How to convince association to increase dues?

Started by ElizabethB2 • 11 replies • 2098 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

ElizabethB2 (Michigan)
Posts: 18

Posted:

For those of you that read and responded to my previous thread "How to deal with this? Serious Issues" this is kind of a continuation from that issue. So now that I have completed my Reserve Study, I have come up with a budget for our association as I am the Treasurer. We currently pay $86 per month, I am going to propose at our meeting June 14, that we increase our dues to $125 per month without lawn service (which we currently do ourselves) If everyone wants lawn service, our dues will be $145 per month. Obviously this is quite a jump from what everyone has been paying. We are only 8 units, we are also a brand new association. The Developer just sold the last unit November 2010. This will be the first proposal to increase dues due to the fact our Developer underestimated what our Reserve Fund should have in it. I have printed out ample documents to show why a reserve study should be done and why it is important to have a fully funded reserve. I will also have ample packets that include the estimates from my reserve study, Excel spreadsheets for all of our money and money out, as well as two different budget options. Am I missing any documents? Is there anything else that someone can suggest to help me "sell" the idea that increasing our monthly dues is essential? Thanks for your input!

FredS7 (Arizona)
Posts: 927

Posted:

Watch our elected representatives, who are trying to deal with the same thing

that is- people want low taxes (dues) but don't want to cut programs (services).

I hope you have better luck than our government.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Elizabeth,

Education is the main way to convince your membership that assessments need to be increased.

Run articles in your newsletters explaining

a)what the reserves are used for and how the amount needed is calculated
b)FHA guidelines are now having the mortgage holders evaluate the financial stability of Associations. Depending on that stability - potential buyers might not be able to get funding to purchase homes in the Association.
c) List any requirements your State law might have concerning disclosure of reserves
d) the differences between operating funds, reserve funds, contingency funds
e) how reserve studies are done

Don't forget to provide the figures you used in determining your reserves (i.e. as your teachers always said - show your work).

Keep the language simple, informative and independently verifiable by providing web links to documentation, laws, etc..

Hope this helps.

Tim

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By TimB4 on 06/11/2011 8:57 PM
Elizabeth,

Education is the main way to convince your membership that assessments need to be increased.

Run articles in your newsletters explaining

a)what the reserves are used for and how the amount needed is calculated
b)FHA guidelines are now having the mortgage holders evaluate the financial stability of Associations. Depending on that stability - potential buyers might not be able to get funding to purchase homes in the Association.
c) List any requirements your State law might have concerning disclosure of reserves
d) the differences between operating funds, reserve funds, contingency funds
e) how reserve studies are done

Don't forget to provide the figures you used in determining your reserves (i.e. as your teachers always said - show your work).

Keep the language simple, informative and independently verifiable by providing web links to documentation, laws, etc..

Hope this helps.

Tim

Yes this helps. I have most of that info ready to go for our meeting. I will look into what the FHA guidelines are so I can provide that as well. Thanks so much!

SusanW1 (Michigan)
Posts: 5,202

Posted:

If I were you, I would motion to establish a Reserve Fund committee who MIGHT come up with the same figures as you - or not. A real reserve fund investigation is needed.

I think it's important that you not be the only voice asking for this increase.

This committee would then "sell" the idea to the board, first, then it's off to the members to get their approval.

Nice thing is: numbers don't lie. Neither does the "life" of assets/liabilities.

PS - I think it's a mistake for the board to allow homeowners to take care of what the HOA should be doing. Enforcement is an issue, conformity and continuity is another.

When the job belongs to everyone, it belongs to no one.

Good luck.

Remind people that this has to do with keeping their property values high.

ElizabethB2 (Michigan)
Posts: 18

Posted:

Quote:

Posted By SusanW1 on 06/12/2011 7:12 AM
If I were you, I would motion to establish a Reserve Fund committee who MIGHT come up with the same figures as you - or not. A real reserve fund investigation is needed.

I think it's important that you not be the only voice asking for this increase.

This committee would then "sell" the idea to the board, first, then it's off to the members to get their approval.

Nice thing is: numbers don't lie. Neither does the "life" of assets/liabilities.

PS - I think it's a mistake for the board to allow homeowners to take care of what the HOA should be doing. Enforcement is an issue, conformity and continuity is another.

When the job belongs to everyone, it belongs to no one.

Good luck.

Remind people that this has to do with keeping their property values high.

I would see this being a great idea if our entire association wasn't only 8 units. Having a Reserve Fund Committee would be nice, but as I said we are just too small. I don't understand what you mean about how its a mistake for the board to allow homeowners to take care of what the HOA should be doing. What do you mean by that statement? Are you meaning that its the Boards job to come up with a budget and that everyone should just deal with the increase? I am not entirely the only voice either, the President understands the figures and while is upset that we will have to increase dues, she is also supportive. thanks for your response!

HoaC (Florida)
Posts: 95

Posted:

I believe what SusanW1 is referring to, as I would interpret it, is a self managed HOA is a mistake.
I disagree with this, as I believe a self managed HOA can best address the issues of the community they live in, providing they serve the community and not their own self interest. We terminated our contract for a Community Association Manager (AKA a CAM). They basically did nothing for us. They sat in their offices, sent us billing and collection notices and never assisted us in any of the problems we experienced. And that seems to be the norm for the greedy CAMs!
We searched around and found the best software for us to keep our records and collections, and to give everyone a voice in the community. And, it is really inexpensive for our needs.

HoaC (Florida)
Posts: 95

Posted:

Back on topic, I would suggest sitting down with a banker or an analyst to help you address the issue and take that recommendation back to the BODs

JohnS43 (Colorado)
Posts: 24

Posted:

You're in a tough spot. Good luck.

Here's another vote for opening the books. Have you ever been to a group dinner where everyone tossed in "their share" only to find it was 30% short on first count? Same mentality here. Just as people forget their appetizers, drinks, tips and taxes, HOA members assume there's only vacuuming common areas and garbage collection and everything else is free.

It might also be helpful to make the case you're not alone. Anecdotally and second-hand, I understand that it is very common for builders to set unrealistically low dues in order to sell and now you're left being the bad person who gets to bring reality to the table.

DavidA7 (California)
Posts: 179

Posted:

Good job, our developer did the same thing. He had every unit at $170 and we are also a 8 unit complex. By 2010 we had fee's ranging from 300 to 350 depending on unit size.

Make sure you cover all your line items in your budget.

Here are our line items

Amendments - we place $310 a year to cover ourselves if we want to perform amendments
Bank Charges
Electrical Maintenance/Service
Fire Equipment - Small amount if we have to replace extinquishers
Fire Alarm Service - annual inspection service
Gate Maintenance/Repairs - general maintenance non-reserve based replacement
Insurance -
Landscape Maintenance - monthly costs
Landscape Repairs - repair of sprinklers, etc...
Landscape Upgrades
Legal Fee's - a small amount so we cover our behind if there is legal issues
Lighting supplies/Fixtures
Management Services
Pest Control Maintenance
Plumbing
Postage and copies
Reimbursable expenses
Reserve Study - 1/36th of cost each month to cover report to be done every three years
Taxes
Taxes, Licnese
Telephone, Intercom
Trash Disposal - We have a general trash disposal for entire complex
Water/Sewer/Electrical - We have one main water line to complex split to each unit. HOA pays all units water. Electrical is HOA electrical but each unit pays their personal electrical. This costs is almost 1/2 of our monthly budget.

Reserve Fund payment

In total we collect almost $2500 a month in dues and we are pretty close to spending all of it minus the money placed into reserves.

ElizabethB2 (Michigan)
Posts: 18

Posted:

Well, we had our meeting last night to discuss the dues. We did increase our dues by $20.00 per month for the lawn service alone. They "tabled" the idea of increasing dues for the reserve. Our new Secretary feels that having $2000 in our current reserve fund is adequate and feels that putting away $2000 each year is a lot of money. We have another meeting in August to further discuss the budget. I was amazed at how diluted people are to how much things cost. I just don't get it. My husband and I are looking into selling now and buying a house, we need to get out of here before anything major happens.....we don't want to pay special assessments for things people refused to save for. I retired my position as Treasurer, which was already decided upon a month ago. We voted in a new one.....one that I hope will look into the documents I have provided him with. IDK

So I guess our association, as of right now, chooses to run itself as our own government does......be in debt and incur more debt.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Elizabeth,

You did your best to address the issue. Feel proud about that. You did achieve something, the fees were increased enough to cover expenses. You can only do so much and then it's in the hands of the membership.

Since you can't change the membership, you are probably making the correct decision to sell and move. I'm sorry you have to do that and I know that sometime in the future, someone within your Association will know how right you were when it comes time to pay for things they don't want to save for but still have to be done.

It took me three years and two votes to get the membership to agree to increase the assessments so the Reserves were funded. I know it's not an easy task and I applaud the time and energy you spent documenting the issue, suggesting corrective actions and then trying to get your membership to understand.

Tim

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here