By Douglas S. MacGregor, J.D., M.S.W.
Homeowners often wonder what their monthly HOA dues or fees pay for. You might think your HOA fees are too high. The official name for HOA dues is “common interest community assessments,” and before you object to neighborhood or condo fees, learn how HOA boards set dues, see what goes into the HOA budget, and – if necessary – find out how you can fight an increase.
Colorado law says dues or “assessments” must be based on a budget “adopted no less frequently” than once a year. Your HOA or common interest community association must prepare and adopt a budget before charging dues.
An HOA budget usually includes the following expenses: administrative costs (including legal advice, accounting, office supplies and postage); utilities (water, electricity, and natural gas); and maintenance (including landscaping, pool, gutter, and elevator maintenance). It may also include contributions to reserve accounts. Reserve accounts are special pots of money to pay for big expenses, such as a new roof or asphalt paving.
Your board must adopt a proposed budget for the upcoming fiscal year. Then, within 90 days, you should receive a budget summary as well as notification of a members’ meeting. At that meeting, you can veto 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.
Once the budget it set, your fees are determined by your “allocated interest in the common expense liability” – or how much you own of the total property. You can find this calculation in the declaration.
To understand how this works, imagine that you live in a condo with 25 large units and 50 small units. Large unit owners may be allocated 2 percent of the common expense liability, while small unit owners may be allocated 1 percent. So if a budget calls for $120,000 in revenues, large unit owners will pay $2,400 a year or $200 a month, while small unit owners will pay $1,200 a year or $100 per month.
In the next post, learn what to do if your HOA board wants to hike your HOA dues.
For more information see “Colorado Community Association Law: Condominiums, Cooperatives, and Homeowners Associations”, by Douglas S. MacGregor, J.D., M.S.W.