A critical function for an owners association is developing a financial budget for project operations and then levying assessments against the owners of interests in the project to obtain the revenue that is needed to operate the project. By California statute, the association must levy regular and special assessments that are sufficient to perform its obligations under the declaration and as required by law. The initial assessment is established by the subdivider, based on a budget that has been submitted to the Department of Real Estate. Thereafter, the association must make a determination of what revenue the association will need for its operations and assess the lot or unit owners in the project in the manner set forth in the project documents.

Regular assessments generally include funds required for the expenditures that will be incurred in the immediate project operations for the fiscal year and also an amount calculated to raise a reserve for repair, restoration, replacement, and maintenance of major components of the project that will be undertaken at a later date. If the revenues collected from regular assessments are not sufficient to pay for obligations of the association, the association, subject to the provisions of the project documentation, has the power to levy special assessments.

The association must provide notice to the members by first-class mail of any increase in the regular or special assessments of the association not less than 30 nor more than 60 days prior to the increased assessment becoming due.

Regular assessments imposed or collected to perform the obligations of an association under the governing documents or the Davis Stirling Common Interest Development Act., are exempt from execution by a judgment creditor of the association, but only to the extent necessary for the association to perform essential services, such as paying for utilities and insurance. In determining the appropriateness of an exemption, a court shall ensure that only essential services are protected. This exemption does not apply to any consensual pledges, liens, or encumbrances that have been approved by the owners of an association, constituting a quorum, casting a majority of the votes at a meeting or election of the association, or to any state tax lien, or to any lien for labor or materials supplied to the common area.

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