Legal Updates

Associations Must Specially Assess if Judgements are Entered Against Them

In a case decided last month, the Court of Appeal held that an association is obligated to levy a special emergency assessment to raise money to satisfy a judgment entered against it. In James F. O'Toole Co., Inc. v. Los Angeles Kingsbury Court Owners Ass'n (2nd District, February 3, 2005) 126 Cal. App. 4th 549, an association's vendor successfully sued the association and obtained a judgment of over $100,000. When the vendor tried to execute on the judgment, the association claimed that its regular assessment receipts were necessary to its continued operation, and could not be seized to pay the judgment. The Court of Appeal agreed, but held that the association was obligated to levy a special, emergency assessment regardless of whether the members approved, to satisfy the judgment. The court pointed to the language of Civil Code § 1366 (b) (1), which allows an association to levy a special emergency assessment (without member approval) for an "extraordinary expense required by an order of the court." Under the Davis-Stirling Act, regular assessments are exempted from collection where they are necessary to provide essential services. Special assessments are not exempt.