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WayneR3 (South Carolina)
Posts: 2
Posted:
WE are a HOA that has 3900 members, the Covent's require that long term storage
can not be stored in driveway or seen from the road if stored in back yard.
We have a Special Use Property for RV storage. The annual rate for storage is
about 10% of commercial storage facilities in the area. The president and HOA
manager feel that they should charge what the going rate is so that they can
build up the reserves fund. For the past 3 years they have collected in excess
of 42,000.00 each year. This year they are doing a 10% increase in the RV Lot rates.
It the HOA breaking laws by producing double the amount require to run the lot, and
in effect changing the Non-Profit status of the HOA by doing this?

Also we have a lake with a 800 foot dam that has been neglected for over 30 years,
we are have to bring it up to new codes. The cost will be 2-3 million dollars
of the next 10 years, At the present time Our reserves have about 3 million in
reserves to cover the estimated 8 million in assets. I think it would be wrong to
deplete the present reserves that have been set aside to cover the existing assets.
My question is shouldn't a special assessment be done to cover the unplanned
work on the dike, instead of drawing our reserves down?
MelissaP1 (Alabama)
Posts: 13,836
Posted:
Why would it change the non-profit status? Your HOA is putting the money back into it's budget/reserves. That money will then go toward the replacement cost of a HOA element. The IRS should determine the profit status of your HOA.

The HOA probably shouldn't be in the RV storage business. It's more like an additional service/amenity now. I think changing that dynamic just puts your HOA in over it's head. Not a bad idea to raise the rental/use of the lot. Just not to match or exceed those businesses that already exist. That doesn't make sense as members will then seek their services and move out.

Former HOA President
DouglasK1 (Florida)
Posts: 2,046
Posted:
I don't have much to add, other than to reinforce that income and profit are two different things, and as long as the association properly accounts for non-dues income at tax time, there is no problem having income from various sources.

Escaped former treasurer and director of a self managed association.
RichardP13 (California)
Posts: 3,868
Posted:
Quote:
Posted By MelissaP1 on 08/29/2018 5:43 PM
Why would it change the non-profit status? Your HOA is putting the money back into it's budget/reserves. That money will then go toward the replacement cost of a HOA element. The IRS should determine the profit status of your HOA.

The HOA probably shouldn't be in the RV storage business. It's more like an additional service/amenity now. I think changing that dynamic just puts your HOA in over it's head. Not a bad idea to raise the rental/use of the lot. Just not to match or exceed those businesses that already exist. That doesn't make sense as members will then seek their services and move out.

The IRS does not determine the profit status of a HOA, the HOA does.

Income from such activities is subject to taxation, if filing under 1120-H.
WayneR3 (South Carolina)
Posts: 2
Posted:
Because of the RV Lot being Special Use Property that is being run like a commercial business, and making such a large profit off less that 10% of the HOA Members.
GeorgeS21 (Florida)
Posts: 3,808
Posted:
Wayne,

I think this is dead end for you.

You could, as we did in a previous neighborhood, simply make the use of our fenced and secured boat trailer lot free to anyone.

On the other hand, we only had about 30 trailers ... it sounds like you have far more.
GlenM4 (Tennessee)
Posts: 141
Posted:
Out bylaws say something along the line , that all members will have rights to all common areas. Is this not a common area , can they charge for it? I would think not as long as you are a member.

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