WITHOUT A VOTE
QUESTION: Can the board increase monthly dues from $470 to $495 without a meeting of the association? –Allan K.
ANSWER: Yes, it can. Approving the budget does not need to be done in a membership meeting. It can be done in a duly noticed open meeting of the board of directors.
Fiduciary Duty. Managing the association's budget is one of the board's duties. Directors are the ones most knowledgeable about the association's financial condition since they review financial reports and pay the bills. By statute, boards are required to levy assessments sufficient to perform their duties. (Civ. Code § 5600.) It explains why boards sometimes raise dues when they would rather not.
20% Limitation. Per the Davis-Stirling Act, boards can increase regular assessments by up to 20% without membership approval. (Civ. Code § 5605.) The 20% is based on the association's regular assessments of the preceding fiscal year.
Inflation. Your increase from $470 to $495 is 5.3%, which is well below the rate of inflation for 2022. Insurance for some associations increased by 400%, energy expenses increased by 13.1%, building supplies, vendor contracts, and management and legal expenses are all going up. Last year saw the largest increase in inflation since 1981. If boards don't factor rising costs into their budgets, they will face significant shortfalls, even larger assessment increases next year, and possible special assessments. Kicking the can down the road will only cause more pain later.
RECOMMENDATION: Boards should increase their association's budgets to keep pace with inflation.
WITHOUT A VOTE
QUESTION: The board is removing our greenbelts and replacing them with succulents. Can they do this without a vote of the members? I know it will save water and maintenance costs but I would rather pay more to preserve the overall appearance of the community. –Nicki S.
ANSWER: When it comes to common area maintenance, boards have wide discretion. If the greenbelt project does not require a special assessment over 5% of the current fiscal year's budgeted gross expenses, the board can approve the project without a membership vote.
Judicial Deference. If members were to challenge the board's decision in court, they would likely lose. The courts defer to board decisions involving management of the common areas. (Harvey v. Landing) So long as the board acts upon reasonable investigation, in good faith, and in a manner the association reasonably believes to be in the best interests of the association and its members, its decision will be upheld. (Lamden v. La Jolla Shores) Due to ongoing drought conditions, public policy has been to encourage associations to replace grass with drought resistant plants and artificial turf. I don't see this trend reversing itself.
Mailboxes 1. Agree with your assessment. Boards should look at new materials which may increase the life expectancy of the component(s). We did the same with replacing wood retaining walls which would have run $144,000 to replace every 10 years. By going to concrete rebar for $165,000, the life of the walls is now 70 years and the outlay saves us $144,000 x 7 (seven 10 yr cycles) or $1,008,000.00. If we ever truly have to replace the walls in 70 years, it won't be a million in repairs. What the member could do is see if the board sought multiple bids due to the costs to show due diligence by the board. -Joseph L.
Mailboxes 2. Being a member of an HOA that recently replaced our mailboxes, I can say that spending $3,500 each for new mailboxes is crazy, hardly a reasonable business judgment. -Gary M.
Mailboxes 3. I think the issue here is the lack of common sense. It is an astronomical amount of money per mailbox at $3,500 each. We recently replaced a row of 7 USPS approved mailboxes for about $5,000 total. For $3,500 they must be at least 14 karat gold and a very high security risk. –William B.
Credit Cards. My experience managing highrises is that a debit card or credit card is invaluable. It is used to purchase supplies, materials and sometimes services. An example would be Amazon for office supplies, plumbing and electrical parts. It could be your underground parking is flooded and the pump-truck won’t pump out without being paid. The credit card or debit card is reconciled at the end of the billing statement. Very cost effective and efficient. –Bill L.
Petty Cash. Modern charging and payment systems are all moving toward electronic transactions. The petty cash box went away with the rotary dial phone. Debit cards leave a transaction audit trail by nature. The process improvement and accounting control provided by credit card and debit card transactions far outweigh the risks. -D.H.
RESPONSE: I believe petty cash is still used by many associations. Perhaps boards and managers can respond and let me know if your association maintains a petty cash fund.
Happy New Year to everyone at Adams|Stirling. You have great people including Rob Ward in San Diego. -Steve A.
Thank you for the newsletter and great information. Happy Holidays to you and your team. "Very Professional"! -Thomas C.
I love your newsletters. They are informative and keep me apprised of what is happening in the condo world. -Leslie M.
Love the newsletter it's been a guiding light keep up the good work I've saved every one of them thank you. -Sunday P.
The board of directors enjoys your email column tremendously. –Pete E.
Thank you for your dedication & talents to produce the monthly newsletter. Our HOA board finds it extremely useful. -Sandra H.
We are so glad to have the monthly Adams|Stirling newsletter. –Denise E.
Thank you for a great many wonderful publications, and we would be lost without your fine, honest and experienced association... Have a very happy and healthy holiday. -Sheldon S.
Thank you for your usual year of information, education and, yes, smiles. I appreciate Adams|Stirling Newsletter. I believe it keeps us all alert and informed. Thank you and Happy 2023. -Cats W.
|DISCLAIMER. Our newsletter provides commentary, not legal advice. Boards need to retain an attorney to review all the facts and give a legal opinion on the issues they face. We serve as corporate counsel to California associations only. Request a proposal to represent your association.
PAST NEWSLETTERS. Readers can find current and prior year newsletters posted here. Older newsletters are not posted since the information they contain can change over time with new statutes and case law. The website, however, is kept updated with current information which can be found via the "Index" or through our website's internal "Google Search" feature.