Filed Under (Real Estate) on 03-15-2012
By Douglas S. MacGregor, J.D., M.S.W.
To raise dues in Colorado, your board must first win approval for a new budget. Most of the time, homeowners pay little attention to the annual HOA budget or budget meeting. But if dues, officially known as “common interest community assessments,” are set to increase, the budget becomes a hot topic.
Here’s how it works: First, the HOA board adopts a proposed budget for the upcoming fiscal year. Then, within 90 days, it will send you a budget summary as well as notification of a members’ meeting. At that meeting, you can vote on the proposed budget.
Your particular community declaration might call for a positive vote of the members to approve the budget. If it doesn’t, then the proposed budget will be adopted unless vetoed by a majority of members.
To cast an intelligent vote, do some research. First, give your board members and the proposed budget the benefit of the doubt. After all, if your dues jump, so do theirs. Politely ask them why they thought an increase was necessary.
Next, ask for a line item breakdown of expenditures in the new budget. You will also want to compare those expenditures to the current year. Your community manager, association president, or treasurer can give you a copy of current year expenditures to date.
Remember, when comparing current expenditures to proposed ones that the present fiscal year has not ended. Some line item expenses may be seasonal. Just because only half the budgeted amount for one item has been spent after nine months does not necessarily mean that too much was budgeted.
Also remember that the governing board can’t control some budget items: insurance, taxes, and utilities. Other “big ticket” items in the typical association budget are the community association manager’s contract, janitorial services, and lawn care.
Finally, consider the HOA’s reserve account contribution. Reserve accounts pay for repair, replacement, or maintenance of major components, such as roofs, roadways, parking lots, and elevators. The truth is most associations underfund reserve accounts to hold down the monthly dues.
Association members may say they shouldn’t have to pay for a repair or replacement because the cost will come long after they have left the community. But before you take that tack, remember that if you live in the community when it’s time for a major repair, you will pay a substantial special assessment unless there’s money in the reserve account. Also remember that underfunded reserves can affect your property’s resale value.
Once in a while, by examining a proposed budget, you can find an extravagance that can be eliminated. But in reality, most association budgets have little flexibility.
Of course, you and your neighbors should attend the budget meeting and insist the board account for increases in any budget line items. But, as a rule, you will not find enough luxuries to significantly reduce your monthly dues.
For more information see “Colorado Community Association Law: Condominiums, Cooperatives, and Homeowners Associations”, by Douglas S. MacGregor, J.D., M.S.W.