Guidance for a Newbie

First I wanted to give you some background so you understand what I am dealing with...

Neighborhood Information
- Location: Bentonville, AR
- French Country Style Architecture
- Number of Lots: 52 Residential, 1 Commercial
- Avg Lot Size: .20 - .30 Acres
- Avg Home Price: $300k - $450k
- Current Dues $150 "Improved" Lot, $75 per "Unimproved" Lot

Neighborhood Background
The Neighborhood was developed in 2004. Developer has gone bankrupt. Of the 52 residential lots, 12 are unimproved (have no home on them) and bank owned. Of the remaining 40 residential lots 7 are "Builder Owned" and used for rental income (Not well maintained). The commercial lot has a half completed structure that was started by the developer before they went bankrupt and is now bank owned. Street lights in neighborhood are basically non-functioning. Exterior neighborhood wall is about to fall down. Neighborhood landscaping needs to be completely redone.

So basically, I need to raise money to pay for a lot of repairs and maintenance so my questions are:

Have you ever seen HOA dues levied on a per acre basis? The reason I am asking is because we have had several people in the neighborhood buy any empty lot behind them (from the bank) and expand their yards. Now one of the homeowners wants to combine their 2 lots into a single lot which means according to the way we currently collect dues my annual potential collections go down.

Is it common to charge reduced dues for "Unimproved" lots? To me, this is benefiting nobody but the bank that owns the property and this was setup this way by the original developer (and it benefited them at the time)... but now the neighborhood is 5 years old and now we can not afford the upkeep needed because we can't reach or maximum potential collections.

Is it common to charge commercial dues at a higher rate than residential dues? Currently we have not been charging dues on the commercial property at all (Again that was benefiting the original developer who owned the lot and was building the commercial structure before they went bankrupt).

My thoughts are to change the way dues are levied to a "Per Acre" basis such that the average home owner does not see a significant increase, levy dues on "Unimproved" lots at the same rate as "Improved" lots which will add to my first year collections and also begin levying dues on the commercial property again adding to my first years collections. I am thinking next year begin raising the "Per Acre" dues at a rate that will allow us to begin addressing neighborhood issues such as street light project (gonna cost us at least $25,000) and wall issues which is again likely to cost in the range of $20,000 - $30,000. I understand that nothing is going to get done overnight but I need to get the neighborhood headed in the right direction.

I appreciate any answers, thoughts or guidance you may be able to offer.

Sincerely,

Russ

Hi Russ:

HOA documents generally reference that the entire HOA consists of X number of lots. Also, generally fees are to be distributed equally between all units. Therefore, depending on your governing documents and state statutes the unimproved lots potentially should pay the same as the improved ones. If homeowners purchased an extra lot then they potentially owe fees for each lot/unit owned. They also get the extra vote as needed for meetings pertaining to that lot.

To make the changes you are asking would require majority of homeowner’s to agree and amending your HOA declaration. So before you put a lot of effort into the idea of changing first you need to determine whether or not you would be able to get enough votes from all the homeowners. Also, any of the ideas you mentioned cannot violate any State Statutes. So before you consider legal fees or anything else to make the change you might review the information yourself. Below is the link to the Arkansas Statutes for your information:

http://www.lexisnexis.com/hottopics/arcode/Default.asp

Title 18 Property
Chapter 13 Horizontal Property Act