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Subject: Increasing HOA Fees Best Practices?
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PatrickY
(Georgia)

Posts:1


03/01/2019 12:50 PM  
Hi All,

Our community is a historic 61 unit building in Atlanta, and we're had relatively low HOA fees for a while (I'm new to the board). We just had a reserve study done which shows we need to be contributing about $65k more to our reserve per year than we are. To achieve this we'd have to increase fees about 76% to reach that yearly goal. Currently the monthly HOA fee is $0.16/sqft. While a 76% increase will increase the monthly HOA of most units to around $250-$300/month which is average to low for Atlanta, there are several larger units which will see a very large increase in total $$$ per month. I'm trying to figure out what the best/fairest way to increase the fees so that we're funded adequately without burdening the community.

We'll need a new roof pretty soon and are chasing constant leaks already in the below ground units, and need paving and some other major repairs completed.

Anyway, what is the best practices in regards to the fees - do we just increase them proportional to the square footage of the unit and move on or...

Thoughts?
TimM11


Posts:241


03/01/2019 1:16 PM  
You should first look at what your CC&Rs say (if anything) about it, as well as any applicable state laws. You may be limited in how much you can increase them each year.

That's a pretty big jump that you described, so I'd ramp it up over time if you can.
RichardP13
(California)

Posts:3424


03/01/2019 1:28 PM  
My recommendation, get someone who who HOA's and reserve studies and get some sound advice from them. None of us can see your report and your financials to get you sound advice.
KerryL1
(California)

Posts:6308


03/01/2019 1:41 PM  
Agree with Richard. Get a certified reserves analyst to review and make recommendations on your reserves study. They all seem to recommend that you be 70-100% funded, but that doesn't need to happen in one year.

And yes, check your own docs and the state laws to see how much you can raise the fee.s

Another possibility is to levy a special assessment--a big lump sum paid by each owner. If a hardship for some, I believe you can spread it out over several months. Again, check to see how much a special assessment is permitted.

So, it sounds like your docs say monthly fees are based on unit size, correct? There are variable assessments on all aspects of your fees, or just som of them?
SheliaH
(Indiana)

Posts:2433


03/01/2019 1:57 PM  
You have good advice from Tim and Richard – I’d start with the reserve study. Since assessments WILL increase regardless of how it’s done, ask the reserve specialist if he or she would be willing to attend a special homeowners’ meeting and make a presentation on the reserve study findings and why people should care. Hopefully, this will be in plain English so people can ask questions. The homeowners will then have a better understanding of what the board is using to determine the assessment increase.

It wouldn’t hurt to review the last two or three years of income/expense reports and summarize that to show what areas are increasing faster than others (e.g. insurance) and why – that will also jack up the assessments. If people want to keep assessments "low," it may mean they will need to be willing to take on more maintenance responsibility for their unit, which will mean a change in the CCRs.

Homeowners should also be advised of the risks if they don’t address this now. If the budget doesn’t keep up with expenses, you’ll have to put off maintenance and when you can’t do that anymore, the costs might warrant a special assessment that has to be paid in addition to regular fees. Those can cost several thousand a pop, especially since you’re in a historical building and may be limited to the types of improvements and replacements you can make.
RoyalP
(South Carolina)

Posts:578


03/01/2019 3:09 PM  
Posted By PatrickY on 03/01/2019 12:50 PM
Hi All,

Our community is a historic 61 unit building in Atlanta, and we're had relatively low HOA fees for a while (I'm new to the board). We just had a reserve study done which shows we need to be contributing about $65k more to our reserve per year than we are. To achieve this we'd have to increase fees about 76% to reach that yearly goal. Currently the monthly HOA fee is $0.16/sqft. While a 76% increase will increase the monthly HOA of most units to around $250-$300/month which is average to low for Atlanta, there are several larger units which will see a very large increase in total $$$ per month. I'm trying to figure out what the best/fairest way to increase the fees so that we're funded adequately without burdening the community.

We'll need a new roof pretty soon and are chasing constant leaks already in the below ground units, and need paving and some other major repairs completed.

Anyway, what is the best practices in regards to the fees - do we just increase them proportional to the square footage of the unit and move on or...

Thoughts?





You answered your own question:
..... Currently the monthly HOA fee is $0.1//sqft. .....


Your assessments are 'prima facie' proportional/square foot based.
GeorgeS21
(Florida)

Posts:1179


03/01/2019 4:07 PM  
One of my previous HOAs contracted for a reserve study ... there were many, many ignorant comments regarding the study and process and increases documented by the licensed engineer.

We asked the study engineer to speak at a members’ meeting - it was well attended and respectful except for one twit, who was shown to be an ignorant fool.

Recommend:
1. Mail the written study and a written line by line assesssment by a special committee appointed by the board
2. Members meeting with the engineer and the special committee working together
GenoS
(Florida)

Posts:2825


03/04/2019 3:43 PM  
Posted By PatrickY on 03/01/2019 12:50 PM
Thoughts?

Along with the sound advice from others above, I'd say:

... the best/fairest way to increase the fees is so that we're funded adequately without burdening the community.

Harsh, perhaps, but it's the only responsible thing to do. If you need a special assessment then you could spread it out over several months, as suggested above. Since the reserves are generally for common property elements I think, unless your documents provide otherwise, assessments for reserve contributions should be equal and not dependent on unit square footage.
KerryL1
(California)

Posts:6308


03/04/2019 3:51 PM  
With gene, I'll repeat my above: if you have variable assessments based on unit size, does it include reserves components?? If so, all of them??

WE have variable assessments in our high rise, but it's just for some operation budget's items.
JohnC46
(South Carolina)

Posts:8195


03/04/2019 3:56 PM  
Patrick

You are wrestling with a dues increase with little to no knowledges/experience in doing so. You all have proportional dues thus making it trickier. Get legal advice how to proceed ASAP>
TimB4
(Virginia)

Posts:16257


03/04/2019 6:29 PM  
Patrick,

As you pointed out, you have had a reserve study done. Great! That is the first step.
Now take the time to explain to the membership what the reserve study does. Do this several times.
Then, even if you don't need to, bring the issue to a membership meeting for a vote (even if it's an advisory vote).

When my Association did it's first reserve study, we discovered a need to increase assessments by 20%. Taking the time to explain this to the membership had a large majority support of the members.



Here is a link to the thread that discusses Reserve Studies:

Subject: Reserve Studies/Funds 101


Here are other threads and articles that may help:

See:




Why an HOA Needs Sufficient Cash Reserves, Large expenses are to be expected in a development, and homeowners must cover the costs, one way or another.
article from nolo

Are your condo's reserves adequate? from How Stuff Works



Dipping Into Reserves
article from an attorney's site

HOA FEES — To Increase or Not to Increase? Article by a management company


Hopefully, these can help you create articles to explain the issue to your membership.
TimB4
(Virginia)

Posts:16257


03/04/2019 6:31 PM  
Posted By PatrickY on 03/01/2019 12:50 PM

Anyway, what is the best practices in regards to the fees - do we just increase them proportional to the square footage of the unit and move on or...




This will depend on how your governing documents specify how annual assessments are done (per lot/unit or per square footage).
Follow what the governing documents specify.
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