Q: My HOA has recently passed a $1,000 a month assessment to each owner of a condominium which has been rented out, with a vague explanation that it is to cover expenses to the homeowners. What is your assessment of that onerous charge? -- M.M., Santa Monica
Q: Can an HOA charge owners who rent out their condo an additional amount as the monthly assessment? Or can the association impose certain fees on owners who rent out their condo such as a fee for lease review? -- T.T., San Diego
A: HOAs can only assess for their actual reasonable costs, under Civil Code Section 5600. Some HOAs have move-in or move-out fees, but still the fee must be roughly connected to identifiable costs directly connected to a resident moving. This was confirmed in the 2015 appellate opinion in Watts v. Oak Shores.
HOAs imposing a large rental fee could find it is ruled to be an "unreasonable" rental restriction under Civil Code Section 4741(a), and could be exposed to a civil penalty of up to $1,000 and possibly be found liable to pay the homeowner's legal fees. Imposing an extra charge to rental landlords could create problems for the HOA.
There are ways to encourage tenants to be good neighbors without being unreasonable or punitive. Check with your HOA legal counsel. Hopefully, they will have several ideas on this subject.
Q: When homeowners make assessment payments, our management company first applies the payment to prior outstanding assessment balances before applying the payment to the current dues assessment.
If a homeowner missed an assessment payment one month and incurred a late fee, and payments for the following months were made on time, the homeowner continues to incur late fees each month because the payments are applied to the prior outstanding balance rather than the current dues assessment.
Our property management company states there are regulations that require HOAs to apply payments in this manner. I could not find any regulations that require this, and it seems like a scheme to rack up late fees.
Are HOAs required to first apply payments to prior outstanding assessments, or can payments first be applied to current dues assessments hence avoid snowballing late fees? -- S.W., Lake Forest
A: Civil Code Section 5655 requires that payments by a delinquent HOA member on their account be applied first to the principal (the unpaid assessment) and after that payments can be applied to interest, late fees, collection costs or attorney fees after the principal is completely paid.
Some unscrupulous assessment collectors have in the past tried to force homeowners to waive the priority of Civil Code 5655 so that their collection costs can be paid first. That is against the intent of the law and is wrongful.
As to whether the payments are credited to the oldest or newest assessments, the overwhelming practice is "FIFO" ("first in first out). The purpose is not to create additional late fees, but to eliminate the oldest delinquency. I am not aware of any statute that requires FIFO or prohibits FIFO. So, no S.W., I don't think your HOA is doing anything wrongful or incorrect by applying FIFO to late payments.