Read My Lips – Raise My Assessments… and Spend Them, Too!
How many politicians would get elected on a promise to raise taxes every year? Not many, because people want their government to do more for less. And yet that is exactly what we expect from our community leaders: To stand in front of their neighbors and regularly ask them to pay more to maintain their community. Many owners, let alone directors, probably don’t realize that a director’s duty is to spend money, spend it wisely, and ask for more when necessary. It is no wonder that serving on a volunteer board is challenging and unpopular.
Fortunately, directors who face owners with this uncomfortable truth have legal support. California states that directors who represent their community owe a fiduciary duty to their fellow owners. That means directors must set aside personal interest, and ensure that the community needs are met before their own. Community needs refers both to the work required, as well as the money to pay for it. Most of the work requirements will be spelled out in the CC&Rs. But the community’s mandatory Reserve Study is also a good source of information about what the community should expect to be repairs, this year, in ten years, and in thirty years. Regardless of how individual directors feel about increasing costs, they cannot simply decide to ignore maintenance to benefit themselves. When work is required, directors must be ready to complete it and ensure that the community is ready to fund it.
There is also clear statutory language that directors rely on for authority to obtain the funds. Civil Code section 5600 states “the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents.” At a quick glance, that looks merely like commitment by the board to collecting assessments as allowed by the CC&Rs. However, when you consider that alongside Civil Code sections 5605 and 5610, the duty becomes clearer. Section 5605(b) permits the association to impose special assessments and regular assessment increases without owner approval. Section 5610 permits boards to impose assessments under emergency situations, regardless of previous budgets or allocations. When read together, the law recognizes both the need for imposing assessments, as well as the board’s ability to do it over the apathy or objection of the owners. More simply, boards cannot use their unhappy owners as an excuse to maintain assessments at current levels. The legal duty to comply with the CC&Rs in making repairs, and the ability to turn to the owners for financial support, give boards all the authority they need to fulfill maintenance obligations for their community.
The remaining challenge is learning how to effectively communicate both duties to owners who don’t share the burden of leadership. Owners who hear about regular increases or even special or emergency assessments may just assume that these decisions are made from boards that are unable to control their spending. Stating that both the CC&Rs and California law require both regular maintenance and regular increases in spending probably won’t be very convincing. A better method might be a gentle reminder to owners that directors share their pain. Seeing individual directors as prudent spenders of both their own money and the community’s money should ease some concern about the need for the resulting cost, and get owners to focus on the resulting benefit instead. A well-maintained community may require frequent funding increases, but it will be a community ready for future challenges.