HOA Fees Structure

I have been posting to this forum for several months now so some of you are familiar with the situation that brought me here in the first place. I will not bore you with those details but I am seeking opinions on my HOA’s fee structure and how you board members would handle the same or a similar situation.

As you may or may not remember my Association (I will refer to it as the Association because that is what the BOD refers to themselves even though the CC&R’s expired and there is no HOA but a nonprofit corporation formed to manage the sanitary sewer) has a unique dues and fees structure.

In 2005, the BOD was informed by the Department of Natural Resources or our County Health Department (don’t know for sure which agency) determined that the development’s sanitary sewer system was being put on notice that it needed some extensive upgrades. Prior to 2005, the Association did not collect enough money from the members to pay for these upgrades. To raise money, the Association implemented a sewer access fee of $5,000 to new owners in good standing and $15,000 to nonmembers of the Association and members not in good standing and a year later raised the sewer user fees from $200 to $250 per year (everyone connected to the sewer pays this.)

I am of the opinion that the sewer access fee is excessive and unfair to the new home owner. Five thousand/fifteen thousand dollars is just a number someone pulled out of their head. They used no actual costs to explain these prices. It should be a more equitable fee. Property owners who have lived in the development for years did not pay a sewer access fee. So if the annual user fees need to be raised or a special assessment needs to be implemented, then that is what should be done. And honestly putting faith in someone new coming into the development and building a new home is risky. That is not a guarantee.

My question is: faced with the same situation where a common necessary element needed extensive upgrades and repairs and the Association would deplete most of its financial resources to make these upgrades, what would you do and what do you think of the way my Association handled it?

Thanks. I appreciate your thoughts and opinions.

Banks it is not unusual to have higher fees between members and non-members. Realistically how many lots remain unsold where they can charge the higher fee which I'm assuming was a one time buy-in, since you mention an annual fee.

Yes they probably should be putting a little something aside for future repairs but since they aren't you should. Maybe stick an extra $20.00 a month aside so that if they need to make a big assessment for a major repair, it doesn't hit you so hard.

"I just don't think the BOD is acting financially responsible in this regard."

Then work to replace them, educate your fellow homeowners, get volunteers willing to work and replace them, either at the next election or by recall.

Glen that is simply not a useful answer ...

I don't know the answer to that. There wasn't such a document when I purchased my property 6 years ago. The disclosure of this fee amounts to a sign at the entrance to the development. It says to contact a certain phone number before building can begin. The sign was erected after our lengthy dispute with the Association. I suppose the BOD thinks that protects them but buyers need to know about this fee before they even buy their lots. It should also be disclosed by the seller but some of the sellers don't even know about the fee because they live else where and are totally uninvolved in the development. We bought our property from a gentleman who had purchased it at a tax sale so he had no clue about the fee. Our lawyer and title company never discussed the fee with us because they didn't know about it either. The bylaws are not recorded so that information was not available to them. What complicates things is the expiration of the CC&R's. There is essentially no HOA so there is no requirement to be a member. It's a real quirky situation and I certainly wished I had known more before buying property here.

Well I suppose she could just jump up and down and hold her breath and expect change or she could work for change.

Glen ... She needs answers to the question she's addressed ... How does your response answer that question?

Well Sally, I know from some of her previous posts that she's been at loggerheads with the Board in the past, so I don't see them taking her suggestions to heart. She and we don't know the logic of the $5,000.00 buy-in but since they are having to wait for assessments to make repairs, I'm thinkin' there are not a lot of buy-ins happening. Now she can whine about how unfair it all is, or she can work to make it fair. And step one it would seem to me would to change the makeup of the Board, hence my suggestion. But since you find my suggestion to be unhelpful, just what brilliant master plan do you have to offer to solve her problems.

Oh I know exactly what the Association's logic is behind the $5,000 sewer access fee. It's so the current membership doesn't have to pay more in annual sewer user fees or be faced with a special assessment. The Association neglected to take care of business thru out the years then in 2005 it came back to bite them in the ass. Someone concocted the scheme to pad their bank account with money from new home builders. I personally disagree with that unfair and inequitable fee structure and am concerned about the Association's precarious financial situation.

I don't see it as whining. I was just seeking some opinions and suggestions. I'm typically a very positive, upbeat person and am always hopeful that things will get better but I just don't see a possibility of changing the makeup of the board. It's a very small Association. The annual meeting that was held early this month was attended by 8 board members, 2 of their spouses, myself and hubby, one other homeowner couple and a new home builder/member. That was it. There is very little member participation and frankly I think the BOD likes it that way.

There is very little member participation and frankly I think the BOD likes it that way.

Well of course they do. Eight Board members, just how large is the community? I never said it would be easy and I wasn't implying that you were whining, you're obviously looking for answers, just that if all a person did was complain instead of trying to change things it would be whining.

From your past posts I think I remember you had legal issues with the Board so I was trying to come up with something that didn't involve expensive law suits, a 50 / 50 gamble at best. That leaves changing the Board or somehow changing the documents they operate under, both I'm afraid time consuming and not for the faint of heart.

The County made an exception in the one case I mentioned. One cannot opt out of hooking into the sewer. Iowa law does not allow private septic tanks if their is a viable option. They only did in this case because the sewer line was not where it was supposed to be.

It is a voluntary association but the caveat is the sewer. One cannot have a home without some means of disposing their waste water and the law says I have to use the system that is currently available. And if I choose not to be a member (that is my preference) the Association will charge me 3 times the annual sewer user fee.

I'm beginning to think Glen's suggestion to put aside $20 a month in case of special assessment is probably the best option I have at this time.

Thanks for your thoughts.

Bank one wit observed many years ago that: "HOA's would be great places to live if only you could get rid of the people."

That is somewhat correct. If I buy a lot from a nonmember or a member not in good standing the fee is $15,000 but I can gain member status by paying the Association 3 years of back dues which are $75 a year.

The seller's status as a member in good standing or a member not in good standing, or a nonmember transfers to the buyer. This actually contradicts the bylaws as the bylaws state that the buyer can gain good standing status by letting the property sit for 3 years, pay dues for 3 years, have no rights as a member for those 3 years and then may hook into the sewer after 3 years at $5,000. But as a buyer, I may just pay the Association $15,000 with no waiting period.

It is confusing and I probably haven't explained it very well.

There is a new home being currently built in the development. The buyer bought his property from a seller who had owned the property for 6 years. The seller had never paid the $75 per year membership dues. The Association let the buyer pay $5,000 to hook into the sewer, 3 years of back dues, and 3 years of late fees. So you see they kind of make things up as they go. I think they know they will run into some serious legal issues if they try to force a buyer into paying $15,000. The Association sued me and my husband for $15,000 but that didn't work out so well for them.

Join or not join, an owner with a house hooked into the sewer is responsible for the annual sewer user fee. If I am a member it is $250 a year. If I am not a member the sewer user fee is 3 times that amount at $750 a year.

People here are just not used to member and non-menber rates. I'm sure its covered in your CCR/Bylaws, but without seeing them, its hard to comment intelligently. Your HOA sounds like it has some very special CCR/Bylaws that are not standard.

I'm not complaining about the $75 membership dues or $250 annual user fee. That is very reasonable. It's the structure of $5,000 or $15,000 sewer hookup fees that bothers me. It's also the disclosure of those fees. There is no provision for buyers to be aware of these fees. There are so many vacant lots here and the Association doesn't keep track of real estate transactions so they don't know when property is bought or sold.

My original post was concern that the Association does not collect enough money for maintenance or upgrades to the sanitary sewer and how can I get the Association to get on more sound footing financially. IMO, they put too much faith in the possibility that new homes will get built and those new owners will pay the Association a lump sum of at least $5,000.

I think the fee structure needs to be studied and revised. That is why I asked what some of you board members would do if you are ever faced with a similar situation of high maintenance costs or what you do to keep your financial situation on sound ground.

I'd do a reserve study and use that as a basis for calculating the amount needed to be set aside for maintenance costs. I would then set assessments (in your case fees for services) accordingly (unless limited by a governing document or law).

Your problem isn't that much different than any other Association. There are those who simply don't want to pay now for something that they (be it by death or selling the property) may or may not be needed later. They will typically fight to keep assessments as low as possible. If they are the individuals elected to the Board (and who doesn't want believe the no new taxes line) then the financial situation may fall onto rocky ground.

As I said in other posts, I used newsletter articles and the study itself to convince enough members that an increase of 20% was needed. Fortunately it worked. Had it not worked, I honestly would have looked at moving sooner rather than later because my eyes were open and I could see what was coming down the road.

So if I get your math correct, the HOA collects $250 per year from 25 and $75 per year from 70 for a total of $11,500. You need at least 1 new $5,000 payer per year to cover your current annual repair expenses. But once you get the $5,000, that person only contributes $325 per year if he remains a member and $250 per year if he doesn't.

I am giving no credence to the $15,000 fee which looks good on paper but no one in their right mind would pay.

Considering your history of being cited by the sewer authority, setting aside $20 per year is likely to be a meaningless gesture. You are at the whim of housing construction.

If you do a Reserve Study, the specialist doing the study is unlikely to project on new homes. He will tell you what you need to do conservatively to allocate projected replacement costs across current sewer users. This could be a wake up call if you have a Board that is responsive and is willing to pay for a Reserve Study. But it seems that your Board thinks they are limping along year to year just fine.

I think the first think you need to find out is how much the HOA has set aside today to cover your costs over the $11,500 in income from yearly fees.

I don't see it as whining. I was just seeking some opinions and suggestions. I'm typically a very positive, upbeat person and am always hopeful that things will get better but I just don't see a possibility of changing the makeup of the board. It's a very small Association. The annual meeting that was held early this month was attended by 8 board members, 2 of their spouses, myself and hubby, one other homeowner couple and a new home builder/member. That was it. There is very little member participation and frankly I think the BOD likes it that way.