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Can an HOA raise dues without notice?

As a homeowner in a community with an HOA (homeowners association), you're probably familiar with paying regular dues or assessment fees. But what exactly are HOA dues, and can an HOA raise dues without notice? The short answer is no - the HOA cannot arbitrarily increase association dues without proper notice and following the procedures outlined in the governing documents. In this article, we’ll explain what HOA dues are, HOA fee increase limits, and five benefits of small, regular increases.

What are HOA dues?

HOA dues, also called assessments or fees, are regular payments made by homeowners to fund the operation and maintenance of the community's common areas and shared amenities like pools, parks, and roads. The amount is determined by the annual HOA budget.

Can an HOA Raise Dues Without Notice Association dues cover expenses such as:
  • Landscaping and ground maintenance
  • Utility costs for common areas
  • Insurance premiums
  • Reserve funding for future repairs/replacements
  • Professional management services
  • Security or amenity staff salaries
The purpose of monthly dues is to equitably share these costs among all homeowners and properly maintain property values in the community.

Understanding HOA fee increase limits

While the HOA board has a fiduciary duty to maintain the community, they must follow proper procedures to raise association dues. State laws and the community's governing documents outline the limits and processes for increasing assessments.

Many HOAs require advance notice to homeowners of any dues increase, and homeowners vote to approve increases beyond a certain percentage threshold (e.g., increases over 10% may require homeowner approval).

Can an HOA raise dues without a vote?

In some cases, smaller dues increase within the allowable threshold may not require a homeowner vote - but the HOA must still provide proper notice and follow the stated procedures in the bylaws or covenants, conditions, and restrictions (CC&Rs). The board cannot circumvent this process and raise dues without notice.

Top 5 benefits of raising HOA dues

These are the top five benefits of raising HOA fees, which can contribute to long-term financial health, safeguard the community's financial well-being, and preserve property values for all homeowners.
  1. Avoid deferred maintenance

    Deferring routine maintenance to keep the budget flat is a short-sighted approach that may lead to much higher emergency repair costs. When replacements and major repairs are put off, the HOA will eventually face costly emergency repairs or replacements when equipment/amenities fail unexpectedly. Preventative maintenance costs far less than emergency fixes.

    Sean Kent, senior vice president of FirstService Financial, points out that avoiding funding your reserve or deferring maintenance creates a snowball effect. “It will lead to an increase in operating expenses and even impact insurance costs and claims. Those can go up as a result of poor maintenance.”

    Small, regular dues increases ensure sufficient reserve funds are available for timely maintenance and replacements on the proper schedule per the reserve study. This proactive approach helps avoid unexpected expenses and special assessments by staying ahead of the maintenance curve. It also prevents common areas and amenities from falling into disrepair, protecting all homeowners' property values.
  2. Keep up with inflation

    With costs for insurance, utilities, labor, and materials rising 2-3% annually due to inflation, flat budgets will eventually fall behind. Eventually, this may lead to funding gaps that strain the community's ability to maintain itself properly. Incremental assessment increases of 2-3% annually help offset the impacts of inflation so the HOA's purchasing power isn't diminished over time. This allows the same level of service, repairs, and replacements to continue being provided.
  3. Enhance curb appeal

    Homeowners look to their community amenities and common areas as key drivers of curb appeal and home value. Updates like new playgrounds, enhanced landscaping, renovated clubhouses/pools, and other capital improvement projects can be funded through modest HOA dues increases tied to those specific initiatives.
  4. Prevent risky special assessments

    If the HOA is underfunded and has depleted reserves, the only option may be charging homeowners a hefty, lump-sum special assessment of thousands of dollars per household - a major burden many can't afford.

    Not only is this a significant unexpected cost burden on residents, but special assessments frequently lead to remorse by those who opted to defer smaller increases over time. Routine small increases in monthly dues spread the costs incrementally to avoid huge spikes that strain budgets.
  5. Maintain marketability

    Prospective buyers today closely scrutinize the HOA's reserve study and financial standing. Underfunded reserves and deferred projects can be red flags that scare off buyers and lower property values in the long run.
The key theme across all these points is that small, incremental association dues increase ease the long-term financial burden on homeowners versus kicking the can down the road. Planning ahead avoids major shocks and unexpected costs. With professional financial guidance, HOAs can implement fair and responsible dues increases that maintain standards and home values for current and future residents.

The importance of your association budget

While raising monthly dues isn't popular, educating homeowners on why small, incremental increases protect their investment goes a long way in getting buy-in and minimizing conflict.

72% of HOA boards don't have enough reserves set aside. As tempting as it may be to keep budgets flat, deferring assessments and letting funding gaps grow ultimately leads to far costlier outcomes for the community down the line.

That's why partnering with a professional property management company like FirstService Residential is invaluable. Our financial experts provide guidance on:
  • Calculating proper reserve funding needs.
  • Creating long-term budget plans and assessment schedules.
  • Drafting communications to convey the rationale to homeowners.
  • Proposing cost-saving alternatives where possible.
  • Overseeing maintenance to extend amenity life cycles.
  • And more...
With their expertise in budgeting, FirstService Residential helps HOA boards fulfill their fiduciary duty in a thoughtful, transparent way that protects home values and promotes harmony within the community.

The key is implementing a prudent long-term financial strategy with small, steady association dues increases - not drastic spikes. This proactive approach maintains property standards, boosts curb appeal, and prevents hugely burdensome special assessments that create anger and resentment among residents.

While no one likes paying more, homeowners can have peace of mind that incremental HOA fee increases are a wise investment in their community's future and their home's resale value. Reach out to the experts at FirstService Residential to look for ways to optimize your HOA's finances and budget process.
Thursday May 09, 2024