Retroactive Monthly Assessment Increase

Recently a member challenged the manner in which our 2022 monthly assessment was increased. Admittedly, our HOA was poorly self-managed and naive about the rules and more recent changes to the Davis-Stirling Act. The member questioned how the monthly assessment was increased for 2022 over 20% without an inspector of elections or secret balloting.

Only recently have we contracted with a community management company and the increase in monthly assessments was specifically to cover the cost of that. As our agent for service they received a letter challenging the manner in which the election was conducted to increase the 2022 monthly assessment. We were already in the process of drafting the 2023 annual budget with proper notification of the monthly assessment being increased again effective 2023. Our community manager after reviewing what documentation we do have and our financials informed us that the increase the board had approved for 2023 exceeded 20% as well even if our 2022 assessment increase had been conducted properly. We had already sent out 1st class mail to the owners of the 2023 budget and monthly assessment increase when it was discovered the 2023 increase was over 20%.

Our community manager had legal review everything and we were told that our 2023 increase had to be voted upon and that the member who was challenging the 2022 increase was legally correct and advised us to also put to a vote retroactively increasing the monthly assessment. We hired an election company that sent our ballots to the owners and were unable to get a quorum. We extended the election and resent out ballots to those that had not voted. We still didn't get a quorum. With the ballots we also sent a neutral and vague letter explaining why we were retroactively asking for the owners to approve the assessment increase and also asking for the owners to vote to approve another increase for 2023. The letter also said that we would issue refunds for the increase of the assessments in 2022 if the owners didn't vote to retroactively increase. Since we didn't get a quorum, can we avoid refunding the owners? We don't have the funds to do so without a special assessment against the owners. One of the other board members that's new to our HOA suggested contacting our insurance. I've lived here for over 25 years, most of it I've spend on the board in various capacities. We have never had a claim on our insurance and I don't think that would be a good thing for us now.

Has anyone else ever experienced a similar situation?

Thank you for your insight. We already spent the money and don't have it to return without nearly emptying the account. It would be cheaper if we didn't refund rather than impose a higher special assessment to make up the refund we issued. We hired this management company to help us straighten out our records and to deal with this owner that objected to the 2022 increase. Since we had no quorum for this election to retroactively raise the assessments, can we hold another without refunding the owners? Or can the board retroactively increase up to 19.9% and issue a .01% refund for 2022?

I am of the opinion you never return special assessments or increases in dues. It's just bad math and leaves a bad taste in everyone's mouth. Makes it harder next time to get the money the HOA needs. Which by the way a HOA is ONLY funded by it's members FOR it's members. So did this "special assessment" go directly to HOA projects/Needs? It wasn't to cover any "fluff" project some board member wanted? There is a difference between needing money to replace a pool pump versus painting the inside of a clubhouse to blue from pink... One is functional need and the other superficial.

Unfortunately, your HOA spent the money. I would not do anything "retractively" as much as correcting the present. Meaning saying "mia culpa" and working toward the correct process. Which at this point is to raise the funds to cover the special assessment from last year.

A HOA getting a grant? Sounds too fishy for me... I do not agree with a HOA getting grant monies. That is just my opinion.

Thank you for your well informed fact based opinion. You are a wealth of knowledge.

I am sorry you can not Google HOA and grants. My opinion is stated. You form your own.

Thank you everyone for your responses.

To give a little more information, we held a meeting at the end of 2022 to vote by acclamation a 30% monthly assessment increase to hire a management company. Some of the owners were not happy as the money wasn't going towards repairs or reserves. The 30% increase was passed at that meeting despite some objections. The president of our HOA then noticed that we had to vote by secret ballot so we quickly made some ballots and mailed them to the owners the next day and asked them to be mailed back to us a week later by New Years.

We opened what ballots we did receive back and more voted in favor of it than not. We raised the monthly assessment effective 2022 the 30% and hired the management company. Now we have tried to raise the monthly assessment again after we received a letter from some of the owners challenging the 2022 increase. Our management company has informed us none of what we have done is allowed and their legal department advised us to send out more secret ballots to retroactively raise the monthly assessment so we can keep the money.

Some of the owners have been asking us for a refund for 2022, we have not answered them as we didn't have a quorum to refund or raise the monthly assessment for 2023. I'm not sure if we are obligated to refund the owners or how we go about keeping this money or getting it back? We need it to pay the management company. We told the management company to deal with the owners but they said its our responsibility to answer them. So far, no one has wrote back to the owners that contacted us a week ago regarding a refund. I was just going to ignore them but now one of them has started saying they were going to file a theft report with the local police department because the amount we took is over $950.

Can the board retroactively approve a 19.9% increase and issue a refund for the remaining amount since we didn't get a quorum?

Really, mismanagement. How little do you know about HOA business?

For example, we don't know how many units are in KrisH's complex, let's say 20. I charge $10.00 a door for single family detached and $15.00 a door for a townhome or condo. But my minimum is $480.00 per association or $24.00 a door. So going from a self-managed HOA to one professionally managed and also with the consideration with inflation kicking in, an increase of 30% is NOT mismanagement, it is the cost of doing business.

Think you should stick to North Carolina business.

Our 2022 increase didn't go into effect until after March and the increase we were asking for in 2023 exceeded our actual 2022 budget. We are asking for more than a 50% increase in less than a 12 month period which is why we were advised by legal to put both the retroactive increase and future increase to a vote. Some of the 2023 assessment increase is to pay the increasing management costs. We are going from $80 per door to about $95 per door. We are a small association with less than 30 residences.

Max, you mentioned it's on us the board to figure out where to get the money if we have to refund the owners. Could we impose a special assessment to recoup the money without being liable ourselves for why we are imposing the special assessment? I was on the board when these things occurred in 2022 and wasn't really knowledgeable about the changes to the law. I don't want to be personally liable for this myself either.

But, whose "legal," Kris? The HOA's? Or the MC's ?

by that logic, anything the board does in violation of the HOA"s docs is justified. if the BOD is too lazy to read the maximum increase per year, they should resign. It's the cost of being ignorant.

This is such a dilemma, Kris. I wish we could be of more help. I think Shelia's ideas look good. but you'd better follow your HOA attorney' advice. And your D&O insurance agent's advice too.

Please ignore Windy. He's a very unkind person.