Monthly Assessment Hike Was Not Disclosed by the Seller

Question: I recently purchased a townhouse. Fifteen days after the close of escrow, I received notice of a homeowner meeting. The notice of meeting was dated one day before my closing date and it referred to an imminent assessment increase. The board approved a 20% increase in the monthly assessment. Then I learned of water intrusion problems and costly testing that is being conducted.

Neither of these matters was disclosed to me before my purchase. I informed the management company that I was very disturbed about the lack of disclosure. What recourse do I have?

Answer: It is especially important to seek the advice of an attorney before purchasing a home in a community association. Any sales transaction is accompanied by several disclosure documents. Of course, there are more documents connected with the transfer of property in an association than with the sale of a home that is not in an association.

If the assessment increase and water intrusion matters were known to the seller, the seller had the duty to disclose them and the real estate agent had the duty to inform the seller about full disclosure of any anticipated increase in assessments, construction problems and many other matters.

Your agent should have protected you by ensuring that you received from the seller, or seller’s agent, a form called the real estate transfer disclosure statement that includes information completed by the seller and the seller’s agent.

Additional disclosure information required in Civil Code 1368 is supposed to be provided by the seller “as soon as practicable before transfer of title” so that the buyer has an opportunity to reject the offer if any of the disclosure information is unacceptable.

The lender usually reviews this specific disclosure information before deciding whether to fund the mortgage. If the disclosure was sent to your lender and not provided to you, that is another mistake on the part of the agent or the escrow company.

Information required in Civil Code Section 1358 includes, along with many other disclosures, “any change in the association’s current regular and special assessments and fees which have been approved by the association’s board of directors but have not become due and payable as of the date disclosure is provided.” This information should not be held back and presented to the buyer at the escrow closing when there isn’t adequate time to review all of the documents and forms.

From your information about the specific dates of the transfer of ownership and the notice of meeting about the impending assessment increase, it appears that you should have been informed about it.

Seek the advice of a real estate attorney who can review all of the documents and advise you of any recourse and deadlines. Until you obtain legal advice, continue to pay your assessments in full, or the association could file a lien on your unit and complicate your legal issues even more.

Can 2-Member Board Approve Increase?

Q: Our association board recently passed an assessment increase. I am curious about the board’s ability to approve the increase because only a board president and an “interim” vice president were serving on the board at the time of the increase. The interim vice president resigned soon after the assessment increase was announced.

A: It appears that the board may have been a few cards short of a full deck, but they played the game anyway. Your association’s legal documents, perhaps the declaration or, more likely, the bylaws, will tell you the number of members that constitutes a board of directors.

For instance, if your bylaws say that your association has a three-member board, then it would be possible for two board members to approve an action. If your association is supposed to have a five-member board, two board members would not have the authority to act. The board needs a majority (quorum) to conduct a meeting and take action.

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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.