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Subject: Assessments
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Author Messages
LauraS8
(Florida)

Posts:4


03/02/2019 4:47 AM  
We have to replace the roofs for $2.5m (the members elected to not fully fund the reserves for the last x number of years, don’t know the back story). I’m a new owner and on the board now. President wants to only give 30 days to collect half of the one time assessment and 30 more to be in full. This doesn’t sound right. Any thoughts on durations to collect? Total amount due from each home owner will be approx. $6k to $12k depending on the unit.
TimB4
(Virginia)

Posts:16199


03/02/2019 5:33 AM  
Typically, it will depend on your governing documents.
Realistically, it will also depend on the amount of the special assessment (per lot/unit).


If you have enough funds in the reserves to cover the cost but need to replace the reserves, you will likely get better results with a longer payback plan (or a longer payback option).

Regardless of the amount of time allotted, you will likely have those who simply don't have the funds readily available and will need additional time to pay. Payment plan options would be preferred here (with or without penalties). However, be prepared to lien and, perhaps foreclose on those who can't or won't pay.
KerryL1
(California)

Posts:6251


03/02/2019 9:30 AM  
Your board also needs to learn if there are any $$ limits on a special assessment in your own documents or in FL.

How many are on your board? The prez has only one vote so perhaps you & others can permit payment plans on a case by case basis. For many folks, half of $6k or of $12K is a lot!
JohnC46
(South Carolina)

Posts:8133


03/02/2019 12:23 PM  
One way to cover the cost is have the HOA take out a bank loan and the bank set up a payment plan for each owner. That is what one HOA (townhomes, 3-4 units per building) I know of did. The payment plans were pay within 30 days and no interest. You were then offered several plans upto 5 years. It created a lien on the home that had to be settled when the home sold. There cost was about $25K per unit.

The HOA got there money all at once and the necessary repairs were done within two years.
GeorgeS21
(Florida)

Posts:1065


03/02/2019 5:38 PM  
Another story of woe when owners push back against analytical products designed to prevent them from screwing up.
SheliaH
(Indiana)

Posts:2430


03/04/2019 9:02 AM  
As George noted, it’s interesting how people buy houses and think they can go years and years and YEARS without anything wearing out or breaking down. These folks never thinking of saving for the day when they have no choice but to repair the roof, furnace, carpeting, etc., but will howl big time about assessments being “too high” to pay the piper! That’s probably the back story you’re wondering about.

This sounds like your president wants to impose some sort of special assessment, which usually can’t happen without homeowner approval (check your documents). Considering that the homeowners voted not to fully fund reserves, I suspect the response to a special assessment would be a big fat no. However, an end run around the documents isn’t a good idea either.

It would be better to hold a special homeowner’ meeting, aka “come to Jesus” fellowship, as it were, and tell people what’s at stake and reminding them of how they came to this point. Since most people have $6K to $12K laying around for a special assessment in one shot, the board should offer some sort of payment plan to at least come up with half the money within a year or two and the rest within 3-5 years. Once you have part of the money, have the roofing contractor determine which buildings need replacement sooner rather than later and work on those first, then do the rest within 5 years.

John suggested that you could also take out a bank loan and the bank set up payment plans for each owner. If homeowners don’t want a separate payment plan, the association board could say fine – the association will take out the loan, but to pay for it (remember loans also mean interest), routine expenses and fund reserves PROPERLY, assessments will be increased every year to the maximum amount allowed by the documents (e.g. 5% over the current year) for the next X number of years until we get past this. If anyone else has a suggestion, bring it on because one way or another, homeowners will have to pay for this (yes, they can always move, but what will they say when potential buyers ask about special assessments and why homeowners voted not to fully fund reserves in the first place?)
JohnC46
(South Carolina)

Posts:8133


03/04/2019 3:46 PM  
Shelai
An HOA is not a bank/money lender. Do not go down that road. The HOA backs the bank loan but payments or lack of are the banks issue, not the HOA's.

SheliaH
(Indiana)

Posts:2430


03/05/2019 4:22 AM  
I didn't say the HOA should loan homeowners the money - I meant the HOA would obtain the loan as a non-profit corporation and then the budget (for the next 5-10 years) would be set to cover loan payments, routine expenses AND reserves. Homeowners ultimately have to pay for all this anyway as association members, so if they don't want to pay at least $6K on top of regular assessments, they have to accept that assessment increases are here to stay. Depending on how underfunded they are, these folks may not be able to avoid a special assessment (or two), even with an increase.

Once upon a time, our board kicked around the idea of getting a loan for something and we were told the bank looks at things like reserves, delinquencies, etc., along with the amount that comes in from assessments. We didn't have great figures for any of this stuff, so our chances of getting one were bleak at best or the interest rate would be out of this world, so we said no. Then we increased fees to bump up reserves and explained to everyone why this was necessary. People grumbled, but went along with it.

You're correct in trying to avoid loans, but this $2 million for roofing has to come from somewhere, so these homeowners need to understand that it might not have been necessary at all if they'd funded reserves properly from the start. Instead, they made the same mistakes we all do in HOA finances as well as our own - we think we have all the time in the world and put all of this off, or we figure we'll be gone by the time the shit rains down. It usually doesn't happen that way and we end up paying far more in the end.
GenoS
(Florida)

Posts:2770


03/06/2019 11:02 AM  
Posted By SheliaH on 03/04/2019 9:02 AM
As George noted, it’s interesting how people buy houses and think they can go years and years and YEARS without anything wearing out or breaking down. These folks never thinking of saving for the day when they have no choice but to repair the roof, furnace, carpeting, etc., but will howl big time about assessments being “too high” to pay the piper! That’s probably the back story you’re wondering about.

This is probably true. It has certainly been true in my HOA. Boards here underfunded the reserves for 10 years and kept annual assessments artificially low in order to not "burden" the majority of homeowners who were senior citizens living on fixed incomes. I attended a board meeting the first year I was here at which the budget for the following year was announced. It included no increase in assessments and the room erupted in cheers and applause. Having already taken a look at the reserve schedules, I just sat there and shook my head. People always marveled at how low the assessments were here. Nobody had any idea how badly the reserves were underfunded. Ignorance is bliss, I suppose.

Anyway, most of those seniors have moved on now leaving those remaining to absorb several years of significant assessment increases. They've been replaced mainly by more senior citizens. We still have a couple more years before our roofs need to be re-shingled at an estimated price of $1.2 million, and we're planning for a few more years of increased reserve contributions. People will still scream bloody murder but the only realistic alternative is a $5,000 special assessment in 2023.

We have 2 new board members elected this year on the basis of their campaign promise to "hold the line" on the yearly assessment increases. They're a minority on the board right now thank goodness.

Good luck to you, Laura8S. Is it really out of the question to delay the roofing project for another year and then give the owners another 12 months to pay? That way the special assessment could be spread out over 24 months. If you're really up against it and the roof is falling apart, though, your options are limited.
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