"Our association management firm raised our HOA dues without the approval of the board. The annual financials were also not reviewed and/or approved by the board. The dues have since been rescinded because of my complaints to the HOA president. Also, the HOA president is approving invoices for services rendered by the association management company without the knowledge or approval of the secretary treasurer which is contrary to the HOA's declaration and bylaws. What course do I take to stop this nonsense? We have no money left in the general fund because of these actions."
- Sharon from San Jose, California
Wow, there are a lot of things going wrong here. The situation seems so bad that I would encourage you to ensure that things are as you have described them. It’s difficult to imagine an association management company unilaterally increasing HOA dues without the board's approval. It's possible that the association managers thought they had board approval, or there may have been some procedural snafu or miscommunication that caused them to believe they could raise the HOA dues.
Let's assume that everything is as you stated and deal with each issue one at a time:
1. Do you have to pay the association manager's increase in HOA dues?
If everything you have described is accurate, the answer is no.
A homeowners association is a quasi-governmental organization. A number of court cases have stated precisely that. And HOAs, like governments, are bound by their own founding documents - the bylaws and CC&Rs - that define the scope of their authority. When you and your fellow members formed an association, you did not give the association the unlimited ability to increase dues or levy fees, except as specifically provided for in your governing documents.
If you are correct that the board has not approved the increase in HOA dues (and you'd better be sure!), then you probably aren't bound to pay the increase. The only increases in dues you are legally obligated to pay are the increases your board of directors approves, or those specified in your bylaws that are automatically triggered by certain events, such as reserves falling below a certain level.
Eventually, if you don't pay the increased dues, the HOA could move to foreclose on your home. At that point, you could raise the fact that your board never approved the increase as they are legally required to and, if your assertion is true, it would likely stick.
If your HOA's reserves have been whittled down to nothing, you can expect an increase in your dues or a special assessment of some kind to get cash back in the HOA's coffers. So it's not surprising that there is a fee increase hitting you given that your HOA has no money left in its general fund, but the board of directors must be the ones who approved it. The association manager can't raise dues or make assessments by themselves.
If you're confident that your association manager is in error, the first action you should take is to file a complaint with the board of directors or the board president. They are the ones in the position to cancel the association manager's contract.
If that fails, remember that your association management company has a license, and therefore you can lodge a complaint with the licensing agency. In your case, the licensing agency is the California Bureau of Real Estate. Should the possibility of litigation arise, know that we're big fans of resolution and mediation programs as they're much cheaper than lawsuits and are effective the majority of the time. You can access the California Complaint Resolution Program here or call (213)576-6885 from anywhere in California.
2. What about your board of directors?
You seem to have a very weak board who could use a better president or some more educated board members - or both. We highly encourage you to run for a position on the board, since you don't seem to be happy with their performance. At the very least, attend board meetings and bring like-minded neighbors for support so that you can hold the board's feet to the fire. They are your representatives and if they aren't sticking up for your association members' interests, nobody else will.
If you're on the board, or you can get some better members elected, you have a real shot at fixing things. This is the best way to solve your association's problems.
From what you describe, your board president and members are falling down on their fiduciary duty to safeguard, protect and prudently deploy association members' funds. The fiduciary standard is the highest, toughest standard of care recognized under the law. Legally, your board members owe your fellow association members the utmost standard of care, integrity and fair dealing.
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