QUESTION: As a member of an HOA, do I have to pay monthly dues for amenities not used or desired by myself or family?
ANSWER: Yes. It’s like paying taxes to California for roads and bridges you never use. Members cannot deduct a portion of their dues because they do not use recreational facilities or because they have a grievance against their association.
Because homeowners associations would cease to exist without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently seek relief against a nonpaying owner. Permitting an owner to broadly assert … [a] “setoff” to such enforcement action would seriously undermine these rules.
A system that would tolerate a[n] owner’s refusal to pay an assessment because the unit owner asserts a grievance . . . would threaten the financial integrity of the entire condominium operation. (Park Place v. Naber.)
QUESTION: When fines are not paid and your only recourse is small claims court or a judicial foreclosure, can we change our CC&Rs to reflect a fine as an assessment to enable a non-judicial foreclosure?
ANSWER: Fines cannot be collected through non-judicial foreclosures (trustee sales) despite any authorizing language that might be contained in an association’s governing documents. Civ. Code §1367.1(e). Monetary penalties cannot be treated as an assessment and cannot be included in a delinquent assessment lien.
In a continuing trend throughout California, another city has banned smoking in all multi-family units including condominiums and townhouses. The statute prohibits smoking in all common areas AND inside units.
To read the ordinance, see “Reduction of Drifting Tobacco Smoke in Multi-Unit Housing.” I expect a similar trend where condominium associations amend their CC&Rs to prohibit smoking inside units. I believe such amendments would be fully enforceable.
Email Minutes. My board approves the meeting minutes at their next scheduled noticed meeting. However, a few days after the meeting, the draft minutes are sent to all directors to review and forward changes to the recording secretary. The reason for this is people normally forget what transpired after a few days, more so after 30 days. Is this practice okay? -Lorna L.
RESPONSE: I think it’s a good practice because it helps ensure accuracy. It does not violate the Open Meeting Act because it’s not an email discussion. Instead, it’s feedback from individual directors to the secretary on corrections and revisions. The draft minutes then go into the board packet for the next meeting for board discussion and approval.
Owner Correspondence #1. You are absolutely correct that letters, opinions, and conversations are not included in the minutes. If a homeowner wants their concerns heard by the board, they should put them in writing, send them to the association manager and request the letter be included in the board packet for board review. Board packets are generally retained as a business record. -Victoria C.
RESPONSE: I agree. It is important that owner correspondence be included in board packets so all directors can read the correspondence and take membership comments into account when making decisions. Making the correspondence part of the minutes is the problem. It can lead to potential liability if statements in the correspondence are defamatory. It can also lead to a great deal of turmoil in the community. As a rule, minutes should record what was done at a meeting, not what was said. (Robert’s Rules, 11th ed., p. 468.)
Owner Correspondence #2. Do you think it a good idea to include a “correspondence” section in the minutes with a very general summary of correspondence? For example, it might say: “Two letters were sent to owners regarding violations of our architectural policies; one letter was sent to an owner regarding assessments more than 90 days delinquent.” In this way, owners know what the HOA is doing, that architectural policies are being enforced, etc. -Glenn P.
RESPONSE: If done properly, it can be done. The summary must be very general (as you illustrated) and should not use any names.
Owner Correspondence #3. I have always felt that member input is not given fair consideration. Why do businesses representing HOAs always refer to member input as grievances, axes to grind, personal agendas, inflammatory, inaccurate, and defamatory? -Tom M.
RESPONSE: Most member input is good. It’s when someone proposes that letters be made part of the minutes that lawyers point out the risk, i.e., potentially inflammatory and defamatory correspondence being published thereby triggering costly litigation. Boards must be cautious about what they put in their minutes.
IRS Audit #1. I read the article about action the IRS is taking in Las Vegas against several HOAs. While your paragraph implies that the IRS is taking action against HOA reserves; that is not exactly how the article reads. It is not reserves that the IRS is looking at but, rather, income that an HOA gets from nonmembers and what expenses are allocated against that nonmember income. -William Erlanger, CPA, Levy, Erlanger & Co.
IRS Audit #2. My community rolls over surplus from the operating budget into the following year’s operating budget. Our reserves, presently in excess of $5 million, are invested. We pay tax on the interest every year and use the interest to subsidize our reserves. Can we reduce our tax burden if, instead, we use the interest in our operating budget?
RESPONSE: Since I’m not a tax attorney, I ran this by HOA tax specialist Bill Erlanger, CPA. In answer to your question, it is not what is done with the interest that has anything to do with income taxes. If interest is earned by the association, it is generally taxable. It does not matter if the interest is kept in reserves or transferred to operations. Some kinds of investment interest are not taxable but that depends on a number of factors that are beyond the scope of the question you asked.