Dues/Assessments

Charles,

A lot of this will depend on what the Association has as common elements that they must maintain. An Association who has to maintain roads should be more concerned about the cost of petroleum products then one who just has to maintain lawns even though the cost of petroleum products may affect both. If you have lawn care the cost of gas may increase the cost of a contracted expense. However, if you have roads, you may need to increase the amount placed into the reserve fund so you are not short funds when needed to repave the roads.

A contingency fund that is being used to buffer delays in assessment payments might be a lower value than a contingency fund planning to cover the cost of snow removal in an universally heavy winter. I have heard that a healthy contingency fund is equal to 1/12 of the annual assessments. If your Association has many delinquent accounts, this amount might need to be higher.

I expect that your Association would know about any increases in the cost of normal operations (insurance, service contracts, trash/recycling, etc.).

As you know, the amount of the annual Assessment would be equal to the sum of the operating expenses, plus the amount being set aside for Reserves and the amount being set aside for contingencies divided by the number of lots within the development.

Since there are many variable factors that affect every Association (physical location, number and type of common elements, number of delinquent accounts, types of services provided, etc.) it's almost impossible to provide you with a rule of thumb as what my increase might be could be too high or too low for your situation.

However, expecting that your normal operating expenses will increase each year, as a minimum I would increase the amount deposited into the reserves by that same percentage. Then when your next reserve study is completed (usually every 5-7 years) that amount can be adjusted up or down.

Hope this helps,

Tim

Our bylaws allow us to increase annual fees, no more than 3% per year. Also, our bylaws allow for (under state statutes) to charge 18% interest on late dues. The software we are using does all these calculations automatically on a monthly basis, so we do not loose money. This has allowed us to keep our collections up and generate revenue to assist us in our reserve funds and special projects. We have only increased our dues 3 times in the almost 30 years we have existed. Our Association is self managed and uses the software to keep transparancy and honesty in the community. We have used the monies collected to offset rising fuel cost, emergenct mainatence due to storms, and to persue legal remedies.