Ah, special assessments… expensive projects, urgent issues, anxious owners, and the added bonus of some strict procedural requirements pursuant to the Davis-Stirling Act. For community managers, the key is to help the board move deliberately, communicate early, and avoid procedural missteps that could derail the election. Below is a practical checklist for preparing a special assessment election.
1. Is member approval required?
Start with the threshold question: can the board approve the assessment on its own, or is membership approval required? A board may not levy special assessments that, in the aggregate, exceed 5% of the association’s budgeted gross expenses for that fiscal year without member approval. Approval requires a majority of a quorum of the members, and quorum means more than 50% of the owners. Whether member approval is required should be confirmed with counsel early before notices, budgets, owner communications, or election materials are prepared.
2. Does the association have compliant election rules?
If member approval is required, the association must have compliant election rules in place. This is especially important because new or amended election rules cannot be adopted less than 90 days before an election. Work with counsel to confirm whether the association’s election rules were updated after the 2020 Davis-Stirling election law changes and whether they address the type of vote being conducted. If the association does not have compliant election rules, contact association counsel immediately – do not wait until the board is ready to send ballots.
Also be mindful that electronic voting is not an option for special assessment elections.
3. What is the budget?
Owners will ask one question first: “How much?”
The board and management should be prepared to explain exactly how the proposed assessment amount was calculated. A strong budget identifies each major cost category, such as:
• Construction or repair contract costs
• Contingency
• Permits
• Construction management or project management
• Engineering or inspection costs
• Administrative expenses
• Legal fees
• Financing costs, if applicable
The goal is not simply to present a number. The goal is to show owners that the number is reasoned, documented, and tied to actual association needs.
4. How will assessment be allocated?
Do not assume every assessment is allocated equally among all owners. The governing documents may require different allocation methods depending on the nature of the assessment. Some costs may be allocated equally. Others may be allocated by square footage, unit type, benefit received, or another formula set forth in the CC&Rs. This is an area where counsel should be involved because the wrong allocation method can create owner challenges and collection problems later.
5. What payment options will be offered?
Before the vote, the board should decide whether owners will be given payment options. For example:
• A single lump-sum payment
• Installment payments or payment plans
• Financing through an association-obtained loan
If the association is considering installment payments, payment plans, or financing through a bank loan, the owners who use those options should be required to sign voluntary liens or other payment agreements. Those documents should be prepared by counsel to protect the association’s ability to collect the special assessment. Managers should also make sure the board understands the administrative burden and potential costs of tracking installment payments and delinquencies.
6. Should the association obtain a loan?
A loan may reduce the immediate burden on owners, but it is not a substitute for careful budgeting. Boards should consider:
• Interest rates and loan costs
• Repayment term
• Whether the governing documents impose borrowing limits, including whether member approval is required
If a loan will be part of the funding plan, start early. Loan approval and documentation can take time.
7. Who is the inspector of elections and what is the election timeline?
The association should select and appoint the inspector of elections early and then work backward from the desired voting deadline. The timeline should account for:
• Election rule requirements
• Notice requirements
• Ballot mailing deadlines
• Owner education (or “town hall”) meetings
• The voting deadline
• The meeting to open and tabulate ballots
• Potential quorum issues
Work with counsel and the inspector of elections to create a workable and compliant timeline.
8. How will the owners know about this?
Owner communication can determine whether a special assessment passes or fails. Managers should encourage boards to communicate well before ballots go out. Owners are more likely to support a special assessment when they understand the need, the cost, the consequences of delay, and the work the board has done to evaluate options. Useful communication tools include:
• Initial announcement letters
• Town hall meetings
• Project summaries
• FAQs
• Visual timelines
• Summaries of inspection findings
• Budget breakdowns
• Regular email or mail updates
The earlier the communication begins, the better. The more transparent the process, the more likely owners are to understand and support the proposed special assessment.
9. Who prepares the election materials?
The election package should be prepared or reviewed by counsel. It should be accurate, neutral, and consistent with the association’s election rules and statutory requirements.
10. Where will the election meeting be held?
Even though much of the process occurs by mail or electronically, the association is required to identify a physical location for the meeting where ballots will be opened and counted. The inspector of elections does not have to attend in person, but the association must have a physical location where owners can observe the inspector opening and tabulating the ballots, whether the inspector is in person or on camera.
Bonus Round: What questions will owners ask?
Owners will have questions, and boards and managers should prepare answers before the ballots are mailed. Common questions include:
• How much will I have to pay?
• How can I pay it?
• Why is it this much?
• What is this for, and why is it needed?
• Why now?
• What is the purpose of the contingency?
• What happens if the contingency is not used?
• What if the project costs more than budgeted?
• Why can’t we use reserves?
• What happens if the special assessment is not approved?
• Can owners see the reports and bids?
• Why is a voluntary lien needed?
Final Takeaway
A successful special assessment process depends on preparation. Managers should help boards confirm the approval threshold, update election procedures, build a defensible budget, communicate with owners, and involve counsel before deadlines become a problem. Special assessments are challenging, but with the right planning, they can be managed in a way that is transparent, legally compliant, and far less stressful for everyone involved.
