Experience with private community needed

Our community recently voted not to fund a dues increase to put money in our Reserve fund (currently only $5000 ) for a 20 home private community with pool, clubhouse, tennis court, private roads, stormwater, sewer, and waterlines. The community also pays for irrigation of commons areas and front yards and mowing of the entire community including residents property. The operating budget has $8000.

A community member was told by an attorney that the community wasn't required to have a reserve fund and the majority of the community does not trust the board with a reserve fund, so they stated that they would fund repairs with assessments as the repairs arose.

The community is 22 years old and little to no day to day maintenance has been done and the operating budget makes up 95% of the dues taken in, so an increase in utilities or mowing contract and we are in the red.

For those with experience, what goes first and what should community members expect these repairs to cost?

email me and I'll share the 1st reserve study of my previous association with you which was done after the community was 30 years old.

[email protected]

Thanks. We do have a new board. I was the former President for one year, but elected not to run given the sad state of finances and the communities lack of interest in improving things. We couldn't afford a reserve study given our finances and the community doesn't want a reserve study as they would rather fund things as they happen rather than plan for something that may not happen. Their belief is that a large reserve can tempt even good people to commit fraud. .

As far as paving, my numbers are significantly different than yours. We had three quotes to Fill and Seal and the lowest was $22500. We had three quotes to mill and pave and the lowest was $6 per sq/ft or $190,000. We have about 1/4 mile of roads and they are 24 feet wide.

Funding reserves is a non-starter. We had sinkholes that needed filled and we had to wait a year for an assessment to be approved and funded. We attempted to get people to understand that, given a reserve, we could have fixed these right away, but there is a belief that a large reserve would be at a high risk for theft.

The Board could do it's own reserve study.

This is how we did our first one in my previous Association.
We utilized historical data, catalogs, the internet, contacted companies to assist (with a promise that they would be contacted to bid), A good home inspector can give you info on the clubhouse for an inexpensive cost.

If you can't afford a specialist, you can do all the work yourself.
It might not be as accurate but it would be better than none at all.

Unfortunately, we are not a wealthy community. Most homeowners are retired and in their 60s, 70s and 80s and living on fixed incomes. Home values are in the 500s. I think your assessment on future costs is spot on, however when we presented it, it was poo-pooed by the homeowners as worst case scenario. Recently, there doesn't seem to be much stomach for assessments and the one to fill in sinkholes was close to being rejected. There seems to be this belief that someone is going to rescue the neighborhood.

Well, if there isn't support with the membership, my advice would be to sell and move before nobody wants to purchase in the development because it's not maintained.

Minnesota state law requires each HOA and Condo to have an adequate Replacement Reserve. Hope your state has a law similar to that.

With all of your amenities, you need a reserve study done by a certified reserves specialists. Are you saying none have ever been done been done???? With all of your amenities, I disagree with Tim that your owners/board can do one themselves.

A certified reserves specialist will come to your clubhouse and make a presentation to your owners w/charge. S/he willconvice owners that they're aren't fraudsters

Your owners need to know that with reserves poorly funded, some lenders will refuse to lend on a home when it sells. Don't you have VA/FHA buyers?

I think it's possible there is no requirement to have a reserve fund and to fund it--- there is none in CA. BUT, a study must be done in CA.

Agree with Cathy that your operating budget does NOT sound sufficient.

This might sound extreme, but have the Board vote to close down the tennis count for several months to save $ on maintenance-- "we just can' afford it!""

If the pool is open/heated for the winter, vote to close now til lMemorialDay or some such."We cannot afford to maintain it." By the way, Dean, at its age it certainly needed resurfacing. And...is the pool decking still safe? If the pool furniture is faded, dirty, needs repair, etc, remove all such pieces: "We cannot afford to repair, restrap, replace, etc."

Cut back on yard maintenance to every other week, Or?? "we cannot afford to maintain with our current dues."

I think someone asked, too: Wh does it seem that owners get to vote on expenditures??? The way a veteran SC poster explains it, the Board proposesa budget and then ownrs can come to a meeting and vote it down. I might have this wrong. JohnC?

Then they may as well sue themselves- if there's no money, how do you pay for amenities? And if you sue over this and win, that's less money the association will have to pay for stuff like master insurance coverage for the pool, clubhouse and that stuff.

The homeowners should have copies of the annual budget and if they want, they should also get tge last 3-5 years of year ending income-expense statements so they can see for themselves how much costs have gone up. If they can put together a HOA budget that can pay for everything at today's prices (and we don't know what 2025 has up its sleeve) AND keep assessments low (whatever that means), they can sit on the board, implement the thing and we'll see how it ends.

ChrisK

Read your Covenants and Bylaws closer you may find the BOD can raise yearly dues as much as they want which is our case. In our case, owners do not get to vote on this. They can reject this but it takes 2/3rds OF ALL owners voting to do so.

You mentioned a $12.00 dues increase. Assuming $12.00 per month, per home and if you had done so you would not be in the trouble you are now in.

Please provide the exact wording from your CC&Rs that states owners must vote on "dues & assessments."
Thank you.

WHAT maintenance could be closed down or reduced that owners WOULD care about?? Nothing that would cause safety issues, of course.

With all of your common areas in such disgusting condition, (I'm a firm realtor among other things)I am surprised that any of your homes DO sell. Why did you buy there two years ago when things obviously already in such horrible shape?

I don't recall a poster here showing costs to laminate maintenance. A veteran poster has mentioned a few times, that their HOA eliminated the swimming pool.

You have all those amenities for just 20 homes?? Your reserve account should be 3 times your operating budget, and that still
will not cover asphalt sealing or resurfacing when needed. In the mean time I would call your own homeowners insurance agent and add
loss assessment coverage to your homeowners policy, because someone will get a better lawyer and sue the board.
This is a financial crisis that needs to be cured, and the owners a squabbling over $25,000.

Time to vote the current board out and vote for someone that can be trusted. And GET A RESERVE STUDY ASAP!

As I've said in the past, provisions like this are licenses to commit financial suicide. And this community is doing it. I'd rant again about lawmakers not considering the impact of the laws the make, but I've concluded that they don't give a rat's patoot whether homeowners bankrupt themselves because the lawmakers won't experience any fallout.

HOA Math:

* Prices don't care about whether you can afford things or not. They are set by the larger economy.

* You get what you pay for. You don't get what you don't pay for.

* Keeping assessments low does not keep expenses low. It does the opposite: delaying maintenance increases the amount of damage that will need to be fixed when people can no longer kick the can down the road.

* Failing to plan is planning to fail.

* There is no Magic HOA Money Printing Machine. There are only assessments.

I suspect we're all talking past each other.

People are recommending a professional study because you asked about which of your components should need replacing when and how much this would cost. Yes, certain board members may be able to do a reasonable estimate of these things - if that board member has the experience to estimate the remaining useful life of components and to handle financial cost projects. Most don't.

(By the by, for the costs of building materials, it's best to use the producer price index (PPI) which tracks the costs of raw materials such as lumber. The CPI tracks the costs of a basket of consumer goods, such as food, shelter, clothing, and medical care - none of which are directly applicable to roof repairs. The two indexes do generally move in tandem, but they're not identical. During the early years of the covid pandemic, supply chain issues drove the costs of building materials through the roof, which in turn affected inflation in the whole economy. Unfortunately many lawmakers don't understand the difference, so CC&Rs may tie assessment increases to the CPI.)

Anyway, your community doesn't have a reserve study problem as much as a membership problem. You can fix the first problem. You generally can't fix the second one unless it's a result of the membership not having good information to work with. It sounds like your membership is not receptive to good information if it means that they have to spend money. That's not fixable.

Worse, your CC&Rs give the membership a say in assessment increases. Board members have a fiduciary duty to the HOA and must act in its best interests. Homeowners have no such duty. They can and will act in their own self-interest, even if that self-interest is harmful to the HOA. I criticize provisions that give homeowners a say in assessment increases because it undermines HOA governance and nearly always results in the kinds of problems you're having. You can hold board members accountable for their bad decisions. You can't hold the membership accountable for theirs - you can only put yourself in a position where their bad choices can't affect you.

(Another aside: Once a community digs itself into a deep enough financial hole, there are two things that will prevent it from being able to get itself back on track. One is finances - ie, the owners don't have the financial resources to afford their homes. Two is CC&Rs that tie assessment increases to an arbitrary measurement such as the CPI. These assume that spending needs will increase uniformly over time, which they will not. They don't account for stupid decisions that must be corrected or things like uninsured losses. It's one strike and you're out. I'm watching a condo community in my area dealing with this right now. They're trying to make better choices, but nothing they're doing is making up the deficit that previous boards have created. They're just treading water until the next wave hits. And it will hit - that's the nature of home ownership.)

Evidently this is not so, since later the OP says the owners would have to approve the apparent needed assessment.

For any owner not wanting to maintain the pool, clubhouse, tennis court and front yards and common areas: Great. These amenities can be cordoned off and no longer used, or neglected , granted with some risk. City/county/state regulations and the HOA's insurer may say more. A proper cleanup is going to cost these 20 owners.

As for the infrastructure (roads, sewer, irrigation): As these fail I expect the owners will support an assessment. If the owners still will not support an assessment, city/county/state rules and the insurer may again say more.

In discussions with owners, the board should inform owners that many an insurer is refusing to insure HOAs these days. Insurers are looking for excuses to turn down HOAs.

Chris: Does this HOA even have insurance?