It is the responsibility of your homeowners association’s board of directors to set a budget each year, which includes the income from homeowners known as homeowners association assessments. While raising assessments is never popular, it is a necessary step to properly cover the cost of maintaining your community and maintaining the property values of those who are part of it.
In order to even consider raising assessments without receiving too much backlash from homeowners, follow these six simple steps as outlined below:
Homeowners Association Assessments: Determine a realistic increase
Take known and anticipated costs into consideration. Analyze how these costs will affect your operating budget & your reserves and adjust the assessments accordingly.
Review your Covenants and Restrictions
Covenants typically provide specifications on how much the board can increase assessments without a vote of the membership. If this is not referenced, we recommend checking with your law office regarding any state law requirements that may apply.
If the board’s proposal is to raise the assessments more than the allowable amount per a board’s vote, determine the proper approval process. It can be challenging to gain the necessary approvals from homeowners, so we encourage board members to take a long-term approach when it comes to saving for expected expenses over time.
Homeowners Association Assessments: Inform homeowners of the expected increase
Send a letter to each homeowner explaining the increase. Include copies of the annual budget and any supporting documentation that explains the cost increase, such as a year-over-year graph of energy cost increases.
Hold a budget meeting with homeowners
Provide homeowners with an opportunity to ask questions and talk through the increase so they can understand why it’s necessary. Show bids for upcoming repair work and invite vendors to explain the cost of their services.
Homeowners Association Assessments: Show how increased assessments can help offset unforeseen expenses
Increasing assessments may not be popular, but requiring a special assessment is even less so. Provide copies of your most recent reserve study, if applicable, to show the future needs of your community and associated costs and explain how increasing assessments will help prevent the need for a lump sum from homeowners later on.
Offer payment plans for those in financial hardship
Offer to work with homeowners who are already struggling to pay their assessments through a delayed payment plan or some other method that works for both the HOA and the homeowner.
No matter how hard your board tries, not all homeowners will be happy with an increase to their assessments. However, taking a proactive, open and transparent approach will at least gain their understanding and acceptance.
At Key Community Management, we are glad to review your budget for any areas of potential savings, which will help to minimize the need for assessment increases every year. Contact us today!