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Subject: Adding a third option to a proxy
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RebeccaR2
(Tennessee)

Posts:1


10/11/2020 8:08 PM  
Our HOA Annual Meeting's proxy lists 2 voting options for monthly Association fees. One option is a 2.7% increase. The other option contributes much more to the Reserve Fund. There is no option given to vote against any increase. Will my vote be counted if I write in NO INCREASE as a third option?
JenniferG11
(Texas)

Posts:660


10/11/2020 8:16 PM  
Posted By RebeccaR2 on 10/11/2020 8:08 PM
Our HOA Annual Meeting's proxy lists 2 voting options for monthly Association fees. One option is a 2.7% increase. The other option contributes much more to the Reserve Fund. There is no option given to vote against any increase. Will my vote be counted if I write in NO INCREASE as a third option?



They are not giving that option, so I don't see the point.
SheliaH
(Indiana)

Posts:3512


10/11/2020 9:02 PM  
You could skip voting altogether, which would be easier. That said, you may want to ask what's behind the proposed increase. You don't say how much your assessments are, but a 2.7% increase doesn't sound huge. Why not take a look at the income/expense reports and see what lo e items have skyrocketed this year and ask why?

As for reserves, has the association had a reserve study? Those should be done every 5 years and it may be yours isn't keeping up with the funding recommendations, so a spike is necessary.

You might still disagree with the choices, but at least you'll make a more informed decision. Or vote for one,but not the other.
CathyA3
(Ohio)

Posts:1315


10/12/2020 5:34 AM  
Adding to what Sheila said, I recently read an article about an association whose membership kept voting down an increase in the association's insurance deductible. After a few years of this and several claims, the association's insurance premium rose until they were in the 100s of thousands of dollars. Of course the owners also voted down the increase in assessments to pay for this huge increase. As a result, the board voted to drop certain kinds of coverage and shift it to the homeowners.

Not surprisingly there were howls of outrage and a move to oust the board.

The person who wrote the article put it bluntly to the owners: you don't have a board problem, you have a financial problem and it's one of your own making. You can replace the board if you like, but the new board won't be able to magic more money into existence.

It was a eye-opening story for owners who vote No to assessment increases without understanding whether they're reasonable or not. (Opinion: I think it's ridiculous for law makers to allow owners to basically commit financial suicide this way. The majority of people aren't particularly good at personal finance, and association finance is more complicated than that. It's not surprising that so many HOA members don't have a clue about this stuff, and putting decision-making authority in their hands is just asking for trouble.)
JenniferG11
(Texas)

Posts:660


10/12/2020 5:59 AM  
Posted By CathyA3 on 10/12/2020 5:34 AM
Adding to what Sheila said, I recently read an article about an association whose membership kept voting down an increase in the association's insurance deductible. After a few years of this and several claims, the association's insurance premium rose until they were in the 100s of thousands of dollars. Of course the owners also voted down the increase in assessments to pay for this huge increase. As a result, the board voted to drop certain kinds of coverage and shift it to the homeowners.

Not surprisingly there were howls of outrage and a move to oust the board.

The person who wrote the article put it bluntly to the owners: you don't have a board problem, you have a financial problem and it's one of your own making. You can replace the board if you like, but the new board won't be able to magic more money into existence.

It was a eye-opening story for owners who vote No to assessment increases without understanding whether they're reasonable or not. (Opinion: I think it's ridiculous for law makers to allow owners to basically commit financial suicide this way. The majority of people aren't particularly good at personal finance, and association finance is more complicated than that. It's not surprising that so many HOA members don't have a clue about this stuff, and putting decision-making authority in their hands is just asking for trouble.)



I agree, that is crazy. Our board would not have to seek our permission for something like that.

On the flip side, TX state law would prohibit them from changing the insurance that way. And our by laws would too. The set up you describe is very odd to me.
JohnC46
(South Carolina)

Posts:10014


10/12/2020 8:36 AM  
In my HOA the BOD can raise the Yearly Dues as much as they want to. I repeat, as much as they want to. There is a procedure to how it must be done and it can only be done once a year. 10% of the owners can call for a Special Meeting (within 30 days) to disapprove the new amount but 51% of all owners, I repeat 51% all owners, must vote against the increase. If they do, then the dues are automatically increased via the CPI which I believe is about 2 to 3%.
SheliaH
(Indiana)

Posts:3512


10/12/2020 9:35 AM  
Posted By CathyA3 on 10/12/2020 5:34 AM
Adding to what Sheila said, I recently read an article about an association whose membership kept voting down an increase in the association's insurance deductible. After a few years of this and several claims, the association's insurance premium rose until they were in the 100s of thousands of dollars. Of course the owners also voted down the increase in assessments to pay for this huge increase. As a result, the board voted to drop certain kinds of coverage and shift it to the homeowners.

Not surprisingly there were howls of outrage and a move to oust the board.

The person who wrote the article put it bluntly to the owners: you don't have a board problem, you have a financial problem and it's one of your own making. You can replace the board if you like, but the new board won't be able to magic more money into existence.

It was a eye-opening story for owners who vote No to assessment increases without understanding whether they're reasonable or not. (Opinion: I think it's ridiculous for law makers to allow owners to basically commit financial suicide this way. The majority of people aren't particularly good at personal finance, and association finance is more complicated than that. It's not surprising that so many HOA members don't have a clue about this stuff, and putting decision-making authority in their hands is just asking for trouble.)




Yup.

No one wants to pay high prices for anything, but "high" is subjrctive. Some don't want to pay because their budgets are stretched for lots of reasons, some are just cheap and everyone else falls somewhere in the midfle. When I was on the board, I tried to look at the association budget like my own, not to spend into obivion, but to be fiscally prudent. If You have to pay more, you need to understand why and consider if the higher price was worth it. When we increased assessments, we'd put an article in the newsletter and the budget letter to homeowners explaining why it was going up, encouraging questions and suggestions on what we could do to reduce costs.

Sometimes reducing costs also means decreasing services, so homeowners In my townhouse community had to consider if they wanted to take on something the association would be responsible for. That would also mean a change to the CCRs in some cases, after which people would have to adjust their personal budgets. If you were already close to the edge in that regard, you usually changed your mind.

That's why I prefer limiting homeowner approval for annual budgets to signifying off on budgets requiring assessment increases over a certain percentage from the current year (5% in my community) or special assessments. In all things HOA boards need to be honest regarding spending and homeowners should hold them accountable for ensuring the money is spend properly. Homeowners must also hold themselves responsible and pay assessments in full and on time, read financial statements and not hesitate to ask questions

CathyA3
(Ohio)

Posts:1315


10/12/2020 9:43 AM  
Posted By JohnC46 on 10/12/2020 8:36 AM
In my HOA the BOD can raise the Yearly Dues as much as they want to. I repeat, as much as they want to. There is a procedure to how it must be done and it can only be done once a year. 10% of the owners can call for a Special Meeting (within 30 days) to disapprove the new amount but 51% of all owners, I repeat 51% all owners, must vote against the increase. If they do, then the dues are automatically increased via the CPI which I believe is about 2 to 3%.




I understand lawmakers' good intentions: after all, it's the homeowners' money.

Where things go wrong:

* Board members have a fiduciary duty to act in the best interest of their association. Individual homeowners do not - they're free to act in their own self interests, even when those interests conflict with those of the community as a whole.

* As I'd mentioned before, most folks aren't terribly good at personal finance, let alone association finance which is significantly more complicated. Allowing people to make decisions without the skills needed to make good ones is asking for trouble.

* Boards can't be held accountable for decisions they don't control. This undermines the rationale for having a corporate structure (and also removes one of the homeowners' tools for holding boards to account when things go wrong).

I would not buy in an association that allows homeowners to override financial decisions like this, and I especially would not serve on a board where I could be hung out to dry over others' poor decisions.

I know we often complain around here about dysfunctional associations, but frankly I'm surprised that they work as well as they do, given how many obstacles they have to overcome.
JohnC46
(South Carolina)

Posts:10014


10/12/2020 12:03 PM  
Our last dues increase was 40% effective 01/01/2020. The dues went from $600 per year to $840 per year with the increase applied to the specific Reserve Item of Roof replacements on each patio home commencing in 2027 and a 7 year project. We had been setting some aside for it, but not near enough.

We introduced the need for such at our 2018 Annual Meeting held in 04/2019 with a preliminary budget backed by costs and spreadsheets. We held an informational meeting in 09/2019 with proposals and more spreadsheets. We raised the dues in 12/2019 to become effective on 01/01/2020. Not that people liked it but we had only one owner (of 112) try to legally challenge us. We simply sent him a copy of the Covenants with the Section that I posted earlier highlighted. He went away.

While we operate within our Budget, the BOD believes we need a small increase to assure we continue to operate with a balanced budget. We are looking at a 5% ($40 per year) increase. We have decided not to do it for this coming year. We plan to wait until 2021 to begin discussing it with our owners. It will happen in 12/2021 effective 01/01/2022.
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