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A special assessment doesn't necessarily need to be a one-time payment. The Board can arrange for a loan from a bank in order to immediately address the project(s) that need to completed to address the deficiencies, while the owners' pay for their portion of the special assessment over a period of time.
Nonsense. On the contrary, buyers will be pleased to learn that the current owners are paying for any deficiencies in the building and that they (the buyers) won't be saddled with a higher HOA fee in order to address said deficiencies.
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Originally Posted by Harpaint
Nonsense. Many HOA's never need special assessments because finances are managed well and the necessity never arises. Special assessments are an indication that there are inadequate reserves and there will probably be another assessment when the next repair is needed.
Thank you Captain Obvious. Who said that special assessments were necessary? I was merely responding to other posters who in turn were discussing how owners were billed for special assessments and whether buyers would be concerned that a special assessment had been done in the past. Again, neither I nor the posters to whom I was responding stated that special assessments were always necessary. The discussion was about whether it was better to raise dues or issue a special assessment if more funds were needed.
So the only thing that was "nonsense" was you quoting my post to make the observation that many HOAs never need special assessments. Once again, thank you Captain Obvious.
Can someone tell me how much of a reserve a condo should have? We have a reserve that is about the amount of our annual gross income. But everyone seems to think that isn't enough. I don't agree.
You have to look at the condo docs to see which deferred maintenance items of the community are the responsibility of the association (i.e. the owners as a group). Different condos have different responsibilities although most have many things in common. My state requires reserves for our roofs, our road, and regular painting of the buildings, for example, although associations may vote to waive it in part or all together. The state also requires us to have reserves for any deferred maintenance costs that exceed $10K.
The amount of money to be set aside is computed by taking cost of the deferred maintenance (and/or the replacement cost) and dividing it by the remaining useful life of the item. So, if the association determines (via a roofer's estimate) that the roof will need to be replaced in 10 years at a cost of $100K, the association needs to set aside at least $10K each year. Same goes with everything else. Of course, the cost of a roof replacement today is likely to be less than it will be in 10 years so it is even more important to have those estimates adjusted periodically.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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If it's any consolation, your higher HOA fees are still ridiculously low compared to our area, where the newer buildings are at over $1,000/month, older ones $400-600. In the Seattle high-rise condos the HOA fees can be as much as $3,000/month. I prefer to pay for my own maintenance and therefore bought a home that was not in an HOA, but I suppose that's not possible with a condo. You are subject to the charges of whatever contractor the HOA board hires, and that may be more than what someone could negotiate themselves or even do some DIY which the HOA would not allow.
I agree that an assessment might well be saying the BOD did not do proper financial planning especially concerning the reserves. It would make me look hard at the financials and ask about a reserve study.
Nonsense. Many HOA's never need special assessments because finances are managed well and the necessity never arises. Special assessments are an indication that there are inadequate reserves and there will probably be another assessment when the next repair is needed.
Agreed! It seems that the board does not know how to manage the funds.
Slightly different situation. We are a SFH HOA; generally good sized homes in the $750K bracket.
Out annual HOA dues are pathetically low. And the previous Board never set up any reserve accounts for our fixed assets: Tennis Courts, etc.
Two years ago we started a small reserve fund based on ten year useful lives for our fixed assets. This year we are going to raise our dues by 15% to a still ridiculously low number. The current Board felt this was a more palatable alternative than dumping a one time assessment on the homeowners should we need to repair/replace one or more of our fixed assets.
The feeling was that we are more responsible creating reserve funds with a minor amount of pain that we are asking for each homeowner to put up a couple thousand dollars should we need to repair/replace. The latter also leads, in our opinion, to the feeling that the Board was irresponsible in not look forward with regard to our assets.
Basically, you can't win, but have to choose the approach which balance needs with emotions. I am not sure that either approach effects property values much, except if a house is sold with a pending assessment.
Agreed! It seems that the board does not know how to manage the funds.
Yes and maybe not. In my experience, reserve funds can only be used for their intended purpose and there can be situations where an expense might occur that is not typically budgeted for or covered by a reserve account's purpose. The work requiring the assessment has to be done, it's not covered by a reserve, and it is not covered by the annual budget which deals with typical ongoing expenses, not extraordinary ones.
It is also common, in my experience, that unit owners want their monthly payments as low as possible and absolutely no one likes the idea of paying now for future repairs that might or might not come about during their time as owners. It's a two-way street.
I agree that an assessment might well be saying the BOD did not do proper financial planning especially concerning the reserves. It would make me look hard at the financials and ask about a reserve study.
Wouldn't you ALWAYS review the latest reserve study?
Separately, another cause of a special assessment might be latent hidden construction defects.
One of the worst things about living in a condo is the utter morons who want to be on the board.
Yes you are correct that the condo fee shouldn't be raised because that will hurt the value of the individual units. But any good real estate agent will ask if there is any assessments coming down the pike so... it is kind of a either way situation.
Can someone tell me how much of a reserve a condo should have? We have a reserve that is about the amount of our annual gross income. But everyone seems to think that isn't enough. I don't agree.
Has your association had a reserve study done? There are firms that specialize in this kind of thing as well as some engineering firms that also do reserve studies. That’s an objective analysis of your current common property, it’s expected life and estimated cost to Repair or replace.
My only hesitation when I purchased my 2-bed (900 SF) condo two years ago was the HOA fee, which was roughly $250. There is a swimming pool, hot tub, and tennis court that not many people actually use, but the main reason for the high price was poor financial management from boards of prior years (the 2007 reserve study was troubling). Last year, all HOA dues went up 20%, so mine went to $290. We just had the annual owner meeting and the board recommended, following a dire reserve study that detailed some very costly 30-year repairs (chimneys and staircases, mostly), to raise it another 20%, so mine would be about $350 now. I tried to convince people that the better course of action is to impose a special assessment, because this one-time action will not negatively affect property values the way an ongoing, elevated monthly fee would turn away prospective owners and investors. But people were opposed to this. Am I correct that a $350 HOA fee will being down values considerably? On the one hand I'm glad we now have a board that is willing to make of for mistakes past and fix the deferred maintenance. But on the other hand, I'm starting to get worried. Is $350 a warning of bad things to come?
A special assessment for very expensive repairs might require people to come up with a large lump sum many are not able to provide. When I lived in a condo, we had to pay for a new bulkhead. If they did it as a special assessment, we'd have had to come up with a couple thousand apiece. That is the drawback of condos, everyone has to agree. If 30% of the owners said they don't have a lump sum, they really have no choice but to raise the condo fee.
It could be worse...the cheapo contractor they selected accidentally destroyed the bulkhead to the house next door, who then sued the condo association.
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