Setting limits(10%) on the increase in monthly fees

Started by RobertG1 • 5 replies • 1566 views

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RobertG1 (Delaware)
Posts: 11

Posted:

We are reviewing our bylaws and declarations. One of the changes we would like to make is to restrict monthly fee increases to 10% beyond that the board would have to seek community approval. Can any one give me the down side of this thinking. We are a 5 year old single dweeling 55 active adult community. Our fees are $170 per month and we are going thru the transition period. Our declarations and or our bylaws make no provision for any cap on fees which can be dangerous.

GeraldT1 (<Not Specified>)
Posts: 519

Posted:

RobertG1,

What is dangerous is prematurely setting a cap on fee increases thereby forcing special assessments. Because one way or other, the fees to maintain and replace the elements, as well as adjust for inflation must be collected.

Since you are going through transition, you may see the developer low-balled the replacement funding schedule (if there was one) in your POS. Therefore, IMO it is a bit premature to lock in a cap of any percent at this time in the development of your community.

Best of success!!
GeraldT1
NNJ

RogerB (Colorado)
Posts: 5,067

Posted:

Robert, I like your suggestion. If the Board feels they need to increase the assessment greater than 10% appropriate document can require approval of a majority or 2/3 of the members voting at a members meeting. The notice of meeting should advise on the increase and educate the members on the process for approving or not approving the Board's budget. This allows the flexibility for increases greater than 10% while maintaining some control by the members.

GregoryB (Florida)
Posts: 15

Posted:

Robert,

We have provisions like that in our By Laws that cap it at 15% yearly increase. We do though have stipulations on how that 15% needs to be calculated requiring we back out any part of the assesment for one time non yearly charges and increases to replace reserves used in the prior years.

It seems reasonable but gives some flexibility to the board to repair things or work on unplanned for items. It is difficult to get a majority or 2/3rds vote when you are looking to increase dues. You have to keep in mind as a board you are required to maintain things in a certan manner and without some flexibility you might have a situation arise where you are required by your documents to do one thing but cant get the vote to do so.

PatrickH (California)
Posts: 204

Posted:

Hi Robert,

Our C,C & R's cap the dues increase without a membership vote at 20%. We rarely need to raise them more than 10% in a single year, 5-8% is typical.

If you're going through the transition period, you may find out in the next year or two that the developer underfunded various items, especially the Reserves, to keep the dues as low as possible. If that's the case, you may need some larger dues increases in the next few years to compensate for that.

Having a cap is a great idea, it does keep the Board from raising dues too much without an ownership vote. If you set it at 10% and need to increase it more, then the Board should be able to explain to everyone why the dues have to go up more to pay the bills and let the owners vote on it.

Personally, I think 10% may be a little low, 15% is probably more common. The costs of building materials and construction labor can easily go up 10% per year, as can insurance, so you might find yourself bumping up against that 10% limit as you take over control from the developer and start figuring out how much money you really need to run the HOA.

BradP (Kansas)
Posts: 2,640

Posted:

Robert:

Ours has a limit of 20%. We are a 5 year old community and so far we have been fortunate that we haven't had to raise them and don't anticipate doing so through at least 2007.

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