California HOA special assessments and the 5 percent rule

California caps what an HOA board can charge owners without putting it to a vote. Under Civil Code 5605, the board may levy special assessments that add up to no more than 5 percent of the association's budgeted gross expenses for the fiscal year, and may raise the regular assessment by no more than 20 percent over the prior year. To go above either limit, the board has to get the approval of a majority of a quorum of the members.

The 5 percent is an aggregate for the year, not a per-assessment cap. An association with a 1,000,000 dollar annual budget can levy up to 50,000 dollars in total special assessments in a year on the board's own authority; beyond that, it goes to a vote of the owners.

There is a narrow exception. Emergency assessments under Civil Code 5610, for an extraordinary expense the board could not have reasonably foreseen, such as a court order or a sudden threat to safety, are not subject to the 5 percent limit.

Special assessments are the most expensive surprise in an HOA purchase. Read these together:

• The reserve study, for how well the association has funded its long-term repairs. A reserve funded at a fraction of its target is the classic setup for a special assessment.
• The budget and financial statements, for the size of the operating budget, which sets the 5 percent ceiling, and for any operating deficit.
• Recent board meeting minutes, for any special assessment that has been discussed, approved, or put to a vote. An approved but not yet billed assessment is a cost you inherit.
• Any member vote in progress on an assessment above the 5 percent or 20 percent limit.

A special assessment does not care who owned the home when the roof failed; it follows the property. Buy into an association with an underfunded reserve and a major repair due, and the bill can land on you within months of closing. The 5 percent rule limits how fast it can arrive without a vote, but it does not prevent the assessment, and a large project goes to the owners for approval anyway.

The signals are all in the disclosure packet, spread across the reserve study, the budget, and the minutes. An HOA Notes brief reads all three together, scores the special-assessment risk, and points to the page behind every finding.

Civil Code section 5605 (Regular assessment increase limit). The board may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year without the approval of owners constituting a quorum casting a majority of votes at a duly called meeting. The board may increase regular assessments up to 20 percent per year without member approval and may impose a special assessment up to 5 percent of budgeted gross expenses without member approval (Civil Code section 5605).

When you read the disclosure packet, watch for board may set assessments at any amount, assessments may be increased without limit, and no cap on assessment increases. HOA Notes flags each of these against the statute and tells you which restrictions are actually enforceable.