IL - NO MORE SPECIAL ASSESSMENTS

Started by ConorM • 10 replies • 1695 views

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ConorM (Illinois)
Posts: 15

Posted:

Our association has a problem: special assessments.

Since the mid 70's they've had over 2 dozen, totaling 1.15 million (in today's dollars). All of these special assessments are for things that should be paid out a reasonable reserve fund as none of them were emergencies.

Buying a unit in this building is like playing hot potato.

Last year I created a small reserve fund to at least have a foundation. Now I want to increase it after getting data for our future needs, but I'll get pushback. Any idea on how to combat the culture of people who don't want to pay into the building? Who believe you don't take the money with you, so why put it into a reserve fund?

So many arguments, so little sense.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Conor,

Good for you in realizing the importance of a Reserve Fund and fully funding it.

Unfortunately, for the people who believe that they will move prior to the next special assessment there is little that can be done to convince them to vote for funding a reserve fund. One thing that you might try is explain how the laws adopted after the housing crisis now has lenders looking at the financial solvency of the Association as a consideration in making loans. The thought being that if the Association doesn't have a properly funded reserve that there is a higher possibility of special assessments. A special assessment may create financial difficulties for the borrower in paying back the loan. Additionally, if your property is a condominium development, lack of a properly funded reserve may keep the note from being sold to Fannie or Freddy.

Therefore, either higher a interest rate will be offered or the lender may refuse to make the loan. Either one may reduce sales of the properties and possibly result in the seller having to lower the asking price.

AllisonD (Florida)
Posts: 449

Posted:

Can you not just present your case logically, by listing the item, replacement cost plus some extra for inflation, remaining life of current item divided by the # of units? Its much easier to sustain smaller costs over time versus one large cost on an emergency basis. Are you saying that your residents wont understand or agree with this approach?

ConorM (Illinois)
Posts: 15

Posted:

Thank you very much. Those are some really good points to make!

ConorM (Illinois)
Posts: 15

Posted:

Quote:

Posted By AllisonD on 08/10/2013 2:48 PM
Can you not just present your case logically, by listing the item, replacement cost plus some extra for inflation, remaining life of current item divided by the # of units? Its much easier to sustain smaller costs over time versus one large cost on an emergency basis. Are you saying that your residents wont understand or agree with this approach?

I wish, and unfortunately, that's exactly what I'm saying.

I'm going to propose the budget next month. I want to increase the assessments by 20%. Here's the kicker, it's not really an increase. I've calculated all of the special assessments back to 1976 and broke the chart down to increments.

In effect, it states "If you've lived here X number of years, you've been paying so many extra dollars per month"

For example, let's say you've lived in the building for 5 years and there's been $6,000 in special assessments over 5 years. You've paid an extra $100 per month. But someone who has lived here 10 year may have been subject to a higher or lower averaged amount.

Even at the lowest amount per month, it is still almost double than what I'm asking for.

I'm going to try and hit it from several angles. 1. We have these future costs. 2. You've really been paying it already. 3. Adverse effects on sales.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Conor,

I like that you've broken down the true monthly costs by dividing the numerous, lump sum, special assessment amounts into the dues payers' contribution to the HOA. That is EXACTLY how you make a persuasive argument, not to mention, a steady flow of adequate cash into Reserves will allow your community to replace equipment and amenities before they suffer catastrophic failure and need emergency attention. It's when the HOA doesn't have time to vet its projects that costs can rise relative to the urgency of the Reserve Fund project.

As long as that budget shows the 20% hike being given to the Reserve Fund, I don't see how a better argument might be made.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Conor

Your logic is correct. The root problem is many do not want to pay for issues that will arise after they are gone. Address this issue. One way to do it is to make a comparison of what costs are today versus say 10 years ago. Forget the 10 years from now when they will not be here.

10 years ago it cost so and so for a Ford Escape (Toyota Camry). Today that Ford Escape (Toyota Camry) costs so and so. Bottom line is I am simply saying, let us keep up with real life cost of living increases and build such in.

JeffT2 (Iowa)
Posts: 880

Posted:

You mentioned units in a building. Is this a condominium? By law, condominiums in Illinois must provide for reasonable reserves in the budget, unless the association has voted by a 2/3 majority to not have reserves.

ConorM (Illinois)
Posts: 15

Posted:

Quote:

Posted By JeffT2 on 08/11/2013 9:31 PM
You mentioned units in a building. Is this a condominium? By law, condominiums in Illinois must provide for reasonable reserves in the budget, unless the association has voted by a 2/3 majority to not have reserves.

You're right. Unfortunately, we don't have a reserve study to shore up my position, but I'm going to have people who will challenge the reasonableness.

TimB4 (Tennessee)
Posts: 21,061

Posted:

Quote:

Posted By ConorM on 09/02/2013 5:07 AM

Unfortunately, we don't have a reserve study to shore up my position

Sounds like that this is the first thing that needs to be done.

JohnB26 (South Carolina)
Posts: 1,569

Posted:

LAW REQUIRED unless 2/3 of TOTAL membership votes NAY (abstentions count as AYE)

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