We have received many questions from SAMLARC Members regarding reducing or deferring assessments and deferring collection of assessments during the COVID-19 period. The following opinion is that of many association legal experts.
Each association is a not for profit corporation governed by governing documents (articles of incorporation, CC&Rs, bylaws, and rules adopted by the Board of Directors). These documents create legal duties and obligations on the association for the preservation and protection of property values, and health and welfare of the members. To meet these duties and obligations, the Board adopts an annual budget. The expenses to be paid by the association are determined in large measure in non-discretionary costs. These include the costs for insurance, management, professional services, maintenance, repair and replacement of assets and amenities. The federal government, and the Governor of California have recognized that the functions and services provided by the association are essential services. The association must continue to pay those costs despite the economic burdens resulting to homeowners resulting from COVID-19. By purchasing property subject to the CC&Rs, homeowners agree to pay all assessments.
Although there is compassion for those who have been financially impacted as a result of COVID-19, the association is not the type of entity to render financial assistance. It is not a for-profit lender, financial institution or government agency, nor does it receive government subsidies or guarantees to serve as a source of credit.
Associations owe legal obligations to the entire membership to uphold the legal obligations under the CC&Rs. If the association were to provide discounts or reductions in assessments, members may use that as an excuse to stop paying assessments altogether, which would prevent the association from maintaining its legal obligations to and which directly benefit all members. Large-scale master homeowners associations, such as SAMLARC, have experienced extraordinary and unforeseen increased costs for security, water/irrigation, fire mitigation, etc. in the past few months. Some of those costs have greatly exceeded the amounts budgeted as they were not foreseen when the budgets were prepared. These associations remain legally obligated to discharge their legal obligations to comply with federal, state, county, and City mandated requirements. These associations have not been excused from compliance as a result of the pandemic. To remain fiscally sound, associations must continue with the assessments in the amounts needed to meet all legal obligations.
Under the law, the association may consider payment plans, and negotiate with owners who may find themselves unable to pay assessments. These must be considered on a case by case basis. In making decisions, the association’s board must act in good faith, in the best interests of the entire association.
For questions regarding the Board of Directors’ response to the Coronavirus, please visit SAMLARC.org/coronavirus. Additional questions may be directed to Candice Fullenkamp, Community Executive Officer, at 949-709-0015 or firstname.lastname@example.org.