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Dear Poles,
To minimize the administrative and accounting costs and headaches associated with condo fees, our community plans to charge each homeowner who is not set up to pay automatically (e-check or credit card) an additional $5-$10 per month. The HOA agreements and regulations do not say whether the HOA can do this.
Can the board simply vote and implement this change, or does it require the approval of a majority of homeowners?
Signed. MADAM
Dear MS,
A public association is generally entitled to charge fees as described in its governing documents. Now this is not an absolute rule in application. Almost all associations charge for items that have known and proven administrative costs, such as key chains, gate access stickers, and sometimes even ID cards or wristbands. And yes, I do think the association could quantify the additional administrative costs of accepting payment by check. So it’s a bit of a gray area and I’m not sure there are any cases that are completely appropriate. One place where you could very well get into trouble is when the association tries to collect this additional fee. Assume that the owner pays by check but does not pay the surcharge. The association returns the check and takes the position that the assessment itself is partially overdue; or instead that the surcharge is overdue and still due. How will this fee be collected? It is not an assessment that can be collected by lien and foreclosure. I also don’t think it would count as a collection fee. Instead, it may simply be a duty that will only be recoverable in small claims court, if at all—in which case the juice won’t be worth the squeeze. Personally, I believe that the benefits of such a policy greatly outweigh the legal risks and the functional impossibility of collecting the fee; but ultimately that decision must be made by the board in consultation with the association’s attorney.
Dear Poles,
I own property in a HOA established in 1978. Our declaration of covenants states that “the maximum annual assessment may be increased each year by no more than 5% above the previous year’s maximum assessment, without a vote of the members. »
Over the next 43 years, there were years when the board chose not to increase the assessment year after year.
Now, as the 2023 budget cycle begins, the board, with the advice of counsel, has taken the position that they can “catch up” at one time and adjust the assessment fee to reflect a 5% increase over six years, as the previous board decided not to do. make an adjustment. They believe they can do it without a membership vote.
There are many owners in the association who do not agree with this approach. A careful study of the wording shows that the assessment increase cannot be more than 5% of the previous year’s assessment. The fact that the assessment adjustment period is tied to the previous year (rather than the plural, years), we believe that the concept of “catch-up” assessment is a violation of our declaration.
What do you think about this?
Signature, DF
Dear DF,
I’m pretty skeptical about it too. You have only quoted one sentence, and the association’s lawyer may well have other relevant information that would lead to the conclusion that a one-time increase is acceptable. But as a general rule, the ban on raising dues will directly match the previous year’s budget with the proposed budget. I don’t see how the association can claim that they can now effectively reverse all past decisions and just assume that all those budgets were increased by 5% per year and that therefore the budget increase could be much larger.
If I were advising my client and depending on the full language of the governing documents, I would likely recommend going ahead and holding a membership vote. It is likely that a majority of the quorum is required, no more than 30%, and sometimes less. The risk of not getting the votes of the members is to end up fighting this in the dues process, finding that the increase was illegal, and having to refund a significant amount of funds to everyone in the community.
If the council has the authority to pass special assessments, they are probably better off catching up that way and then increasing the budget by 5% every year for the next few years (even if they wouldn’t otherwise) to effectively clean up the years when the budget did not increase.
That being said, it is not uncommon for association budgets to remain flat and stable for many years. Most budgets don’t grow year after year without a corresponding increase in operating expenses, just for the sake of it.
Ryan Poliakoff, partner at Backer Aboud Poliakoff & Foelster, LLP, is a board certified specialist in condominium and planned development law. This column is dedicated to the memory of Gary Polyakov, a pioneer of the community legal industry, tireless advocate, author of treatises, books and hundreds of articles. Ryan Polyakov and Gary Polyakov are co-authors of New Neighborhoods—The Consumer’s Guide to Condominiums, Co-Op and HOA Living. Send your questions to condocolumn@gmail.com. Don’t forget to include your location.
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