Annual Budget and Reserve study and misc.

I am beginning to get antsy about how our board is handling a probably large increase in fees or special assessment by the first of the 2025. Tell me first why our lawyer says to just increase fees and strongly DO NOT DO AN ASSESSMENT. IS IT A NIGHTMARE TO DO A SPECIAL ASSESSMENT? Please tell me which you would do if the increase will be very large as we have some very large projects that need attention and we do not have the funds to cover as it would empty plus more our reserves. We currently have very high fees like 700-1000 per month.

I have been told by HOA experts that we should be sharing all this with our co-owners and we have had a reserve study done which supports a huge assessment for 6 years and our President does not want to let our co-owners read this study. What makes sense to me is to be open, talk about these issues with our co-owners, have some meetings with them etc. But no, I think our President just want to spring it on them and I am uncomfortable with that. We have also had a drainage survey, and a roof survey. I am sure nothing has been shown to our co-owners. Please guide me on what I should do. thank you.

You need to read your governing documents in regards to regular assessments vs special assessments. The reason that you may have gotten advice to stay away from special assessments is that many governing documents allow the board to increase regular assessments but require a vote of the members to pass a special assessment.

Also to answer your lawyer question, a special assessment may require homeowner approval where a regular assessment doesn’t.

When an association is facing large expenses for reserve items, their options are limited. Either put off the repairs (which will lead to more damage and a higher cost), or find the money.

As far as finding the money goes, the choices are: 1) setting aside the money ahead of time according to the most recent reserve study; 2) a special assessment; 3) a loan.

A number of states require associations to go for the first option, because experience has shown that this is actually the easiest on homeowners and the lowest cost overall. A special assessment means owners have to come up with a large chunk of money - often many thousands of dollars - on fairly short notice. This can lead to financial hardship and people not paying the assessment, and the association will be forced to engage in collection actions/foreclosure (which further raises expenses). A loan, assuming the association qualifies, is just a special assessment with interest and fees added on. it's not new money, it's new debt - and the owners will begin repaying the loan immediately on top of the normal assessment for current operating expenses.

Also note that banks look at a community's financial health when they decide on making loans, including mortgages. Special assessments and loans are signs of prolonged financial mismanagement. Healthy reserves, on the other hand, show that the community is being managed responsibly.

The board should make the reserve study available to homeowners. They're entitled to see it, and the study shows that the board isn't just pulling the numbers out of thin air. It's an important part of the hard conversations that need to happen when a community has been keeping assessments unrealistically low and now needs to dig itself out of the financial hole that it's in. Transparency is critical. Owners need to know that the board will be giving them the straight scoop, even if that straight scoop isn't something anyone wants to hear.