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Subject: What can we do? the association fee increased to build up reserves

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ME
(California)

Posts:2

08/12/2006 10:00 AM
During our monthly meeting, a vote was taken to raise association fees to build up reserves. Currently, the reserves are very high and it appeared to me that we are well within budget for upcoming expenses. I couldn't see the justification. Plus, during my term on the board, we had a decrease in a few of our annual expenses. (Note..when I mentioned this, the management company rep. and other board members couldn't recall) I voted against the increase while the others, old timers, voted for. Our fees are already high, especially in comparison to other HOAs in our area. The other townhomes in our area are much better kept with beautiful exterior, luxurious landspace and security gates at a lower HOA fee. The townhome owner's are upset about the increase but are timid. Is there anything we can do to have the increase reversed?

TerryL
(California)

Posts:23

08/12/2006 10:16 AM
CC&R's have very specific guidelines about how much should be in the reserves, and generally it is a lot more than just enough to cover expenses. It is probable that your board had a reserve study done and it was recommended to them that they increase the reserves on hand. CC&R's also allow for increases to association fees, but at the same time, they are restricted to how much the increase can be. There is no substitution for being very familiar with your CC&R's and for being very direct in your questions to the board. I think you should ask them why they think the reserves are too low. It is very likely they are looking at a large expense in the future and are trying to provide for that. What happened in our community is that we had a reserve study done and were told that everything was fine. The problem was that the reserve study didn't take into account that our streets are private, and therefore HOA maintained. When the HOA got hit with a $56,000 bill for having to slurry the streets, it was very painful, and we are still in recovery mode.

BradP
(Kansas)

Posts:1742

08/12/2006 10:41 AM
As Terry said there are specific instructions in your bylaws and documents about how increases can be implemented. Typically the board is able to increase a little bit each year without a vote of the homeowners, but if it is a large increase then the homeowners would have to vote. Read your docs, they should give you direction.

CharlesW1
(Georgia)

Posts:818

08/12/2006 10:43 AM
I don’t know the legalities of an HOA. I would suggest looking at the budget and have the board explain their costs to you. Perhaps even have a public meeting to explain the expenses projected for the upcoming year. Have the BOD explain to all the members (that attend) why the increase in dues and how this effects the entire neighborhood. This won’t make things any better by any means but, I think it can be more easily justified, not “just because” You have raised a very good question. I appreciate that you have turned to this discussion board. Sorry to hear of your troubles Chuck W.

Charles E. Wafer Jr.

RogerB
(Colorado)

Posts:3704

08/12/2006 12:14 PM
I recommend all HOAs instigate the following procedures (amend the By-laws and the Declaration when necessary). This gives members some control over assessments and allows financial monitoring by any member who desires. 1) The reserve plan is updated every three to five years. 2) Board approves the annual reserve budget and the annual operating budget. These establish the annual assessment. It is desireable to not change the annual assessment frequently. 4) The Board approves the budgets and presents it them the annual meeting. 5) The Members ratify the budgets. If not ratified the Board shall modify and present new budgets at a future meeting. Until then they shall operate under the current budget limits. 6) Homeowners who submit a request will be emailed a copy of each months income statement. The income statement shall include actual and budgeted amounts for the current month and YTD.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

JoyceS1
(Indiana)

Posts:107

08/12/2006 3:00 PM
My guess is that a reserve study was conducted and with construction costs rising steadily along with gas prices, it may have been discovered that the reserves were inadequate. Our community has itself caught with deferred maintenance, inadequate reserves and rising gas prices all hitting at the same time. We were advised to avoid having a special assessments unless absolutely necessary. It is a red flag to potential buyers and lenders. We have raised our fee to pump money into reserves in an attempt to avoid special assessments for the roofing project we now have underway. The homeowners know this. However, they too do not understand that once the roofs are replaced, we must continue to pump money into reserves to accumulate for the other components for which the HOA is responsible. We've got to work better on communicating that. Is there a major replacement in the works in your community? That should have been brought out at the time of the discussion regarding the fee increase. You are entitled to see the financial reports of your community. Request a copy of both the current and the end of the year report. Look them over carefully and determine if the budget was adequate to begin with. You may be surprised. The financial operations of a community seem to be a deep mystery to some homeowners. I find it odd that homeowners invest in a home and then do not know that it is being adequately cared for or protected through appropriate budgeting and reserve funding. It is important for you to know.

ME
(California)

Posts:2

08/13/2006 7:55 AM
Posted By ME on 08/12/2006 10:00 AM During our monthly meeting, a vote was taken to raise association fees to build up reserves. Currently, the reserves are very high and it appeared to me that we are well within budget for upcoming expenses. I couldn't see the justification. Plus, during my term on the board, we had a decrease in a few of our annual expenses. (Note..when I mentioned this, the management company rep. and other board members couldn't recall) I voted against the increase while the others, old timers, voted for. Our fees are already high, especially in comparison to other HOAs in our area. The other townhomes in our area are much better kept with beautiful exterior, luxurious landspace and security gates at a lower HOA fee. The townhome owner's are upset about the increase but are timid. Is there anything we can do to have the increase reversed? Additional note: The data being used to justify the increase was a Reserve study from 2004. 3 months after the increase took affect, a current Reserve study was presented at the sparsely attended HOA board election meeting and much to the embarrsement of the current board members, it contained expenses for items that had been covered by individual homeowners. Amazingly the majority of current board was re-elected.

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