Arizona HOA: Consumer Product Index ( CPI ) question

Janelle,

I suggest you check your governing documents to see if it is a requirement to use the CPI index for increasing assessments. There is no state law addressing this. The only state law which addresses assessment increases is the planned community statute ARS 33-1803, which says, "Unless limitations in the community documents would result in a lower limit for the asessment, the association shall not impose a regular assessment that is more than 20% greater than the immediately preceding fiscal year's assessment without the approval of the majority of the members of the asociaiton." There is no like condo statute.

The 0.1% metric you specify is the unadjusted rate from December-December. However, I have been unable to locate the "average CPI, (3.8%)" figure. Do you know where that number comes from?

The publish data is here: http://www.bls.gov/cpi/cpid0812.pdf

The short answer is, yes the 3.8 percent metric is acceptable. Indeed, it is the preferable number to use for this purpose. It is certainly the number I would advocate.

The 0.1% is calculated from December to December, based on data collected once each month.

The 3.8% is calculated based on the change in the annual average CPI-U from 2007 to 2008.

The difference is likely explained by a sharp increase in prices in early 2008 (due to energy prices) followed by a slight decrease in the latter months of 2008. A December-December calculation would not show the price spike in early 2008.

I would like to clarify my comments. I would not, typically, advocate that a homeowners association use the CPI-U as a benchmark to adjust fees. The CPI-U is based on the price of numerous products that a homeowners association does not purchase (food, housing, clothing, etc.).

However, in this instance, given the information provided in the original post, of the two choices provided, I would advocate the 3.8% figure.

My guess is that some lawyer wrote the covenant documents restricting annual fee increases to no more than the CPI. I have seen such restrictions in condo deeds infrequently. The problem is that the lawyer had very little knowledge of the data and was not specific enough. It is another instance of the poorly worded covenant documents that plague homeowners associations.

Here is language that uses the CPI-U in a better way

Each year on the anniversary date of this Agreement the fee will be adjusted commensurate, at a minimum, with the changes in the United States Department of Commerce, Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers, US, City Average, All Items average from year to year using the now current base year. (hereinafter, “CPI-U”). Should such data cease to be published, then a successor index or, should no successor index be published, then an index that most closely follows the historical trends, shall be used."

Thank you for your info and insight George.
Did you happen to find where it is written that we can "use either one".

Here is the paragraph from our CCRs (excuse typos..I am typing in the near-dark so as to not awake the hubby)

"From and after January 1 of the year immediately following the conveyance of the first townhouse to an owner other than the declarant, the board may, without a vote of membership, increase the maximum annual assessment during each fiscal year of the Association by an amount proportional to the amount of increase during the prior fiscal year in the Consumer Price Index for all urban consumers (all items)published by the United States Department of Labor, Bureau of Labor Statistics (1967=100)or in the event said index ceases to be published, by any successor index recommended as a substitute therefore by the United States Government."

Here is the problem I am talking about. In the paragraph, the "amount proportional to the amount of increase..." has nothing to do with using an "average" or any other method for what to use. The amount of increase was 0.1% Would it not be correct , then, that the ONLY figure we can use, per our CCRs, is the amount that deals with the increase?

This is where I am shaking my head in disbelief that a lawyer for the management company says to "go ahead an use either CPI amount". The lawyer has, once before, told the board to disregard a bylaw that stated no board meeting is to be held on a holiday. We had our Feb meeting on Presidents day because the lawyer said we could (???)

thanks again, in advance

Janelle,

If you take a closer look at the CCR article,you will note that it says "the board MAY. . .", meaning the board is not obligated even use the CPI index in determining the rate of assessment increase. The CCR is not saying the board must do it that way, only stating they may. At least that's my interpretation.

Janelle,

Well, I guess it's a matter of interpretation, right?

Perhaps you didn't see my response of 2/29 in which I did answer your question. I stated there is NO state law addressing this issue and gave you the statute number of the only state law which addresses increasing assessments. I can also tell you there is no Fed. law which addresses this issue. I don't know if there are any websites out there which talk about this. But, if there are the info would not be "law", only someone's opinion. I would suggest taking your attorney's opinion (that's what he's paid for!), unless you can prove he's wrong, which it appears you can't.

Janelle,

Can you tell me who your mgmt co and attorney are. Also, are you in the Phx metro area? I'm in N. Glendale.

Thx!

Janelle,

No problem. I know of only one HOA attorney in Tucson and am not familiar with any mgmt co's, so I won't be able to offer any insight anyhow.