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Subject: changing membership dues at annual meeting
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Author Messages
FrankF5
(Florida)

Posts:4


09/28/2018 2:27 AM  
Hi,

We are a small HOA in Maine. At our last annual meeting the membership dues was not reviewed or discussed. Can a special membership be called to discuss and vote on new membership dues Our Bylaws state that the dues be discussed and voted on at our annual meeting.
SheliaH
(Indiana)

Posts:2319


09/28/2018 4:11 AM  
Probably, but why not talk to your board first and ask why it didn't come up? It could have been an oversight - or they've decided not to increase the fees this year!
RoyalpitA


Posts:0


09/28/2018 5:30 AM  
assuming y'all are NOT a voluntary association:

y'all do NOT pay dues

y'all do NOT pay fees (unless there is some 'rare' pet fee)

y'all have ASSESSMENTS



as y'all will discover someday TERMINOLOGY is EVERYTHING in covenant/contract law
TimB4
(Virginia)

Posts:16050


09/29/2018 7:46 AM  
Frank,

Without knowing the language used in the governing documents, nobody can really give an informed decision.

Based on language I've seen in other documents, I'd say it may be possible but depends if you are amending the covenants or approving/disapproving a budget or increasing assessments beyond a certain percentage.

Other concerns would include:
what notices are required when assessments are raised.
Does the document require the board set an annual assessment or monthly assessment (goes to when the assessment can be implemented)



MelissaP1
(Alabama)

Posts:7768


09/29/2018 9:07 AM  
Is there a reason to raise dues? Is it for the sake of raising dues? A HOA is only to be funded for as much as it spends out. So unless your HOA has extra expenses or need for more funds, the status quo can stay. Are you a volunteer HOA?

The board may be able to vote for up to a 5% dues increase without owner input. It depends on what your documents say. That increase is usually used to cover increases in the cost of living. Other than that or more, it's a majority rules.

Former HOA President
RichardP13
(California)

Posts:3140


09/29/2018 9:32 AM  
Posted By MelissaP1 on 09/29/2018 9:07 AM
A HOA is only to be funded for as much as it spends out. So unless your HOA has extra expenses or need for more funds, the status quo can stay.


UNTRUE!
Budgets should be calculate not only what the HOA would spend through their operating for month to month expenses, but also collect for contingency and/or reserves funds, which are for long term expense of HOA assets that typically are included in a reserve study.
TimB4
(Virginia)

Posts:16050


09/29/2018 9:43 AM  
Additionally, to keep the IRS happy, the Board can simply transfer any unused funds to the Reserves.
This is what we do (per the advice of our CPA).
MelissaP1
(Alabama)

Posts:7768


09/29/2018 9:46 AM  
I did not add that part as wasn't going to get more complicated into the issue. The OP seemed to have identified the reason for a dues raise. Raising dues for dues sake isn't the way to run a HOA. Once we gathered more information from the poster, then we could talk about included reserve accounts....

Former HOA President
ND
(PA)

Posts:213


10/02/2018 10:20 AM  
Posted By TimB4 on 09/29/2018 9:43 AM
Additionally, to keep the IRS happy, the Board can simply transfer any unused funds to the Reserves.
This is what we do (per the advice of our CPA).




This may be permissible in VA; however, I'd be careful giving it as blanket advice . . .

Our documents and PA HOA law require that any surplus (unused) funds that remain after payment of the year's common expenses and budgeted/planned reserves (IAW the reserve study) are to be given back to the membership in proportion to what they paid for assessments that year. For example, if we had 100 homes all paying the same annual assessment, and we had $10,000 surplus in a given year, we would be required to credit each home $100 as soon as the surplus is identified.
JohnC46
(South Carolina)

Posts:7872


10/02/2018 5:18 PM  
Posted By ND on 10/02/2018 10:20 AM
Posted By TimB4 on 09/29/2018 9:43 AM
Additionally, to keep the IRS happy, the Board can simply transfer any unused funds to the Reserves.
This is what we do (per the advice of our CPA).




This may be permissible in VA; however, I'd be careful giving it as blanket advice . . .

Our documents and PA HOA law require that any surplus (unused) funds that remain after payment of the year's common expenses and budgeted/planned reserves (IAW the reserve study) are to be given back to the membership in proportion to what they paid for assessments that year. For example, if we had 100 homes all paying the same annual assessment, and we had $10,000 surplus in a given year, we would be required to credit each home $100 as soon as the surplus is identified.




In this case budget the Reserves high enough to never have to give money back.
ND
(PA)

Posts:213


10/03/2018 4:37 AM  
Posted By JohnC46 on 10/02/2018 5:18 PM
Posted By ND on 10/02/2018 10:20 AM
Posted By TimB4 on 09/29/2018 9:43 AM
Additionally, to keep the IRS happy, the Board can simply transfer any unused funds to the Reserves.
This is what we do (per the advice of our CPA).




This may be permissible in VA; however, I'd be careful giving it as blanket advice . . .

Our documents and PA HOA law require that any surplus (unused) funds that remain after payment of the year's common expenses and budgeted/planned reserves (IAW the reserve study) are to be given back to the membership in proportion to what they paid for assessments that year. For example, if we had 100 homes all paying the same annual assessment, and we had $10,000 surplus in a given year, we would be required to credit each home $100 as soon as the surplus is identified.




In this case budget the Reserves high enough to never have to give money back.



I suppose that's a possibility; however, not so sure is that sort of practice would be permissible or justifiable from an accounting standpoint.

Not sure how you or others do it, but in our case, we budget the annual reserve contribution at the beginning of the year according to the reserve study. Throughout the year, we deposit monthly into the reserve account such that at year end, we've deposited exactly what we budgeted we would deposit for the year. Only at or close to the end of the year will we know if we'll have a surplus . . . at which point it would be too late to artificially budget the reserves high enough to not have to give surplus back.
TimB4
(Virginia)

Posts:16050


10/03/2018 4:49 AM  
If you have a surplus in the operating fund due to actual expenses being less then the amount budgeted, there are two options available to keep the IRS happy:

1) Offset the next years assessment by the amount of the surplus (but this has to be shown as an actual offset).
To do this, establish the annual assessment then credit each account accordingly based on the surplus.

2) Transfer the surplus to the reserves (ideally done in the last month of the fiscal year or the first month the next fiscal year).

TimB4
(Virginia)

Posts:16050


10/03/2018 4:57 AM  
Keeping the IRS happy, as has been pointed out, does not always keep the State happy.

Therefore, check your local statutes.

PA Condominium Statute:

§ 3313. Surplus funds.
Any amounts accumulated from assessments for limited common expenses and income from the operation of limited common elements to which such limited common expenses pertain in excess of the amount required for actual limited common expenses and reserves for future limited common expenses shall be credited to each unit assessed for a share of such limited common expenses in proportion to the share of such limited common expenses so assessed, these credits to be applied, unless the declaration provides otherwise, to the next monthly assessments of limited common expenses against that unit under the then current fiscal year's budget, and thereafter, until exhausted. Any amounts accumulated from assessments for general common expenses and income from the operation of the common elements, other than limited common elements with regard to which limited common expenses are assessed, in excess of the amount required for actual general common expenses and reserves for future general common expenses shall be credited to each unit in accordance with such unit's interests in common elements, these credits to be applied, unless the declaration provides otherwise, to the next monthly assessments of general common expenses against that unit under the then current fiscal year's budget, and thereafter, until exhausted.

PA HOA statute:

§ 5313. Surplus funds.
Any amounts accumulated from assessments for limited common expenses and income from the operation of limited common elements to which those limited common expenses pertain in excess of the amount required for actual limited common expenses and reserves for future limited common expenses shall be credited to each unit assessed for a share of those limited common expenses in proportion to the share of those limited common expenses so assessed. These credits shall be applied, unless the declaration provides otherwise, to the next monthly assessments of limited common expenses against that unit under the current fiscal year's budget and thereafter until exhausted. Any amounts accumulated from assessments for general common expenses and income from the operation of the common elements, other than limited common elements with regard to which limited common expenses are assessed, in excess of the amount required for actual general common expenses and reserves for future general common expenses shall be credited to each unit in accordance with that unit's interests in common elements. These credits shall be applied, unless the declaration provides otherwise, to the next monthly assessments of general common expenses against the unit under the current fiscal year's budget and thereafter until exhausted.
JohnC46
(South Carolina)

Posts:7872


10/03/2018 6:15 AM  
Posted By TimB4 on 10/03/2018 4:49 AM
If you have a surplus in the operating fund due to actual expenses being less then the amount budgeted, there are two options available to keep the IRS happy:

1) Offset the next years assessment by the amount of the surplus (but this has to be shown as an actual offset).
To do this, establish the annual assessment then credit each account accordingly based on the surplus.

2) Transfer the surplus to the reserves (ideally done in the last month of the fiscal year or the first month the next fiscal year).






We do #2 but also it has never been more than 5% of our total budget so it some regards, chump change.
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