Special Assesment Failed - Board Raises Dues

Started by MikeW16 • 20 replies • 1596 views

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MikeW16 (Michigan)
Posts: 14

Posted:

Hi - Our board recently presented a special assessment request to drain our cash surplus to fix some nearly perfect roads. It was voted down. Now, our board has now raised the assn dues to make up for this.

Can they do this? What's the point of a special assessment if they can just raise our dues to fix the roads we voted down?

MarkM31 (Washington)
Posts: 351

Posted:

A special assessment is a one time fee charged to association members to pay for a cost. It wouldn't normally be a request to drain your reserve.

Read your CC&Rs, I would guess your board has authority to set the dues, as well as to authorize and fund projects such as road improvement.

And the CC&Rs probably give you the ability to recall the board and/or defund this project within the capabilities of the HOA.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Special assessment are to pay for unbudgeted events. Now they are trying to move that expense onto the budget by raising dues.

You may have percentage limits on how much dues can be raised. The members may have the right to ratify or approve the budget. Check your docs and state statutes for both of these things.

If there are no limits on the board's ability to raise dues, you can follow your HOA's procedure for demanding a special meeting. Your argument seems to be that the repairs are unnecessary. That's what the special meeting should be about.

Voting down the special assessment did not vote down the project - it only voted down the funding of the project through a special assessment. If you want to stop them, call a special meeting and vote on the project itself.

Sikubali jukumu. Read all posts at your own risk.

MarkM31 (Washington)
Posts: 351

Posted:

He said it better than I did

MikeW16 (Michigan)
Posts: 14

Posted:

Okay - thanks... The board's special assessment was request to use the money in the surplus to fund the delta from our road reserve and a recent bid.

I've read the bylaws- there's only one part that I can see that would possibly be used to cover this area.

See Pic

DonA2 (Arizona)
Posts: 170

Posted:

That doesn't even sound like a special assessment.

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By DonA2 on 01/11/2016 9:32 AM
That doesn't even sound like a special assessment.

It isn't.

MikeW16 (Michigan)
Posts: 14

Posted:

What is it?

MikeW16 (Michigan)
Posts: 14

Posted:

What is it?

MarkM31 (Washington)
Posts: 351

Posted:

You are given a bill when you are assessed.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Mike,

Please clarify #2. I understand:

1) The board identified a need

2a) The Board requested membership permission to use the reserve funds to pay for this need
2b) The Board requested membership permission for special assessment ($x,xxx per lot) to pay for this need.
2c) The 2015 expenses were less then the money collected in assessments. This "surplus" normally goes to reserves and the Board was requesting membership permission to utilize this surplus for to pay for the need.

3) Membership turned down the Boards request

4) Board has risen annual assessments to pay for the need.

SheliaH (Indiana)
Posts: 6,964

Posted:

If your board wanted to empty the reserves to fix the roads, I wonder if something else is going on - what's the back story behind this? What's the problem and how many bids did the board get (3 is a good place to start)? What happens if the fix isn't done right away? Your board should have provided this information for the homeowners to discuss before the vote, so everyone would be able to make an informed decision.

And what else is your association responsible for? Draining reserves for one project is a horrible idea, no matter what it is (unless you had some sort of disaster like a tornado). Even then, there should have been regular funding of the reserves because special assessments should be very rare - they usually indicate underfunding. Better take a look at the financials and start asking questions - I hope you don't need a major assessment increase, but if you do, at least you'll have a better understanding as to why.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By SheliaH on 01/11/2016 11:02 AM
If your board wanted to empty the reserves to fix the roads, I wonder if something else is going on - what's the back story behind this? What's the problem and how many bids did the board get (3 is a good place to start)? What happens if the fix isn't done right away? Your board should have provided this information for the homeowners to discuss before the vote, so everyone would be able to make an informed decision.

And what else is your association responsible for? Draining reserves for one project is a horrible idea, no matter what it is (unless you had some sort of disaster like a tornado). Even then, there should have been regular funding of the reserves because special assessments should be very rare - they usually indicate underfunding. Better take a look at the financials and start asking questions - I hope you don't need a major assessment increase, but if you do, at least you'll have a better understanding as to why.

The OP claims the roads are "almost perfect", so you're probably right that there is more than meets the eyes.

MikeW16 (Michigan)
Posts: 14

Posted:

This is a very helpful post. Perhaps some additional background. We have a road reserve as well. The plan was to exhaust the road reserve and cash surplus to fund a 1 bid road. That proposal didn't go over too well. We worked by committee to get additional bids then voted against the plan to do this. Having a surplus should be a good sign that we're not under funding no?

MarkM31 (Washington)
Posts: 351

Posted:

Quote:

Posted By MikeW16 on 01/11/2016 11:16 AM
Having a surplus should be a good sign that we're not under funding no?

No.

A HOA could have a massive surplus because they have deferred on maintenance to an unreasonable extent.

MarkM31 (Washington)
Posts: 351

Posted:

It can also occur when insurance is under funded, which is almost like playing Russian Roulette

MikeW16 (Michigan)
Posts: 14

Posted:

Okay - helpful.. This is not the case - Some things could use some repair but I think that we're in good shape.

MikeW16 (Michigan)
Posts: 14

Posted:

Okay - helpful.. This is not the case - Some things could use some repair but I think that we're in good shape.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By MikeW16 on 01/11/2016 11:16 AM
This is a very helpful post. Perhaps some additional background. We have a road reserve as well. The plan was to exhaust the road reserve and cash surplus to fund a 1 bid road. That proposal didn't go over too well. We worked by committee to get additional bids then voted against the plan to do this. Having a surplus should be a good sign that we're not under funding no?

A one bid road? Are you saying the board went out and only got one bid for this work? If the board is still trying to push this through, I'm really wondering why (might these fixes be located near someone's home?)

By the way, did anyone read your most recent reserve study to see what it says on when roadwork should be done and an estimate on how much it may cost? How old IS your study anyway - if older than five years, why not suggest you get an updated one (generally, you should try to do this every five years). You can then use the plan to help set your budget - because right now, it appears your board is winging it....

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

NpS (Pennsylvania)
Posts: 4,216

Posted:

Would help if we had 3 numbers:
1. Annual budget
2. Cost of proposed project
3. Amount of surplus

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

By What does the Board want to raise your dues, Mike?

Mike, it's more likely that the % limit your dues can legally be raised in one year is in your CC&Rs (vs. your bylaws).

Also, see your state statutes on this topic, which Tim & NpS posted on another of yours threads.

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