Written by Kelly G. Richardson

Q: When is it legal not to pay HOA dues/fees because an HOA is not fulfilling its duties? I’ve had emergency leaks and made calls and sent emails that they never returned. I have had animal control issues that they do not attend to unless I go into the office. I have proof of emails sent. — V.B., Chula Vista

A: I am sorry your HOA is not responding to your concerns. It is possible that a homeowner could have financial claims against their HOA due to problems such as unrepaired issues. However, homeowners may not use offsetting claims against their HOA as an excuse to not pay assessments.

This issue was resolved in the 1994 case of Park Place Estates v. Naber, in which Mr. Naber had some complaints about repair work completed by the HOA. He argued that his offsetting monetary claims against the HOA allowed him to withhold his assessment payments, but the appellate court said that the trial court was correct in not allowing Naber to use alleged HOA errors to justify his nonpayment of assessments.

You may or may not have legitimate claims against your HOA, but you still must pay your assessments regardless of any monetary claim you might pursue against the HOA.

Q: Our HOA was suspended by the Secretary of State and Franchise Tax Board. The HOA continues to ask me for their dues, but I have been told that I do not need to pay them since they are suspended and no longer viable. The treasurer who is asking me for the dues is not the treasurer on file with the Secretary of State and no change in treasurer was ever filed. Also, the HOA has collected dues for each year since from all homeowners. Is this legal? — S.H., Grass Valley.

A: Incorporated associations must file state tax returns annually with the Franchise Tax Board and at least every other year file SI-100 and SI-CID forms with the Secretary of State. Associations failing to do so will eventually find out that their corporate status has been suspended.

The state refuses to recognize the existence of a corporation during the suspension. A huge consequence is that courts will not allow suspended corporations to file, maintain or defend lawsuits, so the HOA could find its lawsuit dismissed or a default entered against it as a defendant.

Another problem is that while suspended the name used by the corporation is not recognized by the state as in use, so anyone can reserve the name and use it for a different corporation.

A final consequence is that if the HOA was suspended due to failure to file tax returns, Revenue and Taxation Code Section 23304.1(a) says that during the HOA’s suspension due to not filing tax returns any contracts with the HOA can be canceled by the other party — but cannot be canceled by the HOA.

In spite of all that, your HOA CC&Rs still require payment for assessments, and owners should not withhold assessment payments. Don’t risk incurring liens and collection fees.

To read the Davis-Stirling Common Interest Development Act, go to leginfo.legislature.ca.gov .

Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers and Partner of Richardson Ober LLP. Submit column questions to Kelly@roattorneys.com .

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