Ruffier v. Volcano Hills Road Maintenance Association (2025) 117 Cal.App.5th 899 is a recently published court decision in which an owner successfully challenged an association's assessment increase. 

The Volcano Hills Road Maintenance Association (“Association”) maintains the development's private roads. The Association's 1974 Declaration/CC&Rs limited the annual assessment that the Association could impose upon the owners to $200 per year. Over time, the $200 annual assessment per owner became unrealistic to meet the Association's maintenance obligations. The way that the Association's board of directors chose to address this dilemma suggests that the board likely did not consult legal counsel because a knowledgeable attorney specializing in community association law would have been able to quickly identify the applicable statutory provisions to guide the board to a solution. Instead, the board's actions resulted in protracted litigation that culminated in an appellate court finding that the way in which the board imposed an assessment increase rendered the increase invalid. 

The Association's Declaration was silent as to amendments, but its Bylaws provided that they could be amended by a majority of members at any membership meeting at which a quorum was present. So, at the annual meeting of members in June 2019, at which the bare minimum number of members were present to achieve quorum, a motion was made to amend the Bylaws to eliminate the $200 annual assessment limit (even though that limit was stated in the Declaration). The motion passed. At the board's next meeting in July 2019, the board voted to increase the annual assessment per owner from $200 to $1,000. An owner filed a lawsuit asserting that both the assessment increase and the amendment to the Bylaws were void. A trial court focused on the reasonableness of the $200 assessment limit, which it determined to be unreasonable, and therefore found in favor of the Association. The owner appealed, and the appellate court reversed the trial court's holding and found in favor of the owner. 

Civil Code §5605 is the controlling statute when it comes to assessment increases. Section 5605(a) prohibits any increases in regular assessments without a vote of the owners unless the board has distributed certain items required by Civil Code §5300 to be included in an association's annual budget report for that fiscal year. Provided the board has distributed the required annual budget report items for that fiscal year, Section 5605(b) allows boards to increase regular assessments by up to 20% year over year without a vote of the owners “notwithstanding more restrictive limitations placed on the board by the governing documents” (“notwithstanding” means “regardless of” or “despite”). The appellate court summarized the requirements of Civil Code §5605 as follows: “A board that has complied with the pertinent requirements in section 5300 may increase an annual assessment up to 20 percent without the approval of a majority of a quorum of its members, while a board that has not complied with the requirements in section 5300 may not increase an annual assessment by any amount without the approval of a majority of a quorum of its members.”

In the case at issue, the board had not distributed the required annual budget report items and, therefore, had no authority to increase assessments without a vote of the owners. Even if the board had distributed the required items, it would only have been able to increase assessments by up to 20% without a vote of the owners. However, the board had increased assessments by 400% without a vote of the owners to approve the assessment increase. Accordingly, the appellate court held that the assessment increase was void due to noncompliance with Civil Code §5605.

The Association attempted to argue that the assessment increase was necessary to address a threat to safety on the property, which would allow the board to impose an assessment increase without a vote of the owners on an emergency basis under Civil Code §5610 regardless of Civil Code §5605's limitations. The appellate court did not entertain this argument because it had not been raised at the trial court level, and parties cannot raise new arguments on appeal that had not been raised in the underlying trial court case. However, the appellate court did note that a board member had testified at trial that the need for the road maintenance was “preventative,” implying that an emergency assessment would not be appropriate under the circumstances. 

Having already found the assessment increase invalid, the appellate court only addressed in a footnote the Association's attempt to eliminate the assessment limit stated in its Declaration by way of an amendment to its Bylaws. The court noted that “amendment of an association's bylaws to circumvent a provision in a declaration is an invalid procedure” because Civil Code §4205 establishes a hierarchy of governing documents, and the Declaration would prevail over the Bylaws. The court also noted that Civil Code §4270(b) provides that an association's declaration that does not specify an approval percentage for amendments may be amended with the approval of all members (which is a greater approval requirement than the majority of a quorum of members approval that the Association had obtained in its attempt to eliminate the assessment limit).

The takeaway is that the $200 annual assessment limit in the Association's Declaration would not have prevented the board from increasing assessments by up to 20% year over year as long as the Association distributed a statutorily compliant annual budget report each fiscal year since Civil Code §5605 allows for such increases without a vote of the owners “notwithstanding more restrictive limitations placed on the board by the governing documents.” The statute was enacted specifically to supersede more restrictive limitations like what was included in this Association's Declaration. No amendment to the Declaration (and certainly no amendment to the Bylaws) was necessary. However, the statute conditions the board's authority to increase assessments without a vote of the owners on the board having distributed a statutorily compliant annual budget report for that fiscal year. Any assessment increase greater than 20%, or any increase at all if the board had not distributed a compliant annual budget report, would need to have been approved by a vote of the owners conducted in accordance with the statutory secret ballot voting process. The litigation could have been avoided and assessments could have been validly increased had the Association consulted knowledgeable legal counsel at the outset.