Now I Have To Walk the Walk

I wish We had your problem. We had to raise dues this year. One of the owners told our building manager "we like low fees" Low fees are good, but won't pay the bills.

Seriously, David, you, your board, and your owners all deserve pats on the backs for a job well done. Not only has your board had the willingness to keep assessments high enough to cover costs plus reserves, but your owners have stepped up and accepted their responsibilities in paying.

This is a refreshing change from those "we ain't got no money" threads.

I just wish I could give you some advice on what to do with that surplus but too much money is something I have never once had to deal with in my entire life.

How big is your association?

Larry,

Our association consists of 801 single family homes. We are a "55 or better" community with extensive amenities and 41 acres of common grounds.

To answer the question asked by another poster - how did we manage to accumulate such a surplus?

We were under developer control from 2002 until early 2010. Our governing docs required the developer to pay any annual deficit. To avoid that, the developer raised assessments several times through 2008 even though costs were not increasing significantly. That led to surpluses in those years. In 2009, in anticipation of transition in 2010 to homeowner control, we had a level 1 reserve study conducted. That study implied a that a very substantial increase in contributions to reserves would be required. Rather than raise assessments we applied a large fraction of the accumulated surplus to reserves, allowing us to leave monthly assessments unchanged.

Once transition to homeowner control took place we renegotiated or recompeted virtually every contract the developer had put in place. It was obvious that the developer had awarded sweetheart deals to companies they had many business connections with. We eliminated much duplication and inefficiency. We fired the management company and hired our own in-house staff.

These actions allowed us to provide better services at substantially lower cost in 2010 and 2011 and to accumulate an operating contingency of 15% of annual assessments. The surplus we now need to address is over and above that contingency.

Kelly

You say:

****** HOWEVER, you could set up a minor headache for people who deduct HOA dues on their income taxes.******

Please inform us how HOA dues/assessments are tax deductible.

Thanks

Or if you rent a unit.

Typically the restrictions against home businesses have to do with signs, client traffic, zoning, commercial infow/outflow etc. I surely don't know of any HOA that could seriously, if not legally, prohibit a writer, a public speaker, a tele-commuter, a professor, or any profession of that nature from working out of a HOA. Now running a dance studio out of your basement, or a repair business out of your garage, or a meth lab -- yeah, not allowed. In my neighborhood we have an author of children's books who has hit the big time, having spent the last 6 months in Hollywood participating in the first movie being made from his series. Sadly, but predictably, they will be moving. But I'm 100% sure they are deducting whatever percentage is allowed based on the square footage of the office space of ALL costs, pertaining to the maintenance of that dwelling, including utilities, mortgage, exterior/interior care, office supplies, and yes, those assessments paid on that dwelling, while he made his living as an author out of his home office.

Also, since in most cases being on the Board of an HOA is a volunteer position no one is talking about claiming a deduction for the office/space used in your home to perform these duties. Obviously you can't claim a deduction without income. However, if a Board member is compensated monetarily, without taxes being withheld, and this compensation is more than $2,500 (I believe that is the cut-off for independent contractors to receive 1099's), and they are performing the HOA business from their home, they most certainly can claim the assessments as part of their deductions. Unless the HOA has a central office, it can't very well prohibit their Board members from "doing business" from home, now can it? But, again, this is only in the rare case of a paid Board member.

Right, that's what I was saying, as a percentage of the square footage of the house that you are using for the home office.