Increase in Regular Assessment

This year was the first in 7 years that the Regular Assessment has been increased by the HOA. This increase was done without a meeting of the Association. The only notice that the homeowners received was a letter from the management company that provides accounting services and enforces the CC&R's.
I thought this to be unusual since there was not meeting where the homeowners and the developer could discuss the reason of the increase. The developer has the majority votes and the increase would go through anyway.

I looked in our CC&R's and found the Section that talks to Regular Assessments and assessments in general. I found this verbage under Section 7.9 that seems to indicate that a meeting is required whenever there is an increase in the Regular Assessment. Here is the verbage:

7.9 Special Notice and Quorum Requirements. Notwithstanding anything to the contrary contained in either the Bylaws or the Articles, written notice of any meeting called for the purpose of levying a Special Assessment, or for the purpose of obtaining a membership vote in connection with an increase in the Regular Assessment, shall be sent to all Members of the Association and to any person in possession of a Building Lot in the applicable Tract, not less than fifteen (15) days not more than (30) days before such meeting. At the first such meeting called, the presence of Members or of proxies entitled to cast sixty percent (60%) of the total votes of the Association shall constitute a quorum. (It then continues and explains what needs to happen if a quorum is not reached).

My contention, using this Section 7.9 is that there needs to be a written notice, and a meeting whenever there is a INCREASE of REGULAR ASSESSMENT. I understand the fact that on an annual basis there is a process where the Association determines if the revenue is sufficient to cover the expenses for the year. If not then an increase in dues is required to cover the new expense level and evenlly distributed to all homeowners.

My only question is based on Section 7.9 and what it is saying. I believe it is saying that if there is an increase in the Regular Assessment a notice, meeting, and vote must take place.

If someone could shed some light on this it would be much appreciate.

Joe
Idaho

An increase in the regular assessment and a "special Assessment" are two different animals. If it takes a membership vote combined with a required quorum to increase the "regular assessment", then it's going to be tough to ever raise the regular assessments. It seems that developers usually have a history of understating the regular assessment and after they turn it over, it's your problem. Once it gets turned over, a reserve study is recommended so that you can set aside funds to go into the reserve fund every year. The language is a little confusing. I would think that a mailing or notice should be sent for the increase in the regular assessment, but requiring a meeting with a membership vote, sounds unreasonable. You might not ever be able to raise the regular assessment.

Joseph,

As others have indicated, it is possible that the Board may raise assessments a certain amount without membership approval. This varies from Association to Association. As an example, Larry indicated that his Board can raise up to 20%, my association is limited to 5% without membership approval.

Larry,
Thanks for your response but In my situation the developer has control until the property is almost completely built out. The developer has nothing to worry about. All I am trying to do is make sense of the Section 7.9. Why even have a section 7.9 that speaks to a meeting if the Regular Assessment is increased? That section is very confusing based on the replys I am receiving. The developer is going to get a quorum, just by showing up, and will win the vote. I just wanted to have the meeting so as to discuss the why, where, what and how of increase of expenses that required the dues increase. I would think the developer would want to be transparent and have an open dialogue.

Joe

Typically your docs are for you to abide by "after" the developer turns control over to the members. Its basically a book of his rules. In the meantime, the developer can change anything they want. Until he turns control over to the members the role of the board of directors, officers, etc is very, very limited.

Joseph, often CC&R's are not written from scratch but the Declarants and or their attorneys have boilerplate CC&R's and they pick an choose sections and stitch together a set for a particular development. Often there are confusing or contradictory phrases. You mention in one of your subsequent posts: There are other sections that speak to Special Assessments and dues increases over a certain percentages, so why 7.9?

The way I would interpret it is that if the dues increase was at or under the percentage, then no homeowner involvement required, so no vote required. Increase over the allowed percentage then 7.9 would apply which would require a homeowner vote.

I don't see anything in 7.9 that requires a meeting. I read it as giving the notice and quorum requirements if you have a meeting -- not that you must have a meeting. The heading is "Special Notice and Quorum Requirements.". It does not say meeting requirement.

I agree with Glen's comments. There was probably a deleted provision that spoke of when to have a meeting. 7.9 is probably just a remnant.

Why did I think there was a meeting required? Maybe because Section 7.9 mentions "meeting" three times?

7.9 Special Notice and Quorum Requirements. Notwithstanding anything to the contrary contained in either the Bylaws or the Articles, written notice of any meeting called for the purpose of levying a Special Assessment, or for the purpose of obtaining a membership vote in connection with an increase in the Regular Assessment, shall be sent to all Members of the Association and to any person in possession of a Building Lot in the applicable Tract, not less than fifteen (15) days not more than (30) days before such meeting. At the first such meeting called, the presence of Members or of proxies entitled to cast sixty percent (60%) of the total votes of the Association shall constitute a quorum. (It then continues and explains what needs to happen if a quorum is not reached).

I think part of the confusion might be that 7.9 does not give names to the types of meetings that might be involved. A special meeting of the board for the purpose of levying a Special Assessment. A special meeting of the members (homeowners), though, would be the meeting at which members would vote on a dues increase.

If a dues increase is below the threshold required by your documents in state, the increase presumably could be discussed & voted on solely by the board at its regular meeting. Is Idaho an open meeting state, Joseph? Or can directors meet behind closed doors whenever they wish?

Others have pointed out that these meetings might be required if dues are increased by more than xx%. The question is, it seems to me, what is the % in your case, Joseph? If not in your bylaws, CC&Rs (or perhaps articles), there might a state law or code about this.

If anyone wants to, please translate Melissa's remarks. Is she talking about proxies?

Carol and everyone else that is taking time to help me understand all this. Let me share a link so if anyone wants to see the complete CC&R's for my Association here it is:https://www.google.com/#q=apple+creek+caldwell+idaho+ccr's. It makes it a lot easier for anyone trying to make sense to actually look at the complete document.

I have lived in this sub-divison of new homes for 7 years. About one year ago D.R.Horton sold the property in Corey Barton an Idaho builder. The new owner Corey Barton kept the same CC&R's.
If the board has regular meetings I would not know because the homeowners are never informed of such meetings. The only interaction we have with the Board is indirectly. The developer uses a Management Company to make any announcements which are few and far between. Case in point, the management company is the one who informed us of the Regular Assessment increase. We have had only on meeting per year and that is with the management company to go over the annual budget. The management company pretty much does not discuss anything else with us other than budget and delinquent homeowners and of course talk about homeowners violating the CC&R's. That is it. We don't access to Corey Barton. The management company is our only contact and they only answer questions that pertain to their management duties. I sent emails to the management company telling them that I thought the increase was not legal as per 7.9. The office manager tells me that my interpretation is not her interpretation and that the Regular Assessment is legal and she is using Section 7.2.1 as her justification. If one looks at that section it is only describing how the Regular Assessment is computed. There is never a legal opinion given but just an Office Manager at a Management Company.

There are limitation on dues increases as it pertains to Special Assessments. No Special Assessment shall be levied which exceeds twenty percent of the budgeted gross expenses of such association for that fiscal year, without the vote or written assent of the Owners representing majority of the votes of the Members of such Association. This is under Section: 7.3.

Again, I want to thank you all for your help. It looks like if I choose to continue this an attorney will be required.

I only skimmed your CC&Rs, Joseph, so easily may have missed any text about requirements for increasing assessments. You do have bylaws so read them and read your Articles of Incorporation.

Read ID corporation codes. In them or in your bylaws there should be statements about how often the board of directors is required to meet (e.g., four times a year, or?). The bylaws and state laws also might say whether the board meetings can be attended by homeowners.

Board meetings are required to be open in CA, AZ, VA & many other states. And also in many states, owners must be notified about the time, place etc. of any open meeting of the board. If the next year's budget is simply a matter for a regular meeting of the board, you very well may be able to attend. You also may very well be able to get copies of the minutes for these meetings of the board. But this all depends on your bylaws or state laws.

My sense is that you need to know more before you seriously consider an attorney.

By the way what were your dues and what will they be with the increase?

Here is how I read 7.9. There is no requirement in 7.9 for a meeting. Whenever a meeting is required by some other provision (the only one I see so far is for special assessments), 7.9 gives the notice requirement and the quorum requirement, hence the opening statement "Special Notice and Quorum Requirements.". A requirement for a meeting does not appear in the opening statement or anywhere else in 7.9. It mentions "meeting" only as a qualifier for the type of notice and quorum, not as a requirement for the meeting.

As others have pointed out, a meeting for every increase in regular assessments does not make sense.

" a meeting for every increase in regular assessments does not make sense."

It could make good sense to keep a dialogue on expenses and the property going. Either a BOD educating members on expenses or members educating board members that money needs to be spent and saved to keep the property up. Keeping things on track and people on the same page as to where the money goes and just how much is really needed. Having a handful of laypeople in charge with little to no accountability is not a good business model. With a larger broader group involved, everyone takes ownership and there is more likelihood to have some involved who have more experience or common sense to bring to the table.

Joseph,

I skimmed through the declaration you linked to and found that in Section 4 (a) and 4 (b) the board may increase your annual assessment by up to 10% over the prior year without seeking owner approval.

Larry,

Are you sure you got the right set of CC&Rs? I ask because I don't see a section 4(a) or (b). Section 4 deals with general and specific restrictions.

Here is the set I reviewed: http://gomgm.com/formShow.asp?id=296

That link came from the link Joseph provided https://www.google.com/#q=apple+creek+caldwell+idaho+ccr's (a google search) and taking the first link to the management company. In the document I reviewed, 7.9 matched what was cited and 7.2 seems to agree with the response Joe's management company gave him for the justification for the increase.

Richard,
The CC&R's for the property you show is not the same as the CC&R's for my property. My sub-division does not have a percentage restriction for the Regular Assessment. The only restriction would be that the increase can only cover certain expenses for the Association. The only percentage qualifer is for Special Assessments, which is 20 percent annually.

Carol,
Thank you for your reply. I am truly surprised I have received such a response to my inquiry. I really do appreciate the time that everyone is taking to assist me. This is truly a great site since one can only imagine how much can be done under HOA management that each owner should be alert and aware.
I read the bylaws and the Board of Directors meetings are open meetings. The problem being, there has not been any meetings to date. The only meetings that have been conducted have been the annual meeting with the management company speaking to the income and expense statement.
I agree with you about proceeding carefully before considering an attorney.
The dues for the first 7 years were $170 annually. This year they were increased to $190.00. So the issue of having a meeting for an increase in Regular Assessments was not an issue.
Through all of this my only confusion is the wording of 7.9 and how it should be interpreted. I am not an attorney but I have never seen such wording that is vague and not direct. All the wording of 7.9 does is create its own problem.

Carol,

I believe that Joseph's Association is still under Declarant control.

Even allowing for lower living expenses in Idaho, your dues seem reasonable. And a $20 annual raise after 7 years, also reasonable. Your board of directors will find, after the developer is out of the picture, that you will need to increase dues regularly. Trash collection, lawn care, electricity, all the Association's costs will go up annually. If you don't increase your dues, your reserves will dwindle and you will not be able to maintain the property.