Raised Dues Against the Covenants

I am the President of our HOA in Marion County, Indiana. In 2010, a previous Board raised the dues by $35 (annually) without a vote of the membership. At that time there was no protest. The members have been paying the new fee level for 2 year. Suddenly, this month, a member and her husband decided to circulate a petition demanding the dues go back to the previous level. I have done a 'what if' with the budget and if we can only collect at the previous level we will not be able to meet our financial obligation for the HOA. I contacted a HOA lawyer who said that a good case could be made that if the members paid the dues they gave approval to the fee increase even if it was made against the requirements of the covenants. I am afraid that this petition and these 2 members are going to create a crisis and I would like to get ahead of it. What should I do?

BTW, it take a 60% vote of the membership to increase the dues. We are very lucky to get 10-15% of the membership to attend the annual membership meeting.

Mark,

Also, take a look at state laws. My state allows the BOD to increase assessments by 20% without a member vote. Check the non-profit statutes to see if there is a provision for a lower quorum. My state recognizes a quorum as low as 10% of the members. That way you need only 60% of 10% to approve a budget. If your state allows the use of proxies, solicit the members to allow you to vote on their behalf.

You should also look into amending your CC&R's. There is no point in having a board of directors if the members must ratify their actions.

I do not know about your CC&R's, but mine requires that the board make an annual budget and then base assessments on the budget. Too many boards do just the opposite: they budget based on last year's assessments.

You might propose that since expenses must be cut to balance the lower budget that each owner will need to perform a few hours of yard work each week and be prepared to shovel snow in the winter. Send out a sign-up roster.

If your members need 60% to approve the budget, would it also take 60% to vote it down? If you cannot get members to attend then how will the irate homeowner get support for her position?

really over

Mark:

Is this possible crisis really over just $35 per YEAR? Inflation and cost of doing business would more than cover that sort of increase over two years.

Sounds to me like you have two idiots who now wish to make an issue. My suggestion sit back and wait to see how far they get before you start responding this possible petition.

IF they successfully get a petition signed by the required number of owners to call a special meeting to vote on this THEN I would send out a simple, detailed response with the budget numbers and the affect of now taking in LESS as these two owners suggest.

As a general rule I would think reducing or refunding the dues amount or surplus collected dues is a bad policy. Costs across the board increase over time and in the real world you cannot maintain services and continue operations at the same levels with LESS money.

Every property has them folks who think they alone can figure out some way things should be handled when it is likely they have never bothered to consider what affect these decisions would have if implemented.

If we reduced dues as you suggested what services do you wish to eliminate???? Landscaping, water and sewer, snow removal, insurance, utilities, pool, maintenance, management, just what can we now do without.

Let this rise to the level of an issue before you waste time and money countering this effort.

I agree, Mark, with those who advise you to closely read your own governing docs AND relevant state law to learn if the dues increase was, in fact, legal. In CA, and apparently other states, the board may increase dues xx% without owner approval.

Everyone seems to be absolutely correct. The Association's bylaws should stipulate how much the Board can raise annual assessments without a vote of the membership. After that percentage (in our HOA it is around 15%), then it goes to a vote by the membership. Unfortunately, what happens is if the members are not wanting to pay enough to keep an Association funded then they are running not only the risk of losing certain funded services/amenities, they are probably also running the risk of the need for a special assessment should there be a large unanticipated expense. Educating the membership will hopefully help. Also, an assurance that for future situations the Board will adhere to the bylaws when raising assessments might help defuse the situation.

Follow the advice of others, and provide clear information and communication to the membership about the budget, expenditures, etc.. Go out and politic the issue, inform the membership, and hold a proper and correct vote.

Don't look at this as "two whiners trying to raise a stink". Look at it as it is: The board incorrectly raised the dues, without proper process (i won't say illegal, just improper). Take this as an opportunity to say "thank you for pointing that out. You are right, we did it wrong. Now,how can we do it right this time?".