Condo Board Must Follow Its Assessment Rules

QUESTION: We live in a 35-unit condominium located on a lake. The declaration of covenants, conditions and restrictions includes the following:

1) The monthly assessments should include a contribution to a maintenance reserve fund.

2) If there is a surplus at the end of the year, it should be equally divided and returned to each unit owner.

3) Monthly assessments and special assessments are proportional to the size of each unit based upon the number of bedrooms. (We have one-, two- and three-bedroom units in our complex.)

Until about five years ago, very little money was allocated to the reserves. Because surplus funds were supposed to be returned to the owners at the end of the year, the boards apparently believed that they did not have to put money into the reserves.

As repair or replacement of roofs, swimming pool, irrigation systems and other common area components became necessary, $1,000 to $2,000 special assessments were levied equally to each owner.

At some point in last years, the proportional assessment directive in the covenants was dropped because everyone pays the same amount for their monthly assessments and special assessments.

Now we are faced with a major problem. We are told that we need to replace the boat dock and that it will cost more than $5,500 per unit owner. There are no reserve funds.

Is it fair to expect owners who bought in the last few years to contribute as much as the ones who have been living here for several years and failing to build up the reserve fund?

Can the board of directors levy special assessments according to the number of years that an owner has owned his or her unit?

ANSWER: No, the board must follow the covenants, conditions and restrictions. That may be a new philosophy for your association, but the board must get the association back on track. Now everyone will suffer the consequences of the lack of financial planning during the previous years.

First, if the covenants, conditions and restrictions were not amended by a super-majority vote of the membership, as stipulated in them, your monthly assessments and special assessments should be proportioned on the one-, two- and three-bedroom basis. Boards cannot arbitrarily decide to change the way the assessments are levied.

Second, all owners share in the cost of special assessments, just as stated in the covenants. There is usually no provision in them to protect new owners from their obligation to pay special assessments.

That is the reason that buyers should carefully review the association’s financial disclosures and find out about the amount of the reserve funds before they purchase.

According to California law, detailed information about the reserves is available to purchasers before closing the sale. If recent buyers looked at the reserve disclosure information, they should not be surprised that special assessments are necessary.

Apparently, your association has determined whether the dock can be repaired rather than replaced. If repairing it is not an option, then the board must decide how to fund the new dock. Since the special assessment is probably more than 5% of your annual budget, approval of the unit owners will be required.

Board May Charge for Moving Services

Q: Someone moved out of our condominium complex and left a mess in the trash area. In my opinion, the board overreacted to this one incident when they adopted a new policy. Our association now charges $100 for move-ins and move-outs.

If the unit is rented to a tenant, the owner of the unit is billed for each move. In addition, the owner is billed for any damage that occurs during the move.

I view this policy as a penalty to the nonresident owners who have tenants moving into and out of their units. Damage that has occurred in the past has not been repaired. Why should the association charge for the damages if the repairs are not going to be done? Are move-in/move-out fees legal?

A: The association may charge a reasonable moving fee. The fee should relate to the association’s actual cost of services performed for the move.

California Civil Code Section 1366.1 states: “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

Typical association costs might be for staff services such as changing the name of the new resident on the directory, mailbox and the association’s resident roster; putting protective pads and floor mats in the elevators; keying off the elevator for the exclusive use of the movers; escorting utility workers who turn gas, electric, telephone or cable service off and on; disposal of boxes and packing materials; and monitoring the common area for security and safety purposes during the move. Your association may have other services that go beyond these. You have a right to know what services are provided.

The association has the authority, usually granted in the covenants, conditions and restrictions, to charge an owner for the cost of repairing damage that the owner or his/her family member, guest or tenant causes. However, I would expect repairs to be completed, if possible. Sometimes, damage cannot be immediately repaired. If carpet is permanently stained and no matching carpet is available, replacement may be the only way of correcting the problem. That is the type of damage that may have to wait for redecorating of the common area.

There are some ways that you can protect yourself from damage charges. You could require that your tenants use a licensed, insured moving company that will be liable for any damage to your unit or to the common area. The terms of the lease should allow you to use the tenant’s damage deposit for damage to either the unit or the common area.

It would be discriminatory if the association charges only nonresident owners for tenant moves, but your letter does not state that only tenant moves are charged.

I recommend that you ask the board or manager about the services that the association provides so that you will understand the charges.

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Condo Bluebook Offers Updates on Law, Codes

The Condominium Bluebook, compiled by attorney Branden E. Bickel, is an excellent resource for condominium associations, planned developments and all other forms of community associations.

The 1998 edition contains all of the recent updates to the Davis-Stirling Common Interest Development Act that became effective Jan. 1.

In addition, the reference book contains other portions of the Civil Code, Corporations Code, Labor Code and Vehicle Code that pertain to community associations.

The book can be obtained from Condo Consulting Services for $20, which includes tax, postage and handling. Allow three weeks for delivery. Send check to Condo Consulting Services, P.O. Box 5068, Thousand Oaks, CA 91360.

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Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions received. Send questions to: Condo Q&A;, Box 5068, Thousand Oaks, CA 91360.