Can an HOA charge a special assessment to pay for a lawsuit or judgment?
Reviewed by the OurHOA team · Updated June 2026
HOAs can levy a special assessment to fund litigation or pay a judgment, within limits. Here is when it is allowed, the vote and cap rules, and how insurance fits in.
The short answer: yes, legal costs are usually a common expense
Defending a lawsuit, paying a settlement, or satisfying a court judgment is normally a common expense of the association - a cost shared by all owners, like insurance or roof repairs. When the operating budget and reserves cannot absorb it, a special assessment is a legitimate way to raise the money. What an owner should check is not whether the HOA can ever do this, but whether it followed the right procedure: the authority in the governing documents, any required member vote, and the notice rules that apply to special assessments in your state.
Insurance should come first
Before owners are billed, the association usually has coverage that is supposed to handle exactly these situations. Directors-and-officers (D&O) insurance defends the board against many governance and decision-making claims, and general liability covers injury and property claims. The board is expected to tender the claim to its insurer rather than reach straight into owners' pockets. A special assessment for litigation typically fills the gap insurance leaves: an uninsured type of claim, the policy deductible, an amount above policy limits, or the cost of the HOA bringing its own case (where the association is the plaintiff, not the defendant). On the owner side, the loss-assessment coverage built into most HO-6 policies can reimburse part of a special assessment - see our guide on whether an HOA can require you to carry homeowners insurance.
Vote and cap rules still apply
A special assessment is not a blank check. Many states and most governing documents cap how large a special assessment the board can levy without putting it to the members. In California, Civil Code section 5605 bars the board from imposing special assessments that in the aggregate exceed 5 percent of the year's budgeted gross expenses without member approval. There is an important carve-out for court orders: Civil Code section 5610 lets a board levy an emergency assessment without a member vote when it is for an extraordinary expense required by a court order - which a judgment against the association can be - so long as the board adopts a resolution and records the reasons in the minutes. The takeaway is that a routine litigation-funding assessment may need a vote, while one driven by an actual judgment may not. Our guides on HOA special assessments and on whether there is a cap on special assessments cover the thresholds.
When the HOA is suing, not being sued
Owners often push back hardest when the special assessment funds the association going on offense - suing the developer over construction defects, or pursuing another owner. Boards generally have authority to litigate in the community's interest under the business-judgment rule, but it is also where transparency matters most: some governing documents and a few state statutes require notice to, or a vote of, the membership before the association files certain lawsuits or commits to large legal spending. Owners are entitled to understand the purpose, the likely cost, and the realistic recovery. Our guide on what it means when an HOA is in litigation explains how an active lawsuit affects owners, disclosures, and even financing.
What owners can verify and do
If you receive a special assessment tied to a lawsuit or judgment, ask for the specifics: the resolution and minutes adopting it, the purpose and dollar amount, whether the claim was tendered to insurance, and the document provision or statute the board relied on for the amount and the vote (or no-vote). If the procedure was defective - say, the board skipped a required member vote - you may be able to pay under protest while you challenge it rather than simply refusing, which can trigger late fees and collection on a valid portion. Our guide on how to fight or challenge a special assessment lays out the procedural angles.
How OurHOA helps
Whether a particular litigation-related assessment is proper depends on your state's statute, your governing documents, and the nature of the claim, so treat this as general education and get advice for your situation. What protects everyone is a clear paper trail: the board resolution, the insurance tender, the budget the assessment is filling, and an even-handed bill to every owner. OurHOA helps self-managed boards document special-assessment decisions, notify every owner with the purpose and amount in writing, and track payment transparently - so a hard, expensive moment stays accountable instead of becoming a fight about whether the board followed the rules.
OurHOA is the friendly, affordable way self-managed communities keep dues, records, and reminders in one place. See how it works.
These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.