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California HOA Special Assessments: The 5% Rule and the Member Vote

You bought your condo two years ago. The dues were $400 a month. Now a notice says every owner owes a $15,000 special assessment for a new roof, due in 60 days. You had no idea the roof needed replacing. The reserve fund is nearly empty. And you are wondering: can they do that?

Sometimes they can. But a special assessment is not a blank cheque. The law caps what the board can charge on its own, requires a member vote above the cap, and requires the board to tell you in advance when it expects one for major repairs or reserves.

References below to “§” are to the Davis-Stirling Common Interest Development Act, California Civil Code §§4000–6150, unless otherwise stated.

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New to how HOA money works? The overview of every way an association raises money, and the limit on each, is in What Can a California HOA Charge You? Assessments, Fees, Fines, and Late Charges. This article is about special assessments: what has to be true for one, what the board has to do, and how members can question it.

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What a Special Assessment Is

A special assessment is a one-off charge to every owner, on top of the regular dues, for a specific need the regular budget and the savings cannot cover. Common reasons are a major repair the reserves are not ready for, a legal judgment or settlement, an insurance deductible, or a shortfall in the reserves themselves.

The statute requires the association to “levy regular and special assessments sufficient to perform its obligations under the governing documents and this act” (§5600(a)). A special assessment should therefore be tied to one of those obligations, and it cannot be more than the cost it is meant to cover (§5600(b)).

What It Can Be For, and Who Decides

The Act does not give a list of approved reasons for a special assessment, and it does not require the need to be urgent. Urgency matters only for the emergency route. What the Act requires is simpler:

• It must pay for something the association is responsible for. Assessments exist to fund the association’s obligations under the law and its governing documents (§5600(a)): the common area it maintains, its insurance, its contracts, its legal costs. Read together, on our reading, the duty to assess for those obligations and the cost limit leave no room for a special assessment for something the association is not responsible for (§5600(a) and (b)).
• It cannot be more than the cost. No assessment may exceed the amount needed to cover the costs it is levied for (§5600(b)).
• Your CC&Rs may add conditions. Many declarations have their own special assessment clause, with purposes or procedures of their own. Read it. One thing the CC&Rs cannot do is lower the 5 percent limit: the Act applies that limit notwithstanding a stricter cap in the governing documents, which is generally read as letting the board levy up to 5 percent regardless (§5605(b)).

Within those limits, and within the 5 percent cap, the decision is the board’s. It is not a free hand. Directors must act in good faith, in what they believe is the association’s best interest, with the care a reasonably careful person would use, which includes looking into the facts first (Corporations Code §7231, for incorporated associations, which most are). Courts give a board’s decision on how to maintain and repair the common area considerable deference, but only where the board made it after reasonable investigation, in good faith, with regard for the members’ interests, and within its authority under the law and the governing documents (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249). That case was about how to repair, not how to pay for it, but the same logic should follow the funding decision: a special assessment decided on a whim, or for a project nobody costed, is unlikely to get that deference.

Reserves First, or a Special Assessment?

Whether the money should come from the reserve fund or from a special assessment is not entirely up to the board, because the law restricts what reserves can be spent on.

• Reserves are only for major components. The board cannot spend reserve funds on anything other than the repair, restoration, replacement, or maintenance of the major components the reserve fund was set up for, or litigation about them (§5510(b)). So if the need is a roof, an elevator, or repaving, and the reserves have the money, the reserves should pay for it. That is what the members have been saving for.
• If the reserves fall short on a major component, the gap has to come from somewhere else: a special assessment, a loan, or phasing the work. From 2032, AB 2050 adds a separate tool for the underlying cause: an association that cannot fund its required yearly reserve contribution from its budget must levy a reserve funding special assessment, paid into reserves (§5552(c)(1) and (d)).
• If the need is not a major component, say an insurance premium that jumped, a lawsuit, or a shortfall in running costs, the reserves cannot pay for it. The board may borrow from the reserves temporarily, but only after saying so in the board meeting notice, with the reasons, the repayment options, and whether a special assessment may follow, and with written findings in the minutes; the money must be put back within a year unless the board, after the same notice and a documented finding, delays it, and a special assessment to repay it is itself subject to the 5 percent limit (§5515). Otherwise the choices are a special assessment, cutting costs, or next year’s budget.

So the question to ask is not only “can the board do this?” but “is this the right pot?” A special assessment to replace a roof the reserve study has been funding for years deserves the question why the reserves are not paying. A special assessment to cover a lawsuit is usually the normal route, because reserves can only be used for litigation about the repair or replacement of the components they were set up for (§5510(b)).

A Word on Labels

Some declarations use the words “special assessment” for something quite different: a charge against one owner, for example to recover the cost of a repair that owner caused, or a fine that the declaration says is “enforceable as a special assessment.” That label does not change what the charge is. The Act does not define the term, but the special assessments this article covers, the kind the 5 percent limit is built around (§5605(b)), are charges on the whole membership. A charge against one owner follows its own rules. A fine cannot carry a late charge or interest, whatever the documents call it (§5850(e)), and calling a fine a special assessment does not let the association foreclose on it (§5725(b)). Which rule applies to which charge is set out in What Can a California HOA Charge You? Assessments, Fees, Fines, and Late Charges.

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What Has to Be True: The 5 Percent Limit

Without member approval, the board cannot impose special assessments that “in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year” (§5605(b)). Two words in that sentence matter most.

• “Aggregate.” The limit is for all special assessments in the fiscal year added together, not for each one. Two assessments of 3 percent each in the same year add up to 6 percent, so the second, as proposed, needs a vote.
• “Budgeted gross expenses.” The base is the year’s budgeted expenses, not the reserve balance or last year’s actual spending.

The special assessment limit is separate from the limit on regular assessments. In the same fiscal year, and without a vote, the board can raise the regular assessment by up to 20 percent over the previous year (if its annual budget report is in order, §5605(a)) and also levy special assessments up to 5 percent of budgeted expenses (§5605(b)). Above either limit, the members have to approve, unless the expense is a genuine emergency, which the law defines narrowly (§5610).

The Math

Take an association of 100 units, where the yearly budget is paid for by regular assessments split equally. The table shows what each owner already pays for the year, and the most the board can add in special assessments that year without a member vote: 5 percent of the budget, for everyone together, and that same 5 percent per owner.

Association’s budgeted expenses for the year	What you already pay in regular assessments for the year (1 of 100 equal shares)	5 percent limit: the most the board can levy in special assessments that year without a vote, all owners together	Your share of that limit for the year
$175,000	$1,750	$8,750	$87.50
$500,000	$5,000	$25,000	$250
$1,000,000	$10,000	$50,000	$500

Put simply, in this example: without a vote, the board can add at most 5 percent on top of what you already pay for the year, and that 5 percent covers every special assessment in the year added together. Anything above it needs the members to approve.

Set against the roof in the opening story, the point is plain. A $15,000-per-unit assessment is far above 5 percent of what anyone pays in a year. Even in the $1,000,000 association above, the board’s limit without a vote is $500 per unit. It is lawful only with member approval, or if it truly qualifies as an emergency.

What Member Approval Means

Approval means a majority of a quorum of members, at a member meeting or election (§5605(b)). For this purpose, a quorum is more than 50 percent of the members (§5605(d)(3)), and the yes votes must be a majority of the votes cast and also more than half of the quorum (§4070). The vote is held by secret ballot under the election rules (§5100(a)(1)), and it cannot be held by electronic secret ballot: the Act excludes elections on regular or special assessments from electronic voting (§5105(i)).

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What the Board Has to Do: The Procedure

1. Warn members in the budget report. The annual budget report must state whether the board has decided on, or expects, one or more special assessments to repair, replace, or restore a major component or to build up reserves, and if so the estimated amount, start date, and duration (§5300(b)(5)). A special assessment the board saw coming should not be a surprise.
2. Decide at a board meeting. The board cannot act outside a meeting (§4910(a)). Members get at least four days’ notice of the meeting, with the agenda, except for an emergency meeting (§4920(a), (b)(1), and (d)), and can attend and speak (§4925).
3. Hold a member vote if the 5 percent limit would be exceeded. By secret ballot, with the quorum and approval rules above.
4. Give individual notice. Each member must receive individual notice of any increase in the regular or special assessments 30 to 60 days before it is due (§5615).
5. Size it to the cost. No more than the amount necessary to cover the costs for which it is levied (§5600(b)).

The Emergency Exception

The limits above do not apply to an emergency, but the statute defines an emergency narrowly: an extraordinary expense required by a court order, an extraordinary expense needed to deal with a discovered health or safety hazard, or an extraordinary repair the board could not reasonably have foreseen when it prepared the budget, which also requires a resolution with written findings sent to members with the notice (§5610). A repair the board knew about does not qualify as unforeseeable just because it has become urgent. The full rules, examples, and how to object are in California HOA Emergency Assessments: When the Board Can Skip the Vote.

From 2032: The Reserve Funding Special Assessment

AB 2050 adds a new kind of special assessment from January 1, 2032. If an association cannot fund its required yearly reserve contribution through its annual budget, it must levy a reserve funding special assessment (§5552(c)(1)). It is “subject to the same provisions as a standard special assessment in Section 5605” (§5552(c)(1)). Read with the 5 percent rule, that appears to mean the board can levy it without a vote up to the 5 percent limit (§5605(b)), and the statute confirms that any amount above the limit needs a member vote (§5552(c)(2)). How the two sections work together in detail has not been tested. The statute does not say what happens if the members vote no. The money can only go into reserves (§5552(d)), and an association cannot levy one more than once every nine years (§5552(e)). The details are in California HOA Reserve Law AB 2050: What Changes in 2032.

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How Members Can Question or Object

Before the Decision

If a special assessment is proposed, these are the questions worth asking in writing:

1. What exactly is it for, and what will it cost? The amount cannot exceed the cost (§5600(b)).
2. Does it fit within 5 percent of budgeted expenses, counting every special assessment this year? If not, when is the member vote?
3. Why are the reserves not enough? If the reserve study listed this component, why was it not funded? The answer says a lot about how the budget has been managed.
4. Was it disclosed? Did the last budget report say a special assessment was expected (§5300(b)(5))?
5. Were alternatives considered? Phasing the work, using reserves for part of it, or a loan. A loan spreads the cost over time, but its interest is paid by the members too.
6. Will installments be offered? Many associations let owners pay a large special assessment over several months. The statute does not require it, so ask before the vote.

After the Decision

• Check the procedure. Was it decided at a noticed board meeting? If above 5 percent, was there a secret-ballot vote that met the quorum? Did you get individual notice 30 to 60 days before it was due? If the board called it an emergency, which ground did it rely on, and where are the findings?
• Ask for the records. You can inspect the association’s records, including the minutes, executed contracts, and the board’s written approval of contractor proposals (§§5200(a) and 5205).
• Raise it through internal dispute resolution. Free, started in writing, and the association must take part if you start it (§5910(a), (c), and (g)).
• Pay under protest if you dispute it. Disputing the amount does not stop the association from collecting it if it goes unpaid (§5658(b)), and an unpaid special assessment becomes delinquent like any other (§5650(b)). If the amount in dispute is within the small claims limit, you can pay under protest and sue in small claims court (§5658(a)). For larger disputes, the usual requirement to try alternative dispute resolution before suing does not apply to an assessment dispute, except as otherwise provided by law (§5930(d)).

If You Cannot Pay

A special assessment that goes unpaid is treated like any late assessment: it becomes delinquent 15 days after it is due (or later, if your declaration gives longer) (§5650(b)), and the same late charge, interest, payment-plan, and pre-lien rules apply. Those are explained in California HOA Regular Assessments: Late Fees, Interest, and Delinquency and California HOA Liens: The Pre-Lien Notice, the Board Vote, and Your Rights.

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Before You Buy

Most special-assessment surprises are visible before closing, if you know where to look. The seller has to give you the most recent annual budget report and policy statement (§4525(a)(3)), a statement of the current regular and special assessments and anything unpaid on the unit (§4525(a)(4)), and any assessment increase or special assessment the board has approved but that is not yet due (§4525(a)(8)). On request, the seller also has to provide the board minutes from the last 12 months (§4525(a)(10)), which is often where an upcoming assessment first shows up. In the budget report, read the statement on expected special assessments (§5300(b)(5)) and the reserve summary. How to read the reserve figures is explained in California HOA Reserve Studies and the Reserve Fund: What Owners Must Know.

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For Boards: Preventing Surprises

Fund reserves to the study. Keeping dues low by under-saving does not save owners money. It moves the cost into a lump sum later, and from 2032 the law requires a minimum level of saving.

Disclose early. If a special assessment is foreseeable, say so in the budget report, with an estimated amount and timing, as the law requires (§5300(b)(5)). Owners who are warned can plan; owners who are surprised push back.

Follow the procedure. Count every special assessment in the fiscal year against the 5 percent limit, hold the vote when it is needed, and give individual notice. Use the emergency route only when one of its three grounds truly applies.

Offer installments where you can. A large special assessment split over several months is easier for owners to pay, and easier for the association to collect.

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Key Takeaways

A special assessment is a one-off charge to every owner for something the association is responsible for, and it cannot exceed the cost. The board can levy up to 5 percent of the year’s budgeted expenses in total without a vote; above that, the members decide by secret ballot. The main exception is a genuine emergency, which the law defines narrowly (§5610). And the board has to warn members in the budget report when it expects one for major repairs or reserves.

A well-run association uses special assessments rarely, because its regular budget saves enough for the big repairs it can see coming. When one does arrive, the owners who know the 5 percent limit, the vote, and the disclosure rules can tell whether it was done properly, and ask the right questions before it is decided.

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Not legal advice. General information for California homeowners and board members about special assessments under the Davis-Stirling Act.

Facing a special assessment? HOA Clarity, Haveny’s AI coach, reads the notice and your budget report, checks it against the 5 percent limit and the emergency rules, and helps you frame your questions to the board.