WHAT FEES MAY AN HOA CHARGE?????
What "fees" may an HOA or Condo Association charge to owners? In this E-newsletter I will explore the possibilities. Most association governing documents (usually in the Bylaws) offer general authority to boards to "administer" or "manage" the common area and some also specifically authorize charging fees related to use or administration of the common area.
Maintenance of the common area is generally covered through the collection of assessments and those would not fall into the category of "fees" as discussed here. Security deposits are sometimes collected but unless they are non-refundable, they are not the subject of this E-newsletter.
So what kinds of fees may boards charge? Common fees include those related to access or gate cards, parking permits, pool keys, mailbox keys and the like. However, I am getting more and more questions via email asking about other kinds of fees. It seems a good time to explore the authority on various fees. The pertinent California statute relating to collection of money says this:
Cal Civ Code 1366.1: "An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied."
That is pretty clear! There has to be some cost consideration. Thus, if an owner is going to challenge a fee, it would be important for the board to have some credible evidence available to defend the fee. There are court cases which support the idea that the judges will defer to board business decisions unless they seem to be made without authority or seem arbitrary so this premise might help if there is a challenge. If the HOA can present no cost-related justification though, it might present a problem.
Here are some specific types of fees about which I have been asked recently, and my thoughts:
Move In-Move Out fees: "Fees" are different than a security deposit commonly required of a tenant in a landlord-tenant situation. But the two are commonly confused. A "move in-move out" fee would be nonrefundable, whether or not any damages were discovered due to a move, unless it was called a deposit.
If there is not some historical or evidentiary cost factor tied to a "move in-move out fee" a board might have a problem winning a small claims case over fees. However, a judge could conclude that if the fees authority is in the governing documents, it is legal. Governing documents include bylaws, CC&Rs and rules of the association. The CC&Rs are the recorded covenants and require owner approval to amend or change, and the rules are a document adopted by the board (not recorded) and need to be based on relative authority in the governing documents. CC&Rs are a contract, but rules are not. The bylaws are the official organizational document for the association. CC&Rs and bylaws carry higher "integrity" than rules.
In some associations, such as a condo high-rise, there often are costs associated with "move in-move out" situations. Some associations have to hire extra security personnel, issue extra door or gate passes for movers, make special arrangements for parking of large vehicles, pad elevators and the like. Some associations have a history of damage to repair after the move is completed, such as nicked doors or floors, sheet rock damage, or cleanup related to the move or remaining debris such as boxes. In these cases, the justification for move in-move out fees would not be hard to prove.
May the Board Differentiate Between Resident and Non-Resident Owners? A question arises as to whether boards can charge any fees only in the case of a tenant move, or whether they would have to act consistently and charge a fee when an owner moves. Again, I think it comes down to a matter of what the HOA or Condo association can offer in the way of justification to a hearing officer. If historically tenants have generally been careless and caused damage and owners have not, there you have it - assuming you can prove it, or make a credible showing.
A reader of my website sent an email asking if the landlord-tenant law on security deposits, which requires a landlord to show receipts for what is deducted from a security deposit, would preclude a board from charging a move in-move out fee. I do not believe so, for various reasons including these: (1) because a tenant has no direct legal relationship with an Association unless there is some "tie-in" clause in the CC&Rs or other governing documents; and (2) the statute applies to landlords as between landlords and tenants, not landlords-HOAs or tenants-HOAs.
Mailing Costs and Parking Permits for "Offsite Owners": One reader wrote that in his development, where about 25% of the owners are non-resident owners, the board was adopting a yearly processing fee for nonresident owners of $150 for mailing costs and parking permits. He wanted to know if the board could "discriminate" against offsite owners and "charge that amount of a fee". Depending on how much work was involved and what the mailing and administrative costs were to the association, it might be justified in charging this kind of fee for offsite owners. The Board should probably consider proposing an amendment to the governing documents if authority to charge fees related to administrative costs is not evident in the documents.
Pet Fee: Another reader wrote that her HOA requires a $1000 pet deposit based on its rules and regulations (not provided in the CC&Rs or Bylaws). In her case the deposit is refundable unless damage is documented, but some HOA boards want to consider a fee for pet owners, to help pay for cleanup by gardeners of pet waste and replanting when animal waste kills the landscaping. Boards often have problem with proof as to which pets (really, it's the owners) that caused the damage or left the "deposits" and so they might want to look at this. Of course, if some owners keep their pets inside or use pet carriers or take them off site, they would likely balk at paying the fee intended for this cleanup, so a board might expect to be challenged. I do not know if a judge (would probably be a small claims situation) would find a pet fee justifiable or not. As to a deposit, $1000 may seem steep unless you have been a landlord and had to replace carpeting because of pet waste or scratching at the corners.
I do not have an influential appellate case to offer justifying or criticizing these various fees. I believe an HOA or Condo Association would have a stronger case for any fees if the rights clearly appeared in the bylaws or CC&Rs, as opposed to being adopted by the Board as a rule or policy.
copyright 2010, Beth Grimm, all rights reserved.
By Beth A. Grimm, Attorney. A "service oriented" attorney and member of ECHO and CAI and various other industry organizations in California and nationally, host of the website www.californiacondoguru.com; two Blogs: California Condominium & HOA Law Blog, and Condolawguru.com Blog, and author of many helpful community association publications which can be found in the webstore on her site.