10 HOA Questions That

Could Save Time, Money and Frustration

10 HOA Questions That Could Save Time, Money and Frustration



In the last two decades, we have been summarizing an inventory of the very frequently asked homeowner association questions, and felt these questions best represent the concerns of members. This can be a snap shot which may help you realize the dynamics of association management. Small HOA Management


1) WHY ARE MY HOMEOWNER DUES GOING UP?


Your homeowner's dues are based off the operating budget for your subdivision. Budgets usually are prepared on a "break-even" basis; that is, income should equal expenses. What happens when this doesn't occur and expenses exceed the projected income? You can find then only two ways to balance the budget; increase income or decrease expenses. The budget process is an essential event in the financial life of an association. At budget review time, there's the opportunity to re-evaluate the obligations, needs and expectations of the association in relationship to its membership. It can also be a period to look at cost reducing techniques and decide which are right for the association. In the long run, the Homeowner Association's Board determines if the dues should go up or stay the exact same based off with this budgeting process.


2) WHY DO I HAVE TO PAY MORE DUES WHEN THERE ARE PEOPLE WHO DON'T PAY THEIR DUES AT ALL?


The association has case law and statutes on its side, making the collection process success extremely likely. However, inspite of the likelihood of success, a bankruptcy can stop a lawsuit or collection dead in its tracks, evoking the association serious financial hardship, which, is offered to one other homeowners in the form of higher budgets and increased assessments. Bankruptcy is supposed to be a debtor's last ditch remedy. It prevents an individual from becoming destitute upon the filing of a petition with the bankruptcy court by automatically stopping all collection procedures. The petition triggers a computerized stay which prevents attorneys from proceeding with the lawsuit or obtaining the debtors assets. Thus giving the debtor some breathing room and allows the debtor to obtain back on his/her feet. Despite popular belief, it doesn't always imply that the association cannot collect the delinquent assessments. We all know that collecting delinquent assessments is a difficult job. In the end, these delinquent owners may also be your neighbors. You never want to confront people at the mailbox or at the pool to pay for their assessments. But managers and board members can't ignore the problem. Bankruptcy costs everyone, such as the HOA and it members by lowering the amount of dues collected. The only way to compensate for lower collections consequently of bankruptcies or foreclosures is to divide this up among the remaining members of the HOA.


3) WHAT DO THE DUES PAY FOR?


The association's income consists mostly of fees in the shape of homeowner dues. The entire budget is derived off the dues collected. The budget is initiated to anticipate the dues and anticipated expenses the HOA Board needs to pay for throughout the year, such as for example landscaping maintenance, insurance, electricity, management, postage, irrigation, taxes, and repairs to sprinkler lines and/or pumps.


4) WHY WASN'T I TOLD SOONER THAT THE DUES WOULD BE GOING UP THIS MUCH?


Most association's governing documents declare that the HOA dues is going to be established 30 days in advance of the assessment period. Because most HOA's fiscal year runs from January 1 to December 31, the HOA dues are set by December 1st of every year and notification is mailed on January 1st. The assessment isn't typically applied until January 31 which leaves about 30 days to cover or make arrangements.


5) WILL THE DUES GO UP EVERY YEAR?


Fall is enough time when most homeowner associations feel the ritual of counting last year's income and expenses, and then crunching next year's numbers. If the expenses to offer basic maintenance service increases, it is likely the dues will go up. Listed below are some of the ways to make the cash flow more freely. Often next year's budget is founded on last year's; therefore, do a side by side comparison of the past three year's budgets. You may see large and unnoticed utility cost variances, or increases in landscaping services. The Board, 36 months ago, could have been entirely different and indifferent to the budget. You could catch a cost savings that got passed through un-scrutinized.


** Irrigation Water Costs: Does your system have a rain override that kills the sprinkling cycle when appropriate? If not, budget for and obtain it installed before the following irrigation season.


** Control Pool Temperature: A solar blanket can purchase itself very quickly. A 3-5 degree decrease in pool temperature heating can lead to significant savings.


** Lighting Conservation: In the event that you haven't already, swap all common area exterior incandescent lighting for compact fluorescent and other higher lumen/lower wattage alternatives.


6) DOES A HOMEOWNER HAVE A SAY IN THE AMOUNT OF THE DUES INCREASE?


The total amount of the annual assessment is established every year by the association's board of directors, based on the board's adoption of the annual budget. Typical governing documents may include language allowing the board to boost the dues with a specific percentage (%) without owner approval. The dues are established by taking the full total expected cost, and divided that amount by the number of homeowners in the subdivision. i.e. expected budget of the HOA is $10,000.00, and you can find 50 homeowners, therefore, the dues could be ($10,000/50= $200.00) $200.00 per year.


7) CAN I "OPT-OUT¨ OF THE HOMEOWNER'S ASSOCIATION?


You can't "Opt-Out¨ of the association, as every property in the HOA is at the mercy of the restrictions recorded against them when the deed was initially recorded. Those restrictions follow the property each time it is sold, similar to an application easement.


8) ARE THE VACANT LOTS BOUND BY THE CC&RS?


If they are owned by the developer/grantor they are not subject to the covenants, conditions and restrictions (CC&Rs); however, just because the lot is vacant does not mean that it is owned by the developer. Upon the first sell of the property from the hands of the developer, the property becomes at the mercy of the CC&Rs. (sometimes a creator will build on the developer's lot without purchasing the lot. This property isn't subject to the CC&Rs until the property and the home are sold together for the initial time.)


9) HOW ARE THE BOARD MEMBERS ELECTED?


Every year at the annual meeting, elections are held. Some subdivisions are put up, so your term is only for year so that each position is open each years. Others will specify a 3 year rotating term, so that all term is for 3 years, but they're on a staggered schedule. Meaning, just one position is likely to be up for election each year. If you should be thinking about serving on the board or wish to see the outcome from a recently available vote, we strongly encourage one to attend the annual meeting. Notices are mailed out before the meeting.


10) WHAT DOES IT MEAN WHEN OUR HOA IS DEVELOPER CONTROLLED?


Community associations are conceived by the developer who typically forms a non-profit corporation to possess the land and amenities, and in the event of condominiums, certain elements of the building exterior. Initially, the developer owns all the lots or units in the association and has all the votes; therefore, the developer controls the association. A table of directors typically consisting of the developer and other individuals professionally related to the developer is made to handle the affairs of the association including not merely the physical attributes, but in addition the financial and administrative issues such as for example collecting owner assessments, holding the annual meeting, and enforcing the deed restrictions.