dues versus special assessments

Started by BB5 • 5 replies • 2065 views

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BB5 (Missouri)
Posts: 145

Posted:

We recently had a "special assessment" for blacktop of the road we also paid our yearly dues there was a shortage in the yearly/general funds so money was taken from the special assessment fund to pay bills can this be done ?

LawrenceC1 (Georgia)
Posts: 480

Posted:

BB,

You need to look at your governing documents, especially the Covenants, Conditions, and Restrictions (CC&R). They should tell you all about what is allowed as far as assessments.

It is often the case that a special assessment must be voted on by the membership. Did the blacktop charge come up for a vote before the assessment was levied on the members?

BB5 (Missouri)
Posts: 145

Posted:

I guess I didn't explain the situation right. The way I understand it dues cover "general "expenses (electric, trash p.u. well maint. insurance )the special assessment was for black top of the road a "capital" improvement can funds be taken from the special assessment to pay for general expenses.

LawrenceC1 (Georgia)
Posts: 480

Posted:

BB,

You still need to look at your governing documents to understand what is allowed in your specific situation.

Regular assessments (dues) usually cover all budgeted expenses, plus a contribution to the reserve fund. Regular assessments fund operating and capital expenses.

Special Assessments are usually for items that were not budgeted, and usually require a vote by the membership before they can be imposed. Unbudgeted items can be unexpected expenses (the water heater exploded), or something that the membership wants that the board did not include in the budget.

Specific Assessments are usually fees or fines levied on some number of members, but less than the whole. This can be an assessment on only one member.

I hope this helps. Please read your CC&Rs.

TimB4 (Tennessee)
Posts: 21,059

Posted:

BB,

If the annual assessment (aka dues) are not enough to cover normal expenses (or expenses that exceed the budget - say plowing due to heaver then expected snowfall) and fully fund your reserves or if there are too many delinquent accounts that the money just isn't available, then the money needs to come from somewhere. Hopefully your Association had set up a contingency fund to cover this type of situation. If not, they should consider it. I've heard that as a general rule of thumb a contingency fund should equal 1/12 of the annual assessment - more if there are lots of people not paying on time.

Reserve funds, as you know, are to pay for the expected repairs, maintenance and replacement of common area elements (pool, playground, roads, sidewalks, roofs, etc.).

Unfortunately, some Boards consider all the money as just one big pot and do not differentiate what should be considered reserves, contingencies and general operating funds. Typically when this happens, the only way to change that methodology is through education of the Board members or electing new board members that will revamp the system your Association uses.

As for using funds from a special assessment that was to pay for one thing to pay something else, I don't think it should happen. However, since every Association has different language in their governing documents, to determine if it's allowed to happen in your Association, you will need to read your governing documents about special assessments.

The fact that you needed a special assessment to pay for something that, I believe, should have been planned for and funded from reserves does tell me that your Association probably needs to perform another reserve study and adjust assessments accordingly.

Tim

RogerB (Colorado)
Posts: 5,067

Posted:

IMO, a well run HOA should never have a special assessment. Of course there are reasons to have a special assessment but it should be an extreme emergency. Having said that I am aware that many HOA's members do not want to increase the annual assessment to build sufficient reserve funds. It takes a good long range (20+ years) reserve plan and a convincing presentation to get such owners to agree to sufficiently increasing the annual assessment.

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