TL;DR — Key Takeaways
- Without a membership vote, a California HOA board can generally raise regular assessments by up to 20 percent over the prior year and levy special assessments totaling up to 5 percent of the year’s budgeted gross expenses, as of drafting.
- Anything above those limits requires approval by a majority of a quorum of the members, unless an emergency exception applies.
- The emergency exceptions are narrow: a court order, a newly discovered threat to health or safety, or an expense the board could not reasonably have foreseen. Deferred maintenance is not an emergency.
- Associations must obtain a reserve study with an inspection of major components at least every three years, and review it every year.
- California does not require an association to fund reserves to any particular level. It requires the study, the plan, and disclosure.
- An underfunded reserve does not disappear. It arrives later, as a special assessment.
A California HOA board can generally increase regular assessments by up to 20 percent over the prior fiscal year, and levy special assessments that together total up to 5 percent of the association’s budgeted gross expenses for the year, without a vote of the members. Increases above those limits require approval by a majority of a quorum of the members, unless the increase is needed for an emergency as the statute defines it. The limits, in Civil Code section 5605, are the main protection owners have against sudden assessment increases, and the reserve study required by section 5550 is the main tool that is supposed to make large increases unnecessary.
The board’s authority to raise assessments
Regular assessments. A board may increase regular assessments for a fiscal year by up to 20 percent over the prior year’s regular assessment without member approval, as of drafting, provided the board has complied with the budget and disclosure requirements. An increase greater than 20 percent requires member approval.
Special assessments. A board may levy special assessments that, in the aggregate, do not exceed 5 percent of the association’s budgeted gross expenses for the fiscal year, as of drafting. The limit is an annual aggregate, not a per-assessment cap: a board cannot levy several 5 percent assessments in the same year to stay under the limit.
Member approval. An increase above either limit requires the approval of a majority of a quorum of the members at a meeting or election conducted under the statute.
The budget prerequisite. A board’s authority to increase regular assessments without a vote depends on having distributed the annual budget report on time. A board that skips that step can lose authority it would otherwise have. Confirm the current percentages and procedural requirements before relying on them.
The emergency exceptions
Civil Code section 5610 removes the limits for assessments necessary for an emergency situation. The statute defines emergency narrowly, as an extraordinary expense that is:
- Required by an order of a court.
- Necessary to repair or maintain the development where a threat to personal safety is discovered.
- Necessary to repair or maintain the development that could not have been reasonably foreseen by the board in preparing the budget. For this category, the board must pass a resolution containing written findings explaining why the expense was unforeseeable and why the special assessment is needed, and distribute it to the members with the notice of the assessment.
The third category is where disputes arise. Deferred maintenance is not an emergency. A roof that has been failing for years, a component the reserve study identified as near the end of its life, or a repair the board chose to postpone was foreseeable, and a board that treats it as an emergency to avoid a member vote is exposed to challenge. Ordinary increases in insurance premiums generally do not qualify either.
If your association is considering an assessment near or above the limits, how it is characterized and documented matters. Call Bay Legal at (650) 668-8000 in Northern California or (213) 668-8000 in Southern California.
Reserve studies
Frequency. Civil Code section 5550 requires the board, at least once every three years, to cause a reasonably competent and diligent visual inspection of the accessible areas of the major components the association is obligated to maintain, where the current replacement value of those components is at least half of the association’s gross budget excluding reserve contributions.
Annual review. The board must review the reserve study, or have it reviewed, every year and consider and implement necessary adjustments to its analysis of the reserve account requirements.
Content. The study identifies the major components with a remaining useful life of 30 years or less, estimates their remaining life and replacement cost, estimates the total annual contribution needed to fund their repair or replacement, and states a reserve funding plan.
The funding plan. Under section 5560, the plan must show how the association intends to fund the contribution, including a schedule of the date and amount of any change in regular or special assessments needed to carry it out. The plan is adopted at an open board meeting, and any assessment increase needed to fund it remains subject to the section 5605 limits.
Balcony inspections. For condominium associations, the SB 326 inspection of exterior elevated elements is coordinated with the reserve study, and its findings feed into it. SB 326 balcony inspections covers that requirement.
No required funding level
This surprises owners.
California requires an association to have a reserve study, to adopt a funding plan, and to disclose its reserve position to members and buyers. It does not require the association to fund its reserves to any particular percentage. An association can be in full compliance with the statutes while holding reserves that cover a small fraction of what the study says it needs, provided it has done the study and made the disclosures.
The disclosure is where that shortfall becomes visible. The annual budget report and the resale disclosure package show the reserve position, and buyers, their agents, and lenders read it. An association with thin reserves may find that it affects owners’ ability to sell or refinance well before it produces a special assessment.
Quorum and recent changes
AB 1458. A 2023 change allows an association to use a reduced quorum of 20 percent for a director election that is adjourned after failing to reach quorum, subject to notice requirements. It applies to director elections only. It does not lower the quorum for a member vote on an assessment increase above the section 5605 limits.
AB 572. A change effective January 1, 2025 limits assessment increases for certain newly created associations containing 20 or more deed-restricted affordable units. It is narrow and does not affect most associations.
If you are an owner facing an assessment
Several practical steps help an owner evaluate an assessment before deciding whether to contest it.
Read the notice and the budget report. They should state the amount, the purpose, and, for an increase above the board’s authority, the member approval obtained or the emergency findings relied on.
Check it against the limits. Is the regular increase within 20 percent, and do this year’s special assessments together stay within 5 percent of budgeted gross expenses? If not, was there a member vote, or written emergency findings for an unforeseeable expense?
Look at the reserve study. If the reserve study identified the component years ago, an emergency characterization is harder to sustain.
Request the underlying records. Contractor proposals, board approvals, and the reserve study are association records owners can request. HOA records and SB 410 covers how.
Attend the meeting. Boards often explain assessments in open session, and owners can ask questions there.
Ask about payment options. Many associations offer installment arrangements for large special assessments, and asking early avoids delinquency.
When a special assessment is the right answer
The honest version of this subject is that special assessments are unpopular and frequently necessary.
An association that has underfunded its reserves for years has deferred a cost, not avoided it. The roof, the paving, the plumbing, and the balconies wear out on their own schedule regardless of the budget. When they fail, the money has to come from somewhere, and the choices are a special assessment, a loan repaid through higher regular assessments, or further deferral that usually makes the repair more expensive.
A board that levies a necessary special assessment within its authority, after a reasonable investigation and with a documented basis, is doing its job. Owners who oppose an assessment are better served by examining whether it was properly authorized and documented than by assuming it is improper because it is large. And owners who want to avoid special assessments are best served by supporting realistic regular assessments that fund the reserves in the first place.
HOA board fiduciary duty covers the standard a board is held to in making these decisions.
Bay Legal advises boards on assessment authority and owners on challenging assessments that exceed it. Reach us at (650) 668-8000, (213) 668-8000, or through baylegal.com/contact-us.
Frequently Asked Questions
How much can a California HOA raise assessments without a vote?
Under Civil Code section 5605, a board may generally increase regular assessments by up to 20 percent over the prior fiscal year and levy special assessments totaling up to 5 percent of the year’s budgeted gross expenses without member approval, as of drafting. Larger increases require approval by a majority of a quorum of the members unless an emergency exception applies.
What counts as an emergency special assessment?
Under Civil Code section 5610, an extraordinary expense required by a court order, one necessary to repair or maintain the development where a threat to personal safety is discovered, or one the board could not reasonably have foreseen in preparing the budget. For the unforeseeable category, the board must adopt written findings and distribute them to members. Deferred maintenance and foreseeable repairs do not qualify.
How often does an HOA need a reserve study?
At least once every three years, the board must cause a visual inspection of the accessible areas of the major components the association maintains, where their replacement value is at least half of the gross budget excluding reserves. The board must also review the study every year and implement necessary adjustments.
Is an HOA required to fully fund its reserves?
No. California requires a reserve study, a funding plan, and disclosure of the association’s reserve position, but does not mandate any particular funding level. The reserve position is disclosed to members and to prospective buyers, which is how underfunding becomes visible.
Does AB 1458 lower the quorum for assessment votes?
No. AB 1458 allows a reduced 20 percent quorum only for director elections that are adjourned after failing to reach quorum. It does not change the quorum needed for a member vote approving an assessment increase above the statutory limits.
