When Are HOAs Permitted to Require Special Assessments?
Many residents who move into a community with a homeowners association fear their HOA requiring a special assessment. To fully understand special assessments, it is important to know how an HOA utilizes its money to cover the necessary expenses of its community. Now, let’s discuss HOA management and how it relates to special assessments, review the information below:
What Are HOAs Responsible for?
The homeowners associations are responsible for many different obligations depending on the location, particular requirements, and overall size of the communities that they manage. Usually, HOAs are responsible for maintenance to common areas, emergency repairs to general parts of the community, central area landscaping, public recreation areas, and collecting dues from members. Even though the roles of an HOA will vary, it is important to know what your community’s association is responsible for so that you do not have any misunderstandings.
How to Tell When a Special Assessment Is Coming?
A special assessment is essentially a repair that is required that was not expected by the HOA and that falls outside of the resident’s required annual dues. Natural disasters or unexpected emergencies can lead to special assessments. Also, it is easy to tell if a homeowners association is maintaining the public areas of their community sufficiently. Some examples can be moldy carpet in the common gym, a leaky roof in the clubhouse, among others.
The key is to see these common events happening and to set money aside in your savings account as a homeowner to not be taken by surprise if your community’s HOA is asking for a special assessment in the near future. Concerning natural disasters, homeowners should always have an emergency fund that takes care of natural disasters to avoid being hit with a large special assessment expense when they are not financially repaired.
Are There Limits on Special Assessments?
Due to the many issues with HOAs not reporting their finances properly, many states have cracked down on HOAs and how they are reporting their financial transactions along with how they are billing their current residents. It is important to be aware of the Declaration of Covenants, Conditions, Restrictions, and Easements (CC&R’s), the articles of incorporation, and bylaws of the homeowners association to figure out what procedures it has documented related to special assessments.
Also, many states have set limits on the amount of money HOAs can bill in special assessments each year. It is wise to be aware of both the documents mentioned above drafted along with your state’s current guidelines to be sure that you are not being overcharged by your HOA in special assessments beyond the legal limit of your state.
What Is an HOA Reserve Fund & Why Is It Relevant?
An HOA Reserve Fund is an important fund where the association keeps money in case of an emergency. HOAs that are well-managed can allocate a specific percentage of a member dues to that account to cover unexpected repairs from natural disasters or extreme repairs that need to be made to common areas of the community.
By comparing the reserve fund amount to what’s recommended in the reserve study that should be in your HOAs financial statements, you will be able to figure out whether the association reserve fund has adequate funding. From this information, you will also be able to determine if a special assessment could potentially occur.
Need Help with Your HOAs Community Management?
Finding an external provider to manage an HOA is important to ensure that the reserve fund is being properly utilized and that special assessments can be avoided as often as possible. Clark Simson Miller has helped homeowners associations located in many parts of the United States streamline the management processes of their HOAs so that their finances are well managed, and their operational processes are improved.