A: To give everyone’s favorite attorney answer, it depends! California courts haven’t really supplied us with a bright line distinction between a necessary repair and a capital improvement. The board should likely begin with the association’s governing documents. Do the CC&Rs and/or Bylaws define the term “capital improvements”? Do they require a certain percentage of the homeowners to approve a capital improvement? Do they require approval of capital improvements that cost over a certain amount? Do the governing documents require a certain kind of vote to approve capital improvements? Generally, the board should determine (with the help of legal counsel, if needed) the answer to these questions and comply accordingly. Also note that not all documents contain a capital improvement limitation.

We can also look to out-of-state law for guidance. In one Illinois case, the court defined capital improvements as betterments of a long lasting nature which adds to the capital value of the property. The court considered even roof and gutter replacements to be capital improvements. Florida courts have applied a more balanced approach. Generally, the Florida courts have held that if a change is necessary for protection of the Common Area, or association membership, it is a repair or replacement. If it is more of a significant change to the property or an addition, it is a capital improvement.

The main takeaway is that this is an unsettled area of law. Neither Illinois nor Florida law is controlling in California, just persuasive. The answer to the above question is also dependent on the association’s governing documents. The association may want to consult with legal counsel to determine whether a specific change constitutes a capital improvement, and if so, what approach to take. – Rhonda R. Goldblatt, Esq.