previous note, No. 3, May 11, 2013, dealt with residents' right to veto certain
actions by an association board and characterized this power as quite broad.
This note concerns the limitations that the Act imposes on a board's
capacity to increase regular and special assessments.
Before a board may increase the regular assessment in any fiscal year,
it must comply with certain requirements set forth in section 5300 of the Act.
If it does not comply, it may not increase the assessment.
Generally, the board must first prepare an operating budget, showing estimated revenue and
expenses on an accrual basis, meet several detailed requirements concerning the
association's reserves, and disclose outstanding loans (identifying the
payee, interest rate, amount outstanding, annual payment, and the date the loan
is scheduled to be re-paid).
The "reserve" requirements the board must meet
before increasing a regular assessment are of particular interest. They
are specific and detailed, requiring a summary of the association's reserves; a
statement whether the board has determined to defer or not carry out repairs or
replacement of property; whether special assessments will be required,
including amount, starting date and duration of the assessment; a statement of
the methods the board will follow to fund reserves; and a general statement
describing the procedures used to calculate and establish reserves.
In the alternative, rather than comply with these
requirements, the board may obtain the majority vote of a quorum of members to
approve an increase in a regular assessment. Section 5605
I believe that you will agree that these are substantial
requirements to meet before an increase in a regular assessment may be approved
by an association board. The issue of reserves will be covered in another
note, although I may observe that based upon its current practice, the GRF
Board would have to make major changes and improvements in the manner in which
it handles "reserves" generally before it would be able to comply with
In addition, the Act prohibits an increase in a regular
assessment "that is more than 20 percent greater than the regular
assessment for the association’s preceding fiscal year" without the
"approval of a majority of a quorum of members" in a special vote
Finally, the Act also prohibits "special
assessments which in the aggregate exceed 5 percent of the budgeted gross
expenses of the association for that fiscal year without the approval of a
majority of a quorum of members" (section 5605).
Regular monthly and special assessments are a contentious
issue at Rossmoor, as they are at any association. The Act establishes a
number of strict budget and reserve disclosure requirements that association
boards must meet before assessments may be increased. These requirements
are designed to protect residents from sudden and unanticipated increases, and
to establish limits which may be exceeded only if a majority of residents
At Rossmoor, we lack these protections provided by the