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Subject: Dues Increase Notification
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JohnC46
(South Carolina)

Posts:7772


10/11/2018 10:44 AM  
Below is a 1st draft of a dues increase notice. Names have been changed to protect the innocent.

Your advice, suggestions, comments, etc are welcomed/wanted:

Notice of New Annual Dues For 2019
Our Covenants call for the HOA to replace roofs and siding of all homes. Article V, Section 1, (d) and (f), located on page 10. Although this task does not need to begin until approximately 2027, our present dues structure will not cover this cost. The BOD has explored several ways to address this problem and we have arrived at a painful decision. That decision, in order to be financially prepared for this burden, is to increase our annual dues.

Our neighborhood began in 2007, and our annual dues have been $600 since then. There has never been a dues increase. After researching and getting roof replacement estimates (in excess of $500,000 at today's cost). Our HOA will be woefully short in funds unless something is done now. As unpopular as any dues increase will be, we felt we could not justify waiting any longer without addressing the issue.

Beginning January 1, 2019, our dues will increase from the present $600 per year to $840 per year or $70 per month, which is a $20 a month increase over our current dues. Every dollar of the dues increase will go to a separate reserve account for Roofs and Siding.

Beginning in January, 2019, dues payments will go from a quarterly payment to a monthly payment plan of $70 per month. Sometime in December, a coupon book will be mailed to each homeowner that will have 12 coupons one for each month's dues payment for 2019. We felt going to monthly dues payment would help everyone to be able to better budget a monthly payment versus the existing four lump sum quarterly payments.

So and So, our management company, through their website www.SoandSo.com provides a link to the John Doe Bank who processes our dues payments. Look for the Login to make a payment button and click on it. John Doe Bank offers multiple dues payment options:

1. Use the monthly coupon from the coupon book to mail a check or money order.
2. E-Check.
3. Setup a monthly automatic draft from your bank account.
4. Credit Card - a 3% service charge would be accessed.
5. Debit Card - a $5, service charge would be accessed.

John Doe Bank's contact information if needed is: 800-123-4567 You will need your account number found in your coupon book and So and So Real Estate Services ID number - 1*$3, if you decide to use any of the payment options other than the coupon book.

Also, please find the enclosed OUR HOA 2019 Proposed Budget as well as the OUR HOA 2018 Proposed Budget for comparison purposes. The 2019 Proposed Budget shows the additional dues income and the added line item - Roofing & Siding Reserve.

We are constantly looking for the least expensive ways to provide the conveniences we all benefit from and are always open to suggestions or ideas to better serve everyone in the community. Feel free to contact your BOD at [email protected]

We thank you for your understanding, cooperation, and support.

Our HOA Board of Directors
MarkM19
(Texas)

Posts:111


10/11/2018 11:43 AM  
John,
The letter looks very clear and very detailed.

My question is are you able to make this much of an increase without Voter approval? You may need to check the CC&Rs. It may be an easier path to make a few smaller increases annually until the reserve funds have what you need in them. What happens once the reserves are funded for the one time event? Will the increase have a sunset? Will dues go back down to the lower level?


You can bet HOs will have many more questions so it would be smart to have the answers before they ask.
RoyalpitA
(South Carolina)

Posts:147


10/11/2018 12:44 PM  
PERFECT

clear

rational

explanatory


do NOT back down

JohnC46
(South Carolina)

Posts:7772


10/11/2018 1:56 PM  
Posted By MarkM19 on 10/11/2018 11:43 AM
John,
The letter looks very clear and very detailed.

My question is are you able to make this much of an increase without Voter approval? You may need to check the CC&Rs. It may be an easier path to make a few smaller increases annually until the reserve funds have what you need in them. What happens once the reserves are funded for the one time event? Will the increase have a sunset? Will dues go back down to the lower level?


You can bet HOs will have many more questions so it would be smart to have the answers before they ask.




Mark

In SC we can raise the dues any amount once a year when we present the upcoming year's budget. Owners would have 30 days to call a Special Meeting with 51% of all owners voting against the new budget (increase). If 50% or less of all owners say no, the budget is accepted. Though the wording in our Covenants is very clear a couple of BOD Members wanted to run it by our attorney and the attorney agreed.

We had discussed yearly increments but the stumbling block were two BOD members that insisted we inform people that it would be a $100 per year increase for 3 years. I did not like this for several reasons. One was it could turn off buyers as they might think well it will just go on and on every year but the main reason I opposed it was we could not commit future BOD's to honor it and if they did not, we would be back at square one.

My term on the BOD ends at our next Annual Meeting (April) and while not sure If I will rerun, I knew we had to put this future economic crisis behind us.
MarkM19
(Texas)

Posts:111


10/11/2018 2:05 PM  
John,
Thanks for clearing that up for us. It is crazy how so many States all have different rules on the basic HOA rules. After moving from Ca. and now on a new Board in Texas they have very few similarities.

You are a smart guy and hopefully you will signup and get reelected. Your board needs more like people like you.


Good Luck
JohnC46
(South Carolina)

Posts:7772


10/11/2018 2:19 PM  
Mark

SC law favors corporations (such as an HOA) and businesses over all else. SC pretty much has a hands off approach when it comes to businesses.

SC Laws, guidelines, etc. are riddled with the catch phrase, unless Corporation Bylaws say different.
GenoS
(Florida)

Posts:2435


10/11/2018 3:10 PM  
Posted By JohnC46 on 10/11/2018 10:44 AM
Below is a 1st draft of a dues increase notice. Names have been changed to protect the innocent.

Your advice, suggestions, comments, etc are welcomed/wanted:

Notice of New Annual Dues For 2019
Our Covenants call for the HOA to replace roofs and siding of all homes. Article V, Section 1, (d) and (f), located on page 10. Although this task does not need to begin until approximately 2027, our present dues structure will not cover this cost. The BOD has explored several ways to address this problem and we have arrived at a painful decision. That decision, in order to be financially prepared for this burden, is to increase our annual dues.
...


John, I swear sometimes I think our HOAs are twins separated at birth.
JohnC46
(South Carolina)

Posts:7772


10/11/2018 4:57 PM  
Geno

Our initial blush was to remove this obligation from the HOA (Covenants), which I was for. Then several new BOD Members (both real estate agents), said one of the most attractive selling points about our HOA (and a reason I bought in here) was the care free living as in the HOA did all landscaping and outside home maintenance.

As I agreed with this, we then began exploring the alternatives.

Some of the old timers will have issues with the increase but when we compared our dues (even with the increase) to other HOA's, we are still an attractive purchase even at $70 per month.
GenoS
(Florida)

Posts:2435


10/11/2018 5:35 PM  
Yes, it sounds like it. We're at $300 a month and it's got to go up. I, too, was trying to think outside the box and get the HOA out of the roofing business after the next HOA-paid-for re-roofing project. Our stumbling block is we have 29 duplexes and we'd need some other agreement that obligates both sides of the duplex to pay their share for a new roof. If we had all standalone homes I think we would have done that already. We're stucco over concrete block construction so siding isn't a concern. Paintint is, however, and the HOA reserves for that as well.

The other thing is that it wouldn't really save anyone any money because every home still needs a new roof from time to time. I suppose owners that buy soon after a re-roofing could sell right before it was time for the next roof and escape paying for it, whereas we reserve for roofs and everyone has to pay whether or not they're here when the next re-roofing has to be done. Some older homeowners express that sentiment on a regular basis: "I won't be here when the next re-roofing needs to be done so I don't want to pay for it." That's pretty common from what I've heard.
KellyM3
(North Carolina)

Posts:1312


10/12/2018 4:25 AM  
Posted By JohnC46 on 10/11/2018 4:57 PM
Geno

Our initial blush was to remove this obligation from the HOA (Covenants), which I was for. Then several new BOD Members (both real estate agents), said one of the most attractive selling points about our HOA (and a reason I bought in here) was the care free living as in the HOA did all landscaping and outside home maintenance.

As I agreed with this, we then began exploring the alternatives.

Some of the old timers will have issues with the increase but when we compared our dues (even with the increase) to other HOA's, we are still an attractive purchase even at $70 per month.




After a few years of HOA leadership, a notion "struck me" about HOA property maintenance and the consistent worry of Old Timers. The Old Timers, unconsciously, can enjoy the benefits of solid roofing and siding for many years, keep dues rates too low to slowly build reserves to replace the roof or siding down the road, leaving the bill to be covered by future residents.


So many residents don't understand that a community's capital expenses should be funded by current residents for the benefit of future residents, ultimately. It is most-certainly a "pay it forward" situation.
JohnC46
(South Carolina)

Posts:7772


10/12/2018 7:05 AM  
Posted By GenoS on 10/11/2018 5:35 PM
Yes, it sounds like it. We're at $300 a month and it's got to go up. I, too, was trying to think outside the box and get the HOA out of the roofing business after the next HOA-paid-for re-roofing project. Our stumbling block is we have 29 duplexes and we'd need some other agreement that obligates both sides of the duplex to pay their share for a new roof. If we had all standalone homes I think we would have done that already. We're stucco over concrete block construction so siding isn't a concern. Paintint is, however, and the HOA reserves for that as well.

The other thing is that it wouldn't really save anyone any money because every home still needs a new roof from time to time. I suppose owners that buy soon after a re-roofing could sell right before it was time for the next roof and escape paying for it, whereas we reserve for roofs and everyone has to pay whether or not they're here when the next re-roofing has to be done. Some older homeowners express that sentiment on a regular basis: "I won't be here when the next re-roofing needs to be done so I don't want to pay for it." That's pretty common from what I've heard.




We are 112 owners. 40 duplexes and 32 standalone. When we considered removing the roofing obligation, as in leaving it up to each owner to pay, we had our attorney give us an opinion on how could we control/force owners to re-roof. He said our Covenants gave us that authority. We never discussed how we could do it and we dropped that idea.
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