May Vs Shall

Hey all im hoping someone can help me clear up something from my CC&Rs.. the board is looking to make an increase and the language is not very clear to a simple IT guy like me.

The issue im told is the May VS Shall issue in the language, here is the original text

Thereafter, except as provided below, unless a greater increase is approved by a vote of two-thirds (2/3) of the votes of each class of Members represented in person or by proxy at a meeting of Members called for such purpose, the Maximum Annual Assessment for any fiscal year shall be equal to the Maximum Annual Assessment for the immediately preceding fiscal year increased at a rate equal to the greater of: (a) the percentage increase for the applicable fiscal year over the immediately preceding fiscal year in the Consumer Price Index -- All Urban Consumers -- All Items (1982-1984 Average = 100 Base) published by the Bureau of Labor Statistics of the U.S. Department of Labor (or its successor); or (b) ten percent (10%).

What our management company is suggesting is that this is saying every year out assessments go up, regardless of if the board elects to increase or not and the increase would be the CPI or 10% whichever is greater.

There argument is the word shall which means "must" or "obligated to" in legaleese.

Has anyone run into something like this? does there interpretation make sense?

The maximum amount that assessments can be raised, don't have to, is 10%. By using open/closed years now throw the CPI out with the bath water.

Perhaps the language was developed when the inflation rate was over 10% - not many of those years, but a couple ...

Doug,

The other point is that it can be higher then 10% providing the membership approves it (by a 2/3 majority).

Personally, I hate the CPI language for increases. Most people don't understand it and don't realize that the CPI is often based on data two years old. See: Consumer Price Index FAQ from the dept of labor

Richard, that's the way I read it. I have seen similar language in Texas HOA documents. The maximum increase without approval of the owners is some percentage, usually 10%, but there is no requirement to increase the assessment that much or at all.

We have had owners in client associations who urged their Boards to implement the 10% every year as they realized the Reserves were severely underfunded. Those arguments fell on deaf ears. Very frustrating in associations with builder/developer "teaser rate" assessments of less than $100.00 annually.

All thanks very much for the in depth knowledge and review.

Since our dues are $44/mon and the language as it stands is a "Shall" not a "May" or "Can" they believe we are allowed to go beyond 10% up to Arizona statute of 20%. the reasoning is that originally our dues were $28/mon and every year per the CC&Rs it would go up 10% or the CPI whichever is greater however the board as in our case does not have any obligation to impose the increase however the theoretical cap still goes up.

Math on the Ceiling:
10%
2000 $28.00
2001 $30.80
2002 $33.88
2003 $37.27
2004 $40.99
2005 $45.09
2006 $49.60
2007 $54.56
2008 $60.02
2009 $66.02
2010 $72.62
2011 $79.89
2012 $87.88
2013 $96.66
2014 $106.33
2015 $116.96
2016 $128.66
2017 $141.53
2018 $155.68
2019 $171.25

This being said if the Arizona statute was not in play the Board without the members could raise dues all the way to 171.25/month from 44/month for the fiscal 2019 year. Because Arizona has a statue governing a maximum raise of 20% the board could go as far as $52.80/mon without the members voting. At this point we have had 2 different Legal counsels review this and several people from our management company all saying the same thing..

i have to say legal mubo jumbo is really annoying!!!

the Maximum Annual Assessment for any fiscal year shall be equal to the Maximum Annual Assessment for the immediately preceding fiscal year increased at a rate equal to the greater of:

This is just saying that if it was to be increased, the maximum it could (with out vote) is....