Using Special Assessment to Fund Reserve Account

DavidK34 (Washington)
Posts: 9

Posted:

Wondering if anyone would advise using a Special Assessment to fund a reserve account that is low? Details are: Washington State HOA, fully funded balance $1.5M, current balance $80K. Obviously this is going to be a hard sell. Two assets that are at their useful life amount to about $1.1M and will need to be replaced in 3 to 5 years approx.
Thanks for input.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Is there any language in your state's laws governing HOAs that addresses reserve funding? If so, what does it say?

Does the state law say anything about special assessments: limits on amounts, requirements for owner approval, etc.?

We need to know these things in order to make useful comments.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Have you had an audit to show what replacement costs are for the need of a reserve account amount? Just deciding it is low is grabbing out of the sky. It is best to have hard numbers to reflect the need.

Former HOA President

MichaelS56 (Minnesota)
Posts: 859

Posted:

The Board needs to determine what maintenance is to be listed under Replacement Reserve. Then hire a reputable Replacement Reserve company to complete a Replacement Reserve report.

DeanJ
Posts: 1,786

Posted:

Yours is one of several the day of reckoning had arrived posts we have had recently. If the board has the authority to adopt special assessments, the board should simply explain the situation and pass the assessments required. There will be lots of complaining, whining, requests for the HOA to borrow the money, set up payment plans, delay the repairs, ect. I would ignore these suggestions and do what is required.

If the Board is required to get owner approval, nothing has changed. Either the owners pass the assessment or they don’t. If they don’t, it is time for you to sell and move.

KerryL1 (California)
Posts: 14,550

Posted:

Completely agree with Dean: "If the board has the authority to adopt special assessments, the board should simply explain the situation and pass the assessments required." As already mentioned, there may be a limit for a special assessment, e.g., in Cali, it's 5% in one year.

So....assuming the special assessment won't be adequate, the Board also must raise dues for 2025. This is critical due to two major components needing repair or replacement so soon.

This all is a very tough sell, and it could be the current Board didn't even get your HOA into this deep trouble. So even if the board has enough authority to do a big special assessment AND raise 2025 dues considerably, remember this truely will hurt some owners financially.

I'm assuming that you have had a certified reserves specialist visit your HOA and prepare a reserve study with every common area component for which the HOA is obligated to reaper or replace is in it???

(Melissa, an HOA auditor does not list reserve components)

LoriM15 (Florida)
Posts: 1,009

Posted:

At least the board is thinking 3 - 5 years ahead. Otherwise there might be an even bigger special assessment in the year the item needs to be replaced.

There are only two ways an association can raise money to pay for things, assessments or special assessments. Either way that's a huge shortfall. Most people prefer to have time to pay, so increasing special assessments is always preferable. But special assessments have to happen all the time.

I think we are beginning to see a crisis in condo ownership that is going to get very bad. Many people will be forced to sell or face foreclosure because of the increase in assessments and special assessments caused by new legislation because of the Champlain Towers disaster, increased insurance costs, and the traditional underfunding of reserve accounts.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

David

Could you not raise the monthly dues and use the increase to fund the Reserves?

MarkM19 (Texas)
Posts: 1,459

Posted:

David,
I am with Kerry and John. I would start with a new Reserve Study and make that new shocking number how underfunded your HOA is in this account. I would raise the dues to the maximum allowed for the next several years without a vote of the community. It can really be a hard thing to get done and is also expensive. The board also needs to make some tuff decisions and learn to cut expenses wherever possible. The first thought is always we cannot cut anything. I promise every HOA can reduce costs if a close look and action taken. In our Texas community of over 1450 SFHs with parks and some green space we focused on irrigation and asked the vendor to cut water usage by 30% and he about fainted. He said our community would suffer. Well two years later we are saving 30% on our water usage and the grass is just as green as it always was on years before. Landscapers over water and do it so they look like they are doing a good job. You can always water more if it is needed. You can get the wasted water back. This is just one example and I am sure you have more waisters in your HOA.

SheliaH (Indiana)
Posts: 6,964

Posted:

I agree with all the comments so far. In another conversation on the subject, I said two years ago our community began increasing assessments to the maximum (5%) every year. Those of us who attended the "annual meeting" knew what was coming because the reserve specialist made a special presentation. (Annual meeting is in quotes because we didn't make quorum, but the specialist was there and so we listened anyway. 5% is the maximum our board can increase assessments without homeowner approval). I'm sure people will yell about the increases being "too high", but it's either that or a special assessment - actually, some communities may find they need both, plus a loan.

In the OP's case, I would recommend a special homeowners meeting with the reserve specialist so he or she can explain the study findings and the community's options. Since specialists are paid no matter what the community does, he or she doesn't have a stake in the homeowners' decision, so they can be as candid as they want. Depending on what major repairs or replacements are coming up in the next two years or so, it might may sense to go ahead and do the special assessment while continuing to fund reserves according to the study recommendations.

I really like Mark's suggestion about looking at expenses and seeing where you can cut - this is the underlying reason why we got rid of our pool, and others may have to make similar decisions. Landscaping can be very expensive and I've seen a few articles about planting micro ground cover (I think that's the term) along with grass that results in green lawns, but a reduced need for lawnmowing.

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

LetA (Nevada)
Posts: 2,679

Posted:

Special assessments are are levied and or brought to a vote for two Reasons, One reserve funding is severely deficient and needs proper funding.
Two, emergency unforeseen repairs where there is a deficiency in the operating fund. It is not uncommon for boards to take any leftover money from the
special assessment and divvy it up between the reserves and operating fund. It's an entirely different animal if the special assessment was for
operating expenses and put into reserves.

KerryL1 (California)
Posts: 14,550

Posted:

Reviewing DavidK's OP again, it appears he's knowledgeable about reserves studies. My HOA went through a period where we had 3 reserve firms in 5 years and each one sent their specialist for our area & our high rise to give owners & the Board a useful seminar. There was no extra charge.

We've had our current reserve study provider for several years and every other year or so, he gives a seminar in an open meeting type setting. The Board thinks attendance is so crucial to the well-being of our HOA that they provide pastries and beverages. Turnout is always good.

So I agree with Shelia's approach on that point.

GregoryT1
Posts: 315

Posted:

I agree with Sheila and Kerry points. I have bids for two reserve studies to be done due to NJ law change for mandatory reserves and reserve study. They reached out today and they said they will meet with us if we needed more info. I rather them explain and not have the Grim Reaper of dues persona be me. Looks like free of charge. Good advice by everyone.

KerryL1 (California)
Posts: 14,550

Posted:

Correcto: Our RS gives his seminar to owners & directors in a Town Hall type setting--not at an open board meeting.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By DavidK34 on 04/14/2024 8:10 PM
Wondering if anyone would advise using a Special Assessment to fund a reserve account that is low? Details are: Washington State HOA, fully funded balance $1.5M, current balance $80K. Obviously this is going to be a hard sell. Two assets that are at their useful life amount to about $1.1M and will need to be replaced in 3 to 5 years approx.

What are the assets? Are these assets infrastructure, like roofs? Or are they amenities, like a swimming pool?

Is it possible that the owners would be willing to vote to eliminate these assets?

Is this a condominium? What year was its declaration recorded? Is it subject to RCW 64.90?

Please answer all questions that people ask you.

KerryL1 (California)
Posts: 14,550

Posted:

I have couple of questions too: What are the two components that are such big tix items? Roads? roofs? Or mechanical components like elevators, cooling towers, rooftop boilers ("water heaters") ?

KerryL1 (California)
Posts: 14,550

Posted:

I have couple of questions too: What are the two components that are such big tix items? Roads? roofs? Or mechanical components like elevators, cooling towers, rooftop boilers ("water heaters") ?

DavidK34 (Washington)
Posts: 9

Posted:

Thanks for everyone's input. Here's a little more info. We do have reserve studies (RS) done by a professional firm now. We have only had 3 RS done and the first 2 RS did not include two major assets which are both at the end of their useful life. The earlier RS just assumed that we would have to do a special assessment (SA) when either or both of those two assets needed replacing. The latest RS is well done has clarified the problem. So, to answer a common question, this current board has inherited a reserve account funding deficit problem. It is a problem that the whole community owns, but we get the painful chore to tell the bad news and make the decision that we have to fix it. We do not intend to kick the can down the road for someone else.
At first I thought it would be preferrable to fund it (deficit) with a dues increase over say 10 years. Came to realize that a one-time SA with an optional payment plan is much better for the community. My original post had to do with legality/propriety of funding the reserve account with SA.
As far as I can tell, there are no state (WA) regs that cap our dues increases. Neither do our bylaws contain such. With our state's code (RCW) strict rules for the membership ratifying a board adopted budget, it is unlikely the budget will be rejected. Of course, the real problem is collecting the SA.
The two big assets are the elephants in the room. One is infrastructure and one is an amenity. As for the suggestion of dropping the amenity, my opinion is that this board has the fiduciary responsibility to protect the current assets not deciding we can't or which ones to drop off.

DavidK34 (Washington)
Posts: 9

Posted:

Thanks for everyone's input. Here's a little more info. We do have reserve studies (RS) done by a professional firm now. We have only had 3 RS done and the first 2 RS did not include two major assets which are both at the end of their useful life. The earlier RS just assumed that we would have to do a special assessment (SA) when either or both of those two assets needed replacing. The latest RS is well done has clarified the problem. So, to answer a common question, this current board has inherited a reserve account funding deficit problem. It is a problem that the whole community owns, but we get the painful chore to tell the bad news and make the decision that we have to fix it. We do not intend to kick the can down the road for someone else.
At first I thought it would be preferrable to fund it (deficit) with a dues increase over say 10 years. Came to realize that a one-time SA with an optional payment plan is much better for the community. My original post had to do with legality/propriety of funding the reserve account with SA.
As far as I can tell, there are no state (WA) regs that cap our dues increases. Neither do our bylaws contain such. With our state's code (RCW) strict rules for the membership ratifying a board adopted budget, it is unlikely the budget will be rejected. Of course, the real problem is collecting the SA.
The two big assets are the elephants in the room. One is infrastructure and one is an amenity. As for the suggestion of dropping the amenity, my opinion is that this board has the fiduciary responsibility to protect the current assets not deciding we can't or which ones to drop off.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By ElleN on 04/15/2024 6:47 PM

Posted By DavidK34 on 04/14/2024 8:10 PM
Wondering if anyone would advise using a Special Assessment to fund a reserve account that is low? Details are: Washington State HOA, fully funded balance $1.5M, current balance $80K. Obviously this is going to be a hard sell. Two assets that are at their useful life amount to about $1.1M and will need to be replaced in 3 to 5 years approx.

What are the assets? Are these assets infrastructure, like roofs? Or are they amenities, like a swimming pool?

Is it possible that the owners would be willing to vote to eliminate these assets?

Is this a condominium? What year was its declaration recorded? Is it subject to RCW 64.90?

Please answer all questions that people ask you.

I live in an HOA without a pool or a club house because I understand the costs in maintaining both and would not use either enough to justify the cost. The price I paid for my home also reflected no pool or club house in the community. Eliminating ammenities may reduce the property values and mortgage holders may find themselves upside down when selling their property.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By DavidK34 on 04/16/2024 6:59 AM
One is infrastructure and one is an amenity. As for the suggestion of dropping the amenity, my opinion is that this board has the fiduciary responsibility to protect the current assets not deciding we can't or which ones to drop off.

Sir, the board cannot decide on its own to drop an amenity. But it's quite possible that owners would support dropping the amenity. I advise the board put this option out to owners over a few weeks, announcing a town hall style meeting afterwards. If owners do vote to drop the amenity (including a possibly required amendment to the governing docs), then there are some finer legal points to discuss. But one thing at a time.

DeanJ, yeah? Don't you think it's a matter of picking one's poison? Some owners may not want to pay for the amenity and so support getting rid of it, even if per chance property values take a hit.

As usual the understandable desire for an OP to stay anonymous and so be less than complete hinders discussion here.

We do not even know if this is a condominium.

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By DavidK34 on 04/16/2024 7:02 AM
At first I thought it would be preferrable to fund it (deficit) with a dues increase over say 10 years. Came to realize that a one-time SA with an optional payment plan is much better for the community.

In general, associations should avoid special assessments.

Why is a one-time special assessment with an optional payment plan much better for the community? How is the optional payment plan different than raising the regular assessment? What arguments would you use to inform and convince your community?

DavidK34 (Washington)
Posts: 9

Posted:

I might be wrong, but a SA would get the whole amount invoiced at once, therefore it would show as an AR on our books and could be collateralized if we needed to get a loan to do a project when needed. Haven't checked this out though with banks.
It would also protect any future owners from getting the deficit passed on as a SA would have to be paid before any property transfers at resale. Current owners own the deficit and I don't want it to pass forward.
I also like the idea of keeping the annual dues at a constant level for property values.

SheliaH (Indiana)
Posts: 6,964

Posted:

No one's suggesting the board decide which amenity to keep or not. Before we got rid of our pool, we ran the numbers and presented them to the homeowners and tge reasons why we recommended closing it for good. We then asked people to vote - it took about 18 months but we wanted at least 80% to say yea or nay. There were some people who didn't vote, which was their right, and we couldn't count that as an automatic yes or no.

I think you shoukd go ahead and put it to the homeowners to decide what they want regarding the amenit. If they say keep it, they'll also understand what it'll cost to keep and maintain it. You shoukd show the costs of getting rid of it or converting it into something else so they'll understand the implications of that decision. As to when all this happens, deal with the infrastructure first.

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

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By SheliaH on 04/16/2024 2:26 PM
No one's suggesting the board decide which amenity to keep or not. Before we got rid of our pool, we ran the numbers and presented them to the homeowners and tge reasons why we recommended closing it for good. We then asked people to vote - it took about 18 months but we wanted at least 80% to say yea or nay. There were some people who didn't vote, which was their right, and we couldn't count that as an automatic yes or no.

I think you shoukd go ahead and put it to the homeowners to decide what they want regarding the amenit. If they say keep it, they'll also understand what it'll cost to keep and maintain it. You shoukd show the costs of getting rid of it or converting it into something else so they'll understand the implications of that decision. As to when all this happens, deal with the infrastructure first.

"Sound advice."

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By DavidK34 on 04/16/2024 1:54 PM
I might be wrong, but a SA would get the whole amount invoiced at once, therefore it would show as an AR on our books and could be collateralized if we needed to get a loan to do a project when needed. Haven't checked this out though with banks.
It would also protect any future owners from getting the deficit passed on as a SA would have to be paid before any property transfers at resale. Current owners own the deficit and I don't want it to pass forward.
I also like the idea of keeping the annual dues at a constant level for property values.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By DavidK34 on 04/16/2024 1:54 PM
I might be wrong, but a SA would get the whole amount invoiced at once, therefore it would show as an AR on our books and could be collateralized if we needed to get a loan to do a project when needed. Haven't checked this out though with banks.
It would also protect any future owners from getting the deficit passed on as a SA would have to be paid before any property transfers at resale. Current owners own the deficit and I don't want it to pass forward.
I also like the idea of keeping the annual dues at a constant level for property values.

Pass the SA on is between the seller and the buyer. It is not the association business.

AidylP1 (California)
Posts: 108

Posted:

We are in the process of trying to pass a $3.5M SA over ten years to fund the reserves based on a recently completed reserve study.

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By DavidK34 on 04/16/2024 1:54 PM
I might be wrong, but a SA would get the whole amount invoiced at once, therefore it would show as an AR on our books and could be collateralized if we needed to get a loan to do a project when needed. Haven't checked this out though with banks.
It would also protect any future owners from getting the deficit passed on as a SA would have to be paid before any property transfers at resale. Current owners own the deficit and I don't want it to pass forward.
I also like the idea of keeping the annual dues at a constant level for property values.

So, with the payment plan, a special assessment is like raising the monthly assessment, except that the amount of the special assessment will be formally assessed to the owner who then owes it in the event of a sale of the property, which will be fairer to the next owner.

Seems like a lot of work. Some sellers will pass costs to the buyer.

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By AidylP1 on 04/16/2024 6:37 PM
We are in the process of trying to pass a $3.5M SA over ten years to fund the reserves based on a recently completed reserve study.

Why not raise the monthly (or yearly) assessment? Is your reasoning like DavidK's?

AidylP1 (California)
Posts: 108

Posted:

Quote:

Posted By JeffT2 on 04/16/2024 7:10 PM

Posted By AidylP1 on 04/16/2024 6:37 PM
We are in the process of trying to pass a $3.5M SA over ten years to fund the reserves based on a recently completed reserve study.

Why not raise the monthly (or yearly) assessment? Is your reasoning like DavidK's?

Unfortunately, it can't keep up with inflation.

SheliaH (Indiana)
Posts: 6,964

Posted:

I seem to recall a conversation on this website which discussed some sort of fee to charge sellers as they were on their way out to deposit into reserves. It was a way of the seller paying his/her share of using up the common areas which would be replaced after he/she was long gone. There are a number of ways that fee could be computed - maybe a year's worth of current assessments - but in some cases, the documents would have to be updated to permit this fee.

The thinking behind it was the seller stayed in the home for X number of years, during which time he/she/they drove on the streets, walked on the sidewalks, used the elevators to get back and forth to their home (if they live in a high rise) and so on. Multiply that by X number of residents who did the same thing year in and out, the areas do wear down by the time a new owner comes in. When a new owner is then hit with a special assessment, he/she/they is being forced to pay for replacement of something they didn't use over the last few years, which isn't fair, while the previous owner who DID help use them up got the hell out of Dodge.

Any way you slice it, many HOAs are going to have to increase assessments and possibly have to levy a special assessment and possibly get a loan (sending up assessments even more because loans require loan payments with interest. It's unfortunate a new board has to break the bad news when homeowners conveniently forget they raised all kinds of hell when someone talked about increasing assessments, saying they were already "too high." Whatever that means - ever notice people come up with reasoning like "well HOA X doesn't pay that" (so what, you don't live there, and maybe they're doing better that we are in controlling costs) or being on a fixed income, which I do understand, but they forget that EVERYTHING goes up, regardless of who's running the government. Changes in your life increase costs because you have kids or get diagnosed with a chronic condition that requires more doctor visits and all sorts of prescriptions, etc.

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

AidylP1 (California)
Posts: 108

Posted:

Quote:

Posted By SheliaH on 04/17/2024 5:40 AM
I seem to recall a conversation on this website which discussed some sort of fee to charge sellers as they were on their way out to deposit into reserves. It was a way of the seller paying his/her share of using up the common areas which would be replaced after he/she was long gone. There are a number of ways that fee could be computed - maybe a year's worth of current assessments - but in some cases, the documents would have to be updated to permit this fee.

The thinking behind it was the seller stayed in the home for X number of years, during which time he/she/they drove on the streets, walked on the sidewalks, used the elevators to get back and forth to their home (if they live in a high rise) and so on. Multiply that by X number of residents who did the same thing year in and out, the areas do wear down by the time a new owner comes in. When a new owner is then hit with a special assessment, he/she/they is being forced to pay for replacement of something they didn't use over the last few years, which isn't fair, while the previous owner who DID help use them up got the hell out of Dodge.

Any way you slice it, many HOAs are going to have to increase assessments and possibly have to levy a special assessment and possibly get a loan (sending up assessments even more because loans require loan payments with interest. It's unfortunate a new board has to break the bad news when homeowners conveniently forget they raised all kinds of hell when someone talked about increasing assessments, saying they were already "too high." Whatever that means - ever notice people come up with reasoning like "well HOA X doesn't pay that" (so what, you don't live there, and maybe they're doing better that we are in controlling costs) or being on a fixed income, which I do understand, but they forget that EVERYTHING goes up, regardless of who's running the government. Changes in your life increase costs because you have kids or get diagnosed with a chronic condition that requires more doctor visits and all sorts of prescriptions, etc.

Better name, EXTORTION.

SheliaH (Indiana)
Posts: 6,964

Posted:

By whom and against who? The common areas are owned by all the homeowners and have to be maintained – if they can’t/won’t do it, there won’t be anyone to swoop in and rescue them. That’s when those oh, so important property values everyone yells about go up and down like a seesaw and people point fingers when they drop.

I don’t like assessment increases either, but I dislike special assessments even more because I don’t have several thousand dollars or more lying around for times such as that. Better to give me a realistic budget from the start so I understand what I’m paying for – such is life in a HOA.

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

AidylP1 (California)
Posts: 108

Posted:

You don't charge owners a fee when leaving. They would or should have paid that while residing at the complex. You should be paying for the expenses WHILE a resident, not on your way out.

GregoryT1
Posts: 315

Posted:

I agree with prior comments of NOT passing the buck to the next owners. The current owners should be holding their weight. True story. We had a seller who was selling fully aware there was a potential capitol project on its way. There were no bids yet and things were not fully flushed out. No disclosure to the buyers and they were not aware of the project until they purchased and came on board to the association. That could have been a violation of the real estate disclosure laws. No reserves for the capitol project. There is a high rise I am aware of that at the time of the sale they have to pay a percentage of the selling price on the way out as mentioned above. This ensures transient type owners to pay their share of expenses. Everything points out that a really good solid reserve process should eliminate this nonsense. There is also some high end condo where folks rather pay big special assessments since their investments can make more than the conservative investments that the condo association might be doing. The problem with that thinking is as if they can time the market that their investments can be liquidated in a timely fashion to ensure the condo capitol project can be done. What happens when the condo has to do a project ahead of schedule? Any way you look at it a scheduled quality reserve plan and execution is what is best for the condo association. Anything else works only for individuals and their timing of their needs for leaving town and everyone else is on the sinking ship. I am on that ship and the life preservers are missing.

GregoryT1
Posts: 315

Posted:

oops I should add I know there is a difference in opinions but I think the percentage of the sale price on exit is not a good idea. It points to poor planning and poor reserves. In case of getting a reserve going if there was a low one, none and you have a transient population it it is a way to fund it.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By GregoryT1 on 04/17/2024 3:34 PM
There is also some high end condo where folks rather pay big special assessments since their investments can make more than the conservative investments that the condo association might be doing.

These are folks who have never experienced anything other than a ferociously bull market, like today's. Hysterical.

The current P/E for the S&P 500 is nearly twice the historical average. Can we say bloat?

I am not saying "sell." I am saying looking at the stock market as an ATM, as the folks described above do, is drunken foolishness and sheer naivete. It is very much like the passengers on the Titanic who were in denial, as you aptly put it with your lifejackets comment.

Quote:

Posted By GregoryT1 on 04/17/2024 3:34 PM
The problem with that thinking is as if they can time the market that their investments can be liquidated in a timely fashion to ensure the condo capitol project can be done.

Revered stock analyst Ben Graham could not have said it better.

I have never seen a Declaration that imposes an exit capital contribution on sellers. It's always the buyers stuck with it, in my experience.

It's not extortion. Why can't people be responsible and figure out that if they do not like a contractual term, negotiate to change it? One cannot change the covenant. But one can haggle over the purchase price with the required capital contribution in mind.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By AidylP1 on 04/17/2024 2:57 PM
You don't charge owners a fee when leaving. They would or should have paid that while residing at the complex. You should be paying for the expenses WHILE a resident, not on your way out.

Yes,and THAT'S the heart of the problem. The board didn't do its job in planning the budget to ensure reserves were funded according to the reserve study recommendations. Or they tried and out came tge torches and pitchforks with people shouting about too high assessments. Then they leave and leave a pile of horse dooky in underfunded reserves and deferred maintenance up the yingyang fir tge next hapless owners to clean up.

Just how do you suggest this gets fixed if you don't hold owners responsible somehow? Some HOAS use some or all transfer fees this way, which to me is still unfair because they're NEW owners who weren't around when all this got started, they should pay as they begin using.

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

AidylP1 (California)
Posts: 108

Posted:

Quote:

Posted By SheliaH on 04/17/2024 4:39 PM

Posted By AidylP1 on 04/17/2024 2:57 PM
You don't charge owners a fee when leaving. They would or should have paid that while residing at the complex. You should be paying for the expenses WHILE a resident, not on your way out.

Yes,and THAT'S the heart of the problem. The board didn't do its job in planning the budget to ensure reserves were funded according to the reserve study recommendations. Or they tried and out came tge torches and pitchforks with people shouting about too high assessments. Then they leave and leave a pile of horse dooky in underfunded reserves and deferred maintenance up the yingyang fir tge next hapless owners to clean up.

Just how do you suggest this gets fixed if you don't hold owners responsible somehow? Some HOAS use some or all transfer fees this way, which to me is still unfair because they're NEW owners who weren't around when all this got started, they should pay as they begin using.

Don't believe in transfer or contribution fees. I also don't believe in stealing their wallet on their way out the door.

The scenario is we have an association that has no reserves, zero. We will be proposing a 10-year contribution or special assessment of $3.5M, with each unit contributing $173.61 per month on top of regular assessments. If an owner moves in two years, the remaining special assessment is transferred to the new owner having provided full disclosure during escrow.

SheliaH (Indiana)
Posts: 6,964

Posted:

Good luck with home sales if this passes. Personally, I'd be asking lots of questions as to why this association doesn't have reserves, especially if it's an older community. And then I'd probably say "nah" and look elsewhere.

You say this is a proposal - don't know how much your current assessments are (which will go up anyway because of operating expenses), so I hope you have a plan if this goes down in flames.

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

MichaelS56 (Minnesota)
Posts: 859

Posted:

This is a common issue with HOA's and city council's that do not make difficult decisions about maintenance. You folks have no choice but to find a solution to your issues.

LoriM15 (Florida)
Posts: 1,009

Posted:

Quote:

Posted By SheliaH on 04/17/2024 6:42 PM
Good luck with home sales if this passes. Personally, I'd be asking lots of questions as to why this association doesn't have reserves, especially if it's an older community. And then I'd probably say "nah" and look elsewhere.

You say this is a proposal - don't know how much your current assessments are (which will go up anyway because of operating expenses), so I hope you have a plan if this goes down in flames.

We were looking at condos to purchase a few years ago and several of the communities in our area had large special assessments tacked onto the sales prices. Most were from improvements that had been done to the amenities - golf course renovation, clubhouse renovation, addition of a fitness center, etc.

The special assessments were charged over a several year period. So they would say the sales price was $X, but you are obligated to pay the special assessment for the remaining years. These were very large assessments - sometimes for as much as 25 - 50% of the cost of the condo. These amounts were required to be part of the real estate listing.

Many of the owners were finding it difficult to sell these properties because of the large amounts owed on the special assessments.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By LoriM15 on 04/18/2024 7:03 AM

Posted By SheliaH on 04/17/2024 6:42 PM
Good luck with home sales if this passes. Personally, I'd be asking lots of questions as to why this association doesn't have reserves, especially if it's an older community. And then I'd probably say "nah" and look elsewhere.

You say this is a proposal - don't know how much your current assessments are (which will go up anyway because of operating expenses), so I hope you have a plan if this goes down in flames.

We were looking at condos to purchase a few years ago and several of the communities in our area had large special assessments tacked onto the sales prices. Most were from improvements that had been done to the amenities - golf course renovation, clubhouse renovation, addition of a fitness center, etc.

The special assessments were charged over a several year period. So they would say the sales price was $X, but you are obligated to pay the special assessment for the remaining years. These were very large assessments - sometimes for as much as 25 - 50% of the cost of the condo. These amounts were required to be part of the real estate listing.

Many of the owners were finding it difficult to sell these properties because of the large amounts owed on the special assessments.

Say that again for the people in the back!

Special assessments are sometimes necessary but they should be rare. It's one thing if there was a major natural disaster like a wildfire or hurricane that tore the community apart and now operating funds, reserves AND insurance combined still won't cover replacement costs. That's not the same as a community's failure or refusal to plan for the future, and everyone has to accept the responsibility.

If you really want to get out and not have to worry about a special assessment coming just after you sign those documents at closing, maybe the sales price shoukd be adjusted accordingly. Consider it a form of buying a fixer upper- I pay a lower price because I know I'm going to have to spend money to refloor, repaint, bring it up to current code,, etc.

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

AidylP1 (California)
Posts: 108

Posted:

Quote:

Posted By SheliaH on 04/17/2024 6:42 PM
Good luck with home sales if this passes. Personally, I'd be asking lots of questions as to why this association doesn't have reserves, especially if it's an older community. And then I'd probably say "nah" and look elsewhere.

You say this is a proposal - don't know how much your current assessments are (which will go up anyway because of operating expenses), so I hope you have a plan if this goes down in flames.

Goes into receivership.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By AidylP1 on 04/18/2024 10:14 AM

Posted By SheliaH on 04/17/2024 6:42 PM
Good luck with home sales if this passes. Personally, I'd be asking lots of questions as to why this association doesn't have reserves, especially if it's an older community. And then I'd probably say "nah" and look elsewhere.

You say this is a proposal - don't know how much your current assessments are (which will go up anyway because of operating expenses), so I hope you have a plan if this goes down in flames.

Goes into receivership.

And then the homeowners will really be up shit creek, but ok. All actions have consequences and some people learn the hard way. Better educate your community on what that will entail....

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