HOA special assessments are a polarizing topic in a homeowners association, one that can put the HOA board and community members at odds. But, can an HOA even charge special assessments to homeowners? What are these HOA assessments for anyway?
In this article:
The Ins and Outs of HOA Special Assessments
To any veteran of an HOA community, special assessments are nothing new. However, to an outsider or newcomer, they can be a source of confusion. Homeowners already pay a regular assessment to the association, so why are special assessments even necessary?
Before you can understand what HOA special assessments are, you must first understand how an HOA creates its budget. Each year, the HOA board sits down and puts together an annual budget. They must anticipate the upcoming year’s expenses, including various maintenance services and insurance payments. They must also allocate a certain portion of the funds to the reserves, which is meant for future replacements and repairs.
After calculating the expenses, the board will arrive at a total amount the association will need to cover them. This amount will then be split among all of the households, board members included, creating what you know as assessments.
What Is a Special Assessment?
While the HOA board can refer to past data and talk to vendors about anticipated prices, the association may still incur some unforeseen expenses.
Proper budget planning involves allocating a portion of the money for this exact situation, but unexpected expenses can be too large to accommodate. This is where HOA special assessments come in.
Simply put, homeowners association special assessments are extra fees levied to cover unanticipated expenses. An HOA board does have the power to charge special assessments to homeowners as provided by state laws and the association’s governing documents. For instance, in California, special assessments over a certain percentage of the budgeted expenses need membership approval in order to pass.
Although HOA boards can levy special assessments, they must strictly follow the provisions and procedures laid out in their state laws and CC&Rs or risk legal liability. For all intents and purposes, though, imposing special assessments in an HOA is completely legal.
When Are HOA Special Assessments Needed?
Generally, while HOAs do have the authority to charge special assessments, they must only happen rarely. HOA boards must budget for emergencies properly and make sure to take big projects into account. This way, they can ensure the association has adequate funds to cover such expenses. Nobody likes special assessments, especially homeowners. The idea of paying an extra fee because of improper budgeting can certainly cause homeowners to doubt their HOA board.
Aside from improper calculating the budget, though, there are a number of other instances that may necessitate special assessments. If a lot of homeowners default on their regular assessments, the association may face a deficit. The board may also need to impose special assessments in case the reserve fund has insufficient money to pay for capital expenditures or insurance fails to cover certain damages.
Can Homeowners Refuse to Pay Special Assessments in HOA?
It is only normal for some homeowners to react negatively to the news of special assessments. After all, homeowners already pay monthly or yearly dues to the association.
An additional fee can give homeowners the wrong idea. Homeowners can refuse to pay special assessments, but it is important to remember that there are consequences involved.
The association’s governing documents usually have these consequences outlined, which typically come in the form of fines or late fees. Sometimes, an HOA board can even take away certain privileges, such as revoking the homeowner’s right to use the community amenities.
Of course, this only works if the homeowner in question frequently uses the amenities in the first place. In more extreme cases, the HOA can place a lien on the homeowner’s property or take legal action.
This may come off as unfair to some homeowners at a glance. However, provided the HOA has the power to impose these consequences as outlined by state laws and the governing documents, homeowners have no other choice but to comply. Ultimately, homeowners have a responsibility to pay their share of the association fees even if they do not necessarily agree with the reason for them.
What Can the HOA Board Do to Encourage Payment?
Beyond fines, suspension of rights, and more drastic measures, an HOA board does have a few options in order to encourage homeowners to pay special assessments. Consider the following steps:
1. Be Transparent With Homeowners
More often than not, HOA residents only refuse to pay special assessments because they deem them unjustified or are completely unaware of the reasons behind the charge in the first place. A good way to fix this problem is to practice the utmost transparency when it comes to the association’s financial state.
The HOA board should explain to all community members why a special assessment is necessary. In addition to that, the board must make an effort to update homeowners on where their money is going. This way, the board can forge a trusting relationship with the community.
2. Set Up Payment Plans
Sometimes, homeowners default on special assessments, not in defiance, but out of financial hardship. Although the HOA board must practice uniform enforcement of rules and covenants, it is possible to set up a payment plan for those who need it. After all, $200 paid every month is far more manageable than $2,400 due in 30 days. Providing a longer payment period can significantly lighten the load for homeowners, resulting in a lower delinquency rate.
Prevent Special Assessments With Proper Budgeting
HOA special assessments are a source of contention among homeowners in an association. HOA boards sometimes find the need to charge them due to a number of reasons. The best way to prevent special assessments, along with the anger and headaches that come with it, is to exercise proper budgeting.
Budget for every possible expense, allocate enough money for the reserves, and set aside funds for emergencies. By following these few simple tips, an HOA board can minimize the need for special assessments and keep homeowners happy.
If your HOA is having trouble managing your finances, Elite Management Services offers unparalleled management solutions to associations in the tri-state area. Contact us online, email us at help@emspm.com or call us at (855) 238-8488 to learn more.
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