Reader Questions - Assessment Increases, Spending Authority, Employee Information

Mr. Richardson,

Our Board increased monthly assessments by exactly 20% without bringing it to the members for a vote. Is this legal? Is the law we must vote on any increase 20% or more or is a vote required if it is only OVER 20%? They are doing whatever they want without having to be bothered by a vote from the membership, also our HOA management firm is complicit in these actions.

Regards,

B.B., Temecula

Dear B.B.,

Civil Code Section 5605(b) is one of the few parts of the Davis-Stirling Act which do not defer to the association governing documents.  It permits boards to increase regular assessments up to 20% in a year, regardless of any more restrictive language in the association governing documents.  The idea behind this law is that association boards need flexibility to respond to variations in the association’s expenses. Most members will not commit to studying the HOA expenses and proposed budget (let alone attend board meetings), and that is why there is a board – to make the decisions so all the neighbors don’t have to.

Thanks,
Kelly

Kelly,
Commonly, an HOA board authorizes one or more persons to expend money in small increments (petty cash). It seems only logical that a board may also, if it chooses, delegate similar commitment/purchase authority for other types of expenditures with higher, specified cost limitations, for matters deemed urgent  and important to the welfare and lifestyle of the community–for example, repairs to a pool heater.  However, our manager advises that this is possible only in circumstances deemed “emergency.”  What say you?

D.C., Menifee

Dear D.C.,

Yes, the board can delegate spending authority to a director, officer or the manager.  Some limited authority can give the association flexibility to respond quickly to small situations.  Spending authority should be by motion and documented in the minutes, and reasonably limited to the association’s circumstances. Petty cash should not be necessary – the association’s expenses should be paid by check, to document the expenditures. Some managers prefer not to have any spending authority, while others prefer some authority in order to deal with situations which cannot wait.  All such expenditures should be disclosed in the next meeting to the board and documented in the management report.

Best regards,
Kelly

Kelly,

According to the Davis-Stirling Act, homeowners are entitled to have access to all financial records. It specifically states that we can be provided the salaries and wages of all employees by job classification. I made this request to our association manager and she said that since the employees are hired by the management company they do not have to disclose this. Is this true?

Thank you,

J.S., Beaumont

Dear J.S.,

The law does not give members the right to inspect all financial records, but only certain financial records.  Civil Code Sections 5200, 5205 and 5210 specify the financial records which members may review.  Civil Code Section 5215(b) provides for disclosure of compensation of HOA employees by job classification and not of each specific employee.  However, if the person receives paychecks not from the HOA but from a company doing business with the HOA, that person is not an association employee but is a vendor employee. Your manager is correct.

Thanks for your question,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.