HOA Special Assessments in Los Angeles: What California Buyers Need to Know Before Closing

What is an HOA special assessment, and can it happen to me after I close?

A special assessment is a one-time charge your homeowners association levies on top of regular monthly dues, used to cover costs the reserves can't fund. Under California's Davis-Stirling Act, HOA boards have the authority to impose these charges without a membership vote, as long as the total stays under 5% of the association's gross budgeted expenses for that fiscal year. Above that threshold, a majority vote of owners is required. If the assessment was approved before your close of escrow, your seller owns that bill. If it's approved after closing, it's yours.

That distinction matters enormously when you're buying into a building with underfunded reserves.

By Paul Blair | October 4, 2026

The reserve study sitting in your HOA disclosure package can tell you whether a $50,000 bill is on the way. But only if you know what to look at.

That document is one of the most consequential pieces of paper in any California condo purchase, and most buyers either skim it or skip it entirely. Here's how to read it correctly, what California law requires your seller to hand over, and why two Fannie Mae and Freddie Mac rule changes have made this due diligence more critical than ever for buyers using conventional financing.

What California Law Says About Special Assessments

California HOAs operate under the Davis-Stirling Common Interest Development Act. Under Civil Code Section 5605, a board can levy a special assessment without a membership vote, but only if the total doesn't exceed 5% of the association's gross budgeted expenses for that fiscal year. Anything above 5% requires a majority vote of a quorum of owners (more than half of all owners must participate in the vote).

Emergency exceptions exist. If a court orders it, a safety threat is discovered on the property, or there's a building code violation requiring immediate action, the board can act without a vote. SB 900, effective January 1, 2025, expanded this emergency authority to cover certain essential utility service repairs when reserves fall short.

The practical point: a board that discovers a failing parking structure, a deteriorating balcony system, or a leaking roof can move quickly. If the reserves aren't sufficient, owners cover the difference.

How to Read the Reserve Study

Every California HOA must complete a reserve study at least every three years through a visual inspection of major components (Civil Code Section 5550). That study appears in the disclosure package your seller provides, and the single most important figure in it is the percent funded number.

Percent funded compares the HOA's current reserve balance against what the reserve study says should theoretically be set aside by now, based on the expected lifecycle and replacement cost of major building components.

Here's what those numbers mean in practice:

• 0 to 30% funded: High risk. This association has a meaningful shortfall. Deferred maintenance is common, and a special assessment is likely, not just possible.
• 30 to 70% funded: Moderate risk. A catch-up plan is often underway. Ask about timelines and whether any assessments have come up in board meetings.
• 70% funded and above: Generally healthy. The association is funding reserves at or near the recommended level.

One caveat worth noting: a study more than three years old may significantly understate costs. Construction and materials expenses in Los Angeles have risen sharply in recent years. A reserve study from 2022 may not reflect what repairs actually cost today, which means the percent funded figure could be more optimistic than the building's real financial condition.

A condo building in Torrance made news in LA County when owners were hit with a $49,000 special assessment for structural repairs the reserves couldn't fund. That's not an outlier. Buyers across the country share stories on real estate forums about receiving five-figure assessment notices within months of closing. The building doesn't disclose as underfunded on a listing sheet. It shows up in the documents handed over during escrow.

What Changed in August 2026 (and What's Coming January 2027)

Two Fannie Mae and Freddie Mac rule changes have direct implications for buyers using conventional financing in condo buildings.

Already in effect as of August 3, 2026: The Limited Review process was eliminated for established condo projects with 10 or more units. Full Review is now required for all conventional condo financing. Your lender must now examine the HOA's financial statements, reserve accounts, insurance coverage, pending litigation, special assessments, deferred maintenance, and any known structural issues before approving your loan. This isn't a future change. It's already affecting transactions across Los Angeles.

Taking effect January 4, 2027: HOA reserves must be funded at a minimum of 15% of annual assessment income, up from the prior 10% threshold. This applies to loan applications dated on or after January 4, 2027. Buildings below the 15% allocation will be classified as non-warrantable for conventional financing, meaning buyers won't be able to use standard Fannie Mae or Freddie Mac-backed loans.

That deadline is three months away. If you're shopping condos right now and your escrow is likely to close in late December 2026 or after, ask your lender to run the reserve allocation math on any building you're considering. A building that qualifies today could lose conventional financing eligibility after January 4.

What Your Disclosure Package Must Include

Under California Civil Code Section 4525, your seller is required to provide a specific set of HOA documents. The package must include:

• Governing documents (CC&Rs, bylaws, articles of incorporation, and operating rules)
• The most recent annual budget report and reserve study summary
• A statement of regular and special assessments levied against the property
• A statement of any outstanding debts or fines owed by the current owner
• Notice of any pending litigation against the HOA
• A summary of master insurance policy coverage
• The most recent SB 326 balcony and elevated element inspection report (required since January 1, 2026, under SB 410)

The HOA must provide these documents within 10 days of a written request. Under the standard CAR Residential Purchase Agreement, you have the right to review HOA documents during your contingency period, typically 17 days. If what you find is unsatisfactory, you can cancel within that window without penalty.

If you haven't read through how California's contingency removal process works, the breakdown on contingency removal in Los Angeles covers the mechanics before you're in the middle of escrow trying to figure it out.

Five Questions to Ask Before You Remove Contingencies

Before you remove your contingencies on any HOA property, get clear answers to these five:

1. What is the current percent funded, and when was the reserve study last completed?
2. Have any special assessments been approved, proposed, or informally discussed in the last 12 months of board minutes?
3. What is the assessment delinquency rate? Over 10% is a red flag. It means owners aren't current on dues, which strains the HOA's operating budget and often precedes a special levy.
4. Does the building pass the Full Review requirements now in effect for conventional financing?
5. Will the 2027 budget meet the new 15% reserve allocation minimum? If your loan application will be dated after January 4, ask your lender to check this now.

Your agent should be helping you pull answers to these questions from the disclosure package and, where needed, from direct communication with the HOA. If that conversation isn't happening, it's worth raising.

If you want someone to walk through the documents with you before you make a decision, reach out directly. I've helped buyers work through HOA due diligence on properties across Los Angeles, from high-rise buildings in West Hollywood and Century City to gated communities in Porter Ranch and Hidden Hills. The documents tell the story, but you have to know where to look.

Who Pays at Closing

The general rule in California: the seller pays any special assessment approved before closing. The buyer is responsible for any assessment approved after the close of escrow.

The word "approved" is doing a lot of work there. An assessment that has been discussed at board meetings but not formally voted on is not yet the seller's obligation. That's why reading the last 12 to 24 months of board minutes matters. You're looking for language about deferred maintenance projects, structural concerns, reserve shortfalls, or pending repairs that haven't been formally acted on yet.

This is also a negotiating point in the CAR Residential Purchase Agreement. If the disclosure documents show signs of a coming assessment, you can ask the seller to credit you at closing, adjust the purchase price to reflect the risk, or set up an escrow holdback for a potential future levy.

The documents you receive under Civil Code Section 4525 will cover assessments already approved. They won't capture the problems being discussed quietly at recent board meetings. That's why requesting the minutes is not optional.

For a closer look at the seller's side of this process, the HOA disclosure requirements for California sellers covers what sellers are required to hand over under California law.

Frequently Asked Questions

What is an HOA special assessment in California?

A special assessment is a one-time charge levied by a homeowners association to cover costs the regular reserve fund can't pay. Under California's Davis-Stirling Act (Civil Code Section 5605), HOA boards can impose assessments up to 5% of annual budgeted expenses without a membership vote. Larger assessments require approval from a majority of owners.

Can an HOA levy a special assessment after I buy?

Yes. If an assessment is formally approved after your close of escrow, you are responsible for it. The seller is obligated to pay any assessments already approved before closing. This is why reviewing board meeting minutes from the prior 12 to 24 months is essential. You want to catch discussions about potential assessments before they become formal votes.

How do I know if an HOA is underfunded before I buy?

Request the reserve study from your seller's HOA disclosure package, which is required under California Civil Code Section 4525. Focus on the percent funded figure. A reading below 30% is high risk. Below 70% warrants careful scrutiny. Also check whether the study was completed within the last three years, and ask your lender to run the Fannie Mae Full Review analysis, now required on all established condo projects with 10 or more units.

What do the 2026 and 2027 Fannie Mae rule changes mean for condo buyers in LA?

As of August 3, 2026, lenders must perform a Full Review on all established condo projects with 10 or more units before approving a conventional loan. Starting January 4, 2027, HOAs must show reserves funded at 15% or more of annual assessment income. Buildings that don't meet this threshold will be classified as non-warrantable, meaning standard Fannie Mae and Freddie Mac financing won't be available.

Who pays if a special assessment is announced right after I close?

The buyer is responsible for any assessment approved after closing. However, if you noticed signs of a pending assessment in the board minutes during your contingency period, that's grounds for negotiating a price credit, purchase price reduction, or escrow holdback before you close. This is exactly the kind of detail to flag to your agent and lender before you remove your contingencies.

The reserve study and the board minutes are where a condo purchase either stays on track or gets expensive. California gives you the legal right to review all of it before you're committed.

If you're buying a condo or a home in an HOA community in Los Angeles and want help reading what the documents are actually saying, connect with the Grey Square team here. We work with buyers across the Westside, Beverly Hills, West Hollywood, DTLA, and throughout the Hollywood Hills and the Valley.

About Paul Blair

Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas and Los Angeles. With 22 years in the business and more than $200 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.