Can HOA fees go up, and when do do, how much can HOA fees increase? These are some questions many HOA members often ask about their homeowner dues. How often do HOA fees go up depends on the circumstances of a community. As a community manager, you have a lot to manage when it comes to raising the average HOA fee. Before you send out the HOA dues increase letter, read on to find out if you can have a homeowners association fee hike in the first place.
Can Homeowners Association Raise The Fees?
Many HOA boards encounter resistance when they try to raise monthly HOA assessments. The same goes for adding special assessments, as well. As a result, it may be tempting to raise these funds by other means. Some communities resort to collecting fees for the use of amenities or other services. All of this are done in an effort to avoid displeasure from residents. Can HOA raise dues any time they need to? This article will take a look at the topic of extra fees, how they can impact your community, and things you should consider before adding a fee.
Can HOA Fees Go Up Legally?
The very first consideration you should be thinking about is whether adding these fees is legal in your state. There are actually states, such as California, that prohibit charging residents fees for anything that is not connected to the cost. For instance, if the association has an unexpected maintenance cost, extra funds can only be obtained using special assessment fees which will go directly to the project.
Check first with your state laws to see if charging higher fees is legal in your area.
When Should An HOA Increase Homeowner Dues?
It’s all too easy for an HOA to run out of budget. After all, the HOA is responsible for paying a lot of things. It is the HOA that pays for the maintenance, repair, utilities and replacement for all common amenities. That cleaning bill for the common pool? That’s paid for by the HOA. The same goes for the heating bill, the lawn care services and janitorial staff for the clubhouse.
All of that takes a lot of money. In most cases, the regular HOA fees should be able to cover all of it. If the collection is good, the HOA may even portion off an amount for a reserve fund. Unfortunately, annual costs for services and utilities are almost always on the rise. The fees that homeowners pay today may not be enough for the same services next year.
That’s why an HOA should take a long hard look at their budget before re-evaluating their dues. Understand the annual budget first, and determine if an increase is needed sooner rather than later.
The second consideration is whether your governing documents have any directions on the topic. There may be very specific guidelines in the documents regarding which types of fees you can charge. If neither the governing documents or state laws explicitly prohibit the use of extra fees, your board is free to decide what is best for the community.
Is there a HOA Fee Increase Limit?
Most HOAs will have some form of increase limit in their governing documents. The Declaration of Covenants, Conditions, Restrictions, and Easements (CC&Rs) is usually the first place to look. Many managed communities have provisions in their CC&Rs that limit how much the HOA can increase their dues or their assessments.
Sometimes, the CC&Rs provisions specify a maximum percentage for increases. For example, a HOA could be limited by its declaration to no more than 3% increases in dues every year. Other provisions may specify a maximum dollar amount for increases, as well.
How Often Do HOA Fees Increase?
HOA budgets are typically planned out for the course of a year. As such, the review of HOA dues often happens yearly as well. Some boards may opt to look at their financial statements more often. Even so, state laws and governing documents may limit the frequency of HOA fee increases to no more than once a year.
How Can HOA Raise Money Without Resorting to Fee Increases?
There are a few different types of fees that HOAs use to earn extra revenue. The first type is fees for use of an amenity. The second type is enforcement fees. The first charges residents for the use of common areas such as the clubhouse or pool.
Associations should be very careful when deciding to add a fee for residents to use their own amenities. Usually the assumption of a homeowner is that these amenities are there for their use as part of their monthly HOA fee.
Adding a fee to use the pool or even the clubhouse for a birthday party may give the impression that you are taking advantage of residents. Even if legal, this type of fee should be generally discouraged.
The second type provides consequences for residents who do not follow the governing documents. Fees can be attached for late assessments or repeated offenses against the Rules and Regulations. This type of fee is usually more acceptable as warnings are given to residents before fees are even levied and they are seen as a natural consequence of behavior.
There are many ways to raise funds that do not add an extra financial burden to homeowners. Even in states that prohibit extra fees, it is usually allowable by law to charge individuals or groups outside of the community to use your facilities or amenities. You can open up your clubhouse or property to weddings or parties and charge a fee to raise money. You can even rent out parking spaces or storage areas to individuals outside of the community.
Can HOA Fees Go Up In A Way That Benefit Your Community?
Thinking outside of the box can help your association raise money without burdening homeowners with higher and higher assessments, or fees for things that they should already be enjoying as part of their current assessments. It is a good idea to proceed carefully and consider all of your options, both legally and practically, before trying to add on extra fees. Need some ideas on how to better manage your budget? You can stave off a round of HOA fee increases with better financial management. Call us today, let us know how we can help.
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