How would you legally interrupt this assessment calculation in Restrictions

RogerJ1 (Texas)
Posts: 550

Posted:

Please pay attention the bold (I am crossing my fingers that the HTML bold works as I see no way to preview the post before submitting), as my question is centered around that.

6.03. RATE OF ASSESSMENT
The annual and special assessments shall be fixed at a uniform rate for each Tract as hereinbelow set forth. The annual maintenance assessment pursuant to Section 6.01 of this Declaration shall begin to accrue on each and every Tract as of the date the original Restrictive Covenants were recorded. All maintenance assessments on all Tracts will be assessed and collected annually, in advance, and shall be due and payable on January 1 of the calendar year for which such maintenance charges are assessed.

The rate at which each Tract will be assessed will be determined annually and may be adjusted from year to year by the Board of Directors, as the needs of the Subdivision may require, in the judgment of the Board of Directors of the Association. Such annual assessments shall be uniform and such assessment or charge shall not exceed the amount of $200.00 per acre or for any fraction thereof (the "Annual Assessment"), unless the Annual Assessment is increased as provided for in these restrictions. The Association may collect special assessments as well as annual assessments whenever the members of the Association so vote as provided herein.

For 40 years, the Association billed for the "or any fraction thereof" as a rounded-up full acre. For example, if a lot were 3.2 acres, it would be rounded up to 4 to multiple by the assessment/acre. 3.9 acres would also be rounded up to 4. etc. That is how the founders planned it as that is how they did it, and it continued for every year. Also it literally states that the $200 is "per acre" or "any fraction thereof' indicated the fraction is considered an additional whole acre.

The current Board is trying to argue the $200 (yes I know that is the maximum but the Association always bills the maximum, so in practice it is $200 every year) should be multiplied by the fraction, not the fraction rounded up.

Any legal argument as to how it is (please note, in case practice legally matters, for 40 years it has been rounded up ever year)?

WendyM5 (North Carolina)
Posts: 1,522

Posted:

what they are proposing is perfectly fine. SHALL NOT EXCEED $200 is the key phrase.
if they want to make it less than $200 they can do that. if they charged $800 for a 3.5 acre parcel and now wnat to charge $700 that does not exceed $200/acre so it is fine.

why the heck does it matter to you if people are paying next is the real question?

vis ta vie

WendyM5 (North Carolina)
Posts: 1,522

Posted:

why the heck does it matter to you if people are paying less is the real question?

vis ta vie

WendyM5 (North Carolina)
Posts: 1,522

Posted:

in fact I would argue the phrase
Such annual assessments shall be uniform

means they should be based on common sense fair math, not some stupid arbitrary rounding up regardless of the excess acreage.

vis ta vie

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You realize your HOA is ONLY funded by it's members FOR it's members. So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them... Leave it alone or go about the process of changing the documents...

Former HOA President

CathyA3 (Ohio)
Posts: 6,299

Posted:

I think your board doesn't know how to read your CC&Rs or how to do word problems.

The "rate" is the per-acre assessment, which is uniform (i.e., all owners are assessed the same per-acre charge). The fraction applies to the first calculation of determining the number of acres in whole numbers. It does not apply to the second calculation where you multiple the number of acres (in whole numbers) by the per-acre assessment amount. If you do the way the board wants to, you'll be assessing all whole acres as fractional acres for anyone in the entire community who owns any fractional acres. Somebody who owns a 1.1-acre lot will make out like a bandit, while the person who owns a 1.9-acre lot won't benefit as much.

On the other hand, your community will have to pay its bills one way or the other. If they try this new assessment scheme, they won't have enough money and will need to increase the per-acre assessment amount.

Could there be fairer ways of doing this? Sure. For example, don't use whole acres in the calculation - computers can handle fractional acres as easily as they can whole acres. But that's not what your CC&Rs say, and they'd have to be amended if the community wants a new method of determining the annual assessments. This isn't something that the board can change by themselves.

Your board needs to have an informative chat with the association lawyer. Somebody needs to tell them that (which may be a tough sell since you'll be complaining that their proposed assessments aren't high enough). Best not to wait until Mr. "I Own 4 Acres and I'm Being Assessed More than My Neighbor Who Owns 3.9 Acres" talks to his lawyer and files a lawsuit.

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them...

That is the point. If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By RogerJ1 on 12/16/2022 5:27 AM

So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them...

That is the point. If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Are reserves fully funded and your expenses under control? In other words, is the shortfall really an issue or has the assessments been too high?

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By JohnT38 on 12/16/2022 5:34 AM

Posted By RogerJ1 on 12/16/2022 5:27 AM

So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them...

That is the point. If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Are reserves fully funded and your expenses under control? In other words, is the shortfall really an issue or has the assessments been too high?

No, the exact opposite, also at the fault of the current Board - they are increasing legal and professional fee activity at a hyper rate without any member input to do so. After years of taking in surpluses every year, for the first time, they are running a sizeable yearly deficit, even before entertaining a reduction, with no signs of changing that pace.

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By JohnT38 on 12/16/2022 5:34 AM

Posted By RogerJ1 on 12/16/2022 5:27 AM

So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them...

That is the point. If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Are reserves fully funded and your expenses under control? In other words, is the shortfall really an issue or has the assessments been too high?

At a meeting Wednesday, two days ago, when they discussed the fraction of acres, they admitted a rate will be needed by next year.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By RogerJ1 on 12/16/2022 5:44 AM

Posted By JohnT38 on 12/16/2022 5:34 AM

Posted By RogerJ1 on 12/16/2022 5:27 AM

So collecting less money isn't necessarily a benefit except your personal wallets. Otherwise any special projects or raises in expense can't be covered if no one is contributing enough to pay them...

That is the point. If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Are reserves fully funded and your expenses under control? In other words, is the shortfall really an issue or has the assessments been too high?

No, the exact opposite, also at the fault of the current Board - they are increasing legal and professional fee activity at a hyper rate without any member input to do so. After years of taking in surpluses every year, for the first time, they are running a sizeable yearly deficit, even before entertaining a reduction, with no signs of changing that pace.

if you've had yearly surpluses for years then the assessments by deffintiion are too high. no ones gonna be able to fincially interpret your HOA"S issues. attend every board member meeting and ask how they are balancing the budget and if they are spending on things not approved in the annual budget then call them out for it.

vis ta vie

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By CathyA3 on 12/16/2022 5:27 AM
I think your board doesn't know how to read your CC&Rs or how to do word problems.

The "rate" is the per-acre assessment, which is uniform (i.e., all owners are assessed the same per-acre charge). The fraction applies to the first calculation of determining the number of acres in whole numbers. It does not apply to the second calculation where you multiple the number of acres (in whole numbers) by the per-acre assessment amount. If you do the way the board wants to, you'll be assessing all whole acres as fractional acres for anyone in the entire community who owns any fractional acres. Somebody who owns a 1.1-acre lot will make out like a bandit, while the person who owns a 1.9-acre lot won't benefit as much.

On the other hand, your community will have to pay its bills one way or the other. If they try this new assessment scheme, they won't have enough money and will need to increase the per-acre assessment amount.

Could there be fairer ways of doing this? Sure. For example, don't use whole acres in the calculation - computers can handle fractional acres as easily as they can whole acres. But that's not what your CC&Rs say, and they'd have to be amended if the community wants a new method of determining the annual assessments. This isn't something that the board can change by themselves.

Your board needs to have an informative chat with the association lawyer. Somebody needs to tell them that (which may be a tough sell since you'll be complaining that their proposed assessments aren't high enough). Best not to wait until Mr. "I Own 4 Acres and I'm Being Assessed More than My Neighbor Who Owns 3.9 Acres" talks to his lawyer and files a lawsuit.

OMG ignore this opinion. this is logical math, not ones' opinion on how hoa finainces should be run. the rule clealry states it can be less then $200/acre. the rule also states it can be less than $200 for part of an acre.
if the board wants to make it less then $200 they can end of story.

vis ta vie

WendyM5 (North Carolina)
Posts: 1,522

Posted:

part thereof means “a part of something already mentioned.”

while the term can be informally used to indicate a rounding up of values it does not have to be interpreted this way.

vis ta vie

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By RogerJ1 on 12/16/2022 5:27 AM
... snip ...

If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Actually, I'm surprised that people haven't yelled before now. Your community has been balancing books, more or less, on the backs of the folks who own fractional acres - and the smaller the fraction, the bigger the burden. Yes, that's what the CC&Rs say, and people knew what they were buying before they signed the closing documents - but that doesn't make it fair. There also doesn't seem to be any justification for it other than simplifying the calculations, which computers shouldn't care about.

Optimistically, now that the board and others are looking at this, someone will realize that your community needs to get serious about the finances. This can include making the CC&Rs more clear about how assessments are calculated. I can see why the board now wants to assess fractional acres more fairly, and if you kinda squint at the language in the CC&Rs you can maybe make a case for it. I think the case is shaky, but it's there.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By WendyM5 on 12/16/2022 6:02 AM

Posted By CathyA3 on 12/16/2022 5:27 AM
I think your board doesn't know how to read your CC&Rs or how to do word problems.

The "rate" is the per-acre assessment, which is uniform (i.e., all owners are assessed the same per-acre charge). The fraction applies to the first calculation of determining the number of acres in whole numbers. It does not apply to the second calculation where you multiple the number of acres (in whole numbers) by the per-acre assessment amount. If you do the way the board wants to, you'll be assessing all whole acres as fractional acres for anyone in the entire community who owns any fractional acres. Somebody who owns a 1.1-acre lot will make out like a bandit, while the person who owns a 1.9-acre lot won't benefit as much.

On the other hand, your community will have to pay its bills one way or the other. If they try this new assessment scheme, they won't have enough money and will need to increase the per-acre assessment amount.

Could there be fairer ways of doing this? Sure. For example, don't use whole acres in the calculation - computers can handle fractional acres as easily as they can whole acres. But that's not what your CC&Rs say, and they'd have to be amended if the community wants a new method of determining the annual assessments. This isn't something that the board can change by themselves.

Your board needs to have an informative chat with the association lawyer. Somebody needs to tell them that (which may be a tough sell since you'll be complaining that their proposed assessments aren't high enough). Best not to wait until Mr. "I Own 4 Acres and I'm Being Assessed More than My Neighbor Who Owns 3.9 Acres" talks to his lawyer and files a lawsuit.

OMG ignore this opinion. this is logical math, not ones' opinion on how hoa finainces should be run. the rule clealry states it can be less then $200/acre. the rule also states it can be less than $200 for part of an acre.
if the board wants to make it less then $200 they can end of story.

Yeah, the math is wrong, I was going to go back and re-write but hit Submit by accident. Unfortunately we can't edit or delete our posts.

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By CathyA3 on 12/16/2022 6:22 AM

Posted By RogerJ1 on 12/16/2022 5:27 AM
... snip ...

If not rounded up, as has been done for 40 years, it will be around 15 to 30% less receipts total depending on lot sizes (if more lots are near a next whole acre, 2.8 acres for an example, it will be around 15% less in total, and if more of the lots are just over an acre, 2.1 for example, it will be near 30% or more reduction from total receipts than previous years) either end of that range will be a material shortfall from previous total receipt.

Actually, I'm surprised that people haven't yelled before now. Your community has been balancing books, more or less, on the backs of the folks who own fractional acres - and the smaller the fraction, the bigger the burden. Yes, that's what the CC&Rs say, and people knew what they were buying before they signed the closing documents - but that doesn't make it fair. There also doesn't seem to be any justification for it other than simplifying the calculations, which computers shouldn't care about.

Optimistically, now that the board and others are looking at this, someone will realize that your community needs to get serious about the finances. This can include making the CC&Rs more clear about how assessments are calculated. I can see why the board now wants to assess fractional acres more fairly, and if you kinda squint at the language in the CC&Rs you can maybe make a case for it. I think the case is shaky, but it's there.

It should be per lot, regardless of acreage if fairness is centered in any argument.

The lots range from the smallest around 1.5 acres and largest 3.5 acres. Most lots (about 40 out of 56) are around 2 acres, with a 1.75 to 2.25 range, about 10 lots in the 1.5 acre range and around a half a dozen that are near or over 3 acres. No lot receives any more services, as we have no services, than others, and some of the larger houses are on the smaller lots, so their overall value is more than some of the smaller houses on larger lots, so there is no consistent basis of property value on lot sizes.

Right now, with rounding up, the larger lots are paying around 50% more than the smaller ones. If they do a straight percentage, no rounding up, that disparity will grow to 100% (larger will be paying over twice as much and again, for no difference in services.)

ElleN (Idaho)
Posts: 4,420

Posted:

This part should have been bolded too: "The rate at which each Tract will be assessed will be determined annually and may be adjusted from year to year by the Board of Directors, as the needs of the Subdivision may require, in the judgment of the Board of Directors of the Association." The "each Tract" and "may be adjusted from year to year by the Board___ as the needs of the Subdivision may require, in the judgment of the Board" gives the Board enormous wiggle room each and every year. The judgment has to be fair and logical.

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By ElleN on 12/16/2022 7:05 AM
This part should have been bolded too: "The rate at which each Tract will be assessed will be determined annually and may be adjusted from year to year by the Board of Directors, as the needs of the Subdivision may require, in the judgment of the Board of Directors of the Association." The "each Tract" and "may be adjusted from year to year by the Board___ as the needs of the Subdivision may require, in the judgment of the Board" gives the Board enormous wiggle room each and every year. The judgment has to be fair and logical.

While I doubt no member formally objects, I do not think at this point the Board can assess nor bill for 2023 regular assessment.

The Restrictions, are the article, that gives this POA the direct authority to levy regular assessments, and this Board is violating that authority in one way and likely in two ways.

1) Altering the static due date. As quote above in 6.03, “and shall be due and payable on January 1 of the calendar year for which such maintenance charges are assessed.” January 1st is static. The Board timidly said, “working on it” in a weak voice, indicate they are far from being finished, at the Wednesday meeting. With holidays, they certainly will have to alter a due date that is a day over two weeks now, and I highly suspect they will not be finished, maybe by additional month, past that static due date.

2) The date required for the Board to set the upcoming year regular assessment has passed. It is in section 6.04, which I will quote below. That section requires, “The Board of Directors shall fix the amount of the Annual Assessment against each Tract at least thirty (30) days in advance of the Annual Assessment period, which shall begin on the first day of January of each year.” So by December 1st or 2nd, which ever is legally 30 days before January 1, the Board must have completed what on 12-14-22 they stated, they are “working on” at a board meeting.
I think they are violating that, but since that section is titled “ASSESSMENT INCREASE” one might argue it is only for increases.
All of Section 6.04:

6.04. ASSESSMENT INCREASE The Annual Assessment may be increased each year by not more than ten percent (10%) per year without a vote of the membership. The Annual Assessment may be increased above the ten percent (10%) yearly increase described above only by approval of a majority of the members of the Association who are present and voting, in person or by proxy, at a meeting duly called for this purpose, one vote per Tract.

The Board of Directors shall fix the amount of the Annual Assessment against each Tract at least thirty (30) days in advance of the Annual Assessment period, which shall begin on the first day of January of each year. Written notice of 36 the Annual Assessment shall be sent to every Tract Owner subject thereto. The dates shall be established by the Board of Directors.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Roger

Pay attention to:

by approval of a majority of the members of the Association who are present and voting, in person or by proxy, at a meeting duly called for this purpose, one vote per Tract.
I am not saying you do not understand this but it says a majority of the owners at the meeting. It does not say a majority of all members. People often confuse this.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

Quote:

Posted By RogerJ1 on 12/16/2022 7:38 AM

Posted By ElleN on 12/16/2022 7:05 AM
This part should have been bolded too: "The rate at which each Tract will be assessed will be determined annually and may be adjusted from year to year by the Board of Directors, as the needs of the Subdivision may require, in the judgment of the Board of Directors of the Association." The "each Tract" and "may be adjusted from year to year by the Board___ as the needs of the Subdivision may require, in the judgment of the Board" gives the Board enormous wiggle room each and every year. The judgment has to be fair and logical.

While I doubt no member formally objects, I do not think at this point the Board can assess nor bill for 2023 regular assessment.

The Restrictions, are the article, that gives this POA the direct authority to levy regular assessments, and this Board is violating that authority in one way and likely in two ways.

1) Altering the static due date. As quote above in 6.03, “and shall be due and payable on January 1 of the calendar year for which such maintenance charges are assessed.” January 1st is static. The Board timidly said, “working on it” in a weak voice, indicate they are far from being finished, at the Wednesday meeting. With holidays, they certainly will have to alter a due date that is a day over two weeks now, and I highly suspect they will not be finished, maybe by additional month, past that static due date.

2) The date required for the Board to set the upcoming year regular assessment has passed. It is in section 6.04, which I will quote below. That section requires, “The Board of Directors shall fix the amount of the Annual Assessment against each Tract at least thirty (30) days in advance of the Annual Assessment period, which shall begin on the first day of January of each year.” So by December 1st or 2nd, which ever is legally 30 days before January 1, the Board must have completed what on 12-14-22 they stated, they are “working on” at a board meeting.
I think they are violating that, but since that section is titled “ASSESSMENT INCREASE” one might argue it is only for increases.
All of Section 6.04:

6.04. ASSESSMENT INCREASE The Annual Assessment may be increased each year by not more than ten percent (10%) per year without a vote of the membership. The Annual Assessment may be increased above the ten percent (10%) yearly increase described above only by approval of a majority of the members of the Association who are present and voting, in person or by proxy, at a meeting duly called for this purpose, one vote per Tract.

The Board of Directors shall fix the amount of the Annual Assessment against each Tract at least thirty (30) days in advance of the Annual Assessment period, which shall begin on the first day of January of each year. Written notice of 36 the Annual Assessment shall be sent to every Tract Owner subject thereto. The dates shall be established by the Board of Directors.

well pay $30 a month for prepaid legal and get them to write a letter including the above to the board then.

obviously the board will just then call for the changes to be made next year unless you can vote them out.

vis ta vie

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By WendyM5 on 12/17/2022 4:27 AM

well pay $30 a month for prepaid legal and get them to write a letter including the above to the board then.

I am not sure what you mean by that, but it sounds important. Please explain.

WendyM5 (North Carolina)
Posts: 1,522

Posted:

write a letter and tell them they are violating the bylaws and threaten to sue is what I typed.

vis ta vie

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By WendyM5 on 12/17/2022 12:42 PM
write a letter and tell them they are violating the bylaws and threaten to sue is what I typed.

It is the Restriction, that I cited, not Bylaws - this POA's Bylaws are silent on dues/assessments.

SheliaH (Indiana)
Posts: 6,964

Posted:

Well, attorneys did write this mess, so who knows what the intention of the developer was. This is why I'm a fan of setting one rate for everyone, at least most of the time (I know it's different for high-rise condos because some units are bigger than others).

But Roger, most of us aren't attorneys, so why aren't you taking this to an attorney - and maybe an accountant who can figure out the math? The attorney would be the one to argue this before a judge unless you want to take a whack at it in Small Claims Court (?)

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

RogerJ1 (Texas)
Posts: 550

Posted:

Quote:

Posted By SheliaH on 12/17/2022 7:53 PM
Well, attorneys did write this mess, so who knows what the intention of the developer was. This is why I'm a fan of setting one rate for everyone, at least most of the time (I know it's different for high-rise condos because some units are bigger than others).

But Roger, most of us aren't attorneys, so why aren't you taking this to an attorney - and maybe an accountant who can figure out the math? The attorney would be the one to argue this before a judge unless you want to take a whack at it in Small Claims Court (?)

I know some of the original parties to the first year Association. I, and I doubt anyone, is going to court over this, but I would like to know incase an indirect legal issued happen. There will already be confusion around 2023 dues because there is now a management company, where for 40 years there was not - so payment address and instructions will change. Also, for the first time, there was no billing in late November or Early December, for a set in stone January 1 payment. So the chance of billing errors might occur. If they charge penalties or try to put any lien on any owner's property, and I hear about it, I will get into touch with that owner to relay anything I learn about the lawfulness or unlawfulness of the Board ignoring these aspect.