive a 25% to 30% increase. As provided for in Civil Code §5605(b)
. . . the board may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year.
. There are two ways to interpret the statute. The statute says the "regular assessment for the association's preceding fiscal year
" which indicates a 20% increase in the association as a whole, i.e., its budget, not on individual owners' assessments. Using this interpretation, it would be allowable for some owners to receive a greater than 20% increase as long as the overall increase did not exceed 20%. The second interpretation is to look at the impact on individual assessments. Using this approach the budget increase is limited by the owner with the highest variable assessment.
: To avoid a potential legal challenge, boards should calculate budget increases so that no owners experience a more than a 20% increase. In addition, boards should amend their documents
to eliminate variable assessments and implement a fixed or pro rata
: Associations needing legal assistance can contact us
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