HOA dues increase

Section 3 (a) of our covenants dictate that annual dues can be raised by twice the consumer price index (sub-set "U")an arcane section, but very similar to the main CPI.
(b) the board of directors may fix the assessment at an annual amount not in excess of the maximum.

Section 4 deals with special assessments for capital improvements, etc.

Section 5 states the rules for "Any Action Authorized under section 3 and 4".

For years the dues have been raised just by the HOA board decision, and no one has asked for a vote.
There are 2 opinions on whether we need to don't need to have a vote on this annual increase.

One section seems to give the board the ability to set the rate, but the other seems to indicate it must be voted on.

Anyone ever had a court challenge or legal opinion on this matter?

The point is..... you need to attack the expenses, not the dues increase. If you were to successfully help lower the expenses, there would be no need to increase dues.

Warning: This will require more thought than fighting dues increases.

Tim,

Your board can automatically raise dues by twice the inflation rate subset, plain and simple. Watching the expenses is a good thing but not necessarily in terms of looking exclusively for evidence that expenses are too high. Make sure the HOA budget is covering all the bases with the little things that are required to operate all the amenities and grounds maintenance. A sky high "Flower budget" and a pool furniture budget so low it can't buy an umbrella presents an actionable problem. Likewise, no flower budget and no pool furniture budget are another sign. You've got your low expenses but a rat-trap property.

You're on the right path and it's fair to inquire how the extra dues, if raised, will be allocated within the HOA budget. I, as a president and budget writer, stay prepared to answer any such questions from my neighbors as they are entitled to it. BUT, by covenant, the board can raise dues within the parameters with no penalty other than a mass movement to defeat them at the next election; but I believe they need a reason to reach into your pocket.

To be allowed a 5% increase or even a percentage = to twice the CPI-U inflation rate is pretty good. My budget is locked to a CPI subset (U or W) and we can only mirror the rate with no multiplier. So, we only create budget space by being efficient and continually adjusting how our funds are spend. That said, in past years, less budget-minded boards have arbitrarily decided not to mirror inflation while boosted funding for projects with limited life-spans, like seasonal flower bed replacements. The middle and latter part of last decade was a financial disaster for us to say the least. No assessments but a huge loan following a crumbled, leaky pool and a clubhouse so bad the insurance company threatened to condemn it.

Even heading into 2014, some of our maintenance line items are not - in actual dollar levels - at the level they were as far back as 2007.

Our HOA the board can increase the dues by 5% a year for cost of living expenses. It does not require a membership vote. If we were to raise it higher than that, then that would be considered like a special assessment but it's dues rate not lump sum.

We set a policy up that at 6 months behind on dues, we placed a lien. After a year depending on circumstances, we DISCUSSED foreclosure actions. The legal costs don't increase with the amount owed. It's pretty much a fixed amount to file a lien and foreclosure. You may spend more on attorney's to be more aggressive but that is a choice. The action has already been put into place. Plus the legal fees for filing and costs are part of the lien/foreclosure that has to be paid back.

A good audit should be done to get you all inline with your expenses and collections. Remember, you are a NON-Profit corporation. It is to collect as much money as it needs for it's operations/plus capital improvements. Your HOA should not have any carry over other than the reserve fund each year.

Our expenses are lower than our income but we will have 2 large items within the next5-6 years, including re-paving our roads and replacing our fence.
With the ability to increase at 2 times the CPI (u) it will be tight to pay for. What concerns me is that in years 8-12 years and beyond, the income "may" be able to grow at a much faster rate if future boards keep raising the dues at 2X the CPI.
Right now our income is about $9,500 more than expenses but in 10 years it will be about $15,800/yr more than expenses at a modest 2% CPI rate. After 20 years the excess "may" be as much as $27,000 more than expenses.
At a 3% CPI rate it "may" grow from $10,100 to over $29,000 in just 12 years.
I'm not so much concerned as to present rates, but rates once they begin to exceed by a wide margin what we need to run and to plan for future paving and fence needs.
We basically only have our roads, entry gate, wooden fence and landscaping to maintain. We have phone and electric for the gate and keypad as well as lighting, insurance and minor taxes for common areas but these are the largest costs and not likely to even meet the inflation rate.
The qualifier in my original question regards the part (section 5) that states than any actions under sections 3 and 4 need to be approved by vote.
Does that include the ability of the board to set the new rate each year, which is in section 3??? Or does it just allow the board to bring the new rate to the residents for an up or down vote?

Tim,

I'm 99% sure the HOA covenants allow your HOA board to raise monthly dues at twice the CPI-U. Special assessments have no effect on the operating budget.

So, the board tracks CPI-U for monthly dues if it desires with no community special approval. It needs voter approval for special assessments to cover individual projects and homeowners must approve any dues increases higher than twice the CPI-U.

How large is the savings account (Reserve Fund) to replace your gate equipment, fence and the private road ($$$)? If it's too low, the "excess" funds should be be thrown into that account, where - ethically - it sits untouched to replace those big-ticket items without you paying a lump sum, special assessment. That's where your journey takes you next, what are the Reserve Fund amounts currently and is the board budgeting enough money, yearly, so that it will have saved enough money when the life of the equipment is reasonably expected to end?

This budget review requires a number of "inspections."

1. Reserve Fund amounts and how much is actively deposited into Reserves.

2. If inadequate, look at the operating budget to see if more efficiencies could be squeezed so money can be saved (don't cheat repairs, paint and utility bills)

3. The balance is a combination of the two elements, from my experience.

For example, my board saves enough in Reserves for it to be our largest expense - in spite the fact that some people see it as "excess.' We just retired a large loan in 2012 because we didn't save money to replace a pool and then didn't maintain the clubhouse. However, our site maintenance expenses are year 2000 (or so) levels because we cut to the bone and held our breath a bit to retire the debt and restore our savings......our board can't raise dues except to 1x the CPI, we truly track inflation.

At day's end, you're a dues payer with a board that hasn't explained why they need more of your money. You deserve the information in a clear manner and can then decide whether dues are rising adequately to property needs or if Reserves are a priority to you. Some people think they're going to be dead or moved and don't care about the property in the present due to their future.

Have you received an estimate for repaving the roads fencing? You need to start with that figure, then pick a date they will need to be replaced, then estimate how much needs to go into the reserve account each month to make that goal.