Dues and assessment structure

Started by JohnS124 • 10 replies • 333 views

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JohnS124 (North Carolina)
Posts: 3

Posted:

Our 18 yr old HOA Community can best be described as a small national park. We are located on a navigable lake with several small inland lakes plus 5 miles of paved walking trails as our main amenities. We have homes on and off the lakes with lot sizes ranging from 1 to 4 acres.
Our CC&Rs set up by the long gone original developer called for dues per lot and still states the original $395/year although we are now above $1100/per year.

Last year, we suffered substantial damage to our infrastructure a result of a hurricane turned tropical Storm and are in the process of receiving and SBA FEMA loan.

Although we are 18 years in, we are still less than half built out and the county property assessments range from approximately $7K to $1 Million.

Because of the looming financial burden the community will be facing due to the storm damage, there are those of us that feel the time is right to make the 2/3 vote attempt to change the CC&Rs to more fair and equitable system than just per lot based dues and special assessments.

I am interested in hearing from you on how your HOA sets its dues and special assessment structures.

We are considering identifying classes of lots such as Improved, undeveloped and adjacent as we have members who have purchased adjacent lots for privacy and protection of the forested environment in which we live.

We are also considering a "Dues adder" to the lot fee based on the county assessment with caps on the high end.
Again, the bottom line is that people end up paying a fair share of the burden based on their property value.

Your feedback is appreciated!
Thanks!

AugustinD
Posts: 3,698

Posted:

Quote:

Do the HOA's common areas serve the owners with larger lots and so presumably higher property values in a disproportionate way? Is the HOA responsible for any of the individual lots' maintenance? If not, then for developed lots, I do not think the system you are proposing is fair. Furthermore, the owners with smaller lots could gang up on the owners with larger lots to pass the amendment. The courts call this the 'tyranny of the majority' and may not allow it, even if the required super-majority votes for such an amendment.

I can see billing differently for undeveloped lots vs. developed lots. Some Declarations are set up this way. Such a system perhaps reflect the reality that undeveloped lots translate to no owners using the common amenities.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I'm sorry, property values change all the time and that would be a nightmare for a board to deal with.

You could base the assessment on size of lots (closest acre). That could be reasonable but a hot topic item.

Keep in mind that you likely need 2/3 of the lots to agree to the change. This includes the lots that are not built out. May or may not happen.

It also sounds like your Association failed to get enough insurance. A problem with wanting to keep assessments low. Hopefully, it's a lesson learned and something that is being addressed. Who is responsible for maintaining the storm water management items? This is an area many Associations fail to include in their budgets as well.

BenA2 (Texas)
Posts: 1,273

Posted:

Our assessments are the same regardless of value of lot and about 60% of the lots have homes built on them. It is a valid argument that undeveloped lots should pay less in assessments since those owners do not live here and use the amenities less. The problem is that to lower the assessments on the undeveloped lots you would have to substantially raise the assessments on the lots with homes. That is very unlikely to get 2/3 of the owners to agree. Almost all of the owners with homes will vote against it and many of the owners without homes will vote against it because, presumably, they are planning to eventually build a home.

As to basing assessments on home values, do people living on million dollar properties use the amenities more than people on half-million dollar properties? If not, it's fair and usual that they pay the same in assessments.

JohnS124 (North Carolina)
Posts: 3

Posted:

Thank you for your input. Much appreciated

TimB4 (Tennessee)
Posts: 21,059

Posted:

You could set up lake front vs. non lake front.

However, those on the lakes would likely vote against it and those off the lakes would likely vote for it. Count the lots. If there aren't 2/3 of the owners off the lakes, then it will likely not be adopted.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

John

Setting up a varying dues structure seems to me to be almost not doable. I suggest just do a general dues increase. Secondly if still unsold lots, then set up an HOA Buy In fee at time of sale with the proceeds going to the HOA Reserve Fund and/or Capital Improvement Fund.

If still contemplating a varying dues structure, never lower any. Only go up on some lots.

SheliaH (Indiana)
Posts: 6,964

Posted:

Long before I moved to my townhouse community, assessments were based on whether you had a one-story or two-story unitc, with the two story paying more (and a little more than that because some of them have one-car garages like mine). That didn't work very well at all, so by the time I purchased my home (20 or so years later), assessments were set based on the association's expenses in maintaining/improving the common areas.

Thanks to some of you on this website, I understand why high-rise condos are based on square footage - and because of that, I don't think I'll ever live in one! So, I'm biased in favor of looking at the association expenses and dividing by the number of units - the math is simpler.

In your case, the damage to the common areas would be my focus - if someone has a home on the lot, it would seem to me he/she/they have insurance to pay for the areas they're responsible for, while the association would have to focus on streets, sidewalks, the clubhouse or whatever your document list as common areas. Ditto for the special assessments if those become necessary.

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

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By JohnS124 on 10/26/2021 6:54 AM
Our 18 yr old HOA Community can best be described as a small national park. We are located on a navigable lake with several small inland lakes plus 5 miles of paved walking trails as our main amenities. We have homes on and off the lakes with lot sizes ranging from 1 to 4 acres.
Our CC&Rs set up by the long gone original developer called for dues per lot and still states the original $395/year although we are now above $1100/per year.

Last year, we suffered substantial damage to our infrastructure a result of a hurricane turned tropical Storm and are in the process of receiving and SBA FEMA loan.

Although we are 18 years in, we are still less than half built out and the county property assessments range from approximately $7K to $1 Million.

Because of the looming financial burden the community will be facing due to the storm damage, there are those of us that feel the time is right to make the 2/3 vote attempt to change the CC&Rs to more fair and equitable system than just per lot based dues and special assessments.

I am interested in hearing from you on how your HOA sets its dues and special assessment structures.

We are considering identifying classes of lots such as Improved, undeveloped and adjacent as we have members who have purchased adjacent lots for privacy and protection of the forested environment in which we live.

We are also considering a "Dues adder" to the lot fee based on the county assessment with caps on the high end.
Again, the bottom line is that people end up paying a fair share of the burden based on their property value.

Your feedback is appreciated!
Thanks!

Does the person with the bigger lot or home place a larger burden on the common area or expenses?

CathyA3 (Ohio)
Posts: 6,299

Posted:

I agree with other posters' summaries.

Usually HOAs with single family homes assess a flat fee per lot unless there is something in your CC&Rs that tie lot size to a greater share of common area usage - for example the larger homes may have their own clubhouse or a private lake but are also allowed to use the clubhouse and lakes that serve the entire community. Another example I've seen is where a section of the community receives additional services such as lawn care, and these homes pay a separate assessment in addition to the regular assessment for all owners.

Condos are different because they're often assessed based on the par value of their units. This is essentially a percentage of ownership. Owners of small units generally own a smaller percentage of the common areas and need fewer dollars to maintain their share, so it would make sense that they should pay a smaller assessment.

In all of these cases, owners are assessed based on how many HOA dollars they "use" over the course of the year. It's actually pretty logical if you think about it (unlike some things in HOA-land).

JohnS124 (North Carolina)
Posts: 3

Posted:

Thank you and others for your inputs.

What I have taken away is that in the end, it is about common property and each lot owner's financial responsibility to maintain/repair said infrastructure.

I did get the sense that we may consider (through amendment to the CC&Rs) a different lot fee for those that have improved lots and are using the common roads and amenities and those that do not live here and have yet to develop their lot.

Just food for discussion as we tackle this challenge.

Thanks again for all the input.

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