Reasons for Increase in Assessments

It would depend on what your governing documents state, but I would think that saying the Board "has to" increase the dues is a bit strong. If the dues collected are already sufficient to cover the required expenses, then there isn't necessarily any reason to increase the dues for everyone else. On the other hand, there will come a time when the dues will have to increase even if everyone is paying.

It seems that way, because they are.

However, MOST (I won't say "all") HOA's governing documents allow for a nominal increase in assessments annually or bi-annually without a membership vote, and there doesn't even have to be a "reason."

What you will need to do is read through your Deed Conditions, Covenants and Restrictions (CC&Rs) and your Bylaws, and any other document, including any amendments made over the years to either, and determine what the process is for increasing assessments.

For example, here is ours:

"Section 6. Maximum Annual Assessment.

(a) Until January 1 of the year immediately following the conveyance of the first lot to an owner, the maximum annual assessment shall be set at a rate not to exceed $120.00 per year per lot. From and after January 1 of the year immediately following the conveyance of the first lot to an owner, the maximum annual assessment may be increased each year not more than 25% above the maximum assessment for the previous year without a vote of two-thirds of each class of members pursuant to the Bylaws.

(b) The Board of Directors may fix the annual assessment at an amount not in excess of the maximum. "

Our board increased our annual assessments to $150 about 7 years ago and it's been at that rate ever since, however, we could have conceivably increased it 25% annually each and every year since then, without providing a "reason" and without obtaining a membership vote.

Dorothy,
If some of the owners don't pay, then "revenues" are down. That means your services will be reduced. In that way, yes, the rest of you "pay" for others not contributing in the form of decrease in services. That ought to be explained to your membership.

However, like someone said, things should not be run so tight, that a few delinquencies (and they are just late, since you WILL get the money, eventually) won't make the budget get out of wack.

How much is your annual budget; how much is in arrearage? Those are the two numbers you need to look at.

It sounds like many of you are well versed in HOA budgets. My community has been through many of the things people hear on TV. When our community was being built the management company embezzled all of our funds and took off. The second management company wrote IOU's to vendors and turned the community over to the residents with $1500 in debt. The second management company made no attempt to collect past dues, therefore we have residents that are 4 years delinquent. When the community was turned over to the residents we elected a group of people that were after the prestige that comes with titles rather than the operation of an HOA. The president kept mail in his garage for four months and the VP was more concerned with her looks and could not address people. The entire time I was the chair person of the ARC and managed the landscapers. Through time the VP resigned and I was appointed to the BOD. I am very honest and up front with people. The BOD had an emergency meeting because my neighbor decided to attach a closet door to her fence to prevent me from looking out my window. During this meeting we discussed the problems that we have had with this resident and went on to other topics, something that I mentioned was the fact that the tresurer's name was not on his house, nor was his wife's name. I questioned who owned the home and he said he paid the mortgage (he is an attorney), I turned to him and said, "you did not answer my question", his response was that he would have to look into it. The next day his home was "for sale by owner". I called the number on the sign and amazingly enough talked to the real owner. The new VP and I wrote a resignation letter for him and immediately I put my name on the bank account. The tresurer had been the sole person on the account for about 2 years. I immediately put a freeze on the account and had the tresurer hand over everything he had of ours. During the Christmas and New Year's holiday I spent countless hours reviewing all of our bills, invoices and account statements. We found what appeared to be the tresurer using our account to fund his problems. We had him sign an affidavit that stated that he was the only one on the account for this period of time and than had it notarized. Without going into more detail we have just enough money in the bank to pay for our landscaper and the management company. We have many issues that require large amounts of money, however we cannot move forward with these items because we would be in debt. I do not want to borrow money, because that would put us in a worse situation. The one thing that we have going for us right now is the fact that the management company has made a huge impact. They have the homeowners taking responsibility for their property, when the property is neglected the owner is notified and then fines start when the problem is not resolved. Thankfully this past week demand letters were sent to all owners that owe, they will be given 30 days to pay or make arrangements before they are taken to court. As I mentioned the management company is fantastic and working with us to get some of these issues addressed.

The question that I have is, if the yearly dues just barely cover the yearly expenses, would that be just cause for increasing the annual dues? The problem that we have in our community is that we do not have swim and tennis, matter of fact we have no amenities. Eventually I would like to convert some of our common area (we have tons) into something for the kids, or something where people can meet and relax. With that said it is difficult to increase dues when the residents don't have amenities.

I would like to hear from others that have experienced this same thing. I want our community to have a gathering of some sort, however without the money in the bank it makes it impossible.

Thanks for everyone's time and input.

CW, I have to say, this particular statement made me shoot tea out my nose:

"When the community was turned over to the residents we elected a group of people that were after the prestige that comes with titles rather than the operation of an HOA."

But to answer your question, you really need to review your CC&Rs and other governing documents to determine what amounts (percentage of current annual assessment) your docs allow you to increase (if at all) without a homeowner vote.

In our HOA, the board could conceivably raise the assessments 25% annually with no "reason" given and no vote of homeowners required.

In fact, all you would have to say is "we are raising assessments to keep pace with cost of living increases (or inflation, or whatever)."

But I do agree with Susan, that the board should do some solid financial management first, especially after the recent history, in order to raise the assessments without getting much push-back, even if you decide to increase within the percentage allowed in your docs without a vote.

Good luck.

(seriously, "prestige" ???)

Very true Bruce. However, those homeowners who are opposed to an increase never think about that. :-(