PaulB12 (Virginia)
Posts: 56
Posts: 56
Posted:
Here is the budget letter, August posted this for me but thought I would try to give an update.
"To keep monthly assessments as low as possible, the Board is exploring the option of adjusting the Reserve balance from $274k to $174k. The purpose of such an adjustment would be to "reset" our reserve requirement and eliminate the deficit."
The rest of the letter:
Dear Members of Oak Valley HOA (made up name),
On October 27 the Board passed a resolution to increase monthly assessments from $118 to $130 beginning February 1, 2021.
The 2016 Reserve Study recommended a balance of $274k in our Replacement Reserve Account. This account is currently funded at $299k. The law and our governing documents require that funds in the Replacement Reserve Account be used only "for the maintenance, repair and replacement for Common Area Elements which may be replaced or require maintenance on a periodic basis."
Over the past three years, the HOA has accrued legal fees. As a result the HOA has an equity deficit of $126k. This is equal to about $1181 per home. This means the approximate cash value of the HOA's equity is currently $174k. This is well under the $274k that the 2016 Reserve Study recommends. The law requires the HOA to fund its reserves at the recommended levels to defray future infrastructure (clubhouse, parking lot paving, pond) costs without having any deficit. Consequently raising the HOA's equity funding, to eliminate this deficit, is necessary. Some members have suggested that the HOA impose a Special Assessment to refill the HOA's reserves. However, the equity deficit is due to legal fees, and not infrastructure costs. Because the legal fees caused the equity deficit, the law and covenants prohibit a Special Assessment.
The Board is re-evaluating its legal expenditures. But while the Board does this, the Board feels a 10% increase in the regular assessment is appropriate.
To keep monthly assessments as low as possible, the Board is exploring the option of adjusting the Reserve balance from $274k to $174k. The purpose of such an adjustment would be to "reset" our reserve requirement and eliminate the deficit. If the Board chooses this option, members must bear in mind that this action will not eliminate the HOA's requirement to add funds when the time arrives to make those future repairs. During such an event and depending on the state of our reserves, a special assessment may be necessary to offset any future increase in monthly assessments.
If you have any question, contact management.
Sincerely,
Board of Directors
Oak Valley Homeowners' Association (made up names<)
Not much anyone can do, I don't see any Virginia law broken. They simply adjusted the reserve which they used for legal fee's. They already used the money to pay legal fee's so the letter above is just some trick wording.
"To keep monthly assessments as low as possible, the Board is exploring the option of adjusting the Reserve balance from $274k to $174k. The purpose of such an adjustment would be to "reset" our reserve requirement and eliminate the deficit."
The rest of the letter:
Dear Members of Oak Valley HOA (made up name),
On October 27 the Board passed a resolution to increase monthly assessments from $118 to $130 beginning February 1, 2021.
The 2016 Reserve Study recommended a balance of $274k in our Replacement Reserve Account. This account is currently funded at $299k. The law and our governing documents require that funds in the Replacement Reserve Account be used only "for the maintenance, repair and replacement for Common Area Elements which may be replaced or require maintenance on a periodic basis."
Over the past three years, the HOA has accrued legal fees. As a result the HOA has an equity deficit of $126k. This is equal to about $1181 per home. This means the approximate cash value of the HOA's equity is currently $174k. This is well under the $274k that the 2016 Reserve Study recommends. The law requires the HOA to fund its reserves at the recommended levels to defray future infrastructure (clubhouse, parking lot paving, pond) costs without having any deficit. Consequently raising the HOA's equity funding, to eliminate this deficit, is necessary. Some members have suggested that the HOA impose a Special Assessment to refill the HOA's reserves. However, the equity deficit is due to legal fees, and not infrastructure costs. Because the legal fees caused the equity deficit, the law and covenants prohibit a Special Assessment.
The Board is re-evaluating its legal expenditures. But while the Board does this, the Board feels a 10% increase in the regular assessment is appropriate.
To keep monthly assessments as low as possible, the Board is exploring the option of adjusting the Reserve balance from $274k to $174k. The purpose of such an adjustment would be to "reset" our reserve requirement and eliminate the deficit. If the Board chooses this option, members must bear in mind that this action will not eliminate the HOA's requirement to add funds when the time arrives to make those future repairs. During such an event and depending on the state of our reserves, a special assessment may be necessary to offset any future increase in monthly assessments.
If you have any question, contact management.
Sincerely,
Board of Directors
Oak Valley Homeowners' Association (made up names<)
Not much anyone can do, I don't see any Virginia law broken. They simply adjusted the reserve which they used for legal fee's. They already used the money to pay legal fee's so the letter above is just some trick wording.