Your Playa Vista HOA Wants to Raise Dues. How Do You Know if the Increase Is Fair Before You Sell?

A dues increase is fair when the association can show you why it needs the money and the new number matches its own budget and repair plan. It is a warning sign when the reason is vague, the budget does not support it, or the board keeps patching a shortfall that should have been planned for years ago.

You can check this yourself. The association has to send owners an annual budget report, give notice before an increase takes effect, and stay inside limits California sets on how much a board can raise dues without a vote of the owners. Those three things give you everything you need to judge the increase, and they are the same documents a buyer will read when you sell.

At First Key Pacific, I walk Playa Vista sellers through this before we set a list price, because the dues number sits right next to the price in every buyer's math.

California's Davis-Stirling Act gives the board both a duty and a limit.

The duty

Civil Code section 5600 says the association must collect assessments sufficient to meet its obligations under its governing documents and the law. It also says the association cannot collect more than it needs to cover the costs the assessments are for. So an increase is not something a board does for fun. If costs went up, the board is expected to cover them.

The limit

Civil Code section 5605 sets two caps on what the board can do without the owners. Without member approval, the board cannot raise the regular assessment more than 20 percent over the prior fiscal year. It also cannot impose special assessments that, added together for the year, exceed 5 percent of the association's budgeted gross expenses. Going past either cap takes a vote of the owners. The law makes a narrow exception for increases needed in an emergency.

Section 5605 also ties the yearly increase to the budget report. To raise regular dues each year without a vote, the board has to have sent owners the required budget disclosures. That is your first checkpoint.

Pull out the association mail from the last year, or ask management for copies. Then go through these in order.

1. Find the annual budget report. Civil Code section 5300 requires the association to send it to owners 30 to 90 days before the end of its fiscal year. It includes the operating budget, a summary of the reserves, and a summary of the board's reserve funding plan. Compare this year's budget with last year's, line by line. Insurance, utilities, and repairs are where most of the change usually lives. If you cannot see where the new money goes, ask.
2. Read the reserve funding plan. The budget report has to say that the full reserve study is available on request, and the association has to provide it to any owner who asks. If the study calls for more savings than the association has been putting away, a dues increase can be the board catching up. That is a responsible move, even if it stings. My guide on how to read a Playa Vista reserve study walks through the numbers.
3. Check the size against the caps. Work out the percentage change from last year's regular assessment. If it is more than 20 percent and nobody voted, ask the board what authority it relied on. If it is under 20 percent, it is within the board's power, and the question becomes whether the budget supports it.
4. Check the notice. Civil Code section 5615 requires the association to notify each owner of an increase 30 to 60 days before the higher amount is due. If you got the notice late, or not at all, note it and ask about it in writing.

If all four line up, the increase is probably doing what it should. If two or more do not, it is worth a conversation with the board before you list.

Sellers often assume higher dues mean a lower price. Sometimes the bigger risk is the opposite. A building that held dues flat for years while the repair plan fell behind can leave a buyer looking at a thin reserve fund and wondering what bill is coming next. That buyer may ask for a credit, or move on.

A building that raised dues to fund its plan tells a different story. The buyer sees a budget that matches the costs and a reserve plan the board is following. The monthly number is higher, but the unknown is smaller. For many buyers, a known cost is easier to accept than a guess.

None of this means you should cheer every increase. It means the reason behind the number matters as much as the number itself, and you want to be able to explain that reason in plain terms when a buyer asks.

When you sell a home in an association, Civil Code section 4525 requires you to give the buyer a set of association documents. One of the items covers changes to regular and special assessments that the board has approved but that are not yet due. So an approved increase is not something to keep quiet about. It goes into the buyer's package either way.

Plan for it in three places.

• Your list price. Buyers who are stretching will run the payment with the new dues, not the old ones. Price with that in mind.
• Your listing details. Show the dues the buyer will actually pay, and be ready to say when the change takes effect.
• Your net sheet. If dues go up while you are still in escrow, you pay the higher amount until closing. See how to read your net sheet for where that lands.

If you want to understand what the dues pay for in the first place, my overview of Playa Vista HOA dues and special assessments covers the basics.

Timing rarely changes the outcome as much as sellers hope. Once the board has approved an increase, it has to be disclosed to the buyer even if it has not started yet. Listing a few weeks early does not hide it.

What timing can change is how well you are prepared. If you list after the budget report arrives and you have read it, you can answer a buyer's questions on the spot. If you list in the middle of a board debate, with no decision yet, buyers may see open questions and price in the worst case. In that situation it can help to attend the board meeting, ask for the timeline, and get what you can in writing before you go live.

If you are deciding right now, start with the documents you already have. Then call me. I'll go through the budget report and the notice with you and help you decide when to list. No pressure, just real answers. Visit my contact page or call or text me at 310.708.7717. I'm here when you're ready.