A capital improvement for a community association is generally understood to include any of the following:
- A substantial and discretionary addition to the association’s common area; or
- A substantial and discretionary upgrade to the association’s common area components or materials.
Authority to Construct Capital Improvements
There are no laws prohibiting an association from using its funds to construct capital improvements, nor are there any laws requiring the board of directors to obtain the membership’s authorization to construct capital improvements. However, such requirements are commonly contained within the provisions of an association’s governing documents (typically within its CC&Rs). Even where such provisions are absent, the board will likely need to obtain membership approval to generate the funds needed to construct the capital improvement (i.e., to levy a special assessment greater than five percent (5%) of the association’s annual budget). (Civ. Code § 5605(b); See also “Limitations on Assessment Increases.”)